VARIAN ASSOCIATES INC /DE/, DEF 14A, 1994-12-27

VARIAN ASSOCIATES INC /DE/
DEF 14A, 1994-12-27
ELECTRONIC COMPONENTS & ACCESSORIES

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<PAGE> 1

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant / /
Filed by a Party other than the Registrant /X/

Check the appropriate box:

/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12

Varian Associates, Inc.
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

Varian Associates, Inc.
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:

4) Proposed maximum aggregate value of transaction:

Set forth the amount on which the filing fee is calculated and state how it
was determined.

/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:
<PAGE> 2

[VARIAN WITH LOGO IN P.M.S.-298 BLUE]

VARIAN ASSOCIATES, INC.

WORLD HEADQUARTERS

3050 HANSEN WAY

PALO ALTO, CALIFORNIA 94304-1000

(415) 493-4000

December 27, 1994

Dear Stockholder:

It is our pleasure to invite you to your Company's Annual Meeting of
Stockholders to be held on Thursday, February 16, 1995, at 1:30 p.m.

The Secretary's formal notice of the meeting and the Proxy Statement appear
on the following pages and describe the matters to be acted upon at the meeting.
During the meeting, time will be provided for a review of activities of the past
year and items of general interest about the Company.

We hope that you will be able to attend the meeting in person. However, if
you cannot attend, or if you plan to be present but want the Proxy holders to
vote your shares, please complete, sign and return the enclosed Proxy at your
earliest convenience.

Sincerely,

(SIG)

J. TRACY O'ROURKE
Chairman of the Board
and Chief Executive Officer
<PAGE> 3

[VARIAN WITH LOGO IN P.M.S.-298 BLUE]

VARIAN ASSOCIATES, INC.
------------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON FEBRUARY 16, 1995

The Annual Meeting of Stockholders of Varian Associates, Inc., a Delaware
corporation, will be held at the Santa Clara Convention Center Theater, 5001
Great America Parkway, Santa Clara, California, on Thursday, February 16, 1995,
at 1:30 p.m., for the following purposes:

1. To elect five members of the Company's Board of Directors for three-year
terms;

2. To approve amendments to the Omnibus Stock Plan;

3. To approve the Management Incentive Plan; and

4. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.

The Board of Directors fixed December 19, 1994 as the record date for the
Annual Meeting, and only stockholders of record at the close of business on that
date are entitled to receive notice of and vote at the Annual Meeting and any
adjournment or postponement thereof. In accordance with Delaware law, a list of
the Company's stockholders entitled to vote at the Annual Meeting will be
available for examination by any stockholder for any purpose germane to the
Annual Meeting during normal business hours at the Company's offices at 3050
Hansen Way, Palo Alto, California, for ten days prior to the Annual Meeting.

It is important that your stock be represented at the Annual Meeting to
assure a quorum. Whether or not you now expect to be present at the Annual
Meeting, please complete, sign and date the enclosed Proxy and mail it promptly
in the accompanying addressed envelope, which requires no postage if mailed in
the United States. The Proxy is revocable at any time before it is voted in the
manner described in the accompanying Proxy Statement, and submitting your Proxy
now will not affect your right to vote in person if you attend the Annual
Meeting.
By Order of the Board of Directors

(SIG)

JOSEPH B. PHAIR
Secretary
December 27, 1994
Palo Alto, California
<PAGE> 4

VARIAN ASSOCIATES, INC.

3050 HANSEN WAY
PALO ALTO, CALIFORNIA 94304-1000

------------------------------

PROXY STATEMENT

ANNUAL MEETING TO BE HELD ON FEBRUARY 16, 1995

This Proxy Statement is being furnished to the stockholders of Varian
Associates, Inc., a Delaware corporation ("Company"), in connection with the
solicitation by the Board of Directors of the Company of Proxies for use at the
Annual Meeting of Stockholders to be held on February 16, 1995 and at any
adjournment or postponement thereof ("Annual Meeting"). Shares represented by
Proxies received in time for the Annual Meeting will be voted in accordance with
the instructions set forth on the Proxy. Where no instructions are indicated,
such Proxies will be voted FOR the Board of Directors' nominees for directors,
FOR approval of the amendments to the Omnibus Stock Plan and FOR approval of the
Management Incentive Plan. If any other business is properly brought for action
at the Annual Meeting, the Proxies will be voted in accordance with the judgment
of the Proxy holders as to the best interests of the Company. The Board of
Directors does not know of any matters to be brought before the Annual Meeting
other than those described in this Proxy Statement. This Proxy Statement and the
accompanying form of Proxy were first sent or given to stockholders on or about
December 27, 1994.

Any person executing a Proxy may revoke it at any time prior to its
exercise by (a) filing with Joseph B. Phair, the Company's Secretary (at the
Company's address set forth above), prior to the Annual Meeting a written notice
of revocation, (b) executing and duly delivering prior to the Annual Meeting a
subsequent Proxy bearing a later date, or (c) attending the Annual Meeting and
voting in person.

The cost of soliciting Proxies will be borne by the Company. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries and
custodians to forward to beneficial owners of the Company's common stock held in
their names. Such persons will be reimbursed for their reasonable out-of-pocket
expenses. In addition to solicitations by mail, some of the Company's directors,
officers and other employees, without extra remuneration, may supplement this
solicitation by letter, telegraph, telephone or personal interview. The Company
retained The First National Bank of Boston, Blue Hills Office Park, 150 Royall
Street, Canton, Massachusetts 02021, as the Company's transfer agent and to
provide certain shareholder services, including assistance with the solicitation
of Proxies from brokers, bank nominees and other holders of the Company's common
stock, all for a fixed retainer fee (none of which is allocated to solicitation
services) plus reasonable out-of-pocket expenses. It is anticipated that the
Bank would in turn retain or use (without expense to the Company) the services
of Corporate Investor Communications, Inc., 111
<PAGE> 5

Commerce Road, Carlstadt, New Jersey 07072-2586, to assist with solicitation of
Proxies from brokers, bank nominees and other holders.

As of the close of business on the record date of December 19, 1994, there
were 33,830,732 shares of the Company's common stock outstanding. The Company
effected a 2-for-1 stock split in the form of a 100% stock dividend on March 3,
1994, and all share numbers reported in this Proxy Statement reflect that split.
No shares of any other class of stock are outstanding. Each share of common
stock outstanding at the close of business on such record date is entitled to
one vote with respect to matters to be voted on, except that cumulative voting
applies with respect to the election of directors. Under the cumulative voting
method of election, the stockholder computes the number of votes available to
him or her by multiplying the number of shares he or she owned on the record
date by the number of directors to be elected, and may cast the votes all for a
single nominee or may distribute them in any manner among the nominees.
Discretionary authority to cumulate votes in the manner determined by the Proxy
holders is hereby solicited. The presence in person or by proxy of the persons
entitled to vote a majority of the shares of the Company's common stock at the
Annual Meeting constitutes a quorum. Although abstentions are counted and broker
non-votes are not counted in tabulations of the votes cast on proposals
presented to stockholders, abstentions and broker non-votes will have no effect
upon the election of directors because the five nominees receiving the highest
number of votes will be elected as directors.

ELECTION OF DIRECTORS

The Board of Directors consists of 15 members. Pursuant to the Company's
Restated Certificate of Incorporation, the Board is divided into three classes
and five persons are elected each year for three-year terms. The Board nominates
five persons each year for consideration for election by the stockholders.

The following five persons have been nominated by the Board of Directors
for election at the Annual Meeting for terms expiring at the Annual Meeting of
Stockholders in 1998 and when their respective successors are elected and
qualified: Samuel Hellman; Terry R. Lautenbach; Gordon E. Moore; David E.
Mundell; and Philip J. Quigley.

Certain data with respect to each nominee for director and each director in
the classes continuing in office beyond the Annual Meeting appears on the
following pages. Stock ownership data is determined as of December 1, 1994. With
the exception of Mr. O'Rourke, who is deemed to beneficially own 1.99% of the
Company's common stock outstanding as of December 1, 1994 (see the table below
under the caption "Stock Ownership of Certain Beneficial Owners"), the
beneficial ownership of common stock by each director and each nominee for
director represents less than 1% of the aggregate number of shares issued and
outstanding as of such date.

2
<PAGE> 6

The nominees for directors have indicated their willingness to serve if
elected. The Company does not contemplate that any nominee will be unable to
serve. However, in the event that any nominee declines or becomes unable to
serve, Proxies will be voted for the remainder of the nominees and such
substitute nominee as shall be designated by the Proxy holders in their
discretion and in such order of preference as the Proxy holders may determine
and to the exclusion of others.
- - - --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
PRINCIPAL OCCUPATION OR EMPLOYMENT, OWNED ON
FIVE-YEAR EMPLOYMENT HISTORY AND DIRECTOR DECEMBER 1,
OTHER DIRECTORSHIPS SINCE 1994(1)
<S> <C> <C>
- - - ---------------------------------------------------------------------------------------------
NOMINEES FOR TERMS EXPIRING IN 1998
SAMUEL HELLMAN 1992 4,600(2)
Dr. Hellman is the A. N. Pritzker Distinguished Service
Professor in the Department of Radiation and Cellular Oncology
at the University of Chicago, a position he has held since 1993.
From 1988 to 1993, he was Dean of that University's Division of
Biological Sciences and its Pritzker School of Medicine, Vice
President of the University's Medical Center, and the A. N.
Pritzker Professor in the Department of Radiation and Cellular
Oncology. Age: 60
- - - ----------------------------------------------------------------
TERRY R. LAUTENBACH 1993(3) 4,400(4)
Mr. Lautenbach is former Senior Vice President of International
Business Machines Corporation (a computer systems company), a
position he held from 1988 until his retirement from IBM in
1992. He was general manager of IBM United States from 1988
until 1990, was responsible for IBM's worldwide manufacturing
and development and North American marketing and services from
1990 to 1992, and served on IBM's Management Committee in 1991
and 1992. Mr. Lautenbach is a director of Air Products and
Chemicals, Inc. and Melville Corporation, and is a trustee of
Loomis Sayles Mutual Funds. Age: 56
- - - ----------------------------------------------------------------
GORDON E. MOORE 1983 11,000(5)
Dr. Moore is Chairman of the Board of Intel Corporation (a
computer components and systems manufacturer), a position he
has held since 1979. He is a director of Transamerica
Corporation. Age: 65
</TABLE>

- - - --------------------------------------------------------------------------------
(1) Unless otherwise indicated, consists of shares as to which the director or
nominee has sole voting and/or investment power (subject to community
property laws and direct holdings with spouses in broker accounts).
(2) Includes 4,000 shares which may be acquired under exercisable stock options
granted pursuant to the Omnibus Stock Plan.
(3) On May 21, 1993, Mr. Lautenbach was appointed by the Board of Directors to
complete the three-year term of Tokuo Kubo, who resigned from the Board of
Directors effective May 21, 1993, before completion of his term, which
would have otherwise expired at the Annual Meeting.
(4) Includes 2,000 shares which may be acquired under exercisable stock options
granted pursuant to the Omnibus Stock Plan.
(5) Includes 8,000 shares which may be acquired under exercisable stock options
granted pursuant to the Omnibus Stock Plan.

3
<PAGE> 7

- - - --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
PRINCIPAL OCCUPATION OR EMPLOYMENT, OWNED ON
FIVE-YEAR EMPLOYMENT HISTORY AND DIRECTOR DECEMBER 1,
OTHER DIRECTORSHIPS SINCE 1994
<S> <C> <C>
- - - ---------------------------------------------------------------------------------------------
DAVID E. MUNDELL 1992 6,600(1)
Mr. Mundell is Chairman of the Board of ORIX USA Corporation and
Advisor (a board-level position) to ORIX Corporation (both
financial services companies), positions he has held since
1991. He served as Chairman of the Board of United States
Leasing International, Inc. (a financial services company) from
1988 to 1990, and as its Chief Executive Officer from 1976 to
1989. Mr. Mundell is a director of Commodities Corporation, ORIX
Commercial Alliance Corporation and Beazer Homes Inc. Age: 63
- - - ----------------------------------------------------------------
PHILIP J. QUIGLEY 1992 5,200(2)
Mr. Quigley is Chairman of the Board, President and Chief
Executive Officer of Pacific Telesis Group (a diversified
telecommunications company), positions he has held since 1994.
He also served as President and Chief Executive Officer of
Pacific Bell from 1987 to 1994, and as Group President of the
Bell Operating Companies and as a director of Pacific Telesis
from 1988 to 1994. Age: 52
- - - ----------------------------------------------------------------
DIRECTORS WHOSE TERMS EXPIRE IN 1997
RUTH M. DAVIS 1981 5,641(3)
Dr. Davis founded and is President and Chief Executive Officer
of The Pymatuning Group, Inc. (a technology management
company), a position she has held since 1981. She is a director
of Air Products and Chemicals, Inc., Ceridian Corporation,
Consolidated Edison Company of New York, Inc., Giddings & Lewis,
Inc., Premark International, Inc., Principal Mutual Life
Insurance Company, SofTech, Inc. and Sprint Corporation. Dr.
Davis is also Chairman of the Board of Aerospace Corporation and
a trustee of Consolidated Edison Company of New York. Age: 66
</TABLE>

- - - --------------------------------------------------------------------------------
(1) Includes (a) 2,400 shares held in a revocable trust of which Mr. Mundell is
co-trustee with his wife, and (b) 4,000 shares which may be acquired under
exercisable stock options granted pursuant to the Omnibus Stock Plan.

(2) Includes 4,000 shares which may be acquired under exercisable stock options
granted pursuant to the Omnibus Stock Plan.

(3) Rounded to the nearest whole share; includes 4,000 shares which may be
acquired under exercisable stock options granted pursuant to the Omnibus
Stock Plan.

4
<PAGE> 8

- - - --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
PRINCIPAL OCCUPATION OR EMPLOYMENT, OWNED ON
FIVE-YEAR EMPLOYMENT HISTORY AND DIRECTOR DECEMBER 1,
OTHER DIRECTORSHIPS SINCE 1994
<S> <C> <C>
- - - ---------------------------------------------------------------------------------------------
DAVID W. MARTIN, JR. 1994 200
Dr. Martin is President of Chiron Therapeutics and Senior Vice
President of Chiron Corporation (both bio-technology companies),
positions he has held since 1994. From 1990 through 1993 he was
Executive Vice President for Research and Development at The Du
Pont Merck Pharmaceutical Company (a pharmaceutical company).
He was Senior Vice President for Research and Development at
Genentech, Inc. (a bio-technology company) from 1983 to 1989,
and then served as a consultant to that company from 1989 to
1990. Age: 54
- - - ----------------------------------------------------------------
J. TRACY O'ROURKE 1990 686,500(1)
Mr. O'Rourke is Chairman of the Board and Chief Executive
Officer of the Company, a position he has held since 1990.
Prior to assuming those positions, he was Executive Vice
President and Chief Operating Officer of Rockwell International
Corporation (a diversified electronics company) from 1989 to
1990, and President of Allen-Bradley Company (a diversified
electronics company) from 1978 to 1989. Mr. O'Rourke is a
director of General Instrument Corporation and National
Semiconductor Corporation. Age: 59
- - - ----------------------------------------------------------------
DONALD O. PEDERSON 1986 9,200(2)
Dr. Pederson is Professor Emeritus and former Chairman of the
Department of Electrical Engineering and Computer Sciences at
the University of California, Berkeley, where he served as
Professor from 1955 to 1991. Age: 69
- - - ----------------------------------------------------------------
RICHARD W. VIESER 1991 8,800(3)
Mr. Vieser is the retired Chairman of the Board, Chief Executive
Officer and President of Lear Siegler, Inc. (a diversified
manufacturing company), positions he held from 1987 to 1989.
He is also the retired Chairman of the Board and Chief Executive
Officer of FL Industries, Inc. and FL Aerospace (formerly
Midland-Ross Corporation) (also diversified manufacturing
companies), positions he held from 1985 and 1986, respectively,
to 1989. Mr. Vieser is a director of Berg Electronics, Ceridian
Corporation, Dresser Industries, Inc., INDRESCO Inc. and Sybron
International. Age: 67
</TABLE>

- - - --------------------------------------------------------------------------------

(1) Includes (a) 13,334 shares of restricted stock granted pursuant to the
Omnibus Stock Plan, and (b) 620,000 shares which may be acquired on or
within 60 days of December 1, 1994 under stock options granted pursuant to
the 1982 Non-Qualified Stock Option Plan and the Omnibus Stock Plan.

(2) Includes (a) 1,200 shares held in a revocable trust of which Mr. Pederson is
co-trustee with his wife, and (b) 8,000 shares which may be acquired under
exercisable stock options granted pursuant to the Omnibus Stock Plan.

(3) Includes 6,000 shares which may be acquired under exercisable stock options
granted pursuant to the Omnibus Stock Plan.

5
<PAGE> 9

- - - --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
PRINCIPAL OCCUPATION OR EMPLOYMENT, OWNED ON
FIVE-YEAR EMPLOYMENT HISTORY AND DIRECTOR DECEMBER 1,
OTHER DIRECTORSHIPS SINCE 1994
<S> <C> <C>
- - - ---------------------------------------------------------------------------------------------
DIRECTORS WHOSE TERMS EXPIRE IN 1996
ANGUS A. MACNAUGHTON 1986 20,400(1)
Mr. MacNaughton is President of Genstar Investment Corporation
(a private investment company), a position he has held since
1987. He is a director of Genstar Capital Corporation, Canadian
Pacific Limited, Sun Life Assurance Co. of Canada Ltd., Sun Life
Assurance Company of Canada (U.S.), Sun Life Insurance and
Annuity Company of New York and Wolverine Tube, Inc. Mr.
MacNaughton is also Vice-Chairman of the Board of American
Barrick Resources Corporation. Age: 63
- - - ----------------------------------------------------------------
JOHN G. MCDONALD 1988 11,000(2)
Prof. McDonald is The Industrial Bank of Japan Professor of
Finance at Stanford University's Graduate School of Business,
where he has served since 1968. He is a director of American
Balanced Fund, Emerging Markets Growth Fund, Inc., EuroPacific
Growth Fund, The Growth Fund of America, Inc., The Income Fund
of America, Inc., The Investment Company of America, New
Perspective Fund, Inc., Scholastic Corp. and TriNet Corp. Age:
57
- - - ----------------------------------------------------------------
WILLIAM F. MILLER 1973 14,700(3)
Dr. Miller is Professor of Public and Private Management and
Professor of Computer Science at Stanford University, a position
he has held since 1979. He is also President Emeritus of SRI
International (a research and consulting company), where Dr.
Miller served as President from 1979 until 1990. Dr. Miller is a
director of First Interstate Bancorp, Pacific Gas and Electric
Company and Scios-Nova, Inc. Age: 69
- - - ----------------------------------------------------------------
BURTON RICHTER 1990 11,800(4)
Dr. Richter is Director of the Stanford Linear Accelerator
Center and Paul Pigott Professor in Physical Sciences at
Stanford University, positions he has held since 1984 and 1980,
respectively. Age: 63
</TABLE>

- - - --------------------------------------------------------------------------------

(1) Includes 8,000 shares which may be acquired under exercisable stock options
granted pursuant to the Omnibus Stock Plan.

(2) Includes 8,000 shares which may be acquired under exercisable stock options
granted pursuant to the Omnibus Stock Plan.

(3) Includes (a) 6,300 shares held in a revocable trust of which Dr. Miller is
co-trustee with his wife, and (b) 8,000 shares which may be acquired under
exercisable stock options granted pursuant to the Omnibus Stock Plan.

(4) Includes 8,000 shares which may be acquired under exercisable stock options
granted pursuant to the Omnibus Stock Plan.

6
<PAGE> 10

- - - --------------------------------------------------------------------------------

Stockholder suggestions of persons to be nominated by the Board for
election as a director should be in writing and sent to the Secretary,
Nominating Committee, c/o Chairman of the Board, at the Company's address set
forth above. Stockholder suggestions of potential nominees should reach the
Secretary of the Nominating Committee by May 15 in any given year in order to
receive consideration by that Committee for possible nomination by the Board for
election at the Annual Meeting of Stockholders in the following year.

Under the Company's Bylaws, nominations of persons for election as
directors may be made by a stockholder entitled to vote at an Annual Meeting of
Stockholders only if written notice of such stockholder's intent to make such
nomination is given by personal delivery or by United States mail, postage
prepaid, to the Company's Secretary not later than 60 days in advance of such
Annual Meeting, or in the case of a special meeting of stockholders for the
election of directors, not later than the close of business on the seventh day
following the date on which notice of such meeting is first given to
stockholders. The notice must set forth certain information concerning each
proposed nominee and the stockholder proposing each nominee, including their
respective names and addresses; a representation that such stockholder is a
holder of record of the Company's stock entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; a description of all arrangements or
understandings between the stockholder and each proposed nominee and any other
person pursuant to which the nomination is to be made by the stockholder; such
other information as would be required to be included in a proxy statement
soliciting proxies for the election of each proposed nominee; and the consent of
each proposed nominee to serve if elected. No such notice was received with
respect to the Annual Meeting. The chairman of the Annual Meeting may refuse to
acknowledge the nomination of any person which is not made in compliance with
the foregoing procedure.
- - - ------------

(1) Includes 2,000 shares which may be acquired under an exercisable stock
option granted pursuant to the Omnibus Stock Plan.

7
<PAGE> 11

ORGANIZATION AND COMPENSATION OF THE BOARD OF DIRECTORS

The Board of Directors has six standing committees: The Executive
Committee; the Audit and Corporate Responsibility Committee; the Finance
Committee; the Nominating Committee; the Organization and Compensation
Committee; and the Technology and Environmental Committee.

The Executive Committee consists of directors MacNaughton, McDonald, Miller
(Chairman), O'Rourke and Richter. The Committee is delegated all powers of the
Board of Directors, except certain powers reserved by law to the full Board, and
it meets between regular Board meetings when convening a full Board meeting is
impracticable. The Executive Committee held no meetings during fiscal year 1994.

The Audit and Corporate Responsibility Committee consists of directors
MacNaughton, McDonald (Chairman), Moore, Mundell and Pederson. This Committee is
the principal link between the Board of Directors and the Company's independent
auditors, works with the Company's internal and external auditors and counsel,
reviews the scope and results of internal and external auditing, and reviews
certain compliance policies and programs. The Audit and Corporate Responsibility
Committee held three meetings during fiscal year 1994.

The Finance Committee consists of directors Davis, MacNaughton (Chairman),
McDonald, Mundell and Vieser. This Committee works with the Company's finance
personnel to consider significant financial policies and actions of the Company,
and reviews financial matters requiring Board of Directors approval and
recommends action by the Board. The Finance Committee held four meetings during
fiscal year 1994.

The Nominating Committee consists of directors Davis, Martin, Miller,
Moore, Pederson (Chairman), Quigley and Richter. This Committee identifies and
recommends to the Board of Directors prospective candidates for nominees for
election to the Board, considers stockholder suggestions for Board nominees, and
recommends Board committee assignments to the Board. The Nominating Committee
held four meetings during fiscal year 1994.

The Organization and Compensation Committee consists of directors Hellman,
Lautenbach, MacNaughton, Miller (Chairman), Moore, Quigley, Stern and Vieser.
The Committee consults with management and advises the Board of Directors on
organizational matters, approves the Company's executive salary and compensation
structure, approves salary and compensation actions in excess of specified
levels, and is responsible for the administration of the Company's stock plans
and certain other employee compensation and benefit plans. The Organization and
Compensation Committee held four meetings during fiscal year 1994.

The Technology and Environmental Committee consists of directors Davis
(Chairman), Hellman, Lautenbach, Martin, Moore, Pederson, Richter and Stern.
This Committee reviews the Company's technological and research and development
activities, considers the Company's products from a technological perspective,
and reviews environmental and safety issues affecting the Company. The
Technology and Environmental Committee held four meetings during fiscal year
1994.

8
<PAGE> 12

The Board of Directors held four meetings during fiscal year 1994. Each
director attended at least 75% of the total number of meetings of the Board and
committees of the Board on which he or she served during fiscal year 1994.

Each director who is not a Company employee receives an annual retainer fee
of $19,000, plus $1,000 for each Board and committee meeting attended. Directors
chairing standing committees of the Board each receive an additional annual
retainer fee of $7,000. Under the Omnibus Stock Plan, each director who is not a
Company employee also receives annually (a) a fully-vested grant of 200 shares
of the Company's common stock, subject to payment to the Company of the
aggregate par value of such shares ($1 per share), and (b) a non-qualified stock
option (exercisable after one year from the date of grant) to acquire 2,000
shares of the Company's common stock.(1) Directors who are Company employees
receive no fees for their services as directors.
- - - ---------------

(1) The stock grant was increased from 100 to 200 shares following the 2-for-1
stock split in March 1994. The stock option was similarly increased from
1,000 to 2,000 shares, subject to stockholder approval at the Annual Meeting
of that amendment to the Omnibus Stock Plan (see below under the caption
"Proposal to Approve Amendments to the Omnibus Stock Plan").

9
<PAGE> 13

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information as of December 1, 1994
regarding beneficial ownership of the Company's common stock by (a) each person
who, to the Company's knowledge, beneficially owned more than 5% of the
outstanding shares, (b) each of the executive officers named in the Summary
Compensation Table below, and (c) all executive officers and directors as a
group (24 persons):
- - - --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
(IF APPLICABLE) OF BENEFICIAL OUTSTANDING
OF BENEFICIAL OWNER OWNERSHIP(#) SHARES(%)(1)
<S> <C> <C>
- - - -----------------------------------------------------------------------------------------
Fidelity Management and Research Corporation(2)........ 3,870,500 11.41%
82 Devonshire Street
Boston, MA 02109
Husic Capital Management(3)............................ 2,226,400 6.56
351 California Street, Suite 1100
San Francisco, CA 94104
J. Tracy O'Rourke(4)................................... 686,500 1.99
Chairman of the Board and Chief Executive Officer
Richard A. Aurelio(5).................................. 47,740 0.14
Executive Vice President
Allen J. Lauer(6)...................................... 198,610 0.58
Executive Vice President
Richard M. Levy(7)..................................... 89,230 0.26
Executive Vice President
Al D. Wilunowski(8).................................... 133,496 0.39
Executive Vice President
All Executive Officers and Directors as a Group(9)..... 1,436,795 4.10
</TABLE>

- - - --------------------------------------------------------------------------------

(1) Based on the 33,932,551 shares outstanding on December 1, 1994. The number
of outstanding shares for purposes of computing the respective percentages
shown for the named executive officers is the number of shares outstanding
on December 1, 1994 plus the shares which may be acquired by the named
executive officer on or within 60 days thereafter under stock options, and
the number of outstanding shares for purposes of computing the percentage
shown for all executive officers and directors as a group is the total
number of shares outstanding as of December 1, 1994 plus the shares which
may be acquired by those executive officers and directors on or within 60
days thereafter under stock options.

(2) Fidelity Management and Research Corporation reported on a Form 13(f)
beneficial ownership of 4,231,300 shares as of September 30, 1994, but
verbally reported to the Company beneficial ownership of 3,870,500 shares as
of December 5, 1994.

(3) Husic Capital Management reported on a Form 13(f) beneficial ownership of
2,405,100 shares as of September 30, 1994, but verbally reported to the
Company beneficial ownership of 2,226,400 shares as of December 3, 1994.

(4) Shares deemed beneficially owned by Mr. O'Rourke include (a) 13,334 shares
of restricted stock granted pursuant to the Omnibus Stock Plan, and (b)
620,000 shares which may be acquired on or within 60 days of December 1,
1994 under stock options granted pursuant to the 1982 Non-Qualified Stock
Option Plan and the Omnibus Stock Plan.

(5) Shares deemed beneficially owned by Mr. Aurelio include (a) 7,000 shares of
restricted stock granted pursuant to the Omnibus Stock Plan, (b) 36,000
shares which may be acquired on or within 60 days of December 1, 1994 under
stock options granted pursuant to the 1982 Non-Qualified Stock Option Plan
and the Omnibus Stock Plan, and (c) 318 shares owned by his minor son.

10
<PAGE> 14

(6) Shares deemed beneficially owned by Mr. Lauer include (a) 12,000 shares of
restricted stock granted pursuant to the Restricted Stock Plan and the
Omnibus Stock Plan, (b) 124,000 shares which may be acquired on or within 60
days of December 1, 1994 under stock options granted pursuant to the 1982
Non-Qualified Stock Option Plan and the Omnibus Stock Plan, and (c) 59,210
shares held in a revocable trust of which Mr. Lauer is co-trustee with his
wife.

(7) Shares deemed beneficially owned by Dr. Levy include (a) 12,000 shares of
restricted stock granted pursuant to the Restricted Stock Plan and the
Omnibus Stock Plan, (b) 68,000 shares which may be acquired on or within 60
days of December 1, 1994 under stock options granted pursuant to the 1982
Non-Qualified Stock Option Plan and the Omnibus Stock Plan, and (c) 5,830
shares held in a revocable trust of which Dr. Levy is co-trustee with his
wife.

(8) Shares deemed beneficially owned by Mr. Wilunowski include (a) 12,000 shares
of restricted stock granted pursuant to the Restricted Stock Plan and the
Omnibus Stock Plan, and (b) 99,000 shares which may be acquired on or within
60 days of December 1, 1994 under stock options granted pursuant to the 1982
Non-Qualified Stock Option Plan and the Omnibus Stock Plan.

(9) Includes (a) 70,434 shares of restricted stock granted to executive officers
pursuant to the Restricted Stock Plan and the Omnibus Stock Plan, (b)
1,121,765 shares which may be acquired on or within 60 days of December 1,
1994 by executive officers and directors under stock options granted
pursuant to the 1982 Non-Qualified Stock Option Plan and the Omnibus Stock
Plan, and (c) 81,648 shares as to which voting and/or investment power is
shared (see the footnotes and accompanying text above under the caption
"Election of Directors").

11
<PAGE> 15

CERTAIN EXECUTIVE OFFICER COMPENSATION AND OTHER INFORMATION

The following tables set forth certain information with respect to the
Company's chief executive officer and four other most highly compensated
executive officers for services rendered in all capacities to the Company for
the fiscal years indicated:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------------ -----------------------
OTHER SECURITIES PAYOUTS
ANNUAL RESTRICTED UNDERLYING ---------- ALL OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
NAME AND SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION
PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) ($)(4) (#)(5) ($)(6) ($)(7)
- - - ----------------------------- ------ -------- -------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Tracy O'Rourke............ 1994 $722,400 $930,417 $ 132,880 $ 492,500 60,000 $1,362,915 152,202
Chairman of the Board and 1993 699,794 491,193 130,380 0 60,000 968,087 136,534
Chief Executive Officer 1992 677,941 423,866 -- 242,969 50,000 770,648 --
Richard A. Aurelio........... 1994 295,024 350,811 16,952 258,563 30,000 469,312 47,665
Executive Vice President 1993 286,636 185,269 24,137 0 30,000 312,053 12,289
1992 271,132 120,615 -- 58,313 24,000 218,438 --
Allen J. Lauer............... 1994 291,594 385,980 17,903 258,563 30,000 550,785 53,821
Executive Vice President 1993 282,370 203,844 15,099 0 30,000 401,959 50,877
1992 276,006 176,211 -- 116,625 24,000 320,480 --
Richard M. Levy.............. 1994 291,594 385,980 18,482 258,563 30,000 550,785 53,804
Executive Vice President 1993 282,370 203,844 25,167 0 30,000 401,959 50,780
1992 276,006 176,211 -- 116,625 24,000 320,480 --
Al D. Wilunowski............. 1994 291,594 385,980 18,359 258,563 30,000 550,785 53,800
Executive Vice President 1993 282,370 203,844 19,323 0 30,000 401,959 50,758
1992 276,006 176,211 -- 116,625 24,000 320,480 --
</TABLE>

- - - ------------

(1) Amounts reported for Mr. Aurelio include $2,500 per month in mortgage
assistance payments pursuant to the terms of his retention (and which are
not part of his annual base salary).

(2) Consists of Management Incentive Plan awards and Cash Profit-Sharing Plan
allocations.

(3) Consists of amounts reimbursed for the payment of taxes on certain
perquisites and personal benefits. The amount reported for Mr. O'Rourke also
includes aggregate incremental costs of perquisites and personal benefits
provided to Mr. O'Rourke (including $61,433 and $37,615 for his use of the
Company-leased aircraft in fiscal years 1994 and 1993, respectively).

(4) Consists of two separates grants, one in November 1993 before the Company
established a performance-based measure (return on equity) for restricted
stock grants, and a performance-based grant in November 1994 based on the
Company's actual return on equity in fiscal year 1994. The November 1994
grant was made in fiscal year 1995, but is reported above for fiscal year
1994 as compensation relating to services rendered in that year. Restricted
stock awards listed in this column are released from restrictions over a
three-year period (approximately one-third of the award on each anniversary
of the date of grant), the principal restriction being continued employment
until the respective release dates. Dividends are paid on restricted stock.
The number and value (at $36.50 per share) of the aggregate restricted stock
holdings at the end of fiscal year 1994 were as follows: Mr. O'Rourke,
12,168 shares, $444,132; Mr. Aurelio, 5,200 shares, $189,800; Mr. Lauer,
11,200 shares, $408,800; Dr. Levy, 11,200 shares, $408,800; and Mr.
Wilunowski, 11,600 shares, $423,400. The numbers of shares of restricted
stock awarded in fiscal years 1994, 1993 and 1992, respectively, which
partially vest in under three years were as follows: Mr. O'Rourke, 16,000
shares, 0 shares, and 12,500 shares; Mr. Aurelio, 8,400 shares, 0 shares,
and 3,000 shares; Mr. Lauer, 8,400 shares, 0 shares, and 6,000 shares; Dr.
Levy, 8,400 shares, 0 shares, and 6,000 shares; and Mr. Wilunowski, 8,400
shares, 0 shares, and 6,000 shares. The shares reported are adjusted to
reflect the 2-for-1 stock split in March 1994.

(5) Consists of shares which may be acquired under stock options granted
pursuant to the Omnibus Stock Plan (no stock appreciation rights have been
granted). The shares reported are adjusted to reflect the 2-for-1 stock
split in March 1994.

12
<PAGE> 16

(6) Consists of cash payouts (a) in fiscal year 1995 under the long-term
incentive feature of the Omnibus Stock Plan for a three-year period ended
with fiscal year 1994; (b) in fiscal year 1994 under the long-term incentive
feature of the Omnibus Stock Plan for a three-year period ended with fiscal
year 1993; and (c) in fiscal year 1993 under the Omnibus Stock Plan for a
two-year period ended with fiscal year 1992. As used elsewhere in this Proxy
Statement, "LTIP" refers to the long-term incentive feature of the Omnibus
Stock Plan.

(7) Consists of (a) Company contributions (including interest) to Retirement and
Profit-Sharing Program and Supplemental Retirement Plan accounts for fiscal
years 1994 and 1993, respectively (Mr. O'Rourke, $132,224 and $113,727; Mr.
Aurelio, $46,555 and $11,018; Mr. Lauer, $52,600 and $49,481; Dr. Levy,
$52,583 and $49,384; and Mr. Wilunowski, $52,579 and $49,362); (b)
Company-paid premiums for group term life insurance in fiscal years 1994 and
1993, respectively (Mr. O'Rourke, $2,070 and $2,442; Mr. Aurelio, $1,110 and
$1,127; Mr. Lauer, $1,221 and $1,396; Dr. Levy, $1,221 and $1,396; and Mr.
Wilunowksi, $1,221 and $1,396); and (c) Company costs for supplemental
disability insurance in fiscal years 1994 and 1993, respectively, for Mr.
O'Rourke ($17,908 and $20,365).

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL POTENTIAL REALIZABLE VALUE
UNDERLYING OPTIONS/ AT ASSUMED ANNUAL RATES OF
OPTIONS/ SARS GRANTED STOCK PRICE APPRECIATION
SARS TO EMPLOYEES EXERCISE OR FOR OPTION TERM(3)
GRANTED IN FISCAL BASE PRICE EXPIRATION ------------------------------
NAME (#)(1) YEAR ($/SH)(2) DATE 5%($) 10%($)
- - - ------------------------ ---------- ------------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Tracy O'Rourke....... 60,000 5.17% $25.345 11/18/2000 $ 619,078 $ 1,442,714
Richard A. Aurelio...... 30,000 2.58 25.345 11/18/2000 309,539 721,357
Allen J. Lauer.......... 30,000 2.58 25.345 11/18/2000 309,539 721,357
Richard M. Levy......... 30,000 2.58 25.345 11/18/2000 309,539 721,357
Al D. Wilunowski........ 30,000 2.58 25.345 11/18/2000 309,539 721,357
All Optionees(4)........ 1,161,200 100 25.345 11,981,215 27,921,326
All Stockholders(5)..... 357,727,909 833,658,148
All Optionees' Gain as a 3.3% 3.3%
percentage of All
Stockholders' Gain....
</TABLE>

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
ACQUIRED VALUE FISCAL YEAR-END(#)(7) AT FISCAL YEAR-END ($)(8)
ON EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($)(6) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - ----------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Tracy O'Rourke............ 0 $ 0 663,333 256,667 $16,314,944 $5,220,606
Richard A. Aurelio........... 34,000 570,770 12,000 58,000 208,380 816,150
Allen J. Lauer............... 21,200 483,075 96,000 68,000 2,147,810 1,071,940
Richard M. Levy.............. 30,000 688,125 40,000 68,000 744,890 1,071,940
Al D. Wilunowski............. 5,000 110,937 71,000 68,000 1,516,375 1,071,940
</TABLE>

- - - ------------

(1) Consists of stock options, which were granted at an exercise price of 100%
of the market price of the underlying shares on the date of grant, become
exercisable over three years at the rate of approximately one-third each
year and expire not later than seven years from the date of grant. Payment
of the exercise price may be made under a promissory note or by delivery of
already-owned shares. The shares reported are adjusted to reflect the
2-for-1 stock split in March 1994.

(2) The exercise prices reported are adjusted to reflect the 2-for-1 stock split
in March 1994.

13
<PAGE> 17

(3) The 5% and 10% assumed annual rates of stock price appreciation would result
from per share prices of $35.66 and $49.39, respectively, at the end of
seven years. Such assumed rates are not intended to represent a forecast of
possible future appreciation of the Company's common stock or total
stockholder return.

(4) For "All Optionees," the number of options granted is the total of all
options granted to Company employees in fiscal year 1994, and the potential
realizable value is based on the $25.345 per share exercise price of the
options granted to the named executive officers on November 18, 1993, and a
seven-year option term (the term of all options granted to employees in
fiscal year 1994).

(5) For "All Stockholders," the potential realizable value is based on
seven-year appreciation of the 34,670,410 shares outstanding on November 18,
1993 and the $25.345 per share price of the options granted to the named
executive officers on that date.

(6) Based on the market price of the underlying shares on the exercise date.

(7) The shares reported are adjusted to reflect the 2-for-1 stock split in March
1994.

(8) Based on the market price of the underlying shares at the end of fiscal year
1994 ($36.50 per share).

LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR(1)

<TABLE>
<CAPTION>
PERFORMANCE
NUMBER OF OR OTHER
SHARES, PERIOD ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
UNITS OR UNTIL PRICE-BASED PLANS
OTHER RIGHTS MATURATION -----------------------------------------------
NAME (#) OR PAYOUT THRESHOLD($)(2) TARGET($)(3) MAXIMUM($)(4)
- - - --------------------- ------------- ---------- ---------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
J. Tracy O'Rourke.... N/A 1994-1996 $ 219,636 $ 431,219 --
Richard A. Aurelio... N/A 1994-1996 91,068 178,796 --
Allen J. Lauer....... N/A 1994-1996 91,068 178,796 --
Richard M. Levy...... N/A 1994-1996 91,068 178,796 --
Al D. Wilunowski..... N/A 1994-1996 91,068 178,796 --
</TABLE>

- - - ------------

(1) Determinations by the Committee that the named executive officers may
participate in the LTIP and might receive such compensation for any such
period is an award for purposes of this table. Awards (i.e., the
determination of participation in the LTIP) for the 1994-1996 period were
made in fiscal year 1994. Under the LTIP, each named executive officer may
receive compensation payable in cash or in common stock, or a combination
thereof, based upon the Company's achievement of objectives for average
annual return on net assets ("RONA") over a three-year period. No estimate
or assumption made in connection with this table is intended to represent a
forecast of possible future performance of the Company.

(2) If the minimum level of RONA established by the Committee at the beginning
of the three-year period is achieved, the minimum amount payable is 30% of
annual base salary as of the end of the last fiscal year of the period. If
the RONA for the three-year period does not at least equal such minimum
level, no amount will be paid. The minimum amount payable, if any amount is
paid at all, depends on each named executive's base salary in the last year
of the period, and the amounts shown assume that each named executive
officer's annual base salary at the end of fiscal year 1996 will be
identical to the executive officer's current annual base salary.

(3) A "Target" award is not determinable under the LTIP. The amounts shown are
estimates of the payout for the three-year period assuming (a) that the
level of RONA for the period is the same as the RONA for fiscal year 1993
(an assumption made pursuant to Securities and Exchange Commission rules),
and (b) that each named executive officer's annual base salary at the end of
the three-year cycle will be identical to his current annual base salary.
The actual payment for the three-year period may be greater or less than the
estimate shown in this column, depending upon the actual RONA for fiscal
years 1994, 1995 and 1996 and upon the actual base salary of the named
executive officer at the end of fiscal year 1996.

(4) The maximum amount payable is not determinable or estimable prior to the end
of the three-year period for the following reason: If the maximum level of
RONA established by the Committee at the beginning of the three-year period
is achieved or exceeded, the maximum amount payable is 200% of annual base
salary as of the end of the last fiscal year of the period. The maximum
amount payable is reduced, however, if the aggregate payout to all
participants (including the named executive officers) would exceed 5%
(before such payouts) of the Company's operating earnings in the last fiscal
year of the three-year period.

14
<PAGE> 18

MANAGEMENT INDEBTEDNESS AND CERTAIN TRANSACTIONS

In connection with the February 1990 recruitment and subsequent relocation
of Mr. O'Rourke, the Company provided to Mr. O'Rourke financing in the amount of
$1,260,000 to purchase a residence in California. This financing is evidenced by
two promissory notes, each secured by a deed of trust on the property. One note
is for $700,000 and bears an interest rate based on the appreciation of the
property, and no interest is payable (nor can the actual interest rate be
determined) until the note becomes due. The other note is for $560,000 and does
not bear interest. Periodic payments of principal are not required and the notes
become due (a) upon sale of the property, (b) one year after Mr. O'Rourke's
employment by the Company terminates, or (c) 30 years after the date of the
notes, whichever occurs first. Mr. O'Rourke may, while employed by the Company,
substitute the property securing the notes with a replacement principal
residence. If Mr. O'Rourke retires while the notes remain unpaid, he may convert
the notes to a replacement note at a principal amount determined by an appraisal
of the property and a calculation of the outstanding principal and interest as
if the property had been sold at the appraised value within one year after Mr.
O'Rourke's retirement. The replacement note would bear interest at an annual
rate of 8%, with principal and interest amortized in equal monthly payments over
15 years from the first anniversary of Mr. O'Rourke's retirement, principal and
interest being due upon sale of the property or use of the property other than
as Mr. O'Rourke's residence.

In connection with the March 1991 recruitment and subsequent relocation of
Mr. Aurelio, the Company provided to Mr. Aurelio financing in the amount of
$500,000 to purchase a residence in California. This financing is evidenced by a
promissory note secured by a deed of trust on the property. The note bears an
interest rate based on the appreciation of the property, and no interest is
payable under the note (nor can the actual interest rate be determined) until
the note becomes due. Periodic payments of principal are not required and the
note becomes due (a) upon sale of the property, (b) either one year or three
years after Mr. Aurelio's employment by the Company terminates (depending on the
circumstances of that termination), or (c) 30 years after the date of the note,
whichever occurs first. The Company also agreed to provide Mr. Aurelio with
$2,500 a month in mortgage assistance payments for a period of five years from
the commencement of his employment in April 1991 or until Mr. Aurelio's
employment by the Company terminates, whichever occurs first. However, the
Company and Mr. Aurelio have agreed that no such monthly mortgage assistance
payments will be made after December 1994.

CHANGE IN CONTROL ARRANGEMENTS

The Board of Directors has approved agreements ("Agreements") between the
Company and Mr. O'Rourke ("CEO") and the four other executive officers named in
the Summary Compensation Table above ("Senior Executives") which provide for the
payment of specified compensation and benefits upon certain terminations of
their employment following a change in control of the Company. Each Agreement is
in effect unless and until terminated by the Board of Directors in accordance
with the Agreement.

A change in control of the Company is defined in each Agreement to occur
(a) if any individual or group acquires 30% or more of the combined voting power
of the Company's outstanding securities, (b) if "continuing directors" (defined
as the directors of the

15
<PAGE> 19

Company as of December 12, 1986 and any successor to any such directors who was
nominated by a majority of the directors in office at the time of his nomination
or selection and who is not associated in any way with an individual or group
who is a beneficial owner of more than 10% of the combined voting power of the
Company's outstanding securities) cease to constitute at least a majority of the
Board of Directors, or (c) if the Board of Directors approves a sale of all or
substantially all of the Company's assets, or any merger, consolidation or
similar business combination or reorganization of the Company.

In their respective Agreements, the CEO and Senior Executives agreed that
they will not voluntarily leave the Company's employ during a tender or exchange
offer, proxy solicitation in opposition to the Board of Directors or other
effort by any party to effect a change in control of the Company. This is
intended to assure that management will continue to act in the interest of the
stockholders rather than be affected by personal uncertainties during any
attempts to effect a change in control of the Company, and to enhance the
Company's ability to attract and to retain executives.

The Agreement with Mr. O'Rourke provides that if within 18 months of a
change in control (1) the Company terminates his employment other than by reason
of his death, disability, retirement or for cause (as defined in the Agreement),
or (2) he terminates his employment for any reason, he will receive a lump sum
severance payment equal to 2.99 times his annual base salary.

Each Agreement with a Senior Executive provides that if within 18 months of
a change in control (i) the Company terminates the Senior Executive's employment
other than by reason of his death, disability, retirement or for cause (as
defined in the Agreement), or (ii) the Senior Executive terminates his
employment for "good reason," the Senior Executive will receive a lump sum
severance payment equal to 2.99 times his annual base salary. "Good reason" is
defined as the following after a change in control of the Company: certain
material changes in assignment of duties; a reduction in total compensation;
certain material changes in employee benefits and perquisites; a change in the
site of employment; the Company's failure to obtain the written assumption by
its successor of the obligations contained in the Agreement; attempted
termination of employment for cause on grounds insufficient to constitute a
basis of termination for cause under the terms of the Agreement; or the
Company's failure to promptly make any payment required under the terms of the
Agreement in the event of a dispute relating to employment termination.

Each Agreement provides that upon termination or resignation occurring
under the circumstances described above, the employee will receive a
continuation of all insurance and other benefits on the same terms as if he
remained an employee or equivalent benefits will be provided until the earlier
to occur of commencement of substantially equivalent full-time employment with a
new employer or 24 months after the date of termination of employment with the
Company. Each Agreement also provides that all stock options granted become
exercisable in full according to their terms, and that any unreleased restricted
stock be released from restrictions. Each Agreement further provides that in the
event that any payments and benefits received by the employee from the Company
would subject that person to the excise tax contained in Section 280G of the
Internal Revenue Code of 1986, as amended, the total payments to the employee
will be no higher than the amount not subject to such tax.

16
<PAGE> 20

ARRANGEMENT WITH MR. WILUNOWSKI

On October 20, 1994, the Company announced that it will seek a buyer for
its Electron Devices business ("EDB"). In connection with this possible sale,
the Company and Mr. Wilunowski entered into an agreement ("Incentive Agreement")
providing for Mr. Wilunowski's assistance with such sale and eventual voluntary
termination of employment if such sale is completed. Pursuant to the Incentive
Agreement, Mr. Wilunowski has agreed to resign as an officer and employee of the
Company, effective upon the date of the closing of such a sale ("Final Work
Day"). The Incentive Agreement provides, among other things, for Mr. Wilunowski
to receive, if he remains employed by the Company through the Final Work Day, a
fixed $200,000 bonus and an incentive bonus ranging from $25,000 to $200,000,
with the actual amount of such incentive bonus to be based upon the aggregate
sale price for EDB. If the Company sells EDB and Mr. Wilunowski is not hired by
the acquiror of EDB (or if such acquiror hires Mr. Wilunowski, but such
employment is terminated involuntarily within six months of its commencement),
Mr. Wilunowski also would receive an amount equal to his annual salary as in
effect on the Final Work Day (less any severance payments made by such
acquiror). If Mr. Wilunowski has not become employed within one year after the
Final Work Day, he would be eligible to receive, until he is employed, an
additional amount equal to up to six months of such salary. As long as he is
receiving such salary equivalent amounts, Mr. Wilunowski would remain eligible
to participate in the Company's Cash Profit-Sharing Plan, Employee Stock
Purchase Plan, Supplemental Retirement Plan and certain other employee benefit
plans. Finally, on the Final Work Day, all restrictions on Mr. Wilunowski's
restricted stock would be released and all stock options held by him would
become fully exercisable. None of the foregoing would be provided to Mr.
Wilunowski if the Company does not sell EDB or if his employment by the Company
ends before such a sale is completed.

REPORT OF THE ORGANIZATION AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION

INTRODUCTION

The Organization and Compensation Committee ("Committee") is responsible
for compensation programs that apply to the Company's executive officers. The
Committee is comprised of the eight outside directors whose names appear at the
conclusion of this report. The compensation programs are designed in part to
link Company performance to the compensation paid to the executive officers.
Therefore, a significant portion of executive compensation consists of variable
components based on the Company's financial performance against pre-determined
objectives.

COMPENSATION POLICIES APPLICABLE TO EXECUTIVE OFFICERS

Overall Philosophy. The Company's executive compensation philosophy is to
provide total compensation opportunities which:

- are aligned with the interests of the Company's stockholders;

- are linked with the Company's business strategies and financial
performance;

17
<PAGE> 21

- are competitive within the Company's industry and community so that
the Company can attract and retain high quality executives; and

- base a substantial portion of executive officer compensation on the
Company's achievement of increasingly higher levels of financial and
overall business performance.

In addition to the considerations specifically described below with respect
to compensation of the Company's executive officers generally and its Chief
Executive Officer ("CEO") specifically, the Committee's compensation decisions
for fiscal year 1994 considered information provided by and input from a
compensation consultant retained by the Committee. Among the information
provided by that consultant was a survey of the average total compensation
earned by chief executive officers and other senior executive officers at 11
technology companies for the period 1990 to 1992. The average total compensation
earned by the Company's CEO was between the 75th and 90th percentiles, and the
other four executive officers named in the Summary Compensation Table above were
between the 50th and 75th percentiles, of the surveyed companies. That same
three-year period saw significant improvement in the Company's return on sales,
return on net assets, return on equity, net profit margin and stock price. The
Committee believes that the Company's incentive compensation programs, which
focus on return on sales, return on net assets and shareholder value,
contributed to the Company's improved financial performance over that period and
in fiscal year 1994.

Base Salaries. Base salaries are designed primarily to attract and retain
individuals, and are reviewed annually. Increases to executive officer base
salaries in fiscal year 1994 were determined by the Committee after subjective
consideration of the Company's financial performance in fiscal year 1993, the
individual mix of fixed, annual incentive and long-term incentive compensation
in fiscal year 1993, individual position and responsibilities, economic
conditions, general market surveys of salary adjustments and a survey of
executive salaries at 90 electrical/electronic companies. The Company's
executive officer salary increases in fiscal year 1994 were below the survey
averages, and salaries as adjusted were between the 65th to 90th percentiles of
the companies surveyed. In determining the CEO's salary, the Committee also
subjectively considered his overall performance, as is discussed below.

Management Incentive Plan Awards. Annual incentives are provided through
cash awards under the Management Incentive Plan. Awards under that Plan for
fiscal year 1994 were determined by a formula which measured Company performance
against pre-determined return on sales ("ROS") objectives. The fiscal year 1994
objectives for ROS were determined after subjective consideration of the
Company's historical ROS objectives, historical ROS achieved, budgeted ROS and
prior awards. Awards could have ranged from zero to 200% of an executive
officer's base salary, depending on the ROS achieved and the pre-determined
level of that executive officer's participation (which participation was set by
the Committee on the basis of the responsibilities of the executive officer's
position). The Chief Executive Officer's award could have been no less than the
maximum award to any other executive officer, expressed as a percentage of
annual base salary, actually earned and awarded under the Plan for the same
fiscal year. The Committee could also have granted to the CEO an additional
award above that amount. Total annual aggregate awards to all participants are
limited to 8% of the Company's pre-tax operating earnings.

18
<PAGE> 22

Long-Term Incentive Compensation. Long-term incentives are provided through
annual stock option grants, restricted stock grants, release of previously
granted restricted stock, and awards under the long-term incentive feature of
the Company's Omnibus Stock Plan. These incentives are designed to retain
executive officers and complement the annual Management Incentive Plan by
motivating executive officers to focus on the long-term success of the Company.

Stock Options. The Committee considers stock options as a form of
long-term incentive compensation. Non-qualified stock options were
accordingly granted in fiscal year 1994 with an exercise price equal to the
market price of the Company's stock on the grant date, with a seven-year
term and vesting in equal installments over three years. Thus, those stock
options have value only if the Company's stock price increases after the
date of grant and the executive officer remains employed for the periods
required for the stock option to become exercisable. The size of each stock
option grant in fiscal year 1994 was determined by the Committee after
subjective consideration of individual positions and responsibilities,
stock option grants in each of the previous four fiscal years and
unexercised option shares from prior grants. In determining grants to the
CEO and Executive Vice Presidents, the Committee also considered a survey
of stock option grants during the prior three years to senior executives at
11 technology companies. The fiscal year 1994 grants to the Company's
senior executives were roughly half the size of the average option grants
to comparable executives at the companies surveyed. For other executive
officers, the Committee considered guidelines developed on the basis of a
1992 survey of stock option grants at 15 technology companies, which survey
showed that the Company's prior grants were below competitive levels.

Restricted Stock. The Committee considers restricted stock as a form
of long-term incentive compensation. Grants of restricted stock have
typically been made biennially to executive officers and other key
employees, with vesting in equal installments over three years. Although
the recipient receives dividends on and may vote restricted stock, the
stock certificate is not delivered and the stock may not be sold,
transferred or pledged until it vests. The number of shares of restricted
stock granted to each executive officer in fiscal year 1994 was determined
by the Committee after subjective consideration of the Company's financial
performance in fiscal year 1993 as measured by the Company's return on
equity ("ROE"), individual positions and responsibilities, restricted stock
grants during the previous four fiscal years, officer and director stock
ownership relative to outstanding shares, and the number of option shares
concurrently granted to each executive officer.

In order to more closely link restricted stock grants to the Company's
financial performance and shareholder returns, the Committee implemented
for fiscal year 1994 a program for granting restricted stock annually if
certain pre-determined objectives for ROE are achieved, which restricted
stock if granted would then vest over three years. The fiscal year 1994
objectives for ROE were determined after consideration of the Company's
historical and budgeted ROE. Maximum shares which could be granted upon
achieving the highest ROE objective were determined by the Committee after
subjective consideration of individual positions and responsibilities,
restricted stock

19
<PAGE> 23

grants during the previous four fiscal years, officer and director stock
ownership relative to outstanding shares, and the number of option shares
concurrently granted to each executive officer. At the end of fiscal year
1994, the pre-determined ROE objectives were used to calculate the number
of restricted shares to be granted. Those restricted stock grants related
to fiscal year 1994 performance, but were made in fiscal year 1995.

Other Long-Term Incentive Awards. The Company's Omnibus Stock Plan
includes a provision for providing awards of cash or stock, or a
combination of the two, based on the achievement of pre-determined
long-term financial objectives. This long-term incentive program was
designed to increase stockholder value by linking a potentially substantial
portion of executive officer and other key employee compensation to the
Company's achievement of an average return on net assets ("RONA") for
three-year cycles, one of which ended with fiscal year 1994. The average
RONA for fiscal years 1992-1994 was applied to a pre-determined formula to
calculate the earned award. The 1992-1994 objectives for RONA were
determined in November 1991 after subjective consideration of the RONA
achieved in the prior year, prior awards and estimated and maximum
potential awards. Awards could have ranged from zero to 200% of an
executive officer's base salary, depending on the RONA achieved and the
pre-determined level of that executive officer's participation (which
participation was set by the Committee on the basis of the responsibilities
of the executive officer's position). Total aggregate awards to all
participants is limited to 5% of the Company's pre-tax operating earnings
achieved in the last fiscal year of the three-year cycle. Awards for the
three-year cycle ended with fiscal year 1994 were paid in cash.

Other Compensation. The Company's executive officers are also eligible to
participate in compensation and benefit programs generally available to other
employees on an equal basis, such as the Company's Cash Profit-Sharing Plan,
Employee Stock Purchase Plan, Retirement and Profit-Sharing Program,
Supplemental Retirement Plan and supplemental life and disability insurance
programs. Supplemental Retirement Plan contributions were made on Management
Incentive Plan awards to executive officers because that compensation is
expected to constitute a substantial portion of executive officer compensation,
and the Committee determined that executive officers should therefore receive
retirement benefits based on that compensation.

In order to attract and retain talented executive officers, the Committee
also maintained a policy of providing executive officers with certain
perquisites, such as use and purchase of an automobile under the Company's
Executive Car Program, use of the Company-leased aircraft, reimbursement for tax
planning and return preparation and financial counseling services, reimbursement
for the payment of taxes on certain perquisites and reimbursement for annual
medical examinations.

Tax Deductibility of Executive Compensation. Section 162(m) of the Internal
Revenue Code of 1986, as amended ("Section 162(m)"), generally provides that
publicly held corporations may not deduct in any taxable year certain
compensation in excess of $1 million paid to the chief executive officer and the
next four most highly compensated executive officers. Section 162(m) did not
apply to the Company's fiscal year 1994, but will apply to its fiscal year 1995.
The Committee and the Board of Directors approved, and are with this Proxy
Statement submitting to the Company's stockholders for approval, amend-

20
<PAGE> 24

ments to the Company's Omnibus Stock Plan and adoption of the Management
Incentive Plan in order to qualify for continued tax deductibility all cash and
stock-related incentive compensation to be paid to the Company's executive
officers under those Plans (see below under the captions "Proposal to Approve
Amendments to the Omnibus Stock Plan" and "Proposal to Approve the Management
Incentive Plan"). However, the Committee considers one of its primary
responsibilities to be providing a compensation program that will attract,
retain and reward executive talent necessary to maximize shareholder returns.
Accordingly, the Committee believes that the Company's interests are best served
in some circumstances to provide compensation (such as salary and perquisites)
which might be subject to the tax deductibility limitation of Section 162(m).

BASES FOR CEO COMPENSATION

The same policies and programs described above were followed by the
Committee to determine the fiscal year 1994 compensation for the CEO.

The Committee set the CEO's base salary in fiscal year 1994 after
subjective consideration of the Company's performance in fiscal year 1993, the
mix of the CEO's fixed, annual incentive and long-term incentive compensation in
fiscal year 1993, the CEO's salaries and percentage increases in the previous
four fiscal years, economic conditions and general market surveys (including a
survey of chief executive officer salaries at 32 comparably-sized companies in
the same general industries). The Committee noted, among other things,
improvements in the Company's pre-tax profits, earnings, earnings per share,
earned gross margins, inventory levels, sales per employee, debt, on-time
delivery and costs of quality. Based on such subjective considerations, the
Committee granted to the CEO a 3% increase in his base salary, which was less
than the survey median for salary increases and which placed his salary in
approximately the 90th percentile of the companies surveyed.

The CEO received an annual incentive award for fiscal year 1994 in
accordance with the Management Incentive Plan described above. The actual ROS
and the pre-determined formula resulted in a cash award to the CEO equal to 128%
of his annual base salary. The CEO also received a long-term incentive award for
the three-year cycle ended with fiscal year 1994 in accordance with the
long-term incentive feature of the Omnibus Stock Plan described above. The
actual RONA and the pre-determined formula resulted in a cash award to the CEO
equal to 187% of his annual base salary.

The Committee granted to the CEO a 30,000-share stock option in fiscal year
1994 (before the 2-for-1 stock split in March 1994) based on the subjective
considerations described above with regard to stock options granted under the
Omnibus Stock Plan and the CEO's overall compensation package. Consistent with
the Committee's policy as described above, the option was priced at the market
value of the Company's stock on the date of grant.

21
<PAGE> 25

The Committee also granted to the CEO 4,000 shares of restricted stock in
fiscal year 1994 (before the 2-for-1 stock split in March 1994) based on the
subjective considerations described above with regard to restricted stock
granted under the Omnibus Stock Plan and the CEO's overall compensation package.
The Company's actual ROE in fiscal year 1994 and the pre-determined formula
resulted in an additional restricted stock grant of 8,000 shares (the maximum
award) in fiscal year 1995. Consistent with the Committee's policy as described
above, these restricted stock grants will vest in equal installments over three
years.

<TABLE>
<S> <C>
Samuel Hellman Gordon E. Moore
Terry R. Lautenbach Philip J. Quigley
Angus A. MacNaughton Paul G. Stern
William F. Miller Richard W. Vieser
</TABLE>

22
<PAGE> 26

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG THE COMPANY,
STANDARD & POOR'S 500 COMPOSITE INDEX AND
STANDARD & POOR'S HIGH TECHNOLOGY COMPOSITE INDEX

The following graph reflects a comparison of the cumulative total return
(change in stock price plus reinvestment dividends) of the Company's common
stock in fiscal years 1990 through 1994 (from September 30, 1989 through
September 30, 1994) with the Standard & Poor's 500 Composite Index and the
Standard & Poor's High Technology Index. The graph assumes that the value of the
investment in the Company's common stock and in each index on September 30, 1989
was $100. Standard & Poor's is the source of the data on the indices. The
comparisons in this graph are not intended to represent a forecast of possible
future performance of the Company's common stock or stockholder returns.

<TABLE>
<CAPTION>
YEAR ENDING
-------------------------------------------------
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
VARIAN.............................. $100 $116 $133 $142 $198 $296
S&P 500............................. $100 $ 88 $111 $118 $132 $133
S&P High Technology................. $100 $ 84 $100 $ 96 $118 $135
</TABLE>

[INSERT CRC PERFORMANCE GRAPH]

23
<PAGE> 27

PROPOSAL TO APPROVE AMENDMENTS TO THE OMNIBUS STOCK PLAN

The Board of Directors has approved the adoption of certain amendments to
the Company's Omnibus Stock Plan, as set forth in the amended and restated
Omnibus Stock Plan attached as Exhibit A to this Proxy Statement ("Stock Plan").
Adoption of such amendments as set forth in the amended and restated Stock Plan
is subject to the approval of a majority of the shares of the Company's common
stock which are present in person or represented by proxy and entitled to vote
at the Annual Meeting. If approved, the amended and restated Stock Plan will
replace the version of the Stock Plan that previously was approved by the
Company's stockholders.

SUMMARY OF AMENDMENTS AND REASONS FOR ADOPTION

The primary changes to the Stock Plan are to (a) set a maximum number of
shares with respect to which options or restricted stock may be granted to any
one employee during any one year, (b) set a maximum amount for long-term
incentive awards which may be granted to any one employee during any one year,
(c) specify two specific performance measures (return on equity and return on
net assets) which may be used in setting performance goals for the granting of
restricted stock and long-term incentive awards, (d) provide that the exercise
price of stock options shall be at least 100% of the fair market value of the
shares covered by the option, and (e) adjust the formula for granting stock
options to non-employee directors in order to reflect the Company's 2-for-1
stock split in March 1994 (and provide for automatic adjustments for future
stock splits and certain other transactions).

The proposed changes (other than the non-employee director change) are
designed to permit awards granted under the Stock Plan to qualify under Section
162(m) of the Internal Revenue Code of 1986, as amended ("Section 162(m)").
Under Section 162(m), the federal income tax deductibility of compensation paid
to the Company's Chief Executive Officer and to each of its next four most
highly compensated executive officers may be limited to the extent that it
exceeds $1,000,000 in any one year. However, compensation in excess of that
amount still may be deducted if it qualifies as "performance-based compensation"
under Section 162(m). Accordingly, the amendments to the Omnibus Stock Plan will
permit the Company to continue to receive a federal income tax deduction for
awards paid under the Stock Plan.

PURPOSE OF THE STOCK PLAN

The Stock Plan is intended to promote the Company's success by providing a
vehicle under which a variety of stock-based incentive and other awards can be
granted to employees and directors of the Company who are employees of neither
the Company nor any affiliate ("non-employee directors").

DESCRIPTION OF THE STOCK PLAN

The following paragraphs provide a summary of the principal features of the
Stock Plan and its operation. The Stock Plan is set forth in its entirety as
Exhibit A to this Proxy Statement. The following summary is qualified in its
entirety by reference to Exhibit A.

24
<PAGE> 28

GENERAL

The Stock Plan provides for the granting of stock options, stock
appreciation rights ("SARs"), restricted stock awards and long-term incentive
awards (collectively, "Awards") to eligible Stock Plan participants. The maximum
number of shares of the Company's common stock available for Awards under the
Stock Plan during each fiscal year is 5% of the total outstanding shares of the
Company on the last business day of the preceding fiscal year.

ADMINISTRATION OF THE STOCK PLAN

The Stock Plan is administered by the Organization and Compensation
Committee of the Company's Board of Directors ("Committee"). The members of the
Committee must qualify as "disinterested persons" under Rule 16b-3 under the
Securities Exchange Act of 1934, and as "outside directors" under Section 162(m)
(for purposes of qualifying the Stock Plan as performance-based compensation
under Section 162(m)).

Subject to the terms of the Stock Plan, the Committee has the sole
discretion to determine the employees who shall be granted Awards, the size and
types of such Awards, and the terms and conditions of such Awards. The Committee
may delegate its authority to grant and administer awards to a separate
committee appointed by the Committee, but only the Committee can make awards to
participants who are executive officers of the Company. The Committee also would
be responsible for making adjustments in Awards, shares available for Awards and
numerical limitations for Awards (including as to non-employee directors) to
reflect transactions such as stock splits and stock dividends.

ELIGIBILITY TO RECEIVE AWARDS

Employees of the Company and its affiliates are eligible to be selected to
receive one or more Awards. The actual number of employees who will receive
Awards under the Stock Plan cannot be determined because eligibility for
participation in the Stock Plan is in the discretion of the Committee. However,
636 employees received Awards under the Omnibus Stock Plan in fiscal year 1994.
The Stock Plan also provides for the grant of stock and stock options to the
Company's non-employee directors. Such stock and options are granted pursuant to
an automatic, non-discretionary formula.

STOCK OPTIONS

The Committee may grant non-qualified stock options, incentive stock
options (which are entitled to favorable tax treatment), or a combination
thereof. The number of shares covered by each option is determined by the
Committee, but during any fiscal year of the Company, no participant may be
granted options for more than 1,000,000 shares.

The price of the shares of the Company's common stock subject to each stock
option is set by the Committee but cannot be less than 100% of the fair market
value (on the date of grant) of the shares covered by the option. Previously,
the Stock Plan permitted the grant of options with an exercise price below 100%
of fair market value (although to date all options granted have had an exercise
price of 100% of the fair market value on the date of grant). In addition, the
exercise price of an incentive stock option must be at least 110% of fair market

25
<PAGE> 29

value if (on the grant date) the participant owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or any
of its subsidiaries. Also, the aggregate fair market value of the shares
(determined on the grant date) covered by incentive stock options which first
become exercisable by any participant during any calendar year may not exceed
$100,000.

The exercise price of each option must be paid in full at the time of
exercise. The Committee also may permit payment through the tender of shares of
the Company's common stock that are already owned by the participant, or by any
other means which the Committee determines to be consistent with the Stock
Plan's purpose. Any taxes required to be withheld must be paid by the
participant at the time of exercise.

Options become exercisable at the times and on the terms established by the
Committee. Options expire at the times established by the Committee but not
later than 10 years after the date of grant. The Committee may extend the
maximum term of any option granted under the Stock Plan, subject to the
preceding limit.

NON-EMPLOYEE DIRECTOR AWARDS

Under the Stock Plan, each non-employee director automatically receives, as
of the first business day of each fiscal year, 200 shares of the Company's
common stock and an option to purchase 2,000 shares. The exercise price of each
such option is 100% of the fair market value (on the date of grant) of the
shares covered by the option. Each such option becomes exercisable on the first
anniversary of the grant date (assuming the non-employee director remains on the
Board on such anniversary date, otherwise the option will be forfeited). All
options granted to non-employee directors have a term of no greater than ten
years from the date of grant. If a director terminates service on the Board
prior to an option's normal expiration date, the period of exercisability of the
option will be shorter, depending upon the reason for the termination.

STOCK APPRECIATION RIGHTS

The Committee determines the terms and conditions of each SAR. SARs may be
granted in conjunction with an option, or may be granted on an independent
basis. The number of shares covered by each SAR is determined by the Committee,
but during any fiscal year of the Company, no participant may be granted SARs
for more than 1,000,000 shares. Upon exercise of an SAR, the participant will
receive payment from the Company in an amount determined by multiplying (a) the
difference between the fair market value of a share on the date of exercise over
the grant price, times (b) the number of shares with respect to which the SAR is
exercised. SARs may be paid in cash or shares of the Company's common stock, as
determined by the Committee. SARs are exercisable at the times and on the terms
established by the Committee. To date, no SARs have been granted under the Stock
Plan.

RESTRICTED STOCK AWARDS

Restricted stock awards are shares of the Company's common stock that vest
in accordance with terms and conditions established by the Committee. The number
of shares

26
<PAGE> 30

of restricted stock granted to a participant (if any) is determined by the
Committee, but during any fiscal year of the Company, no participant may be
granted more than 25,000 shares.

In determining whether an Award of restricted stock should be made and/or
the vesting schedule for an Award, the Committee may impose whatever conditions
to vesting as it determines to be appropriate. For example, the Committee may
determine to grant restricted stock only if performance goals established by the
Committee are satisfied. Any performance goals may be applied on a Company-wide
or an individual business unit basis, as determined by the Committee. In
particular, the Committee may (but is not required to) provide that restricted
stock will be granted only if one or more goals for return on equity ("ROE") are
satisfied. However, the Committee retains discretion to eliminate or reduce the
actual restricted stock Award granted to any participant below that which would
otherwise be payable under the applicable formula. For purposes of the Stock
Plan, ROE means the Company's annual earnings expressed as a percentage of the
Company's average shareholders equity, as reported in the Company's Annual
Report to Stockholders.

For fiscal year 1995, the Committee has determined that grants of
restricted stock generally will be made if certain targets for ROE are achieved
(and assuming that the amendments to the Omnibus Stock Plan are approved at the
Annual Meeting). The following table sets forth the grants that would have been
earned by each of the following persons and groups if the Stock Plan had been in
effect for the Company's fiscal 1994. Because the fiscal 1995 actual ROE
performance is not yet determinable, the amounts in the table were calculated by
applying the performance goals and award formula adopted by the Committee for
fiscal year 1994 (which were similarly based on ROE) to the fiscal 1994 actual
ROE performance. There can be no assurance that the pre-established goals for
fiscal 1995 ROE performance actually will be achieved, and therefore there can
be no assurance that any grants of restricted stock will be made.

OMNIBUS STOCK PLAN -- RESTRICTED STOCK

<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF SHARES
--------------------------------------------- ----------------
<S> <C>
J. Tracy O'Rourke............................ 8,000
Chairman of the Board and
Chief Executive Officer
Richard A. Aurelio........................... 4,200
Executive Vice President
Allen J. Lauer............................... 4,200
Executive Vice President
Richard M. Levy.............................. 4,200
Executive Vice President
Al D. Wilunowski............................. 4,200
Executive Vice President
Executive Group.............................. 33,800
Non-Executive Director Group(1).............. N/A
Non-Executive Officer Group.................. 61,000
</TABLE>

- - - ---------------

(1) As described above under the caption "Organization and Compensation of the
Board of Directors," the Company's non-employee directors receive grants of
stock only pursuant to an automatic, non-discretionary formula. The
non-employee directors are not eligible for any other grants of restricted
stock.

27
<PAGE> 31

LONG-TERM INCENTIVE AWARDS

Long-term incentive awards are Awards which will result in a payment to a
participant only if performance goals established by the Committee are
satisfied. The applicable performance goals will be determined by the Committee,
and may be applied on a Company-wide or an individual business unit basis, as
deemed appropriate in light of the participant's specific responsibilities. In
particular, the Committee may (but is not required to) provide that long-term
incentive awards will be granted only if one or more goals for return on net
assets ("RONA") of the Company and/or one of its business units are achieved.
However, the Committee retains discretion to eliminate or reduce the actual
long-term incentive award payable to any participant below that which would
otherwise be payable under the applicable formula. For purposes of the Stock
Plan, "RONA" means annual operating earnings expressed as a percentage of
average net assets.

In addition to the performance requirements discussed above, long-term
incentive awards are subject to additional limits set forth in the Stock Plan.
During any fiscal year of the Company, no participant shall receive a long-term
incentive award of more than the lesser of (a) 200% of the participant's annual
base salary at the end of the performance period, or (b) $5,000,000. In
addition, total long-term incentive awards for any performance period may not
exceed 5% of the Company's pre-tax operating earnings for the last fiscal year
of the performance period. If total long-term incentive awards for a performance
period would exceed this amount, all such Awards for that performance period
will be pro-rated. Long-term incentive awards may be paid in cash or shares of
the Company's common stock, as determined by the Committee.

For the fiscal years 1993-95, 1994-96 and 1995-97 cycles, the Committee has
granted long-term incentive awards which are payable only if certain targets for
RONA are achieved (and assuming that the amendments to the Omnibus Stock Plan
are approved at the Annual Meeting). The following table sets forth the awards
that would have been earned by each of the following persons and groups if the
Stock Plan had been in effect for the Company's fiscal years 1992-1994 cycle.
Because the fiscal years 1993-95, 1994-96 and 1995-97 actual RONA performance
are not yet determinable, the amounts in the table were calculated by applying
the performance goals and award formula adopted by the Committee for the fiscal
years 1992-94 cycle (which were similarly based on RONA) to the fiscal years
1992-94 actual RONA performance. There can be no assurance that the
pre-established goals for fiscal years 1993-95, 1994-96 or 1995-97 RONA
performance actually will be achieved, and therefore there can be no assurance
that the awards shown below actually will be paid for those cycles.

28
<PAGE> 32

OMNIBUS STOCK PLAN -- LONG-TERM INCENTIVE AWARDS

<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR AMOUNT
------------------------------------------------ -------------
<S> <C>
J. Tracy O'Rourke............................... $ 1,326,915
Chairman of the Board and
Chief Executive Officer
Richard A. Aurelio.............................. 469,312
Executive Vice President
Allen J. Lauer.................................. 550,785
Executive Vice President
Richard M. Levy................................. 550,785
Executive Vice President
Al D. Wilunowski................................ 550,785
Executive Vice President
Executive Group................................. 4,548,837
Non-Executive Director Group(1)................. N/A
Non-Executive Officer Group..................... 2,765,507
</TABLE>

OTHER AWARDS

The Committee may approve the use of other forms of awards that are
consistent with the purpose of the Stock Plan.

NONTRANSFERABILITY OF AWARDS

Awards granted under the Stock Plan may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
applicable laws of descent and distribution.

TAX ASPECTS

A recipient of a stock option or SAR will not have taxable income upon the
grant of the option. For options and SARs other than incentive stock options,
the participant will recognize ordinary income upon exercise in an amount equal
to the excess of the fair market value of the shares over the exercise price on
the date of exercise. Any gain or loss recognized upon any later disposition of
the shares generally will be capital gain or loss.

The purchase of shares upon exercise of an incentive stock option will not
result in any taxable income to the participant, except for purposes of the
alternative minimum tax. Gain or loss recognized by the participant on a later
sale or other disposition will either be long-term capital gain or loss or
ordinary income depending upon whether the participant holds the shares
transferred upon the exercise for a specified period. Any ordinary income
recognized will be in the amount, if any, by which the lesser of the fair market
value of such shares on the date of exercise or the amount realized from the
sale exceeds the option price.

- - - ---------------

(1) The Company's non-employee directors are not eligible for long-term
incentive awards.

29
<PAGE> 33

Unless the participant elects to be taxed at the time of receipt of
restricted stock or a long-term incentive award, the participant will not have
taxable income upon the receipt of the Award, but upon vesting will recognize
ordinary income equal to the fair market value of the shares or cash at the time
of vesting.

At the discretion of the Committee, the Stock Plan allows a participant to
satisfy tax withholding requirements under federal and state tax laws in
connection with the exercise or receipt of an Award by electing to have shares
of common stock withheld, or by delivering to the Company already-owned shares,
having a value equal to the amount required to be withheld.

The Company will be entitled to a tax deduction in connection with an Award
under the Stock Plan only in an amount equal to the ordinary income realized by
the participant and at the time the participant recognizes such income, and if
applicable withholding requirements are met. In addition, Section 162(m)
contains special rules regarding the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
other four most highly compensated executive officers. The general rule is that
annual compensation paid to any of these specified executives will be deductible
only to the extent that it does not exceed $1,000,000. However, the Company can
preserve the deductibility of certain compensation in excess of $1,000,000 if it
complies with conditions imposed by the new rules, including stockholder
approval of the maximum number of shares with respect to which Awards may be
granted to any one employee during one year, and if (for Awards other than
options and SARs) the Stock Plan sets forth performance goals which must be
achieved prior to payment of the Awards. The Stock Plan has been designed to
permit the Committee to grant Awards which satisfy the requirements of Section
162(m), thereby permitting the Company to continue to receive a federal income
tax deduction in connection with such Awards. Accordingly, in furtherance of
qualifying the Stock Plan (and the fiscal years 1993-95, 1994-96 and 1995-97
long-term incentive award cycles) as performance-based compensation under
Section 162(m), the Company is seeking stockholder approval of the amendments to
the Stock Plan.

AMENDMENT AND TERMINATION OF THE STOCK PLAN

The Board generally may amend or terminate the Stock Plan at any time and
for any reason.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENTS TO THE OMNIBUS STOCK PLAN.

PROPOSAL TO APPROVE THE MANAGEMENT INCENTIVE PLAN

The Board of Directors has approved the adoption of a new Management
Incentive Plan ("MIP"). Adoption of the MIP is subject to the approval of a
majority of the shares of the Company's common stock which are present in person
or represented by proxy and entitled to vote at the Annual Meeting.

30
<PAGE> 34

BACKGROUND AND REASONS FOR ADOPTION

The Company previously has maintained a performance-based bonus plan
similar to the MIP in order to reward key employees for achieving objectives for
the financial performance of the Company and its business units. However, under
Section 162(m), the federal income tax deductibility of compensation paid to the
Company's Chief Executive Officer and to each of its next four most highly
compensated executive officers may be limited to the extent that it exceeds
$1,000,000 in any one year. The Company can deduct compensation in excess of
that amount if it qualifies as "performance-based compensation" under Section
162(m). Accordingly, the MIP is intended to permit the Company to pay incentive
compensation which qualifies as performance-based compensation, thereby
permitting the Company to continue to receive a federal income tax deduction for
the payment of such incentive compensation.

DESCRIPTION OF THE MIP

The following paragraphs provide a summary of the principal features of the
MIP and its operation. The MIP is set forth in its entirety as Exhibit B to this
Proxy Statement. The following summary is qualified in its entirety by reference
to Exhibit B.

PURPOSE OF THE MIP

The MIP is intended to motivate the Company's key employees to increase
stockholder value by (a) linking a portion of their cash compensation to the
Company's financial performance, (b) providing rewards for improving the
Company's financial performance, and (c) helping to attract and retain key
employees.

ADMINISTRATION OF THE MIP

The MIP will be administered by the Organization and Compensation Committee
of the Company's Board of Directors ("Committee"). The members of the Committee
must qualify as "outside directors" under Section 162(m) (for purposes of
qualifying the MIP as performance-based compensation under such Section).

Subject to the terms of the MIP, the Committee has the sole discretion to
determine the key employees who shall be granted awards, and the amounts, terms
and conditions of each award. The Committee may delegate its authority to grant
and administer awards to a separate committee appointed by the Committee, but
only the Committee can make awards to participants who are subject to Section
162(m).

ELIGIBILITY TO RECEIVE AWARDS

Eligibility for the MIP is determined in the discretion of the Committee.
In selecting participants for the MIP, the Committee will choose key employees
of the Company and its affiliates who are likely to have a significant impact on
Company performance. The actual number of employees who will receive awards
under the MIP cannot be determined because eligibility for participation in the
MIP is in the discretion of the Committee. However, for fiscal year 1995, there
are currently 177 employees approved for participation in the MIP, including the
Company's Chief Executive Officer and other executive officers. Participation

31
<PAGE> 35

in future years will be in the discretion of the Committee, but it currently is
expected that a similar number of employees will participate each year.

AWARDS AND PERFORMANCE GOALS

Under the MIP, the Committee will establish (a) the performance goals which
must be achieved in order for the participant to actually be paid an award, and
(b) a formula or table for calculating a participant's award, depending upon how
actual performance compares to the pre-established performance goals. A
participant's award will increase or decrease as actual performance increases or
decreases. The Committee also will determine the period for measuring actual
performance ("performance period"). Performance periods may be for a single
fiscal year of the Company, or for a multi-fiscal year period.

The Committee may set performance periods and performance goals which
differ from participant to participant. For example, the Committee may choose
performance goals based on either Company-wide or business unit results, as
deemed appropriate in light of the participant's specific responsibilities. For
purposes of qualifying awards as performance based compensation under Section
162(m), the Committee may (but is not required to) specify performance goals for
return on sales of the Company and/or one its business units ("ROS"). ROS means
annual operating earnings expressed as a percentage of annual sales.

During any fiscal year of the Company, no Participant may receive an award
of more than the lesser of (a) 200% of the Participant's annual base salary at
the end of the performance period, or (b) $5,000,000. In addition, the total of
all awards for any fiscal year cannot exceed 8% of the Company's pre-tax
operating earnings for the fiscal year. If total awards for a performance period
would exceed this amount, all such awards for that performance period will be
pro-rated.

DETERMINATION OF ACTUAL AWARDS

After the end of each performance period, a determination will be made as
to the extent to which the performance goals applicable to each participant were
achieved or exceeded. The actual award (if any) for each participant will be
determined by applying the formula to the level of actual performance which was
achieved. However, the Committee retains discretion to eliminate or reduce the
actual award payable to any participant below that which otherwise would be
payable under the applicable formula. Awards under the MIP generally will be
payable in cash after the end of the fiscal year during which the award was
earned.

PRO FORMA BENEFITS FOR THE MIP

Given that payments under the MIP are determined by comparing actual
performance to the performance goals established by the Committee, it is not
possible to conclusively state the amount of benefits which will be paid under
the MIP. The following table sets forth the awards that would have been earned
by each of the following persons and groups if the MIP had been in effect for
the Company's fiscal 1994. Because the fiscal 1995 actual ROS performance is not
yet determinable, the amounts in the table were calculated by applying

32
<PAGE> 36

the performance goals and award formula adopted by the Committee for fiscal 1994
(which were similarly based on ROS) to the fiscal 1994 actual ROS performance.
There can be no assurance that the pre-established performance goals actually
will be achieved, and therefore there can be no assurance that the awards shown
below actually will be paid.

MANAGEMENT INCENTIVE PLAN

<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE
------------------------------------------------ ------------
<S> <C>
J. Tracy O'Rourke............................... $ 910,879
Chairman of the Board and
Chief Executive Officer
Richard A. Aurelio.............................. 343,643
Executive Vice President
Allen J. Lauer.................................. 378,094
Executive Vice President
Richard M. Levy................................. 378,094
Executive Vice President
Al D. Wilunowski................................ 378,094
Executive Vice President
Executive Group................................. 3,128,606
Non-Executive Director Group(1)................. N/A
Non-Executive Officer Group..................... 5,405,960
</TABLE>

AMENDMENT AND TERMINATION OF THE MIP

The Committee may amend or terminate the MIP at any time and for any
reason, but as appropriate under Section 162(m), certain material amendments to
the MIP will be subject to stockholder approval.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THE MANAGEMENT INCENTIVE PLAN.

SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors and executive officers file reports of ownership and changes
in ownership of Company securities with the Securities and Exchange Commission
("Commission"). Based solely on the Company's review of the reporting forms and
written representations received by it from such directors and executive
officers, the Company believes that for the period May 1, 1992 through September
30, 1994, all filing requirements applicable to such executive officers and
directors were timely satisfied, except as previously reported in the Company's
prior proxy statements and as follows: Thomas D. Sege, a former officer and
director of the Company, reported on January 31, 1994 a June 11, 1992 gift of
shares; and Robert A. Lemos, the Company's Vice President, Finance and Chief
Financial Officer, reported on January 26, 1994 a December 16, 1993 sale of
shares.

- - - ---------------

(1) The Company's non-employee directors are not eligible to participate in the
MIP.

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<PAGE> 37

ANNUAL REPORT

The Company's Annual Report for fiscal year 1994, including financial
statements for the periods specified therein, was mailed to all stockholders
concurrently with the mailing of this Proxy Statement.

STOCKHOLDER PROPOSALS

Any stockholder who wishes to present a proposal for action at the
Company's 1996 Annual Meeting of Stockholders and who wishes to have it set
forth in the Proxy Statement and identified in the form of Proxy prepared by the
Company must notify the Company in such a manner that such notice is received by
the Company's Secretary not later than August 28, 1995 at the Company's address
set forth on the first page of this Proxy Statement. In addition, such a
proposal must be in such form as is required under the rules and regulations
promulgated by the Commission.

AUDITORS

The firm of Coopers & Lybrand has been selected by the Board of Directors
as the Company's independent public auditors for fiscal year 1995. Coopers &
Lybrand also acted as the Company's independent auditors for fiscal year 1994. A
Coopers & Lybrand representative will attend the Annual Meeting. That
representative will have the opportunity to make a statement if he or she so
desires and to respond to appropriate questions from stockholders.

(SIG)

JOSEPH B. PHAIR
Secretary
December 27, 1994
Palo Alto, California

34
<PAGE> 38

EXHIBIT A

VARIAN ASSOCIATES, INC.

OMNIBUS STOCK PLAN
(AS AMENDED AND EFFECTIVE AS OF OCTOBER 1, 1994)

1. PURPOSE

The purpose of the Plan is to provide a vehicle under which a variety of
stock-based incentive and other awards may be granted to employees and directors
of the Company and its Subsidiaries to promote the Company's success.

2. DEFINITIONS

A. "Award" means any form of stock option, restricted stock, stock
appreciation right, long-term incentive award or other incentive award granted
under the Plan.

B. "Award Notice" means any written notice from the Company to a
Participant or agreement between the Company and a Participant that establishes
the terms applicable to an Award.

C. "Board of Directors" means the Board of Directors of the Company.

D. "Code" means the Internal Revenue Code of 1986, as amended.

E. "Committee" means the Organization and Compensation Committee of the
Board of Directors, or such other committee designated by the Board of
Directors, which is authorized to administer the Plan under Section 3 hereof.
The Committee shall be comprised solely of Directors who are both (i)
disinterested persons under Rule 16b-3, and (ii) outside directors under Section
162(m) of the Code.

F. "Common Stock" means common stock of the Company.

G. "Company" means Varian Associates, Inc.

H. "Director" means a member of the Board of Directors.

I. "Exchange Act" means the Securities Exchange Act of 1934, as amended.

J. "Fair Market Value" means, as of a specified date, the mean of the high
and the low sales price of the Common Stock on the composite tape for the New
York Stock Exchange-listed securities, or if not traded on that date, then on
the date last traded. If for any reason the Company's stock ceases to be listed
on the New York Stock Exchange, the Committee shall establish the method for
determining the Fair Market Value of the Common Stock.

K. "Key Employee" means any employee of the Company or a Subsidiary whose
performance the Committee determines can have a significant effect on the
success of the Company.

L. "Participant" means any individual to whom an Award is granted under
the Plan.

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<PAGE> 39

M. "Plan" means this Plan, which shall be known as the Varian Associates,
Inc. Omnibus Stock Plan.

N. "Return on Equity" means the Company's annual earnings expressed as a
percentage of the Company's annual average shareholders equity, as reported in
the Company's Annual Report to Stockholders.

O. "Return on Net Assets" means annual operating earnings expressed as a
percentage of annual average net assets. Return on Net Assets for a multi-year
performance period means the average of Return on Net Assets calculated
separately for each fiscal year of such multi-year period.

P. "Rule 16b-3" means Rule 16b-3 issued under the Exchange Act, or any
successor rule.

Q. "Subsidiary" means a corporation or other business entity (i) of which
the Company directly or indirectly has an ownership interest of 50% or more, or
(ii) of which it has a right to elect or appoint 50% or more of the board of
directors or other governing body.

3. ADMINISTRATION

A. The Plan shall be administered by the Committee. The Committee shall
have the authority to:

<TABLE>
<S> <C>
(i) interpret and determine all questions of policy and expediency
pertaining to the Plan;

(ii) adopt such rules, regulations, agreements and instruments as it deems
necessary for its proper administration;

(iii) select Key Employees to receive Awards;

(iv) determine the form and terms of Awards;

(v) determine the number of shares or other consideration subject to Awards
(within the limits prescribed in the Plan);

(vi) determine whether Awards will be granted singly, in combination, in
tandem, in replacement of, or as alternatives to, other grants under
the Plan or any other incentive or compensation plan of the Company, a
Subsidiary or an acquired business unit;

(vii) grant waivers of Plan or Award conditions (other than Awards intended
to qualify under Section 162(m) of the Code);

(viii) accelerate the vesting, exercise or payment of Awards (but with respect
to Awards intended to qualify under Section 162(m) of the Code, only as
permitted under that Section);

(ix) correct any defect, supply any omission, or reconcile any inconsistency
in the Plan, any Award or any Award Notice;
</TABLE>

A-2
<PAGE> 40

<TABLE>
<S> <C>
(x) establish and administer Awards in addition to the types specifically
enumerated in Section 2.A. which the Committee determines are
consistent with the Plan's purpose; and

(xi) take any and all other actions it deems necessary or advisable for the
proper administration of the Plan.
</TABLE>

B. The Committee may adopt such Plan amendments, procedures, regulations,
subplans and the like as it deems are necessary to enable Key Employees and
Directors who are foreign nationals or employed outside the United States to
receive Awards.

C. The Committee may delegate its authority to grant and administer Awards
to a separate committee; however, only the Committee may grant and administer
Awards (i) with respect to persons who are subject to Section 16 of the Exchange
Act, and (ii) which are intended to qualify as performance-based compensation
under Section 162(m) of the Code.

4. ELIGIBILITY

A. Any Key Employee is eligible to become a Participant in the Plan.

B. Directors who are not employees of the Company or a Subsidiary shall
receive Awards in accordance with Section 7.

5. SHARES AVAILABLE

A. Subject to Section 15, the maximum number of shares of Common Stock
available for Award grants (including incentive stock options) during each
fiscal year shall be 5% of the total outstanding shares of the Company on the
last business day of the preceding fiscal year. The maximum number of shares of
Common Stock available for incentive stock option grants under the Plan is
6,000,000.

B. The shares of Common Stock available under the Plan may be authorized
and unissued shares or treasury shares.

6. TERM

The Plan as amended shall become effective as of October 1, 1994, and shall
continue in effect until terminated by the Board of Directors. However, Awards
(other than stock options) intended to qualify under Section 162(m) of the Code
shall be conditional upon approval of the amended and restated Plan by the
Company's stockholders not later than the 1995 annual meeting of stockholders.

7. AWARDS TO NON-EMPLOYEE DIRECTORS

Directors who are not employees of the Company or a Subsidiary shall
receive Awards in accordance with the following terms:

A. On the first business day following adoption of this Plan by the Board
of Directors, and thereafter on the first business day of each fiscal year, each
such director shall receive (i) a fully vested grant of 200 shares of Common
Stock, subject to payment to the Company

A-3
<PAGE> 41

of the aggregate par value of such shares in cash, and (ii) a non-qualified
stock option for 2,000 shares.

B. Options to such directors shall be subject to the following terms: (i)
the exercise price shall be equal to 100% of the Fair Market Value of the shares
on the date of the grant, payable in accordance with all the alternatives stated
in Sections 8.B.(ii) and (iii); (ii) the term of the options shall be 10 years;
(iii) the options shall be exercisable beginning 12 months after the date of the
grant; and (iv) the options shall be subject to Section 13.

8. STOCK OPTIONS

A. Awards may be granted in the form of stock options. Stock options may
be incentive stock options within the meaning of Section 422 of the Code or
non-qualified stock options (i.e., stock options which are not incentive stock
options). During any fiscal year of the Company, no Participant shall be granted
options for more than 1,000,000 shares.

B. Subject to Section 8.C. relating to incentive stock options, options
shall be in such form and contain such terms as the Committee deems appropriate.
While the terms of options need not be identical, each option shall be subject
to the following terms:

(i) The exercise price shall be the price set by the Committee but may
not be less than 100% of the Fair Market Value of the shares on the
date of the grant.

(ii) The price shall be paid in cash (including check, bank draft, or
money order), or at the discretion of the Committee, all or part
of the purchase price may be paid by delivery of the optionee's
full recourse promissory note, delivery of Common Stock already
owned by the Participant for at least 6 months and valued at its
Fair Market Value, or any combination of the foregoing methods of
payment, provided no less than the par value of the stock is paid
in cash. In the case of incentive stock options, the terms of
payment shall be determined at the time of grant.

(iii) Promissory notes given as payment of the price, if permitted by
the Committee, shall contain such terms as set by the Committee
which are not inconsistent with the following: the unpaid
principal shall bear interest at a rate set from time to time by
the Committee; payments of principal and interest shall be made
no less frequently than annually; no part of the note shall be
payable later than 10 years from the date of purchase of the
shares; and the optionee shall give such security as the
Committee deems necessary to ensure full payment.

(iv) The term of an option may not be greater than 10 years from the
date of the grant.

(v) Neither a person to whom an option is granted nor his legal
representative, heir, legatee or distributee shall be deemed to be
the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such option unless and until he
has exercised his option.

A-4
<PAGE> 42

C. The following special terms shall apply to grants of incentive stock
options:

(i) No incentive stock option shall be granted after the 10th
anniversary of the date the Plan is adopted by the Board of
Directors.

(ii) Subject to Section 8.C.(iii), the price under each incentive stock
option shall not be less than 100% of the Fair Market Value of the
shares on the date of the grant.

(iii) No incentive stock option shall be granted to any employee who
directly or indirectly owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the
Company, unless at the time of such grant the option price is at
least 110% of the Fair Market Value of the stock subject to the
option and such option is not exercisable after the expiration of
5 years from the date of the grant.

(iv) No incentive stock option shall be granted to a person in his
capacity as a Key Employee of a Subsidiary if the Company has less
than a 50% ownership interest in such Subsidiary.

(v) The Fair Market Value (determined on the date(s) of grant) of the
shares subject to incentive stock options which first become
exercisable during any calendar year shall not exceed $100,000 for
any employee.

(vi) Options shall contain such other terms as may be necessary to
qualify the options granted therein as incentive stock options
pursuant to Section 422 of the Code, or any successor statute.

9. RESTRICTED STOCK

A. Awards may be granted in the form of restricted stock. During any
fiscal year of the Company, no Participant shall be granted more than 25,000
shares of restricted stock.

B. Grants of restricted stock shall be awarded in exchange for
consideration equal to an amount from 0 to 50% of the aggregate Fair Market
Value of such stock, as determined by the Committee. The price, if any, of such
restricted stock shall be paid in cash, or at the discretion of the Committee,
all or part of the purchase price may be paid by delivery of the Participant's
full recourse promissory note, delivery of Common Stock already owned by the
Participant for at least 6 months and valued at its Fair Market Value, or any
combination of the foregoing methods of payment, provided no less than the par
value of the stock is paid in cash, or the Participant has rendered no less than
3 months' prior service to the Company.

C. Restricted stock awards shall be subject to such restrictions as the
Committee may impose including, if the Committee shall so determine,
restrictions on transferability and restrictions relating to continued
employment. For purposes of qualifying restricted stock as performance-based
compensation under Section 162(m) of the Code, the Committee may in its
discretion determine that grants of restricted stock shall be conditioned on the
achievement of pre-established Company goals for Return on Equity. The target
goals for Return on Equity and the number of shares which may be awarded upon
achievement of such target goals, shall be set by the Committee on or before the
latest date permissible so

A-5
<PAGE> 43

as to qualify under Section 162(m) of the Code. In granting restricted stock
which is intended to qualify under Section 162(m) of the Code, the Committee
shall follow any procedures determined by it to be necessary or appropriate to
ensure such qualification. No restricted stock award intended to qualify under
Section 162(m) of the Code shall be paid unless and until the Committee
certifies in writing that the pre-established performance goals have been
satisfied.

D. The Committee, in its discretion, may reduce or eliminate a
Participant's restricted stock award at any time before it is granted, whether
or not calculated on the basis of pre-established performance goals or formulas.

E. The Committee shall have the discretion to grant to a Participant
receiving restricted shares all or any of the rights of a stockholder while such
shares continue to be subject to restrictions.

10. LONG-TERM INCENTIVE AWARDS

A. Awards may be granted in the form of long-term incentive awards, which
shall be made on the basis of Company and/or business unit performance goals and
formulas determined by the Committee in its sole discretion. In the discretion
of the Committee, long-term incentive awards may be paid in cash and/or shares
of Common Stock having an equivalent value (based on Fair Market Value on the
date that a cash payment otherwise would have been made to the Participant).

B. During any fiscal year of the Company, no Participant shall receive a
long-term incentive award of more than (i) 200% of that Participant's annual
base salary at the end of the applicable performance period, or (ii) $5,000,000,
whichever of these amounts is lower. In applying this limit, any shares of
Common Stock paid in satisfaction of a long-term incentive award shall be valued
at Fair Market Value on the date that the cash payment otherwise would have been
made to the Participant. Total aggregate long-term incentive awards for any
performance period shall not exceed five percent of the Company's pre-tax
operating earnings (before incentive compensation) for the last fiscal year of
the performance period. If total aggregate long-term incentive awards calculated
for a performance period would exceed this aggregate limitation, all long-term
incentive awards for that performance period shall be pro-rated on an equal
basis among all Participants according to a formula established by the
Committee.

C. For purposes of qualifying long-term incentive awards as
performance-based compensation under Section 162(m) of the Code, the Committee
may in its discretion determine that such awards shall be conditioned on the
achievement of pre-established Company and/or business unit goals for Return on
Net Assets, provided that any such goals for purposes of an Award to the
Company's Chief Executive Officer shall be Company goals for Return on Net
Assets. The target goals for Return on Net Assets and the amounts which may be
awarded upon achievement of such target goals, shall be set by the Committee on
or before the latest date permissible so as to qualify under Section 162(m) of
the Code. In granting long-term incentive awards which are intended to qualify
under Section 162(m) of the Code, the Committee shall follow any procedures
determined by it to be necessary or appropriate to ensure such qualification. No
long-term incentive award

A-6
<PAGE> 44

intended to qualify under Section 162(m) of the Code shall be paid unless and
until the Committee certifies in writing that the pre-established performance
goals have been satisfied.

D. The Committee, in its discretion, may reduce or eliminate a
Participant's long-term incentive award at any time before it is paid, whether
or not calculated on the basis of pre-established performance goals or formulas.

11. STOCK APPRECIATION RIGHTS

A. Awards may be granted in the form of stock appreciation rights. Stock
appreciation rights may be awarded in tandem with a stock option, in addition to
a stock option, or may be free-standing and unrelated to a stock option. During
any fiscal year of the Company, no Participant shall be granted stock
appreciation rights for more than 1,000,000 shares.

B. A stock appreciation right entitles the Participant to receive from the
Company an amount equal to the positive difference between (i) the Fair Market
Value of Common Stock on the date of exercise of the stock appreciation right
and (ii) the grant price or some lesser amount as the Committee may determine
either at the time of grant or prior to the time of exercise.

C. With respect to persons subject to Section 16 of the Exchange Act, a
stock appreciation right may only be exercised during a period which (i) begins
on the third business day following a date when the Company's quarterly summary
statement of sales and earnings is released to the public and (ii) ends on the
12th business day following such date. This Section 11.C. shall not apply if the
exercise occurs automatically on the date when a related stock option expires.

D. Settlement of stock appreciation rights may be in cash, in shares of
Common Stock, or a combination thereof, as determined by the Committee.

12. DEFERRAL OF AWARDS

At the discretion of the Committee, payment of an Award, dividend
equivalent, or any portion thereof may be deferred until a time established by
the Committee. Deferrals shall be made in accordance with guidelines established
by the Committee to ensure that such deferrals comply with applicable
requirements of the Code and its regulations. Deferrals shall be initiated by
the delivery of a written, irrevocable election by the Participant to the
Committee or its nominee. Such election shall be made prior to the date
specified by the Committee. The Committee may also (A) credit interest on cash
payments that are deferred and set the rates of such interest and (B) credit
dividends or dividend equivalents on deferred payments denominated in the form
of shares.

A-7
<PAGE> 45

13. EXERCISE OF STOCK OPTIONS UPON TERMINATION OF EMPLOYMENT OR SERVICES

A. Options granted under Section 7 shall be exercisable upon the
Participant's termination of service within the following periods only. Subject
to Section 21, stock options to other Participants may permit the exercise of
options upon the Participant's termination of employment within the following
periods, or such shorter periods as determined by the Committee at the time of
grant:

(i) if on account of death, within 18 months of such event by the
person or persons to whom the Participant's rights pass by will or
the laws of descent or distribution.

(ii) if on account of disability (as defined in Section 22(e)(3) of
the Code or any successor statute), non-qualified stock options
may be exercised within 18 months of such termination and
incentive stock options within 12 months.

(iii) if on account of retirement (as defined from time to time by
Company policy), non-qualified stock options may be exercised
within 36 months of such termination and incentive stock options
within 3 months.

(iv) if on account of resignation, options may be exercised within 1
month of such termination.

(v) if for cause (as defined from time to time by Company policy), no
unexercised option shall be exercisable to any extent after
termination.

(vi) if for any reason other than death, disability, retirement,
resignation, or cause, options may be exercised within 3 months of
such termination.

B. An unexercised option shall be exercisable only to the extent that such
option was exercisable on the date the Participant's employment or service
terminated. However, terms relating to the exercisability of options may be
amended by the Committee before or after such termination, except in respect to
options granted under Section 7.

C. In no case may an unexercised option be exercised to any extent by
anyone after expiration of its term.

14. NONASSIGNABILITY

The rights of a Participant under the Plan shall not be assignable by such
Participant, by operation of law or otherwise, except by will or the laws of
descent and distribution. During the lifetime of the person to whom a stock
option or similar right (including a stock appreciation right) is granted, he or
she alone may exercise it. No Participant may create a lien on any funds,
securities, rights or other property to which he or she may have an interest
under the Plan, or which is held by the Company for the account of the
Participant under the Plan.

15. ADJUSTMENT OF SHARES AVAILABLE

The Committee shall make appropriate and equitable adjustments in the
shares available for future Awards, the numerical limitations set forth in
Sections 8.A., 9.A. and

A-8
<PAGE> 46

11.A., future Awards under Section 7.A., and the number of shares covered by
unexercised, unvested or unpaid Awards upon the subdivision of the outstanding
shares of Common Stock; the declaration of a dividend payable in Common Stock;
the declaration of a dividend payable in a form other than Common Stock in an
amount that has a material effect on the price of the shares of Common Stock;
the combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a lesser number of shares of Common Stock; a
recapitalization; or a similar event.

16. PAYMENT OF WITHHOLDING TAXES

As a condition to receiving or exercising an Award, as the case may be, the
Participant shall pay to the Company or the employer Subsidiary the amount of
all applicable federal, state, local and foreign taxes required by law to be
paid or withheld relating to receipt or exercise of the Award. The Company shall
deduct such withholding taxes from any Award paid in cash.

17. AMENDMENTS

The Board of Directors may amend the Plan at any time and from time to
time, provided however that the Board shall not amend the terms of the Plan more
frequently than permitted under Rule 16b-3 in regard to provisions that affect
persons receiving Awards under Section 7. Rights and obligations under any Award
granted before amendment of the Plan shall not be materially altered or impaired
adversely by such amendment, except with consent of the person to whom the Award
was granted.

18. REGULATORY APPROVALS AND LISTINGS

Notwithstanding any other provision in the Plan, the Company shall have no
obligation to issue or deliver certificates of Common Stock under the Plan prior
to (A) obtaining approval from any governmental agency which the Company
determines is necessary or advisable, (B) admission of such shares to listing on
the stock exchange on which the Common Stock may be listed and (C) completion of
any registration or other qualification of such shares under any state or
federal law or ruling of any governmental body which the Company determines to
be necessary or advisable.

19. NO RIGHT TO CONTINUED EMPLOYMENT OR GRANTS

Participation in the Plan shall not give any Key Employee any right to
remain in the employ of the Company or any Subsidiary. Further, the adoption of
this Plan shall not be deemed to give any Key Employee or other individual the
right to be selected as a Participant or to be granted an Award.

20. NO RIGHT, TITLE, OR INTEREST IN COMPANY ASSETS

No Participant shall have any rights as a stockholder of the Company until
he acquires an unconditional right under an Award to have shares of Common Stock
issued to him. To the extent any person acquires a right to receive payments
from the Company under this

A-9
<PAGE> 47

Plan, such rights shall be no greater than the rights of an unsecured creditor
of the Company.

21. SPECIAL PROVISION PERTAINING TO PERSONS SUBJECT TO SECTION 16

Notwithstanding any other term of this Plan, the following shall apply to
persons subject to Section 16 of the Exchange Act, except in the case of death
or disability:

A. No restricted stock or other equity security (within the meaning used
in Rule 16b-3 of the Exchange Act or any successor rule) offered pursuant to
this Plan may be transferred for at least 6 months after acquisition; and

B. No stock option, stock appreciation right or other derivative security
(within the meaning used in Rule 16b-3 of the Exchange Act or any successor
rule) issued pursuant to the Plan may be exercisable for at least 6 months after
the date of issue.

22. GOVERNING LAW

The Plan shall be governed by and construed in accordance with the laws of
the State of Delaware.

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EXHIBIT B

VARIAN ASSOCIATES, INC.

MANAGEMENT INCENTIVE PLAN
(AS AMENDED AND EFFECTIVE AS OF OCTOBER 1, 1994)

1. PURPOSES

The purposes of the Varian Associates, Inc. Management Incentive Plan are
to motivate the Company's key employees to improve stockholder value by linking
a portion of their cash compensation to the Company's financial performance,
reward key employees for improving the Company's financial performance, and help
attract and retain key employees.

2. DEFINITIONS

A. "Award" means any cash incentive payment made under the Plan.

B. "Code" means the Internal Revenue Code of 1986, as amended.

C. "Committee" means the Organization and Compensation Committee of Varian
Associates, Inc.'s Board of Directors, or such other committee designated by
that Board of Directors, which is authorized to administer the Plan under
Section 3 hereof. The Committee shall be comprised solely of directors who are
outside directors under Section 162(m) of the Code.

D. "Company" means Varian Associates, Inc. and any corporation or other
business entity of which Varian Associates, Inc. (i) directly or indirectly has
an ownership interest of 50% or more, or (ii) has a right to elect or appoint
50% or more of the board of directors or other governing body.

E. "Key Employee" means any employee of the Company whose performance the
Committee determines can have a significant effect on the success of the
Company.

F. "Participant" means any individual to whom an Award is granted under
the Plan.

G. "Plan" means this Plan, which shall be known as the Varian Associates,
Inc. Management Incentive Plan.

H. "Return on Sales" means annual operating earnings expressed as a
percentage of annual sales.

3. ADMINISTRATION

A. The Plan shall be administered by the Committee. The Committee shall
have the authority to:

(i) interpret and determine all questions of policy and expediency
pertaining to the Plan;

(ii) adopt such rules, regulations, agreements and instruments as it
deems necessary for its proper administration;

(iii) select Key Employees to receive Awards;

(iv) determine the terms of Awards;

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(v) determine amounts subject to Awards (within the limits prescribed
in the Plan);

(vi) determine whether Awards will be granted in replacement of or as
alternatives to any other incentive or compensation plan of the
Company or an acquired business unit;

(vii) grant waivers of Plan or Award conditions (other than Awards
intended to qualify under Section 162(m) of the Code);

(viii) accelerate the payment of Awards (but with respect to Awards
intended to qualify under Section 162(m) of the Code, only as
permitted under that Section);

(ix) correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, any Award or any Award notice;

(x) take any and all other actions it deems necessary or advisable for
the proper administration of the Plan;

(xi) adopt such Plan procedures, regulations, subplans and the like as
it deems are necessary to enable Key Employees to receive Awards;
and

(xii) amend the Plan at any time and from time to time, provided however
that no amendment to the Plan shall be effective unless approved
by the Company's stockholders, to the extent such stockholder
approval is required under Section 162(m) of the Code with respect
to Awards which are intended to qualify under that Section.

B. The Committee may delegate its authority to grant and administer Awards
to a separate committee; however, only the Committee may grant and administer
Awards which are intended to qualify as performance-based compensation under
Section 162(m) of the Code.

4. ELIGIBILITY

Any Key Employee is eligible to become a Participant in the Plan.

5. AWARDS

A. Awards may be made on the basis of Company and/or business unit
performance goals and formulas determined by the Committee in its sole
discretion. During any fiscal year of the Company, no Participant shall receive
an Award of more than (i) 200% of that Participant's annual base salary at the
end of the applicable performance period, or (ii) $5,000,000, whichever of these
amounts is lower. Total aggregate Awards for any fiscal year shall not exceed
eight percent of the Company's pre-tax operating earnings (before incentive
compensation) for that fiscal year. If total aggregate Awards calculated for a
fiscal year would exceed this aggregate limitation, all Awards for that fiscal
year shall be pro-rated on an equal basis among all Participants according to a
formula established by the Committee.

B. For purposes of qualifying Awards as performance-based compensation
under Section 162(m) of the Code, the Committee may in its discretion determine
that such Awards shall be conditioned on the achievement of pre-established
Company and/or

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business unit goals for Return on Sales, provided that any such goals for
purposes of an Award to the Company's Chief Executive Officer shall be Company
goals for Return on Sales. The target goals for Return on Sales and the amounts
which may be awarded upon achievement of such target goals shall be set by the
Committee on or before the latest date permissible so as to qualify under
Section 162(m) of the Code. In granting Awards which are intended to qualify
under Section 162(m) of the Code, the Committee shall follow any procedures
determined by it to be necessary or appropriate to ensure such qualification. No
Award intended to qualify under Section 162(m) of the Code shall be paid unless
and until the Committee certifies in writing that the pre-established
performance goals have been satisfied.

C. The Committee, in its discretion, may reduce or eliminate a
Participant's Award at any time before it is paid, whether or not calculated on
the basis of pre-established performance goals or formulas.

D. The Company shall withhold all applicable federal, state, local and
foreign taxes required by law to be paid or withheld relating to the receipt or
payment of any Award.

E. At the discretion of the Committee, payment of an Award or any portion
thereof may be deferred until a time established by the Committee. Deferrals
shall be made in accordance with guidelines established by the Committee to
ensure that such deferrals comply with applicable requirements of the Code and
its regulations. Deferrals shall be initiated by the delivery of a written,
irrevocable election by the Participant to the Committee or its nominee. Such
election shall be made prior to the date specified by the Committee. The
Committee may also credit interest on cash payments that are deferred and set
the rates of such interest.

6. GENERAL

A. The Plan shall become effective as of October 1, 1994, subject to
stockholder approval of the Plan at the 1995 annual meeting of the Company's
stockholders.

B. Any rights of a Participant under the Plan shall not be assignable by
such Participant, by operation of law or otherwise, except by will or the laws
of descent and distribution. No Participant may create a lien on any funds or
rights to which he or she may have an interest under the Plan, or which is held
by the Company for the account of the Participant under the Plan.

C. Participation in the Plan shall not give any Key Employee any right to
remain in the employ of the Company. Further, the adoption of this Plan shall
not be deemed to give any Key Employee or other individual the right to be
selected as a Participant or to be granted an Award.

D. To the extent any person acquires a right to receive payments from the
Company under this Plan, such rights shall be no greater than the rights of an
unsecured creditor of the Company.

E. The Plan shall be governed by and construed in accordance with the laws
of the State of California.

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