FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR QUARTER ENDED March 31, 1997 COMMISSION FILE NO. 0-12025
CIRCON CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-3079904
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6500 Hollister Avenue, Santa Barbara, California 93117-3019
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (805) 685-5100
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 twelve 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
Number of Common Shares Outstanding at March 31, 1997: 13,243,448
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CIRCON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND MARCH 31,1997
ASSETS
(In thousands, except for share amounts)
(UNAUDITED)
December 31, March 31,
1996 1997
--------- ---------
CURRENT ASSETS:
Cash and temporary cash investments $ 6,234 $ 4,218
Marketable securities 1,074 1,091
Accounts receivable, net of allowance of
$1,644 in 1996 and $1,499 in 1997 28,497 29,750
Inventories 35,123 37,636
Prepaid expenses and other assets 1,939 2,393
Deferred income taxes 8,046 8,046
--------- --------
Total current assets 80,913 83,134
--------- --------
DEFERRED INCOME TAXES 831 831
PROPERTY, PLANT, AND EQUIPMENT, NET 53,841 53,725
OTHER ASSETS, at cost net of accumulated
amortization 33,533 32,743
--------- ---------
Total assets $ 169,118 $ 170,433
========= =========
The accompanying notes are an integral part of
these consolidated balance sheets.
CIRCON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND MARCH 31,1997
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands, except for share amounts)
(UNAUDITED)
December 31, March 31,
1996 1997
---------- ----------
CURRENT LIABILITIES:
Current maturities of long-term obligations $ 429 $ 370
Accounts payable 6,344 6,504
Accrued liabilities 12,000 10,978
Customer deposits 879 765
---------- ---------
Total current liabilities 19,652 18,617
---------- ---------
NONCURRENT LIABILITIES:
Long-term obligations 50,565 52,565
---------- ---------
SHAREHOLDERS' EQUITY:
Preferred stock: $0.01 par value
1,000,000 shares authorized, none
outstanding
Common stock: $0.01 par value
50,000,000 shares authorized
13,239,746 and 13,243,448 issued and outstanding
in 1995 and 1996, respectively 132 132
Additional paid-in capital 104,426 104,457
Cumulative translation adjustment (502) (974)
Accumulated deficit (5,155) (4,364)
---------- ----------
Total shareholders' equity 98,901 99,251
========== ==========
Total liabilities and shareholders'
equity $ 169,118 $ 170,433
========== =========
The accompanying notes are an integral part of
these consolidated balance sheets.
CIRCON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
(In thousands, except per share amounts)
(UNAUDITED) (UNAUDITED)
1996 1997
----------- -----------
NET SALES $ 39,962 $ 38,393
Cost of sales 17,764 16,927
----------- ----------
GROSS PROFIT 22,198 21,466
OPERATING EXPENSES:
Research and development 2,975 2,784
Selling, general and administrative 15,645 16,679
---------- ----------
Total operating expenses 18,620 19,463
INCOME FROM OPERATIONS 3,578 2,003
Interest income 95 141
Interest expense (1,128) (919)
Other expense, net (62) (9)
----------- -----------
INCOME BEFORE INCOME TAXES 2,483 1,216
Provision for income taxes 824 425
NET INCOME $ 1,659 $ 791
========== ============
EARNINGS PER SHARE: $ 0.13 $ 0.06
Weighted Average Number of Shares of Common
Stock and Equivalents Outstanding 13,114 13,664
---------- ------------
The accompanying notes are an integral part of
these consolidated statements.
CIRCON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Three Months Ended March, 31
(In thousands)
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1997
---------- -----------
Net income $ 1,659 $ 791
Adjustments to reconcile net
income to cash used in
operating activities:
Depreciation and amortization 2,380 2,151
Deferred income taxes 310 -
Change in assets and liabilities:
Accounts receivable (1,030) (1,253)
Inventories (1,003) (2,513)
Prepaid expenses and other assets (785) (454)
Other assets 123 184
Accounts payable (2,302) 160
Accrued liabilities (172) (1,022)
Customer deposits 112 (114)
--------- ---------
Net cash used in operating activities $ (708) $ (2,070)
--------- ---------
CIRCON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Three Months Ended March, 31
(In thousands)
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM INVESTING ACTIVITIES 1996 1997
---------- -----------
Disposals of marketable securities, net $ 5,911 $ -
Purchase of marketable securities - (17)
Purchases of property, plant and equipment (2,365) (1,264)
Purchase of intangible - (165)
Cumulative translation adjustment 577 (472)
---------- -----------
Net cash provided by (used in) investing activities 4,123 (1,918)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 82 31
Repayments of capital lease obligations (20) (59)
Repayments of long-term obligations (12,783) -
Borrowings from long-term obligations - 2,000
Tax benefit from exercise of stock options 12 -
---------- -----------
Net cash provided by (used in) financing activities (12,709) 1,972
---------- -----------
Net decrease in cash and temporary
cash investments (9,294) (2,016)
Cash and temporary cash investments, beginning
of period 17,586 6,234
---------- ---------
Cash and temporary cash investments, end
of period $ 8,292 $ 4,218
========== =========
SUPPLEMENTAL DISCLOSURES
Cash paid for interest $ 66 $ 828
========= =========
Cash paid for income taxes
(net of refunds received) $ 274 $ 17
========= =========
The accompanying notes are an integral part of
these consolidated statements.
CIRCON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(In Thousands except Share Information)
General
- --------
The accompanying condensed consolidated financial statements include the
accounts of Circon Corporation (the Company) and its subsidiaries. All
significant intercompany transactions and accounts have been eliminated in
consolidation.
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. It is suggested
that these condenesed consolidated financial statements be read in
conjunction with the statements and notes thereto included in the Company's 10K
for the year ended December 31, 1996.
The Company does not believe any recently issued accounting standards will
have a material impact on its financial condition or its operation.
(1) USSC Tender Offer
-----------------
On August 1, 1996, United States Surgical Corporation ("USSC") through its
wholly-owned subsidiary, USS Acquisition Corp., launched an unsolicited
tender offer (the "Offer") for all of the common stock of the Company at a
price of $18 per share. The Board of directors considered the Offer and
recommended that stockholders reject it so the Company can continue to pursue
its strategic plan. In reaching its conclusion, the Board retained and
consulted with Bear Stearns and Company as financial advisors and Wilson,
Sonsini, Goodrich & Rosati as legal advisors. In addition, the Company
retained The Abernathy/MacGregor Group Inc. to advise the Company on public
relations matters, Corporate Investor Communications, Inc. to assist the
Company in connection with communications to stockholders and William M. Mercer
Incorporated to advise the Board of Directors on certain employee matters.
In connection with rejecting the Offer, the Company adopted a Stockholders
Right Plan and an Employee Retention Plan, both of which are the subject of a
lawsuit brought by USSC against the Company and certain of its officers and
directors. In addition, the Company and certain of its directors and officers
are also defendants in certain class action lawsuits purportedly brought on
behalf of Circon stockholders. On December 16, 1996, USSC reduced the offer
to $17 per share and extended the solicitation until February 13, 1997.
On February 13, 1997, the offer was again extended to June 16, 1997. The
Company charged $3,000 in 1996 primarily for expenses related to the Offer
and defending the stockholder litigation.
(2) Inventories
-----------
Inventories include costs of materials, labor and manufacturing overhead and
are priced at the lower of cost (first-in, first-out) or market. Inventories
at December 31, 1996 and March 31, 1997 consist of the following:
1996 1997
------- -------
Raw materials $ 11,995 $ 11,659
Work in process 17,938 19,116
Finished goods 5,190 6,861
------- -------
$ 35,123 $ 37,636
======= =======
(3) Long-Term Obligations
--------------------
Long-term obligations as of December 31, 1996 and March 31, 1997 consist
of the following:
1996 1997
------- -------
Revolving credit facility $ 46,500 $ 48,500
Industrial development authority bonds
due December 2, 2006 4,435 4,435
Other 59 -
------- -------
$ 50,994 $ 52,935
------- -------
Less: current maturities (429) (370)
------- -------
$ 50,565 $ 52,565
======= =======
The Company has a $75,000 reducing revolving credit facility (the
"Credit Facility") which provides for direct borrowings and a maximum of
$5,000 in letters of credit. The Company has the option to borrow money
based upon (i) the higher of the prime rate or an adjusted federal funds
rate or (ii) an adjusted eurodollar rate. The unused portion of the Credit
Facility has a commitment fee which ranges from .1875% to .375%. The Credit
Facility, which expires August 1, 2001, contains certain restrictive
financial covenants and is secured by substantially all of the assets of the
Company.
The Company has a letter of credit in the amount of approximately $5,327
as of March 31, 1997 underlying $7,000 of tax exempt Industrial Development
Authority Bonds (the "Bonds") issued in December 1991 with a 15 year maturity
requiring monthly interest payments and annual principal payments. The letter
of credit has a renewable 5 year term and carries an annual fee of 1% of the
outstanding bond principal amount. The bonds are subject to weekly repricing
at an interest rate based on the remarketing agents' professional judgment and
prevailing market conditions at the time. The Bonds and the letter of credit
facility are collateralized by the Company's two Langhorne, Pennsylvania
facilities. These facilities had a net carrying value of $4,445 as of
March 31, 1997.
The Company repurchased at par, 99.94% of the 7.5% convertible notes
pursuant to a vote of bondholders taken on November 20, 1995. Approximately
$50,500 of the Credit Facility and approximately $16,500 of available cash
was used to repurchase the notes in 1996.
Future principal maturities of the long term obligation are as follows:
1998 $ 390
1999 405
2000 430
2001 48,950
2002 475
Thereafter 2,285
-------
$ 52,935
=======
(4) Ligitation
----------
See Discussion of Legal Proceedings in Part II, Item 1.
ITEM 2. Management's Discussion and Analysis of Operations and Financial
Condition
Three Months Ended March 31, 1997
Compared to Three Months Ended March 31, 1996
Sales
-----
The 1997 first quarter sales started slow and ended strong, with March
having the highest sales of any month since the Cabot merger. First quarter
total sales were $38.4 million compared to $40.0 million for the same period in
1996. Price changes were nominal in the quarter. The U.S. sales force was out
of the field for nearly eight working days for a corporate sales/training
meeting, which was not the case last year. This 12% reduction in selling time
contributed to a 5% decrease in U.S. sales.
During the initial two quarter transition period ending March 31, 1996,
following the merger with Cabot Medical, the newly combined U.S. sales force
had erratic performance due to a number of factors. However, since the
second quarter 1996, sales performance and general operating results have
progressed and management is striving for even better performance.
First quarter 1997 U.S. sales followed the normal seasonal pattern of
declining from the preceding fourth quarter as they have in seven of the
past ten years.
First quarter international sales were up 1% over last year and were the
highest of the past four quarters, being up 36% over the average of quarters
two through four of 1996. As a result of increased focus, international sales
as a percent of total sales, has risen to 18% from the 13% average of the prior
three quarters.
Gross Profit
------------
Gross profit as a percent of sales was 55.9% for the first quarter 1997,
up from 55.5% of the first quarter 1996. Cost improvement efforts initiated
in late 1996 are the primary factors in this improvement.
Gross profit remained a strong 55.9% of sales, the same as the average of the
prior three quarters, even though the normally lower gross profit margin
international sales increased as a proportion of total sales. First quarter
gross profit of $21.5 million exceeded that of the prior three quarter average.
Operating Expenses
------------------
Research and development expenditures totalled $2.8 million, down 6% from the
1996 period, even though new product introductions have accelerated.
Consolidating R&D efforts into three centers of excellence as a result of
closing Cabot Medical's Langhorne, Pennsylvania, facility has resulted in
cost containment and greater effectiveness.
During the past several months, Circon introduced numerous new innovative
products including three of high interest. First is the ultra small 2.3 mm
dual deflecting AUR-7 flexible ureteroscope that allows urologists to easily
perform kidney stone removal. Another innovative product is the 5 mm tripolar
cutting forceps that gives the laparoscopic surgeon the ability to have fast,
bloodless cutting in an ultra-miniature instrument. Also, for hospitals
concerned with reducing their disposable instrument costs, we introduced the
latest in semi-reusable laparoscopic hand instruments, the Snap-In/Snap-Out II
series.
Selling, general and administrative expenses were $16.7 million for the
quarter, up from $15.6 million for the comparable 1996 quarter. This reflects
increased expenses from three areas: the first national sales/training meeting
since the sales force merger in October 1995; expenses associated with the new
French direct sales force; and a revised U.S. sales incentive compensation
program. These expenditures are all strategic investments focused on improving
overall sales performance.
Income/EPS
----------
As a result of lower sales and factors discussed above, first quarter
operating income was $2.0 million, down from the $3.6 million of the comparable
1996 quarter, but exceeding the average of prior three quarters, and down from
the preceding fourth quarter as is seasonally normal.
Income before taxes and net income were $1.2 million and $0.8 million,
respectively, for the quarter, down from the prior year. First quarter 1997
EPS was $0.06, down from the prior year.
Liquidity and Capital Resources
Circon's financial position remains strong with working capital of $64.5
million, including $5.3 million of cash and equivalents. Circon's current
ratio is 4.5:1.
Since the first quarter 1996, total assets have risen $1.5 million, total
debt decreased $6.6 million, and shareholders equity rose $9.8 million,
reflecting a fundamental strengthening of the company.
In the quarter, $2.0 million of cash from increased borrowing was used to
finance the net $2.0 million of cash used in operating activities.
Circon has a $75.0 million reducing secured revolving credit line with a
syndicate of banks. $50.5 million of the facility was used to repurchase
Cabot notes in January 1996 (see footnote 3).
The company believes that cash flow from operations, existing cash and
marketable securities and available cash from bank credit facilities are
adequate to fund the company's existing operations for the foreseeable future.
Forward Looking Statements
--------------------------
See Item 5 regarding forward looking statements in Part II and certain
important cautionary statements.
PART II
Item 1. Legal Proceedings.
On May 28, 1996, two purported stockholders of the Company, Bart Milano and
Elizabeth Heaven, commenced an action in the Superior Court of the State of
California for the County of Santa Barbara, Case No. 213476, purportedly on
behalf of themselves and all others who purchased the Company's common stock
between May 2, 1995 and February 1, 1996, against the Company, Richard A.
Auhll, Rudolf R. Schulte, Harold R. Frank, John F. Blokker, Paul W. Hartloff,
Jr., R. Bruce Thompson, Jon D. St. Clair, Frederick A. Miller, David P.
Zielinski, Winton L. Berci, Jurgen Zobel, Trevor Murdoch and Warren G. Wood.
That complaint alleged that defendants violated Sections 11 and 15 of the
Federal Securities Act of 1933, as amended, Sections 25400-02 and 25500-02 of
the California Corporations Code, and Sections 1709-10 of the California Civil
Code, by disseminating allegedly false and misleading statements relating to
Circon's acquisition of Cabot Medical Corp. by merger and to the combined
companies' future financial performance. In general the complaint alleged that
defendants knew that synergies from the merger would not be achieved, but
misrepresented to the public that they would be achieved, in order to obtain
approval for the merger so they would be executives of a much larger
corporation. This alleged conduct allegedly had the effect of inflating the
Company's stock price. On July 29, 1996, defendants filed demurrers to the
complaint on the ground that plaintiffs' allegations fail to state facts
sufficient to constitute a cause of action. On or about August 6, 1996,
plaintiffs served their response to defendants' demurrers, stating their
intention to file an amended complaint prior to the hearing on defendants'
demurrers. On September 20, 1996, plaintiffs voluntarily dismissed Rudolf R.
Schulte, Harold R. Frank, John F. Blokker and Paul W. Hartloff, Jr. from the
action, without prejudice. On September 30, 1996, plaintiffs, joined by a
third purported stockholder of the Company, Adam Zetter, filed a first
amended complaint against the remaining defendants. Plaintiffs' amended
complaint is substantially similar to the original complaint, but adds a new
purported cause of action under the unfair business practices provisions of the
California Business & Professions Code, Sections 17200, et seq. and 17500, et
seq. Like the original complaint, the amended complaint seeks compensatory
and/or punitive damages, attorneys fees and costs, and any other relief
(including injunctive relief) deemed proper. On December 2, 1996, defendants
filed demurrers to the amended complaint again on the grounds that plaintiffs'
allegations fail to state facts sufficient to constitute a cause of action.
On April 17, 1997, a hearing was held regarding the defendants demurrers
to the first amended complaint. No decision has been rendered at this time.
The Company believes plaintiffs' allegations to be without merit and intends to
vigorously defend the lawsuit.
On August 15, 1996, an action captioned Steiner v. Auhll, et al., No.
15165 was filed in the Court of Chancery of the State of Delaware. Shortly
thereafter, three substantially similar actions were filed by three other
individuals claiming to be stockholders of Circon. All four actions allege
that Circon and certain of its officers and directors breached their fiduciary
duties to Circon's stockholders by taking steps to resist the hostile tender
offer by U.S. Surgical Corporation announced on August 2, 1996. All four
of these actions purport to be brought as class actions on behalf of all
Circon stockholders. On August 16, 1996, a separate action captioned Krim v.
Circon Corp., et al., No. 153767, was filed in the Superior Court of California
in Santa Barbara. The plaintiff in that action also claims to be a Circon
stockholder and purports to bring his claim as a class action. On September
27, 1996, that action was stayed by the Court in favor of the actions pending
in Delaware; the Court also encouraged the plaintiff to refile his action in
Delaware. On or about August 30, 1996, the Chancery Court consolidated the
four Delaware complaints into a single action, and plaintiffs filed an amended
complaint. The Company and its officers and directors filed an answer to
the amended complaint on November 12, 1996. The Company believes plaintiffs'
allegations to be without merit and intends to vigorously defend the lawsuits.
On September 17, 1996, an action captioned U.S. Surgical Corporation v.
Auhll, et al., No. 15223NC was filed in the Court of Chancery of the State of
Delaware. The complaint in this action also alleges that Circon and certain of
its officers and directors breached their fiduciary duties to Circon's
stockholders by taking steps to resist U.S. Surgical's hostile tender offer.
The Company and its officers and directors filed an answer to the complaint on
November 12, 1996. The Company believes plaintiff's allegations to be without
merit and intends to vigorously defend the lawsuit.
Item 5. Other Information
Additional Cautionary Statements
No Assurance of Synergies or Cost Savings from Integration of Operations
Circon acquired Cabot Medical Corporation ("Cabot") by merger (the
"Merger") in August, 1995 with the expectation that the Merger will result in
beneficial synergies and cost savings for the combined Company. Critical to
the realization of the benefits of the Merger is the complete and successful
integration of the Companies. Although the integration is substantially
underway, several important steps are still in progress. There can be no
assurance that these steps will be completed and result in the expected
benefits and synergies. Following the Merger, the Company had to cross train
both former sales forces to sell the medical devices carried by the other.
Although some sales personnel have produced significantly increased sales,
others have experienced significantly lower sales productivity. The failure of
the bottom tier of the sales force to grow sales could adversely impact the
sales synergies the Company realizes as a result of the Merger. In addition,
the closure of the Langhorne facility involved organizational changes or shifts
in employee responsibilities, as well as other factors, that have resulted and
may continue to result in the loss of the services of qualified employees, some
of whom might be difficult to replace. The transfer of products previously
manufactured in Langhorne to other facilities may lead to additional costs and
expenses that are currently not anticipated. Failure to effectively absorb the
Cabot product line and replace former key Cabot employees could also result in
the expected cost savings and sales synergies not being realized.
Disruptive Effect of Hostile Tender Offer
On August 2, 1996, a subsidiary of United States Surgical Corporation
initiated an unsolicited offer to purchase all outstanding shares of the
Company's Common Stock. This tender offer has had, and may continue to
have, various adverse effects on the Company's business and results of
operations, including the increased susceptibility of key employees of the
Company to employment offers by other companies, the risk of negative reactions
among distributors, suppliers or customers to the prospect of such a change in
control of the Company, the distraction of management and other key employees
and the fees and other expenses of financial, legal and other advisors to the
Company in responding to the tender offer and related law suits.
Increasing Competition and Risk of Obsolescence from Technological Advances
The markets in which Circon's products compete are characterized by
continuing technical innovation and increasing competition. Some surgical
procedures which utilize the Company's products could potentially be replaced or
reduced in importance by alternative medical procedures or new drugs which may
adversely affect Circon's business.
Government Regulation
The process of obtaining and maintaining required regulatory approvals is
lengthy, expensive and uncertain. Although Circon has not experienced any
substantial regulatory delays to date, there is no assurance that delays will
not occur in the future, which could have a significant adverse effect on
Circon's ability to introduce new products on a timely basis. Regulatory
agencies periodically inspect Circon's manufacturing facilities to ascertain
compliance with "good manufacturing practices" and can subject approved
products to additional testing and surveillance programs. Failure to comply
with applicable regulatory requirements can, among other things, result in
fines, suspensions of regulatory approvals, product recalls, operating
restrictions and criminal penalties. While the Company believes they are
currently in compliance, if Circon fails to comply with regulatory
requirements, it could have an adverse effect on Circon's results of
operations and financial condition.
Uncertainties within the Healthcare Markets
Political, economic and regulatory influences are subjecting the healthcare
industry in the United States to rapid, continuing and fundamental change.
Although Congress has failed to pass comprehensive health care reform
legislation to date, Circon anticipates that Congress, state legislatures and
the private sector will continue to review and assess alternative health care
delivery and payment systems. Responding to increased costs and to pressure
from the government and from insurance companies to reduce patient charges,
healthcare providers (including customers of Circon) have demanded, and in
many cases received, reduced prices on medical devices. These customers are
expected to continue to demand lower prices in the future. Circon cannot
predict what impact the adoption of any federal or state healthcare reform
measures, private sector reform or market forces may have on its business.
However, pricing pressure is expected to continue to adversely affect profit
margins.
Product Liability Risk
Circon's products involve a risk of product liability. Although Circon
maintains product liability insurance at coverage levels which they believe
are adequate, there is no assurance that, if the Company were to incur
substantial liability for product liability claims, insurance would provide
adequate coverage against such liability.
New Products
Circon's growth depends in part on its ability to introduce new and
innovative products that meet the needs of medical professionals. Although
Circon has historically been successful at bringing new products to market,
there can be no assurance that Circon will be able to continue to introduce
new and innovative products or that the new products that Circon introduces,
or has introduced, will be widely accepted by the marketplace. The failure
of the Company to continue to introduce new products or gain wide spread
acceptance of a new product could adversely affect the Company's operations.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit Index
3.2A Bylaws of Circon Corporation, as amended.
(b) The Company filed no reports on Form 8-K in the First Quarter of 1997
with the Securities and Exchange Commission.
RESOLUTION OF THE BOARD OF DIRECTORS
OF CIRCON CORPORATION
(Unanimously adopted on February 12, 1997)
WHEREAS, the Board of Directors of the Corporation have determined that
it is in the best interest of the Corporation to amend Section 3.7.4 of the
Bylaws of the Corporation to provide that special meetings of the Board may
only be called by a majority of the directors rather than one-third of the
directors.
NOW, THEREFORE, BE IT RESOLVED, that Section 3.7.4, subsection A, of the
Bylaws of the Corporation is deleted its entirety and replaced with the
following:
3.7.4 Special Meetings; Notices.
A. Special meetings of the Board of Directors may be called for any
purpose at any time by the Chairman of the Board, the President, or by a
majority of the directors then in office (rounded up to the nearest
whole number).
SIGNATURES
Pursuant to the requirements 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.
CIRCON CORPORATION
Registrant
May 14, 1997
- ------------- ------------------
Date RICHARD A. AUHLL
President
Chief Executive Officer
May 14, 1997
- ------------ ------------------
Date R. BRUCE THOMPSON
Executive Vice President
Chief Financial Officer
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