ATLANTA, May 25 /PRNewswire-FirstCall/ -- 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.
May 25, 2010
Medafor Shareholders: WITHHOLD
Your Vote on Directors
Pasquale, Gray, Halverson, Shope
and Van Eeckhout
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Important Proxy Voting Materials
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Medafor, Inc.
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Meeting Date: June 10, 2010
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Dear Fellow Medafor Shareholder:
You should have recently received a proxy statement from Medafor
asking you to re-elect the five incumbent members of their board of
directors.
As Medafor's largest shareholder, we are deeply concerned by
both Medafor's rush to hold their annual shareholders' meeting and
by the troubling information disclosed in their proxy statement and
recently issued financial statements and letters to shareholders.
We are writing to urge you to WITHHOLD your support for
directors Michael Pasquale,
Paul Gray, Robert Halverson, Gary
Shope and Gerald Van Eeckhout
given their poor oversight of Medafor.
- Do NOT return your proxy to management.
- If you have already given management your proxy, revoke it
by writing Medafor.
- If you can, attend the meeting in person.
MEDAFOR'S DIRECTORS: ENRICHING THEMSELVES AT THE EXPENSE OF
SHAREHOLDERS
Medafor's management and board have continually diluted
shareholders, issuing new shares to finance the company without
receiving adequate value in return. Their proxy statement and
financial statements provide further evidence of this fact.
Specifically, the proxy discloses several instances during 2009
where stock, warrants and options were issued to employees,
contractors, distributors and others at prices inconsistent with
Medafor's statements about the value of Medafor shares.
In 2009, Medafor's board granted shares to themselves that they
valued at only $1.50 per share.
In the fourth quarter of 2009, Medafor issued options to
management with an exercise price of $2.00 per share. This means that at the end
of 2009, the Medafor board concluded that $2.00 per share was "fair market value," as is
required under the stock incentive plan that Medafor shareholders
approved. Despite this, just two months later, Medafor urged
its shareholders not to sell their shares to CryoLife because, in
Gary Shope's words, $2.00 per share was not "even close to a fair
price" and was "grossly inadequate." Apparently,
$2.00 per share is unconscionably low
when Medafor shareholders want to sell their shares, but it's fair
enough when Medafor's insiders are compensating themselves. One
thing is certain, either the Medafor board and management have been
enriching themselves at the shareholders' expense by undervaluing
their equity and option awards, or their statements regarding the
adequacy of CryoLife's $2.00 per
share offer were not made in good faith.
Also raising a concern is the fact that, in its proxy statement,
Medafor implied that the shares issued to Magle in conjunction with
the technology transfer transaction were issued at an average price
of $5.28 per Medafor share.
This valuation raises questions as to why Medafor routinely
granted stock, options and warrants that were priced considerably
below $5.28 per share in the months
leading up to the consummation of the Magle transaction. Have
Medafor's board and management unjustly, and potentially illegally,
enriched themselves and key partners at the expense of other
shareholders by granting stock and options at prices considerably
below market value or have they not been candid in their statements
to Medafor shareholders regarding the Magle transaction and its
impact on Medafor and its shareholders?
The proxy also indicates that Medafor has entered into severance
and change in control agreements with its CEO and CFO, providing
the current management with golden parachutes that could deter
potential buyers. These agreements are in addition to the
excessive compensation earned by key executives. For
instance, in addition to stock awards and stock option grants,
Medafor's CEO and CFO earned a combined $700,000 in cash in 2009 while delivering
questionable financial performance and significant shareholder
dilution. The amount of cash taken out of the business by the
CEO and CFO for their compensation represents over 70 percent of
Medafor's available cash at the end of 2009. These are
compensation levels that public company executives would be pleased
to receive. They are not appropriate for a private company at
Medafor's stage of development with limited cash.
MEDAFOR'S LIMITED FINANCIAL DISCLOSURES RAISE NEW
CONCERNS
We do not believe that Medafor has sufficient capital to invest
adequately in its business in order to protect its technology from
competition or to maximize its commercial potential. Medafor
has disclosed in its financial statements that it must repay
$3.2 million in convertible notes in
2011 and that it is currently in default of the covenants of its
$1.0 million credit facility that
expires in November 2010, but it has
not provided shareholders with any clarity as to how it plans to
fund the $3.2 million in convertible
note payments.
Furthermore, the Medafor board continues to withhold information
that is required in order to accurately assess the company's
current financial condition and performance. In fact, Medafor
has failed to provide any financial statements for the first
quarter of 2010. In addition, Medafor's directors entered
into a highly unusual and material contract with Magle, involving
substantial dilution to shareholders and a significant cash outlay,
while concealing the information that would be necessary to allow
an accurate assessment of Medafor's current financial condition
following the transaction. Despite our repeated requests,
Medafor has refused to allow us to see the contract with Magle, or
their accounting records related to this transaction, including
what value Medafor ascribed to the technology. They have also
failed to provide key balance sheet data, shareholders' equity
information, or detail on the company's cash position, as they have
in the past, which would allow shareholders to gauge the impact of
the transaction. Additionally, Medafor has trumpeted some
improvement in earnings for the first quarter of 2010, without
noting the impact on earnings per share of the Magle transaction.
This lack of disclosure suggests that Medafor's board has
significantly impaired the value of Medafor shares and is hiding it
from shareholders.
MEDAFOR: CURTAILING SHAREHOLDER RIGHTS
Medafor's directors have unexpectedly scheduled their annual
shareholders' meeting just seven months since the last meeting and
have given shareholders barely three weeks' notice of this
surprising meeting. This timing appears designed to prevent
shareholders from being able to meaningfully evaluate the
performance of Medafor and its board, nominate an alternative slate
of directors, put forth shareholder proposals or otherwise
participate fully in the meeting. In addition to attempting
to prevent shareholder action at the meeting, the timing leads us
to believe that Medafor's directors are anxious to ensure their
re-election before shareholders have any possibility of discovering
the impact that the Magle transaction has had on the company's
condition and the value of their shares.
Medafor has also been actively attempting to curtail the
shareholder rights granted in its bylaws by attempting to keep
shareholders from being able to call their own meetings. They
are working in court to take away the right guaranteed certain
Medafor shareholders to call a special meeting at any time for any
purpose.
Additionally, Medafor is attempting to deny shareholders access
to records of board proceedings in order to conceal information
from shareholders about the board's activities and the current
financial condition of the company. Medafor has also stated
that it has granted Magle the right to terminate its exclusive
supply agreement with Medafor in the event that Medafor is acquired
without board approval, regardless of whether a majority of
shareholders think the transaction is fair.
MEDAFOR'S DIRECTORS ARE DESTROYING SHAREHOLDER VALUE AND
LIMITING SHAREHOLDER RIGHTS
Medafor's board of directors has overseen the destruction of
Medafor's business, its technology, and the value of its shares.
Please join CryoLife in sending a message to Medafor's board
that they must provide shareholders with up-to-date, complete
information about the current condition of the company, especially
the recent Magle transaction, and that they must respect our
fundamental rights as shareholders to participate in director
elections.
- Do NOT return your proxy to management – this communicates
you are WITHHOLDING your vote.
- If you have already voted, you can rescind your proxy by
writing to Medafor at 2700 Freeway Blvd., #800, Minneapolis, MN 55430-1757 and stating "I
hereby revoke the proxy that I previously provided to you in
connection with the annual shareholders' meeting to be held on
June 10, 2010." Your revocation
should be dated and signed, using your exact name as it appears on
your Medafor shares. EVEN IF YOU HAVE RETURNED YOUR PROXY TO
WITHHOLD YOUR VOTES FOR THE MEDAFOR BOARD, IT IS IMPORTANT THAT YOU
RESCIND IT, IN ORDER TO AVOID GIVING MEDAFOR MANAGEMENT
DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY OTHER PROPOSALS
THEY MAY BRING AT THE MEETING WITHOUT HAVING GIVEN YOU PROPER
NOTICE.
- If you can, we also encourage you to attend the meeting and
voice your discontent in person.
By NOT returning your proxy to management, thereby withholding
your vote for Medafor board of director nominees, you will be
sending a clear message to the Medafor management and board that
its actions are unacceptable!
If you have any questions, please do not hesitate to contact
Nina Devlin at 212-704-8145.
Sincerely,
Steven G. Anderson
Founder, CEO and President
Shareholders may continue to visit www.cryolife.com/medaforoffer
for additional information about CryoLife and its relationship with
Medafor.
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 currently 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.
Media
Contacts:
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D. Ashley
Lee
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Executive Vice
President, Chief Financial Officer and
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Chief Operating
Officer
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Phone:
770-419-3355
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Nina
Devlin
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Edelman
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Phone:
212-704-8145
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SOURCE CryoLife, Inc.