CPI HOLDCO INC
EXHIBIT 10.2
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>f01006exv10w2.txt
<DESCRIPTION>EXHIBIT 10.2
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.2


                             MODIFICATION AGREEMENT


      This Modification Agreement ("Agreement") is made effective as of June 18,
2004 (the "Effective Date") between Varian Medical Systems, Inc. ("Varian"), a
Delaware corporation, and Communications & Power Industries, Inc. ("CPI"), a
Delaware corporation.

                                    RECITALS

      Varian (formerly named "Varian Associates, Inc.") and CPI (as successor to
Communications & Power Industries Holding Corporation, Inc.) are parties to the
following existing agreements: Stock Sale Agreement dated June 9, 1995 (the
"Stock Sale Agreement"); Second Amendment to Stock Sale Agreement dated August
11, 1995 (the "2nd Amendment") (the Stock Sale Agreement and 2nd Amendment are
collectively referred to herein as the "1995 Stock Sale Agreement"); and Site
Access Agreement dated August 11, 1995 (the "1995 Site Access Agreement")
(collectively these three agreements are referred to herein as the "CPI/Varian
Agreements"). Any capitalized term used herein and not otherwise defined herein,
shall have the meaning ascribed to such term in the 1995 Stock Sale Agreement.

      CPI is the current owner of real property located at 301 Industrial Road,
San Carlos, California (the "San Carlos Property"). Varian was a prior owner of
the San Carlos Property. CPI acquired the San Carlos Property from Varian
effective August 11, 1995. The 1995 Stock Sale Agreement and the 1995 Site
Access Agreement restrict the right to develop, and to conduct environmental
response actions on, the San Carlos Property and establishes CPI's and Varian's
indemnity obligations related to certain environmental conditions on the
Property. CPI has entered into an agreement (as amended, the "Purchase
Agreement") to sell the San Carlos Property to Palo Alto Medical Foundation
("PAMF"), a non-profit public benefit corporation organized and existing under
the laws of the State of California, for development as a medical facility and
hospital.

      Simultaneously with entering into this Agreement, Varian and CPI are
entering into an Agreement Re Environmental Matters (the "Five Party Agreement")
with, PAMF, 301 Industrial LLC ("301"), a limited liability company organized
and existing under the laws of the State of California, and 301 Holding LLC
("301 Holding"), a limited liability company organized and existing under the
laws of the State of California, to enable CPI to sell the San Carlos Property
for redevelopment. The Five Party Agreement will also provide financial relief
for CPI and Varian for certain obligations and liabilities related to certain
environmental conditions on the San Carlos Property.

      Pursuant to the Purchase Agreement, the purchase price adjustment agreed
to by CPI for the sale of the San Carlos Property by CPI to PAMF is to reimburse
the buyer for remediation costs that will be incurred pursuant to the Five Party
Agreement for remediation of the San Carlos Property in accordance with the
terms and conditions of the Five Party Agreement. Varian and CPI are interested
in further restructuring their obligations and liabilities related to certain
environmental conditions on the San Carlos Property, and restrictions concerning
a


                                      -1-
<PAGE>
property currently owned by CPI and formerly owned by Varian in Beverly,
Massachusetts (the "Beverly Property").

      Pursuant to Section III C(1) of the Five Party Agreement, PAMF and/or 301
or their contractors or agents must contact the California Regional Water
Quality Control Board, San Francisco Bay Region ("RWQCB") within five (5)
business days after the Effective Date of the Five Party Agreement, and pursuant
to Section XIX of the Five Party Agreement any party to the Five Party Agreement
has the right to terminate the Five Party Agreement if the Remedial Action Plan
("RAP") described in that Agreement is not timely approved by the RWQCB as set
out in Sections XIX and III C(1) of that Agreement.

                                    AGREEMENT

      NOW, THEREFORE, in exchange for the consideration referred to in this
Agreement, and other good and valuable consideration, the adequacy of which is
hereby acknowledged, each party hereto agrees as follows:

      1. 301/PAMF DO NOT CONTACT RWQCB. If 301 and/or PAMF, or their contractors
or agents, do not contact the RWQCB about remediation of the San Carlos Property
within thirty (30) business days after the Effective Date of the Five Party
Agreement (provided that if Varian grants an extension pursuant to the Five
Party Agreement for this contact with the RWQCB that extends beyond this 30
business day period, Varian will grant an equivalent extension under this
Agreement), then the 1995 Site Access Agreement terms and conditions remain in
full force and effect and the 1995 Stock Sale Agreement terms and conditions
remain in full force and effect (including without limitation Section 7.11 and
CPI's and Varian's Article X obligations ) without modification by this
Agreement and the Beverly Property restriction of Section 3(d)(2) of this
Agreement shall terminate, and only the terms of this Section 1 and Sections 4
through 23 of this Agreement shall apply pursuant to this Agreement.


      2.    301/PAMF CONTACT RWQCB/RAP NOT APPROVED BY RWQCB.

      (a) If 301 and/or PAMF, or their contractors or agents, contact the RWQCB
about remediation of the San Carlos Property within thirty (30) business days
after the Effective Date of the Five Party Agreement (provided that if Varian
grants an extension pursuant to the Five Party Agreement for this contact with
the RWQCB that extends beyond this 30 business day period, Varian will grant an
equivalent extension under this Agreement), then within thirty (30) days after
the date the RWQCB is contacted, Varian shall pay CPI $250,000, and if this
Section 2 does not apply, because Section 3 does apply, to the Parties under the
terms and conditions of this Agreement, then this Varian $250,000 payment to CPI
shall become a partial payment to CPI of the Varian $500,000 payment obligation
set out in Section 3(b)(1) of this Agreement, and

      (b) if, within 245 days after the Effective Date of the Five Party
Agreement (provided that if Varian grants an extension pursuant to the Five
Party Agreement for this RAP approval by the RWQCB that extends beyond this 245
day period, Varian will grant an equivalent extension under this Agreement), the
RAP is not approved by the RWQCB as set out in Sections XIX and


                                      -2-
<PAGE>
III C(1) of the Five Party Agreement and the Five Party Agreement is terminated
pursuant to Section XIX of the Five Party Agreement, then:

            (1) as modified and supplemented by this Agreement, the 1995 Site
      Access Agreement terms and conditions remain in full force and effect;

            (2) the 1995 Stock Sale Agreement terms and conditions remain in
      full force and effect (including without limitation Section 7.11 and CPI's
      and Varian's Article X obligations), except that:

                  (a) CPI shall be obligated to implement and complete any San
            Carlos Seller Indemnified Environmental Claim, as defined in Section
            2(b)(2)(g) below, (this CPI obligation is defined as "CPI Work")
            and, except to the extent set forth in Section 2(b)(2)(b)(iii), CPI
            shall release Varian from any San Carlos Seller Indemnified
            Environmental Claim arising from or related to such CPI Work and
            defend and hold Varian harmless from and against any Claims arising
            from such CPI Work. Notwithstanding the foregoing, CPI and Varian
            shall not be relieved of their respective obligations under the 1995
            Stock Sale Agreement relating to or arising out of Hazardous
            Materials located off-site from the San Carlos Property or for
            alleged bodily injury from exposure to Hazardous Materials prior to
            August 11, 1995.

                  (b) CPI shall seek, and be entitled to receive, reimbursement
            for its reasonable out-of-pocket payments (excluding any CPI
            internal costs) for CPI Work performed in compliance with this
            Section 2(b)(2) as follows. Any contractors retained by CPI, for
            whose costs CPI seeks reimbursement pursuant to this Section
            2(b)(2)(b), shall be non-affiliated third party contractors whom CPI
            retains pursuant to arms length, bona fide negotiations to perform
            CPI Work.

                       (i) first, CPI shall seek reimbursement for such CPI Work
                  from the Insurance Policy described in the Five Party
                  Agreement;

                       (ii) second, if funds from the Insurance Policy are not
                  available for such CPI Work, CPI shall reimburse itself by
                  applying the $250,000 paid by Varian to CPI in accordance with
                  Section 2(a); and

                       (iii) third, if funds from the Insurance Policy are not
                  available for such CPI Work and the $250,000 paid by Varian in
                  accordance with Section 2(a) has been applied in full pursuant
                  to Section 2(b)(2)(b)(ii), Varian shall reimburse CPI for up
                  to an additional $250,000 pursuant to Section 2(b)(2)(e) of
                  this Agreement.

            CPI shall bear the cost for all CPI Work the cost of which is not
            reimbursed pursuant to clauses (i) through (iii) above.

                  (c) with respect to any reimbursement pursuant to Section
            2(b)(2)(b)(ii) or (iii), CPI shall diligently take such actions as
            are commercially reasonable to obtain insurance proceeds under the
            Insurance Policy described in the Five Party


                                      -3-
<PAGE>
            Agreement for such CPI Work (collectively "CPI Due Diligence
            Actions"), and if, after taking such Due Diligence Actions CPI does
            not receive sufficient insurance proceeds to pay for the CPI Work,
            CPI shall inform Varian in writing of the results of the CPI Due
            Diligence Actions and of CPI's entitlement to reimbursement pursuant
            to Section 2(b)(2)(b)(ii) or (iii). In such event, Varian shall be
            subrogated, with respect to any amounts reimbursed by it pursuant to
            such provisions, to all of CPI's rights under such Insurance Policy
            to the extent of reimbursement of CPI by Varian.

                  (d) CPI shall comply with the following requirements in
            proposing to undertake and in undertaking any CPI Work, whether or
            not reimbursement will be sought from Varian:

                        (i) the CPI and Varian Site Coordinators for CPI Work
                  shall be the same individuals that are appointed Site
                  Coordinators pursuant to the 1995 Site Access Agreement;

                        (ii) prior to proposing to implement any CPI Work and
                  preparing work plans, CPI shall provide Varian with any
                  documents upon which CPI is relying to support its need to
                  perform such CPI Work, including notices, correspondence,
                  orders or other documents from government agencies and
                  correspondence or other documents from third parties, and
                  shall meet with Varian to discuss the facts relied on by CPI
                  to determine that such work is CPI Work;

                        (iii) CPI shall perform CPI Work pursuant to written
                  work plans; prior to performing any CPI Work, CPI shall
                  provide the applicable work plan(s) to Varian for review and
                  comment, which review and comment process Varian shall
                  complete within two weeks of receipt of the work plan(s) from
                  CPI, unless CPI provides a longer period;

                        (iv) CPI shall give good faith consideration to Varian
                  comments and shall use commercially reasonable efforts to
                  reach agreement with Varian on the final work plan and its
                  recommendations;

                        (v) after completing the consultation process described
                  in subsections (ii), (iii) and (iv) above and revising the
                  work plan(s), as appropriate, CPI shall submit the final work
                  plan(s) to the governmental agency with jurisdiction (the
                  "Government Agency") for the CPI Work and simultaneously
                  provide a copy of the final work plan(s) to Varian, provided,
                  however, that if an emergency exists, such as the CPI Work to
                  be performed is to address a situation that poses an imminent
                  and substantial endangerment to human health, CPI shall not be
                  obligated to comply with subsections (ii), (iii) and (iv)
                  above and CPI shall perform such emergency CPI Work ,
                  informing and consulting with Varian insofar as is reasonably
                  consistent with meeting CPI's obligations to address the
                  emergency situation, and, upon completion of such emergency
                  CPI Work, CPI will


                                      -4-
<PAGE>
                  meet with Varian and provide Varian with copies of the
                  documents created for or related to such emergency CPI Work;

                        (vi) CPI shall allow Varian or its agents to participate
                  in any discussions and/or meetings that CPI has with the
                  Government Agency including, to the extent possible, in any
                  emergency situation, and to present Varian's views and
                  recommendations to the Government Agency concerning the work
                  plan(s) and the CPI Work;

                        (vii) CPI shall provide Varian with at least two weeks
                  advance notice prior to the implementation by CPI of any CPI
                  Work, unless CPI is undertaking emergency CPI Work, as
                  described in subsection (v) above, and for any CPI Work,
                  including emergency CPI Work, CPI shall provide Varian or its
                  agents the opportunity to monitor the implementation of CPI
                  Work, including taking split and/or duplicate samples;

                        (viii) during the term of this Agreement, CPI shall
                  provide to Varian: (x) data and other results from any
                  sampling or site investigative activity on the San Carlos
                  Property promptly and, in any event, within 2 business days
                  after receipt by CPI of such data or other results; (y) all
                  correspondence, notices, orders, permits and other documents
                  received by CPI from government agencies that relate to the
                  San Carlos Property and any environmental condition or
                  Hazardous Material; and (z) all correspondence and other
                  documents received by CPI from third parties that relate to
                  the San Carlos Property and any environmental condition or
                  Hazardous Material;

                        (ix) CPI shall preserve, retain and maintain, and
                  instruct all of its contractors, subcontractors, agents and
                  anyone else acting on its behalf to preserve, retain and
                  maintain, all records, correspondence, and other written
                  materials and all electronic files (collectively "Records")
                  generated in the performance of CPI Work and, at Varian's
                  request and expense, shall provide to Varian copies of such
                  Records, and CPI shall not destroy any such Records (unless a
                  copy of such Records has been provided to Varian) without
                  providing notice to Varian of CPI's intent to destroy such
                  Records and giving Varian the opportunity and reasonable time
                  to have a copy of such Records made for Varian at Varian's
                  expense; and

                        (x) if, during the term of this Agreement, Varian elects
                  to perform Varian response work, which is not a San Carlos
                  Varian Response Cost Seller Indemnified Environmental Claim,
                  Varian shall perform such work at its cost in accordance with
                  the terms and conditions of the Site Access Agreement, and if
                  Varian proposes to do such work in conjunction with CPI
                  implementation of any CPI Work, Varian shall cooperate and
                  coordinate with CPI and CPI shall provide Varian reasonable
                  time to implement such Work and shall cooperate and coordinate
                  with Varian in the performance of such Varian work, and,
                  should any such Varian work


                                      -5-
<PAGE>
                  increase the costs of any CPI Work, Varian shall pay CPI the
                  amount of such increased costs.

                  (e) Varian reimbursement payments pursuant to Sections
            2(b)(2)(b)(iii) & 2(b)(2)(d)(x) shall be paid within forty-five (45)
            days of receipt of CPI's invoices therefor accompanied by reasonably
            detailed documentation of the CPI payments for which reimbursement
            is sought, unless Varian elects to dispute such invoices.

                  (f) Varian shall have the right to audit CPI Work records from
            time to time, including invoices from CPI contractors, bids, and
            other financial information related to CPI implementation of CPI
            Work. Such audit shall be at Varian's expense. Varian may initiate
            an audit at any time within 12 months of receipt of an invoice, but
            no more often than annually, and the audit may relate to amounts
            paid by Varian as well as amounts not paid, and to all CPI Work for
            which reimbursement may be sought, whether such reimbursement is
            pursuant to Sections 2(b)(2)(b)(i), (ii) or (iii) or 2(b)(2)(d)(x).

                  (g) "San Carlos Seller Indemnified Environmental Claim" shall
            mean a "Seller Indemnified Environmental Claim" as that term is
            defined by the 1995 Stock Sale Agreement for Response Costs arising
            from or related to the San Carlos Property, but does not include any
            Seller Indemnified Environmental Claim that relates to or arises
            from Hazardous Materials located off-site from the San Carlos
            Property or for alleged bodily injury from exposure to Hazardous
            Materials prior to August 11, 1995, for which the parties remain
            responsible, as provided under the 1995 Stock Sale Agreement.

            (3) the Beverly Property restriction of Section 3(d)(2) of this
      Agreement will be effective for 30 years from the date the $250,000
      payment is made by Varian to CPI in accordance with Section 2(a) of this
      Agreement; and

            (4) only the requirements of this Section 2 and of Section 3(d)(2)
      of this Agreement, as modified by this Section 2, and Sections 4 through
      23 of this Agreement shall apply pursuant this Agreement.

      3. RAP APPROVED BY RWQCB. If, within 245 days after the Effective Date of
the Five Party Agreement (provided that if Varian grants an extension pursuant
to the Five Party Agreement for this RAP approval by the RWQCB that extends
beyond this 245 day period, Varian will grant an equivalent extension under this
Agreement), the RWQCB approves the RAP as set out in Sections III C(1) and XIX
of the Five Party Agreement, then, on the date that the RWQCB approves the RAP,
Sections 1 and 2 of this Agreement shall not apply and the terms and conditions
of this Section 3 and Sections 4 through 23 of this Agreement shall apply.

      (a)   SURVIVAL.

             (1) As modified and supplemented by this Agreement, the 1995 Stock
      Sale Agreement remains in full force and effect.


                                      -6-
<PAGE>
             (2) The 1995 Site Access Agreement remains in full force and
      effect, other than with respect to the San Carlos Property as to which the
      1995 Site Access Agreement remains in full force and effect only until the
      date title to the San Carlos Property is transferred from CPI to 301 or
      PAMF or any permitted transferee in accordance with the Five Party
      Agreement. With respect to the San Carlos Property, CPI and Varian agree
      that CPI shall not assign to 301 or PAMF, or to any affiliate of PAMF or
      other permitted assignee of PAMF or 301 under the Five Party Agreement,
      any rights or obligations that CPI has under the 1995 Site Access
      Agreement.

      (b)   VARIAN FINANCIAL CONTRIBUTION.  Varian shall pay CPI:

            (1) $500,000: (y) $250,000 of which amount shall be the payment that
      Varian made to CPI pursuant to Section 2(a) of this Agreement; and (z) the
      remaining $250,000 shall be paid to CPI by Varian within thirty (30) days
      after the date that the RWQCB approves the RAP as set out in Section III
      C(1) of the Five Party Agreement; and

            (2) $500,000 within thirty (30) days after the date that title to
      the San Carlos Property is transferred from CPI to 301 or PAMF or any
      permitted transferee in accordance with the Five Party Agreement.

      (c)   CPI/VARIAN COST SHARING


             (1) CPI agrees to reimburse Varian for 50% of any and all
      reasonable out-of-pocket payments by Varian (excluding any Varian internal
      costs) as a result of losses, damages, claims, costs and expenses,
      interest, awards, judgments and penalties (including reasonable legal fees
      and costs) arising out of claims by a third party ("Claims") relating to
      Hazardous Materials at, on, or under the San Carlos Property, arising out
      of or directly or indirectly resulting from exposures that occur, or
      personal, property or other damage (including environmental response
      action costs) that is suffered, after the date the RWQCB approves the RAP
      as set out in Section III C(1) of the Five Party Agreement and that are
      not reimbursed to Varian by the Insurance Policy to be obtained by PAMF
      and/or 301 pursuant to the Five Party Agreement, other than Claims arising
      out of or relating to the presence offsite of Hazardous Materials that
      migrated offsite from the San Carlos Property and provided, however, that
      Varian shall bear no liability, responsibility, or obligation for any
      Claims relating to or arising from CPI actions to implement Section V: C,
      D, E & J of the Five Party Agreement. With respect to CPI's obligation to
      reimburse Varian pursuant to this section, CPI and Varian agree diligently
      to take such actions as are commercially reasonable to enforce the
      environmental response action obligations of 301 and/or PAMF, or their
      contractors or agents, established by the Five Party Agreement and to
      obtain insurance proceeds under the Insurance Policy described in the Five
      Party Agreement for such Claims and to inform each other in writing of the
      results of their actions and of Varian's entitlement to reimbursement
      pursuant to this Section 3(c)(1). In such event, CPI shall be subrogated,
      with respect to any amounts reimbursed by it pursuant to this Section
      3(c)(1), to all of Varian's rights under such Insurance Policy to the
      extent of reimbursement of Varian by CPI.


                                      -7-
<PAGE>
             (2) Any contractors retained by Varian, for whose costs Varian
      seeks reimbursement pursuant to this Section 3(c), shall be non-affiliated
      third party contractors whom Varian retains pursuant to arms length, bona
      fide negotiations to perform work required to be performed pursuant to
      Section 3(c)(1).


             (3) With respect to any Claim that involves cleanup, removal,
      treatment, response, remedial, investigation, monitoring or similar
      actions (including, without limitation, enforcement concerning such
      actions) ("environmental response actions"):


                    (a) Varian shall give good faith consideration to CPI
             comments on any written work plans prepared by Varian for
             environmental response actions and shall use commercially
             reasonable efforts to reach agreement with CPI on the final work
             plans and their recommendations.


                    (b) Varian shall allow CPI or its agents to participate in
             any discussions and/or meetings that Varian has with the
             governmental agency with jurisdiction for the environmental
             response actions, including, to the extent possible, in any
             emergency situation, and to present CPI's views and recommendations
             to that government agency concerning the work plans and the
             environmental response actions.


             (4) CPI reimbursement payments pursuant to this Section 3(c) shall
      be paid within forty-five (45) days of receipt of Varian's invoices
      therefor accompanied by reasonably detailed documentation of the Varian
      payments for which reimbursement is sought, unless CPI elects to dispute
      such invoices.

             (5) CPI shall have the right to audit Varian's records relating to
      work for which reimbursement is sought pursuant to this Section 3(c) from
      time to time, including invoices from Varian contractors, bids, and other
      financial information related to Varian implementation of such work. Such
      audit shall be at CPI's expense. CPI may initiate an audit at any time
      within 12 months of receipt of an invoice, but no more often than
      annually, and the audit may relate to amounts paid by CPI as well as
      amounts not paid.

             (6) There is hereby excepted from the indemnities by Varian under
      Article X of the 1995 Stock Sale Agreement, and such indemnities shall not
      apply to, any Claim, relating to Hazardous Materials at, on, or under the
      San Carlos Property, that results from exposure occurring, or personal,
      property or other damage (including environmental response action costs)
      suffered, after the approval by the RWQCB of the RAP as set out in Section
      III C(1) of the Five Party Agreement, other than Claims arising out of or
      relating to the presence offsite of Hazardous Materials that migrated
      offsite from the San Carlos Property which Claims shall be governed by the
      1995 Stock Sale Agreement.

             (7) Upon the transfer of title to the San Carlos Property from CPI
      to 301 or PAMF or any permitted transferee in accordance with the Five
      Party Agreement, there is


                                      -8-
<PAGE>
      hereby excepted from the indemnities by CPI under Article X of the 1995
      Stock Sale Agreement, and such indemnities shall not apply to any Claim,
      relating to Hazardous Materials at, on, or under the San Carlos Property,
      that results from exposure occurring, or personal, property or other
      damage (including environmental response action costs) suffered, after the
      date of transfer of the San Carlos Property by CPI to 301 or PAMF or any
      permitted transferee in accordance with the Five Party Agreement, other
      than Claims arising out of or relating to the presence offsite of
      Hazardous Materials that migrated offsite from the San Carlos Property
      which Claims shall be governed by the 1995 Stock Sale Agreement.

      (d)   USE OF PROPERTIES.

             (1) San Carlos Property: Subject to the condition that the Five
      Party Agreement becomes effective, then, effective on the date that title
      to the San Carlos Property is transferred from CPI to 301 or PAMF or any
      permitted transferee in accordance with the Five Party Agreement, Sections
      7.11 and 10.5(d) of the 1995 Stock Sale Agreement as they apply to the San
      Carlos Property and the 1995 Site Access Agreement as it applies to the
      San Carlos Property will be terminated automatically without any further
      action. Varian waives any claims relating to the investigative actions
      taken and submissions to governmental agencies by PAMF, 301, CPI, or their
      agents that were undertaken during the period from June 1, 2002 to the
      present and that were previously disclosed in writing to Varian, excluding
      any Claims relating to physical damage to the San Carlos Property that may
      have been caused by such actions.

              (2) Beverly Property:

                    (a) Neither CPI nor any subsequent owner of the Beverly
              Property shall, during the period of its ownership, develop (or
              permit the development of) the Beverly Property for Unrestricted
              Uses. For purposes of this Agreement, the term "Unrestricted Uses"
              means residential housing, children facilities (e.g., daycare,
              K-12 schools, preschools, playgrounds), elderly facilities (e.g.,
              nursing homes, hospices, convalescent homes, senior centers,
              assisted living facilities), places of worship, hotels, motels,
              hospitals, skilled nursing facilities, facilities for medical
              procedures, and similar sensitive receptors. CPI and subsequent
              owners of the Beverly Property may develop (or permit the
              development of) the Beverly Property for uses other than
              Unrestricted Uses.

                    (b) If CPI develops the Beverly Property for a use other
              than Unrestricted Uses, the rights and obligations of the parties
              with respect to the Response Costs required for such development
              shall be as stated in the 1995 Stock Sale Agreement (including
              without limitation those relating to or arising out of Hazardous
              Materials located off-site from the Beverly Property or for
              alleged bodily injury from exposure to Hazardous Materials prior
              to August 11, 1995), except that CPI shall be responsible for 50%
              of the Incremental Varian Response Costs. "Incremental Varian
              Response Costs" means the excess, if any, of (x) the Response
              Costs required for such development which are allocable to Varian
              under the 1995 Stock Sale Agreement over (y) the


                                      -9-
<PAGE>
              Response Costs (adjusted for inflation) that would have been
              required to develop such use as of the Effective Date of this
              Agreement, as established by the governmental agency with
              jurisdiction for Response Cost actions at the Beverly Property,
              which are allocable to Varian under the 1995 Stock Sale Agreement.
              The procedures applicable to reimbursement for such 50/50 cost
              sharing shall be those set out in Sections 3(c)(4)&(5).

                    (c) CPI shall not extract or use in any way the groundwater
              at the Beverly Property at any time, except as required by any
              Governmental Authority or as allowed by Varian.

                    (d) CPI shall record against the Beverly Property with
              appropriate Governmental Authorities such acknowledgements, deed
              restrictions, and/or deed notices as are reasonably requested by
              Varian in furtherance of this Section 3(d)(2).

                    (e) CPI shall require any direct successor(s) or assign(s)
              to CPI's interest in the Beverly Property to assume the covenants
              and obligations of CPI set forth in this Section 3(d)(2),
              including this Section 3(d)(2)(e) as to any of its direct
              successors and assigns (and this Section 3(d)(2)(e) shall
              similarly apply to all successive transfers without limit of time)
              and if such party assumes the covenants and obligations of this
              Section 3(d)(2) and CPI provides Varian with written documentation
              of such assumption, CPI is then released from such covenants and
              obligations. Such assumption shall not, however, entitle such
              party to enforce CPI's rights under this Section 3(d)(2).

        (e) RELATIONSHIP TO FIVE PARTY AGREEMENT. Prior to transfer of the San
  Carlos Property by CPI to 301 or PAMF or any permitted transferee, if the
  performance by CPI and/or Varian of an obligation established by the Five
  Party Agreement would be inconsistent with an obligation or obligations
  established by the 1995 Site Access Agreement, then the performance of such
  obligation pursuant to the Five Party Agreement shall not be deemed a breach
  of the 1995 Site Access Agreement.

      4. REPRESENTATIONS. CPI and Varian each represents and warrants to the
other that except as expressly permitted by the CPI/Varian Agreements (or with
the other's prior consent), each has never, by operation of law or otherwise,
transferred or purported to transfer to any other third party, or conveyed or
purported to convey to any third party any right or interest in or to, any of
its rights under the CPI/Varian Agreements as applicable to the San Carlos
Property.

      5. NO ADMISSION OF LIABILITY. It is understood and agreed by each Party
that nothing in this Agreement shall constitute or be considered an admission or
concession of liability by either party.

      6. TAXES. Each Party agrees that any tax that may be payable on the
consideration received pursuant to this Agreement by a Party is the sole
responsibility of such Party receiving such consideration. The Parties agree
that any liability or claim for any tax or other governmental contribution or
any penalty or interest thereon that may be incurred or demanded


                                      -10-
<PAGE>
as a result of the receipt of the consideration provided for in this Agreement
shall be the responsibility of such Party receiving such consideration.

      7. UNDERSTANDING. The Parties confirm that they have read this Agreement,
fully understand its terms and their effect, and sign this Agreement voluntarily
and with the intention of being legally bound thereby. The Parties understand
that they are waiving legal rights by signing this Agreement and have consulted
with counsel before signing this Agreement.

      8. ENTIRE AGREEMENT. This Agreement amends and modifies the 1995 Stock
Sale Agreement and the 1995 Site Access Agreement and to the extent that this
Agreement is inconsistent with either the 1995 Stock Sale Agreement or the 1995
Site Access Agreement, the terms of this Agreement shall control. Except as
modified by this Agreement, the 1995 Stock Sale Agreement and the 1995 Site
Access Agreement remain in full force and effect. This Agreement and the Five
Party Agreement contain all of the terms, promises, representations, and
understanding between the Parties relating to the subject matter of this
Agreement, and supersede any other oral or written agreement or understanding
between the Parties regarding the subject matter of this Agreement. Each Party
agrees that no promises, representations or inducements have been made to it
which caused it to sign this Agreement other than the promises which are
expressly set forth herein or in the Five Party Agreement.

      9. NOTICE. Any notice, request, delivery, approval, consent or report
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been sufficiently given when delivered in person,
transmitted by commercial overnight courier, or transmitted by telecopy to the
Party to whom it is directed at the address shown below or such other address as
such Party shall have last given notice to the other Party.

      CPI                   Communications & Power Industries, Inc.
                            811 Hansen Way
                            Palo Alto, California 94303
                            Attn:  Chief Financial Officer
                            Facsimile:  650-846-3276
                            Telephone:  650-846-2801

      With a copy to:       Irell & Manella, LLP
                            1900 Avenue of the Stars, Suite 900
                            Los Angeles, California 90067
                            Attn:  Rick Wirthlin
                            Facsimile:  310 203-7199
                            Telephone:  310 277-1010


                                      -11-
<PAGE>
      Varian                Varian Medical Systems, Inc.
                            3100 Hansen Way
                            Palo Alto, California 94304
                            Attn:  Legal Department
                            Facsimile:  650-424-5998
                            Telephone:  650-493-4000


      And                   Varian Medical Systems, Inc.
                            3100 Hansen Way
                            Palo Alto, California 94304
                            Attn:  Environmental, Health & Safety Department
                            Facsimile:  650-842-5199
                            Telephone:  650-424-6060

      10. SEVERABILITY. If one or more provisions of this Agreement is (or are)
determined by a panel of arbitrators to be invalid, void or unenforceable under
applicable law as applied in a particular circumstance, the Parties agree to
renegotiate such provision (or provisions) in good faith. In the event that the
Parties cannot reach a mutually agreeable and enforceable replacement for each
such provision, then (i) such provision shall be excluded from this Agreement
with respect to such circumstance, (ii) the balance of this Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of this
Agreement shall be enforceable in accordance with its terms.

      11. AMENDMENTS; WAIVERS. No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, shall be effective
unless in writing signed by the Parties to by bound by such modification,
amendment or waiver. The failure by a Party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such Party.

      12. RULES OF CONSTRUCTION. This Agreement is the result of negotiations
between the Parties and has been reviewed by each Party and their respective
counsel; accordingly, this Agreement shall be deemed to be the product of all of
the Parties, and no ambiguity shall be construed in favor of or against a Party.

      13. ASSIGNMENT. Subject to Section 3(d)(2) of this Agreement, the rights,
benefits and obligations of this Agreement shall inure to the benefit of, be
enforceable by, and be binding on each Party's successors and permitted assigns,
to the same extent as set forth in Section 14.6 of the 1995 Stock Sale
Agreement.

      14.   COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, which may be delivered by electronic facsimile or other
means of electronic transmission, each of which shall constitute an
original, and all of which shall constitute one and the same document.


                                      -12-
<PAGE>
      15.   EXECUTION.  This Agreement shall not be binding in whole or
in part upon a Party unless and until executed and delivered by or on
behalf of the Parties, in which event this Agreement shall be effective
as of the Effective Date.

      16.   HEADINGS.  The headings in this Agreement are inserted for
convenience only and are in no way intended to describe, interpret,
define, or limit the scope, extent or intent of this Agreement or any
provision hereof.

      17.   GOVERNING LAW.  This Agreement and its interpretation shall
be governed exclusively by its terms and by the laws of the State of
California, without regard to principles of conflicts of laws.

      18. COMPLIANCE WITH LAW. In their performance of their obligations under
this Agreement, each of the parties hereto agrees to comply with Environmental
Laws and with all other laws, regulations, and orders of Relevant Agencies which
may be applicable to the performance of this Agreement.

      19.   DISPUTE RESOLUTION.  The dispute resolution provision of the
1995 Stock Sale Agreement, Section 14.13, shall apply to this Agreement.

      20. AUTHORITY. The Parties to this Agreement, and the individuals signing
this Agreement on behalf of the Parties, represent and warrant that they have
full and complete authority and authorization to execute and effect this
Agreement and to take or cause to be taken all acts contemplated by this
Agreement.

      21. INDEPENDENT PARTIES. Nothing in this Agreement shall be construed to
create a relationship of employer and employee, partnership, principal and
agent, joint venture or similar arrangement between CPI and Varian, nor shall
either party have responsibility for compliance by the other with applicable
laws, regulations, or orders of governmental agencies, or for any other acts,
errors or omissions of the other.

      22. EXCLUSIVE REMEDIES. The rights and remedies provided for in this
Agreement are exclusive of all other rights and remedies, at law or in equity or
pursuant to any statute or regulation, including without limitation CERCLA,
other than those rights and remedies expressly set forth in the CPI/Varian
Agreements, to the extent not modified or terminated pursuant to this Agreement.

      23. THIRD PARTIES. This Agreement is solely for the benefit of Varian and
CPI and no third party shall have any rights hereunder, including without
limitation any subrogation rights with respect thereto, other than as expressly
provided in this Agreement or the 1995 Stock Sale Agreement. Where multiple
sources of reimbursement are or may be available for specified costs,
reimbursement shall be made in the following priorities:

      (i) reimbursement shall be sought under the Insurance Policy
described in the Five Party Agreement to the extent set forth herein;

      (ii) any remaining unreimbursed costs shall be reimbursed by the
other party to the extent set forth herein;


                                      -13-
<PAGE>
      (iii) any remaining unreimbursed costs shall be reimbursed by affiliated
parties, former affiliated parties or insurers (other than the insurers under
the Insurance Policy described in the Five Party Agreement) to the extent the
party initially bearing such costs is entitled to such reimbursement.

                            [signature page follows]


                                      -14-
<PAGE>
      IN WITNESS WHEREOF, the undersigned have executed this Modification
Agreement freely and voluntarily intending to be legally bound by it.



                              VARIAN MEDICAL SYSTEMS, INC.



                              By: ________________________________________

                              Name:____________________________________
                              Title:  ____________________________________


                              COMMUNICATIONS & POWER INDUSTRIES, INC.



                              By: ________________________________________

                              Name:____________________________________
                              Title:  ____________________________________


                                      -15-

</TEXT>
</DOCUMENT>
