<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
CIRCON CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
<PAGE>
IMPORTANT
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW CIRCON SHARES YOU
HOLD. PLEASE SIGN AND DATE THE ACCOMPANYING PROXY CARD AND MAIL IT IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE AS PROMPTLY AS POSSIBLE, whether or not you
expect to attend the meeting. If your shares are registered in the name of a
broker, only your broker can execute a proxy and vote your shares and only after
receiving specific instructions. Please contact the person responsible for your
account and direct him or her to execute a proxy on your behalf today. If you
have any questions or need further assistance in voting, please contact the firm
assisting us in solicitation of proxies:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Call toll free at (800)[290-6427]
- --------------------------------------------------------------------------------
CIRCON CORPORATION
6500 Hollister Avenue
Santa Barbara, California 93117
<PAGE>
CIRCON CORPORATION
November 13, 1998
To Our Shareholders:
On behalf of the Board of Directors, we cordially invite you to attend the
Annual Meeting of Shareholders of Circon Corporation. The meeting will be held
November 24, 1998 at the Fess Parker Doubletree Resort in Santa Barbara. At the
meeting, in addition to acting on the matters described in the attached proxy
statement, there will be an opportunity to discuss other matters of interest to
you as a shareholder.
This year's Annual Meeting will feature the election of three directors. The
three nominees of the Board of Directors are George Cloutier, Joseph Hardiman
and Alain Oberrotman. The other four members of the Board, whose terms are not
expiring this year, are John Blokker, Charles Elson, Harold Frank and Victor
Krulak. Mr. Cloutier, the interim CEO, has been on the Board since 1997. Mr.
Hardiman was the President and Chief Executive Officer of the National
Association of Securities Dealers, Inc. from September 1987 through January
1997, prior to which he was a Managing Director and Chief Operating Officer of
Alex.Brown & Sons. Mr. Oberrotman has been an independent management consultant
since 1997, prior to which he was a principal in the private equity group at
Odyssey Partners, L.P. Mr. Oberrotman was one of the nominees of The Circon
Shareholders Committee, with which the Circon Board has reached certain
agreements described in the proxy statement. We look forward to working with the
new Board members on behalf of all the Circon shareholders.
It is important that your shares be represented whether or not you are able
to be present at the meeting. Please sign and date the enclosed proxy card and
promptly return it in the accompanying postage pre-paid envelope.
We would like to take this opportunity to express our gratitude to Circon's
employees for their continued commitment to the Company's primary objective of
supplying the medical community with superior quality products and excellent
customer service. Over the past two years, Circon's employees have shown
exemplary dedication to this objective despite very difficult circumstances and
stress related to the uncertainties concerning Circon's future.
We also want to thank you, the shareholders, for your continued support. WE
REMAIN COMMITTED TO ACTING IN YOUR BEST INTERESTS. Please feel free to call us
at (805) 685-5100 or our proxy solicitor, D. F. King & Co., Inc., at (800)
290-6427, if you have any questions.
Sincerely,
/s/ GEORGE A. CLOUTIER
GEORGE A. CLOUTIER
Chief Executive Officer
<PAGE>
CIRCON CORPORATION
Notice of Annual Meeting of Shareholders
November 24, 1998
TO THE SHAREHOLDERS OF CIRCON CORPORATION:
Notice is hereby given that the 1998 Annual Meeting of Shareholders of
Circon Corporation, a Delaware corporation, will be held on November 24, 1998,
at 9:00 a.m. local time, at Fess Parker's Doubletree Resort, 633 East Cabrillo
Boulevard, Santa Barbara, California, for the following purposes:
1. To elect three Directors.
2. To consider and vote upon a proposal to ratify the appointment of Arthur
Andersen LLP as the Company's independent public accountants for fiscal
year 1998.
3. To transact such other business as may properly come before the meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice.
The Board of Directors has fixed the close of business on October 23, 1998
as the record date for the determination of shareholders entitled to vote at the
1998 Annual Meeting and at any adjournment or postponement thereof.
It is important that your shares be voted at the 1998 Annual Meeting.
Whether or not you expect to attend, you are urged to sign and date the
accompanying proxy card and promptly return it to the Company in the
accompanying postage prepaid envelope.
By Order of the Board of Directors,
ANDREW D. SIMONS
Vice President and Secretary
Santa Barbara, California
November 13, 1998
<PAGE>
CIRCON CORPORATION
6500 HOLLISTER AVENUE
SANTA BARBARA, CALIFORNIA 93117
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 24, 1998
This proxy statement and accompanying proxy card are being furnished to
shareholders of Circon Corporation (the "Company") in connection with the Annual
Meeting of Shareholders to be held on November 24, 1998, and at any and all
adjournments or postponements thereof (the "Annual Meeting"). This proxy
statement and the accompanying proxy card are first being mailed to shareholders
on or about November 13, 1998.
QUORUM AND VOTING RIGHTS
The Board of Directors has fixed the close of business of October 23, 1998,
as the record date (the "Record Date") for the determination of shareholders
entitled to vote at the Annual Meeting. As of the Record Date, there were
outstanding 13,441,419 shares of Common Stock.
A majority of the shares entitled to vote, present in person or represented
by proxy, will constitute a quorum at the Annual Meeting. For purposes of
determining a quorum, shares represented by all valid proxies received will be
counted, including proxies that contain instructions to abstain as to certain
votes and proxies filed by brokers or others indicating that their voting
authority does not extend to all agenda items ("broker non-votes"). On each
agenda item, broker non-votes will be disregarded.
Each share of Circon stock outstanding on the Record Date is entitle to one
vote on each matter. Pursuant to Section 2.7.3 of the Company's Bylaws,
shareholders of the Company are entitled to cumulate their votes for Director
nominees at the Annual Meeting if any shareholder has given advance notice to
the Company of an intent to so cumulate votes and has complied with certain
other requirements. The Company has received notice in compliance with this
Bylaw provision from a shareholder of record on the Record Date, and,
accordingly, holders of Common Stock will be entitled to cumulate their votes at
the Annual Meeting. In the election of Directors under cumulative voting, each
shareholder is entitled to the number of votes to which such shareholder's
shares would normally be entitled, multiplied by the number of Directors to be
elected (three). A shareholder may cast all such votes for a single candidate or
allocate them among as many candidates as the shareholder may choose (up to the
number of Directors to be elected). If a shareholder's proxy card does not
specify how the shares are to be voted in the election of Directors, the
cumulative votes represented by that proxy card will be cast in equal numbers
for each nominee of the Board of Directors (except any nominee as to whom the
proxy card is marked to withold the vote).
Whether or not you plan to attend the meeting, you are urged to vote by
proxy. Duly executed and unrevoked proxies received by the Company prior to the
Annual Meeting will be voted in accordance with the shareholder's specifications
marked thereon. If no specifications are marked thereon, the proxies distributed
by your Board will be voted FOR the election of the Board's nominees and FOR the
ratification of the appointment of Arthur Andersen LLP as independent public
accountants. Any shareholder giving a proxy may revoke it at any time prior to
voting at the Annual Meeting by filing with the Secretary of the Company a duly
executed revocation, by submitting a later dated proxy with respect to the same
shares or by voting in person at the Annual Meeting.
1
<PAGE>
SOLICITATION OF PROXIES
Proxies may be solicited by mail, advertisement, telephone or other methods
and in person. Solicitations may be made by directors, officers, investor
relations personnel and other employees of the Company, none of whom will
receive additional compensation for such solicitations. The Company will request
banks, brokerage houses and other custodians, nominees and fiduciaries to
forward all of its solicitation materials to the beneficial owners of the shares
of Common Stock they hold of record.
The Company has retained D.F. King & Co., Inc. ("D.F. King") for
solicitation and advisory services in connection with the solicitation, for
which D.F. King is to receive a fee estimated at $7,500 plus reimbursement for
its reasonable out-of-pocket expenses. The Company has also agreed to indemnify
D.F. King against certain liabilities and expenses.
All expenses incurred in connection with this solicitation, including
postage, printing, handling, and all the actual expenses incurred by custodians,
nominees, and fiduciaries in forwarding proxy materials to beneficial owners,
will be paid by the Company.
PROPOSAL NO. 1 ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. The term of
one of the three classes expires each year. The term of the Class I Directors
expires in 2000 and each third year thereafter, the term of the Class II
Directors expires in 1998 and each third year thereafter, and the term of the
Class III Directors expires in 1999 and each third year thereafter. Pursuant to
the Company's Certificate of Incorporation, if any Director who was elected
while serving as an officer ceases to be an officer during that Director's term,
such Director's term will expire at the next subsequent annual meeting of
Shareholders. On October 19, 1998, Richard Auhll resigned as President, Chief
Executive Officer and Chairman of the Board of the Company. Accordingly, Mr.
Auhll's term as a director will expire at the Annual Meeting on November 24,
1998. John Blokker, who has served as a director since 1991, will serve as
Chairman of the Board for the Company. Director George Cloutier will serve as
interim Chief Executive Officer for the Company until a replacement for Mr.
Auhll is found. Mr. Cloutier has served as a director on the Circon board since
1996.
Two Class II Directors will be elected at the 1998 Annual Meeting. In
addition, one Class III Director will be elected as a result of the vacancy
created by Mr. Auhll's resignation. The Board of Directors has nominated George
Cloutier and Alain Oberrotman for election as Class II Directors, and has
nominated Joseph Hardiman for election as a Class III Director. Mr. Cloutier and
Mr. Oberrotman are currently serving as Class II Directors. Mr. Hardiman is not
currently a director. The Board's nominees have agreed to serve if elected, but
in the event that the nominees are not available to serve, the proxy holders
will vote for the election of such other persons as the Board may direct.
Section 3.2 of the Company's bylaws provide that any shareholder may
nominate a director candidate to the Circon Board provided such shareholders
complies with certain requirements. A group of Circon shareholders called the
"Circon Shareholders Committee" notified Circon that they intended to nominate
three candidates for election as Directors at the Annual Meeting. The members of
the Committee are Castlerigg Master Investments, Ltd., Metropolitan Capital
Advisors, Inc., Metropolitan Capital III, Inc. and P. Schoenfeld Asset
Management, LLC. On November 9, 1998, the Company and the Committee entered into
an agreement and on November 10, 1998 Circon issued the following press release
summarizing the material terms of the agreement:
Circon Corporation announced today that its Board of Directors has reached
an agreement with the Circon Shareholders Committee, which was formed by a
group of shareholders to nominate and solicit proxies to elect certain
persons as directors at the 1998 Annual Meeting of Shareholders.
Under the terms of the agreement with the Committee, the Board's nominees
will be George Cloutier, Alain Oberrotman and Joseph Hardiman. Mr.
Oberrotman, who was first proposed as
2
<PAGE>
one of the Committee's nominees, was elected to the Board today. The
Committee will withdraw its proposed nominations and has agreed not to
solicit proxies. The only persons eligible for nomination at the Annual
Meeting will be the Board's three nominees, including Mr. Oberrotman.
Circon will reimburse the Committee's legal and other expenses.
George Cloutier, interim CEO states, "We welcome the addition to the Board
of Mr. Oberrotman and, prospectively, Mr. Hardiman. They are highly
qualified and we expect the Board to be strengthened by their
contributions. We also look forward to a continuing dialog with all
shareholders who want to express their views on any matter concerning
Circon."
The Board has also agreed to consider, at the first Board meeting
following the Annual Meeting, the election of Lester Hill to the Board and
any changes to the company's Shareholders Rights Plan that any director
may propose. The Board further agreed to approve an amendment to the
Certificate of Incorporation to change the classified Board provisions to
an annually elected Board. This amendment will be submitted to the
shareholders at the 1999 Annual Meeting to become effective for the
election of directors at that meeting.
Although the Circon Board has previously announced its decision not to
continue to seek new potential buyers for Circon at this time, it intends
to evaluate any new proposals that may be received in the future and
encourages further discussions with companies that have expressed an
interest in such transactions. Any such discussions must be kept
confidential, and it is Circon's policy not to comment on merger rumors.
The Board, including the Board's nominees for election at the Annual
Meeting, is committed to maximize shareholder value.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF
THE BOARD'S NOMINEES (PROPOSAL NO. 1)
The following table sets forth certain information concerning each nominee
and each continuing director of the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL OCCUPATION CLASS AGE SINCE
- ------------------------- ------------------------------------------------------------- --------- --- -----------
<S> <C> <C> <C> <C>
John F. Blokker Chairman of the Board of the Company; President and Chief
Executive Officer, Luxcom, Inc. III 68 1991
George A. Cloutier Chief Executive Officer of the Company; Chairman of the
Board, President and Chief Executive Officer of American
Management Services, Inc. II 53 1997
Charles M. Elson Professor or Law, Stetson College of Law I 38 1997
Harold R. Frank Investor III 74 1984
Victor H. Krulak,
Lt. General President of Words Limited I 85 1997
Joseph R. Hardiman Investor III 61 n/a
Alain M. Oberrotman Independent Management Consultant II 47 1998
</TABLE>
Mr. Blokker serves as Chairman of the Board for the Company. He is President
and Chief Executive Officer of Luxcom, Inc., a telecommunications company. He
was a general partner of Hambrecht & Quist Venture Partners, an investment
banking firm, from February 1985 to February 1988. Prior to 1985, he served for
twenty-seven years in various executive and management positions including Vice
President, General Manager with Hewlett-Packard Company, a manufacturer of
computers and electronic test and measurement instruments. He is a member of the
Boards of Directors of Mid-Peninsula Bank of Palo Alto and Whittier Trust
Company.
Mr. Cloutier is serving as interim Chief Executive Officer of the Company.
He is also Chairman of the Board, President and Chief Executive Officer of
American Management Services, Inc., a consulting firm
3
<PAGE>
for small to mid-size businesses. Prior to founding American Management Services
in 1986, Mr. Cloutier held a number of executive positions with companies
providing a broad range of business consulting and management services.
Mr. Elson has been a Professor of Law at Stetson University College of Law
in St. Petersburg, Florida since 1990. He has served as "of Counsel" to the law
firm of Holland & Knight since 1995. Mr. Elson serves as a director on the
Boards of Sunbeam Corporation and Nuevo Energy Company.
Mr. Frank is the founder of Applied Magnetics Corporation, a manufacturer of
magnetic recording heads. He served as Chairman of its Board of Directors from
inception until February, 1996, and continues to serve as a Director. Mr. Frank
currently serves on the Board of Directors of Trust Company of the West and as
Chairman of the Board of Key Technology, Inc. Mr. Frank is past Chairman of the
Board of the American Electronics Association.
Lt. Gen. Krulak has served as President of Words Limited, an editorial and
feature syndicate, since 1988. Prior to 1988, he served a distinguished career
with the U.S. Marine Corps from 1934 until his retirement as Lieutenant General
in 1968. Lt. Gen. Krulak held positions with Copley News Service from 1968 until
1977, serving as Vice President and then President prior to his retirement in
1977.
Joseph R. Hardiman is currently a private investor. From September 1987
through January 1997 Mr. Hardiman served as the President and Chief Executive
Officer of the National Association of Securities Dealers, Inc., and its wholly
owned subsidiary, the NASDAQ Stock Market, Inc. Prior to that, Mr. Hardiman
served as Chief Operating Officer and a member of the Board of Directors of
Alex. Brown & Sons.
Mr. Oberrotman has been an independent management consultant since 1997.
From 1992 to 1997 Mr. Oberrotman was a principal in the private equity group of
Odyssey Partners, L.P., involved with, among other things, acquisitions,
financings and restructurings of Odyssey's portfolio companies. Mr. Oberrotman
currently serves on the Board of Directors of Eagle Food Centers, Inc.
BOARD MEETINGS AND COMMITTEES
During 1997, the Board of Directors met on eleven occasions. In addition,
significant communications occurred between the Directors and the Company apart
from meetings of the Board and the Board Committees. During 1997, none of the
incumbent Directors attended fewer than 90% of the total number of Board
meetings and the total number of Committee meetings on which he served.
The Company has an Audit Committee and a Compensation Committee. The
function that would be performed by a nominating committee is performed by the
Board of Directors as a whole.
The Audit Committee, which consisted of Directors Blokker, Cloutier and
Frank, held two meetings in 1997. The Audit Committee currently consists of
Directors Blokker and Frank. The Audit Committee recommends the appointment of
independent auditors for the Company, approves the services performed by the
Company's independent auditors, reviews the Company's accounting principles and
consults with the independent auditors on matters relating to internal financial
controls and procedures.
The Compensation Committee, which consisted of Directors Auhll, Cloutier and
Frank during 1997, held one meeting in 1997. The Compensation Committee
currently consists of Directors Blokker, Elson and Oberrotman. The Compensation
Committee reviews and makes recommendations to the Board concerning the
Company's executive compensation policy, bonus plans and equity incentive plans.
The Compensation Committee, as well as the full Board, also administers the
Company's stock option plans.
DIRECTORS' COMPENSATION
The compensation for outside Directors was modified effective July 1, 1997.
First, annual cash fees for services as a director were increased from $2,500 to
$10,000. Second, provision was made for annual grants of Common Stock options to
directors. These changes were made to bring the Company's Directors within
comparable levels of compensation for companies similar in size, capital
structure and board structure.
4
<PAGE>
The new compensation program is designed to ensure that a significant portion of
a non-employee directors compensation is equity-based and, therefore, highly
dependent on the performance of Circon Common Stock. Thus, the program is
designed to align the interests of Circon's non-employee directors and its
shareholders.
Each director who is not an employee of the Company receives cash fees of
$2,500 per quarter for serving as a director. These fees are paid quarterly in
cash. In addition, directors receive a fee of $500 for each Board and committee
meeting attended (whether in person or by telephone) and reimbursement for
expenses incurred in connection with attendance at Board and committee meetings.
The 1995 Directors Stock Option Plan (the "1995 Plan") is administered by
the Board or a committee appointed by the Board for such purpose. Under the 1995
Plan, options for up to 200,000 shares of Common Stock may be granted to
directors who are not officers of the Company ("Outside Directors"), for a price
not less than 85% of the fair market value of the Common Stock on the date of
grant. All option grants to date have been made at the market price on the date
of grant. All options currently held by Outside Directors are fully vested. The
maximum option term is ten years. If the optionee ceases to be a director for
any reason, any options granted which have not been exercised will be canceled
according to the terms of the stock option agreement. In July 1997, each Outside
Director had his options accelerated or received new options or both. The number
of accelerated options or new options granted in July 1997 to each director was
determined by using a schedule designed to bring each director's total stock
options vesting in 1997 to 11,000 shares. Incumbent directors receive subsequent
option grants not to exceed 5,000 shares, on an annual basis. In October 1997,
new directors Elson and Krulak received option grants of 11,000 shares each.
The Company also provides director liability insurance for all directors.
PROPOSAL NO. 2
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has appointed, subject to ratification by the
shareholders, the firm of Arthur Andersen LLP, certified public accountants, to
audit the consolidated financial statements of the Company and its subsidiary
for the fiscal year ending December 31, 1998. Arthur Andersen LLP has served as
independent certified public accountants of the Company since 1977. A
representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting of Shareholders and will be given the opportunity to make a statement
and to respond to appropriate questions. A majority of the shares represented at
the meeting and entitled to vote on this proposal is required to ratify the
selection of Arthur Andersen LLP as independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NO. 2
5
<PAGE>
EXECUTIVE OFFICERS
The Executive Officers of the Company are elected by and serve at the
discretion of the Board of Directors. As of the record date, the Executive
Officers of the Company were as follows:
<TABLE>
<CAPTION>
OFFICER
NAME POSITION AGE SINCE
- ----------------------- -------------------------------------------------------------------------- --- -----------
<S> <C> <C> <C>
George A. Cloutier Chief Executive Officer 53 1998
Winton L. Berci Vice President, Sales and Marketing 43 1989
Frank D. D'Amelio Vice President and Chief Manufacturing Officer 40 1989
Gary J. Menichini Vice President, Sales 41 1998
Andrew D. Simons Vice President, General Counsel and Secretary 37 1996
R. Bruce Thompson Executive Vice President and Chief Financial Officer 54 1982
David P. Zielinski Vice President, ACMI Division General Manager 55 1994
</TABLE>
For certain information concerning the business experience of Mr. Cloutier,
see "Proposal No. 1-- Election of Directors."
Winton Berci joined the Company as Vice President, Sales and Marketing, in
1989. Prior to joining Circon, Mr. Berci worked for fourteen years with Karl
Storz Endoscopy America, Inc., a major Circon competitor. He held various
positions with Karl Storz including Director of Marketing for six years.
Frank D'Amelio was appointed Vice President, Chief Manufacturing Officer in
1994, prior to which he was Vice President, General Manager of the Video
Division since 1993, and Vice President, CIRCON ACMI Engineering and Quality
Control, beginning in 1989. Prior to 1989, Mr. D'Amelio held various positions
with the Company including Director of Quality Assurance. He joined ACMI in
1982.
Gary Menichini joined the Company as Vice President of Sales in 1998. Prior
to joining Circon, Mr. Menichini worked for six years at Cordis Corporation, a
division of Johnson & Johnson Company, including five years as West Region
Manager. Prior to 1992, Mr. Menichini held senior sales positions with Quiena
International, Inc. from 1991 to 1992 and General Electric Medical Systems from
1984 to 1991.
Andrew Simons joined the Company as Vice President, Secretary and General
Counsel in 1996. From 1992 until joining Circon, Mr. Simons worked for Tokos
Medical Corporation in various capacities, including Vice President, General
Counsel and Corporate Secretary. Prior to 1992, Mr. Simons was an Associate at
the law firm of Gibson, Dunn & Crutcher.
Mr. Thompson has been Executive Vice President and Chief Financial Officer
of the Company since 1985, and Vice President since 1982. He joined the Company
in 1977 as Controller. Prior to 1977, Mr. Thompson held positions with
Heyer-Schulte Corporation, a subsidiary of American Hospital Supply Corporation,
and Cutter Laboratories Inc.
David Zielinski was appointed Vice President, ACMI Division General Manager
in 1994, prior to which he was Vice President of Manufacturing for Circon ACMI.
Prior to 1986, Mr. Zielinski held various positions with the Company including
Director of Manufacturing for ACMI. He joined ACMI in 1982. Prior to joining
ACMI, Mr. Zielinski held various positions with General Electric.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
reports of ownership as well as changes in ownership with the Securities and
Exchange Commission ("SEC") and the National Association of Securities Dealers,
Inc. ("NASDAQ"). Such persons are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely upon its review of the copies of such forms received by it, or
written representations from certain reporting persons that no forms were
required for such persons, the Company believes that during the fiscal year
ended December 31, 1997 all filing requirements applicable to its executive
officers, directors and greater than ten percent beneficial owners were complied
with.
6
<PAGE>
REMUNERATION OF OFFICERS
COMPENSATION TABLES
SUMMARY COMPENSATION TABLE. The following table sets forth three years of
compensation history for the Chief Executive Officer and each of the other four
most highly compensated executive officers of the Company as of the last
completed fiscal year:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------
AWARDS
----------- PAYOUTS
ANNUAL COMPENSATION(1) SECURITIES ------------- ALL OTHER
-------------------------------------- UNDERLYING LTIP PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) OTHER($) OPTIONS(#) ($) ($)(5)
- -------------------------------- --------- --------- ------------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Auhll (3).................... 1997 265,860 121,171 -- -- -- 10,538
President, CEO and 1996 316,500 39,274 -- -- -- 10,538
Chairman of the Board 1995 298,000 136,739 -- -- -- 10,408
F. D'Amelio..................... 1997 171,045 52,794 -- 10,000 -- 4,344
Vice President 1996 181,000 43,365 -- -- -- 4,432
Chief Manufacturing 1995 169,000 58,000 -- -- -- 3,672
Officer
R. B. Thompson.................. 1997 166,320 60,695 -- 10,000 -- 5,454
Executive Vice President 1996 176,000 26,860 -- -- -- 5,312
Chief Financial Officer 1995 166,000 64,840 -- -- -- 4,192
W. Berci........................ 1997 154,262 48,388 -- 10,000 -- 3,741
Vice President 1996 163,240 39,329 -- -- -- 3,621
Sales and Marketing 1995 154,000 45,500 -- -- -- 3,283
A. Simons....................... 1997 146,806 49,636 -- 10,000 -- 1,766
Vice President 1996 155,350 9,519(4) -- 10,000 -- 1,704
Secretary and 1995 n/a n/a -- -- -- n/a
General Counsel
</TABLE>
- ------------------------
(1) Includes amounts earned in fiscal year, whether or not deferred.
(2) Includes Management Incentive Bonus payment plus incentive payments earned
as part of cost cutting incentive program implemented in August 1997. As
part of the August 1997 cost reduction program, Mr. Auhll's salary was
reduced by 20% and other executive officers' salaries were reduced by 10%.
(3) Mr. Auhll resigned his position from the Company on October 19, 1998.
(4) Mr. Simons' bonus for 1996 was prorated based on date of hire (4/1/96).
(5) "All Other Compensation" consists of Company match of employee contributions
to 401(k) plans and premiums paid on life insurance by the Company on behalf
of the named individuals.
7
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR. The following table sets forth, for
each of the executive officers named in the Summary Compensation Table, stock
options granted during the year ended December 31, 1997. The Company has never
granted stock appreciation rights (SARs).
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ----------------------------- ----------- ------------- ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
All Shareholders (1)......... n/a n/a n/a n/a $ 135,856,617 $ 344,287,331
R. Auhll (2)................. n/a n/a n/a n/a n/a n/a
F. D'Amelio.................. 10,000(3) 6.86% $ 16.25 10/09/07 $ 102,195 $ 258,983
R. B. Thompson............... 10,000(3) 6.86% $ 16.25 10/09/07 $ 102,195 $ 258,983
W. Berci..................... 10,000(3) 6.86% $ 16.25 10/09/07 $ 102,195 $ 258,983
A. Simons.................... 10,000(3) 6.86% $ 16.25 10/09/07 $ 102,195 $ 258,983
</TABLE>
- ------------------------
(1) Total dollar gain based on assumed annual rate of stock appreciation shown
here and calculated on 13,293,812 shares outstanding as of December 31,
1997, based on a ten-year term.
(2) Mr. Auhll resigned his position from the Company on October 19, 1998.
(3) Options were granted on 10/09/97 and are exercisable on 12/31/98. Options
expire ten years from grant date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
VALUES. The following table sets forth, for each of the executive officers
named in the Summary Compensation Table above, each exercise of stock options
during the year ended December 31, 1997 and the year-end value of unexercised
options:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE (1) OF UNEXERCISED
OPTIONS AT FISCAL YEAR END IN- THE-MONEY OPTIONS AT
1997 FISCAL YEAR END 1997
SHARES ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- --------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Auhll (2).................... n/a n/a 40,000(3) -- $ 200,000 --
R. Thompson..................... n/a n/a 8,571 21,429 $ 51,426 $ 68,754
F. D'Amelio..................... n/a n/a 29,377 28,252 $ 268,974 $ 111,171
W. Berci........................ n/a n/a 19,771 21,429 $ 177,426 $ 68,574
A. Simons....................... n/a n/a 1,429 18,571 $ 9,289 $ 55,712
</TABLE>
- ------------------------
(1) Excess of $15.25 (market price at year end) over exercise price.
(2) Mr. Auhll resigned his position from the Company on October 19, 1998.
(3) Mr. Auhll exercised his options to purchase 40,000 shares on July 20, 1998.
In addition to his outstanding options, Mr. Auhll also held warrants to
purchase 100,000 shares which were fully exercisable at year end. The value
of these warrants, computed as above, was $1,064,000. The warrants were
issued in 1990 in connection with Mr. Auhll's guarantee of certain
indebtedness of the Company and not in connection with his performance of
services to the Company.
8
<PAGE>
MANAGEMENT AGREEMENTS
MANAGEMENT RETENTION PLAN. The Company has a Management Retention Plan (the
"Plan") covering all executive officers and certain other key employees. Under
the Plan, executive officers are entitled to certain "retention" payments for
remaining with the Company through the date of a "change in control" (as defined
in the Plan). The executive officers are also entitled to certain additional
"severance" payments in the event they are terminated for any reason other than
cause within a 24 month period following a change in control.
All payments under the Plan are calculated based on the executive's annual
base salary and target bonus for the year (the "Annual Compensation"). The
retention benefit is eight months of the executive's Annual Compensation and the
severance benefit is sixteen months of the executive's Annual Compensation. The
executive officers are also entitled to a prorated portion of their target bonus
for the year that the change in control occurs and continuation of healthcare
and related benefits for 24 months.
The Management Retention Plan expires on August 20, 1999, unless a change of
control occurs prior to such date. Until such expiration, the program cannot be
revoked or amended to the detriment of participants.
INTERIM CEO. The Board has agreed to pay Mr. Cloutier $25,000 per month and
a bonus to be determined at the Board's discretion for his services as interim
CEO of the Company. The Board also granted Mr. Cloutier a stock option to
purchase 10,000 shares of Circon Common Stock which vests in six months, at the
time a permanent CEO is retained, or upon a change in control, whichever shall
first occur. The Board consulted with certain benefits experts before reaching
this agreement with Mr. Cloutier
FORMER CEO. In connection with Mr. Auhll's resignation, the Board agreed to
pay Mr. Auhll a severance package that is customary for executives under similar
circumstances in the same situation. The Board is in the process of consulting
with benefits experts to determine an appropriate package for Mr. Auhll.
REPORT OF THE COMPENSATION COMMITTEE
COMPENSATION PRINCIPLES
The compensation policies of the Company for all employees, including
executive officers, are guided by the following principles:
- Attract, retain and motivate well qualified employees who contribute to
the long-term success of the Company.
- Encourage the development and achievement of objectives that enhance
long-term shareholder value.
- Relate compensation to the overall success of the Company which includes
providing sales growth coupled with sound financial performance, quality
products and services for customers, and fostering an environment which
enables employees to achieve objectives.
EXECUTIVE COMPENSATION PRACTICES
The Company's executive compensation program consists primarily of cash and
equity based elements. Salary and annual bonus awards, if warranted, under the
Management Incentive Compensation Program ("MICP") comprise the cash elements.
The equity based elements consist of grants of stock options under the Company's
employee stock option plans and participation in the Company's employee stock
purchase plan which is available to all employees. The Company also provides
health and welfare
9
<PAGE>
benefits to the named officers through programs that are generally available to
all employees. In addition, all Company officers are entitled to have life
insurance up to four times their annual base salary.
CASH COMPONENTS
It is the Company's intent to provide a compensation program that can
attract, motivate and retain high performance executives who are critical to the
long-term success of the Company. Salary levels and MICP bonus target levels are
established annually for executive officers by the Compensation Committee, after
a review of a compensation survey for the medical/dental equipment and supply
industry. For 1997, the survey group consisted of 359 publicly traded companies
whose principal business was the manufacture or distribution of medical/dental
equipment and supplies. Of these companies, 170 are included in the NASDAQ index
covering medical stocks (see "Stock Performance Graph"). Salaries for the
Company's executive officers are established after comparing the
responsibilities of the position held and the experience of the individual to
the comparable positions and median compensation indicated in the survey. In
addition, the Company periodically modifies its executive compensation due to
the competitive marketplace for executive talent.
The MICP bonus plan provides for annual awards which are paid after the end
of the fiscal year, based on the achievement of pre-established annual increases
in specific objectives. The 1997 MICP plan had 95 objectives. For every
participant, a total target payout amount is established and a portion of this
total target payout is assigned to specific objectives. Examples of typical
specific objectives might include: growth in sales of a particular product line,
growth in operating income, and reduction in accounts receivable days
outstanding. Each MICP participant has a unique set of objectives which
constitute his or her specific MICP program. There are also one or two
subjective elements in each participant's program. An individual objective has a
pre-established minimum performance level before any payment will occur and a
maximum performance level where further payment ceases. The range of payouts for
each objective is from zero to 200% of a target amount. The Compensation
Committee establishes goals for overall growth in sales, gross profit, operating
and net income on a Company wide basis. Using these Company wide goals as
guidelines, targets are then determined for other business units, and other
subsets of sales, gross profit and operating income. The Compensation Committee
reviews the complete MICP program each year prior to any payment. In years where
there is a significant change in the overall business, or in an individual's
responsibility, the MICP targets are modified to make the performance
measurements meaningful. Targets and payouts are prorated for participation for
less than one year. Employees with other commission or bonus arrangements are
generally excluded from participation in the MICP plan. The MICP plan may be
modified from time to time, or discontinued at the discretion of the
Compensation Committee. During 1997, executive officers had five to fourteen
objectives in their individual MICP programs with each objective having a weight
of 1% to 41% of their total program, with the total target payout ranging from
31% to 51% of an individual executive officer's salary. The weight assigned to
each objective varied widely among the group tailored to the specific
responsibilities of the individual. For 1997, actual payouts for the named
executive officers' MICP programs averaged 63% of their MICP target amount.
Employees, including executive officers, who participate in the 401(k) plan
may receive a Company matching contribution of up to a maximum of 1 1/2% of
their salary per year.
EQUITY BASED COMPONENTS
The Company utilizes equity based compensation in the form of stock options
and a 20% matching program for stock purchases under a stock purchase plan for
its employees to focus employees and management on creating and enhancing long
term shareholder value. The actual value of such equity based compensation
correlates directly to the Company's stock price performance.
10
<PAGE>
Stock options are an essential element of the Company's compensation
program. This component is intended to provide a long term incentive for
employees to stay with the Company and to motivate them to work toward
appreciation in the price of the Company stock over time. Two hundred
eighty-three employees (or approximately 24% of all employees) participate in
the various employee stock option plans. Stock options are currently outstanding
under the 1979 Employee Stock Option Plan, the 1983 Employee Stock Option Plan,
which expired in 1989 and 1993 respectively, the 1993 Stock Option Plan (the
"1993 Plan") and the Cabot Stock Option Plan (the "Cabot Plan").
In determining the number of shares subject to options being granted to
executive officers, the Compensation Committee considers survey data on options
granted to executives with comparable positions at comparable companies, the
number of shares subject to options previously granted to the executive, the
number of unvested shares subject to outstanding options held by the executive
(which is an indicator of the retention value of the outstanding options) and an
evaluation of the executive's individual performance. In 1997, options were
granted to all executive officers with the exception of Mr. Auhll who was
ineligible to receive stock options because of his participating role on the
Board's Compensation Committee.
In the 1979, 1983 and 1993 Employee Stock Option Plans, options generally
become exercisable cumulatively or "vest" at an annual rate of 14.3% of the
total shares granted for seven years commencing one year from the date of grant.
All outstanding stock options were granted at the "market price" as of the date
of grant. Correspondingly, options in the Cabot Plan generally become
exercisable over a three year vesting period. The 1979, 1983, 1993 and Cabot
Plans provide for full vesting of options in the event there is a change in
control of the Company.
1997 CHIEF EXECUTIVE COMPENSATION
Mr. Auhll, in his capacity as Chairman of the Board, Chief Executive Officer
and President participated in substantially the same compensation programs as
the other named officers. In evaluating the performance and setting the
compensation of the chief executive officer and the Company's other executive
officers, the Compensation Committee has taken note of the additional difficulty
faced in operating the Company during a hostile tender offer as well as
management's success in cutting operating expenses.
After considering all factors, the committee approved a $332,325 salary for
Mr. Auhll for 1997, an increase of 5% over his $316,500 salary for the prior
year. In August 1997, Mr. Auhll's salary was reduced 20% as part of a
cost-reduction program implemented by the Board of Directors. A special
cost-cutting incentive program was initiated at the same time, which enabled Mr.
Auhll and other executive officers to earn back the salary reductions by
achieving the cost-cutting objectives and even exceed the salary reduction with
superior cost-cutting performance. The accompanying Compensation Table for
Executive Officers on page 7 of this document shows the resulting compensation
for Mr. Auhll in 1997. Mr. Auhll's target bonus for 1997 MICP program was set at
$135,000, or 41% of his base salary. Mr. Auhll's base salary falls 9% above and
his bonus falls 61% below the 75th percentile compared to the CEOs in the survey
group. Mr. Auhll's MICP program consisted of twelve objectives covering sales
growth, operating performance and financial ratios, each having a weight of 1%
to 41% of his total program. Mr. Auhll's bonus program had payouts for
individual factors that range from 0% to 200% of the target values for 1997.
This resulted in an actual payout of $75,855 or 56% of his target bonus.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to publicly-held corporations for compensation
exceeding $1 million paid to certain of the Company's executive officers. In
1997, the performance-based compensation paid to the Company's executive
officers did not exceed the $1 million limit per officer. It is the Compensation
Committee's intention to review the
11
<PAGE>
Company's compensation policies and regulate compensation levels in order to
comply with the statute and avoid non-deductible compensation payments.
Respectfully submitted,
Richard A. Auhll
George A. Cloutier
Harold R. Frank
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Auhll, Cloutier and Frank comprised the Compensation Committee in
1997. Prior to Mr. Auhll's resignation in October, 1998, Mr. Auhll participated
in discussions regarding compensation for executive officers, except discussions
regarding his own compensation. As a concurrent member of the Compensation
Committee and employee of the Company, Mr. Auhll was ineligible to receive stock
option grants under the Company's stock option plans. The Compensation Committee
currently consists of Directors Blokker, Elson and Oberrotman.
No other member of the Compensation Committee is a former or current officer
or employee of the Company or any of its subsidiaries. Furthermore, there are no
compensation committee interlocks between Circon and other entities involving
the Company's executive officers and board members.
12
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of October 23, 1998,
except as otherwise indicated, regarding the beneficial ownership of Common
Stock of Circon by (i) each person who is known to Circon to be the beneficial
owner of 5% or more of Circon's Common Stock, (ii) each Director of Circon,
(iii) certain executive officers of Circon and (iv) all directors and executive
officers as a group. To the Company's knowledge, the beneficial owners named in
the table have sole voting and investment power with respect to the shares.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME OWNED CLASS(1)
- ---------------------------------------------------- ------------ -----------
<S> <C> <C>
Tyco International Ltd. (2)......................... 1,959,348(2) 14.3%
c/o Tyco International (US) Inc.
One Tyco Park
Exeter, NH 03833
Richard A. Auhll.................................... 1,558,142(3) 11.3%
6500 Hollister Avenue
Santa Barbara, CA 93117
Circon Shareholders Committee (4)................... 1,230,715(4) 9.0%
c/o Mackenzie Partners Inc.
156 Fifth Avenue
New York, NY 10010
Harold R. Frank..................................... 53,277(5) *
John F. Blokker..................................... 50,000(6) *
R. Bruce Thompson................................... 44,774(7) *
Frank D. D'Amelio................................... 33,937(8) *
Winton L. Berci..................................... 23,128(9) *
Charles M. Elson.................................... 17,963(10) *
George A. Cloutier.................................. 16,000(11) *
Victor H. Krulak.................................... 15,463(12) *
Andrew D. Simons.................................... 3,158(13) *
All directors and executive officers as a group (11
persons).......................................... 1,831,414(14) 13.3%
</TABLE>
- ------------------------
* Less than 1%
(1) Percent of the outstanding shares of Common Stock, treating as outstanding
all shares issuable upon exercise of options held by the particular
beneficial owners that are included in the first column.
(2) Information given is based on a Form 3 Initial Statement of Beneficial
Ownership of Securities dated October 13, 1998 as filed with the Securities
and Exchange Commission.
(3) Includes 100,000 shares subject to warrants exercisable currently or within
60 days.
(4) The Circon Shareholders Committee members include Castlerigg Master
Investments, Ltd., Sandell Asset Management Corp., Metropolitan Capital
Advisors, Inc., Metropolitan Capital III, Inc., and P. Schoenfeld Asset
Management, Inc. Information given is based on a Form 13D dated October 20,
1998 and an amended Form 13D/A dated November 2, 1998 as filed with the
Securities and Exchange Commission.
(5) Includes 18,858 shares subject to options exercisable currently or within 60
days.
(6) Includes 50,000 shares subject to options exercisable currently or within 60
days.
(7) Includes 11,428 shares subject to options exercisable currently or within 60
days.
(8) Includes 33,937 shares subject to options exercisable currently or within 60
days.
(9) Includes 22,628 shares subject to options exercisable currently or within 60
days.
(10) Includes 11,000 shares subject to options exercisable currently or within
60 days.
(11) Includes 16,000 shares subject to options exercisable currently or within
60 days.
(12) Includes 11,000 shares subject to options exercisable currently or within
60 days.
(13) Includes 2,858 shares subject to options exercisable currently or within 60
days.
(14) Includes 291,281 shares subject to options exercisable currently or within
60 days.
13
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows the cumulative performance for the Company's
Common Stock over the last five years compared with the performance of the
NASDAQ Composite index (U.S. companies) and an index of NASDAQ-listed companies
with standard industrial classification codes beginning with "38" (SIC
3800-3899, Measuring, analyzing, and controlling instruments; photographic,
medical and optical goods; watches and clocks), published by the Center for
Research in Security Prices, University of Chicago. The price of the Common
Stock, and the levels of such indices, on December 31, 1992, have been converted
to a base of 100 in the graph. The performance shown is not necessarily
indicative of future performance.
Shareholders interested in obtaining a list of companies included in the
industry index may do so by written request to the Company.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL
RETURNS
<S> <C> <C>
Dollars
CIRCON CORPORATION Nasdaq Stock Market (US Companies)
12/31/92 100.0 100.0
12/31/93 52.3 114.8
12/31/94 48.9 112.2
12/31/95 92.0 158.7
12/31/96 69.3 195.2
12/31/97 69.3 239.5
<CAPTION>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL
RETURNS
<S> <C>
Dollars
NASDAQ Stocks (SIC 3800-3899)
12/31/92 100.0
12/31/93 84.6
12/31/94 91.2
12/31/95 134.2
12/31/96 139.8
12/31/97 158.9
</TABLE>
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C>
CIRCON CORPORATION 100 52.3 48.9 92.0 69.3 69.3
Nasdaq Stock Mkt (US Companies) 100 114.8 112.2 158.7 195.2 239.5
NASDAQ Stocks (SIC 3800-3899) 100 84.6 91.2 134.2 139.8 158.9
</TABLE>
14
<PAGE>
SUBMISSION OF SHAREHOLDER PROPOSALS
Individual shareholders of the Company may be entitled to submit proposals
which they believe should be voted upon by the shareholders. The Securities and
Exchange Commission has adopted regulations which govern the inclusion of such
proposals in annual proxy materials.
If a shareholder desires to have a proposal considered for inclusion in the
Proxy Statement and form of Proxy of the Board of Directors for the 1999 Annual
Meeting of Shareholders, such proposal must be received by the close of business
on July 6, 1999, at the executive offices of the Company, 6500 Hollister Avenue,
Santa Barbara, California 93117, Attention: Office of the Secretary.
Each proponent and each proposal submitted must conform to the applicable
proxy rules of the Securities and Exchange Commission concerning the submission,
content and form of shareholder proposals.
FINANCIAL STATEMENTS
The Company's 1997 Annual Report to the shareholders was mailed to
shareholders of record as of June 1, 1998. The Annual Report contains audited
consolidated financial statements of the Company and is not deemed part of the
proxy soliciting material. If any shareholder did not receive such Annual
Report, we will immediately mail one upon receipt of a request from such
shareholder.
THE COMPANY WILL MAIL WITHOUT CHARGE TO ANY SHAREHOLDER UPON WRITTEN
REQUEST A COPY OF THE ANNUAL REPORT ON FORM 10-K, INCLUDING THE
FINANCIAL STATEMENTS, SCHEDULES AND A LIST OF EXHIBITS. REQUESTS SHOULD
BE SENT TO SHAREHOLDER RELATIONS:
Circon Corporation
6500 Hollister Avenue
Santa Barbara, CA 93117
VOTING OF PROXIES AND OTHER MATTERS
Properly executed and returned proxies, unless revoked, will be voted as
directed by the shareholders or in the absence of such direction, will be voted
FOR the election of the Director Nominees to the Board of Directors and FOR the
ratification of the selection of independent auditors.
Management does not know of any other matters which will come before the
Annual Meeting. However, if any other matter should come before the Annual
Meeting or any adjournment thereof, the proxies will be voted in the manner
directed by the Board of Directors.
The Annual Meeting of Shareholders will be held this year at Fess Parker's
Doubletree Resort, 633 East Cabrillo Boulevard, Santa Barbara, California.
Directions may be obtained by contacting the Doubletree Resort at (805)
564-4333.
By Order of the Board of Directors,
ANDREW D. SIMONS
Vice President and Secretary
15
<PAGE>
[LOGO]
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR CIRCON CORPORATION
The owner of the shares represented by this proxy hereby appoints George
A. Cloutier and John F. Blokker, or either of them, Proxies to vote at Circon
Corporation's Annual Meeting of Shareholders on November 24, 1998 and any
adjournments or postponements thereof on the matters referred to on this card
as well as any other matters which may properly come before the Annual
Meeting, in accordance with and as more fully described in the Notice of
Meeting and Proxy Statement, receipt of which is acknowledged. This proxy
revokes all prior proxies given by the undersigned.
The Proxies will vote your shares in accordance with your directions on
this card. IF YOU DO NOT INDICATE YOUR CHOICES ON THIS CARD, THE PROXIES
WILL VOTE YOUR SHARES IN ACCORDANCE WITH THE DIRECTORS' RECOMMENDATIONS,
NAMELY "FOR" PROPOSALS 1 AND 2.
<PAGE>
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
<TABLE>
<S><C>
CIRCON'S DIRECTORS RECOMMEND A VOTE "FOR" PROPOSALS 1 AND 2.
AUTHORITY
FOR WITHHELD
1. ELECTION OF DIRECTORS
George A. Cloutier / / / /
Joseph R. Hardiman
Alain M. Oberrotman
WITHHELD FOR: (Write that nominee's name in the space provided below).
---------------------------------------------
FOR AGAINST ABSTAIN
2. RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS / / / / / /
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE COMPANY
Signature Date Signature Date
-------------------- ---------- -------------------- ----------
IMPORTANT: Please sign as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
</TABLE>
