SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[_] Definitive Additional Materials Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
(ss.)240.14a-11(c) or (ss.)240.14a-12
CRYOLIFE, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[Logo of CryoLife, Inc. Appears Here]
1655 ROBERTS BOULEVARD, N.W.
[LOGO] KENNESAW, GEORGIA 30144
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF CRYOLIFE, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of CRYOLIFE,
INC. will be held at the Marietta Conference Center, 500 Powder Springs Street,
Marietta, Georgia 30064, on May 27, 1999 at 10:00 a.m., Atlanta time, for the
following purposes:
1. To elect five directors to serve until the next Annual Meeting of
Shareholders or until their successors are elected and have qualified.
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The proxy statement dated April 21, 1999 is attached.
Only record holders of CryoLife's $.01 par value common stock at the close
of business on April 9, 1999 will be eligible to vote at the meeting.
Your attendance at the annual meeting is very much desired. However, if
there is any chance you may not be able to attend the meeting, please execute,
complete, date and return the proxy in the enclosed envelope. If you attend the
meeting, you may revoke the proxy and vote in person.
By Order of the Board of Directors:
/s/ Steven G. Anderson
STEVEN G. ANDERSON,
Chairman of the Board and President
Date: April 21, 1999
A copy of the Annual Report of CryoLife, Inc. for the fiscal year ended
December 31, 1998 containing financial statements is enclosed.
<PAGE>
[Logo of CryoLife, Inc. Appears Here]
1655 ROBERTS BOULEVARD, N.W.
[LOGO] KENNESAW, GEORGIA 30144
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished for the solicitation by the Board of
Directors of proxies for the Annual Meeting of Shareholders of CryoLife, Inc. to
be held on May 27, 1999, at 10:00 a.m., Atlanta time, at the Marietta Conference
Center, 500 Powder Springs Street, Marietta, Georgia 30064. The sending in of a
signed proxy will not affect a shareholder's right to attend the meeting and
vote in person. A signed proxy may be revoked by the sending in of a timely, but
later dated, signed proxy. Any shareholder giving a proxy may also revoke it at
any time before it is exercised by giving oral or written notice to Ronald D.
McCall, Secretary of CryoLife, or Ms. Suzanne Gabbert, Assistant Secretary, at
the offices of CryoLife. Oral notice may be delivered by telephone call to Ms.
Gabbert, at the offices of CryoLife, at (770) 419-3355.
Holders of record of CryoLife's $.01 par value common stock at the close of
business on April 9, 1999 will be eligible to vote at the meeting. CryoLife's
stock transfer books will not be closed. At the close of business on April 9,
1999, CryoLife had outstanding a total of 12,370,991 shares of $.01 par value
common stock (excluding a total of 989,698 shares of treasury stock held by
CryoLife, which are not entitled to vote). Each such share will be entitled to
one vote (non-cumulative) at the meeting.
Other than the matters set forth herein, management is not aware of any
other matters that may come before the meeting. If any other business should
properly come before the meeting, the persons named in the enclosed proxy will
have discretionary authority to vote the shares represented by the effective
proxies and intend to vote them in accordance with their best judgment.
This Proxy Statement and the attached proxy were first mailed to security
holders on behalf of CryoLife on or about April 21, 1999. Properly executed
proxies, timely returned, will be voted and, where the person solicited
specifies by means of a ballot a choice with respect to any matter to be acted
upon at the meeting, the shares will be voted as indicated by the shareholder.
If the person solicited does not specify a choice with respect to election of
directors, the shares will be voted "FOR" management's nominees for election as
directors. In addition to the solicitation of proxies by the use of the mails,
directors and officers of CryoLife may solicit proxies on behalf of management
by telephone, telegram and personal interview. Such persons will receive no
additional compensation for their solicitation activities, and will be
reimbursed only for their actual expenses in connection therewith. The costs of
soliciting proxies will be borne by CryoLife.
VOTING PROCEDURES AND VOTE REQUIRED
The Secretary of CryoLife, in consultation with the judges of election, who
will be employees of CryoLife's transfer agent, shall determine the eligibility
of persons present at the Annual Meeting to vote and shall determine whether the
name signed on each proxy card corresponds to the name of a shareholder of
CryoLife. The Secretary, based on such consultation, shall also determine
whether or not a quorum of the shares of CryoLife (consisting of a majority of
the votes entitled to be cast at the Annual Meeting) exists at the Annual
Meeting. Both abstentions from voting and broker non-votes will be counted for
the purpose of determining the presence or absence of a quorum for the
transaction of business.
Nominees for election as directors will be elected by a plurality of the
votes cast by the holders of shares entitled to vote in the election. Since
there are five directorships to be filled, this means that the five individuals
receiving the most votes will be elected. Abstentions and broker non-votes will
therefore not be relevant to the outcome.
There are no rights of appraisal or similar dissenters' rights with respect
to any matter to be acted upon pursuant to this Proxy Statement.
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of CryoLife recommends a vote "FOR" the election of
each of the nominees named below for election as director.
ELECTION OF DIRECTORS
The proxy holders intend to vote "FOR" election of the nominees named below
(who are currently members of the Board) as directors of CryoLife, unless
otherwise specified in the proxy. Directors of CryoLife elected at the Annual
Meeting to be held on May 27, 1999 will hold office until the next Annual
Meeting or until their successors are elected and qualified.
Each of the nominees has consented to serve on the Board of Directors, if
elected. Should any nominee for the office of director become unable to accept
nomination or election, which is not anticipated, it is the intention of the
persons named in the proxy, unless otherwise specifically instructed in the
proxy, to vote for the election of such other person as the Board may recommend.
The individuals listed below as nominees for the Board of Directors were
directors of CryoLife during 1998. The name and age of each nominee, and the
period during which such person has served as a director, together with the
number of shares of CryoLife's common stock beneficially owned, directly or
indirectly, by such person and the percentage of outstanding shares of
CryoLife's common stock such ownership represented at the close of business on
April 9, 1999 (according to information received by CryoLife) is set forth
below:
<TABLE>
<CAPTION>
Shares of
CryoLife Stock
Beneficially Percentage of
Service as Owned at Outstanding Shares
Name of Nominee Director Age April 9, 1999(1) of CryoLife Stock
- --------------------------------- -------------- ------- ------------------------- ---------------------
<S> <C> <C> <C> <C>
Steven G. Anderson Since 1984 60 1,156,533(2) 9.35%
Ronald C. Elkins, M.D.(4)(6) Since 1994 62 101,700(3) *
Benjamin H. Gray(4)(6) Since 1991 48 109,812(5) *
Virginia C. Lacy(4)(6) Since 1997 57 443,586(7) 3.59%
Ronald D. McCall, Esq.(6) Since 1984 62 148,292(8) *
- ---------------
</TABLE>
* Ownership represents less than 1% of outstanding shares of CryoLife common
stock.
(1) Except as otherwise noted, the nature of the beneficial ownership for all
shares is sole voting and investment power.
(2) Includes 105,333 shares held of record by Ms. Ann B. Anderson, Mr.
Anderson's spouse. Also includes options to acquire 31,112 shares of common
stock which are presently exercisable or will become exercisable within 60
days after the date of this Proxy Statement.
(3) Includes options to acquire 82,670 shares of common stock which are
presently exercisable or will become exercisable within 60 days after the
date of this Proxy Statement.
(4) Member of the Audit Committee.
(5) Includes options to acquire 103,500 shares of common stock which are
presently exercisable or will become exercisable within 60 days after the
date of this Proxy Statement.
(6) Member of the Compensation Advisory Committee.
(7) Includes 215,500 shares held as beneficiary of a trust, and 110,586 shares
held as beneficiary of an IRA, of Ms. Lacy's deceased spouse. Includes
30,000 shares held as administrator of a pension plan. Includes 63,500
shares subject to options which are presently exercisable or will become
exercisable within 60 days after the date of this Proxy Statement.
(8) Includes 10,000 shares of common stock owned of record by Ms. Marilyn B.
McCall, Mr. McCall's spouse. Includes options to acquire 83,500 shares of
common stock which are presently exercisable or will become exercisable
within 60 days after the date of this Proxy Statement.
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<PAGE>
Steven G. Anderson, a founder of CryoLife, has served as CryoLife's
President, Chief Executive Officer and Chairman of the Board of Directors since
its inception. Mr. Anderson has more than 30 years of experience in the
implantable medical device industry. Prior to founding CryoLife, Mr. Anderson
was Senior Executive Vice President and Vice President, Marketing, from 1976
until 1983 of Intermedics, Inc. (now Guidant Corp.), a manufacturer and
distributor of pacemakers and other medical devices. Mr. Anderson received his
BA from the University of Minnesota.
Ronald C. Elkins, MD, has served as a Director of CryoLife since January
1994. Dr. Elkins is Professor and Vice Head of the Department of Surgery and
Chief of Thoracic and Cardiovascular Surgery, University of Oklahoma Health
Science Center. Dr. Elkins has been a physician at the Health Science Center
since 1971, and has held his present position since 1975.
Benjamin H. Gray has served as a Director of CryoLife since January 1991.
Mr. Gray is Chief Financial Officer of Columbia Corporation, an operator of
long-term care facilities. Prior to joining Columbia Corporation in 1997, Mr.
Gray was a principal of Massey Burch Capital Corp. and Vice President of Massey
Burch Investment Group, Inc., a Nashville-based venture capital firm
specializing in the health care industry. Mr. Gray joined Massey Burch in 1987
and was responsible for evaluating and managing various investments in the
portfolio. Mr. Gray was previously with Chemical Bank of New York from 1973 to
1987.
Virginia C. Lacy has served as a Director of CryoLife since August 1997.
Ms. Lacy is the Administrator of The Jeanette & John Cruikshank Memorial
Foundation, which provides assistance to those in need throughout the greater
Chicago area. Ms. Lacy has served as Chairman of the Board of Directors of
Precision Devices Corporation, a distributor of pacemakers and other implantable
medical devices, since its founding in 1974. Mrs. Lacy received her BA degree
from Northwestern University in 1963.
Ronald D. McCall, Esq. has served as a Director of CryoLife and as the
Secretary and Treasurer of CryoLife since January 1984. From 1985 to the
present, Mr. McCall has been the proprietor of the law firm of Ronald McCall,
Attorney at Law, based in Tampa, Florida. Mr. McCall was admitted to the
practice of law in Florida in 1961. Mr. McCall received his BA and JD degrees
from the University of Florida.
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
Meetings of the Board of Directors--During 1998, there were seven meetings
of the Board of Directors.
Director Compensation--All non-employee members of the Board of Directors
of CryoLife are paid $1,500 for each Board meeting attended. In addition,
directors are reimbursed for expenses incurred in connection with their services
as a director. In December 1997, CryoLife adopted the CryoLife, Inc. Amended and
Restated Non-Employee Directors Stock Option Plan which plan replaced CryoLife's
1995 Non-Employee Directors Plan. Pursuant to this new plan, options to purchase
5,000 shares of common stock were granted to each of Messrs. Elkins, Gray and
McCall and Ms. Lacy immediately following the 1998 Annual Meeting of
Shareholders. In addition, in May and December 1998, each of these directors
received options to purchase 10,000 shares pursuant to CryoLife's 1998 Long-Term
Incentive Plan and a special grant of options to purchase 8,500 shares,
respectively, and agreed in May 1998 to have 28,000 options that were granted in
May 1996 canceled and replaced (which replacement changed the exercise price of
such options from $16.75 to $17.125, the then current market price, and extended
the exercisability of such options by an additional 2 years). The Amended and
Restated Non-Employee Directors Stock Option Plan provides that an annual grant
will be made each year immediately following CryoLife's Annual Meeting of
Shareholders of an option to purchase 5,000 shares of common stock to each
individual elected, reelected or continuing as a non-employee director of
CryoLife. All options granted pursuant to this new plan are granted at a
purchase price equal to the last closing price of CryoLife's common stock on the
New York Stock Exchange immediately prior to the grant of the option and vest
and become exercisable on the option's grant date. No option granted pursuant to
this new plan may be exercised later than five years following the date of
grant. In addition to the foregoing, Dr. Elkins received approximately $77,000
in consulting fees from CryoLife in 1998.
Audit Committee--CryoLife's Audit Committee consists of three non-employee
directors: Dr. Elkins, Mr. Gray and Ms. Lacy. The Audit Committee met two times
in 1998. The Audit Committee reviews the general scope of CryoLife's annual
audit and the nature of services to be performed for CryoLife in connection
therewith, acting as liaison between the Board of Directors and the independent
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auditors. The Audit Committee also formulates and reviews various company
policies, including those relating to accounting practices and internal control
systems of CryoLife. In addition, the Audit Committee is responsible for
reviewing and monitoring the performance by CryoLife's independent auditors and
for recommending the engagement or discharge of CryoLife's independent auditors.
Compensation Advisory Committee--CryoLife has a Compensation Advisory
Committee currently consisting of four non-employee directors: Mr. McCall, Ms.
Lacy, Dr. Elkins and Mr. Gray. The Compensation Advisory Committee met three
times in 1998. The Compensation Advisory Committee is responsible for evaluating
the performance of officers and setting the annual compensation for all
officers, including the salary and the compensation package of executive
officers. A portion of the compensation package includes a bonus award. The
Compensation Advisory Committee also administers CryoLife's benefit plans,
except that the Compensation Advisory Sub-Committee approves grants of stock
options to executive officers under CryoLife's benefit plans. Currently, the
Compensation Advisory Sub-Committee consists of two non-employee directors: Ms.
Lacy and Mr. Gray. The Compensation Advisory Sub-Committee met three times in
1998.
Nominating Committee--CryoLife does not have a standing nominating
committee of the Board of Directors.
During 1998, no director attended fewer than 75% of the aggregate of the
total number of meetings of the Board of Directors and the total number of
meetings held by all committees of the Board on which he or she served.
Notwithstanding anything to the contrary set forth in any of CryoLife's
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, that might incorporate other CryoLife filings,
including this Proxy Statement, in whole or in part, the following Report and
Performance Graph shall not be incorporated by reference into any such filings.
REPORT OF THE COMPENSATION ADVISORY COMMITTEE ON
EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Advisory Committee of the Board of Directors of CryoLife,
Inc. is composed of non-employee directors and approves the compensation of
CryoLife's executive officers at least annually. The Committee believes the
actions of executive officers of CryoLife have a profound impact on the
short-term and long-term profitability of CryoLife. Therefore, the Committee
gives significant attention to the design of CryoLife's compensation package.
CryoLife's compensation package consists of three parts and is relatively
simple in design. The three primary parts are a base salary, a cash bonus, and
stock-based incentive compensation. No significant perquisites are provided to
executive officers.
BASE SALARY
The Committee believes it is important for executive officers and other
employees of CryoLife to receive acceptable salaries so that CryoLife can
recruit and retain the talent it needs. For several years, the Committee has
obtained a salary survey report. This survey, which is entitled the "Radford
Salary Survey for U.S. Biotech Companies," contains information regarding
salaries paid to various biotech executives in the United States. The Committee
reviews this salary survey primarily for information regarding salaries, as
opposed to bonus and stock incentive information. In setting salaries, the
Committee takes into consideration the individual employee's performance, length
of service to CryoLife, and the information provided by the Radford Survey. The
Committee seeks to set compensation at levels which are reasonable under the
circumstances and near the midrange for U.S. biotech companies. For 1998,
salaries for executive officers were raised by 7.3%, on the average, as compared
to 1997. The range of increases was from 5% to 12%. The base salary for each
executive officer is set on a subjective basis, bearing in mind an overall
impression of that executive's relative skills, experience and contribution to
CryoLife. The Committee does not attempt to address the relative weight assigned
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<PAGE>
to the various factors, which are evaluated on a subjective overall basis by
each individual member of the Committee. Salaries of all executive officers are
reviewed annually by the Committee. In accordance with this procedure, the
Committee consults with Mr. Anderson, the President and Chief Executive Officer
of CryoLife, and an appropriate range of base salary, bonus, and stock options
is subjectively considered, based upon the range of compensation received by the
other executive officers and the requirements of the particular positions to be
filled. The Chief Executive Officer negotiates with candidates for employment,
subject to acceptance and ratification by the Committee, and this negotiated
base salary is reflected in each candidate's employment agreement.
CASH BONUSES
Cash bonuses are the next component of executive officer compensation. In
determining the amount to be paid as bonuses to executive officers, the
Compensation Advisory Committee considers the performance of CryoLife in
reaching goals for increased revenues and pre-tax profit as well as the
performance of each executive officer. For 1998, the Compensation Advisory
Committee based its decision that bonuses should be awarded to CryoLife's
executive officers upon its subjective determination that CryoLife's 1998
increases in total revenues and pre-tax profits justified the granting thereof.
The amount of the bonus paid to individual executive officers was determined
based upon the Committee's subjective analysis of the performance of each such
officer. Excluding the cash bonus paid to the Chief Executive Officer, 1998
executive officer bonuses ranged from $30,000 to $42,000 and were paid in 1999.
STOCK-BASED INCENTIVES
Stock-based incentives have been a supplemental component of compensation
for CryoLife's executive officers, and certain other employees, since the
formation of CryoLife. CryoLife adopted formal incentive stock option plans in
1984, 1989, 1993 and 1998. CryoLife has also made grants of non-qualified
options under an informal stock option program. The Sub-Committee approves
grants of stock options to executive officers under CryoLife's option plans.
Historically, grants made by CryoLife have generally vested at a rate of
20% per year and have had a term of five and one-half years. These options also
usually expire upon termination of employment, except in the event of disability
or death, in which case the term of the option may continue for some time
thereafter.
The Sub-Committee believes that CryoLife's stock option program has been
effective in focusing attention on shareholder value since the gain to be
realized by executive officers upon exercise of options will change as the stock
price changes. The Sub-Committee also believes that the long-term nature of the
options encourages CryoLife's executive officers to remain with CryoLife.
Finally, the Sub-Committee has found it appropriate to grant options to newly
employed executive officers in order to encourage such officers to identify
promptly with CryoLife's goal of increased shareholder value. The number of
shares to be granted is established utilizing the procedure described above at
"--Base Salary." The Sub-Committee subjectively determines the number of shares
to be granted based on its analysis of the number which would provide an
adequate incentive to the new executive officer to accept a position with
CryoLife.
In general, following initial employment, the granting of stock-based
incentives to executive officers is considered by the Sub-Committee to be
justified when CryoLife's revenues and earnings, coupled with the individual
executive's performance, warrant supplemental compensation in addition to the
salary and bonus paid with respect to a given year. Each of these factors is
weighed subjectively by Sub-Committee members in determining whether or not a
stock-based incentive should be granted, and such incentives are not granted
routinely. Except for stock-based incentives granted to the Chief Executive
Officer, no other executive officer was granted a stock-based incentive during
fiscal 1998. The Committee thinks it unlikely that any participants in
CryoLife's stock plans will, in the foreseeable future, receive in excess of $1
million in aggregate compensation (the maximum amount for which an employer may
claim a compensation deduction pursuant to Section 162(m) of the Internal
Revenue Code of 1986 unless certain performance-related compensation exemptions
are met) during any fiscal year, and has therefore determined that CryoLife will
not take any affirmative action at this time to meet the requirements of such
exemptions.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Committee fixed the 1998 salary of Mr. Steven G. Anderson, Chief
Executive Officer of CryoLife, at $385,000. Mr. Anderson was awarded a cash
bonus of $175,000 for his performance in 1998. This bonus reflected an increase
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<PAGE>
of $40,000 over the 1997 bonus. This exhibits the philosophy of the Committee as
set forth at "--Base Salary" and "--Cash Bonuses" above. In 1998, Mr. Anderson
was granted stock options to purchase 18,500 shares of common stock, thereby
providing him with the same option shares granted to the other directors of
CryoLife. The Committee and Sub-Committee believe the compensation of Mr.
Anderson, a founder of CryoLife, reflects their subjective opinions that Mr.
Anderson has provided superlative leadership and fulfilled the functions of an
executive officer of CryoLife at the highest level.
In addition, on May 21, 1998, the Compensation Advisory Sub-Committee
analyzed the difference between the exercise prices of the 40,000 stock options
granted to Mr. Anderson on May 16, 1996 versus the then-current market price of
CryoLife's common stock and determined that, because of the $1.30 price
differential, the options were not providing the desired incentive for the
performance for CryoLife's Chief Executive Officer. Pursuant to this
determination, the Compensation Advisory Sub-Committee canceled all of the
options granted to Mr. Anderson in May 1996 and exchanged them for an equivalent
number of options with an exercise price equal to the closing market price of
CryoLife's common stock as of May 21, 1998. See "Ten-Year Option/Sar Repricings"
table below.
CONCLUSION
The Committee and Sub-Committee believe that the mix of a cash salary and
bonuses and a long-term stock incentive compensation program represents a
balance that has motivated and will continue to motivate CryoLife's management
team to produce the best results possible given overall economic conditions and
the difficulty of predicting CryoLife's performance in the short term.
COMPENSATION ADVISORY
COMMITTEE:
RONALD D. McCALL, CHAIRMAN
VIRGINIA C. LACY
RONALD C. ELKINS, M.D.
BENJAMIN H. GRAY
COMPENSATION ADVISORY
SUB-COMMITTEE:
VIRGINIA C. LACY
BENJAMIN H. GRAY
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PERFORMANCE GRAPH
Set forth below is a line-graph presentation comparing the cumulative
shareholder return on CryoLife's common stock, on an indexed basis, against
cumulative total returns of the Nasdaq Stock Market (U.S. Companies) and a "peer
group" selected by management of CryoLife. The peer group selected for inclusion
in this Proxy Statement includes Advanced Tissue Sciences, Inc., Osteotech, Inc.
and LifeCell Corporation. Each of these companies has securities traded on the
Nasdaq Stock Market. Advanced Tissue and Osteotech were selected because they
had been utilized as a basis for comparison with CryoLife in reports by analysts
for each of the two co-managers of CryoLife's initial public offering.
Management selected LifeCell to be included in the peer group based on the fact
that LifeCell, a developer of tissue engineered products, is also a biomedical
company. The returns for the peer group were weighted according to each issuer's
market capitalization. The Performance Graph shows total return on investment
for the period beginning January 1, 1994 and ending December 31, 1998.
[GRAPH OMITTED]
<TABLE>
<CAPTION>
VALUE OF $100 INVESTED ON JANUARY 1, 1994 AT:
1/1/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
----------- ----------- ------------ ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
CRYOLIFE $ 100.00 $ 104.00 $ 248.00 $ 400.00 $ 436.00 $ 380.00
PEER GROUP $ 100.00 $ 88.55 $ 112.55 $ 108.31 $ 183.54 $ 138.76
NASDAQ MARKET $ 100.00 $ 104.99 $ 136.18 $ 169.23 $ 207.00 $ 291.96
</TABLE>
Total return assumes reinvestment of dividends.
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EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by CryoLife
to CryoLife's Chief Executive Officer and the four other most highly paid
executive officers of CryoLife in 1998 (the "Named Executives"). The information
presented is for the years ended December 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------- --------------
Securities
Underlying All Other
Name and Salary Bonus Options/SARs Compensation
Principal Position Year ($) (1) ($)(2) (#) (3) ($) (5)
- -------------------------------------- -------- ------------------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Steven G. Anderson 1998 $ 385,000 $ 175,000 58,500 $ 27,361
Chairman of the Board of 1997 345,000 135,000 8,000 34,750
Directors, President and Chief 1996 300,000 100,000 40,000 28,125
Executive Officer
Kirby S. Black, PhD 1998 122,850 40,000 0 9,011
Vice President, Research and 1997 117,000 30,000 0 7,896
Development 1996 106,000 20,000 0 0
Albert E. Heacox, PhD 1998 152,250 42,000 0 7,894
Vice President, Laboratory 1997 145,000 40,000 0 8,625
Operations 1996 132,000 40,000 0 7,190
Edwin B. Cordell, Jr. 1998 131,250 42,000 0 3,268
Vice President and Chief 1997 125,000 30,000 10,000 3,098
Financial Officer 1996 112,000 30,000 0 4,668
James C. Vander Wyk, PhD. (4) 1998 131,250 40,000 0 2,503
Vice President, Regulatory 1997 125,000 30,000 0 1,871
Affairs and Quality Assurance 1996 97,856 10,000 30,000 0
</TABLE>
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(1) Includes base salary earned by the Named Executives for the periods
presented or, for executives hired during the periods presented, from the
date of hire to the end of the applicable period. Also includes
compensation deferred under CryoLife's 401(k) plan, and amounts such
officers elected to apply to CryoLife's supplemental life insurance
program. Amounts for perquisites and other personal benefits extended to
the Named Executives are less than the lesser of $50,000 or 10% of the
total of annual salary and bonus of such Named Executive.
(2) Includes bonuses earned by the Named Executives for the periods presented
or, for executives hired during the periods, for the period from the date
of hire to the end of the applicable year.
(3) During the periods presented, the only form of long-term compensation
utilized by CryoLife has been the grant of stock options. CryoLife has not
awarded restricted stock or stock appreciation rights, or made any
long-term incentive payouts. Accordingly, the columns for "Restricted Stock
Award(s)" and "Long Term Incentive Payouts" have been omitted.
(4) Dr. Vander Wyk was first employed by CryoLife in February 1996.
(5) Since the inception of CryoLife's 401(k) plan, CryoLife has been matching
contributions to the plan subject to certain limitations and vesting
requirements. In 1992, CryoLife adopted its supplemental life insurance
program for certain executive officers. The following table sets forth, for
each of the Named Executives, the amount of CryoLife's contributions to the
401(k) plan and the supplemental life insurance program:
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<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------- ----------------------------------- ----------------------------------
SUPPLEMENTAL SUPPLEMENTAL SUPPLEMENTAL
LIFE LIFE LIFE
401(K) INSURANCE 401(K) INSURANCE 401(K) INSURANCE
TOTAL CONTRIBUTION PROGRAM TOTAL CONTRIBUTION PROGRAM TOTAL CONTRIBUTION PROGRAM
------ ------------ -------------- ------ ------------- ----------- ----- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Steven G. Anderson $27,361 $4,973 $22,388 $34,759 $4,750 $30,000 $28,125 $4,750 $23,375
Kirby S. Black, 9,011 2,547 6,464 7,896 2,421 5,475 --- --- ---
Ph.D.
Albert E. Heacox, 7,894 3,743 4,151 8,625 3,625 5,000 7,190 3,300 3,890
PhD
Edwin B. 3,268 3,268 0 3,098 3,098 0 4,668 4,668 ---
Cordell, Jr.
James C. Vander 2,503 2,503 0 1,871 1,871 0 --- --- ---
Wyk, PhD
</TABLE>
Grant of Options. During 1998, options were granted to Steven G. Anderson
in recognition of his performance. No options were granted to any of the other
Named Executives during 1998. No stock appreciation rights (SARs) have been
granted by CryoLife. The following table sets forth information regarding the
grant of options in 1998:
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1998)
<TABLE>
<CAPTION>
Potential Realizable
% of Total Value at Assumed
Number of Options/SARs Annual Rates of
Securities Granted to Appreciation for
Underlying Employees Exercise Option Term
Options/SARs in Fiscal Price Expiration -----------------------
Name Granted (#) Year ($/Sh)(4) Date(5) 5%($) 10%($)
------------------------------------ ----------- ----------- -------- ---------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Steven G. Anderson.............. 40,000(1) 22.66% $ 17.13 05-21-08 430,919 1,092,032
10,000(2) 5.66% 17.13 05-21-08 107,730 273,008
8,500(3) 4.82% 12.00 12-18-08 64,147 162,562
- -------------
</TABLE>
(1) The options vest and become exercisable on a cumulative basis on each
anniversary following the grant date as follows: 50 shares on the second
anniversary, 4,100 shares on the third anniversary, 5,800 shares on the
fourth through ninth anniversaries and 1,000 shares on the tenth
anniversary, with 50 shares immediately vesting on the grant date. The
options were originally granted in May 1996 and were exchanged for options
with an exercise price equal to the closing market price of CryoLife's
common stock on May 21, 1998. See "Ten-Year Option/SAR Repricings" table
below.
(2) The options vest and become exercisable on January 1, 2007 and January 1,
2008 in the amount of 4,800 shares and 5,200 shares, respectively.
(3) The option vests on January 1, 2008.
(4) The exercise price was fixed as the closing market price on the date of
grant.
(5) Options are subject to earlier termination in the event of death,
disability, retirement, or termination of employment.
Options Exercised. The following table sets forth information regarding the
exercise of options in 1998 and the number of options held by the Named
Executives as listed in the Summary Compensation Table, including the value of
unexercised in-the-money options, as of December 31, 1998. The closing price of
CryoLife's common stock on December 31, 1998 used to calculate such values was
$11.875 per share.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR (1998)
AND FISCAL YEAR-END OPTION/SAR VALUES (AS OF DECEMBER 31, 1998)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARs OPTIONS/SARs
ACQUIRED ON VALUE AT YEAR END (#) AT YEAR END ($)
EXERCISE REALIZED ------------------------ ------------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ----------- -------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven G. Anderson........ 32,988 $ 264,728 23,062 94,450 $ 124,226 $ 286,840
Kirby S. Black, PhD....... 0 0 18,000 12,000 112,500 75,000
Albert E. Heacox, PhD..... 0 0 18,000 12,000 78,840 52,560
Edwin B. Cordell, Jr...... 6,000 50,280 8,000 14,000 50,280 50,280
James C. Vander Wyk, PhD.. 0 0 12,000 18,000 40,560 60,840
</TABLE>
-9-
<PAGE>
Option Repricing. CryoLife repriced stock options held by Mr. Anderson in
1998. The following table sets forth the number of stock options that were
repriced in 1998.
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Price Exercise Option Term
Underlying of Stock at Price at New Remaining at
Options/SARs Time of Time of Exercise Date of
Repriced or Repricing or Repricing or Price Repricing or
Name Date Amended (#) Amendment ($) Amendment ($) ($) Amendment
- -------------------------- -------- ------------- ------------ ------------ ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven G. Anderson... 5-21-98 40,000 $17.13 $18.43 $17.13 3 years
</TABLE>
Long-Term Incentive Plans. On December 19, 1997, the Board of Directors
adopted, subject to approval of shareholders, the CryoLife 1998 Long-Term
Incentive Plan. The 1998 Long-Term Incentive Plan provides for the grant of
options, stock appreciation rights and other awards to acquire up to a maximum
of 300,000 shares of common stock, subject to certain adjustments. As of April
9, 1999, options for 210,500 shares were outstanding and options for zero shares
had been exercised. Options may be granted under the 1998 Long-Term Incentive
Plan to employees, officers or directors of and consultants and advisors to
CryoLife and its subsidiaries. CryoLife estimates that, as of April 9, 1999,
approximately 403 employees (including officers) and three non-officer directors
of CryoLife were eligible to participate in the Long-Term 1998 Incentive Plan.
Unless sooner terminated by the Board, the 1998 Long-Term Incentive Plan
terminates in May 2008. These stock options also usually expire upon termination
of employment or shortly thereafter. In the event of a "change of control
transaction" as defined in the 1998 Long-Term Incentive Plan, limitations on
exercisability of stock options owned by executive officers shall be waived, and
the limitations on exercisability of stock options owned by others may be waived
in the discretion of the Compensation Advisory Committee.
CryoLife Amended and Restated Non-Employee Directors Stock Option Plan. The
CryoLife Amended and Restated Non-Employee Directors Stock Option Plan provides
for the grant of options to non-employee directors of CryoLife. This plan
provides for the grant of options to acquire up to a maximum of 175,000 shares
of common stock. At each Annual Meeting of Shareholders, each non-employee
director elected, re-elected or continuing as a non-employee director of
CryoLife receives an annual grant of options to purchase 5,000 shares on the
first business day after such Annual Meeting, which options shall vest and
become exercisable on the date of grant. Except as set forth below, options
granted under this plan are not transferable other than by will or the laws of
descent and distribution. Notwithstanding the foregoing, the optionee may
transfer the option for no consideration to or for the benefit of a member of
the optionee's immediate family (including, without limitation, to a trust or
IRA) subject to such limits as the Board may establish, and the transferee shall
remain subject to all the terms and conditions that were applicable to such
option prior to the transfer. Upon the death of a non-employee director, options
which were exercisable on the date of death are exercisable by his or her legal
representatives or heirs, but in no event may the option be exercised after the
last day on which it could have been exercised by the non-employee director. As
of December 31, 1998, options for 20,000 shares had been granted under this
plan.
Employment Agreements. CryoLife has entered into employment agreements with
each of the Named Executives. Except for Mr. Anderson's agreement, and other
than with respect to position specific terms, such as duties of employment and
compensation, these employment agreements are substantially identical and
provide that employment may be terminated by either party with or without cause
upon 30 days' written notice to the other. The agreements automatically
terminate upon death. Each employee is required to devote his full and exclusive
time and attention to his employment duties, and CryoLife reserves the right to
change the nature and scope of those duties. The agreement conditions employment
and continued employment upon the employee's signing CryoLife's standard Secrecy
and Noncompete Agreement.
-10-
<PAGE>
A new employment agreement with Mr. Anderson was negotiated in 1999 for a
term of five years, which replaces a similar contract negotiated in 1995. The
Compensation Advisory Committee approved the inclusion of a provision in the
agreement pursuant to which Ms. Ann B. Anderson, the spouse of Mr. Anderson,
would be provided with health care coverage throughout her life. The agreement
provides that either party may terminate Mr. Anderson's employment by giving 180
days' written notice to the other. The termination may be with or without cause.
In the event CryoLife terminates employment without cause, Mr. Anderson will be
entitled to be paid for the remainder of his term or for two years, whichever is
greater. If the termination is with cause, after the 180 days' notice period no
additional compensation is due.
Compensation Advisory Committee Interlocks and Insider Participation. The
following four directors serve on the Compensation Advisory Committee of
CryoLife's Board of Directors: Mr. McCall, Ms. Lacy, Dr. Elkins and Mr. Gray.
Mr. McCall has been Secretary and Treasurer of CryoLife since 1984. CryoLife has
engaged Ronald McCall, P.A., a law firm of which Mr. McCall is the sole
shareholder, to perform legal services on an ongoing basis. For the year ended
December 31, 1998, CryoLife paid Ronald McCall, P.A. approximately $68,000 for
such legal services (including expense reimbursements). Management believes that
these services were provided on terms no less favorable to CryoLife than terms
available from unrelated parties for comparable services. See "Information about
the Board of Directors and Committees of the Board - Director Compensation"
regarding consulting fees paid by CryoLife to Dr. Elkins during fiscal 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires CryoLife's
executive officers and directors and persons who beneficially own more than 10%
of CryoLife's stock to file initial reports of ownership and reports of changes
in ownership with the Securities and Exchange Commission. Executive officers,
directors and greater than 10% beneficial owners are required by SEC regulations
to furnish CryoLife with copies of all Section 16(a) forms they file.
Based solely on its review of copies of forms received by it pursuant to
Section 16(a) of the Securities Exchange Act of 1934 or written representations
from reporting persons, CryoLife believes that with respect to 1998, all Section
16(a) filing requirements applicable to its executive officers, directors and
greater than 10% beneficial owners were complied with, except that David Fronk
filed one late report on Form 3.
-11-
<PAGE>
<PAGE>
OWNERSHIP OF PRINCIPAL SHAREHOLDERS, NAMED EXECUTIVES,
AND EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP
The name and address of each person or entity who owned beneficially 5% or
more of the outstanding shares of common stock of CryoLife on April 9, 1999,
together with the number of shares owned and the percentage of outstanding
shares that ownership represents is set forth in the following table. The table
also shows information concerning beneficial ownership by each of the Named
Executives (See "Executive Compensation") and by all directors and executive
officers as a group. The number of shares beneficially owned is determined under
the rules of the SEC, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and also any shares which the individual has
the right to acquire within 60 days after the date hereof through the exercise
of any stock option or other right. Unless otherwise indicated, each person has
sole investment and voting powers (or shares such powers with his or her spouse)
with respect to the shares set forth in the following table:
<TABLE>
<CAPTION>
Percentage of
Number of Shares of Outstanding
Cryolife Stock Shares of
Beneficial Owner Beneficially Owned Cryolife Stock
- --------------------------------------------------- ---------------------- -----------------
<S> <C> <C>
Steven G. Anderson................................. 1,156,533 (1) 9.35%
FMR Corp........................................... 657,100 (2) 5.31%
Kirby S. Black, PhD................................ 18,758 (3) *
Albert E. Heacox, PhD.............................. 79,000 (4) *
Edwin B. Cordell, Jr............................... 23,300 (5) *
James C. Vander Wyk, PhD .......................... 18,000 (6) *
All current Directors and Executive Officers
as a group (11 persons)....................... 2,124,364 (7) 17.17%
- ------------------
</TABLE>
* Ownership represents less than 1% of outstanding CryoLife common stock.
(1) Includes 105,333 shares held of record by Ms. Ann B. Anderson, Mr.
Anderson's spouse. Also includes 31,112 shares subject to options which are
presently exercisable or will become exercisable within 60 days after the
date of this Proxy Statement. The business address for Mr. Anderson is: c/o
CryoLife, Inc., 1655 Roberts Blvd., N.W., Kennesaw, Georgia 30144.
(2) The business address of FMR Corp. is: 82 Devonshire Street, Boston,
Massachusetts 02109.
(3) Includes 18,000 shares subject to options which are either presently
exercisable or will become exercisable within 60 days after the date of
this Proxy Statement. Also includes 270 shares held by Dr. Black's
children.
(4) Includes 18,000 shares subject to options which are either presently
exercisable or will become exercisable within 60 days after the date of
this Proxy Statement.
(5) Includes 2,300 shares in a trading account as to which Mr. Cordell has
signature authority and 8,000 shares subject to options which are either
presently exercisable or will become exercisable within 60 days after the
date of this Proxy Statement.
(6) Includes 18,000 shares subject to options which are either presently
exercisable or will become exercisable within 60 days after the date of
this Proxy Statement.
(7) See "Election of Directors" for information as to the beneficial ownership
of shares attributed to directors. Includes 449,282 shares subject to
options which are presently exercisable or will become exercisable within
60 days after the date of this Proxy Statement. Includes 2,300 shares held
in a trading account as to which Mr. Cordell has signature authority.
Includes 270 shares held as trustee by an executive officer. Includes
215,500 shares held as beneficiary of a trust, and 110,586 shares held as
beneficiary of an IRA, of Ms. Lacy's deceased spouse. Includes 30,000
shares held as administrator of a pension plan. Includes 115,333 shares
held of record by the spouses of executive officers and Directors.
-12-
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Ernst & Young LLP have been the independent
certified public accountants of CryoLife since 1996. Approval or selection of
the independent certified public accountants of CryoLife is not submitted to the
Annual Meeting of Shareholders. The Board of Directors of CryoLife has
historically selected the independent certified public accountants of CryoLife
with the advice of the Audit Committee, and the Board believes that it would be
to the detriment of CryoLife and its shareholders for there to be any impediment
(such as selection or ratification by the shareholders) to its exercising its
judgment to select CryoLife's independent certified public accountants or to
remove them if, in its opinion, such removal is in the best interest of CryoLife
and its shareholders.
It is anticipated that a representative from the accounting firm of Ernst &
Young LLP will be present at the annual meeting of shareholders to answer
questions and make a statement if the representative desires to do so.
SHAREHOLDER PROPOSALS
Appropriate proposals of shareholders intended to be presented at
CryoLife's 2000 Annual Meeting of Shareholders pursuant to Rule 14a-8
promulgated under the Securities Exchange Act of 1934 must be received by
CryoLife by December 19, 1999 for inclusion in its proxy statement and form of
proxy relating to that meeting. In addition, all shareholder proposals submitted
outside of the shareholder proposal rules promulgated pursuant to Rule 14a-8
under the Exchange Act must be received by CryoLife by March 4, 2000, in order
to be considered timely. If such shareholder proposals are not timely received,
proxy holders will have discretionary voting authority with regard to any such
shareholder proposals which may come before the 2000 Annual Meeting. If the date
of the next annual meeting is advanced or delayed by more than 30 calendar days
from the date of the annual meeting to which this Proxy Statement relates,
CryoLife shall, in a timely manner, inform its shareholders of the change, and
the date by which proposals of shareholders must be received.
UPON THE WRITTEN REQUEST OF ANY RECORD OR BENEFICIAL OWNER OF COMMON STOCK
OF CRYOLIFE WHOSE PROXY WAS SOLICITED IN CONNECTION WITH THE 1999 ANNUAL MEETING
OF SHAREHOLDERS, CRYOLIFE WILL FURNISH SUCH OWNER, WITHOUT CHARGE, A COPY OF ITS
ANNUAL REPORT ON FORM 10-K WITHOUT EXHIBITS FOR ITS FISCAL YEAR ENDED DECEMBER
31, 1998. REQUEST FOR A COPY OF SUCH ANNUAL REPORT ON FORM 10-K SHOULD BE
ADDRESSED TO SUZANNE GABBERT, ASSISTANT SECRETARY, CRYOLIFE, INC., 1655 ROBERTS
BOULEVARD, N.W., KENNESAW, GEORGIA 30144.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO SIGN, COMPLETE, DATE AND
RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE, TO WHICH NO POSTAGE NEED BE
AFFIXED.
By Order of the Board of Directors
/s/ Steven G. Anderson
STEVEN G. ANDERSON, Chairman
of the Board, President and Chief
Dated: April 21, 1999 Executive Officer
<PAGE>
Annex 1
CRYOLIFE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR USE AT THE ANNUAL MEETING ON MAY 27, 1999
The undersigned shareholder hereby appoints STEVEN G. ANDERSON and
RONALD D. McCALL, or any of them, with full power of substitution, to act as
proxy for, and to vote the stock of, the undersigned at the Annual Meeting of
Shareholders of CRYOLIFE, INC.
to be held on May 27, 1999, and any adjournments thereof.
The undersigned acknowledges receipt of Notice of the Annual Meeting
and Proxy Statement, each dated April 21, 1999, and grants authority to said
proxies, or their substitutes, and ratifies and confirms all that said proxies
may lawfully do in the undersigned's name, place and stead. The undersigned
instructs said proxies to vote as indicated below and on the reverse hereof.
(continued on the reverse side)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders of
CRYOLIFE, INC.
May 27, 1999
at
Marietta Conference Center
500 Powder Springs Street
Marietta, Georgia
10:00 A.M.
FOLD AND DETACH HERE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR election of the REFRAIN FROM Nominees: Steven G. Anderson
individuals set forth at VOTING FOR election Ronald C. Elkins, M.D.
right (except as marked of the nominees set Benjamin H. Gray
to the contrary) forth at right Virginia C. Lacy
Ronald D. McCall, Esq.
1. ELECTION OF
DIRECTORS: |_| |_|
</TABLE>
(INSTRUCTIONS: To withhold authority to vote for any individual nominee(s),
write that person's name on the space provided below.)
__________________________________________________
2. Upon such other matters as may properly come before the meeting.
THE PROXIES SHALL VOTE AS SPECIFIED ABOVE, OR IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR EACH OF THE LISTED NOMINEES.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please enter your Social Security Number or Federal Employer Identification
Number here:___________________________________
Signature________________ Date________ Signature________________ Date________
NOTE:(Shareholders should sign exactly as name appears on stock. Where there is
more than one owner each should sign. Executors, Administrators, Trustees
and others signing in a representative capacity should so indicate.)
