VARIAN ASSOCIATES INC /DE/, DEF 14A, 1995-12-29

VARIAN ASSOCIATES INC /DE/
DEF 14A, 1995-12-29
ELECTRONIC COMPONENTS & ACCESSORIES

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<PAGE> 1

[LOGO]

VARIAN ASSOCIATES, INC.

WORLD HEADQUARTERS

3050 HANSEN WAY

PALO ALTO, CALIFORNIA 94304-1000

(415) 493-4000

December 29, 1995

Dear Stockholder:

It is our pleasure to invite you to your Company's Annual Meeting of
Stockholders to be held on Thursday, February 15, 1996, 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 matter 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> 2

[LOGO]

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON FEBRUARY 15, 1996

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 15, 1996,
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; and

2. 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 18, 1995 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 29, 1995
Palo Alto, California
<PAGE> 3

VARIAN ASSOCIATES, INC.

3050 HANSEN WAY
PALO ALTO, CALIFORNIA 94304-1000

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

PROXY STATEMENT

ANNUAL MEETING TO BE HELD ON FEBRUARY 15, 1996

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 15, 1996 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 Proxies. Where no instructions are indicated,
such Proxies will be voted FOR the Board of Directors' nominees for directors.
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 29, 1995.

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. The Company will reimburse such persons for their reasonable
out-of-pocket expenses in forwarding solicitation materials. In addition to
solicitations by mail, some of the Company's directors, officers and other
employees, without extra remuneration, might supplement this solicitation by
letter, telegraph, telephone or personal interview. The Company might also
retain Corporate Investor Communications, Inc., 111 Commerce Road, Carlstadt,
New Jersey 07072-2586, to assist with solicitation of Proxies from brokers, bank
nominees and other holders, for a fixed retainer fee of no more than $6,500 plus
reasonable out-of-pocket expenses.

As of the close of business on the record date of December 18, 1995, there
were 31,227,646 shares of the Company's common stock outstanding. 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,
<PAGE> 4

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 Company's
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 1999 and when their respective successors are elected and
qualified: Angus A. MacNaughton, John G. McDonald, Wayne R. Moon, Burton Richter
and Elizabeth E. Tallett. The Board of Directors recommends that stockholders
vote for such nominees.

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, 1995. With
the exception of Mr. O'Rourke, who is deemed to have beneficially owned
approximately 2.45% of the Company's common stock outstanding as of December 1,
1995 (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 represented less than 1% of the aggregate number
of shares issued and outstanding as of such date.

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.

2
<PAGE> 5

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

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
PRINCIPAL OCCUPATION OR EMPLOYMENT, OWNED ON
FIVE-YEAR EMPLOYMENT HISTORY AND DIRECTOR DECEMBER 1,
OTHER DIRECTORSHIPS SINCE 1995(1)
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
NOMINEES FOR TERMS EXPIRING IN 1999
- ----------------------------------------------------------------
ANGUS A. MACNAUGHTON 1986 20,200(2)
Mr. MacNaughton is President of Genstar Investment Corporation
(a private investment company), a position he has held since
1987. He is a director of Canadian Pacific Limited, Sun Life
Assurance Co. of Canada Ltd., Sun Life Assurance Company of
Canada (U.S.) and Sun Life Insurance and Annuity Company of New
York. Mr. MacNaughton is also Vice-Chairman of the Board of
Barrick Gold Corporation. Age: 64
- ----------------------------------------------------------------
JOHN G. MCDONALD 1988 13,200(3)
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, EuroPacific Growth Fund, The Growth Fund of
America, Inc., The Income Fund of America, Inc., The Investment
Company of America, New Perspective Fund, Inc., Emerging Markets
Growth Fund, Inc., Scholastic Corp. and TriNet Corp. Age: 58
- ----------------------------------------------------------------
WAYNE R. MOON 1995(4) 200
Mr. Moon is Chairman of the Board and Chief Executive Officer of
Blue Shield of California (a health care company), positions he
has held since 1993. From 1990 to 1993 he served as President
and Chief Operating Officer of Kaiser Foundation Health Plan and
Hospitals (a health maintenance organization). Age: 55
- ----------------------------------------------------------------
BURTON RICHTER 1990 14,000(5)
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: 64
</TABLE>

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

(1) Unless otherwise indicated, consists of shares as to which the nominee or
director has sole voting and/or investment power (subject to community
property laws and direct holdings with spouses in broker accounts).

(2) Includes 10,000 shares which may be acquired under exercisable stock options
granted pursuant to the Omnibus Stock Plan.

(3) Includes 10,000 shares which may be acquired under exercisable stock options
granted pursuant to the Omnibus Stock Plan.

(4) On February 17, 1995, Mr. Moon was appointed by the Board of Directors to
complete the three-year term of Paul G. Stern, who resigned from the Board
of Directors effective February 17, 1995 before completion of his term,
which would have otherwise expired at the Annual Meeting.

(5) Includes (a) 3,200 shares held in a revocable trust of which Dr. Richter is
co-trustee with his wife, and (b) 10,000 shares which may be acquired under
exercisable stock options granted pursuant to the Omnibus Stock Plan.

3
<PAGE> 6

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

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
PRINCIPAL OCCUPATION OR EMPLOYMENT, OWNED ON
FIVE-YEAR EMPLOYMENT HISTORY AND DIRECTOR DECEMBER 1,
OTHER DIRECTORSHIPS SINCE 1995
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
ELIZABETH E. TALLETT N/A 0
Ms. Tallett is President and Chief Executive Officer of
Transcell Technologies Inc. (a biotechnology company),
positions she has held since 1992. Prior to 1992, she was
President of Centocor Pharmaceuticals. Ms. Tallett is a director
of The Principal Mutual Life Insurance Company. Age: 47
- ----------------------------------------------------------------
DIRECTORS WHOSE TERMS EXPIRE IN 1998
- ----------------------------------------------------------------
SAMUEL HELLMAN 1992 6,800(1)
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: 61
- ----------------------------------------------------------------
TERRY R. LAUTENBACH 1993 6,600(2)
Mr. Lautenbach is a 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 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: 57
- ----------------------------------------------------------------
GORDON E. MOORE 1983 13,200(3)
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: 66
</TABLE>

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

(1) Includes 6,000 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) Includes 10,000 shares which may be acquired under exercisable stock options
granted pursuant to the Omnibus Stock Plan.

4
<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 1995
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
DAVID E. MUNDELL 1992 8,800(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. Mr. Mundell is a director of Beazer Homes Inc. and
Commodities Corporation. Age: 64
- ----------------------------------------------------------------
PHILIP J. QUIGLEY 1992 7,400(2)
Mr. Quigley is Chairman of the Board 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: 53
- ----------------------------------------------------------------
DIRECTORS WHOSE TERMS EXPIRE IN 1997
- ----------------------------------------------------------------
RUTH M. DAVIS 1981 7,844(3)
Dr. Davis is President and Chief Executive Officer of The
Pymatuning Group, Inc. (a technology management company),
positions she has held since 1981. She is a director of Air
Products and Chemicals, Inc., BTG, Inc., Ceridian Corporation,
Consolidated Edison Company of New York, Giddings & Lewis, Inc.,
Premark International, Inc., Principal Mutual Life Insurance
Company, SofTech, Inc. and Sprint Corporation. Dr. Davis is also
a trustee of Consolidated Edison Company of New York, Vice
Chairman of the Board of Betac Corporation, and Chairman of the
Board of Aerospace Corporation. Age: 67
- ----------------------------------------------------------------
DAVID W. MARTIN, JR. 1994 2,400(4)
Dr. Martin is President and director of LYNX Therapeutics (a
biotechnology company), a position he has held since May 1995.
From January 1994 through April 1995, he was Senior Vice
President of Chiron Corporation and President of Chiron
Therapeutics (both biotechnology companies). From 1990 through
1993, Dr. Martin was Executive Vice President for Research and
Development at The Du Pont Merck Pharmaceutical Company. Age: 54
</TABLE>

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

(1) Includes (a) 2,400 shares held in a revocable trust of which Mr. Mundell is
co-trustee with his wife, and (b) 6,000 shares which may be acquired under
exercisable stock options granted pursuant to the Omnibus Stock Plan.

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

(3) Rounded to the nearest whole share; includes 6,000 shares which may be
acquired under exercisable stock options granted pursuant to the Omnibus
Stock Plan.

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

5
<PAGE> 8

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

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

(1) Includes (a) 16,001 shares of restricted stock granted under the Omnibus
Stock Plan, and (b) 714,000 shares which may be acquired on or within 60
days of December 1, 1995 under stock options granted pursuant to the 1982
Non-Qualified Stock Option Plan and the Omnibus Stock Plan.

(2) Includes (a) 1,400 shares held in a revocable trust of which Mr. Pederson is
co-trustee with his wife, and (b) 10,000 shares which may be acquired under
exercisable stock options granted pursuant to the Omnibus Stock Plan.

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

6
<PAGE> 9

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.

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 two meetings during fiscal year
1995.

The Audit and Corporate Responsibility Committee consists of directors
MacNaughton, McDonald (Chairman), Moon, 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 1995.

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 1995.

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 1995.

The Organization and Compensation Committee consists of directors Hellman,
Lautenbach, MacNaughton, Miller (Chairman), Moon, Moore, Quigley and Vieser. The

7
<PAGE> 10

Committee consults with management and advises the Board of Directors on
organizational matters, approves executive compensation, approves all 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
three meetings during fiscal year 1995.

The Technology and Environmental Committee consists of directors Davis
(Chairman), Hellman, Lautenbach, Martin, Moore, Pederson and Richter. 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
1995.

The Board of Directors held four meetings during fiscal year 1995. 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 1995, with
the exception of directors Moon, Quigley and Vieser.

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 and with a ten-year
term) to acquire 2,000 shares of the Company's common stock. Directors who are
Company employees receive no fees for their services as directors.

8
<PAGE> 11

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information as of December 1, 1995
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 (23 persons):
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
(IF APPLICABLE) OF BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP(#) OUTSTANDING SHARES(%)(1)
<S> <C> <C>
- --------------------------------------------------------------------------------------------
Fidelity Management and Research
Corporation......................... 5,065,300(2) 16.12%
82 Devonshire Street
Boston, MA 02109
A I M Management Group Inc............ 2,385,500(3) 7.59
11 Greenway Plaza, Suite 1919
Houston, TX 77046
The Goldman Sachs Group L.P. ......... 1,689,980(4) 5.38
85 Broad Street
New York, NY 10004
</TABLE>

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

(1) Based on the 31,420,398 shares outstanding on December 1, 1995. 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, 1995 plus the shares which may be acquired by the named
executive officer on or within 60 days thereafter under stock options. 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, 1995 plus the shares which may be
acquired by those executive officers and directors on or within 60 days
thereafter under stock options.

(2) As of September 30, 1995, based on a Form 13F-E filed by Fidelity Management
and Research Corporation on November 15, 1995, which Form indicates that all
such shares are held subject to no voting authority and shared dispositive
authority.

(3) As of September 30, 1995, based on a Form 13F filed by A I M Management
Group Inc. on October 11, 1995, which Form indicates that all such shares
are held subject to shared voting and dispositive authority.

(4) Based on a Schedule 13G/A filed on November 10, 1994 which indicates that
such shares are beneficially owned by The Goldman Sachs Group, L.P. and
Goldman, Sachs & Co., and that 1,326,280 shares are subject to shared voting
power and 1,689,980 shares are subject to shared dispositive power.

9
<PAGE> 12

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

<TABLE>
<CAPTION>
NAME AND ADDRESS (IF AMOUNT AND NATURE OF PERCENT OF
APPLICABLE) OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(#) OUTSTANDING SHARES(%)
<S> <C> <C>
- --------------------------------------------------------------------------------------------
J. Tracy O'Rourke..................... 788,500(1) 2.45
Chairman of the Board and
Chief Executive Officer
Richard A. Aurelio.................... 47,953(2) 0.15
Executive Vice President
Allen J. Lauer........................ 211,810(3) 0.67
Executive Vice President
Richard M. Levy....................... 109,857(4) 0.35
Executive Vice President
Robert A. Lemos....................... 57,092(5) 0.18
Vice President, Finance,
Chief Financial Officer
and Treasurer
All Executive Officers and Directors
as a Group.......................... 1,458,472(6) 4.48
</TABLE>

- ---------------
(1) Shares deemed beneficially owned by Mr. O'Rourke include (a) 16,001 shares
of restricted stock granted pursuant to the Omnibus Stock Plan, and (b)
714,000 shares which may be acquired on or within 60 days of December 1,
1995 under stock options granted pursuant to the 1982 Non-Qualified Stock
Option Plan and the Omnibus Stock Plan.

(2) Shares deemed beneficially owned by Mr. Aurelio include (a) 8,400 shares of
restricted stock granted pursuant to the Omnibus Stock Plan, and (b) 34,000
shares which may be acquired on or within 60 days of December 1, 1995 under
stock options granted pursuant to the Omnibus Stock Plan.

(3) Shares deemed beneficially owned by Mr. Lauer include (a) 8,400 shares of
restricted stock granted pursuant to the Omnibus Stock Plan, (b) 133,000
shares which may be acquired on or within 60 days of December 1, 1995 under
stock options granted pursuant to the 1982 Non-Qualified Stock Option Plan
and the Omnibus Stock Plan, and (c) 67,610 shares held in a revocable trust
of which Mr. Lauer is co-trustee with his wife.

(4) Shares deemed beneficially owned by Dr. Levy include (a) 8,400 shares of
restricted stock granted pursuant to the Omnibus Stock Plan, (b) 84,000
shares which may be acquired on or within 60 days of December 1, 1995 under
stock options granted pursuant to the Omnibus Stock Plan, and (c) 14,657
shares held in a revocable trust of which Dr. Levy is co-trustee with his
wife.

(5) Shares deemed beneficially owned by Mr. Lemos include (a) 4,800 shares of
restricted stock granted pursuant to the Omnibus Stock Plan, and (b) 27,999
shares which may be acquired on or within 60 days of December 1, 1995 under
stock options granted pursuant to the Omnibus Stock Plan.

(6) Includes (a) 57,401 shares of restricted stock granted to executive officers
pursuant to the Omnibus Stock Plan, (b) 1,163,631 shares which may be
acquired on or within 60 days of December 1, 1995 by executive officers and
directors under stock options granted pursuant to the 1982 Non-Qualified
Stock Option Plan and the Omnibus Stock Plan, (c) 102,841 shares as to which
voting and/or investment power is shared (see the footnotes and accompanying
text under the caption "Election of Directors" above and the foregoing
footnotes), and (d) 16,900 shares deemed beneficially owned by director
William F. Miller (whose term will not continue after the Annual Meeting),
including 6,300 shares held in a revocable trust of which Mr. Miller is
co-trustee with his wife and 10,000 shares which may be acquired under
exercisable stock options granted pursuant to the Omnibus Stock Plan.

10
<PAGE> 13

CERTAIN EXECUTIVE OFFICER COMPENSATION AND OTHER INFORMATION

The following tables set forth certain information with respect to the
Company's chief executive officer and the 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 ALL
ANNUAL RESTRICTED UNDERLYING ---------- 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......... 1995 $744,150 $1,492,976 $134,691 $389,000 60,000 $1,460,200 $221,515
Chairman of the Board 1994 722,400 930,417 132,880 492,500 60,000 1,326,915 152,202
and Chief Executive 1993 699,794 491,193 130,380 0 60,000 968,087 136,534
Officer

Richard A. Aurelio........ 1995 298,154 618,400 38,241 204,225 30,000 605,488 69,821
Executive Vice President 1994 295,024 350,811 16,952 258,563 30,000 469,312 47,665
1993 286,636 185,269 24,137 0 30,000 312,053 12,289

Allen J. Lauer............ 1995 300,364 418,785 16,876 204,225 30,000 605,488 81,971
Executive Vice President 1994 291,594 385,980 17,903 258,563 30,000 550,785 53,821
1993 282,370 203,844 15,099 0 30,000 401,959 50,877

Richard M. Levy........... 1995 300,364 484,905 19,946 204,225 30,000 605,488 81,864
Executive Vice President 1994 291,594 385,980 18,482 258,563 30,000 550,785 53,804
1993 282,370 203,844 25,167 0 30,000 401,959 50,780

Robert A. Lemos........... 1995 229,372 406,891 19,677 116,700 16,000 346,788 51,713
Vice President, Finance, 1994 222,668 222,563 18,340 147,750 16,000 315,444 36,825
Chief Financial Officer 1993 215,626 117,429 18,023 0 12,000 230,210 34,024
and Treasurer
</TABLE>

- ---------------
(1) Amounts reported for Mr. Aurelio include $2,500 per month in mortgage
assistance payments during all of fiscal years 1993 and 1994 and for two
months in fiscal year 1995, which payments were made pursuant to the terms
of his retention and were not part of his annual base salary.

(2) Consists of Management Incentive Plan awards and Cash Profit-Sharing Plan
allocations. The fiscal year 1995 amount reported for Mr. Lemos also
includes an extraordinary cash bonus.

(3) Consists of amounts reimbursed for the payment of taxes on certain
perquisites and personal benefits. The amounts reported for Mr. O'Rourke
also include aggregate incremental costs of perquisites and personal
benefits provided to Mr. O'Rourke (including (a) $22,635 for his use of a
Company-leased automobile in fiscal year 1995, and (b) $45,199, $61,433 and
$37,615 for his use of the Company-leased aircraft in fiscal years 1995,
1994 and 1993, respectively).

(4) The amounts reported for fiscal year 1994 are based on two separate 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 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 $53.50 per share) of the aggregate restricted stock holdings
at the end of fiscal year 1995 were as follows: Mr. O'Rourke, 13,334 shares,
$713,369; Mr. Aurelio, 7,000 shares, $374,500; Mr. Lauer, 7,000 shares,
$374,500; Dr. Levy, 7,000 shares, $374,500; and Mr. Lemos, 4,000 shares,
$214,000. The shares of restricted stock granted in fiscal years 1995,

11
<PAGE> 14

1994 and 1993, respectively, which partially vest in under three years were
as follows: Mr. O'Rourke, 8,000 shares, 16,000 shares, and 0 shares; Mr.
Aurelio, 4,200 shares, 8,400 shares, and 0 shares; Mr. Lauer, 4,200 shares,
8,400 shares, and 0 shares; Dr. Levy, 4,200 shares, 8,400 shares, and 0
shares; and Mr. Lemos, 2,400 shares, 4,800 shares, and 0 shares. The shares
reported have been 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 have been adjusted to reflect the 2-for-1
stock split in March 1994.

(6) Consists of cash payouts in fiscal years 1996, 1995 and 1994 under the
long-term incentive feature of the Omnibus Stock Plan for three-year periods
ended with fiscal years 1995, 1994 and 1993, respectively.

(7) Consists of (a) Company contributions (including interest) to Retirement and
Profit-Sharing Program and Supplemental Retirement Plan accounts in fiscal
years 1995, 1994 and 1993, respectively (Mr. O'Rourke, $198,298, $132,224
and $113,727; Mr. Aurelio, $68,664, $46,555 and $11,018; Mr. Lauer, $80,726,
$52,600 and $49,481; Dr. Levy, $80,619, $52,583 and $49,384; and Mr. Lemos,
$50,770, $35,893 and $32,805); (b) Company-paid premiums for group term life
insurance in fiscal years 1995, 1994 and 1993, respectively (Mr. O'Rourke,
$2,082, $2,070 and $2,442; Mr. Aurelio, $1,157, $1,110 and $1,127; Mr.
Lauer, $1,245, $1,221 and $1,396; Dr. Levy, $1,245, $1,221 and $1,396; and
Mr. Lemos, $943, $932 and $1,219); and (c) Company-paid premiums for
supplemental disability insurance for Mr. O'Rourke in fiscal years 1995,
1994 and 1993, respectively ($21,135, $17,908 and $20,365).

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
NUMBER OF
SECURITIES POTENTIAL REALIZABLE VALUE
UNDERLYING PERCENT OF AT ASSUMED ANNUAL RATES
OPTIONS/ TOTAL OPTIONS/ OF STOCK PRICE APPRECIATION
SARS SARS GRANTED EXERCISE OR FOR OPTION TERM(2)
GRANTED TO EMPLOYEES BASE PRICE EXPIRATION ------------------------------
NAME (#)(1) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ----------------------- ---------- -------------- ----------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
J. Tracy O'Rourke...... 60,000 5.54% $ 36.00 11/17/2001 $ 879,337 $ 2,049,229
Richard A. Aurelio..... 30,000 2.77 36.00 11/17/2001 439,668 1,024,614
Allen J. Lauer......... 30,000 2.77 36.00 11/17/2001 439,668 1,024,614
Richard M. Levy........ 30,000 2.77 36.00 11/17/2001 439,668 1,024,614
Robert A. Lemos........ 16,000 1.48 36.00 11/17/2001 234,490 546,461
All Optionees(3)....... 1,082,820 100 36.00 11/17/2001 15,869,393 36,982,434
All Stockholders(4).... 33,989,918 498,143,162 1,160,885,396
All Optionees' Gain 3.3% 3.3%
as a Percentage of
All Stockholders'
Gain.................
</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 generally 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.

(2) The 5% and 10% assumed annual rates of stock price appreciation would result
from per share prices of $50.66 and $70.15, respectively. Such assumed rates
are not intended to represent a forecast of possible future appreciation of
the Company's common stock or total stockholder return.

(3) For "All Optionees," the number of options granted is the total of all
options granted to Company employees in fiscal year 1995, and the potential
realizable value is based on the $36.00 per share exercise price of the
options granted to the named executive officers on November 17, 1994, a
November 17, 1994 grant date, and a seven-year option term (the term of all
options granted to employees in fiscal year 1995).

(4) For "All Stockholders," the potential realizable value is based on
seven-year appreciation of the 33,989,918 shares outstanding on November 17,
1994 and the $36.00 per share price of the options granted to the named
executive officers on that date.

12
<PAGE> 15

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

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED VALUE FISCAL YEAR-END(#) FISCAL YEAR-END($)(2)
ON EXERCISE REALIZED ----------------------------- -----------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Tracy O'Rourke........ 100,000 $2,528,250 760,000 120,000 $31,109,850 $ 2,856,200
Richard A. Aurelio....... 36,000 779,050 4,000 60,000 140,380 1,428,100
Allen J. Lauer........... 16,000 571,395 118,000 60,000 4,420,030 1,428,100
Richard M. Levy.......... 24,000 593,460 54,000 60,000 1,784,270 1,428,100
Robert A. Lemos.......... 16,668 348,212 13,333 30,667 422,152 716,329
</TABLE>

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

(2) Based on the market price of the underlying shares at the end of fiscal year
1995 ($53.50 per share).

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

<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE
SHARES, OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
UNITS OR PERIOD UNTIL NON-STOCK 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 1995-1997 $ 226,908 $1,512,720 --
Richard A. Aurelio.......... N/A 1995-1997 94,208 628,056 --
Allen J. Lauer.............. N/A 1995-1997 94,208 628,056 --
Richard M. Levy............. N/A 1995-1997 94,208 628,056 --
Robert A. Lemos............. N/A 1995-1997 71,713 478,088 --
</TABLE>

- ---------------
(1) Determinations by the Committee that the named executive officers may
participate in the long-term incentive feature of the Omnibus Stock Plan
("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 1995-1997 period were made in fiscal year 1995. 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 set forth above assume that each named
executive officer's annual base salary at the end of fiscal year 1997 will
be identical to the executive officer's 1996 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 1994
(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
fiscal year 1997 will be identical to his 1996 annual base salary. The
actual payment for the three-year period may be less (but will not be
greater) than the estimate shown in this column, depending upon the actual
RONA for fiscal years 1995, 1996 and 1997, the actual base salary of the
named executive officer at the end of fiscal year 1997, and the aggregate
payout to all participants (see footnote 4 below).

(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-

13
<PAGE> 16

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. This variable makes the maximum amount not
determinable or estimable.

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. Also in connection with Mr. Aurelio's retention, the
Company 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 terminated,
whichever occurred first. The Company and Mr. Aurelio agreed to terminate such
monthly mortgage assistance payments effective 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 ("Senior Executives") which provide for the
payment of specified compensation and benefits upon certain terminations of
their employment follow-

14
<PAGE> 17

ing 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 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

15
<PAGE> 18

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.

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;

- 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.

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 strong financial performance in fiscal year 1995
and during the five-year period covered by the graph on page 21 of the Proxy
Statement.

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 1995 were determined by the Committee after general
consideration of the Company's financial performance in fiscal year 1994
(improved pre-tax profits, earnings per share, earned gross margin, sales per
employee and net debt-to-capital), the Company's five-year cumulative total
return to stockholders, the general mix of fixed, annual incentive and long-term
incentive compensation in fiscal year 1994 (which emphasized variable "at risk"
cash compensation), individual position and responsibilities, a salary survey of
61 "Group Head" executives of comparable-size electrical/electronic businesses
(which showed that the

16
<PAGE> 19

Company's Executive Vice President salaries were at approximately the 75th
percentile), and a general market survey of salary adjustments. The Company's
executive officer salary increases in fiscal year 1995 were below the survey
average.

Management Incentive Plan Awards. Annual incentives are provided through
cash awards under the Management Incentive Plan. Awards under that Plan for
fiscal year 1995 were determined by a formula which measured Company and/or
business unit performance against pre-determined return on sales ("ROS")
objectives. For fiscal year 1995, the Committee introduced to the formula
business unit ROS objectives for executive officers with operational
responsibilities, so as to tie their compensation more closely to business unit
as well as Company success. The fiscal year 1995 objectives for ROS were
determined after subjective consideration of the Company's historical ROS
objectives and ROS achieved, ROS budgeted for the Company and relevant business
unit, and prior individual and aggregate 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.
Each executive officer's participation level was set by the Committee on the
basis of the responsibilities of the executive officer's position, the potential
award for that participation level and the potential aggregate awards to all
officers. The mix of Company versus business units ROS objectives varied
according to the executive officer's operational responsibility.

Long-Term Incentive Compensation. Long-term incentives are provided
through annual stock option grants, restricted stock grants and cash awards
under 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 1995 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 1995 was determined by the Committee after
subjective consideration of executive officer positions and
responsibilities, stock option grants in each of the four previous fiscal
years, unexercised option shares from prior grants, a 2-for-1 stock split
in March 1994 and aggregate stock option grants to executive officers. In
determining grants to the CEO and Executive Vice Presidents, the Committee
also considered the potential realizable value of stock options granted in
fiscal year 1994, the value of outstanding stock options at the end of
fiscal year 1994, stock option exercises during fiscal year 1994 and a
survey of stock option grants to senior executives at 11 technology
companies. The fiscal year 1995 grants to the Company's Executive Vice
Presidents were approximately two-thirds the size of the average stock
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

17
<PAGE> 20

option grants at 15 technology companies, which survey indicated that the
Company's grants were below competitive levels.

Restricted Stock. The Committee considers restricted stock as a form
of long-term incentive compensation. In order to more closely link
restricted stock grants to the Company's financial performance and
shareholder return, restricted stock is granted annually if certain
pre-determined objectives for the Company's return on equity ("ROE") are
achieved, which restricted stock if granted then vests over three years
assuming continued employment. 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
fiscal year 1995 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 executive officers' relative
positions and responsibilities. At the end of fiscal year 1995, the
pre-determined ROE objectives were used to calculate the number of
restricted shares granted.

Other Long-Term Incentives. The Company's Omnibus Stock Plan provides
for 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 return on net assets ("RONA")
during three-year cycles, one of which ended with fiscal year 1995. The
1993-1995 objectives for RONA were determined in November 1992 after
subjective consideration of the RONA achieved in the prior cycle, awards
made for the prior cycle and the RONA objectives for the prior two cycles.
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. Each executive officer's participation
level was set by the Committee in August 1992 on the basis of the
responsibilities of the executive officer's position, the potential award
for that participation level, previous participation levels and the
potential individual and aggregate awards to officers. The average RONA for
fiscal years 1993-1995 was applied to the pre-determined formula to
calculate earned awards, which 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, 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 reviewed and determined on the basis of subjective considerations to
maintain arrangements 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, reim-

18
<PAGE> 21

bursement 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.

While the Committee generally limits executive officer compensation to the
plans and arrangements described above, the Committee considers it appropriate
in certain limited circumstances to otherwise reward an executive officer for
extraordinary accomplishments. Accordingly, the Committee decided to award to
Robert A. Lemos, the Company's Vice President, Finance, Chief Financial Officer
and Treasurer, a special cash bonus of $50,000 in recognition of Mr. Lemos' key
role in successfully concluding the sale of the Company's Electron Devices
business in fiscal year 1995.

Tax Deductibility of Executive Compensation. Section 162(m) of the
Internal Revenue Code of 1986, as amended, 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. At the 1995 Annual Meeting of Stockholders, the
Company's stockholders approved amendments to the Company's Omnibus Stock Plan
and adoption of the Management Incentive Plan in order for awards under those
Plans to be eligible for continued tax deductibility. Awards under those Plans
for fiscal year 1995 were made in accordance with the requirements of Section
162(m) so as to be tax deductible. 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 interest 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 1995 compensation for the CEO.

The Committee set the CEO's base salary in fiscal year 1995 after
subjective consideration of the Company's performance in fiscal year 1994
(improved pre-tax profits, earnings per share, earned gross margins, sales per
employee and net debt-to-capital), the mix of the CEO's fixed, annual incentive
and long-term incentive compensation in fiscal year 1994 (which emphasized
variable "at risk" cash compensation), the CEO's salary and other compensation
in each of the previous four fiscal years and a general market survey of chief
executive officer salaries at 26 comparable-size electrical/electronic companies
(which showed that the CEO's salary was between the 90th and 95th percentiles).
Based on such subjective considerations, the Committee granted to the CEO a 3%
increase in his base salary.

The CEO received an annual incentive award for fiscal year 1995 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 200%
of his annual base salary. The CEO also received a long-term incentive award for
the three-year cycle ended with fiscal year 1995 in accordance with the
long-term incentive feature of the Omnibus Stock Plan

19
<PAGE> 22

described above. The actual RONA and the pre-determined formula resulted in a
cash award to the CEO equal to 200% of his annual base salary.

Based on the Company's actual ROE in fiscal year 1995 and the
pre-determined formula, the Committee also granted to the CEO 8,000 shares of
restricted stock for fiscal year 1995. Consistent with the Committee's policy as
described above, this restricted stock will vest in equal installments over
three years.

The Committee also granted to the CEO a 60,000-share stock option in fiscal
year 1995 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. The Committee considered survey data which indicated that
the CEO's stock option grants for fiscal year 1995 and previous years were lower
than average grants to chief executive officers of comparable companies.
Consistent with the Omnibus Stock Plan as amended and 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.

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

20
<PAGE> 23

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 reinvested dividends) of the Company's common stock
in fiscal years 1990 through 1995 (from October 2, 1989 through September 29,
1995) 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 October 2, 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>
Measurement Period S&P HIGH
(Fiscal Year Covered) VARIAN S&P 500 TECHNOLOGY
<S> <C> <C> <C>
1990 100 100 100
1991 114 126 119
1992 122 134 115
1993 171 151 142
1994 255 151 162
1995 375 192 253
</TABLE>

21
<PAGE> 24

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, 1993 through September
29, 1995, 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: Mr. Aurelio reported on April 7, 1995 the
February 2, 1995 sale of 318 shares by his minor son; and Dr. Levy reported on
November 29, 1995 his June 1, 1995 and August 18, 1995 transfers of 5,237 and
190 shares, respectively, from his direct ownership to a revocable trust of
which he is co-trustee.

ANNUAL REPORT

The Company's Annual Report for fiscal year 1995, 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 1997 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 31, 1996 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.

22
<PAGE> 25

AUDITORS

The firm of Coopers & Lybrand L.L.P. has been selected by the Board of
Directors as the Company's independent public auditors for fiscal year 1996.
Coopers & Lybrand also acted as the Company's independent auditors for fiscal
year 1995. 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.

By Order of the Board of Directors

(SIG)

JOSEPH B. PHAIR
Secretary

December 29, 1995
Palo Alto, California

23
<PAGE> 26

(LOGO)printed on recycled paper
<PAGE> 27
PROXY

VARIAN ASSOCIATES, INC.

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS--FEBRUARY 15, 1996

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned stockholder of Varian Associates, Inc. hereby constitutes
and appoints J. TRACY O'ROURKE and JOSEPH B. PHAIR, and each of them, proxies
and attorneys-in-fact of the undersigned, with full power of substitution, to
vote all the shares of Common Stock of Varian Associates, Inc. standing in the
name of the undersigned, at the Annual Meeting of Stockholders of Varian
Associates, Inc. to be held at the Santa Clara Convention Center Theater, 5001
Great America Parkway, Santa Clara, California, on February 15, 1996, at 1:30
p.m., and at any adjournment(s) or postponement(s) thereof.

Unless a contrary direction is indicated, this Proxy will be voted FOR all
nominees listed in Proposal 1 and in accordance with the judgment of the proxies
as to the best interests of the Company upon such other business as may properly
come before the meeting or any adjournment or postponement thereof. If specific
instructions are indicated, this Proxy will be voted in accordance therewith.

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

- -------------------------------------------------------------------------------
(If you have written in the above space, please mark the corresponding box
on the reverse side of this card)

PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE
ENCLOSED POSTAGE-PAID RETURN ENVELOPE SEE REVERSE
SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE

FOLD AND DETACH HERE

[MAP]
<PAGE> 28
Please mark
/x/ votes as in
this example.

The Board of Directors recommends a vote FOR proposal 1.

FOR WITHHELD
1. Election of / / / / Nominees: Angus A. MacNaughton,
Directors: John G. McDonald, Wayne R. Moon,
Burton Richter and Elizabeth E. Tallell

For, except vote withheld from the following nominee(s):

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

2. The proxies are authorized to cumulate votes and to vote on such other
business as is properly brought before the Annual Meeting for action
in accordance with their judgment as to the best interests of the Company.

Comments/Change of Address / /

Signature(s):__________________________ Date _____________
Please sign exactly as name appears on your stock certificate. If the stock
is registered in the names of two or more persons, each should sign.
Executors, administrators, trustees, guardians, attorneys and corporate
officers should insert their titles.

FOLD AND DETACH HERE

VARIAN ASSOCIATES, INC.
Annual Meeting of Stockholders

February 15, 1996
1:30 p.m.

Santa Clara Convention Center Theater
5001 Great America Parkway
Santa Clara, California

(Map on Reverse Side)