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                                 CIRCON CORPORATION

                 RICHARD AUHLL SEVERANCE AGREEMENT & MUTUAL RELEASE

     This Severance Agreement and Mutual Release (the "Agreement") is made by 
and between Circon Corporation ("Circon") and Richard Auhll ("Executive"). 

     WHEREAS, Executive was employed by Circon;

     WHEREAS, Executive and Circon have agreed to enter into a severance 
agreement and mutual release;

     NOW THEREFORE, in consideration of the mutual promises made herein and 
the benefits provided pursuant to such promises, Circon and Executive (the 
"Parties") hereby agree as follows:

     1.   RESIGNATION; AGREEMENT NOT TO SEEK DIRECTORSHIP.  Executive 
acknowledges his resignation from his employment with Circon as of October 
19, 1998 (the "Termination Date").  Executive agrees that he shall not seek 
election to the Board of Directors of Circon at the 1998 Shareholders Meeting.

     2.   PAYMENT OF SALARY.  Executive acknowledges and represents that 
Circon has paid all salary, wages, accrued vacation and any and all other 
benefits (but not including the Executive's 401(k) account) due to Executive 
as of the Termination Date.

     3.   CONSIDERATION.  As consideration for Executive entering into and 
abiding by this Agreement, Circon agrees to provide Executive with the 
following benefits:

          (a)  LUMP-SUM PAYMENT.  A lump-sum payment of $627,000, less 
applicable withholding, payable on or before November 25, 1998. 

          (c)  COBRA CONTINUATION.   For a period of thirty-six (36) months 
following the Termination Date, Circon shall pay 100% of the premium cost of 
continuing coverage under the Circon group health and dental plans for and to 
the extent that Executive and his spouse and/or dependents were covered 
immediately prior to the Termination Date.  Executive hereby elects and 
agrees that such continuation coverage shall be under Title X of The 
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") 
or similar California laws to the maximum duration possible.  If, after COBRA 
or similar California continuation coverage is no longer available, the 
Company, despite its best efforts, is not able to provide any or all of such 
benefits during the remaining period of promised coverage, the Company shall 
in lieu of such coverage provide Executive with a lump-sum cash payment equal 
to the present value of the reasonably anticipated cost of the Company 
otherwise providing such benefits.  

     4.   MUTUAL RELEASE OF CLAIMS.  Executive agrees that the foregoing 
consideration represents settlement in full of all outstanding obligations 
owed to Executive by the Company.  Executive and the Company, on behalf of 
themselves, and their respective heirs, executors, officers, directors, 
employees, investors, shareholders, administrators, predecessor and successor 
corporations, and assigns, hereby fully

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and forever release each other and their respective heirs, executors, 
officers, directors, employees, investors, shareholders, administrators, 
predecessor and successor corporations, and assigns, of and from any claim, 
duty, obligation or cause of action relating to any matters of any kind, 
whether presently known or unknown, suspected or unsuspected, that any of 
them may possess arising from any omissions, acts or facts that have occurred 
up until and including the effective date of this Agreement including, 
without limitation, 

          (a)   any and all claims relating to or arising from Executive's 
employment relationship with the Company and the termination of that 
relationship; 

          (b)  any and all claims for wrongful discharge of employment; 
breach of contract, both express and implied; breach of a covenant of good 
faith and fair dealing, both express and implied; negligent or intentional 
infliction of emotional distress; negligent or intentional misrepresentation; 
negligent or intentional interference with contract or prospective economic 
advantage; and defamation; 

          (c)  any and all claims for violation of any federal, state or 
municipal statute, including, but not limited to, Title VII of the Civil 
Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in 
Employment Act of 1967, the Americans with Disabilities Act of 1990, and the 
California Fair Employment and Housing Act; 

          (d)  any and all claims arising out of any other laws and 
regulations relating to employment or employment discrimination; and 

          (e)  any and all claims for attorneys' fees and costs. 

The Company and Executive agree that the release set forth in this section 
shall be and remain in effect in all respects as a complete general release 
as to the matters released.  This release does not extend to any obligations 
incurred under this Agreement.

     The Parties acknowledge that they have been advised by legal counsel and 
are familiar with the provisions of California Civil Code Section 1542, which 
provides as follows:

          A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR 
          DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF 
          EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY 
          AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

     The Parties, being aware of said Code Section, agrees to expressly waive 
any rights they may have thereunder, as well as under any other statute or 
common law principles of similar effect.

     5.   CONFIDENTIALITY.  The Parties hereto each agree to use their best 
efforts to maintain in confidence the existence of this Agreement, the 
contents and terms of this Agreement, and the consideration for this 
Agreement (hereinafter collectively referred to as "Settlement Information"). 
Each Party hereto 


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agrees to take every reasonable precaution to prevent disclosure of any 
Settlement Information to third parties, and each agrees that there will be 
no publicity, directly or indirectly, concerning any Settlement Information.  
The Parties hereto agree to take every precaution to disclose Settlement 
Information only to those Executives, officers, directors, attorneys, 
accountants, governmental entities, and family members who have a reasonable 
need to know of such Settlement Information.

     6.   DISPARAGEMENT.  Each Party and their successors in interest agrees 
to refrain from any disparagement, criticism, defamation, slander of the 
other, or tortious interference with the contracts and relationships of the 
other.  Each Party to this Agreement also agrees that they will not knowingly 
encourage, advise or assist any individual or entity to prosecute any claim, 
charge or complaint against the other Party to this Agreement.

     7.   TAX CONSEQUENCES.  The Company makes no representations or 
warranties with respect to the tax consequences of the payment of any sums to 
Executive under the terms of this Agreement.  Executive agrees and 
understands that she is responsible for payment, if any, of local, state 
and/or federal taxes on the sums paid hereunder by the Company and any 
penalties or assessments thereon.  

     8.   NO ADMISSION OF LIABILITY.  No action taken by the Parties hereto, 
or either of them, either previously or in connection with this Agreement 
shall be deemed or construed to be (a) an admission of the truth or falsity 
of any claims heretofore made or (b) an acknowledgment or admission by either 
Party of any fault or liability whatsoever to the other Party or to any third 
party.

     9.   COSTS.  The Parties shall each bear their own costs, expert fees, 
attorneys' fees and other fees incurred in connection with this Agreement.

     10.  ARBITRATION AND EQUITABLE RELIEF.

          (a)  The Parties agree that any dispute or controversy arising out 
of, relating to, or in connection with this Agreement, or the interpretation, 
validity, construction, performance, breach, or termination thereof shall be 
settled by arbitration to be held in Santa Barbara, California, in accordance 
with the National Rules for the Resolution of Employment Disputes then in 
effect of the American Arbitration Association (the "Rules").  The arbitrator 
may grant injunctions or other relief in such dispute or controversy.  The 
decision of the arbitrator shall be final, conclusive and binding on the 
parties to the arbitration.  Judgment may be entered on the arbitrator's 
decision in any court having jurisdiction.  

          (b)  The arbitrator shall apply California law to the merits of any 
dispute or claim, without reference to rules of conflict of law.  The 
arbitration proceedings shall be governed by federal arbitration law and by 
the Rules, without reference to state arbitration law.  The Parties hereto 
hereby expressly consent to the personal jurisdiction of the state and 
federal courts located in California for any action or proceeding arising 
from or relating to this Agreement and/or relating to any arbitration in 
which the Parties are participants. 

          (c)  The Company and Executive shall each pay one-half of the costs 
and expenses of such arbitration, and shall separately pay its counsel fees 
and expenses.


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          (d)  THE PARTIES HERETO HAVE READ AND UNDERSTAND SECTION 10, WHICH 
DISCUSSES ARBITRATION.  THE PARTIES HERETO UNDERSTAND THAT BY SIGNING THIS 
AGREEMENT, THEY AGREE TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF, RELATING 
TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, 
CONSTRUCTION, PERFORMANCE, BREACH, OR TERMINATION THEREOF TO BINDING 
ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF THEIR 
RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING 
TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT 
LIMITED TO, THE FOLLOWING CLAIMS:

               (i)  ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; 
BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD 
FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL 
INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; 
NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC 
ADVANTAGE; AND DEFAMATION.

              (ii)  ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR 
MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL 
RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN 
EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR 
LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND 
LABOR CODE SECTION 201, ET SEQ;

             (iii)  ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND 
REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

     11.  AUTHORITY.  The Company represents and warrants that the 
undersigned has the authority to act on behalf of the Company and to bind the 
Company and all who may claim through it to the terms and conditions of this 
Agreement.  Executive represents and warrants that he has the capacity to act 
on his own behalf and on behalf of all who might claim through her to bind 
them to the terms and conditions of this Agreement.

     12.  NO REPRESENTATIONS.  Each Party represents that it has had the 
opportunity to consult with an attorney, and has carefully read and 
understands the scope and effect of the provisions of this Agreement.  
Neither Party has relied upon any representations or statements made by the 
other Party hereto which are not specifically set forth in this Agreement.

     13.  SEVERABILITY.  In the event that any provision hereof becomes or is 
declared by a court of competent jurisdiction to be illegal, unenforceable or 
void, this Agreement shall continue in full force and effect without said 
provision.

     14.  ENTIRE AGREEMENT.  This Agreement, along with the Proprietary 
Information Agreement previously entered into by and between the Company and 
Executive (which remains in full force and effect) 


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represent the entire agreement and understanding between the Company and 
Executive concerning Executive's separation from the Company, and supersede 
and replace in their entirety any and all prior agreements and understandings 
concerning Executive's relationship with the Company.

     15.  NO ORAL MODIFICATION.  This Agreement may only be amended in 
writing signed by Executive and the President or Chief Executive Officer of 
the Company.

     16.  EFFECTIVE DATE.  This Agreement is effective immediately after it 
has been signed by both Parties.

     17.  COUNTERPARTS.  This Agreement may be executed in counterparts, and 
each counterpart shall have the same force and effect as an original and 
shall constitute an effective, binding agreement on the part of each of the 
undersigned.

     18.  VOLUNTARY EXECUTION OF AGREEMENT.  This Agreement is executed 
voluntarily and without any duress or undue influence on the part or behalf 
of the Parties hereto, with the full intent of releasing all claims.  The 
Parties acknowledge that:

          (a)  They have read this Agreement;

          (b)  They have been represented in the preparation, negotiation, 
and execution of this Agreement by legal counsel of their own choice;

          (c)  They understand the terms and consequences of this Agreement 
and of the releases it contains; 

          (d)  They are fully aware of the legal and binding effect of this 
Agreement.

     IN WITNESS WHEREOF, the Parties have executed this Agreement on the 
respective dates set forth below.

                                       Circon Corporation


Dated:  November 21, 1998             By  /s/ George Cloutier
                                          -----------------------------------
                                          George Cloutier

                                          Richard Auhll                      

Dated:  November 21, 1998                 /s/ Richard Auhll
                                          -----------------------------------



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