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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
CIRCON CORPORATION
(Name of Subject Company)
CIRCON CORPORATION
(Name of Person(s) Filing Statement)
Common Stock, $.01 par value
(Title of Class of Securities)
172736 10 0
(CUSIP Number of Class of Securities)
RICHARD A. AUHLL
President and Chief Executive Officer
Circon Corporation
6500 Hollister Avenue
Santa Barbara, California 93117
(805) 685-5100
(Name, address and telephone number of person authorized to receive
notice and communications on behalf of person(s) filing statement)
Copy to:
LARRY W. SONSINI, ESQ.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
(415) 493-9300
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Circon Corporation, a Delaware
corporation (the "Company" or "Circon"), and the address of the principal
executive offices of the Company is 6500 Hollister Avenue, Santa Barbara,
California 93117. The title and the class of equity securities to which this
statement relates is the Common Stock, par value $.01 per share, of the Company
(the "Common Stock" or the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the tender offer disclosed in a Tender Offer
Statement on Schedule 14D-1, dated August 5, 1997 (the "Schedule 14D-1"), filed
with the Securities and Exchange Commission (the "SEC") by United States
Surgical Corporation, a Delaware Corporation ("USS") and USS Acquisition Corp.
(the "Purchaser"), a Delaware corporation and wholly-owned subsidiary of USS,
relating to an offer by Purchaser to purchase all outstanding Shares at a price
of $16.50 per Share, net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in the Purchaser's Offer to
Purchase and related Letter of Transmittal (which together constitute the
"Offer"). According to the Schedule 14D-1, the principal executive offices of
each of USS and the Purchaser are located at 150 Glover Avenue, Norwalk,
Connecticut 06856.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the entity filing
this statement, are set forth in Item 1 above.
(b) Except as described herein, to the knowledge of the Company, as of the
date hereof, there are no material contracts, agreements, arrangements or
understandings, or any actual or potential conflicts of interest between the
Company or its affiliates and (i) the Company, its executive officers, directors
or affiliates or (ii) Purchaser, USS or their respective executive officers,
directors or affiliates.
As a result of the Company's concern about the disruptive effects on the
Company's employees of the tender offer commenced by USS and the Purchaser in
August 1996 (the "Original Offer"), the Company retained the independent
consulting firm of William M. Mercer, Incorporated ("Mercer") to advise the
Board of Directors of the Company (the "Board") and to evaluate the possibility
of implementing an employee retention program. Pursuant to a recommendation from
the Board's Compensation Committee, the Board authorized the Company to
implement three separate plans (collectively, the "Plans") to assist the Company
in retaining skilled employees, including plans for executives, the Company's
sales force, and managers, professionals and key contributors. The purpose of
the Plans is to retain certain key employees of the Company during times of
uncertainty, and to keep such persons focused on their jobs and the business of
the Company during such times so that the Company can continue to execute its
strategic plan. Mercer assisted and advised the Board and its Compensation
Committee in formulating the terms of each Plan. Each Plan is summarized below.
Each of the summaries is qualified in its entirety by reference to the full text
of each of the Plans; a copy of each of the Management Retention Plan, the Sales
Force Retention Plan and the Managers, Professionals and Key Contributors
Retention Plan, is filed as Exhibit 1, 2, and 3, respectively, to this
statement, and is incorporated by reference herein.
MANAGEMENT RETENTION PLAN
The Management Retention Plan (the "Management Plan") provides retention and
severance benefits for designated executive officers, vice presidents and senior
managers of the Company. There are three components to the Management Plan: (i)
retention/severance payments, (ii) post-employment coverage under the Company's
group health and life insurance plans, and (iii) pro-rated annual target bonus
payments.
RETENTION/SEVERANCE PAYMENTS
The total potential retention/severance payment is based on a multiple of
annual target bonus and/or annual base salary, with the level of payment related
to the participant's job level. The multiplier ranges from 75% of annual base
salary up to 250% of annual base salary and annual target bonus.
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ITEM 3. IDENTITY AND BACKGROUND (CONTINUED)
The retention payment component is equal to either one-third of the total
cash payment (for executive officers) or one-sixth of the total cash payment
(for vice-presidents and senior managers). It will be paid ninety days following
a change of control of the Company if the participant has remained employed by
the Company or the acquiring entity through such period. The retention payment
is also triggered if a participant is involuntarily terminated without cause or
is constructively terminated following a change of control but prior to ninety
days following a change of control.
The severance payment component is equal to either two-thirds of the total
cash payment (for executive officers) or five-sixths of the total cash payment
(for vice-presidents and senior managers). It will be paid only if the
participant is involuntarily terminated without cause or is constructively
terminated within twenty-four months (for executive officers and
vice-presidents) or twelve months (for senior managers) following a change of
control.
POST-EMPLOYMENT BENEFITS
In the event of an involuntary termination without cause or constructive
termination within twelve or twenty-four months following a change of control,
the participant (and, if covered prior to the change of control, his or her
dependents) receives continued group health, dental and life insurance coverage.
The Company is required to pay the same percentage of the related insurance
premiums as were paid prior to the change of control. The Company continues to
make these premium payments for a period ranging from nine months to two and
one-half years (depending on the participant's job level), or, if earlier, until
the participant becomes covered under comparable benefit plans of another
employer.
PRORATED ANNUAL TARGET INCENTIVE BONUS
Under the Management Plan, executive officers and vice-presidents (but not
senior managers) are eligible to be paid their prorated annual target bonus for
the year in which the change of control occurs. This payment is in lieu of any
bonus otherwise payable under the annual incentive plan. The proration is made
by multiplying the annual target bonus by a fraction, the numerator of which is
the number of days in the Company's fiscal year that have elapsed prior to the
change of control and the denominator of which is three hundred and sixty-five.
The pro-rated bonus is paid to those executive officers and vice-presidents who
remain employed until the last day of the fiscal year in which the change of
control occurs or who are involuntarily terminated without cause or are
constructively terminated prior to the end of the fiscal year, but following a
change of control.
GOLDEN PARACHUTE EXCISE TAX AND NON-DEDUCTIBILITY
In general, benefits and payments under the Management Plan are subject to
reduction, if, in the opinion of the Company's independent accountants, the
golden parachute excise tax and non-deductibility provisions of the Internal
Revenue Code would otherwise be triggered. In such event, a participant's
benefits will be reduced to the largest amount that would not trigger the golden
parachute excise tax and non-deductibility provisions. In the case of the
Company's chief executive officer, benefits under the Management Plan are only
reduced to avoid triggering the golden parachute excise tax and
non-deductibility provisions if so doing would maximize the after-tax economic
benefit to the chief executive officer, as determined by the Company's
independent accountants.
SALES FORCE RETENTION PLAN
The Sales Force Retention Plan (the "Sales Force Plan") provides retention
and severance benefits for all territory managers and sales video specialists
who are not on Company probation at the time of a change of control. It provides
for a maximum payment of twice the compensation earned in the last two full
calendar months preceding the change of control. Compensation is defined for
this purpose as travel allowance, bonus and commissions.
The retention payment component is equal to the compensation earned in the
last two full calendar months preceding the change of control. It will be paid
ninety days following a change of
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ITEM 3. IDENTITY AND BACKGROUND (CONTINUED)
control if the participant has remained employed by the Company or the acquiring
entity through such period. The retention payment is also triggered if a
participant is involuntarily terminated without cause following a change of
control but prior to ninety days following such change of control.
The severance payment component is also equal to the compensation earned in
the last two full calendar months preceding the change of control. It will be
paid only if the participant is involuntarily terminated without cause within
twelve months following a change of control.
MANAGERS, PROFESSIONALS AND KEY CONTRIBUTORS RETENTION PLAN
The Managers, Professionals and Key Contributors Retention Plan (the
"Managers Plan") provides retention and severance benefits for managers,
professionals and key contributors. It provides for a potential cash payment of
a minimum of three months' base salary up to a maximum of one year's base
salary. Between these minimum and maximum limits, the Managers Plan provides for
two weeks' base salary for each full year of employment with the Company (or
with an entity acquired by the Company) up to and including the date of a change
of control.
The retention payment component is equal to one-third of the total potential
cash payment. It will be paid ninety days following a change of control if the
participant has remained employed by the Company or the acquiring entity through
such period. The retention payment is also triggered if a participant is
involuntarily terminated without cause following a change of control but prior
to ninety days following a change of control.
The severance payment component is equal to two-thirds of the total
potential cash payment. It will be paid only if the participant is involuntarily
terminated without cause within twelve months following a change of control.
INDEMNITY AND LIMITATION OF LIABILITY
Section 145 of Delaware General Corporation Law authorizes a court to award,
or a corporation's Board of Directors to grant, indemnity to directors and
officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended (the "Act").
In accordance with Delaware Law, Article Ninth of the Certificate of
Incorporation of the Company, as amended, eliminates the personal liability of a
directors of the Company and its stockholders for monetary damages for breaches
of fiduciary duty as a director. A copy of Article Ninth is filed as Exhibit 4
to this statement and is incorporated by reference herein. Subject to certain
limitations, Article V of the Bylaws of the Company also provides for
indemnification of officers and directors of the Company. A copy of Article V is
filed as Exhibit 5 to this statement and is incorporated herein by reference. In
addition, the Company has entered into indemnification agreements with its
officers and directors by which the Company provides such persons with the
maximum indemnification allowed under applicable law. These agreements also
resolve certain procedural and substantive matters which are not covered, or are
covered in less detail, in the Company's Certificate of Incorporation. A copy of
the form of such indemnification agreement is filed as Exhibit 6 to this
statement and is incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) The Board has determined that the best means for providing value to its
stockholders is for the Company to continue to pursue its strategic plan and not
to be put up for sale at this time. The Board has unanimously concluded that the
Offer is inadequate and not in the best interests of the Company and its
stockholders. In particular, the Board has determined that the Company's
strategic plan offers the potential for greater long-term benefits for the
Company's stockholders than the Offer based on, among other things, greater
opportunities for business expansion, revenue and earnings growth, as well as
benefits resulting from the Company's recently adopted expense reduction plan.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION (CONTINUED)
ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS REJECT THE OFFER AND NOT TENDER THEIR SHARES PURSUANT TO THE OFFER.
A copy of a letter to stockholders communicating the Board's recommendation
and a form of press release announcing such recommendation are filed as Exhibits
7 and 8 hereto, respectively, and are incorporated herein by reference.
(b) In reaching the conclusions referred to in Item 4(a), the Board took
into account numerous factors, including but not limited to the following:
(i) The Board's familiarity with the business, financial condition,
prospects and current business strategy of the Company, the nature of the
business in which the Company operates and the Board's belief that the Offer
does not reflect the long-term values inherent in the Company. In this
regard, the Board particularly considered the following:
- The Company's reputation as a provider of quality products and services
and its position in its industry as a technological leader and innovator.
- The market share of the Company in the urology and gynecology markets and
new products planned for introduction in the future.
- The expected growth rates of the markets for urological and gynecological
products and the product position of the Company in such markets.
- The Company's long-term sales plan, including the effects of products
under development and enhancements to current products.
- The expected effects of the Company's recently implemented expense
reduction plan.
- The risks inherent in achieving the Company's business plan.
(ii) The Company's prospects for future growth and profitability, based
on the Company's strategic plan and expense reduction plan, the various
strategic initiatives which have been implemented and investments that have
been made over the past several years, including the acquisition of Cabot
Medical Corporation, and other opportunities that will be available in the
future, the availability in the future of certain new products and
enhancements to current products in various stages of development, and
current conditions in the businesses in which the Company operates.
(iii) The opinion of Bear, Stearns & Co. Inc. ("Bear Stearns") to the
effect that the consideration offered pursuant to the Offer is inadequate,
from a financial point of view, to the stockholders of the Company
(excluding USS and its affiliates). The full text of the written opinion of
Bear Stearns, dated August 15, 1997, which sets forth the assumptions made,
matters considered and limitations on the review undertaken, is attached
hereto as Exhibit 9 and is incorporated herein by reference. Holders of the
Common Stock are urged to read the opinion carefully in its entirety. The
opinion of Bear Stearns is directed to Circon's Board of Directors, relates
only to the adequacy of the consideration offered pursuant to the Offer from
a financial point of view and does not constitute a recommendation to any
stockholder as to whether such stockholder should tender Shares pursuant to
the Offer. The summary of the opinion of Bear Stearns set forth in this
Schedule 14D-9 is qualified in its entirety by reference to the full text of
such opinion.
(iv) The Board's commitment to protecting the best interests of the
Company's stockholders.
(v) The disruptive effect of the Offer on the Company's employees,
suppliers and customers.
(vi) The numerous conditions to which the Offer is subject.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION (CONTINUED)
The Offer is conditioned upon, among other things, the acquisition of Shares
pursuant to the Offer and the proposed merger following the Offer having been
approved pursuant to Section 203 of the Delaware General Corporation Law
("Section 203") or the Purchaser being satisfied in its sole discretion that
Section 203 is otherwise inapplicable to the acquisition of Shares pursuant to
the Offer and the proposed merger. In light of the Board's decision discussed
above, the Board has determined to take no action which would render Section 203
so inapplicable.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer, the Board did not find it practicable to, and did not,
quantify or otherwise attempt to assign relative weights to the specific factors
considered in reaching its respective determinations.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
(a) Pursuant to a letter agreement dated August 8, 1996 (the "Letter
Agreement"), the Company engaged Bear Stearns to perform certain financial and
advisory services in connection with the Original Offer and the Offer. For such
services the Company agreed to pay Bear Stearns a retainer fee of $175,000 as
well as a fee of $300,000 for its opinion requested by the Company, and an
additional fee of $300,000 for any additional opinion with respect to a
transaction that is approved by the Board (the $175,000 and both of the $300,000
fees are credited against the fees described below). If during the term of the
Letter Agreement the Company sells all or substantially all of its assets to, or
an aggregate of 50% or more of the outstanding Common Stock is acquired by, any
person or group of persons in one or a series of transactions, then the Company
is obligated to pay Bear Stearns an amount equal to 1.0% of the Equity
Consideration (as defined below) paid to the Company's stockholders. In
addition, upon the occurrence, within one year following the date of termination
of the Letter Agreement, of any event described in the foregoing sentence or the
execution of an agreement with respect to such an event, if the event or
agreement is with a third party who has made an Acquisition Proposal (as defined
below) or who has been furnished non-public information by the Company or Bear
Stearns, then the Company is obligated to pay Bear Stearns the fee described in
the foregoing sentence.
If the Company consummates a restructuring or recapitalization, then it
shall pay Bear Stearns an additional fee of $1,500,000. If there is no
Acquisition Proposal by August 8, 1998 (the "Termination Date"), the Company is
obligated to pay Bear Stearns $1,500,000. Notwithstanding the foregoing, the
Company may elect to pay Bear Stearns $1,500,000 regardless of whether there is
an Acquisition Proposal at any time prior to the Termination Date, in which
event the Letter Agreement will terminate. The fee described in this paragraph
is payable only once and will be deducted from any payments made pursuant to the
fourth sentence of this Item 5(a).
"Equity Consideration" means the consideration per share of Common Stock
paid to the Company's stockholders multiplied by the number of shares of Common
Stock outstanding on a fully diluted basis. Equity Consideration will be
determined as if any acquisition described above were of 100% of the outstanding
shares of Common Stock on a fully diluted basis; provided, however, in the event
that the acquisition involves the sale of all or substantially all of the assets
of the Company, then the Equity Consideration will equal the sum of (i) the
total amount received by the Company upon consummation of the sale; and (ii) the
total amount of the Company's indebtedness assumed by or otherwise transferred
to the purchaser.
"Acquisition Proposal" means (i) any tender or exchange offer which if
consummated would result in any person beneficially owning 50% or more of the
Company's securities ("Tender Offer"), or (ii) any publicly proposed or publicly
disclosed proposal or offer relating to (A) any direct or indirect acquisition
or purchase of 50% or more of either the Company's securities or the assets of
the Company, (B) any Tender Offer or (C) any merger, consolidation or business
combination involving the Company or (iii) any "solicitation" of "proxies" (as
such terms are defined in Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended) with respect to the voting of, or granting of
a consent with respect to, any capital stock of the Company.
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ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED (CONTINUED)
Pursuant to the Letter Agreement, the Company agreed to indemnify Bear
Stearns against all liability resulting from the performance of Bear Stearns'
duties under such agreement, except for liability resulting from the gross
negligence or willful misconduct of Bear Stearns. The Company has also agreed to
reimburse Bear Stearns periodically for their reasonable out-of-pocket expenses,
including the reasonable fees and disbursements of their attorneys arising in
connection with any matter referred to in the Letter Agreement.
The Letter Agreement may be terminated at any time by either party thereto,
in which event Bear Stearns will be entitled to any compensation earned by it up
to the date of the termination or completion, including the reimbursement of all
reasonable expenses incurred by Bear Stearns.
(b) The Company has retained The Abernathy/MacGregor Group Inc. as a public
relations advisor in connection with the Offer and has retained Corporate
Investor Communications, Inc. to assist the Company in connection with
communications with stockholders and to provide other services in connection
with the Offer. The Company will pay The Abernathy/MacGregor Group Inc. and
Corporate Investor Communications, Inc. reasonable and customary fees for their
services, reimburse them for their reasonable expenses and provide customary
indemnities.
Except as described above, neither the Company nor any person acting on its
behalf has retained any other person to make solicitations or recommendations to
security holders on its behalf concerning the Offer.
ITEM 6. PRESENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) To the Company's knowledge, no transaction in the Shares has been
effected during the past 60 days by the Company or any executive officer,
director, affiliate or subsidiary of the Company.
(b) To the Company's knowledge, none of the Company's executive officers,
directors, affiliates and subsidiaries presently intends to tender Shares which
are held of record or beneficially owned by them pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
No negotiation is presently underway by the Company in response to the Offer
which relates to or would result in (1) an extraordinary transaction, such as a
merger or reorganization, involving the Company or any of its subsidiaries; (2)
a purchase, sale or transfer of a material amount of assets by the Company or
any of its subsidiaries; (3) a tender offer for or other acquisition of
securities by or of the Company; or (4) any material change in the present
capitalization or dividend policy of the Company.
Notwithstanding the foregoing, the Board may in the future engage in
negotiations in response to the Offer that could have one of the effects
specified in the preceding paragraph. The Board has determined that disclosure
with respect to the parties to, and the possible terms of, any transactions or
proposals of the type referred to in the preceding paragraph might jeopardize
any discussions or negotiations that the Company may conduct. Accordingly, the
Board has instructed management not to disclose the possible terms of any such
transactions or proposals, or the parties thereto, unless and until an agreement
in principle relating thereto has been reached or, upon the advice of counsel,
as may otherwise be required by law.
Other than as set forth above, there is no transaction, board resolution,
agreement in principle or signed contract in response to the tender offer, which
relates to or would result in (1) an extraordinary transaction, such as a merger
or reorganization, involving the Company or any of its subsidiaries; (2) a
purchase, sale or transfer of a material amount of assets by the Company or any
of its subsidiaries; (3) a tender offer for or other acquisition of securities
by or of the Company; or (4) any material change in the present capitalization
or dividend policy of the Company.
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ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Not Applicable.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
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Exhibit 1 Management Retention Plan
Exhibit 2 Sales Force Retention Plan
Exhibit 3 Managers, Professionals and Key Contributors Retention Plan
Exhibit 4 Article Ninth of Certificate of Incorporation, as amended
Exhibit 5 Article V of the Bylaws
Exhibit 6 Form of Indemnification Agreement
Exhibit 7* Letter to Stockholders regarding Board's Recommendation
Exhibit 8 Press Release Announcing Board's Recommendation
Exhibit 9 Opinion of Bear, Stearns & Co. Inc.
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* Included in copy mailed to stockholders
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
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Dated: August 17, 1997 CIRCON CORPORATION
By: /s/ Richard A. Auhll
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Richard A. Auhll
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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Exhibit 1
CIRCON CORPORATION
MANAGEMENT RETENTION PLAN
Introduction
It is expected that Circon Corporation (the "Company") from time to time
will consider the possibility of an acquisition by another company or other
change of control. The Board of Directors of the Company (the "Board")
recognizes that such consideration can be a distraction to key employees and can
cause such employees to consider alternative employment opportunities. The
Board has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
objectivity of these employees, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below) of the Company.
The Board believes that it is in the best interests of the Company and its
stockholders to provide these employees with an incentive to continue their
employment and to motivate these employees to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
The Board believes that it is imperative to provide these employees with
(i) certain retention benefits payable upon remaining in the employ of the
Company for a specified period following a Change of Control, and (ii) certain
severance benefits upon termination of employment following a Change of Control.
These benefits provide these employees with enhanced financial security and
provide efficient incentive and encouragement to these employees to remain with
the Company notwithstanding the possibility or occurrence of a Change of
Control.
Accordingly, the following plan has been developed and adopted.
ARTICLE I
ESTABLISHMENT OF PLAN
1. ESTABLISHMENT OF PLAN. As of the Effective Date, the Company hereby
establishes a management retention plan to be known as the "Management Retention
Plan" (the "Plan"), as set forth in this document. The purposes of the Plan are
as set forth in the Introduction.
2. APPLICABILITY OF PLAN. Subject to the terms of this Plan, the
benefits provided by this Plan shall be available to those Employees of the
Company who, on or after the Effective Date, receive a Notice of Participation.
3. CONTRACTUAL RIGHT TO BENEFITS. Subject to the terms of this Plan,
this Plan and the Notice of Participation establishes and vests in each
Participant a contractual right to the benefits to which he or she is entitled
pursuant to the terms thereof, enforceable by the Participant against the
Company.
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ARTICLE II
DEFINITIONS AND CONSTRUCTION
1. DEFINITIONS. Whenever used in the Plan, the following terms shall
have the meanings set forth below and, when the meaning is intended, the initial
letter of the term is capitalized.
(a) ANNUAL COMPENSATION. "Annual Compensation" shall mean an amount
equal to the sum of (i) the Participant's Company annual base salary as in
effect immediately preceding the Change of Control, and if so specified in the
Participant's Notice of Participation, (ii) the Participant's 100% Target Bonus
amount for the Company's fiscal year in which the Change of Control occurs.
(b) CAUSE. "Cause" shall mean (i) any act of personal dishonesty
taken by the Participant in connection with his responsibilities as an Employee
and intended to result in substantial personal enrichment of the Participant,
(ii) the Participant's conviction of a felony, (iii) a willful act by the
Participant which constitutes gross misconduct and which is injurious to the
Company, or (iv) continued substantial violations by the Participant of the
Participant's employment duties which are demonstrably willful and deliberate on
the Participant's part after there has been delivered to the Participant a
written demand for performance from the Company which specifically sets forth
the factual basis for the Company's belief that the Participant has not
substantially performed his duties.
(c) CHANGE OF CONTROL. "Change of Control" shall mean the occurrence
of any of the following events:
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
(ii) A change in the composition of the Board occurring
within a two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company); or
(iii) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least fifty
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percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation; or
(iv) the consummation of the sale or disposition by the
Company of all or substantially all the Company's assets.
(d) CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) COMPANY. "Company" shall mean Circon Corporation, any subsidiary
corporations, any successor entities as provided in Article IX hereof, and any
parent or subsidiaries of such successor entities.
(f) DISABILITY. "Disability" shall mean that the Participant has
been unable to perform his duties as an Employee as the result of incapacity due
to physical or mental illness, and such inability, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Participant or the
Participant's legal representative (such agreement as to acceptability not to be
unreasonably withheld). Termination resulting from Disability may only be
effected after at least 30 days' written notice by the Company of its intention
to terminate the Participant's employment. In the event that the Participant
resumes the performance of substantially all of his duties hereunder before the
termination of his employment becomes effective, the notice of intent to
terminate shall automatically be deemed to have been revoked.
(g) EFFECTIVE DATE. "Effective Date" shall mean the date the Plan is
approved by the Board.
(h) EMPLOYEE. "Employee" shall mean an individual employed by the
Company.
(i) ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(j) HEALTH CARE CONTINUATION PERIOD. "Health Care Continuation
Period" shall mean the period set forth in a Participant's Notice of
Participation.
(k) INVOLUNTARY TERMINATION. "Involuntary Termination" shall mean
(i) without the Participant's express written consent, the significant reduction
of the Participant's duties or responsibilities relative to the Participant's
duties or responsibilities in effect immediately prior to such reduction;
provided, however, that a reduction in duties or responsibilities solely by
virtue of the Company being acquired and made part of a larger entity (as, for
example, when the Chief Financial Officer of Circon remains as such following a
Change of Control and is not made the Chief Financial Officer of the acquiring
corporation) shall not constitute an "Involuntary Termination;" (ii) a reduction
by the Company in the annual base salary or in the maximum dollar amount of
potential annual cash bonuses relative to the annual base salary and maximum
dollar amount of potential annual
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cash bonuses as in effect immediately prior to such reduction; (iii) a material
reduction by the Company in the kind or level of employee benefits to which the
Participant is entitled immediately prior to such reduction with the result that
the Participant's overall benefits package is significantly reduced; (iv) the
relocation of the Participant to a facility or a location more than 35 miles
from the Participant's then present location, without the Participant's express
written consent; (v) any purported termination of the Participant by the Company
which is not effected for Disability or for Cause; or (vi) the failure of the
Company to obtain the assumption of this agreement by any successors
contemplated in Article IX below.
(l) NOTICE OF PARTICIPATION. "Notice of Participation" shall mean an
individualized written notice of participation in the Plan from an authorized
Employee of the Company.
(m) PARTICIPANT. "Participant" shall mean an individual who meets
the eligibility requirements of Article III.
(n) PLAN. "Plan" shall mean this Circon Corporation Management
Retention Plan.
(o) PRO-RATED BONUS AMOUNT. "Pro-Rated Bonus Amount" shall mean,
with respect to each Participant designated as eligible to receive such a
payment in their Notice of Participation, 100% of such Participant's Target
Bonus as in effect for the fiscal year in which the Change of Control occurs,
pro-rated by multiplying such bonus amount by a fraction, the numerator of which
shall be the number of days prior to occurrence of the Change of Control during
such fiscal year, and the denominator of which shall be three-hundred and sixty-
five.
(p) RETENTION PAYMENT. "Retention Payment" shall mean the payment of
retention compensation as provided in Article VI hereof.
(q) RETENTION PAYMENT PERCENTAGE. "Retention Payment Percentage"
shall mean, for each Participant, the Retention Payment Percentage set forth in
such Participant's Notice of Participation.
(r) SEVERANCE PAYMENT. "Severance Payment" shall mean the payment of
severance compensation as provided in Article IV hereof.
(s) SEVERANCE PAYMENT PERCENTAGE. "Severance Payment Percentage"
shall mean, for each Participant, the Severance Payment Percentage set forth in
such Participant's Notice of Participation.
(t) SEVERANCE WINDOW PERIOD. "Severance Window Period" means the
period, not to exceed twenty-four (24) months, set forth in a Participant's
Notice of Participation.
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(u) TARGET BONUS. "Target Bonus" shall mean the target incentive
bonus award relating to the achievement of the Participant's target specified
under the Company's formal annual incentive bonus plan.
ARTICLE III
ELIGIBILITY
Each Employee who is designated by the Board and who signs and timely
returns to the Company a Notice of Participation shall be a Participant in the
Plan. A Participant shall cease to be a Participant in the Plan when he or she
ceases to be an Employee, unless such Participant is entitled to benefits
hereunder. A Participant entitled to benefits hereunder shall remain a
Participant in the Plan until the full amount of the benefits have been
delivered to the Participant.
ARTICLE IV
SEVERANCE BENEFITS
1. RIGHT TO SEVERANCE BENEFITS.
(a) TERMINATION FOLLOWING A CHANGE OF CONTROL. If a Participant's
employment terminates at any time within the Participant's Severance Window
Period after a Change of Control, then, subject to Article VII hereof, the
Participant shall be entitled to receive severance benefits as follows:
(i) SEVERANCE PAY UPON INVOLUNTARY TERMINATION WITHIN
NINETY DAYS FOLLOWING A CHANGE OF CONTROL. If the Participant's employment is
terminated as a result of Involuntary Termination other than for Cause within
ninety (90) days following a Change of Control, then the Participant shall be
entitled to receive a Severance Payment which equals (i) the product obtained by
multiplying the Participant's Severance Payment Percentage times the
Participant's Annual Compensation, plus (ii) the product obtained by multiplying
the Retention Payment Percentage times the Participant's Annual Compensation,
plus (iii) if and only if (A) the Participant's Notice of Participation
designates him or her as eligible to receive a Pro-Rated Bonus Amount, and (B)
no Pro-Rated Bonus Amount has been paid to such Participant pursuant to Article
V, the Pro-Rated Bonus Amount.
EXAMPLE: A Change of Control is consummated on June 15, 1997. Participant
is Involuntarily Terminated other than for Cause as of July 1, 1997.
Participant's Annual Compensation is $150,000. The Severance Payment
Percentage set forth in the Participant's Notice of Participation is 100%.
The Retention Payment Percentage set forth in the Participant's Notice of
Participation is 50%. Participant's Notice of Participation designates him
as eligible to receive a Pro-Rated Bonus Amount. Participant's Notice of
Participation designates a twelve-month Severance Window Period. The
Company's fiscal year is the
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calendar year and therefore no Pro-Rated Bonus Amount has been paid
pursuant to Article V of the Plan. The Participant's 100% Target Bonus is
$30,000. The Participant is entitled to a Severance Payment equal to (i)
100% x $150,000, plus (ii) 50% x $150,000, plus (iii) (166/365) x $30,000 =
$238,644.
(ii) SEVERANCE PAY UPON INVOLUNTARY TERMINATION ON OR AFTER
NINETY DAYS FOLLOWING A CHANGE OF CONTROL. If the Participant's employment is
terminated as a result of Involuntary Termination other than for Cause on or
after ninety (90) days following a Change of Control, then the Participant shall
be entitled to receive a Severance Payment which equals (i) the product obtained
by multiplying the Participant's Severance Payment Percentage times the
Participant's Annual Compensation, plus (ii) if and only if (A) the
Participant's Notice of Participation designates him or her as eligible to
receive a Pro-Rated Bonus Amount, and (B) no Pro-Rated Bonus Amount has been
paid to such Participant pursuant to Article V, the Pro-Rated Bonus Amount.
EXAMPLE: A Change of Control is consummated on June 15, 1997. Participant
is Involuntarily Terminated Other than for Cause as of October 1, 1997.
Participant's Annual Compensation is $150,000. The Severance Payment
Percentage set forth in the Participant's Notice of Participation is 100%.
Participant's Notice of Participation designates him as eligible to receive
a Pro-Rated Bonus Amount. Participant's Notice of Participation designates
a twelve-month Severance Window Period. The Company's fiscal year is the
calendar year and therefore no Pro-Rated Bonus Amount has been paid
pursuant to Article V of the Plan. The Participant's 100% Target Bonus is
$30,000. The Participant is entitled to a Severance Payment equal to (i)
100% x $150,000, plus (ii) (166/365) x $30,000 = $163,644.
(iii) CONTINUED EMPLOYEE BENEFITS UPON INVOLUNTARY
TERMINATION FOLLOWING A CHANGE OF CONTROL. If the Participant's employment is
terminated as a result of Involuntary Termination other than for Cause, then the
Participant shall receive health, dental and life insurance coverage at the same
level of coverage as was provided to such Participant immediately prior to the
Change of Control, with the same percentage of the premiums for such insurance
coverage paid for by the Company as was paid for by the Company on behalf of
such Participant immediately prior to the Change of Control (together with the
benefits provided pursuant to the following sentence, the "Company-Paid
Coverage"). If such coverage included the Participant's dependents immediately
prior to the Change of Control, then such dependents shall also be covered under
the same terms as set forth in the preceding sentence. Company-Paid Coverage
shall continue until the earlier of (i) the Health Care Continuation Period, or
(ii) the date that the Participant and his or her covered dependents become
covered under another employer's health, dental and life insurance plans
providing comparable benefits and levels of coverage. For purposes of Title X
of the Consolidated Budget Reconciliation Act of 1985 ("COBRA"), the date of the
"qualifying event" for Participant and his or her covered dependents shall be
the date upon which Company-Paid Coverage terminates. Company-Paid Coverage
shall be provided under either, at the Company's discretion, (i) the Company's
plans, or (ii) no less favorable plans or arrangements secured by the Company.
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<PAGE>
(iv) VOLUNTARY RESIGNATION; TERMINATION FOR CAUSE. If the
Participant's employment terminates by reason of the Participant's voluntary
resignation (and is not an Involuntary Termination), or if the Participant is
terminated for Cause, then the Participant shall not be entitled to receive
severance benefits except for those (if any) as may then be established under
the Company's then existing severance and benefits plans and policies at the
time of such termination other than under this Plan.
(v) DISABILITY; DEATH. If the Company terminates the
Participant's employment as a result of the Participant's Disability, or such
Participant's employment is terminated due to the death of the Participant, then
the Participant shall not be entitled to receive severance or other benefits
except for those (if any) as may then be established under the Company's then
existing severance and benefits plans and policies at the time of such
Disability or death; provided, however, that Participant shall still be eligible
to receive a Retention Payment pursuant to the terms of Article VI.
(b) TERMINATION APART FROM CHANGE OF CONTROL. In the event that a
Participant's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twenty-four (24)-month period
following a Change of Control, then the Participant shall be entitled to receive
severance benefits only as may then be established under the Company's existing
severance and benefit plans and policies at the time of such termination other
than this Plan.
2. TIMING OF SEVERANCE PAYMENTS. Any Severance Payment to which a
Participant is entitled shall be paid by the Company in a lump sum within ten
(10) business days after the Participant's termination date.
ARTICLE V
PRO-RATED BONUS AMOUNT PAYMENTS
1. RIGHT TO PRO-RATED BONUS AMOUNT PAYMENTS. If a Participant (i) is
designated as eligible to receive a Pro-Rated Bonus Amount in his or her Notice
of Participation, and (ii) remains employed by the Company through the last day
of Circon Corporation's fiscal year in which a Change of Control occurs, then,
subject to Article VII hereof, the Participant shall be entitled to receive the
Pro-Rated Bonus Amount.
EXAMPLE: Participant's Notice of Participation designates him as eligible
to receive a Pro-Rated Bonus Payment Amount. The Company's fiscal year is
the calendar year. A Change of Control is consummated on June 15, 1997.
Participant remains employed with the Company through December 31, 1997.
Participant's 100% Target Bonus is $30,000. The Participant is entitled
to a Pro-Rated Bonus Amount payment equal to (166/365) x $30,000 = $13,644.
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2. TIMING OF PRO-RATED BONUS AMOUNT PAYMENTS. Any Pro-Rated Bonus Amount
to which a Participant is entitled shall be paid by the Company in a lump sum
within ten (10) business days after the last day of Circon Corporation's fiscal
year in which a Change of Control occurs.
3. PRO-RATED BONUS AMOUNT PAYMENTS IN LIEU OF TARGET BONUS OTHERWISE
PAYABLE. The payment of any Pro-Rated Bonus Amount under this Article V or as
part of a Severance Payment under Article IV shall replace in its entirety and
be in lieu of any payment to the Participant under the Company's annual
incentive bonus plan for the year in which a Change of Control occurs, except
for any payments under bonus plans adopted by the Company following a Change of
Control.
ARTICLE VI
RETENTION PAYMENTS
1. RIGHT TO RETENTION PAYMENTS. If (i) a Participant remains employed by
the Company for ninety (90) days after a Change of Control, (ii) a Participant's
employment with the Company is terminated due to the death or Disability of the
Participant following a Change of Control but prior to ninety days after a
Change of Control, then, subject to Article VII hereof, the Participant shall be
entitled to receive a Retention Payment equal to the product obtained by
multiplying the Participant's Retention Payment Percentage times the
Participant's Annual Compensation.
EXAMPLE: A Change of Control is consummated on June 15, 1997. Participant
remains employed with the Company for ninety (90) days following the Change
of Control. Participant's Annual Compensation is $150,000. The Retention
Payment Percentage set forth in the Participant's Notice of Participation
is 50%. The Participant is entitled to a Retention Payment equal to 50% x
$150,000 = $75,000.
2. TIMING OF RETENTION PAYMENTS. Any Retention Payment to which a
Participant is entitled shall be paid by the Company in a lump sum within ten
(10) business days after the ninetieth (90th) day after a Change of Control.
ARTICLE VII
GOLDEN PARACHUTE EXCISE TAX AND NON-DEDUCTIBILITY LIMITATIONS
Except if specifically otherwise set forth in a Participant's Notice of
Participation, in the event that the benefits under this Plan, when aggregated
with any other payments or benefits received by a Participant, would
(i) constitute "parachute payments" within the meaning of Section 280G of the
Code and (ii) but for this Article VII, would be subject to the excise tax
imposed by Section 4999 of the Code, then the Participant's Plan benefits shall
be reduced to such lesser amount or degree as would result in no portion of such
benefits being subject to excise tax under Section 4999 of the Code. Unless the
Company and the Participant otherwise agree in writing, any determination
required under this Article VII shall be made in writing by the same firm of
independent public
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accountants who were employed by the Company immediately prior to the Change of
Control (the "Accountants"), whose determination shall be conclusive and binding
upon the Participant and the Company for all purposes. For purposes of making
the calculations required by this Article VII, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and the Participant shall
furnish to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Article VII. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Article VII.
ARTICLE VIII
EMPLOYMENT STATUS; WITHHOLDING
1. EMPLOYMENT STATUS. This Plan does not constitute a contract of
employment or impose on the Participant or the Company any obligation to retain
the Participant as an Employee, to change the status of the Participant's
employment, or to change the Company's policies regarding termination of
employment. The Participant's employment is and shall continue to be at-will,
as defined under applicable law. If the Participant's employment with the
Company or a successor entity terminates for any reason, including (without
limitation) any termination prior to a Change of Control, the Participant shall
not be entitled to any payments, benefits, damages, awards or compensation other
than as provided by this Plan, or as may otherwise be available in accordance
with the Company's established employee plans and practices or other agreements
with the Company at the time of termination.
2. TAXATION OF PLAN PAYMENTS. All amounts paid pursuant to this Plan
shall be subject to regular payroll and withholding taxes.
ARTICLE IX
SUCCESSORS TO COMPANY AND PARTICIPANTS
1. COMPANY'S SUCCESSORS. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Plan and agree expressly to perform the
obligations under this Plan by executing a written agreement. For all purposes
under this Plan, the term "Company" shall include any successor to the Company's
business and/or assets which executes and delivers the assumption agreement
described in this subsection or which becomes bound by the terms of this Plan by
operation of law.
2. PARTICIPANT'S SUCCESSORS. All rights of the Participant hereunder
shall inure to the benefit of, and be enforceable by, the Participant's personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
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ARTICLE X
DURATION, AMENDMENT AND TERMINATION
1. DURATION. This Plan shall terminate on August 20, 1998 unless (i)
extended by the Board, or (ii) a Change of Control occurs prior to August 20,
1998. If a Change of Control occurs prior to August 20, 1998, then this Plan
shall terminate upon the earlier of (i) the date that all obligations of the
Company or successor entities hereunder have been satisfied, or (ii) twenty-four
(24) months after a Change of Control, unless sooner terminated as provided in
this Article X. A termination of this Plan pursuant to the preceding sentences
shall be effective for all purposes, except that such termination shall not
affect the payment or provision of compensation or benefits earned by a
Participant prior to the termination of this Plan.
2. AMENDMENT AND TERMINATION. The Board of the Company shall have the
discretionary authority to amend the Plan in any respect, including as to the
removal or addition of Participants, by resolution adopted by a majority of the
Board of the Company, unless a Change of Control has previously occurred. The
Plan may be terminated by resolution adopted by a majority of the Board, unless
a Change of Control has previously occurred. If a Change of Control occurs, the
Plan and the designation of Participants thereto shall no longer be subject to
amendment, change, substitution, deletion, revocation or termination in any
respect whatsoever.
ARTICLE XI
PLAN ADMINISTRATION
1. APPEAL. A Participant or former Participant who disagrees with their
allotment of benefits under this Plan may file a written appeal with the
designated Human Resources representative. Any claim relating to this Plan
shall be subject to this appeal process. The written appeal must be filed
within sixty (60) days of the Participant's termination date.
The appeal must state the reasons the Participant or former Participant
believes he or she is entitled to different benefits under the Plan. The
designated Human Resources representative shall review the claim. If the claim
is wholly or partially denied, the designated Human Resources representative
shall provide the Participant or former Participant a written notice of the
denial, specifying the reasons the claim was denied. Such notice shall be
provided within ninety (90) days of receiving the written appeal.
If the claim is denied, in whole or in part, the Participant may request a
review of the denial at any time within ninety (90) days following the date the
Participant received written notice of the denial of his or her claim. For
purposes of this subsection, any action required or authorized to be taken by
the Participant may be taken by a representative authorized in writing by the
Participant to represent him or her. The designated Human Resources
representative shall afford the Participant a full and fair review of the
decision denying the claim and, if so requested, shall:
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(a) Permit the Participant to review any documents that are pertinent
to the claim;
(b) Permit the Participant to submit to the designated Human
Resources representative issues and comments in writing; and
(c) The decision on review by the designated Human Resources
representative shall be in writing and shall be issued within 60 days following
receipt of the request for review. The decision on review shall include
specific reasons for the decision and specific references to the pertinent Plan
provisions on which the decision of the designated Human Resources
representative is based.
2. ARBITRATION. If the appeal of a Participant or former Participant is
denied, or if the outcome of said appeal is unsatisfactory to the Participant or
former Participant, the sole remedy hereunder shall be arbitration as set forth
below. Any dispute or controversy arising under or in connection with the Plan
shall be settled by arbitration in accordance with the rules of the American
Arbitration Association then in effect, conducted before a panel of three
arbitrators sitting in a location selected by the Participant within fifty (50)
miles from the location of his or her job with the Company. In consideration
for the Participant's or former Participant's waiver of their right to litigate
any such dispute or controversy in a court of law, and notwithstanding any
contrary provisions of California law regarding allocation of attorney fees,
costs and expenses in arbitration proceedings, the Company agrees to pay, on a
monthly basis, the reasonable attorney fees, costs and expenses (with such
reasonableness determined by the arbitrator) incurred in good faith by the
Participant or former Participant in connection with any such arbitration
regardless of the outcome of the arbitration. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. If the Participant or
former Participant is the prevailing party or recovers any damages in such
arbitration, he or she shall be entitled to receive, in addition thereto, pre-
judgment and post-judgment interest. Punitive damages shall not be awarded.
ARTICLE XII
NOTICE
1. GENERAL. Notices and all other communications contemplated by this
Plan shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Participant, mailed
notices shall be addressed to him or her at the home address which he or she
most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
all notices shall be directed to the attention of its General Counsel.
2. NOTICE OF TERMINATION BY THE COMPANY. Any termination by the Company
of the Participant's employment with the Company at any time within twenty-four
(24) months following a Change of Control shall be communicated by a notice of
termination to the Participant at least five (5)
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days prior to the date of such termination (or at least thirty (30) days prior
to the date of a termination by reason of the Participant's Disability). Such
notice shall indicate the specific termination provision or provisions in this
Plan relied upon (if any), shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision or
provisions so indicated, and shall specify the termination date.
3. NOTICE BY THE PARTICIPANT OF INVOLUNTARY TERMINATION BY THE COMPANY.
In the event that the Participant determines that an Involuntary Termination has
occurred at any time within twenty-four (24) months following a Change of
Control, the Participant shall give written notice that such Involuntary
Termination has occurred. Such notice shall be delivered by the Participant to
the Company within ninety (90) days following the date on which such Involuntary
Termination occurred, shall indicate the specific provision or provisions in
this Plan upon which the Participant relied to make such determination and shall
set forth in reasonable detail the facts and circumstances claimed to provide a
basis for such determination. The failure by the Participant to include in the
notice any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Participant hereunder or preclude
the Participant from asserting such fact or circumstance in enforcing his or her
rights hereunder.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
1. NO DUTY TO MITIGATE. The Participant shall not be required to
mitigate the amount of any payment contemplated by this Plan, nor shall any such
payment be reduced by any earnings that the Participant may receive from any
other source.
2. SEVERABILITY. The invalidity or unenforceability of any provision or
provisions of this Plan shall not affect the validity or enforceability of any
other provision hereof, which shall remain in full force and effect.
3. NO ASSIGNMENT OF BENEFITS. The rights of any person to payments or
benefits under this Plan shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this subsection shall be void.
4. TAX WITHHOLDING. All payments made pursuant to this Plan will be
subject to withholding of applicable income and employment taxes.
5. ASSIGNMENT BY COMPANY. The Company may assign its rights under this
Plan to an affiliate, and an affiliate may assign its rights under this Plan to
another affiliate of the Company or to the Company; provided, however, that no
assignment shall be made if the net worth of the assignee is less than the net
worth of the Company at the time of assignment; provided, further, that the
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Company shall guarantee all benefits payable hereunder. In the case of any such
assignment, the term "Company" when used in this Plan shall mean the corporation
that actually employs the Participant.
ARTICLE XIV
ERISA REQUIRED INFORMATION
1. PLAN SPONSOR. The Plan sponsor and administrator is:
Circon Corporation
6500 Hollister Avenue
Santa Barbara, California 93117
(805) 685-5100
2. DESIGNATED AGENT. Designated agent for service of process:
General Counsel
Circon Corporation
6500 Hollister Avenue
Santa Barbara, California 93117
3. PLAN RECORDS. Plan records are kept on a fiscal year basis.
4. PLAN FUNDING. The Plan is funded from the Company's general assets.
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CIRCON CORPORATION MANAGEMENT RETENTION PLAN
NOTICE OF PARTICIPATION [LEVEL I]
TO: Richard A. Auhll
DATE:
The Board of Directors of the Company has designated you as a Participant
in the Circon Corporation Management Retention Plan (the "Plan"), a copy of
which is attached hereto. The terms and conditions of your participation in the
Plan are as set forth in the Plan and herein. The variables relating to your
Plan participation are as follows:
100% TARGET BONUS AMOUNT INCLUDED IN DEFINITION OF ANNUAL COMPENSATION - Yes
SEVERANCE WINDOW PERIOD - Twenty-four months
SEVERANCE PAYMENT PERCENTAGE - 167%
HEALTH CARE CONTINUATION PERIOD - Two and one-half years
RETENTION PAYMENT PERCENTAGE - 83%
PRO-RATED BONUS AMOUNT ELIGIBILITY - Yes
GOLDEN PARACHUTE EXCISE TAX TREATMENT -
Instead of the limitation set forth in Article VII of the Plan, the
following provisions shall apply:
In the event that the benefits provided for in the Plan, when aggregated
with any other payments or benefits received by you, would (i) constitute
"parachute payments" within the meaning of Section 280G of the Code, and (ii)
would be subject to the excise tax imposed by Section 4999 of the Code (the
"Excise Tax"), then your Plan benefits shall be either
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no
portion of such benefits being subject to the Excise Tax,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the Excise Tax, results in the receipt by you
on an after-tax basis, of the greatest amount of benefits, notwithstanding that
all or some portion of such benefits may be taxable under Section 4999 of the
Code. Unless the Company and you otherwise agree in writing, any determination
required under this paragraph shall be made in writing by the same firm of
independent public accountants who
<PAGE>
were employed by the Company immediately prior to the Change of Control (the
"Accountants") whose determination shall be conclusive and binding upon you and
the Company for all purposes. For purposes of making the calculations required
by this paragraph, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999 of
the Code. The Company and you shall furnish to the Accountants such information
and documents as the Accountants may reasonably request in order to make a
determination under this paragraph. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this paragraph.
If you agree to participate in the Plan on these terms and conditions,
please acknowledge your acceptance by signing below. Please return the signed
copy of this Notice of Participation within ten (10) days of the date set forth
above to:
Bruce Thompson
Circon Corporation
6500 Hollister Avenue
Santa Barbara, California 93117
Your failure to timely remit this signed Notice of Participation will result in
your removal from the Plan. Please retain a copy of this Notice of
Participation, along with the Plan, for your records.
Date: Signature:
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<PAGE>
CIRCON CORPORATION MANAGEMENT RETENTION PLAN
NOTICE OF PARTICIPATION [LEVEL II]
TO: [NAME OF PARTICIPANT]
DATE:
The Board of Directors of the Company has designated you as a Participant
in the Circon Corporation Management Retention Plan (the "Plan"), a copy of
which is attached hereto. The terms and conditions of your participation in the
Plan are as set forth in the Plan and herein. The variables relating to your
Plan participation are as follows:
100% TARGET BONUS AMOUNT INCLUDED IN DEFINITION OF ANNUAL COMPENSATION - Yes
SEVERANCE WINDOW PERIOD - Twenty-four months
SEVERANCE PAYMENT PERCENTAGE - 133%
HEALTH CARE CONTINUATION PERIOD - Two Years
RETENTION PAYMENT PERCENTAGE - 67%
PRO-RATED BONUS AMOUNT ELIGIBILITY - Yes
If you agree to participate in the Plan on these terms and conditions,
please acknowledge your acceptance by signing below. Please return the signed
copy of this Notice of Participation within ten (10) days of the date set forth
above to:
Bruce Thompson
Circon Corporation
6500 Hollister Avenue
Santa Barbara, California 93117
Your failure to timely remit this signed Notice of Participation will result in
your removal from the Plan. Please retain a copy of this Notice of
Participation, along with the Plan, for your records. Should you have any
questions regarding this Notice of Participation or the Plan, please do not
hesitate to contact Bruce Thompson at 805-961-1650.
Date: Signature:
---------------- ------------------------------
<PAGE>
CIRCON CORPORATION MANAGEMENT RETENTION PLAN
NOTICE OF PARTICIPATION [LEVEL III]
TO: [NAME OF PARTICIPANT]
DATE:
The Board of Directors of the Company has designated you as a Participant
in the Circon Corporation Management Retention Plan (the "Plan"), a copy of
which is attached hereto. The terms and conditions of your participation in the
Plan are as set forth in the Plan and herein. The variables relating to your
Plan participation are as follows:
100% TARGET BONUS AMOUNT INCLUDED IN DEFINITION OF ANNUAL COMPENSATION - Yes
SEVERANCE WINDOW PERIOD - Twenty-four months
SEVERANCE PAYMENT PERCENTAGE - 125%
HEALTH CARE CONTINUATION PERIOD - One and one-half years
RETENTION PAYMENT PERCENTAGE - 25%
PRO-RATED BONUS AMOUNT ELIGIBILITY - Yes
If you agree to participate in the Plan on these terms and conditions,
please acknowledge your acceptance by signing below. Please return the signed
copy of this Notice of Participation within ten (10) days of the date set forth
above to:
Bruce Thompson
Circon Corporation
6500 Hollister Avenue
Santa Barbara, California 93117
Your failure to timely remit this signed Notice of Participation will result in
your removal from the Plan. Please retain a copy of this Notice of
Participation, along with the Plan, for your records. Should you have any
questions regarding this Notice of Participation or the Plan, please do not
hesitate to contact Bruce Thompson at 805-961-1650.
Date: Signature:
---------------- ------------------------------
<PAGE>
CIRCON CORPORATION MANAGEMENT RETENTION PLAN
NOTICE OF PARTICIPATION [LEVEL IV]
TO: [NAME OF PARTICIPANT]
DATE:
The Board of Directors of the Company has designated you as a Participant
in the Circon Corporation Management Retention Plan (the "Plan"), a copy of
which is attached hereto. The terms and conditions of your participation in the
Plan are as set forth in the Plan. The initially capitalized terms used in this
Notice are formally defined in the Plan, so you should look in the Plan for
their precise meaning. The variables relating to your Plan participation are as
follows:
100% TARGET BONUS AMOUNT INCLUDED IN DEFINITION OF ANNUAL COMPENSATION - No
SEVERANCE WINDOW PERIOD - Twelve months
SEVERANCE PAYMENT PERCENTAGE - 62.5%
HEALTH CARE CONTINUATION PERIOD - Nine months
RETENTION PAYMENT PERCENTAGE - 12.5%
PRO-RATED BONUS AMOUNT ELIGIBILITY - No
SUMMARY OF BENEFITS
There are two components to your Plan benefits: (i) retention/severance
payments, and (ii) post-employment coverage under the Company's group health and
life insurance plans.
RETENTION/SEVERANCE PAYMENTS
The total potential retention/severance payment is based on 75% of your
annual base salary.
The retention payment component is equal to one-sixth of the total cash
payment. It will be earned ninety days following a change of control of the
Company if you have remained employed by the Company or the acquiring entity.
The retention payment is also triggered if you are involuntarily terminated
without cause or are constructively terminated (all as defined in the Plan)
following a change of control but prior to ninety days following a change of
control.
The severance payment component is equal to five-sixths of the total cash
payment (for vice-presidents and senior managers). It will be paid only if you
are involuntarily terminated without cause or are constructively terminated
(again, as defined in the Plan) within twelve months following a change of
control.
<PAGE>
POST-EMPLOYMENT BENEFITS
In the event of an involuntary termination without cause or constructive
termination (as defined in the Plan) within twelve months following a change of
control, you (and, if covered prior to the change of control, your dependents)
will receive continued group health, dental and life insurance coverage. The
Company is required to pay the same percentage of the related insurance premiums
as were paid prior to the change of control. The Company continues to make
these premium payments for a period of nine months, or, if earlier, until you
become covered under comparable benefit plans of another employer.
This Notice is just intended to summarize the Plan provisions and to set
forth the variables relating to your participation, not to change the provisions
of the Plan. The specific terms and conditions of your participation in the
Plan are set forth in the attached Plan.
If you agree to participate in the Plan on these terms and conditions,
please acknowledge your acceptance by signing below. Please return the signed
copy of this Notice of Participation within ten (10) days of the date set forth
above to:
Bruce Thompson
Circon Corporation
6500 Hollister Avenue
Santa Barbara, California 93117
Your failure to timely remit this signed Notice of Participation will result in
your removal from the Plan. Please retain a copy of this Notice of
Participation, along with the Plan, for your records. Should you have any
questions regarding this Notice of Participation or the Plan, please do not
hesitate to contact Bruce Thompson at 805-961-1650.
Date: Signature:
---------------- -----------------------------
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<PAGE>
Exhibit 2
CIRCON CORPORATION
SALES FORCE RETENTION PLAN
Introduction
It is expected that Circon Corporation (the "Company") from time to time
will consider the possibility of an acquisition by another company or other
change of control. The Board of Directors of the Company (the "Board")
recognizes that such consideration can be a distraction to key sales employees
and can cause such employees to consider alternative employment opportunities.
The Board has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
objectivity of these employees, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below) of the Company.
The Board believes that it is in the best interests of the Company and its
stockholders to provide these employees with an incentive to continue their
employment and to motivate these employees to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
The Board believes that it is imperative to provide these employees with
(i) certain retention benefits payable upon remaining in the employ of the
Company for a specified period following a Change of Control, and (ii) certain
severance benefits upon termination of employment following a Change of Control.
These benefits provide these employees with enhanced financial security and
provide efficient incentive and encouragement to these employees to remain with
the Company notwithstanding the possibility or occurrence of a Change of
Control.
Accordingly, the following plan has been developed and adopted.
ARTICLE I
ESTABLISHMENT OF PLAN
1. ESTABLISHMENT OF PLAN. As of the Effective Date, the Company hereby
establishes a sales force retention plan to be known as the "Sales Force
Retention Plan" (the "Plan"), as set forth in this document. The purposes of
the Plan are as set forth in the Introduction.
2. APPLICABILITY OF PLAN. Subject to the terms of this Plan, the
benefits provided by this Plan shall be available to Participants.
3. CONTRACTUAL RIGHT TO BENEFITS. Subject to the terms of this Plan,
this Plan establishes and vests in each Participant a contractual right to the
benefits to which he or she is entitled pursuant to the terms thereof,
enforceable by the Participant against the Company.
<PAGE>
ARTICLE II
DEFINITIONS AND CONSTRUCTION
1. DEFINITIONS. Whenever used in the Plan, the following terms shall
have the meanings set forth below and, when the meaning is intended, the initial
letter of the term is capitalized.
(a) CAUSE. "Cause" shall mean (i) any act of personal dishonesty
taken by the Participant in connection with his responsibilities as an Employee
and intended to result in substantial personal enrichment of the Participant,
(ii) the Participant's conviction of a felony, (iii) a willful act by the
Participant which constitutes gross misconduct and which is injurious to the
Company, or (iv) continued substantial violations by the Participant of the
Participant's employment duties which are demonstrably willful and deliberate on
the Participant's part after there has been delivered to the Participant a
written demand for performance from the Company which specifically sets forth
the factual basis for the Company's belief that the Participant has not
substantially performed his duties.
(b) CHANGE OF CONTROL. "Change of Control" shall mean the occurrence
of any of the following events:
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
(ii) A change in the composition of the Board occurring
within a two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company); or
(iii) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation; or
(iv) the consummation of the sale or disposition by the
Company of all or substantially all the Company's assets.
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<PAGE>
(c) COMPANY. "Company" shall mean Circon Corporation, any subsidiary
corporations, any successor entities as provided in Article VII hereof, and any
parent or subsidiaries of such successor entities.
(d) DISABILITY. "Disability" shall mean that the Participant has
been unable to perform his duties as an Employee as the result of incapacity due
to physical or mental illness, and such inability, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Participant or the
Participant's legal representative (such agreement as to acceptability not to be
unreasonably withheld). Termination resulting from Disability may only be
effected after at least 30 days' written notice by the Company of its intention
to terminate the Participant's employment. In the event that the Participant
resumes the performance of substantially all of his duties hereunder before the
termination of his employment becomes effective, the notice of intent to
terminate shall automatically be deemed to have been revoked.
(e) EFFECTIVE DATE. "Effective Date" shall mean the date the Plan is
approved by the Board.
(f) EMPLOYEE. "Employee" shall mean an individual employed by the
Company.
(g) ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(h) MONTHLY COMPENSATION. "Monthly Compensation" shall mean the
amount of travel allowance, pro-rated bonus (including 100% of amounts required
to be held in a suspense account until year-end) and compensation earned by a
Participant in a specified calendar month.
(i) PARTICIPANT. "Participant" shall mean an individual who meets
the eligibility requirements of Article III.
(j) PLAN. "Plan" shall mean this Circon Corporation Sales Force
Retention Plan.
(k) RETENTION PAYMENT. "Retention Payment" shall mean the payment of
retention compensation as provided in Article V hereof.
(l) SEVERANCE PAYMENT. "Severance Payment" shall mean the payment of
severance compensation as provided in Article IV hereof.
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<PAGE>
ARTICLE III
ELIGIBILITY
Each Employee who is designated by the Board and who is a sales
territory manager or a sales video specialist of the Company who is not on
Company probation at the time of a Change of Control shall be a Participant in
the Plan. A Participant shall cease to be a Participant in the Plan when he or
she ceases to be an Employee, unless such Participant is entitled to benefits
hereunder. A Participant entitled to benefits hereunder shall remain a
Participant in the Plan until the full amount of the benefits have been
delivered to the Participant.
ARTICLE IV
SEVERANCE BENEFITS
1. RIGHT TO SEVERANCE BENEFITS.
(a) TERMINATION FOLLOWING A CHANGE OF CONTROL. If a Participant's
employment terminates at any time within twelve (12) months after a Change of
Control, then the Participant shall be entitled to receive severance benefits as
follows:
(i) SEVERANCE PAY UPON TERMINATION BY COMPANY OTHER THAN
FOR CAUSE WITHIN NINETY DAYS FOLLOWING A CHANGE OF CONTROL. If the
Participant's employment is terminated by the Company other than for Cause
within ninety (90) days following a Change of Control, then the Participant
shall be entitled to receive a Severance Payment equal to the sum of (i) his or
her Monthly Compensation for the last two full calendar months immediately
preceding the Change of Control, and (ii) his or her Retention Payment.
EXAMPLE: A Change of Control is consummated on June 15, 1997. Participant
is terminated by the Company other than for Cause as of July 1, 1997.
Participant's Monthly Compensation for April 1997 is $7,000. Participant's
Monthly Compensation for May 1997 is $8,000. The Participant is entitled
to a Severance Payment of $30,000.
(ii) SEVERANCE PAY UPON TERMINATION BY COMPANY OTHER THAN
FOR CAUSE ON OR AFTER NINETY DAYS FOLLOWING A CHANGE OF CONTROL. If the
Participant's employment is terminated by the Company other than for Cause on or
after ninety (90) days following a Change of Control, then the Participant shall
be entitled to receive a Severance Payment equal to his or her Monthly
Compensation for the last two full calendar months immediately preceding the
Change of Control.
EXAMPLE: A Change of Control is consummated on June 15, 1997. Participant
is terminated by the Company other than for Cause as of October 1, 1997.
Participant's
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<PAGE>
Monthly Compensation for April 1997 is $7,000. Participant's Monthly
Compensation for May 1997 is $8,000. The Participant is entitled to a
Severance Payment of $15,000.
(iii) VOLUNTARY RESIGNATION; TERMINATION FOR CAUSE. If the
Participant's employment terminates by reason of the Participant's voluntary
resignation, or if the Participant is terminated by the Company for Cause, then
the Participant shall not be entitled to receive severance benefits except for
those (if any) as may then be established under the Company's then existing
severance and benefits plans and policies at the time of such termination other
than under this Plan.
(iv) DISABILITY; DEATH. If the Company terminates the
Participant's employment as a result of the Participant's Disability, or such
Participant's employment is terminated due to the death of the Participant, then
the Participant shall not be entitled to receive severance or other benefits
except for those (if any) as may then be established under the Company's then
existing severance and benefits plans and policies at the time of such
Disability or death; provided, however, that Participant shall still be eligible
to receive a Retention Payment pursuant to the terms of Article V.
(b) TERMINATION APART FROM CHANGE OF CONTROL. In the event that a
Participant's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve (12)-month period
following a Change of Control, then the Participant shall be entitled to receive
severance benefits only as may then be established under the Company's existing
severance and benefit plans and policies at the time of such termination other
than this Plan.
2. TIMING OF SEVERANCE PAYMENTS. Any Severance Payment to which a
Participant is entitled shall be paid by the Company in a lump sum within ten
(10) business days after the Participant's termination date.
ARTICLE V
RETENTION PAYMENTS
1. RIGHT TO RETENTION PAYMENTS. If (i) a Participant remains employed by
the Company for ninety (90) days after a Change of Control, or (ii) a
Participant's employment with the Company is terminated due to the death or
Disability of the Participant following a Change of Control but prior to ninety
days after a Change of Control, then the Participant shall be entitled to
receive a Retention Payment equal to his or her Monthly Compensation for the
last two full calendar months immediately preceding the Change of Control.
EXAMPLE: A Change of Control is consummated on June 15, 1997. Participant
remains employed with the Company for ninety (90) days following the Change
of Control. Participant's Monthly Compensation for April 1997 is
$7,000. Participant's Monthly Compensation for May 1997 is $8,000. The
Participant is entitled to a Retention Payment equal to $15,000.
-5-
<PAGE>
2. TIMING OF RETENTION PAYMENTS. Any Retention Payment to which a
Participant is entitled shall be paid by the Company in a lump sum within ten
(10) business days after the ninetieth (90th) day after a Change of Control.
ARTICLE VI
EMPLOYMENT STATUS; WITHHOLDING
1. EMPLOYMENT STATUS. This Plan does not constitute a contract of
employment or impose on the Participant or the Company any obligation to retain
the Participant as an Employee, to change the status of the Participant's
employment, or to change the Company's policies regarding termination of
employment. The Participant's employment is and shall continue to be at-will,
as defined under applicable law. If the Participant's employment with the
Company or a successor entity terminates for any reason, including (without
limitation) any termination prior to a Change of Control, the Participant shall
not be entitled to any payments, benefits, damages, awards or compensation other
than as provided by this Plan, or as may otherwise be available in accordance
with the Company's established employee plans and practices or other agreements
with the Company at the time of termination.
2. TAXATION OF PLAN PAYMENTS. All amounts paid pursuant to this Plan
shall be subject to regular payroll and withholding taxes.
ARTICLE VII
SUCCESSORS TO COMPANY AND PARTICIPANTS
1. COMPANY'S SUCCESSORS. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Plan and agree expressly to perform the
obligations under this Plan by executing a written agreement. For all purposes
under this Plan, the term "Company" shall include any successor to the Company's
business and/or assets which executes and delivers the assumption agreement
described in this subsection or which becomes bound by the terms of this Plan by
operation of law.
2. PARTICIPANT'S SUCCESSORS. All rights of the Participant hereunder
shall inure to the benefit of, and be enforceable by, the Participant's personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
-6-
<PAGE>
ARTICLE VIII
DURATION, AMENDMENT AND TERMINATION
1. DURATION. This Plan shall terminate on August 20, 1998 unless (i)
extended by the Board, or (ii) a Change of Control occurs prior to August 20,
1998. If a Change of Control occurs prior to August 20, 1998, then this Plan
shall terminate upon the earlier of (i) the date that all obligations of the
Company or successor entities hereunder have been satisfied, or (ii) twelve (12)
months after a Change of Control, unless sooner terminated as provided in this
Article VIII. A termination of this Plan pursuant to the preceding sentences
shall be effective for all purposes, except that such termination shall not
affect the payment or provision of compensation or benefits earned by a
Participant prior to the termination of this Plan.
2. AMENDMENT AND TERMINATION. The Board of the Company shall have the
discretionary authority to amend the Plan in any respect, including as to the
removal or addition of Participants, by resolution adopted by a majority of the
Board of the Company, unless a Change of Control has previously occurred. The
Plan may be terminated by resolution adopted by a majority of the Board, unless
a Change of Control has previously occurred. If a Change of Control occurs, the
Plan and the designation of Participants thereto shall no longer be subject to
amendment, change, substitution, deletion, revocation or termination in any
respect whatsoever.
ARTICLE IX
PLAN ADMINISTRATION
1. APPEAL. A Participant or former Participant who disagrees with their
allotment of benefits under this Plan may file a written appeal with the
designated Human Resources representative. Any claim relating to this Plan
shall be subject to this appeal process. The written appeal must be filed
within sixty (60) days of the Participant's termination date.
The appeal must state the reasons the Participant or former Participant
believes he or she is entitled to different benefits under the Plan. The
designated Human Resources representative shall review the claim. If the claim
is wholly or partially denied, the designated Human Resources representative
shall provide the Participant or former Participant a written notice of the
denial, specifying the reasons the claim was denied. Such notice shall be
provided within ninety (90) days of receiving the written appeal.
If the claim is denied, in whole or in part, the Participant may request a
review of the denial at any time within ninety (90) days following the date the
Participant received written notice of the denial of his or her claim. For
purposes of this subsection, any action required or authorized to be taken by
the Participant may be taken by a representative authorized in writing by the
Participant to represent him or her. The designated Human Resources
representative shall afford the Participant a full and fair review of the
decision denying the claim and, if so requested, shall:
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<PAGE>
(a) Permit the Participant to review any documents that are pertinent
to the claim;
(b) Permit the Participant to submit to the designated Human
Resources representative issues and comments in writing; and
(c) The decision on review by the designated Human Resources
representative shall be in writing and shall be issued within 60 days following
receipt of the request for review. The decision on review shall include
specific reasons for the decision and specific references to the pertinent Plan
provisions on which the decision of the designated Human Resources
representative is based.
2. ARBITRATION. If the appeal of a Participant or former Participant is
denied, or if the outcome of said appeal is unsatisfactory to the Participant or
former Participant, the sole remedy hereunder shall be arbitration as set forth
below. Any dispute or controversy arising under or in connection with the Plan
shall be settled by arbitration in accordance with the rules of the American
Arbitration Association then in effect, conducted before a panel of three
arbitrators sitting in a location selected by the Participant within fifty (50)
miles from the location of his or her job with the Company. In consideration
for the Participant's or former Participant's waiver of their right to litigate
any such dispute or controversy in a court of law, and notwithstanding any
contrary provisions of California law regarding allocation of attorney fees,
costs and expenses in arbitration proceedings, the Company agrees to pay, on a
monthly basis, the reasonable attorney fees, costs and expenses (with such
reasonableness determined by the arbitrator) incurred in good faith by the
Participant or former Participant in connection with any such arbitration
regardless of the outcome of the arbitration. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. If the Participant or
former Participant is the prevailing party or recovers any damages in such
arbitration, he or she shall be entitled to receive, in addition thereto, pre-
judgment and post-judgment interest. Punitive damages shall not be awarded.
ARTICLE X
NOTICE
1. GENERAL. Notices and all other communications contemplated by this
Plan shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Participant, mailed
notices shall be addressed to him or her at the home address which he or she
most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
all notices shall be directed to the attention of its General Counsel.
2. NOTICE OF TERMINATION BY THE COMPANY. Any termination by the Company
of the Participant's employment with the Company at any time within twelve (12)
months following a
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<PAGE>
Change of Control shall be communicated by a notice of termination to the
Participant at least five (5) days prior to the date of such termination (or at
least thirty (30) days prior to the date of a termination by reason of the
Participant's Disability). Such notice shall indicate the specific termination
provision or provisions in this Plan relied upon (if any), shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision or provisions so indicated, and shall specify
the termination date.
ARTICLE XI
MISCELLANEOUS PROVISIONS
1. NO DUTY TO MITIGATE. The Participant shall not be required to
mitigate the amount of any payment contemplated by this Plan, nor shall any such
payment be reduced by any earnings that the Participant may receive from any
other source.
2. SEVERABILITY. The invalidity or unenforceability of any provision or
provisions of this Plan shall not affect the validity or enforceability of any
other provision hereof, which shall remain in full force and effect.
3. NO ASSIGNMENT OF BENEFITS. The rights of any person to payments or
benefits under this Plan shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this subsection shall be void.
4. TAX WITHHOLDING. All payments made pursuant to this Plan will be
subject to withholding of applicable income and employment taxes.
5. ASSIGNMENT BY COMPANY. The Company may assign its rights under this
Plan to an affiliate, and an affiliate may assign its rights under this Plan to
another affiliate of the Company or to the Company; provided, however, that no
assignment shall be made if the net worth of the assignee is less than the net
worth of the Company at the time of assignment; provided, further, that the
Company shall guarantee all benefits payable hereunder. In the case of any such
assignment, the term "Company" when used in this Plan shall mean the corporation
that actually employs the Participant.
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<PAGE>
ARTICLE XII
ERISA REQUIRED INFORMATION
1. PLAN SPONSOR. The Plan sponsor and administrator is:
Circon Corporation
6500 Hollister Avenue
Santa Barbara, California 93117
(805) 685-5100
2. DESIGNATED AGENT. Designated agent for service of process:
General Counsel
Circon Corporation
6500 Hollister Avenue
Santa Barbara, California 93117
3. PLAN RECORDS. Plan records are kept on a fiscal year basis.
4. PLAN FUNDING. The Plan is funded from the Company's general assets.
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<PAGE>
CIRCON CORPORATION
SALES FORCE RETENTION PLAN
NOTICE OF PARTICIPATION
TO: [NAME OF PARTICIPANT]
DATE: August 27, 1996
You are eligible to participate in the Circon Corporation Sales Force
Retention Plan (the "Plan"), a copy of which is attached. Please note that the
initially capitalized terms used in this Notice are formally defined in the
Plan, so you should look in the Plan for their precise meaning.
The Plan provides retention and severance benefits for all sales territory
managers and sales video specialists who are not on probation at the time of a
Change of Control. It provides for a maximum payment of twice the compensation
earned in the last two full calendar months preceding the Change of Control.
Compensation is defined for this purpose as travel allowance, pro-rated bonus
(including 100% of amounts required to be held in a suspense account until year-
end) and commissions.
The retention payment component is equal to the compensation that you
earned in the last two full calendar months preceding the change of control.
You will earn this payment ninety days following a change of control if you are
eligible and remain employed by the Company. This retention payment is also
triggered if a you are eligible and are involuntarily terminated without cause
following a change of control but prior to ninety days following such change of
control.
The severance payment component is also equal to the compensation earned in
the last two full calendar months preceding the change of control. It will be
paid only if you are eligible and are involuntarily terminated without cause
within twelve months following a change of control.
This Notice is just intended to summarize the Plan provisions, not to
change the provisions of the Plan or your participation in the Plan. The
specific terms and conditions of your participation in the Plan are set forth in
the attached Plan.
Please retain a copy of this Notice of Participation, along with the Plan,
for your records. Should you have any questions regarding this Notice of
Participation or the Plan, please do not hesitate to contact Bruce Thompson at
805-961-1650.
<PAGE>
Exhibit 3
CIRCON CORPORATION
MANAGERS, PROFESSIONALS & KEY CONTRIBUTORS RETENTION PLAN
Introduction
It is expected that Circon Corporation (the "Company") from time to time
will consider the possibility of an acquisition by another company or other
change of control. The Board of Directors of the Company (the "Board")
recognizes that such consideration can be a distraction to key employees and can
cause such employees to consider alternative employment opportunities. The
Board has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
objectivity of these employees, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below) of the Company.
The Board believes that it is in the best interests of the Company and its
stockholders to provide these employees with an incentive to continue their
employment and to motivate these employees to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.
The Board believes that it is imperative to provide these employees with
(i) certain retention benefits payable upon remaining in the employ of the
Company for a specified period following a Change of Control, and (ii) certain
severance benefits upon termination of employment following a Change of Control.
These benefits provide these employees with enhanced financial security and
provide efficient incentive and encouragement to these employees to remain with
the Company notwithstanding the possibility or occurrence of a Change of
Control.
Accordingly, the following plan has been developed and adopted.
ARTICLE I
ESTABLISHMENT OF PLAN
1. ESTABLISHMENT OF PLAN. As of the Effective Date, the Company hereby
establishes a retention plan to be known as the Managers, Professionals & Key
Contributors Retention Plan (the "Plan"), as set forth in this document. The
purposes of the Plan are as set forth in the Introduction.
2. APPLICABILITY OF PLAN. Subject to the terms of this Plan, the
benefits provided by this Plan shall be available to those Employees of the
Company who, on or after the Effective Date, receive a Notice of Participation.
3. CONTRACTUAL RIGHT TO BENEFITS. Subject to the terms of this Plan,
this Plan establishes and vests in each Participant a contractual right to the
benefits to which he or she is entitled pursuant to the terms thereof,
enforceable by the Participant against the Company.
<PAGE>
ARTICLE II
DEFINITIONS AND CONSTRUCTION
1. DEFINITIONS. Whenever used in the Plan, the following terms shall
have the meanings set forth below and, when the meaning is intended, the initial
letter of the term is capitalized.
(a) BASE SALARY. "Base Salary" shall mean the Participant's base
salary from the Company as in effect immediately prior to a Change of Control.
(b) CAUSE. "Cause" shall mean (i) any act of personal dishonesty
taken by the Participant in connection with his responsibilities as an Employee
and intended to result in substantial personal enrichment of the Participant,
(ii) the Participant's conviction of a felony, (iii) a willful act by the
Participant which constitutes gross misconduct and which is injurious to the
Company, or (iv) continued substantial violations by the Participant of the
Participant's employment duties which are demonstrably willful and deliberate on
the Participant's part after there has been delivered to the Participant a
written demand for performance from the Company which specifically sets forth
the factual basis for the Company's belief that the Participant has not
substantially performed his duties.
(c) CHANGE OF CONTROL. "Change of Control" shall mean the occurrence
of any of the following events:
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing [50%] or more of the total
voting power represented by the Company's then outstanding voting securities; or
(ii) A change in the composition of the Board occurring
within a two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company); or
(iii) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation; or
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(iv) the consummation of the sale or disposition by the
Company of all or substantially all the Company's assets.
(d) COMPANY. "Company" shall mean Circon Corporation, any subsidiary
corporations, any successor entities as provided in Article VII hereof, and any
parent or subsidiaries of such successor entities.
(e) DISABILITY. "Disability" shall mean that the Participant has
been unable to perform his duties as an Employee as the result of incapacity due
to physical or mental illness, and such inability, at least 26 weeks after its
commencement, is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Participant or the
Participant's legal representative (such agreement as to acceptability not to be
unreasonably withheld). Termination resulting from Disability may only be
effected after at least 30 days' written notice by the Company of its intention
to terminate the Participant's employment. In the event that the Participant
resumes the performance of substantially all of his duties hereunder before the
termination of his employment becomes effective, the notice of intent to
terminate shall automatically be deemed to have been revoked.
(f) EFFECTIVE DATE. "Effective Date" shall mean the date the Plan is
approved by the Board.
(g) EMPLOYEE. "Employee" shall mean an individual employed by the
Company.
(h) ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(i) NOTICE OF PARTICIPATION. "Notice of Participation" shall mean an
individualized written notice of participation in the Plan from an authorized
Employee of the Company.
(j) PARTICIPANT. "Participant" shall mean an individual who meets
the eligibility requirements of Article III.
(k) PLAN. "Plan" shall mean this Circon Corporation Management
Retention Plan.
(l) RETENTION PAYMENT. "Retention Payment" shall mean the payment of
retention compensation as provided in Article V hereof.
(m) SEVERANCE PAYMENT. "Severance Payment" shall mean the payment of
severance compensation as provided in Article IV hereof.
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ARTICLE III
ELIGIBILITY
Each Employee who is designated by the Board and who receives a Notice
of Participation shall be a Participant in the Plan. A Participant shall cease
to be a Participant in the Plan when he or she ceases to be an Employee, unless
such Participant is entitled to benefits hereunder. A Participant entitled to
benefits hereunder shall remain a Participant in the Plan until the full amount
of the benefits have been delivered to the Participant.
ARTICLE IV
SEVERANCE BENEFITS
1. RIGHT TO SEVERANCE BENEFITS.
(a) TERMINATION FOLLOWING A CHANGE OF CONTROL. If a Participant's
employment terminates at any time within twelve (12) months after a Change of
Control, then the Participant shall be entitled to receive severance benefits as
follows:
(i) SEVERANCE PAY UPON TERMINATION BY COMPANY OTHER THAN
FOR CAUSE WITHIN NINETY DAYS FOLLOWING A CHANGE OF CONTROL. If the
Participant's employment is terminated by the Company other than for Cause
within ninety (90) days following a Change of Control, then the Participant
shall be entitled to receive a Severance Payment equal to the sum of (i) two
weeks' of his or her Base Salary multiplied by 66.67% for each full year of
service with the Company or an entity acquired by the Company as of the date of
the Change of Control, and (ii) his or her Retention Payment, subject to a
minimum Severance Payment equal to three months' Base Salary and a maximum
Severance Payment equal to one year's Base Salary.
EXAMPLE: A Change of Control is consummated on June 15, 1997. Participant
is terminated by the Company other than for Cause as of July 1, 1997.
Participant had worked three and three-quarters years with Circon as of the
date of the Change of Control. Participant's Base Salary is $1,000 per
week ($52,000 per year). The Participant's Severance Payment would be
($2,000 x 66.67% x 3) + ($2,000 x 33.33% x 3) = $6,000. However, this
amount is less than three months' Base Salary, which equals $13,000.
Therefore the Participant is entitled to a Severance Payment of $13,000.
(ii) SEVERANCE PAY UPON TERMINATION BY COMPANY OTHER THAN
FOR CAUSE ON OR AFTER NINETY DAYS FOLLOWING A CHANGE OF CONTROL. If the
Participant's employment is terminated by the Company other than for Cause on or
after ninety (90) days following a Change of Control, then the Participant shall
be entitled to receive a Severance Payment equal to two weeks of his or her Base
Salary multiplied by 66.67% for each full year of service with the Company or an
entity acquired by the Company as of the date of the Change of Control (with a
minimum Severance
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Payment equal to two months' Base Salary and a maximum Severance Payment equal
to eight months' Base Salary).
EXAMPLE: A Change of Control is consummated on June 15, 1997.
Participant is terminated by the Company other than for Cause as of October
1, 1997. Participant had worked three and three-quarters years with Circon
prior to the date of the Change of Control. Participant's Base Salary is
$1,000 per week ($52,000 per year). The Participant's Severance Payment
would be ($2,000 x 66.67% x 3) = $4,000.20. However, this amount is less
than two months' Base Salary, which equals $8,666.67 Therefore the
Participant is entitled to a Severance Payment of $8,666.67.
(iii) VOLUNTARY RESIGNATION; TERMINATION FOR CAUSE. If the
Participant's employment terminates by reason of the Participant's voluntary
resignation, or if the Participant is terminated by the Company for Cause, then
the Participant shall not be entitled to receive severance benefits except for
those (if any) as may then be established under the Company's then existing
severance and benefits plans and policies at the time of such termination other
than under this Plan.
(iv) DISABILITY; DEATH. If the Company terminates the
Participant's employment as a result of the Participant's Disability, or such
Participant's employment is terminated due to the death of the Participant, then
the Participant shall not be entitled to receive severance or other benefits
except for those (if any) as may then be established under the Company's then
existing severance and benefits plans and policies at the time of such
Disability or death; provided, however, that Participant shall still be eligible
to receive a Retention Payment pursuant to the terms of Article V.
(b) TERMINATION APART FROM CHANGE OF CONTROL. In the event that a
Participant's employment is terminated for any reason, either prior to the
occurrence of a Change of Control or after the twelve (12)-month period
following a Change of Control, then the Participant shall be entitled to receive
severance benefits only as may then be established under the Company's existing
severance and benefit plans and policies at the time of such termination other
than this Plan.
2. TIMING OF SEVERANCE PAYMENTS. Any Severance Payment to which a
Participant is entitled shall be paid by the Company in a lump sum within ten
(10) business days after the Participant's termination date.
ARTICLE V
RETENTION PAYMENTS
1. RIGHT TO RETENTION PAYMENTS. If (i) a Participant remains
employed by the Company for ninety (90) days after a Change of Control, or (ii)
a Participant's employment with the Company is terminated due to the death or
Disability of the Participant following a Change of Control but prior to ninety
days after a Change of Control, then the Participant shall be entitled to
receive a
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Retention Payment equal to two weeks' of his or her Base Salary multiplied by
33.33% for each full year of service with the Company or an entity acquired by
the Company as of the date of the Change of Control, with a minimum Retention
Payment equal to one months' Base Salary and a maximum Retention Payment equal
to four months' Base Salary.
EXAMPLE: A Change of Control is consummated on June 15, 1997. Participant
remains employed with the Company for ninety (90) days following the Change
of Control. Participant's Base Salary is $1,000 per week ($52,000 per
year). The Participant's Retention Payment would be ($2,000 x 33.33% x 3)
= $1999.80. However, this amount is less than one months' Base Salary,
which equals $4,333.33 Therefore the Participant is entitled to a
Retention Payment of $4333.33.
2. TIMING OF RETENTION PAYMENTS. Any Retention Payment to which a
Participant is entitled shall be paid by the Company in a lump sum within ten
(10) business days after the ninetieth (90th) day after a Change of Control.
ARTICLE VI
EMPLOYMENT STATUS; WITHHOLDING
1. EMPLOYMENT STATUS. This Plan does not constitute a contract of
employment or impose on the Participant or the Company any obligation to retain
the Participant as an Employee, to change the status of the Participant's
employment, or to change the Company's policies regarding termination of
employment. The Participant's employment is and shall continue to be at-will,
as defined under applicable law. If the Participant's employment with the
Company or a successor entity terminates for any reason, including (without
limitation) any termination prior to a Change of Control, the Participant shall
not be entitled to any payments, benefits, damages, awards or compensation other
than as provided by this Plan, or as may otherwise be available in accordance
with the Company's established employee plans and practices or other agreements
with the Company at the time of termination.
2. TAXATION OF PLAN PAYMENTS. All amounts paid pursuant to this Plan
shall be subject to regular payroll and withholding taxes.
ARTICLE VII
SUCCESSORS TO COMPANY AND PARTICIPANTS
1. COMPANY'S SUCCESSORS. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Plan and agree expressly to perform the
obligations under this Plan by executing a written agreement. For all purposes
under this Plan, the term "Company" shall include any successor to the Company's
business
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and/or assets which executes and delivers the assumption agreement described in
this subsection or which becomes bound by the terms of this Plan by operation of
law.
2. PARTICIPANT'S SUCCESSORS. All rights of the Participant hereunder
shall inure to the benefit of, and be enforceable by, the Participant's personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
ARTICLE VIII
DURATION, AMENDMENT AND TERMINATION
1. DURATION. This Plan shall terminate on August 20, 1998 unless (i)
extended by the Board, or (ii) a Change of Control occurs prior to August 20,
1998. If a Change of Control occurs prior to August 20, 1998, then this Plan
shall terminate upon the earlier of (i) the date that all obligations of the
Company or successor entities hereunder have been satisfied, or (ii) twelve (12)
months after a Change of Control, unless sooner terminated as provided in this
Article VIII. A termination of this Plan pursuant to the preceding sentences
shall be effective for all purposes, except that such termination shall not
affect the payment or provision of compensation or benefits earned by a
Participant prior to the termination of this Plan.
2. AMENDMENT AND TERMINATION. The Board of the Company shall have the
discretionary authority to amend the Plan in any respect, including as to the
removal or addition of Participants, by resolution adopted by a majority of the
Board of the Company, unless a Change of Control has previously occurred. The
Plan may be terminated by resolution adopted by a majority of the Board, unless
a Change of Control has previously occurred. If a Change of Control occurs, the
Plan and the designation of Participants thereto shall no longer be subject to
amendment, change, substitution, deletion, revocation or termination in any
respect whatsoever.
ARTICLE IX
PLAN ADMINISTRATION
1. APPEAL. A Participant or former Participant who disagrees with their
allotment of benefits under this Plan may file a written appeal with the
designated Human Resources representative. Any claim relating to this Plan
shall be subject to this appeal process. The written appeal must be filed
within sixty (60) days of the Participant's termination date.
The appeal must state the reasons the Participant or former Participant
believes he or she is entitled to different benefits under the Plan. The
designated Human Resources representative shall review the claim. If the claim
is wholly or partially denied, the designated Human Resources representative
shall provide the Participant or former Participant a written notice of the
denial, specifying the reasons the claim was denied. Such notice shall be
provided within ninety (90) days of receiving the written appeal.
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If the claim is denied, in whole or in part, the Participant may request a
review of the denial at any time within ninety (90) days following the date the
Participant received written notice of the denial of his or her claim. For
purposes of this subsection, any action required or authorized to be taken by
the Participant may be taken by a representative authorized in writing by the
Participant to represent him or her. The designated Human Resources
representative shall afford the Participant a full and fair review of the
decision denying the claim and, if so requested, shall:
(a) Permit the Participant to review any documents that are pertinent
to the claim;
(b) Permit the Participant to submit to the designated Human
Resources representative issues and comments in writing; and
(c) The decision on review by the designated Human Resources
representative shall be in writing and shall be issued within 60 days following
receipt of the request for review. The decision on review shall include
specific reasons for the decision and specific references to the pertinent Plan
provisions on which the decision of the designated Human Resources
representative is based.
2. ARBITRATION. If the appeal of a Participant or former Participant is
denied, or if the outcome of said appeal is unsatisfactory to the Participant or
former Participant, the sole remedy hereunder shall be arbitration as set forth
below. Any dispute or controversy arising under or in connection with the Plan
shall be settled by arbitration in accordance with the rules of the American
Arbitration Association then in effect, conducted before a panel of three
arbitrators sitting in a location selected by the Participant within fifty (50)
miles from the location of his or her job with the Company. In consideration
for the Participant's or former Participant's waiver of their right to litigate
any such dispute or controversy in a court of law, and notwithstanding any
contrary provisions of California law regarding allocation of attorney fees,
costs and expenses in arbitration proceedings, the Company agrees to pay, on a
monthly basis, the reasonable attorney fees, costs and expenses (with such
reasonableness determined by the arbitrator) incurred in good faith by the
Participant or former Participant in connection with any such arbitration
regardless of the outcome of the arbitration. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. If the Participant or
former Participant is the prevailing party or recovers any damages in such
arbitration, he or she shall be entitled to receive, in addition thereto, pre-
judgment and post-judgment interest. Punitive damages shall not be awarded.
ARTICLE X
NOTICE
1. GENERAL. Notices and all other communications contemplated by this
Plan shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the
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Participant, mailed notices shall be addressed to him or her at the home address
which he or she most recently communicated to the Company in writing. In the
case of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its General
Counsel.
2. NOTICE OF TERMINATION BY THE COMPANY. Any termination by the Company
of the Participant's employment with the Company at any time within twelve (12)
months following a Change of Control shall be communicated by a notice of
termination to the Participant at least five (5) days prior to the date of such
termination (or at least thirty (30) days prior to the date of a termination by
reason of the Participant's Disability). Such notice shall indicate the
specific termination provision or provisions in this Plan relied upon (if any),
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision or provisions so indicated,
and shall specify the termination date.
ARTICLE XI
MISCELLANEOUS PROVISIONS
1. NO DUTY TO MITIGATE. The Participant shall not be required to
mitigate the amount of any payment contemplated by this Plan, nor shall any such
payment be reduced by any earnings that the Participant may receive from any
other source.
2. SEVERABILITY. The invalidity or unenforceability of any provision or
provisions of this Plan shall not affect the validity or enforceability of any
other provision hereof, which shall remain in full force and effect.
3. NO ASSIGNMENT OF BENEFITS. The rights of any person to payments or
benefits under this Plan shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this subsection shall be void.
4. TAX WITHHOLDING. All payments made pursuant to this Plan will be
subject to withholding of applicable income and employment taxes.
5. ASSIGNMENT BY COMPANY. The Company may assign its rights under this
Plan to an affiliate, and an affiliate may assign its rights under this Plan to
another affiliate of the Company or to the Company; provided, however, that no
assignment shall be made if the net worth of the assignee is less than the net
worth of the Company at the time of assignment; provided, further, that the
Company shall guarantee all benefits payable hereunder. In the case of any such
assignment, the term "Company" when used in this Plan shall mean the corporation
that actually employs the Participant.
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ARTICLE XII
ERISA REQUIRED INFORMATION
1. PLAN SPONSOR. The Plan sponsor and administrator is:
Circon Corporation
6500 Hollister Avenue
Santa Barbara, California 93117
(805) 685-5100
2. DESIGNATED AGENT. Designated agent for service of process:
General Counsel
Circon Corporation
6500 Hollister Avenue
Santa Barbara, California 93117
3. PLAN RECORDS. Plan records are kept on a fiscal year basis.
4. PLAN FUNDING. The Plan is funded from the Company's general assets.
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CIRCON CORPORATION
MANAGERS, PROFESSIONALS & KEY CONTRIBUTORS RETENTION PLAN
NOTICE OF PARTICIPATION
TO: [NAME OF PARTICIPANT]
DATE: August 27, 1996
The Board of Directors of the Company has designated you as a Participant
in the Circon Corporation Managers, Professionals & Key Contributors Retention
Plan (the "Plan"), a copy of which is attached. The initially capitalized terms
used in this Notice are formally defined in the Plan, so you should look in the
Plan for their precise meaning.
The Plan provides you with retention and severance payments in the event of
a Change of Control of the Company. It provides for a potential cash payment of
a minimum of three months' base salary up to a maximum of one year's base
salary. Subject to these minimum and maximum limits, the Plan provides for two
weeks' base salary for each full year you have been employed with the Company
(or with an entity acquired by the Company) up to and including the date of a
Change of Control.
The retention payment component equals one-third of the total potential
cash payment. It will be paid to you if ninety days following a Change of
Control you have remained employed by the Company or the acquirer. The
retention payment is also triggered if you are involuntarily terminated without
Cause after a Change of Control but prior to 90 days following a Change of
Control.
The severance payment component equals two-thirds of the total potential
cash payment. It will be paid to you only if you are involuntarily terminated
without Cause within twelve months following a Change of Control.
This Notice is just intended to summarize the Plan provisions, not to
change the provisions of the Plan or your participation in the Plan. The
specific terms and conditions of your participation in the Plan are set forth in
the attached Plan.
Please retain a copy of this Notice of Participation, along with the Plan,
for your records. Should you have any questions regarding this Notice of
Participation or the Plan, please do not hesitate to contact Bruce Thompson at
805-961-1650.
<PAGE>
EXHIBIT 4
ARTICLE NINTH OF THE COMPANY'S CERTIFICATE
OR INCORPORATION, AS AMENDED
NINTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director
of the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Neither any amendment nor repeal of this Certificate of Incorporation
inconsistent with this Article NINTH, nor the adoption of any provision of
Article NINTH, shall eliminate or reduce the effect of this cause of action,
suit or claim that, but for this Article NINTH, would accrue or arise, prior
to such amendment, repeal or adoption of an inconsistent provision.
<PAGE>
EXHIBIT 5
ARTICLE V OF THE COMPANY'S BYLAWS
ARTICLE V
COMPENSATION; INDEMNIFICATION
5.1 DIRECTORS' FEES AND EXPENSES
5.1.1 COMPENSATION. Directors and committee members may
receive such compensation, if any, for their services, and may be reimbursed
for expenses incurred by them on behalf of the Corporation, in the manner and
to the extent provided in resolutions duly adopted by the Board of Directors.
5.1.2. OFFICER COMPENSATION. This Section 5.1 shall not
preclude any director from also serving as an officer, employee or agent of
the Corporation and receiving compensation from the Corporation for such
services.
5.2 COMPENSATION OF OFFICERS
The compensation of the officers of the Corporation shall be fixed
from time to time by the Board of Directors or by the Chairman of the Board,
subject to any rights of the officer pursuant to any employment contract
between that officer and the Corporation.
5.3 INDEMNIFICATION OF AGENTS
5.3.1 RIGHT TO INDEMNIFICATION. Each person who was or is made
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative ("proceeding"), by reason of the
fact that he or she or a person of whom he or she is the legal
representative, is or was a director, officer or employee of the Corporation
of is or was serving at their request of the Corporation as a director,
officer or employee of another corporation, or of a partnership, joint
venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer or employee or in any
other capacity while serving as a director, officer or employee, shall be
indemnified and held harmless by the Corporation in the fullest extent
authorized by Delaware Law, as the name exists or may hereafter by amended
(but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide prior to such amendment) against
all expenses, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties, amounts paid or to be paid in
settlement and amounts expended in seeking indemnification granted as such
person under applicable law, this Bylaw or any agreement with the
Corporation; reasonably incurred or suggested by such person in connection
therewith and such indemnification shall continue as to person who has ceased
to be a director, officer or employee and shall inure to the benefit of his
or her heirs, executors and
<PAGE>
the Corporation shall indemnify and such person seeking indemnity in
connection with an action, suit or proceeding (or part thereof) initiated by
such person only of such action, suit or proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. Such right shall be
a contract right, shall attach even if such indemnification would otherwise
be discretionary under Delaware Law, and shall include the right to be paid,
by the Corporation, expenses incurred in defending any such proceeding in
advance of its final disposition; PROVIDED, HOWEVER, that if the Delaware
General Corporation Law then so requires, the payment of such expenses
incurred by a director or officer of the Corporation in his or her capacity
as a director or officer (and not in any other capacity in which service was
or is rendered by such person while a director of officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of such proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or behalf of such director or officer, to
repay all amounts so advanced if it should be determined ultimately that such
director or officer is not entitled to be indemnified under this Section or
otherwise.
5.3.2 RIGHT OF CLAIMANT TO BRING SUIT. If a claim under
Section 5.3.1 is not paid in full by the Corporation within twenty (20) days
after a written claim has been received by the Corporation, the claimant may
at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if such suit is not frivolous or brought in
bad faith, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses, incurred in defending any
proceeding in advance of its final disposition where the required
undertaking, if any, has been tendered to this Corporation) that the claimant
has not met the standards of conduct which makes it permissible under the
Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or
she has med the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that
claimant has not met the applicable standard of conduct.
5.3.3 NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person in Section 5.3.1 and 5.3.2 shall not be exclusive of any other right
which such persons may have or hereafter acquire under any statute, provision
of the Certificate of Incorporation, Bylaw, agreement, vote of stockholders
or disinterested directors or otherwise.
5.3.4 INDEMNIFICATION CONTRACTS. The Board of Directors is
authorized to enter into a contract with any director, officer, employee or
agent of the Corporation, or any person serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including employee
benefit plans, providing for indemnification rights equivalent to or, if the
Board of Directors so determines, greater than those provided for in this
Article V.
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5.3.5 INSURANCE. The Corporation shall maintain insurance to
the extent reasonably available, at its expense, to protect itself and any
such director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against
any such expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
5.3.6 EFFECT OF AMENDMENT. Any amendment, repeal or
modification of any provision of this Article V by the stockholders and the
directors of the Corporation shall not adversely affect any right or
protection of a director or officer of the Corporation existing at the time
of such amendment, repeal or modification.
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EXHIBIT 6
CIRCON CORPORATION
FORM OF INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of
_____________ by and between Circon Corporation, a Delaware corporation (the
"Company"), and _______________ ("Indemnitee").
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and
its related entities;
WHEREAS, in order to induce Indemnitee to continue to provide services
to the Company, the Company wishes to provide for the indemnification of, and
the advancement of expenses to, Indemnitee to the maximum extent permitted by
law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty
in obtaining liability insurance for the Company's directors, officers,
employees, agents and fiduciaries, the significant increases in the cost of
such insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same
time as the availability and coverage of liability insurance has been
severely limited; and
WHEREAS, the Company and Indemnitee desire to continue to have in place
the additional protection provided by an indemnification agreement and to
provide indemnification and advancement of expenses to the Indemnitee to the
maximum extent permitted by Delaware law;
WHEREAS, in view of the considerations set forth above, the Company
desires that Indemnitee shall be indemnified and advanced expenses by the
Company as set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth
below.
1. CERTAIN DEFINITIONS.
(a) "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company acting in such
capacity or a corporation
<PAGE>
owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of the Company representing more
than 50% of the total voting power represented by the Company's then
outstanding Voting Securities, (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board
of Directors of the Company and any new director whose election by the Board
of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation other than a merger or consolidation which would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 80% of the
total voting power represented by the Voting Securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of (in one transaction or a series of related transactions) all or
substantially all of the Company's assets.
(b) "Claim" shall mean with respect to a Covered Event: any
threatened, pending or completed action, suit, proceeding or alternative
dispute resolution mechanism, or any hearing, inquiry or investigation that
Indemnitee in good faith believes might lead to the institution of any such
action, suit, proceeding or alternative dispute resolution mechanism, whether
civil, criminal, administrative, investigative or other.
(c) References to the "Company" shall include, in addition to
Circon Corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger to which Circon
Corporation (or any of its wholly owned subsidiaries) is a party which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees, agents or fiduciaries, so that
if Indemnitee is or was a director, officer, employee, agent or fiduciary of
such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee, agent or fiduciary
of another corporation, partnership, joint venture, employee benefit plan,
trust or other enterprise, Indemnitee shall stand in the same position under
the provisions of this Agreement with respect to the resulting or surviving
corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(d) "Covered Event" shall mean any event or occurrence related to
the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or any subsidiary of the Company, or is or was
serving at the request of the Company as a director, officer, employee, agent
or fiduciary of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action or inaction on the part of
Indemnitee while serving in such capacity.
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(e) "Expenses" shall mean any and all expenses (including
attorneys' fees and all other costs, expenses and obligations incurred in
connection with investigating, defending, being a witness in or participating
in (including on appeal), or preparing to defend, to be a witness in or to
participate in, any action, suit, proceeding, alternative dispute resolution
mechanism, hearing, inquiry or investigation), judgments, fines, penalties
and amounts paid in settlement (if such settlement is approved in advance by
the Company, which approval shall not be unreasonably withheld), actually and
reasonably incurred, of any Claim and any federal, state, local or foreign
taxes imposed on the Indemnitee as a result of the actual or deemed receipt
of any payments under this Agreement.
(f) "Expense Advance" shall mean a payment to Indemnitee pursuant
to Section 3 of Expenses in advance of the settlement of or final judgement
in any action, suit, proceeding or alternative dispute resolution mechanism,
hearing, inquiry or investigation which constitutes a Claim.
(g) "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning
the rights of Indemnitee under this Agreement, or of other indemnitees under
similar indemnity agreements).
(h) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed
on Indemnitee with respect to an employee benefit plan; and references to
"serving at the request of the Company" shall include any service as a
director, officer, employee, agent or fiduciary of the Company which imposes
duties on, or involves services by, such director, officer, employee, agent
or fiduciary with respect to an employee benefit plan, its participants or
its beneficiaries; and if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner "not opposed to the best interests of the Company" as
referred to in this Agreement.
(i) "Reviewing Party" shall mean, subject to the provisions of
Section 2(d), any person or body appointed by the Board of Directors in
accordance with applicable law to review the Company's obligations hereunder
and under applicable law, which may include a member or members of the
Company's Board of Directors, Independent Legal Counsel or any other person
or body not a party to the particular Claim for which Indemnitee is seeking
indemnification.
(j) "Section" refers to a section of this Agreement unless
otherwise indicated.
(k) "Voting Securities" shall mean any securities of the Company
that vote generally in the election of directors.
2. INDEMNIFICATION.
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(a) INDEMNIFICATION OF EXPENSES. Subject to the provisions of
Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to
the fullest extent permitted by law if Indemnitee was or is or becomes a
party to or witness or other participant in, or is threatened to be made a
party to or witness or other participant in, any Claim (whether by reason of
or arising in part out of a Covered Event), including all interest,
assessments and other charges paid or payable in connection with or in
respect of such Expenses.
(b) REVIEW OF INDEMNIFICATION OBLIGATIONS. Notwithstanding the
foregoing, in the event any Reviewing Party shall have determined (in a
written opinion, in any case in which Independent Legal Counsel is the
Reviewing Party) that Indemnitee is not entitled to be indemnified hereunder
under applicable law, (i) the Company shall have no further obligation under
Section 2(a) to make any payments to Indemnitee not made prior to such
determination by such Reviewing Party, and (ii) the Company shall be entitled
to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company)
for all Expenses theretofore paid in indemnifying Indemnitee; PROVIDED,
HOWEVER, that if Indemnitee has commenced or thereafter commences legal
proceedings in a court of competent jurisdiction to secure a determination
that Indemnitee is entitled to be indemnified hereunder under applicable law,
any determination made by any Reviewing Party that Indemnitee is not entitled
to be indemnified hereunder under applicable law shall not be binding and
Indemnitee shall not be required to reimburse the Company for any Expenses
theretofore paid in indemnifying Indemnitee until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed). Indemnitee's obligation to
reimburse the Company for any Expenses shall be unsecured and no interest
shall be charged thereon.
(c) INDEMNITEE RIGHTS ON UNFAVORABLE DETERMINATION; BINDING
EFFECT. If any Reviewing Party determines that Indemnitee substantively is
not entitled to be indemnified hereunder in whole or in part under applicable
law, Indemnitee shall have the right to commence litigation seeking an
initial determination by the court or challenging any such determination by
such Reviewing Party or any aspect thereof, including the legal or factual
bases therefor, and, subject to the provisions of Section 15, the Company
hereby consents to service of process and to appear in any such proceeding.
Absent such litigation, any determination by any Reviewing Party shall be
conclusive and binding on the Company and Indemnitee.
(d) SELECTION OF REVIEWING PARTY; CHANGE IN CONTROL. If there has
not been a Change in Control, any Reviewing Party shall be selected by the
Board of Directors, and if there has been such a Change in Control (other
than a Change in Control which has been approved by a majority of the
Company's Board of Directors who were directors immediately prior to such
Change in Control), any Reviewing Party with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnification of
Expenses under this Agreement or any other agreement or under the Company's
Certificate of Incorporation or Bylaws as now or hereafter in effect, or
under any other applicable law, if desired by Indemnitee, shall be
Independent Legal Counsel selected by Indemnitee and approved by the Company
(which approval shall not be unreasonably withheld). Such counsel, among
other things, shall render its written opinion to the Company and Indemnitee
as to whether and to what extent Indemnitee would be entitled to be
indemnified hereunder under applicable law
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and the Company agrees to abide by such opinion. The Company agrees to pay
the reasonable fees of the Independent Legal Counsel referred to above and to
indemnify fully such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating
to this Agreement or its engagement pursuant hereto. Notwithstanding any
other provision of this Agreement, the Company shall not be required to pay
Expenses of more than one Independent Legal Counsel in connection with all
matters concerning a single Indemnitee, and such Independent Legal Counsel
shall be the Independent Legal Counsel for any or all other Indemnitees
unless (i) the Company otherwise determines or (ii) any Indemnitee shall
provide a written statement setting forth in detail a reasonable objection to
such Independent Legal Counsel representing other Indemnitees.
(e) MANDATORY PAYMENT OF EXPENSES. Notwithstanding any other
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
3. EXPENSE ADVANCES.
(a) OBLIGATION TO MAKE EXPENSE ADVANCES. Upon receipt of a
written undertaking by or on behalf of the Indemnitee to repay such amounts
if it shall ultimately be determined that the Indemnitee is not entitled to
be indemnified therefor by the Company, the Company shall make Expense
Advances to Indemnitee.
(b) FORM OF UNDERTAKING. Any written undertaking by the
Indemnitee to repay any Expense Advances hereunder shall be unsecured and no
interest shall be charged thereon.
(c) DETERMINATION OF REASONABLE EXPENSE ADVANCES. The parties
agree that for the purposes of any Expense Advance for which Indemnitee has
made written demand to the Company in accordance with this Agreement, all
Expenses included in such Expense Advance that are certified by affidavit of
Indemnitee's counsel as being reasonable shall be presumed conclusively to be
reasonable.
4. PROCEDURES FOR INDEMNIFICATION AND EXPENSE ADVANCES.
(a) TIMING OF PAYMENTS. All payments of Expenses (including
without limitation Expense Advances) by the Company to the Indemnitee
pursuant to this Agreement shall be made to the fullest extent permitted by
law as soon as practicable after written demand by Indemnitee therefor is
presented to the Company, but in no event later than forty-five (45) business
days after such written demand by Indemnitee is presented to the Company,
except in the case of Expense Advances, which shall be made no later than
twenty (20) business days after such written demand by Indemnitee is
presented to the Company.
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(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified or Indemnitee's
right to receive Expense Advances under this Agreement, give the Company
notice in writing as soon as practicable of any Claim made against Indemnitee
for which indemnification will or could be sought under this Agreement.
Notice to the Company shall be directed to the Chief Executive Officer of the
Company at the address shown on the signature page of this Agreement (or such
other address as the Company shall designate in writing to Indemnitee). In
addition, Indemnitee shall give the Company such information and cooperation
as it may reasonably require and as shall be within Indemnitee's power.
(c) NO PRESUMPTIONS; BURDEN OF PROOF. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement
(whether with or without court approval) or conviction, or upon a plea of
NOLO CONTENDERE, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by this Agreement or applicable law. In addition, neither the
failure of any Reviewing Party to have made a determination as to whether
Indemnitee has met any particular standard of conduct or had any particular
belief, nor an actual determination by any Reviewing Party that Indemnitee
has not met such standard of conduct or did not have such belief, prior to
the commencement of legal proceedings by Indemnitee to secure a judicial
determination that Indemnitee should be indemnified under this Agreement or
applicable law, shall be a defense to Indemnitee's claim or create a
presumption that Indemnitee has not met any particular standard of conduct or
did not have any particular belief. In connection with any determination by
any Reviewing Party or otherwise as to whether the Indemnitee is entitled to
be indemnified hereunder, the burden of proof shall be on the Company to
establish that Indemnitee is not so entitled.
(d) NOTICE TO INSURERS. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company
has liability insurance in effect which may cover such Claim, the Company
shall give prompt notice of the commencement of such Claim to the insurers in
accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause such
insurers to pay, on behalf of the Indemnitee, all amounts payable as a result
of such Claim in accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated hereunder to provide indemnification for or make any Expense
Advances with respect to the Expenses of any Claim, the Company, if
appropriate, shall be entitled to assume the defense of such Claim with
counsel approved by Indemnitee (which approval shall not be unreasonably
withheld) upon the delivery to Indemnitee of written notice of the Company's
election to do so. After delivery of such notice, approval of such counsel
by Indemnitee and the retention of such counsel by the Company, the Company
will not be liable to Indemnitee under this Agreement for any fees or
expenses of separate counsel subsequently employed by or on behalf of
Indemnitee with respect to the same Claim; provided that, (i) Indemnitee
shall have the right to employ Indemnitee's separate counsel in any such
Claim at Indemnitee's expense and (ii) if (A) the employment of separate
counsel by Indemnitee has
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<PAGE>
been previously authorized by the Company, (B) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense, or (C) the Company
shall not continue to retain such counsel to defend such Claim, then the fees
and expenses of Indemnitee's separate counsel shall be Expenses for which
Indemnitee may receive indemnification or Expense Advances hereunder.
5. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. The Company hereby agrees to indemnify the Indemnitee
to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of
this Agreement, the Company's Certificate of Incorporation, the Company's
Bylaws or by statute. In the event of any change after the date of this
Agreement in any applicable law, statute or rule which expands the right of a
Delaware corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, it is the intent of the parties hereto
that Indemnitee shall enjoy by this Agreement the greater benefits afforded
by such change. In the event of any change in any applicable law, statute or
rule which narrows the right of a Delaware corporation to indemnify a member
of its board of directors or an officer, employee, agent or fiduciary, such
change, to the extent not otherwise required by such law, statute or rule to
be applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder except as set forth in Section
10(a) hereof.
(b) NONEXCLUSIVITY. The indemnification and the payment of
Expense Advances provided by this Agreement shall be in addition to any
rights to which Indemnitee may be entitled under the Company's Certificate of
Incorporation, its Bylaws, any other agreement, any vote of stockholders or
disinterested directors, the General Corporation Law of the State of
Delaware, or otherwise. The indemnification and the payment of Expense
Advances provided under this Agreement shall continue as to Indemnitee for
any action taken or not taken while serving in an indemnified capacity even
though subsequent thereto Indemnitee may have ceased to serve in such
capacity.
6. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Certificate of
Incorporation, Bylaws or otherwise) of the amounts otherwise payable
hereunder.
7. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however,
for all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
8. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee
acknowledge that in certain instances, federal law or applicable public
policy may prohibit the Company from indemnifying its directors, officers,
employees, agents or fiduciaries under this Agreement or otherwise.
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Indemnitee understands and acknowledges that the Company has undertaken or
may be required in the future to undertake with the Securities and Exchange
Commission to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's right under public policy
to indemnify Indemnitee.
9. LIABILITY INSURANCE. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or
fiduciaries, Indemnitee shall be covered by such policies in such a manner as
to provide Indemnitee the same rights and benefits as are provided to the
most favorably insured of the Company's directors, if Indemnitee is a
director; or of the Company's officers, if Indemnitee is not a director of
the Company but is an officer; or of the Company's key employees, agents or
fiduciaries, if Indemnitee is not an officer or director but is a key
employee, agent or fiduciary.
10. EXCEPTIONS. Notwithstanding any other provision of this Agreement,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) EXCLUDED ACTION OR OMISSIONS. To indemnify Indemnitee for
Expenses resulting from acts, omissions or transactions for which Indemnitee
is prohibited from receiving indemnification under this Agreement or
applicable law; PROVIDED, HOWEVER, that notwithstanding any limitation set
forth in this Section 10(a) regarding the Company's obligation to provide
indemnification, Indemnitee shall be entitled under Section 3 to receive
Expense Advances hereunder with respect to any such Claim unless and until a
court having jurisdiction over the Claim shall have made a final judicial
determination (as to which all rights of appeal therefrom have been exhausted
or lapsed) that Indemnitee has engaged in acts, omissions or transactions for
which Indemnitee is prohibited from receiving indemnification under this
Agreement or applicable law.
(b) CLAIMS INITIATED BY INDEMNITEE. To indemnify or make Expense
Advances to Indemnitee with respect to Claims initiated or brought
voluntarily by Indemnitee and not by way of defense, counterclaim or
crossclaim, except (i) with respect to actions or proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other agreement or insurance policy or under the Company's Certificate of
Incorporation or Bylaws now or hereafter in effect relating to Claims for
Covered Events, (ii) in specific cases if the Board of Directors has approved
the initiation or bringing of such Claim, or (iii) as otherwise required
under Section 145 of the Delaware General Corporation Law, regardless of
whether Indemnitee ultimately is determined to be entitled to such
indemnification or insurance recovery, as the case may be.
(c) LACK OF GOOD FAITH. To indemnify Indemnitee for any Expenses
incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that
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each of the material assertions made by the Indemnitee as a basis for such
action was not made in good faith or was frivolous, or (ii) by or in the name
of the Company to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each
of the material defenses asserted by Indemnitee in such action was made in
bad faith or was frivolous.
(d) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute; PROVIDED,
HOWEVER, that notwithstanding any limitation set forth in this Section 10(d)
regarding the Company's obligation to provide indemnification, Indemnitee
shall be entitled under Section 3 to receive Expense Advances hereunder with
respect to any such Claim unless and until a court having jurisdiction over
the Claim shall have made a final judicial determination (as to which all
rights of appeal therefrom have been exhausted or lapsed) that Indemnitee has
violated said statute.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs
and personal and legal representatives. The Company shall require and cause
any successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part,
of the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as a director, officer, employee, agent or fiduciary (as
applicable) of the Company or of any other enterprise at the Company's
request.
13. EXPENSES INCURRED IN ACTION RELATING TO ENFORCEMENT OR
INTERPRETATION. In the event that any action is instituted by Indemnitee
under this Agreement or under any liability insurance policies maintained by
the Company to enforce or interpret any of the terms hereof or thereof,
Indemnitee shall be entitled to be indemnified for all Expenses incurred by
Indemnitee with respect to such action (including without limitation
attorneys' fees), regardless of whether Indemnitee is ultimately successful
in such action, unless as a part of such action a court having jurisdiction
over such action makes a final judicial determination (as to which all rights
of appeal therefrom have been exhausted or lapsed) that each of the material
assertions made by Indemnitee as a basis for such action was not made in good
faith or was frivolous; provided, however, that until such final judicial
determination is made, Indemnitee shall be entitled under Section 3 to
receive payment of Expense Advances hereunder with respect to such action.
In the event of an action instituted by or in the name of the Company under
this Agreement to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be indemnified for all Expenses incurred by
Indemnitee in defense of such action (including without limitation costs and
expenses incurred with respect to Indemnitee's counterclaims and cross-claims
made in such action), unless as a part of such action a court having
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jurisdiction over such action makes a final judicial determination (as to
which all rights of appeal therefrom have been exhausted or lapsed) that each
of the material defenses asserted by Indemnitee in such action was made in
bad faith or was frivolous; provided, however, that until such final judicial
determination is made, Indemnitee shall be entitled under Section 3 to
receive payment of Expense Advances hereunder with respect to such action.
14. NOTICE. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i)
if delivered by hand and signed for by the party addressed, on the date of
such delivery, or (ii) if mailed by domestic certified or registered mail
with postage prepaid, on the third business day after the date postmarked.
Addresses for notice to either party are as shown on the signature page of
this Agreement, or as subsequently modified by written notice.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of
Delaware for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action
instituted under this Agreement shall be commenced, prosecuted and continued
only in the Court of Chancery of the State of Delaware in and for New Castle
County, which shall be the exclusive and only proper forum for adjudicating
such a claim.
16. SEVERABILITY. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision
within a single section, paragraph or sentence) are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, and
the remaining provisions shall remain enforceable to the fullest extent
permitted by law. Furthermore, to the fullest extent possible, the
provisions of this Agreement (including without limitation each portion of
this Agreement containing any provision held to be invalid, void or otherwise
unenforceable, that is not itself invalid, void or unenforceable) shall be
construed so as to give effect to the intent manifested by the provision held
invalid, illegal or unenforceable.
17. CHOICE OF LAW. This Agreement, and all rights, remedies,
liabilities, powers and duties of the parties to this Agreement, shall be
governed by and construed in accordance with the laws of the State of
Delaware without regard to principles of conflicts of laws.
18. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all documents required
and shall do all acts that may be necessary to secure such rights and to
enable the Company effectively to bring suit to enforce such rights.
19. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed to be or shall constitute a waiver of any
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver.
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20. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
Circon Corporation
By:
--------------------------------------
Name:
--------------------------------------
Title:
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Address: Circon Corporation
6500 Hollister Ave.
Santa Barbara, California 93117
AGREED TO AND ACCEPTED
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EXHIBIT 7
CIRCON CORPORATION
6500 HOLLISTER AVENUE
SANTA BARBARA, CALIFORNIA 93117
August 18, 1997
TO THE STOCKHOLDERS OF
CIRCON CORPORATION
Dear Stockholder:
As you may be aware, a second unsolicited tender offer (the "Offer") for all
of the Common Stock of Circon Corporation (the "Company") at $16.50 per share
was commenced on August 5, 1997, by United States Surgical Corporation ("USS")
through its wholly-owned subsidiary, USS Acquisition Corp. Your Board of
Directors has carefully considered the Offer and has determined that it is not
in the best interest of the Company and its stockholders. YOUR BOARD RECOMMENDS
THAT YOU AND ALL OTHER STOCKHOLDERS REJECT THE USS OFFER.
The Board has determined that the Company should continue to pursue its
strategic plan and that the Company is not for sale at this time. In particular,
the Board has determined that the Company's strategic plan offers the potential
for greater long-term benefits for the Company's stockholders than the Offer.
In reaching its conclusion, your Board of Directors took into account a
number of factors, including the Board's belief that the tender offer does not
reflect the long-term values inherent in the Company. The Board also considered
the Company's prospects for future growth and profitability, the numerous
conditions to which the Offer is subject and the disruptive effect the
consummation of the Offer could have on the Company's employees, suppliers and
customers. In addition, the Board considered the August 15, 1997 opinion of
Bear, Stearns & Co. Inc., the Company's financial advisor, to the effect that,
as of the date of the opinion and based upon the assumptions stated therein, the
consideration offered pursuant to the Offer is inadequate from a financial point
of view to the Company's stockholders (other than USS).
Enclosed for your information is a copy of your Company's Schedule 14D-9
which contains information concerning your Board's recommendation against the
Offer and which has been filed today with the Securities and Exchange
Commission.
Very truly yours,
Richard A. Auhll
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
<PAGE>
EXHIBIT 8
FOR IMMEDIATE RELEASE:
CIRCON BOARD REJECTS U.S. SURGICAL TENDER OFFER
BOARD ANNOUNCES PLANS TO ACTIVELY EXPLORE STRATEGIC ALTERNATIVES
SANTA BARBARA, CALIFORNIA (AUGUST 18, 1997) - Circon Corporation
(NASDAQ-NMS: CCON) announced today that its Board of Directors has recommended
that Circon shareholders reject U.S. Surgical's (NYSE: USS) tender offer for
all of the outstanding shares of Circon at $16.50 per share, and that
shareholders not tender their shares to U.S. Surgical pursuant to the tender
offer.
The Board concluded that the U.S. Surgical offer, commenced on August 5,
1997, is inadequate and not in the best interests of Circon shareholders. In
arriving at its determination, the Board gave careful consideration to a
number of factors, including the opinion of the investment banking firm of
Bear, Stearns & Co. Inc., the Company's financial advisor, that the offer by
U.S. Surgical was inadequate from a financial point of view to the Circon
shareholders other than U.S. Surgical.
Circon is the leading U.S. supplier of products for minimally invasive
urological and gynecological surgery, including such hardware and endoscopes
and video systems, such disposable products as urological stents,
laparoscopic suction-irrigation devices, and a wide variety of gynecological
products.
###
CONTACT:
Judith Wilkinson / Matthew Sherman
Abernathy MacGregor Group
(212) 371-5999
<PAGE>
[LETTERHEAD]
August 15, 1997
Circon Corporation
6500 Holister Avenue
Santa Barbara, CA 93117-3019
Attention: Mr. Richard A. Auhll
Chairman, President and Chief Executive Officer
Ladies and Gentlemen:
We understand that USS Acquisition Corp., a wholly owned subsidiary of United
States Surgical Corporation (together, "U.S. Surgical"), has commenced a
tender offer (the "Revised U.S. Surgical Tender Offer") to acquire all of the
outstanding shares of common stock (the "Shares") of Circon Corporation
("Circon" or the "Company") for $16.50 net per share in cash, as more fully
described in U.S. Surgical's Schedule 14D-1 and related Offer to Purchase
dated August 5, 1997 (collectively, the "Revised U.S. Surgical Tender Offer
Documents"). We understand that Circon plans to file its Schedule 14D-9 in
response to the Revised U.S. Surgical Tender Offer on or about August 18,
1997 in substantially the form which has been furnished to us.
You have asked for our opinion as to whether the consideration to be offered
for the Shares pursuant to the Revised U.S. Surgical Tender Offer is
adequate, from a financial point of view, to the shareholders of Circon
(excluding U.S. Surgical and its affiliates).
In the course of performing our review and analyses for rendering this
opinion, we have:
1. reviewed the Revised U.S. Surgical Tender Offer Documents and
Circon's Schedule 14D-9 in substantially the form expected to be
filed on or about August 18, 1997;
2. reviewed Circon's Annual Reports to Shareholders and Annual Reports
on Form 10-K for the years ended December 31, 1993 through 1996, and
its Quarterly Reports on Form 10-Q for the periods ended March 31,
1997 and ended June 30, 1997;
3. reviewed certain operating and financial information, including
revised projections, provided to us by management relating to
Circon's businesses and prospects;
4. met with certain members of Circon's senior management to discuss
the Company's operations, historical financial performance (including,
among other things, the factors
<PAGE>
Circon Corporation
August 15, 1997
Page 2
underlying the Company's financial performance during the past seven
quarters), financial condition and future prospects;
5. reviewed the historical prices, valuation multiples and trading
volume of the Shares;
6. reviewed the terms of selected precedent mergers and acquisitions of
companies which we deemed generally comparable to Circon;
7. performed discounted cash flow analyses on the revised projections
furnished to us by Circon;
8. reviewed publicly available financial data, stock market performance
data and valuation multiples of companies which we deemed generally
comparable to Circon;
9. considered that (a) U.S. Surgical had made several previous tender
offers for the Shares wherein the cash consideration offered was
higher than the $16.50 per Share being offered pursuant to the
Revised U.S. Surgical Tender Offer and (b) various strategic
acquirors and/or strategic investors had approached Bear Stearns
and/or the Company on an unsolicited basis during the past year and
expressed an interest in discussing a potential acquisition or other
extraordinary transaction if the Board of Directors of the Company
were to determine to alter its strategic plans and pursue such
alternatives, although no specific values for the Company were
discussed; and
10. conducted such other studies, analyses, inquiries and investigations
as we deemed appropriate.
In the course of our review, we have relied upon and assumed the accuracy and
completeness of the financial and other information provided to us by Circon.
With respect to Circon's revised projected financial results, we have assumed
that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the senior management of
Circon as to the Company's expected future performance. We have not assumed
any responsibility for the information or revised projections provided to us
and we have further relied upon the assurances of the senior management of
Circon that it is unaware of any facts that would make the information or
revised projections provided to us incomplete or misleading. In arriving at
our opinion, we have not performed, nor have we been furnished with, any
independent appraisal of the assets or liabilities of Circon. Our opinion is
necessarily based on economic, market and other conditions, and the
information made available to us, as of the date hereof.
We have been advised by the Company that its Board of Directors has
determined that the present is not a propitious time to sell the Company
because of the Board's view that the near term operating performance of the
Company will improve significantly. We express no opinion as to the Board's
determination in this regard and this opinion should not be construed as any
expression of views as to the future operating performance of the Company or
market prices of the Shares. Our opinion as to the adequacy, from a financial
point of view, of the consideration offered in the Revised U.S. Surgical
Tender Offer is based in large part upon our views as to the consideration
that might be paid by a willing strategic buyer for the entire Company in a
negotiated transaction based upon the synergies and cost savings that might
be achieved by such a transaction and other relevant considerations.
<PAGE>
Circon Corporation
August 15, 1997
Page 3
It is understood that this letter is for the information of the Board of
Directors of the Company and does not constitute a recommendation to any
holder of Shares as to whether to tender Shares pursuant to the Revised U.S.
Surgical Tender Offer. This letter may not be used for any other purpose, or
be reproduced, disseminated, quoted or referred to at any time, in whole or
in part, without our prior written consent; provided, however, that this
letter may be included in its entirety in the Schedule 14D-9 to be
distributed to the holders of the Shares in connection with the Revised U.S.
Surgical Tender Offer.
Based on the foregoing, it is our opinion that the consideration to be
offered for the Shares pursuant to the Revised U.S. Surgical Tender Offer is
inadequate, from a financial point of view, to the shareholders of Circon
(excluding U.S. Surgical and its affiliates).
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/
---------------------------------
Senior Managing Director
