UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
washington,
d.c. 20549
|
FORM
8-K
|
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): March 11,
2010
_______________________
CRYOLIFE,
INC.
(Exact
name of registrant as specified in its charter)
_________________________
|
Florida
|
1-13165
|
59-2417093
|
|
(State
or Other Jurisdiction
of
Incorporation)
|
(Commission
File Number)
|
(IRS
Employer
Identification
No.)
|
1655
Roberts Boulevard, N.W., Kennesaw, Georgia 30144
(Address
of principal executive office) (zip code)
Registrant's
telephone number, including area code: (770) 419-3355
_____________________________________________________________
(Former
name or former address, if changed since last report)
_________________________
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions (see General Instruction
A.2. below):
|
x
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
q
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Section 8 Other Events
Item 8.01 Other Events.
On March 11, 2010, CryoLife, Inc.
(“CryoLife”) delivered a letter to the shareholders of Medafor, Inc. (“Medafor”)
and issued a press release regarding the same. Also, CryoLife updated
the Frequently Asked Questions portion of the Medafor offer portion of its
website and added a new Litigation Overview section to the Medafor offer portion
of its website. These documents are available at www.cryolife.com/medaforoffer
and/or have otherwise been disseminated by CryoLife. The letter to
the Medafor shareholders, the press release dated March 11, 2010, the updated
Frequently Asked Questions portion of the website and the new Litigation
Overview portion of the website are attached hereto as Exhibits 99.1, 99.2, 99.3
and 99.4, respectively.
This filing and the exhibits
hereto are provided for informational purposes only and are not offers to
purchase nor a solicitation of offers to sell shares of Medafor or CryoLife.
Subject to future developments, CryoLife may file a registration statement
and/or tender offer documents and/or proxy statement with the SEC in connection
with the proposed combination. Shareholders should read those
filings, and any other filings made by CryoLife with the SEC in connection with
the combination, as they will contain important information. Those
documents, if and when filed, as well as CryoLife’s other public filings with
the SEC, may be obtained without charge at the SEC’s website at www.sec.gov and
at CryoLife’s website at www.cryolife.com.
Section
9 Financial Statements and Exhibits
Item
9.01(d) Exhibits.
(a)
Financial Statements.
Not applicable.
(b) Pro
Forma Financial Information.
Not applicable.
(c) Shell
Company Transactions.
Not applicable.
(d)
Exhibits.
|
Exhibit Number
|
Description
|
|
|
99.1
|
Letter
to Medafor shareholders
|
|
|
99.2
|
Press
Release dated March 11, 2010
|
|
|
99.3
|
Frequently
Asked Questions available at
www.cryolife.com/medaforoffer
|
|
|
99.4
|
Litigation
Overview available at
www.cryolife.com/medaforoffer
|
-2-
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, CryoLife, Inc. has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| CRYOLIFE, INC. | |||
|
Date: March
11, 2010
|
By:
|
/s/ D.A. Lee | |
| Name: | D. Ashley Lee | ||
| Title : | Executive Vice President, Chief | ||
| Operating Officer and Chief | |||
| Financial Officer | |||
-3-
EXHIBIT
99.1
Important
Information for Medafor Shareholders
March
10, 2010
Dear
Fellow Medafor Shareholder:
In their communications to Medafor
shareholders, Medafor’s management and board have repeatedly mischaracterized
CryoLife’s motives for filing a lawsuit against Medafor as well as our reasons
for proposing to acquire Medafor for $2.00 per share in a combination of cash
and CryoLife stock. I would like to take this opportunity to set the
record straight.
CryoLife filed a lawsuit against
Medafor to protect its rights and the rights of its shareholders after
discovering several misrepresentations and encountering repeated failures on the
part of Medafor management to honor commitments under the exclusive distribution
agreement (“EDA”) Medafor entered into with CryoLife. CryoLife
attempted to resolve its differences with Medafor in a constructive manner via
numerous in-person meetings and written communications. Each time we
urged Medafor to address its misrepresentations and breaches of the EDA and to
adhere to the EDA’s terms going forward. We viewed litigation as a
last resort and only filed our lawsuit, for among other things, breach of
contract, fraud and negligent misrepresentations and violations of the Georgia
Racketeer Influenced and Corrupt Organizations Act, after it became clear that
Medafor management was either unwilling or unable to take appropriate action to
address Medafor’s numerous violations of the EDA.
Specifically, Medafor’s
misrepresentations and violations of the EDA relate to and include selling
directly and indirectly into CryoLife’s territories and fields, agreeing to
provide exclusive territories to CryoLife despite having conflicting agreements
already in place with other distributors (after denying there were conflicting
agreements in place), failing to protect the intellectual property behind
HemoStase and failing to pursue regulatory approval for HemoStase in other
markets around the world, as required by the EDA. Unfortunately, all
of our attempts to resolve our differences with Medafor were unsuccessful, and
Medafor persisted in violating the EDA. Regardless of the outcome of
our proposal to acquire Medafor, we will pursue enforcement of the EDA to the
fullest extent. CryoLife believes that Medafor’s compliance with the
EDA is in the best interest of Medafor shareholders.
While Medafor has claimed that
CryoLife’s lawsuit is an attempt to pressure Medafor into selling the company,
this is simply untrue. In fact, CryoLife’s offer to acquire Medafor
was initially motivated in large part by a desire to avoid costly
litigation. Of course, as we have said before, we continue to believe
that a combination of the two companies would create value for both CryoLife and
Medafor shareholders.
To ensure that Medafor shareholders are
fully informed, we have created a new section on our Web site that provides
information concerning the events leading up to the lawsuit and the steps
CryoLife took in order to try to avoid litigation. We encourage
shareholders to review the information, which is located at
http://www.cryolife.com/medaforoffer/litigationoverview.
As Medafor’s largest shareholder and
largest customer, CryoLife cannot be passive as Medafor’s board and management
continue to damage the value of HemoStase’s underlying technology and the value
of Medafor’s shares. If the existing management team and board
continue to pursue their current policies, CryoLife believes Medafor
shareholders have the following to look forward to:
· Continued share
dilution – Medafor management has repeatedly and substantially diluted
shareholders, issuing new shares to fund the substantial operating expenses of
the company without receiving adequate value in return. The result of
this has been the enrichment of management and its hand-picked consultants at
the expense of shareholders. As you know, the more new shares Medafor
issues without receiving adequate value the less existing shares are
worth. Medafor has issued more than 13 million new shares since 2004,
diluting Medafor shareholders that held shares in 2004 by approximately 63
percent. Furthermore, CryoLife’s decades of experience in
biomaterials leads us to believe that Medafor’s management will need to raise
significant additional equity capital to pursue their “go-it-alone”
strategy.
· A company unable
to invest in or support its products – Medafor’s capital constraints
prevent it from adequately investing in the commercialization of its products in
a meaningful way or conducting the R&D required to maximize the long-term
value of its technology. The hemostatic market has many competitive
products, including Thrombin JMI, Recothrom, Evithrom, Gelfoam, Avitene,
FloSeal, and Surgicel, Surgiflo, and Surgifoam products. There are
also at least three companies with starch based hemostatics at various stages of
completion, such as Starch Medical, HemoStasis, LLC and
BioCur. Without sufficient resources to market products and create a
strong market position – resources CryoLife can provide – Medafor’s product is
likely to end up a marginal player in the hemostatic arena, offering limited
long-term value to Medafor shareholders.
· An absentee
management team whose interests are not aligned with shareholders –
Medafor’s senior management team consisting of its CEO, CFO, VP of Sales
and Chief Technology Officer do not reside in Minnesota. As a result,
Medafor shareholders pay their senior management team’s living and traveling
expenses as they travel back and forth between their homes and Medafor’s
headquarters. This travel helps explains why Medafor’s most recent
set of audited financials (fiscal 2008) reveals that nearly 32 cents of every
revenue dollar was spent on general and administrative costs, pushing the
company to a significant net loss for the year. We do not believe a
company of approximately 20 employees should be generating $3.1 million of
administrative costs. To put this in perspective, the raw material
and manufacturing costs associated with producing HemoStase were $3.6 million in
2008 and sales and marketing expenses were $3.2 million. Medafor
management’s outsized total compensation relative to performance, shareholder
funded lifestyle, and de minimis ownership stake has clearly created an
environment where management’s interests are not aligned with
shareholders.
· A company unable
to protect its intellectual property (IP) – There are several products in
existence or in development that may violate the core IP related to Medafor’s
hemostatic technology. Because Medafor chooses not to challenge these
technologies and protect its IP, the value of Medafor’s products and technology
will diminish. Furthermore, Medafor’s MPH technology currently only
has IP protection in the U.S., Germany and France. Without additional
patentable inventions to protect its technology, we believe Medafor will lose
sales to companies with better delivery devices, new and innovative products, or
variations on Medafor’s core technology. Protecting and developing
intellectual property is costly, and we believe that Medafor simply does not
have the financial resources to do so.
· Inadequate
financial controls – Medafor has not been able to produce audited
financial statements for its investors in a timely manner. In fact,
Medafor was unable to release its 2008 audited financials until September of
2009 (and these financials contained a going concern qualification from
Medafor’s independent auditors). This delay violated Medafor’s loan
covenants and required it to obtain a waiver from its lender. Medafor
is currently unable to state when or how it will release its audited financials
for 2009.
· No exit
strategy – Despite numerous significant operating and financial
challenges, including: (i) a going concern qualification from its
auditors, (ii) a lack of adequate financial controls, (iii) an apparent lack of
alternative strategic buyer interest and (iv) an obvious need for significant
additional capital to properly commercialize the business (with shareholder
dilution being the likely result of obtaining that capital), Medafor’s
management team and board has informed its shareholders that it will not even
explore strategic discussions for the
foreseeable future. Medafor’s own audit committee has stated
that its auditors intend to move away from auditing Medafor as if it were a
public company. This implies that Medafor is likely years away from
contemplating a public offering as a liquidity event, if at all. We believe
Medafor’s management team and board are more focused on protecting their
outsized compensation and preserving their lifestyles than meeting their
fiduciary duty to shareholders.
In previous letters we have detailed
the financial strength, experienced management team, strong direct sales force
and international distribution network that CryoLife would bring to
Medafor. We believe that we are best positioned to drive additional
growth of HemoStase and related products. Simply put, CryoLife will
be a better steward of the product and help create more value for Medafor
shareholders.
As evidenced by our most recent
earnings release, CryoLife has demonstrated consistent financial strength and is
well positioned to continue to create significant value for its
shareholders. While Medafor talks of its “financial success” and
notes that it has raised capital, as discussed above, it has been unable to
produce audited 2009 financial results and has not provided any detail on the
amount or terms of its most recent dilutive capital raise, if there was
one. As Medafor’s largest shareholder and on behalf of all Medafor
shareholders, CryoLife requests that Medafor management and the board produce
audited financial statements for 2009 as soon as possible.
With a timely review of audited
financials, all Medafor shareholders will be able to understand Medafor’s true
financial situation. Based on the failure of Medafor to provide
shareholders with current information and our belief that Medafor does not have
the necessary capital to maximize the potential of its technology and address
competitive challenges in the hemostatic market, CryoLife feels further
shareholder dilution is on the way.
|
Sincerely,
|
|
| /s/ Steven G. Anderson | |
|
Steven
G. Anderson
|
|
|
Founder,
CEO and President
|
|
IMPORTANT
This
letter is provided for informational purposes only and is not an offer to
purchase nor a solicitation of offers to sell shares of Medafor or
CryoLife. Subject to future developments, CryoLife may file a
registration statement and/or tender offer documents and/or proxy
statement with the SEC in connection with the proposed combination of the
two companies. Shareholders should read those filings, and any
other filings made by CryoLife with the SEC in connection with the
combination, as they will contain important information. Those
documents, if and when filed, as well as CryoLife’s other public filings
with the SEC, may be obtained without charge at the SEC’s website at
www.sec.gov and at CryoLife’s website at
www.cryolife.com.
|
About
CryoLife, Inc.
Founded in 1984, CryoLife, Inc. is a
leader in the processing and distribution of implantable living human tissues
for use in cardiac and vascular surgeries throughout the U.S. and
Canada. The Company's CryoValve® SG
pulmonary heart valve, processed using CryoLife's proprietary SynerGraft®
technology, has FDA 510(k) clearance for the replacement of diseased, damaged,
malformed, or malfunctioning native or prosthetic pulmonary
valves. The Company’s CryoPatch® SG
pulmonary cardiac patch has FDA 510(k) clearance for the repair or
reconstruction of the right ventricular outflow tract (RVOT), which is a surgery
commonly performed in children with congenital heart defects, such as tetralogy
of Fallot, truncus arteriosus, and pulmonary atresia. CryoPatch SG is
distributed in three anatomic configurations: pulmonary hemi-artery, pulmonary
trunk, and pulmonary branch. The Company's BioGlue®
Surgical Adhesive is FDA approved as an adjunct to sutures and staples for use
in adult patients in open surgical repair of large vessels. BioGlue
is also CE Marked in the European Community and approved in Canada and Australia
for use in soft tissue repair. The Company's BioFoam™ Surgical Matrix
is CE Marked in the European Community for use as an adjunct in the sealing of
abdominal parenchymal tissues (liver and spleen) when cessation of bleeding by
ligature or other conventional methods is ineffective or
impractical. BIOGLUE Aesthetic® Medical Adhesive is CE
Marked in the European Community for periosteal fixation following endoscopic
browplasty (brow lift) in reconstructive plastic surgery and is distributed by a
third party for this indication. CryoLife distributes HemoStase® a
hemostatic agent, in much of the U.S. for use in cardiac and vascular surgery
and in many international markets for cardiac, vascular, and general surgery,
subject to certain exclusions.
For
additional information about the company, visit CryoLife’s Web
site: www.cryolife.com.
EXHIBIT 99.2
N
E W S R E L E A S E
FOR
IMMEDIATE RELEASE
Media
Contacts:
D. Ashley
Lee
Executive
Vice President, Chief Financial Officer and
Chief
Operating Officer
Phone:
770-419-3355
Nina
Devlin
Edelman
Phone:
212-704-8145
CryoLife
Sends Letter to Medafor, Inc. Shareholders
ATLANTA, GA (March 11, 2010) --
CryoLife, Inc. (NYSE: CRY), an implantable biological medical device and
cardiovascular tissue processing company, announced today that it has sent a
letter to Medafor shareholders, which is included below.
CryoLife
is being advised by Leerink Swann, LLC as financial advisors.
Important
Information for Medafor Shareholders
March
10, 2010
Dear
Fellow Medafor Shareholder:
In their communications to Medafor
shareholders, Medafor’s management and board have repeatedly mischaracterized
CryoLife’s motives for filing a lawsuit against Medafor as well as our reasons
for proposing to acquire Medafor for $2.00 per share in a combination of cash
and CryoLife stock. I would like to take this opportunity to set the
record straight.
CryoLife filed a lawsuit against
Medafor to protect its rights and the rights of its shareholders after
discovering several misrepresentations and encountering repeated failures on the
part of Medafor management to honor commitments under the exclusive distribution
agreement (“EDA”) Medafor entered into with CryoLife. CryoLife
attempted to resolve its differences with Medafor in a constructive manner via
numerous in-person meetings and written communications. Each time we
urged Medafor to address its misrepresentations and breaches of the EDA and to
adhere to the EDA’s terms going forward. We viewed litigation as a
last resort and only filed our lawsuit, for among other things, breach of
contract, fraud and negligent misrepresentations and violations of the Georgia
Racketeer Influenced and Corrupt Organizations Act, after it became clear that
Medafor management was either unwilling or unable to take appropriate action to
address Medafor’s numerous violations of the EDA.
Specifically, Medafor’s
misrepresentations and violations of the EDA relate to and include selling
directly and indirectly into CryoLife’s territories and fields, agreeing to
provide exclusive territories to CryoLife despite having conflicting agreements
already in place with other distributors (after denying there were conflicting
agreements in place), failing to protect the intellectual property behind
HemoStase and failing to pursue regulatory approval for HemoStase in other
markets around the world, as required by the EDA. Unfortunately, all
of our attempts to resolve our differences with Medafor were unsuccessful, and
Medafor persisted in violating the EDA. Regardless of the outcome of
our proposal to acquire Medafor, we will pursue enforcement of the EDA to the
fullest extent. CryoLife believes that Medafor’s compliance with the
EDA is in the best interest of Medafor shareholders.
While Medafor has claimed that
CryoLife’s lawsuit is an attempt to pressure Medafor into selling the company,
this is simply untrue. In fact, CryoLife’s offer to acquire Medafor
was initially motivated in large part by a desire to avoid costly
litigation. Of course, as we have said before, we continue to believe
that a combination of the two companies would create value for both CryoLife and
Medafor shareholders.
To ensure that Medafor shareholders are
fully informed, we have created a new section on our Web site that provides
information concerning the events leading up to the lawsuit and the steps
CryoLife took in order to try to avoid litigation. We encourage
shareholders to review the information, which is located at
http://www.cryolife.com/medaforoffer/litigationoverview.
As Medafor’s largest shareholder and
largest customer, CryoLife cannot be passive as Medafor’s board and management
continue to damage the value of HemoStase’s underlying technology and the value
of Medafor’s shares. If the existing management team and board
continue to pursue their current policies, CryoLife believes Medafor
shareholders have the following to look forward to:
· Continued share
dilution – Medafor management has repeatedly and substantially diluted
shareholders, issuing new shares to fund the substantial operating expenses of
the company without receiving adequate value in return. The result of
this has been the enrichment of management and its hand-picked consultants at
the expense of shareholders. As you know, the more new shares Medafor
issues without receiving adequate value the less existing shares are
worth. Medafor has issued more than 13 million new shares since 2004,
diluting Medafor shareholders that held shares in 2004 by approximately 63
percent. Furthermore, CryoLife’s decades of experience in
biomaterials leads us to believe that Medafor’s management will need to raise
significant additional equity capital to pursue their “go-it-alone”
strategy.
· A company unable
to invest in or support its products – Medafor’s capital constraints
prevent it from adequately investing in the commercialization of its products in
a meaningful way or conducting the R&D required to maximize the long-term
value of its technology. The hemostatic market has many competitive
products, including Thrombin JMI, Recothrom, Evithrom, Gelfoam, Avitene,
FloSeal, and Surgicel, Surgiflo, and Surgifoam products. There are
also at least three companies with starch based hemostatics at various stages of
completion, such as Starch Medical, HemoStasis, LLC and
BioCur. Without sufficient resources to market products and create a
strong market position – resources CryoLife can provide – Medafor’s product is
likely to end up a marginal player in the hemostatic arena, offering limited
long-term value to Medafor shareholders.
Page 2 of
5
· An absentee
management team whose interests are not aligned with shareholders –
Medafor’s senior management team consisting of its CEO, CFO, VP of Sales
and Chief Technology Officer do not reside in Minnesota. As a result,
Medafor shareholders pay their senior management team’s living and traveling
expenses as they travel back and forth between their homes and Medafor’s
headquarters. This travel helps explains why Medafor’s most recent
set of audited financials (fiscal 2008) reveals that nearly 32 cents of every
revenue dollar was spent on general and administrative costs, pushing the
company to a significant net loss for the year. We do not believe a
company of approximately 20 employees should be generating $3.1 million of
administrative costs. To put this in perspective, the raw material
and manufacturing costs associated with producing HemoStase were $3.6 million in
2008 and sales and marketing expenses were $3.2 million. Medafor
management’s outsized total compensation relative to performance, shareholder
funded lifestyle, and de minimis ownership stake has clearly created an
environment where management’s interests are not aligned with
shareholders.
· A company unable
to protect its intellectual property (IP) – There are several products in
existence or in development that may violate the core IP related to Medafor’s
hemostatic technology. Because Medafor chooses not to challenge these
technologies and protect its IP, the value of Medafor’s products and technology
will diminish. Furthermore, Medafor’s MPH technology currently only
has IP protection in the U.S., Germany and France. Without additional
patentable inventions to protect its technology, we believe Medafor will lose
sales to companies with better delivery devices, new and innovative products, or
variations on Medafor’s core technology. Protecting and developing
intellectual property is costly, and we believe that Medafor simply does not
have the financial resources to do so.
· Inadequate
financial controls – Medafor has not been able to produce audited
financial statements for its investors in a timely manner. In fact,
Medafor was unable to release its 2008 audited financials until September of
2009 (and these financials contained a going concern qualification from
Medafor’s independent auditors). This delay violated Medafor’s loan
covenants and required it to obtain a waiver from its lender. Medafor
is currently unable to state when or how it will release its audited financials
for 2009.
· No exit
strategy – Despite numerous significant operating and financial
challenges, including: (i) a going concern qualification from its
auditors, (ii) a lack of adequate financial controls, (iii) an apparent lack of
alternative strategic buyer interest and (iv) an obvious need for significant
additional capital to properly commercialize the business (with shareholder
dilution being the likely result of obtaining that capital), Medafor’s
management team and board has informed its shareholders that it will not even
explore strategic discussions for the
foreseeable future. Medafor’s own audit committee has stated
that its auditors intend to move away from auditing Medafor as if it were a
public company. This implies that Medafor is likely years away from
contemplating a public offering as a liquidity event, if at all. We believe
Medafor’s management team and board are more focused on protecting their
outsized compensation and preserving their lifestyles than meeting their
fiduciary duty to shareholders.
Page 3 of
5
In previous letters we have detailed
the financial strength, experienced management team, strong direct sales force
and international distribution network that CryoLife would bring to
Medafor. We believe that we are best positioned to drive additional
growth of HemoStase and related products. Simply put, CryoLife will
be a better steward of the product and help create more value for Medafor
shareholders.
As evidenced by our most recent
earnings release, CryoLife has demonstrated consistent financial strength and is
well positioned to continue to create significant value for its
shareholders. While Medafor talks of its “financial success” and
notes that it has raised capital, as discussed above, it has been unable to
produce audited 2009 financial results and has not provided any detail on the
amount or terms of its most recent dilutive capital raise, if there was
one. As Medafor’s largest shareholder and on behalf of all Medafor
shareholders, CryoLife requests that Medafor management and the board produce
audited financial statements for 2009 as soon as possible.
With a timely review of audited
financials, all Medafor shareholders will be able to understand Medafor’s true
financial situation. Based on the failure of Medafor to provide
shareholders with current information and our belief that Medafor does not have
the necessary capital to maximize the potential of its technology and address
competitive challenges in the hemostatic market, CryoLife feels further
shareholder dilution is on the way.
|
Sincerely,
|
|
| /s/ Steven G. Anderson | |
|
Steven
G. Anderson
|
|
|
Founder,
CEO and President
|
|
IMPORTANT
This
letter is provided for informational purposes only and is not an offer to
purchase nor a solicitation of offers to sell shares of Medafor or
CryoLife. Subject to future developments, CryoLife may file a
registration statement and/or tender offer documents and/or proxy
statement with the SEC in connection with the proposed combination of the
two companies. Shareholders should read those filings, and any
other filings made by CryoLife with the SEC in connection with the
combination, as they will contain important information. Those
documents, if and when filed, as well as CryoLife’s other public filings
with the SEC, may be obtained without charge at the SEC’s website at
www.sec.gov and at CryoLife’s website at
www.cryolife.com.
|
Page 4 of
5
About
CryoLife, Inc.
Founded in 1984, CryoLife, Inc. is a
leader in the processing and distribution of implantable living human tissues
for use in cardiac and vascular surgeries throughout the U.S. and
Canada. The Company's CryoValve® SG
pulmonary heart valve, processed using CryoLife's proprietary SynerGraft®
technology, has FDA 510(k) clearance for the replacement of diseased, damaged,
malformed, or malfunctioning native or prosthetic pulmonary
valves. The Company’s CryoPatch® SG
pulmonary cardiac patch has FDA 510(k) clearance for the repair or
reconstruction of the right ventricular outflow tract (RVOT), which is a surgery
commonly performed in children with congenital heart defects, such as tetralogy
of Fallot, truncus arteriosus, and pulmonary atresia. CryoPatch SG is
distributed in three anatomic configurations: pulmonary hemi-artery, pulmonary
trunk, and pulmonary branch. The Company's BioGlue®
Surgical Adhesive is FDA approved as an adjunct to sutures and staples for use
in adult patients in open surgical repair of large vessels. BioGlue
is also CE Marked in the European Community and approved in Canada and Australia
for use in soft tissue repair. The Company's BioFoam™ Surgical Matrix
is CE Marked in the European Community for use as an adjunct in the sealing of
abdominal parenchymal tissues (liver and spleen) when cessation of bleeding by
ligature or other conventional methods is ineffective or
impractical. BIOGLUE Aesthetic® Medical Adhesive is CE
Marked in the European Community for periosteal fixation following endoscopic
browplasty (brow lift) in reconstructive plastic surgery and is distributed by a
third party for this indication. CryoLife distributes HemoStase® a
hemostatic agent, in much of the U.S. for use in cardiac and vascular surgery
and in many international markets for cardiac, vascular, and general surgery,
subject to certain exclusions.
For
additional information about the company, visit CryoLife’s Web
site: www.cryolife.com.
END
Page 5 of
5
EXHIBIT
99.3
ADDITIONAL
IMPORTANT INFORMATION
This document
is provided for informational purposes only and is not an offer to purchase nor
a solicitation of an offer to sell shares of Medafor or
CryoLife. Subject to future developments, CryoLife may file a
registration statement and/or tender offer documents and/or proxy statement with
the SEC in connection with the proposed combination. Shareholders
should read those filings, and any other filings made by CryoLife with the SEC
in connection with the combination, as they will contain important
information. Those documents, if and when filed, as well as
CryoLife’s other public filings with the SEC, may be obtained without charge at
the SEC’s website at www.sec.gov and at CryoLife’s website at
www.cryolife.com.
Why
is CryoLife acquiring a stake in Medafor?
We have
acquired this significant stake in Medafor after several attempts to engage
Medafor management in exploratory talks regarding a possible combination of our
businesses. Additionally, as a business partner of Medafor we have
observed a range of business practices that we believed were not in the best
interests of CryoLife, Medafor’s hemostatic technology or Medafor
shareholders. We felt compelled to take action and consider our
current stake in Medafor to be a first step in our efforts to acquire full
control of Medafor. We believe HemoStase and Medafor’s hemostatic
technology have the best opportunity to achieve their full potential under our
ownership. If we are successful, we believe that our experienced
management team, strong direct sales force, international distribution network,
and financial strength will allow us to drive additional growth of HemoStase and
related products, and create value for CryoLife and Medafor
shareholders.
How
much of Medafor does CryoLife now own?
CryoLife
believes it owns approximately 11 percent of the outstanding Medafor common
stock and that it is now the largest single shareholder of Medafor, in addition
to being Medafor’s largest distributor.
What
are the terms of the proposal CryoLife made most recently to
Medafor?
On
January 13, 2010, CryoLife sent a letter to Medafor’s management and board
requesting to enter into discussions with them regarding a potential acquisition
by CryoLife of the remaining outstanding common stock of Medafor for $2.00 per
share in a combination of cash and CryoLife stock, subject to completion of
reasonable due diligence. This would provide Medafor shareholders
with certain value through a cash component, as well as the opportunity to
participate in future upside through continued ownership of the combined company
under CryoLife leadership.
Based on
our current knowledge of Medafor’s business, we believe this proposal represents
full and fair value, reflecting both the upside from the growth potential of
HemoStase and the product’s underlying technology, as well as the downside
presented by the IP restrictions on this product.
Our
proposal also represents a significant premium to the price at which we believe
Medafor’s own board and management have recently offered to convert debt into
equity.
What
is the breakdown between cash and stock?
Negotiations
with the Medafor board would allow us to determine the right mix of cash and
stock. We believe a cash/stock offer is appropriate and attractive,
as the cash component would provide Medafor shareholders with immediate and
certain value, while the stock portion would allow shareholders to participate
in future upside through continued ownership of the combined
company. We think the prospects for CryoLife are strong and that
Medafor shareholders will be able to realize additional value by owning our
stock. It is also important to note that ownership of CryoLife stock
would provide shareholders with further liquidity, as they would be able to
trade this stock on the New York Stock Exchange. That said, given the
current economic climate, we recognize that cash may be more important to some
shareholders, and we are therefore prepared to evaluate how this is best
addressed.
What
has been the reaction of Medafor’s board to the recent CryoLife
proposal?
Medafor’s
board, in a letter to shareholders dated February 10, 2010, rejected CryoLife’s
recent $2.00 per share proposal and indicated its refusal to engage in
discussions and negotiations that could lead to a higher
offer. CryoLife remains committed to entering into friendly
negotiations with Medafor’s board and management and has sent a follow up letter
asking the board to reconsider its refusal to enter into
discussions. In the event that Medafor’s board continues to decide
not to negotiate, CryoLife may consider additional actions to facilitate a
transaction with Medafor that would not require the approval of current board
members.
Why
did CryoLife choose to make this proposal public?
CryoLife
has made every effort to work with Medafor as partners in an amicable and
productive manner. We have made numerous attempts to engage with
Medafor’s management and board about a potential value-creating acquisition of
the company by CryoLife. Medafor has rejected all of our overtures,
including our latest proposal, and refused to negotiate with us. By
providing our fellow Medafor shareholders with complete and timely information
about our proposal, we hope to encourage Medafor’s management and board to
reconsider their refusal to negotiate and come to the table.
Is
the proposal made to the Medafor board available to Medafor
shareholders?
Not at
this time. By providing our fellow Medafor shareholders with complete
and timely information about our proposal, we hope to encourage Medafor’s
management and board to reconsider their refusal to negotiate, or at least
remove any legal barriers that would prevent us from purchasing additional
shares from Medafor shareholders.
What
can Medafor shareholders who wish to sell their shares to CryoLife
do?
We
encourage shareholders to make their voices heard to Medafor’s management and
board by contacting them directly. Medafor has publicly stated that
its contact information for management and the board is as follows:
Medafor
board member
Gary J.
Shope
717‐574‐7083
shope@medafor.com
Medafor
board member
Paul
Gray
713‐416‐7621
paul.gray@yahoo.com
Medafor,
Inc.
1-
877-MEDAFOR
Why
is CryoLife purchasing additional shares from some investors but not making its
proposal available to all?
We have
purchased some additional shares from Medafor shareholders in order to bring our
holding to over 10 percent and to obtain the additional right of being able to
call a special shareholders meeting. While we may make some
additional purchases of Medafor stock from time to time, we encourage
shareholders to make their voices heard to Medafor’s management and board by
contacting them directly. In the event that Medafor’s board continues
to decide not to negotiate, CryoLife may consider additional actions to
facilitate a transaction with Medafor that would not require the approval of
current board members.
How
does CryoLife intend to effect an acquisition of Medafor without agreement from
their management/board if Medafor refuses to negotiate?
We
continue to believe that a combination of our businesses makes compelling
business sense for both companies and is in the best interests of our respective
shareholders. We remain prepared to engage with Medafor in
constructive and good faith discussions to identify additional potential
value. However, in light of the board’s response and refusal to
engage with us, we will consider all options available to us, including our
right to call a special meeting of shareholders, commence a tender offer, or
proceed with a proxy contest to replace at least a majority of the Medafor
directors.
How
has Medafor failed to help HemoStase reach its full potential? What will
CryoLife do differently?
Medafor
has failed to maximize the potential of HemoStase and the product’s underlying
technology for its shareholders. Medafor’s capital constraints
prevent it from conducting significant research and development and investing in
its sales force and distribution network in a meaningful way. With
significantly greater resources, CryoLife would remedy this.
Our
management team has over 150 years combined experience in the medical device
business. We have a direct sales force in the U.S. and an
international distribution network comprised of both direct employees and third
party representatives who are focused on cardiac, vascular and general
surgeons. Our demonstrated ability to grow BioGlue into the leading
global surgical adhesive demonstrates our management team’s ability to create
significant value for shareholders in biomaterials and we believe we can achieve
similar results with HemoStase. HemoStase is complementary to
CryoLife’s BioGlue technology; together BioGlue and HemoStase offer a full range
of products to our surgeon customers to assist them in the control and
prevention of bleeding. We have already demonstrated our ability to
sell HemoStase (having achieved $6 million in sales in 2009) and have the
resources available to us to ensure that HemoStase and related products properly
penetrate the market.
How
did CryoLife come to this current proposal?
The
proposal price results from a detailed analysis of Medafor, its products, and
the market conducted by CryoLife in conjunction with its financial and legal
advisors. The valuation is consistent with comparable company
valuations, similar M&A transactions, and other relevant metrics and
methodologies. Based on our current knowledge of Medafor’s business,
we believe our proposal to Medafor represents full and fair value, reflecting
both the upside from the growth potential of HemoStase and the product’s
underlying technology, as well as the downside presented by the significant IP
restrictions on this product. As previously stated our analysis is
based upon the best information available to us. We remain open to
negotiating our proposal further with Medafor’s management and board, and have
indicated our desire to enter into discussions and consider further information
about Medafor. Any final offer will be contingent upon the conclusion
of reasonable due diligence.
In the
event that Medafor’s board continues to choose not to engage in negotiations
with us, we plan to provide additional detail with regard to our valuation of
Medafor directly to shareholders.
Does
CryoLife’s Medafor stake give CryoLife any additional powers outside those of a
normal shareholder?
Minnesota
corporate law gives special rights to persons who own 3% or more of the common
stock in Medafor. Thus, CryoLife has the right to propose amendments
to the Articles of Incorporation or bylaws of Medafor at a regularly scheduled
meeting of shareholders, and if a meeting has not been held during the last 15
months, CryoLife can demand one.
Additionally,
as an owner of more than 10% of Medafor’s outstanding shares, CryoLife has the
right to call a special shareholders meeting pursuant to Medafor’s
bylaws. CryoLife remains committed to entering into friendly
negotiations with Medafor’s board and management, but, in the event that
Medafor’s board continues to choose not to engage in negotiations with us, a
special shareholders meeting would afford CryoLife the opportunity to seek to
replace the Medafor board in order to maximize value for all Medafor
shareholders.
What
are CryoLife’s next steps?
CryoLife
has sent a follow up letter to Medafor’s board asking it to reconsider its
refusal to engage in discussions with us regarding our $2.00 per share
proposal. In the event that Medafor’s board continues to choose not
to negotiate, we plan to communicate directly with Medafor shareholders about
our proposal and may consider additional actions to facilitate a transaction
with Medafor that would not require the approval of current board
members.
When
does CryoLife plan to communicate with Medafor shareholders?
We plan
to continue to communicate with Medafor shareholders directly about our offer
for Medafor and our strategy for the company going forward on an ongoing
basis.
What
is the timing for this process?
If
Medafor’s board agrees to negotiate with us and we ultimately reach agreement,
we believe this process could take several months. If Medafor’s board
continues to refuse to negotiate with us, then we will evaluate our
options.
Why
did CryoLife file a lawsuit against Medafor?
On April
29, 2009, CryoLife filed a lawsuit against Medafor in the U.S. District Court
for the Northern District of Georgia alleging claims for, among other things,
breach of contract, fraud, negligent misrepresentation, and violations of the
Georgia Racketeer Influenced and Corrupt Organizations Act. The
lawsuit is ongoing.
CryoLife
filed the lawsuit in order to protect its rights and the rights of its
shareholders, and ensure that the potential of HemoStase is fully maximized. The
litigation originated because Medafor repeatedly breached the exclusive
distribution agreement that was signed in good faith by
CryoLife. More information about the lawsuit and the events leading
up to it can be found in a special section on our Web site, which is located at
http://www.cryolife.com/medaforoffer/litigationoverview.
Who
can shareholders contact if they have questions?
You may
contact Nina Devlin at Edelman at 212-704-8145 for more
information. You may also leave a question at the following email
address: medaforinfo@cryolife.com and someone will contact you.
Statements
made in this document that look forward in time or that express management's
beliefs, expectations or hopes are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These
statements include those regarding future actions we may take with respect to
Medafor, our efforts to acquire full control of HemoStase and Medafor’s
hemostatic technology, our ability to help HemoStase realize its full potential
and drive additional sales of HemoStase and related products, and create value
and increase returns for CryoLife and Medafor shareholders, our plans
to communicate with Medafor shareholders about our offer for Medafor and our
strategy for the company going forward at a future date, and our beliefs
regarding the potential timing of a transaction. These future events
may not occur as and when expected, if at all, and, together with our business,
are subject to various risks and uncertainties. These risks and
uncertainties include that any transaction with Medafor may not occur or may be
delayed due to circumstances and events beyond our control, including legal
impediments, we may not be able to realize the anticipated benefits of a
transaction with Medafor, our plans to acquire Medafor may change, our plans to
communicate publicly regarding the proposed transaction may change and may be
influenced by various legal and regulatory considerations, and Medafor’s
management may act in ways that differ from our current
expectations. The timing of and our ability to communicate with
Medafor shareholders may be impacted by the actions of Medafor
management. Also, the success of any transaction between CryoLife and
Medafor is subject to risks facing both companies. These risks
include that CryoLife is significantly dependent on revenues from BioGlue and
there are a variety of risks affecting BioGlue, CryoValve SG pulmonary heart
valves and other SynerGraft processed tissues and products may not be accepted
by the marketplace, the CryoValve SG pulmonary heart valve has a one year shelf
life, the CryoPatch SG has a one year shelf life, we are dependent on the
availability of sufficient quantities of tissue from human donors, the CryoValve
SG pulmonary heart valve post-clearance study requested by the FDA may not
provide the expected positive results, our products and tissues we process and
preserve have allegedly caused and may in the future cause injury to patients,
and we have been and may be exposed to tissue processing and product liability
claims and additional regulatory scrutiny as a result, the possibility that the
FDA could impose additional restrictions on our operations, issue a 483, or
warning letter, or require a recall, or prevent us from processing and
distributing tissues or manufacturing and distributing other products, our
failure to adequately comply with government regulations could result in loss of
revenues and customers as well as additional compliance expense, our ability to
borrow under our credit facility may be limited, the credit facility limits our
ability to pursue significant acquisitions, the financial and credit liquidity
crisis may adversely affect our ability to borrow money or raise capital, the
current economic crisis and future economic crises may adversely affect our
business and financial condition, there are limitations on our use of net
operating loss carry-forwards that could result in our inability to use them
fully or at all, adverse regulatory action outside of the U.S. could affect our
business, physicians have been and may be reluctant to implant or use our
preserved tissues or products, our existing insurance policies may not be
sufficient to cover our actual claims liability, current economic conditions may
impact demand for our tissues and products, intense competition may affect our
ability to operate profitably, we may be unable to obtain adequate insurance at
a reasonable cost or at all, uncertainties related to patents and protection of
proprietary technology may adversely affect the value of our intellectual
property, uncertainties related to patents and protection of proprietary
technology for products distributed by us may adversely affect our ability to
distribute those products, we are dependent on key personnel, we may not be
successful in obtaining necessary clinical results and regulatory approvals for
products and services in development, and our new products and services may not
achieve market acceptance, we may be unable to effectively leverage our existing
sales force to sell HemoStase, the lawsuit we filed against Medafor regarding
our distribution agreement with Medafor may continue to adversely impact our
relationship with Medafor and could hamper or prevent us from distributing
HemoStase, Medafor may in the future attempt to terminate our distribution
agreement, rapid technological change could cause our services and products to
become obsolete, extensive government regulation may adversely affect our
ability to develop and sell products and services, we have experienced operating
losses and negative cash flows in the past, and we must continue to address the
underlying causes in order to continue to operate profitably and generate
positive cash flows, investments in new technologies and acquisitions of
products or distribution rights may not be successful, if we are not successful
in expanding our business activities in international markets, we will be unable
to pursue one of our strategies for increasing our revenues, continued deflation
of foreign currencies relative to the U.S. dollar could materially and adversely
impact our foreign revenues, and future healthcare policies, healthcare
reimbursement methods, and healthcare reimbursement policies may affect the
availability, amount, and timing of our revenues, financial condition, and
profitability. These risks and uncertainties include the risk factors
detailed in our Securities and Exchange Commission filings, including our Form
10-K filing for the year ended December 31, 2008, our Form 10-Q filing for the
quarter ended March 31, 2009, our Form 10-Q filing for the quarter ended June
30, 2009, our Form 10-Q filing for the quarter ended September 30, 2009, and the
Company's other SEC filings. Medafor’s business is also subject to a
number of risks, including the risk that HemoStase does not have adequate
intellectual property protection, that additional regulatory approvals may not
be obtained in a timely fashion, if at all, and that product liability lawsuits
could be filed in connection with the use of HemoStase. In addition,
the acquisition of Medafor by CryoLife, if it occurs, could result in unexpected
costs or liabilities to CryoLife due to potential non-compliance by Medafor
under applicable laws and regulations, although CryoLife is currently not aware
of any material non-compliance, or due to other factors that we are not
currently able to predict, as we have not had the opportunity to perform a due
diligence review with respect to Medafor. The Company does not
undertake to update its forward-looking statements. In addition, the
calculation of the estimated percentage of Medafor’s outstanding shares owned by
CryoLife is based on 20,995,779 shares outstanding, the number of outstanding
shares shown on Medafor’s shareholder list as updated on February 19,
2010. This calculation does not take into account any shares that may
have been repurchased or issued by Medafor since that date. As a
result, CryoLife’s actual percentage ownership of Medafor’s outstanding common
stock may be greater or less than 11%.
EXHIBIT 99.4
ADDITIONAL
IMPORTANT INFORMATION
This
document is provided for informational purposes only and is not an offer to
purchase nor a solicitation of an offer to sell shares of Medafor or CryoLife.
Subject to future developments, CryoLife may file a registration statement
and/or tender offer documents and/or proxy statement with the SEC in connection
with the proposed combination. Shareholders should read those filings, and any
other filings made by CryoLife with the SEC in connection with the combination,
as they will contain important information. Those documents, if and when filed,
as well as CryoLife’s other public filings with the SEC, may be obtained without
charge at the SEC’s website at www.sec.gov and at CryoLife’s website at www.cryolife.com.
Protecting
CryoLife’s Rights – An Overview of the Litigation Against Medafor
The truth about
CryoLife’s lawsuit against Medafor: CryoLife filed a lawsuit
against Medafor to protect its rights and the rights of its shareholders after
repeated failures on the part of Medafor management to honor Medafor’s
commitments under the exclusive distribution agreement (“EDA”) it entered into
with CryoLife. After considering the chronology of events leading up
to the lawsuit, it is clear that Medafor’s claim that CryoLife filed its lawsuit
to pressure Medafor into selling the company is simply not true. To
the contrary, CryoLife’s offers to purchase Medafor were part of its efforts to
address Medafor’s transgressions by finding a business solution that both
protected CryoLife’s rights and created value for CryoLife and Medafor
shareholders without
forcing CryoLife to engage in costly litigation. A review of
CryoLife’s actions makes it clear that suing Medafor was the last
resort.
Medafor’s History
of Misrepresentations and Contractual Breaches of the
EDA: CryoLife’s problems with Medafor started almost
immediately after the execution of the EDA for HemoStase in April
2008. Within a month after the EDA was signed, it became apparent to
CryoLife that Medafor was either unwilling or unable to follow through on the
promises it made and contractual obligations it undertook in the
EDA. Specifically, CryoLife discovered various misrepresentations and
contractual breaches by Medafor, including the following:
|
·
|
Medafor was selling directly
and indirectly into CryoLife’s exclusive fields and
territories. As a result, CryoLife has reduced sales and
profits. At the same time, these sales in violation of the EDA
have artificially increased Medafor’s reported
sales. These inappropriate sales into CryoLife’s
exclusive fields and territories continue to this
date.
|
|
·
|
Medafor contracted to make
certain territories exclusive to CryoLife that were in fact subject to
pre-existing agreements between Medafor and other
distributors. As a result, CryoLife received letters
from these distributors claiming that they have the rights to territories
that Medafor committed to CryoLife in the EDA and threatening to sue
CryoLife for violating those
rights.
|
|
·
|
Medafor is failing to protect
the intellectual property that supports HemoStase. The
EDA requires Medafor to protect the intellectual property that supports
HemoStase. Early in the relationship, however, CryoLife became
aware of several potential infringements of this intellectual property
which it believed could potentially deprive Medafor and CryoLife of
product sales and related profits, as well as diminish Medafor and
CryoLife shareholder value. Indeed, earlier this year, CryoLife
alerted Medafor to yet another potential infringement. In each
instance, CryoLife implored Medafor to take action against these IP
infringements. In breach of the EDA, Medafor has refused to
take appropriate action.
|
|
·
|
Medafor is failing to help
CryoLife obtain regulatory approval for HemoStase in other markets around
the world. CryoLife’s sales of HemoStase have been
hindered by Medafor’s failure to abide by its obligation in the EDA to
appropriately assist CryoLife in obtaining necessary regulatory approvals
for HemoStase. This failure has reduced the value of the
distribution agreement to CryoLife and will ultimately reduce the sales
that Medafor can realize under the
EDA.
|
CryoLife
diligently attempted to resolve the issues outside of
Court. Before filing its lawsuit in April 2009, CryoLife spent
many months diligently attempting to constructively resolve the issues
concerning Medafor’s misrepresentations and contractual
breaches. During this time, CryoLife reached out to Medafor
management—through numerous conversations, in-person meetings, emails, and
letters—to bring these issues to its attention, in the hopes of finding a
solution. Unfortunately, all of CryoLife’s attempts to resolve its
differences with Medafor management were unsuccessful. Medafor
persisted in making misrepresentations to CryoLife and in breaching the EDA,
including in the ways outlined above.
CryoLife proposed
an acquisition of Medafor in order to resolve the dispute and unlock the full
potential of HemoStase. In order to try and resolve the
companies’ differences related to the EDA, unlock the true and full potential of
HemoStase, and create value for both Medafor and CryoLife shareholders, CryoLife
offered to enter into negotiations to purchase Medafor and combine the two
companies in November 2008 and again in February 2009. Medafor
rejected both of these offers.
No alternative to
litigation. CryoLife tried repeatedly to resolve the issues
related to the EDA through negotiations. After these attempts failed,
CryoLife had no alternative but to file suit in order to rectify Medafor’s past
transgressions and ensure Medafor’s future compliance with the
EDA. After almost a year of effort in trying to resolve the problems
amicably, CryoLife filed its lawsuit against Medafor, asserting claims based on
Medafor’s contractual breaches and misrepresentations relating to the
EDA. Ultimately, CryoLife decided to file the lawsuit because it felt
that it could not, in good conscience and given its fiduciary duty to its
shareholders, stand by and watch Medafor continue to violate its rights under
the EDA. Since the lawsuit has been filed, Medafor’s breaches have
persisted.
CryoLife remains
committed to finding a business solution. CryoLife will
continue to act vigorously to protect its rights through the legal system, but
remains committed to finding a business solution to its problems with
Medafor. In January 2010, CryoLife once again proposed to acquire
Medafor, this time for $2.00 per share, to be paid in cash and CryoLife
stock. Medafor has rejected all attempts by CryoLife to engage in
negotiations about its offer. Nevertheless, CryoLife remains committed to
resolving its problems with Medafor while vigorously protecting its rights
through the legal system.
###