cryolife8k302102.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
washington,
d.c. 20549
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 2,
2010
_______________________
CRYOLIFE,
INC.
(Exact
name of registrant as specified in its charter)
_________________________
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Florida
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1-13165
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59-2417093
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(State
or Other Jurisdiction
of
Incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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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):
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x
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Section 1 Registrant’s Business and
Operations
Item 1.02 Termination of a Material Definitive
Agreement.
CryoLife, Inc. (“CryoLife”) and
Medafor, Inc. (“Medafor”) are parties to an exclusive distribution agreement
(the “Agreement”) whereby CryoLife distributes HemoStase, an absorbable blood
clotting agent manufactured by Medafor, in certain markets and certain
fields. Once again, CryoLife believes Medafor is attempting to
improperly terminate the Agreement. On March 2, 2010, Medafor
informed CryoLife of its belief that CryoLife materially breached its duties and
obligations under the Agreement and gave CryoLife notice of its intent to
terminate the Agreement effective April 5, 2010 if the breach is not cured
within 30 days. Medafor contends that the alleged material breach of
the Agreement occurred because CryoLife employees and representatives are
allegedly offering certain bundling packages beyond the scope of the Agreement
and intentionally misrepresenting the scope of the Agreement and the nature of
the relationship between the parties. In these new allegations,
Medafor does not allege that CryoLife employees or representatives have actually
sold HemoStase in violation of the Agreement in conjunction with these alleged
offers or alleged misrepresentations. CryoLife is currently
investigating these allegations, but nonetheless believes, regardless of the
outcome of its investigation, that a court would find that a material breach of
the Agreement has not occurred, and that, in the event a material breach has
occurred, that CryoLife would be able to cure it in a timely
manner. As such, CryoLife does not believe the Agreement will
terminate per the terms of the notice. This is Medafor’s third
attempt to terminate the Agreement since September 2009.
Medafor and CryoLife agreed on March 5,
2010, that if Medafor decides after April 5, 2010 that a material breach has
occurred, and that CryoLife has failed to cure the breach, Medafor will not
terminate the Agreement for at least three weeks from the date on which Medafor
informs CryoLife (1) of its decision, and (2) that the three-week period is
beginning to run. In exchange, CryoLife has agreed that it will not, prior
to being timely informed of Medafor's decision, petition the Court to enjoin
termination of the EDA on the grounds alleged in Medafor’s March 2, 2010
letter. CryoLife and Medafor also agreed that the three-week period would
not begin to run until one of the two parties affirmatively and explicitly
informs the other that it has begun.
Based on the information received from
Medafor as part of the notice described above, CryoLife believes that Medafor
may itself be in breach of the Agreement by directly or indirectly distributing
MPH product into CryoLife’s exclusive field of cardiac and vascular surgeries,
which breach is similar to the ones that CryoLife alleged in its original
complaint against Medafor, as discussed below.
The Agreement has a three-year term
from its effective date of May 1, 2008 and will automatically renew for an
additional three-year period if CryoLife makes minimum purchases as designated
under the Agreement; however, there is no contractual obligation for CryoLife to
make minimum purchases. Per the terms of the Agreement, CryoLife is a
distributor of HemoStase and is the exclusive distributor of the product in the
U.S. for all applications in cardiac and vascular surgery (excluding Department
of Defense hospitals) and the exclusive distributor internationally (excluding
China and Japan) for cardiac, vascular, and general surgery, explicitly
excluding orthopedic, ear, nose and throat surgery, neurosurgery and topical
applications. A copy of the Agreement is filed as Exhibit 10.1 to
CryoLife’s Form 10-Q for the quarter ended June 30, 2008 and is incorporated
herein by reference.
As previously discussed in CryoLife’s
Form 10-K for the year ended December 31, 2009 and its Forms 10-Q for the
quarters ended March 31, 2009, June 30, 2009 and September 30, 2009, CryoLife
has filed a lawsuit against Medafor for, among other things, breach of contract,
fraud, negligent misrepresentation, and violations of Georgia Racketeer
Influenced and Corrupt Organizations Act (“Georgia RICO”), alleging that Medafor
has violated the Agreement by, among other things, allowing other companies to
distribute HemoStase in territories and medical fields reserved exclusively for
CryoLife per the terms of the Agreement. CryoLife’s lawsuit alleges
that Medafor, contrary to its representations in the Agreement, had numerous
distribution agreements regarding HemoStase with other distributors in the U.S.
and internationally, allowing them to market and distribute HemoStase in the
territory and field given exclusively to CryoLife. Medafor is alleged
to have knowingly and purposefully withheld from CryoLife disclosure of all but
three of these agreements; to have knowingly and purposefully misrepresented
that the three distributors with these agreements would not be allowed to
compete with CryoLife after the effective date of the Agreement except in
several explicitly identified facilities, and then only for a short period of
time; and to have intentionally misrepresented to CryoLife that no such
contracts existed with any other distributors, and that no such contracts would
exist after CryoLife’s exclusive rights commenced. The lawsuit also
alleges that Medafor has failed to take reasonable steps to prevent other
distributors from distributing HemoStase in CryoLife’s exclusive field and
territory, and that Medafor breached its contractual obligation to prevent
competing products from violating Medafor’s intellectual property rights in
HemoStase, thereby impairing the value of CryoLife’s exclusive
distributorship.
As specified in the lawsuit, CryoLife
brought these transgressions to Medafor’s attention on numerous occasions and
attempted to work with Medafor to secure its compliance with the terms of the
parties’ Agreement, but was unable to get Medafor to follow the terms of the
Agreement. CryoLife believes that Medafor’s actions have deprived
CryoLife of significant sales volume and have impaired and delayed CryoLife’s
development of relationships with customers in its exclusive
territory.
In addition, CryoLife recently
announced that it has acquired approximately 11% of Medafor’s outstanding common
stock, and offered to engage in negotiations with the Medafor board to purchase
the remaining shares at $2 per share, to be paid in a combination of cash and
stock. The Medafor board has rejected CryoLife’s offer and has
refused to negotiate with it.
On March 2, 2010, CryoLife accepted
service of a new lawsuit filed against it by Medafor in state court in
Minnesota. The lawsuit seeks a declaratory judgment that Medafor is
entitled to a protective order prohibiting CryoLife from obtaining, in its
capacity as a Medafor shareholder, information that Medafor contends is
confidential, privileged and competitive information that is (a) contained in
Medafor’s board minutes and board committee minutes requested by CryoLife or
(b) contained in any other document that CryoLife may request from
Medafor. Medafor similarly seeks an order prohibiting CryoLife from using
documents it has obtained, in its capacity as a Medafor shareholder, in the
Georgia lawsuit unless and until Medafor produces the documents in discovery in
that lawsuit. Although CryoLife’s answer is not yet due, CryoLife
intends to defend its rights to receive information it is entitled to receive as
a Medafor shareholder.
Although CryoLife is not a party to the
lawsuit, Medafor has brought suit against Steven G. Anderson, the Chairman,
Chief Executive Officer and President of CryoLife, alleging tortious
interference with contract in connection with Mr. Anderson’s purchase of 1,000
shares of common stock from a Medafor shareholder who is a former officer of
Medafor. Mr. Anderson has filed counterclaims against
Medafor, requesting that Medafor be ordered to transfer the 1,000
shares to Mr. Anderson, grant him all of the rights of a Medafor shareholder,
and reimburse his legal expenses. Mr. Anderson also has asserted
third-party claims against Gary J. Shope, Medafor's CEO, and Gavin Thomson,
Medafor's CFO, requesting that they be ordered to facilitate the transfer
of the 1,000 shares to Mr. Anderson and reimburse his legal expenses. The
third-party claims also assert that Messrs. Shope and Thomson have tortiously
interfered with contract in connection with Mr. Anderson's contract to
purchase the 1,000 shares from the Medafor shareholder.
Except for the historical information
contained in this report, the statements made by CryoLife are forward-looking
statements that involve risks and uncertainties. All such statements are subject
to the safe harbor created by the Private Securities Litigation Reform Act of
1995. These statements include CryoLife’s belief that a court would find that a
material breach of the Agreement has not occurred, and that CryoLife would be
able to cure any alleged breach of the Agreement, and CryoLife’s belief that the
Agreement will not terminate per the terms of the notice given by Medafor
described above. These statements are subject to a number of risks
that are outside CryoLife’s control, including the risk that Medafor will not
act reasonably in this matter or that a court could disagree with CryoLife’s
interpretation of the Agreement and its rights thereunder. For
further information on additional risk factors impacting CryoLife’s relationship
with Medafor and CryoLife’s business, please refer to “Risk Factors” contained
in CryoLife’s Form 10-K for the year ended December 31, 2009, as filed with the
SEC, and any subsequent SEC filings. CryoLife disclaims any obligation or duty
to update or modify these forward-looking statements.
Additional Important
Information
This filing 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. 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.
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.
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CRYOLIFE,
INC.
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Date: March
5, 2010
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By: /s/
D.A. Lee
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Name: D.
Ashley Lee
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Title: Executive
Vice President, Chief
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Operating Officer and Chief
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Financial Officer
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