Cache Needs Decryption error

This error occurs when you try to run the SDK without having ever launched Half-Life 2.

To fix this error:

1. Run Half-Life 2 from Steam's Play Games window.
2. Run the Source SDK from Steam's Play Games window.
3. If the problem is not resolved, repeat these steps running Counter-Strike: Source and Half-Life 2: Deathmatch.

Running these applications causes them to validate and repair any cache problems they may have.