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to elect nine directors to serve until the 2020 Annual Meeting;

to approve, on an advisory basis, the compensation of our named executive officers as described in the accompanying Proxy Statement;

to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2019; and

to transact any other business that properly comes before the Annual Meeting.

PROXY SUMMARY

GENERAL INFORMATION

PROPOSAL ONE — ELECTION OF DIRECTORS

Our Board; Selection of Nominees

Governance of the Corporation

Board Committees and Committee Meetings

PROPOSAL TWO — ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Background to the Advisory Vote

Philosophy of our Executive Compensation Program

Varian’s Fiscal Year 2018 Performance

Alignment of Executive Incentives with Our Value Creation Strategy

PROPOSAL THREE — RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Selection of the Accounting Firm

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

Principal Accountant Fees and Services

AUDIT COMMITTEE REPORT

STOCK OWNERSHIP

Beneficial Ownership of Certain Stockholders, Directors and Executive Officers

Section 16(a) Beneficial Ownership Reporting Compliance

COMPENSATION OF THE NAMED EXECUTIVE OFFICERS AND DIRECTORS

Executive Compensation Governance Policies

Compensation and Management Development Committee Report

Summary Compensation Table

Compensation Committee Interlocks and Insider Participation

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Review, Approval or Ratification of Related Person Transactions

Transactions with Related Persons

Who is soliciting my proxy?

The Board of Directors (the “Board”) of Varian Medical Systems, Inc. (“we,” “us,” “Varian” or the “Company”) is sending you this Proxy Statement in connection with the Board’s solicitation of proxies for use at the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) or any adjournment or postponement thereof. Certain of our directors, officers and employees also may solicit proxies on the Board’s behalf by mail, telephone, email or fax or in person. We have hired Georgeson LLC, 1290 Avenue of the Americas, New York, New York 10104, to assist in soliciting proxies from brokers, bank nominees and other stockholders.

Who is paying for this solicitation?

We will pay for the solicitation of proxies. Our directors, officers and employees will not receive additional remuneration. We expect that we will pay Georgeson LLC. not more than $9,000, plus reasonable out-of-pocket expenses, and also will reimburse banks, brokers, custodians, nominees and fiduciaries for their reasonable charges and expenses to forward our proxy materials to the beneficial owners of our common stock.

What am I voting on?

You will be voting on three proposals. Proposal One is for the election of Anat Ashkenazi, Jeffrey R. Balser, Judy Bruner, Jean-Luc Butel, Regina E. Dugan, R. Andrew Eckert, Timothy E. Guertin, David J. Illingworth and Dow R. Wilson to the Board for a one-year term ending at the 2020 Annual Meeting of Stockholders.

Who can vote?

Only our stockholders of record at the close of business on December 17, 2018 may vote. Each share of common stock outstanding on that date is entitled to one vote on all matters to come before the meeting.

Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials this year insteadof a full set of proxy materials?

Pursuant to rules adopted by the U.S. Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials (consisting of the Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended September 28, 2018, as filed with the SEC on November 26, 2018) over the Internet. Therefore, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to our stockholders. Starting on the date of distribution of the Notice, all stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request printed copies may be found in the Notice. If you request printed versions of the proxy materials by mail, the materials will also include a proxy card or other voting instruction form.

Can I receive proxy materials for future annual meetings by email rather than receiving a paper copy of the Notice?

If you are a holder of record, you may elect to receive the Notice or other future proxy materials by email by logging into www.proxyvote.com and entering your email address before you vote if you are voting by

What is the difference between a stockholder of record and a “street name” holder?

If your shares are registered directly in your name with Computershare Trust Company, N.A., our stock transfer agent, you are considered the stockholder of record for those shares.

How do I vote and how do I revoke my proxy?

If you hold your shares in your own name as a stockholder of record, you may vote your shares either in person at the meeting or by proxy. To vote in person, please bring a form of identification, such as a valid driver’s license or passport, and proof that you were a stockholder as of December 17, 2018, and we will give you a ballot when you arrive. To vote by proxy, please vote in one of the following ways:

Via the Internet. You may vote through the Internet at www.proxyvote.com by following the instructions provided in the Notice.

Via Telephone. If you received your proxy materials or request printed copies by mail and are in the United States, you may vote by calling the toll-free number found on the proxy card.

Via Mail. If you received your proxy materials or request printed copies by mail, you may vote by mail by marking, dating, signing and mailing the proxy card in the envelope provided.

What is the deadline for submitting a proxy?

Telephone and Internet voting facilities for stockholders of record will be available 24 hours a day. In order to be counted, proxies submitted by telephone or the Internet must be received by 11:59 p.m. Eastern Time on February 13, 2019. Proxies submitted by mail must be received prior to the start of the Annual Meeting.

What constitutes a quorum?

On the record date, we had 91,165,275 shares of common stock, $1.00 par value, outstanding. Voting can take place at the Annual Meeting only if stockholders owning a majority of the issued and outstanding stock entitled to vote at the Annual Meeting are present in person or represented by proxy.

What are abstentions and broker non-votes and how do they affect voting?

Abstentions—If you specify that you wish to “abstain” from voting on an item, your shares will not be voted on that particular item. Abstentions are counted toward establishing a quorum. Abstentions have no effect on the election of directors and are included in the shares entitled to vote on Proposals Two and Three. On Proposals Two and Three, abstentions have the effect of a vote against the proposal.

What vote is needed?

For Proposal One, the election of directors, the nine nominees may be elected only upon the affirmative vote of a majority of the total votes cast. In other words, the number of votes cast “For” a nominee’s election must exceed 50% of the votes cast with respect to that nominee’s election, not including any abstentions. Votes “Against” a nominee’s election will count as a vote cast. However, abstentions or shares as to which a shareholder gives no authority or discretion, including “broker non-votes,” will have no effect and not count as a vote cast with respect to that nominee.

What happens if a director does not receive a majority of votes cast at the Annual Meeting?

Prior to an election, each incumbent director submits a resignation letter whose effectiveness is contingent upon the incumbent director failing to receive more than 50% of the votes cast in an uncontested election. If an incumbent director does not receive a majority of the votes cast, the Nominating and Corporate Governance Committee of the Board will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the Nominating and Corporate Governance Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date of the certification of the election results.

Can I vote on other matters?

You are entitled to vote on any other matters that are properly brought before the Annual Meeting. Our By-Laws limit the business conducted at any annual meeting to (1) business in the notice of the annual meeting, (2) business directed by the Board and (3) business brought by a stockholder of record entitled to vote at the meeting so long as the stockholder has met the requirements for submitting stockholder proposals provided in our By-Laws. Under our By-Laws, a stockholder must notify our Secretary in writing (at our Palo Alto, California headquarters) of the proposal not less than 90 days nor more than 120 days before the anniversary of the prior year’s annual meeting, which for the 2020 Annual Meeting of Stockholders will be no earlier than October 17, 2019 and no later than November 16, 2019. The notice must give a brief description of the business to be brought before the annual meeting, the reasons for conducting the business and the text of the proposal, as well as the name and address of the stockholder giving the notice and the beneficial owner on whose behalf the proposal is made, the number of shares owned and information about that beneficial ownership, all as detailed in our By-Laws. The notice must also describe any material interest the stockholder or beneficial owner has in the business and arrangements between such stockholder or beneficial owner and any other person in connection with the proposal and must include certain representations, all as detailed in our By-Laws.

How do I suggest potential candidates for director positions?

A stockholder may suggest one or more potential candidates for consideration by the Board as nominees for election as one of our directors at an annual meeting of stockholders. This can be done by notifying our Corporate Secretary in writing at our Palo Alto, California headquarters not less than 90 days nor more than 120 days before the anniversary of the prior year’s annual meeting, which for the 2020 Annual Meeting of Stockholders will be no earlier than October 17, 2019 and no later than November 16, 2019. The notice must include all information about the potential candidate that must be disclosed in proxy solicitations pursuant to Regulation 14A under the Exchange Act (including the potential candidate’s written consent to being named as a nominee and serving as a director) and a description of all material monetary agreements

How do I nominate candidates for director positions on the Proxy Statement under proxy access?

How does the Board select nominees for election to the Board?

The Nominating and Corporate Governance Committee (the “Nominating Committee”) will consider potential candidates for directors submitted by stockholders, in addition to those suggested by other Board members and members of our management, and does not evaluate potential candidates differently based upon the source of the potential candidate. The Nominating Committee considers and evaluates each properly submitted potential candidate for director in an effort to achieve a balance of skills and characteristics on the Board, as well as to ensure that the composition of the Board at all times adheres to the independence requirements applicable to NYSE-listed companies and other regulatory requirements applicable to us. Please refer to “Proposal One—Election of Directors” and our Corporate Governance Guidelines for additional details on our policy, process and membership criteria. A stockholder may recommend potential candidates for director by notifying our Corporate Secretary in writing (at our Palo Alto, California headquarters) as detailed in the question and answer above.

How may I communicate with the Board of Directors?

Stockholders and other interested parties may communicate directly with the Board, the Board’s Chairman or any other director or with the independent directors as a group or any other group of directors through the Board’s Chairman by sending an email to lead.director@varian.com. Messages received will be forwarded to the appropriate director or directors.

When and where is the Annual Meeting being held?

The Annual Meeting will be held on Thursday, February 14, 2019 at 4:30 p.m. Pacific Time at our headquarters at 3100 Hansen Way, Palo Alto, California 94304. If you need directions to the Annual Meeting so that you may attend or vote in person, please contact our Investor Relations department at investors@varian.com.

How can I find the results of the Annual Meeting?

Preliminary results will be announced at the Annual Meeting. Final results also will be published in a Current Report on Form 8-K to be filed with the SEC within four business days after the Annual Meeting. If the official results are not available at that time, we will provide preliminary voting results in the Form 8-K and will provide the final results in an amendment to the Form 8-K as soon as they become available.

BOARD RECOMMENDATION

VOTE “FOR” EACH OF THE NOMINEES

Knowledge about our industries and technologies;

Experience in industries beyond healthcare;

International business experience;

Cultural, gender, ethnic or age diversity;

Experience in financial oversight and with the financial community, and a strong reputation with the financial community;

Experience in business management and the potential to succeed top management in the event of an unexpected necessary Board intervention;

Broad experience at policy making in business, government, education, technology or public interest; or

Business contacts, knowledge or influence useful to our business and product lines.

Anat Ashkenazi

Age: 46

Director Since: 2018

Independent

Principal occupation, business experience and directorships

•  Positions at Eli Lilly and Company, a global pharmaceutical company:

•   Senior Vice President, Controller and Chief Financial Officer, Lilly Research Labs (September 2016—present)

•   Vice President, Finance and Chief Financial Officer, Lilly Diabetes and Lilly Global Manufacturing and Quality (April 2015—September 2016)

•   Chief Financial Officer, Lilly Oncology (October 2013—April 2015)

•  Other Current Public Company Board Memberships: None

•  Public Company Board Memberships in Past Five Years: None

Experience, qualifications, attributes or skills supporting directorship

•  Over 20 years of in-depth financial management and planning experience including corporate finance and financial services

•  Extensive experience in the pharmaceutical industry having worked for Eli Lilly and Company across different therapeutic areas and disciplines

•  Experience in global and regional strategic planning, organizational redesign, and Six Sigma implementation

Jeffrey R. Balser

Age: 56

Director Since: 2018

Independent

Principal occupation, business experience and directorships

•  President and Chief Executive Officer of Vanderbilt University Medical Center (May 2016—present)

•  Dean, Vanderbilt University School of Medicine (October 2008—present)

•  Vice Chancellor for Health Affairs, Vanderbilt University Medical Center (June 2009—April 2016),

•  Associate Vice Chancellor for Research, Vanderbilt University Medical Center (January 2004—October 2008)

•  Other Current Public Company Board Memberships: None

•  Public Company Board Memberships in Past Five Years: None

Experience, qualifications, attributes or skills supporting directorship

•  In-depth knowledge of the healthcare industry, hospital operations and managed care industry

•  Experience in management and strategic planning of hospital and physician practice, medical education, clinical and basic research through service as Chief Executive Officer and Dean, and previously as chief research officer, of a leading academic medical institution

•  Licensed Medical Doctor, Board certified in Anesthesiology and Critical Care Medicine

Judy Bruner

Age: 60

Director Since: 2016

Independent

Principal occupation, business experience and directorships

•  Positions at SanDisk Corporation, a global leader in flash memory storage solutions:

•  Executive Vice President, Administration and Chief Financial Officer (June 2004—May 2016)

•  Member of Board of Directors (June 2002—July 2004)

•  Senior Vice President and Chief Financial Officer, Palm, Inc., a manufacturer of personal digital assistants (September 1999—June 2004)

•  Vice President, Finance & Corporate Controller, 3Com Corporation, a digital electronics manufacturer (May 1998—September 1999)

•  Other Current Public Company Board Memberships: Applied Materials, Inc., a provider of engineering solutions; Rapid7, a security data and analytics solutions provider; Seagate Technology PLC, a data storage company

•  Public Company Board Memberships in Past Five Years: Brocade Communications Systems, Inc., a technology company specializing in data and storage networking products

Experience, qualifications, attributes or skills supporting directorship

•  Over 35 years of financial management experience in the high technology industry

•  Deep experience with compliance and enterprise risk management

•  Audit committee chair experience

•  Significant mergers and acquisitions experience

•  Membership on Boards of other public companies

Jean-Luc Butel

Age: 62

Director Since: 2017

Independent

Principal occupation, business experience and directorships

•  Positions at Baxter International, a health care company providing a portfolio of renal and hospital products:

•  President, International (January 2015—June 2015)

•  Corporate Officer, Operating Committee Member, Corporate Vice President and President, International (February 2012—December 2014)

•  Positions at Medtronic, Inc., a global leader in medical technology:

•  Corporate Officer, Executive Committee Member, Executive Vice President; Group President International (January 2011—January 2012)

•  Corporate Officer, Executive Committee Member, Senior Vice President and President, Medtronic International (May 2008—December 2010)

•  Corporate Officer, Executive Committee Member, Senior Vice President, Medtronic and President, Medtronic Asia Pacific (August 2003—April 2008)

•  Other Senior Management Experience: President, Johnson & Johnson Independence Technology; President, Worldwide Consumer Healthcare, Becton Dickinson

•  Other Current Public Company Board Memberships: Takeda Pharmaceutical Company Limited, a global pharmaceuticals company focused on metabolic disorders, gastroenterology, neurology, inflammation and oncology

•  Public Company Board Memberships in Past Five Years: None

Experience, qualifications, attributes or skills supporting directorship

•  Extensive experience in sales, operations and general management of healthcare companies through his service as an executive of several large U.S. healthcare companies

•  Extensive experience leading international business operations of large U.S. healthcare companies, including in Europe, Asia and North and South America

Regina E. Dugan

Age: 55

Director Since: 2013

Independent

Principal occupation, business experience and directorships

•  Vice President of Engineering, Facebook, Inc., leading Building 8, a team charged with developing and delivering next generation consumer hardware to market (May 2016—January 2018)

•  Vice President of Engineering at Google, Inc., leading the Advanced Technology and Products group, a group charged with breakthrough innovations in mobile computing and accelerating the development of promising technologies to market (February 2014—April 2016)

•  Senior Vice President, Google owned Motorola Mobility LLC, a mobile technology company Google acquired in May 2012 (March 2012—February 2014)

•  Director, Defense Advanced Research Projects Agency (DARPA), a breakthrough product development organization of the U.S. Department of Defense (July 2009—March 2012)

•  Co-Founder, President and Chief Executive Officer, RedXDefense LLC, a security solutions company (2005—July 2009)

•  Co-Founder, President and Chief Executive Officer, Dugan Ventures, an investment firm (currently a non-voting partner) (2001—July 2009)

•  Other Current Public Company Board Memberships: Zynga Inc., a social game developer

•  Public Company Board Memberships in Past Five Years: None

Experience, qualifications, attributes or skills supporting directorship

•  Experience leading DARPA, the principal agency within the U.S. Department of Defense responsible for product development, research, demonstration and fielding of high-risk, high-payoff capabilities

•  Familiarity with defense, security and commercial industries

•  Expertise with a wide range of advanced technologies and demonstrated track record in moving to use new technologies, from sensor systems to big data products

•  Years of experience serving in senior executive positions with responsibilities including fostering innovation and developing strategic business relationships across diverse industries and commercial entities large and small

•  Experience serving on the board of another public company

R. Andrew Eckert

Age: 57

Director Since: 2004

Chairman Since: 2014

Independent

Principal occupation, business experience and directorships

•  Chief Executive Officer, Acelity L.P., Inc., a global advanced wound care company (April 2017—present)

•  Chief Executive Officer, Valence Health, a healthcare solutions company (August 2015—October 2016)

•  Chief Executive Officer, TriZetto Corporation, a healthcare IT solutions firm (March 2014—November 2014)

•  Chief Executive Officer, CRC Health Corporation, a provider of substance abuse treatment and adolescent youth services (January 2011—March 2014)

•  Managing Director, Symphony Technology Group, a private equity firm (October 2009—January 2011)

•  President and Chief Executive Officer, Eclipsys Corporation, a former publicly traded healthcare information management software provider (October 2005—May 2009)

•  Chief Executive Officer, SumTotal Systems, Inc., an enterprise software provider (2004—2005)

•  Chief Executive Officer, Docent Inc., an enterprise software provider that was acquired by SumTotal Systems (2002—2004)

•  Chairman and Chief Executive Officer, ADAC Laboratories, a former publicly traded medical imaging company (1997—2001)

•  Other Current Public Company Board Memberships: Becton, Dickinson and Company, a global medical technology company

•  Public Company Board Memberships in Past Five Years: None

Experience, qualifications, attributes or skills supporting directorship

•  Extensive experience obtained over 15 years serving as an executive officer of several public companies, including a medical imaging company and healthcare information management company

•  Deep knowledge of operational, financial, strategic planning, product development and marketing matters

•  Experience serving on the board of directors of several public companies in the healthcare industry

Timothy E. Guertin

Age: 69

Director Since: 2005

Independent

Principal occupation, business experience and directorships

•  Positions at the Company:

•  Chief Executive Officer (February 2006—September 2012)

•  President (August 2005—September 2012)

•  Chief Operating Officer (October 2004—February 2006)

•  Corporate Executive Vice President (October 2002—August 2005)

•  President, Oncology Systems (1992—January 2005)

•  Corporate Vice President (1992—2002)

•  Other Current Public Company Board Memberships: Teradyne, Inc., a supplier of automatic test equipment

•  Public Company Board Memberships in Past Five Years: None

Experience, qualifications, attributes or skills supporting directorship

•  Deep knowledge of our management structure, strategy and users of our technology, which he has gained over more than 30 years with the Company;

•  Extensive knowledge of radiation producing technologies, software controls and safety measures gained through service in various leadership roles, including President and Chief Executive Officer of the Company and President of our Oncology Systems business

•  Broad experience in product development, regulatory, marketing, financial and operational matters

•  Current service on the board of directors of Acelity L.P., Inc., a privately held global advanced wound care company

•  Has served on the board of healthcare and technology industry organizations and is a former director and chairman of the board of directors of TechAmerica (a nationwide technology trade association)

•  Service on the board of trustees and as treasurer of the Radiation Oncology Institute, a non-profit organization engaged in cancer treatment research

David J. Illingworth

Age: 65

Director Since: 2011

Independent

Principal occupation, business experience and directorships

•  Chief Executive Officer, Smith & Nephew plc, a medical devices company (July 2007—April 2011)

•  Chief Operating Officer and Division President, Smith & Nephew plc (2002—July 2007)

•  Other Senior Management Experience: President, XL Vision, Inc.; Chairman and Chief Executive Officer, VidaMed, Inc.; President, Nellcor Puritan Bennett LLC; and Managing Director, Asia/Pacific, GE Medical Systems

•  Other Current Public Company Board Memberships: Domtar, Inc., a manufacturer of fiber-based products

•  Public Company Board Memberships in Past Five Years: Smith & Nephew plc

Experience, qualifications, attributes or skills supporting directorship

•  In-depth knowledge of the medical technology industry

•  Extensive experience in sales, operations and general management in the U.S., United Kingdom and Asia through his service as an executive of various medical technology companies

•  Service on the board of directors and as a member of the audit committee and the environmental, health, safety and sustainability committee, of another public medical device company

Dow R. Wilson

Age: 59

Director Since: 2012

Principal occupation, business experience and directorships

•  Positions at the Company:

•  President and Chief Executive Officer (September 2012—Present)

•  Corporate Executive Vice President and Chief Operating Officer (October 2011—September 2012)

•  Corporate Executive Vice President and President, Oncology Systems (August 2005—September 2011)

•  Corporate Vice President and President, Oncology Systems (January 2005—August 2005)

•  Prior to joining the Company in January 2005, held various senior management positions in and outside of the Unites States with General Electric Company, a diversified industrial company

•  Other Current Public Company Board Memberships: Agilent Technologies, a research, development and manufacturing company for life science.

•  Public Company Board Memberships in Past Five Years: Saba Software, an e-learning software provider; Varex Imaging Corporation, a leading independent supplier of medical X-ray tubes and image processing solutions

•  Presidential Appointment: Appointed to U.S. President’s Advisory Council on Doing Business in Africa in November 2014

Experience, qualifications, attributes or skills supporting directorship

•  Deep knowledge of our business, strategy and technology gained through serving as President of our Oncology Systems business and Chief Operating Officer before becoming our President and Chief Executive Officer

•  Significant knowledge of domestic and international medical and healthcare industries gained from serving in management positions at General Electric

•  Critical insight into operational requirements of a company with worldwide reach, knowledge of corporate and business unit strategies, and operational expertise, each gained from executive management experience at two large, global organizations

•  Experience serving on the board of directors and as lead director of another public company

Ashkenazi Balser Bruner Butel Dugan Eckert Guertin Illingworth Wilson

INDUSTRY KNOWLEDGE

Contributes to a deeper understanding of healthcare trends and technologies and our business strategy, operations, key performance indicators and competitive environment.

GLOBAL BUSINESS EXPERIENCE

Critical to cultivating and sustaining business and governmental relationships internationally and providing oversight of our multinational operations.

PUBLIC COMPANY EXECUTIVE EXPERIENCE

Contributes to the Board’s understanding of our business strategy; demonstrates leadership ability.

RISK MANAGEMENT

Contributes to the identification, assessment and prioritization of risks facing the Company.

TECHNOLOGY/CYBER SECURITY

A significant background working in technology, resulting in knowledge of how to anticipate technological trends, generate disruptive innovation and extend or create new business models; contributes to the Board’s understanding of cyber security risks.

MERGERS & ACQUISITIONS

A history of leading growth through acquisitions and other business combinations, with the ability to assess “build or buy” decisions, analyze the fit of a target with the Company’s strategy and culture, accurately value transactions, and evaluate operational integration plans.

GENDER/ETHNIC DIVERSITY

Representation of gender and/or ethnic diversity that expands the Board’s understanding of the needs and viewpoints of our customers, partners, employees, governments and stockholders worldwide.

INDEPENDENCE

Varian requires that at least two-thirds of its Board members must be independent. The Board has determined that all director nominees, other than Mr. Wilson, meet the independence standards set by the New York Stock Exchange (NYSE).

TENURE

The average tenure of the director nominees is approximately six years, which reflects a balance of company experience and new perspectives.

DIVERSITY

The Board is committed to achieving a diverse and broadly inclusive membership. Three of our nine director nominees are diverse, based on gender and ethnicity.

The Board’s Ethics and Compliance Committee (the “Ethics Committee”) oversees our ethical compliance programs and compliance with requirements involving legal and ethical business conduct.

The Board’s Corporate Governance Guidelines articulate clear corporate governance policies, which include basic director duties and responsibilities.

The Board has adopted a Code of Conduct applicable to all of our employees, including the executive officers, and to our directors.

We have hotlines for employees to report concerns regarding ethics and financial matters, including accounting, internal controls and audit concerns, and the Audit Committee has established procedures for anonymous submission of these matters.

The Board has adopted a policy regarding conflicts of interest and “related-person transactions” under which potential conflicts of interest and related-person transactions must be reviewed and pre-approved by the Nominating Committee. The Nominating Committee has determined that certain categories of transactions are pre-approved under this policy. Please refer to the discussion under “Certain Relationships and Related Transactions” for more information on this policy and the related procedures.

Directors are expected to attend all stockholder meetings, and all current directors that were members of the Board at the time of the 2018 Annual Meeting of Stockholders attended the Annual Meeting.

The Board conducts an annual assessment on its effectiveness and the effectiveness of each of its committees.

The Board encourages director continuing education through a mix of in-house and third-party presentations and programs. The Nominating Committee is charged with tracking director continuing education. We pay or reimburse directors for expenses associated with attending these continuing education events.

We do not maintain a stockholders’ rights plan or “poison pill.”

In fiscal year 2014, the Board appointed an “independent” non-employee director as Chairman, and since 2006 we have separated the roles of Chairman and Chief Executive Officer. Mr. Eckert served in the capacity of lead independent director from February 2012 to February 2014 and has served as Chairman since February 2014.

Ninety percent of the Board members are independent of the Company and our management. The definition of “independent” is included in our Corporate Governance Guidelines, which can be found through the “Corporate Governance” link on the Investors page on our website at www.varian.com.

All members of our key Board committees—the Audit Committee, the Compensation Committee, the Ethics Committee and the Nominating Committee—are independent.

The Company’s Bylaws and Corporate Governance Guidelines amended in 2017 included a majority voting standard for uncontested director elections commencing at our 2018 Annual Meeting. Beginning with our 2018 Annual Meeting, if the number of nominees timely nominated for an annual meeting does not exceed the number of directors to be elected, each nominee shall be elected if the nominee receives the affirmative vote of a majority of the total votes cast, not including any abstentions. Prior to an election, each incumbent director submits a resignation letter whose effectiveness is contingent upon the incumbent director failing to receive more than 50% of the votes cast in an uncontested election. If an incumbent director does not receive a majority of the votes cast, the Nominating and Corporate Governance Committee of the Board will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the Nominating and Corporate Governance Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date of the certification of the election results.

In August 2018, the Board amended our By-Laws, effective as of September 1, 2018, to permit eligible stockholders to be able to nominate candidates for election to the Board in accordance with procedures providing for proxy access. This proxy access provision may be used by an eligible stockholder, or a group of up to 20 eligible stockholders, who has continuously owned at least three percent or more of the outstanding shares of our common stock for three years before, and including the day of, submitting a nomination notice, and who continues to hold the qualifying minimum number of shares through the date of the applicable annual meeting of stockholders. The proxy access provision provides that an eligible stockholder, or a group of eligible stockholders, may nominate up to the greater of (i) 20% of the total number of directors who are members of the Board as of the last day on which a nomination notice may be submitted, or (ii) two directors.

Our entire Board is elected annually.

The Board has since November 2013 added five new independent directors to the Board, including most recently Ms. Ashkenazi and Dr. Balser, and has a commitment to inclusiveness and diversity.

The Board has adopted a guideline for director retirement that provides that a director should not serve on the Board for more than 15 years or after a director reaches the age of 75. This guideline may be waived if the Board deems appropriate.

Our Corporate Governance Guidelines contain committee rotation guidelines that recommend adding a new member to each committee every three years.

The annual cycle of agenda items for Board and committee meetings reflects Board and committee requests and changing business and legal issues. The Board receives regularly scheduled presentations from our finance, legal and compliance departments and major business units and operations, and reviews enterprise risk at least annually. The Board’s and committees’ annual agenda includes, among other items, our long-term strategic plans, periodic reports on progress against long-term strategic plans, emerging and disruptive technologies, potential acquisition or investment targets, capital projects and evaluation of the Chief Executive Officer and management and Board succession.

The Board has adopted stock ownership guidelines for our directors and executive officers.

The Board has adopted a recoupment policy to recover certain cash and equity incentive payments made to executives in the event of a restatement of our financial statements.

The Board has eliminated certain perquisites for executives, including the Executive Car Program and tax gross-ups.

Dr. Balser is the Chief Executive Officer of Vanderbilt University Medical Center, which is a customer of ours.

Mr. Eckert serves as an outside director of a company from whom we are licensing and with whom we are developing certain technology.

Oversees our accounting and financial reporting process and audits of financial statements.

Assists the Board in oversight and monitoring of (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent registered public accounting firm’s qualifications and independence, (iv) the performance of our internal audit function and of the independent registered public accounting firm and (v) the principal risk exposures facing the corporation that are related to financial statements, legal, regulatory and other similar matters, as well as the corporation’s related mitigation efforts.

Prepares the Audit Committee Report included in our proxy statement.

Reviews and approves our foreign exchange exposure management policy, including but not limited to entering swaps thereunder and the exemption of swaps from any execution and clearing requirements.

Reviewing cybersecurity risks and incidents and any other risks and incidents relevant to our computerized information system controls and security, and discussing if any such risks and incidents should be disclosed in our periodic filings with the SEC.

Reports to the Board the results of its monitoring and recommendations.

Provides to the Board any additional information and materials as the committee may determine is necessary to make the Board aware of significant financial matters requiring the Board’s attention.

Discharges the Board’s responsibilities relating to compensation of our executive officers.

Evaluates our compensation plans, policies and programs for executive officers and recommends the establishment of policies dealing with various compensation and employee benefit plans.

Administers our stock and cash incentive plans.

Provides advice on management development matters that have major implications for the growth, development and depth of our management team, including reviewing succession plans.

Reviews and discusses with management and recommends to the Board whether the disclosures under “Compensation Discussion and Analysis” should be included in our proxy statement.

Assesses, at least annually, the risks associated with our compensation policies, and reports to the Board and the Audit Committee whether our compensation policies and practices create risks that are reasonably likely to have a material adverse effect on us.

Oversees compliance with legal, regulatory and global trade requirements.

Oversees compliance programs designed to foster legal and ethical business conduct, interactions with government officials and interactions with healthcare providers.

Develops and recommends to the Board corporate governance principles, including our Corporate Governance Guidelines, Code of Conduct and policy regarding conflicts of interest and related person transactions.

Identifies, evaluates and recommends to the Board potential nominees to the Board, including stockholder suggestions.

Reviews with the Board annually the independence, skills and characteristics of all individual members and the skills and characteristics of the Board as a whole in determining whether to recommend incumbent directors for re-election.

Evaluates and makes recommendations to the Board concerning the size of the Board, the appointment of directors to Board committees, the qualifications of committee members and the selection of Board committee chairs.

Oversees the annual review of director independence and evaluation of the Board’s performance.

Acts on matters when a meeting of the full Board is impracticable.

Has all the powers of the Board except those powers reserved by law to the full Board.

Attraction and Retention of Key Talent. The pay program should enable the Company to attract and retain individuals with the background, experience, and talent required to lead the development and successful implementation of the Company’s business strategy.

Performance-Driven Compensation. A high proportion of total compensation should be at risk and subject to achievement of annual and long-term operating and strategic goals that deliver long-term value creation for both customers and stockholders.

Stockholder Alignment. Long-term incentives should be awarded in Company stock to increase the alignment of executive interests with those of stockholders.

Appropriately Balance Short- and Long-term Performance Orientation. The mix of incentives should place emphasis on achievement of long-term sustainable growth and profitability.

Total Compensation Context. Pay decisions should be made in the context of total compensation relative to the pay practices of competitors for key talent and in consideration of individual performance, experience, knowledge, and internal parity among peers.

  Growth Priorities

FY 2018 Results

  Strengthen Leadership in        

  Radiation Therapy

•  9% growth in oncology gross orders

•  182 gross orders for Halcyon, since launch in May 2017; over half of these orders worldwide have been incremental, thus growing our installed base

•  Over 50% share of global radiation therapy market

•  Grew Linac installed base by 224 units, bringing total to 8,057 units

•  Grew R&D 11% year over year to 8% of revenue to strengthen our investment in developing innovative products

  Extend Global Leadership

•  Over 50% of all gross orders international

•  40% of Halcyon orders in emerging markets

•  Acquisition of a leading distributor in radiotherapy equipment in Taiwan

  Expand Addressable Market

•  Launched Velocity 4.0, a new version of the Velocity cancer imaging software, extending into the interventional oncology market

•  Nearly 600 licenses of Eclipse Multi Criteria Optimization since launch in Q4 2017, providing multi-criteria optimization for enhanced control over treatment planning

•  8% growth in software revenue, including 6% customer growth

•  80% increase in RapidPlan installed base, our knowledge-based treatment planning software

GAAP Annual

Revenues

+11%

$2,919 Million

GAAP Cash Flow

From Operations

+14%

$455 Million

Operating

Earnings*

+47%

(GAAP)

$442 Million

+31%

(Non-GAAP)

$517 Million

Earnings

Per Share*

-33%

(GAAP)

$1.62

+36%

(Non-GAAP)

$4.42

GAAP to Non-GAAP reconciliation is disclosed on Varian’s fiscal year 2018 fourth quarter earnings press release, which is included as an exhibit to the Form 8-K that was furnished to the SEC on October 23, 2018.

  GUIDING PRINCIPLE

CHANGE IN INCENTIVE PLAN DESIGN

  Growth

Annual Cash Incentives

Invest in R&D to drive new product development and invest in appropriate levels of Capital Expenditure to build capacity for growth

Achieve operating efficiencies to drive growth

Promote efficient capital allocation for acquisitions that expand our business base

Adopted an economic profit metric to aid in the balance between short and long-term decision making that:

•  combines growth and return,

•  includes a cost charged on the capital employed to generate growth and earnings, and

•  treats R&D like an investment while holding management accountable for earning a return on cumulative R&D investments over time

  Long-Term Focus

Performance Share Unit (“PSU”) Awards

Use multi-year performance metrics focused on rewarding value creation

Set 3-year goals tied to a combination of revenue growth and change in EBIT margin, two primary metrics of value creation

  Relative Performance

Relative Total Stockholder Return (“TSR”) Modifier for PSUs

Adjust rewards for significant over or under performance versus peers

Index relative TSR to 51 Business Model Peers in the healthcare industry (as described in the section entitled “Relative TSR Modifier” below for the fiscal 2018 PSU awards below)

•  Set maximum PSU payout at 100% of target if TSR ranks in the bottom quartile of Business Model Peers

•  Set minimum PSU payout at 100% of target if TSR rank is in the top quartile of Business Model Peers

  CEO Pay for Performance

CEO Long-Term Incentive Award Mix

Further align CEO pay with performance for stockholders

Grant 100% of CEO long-term incentive equity awards in performance-vested awards consisting of performance stock options and PSUs, replacing time-vested stock option and restricted stock unit awards

89% of our CEO’s total target compensation opportunity was performance-based, with 100% of his long-term incentive (equity) awards subject to performance-based vesting.

79% of our other Named Executive Officers’ total target compensation opportunity was performance-based, with 62% of their long-term incentive (equity) awards subject to performance-based vesting.

CEO realizable pay versus stockholders’ returns. We set rigorous short- and long-term incentive goals and use equity in long-term incentives to ensure executive compensation is aligned with stockholder value creation. The following graph shows that, in general, our CEO’s realizable pay over the past six years has been aligned with Varian’s share price.

The assumptions that were used to calculate the amounts set forth in this chart appear in the “CEO realizable pay versus stockholders’ returns” section in the “Compensation Discussion and Analysis” set forth below.

Fee Category

Audit Fees

Audit-Related Fees

Tax Fees

All Other Fees

Total Fees

Stockholders

The Vanguard Group, Inc. ⁽¹⁾

100 Vanguard Blvd.

Malvern, PA 19355

BlackRock, Inc. ⁽²⁾

55 East 52nd Street

New York, NY 10055

Loomis, Sayles & Co., L.P. ⁽³⁾

One Financial Center

Boston, MA 02111

First Eagle Investment Management, LLC ⁽⁴⁾

1345 Avenue of the Americas

New York, NY 10105

Directors, Nominees for Director and Executive Officers

Anat Ashkenazi

Jeffrey R. Balser

Susan L. Bostrom ⁽⁵⁾

Judy Bruner ⁽⁶⁾

Jean-Luc Butel ⁽⁷⁾

Regina E. Dugan ⁽⁸⁾

R. Andrew Eckert ⁽⁹⁾

Timothy E. Guertin ⁽¹⁰⁾

David J. Illingworth ⁽¹¹⁾

Dow R. Wilson ⁽¹²⁾

Gary E. Bischoping, Jr. ⁽¹³⁾

Kolleen T. Kennedy ⁽¹⁴⁾

John W. Kuo ⁽¹⁵⁾

All directors, nominees for director and executive officers as a group (14 persons) ⁽¹⁶⁾

The percentage of shares of common stock beneficially owned does not exceed one percent of the shares of common stock outstanding at December 1, 2018.

Based on a Schedule 13G/A filed February 9, 2018, The Vanguard Group, Inc. has sole power to vote 128,902 of these shares, shared power to vote 23,782 of these shares, sole power to dispose of 9,146,127 of these shares and shared power to dispose of 151,623 of these shares.

Based on a Schedule 13G/A filed February 8, 2018, BlackRock, Inc. has sole power to vote 7,095,825 of these shares and sole power to dispose of 8,008,040 of these shares.

Based on a Schedule 13G/A filed February 14, 2018, Loomis, Sayles & Co., L.P. has sole power to vote 5,279,581 of these shares and sole power to dispose of 7,455,653 of these shares.

Based on a Schedule 13G filed February 8, 2018, First Eagle Investment Management, LLC has sole power to vote 4,492,468 of these shares and sole power to dispose of 4,744,676 of these shares.

Amount shown includes 4,374 Deferred Stock Units that have vested but that are subject to deferred distribution.

Amount shown includes 2,870 Deferred Stock Units that have vested but that are subject to deferred distribution.

Amount shown includes 1,871 Deferred Stock Units that have vested but that are subject to deferred distribution.

Amount shown includes 4,374 Deferred Stock Units that have vested but that are subject to deferred distribution.

Amount shown includes 11,302 shares that may be acquired under exercisable stock options. Also includes 4,374 Deferred Stock Units that have vested but that are subject to deferred distribution.

Amount shown includes 5,651 shares that may be acquired under exercisable stock options. Also includes 4,374 Deferred Stock Units that have vested but that are subject to deferred distribution and 39,125 shares held in a trust of which Mr. Guertin is the trustee.

Amount shown includes 5,651 shares that may be acquired under exercisable stock options. Also includes 4,374 Deferred Stock Units that have vested but that are subject to deferred distribution.

Amount shown includes 318,286 shares that may be acquired under exercisable stock options.

Amount shown includes 41,849 shares that may be acquired under exercisable stock options.

Amount shown includes 19,580 shares that may be acquired under exercisable stock options.

Amount shown includes 4,132 shares that may be acquired under exercisable stock options.

Amount shown includes 410,376 shares that may be acquired under exercisable stock options and 39,125 shares held in trusts, including those described in footnote 10.

     Growth Priorities

FY 2018 Results

     Strengthen Leadership in
     Radiation Therapy

•  9% growth in oncology gross orders

•  182 gross orders for Halcyon, since launch in May 2017; over half of these orders worldwide have been incremental, thus growing our installed base

•  Over 50% share of global radiation therapy market

•  Grew Linac installed base by 224 units, bringing total to 8,057 units

•  Grew R&D 11% year over year to 8% of revenue to strengthen our investment in developing innovative products

     Extend Global Leadership

•  Over 50% of all gross orders international

•  40% of Halcyon orders in emerging markets

•  Acquisition of a leading distributor in radiotherapy equipment in Taiwan

     Expand Addressable Market

•  Launched Velocity 4.0, a new version of the Velocity cancer imaging software, extending into the interventional oncology market

•  Nearly 600 licenses of Eclipse Multi Criteria Optimization since launch in Q4 2017, providing multi-criteria optimization for enhanced control over treatment planning

•  8% growth in software revenue, including 6% customer growth

•  80% increase in RapidPlan installed base, our knowledge-based treatment planning software

GAAP Annual

Revenues

+11%

$2,919 Million

GAAP Cash Flow

From Operations

+14%

$455 Million

Operating

Earnings*

+47%

(GAAP)

$442 Million

+31%

(Non-GAAP)

$517 Million

Earnings

Per Share*

-33%

(GAAP)

$1.62

+36%

(Non-GAAP)

$4.42

GAAP to Non-GAAP reconciliation is disclosed on Varian’s fiscal year 2018 fourth quarter earnings press release which is included as an exhibit to the Form 8-K that was furnished to the SEC on October 23, 2018.

GUIDING PRINCIPLE

CHANGE IN INCENTIVE PLAN DESIGN

Growth

Annual Cash Incentives

Invest in R&D to drive new product development and invest in appropriate levels of Capital Expenditure to build capacity for growth

Achieve operating efficiencies to drive growth

Promote efficient capital allocation for acquisitions that expand our business base

Adopted an economic profit metric to aid in the balance between short and long-term decision making that:

•  combines growth and return,

•  includes a cost charged on the capital employed to generate growth and earnings, and

•  treats R&D like an investment while holding management accountable for earning a return on cumulative R&D investments over time

Long-Term Focus

Use multi-year performance metrics focused on rewarding value creation

Set 3-year goals tied to a combination of revenue growth and change in EBIT margin, two primary metrics of value creation

Relative Performance

Relative Total Stockholder Return (“TSR”) Modifier for PSUs

Adjust rewards for significant over or under performance versus peers

Index relative TSR to 51 Business Model Peers in the healthcare industry (as described in the Relative TSR Modifier section for the fiscal 2018 PSU awards below)

•  Set maximum PSU payout at 100% of target if TSR ranks in the bottom quartile of Business Model Peers

•  Set minimum PSU payout at 100% of target if TSR rank is in the top quartile of Business Model Peers

CEO Pay for Performance

CEO Long-Term Incentive Award Mix

Further align CEO pay with performance for stockholders

Grant 100% of CEO long-term incentive equity awards in performance-vested awards consisting of performance stock options (“PSOs”) and PSUs, replacing time-vested stock option and restricted stock unit (“RSU”) awards

89% of our CEO’s total target compensation opportunity was performance-based, with 100% of his long-term incentive (equity) awards subject to performance-based vesting.

79% of our other Named Executive Officers’ total target compensation opportunity was performance-based, with 62% of their long-term incentive (equity) awards subject to performance-based vesting.

CEO realizable pay versus stockholders’ returns. The following graph shows that, in general, our CEO’s realizable pay over the past six years has been aligned with Varian’s share price.

Target TDC is the sum of salary paid, target annual incentive, and grant date fair value of long-term incentives from each fiscal year’s Summary Compensation Table. Realizable TDC for each fiscal year is the sum of (i) salary paid, (ii) annual incentive earned and paid for the fiscal year, (iii) time-vested RSUs granted in that fiscal year valued at the stock price on applicable vesting date(s) if vested or September 28, 2018 if unvested, (iv) the intrinsic value of time-vested stock options valued as of September 28, 2018,

  What We Do:

What We DON’T Do:

✓      Independent Compensation Committee

û       Targetpay to any specified percentile of market

✓      Independent compensation advisor

û       “Golden Parachute” tax gross ups

✓      NEOs employed “at will”

û       NEOemployment contracts

✓      Robust CEO & NEO stock ownership guidelines

û       Permit directors and officers to engage in common stock margining, pledging or hedging

✓      Clawback policy that applies to our annual cash incentive plan and equity incentive plan

û       Permitofficers to sell Company stock without a 10b5-1 trading plan

✓      Annual compensation review and risk assessment

û       Excessive NEO perquisites

✓      Annual stockholder “say on pay” vote

û       Reprice and repurchase options without stockholder approval

✓      Award 100% of CEO and 60% of other NEO long-term incentive value in performance-vested equity awards

û       Excessive pension/supplemental NEO retirement plan payouts

✓      Place caps on maximum payouts from our annual cash incentive plan and our PSU plan

û       Single trigger acceleration of equity vesting or change in control payments

✓      Solicit detailed feedback regarding our compensation practices from stockholders throughout the year

û       Change in control severance payments without involuntary job loss or substantial diminution of duties

✓      Annual review of succession plan

û       Excessive severance/change in control provisions that provide cash payments exceeding three times average annual cash compensation for the preceding five years

Attraction and Retention of Key Talent. The pay program should enable the company to attract and retain individuals with the background, experience, and talent required to lead the development and successful implementation of the Company’s business strategy.

Performance-Driven Compensation. A high proportion of total compensation should be at risk and subject to achievement of annual and long-term operating and strategic goals that deliver long-term value creation for both customers and stockholders.

Stockholder Alignment. Long-term incentives should be awarded in Company stock to increase the alignment of executive interests with those of stockholders.

Appropriately Balance Short- and Long-term Performance Orientation. The mix of incentives should place emphasis on achievement of long-term sustainable growth and profitability.

Total Compensation Context. Pay decisions should be made in the context of total compensation relative to pay practices of competitors for key talent and in consideration of individual performance, experience, knowledge, and internal parity among peers.

Name

Title

Dow R. Wilson

President and Chief Executive Officer

Kolleen T. Kennedy

Executive Vice President and President, Oncology Systems

Gary E. Bischoping, Jr.

Senior Vice President, Finance and Chief Financial Officer

John W. Kuo

Senior Vice President, General Counsel and Corporate Secretary

   Component

Purpose and Role

  Base salary

•   Provide a market competitive, fixed level of cash compensation to attract and retain talented and skilled executives

•   Recognize sustained performance, capabilities, job scope, experience, and internal pay equity

  Annual cash incentives

  (Management Incentive Plan, “MIP”)

•   Motivate and reward achievement of annual financial results that drive stockholder value

•   Reward achievement of strategic goals that provide the foundation for future growth and profitability

  Performance Share Units (“PSU”)

•   Reward achievement of 3-year financial goals and TSR relative to peers

•   Align executives’ interests with stockholders’ interests through use of equity

  Performance Stock Options (“PSO”)

•   Reward achievement of 3-year financial goals and TSR relative to peers

•   Provide leveraged gains aligned with stockholders

  Restricted Stock Units (“RSUs”)

•   Encourage stock price growth and executive retention through time-based vesting over three years

•   Align executives’ interests with stockholders’ interests through use of equity

  Time-Based Stock Options

•   Encourage stock price growth and executive retention through time-based vesting over three years and a seven-year period to exercise the options

•   Align executives’ interests with stockholders’ interests through use of equity

•   Provide the same health, welfare and 401(k) benefits as other employees

•   Provide a competitive benefit by allowing executives to defer compensation pursuant to a non-qualified deferred compensation plan

•   Facilitate executive health and focus on our business by providing reimbursement for annual physical exams and financial counseling

•   Encourage support of the communities in which we operate by matching charitable donations (available to all employees)

Risk. Annually review the risks and rewards associated with the Company’s compensation programs. Ensure that the program includes plan design features that mitigate risk without diminishing the incentive nature of the compensation and encourages and rewards prudent business judgment and appropriate risk-taking over the short term and the long term.

Annual Program Assessment. Assess the program to ensure that it is well aligned with the Company’s evolving business strategy and is effective in supporting its talent needs. Solicit recommendations for changes from management and our compensation consultant as appropriate. Determine the specific plan designs to be used for the year.

CEO Compensation and Performance Goals. Annually review and approve corporate goals and objectives relevant to the CEO’s compensation; develop the process for evaluating the CEO’s performance; lead the independent directors of the Board’s evaluation of the CEO’s performance in light of the foregoing corporate goals and objectives; and recommend the CEO’s compensation level based on this evaluation for approval by the independent directors of the Board.

Compensation of Other Executives. Review, discuss, modify and approve, as appropriate, compensation recommendations made by the CEO for other NEOs.

Considerations in Making Compensation Decisions. Consider, among other factors: the Company’s overall performance, stockholder return, the performance of the Company’s business segments, the achievement of specific corporate goals and objectives that the Committee established, the achievement of any specific individual goals that have been assigned, individual performance on job duties, compensation previously provided, compensation of other executives of the Company, and competitive compensation levels. In addition, the Committee confers with the independent directors of the Board and considers, as appropriate, views expressed by stockholders on executive compensation matters, including results of stockholder advisory votes on executive compensation.

Peer Group. Review and establish annually the Company’s comparator/peer group for use in assessing the competitive range of compensation provided to individuals in similar positions at comparable companies. See additional information on the fiscal year 2018 peer group in “Peer Group and Market Analysis” below.

General Advice to the Board. Review management and compensation matters having major implications to the long-range development of the Company including plans for succession of the CEO and other executive officers and corporate officers.

Compensation Consultant. Engage an advisor and meet with its advisor, as needed, in the Committee’s sole discretion.

role including the scope and complexity of responsibilities;

experience and capabilities;

contributions or responsibilities beyond the typical scope of the role;

individual performance;

internal comparisons; and

competitive compensation opportunities as reflected in compensation provided by our peers and other competitors for similar executive talent.

U.S. publicly traded companies from the Healthcare Equipment & Supplies or Life Sciences Tools & Services industries

Companies in a relevant range around Varian’s revenues and market-capitalization

Companies with similar business characteristics and comparable talent requirements, such as complex medical or related electronic devices, significant non-U.S. revenues, and employee headcount generally in a reasonable range around Varian’s headcount

Varian Medical Systems FY 2018 Compensation Peer Group

Healthcare Equipment

Life Sciences Tools and Services

Healthcare Supplies

Boston Scientific

C.R. Bard

Edwards Lifesciences

Hill-Rom

Hologic

IDEXX Labs

Intuitive Surgical

ResMed

Zimmer Biomet

   Company Scope

Varian ⁽¹⁾

Low

Median

High

  Revenue ($M)

  Market Capitalization ($M)

Varian revenue for fiscal year 2017 was estimated using actual 1^st quarter and estimated quarters 2-4 following the spin-off of Varex Imaging Corporation from the Company.

 Name

FY2017 Annual Salary
(effective December 17, 2016) ¹

FY2018 Annual Salary
(effective December 16,  2017)

    % Increase  

 Dow R. Wilson

 Kolleen T. Kennedy

 Gary Bischoping, Jr.

 John W. Kuo

Mr. Bishoping’s salary was effective as of his May 8, 2017 starting date.

Payment of any cash annual incentives to our NEOs and certain other senior executives is conditioned upon achievement of at least $250 million in annual net income calculated using the Company’s currency rates as of the end of September 2017, and subject to applicable adjustments adopted by the Compensation Committee at the time the MIP goals were set.

Total awards paid under the MIP for fiscal year 2018 cannot exceed 8% of fiscal year 2018 EBIT (as defined in the MIP) before incentive compensation. In addition, individual awards payable to each of our NEOs and certain other senior executives are capped at the lesser of 200% of target payout or $3,000,000 per individual.

MIP

  Award $  

  Target  

  Award $  

Economic Profit

Payout %

80%

  Weight  

  Individual Goals

Payout %

20%

  Weight  

0% - 200%

0% - 200%

Payout Range as Percentage of Target

Target Awards

 Name

Annual Salary

MIP Target

MIP Maximum

% of Salary

Amount

% of Salary

Amount

 Dow R. Wilson

$

1,000,000

125

% 

$

1,250,000

250

% 

$

2,500,000

 Kolleen T. Kennedy

$

687,752

90

% 

$

618,977

180

% 

$

1,237,954

 Gary Bischoping, Jr.

$

550,000

75

% 

$

412,500

150

% 

$

825,000

 John W. Kuo

$

484,026

75

% 

$

363,020

150

% 

$

726,039

Financial Performance

  Ownership culture

Encourages management to think and make decisions like owners

  Decision making

Aligns planning and decision-making with the continuous pursuit of value creation

  Balance

Balances pursuit of growth, profitability and cash flow with the required return on new investment

  Value driver

Shows a strong relationship to changes in share price and TSR

Economic Profit Calculation

Adjusted Gross Cash Earnings

Capital Charge on Gross Operating Assets

 +

Operating Earnings

+

Long-term Assets ⁽²⁾

 +

Research & Development Expense

+

Other Assets & Liabilities

 +

Depreciation & Amortization Expense

+

Capitalized R&D

 +

Impairments Expense & Other Adjustments ⁽¹⁾

+

Unusual & One-Time ⁽³⁾

 =

Pre-tax Gross Cash Earnings

+

Gross Operating Assets (GOA)

 –

Taxes (14%)

+

8% Required Rate of Return

 =

Gross Cash Earnings (GCE)

=

Capital Charge

Impairments, restructuring, reserves and currency adjustments

Net Working Capital, Gross PP&E, Goodwill & Intangibles

Tax and accounting rule changes

 FY 2018 MIP Financial Payout

 80% of total

FY 2017
Actual

FY 2017
Adjusted

FY 2018
Target ⁽¹⁾

FY 2018
Maximum

FY 2018
Actual ⁽²⁾

 Economic Profit ($M)

$

340

$

373

$

388

$

449

$

455

 Increase in Economic Profit Over FY 2017 Adjusted

$15

$76

$81

 Percentage of Target Payout

 100%

 200%

 200%

The fiscal 2018 target amount was established based on (a) our fiscal 2017 economic profit of $340 million, (b) adjusted upwards to $373 million after adding back to GCE a $38 million accounts receivables pre-tax charge taken in fiscal 2017 relating to our proton solutions business, and (c) further adjusted upward by an additional $15 million incremental growth target.

Fiscal 2018 results reflect a net incremental adjustment of $255 million in GOA (increasing the fiscal 2018 capital charge) pursuant to adjustment provisions approved by the Compensation Committee at the time the MIP goal was set, covering the following items: removing the benefit from the net deferred tax liability due to the Tax Cuts and Jobs Act and adding back unusual items, such as impairments, restructuring and legal

  Economic Profit

FY 2017
Adjusted*

FY 2018

Change

% Change

Highlighted Drivers of Results

  Operating Earnings

  R&D Add-back

  D&A Add-back

  Impairments & Other

  Pre-tax GCE

  Tax @ 14%

  GCE

$

610

$

703

  Long-term Assets

  Other Assets & Liabilities

  Capitalized R&D

  GOA Quarterly Average