10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 27, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-7598

VARIAN MEDICAL SYSTEMS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	94-2359345
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
3100 Hansen Way, Palo Alto, California	94304-1030
(Address of principal executive offices)	(Zip Code)

(650) 493-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $1 par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10 K    ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   x

As of March 29, 2013, the last business day of Registrant’s most recently completed second fiscal quarter, the aggregate market value of shares of Registrant’s common stock held by non-affiliates of Registrant (based upon the closing sale price of such shares on the New York Stock Exchange on March 28, 2013) was approximately $7,792,603,632. Shares of Registrant’s common stock held by the Registrant’s executive officers and directors and by each entity that owned 10% or more of Registrant’s outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

At November 19, 2013, the number of shares of the Registrant’s common stock outstanding was 105,719,260.

DOCUMENTS INCORPORATED BY REFERENCE

Definitive Proxy Statement for the Company’s 2014 Annual Meeting of Stockholders—Part III of this Form 10 K

   

VARIAN MEDICAL SYSTEMS, INC.

INDEX

		Page
	PART I
Item 1.	Business	1
	Executive Officers of the Registrant	17
Item 1A.	Risk Factors	19
Item 1B.	Unresolved Staff Comments	39
Item 2.	Properties	39
Item 3.	Legal Proceedings	39
Item 4.	Mine Safety Disclosures	39
	PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	40
Item 6.	Selected Financial Data	43
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	65
Item 8.	Financial Statements and Supplementary Data	69
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	118
Item 9A.	Controls and Procedures	118
Item 9B	Other Information	118
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	119
Item 11.	Executive Compensation	119
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	119
Item 13.	Certain Relationships and Related Transactions, and Director Independence	120
Item 14.	Principal Accountant Fees and Services	120
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	121
	Signatures	122

       

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Annual Report”), including the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which provides a “safe harbor” for statements about future events, products and future financial performance that are based on the beliefs of, estimates made by and information currently available to the management of Varian Medical Systems, Inc. (“VMS”) and its subsidiaries (collectively “we,” “our” or the “Company”). The outcome of the events described in these forward-looking statements is subject to risks and uncertainties. Actual results and the outcome or timing of certain events may differ significantly from those projected in these forward-looking statements due to the factors listed under Item 1A, “Risk Factors,” and from time to time in our other filings with the Securities and Exchange Commission (“SEC”). For this purpose, statements concerning industry or market segment outlook; market acceptance of our transition to new products or technology such as fixed field intensity-modulated radiation therapy, image-guided radiation therapy, stereotactic radiosurgery, volumetric modulated arc therapy, brachytherapy, software, treatment techniques, proton therapy and advanced X-ray products; growth drivers; future orders, revenues, backlog, earnings or other financial results; and any statements using the terms “believe,” “expect,” “anticipate,” “can,” “should,” “would,” “could,” “estimate,” “may,” “intended,” “potential,” and “possible” or similar statements are forward-looking statements that involve risks and uncertainties that could cause our actual results and the outcome and timing of certain events to differ materially from those projected or management’s current expectations. By making forward-looking statements, we have not assumed any obligation to, and you should not expect us to, update or revise those statements because of new information, future events or otherwise.

PART I

Item 1. Business

Overview

We, Varian Medical Systems, Inc., are a Delaware corporation originally incorporated in 1948 as Varian Associates, Inc. We are the world’s leading manufacturer of medical devices and software for treating cancer and other medical conditions with radiotherapy, radiosurgery, proton therapy and brachytherapy. We are also a premier supplier of X-ray imaging components for medical, scientific, and industrial applications and also supply X-ray imaging products for cargo screening and industrial inspection. Our mission is to explore and develop radiation technology that helps to protect and save lives and prevent harm. We seek to be a “Partner for Life” and to help save millions of lives every year everywhere. To meet this challenge, we offer tools for fighting cancer, taking X-ray images and protecting ports and borders.

Our Oncology Systems business segment designs, manufactures, sells and services hardware and software products for treating cancer with conventional radiotherapy (including IMRT, IGRT and volumetric modulated arc therapy), stereotactic body radiotherapy, stereotactic radiotherapy, stereotactic radiosurgery and brachytherapy. Our products include linear accelerators, brachytherapy afterloaders, treatment simulation and verification equipment and accessories; as well as information management, treatment planning and image processing software. Our products enable radiation oncology departments in hospitals and clinics to perform conventional radiotherapy treatments and offer advanced treatments such as fixed field intensity-modulated radiation therapy (“IMRT”), image-guided radiation therapy (“IGRT”), volumetric modulated arc therapy, and stereotactic radiotherapy, as well as to treat patients using brachytherapy techniques. Our products are also used by surgeons and radiation oncologists to perform radiosurgery. Our worldwide customers include university research and community hospitals, private and governmental institutions, healthcare agencies, doctors’ offices and cancer care clinics.

Our X-Ray Products business segment designs, manufactures, sells and services X-ray imaging components for use in a range of applications, including radiographic or fluoroscopic imaging, mammography, special procedures, computed tomography (“CT”) and industrial applications. We sell our X-ray imaging components to large imaging system original equipment manufacturer (“OEM”) customers that incorporate them into their medical diagnostic, dental, veterinary and industrial imaging systems. We also sell our X-ray tubes and our flat panel digital image detectors for filmless X-ray imaging (commonly referred to as “flat panel detectors” or “digital image detectors”) to small OEM customers, independent service companies and directly to end-users for replacement purposes.

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We report Security and Inspection Products (“SIP”), Varian Particle Therapy (“VPT”) and Ginzton Technology Center (“GTC”), under the “Other” category. GTC, our scientific research facility, develops technologies that enhance our current businesses or may lead to new business areas, including technology to improve radiation therapy and X-ray imaging, as well as other technology for a variety of applications, including security and cargo screening. GTC is also actively engaged in searching for chemical or biological agents that work synergistically with radiation to improve treatment outcomes. Our SIP business designs, manufactures, sells and services Linatron^® X-ray accelerators, imaging processing software and image detection products (including IntellX^TM) for security and inspection purposes, such as cargo screening at ports and borders and nondestructive examination in a variety of applications. We generally sell SIP products to OEM customers who incorporate our products into their inspection systems.

Our VPT business develops, designs, manufactures, sells and services products and systems for delivering proton therapy, another form of external beam radiotherapy using proton beams, for the treatment of cancer. Although proton therapy has been in clinical use for more than four decades, it has not been widely deployed due to high capital cost. Our current focus is commercializing our ProBeam™ proton therapy system and bringing our expertise in traditional radiation therapy to proton therapy to improve its clinical utility and to reduce its cost of treatment per patient.

Our business is subject to various risks and uncertainties. You should carefully consider the factors described in Item 1A,“Risk Factors” in conjunction with the description of our business set forth below and the other information included in this Annual Report on Form 10-K.

Radiation Therapy and the Cancer Care Market

Radiotherapy is the use of certain types of focused energy to kill cancer cells and shrink tumors. Radiotherapy is commonly used either alone or in combination with surgery or chemotherapy. One important advantage is that radiation has its greatest effect on replicating cells. When radiation interacts with a cell the therapeutic effect is primarily mediated by damaging cellular genetic material (chromosomes), which interrupts cell replication and results in eventual cellular death. Since the need for replication is particularly critical to the survival of a cancer and since normal tissues are better able to repair such damage, radiation tends to disproportionately kill cancer cells. The clinical goal in radiation oncology is to deliver as high of a radiation dose as possible directly to the tumor to kill the cancerous cells while minimizing radiation exposure to healthy tissue surrounding the tumor so that complications, side effects and secondary effects can be limited. This goal has been the driving force in the clinical care advancements in radiation oncology over the past two decades, from conventional radiotherapy to advanced forms of treatment such as IMRT, IGRT, stereotactic radiosurgery (“SRS”), stereotactic body radiotherapy (“SBRT”) and proton therapy, and it has certainly been one of the driving forces in our own product development plans.

The process for delivering radiotherapy typically consists of examining the patient, planning the treatment, simulating and verifying the treatment plan, providing quality assurance for the equipment and software, delivering the treatment, verifying that the treatment was delivered correctly and recording the history and results of the treatment. The team responsible for delivering the radiotherapy treatment generally is comprised of a physician specializing in radiation oncology, a medical physicist for planning patient treatments and conducting appropriate quality assurance procedures and a radiation therapist for positioning the patients for treatment and operating the machines.

The most common form of radiotherapy involves delivering X-ray beams from outside of the patient’s body, a process sometimes referred to as external beam radiotherapy. A device called a linear accelerator generates the X-ray beams and administers the treatment by rotating around a patient lying on a treatment couch and delivering the X-ray beam to the tumor from different angles in order to concentrate radiation at the tumor while at the same time minimizing the dose delivered to the surrounding healthy tissue. Conventional radiotherapy typically involves multiple, or fractionated, treatments of a tumor in up to 50 treatment sessions. The linear accelerator may also deliver electron beams for the treatment of diseases closer to the body surface.

IMRT is an advanced form of external beam radiotherapy in which the shape, intensity and angle of the radiation beams from a linear accelerator are varied, or modulated, across the target area. This form of radiotherapy conforms the radiation beams more closely to the shape of the tumor and allows physicians to deliver higher doses of radiation than conventional radiation, while limiting the amount of radiation delivered to nearby healthy tissue. In this way, clinicians can design and administer an individualized treatment plan for each patient, targeting the tumor as closely as a few millimeters. IMRT can be used to treat head and neck, breast, prostate, pancreatic, lung, liver, gynecological and central nervous system cancers. IMRT has become a well-accepted standard of treatment for cancer; and every year additional treatment centers, from university hospitals to local community clinics, adopt IMRT for their treatments. We are a leading global provider of products that enable IMRT for the treatment of cancer.

IGRT is another advanced form of external beam radiotherapy complementing IMRT to enhance treatments. While IMRT helps physicians shape the beam to the tumor, IGRT goes further in allowing physicians to accommodate for a tumor moving or shrinking. This allows the delivery of even higher doses of radiation to tumors with the goal of sparing even more of the surrounding healthy tissue. IGRT technologies provide dynamic, real-time visualization enabling precise treatment of small, moving and changing tumors

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with greater intensity and accuracy. With the greater precision offered by IGRT, clinics and hospitals are potentially able to improve outcomes by concentrating even still higher doses of radiation at the tumors. We believe IGRT has become an accepted standard for treatment in the radiation oncology market.

SRS and SBRT, often collectively referred to as radiosurgery, are advanced ablative radiation treatment procedures performed in a small number of treatment sessions with high doses of ionizing radiation. Radiosurgery is typically delivered with many small beams of radiation from many positions about the body, incorporating precise stereotactic image-guidance, which maximizes dose to the target and minimizes dose to surrounding normal tissues. Radiation oncologists, surgeons and other oncology specialists are increasingly recognizing radiosurgery as a useful tool to treat cancerous and non-cancerous lesions anywhere in the body.

Volumetric modulated arc therapy is a significant further advancement in IMRT that allows physicians to control three parameters simultaneously: (i) the rate at which the linear accelerator gantry rotates around the patient, (ii) the beam-shaping aperture and (iii) the rate at which the radiation dose is delivered to the patient. This creates a finely-shaped IMRT dose distribution that more closely matches the size and shape of the tumor. Volumetric modulated arc therapy enables faster treatments and greater precision. Our RapidArc^TM radiotherapy products plan and deliver volumetric modulated arc therapy treatments.

Physicians, hospitals and clinics place additional value on radiotherapy equipment and treatments, such as volumetric modulated arc therapy, that enable shorter treatment times and greater patient throughput. From the patient’s standpoint, shorter treatment times means that the patient is immobilized on the treatment couch for a shorter time period. Shorter treatment sessions decrease waiting times and, since treatments are delivered in fractions over the course of many days, can mean fewer disruptions to a patient’s daily routine. From the physicians’ and hospitals’ standpoint, shorter treatment times can lessen the chance of tumors moving during treatment and can increase patient throughput. Shorter treatment times and increased patient throughput can increase the number of treatments per day (which is a particular concern in countries with lower numbers of treatment machines per capita), and, as a result, can decrease the cost per treatment which in turn can mean greater access to advanced care to more patients.

An alternative to external beam radiotherapy, brachytherapy involves the insertion of radioactive seeds, wires or ribbons directly into a tumor or into a body cavity close to the cancerous area. These techniques, unlike external beam radiation therapy, tend to result in much less irradiation of the surrounding healthy tissue so that physicians can prescribe a higher total dose of radiation typically over a shorter period of time. Brachytherapy is often used for cancers of the head and neck, breast, uterus, cervix, soft tissue and prostate.

Proton therapy is another form of external beam radiotherapy that uses proton particles in the form of a beam generated with a cyclotron rather than X-ray beams from a linear accelerator. A proton beam’s signature energy distribution curve, also known as the “Bragg peak,” allows for greater accuracy in targeting tumor cells with an even lower dose to nearby healthy tissue than may be delivered with X-ray beams from a linear accelerator. This makes proton therapy a preferred option for treating certain cancers, particularly tumors near critical structures such as the optic nerve and cancers in children. Pencil-beam scanning capability allows for greater sparing of healthy tissue compared to external beam radiotherapy treatments. Although proton therapy has been in clinical use for more than four decades, it has not been widely deployed due to its high capital cost and the market is still developing. We have entered the proton therapy market because we believe we can apply our experience in traditional radiotherapy to proton therapy, reducing the cost of treatment per patient for existing clinical applications and expanding the use of proton therapy into a broader array of cancer types. We believe that proton therapy will over time become a more widely accepted method of treatment.

The radiation oncology market is growing globally due to a number of factors. The number of new cancer cases diagnosed annually is projected to increase by more than 65 percent from 12.7 million new cases in 2008 to more than 21.3 million in 2030, according to the International Agency for Research on Cancer (the “IARC”) in the World Health Organization. The IARC’s World Cancer Report predicts that the increase in new cases will mainly be due to steadily aging populations in both developed and developing countries. Technological advancements have helped to improve the precision and applicability of radiotherapy and radiosurgery, potentially expanding the use of radiotherapy and radiosurgery equipment to treat a broader range of cases. Technological advances in hardware and software are also creating a market for replacing an aging installed base of machines that are unable to match new, higher standards of care.

The rise in cancer cases, together with the increase in sophistication of new treatment processes, have created demand for more automated products that can be integrated into clinically practical systems to make treatments more rapid and cost effective. Technology advances leading to improvements in patient care, the availability of more advanced, automated and efficient clinical tools in radiation therapy, the advent of more precise forms of radiotherapy treatment (such as IMRT, IGRT, volumetric modulated arc therapy, stereotactic radiotherapy, SRS, SBRT, brachytherapy and proton therapy), and developing technology and equipment (such as volumetric modulated arc therapy) that enable treatments that reduce treatment times and increase patient throughput should drive the demand for our radiation therapy products and services.

International markets in particular are under-equipped to address the growing cancer incidence. Patients in many foreign countries must frequently endure long waits for radiotherapy. Several countries with growing economies, including China, India, and Brazil, are

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beginning to invest in expanding their radiation oncology capability to address the needs of their growing and aging populations. As an example, China and India are estimated to have less than fifteen treatment machines per million people over the age of 64; Brazil has an estimated 25 per million over the age of 64. By comparison, the United States is estimated to have about 90 treatment machines per million people over the age of 64. This capacity shortfall in emerging markets, coupled with ever increasing incidences of cancer, represent additional drivers for our continued growth in international markets.

Products

Oncology Systems

Our Oncology Systems business segment is the leading provider of advanced hardware and software products for treatment of cancer with conventional radiation therapy, IMRT, IGRT, volumetric modulated arc therapy, stereotactic radiotherapy, SRS, SBRT and brachytherapy. Oncology Systems products address each major aspect of the radiotherapy process, including linear accelerators and accessory products for positioning the patient and delivering the X-ray beam; brachytherapy afterloaders for delivering radioactive implantable seeds; treatment planning software for planning treatment sessions and dose delivery; treatment simulation and verification equipment and quality assurance software for simulating and verifying treatment plans before treatment as well as verification of correct treatment delivery; and information management software for recording the history and results of treatments and other patient treatment information and data, including patient X-ray images.

The focus of our Oncology Systems business is addressing the key concerns of the market for advanced cancer care systems; improving efficiency, precision, cost-effectiveness and ease of delivery of these treatments; and providing greater access to advanced treatments. A core element of our business strategy is to provide our customers with highly versatile, clinically proven products that are interoperable and can be configured and integrated into automated systems that combine greater precision, shorter treatment times and greater cost effectiveness and that improve the entire process of treating a patient. Our products and accessories for IMRT and IGRT allow clinicians to track and treat tumors using very precisely shaped beams, targeting the tumor as closely as currently possible and allowing the delivery of higher doses to the tumor while limiting exposure of nearby healthy tissue. Additionally, the precision and versatility of our products and technology makes it possible to use radiotherapy to treat metastatic cancers. With our treatment planning, verification and information management software products, a patient’s treatment plans, treatment data and images are recorded and stored in a single database shared by each of our products, which enables better communication among products. Our products also allow multiple medical specialties – radiation oncology, neurosurgery, radiographic imaging and medical oncology – to share equipment, resources and information in a more efficient, cost-effective manner. Furthermore, the ability of our products and technology to interoperate with each other and to interconnect into automated systems allows physicians to schedule and treat more patients within a set time period, which adds to the cost-effectiveness of our equipment.

Linear accelerators are the core device for delivering conventional external beam radiotherapy, IMRT, IGRT, volumetric modulated arc therapy treatments, stereotactic radio surgery and we produce versions of these devices to suit various clinical requirements. Our Clinac^® medical linear accelerators are used to treat cancer by producing therapeutic electrons and X-ray beams that target tumors and other diseases. The Clinac iX linear accelerators are designed for more streamlined and advanced treatment processes, including IMRT and IGRT. We also produce the Trilogy™ linear accelerator, designed to be a versatile, cost-effective, precise device with a faster dose delivery rate and more precise isocenter compared to the Clinac iX. At the high end, the TrueBeam^TM system for image-guided radiotherapy and radiosurgery is a fully-integrated system designed from the ground up to treat a moving target with higher speed and accuracy and complements our accelerator product line portfolio. TrueBeam was the first platform in the market to introduce flattening filter free beam delivery modes bringing new dose delivery rates to therapy delivery that are between 40-140 percent faster than Trilogy.   

We also manufacture and market linear accelerator accessories that enhance efficiency and enable delivery of advanced treatments such as IMRT, IGRT, stereotactic radiotherapy, SRS, SBRT and volumetric modulated arc therapy. Our Millennium™ series of multi- leaf collimators and High Definition 120 (“HD 120”) multi-leaf collimators are used with a linear accelerator to define the size, shape and intensity of the generated beams. PortalVision™, our electronic portal-imager, is used to verify a patient’s position while on the treatment couch, which is critical for accurate treatments and simplifies quality assurance of individual treatment plans. We also offer an innovative real-time patient position monitoring product, the RPM™ respiratory gating system, which allows the linear accelerator to be synchronized with patient breathing to help compensate for tumor motion during treatment. During the first quarter of fiscal year 2013, we announced the EDGE^TM radiosurgery suite, a combination of products for performing advanced radiosurgery using new real-time tumor tracking technology and motion management capabilities. We have now received Food and Drug Administration (“FDA”) 510(k) clearance for components of EDGE, including the EDGE radiosurgery accelerator and the Calypso^® System with Dynamic Edge™ Gating, and have affixed the Conformité Européenne (“CE”) mark for the European Union (“EU”) on EDGE and the Calypso System. During fiscal year 2013, we booked multiple orders for the EDGE radiosurgery system and EDGE radiosurgery accessories and software, as upgrades to customers’ existing systems.

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Our IGRT accessories include the On-Board Imager^® (“OBI”) hardware accessory affixed to the linear accelerator that allows dynamic, real-time imaging of tumors while the patient is on the treatment couch and a cone-beam computerized tomography (“CBCT”) imaging software accessory that works with the OBI to allow patient positioning based on soft-tissue anatomy. Using sophisticated image analysis tools, the CBCT scan can be compared with a reference CT scan taken previously to determine how the treatment couch should be adjusted to fine-tune and verify the patient’s treatment setup and positioning prior to delivery of the radiation. To deliver the most advanced forms of IGRT, our accelerators would typically have an OBI, CBCT, PortalVision and other IGRT-related hardware and software as accessories. Through the acquisition of Calypso Medical Technologies, Inc. (“Calypso”), a supplier of specialized products and software for real-time tumor tracking and motion management during radiosurgery and radiotherapy, in October 2011, Oncology Systems offers Calypso’s GPS for the Body^® products and software for real-time tumor tracking and motion management during radiosurgery and radiotherapy.

Our RapidArc radiotherapy products are a proprietary implementation of volumetric modulated arc therapy that coordinates beam shaping, dose rate and gantry speed to deliver a highly conformal dose distribution to the target tumor. RapidArc products enable the planning and delivery of image-guided IMRT in a single continuous rotation of up to 360 degrees rather than as a series of fixed fields.  Our RapidArc products enable faster delivery of radiation treatment with the possibility of reduced opportunity for tumor movement during treatment, as well as greater patient throughput and lower cost per patient for the hospital or clinic.  We believe RapidArc represents a significant advancement in IMRT cancer treatment.

Our treatment planning and information management software products enhance and enable the delivery of advanced radiotherapy treatments, from the initial treatment planning and plan quality assurance verification to the post-treatment recording of data and storing of patient information. Prior to any treatment, physicians must prescribe, or plan, the course of radiation delivery for the patient. We offer a range of treatment planning products that assist physicians in designing this plan. Our Eclipse™ treatment planning system provides physicians with 3D image viewing, treatment simulation, radiation dosage calculation and verification and other tools for generating treatment delivery plans for the patient. The Eclipse software utilizes a sophisticated technique known as inverse planning to enable physicians to rapidly develop optimal treatment plans based on a desired radiation dose outcome to the tumor and surrounding tissue.

Finally, our ARIA^® Oncology Information Management System (“ARIA”) is a comprehensive real-time information management system and database that records and verifies radiotherapy treatments carried out on the linear accelerator, records and stores patient data relating to chemotherapy treatment which may be prescribed by a physician in addition to radiotherapy, performs patient charting and manages patient information and patient image data. This gives clinics and hospitals the ability to manage treatment and patient information across radiation oncology and medical oncology procedures. Also, because ARIA is an electronic medical record, it can enable users to operate filmless and paperless oncology departments and cancer clinics. ARIA has been certified fully ARRA- Health Information Technology for Economic and Clinical Health Act (“HITECH”) compliant. In October 2012, we introduced our FullScale^TM oncology-specific information technology solutions, which take advantage of virtualization or cloud technologies to deploy our ARIA oncology information system and our Eclipse treatment planning system in a way that enables treatment centers to take advantage of economies of scale.

Our treatment simulators enable physicians to simulate radiation therapy treatments prior to delivery. We manufacture and sell Acuity™, a simulator that uses advanced amorphous silicon imaging technology and which has been designed to enhance IMRT treatments by integrating simulation more closely with treatment planning and by helping physicians better address tumor motion caused by breathing.

In addition to offering our own suite of equipment and software products for planning and delivering radiotherapy treatments, we have partnered with selected leaders in certain segments of the radiation therapy and radiosurgery market. In April 2012, we entered into a strategic global partnership with Siemens AG (“Siemens”) through which, among other things, we represent Siemens diagnostic imaging products to radiation oncology clinics in most international markets and in North America, and Siemens, in turn, represents our equipment and software products for radiotherapy and radiosurgery within its offerings to its healthcare customers in agreed upon countries. Furthermore, we and Siemens have developed interfaces to enable ARIA and Eclipse to connect with Siemens linear accelerators and imaging systems, and are exploring opportunities to co-develop new imaging and treatment solutions. We and Siemens are exploring opportunities to co-develop new imaging and treatment solutions. We hold a minority equity interest in and have an exclusive option to purchase the remaining equity interest of Augmenix, Inc. (“Augmenix”), a company that is developing hydrogel products to decrease irradiation of radiation sensitive tissue such as the rectum.

Our brachytherapy operations design, manufacture, sell and service advanced brachytherapy products, including VariSource™ HDR afterloaders and GammaMed™ HDR/PDR afterloaders, BrachyVision™ brachytherapy treatment planning system, applicators and accessories. Brachytherapy also develops and markets the VariSeed™ LDR prostate treatment planning system and the Vitesse™ software for real-time treatment planning for HDR prostate brachytherapy.

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Revenues from our Oncology Systems business segment represented 77%, 78% and 78% of total revenues for fiscal years 2013, 2012 and 2011, respectively. Our Oncology Systems business segment revenues include both products and service revenues. Product revenues in Oncology Systems accounted for 47%, 50% and 51% of total revenues for fiscal years 2013, 2012 and 2011, respectively. Service revenues in Oncology Systems accounted for 30%, 28% and 27% of total revenues for fiscal years 2013, 2012 and 2011, respectively. See “—Customer Services and Support.” For a discussion of Oncology Systems business segment financial information, see Note 17, “Segment Information” of the Notes to the Consolidated Financial Statements.

X-Ray Products

Our X-Ray Products business segment is a world leader in designing and manufacturing X-ray tubes, flat panel detectors and image processing tools, which are key components of X-ray imaging systems. We sell our products to OEM customers both for incorporation into new system configurations and as replacement components for installed systems. We conduct an active research and development program to focus on new technology and applications in both the medical and industrial X-ray imaging markets.

We manufacture X-ray tubes for four primary medical diagnostic radiology applications: CT scanners, radiographic or fluoroscopic imaging, special procedures, and mammography. We also offer a large line of industrial X-ray tubes, which consist of analytical X-ray tubes used for X-ray fluorescence and diffraction, as well as tubes used for non-destructive imaging and gauging and airport baggage inspection systems.

Our flat panel detectors, which are based on amorphous silicon imaging technologies, have broad application as an alternative to image intensifier tubes and X-ray film. Our flat panel detector products are being incorporated into next generation filmless medical diagnostic, dental, veterinary, and industrial inspection imaging systems and also serve as a key component of our OBI, which helps enable IGRT. We believe that imaging equipment based on amorphous silicon technologies is more stable and reliable, needs fewer adjustments, suffers less degradation over time than image intensifier tubes, and is more cost effective than X-ray film.

In April 2012, we acquired InfiMed, Inc. (“InfiMed”), a supplier of hardware and software for processing diagnostic X-ray images. Through the acquisition of InfiMed, we now offer image processing tools for X-ray imaging systems for a variety of modalities including fluoroscopy, angiography, cardiology and general radiography. The image processing tools may be combined with our radiographic flat panel detectors to upgrade film-based X-ray imaging systems to digital systems.

We are currently in the process of introducing multiple new products which we believe will help sustain the growth of our X-Ray Products business. Changes in access to diagnostic radiology or the reimbursement rates associated with diagnostic radiology as a result of the Affordable Care Act and similar state proposals, or otherwise, could however affect demand for our products in our X-Ray Products business.

Revenues from X-Ray Products represented 19%, 18% and 18% of total revenues in fiscal years 2013, 2012 and 2011, respectively. For a discussion of the X-Ray Products business segment financial information, see Note 17, “Segment Information” of the Notes to the Consolidated Financial Statements.

Other

Our SIP business designs, manufactures, sells and services Linatron X-ray accelerators, imaging processing software and image detection products for security and inspection purposes, such as cargo screening at ports and borders and nondestructive examination in a variety of applications. The Linatron M-i is a dual energy accelerator that can perform non-intrusive inspection of cargo containers and aid in automatically detecting and alerting operators when high-density nuclear materials associated with dirty bombs or weapons of mass destruction are present during cargo screening. The Linatron K-15 is a high-energy accelerator for inspection of very large, dense objects, including, for example, manufactured segments used in the Ariane rocket program in Europe. IntellX is a gantry-based imaging system for cargo screening.

Generally, we sell our SIP products to OEM customers who incorporate our products into OEM inspection systems. The OEM customers sell the systems to customs and other government agencies for use in overseas ports and borders to screen overland, rail, and sea cargo for contraband, weapons, narcotics and explosives, as well as for manifest verification. We also sell our SIP products to commercial enterprises in the casting, power, aerospace, chemical, petro-chemical and automotive industries for nondestructive product examination purposes, such as industrial inspection and manufacturing quality control.

Our VPT business develops, designs, manufactures, sells and services products and systems for delivering proton therapy, another form of external beam therapy using proton beams, for the treatment of cancer. Our ProBeam system is capable of delivering precise intensity modulated proton therapy (“IMPT”) using pencil beam scanning technology. Proton therapy is a preferred option for treating certain cancers, particularly tumors near critical structures such as the optic nerve and cancers in children. Although proton therapy

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has been in clinical use for more than four decades, it has not been widely deployed due to high capital cost. Proton therapy facilities are large-scale construction projects that are time consuming, involve significant customer investment and often complex project financing.

Our VPT technology and systems are in operation at the Paul Scherrer Institute in Villigen, Switzerland and the Rinecker Proton Therapy Center in Munich, Germany. During fiscal years 2013 and 2012, we continued work on the construction, installation and commissioning of a ProBeam proton therapy system for the five-room Scripps Proton Therapy Center in San Diego, California. In addition to this $88 million system project from California Proton Treatment Center, LLC (“CPTC”), we have a 10-year operations and maintenance agreement valued at approximately $60 million to service the ProBeam system once the Scripps Proton Therapy Center opens, which is scheduled for fiscal 2014. We are also participating with ORIX Capital Markets, LLC (“ORIX”) in a $165 million loan facility to finance the completion and startup operations of the center. We are providing $115 million of the loan commitment, and ORIX is providing $50 million of the loan commitment. See Note 15, “Variable Interest Entity” of the Notes to the Consolidated Financial Statements for further discussion.

In fiscal year 2012, VPT booked two additional orders – a $50 million order to supply a ProBeam system for a two-room proton therapy center at the PTC St. Petersburg Center of Nuclear Medicine of the International Institute of Biological Systems in Russia and a $73 million ProBeam system order for a five-room proton therapy center at the King Fahd Medical City in Riyadh, Saudi Arabia. We did not book any VPT orders in fiscal year 2013.

GTC, our scientific research facility, continues to invest in developing technologies that enhance our current businesses or may lead to new business areas, including next generation digital X-ray imaging technology, volumetric and functional imaging, and improved X-ray sources and technology for security and cargo screening applications. In addition, GTC is developing technologies and products that are designed to improve disease management by more precise targeting of radiation, as well as by employing targeted energy and molecular agents to enhance the effectiveness and broaden the application of radiation therapy. GTC is also actively engaged in searching for chemical or biological agents that work synergistically with radiation to improve treatment outcomes.

SIP, VPT and GTC report their results from operations as part of the “Other” category. Combined revenues from these operations represented 4% of total revenues in each of fiscal years 2013, 2012 and 2011. For a discussion of segment financial information, see Note 17, “Segment Information” of the Notes to the Consolidated Financial Statements.

Marketing and Sales

We employ a combination of direct sales forces and independent distributors or resellers for the marketing and sales of our products worldwide. The recent environment has been characterized by ongoing concerns about the U.S. and Euro zone economies, which has weakened and may continue to weaken global demand, thus slowing down economic activities in faster growing export-centric countries, such as China. These conditions may affect our business and demand for our products in fiscal year 2014. As a U.S.-based company, the competitiveness of our product pricing is influenced by the fluctuation of the U.S. dollar against other currencies. A weaker U.S. dollar against foreign currencies would make our product pricing more competitive in the local currencies of our international customers. A weaker U.S dollar against foreign currencies would also benefit our international revenues and gross orders when measured in U.S. dollars. In fiscal years 2013, 2012 and 2011, we did not have a single customer that represented 10% or more of our total revenues.

Oncology Systems

For our Oncology Systems segment, we sell direct in the United States and Canada and use a combination of direct sales and independent distributors in international regions. Through our strategic global partnership with Siemens, we represent Siemens diagnostic imaging products to radiation oncology clinics in most international markets and in North America. Siemens represents our equipment and software products for radiotherapy and radiosurgery within its offerings to its healthcare customers in agreed upon countries. We sell our Oncology Systems products primarily to university research and community hospitals, private and governmental institutions, healthcare agencies, physicians’ offices and cancer care clinics worldwide. These hospitals, institutes, agencies, physicians’ offices and clinics replace equipment and upgrade treatment capability as technology evolves. Sales cycles for our external beam radiotherapy products typically can be quite lengthy since many of them are considered capital equipment and are affected by budgeting cycles. Our customers frequently fix capital budgets one or more years in advance. In recent years, we have seen the purchasing cycle lengthen as a result of the more complex decision-making process associated with larger dollar value transactions for more sophisticated IGRT and surgical equipment, and other technical advances.

During the most recent economic downturn, we saw customers’ decision-making process further complicated and lengthened, especially in the United States, which caused hospitals, clinics and research institutions to more closely scrutinize and prioritize their capital spending in light of tightened capital budgets, tougher credit requirements and the general constriction in credit availability. In addition, the recent economic downturn had caused customers to delay requested delivery dates. Because our product revenues are

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influenced by the timing of product shipments, which are tied to customer-requested delivery dates, these delivery delays had increased the average order to revenue conversion cycle in the United States. Historically, this conversion cycle has been longer when new products are introduced or when we sell more products internationally. The lengthening of order to revenue conversion cycle could reduce our revenues and margins. In addition, our receivables may take longer to collect. Furthermore, we have recently seen a greater percentage of Oncology Systems gross orders and revenues coming from emerging markets within our international region, such as China, India, Poland and Brazil, which typically demand lower-priced products compared to developed markets. We expect that this shift in geographic mix of gross orders and revenues will generally continue and may negatively impact Oncology Systems gross margin.

Reimbursement rates in the United States have generally supported a favorable return on investment for the purchase of new radiotherapy equipment. While we believe that improved product functionality, greater cost-effectiveness and prospects for better clinical outcomes with new capabilities such as IMRT, IGRT and volumetric modulated arc therapy tend to drive demand for radiotherapy products, large changes in reimbursement rates or reimbursement structure can affect customer demand and cause market shifts. We do not know what impact the Patient Protection and Affordable Care Act (the “Affordable Care Act”) in the United States will have on long-term growth or demand for our products and services. We believe, however, that growth of the radiation oncology market in the United States is being impacted as customers’ decision-making processes are complicated by the uncertainties surrounding the Affordable Care Act and reimbursement rates for radiotherapy and radiosurgery, and that this uncertainty will likely continue into the next fiscal year and result in a high degree of variability of gross orders and revenue from quarter-to-quarter. We also believe that the Affordable Care Act is causing healthcare providers to re-evaluate their business models and we are seeing increased consolidation of hospitals and clinics and more integration of systems and equipment across multi-site healthcare networks, which is impacting transaction size, timing and purchasing processes, and also contributing to the increased variability. In accordance with the Affordable Care Act, in the second quarter of fiscal year 2013, we began to incur the 2.3% excise tax on sales of medical devices (including our Oncology Systems products) in the United States, which has had and may continue to have a negative impact on our gross margin and/or may lead our customers to reduce their orders for our products. In addition, the U.S. Centers for Medicare and Medicaid Services (“CMS”) reduced reimbursement rates for radiation therapy in free-standing clinics in the United States for calendar year 2013.

Total Oncology Systems revenues, including service revenues, were $2.3 billion, $2.2 billion and $2.0 billion for fiscal years 2013, 2012 and 2011, respectively. We divide our market segments for Oncology Systems revenues into North America, Europe, Asia and rest of the world, and these regions constituted 47%, 29%, 18% and 6%, respectively, of Oncology Systems revenues during fiscal year 2013; 46%, 32%, 16% and 6%, respectively, of Oncology Systems revenues during fiscal year 2012; and 48%, 32%, 15% and 5%, respectively, of Oncology Systems revenues during fiscal year 2011.

X-Ray Products

Our X-Ray Products segment employs a combination of direct sales and independent distributors for sales in all of its regions and sells a high proportion of our X-ray imaging components products to a limited number of OEM customers. The long-term fundamental growth driver of this business segment is the on-going success of our key OEM customers, and we expect that revenues from relatively few customers will continue to account for a high percentage of X-Ray Products revenues in the foreseeable future. Our OEM customers include Toshiba Corporation, Carestream Health, Inc., Hitachi Medical Corporation, Planmeca Oy, Siemens AG, Dental Imaging Technologies Corporation, Hologic Inc., GE Healthcare, Philips Medical Systems and Sound-Eklin Medical Systems. These OEM customers represented 68%, 70% and 67% of our total X-Ray Products segment revenues during fiscal years 2013, 2012 and 2011, respectively, with the remaining revenues coming from a large number of small OEM customers and independent services companies. Although our X-ray Products business experienced softer demand from major customers during fiscal year 2012, new products introduced in the second half of fiscal year 2013 begin to contribute to growth in gross orders and revenues in the fourth quarter of fiscal year 2013. Changes in access to diagnostic radiology or the reimbursement rates associated with diagnostic radiology as a result of the Affordable Care Act and similar state proposals will likely affect domestic demand for our products in our X-Ray Products business.

Total revenues for our X-Ray Products segment were $546 million, $493 million and $469 million for fiscal years 2013, 2012 and 2011, respectively. We divide our market segments for X-Ray Products revenues by region into North America, Europe, Asia and rest of the world, and these regions constituted 29%, 23%, 47% and 1%, respectively, of X-Ray Products revenues during fiscal year 2013; 26%, 24%, 48% and 2%, respectively, of X-Ray Products revenues during fiscal year 2012 and 29%, 21%, 49% and 1%, respectively, of X-Ray Products revenues during fiscal year 2011.

Other

Our SIP business also uses a combination of direct sales and independent distributors and also sells a high proportion of its products as subsystems and components to a limited number of OEM customers. As with X-Ray Products, this business depends on the success of our OEM customers, and we expect that revenues from relatively few customers will continue to account for a high percentage of SIP

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revenues in the foreseeable future. We supply Linatron linear accelerators and imaging detector products to OEM customers such as Smiths Detection, Rapiscan Systems, Inc., American Science & Engineering, Inc. and L3 Communications. We also sell our SIP products to regional integrators outside the United States as well as commercial enterprises in the casting, power, aerospace, chemical, petro-chemical and automotive industries for use in non-destructive investigation and testing applications.

We believe demand for our SIP products will be driven primarily by cargo screening, border protection, and non-destructive testing needs domestically and internationally. This business is heavily influenced by domestic and international government policies on border and port security, political change and government budgets. Orders and revenues for our SIP products have been and may continue to be unpredictable as governmental agencies may place large orders with us or with our OEM customers over a short period of time and then may not place additional orders until complete deployment and installation of previously ordered products. We have seen domestic and international governments postpone purchasing decisions and delay installations of products for security and inspection systems. These postponements and delays have been and may in the future be related to re-evaluating program priorities, evaluating funding options, and collaboration between individual government agencies. Furthermore, bid awards in this business may be subject to challenge by third parties, as we have previously encountered, which can make the conversion of some SIP orders to revenue unpredictable.

In the VPT business, we use direct sales specialist representatives who collaborate with our Oncology Systems sales group globally on projects. Potential customers are government-sponsored hospitals and research institutions and research universities, which typically purchase products through public tenders, as well as private hospitals, clinics and private developers. While this market is still developing, we believe that growth in this business will initially develop in the major metropolitan areas in the United States and abroad, driven by institutions that wish to expand their clinical offerings and increase their profile in their respective communities. We are investing substantial resources to build this new business. Proton therapy facilities are large-scale construction projects that are time consuming and involve significant customer investment and often complex project financing. Consequently, this business is vulnerable to general economic and market conditions, as well as reimbursement rates. Customer decision-making cycles tend to be very long, and orders generally involve many contingencies. We have seen the very tight credit markets constrain the ability of proton projects to obtain financing. As with our SIP business, bid awards in this business may be subject to challenge by third parties.

Backlog

Backlog is the accumulation of all gross orders for which revenues have not been recognized and are still considered valid. Backlog also includes a small portion of billed service contracts that are included in deferred revenue. Orders may be revised or canceled, either according to their terms or as customers’ needs change; consequently, it is difficult to predict with certainty the amount of backlog that will result in revenues. Our backlog at the end of fiscal year 2013 was $2.9 billion, of which we expect to recognize approximately 45% to 50% as revenues in fiscal year 2014. Our backlog at the end of fiscal year 2012 was $2.8 billion, of which $1.2 billion was recognized as revenues in fiscal year 2013. Our Oncology Systems backlog represented 87% and 86% of the total backlog at the end of fiscal years 2013 and 2012, respectively.

Beginning in the fourth quarter of fiscal 2013, we changed the presentation of reported orders from net orders to gross orders. Gross orders are defined as the sum of new orders recorded during the period adjusted for any revisions to existing orders during the period. New orders are recorded for the total contractual amount, excluding certain pass-through items, once a written agreement for the delivery of goods or provision of services is in place and, for businesses other than VPT, when shipment of the product (or in the case of certain highly customized products in our SIP business, construction of the product) is expected to occur within two years, so long as any contingencies are deemed perfunctory. However, we will not record SIP orders from governmental agencies with bid protest provisions until the expiration of the bid protest period. For our VPT business, we record orders when construction of the related proton therapy treatment center is reasonably expected to start within two years, but only if any contingencies are either deemed perfunctory or if the existence and nature of material contingencies is disclosed. However, we will not record VPT orders if there are major financing contingencies or customer board approval contingencies pending.

We perform a quarterly review to verify that outstanding orders in the backlog remain valid. Aged orders that are not expected to be converted to revenues are deemed dormant and are reflected as a reduction in the backlog amounts and net orders in the period identified. Backlog adjustments are comprised of dormancies, cancellations, foreign currency exchange rate and other adjustments. In fiscal years 2013, 2012, and 2011, our backlog adjustments were $257 million, $101 million, and $121 million, respectively. During fiscal year 2013, as a result of ongoing uncertainty in the U.S. healthcare environment and higher cancellations, particularly from small freestanding center developers, we re-evaluated similar transactions and removed orders that were not expected to be converted into revenues from our backlog, which resulted in an increase in backlog adjustments in fiscal year 2013 compared to fiscal years 2012 and 2011.

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Competition

Rapidly evolving technology, intense competition and pricing pressure characterize the markets for radiation therapy equipment and software products, including our Oncology Systems products. We compete with companies worldwide. Some of our competitors may have greater financial, marketing and other resources than we have. These competitors could develop technologies and products that are more effective than those we currently use or produce or that could render our products obsolete or noncompetitive. Our smaller competitors could be acquired by companies with greater financial strength, which could enable them to compete more aggressively. Some of our suppliers or distributors could also be acquired by competitors, which could disrupt these supply or distribution arrangements and result in less predictable and reduced revenues. Furthermore, we believe that new competitors will enter our markets, as we have encountered new competitors as we enter new markets such as radiosurgery, volumetric modulated arc therapy and proton therapy. We have directed substantial product development efforts into (i) increasing the interconnectivity of our products for more seamless operation within a system, (ii) enhancing the ease of use of our software products and (iii) reducing setup and treatment times and increasing patient throughput. We have also maintained an “open systems” approach that allows customers to “mix and match” our various individual products, incorporate products from other manufacturers, share information with other systems or products and use the equipment for offering various methods of radiation therapy treatment. We have done this based on our belief that such interconnectivity will increase the acceptance and adoption of IMRT, IGRT and volumetric modulated arc therapy and will stimulate demand for our products. There are competitive “closed-ended” dedicated-use systems, however, that place simplicity of use ahead of flexibility. If we have misjudged the importance to our customers of maintaining an “open systems” approach, or if we are unsuccessful in our efforts to sustain interconnectivity, enhance ease-of-use and reduce setup and treatment times, our revenues could suffer.

Our Oncology Systems customers’ equipment purchase considerations typically include: reliability, servicing, patient throughput, precision, price, payment terms, connectivity, clinical features, the ability to track patient referral patterns, long-term relationship and capabilities of customers’ existing equipment. We believe we compete favorably with our competitors based upon our strategy of providing a complete package solution of products and services in the field of radiation oncology and our continued commitment to global distribution and customer services, value-added manufacturing, technological leadership and new product innovation. To compete successfully, we must provide technically superior, clinically proven products that deliver more precise, cost effective, high quality clinical outcomes, together in a complete package of products and services, and to do so ahead of our competitors. Since our Oncology Systems products are generally sold on a basis of total value to the customer, our business may suffer when purchase decisions are based solely upon price, which can happen if hospitals and clinics give purchasing decision authority to group purchasing organizations. Further, additional competitors may delay customer purchasing decisions as customers evaluate the products of these competitors along with ours, potentially extending our sales cycle and adversely affecting our gross orders.

We are the leading provider of medical linear accelerators and related accessories. In radiotherapy and radiosurgery markets, we compete primarily with Elekta AB and Accuray Incorporated (now selling Tomotherapy products following Accuray’s 2011 acquisition of Tomotherapy). With our information and image management, simulation, treatment planning and radiosurgery products, we also compete with a variety of companies, such as Elekta AB (following its 2012 acquisition of Nucletron B.V.), Philips Medical Systems, RaySearch Laboratories AB, Brainlab AG and Best Theratronics, Ltd. We also encounter some competition from providers of enterprise hospital information systems. With respect to our brachytherapy operations, our competitors are Elekta AB (following its acquisition of Nucletron B.V.), MIM Software Inc. and Eckert & Ziegler BEBIG GmbH. In our Oncology Systems service and maintenance business, we compete with independent service organizations and our customers’ internal service organizations.

In addition, as a radiotherapy and radiosurgery equipment provider, we also face competition from alternative cancer treatment methods, such as traditional surgery, chemotherapy, robotic surgery and drug therapies, among others. To compete successfully, we need to demonstrate and convince our customers of the advantages of radiation therapy over other cancer treatment alternatives. This may involve funding and, in some instances, sponsoring clinical research and studies relating to the efficacy, comparative effectiveness and safety of radiation therapy as compared to such other alternative treatments.

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In our X-Ray Products business, we often compete with companies that have greater financial, marketing and other resources than we have. Some of the major diagnostic imaging systems companies, which are the primary OEM customers for our X-ray components, also manufacture X-ray components, including X-ray tubes, for use in their own imaging systems products. We must compete with these in-house manufacturing operations for business from their affiliated companies. As a result, we must have a competitive advantage in one or more significant areas, which may include lower product cost, better product quality or superior technology and/or performance. We sell a significant volume of our X-ray tubes to OEM customers such as Toshiba Corporation, Hitachi Medical Corporation, Philips Medical Systems, and GE Healthcare, all of which have in-house X-ray tube production capability. In addition, we compete against other stand-alone, independent X-ray tube manufacturers such as Comet AG and IAE Industria Applicazioni Elettroniche Spa as well as small start-up manufacturers in China. These companies compete with us for both the OEM business of major diagnostic imaging equipment manufacturers and the independent servicing business for X-ray tubes. The market for flat panel detectors is also very competitive. We incorporate our flat panel detectors into our equipment for IGRT within our Oncology Systems and also sell to a number of OEM customers, which incorporate our flat panel detectors into their medical diagnostic, dental, veterinary and industrial imaging systems. Our amorphous silicon based flat panel detector technology competes with other detector technologies such as amorphous selenium, charge-coupled devices and variations of amorphous silicon scintillators. We believe that our product provides a competitive advantage due to lower product cost and better product quality and performance. For flat panel detectors, our significant customers include Planmeca U.S.A., Inc., Carestream Health, Inc., Sound-Eklin Medical Systems, Shimadzu Corporation, Toshiba Corporation, Siemens and Dental Imaging Technologies Corporation and we primarily compete against Perkin-Elmer, Inc., Trixell S.A.S., Vieworks Co., Ltd. and Canon, Inc. Recently, Hamamatsu Corporation has entered the flat panel market.

In our SIP business, we compete with other OEM suppliers, primarily outside the United States in the security and inspection market. Currently, our major competitor is Nuctech Company Limited, and we have also seen some competition from Siemens. The market for our SIP products used for nondestructive testing in industrial applications is small and highly fractured, and there is no single major competitor in this nondestructive testing market.

The market for proton therapy products is still developing and is characterized by rapidly evolving technology, high competition and pricing pressure. Our ability to compete successfully depends, in part, on our ability to lower our product costs, develop and provide technically superior, clinically proven products that deliver more precise, cost-effective, high quality clinical outcomes, including integration of IGRT technologies such as OBI. In the proton therapy market, we compete principally with Hitachi Heavy Industries, Ion Beam Applications S.A., Mevion Medical Systems, Inc. (formerly Still River Systems, Inc.) and Sumitomo Heavy Industries, Ltd. There are a number of smaller competitors that are also developing proton therapy products. We are the only medical device company to enter the particle therapy market directly.

Customer Services and Support

We warrant most of our Oncology Systems products for parts and labor for 12 months, and we offer a variety of post-warranty equipment service contracts and software support contracts to suit customers’ requirements. We maintain service centers in Milpitas, California; Las Vegas, Nevada; Marietta, Georgia; Buc, France; Crawley, United Kingdom; Zug, Switzerland; Herlev (Copenhagen), Denmark; Diegem (Brussels), Belgium; Darmstadt, Germany; Houten, The Netherlands; Alcobendas (Madrid), Spain; Cernusco (Milan), Italy; Manama, Bahrain; Moscow, Russia; Mumbai, Delhi, and Chennai, India; Tokyo, Osaka, Sendai, Nagoya, and Fukuoka, Japan; Beijing, Chengdu, Shanghai and Hong Kong, China; Kuala Lumpur, Malaysia; Singapore; Bangkok, Thailand; Belrose, Australia; Sao Paulo, Brazil; Seoul, South Korea; Budapest, Hungary; Vienna, Austria; Helsinki, Finland and Winnipeg, Canada; as well as field service personnel throughout the world for Oncology Systems customer support services. Key Oncology Systems education operations are located in Las Vegas, Nevada; Beijing, China; Mumbai, India; Zug, Switzerland and Tokyo, Japan. Our network of service engineers and customer support specialists provide installation, warranty, repair, training and support services, project management, site planning, and professional services. We also have a distributed service parts network of regional hubs and forward-stocking locations across all major geographic areas. We generate service revenues by providing services to customers on a time-and-materials basis, replacement part sales and through post-warranty equipment service contracts and software support contracts. Most of the field service engineers are our employees, but our products are serviced by employees of distributors and/or agents in a few foreign countries. Customers can access our extensive service network by calling any of our service centers.

We believe customer service and support are an integral part of our Oncology Systems competitive strategy. Growth in our service revenues has resulted from the increasing customer adoption of service contracts as the sophistication and installed base of our products increase. We also believe superior service plays an important role in marketing and selling medical products and systems, particularly as the products become more complex. Nevertheless, some of our customers use their own internal service organizations and/or independent service organizations to service equipment after the warranty period expires and therefore do not enter into agreements with us for extended service.

We generally warrant our X-ray imaging components in our X-Ray Products business segment for 12 months. We provide technical advice and consultation for X-ray imaging components to major OEM customers from our offices in Salt Lake City, Utah; Charleston, South Carolina; Liverpool, New York; Tokyo, Japan; Beijing, China and Willich, Germany. Our applications specialists and engineers

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make recommendations to meet the customer’s technical requirements within the customer’s budgetary constraints. We often develop specifications for a unique product, which will be designed and manufactured to meet a specific customer’s requirements. We also maintain a technical customer support group in Charleston, South Carolina and Liverpool, New York to meet the technical support requirements of independent service companies that use our X-ray imaging components products.

We generally warrant our SIP products for 12 months. We provide technical support and service for these products to major OEM customers from our offices in Las Vegas, Nevada; Lincolnshire, Illinois; Buc, France; Manama, Kingdom of Bahrain; Crawley, United Kingdom; Milano, Italy; Tokyo, Japan and Brussels, Belgium.

In the VPT business, we sell our proton therapy equipment generally with a 12-month warranty. We also generate service revenues by providing on-site proton therapy system technical operation and maintenance support services for relatively long-term periods (i.e., a five-year term or longer). We believe customer service and support are an integral part of our VPT competitive strategy.

Manufacturing and Supplies

We manufacture our medical linear accelerators in Palo Alto, California and in Beijing, China. Our treatment simulator systems and some accelerator subsystems are manufactured in Crawley, United Kingdom and some of our other accessory products in Baden, Switzerland; Helsinki, Finland; Toulouse, France and Winnipeg, Canada. We manufacture our high dose rate brachytherapy systems in Crawley, United Kingdom and Haan, Germany and our brachytherapy treatment planning products in Charlottesville, Virginia. Calypso manufactures components of their tumor tracking and motion management products in Seattle, Washington. Our SIP linear accelerators are manufactured in Palo Alto, California and integrated into complete X-ray sources in Las Vegas, Nevada. We manufacture components and sub-systems for our proton therapy products and systems in Troisdorf, Germany. We manufacture our X-ray imaging component products in Salt Lake City, Utah; Charleston, South Carolina; Liverpool, New York; Willich, Germany and Beijing, China. These facilities employ state-of-the-art manufacturing techniques, and several have been honored by the press, governments and trade organizations for their commitment to quality improvement. These manufacturing facilities are certified by International Standards Organization (“ISO”) under ISO 9001 (for SIP) or ISO 13485 (for medical devices).

Manufacturing processes at our various facilities include machining, fabrication, subassembly, system assembly and final testing. We have invested in various automated and semi-automated equipment for the fabrication and machining of the parts and assemblies that we incorporate into our products. We may, from time to time, invest further in such equipment. Our quality assurance program includes various quality control measures from inspection of raw materials, purchased parts and assemblies through on line inspection. We outsource the manufacturing of many major subassemblies and perform system design, assembly and testing in house. We believe outsourcing enables us to reduce or maintain fixed costs and capital expenditures, while also providing us with the flexibility to increase production capacity. We purchase material and components from various suppliers that are either standard products or customized to our specifications. We obtain some of the components included in our products from a limited group of suppliers or from a single source supplier, such as the radioactive sources for high dose afterloaders, klystrons for linear accelerators; transistor arrays and cesium iodide coatings for flat panel detectors and specialized integrated circuits, X-ray tube targets, housings, glassframes and various other components; and radiofrequency components, magnets and gantry hardware for proton therapy systems. We require certain raw materials such as tungsten, lead and copper for Oncology Systems and SIP; copper, lead, tungsten, rhenium, molybdenum zirconium, and various high grades of steel alloy for X-ray tubes, and high-grade steel, high-grade copper and iron for the VPT business. Worldwide demand, availability and pricing of these raw materials have been volatile, and we expect that availability and pricing will continue to fluctuate in the future. New rules issued by the SEC in August 2012 requires us to ascertain and disclose the origin of some of the raw materials, including tungsten, that we use, which will add to the associated costs.

Research and Development

Developing products, systems and services based on advanced technology is essential to our ability to compete effectively in the marketplace. We maintain a research and development and engineering staff responsible for product design and engineering. Research and development expenses totaled $208 million, $186 million and $171 million in fiscal years 2013, 2012 and 2011, respectively.

Our research and development are conducted both within the relevant product groups of our businesses and through GTC. GTC maintains technical expertise in X-ray technology, accelerator technology, imaging physics and applications, algorithms and software, electronic design, materials science and biosciences to prove feasibility of new product concepts and to improve current products. Present research topics include new imaging concepts, image based radiotherapy treatment planning and delivery, real time accommodation of moving targets, functional imaging and combined modality therapy, manufacturing process improvements, improved X-ray tubes and large-area, high resolution digital X-ray sensor arrays for cone-beam CT and other applications. GTC is also pursuing the potential of combining advances in directed energy and imaging technology with the latest breakthroughs in biotechnology by employing targeted energy to enhance the effectiveness of biological and chemical therapeutic agents. In addition,

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GTC is investigating the use of X-ray and high energy accelerator, detector, and image processing technology for security applications. GTC accepts some sponsored research contracts from external agencies such as the U.S. government or private sources.

Within Oncology Systems, our development efforts focus on enhancing the reliability and performance of existing products and developing new products. This development is conducted primarily in the United States, Switzerland, Canada, England, Finland, Germany, India and China. In addition, we support research and development programs at selected hospitals and clinics. Current areas for development within Oncology Systems include linear accelerator systems and accessories for medical applications, information systems, radiation treatment planning software, image processing software, imaging devices, simulation, patient positioning and equipment diagnosis and maintenance tools. Development for our high energy linear accelerators is focused on improvements in accelerator technology, size, and mobility to address the needs of our customers in the market.

Within X-Ray Products, development is primarily conducted at our Salt Lake City, Utah; Palo Alto, California; Liverpool, New York and Lincolnshire, Illinois facilities and is primarily focused on developing and improving X-ray imaging component products. Current X-ray tube development areas include improvements to tube life and tube stability and reduction of tube noise. We are also working on X-ray tube designs which will operate at higher power loadings and at higher CT rotational speed to enhance the performance of next generation CT scanners as well as X-ray tubes to enhance the performance of our flat panel detectors. Research in imaging technology is aimed at developing new panel technologies for low cost radiographic imaging, wireless panel interfaces, better dose utilization in dental imaging, improved image quality for cone beam CT and new image processing tools for advanced applications.

Within VPT, our development efforts focus on integrating patient set-up, motion management and clinical workflow solutions originally developed in Oncology Systems as well as reducing the size of our proton therapy system. We expect that, in order to realize the full potential of the VPT business, we will need to invest substantial resources to continue to develop proton therapy technology.

Product and Other Liabilities

Our business exposes us to potential product liability claims that are inherent in the manufacture, sale, installation, servicing and support of medical devices and other devices that deliver radiation. Because our products are involved in the intentional delivery of radiation to the human body and other situations where people may come in contact with radiation (for example, when our SIP products are being used to scan cargo), the collection and storage of patient treatment data for medical analysis and treatment delivery, the planning of radiation treatment and diagnostic imaging of the human body, and the diagnosing of medical problems, the possibility for significant injury and/or death exists. Our medical products operate within our customers’ facilities and network systems, and under quality assurance procedures established by the facility that ultimately result in the delivery of radiation to patients. Human and other errors or accidents may arise from the operation of our products in complex environments, particularly with products from other vendors, where interoperability or data sharing protocol may not be optimized even though the equipment or system operates according to specifications. As a result, we may face substantial liability to patients, our customers and others for damages resulting from the faulty, or allegedly faulty, design, manufacture, installation, servicing, support, testing or interoperability of our products with other products, or their misuse or failure, as well as liability related to the loss or misuse of private patient data. We may also be subject to claims for property damages or economic loss related to or resulting from any errors or defects in our products, or the installation, servicing and support of our products. Any accident or mistreatment could subject us to legal costs, litigation, adverse publicity and damage to our reputation, whether or not our products or services were a factor. In addition, if a product we design or manufacture were defective (whether due to design, labeling or manufacturing defects, improper use of the product or other reasons), we may be required to correct or recall the product and notify regulatory authorities. We maintain limited product liability insurance coverage and currently self-insure professional liability/errors and omissions liability.

Government Regulation

U.S. Regulations

Laws governing marketing a medical device. In the United States, as a manufacturer and seller of medical devices and devices emitting radiation or utilizing radioactive by-product material, we and some of our suppliers and distributors are subject to extensive regulation by federal governmental authorities, such as the FDA, Nuclear Regulatory Commission (“NRC”), and state and local regulatory agencies, such as the State of California, to ensure the devices are safe and effective and comply with laws governing products which emit, produce or control radiation. Similar international regulations apply overseas. These regulations, which include the U.S. Food, Drug and Cosmetic Act (the “FDC Act”) and regulations promulgated by the FDA, govern, among other things, the design, development, testing, manufacturing, packaging, labeling, distribution, import/export, sale and marketing and disposal of medical devices, post market surveillance and reporting of serious injuries and death, repairs, replacements, recalls and other matters relating to medical devices, radiation emitting devices and devices utilizing radioactive by-product material. State regulations are extensive and vary from state to state. Our Oncology Systems equipment and software, as well as proton therapy systems offered by our VPT business, constitute medical devices subject to these regulations. Our X-ray tube products and flat panel detectors produced

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by X-Ray Products are also considered medical devices. Under the FDC Act, each medical device manufacturer must comply with quality system regulations that are strictly enforced by the FDA.

Unless an exception applies, the FDA requires that the manufacturer of a new medical device or a new indication for use of, or other significant change in, existing currently marketed medical device obtain either 510(k) pre-market notification clearance or pre-market approval (“PMA”) before it can market or sell those products in the United States. The 510(k) clearance process is applicable when the device introduced into commercial distribution is substantially equivalent to a legally marketed device. The process of obtaining 510(k) clearance generally takes at least six months from the date the application is filed, but could take significantly longer, and generally requires submitting supporting testing data. After a product receives 510(k) clearance, any modifications or enhancements to a product that could significantly affect its safety or effectiveness, or that would constitute a major change in the intended use of the device, technology, materials, labeling, packaging, or manufacturing process may require a new 510(k) clearance. The FDA requires each manufacturer to make this determination in the first instance, but the FDA can review any such decision. If the FDA disagrees with the manufacturer’s decision, it may retroactively require the manufacturer to submit a request for 510(k) pre-market notification clearance and can require the manufacturer to cease marketing and/or recall the product until 510(k) clearance is obtained. The FDA has issued draft guidance that, if finalized and implemented, will result in manufacturers needing to seek a significant number of new clearances for changes made to legally marketed devices. If we cannot establish that a proposed product is substantially equivalent to a legally marketed device, we must seek pre-market approval through a PMA application. Under the PMA process, the applicant submits extensive supporting data, including, in most cases, data from clinical studies, in the PMA application to establish reasonable evidence of the safety and effectiveness of the product. This process typically takes at least one to two years from the date the PMA is accepted for filing, but can take significantly longer for the FDA to review. To date, we have only manufactured Class I medical devices, which do not require PMA or 510(k) clearance, and Class II medical devices, which require 510(k) clearance. We do not manufacture any Class III medical devices, which require PMA. Our X-ray tubes and flat panel detectors are Class I medical devices, while all of the medical devices produced by our Oncology Systems segment and the proton therapy systems manufactured by our VPT business are Class II medical devices.

Quality systems. Our manufacturing operations for medical devices, and those of our third-party manufacturers, are required to comply with the FDA’s Quality System Regulation (“QSR”), which addresses a company’s responsibility for product design, testing, and manufacturing quality assurance, and the maintenance of records and documentation. The QSR requires that each manufacturer establish a quality systems program by which the manufacturer monitors the manufacturing process and maintains records that show compliance with FDA regulations and the manufacturer’s written specifications and procedures relating to the devices. QSR compliance is necessary to receive and maintain FDA clearance or approval to market new and existing products. The FDA makes announced and unannounced periodic and on-going inspections of medical device manufacturers to determine compliance with the QSR. If in connection with these inspections the FDA believes the manufacturer has failed to comply with applicable regulations and/or procedures, it may issue observations that would necessitate prompt corrective action. If FDA inspection observations are not addressed and/or corrective action taken in a timely manner and to the FDA’s satisfaction, the FDA may issue a Warning Letter (which would similarly necessitate prompt corrective action) and/or proceed directly to other forms of enforcement action. Failure to respond timely to FDA inspection observations, a Warning Letter or other notice of noncompliance and to promptly come into compliance could result in the FDA bringing enforcement action against us, which could include the total shutdown of our production facilities, denial of importation rights to the U.S. for products manufactured in overseas locations and denial of export rights for U.S. products and criminal and civil fines.

The FDA and the Federal Trade Commission (“FTC”) also regulate advertising and promotion of our products to ensure that the claims we make are consistent with our regulatory clearances, that there are adequate and reasonable scientific data to substantiate the claims and that our promotional labeling and advertising is neither false nor misleading. We may not promote or advertise our products for uses not within the scope of our intended use statement in our clearances or approvals or make unsupported safety and effectiveness claims.

It is also important that our products comply with electrical safety and environmental standards, such as those of Underwriters Laboratories (“UL”), the Canadian Standards Association (“CSA”), and the International Electrotechnical Commission (“IEC”). In addition, the manufacture and distribution of medical devices utilizing radioactive by-product material requires a specific radioactive material license. Manufacture and distribution of these radioactive sources and devices also must be in accordance with an approved NRC certificate, or an Agreement State registration certificate. Service of these products must be in accordance with a specific radioactive materials license. We are also subject to a variety of additional environmental laws regulating our manufacturing operations and the handling, storage, transport and disposal of hazardous materials, and which impose liability for the cleanup of any contamination from these materials. For a further discussion of these laws and regulations, see “Critical Accounting Estimates” in MD&A and Note 9, “Commitments and Contingencies” of the Notes to the Consolidated Financial Statements.”

Other applicable U.S. regulations. As a participant in the healthcare industry, we are also subject to extensive laws and regulations protecting the privacy and integrity of patient medical information that we receive, including the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), “fraud and abuse” laws and regulations, including, physician self-referral prohibitions, and

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false claims laws. From time to time, these laws and regulations may be revised or interpreted in ways that could make it more difficult for our customers to conduct their businesses, such as recent proposed revisions to the laws prohibiting physician self-referrals, and such revisions could have an adverse effect on the demand for our products, and therefore our business and results of operations. We also must comply with numerous federal, state and local laws of more general applicability relating to such matters as safe working conditions, manufacturing practices and fire hazard control.

The laws and regulations and their enforcement are constantly undergoing change, and we cannot predict what effect, if any, changes to these laws and regulations may have on our business. For example, HIPAA was amended by the HITECH Act, enacted as part of the American Recovery and Reinvestment Act of 2009. The HITECH Act significantly increases the civil money penalties for violations of patient privacy rights protected under HIPAA. Furthermore, business associates who have access to patient health information provided by hospitals and healthcare providers are now directly subject to HIPAA, including the new enforcement scheme and inspection requirements.

Medicare and Medicaid Reimbursement

The federal and state governments of the United States establish guidelines and pay reimbursements to hospitals and free-standing clinics for diagnostic examinations and therapeutic procedures under Medicare at the federal level and Medicaid at the state level. Private insurers often establish payment levels and policies based on reimbursement rates and guidelines established by the government.

The federal government and the Congress review and adjust rates annually, and from time to time consider various Medicare and other healthcare reform proposals that could significantly affect both private and public reimbursement for healthcare services, including radiotherapy and radiosurgery, in hospitals and free-standing clinics. In the past, we have seen our customers’ decision-making process complicated by the uncertainties surrounding reimbursement rates for radiotherapy and radiosurgery in the United States, such as we experienced in 2012 with the reductions to reimbursement rates for radiation therapy proposed by CMS. State government reimbursement for services is determined pursuant to each state’s Medicaid plan, which is established by state law and regulations, subject to requirements of federal law and regulations.

The provisions of the Affordable Care Act went into effect in 2012 and will continue to be in effect through 2014. We are continuing to evaluate the Affordable Care Act and its potential impact on our business. Specifically, one of the components of the law is a 2.3% excise tax on sales of most medical devices, which include our Oncology Systems products, which started January 1, 2013. This tax has had and may continue to have a negative impact on our gross margin and/or may lead our customers to reduce their orders for our products. Other elements of this  legislation, including comparative effectiveness research, an independent payment advisory board, payment system reforms (including shared savings pilots) and other provisions, could meaningfully change the way healthcare is developed and delivered, and may materially impact numerous aspects of our business, including the demand and availability of our products, the reimbursement available for our products from governmental and third-party payors, and reduced medical procedure volumes.

Various healthcare reform proposals have also emerged at the state level, and we are unable to predict which, if any of these proposals will be enacted. We believe that the uncertainty created by healthcare reform in the United States has complicated our customers’ decision-making process and impacted our Oncology Systems and VPT businesses, and may continue to do so.

The sale of medical devices including radiotherapy products, the referral of patients for diagnostic examinations and treatments utilizing such devices, and the submission of claims to third-party payors (including Medicare and Medicaid) seeking reimbursement for such services, are subject to various federal and state laws pertaining to healthcare “fraud and abuse.” These laws include physician self-referral prohibitions, anti-kickback laws and false claims laws. Subject to enumerated exceptions, the federal physician self-referral law, also known as Stark II, prohibits a physician from referring Medicare or Medicaid patients to an entity with which the physician (or a family member) has a financial relationship, if the referral is for a “designated health service,” which is defined explicitly to include radiology and radiation therapy services. Anti-kickback laws make it illegal to solicit, induce, offer, receive or pay any remuneration in exchange for the referral of business, including the purchase of medical devices from a particular manufacturer or the referral of patients to a particular supplier of diagnostic services utilizing such devices. False claims laws prohibit anyone from knowingly and willfully presenting, or causing to be presented, claims for payment to third-party payors (including Medicare and Medicaid) that are false or fraudulent, for services not provided as claimed, or for medically unnecessary services. The Office of the Inspector General prosecutes violations of fraud and abuse laws and any violation may result in criminal and/or civil sanctions including, in some instances, imprisonment and exclusion from participation in federal healthcare programs such as Medicare and Medicaid.

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Foreign Regulations

Our operations, sales and service of our products outside the United States are subject to regulatory requirements that vary from country to country and may differ significantly from those in the United States. In general, our products are regulated outside the United States as medical devices by foreign governmental agencies similar to the FDA.

Marketing a medical device internationally. In order for us to market our products internationally, we must obtain clearances or approvals for products and product modifications. We are required to affix the CE mark to our products in order to sell them in member countries of the European Economic Area (“EEA”). The CE mark is an international symbol of adherence to certain essential principles of safety and effectiveness, which once affixed enables a product to be sold in member countries of the EEA. The CE mark is also recognized in many countries outside the EEA, such as Switzerland and Australia, and can assist in the clearance process. In order to receive permission to affix the CE mark to our products, we must obtain Quality System certification, e.g., ISO 13485, and must otherwise have a quality management system that complies with the EU Medical Device Directive. The ISO promulgates standards for certification of quality assurance operations. We are certified as complying with the ISO 9001 for our SIP products and ISO 13485 for our medical devices. Several Asian countries, including Japan and China, have adopted regulatory schemes that are comparable, and in some cases more stringent, than the EU scheme. To import medical devices into Japan, the requirements of Japan’s New Medical Device Regulation must be met and a “shonin,” the approval to sell medical products in Japan, must be obtained. Similarly, in China a registration certification issued by the State Food and Drug Administration and a China Compulsory Certification mark for certain products are required to sell medical devices in that country. Obtaining such certifications on our products can be time-consuming and can cause us to delay marketing or sales of certain products in such countries. Similarly, prior to selling a device in Canada, manufacturers of Class II, III and IV devices must obtain a medical device license. We sell Class II and Class III devices in Canada. Additionally, many countries have laws and regulations relating to radiation and radiation safety that also apply to our products. In most countries, radiological regulatory agencies require some form of licensing or registration by the facility prior to acquisition and operation of an X-ray generating device or a radiation source. The handling, transportation and the recycling of radioactive metals and source materials are also highly regulated.

A number of countries, including the members of the EU, have implemented or are implementing regulations that would require manufacturers to dispose, or bear certain disposal costs, of products at the end of a product’s useful life and restrict the use of some hazardous substances in certain products sold in those countries. For a further discussion of these regulations, see “Critical Accounting Estimates” in MD&A and Note 9, “Commitments and Contingencies” of the Notes to the Consolidated Financial Statements.”

Manufacturing and selling a device internationally. We are also subject to laws and regulations outside the United States applicable to manufacturers of radiation-producing devices and products utilizing radioactive materials, and laws and regulations of general applicability relating to matters such as environmental protection, safe working conditions, manufacturing practices and other matters, in each case that are often comparable to, if not more stringent than, regulations in the United States. In addition, our sales of products in foreign countries are also subject to regulation of matters such as product standards, packaging requirements, labeling requirements, import restrictions, environmental and product recycling requirements, tariff regulations, duties and tax requirements. In some countries, we rely on our foreign distributors and agents to assist us in complying with foreign regulatory requirements.

Other applicable international regulations. In addition to the U.S. laws regarding the privacy and integrity of patient medical information, we are subject to similar laws and regulations in foreign countries covering data privacy and other protection of health and employee information. Particularly within Europe, data protection legislation is comprehensive and complex and there has been a recent trend toward more stringent enforcement of requirements regarding protection and confidentiality of personal data, as well as enactment of stricter legislation. We are also subject to international “fraud and abuse” laws and regulations, as well as false claims and misleading advertisement laws.

Patent and Other Proprietary Rights

We place considerable importance on obtaining and maintaining patent, copyright and trade secret protection for significant new technologies, products and processes, because of the length of time and expense associated with bringing new products through the development process and to the marketplace.

We generally rely upon a combination of patents, copyrights, trademarks, trade secret and other laws, and contractual restrictions on disclosure, copying and transferring title, including confidentiality agreements with vendors, strategic partners, co developers, employees, consultants and other third parties, to protect our proprietary rights in the developments, improvements and inventions that we have originated and which are incorporated in our products or that fall within our fields of interest. As of September 27, 2013, we owned 418 patents issued in the United States and 182 patents issued throughout the rest of the world and had 346 patent applications on file with various patent agencies worldwide. We intend to file additional patent applications as appropriate. We have trademarks, both registered and unregistered, that are maintained and enforced to provide customer recognition for our products in the

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marketplace. We also have agreements with third parties that provide for licensing of patented or proprietary technology, including royalty bearing licenses and technology cross licenses.

Environmental Matters

For a discussion of environmental matters, see “Critical Accounting Estimates” in MD&A and Note 9, “Commitments and Contingencies” of the Notes to the Consolidated Financial Statements, which discussions are incorporated herein by reference.

Financial Information about Geographic Areas

We do business globally with manufacturing, engineering, and development in the United States, India, Canada, Europe and China and with sales and service operations and customers throughout the world. Roughly half of our revenues are generated from our international regions. In addition to the potentially adverse impact of foreign regulations, see “Government Regulation—Foreign Regulations,” we also may be affected by other factors related to our international sales such as: lower average selling prices and profit margins; longer time periods from shipment to revenue recognition (which increases revenue recognition deferrals and time in backlog); and longer time periods from shipment to cash collection (which increases days sales outstanding (“DSO”)). To the extent that the geographic distribution of our sales continues to shift more towards international regions, our overall revenues and margins may suffer. We sell our products internationally predominantly in local currencies, but our cost structure is weighted towards the U.S. dollar. Accordingly, there may be adverse consequences from fluctuations in foreign currency exchange rates, which may affect both the affordability and competitiveness of our products and our profit margins. We engage in currency hedging strategies to offset the effect of fluctuations in foreign currency exchange rate, but the protection offered by these hedges depends upon the timing of transactions; the effectiveness of the hedges; the number of transactions that are hedged; and forecast volatility.

We are also exposed to other economic, political and other risks inherent in doing business globally. For an additional discussion of these risks, see Item 1A, “Risk Factors.”

For a discussion of financial information about geographic areas, see Note 17, “Segment Information” of the Notes to the Consolidated Financial Statements.

Employees

We had approximately 6,400 full time and part-time employees worldwide, including 3,700 in the United States and 2,700 elsewhere at September 27, 2013. None of our employees based in the United States are unionized or subject to collective bargaining agreements. Employees based in some foreign countries may, from time to time, be represented by works councils or unions or subject to collective bargaining agreements. We currently consider our relations with our employees to be good.

Information Available to Investors

As soon as reasonably practicable after our filing or furnishing the information to the SEC we make the following available free of charge on the Investors page of our website http://www.varian.com: our annual reports on Form 10-K; quarterly reports on Form 10-Q; current reports on Form 8-K (including any amendments to those reports); and proxy statements. Our Code of Business Ethics, Corporate Governance Guidelines and the charters of the Audit Committee, Compensation and Management Development Committee, Nominating and Corporate Governance Committee and Executive Committee are also available on the Investors page of our website. Please note that information on, or that can be accessed through, our website is not deemed “filed” with the SEC and is not to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Executive Officers of the Registrant

The biographical summaries of our executive officers, as of November 1, 2013, are as follows:

Name	Age	Position
Dow R. Wilson	54	President and Chief Executive Officer
Elisha W. Finney	52	Executive Vice President, Finance and Chief Financial Officer
Kolleen T. Kennedy	54	Senior Vice President and President, Oncology Systems
Robert H. Kluge	67	Senior Vice President and President, Imaging Components Businesses
John W. Kuo	50	Senior Vice President, General Counsel and Corporate Secretary
Clarence R. Verhoef	58	Senior Vice President, Finance and Corporate Controller

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Dow R. Wilson was appointed President and Chief Executive Officer effective September 29, 2012. Mr. Wilson served as Corporate Executive Vice President and Chief Operating Officer from October 2011 through September 2012 and as Corporate Executive Vice President and President, Oncology Systems from August 2005 through September 2011. Mr. Wilson served as Corporate Vice President and President, Oncology Systems from January 2005 to August 2005. Prior to joining the Company in January 2005, Mr. Wilson was Chief Executive Officer of the Healthcare-Information Technologies business in General Electric (a diversified technology and services company), from 2003 to 2005. During the previous 18 years, Mr. Wilson held various management positions within General Electric. Mr. Wilson holds a B.A. degree in English from Brigham Young University and an M.B.A. degree from Dartmouth’s Amos Tuck School of Business. Mr. Wilson has served on the board of directors of Saba Software, Inc. (an e-learning software provider) since August 2006 and in August 2011 was named the lead independent director of that board. Mr. Wilson was appointed to our Board of Directors effective September 29, 2012.

Elisha W. Finney was appointed Executive Vice President, Finance, in addition to being Chief Financial Officer, in February 2012. Ms. Finney served as Corporate Senior Vice President and Chief Financial Officer from January 2005 through January 2012 and as Corporate Vice President and Chief Financial Officer from April 1999 to January 2005. Ms. Finney has held various other positions, including Treasurer, during her 25 years with the Company. Ms. Finney holds a B.B.A. degree in risk management and insurance from the University of Georgia and an M.B.A. degree from Golden Gate University in San Francisco. Ms. Finney joined the board of Altera Corporation (a supplier of custom logic solutions) in August 2011.

Kolleen T. Kennedy was appointed Senior Vice President and President, Oncology Systems effective October 2011. From January 2006 through September 2011, Ms. Kennedy served as Vice President, Oncology Systems Customer Service and Support. Prior to that, Ms. Kennedy was the Company’s Vice President, Oncology Systems Marketing, Product Management and Engineering from September 2004 to January 2006. Prior to becoming Vice President, Ms. Kennedy served in various marketing management positions since she joined the Company in 1997. Ms. Kennedy holds a B.S. degree in Radiation Oncology and a B.S. degree in Psychology, both from Wayne State University, as well as an M.S. in Medical Physics from the University of Colorado.

Robert H. Kluge was appointed Senior Vice President and President, Imaging Components Businesses in February 2013. Prior to that, Mr. Kluge served as Corporate Senior Vice President and President, X-Ray Products from February 2008 to February 2013; Corporate Vice President and President, X-Ray Products from December 1999 to February 2008; and Vice President and General Manager of our X-Ray Products business from 1993 to December 1999. Before joining the Company in 1993, Mr. Kluge held various positions with Picker International (an X-ray systems manufacturer). Mr. Kluge holds a B.A. degree in economics and an M.B.A. degree in finance from the University of Wisconsin.

John W. Kuo was appointed Senior Vice President, in addition to being General Counsel and Corporate Secretary in February 2012. Prior to that, he served as Corporate Vice President and General Counsel from July 2005 through January 2012 and as Corporate Secretary since February 2005. Mr. Kuo joined the Company as Senior Corporate Counsel in March 2003 and became Associate General Counsel in March 2004. Prior to joining the Company, Mr. Kuo was General Counsel and Secretary at BroadVision, Inc. (an e-commerce software provider) in 2002 and held senior legal positions at 3Com Corporation (a networking equipment provider) from 1997 to 2002. Mr. Kuo has previously been with the law firms of Gray Cary Ware & Freidenrich (now DLA Piper) and Fulbright & Jaworski. Mr. Kuo holds a B.A. degree from Cornell University and a J.D. degree from Boalt Hall School of Law at the University of California at Berkeley.

Clarence R. Verhoef was appointed Senior Vice President, Finance and Corporate Controller in August 2012. From May 2012 to August 2012, Mr. Verhoef served as the Company’s Vice President and Operations Controller, and from September 2006 to May 2012, he served as the Controller for the Company’s X-Ray Products business. Prior to joining the Company, from 2003 to September 2006, Mr. Verhoef served as the Chief Financial Officer of Techniscan Medical Systems Inc. (a developer of ultrasound technology), and prior to that held various finance management positions with GE Healthcare and other medical imaging equipment companies. Mr. Verhoef holds a B.S. degree in Finance from the University of Utah.

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Item 1A. Risk Factors

The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. Although the risk factors described below are the ones management deems significant, additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. If any of the following risks actually occur, our business, operating results, and financial condition could be adversely affected.

IF OUR PRODUCTS AND PRODUCT LINES FAIL TO CONTINUE TO MEET CUSTOMER DEMANDS, OUR PRODUCTS MAY BECOME LESS USEFUL OR OBSOLETE AND OUR OPERATING RESULTS WILL SUFFER

We believe that IMRT, including volumetric modulated arc therapy, and IGRT have become accepted standards for treatment in the radiation oncology market. Demand for our IMRT and IGRT products have been the drivers for our gross orders and revenues in Oncology Systems and, because of the significance of Oncology Systems, in our business in general. We have introduced products such as TrueBeam, a line of linear accelerators for radiotherapy and radiosurgery, and UNIQUE, a less complex, low-energy linear accelerator for the more price sensitive emerging markets, to meet the evolving needs of our IMRT and IGRT customers. We believe TrueBeam is a valuable tool for clinicians in the fight against cancer and will stimulate faster replacement of older systems in our installed base. We also believe that our RapidArc products for volumetric modulated arc therapy are a significant advance in IMRT treatments and can help drive longer term demand for our linear accelerators and IMRT- and IGRT-related products. Orders for these products and products lines have contributed greatly to our orders and revenue growth and are keys to our future success. If our customers do not purchase these products or if future studies call into question the effectiveness of these or our other IMRT or IGRT products (including other volumetric modulated arc therapy products) or show negative side effects, or if other more effective technologies are introduced, our gross orders, revenues and financial results could suffer. As more institutions buy or upgrade to achieve IMRT and IGRT capabilities, the market for these products (including volumetric modulated arc therapy products) may become saturated. Alternatively, the marketplace may conclude that functions and features of our products should no longer be an element of a generally accepted diagnostic or treatment regimen. If this occurs, the market for our products may be adversely affected and they may become less useful or obsolete.

Our X-Ray Products business sells products primarily to a small number of imaging system OEM customers who use our products in their medical diagnostic and industrial imaging systems. To succeed, we must provide products that meet customer demands for product quality, superior technology and product performance at a competitive cost. If we are unable to continue to innovate our X-ray technology and anticipate our customers’ demands in the areas of cost, quality, technology and performance, then our customers may purchase from other tube or panel manufacturers (including the in-house operations of some of these customers), which would negatively impact this business.

In both the Oncology Systems and X-Ray Products businesses, and in our other product lines, we may be unable to accurately anticipate changes in our markets and the direction of technological innovation and demands of our customers. Our competitors may develop products or processes that are superior to, or more cost efficient than, what we can then offer. If this occurs, the market for our products may be adversely affected and our products may become less useful or obsolete. Any development adversely affecting the markets for our products would force us to reduce production volumes or to discontinue manufacturing one or more of our products or product lines and would reduce our revenues and earnings.

OUR SUCCESS DEPENDS ON THE SUCCESSFUL DEVELOPMENT, INTRODUCTION AND COMMERCIALIZATION OF NEW GENERATIONS OF PRODUCTS AND ENHANCEMENTS TO OR SIMPLIFICATIONS OF EXISTING PRODUCT LINES

Rapid change and technological innovation characterize the markets in which we operate. Our Oncology Systems products often have long development and government approval cycles, so we must anticipate changes in the marketplace, in technology and in customer demands. Our success depends on the successful development, introduction and commercialization of new generations of products, treatment systems and enhancements to and/or simplification of existing product lines. Our Oncology Systems products, including products such as EDGE^™, our new combination of products for performing advanced radiosurgery, TrueBeam and RapidArc, are technologically complex and must keep pace with, if not be superior to, the products of our competitors. Our X-Ray Products business must also continually improve products at competitive costs. We are investing in long-term growth initiatives, such as development of our SIP and VPT businesses, and expect that we will need to invest more to develop and commercialize new products and technology for these businesses. Accordingly, many of our products may require significant planning, design, development and testing, as well as significant capital commitments, involvement of senior management and other investments on our part.  In addition, because of the large footprint and high price of many proton therapy systems, including ours, there is increasing demand for development of a smaller, more compact proton therapy system.  Our ability to compete may depend on our ability to timely develop new technologies to reduce the size and price of our proton therapy system or provide additional features and functionality that our competitors do not.

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We may need to spend more time and money than we expect to develop and introduce new products or enhancements and, even if we succeed, they may not be sufficiently profitable that we are able to recover all or a meaningful part of our investment. Once introduced, new products may adversely impact orders and sales of our existing products, or make them less desirable or even obsolete, and could adversely impact our revenues and operating results. In addition, certain costs, including installation and warranty, associated with new products may be proportionately greater than other products, and may therefore adversely affect our gross and operating margins. If we are unable to lower these costs over time, our operating results could be adversely affected. Compliance with regulations, competitive alternatives, and shifting market preferences may also impact our success with new products or enhancements.

Our ability to successfully develop and introduce new products and product enhancements and simplifications, and the revenues and costs associated with these efforts, are affected by our ability to:

· properly identify customer needs;

· prove the feasibility of new products;

· limit the time required from proof of feasibility to routine production;

· timely and efficiently comply with internal quality assurance systems and processes;

· limit the timing and cost of regulatory approvals;

· accurately predict and control costs associated with inventory overruns caused by phase-in of new products and phase-out of old products;

· price our products competitively and profitably;

· manufacture, deliver and install our products in sufficient volumes on time, and accurately predict and control costs associated with manufacturing, installation, warranty and maintenance of the products;

· appropriately manage our supply chain;

· manage customer acceptance and payment for products;

· manage customer demands for retrofits of both new and old products; and

· anticipate and compete successfully with competitors.

Furthermore, we cannot be sure that we will be able to successfully develop, manufacture or introduce new products, treatment systems or enhancements, the roll-out of which involves compliance with complex quality assurance processes, including the FDA’s QSR. Failure to complete these processes timely and efficiently could result in delays that could affect our ability to attract and retain customers, or could cause customers to delay or cancel orders, causing our revenues and operating results to suffer.

New products generally take longer to install than well-established products. Because a portion of a product’s revenue is generally tied to installation and acceptance of the product, our recognition of revenue associated with new products may be deferred longer than expected. In addition, even if we succeed in our product introductions, potential customers may not decide to upgrade their equipment, or customers may delay delivery of some of our more sophisticated products because of the longer preparation and renovation of treatment rooms required. As a result, our revenues and other financial results could be adversely affected.

MORE THAN HALF OF OUR REVENUES ARE INTERNATIONAL, AND ECONOMIC, POLITICAL AND OTHER RISKS ASSOCIATED WITH INTERNATIONAL SALES AND OPERATIONS COULD ADVERSELY AFFECT OUR SALES OR MAKE THEM LESS PREDICTABLE

We conduct business globally. Our international revenues accounted for approximately 57%, 56% and 55% of revenues from continuing operations during fiscal years 2013, 2012 and 2011, respectively. As a result, we must provide significant service and support globally. We intend to continue to expand our presence in international markets and expect to expend significant resources in doing so. For example, we have aligned our resources to support sales and marketing efforts in emerging markets.  We cannot be sure, however, that we will be able to meet our sales, service and support objectives or obligations in international markets, or to recover our investments. Our future results could be harmed by a variety of factors, including:

· currency fluctuations;

· the lower sales prices and gross margins usually associated with sales of our products in the international region, in particular emerging markets;

· the longer payment cycles associated with many foreign customers;

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· difficulties in interpreting or enforcing agreements and collecting receivables through many foreign country’s legal systems;

· changes in the political, regulatory, safety or economic conditions in a country or region;

· the imposition by foreign countries of additional taxes, tariffs or other restrictions on foreign trade;

· the longer period in the international region from placement of any order to revenue recognition;

· any inability to obtain export licenses and other required export or import licenses or approvals;

· failure to comply with export laws and requirements, which may result in civil or criminal penalties and restrictions on our ability to export our products, particularly our industrial linear accelerator products;

· failure to obtain proper business licenses or other documentation, or to otherwise comply with local laws and requirements regarding marketing, sales, service or any other business we conduct in a foreign jurisdiction, which may result in civil or criminal penalties and restrictions on our ability to conduct business in that jurisdiction; and

· the possibility that it may be more difficult to protect our intellectual property in foreign countries.

Although our orders and sales fluctuate from period to period, in recent years our international region has represented a larger share of our business. The more we depend on sales in the international region, the more vulnerable we become to these factors.

As of September 27, 2013, 68% of our cash and cash equivalents were held abroad. If these funds were repatriated to the United States, they could be subject to additional taxation and our overall tax rate and our results of operations could suffer.

Our effective tax rate is impacted by tax laws in both the United States and in the countries in which our international subsidiaries do business. Earnings from our international region are generally taxed at rates lower than U.S. rates. A change in the percentage of our total earnings from the international region, or a change in the mix of particular tax jurisdictions within the international region could cause our effective tax rate to increase or decrease. Also, we are not currently taxed in the United States on certain undistributed earnings of certain foreign subsidiaries. These earnings could become subject to incremental foreign withholding or U.S. federal and state taxes should they either be deemed or actually remitted to the United States, in which case our financial results would be adversely affected. In addition, there have been proposals that would significantly change U.S. taxation of U.S.-based multinational corporations. Although we cannot predict whether or in what form Congress would enact any such proposals, legislation of this type could negatively impact our effective tax rate and adversely affect our financial results.

OUR RESULTS HAVE BEEN AND MAY CONTINUE TO BE AFFECTED BY CONTINUING WORLDWIDE ECONOMIC INSTABILITY

Since fiscal year 2008, the global economy has been impacted by a number of economic factors, including the sequential effects of the subprime lending crisis; the credit market crisis; collateral effects on the finance and banking industries; volatile currency exchange rates and energy costs; concerns over the downgrade of the sovereign debt of the United States and several European countries; continued sovereign debt and banking system uncertainties in Europe and other foreign countries and concerns regarding recession in Europe and the directions of the Chinese and United States economies. In many markets, these conditions have shrunk capital equipment budgets, slowed decision-making, made financing for large equipment purchases more expensive and more time consuming to obtain, and made it difficult for our customers and our vendors to accurately forecast and plan future business activities and reduced their confidence. This, in turn, has caused our customers to freeze, delay or dramatically reduce purchases and capital project expenditures. Project delays may continue, particularly as they relate to large scale or government projects, which may be affected by austerity measures. Alternatively, in the past, some countries have adopted and may in the future adopt government stimulus programs to revitalize their economies and improve healthcare and medical services. The availability of stimulus programs in the future could positively affect our results in one period and adversely affect our results in other periods, making it difficult for investors to compare our financial results between fiscal periods. Weak economic recovery may also disrupt supply if vendors consolidate or go out of business. As with our customers and vendors, these economic conditions make it more difficult for us to accurately forecast and plan our future business activities. Continued economic uncertainty may also affect our service business, as customers’ constrained budgets may result in pricing pressure, extended warranty provisions and even cancellation of service contracts.

In addition, concerns over continued economic instability, including the sovereign debt and banking crises in Europe, could make it more difficult for us to collect outstanding receivables. Historically, our business has felt the effects of market trends later than other sectors in the healthcare industry, such as diagnostic radiology, and we may experience the effects of any economic recovery later than others in the healthcare industry. A continued weak or deteriorating healthcare market would inevitably adversely affect our business, financial conditions and results of operations.

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WE FACE SIGNIFICANT COSTS IN ORDER TO COMPLY WITH LAWS AND REGULATIONS APPLICABLE TO THE MANUFACTURE AND DISTRIBUTION OF OUR PRODUCTS, AND FAILURE OR DELAYS IN OBTAINING REGULATORY CLEARANCES OR APPROVALS, OR FAILURE TO COMPLY WITH APPLICABLE LAWS AND REGULATIONS COULD PREVENT US FROM DISTRIBUTING OUR PRODUCTS, REQUIRE US TO RECALL OUR PRODUCTS AND RESULT IN SIGNIFICANT PENALTIES

Our products and those of OEMs that incorporate our products are subject to extensive and rigorous government regulation in the United States. Compliance with these laws and regulations is expensive and time-consuming, and failure to comply with these laws and regulations could adversely affect our business. Furthermore, public media reports on misadministrations of radiotherapy in patients and focus on the role of the FDA in regulating medical devices has led to increased scrutiny of medical device companies and an increased likelihood of enforcement actions.

U.S. laws governing marketing a medical device. In the United States, as a manufacturer and seller of medical devices and devices emitting radiation or utilizing radioactive by-product material, we and some of our suppliers and distributors are subject to extensive regulation by federal governmental authorities, such as the FDA, the NRC and state and local regulatory agencies, such as the State of California, to ensure the devices are safe and effective and comply with laws governing products which emit, produce or control radiation. These regulations govern, among other things, the design, development, testing, manufacturing, packaging, labeling, distribution, import/export, sale and marketing and disposal of our products.

Unless an exception applies, the FDA requires that the manufacturer of a new medical device or a new indication for use of, or other significant change in, existing currently marketed medical device obtain either 510(k) pre-market notification clearance or PMA before it can market or sell those products in the United States. Modifications or enhancements to a product that could significantly affect its safety or effectiveness, or that would constitute a major change in the intended use of the device, technology, materials, labeling, packaging, or manufacturing process also require a new 510(k) clearance. Although manufacturers make the initial determination whether a change to a cleared device requires a new 510(k) clearance, we cannot assure you that the FDA will agree with our decisions not to seek additional approvals or clearances for particular modifications to our products or that we will be successful in obtaining new 510(k) clearances for modifications. Obtaining clearances or approvals is time-consuming, expensive and uncertain, and the PMA process is more complex than the 510(k) clearance process. We may not be able to obtain the necessary clearances or approvals or may be unduly delayed in doing so, which could harm our business. Furthermore, even if we are granted regulatory clearances or approvals, they may include significant limitations on the indicated uses of the product, which may limit the market for the product. If we were unable to obtain required FDA clearance or approval for a product or unduly delayed in doing so, or the uses of that product were limited, our business could suffer. In the past, our devices have generally been subject to 510(k) clearance or exempt from 510(k) clearance. However, there are some in the regulatory field who believe that certain medical devices should be required to use the PMA approval process. If we were required to use the PMA process for future products or product modifications, it could delay or prevent release of the proposed products or modifications, which could harm our business.

Further, as we enter new businesses or pursue new business opportunities, such as radiosurgery and opportunities that require clinical trials, we may become subject to additional laws, rules and regulations, including FDA rules and regulations that are applicable to the clinical trial process and protection of study subjects. Becoming familiar with and implementing the infrastructure necessary to comply with these laws, rules and regulations is costly. In addition, failure to comply with these laws, rules and regulations could delay the introduction of new products and could adversely affect our business.

Quality systems. Our manufacturing operations for medical devices, and those of our third-party manufacturers, are required to comply with the FDA’s QSR, as well as other federal and state regulations for medical devices and radiation emitting products. The FDA makes announced and unannounced periodic and on-going inspections of medical device manufacturers to determine compliance with QSR and in connection with these inspections issues reports, known as Form FDA 483 reports when the FDA believes the manufacturer has failed to comply with applicable regulations and/or procedures. If observations from the FDA issued on Form FDA 483 reports are not addressed and/or corrective action taken in a timely manner and to the FDA’s satisfaction, the FDA may issue a Warning Letter and/or proceed directly to other forms of enforcement action. Similarly, if a Warning Letter were issued, prompt corrective action to come into compliance would be required. Failure to respond timely to Form FDA 483 observations, a Warning Letter or other notice of noncompliance and to promptly come into compliance could result in the FDA bringing enforcement action against us, which could include the total shutdown of our production facilities, denial of importation rights to the U.S. for products manufactured in overseas locations, adverse publicity and criminal and civil fines. The expense and costs of any corrective actions that we may take, which may include products recalls, correction and removal of products from customer sites and/or changes to our product manufacturing and quality systems, could adversely impact our financial results and may also divert management resources, attention and time. Additionally, if a Warning Letter were issued, customers could delay purchasing decisions or cancel orders, and we could face increased pressure from our competitors who could use the Warning Letter against us in competitive sales situations, either of which could adversely affect our reputation, business and stock price.

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In addition, we are required to timely file various reports with the FDA, including reports required by the medical device reporting regulations (“MDRs”), that require that we report to regulatory authorities if our devices may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur. If these reports are not filed timely, regulators may impose sanctions and sales of our products may suffer, and we may be subject to product liability or regulatory enforcement actions, all of which could harm our business.

If we initiate a correction or removal of a device to reduce a risk to health posed by the device, we would be required to submit a publicly available Correction and Removal report to the FDA and in many cases, similar reports to other regulatory agencies. This report could be classified by the FDA as a device recall which could lead to increased scrutiny by the FDA, other international regulatory agencies and our customers regarding the quality and safety of our devices. Furthermore, the submission of these reports have been and could be used by competitors against us in competitive situations and cause customers to delay purchase decisions, cancel orders or adversely affect our reputation.

Our medical devices utilizing radioactive material are subject to the NRC clearance and approval requirements, and the manufacture and sale of these products are subject to extensive federal and state regulation that varies from state to state and among regions. Our manufacture, distribution, installation and service (and decommissioning and removal) of medical devices utilizing radioactive material or emitting radiation also requires us to obtain a number of licenses and certifications for these devices and materials. Service of these products must also be in accordance with a specific radioactive materials license. Obtaining licenses and certifications may be time consuming, expensive and uncertain. In addition, we are subject to a variety of environmental laws regulating our manufacturing operations and the handling, storage, transport and disposal of hazardous materials, and which impose liability for the cleanup of any contamination from these materials. In particular, the handling and disposal of radioactive materials resulting from the manufacture, use or disposal of our products may impose significant costs and requirements. Disposal sites for the lawful disposal of materials generated by the manufacture, use or decommissioning of our products may no longer accept these materials in the future, or may accept them on unfavorable terms.

The FDA and the FTC also regulate advertising and promotion of our products to ensure that the claims we make are consistent with our regulatory clearances, that there are adequate and reasonable scientific data to substantiate the claims and that our promotional labeling and advertising is neither false nor misleading in any respect. If the FDA or FTC determines that any of our advertising or promotional claims are misleading, not substantiated or not permissible, we may be subject to enforcement actions, including Warning Letters, and may be required to revise our promotional claims and make other corrections or restitutions.

If we or any of our suppliers, distributors, agents or customers fail to comply with FDA, FTC and other applicable U.S. regulatory requirements or are perceived to potentially have failed to comply, we may face:

· adverse publicity affecting both us and our customers;

· increased pressures from our competitors;

· investigations by governmental authorities or Warning Letters;

· fines, injunctions, and civil penalties;

· partial suspensions or total shutdown of production facilities, or the imposition of operating restrictions;

· increased difficulty in obtaining required FDA clearances or approvals;

· losses of clearances or approvals already granted;

· seizures or recalls of our products or those of our customers;

· delays in purchasing decisions by customers or cancellation of existing orders;

· the inability to sell our products;

· difficulty in obtaining product liability or operating insurance at a reasonable cost, or at all; and

· civil fines and criminal prosecutions.

Other applicable U.S. regulations. As a participant in the healthcare industry, we are also subject to extensive laws and regulations protecting the privacy and integrity of patient medical information that we receive, including the HIPAA, “fraud and abuse” laws and regulations, including physician self-referral prohibitions, and false claims laws. From time to time, these laws and regulations may be revised or interpreted in ways that could make it more difficult for our customers to conduct their businesses, such as recent proposed revisions to the laws prohibiting physician self-referrals, and such revisions could have an adverse effect on the demand for our products, and therefore our business and results of operations. We also must comply with numerous federal, state and local laws of more general applicability relating to such matters as safe working conditions, manufacturing practices and fire hazard control.

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The laws and regulations and their enforcement are constantly undergoing change, and we cannot predict what effect, if any, changes to these laws and regulations may have on our business. For example, HIPAA was amended by the HITECH Act, enacted as part of the American Recovery and Reinvestment Act of 2009. The HITECH Act significantly increases the civil money penalties for violations of patient privacy rights protected under HIPAA. Furthermore, business associates who have access to patient health information provided by hospitals and healthcare providers are now directly subject to HIPAA, including the new enforcement scheme and inspection requirements. Moreover, there has been a trend in recent years toward more stringent regulation and enforcement of requirements applicable to medical device manufacturers who receive or have access to patient health information.

Government regulation also may cause considerable delay or even prevent the marketing and full commercialization of future products or services that we may develop, and/or may impose costly requirements on our business. Insurance coverage is not commercially available for violations of law, including the fines, penalties or investigatory costs that may flow to us as the consequence of regulatory violations; consequently, we do not have insurance that would cover this type of liability.

COMPLIANCE WITH FOREIGN LAWS AND REGULATIONS APPLICABLE TO THE MANUFACTURE AND DISTRIBUTION OF OUR PRODUCTS MAY BE COSTLY, AND FAILURE TO COMPLY MAY RESULT IN SIGNIFICANT PENALTIES

Regulatory requirements affecting our operations and sales outside the United States vary from country to country, often differing significantly from those in the United States. In general, outside the United States, our products are regulated as medical devices by foreign governmental agencies similar to the FDA.

Marketing a medical device internationally. In order for us to market our products internationally, we must obtain clearances or approvals for products and product modifications. These processes (including for example in the EU, the EEA, Switzerland, China, Japan and Canada) can be time consuming, expensive and uncertain, which can delay our ability to market products in those countries. Delays in receipt of or failure to receive regulatory approvals, the inclusion of significant limitations on the indicated uses of a product, the loss of previously obtained approvals or failure to comply with existing or future regulatory requirements could restrict or prevent us from doing business in a country or subject us to a variety of enforcement actions and civil or criminal penalties, which would adversely affect our business.

Within the EEA, we must affix a CE mark, a European marking of conformity that indicates that a product meets the essential requirements of the Medical Device Directive. This conformity to the Medical Device Directive is done through self-declaration and is verified by an independent certification body, called a “Notified Body.” Once the CE mark is affixed, the Notified Body will regularly audit us to ensure that we remain in compliance with the applicable European laws and Medical Device Directive. By affixing the CE mark marking to our product, we are certifying that our products comply with the laws and regulations required by the EEA countries, thereby allowing the free movement of our products within these countries and others that accept CE mark standards. If we cannot support our performance claims and demonstrate compliance with the applicable European laws and Medical Device Directive, we would lose our right to affix the CE mark to our products, which would prevent us from selling our products within the EU/EEA/Switzerland territory and in other countries that recognize the CE mark. Significant revisions to some of the applicable regulations governing requirements for medical devices in the EU/EEA/Switzerland went into effect in March 2010. These revisions have introduced additional uncertainty into the marketing authorization process for medical devices in Europe. Until medical device manufacturers and European regulatory agencies, including Notified Bodies and “Competent Authorities,” (governmental agencies to whom the legislator has delegated the capacity to enforce the Medical Devices Directive) have greater experience with interpreting and applying the revised regulations, we may be subject to risks associated with additional testing, modification, certification or amendment of our existing market authorizations, or we may be required to modify products already installed at our customers’ facilities in order to comply with the official interpretations of these revised regulations.

In addition, we are required to timely file various reports with international regulatory authorities, including reports required by international adverse event reporting regulations, that require that we report to regulatory authorities if our devices may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur. If these reports are not timely filed, regulators may impose sanctions, including temporarily suspend our market authorizations or CE mark, and sales of our products may suffer, and we may be subject to product liability or regulatory enforcement actions, all of which could harm our business.

Further, as we enter new businesses or pursue new business opportunities internationally, such as opportunities that require clinical trials, we may become subject to additional laws, rules and regulations. Becoming familiar with and implementing the infrastructure necessary to comply with these laws, rules and regulations is costly. In addition, failure to comply with these laws, rules and regulations could delay the introduction of new products and could adversely affect our business.

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Manufacturing and selling a device internationally. We are also subject to laws and regulations that apply to manufacturers of radiation emitting devices and products utilizing radioactive materials, as well as laws and regulations of general applicability relating to matters such as environmental protection, safe working conditions, manufacturing practices and other matters. These are often comparable to, if not more stringent than, the equivalent regulations in the United States. Sales overseas are also affected by regulation of matters such as product standards, packaging, labeling, environmental and product recycling requirements, import and export restrictions, tariffs, duties and taxes.

In some countries, we rely on our foreign distributors and agents to assist us in complying with foreign regulatory requirements, and we cannot be sure that they will always do so. If we or any of our suppliers, distributors, agents or customers fail to comply with applicable international regulatory requirements or are perceived to potentially have failed to comply, we may face:

· adverse publicity affecting both us and our customers;

· investigations by governmental authorities;

· fines, injunctions, civil penalties and criminal prosecutions;

· increased difficulty in obtaining required approvals in foreign countries;

· losses of clearances or approvals already granted;

· seizures or recalls of our products or those of our customers;

· delays in purchasing decisions by customers or cancellation of existing orders; and

· the inability to sell our products in or to import our products into such countries.

Other applicable international regulations. We are subject to laws and regulations in foreign countries covering data privacy and other protection of health and employee information. Particularly within Europe, data protection legislation is comprehensive and complex and there has been a recent trend toward more stringent enforcement of requirements regarding protection and confidentiality of personal data. Data protection authorities from the different member states of the EU may interpret the legislation differently, which adds to this complexity, and data protection is a dynamic field where guidance is often revised. Fully understanding and implementing this legislation could be quite costly and timely, which could adversely affect our business. Additionally, in some instances, in order to fulfill the requirements of applicable U.S. laws, we may be faced with deciding whether to comply with international data protection rules. Failure or partial failure to comply with data protection rules and regulations internationally could result in substantial monetary fines. New data protection legislation that will entail substantial changes to the current legal framework, some stricter than before, some less strict, is expected to be enacted by the European Commission in 2014.

We are also subject to international “fraud and abuse” laws and regulations, as well as false claims and misleading advertisement laws. From time to time, these laws and regulations may be revised or interpreted in ways that could make it more difficult for our customers to conduct their businesses, which could have an adverse effect on the demand for our products, and therefore our business and results of operations. The laws and regulations and their enforcement are constantly undergoing change, and we cannot predict what effect, if any, changes to these laws and regulations may have on our business.

THE AFFORDABLE CARE ACT INCLUDES PROVISIONS THAT MAY ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS, INCLUDING AN EXCISE TAX ON THE SALES OF MOST MEDICAL DEVICES

On March 23, 2010, President Obama signed into law the Affordable Care Act, many of the provisions of which will go into effect through 2014. While we are continuing to evaluate the Affordable Care Act, it could adversely impact the demand for our products and services, and therefore our financial position and results of operations, possibly materially.

Specifically, one of the components of the law is a 2.3% excise tax on sales of most medical devices, which include our Oncology Systems and VPT products, which started January 1, 2013. The Congressional Budget Office estimates that the total cost to the medical device industry could exceed $30 billion over ten years. This tax has had and may continue to have a negative impact on our gross margin and/or may lead our customers to reduce their orders for our products.

In addition, discussions relating to the Affordable Care Act have included the possibility for bundled reimbursement payments and accountable care organizations (“ACOs”). ACOs and bundled payment programs were established by the Affordable Care Act to reward integrated, efficient care and allow providers to share in any savings they achieve through the coordination of care and meeting certain mandated quality standards. ACOs and the bundled payment programs have primarily focused on primary care. However, some customers appear to be developing new partnerships across clinical specialties to prepare for the possibility of operating in an ACO environment and bundled reimbursement payments. These and other elements of the Affordable Care Act, including comparative effectiveness research, an independent payment advisory board, payment system reforms (including shared savings

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pilots) and the reporting of certain payments by us to healthcare professionals and hospitals (the “Physician Payment Sunshine Act”), could meaningfully change the way healthcare is developed and delivered, and may materially impact numerous aspects of our business, including the demand and availability of our products, the reimbursement available for our products from governmental and third-party payors, and reduced medical procedure volumes. We believe that growth of the radiation oncology market, which includes both traditional radiation therapy as well as proton therapy, in the United States is being adversely impacted as customers’ decision-making processes are complicated by the uncertainties surrounding the implementation of the Affordable Care Act and reimbursement rates for radiotherapy and radiosurgery, and that this uncertainty will likely continue into the next fiscal year and result in a high degree of variability of gross orders and revenue from quarter-to-quarter.

Various healthcare reform proposals have also emerged at the state level, and we are unable to predict which, if any of these proposals will be enacted. We are also unable to predict what effect ongoing uncertainty surrounding federal and state health reform proposals will have on our customer’s purchasing decisions. However, an expansion in government’s role in the U.S. healthcare industry may adversely affect our business, possibly materially.

CHANGES TO RADIATION ONCOLOGY AND OTHER REIMBURSEMENTS AND CHANGES IN INSURANCE DEDUCTIBLES AND ADMINISTRATION MAY AFFECT DEMAND FOR OUR PRODUCTS

Sales of our healthcare products indirectly depend on whether adequate reimbursement is available to our customers from a variety of sources, such as government healthcare insurance programs, including the Medicare and Medicaid programs; private insurance plans; health maintenance organizations; and preferred provider organizations. In general, employers and third-party payors in the United States have become increasingly cost-conscious, with higher deductibles imposed or encouraged in many medical plans. The imposition of higher deductibles tends to restrain individuals from seeking the same level of medical treatments as they might seek if the costs they bear are lower, particularly in the medical diagnostic portion of our business. Third party payors have also increased utilization controls related to the use of our products by healthcare providers.

Furthermore, there is no uniform policy on reimbursement among third-party payors, and we cannot be sure that third-party payors will reimburse our customers for procedures using our products that will enable us to achieve or maintain adequate sales and price levels for our products. Without adequate support from third-party payors, the market for our products may be limited.

Once Medicare has made a decision to provide reimbursement for a given treatment, these reimbursement rates are generally reviewed and adjusted by Medicare annually. Private third-party payors, although independent from Medicare, sometimes use portions of Medicare reimbursement policies and payment amounts in making their own reimbursement decisions. As a result, decisions by CMS to reimburse for a treatment, or changes to Medicare’s reimbursement policies or reductions in payment amounts with respect to a treatment sometimes extend to third-party payor reimbursement policies and amounts for that treatment. We have seen our customers’ decision-making process complicated by the uncertainty surrounding Medicare reimbursement rates for radiotherapy and radiosurgery in the United States. From time to time, CMS and third party payors may review and modify the factors upon which they rely to determine appropriate levels of reimbursement for cancer treatments. For example, CMS and third-party payors have begun to focus on the comparative effectiveness of radiation therapy versus other methods of cancer treatment, including surgery, and could modify reimbursement rates based on the results of comparative effectiveness studies. In addition, discussions relating to the Affordable Care Act have included the possibility for bundled reimbursement payments and ACOs. Any significant cuts in reimbursement rates or changes in reimbursement methodology or administration for radiotherapy, radiosurgery, proton therapy or brachytherapy, or concerns or proposals regarding further cuts or changes in methodology or administration, could further increase uncertainty, influence our customers’ decisions, reduce demand for our products, cause customers to cancel orders and have a material adverse effect on our revenues and stock price.

Foreign governments also have their own healthcare reimbursement systems and we cannot be sure that adequate reimbursement will be made available with respect to our products under any foreign reimbursement system.

OUR RESULTS MAY BE IMPACTED BY CHANGES IN FOREIGN CURRENCY EXCHANGE RATES

Because our business is global and payments are generally made in local currency, fluctuations in foreign currency exchange rates can impact our results by affecting product demand, or our revenues and expenses, and/or the profitability in U.S. Dollars of products and services that we provide in foreign markets.

While we use hedging strategies to help offset the effect of fluctuations in foreign currency exchange rates, the protection these strategies provide is affected by the timing of transactions, and the effectiveness of the hedges, the number of transactions that are hedged and forecast volatility. If our hedging strategies do not offset these fluctuations, our revenues, margins and other operating results may be harmed. In addition, movement in foreign currency exchange rates could impact our financial results positively or negatively in one period and not another, making it more difficult to compare our financial results from period to period.

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In addition, long-term movements in foreign currency exchange rates can also affect the competitiveness of our products in the local currencies of our international customers. Even though our international sales are mostly in local currencies, our cost structure is weighted towards the U.S. Dollar. The volatility of the U.S. Dollar that we have experienced over the last several years has affected the competitiveness of our pricing against our foreign competitors, some of which may have cost structures based in other currencies, either helping or hindering our international order and revenue growth, thereby affecting our overall financial performance and results. Changes in monetary or other policies here and abroad, including as a result of economic instability or concerns about the downgrade and levels of sovereign debt, or in reaction thereto, would also likely affect foreign currency exchange rates. For example, the value of the Euro against the U.S. Dollar has been impacted by the sovereign debt and banking crises in Greece, Spain and other European countries. Furthermore, in the event that one or more European countries were to replace the Euro with another currency, our sales into these countries, or into Europe generally, would likely be adversely affected until such time as stable exchange rates are established.

WE ARE SUBJECT TO FEDERAL, STATE AND FOREIGN LAWS GOVERNING OUR BUSINESS PRACTICES WHICH, IF VIOLATED, COULD RESULT IN SUBSTANTIAL PENALTIES. ADDITIONALLY, CHALLENGES TO OR INVESTIGATION INTO OUR PRACTICES COULD CAUSE ADVERSE PUBLICITY AND BE COSTLY TO RESPOND TO AND THUS COULD HARM OUR BUSINESS

Laws and ethical rules governing interactions with healthcare providers. The Medicare and Medicaid “anti-kickback” laws, and similar state laws, prohibit payments or other remuneration that is intended to induce hospitals, physicians or others either to refer patients or to purchase, lease or order, or arrange for or recommend the purchase, lease or order of healthcare products or services for which payment may be made under federal and state healthcare programs, such as Medicare and Medicaid. These laws affect our sales, marketing and other promotional activities by limiting the kinds of financial arrangements we may have with hospitals, physicians or other potential purchasers of our products. They particularly impact how we structure our sales offerings, including discount practices, customer support, education and training programs, physician consulting, research grants and other service arrangements. These laws are broadly written, and it is often difficult to determine precisely how these laws will be applied to specific circumstances.

Federal and state “false claims” laws generally prohibit knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other government payors that are false or fraudulent, or for items or services that were not provided as claimed. Although we do not submit claims directly to payors, manufacturers can be, and have been, held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by providing inaccurate billing or coding information to customers, or through certain other activities, including promoting products for uses not approved or cleared by the FDA, which is called off-label promotion. Violating “anti-kickback” and “false claims” laws can result in civil and criminal penalties, which can be substantial, and potential mandatory or discretionary exclusion from healthcare programs for noncompliance. Even an unsuccessful challenge or investigation into our practices could cause adverse publicity, and be costly to defend, and thus could harm our business and results of operations. Additionally, several state, federal and international laws, including the laws in Massachusetts and Vermont, and the federal Physician Payment Sunshine Act, require, among other things, extensive tracking and maintenance of databases regarding the disclosure of equity ownership and payments to physicians, healthcare providers and hospitals. These laws require us to implement the necessary and costly infrastructure to track and report certain payments to healthcare providers. Failure to comply with these new tracking and reporting laws could subject us to significant civil monetary penalties.

We are subject to similar laws in foreign countries where we conduct business. For example, within the EU, the control of unlawful marketing activities is a matter of national law in each of the member states. The member states of the EU closely monitor perceived unlawful marketing activity by companies. We could face civil, criminal and administrative sanctions if any member state determines that we have breached our obligations under its national laws. Industry associations also closely monitor the activities of member companies. If these organizations or authorities name us as having breached our obligations under their regulations, rules or standards, our reputation would suffer and our business and financial condition could be adversely affected.

Anti-corruption laws and regulations. We are also subject to the U.S. Foreign Corrupt Practices Act and anti-corruption laws, and similar laws in foreign countries, such as the U.K. Bribery Act of 2010, which became effective on July 1, 2011, and the Law “On the Fundamentals of Health Protection in the Russian Federation,” with a significant anti-corruption intent and effective since January 2012. In general, there is a worldwide trend to strengthen anticorruption laws and their enforcement, and the healthcare industry and medical equipment manufacturers have been particular targets of these investigation and enforcement efforts. Any violation of these laws by us or our agents or distributors could create a substantial liability for us, subject our officers and directors to personal liability and also cause a loss of reputation in the market. Transparency International’s 2012 Corruption Perceptions Index measured the degree to which public sector corruption is perceived to exist in 174 countries around the world, and found that nearly three quarters of the countries in the index, including many that we consider to be high growth areas for our products, such as China, India, Russia and Brazil, scored below 50, on a scale from 100 (very clean) to 0 (highly corrupt). We currently operate in many countries where the public sector is perceived as being more or highly corrupt. Our strategic business plans include expanding our business in regions and countries that are rated as higher risk for corruption activity by Transparency International. Becoming familiar with and implementing

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the infrastructure necessary to comply with laws, rules and regulations applicable to new business activities and mitigate and protect against corruption risks could be quite costly. In addition, failure by us or our agents or distributors to comply with these laws, rules and regulations could delay our expansion into high-growth markets and could adversely affect our business. This notwithstanding, we will inevitably do more business, directly and potentially indirectly in countries, where the public sector is perceived to be more or highly corrupt and be engaging in business in more countries perceived to be more or highly corrupt. Increased business in higher risk countries could subject us and our officers and directors to increased scrutiny and increased liability. In addition, we have conducted, and in the future expect to conduct internal investigations or face audits or investigations by one or more domestic or foreign government agencies, which could be costly and time-consuming, and could divert our management and key personnel from our business operations. An adverse outcome under any such investigation or audit could subject us to fines or criminal or other penalties, which could adversely affect our business and financial results.

PRODUCT DEFECTS OR MISUSE MAY RESULT IN MATERIAL PRODUCT LIABILITY OR PROFESSIONAL ERRORS AND OMISSIONS CLAIMS, LITIGATION, INVESTIGATION BY REGULATORY AUTHORITIES OR PRODUCT RECALLS THAT COULD HARM FUTURE REVENUES AND REQUIRE US TO PAY MATERIAL UNINSURED CLAIMS

Our business exposes us to potential product liability claims that are inherent in the manufacture, sale, installation, servicing and support of medical devices and other devices that deliver radiation. Because our products are involved in the intentional delivery of radiation to the human body and other situations where people may come in contact with radiation (for example, when our SIP products are being used to scan cargo), the collection and storage of patient treatment data for medical analysis and treatment delivery, the planning of radiation treatment and diagnostic imaging of the human body, and the diagnosing of medical problems, the possibility for significant injury and/or death exists to the intended or unintended recipient of the delivery. Our medical products operate within our customers’ facilities and network systems, and under quality assurance procedures established by the facility that ultimately result in the delivery of radiation to patients. Human and other errors or accidents may arise from the operation of our products in complex environments, particularly with products from other vendors, where interoperability or data sharing protocol may not be optimized even though the equipment or system operates according to specifications. As a result, we may face substantial liability to patients, our customers and others for damages resulting from the faulty, or allegedly faulty, design, manufacture, installation, servicing, support, testing or interoperability of our products with other products, or their misuse or failure. In addition, third party service providers could fail to adequately perform their obligations, which could subject us to further liability. We may also be subject to claims for property damages or economic loss related to or resulting from any errors or defects in our products, or the installation, servicing and support of our products. Any accident or mistreatment could subject us to legal costs, litigation, adverse publicity and damage to our reputation, whether or not our products or services were a factor. In connection with our products that collect and store patient treatment data, we may be liable for the loss or misuse of such private data, if those products fail or are otherwise defective.

Product liability actions are subject to significant uncertainty and may be expensive, time-consuming, and disruptive to our operations. For these and other reasons, we may choose to settle product liability claims against us, regardless of their actual merit. If a product liability action were finally determined against us, it could result in significant damages, including the possibility of punitive damages and our consolidated financial position, results of operations or cash flows could be materially adversely affected. Adverse publicity regarding any accidents or mistreatments, even ones that do not involve our products, could cause patients to be less receptive to radiotherapy or radiosurgery treatments, to question the efficacy of radiation therapy and radiosurgery and to seek other methods of treatment. Adverse publicity could also result in additional regulation of radiation therapy, radiosurgery, medical devices or the healthcare industry in general, and adversely affect our ability to promote, manufacture and sell our products. Both adverse publicity and increased regulatory activities could negatively impact our business and results of operations.

In addition, if a product we design or manufacture were defective (whether due to design, labeling or manufacturing defects, improper use of the product or other reasons), we may be required to correct or recall the product and notify regulatory authorities. The adverse publicity resulting from a correction or recall could damage our reputation and cause customers to review and potentially terminate their relationships with us. A product correction or recall could consume management time and have an adverse financial impact on our business, including incurring substantial costs, losing revenues and accruing losses under accounting principles generally accepted in the United States (“GAAP”).

We maintain limited product liability insurance coverage and currently self-insure professional liability/errors and omissions liability. Our product liability insurance policies are expensive and have high deductible amounts and self-insured retentions. Our insurance coverage may also prove to be inadequate, and future policies may not be available on acceptable terms or in sufficient amounts, if at all. If a material claim is successfully brought against us relating to a self-insured liability or a liability that is in excess of our insurance coverage, or for which insurance coverage is denied or limited, we could have to pay substantial damages, which could have a material adverse effect on our financial position and results of operation.

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WE COMPETE IN HIGHLY COMPETITIVE MARKETS, AND WE MAY LOSE MARKET SHARE TO COMPANIES WITH GREATER RESOURCES OR THE ABILITY TO DEVELOP MORE EFFECTIVE TECHNOLOGIES, OR WE COULD BE FORCED TO REDUCE OUR PRICES

Rapidly evolving technology, intense competition and pricing pressure characterize the markets for radiation therapy equipment and software. New competitors may enter our markets, and we have encountered new competitors as we have entered new markets such as radiosurgery, volumetric modulated arc therapy and proton therapy. Some of these competitors may have greater financial, marketing and other resources than we have. To compete successfully, we must provide technically superior, clinically proven products that deliver more precise, cost-effective, high quality clinical outcomes, in a complete package of products and services, and do so ahead of our competitors. As our Oncology Systems products are generally sold on a basis of total value to the customer, our business may suffer when purchase decisions are based solely upon price, which can happen if hospitals and clinics give purchasing decision authority to group purchasing organizations. The shift in the proportion of sales within our international region towards emerging market countries, which typically have purchased less complex, lower-priced products compared to more developed countries and which usually have stiffer price competition, could also adversely impact our results of operations. New competitors may also delay customer purchasing decisions as customers evaluate the products of these competitors along with ours, potentially extending our sales cycle and adversely affecting our gross orders.

In X-ray imaging components and subsystems, we often compete with companies that have greater financial, marketing and other resources than we have. Some of the major diagnostic imaging systems companies, which are the primary OEM customers for our X-ray components, also manufacture X-ray components, including X-ray tubes, for use in their own imaging systems products. We must compete with these in-house manufacturing operations for business from their affiliated companies. In addition, we compete against other stand-alone, independent X-ray tube manufacturers who compete with us for both the OEM business of major diagnostic imaging equipment manufacturers and the independent servicing business for X-ray tubes. The market for flat panel detectors is also very competitive. As a result, we must have an advantage in one or more significant areas, which may include lower product cost, better product quality and/or superior technology and/or performance.

In our SIP business, we compete with other OEM suppliers, primarily outside of the United States. The market for our SIP products used for nondestructive testing in industrial applications is small and highly fragmented.

The market for proton therapy products is still developing and is characterized by rapidly evolving technology and pricing pressure. Our ability to compete successfully depends, in part, on our ability to lower our product costs, develop and provide technically superior, clinically proven products that deliver more precise, cost-effective, high quality clinical outcomes, including integration of technologies such as our OBI for IGRT and our motion management technologies.

In each of our business segments, existing competitors’ actions and new entrants may adversely affect our ability to compete. These competitors could develop technologies and products that are more effective than those we currently use or produce or that could render our products obsolete or noncompetitive. In addition, the timing of our competitors’ introduction of products into the market could affect the market acceptance and market share of our products. Some competitors offer specialized products that provide, or may be perceived by customers to provide, a marketing advantage over our mainstream cancer treatment products. Also, some of our competitors may not be subject to the same standards, regulatory and/or other legal requirements that we are, and therefore, they could have a competitive advantage in developing, manufacturing and marketing products and services. Any inability to develop, gain regulatory approval for and supply commercial quantities of competitive products to the market as quickly and effectively as our competitors could limit market acceptance of our products and reduce our sales. In addition, some of our smaller competitors could be acquired by larger companies that have greater financial strength, which could enable them to compete more aggressively. Our competitors could also acquire some of our suppliers or distributors, which could disrupt these supply or distribution arrangements and result in less predictable and reduced revenues in our businesses. Any of these competitive factors could negatively affect our pricing, sales, revenues, market share and gross margins and our ability to maintain or increase our operating margins.

OPEN ARCHITECTURE IS BECOMING INCREASINGLY IMPORTANT, AND SALES OF OUR PRODUCTS COULD FALL IF WE FAIL TO ACHIEVE THIS

As radiation oncology treatment becomes more complex, our customers are increasingly focusing on ease-of-use and interconnectivity. Our equipment and software are highly sophisticated and require a high level of training and education to use them competently and safely—requirements made even more important because they work together within integrated environments. We have directed substantial product development efforts into (i) increasing the interconnectivity of our products for more seamless operation within a system, (ii) making our software products easier to use and (iii) reducing setup and treatment times to increase patient throughput. We have emphasized an “open systems” approach that allows customers to “mix and match” our individual products, incorporate products from other manufacturers, share information with other systems or products and use the equipment for offering various methods of radiation and chemotherapy treatment. We have done this based on our belief that such interconnectivity will increase the acceptance and adoption of IMRT, IGRT and volumetric modulated arc therapy and will stimulate demand for our

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products. There are competitive “closed-ended” dedicated-use systems, however, that place simplicity of use ahead of flexibility. If we have misjudged the importance to our customers of maintaining an “open systems” approach, or if we are unsuccessful in our efforts to increase interconnectivity, enhance ease-of-use and reduce setup and treatment times, our revenues could suffer.

Obtaining and maintaining interoperability and compatibility can be costly and time-consuming. While we try to use standard published protocols for communication with widely used oncology products manufactured by other companies, if we cannot do this, we may need to develop individual interfaces so that our products communicate correctly with the other company products. When other companies modify the design or functionality of their products, this may affect their compatibility with our products. In addition, when we improve our products, customers may be reluctant to adopt our new technology due to potential interoperability issues. For example, a clinic may be unwilling to implement one of our new technologies because its third-party software does not yet communicate correctly with our new product. Our ability to obtain compatibility with products of other companies may depend on our ability to obtain adequate information from them regarding their products. In many cases, these third parties are our competitors and may schedule their product changes and delay their release of relevant information to place us at a competitive disadvantage. When we modify our products to make them interoperable or compatible with third-party products, we may be required to obtain additional regulatory clearances. This process is costly and could delay our ability to release our products for commercial use. It is also possible that, despite our best efforts, we may not be able to make our products interoperable or compatible with widely used third-party products or may only be able to do so at a prohibitive expense, making our products less attractive or more costly to our customers.

PROTECTING OUR INTELLECTUAL PROPERTY CAN BE COSTLY AND WE MAY NOT BE ABLE TO MAINTAIN LICENSED RIGHTS, AND IN EITHER CASE OUR COMPETITIVE POSITION WOULD BE HARMED IF WE ARE NOT ABLE TO DO SO

We file applications as appropriate for patents covering new products and manufacturing processes. We cannot be sure, however, that our current patents, the claims allowed under our current patents, or patents for technologies licensed to us will be sufficiently broad to protect our technology position against competitors. Issued patents owned by, or licensed to, us may be challenged, invalidated or circumvented, or the rights granted under the patents may not provide us with competitive advantages. We also cannot be sure that patents will be issued from any of our pending or future patent applications. Asserting our patent rights against others in litigation or other legal proceedings is costly and diverts managerial resources. An unfavorable outcome in any such litigation or proceeding could harm us. In addition, we may not be able to detect patent infringement by others or may lose our competitive position in the market before we are able to do so.

We also rely on a combination of copyright, trade secret and other laws, and contractual restrictions on disclosure, copying and transferring title (including confidentiality agreements with vendors, strategic partners, co-developers, employees, consultants and other third parties), to protect our proprietary and other confidential rights. These protections may prove inadequate, since agreements may still be breached and we may not have adequate remedies for a breach, and our trade secrets may otherwise become known to or be independently developed by others. In the event that our proprietary or confidential information is misappropriated, our business and financial results could be adversely impacted. We have trademarks, both registered and unregistered, that are maintained and enforced to provide customer recognition for our products in the marketplace, but unauthorized third parties may still use them. We also have agreements with third parties that license to us certain patented or proprietary technologies. In some cases products with substantial revenues may depend on these license rights. If we were to lose the rights to license these technologies, or our costs to license these technologies were to materially increase, our business would suffer.

THIRD PARTIES MAY CLAIM WE ARE INFRINGING THEIR INTELLECTUAL PROPERTY, AND WE COULD SUFFER SIGNIFICANT LITIGATION OR LICENSING EXPENSES OR BE PREVENTED FROM SELLING OUR PRODUCTS

There is a substantial amount of litigation over patent and other intellectual property rights in the industries in which we compete. Our competitors, like companies in many high technology businesses, continually review other companies’ activities for possible conflicts with their own intellectual property rights. In addition, non-practicing entities may review our activities for conflicts with their patent rights. Determining whether a product infringes a third party’s intellectual property rights involves complex legal and factual issues, and the outcome of this type of litigation is often uncertain. Third parties may claim that we are infringing their intellectual property rights. We may not be aware of intellectual property rights of others that relate to our products, services or technologies. From time to time, we have received notices from third parties asserting infringement and we have been subject to lawsuits alleging infringement of third-party patent or other intellectual property rights. For example, we are currently involved in a patent infringement lawsuit relating to our Real-time Position Management™ technology initiated in 2007 by the University of Pittsburgh. Any dispute regarding patents or other intellectual property could be costly and time-consuming, and could divert our management and key personnel from our business operations. We may not prevail in a dispute. We do not maintain insurance for intellectual property infringement, so costs of defense, whether or not we are successful in defending an infringement claim, will be borne by us and could be significant. If we are unsuccessful in defending or appealing an infringement claim, we may be subject to significant damages and our consolidated financial position, results of operations or cash flows could be materially adversely affected. For example, in the University of Pittsburgh patent infringement case, as of September 27, 2013 we are subject to a court judgment that could result in the Company

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incurring up to approximately $102 million in damages, including prejudgment interest, plus an ongoing royalty for sales after the date of judgment. While we have appealed the findings against us, this appeal is subject to uncertainties and we cannot provide assurance as to its outcome. As of September 27, 2013, we had accrued an aggregate of approximately $5.0 million related to all ongoing proceedings, including the low end of the range of the probable settlement value for the University of Pittsburgh matter. If actual liabilities significantly exceed the estimates made, our consolidated financial position, results of operations or cash flows could be materially adversely affected. We may also be subject to injunctions against development and sale of our products, the effect of which could be to materially reduce our revenues. Furthermore, even if a third party rights holder is willing to license its rights to us, the amounts we might be required to pay under the associated royalty or license agreement could be significant.

THE LOSS OF A SUPPLIER OR ANY INABILITY TO OBTAIN SUPPLIES OF IMPORTANT COMPONENTS COULD RESTRICT OUR ABILITY TO MANUFACTURE PRODUCTS, CAUSE DELAYS IN OUR ABILITY TO DELIVER PRODUCTS, OR SIGNIFICANTLY INCREASE OUR COSTS

We obtain some of the components included in our products from a limited group of suppliers or from a single source supplier, such as the radioactive sources for high dose afterloaders, klystrons for linear accelerators; transistor arrays and cesium iodide coatings for flat panel detectors, and specialized integrated circuits, X-ray tube targets, housings, glassframes and various other components; and radiofrequency components, magnets and gantry hardware for proton therapy systems. If we lose any of these suppliers, if their operations were substantially interrupted, or if any of them failed to meet performance or quality specifications, we may be required to obtain and qualify one or more replacement suppliers. This may then also require us to redesign or modify our products to incorporate new parts and/or further require us to obtain clearance, qualification or certification of these products by the FDA or obtain other applicable regulatory approvals in other countries. Events like these could significantly increase costs for the affected product and likely cause material delays in delivery of that and other related products. Although we have insurance to protect against business interruption loss, this insurance coverage may not be adequate or continue to remain available on acceptable terms, if at all. Furthermore, some of our single-source suppliers provide components for some of our rapidly growing product lines. Manufacturing capacity limitations of any of our suppliers or other inability of these suppliers to meet increasing demand could adversely affect us, resulting in curtailed growth opportunities for our affected product lines. Shortage of, and greater demand for, components and subassemblies could also increase manufacturing costs if the supply/demand imbalance increases the price of the components and subassemblies. Disruptions or loss of any of our limited- or sole-sourced components or subassemblies or the capacity limitations of the suppliers for these components or subassemblies, including the ones referenced above, could adversely affect our business and financial results and could damage our customer relationships.

A SHORTAGE OR CHANGE IN SOURCE OF RAW MATERIALS COULD RESTRICT OUR ABILITY TO MANUFACTURE PRODUCTS, CAUSE DELAYS, OR SIGNIFICANTLY INCREASE OUR COST OF GOODS

We rely upon the supplies of certain raw materials such as tungsten, lead, iridium and copper for Oncology Systems or SIP; copper, lead, tungsten, rhenium, molybdenum zirconium, and various high grades of steel alloy for X-ray tubes, and high-grade steel, high-grade copper and iron for VPT. Worldwide demand, availability and pricing of these raw materials have been volatile, and we expect that availability and pricing will continue to fluctuate in the future. If supplies are restricted or become unavailable or if prices increase, this could constrain our manufacturing of affected products, reduce our profit margins or otherwise adversely affect our business.

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC has promulgated rules regarding disclosure of the presence in a company’s products of certain metals, known as “conflict minerals,” which are metals mined from the Democratic Republic of the Congo and adjoining countries, as well as procedures regarding a manufacturer’s efforts to identify the sourcing of those minerals from this region. Complying with these rules requires investigative efforts, which has and will continue to cause us to incur associated costs, and could adversely affect the sourcing, supply, and pricing of materials used in our products, or result in process or manufacturing modifications, all of which could adversely affect our results of operations.

CONSOLIDATION AMONG OUR ONCOLOGY SYSTEMS CUSTOMERS COULD ADVERSELY AFFECT OUR SALES OF ONCOLOGY PRODUCTS

We have seen and may continue to see some consolidation among our customers in our Oncology Systems business, as hospitals and clinics combine through mergers and acquisitions, and as they join group purchasing organizations or affiliated enterprises. In addition, we have seen and may continue to see integration of equipment and information systems among hospitals as they consolidate their networks. As customers consolidate and/or integrate, the volume of product sales to these customers might decrease. Alternatively, order size may increase, as what were previously more than one customer combine orders as one entity, or as groups of organizations combine their purchases. As a result, as orders increase in size and require more customer approvals, the purchasing cycle for our Oncology Systems products could lengthen. Both increased order size and extended purchasing cycles could cause our gross orders to be more volatile and less predictable. In addition, some customers appear to be developing new partnerships across clinical specialties to prepare for the possibility of operating in an ACO environment and the possibility of bundled reimbursement

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payments. Group purchasing organizations often focus on pricing as the determinant in making purchase decisions. A reduction in gross orders could affect the level of future revenues, which would adversely affect our operating results, financial condition, and the price of VMS common stock.

WE SELL OUR X-RAY PRODUCTS TO A LIMITED NUMBER OF OEM CUSTOMERS, MANY OF WHICH ARE ALSO OUR COMPETITORS, AND A REDUCTION IN BUSINESS OR INABILITY TO PROPERLY FORECAST SALES BY ONE OR MORE OF THESE CUSTOMERS COULD REDUCE OUR SALES

We sell our X-ray tube products to a limited number of OEM customers, many of which are also our competitors with in-house X-ray tube manufacturing operations. If these customers manufacture a greater percentage of their components in-house or otherwise lower external sourcing costs, we could experience reduction in purchasing volume by, or loss of, one or more of these customers. Such a reduction or loss could have a material adverse effect on our X-Ray Products business. In addition, economic uncertainties over the past few years and, in Japan, the power outages, facility closures and other effects of the 2011 tsunami, have made it difficult for our OEM customers to accurately forecast and plan future business activities. Such economic uncertainties and natural disasters, as well as other factors, have previously impacted our X-Ray Products business with inventory reduction efforts and slowdowns in sales at some of these customers. Similar inventory adjustments and slowdowns in sales could occur in the future. Our agreements for X-ray components may contain purchasing estimates that are based on our customers’ historical purchasing patterns, and actual purchasing volumes under the agreements may vary significantly from these estimates.

ORDERS FOR OUR SECURITY AND INSPECTION PRODUCTS COULD BE UNPREDICTABLE

Our SIP business designs, manufactures, sells and services Linatron X-ray accelerators, imaging processing software and image detection products for security and inspection, such as cargo screening at ports and borders and nondestructive examination for a variety of applications. We generally sell SIP products to OEMs who incorporate our products into their inspection systems, which are then sold to customs and other government agencies, as well as to commercial organizations in the casting, power, aerospace, chemical, petro-chemical and automotive industries. We believe growth in the SIP business will be driven by security cargo screening and border protection needs, as well as by the needs of customs agencies to verify shipments for assessing duties and taxes. Orders for our SIP products have been and may continue to be unpredictable as governmental agencies may place large orders with us or our OEM customers in a short time period, and then may not place any orders for a long time period thereafter. Because it is difficult to predict our OEM customer delivery, the actual timing of sales and revenue recognition varies significantly.

In addition, our SIP business is heavily influenced by U.S. and foreign governmental policies on national and homeland security, border protection and customs revenue activities, which depend upon government budgets and appropriations that are subject to economic conditions, as well as political changes. We have seen customers freeze or dramatically reduce purchases and capital project expenditures, delay projects, or act cautiously as governments around the world wrestle with spending priorities. As economic growth remains sluggish in various jurisdictions and appears to be deteriorating in others, and as concerns about levels of government employment and government debt continue, we expect that these effects will also continue. Furthermore, bid awards in this business may be subject to challenge by third parties, as we have previously encountered with a large government project. These factors make the timing of orders, sales and revenues in this business more unpredictable and could cause volatility in our revenues and earnings, and therefore the price of VMS common stock.

IF WE ARE UNABLE TO PROVIDE THE SIGNIFICANT EDUCATION AND TRAINING REQUIRED FOR THE HEALTHCARE MARKET TO ACCEPT OUR PRODUCTS, OUR BUSINESS WILL SUFFER

In order to achieve market acceptance for our radiation therapy products, we often need to educate physicians about the use of new treatment procedures such as IMRT, IGRT, volumetric modulated arc therapy, stereotactic radiotherapy, stereotactic radiosurgery, stereotactic body radiation therapy or proton therapy, overcome physician objections to some of the effects of the product or its related treatment regimen, convince healthcare payors that the benefits of the product and its related treatment process outweigh its costs and help train qualified physicists in the skilled use of the product. For example, the complex and dynamic nature of IMRT and IGRT requires significant education of hospital personnel and physicians regarding the benefits of and practices associated with IMRT and IGRT. Further, the complexity and high cost of proton therapy requires similar significant education, as well as education regarding construction and facility requirements. We have devoted and will continue to devote significant resources on marketing and educational efforts to create awareness of IMRT, IGRT, volumetric modulated arc therapy, stereotactic radiotherapy, stereotactic radiosurgery, stereotactic body radiation therapy and proton therapy generally, to encourage the acceptance and adoption of our products for these technologies and to promote the safe and effective use of our products in compliance with their operating procedures. Future products may not gain adequate market acceptance among physicians, patients and healthcare payors, even if we spend significant time and expense on their education.

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OUR BUSINESS MAY SUFFER IF WE ARE NOT ABLE TO HIRE AND RETAIN QUALIFIED PERSONNEL

Our future success depends, to a great degree, on our ability to retain, attract, expand, integrate and train our management team and other key personnel, such as qualified engineering, service, sales, marketing and other staff. We compete for key personnel with other medical equipment and software manufacturers and technology companies, as well as universities and research institutions. Because this competition is intense, compensation-related costs could increase significantly if the supply of qualified personnel decreases or demand increases. If we are unable to hire and train qualified personnel, we may not be able to maintain or expand our business. Additionally, if we are unable to retain key personnel, we may not be able to replace them readily or on terms that are reasonable, which also could hurt our business.

IF WE ARE NOT ABLE TO MATCH OUR MANUFACTURING CAPACITY WITH DEMAND FOR OUR PRODUCTS, OUR FINANCIAL RESULTS MAY SUFFER

Many of our products have a long production cycle, and we need to anticipate demand for our products in order to ensure adequate manufacturing or testing capacity. If we are unable to anticipate demand and our manufacturing or testing capacity does not keep pace with product demand, we will not be able to fulfill orders in a timely manner, which may negatively impact our financial results and overall business. Conversely, if demand for our products decreases, the fixed costs associated with excess manufacturing capacity may harm our financial results.

WE MAY NOT REALIZE EXPECTED BENEFITS FROM ACQUISITIONS OF OR INVESTMENTS IN NEW BUSINESSES, PRODUCTS, OR TECHNOLOGIES, WHICH COULD HARM OUR BUSINESS

We need to grow our businesses in response to changing technologies, customer demands and competitive pressures. In some circumstances, we may decide to grow our business through the acquisition of complementary businesses, products or technologies rather than through internal development. For example, in fiscal year 2012 we acquired InfiMed, a supplier of hardware and software for processing diagnostic X-ray images, and Calypso, a supplier of specialized products and software for real-time tumor tracking and motion management during radiosurgery and radiotherapy. Identifying suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to identify suitable candidates or successfully complete identified acquisitions. In addition, completing an acquisition can divert our management and key personnel from our current business operations, which could harm our business and affect our financial results. Even if we complete an acquisition, we may not be able to successfully integrate newly acquired organizations, products, technologies or employees into our operations, or may not fully realize some of the expected synergies.

Integrating an acquisition can also be expensive and time-consuming, and may strain our resources. It may cost us more to commercialize new products than we originally anticipated, as we have experienced with our proton therapy systems, or cause us to increase our expenses related to research and development, either of which could impact our results of operations. In many instances, integrating a new business will also involve implementing or improving internal controls appropriate for a public company at a business that lacks them. In addition, we may be unable to retain the employees of acquired companies, or the acquired company’s customers, suppliers, distributors or other partners for a variety of reasons, including the fact that these entities may be our competitors or may have close relationships with our competitors.

Further, we may find that we need to restructure or divest acquired businesses, or assets of those businesses. Even if we do so, an acquisition may not produce the full efficiencies, growth or benefits we expected. If we decide to sell assets or a business, as we did in fiscal year 2008 with the scientific research instruments business that we acquired as part of our acquisition of ACCEL GmbH, it may be difficult to identify buyers or alternative exit strategies on acceptable terms, in a timely manner, or at all, which could delay the accomplishment of our strategic objectives. We may be required to dispose of a business at a lower price or on less advantageous terms, or to recognize greater losses, than we had anticipated.

We account for our acquisitions under the purchase method of accounting. Under this method, we allocate the total purchase price to the acquired businesses’ tangible assets and liabilities, identifiable intangible assets and in-process research and development costs based on their fair values as of the date of the acquisition, and record the excess of the purchase price over those fair values as goodwill. If we fail to achieve the anticipated growth from an acquisition, or if we decide to sell assets or a business, we may be required to recognize an impairment loss on the write down of our assets and goodwill, which could adversely affect our financial results. In addition, acquisitions can result in potentially dilutive issuances of equity securities or the incurrence of debt, contingent liabilities or expenses, or other charges, any of which could harm our business and affect our financial results.

Additionally, we have investments in privately held companies that are subject to risk of loss of investment capital.  These investments are inherently risky in some instances because the markets for the technologies or products these companies have under development may never materialize.  If these companies do not succeed, we could lose some or all of our investment in these companies.  

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WE MAY FACE ADDITIONAL RISKS FROM THE ACQUISITION OR DEVELOPMENT OF NEW LINES OF BUSINESS

From time to time, we may acquire or develop new lines of business, such as particle therapy. There are substantial risks and uncertainties associated with new lines of business, particularly in instances where the markets are not fully developed. Risks include developing knowledge of and experience in the new business, recruiting market professionals, increasing research and development expenditures, and developing and capitalizing on new relationships with experienced market participants. This may mean significant investment and involvement of our senior management to acquire or develop, then integrate, the business into our operations. Timelines for integration of new businesses may not be achieved and price and profitability targets may not prove feasible, as new products can carry lower gross margins than existing products. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact whether implementation of a new business will be successful. Failure to manage these risks could have a material adverse effect on our business, results of operations and financial condition.

WE WORK WITH DISTRIBUTORS FOR SALES IN SOME TERRITORIES, AND LOSING THEM COULD HARM OUR REVENUES IN THAT TERRITORY

We have strategic relationships with a number of key distributors, including Siemens AG, for sales and service of our products. If these strategic relationships end and are not replaced, our revenues from product sales in these territories and/or ability to service our products in the territories serviced by these distributors could be adversely affected.

FLUCTUATIONS IN OUR OPERATING RESULTS, INCLUDING QUARTERLY GROSS ORDERS, REVENUES, AND MARGINS, MAY CAUSE OUR STOCK PRICE TO BE VOLATILE, WHICH COULD CAUSE LOSSES FOR OUR STOCKHOLDERS

We have experienced and expect in the future to experience fluctuations in our operating results, including gross orders, revenues and margins, from period to period. Drivers of orders include the introduction and timing of announcement of new products or product enhancements by us and our competitors, as well as changes or anticipated changes in third party reimbursement amounts or policies applicable to treatments using our products. The availability of economic stimulus packages or other government funding, or reductions thereof, may also affect timing of customer purchases. Many of our products require significant capital expenditures by our customers. Accordingly, individual product orders can be quite large in dollar amounts, which can extend the customer purchasing cycle. We have experienced this with our IGRT products, and it is especially true with our proton therapy products because of the high cost of the proton therapy equipment and the complexity of project financing. In addition, the budgeting cycles of hospitals and clinics for capital equipment purchases are frequently fixed well in advance. Economic uncertainty also tends to extend the purchasing cycle as potential customers more closely scrutinize and prioritize their capital spending budgets, and analyze appropriate financing alternatives. In addition, some of our more sophisticated equipment, such as IGRT and proton therapy products, requires greater site preparation and longer construction cycles, which can delay customer decision cycles and the placement of orders even further. When orders are placed, installation is accomplished and the revenues recognized affect our quarterly results.

Once orders are received and booked into backlog, factors that may affect whether these orders become revenue (or are cancelled or deemed dormant and reflected as a reduction in the net order amounts) and the timing of revenue include:

· delay in shipment due, for example, to an unanticipated construction delay at a customer location where our products are to be installed, cancellations or reschedulings by customers, extreme weather conditions, natural disasters, port strikes or other labor actions;

· a challenge to a bid award for one or more of our products;

· delay in the installation and/or acceptance of a product;

· failure to satisfy contingencies associated with an order;

· the method of accounting used to recognize revenue;

· a change in a customer’s financial condition or ability to obtain financing; or

· timing of necessary regulatory approvals or authorizations.

Our quarterly operating results, including our margins, may also be affected by a number of other factors, including:

· changes in our or our competitors’ pricing or discount levels;

· changes in foreign currency exchange rates;

· changes in the relative portion of our revenues represented by our various products, including the relative mix between higher margin and lower margin products;

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· changes in the relative portion of our revenues represented by our international region as a whole, by regions within the overall region, as well as by individual countries (notably those in emerging markets);

· fluctuation in our effective tax rate, which may or may not be known to us in advance;

· changes to our organizational structure, which may result in restructuring or other charges;

· disruptions in the supply or changes in the costs of raw materials, labor, product components or transportation services;

· disruptions in our operations, including our ability to manufacture products, caused by events such as earthquakes, fires, floods, terrorist attacks or the outbreak of epidemic diseases;

· the impact of changing levels of sales on sole purchasers of certain of our X-ray products;

· the unfavorable outcome of any litigation or administrative proceeding or inquiry, as well as ongoing costs associated with legal proceedings; and

· accounting changes and adoption of new accounting pronouncements.

Because many of our operating expenses are based on anticipated capacity levels and a high percentage of these expenses are fixed for the short term, a small variation in the timing of revenue recognition can cause significant variations in operating results from quarter to quarter. Our overall gross margin may also be impacted by the gross margin of our proton therapy products, which are presently below the gross margins for our traditional radiotherapy products and particularly prior to completion because the associated revenues are being accounted for in accordance with the zero profit, percentage-of-completion method. If our gross margins fall below the expectation of securities analysts and investors, the trading price of VMS common stock would almost certainly decline.

We report on a quarterly and annual basis our gross orders and backlog. It is important to understand that, unlike revenues, gross orders and backlog are not governed by GAAP, and are not within the scope of the audit conducted by our independent registered public accounting firm; therefore, investors should not interpret our gross orders or backlog in such a manner. Also, for the reasons set forth above, our gross orders and backlog cannot necessarily be relied upon as accurate predictors of future revenues. Order cancellation or delays in customer purchase decisions or delivery dates will reduce our backlog and future revenues, and we cannot predict if or when orders will mature into revenues. Particularly high levels of cancellations in one period will make it difficult to compare our operating results.  Our gross orders, backlog, revenues and net earnings in one or more future periods may fall below the expectations of securities analysts and investors. In that event, the trading price of VMS common stock would almost certainly decline.

THE FINANCIAL RESULTS OF OUR VPT BUSINESS MAY FLUCTUATE AND BE UNPREDICTABLE

The development of our VPT business enables us to offer products for delivering image-guided, intensity-modulated proton therapy for the treatment of cancer. Our success in this area will depend upon the wide-spread awareness, acceptance and adoption by the oncology market of proton therapy systems for the treatment of cancer. However, this technology has not been widely adopted and future developments may not be adopted as quickly as others.

Since proton therapy projects are generally large, highly customized and more complex than projects in our Oncology Systems radiotherapy business, planning for these projects takes more of our time and uses more of our resources. Many of the components used in proton therapy equipment require long lead times, which may require an increase in our inventory levels. This may cause fluctuations in the operating results of VPT that may make it difficult to predict our results and to compare our results from period to period.  The construction of a proton therapy facility requires significant capital investment and may involve complex project financing. Consequently, this business is vulnerable to deterioration in general economic and market conditions. The worldwide economic downturn resulted in a contraction in credit markets. This has made and may continue to make it more difficult for potential customers of this business to find appropriate financing for large proton therapy projects, which could cause them to delay or cancel their projects, or request that we participate in financing arrangements (such as we did for the Scripps Proton Therapy Center) or make payment concessions in their agreements with us, which could impact our operating results. Challenges or delays in obtaining financing or commencing treatment could also impact the viability of one or more of our customers as a going concern. Changes in reimbursement rates for proton therapy treatments, or uncertainty regarding these reimbursement rates, such as we experienced in 2012 with the reductions to reimbursement rates for hospital based proton therapy centers in the United States by CMS, can affect growth or demand for our VPT products and services.

We compete for many proton therapy system sales through tenders, where parties compete on price and other factors.  Some companies may sell their products at a lower price than we do.  If we are unable to lower our prices or our customers are not willing to pay for additional features and functionality that we may provide, there is a risk we will lose sales, and if we lower our prices to gain business, our margins and other financial results may suffer.  Further, the award of certain proton therapy system orders may be subject to challenge by third parties, which can make these orders more unpredictable than orders for other products. Because an order for a proton therapy system can be relatively large and complex, the sales and customer decision cycles for proton therapy projects

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may take several years, and an order in one fiscal period (or the cancellation of an order as a result of bid challenge or otherwise) will cause our gross orders to vary significantly, making comparisons between fiscal periods more difficult. We expect that a limited number of customers will account for a substantial portion of VPT’s business for the foreseeable future. In instances where one customer undertakes multiple proton center projects, an adverse event with respect to one project could cause an adverse event with respect to the other projects, which could adversely impact our operating results. 

Our estimates as to future operating results include certain assumptions about the results of VPT’s business. If we are incorrect in our assumptions, our financial results could be materially and adversely affected.  It is possible that VPT could perform significantly below our expectations due to a number of factors that cannot be predicted with certainty, including revenue growth rates, operating margins and future market conditions. These factors could adversely impact VPT’s ability to meet its projected results, which could cause a portion or all of the goodwill of VPT to become impaired.  As of September 27, 2013, the goodwill of VPT was $60.1 million. If we determine that VPT’s goodwill becomes impaired, we would be required to record a charge that could have a material adverse effect on our results of operations in such period.

OUR VPT BUSINESS MAY SUBJECT US TO INCREASED RISK AND POTENTIAL LIABILITY

VPT’s business may subject us to increased risk and potential liability. For example, because proton therapy projects are large in scale and require detailed project planning, failure to deliver or delays in delivering on our commitments could result in greater than expected liabilities, as we could be required to indemnify business partners and customers for losses suffered or incurred if we are unable to deliver our products in accordance with the terms of customer contracts. Additionally, customers have in the past requested and may in the future request that the systems vendor, as the primary technology provider, provide guarantees for and suffer penalties in relation to the overall construction project, as well as in some situations participate in or provide project financing for the project. Since the cost of each proton therapy center project will often exceed $100 million, the amount of potential liability and potential for financial loss would likely be higher than the levels historically assumed by us for our traditional radiation therapy business and may also exceed the project’s value. Insurance covering these contingencies may be unobtainable or expensive. If we cannot reasonably mitigate or eliminate these contingencies or risks, our ability to competitively bid upon proton center projects will be negatively impacted or we may be required to assume material amounts of potential liability, all of which may have adverse consequences to us. In addition, we have encountered and may encounter additional challenges in the commercialization of the proton therapy products, which may increase our research and development costs and delay the introduction of our products. These and other unanticipated events could adversely affect our business and make our results of operations unpredictable.

WE HAVE ENTERED INTO A CREDIT FACILITY AGREEMENT THAT RESTRICTS CERTAIN ACTIVITIES, AND FAILURE TO COMPLY WITH THIS AGREEMENT MAY HAVE AN ADVERSE EFFECT ON OUR BUSINESS, LIQUIDITY AND FINANCIAL POSITION

We maintain a credit facility with debt outstanding that contains restrictive financial covenants, including financial covenants that require us to comply with specified financial ratios. We may have to curtail some of our operations to comply with these covenants. In addition, our revolving credit facility contains other affirmative and negative covenants that could restrict our operating and financing activities. These provisions limit our ability to, among other things, incur future indebtedness, contingent obligations or liens, guarantee indebtedness, make certain investments and capital expenditures, sell stock or assets and pay dividends, and consummate certain mergers or acquisitions. Because of the restrictions on our ability to create or assume liens, we may find it difficult to secure additional indebtedness if required. Furthermore, if we fail to comply with the credit facility requirements, we may be in default. Upon an event of default, if the credit agreement is not amended or the event of default is not waived, the lender could declare all amounts outstanding, together with accrued interest, to be immediately due and payable. If this happens, we may not be able to make those payments or borrow sufficient funds from alternative sources to make those payments. Even if we were to obtain additional financing, that financing may be on unfavorable terms.

CHANGES IN INTERPRETATION OR APPLICATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES MAY ADVERSELY AFFECT OUR OPERATING RESULTS

We prepare our financial statements to conform to GAAP. These principles are subject to interpretation by the Financial Accounting Standards Board (“FASB”), American Institute of Certified Public Accountants, the SEC and various other regulatory or accounting bodies. A change in interpretations of, or our application of, these principles can have a significant effect on our reported results and may even affect our reporting of transactions completed before a change is announced. In addition, when we are required to adopt new accounting standards, our methods of accounting for certain items may change, which could cause our results of operations to fluctuate from period to period and make it more difficult to compare our financial results to prior periods.

As our operations evolve over time, we may introduce new products or new technologies that require us to apply different accounting principles, including ones regarding revenue recognition, than we have applied in past periods. Currently, we recognize revenues for our proton therapy systems and proton therapy commissioning contracts and for certain highly customized image detection systems in

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our SIP business under contract accounting rules, which affects the timing of revenue recognition. We could be required to apply contract accounting rules to other businesses in the future. Under contract accounting rules, the use of the percentage-of-completion method involves considerable use of estimates in determining revenues, costs and profits and in assigning dollar amounts to relevant accounting periods, estimates which must be periodically reviewed and appropriately adjusted. For example, revenues recognized under the percentage-of-completion method are based on contract costs incurred to date compared with total estimated contract costs. In circumstances in which the final outcome of a contract cannot be precisely estimated but a loss on the contract is not expected, we recognize revenues under the percentage-of-completion method based on a zero profit margin until more precise estimates can be made. Recognizing revenues using the percentage-of-completion method based on a zero profit margin, as we had done with the revenues associated with the Scripps Proton Therapy Center in the earlier stages of the project lowers our gross margins and makes it more difficult to compare our financial results from quarter to quarter. In addition, if we were to recognize revenues for our proton therapy systems and services under either the completed contract method or outside of contract accounting rules altogether, we would defer revenue until a contract is completed or substantially completed. This may cause our results of operations to fluctuate from period to period.

If our estimates prove to be inaccurate or circumstances change over time, we would be required to adjust revenues or even record a contract loss in later periods, and our financial results could suffer. In addition, if a loss is expected on a contract under the percentage-of-completion method, the estimated loss would be charged to cost of sales in the period the loss is identified. The application of different types of accounting principles and related potential changes may make it more difficult to compare our financial results from quarter to quarter, and the trading price of VMS common stock could suffer or become more volatile as a result.

ENVIRONMENTAL LAWS IMPOSE COMPLIANCE COSTS ON OUR BUSINESS AND CAN ALSO RESULT IN LIABILITY

We are subject to environmental laws around the world. These laws regulate many aspects of our operations, including our handling, storage, transport and disposal of hazardous materials. They can also impose cleanup liabilities, including with respect to discontinued operations. As a consequence, we can incur significant environmental costs and liabilities, some recurring and others not recurring. Although we follow procedures intended to comply with existing environmental laws, we, like other businesses, can never completely eliminate the risk of contamination or injury from certain materials that we use in our business and, therefore, the prospect of resulting claims and damage payments. We may also be assessed fines or penalties for failure to comply with environmental laws and regulations. Although insurance has provided coverage for portions of cleanup costs resulting from historical occurrences, we maintain only limited insurance coverage for costs or claims that might result from any future contamination.

Future changes in environmental laws could also increase our costs of doing business, perhaps significantly. Several countries, including some in the EU, now require medical equipment manufacturers to bear certain disposal costs of products at the end of the product’s useful life, increasing our costs. The EU has also adopted a directive that may lead to restrictions on the use of certain hazardous substances in some of our products sold there. This directive, along with another that requires material disclosure information to be provided upon request, could increase our operating costs. All of these costs, and any future violations or liabilities under environmental laws or regulations, could have a material adverse effect on our business.

UNFAVORABLE RESULTS OF LEGAL PROCEEDINGS COULD MATERIALLY ADVERSELY AFFECT OUR FINANCIAL RESULTS

From time to time, we are a party to or otherwise involved in legal proceedings, claims and government inspections or investigations and other legal matters, both inside and outside the United States, arising in the ordinary course of our business or otherwise. We are currently involved in various legal proceedings and claims, including product liability and intellectual property claims, that have not yet been fully resolved and additional claims may arise in the future. Legal proceedings are often lengthy, taking place over a period of years with interim motions or judgments subject to multiple levels of review (such as appeals or rehearings) before the outcome is final. Litigation is subject to significant uncertainty and may be expensive, time-consuming, and disruptive to our operations. For these and other reasons, we may choose to settle legal proceedings and claims, regardless of their actual merit.  

If a legal proceeding were finally resolved against us, it could result in significant compensatory damages, and in certain circumstances punitive or trebled damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief imposed on us. If our existing insurance does not cover the amount or types of damages awarded, or if other resolution or actions taken as a result of the legal proceeding were to restrain our ability to market one or more of our material products or services, our consolidated financial position, results of operations or cash flows could be materially adversely affected. In addition, legal proceedings, and any adverse resolution thereof, can result in adverse publicity and damage to our reputation, which could adversely impact our business.

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AS A STRATEGY TO ASSIST OUR SALES EFFORTS, WE MAY PARTICIPATE IN PROJECT FINANCING OR OFFER EXTENDED PAYMENT TERMS, WHICH MAY ADVERSELY AFFECT OUR FINANCIAL RESULTS

We have provided financing for the construction and start-up operations of the Scripps Proton Therapy Center, and we may provide or be requested to provide financing to other potential VPT customers in the future. Providing such financing could adversely affect our financial results, since we cannot provide assurance that a center will be completed on time or within budget, that the center can or will generate sufficient patient volumes and revenues to support scheduled loan payments or to provide incremental revenue to us, or that the borrower will have the financial means to pay off any financing at maturity. In addition, in connection with our financing of the Scripps Proton Therapy Center, we cannot provide any assurance that any portion of our loan commitment can be syndicated to third parties, or that the loan facility can be successfully refinanced upon the maturity of the loan, which has a maximum term of six years. If a borrower does not have the financial means to pay off its debts and if we cannot recover the amounts due us from the sale of any collateral, we may be required to write off all or a portion of the loan, which would adversely affect our financial results.

In addition, in some circumstances we offer longer or extended payment terms for qualified customers in our other businesses. Many of the areas where we offer such longer or extended payment terms have under-developed legal systems for securing debt and enforcing collection of debt. As of September 27, 2013, customer contracts with remaining terms of more than one year amounted to approximately four percent of our accounts receivable balance. While we qualify customers to whom we offer longer or extended payment terms, their financial positions may change adversely over the longer time period given for payment. Concerns over continued economic instability could also make it more difficult for us to collect outstanding receivables. This may result in an increase in payment defaults and uncollectible accounts, or could cause us to increase our bad debt expense, which would adversely affect our net earnings. In addition, longer or extended payment terms could impact the timing of our revenue recognition, and they have in the past and may in the future result in an increase in our days sales outstanding.

DISRUPTION OF CRITICAL INFORMATION SYSTEMS OR MATERIAL BREACHES IN THE SECURITY OF OUR SYSTEMS MAY ADVERSELY AFFECT OUR BUSINESS AND CUSTOMER RELATIONS

Information technology helps us operate efficiently, interface with and support our customers, maintain financial accuracy and efficiency, and produce our financial statements. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we could be subject to, among other things, transaction errors, processing inefficiencies, the loss of customers, business disruptions, or the loss of or damage to intellectual property through a security breach. If our data management systems do not effectively collect, secure, store, process and report relevant data for the operation of our business, whether due to equipment malfunction or constraints, software deficiencies, or human error, our ability to effectively plan, forecast and execute our business plan and comply with applicable laws and regulations will be impaired, perhaps materially. Any such impairment could materially and adversely affect our financial condition, results of operations, cash flows and the timeliness with which we report our operating results internally and externally.

Moreover, we manufacture and sell products that allow our customers to store confidential information about their patients. While we have implemented security measures to protect our systems from unauthorized access, these measures may not secure our customers’ equipment or any information stored in our customers’ systems or at their locations. A breach of network security and systems or other events that cause the loss or public disclosure of, or access by third parties to, our customers’ stored information could have serious negative consequences for our business, including possible fines, penalties and damages, reduced demand for our solutions, an unwillingness of our customers to use our solutions, harm to our reputation and brand, and time-consuming and expensive litigation, any of which could have an adverse effect on our financial results.

OUR OPERATIONS ARE VULNERABLE TO INTERRUPTION OR LOSS DUE TO NATURAL OR OTHER DISASTERS, POWER LOSS, STRIKES AND OTHER EVENTS BEYOND OUR CONTROL

We conduct a significant portion of our activities, including manufacturing, administration and data processing at facilities located in the State of California and other seismically active areas that have experienced major earthquakes and other natural disasters. We carry limited earthquake insurance that may not be adequate or continue to be available at commercially reasonable rates and terms. A major earthquake or other disaster (such as a major fire, hurricane, flood, tsunami, volcanic eruption or terrorist attack) affecting our facilities, or those of our suppliers, could significantly disrupt our operations, and delay or prevent product manufacture and shipment during the time required to repair, rebuild or replace our or our suppliers’ damaged manufacturing facilities; these delays could be lengthy and costly. If any of our customers’ facilities are adversely affected by a disaster, shipments of our products could be delayed. Additionally, customers may delay purchases of our products until operations return to normal. Even if we are able to quickly respond to a disaster, the ongoing effects of the disaster could create some uncertainty in the operations of our businesses, such as occurred following the March 2011 tsunami in Japan. In addition, our facilities may be subject to a shortage of available electrical power and other energy supplies. Any shortages may increase our costs for power and energy supplies or could result in blackouts, which could disrupt the operations of our affected facilities and harm our business. Further, our products are typically shipped from a limited number of ports, and any disaster, strike or other event blocking shipment from these ports could delay or prevent shipments and harm

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our business. In addition, concerns about terrorism, the effects of a terrorist attack, political turmoil or an outbreak of epidemic diseases, such as the swine flu, could have a negative effect on our business operations, those of our suppliers and customers, and the ability to travel, resulting in adverse consequences on our revenues and financial performance.

WE WORK IN INTERNATIONAL LOCATIONS WHERE THERE ARE HIGH SECURITY RISKS, WHICH COULD RESULT IN HARM TO OUR EMPLOYEES OR CONTRACTORS OR CAUSE US TO INCUR SUBSTANTIAL COSTS

We work in some international locations where there are high security risks, which could result in harm to our employees and contractors or substantial costs. Some of our services are performed in or adjacent to high-risk locations, such as Iraq, Libya, and Mexico, where the country or location and surrounding area is suffering from political, social, or economic issues; war or civil unrest, or has a high level of criminal or terrorist activity. In those locations where we have employees or operations, we may incur substantial costs to maintain the safety of our personnel. Despite these precautions, the safety of our personnel in these locations may continue to be at risk, and we may in the future suffer the loss of employees and contractors, which could harm our business and operating results.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of September 27, 2013, we owned and leased a total of approximately 2.1 million square feet of floor space for our office, manufacturing, research and development and other services worldwide. Our executive offices, our Oncology Systems management, some of our Oncology Systems manufacturing facilities and the GTC are located in Palo Alto, California on 30 acres of land under leaseholds which expire in calendar year 2056. We own these facilities, which contain an aggregate of 475,128 square feet of floor space. We also own 47,699 square feet of space and 2 acres of land in Crawley, England. In Beijing, China we own 143,078 square feet of space which resides on 5 acres of land under a leasehold that expires in 2056. Our X-Ray Products business is located in Salt Lake City, Utah, where we own 38 acres of land and 340,812 square feet of space that is used for office and manufacturing, and also in Liverpool, New York we own 3 acres of land and 27,074 square feet of space that is used for light assembly manufacturing. In Las Vegas, Nevada, we own 191,422 square feet of floor space and 12 acres of land where our SIP Manufacturing, and Oncology Systems Customer Services and Support operations are located. The balance of our facilities is leased.

Substantially all of this space is fully utilized for its intended purposes. We believe that our facilities and equipment are generally well maintained, in good operating condition and adequate for present operations.

Item 3. Legal Proceedings

In 1999, we transferred our instruments business to Varian, Inc. (“VI”) and our semiconductor equipment business to Varian Semiconductor Equipment Associates, Inc. (“VSEA”) and subsequently spun off VI and VSEA, which resulted in a non-cash dividend to our stockholders (the “Spin-offs”). Under the Amended and Restated Distribution Agreement dated as of January 14, 1999 and other associated agreements that govern the Spin-offs, we retained the liabilities related to the medical systems business and agreed to manage and defend claims related to legal proceedings and environmental matters arising from corporate and discontinued operations. Generally, each of the spun-off subsidiaries is obligated to indemnify us for one third of these liabilities (after adjusting for any insurance proceeds we realize or tax benefits we receive), including certain environmental liabilities, and to indemnify us fully for liabilities arising from the operations of the business transferred to it as part of the Spin-offs. For a more detailed discussion of environmental costs and liabilities, see Note 9, “Commitments and Contingencies” to the Notes to the Consolidated Financial Statements, which is by this reference incorporated herein.

From time to time, we are involved in other legal proceedings arising in the ordinary course of our business or otherwise and, from time-to-time, acquired as part of business acquisitions that we make. For a detailed discussion of current material legal proceedings, see Note 9, “Commitments and Contingencies” of the Notes to the Consolidated Financial Statements, which is by this reference incorporated herein.

Item 4. Mine Safety Disclosures

Not applicable.

       

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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

VMS common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “VAR.” The following table sets forth the high and low sales prices for VMS common stock as reported in the consolidated transaction reporting system for the NYSE in fiscal years 2013 and 2012.

	High		Low
Fiscal Year 2013
First Quarter	$	72.61	$	57.00
Second Quarter	$	75.78	$	67.88
Third Quarter	$	73.20	$	63.10
Fourth Quarter	$	76.69	$	65.70
Fiscal Year 2012
First Quarter	$	67.82	$	48.72
Second Quarter	$	71.95	$	64.22
Third Quarter	$	69.81	$	56.61
Fourth Quarter	$	64.00	$	52.90

Since the Spin-offs, we have not paid any cash dividends on VMS common stock. We have no current plan to pay cash dividends on VMS common stock, and will review that decision periodically. Further, our existing unsecured term loan agreement and credit facility agreement contain provisions that limit our ability to pay cash dividends. Specifically, dividends would not be permitted if, when aggregated with other transactions, we would not be in compliance with our financial covenants. See Note 7, “Borrowings” of the Notes to the Consolidated Financial Statements for more information on our credit facility.

As of November 19, 2013, there were approximately 2,413 holders of record of VMS common stock.

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PERFORMANCE GRAPH

This graph shows the total return on VMS common stock and certain indices from September 26, 2008 until the last day of fiscal year 2013.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*

AMONG VARIAN MEDICAL SYSTEMS, INC., THE S&P 500 INDEX AND

THE S&P HEALTHCARE EQUIPMENT INDEX

*$100 invested on 9/26/08 in stock or index, including reinvestment of dividends. Indexes calculated on month-end basis.

	9/26/08	10/2/09	10/1/10	9/30/11	9/28/12	9/27/13
Varian Medical Systems, Inc.	100.00	65.40	99.18	85.26	98.59	121.25
S&P 500	100.00	93.09	102.55	103.72	135.05	161.17
S&P Health Care Equipment	100.00	83.70	81.02	83.94	103.57	119.01

The performance graph and related information shall not be deemed to be soliciting material or to be “filed” with the SEC or to be deemed to be incorporated by reference to any filing under the Securities Act or the Exchange Act.

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Stock Repurchase Program

The following table provides information with respect to the shares of VMS common stock repurchased by VMS during the fourth quarter of fiscal year 2013.

Period	Total Number of Shares Purchased			Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
June 29, 2013 – July 26, 2013		247,973		$	68.99		247,973		3,602,027
July 27, 2013 – August 23, 2013		752,506	(2)	$	73.17		752,027		2,850,000
August 24, 2013 – September 27, 2013		850,000		$	73.44		850,000		2,000,000
Total		1,850,479		$	72.73		1,850,000

(1) In August 2012, the VMS Board of Directors authorized the repurchase of 8,000,000 shares of VMS common stock through December 31, 2013. In November 2013, the VMS Board of Directors authorized the repurchase of an additional 6,000,000 shares of VMS common stock from December 30, 2013 through December 31, 2014. Stock repurchases maybe made in the open market, in privately negotiated transactions (including accelerated share repurchase programs) or under Rule 10b5-1 share repurchase plans, and may be made from time to time in one or more blocks. Shares will be retired upon repurchase.

(2) Includes 479 shares of VMS common stock that were tendered to VMS in satisfaction of tax withholding obligations upon the vesting of restricted stock units granted under our employee stock plans.

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Item 6. Selected Financial Data

We derived the following selected financial data from our audited consolidated financial statements for the five fiscal years ended September 27, 2013. The following financial data should be read in conjunction with our consolidated financial statements and the accompanying notes and the MD&A included elsewhere herein.

Summary of Operations:	Fiscal Years
(In millions, except per share amounts)	2013		2012		2011			2010			2009
Revenues	$	2,942.9	$	2,807.0	$	2,596.7		$	2,356.6		$	2,214.1
Earnings from continuing operations before taxes		612.0		595.9		588.7			532.9			474.6
Taxes on earnings		173.8		168.9		180.1			165.4			143.1
Earnings from continuing operations		438.2		427.0		408.6			367.5			331.5
Loss from discontinued operations, net of taxes (1)		—		—		(9.7	)		(7.1	)		(12.5	)
Net earnings	$	438.2	$	427.0	$	398.9		$	360.4		$	319.0
Net earnings (loss) per share – basic
Continuing operations	$	4.04	$	3.83	$	3.50		$	3.02		$	2.67
Discontinued operations (1)		—		—		(0.08	)		(0.06	)		(0.10	)
Net earnings per share	$	4.04	$	3.83	$	3.42		$	2.96		$	2.57
Net earnings (loss) per share – diluted
Continuing operations	$	3.98	$	3.76	$	3.44		$	2.96		$	2.65
Discontinued operations (1)		—		—		(0.08	)		(0.05	)		(0.10	)
Net earnings per share	$	3.98	$	3.76	$	3.36		$	2.91		$	2.55
Financial Position at Fiscal Year End:
Working capital	$	1,544.2	$	934.0	$	728.7		$	777.8		$	830.1
Total assets		3,468.5		2,878.7		2,498.8			2,324.0			2,308.2
Long-term debt (including current maturities)		506.3		6.3		16.1			23.4			32.4
Short-term borrowings		—		155.0		181.4			20.0			4.4
Stockholders’ equity		1,713.8		1,509.8		1,243.9			1,275.4			1,311.8

(1) In September 2008, we approved a plan to sell Research Instruments. The sale of Research Instruments was completed in the second quarter of fiscal year 2009. We classified the operating results of Research Instruments as a discontinued operation in the Consolidated Statements of Earnings for fiscal years 2011, 2010 and 2009. The net loss of $9.7 million, $7.1 million and $12.5 million was reported in discontinued operations for fiscal years 2011, 2010, and 2009 respectively. In fiscal years 2013 and 2012, we did not recognize any income or losses and did not have any revenues from discontinued operations.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

In fiscal year 2013, total revenues increased 5% over fiscal year 2012, and net earnings from operations per diluted share increased 6% over fiscal year 2012. During fiscal year 2013, we repurchased 6 million shares of VMS common stock.  

Beginning in the fourth quarter of fiscal year 2013, we changed the presentation of reported orders from net orders to gross orders.  Gross orders are defined as the sum of new orders recorded during the period adjusted for any revisions to existing orders during the period. We believe that presentation of gross orders is more consistent and improves comparability with other companies in our industry. Gross orders from Oncology Systems increased 2% and from X-Ray Products increased 15% in fiscal year 2013 compared to fiscal year 2012.  Gross orders in VPT decreased 98% in fiscal year 2013 compared to fiscal year 2012 when two proton therapy systems orders (St. Petersburg in Russia and King Fahd Medical City in Saudi Arabia) totaling approximately $123 million were recorded, compared to no new system orders in fiscal year 2013.

Our backlog adjustments during fiscal year 2013 were approximately $257 million. This amount is higher than typical levels as a result of ongoing uncertainty in the U.S. healthcare environment and higher cancellations of orders, particularly from small freestanding center developers. This caused us to re-evaluate similar transactions and remove orders that were not expected to be converted into revenues. Despite the increase in the backlog adjustments, our backlog at the end of fiscal year 2013 was 1% higher than at the end of fiscal year 2012.

In order to assess how our underlying businesses performed, we also compare the percentage change in revenues and gross orders from one period to another, excluding the effect of foreign currency fluctuations (i.e., using constant currency exchange rates). To present this information on a constant currency basis, we convert current period revenues and gross orders in currencies other than U.S. Dollars into U.S. Dollars using the comparable prior period’s average exchange rate. During fiscal year 2013, our total revenues increased 6% on a constant currency basis.  

We have classified Research Instruments as a discontinued operation for fiscal year 2011 in our Consolidated Statements of Earnings. There were no operating results of Research Instruments beyond fiscal year 2011. As of September 30, 2011, we had no remaining obligations related to Research Instruments, which was previously included in the “Other” category. Unless otherwise stated, the discussion in this MD&A pertains to our continuing operations.

Oncology Systems. Our largest business segment is Oncology Systems, which designs, manufactures, sells and services hardware and software products for treating cancer with conventional radiotherapy, (including IMRT, IGRT, and volumetric modulated arc therapy), stereotactic body radiotherapy, stereotactic radiotherapy, stereotactic radiosurgery and brachytherapy.

Our primary goal in the Oncology Systems business is to promote the adoption of more advanced and effective cancer treatments. In our view, the fundamental market forces that drive long-term growth in our Oncology Systems business are the rise in cancer cases; technology advances and product developments that are leading to improvements in patient care; customer demand for the more advanced and effective cancer treatments that we offer; competitive conditions among hospitals and clinics to offer such advanced treatments; continued improvement in safety and cost efficiency in delivering radiation therapy; and underserved medical needs outside of the United States. We have recently seen a greater percentage of Oncology Systems gross orders and revenues coming from emerging markets within our international region, such as China, India and Poland and Brazil, which typically demand lower-priced products compared to developed markets. We expect that this shift in geographic mix of gross orders and revenues will generally continue and may negatively impact Oncology Systems’ gross margin.

In the radiation oncology markets outside of North America, for the shorter term, we expect the market growth of our European region (which includes Europe, the Middle East, India and Africa) will be mixed, with stronger market growth in Eastern Europe, the Middle East, Africa and India, offset by lower market growth in Southern Europe which is facing severe economic challenges. Our outlook for Asia and the rest of world remains robust and, overall, we believe the longer-term global radiation oncology market can grow, on average, in the mid-single-digit range.

Oncology Systems gross orders increased 2% in fiscal year 2013 compared to fiscal year 2012 with a 6% increase in international orders partially offset by a 3% decrease in orders in North America. Oncology Systems gross orders increased 4% on a constant currency basis in fiscal year 2013 over fiscal year 2012, reflecting increased gross orders in international region partially offset by a decrease in gross orders in North America. We believe that the uncertainty in the United States associated with the Affordable Care Act, some consolidation activity among free standing clinics, and more integration of systems and equipment across multi-site networks, is resulting in slower capital spending in North America that contributed to the decline in Oncology Systems’ gross orders in North America during fiscal year 2013. Emerging markets within our international region are driving growth, and we received several large orders from customers in these markets during fiscal year 2013.  

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Oncology Systems total revenues increased 3% in fiscal year 2013 over 2012. Oncology Systems gross margin in fiscal year 2013 decreased 0.4 percentage points from fiscal year 2012 primarily due to the excise tax on sales of medical devices.

Prior to the fourth quarter of fiscal year 2013, revenues and cost of revenues of parts that were sold by the service department were classified as product revenues and product cost of revenues, respectively. Revenues and costs of revenues of parts that are sold by the service department have been reclassified from product revenues and product cost of revenues to service revenue and service cost of revenues, respectively, for the first nine months of fiscal year 2013 and for fiscal years 2012 and 2011 to conform to the current presentation.  Also, certain other cost of revenue items have been reclassified between product cost of revenues and service cost of revenues for the first nine months of fiscal year 2013 and for fiscal years 2012 and 2011 to conform to the current presentation.

X-Ray Products. Our X-Ray Products business segment designs, manufactures, sells and services X-ray imaging components for use in a range of applications, including radiographic or fluoroscopic imaging, mammography, special procedures, computed tomography and industrial applications. We continue to view the long-term fundamental growth driver for this business to be the ongoing success of key X-ray imaging OEM customers that incorporate our X-ray tube products and flat panel detectors into their medical diagnostic, dental, veterinary and industrial imaging systems.

Our success in our X-Ray Products business depends upon our ability to anticipate changes in our markets, the direction of technological innovation and the demands of our customers.

In fiscal year 2013, X-Ray Products gross orders increased 15% and revenues increased 11% over fiscal year 2012.

X-Ray Products gross margin for fiscal year 2013 decreased 1.6 percentage points over fiscal year 2012, primarily due to price pressure and unfavorable product mix on our flat panel products and higher warranty costs in our X-ray tube products.

Other. The “Other” category is comprised of: (i) SIP, which designs, manufactures, sells and services Linatron^® X-ray accelerators, imaging processing software and image detection products (including IntellX^TM) for security and inspection purposes, (ii) our VPT business, which designs, develops, manufactures, sells and services products and systems for delivering proton therapy treatments, and (iii) the operations of the GTC, our scientific research facility.

Revenues in the “Other” category increased 15% primarily due to increases in VPT and SIP revenues. Gross orders in the “Other” category decreased 60% primarily due to no system orders received for VPT in fiscal year 2013 compared to orders of $126 million in VPT in fiscal year 2012.

This discussion and analysis of our financial condition and results of operations is based upon and should be read in conjunction with the Consolidated Financial Statements and the notes included elsewhere in this Annual Report on Form 10-K, as well as the information contained under Item 1A, “Risk Factors.” We discuss our results of operations below.

Critical Accounting Estimates

The preparation of our financial statements and related disclosures in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are based on historical experience and on various other factors that we believe are reasonable under the circumstances. We periodically review our accounting policies, estimates and assumptions and make adjustments when facts and circumstances dictate. In addition to the accounting policies that are more fully described in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K, we consider the critical accounting policies described below to be affected by critical accounting estimates. Our critical accounting policies that are affected by accounting estimates include revenue recognition, share-based compensation expense, valuation of allowance for doubtful accounts, valuation of inventories, assessment of recoverability of goodwill and intangible assets, valuation of warranty obligations, assessment of loss contingencies, valuation of defined benefit pension and post-retirement benefit plans, valuation of derivative instruments and taxes on earnings. Such accounting policies require us to use judgments, often as a result of the need to make estimates and assumptions regarding matters that are inherently uncertain, and actual results could differ materially from these estimates. For a discussion of how these estimates and other factors may affect our business, see Item 1A, “Risk Factors.”

Revenue Recognition

We frequently enter into sales arrangements with customers that contain multiple elements or deliverables such as hardware, software and services. Judgments as to the allocation of consideration from an arrangement to the multiple elements of the arrangement, and the appropriate timing of revenue recognition are critical with respect to these arrangements to ensure compliance with GAAP.

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The allocation of consideration in a multiple element arrangement is affected by the determination of whether any software deliverables that function together with other hardware components to deliver the hardware products’ essential functionality are considered as non-software products for purpose of revenue recognition. The allocation of consideration to each non-software deliverable is based on the assumptions we use to establish its selling price, which are based on vendor-specific objective evidence (“VSOE”) of selling price, if it exists, otherwise, third-party evidence of selling price, if it exists, and if not on estimated selling prices. In addition, the allocation of consideration to each software deliverable in a multiple element arrangement is affected by our judgment as to whether VSOE of its fair value exists in these arrangements.

Changes to the elements in an arrangement and the amounts allocated to each element could affect the timing and amount of revenue recognition. Revenue recognition also depends on the timing of shipment, the readiness of customers’ facilities for installation or is subject to customer acceptance. If shipments or installations are not made on scheduled timelines or if the products are not accepted by the customer in a timely manner, our reported revenues may differ materially from expectations.

In addition, revenues related to certain highly customized image detection systems, proton therapy systems and proton therapy system commissioning contracts are recognized in accordance with contract accounting. We recognize contract revenues under the percentage-of-completion method which are based on contract costs incurred to date compared with total estimated contract costs. Changes in estimates of total contract revenue, total contract cost or the extent of progress towards completion are recognized in the period in which the changes in estimates are identified. Estimated losses on contracts are recognized in the period in which the loss is identified. In circumstances in which the final outcome of a contract cannot be precisely estimated but a loss on the contract is not expected, we recognize revenues under the percentage-of-completion method based on a zero profit margin until more precise estimates can be made. If and when we can make more precise estimates, revenues and costs of revenues are adjusted in the same period. Because the percentage-of-completion method involves considerable use of estimates in determining revenues, costs and profits and in assigning the dollar amounts to relevant accounting periods, and because the estimates must be periodically reviewed and appropriately adjusted, if our estimates prove to be inaccurate or circumstances change over time, we may be forced to adjust revenues or even record a contract loss in later periods.

Share-based Compensation Expense

We value our stock options granted and the option component of the shares of VMS common stock purchased under the employee stock purchase plan using the Black-Scholes option-pricing model. We value our performance units using the Monte Carlo simulation model. The determination of fair value of share-based payment awards on the date of grant under both the Black-Scholes option-pricing model and the Monte Carlo simulation model is affected by VMS’s stock price, as well as the input of other subjective assumptions, including the expected terms of share-based awards and the expected price volatilities of shares of VMS common stock and peer companies that are used to assess certain performance targets over the expected term of the awards, and the dividend yield of VMS.

The expected term of our stock options is based on the observed and expected time to post-vesting exercise and post-vesting cancellations of stock options by our employees. We determine the expected term of stock options based on the demographic grouping of employees and retirement eligibility. We use a combination of historical and implied volatility, or blended volatility, in deriving the expected volatility assumption for our stock options. Blended volatility represents the weighted average of implied volatility and historical volatility. Implied volatility is derived based on traded options on VMS common stock. Implied volatility is weighted in the calculation of blended volatility based on the ratio of the term of the exchange-traded options to the expected terms of the employee stock options. Historical volatility represents the remainder of the weighting. Our decision to incorporate implied volatility was based on our assessment that implied volatility of publicly traded options on VMS common stock is reflective of market conditions and is generally reflective of both historical volatility and expectations of how future volatility will differ from historical volatility. In determining the extent of use of implied volatility, we considered: (i) the volume of market activity of traded options; (ii) the ability to reasonably match the input variables of traded options to those of stock options granted by us, including the date of grant; (iii) the similarity of the exercise prices; and (iv) the length of term of traded options. After considering the above factors, we determined that we could not rely exclusively on implied volatility based on the fact that the term of VMS exchange-traded options is less than one year and that it is different from the expected terms of the stock options we grant. Therefore, we believe a combination of the historical volatility over the expected terms of the stock options we grant and the implied volatility of exchange-traded options best reflects the expected volatility of VMS common stock. In determining the grant date fair value of our performance units, historical volatilities of shares of VMS common stock, as well as the shares of common stock of peer companies, were used to assess certain performance targets. The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our stock awards. The dividend yield assumption is based on our history and expectation of no dividend payouts. If factors change and we employ different assumptions in future periods, the compensation expense that we record may differ significantly from what we have recorded in the current period. In addition, we are required to estimate the expected forfeiture rate, as well as the probability that certain performance conditions that affect the vesting of performance units will be achieved, and recognize expense only for those awards expected to vest. If the actual forfeiture rate and/or the actual number of performance units that vest based on achievement of

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performance conditions are materially different from our estimates, the share-based compensation expense could be significantly different from what we have recorded in the current period.

Allowance for Doubtful Accounts

We evaluate the creditworthiness of our customers prior to authorizing shipment for all major sale transactions. Except for government tenders, group purchases and orders with letters of credit in Oncology Systems and SIP, and orders in our X-Ray Products business, our payment terms usually require payment of a small portion of the total amount due when the customer signs the purchase order, a significant amount upon transfer of risk of loss to the customer and the remaining amount upon completion of the installation. On a quarterly basis, we evaluate aged items in the accounts receivable aging report and provide an allowance in an amount we deem adequate for doubtful accounts. If our evaluation of our customers’ financial conditions does not reflect our future ability to collect outstanding receivables, additional provisions may be needed and our operating results could be negatively affected.

Inventories

Our inventories include high technology parts and components that are highly specialized in nature and that are subject to rapid technological obsolescence. We have programs to minimize the required inventories on hand and we regularly review inventory quantities on hand and on order and adjust for excess and obsolete inventory based primarily on historical usage rates and our estimates of product demand and production. Actual demand may differ from our estimates, in which case we may have understated or overstated the provision required for obsolete and excess inventory, which would have an impact on our operating results.

Goodwill and Intangible Assets

Goodwill is initially recorded when the purchase price paid for a business acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. The majority of businesses that we have acquired have not had significant identified tangible assets and, as a result, we have typically allocated a significant portion of the purchase price to intangible assets and goodwill. Our future operating performance will be impacted by the future amortization of these acquired intangible assets and potential impairment charges related to these intangibles or to goodwill if indicators of impairment exist. The allocation of the purchase price from business acquisitions to goodwill and intangible assets could have a significant impact on our future operating results. In addition, the allocation of the purchase price of the acquired businesses to goodwill and intangible assets requires us to make significant estimates and assumptions, including estimates of future cash flows expected to be generated by the acquired assets and the appropriate discount rate for those cash flows. Should conditions differ from management’s estimates at the time of the acquisition, material write-downs of intangible assets and/or goodwill may be required, which would adversely affect our operating results.

We evaluate goodwill for impairment at least annually or whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. If we determine that a quantitative analysis is necessary, the impairment test for goodwill is a two-step process. Step one consists of a comparison of the fair value of a reporting unit against its carrying amount, including the goodwill allocated to each reporting unit. We determine the fair value of our reporting units based on a combination of income and market approaches. The income approach is based on the present value of estimated future cash flows of the reporting units and the market approach is based on a market multiple calculated for each business unit based on market data of other companies engaged in similar business. If the carrying amount of the reporting unit is in excess of its fair value, step two requires the comparison of the implied fair value of the reporting unit’s goodwill against the carrying amount of the reporting unit’s goodwill. Any excess of the carrying value of the reporting unit’s goodwill over the implied fair value of the reporting unit’s goodwill is recorded as an impairment loss. The impairment test for intangible assets with indefinite useful lives, if any, consists of a comparison of fair value to carrying value, with any excess of carrying value over fair value being recorded as an impairment loss.

Based on the most recent annual goodwill impairment testing that we performed in fiscal year 2013 for each of our four reporting units with goodwill, Oncology Systems, X-Ray Products, SIP and VPT, the fair value of each such reporting unit was substantially in excess of its carrying value.

We will continue to make assessments of impairment on an annual basis or more frequently if indicators of potential impairment arise.

Warranty Obligations

We warrant most of our products for a specific period of time, usually 12 months from installation, against material defects. We provide for the estimated future costs of warranty obligations in cost of revenues when the related revenues are recognized. The accrued warranty costs represent our best estimate at the time of sale of the total costs that we will incur to repair or replace product parts that fail while still under warranty. The amount of accrued estimated warranty costs obligation for established products is primarily based on historical experience as to product failures adjusted for current information on repair costs. For new products,

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estimates will include historical experience of similar products, as well as reasonable allowance for start-up expenses. Actual warranty costs could differ from the estimated amounts. On a quarterly basis, we review the accrued balances of our warranty obligations and update the historical warranty cost trends, if required. If we were required to accrue additional warranty costs in the future, it would have a negative effect on our operating results.

Loss Contingencies

From time to time, we are a party to or otherwise involved in legal proceedings, claims and government inspections or investigations or other legal matters, both inside and outside the United States, arising in the ordinary course of its business or otherwise. We accrue amounts, to the extent they can be reasonably estimated, that we believe are adequate to address any liabilities related to legal proceedings and other loss contingencies that we believe will result in a probable loss. However, such matters are subject to many uncertainties and outcomes are not predictable with assurance. If actual liabilities significantly exceed the estimates made, our consolidated financial position, results of operations or cash flows could be materially adversely affected.

In addition, we are subject to a variety of environmental laws around the world. Those laws regulate multiple aspects of our operations, including the handling, storage, transport and disposal of hazardous substances. They impose costs on our operations. In connection with our past and present operations and facilities, we record environmental remediation liabilities when we conclude that environmental assessments or remediation efforts are probable and we believe we can reasonably estimate the costs of those efforts. Our accrued environmental costs represent our best estimate of the total costs of assessments and remediation and the time period over which we expect to incur those costs. We review these accrued balances quarterly. If we were required to increase or decrease the accrued environmental costs in the future, it would adversely or favorably impact our operating results.

Defined Benefit Pension and Post-Retirement Benefit Plans

We sponsor five defined benefit pension plans in Germany (where we have two defined benefit pension plans), Japan, Switzerland and the United Kingdom covering employees who meet the applicable eligibility requirements in these countries. In fiscal year 2012, we terminated one pension plan in Germany upon the death of the last participant in the plan. Although we do not have any defined benefit pension plans in the United States, we sponsor a post-retirement benefit plan that provides healthcare benefits to certain eligible retirees. Several statistical and other factors that attempt to anticipate future events are used in calculating the expenses and liabilities related to those plans for which the benefits are actuarially determined, such as our defined benefit pension and post-retirement benefit plans. These factors include assumptions about the discount rate, expected return on plan assets, rate of future compensation increases and rate of healthcare cost increases, all of which we determine within certain guidelines. In addition, we also use assumptions, such as withdrawal and mortality rates, to calculate the expenses and liabilities. The actuarial assumptions we use are long-term assumptions and may differ materially from actual experience particularly in the short term due to changing market and economic conditions and changing participant demographics. These differences may have a significant impact on the amount of defined benefit pension and post-retirement benefit plan expenses we record.

The expected rates of return on the various defined benefit pension plans’ assets are based on the asset allocation of each plan and the long-term projected return on those assets. The discount rate enables us to state expected future cash flows at a present value on the measurement date. The discount rates used for defined benefit plans in all countries are based primarily on the yields of a universe of high quality corporate bonds in each applicable country or the spot rate of high quality AA-rated corporate bonds, with durations corresponding to the expected durations of the benefit obligations. A change in the discount rate will cause the present value of benefit obligations to change in the opposite direction.

Valuation of Derivative Instruments

We use foreign currency forward contracts to reduce the effects of currency rate fluctuations on sales transactions denominated in foreign currencies and on assets and liabilities denominated in foreign currencies. These foreign currency forward contracts are derivative instruments and are measured at fair value. There are three levels of inputs that may be used to measure fair value (see Note 3, “Fair Value” of the Notes to the Consolidated Financial Statements). Each level of input has different levels of subjectivity and difficulty involved in determining fair value. The fair value of foreign currency forward contracts are calculated primarily using Level 2 inputs, which include currency spot and forward rates, interest rate and credit or non-performance risk. The spot rate for each currency is the same spot rate used for all balance sheet translations at the measurement date and sourced from our major trading banks. The forward point values for each currency and the London Interbank Offered Rate (“LIBOR”) to discount assets and liabilities are interpolated from commonly quoted broker services. One year credit default swap spreads of the counterparty at the measurement date are used to adjust derivative assets, all of which mature in 13 months or less, for non-performance risk. We are required to adjust derivative liabilities to reflect the potential non-performance risk to lenders based on our incremental borrowing rate. Each contract is individually adjusted using the counterparty credit default swap rates (for net assets) or our borrowing rate (for net liabilities). The use of Level 2 inputs in determining fair values requires certain management judgment and subjectivity. Changes to these Level 2 inputs

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could have a material impact on the valuation of our derivative instruments, as well as on our result of operations. There were no transfers of assets or liabilities between fair value measurement levels during fiscal years 2013, 2012 and 2011.

Taxes on Earnings

We are subject to taxes on earnings in both the United States and numerous foreign jurisdictions. As a global taxpayer, significant judgments and estimates are required in evaluating our tax positions and determining our provision for taxes on earnings.

The accounting for uncertainty in income taxes requires a two-step approach to recognizing, derecognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that, based on the technical merits, the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Recognition, derecognition and measurement are based on management’s best judgment given the facts, circumstances and information available at the end of the accounting period. A tax benefit should be recognized in the first period in which it meets the more likely than not recognition threshold, and conversely, a tax benefit previously recognized should be derecognized in the first period in which new information results in a change in judgment in which the position fails to meet the recognition threshold. A benefit not previously recognized would be recognized when the tax position is effectively settled through examination, negotiation or litigation with tax authorities, or when the statute of limitations for the relevant taxing authority to examine and challenge the position has expired. Our policy is to include interest and penalties related to unrecognized tax benefits within the provision for taxes on earnings.

Generally, the carrying value of our net deferred tax assets assumes that we will be able to generate sufficient future taxable earnings in the applicable tax jurisdictions to utilize these deferred tax assets. Should we conclude it is more likely than not that we will be unable to recover our net deferred tax assets in these tax jurisdictions, we would increase our valuation allowance and our tax provision would increase in the period in which we make such a determination.

Our foreign earnings are generally taxed at rates lower than U.S. rates. Our effective tax rate is impacted by existing tax laws in both the United States and in the respective countries in which our foreign subsidiaries do business. In addition, a decrease in the percentage of our total earnings from our foreign countries, or a change in the mix of foreign countries among particular tax jurisdictions could increase or decrease our effective tax rate. Our current effective tax rate does not assume U.S. taxes on certain undistributed profits of certain foreign subsidiaries. These earnings could become subject to incremental foreign withholding or U.S. federal and state taxes should they either be deemed or actually remitted to the United States.

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Results of Operations

Fiscal Year

Our fiscal year is the 52- or 53-week period ending on the Friday nearest September 30. Fiscal year 2013 was the 52-week period ended on September 27, 2013. Fiscal year 2012 was the 52-week period ended on September 28, 2012, and fiscal year 2011 was the 52 week period ended on September 30, 2011. Set forth below is a discussion of our results of operations for fiscal years 2013, 2012 and 2011. As indicated above, the operating results of Research Instruments have been segregated and presented as a discontinued operation in our Consolidated Statements of Earnings for fiscal year 2011.

Discussion of Results of Operations for Fiscal Years 2013, 2012 and 2011

Total Revenues

Revenues by sales classification	Fiscal Years
(Dollars in millions)	2013			% Change			2012			% Change			2011
Product	$	2,056			3	%	$	2,004			7	%	$	1,879
Service		887			10	%		803			12	%		718
Total Revenues	$	2,943			5	%	$	2,807			8	%	$	2,597
Product as a percentage of total revenues		70	%					71	%					72	%
Service as a percentage of total revenues		30	%					29	%					28	%
Revenues by region
North America	$	1,263			3	%	$	1,223			5	%	$	1,170
Europe		877			4	%		842			7	%		788
Asia		678			13	%		602			12	%		537
Rest of world		125			(11	%)		140			36	%		102
Total International (1)		1,680			6	%		1,584			11	%		1,427
Total	$	2,943			5	%	$	2,807			8	%	$	2,597
North America as a percentage of total revenues		43	%					44	%					45	%
International as a percentage of total revenues		57	%					56	%					55	%

(1) We consider international revenues to be revenues outside of North America.

The increase in total revenues in fiscal year 2013 over fiscal year 2012 was due to revenue growth in all business units. The increase in total revenues in fiscal year 2012 over fiscal year 2011 was due to revenue growth in Oncology Systems, X-Ray Products and SIP, partially offset by a slight decrease in VPT revenues.

The increase in product revenues in fiscal year 2013 over fiscal year 2012 was due to revenue growth in X-Ray Products, VPT and SIP, partially offset by a decrease in Oncology product revenues.  The increase in product revenues in fiscal year 2012 over fiscal year 2011 was due to revenue growth in Oncology Systems, X-Ray Products, VPT and SIP.

Service revenues increased in fiscal year 2013 over fiscal year 2012 primarily due to an increase in Oncology Systems service revenues and, to a lesser extent, an increase in SIP service revenues.  These increases were partially offset by a small decline in VPT service revenues. Service revenues increased in fiscal year 2012 over fiscal year 2011 due to an increase in Oncology Systems service revenues and, to a lesser extent, an increase in SIP service revenues, partially offset by a decline in VPT service revenues. Growth of service revenues in fiscal year 2013 over fiscal year 2012 was marginally lower than the growth of service revenues in fiscal year 2012 over fiscal year 2011.

The increase in total North American revenues in fiscal year 2013 over fiscal year 2012 was due to increases in North American Oncology Systems and X-Ray Products partially offset by decreases in North American SIP and VPT revenues. The increase in total North American revenues in fiscal year 2012 over fiscal year 2011 was due to North American revenues increases in Oncology Systems, SIP and VPT, partially offset by a decrease in North American revenues in X-Ray Products.  

Increases in revenues in North America, Europe and Asia were partially offset by a decrease in revenue in the rest of world region in fiscal year 2013 compared to fiscal year 2012. International revenues in Oncology, X-Ray Products, SIP and VPT contributed to the increase in international revenues in fiscal year 2013 compared to fiscal year 2012. The U.S. dollar significantly strengthened against the Japanese yen and slightly weakened against the Euro in fiscal year 2013 compared to fiscal year 2012 such that the differences in exchange rates overall had a negative impact on revenues.

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All international regions contributed to the growth in international revenues in fiscal year 2012 over fiscal year 2011. The increase in international revenues in fiscal year 2012 over fiscal year 2011 was primarily due to increases in international revenues in Oncology Systems and X-Ray Products, which increases were partially offset by declines in international revenues in SIP and VPT. The U.S. dollar strengthened against the Euro and weakened against the Japanese yen in fiscal year 2012 compared to fiscal year 2011 such that the differences in currency exchange rates largely offset each other when international revenues were measured in U.S. dollars.

Oncology Systems Revenues

Revenues by sales classification	Fiscal Years
(Dollars in millions)	2013			% Change			2012			% Change			2011
Product	$	1,389			(1	%)	$	1,408			6	%	$	1,325
Service		864			11	%		781			12	%		697
Total Oncology Systems	$	2,253			3	%	$	2,189			8	%	$	2,022
Product as a percentage of Oncology Systems revenues		62	%					64	%					66	%
Service as a percentage of Oncology Systems revenues		38	%					36	%					34	%
Oncology Systems revenues as a percentage of total revenues		77	%					78	%					78	%

Oncology Systems product revenues decreased in fiscal year 2013 over fiscal year 2012 primarily due to decreases in revenues from sales of our software products and upgrades of our high energy linear accelerators. TrueBeam linear accelerators revenue increased as a percentage of overall accelerator revenue.

Oncology Systems product revenues increased in fiscal year 2012 over fiscal year 2011 primarily due to increases in revenues from sales of our high energy linear accelerators and sales of our software products, as well as revenues from sales of tumor tracking products offered by Calypso.  

The increases in Oncology Systems service revenues in fiscal year 2013 over fiscal year 2012 and in fiscal 2012 over fiscal year 2011 were primarily driven by increased customer adoption of service contracts as our products become more sophisticated, and by the increased number of customers as the installed base of our products continues to grow. In fiscal year 2013, the warranty period for TrueBeam systems delivered in fiscal year 2012 started to expire, contributing to an increase in service revenues compared to fiscal year 2012. Service revenues grew faster than product revenues from fiscal year 2013 to fiscal year 2012 and from fiscal year 2012 to fiscal year 2011. Service revenues also increased as a percentage of total Oncology Systems revenues in each fiscal year.

Revenues by region	Fiscal Years
(Dollars in millions)	2013			% Change			2012			% Change			2011
North America	$	1,058			5	%	$	1,005			4	%	$	971
Europe		663			(4	%)		690			6	%		650
Asia		412			15	%		359			18	%		303
Rest of world		120			(11	%)		135			38	%		98
Total International		1,195			1	%		1,184			13	%		1,051
Total Oncology Systems	$	2,253			3	%	$	2,189			8	%	$	2,022
North America as a percentage of Oncology Systems revenues		47	%					46	%					48	%
International as a percentage of Oncology Systems revenues		53	%					54	%					52	%

The international region represented more than half of total Oncology Systems revenues in fiscal years 2013, 2012 and 2011.

Oncology Systems North American revenues increased in fiscal year 2013 over fiscal year 2012 primarily due to an increase in revenues from our service contracts and an increase in sales of high energy linear accelerators. These increases were partially offset by a decrease in North American revenues from sales of our software products. In fiscal year 2013, the increase in Oncology Systems international revenues from fiscal year 2012 was primarily attributable to increases in revenues from service contracts in all international regions, as well as increases in product revenues from sales of high energy linear accelerators and software products in Asia, partially offset by decreases in sales of high energy linear accelerators and software products in Europe and rest of world region. The U.S. dollar was stronger against the Japanese yen during fiscal year 2013 compared to fiscal year 2012 so that the currency exchange rates overall had a negative impact on our Oncology Systems international revenues when measured in U.S. dollars.

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Oncology Systems North American revenues increased in fiscal year 2012 over fiscal year 2011 primarily due to increases in revenues from our service contracts and our software products, as well as revenues from sales of Calypso tumor tracking products. These increases were partially offset by a decrease in North American revenues from sales of our high energy linear accelerators. In fiscal year 2012, the increase in Oncology Systems international revenues over fiscal year 2011 was primarily attributable to increases in revenues from sales of our high energy linear accelerators and service contracts in all international regions. The U.S. dollar strengthened against the Euro and weakened against the Japanese yen in fiscal year 2012 compared to fiscal year 2011 such that the differences in currency exchange rates largely offset each other when Oncology Systems international revenues were measured in U.S. dollars.

Varying cycles of higher and lower revenues between the North American and international regions are impacted by regional influences, which recently have included government economic stimulus programs, the recession and the pace of economic recovery, the European sovereign debt crisis, uncertainty created by healthcare reform (such as the excise tax on the sale of most medical devices, Medicare reimbursement rates and consolidation of free standing clinics in the United States), and different technology adoption cycles that are consistent with the gross order patterns. See further discussion of orders under “Gross Orders.”

X-Ray Products Revenues

Revenues by region	Fiscal Years
(Dollars in millions)	2013			% Change			2012			% Change			2011
North America	$	159			23	%	$	130			(6	%)	$	137
Europe		125			4	%		120			24	%		97
Asia		257			8	%		238			3	%		231
Rest of world		5			6	%		5			10	%		4
Total International		387			7	%		363			9	%		332
Total X-Ray Products	$	546			11	%	$	493			5	%	$	469
North America as a percentage of X-Ray Products revenues		29	%					26	%					29	%
International as a percentage of X-Ray Products revenues		71	%					74	%					71	%
X-Ray Products revenues as a percentage of total revenues		19	%					18	%					18	%

Both North America and the international region contributed to the increase in X-Ray Products revenues in fiscal year 2013 over fiscal year 2012.

In North America, the increase in X-Ray Products revenues in fiscal year 2013 from fiscal year 2012 was due to increases in both the X-ray tube and X-ray panel products.

In the international region, the increase in X-Ray Products in fiscal year 2013 over fiscal year 2012 was primarily due to increased revenues from sale of our X-ray tube products in all international regions and increased revenues from sales of our flat panel products in Asia partially offset by decreased revenues from sales of our flat panel products in Europe and the rest of world region.

Additionally, revenues from sales of new products and revenues from sales of image processing tools, which we added to our product line with the acquisition of InfiMed during the third quarter of fiscal year 2012, also contributed to an increase in X-Ray Products revenues during fiscal year 2013 compared fiscal year 2012.

In North America, the decrease in X-Ray Products revenues in fiscal year 2012 from fiscal year 2011 was primarily due to a decrease in revenues from sales of our flat panel products, and to a lesser extent, a decrease in revenues from sales of our X-ray tube products, which were partially offset by the inclusion in fiscal year 2012 of revenues from sales of image processing tools offered by InfiMed.

In the international region, the increase in X-Ray Products revenues in fiscal year 2012 over fiscal year 2011 was primarily due to increased revenues from sales of our flat panel products in all international regions and increased revenues from sales of our X-ray tube products in Europe, partially offset by decreased revenues from sales of our X-ray tube products in Asia and the rest of the world region. Revenues from sales of image processing tools offered by InfiMed also contributed to the increase in international X-Ray Products revenues in fiscal year 2012 over fiscal year 2011.

The differences in currency exchange rates between the U.S. dollar and foreign currencies between fiscal year 2013 and fiscal year 2012, as well as between fiscal year 2012 and fiscal year 2011, did not have a material impact on X-Ray Products international revenue growth because sales transactions in the X-Ray Products business are primarily denominated in U.S. dollars.

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Other Revenues

Revenues by sales classification	Fiscal Years
(Dollars in millions)	2013			% Change			2012			% Change			2011
Product	$	121			17	%	$	103			22	%	$	85
Service		23			7	%		22			6	%		21
Total Other	$	144			15	%	$	125			18	%	$	106
Other revenues as a percentage of total revenues		4	%					4	%					4	%

Revenues in the “Other” category, which is comprised of  SIP, VPT and GTC, increased in fiscal year 2013 over fiscal year 2012 primarily due to an increase in VPT product revenues and to a lesser extent increases in SIP product and service revenues. These increases were marginally offset by a decrease in VPT service revenues.  

Revenues in the “Other” category increased in fiscal year 2012 over fiscal year 2011 primarily due to increases in SIP product and service revenues. VPT revenues did not change significantly in fiscal year 2012 compared to fiscal year 2011.

Gross Margin¹

	Fiscal Years
(Dollars in millions)	2013			% Change			2012			% Change			2011
Dollar by segment
Oncology Systems	$	976			2	%	$	957			4	%	$	917
X-Ray Products		227			7	%		212			10	%		193
Other		47			70	%		27			7	%		26
Gross margin	$	1,250			4	%	$	1,196			5	%	$	1,136
Percentage by segment
Oncology Systems		43.3	%					43.7	%					45.4	%
X-Ray Products		41.5	%					43.1	%					41.2	%
Total Company		42.5	%					42.6	%					43.7	%

¹ Prior to the fourth quarter of fiscal year 2013, revenues and cost of revenues of parts that were sold by the service department were classified as product revenues and product cost of revenues, respectively. Revenues and costs of revenues of parts that are sold by the service department have been reclassified from product revenues and product cost of revenues to service revenue and service cost of revenues, respectively. As a result of this reclassification, product and service gross margin for Oncology Systems and the total Company have been recalculated for fiscal years 2012 and 2011 to conform to the current presentation. Also, certain cost of revenue items have been reclassified between product cost of revenues and service cost of revenues for the first nine months of fiscal year 2013 and  fiscal years 2012 and 2011 to conform to the current presentation.

The total Company gross margin percentage decreased marginally in fiscal year 2013 from fiscal year 2012. A decrease in the X-Ray Products gross margin percentage and to a lesser extent a decrease in the Oncology Systems gross margin percentage was almost offset by an increase in gross margin in the “Other” category.

Total product gross margin percentage was 37.0% in fiscal year 2013, compared to 37.8% in fiscal year 2012 and 39.7% in fiscal year 2011. Total service gross margin percentage was 55.2% in fiscal year 2013, compared to 54.7% in fiscal year 2012 and 54.3% in fiscal year 2011.

The decrease in total Company gross margin percentage in fiscal year 2012 from fiscal year 2011 was primarily due to decreases in Oncology Systems and SIP gross margins, partially offset by an increase in X-Ray Products gross margin. In addition, total Company gross margin percentage was negatively impacted in fiscal years 2012 and 2011 by the recognition of revenues in VPT relating to the Scripps Proton Therapy Center with a zero profit margin.

Oncology Systems gross margin decreased 0.4 percentage points in fiscal year 2013 from fiscal year 2012 primarily due to a decrease in the product gross margin. Oncology Systems product gross margin percentage decreased to 35.7% in fiscal year 2013 from 37.1% in fiscal year 2012 due to the new excise tax on medical devices and a significant geographic shift of product revenues away from developed markets to emerging markets, which typically demand lower-priced products compared to developed markets. Our Oncology Systems product gross margin was further impacted by pricing pressure in our international region. Improved installation and warranty as well as product cost reductions in fiscal year 2013 from fiscal year 2012 partially offset these decreases. The gross

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margin for Oncology Systems includes the impact of the medical device excise tax of approximately $7.2 million during fiscal year 2013, which is included in the cost of revenues.

Oncology Systems service gross margin in fiscal year 2013 remained consistent with fiscal year 2012 at 55.7%.  Increases in service gross margin due to higher service contract volume (which lowered the costs per contract) and cost control measures in fiscal year 2013 were offset by unfavorable product mix and higher service freight charges.

In addition, the U.S. dollar strengthened against the Japanese yen in fiscal year 2013 compared to fiscal year 2012 and has had a negative impact on the Oncology systems gross margin. We believe the shift of Oncology Systems revenues towards emerging markets, which typically have purchased less complex, lower-priced products compared to developed markets, will generally continue and may negatively impact Oncology Systems gross margin.

Oncology Systems gross margin decreased 1.7 percentage points in fiscal year 2012 from fiscal year 2011 due to a decrease in product gross margin, partially offset by an increase in service gross margin. Oncology Systems product gross margin decreased to 37.1% in fiscal year 2012 from 40.2% in fiscal year 2011 primarily due to a geographic shift of product revenues away from developed markets to emerging markets. Our Oncology Systems product gross margin for fiscal year 2012 was further impacted by increased pricing pressure in our international region, particularly in the higher-growth emerging markets. Improved installation, warranty and factory costs in fiscal years 2012 from fiscal year 2011 partially offset these decreases.

Oncology Systems service gross margin was 55.7% in fiscal year 2012, compared to 55.1% in fiscal year 2011. The increase in service gross margin was primarily due to higher service contract volume (which lowered the costs per contract) and cost control measures in fiscal year 2012. In addition, the U.S. dollar strengthened against the Euro and weakened against the Japanese yen in fiscal year 2012 compared to fiscal year 2011, such that the differences in currency exchange rates largely offset each other when Oncology Systems gross margin was measured in U.S. dollars.  

X-Ray Products gross margin decreased 1.6 percentage points in fiscal year 2013 over fiscal year 2012 primarily due to price pressure and unfavorable product mix in our flat panel products.

X-Ray Products gross margin increased 1.9 percentage points in fiscal year 2012 over fiscal year 2011 primarily due to improved quality costs for our flat panel products and higher margin products representing a greater proportion of X-Ray Products’ sales in fiscal year 2012 than fiscal year 2011.

The increase in gross margin percentage in the “Other” category was primarily due to increases in SIP product and service gross margin percentages and also an increase in VPT product gross margin percentage. The increase in SIP gross margin in fiscal year 2013 from fiscal year 2012 was primarily due to higher margin products representing a greater proportion of SIP’s sales in fiscal year 2013 than fiscal year 2012 and also due to an increase in service revenue with higher gross margin percentage in fiscal 2013 compared to fiscal year 2012. The increase in VPT product gross margin percentage in fiscal year 2013 compared to fiscal year 2012 was due to VPT recognizing revenue on two new projects in fiscal year 2013 using the percentage of completion method and best estimate of gross margin, as compared to the projects in fiscal year 2012 and fiscal 2011 during which revenues were recognized using the percentage of completion method and zero profit margin.

The decrease in SIP gross margin in fiscal year 2012 from fiscal year 2011 was primarily due to lower margin products representing a greater proportion of SIP’s sales in fiscal year 2012 than fiscal year 2011.

Research and Development

	Fiscal Years
(Dollars in millions)	2013			% Change			2012			% Change			2011
Research and development	$	208			12	%	$	186			9	%	$	171
As a percentage of total revenues		7	%					7	%					7	%

The $22 million increase in research and development expenses in fiscal year 2013 over fiscal year 2012 was primarily due to increases in expenses of $14 million in Oncology Systems, $11 million in the “Other” category partially offset by a decrease in expense of $2 million in X-Ray Products. The $14 million increase in Oncology Systems was primarily due to expenses relating to new product development projects, including fixed fees accrued as part of the strategic arrangement with Siemens. The increase in expenses of $11 million in the “Other” category was primarily due to expenses relating to new product development projects and a net increase in costs associated with increased headcount to support our growing research activities in VPT. The $2 million decrease in research and development expenses in X-Ray Products was mainly due to cost control measures.

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The $15 million increase in research and development expenses in fiscal year 2012 over fiscal year 2011 was primarily due to increases in expenses of $9 million in Oncology Systems, $3 million in X-Ray Products and $2 million in the “Other” category. The increase in Oncology Systems was primarily due to higher research and development expenses for Calypso, partially offset by a $3 million favorable currency translation impact, as foreign currency denominated research and development expenses for Oncology Systems were translated into U.S. dollars. The $3 million increase in X-Ray Products was mainly due to higher development expenses for flat panel products, as well as higher research and development expenses for InfiMed. The $2 million increase in the “Other” category was primarily due to an increase in expenses for development projects in VPT, partially offset by a decrease in research expenses in SIP.

Selling, General and Administrative

	Fiscal Years
(Dollars in millions)	2013			% Change			2012			% Change			2011
Selling, general and administrative	$	433			4	%	$	417			11	%	$	377
As a percentage of total revenues		15	%					15	%					15	%

The $16 million increase in selling, general and administrative expenses for fiscal year 2013 compared to fiscal year 2012 was primarily attributable to: (a) a $13 million net increase in employee-related costs, in part for increased headcount to support our growing business activities; (b) a $6 million increase in legal expenses relating to litigation matters; (c) a $4 million increase in restructuring charges; (d) a $4 million increase in depreciation expense; and (e) a $2 million increase in risk insurance expense. These increases were partially offset by a $5 million decrease due to change in fair value of our contingent consideration liabilities; a $4 million decrease in bad debt expense; and a $2 million increase in income from equity method  investment in dpiX Holding LLC.

The $40 million increase in selling, general and administrative expenses for fiscal year 2012 compared to fiscal year 2011 was primarily attributable to: (a) a $15 million net increase in employee-related costs, in part for increased headcount to support our growing sales, marketing and other business activities particularly the in international region; (b) an $8 million increase in bad debt expense to increase the allowance for doubtful accounts related to a limited number of customers; (c) a $6 million increase in selling, general and administrative expenses associated with Calypso and InfiMed; (d) a $5 million net increase in legal expenses relating to ongoing litigation; (e) a $4 million decrease in the income recognized on our equity investment in dpiX Holding LLC; and (f) a $2 million increase in restructuring charge primarily for a workforce reduction in North America that accompanied the realignment of resources to support sales and marketing activities in emerging market countries. These increases were partially offset by a decrease of $4 million in contingent liability charge in fiscal year 2012 compared to fiscal year 2011.

Interest Income, Net

	Fiscal Years
(Dollars in millions)	2013		% Change			2012		% Change			2011
Interest income (expense), net	$	3.2		73	%	$	1.9		614	%	$	0.3

The net increases in interest income, net of interest expense, in fiscal year 2013 over fiscal year 2012 and in fiscal year 2012 over fiscal year 2011, were primarily due to increases in interest income generated from our loan to CPTC. These increases were partially offset by increases in interest expense associated with increased borrowing from our credit facilities.

Taxes on Earnings

	Fiscal Years
	2013			% Change			2012			% Change			2011
Effective tax rate		28.4	%		0.1	%		28.3	%		(2.3	%)		30.6	%

The slight increase in our effective tax rate in fiscal year 2013 from fiscal year 2012 was primarily due to a shift in the geographic mix of earnings.

The decrease in our effective tax rate in fiscal year 2012 from fiscal year 2011 was primarily due to a shift in the geographic mix of earnings, partially offset by a smaller net benefit for discrete items in fiscal year 2012 related to the prior period. These discrete items were primarily related to the release of certain liabilities for uncertain tax positions, including the expiration of the statutes of limitation in various jurisdictions and the favorable resolution of several income tax audits.

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In general, our effective income tax rate differs from the U.S. federal statutory rate primarily because our foreign earnings are taxed at rates that are, on average, lower than the U.S. federal rate, and our domestic earnings are subject to state income taxes. We expect our future effective tax rate may fluctuate due to changes in geographic mix of earnings, changes in the valuation of our deferred tax assets or liabilities and changes in tax laws or interpretations of those laws. For example, recent proposals would make significant changes to U.S. taxation of U.S. based multinational corporations. Although we cannot predict whether or in what form Congress would enact any such proposals, legislation of this type could have an adverse impact on our effective tax rate. We also expect that our effective tax rate may experience may fluctuate from period to period. See Note 13, “Taxes on Earnings” of the Notes to the Consolidated Financial Statements.

Net Earnings Per Diluted Share

	Fiscal Years
	2013		% Change			2012		% Change			2011
Net earnings per diluted share	$	3.98		6	%	$	3.76		9	%	$	3.44

The increase in net earnings per diluted share in fiscal year 2013 over fiscal year 2012 resulted from an increase in total revenues and a reduction in the number of diluted shares of common stock outstanding due to stock repurchases. These positive impacts on net earnings per diluted share were partially offset by an excise tax of $7.2 million on sales of medical devices and restructuring charges of $6.7 million during fiscal year 2013.

The increases in net earnings per diluted share in fiscal year 2012 over fiscal year 2011 resulted from: (a) an increase in total revenues; (b) a decrease in effective tax rate; and (c) a reduction in the number of diluted shares of common stock outstanding due to stock repurchases. These positive impacts on net earnings were partially offset by a decrease in gross margin percentage and a $3 million restructuring charge in fiscal year 2012 primarily for a workforce reduction in North America that accompanies the realignment of resources to support sales and marketing activities in emerging markets.

Gross Orders

Total Gross Orders (by segment and region)	Fiscal Years
(Dollars in millions)	2013		% Change			2012		% Change			2011
Oncology Systems:
North America	$	1,135		(3	%)	$	1,167		1	%	$	1,150
Total International		1,419		6	%		1,333		9	%		1,220
Total Oncology Systems	$	2,554		2	%	$	2,500		5	%	$	2,370
X-Ray Products:
North America	$	160		14	%	$	141		0	%	$	140
Total International		425		16	%		366		7	%		343
Total X-Ray Products	$	585		15	%	$	507		5	%	$	483
Other:	$	86		(60	%)	$	216		7	%	$	201
Total Gross Orders	$	3,225		0	%	$	3,223		6	%	$	3,054

Beginning in the fourth quarter of fiscal 2013, we changed the presentation of reported orders from net orders to gross orders.  We believe this is more consistent with other companies in our industry, will enhance comparability and will better present the orders activity for the period. For comparability and consistency, prior years presented have been revised to also show orders on a gross basis.

Gross orders are defined as the sum of new orders recorded during the period adjusted for any revisions to existing orders during the period. New orders are recorded for the total contractual amount, excluding certain pass-through items, once a written agreement for the delivery of goods or provision of services is in place and, for businesses other than VPT, when shipment of the product (or in the case of certain highly customized products in our SIP business, construction of the product) is expected to occur within two years, so long as any contingencies are deemed perfunctory. However, we will not record SIP orders from governmental agencies with bid protest provisions until the expiration of the bid protest period. For our VPT business, we record orders when construction of the related proton therapy treatment center is reasonably expected to start within two years, but only if any contingencies are either deemed perfunctory or if the existence and nature of material contingencies is disclosed. However, we will not record VPT orders if

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there are major financing contingencies or customer board approval contingencies pending. We perform a quarterly review to verify that outstanding orders remain valid.

Oncology Systems gross orders grew 2% in fiscal year 2013 over fiscal year 2012 compared to 5% in fiscal year 2012 over fiscal year 2011.

An increase in Oncology Systems gross orders in the international region was partially offset by a decrease in gross orders in North America in fiscal year 2013 compared to fiscal year 2012. In North America, a decrease in gross orders in fiscal year 2013 compared to fiscal year 2012 was due to decreases in orders of our high energy linear accelerators and our software products partially offset by an increase in orders for our service contracts. The increase in international Oncology Systems gross orders was primarily due to growth in orders for our service contracts in Europe and Asia, as well as increased orders for our high energy linear accelerators (including TrueBeam) in all international regions. When measured in constant currency, international Oncology Systems gross orders grew 9% in fiscal year 2013 over fiscal year 2012.

Both the international region and North America contributed to the growth in Oncology Systems gross orders in fiscal years 2012 and 2011 over the respective prior fiscal years. The growth in North American Oncology Systems gross orders was primarily due to the continued growth in orders for our service contracts, as well as increased orders for our software products and tumor tracking products offered by Calypso, which increases were partially offset by a decrease in orders for our high energy linear accelerators. The increase in international Oncology Systems gross orders was primarily due to growth in orders for our service contracts in all international regions, as well as increased orders for our linear accelerators and our software products in Asia and Europe. When measured in constant currency, international Oncology Systems gross orders grew 11% in fiscal year 2012 over fiscal year 2011.

The trailing 12 months growth in gross orders for Oncology Systems at the end of fiscal year 2013 and for the three immediately prior fiscal quarters ends were: a 2% total increase, with a 2% decrease in North America and a 6% increase for the international region, as of September 27, 2013; a 4% total increase, with a 3% increase in North America and a 5% increase for the international region, as of June 28, 2013; a 2% total increase, with a 2% increase in North America and a 2% increase for the international region, as of March 29, 2013; a 5% total increase, with a 6% increase in North America and a 3% increase for the international region, as of December 28, 2012. Consistent with the historical pattern, we expect that Oncology Systems gross orders will continue to experience regional fluctuations, even with an overall shift of orders towards international regions and emerging markets. In addition, the availability of government programs that stimulate the purchase of healthcare products could affect the demand for our products from period to period, and could therefore make it difficult to compare our financial results.

X-Ray Products gross orders grew 15% in fiscal year 2013 over fiscal year 2012 compared to 5% in fiscal year 2012 over fiscal year 2011.  X-Ray Products gross orders in North America grew 13% in fiscal year 2013 compared to fiscal year 2012. The North American gross order increase in fiscal year 2013 over fiscal year 2012 was attributable to increases in our flat panel products and X-ray tube products. In the international region, X-Ray Products gross orders grew due to growth in both the X-ray tube and flat panel products in fiscal year 2013 compared to fiscal year 2012. Within the international region, X-ray tube products grew in all regions, with strongest growth in Asia in fiscal year 2013 over fiscal year 2012. Within the international region, growth in flat panel products was due to an increase in flat panel orders in Asia partially offset by decreases in flat panel products in Europe and rest of world region in fiscal year 2013 over fiscal year 2012.

X-Ray Products gross orders grew 5% in fiscal year 2012 over fiscal year 2011. X-Ray Products gross orders in North America were flat in fiscal year 2012 compared to fiscal year 2011. North American gross order increases in fiscal year 2012 over fiscal year 2011 attributable to our flat panel products and our image processing tools offered by InfiMed were offset by a decrease in gross orders for our X-ray tube products. In the international region, the increase in X-Ray Products gross orders in fiscal year 2012 over fiscal year 2011 was primarily due to increased orders for our flat panel products in all international regions and increased orders for our X-ray tube products in Europe, as well as orders for image processing tools offered by InfiMed in Europe and Asia. These increases were partially offset by lower orders for our X-ray tube products in Asia and rest of the world region in fiscal year 2012 over fiscal year 2011.

Gross orders in the “Other” category decreased $130 million in fiscal year 2013 over fiscal year 2012 primarily due to VPT recording two proton therapy system orders in fiscal year 2012, compared to no proton therapy system order recorded in fiscal year 2013 and to a lesser extent a decrease in orders in SIP.

Gross orders in the “Other” category increased $15 million in fiscal year 2012 over fiscal year 2011 primarily due to VPT recording two proton therapy system orders, compared to recording one proton therapy system order in fiscal year 2011. In fiscal year 2012, VPT recorded a $50 million order to supply a proton therapy system for a two-room proton therapy center at the PTC St. Petersburg Center of Nuclear Medicine of the International Institute of Biological Systems in Russia. In addition, we recorded a $77 million order (of which $73 million was allocated to VPT and the remaining amount allocated to Oncology Systems) to supply a proton therapy system and two TrueBeam linear accelerators for a five-room proton therapy center at the King Fahd Medical City in Riyadh, Saudi

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Arabia. In fiscal year 2011, VPT recorded an $88 million order from CPTC for the Scripps Proton Therapy Center. The increase in VPT gross orders for fiscal year 2012 over fiscal year 2011 was partially offset by a decline in SIP gross orders. The decline in SIP gross orders was primarily due to SIP booking a $21 million one-time order from U.S. Customs and Border Protection for five IntellX cargo screening systems in fiscal year 2011.

Orders in any period may not be directly correlated to the level of revenues in any particular future quarter or period since the timing of revenue recognition will vary significantly based on the delivery requirements of individual orders, acceptance schedules and the readiness of individual customer sites for installation of our products. Moreover, certain types of orders, such as orders for software or newly introduced products in our Oncology Systems segment, typically take more time from order to completion of installation and acceptance than hardware or older products. Because an order for a proton therapy system can be relatively large, an order in one fiscal period will cause our gross orders to vary significantly, making comparisons between fiscal periods more difficult. Orders and revenues for our SIP products have been and may continue to be unpredictable as governmental agencies may place large orders with us or with our OEM customers over a short period of time and then may not place any orders for a long time period thereafter. Furthermore, bid awards in the VPT and SIP businesses may be subject to challenge by third parties, which can make these orders more unpredictable than other products.

Net Orders

In the fourth quarter of 2013 we changed our primary presentation of orders to gross orders.  The below table for net orders is provided for comparison purposes. Net orders are defined as gross orders less backlog adjustments. Backlog adjustments are comprised of dormancies, cancellations, foreign currency exchange rate and other adjustments. Aged orders that are not expected to be converted to revenues are deemed dormant and are reflected as a reduction in the backlog amounts and net orders in the period identified.

Total Net Orders (by segment and region)	Fiscal Years
(Dollars in millions)	2013		% Change			2012		% Change			2011
Oncology Systems:
North America	$	939		(14	%)	$	1,091		5	%	$	1,038
Total International		1,360		4	%		1,309		8	%		1,211
Total Oncology Systems	$	2,299		(4	%)	$	2,400		7	%	$	2,249
X-Ray Products:
North America	$	161		14	%	$	141		0	%	$	140
Total International		422		16	%		365		7	%		343
Total X-Ray Products	$	583		15	%	$	506		5	%	$	483
Other:	$	86		(60	%)	$	216		7	%	$	201
Total Net Orders	$	2,968		(5	%)	$	3,122		6	%	$	2,933

Backlog

Backlog is the accumulation of all gross orders for which revenues have not been recognized and are still considered valid. Backlog also includes a small portion of billed service contracts that are included in deferred revenue. Including the $100 million VPT backlog, our backlog at September 27, 2013 was $2.9 billion, which was an increase of 1% over the backlog at September 28, 2012. Our Oncology Systems backlog at September 27, 2013 was 2% higher than the backlog at September 28, 2012, which reflected a 15% increase for the international region and a 9% decrease for North America.

In fiscal years 2013, 2012, and 2011, our backlog adjustments were $257 million, $101 million, and $121 million, respectively. During fiscal year 2013, as a result of ongoing uncertainty in the U.S. healthcare environment and higher cancellations, particularly from small freestanding center developers, we re-evaluated similar transactions and removed orders that were not expected to be converted into revenues from our backlog, which resulted in an increase in the backlog adjustments in fiscal year 2013 compared to fiscal years 2012 and 2011.

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Discontinued Operations

In the fourth quarter of fiscal year 2008, we approved a plan to sell Research Instruments in order to focus our efforts on the development of the proton therapy systems portion of the ACCEL business. The sale of Research Instruments was completed in the second quarter of fiscal year 2009. Research Instruments has been classified as a discontinued operation in our Consolidated Statements of Earnings for fiscal year 2011.

The total loss from discontinued operations for fiscal year 2011 was $9.7 million less applicable income tax of zero. Total revenues of Research Instruments, reported in discontinued operations, for fiscal years 2011 was zero. As of September 30, 2011, we had no remaining obligations related to this discontinued operation. In fiscal years 2013 and 2012, we did not recognize any income or losses and did not have any revenues from discontinued operations. See Note 18, “Discontinued Operations” to the Notes to the Consolidated Financial Statements for a detailed discussion.

Liquidity and Capital Resources

Liquidity is the measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, acquire businesses or make other investments or loans, repurchase shares of VMS common stock, and fund continuing operations and capital expenditures. Our sources of cash have included operations, borrowings, stock option exercises and employee stock purchases and interest income. Our cash usage is actively managed on a daily basis to ensure the maintenance of sufficient funds to meet our needs. Because Research Instruments’ cash flows were not material, we have not segregated them from continuing operations on our Consolidated Statements of Cash Flows and the discussion herein.

Cash and Cash Equivalents

The following table summarizes our cash and cash equivalents:

(In millions)	September 27, 2013		September 28, 2012		Increase
Cash and cash equivalents	$	1,118	$	705	$	413

Our cash and cash equivalents increased $413 million from $705 million at September 28, 2012 to $1,118 million at September 27, 2013. The increase in cash and cash equivalents in fiscal year 2013 was due primarily to $500 million of cash provided from borrowings under the term loan facility, $455 million of cash generated from operating activities, $130 million of cash provided by stock option exercises and employee stock purchases, and $9 million of cash provided by the excess tax benefits from share-based compensation. These increases were partially offset by aggregate payments of $420 million of cash for the repurchase of shares of VMS common stock, $155 million of cash used in net payments under our credit facility, $76 million of cash for purchases of property, plant, and equipment, $10 million of cash used to fund a portion of our loan commitment to CPTC for financing the construction and startup operations of the Scripps Proton Therapy Center, $10 million used to fund a note receivable, and $10 million used to satisfy employee tax withholding requirements for employees who tendered VMS stock upon vesting of restricted common stock and restricted stock units. In addition, foreign currency exchange rate changes in fiscal year 2013 increased cash and cash equivalents by $3 million.

At September 27, 2013, we had approximately $358 million, or 32%, of total cash and cash equivalents in the United States. Approximately $760 million, or 68%, of total cash and cash equivalents was held abroad and could be subject to additional taxation if it were repatriated to the United States. As of September 27, 2013, most of our cash and cash equivalents that were held abroad were in U.S. dollars and were primarily held as bank deposits. We have used our credit facilities to meet our cash needs from time to time and expect to continue to do so in the future. Borrowings under our credit facilities may be used for working capital, capital expenditures, permitted VMS stock repurchases, acquisitions, and other lawful corporate purposes.

Cash Flows

	Fiscal Years
(In millions)	2013			2012			2011
Net cash flow provided by (used in):
Operating activities	$	455		$	493		$	472
Investing activities		(96	)		(122	)		(118	)
Financing activities		51			(234	)		(311	)
Effects of exchange rate changes on cash and cash equivalents		3			4			1
Net increase in cash and cash equivalents	$	413		$	141		$	44

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Our primary cash inflows and outflows for fiscal years 2013, 2012 and 2011 were as follows:

—	We generated net cash from operating activities of $455 million in fiscal year 2013, compared to $493 million in fiscal year 2012 and $472 million in fiscal year 2011.
	The $38 million decrease in net cash from operating activities during fiscal year 2013 compared to fiscal year 2012 was driven primarily by a net change of $35 million in operating assets and liabilities (working capital items) and a decrease in non-cash items of $14 million, partially offset by an increase of $11 million in net earnings.
	The major contributors to the net change in working capital items in fiscal year 2013 were inventories, deferred revenues and advance payments from customers, accounts receivable, and accrued expenses and other liabilities as follows:
	Ø	Inventories increased $76 million due to anticipated customer demands for products in fiscal year 2014, mainly in Oncology Systems and X-Ray Products.
	Ø	Deferred revenue and advance payments from customers increased $75 million due to receipts of down payments for orders for which revenues have not been recognized during fiscal year 2013 and due to nature of contracts and timing of customer acceptances.
	Ø	Accounts receivable increased $43 million due to higher revenues and timing of collections.
	Ø	Accrued expenses and other liabilities decreased $33 million due primarily to the timing of payments processed and specifically due to the timing of tax payments both in the United States and internationally.
	The $21 million increase in net cash from operating activities during fiscal year 2012 compared to fiscal year 2011 was driven primarily by an increase of $28 million in net earnings and a net change of $5 million in operating assets and liabilities (working capital items), partially offset by a decrease in non-cash items of $12 million.
	The major contributors to the net change in working capital items in fiscal year 2012 were accounts receivable, deferred revenues and advance payments from customers, prepaid expenses and other assets, and inventories as follows:
	Ø	Accounts receivable increased $87 million due to higher revenues and timing of collections.
	Ø	Deferred revenue and advance payments from customers increased by $69 million due to receipts of down payments for Oncology System and VPT orders for which revenues have not been recognized during fiscal year 2012.
	Ø	Prepaid expenses and other current assets increased by $47 million primarily due to guaranteed prepayments made under a commercial agreement for products that we resell, as well as timing of expense payments.
	Ø	Inventories increased by $42 million due to anticipated customer demands for products in fiscal year 2013 mainly in Oncology Systems and VPT.
	We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, timing of product shipments, product installation or customer acceptance, accounts receivable collections, inventory management, and the timing and amount of tax and other payments. See Item 1A, “Risk Factors.”
—	Investing activities used $96 million of net cash in fiscal year 2013, compared to $122 million of net cash in fiscal year 2012 and $118 million of net cash in fiscal year 2011. Cash used for purchases of property, plant and equipment was $76 million in fiscal year 2013, compared to $61 million in fiscal year 2012, and $71 million in fiscal year 2011. During fiscal year 2013, we used $10 million to fund a portion of our loan commitment to CPTC and used $10 million to fund a note receivable. In fiscal year 2012, we used $31 million to fund a portion of our loan commitment to CPTC and used $28 million for business acquisitions (primarily Calypso and InfiMed), and we received $9 million of cash from dpiX LLC for the repayment of a note receivable. During fiscal year 2011, we used $19 million for loans to CPTC, paid $15 million to Augmenix for a minority equity interest plus an exclusive option to purchase the remaining equity interest of Augmenix and paid cash of $8 million for the acquisition of all of the outstanding capital stock of a supplier of devices for delivery of brachytherapy treatment.

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— Financing activities provided net cash of $52 million in fiscal year 2013, compared to $234 million of net cash used in fiscal year 2012, and $311 million of net cash used in fiscal year 2011. In fiscal year 2013, we borrowed $500 million under a term loan facility.  In fiscal year 2013 and 2012, we repaid a net amount of $155 million and $26 million, respectively, to our credit facilities.  In fiscal year 2011, we borrowed a net amount of $161 million from our credit facilities.  We received cash proceeds from employee stock option exercises and employee stock purchases of $130 million, $60 million, and $138 million in fiscal years 2013, 2012, and 2011, respectively, as well as cash provided by excess tax benefits from share-based compensation of $10 million in fiscal year 2013, $9 million in fiscal year 2012, and $23 million in fiscal year 2011. In fiscal year 2013, we used $420 million for the repurchases of VMS common stock compared to $257 million in fiscal year 2012. In fiscal year 2011, we paid an aggregate of $611 million in connection with three accelerated share repurchase agreements and for shares repurchased in the open market.  In fiscal year 2013 there were no bank borrowing repayments as compared to $10 million and $7 million in fiscal years 2012, and 2011, respectively. Cash used for financing activities in fiscal years 2013, 2012, and 2011 also includes $10 million, $10 million, and $15 million (the value of withheld shares), respectively, for tendered VMS common stock to satisfy employee tax withholding requirements upon vesting of restricted common stock and restricted stock units.  

We expect our capital expenditures, which typically represent construction and/or purchases of facilities, manufacturing equipment, office equipment and furniture and fixtures, as well as capitalized costs related to the implementation of software applications, will be approximately 2.8% of revenues in fiscal year 2014. As further described under “Contractual Obligations,” we loaned $62.7 million (including accrued interest) to CPTC as of September 27, 2013, and we expect CPTC to continue to draw down the loan facility, under which we have committed to loan up to $115.3 million to CPTC, during the construction and initial operation period of the Scripps Proton Therapy Center through fiscal year 2014.

We had a $300 million credit facility with Bank of America, N.A. (“BofA”) during fiscal years 2013 and 2012 (the “2012 Credit Facility”). At September 28, 2012, a total of $155 million was outstanding under the 2012 Credit Facility with a weighted average interest rate of 1.47%. No letters of credit or swing line loans were outstanding at that date. We were in compliance with all covenants under the 2012 Credit Facility for all periods presented within these consolidated financial statements in which it was in existence.

On August 27, 2013, we repaid all outstanding amounts and terminated the 2012 Credit Facility and entered into a five-year credit agreement with certain lenders and BofA as administrative agent (the “2013 Credit Agreement”) that provides for (i) a five-year term loan facility in an aggregate principal amount of up to $500 million (the “2013 Term Loan Facility”) and (ii) a five-year revolving credit facility in an aggregate principal amount of up to $300 million (the “2013 Revolving Credit Facility”). The Revolving Credit Facility also includes a $50 million sub-facility for the issuance of letters of credit and permits swing line loans of up to $25 million. Under the 2013 Credit Agreement, we have the right to make (i) up to two requests to increase the aggregate commitments under the Term Loan Facility by an aggregate amount for all such requests of up to $100 million and (ii) up to three requests to increase the aggregate commitments under the Revolving Credit Facility by an aggregate amount for all such requests of up to $200 million, provided that, in each case, the Lenders are willing to provide such new or increased commitments and certain other conditions are met. We may prepay, reduce or terminate the commitments without penalty. The 2013 Credit Facility contains provisions that limit our ability to pay cash dividends.

A pledge of 65% of the voting shares that we hold in Varian Medical Systems Nederland B.V., a wholly-owned subsidiary, serves as security for a portion of the 2013 Credit Facility. These stock pledges also serve as security for all hedging or treasury management obligations entered into by the Company with a Lender. As of September 27, 2013, VMS had pledged 65% of the voting shares that it holds in Varian Medical Systems Nederland Holdings B.V., a wholly owned subsidiary.  The 2013 Credit Agreement provides that certain material domestic subsidiaries must guarantee the 2013 Credit Facility, subject to certain limitations on the amount secured. As of September 27, 2013, the 2013 Credit Facility was not guaranteed by any VMS subsidiary.

Borrowings under the 2013 Term Loan Facility accrue interest either (i) based on a Eurodollar Rate, as defined in the Credit Agreement (the “Eurodollar Rate”), plus a margin of 1.00% to 1.25% based on a leverage ratio involving funded indebtedness and EBITDA or (ii) based upon a base rate of (a) the federal funds rate plus 0.50%, (b) BofA’s announced prime rate, or (c) the Eurodollar Rate plus 1.00%, whichever is highest, plus a margin of 0.00% to 0.25% based on the same leverage Ratio, depending upon instructions from the Company.  Borrowings under the 2013 Revolving Credit Facility accrue interest either (i) based on the Eurodollar Rate plus a margin of 1.25% to 1.50% based on a leverage ratio or (ii) based upon a base rate of (a) the federal funds rate plus 0.50%, (b) BofA’s announced prime rate, or (c) the Eurodollar Rate plus 1.00%, whichever is highest, plus a margin of 0.25% to 0.50% based on the same leverage ratio, depending upon instructions from the Company.  At September 27, 2013, borrowings under the 2013 Term Loan Facility totaled $500 million with a weighted average interest rate of 1.31%.  At September 27, 2013, there was no amount outstanding under the 2013 Revolving Credit Facility.  

We must pay a commitment fee on the unused portion of the 2013 Revolving Credit Facility at a rate from 0.15% to 0.275% based on a leverage ratio.

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The 2013 Credit Agreement contains affirmative and negative covenants applicable to us that are typical for credit facilities of this type, and that are subject to materiality and other qualifications, carve-outs, baskets and exceptions.  We have also agreed to maintain certain financial covenants including (i) a maximum consolidated leverage ratio, involving funded indebtedness and EBITDA, and (ii) a minimum cash flow coverage ratio.  We were in compliance with all covenants under the 2013 Credit Agreement for all periods in which it was in existence.

In addition, VMS’s Japanese subsidiary (“VMS KK”) has an unsecured uncommitted credit agreement with Sumitomo Mitsui Banking Corporation that enables VMS KK to borrow and have outstanding at any given time a maximum of 3 billion Japanese yen (the “Sumitomo Credit Facility”). In March 2013, the Sumitomo Credit Facility was extended. The Sumitomo Credit Facility will expire on April 5, 2014.  Borrowings under the Sumitomo Credit Facility accrue interest based on the basic loan rate announced by the Bank of Japan plus a margin of 0.5% per annum. As of September 27, 2013, there was no outstanding balance under the Sumitomo Credit Facility.

See Note 7, “Borrowings” to the Consolidated Financial Statements for a discussion regarding the 2013 Credit Facility and the Sumitomo Credit Facility.

The following table provides additional information regarding our short-term borrowings (excluding current maturities of long-term debt):

(Dollars in millions)	Fourth Quarter of Fiscal Year 2013			Fiscal Year
				2013			2012			2011
Amount outstanding (at end of period)	$	—		$	—		$	155		$	181
Weighted average interest rate (at end of period)		—			—			1.47	%		1.05	%
Average amount outstanding (during period)		96			168			172			60
Weighted average interest rate (during period)		1.71	%		1.45	%		1.29	%		2.07	%
Maximum month-end amount outstanding during period	$	148		$	232		$	205		$	239

Our liquidity is affected by many factors, some of which result from the normal ongoing operations of our business and some of which arise from uncertainties and conditions in the United States and global economies. Although our cash requirements will fluctuate as a result of the shifting influences of these factors, we believe that existing cash and cash equivalents and cash to be generated from operations and current or future credit facilities will be sufficient to satisfy anticipated commitments for capital expenditures and other cash requirements for the next 12 months and into the foreseeable future. We currently anticipate that we will continue to utilize our available liquidity and cash flows from operations, as well as borrowed funds, to make strategic acquisitions, invest in the growth of our business, invest in advancing our systems and processes, repurchase VMS common stock and fund our loan commitment to CPTC.

Total debt as a percentage of total capital increased to 22.8% at September 27, 2013 from 9.6% at September 28, 2012 primarily due to increased borrowings under our 2013 Credit Facility. The ratio of current assets to current liabilities increased to 2.33 to 1 at September 27, 2013 from 1.76 to 1 at September 28, 2012.

Days Sales Outstanding

Trade accounts receivable DSO were 85 days at both September 27, 2013 and September 28, 2012.  Excluding VPT, DSO were 77 days at September 27, 2013 compared to 80 days at September 28, 2012. Our accounts receivable and DSO are impacted by a number of factors, primarily including the timing of product shipments, collections performance, payment terms, the mix of revenues from different regions and the continued sovereign debt and banking crises in Europe. As of September 27, 2013, approximately 4% of our accounts receivable balance was related to customer contracts with remaining terms of more than one year.

Stock Repurchase Program

During fiscal years 2013, 2012 and 2011, we repurchased 6,000,000 shares, 4,433,718 shares, and 9,028,033 shares, respectively, of VMS common stock under various authorizations by VMS’s Board of Directors. The repurchased shares include shares of VMS common stock repurchased under various accelerated share repurchase agreements. Aggregate amount of repurchases in connection with the various accelerated share repurchase agreements (as further discussed below) and for shares repurchased in the open market totaled $424 million, $257 million and $611 million in fiscal years 2013, 2012 and 2011, respectively. All shares that were repurchased have been retired.

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On August 24, 2010, we executed an accelerated share repurchase agreement with BofA (the “August 2010 Repurchase Agreement”). Pursuant to the August 2010 Repurchase Agreement, we initially paid to BofA $225 million and BofA delivered 3,888,249 shares of VMS common stock, representing approximately 90% of the shares expected to be repurchased. Under the terms of the August 2010 Repurchase Agreement, the specific number of shares that we ultimately repurchased was to be based on the volume weighted average share price of VMS common stock during the repurchase period, less a discount, such that we might be entitled to receive additional shares of VMS common stock from BofA or we might be required to deliver VMS shares or, at our option, make a cash payment to BofA. The repurchase period ended on February 23, 2011, and we made a cash payment of $26.1 million in March 2011 to settle the August 2010 Repurchase Agreement.

On February 23, 2011, we executed an accelerated share repurchase agreement with BofA (the “February 2011 Repurchase Agreement”). Pursuant to the February 2011 Repurchase Agreement, we paid to BofA $280 million and BofA delivered 3,547,474 shares of VMS common stock, representing approximately 85% of the shares expected to be repurchased. Under the terms of the February 2011 Repurchase Agreement, the specific number of shares that we ultimately repurchased was to be based on the volume weighted average share price of VMS common stock during the repurchase period, less a discount. In June 2011, BofA accelerated the end of the repurchase period, and we received an additional 630,921 shares of VMS common stock, with a then market value of approximately $41.3 million, upon the settlement of the February 2011 Repurchase Agreement.

On August 25, 2011, we entered into another accelerated share repurchase agreement with BofA (the “August 2011 Repurchase Agreement”). Pursuant to the August 2011 Repurchase Agreement, we paid to BofA $250 million and BofA delivered 3,849,638 shares of VMS common stock, representing approximately 85% of the shares expected to be repurchased. Under the terms of the August 2011 Repurchase Agreement, the specific number of shares that we ultimately repurchased was to be based on the volume weighted average share price of VMS common stock during the repurchase period, less a discount. The repurchase period ended in February 2012, and we received an additional 375,449 shares of VMS common stock, with a then market value of approximately $25 million, upon the settlement of the August 2011 Repurchase Agreement.

In February 2011, the VMS Board of Directors authorized the repurchase of 12 million shares of VMS common stock through the end of fiscal year 2012. As of September 28, 2012, the remaining 3,000,000 shares available for repurchase under the February 2011 authorization expired. In August 2012, the VMS Board of Directors authorized the repurchase of 8,000,000 shares of VMS common stock from September 29, 2012 through December 31, 2013. Stock repurchases under the August 2012 authorization may be made in the open market, in privately negotiated transactions (including accelerated share repurchase programs) or under Rule 10b5-1 share repurchase plans, and may be made from time to time or in one or more blocks.  As of September 27, 2013, 2,000,000 shares remained available for repurchase under the August 2012 authorization.

In November 2013, the VMS Board of Directors authorized the repurchase of an additional 6,000,000 shares of VMS common stock from December 30, 2013 through December 31, 2014. Stock repurchases under the November 2013 authorization may be made in the open market, in privately negotiated transactions (including accelerated share repurchase programs) or under Rule 10b5-1 share repurchase plans, and may be made from time to time in one or more blocks. Shares will be retired upon repurchase.

Contractual Obligations

The following summarizes our contractual obligations as of September 27, 2013 and the effect such obligations are expected to have on our liquidity and cash flows in future periods:

	Payments Due By Period
(In millions)	Fiscal Year 2014		Fiscal Years 2015 - 2016		Fiscal Years 2017 - 2018		Beyond		Total
Long term debt (1) (including current maturities of long-term debt)	$	56.3	$	100.0	$	350.0	$	—	$	506.3
Interest obligation on long term debt (including current maturities of long-term debt) (2)		6.4		10.3		7.4		—		24.1
Unused loan facility to CPTC (3)		52.6		—		—		—		52.6
Operating leases (4)		20.0		29.5		15.0		12.0		76.5
Defined benefit pension plans (5)		6.3		—		—		—		6.3
Post-retirement benefit plan (6)		0.5		1.0		1.0		1.8		4.3
Total (7)	$	142.1	$	140.8	$	373.4	$	13.8	$	670.1

(1) For further discussion regarding long-term debt, see Note 7, “Borrowings” of the Notes to the Consolidated Financial Statements.

(2) Interest on the term loan facility has been calculated based on the interest rate applicable as of September 27, 2013.

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(3) As further described in Note 15, “Variable Interest Entity” of the Notes to the Consolidated Financial Statements, we participate, through our Swiss subsidiary, in a $165 million loan facility to CPTC, under which we committed to loan up to $115.3 million, to finance the construction and startup operations of the Scripps Proton Therapy Center. As of September 27, 2013, we had loaned $62.7 million (including accrued interest) to CPTC, and we expect CPTC to continue to draw down this facility during the construction and initial operation period as of the Scripps Proton Therapy Center through fiscal year 2014. The amounts and timing of loan drawdown may change due to changes in construction progress and other factors. We expect to use cash held abroad to meet funding requirements under this loan facility. We may sell all or a portion of our participation in this loan facility before the end of the drawdown period in 2014. Upon the sale of all or a portion of this facility, we will not be required to make further loan advances for the portion of the facility that is sold.

(4) Operating leases include future minimum lease payments under all our noncancelable operating leases as of September 27, 2013.

(5) As further described in Note 10, “Retirement Plans” of the Notes to the Consolidated Financial Statements, as of September 27, 2013, our defined benefit pension plans were underfunded by $14.9 million. Due to the impact of future plan asset performance, changes in interest rates and other economic and demographic assumptions the potential for changes in legislation in the United States and other foreign jurisdictions, we are not able to reasonably estimate the timing and amount of contributions to fund its defined benefit pension plans beyond the next fiscal year.

(6) As further described in Note 10, “Retirement Plans” of the Notes to the Consolidated Financial Statements, as of September 27, 2013, our post-retirement benefit plan had an estimated total benefit obligation of $4.8 million. Due to changes in health care cost trend rates, mortality rates of plan participants, and the potential for us to change the type of healthcare plans offered or the level of contributions from plan participants, we are not able to reasonably estimate the timing and amount of contributions to fund our post-retirement benefit plan beyond fiscal year 2023.

(7) The following items are not included in the table above:

· Long-term income taxes payable includes the liability for uncertain tax positions, including interest and penalties, and may also include other long-term tax liabilities. As of September 27, 2013, our total liability for uncertain tax positions was $41.9 million, of which we do not anticipate a payment in the next 12 months. We are unable to reliably estimate the timing of the remainder of future payments related to uncertain tax positions; therefore, the liability for uncertain tax positions has been excluded from the table above. See a detailed discussion in Note 13, “Taxes on Earnings” of the Notes to the Consolidated Financial Statements.

· As further described in Note 9, “Commitments and Contingencies,” of the Notes to the Consolidated Financial Statements, as of September 27, 2013, we accrued $11.3 million for environmental remediation liabilities. The amount accrued represents estimates of anticipated future costs and the timing and amount of actual future environmental remediation costs may vary as the scope of our obligations become more clearly defined.

· In connection with the acquisition of businesses in prior years, we entered into agreements which include provisions to make additional consideration payments upon the achievement of certain milestones by the acquired businesses. As of September 27, 2013, the accrual for potential contingent considerations under these agreements is $2.5 million.

· In April 2012, we entered into a strategic global partnership with Siemens through which, among other things, we and Siemens will collaborate to develop interfaces that will enable our ARIA oncology information system software to connect with Siemens linear accelerators and imaging systems. Under the agreement establishing this collaboration, we committed to make certain payments, including up to $10 million in fixed fees and $20 million in license fees, in the event that certain product development milestones are achieved.  We will also pay for additional licenses beyond the minimum quantities set forth in the agreement. We expect that these interfaces will be commercialized as part of our ARIA oncology information system offering to customers.  As of September 27, 2013, we accrued $2 million of the fixed fees under the terms of the agreement. As of September 27, 2013, no amount related to achievement of product development milestones was payable under this agreement.

Contingencies

Environmental Remediation Liabilities

For a discussion of environmental remediation liabilities, see Note 9, “Commitments and Contingencies — Environmental Remediation Liabilities” of the Notes to the Consolidated Financial Statements, which discussion is incorporated herein by reference.

Other Matters

From time to time, we are a party to or otherwise involved in legal proceedings, claims and government inspections or investigations and other legal matters both inside and outside the United States, arising in the ordinary course of our business or otherwise. Such

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matters are subject to many uncertainties and outcomes are not predictable with assurance. See Note 9, “Commitments and Contingencies—Other Matters” of the Notes to the Consolidated Financial Statements, which discussion is incorporated herein by reference.

Off-Balance Sheet Arrangements

In conjunction with the sale of our products in the ordinary course of business, we provide standard indemnification of business partners and customers for losses suffered or incurred for property damages, death and injury and for patent, copyright or any other intellectual property infringement claims by any third parties with respect to our products. The terms of these indemnification arrangements are generally perpetual. Except for losses related to property damages, the maximum potential amount of future payments we could be required to make under these arrangements is unlimited. As of September 27, 2013, we have not incurred any significant costs since the Spin-offs to defend lawsuits or settle claims related to these indemnification arrangements. As a result, we believe the estimated fair value of these arrangements is minimal.

We have entered into indemnification agreements with our directors and officers and certain of our employees that serve as officers or directors of our foreign subsidiaries that may require us to indemnify our directors and officers and those certain employees against liabilities that may arise by reason of their status or service as directors or officers, and to advance their expenses incurred as a result of any legal proceeding against them as to which they could be indemnified.

Recent Accounting Pronouncements

a) New accounting updates recently adopted

In September 2011, the FASB amended Accounting Standard Codification (“ASC”) 350, “Intangibles – Goodwill and Other.” This amendment is intended to simplify how an entity tests goodwill for impairment and will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity no longer will be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that the reporting unit’s fair value is less than its carrying amount. This amendment became effective for us beginning in the first quarter of fiscal year 2013. The adoption of this amendment did not have an impact on our consolidated financial position, results of operations or cash flows.

In June 2011, the FASB amended ASC 220, “Presentation of Comprehensive Income.” This amendment requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. In December 2011, the FASB issued another amendment which defers indefinitely this amendment to the extent it relates to the presentation of reclassification adjustments. The amended guidance became effective for us in the first quarter of fiscal year 2013. The adoption of this amendment concerns disclosure only and did not have an impact on our consolidated financial position, results of operations or cash flows.

In July 2013, the FASB issued an accounting standard update to eliminate diversity in practice in the presentation of unrecognized tax benefits when a net operating loss carry forward, a similar tax loss, or a tax credit carry forward exists. We adopted this guidance beginning in the fourth quarter of fiscal year 2013. The adoption of this guidance did not have a material impact on our consolidated financial position, results of operations or cash flows.

b) Recent accounting standards or updates not yet effective

In December 2011, the FASB amended ASC 210, “Balance Sheet,” enhancing disclosure requirements about the nature of an entity’s right to offset and related arrangements associated with its financial instruments and derivative instruments. The new guidance requires the disclosure of the gross amounts subject to rights of set-off, the amounts offset in accordance with the accounting standards followed, and the related net exposure. The new guidance will be effective for us beginning in the first quarter of fiscal year 2014. The adoption of this amendment concerns disclosure only and we do not expect it to have an impact on our consolidated financial position, results of operations or cash flows.

In February 2013, the FASB issued an accounting standard update to require reclassification adjustments from other comprehensive income to be presented either in the financial statements or in the notes to the financial statements. This accounting standard update will be effective for us beginning in the first quarter of fiscal year 2014, at which time we will include the required disclosures.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to three primary types of market risks: credit risk, foreign currency exchange rate risk and interest rate risk.

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Credit Risk and Counterparty Risk

We are exposed to credit loss in the event of nonperformance by counterparties on the foreign currency forward contracts used in hedging activities. These counterparties are large international and regional financial institutions and to date, no such counterparty has failed to meet its financial obligation to us under such contracts. We are also exposed to credit loss in the event of default by CPTC, the obligor under the loan facility in which we are participating to finance the construction and start-up operations of the Scripps Proton Therapy Center. In addition, cash and cash equivalents held with financial institutions may exceed the Federal Deposit Insurance Corporation insurance limits or similar limits in foreign jurisdictions. We also may need to rely on our credit facilities as described below under “Interest Rate Risk.” Our access to our cash and cash equivalents or ability to borrow could be reduced if one or more financial institutions with which we have deposits or from which we borrow should fail or otherwise be adversely impacted by conditions in the financial or credit markets. Conditions such as those we experienced as a result of the economic downturn of 2008 and accompanying contraction in the credit markets heighten these risks. Concerns over continued economic instability, including the sovereign debt and banking crises in Europe, could make it more difficult for us to collect outstanding receivables and could adversely impact affect our liquidity.

Foreign Currency Exchange Rate Risk

As a global entity, we are exposed to movements in foreign currency exchange rates. These exposures may change over time as business practices evolve. Adverse foreign currency rate movements could have a material negative impact on our financial results. Our primary exposures related to foreign currency denominated sales and purchases are in Europe, Asia, Australia and Canada.

We have many transactions denominated in foreign currencies and address certain of those financial exposures through a risk management program that includes the use of derivative financial instruments. We sell products throughout the world, often in the currency of the customer’s country, and may hedge certain of these larger foreign currency transactions when they are not transacted in the subsidiaries’ functional currency or in U.S. dollars. The foreign currency sales transactions that fit our risk management policy criteria are hedged with forward contracts. We may use other derivative instruments in the future. We enter into foreign currency forward contracts primarily to reduce the effects of fluctuating foreign currency exchange rates. We do not enter into forward contracts for speculative or trading purposes. The forward contracts range from one to thirteen months in maturity.

We also hedge the balance sheet exposures from our various foreign subsidiaries and business units. We enter into foreign currency forward contracts to minimize the short-term impact of currency fluctuations on assets and liabilities denominated in currencies other than the U.S. dollar functional currency.

The notional amounts of forward contracts are not a measure of our exposure. The fair value of forward contracts generally reflects the estimated amounts that we would receive or pay to terminate the contracts at the reporting date, thereby taking into account and approximating the current unrealized and realized gains or losses of the open contracts. A move in foreign currency exchange rates would change the fair value of the contracts, and the fair value of the underlying exposures hedged by the contracts would change in a similar offsetting manner.

The notional values and the weighted average contractual foreign currency exchange rates of our sold and purchased foreign currency forward contracts outstanding at September 27, 2013 were as follows:

(In millions)	Notional Value Sold		Notional Value Purchased		Weighted Average Contract Rate (Foreign Currency Units per USD)
Australian dollar	$	21.9	$	—		1.0746
British pound		18.6		—		0.62
Canadian dollar		—		2.2		1.0311
Euro		228.6		—		0.7391
Indian rupee		4.7		—		63.03
Japanese yen		147.9		—		98.852
Norwegian krone		3.3		2.8		6.0064
Swiss franc		—		70.9		0.9045
Swedish krone		3.1		—		6.4192
Totals	$	428.1	$	75.9

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Interest Rate Risk

Our market risk exposure to changes in interest rates depends primarily on our investment portfolio and short-term borrowings. Our investment portfolio consisted of cash and cash equivalents and a short-term investment as of September 27, 2013. The principal amount of cash and cash equivalents at September 27, 2013 totaled $1.1 billion with a weighted average interest rate of 0.20%. At September 27, 2013, our short-term investment represented a loan of $62.7 million (including accrued interest) to CPTC, which bears interest at LIBOR plus 6.25% per annum with a minimum interest rate of 8.25% per annum.

The 2013 Credit Facility, which includes the 2013 Revolving Credit Facility and the 2013 Term Loan Facility, allows us to borrow up to a maximum amount of $300 million under the 2013 Revolving Credit Facility and $500 million under the 2013 Term Loan Facility. We secured a portion of the 2013 Credit Facility with a pledge of 65% of the voting shares that we hold in Varian Medical Systems Nederland B.V., a wholly-owned subsidiary.

Borrowings under the 2013 Term Loan Facility accrue interest either (i) based on a Eurodollar Rate, as defined in the Credit Agreement (the “Eurodollar Rate”), plus a margin of 1.00% to 1.25% based on a leverage ratio involving funded indebtedness and EBITDA  or (ii) based upon a base rate of (a) the federal funds rate plus 0.50%, (b) BofA’s announced prime rate, or (c) the Eurodollar Rate plus 1.00%, whichever is highest, plus a margin of up to 0.25% based on the same leverage ratio, depending upon instructions from the Company.  Borrowings under the 2013 Revolving Credit Facility accrue interest either (i) based on the Eurodollar Rate plus a margin of 1.25% to 1.50% based on a leverage ratio involving funded indebtedness and EBITDA or (ii) based upon a base rate of (a) the federal funds rate plus 0.50%, (b) BofA’s announced prime rate, or (c) the Eurodollar Rate plus 1.00%, whichever is highest, plus a margin of 0.25% to 0.50% based on the same leverage ratio, depending upon instructions from the Company.

In addition, the Sumitomo Credit Facility allows VMS KK to borrow up to a maximum amount of 3 billion Japanese yen. Borrowings under the Sumitomo Credit Facility accrue interest based on the basic loan rate announced by the Bank of Japan plus a margin.

We are affected by market risk exposure primarily through the effect of changes in interest rates on amounts payable under our revolving credit facility and term loan facility. As of September 27, 2013, there was no amount outstanding under our revolving credit facility.  At September 27, 2013, borrowings under the 2013 Term Loan Facility totaled $500 million with a weighted average interest rate of 1.31%.  If the amount outstanding under our term loan facility remained at this level for an entire year and interest rates increased or decreased by 1%, our annual interest expense would increase or decrease, respectively, by an additional $5 million. See a detailed discussion of our credit facilities in “MD&A – Liquidity and Capital Resources.”

In addition, we had $6.3 million of an unsecured term loan outstanding at September 27, 2013 that carried at a weighted average fixed interest rate of 6.7% with principal payments due in fiscal year 2014. To date, we have not used derivative financial instruments to hedge the interest rate of our investment portfolio, short-term borrowings or long-term debt, but may consider the use of derivative instruments in the future.

The table below presents principal amounts and related weighted average interest rates by year for our cash and cash equivalents, short-term borrowings and long term debt.

	Fiscal Years
(Dollars in millions)	2014			2015			2016			2017			2018			Thereafter		Total
Assets:
Cash and cash equivalents	$	1,117.9		$	—		$	—		$	—		$	—		$	—	$	1,117.9
Average interest rate(1)		0.20	%		—			—			—			—			—		0.20	%
Short-term investment(2)	$	62.7		$	—		$	—		$	—		$	—		$	—	$	62.7
Average interest rate(1)		8.25	%		—			—			—			—			—		8.25	%
Liabilities:
Long-term debt (including current maturities)	$	56.3		$	50.0		$	50.0		$	50.0		$	300.0		$	—	$	506.3
Average interest rate(1)		1.91	%		1.31	%		1.31	%		1.31	%		1.31	%		—		1.44	%

(1) Represents interest rates effective as of September 27, 2013.

(2) Represents amount loaned to CPTC, including accrued interest, under a loan facility. See Note 15, “Variable Interest Entity” of the Notes to the Consolidated Financial Statements for a detailed discussion.

The estimated fair value of our cash and cash equivalents (68% of which was held abroad at September 27, 2013 and could be subject to additional taxation if it were repatriated to the United States) and the estimated fair value of our unsecured term loan approximated the principal amounts reflected above based on the maturities of these financial instruments.  

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The estimated fair value of our term loan payable in fiscal year 2018, at September 27, 2013, approximates its carrying value because the term loan is carried at a market observable interest rate that resets periodically.  

The fair value of our loan to CPTC was $62.7 million at September 27, 2013, which was estimated based on the income approach by using the discounted cash flow model with key assumptions that include discount rates corresponding to the terms and risks associated with the loan to CPTC. In addition, the Company does not increase the fair value above its par value as ORIX, the loan agent, has the option to purchase this loan from the Company under the original terms and conditions at par value.

Although payments under certain of our operating leases for our facilities are tied to market indices, these operating leases do not expose us to material interest rate risk.

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Item 8. Financial Statements and Supplementary Data

VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

	Fiscal Years
(In thousands, except per share amounts)	2013			2012			2011
Revenues:
Product	$	2,055,718		$	2,003,988		$	1,879,327
Service		887,179			803,027			717,339
Total revenues		2,942,897			2,807,015			2,596,666
Cost of revenues:
Product		1,295,492			1,247,278			1,133,118
Service		397,718			363,401			327,659
Total cost of revenues		1,693,210			1,610,679			1,460,777
Gross margin		1,249,687			1,196,336			1,135,889
Operating expenses:
Research and development		208,208			185,742			170,725
Selling, general and administrative		432,589			416,520			376,713
Total operating expenses		640,797			602,262			547,438
Operating earnings		608,890			594,074			588,451
Interest income		7,322			5,269			2,858
Interest expense		(4,129	)		(3,419	)		(2,599	)
Earnings from continuing operations before taxes		612,083			595,924			588,710
Taxes on earnings		173,835			168,875			180,084
Earnings from continuing operations		438,248			427,049			408,626
Loss from discontinued operations, net of taxes		—			—			(9,693	)
Net earnings	$	438,248		$	427,049		$	398,933
Net earnings (loss) per share—basic:
Continuing operations	$	4.04		$	3.83		$	3.50
Discontinued operations		—			—			(0.08	)
Net earnings per share	$	4.04		$	3.83		$	3.42
Net earnings (loss) per share—diluted:
Continuing operations	$	3.98		$	3.76		$	3.44
Discontinued operations		—			—			(0.08	)
Net earnings per share	$	3.98		$	3.76		$	3.36
Shares used in the calculation of net earnings (loss) per share:
Weighted average shares outstanding—basic		108,352			111,376			116,703
Weighted average shares outstanding—diluted		110,053			113,473			118,735

See accompanying notes to the consolidated financial statements.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

	Fiscal Years
(In thousands)	2013			2012			2011
Net earnings	$	438,248		$	427,049		$	398,933
Other comprehensive earnings (loss), net of tax:
Defined benefit pension and post-retirement benefit plans:
Net gain/(loss) arising during the year, net of tax benefit/(expense) of ($1,504), $1,079 and $1,783		5,549			(8,761	)		(8,068	)
Amortization of prior service cost included in net periodic benefit cost, net of tax benefit/(expense) of $159, ($19) and ($18)		(145	)		144			137
Amortization, settlement or curtailment of net actuarial loss, net of tax expense of ($608), ($548) and ($446)		3,138			3,114			1,655
		8,542			(5,503	)		(6,276	)
Unrealized gain on derivatives:
Increase (decrease) in unrealized gain, net of tax benefit/(expense) of ($191), ($541) and $206		318			900			(326	)
Reclassification adjustments, net of tax benefit/(expense) of ($923), ($217) and $396		(1,540	)		(362	)		626
		(1,222	)		538			300
Currency translation adjustment		9,230			(4,808	)		(3,268	)
Other comprehensive earnings (loss)		16,550			(9,773	)		(9,244	)
Comprehensive earnings	$	454,798		$	417,276		$	389,689

See accompanying notes to the consolidated financial statements.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except par values)	September 27, 2013			September 28, 2012
Assets
Current assets:
Cash and cash equivalents	$	1,117,861		$	704,570
Short-term investment		62,700			49,709
Accounts receivable, net of allowance for doubtful accounts of $14,735 at September 27, 2013 and $14,386 at September 28, 2012		698,254			691,806
Inventories		535,223			457,869
Prepaid expenses and other current assets		168,495			150,775
Deferred tax assets		122,250			115,786
Total current assets		2,704,783			2,170,515
Property, plant and equipment, net		315,331			296,592
Goodwill		225,335			222,242
Other assets		223,025			189,377
Total assets	$	3,468,474		$	2,878,726
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	194,272		$	180,736
Accrued expenses		320,884			336,568
Product warranty		39,050			52,799
Deferred revenue		389,479			369,456
Advance payments from customers		160,644			141,972
Short-term borrowings		—			155,000
Current maturities of long-term debt		56,250			—
Total current liabilities		1,160,579			1,236,531
Long-term debt		450,000			6,250
Other long-term liabilities		144,048			126,169
Total liabilities		1,754,627			1,368,950
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock of $1 par value: 1,000 shares authorized; none issued and outstanding		—			—
Common stock of $1 par value: 189,000 shares authorized; 106,491 and 109,407 shares issued and outstanding at September 27, 2013 and at September 28, 2012, respectively		106,491			109,407
Capital in excess of par value		637,084			563,875
Retained earnings		1,010,343			893,115
Accumulated other comprehensive loss		(40,071	)		(56,621	)
Total stockholders’ equity		1,713,847			1,509,776
Total liabilities and stockholders’ equity	$	3,468,474		$	2,878,726

See accompanying notes to the consolidated financial statements.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Fiscal Years
(In thousands)	2013			2012			2011
Cash flows from operating activities:
Net earnings	$	438,248		$	427,049		$	398,933
Adjustments to reconcile net earnings to net cash provided by operating activities:
Share-based compensation expense		42,637			47,876			42,018
Tax benefits from exercises of share-based payment awards		10,708			7,888			24,441
Excess tax benefits from share-based compensation		(9,583	)		(8,929	)		(22,570	)
Depreciation		58,527			56,103			49,643
Amortization of intangible assets		4,332			4,879			2,948
Deferred taxes		(3,946	)		(2,349	)		35,230
Provision for doubtful accounts receivable		5,984			10,350			2,514
Income on equity investment in affiliate		(2,461	)		(245	)		(4,276	)
Change in fair value of contingent consideration		(5,190	)		—			—
Other, net		1,673			1,265			(398	)
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable		(43,301	)		(87,434	)		(41,577	)
Inventories		(76,400	)		(42,459	)		(42,235	)
Prepaid expenses and other assets		(15,694	)		(47,029	)		(13,288	)
Accounts payable		7,784			19,275			35,524
Accrued expenses and other liabilities		(32,731	)		37,748			(15,758	)
Deferred revenues and advance payments from customers		74,598			68,787			21,630
Net cash provided by operating activities		455,185			492,775			472,779
Cash flows from investing activities:
Purchases of property, plant and equipment		(76,277	)		(61,103	)		(70,928	)
Investment in corporate debt security		(10,044	)		(30,503	)		(19,205	)
Investment in a privately held company		—			—			(13,597	)
Acquisition of businesses, net of cash acquired		—			(28,241	)		(9,124	)
Net amounts received from (paid to) deferred compensation plan (“DCP”) trust account		(309	)		(2,960	)		48
Note repayments (receivable) from related party		—			8,800			(781	)
Note receivable from other		(10,000	)		—			—
Other		359			(8,288	)		(4,345	)
Net cash used in investing activities		(96,271	)		(122,295	)		(117,932	)
Cash flows from financing activities:
Repurchases of common stock		(419,933	)		(257,440	)		(505,284	)
Equity forward contracts		—			—			(105,562	)
Proceeds from issuance of common stock to employees		129,582			60,332			137,697
Excess tax benefits from share-based compensation		9,583			8,929			22,570
Employees’ tax withheld and paid for restricted stock and restricted stock units		(9,560	)		(10,122	)		(14,815	)
Net borrowings (repayments) under line of credit agreements		(155,000	)		(26,400	)		161,400
Borrowings under the term loan facility		500,000			—			—
Repayments on bank borrowings		—			(9,876	)		(7,264	)
Other		(3,026	)		(99	)		(77	)
Net cash provided by (used in) financing activities		51,646			(234,676	)		(311,335	)
Effects of exchange rate changes on cash and cash equivalents		2,731			4,309			724
Net increase in cash and cash equivalents		413,291			140,113			44,236
Cash and cash equivalents at beginning of fiscal year		704,570			564,457			520,221
Cash and cash equivalents at end of fiscal year	$	1,117,861		$	704,570		$	564,457

Supplemental information:

VMS common stock valued at $25.0 million was received in fiscal year 2012 upon settlement of the August 2011 Repurchase Agreement. VMS common stock valued at $41.3 million was received in fiscal year 2011 upon settlement of the February 2011 Repurchase Agreement. See Note 11, “Stockholders’ Equity.”

See accompanying notes to the consolidated financial statements.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)	Common Stock						Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total
	Shares			Amount
Balances at October 1, 2010		118,007		$	118,007		$	508,366		$	686,598		$	(37,604	)	$	1,275,367
Net earnings		—			—			—			398,933			—			398,933
Other comprehensive loss		—			—			—			—			(9,244	)		(9,244	)
Issuance of common stock		3,596			3,596			134,101			—			—			137,697
Tax benefits from exercises of share-based payment award		—			—			24,441			—			—			24,441
Shares repurchased for tax withholdings on vesting of restricted stock and restricted stock units		(231	)		(231	)		(14,584	)		—			—			(14,815	)
Share-based compensation expense		—			—			42,358			—			—			42,358
Equity forward contract		—			—			(105,562	)		—			—			(105,562	)
Repurchases of common stock		(9,028	)		(9,028	)		(88,198	)		(408,058	)		—			(505,284	)
Balances at September 30, 2011		112,344			112,344			500,922			677,473			(46,848	)		1,243,891
Net earnings		—			—			—			427,049			—			427,049
Other comprehensive loss		—			—			—			—			(9,773	)		(9,773	)
Issuance of common stock		1,664			1,664			58,668			—			—			60,332
Tax benefits from exercises of share-based payment award		—			—			7,888			—			—			7,888
Shares repurchased for tax withholdings on vesting of restricted stock and restricted stock units		(167	)		(167	)		(9,954	)		—			—			(10,121	)
Share-based compensation expense		—			—			47,950			—			—			47,950
Repurchases of common stock		(4,434	)		(4,434	)		(41,599	)		(211,407	)		—			(257,440	)
Balances at September 28, 2012		109,407			109,407			563,875			893,115			(56,621	)		1,509,776
Net earnings		—			—			—			438,248			—			438,248
Other comprehensive earnings		—			—			—			—			16,550			16,550
Issuance of common stock		3,222			3,222			126,437			—			—			129,659
Tax benefits from exercises of share-based payment awards		—			—			10,708			—			—			10,708
Shares repurchased for tax withholdings on vesting of restricted stock and restricted stock units		(138	)		(138	)		(9,422	)		—			—			(9,560	)
Share-based compensation expense		—			—			42,130			—			—			42,130
Repurchases of common stock		(6,000	)		(6,000	)		(96,644	)		(321,020	)		—			(423,664	)
Balances at September 27, 2013		106,491		$	106,491		$	637,084		$	1,010,343		$	(40,071	)	$	1,713,847

See accompanying notes to the consolidated financial statements.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Varian Medical Systems, Inc. (“VMS”) and subsidiaries (collectively, the “Company”) designs, manufactures, sells and services hardware and software products for treating cancer with radiotherapy, stereotactic radiosurgery, stereotactic body radiotherapy, and brachytherapy. The Company also designs, manufactures, sells and services X-ray imaging components for use in a range of applications, including radiographic or fluoroscopic imaging, mammography, specific procedures, computed tomography and industrial applications. In addition, the Company designs, manufactures, sells and services linear accelerators, image processing software and image detection products for security and inspection purposes. The Company also develops, designs, manufactures, sells and services proton therapy products and systems for cancer treatment.

Basis of Presentation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). As discussed in Note 18, “Discontinued Operations,” the Company has presented the operating results of the scientific research instruments business (“Research Instruments”) of ACCEL Instruments GmbH (“ACCEL,” which has since changed its name to Varian Medical Systems Particle Therapy GmbH) as a discontinued operation in the Consolidated Statements of Earnings for the fiscal year 2011. There were no operating results or other material balances related to Research Instruments beyond fiscal year 2011. Unless noted otherwise, discussion in these notes pertains to the Company’s continuing operations.

Reclassifications

Certain items in the consolidated statements of earnings and consolidated balance sheets have been reclassified to conform to the current fiscal year’s presentation. These reclassifications had no impact on previously reported total revenues, total cost of revenues, net earnings, total current assets, total assets, total current liabilities, total liabilities, and total stockholders’ equity.

Fiscal Year

The fiscal years of the Company as reported are the 52- or 53-week periods ending on the Friday nearest September 30. Fiscal year 2013 was the 52-week period that ended on September 27, 2013. Fiscal year 2012 was the 52-week period that ended on September 28, 2012 and fiscal year 2011 was the 52-week period that ended on September 30, 2011.

Distribution

On April 2, 1999, Varian Associates, Inc. reorganized into three separate publicly traded companies by spinning off, through a tax-free distribution, two of its businesses to stockholders (the “Spin-offs”). The Spin-offs resulted in the following three companies: 1) the Company (renamed from Varian Associates, Inc. to Varian Medical Systems, Inc. following the Spin-offs); 2) Varian, Inc. (“VI”), which became a wholly owned subsidiary of Agilent Technologies Inc. in May 2010; and 3) Varian Semiconductor Equipment Associates, Inc. (“VSEA”), which became a wholly owned subsidiary of Applied Materials, Inc. in November 2011. The Spin-offs resulted in a non cash dividend to stockholders.

In connection with the Spin-offs, the Company, VI and VSEA also entered into various agreements that set forth the principles to be applied in separating the companies and allocating certain related costs and specified portions of contingent liabilities (see Note 9, “Commitments and Contingencies.”)

Principles of Consolidation

The consolidated financial statements include those of VMS and its subsidiaries. Intercompany balances, transactions and stock holdings have been eliminated in consolidation.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Consolidation of Variable Interest Entities

The Company uses a qualitative approach in assessing the consolidation requirement for entities in which it may have a variable interest.  A variable interest entity is an entity with one or more of the following characteristics (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support; (b) as a group, the holders of the equity investment at risk lack the ability to make certain decisions, the obligation to absorb expected losses or the right to receive expected residual returns; or (c) the equity investors have voting rights that are not proportional to their economic interests.

The approach focuses on identifying which entity has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. In the event that the Company is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity will be included in the Company’s Consolidated Financial Statements. For fiscal years 2013, 2012 and 2011, the Company did not consolidate any variable interest entity because the Company was not a primary beneficiary.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Foreign Currency Translation

The Company uses the U.S. dollar predominately as the functional currency of its foreign subsidiaries. For foreign subsidiaries where the U.S. dollar is the functional currency, gains and losses from remeasurement of foreign currency balances into U.S. dollars are included in the Consolidated Statements of Earnings. The aggregate net gains (losses) resulting from foreign currency transactions and remeasurement of foreign currency balances into U.S. dollars, that were included in the Consolidated Statements of Earnings, were $0.7 million, $0.4 million and $(1.4) million in fiscal years 2013, 2012 and 2011, respectively. For the foreign subsidiary where the local currency is the functional currency, translation adjustments of foreign currency financial statements into U.S. dollars are recorded to a separate component of accumulated other comprehensive income (loss). See Note 8, “Derivative Instruments and Hedging Activities” regarding the Company’s hedging activities and derivative instruments. Also see Note 3, “Fair Value” regarding valuation of the Company’s derivative instruments.

Cash and Cash Equivalents

The Company considers currency on hand, demand deposits, time deposits, and all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are held in various financial institutions in the United States and internationally.

Short-term Investment

The Company has an investment in a corporate debt security from the California Proton Therapy Center, LLC (“CPTC”) that it classifies as an available-for-sale investment, which is recorded in the Consolidated Balance Sheets at fair value. Unrealized gains and losses on this investment are included as a separate component of “Accumulated other comprehensive loss,” net of tax, in the Consolidated Balance Sheets. The Company classifies its available-for-sale investment as short-term based on the nature of the investment and its availability for use in current operations. The Company monitors its short-term investment for possible other-than-temporary impairment when business events or changes in circumstances indicate that the carrying value of the investment may not be recoverable. The Company has not identified any indication of impairment of its short-term investment for fiscal years 2013 and 2012.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Investments in Privately Held Companies

Equity investments in privately held companies in which the Company holds at least a 20% ownership interest or in which the Company has the ability to exercise significant influence are accounted for by the equity method. Equity investments in privately held companies in which the Company holds less than a 20% ownership interest and does not have the ability to exercise significant influence are accounted for under the cost method. Equity investments accounted for under the cost method totaled $21.4 million at both September 27, 2013 and September 28, 2012. The Company’s equity investments in privately held companies are included in “Other assets” in the Consolidated Balance Sheets. The Company monitors these equity investments for impairment and makes appropriate reductions in carrying values if the Company determines that impairment charges are required based primarily on the financial condition and near-term prospects of these companies. The Company did not have any impairment loss on equity investments in privately held companies for fiscal years 2013, 2012 and 2011.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash, cash equivalents, short-term investment, trade accounts receivable and derivative financial instruments used in hedging activities. Cash and cash equivalents held with financial institutions may exceed the Federal Deposit Insurance Corporation insurance limits or similar limits in foreign jurisdictions. The Company has not experienced any losses on its deposits of cash and cash equivalents. With respect to its short-term investment, the Company performs a periodic credit evaluation of  CPTC, the obligor under the debt security. In addition, the Company will be exposed to credit loss in the event of nonperformance by counterparties on the foreign currency forward contracts used in hedging activities. The Company transacts its foreign currency forward contracts with several large international and regional financial institutions and, therefore, does not consider the risk of nonperformance to be concentrated in any specific counterparty. The Company has not experienced any losses resulting from the failure of counterparty to meet its financial obligations under foreign currency forward contracts. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers comprising the Company’s customer base and their geographic dispersion. The Company performs ongoing credit evaluations of its customers and, except for government tenders, group purchases and orders with a letter of credit, requires its Oncology Systems, Security and Inspection Products (“SIP”) and Varian Particle Therapy (“VPT”) customers to provide a down payment. The Company maintains an allowance for doubtful accounts based upon the expected collectability of all accounts receivable. No single customer represented more than 10% of the accounts receivable amount for any period presented.

Inventories

Inventories are valued at the lower of cost or market (realizable value). Excess and obsolete inventories are determined primarily based on future demand forecasts and write-downs of excess and obsolete inventories are recorded as a component of cost of revenues. Cost is computed using standard cost (which approximates actual cost) and actual cost on a first-in-first-out or average basis.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation. Major improvements are capitalized, while repairs and maintenance are expensed as incurred. Costs incurred for internal use software during the application development stage are capitalized in accordance with guidance on internal-use software. Internally developed software primarily includes enterprise-level business software that the Company customizes to meet its specific operational needs. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Land is not subject to depreciation, but land improvements are depreciated over fifteen years. Land leasehold rights and leasehold improvements are amortized over the lesser of their estimated useful lives or remaining lease terms. Buildings are depreciated over twenty or thirty years. Machinery and equipment are depreciated over their estimated useful lives, which range from three to seven years. Assets subject to lease are amortized over the lesser of their estimated useful lives or remaining lease terms. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are removed from the accounts. Gains or losses resulting from retirements or disposals of property, plant and equipment are included in operating expenses.

Goodwill and Intangible Assets

Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net identified tangible and intangible assets acquired. Purchased intangible assets are carried at cost, net of accumulated amortization. Intangible assets with finite lives are amortized over their estimated useful lives of approximately one to twenty years generally using the straight-line method.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Impairment of Long-lived Assets, Goodwill and Intangible Assets

The Company reviews long-lived assets and identifiable intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company assesses these assets for impairment based on their estimated undiscounted future cash flows. If the carrying value of the assets exceeds the estimated future undiscounted cash flows, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. The Company did not recognize any impairment charges for long-lived assets and identifiable intangible assets in fiscal years 2013, 2012, and 2011.

The Company evaluates goodwill for impairment at least annually or whenever an event occurs or circumstances changes that would more likely than not reduce the fair value of a reporting unit below its carrying amount. If the Company determines that a quantitative analysis is necessary, the impairment test for goodwill is a two-step process. Step one consists of a comparison of the fair value of a reporting unit against its carrying amount, including the goodwill allocated to each reporting unit. The Company determines the fair value of its reporting units based on a combination of income and market approaches. The income approach is based on the present value of estimated future cash flows of the reporting units and the market approach is based on a market multiple calculated for each business unit based on market data of other companies engaged in similar business. If the carrying amount of the reporting unit is in excess of its fair value, step two requires the comparison of the implied fair value of the reporting unit’s goodwill against the carrying amount of the reporting unit’s goodwill. Any excess of the carrying value of the reporting unit’s goodwill over the implied fair value of the reporting unit’s goodwill is recorded as an impairment loss.

In fiscal years 2013, 2012 and 2011, the Company performed the annual goodwill impairment testing for the four reporting units that carried goodwill, namely Oncology Systems, X-Ray Products, SIP and VPT, and found no impairment. Based on the most recent annual goodwill impairment testing that the Company performed in fiscal year 2013 for each of its four reporting units that carried goodwill, Oncology Systems, X-Ray Products, SIP and VPT, the fair value of each such reporting unit was substantially in excess of its carrying value.  

Loss Contingencies

From time to time, the Company is a party to or otherwise involved in legal proceedings, claims and government inspections or investigations and other legal matters, both inside and outside the United States, arising in the ordinary course of its business or otherwise.  The Company accrues amounts, to the extent they can be reasonably estimated, that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that it believes will result in a probable loss.

Environmental remediation liabilities are recorded when environmental assessments and/or remediation efforts are probable, and the costs of these assessments or remediation efforts can be reasonably estimated.

Revenue Recognition

The Company’s revenues are derived primarily from the sale of hardware and software products, and related services and contracts from the Company’s Oncology Systems, X-Ray Products, SIP and VPT businesses. The Company recognizes its revenues net of any value added or sales tax and net of sales discounts.

Many of the Company’s revenue arrangements consist of multiple deliverables of its software and non-software products, as well as related services. In Oncology Systems, the linear accelerators are often sold with hardware and software accessory products that enhance efficiency and enable delivery of advanced radiotherapy and radiosurgery treatments. Many of the Oncology Systems hardware and software accessory products are also sold on a stand-alone basis. The X-Ray Products business generally sells its X-ray components (including X-ray tubes, flat panel detectors and image processing tools) on a stand-alone basis. However, the X-Ray Products business occasionally sells its flat panel detectors, X-ray tubes and imaging processing tools as a package that is optimized for digital X-ray imaging. While SIP products are generally sold on a stand-alone basis, SIP occasionally sells its Linatron^® X-ray accelerators together with its imaging processing software and image detection products to original equipment manufacturer (“OEM”) customers that incorporate them into their inspection systems. Service contracts are often sold with Oncology Systems products, as well as with certain products in the SIP business. As discussed below, certain of the Oncology Systems and SIP products are sold with installation obligations. Delivery of different elements in a revenue arrangement often span more than one reporting period. For example, a linear accelerator may be delivered in a reporting period but the related installation is completed in a later period. Revenue related to service contracts usually starts after the expiration of the warranty period for non-software products or upon acceptance for software products.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For a multiple element arrangement that includes software and non-software deliverables which includes service contracts, the Company first allocates revenues among the software and non-software deliverables on a relative selling price basis. The amounts allocated to the non-software products and software are accounted for as follows:

Non-software Products

Non-software products include hardware products, software components that function together with the hardware components to deliver the product’s essential functionality, as well as service contracts. Except as described below under “Service,” the Company recognizes revenues for non-software products when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured.

For multiple element revenue arrangements that involve non-software products, a delivered non-software element is considered as a separate unit of accounting when it has stand-alone value and there is no customer-negotiated refund or return rights for the delivered element. The allocation of revenue to all deliverables based on their relative selling prices is determined at the inception of the arrangement. The selling price for each deliverable is determined using vendor-specific objective evidence (“VSOE”) of selling price, if it exists; otherwise, third-party evidence of selling price (“TPE”). If neither VSOE nor TPE of selling price exists for a deliverable the Company uses the deliverable’s estimated selling prices (“ESP”).

The Company’s non-software products have stand-alone value because they are sold separately. Product installation, which is a standard process and does not involve changes to the features or capabilities of the Company’s products, is considered as a separate unit of accounting. Installation of Oncology Systems and SIP non-software products involves the Company’s testing of each product at its factory prior to the product’s delivery to ensure that the product meets the Company’s published specifications. Once these tests establish that the specifications have been met, the product is then disassembled and shipped to the customer’s site as specified in the customer contract. Risk of loss is transferred to the customer either at the time of shipment or delivery, depending upon the shipping terms of the contract. At the customer’s site, the product is reassembled, installed and retested in accordance with the Company’s installation procedures to ensure and demonstrate compliance with the Company’s published specifications for that product.

Under the terms of the Company’s standard non-software sales contracts, “acceptance” of a non-software product with installation obligations is deemed to have occurred upon the earliest of (i) completion of product installation and testing in accordance with the Company’s standard installation procedures showing compliance with the Company’s published specifications for that product, (ii) receipt by the Company of an acceptance form executed by the customer acknowledging installation and compliance with the Company’s published specifications for that product, (iii) use by the customer of the product for any purpose after its delivery or (iv) six months after the delivery of the product to the customer by the Company. The contracts allow for cancellation only by mutual agreement, thus the customer does not have a unilateral right to return the delivered non-software product.

The Company establishes VSOE of selling price based on the price charged for a deliverable when sold separately and, for a deliverable not yet being sold separately, the price established by management having the relevant authority. As discussed above, many products are sold in stand-alone arrangements and accordingly have VSOE of selling price. Service contracts are sold separately through either original sale or subsequent renewal of annual contracts. The Company establishes TPE generally by evaluating the Company’s and competitors’ largely interchangeable competing products or services in stand-alone sales to similarly situated customers. The TPE for product installation is determined based on the estimated labor hours and the prevailing hourly rate charged for similar services, as well as the prices charged by outside vendors for installation of the Company’s products. For certain products for which the Company is not able to establish VSOE or TPE of selling prices, ESPs are used as the basis of their selling prices. The Company estimates selling prices following an established process that considers market conditions, including the product offerings and pricing strategies of competitors, as well as internal factors such as historical pricing practices and margin objectives. The establishment of product and service ESPs is controlled and reviewed by the appropriate level of management in all of the Company’s businesses.

The Company limits the amount of revenue recognized for delivered items to the amount that is not contingent upon the delivery of additional products or services. For Oncology Systems and SIP non-software products with installation obligations, the Company recognizes as revenues a portion of the product purchase price upon transfer of risk of loss and defers revenue recognition on the portion associated with product installation, provided that all other criteria for revenue recognition have been met. The portion deferred is the greater of the relative selling price of the installation services for such products or the amount of payment contractually linked to product installation services.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company does not have installation obligations for X-ray tubes, digital image detectors, spare parts and certain hardware products in Oncology Systems and the SIP business. For the products that do not include installation obligations, the Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the shipping terms of the contract, provided that all other revenue recognition criteria have been met.

Software Products

Except as described below under “Service,” the Company recognizes revenues for software products in accordance with the software revenue recognition guidance. The Company recognizes license revenues when all of the following criteria have been met: persuasive evidence of an arrangement exists, the vendor’s fee is fixed or determinable, collection of the related receivable is probable, delivery of the product has occurred and the Company has received from the customer an acceptance form acknowledging installation and substantial conformance with the Company’s specifications (as set forth in the user manual) for such product, or upon verification of installation when customer acceptance is not required to be received, or upon the expiration of an acceptance period, provided that all other criteria for revenue recognition have been met.

Revenues earned on software arrangements involving multiple elements are allocated to each element based on VSOE of fair value, which is based on the price charged when the same element is sold separately. In instances when evidence of VSOE of fair value of all undelivered elements exists, but evidence does not exist for one or more delivered elements, revenues are recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. Revenue allocated to maintenance and support is recognized ratably over the maintenance term (typically one year).

Installation of the Company’s software products may involve a certain amount of customer-specific implementation to enable the software product to function within the customer’s operating environment (i.e., with the customer’s information technology network and other hardware, with the customer’s data interfaces and with the customer’s administrative processes) and substantially in conformance with the Company’s specifications (as set forth in the user manual) for such product. With these software products, customers do not have full use of the software (i.e., functionality) until the software is installed as described above and functioning within the customer’s operating environment. Therefore, the Company recognizes 100% of such software revenues upon receipt from the customer of the Company’s acceptance form acknowledging installation and such substantial conformance, or upon verification of installation when the Company is not required to receive customer acceptance, or upon the expiration of an acceptance period, provided that all other criteria for revenue recognition have been met.

The Company does not have installation obligations for certain brachytherapy and SIP software products. For software products that do not include installation obligations, the Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the shipping terms of the contract, provided that all other criteria for revenue recognition have been met.

Contracts for Customized Equipment

Revenues related to certain highly customized image detection systems, proton therapy systems and proton therapy system commissioning contracts are recognized in accordance with contract accounting. The Company recognizes contract revenues under the percentage-of-completion method which are based on contract costs incurred to date compared with total estimated contract costs. Changes in estimates of total contract revenue, total contract cost or the extent of progress towards completion are recognized in the period in which the changes in estimates are identified. Estimated losses on contracts are recognized in the period in which the loss is identified. In circumstances in which the final outcome of a contract cannot be precisely estimated but a loss on the contract is not expected, the Company recognizes revenues under the percentage-of-completion method based on a zero profit margin until more precise estimates can be made. If and when the Company can make more precise estimates, revenues and costs of revenues are adjusted in the same period.

Contracts accounted for in accordance with contract accounting are billable upon achievement of milestones specified in the contracts or upon customer acceptance. Costs incurred and revenues recognized under the percentage-of-completion method in excess of customer billings are included in “Accounts receivable” in the Consolidated Balance Sheets. Customer billings in excess of costs incurred and revenue recognized under the percentage-of-completion method, which typically reflect initial down payments, are included in “Advance payments from customers” in the Consolidated Balance Sheets. Costs incurred and revenues recognized in excess of customer billings were $68.1 million as of September 27, 2013 and $48.8 million as of September 28, 2012. Customer billings in excess of costs incurred and revenue recognized were $33.8 million as of September 27, 2013 and $32.6 million as of September 28, 2012.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Service

Service revenues include revenues from service contracts, bundled support arrangements, paid services and trainings, and parts that are sold by the service department. Prior to the fourth quarter of fiscal year 2013, revenues and cost of revenues of parts that were sold by the service department were classified as product revenues and product cost of revenues, respectively. Revenues and costs of revenues of parts that are sold by the service department have been reclassified from product revenues and product cost of revenues to service revenue and service cost of revenues, respectively, for the first nine months of fiscal year 2013 and for fiscal years 2012 and 2011 to conform to the current presentation. Also, certain other cost of revenue items have been reclassified between product cost of revenues and service cost of revenues for the first nine months of fiscal year 2013 and for fiscal years 2012 and 2011 to conform to the current presentation. Revenues allocated to service contracts are generally recognized ratably over the period of the related contracts. For proton therapy systems service contracts, revenues subject to certain penalty provisions are deferred until reliable estimates can be made or the related penalty provisions lapse. Revenues related to services performed on a time-and-materials basis are recognized when they are earned and billable.

Advance Payments from Customers

Except for government tenders, group purchases and orders with letters of credit, the Company typically requires its Oncology Systems, SIP and VPT customers to provide a down payment prior to transfer of risk of loss of ordered products. These payments are recorded as “Advance payments from customers” in the Consolidated Balance Sheets.

Deferred Revenue

Deferred revenue includes (i) the billable amount applicable to shipment of software products but for which installation and/or final acceptance have not been completed (ii) the billable amount applicable to non-software products for which installation and/or acceptance have not been completed and (iii) the billable amount for service contracts for which the services have not been rendered. As of September 27, 2013, advance payments prior to performance under service contracts have been classified as deferred revenue and prior year amounts have been reclassified from advance payments from customers to conform to the current fiscal year’s presentation. Deferred costs associated with deferred revenues are included in “Inventories” in the Consolidated Balance Sheets.

Medical Device Excise Tax

In accordance with the Patient Protection and Affordable Care Act, effective January 1, 2013, the Company began to incur a 2.3% excise tax on sales of medical devices in the United States. The medical device excise tax is included in the cost of revenues on the consolidated statements of earnings for fiscal year 2013, net of any amounts directly billed to customers for this tax.

Share-Based Compensation Expense

The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors, including stock options, employee stock purchases related to the Varian Medical Systems, Inc. Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”), deferred stock units, restricted stock, restricted stock units and performance units based on their fair values.

Share-based compensation expense recognized in the Consolidated Statements of Earnings includes compensation expense for the share-based payment awards based on the grant date fair value estimated in accordance with the guidance on share-based compensation. The Company values VMS’s stock options granted and the option component of the shares of VMS common stock purchased under the Employee Stock Purchase Plan using the Black-Scholes option-pricing model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The Company values its performance units using the Monte Carlo simulation model. Both the Black-Scholes option-pricing model and the Monte Carlo simulation model require the input of certain assumptions and changes in the assumptions can materially affect the fair value estimates of share-based payment awards.

Share-based compensation expense recognized is based on the value of the portion of share-based payment awards that is ultimately expected to vest. The Company attributes the value of share-based compensation to expense using the straight-line method. The Company considers only the direct tax impacts of share-based compensation awards when calculating the amount of tax windfalls or shortfalls.

For fiscal years 2013, 2012 and 2011, total share-based compensation expenses, before taxes, were $42.6 million, $47.9 million and $42.0 million, respectively. See Note 12, “Employee Stock Plans” for a detailed discussion.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Earnings per Share

Basic net earnings per share is computed by dividing net earnings by the weighted average number of shares of VMS common stock outstanding for the period. Diluted net earnings per share is computed by dividing net earnings by the sum of the weighted average number of common shares outstanding and dilutive common shares under the treasury stock method.

The following table sets forth the computation of net basic and diluted earnings per share:

	Fiscal Years
(In thousands, except per share amounts)	2013		2012		2011
Earnings from continuing operations	$	438,248	$	427,049	$	408,626
Loss from discontinued operations, net of taxes		—		—		(9,693	)
Net earnings	$	438,248	$	427,049	$	398,933
Weighted average shares outstanding—basic		108,352		111,376		116,703
Dilutive effect of potential common shares		1,701		2,097		2,032
Weighted average shares outstanding—diluted		110,053		113,473		118,735
Net earnings (loss) per share—basic:
Continuing operations	$	4.04	$	3.83	$	3.50
Discontinued operations		—		—		(0.08	)
Net earnings per share	$	4.04	$	3.83	$	3.42
Net earnings (loss) per share—diluted:
Continuing operations	$	3.98	$	3.76	$	3.44
Discontinued operations		—		—		(0.08	)
Net earnings per share	$	3.98	$	3.76	$	3.36
Anti-dilutive employee share-based awards, excluded		707		249		160

The Company excludes potentially dilutive common shares (consisting of shares underlying stock options, restricted stock units, performance units and the Employee Stock Purchase Plan) from the computation of diluted weighted average shares outstanding if the per share value, either the exercise price of the awards or the sum of (a) the exercise price of the awards and (b) the amount of the compensation cost attributed to future services and not yet recognized and (c) the amount of tax benefit or shortfall that would be recorded in additional paid-in capital when the award becomes deductible, is greater than the average market price of the shares, because the inclusion of the shares underlying these stock awards would be antidilutive to earnings per share.

Shipping and Handling Costs

Shipping and handling costs are included as a component of cost of revenues.

Research and Development

To date, research and development costs have been expensed as incurred. These costs primarily include employees’ compensation, consulting fees, material costs and research grants.

Software Development Costs

Costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized. No costs associated with the development of software have been capitalized as the Company believes its current software development process is essentially completed concurrent with the establishment of technological feasibility.

Comprehensive Earnings

Comprehensive earnings include all changes in equity (net assets) during a period from non-owner sources. Comprehensive earnings include currency translation adjustments, change in unrealized gain or loss on derivative instruments designated as cash flow hedges, net of taxes (see Note 8, “Derivative Instruments and Hedging Activities”), and adjustments to and amortization of unrecognized actuarial gain or loss, unrecognized transition obligation and unrecognized prior service cost of our defined benefit pension and post-retirement benefit plans. See Note 10, “Retirement Plans.”

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Taxes on Earnings

Taxes on earnings are based on pretax financial accounting income. Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Recent Accounting Pronouncements

a) New accounting updates recently adopted

In September 2011, the Financial Accounting Standards Board (“FASB”) amended Accounting Standard Codification (“ASC”) 350, “Intangibles – Goodwill and Other.” This amendment is intended to simplify how an entity tests goodwill for impairment and will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity no longer will be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that the reporting unit’s fair value is less than its carrying amount. This amendment became effective for the Company beginning in the first quarter of fiscal year 2013. The adoption of this amendment did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

In June 2011, the FASB amended ASC 220, “Presentation of Comprehensive Income.” This amendment requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. In December 2011, the FASB issued another amendment which defers indefinitely this amendment to the extent it relates to the presentation of reclassification adjustments. The amended guidance became effective for the Company in the first quarter of fiscal year 2013. The adoption of this amendment concerns disclosure only and did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

In July 2013, the FASB issued an accounting standard update to eliminate diversity in practice in the presentation of unrecognized tax benefits when a net operating loss carry forward, a similar tax loss, or a tax credit carry forward exists. The Company adopted this guidance beginning in the fourth quarter of fiscal year 2013. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

b) Recent accounting standards or updates not yet effective

In December 2011, the FASB amended ASC 210, “Balance Sheet,” enhancing disclosure requirements about the nature of an entity’s right to offset and related arrangements associated with its financial instruments and derivative instruments. The new guidance requires the disclosure of the gross amounts subject to rights of set-off, the amounts offset in accordance with the accounting standards followed, and the related net exposure. The new guidance will be effective for the Company beginning in the first quarter of fiscal year 2014. The adoption of this amendment concerns disclosure only, and the Company does not expect it to have an impact on its consolidated financial position, results of operations or cash flows.

In February 2013, the FASB issued an accounting standard update to require reclassification adjustments from other comprehensive income to be presented either in the financial statements or in the notes to the financial statements. This accounting standard update will be effective for the Company beginning in the first quarter of fiscal year 2014, at which time the Company will include the required disclosures.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. BALANCE SHEET COMPONENTS

	September 27, 2013		September 28, 2012
(In millions)
Short-term Investment:
Corporate debt security:
Amortized cost	$	62.7	$	49.7
Unrealized gain (loss)		—		—
Fair value	$	62.7	$	49.7

The short-term investment, which represents a loan to CPTC, is classified as an available-for-sale corporate debt security. See Note 15, “Variable Interest Entity.”

	September 27, 2013		September 28, 2012
(In millions)
Inventories:
Raw materials and parts	$	276.6	$	237.3
Work-in-process		91.6		75.6
Finished goods		167.0		145.0
Total inventories	$	535.2	$	457.9

Property, plant and equipment:
Land and land improvements	$	44.6		$	43.8
Buildings and leasehold improvements		242.2			215.5
Machinery and equipment		380.8			344.5
Construction in progress		46.6			46.4
Assets subject to lease		1.8			3.2
		716.0			653.4
Accumulated depreciation and amortization		(400.7	)		(356.8	)
Property, plant and equipment, net	$	315.3		$	296.6

Other Assets:
DCP Assets	$	55.2	$	49.3
Equity investment in dpiX Holding LLC (“dpiX Holding”)		49.7		45.5
Other		118.1		94.6
Total other assets	$	223.0	$	189.4

Accrued expenses:
Accrued compensation and benefits	$	159.4	$	150.3
DCP Liabilities		54.6		49.5
Income taxes payable		40.0		63.3
Current deferred tax liabilities		7.6		2.9
Other		59.3		70.6
Total accrued expenses	$	320.9	$	336.6

Other long-term liabilities:
Long-term income taxes payable	$	41.9	$	40.6
Other		102.1		85.6
Total other long-term liabilities	$	144.0	$	126.2

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. FAIR VALUE

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. There is a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets/Liabilities Measured at Fair Value on a Recurring Basis

In the tables below, the Company has segregated all assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

	Fair Value Measurement Using
Type of Instruments	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Balance
(In millions)
Assets at September 27, 2013:
Money market funds	$	50.0	$	—		$	—		$	50.0
Corporate debt security		—		—			62.7			62.7
Option to purchase a company		—		—			1.4			1.4
Total assets measured at fair value	$	50.0	$	—		$	64.1		$	114.1
Liabilities at September 27, 2013:
Derivative liabilities	$	—	$	(1.1	)	$	—		$	(1.1	)
Contingent consideration		—		—			(2.5	)		(2.5	)
Total liabilities measured at fair value	$	—	$	(1.1	)	$	(2.5	)	$	(3.6	)
Assets at September 28, 2012:
Money market funds	$	45.7	$	—		$	—		$	45.7
Corporate debt security		—		—			49.7			49.7
Derivative assets		—		0.8			—			0.8
Option to purchase a company		—		—			1.4			1.4
Total assets measured at fair value	$	45.7	$	0.8		$	51.1		$	97.6
Liabilities at September 28, 2012:
Contingent consideration	$	—	$	—		$	(8.8	)	$	(8.8	)
Total liabilities measured at fair value	$	—	$	—		$	(8.8	)	$	(8.8	)

 Money market funds are included under cash and cash equivalents, corporate debt security is included under short-term investment, option to purchase a company is included under other assets, derivative liabilities are included under accrued liabilities and contingent consideration is included under accrued liabilities and other-long term liabilities on the consolidated balance sheet.

The Company obtains valuations of Level 1 money market funds from quotes for transactions in active exchange markets involving identical assets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company’s valuation of its Level 2 instruments includes valuations obtained from quoted prices for identical assets in markets that are not active. In addition, the Company has elected to use the income approach to value its derivative instruments using standard valuation techniques and Level 2 inputs, such as currency spot rates, forward points and credit default swap spreads. The Company’s derivative instruments are short-term in nature, typically one month to thirteen months in duration.

The Company measures the fair value of its Level 3 contingent consideration liabilities based on the income approach by using a Monte Carlo simulation model with key assumptions that include estimated sales units of an acquired business during the earn-out period and estimated discount rates corresponding to the periods of expected payments. For the acquisition of Calypso Medical Technologies, Inc. (“Calypso”) in fiscal year 2012, (see Note 14, “Business Combinations”), the estimated sales units used in the Monte Carlo simulation model ranged from 69 to 193 units during the earn-out period. The estimated discount rates used ranged from 0.13% to 0.42%. For the acquisition of InfiMed, Inc. (“InfiMed”) in fiscal year 2012, (see Note 14, “Business Combinations”), the estimated sales units used in the risk-neutral Monte Carlo simulation model ranged from 171 to 299 units per quarter during the earn-out period. Since the analysis of the InfiMed contingent consideration liability was performed in a risk-neutral option pricing framework, the estimated discount rates used ranged from 1.37% to 1.75%, based on U.S. Treasury rates that correspond to the terms of the expected payments and an estimate of the Company’s counter-party risk. If the estimated sales units were to increase or decrease during the respective earn-out periods, the fair value of the contingent consideration would increase or decrease, respectively. If the estimated discount rates used were to increase or decrease, the fair value of the contingent consideration would decrease or increase, respectively. The Company estimated that the threshold for the earn-out payments for Calypso would not be met and reversed the entire amount of contingent consideration liability of $4.9 million during the fiscal year 2013. The Company also decreased the contingent consideration liability of InfiMed by $0.3 million during the fiscal 2013 based on the revised estimate of sales units during the remaining earn-out period.

The fair value of the Company’s Level 3 corporate debt security is based on the income approach by using the discounted cash flow model with key assumptions that include discount rates corresponding to the terms and risks associated with the loan to CPTC. In addition, the Company does not increase the fair value above its par value as ORIX Capital Markets, LLC (“ORIX”), the loan agent, has the option to purchase this loan from the Company under the original terms and conditions at par value. If the estimated discount rates used were to increase, the fair value of the debt security would decrease.

The fair value of the option to purchase a company, a Level 3 asset, is based on the income approach using key assumptions that include projected operating results of the company and an estimated discount rate corresponding to the period of expected payment.

The following table presents the reconciliation for all assets and liabilities measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3):

(In millions)	Corporate debt Security		Contingent Consideration			Option to Purchase a Company
Balance at September 28, 2012	$	49.7	$	(8.8	)	$	1.4
Additions, including accrued interest		13.0		—			—
Settlements (1)		—		1.1			—
Change in fair value recognized in earnings		—		5.2			—
Balance at September 27, 2013	$	62.7	$	(2.5	)	$	1.4

(1) Amounts reported under “Contingent Consideration” represent cash payments to settle contingent consideration liabilities.

There were no transfers of assets or liabilities between fair value measurement levels during fiscal years 2013, 2012 and 2011. Transfers between fair value measurement levels are recognized at the end of the reporting period.

Fair Value of Other Financial Instruments

The fair values of certain of the Company’s financial instruments, including bank deposits and certificate of deposits included in cash and cash equivalents, accounts payable and accounts receivable, net of allowance for doubtful accounts, approximate their carrying amounts due to their short maturities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The fair value of our short-term borrowings including the term loan payable in fiscal year 2014 and the current maturities of the term loan payable in fiscal year 2018 approximate carrying value of $56 million at September 27, 2013 due to their short-term maturities. The fair value of our term loan payable in fiscal year 2018, at September 27, 2013 approximates its carrying value of $450 million because the term loan is carried at a market observable interest rate that resets periodically and is categorized as level 2 in the fair value hierarchy.  The fair value and carrying value of the Company’s long term debt at September 28, 2012 was $6.8 million and $6.3 million, respectively.  The estimated fair value of long-term debt was based on the then-current rates available to the Company for debt of similar terms and remaining maturities and also took into consideration default and credit risk. The Company determined the estimated fair value amount by using available market information and commonly accepted valuation methodologies. The fair value of the long-term debt was categorized as level 2 in the fair value hierarchy.

4. FINANCING RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

A financing receivable represents a financing arrangement with a contractual right to receive money, on demand or on fixed or determinable dates, and that is recognized as an asset on the Company’s balance sheet.

The Company’s financing receivables, consisting of its accounts receivable with contractual maturities of more than one year and the related allowance for doubtful accounts are presented in the following table:

(In millions)	September 27, 2013			September 28, 2012			September 30, 2011
Accounts receivable with contractual maturities of more than one year:
Gross amount	$	28.0		$	29.9		$	16.2
Allowance for doubtful accounts		(3.0	)		(3.0	)		—
Net amount	$	25.0		$	26.9		$	16.2
Amount past due	$	3.1		$	4.3		$	1.2

During fiscal years 2013, 2012, and 2011, the Company sold $1.3 million, $11.0 million, and $3.6 million, respectively, of accounts receivable with contractual maturities of more than one year. There was no significant activity in the allowance for doubtful financing receivable accounts during fiscal years 2013, 2012, and 2011.

5. GOODWILL AND INTANGIBLE ASSETS

The following table reflects the gross carrying amount and accumulated amortization of the Company’s intangible assets included in “Other assets” in the Consolidated Balance Sheets:

(In millions)	September 27, 2013			September 28, 2012
Intangible Assets:
Acquired existing technology	$	36.6		$	36.3
Patents, licenses and other		29.0			28.1
Customer contracts and supplier relationship		10.9			10.9
Accumulated amortization		(53.1	)		(48.5	)
Net carrying amount	$	23.4		$	26.8

Amortization expense for intangible assets was $4.3 million, $4.9 million and $2.9 million for fiscal years 2013, 2012 and 2011, respectively. The Company estimates that the amortization expense for fiscal years 2014 through 2018, and thereafter, will be as follows (in millions): $5.3, $6.0, $2.4, $1.8, $1.8, and $6.1, respectively.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table reflects the activity of goodwill by reportable operating segment:

(In millions)	Oncology Systems		X-Ray Products		Other			Total
Balance at September 30, 2011	$	130.5	$	6.1	$	75.9		$	212.5
Acquisition of businesses		1.5		10.9		—			12.4
Foreign currency translation adjustments		—		—		(2.7	)		(2.7	)
Balance at September 28, 2012		132.0		17.0		73.2			222.2
Foreign currency translation adjustments		—		—		3.1			3.1
Balance at September 27, 2013	$	132.0	$	17.0	$	76.3		$	225.3

6. RELATED PARTY TRANSACTIONS

VMS has a 40% ownership interest in dpiX Holding, a two-member consortium which has a 100% ownership interest in dpiX LLC (“dpiX”), a supplier of amorphous silicon based thin film transistor arrays (“flat panels”) for the Company’s X-ray Products’ digital image detectors and for its Oncology Systems’ On-Board Imager^® (“OBI”), and PortalVision^TM imaging products. In accordance with the dpiX Holding agreement, net losses were to be allocated to the members, in succession, until their capital accounts equaled zero, then to the members in accordance with their ownership interests. The dpiX Holding agreement also provided that net profits were to be allocated to the members, in succession, until their capital accounts equaled the net losses previously allocated, then to the members in accordance with their ownership interests.

The equity investment in dpiX Holding is accounted for under the equity method of accounting. When VMS recognizes its share of net profits or losses of dpiX Holding, profits or losses in inventory purchased from dpiX are eliminated until realized by VMS. VMS recorded income on the equity investment in dpiX Holding of $2.5 million, $0.2 million and $4.3 million in fiscal years 2013, 2012 and 2011 respectively. Income and loss on the equity investment in dpiX Holding are included in “Selling, general and administrative” expenses in the Consolidated Statements of Earnings. The carrying value of the equity investment in dpiX Holding, which was included in “Other assets” in the Consolidated Balance Sheets, was $49.7 million at September 27, 2013 and $45.5 million at September 28, 2012.

VMS entered into a loan agreement with dpiX in February 2009, which was amended in December 2011. Under this loan agreement, VMS loaned $8.8 million to dpiX. The loan bore interest at prime plus 1% per annum. The principal amount, together with accrued and unpaid interest, was repaid in two installments through July 2012.

During fiscal years 2013, 2012 and 2011, the Company purchased glass transistor arrays from dpiX totaling approximately $25.9 million, $14.5 million and $23.3 million, respectively. These purchases of glass transistor arrays are included as a component of “Inventory” in the Consolidated Balance Sheets or “Cost of revenues – product” in the Consolidated Statements of Earnings for these fiscal years.

7. BORROWINGS

On August 27, 2013, VMS entered into a credit agreement (the “2013 Credit Agreement”) with certain lenders and Bank of America (“BofA”) as administrative agent. The Credit Agreement provides for (i) a five-year term loan facility in an aggregate principal amount of up to $500 million (the “2013 Term Loan Facility”) and (ii) a five-year revolving credit facility in an aggregate principal amount of up to $300 million (the “2013 Revolving Credit Facility” and, collectively with the Term Loan Facility, the “2013 Credit Facility”). The Revolving Credit Facility also includes a $50 million sub-facility for the issuance of letters of credit and permits swing line loans of up to $25 million. Under the 2013 Credit Agreement, the Company has the right to make (i) up to two requests to increase the aggregate commitments under the Term Loan Facility by an aggregate amount for all such requests of up to $100 million and (ii) up to three requests to increase the aggregate commitments under the Revolving Credit Facility by an aggregate amount for all such requests of up to $200 million, provided that, in each case, the Lenders are willing to provide such new or increased commitments and certain other conditions are met. The 2013 Credit Facility contains provisions that limit the Company’s ability to pay cash dividends.  

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The proceeds of the Credit Facility will be used for working capital, capital expenditures, permitted Company share repurchases, permitted acquisitions and other lawful corporate purposes. Borrowings under the 2013 Term Loan Facility accrue interest either (i) based on a Eurodollar Rate, as defined in the Credit Agreement (the “Eurodollar Rate”), plus a margin of 1.00% to 1.25% based on a leverage ratio involving funded indebtedness and EBITDA  or (ii) based upon a base rate of (a) the federal funds rate plus 0.50%, (b) BofA’s announced prime rate, or (c) the Eurodollar Rate plus 1.00%, whichever is highest, plus a margin of up to 0.25% based on the same leverage Ratio, depending upon instructions from the Company.  Borrowings under the 2013 Revolving Credit Facility accrue interest either (i) based on the Eurodollar Rate plus a margin of 1.25% to 1.50% based on a leverage ratio involving funded indebtedness and EBITDA or (ii) based upon a base rate of (a) the federal funds rate plus 0.50%, (b) BofA’s announced prime rate, or (c) the Eurodollar Rate plus 1.00%, whichever is highest, plus a margin of 0.25% to 0.50% based on the same leverage ratio, depending upon instructions from the Company.  At September 27, 2013, borrowings under the 2013 Term Loan Facility totaled $500 million with a weighted average interest rate of 1.31%.  At September 27, 2013, there was no amount outstanding on the 2013 Revolving Credit Facility.  

The Company must pay a commitment fee on the unused portion of the 2013 Revolving Credit Facility at a rate from 0.15% to 0.275% based on a leverage ratio. The Company may prepay, reduce or terminate the commitments without penalty. Swing line loans under the 2013 Credit Facility will bear interest at the base rate plus the then applicable margin for base rate loans.

Subject to certain limitations on the amount secured, a pledge of stock issued by certain of our present and future subsidiaries that are deemed to be material under the terms of the 2013 Credit Facility serve as security for the 2013 Credit Facility. These stock pledges also serve as security for all hedging or treasury management obligations entered into by the Company with a Lender. As of September 27, 2013, VMS had pledged 65% of the voting shares that it holds in Varian Medical Systems Nederland Holdings B.V., a wholly owned subsidiary.  The 2013 Credit Agreement provides that certain material domestic subsidiaries must guarantee the 2013 Credit Facility, subject to certain limitations on the amount secured. As of September 27, 2013, the 2013 Credit Facility was not guaranteed by any VMS subsidiary.

The 2013 Credit Agreement contains affirmative and negative covenants applicable to the Company and its subsidiaries that are typical for credit facilities of this type, and that are subject to materiality and other qualifications, carve-outs, baskets and exceptions. The Company has also agreed to maintain certain financial covenants including (i) a maximum consolidated leverage ratio, involving funded indebtedness and EBITDA (earnings before interest, tax and depreciation and amortization), and (ii) a minimum cash flow coverage ratio.  The Company was in compliance with all covenants under the 2013 Credit Agreement for all periods within these consolidated financial statements in which it was in existence.

Prior to the 2013 Credit Facility, VMS had a credit agreement (the “2012 Credit Facility”) with certain lenders and BofA as administrative agent which provided for a revolving credit facility that enabled the Company to borrow and have outstanding at any given time a maximum of $300 million.  On August 27, 2013, VMS replaced the 2012 Credit Facility with the 2013 Revolving Credit Facility, terminating the 2012 Credit Facility agreement entered into as of April 27, 2012 and repaying in full the approximately $148 million then-outstanding principal balance, plus accrued interest and fees.

The 2012 Credit Facility included a $50 million sub-facility for the issuance of letters of credit and permits swing line loans of up to $25 million. The 2012 Credit Facility was secured, subject to certain limitations on the amount secured, by a pledge of stock of certain of VMS’s present and future subsidiaries that are deemed to be material subsidiaries. As of September 28, 2012, VMS had pledged 65% of the voting shares that it holds in Varian Medical Systems Nederland Holdings B.V., a wholly owned subsidiary.  

Borrowings under the 2012 Credit Facility accrued interest either (i) based on a Eurodollar rate (as defined in the credit agreement), plus a margin of 1.25% to 1.5% based on a leverage ratio involving funded indebtedness and earnings before interest, taxes and depreciation and amortization (“EBITDA” ) or (ii) based upon a base rate of the highest of (a) the federal funds rate plus 0.5%, (b) BofA’s announced prime rate or (c) the Eurodollar rate plus 1%, plus a margin of 0.25% to 0.5% based on the same leverage ratio, depending on instructions from the Company. The Company also paid a commitment fee on the unused portion of the 2012 Credit Facility at a rate from 0.25% to 0.30% based on the same leverage ratio.  At September 28, 2012, a total of $155 million was outstanding under the 2012 Credit Facility with a weighted average interest rate of 1.47%.  No letters of credit or swing line loans were outstanding at September 28, 2012.  

The 2012 credit agreement contained affirmative and negative covenants applicable to the Company that are typical for credit facilities of this type, and that are subject to materiality and other qualifications, carve-outs, baskets and exceptions. The Company had also agreed to maintain certain financial covenants, including (i) a maximum consolidated leverage ratio, involving funded indebtedness and EBITDA and (ii) a minimum cash flow coverage. The Company was in compliance with all covenants under the 2012 Credit Facility for all periods presented within these consolidated financial statements in which it was in existence.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

VMS’s Japanese subsidiary (“VMS KK”) has an unsecured uncommitted credit agreement with Sumitomo that enables VMS KK to borrow and have outstanding at any given time a maximum of 3 billion Japanese yen (the “Sumitomo Credit Facility”). In March 2013, the Sumitomo Credit Facility was extended. The Sumitomo Credit Facility will expire on April 5, 2014. Borrowings under the Sumitomo Credit Facility accrue interest based on the basic loan rate announced by the Bank of Japan plus a margin of 0.5% per annum. As of September 27, 2013, there was no outstanding balance under the Sumitomo Credit Facility.

The Company paid commitment fees of $0.3 million for each of the three fiscal years 2013, 2012 and 2011.

Long-term debt outstanding is summarized as follows:

(Dollars in millions)	September 27, 2013			September 28, 2012
Unsecured term loan, 6.70% due in one installment of $6.25 payable in fiscal year 2014	$	6.3		$	6.3
2013 Term Loan Facility, variable interest rate (1.31% at September 27, 2013) payable quarterly in installments with maturity date in fiscal year 2018		500.0			—
		506.3			6.3
Less: current maturities of long-term debt		(56.3	)		—
Long-term debt	$	450.0		$	6.3

The unsecured term loan agreements contain a covenant that requires the Company to pay prepayment penalties if the Company elects to pay off this debt before the maturity dates and the market interest rate is lower than the fixed interest rates of the debt at the time of repayment. They also contain covenants that limit future borrowings and cash dividend payments and require the Company to maintain specified levels of working capital and operating results. For all fiscal years presented within these consolidated financial statements, the Company was in compliance with all restrictive covenants of the unsecured term loan agreements.

Interest paid on borrowings was $2.9 million for fiscal year 2013, $3.3 million for fiscal year 2012, and $2.3 million for fiscal year 2011.  As of September 27, 2013, future principal payments for long-term debt for fiscal years 2014, 2015, 2016, 2017, and 2018 are as follows (in millions): $56.3, $50, $50, $50 and $300, respectively.

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company measures all derivatives at fair value on the Consolidated Balance Sheets. The accounting for gains or losses resulting from changes in the fair value of those derivatives depends upon the use of the derivative and whether it qualifies for hedge accounting. Changes in the fair value of derivatives that do not qualify for hedge accounting treatment must be recognized in earnings, together with elements excluded from effectiveness testing and the ineffective portion of a particular hedge.

The fair values of derivative instruments reported on the Company’s Consolidated Balance Sheets were as follows:

	Asset Derivatives					Liability Derivatives
	Balance Sheet Location	September 27, 2013		September 28, 2012		Balance Sheet Location	September 27, 2013		September 28, 2012
(In millions)		Fair Value		Fair Value			Fair Value		Fair Value
Derivative designated as hedging instruments:
Foreign exchange forward contracts	Prepaid Expenses	$	—	$	0.8	Accrued liabilities	$	1.1	$	—
Derivative not designated as hedging instruments:
Foreign exchange forward contracts	Prepaid Expenses		—		—	Accrued liabilities		—		—
Total derivatives		$	—	$	0.8		$	1.1	$	—

See Note 3, “Fair Value” regarding valuation of the Company’s derivative instruments. Also see Note 1, “Summary of Significant Accounting Policies” to the Consolidated Financial Statements regarding credit risk associated with the Company’s derivative instruments.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Cash Flow Hedging Activities

The Company has many transactions denominated in foreign currencies and addresses certain of those financial exposures through a risk management program that includes the use of derivative financial instruments. The Company sells products throughout the world, often in the currency of the customer’s country, and may hedge certain of the larger foreign currency transactions when they are either not denominated in the relevant subsidiary’s functional currency or the U.S. dollar. These foreign currency sales transactions are hedged using foreign currency forward contracts. The Company may use other derivative instruments in the future. The Company enters into foreign currency forward contracts primarily to reduce the effects of fluctuating foreign currency exchange rates. The Company does not enter into foreign currency forward contracts for speculative or trading purposes. Foreign currency forward contracts are entered into several times a quarter and range from one to thirteen months in maturity. As of September 27, 2013, the Company did not have any foreign currency forward contracts with an original maturity greater than thirteen months.

The hedges of foreign currency denominated forecasted revenues are accounted for in accordance with the guidance on “Derivatives and Hedging”, pursuant to which the Company has designated its hedges of forecasted foreign currency revenues as cash flow hedges. The Company’s designated cash flow hedges de-designate when the anticipated revenues associated with the transactions are recognized and the effective portion in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets is reclassified to “Revenues” in the Consolidated Statements of Earnings. Subsequent changes in fair value of the derivative instrument are recorded in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings to offset changes in fair value of the resulting non-functional currency receivables. For derivative instruments that are designated and qualified as cash flow hedges under “Derivatives and Hedging,” the Company formally documents for each derivative instrument at the hedge’s inception, the relationship between the hedging instrument (foreign currency forward contract) and hedged item (forecasted foreign currency revenues), the nature of the risk being hedged and its risk management objective and strategy for undertaking the hedge. The Company records the effective portion of the gain or loss on the derivative instruments that are designated and qualified as cash flow hedges in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets and reclassifies these amounts into “Revenues” in the Consolidated Statements of Earnings in the period in which the hedged transaction is recognized in earnings. The Company assesses hedge effectiveness both at the onset of the hedge and on an ongoing basis using regression analysis. The Company measures hedge ineffectiveness by comparing the cumulative change in the fair value of the effective component of the hedge contract with the cumulative change in the fair value of the hedged item. The Company recognizes any over performance of the derivative as ineffectiveness in “Revenues,” and time value amounts excluded from the assessment of effectiveness in “Cost of revenues” in the Consolidated Statements of Earnings. During fiscal years 2013, 2012 and 2011, the Company did not discontinue any cash flow hedge. At the inception of the hedge relationship and quarterly thereafter, the Company assesses whether the likelihood of meeting the forecasted cash flow is highly probable. As of September 27, 2013, all forecasted cash flows were still probable to occur. As of September 27, 2013, net unrealized loss on derivative instruments before tax, of $1.1 million, was included in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets and is expected to be reclassified to earnings over the 12 months that follow.

The Company had the following outstanding foreign currency forward contracts that were entered into to hedge forecasted revenues and designated as cash flow hedges:

	At September 27, 2013
(In millions)	Notional Value Sold
Euro	$	40.5
Japanese yen		78.5
Totals	$	119.0

The following table presents the amounts, before tax, recognized in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets and in the Consolidated Statements of Earnings that are related to the effective portion of the foreign currency forward contracts designated as cash flow hedges:

(in millions)	Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion)							Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Net Earnings (Effective Portion)	Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Net Earnings (Effective Portion)
	Fiscal Years								Fiscal Years
	2013		2012		2011				2013		2012		2011
Foreign exchange contracts	$	0.5	$	1.4	$	(0.5	)	Revenues	$	2.5	$	0.6	$	(1.0	)

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The portion of cash flow hedges gain or loss excluded from the assessment of effectiveness and the ineffective portion of the cash flow hedges were not material in fiscal years 2013, 2012 and 2011.

Balance Sheet Hedging Activities

The Company also hedges balance sheet exposures from its various subsidiaries and business units where the U.S. dollar is the functional currency. The Company enters into foreign currency forward contracts to minimize the short-term impact of foreign currency fluctuations on monetary assets and liabilities denominated in currencies other than the U.S. dollar functional currency. The foreign currency forward contracts are short term in nature, typically with a maturity of approximately one month, and are based on the net forecasted balance sheet exposure. These hedges of foreign-currency-denominated assets and liabilities do not qualify for hedge accounting treatment and are not designated as hedging instruments. For derivative instruments not designated as hedging instruments, changes in their fair values are recognized in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings. Changes in the values of these hedging instruments are offset by changes in the values of foreign-currency-denominated assets and liabilities. Variations from the forecasted foreign currency assets or liabilities, coupled with a significant currency rate movement, may result in a material gain or loss if the hedges are not effectively offsetting the change in value of the foreign currency asset or liability. Other than foreign exchange hedging activities, the Company has no other free-standing or embedded derivative instruments.

The Company had the following outstanding foreign currency forward contracts that were entered into to hedge balance sheet exposures from its various foreign subsidiaries and business units:

	At September 27, 2013
(In millions)	Notional Value Sold		Notional Value Purchased
Australian dollar	$	21.9	$	—
British pound		18.6		—
Canadian dollar		—		2.2
Euro		188.1		—
Indian rupee		4.7		—
Japanese yen		69.3		—
Norwegian krone		3.3		2.8
Swedish krona		3.2		—
Swiss franc		—		70.9
Totals	$	309.1	$	75.9

The following table presents the gains (losses) recognized in the Consolidated Statements of Earnings related to the foreign currency forward contracts that are not designated as hedging instruments.

Location of Gain or (Loss)	Amount of Gain or (Loss) Recognized in Net Earnings on Derivative
	Fiscal Years
(In millions)	2013		2012		2011
Selling, general and administrative expenses	$	9.6	$	5.0	$	2.3

The gains (losses) on these derivative instruments were significantly offset by the gains (losses) resulting from the re-measurement of monetary assets and liabilities denominated in currencies other than the U.S. dollar functional currency.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Contingent Features

Certain of the Company’s derivative instruments are subject to master agreements which contain provisions that require the Company, in the event of a default, to settle the outstanding contracts in net liability positions by making settlement payments in cash or by setting off amounts owed to the counterparty against any credit support or collateral held by the counterparty. The counterparty’s right of set-off is not limited to the derivative instruments and applies to other rights held by the counterparty. These events of default, which are defined by the existing agreements, are primarily related to the Company’s failure to pay the counterparty under the derivative instruments, the Company’s voluntary or involuntary bankruptcy, the Company’s default on its borrowings and the deterioration of the creditworthiness of the surviving entity if the Company merges or transfers its assets or liabilities to another entity. As of September 27, 2013 and September 28, 2012, the Company did not have a significant amount of outstanding derivative instruments with credit-risk-related contingent features that were in a net liability position.

9. COMMITMENTS AND CONTINGENCIES

Indemnification Agreements

In conjunction with the sale of the Company’s products in the ordinary course of business, the Company provides standard indemnification of business partners and customers for losses suffered or incurred for property damages, death and injury and for patent, copyright or any other intellectual property infringement claims by any third parties with respect to its products. The terms of these indemnification arrangements are generally perpetual. Except for losses related to property damages, the maximum potential amount of future payments the Company could be required to make under these arrangements is unlimited. As of September 27, 2013, the Company had not incurred any significant costs since the Spin-offs to defend lawsuits or settle claims related to these indemnification arrangements. As a result, the Company believes the estimated fair value of these arrangements is minimal.

VMS has entered into indemnification agreements with its directors and officers and certain of its employees that serve as officers or directors of its foreign subsidiaries that may require VMS to indemnify its directors and officers and those certain employees against liabilities that may arise by reason of their status or service as directors or officers, and to advance their expenses incurred as a result of any legal proceeding against them as to which they could be indemnified.

Product Warranty

The Company warrants most of its products for a specific period of time, usually 12 months from installation, against material defects. The Company provides for the estimated future costs of warranty obligations in cost of revenues when the related revenues are recognized. The accrued warranty costs represent the best estimate at the time of sale of the total costs that the Company will incur to repair or replace product parts that fail while still under warranty. The amount of the accrued estimated warranty costs obligation for established products is primarily based on historical experience as to product failures adjusted for current information on repair costs. For new products, estimates include the historical experience of similar products, as well as reasonable allowance for warranty expenses associated with new products. On a quarterly basis, the Company reviews the accrued warranty costs and updates the historical warranty cost trends, if required.

The following table reflects the changes in the Company’s accrued product warranty:

	Fiscal Years
(In millions)	2013			2012
Accrued product warranty, at beginning of period	$	52.8		$	50.1
Charged to cost of revenues		57.7			58.1
Actual product warranty expenditures		(57.3	)		(55.4	)
Accrued product warranty, at end of period	$	53.2		$	52.8

Long-term accrued product warranty costs of $14.1 million at end of period are included under Other long-term liabilities on the Consolidated Balance Sheet for fiscal year 2013.

Lease Commitments

At September 27, 2013, the Company was committed to minimum rentals under noncancelable operating leases (including rent escalation clauses) for fiscal years 2014, 2015, 2016, 2017, 2018 and thereafter, as follows (in millions): $20, $17, $12.5, $9.1, $5.9 and $12, respectively. Rental expenses for fiscal years 2013, 2012 and 2011 (in millions) were $26.0, $24.9 and $23.8, respectively.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Other Commitments

In September 2011, the Company, through its Swiss subsidiary, participated in a $165.3 million loan facility for CPTC, under which the subsidiary committed to loan up to $115.3 million to finance the construction and start-up operations of a proton therapy center. See Note 15, “Variable Interest Entity” for a detailed discussion.

Contingencies

Environmental Remediation Liabilities

The Company’s operations and facilities, past and present, are subject to environmental laws, including laws that regulate the handling, storage, transport and disposal of hazardous substances. Certain of those laws impose cleanup liabilities under certain circumstances. In connection with those laws and certain of the Company’s past and present operations and facilities, the Company oversees various environmental cleanup projects and also reimburses certain third parties for cleanup activities. Those include facilities sold as part of the Company’s electron devices business in 1995 and thin film systems business in 1997. In addition, the U.S. Environmental Protection Agency (“EPA”) or third parties have named the Company as a potentially responsible party under the amended Comprehensive Environmental Response Compensation and Liability Act of 1980 (“CERCLA”), at sites to which the Company or the facilities of the sold businesses were alleged to have shipped waste for recycling or disposal (the “CERCLA sites”). In connection with the CERCLA sites, the Company to date has been required to pay only modest amounts as its contributions to cleanup efforts. Under the agreement that governs the Spin-offs, VI and VSEA are each obligated to indemnify the Company for one-third of the environmental cleanup costs associated with corporate, discontinued or sold operations prior to the Spin-offs (after adjusting for any insurance proceeds or tax benefits received by the Company), as well as fully indemnify the Company for other liabilities arising from the operations of the business transferred to it as part of the Spin-offs.

The Company spent $1.0 million, $1.6 million and $1.3 million (net of amounts borne by VI and VSEA) during fiscal years 2013, 2012 and 2011, respectively, on environmental cleanup costs, third-party claim costs, project management costs and legal costs.

Inherent uncertainties make it difficult to estimate the likelihood of the cost of future cleanup, third-party claims, project management and legal services for the CERCLA sites and one of the Company’s past facilities. Nonetheless, as of September 27, 2013, the Company estimated that, net of VI’s and VSEA’s indemnification obligations, future costs associated with the CERCLA sites and this facility would range in total from $1.9 million to $9.8 million. The time frames over which these cleanup project costs are estimated vary, ranging from one year up to thirty years as of September 27, 2013. Management believes that no amount in that range is more probable of being incurred than any other amount and therefore had accrued $1.9 million for these cleanup projects as of September 27, 2013. The accrued amount has not been discounted to present value due to the uncertainties that make it difficult to develop a single best estimate.

The Company believes it has gained sufficient knowledge to better estimate the scope and cost of monitoring, cleanup and management activities for its other past and present facilities. This, in part, is based on agreements with other parties and also cleanup plans approved by or completed in accordance with the requirements of the governmental agencies having jurisdiction. As of September 27, 2013, the Company estimated that the Company’s future exposure, net of VI’s and VSEA’s indemnification obligations, for the costs at these facilities, and reimbursements of third party’s claims for these facilities, ranged in total from $6.4 million to $36.0 million. The time frames over which these costs are estimated to be incurred vary, ranging from one to thirty years as of September 27, 2013. As to each of these facilities, management determined that a particular amount within the range of estimated costs was a better estimate than any other amount within the range, and that the amount and timing of these future costs were reliably determinable. The best estimate within that range was $12.4 million at September 27, 2013. Accordingly, the Company had accrued $9.4 million for these costs as of September 27, 2013, which represented the best estimate discounted at 4%, net of inflation. This accrual is in addition to the $1.9 million described in the preceding paragraph.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The table that follows presents information about the Company’s reserve for future environmental costs at September 27, 2013, based on estimates as of that date.

(In millions)	Recurring Costs		Non-Recurring Costs		Total Anticipated Future Costs
Fiscal Years:
2014	$	0.6	$	1.7	$	2.3
2015		0.6		0.4		1.0
2016		0.7		0.4		1.1
2017		0.8		0.2		1.0
2018		0.7		0.5		1.2
Thereafter		6.3		1.4		7.7
Total costs	$	9.7	$	4.6	$	14.3
Less imputed interest						(3.0	)
Reserve amount					$	11.3

Recurring costs include expenses for such tasks as the ongoing operation, maintenance and monitoring of cleanup. Non-recurring costs include expenses for such tasks as soil excavation and treatment, installation of injection and monitoring wells, other costs for soil and groundwater treatment by injection, construction of ground and surface water treatment systems, soil and groundwater investigation, governmental agency costs required to be reimbursed by the Company, removal and closure of treatment systems and monitoring wells, and the defense and settlement of pending and anticipated third-party claims.

These amounts are only estimates of anticipated future costs. The amounts the Company will actually spend may be greater or less than these estimates, even as the Company believes the degree of uncertainty will narrow as cleanup activities progress. While the Company believes its reserve is adequate, as the scope of the Company’s obligations becomes more clearly defined, the Company may modify the reserve, and charge or credit future earnings accordingly. Nevertheless, based on information currently known to management, and assuming VI and VSEA satisfy their indemnification obligations, management believes the costs of these environmental related matters are not reasonably likely to have a material adverse effect on the consolidated financial statements of the Company in any one fiscal year.

The Company evaluates its liability for investigation and cleanup costs in light of the obligations and apparent financial strength of potentially responsible parties and insurance companies with respect to which the Company believes it has rights to indemnity or reimbursement. The Company has asserted claims for recovery of environmental investigation and cleanup costs already incurred, and to be incurred in the future against various insurance companies and other third parties. The Company receives certain cash payments in the form of settlements and judgments from defendants, insurers and other third parties from time to time. The Company has also reached an agreement with an insurance company under which that insurer has agreed to pay a portion of the Company’s past and future environmental related expenditures. Receivables, from that insurer, amounted to $2.4 million at September 27, 2013 and $2.6 million at September 28, 2012 with the respective current portion included in “Prepaid expenses and other current assets” and the respective noncurrent portion included in “Other assets” in the Consolidated Balance Sheets. The Company believes that this receivable is recoverable because it is based on a binding, written settlement agreement with what appears to be a financially viable insurance company, and the insurance company has paid the Company’s claims in the past.

The availability of the indemnities of VI and VSEA will depend upon the future financial strength of VI and VSEA. Given the long-term nature of some of the liabilities, VI and VSEA may be unable to fund the indemnities in the future. It is also possible that a court would disregard this contractual allocation among the parties and require the Company to assume responsibility for obligations allocated to another party, particularly if the other party were to refuse or was unable to pay any of its allocated share. The agreement governing the Spin-offs generally provides that if a court prohibits a company from satisfying its shared indemnification obligations, the indemnification obligations will be shared equally by the two other companies.

Other Matters

The Company is a party to or otherwise involved in legal proceedings, claims and government inspections or investigations or other legal matters, both inside and outside the United States, arising in the ordinary course of its business or otherwise. These matters included, as of September 27, 2013, a patent infringement lawsuit initiated on April 13, 2007 by the University of Pittsburgh of the Commonwealth System of Higher Education (the “University of Pittsburgh”) regarding the Company’s Real-time Position Management™ (“RPM”) technology. The lawsuit was dismissed and re-filed on June 16, 2008 in the Northern District of California.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The case was subsequently transferred to the United States District Court for the Western District of Pennsylvania (“trial court”). On or about December 21, 2011, the trial court entered a summary judgment order in the case finding that the Company’s RPM technology was covered by some of the claims of the subject patent. Subsequently, in early 2012, in the proceedings at the trial court on the remaining issues in litigation, it was found (i) that the Company willfully infringed the subject patent, (ii) that the Company is liable for approximately $40 million in actual damages and (iii) that the subject patent was valid. The trial court has ordered the Company to pay a total of approximately $102 million, comprised of approximately $80 million in enhanced damages (a doubling of the damages amount), pre-judgment interest to the damage award of approximately $13 million and approximately $9 million in attorneys’ fees. The trial court also ordered the Company to pay ongoing royalties at the rates found by the jury for sales after the date of judgment. If our appeal is not successful, on-going royalties, assuming future U.S. sales and manufacturing of the infringing product remains approximately at the historical levels since the verdict in early 2012, could be up to $5 million per year through September 2016, the expiration of University of Pittsburgh’s patent. The Company has appealed the findings against it and believes that it has valid reasons for the judgment to be reversed.

The Company accrues amounts, to the extent they can be reasonably estimated, that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that the Company believes will result in a probable loss (including, among other things, probable settlement value). As of September 27, 2013, the Company had accrued an aggregate of approximately $5.0 million of such losses with respect to ongoing matters, including the low end of the range of the probable settlement value for the University of Pittsburgh proceeding. However, such matters are subject to many uncertainties and outcomes are not predictable with assurance. The range of reasonably possible loss for the University of Pittsburgh matter, up to the date of the trial court judgment, is from zero to approximately $102 million (this range does not include ongoing royalties subsequent to the date of the trial court judgment). The Company is unable to estimate a range of reasonably possible losses in excess of the amounts accrued with respect to all other matters. There can be no assurances as to whether the Company will become subject to significant additional claims and liabilities with respect to ongoing or future proceedings. If actual liabilities significantly exceed the estimates made, the Company’s consolidated financial position, results of operations or cash flows could be materially adversely affected.

Restructuring Charges

As part of the Company’s plan to enhance operational performance through productivity initiatives, the Company offered an enhanced retirement program to its qualified employees across all reporting segments during the first quarter of fiscal year 2013. Approximately 85 employees accepted the voluntary retirement program. The Company incurred restructuring charges of $6.7 million during fiscal year 2013. The Company made cash payments of $6.7 million in fiscal year 2013.

10. RETIREMENT PLANS

The Company sponsors the Varian Medical Systems, Inc. Retirement Plan (the “Retirement Plan”) — a defined contribution plan that is available to substantially all of its employees in the United States. Under Section 401(k) of the Internal Revenue Code, the Retirement Plan allows for tax-deferred salary contributions by eligible employees.

Participants can contribute from 1% to 25% of their eligible base compensation to the Retirement Plan on a pre-tax basis (plus up to an additional 15% on an after-tax basis if they have more than one year of service with the Company) and all or a portion of his or her bonus under the Employee Incentive Plan. However, participant contributions are limited to a maximum annual amount as determined periodically by the Internal Revenue Service. The Company matches eligible participant contributions dollar for dollar for the first 6% of eligible base compensation or bonus (for those employees with one or more years of service with the Company). All matching contributions vest immediately. The Retirement Plan allows participants to invest up to 25% of their contributions in shares of VMS common stock as an investment option. The Company also has a defined contribution plan that is available to regular full-time employees in the United Kingdom (the “U.K. Savings Plan”). Participants can contribute from 4% to 100% of their eligible base compensation to the U.K. Savings Plan. The Company matches participant contributions up to 6% of participants’ eligible base compensation, based on the participants’ level of contributions under this U.K. Savings Plan. All matching contributions vest immediately.

The Company also sponsors five defined benefit pension plans for regular full time employees in Germany, Japan, Switzerland and the United Kingdom. In fiscal year 2012, the Company terminated one pension plan in Germany upon the death of the last participant in the plan. The Company also sponsors a post-retirement benefit plan that provides healthcare benefits to certain eligible retirees in the United States.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company recognizes the funded status of its defined benefit pension and post-retirement benefit plans on its Consolidated Balance Sheets. Each overfunded plan is recognized as an asset, and each underfunded plan is recognized as a liability. Unrecognized prior service costs or credits and net actuarial gains or losses, as well as subsequent changes in the funded status are recognized as a component of “Accumulated other comprehensive loss” within Stockholders’ equity.

Total retirement, post-retirement benefit plan and defined benefit plan expense for all retirement plans amounted to $29.0 million, $27.9 million and $24.0 million for fiscal years 2013, 2012 and 2011, respectively.

Obligations and Funded Status

The following table presents the funded status of the defined benefit pension and post-retirement benefit plans:

	Defined Benefit Plans						Post-Retirement Benefit Plan
(In millions)	September 27, 2013			September 28, 2012			September 27, 2013			September 28, 2012
Change in benefit obligation:
Benefit obligation—beginning of fiscal year	$	181.1		$	160.5		$	5.6		$	5.9
Service cost		4.8			4.3			—			—
Interest cost		5.2			5.3			0.2			0.3
Plan participants’ contributions		10.9			5.3			—			—
Plan amendment		0.5			—			—			—
Plan settlement		(4.7	)		(2.5	)		—			—
Plan curtailment		—			(0.2	)		—			—
Actuarial (gain) loss		(0.7	)		14.5			(0.5	)		(0.1	)
Foreign currency changes		3.2			(2.4	)		—			—
Benefit and expense payments		(4.6	)		(3.7	)		(0.5	)		(0.5	)
Benefit obligation—end of fiscal year	$	195.7		$	181.1		$	4.8		$	5.6
Change in plan assets:
Plan assets—beginning of fiscal year	$	142.6		$	125.5		$	—		$	—
Employer contributions		22.2			9.6			0.5			0.5
Actual return on plan assets		11.6			9.8			—			—
Plan participants’ contributions		10.9			5.3			—			—
Plan settlement		(4.7	)		(2.5	)		—			—
Foreign currency changes		2.8			(1.4	)		—			—
Benefit and expense payments		(4.6	)		(3.7	)		(0.5	)		(0.5	)
Plan assets—end of fiscal year	$	180.8		$	142.6		$	—		$	—
Funded status	$	(14.9	)	$	(38.5	)	$	(4.8	)	$	(5.6	)
Amounts recognized within the consolidated balance sheet:
Noncurrent assets	$	3.1			—			—			—
Current liabilities		—		$	—		$	(0.5	)	$	(0.5	)
Noncurrent liabilities		(18.0	)		(38.5	)		(4.3	)		(5.1	)
Net amount recognized	$	(14.9	)	$	(38.5	)	$	(4.8	)	$	(5.6	)

The following table presents the amounts recognized in accumulated other comprehensive loss (before tax):

	Defined Benefit Plans						Post-Retirement Benefit Plan
(In millions)	September 27, 2013			September 28, 2012			September 27, 2013		September 28, 2012
Prior service cost	$	(0.7	)	$	(0.4	)	$	—	$	—
Net gain (loss)		(49.4	)		(59.7	)		0.1		(0.4	)
Accumulated other comprehensive loss	$	(50.1	)	$	(60.1	)	$	0.1	$	(0.4	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table presents the total fair value of plan assets, projected benefit obligation and accumulated benefit obligation for those defined benefit pension plans where accumulated benefit obligation exceeded the fair value of plan assets:

	Defined Benefit Plans
(In millions)	September 27, 2013		September 28, 2012
Projected benefit obligation	$	—	$	76.4
Accumulated benefit obligation	$	—	$	71.1
Fair value of plan assets	$	—	$	62.9

The accumulated benefit obligation for all defined benefit pension plans was $167.3 million and $146.2 million at September 27, 2013 and September 28, 2012, respectively.

Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive (Income) Loss

The following table shows the components of the Company’s net periodic benefit costs and the other amounts recognized in other comprehensive (income) loss, before tax, related to the Company’s defined benefit pension plans and the Company’s post-retirement benefit plan:

	Defined Benefit Plans									Post-Retirement Benefit Plan
	Fiscal Years									Fiscal Years
(In millions)	2013			2012			2011			2013			2012			2011
Net Periodic Benefit Costs:
Service cost	$	4.8		$	4.3		$	3.7		$	—		$	—		$	—
Interest cost		5.2			5.3			5.0			0.2			0.2			0.2
Loss due to settlement or curtailment		1.0			0.9			—			—			—			—
Expected return on assets		(5.7	)		(5.3	)		(4.9	)		—			—			—
Amortization of prior service cost		0.2			0.2			0.1			—			—			—
Recognized actuarial loss		2.7			2.5			2.1			—			0.1			0.1
Net periodic benefit cost		8.2			7.9			6.0			0.2			0.3			0.3
Other Amounts Recognized in Other Comprehensive (Income) Loss:
New prior service cost		0.5			—			—			—			—			—
Net (gain) loss arising during the year		(6.6	)		9.9			9.6			(0.4	)		(0.1	)		0.3
Amortization of prior service cost		(0.2	)		(0.2	)		(0.1	)		—			—			—
Amortization, settlement and curtailment of net actuarial loss		(3.7	)		(3.5	)		(2.1	)		(0.1	)		(0.1	)		(0.1	)
Total recognized in other comprehensive (income) loss		(10.0	)		6.2			7.4			(0.5	)		(0.2	)		0.2
Total recognized in net periodic benefit cost and other comprehensive loss	$	(1.8	)	$	14.1		$	13.4		$	(0.3	)	$	0.1		$	0.5

The amounts in “Accumulated other comprehensive loss” that are expected to be recognized as components of net periodic benefit cost during fiscal year 2014 are as follows:

(In millions)	Defined Benefit Plans			Post-Retirement Benefit Plan		Total
Prior service cost	$	(0.2	)	$	—	$	(0.2	)
Net loss		(2.4	)		—		(2.4	)
	$	(2.6	)	$	—	$	(2.6	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Assumptions

The assumptions used to determine net periodic benefit cost and to compute the expected long-term return on assets for the Company’s defined benefit pension and post-retirement benefit plans were as follows:

	Fiscal Years
Net Periodic Benefit Cost	2013			2012			2011
Defined benefit plans:
Discount rates		2.94	%		3.38	%		3.45	%
Rates of compensation increase		2.37	%		2.48	%		2.44	%
Expected long-term return on assets		3.82	%		4.02	%		4.13	%
Post-retirement benefit plan:
Discount rate		3.00	%		3.90	%		4.40	%

The assumptions used to measure the benefit obligations for the Company’s defined benefit pension and post-retirement benefit plans were as follows:

Benefit Obligations	September 27, 2013			September 28, 2012
Defined benefit plans:
Discount rates		3.11	%		2.94	%
Rates of compensation increase		2.51	%		2.37	%
Post-retirement benefit plan:
Discount rate		3.80	%		3.00	%

The benefit obligations of defined benefit pension plans and post-retirement benefit plans were measured as of September 27, 2013. For defined benefit pension plans, the discount rate was adjusted as of September 27, 2013 to the range of 1.70% to 4.50% primarily based on the yields of a universe of high quality corporate bonds in each applicable country or the spot rates on high quality AA-rated corporate bonds, with durations corresponding to the expected duration of the benefit obligations. Additionally, the rate of projected compensation increase was adjusted as of September 27, 2013 to the range of 1.75% to 3.90% reflecting expected inflation levels and future outlook. For post-retirement benefit plans, the discount rate as of September 27, 2013 increased to 3.8%. This discount rate was determined based on the yields of high quality zero-coupon corporate bonds with maturities that match the expected durations of the benefit obligations.

During the fourth quarter of fiscal year 2013, the Company reviewed the expected long-term rate of return on defined benefit pension plan assets. This review consisted of forward-looking projections for a risk-free rate of return, inflation rate and implied equity risk premiums for particular asset classes. Historical returns were not used. The results of this review were applied to the target asset allocation in accordance with the Company’s planned investment strategies, which are implemented by outside investment managers. The expected long-term rate of return on plan assets was determined based on the weighted average of projected returns on each asset class.

The assumed healthcare cost trend rates for the post-retirement benefit plan are as follows:

	Fiscal Years
Assumed Healthcare Cost Trend Rates	2013			2012			2011
Post-retirement benefit plan:
Current medical cost trend rate		8.2	%		9.9	%		11.2	%
Ultimate medical cost trend rate		4.5	%		4.5	%		4.5	%

Current medical cost trend rates represent expected increases in healthcare costs in the short term and are based on assessments and surveys from health plan providers. While the current medical cost trend rate is based on market conditions, the ultimate trend rate, which is expected be achieved in fiscal year 2030, reflects a long-term view of expected increases in healthcare costs in the U.S., which is assumed to be consistent with the long-term expected nominal gross domestic product growth rates. Assumed healthcare cost trend rates could have an effect on the amounts reported for healthcare plans. A 1.0 percentage point increase in the assumed healthcare cost trend rates would have increased the total service cost and interest cost components reported in fiscal year 2013 by $12,000 and would have increased the post-retirement benefit obligation reported in fiscal year 2013 by $312,000.  A 1.0 percentage

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

point decrease in the assumed healthcare cost trend rates would have decreased the total service cost and interest cost components reported in fiscal year 2013 by $10,000 and would have decreased the post-retirement benefit obligation in fiscal year 2013 by $283,000.

Plan Assets

The Company contributes to post-retirement benefit plans on a cash basis as benefits are paid. No assets have been segregated and restricted to provide post-retirement benefits.

For the defined benefit pension plans, the investment objectives of the Company are to generate returns that will enable the defined benefit pension plans to meet their future obligations. The precise amount of these obligations depends on future events, including the life expectancies of the pension plans’ members and the level of salary increases. The obligations are estimated using actuarial assumptions, based on the current economic environment. The investment strategy depends on the country in which the defined benefit pension plan applies. The investment objectives of some defined benefit pension plans are more conservative than others. In general, the investment strategy of the defined benefit pension plans is to balance the requirement to generate return using higher-returning assets such as equity securities, with the need to control risk with less volatile assets, such as fixed-income securities. Risks include, among others, the likelihood of the defined benefit pension plans becoming underfunded, thereby increasing their dependence on contributions from the Company. Within each asset class, investment managers give consideration to balancing the portfolio among industry sectors, geographies, interest rate sensitivity, dependence on economic growth, currency and other factors that affect investment returns. The target allocation as of the end of fiscal year 2013 was 32% equities, 57% debt and fixed income assets and 11% other.

The following table presents the Company’s defined benefit pension plans’ major asset categories, their associated fair values, as well as the actual allocation of equity, debt and fixed income, real estate and all other types of investments:

(In millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
As of September 27, 2013:
Investment funds:
Mutual funds—equities	$	—	$	49.9	$	—	$	49.9
Mutual funds—debt		—		26.1		—		26.1
Mutual funds—real estate		—		3.6		—		3.6
Assets held by insurance company:
Insurance contracts		—		86.3		—		86.3
Cash and cash equivalents		14.9		—		—		14.9
Total	$	14.9	$	165.9	$	—	$	180.8
As of September 28, 2012:
Investment funds:
Mutual funds—equities	$	—	$	40.3	$	—	$	40.3
Mutual funds—debt		—		23.2		—		23.2
Mutual funds—real estate		—		3.5		—		3.5
Assets held by insurance company:
Insurance contracts		—		73.3		—		73.3
Cash and cash equivalents		2.3		—		—		2.3
Total	$	2.3	$	140.3	$	—	$	142.6

Valuation Techniques

Debt securities are valued at the closing price reported on the stock exchange on which the individual securities are traded. Mutual funds held in trust or similar entities include investments in publicly traded mutual funds and are typically valued using the net asset value (“NAV”) provided by the administrator of the fund. Insurance contracts are valued by the insurer using the cash surrender value, which is the amount a plan would receive if a contract was terminated. Cash includes deposits and money market accounts, which are valued at their cost plus interest on a daily basis, which approximates fair value. There were no changes in valuation techniques during fiscal years 2013 and 2012.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Medicare Prescription Drug Act

The Medicare Prescription Drug, Improvement and Modernization Act (the “Prescription Drug Act”) provides a prescription drug benefit under Medicare (Medicare Part D), as well as a federal subsidy to sponsors of retiree healthcare benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. Since it sponsors post-retirement benefit plans that provide prescription drug benefits, the Company enrolled all Medicare eligible retirees in fiscal years 2013, 2012 and 2011 in either Medicare Advantage plans which are at least equivalent to Medicare Part D or in health plans where the prescription drug benefit is, on average, expected to pay out as much as the standard Medicare prescription drug coverage.

Estimated Contributions and Future Benefit Payments

The Company made contributions of $22.2 million to the defined benefit pension plans during fiscal year 2013, compared to $9.6 million in fiscal year 2012 due to additional funding. The Company made contributions of $0.5 million to the post-retirement benefit plan for fiscal year 2013. The Company expects total contributions to the defined benefit pension plans and the post-retirement benefit plan for fiscal year 2014 will be approximately $6.28 million and approximately $0.5 million, respectively.

Estimated future benefit payments at September 27, 2013 were as follows:

(In millions)	Defined Benefit Plans		Post-Retirement Benefit Plan		Total
Fiscal Years:
2014	$	4.8	$	0.5	$	5.3
2015		5.2		0.5		5.7
2016		4.9		0.5		5.4
2017		7.2		0.5		7.7
2018		7.3		0.4		7.7
2019-2023		39.9		1.8		41.7
	$	69.3	$	4.2	$	73.5

11. STOCKHOLDERS’ EQUITY  

Stock Repurchase Program

During fiscal years 2013, 2012 and 2011, the Company repurchased 6,000,000 shares, 4,433,718 shares and 9,028,033 shares, respectively, of VMS common stock under various authorizations by VMS’s Board of Directors. The repurchased shares include shares of VMS common stock repurchased under various accelerated share repurchase agreements. Aggregate amount of repurchases in connection with the various accelerated share repurchase agreements (as further discussed below) and for shares repurchased in the open market totaled $424 million, $257 million and $611 million in fiscal years 2013, 2012 and 2011, respectively. All shares that were repurchased have been retired.

On August 24, 2010, the Company executed an accelerated share repurchase agreement with BofA (the “August 2010 Repurchase Agreement”). Pursuant to the August 2010 Repurchase Agreement, the Company initially paid to BofA $225 million and BofA delivered 3,888,249 shares of VMS common stock, representing approximately 90% of the shares expected to be repurchased. Under the terms of the August 2010 Repurchase Agreement, the specific number of shares that the Company ultimately repurchased was to be based on the volume weighted average share price of VMS common stock during the repurchase period, less a discount, such that the Company might be entitled to receive additional shares of VMS common stock from BofA or the Company might be required to deliver VMS shares or, at its option, make a cash payment to BofA. The repurchase period ended on February 23, 2011 and the Company made a cash payment of $26.1 million in March 2011 to settle this contract. This cash payment upon settlement, together with $22.5 million, representing approximately 10% of the initial cash payment to BofA, was included in “Capital in excess of par value.”

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On February 23, 2011, the Company entered into a substantially identical accelerated share repurchase agreement with BofA (the “February 2011 Repurchase Agreement”). Pursuant to the February 2011 Repurchase Agreement, the Company paid to BofA $280 million and BofA delivered 3,547,474 shares of VMS common stock, representing approximately 85% of the shares expected to be repurchased. The remaining $42 million, representing approximately 15% of the cash payment to BofA, was recorded as an equity forward contract, which was included in “Capital in excess of par value”. Under the terms of the February 2011 Repurchase Agreement, the specific number of shares that the Company ultimately repurchased was to be based on the volume weighted average share price of VMS common stock during the repurchase period, less a discount. In June 2011, BofA accelerated the end of the repurchase period and the Company received an additional 630,921 shares of VMS common stock upon the settlement of the February 2011 Repurchase Agreement. The market value of the shares received of $41.3 million was included in “Capital in excess of par value.”  

On August 25, 2011, the Company entered into another accelerated share repurchase agreement with BofA (the “August 2011 Repurchase Agreement”). Pursuant to the August 2011 Repurchase Agreement, the Company paid to BofA $250 million and BofA delivered 3,849,638 shares of VMS common stock, representing approximately 85% of the shares expected to be repurchased. The remaining $37.5 million, representing approximately 15% of the initial cash payment to BofA, was recorded as an equity forward contract, which was included in “Capital in excess of par value”. Under the terms of the August 2011 Repurchase Agreement, the specific number of shares that the Company ultimately repurchased was to be based on the volume weighted average share price of VMS common stock during the repurchase period, less a discount. The repurchase period ended in February 2012 and the Company received an additional 375,449 shares of VMS common stock upon the settlement of the August 2011 Repurchase Agreement. The market value of the shares received of $25 million was included in “Capital in excess of par value.”

In February 2011, the VMS Board of Directors authorized the repurchase of 12 million shares of VMS common stock through the end of fiscal year 2012. As of September 28, 2012, the remaining 3,000,000 shares available for repurchase under the February 2011 authorization expired. In August 2012, the VMS Board of Directors authorized the repurchase of 8,000,000 shares of VMS common stock from September 29, 2012 through December 31, 2013. Stock repurchases under the August 2012 authorization may be made in open market, in privately negotiated transactions (including accelerated share repurchase programs) or under Rule 10b5-1 share repurchase plans, and may be made from time to time or in one or more blocks. As of September 27, 2013 about 2,000,000  shares remain available for repurchase under the August 2012 authorization.

Accumulated Other Comprehensive Loss

	Accumulated Other Comprehensive Loss
(In thousands)	Defined Benefit Pension and Post-retirement Benefit Plans			Unrealized Gain (Loss) on Derivatives			Cumulative Translation Adjustments			Total
Balance at October 1, 2010	$	(36,844	)	$	(307	)	$	(453	)	$	(37,604	)
Current period other comprehensive income (loss)		(6,276	)		300			(3,268	)		(9,244	)
Balance at September 30, 2011		(43,120	)		(7	)		(3,721	)		(46,848	)
Current period other comprehensive income (loss)		(5,503	)		538			(4,808	)		(9,773	)
Balance at September 28, 2012		(48,623	)		531			(8,529	)		(56,621	)
Current period other comprehensive income (loss)		8,542			(1,222	)		9,230			16,550
Balance at September 27, 2013	$	(40,081	)	$	(691	)	$	701		$	(40,071	)

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. EMPLOYEE STOCK PLANS

Employee Stock Plans

During fiscal year 1991, VMS adopted the stockholder-approved Omnibus Stock Plan (the “Omnibus Plan”) under which shares of common stock could be issued to officers, directors, key employees and consultants. The Omnibus Plan was amended and restated as of the Spin-offs. The maximum number of shares that could have been issued was limited to 20,000,000 shares. Stock options granted under the Omnibus Plan have an exercise price equal to the closing market price of the underlying stock on the grant date (unless the stock market was closed on the grant date, in which case the exercise price was equal to the average of the highest and lowest quoted selling prices on the stock market on the day before and the day after the grant date) and expire no later than ten years from the grant date. Options granted under the Omnibus Plan before November 2000 were generally exercisable in cumulative installments of one third each year, commencing one year following the date of grant. Options granted after November 2000 were exercisable in the following manner: the first one-third one year from the date of grant, with the remainder vesting monthly during the following two-year period. No further awards may be made under the Omnibus Plan.

In November 2000, VMS adopted the 2000 Stock Option Plan (the “2000 Plan”), which was intended to supplement the Omnibus Plan. The maximum number of shares that could have been issued was limited to 12,000,000 shares. The 2000 Plan is similar to the Omnibus Plan in all material respects, with the exception that shares available for awards under the 2000 Plan could not be issued to directors or officers of VMS. Stock options granted under the 2000 Plan are exercisable for the first one-third of the option shares one year from the date of grant, with the remainder vesting monthly during the following two-year period. Other terms of the 2000 Plan mirror the Omnibus Plan. No further awards may be made under the 2000 Plan.

In February 2005, VMS’s stockholders approved the 2005 Omnibus Stock Plan (the “2005 Plan”), which was last amended and restated in February 2012. The 2005 Plan, as amended and restated to date, is referred to as the “Third Amended 2005 Plan.” The Third Amended 2005 Plan provides for the grant of equity incentive awards, including stock options, restricted stock, stock appreciation rights, performance units, restricted stock units and performance shares to officers, directors, key employees and consultants. The Third Amended 2005 Plan also provides for the grant of deferred stock units to non-employee directors. The maximum number of shares issuable under the Third Amended 2005 Plan is (a) 24,950,000, plus (b) the number of shares authorized for issuance, but never issued, under the Omnibus Plan and the 2000 Plan, plus (c) the number of shares subject to awards previously granted under the Omnibus Plan and 2000 Plan that terminate, expire, or lapse, plus (d) amounts granted in substitution of options in connection with certain transactions.

For purposes of the total number of shares available for grant under the Third Amended 2005 Plan, any shares subject to awards of stock options or stock appreciation rights are counted against the available-for-grant limit as one share for every one share subject to the award. Awards other than stock options and stock appreciation rights are counted against the available-for-grant limit as three shares for every one share awarded before February 16, 2007, as 2.5 shares for every one share awarded between February 16, 2007 and February 8, 2012 and as 2.6 shares for every one share awarded on or after February 9, 2012. All awards may be subject to restrictions on transferability and continued employment as determined by the Compensation and Management Development Committee.

Stock options granted under the Third Amended 2005 Plan generally have an exercise price equal to the closing market price of a share of VMS common stock on the grant date. Except for directors, stock options granted under the Third Amended 2005 Plan generally are exercisable in the following manner: the first one-third one year from the date of grant, with the remainder vesting monthly during the following two-year period. Stock option grants to directors are immediately exercisable. For grants of non-qualified stock options made on or after November 17, 2005 under the Third Amended 2005 Plan to employees who retire from the Company within one year of the grant date, the number of shares subject to the stock option shall be adjusted proportionally by the time during such one-year period that the employee remained an employee of the Company (based upon a 365 day year). The revised number of shares subject to the stock option would continue to vest in accordance with the original vesting schedule, and the remaining shares would be cancelled as of the date of retirement. Under the Third Amended 2005 Plan, stock options granted on or prior to February 16, 2007 generally have a term of ten years and stock options granted after February 16, 2007 generally have a term of seven years. The Third Amended 2005 Plan prohibits the repricing of stock options and stock appreciation rights without the approval of VMS’s stockholders.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Restricted stock awards and restricted stock unit awards generally vest over a period of one to five years from the date of grant. For awards of restricted stock and restricted stock units prior to fiscal year 2010, any unvested awards are generally forfeited at the time of termination. However, restricted stock units granted in fiscal year 2010 and thereafter that are unvested at death become fully vested and unvested restricted stock units will generally continue to vest in accordance with the original vesting schedule if a retirement eligible employee retires one year or more from grant date. If a retirement eligible employee retires within one year of the grant date, the number of restricted stock units shall be adjusted proportionally by the time during such one year period that the employee remained an employee of the Company (based upon a 365 day year). The revised number of restricted stock units would vest in accordance with the original vesting schedule and the remaining restricted stock units would be cancelled as of the date of retirement.

Deferred stock unit awards to non-employee directors vest over a period of not less than one year from the date of grant, unless otherwise provided in the grant agreement as determined by VMS’s Board of Directors, and vesting may be pro rata during the vesting period. Each deferred stock unit is deemed to be the equivalent of one share of VMS common stock. Payment of deferred stock units generally will be made in shares of VMS common stock upon the earlier of the third anniversary of the grant date or the director’s termination.

In fiscal years 2013 and 2012, the Company granted performance units to certain employees under the Third Amended 2005 Plan (before and after its amendment and restatement). The number of shares of VMS common stock ultimately issued under the performance units at the end of a three-year performance period will depend on the Company’s business performance during the three-year period against specified performance targets set by the Compensation and Management Development Committee of the Board of Directors at the beginning of the period. Any unvested performance unit awards are generally forfeited at the time of termination, except in the case of death, in which case the employee is considered to have been continuously employed through the last day of the performance period. Also, similar to the adjustments discussed above for restricted stock unit awards, the number of performance units that ultimately vest is adjusted in the case of retirement.

The fair value of options granted and the option component of the shares purchased under the Employee Stock Purchase Plan (which is described further below) shares were estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions:

	Employee Stock Plans									Employee Stock Purchase Plan
	Fiscal Years									Fiscal Years
	2013			2012			2011			2013			2012			2011
Expected term (in years)		4.76			4.64			4.75			0.50			0.50			0.50
Risk-free interest rate		0.6	%		0.8	%		2.0	%		0.1	%		0.1	%		0.1	%
Expected volatility		32.2	%		36.9	%		35.5	%		16.5	%		19.3	%		14.0	%
Expected dividend yield		0	%		0	%		0	%		0	%		0	%		0	%
Weighted average fair value at grant date	$	19.73		$	18.75		$	23.26		$	12.95		$	12.17		$	12.61

The expected term of stock options represents the weighted average period the stock options are expected to remain outstanding. The expected term is based on the observed and expected time to post-vesting exercise and post-vesting cancellations of stock options by Company employees. The Company determined the expected term of stock options based on the demographic grouping of employees and retirement eligibility. The Company used a combination of historical and implied volatility, or blended volatility, in deriving the expected volatility assumption. Blended volatility represents the weighted average of implied volatility and historical volatility. Implied volatility was derived based on traded options on VMS common stock. Implied volatility is weighted in the calculation of blended volatility based on the ratio of the term of the exchange-traded options to the expected terms of the employee stock options. Historical volatility represents the remainder of the weighting. The decision to incorporate implied volatility was based on the Company’s assessment that implied volatility of publicly traded options on VMS common stock is reflective of market conditions and is generally reflective of both historical volatility and expectations of how future volatility will differ from historical volatility. In determining the extent of use of implied volatility, the Company considered: (i) the volume of market activity of traded options; (ii) the ability to reasonably match the input variables of traded options to those of stock options granted by the Company, including the date of grant; (iii) the similarity of the exercise prices; and (iv) the length of term of traded options. After considering the above factors, the Company determined that it cannot rely exclusively on implied volatility based on the fact that the term of VMS exchange-traded options is less than one year and that it is different from the expected terms of the stock options granted by the Company. Therefore, the Company believes a combination of the historical volatility over the expected terms of the stock options granted by the Company and the implied volatility of exchange-traded options best reflects the expected volatility of VMS common stock. The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of VMS’s stock options. The dividend yield assumption is based on the Company’s history and expectation of no dividend payouts.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As share-based compensation expense recognized in the Consolidated Statements of Earnings is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures, based on historical experience. Forfeitures are estimated at the time of grant and revised, in subsequent periods if actual forfeitures differ from those estimates.

The table below summarizes the effect of recording share-based compensation expense:

	Fiscal Years
(In thousands)	2013			2012			2011
Cost of revenues—Product	$	4,088		$	4,419		$	3,917
Cost of revenues—Service		3,460			1,472			1,977
Research and development		5,993			6,378			5,467
Selling, general and administrative		29,096			35,606			30,657
Taxes on earnings		(12,989	)		(15,406	)		(14,063	)
Net share-based compensation expense	$	29,648		$	32,469		$	27,955

During fiscal years 2013, 2012 and 2011, total share-based compensation expense recognized in earnings before taxes was $42.6 million, $47.9 million and $42.0 million, respectively, and the total related recognized tax benefit was $13.0 million, $15.4 million and $14.1 million, respectively.  

A summary of share-based awards available for grant is as follows:

(In thousands)	Shares Available for Grant
Balance at October 1, 2010		8,407
Granted		(108	)
Canceled, expired or forfeited		125
Balance at September 30, 2011		8,424
Authorized		6,000
Granted		(2,680	)
Canceled, expired or forfeited		124
Balance at September 28, 2012		11,868
Granted		(2,045	)
Canceled, expired or forfeited		102
Balance at September 27, 2013		9,925

Awards other than stock options set forth in the table were counted against the shares available for grant limit of the Third Amended 2005 Plan as 2.5 shares for every one share awarded before February 9, 2012 and were counted against the shares available for grant limit as 2.6 shares for every one awarded on or after February 9, 2012. In addition, the shares available for grant limit was further adjusted to reflect a maximum payout of 1.5 shares that could be issued for each performance unit granted.

 104 

VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Activity under the Company’s employee stock plans is presented below:

(In thousands, except per share amounts)	Options Outstanding
	Number of Shares			Weighted Average Exercise Price
Balance at October 1, 2010		10,174		$	44.03
Granted		48			69.67
Canceled, expired or forfeited		(46	)		48.64
Exercised		(3,259	)		40.38
Balance at September 30, 2011		6,917			45.90
Granted		743			58.50
Canceled, expired or forfeited		(30	)		55.73
Exercised		(1,171	)		40.18
Balance at September 28, 2012  (5,540 options exercisable at a weighted average exercise price of $46.91)		6,459			48.34
Granted		613			68.93
Canceled, expired or forfeited		(20	)		60.81
Exercised		(2,567	)		44.97
Balance at September 27, 2013		4,485		$	53.02

For fiscal year 2013, the total pre-tax intrinsic value of options exercised was $66.3 million.

The following table summarizes information related to options outstanding and exercisable under the Company’s employee stock plans at September 27, 2013:

	Options Outstanding								Options Exercisable
Range of Exercise Prices	Number of Shares		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)		Number of Shares		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)
(In thousands, except years and per-share amounts)
$32.10 – $39.85		665		1.61		38.23		23,919		665		1.61		38.23		23,919
$40.21 – $52.07		1,359		2.65		50.20		32,599		1,359		2.65		50.20		32,599
$52.08 – $72.26		2,461		3.84		58.58		38,391		1,631		2.93		55.04		31,202
Total		4,485		3.15	$	53.02	$	94,909		3,655		2.58	$	50.18	$	87,720

(1) The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the closing price of VMS common stock of $74.18 as of September 27, 2013, the last trading date of fiscal year 2013, and which represents the amount that would have been received by the option holders had all option holders exercised their options and sold the shares received upon exercise as of that date.

As of September 27, 2013, there was $9.5 million of total unrecognized compensation expense related to stock options granted under the Company’s employee stock plans. This unrecognized compensation expense is expected to be recognized over a weighted average period of 1.6 years.

 105 

VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The activity for restricted stock, restricted stock units, deferred stock units and performance units is summarized as follows:

(In thousands, except per share amounts)	Number of Shares			Weighted Average Grant-Date Fair Value
Balance at October 1, 2010		1,333		$	46.91
Granted		24			68.67
Vested		(590	)		47.27
Cancelled or expired		(32	)		46.59
Balance at September 30, 2011		735		$	47.36
Granted		716			59.06
Vested		(469	)		44.68
Cancelled or expired		(37	)		53.94
Balance at September 28, 2012		945		$	57.30
Granted		516			70.37
Vested		(396	)		55.67
Cancelled or expired		(30	)		61.82
Balance at September 27, 2013		1,035		$	64.36

Share-based compensation expense for restricted common stock, restricted stock units and deferred stock units is measured at the stock’s fair value on the date of grant and is amortized over each award’s respective service period. The Company values performance units using the Monte Carlo simulation model on the date of grant with assumptions that includes the historical volatilities of shares of VMS common stock, as well as the shares of common stock of peer companies. In addition, the Company estimates the probability that certain performance conditions that affect the vesting of performance units will be achieved, and recognizes expense only for those awards expected to vest.

For fiscal years 2013, 2012 and 2011, the Company recognized total share-based compensation expense related to restricted stock and restricted stock units of $25.1 million, $26.8 million and $25.0 million, respectively. The Company recognized $0.7 million of share-based compensation expense related to deferred stock units in each of the fiscal years 2013, 2012, and 2011. In addition, the Company recognized $2.4 million and $4.1 million share-based compensation expense related to performance units in fiscal years 2013 and 2012, respectively.

As of September 27, 2013, unrecognized compensation expense totaling $31.5 million was related to restricted stock, restricted stock units, deferred stock units and performance units granted under the Company’s employee stock plans. This unrecognized share-based compensation expense is expected to be recognized over a weighted average period of 1.8 years. The 396,239 shares that vested in fiscal year 2013 represented deferred stock units, restricted stock units and restricted common stock, and the total fair value of these shares upon vesting was $27.4 million. The Company withheld 138,159 shares (fair value of approximately $9.6 million) for employees’ minimum withholding taxes at vesting of such awards in fiscal year 2013.

Employee Stock Purchase Plan

VMS had an Employee Stock Purchase Plan (the “Prior ESPP”) under which VMS common stock could be issued to substantially all employees in the United States. In May 2009, as part of a broader set of cost control initiatives, VMS’s Board of Directors authorized the suspension of purchases under the Prior ESPP beginning in October 2009. In February 2010, VMS’s stockholders approved the 2010 Employee Stock Purchase Plan (the “2010 ESPP”). The 2010 ESPP, like the Prior ESPP, provides eligible employees with an opportunity to purchase shares of VMS common stock at 85% of the lower of its fair market value at the start and end of a six-month purchase period. The 2010 ESPP provides for the purchase of up to 7 million shares of VMS common stock (including shares that were available for purchase under the Prior ESPP as of February 11, 2010, the date the 2010 ESPP became effective). Once the 2010 ESPP became effective, purchases could no longer be made under the Prior ESPP.

VMS issued 262,455 shares for $14.2 million in fiscal year 2013 and 262,660 shares for $13.3 million in fiscal year 2012. At September 27, 2013, 6.4 million shares were available for issuance under the 2010 ESPP.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. TAXES ON EARNINGS

The Company accounts for income taxes under an asset and liability approach where deferred income taxes are based upon enacted tax laws and rates applicable to the periods in which the taxes become payable.

Taxes on earnings from continuing operations were as follows:

	Fiscal Years Ended
(In millions)	2013			2012			2011
Current provision:
Federal	$	110.1		$	99.3		$	80.4
State and local		13.4			8.5			11.7
Foreign		54.3			63.5			52.7
Total current		177.8			171.3			144.8
Deferred provision (benefit):
Federal		(3.9	)		(4.5	)		32.9
State and local		(0.2	)		0.1			6.0
Foreign		0.1			2.0			(3.6	)
Total deferred		(4.0	)		(2.4	)		35.3
Taxes on earnings	$	173.8		$	168.9		$	180.1

Earnings from continuing operations before taxes are generated from the following geographic areas:

	Fiscal Years Ended
(In millions)	2013		2012		2011
United States	$	308.0	$	271.4	$	299.3
Foreign		304.1		324.5		289.4
	$	612.1	$	595.9	$	588.7

The effective tax rate differs from the U.S. federal statutory tax rate as a result of the following:

	Fiscal Years Ended
	2013			2012			2011
Federal statutory income tax rate		35.0	%		35.0	%		35.0	%
State and local taxes, net of federal tax benefit		1.3			1.3			2.5
Non-U.S. income taxed at different rates, net		(5.6	)		(5.9	)		(3.3	)
Resolution of tax contingencies due to lapses of statutes of limitations		(1.2	)		(1.8	)		(2.8	)
Other		(1.1	)		(0.3	)		(0.8	)
Effective tax rate		28.4	%		28.3	%		30.6	%

During fiscal years 2013, 2012 and 2011, the Company’s effective tax rate was lower than the U.S. federal statutory rate primarily because the Company’s foreign earnings are taxed at rates that, on average, are lower than the U.S. federal rate. This reduction is partly offset by the fact that the Company’s domestic earnings are also subject to state income taxes. During fiscal years 2013 and 2012, and 2011, the benefit of the release of liabilities for uncertain tax positions as a result of the expiration of the statutes of limitation in various jurisdictions also contributed to the Company’s effective tax rate being lower than the U.S. federal statutory rate.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Significant components of deferred tax assets and liabilities are as follows:

(In millions)	September 27, 2013			September 28, 2012
Deferred Tax Assets:
Deferred revenues	$	26.8		$	26.8
Deferred compensation		34.9			32.7
Product warranty		13.9			13.7
Inventory adjustments		18.3			17.0
Equity-based compensation		33.3			41.8
Environmental reserve		5.7			5.9
Net operating loss carryforwards		78.6			54.2
Other		37.8			45.4
		249.3			237.5
Valuation allowance		(60.7	)		(45.8	)
Total deferred tax assets		188.6			191.7
Deferred Tax Liabilities:
Tax-deductible goodwill		(27.3	)		(27.4	)
Fixed assets		(17.7	)		(22.3	)
Other		(30.4	)		(28.8	)
Total deferred tax liabilities		(75.4	)		(78.5	)
Net deferred tax assets	$	113.2		$	113.2
Reported As:
Net current deferred tax assets	$	122.3		$	115.8
Net long-term deferred tax assets (included in “Other Assets”)		10.5			13.8
Net current deferred tax liabilities (included in “Accrued Expenses”)		(7.6	)		(2.9	)
Net long-term deferred tax liabilities (included in “Other long-term liabilities”)		(12.0	)		(13.5	)
Net deferred tax assets	$	113.2		$	113.2

The Company has not provided for U.S. federal income and foreign withholding taxes on $1,412.2 million of cumulative undistributed earnings of non-U.S. subsidiaries. Such earnings are intended to be reinvested in the non-U.S. subsidiaries for an indefinite period of time. If such earnings were not considered to be reinvested indefinitely, additional deferred taxes of approximately $358.4 million would be provided.

The Company has federal net operating loss carryforwards of approximately $14.7 million expiring between 2018 and 2031. The federal net operating loss carryforwards are subject to an annual limitation of approximately $1.3 million per year. The Company has state net operating loss carryforwards of $31.1 million expiring between 2018 and 2032. The Company has foreign net operating loss carryforwards of $218.9 million with an indefinite life. Of this amount, $24.1 million is unavailable to the Company under local loss utilization rules.

Our valuation allowance relates primarily to net operating losses in certain foreign jurisdictions where, based on the weight of available evidence, it is more likely than not that the tax benefit of the net operating losses will not be realized.  The valuation allowance increased by $14.9 million during fiscal year 2013, decreased by $1.1 million during fiscal year 2012, and increased by $8.4 million in fiscal year 2011.

Income taxes paid were as follows:

	Fiscal Years Ended
(In millions)	2013		2012		2011
Federal income taxes paid, net	$	119.1	$	77.6	$	70.0
State income taxes paid, net		14.9		9.3		11.9
Foreign income taxes paid, net		69.4		47.7		57.5
Total	$	203.4	$	134.6	$	139.4

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company accounts for uncertainty in income taxes following a two-step approach for recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that, based on the technical merits, the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.

Changes in the Company’s unrecognized tax benefits were as follows:

	Fiscal Years Ended
(In millions)	2013			2012			2011
Unrecognized tax benefits balance–beginning of fiscal year	$	38.8		$	37.1		$	46.4
Additions based on tax positions related to a prior year		2.5			3.8			1.0
Reductions based on tax positions related to a prior year		(0.7	)		(0.9	)		(0.4	)
Additions based on tax positions related to the current year		6.6			6.8			8.6
Settlements		(4.2	)		(0.4	)		(5.1	)
Reductions resulting from the expiration of the applicable statute of limitations		(6.0	)		(7.6	)		(13.4	)
Unrecognized tax benefits balance–end of fiscal year	$	37.0		$	38.8		$	37.1

As of September 27, 2013, the total amount of gross unrecognized tax benefits was $37.0 million. Of this amount, $32.8 million would affect the effective tax rate if recognized. The difference would be offset by changes to deferred tax assets and liabilities.

The Company includes interest and penalties related to income taxes within “Taxes on earnings” on the Consolidated Statements of Earnings. As of September 27, 2013, the Company had accrued $6.7 million for the payment of interest and penalties related to unrecognized tax benefits. A net expense of $1.2 million related to interest and penalties was included in “Taxes on earnings.” As of September 28, 2012, the Company had accrued $5.5 million for the payment of interest and penalties related to unrecognized tax benefits. A net benefit of $2.2 million related to interest and penalties was included in “Taxes on earnings.”

The Company files U.S. federal, U.S. state, and foreign tax returns. The Company’s U.S. federal tax returns are generally no longer subject to tax examinations for years prior to 2010. The Company has significant operations in Switzerland. The Company’s Swiss tax returns are generally no longer subject to tax examinations for years prior to 2009. For U.S. states and other foreign tax returns, the Company is generally no longer subject to tax examinations for years prior to 2007.

14. BUSINESS COMBINATIONS

On March 4, 2011, the Company acquired all of the outstanding equity of a privately held company, which was then integrated into the Company’s Oncology Systems business. This acquisition was accounted for as a business combination. The total purchase price of $8.0 million consisted of $7.5 million of cash consideration and $0.5 million of contingent consideration at fair value. Of the purchase price, $3.4 million was allocated to goodwill, $5.7 million to amortizable intangible assets, and $(1.1) million to net assumed liabilities. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and in this case was not deductible for income tax purposes.

On October 3, 2011, the Company acquired all of the outstanding equity of Calypso Medical Technologies, Inc. (“Calypso”), a privately held supplier of specialized products and software for real-time tumor tracking and motion management during radiosurgery and radiotherapy. This acquisition, which was integrated into the Company’s Oncology Systems business, enables the Company to offer real-time, non-ionizing tumor tracking tools for enhancing the precision of cancer treatments. This acquisition was accounted for as a business combination. The total purchase price of $15.8 million consisted of $10.9 million of cash consideration and $4.9 million of contingent consideration at fair value. During the fourth quarter of fiscal year 2012, the Company adjusted the preliminary amounts allocated to deferred tax assets and liabilities in order to reflect additional information obtained since the acquisition date related to deferred tax positions that existed at the acquisition date. The opening balances have been adjusted to reflect an increase to deferred tax asset of $2.5 million and a decrease of goodwill of $2.5 million. As of September 28, 2012, the Company had finalized the allocation of the purchase price of Calypso. Of the purchase price, $7.9 million was allocated to amortizable intangible assets and $7.9 million to net assets.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On April 3, 2012, VMS acquired all of the outstanding equity of InfiMed, a privately-held supplier of hardware and software for processing diagnostic X-ray images. This acquisition, which was integrated into the Company’s X-Ray Products business, enables the Company to provide more fully integrated X-ray component solutions to its customers. This acquisition was accounted for as a business combination. The total purchase price of $20.8 million consisted of $17.1 million of cash consideration and $3.7 million of contingent consideration at fair value. Of the purchase price, $10.9 million was allocated to goodwill, $5.4 million to amortizable intangible assets, and $4.5 million to net assets. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and in this case was deductible for income tax purposes.

The impact of these business combinations was not significant to the Consolidated Financial Statements and therefore pro forma disclosures have not been presented.

15. VARIABLE INTEREST ENTITY

During fiscal year 2011, the Company entered into a number of agreements with CPTC. CPTC is a variable interest entity that was established to finance and operate the Scripps Proton Therapy Center in San Diego, California.  

In April 2010, the Company signed an $88 million agreement to supply a proton therapy system to CPTC. The Company began recognizing revenues under this contract in the fourth quarter of fiscal year 2011. In June 2011, the Company signed a ten-year, approximately $60 million agreement with CPTC to service the proton therapy system. No revenues have been recognized under this service agreement. In addition, in September 2011, ORIX and the Company, through its Swiss subsidiary, committed to loan up to $165.3 million to CPTC. ORIX is the loan agent for this facility and, along with CPTC and Scripps, has budgetary approval authority for the Scripps Proton Therapy Center. The Company’s maximum loan commitment under this facility is $115.3 million, reflecting the Company’s pro rata share of 69.75% of the obligation to fund the initial distribution and subsequent advances. As of September 27, 2013, the Company had funded $62.7 million (including accrued interest) of its $115.3 million commitment, which is reported as a current asset on the Company’s Consolidated Balance Sheets. The Company’s subsidiary is not obligated to fund any additional amounts to CPTC beyond the $115.3 million committed under the loan facility. The Company may sell all or a portion of its participation in this loan facility before the end of the drawdown period in 2014. Upon the sale of all or a portion of this facility, the Company will not be required to make further loan advances for the portion of the facility that is sold.

The loan, which matures in September 2015, bears interest at LIBOR plus 6.25% per annum with a minimum interest rate of 8.25% per annum. The loan can be extended for two additional one-year terms at the election of CPTC during which extensions interest will accrue at LIBOR plus 7.00% per annum with a minimum interest rate of 9.00% per annum. Interest only payments are due monthly in arrears until July 1, 2014, at which time monthly payments based on amortization of the principal balance over a 15-year period at an interest rate of 8.25% per annum become due and payable. If all or a portion of the principal is repaid on or before July 1, 2014, interest that would have been payable had the principal not been repaid early is due and payable. The Company, as one of the lenders, is entitled to certain fees, including a commitment fee of 1.5% of the loan facility commitment amount and an exit fee of 1% of the amount of principal paid, whether as a result of prepayment or maturity. The loan facility is collateralized by all of the assets of the Scripps Proton Therapy Center. In connection with the loan facility, the Company’s subsidiary also shares 4% of the gross revenues of the Scripps Proton Therapy Center for 35 years. The Company’s subsidiary’s right of revenue sharing may be reduced upon the sale of a portion of the Company’s loan and will be reduced to an amount not to exceed 1% of the gross revenues of the Scripps Proton Therapy Center upon repayment of the first $71 million of the Company’s loan amount. The Company has not sold any portion of its loan to date.

The Company has determined that CPTC is a variable interest entity and that the Company holds a significant variable interest of CPTC through its subsidiary’s participation in the loan facility and its agreements to supply and service the proton therapy equipment. The Company has concluded that it is not the primary beneficiary of CPTC. The Company has no voting rights, has no approval authority or veto rights for CPTC’s budget, and does not have the power to direct patient recruitment, clinical operations and management of the Scripps Proton Therapy Center, which the Company believes are the matters that most significantly affect CPTC’s economic performance.

As of September 27, 2013, in addition to the $62.7 million loan to CPTC, the Company had recorded $43.5 million in accounts receivable from CPTC. As of September 28, 2012, the outstanding loan balance to CPTC was $49.7 million and the accounts receivable balance from CPTC was $30.7 million. The Company’s exposure to loss as a result of its involvement with CPTC was limited to the carrying amounts of these assets on its Consolidated Balance Sheets.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. STRATEGIC ARRANGEMENT

In April 2012, VMS entered into a strategic global partnership with Siemens AG (“Siemens”) through which, among other things, the Company and Siemens are working on developing interfaces to enable the Company’s ARIA^® oncology information system software to connect with Siemens linear accelerators and imaging systems. Under the agreement establishing this collaboration, the Company committed to make certain payments, including up to $10 million in fixed fees and $20 million in license fees, in the event certain product development milestones are achieved. The Company will also pay for additional licenses beyond the minimum quantities set forth in the agreement. During fiscal year 2013, the Company accrued $2 million of the fixed fees under the terms of the agreement. As of September 27, 2013, no amount related to achievement of product development milestones was payable under this agreement.

In addition, pursuant to this agreement, the Company represents Siemens diagnostic imaging products to radiation oncology clinics in most international markets and in North America, and Siemens, in turn, represents the Company’s equipment and software products for radiotherapy and radiosurgery within its offerings to its healthcare customers in agreed upon countries. The Company receives commissions from Siemens for sales agency activities provided to Siemens and makes commission payments to Siemens for sales agency activities provided to the Company as part of this agreement. The Company incurred commissions expense of approximately $0.2 million and recognized commissions income of approximately $0.3 million during fiscal year 2013. This agreement also provides a framework for both companies to explore opportunities to co-develop new imaging and treatment solutions in the future.

17. SEGMENT INFORMATION

Description of Segments

The Company’s operations are grouped into two reportable operating segments: Oncology Systems and X-Ray Products. These reportable operating segments were determined based on how the Company’s Chief Executive Officer, its Chief Operating Decision Maker (“CODM”), views and evaluates the Company’s operations. The Company’s Ginzton Technology Center (“GTC”), SIP business and VPT are reflected in the “Other” category because these operating segments do not meet the criteria of a reportable operating segment. The CODM allocates resources to and evaluates the financial performance of each operating segment primarily based on operating earnings.

The Oncology Systems business segment designs, manufactures, sells and services hardware and software products for treating cancer with radiotherapy, stereotactic radiotherapy, stereotactic body radiotherapy, stereotactic radiosurgery and brachytherapy. Products include linear accelerators, brachytherapy afterloaders, treatment simulation and verification equipment and accessories; as well as information management, treatment planning and image processing software. Oncology Systems’ products enable radiation oncology departments in hospitals and clinics to perform conventional radiotherapy treatments and offer advanced treatments such as fixed field intensity-modulated radiation therapy (“IMRT”), image-guided radiation therapy (“IGRT”), volumetric modulated arc therapy and stereotactic radiotherapy, as well as to treat patients using brachytherapy techniques, which involve temporarily implanting radioactive sources. The Company’s Oncology Systems products are also used by neurosurgeons to perform stereotactic radiosurgery. Oncology Systems’ customers worldwide include university research and community hospitals, private and governmental institutions, healthcare agencies, physicians’ offices and cancer care clinics.

The X-Ray Products business segment designs, manufactures, sells and services X-ray imaging components for use in a range of applications, including radiographic or fluoroscopic imaging, mammography, special procedures, computed tomography and industrial applications. The Company’s X-ray imaging components are sold to large imaging system OEM customers that incorporate them into their medical diagnostic, dental, veterinary and industrial imaging systems. The Company sells X-ray tubes and flat panel digital image detectors for filmless X-ray imaging (commonly referred to as “flat panel detectors” or “digital image detectors”) to small OEM customers, independent service companies and directly to end-users for replacement purposes.

The Company has three other businesses that are reported together under the “Other” category. SIP designs, manufactures, sells and services Linatron^® X-ray accelerators, imaging processing software and image detection products (including IntellX^TM) for security and inspection purposes, such as cargo screening at ports and borders and nondestructive examination in a variety of applications. The Company generally sells SIP products to OEM customers who incorporate its products into their inspection systems, which are then sold to customs and other government agencies, as well as to commercial private parties in the casting, power, aerospace, chemical, petro-chemical and automotive industries for nondestructive product examination purposes.

The VPT business develops, designs, manufactures, sells and services products and systems for delivering proton therapy, a form of external beam radiotherapy using proton beams for the treatment of cancer.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In the second quarter of fiscal year 2009, the Company completed the sale of Research Instruments in order to focus that business exclusively on the development of the VPT business. Research Instruments is classified as a discontinued operation for fiscal year 2011 and the Company has segregated the operating results of Research Instruments from continuing operations on the Consolidated Statements of Earnings. There were no operating results of Research Instruments beyond fiscal year 2011.Segment data does not include amounts for discontinued operations. Research Instruments was previously included in the “Other” category. See Note 18, “Discontinued Operations” for a more detailed discussion.

GTC develops technologies that enhance the Company’s current businesses or may lead to new business areas, including technology to improve radiation therapy and X-ray imaging, as well as other technology for a variety of applications, including security and cargo screening.

Accordingly, the following information is provided for purposes of achieving an understanding of operations, but may not be indicative of the financial results of the reported segments were they independent organizations. In addition, comparisons of the Company’s operations to similar operations of other companies may not be meaningful.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Segment Data

	Revenues						Operating Earnings
	Fiscal Years						Fiscal Years
(In millions)	2013		2012		2011		2013			2012			2011
Oncology Systems	$	2,253	$	2,189	$	2,022	$	512		$	505		$	507
X-Ray Products		546		493		469		144			131			118
Total reportable segments		2,799		2,682		2,491		656			636			625
Other		144		125		106		(25	)		(32	)		(32	)
Corporate		—		—		—		(22	)		(10	)		(5	)
Total company	$	2,943	$	2,807	$	2,597	$	609		$	594		$	588
	Depreciation & Amortization						Capital Additions
	Fiscal Years						Fiscal Years
(In millions)	2013		2012		2011		2013			2012			2011
Oncology Systems	$	21	$	23	$	19	$	25		$	17		$	17
X-Ray Products		13		10		8		8			8			7
Total reportable segments		34		33		27		33			25			24
Other		3		4		3		10			10			13
Corporate		26		24		23		35			32			34
Total company	$	63	$	61	$	53	$	78		$	67		$	71
	Total Assets						Goodwill
	Fiscal Years						Fiscal Years
(In millions)	2013		2012		2011		2013			2012			2011
Oncology Systems	$	1,217	$	1,220	$	1,093	$	132		$	132		$	130
X-Ray Products		309		265		268		17			17			6
Total reportable segments		1,526		1,485		1,361		149			149			136
Other		367		313		239		76			73			76
Corporate		1,575		1,081		899		—			—			—
Total company	$	3,468	$	2,879	$	2,499	$	225		$	222		$	212

The reconciliation of segment operating results information to the Company’s earnings from operations before taxes was as follows:

	Fiscal Years
(In millions)	2013			2012			2011
Earnings from operations before taxes:
Oncology Systems	$	512		$	505		$	507
X-Ray Products		144			131			118
Total reportable segments		656			636			625
Other		(25	)		(32	)		(32	)
Corporate		(22	)		(10	)		(5	)
Interest income (expense), net		3			2			1
Total company	$	612		$	596		$	589

Geographic Information

	Revenues						Long-Lived Assets
	Fiscal Years						Fiscal Years
(In millions)	2013		2012		2011		2013		2012		2011
United States	$	1,212	$	1,156	$	975	$	238	$	229	$	223
International		1,731		1,651		1,622		77		68		63
Total company	$	2,943	$	2,807	$	2,597	$	315	$	297	$	286

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company operates various manufacturing and marketing operations outside the United States. Allocation between domestic and foreign revenues is based on final destination of products sold. No single foreign country represented 10% or more of the Company’s total revenues for fiscal years 2013, 2012 and 2011. Intercompany revenues between geographic areas are accounted for at cost plus prevailing markups arrived at through negotiations between profit centers. Intercompany and intracompany profits are eliminated in consolidation.

18. DISCONTINUED OPERATIONS

In September 2008, the Company approved a plan to sell Research Instruments, which developed, manufactured and serviced highly customized scientific instrument components and systems for fundamental and applied physics research primarily for national research laboratories worldwide. Research Instruments was part of the January 2007 ACCEL acquisition and was previously included in the “Other” category in the Company’s Consolidated Financial Statements. The Company decided to sell Research Instruments in order to focus exclusively on the development of its VPT business. In the second quarter of fiscal year 2009, the Company completed the sale of Research Instruments for total cash proceeds of $0.4 million. In connection with the sale of Research Instruments, the Company entered into a non-binding supply agreement with the buyer to supply certain inventory parts for the VPT business. The inventory purchases under this supply agreement have not and are not expected to have a significant impact on the cash flows of Research Instruments.

The Company classified the operating results of Research Instruments as a discontinued operation in the Consolidated Statements of Earnings for fiscal year 2011. There were no operating results of Research Instruments beyond fiscal year 2011. Because the amounts related to Research Instruments are not material in the Consolidated Statement of Comprehensive Earnings, Consolidated Balance Sheet, Consolidated Statement of Cash Flows and the Consolidated Statement of Stockholders’ Equity, the Company has not segregated them from continuing operations for fiscal year 2011.

The total loss from discontinued operations for fiscal year 2011 was $9.7, less applicable income tax of zero. Total revenues of Research Instruments, reported in discontinued operations, for fiscal year 2011 was zero. As of September 30, 2011, the Company had no remaining obligation related to this discontinued operation. In fiscal years 2013 and 2012, the Company did not recognize any income or losses and did not have any revenues from discontinued operations.

19. QUARTERLY FINANCIAL DATA (UNAUDITED)

	Fiscal Year 2013
(In millions, except per share amounts)	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total Year
Total revenues	$	678.4	$	768.4	$	726.2	$	769.9	$	2,942.9
Gross margin	$	291.1	$	319.6	$	310.5	$	328.5	$	1,249.7
Net earnings	$	95.3	$	112.8	$	112.8	$	117.3	$	438.2
Net earnings per share – basic:	$	0.87	$	1.04	$	1.04	$	1.09	$	4.04
Net earnings per share – diluted:	$	0.86	$	1.02	$	1.03	$	1.08	$	3.98
	Fiscal Year 2012
(In millions, except per share amounts)	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total Year
Total revenues	$	625.3	$	720.3	$	705.3	$	756.1	$	2,807.0
Gross margin	$	268.8	$	296.7	$	307.6	$	323.2	$	1,196.3
Net earnings	$	90.2	$	107.8	$	108.8	$	120.2	$	427.0
Net earnings per share – basic:	$	0.80	$	0.96	$	0.98	$	1.09	$	3.83
Net earnings per share – diluted:	$	0.79	$	0.94	$	0.96	$	1.08	$	3.76

The four quarters of net earnings per share may not add to the total fiscal year because of differences in the weighted average numbers of shares outstanding during the quarters and the fiscal year.

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VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20. SUBSEQUENT EVENT

In November 2013, the VMS Board of Directors authorized the repurchase of an additional 6,000,000 shares of VMS common stock from December 30, 2013 through December 31, 2014. Stock repurchases under the November 2013 authorization may be made in open market purchases, in privately negotiated transactions (including accelerated share repurchase programs) or under Rule 10b5-1 share repurchase plans, and may be made from time to time in one or more blocks. Shares will be retired upon repurchase.

       

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REPORT OF MANAGEMENT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING

Management of Varian Medical Systems, Inc. and its subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of September 27, 2013. In making this assessment, management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of September 27, 2013. PricewaterhouseCoopers LLP has issued a report on the Company’s internal control over financial reporting as of September 27, 2013, which appears immediately after this report.

   

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Varian Medical Systems, Inc.:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Varian Medical Systems, Inc. and its subsidiaries at September 27, 2013 and September 28, 2012, and the results of their operations and their cash flows for each of the three years in the period ended September 27, 2013 in conformity with accounting principles generally accepted in the United States of America.  In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 27, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances.  We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/S/ PRICEWATERHOUSECOOPERS LLP

San Jose, California

November 26, 2013

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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures (as defined in the Rules 13a-15(e) and 15d-15(e) under the Exchange Act required by Exchange Act) Rules 13a-15(b) or 15d-15(b), our principal executive officer and principal financial officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Report of management on internal control over financial reporting. The information required to be furnished pursuant to this item is set forth under the caption “Report of Management on Internal Control over Financial Reporting” under Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K, and is incorporated here by reference.

(c) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter of fiscal year 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

The information required by this item with respect to our executive officers is set forth in Part I of this Annual Report on Form 10-K. The information required by this item with respect to our directors, our Audit Committee and its members, and audit committee financial expert is incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders under the caption “Proposal One—Election of Directors.” The information required by this item with respect to compliance with Section 16(a) of the Exchange Act is incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders under the caption “Stock Ownership—Section 16(a) Beneficial Ownership Reporting Compliance.”

Code of Business Ethics

We have adopted a Code of Business Ethics that applies to all of our executive officers and directors. The Code of Business Ethics is posted on our website. The Internet address for our website is http://www.varian.com, and the Code of Business Ethics may be found as follows:

1. From our main web page, first click “Investors.”

2. Next click on “Corporate Governance” in the left hand navigation bar.

3. Finally, click on “Code of Ethics.”

We intend to satisfy the disclosure requirements under Item 5.05(c) of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Business Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions by posting such information on our website, at the address and location specified above.

Item 11. Executive Compensation

The information required by this item is incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders under the caption “Compensation of the Named Executive Officers and Directors.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plan Information

The following table provides information as of September 27, 2013 with respect to the shares of VMS common stock that may be issued under existing equity compensation plans.

	A			B		C
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights			Weighted average exercise price of outstanding options, warrants and rights(4)		Number of securities remaining available for future issuance under  equity compensation plans (excluding securities reflected in column A)
Equity compensation plans approved by security holders		5,385,620	(1)	$	53.77		16,285,426	(2)
Equity compensation plans not approved by security holders (3)		224,139		$	38.82		—
Total		5,609,759		$	53.02		16,285,426

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(1) Consists of stock options, restricted stock units, deferred stock units and performance units granted under the Omnibus Stock Plan and the Third Amended and Restated 2005 Omnibus Stock Plan. Effective February 17, 2005, no further grants can be made under the Omnibus Stock Plan. The number of performance units reflects the maximum payout of 1.5 shares that could be issued for each performance unit granted.

(2) Includes 6,360,897 shares available for future issuance under the 2010 Employee Stock Purchase Plan.

(3) Consists of awards granted under the 2000 Stock Option Plan. Effective February 17, 2005, no further grants can be made under the 2000 Stock Option Plan.

(4) The weighted average exercise price does not take into account the shares issuable upon vesting of outstanding restricted stock units, deferred stock units and performance units, which have no exercise price.

The 2000 Stock Option Plan was intended to supplement the Omnibus Stock Plan. The 2000 Stock Option Plan is similar to the Omnibus Stock Plan in all material respects, with the exception that awards under the 2000 Stock Option Plan could not be made to directors or officers of the Company. For a description of the material features of the Omnibus Stock Plan and the 2000 Stock Option Plan, see Note 12, “Employee Stock Plans” of the Notes to the Consolidated Financial Statements, which description is incorporated by reference.

The information required by this item with respect to the security ownership of certain beneficial owners and the security ownership of directors and executive officers is incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders under the caption “Stock Ownership—Beneficial Ownership of Certain Stockholders, Directors and Executive Officers.”

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item with respect to certain relationships and related transactions is incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders under the caption “Certain Relationships and Related Transactions.” The information required by this item with respect to director and committee member independence is incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders under the caption “Proposal One—Election of Directors.”

Item 14. Principal Accountant Fees and Services

The information required by this item is incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders under the caption “Proposal Four—Ratification of the Appointment of Our Independent Registered Public Accounting Firm.”

 120 

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report:

(1) Consolidated Financial Statements:

· Consolidated Statements of Earnings

· Consolidated Statements of Comprehensive Earnings

· Consolidated Balance Sheets

· Consolidated Statements of Cash Flows

· Consolidated Statements of Stockholders’ Equity

· Notes to the Consolidated Financial Statements

· Report of Independent Registered Public Accounting Firm

(2) Consolidated Financial Statement Schedule:

The following financial statement schedule of the Registrant and its subsidiaries for fiscal years 2013, 2012 and 2011 is filed as a part of this report and should be read in conjunction with the Consolidated Financial Statements of the Registrant and its subsidiaries:

Schedule
II	Valuation and Qualifying Accounts

All other schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or the notes thereto.

(3) Exhibits:

The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Form 10-K.

 121 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 26, 2013

	VARIAN MEDICAL SYSTEMS, INC.
By:	/s/ ELISHA W. FINNEY
	Elisha W. Finney Executive Vice President, Finance and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.

Signature	Capacity	Date
/s/ DOW R. WILSON Dow R. Wilson	President and Chief Executive Officer and Director (Principal Executive Officer)	November 26, 2013
/s/ ELISHA W. FINNEY Elisha W. Finney	Executive Vice President, Finance and Chief Financial Officer (Principal Financial Officer)	November 26, 2013
/s/ CLARENCE R. VERHOEF Clarence R. Verhoef	Senior Vice President, Finance and Corporate Controller (Principal Accounting Officer)	November 26, 2013
/s/ RICHARD M. LEVY Richard M. Levy	Chairman of the Board	November 26, 2013
/s/ TIMOTHY E. GUERTIN Timothy E. Guertin	Vice Chairman of the Board	November 26, 2013
/s/ SUSAN L. BOSTROM Susan L. Bostrom	Director	November 26, 2013
/s/ R. ANDREW ECKERT R. Andrew Eckert	Director	November 26, 2013
/s/ DAVID J. ILLINGWORTH David J. Illingworth	Director	November 26, 2013
/s/ MARK R. LARET Mark R. Laret	Director	November 26, 2013
/s/ RUEDIGER NAUMANN-ETIENNE Ruediger Naumann-Etienne	Director	November 26, 2013
/s/ ERICH R. REINHARDT, PH.D. Erich R. Reinhardt, Ph.D.	Director	November 26, 2013
/s/ VENKATRAMAN THYAGARAJAN Venkatraman Thyagarajan	Director	November 26, 2013

 122 

Schedule II 

VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES 

VALUATION AND QUALIFYING ACCOUNTS 

Fiscal Year	Description	Balance at Beginning of Period		Charged to Bad Debt Expense		Write-Offs/ Adjustments Charged to Allowance		Balance at End of Period
				(In thousands)
2013	Allowance for doubtful accounts receivable	$	14,386	$	5,984	$	5,635	$	14,735
2012	Allowance for doubtful accounts receivable	$	6,034	$	10,350	$	1,998	$	14,386
2011	Allowance for doubtful accounts receivable	$	4,209	$	2,514	$	689	$	6,034

Fiscal Year	Description	Balance at Beginning of Period		Increases		Deductions		Balance at End of Period
				(In thousands)
2013	Valuation allowance for deferred tax assets	$	45,751	$	14,953	$	—	$	60,704
2012	Valuation allowance for deferred tax assets	$	46,924	$	—	$	1,173	$	45,751
2011	Valuation allowance for deferred tax assets	$	38,456	$	8,642	$	174	$	46,924

 123 

EXHIBIT INDEX 

Exhibit Number	Description
2	Amended and Restated Distribution Agreement, dated as of January 14, 1999, by and among Varian Associates, Inc. (which has been renamed Varian Medical Systems, Inc.), Varian, Inc. and Varian Semiconductor Equipment Associates, Inc. (incorporated by reference to Exhibit No. 2 to the Registrant’s Form 8-K Current Report filed as of April 2, 1999, File No. 1-7598).
3.1	Registrant’s Amended and Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit No. 3.1 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended July 2, 2004, File No. 1-7598).
3.2	Registrant’s By-Laws, as amended, effective November 12, 2010 (incorporated by reference to Exhibit No. 3.2 to the Registrant’s Form 8-K/A Current Report filed as of November 17, 2010, File No. 1-7598).
4.1	Specimen Common Stock Certificate (incorporated by reference to Exhibit No. 4.1 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended April 2, 1999, File No. 1-7598).
10.1†	Registrant’s Amended and Restated Omnibus Stock Plan (incorporated by reference to Exhibit No. 10.1 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended July 2, 2004, File No. 1-7598).
10.2†	Registrant’s Amended and Restated 2000 Stock Option Plan (incorporated by reference to Exhibit No. 10.2 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended July 2, 2004, File No. 1-7598).
10.3†	Form of Registrant’s Indemnity Agreement with the directors and executive officers (incorporated by reference to Exhibit No. 10.3 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended April 2, 1999, File No. 1-7598).
10.4†	Form of Registrant’s Change in Control Agreement for Chief Executive Officer (incorporated by reference to Exhibit No. 10.5 to the Registrant’s Form 10-K Annual Report for the fiscal year ended September 28, 2011, File No. 1-7598).
10.5†	Form of Registrant’s Change in Control Agreement for Senior Executives (Chief Financial Officer and General Counsel) (incorporated by reference to Exhibit No. 10.5 to the Registrant’s Form 10-K Annual Report for the fiscal year ended September 29, 2006, File No. 1-7598).
10.6†	Form of Registrant’s Change in Control Agreement for Senior Executives (Chief Financial Officer and General Counsel) (effective for any person assuming such position on or after October 1, 2011) (incorporated by reference to Exhibit No. 10.7 to the Registrant’s Form 10-K Annual Report for the fiscal year ended September 28, 2011, File No. 1-7598).
10.7†	Form of Registrant’s Change in Control Agreement for Senior Executives (other than the Chief Executive Officer, the Chief Financial Officer, and the General Counsel) (incorporated by reference to Exhibit No. 10.6 to the Registrant’s Form 10-K Annual Report for the fiscal year ended September 29, 2006, File No. 1-7598).
10.8†	Form of Registrant’s Change in Control Agreement for Senior Executives (other than the Chief Executive Officer, the Chief Financial Officer, and the General Counsel) (effective for any person assuming such position on or after October 1, 2011) (incorporated by reference to Exhibit No. 99.1 to the Registrant’s Form 8-K Current Report filed on October 4, 2011, File No. 1-7598).
10.9†	Form of Registrant’s Change in Control Agreement for Key Employees (incorporated by reference to Exhibit No. 10.7 to the Registrant’s Form 10-K Annual Report for the fiscal year ended September 29, 2006, File No. 1-7598).
10.10†	Form of Registrant’s Change in Control Agreement for Key Employees (effective for any person assuming such position on or after October 1, 2011) (incorporated by reference to Exhibit No. 10.11 to the Registrant’s Form 10-K Annual Report for the fiscal year ended September 28, 2011, File No. 1-7598).
10.11†	Form of Amendment to the Change in Control Agreement for Chief Executive Officer, Senior Executives (Chief Financial Officer and General Counsel), Senior Executives (other than the Chief Executive Officer, the Chief Financial Officer, and the General Counsel) and Key Employees (incorporated by reference to Exhibit No. 10.8 to the Registrant’s Form 10-K Annual Report for the fiscal year ended September 26, 2008, File No. 1-7598).
10.12	Amended and Restated Note Purchase and Private Shelf Agreement, dated as of April 2, 1999, between the Registrant and Prudential Insurance Company of America (certain exhibits and schedules omitted) (incorporated by reference to Exhibit No. 10.7 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended April 2, 1999, File No. 1-7598).

 124 

Exhibit Number	Description
10.13	Employee Benefits Allocation Agreement, dated April 2, 1999, by and among Varian Associates, Inc. (which has been renamed Varian Medical Systems, Inc.), Varian, Inc. and Varian Semiconductor Equipment Associates, Inc. (incorporated by reference to Exhibit No. 99.1 to the Registrant’s Form 8-K Current Report filed as of April 2, 1999, File No. 1-7598).
10.14	Intellectual Property Agreement, dated April 2, 1999, by and among Varian Associates, Inc. (which has been renamed Varian Medical Systems, Inc.), Varian, Inc. and Varian Semiconductor Equipment Associates, Inc. (incorporated by reference to Exhibit No. 99.2 to the Registrant’s Form 8-K Current Report filed as of April 2, 1999, File No. 1-7598).
10.15	Tax Sharing Agreement, dated April 2, 1999, by and among Varian Associates, Inc. (which has been renamed Varian Medical Systems, Inc.), Varian, Inc. and Varian Semiconductor Equipment Associates, Inc. (incorporated by reference to Exhibit No. 99.3 to the Registrant’s Form 8-K Current Report filed as of April 2, 1999, File No. 1-7598).
10.16†	Registrant’s Frozen Deferred Compensation Plan (incorporated by reference to Exhibit No. 10.17 to the Registrant’s Form 10-K Annual Report for the fiscal year ended September 29, 2000, File No. 1-7598).
10.17†	Registrant’s Amended and Restated 2005 Deferred Compensation Plan (incorporated by reference to Exhibit No. 10.2 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended January 2, 2009, File No. 1-7598).
10.18†	Registrant’s Management Incentive Plan (incorporated by reference to Exhibit No. 10.5 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended April 3, 2009, File No. 1-7598).
10.19†	Registrant’s Retirement Plan (incorporated by reference to Exhibit No. 99.1 to the Registrant’s Registration Statement on Form S-8 filed on March 14, 2001, and amended June 20, 2001, Registration No. 333-57012).
10.20†	Registrant’s 2010 Employee Stock Purchase Plan (incorporated by reference to Exhibit No. 10.1 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended April 2, 2010, File No. 1-7598).
10.21†*	Description of Certain Compensatory Arrangements between the Registrant and its Executive Officers and Directors as of November 14, 2013.
10.22†	Registrant’s Third Amended and Restated 2005 Omnibus Stock Plan (incorporated by reference to Exhibit No. 10.1 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 30, 2012, File No. 1-7598).
10.23†	Form of Registrant’s Nonqualified Stock Option Agreement for Officers under the Registrant’s Third Amended and Restated 2005 Omnibus Stock Plan (incorporated by reference to Exhibit No. 10.2 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 30, 2012, File No. 1-7598).
10.24†	Form of Registrant’s Non-Employee Director Nonqualified Stock Option Agreement under the Registrant’s Third Amended and Restated 2005 Omnibus Stock Option Plan (incorporated by reference to Exhibit No. 10.3 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 30, 2012, File No. 1-7598).
10.25†	Form of Registrant’s Non-Employee Director Nonqualified Stock Option Agreement (for use in Singapore) under the Registrant’s Third Amended and Restated 2005 Omnibus Stock Plan (incorporated by reference to Exhibit 10.4 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 30, 2012, File No. 1-7598).
10.26†	Form of Registrant’s Non-Employee Director Nonqualified Stock Option Agreement (for use outside of U.S. except for Singapore) under the Registrant’s Third Amended and Restated 2005 Omnibus Stock Plan (incorporated by reference to Exhibit No. 10.26 to the Registrant’s Form 10-K Annual Report for the year ended September 28, 2012, File No. 1-7598).
10.27†	Form of Registrant’s Restricted Stock Unit Agreement under the Registrant’s Third Amended and Restated 2005 Omnibus Stock Plan (incorporated by reference to Exhibit No. 10.5 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 30, 2012, File No. 1-7598).
10.28†	Form of Registrant’s Performance Unit Agreement under the Registrant’s Third Amended and Restated 2005 Omnibus Stock Plan (incorporated by reference to Exhibit No. 10.6 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 30, 2012, File No. 1-7598).
10.29†	Form of Registrant’s Grant Agreement for Deferred Stock Units under the Registrant’s Third Amended and Restated 2005 Omnibus Stock Plan (incorporated by reference to Exhibit No. 10.7 to the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 30, 2012, File No. 1-7598).

 125 

Exhibit Number	Description
10.30†	Form of Registrant’s Non-Employee Grant Agreement for Deferred Stock Units (for use in Singapore) under the Registrant’s Third Amended and Restated 2005 Omnibus Stock Plan (incorporated by reference to Exhibit 10.8 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 30, 2012, File No. 1-7598).
10.31†	Form of Registrant’s Non-Employee Grant Agreement for Deferred Stock Units (for use outside of U.S. except for Singapore) under the Registrant’s Third Amended and Restated 2005 Omnibus Stock Plan (incorporated by reference to Exhibit No. 10.31 to the Registrant’s Form 10-K Annual Report for the year ended September 28, 2012, File No. 1-7598).
10.32++*	Credit Agreement, dated as of August 27, 2013, among the Registrant, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and each lender from time to time party thereto.
10.33	Loan and Security Agreement between California Proton Treatment Center, LLC, ORIX Capital Markets, LLC, ORIX Capital Markets, LLC, and Varian Medical Systems International AG, dated September 30, 2011 (incorporated by reference to Exhibit No. 10.44 to the Registrant’s Form 10-K Annual Report for the fiscal year ended September 30, 2011, File No. 1-7598).
10.34	Revenue Sharing Agreement between ORIX Proton San Diego, LLC and Varian Medical Systems International AG, dated September 30, 2011 (incorporated by reference to Exhibit No. 10.45 to the Registrant’s Form 10-K Annual Report for the fiscal year ended September 30, 2011, File No. 1-7598).
21*	List of Subsidiaries as of November 1, 2013.
23*	Consent of Independent Registered Public Accounting Firm.
31.1*	Chief Executive Officer Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act.
31.2*	Chief Financial Officer Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act.
32.1*	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

† Management contract or compensatory arrangement.

* Filed herewith

++ Confidential treatment has been requested as to certain portions of this exhibit pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

** Attached as Exhibit 101 to this Annual Report on Form 10-K are the following formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Earnings for the fiscal years ended September 27, 2013, September 28, 2012 and September 30, 2011; (ii) Consolidated Statements of Comprehensive Earnings for the fiscal years ended September 27, 2013, September 28, 2012 and September 30, 2011(iii) Consolidated Balance Sheets at September 27, 2013 and September 28, 2012; (iv) Consolidated Statements of Cash Flows for the fiscal years ended September 27, 2013, September 28, 2012 and September 30, 2011; (v) Consolidated Statements of Stockholders’ Equity for the fiscal years ended September 27, 2013, September 28, 2012 and September 30, 2011; and (vi) Notes to Consolidated Financial Statements for fiscal year ended September 27, 2013.

 126 

EX-10

Exhibit 10.21

Description of Certain Compensatory Arrangements

Executive Compensation

Varian Medical Systems, Inc. (the “Company”) does not have a written employment agreement with any of its executive officers.  The annual base salary for calendar year 2014 for each of the Company’s Principal Executive Officer, Principal Financial Officer, and certain executive officers (the “executive officers”) is as follows:

Name	Base Salary
Dow R. Wilson, President and Chief Executive Officer	$	945,000
Elisha W. Finney, Executive Vice President, Finance and Chief Financial Officer	$	590,947
Kolleen T. Kennedy, Senior Vice President and President, Oncology Systems	$	572,069
Robert H. Kluge, Senior Vice President and President, Imaging Components Businesses	$	463,316
John W. Kuo, Senior Vice President, General Counsel and Corporate Secretary	$	433,708

On November 14, 2013, the Compensation and Management Development Committee (the “Compensation Committee”) set the performance goals for fiscal year 2014 under the Company’s Management Incentive Plan (“MIP”) for the executive officers.  For fiscal year 2014, the Compensation Committee established a pool of funds equal to one and one-quarter percent (1.25%) of the Company’s fiscal year 2014 earnings before interest and taxes (“EBIT”) results (the “MIP Bonus Pool”) to be available for annual cash incentives under the MIP to this group.  The Compensation Committee has discretion to pay each of these executive officers less than their corresponding share of the MIP Bonus Pool.  Such discretion shall be exercised by the Compensation Committee based on the achievement of performance goals in the following categories in fiscal year 2014 over fiscal year 2013 and any other factors determined by the Compensation Committee in its sole discretion:  EBIT growth, revenue growth, orders growth, the executive officer’s individual performance and such other factors determined by the Compensation Committee in its sole discretion.  Payment under the MIP to the executive officers may vary from $0 to the maximum of the lesser of two times their target participation level or a specified percentage of the MIP Bonus Pool based upon achievement of such performance goals.

Set forth below are payout levels for each executive officer if the target and maximum levels under the MIP are achieved:

Name	Target			Maximum (the lesser of the following)
	As a % of base salary				As a % of base salary			As a % of MIP Bonus Pool
Dow R. Wilson		120	%			240	%		39	%
Elisha W. Finney		83	%			166	%		17	%
Kolleen T. Kennedy		83	%			166	%		16	%
Robert H. Kluge		78	%			156	%		12	%
John W. Kuo		68	%			136	%		10	%

These executive officers have also been extended certain perquisites, such as use of a leased automobile under the Company’s Executive Car Program, which provides a leased vehicle costing up to $82,000 for the Chief Executive Officer and leased vehicles costing up to $68,000 for the other executive officers and covers insurance, maintenance expenses and fuel costs. Participants have an option to purchase the car at the end of its three-year lease period or upon retirement.

The Company does not permit its executive officers to use the Company’s fractionally owned aircraft for purely personal trips. However, the Company allows and includes in an executive officer’s compensation, as applicable, aircraft use attributable to permitted spousal use of the fractionally owned aircraft for business purposes and spousal travel on commercial airplanes deemed valuable and appropriate for business purposes.  

The Company reimburses executive officers and non-executive officers for financial planning, estate planning, tax planning, tax return preparation and financial counseling services (to a maximum of $6,500 per year and uncapped for the Chief Executive Officer).  The Company also reimburses certain individuals, including all executive officers and non-executive officers, for annual medical examinations (up to a maximum of $4,000 per year).  

Additionally, for the benefit of the executive officers, the Company also provides a Company supplemental contribution match representing retirement contributions which could not be contributed to the executive officers’ qualified retirement accounts due to Internal Revenue Code limitations.  

Compensation of Directors

Annual Cash Compensation. Each non-employee director receives an annual retainer of $45,000, except that the lead director receives an annual retainer of $60,000, or in the case of a new director or lead director a pro-rata portion thereof. The chairs of the Compensation and Management Development Committee and the Nominating and Corporate Governance Committee also receive an additional $10,000 annual retainer for serving in these positions, and the chair of the Audit Committee receives an additional $15,000. Each non-employee director also receives $2,000 for each Board meeting attended ($1,000 if the Board meeting was an in-person meeting and the director attended by telephone or video conference), and $1,500 for each committee meeting attended ($750 if the committee meeting was an in-person meeting and the director attended by telephone or video conference).  Directors who are employees receive no compensation for their services as directors.  All directors, however, receive reimbursement for out-of-pocket expenses of the directors’ associated with attending Board and committee meetings and for expenses related to directors’ continuing education programs.  Non-employee directors may elect to receive cash compensation as full-value shares of the Company’s common stock, at a value equal to the fair market value of the Company’s common stock on the date that the foregone cash compensation otherwise would have been paid.  Directors may alternatively elect to defer their retainer and/or meeting fees under the Company’s Deferred Compensation Plan, subject to the restrictions of applicable tax laws.  

Equity Compensation.  New non-employee directors do not receive initial equity awards, but each continuing non-employee director receives an annual grant of non-qualified stock options to purchase 5,000 shares of common stock at an exercise price equal to the fair market value (i.e., the closing price) of the underlying shares of the Company’s common stock on the date of grant and an annual grant of Deferred Stock Units having a fair market value on the date of grant of $100,000, based on the fair market value of the Company’s common stock on the date of grant (typically the date after the Company’s annual meeting of stockholders).  

Compensation for Levy as a Non-Executive Employee

In his role as a non-executive employee of the Company (and in addition to his responsibilities as Chairman of the Board), Dr. Levy provides on-going advice and counsel to the management of the Company on strategic business and technological matters, and is involved with investor groups and key customers.  In connection with this non-executive employee role, Dr. Levy receives the following compensation:

· base salary at a rate of $160,000 per annum;

· provision of a leased office space;

· provision of an administrator; and

· eligibility for the Corporation’s non-executive employee health and welfare benefit plans, subject to his election and contributions towards those benefit plans, as well as the Employee Incentive Plan.

Dr. Levy does not receive any separate compensation for his duties serving on the Board.  

   

EX-10

Exhibit 10.32

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

Published CUSIP Numbers:

Deal:  92220RAC5

Revolver:  92220RAD3

Term:  92220RAE1

CREDIT AGREEMENT

Dated as of August 27, 2013

among

VARIAN MEDICAL SYSTEMS, INC.,

as the Borrower,

BANK OF AMERICA, N.A.,
as Administrative Agent, Swing Line Lender
and
L/C Issuer,

and

The Other Lenders Party Hereto

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

SUMITOMO MITSUI BANKING CORPORATION

and

WELLS FARGO SECURITIES, LLC,

as Joint Lead Arrangers

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

as Sole Bookrunner

SUMITOMO MITSUI BANKING CORPORATION

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Co-Syndication Agents and Co-Documentation Agents

           

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

TABLE OF CONTENTS

Section			Page
ARTICLE I.      DEFINITIONS AND ACCOUNTING TERMS			1
	1.01	Defined Terms	1
	1.02	Other Interpretive Provisions	30
	1.03	Accounting Terms	31
	1.04	Rounding	32
	1.05	Times of Day	32
	1.06	Letter of Credit Amounts	32
ARTICLE II.       THE COMMITMENTS AND CREDIT EXTENSIONS			32
	2.01	Loans	32
	2.02	Borrowings, Conversions and Continuations of Loans	33
	2.03	Letters of Credit	35
	2.04	Swing Line Loans	44
	2.05	Prepayments	47
	2.06	Termination or Reduction of Revolving Credit Commitments	48
	2.07	Repayment of Loans	48
	2.08	Interest	49
	2.09	Fees	49
	2.10	Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate	50
	2.11	Evidence of Debt	51
	2.12	Payments Generally; Administrative Agent’s Clawback	51
	2.13	Sharing of Payments by Lenders	53
	2.14	Increase in Commitments	54
	2.15	Cash Collateral	57
	2.16	Defaulting Lenders.	58
ARTICLE III.       TAXES, YIELD PROTECTION AND ILLEGALITY			61
	3.01	Taxes	61
	3.02	Illegality	66
	3.03	Inability to Determine Rates	66
	3.04	Increased Costs; Reserves on Eurodollar Rate Loans	67
	3.05	Compensation for Losses	69
	3.06	Mitigation Obligations; Replacement of Lenders	69
	3.07	Survival	70
ARTICLE IV.       CONDITIONS PRECEDENT TO CREDIT EXTENSIONS			70
	4.01	Conditions of Initial Credit Extension	70
	4.02	Conditions to all Credit Extensions	73
ARTICLE V.       REPRESENTATIONS AND WARRANTIES			73

 i 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

	5.01	Existence, Qualification and Power	73
	5.02	Authorization; No Contravention	73
	5.03	Governmental Authorization; Other Consents	74
	5.04	Binding Effect	74
	5.05	Financial Statements; No Material Adverse Effect	74
	5.06	Litigation	75
	5.07	No Default	75
	5.08	Ownership of Property; Liens	75
	5.09	Regulatory Compliance	75
	5.10	Insurance	75
	5.11	Taxes	75
	5.12	ERISA Compliance	76
	5.13	Subsidiaries; Equity Interests	77
	5.14	Margin Regulations; Investment Company Act	77
	5.15	Disclosure	78
	5.16	Compliance with Laws	78
	5.17	Solvency	78
	5.18	Labor Matters	78
	5.19	Taxpayer Identification Number	78
	5.20	Intellectual Property; Licenses, Etc	78
	5.21	Collateral Documents	79
	5.22	OFAC	79
ARTICLE VI.       AFFIRMATIVE COVENANTS			79
	6.01	Financial Statements	79
	6.02	Certificates; Other Information	80
	6.03	Notices	82
	6.04	Payment of Obligations	82
	6.05	Preservation of Existence, Etc	83
	6.06	Maintenance of Properties	83
	6.07	Maintenance of Insurance	83
	6.08	[Reserved]	83
	6.09	Compliance with Laws	83
	6.10	Books and Records	84
	6.11	Inspection Rights	84
	6.12	Use of Proceeds	84
	6.13	Compliance with FDA Regulations and Environmental Laws	84
	6.14	Covenant to Guarantee Obligations and Give Security	85
	6.15	Further Assurances	86
ARTICLE VII.       NEGATIVE COVENANTS			86
	7.01	Liens	87
	7.02	Investments	89
	7.03	Subsidiary Guarantees	90
	7.04	Fundamental Changes	91

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	7.05	Dispositions	91
	7.06	Restricted Payments	92
	7.07	Change in Nature of Business	93
	7.08	Transactions with Affiliates	93
	7.09	Burdensome Agreements	93
	7.10	Use of Proceeds	93
	7.11	Financial Covenants	93
	7.12	Amendment or Modification of Organization Documents	93
	7.13	Accounting Changes	94
	7.14	Post-Closing Matters	94
ARTICLE VIII.       EVENTS OF DEFAULT AND REMEDIES			94
	8.01	Events of Default	94
	8.02	Remedies Upon Event of Default	96
	8.03	Application of Funds	97
ARTICLE IX.       ADMINISTRATIVE AGENT			98
	9.01	Appointment and Authority	98
	9.02	Rights as a Lender	99
	9.03	Exculpatory Provisions	99
	9.04	Reliance by Administrative Agent	100
	9.05	Delegation of Duties	100
	9.06	Resignation of Administrative Agent	101
	9.07	Non-Reliance on Administrative Agent and Other Lenders	102
	9.08	No Other Duties, Etc	102
	9.09	Administrative Agent May File Proofs of Claim	103
	9.10	Collateral and Guaranty Matters	104
ARTICLE X.       MISCELLANEOUS			105
	10.01	Amendments, Etc	105
	10.02	Notices; Effectiveness; Electronic Communication	107
	10.03	No Waiver; Cumulative Remedies; Enforcement	109
	10.04	Expenses; Indemnity; Damage Waiver	110
	10.05	Payments Set Aside	112
	10.06	Successors and Assigns	112
	10.07	Treatment of Certain Information; Confidentiality	117
	10.08	Right of Setoff	118
	10.09	Interest Rate Limitation	118
	10.10	Counterparts; Integration; Effectiveness	119
	10.11	Survival of Representations and Warranties	119
	10.12	Severability	119
	10.13	Replacement of Lenders	119
	10.14	Governing Law; Jurisdiction; Etc	120
	10.15	Waiver of Jury Trial	121
	10.16	No Advisory or Fiduciary Responsibility	122

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	10.17	Electronic Execution of Assignments and Certain Other Documents	122
	10.18	USA PATRIOT Act	122
	10.19	Parallel Debt	123
	10.20	Keepwell	124
SIGNATURES			S-1

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SCHEDULES
	2.01	Commitments and Applicable Percentages
	5.05	Supplement to Interim Financial Statements
	5.06	Litigation
	5.09	Regulatory Matters
	5.13	Subsidiaries; Other Equity Investments
	5.20	Intellectual Property Matters
	7.01	Existing Liens
	7.03	Existing Guarantees
	7.14	Post-Closing Deliveries
	8.01(h)	Exception to Judgment Event of Default
	10.02	Administrative Agent’s Office; Certain Addresses for Notices
EXHIBITS
		Form of
	A	Loan Notice
	B	Swing Line Loan Notice
	C-1	Revolving Credit Note
	C-2	Term Loan Note
	D	Compliance Certificate
	E-1	Assignment and Assumption
	E-2	Administrative Questionnaire
	F	Guaranty
	G	Opinion of DLA Piper
	H	Pledge Agreement
	I-1	U.S. Tax Compliance Certificate
	I-2	U.S. Tax Compliance Certificate
	I-3	U.S. Tax Compliance Certificate
	I-4	U.S. Tax Compliance Certificate
	J	Secured Party Designation Notice
	K	Funding Indemnity Letter
	L	Report of Letter of Credit Information

       

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

CREDIT AGREEMENT

This CREDIT AGREEMENT (“Agreement”) is entered into as of August 27, 2013, among VARIAN MEDICAL SYSTEMS, INC., a Delaware corporation (the “Borrower”), each lender from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”), and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

The Borrower has requested that the Lenders provide a revolving credit facility and a term loan facility, and the Lenders are willing to do so on the terms and conditions set forth herein.

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I.DEFINITIONS AND ACCOUNTING TERMS

1.01Defined Terms.  As used in this Agreement, the following terms shall have the meanings set forth below:

“Accelerated Share Repurchase” means purchases, redemptions, and other acquisitions by the Borrower of shares of its common stock consistent with past practice and approved by the Administrative Agent.

“Acquired Entity” means (a) any Person that becomes a Subsidiary of the Borrower as a result of an Acquisition or (b) any business entity or division of a Person, all or substantially all of the assets and business of which are acquired by the Borrower or a Subsidiary of the Borrower pursuant to an Acquisition.

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person (other than a Person that is a Subsidiary), (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person (other than a Person that is a Subsidiary), or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary).

“Adjusted Repurchases” means in respect of the Borrower for any period, total repurchases, redemptions and acquisitions by the Borrower of its Equity Interests (other than the Accelerated Share Repurchase) during such period (“gross repurchases”); provided that if as of the last day of such period Total Liquidity equals or exceeds 25% of gross repurchases, then “Adjusted Repurchases” for such period shall be equal to 75% of gross repurchases.

“Administrative Agent” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

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“Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders.

“Administrative Questionnaire” means an Administrative Questionnaire in substantially the form of Exhibit E-2 or any other form approved by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Aggregate Commitments” means the Commitments of all the Lenders.  As of the Closing Date the Aggregate Commitments shall be $800,000,000.

“Aggregate Revolving Credit Commitments” means the Revolving Credit Commitments of all the Revolving Credit Lenders.  As of the Closing Date the Aggregate Revolving Credit Commitments shall be $300,000,000.

“Agreement” means this Credit Agreement.

“Applicable Percentage” means (a) in respect of the Term Loan Facility, with respect to any Term Loan Lender at any time, the percentage (carried out to the ninth decimal place) of the Term Loan Facility represented by (i) on or prior to the Closing Date, such Term Loan Lender’s Term Loan Commitment at such time and (ii) thereafter, the principal amount of such Term Loan Lender’s Term Loans outstanding at such time, and (b) in respect of the Revolving Credit Facility, with respect to any Revolving Credit Lender at any time, the percentage (carried out to the ninth decimal place) of the Aggregate Revolving Credit Commitments represented by such Revolving Credit Lender’s Revolving Credit Commitment at such time, in each case, subject to adjustment as provided in Section 2.16.  If the commitment of each Revolving Credit Lender to make Revolving Credit Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, or if the Revolving Credit Commitments have expired, then the Applicable Percentage of each Revolving Credit Lender in respect of the Revolving Credit Facility shall be determined based on the Applicable Percentage of such Revolving Credit Lender in respect of the Revolving Credit Facility most recently in effect, giving effect to any subsequent assignments.  The initial Applicable Percentage of each Lender in respect of each Facility is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

“Applicable Rate” means the following percentages per annum, based upon the Consolidated Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(b):

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		Revolving Credit Loans			Term Loans
Pricing Level	Consolidated Leverage Ratio	Commitment Fee	Eurodollar Rate + Letters of Credit	Base Rate +	Eurodollar Rate +	Base Rate +
1	Less than 0.50 to 1.00	0.150%	1.250%	0.250%	1.000%	0.000%
2	Greater than or equal to 0.50 to 1.00 but less than 1.00 to 1.00	0.200%	1.375%	0.375%	1.125%	0.125%
3	Greater than or equal to 1.00 to 1.00	0.275%	1.500%	0.500%	1.250%	0.250%

Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(b); provided, however, that if a Compliance Certificate is not delivered when due in accordance with such Section, then, upon the request of the Required Term Lenders (in the case of the Term Loan Facility) and the Required Revolving Lenders (in the case of the Revolving Credit Facility), Pricing Level 3 shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and shall remain in effect until the date on which such Compliance Certificate is delivered.  The Applicable Rate in effect from the Closing Date through the date of delivery of the Compliance Certificate in respect of the fiscal quarter ending on or about September 30, 2013 shall be determined based upon Pricing Level 2.  Notwithstanding anything to the contrary contained in this definition, the determination of the Applicable Rate for any period shall be subject to the provisions of Section 2.10(b).

“Applicable Revolving Credit Percentage” means with respect to any Revolving Credit Lender at any time, such Revolving Credit Lender’s Applicable Percentage in respect of the Revolving Credit Facility at such time.

“Appropriate Lender” means, at any time, (a) with respect to any Facility, a Lender that has a Commitment with respect to such Facility or holds a Loan under such Facility at such time, (b) with respect to the Letter of Credit Sublimit, (i) the L/C Issuer and (ii) if any Letters of Credit have been issued pursuant to Section 2.03(a), the Revolving Credit Lenders and (c) with respect to the Swing Line Sublimit, (i) the Swing Line Lender and (ii) if any Swing Line Loans are outstanding pursuant to Section 2.04(a), the Revolving Credit Lenders.

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

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“Arranger” means Merrill Lynch, Pierce, Fenner & Smith Incorporated, in its capacity as joint lead arranger and sole bookrunner.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b)), and accepted by the Administrative Agent, in substantially the form of Exhibit E-1 or any other form (including electronic documentation generated by MarkitClear or other electronic platform) approved by the Administrative Agent.

“Attributable Indebtedness” means, with respect to any Person, on any date, (a) in respect of any capital lease of such Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease.

“Audited Financial Statements” means the audited consolidated balance sheet of the Borrower and its Subsidiaries for the fiscal year ended September 28, 2012, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of the Borrower and its Subsidiaries, including the notes thereto.

“Availability Period” means, in respect of the Revolving Credit Facility, the period from and including the Closing Date to the earliest of (a) the Maturity Date for the Revolving Credit Facility, (b) the date of termination of the Revolving Credit Commitments pursuant to Section 2.06, and (c) the date of termination of the commitment of each Revolving Credit Lender to make Revolving Credit Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.

“Bank of America” means Bank of America, N.A. and its successors.

“Base Rate” means for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 1/2 of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate,” and (c) the Eurodollar Rate plus 1.00%.  The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.  Any change in such prime rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.   

“Base Rate Loan” means a Revolving Credit Loan or a Term Loan that bears interest based on the Base Rate.

“Borrower” has the meaning specified in the introductory paragraph hereto.

“Borrower Materials” has the meaning specified in Section 6.02.

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“Borrowing” means a Revolving Credit Borrowing, a Swing Line Borrowing or a Term Loan Borrowing, as the context may require.

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day that is also a London Banking Day.

“Capital Expenditures” means, with respect to any Person for any period, any expenditure in respect of the purchase or other acquisition of any fixed or capital asset (excluding normal replacements and maintenance which are properly charged to current operations).  For purposes of this definition, the purchase price of equipment that is purchased promptly with the trade-in of existing equipment or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount by which such purchase price exceeds the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of such insurance proceeds, as the case may be.

“Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of one or more of the L/C Issuer or the Revolving Credit Lenders, as collateral for L/C Obligations or obligations of the Revolving Credit Lenders to fund participations in respect of L/C Obligations, cash or deposit account balances or, if the Administrative Agent and the L/C Issuer shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent and the L/C Issuer. “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.

“Cash Management Agreement” means any agreement to provide cash management services, including treasury, depository, overdraft, credit or debit card, electronic funds transfer and other cash management arrangements.

“Cash Management Bank” means any Person that, (a) at the time it enters into a Cash Management Agreement with a Loan Party, is a Lender or an Affiliate of a Lender, or (b) at the time it (or its Affiliate) becomes a Lender, is a party to a Cash Management Agreement with a Loan Party, in each case in its capacity as a party to such Cash Management Agreement (even if such Person ceases to be a Lender or such Person’s Affiliate ceased to be a Lender); provided, however, that for any of the foregoing to be included as a “Secured Cash Management Agreement” on any date of determination by the Administrative Agent, the applicable Cash Management Bank (other than the Administrative Agent or an Affiliate of the Administrative Agent) must have delivered a Secured Party Designation Notice to the Administrative Agent prior to such date of determination.

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

“Change of Control” means an event or series of events by which:

(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of 35% or more of the equity securities of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right);

(b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors); or

(c) any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Borrower, or control over the equity securities of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis (and taking into account all such securities that such Person or group has the right to acquire pursuant to any option right) representing 35% or more of the combined voting power of such securities.

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

“Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 10.01.

“Code” means the Internal Revenue Code of 1986.

“Collateral” means all of the “Collateral” referred to in the Collateral Documents and all of the other property that is or is intended under the terms of the Collateral Documents to be subject to Liens in favor of the Administrative Agent for the benefit of the Secured Parties.

“Collateral Documents” means, collectively, the Pledge Agreement (including any Pledge Agreement Supplement and any Pledge Joinder Agreement), each collateral assignment, security agreement, pledge agreement or other similar agreement delivered to the Administrative Agent pursuant to Section 6.14 or 7.14, and each of the other agreements, instruments or documents that creates or purports to create a Lien in favor of the Administrative Agent for the benefit of the Secured Parties.

“Commitment” means a Term Loan Commitment or a Revolving Credit Commitment, as the context may require.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

“Compliance Certificate” means a certificate substantially in the form of Exhibit D.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Consolidated EBITDA” means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges for such period, (ii) the provision for Federal, state, local and foreign income taxes payable by the Borrower and its Subsidiaries for such period, (iii) depreciation and amortization expense, (iv) other non-recurring expenses of the Borrower and its Subsidiaries reducing such Consolidated Net Income which do not represent a cash item in such period or any future period and (v) cost of employee services received in share-based payment transactions (in accordance with FASB ASC 718) which do not represent a cash item in such period or any future period and minus (b) the following to the extent included in calculating such Consolidated Net Income: (i) Federal, state, local and foreign income tax credits of the Borrower and its Subsidiaries for such period and (ii) all non-cash items increasing Consolidated Net Income for such period.

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“Consolidated Fixed Charge Coverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated EBITDA for the period of the four prior fiscal quarters ending on such date less (i) Capital Expenditures for such period less (ii) dividends in respect of Equity Interests of the Borrower and Adjusted Repurchases for such period, less (iii) cash taxes paid for such period, to (b) Consolidated Fixed Charges for such period.

“Consolidated Fixed Charges” means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) Consolidated Interest Charges for such period, and (b) all scheduled principal payments in respect of Consolidated Funded Indebtedness for the four fiscal quarter period following the last day of such period.

“Consolidated Funded Indebtedness” means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, (b) all purchase money Indebtedness, (c) all direct, non-contingent obligations arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments (in each case limited to the extent drawn and not yet reimbursed), (d) all obligations in respect of the deferred purchase price of property or services (other than trade accounts and intercompany accounts payable in the ordinary course of business), (e) Attributable Indebtedness in respect of capital leases and Synthetic Lease Obligations, (f) without duplication, all Guarantees with respect to outstanding Indebtedness of the types specified in clauses (a) through (e) above of Persons other than the Borrower or any Subsidiary, and (g) all Indebtedness of the types referred to in clauses (a) through (f) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which the Borrower or a Subsidiary is a general partner or joint venturer, unless such Indebtedness is expressly made non-recourse to the Borrower or such Subsidiary.  

“Consolidated Interest Charges” means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, interest expense determined in accordance with GAAP, consistently applied.

“Consolidated Leverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA for the period of the four fiscal quarters most recently ended.

“Consolidated Net Income” means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, the net income of the Borrower and its Subsidiaries (excluding extraordinary gains and extraordinary losses and the related tax effects thereon) for that period as determined in accordance with GAAP.

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.

“Corresponding Obligations” means the Secured Obligations as they may exist from time to time, excluding the Parallel Debt.

“Credit Extension” means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

“Default Rate” means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate, if any, applicable to Base Rate Loans under the Term Loan Facility or the Revolving Credit Facility, as applicable, plus (iii) 2% per annum; provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus 2% per annum, and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate under the Revolving Credit Facility plus 2% per annum.

“Defaulting Lender” means, subject to Section 2.16(b), any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, the L/C Issuer, the Swing Line Lender or any other Lender any other amount required to be paid by it hereunder (including, in the case of any Revolving Credit Lender, in respect of its participation in Letters of Credit or Swing Line Loans) within two Business Days of the date when due, (b) has notified the Borrower, the Administrative Agent, the L/C Issuer or the Swing Line Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding

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obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.  Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above, and of the effective date of such status, shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.16(b)) as of the date established therefor by the Administrative Agent in a written notice of such determination, which shall be delivered by the Administrative Agent to the Borrower, the L/C Issuer, the Swing Line Lender and each other Lender promptly following such determination.

“Designated Jurisdiction” means any country or territory to the extent that such country or territory itself is the subject of any Sanction.

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith, but excluding any Involuntary Disposition.

“Dollar” and “$” mean lawful money of the United States.

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of any state or other political subdivision (including the District of Columbia) of the United States.

“Earn Out Obligations” means, with respect to an Acquisition, all obligations of the Borrower to make earn out or other contingency payments (including purchase price adjustments, non-competition and consulting agreements, or other indemnity obligations) pursuant to the documentation relating to such Acquisition.  The amount of any Earn Out Obligations at the time of determination shall be the aggregate amount, if any, of such Earn Out Obligations that are required at such time under GAAP to be recognized as liabilities on the consolidated balance sheet of the Borrower.

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“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 10.06(b)(iii) and (v) (subject to such consents, if any, as may be required under Section 10.06(b)(iii)).

“Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any hazardous materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA; (e) the institution by the PBGC of proceedings to terminate a Pension Plan; (f) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to

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administer, any Pension Plan; (g) the determination that any Pension Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; or (h) the imposition of any material liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

“Eurodollar Rate” means:

(a) for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the London Interbank Offered Rate (“LIBOR”) or a comparable or successor rate, which rate is approved by the Administrative Agent, as published on the applicable Reuters screen page (or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period; and

(b) for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to LIBOR, at or about 11:00 a.m., London time determined two Business Days prior to such date for U.S. Dollar deposits with a term of one month commencing that day;

provided that to the extent a comparable or successor rate is approved by the Administrative Agent in connection herewith, the approved rate shall be applied in a manner consistent with market practice; provided, further that to the extent such market practice is not administratively feasible for the Administrative Agent, such approved rate shall be applied in a manner as otherwise reasonably determined by the Administrative Agent.

“Eurodollar Rate Loan” means a Revolving Credit Loan or a Term Loan that bears interest at a rate based on clause (a) of the definition of “Eurodollar Rate.”

“Event of Default” has the meaning specified in Section 8.01.

“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guaranty of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act (determined after giving effect to Section 10.20 or Section 28 of the Guaranty and any other “keepwell, support or other agreement” for the benefit of such Guarantor and any and all guarantees of such Guarantor’s Swap Obligations by other Loan Parties) at the time the Guaranty of such Guarantor, or a grant by such Guarantor of a security interest, becomes effective with respect to such Swap Obligation.  If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guaranty or security interest is or becomes excluded in accordance with the first sentence of this definition.

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“Excluded Taxes” means any of the following Taxes imposed on or with respect to any Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 10.13) or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to Section 3.01(a)(ii), (a)(iii) or (c), amounts with respect to such Taxes were payable either to such Lender's assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Office, (c) Taxes attributable to such Recipient’s failure to comply with Section 3.01(e) and (d) any U.S. federal withholding Taxes imposed pursuant to FATCA.

“Exempt Subsidiary” has the meaning specified in Section 6.14.

“Existing Credit Agreement” means that certain Credit Agreement dated as of April 27, 2012, as amended, supplemented or otherwise modified prior to the date hereof, among the Borrower, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent, swing line lender and L/C issuer.

“Facility” means the Term Loan Facility or the Revolving Credit Facility, as the context may require.

“Facility Termination Date” means the date as of which all of the following shall have occurred:  (a) the Aggregate Commitments have terminated, (b) all Obligations have been paid in full (other than contingent indemnification obligations), and (c) all Letters of Credit have terminated or expired (other than Letters of Credit as to which other arrangements with respect thereto satisfactory to the Administrative Agent and the L/C Issuer shall have been made).

“FASB ASC” means the Accounting Standards Codification of the Financial Accounting Standards Board.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.

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“FDA” means the U.S. Food and Drug Administration, together with any comparable regulatory agency or other Governmental Authority existing under the laws of any non-U.S. jurisdiction.

“FDA Regulations” means any Laws relating to or administered by the FDA.

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.

“Fee Letter” means the letter agreement, dated July 19, 2013, among the Borrower, the Administrative Agent and the Arranger.

“First Tier Foreign Subsidiary” means a Foreign Subsidiary that is a direct Subsidiary of the Borrower or of a Domestic Subsidiary.

“Foreign Government Scheme or Arrangement” has the meaning specified in Section 5.12(d).

“Foreign Lender” means (a) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (b) if the Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.  For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Plan” has the meaning specified in Section 5.12(d).

“Foreign Subsidiary” means any Subsidiary other than a Domestic Subsidiary.

“Foreign Subsidiary Holding Company” means, as of any time of determination, a Domestic Subsidiary that at such time (i) holds Equity Interests of one or more Foreign Subsidiaries, (ii) conducts no business or financial operations, (iii) has no Indebtedness, (iv) holds no assets other than assets incidental to the ownership of such Equity Interests of such Foreign Subsidiaries, and (v) has no Liens (other than Liens pursuant to the Loan Documents) on any of its assets.

“FRB” means the Board of Governors of the Federal Reserve System of the United States.

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“Fronting Exposure” means, at any time there is a Defaulting Lender that is a Revolving Credit Lender, (a) with respect to the L/C Issuer, such Defaulting Lender’s Applicable Percentage of the outstanding L/C Obligations other than L/C Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Revolving Credit Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swing Line Lender, such Defaulting Lender’s Applicable Percentage of Swing Line Loans other than Swing Line Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Revolving Credit Lenders or Cash Collateralized in accordance with the terms hereof.

“Fund” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.

“Funding Indemnity Letter” means a funding indemnity letter, substantially in the form of Exhibit K.

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied and as in effect from time to time.

“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien other than the

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obligation to provide an equal and ratable Lien upon the events set forth in Section 5D of the Note Purchase Agreement for so long as such obligation is solely a contingent obligation thereunder).  The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a corresponding meaning.

“Guarantor Assessment Date” means each of (i) any date on which the Borrower delivers or is obligated to deliver to the Administrative Agent financial statements under Section 6.01(a), (ii) any date on which the Borrower consummates any Acquisition, or acquires or creates any new or additional Subsidiary, (iii) any date on which the Borrower Disposes of any Subsidiary or all or substantially of the assets of any Subsidiary, and (iv) any date on which a Domestic Subsidiary previously deemed a Foreign Subsidiary Holding Company ceases to be a Foreign Subsidiary Holding Company.

“Guarantor” means (a) each Subsidiary that, following the Closing Date, shall be required to execute and deliver a guaranty or guaranty joinder or supplement pursuant to Section 6.14 and (b) with respect to (i) Secured Obligations owing by any Loan Party (other than the Borrower) under any Swap Contract or any Cash Management Agreement and (ii) the payment and performance by each Specified Loan Party of its obligations under its Guaranty with respect to all Swap Obligations, the Borrower.

“Guaranty” means the Guaranty Agreement made by the Guarantors in favor of the Administrative Agent and for the benefit of the Secured Parties, substantially in the form of Exhibit F, as supplemented from time to time by the execution and delivery of any Guaranty Joinder Agreements pursuant to Section 6.14.

“Guaranty Joinder Agreement” means each Guaranty Joinder Agreement, substantially in the form thereof attached to the Guaranty, executed and delivered by a Subsidiary to the Administrative Agent (for the benefit of the Secured Parties) pursuant to Section 6.14.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law because of their hazardous, dangerous or deleterious properties or characteristics.

“Hedge Bank” means any Person that, (a) at the time it enters into an interest rate Swap Contract permitted by this Agreement, is a Lender or an Affiliate of a Lender, or (b) at the time it (or its Affiliate) becomes a Lender, is a party to an interest rate Swap Contract not prohibited by this Agreement, in each case, in its capacity as a party to such Swap Contract (even if such Person ceases to be a Lender or such Person’s Affiliate ceased to be a Lender); provided that for any of the foregoing to be included as a “Secured Hedge Agreement” on any date of determination by the Administrative Agent, the applicable Hedge Bank (other than the

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Administrative Agent or an Affiliate of the Administrative Agent) must have delivered a Secured Party Designation Notice to the Administrative Agent prior to such date of determination.

“Honor Date” has the meaning specified in Section 2.03(c)(i).

“IFRS” means International Financial Reporting Standards as adopted by the International Accounting Standards Board from time to time, consistently applied.

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

(b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

(c) net obligations of such Person under any Swap Contract;

(d) all obligations of such Person to pay the deferred purchase price of property (including Earn Out Obligations) or services (other than trade accounts payable in the ordinary course of business and, in each case, not past due for more than 180 days after the date on which such trade account payable was created and earn out obligations to the extent such earn out obligations are not required to be shown as a liability on the balance sheet of such Person);

(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(f) capital leases and Synthetic Lease Obligations;

(g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and

(h) all Guarantees of such Person in respect of any of the foregoing.

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For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.  The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date.  The amount of any capital lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.

“Indemnitees” has the meaning specified in Section 10.04(b).

“Information” has the meaning specified in Section 10.07.

“Intangible Assets” means assets that are considered to be intangible assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks, patents, franchises, licenses, unamortized deferred charges, unamortized debt discount and capitalized research and development costs.

“Interest Payment Date” means, (a) as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan (including a Swing Line Loan), the last Business Day of each March, June, September and December and the Maturity Date.

“Interest Period” means as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrower in its Loan Notice, or such other period that is twelve months or less requested by the Borrower and consented to by all the Appropriate Lenders; provided that:

(i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Rate Loan, such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

(ii) any Interest Period pertaining to a Eurodollar Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

(iii) no Interest Period shall extend beyond the Maturity Date.

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“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit.  For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

“Involuntary Disposition” means any loss of, damage to or destruction of, or any condemnation or other taking for public use of, any property of any Loan Party or any of its Subsidiaries.

“IP Rights” has the meaning specified in Section 5.20.

“IRS” means the United States Internal Revenue Service.

“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance).

“Issuer Documents” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and the Borrower (or any Subsidiary) or in favor of the L/C Issuer and relating to such Letter of Credit.

“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

“L/C Advance” means, with respect to each Revolving Credit Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Applicable Revolving Credit Percentage.

“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Revolving Credit Borrowing.

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

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“L/C Issuer” means each of Bank of America and JPMorgan Chase Bank, N.A., each in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder.  At any time there is more than one L/C Issuer, all singular references to the L/C Issuer shall mean any L/C Issuer, either L/C Issuer, each L/C Issuer, the L/C Issuer that has issued the applicable Letter of Credit or both L/C Issuers, as the context may require.

“L/C Obligations” means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings.  For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06.  For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

“Lead Arrangers” means, collectively, (x) the Arranger and (y) Sumitomo Mitsui Bank Corporation and Wells Fargo Securities, LLC, each in its capacity as joint lead arranger.

“Lender” has the meaning specified in the introductory paragraph hereto and, unless the context requires otherwise, includes the Swing Line Lender.

“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

“Letter of Credit” means any standby letter of credit issued hereunder providing for the payment of cash upon the honoring of a presentation thereunder.

“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.

“Letter of Credit Expiration Date” means the day that is seven days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).

“Letter of Credit Fee” has the meaning specified in Section 2.03(h).

“Letter of Credit Sublimit” means an amount equal to $50,000,000.  The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Revolving Credit Commitments.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

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“Loan” means an extension of credit by a Lender to the Borrower under Article II in the form of a Term Loan, Revolving Credit Loan or a Swing Line Loan.

“Loan Documents” means this Agreement, each Note, each Issuer Document, any agreement creating or perfecting rights in Cash Collateral pursuant to the provisions of Section 2.15 of this Agreement, the Fee Letter, the Guaranty, the Pledge Agreement and each other Collateral Document.

“Loan Notice” means a notice of (a) a Term Loan Borrowing, (b) a Revolving Credit Borrowing, (c) a conversion of Loans from one Type to the other, or (c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A.

“Loan Parties” means, collectively, the Borrower and each Guarantor.

“London Banking Day” means any day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent), or financial condition of the Borrower or the Borrower and its Subsidiaries taken as a whole; (b) a material impairment of the ability of any Loan Party to perform its material obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.

“Material IP Rights” has the meaning specified in Section 5.20.

“Material Subsidiary” means,

(a) any Domestic Subsidiary (other than a Foreign Subsidiary Holding Company) that, on any Guarantor Assessment Date (other than a Guarantor Assessment Date occurring as a result of an Acquisition, creation or divestiture), meets either of the following conditions: (i) such Subsidiary’s total assets, as of the last day of the four fiscal quarter period most recently ended, are equal to or greater than fifteen percent (15%) of the consolidated total assets of the Borrower and its Subsidiaries as of such date, determined in accordance with GAAP, or (ii) such Subsidiary’s total revenues (excluding intercompany revenues from the Borrower or its Subsidiaries) for the four fiscal quarter period most recently ended is equal to or greater than fifteen percent (15%) of the consolidated total revenues of the Borrower and its Subsidiaries for such four fiscal quarter period, determined in accordance with GAAP; in each case as reflected in the most recent annual or quarterly (as applicable) financial statements of the Borrower required to be delivered pursuant to Section 6.01; and

(b) any Domestic Subsidiary (other than a Foreign Subsidiary Holding Company) that, on any Guarantor Assessment Date occurring as a result of an Acquisition, creation or divestiture, meets either of the following conditions:  (i) such Subsidiary’s total assets are equal to or greater than fifteen percent (15%) of the pro forma consolidated total assets of the Borrower and its Subsidiaries as of such Guarantor Assessment Date (after giving effect to the applicable

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Acquisition, creation or divestiture), or (ii) such Subsidiary’s pro forma total revenues (excluding intercompany revenues from the Borrower or its Subsidiaries) for the four fiscal quarter period most recently ended would have been equal to or greater than fifteen percent (15%) of the pro forma consolidated total revenues of the Borrower and its Subsidiaries for such four fiscal quarter period (after giving effect to the applicable Acquisition, creation or divestiture, as though it had occurred on the first day of such four fiscal quarter period), in each case, determined in accordance with GAAP.

For the avoidance of doubt the Borrower’s Equity Interest in its Subsidiaries shall not be included in valuing the assets of the Borrower.

“Maturity Date” means August 27, 2018; provided, however, that if such date is not a Business Day, the Maturity Date shall be the next preceding Business Day.

“Minimum Collateral Amount” means, at any time, (i) with respect to Cash Collateral consisting of cash or deposit account balances provided to reduce or eliminate Fronting Exposure during the existence of a Defaulting Lender, an amount equal to 103% of the Fronting Exposure of the L/C Issuer with respect to Letters of Credit issued and outstanding at such time, (ii) with respect to Cash Collateral consisting of cash or deposit account balances provided in accordance with the provisions of Section 2.15(a)(i), (a)(ii) or (a)(iii), an amount equal to 103% of the Outstanding Amount of all L/C Obligations, and (iii) otherwise, an amount determined by the Administrative Agent and the L/C Issuer in their sole discretion.

“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

“Multiple Employer Plan” means a Plan which has two or more contributing sponsors (including the Borrower or any ERISA Affiliate) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.

“Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment that (i) requires the approval of all Lenders or all affected Lenders in accordance with the terms of Section 10.01 and (ii) has been approved by the Required Lenders.

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.

“Note” means a Term Loan Note or a Revolving Credit Note, as the context may require.

“Note Purchase Agreement” means that Amended and Restated Note Purchase and Private Shelf Agreement dated as of April 2, 1999 between the Borrower and The Prudential Insurance Company of America.

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“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 3.06).

“Outstanding Amount” means (i) with respect to Term Loans, Revolving Credit Loans and Swing Line Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Term Loans, Revolving Credit Loans and Swing Line Loans, as the case may be, occurring on such date; and (ii) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by the Borrower of Unreimbursed Amounts.

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“Parallel Debt” has the meaning specified in Section 10.19(a).

“Participant” has the meaning specified in Section 10.06(d).

“Participant Register” has the meaning specified in Section 10.06(d).

“PBGC” means the Pension Benefit Guaranty Corporation.

“Pension Act” means the Pension Protection Act of 2006.

“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to Pension Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, Section 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.

“Pension Plan” means any employee pension benefit plan (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained or is contributed to by the Borrower and any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code.

“Permitted Disposition” has the meaning specified in Section 7.05.

“Permitted Investment” has the meaning specified in Section 7.02.

“Permitted Liens” has the meaning specified in Section 7.01.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Plan), maintained for employees of the Borrower or any ERISA Affiliate or any such Plan to which the Borrower or any ERISA Affiliate is required to contribute on behalf of any of its employees.

“Platform” has the meaning specified in Section 6.02.

“Pledge Agreement” means the Pledge Agreement dated as of the date hereof entered into among the Loan Parties and the Administrative Agent, for the benefit of the Secured Parties, substantially in the form of Exhibit H attached hereto (including any Pledge Agreement Supplement or Pledge Agreement Joinder Agreement entered into pursuant to Section 6.14).

“Pledge Agreement Supplement” means a Pledge Agreement Supplement substantially in the form affixed as an Exhibit to the Pledge Agreement.

“Pledge Joinder Agreement” means a Pledge Joinder Agreement substantially in the form affixed as an Exhibit to the Pledge Agreement.

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“Public Lender” has the meaning specified in Section 6.02.

“Qualified ECP Guarantor” shall mean, at any time, each Loan Party with total assets exceeding $10,000,000 or that qualifies at such time as an “eligible contract participant” under the Commodity Exchange Act and can cause another person to qualify as an “eligible contract participant” at such time under §1a(18)(A)(v)(II) of the Commodity Exchange Act.

“Recipient” means the Administrative Agent, any Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder.

“Register” has the meaning specified in Section 10.06(c).

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

“Request for Credit Extension” means (a) with respect to a Borrowing, conversion or continuation of Term Loans or Revolving Credit Loans, a Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.

“Required Facility Lenders” means (a) for the Revolving Credit Facility, the Required Revolving Lenders and (b) for the Term Loan Facility, the Required Term Loan Lenders.

“Required Lenders” means, at any time, Lenders having Total Credit Exposures representing more than 50% of the Total Credit Exposures of all Lenders.  The Total Credit Exposure of any Defaulting Lender shall be disregarded in determining Required Lenders at any time; provided that, the amount of any participation in any Swing Line Loan and Unreimbursed Amounts that any Defaulting Lender which is a Revolving Credit Lender has failed to fund that have not been reallocated to and funded by another Revolving Credit Lender shall be deemed to be held by the Lender that is the Swing Line Lender or L/C Issuer, as the case may be, in making such determination.

“Required Revolving Lenders” means, at any time, Revolving Credit Lenders having Total Revolving Credit Exposures representing more than 50% of the Total Revolving Credit Exposures of all Revolving Credit Lenders.  The Total Revolving Credit Exposure of any Defaulting Lender which is a Revolving Credit Lender shall be disregarded in determining Required Revolving Credit Lenders at any time; provided that, the amount of any participation in any Swing Line Loan and Unreimbursed Amounts that such Defaulting Lender has failed to fund that have not been reallocated to and funded by another Revolving Credit Lender shall be deemed to be held by the Lender that is the Swing Line Lender or L/C Issuer, as the case may be, in making such determination.

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“Required Term Loan Lenders” means, at any time, Term Loan Lenders having Term Loan Credit Exposures representing more than 50% of the Term Loan Credit Exposures of all Lenders.  The Term Loan Credit Exposure of any Defaulting Lender shall be disregarded in determining Required Term Loan Lenders at any time.

“Responsible Officer” means the chief executive officer, president, chief operating officer, chief financial officer, treasurer, assistant treasurer or controller of a Loan Party and solely for purposes of the delivery of incumbency certificates pursuant to Section 4.01, the secretary or any assistant secretary of a Loan Party.  Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to the Borrower’s stockholders, partners or members (or the equivalent Person thereof).

“Revolving Credit Borrowing” means a borrowing consisting of simultaneous Revolving Credit Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01.

“Revolving Credit Commitment” means, as to each Revolving Credit Lender, its obligation to (a) make Revolving Credit Loans to the Borrower pursuant to Section 2.01(b), (b) purchase participations in L/C Obligations, and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 under the caption “Revolving Credit Commitment” or opposite such caption in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

“Revolving Credit Exposure” means, as to any Revolving Credit Lender at any time, the aggregate principal amount at such time of its outstanding Revolving Credit Loans and such Revolving Credit Lender’s participation in L/C Obligations and Swing Line Loans at such time.

“Revolving Credit Facility” means, at any time, the revolving credit facility provided in this Agreement in the aggregate amount of the Revolving Credit Lenders’ Revolving Credit Commitments at such time.

“Revolving Credit Lender” means, at any time, (a) so long as any Revolving Credit Commitment is in effect, any Lender that has a Revolving Credit Commitment at such time or (b) if the Revolving Credit Commitments have terminated or expired, any Lender that has a Revolving Credit Loan or a participation in L/C Obligations or Swing Line Loans at such time.

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“Revolving Credit Loan” has the meaning specified in Section 2.01(b).

“Revolving Credit Note” means a promissory note made by the Borrower in favor of a Revolving Credit Lender evidencing Revolving Credit Loans or Swing Line Loans, as the case may be, made by such Revolving Credit Lender, substantially in the form of Exhibit C-1.

“Sanction(s)” means any international economic sanction administered or enforced by the United States Government (including without limitation, OFAC), the United Nations Security Council, the European Union, Her Majesty’s Treasury or other relevant sanctions authority.

“Secured Cash Management Agreement” means any Cash Management Agreement that is entered into by and between any Loan Party and any Cash Management Bank.

“Secured Hedge Agreement” means any interest rate Swap Contract permitted under Article VI or VII that is entered into by and between any Loan Party and any Hedge Bank.

“Secured Obligations” means all Obligations, all obligations of any Loan Party arising under Secured Cash Management Agreements and Secured Hedge Agreements and all costs and expenses incurred in connection with enforcement and collection of the foregoing by any Loan Party, including the fees, charges and disbursements of counsel, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding; provided that the “Secured Obligations” shall exclude any Excluded Swap Obligations.

“Secured Parties” means, collectively, the Administrative Agent, the Lenders, the L/C Issuer, the Hedge Banks, the Cash Management Banks, each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 9.05, and the other Persons the Secured Obligations owing to which are or are purported to be secured by the Collateral under the terms of the Collateral Documents.

“Secured Party Designation Notice” shall mean a notice from any Lender or an Affiliate of a Lender substantially in the form of Exhibit J.

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

“Securities Laws” means the Securities Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the Public Company Accounting Oversight Board, as each of the foregoing may be amended and in effect on any applicable date hereunder.

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“Shareholders’ Equity” means, as of any date of determination, consolidated shareholders’ equity of the Borrower and its Subsidiaries as of that date determined in accordance with GAAP.

“Significant Subsidiary” means, as of any date of determination, any Subsidiary having, as of the then-most recent fiscal quarter-end end date for which financial statements are available, total assets of not less than $10,000,000.

“Specified Loan Party” means any Loan Party that is not an “eligible contract participant” under the Commodity Exchange Act (determined prior to giving effect to Section 10.20 or Section 28 of the Guaranty).

“Solvent” means, with respect to any Person as of a particular date, that on such date (a) such Person is able to pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (b) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature in their ordinary course, (c) such Person is not engaged in a business or transaction, and is not about to engage in a business or a transaction, for which such Person’s assets would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged or is to engage, (d) the fair value of the assets of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, and (e) the aggregate fair saleable value (i.e., the amount that may be realized within a reasonable time, considered to be six months to one year, either through collection or sale at the regular market value, conceiving the latter as the amount that could be obtained for the assets in question within such period by a capable and diligent businessman from an interested buyer who is willing to purchase under ordinary selling conditions) of the assets of such Person will exceed its debts and other liabilities (including contingent, subordinated, unmatured and unliquidated debts and liabilities). For purposes of this definition, “debt” means any liability on a claim, and “claim” means (i) a right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (ii) a right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right is an equitable remedy, is reduced judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured.

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

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“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

“Swap Obligations” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.

“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

“Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.04.

“Swing Line Lender” means Bank of America in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.

“Swing Line Loan” has the meaning specified in Section 2.04(a).

“Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, shall be substantially in the form of Exhibit B.

“Swing Line Sublimit” means an amount equal to the lesser of (a) $25,000,000 and (b) the Aggregate Revolving Credit Commitments.  The Swing Line Sublimit is part of, and not in addition to, the Aggregate Revolving Credit Commitments.

“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such

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Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Term Loan” means an advance made by any Term Loan Lender under the Term Loan Facility.

“Term Loan Borrowing” means a borrowing consisting of simultaneous Term Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period made by each of the Term Loan Lenders pursuant to Section 2.01(a).

“Term Loan Commitment” means, as to each Term Loan Lender on or prior to the Closing Date, its obligation to make Term Loans on the Closing Date to the Borrower pursuant to Section 2.01(a) in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Term Loan Lender’s name on Schedule 2.01 under the caption “Term Loan Commitment” or opposite such caption in the Assignment and Assumption pursuant to which such Term Loan Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

“Term Loan Credit Exposure” means, as to any Term Loan Lender at any time, the aggregate principal amount at such time of its outstanding Term Loans.

“Term Loan Facility” means, at any time, the term loan facility provided in this Agreement in the aggregate principal amount of the Term Loans of all Term Loan Lenders outstanding at such time.

“Term Loan Increase” has the meaning specified in Section 2.14(b)(i).

“Term Loan Increase Effective Date” has the meaning specified in Section 2.14(b)(iv).

“Term Loan Lender” means (a) at any time on or prior to the Closing Date, any Lender that has a Term Loan Commitment at such time and (b) at any time after the Closing Date, any Lender that holds Term Loans at such time.

“Term Loan Note” means a promissory note made by the Borrower in favor of a Term Loan Lender evidencing Term Loans made by such Term Loan Lender, substantially in the form of Exhibit C-2.

“Threshold Amount” means $25,000,000.

“Total Consideration” means, in respect of any Acquisition undertaken by the Borrower or its Subsidiaries, total consideration paid or agreed to be paid by the Borrower or its Subsidiaries in connection therewith, including consideration consisting of (i) cash and cash equivalents, (ii) Equity Interests of the Borrower, (iii) licenses granted or received in connection therewith in respect of IP Rights (excluding, however, any licenses of acquired IP Rights that are

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transferred back to the seller in such Acquisition), (iv) the assumption of Indebtedness or other obligations or liabilities of the Acquired Entity existing prior to such Acquisition, and (v) Earn Out Obligations.

“Total Credit Exposure” means, as to any Lender at any time, the Total Revolving Credit Exposure and Term Loan Credit Exposure of such Lender at such time.

“Total Liquidity” means, as of any date of determination for the Borrower and its Subsidiaries on a consolidated basis, the sum, without duplication, of (i) cash, (ii) cash-equivalents, and (iii) marketable securities.

“Total Outstandings” means the aggregate Outstanding Amount of all Loans and all L/C Obligations.

“Total Revolving Credit Exposure” means, as to any Revolving Credit Lender at any time, the unused Revolving Credit Commitments and Revolving Credit Exposure of such Revolving Credit Lender at such time.

“Total Revolving Credit Outstandings” means the aggregate Outstanding Amount of all Revolving Credit Loans, Swing Line Loans and L/C Obligations.

“Type” means, with respect to a Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.

“UCC” means the Uniform Commercial Code as in effect in the State of New York.

“UCP” means, with respect to any Letter of Credit, the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce (“ICC”) Publication No. 600 (or such later version thereof as may be in effect at the time of issuance).

“United States” and “U.S.” mean the United States of America.

“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).

“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning specified in Section 3.01(e)(ii)(B)(III).

“Voting Equity Interests” means, with respect to any Person, the Equity Interests entitled to vote for members of the board of directors or equivalent governing body of such Person.

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1.02Other Interpretive Provisions.  With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

(a)The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “hereto,” “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

(b)In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

(c)Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

1.03Accounting Terms.  

(a)Generally.  All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein. Notwithstanding the foregoing, for purposes of determining compliance with any covenant (including the computation of any financial covenant) contained herein, Indebtedness of the Borrower and its Subsidiaries shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of FASB ASC 825 and FASB ASC 470-20 on financial liabilities shall be disregarded.

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(b)Changes in GAAP.  If at any time any change in GAAP (including the adoption of IFRS) would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (A) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (B) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.  Without limiting the foregoing, leases shall continue to be classified and accounted for on a basis consistent with that reflected in the Audited Financial Statements for all purposes of this Agreement, notwithstanding any change in GAAP relating thereto, unless the parties hereto shall enter into a mutually acceptable amendment addressing such changes, as provided for above.

(c)Consolidation of Variable Interest Entities.  All references herein to consolidated financial statements of the Borrower and its Subsidiaries or to the determination of any amount for the Borrower and its Subsidiaries on a consolidated basis or any similar reference shall, in each case, be deemed to include each variable interest entity that the Borrower is required to consolidate pursuant to FASB ASC 810 as if such variable interest entity were a Subsidiary as defined herein.

1.04Rounding.  Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

1.05Times of Day.  Unless otherwise specified, all references herein to times of day shall be references to Pacific time (daylight or standard, as applicable).

1.06Letter of Credit Amounts.  Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.

ARTICLE II.THE COMMITMENTS AND CREDIT EXTENSIONS

2.01Loans.  

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(a)Term Loan Borrowing.  Subject to the terms and conditions set forth herein, each Term Loan Lender severally agrees to make a single loan to the Borrower on the Closing Date in an amount not to exceed such Term Loan Lender’s Term Loan Commitment.  The Term Loan Borrowing shall consist of Term Loans made simultaneously by the Term Loan Lenders in accordance with their respective Term Loan Commitments.  Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed.  Term Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein; provided, however, that any Term Loan Borrowing made on the Closing Date shall be made as Base Rate Loans unless the Borrower delivers a Funding Indemnity Letter not less than three Business Days prior to the date of such Term Loan Borrowing.

(b)Revolving Credit Borrowings.  Subject to the terms and conditions set forth herein, each Revolving Credit Lender severally agrees to make loans (each such loan, a “Revolving Credit Loan”) to the Borrower from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Revolving Credit Commitment; provided, however, that after giving effect to any Revolving Credit Borrowing, (i) the Total Revolving Credit Outstandings shall not exceed the Aggregate Revolving Credit Commitments, and (ii) the Revolving Credit Exposure of any Revolving Credit Lender shall not exceed such Lender’s Revolving Credit Commitment.  Within the limits of each Revolving Credit Lender’s Revolving Credit Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01(b), prepay under Section 2.05, and reborrow under this Section 2.01(b).  Revolving Credit Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein; provided, however, that any Revolving Credit Borrowings made on the Closing Date or any of the three (3) Business Days following the Closing Date shall be made as Base Rate Loans unless the Borrower delivers a Funding Indemnity Letter not less than three Business Days prior to the date of such Revolving Credit Borrowing.

2.02Borrowings, Conversions and Continuations of Loans.  

(a)Each Term Loan Borrowing, each Revolving Credit Borrowing, each conversion of Term Loans or Revolving Credit Loans from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the Borrower’s irrevocable notice to the Administrative Agent, which may be given by telephone.  Each such notice must be received by the Administrative Agent not later than 8:00 a.m. (i) three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Loans, and (ii) on the requested date of any Borrowing of Base Rate Loans; provided, however, that if the Borrower wishes to request Eurodollar Rate Loans having an Interest Period other than one, two, three or six months in duration as provided in the definition of “Interest Period,” the applicable notice must be received by the Administrative Agent not later than 8:00 a.m. four Business Days prior to the requested date of such Borrowing, conversion or continuation, whereupon the Administrative Agent shall give prompt notice to the Lenders of such request and determine whether the requested Interest Period is acceptable to all of them.  Not later than 11:00 a.m., three Business Days before the requested date of such Borrowing, conversion or continuation, the Administrative Agent shall notify the Borrower (which notice may be by telephone) whether or not the requested Interest Period has been consented to by all the Lenders.  Each telephonic notice by the Borrower

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pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower.  Each Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be in a principal amount of $2,000,000 or a whole multiple of $1,000,000 in excess thereof.  Except as provided in Sections 2.03(c) and 2.04(c), each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof.  Each Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Term Loan Borrowing, a Revolving Credit Borrowing, a conversion of Term Loans or Revolving Credit Loans from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv) the Type of Loans to be borrowed or to which existing Term Loans or Revolving Credit Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto.  If the Borrower fails to specify a Type of Loan in a Loan Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Term Loans or Revolving Credit Loans shall be made as, or converted to, Base Rate Loans.  Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans.  If the Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any such Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.

(b)Following receipt of a Loan Notice for a Facility, the Administrative Agent shall promptly notify each Appropriate Lender of the amount of its Applicable Percentage under such Facility of the applicable Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Appropriate Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection.  In the case of a Term Loan Borrowing or Revolving Credit Borrowing, each Appropriate Lender shall make the amount of its Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 1:00 p.m. on the Business Day specified in the applicable Loan Notice.  Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01), the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower; provided, however, that if, on the date a Loan Notice with respect to a Revolving Credit Borrowing is given by the Borrower, there are L/C Borrowings outstanding, then the proceeds of such Revolving Credit Borrowing, first, shall be applied to the payment in full of any such L/C Borrowings, and second, shall be made available to the Borrower as provided above.

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(c)Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan.  During the existence of a Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders.

(d)The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate.  At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

(e)After giving effect to all Term Loan Borrowings, all conversions of Term Loans from one Type to the other, and all continuations of Term Loans as the same Type, there shall not be more than ten Interest Periods in effect in respect of the Term Loan Facility.  After giving effect to all Revolving Credit Borrowings, all conversions of Revolving Credit Loans from one Type to the other, and all continuations of Revolving Credit Loans as the same Type, there shall not be more than ten Interest Periods in effect in respect of the Revolving Credit Facility.

2.03Letters of Credit.  

(a)The Letter of Credit Commitment.

(i)Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the Revolving Credit Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrower or its Subsidiaries, and to amend or extend Letters of Credit previously issued by it, in accordance with subsection (b) below, and (2) to honor drawings under the Letters of Credit; and (B) the Revolving Credit Lenders severally agree to participate in Letters of Credit issued for the account of the Borrower or its Subsidiaries and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (x) the Total Revolving Credit Outstandings shall not exceed the Aggregate Revolving Credit Commitments, (y) the Revolving Credit Exposure of any Revolving Credit Lender shall not exceed such Lender’s Revolving Credit Commitment, and (z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit.  Each request by the Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrower that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence.  Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.  

(ii)The L/C Issuer shall not issue any Letter of Credit, if:

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(A)Subject to Section 2.03(b)(iii), the expiry date of the requested Letter of Credit would occur more than twelve months after the date of issuance or last extension, unless the Required Revolving Lenders have approved such expiry date; or

(B)the expiry date of the requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Revolving Credit Lenders have approved such expiry date.

(iii)The L/C Issuer shall not be under any obligation to issue any Letter of Credit if:

(A)any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing the Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or the Letter of Credit in particular or shall impose upon the L/C Issuer with respect to the Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it;

(B)the issuance of the Letter of Credit would violate one or more policies of the L/C Issuer applicable to letters of credit generally;

(C)except as otherwise agreed by the Administrative Agent and the L/C Issuer, the Letter of Credit is in an initial stated amount less than $100,000;

(D)the Letter of Credit is to be denominated in a currency other than Dollars;

(E)any Revolving Credit Lender is at that time a Defaulting Lender, unless the L/C Issuer has entered into arrangements, including the delivery of Cash Collateral, satisfactory to the L/C Issuer (in its sole discretion) with the Borrower or such Defaulting Lender to eliminate the L/C Issuer’s actual or potential Fronting Exposure (after giving effect to Section 2.16(a)(iv)) with respect to the Defaulting Lender arising from either the Letter of Credit then proposed to be issued or that Letter of Credit and all other L/C Obligations as to which the L/C Issuer has actual or potential Fronting Exposure, as it may elect in its sole discretion; or

(F)the Letter of Credit contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder.

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(iv)The L/C Issuer shall not amend any Letter of Credit if the L/C Issuer would not be permitted at such time to issue the Letter of Credit in its amended form under the terms hereof.

(v)The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue the Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of the Letter of Credit does not accept the proposed amendment to the Letter of Credit.

(vi)The L/C Issuer shall act on behalf of the Revolving Credit Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in Article IX included the L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C Issuer.

(b)Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit.  

(i)Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower.  Such Letter of Credit Application may be sent by facsimile, by United States mail, by overnight courier, by electronic transmission using the system provided by the L/C Issuer, by personal delivery or by any other means acceptable to the L/C Issuer.  Such Letter of Credit Application must be received by the L/C Issuer and the Administrative Agent not later than 11:00 a.m. at least two Business Days (or such later date and time as the Administrative Agent and the L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be.  In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; (G) the purpose and nature of the requested Letter of Credit; and (H) such other matters as the L/C Issuer may require.  In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may require.  Additionally, the Borrower shall furnish to the L/C Issuer and the Administrative Agent such other documents and information pertaining to such requested Letter of

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Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer or the Administrative Agent may require.

(ii)Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, the L/C Issuer will provide the Administrative Agent with a copy thereof.  Unless the L/C Issuer has received written notice from any Revolving Credit Lender, the Administrative Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article IV shall not then be satisfied, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower (or the applicable Subsidiary) or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer’s usual and customary business practices.  Immediately upon the issuance of each Letter of Credit, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Revolving Credit Lender’s Applicable Revolving Credit Percentage times the amount of such Letter of Credit.

(iii)If the Borrower so requests in any applicable Letter of Credit Application, the L/C Issuer may, in its sole discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit the L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued.  Unless otherwise directed by the L/C Issuer, the Borrower shall not be required to make a specific request to the L/C Issuer for any such extension.  Once an Auto-Extension Letter of Credit has been issued, the Revolving Credit Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the L/C Issuer shall not permit any such extension if (A) the L/C Issuer has determined that it would not be permitted, or would have no obligation, at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is seven Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Required Revolving Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Revolving Credit Lender or the Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the L/C Issuer not to permit such extension.

(iv)Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the

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L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

(c)Drawings and Reimbursements; Funding of Participations.

(i)Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the Borrower and the Administrative Agent thereof.  Not later than 11:00 a.m. on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the Borrower shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing; provided, that, the Borrower has received notice of such payment by 10:00 a.m. on such Honor Date, otherwise the Borrower shall make such payment not later than 11:00 a.m. on the following Business Day (together with interest thereon).  If the Borrower fails to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Revolving Credit Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Lender’s Applicable Percentage thereof.  In such event, the Borrower shall be deemed to have requested a Revolving Credit Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Revolving Credit Commitments and the conditions set forth in Section 4.02 (other than the delivery of a Loan Notice) (it being understood and agreed that no Default or Event of Default caused solely by the Borrower’s failure to reimburse the L/C Issuer for any Unreimbursed Amount in accordance with the first sentence of this Section 2.03(c)(i) shall exist to the extent such Unreimbursed Amount is refinanced by a borrowing of Revolving Credit Loans in the amount of such Unreimbursed Amount pursuant to this Section 2.03(c)(i)).  Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

(ii)Each Revolving Credit Lender shall upon any notice pursuant to Section 2.03(c)(i) make funds available (and the Administrative Agent may apply Cash Collateral provided for this purpose) to the Administrative Agent for the account of the L/C Issuer at the Administrative Agent’s Office in an amount equal to its Applicable Revolving Credit Percentage of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Revolving Credit Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount.  The Administrative Agent shall remit the funds so received to the L/C Issuer.

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(iii)With respect to any Unreimbursed Amount that is not fully refinanced by a Revolving Credit Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate.  In such event, each Revolving Credit Lender’s payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Revolving Credit Lender in satisfaction of its participation obligation under this Section 2.03.

(iv)Until each Revolving Credit Lender funds its Revolving Credit Loan or L/C Advance pursuant to this Section 2.03(c) to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Revolving Credit Lender’s Applicable Revolving Credit Percentage of such amount shall be solely for the account of the L/C Issuer.

(v)Each Revolving Credit Lender’s obligation to make Revolving Credit Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Revolving Credit Lender may have against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default; or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Revolving Credit Lender’s obligation to make Revolving Credit Loans pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 4.02 (other than delivery by the Borrower of a Loan Notice).  No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein.

(vi)If any Revolving Credit Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Revolving Credit Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), then, without limiting the other provisions of this Agreement, the L/C Issuer shall be entitled to recover from such Revolving Credit Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the L/C Issuer in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the L/C Issuer in connection with the foregoing.  If such Revolving Credit Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Revolving Credit Lender’s Revolving Credit Loan included in the relevant Revolving Credit Borrowing or L/C Advance in

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respect of the relevant L/C Borrowing, as the case may be.  A certificate of the L/C Issuer submitted to any Revolving Credit Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.

(d)Repayment of Participations.  

(i)At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Revolving Credit Lender such Revolving Credit Lender’s L/C Advance in respect of such payment in accordance with Section 2.03(c), if the Administrative Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Revolving Credit Lender its Applicable Revolving Credit Percentage thereof in the same funds as those received by the Administrative Agent.

(ii)If any payment received by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the L/C Issuer in its discretion), each Revolving Credit Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Applicable Revolving Credit Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Revolving Credit Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect.  The obligations of the Revolving Credit Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

(e)Obligations Absolute.  The obligation of the Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

(i)any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;

(ii)the existence of any claim, counterclaim, setoff, defense or other right that the Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

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(iii)any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

(iv)waiver by the L/C Issuer of any requirement that exists for the L/C Issuer’s protection and not the protection of the Borrower or any waiver by the L/C Issuer which does not in fact materially prejudice the Borrower;

(v)honor of a demand for payment presented electronically even if such Letter of Credit requires that demand be in the form of a draft;

(vi)any payment made by the L/C Issuer in respect of an otherwise complying item presented after the date specified as the expiration date of, or the date by which documents must be received under such Letter of Credit if presentation after such date is authorized by the UCC, the ISP or the UCP, as applicable;

(vii)any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or

(viii)any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or any Subsidiary.

The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will promptly notify the L/C Issuer.  The Borrower shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.

(f)Role of L/C Issuer.  Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Revolving Credit Lenders or the Required Revolving Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document.  

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The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement.  None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (viii) of Section 2.03(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit.  In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.  The L/C Issuer may send a Letter of Credit or conduct any communication to or from the beneficiary via the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) message or overnight courier, or any other commercially reasonable means of communicating with a beneficiary.

(g)Applicability of ISP and UCP; Limitation of Liability.  Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued, the rules of the ISP shall apply to each Letter of Credit.  Notwithstanding the foregoing, the L/C Issuer shall not be responsible to the Borrower for, and the L/C Issuer’s rights and remedies against the Borrower shall not be impaired by, any action or inaction of the L/C Issuer required or permitted under any law, order, or practice that is required or permitted to be applied to any Letter of Credit or this Agreement, including the Law or any order of a jurisdiction where the L/C Issuer or the beneficiary is located, the practice stated in the ISP or UCP, as applicable, or in the decisions, opinions, practice statements, or official commentary of the ICC Banking Commission, the Bankers Association for Finance and Trade - International Financial Services Association (BAFT-IFSA), or the Institute of International Banking Law & Practice, whether or not any Letter of Credit chooses such law or practice.

(h)Letter of Credit Fees.  The Borrower shall pay to the Administrative Agent for the account of each Revolving Credit Lender in accordance, subject to Section 2.16, with its Applicable Revolving Credit Percentage a Letter of Credit fee (the “Letter of Credit Fee”) for each Letter of Credit equal to the Applicable Rate times the daily amount available to be drawn under such Letter of Credit.  For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06.  Letter of Credit Fees shall be (i) due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand and (ii) computed on a quarterly basis in arrears.  If there is any change

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in the Applicable Rate during any quarter, the daily amount available to be drawn under each Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.  Notwithstanding anything to the contrary contained herein, upon the request of the Required Revolving Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate.

(i)Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer.  The Borrower shall pay directly to the L/C Issuer for its own account a fronting fee with respect to each Letter of Credit, at the rate per annum specified in the Fee Letter, computed on the daily amount available to be drawn under such Letter of Credit on a quarterly basis in arrears  Such fronting fee shall be due and payable on the tenth Business Day after the end of each March, June, September and December in respect of the most recently-ended quarterly period (or portion thereof, in the case of the first payment), commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand.  For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06.  In addition, the Borrower shall pay directly to the L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer relating to letters of credit as from time to time in effect.  Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

(j)Conflict with Issuer Documents.  In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.

(k)Letters of Credit Issued for Subsidiaries.  Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary, the Borrower shall be obligated to reimburse the L/C Issuer hereunder for any and all drawings under such Letter of Credit.  The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of Subsidiaries inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such Subsidiaries.

(l)Letters of Credit Reports.  For so long as any Letter of Credit issued by an L/C Issuer is outstanding, such L/C Issuer shall deliver to the Administrative Agent on the last Business Day of each calendar month, and on each date that an L/C Credit Extension occurs with respect to any such Letter of Credit, a report in the form of Exhibit L hereto, appropriately completed with the information for every outstanding Letter of Credit issued by such L/C Issuer.  The Administrative Agent shall deliver to the Lenders on a monthly basis a report of all outstanding Letters of Credit.

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2.04Swing Line Loans.

(a)The Swing Line.  Subject to the terms and conditions set forth herein, the Swing Line Lender, in reliance upon the agreements of the other Lenders set forth in this Section 2.04, may in its sole discretion make loans (each such loan, a “Swing Line Loan”) to the Borrower from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Applicable Revolving Credit Percentage of the Outstanding Amount of Revolving Credit Loans and L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s Revolving Credit Commitment; provided, however, that (x) after giving effect to any Swing Line Loan, (i) the Total Revolving Credit Outstandings shall not exceed the Aggregate Revolving Credit Commitments, and (ii) the Revolving Credit Exposure of any Revolving Credit Lender shall not exceed such Lender’s Revolving Credit Commitment, (y) the Borrower shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan, and (z) the Swing Line Lender shall not be under any obligation to make any Swing Line Loan if it shall determine (which determination shall be conclusive and binding absent manifest error) that it has, or by such Credit Extension may have, Fronting Exposure.  Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.04, prepay under Section 2.05, and reborrow under this Section 2.04.  Each Swing Line Loan shall be a Base Rate Loan.  Immediately upon the making of a Swing Line Loan, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Revolving Credit Lender’s Applicable Revolving Credit Percentage times the amount of such Swing Line Loan.

(b)Borrowing Procedures.  Each Swing Line Borrowing shall be made upon the Borrower’s irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 10:00 a.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000, and (ii) the requested borrowing date, which shall be a Business Day.  Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower.  Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof.  Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Revolving Credit Lender) prior to 11:00 a.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the first proviso to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 12:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the

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Borrower at its office by crediting the account of the Borrower on the books of the Swing Line Lender in immediately available funds.

(c)Refinancing of Swing Line Loans.

(i)The Swing Line Lender at any time in its sole discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that each Revolving Credit Lender make a Base Rate Loan in an amount equal to such Revolving Credit Lender’s Applicable Revolving Credit Percentage of the amount of Swing Line Loans then outstanding.  Such request shall be made in writing (which written request shall be deemed to be a Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.02.  The Swing Line Lender shall furnish the Borrower with a copy of the applicable Loan Notice promptly after delivering such notice to the Administrative Agent.  Each Revolving Credit Lender shall make an amount equal to its Applicable Revolving Credit Percentage of the amount specified in such Loan Notice available to the Administrative Agent in immediately available funds (and the Administrative Agent may apply Cash Collateral available with respect to the applicable Swing Line Loan) for the account of the Swing Line Lender at the Administrative Agent’s Office not later than 10:00 a.m. on the day specified in such Loan Notice, whereupon, subject to Section 2.04(c)(ii), each Revolving Credit Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount.  The Administrative Agent shall remit the funds so received to the Swing Line Lender.

(ii)If for any reason any Swing Line Loan cannot be refinanced by such a Revolving Credit Borrowing in accordance with Section 2.04(c)(i), the request for Base Rate Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Revolving Credit Lenders fund its risk participation in the relevant Swing Line Loan and each Revolving Credit Lender’s payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall be deemed payment in respect of such participation.

(iii)If any Revolving Credit Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to recover from such Revolving Credit Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the Swing Line Lender in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Swing Line Lender in connection with the foregoing.  If such Revolving Credit Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Revolving Credit Lender’s Revolving Credit Loan included in the

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relevant Revolving Credit Borrowing or funded participation in the relevant Swing Line Loan, as the case may be.  A certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.

(iv)Each Revolving Credit Lender’s obligation to make Revolving Credit Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Revolving Credit Lender’s obligation to make Revolving Credit Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02.  No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein.

(d)Repayment of Participations.  

(i)At any time after any Revolving Credit Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Revolving Credit Lender its Applicable Revolving Credit Percentage thereof in the same funds as those received by the Swing Line Lender.

(ii)If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Revolving Credit Lender shall pay to the Swing Line Lender its Applicable Revolving Credit Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate.  The Administrative Agent will make such demand upon the request of the Swing Line Lender.  The obligations of the Revolving Credit Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

(e)Interest for Account of Swing Line Lender.  The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans.  Until each Revolving Credit Lender funds its Base Rate Loan or risk participation pursuant to this Section 2.04 to refinance such Revolving Credit Lender’s Applicable Revolving Credit Percentage of any Swing Line Loan, interest in respect of such Applicable Revolving Credit Percentage shall be solely for the account of the Swing Line Lender.

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(f)Payments Directly to Swing Line Lender.  The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.

2.05Prepayments.

(a)The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Term Loans or Revolving Credit Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 8:00 a.m. (A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $2,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if less, the entire principal amount thereof then outstanding); and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and, if Eurodollar Rate Loans are to be prepaid, the Interest Period(s) of such Loans.  The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Applicable Percentage of such prepayment.  If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.  Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05.  Each prepayment of the outstanding Term Loans pursuant to this Section 2.05(a) shall be applied to the principal repayment installments thereof on a pro rata basis.  Subject to Section 2.16, each such prepayment shall be applied to the Loans of the Lenders in accordance with their respective Applicable Percentages in respect of each of the relevant Facilities.  Unless the Borrower otherwise instructs the Administrative Agent at the time prepayment is made, prepayment of Revolving Credit Loans pursuant to this Section 2.05(a) shall not reduce the Aggregate Revolving Credit Commitments.

(b)The Borrower may, upon notice to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 10:00 a.m. on the date of the prepayment, and (ii) any such prepayment shall be in a minimum principal amount of $100,000 (or, if less, the entire principal amount thereof then outstanding).  Each such notice shall specify the date and amount of such prepayment.  If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.

(c)If for any reason the Total Revolving Credit Outstandings at any time exceed the Aggregate Revolving Credit Commitments then in effect, the Borrower shall immediately prepay Revolving Credit Loans, Swing Line Loans and L/C Borrowings and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided, however, that the Borrower shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.05(c) unless after the prepayment in full of the Revolving Credit Loans and Swing Line Loans

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the Total Revolving Credit Outstandings exceed the Aggregate Revolving Credit Commitments then in effect.

2.06Termination or Reduction of Revolving Credit Commitments.  The Borrower may, upon notice to the Administrative Agent, terminate, in whole or in part, the Aggregate Revolving Credit Commitments, or from time to time permanently reduce the Aggregate Revolving Credit Commitments; provided that (i) any such notice shall be received by the Administrative Agent not later than 11:00 a.m. five Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) the Borrower shall not terminate or reduce the Aggregate Revolving Credit Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Revolving Credit Outstandings would exceed the Aggregate Revolving Credit Commitments, and (iv) if, after giving effect to any reduction of the Aggregate Revolving Credit Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit exceeds the amount of the Aggregate Revolving Credit Commitments, such Sublimit shall be automatically reduced by the amount of such excess.  The Administrative Agent will promptly notify the Lenders of any such notice of termination or reduction of the Aggregate Revolving Credit Commitments.  Any reduction of the Aggregate Revolving Credit Commitments shall be applied to the Revolving Credit Commitment of each Revolving Credit Lender according to its Applicable Revolving Credit Percentage.  All fees accrued until the effective date of any termination of the Aggregate Revolving Credit Commitments shall be paid on the effective date of such termination.

2.07Repayment of Loans.

(a)Term Loans.  The Borrower shall repay to the Term Loan Lenders the aggregate principal amount of all Term Loans in equal quarterly principal installments of (i) $12,500,000 plus (ii) in the case of each quarterly principal installment payment date occurring after a Term Loan Increase Effective Date, 2.5% of the original principal amount of each Term Loan Increase effective prior to such payment date (which principal amounts shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.05); provided, however, that the final principal repayment installment of the Term Loans shall be repaid on the Maturity Date and in any event shall be in an amount equal to the aggregate principal amount of all Term Loans outstanding on such date.  Each such quarterly principal installment payment shall be due and payable by the Borrower on the last Business Day of each March, June, September and December.

(b)Revolving Credit Loans.  The Borrower shall repay to the Revolving Credit Lenders on the Maturity Date the aggregate principal amount of Revolving Credit Loans outstanding on such date.

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(c)Swing Line Loans.  The Borrower shall repay each Swing Line Loan on the earlier to occur of (i) the date ten Business Days after such Loan is made and (ii) the Maturity Date.

2.08Interest.

(a)Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate; (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate; and (iii) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate.

(b)(i)     If any amount of principal of any Loan is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

(ii)If any amount (other than principal of any Loan) payable by the Borrower under any Loan Document is not paid when due (after the expiration of any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon the request of the Required Lenders, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

(iii)Upon the request of the Required Lenders, while any Event of Default exists (other than as set forth in clauses (b)(i) and (b)(ii) above) and is continuing, the Borrower shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.  

(iv)Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

(c)Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

2.09Fees.  In addition to certain fees described in subsections (h) and (i) of Section 2.03:

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(a)Commitment Fee.  Subject to adjustment as provided in Section 2.16, the Borrower shall pay to the Administrative Agent for the account of each Revolving Credit Lender in accordance with its Applicable Revolving Credit Percentage, a commitment fee equal to the Applicable Rate times the actual daily amount by which the Aggregate Revolving Credit Commitments exceed the sum of (i) the Outstanding Amount of Revolving Credit Loans and (ii) the Outstanding Amount of L/C Obligations. For the avoidance of doubt, the Outstanding Amount of Swing Line Loans shall not be counted towards or considered usage of the Aggregate Revolving Credit Commitments for purposes of determining the commitment fee. The commitment fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the last day of the Availability Period.  The commitment fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.

(b)Other Fees.  (i) The Borrower shall pay to the Arranger and the Administrative Agent for their own respective accounts fees in the amounts and at the times specified in the Fee Letter.  Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

(ii)The Borrower shall pay to the Lenders such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified.  Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

2.10Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate.  

(a)All computations of interest for Base Rate Loans (including Base Rate Loans determined by reference to the Eurodollar Rate) shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year).  Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a), bear interest for one day.  Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

(b)If, as a result of any restatement of or other adjustment to the financial statements of the Borrower or for any other reason, the Borrower or the Lenders determine that (i) the Consolidated Leverage Ratio as calculated by the Borrower as of any applicable date was inaccurate and (ii) a proper calculation of the Consolidated Leverage Ratio would have resulted in higher pricing for such period, the Borrower shall immediately and retroactively be obligated to pay to the Administrative Agent for the account of the applicable Lenders or the L/C Issuer, as the case may be, promptly on demand by the Administrative Agent (or, after the occurrence of an

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actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, automatically and without further action by the Administrative Agent, any Lender or the L/C Issuer), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period.  This paragraph shall not limit the rights of the Administrative Agent, any Lender or the L/C Issuer, as the case may be, under Section 2.03(c)(iii), 2.03(h) or 2.08(b) or under Article VIII.  The Borrower’s obligations under this paragraph shall survive the termination of the Aggregate Commitments and the repayment of all other Obligations hereunder for a period of one (1) year from the date of such termination.

2.11Evidence of Debt.  

(a)The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business.  The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.  Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Loans in addition to such accounts or records.  Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.

(b)In addition to the accounts and records referred to in subsection (a) above, each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans.  In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

2.12Payments Generally; Administrative Agent’s Clawback.

(a)General.  All payments to be made by the Borrower shall be made free and clear of and without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 11:00 a.m. on the date specified herein.  The Administrative Agent will promptly distribute to each Lender its Applicable Percentage in respect of the relevant Facility (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office.  All payments received by the Administrative Agent

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after 11:00 a.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.  If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

(b)(i)     Funding by Lenders; Presumption by Administrative Agent.  Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing of Eurodollar Rate Loans (or, in the case of any Borrowing of Base Rate Loans, prior to 9:00 a.m. on the date of such Borrowing) that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 (or, in the case of a Borrowing of Base Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount.  In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans.  If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period.  If such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such Borrowing.  Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.  

(ii)Payments by Borrower; Presumptions by Administrative Agent.  Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the L/C Issuer hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Appropriate Lenders or the L/C Issuer, as the case may be, the amount due.  In such event, if the Borrower has not in fact made such payment, then each of the Appropriate Lenders or the L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the L/C Issuer, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by

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the Administrative Agent in accordance with banking industry rules on interbank compensation.

A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.

(c)Failure to Satisfy Conditions Precedent.  If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

(d)Obligations of Lenders Several.  The obligations of the Lenders hereunder to make Term Loans and Revolving Credit Loans, to fund participations in Letters of Credit and Swing Line Loans and to make payments pursuant to Section 10.04(c) are several and not joint.  The failure of any Lender to make any Loan, to fund any such participation or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan, to purchase its participation or to make its payment under Section 10.04(c).

(e)Funding Source.  Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

2.13Sharing of Payments by Lenders.  If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Loans made by it, or the participations in L/C Obligations or in Swing Line Loans held by it resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and subparticipations in L/C Obligations and Swing Line Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them, provided that:

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(i)if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

(ii)the provisions of this Section shall not be construed to apply to (x) any payment made by or on behalf of the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender), (y) the application of Cash Collateral provided for in Section 2.15, or (z) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or subparticipations in L/C Obligations or Swing Line Loans to any assignee or participant, other than an assignment to the Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply).

The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

2.14Increase in Commitments.  

(a)Revolving Credit Facility Increase.

(i)Request for Revolving Credit Increase.  Provided there exists no Default that is then continuing, upon notice to the Administrative Agent (which shall promptly notify the Revolving Credit Lenders), the Borrower may from time to time, request an increase in the Aggregate Revolving Credit Commitments by an amount (for all such requests) not exceeding $200,000,000; provided that (i) any such request for an increase shall be in a minimum amount of $50,000,000, and (ii) the Borrower may make a maximum of three such requests.  At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Revolving Credit Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Revolving Credit Lenders).  

(ii)Revolving Credit Lender Elections to Increase.  Each Revolving Credit Lender shall notify the Administrative Agent within such time period whether or not it agrees in its sole discretion to increase its Revolving Credit Commitment and, if so, whether by an amount equal to, greater than, or less than its Applicable Revolving Credit Percentage of such requested increase.  Any Revolving Credit Lender not responding within such time period shall be deemed to have declined to increase its Revolving Credit Commitment.  

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(iii)Notification by Administrative Agent; Additional Revolving Credit Lenders.  The Administrative Agent shall notify the Borrower and each Revolving Credit Lender of the Revolving Credit Lenders’ responses to each request made hereunder.  To achieve the full amount of a requested increase and subject to the approval of the Administrative Agent, the L/C Issuer and the Swing Line Lender (which approvals shall not be unreasonably withheld), the Borrower may also invite additional Eligible Assignees to become Revolving Credit Lenders pursuant to a joinder agreement in form and substance satisfactory to the Administrative Agent and its counsel.

(iv)Effective Date and Allocations.  If the Aggregate Revolving Credit Commitments are increased in accordance with this Section 2.15(a), the Administrative Agent and the Borrower shall determine the effective date (the “Revolving Credit Increase Effective Date”) and the final allocation of such increase.  The Administrative Agent shall promptly notify the Borrower and the Revolving Credit Lenders of the final allocation of such increase and the Revolving Credit Increase Effective Date.  

(v)Conditions to Effectiveness of Revolving Credit Increase.  As a condition precedent to such increase, the Borrower shall deliver to the Administrative Agent a certificate of each Loan Party dated as of the Revolving Credit Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer of such Loan Party (x) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such increase, and (y) in the case of the Borrower, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects on and as of the Revolving Credit Increase Effective Date, except that (x) if a qualifier relating to materiality, Material Adverse Effect or a similar concept applies, such representation and warranty shall be required to be true and correct in all respects, (y) to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and (z) for purposes of this Section 2.14, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01, and (B) no Default exists.  The Borrower shall prepay any Revolving Credit Loans outstanding on the Revolving Credit Increase Effective Date (and pay any additional amounts required pursuant to Section 3.05) to the extent necessary to keep the outstanding Revolving Credit Loans ratable with any revised Applicable Revolving Credit Percentages arising from any nonratable increase in the Revolving Credit Commitments under this Section.

(vi)Conflicting Provisions.  This Section shall supersede any provisions in Section 2.13 or 10.01 to the contrary.  

(b)Term Loan Facility Increase.

(i)Request for Increase.  Provided there exists no Default that is then continuing, upon notice to the Administrative Agent (which shall promptly notify the Term Loan Lenders), the Borrower may from time to time, request (A) an increase in the Term Loans (each, a “Term Loan Increase”) or (B) one or more term loan tranches to be

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made available to the Borrower (each, an “Incremental Term Loan”); provided that (1) the aggregate principal amount for all such Term Loan Increases and Incremental Term Loans shall not (for all such requests) exceed $100,000,000, (2) any such request for a Term Loan Increase or Incremental Term Loan shall be in a minimum amount of $50,000,000, and (3) the Borrower may make a maximum of two such requests.  At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Term Loan Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Term Loan Lenders).  Each Term Loan Increase shall have the same terms as the outstanding Term Loans and be part of the existing Term Loan Facility hereunder.  Each Incremental Term Loan (v) shall rank pari passu or junior in right of payment, prepayment, voting and security with the Term Loans (unless agreed to be paid after the Term Loans by the Lenders providing such Incremental Term Loans) (and any Incremental Term Loans which are junior in right of payment and/or security shall have customary second lien, prepayment, subordination, standstill and other provisions reasonably acceptable to the Administrative Agent), (w) shall not mature earlier than the Maturity Date and shall have a weighted average life to maturity than the then remaining weighted average life to maturity of the Term Loan Facility, (x) shall have an Applicable Rate or pricing grid as determined by the Lenders providing such Incremental Term Loans and the Borrower; provided that if the Applicable Rate in respect of any Incremental Term Loan exceeds the Applicable Rate for the Term Loan Facility by more than 0.50% for each Type of Loan, then the Applicable Rate for the Term Loan Facility shall be increased so that the Applicable Rate in respect of the Term Loan Facility for each Type of Loan is equal to the Applicable Rate for the Incremental Term Loan for each Type of Loan minus 0.50%; provided, further, solely for the purposes of this Section 2.15(b), in determining the Applicable Rate(s) applicable to each Incremental Term Loan and the Applicable Rate(s) for the Term Loan Facility, (1) original issue discount (“OID”) or upfront fees (which shall be deemed to constitute like amounts of OID) payable by the Borrower to the Lenders under such Incremental Term Loan or the Term Loan Facility in the initial primary syndication thereof shall be included (with OID being equated to interest based on assumed four-year life to maturity), (2) the effects of any and all interest rate floors shall be included and (3) customary arrangement or commitment fees payable to a Lead Arranger (or its Affiliates) in connection with the Term Loan Facility or to one or more arrangers (or their Affiliates) of any Incremental Term Loan shall be excluded; (y) except as provided above, all other terms and conditions applicable to any Incremental Term Loan, to the extent not consistent with the terms and conditions applicable to the Term Loan Facility, shall be reasonably satisfactory to the Administrative Agent, the applicable Lenders providing such Incremental Term Loan and the Borrower; and (z) each Incremental Term Loan shall constitute Obligations hereunder and, except as provided above with respect to any Incremental Term Loan that is junior in right of payment, prepayment, voting and/or security, shall be guaranteed and secured pursuant to the Guaranty and the Collateral Documents on a pari passu basis with the other Obligations hereunder

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(ii)Term Loan Lender Elections to Increase.  Each Term Loan Lender shall notify the Administrative Agent within such time period whether or not it agrees to increase its Term Loans or provide the requested Incremental Term Loan, as the case may be, and, if so, whether by an amount equal to, greater than, or less than its ratable portion (based on such Term Loan Lender’s Applicable Percentage in respect of the Term Loan Facility) of such requested Term Loan Increase or Incremental Term Loan.  Any Term Loan Lender not responding within such time period shall be deemed to have declined to increase its Term Loans or provide any Incremental Term Loans.

(iii)Notification by Administrative Agent; Additional Term Loan Lenders.  The Administrative Agent shall notify the Borrower and each Term Loan Lender of the Term Loan Lenders’ responses to each request made hereunder.  To achieve the full amount of a requested Term Loan Increase or Incremental Term Loan, and subject to the approval of the Administrative Agent, the Borrower may also invite additional Eligible Assignees to become Term Loan Lenders pursuant to a joinder agreement in form and substance satisfactory to the Administrative Agent and its counsel.

(iv)Effective Date and Allocations.  If the Term Loans are increased or an Incremental Term Loan made available to the Borrower in accordance with this Section 2.15(b), the Administrative Agent and the Borrower shall determine the effective date (the “Term Loan Increase Effective Date”) and the final allocation of such Term Loan Increase or Incremental Term Loan.  The Administrative Agent shall promptly notify the Borrower and the Term Loan Lenders of the final allocation of such Term Loan Increase or Incremental Term Loan and the Term Loan Increase Effective Date.  

(v)Conditions to Effectiveness of Term Loan Increase or Incremental Term Loan.  As a condition precedent to such Term Loan Increase or Incremental Term Loan, the Borrower shall deliver to the Administrative Agent a certificate of each Loan Party dated as of the Term Loan Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer of such Loan Party (A) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such Term Loan Increase or Incremental Term Loan, and (B) in the case of the Borrower, certifying that, before and after giving effect to such Term Loan Increase or Incremental Term Loan, (1) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects on and as of the Term Loan Increase Effective Date, except that (x) if a qualifier relating to materiality, Material Adverse Effect or a similar concept applies, such representation and warranty shall be required to be true and correct in all respects, (y) to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and (z) for purposes of this Section 2.14, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01, and (B) no Default exists.  The additional Term Loans or Incremental Term Loans shall be made by the Term Loan Lenders participating therein pursuant to the procedures set forth in Section 2.02.

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(vi)Conflicting Provisions.  This Section shall supersede any provisions in Section 2.13 or 10.01 to the contrary.

2.15Cash Collateral.

(a)Certain Credit Support Events.  If (i) the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, (ii) as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, (iii) the Borrower shall be required to provide Cash Collateral pursuant to Section 8.02(c), or (iv) there shall exist a Defaulting Lender, the Borrower shall immediately (in the case of clause (iii) above) or within one Business Day (in all other cases) following any request by the Administrative Agent or the L/C Issuer, provide Cash Collateral in an amount not less than the applicable Minimum Collateral Amount (determined in the case of Cash Collateral provided pursuant to clause (iv) above, after giving effect to Section 2.16(a)(iv) and any Cash Collateral provided by the Defaulting Lender).  

(b)Grant of Security Interest.  The Borrower, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants to (and subjects to the control of) the Administrative Agent, for the benefit of the Administrative Agent, the L/C Issuer and the Lenders, and agrees to maintain, a first priority security interest in all such cash, deposit accounts and all balances therein, and all other property so provided as collateral pursuant hereto, and in all proceeds of the foregoing, all as security for the obligations to which such Cash Collateral may be applied pursuant to Section 2.15(c).  If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent or the L/C Issuer as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, the Borrower will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency. All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be maintained in blocked, non-interest bearing deposit accounts at Bank of America. The Borrower shall pay on demand therefor from time to time all customary account opening, activity and other administrative fees and charges in connection with the maintenance and disbursement of Cash Collateral.

(c)Application.  Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under any of this Section 2.15 or Sections 2.03, 2.04, 2.05, 2.16 or 8.02 in respect of Letters of Credit shall be held and applied to the satisfaction of the specific L/C Obligations, obligations to fund participations therein (including, as to Cash Collateral provided by a Revolving Credit Lender that is a Defaulting Lender, any interest accrued on such obligation) and other obligations for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.

(d)Release.  Cash Collateral (or the appropriate portion thereof) provided to reduce Fronting Exposure or to secure other obligations shall be released promptly following (i) the elimination of the applicable Fronting Exposure or other obligations giving rise thereto (including by the termination of Defaulting Lender status of the applicable Revolving Credit Lender (or, as appropriate, its assignee following compliance with Section 10.06(b)(vi))) or (ii) the determination by the Administrative Agent and the L/C Issuer that there exists excess Cash

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Collateral; provided, however, (x) any such release shall be without prejudice to, and any disbursement or other transfer of Cash Collateral shall be and remain subject to, any other Lien conferred under the Loan Documents and the other applicable provisions of the Loan Documents, and (y) the Person providing Cash Collateral and the L/C Issuer may agree that Cash Collateral shall not be released but instead held to support future anticipated Fronting Exposure or other obligations.

2.16Defaulting Lenders.

(a)Adjustments.  Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:

(i)Waivers and Amendments.  Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of “Required Lenders,” “Required Revolving Credit Lenders,” “Required Term Lenders” and Section 10.01.

(ii)Defaulting Lender Waterfall.  Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VIII or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 10.08 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, if such Defaulting Lender is a Revolving Credit Lender, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the L/C Issuer or Swing Line Lender hereunder; third, if such Defaulting Lender is a Revolving Credit Lender, to Cash Collateralize the L/C Issuer’s Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.15; fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement and (y) if such Defaulting Lender is a Revolving Credit Lender, Cash Collateralize the L/C Issuer’s future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 2.15; sixth, in the case of a Defaulting Lender under any Facility, to the payment of any amounts owing to the other Lenders under such Facility (in the case of the Revolving Credit Facility, including the L/C Issuer or Swing Line Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the L/C Issuer or the Swing Line Lender) against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender's breach

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of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or L/C Borrowings in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 4.02 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and L/C Obligations owed to, all Non-Defaulting Lenders under the applicable Facility on a pro rata basis (and ratable among all applicable Facilities computed in accordance with the Defaulting Lenders’ respective funding deficiencies) prior to being applied to the payment of any Loans of, or L/C Obligations owed to, such Defaulting Lender under the applicable Facility until such time as all Loans and funded and unfunded participations in L/C Obligations and Swing Line Loans are held by the Lenders pro rata in accordance with the Commitments hereunder without giving effect to Section 2.16(a)(iv). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.16(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.  

(iii)Certain Fees.

(A)No Defaulting Lender shall be entitled to receive any fee payable under Section 2.09(a) for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

(B)Each Defaulting Lender which is a Revolving Credit Lender shall be entitled to receive Letter of Credit Fees for any period during which that Lender is a Defaulting Lender only to the extent allocable to its Applicable Revolving Credit Percentage of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 2.16.  

(C)With respect to any Letter of Credit Fee not required to be paid to any Defaulting Lender pursuant to clause (A) or (B) above, the Borrower shall (x) pay to each Non-Defaulting Lender which is a Revolving Credit Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in L/C Obligations or Swing Line Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the L/C Issuer and Swing Line Lender, as applicable, the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to such L/C Issuer’s or Swing Line Lender’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.

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(iv)Reallocation of Applicable Revolving Credit Percentages to Reduce Fronting Exposure.  All or any part of such Defaulting Lender’s participation in L/C Obligations and Swing Line Loans shall be reallocated among the Non-Defaulting Lenders which are Revolving Credit Lenders in accordance with their respective Applicable Revolving Credit Percentages (calculated without regard to such Defaulting Lender’s Revolving Credit Commitment) but only to the extent that (x) the conditions set forth in Section 4.02 are satisfied at the time of such reallocation (and, unless the Borrower shall have otherwise notified the Administrative Agent at such time, the Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the aggregate Revolving Credit Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s Revolving Credit Commitment.  No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.

(v)Cash Collateral, Repayment of Swing Line Loans.  If the reallocation described in clause (a)(iv) above cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under applicable Law, (x) first, prepay Swing Line Loans in an amount equal to the Swing Line Lender’s Fronting Exposure and (y) second, Cash Collateralize the L/C Issuer’s Fronting Exposure in accordance with the procedures set forth in Section 2.15.

(b)Defaulting Lender Cure.If the Borrower, the Administrative Agent and, in the case that a Defaulting Lender is a Revolving Credit Lender, the Swing Line Lender and the L/C Issuer, agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Revolving Credit Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Revolving Credit Loans and funded and unfunded participations in Letters of Credit and Swing Line Loans to be held on a pro rata basis by the Lenders in accordance with their Applicable Percentages (without giving effect to Section 2.16(a)(iv)), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

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ARTICLE III.TAXES, YIELD PROTECTION AND ILLEGALITY

3.01Taxes.    

(a)Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes.  

(i)Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable Laws.  If any applicable Laws (as determined in the good faith discretion of the Administrative Agent) require the deduction or withholding of any Tax from any such payment by the Administrative Agent or a Loan Party, then the Administrative Agent or such Loan Party shall be entitled to make such deduction or withholding, upon the basis of the information and documentation to be delivered pursuant to subsection (e) below.

(ii)If any Loan Party or the Administrative Agent shall be required by the Code to withhold or deduct any Taxes, including both United States Federal backup withholding and withholding taxes, from any payment, then (A) the Administrative Agent shall withhold or make such deductions as are determined by the Administrative Agent to be required based upon the information and documentation it has received pursuant to subsection (e) below, (B) the Administrative Agent shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Code, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Loan Party shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section 3.01) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

(iii)If any Loan Party or the Administrative Agent shall be required by any applicable Laws other than the Code to withhold or deduct any Taxes from any payment, then (A) such Loan Party or the Administrative Agent, as required by such Laws, shall withhold or make such deductions as are determined by it to be required based upon the information and documentation it has received pursuant to subsection (e) below, (B) such Loan Party or the Administrative Agent, to the extent required by such Laws, shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with such Laws, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Loan Party shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section 3.01) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

(b)Payment of Other Taxes by the Borrower.  Without limiting the provisions of subsection (a) above, the Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.

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(c)Tax Indemnifications.  (i) The Borrower shall, and does hereby, indemnify each Recipient, and shall make payment in respect thereof within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 3.01) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the L/C Issuer (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the L/C Issuer, shall be conclusive absent manifest error.  The Borrower shall, and does hereby, indemnify the Administrative Agent, and shall make payment in respect thereof within 10 days after demand therefor, for any amount which a Lender or the L/C Issuer for any reason fails to pay indefeasibly to the Administrative Agent as required pursuant to Section 3.01(c)(ii) below.

(ii)Each Lender and the L/C Issuer shall, and does hereby, severally indemnify, and shall make payment in respect thereof within 10 days after demand therefor, (x) the Administrative Agent against any Indemnified Taxes attributable to such Lender or the L/C Issuer (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (y) the Administrative Agent and the Borrower, as applicable, against any Taxes attributable to such Lender’s failure to comply with the provisions of Section 10.06(d) relating to the maintenance of a Participant Register and (z) the Administrative Agent and the Borrower, as applicable, against any Excluded Taxes attributable to such Lender or the L/C Issuer, in each case, that are payable or paid by the Administrative Agent or the Borrower in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error.  Each Lender and the L/C Issuer hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender or the L/C Issuer, as the case may be, under this Agreement or any other Loan Document against any amount due to the Administrative Agent under this clause (ii).  

(d)Evidence of Payments.  Upon request by the Borrower or the Administrative Agent, as the case may be, after any payment of Taxes by the Borrower or by the Administrative Agent to a Governmental Authority as provided in this Section 3.01, the Borrower shall deliver to the Administrative Agent or the Administrative Agent shall deliver to the Borrower, as the case may be, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to the Borrower or the Administrative Agent, as the case may be.

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(e)Status of Lenders; Tax Documentation.

(i)Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 3.01(e)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(ii)Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Person,

(A)any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

(B)any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:

(I)in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

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(II)executed originals of IRS Form W-8ECI;

(III)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit I-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN; or

(IV)to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit I-2 or Exhibit I-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit I-4 on behalf of each such direct and indirect partner;

(C)any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

(D)if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

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(iii)Each Lender agrees that if any form or certification it previously delivered pursuant to this Section 3.01 expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

(f)Treatment of Certain Refunds.  Unless required by applicable Laws, at no time shall the Administrative Agent have any obligation to file for or otherwise pursue on behalf of a Lender or the L/C Issuer, or have any obligation to pay to any Lender or the L/C Issuer, any refund of Taxes withheld or deducted from funds paid for the account of such Lender or the L/C Issuer, as the case may be.  If any Recipient determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 3.01, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 3.01 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) incurred by such Recipient, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Recipient, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Recipient in the event the Recipient is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this subsection, in no event will the applicable Recipient be required to pay any amount to the Borrower pursuant to this subsection the payment of which would place the Recipient in a less favorable net after-Tax position than such Recipient would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.  This subsection shall not be construed to require any Recipient to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

(g)Survival.  Each party’s obligations under this Section 3.01 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender or the L/C Issuer, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations.

3.02Illegality.  If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its Lending Office to make, maintain or fund Loans whose interest is determined by reference to the Eurodollar Rate, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, (i) any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended, and (ii) if such notice asserts the illegality of such Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference to the Eurodollar Rate component of the Base Rate, the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurodollar Rate component of the Base Rate, in

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each case until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, (x) the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans (the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurodollar Rate component of the Base Rate), either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the Eurodollar Rate, the Administrative Agent shall during the period of such suspension compute the Base Rate applicable to such Lender without reference to the Eurodollar Rate component thereof until the Administrative Agent is advised in writing by such Lender that it is no longer illegal  for such Lender to determine or charge interest rates based upon the Eurodollar Rate.  Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

3.03Inability to Determine Rates.  If in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof,  (a) the Administrative Agent determines that (i) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, or (ii) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan or in connection with an existing or proposed Base Rate Loan (in each case with respect to clause (a)(i) above, “Impacted Loans”), or (b) the Administrative Agent or the Required Lenders determine that for any reason  the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Eurodollar Rate Loan, the Administrative Agent will promptly so notify the Borrower and each Lender.  Thereafter, (x) the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended, (to the extent of the affected Eurodollar Rate Loans or Interest Periods), and (y) in the event of a determination described in the preceding sentence with respect to the Eurodollar Rate component of the Base Rate, the utilization of the Eurodollar Rate component in determining the Base Rate shall be suspended, in each case until the Administrative Agent upon the instruction of the Required Lenders revokes such notice.  Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans (to the extent of the affected Eurodollar Rate Loans or Interest Periods) or, failing that, will be deemed to have converted such request into a request for a Committed Borrowing of Base Rate Loans in the amount specified therein.

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Notwithstanding the foregoing, if the Administrative Agent has made the determination described in clause (a)(i) of this section, the Administrative Agent, in consultation with the Borrower and the affected Lenders, may establish an alternative interest rate for the Impacted Loans, in which case, such alternative rate of interest shall apply with respect to the Impacted Loans until (1) the Administrative Agent revokes the notice delivered with respect to the Impacted Loans under clause (a) of the first sentence of this section, (2) the Administrative Agent or the Required Lenders notify the Administrative Agent and the Borrower that such alternative interest rate does not adequately and fairly reflect the cost to such Lenders of funding the Impacted Loans, or (3) any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for such Lender or its applicable Lending Office to make, maintain or fund Loans whose interest is determined by reference to such alternative rate of interest or to determine or charge interest rates based upon such rate or any Governmental Authority has imposed material restrictions on the authority of such Lender to do any of the foregoing and provides the Administrative Agent and the Borrower written notice thereof.

3.04Increased Costs; Reserves on Eurodollar Rate Loans.   

(a)Increased Costs Generally.  If any Change in Law shall:

(i)impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 3.04(e)) or the L/C Issuer;

(ii)subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii)impose on any Lender or the L/C Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making, converting to, continuing or maintaining any Loan the interest on which is determined by reference to the Eurodollar Rate (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the L/C Issuer, the Borrower will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.

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(b)Capital Requirements.  If any Lender or the L/C Issuer determines that any Change in Law affecting such Lender or the L/C Issuer or any Lending Office of such Lender or such Lender’s or the L/C Issuer’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or the L/C Issuer’s capital or on the capital of such Lender’s or the L/C Issuer’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit or Swing Line Loans held by, such Lender, or the Letters of Credit issued by the L/C Issuer, to a level below that which such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the L/C Issuer’s policies and the policies of such Lender’s or the L/C Issuer’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company for any such reduction suffered.

(c)Certificates for Reimbursement.  A certificate of a Lender or the L/C Issuer setting forth the amount or amounts necessary to compensate such Lender or the L/C Issuer or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error.  The Borrower shall pay such Lender or the L/C Issuer, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

(d)Delay in Requests.  Failure or delay on the part of any Lender or the L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section 3.04 shall not constitute a waiver of such Lender’s or the L/C Issuer’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the L/C Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender or the L/C Issuer, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the L/C Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

(e)Reserves on Eurodollar Rate Loans.  The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days’ prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender.  If a Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.

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3.05Compensation for Losses.  Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any actual and direct loss, cost or expense incurred by it as a result of:

(a)any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

(b)any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or

(c)any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 10.13;

excluding any loss of anticipated profits but including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained.  The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.

For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.

3.06Mitigation Obligations; Replacement of Lenders.  

(a)Designation of a Different Lending Office.  If any Lender requests compensation under Section 3.04, or requires the Borrower to pay any Indemnified Taxes or additional amounts to any Lender, the L/C Issuer, or any Governmental Authority for the account of any Lender or the L/C Issuer pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then at the request of the Borrower such Lender or the L/C Issuer shall, as applicable, use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender or the L/C Issuer, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender or the L/C Issuer, as the case may be, to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender or the L/C Issuer, as the case may be.  The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender or the L/C Issuer in connection with any such designation or assignment.

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(b)Replacement of Lenders.  If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01 and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 3.06(a), the Borrower may replace such Lender in accordance with Section 10.13.

3.07Survival.  All of the Borrower’s obligations under this Article III shall survive termination of the Aggregate Commitments, repayment of all other Obligations hereunder, and resignation of the Administrative Agent.

ARTICLE IV.CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

4.01Conditions of Initial Credit Extension.  The obligation of the L/C Issuer and each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent:

(a)The Administrative Agent’s receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and each of the Lenders:

(i)executed counterparts of this Agreement, the Pledge Agreement and the Guaranty, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrower;

(ii)a Note executed by the Borrower in favor of each Lender requesting a Note;

(iii)each of the Collateral Documents required by the Administrative Agent to be executed and delivered on the date hereof, duly executed by each Loan Party, together with:

(A)all certificates representing any Equity Interests required to be delivered thereby accompanied by undated transfer powers executed in blank, as applicable,

(B)proper financing statements in form appropriate for filing under the Uniform Commercial Code of all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect the Liens created under such Collateral Documents, covering the Collateral described therein, in each case as a first priority Lien (subject only to Permitted Liens),

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(C)completed requests for information, dated on or before the date of the initial Credit Extension, listing the financing statements referred to in clause (B) above and all other effective financing statements filed in the jurisdictions referred to in clause (B) above that name any Loan Party as debtor, together with copies of such other financing statements, and

(D)evidence of the completion of all other actions, recordings and filings of or with respect to the Collateral Documents that the Administrative Agent may deem necessary or desirable in order to perfect the Liens created thereby, in each case as a first priority Lien (subject only to Permitted Liens);

(iv)such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party;

(v)such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and that each of the Borrower and each Guarantor is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect;

(vi)a favorable opinion of DLA Piper, counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, as to the matters set forth in Exhibit G and such other matters concerning the Loan Parties and the Loan Documents as the Required Lenders may reasonably request;

(vii)a certificate of a Responsible Officer of each Loan Party either (A) attaching copies of all consents, licenses and approvals required in connection with the execution, delivery and performance by such Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required;

(viii)a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfied, (B) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect and (C) a calculation of the Consolidated Leverage Ratio as of the last day of the fiscal quarter of the Borrower most recently ended prior to the Closing Date;

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(ix)a complete search of the records of each filing office where a financing statement (including under the Uniform Commercial Code), judgment Lien, tax Lien or other Lien naming a Loan Party or any other party must be filed to perfect the Administrative Agent’s security interest and Lien, for the benefit of the Secured Parties, in any of the Collateral, which searches shall be satisfactory to the Administrative Agent;

(x)evidence that the Existing Credit Agreement (and all commitments thereunder) has been or concurrently with the Closing Date is being terminated and all Liens securing obligations under the Existing Credit Agreement have been or concurrently with the Closing Date are being released (and each Lender hereunder which was a “Lender” as defined in the Existing Credit Agreement (A) waives the requirement under Section 2.06 of the Existing Credit Agreement for five Business Days prior notice of the termination thereof and (B) acknowledges that the provisions in the Existing Credit Agreement regarding “Secured Cash Management Agreements” and “Secured Hedge Agreements” are now covered by the provisions regarding Secured Cash Management Agreements and Secured Hedge Agreements hereunder); and

(xi)such other assurances, certificates, documents, consents or opinions as the Administrative Agent, the L/C Issuer, the Swing Line Lender or the Required Lenders reasonably may require.

(b)Any fees required to be paid on or before the Closing Date shall have been paid.

(c)Unless waived by the Administrative Agent, the Borrower shall have paid all  reasonable fees, charges and disbursements of counsel to the Administrative Agent (directly to such counsel if requested by the Administrative Agent) to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent).

Without limiting the generality of the provisions of the last paragraph of Section 9.03, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

4.02Conditions to all Credit Extensions.  The obligation of each Lender to honor any Request for Credit Extension (other than a Loan Notice requesting only a conversion of Loans to the other Type, or a continuation of Eurodollar Rate Loans) is subject to the following conditions precedent:

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(a)The representations and warranties of the Borrower and each other Loan Party contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects on and as of the date of such Credit Extension, except that (w) if a qualifier relating to materiality, Material Adverse Effect or a similar concept applies, such representation and warranty shall be required to be true and correct in all respects, (x) to the extent such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and (y) for purposes of this Section 4.02, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01.

(b)No Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds thereof.

(c)The Administrative Agent and, if applicable, the L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.

Each Request for Credit Extension (other than a Loan Notice requesting only a conversion of Loans to the other Type or a continuation of Eurodollar Rate Loans) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.

ARTICLE V.REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Administrative Agent and the Lenders that:

5.01Existence, Qualification and Power.  Each Loan Party (a) is duly organized or formed, validly existing and, as applicable, in good standing (or the equivalent under local law or regulations) under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and, as applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (b)(i) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

5.02Authorization; No Contravention.  The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien (other than any Lien created under the Loan Documents) under, or require any payment to be made under (i) any material Contractual Obligation to which such Person is a party or affecting such Person or the properties

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of such Person or any of its Subsidiaries (other than conflicts, breaches and contraventions that could not reasonably be expected to have a Material Adverse Effect) or (ii) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any material Law.  Each Loan Party and each Subsidiary thereof is in compliance with all material Contractual Obligations referred to in clause (b)(i), except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

5.03Governmental Authorization; Other Consents.  No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document other than (a) those that have already been obtained and are in full force and effect, (b) authorizations, approvals, actions, notices and filings contemplated by the Collateral Documents, (c) notices and filings which customarily are required in connection with the exercise of remedies in respect of the Collateral, and (d) those approvals, consents, exemptions, authorizations, actions, notices or filings the failure of which to obtain, take, give or make could not be reasonably expected to have a Material Adverse Effect.

5.04Binding Effect.  This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto.  This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party that is a party thereto, enforceable against such Loan Party that is party thereto in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, Debtor Relief Laws or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability (whether enforcement is sought by proceedings in equity or at law).

5.05Financial Statements; No Material Adverse Effect.  

(a)The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) to the extent required by GAAP, show all material indebtedness and other liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

(b)The unaudited consolidated balance sheets of the Borrower and its Subsidiaries dated June 28, 2013, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Borrower and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.  Schedule 5.05 sets forth all material indebtedness and other liabilities,

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direct or contingent, of the Borrower and its consolidated Subsidiaries as of the date of such financial statements, including liabilities for taxes, material commitments and Indebtedness.

(c)Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

5.06Litigation.  There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower after due and diligent investigation, threatened in writing or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) except as specifically disclosed in Schedule 5.06, either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.

5.07No Default.  No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.  

5.08Ownership of Property; Liens.  Each of the Borrower and each Subsidiary has good record and marketable title in fee simple (or the equivalent under local law or regulations) to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  The property of the Borrower and its Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01.

5.09Regulatory Compliance.  The Borrower and its Subsidiaries conduct in the ordinary course of business a review of the effect of (i) existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law and (ii) existing FDA Regulations, on their respective businesses, operations and properties, and as a result thereof the Borrower has reasonably concluded that, except as specifically disclosed in Schedule 5.09, such Environmental Laws and claims and FDA Regulations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

5.10Insurance.  The properties of the Loan Parties are insured with financially sound and reputable insurance companies not Affiliates of the Borrower, in such amounts (after giving effect to any self-insurance compatible with the following standards), with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower or the applicable Subsidiary operates.

5.11Taxes.  The Borrower and its Subsidiaries have filed (or obtained appropriate extensions in respect of) all Federal, state and other material tax returns and reports required to be filed, and have paid (or obtained appropriate extensions in respect of) all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP.  To Borrower’s knowledge,

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there is no proposed tax assessment against the Borrower or any Subsidiary that would, if made, have a Material Adverse Effect.  

5.12ERISA Compliance.

(a)To the best knowledge of the Borrower, each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state laws except in such instances in which the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.  With respect to each Pension Plan that is intended to be a qualified plan under Section 401(a) of the Code, at least one of the following applies: (i) such Pension Plan received a favorable determination letter from the Internal Revenue Service to the effect that the form of such Plan is qualified under Section 401(a) of the Code and the trust related thereto and has been determined by the Internal Revenue Service to be exempt from federal income tax under Section 501(a) of the Code, (ii) an application for such a letter is currently being processed by the Internal Revenue Service, or such Plan has time remaining in which to apply to the Internal Revenue Service for such a letter prior to the expiration of the requisite period under applicable Treasury regulations or Internal Revenue Service pronouncements in which to apply for such letter and to make any amendments necessary to obtain a favorable determination, or (iii) such Pension Plan has been established under or operates as a prototype or volume submitter plan with respect to which the Internal Revenue Service has issued an opinion letter to the plan sponsor on which the employer can rely.  To the best knowledge of the Borrower, nothing has occurred that would prevent or cause the loss of such tax-qualified status.

(b)There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or  lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

(c)Except as could not reasonably be expected to result in a Material Adverse Effect, (i) no ERISA Event has occurred, and neither the Borrower nor any ERISA Affiliate is aware of any fact, event or circumstance that could reasonably be expected to constitute or result in an ERISA Event with respect to any Pension Plan; (ii) the Borrower and each ERISA Affiliate has met all applicable requirements under the Pension Funding Rules in respect of each Pension Plan, and no waiver of the minimum funding standards under the Pension Funding Rules has been applied for or obtained; (iii) as of the most recent valuation date for any Pension Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of the Code) is 60% or higher and neither the Borrower nor any ERISA Affiliate knows of any facts or circumstances that could reasonably be expected to cause the funding target attainment percentage for any such plan to drop below 60% as of the most recent valuation date; (iv) neither the Borrower nor any ERISA Affiliate has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due that are unpaid; (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or Section 4212(c) of ERISA; and (vi) no Pension Plan has been terminated by the plan administrator thereof nor by the PBGC, and no event or circumstance has occurred or exists that

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could reasonably be expected to cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Pension Plan.

(d)With respect to each scheme or arrangement mandated by a government other than the United States (a “Foreign Government Scheme or Arrangement”) and with respect to each employee benefit plan maintained or contributed to by any Loan Party or any Subsidiary of any Loan Party that is not subject to United States law (a “Foreign Plan”):

(i)any employer and employee contributions required by law or by the terms of any Foreign Government Scheme or Arrangement or any Foreign Plan have been made, or, if applicable, accrued, in accordance with normal accounting practices;

(ii)the fair market value of the assets of each funded Foreign Plan, the liability of each insurer for any Foreign Plan funded through insurance or the book reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations, as of the date hereof, with respect to all current and former participants in such Foreign Plan according to the actuarial assumptions and valuations most recently used to account for such obligations in accordance with applicable generally accepted accounting principles; and

(iii)each Foreign Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities.  

5.13Subsidiaries; Equity Interests.  As of the Closing Date, the Borrower has no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are owned by the Borrower or its Subsidiaries (as so indicated) free and clear of all Liens other than Permitted Liens.  The Borrower has no equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13.  Part (a) of such Schedule further specifies or identifies (i) all Significant Subsidiaries as of the Closing Date and (ii) all Material Subsidiaries as of the Closing Date.  All of the outstanding Equity Interests in the Borrower have been validly issued and are fully paid and nonassessable.

5.14Margin Regulations; Investment Company Act.  

(a)The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock. Following the application of the proceeds of each Borrowing or drawing under each Letter of Credit, not more than 25% of the value of the assets (either of the Borrower only or of the Borrower and its Subsidiaries on a consolidated basis) subject to the provisions of Section 7.01 or Section 7.05 or subject to any restriction contained in any agreement or instrument between the Borrower and any Lender or any Affiliate of any Lender relating to Indebtedness and within the scope of Section 8.01(e) will be margin stock.

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(b)None of the Borrower, any Person Controlling the Borrower, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

5.15Disclosure.  The Borrower has disclosed to the Administrative Agent and the Lenders all material agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.  No report, financial statement, certificate or other information furnished (whether in writing or orally) by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other information so furnished) contains to the Borrower’s knowledge any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time (it being understood by us that the such projected financial information is not to be viewed as facts and that actual results during the period or periods covered may differ from projected results and that such differences may be material).

5.16Compliance with Laws.  Each Loan Party and each Subsidiary thereof is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

5.17Solvency.  Each Loan Party is, individually and together with its Subsidiaries on a consolidated basis, Solvent.

5.18Labor Matters.  There are no collective bargaining agreements or Multiemployer Plans covering the employees of the Borrower or any of its Domestic Subsidiaries or such other Subsidiaries located in the United States as of the Closing Date.

5.19Taxpayer Identification Number.  The Borrower’s true and correct U.S. taxpayer identification number is set forth on Schedule 10.02.

5.20Intellectual Property; Licenses, Etc.  Except as disclosed in Schedule 5.20, to the Borrower’s knowledge, the Borrower and its Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights (collectively, “IP Rights”) that are reasonably necessary for the operation of the business of the Borrower and its Subsidiaries, taken as a whole, except as would not reasonably be expected to have Material Adverse Effect (collectively, the “Material IP Rights”).  Except as disclosed in Schedule 5.20, no claim or litigation regarding any of the Material IP Rights is pending or, to the Borrower’s knowledge, threatened, which, either

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individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.  All material patents and patent applications owned by the Borrower as of the Closing Date, and all material patent licenses relating to third party patents as to which the Borrower is licensee, together with their respective expiry or termination dates, are set forth on Schedule 5.20.

5.21Collateral Documents.  The provisions of the Collateral Documents are effective to create in favor of the Administrative Agent for the benefit of the Secured Parties a legal, valid and enforceable first priority Lien (subject only to Permitted Liens) on all right, title and interest of the respective Loan Parties in the Collateral described therein.  Except for filings completed prior to the Closing Date and as contemplated hereby and by the Collateral Documents, no filing or other action will be necessary to perfect or protect such Liens

5.22OFAC.  No Loan Party, nor, to the knowledge of any Loan Party, any Related Party, (i) is currently the subject of any Sanctions, (ii) is located, organized or residing in any Designated Jurisdiction, or (iii) is or has been (within the previous five (5) years) engaged in any transaction with any Person who is now or was then the subject of Sanctions or who is located, organized or residing in any Designated Jurisdiction.  No Loan, nor the proceeds from any Loan, has been used, directly or indirectly, to lend, contribute, provide or has otherwise made available to fund any activity or business in any Designated Jurisdiction or to fund any activity or business of any Person located, organized or residing in any Designated Jurisdiction or who is the subject of any Sanctions, or in any other manner that will result in any violation by any Person (including any Lender, any Lead Arranger, the Administrative Agent, the L/C Issuer or the Swing Line Lender) of Sanctions.

ARTICLE VI.AFFIRMATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification obligations), or any Letter of Credit shall remain outstanding, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02 and 6.03) cause each Subsidiary to:

6.01Financial Statements.  Deliver to the Administrative Agent, in form and detail reasonably satisfactory to the Administrative Agent and the Required Lenders:

(a)as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower (or if earlier, 15 days after the date required to be filed with the SEC) (commencing with the fiscal year ended September 30, 2013), a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, changes in shareholders’ equity, and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Required Lenders, which report and opinion shall be prepared in accordance with generally accepted auditing standards and applicable Securities Laws and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit; and

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(b)as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower (commencing with the fiscal quarter ending December 31, 2013), a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, the related consolidated statements of income or operations for such fiscal quarter and for the portion of the Borrower’s fiscal year then ended, and the related consolidated statements of changes in shareholders’ equity, and cash flows for such fiscal quarter and for the portion of the Borrower’s fiscal year then ended, setting forth in each case in comparative form, as applicable, the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, such consolidated statements to be certified by the chief executive officer, chief financial officer, treasurer or controller of the Borrower as fairly presenting in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes.

As to any information contained in materials furnished pursuant to Section 6.02(d), the Borrower shall not be separately required to furnish such information under subsection (a) or (b) above, but the foregoing shall not be in derogation of the obligation of the Borrower to furnish the information and materials described in subsections (a) and (b) above at the times specified therein.

6.02Certificates; Other Information.  Deliver to the Administrative Agent for further delivery to each Lender, in form and detail reasonably satisfactory to the Administrative Agent and the Required Lenders:

(a)concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate signed by the chief executive officer, chief financial officer, treasurer or controller of the Borrower (which delivery may, unless the Administrative Agent, or a Lender requests executed originals, be by electronic communication including fax or e-mail and shall be deemed to be an original authentic counterpart thereof for all purposes);

(b)promptly after any request by the Administrative Agent or any Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Borrower by independent accountants in connection with the accounts or books of the Borrower or any Subsidiary, or any audit of any of them;

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(c)promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Borrower, and copies of all annual, regular, periodic and special reports and registration statements which the Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to the Administrative Agent pursuant hereto;

(d)promptly, and in any event within ten Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or possible investigation or other inquiry by such agency regarding financial or other operational results of any Loan Party or any Subsidiary thereof; and

(e)promptly, such additional information regarding the business, financial or corporate affairs of the Borrower or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender may from time to time reasonably request (it being understood and agreed that, notwithstanding anything to the contrary in this Agreement, none of the Borrower or any Subsidiary will be required to disclose, permit the inspection, examination or making copies or abstracts of, or discussion of, any document, information or other matter requested under this Section 6.02 that (x) constitutes non-financial trade secrets or non-financial proprietary information, (y) in respect of which disclosure to the Administrative Agent or any Lender (or their respective representatives or contractors) is prohibited by Law, or (z) is subject to a third-party confidentiality agreement.

Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(c) or (d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) the Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender upon its request to the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) if requested by the Administrative Agent or any Lender (through the Administrative Agent), the Borrower shall notify the Administrative Agent or any such Lender (by facsimile or electronic mail) of the posting of any such documents (if the Administrative Agent has not posted such documents on the Borrower’s behalf) and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents.  The Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request by a Lender for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

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The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Lead Arrangers may, but shall not be obligated to, make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on Debt Domain, IntraLinks, Syndtrak or another similar electronic system (the “Platform”) and (b) certain of the Lenders (each, a “Public Lender”) may have personnel who do not wish to receive material non-public information with respect to the Borrower or its Affiliates, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons’ securities.  The Borrower hereby agrees that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent, the Lead Arrangers, the L/C Issuer and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Borrower or its securities for purposes of United States Federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.07); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Side Information;” and (z) the Administrative Agent and the Lead Arrangers shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Side Information.”  For the avoidance of doubt, it is acknowledged and agreed that, as of the Closing Date, none of the Lenders is a Public Lender.  

Notwithstanding the foregoing, the Borrower shall be under no obligation to mark any Borrower Materials “PUBLIC.”

6.03Notices.  Promptly after knowledge thereof by a Responsible Officer of the Borrower notify the Administrative Agent:

(a)of the occurrence of any Default;

(b)of any matter (other than general economic trends) that has resulted or could reasonably be expected to result in a Material Adverse Effect, as determined by the Borrower in good faith;

(c)of the occurrence of any ERISA Event which reasonably could be expected to result in liability in excess of $15,000,000;

(d)of any material change in accounting policies or financial reporting practices by the Borrower or any Subsidiary, including any determination by the Borrower referred to in Section 2.10(b); and

(e)of any amendment, modification or waiver to or under the Note Purchase Agreement, or any notes from time to time issued and outstanding thereunder (other than in connection with the prepayment thereof).

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Each notice pursuant to this Section 6.03 shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.  Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

6.04Payment of Obligations.  Pay and discharge as the same shall become due and payable, (a) all material tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless (i) the same are being contested in good faith by appropriate proceedings diligently conducted, (ii) adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary, and (iii) failure to make such payment pending such contest could not reasonably be expected to result in a Material Adverse Effect; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property (other than inchoate Liens permitted under Section 7.01) unless (i) the same are being contested in good faith by appropriate proceedings diligently conducted, (ii) adequate reserves in accordance with GAAP are being maintained by the Borrower or such Subsidiary, and (iii) failure to make such payment pending such contest could not reasonably be expected to result in a Material Adverse Effect; and (c) all Indebtedness (other than Indebtedness the non-payment of which would not violate Section 8.01(e)), as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness.

6.05Preservation of Existence, Etc.  (a) Preserve, renew and maintain in full force and effect its legal existence and good standing (to the extent applicable under local law or regulation) under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.04 or 7.05; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises (including all Material IP Rights) necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) other than in connection with a Disposition permitted under Section 7.05, preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.  Notwithstanding the foregoing, this Section 6.05 shall not prohibit the Borrower or any Subsidiary from reorganizing in another state of the United States or changing its entity form so long as (x) in the case of any Loan Party, such Loan Party has provided at least thirty (30) days prior written notice to the Administrative Agent and such reorganization or change is not materially adverse to the Lenders or (y) in the case of any Subsidiary that is not a Loan Party, the Borrower provides written notice to the Administrative Agent within thirty (30) days after such reorganization or change shall have taken effect

6.06Maintenance of Properties.  (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear and Involuntary Dispositions excepted and (b) use the standard of care typical in the industry in the operation and maintenance of its facilities and (c) make all necessary repairs thereto and renewals and replacements thereof that the Loan Parties in their reasonable business judgment deem necessary; in each case except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

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6.07Maintenance of Insurance.  Maintain with financially sound and reputable insurance companies not Affiliates of the Borrower, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance compatible with the following standards) as are customarily carried under similar circumstances by such other Persons.

6.08[Reserved].  

6.09Compliance with Laws.  Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

6.10Books and Records.  (a)  With respect to the Borrower and its Domestic Subsidiaries, maintain proper books of record and account, in which full, true and correct entries in all material respects in conformity with GAAP consistently applied, as in effect from time to time, shall be made of all financial transactions and matters involving the assets and business of the Borrower or such Subsidiary, as the case may be; and (b) with respect to Foreign Subsidiaries, maintain such books of record and account in material conformity with all applicable rules generally applied in the relevant jurisdiction and, as the case may be, all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrower or such Subsidiary, as the case may be.

6.11Inspection Rights.  Permit representatives and independent contractors of the Administrative Agent to visit and inspect any of its properties (provided that with respect to any leased property, such inspection shall not violate the terms of the applicable lease), to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, that (i) the Borrower shall not be obligated to reimburse the expenses associated with more than one visit and inspection per calendar year (subject to clause (ii) below), (ii) when an Event of Default exists the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice and (iii) the Administrative Agent and the Lenders will (so long as no Event of Default exists) use commercially reasonable efforts to give the Borrower the opportunity to participate in any discussions with the Borrower’s accountants.

6.12Use of Proceeds.  Use the proceeds of the Credit Extensions (i) for working capital, capital expenditures, (ii) to refinance all outstanding Indebtedness under the Existing Credit Agreement, (iii) to finance (x) certain permitted open market repurchases of the Borrower’s common stock and (y) Acquisitions permitted hereunder and (iv) for other general corporate purposes not in contravention of any Law or of any Loan Document

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6.13Compliance with FDA Regulations and Environmental Laws.  The Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with, all applicable FDA Regulations and Environmental Laws, except where the failure to so comply could not reasonably expect to result in a Material Adverse Effect, and obtain and comply in all material respects with, and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable FDA Regulations and Environmental Laws except where the failure to so comply, obtain and maintain could not reasonably be expected to result in a Material Adverse Effect.

6.14Covenant to Guarantee Obligations and Give Security.  (a)  On each Guarantor Assessment Date, the Borrower shall determine whether there exists any new or additional Material Subsidiaries, and if so, the Borrower shall promptly notify the Administrative Agent of such fact and promptly thereafter (and in any event, with respect to Domestic Subsidiaries (other than Foreign Subsidiary Holding Companies), within thirty (30) days, and, with respect to Foreign Subsidiary Holding Companies and Foreign Subsidiaries, within sixty (60) days, or, in each case, such other period as the Administrative Agent may approve in its sole discretion):

(i)unless such Subsidiary is unable to execute a Guaranty Joinder Agreement (or in the case of the first such Subsidiary to become a Loan Party, the Guaranty), a Pledge Agreement Joinder Agreement or a Pledge Agreement Supplement without contravening local law and without causing any non-de minimis adverse tax effect as to the Borrower (and the Borrower provides a certificate to such effect) (any Subsidiary subject to either such inability, an “Exempt Subsidiary”), cause such Subsidiary to deliver to the Administrative Agent the Guaranty or a Guaranty Joinder Agreement, as applicable, duly executed by such Subsidiary (but subject to the limitations on the amounts guarantied set forth in the form of Guaranty attached hereto);

(ii)deliver to the Administrative Agent documents of the types referred to in clauses (iv) and (v) of Section 4.01(a) and, if requested by the Administrative Agent, favorable customary opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to in this Section 6.14), all in form, content and scope reasonably satisfactory to the Administrative Agent;

(iii)to duly execute and deliver, and cause such Subsidiary and, as to any Domestic Subsidiary that is a direct or indirect parent of such Subsidiary, but is not an Exempt Subsidiary, (if it has not already done so) to duly execute and deliver to the Administrative Agent a Pledge Agreement Joinder Agreement and a Pledge Agreement Supplement, as applicable, and, if such Subsidiary is a Foreign Subsidiary, such other pledge agreements, pledge agreement supplements or other similar agreements as the Administrative Agent may reasonably request, as specified by and in form and substance satisfactory to the Administrative Agent (including delivery of all (or in the case of an Exempt Subsidiary, 65%) of the Equity Interests in and of such Subsidiary or the First-Tier Foreign Subsidiary that is a direct or indirect parent of such Subsidiary, and other instruments of the type specified in Section 4.01(a)(iii)), securing payment of all the Secured Obligations of such Subsidiary or such parent, as the case may be, under the

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Loan Documents (but subject to the limitations on the amounts secured set forth in the Pledge Agreement) and constituting Liens on all such Collateral;

(iv)within 30 days after such formation or acquisition, cause such Subsidiary and each direct and indirect parent of such Subsidiary (if it has not already done so) to take whatever action (including the filing of Uniform Commercial Code financing statements and the giving of notices) may be necessary or advisable in the opinion of the Administrative Agent to vest in the Administrative Agent (or in any representative of the Administrative Agent designated by it) a valid and subsisting Liens on the Equity Interests purported to be subject to the Pledge Agreement or such other similar or related agreements delivered pursuant to this Section 6.14, enforceable against all third parties in accordance with their terms;

Notwithstanding anything to the contrary herein, (a) no Foreign Subsidiary or Foreign Subsidiary Holding Company shall be required to become a Guarantor or Loan Party or grant Liens on any of its property (including pledge any Equity Interests and execution of a Pledge Agreement Supplement or Pledge Agreement Joinder), and (b) neither the Borrower nor any Subsidiary shall be required to pledge more than 65% of the Voting Equity Interests in any Foreign Subsidiary or Foreign Subsidiary Holding Company, if becoming a Guarantor or Loan Party, executing a execute a Guaranty Joinder Agreement, a Pledge Agreement Joinder Agreement or a Pledge Agreement Supplement, or the pledge of more than 65% of the Voting Equity Interests in any Foreign Subsidiary or Foreign Subsidiary Holding Company would violate applicable Law or result in any non-de minimus adverse tax consequence to the Borrower or any Subsidiary.

(b)If the Borrower shall determine on any Guarantor Assessment Date in respect of any Subsidiary that is, at such time, a Guarantor, that such Subsidiary is no longer a Material Subsidiary, the Borrower may deliver to the Administrative Agent a request for a release of such Subsidiary from the Guaranty, accompanied by a certificate to such effect and certifying as to the absence of any Default or Event of Default, whereupon the Administrative Agent shall execute such documents and instruments of release as shall be reasonably satisfactory to the parties, confirming the release of such Subsidiary from the Guaranty and releasing any related pledge of Equity Interests of such Subsidiary required hereunder.

6.15Further Assurances.  Promptly upon request, from time to time, by the Administrative Agent, or any Lender through the Administrative Agent, (a) correct any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and (b) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, financing statements and continuation thereof, termination statements, certificates, assurances and other instruments as the Administrative Agent, or any Lender through the Administrative Agent, may reasonably require from time to time in order to (i) carry out more effectively the purposes of this Agreement and any other Loan Documents, (ii) to the fullest extent permitted by applicable law, subject any Loan Party’s or any of its Subsidiaries’ properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (iii) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (iv) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Secured Parties the rights

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granted or now or hereafter intended to be granted to the Secured Parties under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Loan Party or any of its Subsidiaries is or is to be a party, and cause each of its Subsidiaries to do so.

ARTICLE VII.NEGATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification Obligations), or any Letter of Credit shall remain outstanding, the Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly:

7.01Liens.  Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following (“Permitted Liens”):

(a)Liens pursuant to any Loan Document;

(b)Liens existing on the date hereof and listed on Schedule 7.01 and any renewals or extensions thereof, provided that (i) the property covered thereby is not changed, (ii) the amount secured or benefited thereby is not increased except as contemplated by Section 7.03(b), (iii) the direct or any contingent obligor with respect thereto is not changed, and (iv) any renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.03(b);

(c)Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

(d)carriers’, warehousemen’s, mechanics’, materialmen’s, landlord’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person;

(e)pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA;

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(f)deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

(g)easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;

(h)Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h);

(i)Liens on assets securing purchase money Indebtedness and capital leases in respect of such assets;

(j)Interests of lessors under operating leases;

(k)Liens consisting of leases or subleases of tangible property granted to others not interfering in any material respect with the business of the Borrower and its Subsidiaries, taken as a whole, and licenses and sublicenses of IP Rights permitted under Section 7.05(f);

(l)Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(m)Liens on cash collateral securing reimbursement obligations to issuing banks under letters of credit otherwise permitted hereunder;

(n)Liens on assets acquired in any Investment not prohibited hereunder to the extent such Liens were in existence at the time of acquisition and not incurred in anticipation thereof;

(o)Liens upon such accounts and the financial assets therein in favor of other financial institutions arising in connection with Borrower’s or any Subsidiary’s deposit or securities accounts held at such institutions and not securing Indebtedness;

(p)Liens on earnest money deposits required under a letter of intent or purchase agreement in connection with Acquisitions and other transactions otherwise permitted hereunder;

(q)Liens on assets representing part of the proceeds of a sale or other disposition of property otherwise permitted hereunder, to secure post closing obligations to the buyer in connection with such sale or other disposition;

(r)Liens on cash representing proceeds from the issuance of Indebtedness solely for the purpose of making interest payments in connection with such Indebtedness;

(s)Liens on insurance proceeds securing the payment of financed insurance premiums;

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(t)(A) Liens that are contractual rights of setoff relating to purchase orders entered into with customers of such Person in the ordinary course of its business and (B) Liens on goods the purchase price of which is financed by a documentary letter of credit issued for the account of the Borrower or any of its Subsidiaries, provided that such Lien secures only the obligations of the Borrower or such Subsidiaries in respect of such letter of credit to the extent permitted hereunder;

(u)Liens on any assets or Equity Interests of a Foreign Subsidiary of the Borrower securing Indebtedness of such Foreign Subsidiary permitted hereunder;

(v)any security interest or set-off arrangements entered into by any Foreign Subsidiary in the ordinary course of its banking arrangements which arise from the general banking conditions (algemene bankvoorwaarden) (including, for the avoidance of doubt, in relation to a Foreign Subsidiary which is incorporated under the laws of the Netherlands, any security created pursuant to the general conditions of a bank operating in the Netherlands based on the general conditions drawn up by the Netherlands Bankers’ Association (Nederlandse Vereniging van Banken) and the Consumers Union (Consumentenbond));

(w)Liens on cash collateral or other assets with an aggregate value not to exceed $200,000,000 securing obligations in respect of amounts paid or payable under performance, payment, stay, appeal or surety bonds, or similar instruments; and

(x)other Liens on assets securing Indebtedness not in excess of the Threshold Amount in the aggregate at any time outstanding.

7.02Investments.  Make any Investments, except the following (each a “Permitted Investment”):

(a)Investments held by the Borrower or such Subsidiary in the form of cash equivalents, or short-term marketable securities and other Investments permitted by the Borrower’s board-approved investment policy in effect from time to time;

(b)advances to officers, directors and employees of the Borrower and Subsidiaries in an aggregate amount not to exceed $2,000,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes;

(c)(i) Investments of the Borrower in any Guarantor and Investments of any Guarantor in the Borrower or in another Guarantor; and (ii) Investments by Subsidiaries that are not Guarantors in other Subsidiaries or the Borrower;

(d)Investments consisting of extensions of credit in the nature of accounts receivable, prepaid royalties or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and Investments received in compromise or resolution of litigation, arbitration or other disputes;

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(e)Guarantees permitted by Section 7.03;

(f)Acquisitions by the Borrower or any of its wholly-owned Subsidiaries, provided that (i) the Total Consideration for any Acquisition does not exceed $[****]^*, and (ii) after giving effect to such Acquisition, the Total Consideration for all Acquisitions together consummated by the Borrower or its Subsidiaries from and after the Closing Date does not exceed $[****]^*;

(g)Investments acquired in exchange for any other Investments in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization;

(h)Investments consisting of deposits, prepayments and other credits to suppliers made in the ordinary course of business of the Borrower and its Subsidiaries consistent with reasonable past practices;

(i)guaranties in the ordinary course of business and consistent with past practice of obligations owed to or of landlords, suppliers, licensors and licensees of the Borrower and its Subsidiaries or otherwise permitted hereunder;

(j)to the extent constituting an Investment, the Borrower and its Subsidiaries may (i) endorse negotiable instruments held for collection in the ordinary course of business or (ii) make lease, utility and other similar deposits in the ordinary course of business; and

(k)so long as immediately before and after giving effect to any such Investment, no Event of Default has occurred and is continuing, other Investments by the Borrower or any Subsidiary consisting of or in the nature of a transfer or other disposition of Equity Interests of one or more Foreign Subsidiaries of the Borrower to one or more other Subsidiaries of the Borrower;

(l)Investments held by Persons whose Equity Interests or assets are acquired in an Acquisition permitted hereunder after the Closing Date to the extent that such Investments were not made in contemplation of or in connection with such Acquisition and were in existence on the date of such Acquisition;

(m)Investments arising out of the receipt by Borrower or its Subsidiaries of promissory notes and other non-cash consideration for Permitted Dispositions;

(n)(i) third-party trade receivables, (ii) intercompany trade receivables among Loan Parties, (iii) intercompany payables resulting from unreimbursed costs related to the allocation of shared employees and services, so long as such transactions in the ordinary course of such Person’s business, and (iv) intercompany receivables among any Loan Party and any of their Subsidiaries recorded as intercompany journal entries in connection with transfer pricing, cost-sharing and similar arrangements, so long as such transactions are cashless and in each case incurred in the ordinary course of such Person’s business; and

^* Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

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(o)other Investments (including joint ventures and loan fundings and commitments), other than Acquisitions, provided that, the aggregate amount of all such Investments together during the term of this Agreement does not exceed $[****]^*.

7.03Subsidiary Guarantees.  Create, incur, assume or suffer to exist any Guarantees issued by Subsidiaries, except:

(a)the Guaranty;

(b)Guarantees outstanding on the date hereof and listed on Schedule 7.03;

(c)Guarantees issued by a Subsidiary other than a Domestic Subsidiary or a First Tier Foreign Subsidiary with respect to Indebtedness or other obligations of any other Subsidiary;

(d)Guarantees of First Tier Foreign Subsidiaries in respect of ordinary course real estate lease, vendor and other ordinary course transactions not constituting financings and entered into by Subsidiaries of any such First Tier Foreign Subsidiary; and

(e)Indebtedness arising from any refinancings, refundings, renewals or extensions of item (b) and (c) above; provided that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection therewith and by an amount equal to any existing commitments unutilized thereunder.

7.04Fundamental Changes.  Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result therefrom:

(a)any Subsidiary may merge or consolidate with (i) the Borrower, provided that the Borrower shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries, provided that when any Guarantor is merging with another Subsidiary, a Guarantor shall be the continuing or surviving Person;

(b)the Borrower and Subsidiaries of Borrower may merge or consolidate with any Person as necessary to consummate Acquisitions permitted hereunder; provided that if Borrower is party to transaction, Borrower shall be the surviving Person;

(c)any Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Subsidiary; provided that if the transferor in such a transaction is a Guarantor, then the transferee must either be the Borrower or a Guarantor;

^* Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

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(d)Dispositions of all or substantially all of the assets of any Subsidiary (other than a Guarantor) not otherwise permitted under this Section 7.04; provided that (i) at the time of such Disposition, no Default shall exist or would result from such Disposition, (ii) the combined book value of all property and assets Disposed of in reliance of this clause (d) while this Agreement is in effect shall not exceed $100,000,000 in the aggregate, and (iii) after giving effect to such Disposition, the Borrower is in compliance, on a projected pro forma basis, with Section 7.11 for the subsequent four fiscal quarters;

7.05Dispositions.  Make any Disposition or enter into any agreement to make any Disposition, except the following (each a “Permitted Disposition”):

(a)Dispositions of surplus, obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business;

(b)Dispositions of inventory in the ordinary course of business;

(c)Dispositions of equipment or real property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such Disposition are reasonably promptly applied to the purchase price of such replacement property;

(d)Dispositions of property by any Subsidiary to any Loan Party or to a wholly-owned Subsidiary; provided that if the transferor of such property is a Guarantor, the transferee thereof must either be the Borrower or a Guarantor;

(e)Dispositions permitted by Section 7.04 and Dispositions consisting of Permitted Liens or Permitted Investments;

(f)(i) licenses and sublicenses of IP Rights in the ordinary course of business, (ii) licenses and cross-licenses of IP Rights in connection with settlements of intellectual property-related disputes with third parties; (iii) customary licenses and cross-licenses of IP Rights acquired in an Acquisition that are granted back to the seller, and (iv) the abandonment, permitted lapse, cancellation, termination and/or cessation of IP Rights that are, in the reasonable judgment of the Borrower, no longer economically practicable, commercially desirable to maintain or useful, in each case, in the conduct of business of the Borrower and its Subsidiaries taken as a whole;

(g)sales or discounting of delinquent accounts in the ordinary course of business;

(h)any Involuntary Disposition;

(i)the transfer of amounts by the Borrower to or from one of its investment or deposit accounts maintained any Lead Arranger, Bank of America or any Lender, as the case may be, to another of its investment or deposit accounts maintained with any Lead Arranger, Bank of America or any Lender, as the case may be; and

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(j)Dispositions by the Borrower and its Subsidiaries not otherwise permitted under this Section 7.05; provided that (i) at the time of such Disposition, no Default shall exist or would result from such Disposition, (ii) the combined book value of all property and assets Disposed of in reliance of this clause (h) while this Agreement is in effect shall not exceed $100,000,000 in the aggregate, and (iii) after giving effect to such Disposition, the Borrower is in compliance, on a projected pro forma basis, with Section 7.11 for the subsequent four fiscal quarters;

provided, however, that any Disposition pursuant to subsections (a), (b), (c), (g), (i) and (j) shall be for fair value.

7.06Restricted Payments.  Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that, so long as no Default shall have occurred and be continuing at the time of any action described below or would result therefrom:

(a)each Subsidiary may make Restricted Payments to the Borrower, the Guarantors and any other Person that owns an Equity Interest in such Subsidiary, ratably according to their respective holdings of the type of Equity Interest in respect of which such Restricted Payment is being made;

(b)the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person;

(c)the Borrower and each Subsidiary may purchase, redeem or otherwise acquire Equity Interests issued by it with the proceeds received from the substantially concurrent issue of new shares of its common stock or other common Equity Interests;  

(d)the Borrower may make Accelerated Share Repurchases; and

(e)the Borrower may declare or pay cash dividends to its stockholders and purchase, redeem or otherwise acquire for cash Equity Interests issued by it, provided, that after giving effect to such declaration, payment, purchase, redemption or acquisition, the Borrower is in compliance, on a projected pro forma basis, with Section 7.11 for the subsequent four fiscal quarters.

7.07Change in Nature of Business.  Engage in any material line of business substantially different from those lines of business conducted by the Borrower and its Subsidiaries on the date hereof or any business reasonably related or incidental thereto.

7.08Transactions with Affiliates.  Enter into any transaction of any kind with any Affiliate of the Borrower, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate, provided that the foregoing restriction shall not apply to transactions between or among the Borrower and any of its wholly-owned Subsidiaries or between and among any wholly-owned Subsidiaries.

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7.09Burdensome Agreements.  Enter into any Contractual Obligation (other than this Agreement or any other Loan Document) that (a) limits the ability (i) of any Subsidiary to make Restricted Payments to the Borrower or any Guarantor or to otherwise transfer property to the Borrower or any Guarantor, (ii) of any Subsidiary to Guarantee the Indebtedness of the Borrower or (iii) of any Domestic Subsidiary to pledge Voting Stock of any First Tier Foreign Subsidiary, or (b) that requires the grant of a Lien to secure an obligation of another Person if such Voting Stock should be so pledged.

7.10Use of Proceeds.  Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.

7.11Financial Covenants.  

(a)Consolidated Leverage Ratio.  Permit the Consolidated Leverage Ratio as of the last day of any fiscal quarter of the Borrower to be greater than 1.50 to 1.00.

(b)Consolidated Fixed Charge Coverage Ratio.  Permit the Consolidated Fixed Charge Coverage Ratio as of the last day of any fiscal quarter of the Borrower to be less than 3.00 to 1.00.

7.12Amendment or Modification of Organization Documents.  Amend, modify or change in any manner any term or provision of any Loan Party’s Organization Documents in any manner materially adverse to the interests of any Secured Party.

7.13Accounting Changes.  Make any change in accounting policies or reporting practices, except as required by GAAP or as may be required by applicable Law or, in the case of any change to fiscal quarter or fiscal year end date methodology after the Closing Date, without prompt notice thereof to the Administrative Agent.

7.14Post-Closing Matters.  Fail to satisfy any of the requirements set forth on Schedule 7.14 within the applicable time period specified therein.

ARTICLE VIII.EVENTS OF DEFAULT AND REMEDIES

8.01Events of Default.  Any of the following shall constitute an Event of Default:

(a)Non-Payment.  The Borrower or any other Loan Party fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan or any L/C Obligation, or (ii) within three Business Days after the same becomes due, any interest on any Loan or on any L/C Obligation, or any fee due hereunder, or (iii) within five Business Days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or

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(b)Specific Covenants.  The Borrower fails to perform or observe any term, covenant or agreement contained in any of Section 6.01, 6.02, 6.03, 6.05, 6.10, 6.11, 6.12, 6.14 or Article VII, or any Guarantor fails to perform or observe any similar material term, covenant or agreement contained in the Guaranty; or

(c)Other Defaults.  Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 45 days after the earlier of the date on which (i) a Responsible Officer of any Loan Party becomes aware of such failure and (ii) notice thereof shall have been given to any Loan Party by the Administrative Agent or any Lender; or

(d)Representations and Warranties.  Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect (except, if a qualifier relating to materiality, Material Adverse Effect or a similar concept applies, such representation, warranty, certification or statement of fact was incorrect or misleading in any respect when made or deemed made) when made or deemed made; or

(e)Cross-Default.  (i) Any Loan Party or any Significant Subsidiary (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which any Loan Party or any Significant Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which any Loan Party or any Significant Subsidiary is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by such Loan Party or such Significant Subsidiary as a result thereof is greater than the Threshold Amount; provided, that, an Event of Default under this clause (e) shall not be deemed to have occurred if the applicable event or condition giving rise to such Event of Default has been waived or rescinded in writing by the holders of such Indebtedness within five (5) Business Days of the occurrence of such event or condition; or

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(f)Insolvency Proceedings, Etc.  Any Loan Party or any Significant Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days without being dismissed; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or

(g)Inability to Pay Debts; Attachment.  (i) Any Loan Party or any Significant Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or

(h)Judgments.  Except as set forth on Schedule 8.01(h), there is entered against any Loan Party or any Significant Subsidiary (i) one or more final judgments or orders for the payment of money in an aggregate amount (as to all such judgments or orders) exceeding the Threshold Amount (to the extent not covered by independent third-party insurance or commercial surety as to which the insurer or surety does not dispute coverage), or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 20 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or

(i)ERISA.  (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of the Threshold Amount, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the Threshold Amount; or

(j)Invalidity of Loan Documents.  Any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations (other than contingent indemnification obligations that survive the termination of this Agreement), ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; or

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(k)Lien Priority.  Any Lien purported to be created under any Collateral Document shall cease to be, or shall be asserted by any Loan Party or any other Person not to be, a valid and perfected Lien on any Collateral, with the priority required by this Agreement, except as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents; or

(l)Change of Control.  There occurs any Change of Control with respect to the Borrower.

8.02Remedies Upon Event of Default.  If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:

(a)declare the commitment of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;

(b)declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;

(c)require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the Minimum Collateral Amount with respect thereto); and

(d)exercise on behalf of itself, the Lenders and the L/C Issuer all rights and remedies available to it, the Lenders and the L/C Issuer under the Loan Documents;

provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.

8.03Application of Funds.  After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Secured Obligations shall, subject to the provisions of Sections 2.15 and 2.16, be applied by the Administrative Agent in the following order:

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First, to payment of that portion of the Secured Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;

Second, to payment of that portion of the Secured Obligations constituting fees, indemnities and other amounts (other than principal, interest and Letter of Credit Fees) payable to the Lenders and the L/C Issuer (including fees, charges and disbursements of counsel to the respective Lenders and the L/C Issuer arising under the Loan Documents and amounts payable under Article III), ratably among them in proportion to the respective amounts described in this clause Second payable to them;

Third, to payment of that portion of the Secured Obligations constituting accrued and unpaid Letter of Credit Fees and interest on the Loans, L/C Borrowings and other Secured Obligations arising under the Loan Documents, ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Third payable to them;

Fourth, to payment of that portion of the Secured Obligations constituting unpaid principal of the Loans, L/C Borrowings and Secured Obligations then owing under Secured Hedge Agreements and Secured Cash Management Agreements, ratably among the Lenders, the L/C Issuer, the Hedge Banks and the Cash Management Banks in proportion to the respective amounts described in this clause Fourth held by them;

Fifth, to the Administrative Agent for the account of the L/C Issuer, to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit to the extent not otherwise Cash Collateralized by the Borrower pursuant to Sections 2.03 and 2.15; and

Last, the balance, if any, after all of the Secured Obligations (other than indemnities and other similar contingent obligations surviving the termination of this Agreement for which no claim has been made and which are unknown and not calculable at the time of termination) have been indefeasibly paid in full, to the Borrower or as otherwise required by Law; provided that Excluded Swap Obligations with respect to any Loan Party shall not be paid with amounts received from such Loan Party or its assets, but appropriate adjustments shall be made with respect to payments from other Loan Parties to preserve the allocation to Secured Obligations otherwise set forth above in this Section.

Subject to Sections 2.03(c) and 2.15, amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur.  If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Secured Obligations, if any, in the order set forth above.

Notwithstanding the foregoing, Secured Obligations arising under Secured Cash Management Agreements and Secured Hedge Agreements shall be excluded from the application described above if the Administrative Agent has not received a Secured Party Designation Notice, together with such supporting documentation as the Administrative Agent may request, from the

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applicable Cash Management Bank or Hedge Bank, as the case may be.  Each Cash Management Bank or Hedge Bank not a party to this Agreement that has given the notice contemplated by the preceding sentence shall, by such notice, be deemed to have acknowledged and accepted the appointment of the Administrative Agent pursuant to the terms of Article IX for itself and its Affiliates as if a “Lender” party hereto.

ARTICLE IX.ADMINISTRATIVE AGENT

9.01Appointment and Authority.  (a)  Each of the Lenders (including in its capacities as a potential Cash Management Bank and a potential Hedge Bank) and the L/C Issuer hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.  The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the L/C Issuer, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions.  It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

(b)The Administrative Agent shall also act as the “collateral agent” under the Loan Documents, and each of the Lenders (including in its capacities as a potential Hedge Bank and a potential Cash Management Bank) and the L/C Issuer hereby irrevocably appoints and authorizes the Administrative Agent to act as the agent of such Lender and the L/C Issuer for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Secured Obligations, together with such powers and discretion as are reasonably incidental thereto.  In this connection, the Administrative Agent, as “collateral agent” and any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant to Section 9.05 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents, or for exercising any rights and remedies thereunder at the direction of the Administrative Agent), shall be entitled to the benefits of all provisions of this Article IX and Article X (including Section 10.04(c), as though such co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under the Loan Documents) as if set forth in full herein with respect thereto.

9.02Rights as a Lender.  The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

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9.03Exculpatory Provisions.  The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature.  Without limiting the generality of the foregoing, the Administrative Agent:

(a)shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

(b)shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and

(c)shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment.  The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given in writing to the Administrative Agent by the Borrower, a Lender or the L/C Issuer.

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The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Collateral Documents, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

9.04Reliance by Administrative Agent.  The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.  The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition hereunder to the making of a Loan, or the issuance, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the Administrative Agent may presume that such condition is satisfactory to such Lender or the L/C Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit.  The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

9.05Delegation of Duties.  The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent.  The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties.  The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.  The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.

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9.06Resignation of Administrative Agent.  

(a)The Administrative Agent may at any time give notice of its resignation to the Lenders, the L/C Issuer and the Borrower.  Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States.  If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not be obligated to) on behalf of the Lenders and the L/C Issuer, appoint a successor Administrative Agent meeting the qualifications set forth above.  Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.

(b)If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Required Lenders may, to the extent permitted by applicable law, by notice in writing to the Borrower and such Person remove such Person as Administrative Agent and, in consultation with the Borrower, appoint a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days (or such earlier day as shall be agreed by the Required Lenders) (the “Removal Effective Date”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.

(c)With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (1) the retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the L/C Issuer under any of the Loan Documents, the retiring or removed Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (2) except for any indemnity payments or other amounts then owed to the retiring or removed Administrative Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the L/C Issuer directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above.  Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or removed) Administrative Agent (other than as provided in Section 3.01(g) and other than any rights to indemnity payments or other amounts owed to the retiring or removed Administrative Agent as of the Resignation Effective Date or the Removal Effective Date, as applicable), and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section).  The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.  After the retiring or removed Administrative Agent’s resignation or removal hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its

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sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.

(d)Any resignation by Bank of America as Administrative Agent pursuant to this Section shall also constitute its resignation as L/C Issuer and Swing Line Lender.  If Bank of America resigns as an L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto, including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c).  If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c).  Upon the appointment by the Borrower of a successor L/C Issuer or Swing Line Lender hereunder (which successor shall in all cases be a Lender other than a Defaulting Lender), (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as applicable, (b) the retiring L/C Issuer and Swing Line Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America to effectively assume the obligations of Bank of America  with respect to such Letters of Credit.

(e)A resignation of the Administrative Agent as referred to in this Section 9.06(e) shall not affect the rights and obligations of the Administrative Agent under or in connection with the Parallel Debt and the Administrative Agent shall continue to hold such rights and obligations until the effective assignment thereof by the Administrative Agent to, and assumption thereof by, a successor.  The Administrative Agent will reasonably cooperate in the assumption of its rights and obligations under or in connection with the Parallel Debt by any such successor and will reasonably cooperate in transferring to such successor all rights under the Collateral Documents to the extent governed by the laws of the Netherlands.

9.07Non-Reliance on Administrative Agent and Other Lenders.  Each Lender and the L/C Issuer acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender and the L/C Issuer also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

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9.08No Other Duties, Etc.  Anything herein to the contrary notwithstanding, none of the Sole Bookrunner, the Joint Lead Arrangers, the Syndication Agents or the Documentation Agents listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or the L/C Issuer hereunder.

9.09Administrative Agent May File Proofs of Claim.  In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise

(a)to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Secured Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuer and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer and the Administrative Agent under Sections 2.03(h) and (i), 2.09 and 10.04) allowed in such judicial proceeding; and

(b)to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.09 and 10.04.

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Secured Obligations or the rights of any Lender or the L/C Issuer to authorize the Administrative Agent to vote in respect of the claim of any Lender or the L/C Issuer in any such proceeding.

The Loan Parties and the Secured Parties hereby irrevocably authorize the Administrative Agent, based upon the instruction of the Required Lenders, to credit bid and in such manner purchase (either directly or through one or more acquisition vehicles) all or any portion of the Collateral at any sale thereof conducted under the provisions of the Bankruptcy Code of the United States, including under Section 363 of the Bankruptcy Code of the United States or any similar Laws in any other jurisdictions to which a Loan Party is subject, or credit bid and in such manner purchase (either directly or through one or more acquisition vehicles) all or any portion

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of the Collateral at any other sale or foreclosure conducted by (or with the consent or at the direction of) the Administrative Agent (whether by judicial action or otherwise) in accordance with applicable Law.  In connection with any such credit bid and purchase, the Secured Obligations owed to the Secured Parties shall be entitled to be, and shall be, credit bid on a ratable basis (with Secured Obligations with respect to contingent or unliquidated claims being estimated for such purpose if the fixing or liquidation thereof would not unduly delay the ability of the Administrative Agent to credit bid and purchase at such sale or other disposition of the Collateral and, if such claims cannot be estimated without unduly delaying the ability of the Administrative Agent to credit bid, then such claims shall be disregarded, not credit bid, and not entitled to any interest in the asset or assets purchased by means of such credit bid) and the Secured Parties whose Secured Obligations are credit bid shall be entitled to receive interests (ratably based upon the proportion of their Secured Obligations credit bid in relation to the aggregate amount of Secured Obligations so credit bid) in the asset or assets so purchased (or in the Equity Interests of the acquisition vehicle or vehicles that are used to consummate such purchase).  Except as provided above and otherwise expressly provided for herein or in the other Collateral Documents, the Administrative Agent will not execute and deliver a release of any Lien on any Collateral.  Upon request by the Administrative Agent or the Borrower at any time, the Secured Parties will confirm in writing the Administrative Agent’s authority to release any such Liens on particular types or items of Collateral pursuant to this Section 9.09.

9.10Collateral and Guaranty Matters.  Each of the Lenders (including in its capacities as a potential Cash Management Bank and a potential Hedge Bank) and the L/C Issuer irrevocably authorize the Administrative Agent, at its option and in its discretion,

(a)to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (i) upon the Facility Termination Date, (ii) that is sold or otherwise disposed of or to be sold or otherwise disposed of as part of or in connection with any sale or other disposition permitted hereunder or under any other Loan Document, or (iii) if approved, authorized or ratified in writing in accordance with Section 10.01;

(b)to subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 7.01(x); and

(c)to release any Guarantor from its obligations under the Guaranty if such Person ceases to be a Material Subsidiary or a Subsidiary as a result of a transaction permitted under the Loan Documents.

Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty pursuant to this Section 9.10.  In each case as specified in this Section 9.10, the Administrative Agent will, at the Borrower’s expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Collateral Documents or to subordinate its interest in such item, or to release such Guarantor from its

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obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.10.

The Administrative Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent’s Lien thereon, or any certificate prepared by any Loan Party in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.

9.11Secured Cash Management Agreements and Secured Hedge Agreements.  Except as otherwise expressly set forth herein, no Cash Management Bank or Hedge Bank that obtains the benefit of the provisions of Section 8.03, the Guaranty or any Collateral by virtue of the provisions hereof or of the Guaranty or any Collateral Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) (or to notice of or to consent to any amendment, waiver or modification of the provisions hereof or of the Guaranty or any Collateral Document) other than in its capacity as a Lender, the L/C Issuer or the Administrative Agent and, in such case, only to the extent expressly provided in the Loan Documents.  Notwithstanding any other provision of this Article IX to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Secured Obligations arising under Secured Cash Management Agreements and Secured Hedge Agreements unless the Administrative Agent has received a Secured Party Designation Notice of such Secured Obligations, together with such supporting documentation as the Administrative Agent may request, from the applicable Cash Management Bank or Hedge Bank, as the case may be.  The Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Secured Obligations arising under Secured Cash Management Agreements and Secured Hedge Agreements, in the case of a Facility Termination Date.

ARTICLE X.MISCELLANEOUS

10.01Amendments, Etc.  No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that (x) the Administrative Agent and the Borrower may, with the consent of the other, amend, modify or supplement this Agreement and any other Loan Document to cure any ambiguity, typographical error, defect or inconsistency if such amendment, modification or supplement does not adversely affect the rights of any Agent, any Lender or any L/C Issuer, and (y) no such amendment, waiver or consent shall:

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(a)(i) waive any condition set forth in Section 4.01(a) without the written consent of each Lender; or (ii) waive any condition set forth in Section 4.02 as to any Credit Extension under the Revolving Credit Facility without the written consent of the Required Revolving Lenders;

(b)extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender whose Commitment is being extended or increased (it being understood and agreed that a waiver of any condition precedent set forth in Section 4.02 or of any Default is not considered an extension or increase in Commitments of any Lender);

(c)postpone any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender entitled to receive such payment;

(d)reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (iv) of the second proviso to this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender entitled to receive such payment; provided, however, that only the consent of the Required Lenders shall be necessary (i) to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest or Letter of Credit Fees at the Default Rate or (ii) to amend any financial covenant hereunder (or any defined term used therein) even if the effect of such amendment would be to reduce the rate of interest on any Loan or L/C Borrowing or to reduce any fee payable hereunder;

(e)change Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender;

(f)change any provision of this Section or the definition of “Required Lenders”, “Required Revolving Lenders” or “Required Term Loan Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender;

(g)except in connection with a Permitted Disposition, release all or substantially all of the Collateral in any transaction or series of transactions without the written consent of each Lender;

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(h)except in connection with a Permitted Disposition or a transaction permitted by Section 7.04, release a Guarantor from the Guaranty or all or substantially all of the value of the Guaranty without the written consent of each Lender, except to the extent the release of any Guarantor is permitted pursuant to Section 9.10 (in which case such release may be made by the Administrative Agent acting alone); or

(i)impose any greater restriction on the ability of any Lender under a Facility to assign any of its rights or obligations hereunder without the written consent of the Required Facility Lenders under such Facility;

and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.  Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender or all Lenders or each affected Lender under a Facility may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender or all Lenders or each affected Lender under a Facility that by its terms affects any Defaulting Lender disproportionately adversely relative to other affected Lenders shall require the consent of such Defaulting Lender.

10.02Notices; Effectiveness; Electronic Communication.    

(a)Notices Generally.  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or electronic mail as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

(i)if to the Borrower, the Administrative Agent, the L/C Issuer or the Swing Line Lender, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and

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(ii)if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire (including, as appropriate, notices delivered solely to the Person designated by a Lender on its Administrative Questionnaire then in effect for the delivery of notices that may contain material non-public information relating to the Borrower).

Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient).  Notices and other communications delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

(b)Electronic Communications.  Notices and other communications to the Lenders and the L/C Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the L/C Issuer pursuant to Article II if such Lender or the L/C Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication.  The Administrative Agent, the Swing Line Lender, the L/C Issuer or the Borrower may each, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii), if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice, email or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

(c)The Platform.  THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.”  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM.  In no event shall the Administrative

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Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower, any Lender, the L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrower’s, any Loan Party’s or the Administrative Agent’s transmission of Borrower Materials through the Internet.

(d)Change of Address, Etc.  Each of the Borrower, the Administrative Agent, the L/C Issuer and the Swing Line Lender may change its address, facsimile or telephone number for notices and other communications hereunder by notice to the other parties hereto.  Each other Lender may change its address, facsimile or telephone number for notices and other communications hereunder by notice to the Borrower, the Administrative Agent, the L/C Issuer and the Swing Line Lender.  In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, facsimile number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.  Furthermore, each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable Law, including United States Federal and state securities Laws, to make reference to Borrower Materials that are not made available through the “Public Side Information” portion of the Platform and that may contain material non-public information with respect to the Borrower or its securities for purposes of United States Federal or state securities laws.

(e)Reliance by Administrative Agent, L/C Issuer and Lenders.  The Administrative Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including telephonic or electronic Loan Notices, Letter of Credit Applications and Swing Line Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Borrower shall indemnify the Administrative Agent, the L/C Issuer, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower.  All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

10.03No Waiver; Cumulative Remedies; Enforcement.  No failure by any Lender, the L/C Issuer or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

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Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 8.02 for the benefit of all the Lenders and the L/C Issuer; provided, however, that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) the L/C Issuer or the Swing Line Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as L/C Issuer or Swing Line Lender, as the case may be) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff rights in accordance with Section 10.08 (subject to the terms of Section 2.13), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Debtor Relief Law; and provided, further, that if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 8.02 and (ii) in addition to the matters set forth in clauses (b), (c) and (d) of the preceding proviso and subject to Section 2.13, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.

10.04Expenses; Indemnity; Damage Waiver.     

(a)Costs and Expenses.  The Borrower shall pay (i) all reasonable documented out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable documented fees, charges and disbursements of counsel for the Administrative Agent), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable documented out-of-pocket expenses incurred by the L/C Issuer in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all documented out-of-pocket expenses incurred by the Administrative Agent, any Lender or the L/C Issuer (including the fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or the L/C Issuer), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

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(b)Indemnification by the Borrower.  The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the L/C Issuer, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the reasonable fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any Person (including the Borrower or any other Loan Party) other than such Indemnitee and its Related Parties arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents (including in respect of any matters addressed in Section 3.01), (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.  Without limiting the provisions of Section 3.01(c), this Section 10.04(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

(c)Reimbursement by Lenders.  To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the L/C Issuer, the Swing Line Lender or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the L/C Issuer, the Swing Line Lender or such Related Party, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought based on each Lender’s share of the Total Credit Exposure at such time) of such unpaid amount (including any such unpaid amount in respect of a claim asserted by such Lender), such payment to be made severally among them based on such Lenders’ Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought), provided, further that, the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent), the L/C Issuer or the Swing Line Lender in its capacity as such, or against any Related

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Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent), the L/C Issuer or the Swing Line Lender in connection with such capacity.  The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.12(d).

(d)Waiver of Consequential Damages, Etc.  To the fullest extent permitted by applicable law, the Borrower shall not assert, and hereby waives, and acknowledges that no other Person shall have, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.  No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

(e)Payments.  All amounts due under this Section shall be payable not later than ten Business Days after demand therefor.

(f)Survival.  The agreements in this Section and the indemnity provisions of Section 10.02(e) shall survive the resignation of the Administrative Agent, the L/C Issuer and the Swing Line Lender, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

10.05Payments Set Aside.  To the extent that any payment by or on behalf of the Borrower is made to the Administrative Agent, the L/C Issuer or any Lender, or the Administrative Agent, the L/C Issuer or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent, the L/C Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.  The obligations of the Lenders and the L/C Issuer under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

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10.06Successors and Assigns.    

(a)Successors and Assigns Generally.The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the L/C Issuer and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)Assignments by Lenders.  Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this subsection (b), participations in L/C Obligations and in Swing Line Loans) at the time owing to it); provided that (in each case with respect to any Facility) any such assignment shall be subject to the following conditions:

(i)Minimum Amounts.

(A)in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment under any Facility and/or the Loans at the time owing to it with respect to any Facility or contemporaneous assignments to related Approved Funds that equal at least the amount specified in paragraph (b)(i)(B) of this Section in the aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

(B)in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $10,000,000, in the case of any assignment in respect of the Revolving Credit Facility, or $1,000,000 in the case of any assignment in respect of the Term Loan Facility, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).

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(ii)Proportionate Amounts.  Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned, except that this clause (ii) shall not apply to the Swing Line Lender’s rights and obligations in respect of Swing Line Loans;

(iii)Required Consents.  No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:

(A)the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (1) an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;

(B)the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of (i) any Revolving Credit Commitment if such assignment is to a Person that is not a Revolving Credit Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender or (ii) any Term Loan to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund; and

(C)the consent of the L/C Issuer and the Swing Line Lender shall be required for any assignment in respect of the Revolving Credit Facility (such consents not to be unreasonably withheld or delayed).

(iv)Assignment and Assumption.  The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment.  The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

(v)No Assignment to Certain Persons.  No such assignment shall be made (A) to the Borrower or any of the Borrower’s Affiliates or Subsidiaries, (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B), or (C) to a natural Person.  

(vi)Certain Additional Payments.  In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and

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assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, the L/C Issuer or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata share of all Loans and participations in Letters of Credit and Swing Line Loans in accordance with its Applicable Percentage.  Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.  Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender.  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.

(c)Register.  The Administrative Agent, acting solely for this purpose as an agent of the Borrower (and such agency being solely for tax purposes), shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it (or the equivalent thereof in electronic form) and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

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(d)Participations.  Any Lender may at any time, without the consent of, or notice to, the Borrower, the Administrative Agent, the L/C Issuer or the Swing Line Lender, sell participations to any Person (other than a natural Person, a Defaulting Lender or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Lenders and the L/C Issuer shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 10.04(c) without regard to the existence of any participation.

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any  provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant.  The Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section (it being understood that the documentation required under Section 3.01(e) shall be delivered to the Lender who sells the participation) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Sections 3.06 and 10.13 as if it were an assignee under paragraph (b) of this Section and (B) shall not be entitled to receive any greater payment under Sections 3.01 or 3.04, with respect to any participation, than the Lender from whom it acquired the applicable participation would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation.  Each Lender that sells a participation agrees, at the Borrower's request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 3.06 with respect to any Participant.  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.13 as though it were a Lender.  Each Lender that sells a participation shall, acting solely for this purpose as a nonfiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant's interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.  The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this

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Agreement notwithstanding any notice to the contrary.  For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

(e)Certain Pledges.  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

(f)Resignation as L/C Issuer or Swing Line Lender after Assignment.  Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Commitment and Loans pursuant to subsection (b) above, Bank of America may, (i) upon 30 days’ notice to the Borrower and the Lenders, resign as L/C Issuer and/or (ii) upon 30 days’ notice to the Borrower, resign as Swing Line Lender.  In the event of any such resignation as L/C Issuer or Swing Line Lender, the Borrower shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of Bank of America as L/C Issuer or Swing Line Lender, as the case may be.  If Bank of America resigns as L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).  If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c).  Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case may be, and (b) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America to effectively assume the obligations of Bank of America with respect to such Letters of Credit.

10.07Treatment of Certain Information; Confidentiality.  Each of the Administrative Agent, the Lenders and the L/C Issuer agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any

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other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement or any Eligible Assignee invited to be a Lender pursuant to Section 2.14(a)(iii) or 2.14(b)(iii) or (ii) any actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to the Borrower and its obligations, this Agreement or payments hereunder, (g) on a confidential basis to (i) any rating agency in connection with rating the Borrower or its Subsidiaries or the credit facilities provided hereunder or (ii) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers or other market identifiers with respect to the credit facilities provided hereunder, (h) with the consent of the Borrower or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, any Lender, the L/C Issuer or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower.  For purposes of this Section, “Information” means all information received from the Borrower or any Subsidiary relating to the Borrower or any Subsidiary or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the L/C Issuer on a nonconfidential basis prior to disclosure by the Borrower or any Subsidiary, provided that, in the case of information received from the Borrower or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

Each of the Administrative Agent, the Lenders and the L/C Issuer acknowledges that (a) the Information may include material non-public information concerning the Borrower or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including United States Federal and state securities Laws.

10.08Right of Setoff.  If an Event of Default shall have occurred and be continuing, each Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the L/C Issuer or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender or the L/C Issuer or their respective Affiliates, irrespective of whether or not such Lender, L/C Issuer or Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch, office or Affiliate of such Lender or the L/C Issuer different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness; provided, that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.16 and, pending such

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payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the L/C Issuer and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Secured Obligations owing to such Defaulting Lender as to which it exercised such right of setoff.  The rights of each Lender, the L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the L/C Issuer or their respective Affiliates may have.  Each Lender and the L/C Issuer agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.  

10.09Interest Rate Limitation.  Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”).  If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower.  In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

10.10Counterparts; Integration; Effectiveness.  This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement, the other Loan Documents, and any separate letter agreements with respect to fees payable to the Administrative Agent or the L/C Issuer, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto.  Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic imaging means (e.g. “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart of this Agreement.

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10.11Survival of Representations and Warranties.  All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

10.12Severability.  If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  Without limiting the foregoing provisions of this Section 10.12, if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent, the L/C Issuer or the Swing Line Lender, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.

10.13Replacement of Lenders.  If the Borrower is entitled to replace a Lender pursuant to the provisions of Section 3.06 or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights (other than its existing rights to payments pursuant to Sections 3.01 and 3.04) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

(a)the Borrower shall have paid to the Administrative Agent the assignment fee (if any) specified in Section 10.06(b);

(b)such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

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(c)in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter;

(d)such assignment does not conflict with applicable Laws; and

(e)in the case of an assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

10.14Governing Law; Jurisdiction; Etc.    

(a)GOVERNING LAW.  This Agreement and the other Loan Documents and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Loan Document (except, as to any other Loan Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of NEW yORK, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATION LAW OF THE STATE OF NEW YORk.

(b)SUBMISSION TO JURISDICTION.  THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Administrative Agent, any Lender, the l/c Issuer, or any Related Party of the foregoing in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION, LITIGATION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT,

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ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(c)WAIVER OF VENUE.  THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(d)SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

10.15Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (b) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

10.16No Advisory or Fiduciary Responsibility.  In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), the Borrower and each other Loan Party acknowledges and agrees, and acknowledges its Affiliates’ understanding, that: (i) (A) the arranging and other services regarding this Agreement provided by the Administrative Agent, the Arranger, the other Lead Arrangers and the Lenders are arm’s-length commercial transactions between the Borrower, each other Loan Party and their respective Affiliates, on the one hand, and the Administrative Agent, the Arranger, the other Lead Arrangers and the Lenders, on the other hand, (B) each of the Borrower and the other Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) the

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Borrower and each other Loan Party is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) the Administrative Agent, the Arranger, each other Lead Arranger and each Lender is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Borrower, any other Loan Party or any of their respective Affiliates, or any other Person and (B) neither the Administrative Agent, the Arranger, any other Lead Arranger nor any Lender has any obligation to the Borrower, any other Loan Party or any of their respective Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent, the Arranger, the other Lead Arrangers and the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower, the other Loan Parties and their respective Affiliates, and neither the Administrative Agent, the Arranger, any other Lead Arranger nor any Lender has any obligation to disclose any of such interests to the Borrower, any other Loan Party or any of their respective Affiliates.  To the fullest extent permitted by law, each of the Borrower and each other Loan Party hereby waives and releases any claims that it may have against the Administrative Agent, the Arranger, any other Lead Arranger or any Lender with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

10.17Electronic Execution of Assignments and Certain Other Documents.  The words “execute,” “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption or in any amendment or other modification hereof (including waivers and consents) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

10.18USA PATRIOT Act.  Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act.  The Borrower shall, promptly following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act.

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10.19Parallel Debt.  (a) For the purpose of ensuring the validity and enforceability of the rights of pledge governed by the laws of the Netherlands, the Borrower hereby irrevocably and unconditionally undertakes to pay to the Administrative Agent an amount equal to the aggregate amount payable by it in respect of the Corresponding Obligations as they may exist from time to time.  The payment undertaking the Borrower to the Administrative Agent under this Section 10.19(a) is hereinafter to be referred to as the “Parallel Debt”.

(b)The Parallel Debt will be payable in the currency or currencies of the Corresponding Obligations and will become due and payable as and when and to the extent one or more of the Corresponding Obligations become due and payable.  An Event of Default in respect of any of the Corresponding Obligations shall constitute a default (verzuim) within the meaning of section 3:248 of the Netherlands Civil Code with respect to the Parallel Debt without any notice being required.

(c)Each of the parties to this Agreement hereby acknowledges that (i) the Parallel Debt constitutes an undertaking, obligation and liability to the Administrative Agent which is separate and independent from, and without prejudice to, the Corresponding Obligations and (ii) the Parallel Debt represents the Administrative Agent’s own separate and independent claim to receive payment of the Parallel Debt from the Borrower, it being understood, in each case, that (A) the amount which may become payable by the Borrower as the Parallel Debt shall never exceed the total of the amounts which are payable under or in connection with the Corresponding Obligations, and (B) at no time shall the combined, aggregate outstanding amount of the Parallel Debt plus the Corresponding Obligations plus the Secured Obligations ever exceed, or, for any purpose whatsoever, be deemed to exceed, the an amount equal to aggregate outstanding amount of the Secured Obligations.

(d)To the extent the Administrative Agent receives any amount in payment of the Parallel Debt, the Administrative Agent shall distribute that amount among the Secured Parties that are creditors of the Corresponding Obligations in accordance with Section 8.03.  Each of the parties to this Agreement hereby agrees that upon receipt by the Administrative Agent of any amount in payment of the Parallel Debt (a “Received Amount”), the Corresponding Obligations owing to the Secured Parties shall be automatically and immediately reduced, pro rata in respect of each Secured Party individually, by amounts totaling an amount (a “Deductible Amount”) exactly equal to the Received Amount in the manner as if the Deductible Amount were actually received by the Secured Parties, or the Administrative Agent on behalf of the Secured Parties in accordance with the terms of this Agreement, as a payment of the Corresponding Obligations owed by the Borrower on the date of receipt by such Secured Party of the Received Amount.  

(e)For the purpose of this Section 10.19 but subject to clause (d) above, the Administrative Agent acts in its own name and on behalf of itself and not as agent, representative or trustee of any other Secured Party.  

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10.20Keepwell.  Each Loan Party that is a Qualified ECP Guarantor at the time the Guaranty or the grant of the security interest under the Loan Documents, in each case, by any Specified Loan Party, becomes effective with respect to any Swap Obligation, hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support to each Specified Loan Party with respect to such Swap Obligation as may be needed by such Specified Loan Party from time to time to honor all of its obligations under its Guaranty and the other Loan Documents in respect of such Swap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP Guarantor’s obligations and undertakings under this Section 10.20 voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount).  The obligations and undertakings of each Qualified ECP Guarantor under this Section shall remain in full force and effect until the Facility Termination Date. Each Qualified ECP Guarantor intends this Section to constitute, and this Section shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of, each Specified Loan Party for all purposes of the Commodity Exchange Act.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

VARIAN MEDICAL SYSTEMS, INC.
By:	/s/ Franco N. Palmoba
Name:		Franco N. Palomba
Title:		Corporate Senior Vice President,
		Finance and Treasurer

       

CREDIT AGREEMENT

Signature Page

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

bank of america, n.a., as Administrative Agent
By:	/s/ Dora A. Brown
Name:		Dora A. Brown
Title:		Vice President

CREDIT AGREEMENT

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

bank of america, n.a., as a Lender, L/C Issuer and Swing Line Lender
By:	/s/ John C. Plecque
Name:		John C. Plecque
Title:		Senior Vice President

CREDIT AGREEMENT

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender
By:	/s/ Matt Jurgens
Name:		Matt Jurgens
Title:		Vice President

CREDIT AGREEMENT

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

SUMITOMO MITSUI BANKING CORPORATION, as a Lender
By:	/s/ David W. Kee
Name:		David W. Kee
Title:		Managing Director

CREDIT AGREEMENT

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

JPMORGAN CHASE BANK, N.A. , as a Lender and L/C Issuer
By:	/s/ Dawn L. LeeLum
Name:		Dawn L. LeeLum
Title:		Executive Director

CREDIT AGREEMENT

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

MORGAN STANLEY BANK, N.A., as a Lender
By:	/s/ Kelly Chin
Name:		Kelly Chin
Title:		Authorized Signatory

CREDIT AGREEMENT

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

SCHEDULE 2.01

COMMITMENTS
AND APPLICABLE PERCENTAGES

Lender	Revolving Credit Commitment		Applicable Revolving Credit Percentage			Term Loan Commitment		Applicable Percentage of Term Loan Commitment
Bank of America, N.A.	$	90,000,000.00		30.000000000	%	$	200,000,000.00		40.000000000	%
Sumitomo Mitsui Banking Corporation	$	70,000,000.00		23.333333333	%	$	125,000,000.00		25.000000000	%
Wells Fargo Bank, National Association	$	70,000,000.00		23.333333333	%	$	125,000,000.00		25.000000000	%
JPMorgan Chase Bank, N.A.	$	35,000,000.00		11.666666667	%	$	50,000,000.00		10.000000000	%
Morgan Stanley Bank, N.A.	$	35,000,000.00		11.666666667	%		—		—
Total	$	300,000,000.00		100.000000000	%	$	500,000,000.00		100.000000000	%

       

Schedule 2.01

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SCHEDULE 5.05

SUPPLEMENT TO FINANCIAL STATEMENTS

Please see the Borrower’s Annual Report on Form 10-K for the fiscal year ended September 28, 2012 (“FY12 10-K”) and its Quarterly Report on Form 10-Q for the quarter ended June 28, 2013 (“Q3 FY13 10-Q”).  Specifically, reference is made to Part I, Item 3 (Legal Proceedings) and Part II, Item 8 (Financial Statements and Supplementary Data) in the FY12 10-K and Part I, Item 1 (Unaudited Financial Statements) and Part II, Item 1 (Legal Proceedings) in the Q3 FY13 10-Q.

Please also see Schedule 5.06.

       

Schedule 5.05

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SCHEDULE 5.06

LITIGATION

University of Pittsburgh of the Commonwealth System of Higher Education d/b/a University of Pittsburgh v. Varian Medical Systems, Inc.; Civil Action No. 2:08-cv-1307; United States District Court Western District of Pennsylvania; Judge Arthur A. Schwab

The University of Pittsburgh has sued the Borrower for patent infringement relating to the Borrower’s Real-time Position Management™ (“RPM”) technology.  On or about December 21, 2011, the trial court presiding over the litigation entered a summary judgment order in the case finding that the Borrower’s RPM technology was covered by some of the claims of the subject patent.  Subsequently, in early 2012, in the proceedings at the trial court on the remaining issues in litigation, it was found (i) that the Borrower willfully infringed the subject patent, (ii) that the Borrower is liable for approximately $40 million in actual damages and (iii) that the subject patent was valid. The trial court has ordered the Borrower to pay a total of approximately $102 million, comprised of approximately $80 million in enhanced damages (a doubling of the damages amount), pre-judgment interest to the damage award of approximately $13 million and approximately $9 million in attorneys’ fees. The trial court also ordered the Borrower to pay ongoing royalties at the rates found by the jury for sales after the date of judgment, and post judgment interest pursuant to 28 U.S.C. Section 1961. The Borrower intends to appeal the findings against it.  If the Borrower’s appeal is not successful, ongoing royalties, assuming future U.S. sales and manufacturing of the infringing product remain approximately at the 2012 levels, could be up to $5 million per year through September 2016, the expiration of the University of Pittsburgh’s patent.   

   

Schedule 5.06

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SCHEDULE 5.09

REGULATORY MATTERS

Borrower has concluded that such Environmental Laws and claims and FDA Regulations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, except as specifically disclosed in the FY12 10-K and the Q3 FY13 10-Q.  Specifically, reference is made to Part I, Item1 (Business – Government Regulation; Environmental Matters), Item 1A (Risk Factors), Item 3 (Legal Proceedings) and Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contingencies), and Part II, Item 8 (Financial Statements and Supplementary Data, Note 10) in the FY12 10-K, as well as Part I, Item 1 (Unaudited Financial Statements, Note 9) and Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contingencies) and Part II, Item 1 (Legal Proceedings) and Item 1A (Risk Factors) in the Q3 FY13 10-Q.

   

Schedule 5.09

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SCHEDULE 5.13

SUBSIDIARIES; OTHER EQUITY INVESTMENTS

Part (a)

Subsidiaries	Material Subsidiary?	Significant Subsidiary?	Exempt Subsidiary?
Centella Therapeutics, Inc.5	No	No	No
Mansfield Insurance Company7	No	No	No
Page Mill Corporation7	No	No	No
Varian BioSynergy, Inc.7	No	No	No
Varian FSC B.V.(inactive)7	No	No	Yes
Varian Medical Systems K.K.7	No	Yes	Yes
Varian Medical Systems (China) Co., Ltd.10	No	Yes	Yes
Varian Medical Systems (RUS) LLC11	No	No	Yes
Varian Medical Systems Australasia Pty Ltd.7	No	Yes	Yes
Varian Medical Systems Belgium N.V.13	No	Yes	Yes
Varian Medical Systems Brasil Limitada14	No	No	Yes
Varian Medical Systems Canada Holdings, Inc.7	No	No	No
Varian Medical Systems Canada, Inc.4	No	No	Yes
Varian Medical Systems Deutschland G.m.b.H.2	No	Yes	Yes
Varian Medical Systems Deutschland Holdings GmbH11	No	Yes	Yes
Varian Medical Systems Finland OY11	No	Yes	Yes
Varian Medical Systems France SARL8	No	Yes	Yes
Varian Medical Systems Gesellschaft m.b.H.1	No	No	Yes
Varian Medical Systems Haan G.m.b.H.2	No	Yes	Yes
Varian Medical Systems Hungary, Kft7	No	No	Yes
Varian Medical Systems Iberica S.L.7	No	Yes	Yes
Varian Medical Systems Imaging Laboratory GmbH11	No	Yes	Yes
Varian Medical Systems India Pvt. Ltd.7	No	No	No
Varian Medical Systems India Software Pvt. Ltd.15	No	No	Yes
Varian Medical Systems International (India) PVT. Ltd.16	No	Yes	Yes
Varian Medical Systems International A.G.1	No	Yes	Yes
Varian Medical Systems International Holdings, Inc.7	No	Yes	No
Varian Medical Systems Italia S.p.A.8	No	Yes	Yes
Varian Medical Systems Korea, Inc. 7	No	No	No
Varian Medical Systems Latin America, Ltd.7	No	No	No
Varian Medical Systems Mauritius Ltd.11	No	Yes	Yes
Varian Medical Systems Nederland B.V.12	No	Yes	Yes
Varian Medical Systems Nederland Finance B.V.	No	No	Yes
Varian Medical Systems Nederland Holdings B.V.7	No	Yes	Yes
Varian Medical Systems Pacific, Inc.7	No	No	No
Varian Medical Systems Particle Therapy GmbH2	No	Yes	Yes
Varian Medical Systems Scandinavia AS8	No	Yes	Yes
Varian Medical Systems Trading (Beijing) Co., Ltd10	No	Yes	Yes
Varian Medical Systems UK Holdings Limited8	No	Yes	Yes

Schedule 5.13

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Subsidiaries	Material Subsidiary?	Significant Subsidiary?	Exempt Subsidiary?
Varian Medical Systems UK Ltd.3	No	Yes	Yes
Varian Philippines, Ltd. (inactive)7	No	No	No
VivaRay, Inc.7	No	No	No

Footnotes:

1 Owned by Varian Medical Systems Nederland B.V.

2   Owned by Varian Medical Systems Deutschland Holdings GmbH

3   Owned by Varian Medical Systems UK Holdings Limited

4 Owned by Varian Medical Systems Canada Holdings, Inc.

5   Owned by Varian Biosynergy, Inc.

6   Owned by Varian Medical Systems India Pvt. Ltd.

7 Owned by Varian Medical Systems, Inc.

8 Owned by Varian Medical Systems International Holdings, Inc.

9 Owned by Varian Medical Systems Latin America, Ltd

10 Owned by Varian Medical Systems Mauritius, Ltd

11 Owned by Varian Medical Systems International AG

12 Owned by Varian Medical Systems Nederland Holdings B.V.

13 Majority owned by Varian Medical Systems, Inc. and minority owned by Varian BioSynergy, Inc.

14 Majority owned by Varian Medical Systems International Holdings, Inc. and minority owned by Varian Medical Systems Latin America Ltd.

15 Minority owned by Varian Medical Systems, Inc. and majority owned by Varian Medical Systems India Pvt Ltd.

16 Majority owned by Varian Medical Systems, Inc. and minority owned by Varian Medical Systems India Pvt Ltd.

       

Schedule 5.13

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Part (b)

Other Equity Investments		Equity Ownership Amounts
dpiX		see below
	(description is set forth in Footnote 6 to Notes to Consolidated Financial Statements in Borrower’s Q3 FY13 10-Q and duplicated below)
Cryoelectra Gesellschaft fur Kryoelektrische Produkte mbH		USD23,140
	(contract manufacturing operation acquired as a part of the ACCEL Instruments GmbH acquisition)
Brainlab AG		USD7,784,362
(direct investment in business partner)
Augmenix, Inc.		USD13,596,971
(direct investment)

* Description of dpiX investment, as set forth in Footnote 6 to Notes to Consolidated Financial Statements in Borrower’s Q3 FY13 10-Q:

The Borrower has a 40% ownership interest in dpiX Holding LLC (“dpiX Holding”), a two-member consortium which has a 100% ownership interest in dpiX LLC (“dpiX”), a supplier of amorphous silicon based thin-film transistor arrays (“flat panels”) for the Borrower’s (consisting collectively of the Borrower and its subsidiaries) X-ray Products’ digital image detectors and for its Oncology Systems’ On-Board Imager® (“OBI”) and PortalVisionTM imaging products.  In accordance with the dpiX Holding agreement, net losses were to be allocated to the members, in succession, until their capital accounts equaled zero, then to the members in accordance with their ownership interests.  The dpiX Holding agreement also provided that net profits were initially to be allocated to the members, in succession, until their capital accounts equaled the net losses previously allocated, then to the members in accordance with their ownership interests.

The equity investment in dpiX Holding is accounted for under the equity method of accounting.  When the Borrower recognizes its share of net profits or losses of dpiX Holding, profits or losses in inventory purchased from dpiX are eliminated until realized by the Borrower.  The Borrower recorded income on the equity investment in dpiX Holding of $3.0 million in the three months ended June 28, 2013 and income of $1.7 million in the three months ended June 29, 2012.  The Borrower recorded income on the equity investment in dpiX Holding of $2.5 million in the nine months ended June 28, 2013 and income of $1.2 million in the nine months ended June 29, 2012.  Income and loss on the equity investment in dpiX Holding are included in “Selling, general and administrative” expenses in the Condensed Consolidated Statements of Earnings.  The carrying value of the equity investment in dpiX Holding, which was included in “Other assets” in the Condensed Consolidated Balance Sheets, was $49.7 million at June 28, 2013 and $45.5 million at September 28, 2012.

The Borrower entered into a loan agreement with dpiX in February 2009, which was amended in December 2011.  Under this loan agreement, the Borrower loaned $8.8 million to dpiX.  The loan bore interest at prime plus 1% per annum. The principal amount, together with accrued interest, was repaid in two installments through July 2012.  

Schedule 5.13

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During the three months ended June 28, 2013 and June 29, 2012, the Company purchased glass transistor arrays from dpiX totaling approximately $6.5 million and $2.9 million, respectively.  Glass transistor arrays purchased from dpiX totaled approximately $22.6 million for the nine months ended June 28, 2013 and $10.9 million for the nine months ended June 29, 2012.  These purchases of glass transistor arrays are included as a component of “Inventory” in the Condensed Consolidated Balance Sheets and “Cost of revenues—product” in the Condensed Consolidated Statements of Earnings for these periods.

   

Schedule 5.13

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SCHEDULE 5.20

INTELLECTUAL PROPERTY MATTERS

See Schedule 5.06.

   

Schedule 5.20

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SCHEDULE 7.01

EXISTING LIENS

Debtor	Secured Party	Jurisdiction	Collateral Description
Varian Medical Systems, Inc.	Air Liquide Industrial U.S. LP	Delaware Secretary of State	Specified equipment.
Varian Medical Systems, Inc.	Air Liquide Industrial U.S. LP	Delaware Secretary of State	Specified equipment.
Varian Medical Systems, Inc.	GFC Medical Systems, Inc.	Delaware Secretary of State	Specified copy equipment.
Varian Medical Systems, Inc.	GreatAmerica Leasing Corporation	Delaware Secretary of State	Leased copy equipment
Varian Medical Systems, Inc.	Air Liquide Industrial U.S. LP	Delaware Secretary of State	Specified equipment.
Varian Medical Systems, Inc.	Makino Inc.	Delaware Secretary of State	Specified equipment.
Varian Medical Systems, Inc.	Citibank Europe Plc	Delaware Secretary of State	Accounts receivable owing to Debtor by Koninklijke Philips Electronics N.V. and its subsidiaries or affiliates under an Accounts Receivable Purchase Agreement between the Debtor and the Secured Party

· A first priority right of pledge (pandrecht eerste in rang) in favor of Bank of America, N.A. over 117 ordinary registered shares in the capital of Varian Medical Systems Nederland Holdings B.V. created pursuant to a notarial deed of pledge over registered shares dated July 26, 2012, which pledge is being released in connection with the payoff of the obligations of the Borrower under the Existing Credit Agreement.

   

Schedule 7.01

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SCHEDULE 7.03

EXISTING GUARANTEES

None.

   

Schedule 7.03

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SCHEDULE 7.14

POST-CLOSING DELIVERIES

The Borrower shall deliver, or cause to be delivered, to the Administrative Agent each of the following documents, each in form and substance satisfactory to the Administrative Agent, as soon as possible but in any event within ten (10) Business Days after the Closing Date (or such longer period as the Administrative Agent may otherwise agree in its sole discretion):

1. A share pledge agreement and other such documents necessary to create a valid first priority right of pledge (pandrecht eerste in rang) over the outstanding Equity Interests in Varian Medical Systems Nederland Holdings B.V., as required by the Credit Agreement.

2.  Evidence of perfection in connection with such Netherlands pledge agreement referenced in item 1 above.

3. An opinion of the Borrower’s Netherlands counsel relating to items 1 and 2 above, in form and substance reasonably satisfactory to the Administrative Agent.

   

Schedule 7.14

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SCHEDULE 8.01(h)

EXCEPTION TO JUDGMENT EVENT OF DEFAULT

Notwithstanding anything to the contrary in Section 8.01(h) of the Credit Agreement, in the event that a final judgment is entered against the Borrower in connection with the litigation matter disclosed on Schedule 5.06, an Event of Default shall occur under the Credit Agreement only if each of the following occur, regardless of whether enforcement proceedings are commenced by a creditor upon such judgment or order:

a. such judgment is a final (i.e., not interlocutory) order of the United States District Court for the Western District of Pennsylvania and requires the payment of money by the Borrower in an aggregate amount in excess of Eighty Million Dollars ($80,000,000), exclusive of any award for attorneys’ fees, interest or costs, and exclusive of any post judgment interest or ongoing royalties incurred after the date of judgment; and

b. either (i) there is a period of sixty (60) consecutive days after entry thereof during which such judgment is not vacated, satisfied, discharged or execution thereof stayed, bonded pending appeal or settled or compromised on terms more favorable to the Borrower than the terms of the judgment, or (ii) there is a period of sixty (60) consecutive days after the expiration of any such stay or termination of such bond, or the issuance of a mandate following an appeal of such judgment, during which the judgment is not vacated, satisfied or discharged, or settled or compromised on terms more favorable to the Borrower than the terms of the judgment.

   

Schedule 8.01(h)

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SCHEDULE 10.02

NOTICE ADDRESSES AND LENDING OFFICE

BORROWER:

Varian Medical Systems, Inc.:

3100 Hansen Way

Palo Alto, California 94304

Attention: Franco Palomba, Treasurer

Telephone: (650) 424-5955

Facsimile: (650) 842-5080

Electronic Mail: franco.palomba@varian.com

Website Address: www.varian.com

Taxpayer ID:  94-2359345

ADMINISTRATIVE AGENT:

Administrative Agent’s Office  (for payments and Requests for Credit Extensions):

Bank of America, N.A.

Mail Code:  NC1-01-04-39

101 N. Tryon Street

Charlotte, North Carolina 28255

Attn:  David Sanctis

Telephone: (980) 387-2466

Facsimile: (704) 409-0026

Electronic Mail: david.sanctis@baml.com

Wire instructions:

Bank of America, New York NY

ABA No. 026009593

Account Name:  Credit Services

Account No. 1366212250600

Reference:  Varian Medical Systems, Inc.

Other Notices as Administrative Agent:

Bank of America, N.A.  Agency Management 5727 196th SW

Mail Code:  WA4-127-01-01 Lynwood, Washington 98036

Attention:   Dora A. Brown

Telephone:  (206) 358-0101

Facsimile:  (415) 343-0556

Electronic Mail:  dora.a.brown@baml.com

Schedule 10.02

Page  1 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

L/C ISSUER:

Bank of America, N.A.

Trade Operations

1000 W. Temple Street

Mail Code:  CA9-705-07-05

Los Angeles, California 90012

Attention: Sandra Leon

Telephone:(213) 417-9524

Facsimile:(888) 277-5577

Electronic Mail:  sandra.leon@baml.com

SWING LINE LENDER:

Bank of America, N.A.

Mail Code:  NC1-01-04-39

101 N. Tryon Street

Charlotte, North Carolina 28255

Attn:  David Sanctis

Telephone: (980) 387-2466

Facsimile: (704) 409-0026

Electronic Mail: david.sanctis@baml.com

Wire instructions:

Bank of America, New York NY

ABA No. 026009593

Account Name:  Credit Services

Account No. 1366212250600

Reference:  Varian Medical Systems, Inc.

   

Schedule 10.02

Page  2 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT A

FORM OF LOAN NOTICE

Date:  ___________, _____

To: Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement, dated as of August 27, 2013 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined), among Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

The undersigned hereby requests (select one):

¨	A Revolving Credit Borrowing	¨	A conversion or continuation of Revolving Credit Loans
¨	A Term Loan Borrowing	¨	A conversion or continuation of Term Loans

1. On  ______________________ (a Business Day).

2. In the principal amount of $            .

3. Comprised of ______________________.

[Type of Loan requested]

4. For Eurodollar Rate Loans:  with an Interest Period of  ___________ months.

[The Revolving Credit Borrowing, if any, requested herein complies with the provisos to the first sentence of Section 2.01(b) of the Credit Agreement.]¹

VARIAN MEDICAL SYSTEMS, INC.
By:
Name:
Title:
	(a Responsible Officer)

¹ Include this sentence in the case of a Revolving Credit Borrowing.

       

A- 1 

Form of Loan Notice

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT B

FORM OF SWING LINE LOAN NOTICE

Date:  ___________, _____

To: Bank of America, N.A., as Swing Line Lender  Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement, dated as of August 27, 2013 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined), among Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

The undersigned hereby requests a Swing Line Borrowing:

1. On ________________________________ (a Business Day).

2. In the principal amount of $            .

The Swing Line Borrowing requested herein complies with the requirements of the provisos to the first sentence of Section 2.04(a) of the Credit Agreement.

VARIAN MEDICAL SYSTEMS, INC.
By:
Name:
Title:
	(a Responsible Officer)

       

B- 1 

Form of Swing Line Loan Notice

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT C-1

FORM OF REVOLVING CREDIT NOTE

__________, 20__

FOR VALUE RECEIVED, the undersigned (the “Borrower”), hereby promises to pay to _____________________ or registered assigns (the “Lender”), in accordance with the provisions of the Credit Agreement (as hereinafter defined), the principal amount of each Revolving Credit Loan from time to time made by the Lender to the Borrower under that certain Credit Agreement, dated as of August 27, 2013 (as amended, restated, extended, supplemented, increased or otherwise modified in writing from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

The Borrower promises to pay interest on the unpaid principal amount of each Revolving Credit Loan from the date of such Revolving Credit Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Credit Agreement.  Except as otherwise provided in Section 2.04(f) of the Credit Agreement with respect to Swing Line Loans, all payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent’s Office.  If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Credit Agreement.

This Revolving Credit Note is one of the Revolving Credit Notes referred to in the Credit Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein.  This Revolving Credit Note is also entitled to the benefits of the Guaranty and is secured by the Collateral.  Upon the occurrence and continuation of one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Revolving Credit Note shall become, or may be declared to be, immediately due and payable all as provided in the Credit Agreement.  Revolving Credit Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Revolving Credit Note and endorse thereon the date, amount and maturity of its Revolving Credit Loans and payments with respect thereto.

The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Revolving Credit Note.

THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATION LAW OF THE STATE OF NEW YORK.

   

C-1- 1 

Form of Revolving Credit Note

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

VARIAN MEDICAL SYSTEMS, INC.

By:

Name:

Title:

       

C-1- 2 

Form of Revolving Credit Note

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

LOANS AND PAYMENTS WITH RESPECT THERETO

Date	Type of Loan Made	Amount of Loan Made	End of Interest Period	Amount of Principal or Interest Paid This Date	Outstanding Principal Balance This Date	Notation Made By
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________

       

C-1- 3 

Form of Revolving Credit Note

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT C-2

FORM OF TERM LOAN NOTE

__________, 20__

FOR VALUE RECEIVED, the undersigned (the “Borrower”), hereby promises to pay to _____________________ or registered assigns (the “Lender”), in accordance with the provisions of the Credit Agreement (as hereinafter defined), the principal amount of each Term Loan from time to time made by the Lender to the Borrower under that certain Credit Agreement, dated as of August 27, 2013 (as amended, restated, extended, supplemented, increased or otherwise modified in writing from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined), among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

The Borrower promises to pay interest on the unpaid principal amount of each Term Loan from the date of such Term Loan until such principal amount is paid in full, at such interest rates and at such times as provided in the Credit Agreement.  All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent’s Office.  If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Credit Agreement.

This Term Loan Note is one of the Term Loan Notes referred to in the Credit Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein.  This Term Loan Note is also entitled to the benefits of the Guaranty and is secured by the Collateral.  Upon the occurrence and continuation of one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Term Loan Note shall become, or may be declared to be, immediately due and payable all as provided in the Credit Agreement.  Term Loans made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Term Loan Note and endorse thereon the date, amount and maturity of its Term Loans and payments with respect thereto.

The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Term Loan Note.

THIS TERM LOAN NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATION LAW OF THE STATE OF NEW YORK.

   

C-2- 1 

Form of Term Loan Note

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

VARIAN MEDICAL SYSTEMS, INC.

By:

Name:

Title:

       

C-2- 2 

Form of Term Loan Note

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

LOANS AND PAYMENTS WITH RESPECT THERETO

Date	Type of Loan Made	Amount of Loan Made	End of Interest Period	Amount of Principal or Interest Paid This Date	Outstanding Principal Balance This Date	Notation Made By
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________
_________	_________	_________	_________	_________	_________	_________

       

C-2- 3 

Form of Term Loan Note

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT D

FORM OF COMPLIANCE CERTIFICATE

Financial Statement Date: _________,

To: Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement, dated as of August 27, 2013 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Credit Agreement;” the terms defined therein being used herein as therein defined), among Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the ______________________________________________________ of the Borrower, and that, as such, he/she is authorized to execute and deliver this Compliance Certificate to the Administrative Agent on the behalf of the Borrower, and that:

[Use following paragraph 1 for fiscal year-end financial statements]

1. The Borrower has delivered the year-end audited financial statements required by Section 6.01(a) of the Credit Agreement for the fiscal year of the Borrower ended as of the above date, together with the report and opinion of an independent certified public accountant required by such section.

[Use following paragraph 1 for fiscal quarter-end financial statements]

1. The Borrower has delivered the unaudited financial statements required by Section 6.01(b) of the Credit Agreement for the fiscal quarter of the Borrower ended as of the above date.  Such financial statements fairly present in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal year-end audit adjustments and the absence of footnotes.

2. The undersigned has reviewed and is familiar with the terms of the Credit Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Borrower during the accounting period covered by such financial statements.

3. A review of the activities of the Borrower during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such fiscal period the Borrower performed and observed all its Obligations under the Loan Documents, and

[select one:]

D- 1 

Form of Compliance Certificate

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

[to the best knowledge of the undersigned, during such fiscal period the Borrower performed and observed each covenant and condition of the Loan Documents applicable to it, and no Default has occurred and is continuing.]

—or—

[to the best knowledge of the undersigned, during such fiscal period the following covenants or conditions have not been performed or observed and the following is a list of each such Default and its nature and status:]

4. The representations and warranties of the Borrower contained in Article V of the Credit Agreement, and any representations and warranties of any Loan Party that are contained in any document furnished at any time under or in connection with the Loan Documents, are true and correct in all material respects on and as of the date hereof, except that (i) if a qualifier relating to materiality, Material Adverse Effect or a similar concept applies, such representation and warranty is true and correct in all respects, (ii) to the extent that such representations and warranties specifically refer to an earlier date, such representations and warranties are true and correct as of such earlier date, and (iii) for purposes of this Compliance Certificate, the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01 of the Credit Agreement, including the statements in connection with which this Compliance Certificate is delivered.

5. The financial covenant analyses and information set forth on Schedules 1 and 2 attached hereto are true and accurate on and as of the date of this Compliance Certificate.

IN WITNESS WHEREOF, the undersigned has executed this Compliance Certificate as of __________, _________.

VARIAN MEDICAL SYSTEMS, INC.

By:

Name:

Title:

[Chief Executive Officer, Chief Financial Officer, Treasurer or Controller]

   

D- 2 

Form of Compliance Certificate

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

For the Quarter/Year ended ___________________(“Statement Date”)

SCHEDULE 1
to the Compliance Certificate
($ in 000’s)

I. Section 7.11 (a) – Consolidated Leverage Ratio.

A.	Consolidated Funded Indebtedness at Statement Date:		$ __________
B.	Consolidated EBITDA for four consecutive quarters ending on above date (“Subject Period”):
	1.	Consolidated Net Income for Subject Period:	$ __________
	2.	Consolidated Interest Charges for Subject Period:	$ __________
	3.	Net income taxes for Subject Period:	$ __________
	4.	Depreciation expenses for Subject Period:	$ __________
	5.	Amortization expenses for Subject Period:	$ __________
	6.	Non-recurring, non-cash reductions of Consolidated Net Income for Subject Period:	$ __________
	7.	Non-cash cost of employee services received in share-based payment transactions (in accordance with FASB ASC 718) for Subject Period:	$ __________
	8.	Income tax credits for Subject Period:	$ __________
	9.	Non-cash additions to Consolidated Net Income for Subject Period:	$ __________
	10.	Consolidated EBITDA (Lines I.B.1 + 2 + 3 + 4 + 5 + 6 + 7 – 8 – 9):	$ __________
C.	Consolidated Leverage Ratio (Line I.A ÷ Line I.B.10):		__________to 1
	Maximum permitted:		1.50 to 1.00

II. Section 7.11 (b) – Consolidated Fixed Charge Coverage Ratio.

A.	Consolidated EBITDA for Subject Period (Line I.B.10 above):	$ __________
B.	Capital Expenditures for Subject Period:	$__________
C.	Dividends and Adjusted Repurchases for Subject Period:	$ __________
D.	Cash taxes paid during Subject Period:	$__________
E.	Consolidated Fixed Charges for Subject Period:	$__________

D- 3 

Form of Compliance Certificate

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

	1.	Consolidated Interest Charges for Subject Period:	$__________
	2.	Scheduled principal payments on Consolidated Funded Indebtedness for four consecutive quarters following the Statement Date:	$__________
	3.	Consolidated Fixed Charges for Subject Period (Lines II.E.1 + 2):	$__________
F.	Consolidated Fixed Charge Coverage Ratio ((Line II.A – Line II.B – Line II.C – Line II.D) ÷ Line II.E.3):		__________to 1
	Minimum required:		3.00 to 1.00

D- 4 

Form of Compliance Certificate

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

For the Quarter/Year ended ___________________(“Statement Date”)

SCHEDULE 2
to the Compliance Certificate
($ in 000’s)

Consolidated EBITDA
(in accordance with the definition of Consolidated EBITDA
as set forth in the Credit Agreement)

Consolidated EBITDA	Quarter Ended	Quarter Ended	Quarter Ended	Quarter Ended	Twelve Months Ended
Consolidated Net Income
+ Consolidated Interest Charges
+ income taxes
+ depreciation expense
+ amortization expense
+ non-recurring non-cash expenses
+ non-cash costs of employee services received in share-based payment transactions (in accordance with FASB ASC 718)
- income tax credits
- non-cash income
= Consolidated EBITDA

   

D- 5 

Form of Compliance Certificate

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT E-1

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (this “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [the][each]² Assignor identified in item 1 below ([the][each, an] “Assignor”) and [the][each]³ Assignee identified in item 2 below ([the][each, an] “Assignee”).  [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees]⁴ hereunder are several and not joint.]⁵ Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee.  The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and any other documents or instruments delivered pursuant thereto in the amount[s] and equal to the percentage interest[s] identified below of all the outstanding rights and obligations under the respective facilities identified below (including, without limitation, the Letters of Credit and the Swing Line Loans included in such facilities⁶) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “Assigned Interest”). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][any] Assignor.

² For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language.  If the assignment is from multiple Assignors, choose the second bracketed language.

³ For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language.  If the assignment is to multiple Assignees, choose the second bracketed language.

⁴ Select as appropriate.

⁵ Include bracketed language if there are either multiple Assignors or multiple Assignees.

⁶ Include all applicable subfacilities.

E-1- 1 

Form of Assignment and Assumption

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

1. Assignor[s]:

		[Assignor [is] [is not] a Defaulting Lender]
2.	Assignee[s]:

		[for each Assignee, indicate [Affiliate][Approved Fund] of [identify Lender]]
3.	Borrower:	Varian Medical Systems, Inc. (the “Borrower”)

4. Administrative Agent: Bank of America, N.A., as the administrative agent under the Credit Agreement

5. Credit Agreement: Credit Agreement, dated as of August 27, 2013, among the Borrower, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

6. Assigned Interest(s):

Assignor[s]7	Assignee[s]8	Facility Assigned9	Aggregate Amount of Commitment/Loans for all Lenders10	Amount of Commitment/ Loans Assigned	Percentage Assigned of Commitment/ Loans11	CUSIP Number
			$________________	$_________	____________%
			$________________	$_________	____________%
			$________________	$_________	____________%

[7. Trade Date: ]¹²

⁷ List each Assignor, as appropriate.

⁸ List each Assignee and, if available, its market entity identifier, as appropriate.

⁹ Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g. “Revolving Credit Commitment”, “Term Loan Commitment”, etc.).

¹⁰ Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.

¹¹ Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.

¹² To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.

E-1- 2 

Form of Assignment and Assumption

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

Effective Date: __________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

       

E-1- 3 

Form of Assignment and Assumption

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR

[NAME OF ASSIGNOR]

By:

[NAME OF ASSIGNOR]

By:

Title:

ASSIGNEE

[NAME OF ASSIGNEE]

By:

Title:

[NAME OF ASSIGNEE]

By:

Title:

[Consented to and]13 Accepted:
BANK OF AMERICA, N.A., as
Administrative Agent
By:
	Title:
[Consented to:]14
By:
	Title:

¹³ To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.

¹⁴ To be added only if the consent of the Borrower and/or other parties (e.g. Swing Line Lender, L/C Issuer) is required by the terms of the Credit Agreement.

E-1- 4 

Form of Assignment and Assumption

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1.Representations and Warranties.

1.1.Assignor. [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim, (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and (iv) it is [not] a Defaulting Lender; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

1.2.Assignee. [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an assignee under Section 10.06(b)(iii) and (v) of the Credit Agreement (subject to such consents, if any, as may be required under Section 10.06(b)(iii) of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 6.01 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

E-1- 5 

Form of Assignment and Assumption

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

2.Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date.  Notwithstanding the foregoing, the Administrative Agent shall make all payments of interest, fees or other amounts paid or payable in kind from and after the Effective Date to [the][the relevant] Assignee.

3.General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns.  This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument.  Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

E-1- 6 

Form of Assignment and Assumption

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT E-2

FORM OF ADMINISTRATIVE QUESTIONNAIRE

See attached.

       

E-2-1
Form of Administrative Questionnaire

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

[Bank of America Merrill Lynch logo]

ADMINISTRATIVE DETAILS REPLY FORM – US DOLLAR ONLY

CONFIDENTIAL

1.Borrower or Deal Name:         Varian Medical Systems, Inc. 

E-mail this document with your commitment letter to:[****]^*

E-mail address of recipient: [****]^*

2.Legal Name of Lender of Record for Signature Page:

Markit Entity Identifier (MEI) #

Fund Manager Name (if applicable)

Legal Address from Tax Document of Lender of Record:

Country

Address

City  State/Province    Country  

3.Domestic Funding Address:4.Eurodollar Funding Address:

Street Address Street Address

Suite/Mail Code Suite/Mail Code

City State City State

Postal Code Country Postal Code Country

5.Credit Contact Information

Syndicate level information (which may contain material non-public information about the Borrower and its related parties or their respective securities) will be made available to the Credit Contact(s). The Credit Contacts identified must be able to receive such information in accordance with his/her institution’s compliance procedures and applicable laws, including Federal and State securities laws.

Primary Credit Contact:

First Name

Middle Name

Last Name

Title

Street Address

Suite/Mail Code

City

State

Postal Code

Country

Office Telephone #

Office Facsimile #

Work E-Mail Address

IntraLinks/SyndTrak

E-Mail Address

Primary Credit Contact:

First Name

Middle Name

Last Name

Title

Street Address

Suite/Mail Code

City

State

Postal Code

Country

Office Telephone #

Office Facsimile #

Work E-Mail Address

IntraLinks/SyndTrak

E-Mail Address

^* Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

 1 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

[Bank of America Merrill Lynch logo]

ADMINISTRATIVE DETAILS REPLY FORM – US DOLLAR ONLY

CONFIDENTIAL

Primary Operations Contact: FirstMILast Title Street Address Suite/Mail Code CityState Postal CodeCountry TelephoneFacsimile E-Mail Address IntraLinks/SyndTrak E-Mail Address Primary Operations Contact: FirstMILast Title Street Address Suite/Mail Code CityState Postal CodeCountry TelephoneFacsimile E-Mail Address IntraLinks/SyndTrak E-Mail Address

Does Secondary Operations Contact need copy of notices? ____ YES   ____ NO

Letter of Credit Contact: FirstMILast Title Street Address Suite/Mail Code CityState Postal CodeCountry TelephoneFacsimile E-Mail Address Draft Documentation Contact or Legal Contract: FirstMILast Title Street Address Suite/Mail Code CityState Postal CodeCountry TelephoneFacsimile E-Mail Address

6.Lender’s Fed Wire Payment Instructions:

Pay to:

Bank Name

ABA #

City  State

Account #

Account Name

Attention

7.Lender’s Standby Letter of Credit, Commercial Letter of Credit, and Bankers’ Acceptance Fed Wire Payment Instructions (if applicable):

Pay to:

Bank Name

ABA #

City  State

Account #

Account Name

Attention

Can the Lender’s Fed Wire Payment Instructions in Section 6 be used?  ____  YES  ____ NO

 2 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

[Bank of America Merrill Lynch logo]

ADMINISTRATIVE DETAILS REPLY FORM – US DOLLAR ONLY

CONFIDENTIAL

8.Lender’s Organizational Structure and Tax Status

Please refer to the enclosed withholding tax instructions below and then complete this section accordingly:

Lender Taxpayer Identification Number (TIN): ___ ___—___ ___ ___ ___ ___ ___

Tax Withholding Form Delivered to Bank of America (check applicable one):

____ W-9____ W-8BEN____ W-8ECI____ W-8EXP____ W-8IMY

Tax Contact:

FirstMILast

Title

Street Address

Suite/Mail Code

CityState

Postal CodeCountry

TelephoneFacsimile

E-Mail Address

NON–U.S. LENDER INSTITUTIONS

1. Corporations:

If your institution is incorporated outside of the United States for U.S. federal income tax purposes, and is the beneficial owner of the interest and other income it receives, you must complete one of the following three tax forms, as applicable to your institution: a.) Form W-8BEN (Certificate of Foreign Status of Beneficial Owner), b.) Form W-8ECI (Income Effectively Connected to a U.S. Trade or Business), or c.) Form W-8EXP (Certificate of Foreign Government or Governmental Agency).

A U.S. taxpayer identification number is required for any institution submitting a Form W-8 ECI. It is also required on Form W-8BEN for certain institutions claiming the benefits of a tax treaty with the U.S. Please refer to the instructions when completing the form applicable to your institution. In addition, please be advised that U.S. tax regulations do not permit the acceptance of faxed forms. An original tax form must be submitted.

2. Flow-Through Entities

If your institution is organized outside the U.S., and is classified for U.S. federal income tax purposes as either a Partnership, Trust, Qualified or Non-Qualified Intermediary, or other non-U.S. flow-through entity, an original Form W-8IMY (Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. branches for United States Tax Withholding) must be completed by the intermediary together with a withholding statement. Flow-through entities other than Qualified Intermediaries are required to include tax forms for each of the underlying beneficial owners.

Please refer to the instructions when completing this form. In addition, please be advised that U.S. tax regulations do not permit the acceptance of faxed forms. Original tax form(s) must be submitted.

U.S. LENDER INSTITUTIONS:

If your institution is incorporated or organized within the United States, you must complete and return Form W-9 (Request for Taxpayer Identification Number and Certification). Please be advised that we require an original form W-9.

Pursuant to the language contained in the tax section of the Credit Agreement, the applicable tax form for your institution must be completed and returned on or prior to the date on which your institution becomes a lender under this Credit Agreement. Failure to provide the proper tax form when requested will subject your institution to U.S. tax withholding.

 3 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

[Bank of America Merrill Lynch logo]

ADMINISTRATIVE DETAILS REPLY FORM – US DOLLAR ONLY

CONFIDENTIAL

*Additional guidance and instructions as to where to submit this documentation can be found at this link:

[link to Tax Form Tool Kit (2006) (2)]

9.Bank of America’s Payment Instructions:

Pay to:

Bank of America, N.A.

ABA # 026009593

New York, NY

Account # [****]^*

Attn: Corporate Credit Services

Ref: Varian Medical Systems, Inc.

^* Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

   

 4 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT F

FORM OF GUARANTY

See attached.

                       

F- 1 

Form of Guaranty

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

GUARANTY AGREEMENT

THIS GUARANTY AGREEMENT dated as of [_________ __, 20__] (this “Guaranty Agreement”), is being entered into among EACH OF THE UNDERSIGNED AND EACH OTHER PERSON WHO SHALL BECOME A PARTY HERETO BY EXECUTION OF A GUARANTY JOINDER AGREEMENT (each a “Guarantor” and collectively the “Guarantors”) and BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”) for each of the Secured Parties (as defined in the Credit Agreement referenced below).  All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement.

RECITALS:

A.Pursuant to a Credit Agreement dated as of August 27, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), the Administrative Agent, Bank of America, N.A., as Swing Line Lender and L/C Issuer, and the lenders now or hereafter party thereto (the “Lenders”), the Lenders have agreed to provide to the Borrower a term loan facility and a revolving credit facility with a letter of credit sublimit and swing line facility.

B.Certain additional extensions of credit may be made from time to time for the benefit of one or more Loan Parties pursuant to certain Secured Cash Management Agreements and Secured Hedge Agreements (each as defined in the Credit Agreement).

C.It is a condition precedent to the Secured Parties’ obligations to extend such credit that the Guarantors shall have executed and delivered this Guaranty Agreement to the Administrative Agent.

D.Each Guarantor is, directly or indirectly, a Subsidiary of the Borrower and will materially benefit from such extensions of credit to the Borrower.  The credit extended under the Credit Agreement may be used in part to enable the Borrower to make valuable transfers to the Guarantors in connection with the operation of their respective businesses.  The credit extended under the Credit Agreement will enhance the overall financial strength and stability of the Borrower’s consolidated group of companies, including the Guarantors.

In order to induce the Secured Parties to from time to time to extend credit under the Credit Agreement and under the Secured Cash Management Agreements and Secured Hedge Agreements, the parties hereto agree as follows:

1.Guaranty.  Each Guarantor hereby jointly and severally, unconditionally, absolutely, continually and irrevocably guarantees to the Administrative Agent for the benefit of the Secured Parties the payment and performance in full of the Guaranteed Liabilities (as defined below).  For all purposes of this Guaranty Agreement, “Guaranteed Liabilities” means:  (a) the Borrower’s prompt payment in full, when due or declared due and at all such times, of all Obligations and all other amounts pursuant to the terms of the Credit Agreement, the Notes, and

 1 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

all other Loan Documents heretofore, now or at any time or times hereafter owing, arising, due or payable from the Borrower to any one or more of the Secured Parties, including principal, interest, fees and expenses (including all fees and expenses of counsel (collectively, “Attorneys’ Costs”)); (b) the Borrower’s performance, observance and discharge of each and every agreement, undertaking, covenant and provision required to be performed, observed or discharged by the Borrower under the Credit Agreement, the Notes and all other Loan Documents, each at the time and in the manner set forth in the Loan Documents; and (c) each Loan Party’s prompt payment when due (whether at stated maturity, by required prepayment, upon acceleration, demand or otherwise and at all times thereafter) of all other Secured Obligations, in the amounts, at the times and in the manner arising under the Loan Documents and any Secured Cash Management Agreements and Secured Hedge Agreements; provided that the “Guaranteed Liabilities” shall exclude any Excluded Swap Obligations.  The Guarantors’ obligations to the Secured Parties under this Guaranty Agreement, subject to the limitations set forth below, are hereinafter collectively referred to as the “Guarantors’ Obligations” and, with respect to each Guarantor individually, the “Guarantor’s Obligations”.  

Anything contained herein to the contrary notwithstanding, the Guarantors’ Obligations and the liability of each Guarantor individually with respect to its Guarantor’s Obligations shall each be limited to an aggregate amount equal to the lesser of (i) the largest amount that would not render the Guarantor’s Obligations of such Guarantor to be subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code (Title 11, United States Code) or any comparable provisions of any similar federal or state law, and (ii) at all times indebtedness is outstanding under the Note Purchase Agreement, an amount equal to $1.00 less than the amount that would cause the Borrower to be in breach of Section 6C(2) or 6C(3) of the Note Purchase Agreement, as such Section appears in the form of Note Purchase Agreement provided by the Borrower to the Administrative Agent prior to the Closing Date, or as amended thereafter with the written consent of the Administrative Agent and the Required Lenders, not to be unreasonably withheld, provided that the amount provided under this clause (ii) shall be no less than $60,000,000.

Each Guarantor agrees that it is jointly and severally, directly and primarily liable for the Guaranteed Liabilities, subject to the limitations set forth in this Section 1.  

The Guarantors’ Obligations are secured by various Collateral Documents referred to in the Credit Agreement, including without limitation the Pledge Agreement, pursuant to the terms and conditions contained therein.

2.Payment.If the Borrower or any other applicable Loan Party shall default in payment or performance of any of the Guaranteed Liabilities, whether principal, interest, fees, expenses (including, but not limited to, Attorneys’ Costs), or otherwise, when and as the same shall become due, and after expiration of any applicable grace period, whether according to the terms of the Credit Agreement, by acceleration, or otherwise, or upon the occurrence and during the continuance of any Event of Default under the Credit Agreement, then any or all of the Guarantors will, jointly and severally, upon demand thereof by the Administrative Agent, (i) pay to the Administrative Agent, for the benefit of the Secured Parties, subject to the restrictions set forth in Section 1 hereof, an amount equal to all the Guaranteed Liabilities then due and owing or

 2 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

declared or deemed to be due and owing, including for this purpose, in the event of any Event of Default under Section 8.01(f) of the Credit Agreement (and irrespective of the applicability of any restriction on acceleration or other action as against any other Loan Party under any Debtor Relief Laws), the entire outstanding or accrued amount of all Secured Obligations or (ii) perform such Guaranteed Liabilities, as applicable. For purposes of this Section 2, the Guarantors acknowledge and agree that “Guaranteed Liabilities” shall be deemed to include any amount (whether principal, interest, fees or expenses) which would have been accelerated in accordance with Section 8.02 of the Credit Agreement but for the fact that such acceleration could be unenforceable or not allowable under any Debtor Relief Law.

3.Absolute Rights and Obligations.  This is a guaranty of payment and not of collection.  The Guarantors’ Obligations under this Guaranty Agreement shall be joint and several as set forth in Section 1 above, absolute and unconditional irrespective of, and each Guarantor hereby expressly waives, to the extent permitted by law, any defense to its obligations under this Guaranty Agreement and all Collateral Documents to which it is a party by reason of:

(a)any lack of legality, validity or enforceability of the Credit Agreement, of any of the Notes, of any other Loan Document, or of any other agreement or instrument creating, providing security for, or otherwise relating to any of the Guarantors’ Obligations, any of the Guaranteed Liabilities, or any other guaranty of any of the Guaranteed Liabilities (the Loan Documents and all such other agreements and instruments being collectively referred to as the “Related Agreements”);

(b)any action taken under any of the Related Agreements, any exercise of any right or power therein conferred, any failure or omission to enforce any right conferred thereby, or any waiver of any covenant or condition therein provided;

(c)any acceleration of the maturity of any of the Guaranteed Liabilities, of the Guarantor’s Obligations of any other Guarantor, or of any other obligations or liabilities of any Person under any of the Related Agreements;

(d)any release, exchange, non-perfection, lapse in perfection, disposal, deterioration in value, or impairment of any security for any of the Guaranteed Liabilities, for any of the Guarantor’s Obligations of any Guarantor, or for any other obligations or liabilities of any Person under any of the Related Agreements;

(e)any dissolution of the Borrower, any Guarantor, any other Loan Party or any other party to a Related Agreement, or the combination or consolidation of the Borrower, any Guarantor, any other Loan Party or any other party to a Related Agreement into or with another entity or any transfer or disposition of any assets of the Borrower, any Guarantor or any other Loan Party or any other party to a Related Agreement;

(f)any extension (including without limitation extensions of time for payment), renewal, amendment, restructuring or restatement of, any acceptance of late or partial payments under, or any change in the amount of any borrowings or any credit

 3 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

facilities available under, the Credit Agreement, any of the Notes or any other Loan Document or any other Related Agreement, in whole or in part;

(g)the existence, addition, modification, termination, reduction or impairment of value, or release of any other guaranty (or security therefor) of the Guaranteed Liabilities (including without limitation the Guarantor’s Obligations of any other Guarantor and obligations arising under any other Guaranty or any other Loan Document now or hereafter in effect);

(h)any waiver of, forbearance or indulgence under, or other consent to any change in or departure from any term or provision contained in the Credit Agreement, any other Loan Document or any other Related Agreement, including without limitation any term pertaining to the payment or performance of any of the Guaranteed Liabilities, any of the Guarantor’s Obligations of any other Guarantor, or any of the obligations or liabilities of any party to any other Related Agreement; and

(i)any other circumstance whatsoever (with or without notice to or knowledge of any Guarantor or any other Loan Party) which might in any manner or to any extent vary the risks of such Loan Party, or might otherwise constitute a legal or equitable defense available to, or discharge of, a surety or a guarantor, including without limitation any right to require or claim that resort be had to the Borrower or any other Loan Party or to any collateral in respect of the Guaranteed Liabilities or Guarantors’ Obligations.

It is the express purpose and intent of the parties hereto that this Guaranty Agreement and the Guarantors’ Obligations hereunder and under each Guaranty Joinder Agreement shall be absolute and unconditional under any and all circumstances and shall not be discharged except by payment and performance as herein provided.

4.Currency and Funds of Payment.  All Guarantors’ Obligations for payment will be paid in lawful currency of the United States of America and in immediately available funds, regardless of any law, regulation or decree now or hereafter in effect that might in any manner affect the Guaranteed Liabilities, or the rights of any Secured Party with respect thereto as against the Borrower or any other Loan Party, or cause or permit to be invoked any alteration in the time, amount or manner of payment by the Borrower or any other Loan Party of any or all of the Guaranteed Liabilities.

5.Events of Default.  Without limiting the provisions of Section 2 hereof, in the event that there shall occur and be continuing an Event of Default, then notwithstanding any collateral or other security or credit support for the Guaranteed Liabilities, at the Administrative Agent’s election and without notice thereof or demand therefor, each of the Guaranteed Liabilities and the Guarantors’ Obligations shall (subject to any restrictions on the Guarantors’ Obligations and each Guarantor’s Obligations set forth in Section 1 hereof) immediately be and become due and payable.

 4 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

6.Subordination.  Until this Guaranty Agreement is terminated in accordance with Section 22 hereof, each Guarantor hereby unconditionally subordinates all present and future debts, liabilities or obligations now or hereafter owing to such Guarantor (a) of the Borrower, to the payment in full of the Guaranteed Liabilities, (b) of every other Guarantor (each an “obligated guarantor”), to the payment in full of the Guarantors’ Obligations of such obligated guarantor, and (c) of each other Person now or hereafter constituting a Loan Party, to the payment in full of the obligations of such Loan Party owing to any Secured Party and arising under the Loan Documents or any Secured Cash Management Agreement or Secured Hedge Agreement.  All amounts due under such subordinated debts, liabilities, or obligations shall, upon the occurrence and during the continuance of an Event of Default, be collected by the applicable Guarantor and, upon request by the Administrative Agent, paid over forthwith to the Administrative Agent for the benefit of the Secured Parties on account of the Guaranteed Liabilities or the Guarantors’ Obligations, as applicable, and, after such request and pending such payment, shall be held by such Guarantor as agent and bailee of the Secured Parties separate and apart from all other funds, property and accounts of such Guarantor.

7.Suits.  Each Guarantor from time to time shall pay to the Administrative Agent for the benefit of the Secured Parties, on demand, at the Administrative Agent’s Office or such other address as the Administrative Agent shall give notice of to such Guarantor, the Guarantors’ Obligations as they become or are declared due, and in the event such payment is not made forthwith, the Administrative Agent may proceed to suit against any one or more or all of the Guarantors.  At the Administrative Agent’s election, one or more and successive or concurrent suits may be brought hereon by the Administrative Agent against any one or more or all of the Guarantors, whether or not suit has been commenced against the Borrower, any other Guarantor, or any other Person and whether or not the Secured Parties have taken or failed to take any other action to collect all or any portion of the Guaranteed Liabilities or have taken or failed to take any actions against any collateral securing payment or performance of all or any portion of the Guaranteed Liabilities, and irrespective of any event, occurrence, or condition described in Section 3 hereof.

8.Set-Off and Waiver.  Each Guarantor waives, to the extent permitted by Law, any right to assert against any Secured Party as a defense, counterclaim, set-off, recoupment or cross claim in respect of its Guarantor’s Obligations, any defense (legal or equitable) or other claim which such Guarantor may now or at any time hereafter have against the Borrower or any other Loan Party or any or all of the Secured Parties without waiving any additional defenses, set-offs, counterclaims or other claims otherwise available to such Guarantor.  Each Guarantor agrees that each Secured Party shall have a lien for all the Guarantor’s Obligations of such Guarantor upon all deposits or deposit accounts, of any kind, or any interest in any deposits or deposit accounts, now or hereafter pledged, mortgaged, transferred or assigned to such Secured Party or otherwise in the possession or control of such Secured Party for any purpose (other than solely for safekeeping) for the account or benefit of such Guarantor, including any balance of any deposit account or of any credit of such Guarantor with such Secured Party, whether now existing or hereafter established, and hereby authorizes each Secured Party from and after the occurrence and during the continuance of an Event of Default at any time or times with or without prior notice to apply such balances or any part thereof to such of the Guarantor’s Obligations of such Guarantor to the Secured Parties as are then due, in such amounts as

 5 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

provided for in the Credit Agreement or otherwise as they may elect (subject to any restrictions set forth in Section 1 hereof).  For the purposes of this Section 8, all remittances and property shall be deemed to be in the possession of a Secured Party as soon as the same may be put in transit to it by mail or carrier or by other bailee.

9.Waiver of Notice; Subrogation.

(a)Each Guarantor hereby waives to the extent permitted by law notice of the following events or occurrences:  (i) acceptance of this Guaranty Agreement; (ii) the Lenders’ heretofore, now or from time to time hereafter making Loans and issuing Letters of Credit and otherwise loaning monies or giving or extending credit to or for the benefit of the Borrower or any other Loan Party, or otherwise entering into arrangements with any Loan Party giving rise to Guaranteed Liabilities, whether pursuant to the Credit Agreement or the Notes or any other Loan Document or Related Agreement or any amendments, modifications, or supplements thereto, or replacements or extensions thereof; (iii) presentment, demand, default, non-payment, partial payment and protest; and (iv) any other event, condition, or occurrence described in Section 3 hereof.  Each Guarantor agrees that each Secured Party may heretofore, now or at any time hereafter do any or all of the foregoing in such manner, upon such terms and at such times as each Secured Party, in its sole and absolute discretion, deems advisable, without in any way or respect impairing, affecting, reducing or releasing such Guarantor from its Guarantor’s Obligations, and each Guarantor hereby consents to each and all of the foregoing events or occurrences.

(b)Each Guarantor hereby agrees that payment or performance by such Guarantor of its Guarantor’s Obligations under this Guaranty Agreement may be enforced by the Administrative Agent on behalf of the Secured Parties upon demand by the Administrative Agent to such Guarantor without the Administrative Agent being required, such Guarantor expressly waiving to the extent permitted by law any right it may have to require the Administrative Agent, to (i) prosecute collection or seek to enforce or resort to any remedies against the Borrower or any other Guarantor or any other guarantor of the Guaranteed Liabilities, or (ii) seek to enforce or resort to any remedies with respect to any security interests, Liens or encumbrances granted to the Administrative Agent or any Lender or other party to a Related Agreement by the Borrower, any other Guarantor or any other Person on account of the Guaranteed Liabilities or any guaranty thereof, IT BEING EXPRESSLY UNDERSTOOD, ACKNOWLEDGED AND AGREED TO BY SUCH GUARANTOR THAT DEMAND UNDER THIS GUARANTY AGREEMENT MAY BE MADE BY THE ADMINISTRATIVE AGENT, AND THE PROVISIONS HEREOF ENFORCED BY THE ADMINISTRATIVE AGENT, EFFECTIVE AS OF THE FIRST DATE ANY EVENT OF DEFAULT OCCURS AND IS CONTINUING UNDER THE CREDIT AGREEMENT.

(c)Each Guarantor further agrees that with respect to this Guaranty Agreement, such Guarantor shall not exercise any of its rights of subrogation, reimbursement, contribution, indemnity or recourse to security for the Guaranteed

 6 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

Liabilities until 93 days immediately following the Facility Termination Date shall have elapsed without the filing or commencement, by or against any Loan Party, of any state or federal action, suit, petition or proceeding seeking any reorganization, liquidation or other relief or arrangement in respect of creditors of, or the appointment of a receiver, liquidator, trustee or conservator in respect to, such Loan Party or its assets.  If an amount shall be paid to any Guarantor on account of such rights at any time prior to termination of this Guaranty Agreement in accordance with the provisions of Section 22 hereof, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Administrative Agent, for the benefit of the Secured Parties, to be credited and applied upon the Guarantors’ Obligations, whether matured or unmatured, in accordance with the terms of the Credit Agreement or otherwise as the Secured Parties may elect.  The agreements in this subsection shall survive repayment of all of the Guarantors’ Obligations, the termination or expiration of this Guaranty Agreement in any manner, including but not limited to termination in accordance with Section 22 hereof, and occurrence of the Facility Termination Date.  

10.Effectiveness; Enforceability.  This Guaranty Agreement shall be effective as of the date first above written and shall continue in full force and effect until termination in accordance with Section 22 hereof.  Any claim or claims that the Secured Parties may at any time hereafter have against a Guarantor under this Guaranty Agreement may be asserted by the Administrative Agent on behalf of the Secured Parties by written notice directed to such Guarantor in accordance with Section 24 hereof.

11.Representations and Warranties.  Each Guarantor warrants and represents to the Administrative Agent, for the benefit of the Secured Parties, that (a) it is duly authorized to execute and deliver this Guaranty Agreement (or the Guaranty Joinder Agreement to which it is a party, as applicable), and to perform its obligations under this Guaranty Agreement; (b) this Guaranty Agreement (or the Guaranty Joinder Agreement to which it is a party, as applicable) has been duly executed and delivered on behalf of such Guarantor by its duly authorized representatives; (c) this Guaranty Agreement (and any Guaranty Joinder Agreement to which such Guarantor is a party) is legal, valid, binding and enforceable against such Guarantor in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, Debtor Relief Laws or similar laws affecting the enforcement of creditors’ rights generally and by equitable principles relating to enforceability (whether enforcement is sought by proceedings in equity or at law); and (d) such Guarantor’s execution, delivery and performance of this Guaranty Agreement (and any Guaranty Joinder Agreement to which such Guarantor is a party) do not violate or constitute a breach of (i) any of its Organization Documents, (ii) any material agreement or instrument to which such Guarantor is a party in a manner which could reasonably be expected to have a Material Adverse Effect, or (iii) any material Law to which it or its properties or operations is subject.

12.Expenses and Indemnity.  Each Guarantor agrees to be jointly and severally liable for the payment of all documented out-of-pocket fees and expenses, including documented Attorneys’ Costs, incurred by any Secured Party in connection with the enforcement of this Guaranty Agreement, whether or not suit be brought.  Without limitation of any other obligations of any Guarantor or remedies of the Administrative Agent or any Secured Party under this

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Guaranty Agreement, each Guarantor shall, to the fullest extent permitted by Law, indemnify, defend and save and hold harmless the Administrative Agent and each Secured Party from and against, and shall pay on within ten (10) Business Days after demand therefor, any and all damages, losses, liabilities and expenses (including Attorneys’ Costs) that may be suffered or incurred by the Administrative Agent or such Secured Party in connection with or as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of the Borrower or any applicable Loan Party enforceable against the Borrower or such applicable Loan Party in accordance with their terms.  The obligations of each Guarantor under this paragraph shall survive the payment in full of the Guaranteed Obligations and termination of this Guaranty Agreement.

13.Reinstatement.  Each Guarantor agrees that this Guaranty Agreement shall continue to be effective or be reinstated, as the case may be, at any time payment received by any Secured Party in respect of any Guaranteed Liabilities is rescinded or must be restored for any reason, or is repaid by any Secured Party in whole or in part in good faith settlement of any pending or threatened avoidance claim.

14.Attorney-in-Fact.  To the extent permitted by law, each Guarantor hereby appoints the Administrative Agent, for the benefit of the Secured Parties, as such Guarantor’s attorney-in-fact for the purposes of carrying out the provisions of this Guaranty Agreement and taking any action and executing any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is coupled with an interest and is irrevocable; provided, that the Administrative Agent shall have and may exercise rights under this power of attorney only upon the occurrence and during the continuance of an Event of Default.

15.Reliance.  Each Guarantor represents and warrants to the Administrative Agent, for the benefit of the Secured Parties, that:  (a) such Guarantor has adequate means to obtain on a continuing basis (i) information concerning the Loan Parties and the Loan Parties’ financial condition and affairs and (ii) such other information as it deems material in deciding to provide this Guaranty Agreement and any Guaranty Joinder Agreement (“Other Information”), and has adequate access to the Loan Parties’ books and records and to such Other Information; (b) such Guarantor is not relying on any Secured Party or its or their employees, directors, agents or other representatives or Affiliates, to provide any such information, now or in the future; (c) such Guarantor has been furnished with and reviewed the terms of the Credit Agreement and such other Loan Documents and Related Agreements as it has requested, is executing this Guaranty Agreement (or the Guaranty Joinder Agreement to which it is a party, as applicable) freely and deliberately, and understands the obligations and financial risk undertaken by providing this Guaranty Agreement (and any Guaranty Joinder Agreement); (d) such Guarantor has relied solely on the Guarantor’s own independent investigation, appraisal and analysis of the Borrower and the other Loan Parties, such Persons’ financial condition and affairs, the Other Information, and such other matters as it deems material in deciding to provide this Guaranty Agreement (and any Guaranty Joinder Agreement) and is fully aware of the same; and (e) such Guarantor has not depended or relied on any Secured Party or its or their employees, directors, agents or other representatives or Affiliates, for any information whatsoever concerning the Borrower or the Borrower’s financial condition and affairs or any other matters material to such Guarantor’s

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decision to provide this Guaranty Agreement (and any Guaranty Joinder Agreement), or for any counseling, guidance, or special consideration or any promise therefor with respect to such decision.  Each Guarantor agrees that no Secured Party has any duty or responsibility whatsoever, now or in the future, to provide to such Guarantor any information concerning the Borrower or any other Loan Party or such Persons’ financial condition and affairs, or any Other Information, other than as expressly provided herein, and that, if such Guarantor receives any such information from any Secured Party or its or their employees, directors, agents or other representatives or Affiliates, such Guarantor will independently verify the information and will not rely on any Secured Party or its or their employees, directors, agents or other representatives or Affiliates, with respect to such information.

16.Rules of Interpretation.  The rules of interpretation contained in Section 1.02 of the Credit Agreement shall be applicable to this Guaranty Agreement and each Guaranty Joinder Agreement and are hereby incorporated by reference.  All representations and warranties contained herein shall survive the delivery of documents and any extension of credit referred to herein or guaranteed hereby.

17.Entire Agreement.  This Guaranty Agreement and each Guaranty Joinder Agreement, together with the Credit Agreement and the other Loan Documents, constitute and express the entire understanding between the parties hereto with respect to the subject matter hereof, and supersede all prior negotiations, agreements, understandings, inducements, commitments or conditions, express or implied, oral or written, except as herein contained.  The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof.  Except as provided in Section 22, neither this Guaranty Agreement nor any Guaranty Joinder Agreement nor any portion or provision hereof or thereof may be changed, altered, modified, supplemented, discharged, canceled, terminated, or amended orally or in any manner other than as provided in the Credit Agreement.

18.Binding Agreement; Assignment.  This Guaranty Agreement, each Guaranty Joinder Agreement and the terms, covenants and conditions hereof and thereof, shall be binding upon and inure to the benefit of the parties hereto and thereto, and to their respective heirs, legal representatives, successors and assigns; provided, however, that no Guarantor shall be permitted to assign any of its rights, powers, duties or obligations under this Guaranty Agreement, any Guaranty Joinder Agreement or any other interest herein or therein except as expressly permitted herein or in the Credit Agreement.  Without limiting the generality of the foregoing sentence of this Section 18, any Lender may assign to one or more Persons, or grant to one or more Persons participations in or to, all or any part of its rights and obligations under the Credit Agreement (to the extent permitted by the Credit Agreement); and to the extent of any such assignment or participation such other Person shall, to the fullest extent permitted by law, thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject however, to the provisions of the Credit Agreement, including Article IX thereof (concerning the Administrative Agent) and Section 10.06 thereof concerning assignments and participations.  All references herein to the Administrative Agent shall include any successor thereof.

19.Secured Cash Management Agreements and Secured Hedge Agreements.  No Secured Party (other than the Administrative Agent) that obtains the benefit of this Guaranty

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Agreement shall have any right to notice of any action or to consent to, direct or object to any action hereunder (including the release, impairment or modification of any Guarantors’ Obligations or security therefor) other than in its capacity as a Lender or the L/C Issuer and, in such case, only to the extent expressly provided in the Loan Documents.  Notwithstanding any other provision of this Guaranty Agreement to the contrary, the Administrative Agent shall only be required to verify the payment of, or that other satisfactory arrangement have been made with respect to, the Secured Obligations arising under Secured Cash Management Agreements and Secured Hedge Agreements to the extent the Administrative Agent has received written notice of such Secured Obligations, together with such supporting documentation as it may request, from the applicable Cash Management Bank or Hedge Bank, as the case may be.  Each Secured Party not a party to the Credit Agreement that obtains the benefit of this Guaranty Agreement shall be deemed to have acknowledged and accepted the appointment of the Administrative Agent pursuant to the terms of the Credit Agreement, and that with respect to the actions and omissions of the Administrative Agent hereunder or otherwise relating hereto that do or may affect such Secured Party, the Administrative Agent and each of its Related Parties shall be entitled to all the rights, benefits and immunities conferred under Article IX of the Credit Agreement.

20.Severability.  If any provision of this Guaranty Agreement is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Guaranty Agreement shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

21.Counterparts.  This Guaranty Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Guaranty Agreement to produce or account for more than one such counterpart executed by the Guarantors against whom enforcement is sought.  Without limiting the foregoing provisions of this Section 21, the provisions of Section 10.10 of the Credit Agreement shall be applicable to this Guaranty Agreement.

22.Termination.  Subject to reinstatement pursuant to Section 13 hereof, this Guaranty Agreement and each Guaranty Joinder Agreement, and all of the Guarantors’ Obligations hereunder (excluding those Guarantors’ Obligations relating to Guaranteed Liabilities that expressly survive such termination) shall without delivery of any instrument or performance of any act by any party terminate on the Facility Termination Date.

23.Remedies Cumulative; Late Payments.  All remedies hereunder are cumulative and are not exclusive of any other rights and remedies of the Administrative Agent or any other Secured Party provided by law or under the Credit Agreement, the other Loan Documents or other applicable agreements or instruments.  The making of the Loans and other credit extensions pursuant to the Credit Agreement and other Related Agreements shall be conclusively presumed to have been made or extended, respectively, in reliance upon each Guarantor’s guaranty of the Guaranteed Liabilities, subject to the limitations set forth in Section 1, pursuant to the terms hereof.  Any amounts not paid when due under this Guaranty Agreement shall bear

 10 

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interest from the date of demand until paid in full at the Default Rate, to the extent permitted by applicable law.

24.Notices.  Any notice required or permitted hereunder or under any Guaranty Joinder Agreement shall be given, (a) with respect to each Guarantor, at the address of the Borrower indicated in Schedule 10.02 of the Credit Agreement and (b) with respect to the Administrative Agent or any other Secured Party, at the Administrative Agent’s address indicated in Schedule 10.02 of the Credit Agreement.  All such addresses may be modified, and all such notices shall be given and shall be effective, as provided in Section 10.02 of the Credit Agreement for the giving and effectiveness of notices and modifications of addresses thereunder.

25.Joinder.  Each Person that shall at any time execute and deliver to the Administrative Agent a Guaranty Joinder Agreement substantially in the form attached as Exhibit A hereto shall thereupon irrevocably, absolutely and unconditionally become a party hereto and obligated hereunder as a Guarantor, and all references herein and in the other Loan Documents to the Guarantors or to the parties to this Guaranty Agreement shall be deemed to include such Person as a Guarantor hereunder.

26.Governing Law; Jurisdiction; Etc.

(a)GOVERNING LAW.  THIS GUARANTY AGREEMENT AND EACH GUARANTY JOINDER AGREEMENT and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this guaranty Agreement or any guaranty joinder agreement and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of NEW yORK, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATION LAW OF THE STATE OF NEW YORK.

(b)SUBMISSION TO JURSDICTION.  EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT IT WILL NOT COMMENCE ANY ACTION, LITIGATION OR PROCEEDING OF ANY KIND OR DESCRIPTION, WHETHER IN LAW OR EQUITY, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, AGAINST THE ADMINISTRATIVE AGENT, ANY LENDER, THE L/C ISSUER, OR ANY RELATED PARTY OF THE FOREGOING IN ANY WAY RELATING TO THIS GUARANTY AGREEMENT OR ANY GUARANTY JOINDER AGREEMENT OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN ANY FORUM OTHER THAN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS  AND AGREES THAT ALL CLAIMS IN

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION, LITIGATION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS GUARANTY AGREEMENT OR IN ANY GUARANTY JOINDER AGREEMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS GUARANTY AGREEMENT OR ANY GUARANTY JOINDER AGREEMENT AGAINST ANY GUARANTOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(c)WAIVER OF VENUE.  EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY AGREEMENT OR ANY GUARANTY JOINDER AGREEMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(d)SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 24.  NOTHING IN THIS GUARANTY AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

27.Waiver of Jury Trial.EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY AGREEMENT OR ANY GUARANTY JOINDER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (b) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN

 12 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

INDUCED TO ENTER INTO THIS GUARANTY AGREEMENT OR ANY GUARANTY JOINDER AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.  

28.Keepwell.  Each Loan Party that is a Qualified ECP Guarantor at the time the guaranty or the grant of the security interest under the Loan Documents, in each case, by any Specified Loan Party, becomes effective with respect to any Swap Obligation, hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support to each Specified Loan Party with respect to such Swap Obligation as may be needed by such Specified Loan Party from time to time to honor all of its obligations under this Guaranty Agreement and the other Loan Documents in respect of such Swap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP Guarantor’s obligations and undertakings under this Section 1 voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount).  The obligations and undertakings of each Qualified ECP Guarantor under this Section shall remain in full force and effect until the Facility Termination Date.  Each Qualified ECP Guarantor intends this Section to constitute, and this Section shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of, each Specified Loan Party for all purposes of the Commodity Exchange Act.  

[Signature page follows.]

   

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Guaranty Agreement as of the day and year first written above.

GUARANTORS:

[___________________________]¹

By:_______________________________________

Name:____________________________________

Title:____________________________________

[___________________________]

By:_______________________________________

Name:____________________________________

Title:____________________________________

ADMINISTRATIVE AGENT:

BANK OF AMERICA, N.A., as Administrative

Agent

By:_______________________________________

Name:____________________________________

Title:____________________________________

______________

¹ Insert Guarantors as applicable.

       

GUARANTY AGREEMENT
Signature Page

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT A

Form of Guaranty Joinder Agreement

GUARANTY JOINDER AGREEMENT

THIS GUARANTY JOINDER AGREEMENT dated as of _____________, 20__ (this “Guaranty Joinder Agreement”), is made by _______________________________, a ________________ (the “Joining Guarantor”), in favor of BANK OF AMERICA, N.A., in its capacity as Administrative Agent (the “Administrative Agent”) for the Secured Parties (as defined in the Credit Agreement referenced below; all capitalized terms used but not defined herein shall have the meanings provided therefor in such Credit Agreement).

RECITALS:

A.Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), the Lenders party thereto and the Administrative Agent are party to a Credit Agreement dated as of August 27, 2013 (as in effect on the date hereof, the “Credit Agreement”).

B.Certain Subsidiaries of the Borrower are party to a Guaranty Agreement dated as of [________ __, 20__] (as in effect on the date hereof, the “Guaranty Agreement”).

C.The Joining Guarantor is a Subsidiary of the Borrower and is required by the terms of the Credit Agreement to be joined as a party to the Guaranty Agreement as a Guarantor (as defined in the Guaranty Agreement).

D.The Joining Guarantor will materially benefit directly or indirectly from the extensions of credit made from time to time under the Credit Agreement, Secured Cash Management Agreements and Secured Hedge Agreements.

In order to induce the Secured Parties to from time to time to extend credit under the Credit Agreement, Secured Cash Management Agreements and Secured Hedge Agreements, the Joining Guarantor hereby agrees as follows:

1.Joinder.  The Joining Guarantor hereby irrevocably, absolutely and unconditionally becomes a party to the Guaranty Agreement as a Guarantor and is bound by all the terms, conditions, obligations, liabilities and undertakings of each Guarantor or to which each Guarantor is subject thereunder, including without limitation the joint and several, unconditional, absolute, continuing and irrevocable guarantee to the Administrative Agent for the benefit of the Secured Parties of the payment and performance in full of the Guaranteed Liabilities (as defined in the Guaranty Agreement) whether now existing or hereafter arising, subject to the limitations set forth in Section 1 of the Guaranty Agreement, all with the same force and effect as if the Joining Guarantor were a signatory to the Guaranty Agreement.

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

2.Affirmations.  The Joining Guarantor hereby acknowledges and reaffirms as of the date hereof with respect to itself, its properties and its affairs each of the waivers, representations, warranties, acknowledgements and certifications applicable to any Guarantor contained in the Guaranty Agreement.

3.Severability.  If any provision of this Guaranty Joinder Agreement is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Guaranty Joinder Agreement shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

4.Counterparts.  This Guaranty Joinder Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Guaranty Joinder Agreement to produce or account for more than one such counterpart executed by the Joining Guarantor.  Without limiting the foregoing provisions of this Section 4, the provisions of Section 10.10 of the Credit Agreement shall be applicable to this Guaranty Joinder Agreement.

5.Delivery.  The Joining Guarantor hereby irrevocably waives notice of acceptance of this Guaranty Joinder Agreement and acknowledges that the Guaranteed Liabilities are and shall be deemed to be incurred, and credit extensions under the Loan Documents, Secured Cash Management Agreements and Secured Hedge Agreements made and maintained, in reliance on this Guaranty Joinder Agreement and the Joining Guarantor’s joinder as a party to the Guaranty Agreement as herein provided.

6.Governing Law; Jurisdiction; Waiver of Jury Trial; Etc.The provisions of Sections 26 and 27 of the Guaranty Agreement are hereby incorporated by reference as if fully set forth herein.

[Signature page follows.]

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IN WITNESS WHEREOF, the Joining Guarantor has duly executed and delivered this Guaranty Joinder Agreement as of the day and year first written above.

JOINING GUARANTOR:

__________________________________________

By:_______________________________________

Name:____________________________________

Title:____________________________________

   

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EXHIBIT G

LEGAL OPINION OF DLA PIPER

See attached.

   

G-1

Opinion of DLA Piper

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

DLA Piper LLP (US)

1251 Avenue of the Americas

New York, New York 10020-1104

T 212.335.4500

F 212.335.4501

W www.dlapiper.com

August 27, 2013

Bank of America, N.A.,

 as Administrative Agent and Lender

 and the Lenders under the Credit Agreement

 referred to below

Agency Management 5727 196^th SW

Mail Code:  WA4-127-01-01 Lynwood, Washington 98036

Re: Varian Medical Systems, Inc.

Ladies and Gentlemen:

We have acted as special counsel to Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), in connection with the execution and delivery of the Credit Agreement, dated as of the date hereof (the “Credit Agreement”), among the Borrower, the Lenders from time to time party thereto (each a “Lender” and collectively, the “Lenders”), and Bank of America, N.A., as Administrative Agent (the “Administrative Agent”), Swing Line Lender and L/C Issuer, and each of the other agreements listed on Schedule 1 hereto (collectively with the Credit Agreement, the “Transaction Documents”).

This opinion is being delivered to the Administrative Agent pursuant to Section 4.01(a)(vi) of the Credit Agreement.  Capitalized terms used in this opinion, that are not otherwise defined in this opinion, shall have the respective meanings assigned to them in the Credit Agreement.  

In connection with the opinions expressed herein, we have made such examinations of law as we considered appropriate or advisable for purposes hereof.  As to matters of fact material to the opinions expressed herein, we have relied upon, and assumed the accuracy, completeness and genuineness of all representations and warranties made by the parties to the Transaction Documents and the certificates of certain government officials and of officers of the Borrower described below.  We have made no independent investigation of any of the facts stated in any such representations, warranties or certificates. We have also examined executed originals or copies, certified or otherwise identified to our satisfaction of:

(i) the executed Transaction Documents;

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

Bank of America, N.A.,

as Administrative Agent and Lender and

the Lenders under the Credit Agreement

August 27, 2013

Page  20 

(ii) the Restated Certificate of Incorporation of the Borrower, certified by the Secretary of State of the State of Delaware as of August 1, 2013 and certified to us by an officer of the Borrower as being complete and in full force and effect as of the date of this opinion, and a copy of the by-laws of the Borrower certified to us by an officer of the Borrower as being complete and in full force and effect as of the date of this opinion (collectively, the “Organizational Documents”);

(iii) the records of the proceedings and actions of the Board of Directors of the Borrower with respect to the transactions contemplated by the Transaction Documents, certified as true, accurate and complete, and in full force and effect, by an officer of the Borrower;

(iv) the Designated Agreements (as defined below);

(v) certain certificates, each made by an officer of the Borrower, dated as of the date hereof (collectively, the “Officer Certificates” and each an “Officer Certificate”), as to the matters set forth therein; and

(vi) such other certificates, documents and matters as we have deemed necessary and appropriate to render the opinions set forth in this opinion, subject to the limitations, assumptions, and qualifications noted below.

In basing the opinions and other matters set forth herein on “our knowledge,” the words “our knowledge” signify that, in the course of our representation of the Borrower in connection with the Transaction Documents, no information has come to our attention that would give us current actual knowledge that any such opinions or other matters are not accurate or that any of the documents, certificates, reports, and information on which we have relied are not accurate and complete.  We have undertaken no independent investigation or verification of such matters and any limited inquiry undertaken by us during the preparation of this opinion letter should not be regarded as such an inquiry or investigation; no inference as to our knowledge of any matters bearing on the accuracy of any such statement should be drawn from the fact of our representation of the Borrower.  The words “our knowledge” and similar language used herein are intended to be limited to the knowledge of the lawyers within our firm who have worked on the transactions described in the Transaction Documents on behalf of the Borrower.  We specifically did not undertake a search of the records of any court or government agency to determine if there is any outstanding judgment or pending litigation with respect to the Borrower.  

For purposes of this opinion, the term “Applicable Laws” means those substantive laws, rules and regulations of State of New York, the substantive federal laws of the United States of America, and the Delaware General Corporation Law (“DGCL”). The opinions set forth below, with respect to Applicable Laws, are limited to those Applicable Laws that are binding on the Borrower, which an attorney licensed in New York exercising customary professional diligence would reasonably recognize as being applicable to transactions of the type provided for in the

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

Bank of America, N.A.,

as Administrative Agent and Lender and

the Lenders under the Credit Agreement

August 27, 2013

Page  21 

Transaction Documents and to business organizations generally, without our having made any special investigation concerning any other law, rule or regulation.  Opinions of counsel licensed to practice law in states other than the State of New York have not been obtained to support the opinions contained herein.  With respect to our opinions regarding the DGCL, our opinions are based solely on a review of the current promulgated version of the DGCL, Del. Code Ann., Title 8 (2009).  We have not reviewed and do not render any opinion with respect to any other statutes of the State of Delaware or judicial decisions construing the DGCL.  By rendering the opinions set forth herein we do not intend to indicate that the attorneys participating in the preparation of this opinion are experts on the laws of the State of Delaware.  We express no opinion as to the laws of any other state or jurisdiction of the United States or of any foreign jurisdiction other than the Applicable Laws.  We further disclaim any opinion as to any statute, rule, regulation, ordinance, order or other promulgation of any regional or local governmental body, any municipality, or any political subdivision or as to any related judicial or administrative decision.  We have made no inquiry into the laws and regulations of any other jurisdiction or jurisdictions or as to laws relating to choice of law or conflicts of law principles (other than to the extent that any opinion relates to the enforceability of the choice of New York law and choice of New York forum provisions of any Transaction Document).  

Our opinion in Paragraph 1 below as to the valid existence, qualification to do business and good standing of the Borrower is based solely on our review of a certificate of good standing issued by the Secretary of State of the State of Delaware, which, with your permission, we assume to be accurate as of the date hereof notwithstanding its issuance on an earlier date.  We have made no additional investigation after the date of such certificate.

With respect to our opinions in Paragraph 4 below:

(a)  we have assumed that the Borrower will not in the future take any discretionary action (including a decision not to act) permitted by the Transaction Documents that would cause the performance of any Transaction Document to violate any Applicable Laws or any order, judgment or decree under any Applicable Laws, or to violate, conflict with or breach or contravene any of the Designated Agreements; and

(b)  we have relied solely upon a representation made to us in an Officer Certificate to the effect that there are no judgments, decrees or orders binding upon or affecting the Borrower or its property or assets.

We have assumed that the Lenders and the Administrative Agent have complied with all laws, rules or regulations applicable to their performance under the Transaction Documents, and have obtained or made all governmental permits, consents, approvals, authorizations, registrations, declarations, filings or licenses required in connection with the transactions contemplated by the Transaction Documents. We express no opinion as to the effect of (i) the compliance or noncompliance of the Administrative Agent or any Lender with any state, federal

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or other laws, rules or regulations applicable to it or (ii) the legal or regulatory status or nature of the Administrative Agent or any Lender on the opinions herein stated.  

To the extent that any of the Designated Agreements is governed by the laws of any jurisdiction other than the State of New York, we have assumed that each such agreement is governed by the laws of the State of New York, and our opinion relating to those agreements is based solely upon the plain meaning of their language without regard to interpretation or construction that might be indicated by the laws governing those agreements and instruments and without consideration of any parol evidence.  We have not examined the question of what law would govern interpretation or enforcement of any Designated Agreement.  Moreover, we have not reviewed, and express no opinion on:  (i)  covenants, including financial covenants, or similar provisions requiring financial calculations or determinations to ascertain compliance; or (ii) provisions relating to the occurrence of a “material adverse event”, “material adverse change”, “material adverse effect” or words of similar import contained in any document, agreement or instrument.  Without limiting the generality of the foregoing, with your permission, we express no opinion with respect to whether the Borrower’s execution and delivery of, and performance under, the Transaction Documents, does or will conflict with, result in any breach or contravention of, or result in the creation or imposition of any lien, security interest or other encumbrance upon any assets of the Borrower pursuant to, any of Sections 5D, 6A, 6B, 6C or 8D of the Prudential Agreement.  We call your attention to the fact that the Borrower’s compliance with those provisions, in some cases, requires financial calculations that may change from time to time, and that the Borrower’s ability to achieve or maintain compliance with those provisions may be impaired by events and circumstances that it does not control.

In examining the Transaction Documents, and in rendering the opinions set forth below, we have also assumed the following:

(a) with respect to each of the parties to the Transaction Documents other than the Borrower (i) such party has the requisite corporate, limited liability or similar power and authority and has taken all action necessary to authorize it to execute and deliver each of the Transaction Documents, (ii) such party has duly and validly executed and delivered each of the Transaction Documents, (iii) the execution and delivery of the Transaction Documents by each of such parties and the consummation of the transactions contemplated thereby will not conflict with or result in a violation of any of each of such parties’ respective organizational documents and each instrument, agreement, and other document executed in connection with the Transaction Documents to which such party is a signatory, and (iv) no consent, approval or action of, or filing by or with, any governmental or public body or authority of any jurisdiction, is required to authorize, or is otherwise required in connection with, the execution, delivery and performance by such party of any of the Transaction Documents to which such party is a party;

(b) with respect to each of the parties to the Transaction Documents other than the Borrower, each such party’s obligations set forth in the Transaction Documents, are its legal, valid and binding obligations, enforceable in accordance with their respective terms;

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(c) each person executing any such instrument, agreement, or other document on behalf of any such party (other than the Borrower) is duly authorized to do so and there is adequate and lawful consideration for the obligations undertaken by each party to the Transaction Documents;

(d) each natural person executing any such instrument, agreement, or other document is legally competent and has the legal capacity to do so;

(e) the Transaction Documents accurately describe and contain the mutual understandings of the parties, there are no oral or written modifications of or amendments or supplements to the Transaction Documents, and there has been no waiver of any of the provisions of the Transaction Documents by actions or conduct of the parties or otherwise;

(f) the Administrative Agent and the Lenders have received all documents, instruments and agreements that they are entitled to receive under the Transaction Documents;

(g) all documents submitted to us as originals are genuine, authentic and complete, all documents submitted to us as certified or photostatic copies or telecopies are complete and conform to the original document (and the authenticity of the originals of such copies), all signatures on all documents submitted to us for examination (and including signatures on photocopies and telecopies) are genuine and all public records that we reviewed are accurate and complete;

(h)there has been no mutual mistake of fact, or misunderstanding or fraud, duress or undue influence in connection with the negotiation, delivery and execution of the Transaction Documents; and

(i)there are and have been no agreements or understandings among the parties, written or oral, and there is and has been no usage of trade or course of prior dealing among the parties that would, in either case, vary, supplement, or qualify the terms of the Transaction Documents.

Based on our review of the foregoing, and subject to the limitations, assumptions, and qualifications set forth herein, it is our opinion that, as of the date of this opinion:

2. The Borrower is a corporation validly existing and in good standing under the laws of the State of Delaware.  

3. The Borrower has the requisite corporate power under the DGCL and the Organizational Documents to execute, deliver and perform its obligations under the Transaction Documents.  The Transaction Documents have been duly authorized by all necessary corporate action on the part of the Borrower under the DGCL and the Organizational Documents, and the Transaction Documents have been duly executed and delivered by the Borrower.

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4. Each of the Transaction Documents constitutes a valid and legally binding obligation of the Borrower, enforceable against the Borrower in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting the rights of creditors generally and subject to general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity.

5. The execution, delivery and performance of the Transaction Documents by the Borrower will not (i) violate the terms of its Organizational Documents, (ii) conflict with, or result in any breach or contravention of, the agreements to which the Borrower is a party and which are listed on Schedule 2 hereto (the “Designated Agreements”) or result in the creation or imposition of any lien, security interest or other encumbrance (except as contemplated by the Transaction Documents) upon any assets of the Borrower pursuant to the terms of any Designated Agreement, (iii) result in a violation of any Applicable Laws, or (iv) based solely upon the Borrower’s disclosure of orders, judgments and decrees designated as material to the Borrower’s business, if any, in an Officer Certificate, and our review of such orders, judgments and decrees, result in a violation of any order, judgment or decree under Applicable Laws applicable to the Borrower or by which any property or asset of the Borrower is bound or affected, if any.

5. No consent or approval of, or filing with, any governmental authority of the State of New York or under the DGCL is required for the execution and delivery by the Borrower of the Transaction Documents, or if required, the requisite consent or approval has been obtained, the requisite filing has been accomplished, or the requisite action has been taken.

The opinions set forth above are subject to the following further assumptions, qualifications, and limitations:

A. We express no opinion concerning any state securities laws or regulations, including, without limitation, any “Blue Sky” laws or any federal securities laws.

B. Our opinions in opinion paragraph 3 are subject to the following additional assumptions and qualifications:

(i) we express no opinion regarding the applicability or effect of statutory law and judicial decisions which limit enforcement of an exculpatory or indemnity provision, including, without limitation, limitations on the enforcement of provisions which encompass indemnification, exculpation or contribution with respect to (a) the negligence or willful misconduct of the party seeking relief or of any person for whom said party is legally responsible, (b) violations of law, or (c) matters found to be contrary to statute or public policy;

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(ii) we express no opinion on the enforceability of any provisions permitting modifications of the Transaction Documents only if in writing, or stating that the provisions of any Transaction Document are severable;

(iii) we express no opinion as to the effect of judicial decisions and statutory law restricting acceleration of the due date of notes and the availability of specific performance or any other remedy of a lender if the violation of a covenant is not material or if the action is not undertaken in good faith under the then existing circumstances or is otherwise contrary to applicable laws or judicial precedent;

(iv) we express no opinion regarding the unenforceability of unspecified fees or charges imposed in the sole discretion of the Administrative Agent or Lenders;

(v) enforceability may be limited to the extent that remedies are sought by a party with respect to a breach that a court concludes is not material or does not adversely affect such party, and enforceability may be limited by any unconscionable, inequitable, or unreasonable conduct on the part of such party seeking enforcement, defenses arising from such party’s failure to act in accordance with the terms and conditions of the Transaction Documents, defenses arising as a consequence of the passage of time, or defenses arising as a result of such party’s failure to act reasonably or in good faith or to comply with the terms of the Transaction Documents;

(vi) we express no opinion on the enforceability of the self-help, non-judicial remedies provided in the Transaction Documents, including but not limited to any grant of a power of attorney to the Administrative Agent or the Lender, and we note that the enforceability of the Transaction Documents will be subject to statutory and other legal requirements generally applicable to a lender exercising remedies relating to its collateral;

(vii) we express no opinion on the enforceability of any provisions of the Transaction Documents requiring any party to waive any procedural, judicial, or substantive rights or defenses, such as rights to notice, right to a jury trial, statutes of limitation, appraisal or valuation rights, and marshaling of assets, or any provisions purporting to waive any right to consequential or other damages, or any provisions purporting to require the Borrower to give notice to the Administrative Agent or any Lender of any acts or omissions of the Administrative Agent or any Lender or any of such party’s agents or employees;

(viii) the provisions of the Transaction Documents which provide for jurisdiction of the courts of any particular jurisdiction may not be binding on the courts in the forums selected or excluded (other than the enforceability in a court of the State of New York of any such agreement to submit to the jurisdiction of a court of the State of New York) and we express no opinion as to the validity, binding effect or enforceability of any such provisions relating to arbitration or the choice of forum for resolving disputes;

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(ix)we express no opinion with respect to the availability of specific performance, injunctive relief, or other equitable remedies with respect to any of the provisions of the Transaction Documents, whether such relief is sought in a court of law or a court of equity;

(x)the provisions regarding the remedies available to the Administrative Agent or the Lenders on default as set forth in the Transaction Documents are subject to certain procedural requirements which affect and may restrict rights and remedies stated to be available to Administrative Agent or the Lenders; and

(xi)we express no opinion on any provision of the Transaction Documents that purports to vest in any person the rights of a third-party beneficiary with respect to any other agreement where such person is not also named a third-party beneficiary of such other agreement in such other agreement.

C. To the extent that any opinion relates to the enforceability of the choice of New York law and choice of New York forum provisions contained in any Transaction Agreement, the opinions stated herein are rendered solely in reliance upon New York General Obligations Law sections 5-1401 and 5-1402 and Rule 327(b) of New York Civil Practice Law and Rules and are subject to the qualification that such enforceability may be subject to, in each case, the exceptions and limitations in such sections 5-1401 and 5-1402, as well as by principles of public policy, comity or constitutionality.

D. We express no opinion herein as to the applicability or effect of any fraudulent transfer or similar law on the Transaction Documents or any transactions contemplated thereby.

E. Other than as expressly specified herein, we render no opinion as to any agreement, document, certificate or instrument, other than the Transaction Documents (including agreements, documents, certificates or instruments that may be an exhibit to, or referred to in or contemplated by any of the Transaction Documents).  To the extent that any Transaction Document refers to, or incorporates, any term or terms from any other agreement or document, we assume that (i) such agreement or document exists and contains the intended term or terms and (ii) an original or copy of such agreement or document has been provided to the parties to such Loan Document.

F. Statements in this opinion as to enforceability are further limited to the extent that judicial decisions may permit the introduction of extrinsic evidence to interpret the terms of written contracts.

G. We express no opinion on provisions in the Transaction Documents, if any, which waive the requirements of good faith, notice and commercial reasonableness under the Uniform Commercial Code as enacted in any state, to the extent such requirements cannot be waived by consent.  We further advise that the award and the amount of attorney’s fees are subject to the

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discretion of the court before which any proceeding involving the Transaction Documents may be brought.  

H. We express no opinion as to (i) any federal, state or local laws, rules or regulations relating to criminal matters, securities, antitrust, tax, land use and zoning, environmental, pollution, RICO, criminal or civil forfeiture, ERISA, employee benefits, the Federal Reserve Board, the Federal Energy Regulatory Commission, intellectual property, health safety and welfare, anti-terrorism (including the USA PATRIOT Act), anti-money laundering, hazardous materials, privacy, insurance, gaming, usury, banking, or any treaties; or (ii) the issuance or availability of any governmental permits, licenses or certificates concerning the occupancy or physical condition of any property or any activities conducted thereon.

I. The enforceability of certain provisions of the Transaction Documents, if any, (including, without limitation, provisions that purport to permit the Administrative Agent or the Lenders to increase the rate of interest or to collect a late charge or prepayment penalty in the event of delinquency or default) may be subject to or limited by statutes and judicial decisions which limit or deny enforcement of such provisions under circumstances where the enforcement of such provisions, the imposition of such charges, or the amount thereof, as the case may be, is found to impose a penalty or forfeiture, or to constitute an invalid liquidated damages provision.

J. We express no opinion as to the validity or enforceability of any provisions that:  

(i) address the enforceability of any provision pursuant to which the Borrower agreed to make payments without setoff, defense or counterclaim or to release any claims;

(ii) purport to require the award or payment of attorneys’ fees, expenses or costs where such provisions in any action where the Administrative Agent or the Lenders are not the prevailing party; in this regard we also note that the award and amount of attorneys’ fees and costs is up to the discretion of the court, even where the Administrative Agent or the Lenders are the prevailing party;

(iii) provide that rights or remedies are not exclusive, that every right or remedy is cumulative and may be exercised in addition to or with any other right or remedy, that the election of some particular remedy or remedies does not preclude recourse to one or another remedy or that failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such right or remedy;

(iv) prohibit waiver of any terms or provisions of any of the Transaction Documents other than in writing or prohibit oral modifications thereof or modification by course of dealing to the extent such provisions are inconsistent with applicable law;

(v) provide for penalties, liquidated damages, acceleration of future amounts due (other than principal) without appropriate discount to present value; or

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(vi) attempt to change or waive rules of evidence or fix the method or quantum of proof to be applied in litigation or similar proceedings.

K.We express no opinion with respect to the creation, attachment, perfection or priority of any lien or security interest.

L.The Transaction Documents contemplate that certain filings are to be made with governmental authorities.  We express no opinion with respect to any such filings.  We further assume that the Administrative Agent and the Lenders are not relying on us for the recordation or filing of any Transaction Documents or for any recordation or filing contemplated by any Transaction Documents.

M.We express no opinion on the enforceability of any provisions of the Transaction Documents that entitle the Administrative Agent or the Lenders as a matter of right, to the appointment of a receiver after the occurrence of a default.

N.We express no opinion on the enforceability of any provisions of the Transaction Documents requiring any party to indemnify the Administrative Agent or the Lenders or any other person or its or their directors, officers, agents, employees, or successors or assigns, or any provisions exculpating the Administrative Agent or the Lenders from liability for its actions or inaction to the extent such indemnification or exculpation is contrary to public policy or law.

The opinions expressed in this opinion are solely for use of the Administrative Agent and the Lenders and their respective successors and permitted assigns and these opinions may not be relied on by any other persons without our prior written approval.  The opinions expressed in this opinion are rendered to the Administrative Agent and the Lenders (and their respective successors and permitted assigns) with respect to such facts existing and such Applicable Laws in effect as of the date hereof and as they presently apply, and we assume no obligation to supplement this opinion in the event of any change in Applicable Laws or in the facts upon which any of the opinions herein are based.  The opinions expressed herein are limited to the matters set forth in this opinion, and no other opinions should be inferred beyond the matters expressly stated.

This opinion may not be quoted, filed with any governmental authority or any other person (except as provided in the foregoing paragraph) or utilized for any other purpose without our prior written approval unless required by any Applicable Laws, and if any such Applicable Laws require that this opinion be quoted, filed with any governmental authority or any other person or utilized for any other purpose, then without our prior written approval this opinion may be so quoted, filed or utilized only to the extent (and only for the specific purpose) required by such Applicable Laws.

Very truly yours,

DLA PIPER LLP (US)

           

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SCHEDULE 1

TRANSACTION DOCUMENTS

Each of the following documents is dated as of the date of this opinion:

1. Credit Agreement

2. Pledge Agreement, among the Borrower, certain subsidiaries of the Borrower from time to time party thereto, and the Administrative Agent

3. Revolving Credit Note, by the Borrower in favor of Bank of America, N.A.

4. Revolving Credit Note, by the Borrower in favor of Wells Fargo Bank, N.A.

5. Term Loan Note, by the Borrower in favor of Bank of America, N.A.

6. Term Loan Note, by the Borrower in favor of Wells Fargo Bank, N.A.

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SCHEDULE 2

DESIGNATED AGREEMENTS

1. Amended and Restated Distribution Agreement, dated as of January 14, 1999, by and among Varian Associates, Inc. (now named Varian Medical Systems, Inc.), Varian, Inc. and Varian Semiconductor Equipment Associates, Inc.

2. Amended and Restated Note Purchase and Private Shelf Agreement, dated as of April 2, 1999, between the Borrower and Prudential Insurance Company of America (the “Prudential Agreement”).

3. Intellectual Property Agreement, dated April 2, 1999, by and among Varian Associates, Inc., Varian, Inc. and Varian Semiconductor Equipment Associates, Inc.

4. Amended and Restated 2005 Deferred Compensation Plan of the Borrower.

5. Management Incentive Plan of the Borrower.

6. Retirement Plan of the Borrower.

7. 2010 Employee Stock Purchase Plan of the Borrower.

8. Third Amended and Restated 2005 Omnibus Stock Plan of the Borrower.

       

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EXHIBIT H

form of pledge agreement

See attached.

       

H-1

Form of Pledge Agreement

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PLEDGE AGREEMENT

THIS PLEDGE AGREEMENT dated as of August 27, 2013 (this “Pledge Agreement”), is being entered into among VARIAN MEDICAL SYSTEMS, INC., a Delaware corporation (the “Borrower”), EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER AND EACH OTHER PERSON THAT SHALL BECOME A PARTY HERETO BY EXECUTION OF A PLEDGE JOINDER AGREEMENT (each a “Pledgor”, and, together with the Borrower, collectively, the “Pledgors”), and BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”) for each of the Secured Parties (as defined in the Credit Agreement referenced below).

RECITALS:

A.Pursuant to a Credit Agreement dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the Administrative Agent, Bank of America, N.A., as Swing Line Lender and L/C Issuer, and the lenders now or hereafter party thereto (the “Lenders”), the Lenders have agreed to provide to the Borrower a term loan facility and a revolving credit facility with a letter of credit sublimit and swing line facility.

B.Certain additional extensions of credit may be made from time to time for the benefit of one or more Loan Parties pursuant to certain Secured Cash Management Agreements and Secured Hedge Agreements (each as defined in the Credit Agreement).

C.It is a condition precedent to the Secured Parties’ obligations to extend such credit that the Pledgors shall have executed and delivered this Pledge Agreement to the Administrative Agent.

In order to induce the Secured Parties to from time to time to extend credit under the Credit Agreement and such Secured Cash Management Agreements and Secured Hedge Agreements, the parties hereto agree as follows:

1.Certain Definitions.  All capitalized terms used but not otherwise defined herein shall have the meanings assigned thereto in the Credit Agreement.  Terms used in this Pledge Agreement that are not otherwise expressly defined herein or in the Credit Agreement, and for which meanings are provided in the Uniform Commercial Code of the State of New York (the “UCC”), shall have such meanings unless the context requires otherwise.  In addition, for purposes of this Pledge Agreement, the following term shall have the following definition:

“Secured Obligations” shall have the meaning given such term in the Credit Agreement; provided that, notwithstanding anything contained herein to the contrary, the Secured Obligations shall not at any time as indebtedness is outstanding under the Note Purchase Agreement exceed an aggregate amount equal to $1.00 less than the amount that would create an obligation to grant a lien or security interest under Section 5D of the Note Purchase Agreement or that would cause the Borrower to be in breach of Section 6C(1), 6C(2) or 6C(3) of the Note Purchase Agreement, as such Sections appear in the form of Note Purchase Agreement provided

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by the Borrower to the Administrative Agent prior to the Closing Date, or as amended thereafter with the written consent of the Administrative Agent and the Required Lenders, not to be unreasonably withheld (such maximum amount, the “Maximum Amount”), provided that the Maximum Amount shall be no less than $60,000,000.  

2.Pledge of Pledged Interests; Other Collateral.  

(a)Subject to the limitations set forth in this Pledge Agreement, as collateral security for the payment and performance by each Pledgor of its now or hereafter existing Secured Obligations, each Pledgor hereby pledges and collaterally assigns to the Administrative Agent for the benefit of the Secured Parties, and grants to the Administrative Agent, for the benefit of the Secured Parties, a security interest in all of such Pledgor’s right, title and interest in and to the following items of property in which it now has or may at any time hereafter acquire an interest or rights therein, and wheresoever located:

(i)all Equity Interests owned by such Pledgor in all of its Subsidiaries (limited, in the case of Foreign Subsidiaries and Foreign Subsidiary Holding Companies, to Equity Interests of First Tier Foreign Subsidiaries and Foreign Subsidiary Holding Companies that, when taken together with all other Equity Interests pledged by the Pledgors hereunder, constitute no more than (x) 65% of the Voting Equity Interests of each such First Tier Foreign Subsidiary or Foreign Subsidiary Holding Company and (y) 100% of the other Equity Interests of each such First Tier Foreign Subsidiary or Foreign Subsidiary Holding Company, if the pledge of any greater amount would violate applicable Law or result in a non-de minimis adverse tax consequence to the Borrower or any Subsidiary), in each case, whether now existing or hereafter created or acquired and subject to the limitations set forth in this Section 2(a) (collectively, the “Pledged Interests”), including without limitation the Pledged Interests more particularly described on Schedule I hereto (such Subsidiaries, together with all other Subsidiaries whose Equity Interests may be required to be subject to this Pledge Agreement from time to time, are referred to collectively as the “Pledged Subsidiaries”);

(ii)all money, securities, security entitlements and other investment property, dividends, rights, general intangibles and other property at any time and from time to time (x) declared or distributed in respect of or in exchange for or on conversion of any Pledged Interest, or (y) by its or their terms exchangeable or exercisable for or convertible into any Pledged Interest;

(iii)all other property of whatever character or description, including money, securities, security entitlements and other investment property, and general intangibles hereafter, in each case, delivered to the Administrative Agent in substitution for or as an addition to any of the foregoing;

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(iv)any proceeds thereof and all certificates and instruments representing or evidencing any of the foregoing or any proceeds thereof; and

(v)all proceeds of any of the foregoing.

All such Pledged Interests, certificates, instruments, cash, securities, interests, dividends, rights and other property referred to in clauses (i) through (v) of this Section 2(a) are herein collectively referred to as the “Collateral.”

Notwithstanding anything herein to the contrary, in no event shall the Collateral include, and no Pledgor shall be deemed to have granted a security interest in, any of such Pledgor’s right, title or interest in or to any of the outstanding capital stock or other ownership interests of a Controlled Foreign Corporation (as defined below) or a Foreign Subsidiary Holding Company in excess of 65% of the voting power of all classes of capital stock of or other ownership interests in such Controlled Foreign Corporation or Foreign Subsidiary Holding Company entitled to vote; provided that (i) immediately upon the amendment of the Code to allow the pledge of a greater percentage of the voting power of capital stock or other ownership interests in a Controlled Foreign Corporation or Foreign Subsidiary Holding Company without adverse tax consequences, the Collateral shall include, and the applicable Pledgor shall be deemed to have granted a security interest in, such greater percentage of capital stock or other ownership interests of each Controlled Foreign Corporation or Foreign Subsidiary Holding Company; and (ii) if no adverse tax consequences to the applicable Pledgor shall arise or exist in connection with the pledge of the capital stock of or other ownership interest in any Controlled Foreign Corporation or Foreign Subsidiary Holding Company, the Collateral shall include, and the applicable Pledgor shall be deemed to have granted a security interest in, all capital stock and other ownership interests in such Controlled Foreign Corporation or Foreign Subsidiary Holding Company. As used herein, “Controlled Foreign Corporation” shall mean a “controlled foreign corporation” as defined in the Code.

(b)Subject to any other provision of this Pledge Agreement, each Pledgor agrees to deliver all certificates, instruments or other documents representing any Collateral to the Administrative Agent at such location as the Administrative Agent shall from time to time designate by written notice pursuant to Section 23 for its custody at all times until termination of this Pledge Agreement, together with such instruments of assignment and transfer as reasonably requested by the Administrative Agent.  If any Pledgor, pursuant to the foregoing sentence, shall have delivered certificates representing more than 65% of the voting power of all classes of capital stock or other ownership interest of a Controlled Foreign Corporation or a Foreign Subsidiary Holding Company, the Administrative Agent shall at any time thereafter accept, in substitution thereof, certificates representing 65% of such stock or other ownership interest, which certificates shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Administrative Agent.  Immediately upon receipt of such certificates and instrument, the Administrative Agent shall return to such Pledgor the certificates and instruments first delivered. In accordance with Section 2(a), despite the delivery of certificates representing more than 65% (or such greater percentage as provided in Section 2(a)) of the voting power of all classes of stock of or other ownership interest of a Controlled Foreign Corporation or a Foreign Subsidiary Holding Company, such Pledgor shall not

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be deemed to have granted a security interest in excess of 65% of such stock or ownership interests.

(c)Each Pledgor agrees to execute and deliver, or cause to be executed and delivered by other Persons, at Pledgor’s expense, all share certificates, documents, instruments, agreements, financing statements (and amendments thereto and continuations thereof), assignments, control agreements, or other writings as the Administrative Agent may reasonably request from time to time to carry out the terms of this Pledge Agreement or to protect or enforce the Administrative Agent’s Lien and security interest in the Collateral hereunder granted to the Administrative Agent for the benefit of the Secured Parties.  Each Pledgor further agrees to do and cause to be done upon the Administrative Agent’s reasonable request, at Pledgor’s expense, all things determined by the Administrative Agent to be necessary or advisable to perfect and keep in full force and effect the Lien in the Collateral hereunder granted to the Administrative Agent for the benefit of the Secured Parties, including the prompt payment following the Administrative Agent’s written request therefore of all reasonable documented out-of-pocket fees and expenses incurred by the Administrative Agent in connection with any filings made to perfect or continue the Lien and security interest in the Collateral hereunder granted in favor of the Administrative Agent for the benefit of the Secured Parties.

(d)All filing fees, advances, charges, costs and expenses, including all documented fees and expenses of counsel (collectively, “Attorneys’ Costs”), incurred or paid by the Administrative Agent or any Lender in exercising any right, power or remedy conferred by this Pledge Agreement, or in the enforcement thereof, shall become a part of the Secured Obligations secured hereunder and shall be paid to the Administrative Agent for the benefit of the Secured Parties by the Pledgor in respect of which the same was incurred within ten (10) Business Days after demand therefor, and any amounts not so paid on demand (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate, to the extent permitted by applicable Law.

(e)Each Pledgor agrees to register and cause to be registered the interest of the Administrative Agent, for the benefit of the Secured Parties, in the Pledged Interests on its own books and records and the registration books of each of the Pledged Subsidiaries.

3.Status of Pledged Interests.  Each Pledgor hereby represents, warrants and covenants to the Administrative Agent for the benefit of the Secured Parties, solely with respect to itself and the Collateral as to which it has or acquires any interest, that:

(a)All of the Pledged Interests are, as of the date of execution of this Pledge Agreement or any Pledge Agreement Supplement or Pledge Joinder Agreement, as applicable,  

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by each Pledgor pledging such Pledged Interests (such date as applicable with respect to each Pledgor, its “Applicable Date”), and shall at all times thereafter (i) be validly issued, (ii) are accurately described on Schedule I (as supplemented from time to time) and (iii) constitute 100% of the Equity Interests of the applicable Pledged Subsidiaries, except as provided in Section 2(a) hereof.

(b)The Pledgor is as at its Applicable Date and shall at all times thereafter (subject to Dispositions permitted under the Credit Agreement) be the sole registered and record and beneficial owner of the Pledged Interests, free and clear of all Liens and restrictions on pledge or transfer, including transfer of voting rights (other than the pledge hereunder and applicable restrictions pursuant to federal and state and applicable foreign securities laws).  Without limiting the foregoing, the Pledged Interests are not and will not be subject to any voting trust, shareholders agreement, right of first refusal, voting proxy, power of attorney or other similar arrangement (other than the rights hereunder in favor of the Administrative Agent).

(c)At no time shall any Pledged Interests (i) be held or maintained in the form of a security entitlement or credited to any securities account and (ii) which constitute a “security” (or as to which the related Pledged Subsidiary has elected to have treated as a “security”) under Article 8 of the UCC (including, for the purposes of this Section, the Uniform Commercial Code of any other applicable jurisdiction) to be maintained in the form of uncertificated securities.  With respect to Pledged Interests that are “securities” under the UCC, or as to which the issuer has elected at any time to have such interests treated as “securities” under the UCC, such Pledged Interests are, and shall at all times be, represented by the share certificates listed on Schedule I (as supplemented from time to time) hereto, which share certificates, with stock powers duly executed in blank by the Pledgor, have been delivered to the Administrative Agent on or before the Applicable Date or, in the case of Additional Interests as defined in Section 22, shall be delivered pursuant to Section 22. In addition, with respect to all Pledged Interests, including Pledged Interests that are not “securities” under the UCC and as to which the applicable Pledged Subsidiary has not elected to have such interests treated as “securities” under the UCC, the Pledgor has at its Applicable Date delivered to the Administrative Agent (or has previously delivered to the Administrative Agent or, in case of Additional Interests shall deliver pursuant to Section 22) Uniform Commercial Code financing statements (or appropriate amendments thereto) duly authorized by the Pledgor and naming the Administrative Agent for the benefit of the Secured Parties as “secured party,” in form, substance and number sufficient in the reasonable opinion of the Administrative Agent to be filed in all UCC filing offices and in all jurisdictions in which filing is necessary or advisable to perfect in favor of the Administrative Agent for the benefit of the Secured Parties the Lien on such Pledged Interests, together with all required filing fees.  Without limiting the foregoing provisions of this Section 3(c), with respect to any Pledged Interests issued by any First Tier Foreign Subsidiary, each applicable Pledgor shall deliver or cause to be delivered, (i) in addition to or in substitution for all or any of the foregoing items, as the Administrative Agent may elect, such other instruments, certificates, agreements, notices, filings, and other documents, and take or cause to be taken such other action (including the payment of all taxes, fees, assessments or other charges in connection therewith), as the Administrative Agent may, in its sole discretion, determine to be necessary or advisable under the laws of the jurisdiction of formation of such First Tier Foreign Subsidiary, to grant, perfect and protect as a first priority lien in such Collateral in favor of the Administrative Agent

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for the benefit of the Secured Parties, and (ii) if requested by the Administrative Agent, an opinion of counsel acceptable in form and substance to the Administrative Agent issued by a law firm acceptable to the Administrative Agent licensed to practice law in such foreign jurisdiction, addressing with respect to such Pledged Interests such matters as the Administrative Agent may reasonably request.

(d)It has all requisite corporate, limited liability company or other applicable power, legal right and lawful authority to execute this Pledge Agreement (and any Pledge Joinder Agreement applicable to it) and to pledge, assign and transfer its Pledged Interests pursuant to the terms and conditions of this Pledge Agreement.

(e)With respect to certificated Pledged Interests located in the United States, the taking possession by Administrative Agent of all certificates and other instruments constituting such Pledged Interests from time to time (with any necessary endorsements or appropriate stock powers or instruments of transfer duly executed in blank) and the filing of financing statements or other registrations of pledge with the Secretary of State (or equivalent governmental official or personal property registry) of the jurisdiction in which such Pledgor is organized, will perfect, and, except with respect to any Pledged Interests subject to a Permitted Lien, establish the first priority of, the security interest granted hereunder in such Pledged Interests in favor of the Administrative Agent for the benefit of the Secured Parties, securing the payment of the Secured Obligations, assuming, in the case of the Pledged Interests which constitute certificated “securities” under the UCC (including, for the purposes of this Section, the Uniform Commercial Code of any other applicable jurisdiction), continuous and uninterrupted possession by or on behalf of the Administrative Agent.  The Pledgor will, at its own cost and expense, appear in and defend any action, suit or proceeding which purports to affect the Secured Parties’ right, title and security interest in and to the Collateral.

(f)Except as otherwise expressly permitted hereunder or pursuant to a Disposition permitted under the Credit Agreement, none of the Pledged Interests (nor any interest therein or thereto) shall be sold, transferred or assigned without the Administrative Agent’s prior written consent.

(g)It shall at all times cause the Pledged Interests of such Pledgor that constitute “securities” (or as to which the issuer elects to have treated as “securities”) under the UCC to be represented by the certificates now and hereafter delivered to the Administrative Agent in accordance with Sections 2, 3 and 22 hereof and it shall cause each of the Pledged Subsidiaries as to which it is the Pledgor not to issue any Equity Interests, or securities convertible into, or exchangeable or exercisable for, Equity Interests, at any time during the term of this Pledge Agreement unless the Pledged Interests of such Pledge Subsidiary are issued solely to either (y) such Pledgor who shall immediately comply with Sections 3 and 22 hereof with respect to such property or (z) the Borrower or another Pledgor who shall immediately pledge such additional Equity Interests to the Administrative Agent for the benefit of the Secured Parties pursuant to Section 22 or 24 hereof, as applicable, on substantially identical terms as are contained herein and deliver or cause to be delivered the appropriate documents described in Section 3(c) hereof to the Administrative Agent and take such further actions as the Administrative Agent may deem necessary in order to perfect a first priority security interest in such Equity Interests.

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(h)The exact legal name and address, type of Person, jurisdiction of formation, jurisdiction of formation identification number (if any), and location of the chief executive office of such Pledgor are as specified on Schedule II attached hereto.  No Pledgor shall change its name, jurisdiction of formation (whether by reincorporation, merger or otherwise), or the location of its chief executive office, except upon giving not less than thirty (30) days’ prior written notice to the Administrative Agent and taking or causing to be taken all such action at such Pledgor’s expense as may be reasonably requested by the Administrative Agent to perfect or maintain the perfection of the Lien of the Administrative Agent in the Collateral.

4.Preservation and Protection of Collateral.

(a)The Administrative Agent shall be under no duty or liability with respect to the collection, protection or preservation of the Collateral, or otherwise, beyond the use of reasonable care in the custody and preservation thereof while in its possession.

(b)Each Pledgor agrees to pay and discharge when due and payable (a) all material tax liabilities, assessments and governmental charges or levies upon it or the Collateral in which it has an interest, unless being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves have been established in accordance with GAAP by such Pledgor and (b) all lawful claims which, if unpaid, would by law become a Lien upon its Collateral (other than inchoate Liens permitted under Section 7.01 of the Credit Agreement) in each case, where a failure to so pay and discharge could not reasonably be expected to have a Material Adverse Effect.  Upon the failure of any Pledgor to so pay, discharge or contest such tax liabilities, assessments, governmental charges, levies or claims, or upon the failure of any Pledgor to pay any amount pursuant to Section 2(c), the Administrative Agent at its option may pay or contest any of them (the Administrative Agent having the sole right to determine the legality or validity and the amount necessary to discharge such tax liabilities, assessments, governmental charges, levies or claims) but shall not have any obligation to make any such payment or contest.  All sums so disbursed by the Administrative Agent, including Attorneys’ Costs, court costs, expenses and other charges related thereto, shall be payable within ten (10) Business Days after demand therefor by the applicable Pledgor to the Administrative Agent and shall be additional Secured Obligations secured by the Collateral, and any amounts not so paid (in addition to other rights and remedies resulting from such nonpayment) shall bear interest from the date of demand until paid in full at the Default Rate, to the extent permitted by applicable Law.

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(c)Each Pledgor hereby (i) irrevocably authorizes the Administrative Agent to file (with, or to the extent permitted by applicable law, without the signature of the Pledgor appearing thereon) financing statements (including amendments thereto and continuations and copies thereof) showing such Pledgor as “debtor” at such time or times and in all filing offices as the Administrative Agent may from time to time determine to be necessary or advisable to perfect or protect the rights of the Administrative Agent and the Secured Parties hereunder, or otherwise to give effect to the transactions herein contemplated, and (ii) irrevocably ratifies and acknowledges all such actions taken by or on behalf of the Administrative Agent prior to the Applicable Date.

5.Default.  Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent is given full power and authority, then or at any time thereafter, to sell, assign, deliver or collect the whole or any part of the Collateral, or any substitute therefor or any addition thereto, in one or more sales, with or without any previous demands or demand of performance or, to the extent permitted by law, notice or advertisement, in such order as the Administrative Agent may elect; and any such sale may be made either at public or private sale at the Administrative Agent’s place of business or elsewhere, either for cash or upon credit or for future delivery, at such price or prices as the Administrative Agent may reasonably deem fair; and the Administrative Agent or any other Secured Party may be the purchaser of any or all Collateral so sold and hold the same thereafter in its own right free from any claim of any Pledgor or right of redemption.  Demands of performance, advertisements and presence of property and sale and notice of sale are hereby waived to the extent permissible by law.  Any sale hereunder may be conducted by an auctioneer or any officer or agent of the Administrative Agent.  Each Pledgor recognizes that the Administrative Agent may be unable to effect a public sale of the Collateral by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the “Securities Act”), and applicable state law, and may be otherwise delayed or adversely affected in effecting any sale by reason of present or future restrictions thereon imposed by governmental authorities, and that as a consequence of such prohibitions and restrictions the Administrative Agent may be compelled (i) to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to the distribution or resale thereof, or (ii) to seek regulatory approval of any proposed sale or sales, or (iii) to limit the amount of Collateral sold to any Person or group.  Each Pledgor agrees and acknowledges that private sales so made may be at prices and upon terms less favorable to such Pledgor than if such Collateral was sold either at public sales or at private sales not subject to other regulatory restrictions, and that the Administrative Agent has no obligation to delay the sale of any of the Collateral for the period of time necessary to permit the Pledged Subsidiary to register or otherwise qualify the Collateral, even if such Pledged Subsidiary would agree to register or otherwise qualify such Collateral for public sale under the Securities Act or applicable state law.  Each Pledgor further agrees, to the extent permitted by applicable law, that the use of private sales made under the foregoing circumstances to dispose of the Collateral shall be deemed to be dispositions in a commercially reasonable manner.  Each Pledgor hereby acknowledges that a ready market may not exist for the Pledged Interests if they are not traded on a national securities exchange or quoted on an automated quotation system and agrees and acknowledges that in such event the Pledged Interests may be sold for an amount less than a pro rata share of the fair market value of the Pledged Subsidiary’s assets minus its liabilities.  In addition to the foregoing,

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the Secured Parties may exercise such other rights and remedies as may be available under the Loan Documents, at law (including without limitation the UCC) or in equity.

6.Proceeds of Sale.  The net cash proceeds resulting from the collection, liquidation, sale, or other disposition of the Collateral shall be applied first to the expenses (including all Attorneys’ Costs) of retaking, holding, storing, processing and preparing for sale, selling, collecting, liquidating and the like, and then to the satisfaction of all Secured Obligations in accordance with the terms of Section 8.03 of the Credit Agreement.  Subject to the limitations contained in the definition of “Secured Obligations” in this Pledge Agreement, each Pledgor shall be liable to the Administrative Agent, for the benefit of the Secured Parties, and shall pay to the Administrative Agent, for the benefit of the Secured Parties, on demand any deficiency which may remain after such sale, disposition, collection or liquidation of the Collateral.

7.Presentments, Demands and Notices.  To the extent permitted by applicable Law, the Administrative Agent shall not be under any duty or obligation whatsoever to make or give any presentments, demands for performances, notices of nonperformance, protests, notice of protest or notice of dishonor in connection with any obligations or evidences of indebtedness held hereby as Collateral, or in connection with any obligations or evidences of indebtedness which constitute in whole or in part the Secured Obligations secured hereunder.

8.Attorney-in-Fact.  Each Pledgor hereby appoints the Administrative Agent as the Pledgor’s attorney-in-fact for the purposes of carrying out the provisions of this Pledge Agreement and taking any action and executing any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest; provided, that the Administrative Agent shall have and may exercise rights under this power of attorney only upon the occurrence and during the continuance of a Default or an Event of Default.  Without limiting the generality of the foregoing, upon the occurrence and during the continuance of a Default or an Event of Default, the Administrative Agent shall have the right and power to receive, endorse and collect all checks and other orders for the payment of money made payable to any Pledgor representing any dividend, interest payment, principal payment or other distribution payable or distributable in respect to the Collateral or any part thereof and to give full discharge for the same.

9.Reinstatement.  The granting of a security interest in the Collateral and the other provisions hereof shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Secured Obligations is rescinded or must otherwise be returned by any Secured Party or is repaid by any Secured Party in whole or in part in good faith settlement of a pending or threatened avoidance claim, whether upon the insolvency, bankruptcy or reorganization of any Pledgor or any other Loan Party or otherwise, all as though such payment had not been made. The provisions of this Section 9 shall survive repayment of all of the Secured Obligations and the termination or expiration of this Pledge Agreement in any manner, including but not limited to termination upon occurrence of the Facility Termination Date.  

10.Waiver by the Pledgors.  Each Pledgor waives to the extent permitted by applicable law (a) any right to require any Secured Party or any other obligee of the Secured Obligations to (i) proceed against any Person or entity, including without limitation any Loan Party, (ii) proceed against or exhaust any Collateral or other collateral for the Secured

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Obligations, or (iii) pursue any other remedy in its power, (b) any defense arising by reason of any disability or other defense of any other Person, or by reason of the cessation from any cause whatsoever of the liability of any other Person or entity, (c) any right of subrogation, (d) any right to enforce any remedy which any Secured Party or any other obligee of the Secured Obligations now has or may hereafter have against any other Person and any benefit of and any right to participate in any collateral or security whatsoever now or hereafter held by the Administrative Agent for the benefit of the Secured Parties.  Each Pledgor authorizes each Secured Party and each other obligee of the Secured Obligations without notice (except notice required by applicable law) or demand and without affecting its liability hereunder or under the Loan Documents from time to time to: (x) take and hold security, other than the Collateral herein described, for the payment of such Secured Obligations or any part thereof, and exchange, enforce, waive and release the Collateral herein described or any part thereof or any such other security; and (y) apply such Collateral or other security and direct the order or manner of sale thereof as such Secured Party or obligee in its discretion may determine.

The Administrative Agent may at any time deliver (without representation, recourse or warranty) the Collateral or any part thereof to a Pledgor and the receipt thereof by such Pledgor shall be a complete and full acquittance for the Collateral so delivered, and the Administrative Agent shall thereafter be discharged from any liability or responsibility therefor.

11.Dividends and Voting Rights.

(a)All dividends and other distributions with respect to any of the Pledged Interests shall be subject to the pledge hereunder, provided, however, that cash dividends paid to a Pledgor as record owner of the Pledged Interests, to the extent permitted by the Credit Agreement to be declared and paid, may be retained by such Pledgor unless and until an Event of Default shall have occurred and be continuing and written notice shall have been given by the Administrative Agent terminating or suspending such rights, free from any Liens hereunder.

(b)Unless and until an Event of Default shall have occurred and be continuing and written notice shall have been given by the Administrative Agent, the registration of the Collateral in the name of a Pledgor as record and beneficial owner shall not be changed and such Pledgor shall be entitled to exercise all voting and other rights and powers pertaining to the Collateral for all purposes not inconsistent with the terms of the Loan Documents.  

(c)Upon the occurrence and during the continuance of any Event of Default, all rights of the Pledgors to receive and retain cash dividends and other cash distributions upon the Collateral pursuant to subsection (a) above shall cease and shall thereupon be vested in the Administrative Agent for the benefit of the Secured Parties, and each Pledgor shall promptly deliver, or shall cause to be promptly delivered, all such cash dividends and other distributions which are received by such Pledgor with respect to the Pledged Interests to the Administrative Agent (together, if the Administrative Agent shall request, with the documents described in Sections 2(c) and 3(c) hereof or other negotiable documents or instruments so distributed) to be held by it hereunder or, at the option of the Administrative Agent, to be applied to the Secured Obligations.  Pending delivery to the

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Administrative Agent of such property, each Pledgor shall keep such property segregated from its other property and shall be deemed to hold the same in trust for the benefit of the Secured Parties.

(d)Upon the occurrence and during the continuance of any Event of Default, at the option of and upon notice thereof from the Administrative Agent, all rights of each of the Pledgors to exercise the voting or consensual rights and powers which it is authorized to exercise pursuant to subsection (b) above shall cease and the Administrative Agent may thereupon (but shall not be obligated to), at its request, cause such Collateral to be registered in the name of the Administrative Agent or its nominee or agent for the benefit of the Secured Parties and/or exercise such voting or consensual rights and powers as appertain to ownership of such Collateral, and to that end each Pledgor hereby appoints the Administrative Agent as its proxy, with full power of substitution, to vote and exercise all other rights as a shareholder with respect to such Pledged Interests hereunder upon the occurrence and during the continuance of any Event of Default, which proxy is coupled with an interest and is irrevocable until the Facility Termination Date, and each Pledgor hereby agrees to provide such further proxies as the Administrative Agent may request; provided, however, that the Administrative Agent in its discretion may from time to time refrain from exercising, and shall not be obligated to exercise, any such voting or consensual rights or such proxy.

12.Continued Powers.  Until the Facility Termination Date shall have occurred, the power of sale and other rights, powers and remedies granted to the Administrative Agent for the benefit of the Secured Parties hereunder shall continue to exist and may be exercised by the Administrative Agent at any time and from time to time irrespective of the fact that any of the Secured Obligations or any part thereof may have become barred by any statute of limitations or that any part of the liability of any Pledgor may have ceased.

13.Other Rights.  The rights, powers and remedies given to the Administrative Agent for the benefit of the Secured Parties by this Pledge Agreement shall be in addition to all rights, powers and remedies given to the Administrative Agent or any Secured Party under any Loan Document or by virtue of any statute or rule of law.  Any forbearance or failure or delay by the Administrative Agent in exercising any right, power or remedy hereunder shall not be deemed to be a waiver of such right, power or remedy, and any single or partial exercise of any right, power or remedy hereunder shall not preclude the further exercise thereof; and every right, power and remedy of the Secured Parties shall continue in full force and effect until such right, power or remedy is specifically waived or terminated in accordance with the terms of the Credit Agreement or this Pledge Agreement.

14.Anti-Marshaling Provisions.  The right is hereby given by each Pledgor to the Administrative Agent, for the benefit of the Secured Parties, to make releases (whether in whole or in part) of all or any part of the Collateral agreeable to the Administrative Agent without notice to, or the consent, approval or agreement of other parties and interests, including junior lienors, which releases shall not impair in any manner the validity of or priority of the Liens and security interests in the remaining Collateral conferred hereunder, nor release any Pledgor from personal liability for the Secured Obligations.  Notwithstanding the existence of any other security interest in the Collateral held by the Administrative Agent, for the benefit of the Secured

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Parties, the Administrative Agent shall have the right to determine the order in which any or all of the Collateral shall be subjected to the remedies provided in this Pledge Agreement.  Each Pledgor hereby waives any and all right to require the marshaling of assets in connection with the exercise of any of the remedies permitted by applicable law or provided herein or in any Loan Document.

15.Entire Agreement.  This Pledge Agreement, each Pledge Agreement Supplement and each Pledge Joinder Agreement, together with the Credit Agreement and other Loan Documents, constitute and express the entire understanding between the parties hereto with respect to the subject matter hereof, and supersede all prior negotiations, agreements and understandings, inducements, commitments or conditions, express or implied, oral or written, except as herein contained.  The express terms hereof, of the Pledge Agreement Supplements and of the Pledge Joinder Agreements control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof and thereof.  None of this Pledge Agreement, any Pledge Agreement Supplement and any Pledge Joinder Agreement nor any portion or provision hereof or thereof may be changed, altered, modified, supplemented, discharged, canceled, terminated, or amended orally or in any manner other than as provided in the Credit Agreement.

16.Further Assurances.  Each Pledgor agrees at its own expense to do such further acts and things, and to execute and deliver, and cause to be executed and delivered as may be necessary or advisable to give effect thereto, such additional conveyances, assignments, financing statements, control agreements, documents, certificates, stock powers, agreements and instruments, as the Administrative Agent may at any time reasonably request in connection with the administration or enforcement of this Pledge Agreement or any Pledge Joinder Agreement or related to the Collateral or any part thereof or in order better to assure and confirm unto the Administrative Agent its rights, powers and remedies for the benefit of the Secured Parties granted hereunder or thereunder.  Each Pledgor hereby consents and agrees that the Pledged Subsidiaries and all other Persons, shall be entitled to accept the provisions hereof and of the Pledge Joinder Agreements as conclusive evidence of the right of the Administrative Agent, on behalf of the Secured Parties, to exercise its rights, privileges, and remedies hereunder and thereunder with respect to the Collateral, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by any Pledgor or any other Person to any of such Pledged Subsidiaries or other Persons.

17.Binding Agreement; Assignment.  This Pledge Agreement and each Pledge Joinder Agreement, and the terms, covenants and conditions hereof and thereof, shall be binding upon and inure to the benefit of the parties hereto, and to their respective successors and assigns, except that no Pledgor shall be permitted to assign this Pledge Agreement, any Pledge Joinder Agreement or any interest herein or therein, except as permitted by the Credit Agreement.  Without limiting the generality of the foregoing sentence of this Section 17, any Lender may assign to one or more Persons, or grant to one or more Persons participations in or to, all or any part of its rights and obligations under the Credit Agreement (to the extent permitted by the Credit Agreement); and to the extent of any such assignment or participation such other Person shall, to the fullest extent permitted by law, thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject however, to the provisions of

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the Credit Agreement, including Article IX thereof (concerning the Administrative Agent) and Section 10.06 thereof (concerning assignments and participations).  All references herein to the Administrative Agent and to the Secured Parties shall include any successor thereof or permitted assignee, and any other obligees from time to time of the Secured Obligations.

18.Secured Cash Management Agreements and Secured Hedge Agreements.  No Secured Party (other than the Administrative Agent) that obtains the benefit of this Pledge Agreement shall have any right to notice of any action or to consent to, direct or object to any action hereunder or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents.  Notwithstanding any other provision of this Pledge Agreement to the contrary, the Administrative Agent shall only be required to verify the payment of, or that other satisfactory arrangement have been made with respect to, the Secured Obligations arising under Secured Cash Management Agreements and Secured Hedge Agreements to the extent the Administrative Agent has received written notice of such Obligations, together with such supporting documentation as it may request, from the applicable Cash Management Bank or Hedge Bank, as the case may be.  Each Secured Party not a party to the Credit Agreement that obtains the benefit of this Pledge Agreement shall be deemed to have acknowledged and accepted the appointment of the Administrative Agent pursuant to the terms of the Credit Agreement, and that with respect to the actions and omissions of the Administrative Agent hereunder or otherwise relating hereto that do or may affect such Secured Party, the Administrative Agent and each of its Related Parties shall be entitled to all the rights, benefits and immunities conferred under Article IX of the Credit Agreement.

19.Severability.  If any provision of this Pledge Agreement is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Pledge Agreement shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

20.Counterparts.  This Pledge Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Pledge Agreement to produce or account for more than one such counterpart executed by the Pledgor against whom enforcement is sought.  Without limiting the foregoing provisions of this Section 20, the provisions of Section 10.10 of the Credit Agreement shall be applicable to this Pledge Agreement.

21.Termination.  Subject to the provisions of Section 9, this Pledge Agreement and each Pledge Joinder Agreement, and all obligations of the Pledgors hereunder (excluding those obligations and liabilities that expressly survive such termination) shall terminate without delivery of any instrument or performance of any act by any party on the Facility Termination Date.  Upon such termination of this Pledge Agreement, the Administrative Agent shall, at the sole expense of the Pledgors, promptly deliver to the Pledgors the certificates evidencing its shares of Pledged Interests, together with any related stock powers (and any other property received as a dividend or distribution or otherwise in respect of such Pledged Interests or other

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Collateral to the extent then held by the Administrative Agent or any Secured Party), together with any cash then constituting the Collateral not then sold or otherwise disposed of in accordance with the provisions hereof, and take such further actions at the request of the Pledgors as may be necessary to effect the same.

22.Additional Interests.  If any Pledgor shall at any time acquire or hold any additional Pledged Interests, including any Pledged Interests issued by any Subsidiary not listed on Schedule I hereto which are required to be subject to a Lien pursuant to the Pledge Agreement by the terms hereof or of any provision of the Credit Agreement (any such shares being referred to herein as the “Additional Interests”), such Pledgor shall deliver to the Administrative Agent for the benefit of the Secured Parties (i) a Pledge Agreement Supplement in the form of Exhibit A hereto with respect to such Additional Interests duly completed and executed by such Pledgor and (iii) any other document required in connection with such Additional Interests as described in Section 3(c).  Each Pledgor shall comply with the requirements of this Section 22 concurrently with the acquisition of any such Additional Interests or, in the case of Additional Interests to which Section 6.15 of the Credit Agreement applies, within the time period specified in such Section or elsewhere in the Credit Agreement with respect to such Additional Interests; provided, however, that the failure to comply with the provisions of this Section 22 shall not impair the Lien on Additional Interests conferred hereunder.

23.Notices.  Any notice required or permitted hereunder shall be given (a) with respect to the Borrower, at the address of the Borrower indicated in Schedule 10.02 of the Credit Agreement, (b) with respect to each Subsidiary which is a Pledgor hereunder, at the address then in effect for the giving of notices to such Subsidiary under the Guaranty to which it is a party, and (c) with respect to the Administrative Agent or a Lender, at the Administrative Agent’s address indicated in Schedule 10.02 of the Credit Agreement.  All such addresses may be modified, and all such notices shall be given and shall be effective, as provided in Section 10.02 of the Credit Agreement for the giving and effectiveness of notices and modifications of addresses thereunder.

24.Joinder.  Each Person who shall at any time execute and deliver to the Administrative Agent a Pledge Joinder Agreement substantially in the form attached as Exhibit B hereto shall thereupon irrevocably, absolutely and unconditionally become a party hereto and obligated hereunder as a Pledgor and shall have thereupon pursuant to Section 2 hereof granted a security interest in and collaterally assigned and pledged to the Administrative Agent for the benefit of the Secured Parties all Pledged Interests which it has at its Applicable Date or thereafter acquires any interest or right, and all references herein and in the other Loan Documents to the Pledgors or to the parties to this Pledge Agreement shall be deemed to include such Person as a Pledgor hereunder.  Each Pledge Joinder Agreement shall be accompanied by the Supplemental Schedules referred to therein, appropriately completed with information relating to the Pledgor executing such Pledge Joinder Agreement and its property. Each of the applicable Schedules attached hereto shall be deemed amended and supplemented without further action by such information reflected on the Supplemental Schedules.

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25.Rules of Interpretation.  The rules of interpretation contained in Section 1.02 of the Credit Agreement shall be applicable to this Pledge Agreement and each Pledge Joinder Agreement and are hereby incorporated by reference.  All representations and warranties contained herein shall survive the delivery of documents and any Credit Extensions referred to herein or secured hereby.

26.Governing Law; Jurisdictions; Etc.

(a)GOVERNING LAW.  THIS PLEDGE AGREEMENT, EACH PLEDGE JOINDER AGREEMENT AND EACH PLEDGE AGREEMENT SUPPLEMENT AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT, ANY PLEDGE JOINDER AGREEMENT OR ANY PLEDGE AGREEMENT SUPPLEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATION LAW OF THE STATE OF NEW YORK.

(b)SUBMISSION TO JURSDICTION.  EACH PLEDGOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT IT WILL NOT COMMENCE ANY ACTION, LITIGATION OR PROCEEDING OF ANY KIND OR DESCRIPTION, WHETHER IN LAW OR EQUITY, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, AGAINST THE ADMINISTRATIVE AGENT, ANY LENDER, THE L/C ISSUER, OR ANY RELATED PARTY OF THE FOREGOING IN ANY WAY RELATING TO THIS PLEDGE AGREEMENT, ANY PLEDGE JOINDER AGREEMENT OR ANY PLEDGE AGREEMENT SUPPLEMENT OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN ANY FORUM OTHER THAN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION, LITIGATION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS PLEDGE AGREEMENT, IN ANY PLEDGE JOINDER AGREEMENT OR IN ANY PLEDGE AGREEMENT SUPPLEMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS PLEDGE AGREEMENT, ANY PLEDGE JOINDER AGREEMENT OR ANY PLEDGE AGREEMENT SUPPLEMENT AGAINST ANY PLEDGOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(c)WAIVER OF VENUE.  EACH PLEDGOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT OR ANY PLEDGE JOINDER AGREEMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(d)SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 23.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

27.Waiver of Jury Trial.EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT OR ANY PLEDGE JOINDER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (b) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS PLEDGE AGREEMENT OR ANY PLEDGE JOINDER AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

                   

[Signature pages follow.]

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IN WITNESS WHEREOF, the parties have duly executed this Pledge Agreement on the day and year first written above.

PLEDGOR:

VARIAN MEDICAL SYSTEMS, INC.

By:______________________________________

Name:Franco N. Palomba

Title:Corporate Senior Vice President,

Finance and Treasurer

PLEDGE AGREEMENT

Signature Page

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

ADMINISTRATIVE AGENT:

BANK OF AMERICA, N.A., as Administrative Agent

By:______________________________________

Name:Dora A. Brown

Title:Vice President

       

PLEDGE AGREEMENT

Signature Page

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

SCHEDULE I

Name of Pledgor	Name, Jurisdiction of Formation and Type of Entity of Pledged Subsidiary	Class or Type of Pledged Interest	Total Amount of Class or Type of Pledged Interests Authorized	Total Amount of Class or Type Outstanding	Total Amount Pledged	Certificate Number (if applicable)	Par Value   (if applicable)	Name of Transfer Agent (if any)
Varian Medical Systems, Inc.	Varian Medical Systems Nederland Holdings BV Houton, Netherlands Private company with limited liability	Shares	90,000 shares	18,000 shares	11,700 shares	N/A	EUR 100	N/A

   

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SCHEDULE II

Name and Address of Pledgor	Type of Person	Jurisdiction of Formation of Pledgor	Jurisdiction of Formation Identification Number	Address of Chief Executive Office
Varian Medical Systems, Inc. 3100 Hansen Way Palo Alto, CA 94304	Corporation	Delaware, USA	DE Corp # 0820557	3100 Hansen Way Palo Alto, CA 94304

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EXHIBIT A

PLEDGE AGREEMENT SUPPLEMENT

THIS PLEDGE AGREEMENT SUPPLEMENT dated as of _____________, 20__ (this “Pledge Agreement Supplement”), is made by _______________________________, a ________________ (the “Pledgor”), in favor of BANK OF AMERICA, N.A., in its capacity as Administrative Agent (the “Administrative Agent”) for the Secured Parties (as defined in the Credit Agreement referenced below; all capitalized terms used but not defined herein shall have the meanings given to such terms in such Credit Agreement).

RECITALS:

A.Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), the Lenders party thereto and the Administrative Agent are party to a Credit Agreement dated as of August 27, 2013 (as in effect on the date hereof, the “Credit Agreement”)

B.The Pledgor is party to that certain Pledge Agreement dated as of August 27, 2013 (as in effect on the date hereof, the “Pledge Agreement”), among Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), certain of its Subsidiaries and the Administrative Agent.

C.The Pledgor has acquired rights in the Pledged Interests listed on Annex A to this Pledge Agreement Supplement (the “Additional Interests”) and desires to pledge, and evidence its prior pledge, to the Administrative Agent for the benefit of the Secured Parties all of the Additional Interests in accordance with the terms of the Credit Agreement and the Pledge Agreement.

In order to induce the Secured Parties to from time to time to extend credit under the Credit Agreement, Secured Cash Management Agreements and Secured Hedge Agreements, the Pledgor hereby agrees as follows:

1.Affirmations.  The Pledgor hereby reaffirms and acknowledges the pledge and collateral assignment to, and the grant of security interest in, the Additional Interests contained in the Pledge Agreement and pledges and collaterally assigns to the Administrative Agent for the benefit of the Secured Parties, and grants to the Administrative Agent for the benefit of the Secured Parties a security interest in all of the Pledgor’s right, title and interest in and to the Additional Interests and all of the following:

(a)all money, securities, security entitlements and other investment property, dividends, rights, general intangibles and other property at any time and from time to time (x) declared or distributed in respect of or in exchange for or on conversion of any or all of the Additional Interests or (y) by its or their terms exchangeable or exercisable for or convertible into any Additional Interest or other Pledged Interest;

A- 1 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

(b)all other property of whatever character or description, including money, securities, security entitlements and other investment property, and general intangibles hereafter, in each case delivered to the Administrative Agent in substitution for or as an addition to any of the foregoing;

(c)any proceeds thereof and all certificates and instruments representing or evidencing any of the foregoing or any proceeds thereof; and

(d)all proceeds of any of the foregoing.

The Pledgor hereby acknowledges, agrees and confirms by its execution of this Pledge Agreement Supplement that the Additional Interests constitute “Pledged Interests” under and are subject to the Pledge Agreement, and the items of property referred to in clauses (a) through (d) above (the “Additional Collateral”) shall collectively constitute “Collateral” under and are subject to the Pledge Agreement, including without limitation the limitations contained in Section 2(a) of the Pledge Agreement.  Each of the representations and warranties with respect to Pledged Interests and Collateral contained in the Pledge Agreement is hereby made by the Pledgor with respect to the Additional Interests and the Additional Collateral, respectively, as of the date hereof.  The Pledgor further represents and warrants that Annex A attached to this Pledge Agreement Supplement contains a true, correct and complete description of the Additional Interests, and that all other documents required to be furnished to the Administrative Agent pursuant to Section 3(c) of the Pledge Agreement in connection with the Additional Collateral have been delivered or are being delivered simultaneously herewith to the Administrative Agent.  The Pledgor further acknowledges that Schedule I to the Pledge Agreement shall be deemed, as to it, to be supplemented as of the date hereof to include the Additional Interests as described on Annex A to this Pledge Agreement Supplement.

2.Counterparts.  This Pledge Agreement Supplement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Pledge Agreement Supplement to produce or account for more than one such counterpart executed by the Pledgor.  Without limiting the foregoing provisions of this Section 2, the provisions of Section 10.10 of the Credit Agreement shall be applicable to this Pledge Agreement Supplement.

3.Governing Law; Jurisdiction; Waiver of Jury Trial; Etc.  The provisions of Section 26 and 27 of the Pledge Agreement are hereby incorporated by reference as if fully set forth herein.

A- 2 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

IN WITNESS WHEREOF, the Pledgor has caused this Supplement to be duly executed by its authorized officer as of the day and year first above written.

PLEDGOR:

________________________________________

By:_____________________________________

Name:___________________________________

Title:____________________________________

A- 3 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

ANNEX A

(to Pledge Agreement Supplement of __________ dated __________)

SCHEDULE I

Additional Interests

    Name of Pledgor Name, Jurisdiction of Formation and Type of Entity of Pledged Subsidiary Class or Type of Pledged Interest Total Amount of Class or Type of Pledged Interests Authorized Total Amount of Class or Type Outstanding Total Amount Pledged Certificate Number (if applicable) Par Value (if applicable) Name of Transfer Agent (if any)

Delivered Pursuant to Pledge Agreement Supplement of: __________________________________

Applicable Date:  __________, 20__

A- 4 

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT B

PLEDGE JOINDER AGREEMENT

THIS PLEDGE JOINDER AGREEMENT dated as of _____________, 20__ (this “Pledge Joinder Agreement”), is made by _______________________________, a ________________ (the “Joining Pledgor”), in favor of BANK OF AMERICA, N.A., in its capacity as Administrative Agent (the “Administrative Agent”) for the Secured Parties (as defined in the Credit Agreement referenced below; all capitalized terms used but not defined herein shall have the meanings given to such terms in such Credit Agreement).

RECITALS:

A.Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), the Lenders party thereto and the Administrative Agent are party to a Credit Agreement dated as of August 27, 2013 (as in effect on the date hereof, the “Credit Agreement”).

B.The Borrower, certain of its Subsidiaries and the Administrative Agent, are party to a Pledge Agreement dated as of August 27, 2013 (as in effect on the date hereof, the “Pledge Agreement”).

C.The Joining Pledgor is a Subsidiary of the Borrower and is required by the terms of the Credit Agreement to be joined as a party to the Pledge Agreement as a Pledgor.

D.The Joining Pledgor will materially benefit directly and indirectly from the making and maintenance of the extensions of credit made from time to time under the Credit Agreement, Secured Cash Management Agreements and Secured Hedge Agreements.

In order to induce the Secured Parties to from time to time to extend credit under the Credit Agreement, Secured Cash Management Agreements and Secured Hedge Agreements, the Joining Pledgor hereby agrees as follows:

1.Joinder.  The Subsidiary hereby irrevocably, absolutely and unconditionally becomes a party to the Pledge Agreement as a Pledgor and bound by all the terms, conditions, obligations, liabilities and undertakings to which a Pledgor is subject thereunder, including without limitation the grant pursuant to Section 2 of the Pledge Agreement of a security interest to the Administrative Agent for the benefit of the Secured Parties in, and collateral assignment and pledge to the Administrative Agent for the benefit of the Secured Parties of, all of such Pledgor’s right, title and interest in and to the Pledged Interests and other property constituting Collateral of such Pledgor or in which such Pledgor has or may have or acquire an interest or right therein, whether now owned or existing or hereafter created, acquired or arising and wheresoever located, as collateral security for the payment and performance by such Pledgor of its now or hereafter existing Secured Obligations, all with the same force and effect as if the Joining Pledgor were a signatory to the Pledge Agreement.

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

2.Affirmations.  The Joining Pledgor hereby acknowledges and affirms as of the date hereof with respect to itself, its properties and its affairs each of the waivers, representations, warranties, acknowledgements and certifications applicable to a Pledgor contained in the Pledge Agreement.

3.Supplemental Schedules.  Attached to this Pledge Joinder Agreement are duly completed schedules (the “Supplemental Schedules”) supplementing as thereon indicated the respective Schedules to the Pledge Agreement.  The Joining Pledgor represents and warrants that the information contained on each of the Supplemental Schedules with respect to such Joining Pledgor and its properties and affairs is true, complete and accurate as of its Applicable Date.

4.Severability.  If any provision of this Pledge Joinder Agreement is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Pledge Joinder Agreement shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

5.Counterparts.  This Pledge Joinder Agreement may be executed in any number of counterparts each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Pledge Joinder Agreement to produce or account for more than one such counterpart executed by the Joining Pledgor.  Delivery of an executed counterpart of a signature page of this Pledge Joinder Agreement by facsimile or electronic transmission (including .pdf file) shall be effective as delivery of a manually executed counterpart hereof.

6.Delivery.  The Joining Pledgor hereby irrevocably waives notice of acceptance of this Pledge Joinder Agreement and acknowledges that the Secured Obligations are and shall be deemed to be incurred, and credit extensions under the Loan Documents, Secured Cash Management Agreements and Secured Hedge Agreements made and maintained, in reliance on this Pledge Joinder Agreement and the Pledgor’s joinder as a party to the Pledge Agreement as herein provided.

7.Governing Law; Jurisdiction; Waiver of Jury Trial; Etc.  The provisions of Section 26 and 27 of the Pledge Agreement are hereby incorporated by reference as if fully set forth herein.

[Signature page follows.]

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

IN WITNESS WHEREOF, the Joining Pledgor has duly executed and delivered this Pledge Joinder Agreement as of the day and year first written above.

JOINING PLEDGOR:

__________________________________________

By:_______________________________________

Name:____________________________________

Title:____________________________________

   

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SUPPLEMENTAL
SCHEDULE I

Additional Interests

    Name of Pledgor Name, Jurisdiction of Formation and Type of Entity of Pledged Subsidiary Class or Type of Pledged Interest Total Amount of Class or Type of Pledged Interests Authorized Total Amount of Class or Type Outstanding Total Amount Pledged Certificate Number (if applicable) Par Value (if applicable) Name of Transfer Agent (if any)

Delivered Pursuant to Pledge Joinder Agreement of: __________________________________

Applicable Date:  __________, 20__

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CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

SUPPLEMENTAL

SCHEDULE II

    Name and Address of Pledgor     Type of Person Jurisdiction of Formation of Pledgor Jurisdiction of Formation Identification Number Address of Chief Executive Office

Delivered Pursuant to Pledge Joinder Agreement of: __________________________________

Applicable Date:  __________, 20__

   

H-1

Form of Pledge Agreement

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT I-1

Form of

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to that certain Credit Agreement, dated as of August 27, 2013 (as amended, restated, extended, supplemented, increased or otherwise modified in writing from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined), among Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.  

Pursuant to the provisions of Section 3.01(e)(ii)(B)(III) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN.  By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

[NAME OF LENDER]

By:

Name:

Title:

Date: ________ __, 20[  ]

       

I-1

Form of U.S. Tax Compliance Certificate

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT I-2

Form of

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to that certain Credit Agreement, dated as of August 27, 2013 (as amended, restated, extended, supplemented, increased or otherwise modified in writing from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined), among Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.  

Pursuant to the provisions of Section 3.01(e)(ii)(B)(IV) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN.  By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

[NAME OF PARTICIPANT]

By:

Name:

Title:

Date: ________ __, 20[  ]

   

I-2

Form of U.S. Tax Compliance Certificate

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT I-3

Form of

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to that certain Credit Agreement, dated as of August 27, 2013 (as amended, restated, extended, supplemented, increased or otherwise modified in writing from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined), among Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.  

Pursuant to the provisions of Section 3.01(e)(ii)(B)(IV) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption.  By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

[NAME OF PARTICIPANT]

By:

Name:

Title:

Date: ________ __, 20[  ]

   

I-3

Form of U.S. Tax Compliance Certificate

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT I-4

FORM OF

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to that certain Credit Agreement, dated as of August 27, 2013 (as amended, restated, extended, supplemented, increased or otherwise modified in writing from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined), among Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.  

Pursuant to the provisions of Section 3.01(e)(ii)(B)(IV) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption.  By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

[NAME OF LENDER]

By:

Name:

Title:

Date: ________ __, 20[  ]

   

I-4- 1 

Form of U.S. Tax Compliance Certificate

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT J

FORM OF

secured party designation notice

TO:	Bank of America, N.A., as Administrative Agent
RE:	Credit Agreement, dated as of August 27, 2013 by and among Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), the Lenders and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer (as amended, modified, extended, restated, replaced, or supplemented from time to time, the “Credit Agreement”; capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Credit Agreement).
DATE:	[Date]

[Name of Cash Management Bank/Hedge Bank] (the “Secured Party”) hereby notifies you, pursuant to the terms of the Credit Agreement, that the Secured Party meets the requirements of a [Cash Management Bank] [Hedge Bank] under the terms of the Credit Agreement and is a [Cash Management Bank] [Hedge Bank] under the Credit Agreement and the other Loan Documents.

Delivery of an executed counterpart of a signature page of this notice by fax transmission or other electronic mail transmission (e.g. “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart of this notice.

A duly authorized officer of the undersigned has executed this notice as of the day and year set forth above.

as a [Cash Management Bank] [Hedge Bank]

By:

Name:

Title:

   

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Form of Secured Party Designation Notice

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT K

FORM OF FUNDING INDEMNITY LETTER

August [__], 2013

To the Lenders and the Administrative Agent referred to below

Ladies and Gentlemen:

Varian Medical Systems, Inc., a Delaware corporation (the “Borrower”), intends to enter into a proposed Credit Agreement (the “Credit Agreement”) anticipated to be dated on or about August 27, 2013 (the “Anticipated Closing Date”), by and among the Borrower, the lenders party thereto (the “Lenders”), and Bank of America, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”), Swing Line Lender and L/C Issuer.  The current draft of the Credit Agreement was distributed to the Borrower on August [__], 2013 (the “Provisional Credit Agreement”; capitalized terms used herein but not otherwise defined herein shall have the meaning set forth in the Provisional Credit Agreement).

In addition, in accordance with the terms of the Provisional Credit Agreement, the Borrower has delivered to the Administrative Agent an initial Loan Notice dated on or before August [__], 2013 (the “Initial Loan Notice”).  Pursuant to the Initial Loan Notice, the Borrower has irrevocably requested that all of the initial Borrowing be made as Eurodollar Rate Loans under the Credit Agreement on the Anticipated Closing Date.

The Borrower acknowledges that (a) in order to accommodate the foregoing request, the Lenders are making arrangements for value to provide, on the Anticipated Closing Date, the requested initial Borrowing, (b) there can be no assurance that the Closing Date will occur on the Anticipated Closing Date, (c) no Lender shall make or be obligated to make available any portion of the initial Borrowing unless the Closing Date has occurred and all conditions for the making of the Loans under the Credit Agreement have been satisfied, including without limitation the conditions stated in Sections 4.01 and 4.02 of the Credit Agreement (collectively, the “Conditions”), and (d) if the Closing Date does not occur by, or if all of the Conditions are not satisfied prior to or on the Anticipated Closing Date, each of the Lenders will have sustained funding losses as a result of, and with respect to, such failure of the requested Eurodollar Rate Loans to be made on such date.

Accordingly, the Borrower irrevocably agrees to reimburse each Lender for and hold each Lender harmless from any losses, costs and reasonable expenses which such Lender may sustain or incur (i) as a consequence of the failure of any Loan requested to be made as a Eurodollar Rate Loan in accordance with the Initial Loan Notice to be made for any reason on the Anticipated Closing Date or (ii) in connection with the preparation, administration or enforcement of, or any dispute arising under, this Funding Indemnity Letter.  The Borrower’s agreement in the preceding sentence shall operate with respect to the portion of any Loan requested to be funded as one or more Eurodollar Rate Loans on the Anticipated Closing Date to the same extent and in the manner as provided in Section 3.05 of the Provisional Credit Agreement, the terms of which (including all related provisions and definitions contained in the Provisional Credit Agreement), are hereby incorporated by reference herein.  The Borrower’s obligations under this Funding Indemnity Letter shall be effective whether any loss, cost or expense described herein shall occur as a result of any delay in the occurrence of the Closing Date or any failure of the credit facilities under the Credit Agreement to close or fund for any reason whatsoever, including without limitation the failure of any of the Conditions to occur or be satisfied; provided, however, that following the execution and delivery of the Credit Agreement by the parties thereto, the occurrence of the Closing Date, and the satisfaction of all conditions to funding provided for in the Credit Agreement as so executed and delivered, the obligations of the Borrower hereunder shall not be applicable to

K- 1 

Form of Funding Indemnity Letter

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

any loss, cost or expense described in Section 3.05 of the Provisional Credit Agreement that (i) arises on or after the Closing Date and (ii) results from any failure of a Lender to fund any Loans on or after the Closing Date to the extent such funding was required under the Credit Agreement.  For the purpose of calculating amounts payable by the Borrower to any Lender under this Funding Indemnity Letter, each Eurodollar Rate Loan to be made by a Lender (and, in each case, each related reserve, special deposit or similar requirement) pursuant to the Initial Loan Notice shall be conclusively deemed to have been funded by each such Lender (x) in reliance on the Borrower’s undertakings contained in this Funding Indemnity Letter and (y) at the rates used or to be used under the Provisional Credit Agreement in determining the Eurodollar Rate for such Eurodollar Rate Loans described in the Initial Loan Notice by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not any such Eurodollar Rate Loan is in fact so funded.

The Borrower hereby waives notice of acceptance of this Funding Indemnity Letter by the Administrative Agent and the Lenders.

This Funding Indemnity Letter shall be governed by and construed in accordance with the law of the State of New York.

[Signature page follows.]

   

K- 2 

Form of Funding Indemnity Letter

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Funding Indemnity Letter as of the day and year first written above.

VARIAN MEDICAL SYSTEMS, INC.

By:

Name:

Title:

K- 3 

Form of Funding Indemnity Letter

CONFIDENTIAL TREATMENT REQUESTED – REDACTED COPY

EXHIBIT L

FORM OF

REPORT OF LETTER OF CREDIT INFORMATION

To:	Bank of America, N.A. as Administrative Agent
Attn:
Phone No.:
Fax No.:
Ref.:	Letters of Credit
	Issued for the account of Varian Medical Systems, Inc.
	or any Subsidiary thereof under the Credit Agreement dated as of August 27, 2013

Reporting Period :___/___/20___ through ___/___/20___

L/C No. Maximum Face Amount Current Face Amount Currency of L/C Escalating Y/N(?) If “Y" Provide Schedule* Beneficiary Name Issuance Date Expiry Date Auto Renewal Auto Renewal Period/ Notice Date of Amend -ment Amount of Amend-ment Type of Amendment

   

L- 1 

Form of Report of Letter of Credit Information

EX-21

EXHIBIT 21

VARIAN MEDICAL SYSTEMS, INC.

LIST OF SUBSIDIARIES

Name	State or Other Jurisdiction of Incorporation
Centella Therapeutics, Inc.	DE, USA
Varian BioSynergy, Inc.	DE, USA
Varian Medical Systems Latin America, Ltd.	DE, USA
Varian Medical Systems India Pvt. Ltd.	DE, USA
Varian Medical Systems Pacific, Inc.	DE, USA
Varian Medical Systems Canada Holdings, Inc.	DE, USA
Varian Medical Systems International Holdings, Inc.	DE, USA
Varian Philippines, Ltd.	DE, USA
VivaRay, Inc.	CA, USA
Page Mill Corporation	MA, USA
Mansfield Insurance Company	VT, USA
Varian Medical Systems Australasia Pty Ltd.	Australia
Varian Medical Systems Gesellschaft m.b.H.	Austria
Varian Medical Systems Belgium N.V.	Belgium
Varian Medical Systems Brasil Limitada	Brazil
Varian Medical Systems Canada, Inc.	Canada
Varian Medical Systems (China) Co. Ltd.	China
Varian Medical Systems Trading (Beijing) Co., Ltd.	China
Varian Medical Systems Scandinavia AS	Denmark
Varian Medical Systems Finland OY	Finland
Varian Medical Systems France	France
Varian Medical Systems Deutschland G.m.b.H.	Germany
Varian Medical Systems Haan G.m.b.H.	Germany
Varian Medical Systems Deutschland Holdings G.m.b.H.	Germany
Varian Medical Systems Particle Therapy GmbH	Germany
Varian Medical Systems Hungary Kft Varian Medical Systems Italia S.p.A.	Hungary Italy
Varian Medical Systems India Software Pvt. Ltd.	India
Varian Medical Systems International (India) Pvt. Ltd.	India
Varian Medical Systems K.K.	Japan
Varian Medical Systems Korea, Inc.	Korea
Varian Medical Systems Mauritius Ltd.	Mauritius
Varian FSC B.V.	Netherlands
Varian Medical Systems Nederland B.V.	Netherlands
Varian Medical Systems Nederland  Holdings B.V.	Netherlands
VMS Nederland Finance B.V.	Netherlands
Varian Medical Systems (RUS) LLC	Russia
Varian Medical Systems Iberica S.L.	Spain
Varian Medical Systems International A.G.	Switzerland
Varian Medical Systems Imaging Laboratory Gmbh	Switzerland
Varian Medical Systems UK Ltd.	United Kingdom
Varian Medical Systems UK Holdings Limited	United Kingdom

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-188693, No. 333-168444, No. 333-168443, No. 333-146176, No. 333-130001, No. 333-152903, No. 333-123778, No. 333-75531, No. 333-57006, No. 333-57008, No. 333-57010, No. 333-57012, No. 333-161307) of Varian Medical Systems, Inc. of our report dated November 26, 2013 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/S/ PRICEWATERHOUSECOOPERS LLP

San Jose, California

November 26, 2013

EX-31

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Dow R. Wilson, certify that:

1. I have reviewed this Annual Report on Form 10-K of Varian Medical Systems, Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 26, 2013	/s/ Dow R. Wilson
	Dow R. Wilson
	President
	and Chief Executive Officer

EX-31

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Elisha W. Finney, certify that:

1. I have reviewed this Annual Report on Form 10-K of Varian Medical Systems, Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 26, 2013	/s/ Elisha W. Finney
	Elisha W. Finney
	Executive Vice President, Finance and
	Chief Financial Officer

EX-32

EXHIBIT 32.1

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report of Varian Medical Systems, Inc. (the “Company”), on Form 10-K for the year ended September 27, 2013 (the “Report”), I, Dow R. Wilson, Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 26, 2013	/s/ Dow R. Wilson
	Dow R. Wilson
	President
	and Chief Executive Officer

                       

EX-32

EXHIBIT 32.2

CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report of Varian Medical Systems, Inc. (the “Company”), on Form 10-K for the year ended September 27, 2013 (the “Report”), I, Elisha W. Finney, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 26, 2013	/s/ Elisha W. Finney
	Elisha W. Finney
	Executive Vice President, Finance and Chief Financial Officer

   

XML

Accumulated Other Comprehensive Income (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Defined Benefit Plan Disclosure [Line Items]
Beginning Balance	$ (56,621)	$ (46,848)	$ (37,604)
Current period other comprehensive income (loss)	16,550	(9,773)	(9,244)
Ending Balance	(40,071)	(56,621)	(46,848)
Defined Benefit Pension and Post Retirement Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Beginning Balance	(48,623)	(43,120)	(36,844)
Current period other comprehensive income (loss)	8,542	(5,503)	(6,276)
Ending Balance	(40,081)	(48,623)	(43,120)
Unrealized Gain (Loss) on Derivatives
Defined Benefit Plan Disclosure [Line Items]
Beginning Balance	531	(7)	(307)
Current period other comprehensive income (loss)	(1,222)	538	300
Ending Balance	(691)	531	(7)
Cumulative Translation Adjustments
Defined Benefit Plan Disclosure [Line Items]
Beginning Balance	(8,529)	(3,721)	(453)
Current period other comprehensive income (loss)	9,230	(4,808)	(3,268)
Ending Balance	$ 701	$ (8,529)	$ (3,721)

XML

Schedule of Amounts Recognized in Accumulated Other Comprehensive Loss (Before Tax) (Detail) (USD $) In Millions, unless otherwise specified	Sep. 27, 2013	Sep. 28, 2012
Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Prior service cost	$ (0.7)	$ (0.4)
Net gain (loss)	(49.4)	(59.7)
Accumulated other comprehensive loss	(50.1)	(60.1)
Post-Retirement Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Prior service cost	0	0
Net gain (loss)	0.1	(0.4)
Accumulated other comprehensive loss	$ 0.1	$ (0.4)

XML

Schedule of Net Periodic Benefit Costs (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 4.8	$ 4.3	$ 3.7
Interest cost	5.2	5.3	5.0
Loss due to settlement or curtailment	1.0	0.9	0
Expected return on assets	(5.7)	(5.3)	(4.9)
Amortization of prior service cost	0.2	0.2	0.1
Recognized actuarial loss	2.7	2.5	2.1
Net periodic benefit cost	8.2	7.9	6.0
New prior service cost	0.5	0	0
Net (gain) loss arising during the year	(6.6)	9.9	9.6
Amortization of prior service cost	(0.2)	(0.2)	(0.1)
Amortization, settlement and curtailment of net actuarial loss	(3.7)	(3.5)	(2.1)
Total recognized in other comprehensive (income) loss	(10.0)	6.2	7.4
Total recognized in net periodic benefit cost and other comprehensive loss	(1.8)	14.1	13.4
Post-Retirement Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Service cost	0	0	0
Interest cost	0.2	0.2	0.2
Loss due to settlement or curtailment	0	0	0
Expected return on assets	0	0	0
Amortization of prior service cost	0	0	0
Recognized actuarial loss	0	0.1	0.1
Net periodic benefit cost	0.2	0.3	0.3
New prior service cost	0	0	0
Net (gain) loss arising during the year	(0.4)	(0.1)	0.3
Amortization of prior service cost	0	0	0
Amortization, settlement and curtailment of net actuarial loss	(0.1)	(0.1)	(0.1)
Total recognized in other comprehensive (income) loss	(0.5)	(0.2)	0.2
Total recognized in net periodic benefit cost and other comprehensive loss	$ (0.3)	$ 0.1	$ 0.5

XML

Reconciliation of Segment Operating Results to Companys Earnings from Continuing Operations before Taxes (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Segment Reporting Information [Line Items]
Earnings from operations before taxes	$ 612	$ 596	$ 589
Interest income (expense), net	3	2	1
Oncology Systems
Segment Reporting Information [Line Items]
Earnings from operations before taxes	512	505	507
X-Ray Products
Segment Reporting Information [Line Items]
Earnings from operations before taxes	144	131	118
Total Reportable Segments
Segment Reporting Information [Line Items]
Earnings from operations before taxes	656	636	625
Other
Segment Reporting Information [Line Items]
Earnings from operations before taxes	(25)	(32)	(32)
Corporate
Segment Reporting Information [Line Items]
Earnings from operations before taxes	$ (22)	$ (10)	$ (5)

XML

Options Outstanding and Exercisable Under Employee Stock Plans (Parenthetical) (Detail) (USD $)	Sep. 27, 2013
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Closing price of VMS common stock	$ 74.18

XML

Schedule of Components of Deferred Tax Assets and Liabilities (Detail) (USD $)	Sep. 27, 2013	Sep. 28, 2012
Schedule Of Deferred Income Tax Assets And Liabilities [Line Items]
Deferred revenues	$ 26,800,000	$ 26,800,000
Deferred compensation	34,900,000	32,700,000
Product warranty	13,900,000	13,700,000
Inventory adjustments	18,300,000	17,000,000
Equity-based compensation	33,300,000	41,800,000
Environmental reserve	5,700,000	5,900,000
Net operating loss carryforwards	78,600,000	54,200,000
Other	37,800,000	45,400,000
Total deferred tax assets, gross	249,300,000	237,500,000
Valuation allowance	(60,700,000)	(45,800,000)
Total deferred tax assets	188,600,000	191,700,000
Tax-deductible goodwill	(27,300,000)	(27,400,000)
Fixed assets	(17,700,000)	(22,300,000)
Other	(30,400,000)	(28,800,000)
Total deferred tax liabilities	(75,400,000)	(78,500,000)
Net deferred tax assets	113,200,000	113,200,000
Net current deferred tax assets	122,250,000	115,786,000
Net long-term deferred tax assets (included in “Other Assets”)	10,500,000	13,800,000
Net current deferred tax liabilities (included in “Accrued Expenses”)	(7,600,000)	(2,900,000)
Net long-term deferred tax liabilities (included in “Other long-term liabilities”)	(12,000,000)	(13,500,000)
Net deferred tax assets	$ 113,200,000	$ 113,200,000

XML

Derivative Instruments and Hedging Activities

12 Months Ended

Sep. 27, 2013

Derivative Instruments and Hedging Activities

8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company measures all derivatives at fair value on the Consolidated Balance Sheets. The accounting for gains or losses resulting from changes in the fair value of those derivatives depends upon the use of the derivative and whether it qualifies for hedge accounting. Changes in the fair value of derivatives that do not qualify for hedge accounting treatment must be recognized in earnings, together with elements excluded from effectiveness testing and the ineffective portion of a particular hedge.

The fair values of derivative instruments reported on the Company’s Consolidated Balance Sheets were as follows:

	Asset Derivatives							Liability Derivatives
	BalanceSheet Location	September27, 2013		September28, 2012			Balance Sheet Location			September27, 2013			September28, 2012
(In millions)		Fair Value		Fair Value						Fair Value			Fair Value
Derivative designated as hedging instruments:
Foreign exchange forward contracts	PrepaidExpenses	$	-		$	0.8			Accruedliabilities		$	1.1		$	-
Derivative not designated as hedging instruments:
Foreign exchange forward contracts	PrepaidExpenses		-			-			Accruedliabilities			-			-
Total derivatives		$	-		$	0.8					$	1.1		$	-

See Note 3, “Fair Value” regarding valuation of the Company’s derivative instruments. Also see Note 1, “Summary of Significant Accounting Policies” to the Consolidated Financial Statements regarding credit risk associated with the Company’s derivative instruments.

Cash Flow Hedging Activities

The Company has many transactions denominated in foreign currencies and addresses certain of those financial exposures through a risk management program that includes the use of derivative financial instruments. The Company sells products throughout the world, often in the currency of the customer’s country, and may hedge certain of the larger foreign currency transactions when they are either not denominated in the relevant subsidiary’s functional currency or the U.S. dollar. These foreign currency sales transactions are hedged using foreign currency forward contracts. The Company may use other derivative instruments in the future. The Company enters into foreign currency forward contracts primarily to reduce the effects of fluctuating foreign currency exchange rates. The Company does not enter into foreign currency forward contracts for speculative or trading purposes. Foreign currency forward contracts are entered into several times a quarter and range from one to thirteen months in maturity. As of September27, 2013, the Company did not have any foreign currency forward contracts with an original maturity greater than thirteen months.

The hedges of foreign currency denominated forecasted revenues are accounted for in accordance with the guidance on “Derivatives and Hedging”, pursuant to which the Company has designated its hedges of forecasted foreign currency revenues as cash flow hedges. The Company’s designated cash flow hedges de-designate when the anticipated revenues associated with the transactions are recognized and the effective portion in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets is reclassified to “Revenues” in the Consolidated Statements of Earnings. Subsequent changes in fair value of the derivative instrument are recorded in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings to offset changes in fair value of the resulting non-functional currency receivables. For derivative instruments that are designated and qualified as cash flow hedges under “Derivatives and Hedging,” the Company formally documents for each derivative instrument at the hedge’s inception, the relationship between the hedging instrument (foreign currency forward contract) and hedged item (forecasted foreign currency revenues), the nature of the risk being hedged and its risk management objective and strategy for undertaking the hedge. The Company records the effective portion of the gain or loss on the derivative instruments that are designated and qualified as cash flow hedges in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets and reclassifies these amounts into “Revenues” in the Consolidated Statements of Earnings in the period in which the hedged transaction is recognized in earnings. The Company assesses hedge effectiveness both at the onset of the hedge and on an ongoing basis using regression analysis. The Company measures hedge ineffectiveness by comparing the cumulative change in the fair value of the effective component of the hedge contract with the cumulative change in the fair value of the hedged item. The Company recognizes any over performance of the derivative as ineffectiveness in “Revenues,” and time value amounts excluded from the assessment of effectiveness in “Cost of revenues” in the Consolidated Statements of Earnings. During fiscal years 2013, 2012 and 2011, the Company did not discontinue any cash flow hedge. At the inception of the hedge relationship and quarterly thereafter, the Company assesses whether the likelihood of meeting the forecasted cash flow is highly probable. As of September27, 2013, all forecasted cash flows were still probable to occur. As of September27, 2013, net unrealized loss on derivative instruments before tax, of $1.1 million, was included in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets and is expected to be reclassified to earnings over the 12 months that follow.

The Company had the following outstanding foreign currency forward contracts that were entered into to hedge forecasted revenues and designated as cash flow hedges:

	AtSeptember27, 2013
(In millions)	Notional Value Sold
Euro	$	40.5
Japanese yen		78.5
Totals	$	119.0

The following table presents the amounts, before tax, recognized in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets and in the Consolidated Statements of Earnings that are related to the effective portion of the foreign currency forward contracts designated as cash flow hedges:

(in millions)	Gain(Loss)RecognizedinOther Comprehensive Income (EffectivePortion)									LocationofGain(Loss) Reclassified from Accumulated Other ComprehensiveIncome into Net Earnings (Effective Portion)		Gain(Loss)Reclassifiedfrom AccumulatedOtherComprehensive Income into Net Earnings (EffectivePortion)
	Fiscal Years											Fiscal Years
	2013		2012			2011						2013			2012			2011
Foreign exchange contracts	$	0.5	$	1.4	$		(0.5	)	Revenues		$		2.5	$		0.6	$		(1.0	)

The portion of cash flow hedges gain or loss excluded from the assessment of effectiveness and the ineffective portion of the cash flow hedges were not material in fiscal years 2013, 2012 and 2011.

Balance Sheet Hedging Activities

The Company also hedges balance sheet exposures from its various subsidiaries and business units where the U.S. dollar is the functional currency. The Company enters into foreign currency forward contracts to minimize the short-term impact of foreign currency fluctuations on monetary assets and liabilities denominated in currencies other than the U.S. dollar functional currency. The foreign currency forward contracts are short term in nature, typically with a maturity of approximately one month, and are based on the net forecasted balance sheet exposure. These hedges of foreign-currency-denominated assets and liabilities do not qualify for hedge accounting treatment and are not designated as hedging instruments. For derivative instruments not designated as hedging instruments, changes in their fair values are recognized in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings. Changes in the values of these hedging instruments are offset by changes in the values of foreign-currency-denominated assets and liabilities. Variations from the forecasted foreign currency assets or liabilities, coupled with a significant currency rate movement, may result in a material gain or loss if the hedges are not effectively offsetting the change in value of the foreign currency asset or liability. Other than foreign exchange hedging activities, the Company has no other free-standing or embedded derivative instruments.

The Company had the following outstanding foreign currency forward contracts that were entered into to hedge balance sheet exposures from its various foreign subsidiaries and business units:

	AtSeptember27,2013
(In millions)	Notional Value Sold		Notional Value Purchased
Australian dollar	$	21.9	$	-
British pound		18.6		-
Canadian dollar		-		2.2
Euro		188.1		-
Indian rupee		4.7		-
Japanese yen		69.3		-
Norwegian krone		3.3		2.8
Swedish krona		3.2		-
Swiss franc		-		70.9
Totals	$	309.1	$	75.9

The following table presents the gains (losses) recognized in the Consolidated Statements of Earnings related to the foreign currency forward contracts that are not designated as hedging instruments.

Location of Gain or (Loss)		AmountofGainor(Loss) RecognizedinNetEarnings on Derivative
	Fiscal Years
(In millions)	2013			2012		2011
Selling, general and administrative expenses	$		9.6	$	5.0	$	2.3

The gains (losses) on these derivative instruments were significantly offset by the gains (losses) resulting from the re-measurement of monetary assets and liabilities denominated in currencies other than the U.S. dollar functional currency.

Contingent Features

Certain of the Company’s derivative instruments are subject to master agreements which contain provisions that require the Company, in the event of a default, to settle the outstanding contracts in net liability positions by making settlement payments in cash or by setting off amounts owed to the counterparty against any credit support or collateral held by the counterparty. The counterparty’s right of set-off is not limited to the derivative instruments and applies to other rights held by the counterparty. These events of default, which are defined by the existing agreements, are primarily related to the Company’s failure to pay the counterparty under the derivative instruments, the Company’s voluntary or involuntary bankruptcy, the Company’s default on its borrowings and the deterioration of the creditworthiness of the surviving entity if the Company merges or transfers its assets or liabilities to another entity. As of September27, 2013 and September28, 2012, the Company did not have a significant amount of outstanding derivative instruments with credit-risk-related contingent features that were in a net liability position.

XML

Components of Accrued Expenses (Detail) (USD $)	Sep. 27, 2013	Sep. 28, 2012
Accrued expenses:
Accrued compensation and benefits	$ 159,400,000	$ 150,300,000
DCP Liabilities	54,600,000	49,500,000
Income taxes payable	40,000,000	63,300,000
Current deferred tax liabilities	7,600,000	2,900,000
Other	59,300,000	70,600,000
Total accrued expenses	$ 320,884,000	$ 336,568,000

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Parenthetical) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Net gain/(loss) arising during the year, tax benefit/(expense)	$ (1,504)	$ 1,079	$ 1,783
Amortization of prior service cost included in net periodic benefit cost, tax benefit/(expense)	159	(19)	(18)
Amortization of net actuarial loss included in net periodic benefit cost, tax expense	(608)	(548)	(446)
Increase (decrease) in unrealized gain, tax benefit/(expense)	(191)	(541)	206
Reclassification adjustments, tax benefit/(expense)	$ (923)	$ (217)	$ 396

XML

Summary of Significant Accounting Policies

12 Months Ended

Sep. 27, 2013

Summary of Significant Accounting Policies

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Varian Medical Systems, Inc. (“VMS”) and subsidiaries (collectively, the “Company”) designs, manufactures, sells and services hardware and software products for treating cancer with radiotherapy, stereotactic radiosurgery, stereotactic body radiotherapy, and brachytherapy. The Company also designs, manufactures, sells and services X-ray imaging components for use in a range of applications, including radiographic or fluoroscopic imaging, mammography, specific procedures, computed tomography and industrial applications. In addition, the Company designs, manufactures, sells and services linear accelerators, image processing software and image detection products for security and inspection purposes. The Company also develops, designs, manufactures, sells and services proton therapy products and systems for cancer treatment.

Basis of Presentation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). As discussed in Note 18, “Discontinued Operations,” the Company has presented the operating results of the scientific research instruments business (“Research Instruments”) of ACCEL Instruments GmbH (“ACCEL,” which has since changed its name to Varian Medical Systems Particle Therapy GmbH) as a discontinued operation in the Consolidated Statements of Earnings for the fiscal year 2011. There were no operating results or other material balances related to Research Instruments beyond fiscal year 2011. Unless noted otherwise, discussion in these notes pertains to the Company’s continuing operations.

Reclassifications

Certain items in the consolidated statements of earnings and consolidated balance sheets have been reclassified to conform to the current fiscal year’s presentation. These reclassifications had no impact on previously reported total revenues, total cost of revenues, net earnings, total current assets, total assets, total current liabilities, total liabilities, and total stockholders’ equity.

Fiscal Year

The fiscal years of the Company as reported are the 52- or 53-week periods ending on the Friday nearest September30. Fiscal year 2013 was the 52-week period that ended on September27, 2013. Fiscal year 2012 was the 52-week period that ended on September28, 2012 and fiscal year 2011 was the 52-week period that ended on September30, 2011.

Distribution

On April2, 1999, Varian Associates, Inc. reorganized into three separate publicly traded companies by spinning off, through a tax-free distribution, two of its businesses to stockholders (the “Spin-offs”). The Spin-offs resulted in the following three companies: 1) the Company (renamed from Varian Associates, Inc. to Varian Medical Systems, Inc. following the Spin-offs); 2) Varian, Inc. (“VI”), which became a wholly owned subsidiary of Agilent Technologies Inc. in May 2010; and 3) Varian Semiconductor Equipment Associates, Inc. (“VSEA”), which became a wholly owned subsidiary of Applied Materials, Inc. in November 2011. The Spin-offs resulted in a non cash dividend to stockholders.

In connection with the Spin-offs, the Company, VI and VSEA also entered into various agreements that set forth the principles to be applied in separating the companies and allocating certain related costs and specified portions of contingent liabilities (see Note 9, “Commitments and Contingencies.”)

Principles of Consolidation

The consolidated financial statements include those of VMS and its subsidiaries. Intercompany balances, transactions and stock holdings have been eliminated in consolidation.

Consolidation of Variable Interest Entities

The Company uses a qualitative approach in assessing the consolidation requirement for entities in which it may have a variable interest.  A variable interest entity is an entity with one or more of the following characteristics (a)the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support; (b)as a group, the holders of the equity investment at risk lack the ability to make certain decisions, the obligation to absorb expected losses or the right to receive expected residual returns; or (c)the equity investors have voting rights that are not proportional to their economic interests.

The approach focuses on identifying which entity has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. In the event that the Company is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity will be included in the Company’s Consolidated Financial Statements. For fiscal years 2013, 2012 and 2011, the Company did not consolidate any variable interest entity because the Company was not a primary beneficiary.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Foreign Currency Translation

The Company uses the U.S. dollar predominately as the functional currency of its foreign subsidiaries. For foreign subsidiaries where the U.S. dollar is the functional currency, gains and losses from remeasurement of foreign currency balances into U.S. dollars are included in the Consolidated Statements of Earnings. The aggregate net gains (losses) resulting from foreign currency transactions and remeasurement of foreign currency balances into U.S. dollars, that were included in the Consolidated Statements of Earnings, were $0.7 million, $0.4 million and $(1.4) million in fiscal years 2013, 2012 and 2011, respectively. For the foreign subsidiary where the local currency is the functional currency, translation adjustments of foreign currency financial statements into U.S. dollars are recorded to a separate component of accumulated other comprehensive income (loss). See Note 8, “Derivative Instruments and Hedging Activities” regarding the Company’s hedging activities and derivative instruments. Also see Note 3, “Fair Value” regarding valuation of the Company’s derivative instruments.

Cash and Cash Equivalents

The Company considers currency on hand, demand deposits, time deposits, and all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are held in various financial institutions in the United States and internationally.

Short-term Investment

The Company has an investment in a corporate debt security from the California Proton Therapy Center, LLC (“CPTC”) that it classifies as an available-for-sale investment, which is recorded in the Consolidated Balance Sheets at fair value. Unrealized gains and losses on this investment are included as a separate component of “Accumulated other comprehensive loss,” net of tax, in the Consolidated Balance Sheets. The Company classifies its available-for-sale investment as short-term based on the nature of the investment and its availability for use in current operations. The Company monitors its short-term investment for possible other-than-temporary impairment when business events or changes in circumstances indicate that the carrying value of the investment may not be recoverable. The Company has not identified any indication of impairment of its short-term investment for fiscal years 2013 and 2012.

Investments in Privately Held Companies

Equity investments in privately held companies in which the Company holds at least a 20% ownership interest or in which the Company has the ability to exercise significant influence are accounted for by the equity method. Equity investments in privately held companies in which the Company holds less than a 20% ownership interest and does not have the ability to exercise significant influence are accounted for under the cost method. Equity investments accounted for under the cost method totaled $21.4 million at both September27, 2013 and September28, 2012. The Company’s equity investments in privately held companies are included in “Other assets” in the Consolidated Balance Sheets. The Company monitors these equity investments for impairment and makes appropriate reductions in carrying values if the Company determines that impairment charges are required based primarily on the financial condition and near-term prospects of these companies. The Company did not have any impairment loss on equity investments in privately held companies for fiscal years 2013, 2012 and 2011.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash, cash equivalents, short-term investment, trade accounts receivable and derivative financial instruments used in hedging activities. Cash and cash equivalents held with financial institutions may exceed the Federal Deposit Insurance Corporation insurance limits or similar limits in foreign jurisdictions. The Company has not experienced any losses on its deposits of cash and cash equivalents. With respect to its short-term investment, the Company performs a periodic credit evaluation of  CPTC, the obligor under the debt security. In addition, the Company will be exposed to credit loss in the event of nonperformance by counterparties on the foreign currency forward contracts used in hedging activities. The Company transacts its foreign currency forward contracts with several large international and regional financial institutions and, therefore, does not consider the risk of nonperformance to be concentrated in any specific counterparty. The Company has not experienced any losses resulting from the failure of counterparty to meet its financial obligations under foreign currency forward contracts. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers comprising the Company’s customer base and their geographic dispersion. The Company performs ongoing credit evaluations of its customers and, except for government tenders, group purchases and orders with a letter of credit, requires its Oncology Systems, Security and Inspection Products (“SIP”) and Varian Particle Therapy (“VPT”) customers to provide a down payment. The Company maintains an allowance for doubtful accounts based upon the expected collectability of all accounts receivable. No single customer represented more than 10% of the accounts receivable amount for any period presented.

Inventories

Inventories are valued at the lower of cost or market (realizable value). Excess and obsolete inventories are determined primarily based on future demand forecasts and write-downs of excess and obsolete inventories are recorded as a component of cost of revenues. Cost is computed using standard cost (which approximates actual cost) and actual cost on a first-in-first-out or average basis.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation. Major improvements are capitalized, while repairs and maintenance are expensed as incurred. Costs incurred for internal use software during the application development stage are capitalized in accordance with guidance on internal-use software. Internally developed software primarily includes enterprise-level business software that the Company customizes to meet its specific operational needs. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Land is not subject to depreciation, but land improvements are depreciated over fifteen years. Land leasehold rights and leasehold improvements are amortized over the lesser of their estimated useful lives or remaining lease terms. Buildings are depreciated over twenty or thirty years. Machinery and equipment are depreciated over their estimated useful lives, which range from three to seven years. Assets subject to lease are amortized over the lesser of their estimated useful lives or remaining lease terms. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are removed from the accounts. Gains or losses resulting from retirements or disposals of property, plant and equipment are included in operating expenses.

Goodwill and Intangible Assets

Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net identified tangible and intangible assets acquired. Purchased intangible assets are carried at cost, net of accumulated amortization. Intangible assets with finite lives are amortized over their estimated useful lives of approximately oneto twenty years generally using the straight-line method.

Impairment of Long-lived Assets, Goodwill and Intangible Assets

The Company reviews long-lived assets and identifiable intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company assesses these assets for impairment based on their estimated undiscounted future cash flows. If the carrying value of the assets exceeds the estimated future undiscounted cash flows, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. The Company did not recognize any impairment charges for long-lived assets and identifiable intangible assets in fiscal years 2013, 2012, and 2011.

The Company evaluates goodwill for impairment at least annually or whenever an event occurs or circumstances changes that would more likely than not reduce the fair value of a reporting unit below its carrying amount. If the Company determines that a quantitative analysis is necessary, the impairment test for goodwill is a two-step process. Step one consists of a comparison of the fair value of a reporting unit against its carrying amount, including the goodwill allocated to each reporting unit. The Company determines the fair value of its reporting units based on a combination of income and market approaches. The income approach is based on the present value of estimated future cash flows of the reporting units and the market approach is based on a market multiple calculated for each business unit based on market data of other companies engaged in similar business. If the carrying amount of the reporting unit is in excess of its fair value, step two requires the comparison of the implied fair value of the reporting unit’s goodwill against the carrying amount of the reporting unit’s goodwill. Any excess of the carrying value of the reporting unit’s goodwill over the implied fair value of the reporting unit’s goodwill is recorded as an impairment loss.

In fiscal years 2013, 2012 and 2011, the Company performed the annual goodwill impairment testing for the four reporting units that carried goodwill, namely Oncology Systems, X-Ray Products, SIP and VPT, and found no impairment. Based on the most recent annual goodwill impairment testing that the Company performed in fiscal year 2013 for each of its four reporting units that carried goodwill, Oncology Systems, X-Ray Products, SIP and VPT, the fair value of each such reporting unit was substantially in excess of its carrying value.

Loss Contingencies

From time to time, the Company is a party to or otherwise involved in legal proceedings, claims and government inspections or investigations and other legal matters, both inside and outside the United States, arising in the ordinary course of its business or otherwise.  The Company accrues amounts, to the extent they can be reasonably estimated, that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that it believes will result in a probable loss.

Environmental remediation liabilities are recorded when environmental assessments and/or remediation efforts are probable, and the costs of these assessments or remediation efforts can be reasonably estimated.

Revenue Recognition

The Company’s revenues are derived primarily from the sale of hardware and software products, and related services and contracts from the Company’s Oncology Systems, X-Ray Products, SIP and VPT businesses. The Company recognizes its revenues net of any value added or sales tax and net of sales discounts.

Many of the Company’s revenue arrangements consist of multiple deliverables of its software and non-software products, as well as related services. In Oncology Systems, the linear accelerators are often sold with hardware and software accessory products that enhance efficiency and enable delivery of advanced radiotherapy and radiosurgery treatments. Many of the Oncology Systems hardware and software accessory products are also sold on a stand-alone basis. The X-Ray Products business generally sells its X-ray components (including X-ray tubes, flat panel detectors and image processing tools) on a stand-alone basis. However, the X-Ray Products business occasionally sells its flat panel detectors, X-ray tubes and imaging processing tools as a package that is optimized for digital X-ray imaging. While SIP products are generally sold on a stand-alone basis, SIP occasionally sells its Linatron® X-ray accelerators together with its imaging processing software and image detection products to original equipment manufacturer (“OEM”) customers that incorporate them into their inspection systems. Service contracts are often sold with Oncology Systems products, as well as with certain products in the SIP business. As discussed below, certain of the Oncology Systems and SIP products are sold with installation obligations. Delivery of different elements in a revenue arrangement often span more than one reporting period. For example, a linear accelerator may be delivered in a reporting period but the related installation is completed in a later period. Revenue related to service contracts usually starts after the expiration of the warranty period for non-software products or upon acceptance for software products.

For a multiple element arrangement that includes software and non-software deliverables which includes service contracts, the Company first allocates revenues among the software and non-software deliverables on a relative selling price basis. The amounts allocated to the non-software products and software are accounted for as follows:

Non-software Products

Non-software products include hardware products, software components that function together with the hardware components to deliver the product’s essential functionality, as well as service contracts. Except as described below under “Service,” the Company recognizes revenues for non-software products when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured.

For multiple element revenue arrangements that involve non-software products, a delivered non-software element is considered as a separate unit of accounting when it has stand-alone value and there is no customer-negotiated refund or return rights for the delivered element. The allocation of revenue to all deliverables based on their relative selling prices is determined at the inception of the arrangement. The selling price for each deliverable is determined using vendor-specific objective evidence (“VSOE”) of selling price, if it exists; otherwise, third-party evidence of selling price (“TPE”). If neither VSOE nor TPE of selling price exists for a deliverable the Company uses the deliverable’s estimated selling prices (“ESP”).

The Company’s non-software products have stand-alone value because they are sold separately. Product installation, which is a standard process and does not involve changes to the features or capabilities of the Company’s products, is considered as a separate unit of accounting. Installation of Oncology Systems and SIP non-software products involves the Company’s testing of each product at its factory prior to the product’s delivery to ensure that the product meets the Company’s published specifications. Once these tests establish that the specifications have been met, the product is then disassembled and shipped to the customer’s site as specified in the customer contract. Risk of loss is transferred to the customer either at the time of shipment or delivery, depending upon the shipping terms of the contract. At the customer’s site, the product is reassembled, installed and retested in accordance with the Company’s installation procedures to ensure and demonstrate compliance with the Company’s published specifications for that product.

Under the terms of the Company’s standard non-software sales contracts, “acceptance” of a non-software product with installation obligations is deemed to have occurred upon the earliest of (i)completion of product installation and testing in accordance with the Company’s standard installation procedures showing compliance with the Company’s published specifications for that product, (ii)receipt by the Company of an acceptance form executed by the customer acknowledging installation and compliance with the Company’s published specifications for that product, (iii)use by the customer of the product for any purpose after its delivery or (iv)six months after the delivery of the product to the customer by the Company. The contracts allow for cancellation only by mutual agreement, thus the customer does not have a unilateral right to return the delivered non-software product.

The Company establishes VSOE of selling price based on the price charged for a deliverable when sold separately and, for a deliverable not yet being sold separately, the price established by management having the relevant authority. As discussed above, many products are sold in stand-alone arrangements and accordingly have VSOE of selling price. Service contracts are sold separately through either original sale or subsequent renewal of annual contracts. The Company establishes TPE generally by evaluating the Company’s and competitors’ largely interchangeable competing products or services in stand-alone sales to similarly situated customers. The TPE for product installation is determined based on the estimated labor hours and the prevailing hourly rate charged for similar services, as well as the prices charged by outside vendors for installation of the Company’s products. For certain products for which the Company is not able to establish VSOE or TPE of selling prices, ESPs are used as the basis of their selling prices. The Company estimates selling prices following an established process that considers market conditions, including the product offerings and pricing strategies of competitors, as well as internal factors such as historical pricing practices and margin objectives. The establishment of product and service ESPs is controlled and reviewed by the appropriate level of management in all of the Company’s businesses.

The Company limits the amount of revenue recognized for delivered items to the amount that is not contingent upon the delivery of additional products or services. For Oncology Systems and SIP non-software products with installation obligations, the Company recognizes as revenues a portion of the product purchase price upon transfer of risk of loss and defers revenue recognition on the portion associated with product installation, provided that all other criteria for revenue recognition have been met. The portion deferred is the greater of the relative selling price of the installation services for such products or the amount of payment contractually linked to product installation services.

The Company does not have installation obligations for X-ray tubes, digital image detectors, spare parts and certain hardware products in Oncology Systems and the SIP business. For the products that do not include installation obligations, the Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the shipping terms of the contract, provided that all other revenue recognition criteria have been met.

Software Products

Except as described below under “Service,” the Company recognizes revenues for software products in accordance with the software revenue recognition guidance. The Company recognizes license revenues when all of the following criteria have been met: persuasive evidence of an arrangement exists, the vendor’s fee is fixed or determinable, collection of the related receivable is probable, delivery of the product has occurred and the Company has received from the customer an acceptance form acknowledging installation and substantial conformance with the Company’s specifications (as set forth in the user manual) for such product, or upon verification of installation when customer acceptance is not required to be received, or upon the expiration of an acceptance period, provided that all other criteria for revenue recognition have been met.

Revenues earned on software arrangements involving multiple elements are allocated to each element based on VSOE of fair value, which is based on the price charged when the same element is sold separately. In instances when evidence of VSOE of fair value of all undelivered elements exists, but evidence does not exist for one or more delivered elements, revenues are recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. Revenue allocated to maintenance and support is recognized ratably over the maintenance term (typically one year).

Installation of the Company’s software products may involve a certain amount of customer-specific implementation to enable the software product to function within the customer’s operating environment (i.e., with the customer’s information technology network and other hardware, with the customer’s data interfaces and with the customer’s administrative processes) and substantially in conformance with the Company’s specifications (as set forth in the user manual) for such product. With these software products, customers do not have full use of the software (i.e., functionality) until the software is installed as described above and functioning within the customer’s operating environment. Therefore, the Company recognizes 100% of such software revenues upon receipt from the customer of the Company’s acceptance form acknowledging installation and such substantial conformance, or upon verification of installation when the Company is not required to receive customer acceptance, or upon the expiration of an acceptance period, provided that all other criteria for revenue recognition have been met.

The Company does not have installation obligations for certain brachytherapy and SIP software products. For software products that do not include installation obligations, the Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the shipping terms of the contract, provided that all other criteria for revenue recognition have been met.

Contracts for Customized Equipment

Revenues related to certain highly customized image detection systems, proton therapy systems and proton therapy system commissioning contracts are recognized in accordance with contract accounting. The Company recognizes contract revenues under the percentage-of-completion method which are based on contract costs incurred to date compared with total estimated contract costs. Changes in estimates of total contract revenue, total contract cost or the extent of progress towards completion are recognized in the period in which the changes in estimates are identified. Estimated losses on contracts are recognized in the period in which the loss is identified. In circumstances in which the final outcome of a contract cannot be precisely estimated but a loss on the contract is not expected, the Company recognizes revenues under the percentage-of-completion method based on a zero profit margin until more precise estimates can be made. If and when the Company can make more precise estimates, revenues and costs of revenues are adjusted in the same period.

Contracts accounted for in accordance with contract accounting are billable upon achievement of milestones specified in the contracts or upon customer acceptance. Costs incurred and revenues recognized under the percentage-of-completion method in excess of customer billings are included in “Accounts receivable” in the Consolidated Balance Sheets. Customer billings in excess of costs incurred and revenue recognized under the percentage-of-completion method, which typically reflect initial down payments, are included in “Advance payments from customers” in the Consolidated Balance Sheets. Costs incurred and revenues recognized in excess of customer billings were $68.1 million as of September27, 2013 and $48.8 million as of September28, 2012. Customer billings in excess of costs incurred and revenue recognized were $33.8 million as of September27, 2013 and $32.6 million as of September28, 2012.

Service

Service revenues include revenues from service contracts, bundled support arrangements, paid services and trainings, and parts that are sold by the service department. Prior to the fourth quarter of fiscal year 2013, revenues and cost of revenues of parts that were sold by the service department were classified as product revenues and product cost of revenues, respectively. Revenues and costs of revenues of parts that are sold by the service department have been reclassified from product revenues and product cost of revenues to service revenue and service cost of revenues, respectively, for the first nine months of fiscal year 2013 and for fiscal years 2012 and 2011 to conform to the current presentation. Also, certain other cost of revenue items have been reclassified between product cost of revenues and service cost of revenues for the first nine months of fiscal year 2013 and for fiscal years 2012 and 2011 to conform to the current presentation.Revenues allocated to service contracts are generally recognized ratably over the period of the related contracts. For proton therapy systems service contracts, revenues subject to certain penalty provisions are deferred until reliable estimates can be made or the related penalty provisions lapse. Revenues related to services performed on a time-and-materials basis are recognized when they are earned and billable.

Advance Payments from Customers

Except for government tenders, group purchasesand orders with letters of credit, the Company typically requires its Oncology Systems, SIP and VPT customers to provide a down payment prior to transfer of risk of loss of ordered products. These payments are recorded as “Advance payments from customers” in the Consolidated Balance Sheets.

Deferred Revenue

Deferred revenue includes (i)the billable amount applicable to shipment of software products but for which installation and/or final acceptance have not been completed (ii)the billable amount applicable to non-software products for which installation and/or acceptance have not been completed and (iii) the billable amount for service contracts for which the services have not been rendered. As of September 27, 2013, advance payments prior to performance under service contracts have been classified as deferred revenue and prior year amounts have been reclassified from advance payments from customers to conform to the current fiscal year’s presentation.Deferred costs associated with deferred revenues are included in “Inventories” in the Consolidated Balance Sheets.

Medical Device Excise Tax

In accordance with the Patient Protection and Affordable Care Act, effective January1, 2013, the Company began to incur a 2.3% excise tax on sales of medical devices in the United States. The medical device excise tax is included in the cost of revenues on the consolidated statements of earnings for fiscal year 2013, net of any amounts directly billed to customers for this tax.

Share-Based Compensation Expense

The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors, including stock options, employee stock purchases related to the Varian Medical Systems, Inc. Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”), deferred stock units, restricted stock, restricted stock units and performance units based on their fair values.

Share-based compensation expense recognized in the Consolidated Statements of Earnings includes compensation expense for the share-based payment awards based on the grant date fair value estimated in accordance with the guidance on share-based compensation. The Company values VMS’s stock options granted and the option component of the shares of VMS common stock purchased under the Employee Stock Purchase Plan using the Black-Scholes option-pricing model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The Company values its performance units using the Monte Carlo simulation model. Both the Black-Scholes option-pricing model and the Monte Carlo simulation model require the input of certain assumptions and changes in the assumptions can materially affect the fair value estimates of share-based payment awards.

Share-based compensation expense recognized is based on the value of the portion of share-based payment awards that is ultimately expected to vest. The Company attributes the value of share-based compensation to expense using the straight-line method. The Company considers only the direct tax impacts of share-based compensation awards when calculating the amount of tax windfalls or shortfalls.

For fiscal years 2013, 2012 and 2011, total share-based compensation expenses, before taxes, were $42.6 million, $47.9 million and $42.0 million, respectively. See Note 12, “Employee Stock Plans” for a detailed discussion.

Earnings per Share

Basic net earnings per share is computed by dividing net earnings by the weighted average number of shares of VMS common stock outstanding for the period. Diluted net earnings per share is computed by dividing net earnings by the sum of the weighted average number of common shares outstanding and dilutive common shares under the treasury stock method.

The following table sets forth the computation of net basic and diluted earnings per share:

	Fiscal Years
(In thousands, except per share amounts)	2013			2012			2011
Earnings from continuing operations	$	438,248	$		427,049	$		408,626
Loss from discontinued operations, net of taxes		-			-			(9,693	)
Net earnings	$	438,248	$		427,049	$		398,933
Weighted average shares outstanding - basic		108,352			111,376			116,703
Dilutive effect of potential common shares		1,701			2,097			2,032
Weighted average shares outstanding - diluted		110,053			113,473			118,735
Net earnings (loss) per share - basic:
Continuing operations	$	4.04	$		3.83	$		3.50
Discontinued operations		-			-			(0.08	)
Net earnings per share	$	4.04	$		3.83	$		3.42
Net earnings (loss) per share - diluted:
Continuing operations	$	3.98	$		3.76	$		3.44
Discontinued operations		-			-			(0.08	)
Net earnings per share	$	3.98	$		3.76	$		3.36
Anti-dilutive employee share-based awards, excluded		707			249			160

The Company excludes potentially dilutive common shares (consisting of shares underlying stock options, restricted stock units, performance units and the Employee Stock Purchase Plan) from the computation of diluted weighted average shares outstanding if the per share value, either the exercise price of the awards or the sum of (a)the exercise price of the awards and (b)the amount of the compensation cost attributed to future services and not yet recognized and (c)the amount of tax benefit or shortfall that would be recorded in additional paid-in capital when the award becomes deductible, is greater than the average market price of the shares, because the inclusion of the shares underlying these stock awards would be antidilutive to earnings per share.

Shipping and Handling Costs

Shipping and handling costs are included as a component of cost of revenues.

Research and Development

To date, research and development costs have been expensed as incurred. These costs primarily include employees’ compensation, consulting fees, material costs and research grants.

Software Development Costs

Costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized. No costs associated with the development of software have been capitalized as the Company believes its current software development process is essentially completed concurrent with the establishment of technological feasibility.

Comprehensive Earnings

Comprehensive earnings include all changes in equity (net assets) during a period from non-owner sources. Comprehensive earnings include currency translation adjustments, change in unrealized gain or loss on derivative instruments designated as cash flow hedges, net of taxes (see Note 8, “Derivative Instruments and Hedging Activities”), and adjustments to and amortization of unrecognized actuarial gain or loss, unrecognized transition obligation and unrecognized prior service cost of our defined benefit pension and post-retirement benefit plans. See Note 10, “Retirement Plans.”

Taxes on Earnings

Taxes on earnings are based on pretax financial accounting income. Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Recent Accounting Pronouncements

a) New accounting updates recently adopted

In September 2011, the Financial Accounting Standards Board (“FASB”) amended Accounting Standard Codification (“ASC”) 350, “Intangibles – Goodwill and Other.” This amendment is intended to simplify how an entity tests goodwill for impairment and will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity no longer will be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that the reporting unit’s fair value is less than its carrying amount. This amendment became effective for the Company beginning in the first quarter of fiscal year 2013. The adoption of this amendment did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

In June 2011, the FASB amended ASC 220, “Presentation of Comprehensive Income.” This amendment requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. In December 2011, the FASB issued another amendment which defers indefinitely this amendment to the extent it relates to the presentation of reclassification adjustments. The amended guidance became effective for the Company in the first quarter of fiscal year 2013. The adoption of this amendment concerns disclosure only and did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

In July 2013, the FASB issued an accounting standard update to eliminate diversity in practice in the presentation of unrecognized tax benefits when a net operating loss carry forward, a similar tax loss, or a tax credit carry forward exists. The Company adopted this guidance beginning in the fourth quarter of fiscal year 2013. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

b) Recent accounting standards or updates not yet effective

In December 2011, the FASB amended ASC 210, “Balance Sheet,” enhancing disclosure requirements about the nature of an entity’s right to offset and related arrangements associated with its financial instruments and derivative instruments. The new guidance requires the disclosure of the gross amounts subject to rights of set-off, the amounts offset in accordance with the accounting standards followed, and the related net exposure. The new guidance will be effective for the Company beginning in the first quarter of fiscal year 2014. The adoption of this amendment concerns disclosure only, and the Company does not expect it to have an impact on its consolidated financial position, results of operations or cash flows.

In February 2013, the FASB issued an accounting standard update to require reclassification adjustments from other comprehensive income to be presented either in the financial statements or in the notes to the financial statements. This accounting standard update will be effective for the Company beginning in the first quarter of fiscal year 2014, at which time the Company will include the required disclosures.

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Variable Interest Entity

12 Months Ended

Sep. 27, 2013

Variable Interest Entity

15. VARIABLE INTEREST ENTITY

During fiscal year 2011, the Company entered into a number of agreements with CPTC. CPTC is a variable interest entity that was established to finance and operate the Scripps Proton Therapy Center in San Diego, California. 

In April 2010, the Company signed an $88 million agreement to supply a proton therapy system to CPTC. The Company began recognizing revenues under this contract in the fourth quarter of fiscal year 2011. In June 2011, the Company signed a ten-year, approximately $60 million agreement with CPTC to service the proton therapy system. No revenues have been recognized under this service agreement. In addition, in September 2011, ORIX and the Company, through its Swiss subsidiary, committed to loan up to $165.3 million to CPTC. ORIX is the loan agent for this facility and, along with CPTC and Scripps, has budgetary approval authority for the Scripps Proton Therapy Center. The Company’s maximum loan commitment under this facility is $115.3 million, reflecting the Company’s pro rata share of 69.75% of the obligation to fund the initial distribution and subsequent advances. As of September27, 2013, the Company had funded $62.7 million (including accrued interest) of its $115.3 million commitment, which is reported as a current asset on the Company’s Consolidated Balance Sheets. The Company’s subsidiary is not obligated to fund any additional amounts to CPTC beyond the $115.3 million committed under the loan facility. The Company may sell all or a portion of its participation in this loan facility before the end of the drawdown period in 2014. Upon the sale of all or a portion of this facility, the Company will not be required to make further loan advances for the portion of the facility that is sold.

The loan, which matures in September 2015, bears interest at LIBOR plus 6.25%per annum with a minimum interest rate of 8.25%per annum. The loan can be extended for two additional one-year terms at the election of CPTC during which extensions interest will accrue at LIBOR plus 7.00%per annum with a minimum interest rate of 9.00%per annum. Interest only payments are due monthly in arrears until July1, 2014, at which time monthly payments based on amortization of the principal balance over a 15-year period at an interest rate of 8.25%per annum become due and payable. If all or a portion of the principal is repaid on or before July1, 2014, interest that would have been payable had the principal not been repaid early is due and payable. The Company, as one of the lenders, is entitled to certain fees, including a commitment fee of 1.5% of the loan facility commitment amount and an exit fee of 1% of the amount of principal paid, whether as a result of prepayment or maturity. The loan facility is collateralized by all of the assets of the Scripps Proton Therapy Center. In connection with the loan facility, the Company’s subsidiary also shares 4% of the gross revenues of the Scripps Proton Therapy Center for 35 years. The Company’s subsidiary’s right of revenue sharing may be reduced upon the sale of a portion of the Company’s loan and will be reduced to an amount not to exceed 1% of the gross revenues of the Scripps Proton Therapy Center upon repayment of the first $71 million of the Company’s loan amount. The Company has not sold any portion of its loan to date.

The Company has determined that CPTC is a variable interest entity and that the Company holds a significant variable interest of CPTC through its subsidiary’s participation in the loan facility and its agreements to supply and service the proton therapy equipment. The Company has concluded that it is not the primary beneficiary of CPTC. The Company has no voting rights, has no approval authority or veto rights for CPTC’s budget, and does not have the power to direct patient recruitment, clinical operations and management of the Scripps Proton Therapy Center, which the Company believes are the matters that most significantly affect CPTC’s economic performance.

As of September27, 2013, in addition to the $62.7 million loan to CPTC, the Company had recorded $43.5 million in accounts receivable from CPTC. As of September28, 2012, the outstanding loan balance to CPTC was $49.7 million and the accounts receivable balance from CPTC was $30.7 million. The Company’s exposure to loss as a result of its involvement with CPTC was limited to the carrying amounts of these assets on its Consolidated Balance Sheets.

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Subsequent Event - Additional Information (Detail)	Aug. 31, 2012	Feb. 28, 2011	Nov. 30, 2013 Subsequent Event
Subsequent Event [Line Items]
Number of shares authorized to be repurchased by VMS Board of Directors	8,000,000	12,000,000	6,000,000

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Outstanding Foreign Currency Forward Contracts (Detail) (USD $) In Millions, unless otherwise specified	Sep. 27, 2013
Notional Amount of Derivatives [Abstract]
Foreign currency, notional values	$ 119.0
Euro
Notional Amount of Derivatives [Abstract]
Foreign currency, notional values	40.5
Japanese Yen
Notional Amount of Derivatives [Abstract]
Foreign currency, notional values	$ 78.5

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Fair Value - Additional Information (Detail) (USD $)			12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 27, 2013 Calypso Medical Technologies, Inc.	Sep. 27, 2013 InfiMed, Inc.	Sep. 27, 2013 Minimum Calypso Medical Technologies, Inc.	Sep. 27, 2013 Minimum InfiMed, Inc.	Sep. 27, 2013 Maximum Calypso Medical Technologies, Inc.	Sep. 27, 2013 Maximum InfiMed, Inc.
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Contingent consideration, estimated sales units used in simulation					69	171	193	299
Contingent consideration, estimated discount rates used in simulation					0.13%	1.37%	0.42%	1.75%
Contingent consideration liability, reversed			$ 4,900,000	$ 300,000
Long-term debt at fair value		6,800,000
Long-term debt	450,000,000	6,250,000
Short term borrowings including current maturities of long-term debt	$ 56,000,000

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Commitments and Contingencies

12 Months Ended

Sep. 27, 2013

Commitments and Contingencies

9. COMMITMENTS AND CONTINGENCIES

Indemnification Agreements

In conjunction with the sale of the Company’s products in the ordinary course of business, the Company provides standard indemnification of business partners and customers for losses suffered or incurred for property damages, death and injury and for patent, copyright or any other intellectual property infringement claims by any third parties with respect to its products. The terms of these indemnification arrangements are generally perpetual. Except for losses related to property damages, the maximum potential amount of future payments the Company could be required to make under these arrangements is unlimited. As of September27, 2013, the Company had not incurred any significant costs since the Spin-offs to defend lawsuits or settle claims related to these indemnification arrangements. As a result, the Company believes the estimated fair value of these arrangements is minimal.

VMS has entered into indemnification agreements with its directors and officers and certain of its employees that serve as officers or directors of its foreign subsidiaries that may require VMS to indemnify its directors and officers and those certain employees against liabilities that may arise by reason of their status or service as directors or officers, and to advance their expenses incurred as a result of any legal proceeding against them as to which they could be indemnified.

Product Warranty

The Company warrants most of its products for a specific period of time, usually 12 months from installation, against material defects. The Company provides for the estimated future costs of warranty obligations in cost of revenues when the related revenues are recognized. The accrued warranty costs represent the best estimate at the time of sale of the total costs that the Company will incur to repair or replace product parts that fail while still under warranty. The amount of the accrued estimated warranty costs obligation for established products is primarily based on historical experience as to product failures adjusted for current information on repair costs. For new products, estimates include the historical experience of similar products, as well as reasonable allowance for warranty expenses associated with new products. On a quarterly basis, the Company reviews the accrued warranty costs and updates the historical warranty cost trends, if required.

The following table reflects the changes in the Company’s accrued product warranty:

	Fiscal Years
(In millions)	2013			2012
Accrued product warranty, at beginning of period	$	52.8		$	50.1
Charged to cost of revenues		57.7			58.1
Actual product warranty expenditures		(57.3	)		(55.4	)
Accrued product warranty, at end of period	$	53.2		$	52.8

Long-term accrued product warranty costs of $14.1 million at end of period are included under Other long-term liabilities on the Consolidated Balance Sheet for fiscal year 2013.

Lease Commitments

At September27, 2013, the Company was committed to minimum rentals under noncancelable operating leases (including rent escalation clauses) for fiscal years 2014, 2015, 2016, 2017, 2018 and thereafter, as follows (in millions): $20, $17, $12.5, $9.1, $5.9 and $12, respectively. Rental expenses for fiscal years 2013, 2012 and 2011 (in millions) were $26.0, $24.9 and $23.8, respectively.

Other Commitments

In September 2011, the Company, through its Swiss subsidiary, participated in a $165.3 million loan facility for CPTC, under which the subsidiary committed to loan up to $115.3 million to finance the construction and start-up operations of a proton therapy center. See Note 15, “Variable Interest Entity” for a detailed discussion.

Contingencies

Environmental Remediation Liabilities

The Company’s operations and facilities, past and present, are subject to environmental laws, including laws that regulate the handling, storage, transport and disposal of hazardous substances. Certain of those laws impose cleanup liabilities under certain circumstances. In connection with those laws and certain of the Company’s past and present operations and facilities, the Company oversees various environmental cleanup projects and also reimburses certain third parties for cleanup activities. Those include facilities sold as part of the Company’s electron devices business in 1995 and thin film systems business in 1997. In addition, the U.S. Environmental Protection Agency (“EPA”) or third parties have named the Company as a potentially responsible party under the amended Comprehensive Environmental Response Compensation and Liability Act of 1980 (“CERCLA”), at sites to which the Company or the facilities of the sold businesses were alleged to have shipped waste for recycling or disposal (the “CERCLA sites”). In connection with the CERCLA sites, the Company to date has been required to pay only modest amounts as its contributions to cleanup efforts. Under the agreement that governs the Spin-offs, VI and VSEA are each obligated to indemnify the Company for one-third of the environmental cleanup costs associated with corporate, discontinued or sold operations prior to the Spin-offs (after adjusting for any insurance proceeds or tax benefits received by the Company), as well as fully indemnify the Company for other liabilities arising from the operations of the business transferred to it as part of the Spin-offs.

The Company spent $1.0 million, $1.6 million and $1.3 million (net of amounts borne by VI and VSEA) during fiscal years 2013, 2012 and 2011, respectively, on environmental cleanup costs, third-party claim costs, project management costs and legal costs.

Inherent uncertainties make it difficult to estimate the likelihood of the cost of future cleanup, third-party claims, project management and legal services for the CERCLA sites and one of the Company’s past facilities. Nonetheless, as of September27, 2013, the Company estimated that, net of VI’s and VSEA’s indemnification obligations, future costs associated with the CERCLA sites and this facility would range in total from $1.9 million to $9.8 million. The time frames over which these cleanup project costs are estimated vary, ranging from one year up to thirty years as of September27, 2013. Management believes that no amount in that range is more probable of being incurred than any other amount and therefore had accrued $1.9 million for these cleanup projects as of September27, 2013. The accrued amount has not been discounted to present value due to the uncertainties that make it difficult to develop a single best estimate.

The Company believes it has gained sufficient knowledge to better estimate the scope and cost of monitoring, cleanup and management activities for its other past and present facilities. This, in part, is based on agreements with other parties and also cleanup plans approved by or completed in accordance with the requirements of the governmental agencies having jurisdiction. As of September27, 2013, the Company estimated that the Company’s future exposure, net of VI’s and VSEA’s indemnification obligations, for the costs at these facilities, and reimbursements of third party’s claims for these facilities, ranged in total from $6.4 million to $36.0 million. The time frames over which these costs are estimated to be incurred vary, ranging from one to thirty years as of September27, 2013. As to each of these facilities, management determined that a particular amount within the range of estimated costs was a better estimate than any other amount within the range, and that the amount and timing of these future costs were reliably determinable. The best estimate within that range was $12.4 million at September27, 2013. Accordingly, the Company had accrued $9.4 million for these costs as of September27, 2013, which represented the best estimate discounted at 4%, net of inflation. This accrual is in addition to the $1.9 million described in the preceding paragraph.

The table that follows presents information about the Company’s reserve for future environmental costs at September27, 2013, based on estimates as of that date.

(In millions)	Recurring Costs		Non-Recurring Costs		TotalAnticipated Future Costs
Fiscal Years:
2014	$	0.6	$	1.7	$	2.3
2015		0.6		0.4		1.0
2016		0.7		0.4		1.1
2017		0.8		0.2		1.0
2018		0.7		0.5		1.2
Thereafter		6.3		1.4		7.7
Total costs	$	9.7	$	4.6	$	14.3
Less imputed interest						(3.0	)
Reserve amount					$	11.3

Recurring costs include expenses for such tasks as the ongoing operation, maintenance and monitoring of cleanup. Non-recurring costs include expenses for such tasks as soil excavation and treatment, installation of injection and monitoring wells, other costs for soil and groundwater treatment by injection, construction of ground and surface water treatment systems, soil and groundwater investigation, governmental agency costs required to be reimbursed by the Company, removal and closure of treatment systems and monitoring wells, and the defense and settlement of pending and anticipated third-party claims.

These amounts are only estimates of anticipated future costs. The amounts the Company will actually spend may be greater or less than these estimates, even as the Company believes the degree of uncertainty will narrow as cleanup activities progress. While the Company believes its reserve is adequate, as the scope of the Company’s obligations becomes more clearly defined, the Company may modify the reserve, and charge or credit future earnings accordingly. Nevertheless, based on information currently known to management, and assuming VI and VSEA satisfy their indemnification obligations, management believes the costs of these environmental related matters are not reasonably likely to have a material adverse effect on the consolidated financial statements of the Company in any one fiscal year.

The Company evaluates its liability for investigation and cleanup costs in light of the obligations and apparent financial strength of potentially responsible parties and insurance companies with respect to which the Company believes it has rights to indemnity or reimbursement. The Company has asserted claims for recovery of environmental investigation and cleanup costs already incurred, and to be incurred in the future against various insurance companies and other third parties. The Company receives certain cash payments in the form of settlements and judgments from defendants, insurers and other third parties from time to time. The Company has also reached an agreement with an insurance company under which that insurer has agreed to pay a portion of the Company’s past and future environmental related expenditures. Receivables, from that insurer, amounted to $2.4 million at September27, 2013 and $2.6 million at September28, 2012 with the respective current portion included in “Prepaid expenses and other current assets” and the respective noncurrent portion included in “Other assets” in the Consolidated Balance Sheets. The Company believes that this receivable is recoverable because it is based on a binding, written settlement agreement with what appears to be a financially viable insurance company, and the insurance company has paid the Company’s claims in the past.

The availability of the indemnities of VI and VSEA will depend upon the future financial strength of VI and VSEA. Given the long-term nature of some of the liabilities, VI and VSEA may be unable to fund the indemnities in the future. It is also possible that a court would disregard this contractual allocation among the parties and require the Company to assume responsibility for obligations allocated to another party, particularly if the other party were to refuse or was unable to pay any of its allocated share. The agreement governing the Spin-offs generally provides that if a court prohibits a company from satisfying its shared indemnification obligations, the indemnification obligations will be shared equally by the two other companies.

Other Matters

The Company is a party to or otherwise involved in legal proceedings, claims and government inspections or investigations or other legal matters, both inside and outside the United States, arising in the ordinary course of its business or otherwise. These matters included, as of September27, 2013, a patent infringement lawsuit initiated on April13, 2007 by the University of Pittsburgh of the Commonwealth System of Higher Education (the “University of Pittsburgh”) regarding the Company’s Real-time Position Management™ (“RPM”) technology. The lawsuit was dismissed and re-filed on June16, 2008 in the Northern District of California. The case was subsequently transferred to the United States District Court for the Western District of Pennsylvania (“trial court”). On or about December21, 2011, the trial court entered a summary judgment order in the case finding that the Company’s RPM technology was covered by some of the claims of the subject patent. Subsequently, in early 2012, in the proceedings at the trial court on the remaining issues in litigation, it was found (i)that the Company willfully infringed the subject patent, (ii)that the Company is liable for approximately $40 million in actual damages and (iii)that the subject patent was valid.The trial court has ordered the Company to pay a total of approximately $102 million, comprised of approximately $80 million in enhanced damages (a doubling of the damages amount), pre-judgment interest to the damage award of approximately $13 million and approximately $9 million in attorneys’ fees. The trial court also ordered the Company to pay ongoing royalties at the rates found by the jury for sales after the date of judgment.If our appeal is not successful, on-going royalties, assuming future U.S. sales and manufacturing of the infringing product remains approximately at the historical levels since the verdict in early 2012, could be up to $5 million per year through September 2016, the expiration of University of Pittsburgh’s patent. The Company has appealed the findings against it and believes that it has valid reasons for the judgment to be reversed.

The Company accrues amounts, to the extent they can be reasonably estimated, that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that the Company believes will result in a probable loss (including, among other things, probable settlement value).As of September27, 2013, the Company had accrued an aggregate of approximately $5.0 million of such losses with respect to ongoing matters, including the low end of the range of the probable settlement value for the University of Pittsburgh proceeding. However, such matters are subject to many uncertainties and outcomes are not predictable with assurance. The range of reasonably possible loss for the University of Pittsburgh matter, up to the date of the trial court judgment, is from zero to approximately $102 million (this range does not include ongoing royalties subsequent to the date of the trial court judgment). The Company is unable to estimate a range of reasonably possible losses in excess of the amounts accrued with respect to all other matters.There can be no assurances as to whether the Company will become subject to significant additional claims and liabilities with respect to ongoing or future proceedings.If actual liabilities significantly exceed the estimates made, the Company’s consolidated financial position, results of operations or cash flows could be materially adversely affected.

Restructuring Charges

As part of the Company’s plan to enhance operational performance through productivity initiatives,the Company offered an enhanced retirement program to its qualified employees across all reporting segments during the first quarter of fiscal year 2013. Approximately 85 employees accepted the voluntary retirement program.The Company incurred restructuring charges of $6.7 million during fiscal year 2013. The Company made cash payments of $6.7 million in fiscal year 2013.

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Stockholders Equity - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified	1 Months Ended	12 Months Ended				1 Months Ended	12 Months Ended		1 Months Ended	12 Months Ended			1 Months Ended	12 Months Ended
	Aug. 31, 2012	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011	Feb. 28, 2011	Mar. 31, 2011 August Two Thousand Ten Repurchase Agreement	Sep. 27, 2013 August Two Thousand Ten Repurchase Agreement	Aug. 24, 2010 August Two Thousand Ten Repurchase Agreement	Jun. 30, 2011 February 2011 Repurchase Agreement	Sep. 27, 2013 February 2011 Repurchase Agreement	Sep. 30, 2011 February 2011 Repurchase Agreement	Feb. 23, 2011 February 2011 Repurchase Agreement	Feb. 29, 2012 August 2011 Repurchase Agreement	Sep. 27, 2013 August 2011 Repurchase Agreement	Aug. 25, 2011 August 2011 Repurchase Agreement	Sep. 28, 2012 Expired
Shareholders Equity [Line Items]
Common stock repurchased, shares		6,000,000	4,433,718	9,028,033
Aggregate cash payments for accelerated share repurchase agreements and for shares repurchased in open market		$ 424	$ 257	$ 611
Repurchase agreement, amount paid								225				280			250
Repurchase agreement, shares received								3,888,249				3,547,474			3,849,638
Percentage of shares delivered by BofA upon execution of repurchase agreement								90.00%				85.00%			85.00%
Cash payment upon settlement recorded as an equity forward contract						26.1
Remaining initial cash payment recorded as an equity forward contract							22.5			42.0				37.5
Percentage of initial cash payment recorded as an equity forward contract							10.00%			15.00%				15.00%
VMS common stock received upon settlement									630,921				375,449
Value of VMS common stock received upon settlement											$ 41.3			$ 25.0
Number of shares authorized to be repurchased by VMS Board of Directors	8,000,000				12,000,000
Number of shares remain available for repurchase		2,000,000														3,000,000
Common stock repurchase period	September 29, 2012 through December 31, 2013

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Components of Property, Plant and Equipment (Detail) (USD $)	Sep. 27, 2013	Sep. 28, 2012
Property Plant And Equipment [Line Items]
Land and land improvements	$ 44,600,000	$ 43,800,000
Buildings and leasehold improvements	242,200,000	215,500,000
Machinery and equipment	380,800,000	344,500,000
Construction in progress	46,600,000	46,400,000
Assets subject to lease	1,800,000	3,200,000
Property Plant and Equipment, Gross	716,000,000	653,400,000
Accumulated depreciation and amortization	(400,700,000)	(356,800,000)
Property, plant and equipment, net	$ 315,331,000	$ 296,592,000

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Schedule of Assumptions Used to Determine Net Periodic Benefit Cost (Detail)	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Discount rate	2.94%	3.38%	3.45%
Rates of compensation increase	2.37%	2.48%	2.44%
Expected long-term return on assets	3.82%	4.02%	4.13%
Post-Retirement Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Discount rate	3.00%	3.90%	4.40%

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Gross Carrying Amount and Accumulated Amortization of Intangible Assets (Detail) (USD $) In Millions, unless otherwise specified	Sep. 27, 2013	Sep. 28, 2012
Finite Lived Intangible Assets [Line Items]
Accumulated amortization	$ (53.1)	$ (48.5)
Net carrying amount	23.4	26.8
Developed Technology Rights
Finite Lived Intangible Assets [Line Items]
Finite Lived Intangible Assets Gross	36.6	36.3
Patents Licenses And Other
Finite Lived Intangible Assets [Line Items]
Finite Lived Intangible Assets Gross	29.0	28.1
Customer Contracts And Relationships
Finite Lived Intangible Assets [Line Items]
Finite Lived Intangible Assets Gross	$ 10.9	$ 10.9

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Derivative Instruments and Hedging Activities (Tables)

12 Months Ended

Sep. 27, 2013

Fair Value of Derivative Instrument Reported in Statement of Financial Position

The fair values of derivative instruments reported on the Company’s Consolidated Balance Sheets were as follows:

	Asset Derivatives							Liability Derivatives
	BalanceSheet Location	September27, 2013		September28, 2012			Balance Sheet Location			September27, 2013			September28, 2012
(In millions)		Fair Value		Fair Value						Fair Value			Fair Value
Derivative designated as hedging instruments:
Foreign exchange forward contracts	PrepaidExpenses	$	-		$	0.8			Accruedliabilities		$	1.1		$	-
Derivative not designated as hedging instruments:
Foreign exchange forward contracts	PrepaidExpenses		-			-			Accruedliabilities			-			-
Total derivatives		$	-		$	0.8					$	1.1		$	-

Outstanding Foreign Currency Forward Contracts

The Company had the following outstanding foreign currency forward contracts that were entered into to hedge balance sheet exposures from its various foreign subsidiaries and business units:

	AtSeptember27,2013
(In millions)	Notional Value Sold		Notional Value Purchased
Australian dollar	$	21.9	$	-
British pound		18.6		-
Canadian dollar		-		2.2
Euro		188.1		-
Indian rupee		4.7		-
Japanese yen		69.3		-
Norwegian krone		3.3		2.8
Swedish krona		3.2		-
Swiss franc		-		70.9
Totals	$	309.1	$	75.9

Effective Portion of Foreign Currency Forward Contracts Designated as Cash Flow Hedges

The following table presents the amounts, before tax, recognized in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets and in the Consolidated Statements of Earnings that are related to the effective portion of the foreign currency forward contracts designated as cash flow hedges:

(in millions)	Gain(Loss)RecognizedinOther Comprehensive Income (EffectivePortion)									LocationofGain(Loss) Reclassified from Accumulated Other ComprehensiveIncome into Net Earnings (Effective Portion)		Gain(Loss)Reclassifiedfrom AccumulatedOtherComprehensive Income into Net Earnings (EffectivePortion)
	Fiscal Years											Fiscal Years
	2013		2012			2011						2013			2012			2011
Foreign exchange contracts	$	0.5	$	1.4	$		(0.5	)	Revenues		$		2.5	$		0.6	$		(1.0	)

Gains (Losses) Related to Foreign Currency Forward Exchange Contracts that are Not Designated as Hedging Instruments

The following table presents the gains (losses) recognized in the Consolidated Statements of Earnings related to the foreign currency forward contracts that are not designated as hedging instruments.

Location of Gain or (Loss)		AmountofGainor(Loss) RecognizedinNetEarnings on Derivative
	Fiscal Years
(In millions)	2013			2012		2011
Selling, general and administrative expenses	$		9.6	$	5.0	$	2.3

Cash Flow Hedging

Outstanding Foreign Currency Forward Contracts

The Company had the following outstanding foreign currency forward contracts that were entered into to hedge forecasted revenues and designated as cash flow hedges:

	AtSeptember27, 2013
(In millions)	Notional Value Sold
Euro	$	40.5
Japanese yen		78.5
Totals	$	119.0

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Discontinued Operations

12 Months Ended

Sep. 27, 2013

Discontinued Operations

18. DISCONTINUED OPERATIONS

In September 2008, the Company approved a plan to sell Research Instruments, which developed, manufactured and serviced highly customized scientific instrument components and systems for fundamental and applied physics research primarily for national research laboratories worldwide. Research Instruments was part of the January 2007 ACCEL acquisition and was previously included in the “Other” category in the Company’s Consolidated Financial Statements. The Company decided to sell Research Instruments in order to focus exclusively on the development of its VPT business. In the second quarter of fiscal year 2009, the Company completed the sale of Research Instruments for total cash proceeds of $0.4 million. In connection with the sale of Research Instruments, the Company entered into a non-binding supply agreement with the buyer to supply certain inventory parts for the VPT business. The inventory purchases under this supply agreement have not and are not expected to have a significant impact on the cash flows of Research Instruments.

The Company classified the operating results of Research Instruments as a discontinued operation in the Consolidated Statements of Earnings for fiscal year 2011. There were no operating results of Research Instruments beyond fiscal year 2011. Because the amounts related to Research Instruments are not material in the Consolidated Statement of Comprehensive Earnings, Consolidated Balance Sheet, Consolidated Statement of Cash Flows and the Consolidated Statement of Stockholders’ Equity, the Company has not segregated them from continuing operations for fiscal year 2011.

The total loss from discontinued operations for fiscal year 2011 was $9.7, less applicable income tax of zero. Total revenues of Research Instruments, reported in discontinued operations, for fiscal year 2011 was zero. As of September30, 2011, the Company had no remaining obligation related to this discontinued operation. In fiscal years 2013 and 2012, the Company did not recognize any income or losses and did not have any revenues from discontinued operations.

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Segment Information

12 Months Ended

Sep. 27, 2013

Segment Information

17. SEGMENT INFORMATION

Description of Segments

The Company’s operations are grouped into two reportable operating segments: Oncology Systems and X-Ray Products. These reportable operating segments were determined based on how the Company’s Chief Executive Officer, its Chief Operating Decision Maker (“CODM”), views and evaluates the Company’s operations. The Company’s Ginzton Technology Center (“GTC”), SIP business and VPT are reflected in the “Other” category because these operating segments do not meet the criteria of a reportable operating segment. The CODM allocates resources to and evaluates the financial performance of each operating segment primarily based on operating earnings.

The Oncology Systems business segment designs, manufactures, sells and services hardware and software products for treating cancer with radiotherapy, stereotactic radiotherapy, stereotactic body radiotherapy, stereotactic radiosurgery and brachytherapy. Products include linear accelerators, brachytherapy afterloaders, treatment simulation and verification equipment and accessories; as well as information management, treatment planning and image processing software. Oncology Systems’ products enable radiation oncology departments in hospitals and clinics to perform conventional radiotherapy treatments and offer advanced treatments such as fixed field intensity-modulated radiation therapy (“IMRT”), image-guided radiation therapy (“IGRT”), volumetric modulated arc therapy and stereotactic radiotherapy, as well as to treat patients using brachytherapy techniques, which involve temporarily implanting radioactive sources. The Company’s Oncology Systems products are also used by neurosurgeons to perform stereotactic radiosurgery. Oncology Systems’ customers worldwide include university research and community hospitals, private and governmental institutions, healthcare agencies, physicians’ offices and cancer care clinics.

The X-Ray Products business segment designs, manufactures, sells and services X-ray imaging components for use in a range of applications, including radiographic or fluoroscopic imaging, mammography, special procedures, computed tomography and industrial applications. The Company’s X-ray imaging components are sold to large imaging system OEM customers that incorporate them into their medical diagnostic, dental, veterinary and industrial imaging systems. The Company sells X-ray tubes and flat panel digital image detectors for filmless X-ray imaging (commonly referred to as “flat panel detectors” or “digital image detectors”) to small OEM customers, independent service companies and directly to end-users for replacement purposes.

The Company has three other businesses that are reported together under the “Other” category. SIP designs, manufactures, sells and services Linatron® X-ray accelerators, imaging processing software and image detection products (including IntellXTM) for security and inspection purposes, such as cargo screening at ports and borders and nondestructive examination in a variety of applications. The Company generally sells SIP products to OEM customers who incorporate its products into their inspection systems, which are then sold to customs and other government agencies, as well as to commercial private parties in the casting, power, aerospace, chemical, petro-chemical and automotive industries for nondestructive product examination purposes.

The VPT business develops, designs, manufactures, sells and services products and systems for delivering proton therapy, a form of external beam radiotherapy using proton beams for the treatment of cancer.

In the second quarter of fiscal year 2009, the Company completed the sale of Research Instruments in order to focus that business exclusively on the development of the VPT business. Research Instruments is classified as a discontinued operation for fiscal year 2011 and the Company has segregated the operating results of Research Instruments from continuing operations on the Consolidated Statements of Earnings. There were no operating results of Research Instruments beyond fiscal year 2011.Segment data does not include amounts for discontinued operations. Research Instruments was previously included in the “Other” category. See Note 18, “Discontinued Operations” for a more detailed discussion.

GTC develops technologies that enhance the Company’s current businesses or may lead to new business areas, including technology to improve radiation therapy and X-ray imaging, as well as other technology for a variety of applications, including security and cargo screening.

Accordingly, the following information is provided for purposes of achieving an understanding of operations, but may not be indicative of the financial results of the reported segments were they independent organizations. In addition, comparisons of the Company’s operations to similar operations of other companies may not be meaningful.

Segment Data

	Revenues									Operating Earnings
	Fiscal Years									Fiscal Years
(In millions)	2013			2012			2011				2013				2012				2011
Oncology Systems	$	2,253	$		2,189	$		2,022	$			512		$		505		$		507
X-Ray Products		546			493			469				144				131				118
Total reportable segments		2,799			2,682			2,491				656				636				625
Other		144			125			106				(25	)			(32	)			(32	)
Corporate		-			-			-				(22	)			(10	)			(5	)
Total company	$	2,943	$		2,807	$		2,597	$			609		$		594		$		588

	Depreciation&Amortization									Capital Additions
	Fiscal Years									Fiscal Years
(In millions)	2013			2012			2011				2013			2012			2011
Oncology Systems	$	21	$		23	$		19	$			25	$		17	$		17
X-Ray Products		13			10			8				8			8			7
Total reportable segments		34			33			27				33			25			24
Other		3			4			3				10			10			13
Corporate		26			24			23				35			32			34
Total company	$	63	$		61	$		53	$			78	$		67	$		71
	Total Assets									Goodwill
	Fiscal Years									Fiscal Years
(In millions)	2013			2012			2011				2013			2012			2011
Oncology Systems	$	1,217	$		1,220	$		1,093	$			132	$		132	$		130
X-Ray Products		309			265			268				17			17			6
Total reportable segments		1,526			1,485			1,361				149			149			136
Other		367			313			239				76			73			76
Corporate		1,575			1,081			899				-			-			-
Total company	$	3,468	$		2,879	$		2,499	$			225	$		222	$		212

The reconciliation of segment operating results information to the Company’s earnings from operations before taxes was as follows:

	Fiscal Years
(In millions)	2013				2012				2011
Earnings from operations before taxes:
Oncology Systems	$	512		$		505		$		507
X-Ray Products		144				131				118
Total reportable segments		656				636				625
Other		(25	)			(32	)			(32	)
Corporate		(22	)			(10	)			(5	)
Interest income (expense), net		3				2				1
Total company	$	612		$		596		$		589

Geographic Information

	Revenues									Long-Lived Assets
	Fiscal Years									Fiscal Years
(In millions)	2013			2012			2011				2013			2012			2011
United States	$	1,212	$		1,156	$		975	$			238	$		229	$		223
International		1,731			1,651			1,622				77			68			63
Total company	$	2,943	$		2,807	$		2,597	$			315	$		297	$		286

The Company operates various manufacturing and marketing operations outside the United States. Allocation between domestic and foreign revenues is based on final destination of products sold. No single foreign country represented 10% or more of the Company’s total revenues for fiscal years 2013, 2012 and 2011. Intercompany revenues between geographic areas are accounted for at cost plus prevailing markups arrived at through negotiations between profit centers. Intercompany and intracompany profits are eliminated in consolidation.

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Schedule of Effective Income Tax Rate (Detail)	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Schedule Of Effective Tax Rates [Line Items]
Federal statutory income tax rate	35.00%	35.00%	35.00%
State and local taxes, net of federal tax benefit	1.30%	1.30%	2.50%
Non-U.S. income taxed at different rates, net	(5.60%)	(5.90%)	(3.30%)
Resolution of tax contingencies due to lapses of statutes of limitations	(1.20%)	(1.80%)	(2.80%)
Other	(1.10%)	(0.30%)	(0.80%)
Effective tax rate	28.40%	28.30%	30.60%

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Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)	12 Months Ended
	Sep. 27, 2013 Customer	Sep. 28, 2012	Sep. 30, 2011
Significant Accounting Policies [Line Items]
Excise tax on sales of medical devices, percentage	2.30%
Foreign currency gain (loss) before tax	$ 700,000	$ 400,000	$ (1,400,000)
Equity investments under cost method	21,400,000	21,400,000
Impairment loss on equity investments in privately held companies	0	0	0
Number of customers accounted for more than 10% of total accounts receivable	0
Impairment charges for long-lived assets and identifiable assets	0	0	0
Goodwill impairment charges	0	0	0
Costs incurred and revenues recognized in excess of customer billings	68,100,000	48,800,000
Customer billings in excess of costs incurred and revenue recognized	33,800,000	32,600,000
Share-based compensation expenses	$ 42,600,000	$ 47,900,000	$ 42,000,000
Minimum
Significant Accounting Policies [Line Items]
Finite-lived intangible asset, useful life	1 year
Maximum
Significant Accounting Policies [Line Items]
Finite-lived intangible asset, useful life	20 years
Land Improvements
Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	15 years
Building | Minimum
Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	20 years
Building | Maximum
Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	30 years
Machinery and Equipment | Minimum
Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	3 years
Machinery and Equipment | Maximum
Significant Accounting Policies [Line Items]
Property, plant and equipment, useful life	7 years
Assets Subject To Lease
Significant Accounting Policies [Line Items]
Property, plant and equipment, estimated useful lives	the lesser of estimated useful lives or remaining lease terms
Land Leasehold Rights And Leasehold Improvements
Significant Accounting Policies [Line Items]
Property, plant and equipment, estimated useful lives	the lesser of estimated useful lives or remaining lease terms

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Fair Value (Tables)

12 Months Ended

Sep. 27, 2013

Assets and Liabilities Measured at Fair Value on Recurring Basis

In the tables below, the Company has segregated all assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

	Fair Value Measurement Using
Type of Instruments	QuotedPricesin Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total Balance
(In millions)
Assets at September27, 2013:
Money market funds	$	50.0		$	-			$	-			$	50.0
Corporate debt security		-			-				62.7				62.7
Option to purchase a company		-			-				1.4				1.4
Total assets measured at fair value	$	50.0		$	-			$	64.1			$	114.1
Liabilities at September27, 2013:
Derivative liabilities	$	-		$	(1.1	)		$	-			$	(1.1	)
Contingent consideration		-			-				(2.5	)			(2.5	)
Total liabilities measured at fair value	$	-		$	(1.1	)		$	(2.5	)		$	(3.6	)
Assets at September28, 2012:
Money market funds	$	45.7		$	-			$	-			$	45.7
Corporate debt security		-			-				49.7				49.7
Derivative assets		-			0.8				-				0.8
Option to purchase a company		-			-				1.4				1.4
Total assets measured at fair value	$	45.7		$	0.8			$	51.1			$	97.6
Liabilities at September28, 2012:
Contingent consideration	$	-		$	-			$	(8.8	)		$	(8.8	)
Total liabilities measured at fair value	$	-		$	-			$	(8.8	)		$	(8.8	)

Reconciliation for Assets and Liabilities Measured and Recorded at Fair Value on Recurring Basis

The following table presents the reconciliation for all assets and liabilities measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3):

(In millions)	Corporate debt Security			Contingent Consideration				Option to Purchasea Company
Balance at September 28, 2012	$	49.7	$		(8.8	)	$		1.4
Additions, including accrued interest		13.0			-				-
Settlements (1)		-			1.1				-
Change in fair value recognized in earnings		-			5.2				-
Balance at September 27, 2013	$	62.7	$		(2.5	)	$		1.4

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Retirement Plans (Tables)

12 Months Ended

Sep. 27, 2013

Schedule of Funded Status of the Defined Benefit Pension and Post-Retirement Benefit Plans

The following table presents the funded status of the defined benefit pension and post-retirement benefit plans:

	Defined Benefit Plans						Post-Retirement Benefit Plan
(In millions)	September27, 2013			September28, 2012				September27, 2013			September28, 2012
Change in benefit obligation:
Benefit obligation - beginning of fiscal year	$	181.1		$	160.5			$	5.6		$	5.9
Service cost		4.8			4.3				-			-
Interest cost		5.2			5.3				0.2			0.3
Plan participants’ contributions		10.9			5.3				-			-
Plan amendment		0.5			-				-			-
Plan settlement		(4.7	)		(2.5	)			-			-
Plan curtailment		-			(0.2	)			-			-
Actuarial (gain) loss		(0.7	)		14.5				(0.5	)		(0.1	)
Foreign currency changes		3.2			(2.4	)			-			-
Benefit and expense payments		(4.6	)		(3.7	)			(0.5	)		(0.5	)
Benefit obligation - end of fiscal year	$	195.7		$	181.1			$	4.8		$	5.6
Change in plan assets:
Plan assets - beginning of fiscal year	$	142.6		$	125.5			$	-		$	-
Employer contributions		22.2			9.6				0.5			0.5
Actual return on plan assets		11.6			9.8				-			-
Plan participants’ contributions		10.9			5.3				-			-
Plan settlement		(4.7	)		(2.5	)			-			-
Foreign currency changes		2.8			(1.4	)			-			-
Benefit and expense payments		(4.6	)		(3.7	)			(0.5	)		(0.5	)
Plan assets - end of fiscal year	$	180.8		$	142.6			$	-		$	-
Funded status	$	(14.9	)	$	(38.5	)		$	(4.8	)	$	(5.6	)
Amounts recognized within the consolidated balance sheet:
Noncurrent assets	$	3.1			-				-			-
Current liabilities		-		$	-			$	(0.5	)	$	(0.5	)
Noncurrent liabilities		(18.0	)		(38.5	)			(4.3	)		(5.1	)
Net amount recognized	$	(14.9	)	$	(38.5	)		$	(4.8	)	$	(5.6	)

Schedule of Amounts Recognized in Accumulated Other Comprehensive Loss (Before Tax)

The following table presents the amounts recognized in accumulated other comprehensive loss (before tax):

	Defined Benefit Plans						Post-Retirement Benefit Plan
(In millions)	September27, 2013			September28, 2012				September27, 2013		September28, 2012
Prior service cost	$	(0.7	)	$	(0.4	)		$	-	$	-
Net gain (loss)		(49.4	)		(59.7	)			0.1		(0.4	)
Accumulated other comprehensive loss	$	(50.1	)	$	(60.1	)		$	0.1	$	(0.4	)

Schedule of Defined Benefit Pension Plan Balances with Accumulated Benefit Obligation Exceeded Fair Value of Plan Assets

The following table presents the total fair value of plan assets, projected benefit obligation and accumulated benefit obligation for those defined benefit pension plans where accumulated benefit obligation exceeded the fair value of plan assets:

	Defined Benefit Plans
(In millions)	September27, 2013		September28, 2012
Projected benefit obligation	$	-		$	76.4
Accumulated benefit obligation	$	-		$	71.1
Fair value of plan assets	$	-		$	62.9

Schedule of Net Periodic Benefit Costs

The following table shows the components of the Company’s net periodic benefit costs and the other amounts recognized in other comprehensive (income) loss, before tax, related to the Company’s defined benefit pension plans and the Company’s post-retirement benefit plan:

	Defined Benefit Plans											Post-Retirement Benefit Plan
	Fiscal Years											Fiscal Years
(In millions)	2013			2012				2011					2013				2012				2011
Net Periodic Benefit Costs:
Service cost	$	4.8		$	4.3		$		3.7		$			-		$		-		$		-
Interest cost		5.2			5.3				5.0					0.2				0.2				0.2
Loss due to settlement or curtailment		1.0			0.9				-					-				-				-
Expected return on assets		(5.7	)		(5.3	)			(4.9	)				-				-				-
Amortization of prior service cost		0.2			0.2				0.1					-				-				-
Recognized actuarial loss		2.7			2.5				2.1					-				0.1				0.1
Net periodic benefit cost		8.2			7.9				6.0					0.2				0.3				0.3
Other Amounts Recognized in Other Comprehensive (Income) Loss:
New prior service cost		0.5			-				-					-				-				-
Net (gain) loss arising during the year		(6.6	)		9.9				9.6					(0.4	)			(0.1	)			0.3
Amortization of prior service cost		(0.2	)		(0.2	)			(0.1	)				-				-				-
Amortization, settlement and curtailment of net actuarial loss		(3.7	)		(3.5	)			(2.1	)				(0.1	)			(0.1	)			(0.1	)
Total recognized in other comprehensive (income) loss		(10.0	)		6.2				7.4					(0.5	)			(0.2	)			0.2
Total recognized in net periodic benefit cost and other comprehensive loss	$	(1.8	)	$	14.1		$		13.4		$			(0.3	)	$		0.1		$		0.5

Schedule of Accumulated Other Comprehensive Income (Loss) Expected to be Recognized as Components of Net Periodic Benefit Cost

The amounts in “Accumulated other comprehensive loss” that are expected to be recognized as components of net periodic benefit cost during fiscal year 2014 are as follows:

(In millions)	Defined BenefitPlans			Post-Retirement Benefit Plan		Total
Prior service cost	$	(0.2	)	$	-	$	(0.2	)
Net loss		(2.4	)		-		(2.4	)
	$	(2.6	)	$	-	$	(2.6	)

Schedule of Assumptions Used to Determine Net Periodic Benefit Cost

The assumptions used to determine net periodic benefit cost and to compute the expected long-term return on assets for the Company’s defined benefit pension and post-retirement benefit plans were as follows:

	Fiscal Years
Net Periodic Benefit Cost	2013			2012			2011
Defined benefit plans:
Discount rates		2.94	%		3.38	%		3.45	%
Rates of compensation increase		2.37	%		2.48	%		2.44	%
Expected long-term return on assets		3.82	%		4.02	%		4.13	%
Post-retirement benefit plan:
Discount rate		3.00	%		3.90	%		4.40	%

Schedule of Assumptions Used to Measure Benefit Obligations for Company's Defined Benefit Pension and Post Retirement Benefit Plans

The assumptions used to measure the benefit obligations for the Company’s defined benefit pension and post-retirement benefit plans were as follows:

Benefit Obligations	September27, 2013			September28, 2012
Defined benefit plans:
Discount rates		3.11	%		2.94	%
Rates of compensation increase		2.51	%		2.37	%
Post-retirement benefit plan:
Discount rate		3.80	%		3.00	%

Schedule of Assumed Healthcare Cost Trend Rates for Post-Retirement Benefit Plan

The assumed healthcare cost trend rates for the post-retirement benefit plan are as follows:

	Fiscal Years
Assumed Healthcare Cost Trend Rates	2013			2012			2011
Post-retirement benefit plan:
Current medical cost trend rate		8.2	%		9.9	%		11.2	%
Ultimate medical cost trend rate		4.5	%		4.5	%		4.5	%

Schedule of Fair Values of Plan Assets

The following table presents the Company’s defined benefit pension plans’ major asset categories, their associated fair values, as well as the actual allocation of equity, debt and fixed income, real estate and all other types of investments:

(In millions)	QuotedPricesin ActiveMarketsfor Identical Assets (Level 1)		Significant ObservableInputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
As of September27, 2013:
Investment funds:
Mutual funds - equities	$	-	$	49.9	$		-	$		49.9
Mutual funds - debt		-		26.1			-			26.1
Mutual funds - real estate		-		3.6			-			3.6
Assets held by insurance company:
Insurance contracts		-		86.3			-			86.3
Cash and cash equivalents		14.9		-			-			14.9
Total	$	14.9	$	165.9	$		-	$		180.8
As of September28, 2012:
Investment funds:
Mutual funds - equities	$	-	$	40.3	$		-	$		40.3
Mutual funds - debt		-		23.2			-			23.2
Mutual funds - real estate		-		3.5			-			3.5
Assets held by insurance company:
Insurance contracts		-		73.3			-			73.3
Cash and cash equivalents		2.3		-			-			2.3
Total	$	2.3	$	140.3	$		-	$		142.6

Schedule of Estimated Future Benefit Payments

Estimated future benefit payments at September27, 2013 were as follows:

(In millions)	DefinedBenefit Plans		Post-Retirement BenefitPlan		Total
Fiscal Years:
2014	$	4.8	$	0.5	$	5.3
2015		5.2		0.5		5.7
2016		4.9		0.5		5.4
2017		7.2		0.5		7.7
2018		7.3		0.4		7.7
2019-2023		39.9		1.8		41.7
	$	69.3	$	4.2	$	73.5

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Components of Other Long-Term Liabilities (Detail) (USD $)	Sep. 27, 2013	Sep. 28, 2012
Other long-term liabilities:
Long-term income taxes payable	$ 41,900,000	$ 40,600,000
Other	102,100,000	85,600,000
Total other long-term liabilities	$ 144,048,000	$ 126,169,000

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Sep. 27, 2013

Basis of Presentation

Basis of Presentation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). As discussed in Note 18, “Discontinued Operations,” the Company has presented the operating results of the scientific research instruments business (“Research Instruments”) of ACCEL Instruments GmbH (“ACCEL,” which has since changed its name to Varian Medical Systems Particle Therapy GmbH) as a discontinued operation in the Consolidated Statements of Earnings for the fiscal year 2011. There were no operating results or other material balances related to Research Instruments beyond fiscal year 2011. Unless noted otherwise, discussion in these notes pertains to the Company’s continuing operations.

Reclassifications

Reclassifications

Certain items in the consolidated statements of earnings and consolidated balance sheets have been reclassified to conform to the current fiscal year’s presentation. These reclassifications had no impact on previously reported total revenues, total cost of revenues, net earnings, total current assets, total assets, total current liabilities, total liabilities, and total stockholders’ equity.

Fiscal Year

Fiscal Year

The fiscal years of the Company as reported are the 52- or 53-week periods ending on the Friday nearest September30. Fiscal year 2013 was the 52-week period that ended on September27, 2013. Fiscal year 2012 was the 52-week period that ended on September28, 2012 and fiscal year 2011 was the 52-week period that ended on September30, 2011.

Distribution

Distribution

On April2, 1999, Varian Associates, Inc. reorganized into three separate publicly traded companies by spinning off, through a tax-free distribution, two of its businesses to stockholders (the “Spin-offs”). The Spin-offs resulted in the following three companies: 1) the Company (renamed from Varian Associates, Inc. to Varian Medical Systems, Inc. following the Spin-offs); 2) Varian, Inc. (“VI”), which became a wholly owned subsidiary of Agilent Technologies Inc. in May 2010; and 3) Varian Semiconductor Equipment Associates, Inc. (“VSEA”), which became a wholly owned subsidiary of Applied Materials, Inc. in November 2011. The Spin-offs resulted in a non cash dividend to stockholders.

In connection with the Spin-offs, the Company, VI and VSEA also entered into various agreements that set forth the principles to be applied in separating the companies and allocating certain related costs and specified portions of contingent liabilities (see Note 9, “Commitments and Contingencies.”)

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include those of VMS and its subsidiaries. Intercompany balances, transactions and stock holdings have been eliminated in consolidation.

Consolidation of Variable Interest Entities

Consolidation of Variable Interest Entities

The Company uses a qualitative approach in assessing the consolidation requirement for entities in which it may have a variable interest.  A variable interest entity is an entity with one or more of the following characteristics (a)the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support; (b)as a group, the holders of the equity investment at risk lack the ability to make certain decisions, the obligation to absorb expected losses or the right to receive expected residual returns; or (c)the equity investors have voting rights that are not proportional to their economic interests.

The approach focuses on identifying which entity has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. In the event that the Company is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity will be included in the Company’s Consolidated Financial Statements. For fiscal years 2013, 2012 and 2011, the Company did not consolidate any variable interest entity because the Company was not a primary beneficiary.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Foreign Currency Translation

Foreign Currency Translation

The Company uses the U.S. dollar predominately as the functional currency of its foreign subsidiaries. For foreign subsidiaries where the U.S. dollar is the functional currency, gains and losses from remeasurement of foreign currency balances into U.S. dollars are included in the Consolidated Statements of Earnings. The aggregate net gains (losses) resulting from foreign currency transactions and remeasurement of foreign currency balances into U.S. dollars, that were included in the Consolidated Statements of Earnings, were $0.7 million, $0.4 million and $(1.4) million in fiscal years 2013, 2012 and 2011, respectively. For the foreign subsidiary where the local currency is the functional currency, translation adjustments of foreign currency financial statements into U.S. dollars are recorded to a separate component of accumulated other comprehensive income (loss). See Note 8, “Derivative Instruments and Hedging Activities” regarding the Company’s hedging activities and derivative instruments. Also see Note 3, “Fair Value” regarding valuation of the Company’s derivative instruments.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers currency on hand, demand deposits, time deposits, and all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are held in various financial institutions in the United States and internationally.

Short-term Investment

Short-term Investment

The Company has an investment in a corporate debt security from the California Proton Therapy Center, LLC (“CPTC”) that it classifies as an available-for-sale investment, which is recorded in the Consolidated Balance Sheets at fair value. Unrealized gains and losses on this investment are included as a separate component of “Accumulated other comprehensive loss,” net of tax, in the Consolidated Balance Sheets. The Company classifies its available-for-sale investment as short-term based on the nature of the investment and its availability for use in current operations. The Company monitors its short-term investment for possible other-than-temporary impairment when business events or changes in circumstances indicate that the carrying value of the investment may not be recoverable. The Company has not identified any indication of impairment of its short-term investment for fiscal years 2013 and 2012.

Investments in Privately Held Companies

Investments in Privately Held Companies

Equity investments in privately held companies in which the Company holds at least a 20% ownership interest or in which the Company has the ability to exercise significant influence are accounted for by the equity method. Equity investments in privately held companies in which the Company holds less than a 20% ownership interest and does not have the ability to exercise significant influence are accounted for under the cost method. Equity investments accounted for under the cost method totaled $21.4 million at both September27, 2013 and September28, 2012. The Company’s equity investments in privately held companies are included in “Other assets” in the Consolidated Balance Sheets. The Company monitors these equity investments for impairment and makes appropriate reductions in carrying values if the Company determines that impairment charges are required based primarily on the financial condition and near-term prospects of these companies. The Company did not have any impairment loss on equity investments in privately held companies for fiscal years 2013, 2012 and 2011.

Concentration Of Credit Risk

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash, cash equivalents, short-term investment, trade accounts receivable and derivative financial instruments used in hedging activities. Cash and cash equivalents held with financial institutions may exceed the Federal Deposit Insurance Corporation insurance limits or similar limits in foreign jurisdictions. The Company has not experienced any losses on its deposits of cash and cash equivalents. With respect to its short-term investment, the Company performs a periodic credit evaluation of  CPTC, the obligor under the debt security. In addition, the Company will be exposed to credit loss in the event of nonperformance by counterparties on the foreign currency forward contracts used in hedging activities. The Company transacts its foreign currency forward contracts with several large international and regional financial institutions and, therefore, does not consider the risk of nonperformance to be concentrated in any specific counterparty. The Company has not experienced any losses resulting from the failure of counterparty to meet its financial obligations under foreign currency forward contracts. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers comprising the Company’s customer base and their geographic dispersion. The Company performs ongoing credit evaluations of its customers and, except for government tenders, group purchases and orders with a letter of credit, requires its Oncology Systems, Security and Inspection Products (“SIP”) and Varian Particle Therapy (“VPT”) customers to provide a down payment. The Company maintains an allowance for doubtful accounts based upon the expected collectability of all accounts receivable. No single customer represented more than 10% of the accounts receivable amount for any period presented.

Inventories

Inventories

Inventories are valued at the lower of cost or market (realizable value). Excess and obsolete inventories are determined primarily based on future demand forecasts and write-downs of excess and obsolete inventories are recorded as a component of cost of revenues. Cost is computed using standard cost (which approximates actual cost) and actual cost on a first-in-first-out or average basis.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation. Major improvements are capitalized, while repairs and maintenance are expensed as incurred. Costs incurred for internal use software during the application development stage are capitalized in accordance with guidance on internal-use software. Internally developed software primarily includes enterprise-level business software that the Company customizes to meet its specific operational needs. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Land is not subject to depreciation, but land improvements are depreciated over fifteen years. Land leasehold rights and leasehold improvements are amortized over the lesser of their estimated useful lives or remaining lease terms. Buildings are depreciated over twenty or thirty years. Machinery and equipment are depreciated over their estimated useful lives, which range from three to seven years. Assets subject to lease are amortized over the lesser of their estimated useful lives or remaining lease terms. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are removed from the accounts. Gains or losses resulting from retirements or disposals of property, plant and equipment are included in operating expenses.

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net identified tangible and intangible assets acquired. Purchased intangible assets are carried at cost, net of accumulated amortization. Intangible assets with finite lives are amortized over their estimated useful lives of approximately oneto twenty years generally using the straight-line method.

Impairment of Long-Lived Assets, Goodwill and Intangible Assets

Impairment of Long-lived Assets, Goodwill and Intangible Assets

The Company reviews long-lived assets and identifiable intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The Company assesses these assets for impairment based on their estimated undiscounted future cash flows. If the carrying value of the assets exceeds the estimated future undiscounted cash flows, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. The Company did not recognize any impairment charges for long-lived assets and identifiable intangible assets in fiscal years 2013, 2012, and 2011.

The Company evaluates goodwill for impairment at least annually or whenever an event occurs or circumstances changes that would more likely than not reduce the fair value of a reporting unit below its carrying amount. If the Company determines that a quantitative analysis is necessary, the impairment test for goodwill is a two-step process. Step one consists of a comparison of the fair value of a reporting unit against its carrying amount, including the goodwill allocated to each reporting unit. The Company determines the fair value of its reporting units based on a combination of income and market approaches. The income approach is based on the present value of estimated future cash flows of the reporting units and the market approach is based on a market multiple calculated for each business unit based on market data of other companies engaged in similar business. If the carrying amount of the reporting unit is in excess of its fair value, step two requires the comparison of the implied fair value of the reporting unit’s goodwill against the carrying amount of the reporting unit’s goodwill. Any excess of the carrying value of the reporting unit’s goodwill over the implied fair value of the reporting unit’s goodwill is recorded as an impairment loss.

In fiscal years 2013, 2012 and 2011, the Company performed the annual goodwill impairment testing for the four reporting units that carried goodwill, namely Oncology Systems, X-Ray Products, SIP and VPT, and found no impairment. Based on the most recent annual goodwill impairment testing that the Company performed in fiscal year 2013 for each of its four reporting units that carried goodwill, Oncology Systems, X-Ray Products, SIP and VPT, the fair value of each such reporting unit was substantially in excess of its carrying value.

Loss Contingencies

Loss Contingencies

From time to time, the Company is a party to or otherwise involved in legal proceedings, claims and government inspections or investigations and other legal matters, both inside and outside the United States, arising in the ordinary course of its business or otherwise.  The Company accrues amounts, to the extent they can be reasonably estimated, that it believes are adequate to address any liabilities related to legal proceedings and other loss contingencies that it believes will result in a probable loss.

Environmental remediation liabilities are recorded when environmental assessments and/or remediation efforts are probable, and the costs of these assessments or remediation efforts can be reasonably estimated.

Revenue Recognition

Revenue Recognition

The Company’s revenues are derived primarily from the sale of hardware and software products, and related services and contracts from the Company’s Oncology Systems, X-Ray Products, SIP and VPT businesses. The Company recognizes its revenues net of any value added or sales tax and net of sales discounts.

Many of the Company’s revenue arrangements consist of multiple deliverables of its software and non-software products, as well as related services. In Oncology Systems, the linear accelerators are often sold with hardware and software accessory products that enhance efficiency and enable delivery of advanced radiotherapy and radiosurgery treatments. Many of the Oncology Systems hardware and software accessory products are also sold on a stand-alone basis. The X-Ray Products business generally sells its X-ray components (including X-ray tubes, flat panel detectors and image processing tools) on a stand-alone basis. However, the X-Ray Products business occasionally sells its flat panel detectors, X-ray tubes and imaging processing tools as a package that is optimized for digital X-ray imaging. While SIP products are generally sold on a stand-alone basis, SIP occasionally sells its Linatron® X-ray accelerators together with its imaging processing software and image detection products to original equipment manufacturer (“OEM”) customers that incorporate them into their inspection systems. Service contracts are often sold with Oncology Systems products, as well as with certain products in the SIP business. As discussed below, certain of the Oncology Systems and SIP products are sold with installation obligations. Delivery of different elements in a revenue arrangement often span more than one reporting period. For example, a linear accelerator may be delivered in a reporting period but the related installation is completed in a later period. Revenue related to service contracts usually starts after the expiration of the warranty period for non-software products or upon acceptance for software products.

For a multiple element arrangement that includes software and non-software deliverables which includes service contracts, the Company first allocates revenues among the software and non-software deliverables on a relative selling price basis. The amounts allocated to the non-software products and software are accounted for as follows:

Non-software Products

Non-software products include hardware products, software components that function together with the hardware components to deliver the product’s essential functionality, as well as service contracts. Except as described below under “Service,” the Company recognizes revenues for non-software products when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured.

For multiple element revenue arrangements that involve non-software products, a delivered non-software element is considered as a separate unit of accounting when it has stand-alone value and there is no customer-negotiated refund or return rights for the delivered element. The allocation of revenue to all deliverables based on their relative selling prices is determined at the inception of the arrangement. The selling price for each deliverable is determined using vendor-specific objective evidence (“VSOE”) of selling price, if it exists; otherwise, third-party evidence of selling price (“TPE”). If neither VSOE nor TPE of selling price exists for a deliverable the Company uses the deliverable’s estimated selling prices (“ESP”).

The Company’s non-software products have stand-alone value because they are sold separately. Product installation, which is a standard process and does not involve changes to the features or capabilities of the Company’s products, is considered as a separate unit of accounting. Installation of Oncology Systems and SIP non-software products involves the Company’s testing of each product at its factory prior to the product’s delivery to ensure that the product meets the Company’s published specifications. Once these tests establish that the specifications have been met, the product is then disassembled and shipped to the customer’s site as specified in the customer contract. Risk of loss is transferred to the customer either at the time of shipment or delivery, depending upon the shipping terms of the contract. At the customer’s site, the product is reassembled, installed and retested in accordance with the Company’s installation procedures to ensure and demonstrate compliance with the Company’s published specifications for that product.

Under the terms of the Company’s standard non-software sales contracts, “acceptance” of a non-software product with installation obligations is deemed to have occurred upon the earliest of (i)completion of product installation and testing in accordance with the Company’s standard installation procedures showing compliance with the Company’s published specifications for that product, (ii)receipt by the Company of an acceptance form executed by the customer acknowledging installation and compliance with the Company’s published specifications for that product, (iii)use by the customer of the product for any purpose after its delivery or (iv)six months after the delivery of the product to the customer by the Company. The contracts allow for cancellation only by mutual agreement, thus the customer does not have a unilateral right to return the delivered non-software product.

The Company establishes VSOE of selling price based on the price charged for a deliverable when sold separately and, for a deliverable not yet being sold separately, the price established by management having the relevant authority. As discussed above, many products are sold in stand-alone arrangements and accordingly have VSOE of selling price. Service contracts are sold separately through either original sale or subsequent renewal of annual contracts. The Company establishes TPE generally by evaluating the Company’s and competitors’ largely interchangeable competing products or services in stand-alone sales to similarly situated customers. The TPE for product installation is determined based on the estimated labor hours and the prevailing hourly rate charged for similar services, as well as the prices charged by outside vendors for installation of the Company’s products. For certain products for which the Company is not able to establish VSOE or TPE of selling prices, ESPs are used as the basis of their selling prices. The Company estimates selling prices following an established process that considers market conditions, including the product offerings and pricing strategies of competitors, as well as internal factors such as historical pricing practices and margin objectives. The establishment of product and service ESPs is controlled and reviewed by the appropriate level of management in all of the Company’s businesses.

The Company limits the amount of revenue recognized for delivered items to the amount that is not contingent upon the delivery of additional products or services. For Oncology Systems and SIP non-software products with installation obligations, the Company recognizes as revenues a portion of the product purchase price upon transfer of risk of loss and defers revenue recognition on the portion associated with product installation, provided that all other criteria for revenue recognition have been met. The portion deferred is the greater of the relative selling price of the installation services for such products or the amount of payment contractually linked to product installation services.

The Company does not have installation obligations for X-ray tubes, digital image detectors, spare parts and certain hardware products in Oncology Systems and the SIP business. For the products that do not include installation obligations, the Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the shipping terms of the contract, provided that all other revenue recognition criteria have been met.

Software Products

Except as described below under “Service,” the Company recognizes revenues for software products in accordance with the software revenue recognition guidance. The Company recognizes license revenues when all of the following criteria have been met: persuasive evidence of an arrangement exists, the vendor’s fee is fixed or determinable, collection of the related receivable is probable, delivery of the product has occurred and the Company has received from the customer an acceptance form acknowledging installation and substantial conformance with the Company’s specifications (as set forth in the user manual) for such product, or upon verification of installation when customer acceptance is not required to be received, or upon the expiration of an acceptance period, provided that all other criteria for revenue recognition have been met.

Revenues earned on software arrangements involving multiple elements are allocated to each element based on VSOE of fair value, which is based on the price charged when the same element is sold separately. In instances when evidence of VSOE of fair value of all undelivered elements exists, but evidence does not exist for one or more delivered elements, revenues are recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. Revenue allocated to maintenance and support is recognized ratably over the maintenance term (typically one year).

Installation of the Company’s software products may involve a certain amount of customer-specific implementation to enable the software product to function within the customer’s operating environment (i.e., with the customer’s information technology network and other hardware, with the customer’s data interfaces and with the customer’s administrative processes) and substantially in conformance with the Company’s specifications (as set forth in the user manual) for such product. With these software products, customers do not have full use of the software (i.e., functionality) until the software is installed as described above and functioning within the customer’s operating environment. Therefore, the Company recognizes 100% of such software revenues upon receipt from the customer of the Company’s acceptance form acknowledging installation and such substantial conformance, or upon verification of installation when the Company is not required to receive customer acceptance, or upon the expiration of an acceptance period, provided that all other criteria for revenue recognition have been met.

The Company does not have installation obligations for certain brachytherapy and SIP software products. For software products that do not include installation obligations, the Company recognizes revenues upon the transfer of risk of loss, which is either at the time of shipment or delivery, depending upon the shipping terms of the contract, provided that all other criteria for revenue recognition have been met.

Contracts for Customized Equipment

Revenues related to certain highly customized image detection systems, proton therapy systems and proton therapy system commissioning contracts are recognized in accordance with contract accounting. The Company recognizes contract revenues under the percentage-of-completion method which are based on contract costs incurred to date compared with total estimated contract costs. Changes in estimates of total contract revenue, total contract cost or the extent of progress towards completion are recognized in the period in which the changes in estimates are identified. Estimated losses on contracts are recognized in the period in which the loss is identified. In circumstances in which the final outcome of a contract cannot be precisely estimated but a loss on the contract is not expected, the Company recognizes revenues under the percentage-of-completion method based on a zero profit margin until more precise estimates can be made. If and when the Company can make more precise estimates, revenues and costs of revenues are adjusted in the same period.

Contracts accounted for in accordance with contract accounting are billable upon achievement of milestones specified in the contracts or upon customer acceptance. Costs incurred and revenues recognized under the percentage-of-completion method in excess of customer billings are included in “Accounts receivable” in the Consolidated Balance Sheets. Customer billings in excess of costs incurred and revenue recognized under the percentage-of-completion method, which typically reflect initial down payments, are included in “Advance payments from customers” in the Consolidated Balance Sheets. Costs incurred and revenues recognized in excess of customer billings were $68.1 million as of September27, 2013 and $48.8 million as of September28, 2012. Customer billings in excess of costs incurred and revenue recognized were $33.8 million as of September27, 2013 and $32.6 million as of September28, 2012.

Service

Service revenues include revenues from service contracts, bundled support arrangements, paid services and trainings, and parts that are sold by the service department. Prior to the fourth quarter of fiscal year 2013, revenues and cost of revenues of parts that were sold by the service department were classified as product revenues and product cost of revenues, respectively. Revenues and costs of revenues of parts that are sold by the service department have been reclassified from product revenues and product cost of revenues to service revenue and service cost of revenues, respectively, for the first nine months of fiscal year 2013 and for fiscal years 2012 and 2011 to conform to the current presentation. Also, certain other cost of revenue items have been reclassified between product cost of revenues and service cost of revenues for the first nine months of fiscal year 2013 and for fiscal years 2012 and 2011 to conform to the current presentation.Revenues allocated to service contracts are generally recognized ratably over the period of the related contracts. For proton therapy systems service contracts, revenues subject to certain penalty provisions are deferred until reliable estimates can be made or the related penalty provisions lapse. Revenues related to services performed on a time-and-materials basis are recognized when they are earned and billable.

Advance Payments from Customers

Advance Payments from Customers

Except for government tenders, group purchasesand orders with letters of credit, the Company typically requires its Oncology Systems, SIP and VPT customers to provide a down payment prior to transfer of risk of loss of ordered products. These payments are recorded as “Advance payments from customers” in the Consolidated Balance Sheets.

Deferred Revenue

Deferred Revenue

Deferred revenue includes (i)the billable amount applicable to shipment of software products but for which installation and/or final acceptance have not been completed (ii)the billable amount applicable to non-software products for which installation and/or acceptance have not been completed and (iii) the billable amount for service contracts for which the services have not been rendered. As of September 27, 2013, advance payments prior to performance under service contracts have been classified as deferred revenue and prior year amounts have been reclassified from advance payments from customers to conform to the current fiscal year’s presentation.Deferred costs associated with deferred revenues are included in “Inventories” in the Consolidated Balance Sheets.

Medical Device Excise Tax

Medical Device Excise Tax

In accordance with the Patient Protection and Affordable Care Act, effective January1, 2013, the Company began to incur a 2.3% excise tax on sales of medical devices in the United States. The medical device excise tax is included in the cost of revenues on the consolidated statements of earnings for fiscal year 2013, net of any amounts directly billed to customers for this tax.

Share-Based Compensation Expense

Share-Based Compensation Expense

The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors, including stock options, employee stock purchases related to the Varian Medical Systems, Inc. Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”), deferred stock units, restricted stock, restricted stock units and performance units based on their fair values.

Share-based compensation expense recognized in the Consolidated Statements of Earnings includes compensation expense for the share-based payment awards based on the grant date fair value estimated in accordance with the guidance on share-based compensation. The Company values VMS’s stock options granted and the option component of the shares of VMS common stock purchased under the Employee Stock Purchase Plan using the Black-Scholes option-pricing model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The Company values its performance units using the Monte Carlo simulation model. Both the Black-Scholes option-pricing model and the Monte Carlo simulation model require the input of certain assumptions and changes in the assumptions can materially affect the fair value estimates of share-based payment awards.

Share-based compensation expense recognized is based on the value of the portion of share-based payment awards that is ultimately expected to vest. The Company attributes the value of share-based compensation to expense using the straight-line method. The Company considers only the direct tax impacts of share-based compensation awards when calculating the amount of tax windfalls or shortfalls.

For fiscal years 2013, 2012 and 2011, total share-based compensation expenses, before taxes, were $42.6 million, $47.9 million and $42.0 million, respectively. See Note 12, “Employee Stock Plans” for a detailed discussion.

Earnings per Share

Earnings per Share

Basic net earnings per share is computed by dividing net earnings by the weighted average number of shares of VMS common stock outstanding for the period. Diluted net earnings per share is computed by dividing net earnings by the sum of the weighted average number of common shares outstanding and dilutive common shares under the treasury stock method.

The following table sets forth the computation of net basic and diluted earnings per share:

	Fiscal Years
(In thousands, except per share amounts)	2013			2012			2011
Earnings from continuing operations	$	438,248	$		427,049	$		408,626
Loss from discontinued operations, net of taxes		-			-			(9,693	)
Net earnings	$	438,248	$		427,049	$		398,933
Weighted average shares outstanding - basic		108,352			111,376			116,703
Dilutive effect of potential common shares		1,701			2,097			2,032
Weighted average shares outstanding - diluted		110,053			113,473			118,735
Net earnings (loss) per share - basic:
Continuing operations	$	4.04	$		3.83	$		3.50
Discontinued operations		-			-			(0.08	)
Net earnings per share	$	4.04	$		3.83	$		3.42
Net earnings (loss) per share - diluted:
Continuing operations	$	3.98	$		3.76	$		3.44
Discontinued operations		-			-			(0.08	)
Net earnings per share	$	3.98	$		3.76	$		3.36
Anti-dilutive employee share-based awards, excluded		707			249			160

The Company excludes potentially dilutive common shares (consisting of shares underlying stock options, restricted stock units, performance units and the Employee Stock Purchase Plan) from the computation of diluted weighted average shares outstanding if the per share value, either the exercise price of the awards or the sum of (a)the exercise price of the awards and (b)the amount of the compensation cost attributed to future services and not yet recognized and (c)the amount of tax benefit or shortfall that would be recorded in additional paid-in capital when the award becomes deductible, is greater than the average market price of the shares, because the inclusion of the shares underlying these stock awards would be antidilutive to earnings per share.

Shipping and Handling Costs

Shipping and Handling Costs

Shipping and handling costs are included as a component of cost of revenues.

Research and Development

Research and Development

To date, research and development costs have been expensed as incurred. These costs primarily include employees’ compensation, consulting fees, material costs and research grants.

Software Development Costs

Software Development Costs

Costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized. No costs associated with the development of software have been capitalized as the Company believes its current software development process is essentially completed concurrent with the establishment of technological feasibility.

Comprehensive Earnings

Comprehensive Earnings

Comprehensive earnings include all changes in equity (net assets) during a period from non-owner sources. Comprehensive earnings include currency translation adjustments, change in unrealized gain or loss on derivative instruments designated as cash flow hedges, net of taxes (see Note 8, “Derivative Instruments and Hedging Activities”), and adjustments to and amortization of unrecognized actuarial gain or loss, unrecognized transition obligation and unrecognized prior service cost of our defined benefit pension and post-retirement benefit plans. See Note 10, “Retirement Plans.”

Taxes on Earnings

Taxes on Earnings

Taxes on earnings are based on pretax financial accounting income. Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

a) New accounting updates recently adopted

In September 2011, the Financial Accounting Standards Board (“FASB”) amended Accounting Standard Codification (“ASC”) 350, “Intangibles – Goodwill and Other.” This amendment is intended to simplify how an entity tests goodwill for impairment and will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity no longer will be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that the reporting unit’s fair value is less than its carrying amount. This amendment became effective for the Company beginning in the first quarter of fiscal year 2013. The adoption of this amendment did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

In June 2011, the FASB amended ASC 220, “Presentation of Comprehensive Income.” This amendment requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. In December 2011, the FASB issued another amendment which defers indefinitely this amendment to the extent it relates to the presentation of reclassification adjustments. The amended guidance became effective for the Company in the first quarter of fiscal year 2013. The adoption of this amendment concerns disclosure only and did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

In July 2013, the FASB issued an accounting standard update to eliminate diversity in practice in the presentation of unrecognized tax benefits when a net operating loss carry forward, a similar tax loss, or a tax credit carry forward exists. The Company adopted this guidance beginning in the fourth quarter of fiscal year 2013. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

b) Recent accounting standards or updates not yet effective

In December 2011, the FASB amended ASC 210, “Balance Sheet,” enhancing disclosure requirements about the nature of an entity’s right to offset and related arrangements associated with its financial instruments and derivative instruments. The new guidance requires the disclosure of the gross amounts subject to rights of set-off, the amounts offset in accordance with the accounting standards followed, and the related net exposure. The new guidance will be effective for the Company beginning in the first quarter of fiscal year 2014. The adoption of this amendment concerns disclosure only, and the Company does not expect it to have an impact on its consolidated financial position, results of operations or cash flows.

In February 2013, the FASB issued an accounting standard update to require reclassification adjustments from other comprehensive income to be presented either in the financial statements or in the notes to the financial statements. This accounting standard update will be effective for the Company beginning in the first quarter of fiscal year 2014, at which time the Company will include the required disclosures.

XML

Discontinued Operations - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended	12 Months Ended
	Apr. 03, 2009	Sep. 30, 2011
Discontinued Operations [Line Items]
Proceeds from the sale of business	$ 0.4
Total loss from discontinued operations		9.7
Tax effect on total losses of Research Instruments		0
Revenues, reported in discontinued operations		$ 0

XML

Summary of Long-term Debt Outstanding (Detail) (USD $)	Sep. 27, 2013	Sep. 28, 2012
Debt Instrument [Line Items]
Long-term debt	$ 506,300,000	$ 6,300,000
Less: current maturities of long-term debt	(56,250,000)	0
Long-term debt	450,000,000	6,250,000
Unsecured term loan, 6.70% due in one installment of $6.25 payable in fiscal year 2014
Debt Instrument [Line Items]
Unsecured term loan	6,300,000	6,300,000
Less: current maturities of long-term debt	(6,250,000)
Secured Debt
Debt Instrument [Line Items]
Secured loans	$ 500,000,000	$ 0

XML

Geographic Information (Detail) (USD $)	3 Months Ended								12 Months Ended
	Sep. 27, 2013	Jun. 28, 2013	Mar. 29, 2013	Dec. 28, 2012	Sep. 28, 2012	Jun. 29, 2012	Mar. 30, 2012	Dec. 30, 2011	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Segment Reporting Information [Line Items]
Revenues	$ 769,900,000	$ 726,200,000	$ 768,400,000	$ 678,400,000	$ 756,100,000	$ 705,300,000	$ 720,300,000	$ 625,300,000	$ 2,942,897,000	$ 2,807,015,000	$ 2,596,666,000
Long-Lived Assets	315,000,000				297,000,000				315,000,000	297,000,000	286,000,000
United States
Segment Reporting Information [Line Items]
Revenues									1,212,000,000	1,156,000,000	975,000,000
Long-Lived Assets	238,000,000				229,000,000				238,000,000	229,000,000	223,000,000
International
Segment Reporting Information [Line Items]
Revenues									1,731,000,000	1,651,000,000	1,622,000,000
Long-Lived Assets	$ 77,000,000				$ 68,000,000				$ 77,000,000	$ 68,000,000	$ 63,000,000

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Accrued Product Warranty (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012
Warranty Liability [Line Items]
Accrued product warranty, at beginning of period	$ 52.8	$ 50.1
Charged to cost of revenues	57.7	58.1
Actual product warranty expenditures	(57.3)	(55.4)
Accrued product warranty, at end of period	$ 53.2	$ 52.8

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Borrowings - Additional Information (Detail) In Millions, unless otherwise specified	12 Months Ended																				1 Months Ended	11 Months Ended	12 Months Ended	11 Months Ended				11 Months Ended			11 Months Ended
	Sep. 27, 2013 USD ($)	Sep. 28, 2012 USD ($)	Sep. 30, 2011 USD ($)	Sep. 27, 2013 Minimum	Sep. 27, 2013 Maximum	Sep. 27, 2013 Long-term Debt USD ($)	Sep. 28, 2012 Long-term Debt USD ($)	Sep. 30, 2011 Long-term Debt USD ($)	Sep. 27, 2013 Two Thousand Thirteen Term Loan Facility USD ($)	Sep. 27, 2013 Two Thousand Thirteen Term Loan Facility Minimum	Sep. 27, 2013 Two Thousand Thirteen Term Loan Facility Maximum	Sep. 27, 2013 Two Thousand Thirteen Revolving Credit Facility	Sep. 27, 2013 Two Thousand Thirteen Revolving Credit Facility Minimum	Sep. 27, 2013 Two Thousand Thirteen Revolving Credit Facility Maximum	Sep. 27, 2013 Sumitomo Credit Facility JPY (¥)	Sep. 27, 2013 Two Thousand Thirteen Credit Agreement	Sep. 27, 2013 Two Thousand Thirteen Credit Agreement Two Thousand Thirteen Term Loan Facility USD ($)	Sep. 27, 2013 Two Thousand Thirteen Credit Agreement Two Thousand Thirteen Revolving Credit Facility USD ($)	Sep. 27, 2013 Two Thousand Thirteen Credit Agreement Two Thousand Thirteen Revolving Credit Facility Letter of Credit USD ($)	Sep. 27, 2013 Two Thousand Thirteen Credit Agreement Two Thousand Thirteen Revolving Credit Facility Swingline Loans USD ($)	Aug. 27, 2013 Two Thousand Twelve Credit Facility USD ($)	Aug. 27, 2013 Two Thousand Twelve Credit Facility USD ($)	Sep. 28, 2012 Two Thousand Twelve Credit Facility USD ($)	Aug. 27, 2013 Two Thousand Twelve Credit Facility Interest Accrued Description One	Aug. 27, 2013 Two Thousand Twelve Credit Facility Interest Accrued Description Two	Aug. 27, 2013 Two Thousand Twelve Credit Facility Minimum	Aug. 27, 2013 Two Thousand Twelve Credit Facility Minimum Interest Accrued Description One	Aug. 27, 2013 Two Thousand Twelve Credit Facility Minimum Interest Accrued Description Two	Aug. 27, 2013 Two Thousand Twelve Credit Facility Maximum	Aug. 27, 2013 Two Thousand Twelve Credit Facility Maximum Interest Accrued Description One	Aug. 27, 2013 Two Thousand Twelve Credit Facility Maximum Interest Accrued Description Two	Aug. 27, 2013 Two Thousand Twelve Credit Facility Letter of Credit USD ($)	Aug. 27, 2013 Two Thousand Twelve Credit Facility Swingline Loans USD ($)
Line Of Credit Facility [Line Items]
Date of credit agreement																Aug. 27, 2013
Credit facility term																	5 years	5 years
Loan facility, maximum borrowing capacity															¥ 3,000		$ 500	$ 300	$ 50	$ 25	$ 300	$ 300										$ 50	$ 25
Loan Facility Maximum Commitment Amount																	100	200
Line of credit, interest rate										1.00%	1.25%		1.25%	1.50%													1.25%			1.50%
Line of credit, description of interest rate calculation										Based on a Eurodollar Rate, as defined in the Credit Agreement (the “Eurodollar Rate”), plus a margin of 1.00% to 1.25% based on a leverage ratio involving funded indebtedness and EBITDA or (ii) based upon a base rate of (a) the federal funds rate plus 0.50%, (b) BofA’s announced prime rate, or (c) the Eurodollar Rate plus 1.00%, whichever is highest, plus a margin of 0.00% to 0.25% based on the same leverage Ratio, depending upon instructions from the Company.			based on a Eurodollar Rate, as defined in the Credit Agreement (the “Eurodollar Rate”), plus a margin of 1.00% to 1.25% based on a leverage ratio involving funded indebtedness and EBITDA or (ii) based upon a base rate of (a) the federal funds rate plus 0.50%, (b) BofA’s announced prime rate, or (c) the Eurodollar Rate plus 1.00%, whichever is highest, plus a margin of up to 0.25% based on the same leverage Ratio, depending upon instructions from the Company.											Based on a Eurodollar rate (as defined in the credit agreement), plus a margin of 1.25% to 1.5% based on a leverage ratio involving funded indebtedness and earnings before interest, taxes and depreciation and amortization (“EBITDA” )	The Eurodollar rate plus 1%, plus a margin of 0.25% to 0.5% based on the same leverage ratio, depending on instructions from the Company
Margin added if base rate is based on federal funds rate									0.50%			0.50%													0.50%
Percentage added to Eurodollar base rate before margin									1.00%			1.00%										1.00%
Line of credit, interest rate calculation (base rate margin)											0.25%		0.25%	0.50%														0.25%			0.50%
Line of credit, amount outstanding									500														155
Credit facility weighted average interest rate									1.31%														1.47%
Line of Credit Facility, Commitment Fee Percentage				0.15%	0.275%																					0.25%			0.30%
Percentage of voting rights pledged																65.00%							65.00%
Repayment of outstanding debt amount																					148
Sumitomo credit facility expiration date															Apr. 05, 2014
Credit facility accrued interest rate per annum															0.50%
Line of Credit Facility, commitment fee amount	0.3	0.3	0.3
Interest paid on borrowings						2.9	3.3	2.3
Future principal payments for long-term debt for fiscal years 2014	56.3
Future principal payments for long-term debt for fiscal years 2015	50
Future principal payments for long-term debt for fiscal years 2016	50
Future principal payments for long-term debt for fiscal years 2017	50
Future principal payments for long-term debt for fiscal years 2018	$ 300

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Taxes on Earnings (Tables)

12 Months Ended

Sep. 27, 2013

Schedule of Taxes on Earnings from Continuing Operations

Taxes on earnings from continuing operations were as follows:

	Fiscal Years Ended
(In millions)	2013			2012			2011
Current provision:
Federal	$	110.1		$	99.3		$	80.4
State and local		13.4			8.5			11.7
Foreign		54.3			63.5			52.7
Total current		177.8			171.3			144.8
Deferred provision (benefit):
Federal		(3.9	)		(4.5	)		32.9
State and local		(0.2	)		0.1			6.0
Foreign		0.1			2.0			(3.6	)
Total deferred		(4.0	)		(2.4	)		35.3
Taxes on earnings	$	173.8		$	168.9		$	180.1

Schedule of Earnings from Continuing Operations Before Taxes

Earnings from continuing operations before taxes are generated from the following geographic areas:

	Fiscal Years Ended
(In millions)	2013		2012		2011
United States	$	308.0	$	271.4	$	299.3
Foreign		304.1		324.5		289.4
	$	612.1	$	595.9	$	588.7

Schedule of Effective Income Tax Rate

The effective tax rate differs from the U.S. federal statutory tax rate as a result of the following:

	Fiscal Years Ended
	2013				2012				2011
Federal statutory income tax rate		35.0		%		35.0		%		35.0		%
State and local taxes, net of federal tax benefit		1.3				1.3				2.5
Non-U.S. income taxed at different rates, net		(5.6	)			(5.9	)			(3.3	)
Resolution of tax contingencies due to lapses of statutes of limitations		(1.2	)			(1.8	)			(2.8	)
Other		(1.1	)			(0.3	)			(0.8	)
Effective tax rate		28.4		%		28.3		%		30.6		%

Schedule of Components of Deferred Tax Assets and Liabilities

Significant components of deferred tax assets and liabilities are as follows:

(In millions)	September27, 2013			September28, 2012
Deferred Tax Assets:
Deferred revenues	$	26.8		$	26.8
Deferred compensation		34.9			32.7
Product warranty		13.9			13.7
Inventory adjustments		18.3			17.0
Equity-based compensation		33.3			41.8
Environmental reserve		5.7			5.9
Net operating loss carryforwards		78.6			54.2
Other		37.8			45.4
		249.3			237.5
Valuation allowance		(60.7	)		(45.8	)
Total deferred tax assets		188.6			191.7
Deferred Tax Liabilities:
Tax-deductible goodwill		(27.3	)		(27.4	)
Fixed assets		(17.7	)		(22.3	)
Other		(30.4	)		(28.8	)
Total deferred tax liabilities		(75.4	)		(78.5	)
Net deferred tax assets	$	113.2		$	113.2
Reported As:
Net current deferred tax assets	$	122.3		$	115.8
Net long-term deferred tax assets (included in “Other Assets”)		10.5			13.8
Net current deferred tax liabilities (included in “Accrued Expenses”)		(7.6	)		(2.9	)
Net long-term deferred tax liabilities (included in “Other long-term liabilities”)		(12.0	)		(13.5	)
Net deferred tax assets	$	113.2		$	113.2

Schedule of Income Taxes Paid

Income taxes paid were as follows:

	Fiscal Years Ended
(In millions)	2013		2012		2011
Federal income taxes paid, net	$	119.1	$	77.6	$	70.0
State income taxes paid, net		14.9		9.3		11.9
Foreign income taxes paid, net		69.4		47.7		57.5
Total	$	203.4	$	134.6	$	139.4

Schedule of Changes in Unrecognized Tax Benefits

Changes in the Company’s unrecognized tax benefits were as follows:

	Fiscal Years Ended
(In millions)	2013				2012				2011
Unrecognized tax benefits balance–beginning of fiscal year	$	38.8		$		37.1		$		46.4
Additions based on tax positions related to a prior year		2.5				3.8				1.0
Reductions based on tax positions related to a prior year		(0.7	)			(0.9	)			(0.4	)
Additions based on tax positions related to the current year		6.6				6.8				8.6
Settlements		(4.2	)			(0.4	)			(5.1	)
Reductions resulting from the expiration of the applicable statute of limitations		(6.0	)			(7.6	)			(13.4	)
Unrecognized tax benefits balance–end of fiscal year	$	37.0		$		38.8		$		37.1

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Outstanding Foreign Currency Forward Contracts That Were Entered into to Hedge Balance Sheet Exposures (Detail) (USD $) In Millions, unless otherwise specified	Sep. 27, 2013
Notional Value Sold
Derivative [Line Items]
Notional Value	$ 309.1
Notional Value Purchased
Derivative [Line Items]
Notional Value	75.9
Australian Dollar | Notional Value Sold
Derivative [Line Items]
Notional Value	21.9
Australian Dollar | Notional Value Purchased
Derivative [Line Items]
Notional Value	0
British Pound | Notional Value Sold
Derivative [Line Items]
Notional Value	18.6
British Pound | Notional Value Purchased
Derivative [Line Items]
Notional Value	0
Canadian Dollar | Notional Value Sold
Derivative [Line Items]
Notional Value	0
Canadian Dollar | Notional Value Purchased
Derivative [Line Items]
Notional Value	2.2
Euro | Notional Value Sold
Derivative [Line Items]
Notional Value	188.1
Euro | Notional Value Purchased
Derivative [Line Items]
Notional Value	0
Indian Rupee | Notional Value Sold
Derivative [Line Items]
Notional Value	4.7
Indian Rupee | Notional Value Purchased
Derivative [Line Items]
Notional Value	0
Japanese Yen | Notional Value Sold
Derivative [Line Items]
Notional Value	69.3
Japanese Yen | Notional Value Purchased
Derivative [Line Items]
Notional Value	0
Norwegian Krone | Notional Value Sold
Derivative [Line Items]
Notional Value	3.3
Norwegian Krone | Notional Value Purchased
Derivative [Line Items]
Notional Value	2.8
Swedish Krona | Notional Value Sold
Derivative [Line Items]
Notional Value	3.2
Swedish Krona | Notional Value Purchased
Derivative [Line Items]
Notional Value	0
Swiss Franc | Notional Value Sold
Derivative [Line Items]
Notional Value	0
Swiss Franc | Notional Value Purchased
Derivative [Line Items]
Notional Value	$ 70.9

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Employee Stock Plans - Additional Information (Detail) (USD $)	12 Months Ended						12 Months Ended										12 Months Ended					12 Months Ended										1 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011	Feb. 29, 2012	Feb. 16, 2007	Feb. 28, 2005	Sep. 27, 2013 Deferred Stock Units	Sep. 28, 2012 Deferred Stock Units	Sep. 30, 2011 Deferred Stock Units	Sep. 27, 2013 Restricted Stock Units And Restricted Stock	Sep. 28, 2012 Restricted Stock Units And Restricted Stock	Sep. 30, 2011 Restricted Stock Units And Restricted Stock	Sep. 27, 2013 Restricted Stock Restricted Stock Units Deferred Stock Units And Performance Units	Sep. 27, 2013 Restricted Stock, Restricted Stock Units And Deferred Stock Units	Sep. 27, 2013 Stock Option	Sep. 27, 2013 Stock Appreciation Rights (SARs)	Sep. 27, 2013 The Omnibus Plan	Sep. 27, 2013 The Omnibus Plan Maximum Y	Sep. 27, 2013 The 2000 Plan	Sep. 27, 2013 Third Amended 2005 Plan	Feb. 29, 2012 Third Amended 2005 Plan	Sep. 27, 2013 Third Amended 2005 Plan Stock Options awarded before February 16, 2007	Sep. 27, 2013 Third Amended 2005 Plan Stock Options awarded after February 16, 2007	Sep. 27, 2013 Third Amended 2005 Plan Deferred Stock Units	Sep. 27, 2013 Third Amended 2005 Plan Performance Units	Sep. 28, 2012 Third Amended 2005 Plan Performance Units	Sep. 27, 2013 Third Amended 2005 Plan Maximum Restricted Stock And Restricted Stock Unit	Sep. 27, 2013 Third Amended 2005 Plan Minimum Restricted Stock And Restricted Stock Unit	Sep. 27, 2013 Third Amended 2005 Plan Minimum Deferred Stock Units	Sep. 27, 2013 Employee Stock Purchase Plan	Sep. 28, 2012 Employee Stock Purchase Plan	Feb. 29, 2012 Third Amended and Restated 2005 Plan	Sep. 27, 2013 Third Amended and Restated 2005 Plan
Employee Stock Plans [Line Items]
Number of shares authorized																	20,000,000		12,000,000
Life of stock options																		10
Vesting period																	Options granted under the Omnibus Plan before November 2000 were generally exercisable in cumulative installments of one third each year, commencing one year following the date of grant. Options granted after November 2000 were exercisable in the following manner: the first one-third one year from the date of grant, with the remainder vesting monthly during the following two-year period.		The first one-third of the option shares one year from the date of grant, with the remainder vesting monthly during the following two-year period.
Award expiration period																						10 years	7 years
Award vesting period																								1 year			5 years	1 year	1 year
Award performance period																									3 years
Share-based compensation expenses	$ 42,600,000	$ 47,900,000	$ 42,000,000				$ 700,000	$ 700,000	$ 700,000	$ 25,100,000	$ 26,800,000	$ 25,000,000													$ 2,400,000	$ 4,100,000
Tax benefit recognized on share-based compensation expense	12,989,000	15,406,000	14,063,000
Total pre-tax intrinsic value of options exercised	66,300,000
Unrecognized compensation expense related to outstanding stock awards	9,500,000												31,500,000
Weighted average period unrecognized compensation expense is expected to be recognized, years	1 year 7 months 6 days												1 year 9 months 18 days
Shares vested during the year, number	396,000	469,000	590,000											396,239
Shares vested during the year, fair value														27,400,000
Shares withheld for employees minimum withholding taxes at vesting, number	138,159
Shares withheld for employees minimum withholding taxes at vesting, fair value	9,600,000
Maximum number of shares purchased																														7,000,000
Shares issued, number																														262,455	262,660
Shares issued, value																														$ 14,200,000	$ 13,300,000
Shares available for issuance																														6,400,000
Number of shares authorized - Portion																																24,950,000
Number of shares authorized description																																(a) 24,950,000, plus (b) the number of shares authorized for issuance, but never issued, under the Omnibus Plan and the 2000 Plan, plus (c) the number of shares subject to awards previously granted under the Omnibus Plan and 2000 Plan that terminate, expire, or lapse, plus (d) amounts granted in substitution of options in connection with certain transactions.
Shares counted against the available for grant				2.5	2.5	3									1	1				2.6	2.6											2.6	2.6
Maximum payout of shares that could be issued for each performance unit granted	1.5

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Activity for Restricted Stock Restricted Stock Units and Performance Units (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Nonvested Shares, Beginning Balance	945	735	1,333
Granted	516	716	24
Vested	(396)	(469)	(590)
Cancelled or expired	(30)	(37)	(32)
Nonvested Shares, Ending Balance	1,035	945	735
Weighted Average Grant-Date Fair Value, Beginning Balance	$ 57.30	$ 47.36	$ 46.91
Weighted Average Grant-Date Fair Value, Granted	$ 70.37	$ 59.06	$ 68.67
Weighted Average Grant-Date Fair Value, Vested	$ 55.67	$ 44.68	$ 47.27
Weighted Average Grant-Date Fair Value, Cancelled or expired	$ 61.82	$ 53.94	$ 46.59
Weighted Average Grant-Date Fair Value, Ending Balance	$ 64.36	$ 57.30	$ 47.36

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Schedule II Valuation and Qualifying Accounts (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Allowance for Doubtful Accounts
Valuation And Qualifying Accounts Disclosure [Line Items]
Balance at Beginning of Period	$ 14,386	$ 6,034	$ 4,209
Charged to Bad Debt Expense	5,984	10,350	2,514
Write-Offs/ Adjustments Charged to Allowance	5,635	1,998	689
Balance at End of Period	14,735	14,386	6,034
Valuation Allowance of Deferred Tax Assets
Valuation And Qualifying Accounts Disclosure [Line Items]
Balance at Beginning of Period	45,751	46,924	38,456
Balance at End of Period	60,704	45,751	46,924
Increases	14,953		8,642
Deductions		$ 1,173	$ 174

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Schedule of Taxes on Earnings from Continuing Operations (Detail) (USD $)	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Components Of Income Tax Expense Benefit [Line Items]
Current Provision, Federal	$ 110,100,000	$ 99,300,000	$ 80,400,000
Current Provision, State and Local	13,400,000	8,500,000	11,700,000
Current Provision, Foreign	54,300,000	63,500,000	52,700,000
Total Current Provision	177,800,000	171,300,000	144,800,000
Deferred Provision (Benefit), Federal	(3,900,000)	(4,500,000)	32,900,000
Deferred Provision (Benefit), State and Local	(200,000)	100,000	6,000,000
Deferred Provision (Benefit), Foreign	100,000	2,000,000	(3,600,000)
Total Deferred Provision (Benefit)	(3,946,000)	(2,349,000)	35,230,000
Taxes on earnings	$ 173,835,000	$ 168,875,000	$ 180,084,000

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Strategic Arrangement

12 Months Ended

Sep. 27, 2013

Strategic Arrangement

16. STRATEGIC ARRANGEMENT

In April 2012, VMS entered into a strategic global partnership with Siemens AG (“Siemens”) through which, among other things, the Company and Siemens are working on developing interfaces to enable the Company’s ARIA® oncology information system software to connect with Siemens linear accelerators and imaging systems. Under the agreement establishing this collaboration, the Company committed to make certain payments, including up to $10 million in fixed fees and $20 million in license fees, in the event certain product development milestones are achieved. The Company will also pay for additional licenses beyond the minimum quantities set forth in the agreement. During fiscal year 2013, the Company accrued $2 million of the fixed fees under the terms of the agreement. As of September27, 2013, no amount related to achievement of product development milestones was payable under this agreement.

In addition, pursuant to this agreement, the Company represents Siemens diagnostic imaging products to radiation oncology clinics in most international markets and in North America, and Siemens, in turn, represents the Company’s equipment and software products for radiotherapy and radiosurgery within its offerings to its healthcare customers in agreed upon countries. The Company receives commissions from Siemens for sales agency activities provided to Siemens and makes commission payments to Siemens for sales agency activities provided to the Company as part of this agreement. The Company incurred commissions expense of approximately $0.2 million and recognized commissions income of approximately $0.3 million during fiscal year 2013. This agreement also provides a framework for both companies to explore opportunities to co-develop new imaging and treatment solutions in the future.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 27, 2013	Sep. 28, 2012
Accounts receivable, allowance for doubtful accounts	$ 14,735	$ 14,386
Preferred stock, par value	$ 1	$ 1
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	189,000,000	189,000,000
Common stock, shares issued	106,491,000	109,407,000
Common stock, shares outstanding	106,491,000	109,407,000

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Operating Results Information for each Business Segment (Detail) (USD $)	3 Months Ended								12 Months Ended
	Sep. 27, 2013	Jun. 28, 2013	Mar. 29, 2013	Dec. 28, 2012	Sep. 28, 2012	Jun. 29, 2012	Mar. 30, 2012	Dec. 30, 2011	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Segment Reporting Information [Line Items]
Revenues	$ 769,900,000	$ 726,200,000	$ 768,400,000	$ 678,400,000	$ 756,100,000	$ 705,300,000	$ 720,300,000	$ 625,300,000	$ 2,942,897,000	$ 2,807,015,000	$ 2,596,666,000
Operating Earnings									608,890,000	594,074,000	588,451,000
Depreciation & Amortization									63,000,000	61,000,000	53,000,000
Capital Additions									78,000,000	67,000,000	71,000,000
Total Assets	3,468,474,000				2,878,726,000				3,468,474,000	2,878,726,000	2,499,000,000
Goodwill	225,335,000				222,242,000				225,335,000	222,242,000	212,500,000
Oncology Systems
Segment Reporting Information [Line Items]
Revenues									2,253,000,000	2,189,000,000	2,022,000,000
Operating Earnings									512,000,000	505,000,000	507,000,000
Depreciation & Amortization									21,000,000	23,000,000	19,000,000
Capital Additions									25,000,000	17,000,000	17,000,000
Total Assets	1,217,000,000				1,220,000,000				1,217,000,000	1,220,000,000	1,093,000,000
Goodwill	132,000,000				132,000,000				132,000,000	132,000,000	130,500,000
X-Ray Products
Segment Reporting Information [Line Items]
Revenues									546,000,000	493,000,000	469,000,000
Operating Earnings									144,000,000	131,000,000	118,000,000
Depreciation & Amortization									13,000,000	10,000,000	8,000,000
Capital Additions									8,000,000	8,000,000	7,000,000
Total Assets	309,000,000				265,000,000				309,000,000	265,000,000	268,000,000
Goodwill	17,000,000				17,000,000				17,000,000	17,000,000	6,100,000
Total Reportable Segments
Segment Reporting Information [Line Items]
Revenues									2,799,000,000	2,682,000,000	2,491,000,000
Operating Earnings									656,000,000	636,000,000	625,000,000
Depreciation & Amortization									34,000,000	33,000,000	27,000,000
Capital Additions									33,000,000	25,000,000	24,000,000
Total Assets	1,526,000,000				1,485,000,000				1,526,000,000	1,485,000,000	1,361,000,000
Goodwill	149,000,000				149,000,000				149,000,000	149,000,000	136,000,000
Other
Segment Reporting Information [Line Items]
Revenues									144,000,000	125,000,000	106,000,000
Operating Earnings									(25,000,000)	(32,000,000)	(32,000,000)
Depreciation & Amortization									3,000,000	4,000,000	3,000,000
Capital Additions									10,000,000	10,000,000	13,000,000
Total Assets	367,000,000				313,000,000				367,000,000	313,000,000	239,000,000
Goodwill	76,000,000				73,000,000				76,000,000	73,000,000	76,000,000
Corporate
Segment Reporting Information [Line Items]
Revenues
Operating Earnings									(22,000,000)	(10,000,000)	(5,000,000)
Depreciation & Amortization									26,000,000	24,000,000	23,000,000
Capital Additions									35,000,000	32,000,000	34,000,000
Total Assets	1,575,000,000				1,081,000,000				1,575,000,000	1,081,000,000	899,000,000
Goodwill

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 28, 2012 August 2011 Repurchase Agreement	Sep. 30, 2011 February 2011 Repurchase Agreement
Value of Shares Received Upon Settlement of Repurchase Agreement	$ 25.0	$ 41.3

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Balance Sheet Components

12 Months Ended

Sep. 27, 2013

Balance Sheet Components

2. BALANCE SHEET COMPONENTS

	September27, 2013		September28, 2012
(In millions)
Short-term Investment:
Corporate debt security:
Amortized cost	$	62.7	$	49.7
Unrealized gain (loss)		-		-
Fair value	$	62.7	$	49.7

The short-term investment, which represents a loan to CPTC, is classified as an available-for-sale corporate debt security. See Note 15, “Variable Interest Entity.”

	September27, 2013		September28, 2012
(In millions)
Inventories:
Raw materials and parts	$	276.6	$	237.3
Work-in-process		91.6		75.6
Finished goods		167.0		145.0
Total inventories	$	535.2	$	457.9

Property, plant and equipment:
Land and land improvements	$	44.6		$	43.8
Buildings and leasehold improvements		242.2			215.5
Machinery and equipment		380.8			344.5
Construction in progress		46.6			46.4
Assets subject to lease		1.8			3.2
		716.0			653.4
Accumulated depreciation and amortization		(400.7	)		(356.8	)
Property, plant and equipment, net	$	315.3		$	296.6

Other Assets:
DCP Assets	$	55.2	$	49.3
Equity investment in dpiX Holding LLC (“dpiX Holding”)		49.7		45.5
Other		118.1		94.6
Total other assets	$	223.0	$	189.4

Accrued expenses:
Accrued compensation and benefits	$	159.4	$	150.3
DCP Liabilities		54.6		49.5
Income taxes payable		40.0		63.3
Current deferred tax liabilities		7.6		2.9
Other		59.3		70.6
Total accrued expenses	$	320.9	$	336.6

Other long-term liabilities:
Long-term income taxes payable	$	41.9	$	40.6
Other		102.1		85.6
Total other long-term liabilities	$	144.0	$	126.2

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Commitments and Contingencies - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	1 Months Ended	12 Months Ended
	Sep. 30, 2011	Sep. 27, 2013 Employee	Sep. 28, 2012	Sep. 30, 2011
Commitments And Contingencies [Line Items]
Minimum rentals under operating leases fiscal year 2014		$ 20
Minimum rentals under operating leases fiscal year 2015		17
Minimum rentals under operating leases fiscal year 2016		12.5
Minimum rentals under operating leases fiscal year 2017		9.1
Minimum rentals under operating leases fiscal year 2018		5.9
Operating leases future minimum payments due thereafter		12
Rental expenses		26.0	24.9	23.8
Loan facility to CPTC	165.3	165.3	165.3	165.3
Varian's participation under the CPTC loan facility	115.3	115.3	115.3
Environmental cleanup costs, third-party claim costs, project management costs and legal costs		1.0	1.6	1.3
Receivables of past and future environmental-related expenditures		2.4	2.6
Actual damages found by jury			40
Court ordered amount			102
Enhanced damages			80
Prejudgment interest to the damages award			13
Attorneys' fee added to the judgment			9
Aggregate accrual for ongoing proceedings		5.0
Range of reasonably possible loss for the University of Pittsburg matter, Minimum		0
Range of reasonably possible loss, maximum		102
Number of employees accepted the voluntary retirement program		85
Restructuring charges		6.7		0
Payments for restructuring charges		6.7
Long term accrued product warranty costs		14.1
Royalties
Commitments And Contingencies [Line Items]
Royalty rate maximum		5
Cercla Sites and One Past Facility
Commitments And Contingencies [Line Items]
Estimated environmental remediation costs, minimum		1.9
Estimated environmental remediation costs, maximum		9.8
Amount accrued for environmental remediation expense		1.9
Cercla Sites and One Past Facility | Minimum
Commitments And Contingencies [Line Items]
Estimated time frames to resolve contingency related to environmental remediation contingencies, years		1
Cercla Sites and One Past Facility | Maximum
Commitments And Contingencies [Line Items]
Estimated time frames to resolve contingency related to environmental remediation contingencies, years		30
Other Sites
Commitments And Contingencies [Line Items]
Estimated environmental remediation costs, minimum		6.4
Estimated environmental remediation costs, maximum		36.0
Amount accrued for environmental remediation expense		9.4
Estimated environmental remediation costs, best estimate, undiscounted		$ 12.4
Discount rate for environmental remediation costs, net of inflation		4.00%
Other Sites | Minimum
Commitments And Contingencies [Line Items]
Estimated time frames to resolve contingency related to environmental remediation contingencies, years		1
Other Sites | Maximum
Commitments And Contingencies [Line Items]
Estimated time frames to resolve contingency related to environmental remediation contingencies, years		30

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE EARNINGS (USD $) In Thousands	Total	Common Stock	Capital in Excess of Par Value	Retained Earnings	Accumulated Other Comprehensive Loss
Beginning Balance at Oct. 01, 2010	$ 1,275,367	$ 118,007	$ 508,366	$ 686,598	$ (37,604)
Beginning Balance (in shares) at Oct. 01, 2010		118,007
Net earnings	398,933	0	0	398,933	0
Other comprehensive earnings (loss)	(9,244)	0	0	0	(9,244)
Issuance of common stock	137,697	3,596	134,101	0	0
Issuance of common stock (in shares)		3,596
Tax benefits from exercises of share-based payment award	24,441	0	24,441	0	0
Shares repurchased for tax withholdings on vesting of restricted stock and restricted stock units	(14,815)	(231)	(14,584)	0	0
Shares repurchased for tax withholdings on vesting of restricted stock and restricted stock units (in shares)		(231)
Share-based compensation expense	42,358	0	42,358	0	0
Equity forward contract	(105,562)	0	(105,562)	0	0
Repurchases of common stock	(505,284)	(9,028)	(88,198)	(408,058)	0
Repurchases of common stock, shares		(9,028)
Ending Balance at Sep. 30, 2011	1,243,891	112,344	500,922	677,473	(46,848)
Ending Balance (in shares) at Sep. 30, 2011		112,344
Net earnings	427,049	0	0	427,049	0
Other comprehensive earnings (loss)	(9,773)	0	0	0	(9,773)
Issuance of common stock	60,332	1,664	58,668	0	0
Issuance of common stock (in shares)		1,664
Tax benefits from exercises of share-based payment award	7,888	0	7,888	0	0
Shares repurchased for tax withholdings on vesting of restricted stock and restricted stock units	(10,121)	(167)	(9,954)	0	0
Shares repurchased for tax withholdings on vesting of restricted stock and restricted stock units (in shares)		(167)
Share-based compensation expense	47,950	0	47,950	0	0
Repurchases of common stock	(257,440)	(4,434)	(41,599)	(211,407)	0
Repurchases of common stock, shares		(4,434)
Ending Balance at Sep. 28, 2012	1,509,776	109,407	563,875	893,115	(56,621)
Ending Balance (in shares) at Sep. 28, 2012		109,407
Net earnings	438,248	0	0	438,248	0
Other comprehensive earnings (loss)	16,550	0	0	0	16,550
Issuance of common stock	129,659	3,222	126,437	0	0
Issuance of common stock (in shares)		3,222
Tax benefits from exercises of share-based payment award	10,708	0	10,708	0	0
Shares repurchased for tax withholdings on vesting of restricted stock and restricted stock units	(9,560)	(138)	(9,422)	0	0
Shares repurchased for tax withholdings on vesting of restricted stock and restricted stock units (in shares)		(138)
Share-based compensation expense	42,130	0	42,130	0	0
Repurchases of common stock	(423,664)	(6,000)	(96,644)	(321,020)	0
Repurchases of common stock, shares		(6,000)
Ending Balance at Sep. 27, 2013	$ 1,713,847	$ 106,491	$ 637,084	$ 1,010,343	$ (40,071)
Ending Balance (in shares) at Sep. 27, 2013		106,491

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Stockholders' Equity (Tables)

12 Months Ended

Sep. 27, 2013

Schedule of Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Loss

	Accumulated Other Comprehensive Loss
(In thousands)	DefinedBenefit Pension and Post-retirement Benefit Plans			Unrealized Gain(Loss)on Derivatives			Cumulative Translation Adjustments			Total
Balance at October1, 2010	$	(36,844	)	$	(307	)	$	(453	)	$	(37,604	)
Current period other comprehensive income (loss)		(6,276	)		300			(3,268	)		(9,244	)
Balance at September30, 2011		(43,120	)		(7	)		(3,721	)		(46,848	)
Current period other comprehensive income (loss)		(5,503	)		538			(4,808	)		(9,773	)
Balance at September28, 2012		(48,623	)		531			(8,529	)		(56,621	)
Current period other comprehensive income (loss)		8,542			(1,222	)		9,230			16,550
Balance at September27, 2013	$	(40,081	)	$	(691	)	$	701		$	(40,071	)

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Quarterly Financial Data

12 Months Ended

Sep. 27, 2013

QUARTERLY FINANCIAL DATA

19. QUARTERLY FINANCIAL DATA (UNAUDITED)

	Fiscal Year 2013
(In millions, except per share amounts)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
Total revenues	$	678.4	$		768.4	$		726.2	$		769.9	$		2,942.9
Gross margin	$	291.1	$		319.6	$		310.5	$		328.5	$		1,249.7
Net earnings	$	95.3	$		112.8	$		112.8	$		117.3	$		438.2
Net earnings per share – basic:	$	0.87	$		1.04	$		1.04	$		1.09	$		4.04
Net earnings per share – diluted:	$	0.86	$		1.02	$		1.03	$		1.08	$		3.98

	Fiscal Year 2012
(In millions, except per share amounts)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
Total revenues	$	625.3	$		720.3	$		705.3	$		756.1	$		2,807.0
Gross margin	$	268.8	$		296.7	$		307.6	$		323.2	$		1,196.3
Net earnings	$	90.2	$		107.8	$		108.8	$		120.2	$		427.0
Net earnings per share – basic:	$	0.80	$		0.96	$		0.98	$		1.09	$		3.83
Net earnings per share – diluted:	$	0.79	$		0.94	$		0.96	$		1.08	$		3.76

The four quarters of net earnings per share may not add to the total fiscal year because of differences in the weighted average numbers of shares outstanding during the quarters and the fiscal year.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Sep. 27, 2013

Computation of Net Basic and Diluted Earnings Per Share

Basic net earnings per share is computed by dividing net earnings by the weighted average number of shares of VMS common stock outstanding for the period. Diluted net earnings per share is computed by dividing net earnings by the sum of the weighted average number of common shares outstanding and dilutive common shares under the treasury stock method.

The following table sets forth the computation of net basic and diluted earnings per share:

	Fiscal Years
(In thousands, except per share amounts)	2013			2012			2011
Earnings from continuing operations	$	438,248	$		427,049	$		408,626
Loss from discontinued operations, net of taxes		-			-			(9,693	)
Net earnings	$	438,248	$		427,049	$		398,933
Weighted average shares outstanding - basic		108,352			111,376			116,703
Dilutive effect of potential common shares		1,701			2,097			2,032
Weighted average shares outstanding - diluted		110,053			113,473			118,735
Net earnings (loss) per share - basic:
Continuing operations	$	4.04	$		3.83	$		3.50
Discontinued operations		-			-			(0.08	)
Net earnings per share	$	4.04	$		3.83	$		3.42
Net earnings (loss) per share - diluted:
Continuing operations	$	3.98	$		3.76	$		3.44
Discontinued operations		-			-			(0.08	)
Net earnings per share	$	3.98	$		3.76	$		3.36
Anti-dilutive employee share-based awards, excluded		707			249			160

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Derivative Instruments and Hedging Activities - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013
Derivative [Line Items]
Minimum remaining maturity of foreign currency derivatives	1 month
Maximum remaining maturity of foreign currency derivatives	13 months
Net unrealized gain on derivative instruments, before tax	$ 1.1

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Schedule of Changes in Unrecognized Tax Benefits (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Reconciliation Of Unrecognized Tax Benefits [Line Items]
Unrecognized tax benefits balance–beginning of fiscal year	$ 38.8	$ 37.1	$ 46.4
Additions based on tax positions related to a prior year	2.5	3.8	1.0
Reductions based on tax positions related to a prior year	(0.7)	(0.9)	(0.4)
Additions based on tax positions related to the current year	6.6	6.8	8.6
Settlements	(4.2)	(0.4)	(5.1)
Reductions resulting from the expiration of the applicable statute of limitations	(6.0)	(7.6)	(13.4)
Unrecognized tax benefits balance–end of fiscal year	$ 37.0	$ 38.8	$ 37.1

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Borrowings (Tables)

12 Months Ended

Sep. 27, 2013

Summary of Long-term Debt Outstanding

Long-term debt outstanding is summarized as follows:

(Dollars in millions)	September27, 2013			September28, 2012
Unsecured term loan, 6.70% due in one installment of $6.25 payable in fiscal year 2014	$	6.3			$	6.3
2013 Term Loan Facility, variable interest rate (1.31% at September 27, 2013) payable quarterly in installments with maturity date in fiscal year 2018		500.0				-
		506.3				6.3
Less: current maturities of long-term debt		(56.3	)			-
Long-term debt	$	450.0			$	6.3

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Gains (Losses) Related to Foreign Currency Forward Exchange Contracts that are Not Designated as Hedging Instruments (Detail) (Selling, General and Administrative Expenses, USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Selling, General and Administrative Expenses
Derivative [Line Items]
Amount of Gain or (Loss) Recognized in Net Earnings on Derivative not designated as hedging instrument	$ 9.6	$ 5.0	$ 2.3

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Activity Under Employee Stock Plans (Parenthetical) (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	Sep. 27, 2013	Sep. 28, 2012
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Shares, Options Exercisable	3,655	5,540
Weighted Average Exercise Price, Options Exercisable	$ 50.18	$ 46.91

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Reconciliation for Assets and Liabilities Measured and Recorded at Fair Value on Recurring Basis (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013
Corporate Debt Security
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning balance	$ 49.7
Additions, including accrued interest	13.0
Settlements	0	[1]
Change in fair value recognized in earnings	0
Ending balance	62.7
Contingent Consideration
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning balance	(8.8)
Additions, including accrued interest	0
Settlements	1.1	[1]
Change in fair value recognized in earnings	5.2
Ending balance	(2.5)
Option to Purchase a Company
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]
Beginning balance	1.4
Additions, including accrued interest	0
Settlements	0	[1]
Change in fair value recognized in earnings	0
Ending balance	$ 1.4

[1] Amounts reported under “Contingent Consideration” represent cash payments to settle contingent consideration liabilities.

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Short-term Investment (Detail) (USD $) In Millions, unless otherwise specified	Sep. 27, 2013	Sep. 28, 2012
Schedule Of Available For Sale Securities [Line Items]
Amortized cost	$ 62.7	$ 49.7
Unrealized gain (loss)	0	0
Fair value	$ 62.7	$ 49.7

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Quarterly Financial Data (Tables)

12 Months Ended

Sep. 27, 2013

Schedule of Quarterly Financial Data

	Fiscal Year 2013
(In millions, except per share amounts)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
Total revenues	$	678.4	$		768.4	$		726.2	$		769.9	$		2,942.9
Gross margin	$	291.1	$		319.6	$		310.5	$		328.5	$		1,249.7
Net earnings	$	95.3	$		112.8	$		112.8	$		117.3	$		438.2
Net earnings per share – basic:	$	0.87	$		1.04	$		1.04	$		1.09	$		4.04
Net earnings per share – diluted:	$	0.86	$		1.02	$		1.03	$		1.08	$		3.98

	Fiscal Year 2012
(In millions, except per share amounts)	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
Total revenues	$	625.3	$		720.3	$		705.3	$		756.1	$		2,807.0
Gross margin	$	268.8	$		296.7	$		307.6	$		323.2	$		1,196.3
Net earnings	$	90.2	$		107.8	$		108.8	$		120.2	$		427.0
Net earnings per share – basic:	$	0.80	$		0.96	$		0.98	$		1.09	$		3.83
Net earnings per share – diluted:	$	0.79	$		0.94	$		0.96	$		1.08	$		3.76

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Net earnings	$ 438,248	$ 427,049	$ 398,933
Defined benefit pension and post-retirement benefit plans:
Net gain/(loss) arising during the year, net of tax benefit/(expense) of ($1,504), $1,079 and $1,783	5,549	(8,761)	(8,068)
Amortization of prior service cost included in net periodic benefit cost, net of tax benefit/(expense) of $159, ($19) and ($18)	(145)	144	137
Amortization, settlement or curtailment of net actuarial loss, net of tax expense of ($608), ($548) and ($446)	3,138	3,114	1,655
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax	8,542	(5,503)	(6,276)
Unrealized gain on derivatives:
Increase (decrease) in unrealized gain, net of tax benefit/(expense) of ($191), ($541) and $206	318	900	(326)
Reclassification adjustments, net of tax benefit/(expense) of ($923), ($217) and $396	(1,540)	(362)	626
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax, Total	(1,222)	538	300
Currency translation adjustment	9,230	(4,808)	(3,268)
Other comprehensive earnings (loss)	16,550	(9,773)	(9,244)
Comprehensive earnings	$ 454,798	$ 417,276	$ 389,689

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Goodwill and Intangible Assets

12 Months Ended

Sep. 27, 2013

Goodwill and Intangible Assets

5. GOODWILL AND INTANGIBLE ASSETS

The following table reflects the gross carrying amount and accumulated amortization of the Company’s intangible assets included in “Other assets” in the Consolidated Balance Sheets:

(In millions)	September27, 2013			September28, 2012
Intangible Assets:
Acquired existing technology	$	36.6			$	36.3
Patents, licenses and other		29.0				28.1
Customer contracts and supplier relationship		10.9				10.9
Accumulated amortization		(53.1	)			(48.5	)
Net carrying amount	$	23.4			$	26.8

Amortization expense for intangible assets was $4.3 million, $4.9 million and $2.9 million for fiscal years 2013, 2012 and 2011, respectively. The Company estimates that the amortization expense for fiscal years 2014 through 2018, and thereafter, will be as follows (in millions): $5.3, $6.0, $2.4, $1.8, $1.8, and $6.1, respectively.

The following table reflects the activity of goodwill by reportable operating segment:

(In millions)	Oncology Systems		X-Ray Products		Other			Total
Balance at September30, 2011	$	130.5	$	6.1	$	75.9		$	212.5
Acquisition of businesses		1.5		10.9		-			12.4
Foreign currency translation adjustments		-		-		(2.7	)		(2.7	)
Balance at September28, 2012		132.0		17.0		73.2			222.2
Foreign currency translation adjustments		-		-		3.1			3.1
Balance at September27, 2013	$	132.0	$	17.0	$	76.3		$	225.3

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 27, 2013	Sep. 28, 2012
Current assets:
Cash and cash equivalents	$ 1,117,861	$ 704,570
Short-term investment	62,700	49,709
Accounts receivable, net of allowance for doubtful accounts of $14,735 at September 27, 2013 and $14,386 at September 28, 2012	698,254	691,806
Inventories	535,223	457,869
Prepaid expenses and other current assets	168,495	150,775
Deferred tax assets	122,250	115,786
Total current assets	2,704,783	2,170,515
Property, plant and equipment, net	315,331	296,592
Goodwill	225,335	222,242
Other assets	223,025	189,377
Total assets	3,468,474	2,878,726
Current liabilities:
Accounts payable	194,272	180,736
Accrued expenses	320,884	336,568
Product warranty	39,050	52,799
Deferred revenue	389,479	369,456
Advance payments from customers	160,644	141,972
Short-term borrowings	0	155,000
Current maturities of long-term debt	56,250	0
Total current liabilities	1,160,579	1,236,531
Long-term debt	450,000	6,250
Other long-term liabilities	144,048	126,169
Total liabilities	1,754,627	1,368,950
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock of $1 par value: 1,000 shares authorized; none issued and outstanding	0	0
Common stock of $1 par value: 189,000 shares authorized; 106,491 and 109,407 shares issued and outstanding at September 27, 2013 and at September 28, 2012, respectively	106,491	109,407
Capital in excess of par value	637,084	563,875
Retained earnings	1,010,343	893,115
Accumulated other comprehensive loss	(40,071)	(56,621)
Total stockholders’ equity	1,713,847	1,509,776
Total liabilities and stockholders’ equity	$ 3,468,474	$ 2,878,726

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Activity of Goodwill by Reportable Operating Segment (Detail) (USD $)	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012
Goodwill [Line Items]
Balance, beginning	$ 222,242,000	$ 212,500,000
Acquisition of businesses		12,400,000
Foreign currency translation adjustments	3,100,000	(2,700,000)
Balance, ending	225,335,000	222,242,000
Oncology Systems
Goodwill [Line Items]
Balance, beginning	132,000,000	130,500,000
Acquisition of businesses		1,500,000
Foreign currency translation adjustments
Balance, ending	132,000,000	132,000,000
X-Ray Products
Goodwill [Line Items]
Balance, beginning	17,000,000	6,100,000
Acquisition of businesses		10,900,000
Foreign currency translation adjustments
Balance, ending	17,000,000	17,000,000
Other
Goodwill [Line Items]
Balance, beginning	73,200,000	75,900,000
Acquisition of businesses
Foreign currency translation adjustments	3,100,000	(2,700,000)
Balance, ending	$ 76,300,000	$ 73,200,000

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CONSOLIDATED STATEMENTS OF EARNINGS (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Revenues:
Product	$ 2,055,718	$ 2,003,988	$ 1,879,327
Service	887,179	803,027	717,339
Total revenues	2,942,897	2,807,015	2,596,666
Cost of revenues:
Product	1,295,492	1,247,278	1,133,118
Service	397,718	363,401	327,659
Total cost of revenues	1,693,210	1,610,679	1,460,777
Gross margin	1,249,687	1,196,336	1,135,889
Operating expenses:
Research and development	208,208	185,742	170,725
Selling, general and administrative	432,589	416,520	376,713
Total operating expenses	640,797	602,262	547,438
Operating earnings	608,890	594,074	588,451
Interest income	7,322	5,269	2,858
Interest expense	(4,129)	(3,419)	(2,599)
Earnings from continuing operations before taxes	612,083	595,924	588,710
Taxes on earnings	173,835	168,875	180,084
Earnings from continuing operations	438,248	427,049	408,626
Loss from discontinued operations, net of taxes	0	0	(9,693)
Net earnings	$ 438,248	$ 427,049	$ 398,933
Net earnings (loss) per share - basic:
Continuing operations	$ 4.04	$ 3.83	$ 3.50
Discontinued operations	$ 0	$ 0	$ (0.08)
Net earnings per share	$ 4.04	$ 3.83	$ 3.42
Net earnings (loss) per share - diluted:
Continuing operations	$ 3.98	$ 3.76	$ 3.44
Discontinued operations	$ 0	$ 0	$ (0.08)
Net earnings per share	$ 3.98	$ 3.76	$ 3.36
Shares used in the calculation of net earnings (loss) per share:
Weighted average shares outstanding - basic	108,352	111,376	116,703
Weighted average shares outstanding - diluted	110,053	113,473	118,735

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Components of Inventories (Detail) (USD $)	Sep. 27, 2013	Sep. 28, 2012
Inventories:
Raw materials and parts	$ 276,600,000	$ 237,300,000
Work-in-process	91,600,000	75,600,000
Finished goods	167,000,000	145,000,000
Total inventories	$ 535,223,000	$ 457,869,000

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Schedule of Accumulated Other Comprehensive Income (Loss) Expected to be Recognized as Components of Net Periodic Benefit Cost (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013
Defined Benefit Plan Disclosure [Line Items]
Prior service cost	$ (0.2)
Net loss	(2.4)
Pension and Other Postretirement Benefit Plans, Amounts that Will be Amortized from Accumulated Other Comprehensive Income (Loss) in Next Fiscal Year, Total	(2.6)
Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Prior service cost	(0.2)
Net loss	(2.4)
Pension and Other Postretirement Benefit Plans, Amounts that Will be Amortized from Accumulated Other Comprehensive Income (Loss) in Next Fiscal Year, Total	(2.6)
Post-Retirement Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Prior service cost	0
Net loss	0
Pension and Other Postretirement Benefit Plans, Amounts that Will be Amortized from Accumulated Other Comprehensive Income (Loss) in Next Fiscal Year, Total	$ 0

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Schedule of Funded Status of the Defined Benefit Pension and Post-Retirement Benefit Plans (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Defined Benefit Plan Disclosure [Line Items]
Plan assets - end of fiscal year	$ 180.8	$ 142.6
Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Benefit obligation - beginning of fiscal year	181.1	160.5
Service cost	4.8	4.3	3.7
Interest cost	5.2	5.3
Plan participants’ contributions	10.9	5.3
Plan amendment	0.5	0
Plan settlement	(4.7)	(2.5)
Plan curtailment	0	(0.2)
Actuarial (gain) loss	(0.7)	14.5
Foreign currency changes	3.2	(2.4)
Benefit and expense payments	(4.6)	(3.7)
Benefit obligation - end of fiscal year	195.7	181.1	160.5
Plan assets - beginning of fiscal year	142.6	125.5
Employer contributions	22.2	9.6
Actual return on plan assets	11.6	9.8
Plan participants’ contributions	10.9	5.3
Plan settlement	(4.7)	(2.5)
Foreign currency changes	2.8	(1.4)
Benefit and expense payments	(4.6)	(3.7)
Plan assets - end of fiscal year	180.8	142.6	125.5
Funded status	(14.9)	(38.5)
Noncurrent assets	3.1	0
Current liabilities	0	0
Noncurrent liabilities	(18.0)	(38.5)
Net amount recognized	(14.9)	(38.5)
Post-Retirement Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Benefit obligation - beginning of fiscal year	5.6	5.9
Service cost	0	0	0
Interest cost	0.2	0.3
Plan participants’ contributions	0	0
Plan amendment	0	0
Plan settlement	0	0
Plan curtailment	0	0
Actuarial (gain) loss	(0.5)	(0.1)
Foreign currency changes	0	0
Benefit and expense payments	(0.5)	(0.5)
Benefit obligation - end of fiscal year	4.8	5.6	5.9
Plan assets - beginning of fiscal year	0	0
Employer contributions	0.5	0.5
Actual return on plan assets	0	0
Plan participants’ contributions	0	0
Plan settlement	0	0
Foreign currency changes	0	0
Benefit and expense payments	(0.5)	(0.5)
Plan assets - end of fiscal year	0	0	0
Funded status	(4.8)	(5.6)
Noncurrent assets	0	0
Current liabilities	(0.5)	(0.5)
Noncurrent liabilities	(4.3)	(5.1)
Net amount recognized	$ (4.8)	$ (5.6)

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Subsequent Events

12 Months Ended

Sep. 27, 2013

Subsequent Events

20. SUBSEQUENT EVENT

In November 2013, the VMS Board of Directors authorized the repurchase of an additional 6,000,000 shares of VMS common stock from December 30, 2013 through December31, 2014. Stock repurchases under the November 2013 authorization may be made in open market purchases, in privately negotiated transactions (including accelerated share repurchase programs) or under Rule 10b5-1 share repurchase plans, and may be made from time to time in one or more blocks. Shares will be retired upon repurchase.

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Business Combinations

12 Months Ended

Sep. 27, 2013

Business Combinations

14. BUSINESS COMBINATIONS

On March4, 2011, the Company acquired all of the outstanding equity of a privately held company, which was then integrated into the Company’s Oncology Systems business. This acquisition was accounted for as a business combination. The total purchase price of $8.0 million consisted of $7.5 million of cash consideration and $0.5 million of contingent consideration at fair value. Of the purchase price, $3.4 million was allocated to goodwill, $5.7 million to amortizable intangible assets, and $(1.1) million to net assumed liabilities. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and in this case was not deductible for income tax purposes.

On October3, 2011, the Company acquired all of the outstanding equity of Calypso Medical Technologies, Inc. (“Calypso”), a privately held supplier of specialized products and software for real-time tumor tracking and motion management during radiosurgery and radiotherapy. This acquisition, which was integrated into the Company’s Oncology Systems business, enables the Company to offer real-time, non-ionizing tumor tracking tools for enhancing the precision of cancer treatments. This acquisition was accounted for as a business combination. The total purchase price of $15.8 million consisted of $10.9 million of cash consideration and $4.9 million of contingent consideration at fair value. During the fourth quarter of fiscal year 2012, the Company adjusted the preliminary amounts allocated to deferred tax assets and liabilities in order to reflect additional information obtained since the acquisition date related to deferred tax positions that existed at the acquisition date. The opening balances have been adjusted to reflect an increase to deferred tax asset of $2.5 million and a decrease of goodwill of $2.5 million. As of September28, 2012, the Company had finalized the allocation of the purchase price of Calypso. Of the purchase price, $7.9 million was allocated to amortizable intangible assets and $7.9 million to net assets.

On April3, 2012, VMS acquired all of the outstanding equity of InfiMed, a privately-held supplier of hardware and software for processing diagnostic X-ray images. This acquisition, which was integrated into the Company’s X-Ray Products business, enables the Company to provide more fully integrated X-ray component solutions to its customers. This acquisition was accounted for as a business combination. The total purchase price of $20.8 million consisted of $17.1 million of cash consideration and $3.7 million of contingent consideration at fair value. Of the purchase price, $10.9 million was allocated to goodwill, $5.4 million to amortizable intangible assets, and $4.5 million to net assets. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and in this case was deductible for income tax purposes.

The impact of these business combinations was not significant to the Consolidated Financial Statements and therefore pro forma disclosures have not been presented.

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Business Combinations - Additional Information (Detail) (USD $) In Millions, unless otherwise specified		1 Months Ended
	Mar. 04, 2011	Oct. 03, 2011 Calypso Medical Technologies, Inc.	Apr. 03, 2012 InfiMed, Inc.
Business Acquisition [Line Items]
Total purchase price	$ 8.0	$ 15.8	$ 20.8
Cash consideration	7.5	10.9	17.1
Contingent consideration at fair value	0.5	4.9	3.7
Goodwill acquired	3.4		10.9
Allocated to amortizable intangible assets	5.7	7.9	5.4
Net assets acquired	(1.1)	7.9	4.5
Opening balances adjustment to deferred tax asset		2.5
Opening balances adjustment to goodwill		$ (2.5)

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Segment Information (Tables)

12 Months Ended

Sep. 27, 2013

Operating Results Information for Each Business Segment

Accordingly, the following information is provided for purposes of achieving an understanding of operations, but may not be indicative of the financial results of the reported segments were they independent organizations. In addition, comparisons of the Company’s operations to similar operations of other companies may not be meaningful.

Segment Data

	Revenues									Operating Earnings
	Fiscal Years									Fiscal Years
(In millions)	2013			2012			2011				2013				2012				2011
Oncology Systems	$	2,253	$		2,189	$		2,022	$			512		$		505		$		507
X-Ray Products		546			493			469				144				131				118
Total reportable segments		2,799			2,682			2,491				656				636				625
Other		144			125			106				(25	)			(32	)			(32	)
Corporate		-			-			-				(22	)			(10	)			(5	)
Total company	$	2,943	$		2,807	$		2,597	$			609		$		594		$		588

	Depreciation&Amortization									Capital Additions
	Fiscal Years									Fiscal Years
(In millions)	2013			2012			2011				2013			2012			2011
Oncology Systems	$	21	$		23	$		19	$			25	$		17	$		17
X-Ray Products		13			10			8				8			8			7
Total reportable segments		34			33			27				33			25			24
Other		3			4			3				10			10			13
Corporate		26			24			23				35			32			34
Total company	$	63	$		61	$		53	$			78	$		67	$		71
	Total Assets									Goodwill
	Fiscal Years									Fiscal Years
(In millions)	2013			2012			2011				2013			2012			2011
Oncology Systems	$	1,217	$		1,220	$		1,093	$			132	$		132	$		130
X-Ray Products		309			265			268				17			17			6
Total reportable segments		1,526			1,485			1,361				149			149			136
Other		367			313			239				76			73			76
Corporate		1,575			1,081			899				-			-			-
Total company	$	3,468	$		2,879	$		2,499	$			225	$		222	$		212

Reconciliation of Segment Operating Results to Companys Earnings from Continuing Operations before Taxes

The reconciliation of segment operating results information to the Company’s earnings from operations before taxes was as follows:

	Fiscal Years
(In millions)	2013				2012				2011
Earnings from operations before taxes:
Oncology Systems	$	512		$		505		$		507
X-Ray Products		144				131				118
Total reportable segments		656				636				625
Other		(25	)			(32	)			(32	)
Corporate		(22	)			(10	)			(5	)
Interest income (expense), net		3				2				1
Total company	$	612		$		596		$		589

Geographic Information

Geographic Information

	Revenues									Long-Lived Assets
	Fiscal Years									Fiscal Years
(In millions)	2013			2012			2011				2013			2012			2011
United States	$	1,212	$		1,156	$		975	$			238	$		229	$		223
International		1,731			1,651			1,622				77			68			63
Total company	$	2,943	$		2,807	$		2,597	$			315	$		297	$		286

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Schedule of Defined Benefit Pension Plan Balances with Accumulated Benefit Obligation Exceeded Fair Value of Plan Assets (Detail) (USD $) In Millions, unless otherwise specified	Sep. 27, 2013	Sep. 28, 2012
Retirement Plans [Abstract]
Projected benefit obligation	$ 0	$ 76.4
Accumulated benefit obligation	0	71.1
Fair value of plan assets	$ 0	$ 62.9

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Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) In Millions, unless otherwise specified	Sep. 27, 2013	Sep. 28, 2012
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Corporate debt security	$ 62.7	$ 49.7
Derivative assets		0.8
Option to purchase a company	1.4	1.4
Total assets measured at fair value	114.1	97.6
Derivative liabilities	(1.1)
Contingent consideration	(2.5)	(8.8)
Total liabilities measured at fair value	(3.6)	(8.8)
Money market funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash and cash equivalents	50.0	45.7
Quoted Prices in Active Markets for Identical Instruments (Level 1)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Corporate debt security	0	0
Derivative assets		0
Option to purchase a company	0	0
Total assets measured at fair value	50.0	45.7
Derivative liabilities	0
Contingent consideration	0	0
Total liabilities measured at fair value	0	0
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Money market funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash and cash equivalents	50.0	45.7
Significant Other Observable Inputs (Level 2)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Corporate debt security	0	0
Derivative assets		0.8
Option to purchase a company	0	0
Total assets measured at fair value	0	0.8
Derivative liabilities	(1.1)
Contingent consideration	0	0
Total liabilities measured at fair value	(1.1)	0
Significant Other Observable Inputs (Level 2) | Money market funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash and cash equivalents	0	0
Significant Unobservable Inputs (Level 3)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Corporate debt security	62.7	49.7
Derivative assets		0
Option to purchase a company	1.4	1.4
Total assets measured at fair value	64.1	51.1
Derivative liabilities	0
Contingent consideration	(2.5)	(8.8)
Total liabilities measured at fair value	(2.5)	(8.8)
Significant Unobservable Inputs (Level 3) | Money market funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash and cash equivalents	$ 0	$ 0

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Summary of Long-term Debt Outstanding (Parenthetical) (Detail) (USD $) In Thousands, unless otherwise specified			12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 27, 2013 Unsecured term loan, 6.70% due in one installment of $6.25 payable in fiscal year 2014 Installment	Sep. 27, 2013 Secured Debt
Debt Instrument [Line Items]
Debt instrument stated interest rate			6.70%	1.31%
Current maturities of long-term debt	$ 56,250	$ 0	$ 6,250
Debt Instrument Maturity Dates			2014	2018
Unsecured term loan, number of installment payments			1

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Commitments and Contingencies (Tables)

12 Months Ended

Sep. 27, 2013

Accrued Product Warranty

The following table reflects the changes in the Company’s accrued product warranty:

	Fiscal Years
(In millions)	2013			2012
Accrued product warranty, at beginning of period	$	52.8		$	50.1
Charged to cost of revenues		57.7			58.1
Actual product warranty expenditures		(57.3	)		(55.4	)
Accrued product warranty, at end of period	$	53.2		$	52.8

Schedule of Reserve for Future Environmental Costs

The table that follows presents information about the Company’s reserve for future environmental costs at September27, 2013, based on estimates as of that date.

(In millions)	Recurring Costs		Non-Recurring Costs		TotalAnticipated Future Costs
Fiscal Years:
2014	$	0.6	$	1.7	$	2.3
2015		0.6		0.4		1.0
2016		0.7		0.4		1.1
2017		0.8		0.2		1.0
2018		0.7		0.5		1.2
Thereafter		6.3		1.4		7.7
Total costs	$	9.7	$	4.6	$	14.3
Less imputed interest						(3.0	)
Reserve amount					$	11.3

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Financing Receivables and Allowance for Credit Losses (Tables)

12 Months Ended

Sep. 27, 2013

Financing Receivables and Allowance for Credit Losses

The Company’s financing receivables, consisting of its accounts receivable with contractual maturities of more than one year and the related allowance for doubtful accounts are presented in the following table:

(In millions)	September27, 2013			September28, 2012			September30, 2011
Accounts receivable with contractual maturities of more than one year:
Gross amount	$	28.0		$	29.9		$	16.2
Allowance for doubtful accounts		(3.0	)		(3.0	)		-
Net amount	$	25.0		$	26.9		$	16.2
Amount past due	$	3.1		$	4.3		$	1.2

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Goodwill and Intangible Assets (Tables)

12 Months Ended

Sep. 27, 2013

Gross Carrying Amount and Accumulated Amortization of Intangible Assets

The following table reflects the gross carrying amount and accumulated amortization of the Company’s intangible assets included in “Other assets” in the Consolidated Balance Sheets:

(In millions)	September27, 2013			September28, 2012
Intangible Assets:
Acquired existing technology	$	36.6			$	36.3
Patents, licenses and other		29.0				28.1
Customer contracts and supplier relationship		10.9				10.9
Accumulated amortization		(53.1	)			(48.5	)
Net carrying amount	$	23.4			$	26.8

Activity of Goodwill by Reportable Operating Segment

The following table reflects the activity of goodwill by reportable operating segment:

(In millions)	Oncology Systems		X-Ray Products		Other			Total
Balance at September30, 2011	$	130.5	$	6.1	$	75.9		$	212.5
Acquisition of businesses		1.5		10.9		-			12.4
Foreign currency translation adjustments		-		-		(2.7	)		(2.7	)
Balance at September28, 2012		132.0		17.0		73.2			222.2
Foreign currency translation adjustments		-		-		3.1			3.1
Balance at September27, 2013	$	132.0	$	17.0	$	76.3		$	225.3

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Financing Receivables and Allowance for Credit Losses

12 Months Ended

Sep. 27, 2013

Financing Receivables and Allowance for Credit Losses

4. FINANCING RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

A financing receivable represents a financing arrangement with a contractual right to receive money, on demand or on fixed or determinable dates, and that is recognized as an asset on the Company’s balance sheet.

The Company’s financing receivables, consisting of its accounts receivable with contractual maturities of more than one year and the related allowance for doubtful accounts are presented in the following table:

(In millions)	September27, 2013			September28, 2012			September30, 2011
Accounts receivable with contractual maturities of more than one year:
Gross amount	$	28.0		$	29.9		$	16.2
Allowance for doubtful accounts		(3.0	)		(3.0	)		-
Net amount	$	25.0		$	26.9		$	16.2
Amount past due	$	3.1		$	4.3		$	1.2

During fiscal years 2013, 2012, and 2011, the Company sold $1.3 million, $11.0million, and $3.6 million, respectively, of accounts receivable with contractual maturities of more than one year. There was no significant activity in the allowance for doubtful financing receivable accounts during fiscal years 2013, 2012, and 2011.

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Financing Receivables and Allowance for Credit Losses - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Financing Receivables [Line Items]
Accounts receivable with contractual maturities of more than one year, amount sold	$ 1.3	$ 11.0	$ 3.6

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Share-Based Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Share-based compensation expenses	$ 42,600	$ 47,900	$ 42,000
Taxes on earnings	(12,989)	(15,406)	(14,063)
Net share-based compensation expense	29,648	32,469	27,955
Cost of revenues - Product
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Share-based compensation expenses	4,088	4,419	3,917
Cost of revenues - Service
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Share-based compensation expenses	3,460	1,472	1,977
Research and development
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Share-based compensation expenses	5,993	6,378	5,467
Selling, general and administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Share-based compensation expenses	$ 29,096	$ 35,606	$ 30,657

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Valuation and Qualifying Accounts

12 Months Ended

Sep. 27, 2013

Valuation and Qualifying Accounts

VARIANMEDICALSYSTEMS,INC.ANDSUBSIDIARIES

VALUATIONANDQUALIFYINGACCOUNTS

Fiscal Year	Description	Balanceat Beginningof Period		ChargedtoBad DebtExpense			Write-Offs/ Adjustments Chargedto Allowance			Balanceat EndofPeriod
				(Inthousands)
2013	Allowancefordoubtfulaccountsreceivable	$	14,386	$	5,984	$		5,635	$		14,735
2012	Allowancefordoubtfulaccountsreceivable	$	6,034	$	10,350	$		1,998	$		14,386
2011	Allowancefordoubtfulaccountsreceivable	$	4,209	$	2,514	$		689	$		6,034

Fiscal Year	Description	Balanceat Beginningof Period		Increases		Deductions		Balanceat EndofPeriod
				(Inthousands)
2013	Valuationallowancefordeferredtaxassets	$	45,751	$	14,953	$	-	$	60,704
2012	Valuationallowancefordeferredtaxassets	$	46,924	$	-	$	1,173	$	45,751
2011	Valuationallowancefordeferredtaxassets	$	38,456	$	8,642	$	174	$	46,924

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Employee Stock Plans (Tables)

12 Months Ended

Sep. 27, 2013

Fair Value of Employee Stock Option Plans with Weighted Average Assumptions

The fair value of options granted and the option component of the shares purchased under the Employee Stock Purchase Plan (which is described further below) shares were estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions:

	Employee Stock Plans												EmployeeStockPurchasePlan
	Fiscal Years												Fiscal Years
	2013				2012				2011					2013				2012				2011
Expected term (in years)		4.76				4.64				4.75					0.50				0.50				0.50
Risk-free interest rate		0.6	%			0.8	%			2.0	%				0.1	%			0.1	%			0.1	%
Expected volatility		32.2	%			36.9	%			35.5	%				16.5	%			19.3	%			14.0	%
Expected dividend yield		0	%			0	%			0	%				0	%			0	%			0	%
Weighted average fair value at grant date	$	19.73		$		18.75		$		23.26		$			12.95		$		12.17		$		12.61

Net Share-Based Compensation Expense

The table below summarizes the effect of recording share-based compensation expense:

	Fiscal Years
(In thousands)	2013			2012			2011
Cost of revenues - Product	$	4,088		$	4,419		$	3,917
Cost of revenues - Service		3,460			1,472			1,977
Research and development		5,993			6,378			5,467
Selling, general and administrative		29,096			35,606			30,657
Taxes on earnings		(12,989	)		(15,406	)		(14,063	)
Net share-based compensation expense	$	29,648		$	32,469		$	27,955

Activity Under Employee Stock Plans

A summary of share-based awards available for grant is as follows:

(In thousands)	SharesAvailable for Grant
Balance at October1, 2010		8,407
Granted		(108	)
Canceled, expired or forfeited		125
Balance at September30, 2011		8,424
Authorized		6,000
Granted		(2,680	)
Canceled, expired or forfeited		124
Balance at September28, 2012		11,868
Granted		(2,045	)
Canceled, expired or forfeited		102
Balance at September27, 2013		9,925

Awards other than stock options set forth in the table were counted against the shares available for grant limit of the Third Amended 2005 Plan as 2.5 shares for every one share awarded before February9, 2012 and were counted against the shares available for grant limit as 2.6 shares for every one awarded on or after February9, 2012. In addition, the shares available for grant limit was further adjusted to reflect a maximum payout of1.5 shares that could be issued for each performance unit granted.

Activity under the Company’s employee stock plans is presented below:

(In thousands, except per share amounts)	OptionsOutstanding
	NumberofShares				WeightedAverage Exercise Price
Balance at October1, 2010		10,174		$		44.03
Granted		48				69.67
Canceled, expired or forfeited		(46	)			48.64
Exercised		(3,259	)			40.38
Balance at September30, 2011		6,917				45.90
Granted		743				58.50
Canceled, expired or forfeited		(30	)			55.73
Exercised		(1,171	)			40.18
Balance at September28, 2012  (5,540 options exercisable at a weighted average exercise price of $46.91)		6,459				48.34
Granted		613				68.93
Canceled, expired or forfeited		(20	)			60.81
Exercised		(2,567	)			44.97
Balance at September27, 2013		4,485		$		53.02

Options Outstanding And Exercisable

The following table summarizes information related to options outstanding and exercisable under the Company’s employee stock plans at September27, 2013:

	Options Outstanding									Options Exercisable
Range of Exercise Prices	Number ofShares		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)		Number ofShares			Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)
(In thousands, except years and per-share amounts)
$32.10–$39.85		665		1.61		38.23		23,919			665		1.61		38.23		23,919
$40.21–$52.07		1,359		2.65		50.20		32,599			1,359		2.65		50.20		32,599
$52.08–$72.26		2,461		3.84		58.58		38,391			1,631		2.93		55.04		31,202
Total		4,485		3.15	$	53.02	$	94,909			3,655		2.58	$	50.18	$	87,720

(1) The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the closing price of VMS common stock of $74.18 as of September27, 2013, the last trading date of fiscal year 2013, and which represents the amount that would have been received by the option holders had all option holders exercised their options and sold the shares received upon exercise as of that date.

Activity for Restricted Stock, Restricted Stock Units, Deferred Stock Units and Performance Units

The activity for restricted stock, restricted stock units, deferred stock units and performance units is summarized as follows:

(In thousands, except per share amounts)	Number of Shares				WeightedAverage Grant-DateFair Value
Balance at October1, 2010		1,333		$		46.91
Granted		24				68.67
Vested		(590	)			47.27
Cancelled or expired		(32	)			46.59
Balance at September30, 2011		735		$		47.36
Granted		716				59.06
Vested		(469	)			44.68
Cancelled or expired		(37	)			53.94
Balance at September28, 2012		945		$		57.30
Granted		516				70.37
Vested		(396	)			55.67
Cancelled or expired		(30	)			61.82
Balance at September27, 2013		1,035		$		64.36

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Taxes on Earnings - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011	Oct. 01, 2010
Income Tax [Line Items]
Increase (decrease) in valuation allowance	$ 14.9	$ (1.1)	$ 8.4
Minimum likelihood percentage of uncertain tax position being realized upon settlement	50.00%
Unrecognized tax benefits	37.0	38.8	37.1	46.4
Amount that would affect the effective tax rate	32.8
Accrued interest and penalties related to unrecognized tax benefits	6.7	5.5
Net expense (benefit) related to interest and penalties was included in taxes on earnings	1.2	(2.2)
Foreign Tax Authority
Income Tax [Line Items]
Cumulative undistributed earnings of non-U.S subsidiaries	1,412.2
Additional deferred taxes if earnings were not considered to be reinvested indefinitely	358.4
Net operating loss carry forwards	218.9
Amount unavailable to the company under local loss utilization	24.1
Federal
Income Tax [Line Items]
Net operating loss carry forwards	14.7
Net operating loss carryforwards expiring period	Between 2018 and 2031
Net operating loss carryforwards subject to an annual limitation	1.3
State and Local Jurisdiction
Income Tax [Line Items]
Net operating loss carry forwards	$ 31.1
Net operating loss carryforwards expiring period	Between 2018 and 2032

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Borrowings

12 Months Ended

Sep. 27, 2013

Borrowings

7. BORROWINGS

On August 27, 2013, VMS entered into a credit agreement (the “2013 Credit Agreement”) with certain lenders and Bank of America (“BofA”) as administrative agent. The Credit Agreement provides for (i) a five-year term loan facility in an aggregate principal amount of up to $500 million (the “2013 Term Loan Facility”) and (ii) a five-year revolving credit facility in an aggregate principal amount of up to $300 million (the “2013 Revolving Credit Facility” and, collectively with the Term Loan Facility, the “2013 Credit Facility”). The Revolving Credit Facility also includes a $50 million sub-facility for the issuance of letters of credit and permits swing line loans of up to $25 million. Under the 2013 Credit Agreement, the Company has the right to make (i) up to two requests to increase the aggregate commitments under the Term Loan Facility by an aggregate amount for all such requests of up to $100 million and (ii) up to three requests to increase the aggregate commitments under the Revolving Credit Facility by an aggregate amount for all such requests of up to $200 million, provided that, in each case, the Lenders are willing to provide such new or increased commitments and certain other conditions are met. The 2013 Credit Facility contains provisions that limit the Company’s ability to pay cash dividends.

The proceeds of the Credit Facility will be used for working capital, capital expenditures, permitted Company share repurchases, permitted acquisitions and other lawful corporate purposes. Borrowings under the 2013 Term Loan Facility accrue interest either (i) based on a Eurodollar Rate, as defined in the Credit Agreement (the “Eurodollar Rate”), plus a margin of 1.00% to 1.25% based on a leverage ratio involving funded indebtedness and EBITDA  or (ii) based upon a base rate of (a) the federal funds rate plus 0.50%, (b) BofA’s announced prime rate, or (c) the Eurodollar Rate plus 1.00%, whichever is highest, plus a margin of up to 0.25% based on the same leverage Ratio, depending upon instructions from the Company.  Borrowings under the 2013 Revolving Credit Facility accrue interest either (i) based on the Eurodollar Rate plus a margin of 1.25% to 1.50% based on a leverage ratio involving funded indebtedness and EBITDA or (ii) based upon a base rate of (a) the federal funds rate plus 0.50%, (b) BofA’s announced prime rate, or (c) the Eurodollar Rate plus 1.00%, whichever is highest, plus a margin of 0.25% to 0.50% based on the same leverage ratio, depending upon instructions from the Company.  At September 27, 2013, borrowings under the 2013 Term Loan Facility totaled $500 million with a weighted average interest rate of 1.31%.  At September 27, 2013, there was no amount outstanding on the 2013 Revolving Credit Facility.

The Company must pay a commitment fee on the unused portion of the 2013 Revolving Credit Facility at a rate from 0.15% to 0.275% based on a leverage ratio. The Company may prepay, reduce or terminate the commitments without penalty. Swing line loans under the 2013 Credit Facility will bear interest at the base rate plus the then applicable margin for base rate loans.

Subject to certain limitations on the amount secured, a pledge of stock issued by certain of our present and future subsidiaries that are deemed to be material under the terms of the 2013 Credit Facility serve as security for the 2013 Credit Facility. These stock pledges also serve as security for all hedging or treasury management obligations entered into by the Company with a Lender. As of September 27, 2013, VMS had pledged 65% of the voting shares that it holds in Varian Medical Systems Nederland Holdings B.V., a wholly owned subsidiary.  The 2013 Credit Agreement provides that certain material domestic subsidiaries must guarantee the 2013 Credit Facility, subject to certain limitations on the amount secured. As of September 27, 2013, the 2013 Credit Facility was not guaranteed by any VMS subsidiary.

The 2013 Credit Agreement contains affirmative and negative covenants applicable to the Company and its subsidiaries that are typical for credit facilities of this type, and that are subject to materiality and other qualifications, carve-outs, baskets and exceptions. The Company has also agreed to maintain certain financial covenants including (i) a maximum consolidated leverage ratio, involving funded indebtedness and EBITDA (earnings before interest, tax and depreciation and amortization), and (ii) a minimum cash flow coverage ratio.  The Company was in compliance with all covenants under the 2013 Credit Agreement for all periods within these consolidated financial statements in which it was in existence.

Prior to the 2013 Credit Facility, VMS had a credit agreement (the “2012 Credit Facility”) with certain lenders and BofA as administrative agent which provided for a revolving credit facility that enabled the Company to borrow and have outstanding at any given time a maximum of $300 million.  On August 27, 2013, VMS replaced the 2012 Credit Facility with the 2013 Revolving Credit Facility, terminating the 2012 Credit Facility agreement entered into as of April 27, 2012 and repaying in full the approximately $148 million then-outstanding principal balance, plus accrued interest and fees.

The 2012 Credit Facility included a $50 million sub-facility for the issuance of letters of credit and permits swing line loans of up to $25 million. The 2012 Credit Facility was secured, subject to certain limitations on the amount secured, by a pledge of stock of certain of VMS’s present and future subsidiaries that are deemed to be material subsidiaries.As of September28, 2012, VMS had pledged 65% of the voting shares that it holds in Varian Medical Systems Nederland Holdings B.V., a wholly owned subsidiary.

Borrowings under the 2012 Credit Facility accrued interest either (i)based on a Eurodollar rate (as defined in the credit agreement), plus a margin of 1.25% to 1.5% based on a leverage ratio involving funded indebtedness and earnings before interest, taxes and depreciation and amortization (“EBITDA” ) or (ii)based upon a base rate of the highest of (a)the federal funds rate plus 0.5%, (b)BofA’s announced prime rate or (c)the Eurodollar rate plus 1%, plus a margin of 0.25% to 0.5% based on the same leverage ratio, depending on instructions from the Company. The Company also paid a commitment fee on the unused portion of the 2012 Credit Facility at a rate from 0.25% to 0.30% based on the same leverage ratio.  At September 28, 2012, a total of $155 million was outstanding under the 2012 Credit Facility with a weighted average interest rate of 1.47%.  No letters of credit or swing line loans were outstanding at September 28, 2012.

The 2012 credit agreement contained affirmative and negative covenants applicable to the Company that are typical for credit facilities of this type, and that are subject to materiality and other qualifications, carve-outs, baskets and exceptions. The Company had also agreed to maintain certain financial covenants, including (i)a maximum consolidated leverage ratio, involving funded indebtedness and EBITDA and (ii)a minimum cash flow coverage. The Company was in compliance with all covenants under the 2012 Credit Facility for all periods presented within these consolidated financial statements in which it was in existence.

VMS’s Japanese subsidiary (“VMS KK”) has an unsecured uncommitted credit agreement with Sumitomo that enables VMS KK to borrow and have outstanding at any given time a maximum of 3 billion Japanese yen (the “Sumitomo Credit Facility”). In March 2013, the Sumitomo Credit Facility was extended. The Sumitomo Credit Facility will expire on April5, 2014. Borrowings under the Sumitomo Credit Facility accrue interest based on the basic loan rate announced by the Bank of Japan plus a margin of 0.5%per annum. As of September27, 2013, there was no outstanding balance under the Sumitomo Credit Facility.

The Company paid commitment fees of $0.3 million for each of the three fiscal years 2013, 2012 and 2011.

Long-term debt outstanding is summarized as follows:

(Dollars in millions)	September27, 2013			September28, 2012
Unsecured term loan, 6.70% due in one installment of $6.25 payable in fiscal year 2014	$	6.3			$	6.3
2013 Term Loan Facility, variable interest rate (1.31% at September 27, 2013) payable quarterly in installments with maturity date in fiscal year 2018		500.0				-
		506.3				6.3
Less: current maturities of long-term debt		(56.3	)			-
Long-term debt	$	450.0			$	6.3

The unsecured term loan agreements contain a covenant that requires the Company to pay prepayment penalties if the Company elects to pay off this debt before the maturity dates and the market interest rate is lower than the fixed interest rates of the debt at the time of repayment. They also contain covenants that limit future borrowings and cash dividend payments and require the Company to maintain specified levels of working capital and operating results. For all fiscal years presented within these consolidated financial statements, the Company was in compliance with all restrictive covenants of the unsecured term loan agreements.

Interest paid on borrowings was $2.9 million for fiscal year 2013, $3.3 million for fiscal year 2012, and $2.3 million for fiscal year 2011.As of September 27, 2013, future principal payments for long-term debt for fiscal years 2014, 2015, 2016, 2017, and 2018 are as follows (in millions): $56.3, $50, $50, $50 and $300, respectively.

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Options Outstanding and Exercisable Under Employee Stock Plans (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Sep. 27, 2013		Sep. 28, 2012	Sep. 30, 2011	Oct. 01, 2010
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Shares, Options Outstanding	4,485		6,459	6,917	10,174
Weighted Average Remaining Contractual Term (in years), Options Outstanding	3 years 1 month 24 days
Weighted Average Exercise Price, Options Outstanding	$ 53.02		$ 48.34	$ 45.90	$ 44.03
Aggregate Intrinsic Value, Options Outstanding	$ 94,909	[1]
Number of Shares, Options Exercisable	3,655		5,540
Weighted Average Remaining Contractual Term (in years), Options Exercisable	2 years 6 months 29 days
Weighted Average Exercise Price, Options Exercisable	$ 50.18		$ 46.91
Aggregate Intrinsic Value, Options Exercisable	87,720	[1]
Range One
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Range of Exercise Prices, lower limit	$ 32.1
Range of Exercise Prices, upper limit	$ 39.85
Number of Shares, Options Outstanding	665
Weighted Average Remaining Contractual Term (in years), Options Outstanding	1 year 7 months 10 days
Weighted Average Exercise Price, Options Outstanding	$ 38.23
Aggregate Intrinsic Value, Options Outstanding	23,919	[1]
Number of Shares, Options Exercisable	665
Weighted Average Remaining Contractual Term (in years), Options Exercisable	1 year 7 months 10 days
Weighted Average Exercise Price, Options Exercisable	$ 38.23
Aggregate Intrinsic Value, Options Exercisable	23,919	[1]
Range Two
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Range of Exercise Prices, lower limit	$ 40.21
Range of Exercise Prices, upper limit	$ 52.07
Number of Shares, Options Outstanding	1,359
Weighted Average Remaining Contractual Term (in years), Options Outstanding	2 years 7 months 24 days
Weighted Average Exercise Price, Options Outstanding	$ 50.20
Aggregate Intrinsic Value, Options Outstanding	32,599	[1]
Number of Shares, Options Exercisable	1,359
Weighted Average Remaining Contractual Term (in years), Options Exercisable	2 years 7 months 24 days
Weighted Average Exercise Price, Options Exercisable	$ 50.20
Aggregate Intrinsic Value, Options Exercisable	32,599	[1]
Range Three
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Range of Exercise Prices, lower limit	$ 52.08
Range of Exercise Prices, upper limit	$ 72.26
Number of Shares, Options Outstanding	2,461
Weighted Average Remaining Contractual Term (in years), Options Outstanding	3 years 10 months 2 days
Weighted Average Exercise Price, Options Outstanding	$ 58.58
Aggregate Intrinsic Value, Options Outstanding	38,391	[1]
Number of Shares, Options Exercisable	1,631
Weighted Average Remaining Contractual Term (in years), Options Exercisable	2 years 11 months 5 days
Weighted Average Exercise Price, Options Exercisable	$ 55.04
Aggregate Intrinsic Value, Options Exercisable	$ 31,202	[1]

[1] The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the closing price of VMS common stock of $74.18 as of September 27, 2013, the last trading date of fiscal year 2013, and which represents the amount that would have been received by the option holders had all option holders exercised their options and sold the shares received upon exercise as of that date

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Schedule of Reserve for Future Environmental Costs (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013
Commitments And Contingencies [Line Items]
2014	$ 2.3
2015	1.0
2016	1.1
2017	1.0
2018	1.2
Thereafter	7.7
Total costs	14.3
Less imputed interest	(3.0)
Reserve amount	11.3
Recurring Costs
Commitments And Contingencies [Line Items]
2014	0.6
2015	0.6
2016	0.7
2017	0.8
2018	0.7
Thereafter	6.3
Total costs	9.7
Non-Recurring Costs
Commitments And Contingencies [Line Items]
2014	1.7
2015	0.4
2016	0.4
2017	0.2
2018	0.5
Thereafter	1.4
Total costs	$ 4.6

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Fair Value

12 Months Ended

Sep. 27, 2013

Fair Value

3. FAIR VALUE

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. There is a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets/Liabilities Measured at Fair Value on a Recurring Basis

In the tables below, the Company has segregated all assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

	Fair Value Measurement Using
Type of Instruments	QuotedPricesin Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total Balance
(In millions)
Assets at September27, 2013:
Money market funds	$	50.0		$	-			$	-			$	50.0
Corporate debt security		-			-				62.7				62.7
Option to purchase a company		-			-				1.4				1.4
Total assets measured at fair value	$	50.0		$	-			$	64.1			$	114.1
Liabilities at September27, 2013:
Derivative liabilities	$	-		$	(1.1	)		$	-			$	(1.1	)
Contingent consideration		-			-				(2.5	)			(2.5	)
Total liabilities measured at fair value	$	-		$	(1.1	)		$	(2.5	)		$	(3.6	)
Assets at September28, 2012:
Money market funds	$	45.7		$	-			$	-			$	45.7
Corporate debt security		-			-				49.7				49.7
Derivative assets		-			0.8				-				0.8
Option to purchase a company		-			-				1.4				1.4
Total assets measured at fair value	$	45.7		$	0.8			$	51.1			$	97.6
Liabilities at September28, 2012:
Contingent consideration	$	-		$	-			$	(8.8	)		$	(8.8	)
Total liabilities measured at fair value	$	-		$	-			$	(8.8	)		$	(8.8	)

Money market funds are included under cash and cash equivalents, corporate debt security is included under short-term investment, option to purchase a company is included under other assets, derivative liabilities are included under accrued liabilities and contingent consideration is included under accrued liabilities and other-long term liabilities on the consolidated balance sheet.

The Company obtains valuations of Level 1 money market funds from quotes for transactions in active exchange markets involving identical assets.

The Company’s valuation of its Level 2 instruments includes valuations obtained from quoted prices for identical assets in markets that are not active. In addition, the Company has elected to use the income approach to value its derivative instruments using standard valuation techniques and Level 2 inputs, such as currency spot rates, forward points and credit default swap spreads. The Company’s derivative instruments are short-term in nature, typically one month to thirteen months in duration.

The Company measures the fair value of its Level 3 contingent consideration liabilities based on the income approach by using a Monte Carlo simulation model with key assumptions that include estimated sales units of an acquired business during the earn-out period and estimated discount rates corresponding to the periods of expected payments. For the acquisition of Calypso Medical Technologies, Inc. (“Calypso”) in fiscal year 2012, (see Note 14, “Business Combinations”), the estimated sales units used in the Monte Carlo simulation model ranged from 69 to 193 units during the earn-out period. The estimated discount rates used ranged from 0.13% to 0.42%. For the acquisition of InfiMed, Inc. (“InfiMed”) in fiscal year 2012, (see Note 14, “Business Combinations”), the estimated sales units used in the risk-neutral Monte Carlo simulation model ranged from 171 to 299 units per quarter during the earn-out period. Since the analysis of the InfiMed contingent consideration liability was performed in a risk-neutral option pricing framework, the estimated discount rates used ranged from 1.37% to 1.75%, based on U.S. Treasury rates that correspond to the terms of the expected payments and an estimate of the Company’s counter-party risk. If the estimated sales units were to increase or decrease during the respective earn-out periods, the fair value of the contingent consideration would increase or decrease, respectively. If the estimated discount rates used were to increase or decrease, the fair value of the contingent consideration would decrease or increase, respectively. The Company estimated that the threshold for the earn-out payments for Calypso would not be met and reversed the entire amount of contingent consideration liability of $4.9 million during the fiscal year 2013. The Company also decreased the contingent consideration liability of InfiMed by $0.3 million during the fiscal 2013 based on the revised estimate of sales units during the remaining earn-out period.

The fair value of the Company’s Level 3 corporate debt security is based on the income approach by using the discounted cash flow model with key assumptions that include discount rates corresponding to the terms and risks associated with the loan to CPTC. In addition, the Company does not increase the fair value above its par value as ORIX Capital Markets, LLC (“ORIX”), the loan agent, has the option to purchase this loan from the Company under the original terms and conditions at par value.If the estimated discount rates used were to increase, the fair value of the debt security would decrease.

The fair value of the option to purchase a company, a Level 3 asset, is based on the income approach using key assumptions that include projected operating results of the company and an estimated discount rate corresponding to the period of expected payment.

The following table presents the reconciliation for all assets and liabilities measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3):

(In millions)	Corporate debt Security			Contingent Consideration				Option to Purchasea Company
Balance at September 28, 2012	$	49.7	$		(8.8	)	$		1.4
Additions, including accrued interest		13.0			-				-
Settlements (1)		-			1.1				-
Change in fair value recognized in earnings		-			5.2				-
Balance at September 27, 2013	$	62.7	$		(2.5	)	$		1.4

(1)Amounts reported under “Contingent Consideration” represent cash payments to settle contingent consideration liabilities.

There were no transfers of assets or liabilities between fair value measurement levels during fiscal years 2013, 2012 and 2011. Transfers between fair value measurement levels are recognized at the end of the reporting period.

Fair Value of Other Financial Instruments

The fair values of certain of the Company’s financial instruments, including bank deposits andcertificate of deposits included in cash and cash equivalents, accounts payable and accounts receivable, net of allowance for doubtful accounts, approximate their carrying amounts due to their short maturities.

The fair value of our short-term borrowings including the term loan payable in fiscal year 2014 and the current maturities of the term loan payable in fiscal year 2018 approximate carrying value of $56 million at September 27, 2013 due to their short-term maturities. The fair value of our term loan payable in fiscal year 2018, at September 27, 2013 approximates its carrying value of $450 million because the term loan is carried at a market observable interest rate that resets periodically and is categorized as level 2 in the fair value hierarchy.  The fair value and carrying value of the Company’s long term debt at September 28, 2012 was $6.8 million and $6.3 million, respectively.  The estimated fair value of long-term debt was based on the then-current rates available to the Company for debt of similar terms and remaining maturities and also took into consideration default and credit risk. The Company determined the estimated fair value amount by using available market information and commonly accepted valuation methodologies. The fair value of the long-term debt was categorized as level 2 in the fair value hierarchy.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Cash flows from operating activities:
Net earnings	$ 438,248	$ 427,049	$ 398,933
Adjustments to reconcile net earnings to net cash provided by operating activities:
Share-based compensation expense	42,637	47,876	42,018
Tax benefits from exercises of share-based payment awards	10,708	7,888	24,441
Excess tax benefits from share-based compensation	(9,583)	(8,929)	(22,570)
Depreciation	58,527	56,103	49,643
Amortization of intangible assets	4,332	4,879	2,948
Deferred taxes	(3,946)	(2,349)	35,230
Provision for doubtful accounts receivable	5,984	10,350	2,514
Income on equity investment in affiliate	(2,461)	(245)	(4,276)
Change in fair value of contingent consideration	(5,190)	0	0
Other, net	1,673	1,265	(398)
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable	(43,301)	(87,434)	(41,577)
Inventories	(76,400)	(42,459)	(42,235)
Prepaid expenses and other assets	(15,694)	(47,029)	(13,288)
Accounts payable	7,784	19,275	35,524
Accrued expenses and other liabilities	(32,731)	37,748	(15,758)
Deferred revenues and advance payments from customers	74,598	68,787	21,630
Net cash provided by operating activities	455,185	492,775	472,779
Cash flows from investing activities:
Purchases of property, plant and equipment	(76,277)	(61,103)	(70,928)
Investment in corporate debt security	(10,044)	(30,503)	(19,205)
Investment in a privately held company	0	0	(13,597)
Acquisition of businesses, net of cash acquired	0	(28,241)	(9,124)
Net amounts received from (paid to) deferred compensation plan (“DCP”) trust account	(309)	(2,960)	48
Note repayments (receivable) from related party	0	8,800	(781)
Note receivable from other	(10,000)	0	0
Other	359	(8,288)	(4,345)
Net cash used in investing activities	(96,271)	(122,295)	(117,932)
Cash flows from financing activities:
Repurchases of common stock	(419,933)	(257,440)	(505,284)
Equity forward contracts	0	0	(105,562)
Proceeds from issuance of common stock to employees	129,582	60,332	137,697
Excess tax benefits from share-based compensation	9,583	8,929	22,570
Employees’ tax withheld and paid for restricted stock and restricted stock units	(9,560)	(10,122)	(14,815)
Net borrowings (repayments) under line of credit agreements	(155,000)	(26,400)	161,400
Borrowings under the term loan facility	500,000	0	0
Repayments on bank borrowings	0	(9,876)	(7,264)
Other	(3,026)	(99)	(77)
Net cash provided by (used in) financing activities	51,646	(234,676)	(311,335)
Effects of exchange rate changes on cash and cash equivalents	2,731	4,309	724
Net increase in cash and cash equivalents	413,291	140,113	44,236
Cash and cash equivalents at beginning of fiscal year	704,570	564,457	520,221
Cash and cash equivalents at end of fiscal year	$ 1,117,861	$ 704,570	$ 564,457

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Activity Under Employee Stock Plans (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Number of Shares
Number of Shares, Options Outstanding	6,459	6,917	10,174
Number of Shares, Granted	613	743	48
Number of Shares, Canceled, expired or forfeited	(20)	(30)	(46)
Number of Shares, Exercised	(2,567)	(1,171)	(3,259)
Number of Shares, Options Outstanding	4,485	6,459	6,917
Weighted Average Exercise Price
Weighted Average Exercise Price, Options Outstanding	$ 48.34	$ 45.90	$ 44.03
Weighted Average Exercise Price, Granted	$ 68.93	$ 58.50	$ 69.67
Weighted Average Exercise Price, Canceled, expired or forfeited	$ 60.81	$ 55.73	$ 48.64
Weighted Average Exercise Price, Exercised	$ 44.97	$ 40.18	$ 40.38
Weighted Average Exercise Price, Options Outstanding	$ 53.02	$ 48.34	$ 45.90
Shares Available for Grant
Shares Available for Grant, Beginning Balance	11,868	8,424	8,407
Shares Available for Grant, Authorized		6,000
Shares Available for Grant, Granted	(2,045)	(2,680)	(108)
Shares Available for Grant, Canceled, expired or forfeited	102	124	125
Shares Available for Grant, Ending Balance	9,925	11,868	8,424

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Other Assets (Detail) (USD $)	Sep. 27, 2013	Sep. 28, 2012
Other Assets:
DCP Assets	$ 55,200,000	$ 49,300,000
Equity investment in dpiX Holding LLC (“dpiX Holding”)	49,700,000	45,500,000
Other	118,100,000	94,600,000
Other assets	$ 223,025,000	$ 189,377,000

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Computation of Net Basic and Diluted Earnings Per Share (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Sep. 27, 2013	Jun. 28, 2013	Mar. 29, 2013	Dec. 28, 2012	Sep. 28, 2012	Jun. 29, 2012	Mar. 30, 2012	Dec. 30, 2011	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Earnings Per Share [Line Items]
Earnings from continuing operations									$ 438,248	$ 427,049	$ 408,626
Loss from discontinued operations, net of taxes									0	0	(9,693)
Net earnings	$ 117,300	$ 112,800	$ 112,800	$ 95,300	$ 120,200	$ 108,800	$ 107,800	$ 90,200	$ 438,248	$ 427,049	$ 398,933
Weighted average shares outstanding - basic									108,352	111,376	116,703
Dilutive effect of potential common shares									1,701	2,097	2,032
Weighted average shares outstanding - diluted									110,053	113,473	118,735
Net earnings (loss) per share - basic:
Continuing operations									$ 4.04	$ 3.83	$ 3.50
Discontinued operations									$ 0	$ 0	$ (0.08)
Net earnings per share	$ 1.09	$ 1.04	$ 1.04	$ 0.87	$ 1.09	$ 0.98	$ 0.96	$ 0.80	$ 4.04	$ 3.83	$ 3.42
Net earnings (loss) per share - diluted:
Continuing operations									$ 3.98	$ 3.76	$ 3.44
Discontinued operations									$ 0	$ 0	$ (0.08)
Net earnings per share	$ 1.08	$ 1.03	$ 1.02	$ 0.86	$ 1.08	$ 0.96	$ 0.94	$ 0.79	$ 3.98	$ 3.76	$ 3.36
Anti-dilutive employee share-based awards, excluded									707	249	160

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Variable Interest Entity - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	1 Months Ended		12 Months Ended				1 Months Ended	12 Months Ended
	Sep. 30, 2011	Jun. 30, 2011	Sep. 27, 2013	Sep. 28, 2012	Sep. 27, 2013 Intial Term	Sep. 27, 2013 Extension Term	Apr. 30, 2010 C P T C	Sep. 27, 2013 Scripps Proton Therapy Center	Sep. 27, 2013 Scripps Proton Therapy Center Maximum
Variable Interest Entity [Line Items]
Value of CPTC proton therapy system agreement							$ 88
Duration of CPTC proton therapy system service agreement		10 years
Approximate value of CPTC proton therapy system service agreement		60
CPTC loan facility, Varian's maximum loan commitment	115.3
Pro rata share of the Company's obligation to fund the initial distribution and subsequent advances	69.75%
Loan to CPTC			62.7	49.7
CPTC loan facility, end of the drawdown period	2014
Loan facility to CPTC	165.3		165.3	165.3
CPTC loan facility, maturity			2015-09
CPTC loan facility, interest rate margin					6.25%	7.00%
CPTC loan facility, minimum interest rate during initial term			8.25%
CPTC loan facility, minimum interest rate during extension term			9.00%
CPTC loan facility, description of interest and principal payments			The loan, which matures in September 2015, bears interest at LIBOR plus 6.25% per annum with a minimum interest rate of 8.25% per annum. The loan can be extended for two additional one-year terms at the election of CPTC during which extensions interest will accrue at LIBOR plus 7.00% per annum with a minimum interest rate of 9.00% per annum
CPTC loan facility, amortization period over which monthly payments are calculated after July 1, 2014			15 years
CPTC loan facility, interest rate based on which monthly payments are calculated after July 1, 2014			8.25%
CPTC loan facility, commitment fee as a % of loan facility amount			1.50%
CPTC loan facility, exit fee as a % of principal paid			1.00%
The Company's subsidiary right to share revenues of the Scripps Proton Therapy Center (%)								4.00%
The Company's subsidiary right to share revenues of the Scripps Proton Therapy Center (period)								35 years
Percentage of the gross revenues of the Scripps Proton Therapy Center upon repayment.									1.00%
Loan repayment amount that results in reduction of revenue shares								71
Accounts receivable from CPTC			$ 43.5	$ 30.7

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Schedule of Assumed Healthcare Cost Trend Rates for Post-Retirement Benefit Plan (Detail)	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Defined Benefit Plan Disclosure [Line Items]
Current medical cost trend rate	8.20%	9.90%	11.20%
Ultimate medical cost trend rate	4.50%	4.50%	4.50%

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Schedule of Quarterly Financial Data (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Sep. 27, 2013	Jun. 28, 2013	Mar. 29, 2013	Dec. 28, 2012	Sep. 28, 2012	Jun. 29, 2012	Mar. 30, 2012	Dec. 30, 2011	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Quarterly Financial Data [Line Items]
Total revenues	$ 769,900	$ 726,200	$ 768,400	$ 678,400	$ 756,100	$ 705,300	$ 720,300	$ 625,300	$ 2,942,897	$ 2,807,015	$ 2,596,666
Gross margin	328,500	310,500	319,600	291,100	323,200	307,600	296,700	268,800	1,249,687	1,196,336	1,135,889
Net earnings	$ 117,300	$ 112,800	$ 112,800	$ 95,300	$ 120,200	$ 108,800	$ 107,800	$ 90,200	$ 438,248	$ 427,049	$ 398,933
Net earnings per share – basic:	$ 1.09	$ 1.04	$ 1.04	$ 0.87	$ 1.09	$ 0.98	$ 0.96	$ 0.80	$ 4.04	$ 3.83	$ 3.42
Net earnings per share – diluted:	$ 1.08	$ 1.03	$ 1.02	$ 0.86	$ 1.08	$ 0.96	$ 0.94	$ 0.79	$ 3.98	$ 3.76	$ 3.36

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Balance Sheet Components (Tables)

12 Months Ended

Sep. 27, 2013

Short-Term Investment

	September27, 2013		September28, 2012
(In millions)
Short-term Investment:
Corporate debt security:
Amortized cost	$	62.7	$	49.7
Unrealized gain (loss)		-		-
Fair value	$	62.7	$	49.7

Components of Inventories

	September27, 2013		September28, 2012
(In millions)
Inventories:
Raw materials and parts	$	276.6	$	237.3
Work-in-process		91.6		75.6
Finished goods		167.0		145.0
Total inventories	$	535.2	$	457.9

Components of Property, Plant and Equipment

Property, plant and equipment:
Land and land improvements	$	44.6		$	43.8
Buildings and leasehold improvements		242.2			215.5
Machinery and equipment		380.8			344.5
Construction in progress		46.6			46.4
Assets subject to lease		1.8			3.2
		716.0			653.4
Accumulated depreciation and amortization		(400.7	)		(356.8	)
Property, plant and equipment, net	$	315.3		$	296.6

Other Assets

Other Assets:
DCP Assets	$	55.2	$	49.3
Equity investment in dpiX Holding LLC (“dpiX Holding”)		49.7		45.5
Other		118.1		94.6
Total other assets	$	223.0	$	189.4

Components of Accrued Expenses

Accrued expenses:
Accrued compensation and benefits	$	159.4	$	150.3
DCP Liabilities		54.6		49.5
Income taxes payable		40.0		63.3
Current deferred tax liabilities		7.6		2.9
Other		59.3		70.6
Total accrued expenses	$	320.9	$	336.6

Components of Other Long-Term Liabilities

Other long-term liabilities:
Long-term income taxes payable	$	41.9	$	40.6
Other		102.1		85.6
Total other long-term liabilities	$	144.0	$	126.2

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Schedule of Income Taxes Paid (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Income Taxes Paid Net [Line Items]
Income taxes paid	$ 203.4	$ 134.6	$ 139.4
Federal
Income Taxes Paid Net [Line Items]
Income taxes paid	119.1	77.6	70.0
State
Income Taxes Paid Net [Line Items]
Income taxes paid	14.9	9.3	11.9
Foreign
Income Taxes Paid Net [Line Items]
Income taxes paid	$ 69.4	$ 47.7	$ 57.5

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Schedule of Earnings from Continuing Operations Before Taxes (Detail) (USD $)	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Schedule of Income Before Income Tax [Line Items]
United States	$ 308,000,000	$ 271,400,000	$ 299,300,000
Foreign	304,100,000	324,500,000	289,400,000
Earnings from continuing operations before taxes	$ 612,083,000	$ 595,924,000	$ 588,710,000

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Schedule of Assumptions used to Measure Benefit Obligations for Company's Defined Benefit Pension and Post Retirement Benefit Plans (Detail)	Sep. 27, 2013	Sep. 28, 2012
Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Discount rate	3.11%	2.94%
Rates of compensation increase	2.51%	2.37%
Post-Retirement Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Discount rate	3.80%	3.00%

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Fair Value of Employee Stock Purchase Plan with Weighted Average Assumptions (Detail) (USD $)	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Employee Stock Option plans
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term (in years)	4 years 9 months 4 days	4 years 7 months 21 days	4 years 9 months
Risk-free interest rate	0.60%	0.80%	2.00%
Expected volatility	32.20%	36.90%	35.50%
Expected dividend yield	0.00%	0.00%	0.00%
Weighted average fair value at grant date	$ 19.73	$ 18.75	$ 23.26
Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term (in years)	6 months	6 months	6 months
Risk-free interest rate	0.10%	0.10%	0.10%
Expected volatility	16.50%	19.30%	14.00%
Expected dividend yield	0.00%	0.00%	0.00%
Weighted average fair value at grant date	$ 12.95	$ 12.17	$ 12.61

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Fair Value of Derivative Instrument Reported in Condensed Consolidated Balance Sheet (Detail) (USD $) In Millions, unless otherwise specified	Sep. 27, 2013	Sep. 28, 2012
Derivatives Fair Value [Line Items]
Asset Derivatives	$ 0	$ 0.8
Liability Derivatives	1.1	0
Prepaid Expenses
Derivatives Fair Value [Line Items]
Asset derivatives, not designated as hedging instruments	0	0
Accrued Liabilities
Derivatives Fair Value [Line Items]
Liability derivatives, not designated as hedging instruments	0	0
Derivatives Designated as Hedging Instruments | Prepaid Expenses
Derivatives Fair Value [Line Items]
Asset Derivatives	0	0.8
Derivatives Designated as Hedging Instruments | Accrued Liabilities
Derivatives Fair Value [Line Items]
Liability Derivatives	$ 1.1	$ 0

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Goodwill and Intangible Assets - Additional Information (Detail) (USD $)	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Finite Lived Intangible Assets [Line Items]
Amortization expense for intangible assets	$ 4,332,000	$ 4,879,000	$ 2,948,000
Future amortization expense, remaining fiscal year 2014	5,300,000
Future amortization expense, fiscal year 2015	6,000,000
Future amortization expense, fiscal year 2016	2,400,000
Future amortization expense, fiscal year 2017	1,800,000
Future amortization expense, fiscal year 2018	1,800,000
Future amortization expense, fiscal year 2018 and thereafter	$ 6,100,000

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Schedule of Fair Values of Plan Assets (Detail) (USD $) In Millions, unless otherwise specified	Sep. 27, 2013	Sep. 28, 2012
Defined Benefit Plan Disclosure [Line Items]
Plan assets	$ 180.8	$ 142.6
Mutual Funds Equities
Defined Benefit Plan Disclosure [Line Items]
Plan assets	49.9	40.3
Mutual Funds Debt
Defined Benefit Plan Disclosure [Line Items]
Plan assets	26.1	23.2
Mutual Funds Real Estate
Defined Benefit Plan Disclosure [Line Items]
Plan assets	3.6	3.5
Insurance Contracts
Defined Benefit Plan Disclosure [Line Items]
Plan assets	86.3	73.3
Cash and Cash Equivalents
Defined Benefit Plan Disclosure [Line Items]
Plan assets	14.9	2.3
Quoted Prices in Active Markets for Identical Instruments (Level 1)
Defined Benefit Plan Disclosure [Line Items]
Plan assets	14.9	2.3
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Mutual Funds Equities
Defined Benefit Plan Disclosure [Line Items]
Plan assets	0	0
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Mutual Funds Debt
Defined Benefit Plan Disclosure [Line Items]
Plan assets	0	0
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Mutual Funds Real Estate
Defined Benefit Plan Disclosure [Line Items]
Plan assets	0	0
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Insurance Contracts
Defined Benefit Plan Disclosure [Line Items]
Plan assets	0	0
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Cash and Cash Equivalents
Defined Benefit Plan Disclosure [Line Items]
Plan assets	14.9	2.3
Significant Other Observable Inputs (Level 2)
Defined Benefit Plan Disclosure [Line Items]
Plan assets	165.9	140.3
Significant Other Observable Inputs (Level 2) | Mutual Funds Equities
Defined Benefit Plan Disclosure [Line Items]
Plan assets	49.9	40.3
Significant Other Observable Inputs (Level 2) | Mutual Funds Debt
Defined Benefit Plan Disclosure [Line Items]
Plan assets	26.1	23.2
Significant Other Observable Inputs (Level 2) | Mutual Funds Real Estate
Defined Benefit Plan Disclosure [Line Items]
Plan assets	3.6	3.5
Significant Other Observable Inputs (Level 2) | Insurance Contracts
Defined Benefit Plan Disclosure [Line Items]
Plan assets	86.3	73.3
Significant Other Observable Inputs (Level 2) | Cash and Cash Equivalents
Defined Benefit Plan Disclosure [Line Items]
Plan assets	0	0
Significant Unobservable Inputs (Level 3)
Defined Benefit Plan Disclosure [Line Items]
Plan assets	0	0
Significant Unobservable Inputs (Level 3) | Mutual Funds Equities
Defined Benefit Plan Disclosure [Line Items]
Plan assets	0	0
Significant Unobservable Inputs (Level 3) | Mutual Funds Debt
Defined Benefit Plan Disclosure [Line Items]
Plan assets	0	0
Significant Unobservable Inputs (Level 3) | Mutual Funds Real Estate
Defined Benefit Plan Disclosure [Line Items]
Plan assets	0	0
Significant Unobservable Inputs (Level 3) | Insurance Contracts
Defined Benefit Plan Disclosure [Line Items]
Plan assets	0	0
Significant Unobservable Inputs (Level 3) | Cash and Cash Equivalents
Defined Benefit Plan Disclosure [Line Items]
Plan assets	$ 0	$ 0

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Retirement Plans

12 Months Ended

Sep. 27, 2013

Retirement Plans

10. RETIREMENT PLANS

The Company sponsors the Varian Medical Systems, Inc. Retirement Plan (the “Retirement Plan”) — a defined contribution plan that is available to substantially all of its employees in the United States. Under Section401(k) of the Internal Revenue Code, the Retirement Plan allows for tax-deferred salary contributions by eligible employees.

Participants can contribute from 1% to 25% of their eligible base compensation to the Retirement Plan on a pre-tax basis (plus up to an additional 15% on an after-tax basis if they have more than one year of service with the Company) and all or a portion of his or her bonus under the Employee Incentive Plan. However, participant contributions are limited to a maximum annual amount as determined periodically by the Internal Revenue Service. The Company matches eligible participant contributions dollar for dollar for the first 6% of eligible base compensation or bonus (for those employees with one or more years of service with the Company). All matching contributions vest immediately. The Retirement Plan allows participants to invest up to 25% of their contributions in shares of VMS common stock as an investment option. The Company also has a defined contribution plan that is available to regular full-time employees in the United Kingdom (the “U.K. Savings Plan”). Participants can contribute from 4% to 100% of their eligible base compensation to the U.K. Savings Plan. The Company matches participant contributions up to 6% of participants’ eligible base compensation, based on the participants’ level of contributions under this U.K. Savings Plan. All matching contributions vest immediately.

The Company also sponsors five defined benefit pension plans for regular full time employees in Germany, Japan, Switzerland and the United Kingdom. In fiscal year 2012, the Company terminated one pension plan in Germany upon the death of the last participant in the plan. The Company also sponsors a post-retirement benefit plan that provides healthcare benefits to certain eligible retirees in the United States.

The Company recognizes the funded status of its defined benefit pension and post-retirement benefit plans on its Consolidated Balance Sheets. Each overfunded plan is recognized as an asset, and each underfunded plan is recognized as a liability. Unrecognized prior service costs or credits and net actuarial gains or losses, as well as subsequent changes in the funded status are recognized as a component of “Accumulated other comprehensive loss” within Stockholders’ equity.

Total retirement, post-retirement benefit plan and defined benefit plan expense for all retirement plans amounted to $29.0 million, $27.9 million and $24.0 million for fiscal years 2013, 2012 and 2011, respectively.

Obligations and Funded Status

The following table presents the funded status of the defined benefit pension and post-retirement benefit plans:

	Defined Benefit Plans						Post-Retirement Benefit Plan
(In millions)	September27, 2013			September28, 2012				September27, 2013			September28, 2012
Change in benefit obligation:
Benefit obligation - beginning of fiscal year	$	181.1		$	160.5			$	5.6		$	5.9
Service cost		4.8			4.3				-			-
Interest cost		5.2			5.3				0.2			0.3
Plan participants’ contributions		10.9			5.3				-			-
Plan amendment		0.5			-				-			-
Plan settlement		(4.7	)		(2.5	)			-			-
Plan curtailment		-			(0.2	)			-			-
Actuarial (gain) loss		(0.7	)		14.5				(0.5	)		(0.1	)
Foreign currency changes		3.2			(2.4	)			-			-
Benefit and expense payments		(4.6	)		(3.7	)			(0.5	)		(0.5	)
Benefit obligation - end of fiscal year	$	195.7		$	181.1			$	4.8		$	5.6
Change in plan assets:
Plan assets - beginning of fiscal year	$	142.6		$	125.5			$	-		$	-
Employer contributions		22.2			9.6				0.5			0.5
Actual return on plan assets		11.6			9.8				-			-
Plan participants’ contributions		10.9			5.3				-			-
Plan settlement		(4.7	)		(2.5	)			-			-
Foreign currency changes		2.8			(1.4	)			-			-
Benefit and expense payments		(4.6	)		(3.7	)			(0.5	)		(0.5	)
Plan assets - end of fiscal year	$	180.8		$	142.6			$	-		$	-
Funded status	$	(14.9	)	$	(38.5	)		$	(4.8	)	$	(5.6	)
Amounts recognized within the consolidated balance sheet:
Noncurrent assets	$	3.1			-				-			-
Current liabilities		-		$	-			$	(0.5	)	$	(0.5	)
Noncurrent liabilities		(18.0	)		(38.5	)			(4.3	)		(5.1	)
Net amount recognized	$	(14.9	)	$	(38.5	)		$	(4.8	)	$	(5.6	)

The following table presents the amounts recognized in accumulated other comprehensive loss (before tax):

	Defined Benefit Plans						Post-Retirement Benefit Plan
(In millions)	September27, 2013			September28, 2012				September27, 2013		September28, 2012
Prior service cost	$	(0.7	)	$	(0.4	)		$	-	$	-
Net gain (loss)		(49.4	)		(59.7	)			0.1		(0.4	)
Accumulated other comprehensive loss	$	(50.1	)	$	(60.1	)		$	0.1	$	(0.4	)

The following table presents the total fair value of plan assets, projected benefit obligation and accumulated benefit obligation for those defined benefit pension plans where accumulated benefit obligation exceeded the fair value of plan assets:

	Defined Benefit Plans
(In millions)	September27, 2013		September28, 2012
Projected benefit obligation	$	-		$	76.4
Accumulated benefit obligation	$	-		$	71.1
Fair value of plan assets	$	-		$	62.9

The accumulated benefit obligation for all defined benefit pension plans was $167.3 million and $146.2 million at September27, 2013 and September28, 2012, respectively.

Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive (Income) Loss

The following table shows the components of the Company’s net periodic benefit costs and the other amounts recognized in other comprehensive (income) loss, before tax, related to the Company’s defined benefit pension plans and the Company’s post-retirement benefit plan:

	Defined Benefit Plans											Post-Retirement Benefit Plan
	Fiscal Years											Fiscal Years
(In millions)	2013			2012				2011					2013				2012				2011
Net Periodic Benefit Costs:
Service cost	$	4.8		$	4.3		$		3.7		$			-		$		-		$		-
Interest cost		5.2			5.3				5.0					0.2				0.2				0.2
Loss due to settlement or curtailment		1.0			0.9				-					-				-				-
Expected return on assets		(5.7	)		(5.3	)			(4.9	)				-				-				-
Amortization of prior service cost		0.2			0.2				0.1					-				-				-
Recognized actuarial loss		2.7			2.5				2.1					-				0.1				0.1
Net periodic benefit cost		8.2			7.9				6.0					0.2				0.3				0.3
Other Amounts Recognized in Other Comprehensive (Income) Loss:
New prior service cost		0.5			-				-					-				-				-
Net (gain) loss arising during the year		(6.6	)		9.9				9.6					(0.4	)			(0.1	)			0.3
Amortization of prior service cost		(0.2	)		(0.2	)			(0.1	)				-				-				-
Amortization, settlement and curtailment of net actuarial loss		(3.7	)		(3.5	)			(2.1	)				(0.1	)			(0.1	)			(0.1	)
Total recognized in other comprehensive (income) loss		(10.0	)		6.2				7.4					(0.5	)			(0.2	)			0.2
Total recognized in net periodic benefit cost and other comprehensive loss	$	(1.8	)	$	14.1		$		13.4		$			(0.3	)	$		0.1		$		0.5

The amounts in “Accumulated other comprehensive loss” that are expected to be recognized as components of net periodic benefit cost during fiscal year 2014 are as follows:

(In millions)	Defined BenefitPlans			Post-Retirement Benefit Plan		Total
Prior service cost	$	(0.2	)	$	-	$	(0.2	)
Net loss		(2.4	)		-		(2.4	)
	$	(2.6	)	$	-	$	(2.6	)

Assumptions

The assumptions used to determine net periodic benefit cost and to compute the expected long-term return on assets for the Company’s defined benefit pension and post-retirement benefit plans were as follows:

	Fiscal Years
Net Periodic Benefit Cost	2013			2012			2011
Defined benefit plans:
Discount rates		2.94	%		3.38	%		3.45	%
Rates of compensation increase		2.37	%		2.48	%		2.44	%
Expected long-term return on assets		3.82	%		4.02	%		4.13	%
Post-retirement benefit plan:
Discount rate		3.00	%		3.90	%		4.40	%

The assumptions used to measure the benefit obligations for the Company’s defined benefit pension and post-retirement benefit plans were as follows:

Benefit Obligations	September27, 2013			September28, 2012
Defined benefit plans:
Discount rates		3.11	%		2.94	%
Rates of compensation increase		2.51	%		2.37	%
Post-retirement benefit plan:
Discount rate		3.80	%		3.00	%

The benefit obligations of defined benefit pension plans and post-retirement benefit plans were measured as of September27, 2013. For defined benefit pension plans, the discount rate was adjusted as of September27, 2013 to the range of 1.70% to 4.50% primarily based on the yields of a universe of high quality corporate bonds in each applicable country or the spot rates on high quality AA-rated corporate bonds, with durations corresponding to the expected duration of the benefit obligations. Additionally, the rate of projected compensation increase was adjusted as of September27, 2013 to the range of 1.75% to 3.90% reflecting expected inflation levels and future outlook. For post-retirement benefit plans, the discount rate as of September27, 2013 increased to 3.8%. This discount rate was determined based on the yields of high quality zero-coupon corporate bonds with maturities that match the expected durations of the benefit obligations.

During the fourth quarter of fiscal year 2013, the Company reviewed the expected long-term rate of return on defined benefit pension plan assets. This review consisted of forward-looking projections for a risk-free rate of return, inflation rate and implied equity risk premiums for particular asset classes. Historical returns were not used. The results of this review were applied to the target asset allocation in accordance with the Company’s planned investment strategies, which are implemented by outside investment managers. The expected long-term rate of return on plan assets was determined based on the weighted average of projected returns on each asset class.

The assumed healthcare cost trend rates for the post-retirement benefit plan are as follows:

	Fiscal Years
Assumed Healthcare Cost Trend Rates	2013			2012			2011
Post-retirement benefit plan:
Current medical cost trend rate		8.2	%		9.9	%		11.2	%
Ultimate medical cost trend rate		4.5	%		4.5	%		4.5	%

Current medical cost trend rates represent expected increases in healthcare costs in the short term and are based on assessments and surveys from health plan providers. While the current medical cost trend rate is based on market conditions, the ultimate trend rate, which is expected be achieved in fiscal year 2030, reflects a long-term view of expected increases in healthcare costs in the U.S., which is assumed to be consistent with the long-term expected nominal gross domestic product growth rates. Assumed healthcare cost trend rates could have an effect on the amounts reported for healthcare plans. A 1.0 percentage point increase in the assumed healthcare cost trend rates would have increased the total service cost and interest cost components reported in fiscal year 2013 by $12,000 and would have increased the post-retirement benefit obligation reported in fiscal year 2013 by $312,000.  A 1.0 percentage point decrease in the assumed healthcare cost trend rates would have decreased the total service cost and interest cost components reported in fiscal year 2013 by $10,000 and would have decreased the post-retirement benefit obligation in fiscal year 2013 by $283,000.

Plan Assets

The Company contributes to post-retirement benefit plans on a cash basis as benefits are paid. No assets have been segregated and restricted to provide post-retirement benefits.

For the defined benefit pension plans, the investment objectives of the Company are to generate returns that will enable the defined benefit pension plans to meet their future obligations. The precise amount of these obligations depends on future events, including the life expectancies of the pension plans’ members and the level of salary increases. The obligations are estimated using actuarial assumptions, based on the current economic environment. The investment strategy depends on the country in which the defined benefit pension plan applies. The investment objectives of some defined benefit pension plans are more conservative than others. In general, the investment strategy of the defined benefit pension plans is to balance the requirement to generate return using higher-returning assets such as equity securities, with the need to control risk with less volatile assets, such as fixed-income securities. Risks include, among others, the likelihood of the defined benefit pension plans becoming underfunded, thereby increasing their dependence on contributions from the Company. Within each asset class, investment managers give consideration to balancing the portfolio among industry sectors, geographies, interest rate sensitivity, dependence on economic growth, currency and other factors that affect investment returns. The target allocation as of the end of fiscal year 2013 was 32% equities, 57% debt and fixed income assets and 11% other.

The following table presents the Company’s defined benefit pension plans’ major asset categories, their associated fair values, as well as the actual allocation of equity, debt and fixed income, real estate and all other types of investments:

(In millions)	QuotedPricesin ActiveMarketsfor Identical Assets (Level 1)		Significant ObservableInputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total
As of September27, 2013:
Investment funds:
Mutual funds - equities	$	-	$	49.9	$		-	$		49.9
Mutual funds - debt		-		26.1			-			26.1
Mutual funds - real estate		-		3.6			-			3.6
Assets held by insurance company:
Insurance contracts		-		86.3			-			86.3
Cash and cash equivalents		14.9		-			-			14.9
Total	$	14.9	$	165.9	$		-	$		180.8
As of September28, 2012:
Investment funds:
Mutual funds - equities	$	-	$	40.3	$		-	$		40.3
Mutual funds - debt		-		23.2			-			23.2
Mutual funds - real estate		-		3.5			-			3.5
Assets held by insurance company:
Insurance contracts		-		73.3			-			73.3
Cash and cash equivalents		2.3		-			-			2.3
Total	$	2.3	$	140.3	$		-	$		142.6

Valuation Techniques

Debt securities are valued at the closing price reported on the stock exchange on which the individual securities are traded. Mutual funds held in trust or similar entities include investments in publicly traded mutual funds and are typically valued using the net asset value (“NAV”) provided by the administrator of the fund. Insurance contracts are valued by the insurer using the cash surrender value, which is the amount a plan would receive if a contract was terminated. Cash includes deposits and money market accounts, which are valued at their cost plus interest on a daily basis, which approximates fair value. There were no changes in valuation techniques during fiscal years 2013 and 2012.

Medicare Prescription Drug Act

The Medicare Prescription Drug, Improvement and Modernization Act (the “Prescription Drug Act”) provides a prescription drug benefit under Medicare (Medicare Part D), as well as a federal subsidy to sponsors of retiree healthcare benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. Since it sponsors post-retirement benefit plans that provide prescription drug benefits, the Company enrolled all Medicare eligible retirees in fiscal years 2013, 2012 and 2011 in either Medicare Advantage plans which are at least equivalent to Medicare Part D or in health plans where the prescription drug benefit is, on average, expected to pay out as much as the standard Medicare prescription drug coverage.

Estimated Contributions and Future Benefit Payments

The Company made contributions of $22.2 million to the defined benefit pension plans during fiscal year 2013, compared to $9.6 million in fiscal year 2012 due to additional funding. The Company made contributions of $0.5 million to the post-retirement benefit plan for fiscal year 2013. The Company expects total contributions to the defined benefit pension plans and the post-retirement benefit plan for fiscal year 2014 will be approximately $6.28 million and approximately $0.5 million, respectively.

Estimated future benefit payments at September27, 2013 were as follows:

(In millions)	DefinedBenefit Plans		Post-Retirement BenefitPlan		Total
Fiscal Years:
2014	$	4.8	$	0.5	$	5.3
2015		5.2		0.5		5.7
2016		4.9		0.5		5.4
2017		7.2		0.5		7.7
2018		7.3		0.4		7.7
2019-2023		39.9		1.8		41.7
	$	69.3	$	4.2	$	73.5

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Related Party Transactions

12 Months Ended

Sep. 27, 2013

Related Party Transactions

6. RELATED PARTY TRANSACTIONS

VMS has a 40% ownership interest in dpiX Holding, a two-member consortium which has a 100% ownership interest in dpiX LLC (“dpiX”), a supplier of amorphous silicon based thin film transistor arrays (“flat panels”) for the Company’s X-ray Products’ digital image detectors and for its Oncology Systems’ On-Board Imager®(“OBI”), and PortalVisionTM imaging products. In accordance with the dpiXHolding agreement, net losses were to be allocated to the members, in succession, until their capital accounts equaled zero, then to the members in accordance with their ownership interests. The dpiXHolding agreement also provided that net profits were to be allocated to the members, in succession, until their capital accounts equaled the net losses previously allocated, then to the members in accordance with their ownership interests.

The equity investment in dpiX Holding is accounted for under the equity method of accounting. When VMS recognizes its share of net profits or losses of dpiX Holding, profits or losses in inventory purchased from dpiX are eliminated until realized by VMS. VMS recorded income on the equity investment in dpiXHolding of $2.5 million, $0.2million and$4.3million in fiscal years 2013, 2012 and 2011 respectively. Income and loss on the equity investment in dpiX Holding are included in “Selling, general and administrative” expenses in the Consolidated Statements of Earnings. The carrying value of the equity investment in dpiX Holding, which was included in “Other assets” in the Consolidated Balance Sheets, was $49.7 million at September27, 2013 and $45.5 million at September28, 2012.

VMS entered into a loan agreement with dpiX in February 2009, which was amended in December 2011. Under this loan agreement, VMS loaned $8.8 million to dpiX. The loan bore interest at prime plus 1%per annum. The principal amount, together with accrued and unpaid interest, was repaid in two installments through July 2012.

During fiscal years 2013, 2012 and 2011, the Company purchased glass transistor arrays from dpiX totaling approximately $25.9 million, $14.5 million and $23.3 million, respectively. These purchases of glass transistor arrays are included as a component of “Inventory” in the Consolidated Balance Sheets or “Cost of revenues – product” in the Consolidated Statements of Earnings for these fiscal years.

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Effective Portion of Foreign Currency Forward Contracts Designated as Cash Flow Hedges (Detail) (Forward Foreign Exchange Contracts, USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Forward Foreign Exchange Contracts
Derivative [Line Items]
Gain (Loss) Recognized in Other Comprehensive income	$ 0.5	$ 1.4	$ (0.5)
Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Net Earnings	$ 2.5	$ 0.6	$ (1.0)

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Taxes on Earnings

12 Months Ended

Sep. 27, 2013

Taxes on Earnings

13. TAXES ON EARNINGS

The Company accounts for income taxes under an asset and liability approach where deferred income taxes are based upon enacted tax laws and rates applicable to the periods in which the taxes become payable.

Taxes on earnings from continuing operations were as follows:

	Fiscal Years Ended
(In millions)	2013			2012			2011
Current provision:
Federal	$	110.1		$	99.3		$	80.4
State and local		13.4			8.5			11.7
Foreign		54.3			63.5			52.7
Total current		177.8			171.3			144.8
Deferred provision (benefit):
Federal		(3.9	)		(4.5	)		32.9
State and local		(0.2	)		0.1			6.0
Foreign		0.1			2.0			(3.6	)
Total deferred		(4.0	)		(2.4	)		35.3
Taxes on earnings	$	173.8		$	168.9		$	180.1

Earnings from continuing operations before taxes are generated from the following geographic areas:

	Fiscal Years Ended
(In millions)	2013		2012		2011
United States	$	308.0	$	271.4	$	299.3
Foreign		304.1		324.5		289.4
	$	612.1	$	595.9	$	588.7

The effective tax rate differs from the U.S. federal statutory tax rate as a result of the following:

	Fiscal Years Ended
	2013				2012				2011
Federal statutory income tax rate		35.0		%		35.0		%		35.0		%
State and local taxes, net of federal tax benefit		1.3				1.3				2.5
Non-U.S. income taxed at different rates, net		(5.6	)			(5.9	)			(3.3	)
Resolution of tax contingencies due to lapses of statutes of limitations		(1.2	)			(1.8	)			(2.8	)
Other		(1.1	)			(0.3	)			(0.8	)
Effective tax rate		28.4		%		28.3		%		30.6		%

During fiscal years 2013, 2012 and 2011, the Company’s effective tax rate was lower than the U.S. federal statutory rate primarily because the Company’s foreign earnings are taxed at rates that, on average, are lower than the U.S. federal rate. This reduction is partly offset by the fact that the Company’s domestic earnings are also subject to state income taxes. During fiscal years 2013 and 2012, and 2011, the benefit of the release of liabilities for uncertain tax positions as a result of the expiration of the statutes of limitation in various jurisdictions also contributed to the Company’s effective tax rate being lower than the U.S. federal statutory rate.

Significant components of deferred tax assets and liabilities are as follows:

(In millions)	September27, 2013			September28, 2012
Deferred Tax Assets:
Deferred revenues	$	26.8		$	26.8
Deferred compensation		34.9			32.7
Product warranty		13.9			13.7
Inventory adjustments		18.3			17.0
Equity-based compensation		33.3			41.8
Environmental reserve		5.7			5.9
Net operating loss carryforwards		78.6			54.2
Other		37.8			45.4
		249.3			237.5
Valuation allowance		(60.7	)		(45.8	)
Total deferred tax assets		188.6			191.7
Deferred Tax Liabilities:
Tax-deductible goodwill		(27.3	)		(27.4	)
Fixed assets		(17.7	)		(22.3	)
Other		(30.4	)		(28.8	)
Total deferred tax liabilities		(75.4	)		(78.5	)
Net deferred tax assets	$	113.2		$	113.2
Reported As:
Net current deferred tax assets	$	122.3		$	115.8
Net long-term deferred tax assets (included in “Other Assets”)		10.5			13.8
Net current deferred tax liabilities (included in “Accrued Expenses”)		(7.6	)		(2.9	)
Net long-term deferred tax liabilities (included in “Other long-term liabilities”)		(12.0	)		(13.5	)
Net deferred tax assets	$	113.2		$	113.2

The Company has not provided for U.S. federal income and foreign withholding taxes on $1,412.2 million of cumulative undistributed earnings of non-U.S. subsidiaries. Such earnings are intended to be reinvested in the non-U.S. subsidiaries for an indefinite period of time. If such earnings were not considered to be reinvested indefinitely, additional deferred taxes of approximately $358.4 million would be provided.

The Company has federal net operating loss carryforwards of approximately $14.7 million expiring between 2018 and 2031. The federal net operating loss carryforwards are subject to an annual limitation of approximately $1.3 million per year. The Company has state net operating loss carryforwards of $31.1 million expiring between 2018 and 2032. The Company has foreign net operating loss carryforwards of $218.9 million with an indefinite life. Of this amount, $24.1 million is unavailable to the Company under local loss utilization rules.

Our valuation allowance relates primarily to net operating losses in certain foreign jurisdictions where, based on the weight of available evidence, it is more likely than not that the tax benefit of the net operating losses will not be realized.  The valuation allowance increased by $14.9 million during fiscal year 2013, decreased by $1.1 million during fiscal year 2012, and increased by $8.4 million in fiscal year 2011.

Income taxes paid were as follows:

	Fiscal Years Ended
(In millions)	2013		2012		2011
Federal income taxes paid, net	$	119.1	$	77.6	$	70.0
State income taxes paid, net		14.9		9.3		11.9
Foreign income taxes paid, net		69.4		47.7		57.5
Total	$	203.4	$	134.6	$	139.4

The Company accounts for uncertainty in income taxes following a two-step approach for recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that, based on the technical merits, the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.

Changes in the Company’s unrecognized tax benefits were as follows:

	Fiscal Years Ended
(In millions)	2013				2012				2011
Unrecognized tax benefits balance–beginning of fiscal year	$	38.8		$		37.1		$		46.4
Additions based on tax positions related to a prior year		2.5				3.8				1.0
Reductions based on tax positions related to a prior year		(0.7	)			(0.9	)			(0.4	)
Additions based on tax positions related to the current year		6.6				6.8				8.6
Settlements		(4.2	)			(0.4	)			(5.1	)
Reductions resulting from the expiration of the applicable statute of limitations		(6.0	)			(7.6	)			(13.4	)
Unrecognized tax benefits balance–end of fiscal year	$	37.0		$		38.8		$		37.1

As of September27, 2013, the total amount of gross unrecognized tax benefits was $37.0 million. Of this amount, $32.8 million would affect the effective tax rate if recognized. The difference would be offset by changes to deferred tax assets and liabilities.

The Company includes interest and penalties related to income taxes within “Taxes on earnings” on the Consolidated Statements of Earnings. As of September27, 2013, the Company had accrued $6.7 million for the payment of interest and penalties related to unrecognized tax benefits. A net expense of $1.2 million related to interest and penalties was included in “Taxes on earnings.” As of September28, 2012, the Company had accrued $5.5 million for the payment of interest and penalties related to unrecognized tax benefits. A net benefit of $2.2 million related to interest and penalties was included in “Taxes on earnings.”

The Company files U.S. federal, U.S. state, and foreign tax returns. The Company’s U.S. federal tax returns are generally no longer subject to tax examinations for years prior to 2010. The Company has significant operations in Switzerland. The Company’s Swiss tax returns are generally no longer subject to tax examinations for years prior to 2009. For U.S. states and other foreign tax returns, the Company is generally no longer subject to tax examinations for years prior to 2007.

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Stockholders' Equity

12 Months Ended

Sep. 27, 2013

Stockholders' Equity

11. STOCKHOLDERS’ EQUITY 

Stock Repurchase Program

During fiscal years 2013, 2012 and 2011, the Company repurchased 6,000,000 shares, 4,433,718 shares and 9,028,033 shares, respectively, of VMS common stock under various authorizations by VMS’s Board of Directors. The repurchased shares include shares of VMS common stock repurchased under various accelerated share repurchase agreements. Aggregate amount of repurchases in connection with the various accelerated share repurchase agreements (as further discussed below) and for shares repurchased in the open market totaled $424 million, $257 million and $611 million in fiscal years 2013, 2012 and 2011, respectively. All shares that were repurchased have been retired.

On August24, 2010, the Company executed an accelerated share repurchase agreement with BofA (the “August 2010 Repurchase Agreement”). Pursuant to the August 2010 Repurchase Agreement, the Company initially paid to BofA $225 million and BofA delivered 3,888,249 shares of VMS common stock, representing approximately 90% of the shares expected to be repurchased. Under the terms of the August 2010 Repurchase Agreement, the specific number of shares that the Company ultimately repurchased was to be based on the volume weighted average share price of VMS common stock during the repurchase period, less a discount, such that the Company might be entitled to receive additional shares of VMS common stock from BofA or the Company might be required to deliver VMS shares or, at its option, make a cash payment to BofA. The repurchase period ended on February23, 2011 and the Company made a cash payment of $26.1 million in March 2011 to settle this contract. This cash payment upon settlement, together with $22.5 million, representing approximately 10% of the initial cash payment to BofA, was included in “Capital in excess of par value.”

On February23, 2011, the Company entered into a substantially identical accelerated share repurchase agreement with BofA (the “February 2011 Repurchase Agreement”). Pursuant to the February 2011 Repurchase Agreement, the Company paid to BofA $280 million and BofA delivered 3,547,474 shares of VMS common stock, representing approximately 85% of the shares expected to be repurchased. The remaining $42 million, representing approximately 15% of the cash payment to BofA, was recorded as an equity forward contract, which was included in “Capital in excess of par value”. Under the terms of the February 2011 Repurchase Agreement, the specific number of shares that the Company ultimately repurchased was to be based on the volume weighted average share price of VMS common stock during the repurchase period, less a discount. In June 2011, BofA accelerated the end of the repurchase period and the Company received an additional 630,921 shares of VMS common stock upon the settlement of the February 2011 Repurchase Agreement. The market value of the shares received of $41.3 million was included in “Capital in excess of par value.” 

On August25, 2011, the Company entered into another accelerated share repurchase agreement with BofA (the “August 2011 Repurchase Agreement”). Pursuant to the August 2011 Repurchase Agreement, the Company paid to BofA $250 million and BofA delivered 3,849,638 shares of VMS common stock, representing approximately 85% of the shares expected to be repurchased. The remaining $37.5 million, representing approximately 15% of the initial cash payment to BofA, was recorded as an equity forward contract, which was included in “Capital in excess of par value”. Under the terms of the August 2011 Repurchase Agreement, the specific number of shares that the Company ultimately repurchased was to be based on the volume weighted average share price of VMS common stock during the repurchase period, less a discount. The repurchase period ended in February 2012 and the Company received an additional 375,449 shares of VMS common stock upon the settlement of the August 2011 Repurchase Agreement. The market value of the shares received of $25 million was included in “Capital in excess of par value.”

In February 2011, the VMS Board of Directors authorized the repurchase of 12million shares of VMS common stock through the end of fiscal year 2012. As of September28, 2012, the remaining 3,000,000 shares available for repurchase under the February 2011 authorization expired. In August 2012, the VMS Board of Directors authorized the repurchase of 8,000,000 shares of VMS common stock from September29, 2012 through December31, 2013. Stock repurchases under the August 2012 authorization may be made in open market, in privately negotiated transactions (including accelerated share repurchase programs) or under Rule 10b5-1 share repurchase plans, and may be made from time to time or in one or more blocks. As of September 27, 2013 about 2,000,000 shares remain available for repurchase under the August 2012 authorization.

Accumulated Other Comprehensive Loss

	Accumulated Other Comprehensive Loss
(In thousands)	DefinedBenefit Pension and Post-retirement Benefit Plans			Unrealized Gain(Loss)on Derivatives			Cumulative Translation Adjustments			Total
Balance at October1, 2010	$	(36,844	)	$	(307	)	$	(453	)	$	(37,604	)
Current period other comprehensive income (loss)		(6,276	)		300			(3,268	)		(9,244	)
Balance at September30, 2011		(43,120	)		(7	)		(3,721	)		(46,848	)
Current period other comprehensive income (loss)		(5,503	)		538			(4,808	)		(9,773	)
Balance at September28, 2012		(48,623	)		531			(8,529	)		(56,621	)
Current period other comprehensive income (loss)		8,542			(1,222	)		9,230			16,550
Balance at September27, 2013	$	(40,081	)	$	(691	)	$	701		$	(40,071	)

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Strategic Arrangement - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Sep. 27, 2013
Strategic Alliance And Collaboration [Line Items]
Fixed fee committed	$ 10
License fee committed	20
Strategic Global Partnership
Strategic Alliance And Collaboration [Line Items]
Accrual of fixed fees during the period	2
Siemens Ag | Strategic Global Partnership
Strategic Alliance And Collaboration [Line Items]
Amount payable related to product development milestones	0
Commissions expense incurred	0.2
Commissions income recognized	$ 0.3

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Document and Entity Information (USD $)	12 Months Ended
	Sep. 27, 2013	Nov. 19, 2013	Mar. 28, 2013
Document Information [Line Items]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Sep. 27, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Trading Symbol	VAR
Entity Registrant Name	VARIAN MEDICAL SYSTEMS INC
Entity Central Index Key	0000203527
Current Fiscal Year End Date	--09-27
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		105,719,260
Entity Public Float			$ 7,792,603,632

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Schedule of Estimated Future Benefit Payments (Detail) (USD $) In Millions, unless otherwise specified	Sep. 27, 2013
Defined Benefit Plan Disclosure [Line Items]
2014	$ 5.3
2015	5.7
2016	5.4
2017	7.7
2018	7.7
2019-2023	41.7
Defined Benefit Plan, Expected Future Benefit Payments, Total	73.5
Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
2014	4.8
2015	5.2
2016	4.9
2017	7.2
2018	7.3
2019-2023	39.9
Defined Benefit Plan, Expected Future Benefit Payments, Total	69.3
Post-Retirement Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
2014	0.5
2015	0.5
2016	0.5
2017	0.5
2018	0.4
2019-2023	1.8
Defined Benefit Plan, Expected Future Benefit Payments, Total	$ 4.2

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Employee Stock Plans

12 Months Ended

Sep. 27, 2013

Employee Stock Plans

12. EMPLOYEE STOCK PLANS

Employee Stock Plans

During fiscal year 1991, VMS adopted the stockholder-approved Omnibus Stock Plan (the “Omnibus Plan”) under which shares of common stock could be issued to officers, directors, key employees and consultants. The Omnibus Plan was amended and restated as of the Spin-offs. The maximum number of shares that could have been issued was limited to 20,000,000 shares. Stock options granted under the Omnibus Plan have an exercise price equal to the closing market price of the underlying stock on the grant date (unless the stock market was closed on the grant date, in which case the exercise price was equal to the average of the highest and lowest quoted selling prices on the stock market on the day before and the day after the grant date) and expire no later than ten years from the grant date. Options granted under the Omnibus Plan before November 2000 were generally exercisable in cumulative installments of one third each year, commencing one year following the date of grant. Options granted after November 2000 were exercisable in the following manner: the first one-third one year from the date of grant, with the remainder vesting monthly during the following two-year period. No further awards may be made under the Omnibus Plan.

In November 2000, VMS adopted the 2000 Stock Option Plan (the “2000 Plan”), which was intended to supplement the Omnibus Plan. The maximum number of shares that could have been issued was limited to 12,000,000 shares. The 2000 Plan is similar to the Omnibus Plan in all material respects, with the exception that shares available for awards under the 2000 Plan could not be issued to directors or officers of VMS. Stock options granted under the 2000 Plan are exercisable for the first one-third of the option shares one year from the date of grant, with the remainder vesting monthly during the following two-year period. Other terms of the 2000 Plan mirror the Omnibus Plan. No further awards may be made under the 2000 Plan.

In February 2005, VMS’s stockholders approved the 2005 Omnibus Stock Plan (the “2005 Plan”), which was last amended and restated in February 2012. The 2005 Plan, as amended and restated to date, is referred to as the “Third Amended 2005 Plan.” The Third Amended 2005 Plan provides for the grant of equity incentive awards, including stock options, restricted stock, stock appreciation rights, performance units, restricted stock units and performance shares to officers, directors, key employees and consultants. The Third Amended 2005 Plan also provides for the grant of deferred stock units to non-employee directors. The maximum number of shares issuable under the Third Amended 2005 Plan is (a)24,950,000, plus (b)the number of shares authorized for issuance, but never issued, under the Omnibus Plan and the 2000 Plan, plus (c)the number of shares subject to awards previously granted under the Omnibus Plan and 2000 Plan that terminate, expire, or lapse, plus (d)amounts granted in substitution of options in connection with certain transactions.

For purposes of the total number of shares available for grant under the Third Amended 2005 Plan, any shares subject to awards of stock options or stock appreciation rights are counted against the available-for-grant limit as one share for every one share subject to the award. Awards other than stock options and stock appreciation rights are counted against the available-for-grant limit as three shares for every one share awarded before February16, 2007, as 2.5 shares for every one share awarded between February16, 2007 and February8, 2012 and as 2.6 shares for every one share awarded on or after February9, 2012. All awards may be subject to restrictions on transferability and continued employment as determined by the Compensation and Management Development Committee.

Stock options granted under the Third Amended 2005 Plan generally have an exercise price equal to the closing market price of a share of VMS common stock on the grant date. Except for directors, stock options granted under the Third Amended 2005 Plan generally are exercisable in the following manner: the first one-third one year from the date of grant, with the remainder vesting monthly during the following two-year period. Stock option grants to directors are immediately exercisable. For grants of non-qualified stock options made on or after November17, 2005 under the Third Amended 2005 Plan to employees who retire from the Company within one year of the grant date, the number of shares subject to the stock option shall be adjusted proportionally by the time during such one-year period that the employee remained an employee of the Company (based upon a 365 day year). The revised number of shares subject to the stock option would continue to vest in accordance with the original vesting schedule, and the remaining shares would be cancelled as of the date of retirement. Under the Third Amended 2005 Plan, stock options granted on or prior to February16, 2007 generally have a term of ten years and stock options granted after February16, 2007 generally have a term of seven years. The Third Amended 2005 Plan prohibits the repricing of stock options and stock appreciation rights without the approval of VMS’s stockholders.

Restricted stock awards and restricted stock unit awards generally vest over a period of one to five years from the date of grant. For awards of restricted stock and restricted stock units prior to fiscal year 2010, any unvested awards are generally forfeited at the time of termination. However, restricted stock units granted in fiscal year 2010 and thereafter that are unvested at death become fully vested and unvested restricted stock units will generally continue to vest in accordance with the original vesting schedule if a retirement eligible employee retires one year or more from grant date. If a retirement eligible employee retires within one year of the grant date, the number of restricted stock units shall be adjusted proportionally by the time during such one year period that the employee remained an employee of the Company (based upon a 365 day year). The revised number of restricted stock units would vest in accordance with the original vesting schedule and the remaining restricted stock units would be cancelled as of the date of retirement.

Deferred stock unit awards to non-employee directors vest over a period of not less than one year from the date of grant, unless otherwise provided in the grant agreement as determined by VMS’s Board of Directors, and vesting may be pro rata during the vesting period. Each deferred stock unit is deemed to be the equivalent of one share of VMS common stock. Payment of deferred stock units generally will be made in shares of VMS common stock upon the earlier of the third anniversary of the grant date or the director’s termination.

In fiscal years 2013 and 2012, the Company granted performance units to certain employees under the Third Amended 2005 Plan (before and after its amendment and restatement). The number of shares of VMS common stock ultimately issued under the performance units at the end of a three-year performance period will depend on the Company’s business performance during the three-year period against specified performance targets set by the Compensation and Management Development Committee of the Board of Directors at the beginning of the period. Any unvested performance unit awards are generally forfeited at the time of termination, except in the case of death, in which case the employee is considered to have been continuously employed through the last day of the performance period.Also, similar to the adjustments discussed above for restricted stock unit awards, the number of performance units that ultimately vest is adjusted in the case of retirement.

The fair value of options granted and the option component of the shares purchased under the Employee Stock Purchase Plan (which is described further below) shares were estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions:

	Employee Stock Plans												EmployeeStockPurchasePlan
	Fiscal Years												Fiscal Years
	2013				2012				2011					2013				2012				2011
Expected term (in years)		4.76				4.64				4.75					0.50				0.50				0.50
Risk-free interest rate		0.6	%			0.8	%			2.0	%				0.1	%			0.1	%			0.1	%
Expected volatility		32.2	%			36.9	%			35.5	%				16.5	%			19.3	%			14.0	%
Expected dividend yield		0	%			0	%			0	%				0	%			0	%			0	%
Weighted average fair value at grant date	$	19.73		$		18.75		$		23.26		$			12.95		$		12.17		$		12.61

The expected term of stock options represents the weighted average period the stock options are expected to remain outstanding. The expected term is based on the observed and expected time to post-vesting exercise and post-vesting cancellations of stock options by Company employees. The Company determined the expected term of stock options based on the demographic grouping of employees and retirement eligibility. The Company used a combination of historical and implied volatility, or blended volatility, in deriving the expected volatility assumption. Blended volatility represents the weighted average of implied volatility and historical volatility. Implied volatility was derived based on traded options on VMS common stock. Implied volatility is weighted in the calculation of blended volatility based on the ratio of the term of the exchange-traded options to the expected terms of the employee stock options. Historical volatility represents the remainder of the weighting. The decision to incorporate implied volatility was based on the Company’s assessment that implied volatility of publicly traded options on VMS common stock is reflective of market conditions and is generally reflective of both historical volatility and expectations of how future volatility will differ from historical volatility. In determining the extent of use of implied volatility, the Company considered: (i)the volume of market activity of traded options; (ii)the ability to reasonably match the input variables of traded options to those of stock options granted by the Company, including the date of grant; (iii)the similarity of the exercise prices; and (iv)the length of term of traded options. After considering the above factors, the Company determined that it cannot rely exclusively on implied volatility based on the fact that the term of VMS exchange-traded options is less than one year and that it is different from the expected terms of the stock options granted by the Company. Therefore, the Company believes a combination of the historical volatility over the expected terms of the stock options granted by the Company and the implied volatility of exchange-traded options best reflects the expected volatility of VMS common stock. The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of VMS’s stock options. The dividend yield assumption is based on the Company’s history and expectation of no dividend payouts.

As share-based compensation expense recognized in the Consolidated Statements of Earnings is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures, based on historical experience. Forfeitures are estimated at the time of grant and revised, in subsequent periods if actual forfeitures differ from those estimates.

The table below summarizes the effect of recording share-based compensation expense:

	Fiscal Years
(In thousands)	2013			2012			2011
Cost of revenues - Product	$	4,088		$	4,419		$	3,917
Cost of revenues - Service		3,460			1,472			1,977
Research and development		5,993			6,378			5,467
Selling, general and administrative		29,096			35,606			30,657
Taxes on earnings		(12,989	)		(15,406	)		(14,063	)
Net share-based compensation expense	$	29,648		$	32,469		$	27,955

During fiscal years 2013, 2012 and 2011, total share-based compensation expense recognized in earnings before taxes was $42.6 million, $47.9 million and $42.0 million, respectively, and the total related recognized tax benefit was $13.0 million, $15.4 million and $14.1 million, respectively. 

A summary of share-based awards available for grant is as follows:

(In thousands)	SharesAvailable for Grant
Balance at October1, 2010		8,407
Granted		(108	)
Canceled, expired or forfeited		125
Balance at September30, 2011		8,424
Authorized		6,000
Granted		(2,680	)
Canceled, expired or forfeited		124
Balance at September28, 2012		11,868
Granted		(2,045	)
Canceled, expired or forfeited		102
Balance at September27, 2013		9,925

Awards other than stock options set forth in the table were counted against the shares available for grant limit of the Third Amended 2005 Plan as 2.5 shares for every one share awarded before February9, 2012 and were counted against the shares available for grant limit as 2.6 shares for every one awarded on or after February9, 2012. In addition, the shares available for grant limit was further adjusted to reflect a maximum payout of1.5 shares that could be issued for each performance unit granted.

Activity under the Company’s employee stock plans is presented below:

(In thousands, except per share amounts)	OptionsOutstanding
	NumberofShares				WeightedAverage Exercise Price
Balance at October1, 2010		10,174		$		44.03
Granted		48				69.67
Canceled, expired or forfeited		(46	)			48.64
Exercised		(3,259	)			40.38
Balance at September30, 2011		6,917				45.90
Granted		743				58.50
Canceled, expired or forfeited		(30	)			55.73
Exercised		(1,171	)			40.18
Balance at September28, 2012  (5,540 options exercisable at a weighted average exercise price of $46.91)		6,459				48.34
Granted		613				68.93
Canceled, expired or forfeited		(20	)			60.81
Exercised		(2,567	)			44.97
Balance at September27, 2013		4,485		$		53.02

For fiscal year 2013, the total pre-tax intrinsic value of options exercised was $66.3 million.

The following table summarizes information related to options outstanding and exercisable under the Company’s employee stock plans at September27, 2013:

	Options Outstanding									Options Exercisable
Range of Exercise Prices	Number ofShares		Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)		Number ofShares			Weighted Average Remaining Contractual Term (in years)		Weighted Average Exercise Price		Aggregate Intrinsic Value (1)
(In thousands, except years and per-share amounts)
$32.10–$39.85		665		1.61		38.23		23,919			665		1.61		38.23		23,919
$40.21–$52.07		1,359		2.65		50.20		32,599			1,359		2.65		50.20		32,599
$52.08–$72.26		2,461		3.84		58.58		38,391			1,631		2.93		55.04		31,202
Total		4,485		3.15	$	53.02	$	94,909			3,655		2.58	$	50.18	$	87,720

(1) The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the closing price of VMS common stock of $74.18 as of September27, 2013, the last trading date of fiscal year 2013, and which represents the amount that would have been received by the option holders had all option holders exercised their options and sold the shares received upon exercise as of that date.

As of September27, 2013, there was $9.5 million of total unrecognized compensation expense related to stock options granted under the Company’s employee stock plans. This unrecognized compensation expense is expected to be recognized over a weighted average period of 1.6 years.

The activity for restricted stock, restricted stock units, deferred stock units and performance units is summarized as follows:

(In thousands, except per share amounts)	Number of Shares				WeightedAverage Grant-DateFair Value
Balance at October1, 2010		1,333		$		46.91
Granted		24				68.67
Vested		(590	)			47.27
Cancelled or expired		(32	)			46.59
Balance at September30, 2011		735		$		47.36
Granted		716				59.06
Vested		(469	)			44.68
Cancelled or expired		(37	)			53.94
Balance at September28, 2012		945		$		57.30
Granted		516				70.37
Vested		(396	)			55.67
Cancelled or expired		(30	)			61.82
Balance at September27, 2013		1,035		$		64.36

Share-based compensation expense for restricted common stock, restricted stock units and deferred stock units is measured at the stock’s fair value on the date of grant and is amortized over each award’s respective service period. The Company values performance units using the Monte Carlo simulation model on the date of grant with assumptions that includes the historical volatilities of shares of VMS common stock, as well as the shares of common stock of peer companies. In addition, the Company estimates the probability that certain performance conditions that affect the vesting of performance units will be achieved, and recognizes expense only for those awards expected to vest.

For fiscal years 2013, 2012 and 2011, the Company recognized total share-based compensation expense related to restricted stock and restricted stock units of $25.1 million, $26.8 million and $25.0 million, respectively. The Company recognized $0.7 million of share-based compensation expense related to deferred stock units in each of the fiscal years 2013, 2012, and 2011. In addition, the Company recognized $2.4 million and $4.1 million share-based compensation expense related to performance units in fiscal years 2013 and 2012, respectively.

As of September27, 2013, unrecognized compensation expense totaling $31.5 million was related to restricted stock, restricted stock units, deferred stock units and performance units granted under the Company’s employee stock plans. This unrecognized share-based compensation expense is expected to be recognized over a weighted average period of 1.8 years. The 396,239 shares that vested in fiscal year 2013 represented deferred stock units, restricted stock units and restricted common stock, and the total fair value of these shares upon vesting was $27.4 million. The Company withheld 138,159 shares (fair value of approximately $9.6 million) for employees’ minimum withholding taxes at vesting of such awards in fiscal year 2013.

Employee Stock Purchase Plan

VMS had an Employee Stock Purchase Plan (the “Prior ESPP”) under which VMS common stock could be issued to substantially all employees in the United States. In May 2009, as part of a broader set of cost control initiatives, VMS’s Board of Directors authorized the suspension of purchases under the Prior ESPP beginning in October 2009. In February 2010, VMS’s stockholders approved the 2010 Employee Stock Purchase Plan (the “2010 ESPP”). The 2010 ESPP, like the Prior ESPP, provides eligible employees with an opportunity to purchase shares of VMS common stock at 85% of the lower of its fair market value at the start and end of a six-month purchase period. The 2010 ESPP provides for the purchase of up to 7million shares of VMS common stock (including shares that were available for purchase under the Prior ESPP as of February11, 2010, the date the 2010 ESPP became effective). Once the 2010 ESPP became effective, purchases could no longer be made under the Prior ESPP.

VMS issued 262,455 shares for $14.2 million in fiscal year 2013 and 262,660 shares for $13.3 million in fiscal year 2012. At September27, 2013, 6.4million shares were available for issuance under the 2010 ESPP.

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Financing Receivables and Allowance for Credit Losses (Detail) (USD $) In Millions, unless otherwise specified	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Financing Receivables [Line Items]
Accounts receivable with contractual maturities of more than one year, Gross amount	$ 28.0	$ 29.9	$ 16.2
Accounts receivable with contractual maturities of more than one year, Allowance for doubtful accounts	(3.0)	(3.0)
Accounts receivable with contractual maturities of more than one year, Net amount	25.0	26.9	16.2
Accounts receivable with contractual maturities of more than one year, Amount past due	$ 3.1	$ 4.3	$ 1.2

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Segment Information - Additional Information (Detail)	12 Months Ended
	Sep. 27, 2013 Segment
Segment Reporting Information [Line Items]
Number of Reportable Segments	2

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Related Party Transactions - Additional Information (Detail) (USD $)	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Related Party Transaction [Line Items]
Ownership interest in dpiX Holding LLC	40.00%
dpiX Holding LLC's ownership interest in dpiX LLC	100.00%
Income (Loss) on equity investment in affiliate	$ 2,461,000	$ 245,000	$ 4,276,000
Carrying value of the equity investment in dpiX Holding	49,700,000	45,500,000
Loan agreement, amendment date	December 2011
Loan agreement, related party			8,800,000
Related party loan agreement, interest rate	prime plus 1%
Purchases of glass transistor arrays from dpiX	$ 25,900,000	$ 14,500,000	$ 23,300,000
Principal with accrued interest
Related Party Transaction [Line Items]
Number of installment payment	2

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Retirement Plans - Additional Information (Detail) (USD $)	12 Months Ended
	Sep. 27, 2013	Sep. 28, 2012	Sep. 30, 2011
Retirement Plans [Line Items]
Total retirement, post-retirement benefit plan and defined benefit plan expense	$ 29,000,000	$ 27,900,000	$ 24,000,000
Accumulated benefit obligation for defined benefit pension plans	167,300,000	146,200,000
Equity Securities
Retirement Plans [Line Items]
Target percentage allocation	32.00%
Debt and fixed income assets
Retirement Plans [Line Items]
Target percentage allocation	57.00%
Other
Retirement Plans [Line Items]
Target percentage allocation	11.00%
US 401(K) Plan
Retirement Plans [Line Items]
Maximum eligible participant compensation that company matches under defined contribution plan	6.00%
Maximum participant contribution allowed to be invested in VMS common stock	25.00%
US 401(K) Plan | Minimum
Retirement Plans [Line Items]
Participant contribution for eligible base compensation	1.00%
US 401(K) Plan | Maximum
Retirement Plans [Line Items]
Participant contribution for eligible base compensation	25.00%
Contribution as percentage on after-tax basis	15.00%
U.K. Savings Plan
Retirement Plans [Line Items]
Maximum eligible participant compensation that company matches under defined contribution plan	6.00%
U.K. Savings Plan | Minimum
Retirement Plans [Line Items]
Participant contribution for eligible base compensation	4.00%
U.K. Savings Plan | Maximum
Retirement Plans [Line Items]
Participant contribution for eligible base compensation	100.00%
Defined Benefit Plans
Retirement Plans [Line Items]
Discount rate	3.11%	2.94%
Rate of projected compensation increase	2.51%	2.37%
Contributions by employer	22,200,000	9,600,000
Expected total contribution to the defined benefit plans for the fiscal year 2014	6,280,000
Defined Benefit Plans | Minimum
Retirement Plans [Line Items]
Discount rate	1.70%
Rate of projected compensation increase	1.75%
Defined Benefit Plans | Maximum
Retirement Plans [Line Items]
Discount rate	4.50%
Rate of projected compensation increase	3.90%
Post-Retirement Benefit Plans
Retirement Plans [Line Items]
Discount rate	3.80%	3.00%
Discount rates used to determine the benefit obligations - methodology	Based on the yields of high quality zero-coupon corporate bonds with maturities that match the expected durations of the benefit obligations
Estimated increase in service and interest cost components due to one percentage point increase in assumed health care cost trend rates	12,000
Estimated increase in accumulated postretirement benefit obligation due to one percentage point increase in assumed health care cost trend rates	312,000
Estimated decrease in service and interest cost components due to one percentage point decrease in assumed health care cost trend rates	10,000
Estimated decrease in accumulated postretirement benefit obligation due to one percentage point decrease in assumed health care cost trend rates	283,000
Contributions by employer	500,000	500,000
Expected total contribution to the defined benefit plans for the fiscal year 2014	$ 500,000