<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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / 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:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(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 WHITE PROXY CARD AND MAIL IT IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE AS PROMPTLY AS POSSIBLE, whether or not you
expect to attend the meeting. Remember, do not return any [blue] proxy cards
sent to you by [The Circon Shareholder Committee]. 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 WHITE Management
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
[Mailing Date]
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.
At the Annual Meeting, the election of directors this year is particularly
important. As discussed in some detail in the proxy statement under the caption
"Proposal No. 1," the Circon shareholders have a choice between two groups of
nominees with two very different agendas. The Board believes that the election
of its nominees is essential to build and maximize shareholder value and that
the election of the rival group of nominees could have seriously harmful
consequences to the shareholders.
It is important that your views be represented whether or not you are able
to be present at the meeting. Please sign and date the enclosed WHITE 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/ JOHN F. BLOKKER
JOHN F. BLOKKER
Chairman of the Board
/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 (the "Record Date") for the determination of shareholders
entitled to vote at the 1998 Annual Meeting and at any adjournment or
postponement thereof.
You will need a ticket if you plan to attend the Annual Meeting. If your
shares are registered in your name and not in the name of a bank, broker or
other third party, an admission ticket is attached to your proxy card. Please
detach and save the ticket. You will need to present it in order to be admitted
to the Annual Meeting. If your shares are not registered in your own name,
please follow the directions contained in the Section entitled "Information
About Attending the Annual Meeting" that appears on Page 14 of the Proxy
Statement.
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 WHITE proxy card and promptly return it to the Company in the
accompanying postage prepaid envelope.
By Order of the Board of Directors,
/s/ ANDREW D. SIMONS
ANDREW D. SIMONS
Vice President and Secretary
Santa Barbara, California
[Mailing Date]
<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 white 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 white proxy card are first being mailed to
shareholders on or about [Mailing Date].
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 and abstentions will be
treated as negative votes.
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, or is
marked to indicate a vote for more than one nominee, the cumulative votes
represented by that proxy card will be cast in equal numbers for each nominee on
the Board of Directors (except any nominee as to whom the proxy card is marked
to withold the vote); however, if the proxy holders determine that all of such
nominees cannot be elected, they may at their discretion allocate the votes (to
the exclusion of any one of more such nominees) in order to elect as many
nominees as they believe possible under the then prevailing circumstances.
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 WHITE proxies
distributed by your Board will be voted FOR the election of your Board's
nominees and FOR the
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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.
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 $125,000 plus reimbursement for
its reasonable out-of-pocket expenses. The Company has also agreed to indemnify
D.F. King against certain liabilities and expenses. It is anticipated that D.F.
King will employ approximately thirty persons to solicit shareholders for the
Annual Meeting.
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
Director 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 Articles 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. Mr. 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 Mr.
George Cloutier and Mr. Alain Oberrotman for election as Class II Directors, and
has nominated [name to be provided by amendment] for election as a Class III
Director. Mr. Cloutier is currently serving as a Class II Director. Mr.
Oberrotman and Mr. [name to be provided by amendment] are not currently
Directors. 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.
Certain Circon shareholders have formed a group they call the "Circon
Shareholders Committee," which has notified Circon that they intend to nominate
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. According to the Committee's preliminary proxy statement filed
with the Securities and Exchange Commission dated October 23, 1998, the members
of the Committee "and other participants in the Committee's solicitation" held
1,246,215 shares of Circon Common Stock on the Record Date. The Company does not
know the number of shares currently held by the members of the Committee and
"other participants" in their
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solicitation. The Committee's proxy statement discloses that they had made 73
purchases and 31 sales of Circon shares during 1998 (through October 15), so the
Company cannot assume any level of ownership at any particular time.
Pursuant to Section 3.2 of the Company's bylaws, shareholders who intend to
make Director nominations at an Annual Meeting are required to give notice of
such intent to the Company's Secretary not later than ten days after Circon
first gives notice to shareholders of the Annual Meeting or, if earlier, ten
days after Circon first gives public notice of the date of the Annual Meeting.
Circon gave public notice of the Annual Meeting on October 7,1998, and the
Committee gave timely notice of its intention to nominate Jonathan R. Macey and
Adam M. Oberrotman for election as Class II Directors. On October 28, 1998,
after the end of the ten-day period specified in Section 3.2 of the bylaws, the
Committee gave notice of its intention to nominate a third person, Lester Hill.
The Company reserves the right to challenge the nomination of Mr. Hill.
WHY CIRCON SHAREHOLDERS SHOULD VOTE FOR THE BOARD'S NOMINEES, NOT THE
COMMITTEE'S
WHO ARE THE BOARD'S NOMINEES?
The Board's nominees are: GEORGE CLOUTIER, a current member of the Board and
acting CEO pending the selection of a permanent CEO. Mr. Cloutier's resume
appears following the table on page .
[name and description of second nominee to be provided by
amendment.]
ALAIN OBERROTMAN, one of the nominees of the Committee. The Circon Board
believes that Mr. Oberrotman's qualifications and his support by substantial
shareholders make it appropriate for him to be included as a Board nominee.
THE COMMITTEE WANTS YOU TO BELIEVE THAT THE CIRCON BOARD HAS NO INTEREST IN
MAXIMIZING SHAREHOLDER VALUE AND IS DETERMINED TO KEEP CIRCON INDEPENDENT: IS
IT TRUE?
Circon's financial advisors, Bear Stearns & Co., at the Board's direction,
have diligently solicited proposals from numerous other companies to acquire
Circon or engage in some other form of strategic transaction beneficial to
Circon shareholders. After several months of seeking such proposals, Circon
announced on October 20, 1998 that none had been received, except two at
extremely low prices. Even those two were withdrawn when Bear Stearns attempted
to negotiate a more reasonable price.
The Board believes that it is harmful to the stability and growth of
Circon's business to continue actively soliciting new acquisition proposals at
this time and that shareholder value will be enhanced by hiring a new CEO and
focusing management's efforts on improving the Company's financial performance
and growth prospects. During 1996 and 1997, Circon has had unusually high levels
of turnover in its sales force and substantially reduced foreign sales through
independent dealers, which Circon believes are largely attributable to
uncertainties regarding Circon's future as an independent company or a
subsidiary of another company. These uncertainties have materially harmed
Circon's operating performance and its value both to investors and to potential
acquirors.
HOWEVER, the Circon Board has absolutely NOT closed the door to
consideration of any new unsolicited proposals that may be received at any time.
Moreover, as stated in Circon's press release of October 20, 1998, the Company
may have further discussions with companies that had earlier expressed an
interest in Circon. Indeed, Circon has encouraged companies that have expressed
a continuing interest to consider making a proposal for the Board to evaluate.
Any such proposals and related preliminary discussions must be kept
confidential, and it is Circon's policy not to comment on merger rumors.
The extensive effort by the Circon Board to explore ways to maximize
shareholder value are nowhere mentioned in the Committee's proxy statement,
which gives the misleading impression that the Board has done nothing to provide
"any alternative other than Circon remaining independent." The fact is that the
Circon Board and its financial advisors Bear Stearns & Co. have diligently
explored the alternatives to remaining independent and continue to be receptive
to proposals that will enhance shareholder value.
3
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It is a DELUSION to believe that electing the Committee's nominees, rather
than the Board's nominees, would produce buyers at favorable prices. More
likely, it would lead potential buyers to conclude that Circon's Board may be
ready to sell at ANY price.
Although Circon's Board is recommending the election of one of the
committee's candidates, Mr. Oberrotman, if an additional Committee nominee were
to be elected, there would be a "change of control" of Circon's triggering
immediate payments to certain Circon employees under the Management Retention
Plan aggregating approximately $6.6 million. This money would have to be paid
irrespective of whether Circon was actually sold. Under the Management Retention
Plan, these employees are also entitled to additional "severance payments" in
the event they are terminated in a one, and in some cases two, year period
following a change of control. In addition, the Circon Stock Option Plan
provides for the automatic vesting of any outstanding unvested options of any
employee-optionholder who is terminated within one year of a change in control.
Therefore, the election of the Committee's slate could result in a liability to
the Company of up to $12 million assuming, as a worst case scenario, a
substantial majority of the Company's employees were laid-off or terminated
following the election.
Moreover, the Board is concerned that a shareholder rejection of its
nominees could destabilize the Company, create apprehension among sales
personnel and other employees and foreign dealers, and thereby lessen the value
of Circon. This would harm our shareholders, whether or not a sale were later to
occur.
In conclusion, the Board is acting in the shareholders' best interests and
recommends the election of the board' nominees, including Mr. Oberrotman, to
enable the Board to continue its efforts to maximize shareholder value by
improving financial performance and being receptive to reasonable acquisition
proposals, rather than holding an immediate "fire sale."
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
[ADDITIONAL NAMED
NOMINEE] III n/a
Alain Oberrotman Independent Management Consultant II 47 n/a
</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
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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 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.
[DESCRIPTION OF ADDITIONAL NAMED NOMINEE]
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
The Board of Directors meets on a regularly scheduled basis and, during
1997, met on eleven occasions. In addition, significant communications occur
between the Directors and the Company apart from regularly scheduled meetings of
the Board and the Board Committees. Accordingly, management considers many
factors, including attendance at meetings, in their evaluation of contributions
by Directors to the Company. For the Board of Directors as a whole, average
attendance at meetings of the Board and the Board Committees (the aggregate of
the total number of meetings of the Board of Directors and the total number of
meetings of all Board Committees on which each Director served) during 1997 was
98.4%. During 1997, none of the incumbent Directors attended less than 90% of
the aggregate 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 currently consists of Directors Blokker, Cloutier
and Frank, held two meetings in 1997. 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 consists of Directors Auhll, Cloutier and
Frank, held one meeting in 1997. 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 also
administers the Company's stock option plans.
5
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DIRECTORS' COMPENSATION
The compensation for outside Directors was modified effective July 1, 1997,
as discussed below. First, the annual retainer for services as a Director was
increased from $2,500 to $10,000. Second, provision was made for annual grants
of Common Stock equivalents. 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. The new compensation program is
designed to ensure that a significant portion of a non-employee Director's
compensation is equity-based and, therefore, highly dependent on the long-term
performance of Circon Common Stock. Thus, the program is designed to align the
interests of Circon's non-employee Directors and its shareholders.
Effective July 1, 1997, each Director who is not an employee of the Company
receives an annual retainer of $10,000 for services 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 and reimbursement for expenses
incurred in connection with attendance at Board and committee meetings.
In 1995, the shareholders approved the adoption of the 1995 Directors Stock
Option Plan (the "1995 Plan") to replace the 1984 Directors Stock Option Plan
(the "1984 Plan") which expired in 1994. 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, for a price not less than 85% of the fair market value of the
common stock on the date of grant. The vesting schedule for the options granted
is determined by a committee of Directors (the "Committee") at the time of the
option grant. 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, the Committee elected to accelerate the vesting schedule for previously
granted options. Each Director who is not an employee of the Company received
accelerated options or a combination of accelerated options and new stock Common
Stock options in recognition of services rendered over the past year. The number
of accelerated options or new options granted in the July 1997 grant to a
particular Director was determined by using a schedule designed to bring that
Director's total stock options vesting in 1997 to 11,000 shares. Incumbent
Directors who are not employees will receive subsequent option grants not to
exceed 5,000 shares, on an annual basis. In October 1997, the Board recognized
the addition of two new Board Members, namely Mr. Elson and Lt. Gen. Krulak,
with new 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
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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
7
<PAGE>
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.
8
<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.
9
<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 also holds 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.
10
<PAGE>
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 awards, if warranted, under the
Management Incentive Compensation Program ("MICP") comprise the cash elements.
Grants of stock options under the Company's employee stock option plans and
participation in the Company's employee stock purchase plan comprise the equity
based elements. The Company also provides health and welfare 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 target levels are
established annually for executive officers by the Compensation Committee, after
a review of compensation surveys 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 executive
officers are established by evaluating the responsibilities of the position held
and the experience of the individual and by reference to the competitive
marketplace for executive talent.
The MICP 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 overall MICP program typically has many objectives. The
1997 MICP plan had 95 objectives. For every participant, a target payout is
established for each objective and the weighting or value is assigned to each
component. 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 and reviews the complete MICP program each year.
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. 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. Awards 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
11
<PAGE>
Committee. During 1997, executive officers had five to fourteen objectives in
their MICP program with each objective having a weight of one to forty-one
percent of their total program. The weight of the objectives varied widely among
the group depending on the responsibilities of the individual. For 1997, actual
payouts for the named executive officers' MICP programs averaged 63% of target.
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.
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. The Compensation Committee based Mr. Auhll's total
compensation, including compensation derived from the MICP plan at a level it
believes is competitive with comparably sized medical companies, based on survey
data. Circon's sales put the Company in the 75th percentile of the companies
surveyed.
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. Mr. Auhll's target bonus for 1997 MICP program was set at $135,000. Mr.
Auhll's MICP program consisted of twelve objectives covering sales growth,
operating performance and financial ratios, each having a weight of one to
forty-one percent 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.
12
<PAGE>
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.
In August 1997, Mr. Auhll's salary was reduced 20% as part of a
cost-reduction program implemented by the Board of Directors. A cost-cutting
incentive program was initiated at the same time, which enabled management 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 8 of this
document shows the resulting compensation for Mr. Auhll in 1997.
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 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 comprise the Compensation Committee. In
October, 1998, Mr. Auhll resigned as President and Chief Executive Officer of
the Company. Prior to his resignation, 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.
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.
13
<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, NY 03833
Richard A. Auhll......................................................................... 1,558,142(3) 11.3%
6500 Hollister Avenue
Santa Barbara, CA 93117
Harold R. Frank.......................................................................... 53,277(4) *
John F. Blokker.......................................................................... 50,000(5) *
R. Bruce Thompson........................................................................ 44,774(6) *
Frank D. D'Amelio........................................................................ 33,937(7) *
Winton L. Berci.......................................................................... 23,128(8) *
Charles M. Elson......................................................................... 17,963(9) *
George A. Cloutier....................................................................... 16,000(10) *
David P. Zielinski....................................................................... 15,572(11) *
Victor H. Krulak......................................................................... 15,463(12) *
All directors and executive officers as a group (11 persons)............................. 1,831,414(13) 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) Includes 18,858 shares subject to options exercisable currently or within 60
days.
(5) Includes 50,000 shares subject to options exercisable currently or within 60
days.
(6) Includes 11,428 shares subject to options exercisable currently or within 60
days.
(7) Includes 33,937 shares subject to options exercisable currently or within 60
days.
(8) Includes 22,628 shares subject to options exercisable currently or within 60
days.
(9) Includes 11,000 shares subject to options exercisable currently or within 60
days.
(10) Includes 16,000 shares subject to options exercisable currently or within
60 days.
(11) Includes 13,572 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 291,281 shares subject to options exercisable currently or within
60 days.
14
<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>
15
<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
INFORMATION ABOUT ATTENDING THE MEETING
The Annual Meeting of Shareholders will be held this year at Fess Parker's
Doubletree Resort, 633 East Cabrillo Boulevard, Santa Barbara, California. If
directions to the Annual Meeting are not included with your pre-printed proxy
card, directions may be obtained by contacting the Doubletree Resort at (805)
564-4333.
Each shareholder will need a ticket to attend the Annual Meeting. If a
shareholder's stock is registered in his or her name and not in the name of a
bank, broker or other third party, the shareholder will receive an admission
ticket attached to his or her proxy card. This ticket must be presented in order
to be admitted to the Annual Meeting.
However, if a shareholder's stock is not registered in his or her name, the
shareholder must advise the firm that is the holder of record of those shares
(bank, broker or other institution holding such shares) that he or she wishes to
attend the Annual Meeting. That firm must provide the shareholder with
documentation showing his or her ownership of shares of Circon Common Stock as
of the Record Date, October 23, 1998. Alternatively, a shareholder must produce
a bank, broker or other valid monthly statement which clearly shows that he or
she was a shareholder of Circon Common Stock as of the Record Date. The
shareholder must bring this documentation to the Annual Meeting in order to gain
admittance to the Annual Meeting. Shareholders whose shares are not registered
in their own name should plan on arriving early to allow adequate time to have
their proof of ownership reviewed prior to the start of the Annual Meeting.
Circon will establish reasonable rules and procedures for the conduct of the
Annual Meeting to ensure that there is sufficient time to address all of the
items on the agenda and to facilitate an orderly
16
<PAGE>
meeting. Attendance at the Annual Meeting is limited to Circon's shareholders.
These rules will be posted at the Annual Meeting and will include an agenda for
the Annual Meeting, procedures for maintaining order and limitations on the time
allotted to questions or comments by shareholders.
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.
By Order of the Board of Directors,
/s/ ANDREW D. SIMONS
ANDREW D. SIMONS
Vice President and Secretary
17
<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 R. Bruce Thompson, 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 / / / /
Alain M. Oberrotman
[Nominee to be Named]
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>
<PAGE>
[LOGO]
Circon Corporation
6500 Hollister Avenue
Santa Barbara, CA
93117
Telephone: (805)
685-5100
[Mailing Date]
The Annual Meeting of Shareholders of Circon Corporation will be held at
9:00 a.m., Pacific daylight time, on Tuesday, November 24, 1998 at Fess Parker's
Doubletree Resort, 633 East Cabrillo Boulevard, Santa Barbara, California.
Please fill in the boxes on the proxy card to indicate how your shares
should be voted, sign and date your proxy card and return it as soon as possible
in the enclosed postpaid envelope.
PLEASE NOTE: IF YOU PLAN TO ATTEND THIS YEAR'S ANNUAL MEETING, YOU WILL
NEED TO PRESENT THE ADMISSION TICKET WHICH IS ATTACHED TO THIS LETTER. EACH
TICKET ADMITS ONE PERSON UNLESS YOUR ACCOUNT IS HELD JOINTLY. PROOF OF OWNERSHIP
IS REQUIRED. PLEASE BRING THE ADMISSION TICKET WITH YOU TO THE ANNUAL MEETING.
Andrew D. Simons
Secretary
<PAGE>
ADMISSION TICKET
CIRCON CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, NOVEMBER 24, 1998
9:00 - 11:00 A.M.
LOCATION OF MEETING
Fess Parker's Doubletree Resort
633 East Cabrillo Boulevard
Santa Barbara, CA 93103
(805) 564-4333
DIRECTIONS FROM THE SOUTH
From LAX, take the 405 North (aka the San Diego Freeway). Take 101 North
(aka the Ventura Freeway) to Santa Barbara. Exit the freeway on Cabrillo
Blvd/Beach Area. Turn left onto Cabrillo Blvd. Follow Cabrillo for approximately
1/2 mile. Turn right on Milpas Street. Turn left onto Calle Puerta Vallarta
(first light). Turn right into hotel entrance.
DIRECTIONS FROM THE NORTH
Take 101 southbound to Santa Barbara. Exit the freeway on Milpas Street.
Turn right onto Milpas. Turn right on Calle Puerta Vallarta (first light past
train tracks). Turn right into hotel entrance
