Circon and Cabot announce agreement to merge.

SANTA BARBARA, Calif.--(BUSINESS WIRE)--April 25, 1995--Circon Corp. (NASDAQ/NMS:CCON) and Cabot Medical Corp. (NASDAQ/NMS:CBOT) Tuesday jointly announced the signing of a definitive agreement to merge in a stock-for-stock transaction, creating the largest publicly-traded minimally invasive surgery company in the fields of urology and gynecology.

Under the terms of the agreement, unanimously approved by the boards of both companies, Cabot shareholders would receive 0.415 shares of Circon common stock in exchange for each Cabot share held. It is anticipated that the proposed merger will be tax-free to Cabot shareholders and will be accounted for as a pooling-of-interests.

Based on Circon's April 24 closing stock price of $21 7/8, the exchange value for each Cabot share would equal $9.08 for a total value of approximately $105 million.

The merger is subject to various conditions including the approval of shareholders of both companies and the receipt by Circon of financing of approximately $50 million to cover the potential early retirement of Cabot's convertible subordinated notes. The merger is expected to close during the third calendar quarter of 1995.

Circon is the largest U.S. producer of medical endoscope and video systems and, selling under the trade name Circon ACMI, has the largest share of the U.S. urology endoscope market. In the fiscal year ended Dec. 31, 1994, Circon had sales of $88.9 million, operating income of $5.4 million and net income of $3.8 million.

Cabot is the largest U.S. producer of gynecology sterilization and gynecology-laparoscopy suction/irrigation devices and, selling under the Surgitek name, has the largest share of the U.S. urology premium stent market. In the fiscal year ended Oct. 31, 1994, Cabot had sales of $68.1 million, operating income of $8.3 million and net income of $2.1 million.

The companies expect the merger to be accretive to 1996 earnings per share after factoring in cost savings and merger benefits.

In a joint statement, Richard A. Auhll and Warren G. Wood, chief executive officers of Circon and Cabot, respectively, expressed their enthusiasm about the merger and the prospects for the combined company. "Circon and Cabot products are very complementary with very little overlap. They are often used by the same doctors and in the same procedures.

"Circon has a very strong position in hardware products such as endoscopes and video systems. Cabot, on the other hand, has a very strong position in disposable products such as urological stents and laparoscopic suction/irrigation devices. The combination creates one of the premier minimally invasive surgery companies in the fields of urology and gynecology," said Auhll.

"This merger positions the combined company to excel in the rapidly changing healthcare market. The new company will be a larger and more efficient organization, with significant opportunity to improve operations at all levels. Further, with an expanded product line and a combined USA sales force of 160 -- one of the largest in the field of endoscopy -- the merged company will be well positioned to increase its penetration of the hospital market" said Wood.

CONTACT: Circon Corporation

R. Bruce Thompson, 805/685-5100

or

Cabot Medical Corp.

Marvin Sharfstein, 215/752-8300