Shareholders Commence Legal Action

The Ventracor Shareholders group currently has more committed funding than Orqis and we have better prospects of long term funding than Orqis. We are not going to stand by and watch this travesty any longer. We have commenced legal action and the following letter is being sent to all 17,500 Ventracor shareholders...

18 June 2009

This letter is sent by the Ventracor Shareholder Group (VCRSHG) to all 17,500 shareholders listed as at 30 September 2008). Since Ventracor went into Administration on 19th March 2009 the VCRSHG has been working to keep the company in Australian shareholder hands; relist on the ASX; and provide the capital and management required to commercialise the VentrAssist. We have been working voluntarily with generous financial support from many shareholders. This letter is sent in our capacity as shareholder representatives only and is not a company endorsed communication.

Many of you will be familiar with our website at www.saveventracor.com. If not, please familiarise yourself with our progress to date. Your team, the VCRSHG, are still working actively to secure the company’s future and we will continue to work on your behalf.

The fate of your company rests firmly in shareholder hands. It has been said that the problem with Ventracor was investment mainly from small retail “mum and dad” investors. This is also our strength if all we “mum and dad” shareholders believe in the product, the company and its potential.

Remember why you first invested in Ventracor? The technology is unchanged, and in fact has been further verified since March 2009. Industry dynamics are unchanged, except for Heartware’s sale for $A400M. Ventracor is globally recognised as the number two player in the LVAD field, and FDA approval for Bridge to Transplant (BTT) is expected in the near term. Industry players such as Berlin Heart are watching Ventracor closely and have shown a desire to engage with Ventracor but have been rebuffed by the previous management.

The only failure has been Ventracor management. We will replace them with passionate, competent people receiving justifiable remuneration and milestone-based incentives. The VCRSHG will be formalised to provide fair oversight. Costs will be contained and money spent to drive results. Communication within the company and to the shareholders will be open and frank.

The position now seems that legal action is the only remaining recourse, a responsibility which cannot be taken lightly. The legal issues which we believe should be determined by a judge of the Supreme Court of New South Wales are as follows:

1. Have the directors of Ventracor in making their determination to place the company into administration on 19 March 2009 exercised their power for a valid purpose. Was the dominant purpose because the company was likely to become insolvent at some time in the future or was there some other purpose which would invalidate the appointment of the administrators.

2. The company has entered into the general Deed of Company Arrangement on 15 June 2009. Whether pursuant to section 445G of the Corporations Act 2001 the court should make an order to declare the deed void as a result of various inadequacies of the administrators during the administration process.

3. Whether pursuant to Section 445D of the Corporations Act 2001 the court should make an order terminating the Deed of Company Arrangement as a result of:

(a) a failure to adequately inform voting creditors, through either misstatement or omission in the report to creditors or at the meeting of creditors;

(b) Oppression or ‘unfair prejudice’;

(c) Other discretionary grounds.

If we win this action then in effect the clock is wound back 3 months, the administrator is replaced and the Orqis / Siqro contract is null and void. The whole administration process would be considered invalid. The shareholders then get their opportunity to recapitalise the company and we now have the financial backing to do just that.

The beauty of this strategy is that no matter how far the Orqis / Siqro deal has progressed, even if they have taken control of the company, it will all be reversed if we win.

To date we have incurred significant (but fully funded) legal costs, and these costs will escalate once litigation commences. Initial costs of preparing a brief will be in the region of $20,000. Once we proceed to court we intend engaging a barrister and a Queen’s Council which will cost even more. The entire exercise might cost between $100,000 and $200,000 although higher costs can’t be ruled out.

Even if the bill reaches $500,000, which seems a huge amount, it is still less than $30 per shareholder. To fund litigation to keep Ventracor in shareholder hands, we need every shareholder to contribute to the limit of their capacity. We hope contributions toward the legal costs will be converted to equity after Ventracor’s ASX relisting. All unused monies will be returned on a pro rata basis or may be converted to additional shares at the donor’s discretion.

To donate to the legal costs please visit http://www.saveventracor.com/Pages/donate.html and follow the instructions.

Before you put this letter down, please consider:
- Ventracor is one of the top LVAD companies in the world, with arguably the world’s best product.
- Ventracor is close to FDA approval for BTT application.
- Ventracor will be lost to Australia and your current investment will be lost if we do not continue to act.
- Only shareholders have taken any significant action to stop the fire sale of Ventracor. ASIC and our political leaders have shown no resolve to stop this loss of ground-breaking Australian technology.

Ventracor’s future is in your hands. Please take the action you need to protect your investment and your company.

Thank you for your support and patience.

The Ventracor Shareholder’s Group

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