-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L/B2mspz0wXBqu41piIcftvqC6wHQaqGYrwDMltEy50Ze/rH5nQMFG3P5BVj7cHA tiIXnXK3UvVKZWPxREvzjw== 0000912057-96-018206.txt : 19960820 0000912057-96-018206.hdr.sgml : 19960820 ACCESSION NUMBER: 0000912057-96-018206 CONFORMED SUBMISSION TYPE: SC 14D9/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19960819 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CIRCON CORP CENTRAL INDEX KEY: 0000719727 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 953079904 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-36096 FILM NUMBER: 96617379 BUSINESS ADDRESS: STREET 1: 6500 HOLLISTER AVE CITY: SANTA BARBARA STATE: CA ZIP: 93111 BUSINESS PHONE: 8059670404 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CIRCON CORP CENTRAL INDEX KEY: 0000719727 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 953079904 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9/A BUSINESS ADDRESS: STREET 1: 6500 HOLLISTER AVE CITY: SANTA BARBARA STATE: CA ZIP: 93111 BUSINESS PHONE: 8059670404 SC 14D9/A 1 SCHEDULE 14D-9/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14D-9/A (Amendment No. 2) Solicitation/Recommendation Statement Pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934 CIRCON CORPORATION (Name of Subject Company) CIRCON CORPORATION (Name of Person(s) Filing Statement) Common Stock, $.01 par value (Title of Class of Securities) 172736 10 0 (CUSIP Number of Class of Securities) RICHARD A. AUHLL President and Chief Executive Officer Circon Corporation 6500 Hollister Avenue Santa Barbara, California 93117 (805) 685-5100 (Name, address and telephone number of person authorized to receive notice and communications on behalf of person(s) filing statement) Copy to: LARRY W. SONSINI, ESQ. Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Road Palo Alto, California 94304-1050 (415) 493-9300 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Amendment No. 2 supplements the Schedule 14D-9 of Circon Corporation, a Delaware corporation (the "Company"), filed with the Securities and Exchange Commission ("SEC") on August 15, 1996, and as subsequently amended, relating to a Tender Offer Statement on Schedule 14D-1, dated August 2, 1996 (the "Schedule 14D-1"), filed with the SEC by USS Acquisition Corp. (the "Purchaser"), a Delaware corporation and wholly-owned subsidiary of United States Surgical Corporation, a Delaware corporation ("USS"), relating to an offer the ("Offer") by Purchaser to purchase all outstanding Shares at a price of $18.00 per Share, net to the seller in cash, without interest thereon. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED On August 16, 1996 the Company mailed a letter to its employees regarding the Offer. A copy of the letter is filed as Exhibit 10 to this statement. On or about August 15, 1996, the Company, certain of the Company's officers and the individuals who serve on its Board of Directors were named as defendants in three lawsuits filed in Delaware Chancery Court. The three suits were brought by individuals who claim to be stockholders of the Company. Each suit seeks to be certified as a class action on behalf of all of the Company's stockholders. The suits, which are similar in substance, allege that the Company and the named individuals violated certain fiduciary duties to the Company's stockholders in connection with the Company's response to the Offer. The complaints seek various forms of relief, including injunctive relief and unspecified monetary damages. The Company has reviewed the allegations and claims contained in the plaintiffs' complaints, and believes that they are without merit. The Company and the named individuals intend to vigorously defend against these claims. Copies of the three complaints relating to the three lawsuits are filed as Exhibit 11, Exhibit 12 and Exhibit 13, respectively, to this statement. On August 19, 1996, the Company issued a press release in connection with the aforementioned three complaints. A copy of the press release is filed as Exhibit 14 to this statement. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS Exhibit 1(F) The "Board Compensation," "Remuneration of Officers," "Report of the Compensation Committee" and "Compensation Committee Interlocks and Insider Participation" sections of the Proxy Exhibit 2(F) Article Ninth of Certificate of Incorporation, as amended Exhibit 3(F) Article V of the Bylaws Exhibit 4(F) Form of Indemnification Agreement Exhibit 5*(F) Letter to Stockholders regarding Board's Recommendation Exhibit 6(F) Press Release Announcing Board's Recommendation Exhibit 7(F) Opinion of Bear, Stearns & Co. Inc. Exhibit 8*(F) Summary of Stockholders Rights Plan Exhibit 9(F) Press Release of the Company dated August 5, 1996 Exhibit 10(F) Letter to Employees Regarding the Offer Exhibit 11 Complaint of William Steiner against the Company, its Directors and certain of its officers, filed on or about August 15, 1996 Exhibit 12 Complaint of Charles Miller against the Company, its Directors and certain of its officers, filed on or about August 15, 1996 Exhibit 13 Complaint of F. Richard Manson against the Company, its Directors and certain of its officers, filed on or about August 15, 1996 Exhibit 14 Press Release of the Company dated August 19, 1996
- ------------------------ * Included in copy mailed to stockholders (F) Previously filed SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: August 19, 1996 CIRCON CORPORATION By: /s/ Richard A. Auhll Richard A. Auhll PRESIDENT AND CHIEF EXECUTIVE OFFICER
2 EX-11 2 EXHIBIT 11 EXHIBIT 11 IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - ----------------------------------------- WILLIAM STEINER, ) ) Plaintiff, ) ) - against - ) ) Civil Action No. 15165-NC RICHARD A. AUHLL, R. BRUCE ) THOMPSON, HAROLD R. FRANK, ) RUDOLF R. SCHULTE, PAUL W. ) HARTLOFF, JR., JOHN BLOKKER AND ) CIRCON CORPORATION, ) ) ) Defendants. ) ) - ----------------------------------------- COMPLAINT Plaintiff, by and through his attorneys, alleges as follows: 1. Plaintiff brings this action as a class action on behalf of himself and all other shareholders of Circon Corporation ("Circon" or the "Company") who are similarly situated, to enjoin defendants' efforts (a) to entrench themselves in their offices as Circon directors, (b) solidify their control of Circon, and (c) thwart any takeover of the Company by, among other things, implementing and maintaining anti-takeover devices, in particular, the poison pill or shareholder rights plan, described below, despite a favorable offer to purchase the Company. 2. On August 2, 1996, USS Acquisition Corp., a wholly owned subsidiary of United States Surgical Corporation (collectively, "USS"), announced the commencement of a $235 million cash tender offer for all the outstanding shares of Circon at an offering price of $18 per share -- a premium of approximately 83% over the average closing price of Circon's common stock for the 10 days preceding the USS proposal. Defendants' reaction was to summarily reject this proposal that, on its face, appears very valuable to Circon's public shareholders, and to adopt a shareholders rights plan. No effort was made to negotiate with USS or even explore with it the extent to which it would increase this relatively high offer even more, or to implement another transaction of equivalent or greater value. 3. Defendants' actions are designed to entrench themselves in office and to continue to receive the substantial salaries, compensation and other benefits and perquisites of their offices. PARTIES 4. Plaintiff is the owner of Circon common stock, and has owned such stock at all times relevant herein. 5. Circon designs, manufactures and markets medical endoscope and electrosurgery systems for diagnosis and minimally invasive surgery. On August 28, 1995, the Company completed a merger with Cabot Medical Corporation ("Cabot"), a designer, manufacturer and marketer of medical and other devices, creating the largest publicly-traded minimally invasive surgery company in the fields of urology and gynecology. Circon also designs, assembles and markets miniature color video systems used with endoscope systems. -2- 6. (a) Defendant Richard A. Auhll ("Auhll") is the chairman of Circon's Board of Directors, President, and Chief Executive Officer. For the year ended December 31, 1995, Auhll earned a salary of $298,000 and approximately $20,000 in other compensation, including 401K contributions and insurance premiums paid by the Company on Auhll's behalf. In addition, Auhll also received compensation in the form of stock options pursuant to the Company's Directors Stock Option Plan, as well as warrants to purchase the Company's common stock. (b) Defendant R. Bruce Thompson ("Thompson") is an Executive Vice President and Chief Financial Officer of Circon. Prior to 1977, Thompson held positions with Heyer-Schulte Corporation, a company founded by defendant Rudolf R. Schulte. For the year ended December 31, 1995, Thompson earned a salary of $166,000 and approximately $8,000 in other compensation, including 401K contributions and insurance premiums paid by the Company on Auhll's [sic] behalf. In addition, Thompson also received compensation in the form of stock options pursuant to the Company's Directors Stock Option Plan [sic] (c) Defendant Harold R. Frank is a member of the Circon Board of Directors and has been since 1984. (d) Defendant Rudolf R. Schulte ("Schulte") is a member of the Circon Board of Directors and has been since 1977. Schulte has a long personal and professional relationship with Thompson who, prior to his joining Circon's board, held various positions at Heyer-Schulte Corporation, a company founded by Schulte. Schulte received compensation in 1995 in the form of stock options pursuant to the Company's Directors Stock Option Plan. -3- (e) Defendant Paul W. Hartloff, Jr. ("Hartloff") is a member of the Circon Board of Directors and has been since 1991. Hartloff also served as the Company's Secretary from 1977 to 1988. Hartloff received compensation in 1995 in the form of stock options pursuant to the Company's Directors Stock Option Plan. (f) Defendant John P. Blokker ("Blokker") is a member of the Circon Board of Directors and has been since 1991. Blokker received compensation in 1995 in the form of stock options pursuant to the Company's Directors Stock Option Plan. 7. The Individual Defendants named in paragraph 6 above are officers and/or directors of Circon and, as such, are in a fiduciary relationship with plaintiff and the other public stockholders of Circon and owe to plaintiff and other members of the class the highest obligations of good faith, fair dealing and full disclosure. CLASS ACTION ALLEGATIONS 8. Plaintiff brings this action for injunctive and other relief on his own behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery and on behalf of all common stockholders of Circon (except defendants herein and any person, firm, trust, corporation or other entity related to or affiliated with any of the defendants) or their successors in interest, who are being deprived of the opportunity to maximize the value of their Circon shares by the wrongful acts of the individual defendants described herein ("Class"). 9. This action is properly maintainable as a class action for the following reasons: (a) The Class for whose benefit this action is brought is so numerous that joinder of all class members is impracticable. There are more than 12.5 million common shares of Circon -4- outstanding, owned by over 1,200 of [sic] stockholders of record. Members of the class are disbursed throughout the United States. (b) There are questions of law and fact which are common to members of the Class and which predominate over all questions affecting only individual members, including whether the defendants have breached the fiduciary duties owed by them to plaintiff and members of the Class by reason of their efforts to entrench themselves in office and prevent Circon public stockholders from maximizing the value of their holdings. (c) The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has no interests that are adverse or antagonistic to the interests of the Class. (d) Plaintiff is committed to the vigorous prosecution of this action and has retained competent counsel experienced in litigation in this nature. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. (e) The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for the party opposing the Class. (f) Defendants have acted and are about to act on grounds generally applicable to the Class, thereby making appropriate final injunctive or other equitable relief with respect to the Class as a whole. FACTUAL BACKGROUND 10. Circon is a company which specializes in providing products used in minimally invasive surgeries, or surgeries accomplished without a major incision or other traumatization to the -5- patient. Among other things, Circon designs, manufactures and markets medical endoscope systems. Endoscopy is one of the most important minimally invasive surgical techniques. In some cases, endoscopic surgeries are performed without the use of general anesthesia, and can often cost saving [sic] and substantially reduce or eliminate postoperative hospitalization. 11. Specialized endoscopes for various diagnostic and surgical procedures include, among other things, laparoscopes, which are used for abdominal cavity surgeries below the diaphragm and which are designed and manufactured by Circon. 12. USS is a leading manufacturer and marketer of specialized wound management products designed for use in the field of minimally invasive surgeries. Among other things, USS also designs and markets laparoscopes, and has an extensive sales force employed for that purpose. USS had sales of $1.02 billion in 1995, as compared with Circon's $160 million in sales, and is a worldwide company with approximately 50% of its sales outside the United States. USS also beneficially owns 1,000,100 shares of Circon common stock, or approximately 8% of the Company's 12,586,677 shares outstanding (as of May 13, 1996), not including an additional 1,669,649 shares (as of December 31, 1995) outstanding under the Company's stock option plans and warrants (as of December 31, 1995) to purchase 228,767 shares. 13. On August 1, 1992, USS approached Circon to explore a potential merger of the two companies. The next day, on August 2, 1996 USS announced the commencement of a cash tender offer for all the outstanding shares of Circon at $18 per share -- a transaction which has an estimated worth of approximately $235 million. -6- 14. Although the Company has taken steps to improve the Company's value, such as entering into the merger with Cabot, the Company still little international presence, as its international sales account for less than 20% of its total sales. Also, the Cabot merger has not significantly improved the trading price of Circon' [sic] stock, which closed on August 1, 1996 at $12 1/8 per share, and had hit a 52-week low of $8.50 per share just one week prior, on July 24, 1996. Thus, USS's offer would represent a premium in excess of 110% over its unaffected market price. 15. In its August 2, 1996 Tender Offer Statement, USS indicated that it would be willing to negotiate with Circon with respect to the acquisition of the Company. 16. In immediate response to the USS proposal, Circon said it would review USS's proposal and encouraged stockholders to wait for the Company's decision before tendering their shares. 17. However, in a 14D-9 statement filed with the Securities Exchange Commission [sic] and dated August 14, 1996 (the "14D-9"), Circon announced that the Board of Directors unanimously recommended that Circon shareholders reject the USS offer and not tender their shares. 18. Further, the 14D-9 disclosed that in immediate response to USS's proposal, the Individual Defendants had promptly moved to strengthen and secure their positions of control over Circon by adopting a Stockholders Rights Plan. The 14D-9 states that in meetings held on August 5, 8 and 13, 1996, the Board met to analyze USS's proposal and to consider implementation of a Stockholders Rights Plan (more commonly known as a "poison pill"), and that at its August 13, 1996 Board Meeting, it had determined that implementation of a Stockholders Rights Plan would be in the best interests of the Company. -7- 19. Pursuant to the terms of Circon's poison pill, the rights will be triggered when it is announced that a person or group has acquired 15% or more of Circon common stock, or commences a tender offer that would result in such person or group owning 15% or more of the Company's outstanding stock. 20. In summarizing Circon's poison pill, the Company claims in its 14D-9 statement that its Board-approved Stockholders Rights Plan is designed to "protect and maximize the value of the outstanding equity interests of the Company and the long-term strategic plan of the Company," and that "[t]akeover attempts pose a threat to the Company's long-term strategic plan." However, the plan adopted by the Company has a low "trigger" threshold (i.e., 15%) which would make a takeover of Circon prohibitively expensive without the Individual Defendants' approval. Thus, defendants have absolute discretion to determine whether an acquisition proposal, even one favorable to class members, can be effectuated. 21. Defendants' reflexive rejection of the USS proposal and their adoption of the poison pill at a low trigger percentage, without either further exploration of the parameters of the proposal or adoption of an alternative transaction designed to provide class members with equivalent or greater value, was not a reasonable response to the highly-priced USS proposal, which USS stated was negotiable, and constitutes a breach of defendants' fiduciary duties owed to plaintiff and other members of the Class. 22. At all times herein, defendants were and are obligated to adequately consider, in a timely fashion and on an informed basis, any reasonable proposal from any party, not to place their own self-interests and personal considerations ahead of the interests of the stockholders and to make -8- corporate decisions in good faith. The actions of the Individual Defendants in just rejecting the offer and implementing the poison pill were fundamentally motivated to further their own self-interests and objectives, and correspondingly preserve and protect their emoluments and positions in the Company, all in violation of their fiduciary duties and to the detriment of the shareholders of the Company. 23. The Individual Defendants' entrenchment motives are evidenced by, INTER ALIA, the following: (a) Through the adoption of the poison pill, defendants have erected a virtually insurmountable barrier to persons who may wish to acquire Circon, obtain control or take steps to maximize shareholder value, and are thereby attempting to entrench themselves in their positions of control and improperly advance their own personal agenda at the expense of Circon's public stockholders; (b) In announcing the poison pill defendants stated that the poison pill is designed to protect Circon stockholders from ". . . [t]akeover attempts . . . that do not adequately reflect the inherent value of the Company or coercive tactics to deprive the Company's Board of Directors and its stockholders of any real opportunity to determine the destiny of the Company . . . ." Defendants have wrongfully misled Circon's stockholders and the investing community as to the true purpose and effect of these provisions. Defendants' statements are belied by the fact that the Company took no steps to use the poison pill either as a bargaining chip to increase an offer that on its face would already provide class members with a very significant premium or as a shield to provide the Company with time within which to structure another valuable transaction. Instead, defendants simply rejected the offer, making vague reference to the inherent value of the Company without -9- providing any reason to believe that the Company's stock will achieve that unstated value any time within the near or even distant future. Defendants' characterizations were, in fact, a smoke-screen to obfuscate their true motives and objectives and thereby deter shareholder opposition to the poison pill, and (c) The poison pill was formulated and implemented almost immediately after and in direct response to the USS proposal. The Individual Defendants' implementation of the poison pill was not an ordinary business decision made during a regular meeting of the Circon Board of Directors. Instead, the Individual Defendants hastily reacted in "knee-jerk" fashion to USS's proposal by enacting the poison pill and thus, strengthening and securing their positions of control over Circon. 24. In adopting the poison pill, the Individual Defendants have acted to manipulate the corporate machinery of Circon, thereby impairing the corporate democratic process within the Company at the expense and to the detriment of the Company's common stockholders. By adopting the poison pill, the Individual Defendants have restrained and impaired the ability of Circon stockholders to affect corporate policy, and freely structure the directorial constituency of the Company. The poison pill, INTER ALIA, impedes shareholder ability to accumulate shares and associate together to replace incumbent management, oppose any management initiative, or otherwise affect corporate policy through stockholder resolutions. By effectively preventing any single party from owning and thereby voting greater than 15% of the outstanding common shares, management clearly has a significant advantage in any proxy contest which threatens to eliminate or diminish their control over Circon. The poison pill thereby thwarts shareholder opposition and serves to perpetuate senior management's control over the business and operations of the Company. -10- 25. Defendants' fiduciary obligations require them to: (a) undertake an appropriate evaluation of ANY bona fide offers, and take appropriate steps to solicit all potential bids for the Company or its assets or consider strategic alternatives; (b) act independently, including appointing a disinterested committee so that the interests of Circon's public stockholders would be protected; and (c) adequately ensure that no conflicts of interest exist between defendants' own interests and their fiduciary obligations to the public stockholders of Circon. 26. The USS proposal represents an opportunity to effect a change of control of Circon, its business and affairs. In a change of control transaction, the Individual Defendants necessarily and inherently suffer from a conflict of interest between their own personal desires to retain their offices in Circon, with the emoluments and prestige which accompany those offices, and their fiduciary obligation to maximize shareholder value in a change of control transaction. Because of such conflict of interest, it is unlikely that defendants will be able to represent the interests of Circon's public stockholders with the impartiality that their fiduciary duties require, nor will they be able to ensure that their conflicts of interest will be resolved in the best interests of Circon's public stockholders. 27. By virtue of the acts and conduct alleged herein, the Individual Defendants, who direct the actions of the Company, are carrying out a preconceived plan and scheme to entrench themselves in office and to protect and advance their own parochial interests at the expense of Circon. Defendants' conduct wrongfully infringes on the Company's stockholders' ability to influence corporate policy through the proxy mechanism. -11- 28. As a result of the foregoing, the Individual Defendants have breached their fiduciary duties owed to Circon's public stockholders. 29. Unless enjoined by this Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the other members of the Class and entrench themselves in their corporate offices, all to the irreparable harm of the Class. 30. Plaintiff and the other members of the Class have no adequate remedy at law. WHEREFORE, plaintiff demands judgment as follows: (a) declaring this to be a proper class action; (b) ordering the Individual Defendants to carry out their fiduciary duties to plaintiff and the other members of the Class by announcing their intention to: (i) undertake an appropriate evaluation of alternatives designed to maximize value for Circon's public stockholders; and (ii) adequately ensure that no conflicts of interests exist between defendants' own interests and their fiduciary obligations to public stockholders or, if such conflicts exist, ensure that all the conflicts would be resolved in the best interests of Circon's public stockholders; (c) ordering defendants, jointly and severally, to account to plaintiff and the other members of the Class for all damages suffered and to be suffered by them as a result of the acts and transactions alleged herein; (d) ordering defendants to deploy the poison pill only for the benefit of Circon's shareholders in a manner which will maximize shareholder value; -12- (e) awarding plaintiff the costs and disbursements of this action, including a reasonable allowance for plaintiff's attorney's fees and experts' fees; and (f) granting such other and further relief as this Court may deem to be just and proper. ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By: /s/ _________________________________ Suite 1401, Mellon Bank Center Wilmington, Delaware 19899 (302) 656-4433 Attorneys for Plaintiff OF COUNSEL: GOODKIND LABATON RUDOFF & SUACHAROW LLP 100 Park Avenue New York, NY 10017-5563 (212) 907-0700 -13- EX-12 3 EXHIBIT 12 EXHIBIT 12 IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - ------------------------------------ CHARLES MILLER, ) ) Plaintiff, ) ) - against - ) Civil Action No. 15166-NC ) RICHARD A. AUHLL, R. BRUCE ) THOMPSON, HAROLD R. FRANK, ) RUDOLF R. SCHULTE, PAUL W. ) HARTLOFF, JR., JOHN BLOKKER and ) CIRCON CORPORATION, ) ) Defendants. ) ) - ------------------------------------ COMPLAINT Plaintiff, by and through his attorneys, alleges as follows: 1. Plaintiff brings this action as a class action on behalf of himself and all other shareholders of Circon Corporation ("Circon" or the "Company") who are similarly situated, to enjoin defendants' efforts (a) to entrench themselves in their offices as Circon directors, (b) solidify their control of Circon, and (c) thwart any takeover of the Company by, among other things, implementing and maintaining anti-takeover devices, in particular, the poison pill or shareholder rights plan, described below, despite a favorable offer to purchase the Company. 2. On August 2, 1996, USS Acquisition Corp., a wholly owned subsidiary of United States Surgical Corporation (collectively, "USS"), announced the commencement of a $235 million cash tender offer for all the outstanding shares of Circon at an offering price of $18 per share -- a premium of approximately 83% over the average closing price of Circon's common stock for the 10 days preceding the USS proposal. Defendants' reaction was to summarily reject this proposal that, on its face, appears very valuable to Circon's public shareholders, and to adopt a shareholders rights plan. No effort was made to negotiate with USS or even explore with it the extent to which it would increase this relatively high offer even more, or to implement another transaction of equivalent or greater value. 3. Defendants' actions are designed to entrench themselves in office and to continue to receive the substantial salaries, compensation and other benefits and perquisites of their offices. PARTIES 4. Plaintiff is the owner of Circon common stock, and has owned such stock at all times relevant herein. 5. Circon designs, manufactures and markets medical endoscope and electrosurgery systems for diagnosis and minimally invasive surgery. On August 28, 1995, the Company completed a merger with Cabot Medical Corporation ("Cabot"), a designer, manufacturer and marketer of medical and other devices, creating the largest publicly-traded minimally invasive surgery company in the fields of urology and gynecology. Circon also designs, assembles and markets miniature color video systems used with endoscope systems. 6. (a) Defendant Richard A. Auhll ("Auhll") is the chairman of Circon's Board of Directors, President, and Chief Executive Officer. For the year ended December 31, 1995, Auhll earned a salary of $298,000 and approximately $20,000 in other compensation, including 401K contributions and insurance premiums paid by the Company on Auhll's behalf. In addition, Auhll also received compensation in the form of stock options pursuant to the Company's Directors Stock Option Plan, as well as warrants to purchase the Company's common stock. -2- (b) Defendant R. Bruce Thompson ("Thompson") is an Executive Vice President and Chief Financial Officer of Circon. Prior to 1977, Thompson held positions with Heyer-Schulte Corporation, a company founded by defendant Rudolf R. Schulte. For the year ended December 31, 1995, Thompson earned a salary of $166,000 and approximately $8,000 in other compensation, including 401K contributions and insurance premiums paid by the Company on Auhll's [sic] behalf. In addition, Thompson also received compensation in the form of stock options pursuant to the Company's Directors Stock Option Plan. (c) Defendant Harold R. Frank is a member of the Circon Board of Directors and has been since 1984. (d) Defendant Rudolf R. Schulte ("Schulte") is a member of the Circon Board of Directors and has been since 1977. Schulte has a long personal and professional relationship with Thompson who, prior to his joining Circon's board, held various positions at Heyer-Schulte Corporation, a company founded by Schulte. Schulte received compensation in 1995 in the form of stock options pursuant to the Company's Directors Stock Option Plan. (e) Defendant Paul W. Hartloff, Jr. ("Hartloff") is a member of the Circon Board of Directors and has been since 1991. Hartloff also served as the Company's Secretary from 1977 to 1988. Hartloff received compensation in 1995 in the form of stock options pursuant to the Company's Directors Stock Option Plan. (f) Defendant John F. Blokker ("Blokker") is a member of the Circon Board of Directors and has been since 1991. Blokker received compensation in 1995 in the form of stock options pursuant to the Company's Directors Stock Option Plan. -3- 7. The Individual Defendants named in paragraph 6 above are officers and/or directors of Circon and, as such, are in a fiduciary relationship with plaintiff and the other public stockholders of Circon and owe to plaintiff and other members of the class the highest obligations of good faith, fair dealing and full disclosure. CLASS ACTION ALLEGATIONS 8. Plaintiff brings this action for injunctive and other relief on his own behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery and on behalf of all common stockholders of Circon (except defendants herein and any person, firm, trust, corporation or other entity related to or affiliated with any of the defendants) or their successors in interest, who are being deprived of the opportunity to maximize the value of their Circon shares by the wrongful acts of the individual defendants described herein ("Class"). 9. This action is properly maintainable as a class action for the following reasons: (a) The Class for whose benefit this action is brought is so numerous that joinder of all class members is impracticable. There are more than 12.5 million common shares of Circon outstanding, owned by over 1,200 of [sic] stockholders of record. Members of the class are disbursed throughout the United States. (b) There are questions of law and fact which are common to members of the Class and which predominate over all questions affecting only individual members, including whether the defendants have breached the fiduciary duties owed by them to plaintiff and members of the Class by reason of their efforts to entrench themselves in office and prevent Circon public stockholders from maximizing the value of their holdings. -4- (c) The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has no interests that are adverse or antagonistic to the interests of the Class. (d) Plaintiff is committed to the vigorous prosecution of this action and has retained competent counsel experienced in litigation in this nature. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. (e) The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for the party opposing the Class. (f) Defendants have acted and are about to act on grounds generally applicable to the Class, thereby making appropriate final injunctive or other equitable relief with respect to the Class as a whole. FACTUAL BACKGROUND 10. Circon is a company which specializes in providing products used in minimally invasive surgeries, or surgeries accomplished without a major incision or other traumatization to the patient. Among other things, Circon designs, manufactures and markets medical endoscope systems. Endoscopy is one of the most important minimally invasive surgical techniques. In some cases, endoscopic surgeries are performed without the use of general anesthesia, and can often cost saving [sic] and substantially reduce or eliminate postoperative hospitalization. 11. Specialized endoscopes for various diagnostic and surgical procedures include, among other things, laparoscopes, which are used for abdominal cavity surgeries below the diaphragm and which are designed and manufactured by Circon. -5- 12. USS is a leading manufacturer and marketer of specialized wound management products designed for use in the field of minimally invasive surgeries. Among other things, USS also designs and markets laparoscopes, and has an extensive sales force employed for that purpose. USS had sales of $1.02 billion in 1995, as compared with Circon's $160 million in sales, and is a worldwide company with approximately 50% of its sales outside the United States. USS also beneficially owns 1,000,100 shares of Circon common stock, or approximately 8% of the Company's 12,588,677 shares outstanding (as of May 13, 1996), not including an additional 1,669,649 shares (as of December 31, 1995) outstanding under the Company's stock option plans and warrants (as of December 31, 1995) to purchase 228,767 shares. 13. On August 1, 1992, USS approached Circon to explore a potential merger of the two companies. The next day, on August 2, 1996 USS announced the commencement of a cash tender offer for all the outstanding shares of Circon at $18 per share -- a transaction which has an estimated worth of approximately $235 million. 14. Although the Company has taken steps to improve the Company's value, such as entering into the merger with Cabot, the Company still has little international presence, as its international sales account for less than 20% of its total sales. Also, the Cabot merger has not significantly improved the trading price of Circon' [sic] stock, which closed on August 1, 1996 at $12 1/8 per share, and had hit a 52-week low of $8.50 per share just one week prior, on July 24, 1996. Thus, USS's offer would represent a premium in excess of 110% over its unaffected market price. 15. In its August 2, 1996 Tender Offer Statement, USS indicated that it would be willing to negotiate with Circon with respect to the acquisition of the Company. -6- 16. In immediate response to the USS proposal, Circon said it would review USS's proposal and encouraged stockholders to wait for the Company's decision before tendering their shares. 17. However, in a 14D-9 statement filed with the Securities Exchange Commission [sic] and dated August 14, 1996 (the "14D-9"), Circon announced that the Board of Directors unanimously recommended that Circon shareholders reject the USS offer and not tender their shares. 18. Further, the 14D-9 disclosed that in immediate response to USS's proposal, the Individual Defendants had promptly moved to strengthen and secure their positions of control over Circon by adopting a Stockholders Rights Plan. The 14D-9 states that in meetings held on August 5, 8 and 13, 1996, the Board met to analyze USS's proposal and to consider implementation of a Stockholders Rights Plan (more commonly known as a "poison pill"), and that at its August 13, 1996 Board Meeting, it had determined that implementation of a Stockholders Rights Plan would be in the best interests of the Company. 19. Pursuant to the terms of Circon's poison pill, the rights will be triggered when it is announced that a person or group has acquired 15% or more of Circon common stock, or commences a tender offer that would result in such person or group owning 15% or more of the Company's outstanding stock. 20. In summarizing Circon's poison pill, the Company claims in its 14D-9 statement that its Board-approved Stockholders Rights Plan is designed to "protect and maximize the value of the outstanding equity interests of the Company and the long-term strategic plan of the Company," and that "[t]akeover attempts pose a threat to the Company's long-term strategic plan." However, the plan adopted by the Company has a low "trigger" threshold (i.e., 15%) which would make a takeover of Circon prohibitively expensive without the Individual Defendants' approval. Thus, defendants have -7- absolute discretion to determine whether an acquisition proposal, even one favorable to class members, can be effectuated. 21. Defendants' reflexive rejection of the USS proposal and their adoption of the poison pill at a low trigger percentage, without either further exploration of the parameters of the proposal or adoption of an alternative transaction designed to provide class members with equivalent or greater value, was not a reasonable response to the highly-priced USS proposal, which USS stated was negotiable, and constitutes a breach of defendants' fiduciary duties owed to plaintiff and other members of the Class. 22. At all times herein, defendants were and are obligated to adequately consider, in a timely fashion and on an informed basis, any reasonable proposal from any party, not to place their own self-interests and personal considerations ahead of the interests of the stockholders and to make corporate decisions in good faith. The actions of the Individual Defendants in just rejecting the offer and implementing the poison pill were fundamentally motivated to further their own self-interests and objectives, and correspondingly preserve and protect their emoluments and positions in the Company, all in violation of their fiduciary duties and to the detriment of the shareholders of the Company. 23. The Individual Defendants' entrenchment motives are evidenced by, INTER ALIA, the following: (a) Through the adoption of the poison pill, defendants have erected a virtually insurmountable barrier to persons who may wish to acquire Circon, obtain control or take steps to maximize shareholder value, and are thereby attempting to entrench themselves in their positions of control and improperly advance their own personal agenda at the expense of Circon's public stockholders; (b) In announcing the poison pill defendants stated that the poison pill is designed to protect Circon stockholders from " . . . [t]akeover attempts . . . that do not adequately reflect the inherent -8- value of the Company or coercive tactics to deprive the Company's Board of Directors and its stockholders of any real opportunity to determine the destiny of the Company...." Defendants have wrongfully misled Circon's stockholders and the investing community as to the true purpose and effect of these provisions. Defendants' statements are belied by the fact that the Company took no steps to use the poison pill either as a bargaining chip to increase an offer that on its face would already provide class members with a very significant premium or as a shield to provide the Company with time within which to structure another valuable transaction. Instead, defendants simply rejected the offer, making vague reference to the inherent value of the Company without providing any reason to believe that the Company's stock will achieve that unstated value any time within the near or even distant future. Defendants' characterizations, were, in fact, a smoke-screen to obfuscate their true motives and objectives and thereby deter shareholder opposition to the poison pill, and (c) The poison pill was formulated and implemented almost immediately after and in direct response to the USS proposal. The Individual Defendants' implementation of the poison pill was not an ordinary business decision made during a regular meeting of the Circon Board of Directors. Instead, the individual Defendants hastily reacted in "knee-jerk" fashion to USS's proposal by enacting the poison pill and thus, strengthening and securing their positions of control over Circon. 24. In adopting the poison pill, the Individual Defendants have acted to manipulate the corporate machinery of Circon, thereby impairing the corporate democratic process within the Company at the expense and to the detriment of the Company's common stockholders. By adopting the poison pill, the Individual Defendants have restrained and impaired the ability of Circon stockholders to affect corporate policy, and freely structure the directorial constituency of the Company. The poison pill, INTER ALIA, impedes shareholder ability to accumulate shares and associate together to replace incumbent -9- management, oppose any management initiative, or otherwise affect corporate policy through stockholder resolutions. By effectively preventing any single party from owning and thereby voting greater than 15% of the outstanding common shares, management clearly has a significant advantage in any proxy contest which threatens to eliminate or diminish their control over Circon. The poison pill thereby thwarts shareholder opposition and serves to perpetuate senior management's control over the business and operations of the Company. 25. Defendants' fiduciary obligations require them to: (a) undertake an appropriate evaluation of ANY bona fide offers, and take appropriate steps to solicit all potential bids for the Company or its assets or consider strategic alternatives; (b) act independently, including appointing a disinterested committee so that the interests of Circon's public stockholders would be protected; and (c) adequately ensure that no conflicts of interest exist between defendants' own interests and their fiduciary obligations to the public stockholders of Circon. 26. The USS proposal represents an opportunity to effect a change of control of Circon, its business and affairs. In a change of control transaction, the Individual Defendants necessarily and inherently suffer from a conflict of interest between their own personal desires to retain their offices in Circon, with the emoluments and prestige which accompany those offices, and their fiduciary obligation to maximize shareholder value in a change of control transaction. Because of such conflict of interest, it is unlikely that defendants will be able to represent the interests of Circon's public stockholders with the impartiality that their fiduciary duties require, nor will they be able to ensure that their conflicts of interest will be resolved in the best interests of Circon's public stockholders. -10- 27. By virtue of the acts and conduct alleged herein, the Individual Defendants, who direct the actions of the Company, are carrying out a preconceived plan and scheme to entrench themselves in office and to protect and advance their own parochial interests at the expense of Circon. Defendants' conduct wrongfully infringes on the Company's stockholders' ability to influence corporate policy through the proxy mechanism. 28. As a result of the foregoing, the Individual Defendants have breached their fiduciary duties owed to Circon's public stockholders. 29. Unless enjoined by this Court, defendants will continue to breach their fiduciary duties owed to plaintiff and the other members of the Class and entrench themselves in their corporate offices, all to the irreparable harm of the Class. 30. Plaintiff and the other members of the Class have no adequate remedy at law. WHEREFORE, plaintiff demands judgment as follows: (a) declaring this to be a proper class action; (b) ordering the Individual Defendants to carry out their fiduciary duties to plaintiff and the other members of the Class by announcing their intention to: (i) undertake an appropriate evaluation of alternatives designed to maximize value for Circon's public stockholders; and (ii) adequately ensure that no conflicts of interests exist between defendants' own interests and their fiduciary obligations to public stockholders or, if such conflicts exist, ensure that all the conflicts would be resolved in the best interests of Circon's public stockholders; -11- (c) ordering defendants, jointly and severally, to account to plaintiff and the other members of the Class for all damages suffered and to be suffered by them as a result of the acts and transactions alleged herein; (d) ordering defendants to deploy the poison pill only for the benefit of Circon's shareholders in a manner which will maximize shareholder value; (e) awarding plaintiff the costs and disbursements of this action, including a reasonable allowance for plaintiff's attorney's fees and experts' fees; and (f) granting such other and further relief as this Court may deem to be just and proper. ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By: /s/ -------------------------------------- Suite 1401, Mellon Bank Center Wilmington, Delaware 19899 (302) 656-4433 Attorneys for Plaintiff OF COUNSEL: WECHSLER HARWOOD HALEBIAN & FEFFER 805 Third Avenue 7th Floor New York, New York 10022 (212) 935-7400 -12- EX-13 4 EXHIBIT 13 EXHIBIT 13 IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - ------------------------------------ F. RICHARD MANSON ) ) Plaintiff, ) v. ) ) C. A. No. 15167-NC RICHARD A. AUHLL, JOHN F. ) BLOKKER, HAROLD R. FRANK, PAUL ) W. HARTLOFF, JR., RUDOLF R. ) SCHULTE, and CIRCON CORPORATION, ) ) Defendants. ) ) - ------------------------------------ CLASS ACTION COMPLAINT Plaintiff, by his attorneys, alleges upon information and belief, except with respect to his ownership of Circon Corporation ("Circon" or the "Company") common stock as follows: PARTIES 1. Plaintiff is the owner of common stock of Circon. 2. Circon is a Delaware corporation with its principal offices at 6500 Hollister Avenue, Santa Barbara, California. Circon designs, manufactures and markets medical endoscope systems, electrosurgery systems and miniature color video systems for diagnosis and minimally invasive surgery applications. As of May 13, 1996, Circon had approximately 12.5 million shares of common stock outstanding held by approximately 1200 shareholders of record. 3. Defendant Richard A. Auhll is President, Chief Executive Officer and Chairman of the Board of Directors of Circon. Defendant Auhll is deemed to be the beneficial owner of 12% of Circon common stock. 4. Defendants John F. Blokker, Harold R. Frank, Paul W. Hartloff, Jr., and Rudolf R. Schulte are directors of Circon. 5. Defendants Auhll, Blokker, Frank, Hartloff and Schulte are collectively referred to as the "Director Defendants". CLASS ACTION ALLEGATIONS 6. Plaintiff bring [sic] this action on his own behalf and as a class action on behalf of all shareholders of defendant Circon (except defendants herein and any person, firm, trust, corporation or other entity related to or affiliated with any of the defendants) or their successors in interest, who have been or will be adversely affected by the conduct of defendants alleged herein. 7. This action is properly maintainable as a class action for the following reasons: (a) The class of shareholders for whose benefit this action is brought is so numerous that joinder of all class members is impracticable. As of March 31, 1996, there were over 12 million shares of defendant Circon's common stock outstanding owned by approximately 1200 shareholders of record scattered throughout the United States. (b) There are questions of law and fact which are common to members of the Class and which predominate over any questions affecting any individual members. The common questions include, INTER ALIA, the following: i. Whether the Director Defendants have breached fiduciary duties owed by them to plaintiff and members of the Class, and/or have aided and abetted in such breach, by virtue of their participation and/or acquiescence and by their other conduct complained of herein; ii. Whether the Director Defendants have wrongfully failed to act in the best interests of Circon and its shareholders; and -2- iii. Whether plaintiff and the other members of the Class will be irreparably damaged by the wrongful conduct complained of herein. 8. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has the same interest as the other members of the Class. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. 9. Defendants have acted or refused to act on grounds generally applicable to the Class, thereby making appropriate injunctive relief with respect to the Class as a whole. 10. The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for defendants or adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications. 11. Plaintiff anticipates that there will not be any difficulty in the management of this litigation. 12. For the reasons stated herein, a class action is superior to other available methods for the fair and efficient adjudication of this action. SUBSTANTIVE ALLEGATIONS 13. On August 1, 1996, Leon Hirsch, President and Chief Executive Officer of United States Surgical Corporation ("U.S. Surgical") advised defendant Auhll that U.S. Surgical was launching an unsolicited takeover bid for Circon at $18 a share for a total value of approximately $230 million (the "Offer"). The Offer, which commenced on August 2, 1996, is contingent upon the receipt of at least 67% -3- of Circon's shares on a fully diluted basis and is scheduled to expire on August 29, 1996. The $18 per share offer represented an 83% premium over the average closing price of Circon's stock during the last ten trading days prior to the August 2 announcement. At that time, one analyst, Piper Jaffray, reportedly valued Circon at about $15 a share, or $3 per share less than the current tender offer price. 14. On or about August 15, 1996, the Circon board filed its Schedule 14D-9 in which it recommended that Circon's shareholders reject U.S. Surgical's offer and stated that Circon is not for sale. Circon also announced that the Circon board had adopted a shareholder rights plan pursuant to which shareholders of record on August 26 will receive a dividend distribution of preferred stock purchase rights which are exercisable if a person acquires 15% or more of Circon's common stock. The shareholder rights plan serves as a virtually insurmountable obstacle to any offer to acquire Circon, including the U.S. Surgical Offer. 15. Notwithstanding U. S. Surgical's statements in its Offer to Purchase of its intention to seek to negotiate with Circon with respect to the acquisition of the Company, there is no indication in the Circon 14D-9 that any efforts were undertaken by Circon or its advisors to negotiate with Circon a higher price or even to discuss the Offer with U.S. Surgical. 16. Further, the Circon 14D-9 omits material information concerning the board's decision to reject the offer. The 14D-9 states that Bear Stearns, the financial advisor retained by the Circon board to evaluate the Offer, opined that the consideration offered pursuant to the Offer is inadequate from a financial point of view. The 14D-9 also states that the Board determined that the Company's strategic plan offers the potential for greater long-term benefits for the shareholders. However, the 14D-9 fails to disclose the results of the analyses conducted by Bear Stearns in valuing Circon, including any ranges of values for the Company. The 14D-9 also does not disclose the projected long-term values of pursuing -4- the Company's strategic plan, or any comparative analysis of the purported "strategic plan" and the Offer. Thus, the Circon shareholders are not provided with the information necessary to compare the Offer with Bear Stearns valuation of the Company or the projected long-term value of the Company or to determine whether the Offer or the Board's "strategic plan" are in the best interests of the shareholders. 17. The Director Defendants have breached and are breaching fiduciary duties owed to the public shareholders of Circon. The Director Defendants were and are obligated to act in the best interests of Circon and its shareholders, including due and proper consideration and exploration of all alternatives to maximize shareholder value such as BONA FIDE offers or proposals to acquire the Company or its assets, and whether such alternatives are in the best interests of the shareholders. The Director Defendants, however, apparently made no efforts to negotiate with U.S. Surgical concerning the Offer price or even to discuss the Offer with U.S. Surgical and thus, failed to adequately inform themselves concerning the Offer. 18. Moreover, the Director Defendants breached their duty of candor by omitting material information from the 14D-9. 19. The conduct of the Director Defendants is, and unless corrected, will continue to be, wrongful, unfair and harmful to Circon's public shareholders. 20. In contemplating, planning and/or effecting the foregoing actions and inactions, the Director Defendants are not acting in good faith and with due care and loyalty toward plaintiff and the Class, and have breached, and are breaching, fiduciary duties to plaintiff and the Class. 21. Because the Director Defendants (and those acting in concert with them) dominate and control the business and corporate affairs of Circon and because they are in possession of private corporate information concerning Circon's businesses and future prospects, there exists an imbalance and -5- disparity of knowledge between the Director Defendants and U.S. Surgical and the public shareholders of Circon. 22. As a result of the wrongful actions and inactions of the Director Defendants, plaintiff and the Class have been and will be damaged. 23. Unless enjoined by this Court, the Director Defendants will continue to breach fiduciary duties owed to plaintiff and the Class, all to the irreparable harm of the Class. 24. Plaintiff has no adequate remedy at law. WHEREFORE, plaintiff demands judgment as follows: (a) Declaring that this action may be maintained as a class action; (b) Enjoining preliminarily and permanently the Director Defendants duly to consider all alternatives to maximize shareholder value and to negotiate with respect to all BONA FIDE offers or proposals for the Company or its assets, and conduct a proper process, all in the best interests of Circon shareholders; (c) Enjoining the Director Defendants from the improper use of defensive measures, including the Circon shareholder rights plan; (d) Requiring the Director Defendants to supplement the 14D-9 by disseminating all material information including the information specified herein; (e) Requiring defendants to compensate plaintiff and the members of the Class for all losses and damages suffered and to be suffered by them as a result of the wrongful conduct complained of herein, together with prejudgment and post-judgment interest; (f) Awarding plaintiff the costs and disbursements of this action, including reasonable attorneys', accountants', and experts' fees; and -6- (g) Granting such other and further relief as may be just and proper. Dated: August 15, 1996 CHIMICLES, JACOBSEN & TIKELLIS /s/ James C. Strum --------------------------------------- Pamela S. Tikellis James C. Strum Robert J. Kriner, Jr. One Rodney Square P.O. Box 1035 Wilmington, DE 19899 (302) 656-2500 Attorneys for Plaintiff OF COUNSEL: WOLF, HALDENSTEIN, ADLER, FREEMAN & HERZ LLP 270 Madison Avenue New York, New York 10016 (212) 545-4600 LAW OFFICES OF CHARLES J. PIVEN 111 S. Calvert Street Suite 2700 Baltimore, Maryland 21202 (410) 385-5251 -7- EX-14 5 EXHIBIT 14 EXHIBIT 14 FOR IMMEDIATE RELEASE: CIRCON BELIEVES CLAIMS ARE WITHOUT MERIT Santa Barbara, California (August 19, 1996) - Circon Corporation (NASDAQ-NMS:CCON) announced today that it and certain of its officers and the individuals who serve on its board of directors were named as defendants in three lawsuits filed last week in Delaware Chancery Court. The three suits were brought by individuals who claim to be stockholders of Circon. Each suit seeks to be certified as a class action on behalf of all Circon stockholders. The suits, which are similar in substance, allege that Circon and the named individuals violated certain fiduciary duties to Circon's stockholders in connection with the Company's response to an unsolicited tender offer made by United States Surgical Corporation on August 2, 1996. The complaints seek various forms of relief, including injunctive relief and unspecified monetary damages. Circon has reviewed the allegations and claims contained in the plaintiffs' complaints, and believes that they are without merit. The Company and the named individuals intend to vigorously defend against these claims. Circon is the leading U.S. supplier of products for minimally invasive urological and gynecological surgery, including such hardware products as endoscopes and video systems, and such disposable products as urological stents, laproscopic suction-irrigation devices, and a wide variety of gynecological products. # # # CONTACTS: Judy Wilkinson / Daniel Katcher Abernathy MacGregor Group (212) 371-5999 -----END PRIVACY-ENHANCED MESSAGE-----