Employee Benefits Allocation Agreement

EXHIBIT 10.1


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EMPLOYEE BENEFITS ALLOCATION AGREEMENT
AMONG
VARIAN ASSOCIATES, INC.,
VARIAN SEMICONDUCTOR EQUIPMENT ASSOCIATES, INC.
AND
VARIAN, INC.
Dated as of


April 2, 1999


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TABLE OF CONTENTS


PAGE ARTICLE I DEFINITIONS...................................................................................... 1

Section 1.01. Definitions...................................................................... 1
ARTICLE II GENERAL EMPLOYMENT MATTERS....................................................................... 2

Section 2.01. General Obligations.............................................................. 2

Section 2.02. Initial Compensation of Active Employees......................................... 2

Section 2.03. No Additional Employment Rights Created.......................................... 2

Section 2.04. Corporate and Transition Employees............................................... 2

Section 2.05. Retiree Payments................................................................. 3
ARTICLE III UNITED STATES RETIREMENT AND PROFIT-SHARING PLAN BENEFITS........................................ 3

Section 3.01. Varian Associates, Inc. Retirement and Profit-Sharing Program.................... 3

Section 3.02. Establishment of Varian Semiconductor Equipment Associates, Inc. Defined
Contribution Plan................................................................ 3

Section 3.03. Establishment of Varian, Inc. Defined Contribution Plan.......................... 3

Section 3.04. Reimbursement and Indemnification................................................ 4
ARTICLE IV EMPLOYEE BENEFITS MATTERS OUTSIDE THE UNITED STATES.............................................. 4

Section 4.01. Employee Benefits Matters Outside the United States.............................. 4
ARTICLE V EXECUTIVE COMPENSATION........................................................................... 5

Section 5.01. Supplemental Retirement Plan..................................................... 5

Section 5.02. Management Incentive Plan........................................................ 5

Section 5.03. Long-Term Incentives............................................................. 5

Section 5.04. Deferred Cash Compensation....................................................... 5

Section 5.05. Restricted Stock Program......................................................... 5

Section 5.06. Options.......................................................................... 5

Section 5.07. Restricted Stock................................................................. 7
ARTICLE VI WELFARE BENEFITS................................................................................. 7

Section 6.01. Welfare Plans.................................................................... 7

Section 6.02. Allocation and Discharge of Welfare Plan Liabilities............................. 7
ARTICLE VII GENERAL.......................................................................................... 7

Section 7.01. Post-Distribution Administration of Plans........................................ 7

Section 7.02. Costs and Expenses............................................................... 7

Section 7.03. Sharing of Participant Information............................................... 8
ARTICLE VIII INDEMNIFICATION.................................................................................. 8

Section 8.01. Rights and Obligations........................................................... 8
ARTICLE IX DISPUTE RESOLUTION............................................................................... 8

Section 9.01. Distribution Agreement to Control................................................ 8


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TABLE OF CONTENTS
(CONTINUED)


PAGE ARTICLE X MISCELLANEOUS..................................................................................... 8

Section 10.01. Complete Agreement; Construction.................................................... 8

Section 10.02. Other Agreements.................................................................... 8

Section 10.03. Counterparts........................................................................ 8

Section 10.04. Survival of Agreements.............................................................. 8

Section 10.05. Expenses............................................................................ 8

Section 10.06. Notices............................................................................. 9

Section 10.07. Waivers............................................................................. 10

Section 10.08. Amendments.......................................................................... 10

Section 10.09. Assignment.......................................................................... 10

Section 10.10. Successors and Assigns.............................................................. 10

Section 10.11. Termination......................................................................... 10

Section 10.12. No Third Party Beneficiaries........................................................ 10

Section 10.13. Titles and Headings; Interpretation................................................. 10

Section 10.14. Governing Law....................................................................... 10

Section 10.15. Severability........................................................................ 10


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EMPLOYEE BENEFITS ALLOCATION AGREEMENT


THIS EMPLOYEE BENEFITS ALLOCATION AGREEMENT is made and entered into as of this 2nd day of April, 1999 by and among Varian Associates, Inc., a Delaware corporation ("Varian" or "HCS"), Varian Semiconductor Equipment Associates, Inc., a Delaware corporation ("SEB"), and Varian, Inc., a Delaware corporation ("IB").


WHEREAS, pursuant to the terms of that certain Amended and Restated Distribution Agreement by and among Varian, SEB and IB and dated as of January 14, 1999 (the "Distribution Agreement"), the parties have entered into this Agreement regarding certain employment, compensation and benefit matters occasioned by the Distributions.


NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement and the Distribution Agreement, each of the parties hereto, on behalf of itself and each other member of its Group, hereby agrees as follows:


ARTICLE I


DEFINITIONS


Section 1.01. Definitions. The following terms, when capitalized herein,
----------- shall have the meanings set forth below in this Article I. All other capitalized terms which are used but are not otherwise defined herein shall have the meanings ascribed to them in the Distribution Agreement.


"Active Employees" means, with respect to each Group, all employees
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actively engaged in and primarily dedicated to the performance of services
to, for or on behalf of any member of such Group as of the Effective Time,
including any employee who is not actively performing services because of
(a) PPL, (b) leave of absence, or (c) disability, and the dependents of
such persons (and, as applicable, the alternate payees of such persons).
"Active Employees" includes, with respect to a Group, non-employee
directors of Varian Associates, Inc. providing services as a director to
any member of the Group as of the Effective Time.


"Corporate Employees" means (a) the Non-Designated United States
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Former Employees and (b) the United States Active Employees who have been
or will be separated from employment in connection with the Distribution
and are listed on Schedule 1.


"Former Employees" means all former employees and former non-employee
----------------
directors of Varian and/or its Subsidiaries as of the Effective Time
(including, but not limited to, such employees who, as of the Effective
Time, are (a) on disability, (b) in RIF status, (c) on salary continuation,
or (d) within termination notice periods, and the dependents and, as
applicable, the alternate payees, of those persons, and including retirees
but excluding the Retirees).


"Former Health Care Systems Employees" means Former Employees who, if
------------------------------------
they were actively engaged in and primarily dedicated to the performance of
services to, for or on behalf of Varian or any of its Subsidiaries at the
Effective Time, would be Active Employees of the Health Care Systems Group,
determined on a basis consistent with the determination of the Active
Employees of such Group.


"Former Instruments Employees" means Former Employees who, if they
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were actively engaged in and primarily dedicated to the performance of
services to, for or on behalf of Varian or any of its Subsidiaries at the
Effective Time, would be Active Employees of the Instruments Group,
determined on a basis consistent with the determination of the Active
Employees of such Group.


"Former Semiconductor Equipment Employees" means Former Employees who,
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if they were actively engaged in and primarily dedicated to the performance
of services to, for or on behalf of Varian or


1


any of its Subsidiaries at the Effective Time, would be Active Employees of
the Semiconductor Equipment Group, determined on a basis consistent with
the determination of the Active Employees of such Group, including without
limitation persons who were employees of the Thin Film Systems business at
the time of or prior to its disposition.


"Non-Designated Foreign Employees" means (a) non-United States Former
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Employees who are not Former Health Care System Employees, Former
Instruments Employees or Former Semiconductor Equipment Employees and (b)
non-United States Active Employees who are not primarily dedicated to a
single Group and who will be terminated in connection with the
Distribution.


"Non-Designated United States Former Employees" means United States
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Former Employees who are not Former Health Care System Employees, Former
Instruments Employees or Former Semiconductor Equipment Employees.


"Retirees" means J. Tracy O'Rourke, Robert A. Lemos, Joseph B. Phair,
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Wayne P. Somrak, Ernest M. Felago, Derrel B. De Passe and James Hennessy,
and the dependents and, as applicable, the alternate payees of such
persons.


"Transition Employees" means the Active Employees listed on Schedule
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2, but only during the period they are providing transition services.


"Varian Welfare Plans" means, collectively, the Varian Business Travel
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Accident Plan, the Varian Dental Plan, the Varian Dependent Care Assistance
Plan, Varian Dependent Life Insurance, the Varian Disability Plan, the
Varian HMO Plans, Varian Life and AD&D Insurance, the Varian Major Medical
Plan, the Varian Out-of-Area Medical Plans, the Varian Personal Paid Leave
Plan, the Varian Retiree Medical Plans and the Varian Vision Plan.


ARTICLE II


GENERAL EMPLOYMENT MATTERS


Section 2.01. General Obligations. Except as specifically provided herein,
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