FORM 10-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000
OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-13165

CRYOLIFE, INC.
(Exact name of registrant as specified in its charter)

Florida                                           59-2417093
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                           Identification No.)

1655 Roberts Boulevard N.W., Kennesaw, GA 30144
(Address of principal executive offices) (zip code)

Registrant's telephone number, including area code (770) 419-3355

Securities registered pursuant to Section
12(b) of the Act:

Name of each exchange
Title of each class                             on which registered
-------------------------------                     ------------------------
Common Stock, $.01 par value                        New York Stock Exchange
Preferred Share Purchase Rights                      New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the preceding 12 months (or such shorter  period that the registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. [X] Yes [  ] No

Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The  aggregate  market value of voting stock held by  nonaffiliates  of the
registrant was approximately $398,777,000 at March 27, 2001 (16,060,309 shares).
The  number of  common  shares  outstanding  at March  27,  2001 was  18,750,704
(exclusive of treasury shares).

Documents Incorporated By Reference

Part III: Portions of Registrant's  Proxy Statement  relating to the Annual
Meeting of Shareholders to be filed not later than April 30, 2001.

PART I

Item 1. Business.

Overview

CryoLife,   Inc.   ("CryoLife"   or  the   "Company")   is  the  leader  in  the
cryopreservation  of viable  human  tissues  for  cardiovascular,  vascular  and
orthopaedic transplant applications,  and develops and commercializes additional
implantable  products,  including surgical  bioadhesives.  The Company estimates
that it provided in excess of 70% of the cryopreserved  human heart valve tissue
implanted in the U.S. in 2000.  The Company uses its  expertise in  biochemistry
and cell  biology,  and its  understanding  of the needs of the  cardiovascular,
vascular and orthopaedic surgery medical  specialties,  to continue expansion of
its core  cryopreservation  business  and to develop  or  acquire  complementary
implantable products and technologies for these fields. The Company develops and
markets  proprietary  implantable  biomaterials,  including  BioGlue(R) surgical
adhesive, which it began commercializing within the European Community ("EC") in
April  1998 and within the U.S.  in  December  1999.  Additionally  the  Company
develops  bioprosthetic   cardiovascular  devices  including  two  novel  design
stentless  porcine heart valves  currently  marketed in the EC. In November 2000
the Company received a Conformite Europeene ("CE") Mark (product  certification)
for  commercial  distribution  of its  SynerGraft(R)  heart  valve  in  the  EC.
Domestically the Company began applying its proprietary SynerGraft technology in
February 2000 to enhance the preservation of human heart valves.

CryoLife processes and distributes for transplantation cryopreserved human heart
valves and conduits,  human vascular tissue and human connective  tissue for the
knee.  Management  believes that  cryopreserved  human heart valves and conduits
offer  certain   advantages  over  mechanical,   synthetic  and   animal-derived
alternatives.  Depending on the  alternative,  these  advantages  include a more
natural functionality,  the elimination of a long-term need for anti-coagulation
drug  therapy,  a  reduced  incidence  of  reoperation  and a  reduced  risk  of
catastrophic  failure,  thromboembolism  (stroke) or calcification.  The Company
estimates  that the potential U.S.  market for  implantable  products  targeting
indications  addressed by the cryopreserved tissues processed by the Company was
in excess of $1 billion in 2000. The Company seeks to expand the availability of
human tissue through its  established  relationships  with over 100 tissue banks
and organ procurement agencies nationwide.

CryoLife is developing  implantable  biomaterials for use as surgical  adhesives
and sealants. The Company's patent protected BioGlue surgical adhesive, designed
for cardiovascular, vascular and pulmonary applications, is a polymer based on a
derivative of an animal blood protein and a cross-linking  agent. BioGlue offers
advantages over sutures and staples, including more effective sealing and easier
application. The Company estimates that the annual worldwide market for surgical
sutures and staples in 2000 was in excess of $2 billion. The Company received CE
Mark  certification in 1998 for use of its BioGlue surgical adhesive in vascular
applications  and began marketing this product in April 1998 in the EC. In March
1999 the  Company was  awarded a second CE Mark  allowing  the use of BioGlue in
pulmonary  indications,  including the repair of air leaks in lungs. In December
1999 the Company received U.S. Food and Drug Administration  ("FDA") approval to
distribute  BioGlue  surgical  adhesive  under a Humanitarian  Device  Exemption
("HDE") for use as an adjunct in the repair of acute thoracic aortic dissections
and immediately  began  marketing this product in the U.S.  pursuant to the HDE.
The Company  completed its clinical trial for the use of BioGlue in all vascular
repair in the fall of 2000, and filed a premarket  approval ("PMA") with the FDA
on  February 1, 2001 that,  if  approved,  would allow for the broad  commercial
distribution of BioGlue in the U.S.

CryoLife  has   developed  and  markets   outside  of  the  U.S.   bioprosthetic
cardiovascular devices for implantation,  currently consisting of glutaraldehyde
fixed stentless porcine heart valves.  Glutaraldehyde fixed porcine heart valves
are often  preferred  by surgeons  for  procedures  involving  elderly  patients
because  they  eliminate  the  risk of  patient  non-compliance  with  long-term
anti-coagulation  drug  therapy  associated  with  mechanical  valves,  are less
expensive  than  human  heart  valves or  mechanical  valves  and their  shorter
longevity is more appropriately  matched with these patients' life expectancies.
Glutaraldehyde  fixed porcine and bovine heart valves address a worldwide target
market estimated to have been $325 million in 2000.  Unlike most other available

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porcine  heart  valves,  the  Company's  stentless  porcine  heart valves do not
contain  synthetic  materials  which  increase  the  risk  of  endocarditis,   a
debilitating and potentially fatal infection. The Company's  CryoLife-O'Brien(R)
aortic heart valve,  currently  marketed in the EC and certain other territories
outside the U.S., is a stentless  porcine  heart valve which  contains a matched
composite  leaflet  design  that  approximates  human  heart  valve  blood  flow
characteristics and requires only a single suture line which simplifies surgical
implantation.  The Company's  CryoLife-Ross(R) pulmonary heart valve, another of
the Company's  fixed stentless  porcine  valves,  is also marketed in the EC and
certain  countries  outside the U.S.  The  Company  has applied its  proprietary
SynerGraft  technology to the  processing of human heart valves and conduits and
to some of the Company's stentless porcine heart valves. SynerGraft involves the
depopulation  of cells from the  structure of human heart tissue and  non-viable
animal  heart  tissue  leaving a collagen  matrix that has the  potential  to be
repopulated  with the implant  recipient's  cells.  This  process is designed to
reduce  calcification  of heart valves,  thereby  increasing  longevity,  and to
improve the  biocompatibility and functionality of such tissue. In November 2000
the Company received CE Mark approval for its SynerGraft porcine pulmonary heart
valves, which allowed the Company to begin commercial  distribution into the EC.
The Company believes that its porcine heart valves,  treated with the SynerGraft
technology, will expand its opportunity to address the broader international and
U.S. heart valve markets,  estimated to have been $390 million and $400 million,
respectively, in 2000.

Beginning in 1998,  the Company  began  seeking to complete a potential  private
placement  of equity  or  equity-oriented  securities  representing  a  majority
investment in its wholly-owned  subsidiary  company,  AuraZyme  Pharmaceuticals,
Inc.  ("AuraZyme"),  for the commercial  development  of its Activation  Control
Technology  ("ACT")  technology.  The  ACT  technology  is a  reversible  linker
technology  that has potential uses in the areas of cancer  therapy,  blood clot
dissolving,  heart attack therapies and other drug delivery  applications.  This
strategy  is  designed  to allow the  Company to  continue  development  of this
technology without incurring  additional research and development  expenditures,
other than through AuraZyme, and allow the Company to focus its resources on the
commercial  development of its BioGlue surgical adhesive,  SynerGraft technology
and other products under development.

In the U.S., the Company markets its  cryopreservation  services for human heart
valves and conduits,  human vascular  tissue and its BioGlue  surgical  adhesive
through its direct technical service representatives,  and relies on independent
orthopaedic sales  representatives to market its  cryopreservation  services for
human  connective  tissue  for the knee.  Internationally,  cryopreserved  human
tissues, bioprosthetic cardiovascular devices, including SynerGraft, and BioGlue
surgical adhesive are distributed through independent representatives located in
several countries in Europe, Canada, South America and Asia.

Growth Strategy

The Company's primary objective is to continue its consistent revenue growth and
profitability.  The Company's  strategy to generate continued growth is based on
increasing the use of cryopreserved  tissues as an alternative to mechanical and
synthetic implantable products, developing new markets for existing products and
technologies  and developing new products and  technologies for new and existing
markets.  The Company  also  selectively  considers  strategic  acquisitions  of
complementary technologies and businesses to supplement its internal growth. The
key elements of the Company's business and growth strategy are to:

o    Continue  Leadership  in  Cryopreservation  of Human Heart  Valves and
Conduits.  The Company  intends to increase the market  penetration of
its  cryopreserved  human heart valves and  conduits by (i)  expanding
awareness  of  clinical  advantages  of  cryopreserved  human  tissues
through  continuing   educational   efforts  directed  to  physicians,
prospective heart valve and conduit  recipients and tissue procurement
agencies,  (ii)  expanding  its  relationships  with the more than 100
tissue  banks and  procurement  agencies  across  the U.S.  which send
tissue  to the  Company  for  cryopreservation,  (iii)  expanding  its
physician training activities and (iv) expanding its product offerings
by  applying  its  SynerGraft  technology  to human  heart  valves and
conduits  for  antigen  reduction  properties  and the  potential  for
recipient cell repopulation.

3

o    Expand   Distribution  of  Cryopreserved  Human  Vascular  Tissue  and
Connective  Tissue  for the  Knee.  Using  the  same  strategy  it has
successfully  employed  to expand its  cryopreservation  services  for
human heart valves and conduits,  the Company  intends to increase its
cryopreservation  revenues from human  vascular  tissue and connective
tissue for the knee through continuing educational efforts directed to
vascular and  orthopaedic  surgeons  about the clinical  advantages of
cryopreserved   vascular  and   orthopaedic   tissue,   expanding  its
relationships with tissue banks and procurement agencies and expanding
its   programs  for   training   physicians   in  the  use  of  tissue
cryopreserved by the Company.

o    Broaden  Application of  Cryopreservation  Services.  The Company will
continue to collect,  monitor and evaluate implant data to (i) develop
expanded uses for the human  tissues  currently  cryopreserved  by the
Company  and  (ii)  identify  new  human  tissues  as  candidates  for
cryopreservation.  In 1997, the Company began providing  cryopreserved
human vascular tissue to be used as dialysis access replacement grafts
for patients  undergoing chronic dialysis,  and separately,  as venous
valve  replacements for patients suffering from diseases of the venous
system.  In 1998 in addition to patellar  and  achilles  tendons,  the
Company began providing  cryopreserved posterior and anterior tibialis
and semi-t/gracilis tendons for use in knee repairs, and in 1999 began
providing  preserved human  osteoarticular  grafts to repair articular
defects and  aortoiliac  grafts to repair  infected  abdominal  aortic
grafts.  The Company is also  investigating  the use of  cryopreserved
human  endothelial  cells,  peripheral  nerves  and  other  connective
tissues in various surgical applications.

o    Develop and  Commercialize  Biomaterials  for  Surgical  Adhesive  and
Sealant Applications.  In the second quarter of 1998 the Company began
commercial marketing of its patent protected BioGlue surgical adhesive
in the EC through its  independent  representatives.  In December 1999
the Company  received  FDA  approval to  distribute  BioGlue  surgical
adhesive  under a HDE for use as an  adjunct  in the  repair  of acute
thoracic aortic dissections.  The Company completed its clinical trial
for the use of BioGlue in all vascular repair in the fall of 2000, and
filed a PMA with the FDA on February 1, 2001, that, if approved, would
allow for the broad commercial  distribution of BioGlue in the U.S. In
addition  to  the   adhesive   and  sealant   applications   of  these
biomaterials,  the  Company  intends to  pursue,  either  directly  or
through  strategic  alliances,  certain drug delivery  applications of
BioGlue   surgical   adhesive   and  its  ACT   technology,   such  as
administering  antibiotics,  attaching  chemotherapy  drugs to tumors,
delivering  bone  material  for  orthopaedic  bone  repair,  and  as a
replacement for spinal discs.

o    Develop and Commercialize  Bioprosthetic  Cardiovascular  Devices. The
Company  intends to leverage its expertise with stentless  human heart
valves to expand  commercialization  of its  stentless  porcine  heart
valves and to use its stentless porcine heart valves as a platform for
the  development  and  commercialization  of the Company's  SynerGraft
technology,  which is being  developed to expand the target market for
the stentless porcine heart valves by minimizing  calcification  often
associated   with  porcine  tissues  and  thereby   increasing   their
longevity. In October 2000 the Company received a CE Mark allowing for
commercial distribution of the new tissue-engineered  SynerGraft heart
valve throughout the European Community.  The Company has expanded its
production  capacity for its bioprosthetic  cardiovascular  devices to
address the increased demand it is currently experiencing.

o    Leverage Existing Capability across Product Lines. The Company intends
to apply its  expertise  with  stentless  human heart valves to expand
commercialization of its stentless porcine heart valves and to use its
human  heart  valve and  conduit  cryopreservation  expertise  and its
stentless  porcine heart valves as a platform for the  development and
commercialization of the Company's SynerGraft technology.

Services and Products

Cryopreservation of Human Tissue for Transplant

The Company's proprietary and patent protected cryopreservation process involves
the procurement of tissue from deceased human donors,  the timely and controlled
delivery of such tissue to the Company, the screening, disinfection,  dissection

4

and  cryopreservation of the tissue by the Company,  the storage and shipment of
the cryopreserved  tissue and the controlled thawing of the tissue.  Thereafter,
the tissue is surgically implanted into a human recipient.

The transplant of human tissue that has not been preserved must be  accomplished
within extremely short time limits (not to exceed eight hours for transplants of
the human heart).  Prior to the advent of human tissue  cryopreservation,  these
time constraints resulted in the inability to use much of the tissue donated for
transplantation.  The application of the Company's cryopreservation technologies
to donated tissue expands the amount of human tissue available to physicians for
transplantation.  Cryopreservation  also expands the treatment options available
to  physicians  and their  patients  by  offering  alternatives  to  implantable
mechanical,   synthetic  and  animal-derived   devices.  The  tissues  presently
cryopreserved  by the Company include human heart valves and conduits,  vascular
tissue and connective tissue for the knee.

CryoLife  maintains  and  collects  extensive  clinical  data  on  the  use  and
effectiveness of implanted human tissues that it has  cryopreserved,  and shares
this data with implanting physicians and its procurement  partners.  The Company
also uses  this data to help  direct  its  continuing  efforts  to  improve  its
cryopreservation services through ongoing research and development. Its research
staff and technical  representatives  assist physicians by providing educational
materials,  seminars  and clinics on methods for  handling  and  implanting  the
tissue cryopreserved by the Company and the clinical advantages, indications and
applications  for those  tissues.  The Company has ongoing  efforts to train and
educate  physicians  on the  indications  for  and  uses  of the  human  tissues
cryopreserved  by the Company,  as well as its programs  whereby  surgeons train
other surgeons in best demonstrated  techniques.  The Company also assists organ
procurement  agencies  and tissue banks  through  training  and  development  of
protocols and provides  necessary  materials to improve their tissue  processing
techniques and to increase efficiency and the yield of usable tissue.

Human  Heart  Valves  and   Conduits.   The  human  heart  valves  and  conduits
cryopreserved by the Company are used in reconstructive  heart valve replacement
surgery.  CryoLife shipped approximately 46,500 cryopreserved human heart valves
and conduits from 1984 through 2000.  Based on CryoLife's  records of documented
implants,  management believes that the Company's success in the allograft heart
valve market is due in part to  physicians'  recognition  of the  longevity  and
natural  functionality of the Company's  cryopreserved human tissues as compared
to mechanical and porcine heart valve alternatives in certain applications.  The
Company  currently  applies  its  cryopreservation  services  to  human  aortic,
pulmonary  and mitral  heart valves for  implantation  by cardiac  surgeons.  In
addition, the Company provides cryopreserved conduit tissue to surgeons who wish
to perform certain  specialized  cardiac repair procedures.  Each of these human
heart valves and conduits maintains a viable tissue structure which more closely
resembles  and performs  like the  patient's  own tissue than  non-human  tissue
alternatives.  In February 2000 the Company began processing and distributing in
the U.S.  decellularized  human heart valves and conduits utilizing the first of
its SynerGraft technology  applications,  which involves developing  depopulated
heart valves with antigen  reduction  properties and the potential for recipient
cell repopulation.

In February of 2000 CryoLife began  processing some human allograft heart valves
using its SynerGraft  technology.  The SynerGraft technology effectively removes
cells from the heart valve leaving the collagen matrix intact.  The CryoValve(R)
SG valve is especially  designed to benefit patients,  both children and adults,
who have had a minor immune  response to  transplanted  tissues.  Early clinical
data indicates that the new SynerGraft  processing method mitigates the increase
of PRA (panel  reactive  antibodies)  experienced  by some of the  patients  who
receive  allograft heart valves.  The absence of an immunologic  response to the
decellularized allograft has the potential of improved long-term function of the
allograft  heart valves.  Advanced  animal studies of both allograft and porcine
heart valves that have been treated with the SynerGraft  process show that these
valves have the  potential to  repopulate  themselves in vivo with the patient's
own cells.

The Company estimates that the total heart valve and conduit  replacement market
in the U.S. in 2000 was  approximately  $400 million.  Management  believes that
approximately  88,000 heart valve and conduit  surgeries  were  conducted in the
U.S.  in 2000.  Of the  total  number  of heart  valve  and  conduit  surgeries,
approximately   43,000,   or  49%,   involved   mechanical  heart  valves,   and
approximately  45,000,  or  51%,  involved  tissue  heart  valves  or  conduits,

5

including porcine and  cryopreserved  human tissues.  Approximately  5,400 human
heart  valves  and  conduits  cryopreserved  by the  Company  were  shipped  for
implantation in 2000.

Management   believes   cryopreserved  human  heart  valves  and  conduits  have
characteristics  that make them the  preferred  replacement  for most  patients.
Specifically,  human heart valves,  such as those  cryopreserved by the Company,
allow for more normal blood flow and provide  higher cardiac output than porcine
and  mechanical  heart  valves.  Human heart  valves are not as  susceptible  to
progressive calcification, or hardening, as are porcine heart valves, and do not
require  anti-coagulation  drug therapy,  as do mechanical valves. The synthetic
sewing  rings  contained in  mechanical  and stented  porcine  valves may harbor
bacteria  leading to  endocarditis.  Furthermore,  endocarditis  is difficult to
treat with  antibiotics,  and this usually  necessitates the surgical removal of
these  valves  at   considerable   cost,   morbidity   and  risk  of  mortality.
Consequently,  for  many  physicians,  human  heart  valves  are  the  preferred
alternative to mechanical  and stented  porcine valves for patients who have, or
are at risk to contract, endocarditis.

The following table sets forth the  characteristics  of alternative  heart valve
implants  that  management  believes make  cryopreserved  human heart valves the
preferred replacement for most patients:

Porcine
-----------------------------------
Cryopreserved                                                                Bovine
Human          Stented         Stentless(1)         Mechanical         Pericardium
----------------- ------------------ ------------------- ---------------   ----------------
Materials:                   human        glutaraldehyde     glutaraldehyde      pyrolitic carbon  glutaraldehyde
tissue       fixed pig tissue   fixed pig tissue    bi-leaflet and    fixed cow tissue            
and synthetic                          and synthetic     and synthetic      
sewing ring                            sewing ring       sewing ring

Blood Flow Dynamics          normal        moderate          nearly normal       high elevation    high elevation
(Required Pressure): (2)     (0-5)         elevation         (5-15)              (10-25)           (10-30)

Mode of Failure:             gradual       gradual           expected to be      catastrophic      gradual 
gradual 

Longevity:                   15-20         10-15 years       expected to         15-20 years       10-15 years 
years                           exceed stented
porcine valves

Increased Risk of Bleeding    no           occasional        occasional           yes              occasional 
or Thromboembolic Events  
(strokes or other
clotting):

Anti-Coagulation Drug        none          short-term        short-term          chronic          short-term 
Therapy Required:    

Responsiveness to            high          low               low                 low              low 
Antibiotic       
Treatment of
Endocarditis:

Average Valve Cost in        $6,900        $4,500            $5,500              $4,100(3)        $4,500   
U.S.:  

(1)  Limited long-term  clinical data is available since stentless porcine heart
valves only recently became commercially available.

(2)  Pressure measured in mm/Hg.

(3)  Mechanical valves also require chronic  anti-coagulation  drug therapy at a
cost of approximately $450 per year.

While the clinical benefits of cryopreserved  human heart valves discussed above
are relevant to all patients,  they are particularly important for (i) pediatric
patients (newborn to 17 years) who are prone to calcification of porcine tissue,
(ii) young or otherwise  active  patients  who face an increased  risk of severe
blood   loss  or  even   death  due  to  side   effects   associated   with  the
anti-coagulation drug therapy required with mechanical valves and (iii) women in
their   childbearing   years  for  whom   anti-coagulation   drug   therapy   is
contraindicated.

Human  Vascular  Tissues.   The  Company   cryopreserves   human  saphenous  and
superficial  femoral  veins and  arteries  for use in  vascular  surgeries  that
require small diameter  conduits (3mm to 6mm),  such as coronary  bypass surgery
and peripheral vascular  reconstructions.  Failure to bypass or revascularize an
obstruction in such cases may result in death or the loss of a limb. The Company

6

believes  it offers  the only  available  small  diameter  conduit  product  for
below-the-knee   vascular   reconstruction.   The  Company  also   cryopreserves
aortoiliac  arteries  for the  reconstruction  of infected  abdominal  synthetic
grafts.  The Company shipped  approximately  22,800 human vascular  tissues from
1986 through 2000, which includes 5,200 shipments in 2000.

A surgeon's  first choice for replacing  diseased or damaged  vascular tissue is
generally the patient's tissue.  However, in cases of advanced vascular disease,
the  patient's  tissue is often  unusable  and the  surgeon may  consider  using
synthetic grafts or transplanted human vascular tissue. Small diameter synthetic
vascular grafts are generally not suitable for below-the-knee  surgeries because
they have a  tendency  to  occlude  because  the  synthetic  materials  in these
products  attract  cellular  material from the blood stream which in turn closes
off the vessel to normal  blood flow.  Cryopreserved  vascular  tissues  tend to
remain open longer and as such are used in indications  where  synthetics  fail.
The Company's  cryopreserved human vascular tissues are used for coronary artery
bypass  surgeries,  peripheral  vascular  reconstruction,  dialysis access graft
replacement,   venous  valve   transplantation   and  infected  abdominal  graft
replacement.

In 1986, the Company began a program to cryopreserve  saphenous veins for use in
coronary artery bypass  surgeries.  Although the Company's  cryopreserved  human
tissue was used in only a small percentage of the nearly 500,000 coronary artery
bypass procedures estimated to have been performed in 2000, the Company believes
it is the only commercially  available  alternative to the patient's tissue. The
Company  estimates  that, in 1998,  approximately  20,000 coronary artery bypass
surgeries  using the  patient's  vascular  tissue were  performed in which human
vascular tissues cryopreserved by the Company could have been used.

In 1989,  the Company  began a program to  cryopreserve  long segment  saphenous
veins for use in  peripheral  vascular  reconstruction.  In cases of  peripheral
arteriosclerosis,  a  cryopreserved  saphenous vein can be implanted as a bypass
graft for the  diseased  artery in order to improve  blood  flow and  maintain a
functional  limb.  Analysis of the Company's data on file of  approximately  425
implants  has shown that  approximately  80% of  patients  receiving  CryoLife's
preserved vascular tissues in this type of surgical procedure still have the use
of the affected leg four years after surgery.  The only  alternative for many of
these  patients  was   amputation.   The  Company   estimates   that,  in  2000,
approximately   130,000  peripheral  vascular   reconstruction   surgeries  were
performed in which its  cryopreserved  human  vascular  tissues  could have been
used.

In  1996,  the  Company  began a  program  for  the  cryopreservation  of  human
superficial  femoral veins for use in dialysis  access graft  replacement  as an
alternative  for  synthetic  grafts which have a higher risk of  infection  than
human tissue. The Company estimates that, in 2000, approximately 30,000 dialysis
access  graft  replacements  were  performed  in which its  cryopreserved  human
vascular tissues could have been used.

Human  Connective  Tissue for the Knee.  The Company  provides  cryopreservation
services  for  surgical  replacements  for the  meniscus  and the  anterior  and
posterior cruciate ligaments,  which are critical to the proper operation of the
human knee,  as well as  osteochondral  grafts used for the repair of  cartilage
defects in the knee. CryoLife has shipped  approximately 16,600 human connective
tissues for the knee through 2000, which includes 5,300 shipments in 2000.

Human menisci  cryopreserved by the Company provide orthopaedic surgeons with an
alternative  treatment in cases where a patient's  meniscus has been  completely
removed.   When  a  patient  has  a  damaged  meniscus,   the  current  surgical
alternatives are to repair,  partially remove or completely remove the patient's
meniscus, with partial removal being the most common procedure. Meniscal removal
increases the risk of premature  knee  degeneration  and arthritis and typically
results  in the need for knee  replacement  surgery  at some  point  during  the
patient's  life.  Management  believes  that the Company is the only provider of
cryopreserved  meniscal  tissue and that there are no  synthetic  menisci on the
market.  The Company  estimates that in 2000 in the U.S.  approximately  700,000
patients underwent partial or total  meniscectomies.  The Company believes up to
30% of these patients could become  candidates for meniscal  replacement  within
five years.

Tendons cryopreserved by the Company are used for the reconstruction of anterior
cruciate  ligaments  in cases  where the  patient's  ligaments  are  irreparably
damaged. Surgeons have traditionally removed a portion of the patient's patellar
tendon from the patient's undamaged knee for use in repairing a damaged anterior
cruciate ligament.  Tendons  cryopreserved by the Company provide an alternative

7

to this procedure.  Because surgeries using cryopreserved  tissue do not involve
the removal of any of the patient's own patellar  tendon,  the patient  recovery
period is typically  shorter.  The Company estimates that in 2000  approximately
175,000 cruciate ligament reconstruction surgeries were performed.

Other  Allograft  Tissue  Research  and  Development.  The Company is engaged in
research and  development on other projects for the use of  cryopreserved  human
endothelial cells,  peripheral nerves and other connective  tissues,  in various
surgical applications.

Implantable Biomaterials for Use as Surgical Adhesives and Sealants

The  effective  closure of internal  wounds  following  surgical  procedures  is
critical  to the  restoration  of the  function  of tissue  and to the  ultimate
success of the surgical  procedure.  Failure to effectively seal surgical wounds
can  result in  leakage  of air in lung  surgeries,  cerebral  spinal  fluids in
neurosurgeries,  blood in cardiovascular surgeries and gastrointestinal contents
in abdominal  surgeries.  Air and fluid leaks resulting from surgical procedures
can  lead  to  significant   post-operative  morbidity  resulting  in  prolonged
hospitalization,  higher levels of  post-operative  pain and a higher  mortality
rate.

Sutures and staples  facilitate  healing by joining wound edges and allowing the
body to heal  naturally.  However,  because  sutures  and  staples  do not  have
inherent sealing capabilities,  they cannot consistently eliminate air and fluid
leakage  at the wound  site.  This is  particularly  the case when  sutures  and
staples are used to close tissues containing air or fluids under pressure,  such
as the lobes of the lung,  the dural membrane  surrounding  the brain and spinal
cord, blood vessels and the  gastrointestinal  tract. In addition,  in minimally
invasive  surgical  procedures,  where the physician must operate  through small
access  devices,  it can be difficult  and time  consuming  for the physician to
apply  sutures  and  staples.  The  Company  believes  that the use of  surgical
adhesives  and sealants  with or without  sutures and staples  could enhance the
efficacy of these procedures through more effective and rapid wound closure.

In order to address the inherent limitations of sutures and staples, the Company
has developed  and begun  commercializing  its BioGlue  surgical  adhesive.  The
BioGlue  surgical  adhesive  is a  polymeric  surgical  bioadhesive  based  on a
derivative  of an  animal  blood  protein  and a  cross-linking  agent.  BioGlue
surgical  adhesive  has a tensile  strength  that is four to five  times that of
fibrin sealants.  Clinical  applications  for BioGlue surgical  adhesive include
cardiovascular,  vascular and pulmonary repair. Other potential applications for
BioGlue surgical adhesive include neurosurgery, orthopaedic indications, general
surgery and as a  replacement  for spinal  discs.  A  derivative  of the BioGlue
technology is BioLastic(TM),  an implantable biomaterial under development which
is capable of exchanging oxygen and carbon dioxide. BioLastic is being developed
for use in  reinforcing  or patching  vascular  tissue,  repairing  air leaks in
lungs, and replacing or sealing holes in dura mater.

The Company estimates that the worldwide market for surgical sutures and staples
in 2000 was in excess of $2 billion. The Company began shipping BioGlue surgical
adhesive  for  distribution  in the EC in the second  quarter of 1998 for use in
vascular  applications  and in the first  quarter  of 1999 for use in  pulmonary
applications.  In December  1999 the Company  began  shipping  BioGlue  surgical
adhesive in the U.S. pursuant to an HDE for use as an adjunct in repair of acute
thoracic aortic dissections.

Bioprosthetic Cardiovascular Devices

The Company is  developing  bioprosthetic  cardiovascular  devices  based on its
experience with  cryopreserved  human tissue implants.  Like human heart valves,
the  Company's  porcine heart valves are stentless  with the valve  opening,  or
annulus,  retaining a more natural  flexibility.  Stented porcine and mechanical
heart valves are typically  fitted with  synthetic  sewing rings which are rigid
and can impede  normal blood flow.  Unlike most other  available  porcine  heart
valves,  the Company's  stentless  porcine heart valves do not contain synthetic
materials  which  increase  the  risk  of   endocarditis,   a  debilitating  and
potentially deadly infection.

Glutaraldehyde  fixed porcine  heart valves are often  preferred by surgeons for
procedures involving elderly patients because they eliminate the risk of patient
non-compliance  with  anti-coagulation  drug therapy  associated with mechanical
valves,  they are  less  expensive  than  allograft  valves  and  their  shorter

8

longevity is more appropriately  matched with these patients' life expectancies.
Glutaraldehyde  fixed porcine and bovine heart valves address a worldwide target
market estimated to have been $325 million in 2000.

The  Company's  SynerGraft  technology  involves  the  removal of cells from the
structure of non-viable  animal tissue,  leaving a collagen  matrix that has the
potential to repopulate in vivo with the recipient's own cells.  This process is
designed to reduce  calcification  of porcine heart valves,  thereby  increasing
their  longevity,  and  more  generally  to  improve  the  biocompatibility  and
functionality  of such  tissue.  The Company  believes  that its  porcine  heart
valves, when treated with SynerGraft technology,  will expand its opportunity to
address the broader  international  and U.S. heart valve  markets,  estimated to
have been $390 million and $400 million, respectively, in 2000. Potential future
SynerGraft  technology  applications  involve developing stentless porcine heart
valves repopulated in vitro with viable human cells prior to implantation.

The  following  table  sets  forth  the  bioprosthetic   cardiovascular  devices
currently  marketed by the Company,  along with the product  features and market
status for each.

Fixed Stentless Porcine Valves                Features                        Regulatory/Market Status
------------------------------   ------------------------------------------   --------------------------------------
SynerGraft                      depopulated    aortic    pulmonary   valve
currently   marketed  in  Europe  with  of
composite  leaflet  design;  no regulatory
approval under CE Mark synthetic material;
normal hemodynamics

CryoLife-O'Brien                aortic valve of matched composite            currently marketed in Europe with
leaflet design; single suture line           regulatory approval under CE Mark;
implantation technique; no                   currently marketed in Canada with
synthetic material; normal                   regulatory approval under Therapeutic
hemodynamics                                 Products Programme

CryoLife-Ross                   pulmonary valve with attached                currently marketed in Europe with
conduit; no synthetic material;              regulatory approval under CE Mark
normal hemodynamics

The SynerGraft heart valve is a depopulated  stentless  porcine heart valve with
antigen  reduction  properties.  CryoLife  obtained a CE Mark for the SynerGraft
heart valve in November 2000. This technology removes cells from animal tissues,
thereby  reducing the transplant  recipient's  immune  response to the implanted
tissue. Typically calcium is deposited through an immune response, which reduces
the useful life of the implant.  By removing  animal cells from the tissue while
maintaining the underlying  structural strength of the porcine heart valve, this
SynerGraft  application  is designed to provide a platform  for a patient's  own
cells to potentially repopulate the implant.

The  CryoLife-O'Brien  aortic  valve is a  stentless  porcine  valve with design
features which  management  believes provide  significant  advantages over other
stentless porcine heart valves.  CryoLife began exclusive worldwide distribution
of this valve in 1992 and acquired all rights to the  underlying  technology  in
1995. The Company's  CryoLife-O'Brien  aortic heart valve, currently marketed in
the EC and  certain  other  territories  outside  the U.S.,  contains  a matched
composite  leaflet  design  that  approximates  human  heart  valve  blood  flow
characteristics  and  requires  only a single  suture line  thereby  simplifying
surgical  implantation.  Most  other  stentless  porcine  valves  require a more
complicated implant procedure.

The CryoLife-Ross  pulmonary valve, the patent for which the Company acquired in
October  1996,  is an advanced  design  stentless  porcine heart valve within an
attached conduit of porcine tissue,  which mimics the structure of a human heart
valve.  The Company  began  manufacturing  and  distributing  the  CryoLife-Ross
pulmonary heart valve, in the EC in September 1998.

9

Single-Use Medical Devices

On October 9, 2000 the Company sold substantially all of the remaining assets of
Ideas for Medicine,  Inc. ("IFM") to Horizon Medical Products,  Inc. See Item 7:
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" for a more detailed discussion.

Sales, Distribution and Marketing

Cryopreservation Services

CryoLife markets its cryopreservation  services to tissue procurement  agencies,
implanting physicians and prospective tissue recipients.  The Company works with
tissue banks and organ  procurement  agencies to ensure consistent and continued
availability of donated human tissue for transplant and educates  physicians and
prospective  tissue  recipients  with respect to the  benefits of  cryopreserved
human tissues.

Procurement  of Tissue.  Donated human tissue is procured  from  deceased  human
donors by organ procurement  agencies and tissue banks. After  procurement,  the
tissue is packed and shipped, together with certain information about the tissue
and its donor,  to the Company in accordance with the Company's  protocols.  The
tissue is  transported  to the Company's  laboratory  facilities  via commercial
airlines  pursuant to  arrangements  with  qualified  courier  services.  Timely
receipt of procured tissue is important, as tissue that is not received promptly
cannot be cryopreserved  successfully.  The procurement  agency is reimbursed by
the Company,  for the costs  associated  with these  procurement  services.  The
procurement fee and related  shipping  costs,  together with the charges for the
cryopreservation  services of the Company, are ultimately paid to the Company by
the hospital with which the implanting physician is associated.  The Company has
developed  relationships  with  over 100  tissue  banks  and  organ  procurement
agencies  throughout the U.S.  Management  believes the  establishment  of these
relationships  is  critical  for a  growing  business  in  the  cryopreservation
services industry and that the breadth of these existing  relationships provides
the Company a significant  advantage over potential new entrants to this market.
The Company employs  approximately 14 individuals to work with organ procurement
agencies and tissue  banks,  six of whom are employed as  procurement  relations
managers and are stationed  throughout the country. The Company's central office
for procurement relations is staffed 24 hours per day, 365 days per year.

Preservation of Tissue.  Upon receiving tissue, a Company  technician  completes
the documentation  control for the tissue prepared by the procurement agency and
gives it a control number.  The  documentation  identifies,  among other things,
donor age and cause of death. A trained  technician  then removes the portion or
portions of the delivered  tissue that will be  cryopreserved.  These procedures
are  conducted  under  aseptic  conditions  in clean  rooms.  At the same  time,
additional  samples  are taken  from the  donated  tissue and  subjected  to the
Company's  comprehensive  quality assurance  program.  This program may identify
characteristics which would disqualify the tissue for cryopreservation.

Human heart valves and conduits,  vascular tissue and connective  tissue for the
knee are cryopreserved in a proprietary  freezing process conducted according to
strict Company protocols.  After the cryopreservation process, the specimens are
transferred to liquid  nitrogen  freezers for long-term  storage at temperatures
below -135(Degree)C.  The entire cryopreservation  process is rigidly controlled
by guidelines established by the Company.

Distribution of Tissue to Implanting Physicians. After cryopreservation,  tissue
is stored by the Company or is delivered directly to hospitals at the implanting
physician's  request.  Cryopreserved  tissue must be transported under stringent
handling conditions and maintained within specific temperature tolerances at all
times.  Cryopreserved  tissue is  packaged  for  shipment  using  the  Company's
proprietary processes.  At the hospital, the tissue is held in a liquid nitrogen
freezer  according  to  Company  protocols  pending  implantation.  The  Company
provides a detailed protocol for thawing the cryopreserved  tissue.  The Company
also makes its  technical  personnel  available  by phone or in person to answer
questions.  After the Company transports the tissue to the hospital, the Company
invoices  the   institution   for  its  services,   the   procurement   fee  and
transportation costs.

10

The Company provides  Company-owned liquid nitrogen freezers to client hospitals
without  charge.  The Company  has  currently  installed  more than 300 of these
freezers.  Participating  hospitals pay the cost of liquid  nitrogen and regular
maintenance.  The  availability  of  on-site  freezers  makes  it  easier  for a
hospital's  physicians  to utilize the  Company's  cryopreservation  services by
making the  cryopreserved  tissue more readily  available.  Because fees for the
Company's  cryopreservation  services  become due upon the delivery of tissue to
the  hospital,  the use of such  on-site  freezers  also  reduces the  Company's
working capital needs.

Marketing,  Educational  and Technical  Support.  The Company  maintains  active
relationships with approximately 2,000 cardiovascular,  vascular and orthopaedic
surgeons who have active practices  implanting  cryopreserved  human tissues and
markets to a broader  group of  physicians  within  these  medical  specialties.
Because  the  Company  markets  its   cryopreservation   services   directly  to
physicians,  an important aspect of increasing the distribution of the Company's
cryopreservation  services is educating  physicians on the use of  cryopreserved
human  tissue  and on proper  implantation  techniques.  Trained  field  support
personnel provide support to implanting  institutions and surgeons.  The Company
currently  has  over  150  independent  technical  service  representatives  and
sub-representatives  (who deal primarily with  orthopaedic  surgeons and who are
paid on a commission  basis) as well as 45 persons employed as technical service
representatives  (who deal primarily with  cardiovascular  and vascular surgeons
and receive a base salary with a  performance  bonus) all of whom provide  field
support.

The Company sponsors  physician training seminars where leading physicians teach
other physicians the proper technique for handling and implanting  cryopreserved
human  tissue.  Physicians  pay their own expenses to attend  these  seminars in
addition to paying the Company a fee for  attendance.  The Company also produces
educational  videotapes for  physicians.  The Company  coordinates  live surgery
demonstrations  at  various  medical  schools.   The  Company  also  coordinates
laboratory  sessions  that utilize  animal  tissue to  demonstrate  the surgical
techniques.  Members of the  Company's  Medical  Advisory  Board  often lead the
surgery  demonstrations and laboratory sessions.  Management believes that these
activities improve the medical community's acceptance of the cryopreserved human
tissue processed by the Company.

To  assist   procurement   agencies  and  tissue  banks,  the  Company  provides
educational  materials and training on  procurement,  dissection,  packaging and
shipping  techniques.  The Company  also  produces  educational  videotapes  and
coordinates laboratory sessions on procurement techniques for procurement agency
personnel.  To  supplement  its  educational  activities,  the  Company  employs
in-house technical specialists that provide technical information and assistance
and maintains a staff 24 hours per day, 365 days per year for customer support.

European Distribution

In September  1999 the Company  established  its European  subsidiary,  CryoLife
Europa Ltd ("Europa"),  to provide  distribution  and technical  services to the
Company's  network of  European  representatives,  institutional  customers  and
surgeons.  In February 2000 Europa  officially  opened its headquarters  located
near London, England.

BioGlue Surgical Adhesive

The Company markets and distributes  its BioGlue  surgical  adhesive in the U.S.
through its existing direct technical  representatives.  The Company markets and
distributes its BioGlue surgical  adhesive in international  markets,  excluding
Japan,  through  Europa  and other  existing  independent  representatives.  The
Company's  European,  Middle East and African sales,  marketing and distribution
activities   directed  through  Europa  are  channeled  through  26  independent
distributors located in the United Kingdom,  Germany,  France,  Norway,  Sweden,
Denmark, Finland, Latvia, Benelux, Switzerland, Austria, Poland, Czech Republic,
Hungary,  Solvenia,  Spain, Portugal,  Italy, Greece, Turkey,  Lebanon,  Israel,
Jordan,  Syria,  Kuwait,  UAE and South Africa.  Marketing  efforts are directed
almost exclusively toward  cardiovascular,  vascular and thoracic surgeons,  and
the  Company  conducts  training  sessions  for  doctors  with  respect  to  the
application and administration of BioGlue surgical adhesive.

During 1998,  the Company  signed a five-year  exclusive  agreement with Century
Medical,  Inc. for the introduction and distribution of BioGlue in Japan.  Under
the terms of the agreement, Century Medical will be responsible for applications
and clearances with the Japanese Ministry of Health and Welfare.

11

Bioprosthetic Cardiovascular Devices

The Company markets the  CryoLife-O'Brien  and  CryoLife-Ross  stentless porcine
heart valves in Europe, the Middle East and Africa. The  CryoLife-O'Brien  valve
is marketed in Canada.  The Company  commenced  marketing the  SynerGraft  heart
valve in Europe  during  the  fourth  quarter  of 2000.  Marketing  efforts  are
primarily directed toward cardiac, cardio-thoracic and vascular surgeons and the
Company  conducts  educational  seminars and conferences to train these surgeons
and educate them with respect to the uses and benefits of its porcine  stentless
heart valves.

Research and Development

The Company uses its expertise in immunology, biochemistry and cell biology, and
its understanding of the needs of the  cardiovascular,  vascular and orthopaedic
surgery  medical  specialties,  to continue to expand its core  cryopreservation
business  in the  U.S.  and to  develop  or  acquire  implantable  products  and
technologies  for these fields.  The Company seeks to identify market areas that
can benefit from  preserved  living tissues and other related  technologies,  to
develop  innovative  techniques and products within these areas, to secure their
commercial  protection,  to  establish  their  efficacy and then to market these
techniques  and products.  The Company  employs  approximately  22 people in its
research and development  department,  including seven PhDs with  specialties in
the  fields  of  immunology,   molecular  biology,  protein  chemistry,  organic
chemistry and vascular biology.

In order to expand the Company's service and product  offerings,  the Company is
currently in the process of developing or investigating several technologies and
products,  including  additional  applications of the SynerGraft  technology and
additional  applications  of  BioGlue  surgical  adhesive,  as  well  as its ACT
technology.  The  Company  is  currently  investigating  certain  drug  delivery
applications  for BioGlue  surgical  adhesive  and its ACT  technology,  such as
administering  antibiotics,  attaching chemotherapy drugs to tumors,  delivering
growth agents or delivering  bone material for orthopaedic  bone repair.  To the
extent the Company identifies  additional  applications for these products,  the
Company may attempt to license these products to corporate  partners for further
development  of such  applications  or seek  funding  from  outside  sources  to
continue the commercial development of such technologies. The Company's research
and development  strategy is to allocate available resources among the Company's
core market areas of  cryopreservation  services,  bioprosthetic  cardiovascular
devices and implantable biomaterials,  based on the size of the potential market
for any specific product  candidate and the estimated  development time and cost
required to bring the product to market.

Research on these and other projects is conducted in the Company's  research and
development  laboratory or at universities or clinics where the Company sponsors
research projects.  In 1998, 1999 and 2000, the Company spent approximately $4.7
million,  $4.4  million  and  $5.2  million,   respectively,   on  research  and
development  activities on new and existing products.  These amounts represented
approximately  8%, 7% and 7% of the  Company's  revenues  for  those  respective
years. The Company's research and development program is overseen by its medical
and scientific advisory boards. The Company's pre-clinical studies are conducted
at universities  and other locations  outside the Company's  facilities by third
parties  under  contract  with the Company.  In addition to these  efforts,  the
Company  may, as  situations  develop,  pursue other  research  and  development
activities.

Manufacturing and Operations

The Company's  facilities are located in suburban Atlanta,  Georgia, and consist
of three separate locations totaling approximately 130,000 square feet of leased
office,  laboratory and warehouse  space.  Approximately  17,500 square feet are
dedicated to laboratory work areas. The primary facility, which does not include
the  biomedical   products   laboratory  and  the  bioprosthetic   manufacturing
operation, has four main laboratory facilities: human tissue processing, BioGlue
manufacturing,  research and development and  microbiology.  Each of these areas
consists of a general  technician work area and adjoining "clean rooms" for work
with human  tissue or BioGlue  manufacturing,  and for aseptic  processing.  The
clean rooms are supplied with highly  filtered air which provides a near-sterile
environment. In February 2000 the Company began construction of a 100,000 square
foot expansion of its corporate headquarters and manufacturing facilities, which
is expected to be fully completed and occupied in the fourth quarter of 2001.

12

Human Tissue Processing

The human tissue  processing  laboratory is  responsible  for the processing and
cryopreservation  of human tissue for  transplant,  including the  processing of
SynerGraft treated human heart valves and conduits and certain vascular tissues.
This includes all processing of heart valves and conduits,  vascular  tissue and
connective  tissue for the knee supplied by CryoLife.  This laboratory  contains
approximately  7,700  square feet with a suite of seven clean  rooms.  Currently
there are 58  technicians  employed in this area,  and the laboratory is staffed
for  two  shifts,   365  days  per  year.  In  2000  the  laboratory   processed
approximately 17,200 human tissues for distribution and transplant.  The current
staffing  level is estimated to be at about half of total  capacity.  Increasing
this capacity  could be  accomplished  by increasing  employees and expanding to
three shifts.

Implantable Biomaterials for Use as Surgical Adhesives and Sealants

BioGlue   surgical   adhesive  is  presently   manufactured   at  the  Company's
headquarters  facility,  which has an annual capacity of  approximately  300,000
units. This laboratory contains  approximately  14,500 square feet,  including a
suite of four cleanrooms.  Currently, there are six technicians employed in this
area.  The Company  conducts  research on its ACT  technology in the  biomedical
products  laboratory,  which is located in  Marietta,  Georgia,  and employs two
technicians.   This  laboratory  contains   approximately  11,000  square  feet,
including  4,000  square  feet of  laboratory  space and a suite of eight  clean
rooms.

Bioprosthetic Cardiovascular Devices

The  bioprosthesis  laboratory  is  responsible  for  the  manufacturing  of the
CryoLife-O'Brien  and  CryoLife-Ross  stentless porcine heart valves, as well as
for the manufacturing of SynerGraft  porcine valves.  This laboratory is located
in Marietta,  Georgia and contains  approximately 20,500 square feet, with about
2,100 square feet of laboratory  space and a suite of six clean rooms for tissue
processing.  Currently,  this laboratory employs 36 technicians and is scheduled
to  manufacture   approximately   1,600   CryoLife-O'Brien,   CryoLife-Ross  and
SynerGraft valves in 2001.

Quality Assurance

The Company's  operations  encompass the provision of cryopreservation  services
and  the  manufacturing  of  bioprosthetics  and  bioadhesives.  In  all  of its
facilities,   the  Company  is  subject  to   regulatory   standards   for  good
manufacturing practices, including current Quality System Regulations, which are
FDA  regulatory   requirements  for  medical  device   manufacturers.   The  FDA
periodically inspects Company facilities to ensure Company compliance with these
regulations.  The Company also  operates  according  to ISO 9001 Quality  System
Requirements,   an  internationally   recognized  voluntary  system  of  quality
management  for companies  that design,  develop,  manufacture,  distribute  and
service  products.  The Company maintains a Certification of Approval to the ISO
9001, as well as EN46001 and ANSI/ISO/ASQC/Q9001, the European and U.S. versions
of the international standard,  respectively. This approval is issued by Lloyd's
Register Quality Assurance Limited ("LRQA").  LRQA is a Notified Body officially
recognized by the EC to perform  assessments of compliance with ISO 9001 and its
derivative  standards.  LRQA performs  semi-annual  on-site  inspections  of the
Company's quality systems.

The Company's  quality  assurance  staff is comprised  primarily of  experienced
professionals   from  the  medical  device  and   pharmaceutical   manufacturing
industries.  The quality assurance department, in conjunction with the Company's
research  and  development  and select  university  research  staffs,  routinely
evaluates the Company's processes and procedures.

13

Cryopreservation Services

The Company  employs a  comprehensive  quality  assurance  program in all of its
tissue  processing  activities.   The  Company  is  subject  to  Quality  System
Regulations,  additional FDA  regulations  and ISO 9001.  The Company's  quality
assurance  program begins with the  development and  implementation  of training
courses for the  employees of  procurement  agencies.  To assure  uniformity  of
procurement  practices  among the tissue recovery  teams,  the Company  provides
procurement  protocols,  transport  packages and tissue transport liquids to the
donor sites.

Upon receipt by the  Company,  each tissue is assigned a unique  control  number
that provides traceability of tissue from procurement through the processing and
preservation  processes,  and ultimately to the tissue recipient.  Blood samples
from  each  tissue  donor are  subjected  to a  variety  of tests to screen  for
infectious  diseases.  Samples of certain  tissues are also sent to  independent
laboratories  for pathology  testing.  Following  dissection of the tissue to be
cryopreserved,  a separate  disinfection  procedure  is begun  during  which the
dissected tissue is treated with  proprietary  antibiotic  solutions.  A trained
technician then removes  samples from the  disinfected  tissue upon which serial
cultures are performed to identify bacterial or fungal growth.

The  materials  and  solutions  used by the  Company  in  processing  tissue are
pre-screened  to determine if they are of desired  quality as defined by Company
protocols. Only materials and solutions that meet the Company's requirements are
approved by quality assurance personnel for use in processing. Throughout tissue
processing,  detailed  records are maintained and reviewed by quality  assurance
personnel.

The Company's tissue  processing  facilities are annually licensed by the States
of Georgia,  New York, Florida and California as facilities that process,  store
and distribute  human tissue for  implantation.  The regulatory  bodies of these
states perform  appropriate  inspections of the facilities to ensure  compliance
with state law and  regulations.  In addition,  the Company's  human heart valve
processing  operations are  additionally  regulated by the FDA and  periodically
inspected  for  compliance  to Quality  System  Regulations.  Other human tissue
processed by the Company is periodically  inspected for compliance with the Code
of Federal  Regulation  ("CFR") Part 1270. CFR 1270 is an FDA  regulation  which
sets forth the  requirements  with which the Company must comply in  determining
the suitability of human tissue for implantation.

Bioprosthetic and Bioadhesive Manufacturing

The Company  employs a  comprehensive  quality  assurance  program in all of its
manufacturing activities.  The Company is subject to Quality System Regulations,
additional FDA regulations and ISO 9001.

All  materials  and  components  utilized  in the  production  of the  Company's
products are  received  and  thoroughly  inspected  by trained  quality  control
personnel,   according  to  written   specifications   and  standard   operating
procedures.   Only  materials  and  components  found  to  comply  with  Company
procedures are accepted by quality control and utilized in production.

All materials, components and resulting sub-assemblies are traced throughout the
manufacturing  process to assure  that  appropriate  corrective  actions  can be
implemented if necessary.  Each process is documented  along with all inspection
results, including final finished product inspection and acceptance. Records are
maintained  as to the  consignee of product to  facilitate  product  removals or
corrections,  if  necessary.  All  processes in  manufacturing  are validated by
quality  engineers  to assure  that they are capable of  consistently  producing
product  meeting  specifications.  The  Company  maintains  a  rigorous  quality
assurance  program of measuring devices used for manufacturing and inspection to
ensure appropriate accuracy and precision.

Each  manufacturing  facility is subject to periodic  inspection  by the FDA and
LRQA to  independently  assure the  Company's  compliance  with its  systems and
regulatory requirements.

14

Patents, Licenses and Other Proprietary Rights

The Company  relies on a combination of patents,  trade secrets,  trademarks and
confidentiality  agreements  to protect  its  proprietary  products,  processing
technology and know-how.  The Company believes that its patents,  trade secrets,
trademarks and technology licensing rights provide it with important competitive
advantages.  The Company owns or has licensed  rights to 35 U.S.  patents and 33
foreign  patents,  including  patents relating to its technology for human heart
valve  and  conduit,   vascular  tissue  and  connective  tissue  for  the  knee
preservation; tissue revitalization prior to freezing; tissue transport; BioGlue
surgical adhesive;  ACT; organ storage solution; and packaging.  The Company has
20  pending  U.S.  patent  applications  and in  excess  of 78  pending  foreign
applications  that relate to areas including  heart valve and tissue  processing
technology  and delivery of  bioadhesives  for  anastomosis  and other uses.  In
connection with the sale of the IFM product line to Horizon in 1998, the Company
sold all patents  related to such product line.  There can be no assurance  that
any  patents  pending  will  result  in issued  patents.  The  Company  also has
exclusive  licensing rights for technology  relating to  light-sensitive  enzyme
inhibitors. The remaining duration of the Company's issued patents ranges from 3
to 17 years.  The Company has licensed from third parties  certain  technologies
used in the development of its ACT technology and SynerGraft  technology.  These
licenses call for the payment of both development milestones and royalties based
on product sales, when and if such products are approved for marketing. The loss
of these licenses could adversely  affect the Company's  ability to successfully
develop its ACT and SynerGraft technologies.

There  can be no  assurance  that the  claims  allowed  in any of the  Company's
existing or future patents will provide competitive advantages for the Company's
products,  processes and technologies or will not be successfully  challenged or
circumvented  by competitors.  To the extent that any of the Company's  products
are not patent  protected,  the  Company's  business,  financial  condition  and
results of operations could be materially adversely affected. Under current law,
patent  applications  in the U.S. are  maintained  in secrecy  until patents are
issued and patent  applications  in foreign  countries are maintained in secrecy
for a period after filing.  The right to a patent in the U.S. is attributable to
the first to invent,  not the first to file a patent  application.  The  Company
cannot be sure that its products or  technologies  do not infringe  patents that
may be granted in the future pursuant to pending patent applications or that its
products do not infringe any patents or proprietary rights of third parties. The
Company  may  incur  substantial  legal  fees  in  defending  against  a  patent
infringement  claim or in asserting  claims against third parties.  In the event
that any  relevant  claims  of  third-party  patents  are  upheld  as valid  and
enforceable, the Company could be prevented from selling certain of its products
or could be required to obtain  licenses  from the owners of such  patents or be
required  to  redesign  its  products  to avoid  infringement.  There  can be no
assurance  that such licenses  would be available or, if available,  would be on
terms  acceptable  to the Company or that the Company would be successful in any
attempt to  redesign  its  products  or  processes  to avoid  infringement.  The
Company's  failure to obtain these  licenses or to redesign  its products  could
have a material adverse effect on the Company's  business,  financial  condition
and results of operations.

The  Company  has  entered  into  confidentiality  agreements  with  all  of its
employees and several of its consultants and third-party vendors to maintain the
confidentiality  of trade secrets and proprietary  information.  There can be no
assurance  that the  obligations  of employees of the Company and third  parties
with  whom  the  Company  has  entered  into  confidentiality   agreements  will
effectively  prevent  disclosure of the Company's  confidential  information  or
provide  meaningful  protection  for the Company's  confidential  information if
there is unauthorized use or disclosure,  or that the Company's trade secrets or
proprietary  information  will not be  independently  developed by the Company's
competitors.   Litigation   may  be  necessary  to  defend   against  claims  of
infringement,  to enforce  patents and trademarks of the Company,  or to protect
trade secrets and could result in  substantial  cost to, and diversion of effort
by, the Company. There can be no assurance that the Company would prevail in any
such litigation.  In addition, the laws of some foreign countries do not protect
the Company's proprietary rights to the same extent as do the laws of the U.S.

15

Competition

Cryopreserved Human Tissues and Bioprosthetic Cardiovascular Devices

The Company faces  competition  from at least one for profit company and a small
number of non-profit tissue banks that cryopreserve and distribute human tissue,
as well as from  companies  that market  mechanical,  porcine  and bovine  heart
valves for implantation. Many established companies, some with resources greater
than those of the Company,  are engaged in manufacturing,  marketing and selling
alternatives to cryopreserved human tissue. Management believes that it competes
favorably  with other  entities that  cryopreserve  human tissue on the basis of
technology, customer service and quality assurance.

As compared to mechanical,  porcine and bovine heart valves, management believes
that the human heart valves  cryopreserved by the Company compete on the factors
set  forth  above,  as well  as by  providing  a  tissue  that is the  preferred
replacement  alternative  with respect to certain  medical  conditions,  such as
pediatric  cardiac  reconstruction,   valve  replacements  for  women  in  their
child-bearing  years and valve  replacements  for  patients  with  endocarditis.
Although human tissue  cryopreserved  by the Company is initially  higher priced
than are mechanical alternatives,  these alternatives typically require that the
patient take anti-coagulation drug therapy for the lifetime of the implant. As a
result of the costs  associated  with  anti-coagulants,  mechanical  valves  are
generally,   over  the  life  of  the  implant,   more   expensive  than  tissue
cryopreserved by the Company. Notwithstanding the foregoing, management believes
that, to date, price has not been a significant competitive factor.

Generally,  for each  procedure  that may utilize  other  human  tissue that the
Company cryopreserves,  there are alternative treatments.  Often, as in the case
of veins and ligaments,  these alternatives include the repair,  partial removal
or complete removal of the damaged tissue and may utilize other tissues from the
patients themselves or synthetic products. The selection of treatment choices is
made by the  attending  physician in  consultation  with the patient.  Any newly
developed  treatments will also compete with the use of tissue  cryopreserved by
the Company.

Human and Stentless  Porcine Heart  Valves.  Alternatives  to human heart valves
cryopreserved  by the Company  include  mechanical  valves,  porcine  valves and
valves  constructed  from  bovine  pericardium.  St. Jude  Medical,  Inc. is the
leading  supplier  of  mechanical   heart  valves,   and  has  a  marketing  and
distribution   arrangement  with  a  non-profit  tissue  bank  for  supplies  of
cryopreserved  human heart valves.  Edwards Life  Sciences,  Inc. is the leading
supplier of bovine heart valves. In addition,  management believes that at least
three  tissue  banks offer  cryopreservation  services for human heart valves in
competition with the Company.  The Company  presently  distributes its stentless
porcine heart valves only outside the U.S. These stentless  porcine heart valves
compete  with  mechanical  valves,  human  heart  valves  and  processed  bovine
pericardium.  The Company is aware of at least three other  companies that offer
stentless porcine heart valves.

Human Vascular  Tissue.  Synthetic  alternatives to veins  cryopreserved  by the
Company  are  available  primarily  in medium  and large  diameters.  Currently,
management  believes that there are no other  providers of  cryopreserved  human
vascular  tissue in  competition  with the Company.  Companies  offering  either
synthetic or allograft products may enter this market in the future.

Human Connective  Tissue for the Knee. The Company's  competition in the area of
connective  tissue for the knee varies  according to the tissue  involved.  When
transplant  is  indicated,   the   principal   competition   for  human  tissues
cryopreserved  by the Company are freeze-dried and fresh frozen human connective
tissues.  These  alternative  allografts  are  distributed  by  distributors  of
Osteotech,  Inc. and various tissue banks,  among others.  Ligaments and tendons
cryopreserved  by the Company  constitute  the principal  treatment  options for
injuries which require anterior cruciate ligament repair.

Implantable Biomedical Devices for Use as Surgical Adhesives and Sealants

The  Company   competes   with  many  domestic  and  foreign   medical   device,
pharmaceutical  and  biopharmaceutical  companies.  In the surgical adhesive and
surgical  sealant area,  the Company will compete with  existing  methodologies,
including  traditional  wound  closure  products  such as sutures  and  staples,
marketed  by  companies  such as  Johnson  &  Johnson,  United  States  Surgical

16

Corporation,  Sherwood,  Davis & Geck and others. Other products currently being
marketed  include  fibrin  glue  sold by  Immuno  AG,  a  subsidiary  of  Baxter
Healthcare Company,  Chemo-Sero  Therapeutic Research Institute,  Hoechst AG and
others,  and management  believes other products are under development by Baxter
Healthcare  Corporation,  Bristol-Myers Squibb Company, V.I. Technologies,  Inc.
and others.  Other  competitors in the surgical  sealant market include  Closure
Medical  Corporation,  B. Braun GmbH, Focal,  Inc., Fusion Medical  Technologies
Inc. and Cohesion,  Inc.  Competitive  products may also be under development by
other large medical device, pharmaceutical and biopharmaceutical companies. Many
of the Company's current and potential  competitors have  substantially  greater
financial,  technological,  research and  development,  regulatory and clinical,
manufacturing, marketing and sales and personnel resources than the Company.

These  competitors  may also have greater  experience  in  developing  products,
conducting clinical trials,  obtaining regulatory  approvals,  and manufacturing
and marketing  such  products.  Certain of these  competitors  may obtain patent
protection,  approval or  clearance  by the FDA or foreign  countries or product
commercialization  earlier  than  the  Company,  any of which  could  materially
adversely affect the Company.  Furthermore, if the Company commences significant
commercial  sales of its  products,  it will also be  competing  with respect to
manufacturing efficiency and marketing capabilities, areas in which it currently
has limited experience.

Other recently  developed  technologies  or procedures are, or may in the future
be,  the  basis of  competitive  products.  There can be no  assurance  that the
Company's  current  competitors  or other parties will not succeed in developing
alternative technologies and products that are more effective,  easier to use or
more economical than those which have been or are being developed by the Company
or that  would  render  the  Company's  technology  and  products  obsolete  and
non-competitive  in  these  fields.  In  such  event,  the  Company's  business,
financial  condition  and results of operations  could be  materially  adversely
affected. See "Risk Factors--Rapid Technological Change."

Government Regulation

U.S. Federal Regulation

Because  human heart  valves and BioGlue  surgical  bioadhesives  are, and other
Company  products  may be,  regulated  in the future as,  medical  devices,  the
Company and these  products are subject to the  provisions  of the Federal Food,
Drug and Cosmetic Act ("FDCA")  and  implementing  regulations.  Pursuant to the
FDCA, the FDA regulates the manufacture, distribution, labeling and promotion of
medical devices in the U.S. In addition,  various foreign countries in which the
Company's  products  are or  may be  distributed  impose  additional  regulatory
requirements.

The FDCA provides that,  unless exempted by regulation,  medical devices may not
be  distributed  in the U.S.  unless  they have been  approved  or  cleared  for
marketing by the FDA. There are two review  procedures by which medical  devices
can receive such approval or clearance.  Some products may qualify for clearance
to be  marketed  under a  Section  510(k)  ("510(k)")  procedure,  in which  the
manufacturer  provides  a  premarket  notification  that  it  intends  to  begin
marketing the product, and shows that the product is substantially equivalent to
another legally  marketed  product (i.e.,  that it has the same intended use and
that it is as safe and effective as a legally marketed device and does not raise
different  questions of safety and  effectiveness  than does a legally  marketed
device).  In some cases, the submission must include data from clinical studies.
Marketing  may  commence  when the FDA issues a clearance  letter  finding  such
substantial equivalence.

If the product does not qualify for the 510(k)  procedure  (either because it is
not  substantially  equivalent to a legally  marketed  device or because it is a
Class III device  required by the FDCA and  implementing  regulations to have an
approved  application  for PMA,  the FDA must approve a PMA  application  before
marketing can begin. PMA  applications  must  demonstrate,  among other matters,
that the medical device is safe and effective.  A PMA application is typically a

17

complex submission, usually including the results of human clinical studies, and
preparing an application is a detailed and  time-consuming  process.  Once a PMA
application has been submitted,  the FDA's review may be lengthy and may include
requests for additional  data. By statute and  regulation,  the FDA may take 180
days  to  review  a  PMA  application   although  such  time  may  be  extended.
Furthermore,  there can be no assurance that a PMA application  will be reviewed
within 180 days or that a PMA application will be approved by the FDA.

The FDCA also provides for an  investigational  device  exemption  ("IDE") which
authorizes  distribution  for clinical  evaluation of devices that lack a PMA or
510(k). Devices subject to an IDE are subject to various restrictions imposed by
the FDA. The number of patients  that may be treated with the device is limited,
as are the number of institutions at which the device may be used. Patients must
give informed consent to be treated with an  investigational  device. The device
must be labeled that it is for investigational use and may not be advertised, or
otherwise  promoted,  and the  price  charged  for the  device  may be  limited.
Unexpected adverse experiences must be reported to the FDA.

Under certain circumstances,  the FDA may grant a Humanitarian Device Exemption.
HDE's are  granted by the FDA in an  attempt to  encourage  the  development  of
medical  devices for use in the treatment of rare  conditions  that affect small
patient  populations.  An  approval by the FDA exempts  such  devices  from full
compliance with clinical study requirements for premarket approval.

The FDCA requires all medical device  manufacturers and distributors to register
with the FDA  annually  and to  provide  the FDA  with a list of  those  medical
devices which they distribute commercially. The FDCA also requires manufacturers
of medical  devices to comply  with  labeling  requirements  and to  manufacture
devices in  accordance  with  Quality  System  Regulations,  which  require that
companies   manufacture  their  products  and  maintain  their  documents  in  a
prescribed manner with respect to good manufacturing practices, design, document
production,  process,  labeling and packaging  controls,  process validation and
other quality control activities.  The FDA's medical device reporting regulation
requires that a device  manufacturer  provide information to the FDA on death or
serious  injuries  alleged to have been associated with the use of its products,
as well as product  malfunctions  that would likely cause or contribute to death
or serious  injury if the  malfunction  were to recur.  The FDA's medical device
tracking  regulation  requires  the  adoption of a method of device  tracking by
manufacturers of life-sustaining or implantable  products,  the failure of which
would be reasonably  likely to have serious  adverse  health  consequences.  The
manufacturer  must adopt  methods to ensure that such devices can be traced from
the  manufacturing  facility to the ultimate user, the patient.  The FDA further
requires  that  certain  medical  devices not cleared for  marketing in the U.S.
follow certain procedures before they are exported.

The FDA inspects medical device manufacturers and distributors and has authority
to seize  noncomplying  medical  devices,  to  enjoin  and/or  to  impose  civil
penalties on manufacturers  and  distributors  marketing  non-complying  medical
devices,  to  criminally  prosecute  violators  and to order  recalls in certain
instances.

Human  Heart  Valves.  The  Company's  human  heart  valves  became  subject  to
regulation by the FDA in June 1991, when the FDA published a notice stating that
human heart valves were Class III medical  devices under the FDCA. The June 1991
notice  provided  that  distribution  of human heart valves for  transplantation
would violate the FDCA unless they were the subject of an approved PMA or IDE on
or before August 26, 1991.

On October 14, 1994,  the FDA announced in the Federal  Register that neither an
approved  application  for  PMA  nor an  IDE  is  required  for  processors  and
distributors who had marketed heart valve allografts  before June 26, 1991. This
action by the FDA has resulted in the allograft heart valves being classified as
Class II Medical  Devices and has removed them from clinical  trial  status.  It
also allows the Company to  distribute  such valves to  cardiovascular  surgeons
throughout the U.S.

Other Tissue. Other than human and porcine heart valves,  BioGlue and SynerGraft
devices,  none of the Company's other tissue  services or tissue-based  products
are currently  subject to  regulation  as medical  devices under the FDCA or FDA
regulation.  Heart valves are one of a small number of processed  human  tissues
over which the FDA has asserted medical device  jurisdiction.  In July 1997, the
FDA published a final rule, which became  effective in January 1998,  regulating
"human  tissue." The rule  clarifies  and  modifies an earlier  interim rule and
defines  human  tissue as any  tissue  derived  from a human  body  which is (i)
intended  for   administration  to  another  human  for  the  diagnosis,   cure,
mitigation,  treatment  or  prevention  of any  condition  or  disease  and (ii)
recovered,  processed,  stored or  distributed by methods not intended to change
tissue function or  characteristics.  The FDA definition  excludes,  among other

18

things,  tissue that currently is regulated as a human drug,  biological product
or medical device and excludes kidney, liver, heart, lung, pancreas or any other
vascularized  human  organ.  In January  2001 the FDA  published a final rule to
require  establishments  that process or produce human tissue and cellular-based
products to register  with the agency and list the tissue and cellular  products
they  process or  manufacture.  Human tissue is regulated by the FDA in a manner
the  agency  has  deemed  necessary  to  protect  the  public  health  from  the
transmission of HIV infection and hepatitis infection through transplantation of
tissue from donors with or at risk for these  diseases.  Unlike  certain  drugs,
biologicals  and  medical  devices,  human  tissue is not  subject to  premarket
notification or approval by the FDA. It is likely,  moreover,  that the FDA will
expand its regulation of processed human tissue in the future.  For example,  in
November 2000 the FDA  published a proposed  rule for good tissue  manufacturing
practices.  Moreover, the FDA may determine that the veins and connective tissue
that are currently  processed by the Company are medical devices, or the FDA may
determine to regulate  human heart valves as "human  tissue" rather than medical
devices, but the FDA has not done so at this time. Complying with FDA regulatory
requirements  or obtaining  required  FDA  approvals  or  clearances  may entail
significant  time delays and expenses or may not be  possible,  any of which may
have a material adverse effect on the Company. In addition, the U.S. Congress is
expected to consider legislation that would regulate human tissue for transplant
or the FDA could  impose a separate  regulatory  scheme for human  tissue.  Such
legislation or regulation could have a material adverse effect on the Company.

Porcine Heart Valves.  Porcine heart valves are Class III medical  devices,  and
FDA  approval  of a PMA is required  prior to  commercial  distribution  of such
valves in the U.S. The porcine  heart valves  currently  marketed by the Company
have not been approved by the FDA for  commercial  distribution  in the U.S. but
may be manufactured in the U.S. and exported to foreign  countries if the valves
meet the specifications of the foreign purchaser,  do not conflict with the laws
of and are  approved by the  country to which they will be exported  and the FDA
determines  that their  exportation  is not  contrary  to the public  health and
safety.

BioGlue Surgical Adhesive. BioGlue surgical adhesive is regulated as a Class III
medical  device by the FDA.  The  Company  received a HDE in  December  1999 for
BioGlue  surgical  adhesive  for use as an adjunct  in repair of acute  thoracic
aortic dissections. The Company commercially distributes BioGlue in the U.S. for
this indication, subject to the limitations imposed by the FDA under an HDE. The
Company  commenced  and  completed  enrollment  of  a  clinical  trial  under  a
supplemental IDE for BioGlue  surgical  adhesive for use in vascular and cardiac
surgery,  and on  February 1, 2001,  the Company  submitted a PMA to the FDA. If
successful,  the Company would be able to commercially distribute BioGlue in the
U.S. for these indications.  However, there can be no assurance that the Company
will be successful in gaining approval for the PMA.

Possible Other FDA Regulation. Other products and processes under development by
the  Company  are  likely to be subject to  regulation  by the FDA.  Some may be
classified as medical  devices;  others may be classified as drugs or biological
products  or subject to a  regulatory  scheme for human  tissue that the FDA may
adopt  in  the  future.   Regulation  of  drugs  and   biological   products  is
substantially  similar to regulation of medical devices.  Obtaining FDA approval
to market these products is likely to be a time consuming and expensive process,
and there can be no assurance  that any of these  products will ever receive FDA
approval, if required, to be marketed.

NOTA Regulation.  The Company's  activities in processing and transporting human
hearts and certain other organs are also subject to federal regulation under the
National Organ  Transplant Act ("NOTA"),  which makes it unlawful for any person
to knowingly acquire, receive or otherwise transfer any human organ for valuable
consideration  for  use  in  human   transplantation  if  the  transfer  affects
interstate   commerce.   NOTA   excludes   from  the   definition  of  "valuable
consideration" reasonable payments associated with the removal,  transportation,
implantation,  processing,  preservation, quality control and storage of a human
organ. The purpose of this statutory  provision is to allow for compensation for
legitimate services.  The Company believes that to the extent its activities are
subject  to  NOTA,   it  meets  this   statutory   provision   relating  to  the
reasonableness  of  its  charges.  There  can  be no  assurance,  however,  that
restrictive interpretations of NOTA will not be adopted in the future that would
call into question one or more aspects of the Company's  methods of charging for
its preservation services.

19

State Licensing Requirements

Some states have enacted  statutes and  regulations  governing  the  processing,
transportation and storage of human organs and tissue. The activities engaged in
by the Company  require it to be licensed  as a clinical  laboratory  and tissue
bank under Georgia,  New York,  California and Florida law. The Company has such
licenses,  and the Company  believes it is in compliance with  applicable  state
laws and regulations  relating to clinical  laboratories  and tissue banks which
store,  process  and  distribute  human  tissue  designed to be used for medical
purposes  in  human  beings.  There  can be no  assurance,  however,  that  more
restrictive  state laws or  regulations  will not be adopted in the future  that
could  adversely  affect the  Company's  operations.  Certain  employees  of the
Company have obtained other required licenses.

Foreign Approval Requirements

Sales of medical devices and biological products outside the U.S. are subject to
foreign  regulatory  requirements  that vary  widely  from  country to  country.
Approval of a product by comparable regulatory  authorities of foreign countries
must be  obtained  prior to  commercial  distribution  of the  product  in those
countries.  The time  required  to  obtain  foreign  approvals  may be longer or
shorter  than  that  required  for FDA  approval.  The EC  recognizes  a  single
approval, called a CE Mark, which allows for distribution of an approved product
throughout the EC (15 countries) without additional general applications to each
country. However,  individual EC members reserve the right to require additional
data to address particular patient safety issues prior to allowing  importation.
France and an increasing  number of EC members  require such additional data for
products  containing  material of animal origin. The CE Mark is awarded by third
parties called Notified  Bodies.  These Notified Bodies are approved and subject
to review by the Competent Authorities of their respective  countries.  A number
of  countries  outside  of the EC accept  the CE Mark in lieu of  clinical  data
submission as an addendum to that country's application process. The Company has
been issued CE Marks for its  CryoLife-O'Brien  and CryoLife-Ross  porcine heart
valves, BioGlue surgical adhesive, and its SynerGraft pulmonary heart valve. The
Company's porcine heart valves may be exported to specified  developed  nations,
including countries in the EC, Australia,  Canada,  Israel,  Japan, New Zealand,
South  Africa and  Switzerland  if they comply with the laws of that country and
have valid marketing authorization by the appropriate authority in that country.
Beginning  in July 1998,  CE Mark  Certification  is required to market  porcine
heart valves and other bioprosthetics in the EC.

Environmental Matters

The Company's  tissue  processing  activities  generate some  biomedical  wastes
consisting  primarily of human  pathological  and biological  wastes,  including
human  tissue  and  body  fluids  removed  during  laboratory  procedures.   The
biomedical   wastes  generated  by  the  Company  are  placed  in  appropriately
constructed  and  labeled  containers  and  are  segregated  from  other  wastes
generated  by  the  Company.  The  Company  contracts  with  third  parties  for
transport,  treatment  and disposal of  biomedical  waste.  Although the Company
believes it is in compliance with applicable laws and regulations promulgated by
the U.S.  Environmental  Protection Agency and the Georgia Department of Natural
Resources,  Environmental  Protection  Division,  the  failure by the Company to
comply  fully  with  any such  regulations  could  result  in an  imposition  of
penalties, fines or sanctions, which could have a material adverse effect on the
Company's business.

Employees

At March 20, 2001 the Company had approximately  340 employees.  These employees
included  11  persons  with PhD  degrees.  None of the  Company's  employees  is
represented  by a labor  organization  or  covered  by a  collective  bargaining
agreement, and the Company has never experienced a work stoppage or interruption
due to labor disputes.  Management believes its relations with its employees are
good.

20

RISK FACTORS

Dependence on Cryopreservation of Human Tissue

A  significant  portion of the  Company's  current  revenues is derived from the
cryopreservation  of human tissues.  The success of this business  depends upon,
among other factors,  the  availability of sufficient  quantities of tissue from
human donors. Any material reduction in the supply of donated human tissue could
restrict the Company's growth.  The Company relies primarily upon the efforts of
third  party   procurement   agencies   and  tissue  banks  (all  of  which  are
not-for-profit)  and others to educate  the public and foster a  willingness  to
donate  tissue.  Based on the Company's  experience  with human heart valves and
vascular  and  orthopaedic  tissues,  management  believes  that once the use by
physicians of a particular  transplantable  tissue gains acceptance,  demand for
that  tissue  will  exceed the  amount of tissue  available  from human  donors.
Failure of the  Company to  maintain  its supply of tissue for  cryopreservation
could  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of operations.  Furthermore, a reduction in the demand for
the  Company's  cryopreserved  human tissue  could also have a material  adverse
effect on the Company's business, financial condition and results of operations.
Such  reduction  could occur if  competitors'  products were perceived as either
functionally  superior or more cost  effective,  if the number of  procedures in
which cryopreserved tissues are used declines or if hospitals acquire sufficient
inventories  of  cryopreserved  tissue to allow a reduction  in new orders.  See
"--Intense  Competition"  and  "--Uncertainties  Regarding  Future  Health  Care
Reimbursement."

Intense Competition

The Company faces  competition  from other  companies  that  cryopreserve  human
tissue,  as well as companies  that market  mechanical  valves and synthetic and
animal tissue for implantation and companies that market wound closure products.
Management  believes  that at least three  tissue  banks offer  cryopreservation
services for human heart valves and many companies offer processed porcine heart
valves and mechanical  heart valves.  A few companies  dominate  portions of the
mechanical  and porcine heart valve markets,  including St. Jude Medical,  Inc.,
Medtronic,  Inc.  and Edwards Life  Sciences.  The Company is aware that several
companies  have  surgical  adhesive  products  under  development.   Competitive
products  may  also  be  under   development  by  other  large  medical  device,
pharmaceutical   and   biopharmaceutical   companies.   Many  of  the  Company's
competitors  have greater  financial,  technical,  manufacturing  and  marketing
resources than the Company and are well established in their markets.  There can
be no assurance that the Company's products and services will be able to compete
successfully  with  the  products  of these or  other  companies.  Any  products
developed by the Company that gain regulatory clearance or approval will have to
compete  for market  acceptance  and  market  share.  Failure of the  Company to
compete  effectively  could  have a  material  adverse  effect on the  Company's
business, financial condition and results of operations.
See  "Business--Competition." 

Rapid Technological Change

The technologies  underlying the Company's  products and services are subject to
rapid and profound  technological  change.  The Company  expects  competition to
intensify  as  technical  advances in each field are made and become more widely
known.  There can be no  assurance  that  others  will not  develop  products or
processes with  significant  advantages over the products and processes that the
Company  offers or is  seeking  to  develop.  Any such  occurrence  could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

Uncertainties Regarding Products in Development

The Company's growth and profitability will depend, in part, upon its ability to
complete  development  of and  successfully  introduce new  products,  including
additional  applications of its BioGlue and SynerGraft  technologies and its ACT
technology.  The Company may be required to undertake  time consuming and costly

21

development  activities  and  seek  regulatory  clearance  or  approval  for new
products.  See  "--Extensive  Government  Regulation."  Although the Company has
conducted  pre-clinical  studies on many of its products under development which
indicate that such products may be effective in a particular application,  there
can be no assurance  that the results  obtained from expanded  clinical  studies
will be consistent  with earlier trial results or be sufficient  for the Company
to obtain any  required  regulatory  approvals  or  clearances.  There can be no
assurance that the Company will not experience  difficulties that could delay or
prevent the successful development,  introduction and marketing of new products,
that  regulatory  clearance  or  approval of these or any new  products  will be
granted on a timely basis,  if ever,  or that the new products  will  adequately
meet the requirements of the applicable market or achieve market acceptance. The
completion of the development of any of the Company's  products  remains subject
to all of the risks associated with the  commercialization of new products based
on innovative technologies, including unanticipated technical or other problems,
manufacturing difficulties and the possible insufficiency of the funds allocated
for the completion of such development.  Consequently, there can be no assurance
that  any of the  Company's  products  under  development  will be  successfully
developed or manufactured or, if developed and manufactured,  that such products
will meet price or  performance  objectives,  be  developed on a timely basis or
prove to be as  effective  as  competing  products.  The  inability  to complete
successfully the development of a product or application,  or a determination by
the  Company,  for  financial,  technical  or  other  reasons,  not to  complete
development of any product or  application,  particularly  in instances in which
the Company has made  significant  capital  expenditures,  could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

The Company's  BioGlue  surgical  adhesive is currently  offered for sale in the
U.S. pursuant to an HDE approval,  which provides for limited  distribution.  On
February 1, 2001 the  Company  submitted a PMA to the FDA for the use of BioGlue
in vascular and cardiac surgery. There can be no assurance that the Company will
obtain this or other  necessary  approvals to allow for general  distribution of
its BioGlue surgical adhesive in the U.S.

The Company's  porcine heart valve  products,  including its SynerGraft  treated
porcine  valves,  are  currently  only offered for sale outside of the U.S . The
Company's  porcine  heart valves are subject to the risk that the Company may be
unable to obtain regulatory approval necessary to permit commercial distribution
of these products in the U.S.

The Company's research and development  efforts are time consuming and expensive
and there can be no  assurance  that  these  efforts  will lead to  commercially
successful products or services. Even the successful  commercialization of a new
service or product in the medical  industry can be  characterized by slow growth
and high costs associated with marketing, under-utilized production capacity and
continuing  research,  and  development  and  education  costs.  Generally,  the
introduction  of  new  human  tissue  products  requires  significant  physician
training and years of clinical  evidence derived from follow-up studies on human
implant recipients in order to gain acceptance in the medical community.

Uncertainties Regarding the Funding of the ACT Technology

The ACT technology is a reversible  linker technology that has potential uses in
the areas of cancer therapy,  blood clot dissolving,  heart attack therapies and
other  drug  delivery   applications.   The  Company  has  formed  AuraZyme,   a
wholly-owned subsidiary, in order to seek funding for the development of the ACT
technology.  This  strategy  is  designed  to  allow  the  Company  to  continue
development  of  this  technology  without  incurring  additional  research  and
development expenditures, other than through AuraZyme. There can be no guarantee
that such  funding  can be  obtained  on  acceptable  terms,  if at all. If such
funding is not  obtained,  the  Company  may be unable to  effectively  test and

22

develop  the ACT  technology,  and may  therefore  be  unable to  determine  its
effectiveness.  Even if such  financing is obtained,  there is no guarantee that
the ACT technology will in fact prove to be effective in the above applications.
Failure to obtain the desired  financing,  or failure of the ACT  technology  to
perform as anticipated in future tests,  could have a material adverse effect on
our future expansion plans and could limit future growth.

Uncertainties Regarding the SynerGraft Technology

The  Company  currently  processes  both  porcine  and  human  tissues  with the
SynerGraft process. In animal studies,  explanted porcine heart valves have been
shown to repopulate with the hosts' cells.  However,  should  SynerGraft-treated
tissues  implanted  in humans  not  repopulate  with the human host  cells,  the
SynerGraft-treated tissues may not have the longevity that the Company currently
expects. This could have a material adverse effect on future expansion plans and
could limit future growth.

Extensive Government Regulation

Government  regulation in the U.S., the EC and other jurisdictions  represents a
potentially  determinative  factor in the  success of the  Company's  efforts to
market and develop its  products.  See  "Business--Government  Regulation."  The
human heart valves to which the Company  applies its  cryopreservation  services
are currently  regulated as Class II medical  devices by the FDA and are subject
to significant regulatory requirements, including Quality System Regulations and
recordkeeping requirements. There can be no assurance that changes in regulatory
treatment or the adoption of new statutory or regulatory  requirements  will not
occur,  which could  adversely  impact the  marketing  or  development  of these
products or could adversely affect market demand for these products.

Other allograft  tissues  processed and distributed by the Company are currently
regulated as "human  tissue" under rules  promulgated by the FDA pursuant to the
Public Health Services Act. These rules establish requirements for donor testing
and screening of human tissue and recordkeeping relating to these activities and
impose certain  registration and product listing  requirements on establishments
that process or distribute human tissue or cellular-based products. Although the
Company's other human tissue  allografts are not currently  regulated as medical
devices,  such tissue may in the future  become  subject to more  extensive  FDA
regulation, which could include PMA or product licensing requirements.

BioGlue  surgical  adhesive is regulated  as a Class III medical  device and the
Company  believes that its ACT technology may be regulated as a biologic or drug
by the FDA. BioGlue surgical  adhesive has been approved for distribution in the
U.S. under a Humanitarian Device Exemption while the ACT technology has not been
approved for  commercial  distribution  in the U.S. or elsewhere.  Fixed porcine
heart valve products are classified as Class III medical  devices.  There can be
no assurance  that the Company will be able to obtain the FDA approval  required
to distribute its surgical sealants or porcine heart valve products in the U.S.,
or the approval for unlimited  distribution of its BioGlue surgical  adhesive in
the U.S.  Distribution  of these  products  within the EC is dependent  upon the
Company maintaining its CE Mark and ISO 9001 certifications,  of which there can
be no assurance.

Most of the Company's products in development,  if successfully developed,  will
require  regulatory   approvals  from  the  FDA  and  perhaps  other  regulatory
authorities  before  they  may  be  commercially  distributed.  The  process  of
obtaining required regulatory  approvals from the FDA normally involves clinical
trials and the  preparation of an extensive PMA application and often takes many
years.  The process is expensive and can vary  significantly  based on the type,
complexity  and  novelty  of the  product.  There can be no  assurance  that any
products  developed  by the  Company,  independently  or in  collaboration  with
others,  will receive the required  approvals for  manufacturing  and marketing.
Delays in  obtaining  U.S.  or foreign  approvals  could  result in  substantial
additional  cost to the Company and adversely  affect the Company's  competitive
position.  The FDA may also place  conditions  on product  approvals  that could
restrict commercial  applications of such products.  Product marketing approvals
or clearances may be withdrawn if compliance  with  regulatory  standards is not
maintained or if problems occur following initial  marketing.  Delays imposed by

23

the governmental clearance process may materially reduce the period during which
the Company has the exclusive right to commercialize  patented  products.  Also,
delays or  rejections  may be  encountered  during  any stage of the  regulatory
approval  process  based  upon the  failure  of the  clinical  or other  data to
demonstrate  compliance  with,  or upon the failure of the product to meet,  the
regulatory  agency's  requirements for safety,  efficacy and quality,  and those
requirements  may  become  more  stringent  due to changes  in  applicable  law,
regulatory agency policy or the adoption of new regulations. Clinical trials may
also be delayed due to unanticipated side effects,  inability to locate, recruit
and qualify  sufficient numbers of patients,  lack of funding,  the inability to
locate or  recruit  clinical  investigators,  the  redesign  of  clinical  trial
programs,  the inability to manufacture or acquire sufficient  quantities of the
particular  product  candidate  or any other  components  required  for clinical
trials,  changes in the  Company's or its  collaborative  partners'  development
focus  and  disclosure  of trial  results  by  competitors.  Even if  regulatory
approval is obtained for any of the Company's products or services, the scope of
the approval may significantly limit the indicated usage for which such products
or services may be marketed.

Products  marketed  by the  Company  pursuant  to FDA or  foreign  oversight  or
approval  are  subject to  pervasive  and  continuing  regulation.  In the U.S.,
devices and biologics must be manufactured in registered establishments (and, in
the  case  of  biologics,  licensed  establishments)  and  must be  produced  in
accordance  with  Quality  System  Regulations.   Manufacturing  facilities  and
processes  are subject to periodic  FDA  inspection.  Labeling  and  promotional
activities are also subject to scrutiny by the FDA and, in certain instances, by
the  Federal  Trade  Commission.  The export of devices  and  biologics  is also
subject to regulation  and may require FDA approval.  From time to time, the FDA
may modify such  regulations,  imposing  additional  or different  requirements.
Failure to comply with any applicable FDA requirements,  which may be ambiguous,
could  result in civil and  criminal  enforcement  actions,  product  recalls or
detentions and other  penalties and could have a material  adverse effect on the
Company's business,  financial condition and results of operations. In addition,
NOTA  prohibits  the  acquisition  or  transfer  of human  organs for  "valuable
consideration"  for use in human  transplantation.  NOTA  permits the payment of
reasonable  expenses  associated with the removal,  transportation,  processing,
preservation,  quality  control  and  storage of human  organs.  There can be no
assurance that  restrictive  interpretations  of NOTA will not be adopted in the
future  that will  challenge  one or more  aspects of the  Company's  methods of
charging for its cryopreservation  services. The Company's laboratory operations
are  subject to the U.S.  Department  of Labor,  Occupational  Safety and Health
Administration and Environmental  Protection Agency  requirements for prevention
of  occupational  exposure to  infectious  agents and  hazardous  chemicals  and
protection of the environment. Some states have enacted statutes and regulations
governing the processing, transportation and storage of human organs and tissue.
While  management  believes  that the Company is presently in  compliance in all
material respects with all such applicable  statutes and regulations,  there can
be no assurance  that more  restrictive  state laws or  regulations  will not be
adopted in the future that could have a material adverse effect on the Company's
business,    financial    condition    and    results   of    operations.    See
"Business--Government Regulation."

Uncertainties Related to Patents and Protection of Proprietary Technology

The Company owns several patents,  patent  applications and licenses relating to
its technologies,  which it believes provide important  competitive  advantages.
There can be no assurance that the Company's  pending patent  applications  will
issue as  patents  or that  challenges  will not be  instituted  concerning  the
validity  or  enforceability  of  any  patent  owned  by  the  Company,  or,  if
instituted,  that such challenges will not be successful. The cost of litigation
to  uphold  the  validity  and  prevent   infringement  of  a  patent  could  be
substantial.  Furthermore,  there can be no assurance that  competitors will not
independently   develop   similar   technologies   or  duplicate  the  Company's
technologies   or  design   around  the  patented   aspects  of  the   Company's
technologies. There can be no assurance that the Company's proposed technologies
will not infringe  patents or other rights owned by others.  In addition,  under
certain  of the  Company's  license  agreements,  if the  Company  fails to meet
certain  contractual  obligations,  including  the  payment of  minimum  royalty
amounts,  such licenses may become  nonexclusive  or terminable by the licensor,
which could have a material adverse effect on the Company's business,  financial
condition  and results of  operations.  Additionally,  the Company  protects its
proprietary  technologies  and processes in part by  confidentiality  agreements
with its  collaborative  partners,  employees and  consultants.  There can be no
assurance that these agreements will not be breached, that the Company will have
adequate  remedies for any breach or that the  Company's  trade secrets will not
otherwise become known or independently discovered by competitors,  any of which
could  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of operations.

Uncertainties Regarding Future Health Care Reimbursement

Even though the Company  does not receive  payments  directly  from  third-party
health care payors,  their reimbursement  methods and policies impact demand for
the  Company's  cryopreserved  tissue  and  other  services  and  products.  The
Company's   cryopreservation   services  may  be  particularly   susceptible  to
third-party  cost  containment  measures.  In particular,  the initial cost of a

24

cryopreserved  human heart  valve  generally  exceeds the cost of a  mechanical,
synthetic or animal-derived valve. The Company is unable to predict what changes
will be made in the  reimbursement  methods and policies utilized by third-party
health care payors or their effect on the Company.  Changes in the reimbursement
methods and  policies  utilized by  third-party  health care  payors,  including
Medicare,  with  respect to  cryopreserved  tissues  provided for implant by the
Company and other Company  services and products,  could have a material adverse
effect on the Company.  Significant  uncertainty  exists as to the reimbursement
status of newly  approved  health care products and services and there can be no
assurance that adequate  third-party  coverage will be available for the Company
to maintain price levels sufficient for realization of an appropriate  return on
its  investment in developing  new products.  Government  and other  third-party
payors are increasingly attempting to contain health care costs by limiting both
coverage and the level of reimbursement  for new products approved for marketing
by the FDA and by  refusing in some cases to provide  any  coverage  for uses of
approved  products for indications  for which the FDA has not granted  marketing
approval.  If adequate  coverage  and  reimbursement  levels are not provided by
government and other  third-party  payors for uses of the Company's new products
and services,  market acceptance of these products would be adversely  affected,
which could have a material adverse effect on the Company's business,  financial
condition and results of operations.

Dependence on Key Personnel

The Company's  business and future operating  results depend in significant part
upon the  continued  contributions  of its key  technical  personnel  and senior
management,  many of whom would be difficult to replace.  The Company's business
and future operating results also depend in significant part upon its ability to
attract and retain qualified management, processing, technical, marketing, sales
and support  personnel  for its  operation.  Competition  for such  personnel is
intense and there can be no  assurance  that the Company will be  successful  in
attracting and retaining such personnel.  The loss of key employees, the failure
of any key employee to perform adequately or the Company's  inability to attract
and retain skilled  employees as needed could have a material  adverse effect on
the Company's business, financial condition and results of operations.

Product Liability and Insurance

The use of the  Company's  products  and human  tissue  processed by the Company
involves  the  possibility  of adverse  effects that could expose the Company to
product liability claims. A recent U.S. Supreme Court decision held that product
liability may exist despite FDA  approval,  and future court  decisions may also
increase the Company's risk of product liability. From time to time, the Company
is involved in legal  proceedings  based on product liability claims of a nature
considered  normal to its business.  The  Company's  products are used by health
care  providers in  connection  with the  treatment of  patients,  who will,  on
occasion,  sustain  injury  or die as a result  of their  condition  or  medical
treatment.  If a lawsuit is filed  because of such an  occurrence,  the Company,
along with physicians and nurses,  hospitals and other medical suppliers, may be
named as a defendant, and whether or not the Company is ultimately determined to
be liable, the Company may incur significant legal expenses.  In addition,  such
litigation  could  damage the  Company's  reputation  and  therefore  impair its
ability to market its products or obtain product  liability  insurance and could
cause the  premiums for such  insurance  to  increase.  Although the Company has
incurred minimal losses due to product liability claims to date, there can be no
assurance that it will not incur significant  losses in the future.  The Company
currently  maintains product liability  insurance in the aggregate amount of $14
million per year.  There can be no assurance that such coverage will continue to
be available on terms acceptable to the Company or will be adequate to cover any
losses due to product  claims if  actually  incurred.  Furthermore,  if any such
claim is  successful,  it could have a material  adverse effect on the Company's
business,  financial condition and results of operations.  See  "Business--Legal
Proceedings."

Use and Disposal of Hazardous Material

The  Company's  research,  development  and  processing  activities  involve the
controlled use of small quantities of radioactive  compounds,  chemical solvents
and other  hazardous  materials.  The  Company's  activities  also  include  the
preservation  and  growth of human  cells and the  processing  of human  tissue.

25

Although  the  Company  believes  that  its  safety   procedures  for  handling,
processing and disposing of hazardous materials and human tissue comply with the
standards  prescribed  by  federal,  state  and local  regulations,  the risk of
accidental  contamination,  injury or disease  transmission from these materials
cannot  be  completely  eliminated.   In  the  event  of  such  an  accident  or
transmission,  the Company  could be held liable for  resulting  damages and any
liability  could  have a  material  adverse  effect on the  Company's  business,
financial condition and results of operations.  Also, any failure to comply with
applicable  regulations  could result in the imposition of penalties,  fines and
sanctions, which could have a material adverse effect on the Company's business,
financial condition and results of operations.

Volatility of Securities Prices

The  trading  price of the  Company's  Common  Stock  has been  subject  to wide
fluctuations from time to time and may continue to be subject to such volatility
in the future. Trading price fluctuations can be caused by a variety of factors,
including quarter to quarter  variations in operating  results,  announcement of
technological  innovations  or new  products by the Company or its  competitors,
governmental   regulatory  acts,   developments   with  respect  to  patents  or
proprietary  rights,  general  conditions  in  the  medical  device  or  service
industries,   actions  taken  by  government  regulators,  changes  in  earnings
estimates by securities  analysts or other events or factors,  many of which are
beyond the Company's control.  If the Company's revenues or operating results in
future  quarters  fall  below  the  expectations  of  securities   analysts  and
investors, the price of the Company's Common Stock would likely decline, perhaps
substantially.  Changes in the trading price of the  Company's  Common Stock may
bear no relation to the Company's actual operational or financial results.

Anti-Takeover Provisions

The Company's  Articles of Incorporation and Bylaws contain  provisions that may
discourage  or make more  difficult  any  attempt by a person or group to obtain
control  of the  Company,  including  provisions  authorizing  the  issuance  of
preferred stock without  shareholder  approval,  restricting the persons who may
call a special meeting of the  shareholders  and prohibiting  shareholders  from
taking action by written consent. In addition, the Company is subject to certain
provisions of Florida law that may  discourage or make more  difficult  takeover
attempts or acquisitions of substantial  amounts of the Company's  Common Stock.
Further,  pursuant to the terms of a  shareholder  rights plan  adopted in 1995,
each  outstanding  share of Common Stock has one attached right. The rights will
cause  substantial  dilution of the ownership of a person or group that attempts
to  acquire  the  Company  on terms not  approved  by the Board and may have the
effect of deterring hostile takeover attempts.

Absence of Dividends

The Company has not paid, and does not presently  intend to pay, cash dividends.
The Company's major credit agreement contains,  and future credit agreements may
contain, financial covenants,  including covenants to maintain certain levels of
net  worth  and  certain  leverage  ratios,  which  could  have  the  effect  of
restricting  the amount of dividends  that the Company may pay. It is not likely
that any cash dividends will be paid in the foreseeable future.

Forward-Looking Statements

This Form 10-K  includes  "forward-looking  statements"  within  the  meaning of
Section 27A of the  Securities Act of 1933, as amended (the  "Securities  Act"),
Section 21E of the  Securities  Exchange Act of 1934, as amended (the  "Exchange
Act") and the Private Securities  Litigation Reform Act of 1995. All statements,
other than statements of historical facts, included or incorporated by reference
in this Form 10-K which address  activities,  events or  developments  which the

26

Company  expects  or  anticipates  will or may  occur in the  future,  including
statements  regarding  the  Company's  competitive   position,   the  successful
development  of  its  SynerGraft   porcine  valves,   the  funding  to  continue
development  of the  ACT  technology,  other  estimated  dates  relating  to the
Company's proposed regulatory  submissions,  the timing of the completion of the
expansion of the Company's corporate headquarters and manufacturing  facilities,
the  Company's   expectations   regarding  the  adequacy  of  current  financing
arrangements,  product  demand  and  market  growth,  the  potential  of the ACT
technologies for use in cancer  therapies,  blood clot dissolving,  heart attack
therapies and other drug delivery  applications and other  statements  regarding
future  plans  and  strategies,   anticipated   events  or  trends  and  similar
expressions concerning matters that are not historical facts are forward-looking
statements.  These statements are based on certain assumptions and analyses made
by the  Company in light of its  experience  and its  perception  of  historical
trends,  current  conditions and expected  future  developments as well as other
factors it believes  are  appropriate  in the  circumstances.  However,  whether
actual results and developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties  which could cause
actual results to differ materially from the Company's  expectations,  including
the risk factors  discussed in this Form 10-K and other  factors,  many of which
are beyond the control of the Company.  Consequently, all of the forward-looking
statements made in this Form 10-K are qualified by these  cautionary  statements
and  there  can  be  no  assurance  that  the  actual  results  or  developments
anticipated by the Company will be realized or, even if substantially  realized,
that they will have the  expected  consequences  to or effects on the Company or
its business or operations. The Company assumes no obligation to update publicly
any such  forward-looking  statements,  whether as a result of new  information,
future events or otherwise.

Item 2. Properties.

The  Company's  facilities  are located in  suburban  Atlanta,  Georgia,  and in
Fareham,  United  Kingdom.  The  Atlanta  facility  consists  of three  separate
locations  totaling   approximately   130,000  square  feet  of  leased  office,
laboratory and warehouse space.  Approximately  17,500 square feet are dedicated
to  laboratory  work  areas.  The primary  facility,  which does not include the
biomedical  products laboratory and the bioprosthetic  manufacturing  operation,
has  four  main  laboratory   facilities:   human  tissue  processing,   BioGlue
manufacturing,  research and development, and microbiology.  Each of these areas
consists of a general  technician work area and adjoining "clean rooms" for work
with human tissue and for aseptic processing.  The clean rooms are supplied with
highly filtered air which provides a near-sterile environment.  The human tissue
processing  laboratory contains  approximately 7,700 square feet with a suite of
seven clean rooms. The BioGlue manufacturing  laboratory contains  approximately
4,500 square feet with a suite of four clean rooms. The research and development
laboratory is approximately  5,500 square feet with a suite of five clean rooms.
The microbiology  laboratory is approximately  3,200 square feet with a suite of
three  clean  rooms.  The  biomedical   products  laboratory  facility  contains
approximately 11,000 square feet,  including  approximately 4,000 square feet of
laboratory space with a suite of eight clean rooms. The Company's  porcine heart
valves  are  manufactured  in  the  Company's  bioprosthesis  laboratory,  which
contains  approximately  20,500  square  feet,  with about 2,100  square feet of
laboratory  space  and a  suite  of  six  clean  rooms  for  tissue  processing.
Subsequent  to the sale of the remaining  IFM assets,  the Company  continues to
lease the 30,000  square foot IFM facility in St.  Petersburg,  Florida from the
former  principal  shareholder of IFM. A  wholly-owned  subsidiary of Vascutech,
Inc. currently subleases the IFM facility from the Company.  The Company's lease
and sublease on its IFM facility expires in 2007. The Europa facility located in
Fareham,  United  Kingdom  contains  approximately  5,600 square feet of office,
warehousing and training laboratory space.

In February 2000 the Company began  construction  of a major new addition to its
corporate headquarters and manufacturing facilities located in suburban Atlanta,
Georgia.   The  new  addition  consists  of  a  two-story  100,000  square  foot
manufacturing facility for BioGlue surgical adhesive and SynerGraft products, as
well as physician training  laboratories and additional  corporate office space.
The Company anticipates completion of the project in mid to late 2001.

Item 3. Legal Proceedings.

From time to time,  the  Company is involved  in  litigation  relating to claims
arising  out of its  operations  in the normal  course of  business.  Management
believes that no currently ongoing  litigation,  if determined  adversely to the
Company,  will  have  a  material  adverse  effect  on the  Company's  business,
financial condition or results of operations.

27

Item 4. Submission of Matters to Vote of Security Holders.

Inapplicable.

Item 4A. Executive Officers of the Registrant.

Each of the  executive  officers of the  Registrant  was elected by the Board of
Directors to serve until the Board of Directors' meeting  immediately  following
the next annual  meeting of  shareholders  or until his  earlier  removal by the
Board of Directors or his  resignation.  The following table lists the executive
officers of the Registrant and their ages,  positions with the  Registrant,  and
the dates from which they have  continually  served in their  present  positions
with the Registrant.

Date First Elected to
Name                            Age   Position                                          Present Office
----                            ---   --------                                          --------------
Steven G. Anderson               62   President, Chief Executive Officer and Chairman   February, 1984
Sidney B. Ashmore                42   Vice President, Marketing                         March, 2001
Kirby S. Black, PhD              46   Senior Vice President, Research and Development   July, 1995
David M. Fronk                   37   Vice President, Clinical Research                 December, 1998
Albert E. Heacox, PhD            50   Senior Vice President, Laboratory Operations      June, 1995
D. Ashley Lee, CPA               36   Vice President and Chief Financial Officer        April, 2000
James C. Vander Wyk, PhD         56   Vice President, Regulatory Affairs and Quality    February, 1996
Assurance
Ronald D. McCall, Esq.           64   Director, Secretary and Treasurer                 January, 1984

Steven G.  Anderson,  a founder  of the  Company,  has  served as the  Company's
President,  Chief  Executive  Officer  and  Chairman  since its  inception.  Mr.
Anderson has more than 30 years of experience in the implantable  medical device
industry.  Prior to joining the Company,  Mr. Anderson was Senior Executive Vice
President and Vice  President,  Marketing,  from 1976 until 1983 of Intermedics,
Inc. (now Guidant, Inc.), a manufacturer and distributor of pacemakers and other
medical devices. Mr. Anderson received his BA from the University of Minnesota.

Sydney B. Ashmore has served as Vice President of Marketing since March 2001 and
has been with the Company since  September  1996 as Director of  Marketing.  Mr.
Ashmore is responsible for developing and  implementing  the Company's sales and
marketing  plans and  supervising all tissue  procurement  activities.  Prior to
joining the Company,  Mr.  Ashmore held senior  marketing  positions with Baxter
Healthcare  from 1991 to 1996,  and general  management  positions with Amorient
Aquafarms  from  1985 -  1989.  Mr.  Ashmore  received  his BA  from  Vanderbilt
University  in 1981,  his MS from the  University  of Hawaii in 1985 and his MBA
from Northwestern University in 1991.

Kirby S. Black,  PhD, has served as Vice  President of Research and  Development
since July 1995.  Dr. Black was promoted to Senior Vice President in December of
2000.  Dr. Black is responsible  for the continued  development of the Company's
current  products as well as the  evaluation of new  technologies.  Dr. Black is
listed on six patents and has authored over 130  publications.  Prior to joining
the Company, Dr. Black was Director, Medical Information and Project Leader from
July 1993 until July 1994 at Advanced Tissue Sciences, LaJolla,  California. Dr.
Black has also held a number of positions at the  University  of  California  at
Irvine,   including  Director,   Transplantation  and  Immunology  Laboratories,
Department of Surgery. Dr. Black received his BSME degree from the University of
California, Los Angeles, and his PhD degree in immunology from the University of
California at Irvine.

David M. Fronk was  appointed  to the  position  of Vice  President  of Clinical
Research in December 1998 and has been with the Company since 1992. Mr. Fronk is
responsible for managing the  pre-clinical and clinical  investigations  for all
products,  as well as  monitoring  product  performance.  Prior to  joining  the
Company,  Mr. Fronk held engineering  positions with Zimmer Inc. from 1986 until

28

1988 and Baxter Healthcare Corporation from 1988 until 1991. Mr. Fronk served as
a market manager with Baxter  Healthcare  Corporation  from 1991 until 1992. Mr.
Fronk received his BS in Mechanical  Engineering at The Ohio State University in
1985 and his MS in Biomedical Engineering at The Ohio State University in 1986.

Albert E. Heacox, PhD, has served as Vice President, Laboratory Operations since
June 1988 and has been with the  Company  since  June of 1985.  Dr.  Heacox  was
promoted to Senior Vice  President  in  December  of 2000.  Dr.  Heacox has been
responsible for developing  protocols and procedures for both cardiovascular and
connective tissues,  implementing upgrades in procedures in conjunction with the
Company's quality assurance programs,  and overseeing all production  activities
of the Company's  laboratories.  Prior to joining the Company, Dr. Heacox worked
as a researcher  with the U.S.  Department of Agriculture and North Dakota State
University, developing methods for the cryopreservation of cells and animal germ
plasm  storage.  Dr.  Heacox  received  a BA and an MS in Biology  from  Adelphi
University,  received his PhD in Biology from  Washington  State  University and
completed  his  post-doctorate  training in cell  biology at the  University  of
Cologne, West Germany.

D. Ashley Lee, CPA, has served as Vice President and Chief Financial  Officer of
the Company  since April 2000 and had  previously  served as  controller  of the
Company since December 1994. Mr. Lee is responsible for the financial affairs of
the Company, as well as information technology, human resources, and purchasing.
From 1993 to 1994,  Mr.  Lee served as the  Assistant  Director  of Finance  for
Compass  Retail Inc, a wholly-owned  subsidiary of Equitable  Real Estate.  From
1987 to 1993, Mr. Lee was employed as a certified public accountant with Ernst &
Young,  LLP.  Mr. Lee  received  his BS in  Accounting  from the  University  of
Mississippi.

James C. Vander Wyk, PhD, has served as Vice President,  Regulatory  Affairs and
Quality  Assurance  of the Company  since  February  1996.  Prior to joining the
Company,  Dr. Vander Wyk held senior  management  positions at Schneider  (USA),
Inc. from 1993 until 1996,  Pharmacia Deltec, Inc. from 1985 until 1993, Delmed,
Inc. from 1980 until 1985 and Pharmaco, Inc. from 1975 to 1979, gaining 20 years
of  experience  in  Regulatory  Affairs and Quality  Assurance.  Dr.  Vander Wyk
received his BS in Pharmacy from the  Massachusetts  College of Pharmacy and his
PhD in  Microbiology  from the  University  of  Massachusetts.  Dr.  Vander  Wyk
performed his NIH Postdoctoral Fellowship at the University of Illinois.

Ronald D. McCall has served as a director  of the  Company and as the  Secretary
and Treasurer of the Company since January 1984.  From 1985 to the present,  Mr.
McCall has been the proprietor of the law firm of Ronald D. McCall,  Attorney At
Law, 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.

29

PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters.

The response to Item 5 is  incorporated  herein by reference to the  information
set forth under the  caption  "Market  Price of Common  Stock" on page 35 of the
annual shareholders report for the year ended December 31, 2000.

Item 6.   Selected Financial Data.

The response to Item 6 is  incorporated  herein by reference to the  information
set forth under the caption "Selected  Financial  Information" on page 36 of the
annual shareholders report for the year ended December 31, 2000.

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

Overview

CryoLife, Inc. was organized in 1984 to address market opportunities in the area
of biological implantable products and materials, and today is the leader in the
preservation  of  viable  human  tissue  for   cardiovascular,   vascular,   and
orthopaedic applications.  The Company pays a fee to an organ procurement agency
or  tissue  bank at the time  such  organization  consigns  human  tissue to the
Company.  The Company generates revenues from preservation  services by charging
hospitals a fee, which covers the Company's services, the associated procurement
fee, and applicable shipping expenses. The Company records revenue upon shipping
tissue. Costs associated with the procurement, processing, and storage of tissue
are accounted for as deferred  preservation costs on the Company's  consolidated
balance sheet and are expensed when the tissue is shipped.

Through a series of acquisitions of  intellectual  property and businesses,  the
Company has expanded its  portfolio of products and services.  As a result,  the
Company also  develops  implantable  biomaterials,  including  BioGlue  surgical
adhesive,  which is approved for  distribution  in 42 countries;  SynerGraft,  a
tissue  engineering  technology  which  incorporates  the use of  decellularized
animal  tissues  with the  potential  to  remodel in vivo;  and other  stentless
porcine  heart  valves that are approved for  distribution  internationally.  In
1996,  the Company also  acquired the assets of UCFI,  a tissue  processor,  for
$750,000 in cash and a $1.3 million note. In 1997,  the Company  acquired  Ideas
for Medicine,  Inc. ("IFM") and its line of single-use  medical devices for $4.5
million in cash, and a $5.0 million convertible debenture.

On September 30, 1998 the Company completed the sale of substantially all of the
IFM product line and certain  related assets to Horizon Medical  Products,  Inc.
("HMP")  for $15  million  in cash  pursuant  to an  asset  purchase  agreement.
Concurrently,  IFM and HMP signed a  Manufacturing  Agreement (the  "Agreement")
which provided for the manufacture by IFM of specified minimum dollar amounts of
IFM  products  to be  purchased  exclusively  by HMP over each of the four years
following the sale. Thereafter,  responsibility for such manufacturing was to be
assumed by HMP. The Company  recorded a deferred  gain at the  transaction  date
totaling $2.9 million, representing the selling price less the net book value of
the assets sold,  which  included $7.7 million of goodwill,  net of  accumulated

30

amortization,  and the costs related to the sale. The gain was deferred  because
the sale and the manufacturing  agreements represent, in the aggregate, a single
transaction  for which the related income should be recognized  over the term of
the  Agreement.  Accordingly,  the deferred  gain was reflected in cost of goods
sold during 1999 and 1998 to maintain margins that would have been approximately
equal over the four-year  period of the  Agreement on the products  manufactured
and sold by IFM to HMP. During 1999 and 1998  amortization  of deferred  revenue
totaled $1.2 million and $387,000,  respectively.  As more fully discussed under
nonrecurring  charges in the Results of Operations section, HMP defaulted on the
Agreement in June of 1999.

On October 9, 2000 the Company sold substantially all of the remaining assets of
Ideas for Medicine,  Inc. ("IFM") to Horizon Medical Products, Inc. ("HMP"). The
assets consisted  primarily of inventory,  equipment and leasehold  improvements
which had a net book value of $2.4 million at the date of sale. The  transaction
provided  for HMP to pay the  Company  the sum of  approximately  $5.9  million,
payable in equal monthly installments of principal and interest of $140,000. The
note consists of a portion,  approximately $3.8 million, which bears interest at
9% per year, and a  non-interest-bearing  portion of approximately $2.1 million.
The note also requires an additional  $1 million  principal  payment at any time
prior to April 3, 2001. If the $1 million payment is made when due, and no other
defaults  exist  under the note,  then $1  million  of the  non-interest-bearing
portion of the note will be forgiven. In addition, at such time as the principal
balance has been paid down to $1.1 million and there have been no defaults under
the  promissory  note,  the  remainder of the note will be forgiven and the note
will be canceled.  The Company has recorded  reserves  against  these notes such
that the gain from the sale is  deferred  until  the full  amount of the note is
deemed  collectible.  On March 30,  2001,  HMP  transferred  the IFM assets to a
wholly-owned  subsidiary of Vascutech,  Inc. and the HMP note was assumed by the
Vascutech subsidiary. The assumed note is guaranteed by Vascutech, Inc.

The composition of the Company's revenues is expected to change in future years,
reflecting,  among other things,  the  anticipated  growth in shipments of human
vascular tissue and human  connective  tissue for the knee, and the introduction
of BioGlue surgical adhesive into domestic and international markets, as well as
other expected new products.

Results of Operations

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Revenues  increased 16% to $77.1 million in 2000 from $66.7 million in 1999. The
increase in revenues was  primarily  due to increased  acceptance in the medical
community of preserved  tissues  which has resulted in increased  demand for the
Company's  preservation  services,  the  Company's  ability to  procure  greater
amounts  of tissue,  revenues  attributable  to the  Company's  introduction  of
BioGlue  surgical  adhesive  in domestic  markets in January of 2000,  and other
reasons discussed below. These increases in revenues have been offset by certain
decreases in revenues as discussed below.

Revenues from human heart valve and conduit cryopreservation  services increased
2% to $29.7  million in 2000 from $29.0  million in 1999,  representing  39% and
44%,  respectively,  of total  revenues  during such  periods.  This increase in
revenues resulted from a 5% increase in the number of heart allograft  shipments
due to increased demand.

Revenues from human vascular tissue  cryopreservation  services increased 10% to
$21.3  million in 2000 from $19.3  million  in 1999,  representing  28% and 29%,
respectively,  of total revenues during such periods.  This increase in revenues
was  primarily  due to an 11%  increase  in the  number  of  vascular  allograft
shipments due to an increased  demand for saphenous vein, the Company's  ability
to procure greater amounts of tissue, and the growth in demand for the Company's
cryopreserved femoral vein for dialysis access.

Revenues  from human  connective  tissue of the knee  cryopreservation  services
increased 44% to $16.1 million in 2000 from $11.2 million in 1999,  representing
21% and 17%, respectively,  of total revenues during such periods. This increase
in revenues  was  primarily  due to a 45%  increase  in the number of  allograft
shipments  due to increased  acceptance  of  osteoarticular  grafts and non-bone
tendons  by the  orthopaedic  surgeon  community  and the  Company's  ability to
procure greater amounts of tissue.

31

Revenues  from the sale of  BioGlue  surgical  adhesive  increased  287% to $6.4
million  for  2000  from  $1.7  million  in  1999,   representing   8%  and  2%,
respectively, of total revenues during such periods. The increase in revenues is
due to a 177%  increase in the number of milliliter  shipment s of BioGlue.  The
increase  in  shipments  was  primarily  due to the  introduction  of BioGlue in
domestic  markets in  January  of 2000  pursuant  to a  Humanitarian  Use Device
Exemption  for the use of BioGlue as an adjunct in the repair of acute  thoracic
aortic dissections,  as well as greater product awareness since the introduction
of  BioGlue  in  international  markets  in  April of  1998,  increased  surgeon
training, and the receipt of the CE approval for pulmonary indications in Europe
in March 1999.

Revenues from bioprosthetic  cardiovascular devices decreased 19% to $771,000 in
2000 from  $955,000  in 1999,  representing  1% of total  revenues  during  such
periods.  This decrease in revenues is primarily  due to the Company's  focus on
the  start-up  of  the  SynerGraft  heart  valve  manufacturing  process,  which
adversely impacted its ability to manufacture other bioprosthetic cardiovascular
devices.

Revenues  from IFM  decreased  41% to $2.2  million in 2000 from $3.7 million in
1999,  representing  3% and 6%,  respectively,  of total  revenues  during  such
periods.   The  decrease  in  revenues  is  due  to  HMP's   default  under  its
manufacturing agreement and to the sale of the remaining assets of IFM to HMP.

Grant  revenues  decreased  to  $616,000 in 2000 from  $877,000  in 1999.  Grant
revenues are primarily  attributable to the SynerGraft  research and development
programs.

Cost of cryopreservation  services and products aggregated $33.3 million in 2000
compared to $30.2 million in 1999,  representing 44% and 46%,  respectively,  of
total  cryopreservation  and product revenues.  The decrease in the 2000 cost of
cryopreservation  services and products as a percentage of revenues results from
an increase in revenues from BioGlue surgical adhesive, which carry higher gross
margins  than  cryopreservation  services,  and from a greater  portion  of 2000
orthopaedic  cryopreservation  revenues  being  derived from  services that have
higher gross margins than other orthopaedic cryopreservation services, partially
offset by a lesser portion of 2000 revenues being derived from human heart valve
and conduit  cryopreservation  services,  which carry higher gross  margins than
other cryopreservation services.

General,  administrative,  and marketing expenses increased 16% to $28.7 million
in  2000,  compared  to  $24.7  million  in  1999,  representing  38%  of  total
cryopreservation   and  product  revenues  for  each  period.  The  increase  in
expenditures in 2000 resulted from expenses  incurred to support the increase in
revenues  and  expenses  associated  with  the  establishment  of the  Company's
European headquarters.

Research  and  development  expenses  increased  18% to $5.2  million  in  2000,
compared to $4.4 million in 1999,  representing 7% of total cryopreservation and
product  revenues for each period.  Research and  development  spending  relates
principally  to the  Company's  ongoing  human  clinical  trials for its BioGlue
surgical adhesive and to its focus on its SynerGraft and BioGlue technologies.

As more fully discussed in the following  comparison of years ended December 31,
1999 and December 31, 1998, the Company  recorded a nonrecurring  charge of $2.4
million in 1999  primarily  as a result of HMP's  default  on its  manufacturing
contract with IFM.

Net interest  income was $1.7  million and $1.2 in 2000 and 1999,  respectively.
This  increase  in interest  income was due  primarily  to the  increase in cash
generated from operations during the year ended December 31, 2000.

The effective  income tax rate was 33% and 32% for the years ended  December 31,
2000 and 1999, respectively.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Revenues  increased 10% to $66.7 million in 1999 from $60.7 million in 1998. The
increase in revenues was  primarily  due to increased  acceptance in the medical
community of  cryopreserved  tissues,  the Company's  ability to procure greater
amounts  of  tissue,  price  increases  for  certain  cryopreservation  services
instituted  during the third quarter of 1998 which continued during 1999, a full

32

year of BioGlue  international  revenue in 1999 as  compared  to nine  months in
1998, and revenues attributable to the Company's  introduction of osteoarticular
grafts in January 1999.  These increases in revenues have been offset by certain
decreases in revenues as discussed below.

Revenues from human heart valve and conduit cryopreservation  services decreased
6% to $29.0  million in 1999 from $30.8  million in 1998,  representing  44% and
51%,  respectively,  of total  revenues  during such  periods.  This decrease in
revenues  resulted  from  an 8%  decrease  in  the  number  of  heart  allograft
shipments,  which decrease consisted primarily of a 9% decrease in the number of
pulmonary  heart  valve  shipments  due to a  decrease  in the  number  of  Ross
procedures being performed and competitive  price pressures on pulmonary valves.
In a Ross procedure,  the patient's  pulmonary  valve is  transplanted  into the
aortic  position  and a human  pulmonary  allograft  is  transplanted  into  the
patient's pulmonary position.  The Company has attempted to promote the positive
clinical  results of the Ross  procedure by hosting  science  forums  around the
country with its cardiovascular surgeon customers.

Revenues from human vascular tissue  cryopreservation  services increased 35% to
$19.3  million in 1999 from $14.3  million  in 1998,  representing  29% and 24%,
respectively,  of total revenues during such periods.  This increase in revenues
was  primarily  due  to a 32%  increase  in the  number  of  vascular  allograft
shipments attributable to an increased demand for preserved vascular tissue, the
Company's ability to procure greater amounts of tissue,  and the introduction of
the  femoral  vein  program  for use as A-V  shunts in  dialysis  patients.  The
increase  in  revenues  was also due to the  Company's  focus on  procuring  and
distributing  long segment veins,  which have a higher per unit revenue than the
short segment veins.

Revenues  from human  connective  tissue of the knee  cryopreservation  services
increased 45% to $11.2  million in 1999 from $7.7 million in 1998,  representing
17% and 13%, respectively,  of total revenues during such periods. This increase
in revenues  was  primarily  due to a 31%  increase  in the number of  allograft
shipments  due to increased  demand,  the Company's  ability to procure  greater
amounts of tissue,  and the introduction of preserved  osteoarticular  grafts in
January of 1999.  Additional revenue increases resulted from price increases for
the cryopreservation of menisci and tendons during the third quarter of 1998.

Revenues  from IFM  decreased  34% to $3.7  million in 1999 from $5.7 million in
1998,  representing  6% and 9%,  respectively,  of total  revenues  during  such
periods.  The  decrease in revenues is due to HMP's  failure to meet the minimum
purchase requirements set forth in the Agreement as more fully discussed below.

Revenues from BioGlue surgical  adhesive  increased 88% to $1.7 million for 1999
from $883,000 in 1998,  representing 2% and 1%, respectively,  of total revenues
during such  periods.  The  increase in revenues is due to a 95% increase in the
volume of milliliter  shipments of BioGlue due to increased product awareness as
a result of the  introduction  of BioGlue in  international  markets in April of
1998,  increased surgeon  training,  and the receipt of the CE mark approval for
the use of BioGlue for pulmonary indications in Europe in March 1999.

Revenues from bioprosthetic  cardiovascular devices increased 20% to $955,000 in
1999 from  $798,000  in 1998,  representing  1% of total  revenues  during  such
periods.  This  increase in  revenues  was due to a 7% increase in the number of
bioprosthetic  cardiovascular  device  shipments due to an increase in demand, a
full year of international  revenues from the  CryoLife-Ross  Pulmonary Valve in
1999 as compared to three  months of revenues in 1998,  and price  increases  in
November of 1998 that continued throughout 1999.

Grant  revenues  increased  to  $877,000  in 1999 from  $512,000  in 1998.  This
increase in grant revenues is primarily  attributable to the SynerGraft research
and development programs.

Other  income  decreased  to $224,000 in 1999 from $1.1  million in 1998.  Other
income in 1998 relates primarily to proceeds from the sale of the Company's port
product line.

Cost of cryopreservation  services and products aggregated $30.2 million in 1999
compared to $25.3 million in 1998,  representing 46% and 42%,  respectively,  of
total  cryopreservation  and  product  revenues.  The  increase  of the  cost of
cryopreservation  services  and  products  as a  percentage  of revenues in 1999

33

results from a smaller  percentage  of 1999  revenues  being  derived from human
heart valve and conduit  cryopreservation  services, which carry a significantly
higher gross margin than other  cryopreservation  services. An additional reason
for the  increase in costs in 1999 results from the switch in October of 1998 to
OEM  manufacturing of single-use  medical  devices,  which generates lower gross
margins  than  cryopreservation  services  and lower gross  margins than the IFM
products generated prior to the sale of the IFM product line.

General, administrative, and marketing expenses increased 3% to $24.7 million in
1999, compared to $23.9 million in 1998, representing 38% and 40%, respectively,
of total  cryopreservation and product revenues in such periods. The increase in
expenditures in 1999 resulted from expenses  incurred to support the increase in
revenues,   partially  offset  by  increased  absorption  of  overhead  expenses
associated with increased production of new products.

Research and development expenses decreased 7% to $4.4 million in 1999, compared
to $4.7  million  in  1998,  representing  7% and  8%,  respectively,  of  total
cryopreservation and product revenues for each period.  Research and development
spending  relates  principally to the Company's  focus on its  bioadhesives  and
SynerGraft technologies.

The  Company  recorded  a  nonrecurring  pretax  charge of $2.4  million in 1999
primarily as a result of HMP's default on its  manufacturing  contract with IFM.
On June 22, 1999 IFM notified  HMP that it was in default of certain  provisions
of the Agreement.  Specifically,  HMP was in violation of the payment provisions
contained within the Agreement,  which calls for inventory  purchases to be paid
for  within  45 days of  delivery.  Additionally,  HMP was in  violation  due to
nonpayment of interest related to such past due accounts receivable.

After  notification  of the default,  HMP indicated to the Company that it would
not be able to meet and did not met the minimum purchase  requirements  outlined
in the Agreement. Due to the significant  uncertainties related to the Company's
ability to realize its  investment  in IFM, the Company  determined  that it had
incurred an impairment loss on its IFM assets.  In calculating the amount of the
impairment  loss,  management used its best estimate to determine the realizable
value  of its  increase  in  working  capital  due to the HMP  default,  and the
recoverability  of IFM's long-lived  assets,  consisting  primarily of leasehold
improvements  and  equipment.  As a result,  management  recorded a $2.1 million
impairment  loss  on  working  capital  and a $2.6  million  impairment  loss on
leasehold improvements.  Additionally, the Company offset the above charges with
$2.5 million of deferred gain  recorded in  connection  with the sale of the IFM
product line to HMP. The net pretax effect of the above nonrecurring  charges is
$2.2 million, and has been included under the caption "Nonrecurring  charges" in
the accompanying Consolidated Income Statements.

As previously  discussed in the Overview section, on October 9, 2000 the Company
sold substantially all of the remaining assets of IFM to HMP.

Net   interest   income  was  $1.2  million  and  $820,000  in  1999  and  1998,
respectively.  This increase in interest  income is due to recording a full year
of interest income on the invested  proceeds from the follow-on  equity offering
(the "Offering")  completed in April 1998, lower interest expense resulting from
the repayment of certain  indebtedness with the proceeds from the Offering,  and
the  conversion  of certain  convertible  debentures  into  common  stock of the
Company.

The increase in the  effective  income tax rate to 32% in 1999 from 25% in 1998,
is the result of the  nonrecurrence of income tax benefits realized in 1998 from
the  implementation  of certain  income tax  planning  strategies  in the fourth
quarter,  which had a  significant  one-time  impact on 1998 taxes.  Despite the
increase in the tax rate between 1999 and 1998,  the 1999  effective tax rate is
reflective of the ongoing impact of these tax planning strategies.

Seasonality

The demand for the  Company's  human heart  valve and  conduit  cryopreservation
services is  seasonal,  with peak demand  generally  occurring in the second and
third quarters. Management believes this trend for human heart valve and conduit
cryopreservation  services  is  primarily  due to the high  number of  surgeries

34

scheduled during the summer months.  However, the demand for the Company's human
connective tissue of the knee cryopreservation  services,  human vascular tissue
cryopreservation  services,  bioprosthetic  cardiovascular  devices, and BioGlue
surgical adhesive does not appear to experience seasonal trends.

Liquidity and Capital Resources

At December 31, 2000 net working  capital was $68.5  million,  compared to $59.6
million at December  31,  1999,  with a current  ratio of 7 to 1. The  Company's
primary capital requirements arise out of general working capital needs, capital
expenditures  for facilities and equipment,  funding of research and development
projects,  and a common stock repurchase plan approved by the board of directors
in October of 1998.  The  Company  historically  has funded  these  requirements
through  bank  credit  facilities,  cash  generated  by  operations,  and equity
offerings.

Net cash provided by operating activities was $10.3 million in 2000, as compared
to net cash  provided by  operating  activities  of $1.3  million in 1999.  This
increase  primarily resulted from 1) an increase in net income, 2) a decrease in
accounts receivable despite increased revenues,  3) a reduction in the growth of
deferred preservation costs and inventories, and 4) an increase in the amount of
accounts  payable  due  to the  timing  of  payments  of  outstanding  invoices,
partially offset by a decrease in accrued expenses.

Net cash used in investing  activities  was $6.6 million in 2000, as compared to
$3.6 million in 1999. This increase in cash used was primarily attributable to a
increase in capital expenditures due to the expansion of the Company's corporate
headquarters and  manufacturing  facilities,  partially offset by an increase in
sales of marketable equity securities during 2000.

Net cash provided by financing  activities was $7.8 million in 2000, as compared
to net cash used in financing  activities of $4.5 million in 1999. This increase
was primarily  attributable to the proceeds  received on the bank line of credit
to  finance  the  expansion  of the  Company's  headquarters  and  manufacturing
facilities,  a reduction in the Company's  repurchase  of treasury  stock during
2000 and an increase in the proceeds from stock option exercises.

Management  is currently  seeking to complete a potential  private  placement of
equity  or  equity-oriented  securities  to form a  subsidiary  company  for the
commercial  development of its serine  proteinase light activation  technologies
through its wholly-owned subsidiary AuraZyme Pharmaceutical, Inc. This strategy,
if  successful,  will allow an  affiliated  entity to fund the light  activation
technology  and should  expedite the  commercial  development  of its blood clot
dissolving and surgical sealant product applications without additional research
and  development  expenditures by the Company (other than through the affiliated
company).  This  strategy,  if successful,  will favorably  impact the Company's
liquidity going forward.  The Company has ceased further material development of
light activation technology pending the identification of a corporate partner to
fund future development.

The Company  anticipates  that  current  cash and  marketable  securities,  cash
generated from  operations and its $10 million of bank facilities (of which $8.0
million was drawn as of March 31, 2001) will be sufficient to meet its operating
and development  needs for at least the next 12 months,  including the expansion
of the Company's corporate headquarters and manufacturing  facilities.  However,
the Company's future liquidity and capital  requirements beyond that period will
depend upon numerous  factors,  including the timing of the Company's receipt of
FDA  approvals  to  begin  clinical   trials  for  its  products   currently  in
development,  the resources  required to further develop its marketing and sales
capabilities  if and when those products gain approval,  the resources  required
for any additional  expansion of its corporate  headquarters  and  manufacturing
facility,  and the  extent  to which  the  Company's  products  generate  market
acceptance  and demand.  There can be no assurance  the Company will not require
additional  financing or will not seek to raise  additional  funds  through bank
facilities, debt or equity offerings, or other sources of capital to meet future
requirements.  These  additional  funds may not be  available  when needed or on
terms  acceptable to the Company,  which could have a material adverse effect on
the Company's business, financial condition, and results of operations.

35

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.

The Company's  interest  income and expense are most sensitive to changes in the
general level of U.S.  interest rates. In this regard,  changes in U.S. interest
rates affect the  interest  earned on the  Company's  cash  equivalents  of $8.3
million and short-term  investments of $17.8 million in municipal obligations as
of December 31, 2000,  as well as interest  paid on its debt. At March 31, 2001,
approximately  $8 million of the Company's  debt charged  interest at a variable
rate. To mitigate the impact of fluctuations in U.S. interest rates, the Company
generally  maintains  approximately 50% (approximately $4.6 million at March 31,
2001) of its debt as fixed rate in nature.  As a result,  the Company is subject
to a risk that  interest  rates will  decrease  and the Company may be unable to
refinance its debt.

Item 8.   Financial Statements and Supplementary Data.

The  report  of  independent  auditors  and  consolidated  financial  statements
included on pages 22 through 35 of the annual  shareholders  report for the year
ended December 31, 2000 are incorporated herein by reference.  Quarterly Results
of  Operations on page 36 of the annual  shareholders  report for the year ended
December 31, 2000 is incorporated herein by reference.

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

None required to be reported in the Form 10-K.

36

PART III

Item 10.   Directors and Executive Officers of the Registrant.

The  response  to Item  10,  applicable  to the  Directors  of the  Company,  is
incorporated  herein by reference to the information set forth under the caption
"Election  of  Directors"  in the Proxy  Statement  for the  Annual  Meeting  of
Shareholders  to be filed with the  Commission  not later  than April 30,  2001.
Information concerning executive officers is included in Part I, Item 4A of this
Form 10-K.

The response to Item 10, applicable to Section 16(a) of the Securities  Exchange
Act of 1934, as amended,  is incorporated herein by reference to the information
set forth  under the  caption  "Section  16(a)  Beneficial  Ownership  Reporting
Compliance" in the Proxy  Statement for the Annual Meeting of Shareholders to be
filed with the Commission not later than April 30, 2001.

Item 11.   Executive Compensation.

The response to Item 11 is  incorporated  herein by reference to the information
set forth under the caption "Executive  Compensation" in the Proxy Statement for
the Annual  Meeting of  Shareholders  to be filed with the  Commission not later
than April 30, 2001.

Item 12.   Security Ownership of Certain Beneficial Owners and Management.

The response to Item 12 is  incorporated  herein by reference to the information
set forth under the captions  "Ownership of Principal  Shareholders  and Certain
Executive  Officers" and "Election of Directors" in the Proxy  Statement for the
Annual  Meeting of  Shareholders  to be filed with the Commission not later than
April 30, 2001.

Item 13.   Certain Relationships and Related Transactions.

The response to Item 13 is  incorporated  herein by reference to the information
set forth under the caption "Executive  Compensation" in the Proxy Statement for
the Annual  Meeting of  Stockholders  to be filed with the  Commission not later
than April 30, 2001.

37

PART IV

Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

The following are filed as part of this report:

(a)  1. Financial Statements

The report of independent  public  accountants and  consolidated  financial
statements  included  on pages 22  through  35 of the  annual  shareholders
report for the year ended  December  31,  2000 are  incorporated  herein by
reference and the report of independent  auditors for each of the two years
in the period ended December 31, 1998 is set forth below.

Report of Independent Auditors

The Board of Directors and Shareholders
CryoLife, Inc.

We  have   audited  the   accompanying   consolidated   statements   of  income,
shareholders'  equity,  and cash  flows of  CryoLife,  Inc.  for the year  ended
December 31, 1998.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion, the consolidated statements of income,  shareholders' equity and
cash flows of CryoLife,  Inc.  referred to above present fairly, in all material
respects,  the consolidated results of its operations and its cash flows for the
year ended December 31, 1998, in conformity with accounting principles generally
accepted in the United States.

Ernst & Young LLP

Atlanta, GA
February 2, 1999

2. Financial Statement Schedule

Report of Independent Public Accountants on Schedule II

Schedule II--Valuation and Qualifying Accounts

All other  financial  statement  schedules not listed above are omitted,  as the
required  information is not  applicable or the  information is presented in the
consolidated financial statements or related notes.

3.  A. Exhibits

The following exhibits are filed herewith or incorporated herein by reference:

Exhibit
Number      Description
--------    -----------

2.1         Asset   Purchase    Agreement   among   the   Company   and   United
Cryopreservation  Foundation,  Inc., United  Transplant  Foundation,
Inc.  and QV,  Inc.  dated  September  11,  1996.  (Incorporated  by
reference  to Exhibit 2.2 to the  Registrant's  Quarterly  Report on
Form 10-Q for the quarter ended September 30, 1996.)

2.2         Agreement  and Plan of Merger  dated as of March 5, 1997 among Ideas
for Medicine,  Inc., J.  CraytonPruitt,  Sr.,  M.D.,  Thomas Benham,
Thomas  Alexandris,  Tom  Judge,  Natalie  Judge,  Helen  Wallace,J.
Crayton Pruitt,  Jr., M.D., and Johanna Pruitt,  and CryoLife,  Inc.
and CryoLife Acquisition Corporation.  (Incorporated by reference to
Exhibit 2.1 to the  Registrant's  Current Report on Form 8-Kfiled on
March 19, 1997.)

38

Exhibit
Number      Description
--------    -----------

2.3         Asset Purchase  Agreement by and between Horizon  Medical  Products,
Inc.  and  Ideas  for  Medicine,  Inc.  dated  September  30,  1998.
(Incorporated by reference to Exhibit 2 to Horizon Medical Products,
Inc.'s  Current  Report on Form 8-K filed  with the  Securities  and
Exchange Commission on October 14, 1998.)

2.4*+       Asset  Purchase  Agreement,  dated  October 9, 2000,  by and between
Horizon and IFM.

3.1         Restated Certificate of Incorporation of the Company.  (Incorporated
by reference  to Exhibit 3.1 to the  Registrant's  Annual  Report on
Form 10-K for the fiscal year ended December 31, 1999.)

3.2         ByLaws of the  Company,  as amended.  (Incorporated  by reference to
Exhibit 3.2 to the  Registrant's  Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.)

3.3*        Articles  of  Amendment  to the  Articles  of  Incorporation  of the
Company.

4.1         Form of Certificate for the Company's Common Stock. (Incorporated by
reference to Exhibit 4.1 to the Registrant's  Registration Statement
on Form S-1 (No. 33-56388).

4.2         Form of Certificate for the Company's Common Stock. (Incorporated by
reference to Exhibit 4.2 to the  Registrant's  Annual Report on Form
10-K for the fiscal year ended December 31, 1997.)

10.1        Lease,  by and between New Market  Partners III,  Laing  Properties,
Inc.,  General  Partner,  as Landlord,  and the Company,  as Tenant,
dated February 13, 1986, as amended by that  Amendment to Lease,  by
and between  the  parties,  dated April 7, 1986,  as amended by that
Amendment to Lease, by and between the parties,  dated May 15, 1987,
as amended by that  Second  Amendment  to Lease,  by and between the
parties,  dated June 22, 1988, as amended by that Third Amendment to
Lease,  by and between the parties,  dated April 4, 1989, as amended
by that Fourth Amendment to Lease, by and between the parties, dated
April 4, 1989 as amended by that Fifth  Amendment  to Lease,  by and
between the  parties,  dated  October  15,  1990.  (Incorporated  by
reference to Exhibit 10.1 to the Registrant's Registration Statement
on Form S-1 (No. 33-56388).)

10.1(a)     Seventh  Amendment to Lease dated  February 13, 1986, by and between
New Market Partners III, Laing Properties, Inc., General Partner, as
Landlord,   and  the  Company  as  tenant,   dated  May  15,   1996.
(Incorporated  by reference to Exhibit  10.1(a) to the  Registrant's
Annual  Report on Form 10-K for the fiscal year ended  December  31,
1996.)

10.2        Lease by and between Newmarket  Partners I, Laing  Properties,  Inc.
and Laing Management Company,  General Partner, as Landlord, and the
Company as Tenant,  dated July 23, 1993.  (Incorporated by reference
to Exhibit 10.2 to the  Registrant's  Annual Report on Form 10-K for
the fiscal year ended December 31, 1993.)

10.3        1993  Employee  Stock  Incentive  Plan  adopted  on  July  6,  1993.
(Incorporated  by  reference  to  Exhibit  10.3 to the  Registrant's
Annual  Report on Form 10-K for the fiscal year ended  December  31,
1993.)

10.4        1989 Incentive  Stock Option Plan for the Company,  adopted on March
23,  1989.  (Incorporated  by  reference  to  Exhibit  10.2  to  the
Registrant's Registration Statement on Form S-1 (No. 33-56388).)

10.5        Incentive   Stock   Option   Plan,   dated  as  of  April  5,  1984.
(Incorporated  by  reference  to  Exhibit  10.3 to the  Registrant's
Registration Statement on Form S-1 (No. 33-56388).)

39

Exhibit
Number      Description
--------    -----------

10.6        Form of Stock Option  Agreement and Grant under the Incentive  Stock
Option  and  Employee  Stock  Incentive   Plans.   (Incorporated  by
reference to Exhibit 10.4 to the Registrant's Registration Statement
on Form S-1 (No. 33-56388).)

10.7        CryoLife,  Inc.  Profit  Sharing 401(k) Plan, as adopted on December
17,  1991.  (Incorporated  by  reference  to  Exhibit  10.5  to  the
Registrant's Registration Statement on Form S-1 (No. 33-56388).)

10.8        Form of Supplemental Retirement Plan, by and between the Company and
its Officers -- Parties to Supplemental  Retirement Plans: Steven G.
Anderson,  David M. Fronk,  Sidney B. Ashmore,  James C. Vander Wyk,
Albert  E.   Heacox,   Kirby  S.  Black,   and  David   Ashley  Lee.
(Incorporated  by  reference  to  Exhibit  10.6 to the  Registrant's
Registration Statement on Form S-1 (No. 33-56388).)

10.9(a)     Employment  Agreement,  by and  between  the  Company  and Steven G.
Anderson.  (Incorporated  by  reference  to  Exhibit  10.9(a) to the
Registrant's  Annual  Report on Form 10-K for the fiscal  year ended
December 31, 1998.)

10.9(b)     Employment  Agreement,  by and  between  the  Company  and Albert E.
Heacox.  (Incorporated  by  reference  to  Exhibit  10.7(c)  to  the
Registrant's Registration Statement on Form S-1 (No. 33-56388).)

10.9(c)*    Employment Agreement,  by and between the Company and D. Ashley Lee,
dated December 12, 1994.

10.9(d)     Employment Agreement, by and between the Company and James C. Vander
Wyk,  Ph.D.  (Incorporated  by reference  to Exhibit  10.9(f) to the
Registrant's  Annual  Report on Form 10-K for the fiscal  year ended
December 31, 1995.)

10.9(e)     Employment Agreement, by and between the Company and Kirby S. Black,
Ph.D.   (Incorporated   by  reference  to  Exhibit  10.9(g)  to  the
Registrant's  Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1996.)

10.9(f)     Employment Agreement, by and between the Company and David M. Fronk.
(Incorporated  by reference to Exhibit  10.9(g) to the  Registrant's
Annual  Report on Form 10-K for the fiscal year ended  December  31,
1998.)

10.10       Form of Secrecy and Noncompete Agreement, by and between the Company
and its Officers.  (Incorporated by reference to Exhibit 10.9 to the
Registrant's Registration Statement on Form S-1 (No. 33-56388).)

10.11       Terms of Agreement  Between  Bruce J. Van Dyne,  M.D. and  CryoLife,
Inc. dated November 1, 1999.  (Incorporated  by reference to Exhibit
10.11 to the Registrant's  Annual Report on Form 10-K for the fiscal
year ended December 31, 1999.)

10.12       Technology  Acquisition  Agreement  between the Company and Nicholas
Kowanko, Ph.D., dated March 14, 1996.  (Incorporated by reference to
Exhibit 10.14 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.)

40

Exhibit
Number      Description
--------    -----------

10.13       Option  Agreement,  by and between the Company and Duke  University,
dated July 9, 1990, as amended by that Option  Agreement  Extension,
by and between the  parties,  dated July 9, 1991.  (Incorporated  by
reference  to  Exhibit  10.20  to  the   Registrant's   Registration
Statement on Form S-1 (No. 33-56388).)

10.14       Research and License Agreement by and between Medical  University of
South  Carolina and CryoLife  dated November 15, 1985, as amended by
Amendment to the Research and License  Agreement  dated February 25,
1986 by and between  the  parties  and an  Addendum to Research  and
License  Agreement by and between the parties,  dated March 4, 1986.
(Incorporated  by  reference  to Exhibit  10.23 to the  Registrant's
Registration Statement on Form S-1 (No. 33-56388).)

10.15       CryoLife, Inc. Non-Employee Directors Stock Option Plan, as amended.
(Incorporated  by  reference  to  Appendix  2  to  the  Registrant's
Definitive  Proxy  Statement  filed with the Securities and Exchange
Commission on April 17, 1998.)

10.16       Lease  Agreement  between the  Company and Amli Land  Development--I
Limited  Partnership,   dated  April  18,  1995.   (Incorporated  by
reference to Exhibit 10.26 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1995.)

10.16(a)    First Amendment to Lease  Agreement,  dated April 18, 1995,  between
the Company and Amli Land  Development--I  Limited Partnership dated
August 6, 1999.  (Incorporated  by reference to Exhibit  10.16(a) to
the  Registrant's  Annual  Report on Form 10-K for the  fiscal  year
ended December 31, 1999.)

10.16(b)*   Restatement and Amendment to Funding  Agreement  between the Company
and Amli Land  Development- I Limited  Partnership,  dated August 6,
1999.

10.18       CryoLife,   Inc.  Employee  Stock  Purchase  Plan  (Incorporated  by
reference  to  Exhibit  "A" of  the  Registrant's  Definitive  Proxy
Statement filed with the Securities and Exchange Commission on April
10, 1996.)

10.19       Noncompetition    Agreement   between   the   Company   and   United
Cryopreservation   Foundation,   Inc.   dated   September   11,1996.
(Incorporated  by  reference  to  Exhibit  10.1 to the  Registrant's
Quarterly  Report on Form 10-Q for the quarter  ended  September 30,
1996.)

10.20       Noncompetition  Agreement  between the  Company  and QV, Inc.  dated
September  11, 1996.  (Incorporated  by reference to Exhibit 10.3 to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.)

10.21       Revolving  Term Loan  Facility  between the Company and  NationsBank
N.A.,  dated August 30, 1996.  (Incorporated by reference to Exhibit
10.4 to the  Registrant's  Quarterly  Report  on Form  10-Q  for the
quarter ended September 30, 1996.)

10.22       Technology  License Agreement between the Company and Colorado State
University Research  Foundation dated March 28, 1996.  (Incorporated
by reference to Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996.)

10.23       Noncompetition  Agreement  between the Company and United Transplant
Foundation,   Inc.  dated  September  11,  1996.   (Incorporated  by
reference to Exhibit 10.2 to the  Registrant's  Quarterly  Report on
Form 10-Q for the quarter ended September 30, 1996.)

10.24(a)    First Amendment of Third Amended and Restated Loan Agreement between
CryoLife,  Inc.,  as Borrower  and  NationsBank,  N.A.  (South),  as
Lender, dated April 14, 1997.  (Incorporated by reference to Exhibit
10.1 to the  Registrant's  Quarterly  Report  on Form  10-Q  for the
quarter ended June 30, 1997.)

10.24(b)    Second  Modification  of Third Amended and Restated  Loan  Agreement
dated   December  16,  1997  by  and  between  the   Registrant  and
NationsBank, N.A. . (Incorporated by reference to Exhibit 4.2 to the
Registrant's  Annual  Report on Form 10-K for the fiscal  year ended
December 31, 1997.)

41

Exhibit
Number      Description
--------    -----------

10.24       Fourth  Modification  of Third Amended and Restated  Loan  Agreement
dated  December  16,  1997 by and  between  the  Company and Bank of
America,  N.A.  and  First  Modification  of  Revolving  Note  dated
December 31, 1999.  (Incorporated  by reference to Exhibit  10.24 to
the  Registrant's  Annual  Report on Form 10-K for the  fiscal  year
ended December 31, 1999)

10.25       Reserved.

10.26       CryoLife,  Inc. 1998  Long-Term  Incentive  Plan.  (Incorporated  by
reference  to  Appendix  2  to  the  Registrant's  Definitive  Proxy
Statement filed with the Securities and Exchange Commission on April
17, 1998.)

10.27       Consulting   Agreement   dated  March  5,  1997   between   CryoLife
Acquisition   Corporation   and  J.  Crayton   Pruitt,   Sr.,   M.D.
(Incorporated  by  reference  to  Exhibit  10.2 to the  Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.)

10.28       Subordinated  Convertible  Debenture dated March 5, 1997 between the
Company and J. Crayton Pruitt, Sr., M.D.  (Incorporated by reference
to Exhibit 10.3 to the  Registrant's  Quarterly  Report on Form 10-Q
for the quarter ended March 31, 1997.)

10.29       Lease  Agreement  dated  March 5, 1997  between  the  Company and J.
Crayton Pruitt, Sr., M.D. (Incorporated by reference to Exhibit 10.4
to the  Registrant's  Quarterly  Report on Form 10-Q for the quarter
ended March 31, 1997.)

10.30       Lease  Guaranty dated March 5, 1997 between J. Crayton Pruitt Family
Trust  U/T/A  and   CryoLife,   Inc.,   as  Guarantor  for  CryoLife
Acquisition Corporation.  (Incorporated by reference to Exhibit 10.5
to the  Registrant's  Quarterly  Report on Form 10-Q for the quarter
ended March 31, 1997.)

10.31       Form of  Non-Competition  Agreement  dated March 5, 1997 between the
Company and J. Crayton  Pruitt,  Sr., M.D.,  Thomas  Benham,  Thomas
Alexandris,  Tom Judge,  Natalie Judge,  Helen  Wallace,  J. Crayton
Pruitt, Jr., M.D., and Johanna Pruitt. (Incorporated by reference to
Exhibit 10.6 to the  Registrant's  Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997.)

10.32       Standard Form of Agreements  Between Owner and Design/Builder by and
between  the  Company  and  Choate  Design and Build  Company  dated
January 19, 2000. (Incorporated by reference to Exhibit 10.32 to the
Registrant's  Annual  Report on Form 10-K for the fiscal  year ended
December 31, 1999)

10.33       Construction  Loan and Permanent  Financing  Agreement  with Bank of
America dated April 25, 2000.  (Incorporated by reference to Exhibit
10.1 to the  Registrant's  Quarterly  Report  on Form  10-Q  for the
quarter ended June 30, 2000.)

10.34*      Sublease Agreement between Horizon and IFM, dated October 9, 2000.

10.35*      Terms of Agreement between Ronald C. Elkins, MD and CryoLife,  Inc.,
dated November 7, 2000.

10.36*      Rights Agreement between the Company and Chemical Mellon Shareholder
Services, L.L.C., as Rights Agent, dated as of November 27, 1995.

10.37*      International  Distribution  Agreement,  dated  September  17, 1998,
between the Company and Century Medical, Inc.

13.1*       Portions of the  Registrant's  Annual Report to Shareholders for the
year ended  December  31, 2000 which are  incorporated  by reference
herein.

21.1*       Subsidiaries of CryoLife, Inc.

23.1*       Consent of Arthur Andersen LLP.

23.2*       Consent of Ernst & Young LLP.

---------------------
* Filed herewith.
+ In accordance with Item 601(b)(2) of Regulation S-K, the schedules and certain
exhibits  have been omitted and a list of the  schedules  and exhibits is at the
end of the Exhibit.  The Registrant  will furnish  supplementally  a copy of any
omitted schedule or exhibit to the Commission upon request.

42

3. B. Executive Compensation Plans and Arrangements.

1.        1993 Employee Stock  Incentive Plan adopted on July 6, 1993.  (Exhibit
10.2 to the  Registrant's  Annual  Report on Form 10-K for the  fiscal
year ended December 31, 1994.)

2.        1989 Incentive Stock Option Plan for the Company, adopted on March 23,
1989 (Exhibit 10.2 to the Registrant's  Registration Statement on Form
S-1 (No. 33-56388).)

3.        Incentive  Stock Option Plan,  dated as of April 5, 1984 (Exhibit 10.3
to  the   Registrant's   Registration   Statement  on  Form  S-1  (No.
33-56388).)

4.        Form of Stock Option  Agreement  and Grant under the  Incentive  Stock
Option  and  Employee  Stock  Incentive  Plans  (Exhibit  10.4  to the
Registrant's Registration Statement on Form S-1 (No. 33-56388).)

5.        CryoLife,  Inc. Profit Sharing 401(k) Plan, as adopted on December 17,
1991 (Exhibit 10.5 to the Registrant's  Registration Statement on Form
S-1 (No. 33-56388).)

6.        Form of Supplemental  Retirement  Plan, by and between the Company and
its Officers--  Parties to Supplemental  Retirement  Plans:  Steven G.
Anderson,  Robert T.  McNally,  Gerald B. Seery,  James C. Vander Wyk,
Albert E. Heacox,  Kirby S. Black and Edwin B. Cordell,  Jr.  (Exhibit
10.6 to the  Registrant's  Registration  Statement  on Form  S-1  (No.
33-56388).)

7.        Employment  Agreement,  by and  between  the  Company  and  Steven  G.
Anderson.  (Incorporated  by  reference  to  Exhibit  10.9(a)  to  the
Registrant's  Annual  Report on Form 10-K for the year ended  December
31, 1998.)

8.        Employment  Agreement,  by and between the Company and David M. Fronk.
(Incorporated  by  reference  to Exhibit  10.9(g) to the  Registrant's
Annual Report on Form 10-K for the year ended December 31, 1998.)

9.        Employment Agreement, by and between the Company and Albert E. Heacox.
(Exhibit  10.7(c) to the Registrant's  Registration  Statement on Form
S-1 (No. 33-56388).)

10.       Employment Agreement,  by and between the Company and Gerald B. Seery.
(Incorporated  by  reference  to Exhibit  10.9(e) to the  Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995.)

11.       Employment  Agreement,  by and between the Company and James C. Vander
Wyk,  Ph.D.  (Incorporated  by  reference  to  Exhibit  10.9(f) to the
Registrant's  Annual  Report on Form 10-K for the year ended  December
31, 1995.)

12.       Employment Agreement, by and between the Company and D. Ashley Lee.

13.       CryoLife,  Inc. Non-Employee  Directors Stock Option Plan, as amended.
(Incorporated by reference to Exhibit 10.15 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.)

14.       CryoLife,   Inc.  Employee  Stock  Purchase  Plan.   (Incorporated  by
reference  to  Exhibit  "A"  of  the  Registrant's   Definitive  Proxy
Statement  filed with the Securities and Exchange  Commission on April
10, 1996.)

15.       Employment  Agreement  by and  between  the Company and Kirby S. Black
(Incorporated  by  reference  to Exhibit  10.9(g) to the  Registrant's
Annual  Report on Form 10-K/A for the fiscal year ended  December  31,
1996.)

16.       CryoLife,  Inc.  1998  Long-Term  Incentive  Plan.   (Incorporated  by
reference to Exhibit 10.34 to the  Registrant's  Annual Report on Form
10-K for the fiscal year ended December 31, 1999.)

17.       Terms of Agreement Between Bruce J. Van Dyne, M.D. and CryoLife, Inc.,
dated November 1, 1999.

18.       Terms of Agreement  between Ronald C. Elkins,  MD and CryoLife,  Inc.,
dated November 7, 2000.

(b)  Reports on Form 8-K

1. NONE.

43

SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

CRYOLIFE, INC.

April 2, 2001
By  /S/   STEVEN G. ANDERSON
--------------------------------------
Steven G. Anderson,
President, Chief Executive
Officer and Chairman of
the Board of Directors

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.

Signature                                 Title                           Date

/s/ STEVEN G. ANDERSON           President, Chief Executive Officer         April 2, 2001
-------------------------------  and Chairman of the Board of
Steven G. Anderson               Directors (Principal Executive
Officer)

/s/ D. ASHLEY LEE                Vice President and Chief Financial         April 2, 2001
-------------------------------  Officer (Principal Financial and
D. Ashley Lee                    Accounting Officer)

/s/ RONALD D. MCCALL             Director                                   April 2, 2001
-------------------------------
Ronald D. McCall

/s/ VIRGINIA C. LACY             Director                                   April 2, 2001
-------------------------------
Virginia C. Lacy

/s/ RONALD CHARLES ELKINS, M.D.  Director                                   April 2, 2001
-------------------------------
Ronald Charles Elkins, M.D.

/s/ JOHN M. COOK                 Director                                   April 2, 2001
-------------------------------
John M. Cook

44

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To CryoLife, Inc.

We have audited, in accordance with auditing standards generally accepted in the
United  States,  the  consolidated  financial  statements  included in CryoLife,
Inc.'s 2000 annual report to stockholders and this Form 10-K and have issued our
report  thereon  dated  February 7, 2001.  Our audit was made for the purpose of
forming an opinion on those financial  statements taken as a whole. The schedule
listed  in Item 14 of this  Form  10-K is the  responsibility  of the  Company's
management,  is  presented  for purposes of complying  with the  Securities  and
Exchange  Commission's rules, and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic  financial  statements  and, in our opinion,  fairly  states in all
material  respects  the  financial  data  required  to be set forth  therein  in
relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP
Atlanta, Georgia
February 7, 2001

S-1

SCHEDULE II
CRYOLIFE, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

Years ended December 31, 2000, 1999, and 1998

Balance beginning                            Balance end of
Description                      of period     Additions   Deductions        Period
-----------                  ----------------- ---------   ----------    ---------------
Year ended December 31, 2000
Allowance for doubtful accounts...........    $   528,000     $21,000     $464,000         $85,000
Deferred preservation costs...............        151,000     230,000      152,000         229,000

Year ended December 31, 1999
Allowance for doubtful accounts...........    $   256,000    $521,000     $249,000        $528,000
Deferred preservation costs...............         53,000     235,000      137,000         151,000

Year ended December 31, 1998
Allowance for doubtful accounts...........    $   103,000   $ 171,000     $ 18,000       $ 256,000
Deferred preservation costs...............        152,000         --        99,000          53,000

S-2
1345392

Exhibit 2.4

================================================================================

ASSET PURCHASE AGREEMENT

by and between

HORIZON MEDICAL PRODUCTS, INC.

and

IDEAS FOR MEDICINE, INC.

October 9, 2000

================================================================================

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE  AGREEMENT (this  "Agreement") is made as of October 9,
2000 by and  between  HORIZON  MEDICAL  PRODUCTS,  INC.,  a Georgia  corporation
("Horizon"), and IDEAS FOR MEDICINE, INC., a Florida corporation ("IFM").

W I T N E S S E T H:

WHEREAS,  IFM is a  wholly-owned  subsidiary  of CryoLife,  Inc., a Florida
corporation  ("CryoLife"),  and is in the medical device manufacturing  business
(the "Business");

WHEREAS,  Horizon and IFM  previously  entered into that  certain  purchase
agreement,  dated as of May 19, 1998 (the "First Purchase Agreement"),  pursuant
to which Horizon purchased certain assets of IFM;

WHEREAS,  Horizon and IFM  previously  entered into that  certain  purchase
agreement,  dated as of September  30, 1998 (the "Second  Purchase  Agreement"),
pursuant to which Horizon purchased certain additional assets of IFM; and

WHEREAS,  Horizon  wishes to  acquire  substantially  all of the  remaining
assets  of IFM,  and IFM  wishes  to sell  such  assets,  all on the  terms  and
conditions set forth in this Agreement.

NOW,  THEREFORE,  in  consideration  of the mutual covenants and agreements
herein  contained  and for other good and valuable  consideration,  the receipt,
adequacy and sufficiency of which are hereby acknowledged, Horizon and IFM agree
as follows:

1. Purchase and Sale of Assets; Assumed Liabilities.

1.1 Purchase and Sale of Assets.  On the Closing Date (as  hereinafter
defined),  upon and subject to the terms and conditions of this  Agreement,  IFM
shall sell, transfer,  assign, convey, and deliver to Horizon, and Horizon shall
purchase and acquire from IFM all right, title and interest of IFM in and to all
of the  assets,  properties  and rights of IFM,  of every kind and  description,
personal and mixed, tangible and intangible,  wherever situated,  except for the
Excluded  Assets (as  defined  in Section  1.4)  (collectively,  the  "Purchased
Assets"), free and clear of all mortgages,  liens, pledges,  security interests,
charges, claims, restrictions and encumbrances of any nature whatsoever,  except
for the Assumed  Liabilities  (as defined in Section 1.7). The Purchased  Assets
shall not include any assets  previously  purchased  by Horizon  pursuant to the
First Purchase Agreement or the Second Purchase Agreement.

1.2  Purchased  Assets.  Except as  otherwise  expressly  set forth in
Section 1.4 hereof, the Purchased Assets shall include, without limitation,  the
following assets, properties and rights of IFM:

(a) All of IFM's right, title and interest in and to its fixed assets,
as  further  described  in  Schedule  1.2(a)  hereto,  including,   without

limitation, all production equipment,  office equipment, dies, drawings and
other equipment used in the  production,  manufacture,  sale,  marketing or
distribution of products (the "Fixed Assets");

(b) All of IFM's right,  title and interest in and to (1) all finished
goods inventory as of the close of business on the Closing Date, including,
without  limitation,  the items set forth on Schedule 1.2(b)(1) hereto, and
all containers and other packaging materials  associated with such finished
goods  inventory  (the  "Finished  Goods  Inventory");  and (2)  all  other
inventory,  as further described in Schedule  1.2(b)(2) hereto,  including,
without limitation,  raw materials and work in process,  whether located at
IFM's or CryoLife's facilities, in route to the sterilizer or other outside
vendors,  or  elsewhere  (the  "Other  Inventory,"  and  together  with the
Finished Goods Inventory, collectively, the "Inventory").

(c) All  leasehold  improvements,  as further  described  in  Schedule
1.2(c) hereto, including,  without limitation, clean rooms and air handling
equipment;

(d) All of IFM's right, title and interest in and to all United States
and  foreign   patents,   patent   application,   tradenames,   trademarks,
copyrights,  trade  dress,  logos,  business  and product  names,  slogans,
inventions, trade secrets, industrial models, formulas, processes, designs,
confidential  and technical  information,  manufacturing,  engineering  and
technical drawings, product specifications, know-how and all other material
intangible  property and intellectual  property rights to or similar to and
registrations  and  applications  for  registration  relating to any of the
foregoing or licenses owned by IFM (collectively,  "Intellectual Property")
including,  without  limitation,  the items set  forth on  Schedule  1.2(d)
hereto;

(e) All of IFM's and/or  CryoLife's  rights and  benefits  pursuant to
those certain  third-party  contracts and  agreements set forth on Schedule
1.2(e)  hereto  and   incorporated   herein  by  reference  (the  "Assigned
Contracts");

(f) All of IFM's  right,  title and  interest in and to the "Ideas for
Medicine" and "IFM" names and any  trademarks and  tradenames,  designs and
logos associated therewith; and

(g) All records and documents related to the Business or the Purchased
Assets,  whether in paper,  electronic or other media,  including,  without
limitation,  all FDA 510(k) filings and other FDA filings, all drawings and
designs,  all test protocols and results,  all  biocompatibility  data, all
customer lists,  sales brochures,  medical records,  all production records
and all other business records. IFM shall be entitled to keep a copy of all
such records and  documents.  IFM shall  protect such records and documents
under the  confidentiality  provisions  of Section  11.1  through the sixth
(6th)  anniversary of the Closing Date and shall then promptly  destroy all
of such records and  documents  with written  notice to Horizon  confirming
such destruction.  After the destruction of such records and documents, IFM
will have access to such records and  documents in Horizon's  possession in
accordance with Section 6.8(b).  Such records and documents will be used by
IFM solely for the  preparation  of the  prosecution  or the defense of any

2

suit, action, litigation or administrative, arbitration or other proceeding
or investigation by or against IFM or CryoLife or for any third party claim
for which  indemnification  is claimed  pursuant  to the terms of Section 9
below, or for the  preparation  for the filing of any document  required by
any federal,  state or local  governmental  department,  regulatory agency,
authority, commission, board or court.

1.3  Technical  Files.  At the Closing,  IFM shall  deliver to Horizon
copies of the technical  file or dossier on the CE mark for each Product,  which
copies shall include, without limitation, all paper and electronic files related
to IFM's products. IFM may redact from such copies any information pertaining to
the Excluded Products.

1.4 Excluded Assets. IFM shall retain and shall not sell or deliver to
Horizon,  and Horizon shall not purchase from IFM, the following assets,  all of
which shall be excluded from the Purchased Assets  (collectively,  the "Excluded
Assets"):

(a) All cash;

(b) All accounts  receivable relating to or arising out of sales on or
before the Effective Date;

(c) Any rights including without limitation,  all trade secrets,  know
how and other  intellectual  property to the  following  products and their
related inventory and packaging (collectively, the "Excluded Products"):

(i) BioGlue applicator tip connector;

(ii) heart value holder;

(iii) BioGlue Aortic dissection catheters;

(iv) CryoValve tags; and

(v)  Cardiac   Manipulator   for  Minimally   Invasive   Surgical
Procedures;

(d) Any raw materials  supplied by third parties,  including,  without
limitation,  work in progress and finished goods  inventory  resulting from
such raw  materials,  to which  title  shall  remain  with such third party
supplier pursuant to an Assigned Contract;

(e)  Accounts  receivable  resulting  from  work  performed  under the
Assigned  Contracts  prior to the Effective  Date, as set forth in Schedule
1.4(e) hereto;

(f) Any packaging or other items bearing the "CryoLife" name;

3

(g) Any  materials,  equipment,  fixtures,  dies and tooling listed on
Schedule  1.4(g) which are utilized in  connection  with the  packaging and
manufacture of the Excluded Products;

(h)  All  packaging  for and  work in  process  and  inventory  of the
Excluded Products,  including,  without limitation, all BioGlue dispensers,
mixing tips and twist rings and connectors, all CryoPacks, and all CryoLife
Intermediates (also known as allograft packaging); and

(i) All equipment owned by third parties and listed on Schedule 1.4(i)
hereto, which shall continue to be owned by such third parties.

1.5 Liabilities Not Assumed.  Except as expressly set forth in Section
1.7, Horizon shall not and will not accept or assume any liability or obligation
of any nature  whatsoever  (whether  express or  implied,  fixed or  contingent,
liquidated or unliquidated,  known or unknown,  accrued or to become due) of IFM
or CryoLife. Without limiting the generality of the foregoing, Horizon shall not
and will not accept nor assume any liability or obligation of IFM:

(a) arising from or related to any federal,  state,  or local  income,
sales, use, excise, or other tax of IFM (including  without  limitation any
such taxes  incurred  by IFM as a result of the  transactions  contemplated
hereby), except as set forth in Section 1.7(c);

(b) relating to any  employees  or former  employees of IFM arising by
reason of any such other  person's  employment or termination of employment
by IFM, except as expressly set forth in Section 6.5;

(c)  resulting  from the  conduct of the  Business  on or prior to the
Closing  Date,  provided the  foregoing  shall not be deemed to limit IFM's
right  to  seek   indemnification  from  Horizon  under  the  Manufacturing
Agreement (as defined in Section 2.7);

(d)  resulting  from  any  product  manufactured  by IFM  for  Horizon
pursuant to the Manufacturing  Agreement (the "HMP/IFM  Products") which is
returned to Horizon or IFM prior to, on, or after the Closing  Date if such
product  (i) is  defective  as a result of a defect in the  manufacture  or
assembly  thereof  (and not as a result  of any  defect  in the  design  or
specifications),  and (ii) was  sold by IFM,  or is a part of the  Finished
Goods Inventory (a "Defective  HMP/IFM  Product"),  provided such defect is
not caused by the action or inaction of Horizon;

(e) resulting from IFM's  production,  manufacture and assembly of any
of IFM's products other than the HMP/IFM Products (the "Non-HMP  Products")
on or  prior  to the  Closing  Date,  including,  without  limitation,  any
personal injury or product damage whether  occurring prior to, on, or after
the  Closing  Date,  caused by or  through  or  arising  as a result of the
marketing,  sale, delivery,  production,  manufacture or assembly by IFM of
the Non-HMP Products;

4

(f) resulting from any defective or damaged Non-HMP  Product  returned
to Horizon or IFM prior to, on, or after the Closing  Date if such  product
(i) was sold by IFM, or (ii) is a part of the Finished  Goods  Inventory (a
"Defective  Non-HMP  Product,"  and  together  with the  Defective  HMP/IFM
Products,  collectively, the "Defective Products"), provided such defect or
damage is not caused by the action or inaction of Horizon; or

(g)  resulting  from  IFM's  lack of  compliance  with any  applicable
federal, state, or local laws, rules, regulations, ordinances, or orders.

1.6 Valuation For Tax Reporting  Purposes.  IFM and Horizon agree that
Schedule 1.6, in which the parties have allocated the Purchase Price (as defined
below) among the  Purchased  Assets,  has been  jointly  prepared by the parties
hereto.  The parties  agree to use Schedule  1.6 in  preparing  and filing their
respective  Forms  8594  with the  Internal  Revenue  Service  and for all other
relevant  federal and state income tax purposes.  Each party will provide a copy
of the Form 8594 to the other  party  prior to filing.  In the event the parties
are unable to agree on Schedule 1.6 as of the Closing,  the parties  shall agree
on such Schedule 1.6 within ninety (90) days of the Closing Date.

1.7  Assumption of  Liabilities.  On the Closing  Date,  Horizon shall
assume from IFM the following  liabilities  and obligations of IFM (the "Assumed
Liabilities"):

(a) the trade payables of IFM with respect to Inventory received after
the Effective  Date and the trade payables of IFM arising in respect of the
provision  of goods  (excluding  Inventory)  or  services  on or after  the
Effective Date;

(b) all ad valorem taxes on the Purchased  Assets accruing on or after
the Effective Date; and

(c) the monetary obligations of IFM accruing on or after the Effective
Date under the Assigned  Contracts and all other obligations or liabilities
under the Assigned Contracts accruing after the Closing Date.

2. Purchase Price; Refund of Purchase Price.

2.1 Purchase  Price.  In  consideration  for IFM's sale,  transfer and
delivery of the Purchased  Assets (as defined  above) to Horizon,  Horizon shall
deliver to IFM at Closing a promissory note in the form of Exhibit A hereto (the
"Note")  in favor of IFM with a  principal  amount  equal to Five  Million  Nine
Hundred  Forty-Five  Thousand  Two Hundred  Sixteen  Dollars  ($5,945,216)  (the
"Purchase Price'). The terms of the Note shall be as follows:

(a) Three Million Eight Hundred Thousand  Dollars  ($3,800,000) of the
Note shall bear  interest  at the rate of nine  percent  (9%) per annum and
shall be payable in monthly  installments  of principal and interest of One
Hundred Forty Thousand Dollars ($140,000) per month until all principal and
interest due under the Note is paid in full.

5

(b) Two Million One Hundred  Forty-Five  Thousand Two Hundred  Sixteen
Dollars  ($2,145,216) of the Note shall bear no interest so long as Horizon
makes all payments under the Note on a timely basis.

(c) If Horizon fails to make any payment  under the Note on time,  the
remaining  principal  balance of the Note shall bear  interest  at eighteen
percent (18%).  If Horizon makes all payments on a timely basis without any
late or deficient  payments until such time as the principal balance on the
Note is reduced (by  payment,  set-off,  adjustment  or  otherwise)  to Two
Million  One  Hundred  Forty-Five  Thousand  Two  Hundred  Sixteen  Dollars
($2,145,216),  IFM shall  forgive  the  remaining  Two  Million One Hundred
Forty-Five  Thousand  Two Hundred  Sixteen  Dollar  ($2,145,216)  principal
balance of the Note (the "Discount").

2.2.  Scheduled Payment of Note.  Horizon agrees to pay under the Note
the sum of One Million Dollars  ($1,000,000)  in cash (the "Scheduled  Payment")
upon the  earlier of (i) the  closing  of one or more  equity  financings  which
result  in  consideration  to  Horizon  of  at  least  Fifteen  Million  Dollars
($15,000,000) in exchange for Horizon common and/or preferred stock (the "Equity
Financing")  or (ii) April 3, 2001.  In the event  Horizon's  pays the Scheduled
Payment  prior  to  April  3,  2001,  IFM  shall  forgive  One  Million  Dollars
($1,000,000) of the principal amount of the Note in accordance with the terms of
the Note.

2.3. Physical Inventory.

(a) Horizon and IFM have taken a physical  inventory of the  Inventory
and Fixed Assets (the "Physical Inventory") prior to Closing.  Based on the
Physical  Inventory,  the  Purchase  Price  shall be adjusted as follows to
reflect the  difference,  if any,  between (1) the  estimated  value of the
Inventory  and the  Fixed  Assets  totaling  Three  Million  Three  Hundred
Eighteen  Thousand Three Hundred Twenty  ($3,318,320) (the "Estimated Asset
Value"),  and (2) the value of the Inventory and Fixed Assets  reflected in
the Physical Inventory (the "Actual Asset Value").

(i) In the event that the  Estimated  Asset Value is greater than
the Actual  Asset  Value,  the  principal  amount of the Note shall be
reduced to reflect the  difference  between the Estimated  Asset Value
and the Actual Asset Value.

(ii) In the event that the Actual Asset Value is greater than the
Estimated  Asset  Value,  the  principal  amount of the Note  shall be
increased to reflect the difference between the Actual Asset Value and
the Estimated Asset Value.

(b) For purposes of  determining  the Actual  Asset Value  pursuant to
this Section 2.3, (i) the value of all raw  materials,  work in process and
finished  goods  inventory  shall reflect  IFM's fully  absorbed cost which
shall  be equal  to the  original  cost of such  Inventory,  excluding  any

6

write-off or discount  subsequently taken by IFM with respect thereto,  and
(ii) the value of the Fixed  Assets  shall be the book value for such Fixed
Assets,   calculated  in  accordance  with  generally  accepted  accounting
principles.

(c) In connection with the Purchase Price adjustment  pursuant to this
Section 2.3, the Parties shall take into account the appropriate prorations
for the following items: utilities,  phone service, deposits, rent, prepaid
items and  employee  compensation.  IFM shall be  responsible  for all such
expenses  incurred or accruing  prior to October 1, 2000, and Horizon shall
be  responsible  for all such  expenses  incurred  or  accruing on or after
October 1, 2000.

(d) In the event that the parties are unable to agree on the amount of
the Purchase  Price  adjustment  required  pursuant to this Section 2.3, if
any, within twenty (20) days after the Closing Date,  Horizon and IFM shall
engage an independent accounting firm ("IA") at such time, to determine the
amount of the Purchase Price  adjustment.  The cost of the IA shall be paid
equally by both parties. The decision of the IA shall be made within thirty
(30)  days  after  being  engaged  and shall be final  and  binding  on the
parties. In the event that Horizon and IFM are unable to agree on the IA by
the  twentieth  (20th) day after the Closing  Date,  any dispute under this
Section 2.3 shall be settled in accordance  with the  provisions of Section
2.4(b).

(e) Any  adjustment to the Purchase  Price  required  pursuant to this
Section 2.3 will be made against the principal  balance of the Note. In the
event of such  adjustment,  IFM shall surrender the Note, and Horizon shall
execute and deliver to IFM an amended and restated  Note that reflects such
adjustment. In such case, the original Note shall be canceled regardless of
any failure of IFM to deliver said Note, which failure shall not affect the
amendment and restatement of the Note. Any failure of Horizon to deliver an
amended  and  restated  Note if  required  hereunder  shall not  affect the
obligation to make payments as required hereunder.

2.4 Refund for Damaged Finished Goods Inventory.

(a) IFM and CryoLife agree to reduce the principal  amount of the Note
by the price paid by Horizon for any Defective  Product in accordance  with
this Section 2.4. On or before the ninetieth  (90th) day after  delivery of
the  Inventory  pursuant to Section 2.5,  Horizon shall return all products
which  are  alleged  to be  Defective  Products  to  IFM  or  CryoLife  for
inspection  with a  description  of the  alleged  defect or damage.  If IFM
determines  in good  faith that a product is a  Defective  Product,  IFM or
CryoLife  shall  agree to reduce  the  principal  amount of the Note by the
price paid by Horizon for each such Defective Product. In the event of such
a reduction,  IFM shall  surrender the Note,  and Horizon shall execute and
deliver to IFM or CryoLife an amended and restated  note that reflects such
adjustment.

(b) Any dispute  between the parties  under this  Section 2.4 shall be
settled  by  arbitration  conducted  in  Atlanta,  Georgia  before  and  in
accordance  with the then existing Rules for Commercial  Arbitration of the

7

American  Arbitration  Association,  provided  that only one  arbitrator as
selected  by  the  American  Arbitration   Association  shall  conduct  any
arbitration  proceeding.  Any arbitration  shall be final and binding.  Any
judgment  upon  any  interim  or  final  award  or  order  rendered  by the
arbitrator may be entered by any federal or state court having jurisdiction
thereof. Each party in the arbitration  proceeding shall bear its own costs
and expenses of  investigating,  preparing,  and pursuing such  arbitration
claim.  The cost of the  arbitration  shall be borne by the  non-prevailing
party which the arbitration will determine in such arbitration  proceeding.
In the event that the  arbitrator  is unable to determine a prevailing  and
non-prevailing party, the cost of arbitration will be shared equally.

2.5 Shipment of Finished Goods Inventory to Horizon.  On or before the
sixtieth  (60th)  business  day after the  Closing  Date,  IFM will  deliver the
Finished Goods Inventory which is located at any location (a "Storage Location")
other than the  Premises  (as defined in Section  4.7) to Horizon or its carrier
F.O.B. such Storage Location. IFM shall deliver such finished Goods Inventory at
such times and in such number of shipments as instructed  by Horizon;  provided,
however, that the number of shipments requested by Horizon shall not exceed four
(4) shipments.

2.6 Manufacturing Agreement. Horizon and IFM hereby agree to terminate
that certain  Manufacturing  Agreement  dated as of September  30, 1998,  by and
between Horizon and IFM (the "Manufacturing  Agreement"), as of the Closing Date
and agree that the Manufacturing Agreement shall have no further force or effect
after the Closing Date; provided, however, that the provisions of Sections 6, 8,
9, 12, 14,  17, 18 and 19 of the  Manufacturing  Agreement  shall  survive  such
termination.  The parties  acknowledge  and agree that upon  termination  of the
Manufacturing  Agreement  as  provided  herein,  (i)  Horizon  shall not owe any
further payment to IFM under the Manufacturing Agreement, (ii) Horizon shall not
be subject to any claims,  liabilities,  obligations,  losses, costs,  expenses,
penalties,   fines  or  other  judgments  (at  equity  or  at  law)  or  damages
(collectively,  "Damages"),  whenever  arising or  incurred,  arising  out of or
relating to Horizon's  default under the  Manufacturing  Agreement  prior to the
date  hereof,  excluding  Damages  for  which  the other  party is  entitled  to
indemnification  pursuant  to  Section  6  thereof,  and  (iii) IFM shall not be
subject to any Damages, whenever arising or incurred, arising out of or relating
to default by IFM, if any, under the  Manufacturing  Agreement prior to the date
hereof,   excluding   Damages   for  which  the  other   party  is  entitled  to
indemnification pursuant to Section 6 thereof.

3. Closing.

3.1 Date and Place of Closing.  The purchase and sale of the Purchased
Assets contemplated by this Agreement (the "Closing") shall occur at the offices
of King & Spalding at 191 Peachtree Street, Atlanta,  Georgia on October 9, 2000
(the "Closing Date").  The term "Effective Date" as used in this Agreement shall
mean the opening of business on October 1, 2000.

3.2  Deliveries by IFM. At the Closing,  IFM shall deliver or cause to
be delivered to Horizon the following:

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(a) An  executed  copy of the  Guaranty  of  CryoLife  in the  form of
Exhibit B hereto (the "CryoLife Guaranty");

(b) An executed copy of the Bill of Sale and General  Assignment  from
IFM in the form of Exhibit C hereto (the "Bill of Sale") conveying good and
marketable  title to the  Purchased  Assets  free and  clear of all  liens,
mortgages,  pledges, security interests,  restrictions,  prior assignments,
charges,  encumbrances,  equities,  and other  claims of any kind or nature
whatsoever (collectively, "Encumbrances");

(c) An executed copy of the Assignment and Assumption Agreement in the
form of  Exhibit  D hereto  (the  "Assignment  and  Assumption  Agreement")
assigning the Assigned Contracts to Horizon;

(d) A legal  opinion of Arnall,  Golden & Gregory,  counsel to IFM, in
the form of Exhibit E hereto; 

(e) An executed copy of the Sublease  Agreement in the form of Exhibit
F hereto (the "Sublease Agreement");

(f) An executed  copy of the  Manufacturing,  Assembly  and  Packaging
Agreement in the form of Exhibit G hereto (the "Manufacturing, Assembly and
Packaging  Agreement"),  pursuant to which Horizon  shall  provide  certain
manufacturing, assembly and packaging services to CryoLife;

(g) An executed copy of the Transition  Services Agreement in the form
of Exhibit H hereto (the "Transition Services Agreement"),  whereby IFM and
CryoLife agree to continue to provide  information  technology,  accounting
and laboratory services during the transition period;

(h) A certificate of IFM as required by Section 7.3 hereof;

(i) A certified  copy of the corporate  charter and bylaws of IFM, and
the resolutions of the Board of Directors of IFM and the  shareholder(s) of
IFM authorizing the transactions contemplated by this Agreement;

(j)  Certificates  from the appropriate  public  officials  evidencing
IFM's  good  standing  in  its  state  of   incorporation   and  any  other
jurisdiction in which IFM is qualified to conduct business;

(k) The  written  consent  of each  party  to the  Assigned  Contracts
consenting to the  assignment of such Assigned  Contract if such consent is
required under such Assigned Contract;

(l) Actual possession and operating control of the Purchased Assets;

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(m) A list of open purchase orders for materials  purchased by IFM but
not yet received by IFM, together with any supporting materials relating to
such open purchase orders as Horizon shall reasonably request; and

(n) Such other instruments,  assignments,  terminations, releases, and
other instruments of transfer,  assignment,  and release of IFM as shall be
reasonably  deemed  necessary  by  Horizon  to vest  in  Horizon  good  and
marketable  title to the  Purchased  Assets,  free and clear of any and all
Encumbrances.

3.3  Deliveries by Horizon.  At the Closing,  Horizon shall deliver or
cause to be delivered to IFM the following:

(a) The Purchase Price in the manner provided by Section 2 hereof,

(b) An executed copy of a Security  Agreement in the form of Exhibit I
hereto  evidencing  a  security  interest  in all of the  Purchased  Assets
purchased by Horizon to secure  payment of the Note which will be junior in
priority  to  the  security  interests  granted  to  secure  (i)  Horizon's
Obligations  (as  defined  in that  certain  Amended  and  Restated  Credit
Agreement dated as of May 26, 1998,  among Horizon,  Bank of America,  N.A.
f/k/a  NationsCredit   Commercial   Corporation   ("Lendee"),   and  Stepic
Corporation,  Horizon  Acquisition  Corp.,  and  Strato/Infusaid  Inc.,  as
Guarantors, as amended prior to or following the date hereof (collectively,
the "Credit  Agreement")) under or in connection with the Credit Agreement,
as the Credit Agreement and/or such Obligations may be increased,  renewed,
modified,  extended or  otherwise  changed in the  absolute  discretion  of
Lender,  and  (ii)  any  future  bank  indebtedness  incurred  by  Horizon;
provided,  however, that in no event shall the aggregate of subsections (i)
and (ii) above exceed Sixty-Five Million Dollars ($65,000,000) of principal
indebtedness,  exclusive of interest, fees and other charges (collectively,
the "Bank Indebtedness").

(c) An executed  copy of the  Manufacturing,  Assembly  and  Packaging
Agreement;

(d) An executed copy of the Transition Services Agreement;

(e) A legal opinion of King & Spalding, counsel to Horizon in the form
of Exhibit J hereto; 

(f) A certificate of Horizon as required by Section 8.2 hereof;

(g) A certified  copy of the corporate  charter and bylaws of Horizon,
and the  resolutions of the Board of Directors of Horizon  authorizing  the
transactions contemplated by this Agreement;

(h) A Certificate  from the  Secretary of State of Georgia  evidencing
Horizon's good standing in the State of Georgia,  and Certificates from any
states where Horizon is qualified to do business as a foreign corporation;

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(i) An executed copy of the Assignment and Assumption Agreement; and

(j) An executed copy of the Sublease Agreement.

4.  Representations  and  Warranties of IFM. In order to induce  Horizon to
enter  into this  Agreement  and to  consummate  the  transactions  contemplated
hereunder, IFM represents and warrants to and covenants with Horizon that:

4.1  Organization  and  Good  Standing.  IFM  is  a  corporation  duly
organized, validly existing, and in good standing under the laws of Florida, and
has the  requisite  corporate  power and  authority  to execute and deliver this
Agreement and all other documents,  agreements, and certificates  (collectively,
the "IFM Transfer Documents") which are required to be executed and delivered by
IFM pursuant to this  Agreement  and to perform in all respects its  obligations
hereunder and  thereunder.  IFM is duly qualified or licensed to do business and
in good standing in each jurisdiction in which the nature of its business or the
character  of the  assets  owned or leased by IFM makes  such  qualification  or
licensing  necessary,  except  where the failure to be so  qualified or licensed
would not materially  impair or adversely affect the  transactions  contemplated
hereunder.  IFM has all of the necessary local,  state, and federal licenses and
permits to carry on and operate the Business.

4.2 Due  Authorization;  Enforceability;  No Conflict.  The execution,
delivery,  and performance of this Agreement and the IFM Transfer Documents have
been duly authorized by all requisite  corporate action on the part of IFM. This
Agreement has been duly executed and delivered by IFM and constitutes,  and each
of the IFM Transfer Documents when executed and delivered will constitute, valid
and binding  obligations of IFM,  enforceable in accordance  with and subject to
their   respective   terms,   except  as  limited  by  bankruptcy,   insolvency,
reorganization,  and similar laws affecting the enforcement of creditors' rights
or contractual obligations generally.  Except as expressly described in Schedule
4.2, the execution,  delivery,  and performance by IFM of this Agreement and IFM
Transfer Documents, the assignment of IFM's rights under the Assigned Contracts,
and the  consummation of the transactions  contemplated  hereby and thereby will
not:

(a) violate any provision of the Articles of  Incorporation  or bylaws
of IFM;

(b)  result in the  creation  of any  liens,  security  interests,  or
encumbrances  upon any of the Purchased  Assets,  assuming the consents set
forth on Schedule 4.2 are obtained;

(c) violate any  provision  of any judicial or  administrative  order,
award, judgment, or decree applicable to IFM;

(d)  conflict  with,  result in a material  breach of or  constitute a
default  under any  agreement or  instrument  to which IFM is a party or by
which it is bound,  assuming  the  consents  set forth on Schedule  4.2 are
obtained;

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(e) violate,  in any  material  respect,  any  applicable  law,  rule,
ordinance, or regulation applicable to IFM; or

(f) require IFM to obtain the consent,  approval, or authorization of,
or require IFM to file with,  any  federal,  state,  or local  governmental
authority or agency, any lender or lien holder, or other person or entity.

4.3  Litigation.  There are no  judicial  or  administrative  actions,
suits,  or proceedings or, to the knowledge of IFM, any  investigations  pending
against IFM or CryoLife which would, if adversely determined,  prevent,  hinder,
delay,  or  otherwise  adversely  affect the  consummation  of the  transactions
contemplated  hereby.  IFM is not a party to or subject to the provisions of any
order,  decree,  or judgment of any court or of any  governmental  authority  or
agency which may prevent, hinder, or otherwise adversely affect the consummation
of the  transactions  contemplated  hereby.  Except as  expressly  described  in
Schedule  4.3, to the  knowledge  of IFM,  there are no  outstanding  or pending
product liability,  intellectual property infringement or other claims that have
been asserted  against IFM, nor are there any outstanding or pending claims that
have been asserted against CryoLife arising out of or related to the Business or
the Purchased Assets.

4.4 Ownership of Assets.

(a) On the Closing  Date,  IFM will have,  and upon  completion of the
Closing will have  conveyed to Horizon,  good and  marketable  title to the
Purchased Assets, free and clear of any and all Encumbrances.

(b) All  equipment  and other  items of tangible  property  and assets
which are included in the Purchased Assets are in good operating  condition
and repair  subject to normal wear and  maintenance,  and are usable in the
regular and ordinary course of business.

(c) There are no existing agreements,  options,  commitments or rights
with,  of or to any  person to acquire  any of the  assets,  properties  or
rights included in the Purchased Assets or any interest therein.

4.5 Tax Returns;  Taxes. IFM has duly filed all federal,  state, local
and  foreign  tax returns  required  to be filed by them,  all such  returns are
accurate  in all  material  respects,  and IFM has  duly  paid or made  adequate
provisions for the payment of all taxes  (including any interest,  penalties and
additions  to tax) which are due or payable  pursuant  to such  returns or which
otherwise are due and payable in any jurisdiction,  whether or not in connection
with such  returns.  There are no pending  claims  asserted  for taxes of IFM or
outstanding  agreements or waivers  extending the statutory period of limitation
applicable  to any  tax  return  of IFM or  outstanding  agreements  or  waivers
extending the statutory period of limitation applicable to any tax return of IFM
for any period that would affect the Business or the transaction contemplated by
this  Agreement or any of IFM  Transfer  Documents.  IFM has made all  estimated
income tax  deposits  and all other  required  tax payments or deposits and have
complied for all prior periods in all material respects with the tax withholding
provisions of all applicable federal, state, local and other laws.

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4.6  Inventory.  The  Inventory  is of good and usable  quality and is
merchantable and saleable in the ordinary course of business.

4.7  Insurance.  Schedule  4.7 hereto  sets  forth a true and  correct
description  of all insurance  policies of any nature  whatsoever  maintained by
CryoLife or IFM on the date of this  Agreement  relating to the  Business or any
property owned, leased or used by IFM (the "Premises"). Neither CryoLife nor IFM
has received  notice of a  cancellation  with respect to such policies or of any
default  thereunder.  Each  of IFM or  CryoLife  has  complied  in all  material
respects  with the terms and  provisions of such  policies.  Within the past two
years,  neither  CryoLife nor IFM has been refused any basic insurance  coverage
applied for with respect to the Business.

4.8. Intellectual Property.  Except as expressly described on Schedule
4.8:

(a) No  interference  or  infringement  actions or other  judicial  or
adversary  proceedings  concerning any of such items of intangible personal
property are pending, and to the best of IFM's knowledge, no such action or
proceeding is threatened;

(b) To the best of IFM's knowledge, IFM has the right and authority to
use the  Intellectual  Property  in  connection  with  the  conduct  of the
Business  in the  manner  presently  conducted,  and to the  best of  IFM's
knowledge,  such use does not conflict with,  infringe upon, or violate any
rights of any other person, firm, or corporation;

(c)  There  are no  outstanding  or,  to the best of IFM's  knowledge,
threatened  disputes  or other  disagreements  with  respect  to any of the
Intellectual Property;

(d) To the best of IFM's knowledge, there is no proprietary intangible
personal  property  used in any material  respect in the  operations of the
Business as  presently  conducted  that is not owned by or licensed to IFM;
and

(e) To the best of IFM's knowledge,  none of the Intellectual Property
is  subject  to  any  outstanding  order,  ruling,   decree,   judgment  or
stipulation by or with any court, arbitrator, or administrative agency, nor
has any of the  Intellectual  Property  been the subject of any  litigation
involving  IFM or  CryoLife  within  the last four  years,  whether  or not
resolved in favor of IFM.

4.9 Contracts.  Schedule 4.9 hereto sets forth a true and correct list
of each contract  pertaining to the Business (other than the Assigned  Contracts
and  the  Manufacturing   Agreement)  to  which  IFM  or  CryoLife  is  a  party
(collectively  and  together  with the Assigned  Contracts,  but  excluding  the
Manufacturing Agreement, the "Contracts"). True, complete, and correct copies of
each of the  Contracts,  or where  they are  oral,  true  and  complete  written
summaries  thereof,  have been delivered to Horizon by IFM.  Except as expressly
described on Schedule 4.9:

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(a) IFM has fulfilled all material  obligations  required  pursuant to
each Contract to have been performed by IFM;

(b) There has not occurred any default  under any of the  Contracts on
the part of IFM or, to the best  knowledge of IFM, on the part of any other
party thereto,  nor has any event occurred which, with the giving of notice
or the lapse of time,  or both,  would  constitute a default on the part of
IFM under any of the Contracts,  nor, to the best of IFM's  knowledge,  has
any event occurred  which,  with the giving of notice or the lapse of time,
or both,  would  constitute a default on the part of any other party to any
of the Contracts;

(c) Except for the consents  described on Schedule  4.2, no consent of
any party to any of the Contracts is required for the execution,  delivery,
or performance of this Agreement or the  consummation  of the  transactions
contemplated hereby; and

(d) All such  Contracts  are in full force and effect and  enforceable
against IFM and each other party thereto.

4.10 Compliance with Law; FDA Matters.

(a)  Except as set forth on  Schedule  4.10(a),  IFM has all  material
authorizations, approvals, licenses and orders of and from all governmental
and regulatory offices, agencies, officers and bodies necessary to carry on
the Business as it is currently being conducted, to own or hold under lease
the  properties  and assets it owns or holds under lease and to perform all
of  its   obligations   under  all  agreements  to  which  it  is  a  party
(collectively,  the  "Material  Licenses"),  and  IFM  has  been  and is in
compliance with all applicable laws,  regulations and administrative orders
of any country,  state or  municipality  or of any  subdivision  thereof to
which its business and its  employment  of labor or its use or occupancy of
properties  or any part thereof are  subject,  the failure to obtain or the
violation  of which  would have a Material  Adverse  Effect (as  defined in
Section  4.12(b)).  Schedule 4.10(a) sets forth a true and complete list of
all Material Licenses.

(b) With respect to the Business and the Purchased Assets:

(i) IFM has  been  and is in  compliance  with  all  current  and
otherwise applicable statutes, rules, regulations,  standards,  guides
or  orders  pertaining  to the  Purchased  Assets  (each a  "Law"  and
collectively  the "Laws")  administered  or issued by the federal Food
and Drug Administration ("FDA") and all other federal, state, local or
foreign governmental  departments,  regulatory agencies,  authorities,
commissions,  boards or courts or other law, rule or regulation-making
entities  having  regulatory  authority  over  CryoLife,  IFM  or  the
Business  (the  "Authorities"),  except for any such failure to comply
that would not have a Material Adverse Effect; and

14

(ii)  Except as set forth on  Schedule  4.10(b)(ii),  IFM has not
received any notice of adverse findings,  warning letters, Section 305
notices,  subpoenas or other similar communications by any Authorities
since September 30, 1998 related to the Purchased Assets.

(c)  There  have  been no  recalls,  field  notifications,  alerts  or
seizures  requested or  threatened  relating to the  Purchased  Assets that
Horizon has not itself directed.

(d) IFM has made available to Horizon a copy of all its European Union
notified  body's  certifications  and all  FDA  inspection  reports  ("Form
483's")  or  comparable  reports  of foreign  authorities  relating  to the
Business, IFM's responses to such Form 483's or comparable foreign reports.
In addition,  IFM will make  available to Horizon  information  relating to
design  dossiers  for  the  Excluded   Products  during  the  term  of  the
Manufacturing, Assembly and Packaging Agreement.

(e) The  representations and warranties set forth in this Section 4.10
shall not apply to any environmental  matters with respect to which Section
4.17 shall solely apply.

4.11 Transactions with Affiliates. Except for the Contracts identified
on Schedule 4.11, no officer or director of IFM or CryoLife has any interest in:
(i) any  contract,  arrangement  or  understanding  with,  or  relating  to, the
Business or the Purchased  Assets;  (ii) any loan,  arrangement,  understanding,
agreement or contract for or relating to the Business or the  Purchased  Assets;
or (iii) any property (real, personal or mixed), tangible or intangible, used or
currently intended to be used in the Business.

4.12 Financial Statements, Absence of Changes, and Related Matters.

(a) IFM has delivered to Horizon (i) the unaudited  balance  sheets of
IFM as of  December  31, 1999 and the related  statements  of revenues  and
expenses for the fiscal years then ending;  and (ii) the unaudited  balance
sheet of IFM as of August 31, 2000 (the  "Interim  Balance  Sheet") and the
related  unaudited  statements  of revenues and expenses for the  quarterly
period then ended (the "Interim Balance Sheet Date").  All of the foregoing
financial  statements  are  hereinafter  collectively  referred  to as  the
"Financial  Statements."  The Financial  Statements have been prepared from
and are in accordance  with the books and records of IFM and present fairly
the financial position and results of operations of IFM, in accordance with
GAAP, as of the dates for the periods indicated.

(b) Since the Interim  Balance Sheet Date,  there has not been (i) any
material   adverse  effect  upon  the  assets,   liabilities,   results  of
operations,  financial condition,  business or prospects of the Business (a
"Material Adverse Effect"), (ii) any damage, destruction,  loss or casualty
to  property or assets of the  Business,  not  covered by  insurance  which
property or assets are  material to the  Business,  (iii) any  liability or
obligation  (absolute,  accrued or  contingent)  incurred  or any bad debt,
contingency or other reserve increased suffering, except, in each such case

15

in the ordinary course of business and consistent with past practice,  (iv)
any  cancellation  of any  debts or  waiver  of any  claims  or  rights  of
substantial value, or sale, transfer or other disposition of any properties
or assets real,  personal or mixed,  tangible or intangible) of substantial
value relating to the Business, except in each such case in transactions in
the ordinary course of business and consistent with past practice,  (v) any
transactions entered into other than in the ordinary course of business, or
(vi) any agreements to do any of the foregoing (other than this Agreement).

4.13  Hart-Scott-Rodino.   No  shareholder  of  CryoLife  directly  or
indirectly  beneficially  owns  or has  the  right  to  vote  50% or more of the
outstanding voting securities of CryoLife,  or, directly or indirectly,  has the
right  (whether by contract or otherwise) to elect 50% or more of the members of
the board of directors of CryoLife.  The total assets (within the meaning of the
Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976, as amended) of CryoLife
are less than $100,000,000 in the aggregate.

4.14 Officers,  Directors and Employees.  Schedule 4.14 contains (a) a
true and complete list of all of the officers and  directors of IFM,  specifying
(i)  their  office,  and (ii)  their  salary,  bonuses,  commissions  and  other
compensation  programs  paid by IFM, and (b) a true and complete  list of all of
the employees of IFM as of the date hereof together with an appropriate notation
next to the name of any  employee  on such  list  with  whom  IFM has a  written
employment  agreement  or to whom  IFM has made  verbal  commitments  which  are
binding on IFM.

4.15 Employee Benefit Plans.

(a)  Definition of Benefit  Plans.  For purposes of this Section 4.15,
the term "IFM Benefit  Plan" means any plan,  program,  arrangement,  fund,
policy, practice or contract which, through which or under which IFM or any
IFM  ERISA  Affiliate  (as  hereinafter   defined)   provides  benefits  or
compensation to or on behalf of employees or former employees of IFM or any
IFM ERISA  Affiliate,  whether formal or informal,  whether or not written,
including but not limited to the following:

(i)  Arrangements.  Any  bonus,  incentive  compensation,   stock
option,  deferred  compensation,  commission,  severance  pay,  golden
parachute or other compensation plan or rabbi trust;

(ii) ERISA  Plans.  Any  "employee  benefit  plan" (as defined in
Section 3(3) of the Employee  Retirement  Income Security Act of 1974,
as  amended   ("ERISA")),   including,   but  not   limited   to,  any
multiemployer  plan (as defined in Section  3(37) and Section  4001(a)
(3) of ERISA),  defined  benefit  plan,  profit  sharing  plan,  money
purchase  pension  plan,  401(k) plan,  savings or thrift plan,  stock
bonus plan, employee stock ownership plan, or any plan, fund, program,
arrangement   or   practice    providing   for   medical    (including
post-retirement   medical),   hospitalization,   accident,   sickness,
disability, or life insurance benefits; and

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(iii)  Other  Employee  Fringe  Benefits.   Any  stock  purchase,
vacation,  scholarship,  day care,  prepaid legal services,  dependent
care or other fringe benefit plans, programs, arrangements,  contracts
or practices.

(b) IFM ERISA  Affiliate.  For purposes of this Section 4.15, the term
"IFM  ERISA  Affiliate"  means  each  trade  or  business  (whether  or not
incorporated) which together with IFM is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Internal Revenue Code (the "Code").

(c) Identification of Benefit Plans.  Except for (i) those IFM Benefit
Plans  identified in Schedule  4.15,  and (ii) IFM Benefit Plans which have
been  terminated  and with  respect to which  neither IFM nor any IFM ERISA
Affiliate has any material  financial,  administrative  or other liability,
obligation or responsibility,  IFM neither maintains,  nor have they at any
time established or maintained, nor have they at any time been obligated to
make,  or  otherwise   made,   contributions   to  or  under  or  otherwise
participated in any IFM Benefit Plan.

(d) MEPPA  Liability/Post-Retirement  Medical Benefits/Defined Benefit
Plans/Supplemental  Retirement  Plans.  Neither  IFM,  nor  any  IFM  ERISA
Affiliate maintains,  or has at any time established or maintained,  or has
at any time been obligated to make, or made,  contributions to or under any
multiemployer  plan (as defined in Section 3(37) and Section  4001(a)(3) of
ERISA).  IFM  does  not  maintain,  nor  has at  any  time  established  or
maintained,  nor  has  at  any  time  been  obligated  to  make,  or  made,
contributions  to or under  (i) any  plan  which  provides  post-retirement
medical or health  benefits  with  respect to  employees  of IFM,  (ii) any
organization  described in Sections  501(c)(9) or  501(c)(20)  of the Code,
(iii) any defined benefit pension plan subject to Title IV of ERISA.

(e)  Compliance  with  Laws.  Each  IFM  Benefit  Plan is in  material
compliance with the provisions of all applicable  laws  including,  but not
limited  to,  ERISA and the Code with  respect  to the  administration  and
documentation  of said plan. In addition,  all medical benefit plans are in
material compliance with the provisions of the Consolidated  Omnibus Budget
Reconciliation  Act relating to the  continuance  of insurance  coverage or
benefit  coverage  and  with  the  requirements  of  the  Health  Insurance
Portability and Accountability Act.

(f)  Qualified  Status.  Each IFM  Benefit  Plan  that is an  employee
benefit  plan  (within the meaning of Section 3(2) of ERISA) that is funded
through a trust or insurance  contract or is a welfare benefit plan (within
the  meaning of Section  3(l) of ERISA)  funded  through a trust has at all
times  satisfied  in  all  material  respects,  by  its  terms  and  in its
operation, all applicable requirements for an exemption from federal income
taxation  under Section  501(a) of the Code.  Neither IFM nor any IFM ERISA
Affiliate  maintains or has previously  maintained a IFM Benefit Plan which
meets or was  intended to meet the  requirements  of Section  401(a) of the
Code except as disclosed on Schedule 4.15.

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(g) Legal Actions. There are no actions, audits, suits or claims which
are pending or, to the knowledge of IFM, threatened against any IFM Benefit
Plan, any fiduciary of any of IFM Benefit Plans with respect to IFM Benefit
Plans or against the assets of any of IFM Benefit Plans,  except claims for
benefits made in the ordinary course of the operation of such plans.

(h) Funding.  Each of IFM and each IFM ERISA  Affiliate  has made full
and timely  payment of all  amounts  required to be  contributed  under the
terms of each IFM Benefit Plan and applicable law or required to be paid as
expenses under such IFM Benefit Plan, and no excise taxes are assessable as
a result of any nondeductible or other  contributions made or not made to a
IFM Benefit  Plan.  The assets of all IFM Benefit  Plans which are required
under  applicable  laws to be held in trust are in fact held in trust,  and
the assets of each such IFM Benefit Plan equal or exceed the liabilities of
each such  plan.  The  liabilities  of each  other  plan are  properly  and
accurately  reported on the  financial  statements  and records of IFM. The
assets of each IFM Benefit  Plan are reported at their fair market value on
the books and records of each plan.

(i) Liabilities. Neither IFM nor any IFM ERISA Affiliate is subject to
any material  liability,  tax or penalty to any person as a result of IFM's
or any ERISA Affiliate's  engaging in a prohibited  transaction under ERISA
or the Code, and IFM has no knowledge of any circumstances which reasonably
might result in any such material liability,  tax or penalty as a result of
a breach of fiduciary  duty under  ERISA.  No IFM Benefit Plan has suffered
any  accumulated  funding  deficiency  within the meaning of Section 302 of
ERISA and  Section 412 of the Code.  There is no lien upon any  property of
IFM or any IFM ERISA  Affiliate  outstanding  pursuant to Section 412(n) of
the  Code in favor  of any IFM  Plan.  No  assets  of IFM or any IFM  ERISA
Affiliate  have been  provided  as  security  to any IFM Plan  pursuant  to
Section 401 (a) (29) of the Code.

(j) CIGNA Plan.  The only IFM Benefit Plan which  provides  healthcare
benefits to IFM employees is a fully  insured,  group health plan issued in
the State of Florida which IFM purchased from CIGNA  HealthCare (the "CIGNA
Plan").  Except  as set  forth on  Schedule  4.15(j),  IFM pays 100% of the
premiums  for  each  employee's  coverage  under  the  CIGNA  Plan for each
calendar  month (either in whole or in part from IFM's general assets or in
whole or in part from payroll  deductions  duly authorized by each affected
employee), and all such monthly premium for such coverage for each calendar
month  are  paid  at the  beginning  of each  such  calendar  month.  CIGNA
HealthCare  has no  right  to  receive  any  payments  from  IFM or any IFM
employee for such  coverage in addition to such monthly  premium  payments,
and IFM has no right to any refunds or rebates from CIGNA  HealthCare  with
respect to any such coverage.

4.16 Labor Relations.  IFM is in material  compliance with all federal
and  state  laws  respecting  employment  and  employment  practices,  terms and
conditions of employment,  wages and hours, and IFM is not engaged in any unfair
labor or unlawful employment practice.  There is no unlawful employment practice
or  discrimination  charge  pending  before  the  Equal  Employment  Opportunity
Commission  ("EEOC"),  EEOC  recognized  state  "referral  agency"  or any other
governmental  agency.  There is no unfair  labor  practice  charge or  complaint
against IFM pending before the National Labor Relations Board ("NLRB"). There is
no labor strike, dispute,  slowdown or stoppage actually pending or, to the best

18

knowledge of IFM,  threatened  against or involving or affecting IFM and no NLRB
representation  question exists respecting the employees of IFM. No grievance or
arbitration  proceeding relating to the employees of IFM is pending, and, to the
knowledge  of IFM, no written  claim  therefor  exists with  respect to any such
employees. There is no collective bargaining agreement that is binding on IFM.

4.17 Environmental Matters. To the best of IFM's knowledge,  except as
disclosed  on  Schedule  4.17  and in the  environmental  report  (the  "Horizon
Environmental  Report")  done by Horizon on the  Premises (as defined in Section
4.7 above) and except for such  failure to comply that would not have a Material
Adverse  Effect,  IFM  is in  compliance  with  all  statutes,  regulations  and
ordinances and common law requirements  relating to hazardous  substances and/or
the  protection  of  human  health  and  the  environment   including,   without
limitation,  the Clean  Water Act,  33 U.S.C.  ss.  1251 et seq.,  the  Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., the Clean Air Act, 42
U.S.C. ss. 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et
seq., the Emergency Planning  Community  Right-to-Know Act, 42 U.S.C. ss. 11,001
et  seq.,  the  regulations   developed  pursuant  to  these  statutes  and  the
corresponding state and local statutes,  ordinances and regulations. To the best
of IFM's  knowledge,  except  as  disclosed  on  Schedule  4.17 and the  Horizon
Environmental  Report,  IFM  possesses  all permits,  authorizations,  and other
governmental  approvals  and  registrations  required  under any  statute,  law,
ordinance,   regulation,  or  other  legally  binding  requirement  relating  to
hazardous  substances  and/or the protection of human health and the environment
as are necessary for the continued  operation of the Business,  is in compliance
with all such permits,  authorizations,  and approvals,  and no proceedings  are
pending to revoke or modify such permits,  authorizations,  or approvals, except
for a  failure,  non-compliance,  or  proceeding  that would not have a Material
Adverse Effect. To the best of IFM's knowledge,  except as disclosed on Schedule
4.17 and the  Horizon  Environmental  Report,  there  has been no  release  of a
"hazardous substance" as that term is defined in the Comprehensive Environmental
Response,  Compensation  and Liability Act of 1980, 42 U.S.C.  ss. 9601(14) into
the environment at the Premises, including, without limitation, any such release
in the soil or  groundwater  underlying or adjacent to the Premises,  except for
such  releases  that would not have a Material  Adverse  Effect.  To the best of
IFM's  knowledge,   except  as  disclosed  on  Schedule  4.17  and  the  Horizon
Environmental  Report,  there  is  no  asbestos,  polychlorinated  biphenyls  or
underground  storage  tank  located  on the  Premises,  and  there  have been no
releases at, on or under the Premises of asbestos,  polychlorinated biphenyls or
materials stored in underground  storage tanks,  including,  without limitation,
petroleum or petroleum-based materials,  except for such releases that would not
have a Material  Adverse Effect.  IFM has not received  written notice of and no
IFM officer has  received  any oral or written  notice of any  violation  of any
environmental  statute or  regulation or other legal  requirement  pertaining to
environmental  matters,  nor has IFM  been  advised  of any  material  claim  or
liability  pursuant to any  environmental  statute or  regulation or other legal
requirement  pertaining to  environmental  matters  brought by any  governmental
agency or private party.

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4.18 Property.

(a) To the best of IFM's knowledge,  the structures owned or leased by
IFM are structurally  sound,  are in good and safe operating  condition and
repair and are  adequate  for the uses to which they are being put,  except
for maintenance performed in the ordinary course of business.

(b) Schedule 4.18(b) hereto sets forth a true and correct  description
of each of the services provided to IFM by CryoLife.

4.19 Brokers. Neither IFM nor CryoLife has not retained,  employed, or
dealt with any third-party  broker,  finder,  or investment banker in connection
with this  Agreement or the  transactions  contemplated  hereby and no broker or
other  third-party  is entitled to any commission or finder's fee as a result of
any agreement or action taken by IFM or its  affiliates in connection  with such
transactions.

5. Horizon's Representations and Warranties.  Horizon hereby represents and
warrants to IFM as follows:

5.1  Organization  and Good  Standing.  Horizon is a corporation  duly
organized, validly existing, and in good standing under the laws of Georgia, and
has the  requisite  corporate  power and  authority  to execute and deliver this
Agreement and the documents,  agreements,  and certificates  (collectively,  the
"Horizon Transfer Documents") which are required to be executed and delivered by
Horizon  pursuant  to  this  Agreement  and  to  perform  in  all  respects  its
obligations hereunder and thereunder.

5.2 Due  Authorization;  Enforceability;  No Conflict.  The execution,
delivery,  and performance of this Agreement and the Horizon Transfer  Documents
have been  duly  authorized  by all  requisite  corporate  action on the part of
Horizon.  This  Agreement  has been duly  executed and  delivered by Horizon and
constitutes,  and each of the  Horizon  Transfer  Documents  when  executed  and
delivered  will  constitute,  the  valid  and  binding  obligation  of  Horizon,
enforceable in accordance with and subject to their respective terms,  except as
limited by bankruptcy,  insolvency,  reorganization,  and similar laws affecting
the  enforceability of creditors' rights or contractual  obligations  generally.
Except as set forth on Schedule 5.2 attached  hereto,  the execution,  delivery,
and performance by Horizon of this Agreement and the Horizon Transfer  Documents
and the  consummation of the transactions  contemplated  hereby and thereby will
not:

(a) Violate any provision of the Articles of  Incorporation  or bylaws
of Horizon;

(b) Violate any provision of any judicial,  arbitral or administrative
order, award, judgment, or decree applicable to Horizon;

(c)  Conflict  with,  result in a material  breach of or  constitute a
default under any agreement or instrument to which Horizon is a party or by
which it is bound;

20

(d) Violate,  in any  material  respect,  any  applicable  law,  rule,
ordinance, or regulation applicable to Horizon; or

(e) Require Horizon to obtain the consent,  approval, or authorization
of, or require Horizon to file a certificate,  notice, application,  report
or other document with, any federal, state, or local governmental authority
or agency, lender, lien holder, or other person or entity.

5.3 Litigation.  There are no judicial,  arbitral,  or  administrative
actions,   suits,  or  proceedings   or,  to  the  knowledge  of  Horizon,   any
investigations  pending against  Horizon which would,  if adversely  determined,
prevent,  hinder,  delay, or otherwise  adversely affect the consummation of the
transactions  contemplated  hereby.  Horizon is not a party to or subject to the
provisions of any order, decree, or judgment of any court or of any governmental
agency which may prevent, hinder, or otherwise adversely affect the consummation
of the transactions contemplated hereby.

5.4 Brokers.  Horizon has not  retained,  employed,  or dealt with any
third-party  broker,  finder,  or  investment  banker  in  connection  with this
Agreement  or the  transactions  contemplated  hereby  and no  broker  or  other
third-party  is entitled to any  commission  or finder's  fee as a result of any
agreement or action taken by Horizon or its  affiliates in connection  with such
transactions.

5.5 Priority of Security Interest.  Upon execution and delivery of the
Security  Agreement,  IFM shall  obtain a valid lien  against all the  Purchased
Assets,  prior to all other  liens or  encumbrances,  including  those which may
hereafter accrue,  except for any security interests granted with respect to the
Bank Indebtedness. The current aggregate amount loaned and available for loan to
Horizon under the Bank Indebtedness is approximately Fifty Million Seven Hundred
Thousand Dollars ($50,700,000).

6. Covenants and Agreements of the Parties.

6.1   Horizon   Access.   Prior  to  the   Closing,   (i)   authorized
representatives  of Horizon  shall  have  reasonable  access to the  properties,
books,  records,  employees and documents of IFM  pertaining to the Business and
Purchased Assets,  (ii) IFM will furnish to Horizon all information with respect
to the affairs of the Business that Horizon may reasonably request.

6.2  Cooperation in Litigation.  Each party will fully  cooperate with
the other in the defense or prosecution of any litigation or proceeding  already
instituted  or  which  may be  instituted  hereafter  against  or by such  party
relating to or arising out of the conduct of the Business  prior to or after the
closing Date (other than litigation arising out of the transactions contemplated
by this  Agreement).  Except as  provided  for by  Section  9 hereof,  the party
requesting such  cooperation  shall pay the  out-of-pocket  expenses  (including
legal fees and disbursements) of the party providing such cooperation and of its
officers,  directors,  employees,  and agents reasonably  incurred in connection
with providing such  cooperation,  but shall not be responsible to reimburse the
party providing such cooperation for such party's time spent in such cooperation
or the salaries or cost of fringe benefits or other similar expenses paid by the
parties providing such cooperation to its officers,  directors,  employees,  and
agents while  assisting in the defense or prosecution of any such  litigation or
proceeding.

21

6.3 Conduct of Business.  From the date of this  Agreement and through
and including the Closing Date, (i) IFM shall conduct the Business in accordance
with prior  practice and only in the ordinary  course of business and (ii) shall
use its commercially  reasonable efforts to preserve the Purchased Assets and to
preserve for Horizon,  IFM's favorable business  relationship with its customers
and  others  with  whom  business  relationships  exist.  Without  limiting  the
generality of the foregoing,  unless otherwise  consented in writing by Horizon,
IFM shall:

(a) not produce  finished  goods  inventory  in excess of the quantity
that is  needed to fill  Horizon's  purchase  orders  and  sustain  current
inventory levels;

(b)  not  purchase  production  equipment  in  excess  of  Twenty-Five
Thousand Dollars ($25,000);

(c) not purchase  office  equipment in excess of Ten Thousand  Dollars
($10,000);

(d) not enter into any material transaction not in the ordinary course
of the Business;

(e) not sell or transfer  any of its  assets,  except for sales in the
ordinary course of the Business;

(f) not pledge or encumber any of the Purchased Assets;

(g) not materially  amend,  modify, or terminate any material Contract
relating to the Business or the Purchased Assets;

(h) not reduce the amount of the Inventory  other than in the ordinary
course of the Business;

(i)  not  make  any  material  changes  in  its  methods  or  business
operations relating to the Business or the Purchased Assets; and

(j) comply in all material  respects with all Laws  applicable to IFM,
the Business or the Purchased Assets.

6.4 CryoLife  Projects.  After the Closing,  Horizon shall continue to
perform the work currently  being  performed by IFM for CryoLife,  including (i)
the  manufacturing  and packaging of BioGlue  dispensers,  mixing tips and twist
rings,  (ii) the  preparation of packaging for allograft  tissue,  and (iii) the
preparation  work  for  CryoLife's  cryopaks,  pursuant  to  the  terms  of  the
Manufacturing, Assembly and Packaging Agreement in the form of Exhibit G hereto.

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6.5 Employees. On the Closing Date, IFM shall terminate the employment
of all employees of IFM, and Horizon shall rehire and engage only such employees
as designated on Schedule 6.5(a) (the "Retained Employees");  provided, however,
that the number of employees of IFM who do not become  Retained  Employees shall
not exceed forty-nine (49) employees.  Horizon agrees to pay the retention bonus
amounts earned by the Retained Employees as set forth in the contracts listed on
Schedule  6.5(b)  up to an  aggregate  amount  of  $62,123.24,  plus any  amount
resulting from an increase in any Retained  Employee's  compensation on or after
October  9,  2000.  Horizon  shall have no  responsibility  to pay any  Retained
Employee any  separation  benefit or severance  compensation  if Horizon  should
terminate the Retained  Employee prior to December 1, 2000, except to the extent
that such separation benefit or severance compensation results from any increase
in any Retained  Employee's  compensation  after October 9, 2000.  Horizon shall
continue the CIGNA Plan (as defined in Section  4.15(j))  under  Horizon's  name
through the end of the current policy year for all Retained Employees. After the
current policy year,  Horizon shall continue the CIGNA Plan on a  month-to-month
basis until the Retained  Employees  are added to the Horizon group health plan.
IFM shall  take such  steps as  reasonably  requested  by  Horizon  to assign to
Horizon  IFM's rights and  interests as the employer  under the CIGNA Plan as of
the Closing Date. All other liabilities and obligations  arising from employment
or  termination  of IFM  employees  who are not engaged by Horizon  shall be the
responsibility  of IFM or CryoLife.  All liabilities  and  obligations  accruing
after Closing relating to the Retained  Employees shall be the responsibility of
Horizon,  and all liabilities and obligations relating to the Retained Employees
accruing prior to Closing shall be the responsibility of IFM or CryoLife, except
with respect to the payment of employee  compensation  that is prorated pursuant
to  Section  2.3(c)  and as  otherwise  set forth  herein.  Notwithstanding  the
foregoing,  Bill Wright shall become an employee of CryoLife,  and Horizon shall
not  be  responsible  for  any  obligations  or  liabilities  arising  from  the
termination  of Mr. Wright as an IFM employee.  Mr.  Wright's  services shall be
made  available  without  cost to  Horizon by  CryoLife  for a period of six (6)
months following the Closing Date to assist with the transition of the Purchased
Assets from IFM to Horizon.  Mr.  Wright  shall make  available  to Horizon such
information  concerning  the Business or the  Purchased  Assets as Horizon shall
request.

6.6 Transition Services. IFM and CryoLife agree to provide information
technology services, accounting assistance and laboratory services to Horizon at
cost for a period of transition as provided in the Transition Services Agreement
in the form of Exhibit H hereto.

6.7  Current  Information.  IFM will advise  Horizon and Horizon  will
advise IFM in writing immediately, but in any event prior to the Closing, of:

(a)  the   occurrence   of  any  event   which   renders  any  of  the
representations or warranties set forth herein materially inaccurate or the
awareness of either Horizon or IFM that any  representation or warranty set
forth herein was not materially accurate when made;

(b) any fact that, if existing or known on the date hereof, would have
been  required  to be  set  forth  or  disclosed  in or  pursuant  to  this
Agreement; and

23

(c) the failure of any party hereto to comply with or  accomplish  any
of the covenants or agreements set forth herein.

6.8 Access.

(a) IFM and CryoLife shall reasonably cooperate with Horizon after the
Closing Date so that Horizon has access to any information  relating to the
Business or the Purchased  Assets as is reasonably  necessary  (but only to
the extent  necessary) for (i) the  preparation  for or the  prosecution or
defense of any suit, action, litigation, or administrative, arbitration, or
other  proceeding or  investigation  by or against Horizon or for any third
party claim for which  indemnification  is claimed pursuant to the terms of
Section 9 below,  (ii) the  preparation  and  filing  of any tax  return or
election  relating to the Business or the Purchased Assets and any audit by
any taxing authority  relating thereto,  (iii) the preparation and auditing
of Horizon's  financial  statements,  or (iv) the preparation and filing of
any other document  required by any federal,  state, or local  governmental
department,  regulatory agency, authority, commission, board, or court. The
access contemplated by this provision shall be during normal business hours
and upon not less than two (2) business days prior written request.

(b) Horizon shall reasonably cooperate with IFM and CryoLife after the
Closing  Date so that  IFM has  access  to  information  and  documentation
concerning  the  Purchased  Assets as is necessary  (but only to the extent
necessary) for (i) the preparation for or the prosecution or the defense of
any suit,  action,  litigation,  or administrative,  arbitration,  or other
proceeding or  investigation by or against IFM or CryoLife or for any third
party claim for which  indemnification  is claimed pursuant to the terms of
Section 9 below,  (ii) the  preparation  and  filing  of any tax  return or
election  relating to the  Business  and any audit by any taxing  authority
relating thereto, or (iii) the preparation and filing of any other document
required  by  any  federal,   state,  or  local  governmental   department,
regulatory  agency,  authority,  commission,  board,  or court.  The access
contemplated  by this provision  shall be during normal  business hours and
upon not less than two (2) business days' prior written request.

6.9 Product  Liability  Insurance.  The parties  acknowledge and agree
that IFM's  obligation  to  maintain  product  liability  insurance  pursuant to
Section  6.6 of the  Second  Purchase  Agreement  and  Horizon's  obligation  to
maintain product liability insurance pursuant to Section 18 of the Manufacturing
Agreement shall remain in effect  following the execution of this Agreement,  in
accordance with the terms of the Second Purchase Agreement and the Manufacturing
Agreement,  respectively. In addition, the insurance that IFM maintains pursuant
to  Section  6.6 of the  Second  Purchase  Agreement  shall  cover all  products
manufactured by IFM prior to the Closing Date,  including,  without  limitation,
the Excluded Products, in addition to the Products and the Products Business (as
defined in the Second Purchase Agreement).

6.10 Public Announcements. The timing and content of all announcements
regarding any aspect of this Agreement or the transactions  contemplated  hereby
to the financial community, government agencies, employees or the general public
shall be agreed upon among the parties hereto in advance  (unless Horizon or IFM
is  advised  by  counsel  that any such  announcement  or other  disclosure  not
mutually agreed upon in advance is required to be made by law or applicable rule
of the American Stock Exchange  and/or the New York Stock Exchange and then only
after  making  a  reasonable  attempt  to  comply  with the  provisions  of this
Section).

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6.11  Labeling.  All  Products  (as  defined  in the  Second  Purchase
Agreement) shall be labeled as follows:

(a) all Products  labeled on or prior to the Closing  Date  (including
all Finished Goods Inventory and labeled work in process) shall bear labels
including the IFM and CryoLife names, and CryoLife grants Horizon a license
to use its  name  and  trademarks  in the  sale  and  distribution  of such
Products;

(b) all Products labeled after the Closing Date and on or prior to the
sixtieth (60th) day following the Closing Date shall bear labels  including
the IFM and CryoLife names; provided,  however, that Horizon shall mark out
the CryoLife name on such labels; and

(c) all Products  labeled after the sixtieth  (60th) day following the
Closing Date shall bear labels which do not include the CryoLife name.

7. Conditions Precedent to Horizon's  Obligations.  Unless otherwise waived
by Horizon,  the  obligations of Horizon under this Agreement are subject to the
fulfillment on or before the Closing Date of each of the following conditions:

7.1 Approvals.  Horizon's obligations to purchase the Purchased Assets
are subject to:

(i) approval by the Board of Directors of Horizon,

(ii) approval by the Board of Directors of CryoLife,

(iii) approval by Horizon's lender, Bank of America, N.A., and

(iv) consent by Secret Promise, Ltd. to the Sublease Agreement.

7.2  Encumbrances.  IFM shall have delivered to Horizon  evidence,  in
form and substance reasonably  satisfactory to Horizon, that IFM has not created
any Encumbrances and that no Encumbrances then exist on the Purchased Assets.

7.3 Representations,  Warranties,  and Covenants.  The representations
and warranties of IFM contained in this  Agreement  shall be true and correct in
all material  respects at and as of the date hereof and at and as of the Closing
Date with the same  force and  effect  as though  made at and as of the  Closing
Date,  except for changes  therein as may be  specifically  contemplated by this
Agreement.  IFM shall have duly performed and complied in all material  respects
with all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or on the Closing Date. IFM shall have delivered to
Horizon a certificate dated as of the Closing Date to the foregoing effect.

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7.4  Litigation  Affecting  Closing.  There  shall not be  pending  or
threatened  any action or proceeding  for any  injunction,  writ, or preliminary
restraining  order,  or for any  order of any  court,  governmental  agency,  or
arbitrator,  domestic  or  foreign,  federal,  state,  or  local,  of  competent
jurisdiction,  or any investigation or examination which might result in such an
action or proceeding, directing that the sale of the Purchased Assets to Horizon
or  any  of  the  other  transactions  contemplated  by  this  Agreement  not be
consummated or otherwise  challenging the legality thereof,  and there shall not
be in effect on the  Closing  Date any such  injunction,  writ,  or  preliminary
restraining order or such other order.

7.5 Closing  Deliveries.  At the Closing,  IFM shall have delivered to
Horizon such instruments,  documents,  and certificates as are required pursuant
to Section 3.2 hereof.

7.6 No Damage, etc. Between the date of this Agreement and the Closing
Date,  there shall not have occurred any damage or  destruction  of, or loss to,
any of the Purchased Assets, whether or not covered by insurance,  which has had
or may reasonably be expected to have a Material Adverse Effect, nor shall there
have occurred any other event or condition which has had or which reasonably may
be expected to have a Material Adverse Effect.

7.7  Consents.  IFM shall have  obtained  all  necessary  consents and
approvals as set forth on Schedule 4.2, if any.

7.8  Corporate  Action.  All  corporate  action  necessary  by  IFM to
authorize the  execution,  delivery and  performance  of this  Agreement and the
consummation of the transactions contemplated hereby shall have duly and validly
taken.

8. Conditions  Precedent to IFM's  Obligations.  Unless otherwise waived by
IFM, the  obligations of IFM under this Agreement are subject to the fulfillment
on or before the Closing Date of each of the following conditions:

8.1  Approvals.  IFM's  obligation  to sell the  Purchased  Assets  is
subject to:

(i) approval by the Board of Directors of CryoLife,

(ii) approval by the Board of Directors of Horizon,

(iii) approval by CryoLife's lender, and

(iv) consent by Secret Promise, Ltd. to the Sublease Agreement.

8.2 Representations,  Warranties,  and Covenants.  The representations
and warranties of Horizon  contained in this Agreement shall be true and correct
in all  material  respects at and as of the Closing Date with the same force and
effect as though made at and as of the  Closing  Date,  except for such  changes
therein as may be specifically  contemplated  by this  Agreement.  Horizon shall
have duly  performed and complied in all material  respects with all  agreements
and conditions required by this Agreement to be performed or complied with by it
prior  to or on  the  Closing  Date.  Horizon  shall  have  delivered  to  IFM a
certificate dated the Closing Date to the foregoing effect.

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8.3  Litigation  Affecting  Closing.  There  shall not be  pending  or
threatened  any action or proceeding  for any  injunction,  writ, or preliminary
restraining  order,  or for any  order of any  court,  governmental  agency,  or
arbitrator,  domestic  or  foreign,  federal,  state,  or  local,  of  competent
jurisdiction,  or any investigation or examination which might result in such an
action or proceeding, directing that the sale of the Purchased Assets to Horizon
or  any  of  the  other  transactions  contemplated  by  this  Agreement  not be
consummated or otherwise  challenging the legality thereof,  and there shall not
be in effect on the  Closing  Date any such  injunction,  writ,  or  preliminary
restraining order or such other order.

8.4 Closing Deliveries.  At the Closing,  Horizon shall have delivered
to IFM such instruments,  documents,  certificates, and payments as are required
pursuant to Section 3.3 hereof.

8.5 Consents.  Horizon shall have obtained all necessary  consents and
approvals as set forth on Schedule 5.2, if any.

8.6 Corporate  Action.  All corporate  action  necessary by Horizon to
authorize the  execution,  delivery and  performance  of this  Agreement and the
consummation of the transactions contemplated hereby shall have duly and validly
taken.

9. Indemnification.

9.1.  Indemnification  Obligations of IFM. From and after the Closing,
IFM shall indemnify and hold harmless Horizon,  its officers and directors,  and
each of the  successors and assigns of any of the foregoing  (collectively,  the
"Horizon  Indemnified  Parties")  from,  against  and in  respect of any and all
claims, liabilities,  obligations, losses, costs, expenses, penalties, fines and
other judgments (at equity or at law) and damages  whenever  arising or incurred
(including,   without   limitation,   amounts  paid  in  settlement,   costs  of
investigation  and  reasonable  attorneys'  fees  and  expenses)   (collectively
"Damages")  arising  out of or  relating  to:  (a) any and all  liabilities  and
obligations of IFM of any nature whatsoever, except the Assumed Liabilities; (b)
any and all  actions,  suits,  claims,  or legal,  administrative,  arbitration,
governmental  or  other  proceedings  or  investigations   against  any  Horizon
Indemnified  Party that relate to IFM, the Business or the  Purchased  Assets to
the extent the  principal  event giving rise thereto (i) occurred on or prior to
the Closing Date or (ii) resulted from or arose out of any action or inaction of
IFM after the  Closing  Date;  (c) any breach of any  representation,  warranty,
covenant,  agreement or  undertaking  made by IFM in this Agreement or in any of
the IFM Transfer Documents;  or (d) any fraud, willful misconduct,  bad faith or
any intentional breach of any representation,  warranty,  covenant, agreement or
undertaking made by IFM in this Agreement or the IFM Transfer Documents.

9.2  Indemnification  Obligations  of  Horizon.  From  and  after  the
Closing,  Horizon  shall  indemnify and hold harmless IFM and CryoLife and their
officers and  directors,  and each of the  successors  and assigns of any of the
foregoing  (collectively,  the "IFM Indemnified  Parties") from,  against and in
respect of any and all Damages arising out of or relating to: (a) any failure of
Horizon  to  perform  or  discharge  any  Assumed  Liabilities;  (b) any and all
actions, suits, claims, or legal, administrative,  arbitration,  governmental or
other  proceedings  or  investigations  against any IFM  Indemnified  Party that
relate to Horizon or the  conduct by Horizon of the  Business  to the extent the
principal event giving rise thereto  resulted from or arose out of any action or

27

inaction   of  Horizon   after  the  Closing   Date;   (c)  any  breach  of  any
representation,  warranty, covenant, agreement or undertaking made by Horizon in
this Agreement or in any of the Horizon  Transfer  Documents;  or (d) any fraud,
willful  misconduct,  bad faith or any intentional breach of any representation,
warranty,  covenant,  agreement or undertaking made by Horizon in this Agreement
or any of the Horizon Transfer Documents.

9.3 Indemnification Procedure.

(a) Promptly  after receipt by a Horizon  Indemnified  Party or an IFM
Indemnified Party (hereinafter  collectively referred to as an "Indemnified
Party") of notice by a third party of any complaint or the  commencement of
any action or  proceeding  with respect to which  indemnification  is being
sought  hereunder,  such  Indemnified  Party shall  notify  Horizon or IFM,
whoever is the appropriate  indemnifying party hereunder (the "Indemnifying
Party"),  of  such  complaint  or of the  commencement  of such  action  or
proceeding;   provided,   however,  that  the  failure  to  so  notify  the
Indemnifying  Party shall not relieve the Indemnifying Party from liability
for such claim arising otherwise than under this Agreement and such failure
to so notify the Indemnifying  Party shall relieve the  Indemnifying  Party
from liability which the Indemnifying Party may have hereunder with respect
to such  claim  only  to the  extent  that,  such  failure  to  notify  the
Indemnifying  Party results in the forfeiture by the Indemnifying  Party of
rights and  defenses  otherwise  available to the  Indemnifying  Party with
respect to such claim.  The Indemnifying  Party shall have the right,  upon
written  notice to the  Indemnified  Party,  to assume the  defense of such
action or  proceeding,  including  the  employment  of  counsel  reasonably
satisfactory  to the  Indemnified  Party  and the  payment  of the fees and
disbursements of such counsel. In the event, however, that the Indemnifying
Party  declines or fails to assume the defense of the action or  proceeding
or to employ counsel  reasonably  satisfactory to the Indemnified Party, in
either  case in a timely  manner,  then such  Indemnified  Party may employ
counsel to represent or defend it in any such action or proceeding  and the
Indemnifying  Party shall pay the reasonable fees and disbursements of such
counsel as incurred;  provided,  however, that the Indemnifying Party shall
not be required to pay the fees and  disbursements of more than one counsel
for all  Indemnified  Parties in any  jurisdiction  in any single action or
proceeding.   In  any   action  or   proceeding   with   respect  to  which
indemnification  is being sought  hereunder,  the Indemnified  Party or the
Indemnifying  Party,  whichever is not assuming the defense of such action,
shall have the right to  participate  in such  litigation and to retain its
own counsel at such  party's own  expense.  The  Indemnifying  Party or the
Indemnified  Party,  as the case may be, shall at all times use  reasonable
efforts to keep the  Indemnifying  Party or the  Indemnified  Party, as the
case may be, reasonably apprised of the status of the defense of any action
the defense of which they are  maintaining  and to  cooperate in good faith
with each other with respect to the defense of any such action.

(b) No Indemnified Party may settle or compromise any claim or consent
to the entry of any judgment with respect to which indemnification is being
sought  hereunder  without the prior  written  consent of the  Indemnifying
Party,   unless  such   settlement,   compromise  or  consent  includes  an

28

unconditional  release of the Indemnifying Party from all liability arising
out of such claim. An Indemnifying Party may not, without the prior written
consent of the Indemnified Party, settle or compromise any claim or consent
to the entry of any judgment with respect to which indemnification is being
sought hereunder unless such settlement,  compromise or consent includes an
unconditional  release of the Indemnified  Party from all liability arising
out of such claim and does not contain  any  equitable  order,  judgment or
term which in any manner affects, restrains or interferes with the business
of the  Indemnified  Party  or any of the  Indemnified  Party's  respective
affiliates.

(c) In the event an  Indemnified  Party shall claim a right to payment
pursuant to this  Agreement,  such  Indemnified  Party  shall send  written
notice of such claim to the  appropriate  Indemnifying  Party.  Such notice
shall specify the basis for such claim.  As promptly as possible  after the
Indemnified  Party has given such notice,  such  Indemnified  Party and the
appropriate  Indemnifying  Party shall  establish  the merits and amount of
such claim (by mutual  agreement,  litigation,  arbitration  or otherwise).
Within five (5) business days of the final  determination of the merits and
amount  of  such  claim,  the  Indemnifying  Party  shall  deliver  to  the
Indemnified  Party in immediately  available  funds an amount equal to such
claim as determined  hereunder;  provided,  however, that to the extent any
such claim arising out of Section 9.1 of this  Agreement does not involve a
payment by Horizon to any third party  (including  attorneys' fees incurred
by  Horizon),  an amount  equal to such claim shall  instead (i) be set off
against the monthly  obligations  of Horizon to pay  principal and interest
under the Note as such monthly  payments  become due, and (ii) be delivered
to the Horizon  Indemnified  Party in  immediately  available  funds to the
extent that such claim  exceeds the  remaining  principal  and interest due
under the Note.

9.4 Claims  Period.  Except as provided in this  Section 9.4, no claim
for indemnification under this Agreement,  including,  but not limited to claims
for  indemnification  or breach of warranty or covenants,  may be asserted by an
Indemnified  Party after the  expiration of the  appropriate  claims period (the
"Claims  Period") which shall  commence on the Closing Date and shall  terminate
eighteen (18) months after the Closing  Date;  provided,  however,  that (a) the
Claims Period with respect to Damages  arising under  Sections 4.1,  4.2.,  4.4,
4.5, 4.15, 5.1, 5.2, 5.5, 9.1(a),  (b), and (d), and 9.2(a), (b) and (d) of this
Agreement  shall  commence on the Closing  Date and shall  survive and remain in
effect without  limitation  until the  expiration of the  applicable  statute of
limitations  period, (b) the Claims Period with respect to Damages arising under
Section  4.17 of this  Agreement  shall  commence on the Closing  Date and shall
survive  and  remain  in  effect  without   limitation  until  the  fifth  (5th)
anniversary of the Closing Date,  (c) the obligation of Horizon to pay,  perform
and discharge the Assumed  Liabilities shall survive until such liabilities have
been paid,  performed and discharged,  and (d) if prior to the close of business
on the last day of the Claims  Period,  an  Indemnifying  Party  shall have been
properly  notified of a claim for  Indemnity  hereunder and such claim shall not
have been finally  resolved or disposed of at such date, the basis of such claim
shall  continue to survive  with  respect to such claim and shall remain a basis
for indemnity  hereunder  with respect to such claim until such claim is finally
resolved or disposed of in accordance with the terms hereof.

29

9.5  Liability  Limits.  Notwithstanding  anything to the contrary set
forth herein:

(a) IFM shall be liable to Horizon  Indemnified  Parties  and  Horizon
shall be liable to IFM  Indemnified  Parties for Damages only to the extent
that any such Damages exceed,  in the aggregate,  Fifteen  Thousand Dollars
($15,000) (the "Basket Amount");  provided,  however,  that Damages arising
under or pursuant to Sections  4.1, 4.2,  4.4,  4.5,  4.15,  5.1, 5.2, 5.5,
9.1(a),  (b) and (d) and 9.2(a), (b) and (d) shall not be subject to Basket
Amount,  nor shall the  amount of any such  Damages or  indemnification  be
included in determining whether such Basket Amount has been reached.

(b) Cap Amount.

(i) The  indemnification  obligations of IFM or Horizon hereunder
shall  not  exceed  Three  Million  Eight  Hundred   Thousand  Dollars
($3,800,000) (the "Cap Amount"). Notwithstanding the first sentence of
this  Section  9.5(b)(i),  the Cap Amount  shall be  increased to Five
Million Nine Hundred  Forty-Five  Thousand Two Hundred Sixteen Dollars
($5,945,216)  in the event that  Horizon  becomes  ineligible  for any
reason to receive the Discount (as defined in Section 2.1(c)).  Except
to the  extent  that any  claim  arising  out of  Section  9.1 of this
Agreement  involves a payment by Horizon to any third party (including
attorneys' fees incurred by Horizon),  in no event shall the aggregate
amount of funds that may be paid by CryoLife and IFM pursuant to their
indemnification  obligations hereunder exceed (a) the aggregate amount
of principal and interest  payments received by IFM from Horizon under
the Note,  plus (b) any  amount  offset by  Horizon  against  the Note
pursuant to Section 9.3(c) as a result of any claim covered by Section
9.5(b)(ii).

(ii)  Notwithstanding  the provisions of Section  9.5(b)(i),  any
Damages  arising  under or pursuant to Sections  4.1,  4.2,  4.4, 4.5,
4.15,  5.1, 5.2, 5.5,  9.1(a),  (b) and (d), and 9.2(a),  (b), and (d)
shall  not be  subject  to the  Cap  Amount,  and  there  shall  be no
limitation on the  indemnification  obligations of IFM or Horizon with
respect to Damages or  indemnification  arising  under or  pursuant to
such Sections.

(c) Neither  Horizon nor IFM shall be liable under this  Agreement for
any Damages  arising out of or relating to the Port  Business (as that term
is defined in the First  Purchase  Agreement)  and the  provisions  of this
Section 9 shall neither  extend nor limit the  indemnification  provided by
the First Purchase Agreement.

(d) Neither  Horizon nor IFM shall be liable under this  Agreement for
any Damages  arising out of or relating to the  Products  Business (as that
term is defined in the Second  Purchase  Agreement)  and the  provisions of
this Section 9 shall neither extend nor limit the indemnification  provided
by the Second Purchase Agreement.

(e) Neither  Horizon nor IFM shall be liable under this  Agreement for
any Damages  arising out of or  resulting  from any defects in or damage or
injury to any person  caused by any products  manufactured  or delivered by
IFM  to   Horizon   pursuant   to   the   Manufacturing   Agreement,   such
indemnification  for such  Damages to be as set forth in the  Manufacturing
Agreement.

30

(f) The rights and  remedies  set forth in  Sections  9.1  through 9.5
shall be the exclusive  remedies available to the parties pertaining to any
alleged  environmental  liability,  and the  parties  explicitly  waive any
rights to cost  recovery or  contribution  that they have or may have under
any state or federal environmental statute or under the common law.

9.6 Jurisdiction and Forum.

(a) By the execution and delivery of this Agreement, each Indemnifying
Party  irrevocably  designates  and appoints  each of the parties set forth
under its name below as its  authorized  agent upon  which  process  may be
served  in any  suit  or  proceeding  arising  out of or  relating  to this
Agreement that may be instituted in any state or federal court in the State
of Georgia.

IFM:

Clinton D. Richardson, Esq.
Arnall Golden & Gregory, LLP
1201 West Peachtree Street
2800 One Atlantic Center
Atlanta, Georgia 30309

Horizon:

Jon R. Harris, Jr., Esq.
King & Spalding
191 Peachtree Street, N.E.
Suite 4600
Atlanta, Georgia 30303-1763

In  addition,  each party  agrees  that  service  of process  upon the
above-designated  parties shall be deemed in every  respect  effective
service of process  upon such  Indemnifying  Party in any such suit or
proceeding.  Each such  Indemnifying  Party further agrees to take any
and all action reasonably requested by an Indemnified Party, including
the  execution   and  filing  of  any  and  all  such   documents  and
instruments,  as may be necessary  to continue  such  designation  and
appointment of the  above-designated  parties in full force and effect
so long as this Agreement shall be in effect.  The foregoing shall not
limit the  rights of any party to serve  process  in any other  manner
permitted by law.

(b) To the extent that any  Indemnifying  Party has or  hereafter  may
acquire  any  immunity  from  jurisdiction  of any  court or from any legal
process (whether  through service or notice,  attachment prior to judgment,
attachment in aid of execution or otherwise)  with respect to itself or its
property,  each Indemnifying  Party hereby irrevocably waives such immunity
in respect of its obligations with respect to this Agreement.

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(c) The parties  hereto consent and agree that the  appropriate  forum
and venue for any disputes between any of the parties hereto arising out of
this Agreement shall be in any of the following courts and hereby waive any
defense or objection  they may have of improper  venue in any such lawsuits
filed in these courts:  (i) the state or superior court of the county where
each  of  CryoLife  and  Horizon  has  its  principal   place  of  business
(presently,  Cobb County, Georgia and Meriwether County, Georgia); and (ii)
the United  States  District  Court for the  Northern  District of Georgia,
Atlanta  Division,  and each of the parties  hereto  hereby  submits to the
personal  jurisdiction of any such court. The foregoing shall not limit the
rights  of  any  party  to  obtain  execution  of  judgment  in  any  other
jurisdiction.  The parties further agree,  to the extent  permitted by law,
that a final and unappealable judgment against any of them in any action or
proceeding  contemplated  above shall be conclusive  and may be enforced in
any other  jurisdiction  within or outside the United States by suit on the
judgment,  a certified  or  exemplified  copy of which shall be  conclusive
evidence of the fact and amount of such judgment.

9.7 Bulk Sales  Indemnity.  Horizon hereby waives  compliance with the
provisions of any applicable  bulk sales or transfer laws in connection with the
sale of the  Purchased  Assets  contemplated  by this  Agreement.  IFM agrees to
indemnify  and hold  Horizon  harmless  from and  against  any and all  Damages,
including  without  limitation  any claims  made by  creditors  and any  Damages
arising out of or relating to any Encumbrance on Purchased Assets arising out of
or relating to IFM's  non-compliance  with any applicable bulk sales or transfer
laws in connection  with the sale of the Purchased  Assets  contemplated by this
Agreement, except to the extent that any such Damages results from or arises out
of any failure by Horizon to pay or perform,  when due,  any  obligations  to be
paid or performed by Horizon as provided in this Agreement.

9.8   Exclusive   Remedies.   After  the   Closing,   the   rights  of
indemnification  contained in this Section 9 shall be deemed to be the exclusive
remedy of the parties  hereto  with  respect to a default or breach by any other
party or other claim under or with respect to this Agreement.

10. Termination.

10.1 Termination and Abandonment.  This Agreement may be terminated at
any time prior to the Closing:

(a) by mutual agreement of Horizon and IFM;

(b) by either party at any time after  November 1, 2000 if Closing has
not  occurred  and the  Closing  Date has not been  extended by the parties
hereto;

32

(c) by IFM, if the  conditions set forth in Section 8 hereof shall not
have  been   complied  with  or  performed   and  such   noncompliance   or
nonperformance  shall not have been cured or  eliminated  (or by its nature
cannot be cured or  eliminated)  by Horizon on or before the Closing  Date;
and

(d) by Horizon,  if the conditions set forth in Section 7 hereof shall
not  have  been  complied  with or  performed  and  such  noncompliance  or
nonperformance  shall not have been cured or  eliminated  (or by its nature
cannot be cured or eliminated) by IFM on or before Closing Date.

10.2  Effect  of  Termination.  In the  event of  termination  of this
Agreement  pursuant to this Section 10, this Agreement  shall  forthwith be void
and  there  shall be no  liability  on the part of any  party or its  respective
officers,  directors,  partners or  shareholders,  except for obligations  under
Sections  10,  11  and  12.3,  all  of  which  shall  survive  the  termination.
Notwithstanding the foregoing,  nothing contained herein shall relieve any party
from  liability  for any breach of any covenant or  agreement in this  Agreement
prior to termination.

11. Confidentiality.

11.1  Confidentiality.  All  proprietary  information  related  to the
Business or the  Purchased  Assets  (the  "Confidential  Information")  shall be
treated by IFM and  CryoLife as  confidential  and shall not be disclosed to any
third parties unless (i) such Confidential Information is or becomes part of the
public knowledge or literature through no fault of IFM or CryoLife,  or (ii) IFM
and  CryoLife  are  advised  by written  opinion  of counsel  that it is legally
required  to  disclose  such  Confidential  Information,   in  which  case  such
Confidential  Information may be disclosed only to the extent legally  required;
provided,  however,  that IFM and CryoLife  agree to promptly  notify Horizon of
such legal disclosure  requirement so that Horizon has a reasonable  opportunity
to seek a protective order. IFM and CryoLife shall use all reasonable efforts to
prevent the use of all or any part of such Confidential Information in any other
connection or the transmission  thereof to third parties unless and until it has
first obtained the written consent of Horizon specifically  authorizing such use
or transmission.

11.2 Remedies. IFM and Horizon hereby agree that any remedy at law for
any  breach  of the  provisions  contained  in  Section  11.1  hereof  shall  be
inadequate  and that  Horizon or IFM,  as the case may be,  shall be entitled to
injunctive  relief in addition to any other remedy Horizon might have under this
Agreement.

11.3 Continuing  Right to Use. IFM and CryoLife shall retain the right
to use  portions of the trade  secrets,  Confidential  Information  and know-how
conveyed to Horizon  which have  applications  outside the Business (the "Shared
Information")  and are  retained  in the minds of  CryoLife  employees  and Bill
Wright,  but only in connection with the manufacture of medical  products not in
competition  with the  Business or Horizon,  provided  that IFM and/or  CryoLife
shall be responsible for paying any royalty,  license or fee obligations arising
out of IFM's and/or  CryoLife's use of the Shared  Information.  Notwithstanding
anything  to the  contrary  contained  in this  Section  11.3,  neither  IFM nor
CryoLife  shall  have the right to use any  portion  of the  Shared  Information
relating to the development, manufacture or sale of any synthetic latex product.

33

12. Miscellaneous.

12.1  Further  Assurances.  Subject  to the other  provisions  of this
Agreement,  IFM agrees that after the Closing Date it shall,  from time to time,
upon  the  reasonable  request  of  Horizon,  execute  and  deliver  such  other
instruments  of  conveyance  and other  similar  documents  and take such  other
actions as Horizon may  reasonably  require,  consistent  with the terms of this
Agreement, as are reasonably necessary or desirable to transfer to Horizon title
to the  Purchased  Assets  and to  otherwise  perform  the  provisions  of  this
Agreement  to be  performed by IFM.  From and after the Closing  Date,  upon the
reasonable request of IFM, Horizon shall execute,  deliver,  and acknowledge all
such further instruments of conveyance and other similar documents and take such
other actions as IFM may reasonably  require,  consistent with the terms of this
Agreement, as are reasonably necessary or desirable to perform the provisions of
this Agreement to be performed by Horizon.

12.2 Benefit of Agreement.  This  Agreement  shall be binding upon and
inure to the  benefit of IFM and  Horizon and their  respective  successors  and
assigns and shall not confer any rights upon any third persons.

12.3 Expenses.  Except as otherwise provided herein, each party hereto
agrees  to pay  its  expenses  incurred  in  connection  with  the  transactions
contemplated  by this Agreement,  including,  without  limitation,  the fees and
expenses of its accountants and counsel.

12.4 Entire Agreement;  Amendments.  This Agreement and the agreements
referenced  herein  (including,   without   limitation,   the  Horizon  Transfer
Documents,   the  IFM  Transfer  Documents,  the  surviving  provisions  of  the
Manufacturing  Agreement as specified herein,  the First Purchase  Agreement and
the Second  Purchase  Agreement)  constitute  the entire  agreement  between the
parties  pertaining to the subject matter contained  herein,  and supersedes all
prior  agreements,   arrangements,   and  understandings  of  the  parties.   No
supplement, modification, or amendment of or to this Agreement shall be binding,
unless  executed  in  writing  by the  parties  hereto.  No waiver of any of the
provisions of this Agreement shall be deemed, or shall  constitute,  a waiver of
any other provision,  whether or not similar,  nor shall any waiver constitute a
continuing  waiver. No waiver shall be binding unless executed in writing by the
party granting the waiver.

12.5  Counterparts.  This  Agreement  may be  executed  in two or more
counterparts,  each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.

12.6  Section  and  Paragraph  Headings.  The  index and  section  and
paragraph  headings of this  Agreement are included for purposes of  convenience
only and shall not affect in any way the construction or  interpretation  of any
of the provisions of this Agreement.

34

12.7 Notices. All notices, requests, demands, and other communications
under this Agreement  shall be in writing and shall be deemed to have been given
on the date when  delivered  personally or sent by facsimile,  the next business
day after delivery to a nationally  recognized overnight delivery service, or on
the seventh (7th) day after mailing if mailed by first class mail, registered or
certified,  postage prepaid,  and properly addressed as follows or to such other
address as either party may designate by notice to the other party:

(a) To Horizon:

Horizon Medical Products, Inc.
Attn:  Robert M. Dodge, Chief Financial Officer
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
FAX:  404/264-9919

With copies to:

Nat G. Slaughter, III
Slaughter & Virgin, P.C.
400 Colony Square; Suite 1110
1201 Peachtree Street, N.E.
Atlanta, Georgia 30361
FAX:  404/872-7879

and

Jon R. Harris, Jr., Esq.
King & Spalding
191 Peachtree Street, N.E.
Suite 4600
Atlanta, Georgia 30303-1763
FAX:  404/572-5146

(b) To IFM:

Ideas for Medicine, Inc.
c/o CryoLife, Inc.
Attn: Vice President of Finance
1655 Roberts Blvd., N.W.
Kennesaw, Georgia 30144
FAX:  770/590-3754

35

With a copy to:

Arnall Golden & Gregory, LLP
Attn:  Clinton D. Richardson
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
FAX:  404/873-8665

(c) To CryoLife:

CryoLife, Inc.
Attn: Chief Financial Officer
1655 Roberts Blvd., N.W.
Kennesaw, Georgia 30144
FAX:  770/590-3754

With a copy to:

Arnall Golden & Gregory, LLP
Attn: Clinton D. Richardson
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
FAX:  404/873-8665

12.8 Governing Law. This Agreement  shall be governed by and construed
exclusively  in  accordance  with the  internal  laws of the  State of  Georgia,
without reference to its conflicts of law principles.

12.9 Interpretation.  The parties acknowledge and agree that: (i) each
party and its counsel  reviewed and  negotiated the terms and provisions of this
Agreement and have contributed to its revision; (ii) the rule of construction to
the effect that any  ambiguities  are resolved  against the drafting party shall
not be employed in the interpretation of this Agreement; and (iii) the terms and
provisions of this Agreement shall be construed fairly as to all parties hereto,
regardless of which party was generally  responsible for the preparation of this
Agreement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

36

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered by its duly authorized  officer as of the day and year
first above written.

HORIZON MEDICAL PRODUCTS, INC.

By:    /s/ William E. Peterson, Jr.                
--------------------------------------------
Name: William E. Peterson, Jr.
Title: President

IDEAS FOR MEDICINE, INC.

By:    /s/ D. A. Lee                               
--------------------------------------------
Name: D.A. Lee
Title: VP Finance and CFO

List of Exhibits

Exhibit A               Form of Note
Exhibit B               Form of CryoLife Guaranty
Exhibit C               Form of Bill of Sale
Exhibit D               Form of Assignment and Assumption Agreement
Exhibit E               Form of Opinion of Counsel to IFM and CryoLife
Exhibit F               Form of Sublease Agreement
Exhibit G               Form of Manufacturing, Assembly and Packaging Agreement
Exhibit H               Form of Transition Services Agreement
Exhibit I               Form of Security Agreement
Exhibit J               Form of Opinion of Counsel to Horizon

List of Schedules

Schedule 1.2(a)         Fixed Assets
Schedule 1.2(b)(1)      Finished Goods Inventory 
Schedule 1.2(b)(2)      Other Inventory
Schedule 1.2(c)         Leasehold  Improvements  
Schedule 1.2(d)         Intellectual  Property
Schedule 1.2(e)         Assigned Contracts 
Schedule 1.4(e)         Accounts  Receivable 
Schedule 1.4(g)         Excluded Product Materials 
Schedule 1.4(i)         Third Party Equipment 
Schedule 1.6            Allocation of Purchase Price 
Schedule 1.7(a)         Trade Payables 
Schedule 4.2            IFM Consents and Approvals  
Schedule 4.3            Litigation  
Schedule 4.7            Insurance 
Schedule 4.8            Intangible  Personal  Property  
Schedule 4.9            Contracts  
Schedule 4.10(a)        Material Licenses 
Schedule 4.10(b)(ii)    Notice of Adverse Filings,  etc. 
Schedule 4.11           Transactions  with  Affiliates  
Schedule 4.14           Officers,   Directors  and Employees  
Schedule 4.15           Employee  Benefit  Plans  
Schedule 4.15(j)        CIGNA Plan Premiums 
Schedule 4.17           Environmental  Matters 
Schedule 4.18(b)        Assets Necessary to Conduct Business 
Schedule 5.2            Horizon Consents and Approvals  
Schedule 6.5(a)         Retained Employees 
Schedule 6.5(b)         Bonuses

Exhibit A

FORM OF SUBORDINATED PROMISSORY NOTE

October 9, 2000                                                       $5,945,216
Atlanta, Georgia

FOR VALUE RECEIVED,  the  undersigned,  HORIZON MEDICAL  PRODUCTS,  INC., a
Georgia  corporation  ("Maker"),  promises  to pay to the  order  of  IDEAS  FOR
MEDICINE, INC., a Florida corporation ("Payee" and, together with any subsequent
holder(s)  hereof,  "Holder"),  the  principal  sum of FIVE MILLION NINE HUNDRED
FORTY-FIVE  THOUSAND TWO HUNDRED  SIXTEEN DOLLARS  ($5,945,216)  (the "Principal
Amount").  The Principal Amount is comprised of the following three amounts: (i)
an amount equal to Three  Million Eight Hundred  Thousand  Dollars  ($3,800,000)
(the "Interest  Bearing  Amount"),  (ii) an amount equal to One Million  Dollars
($1,000,000)  (the "Scheduled  Payment  Discount  Amount"),  and (iii) an amount
equal to One Million One Hundred Forty-Five Thousand Two Hundred Sixteen Dollars
($1,145,216)  (the "Timely  Payment  Discount  Amount,"  and  together  with the
Scheduled Payment Discount Amount, collectively, the "Discount Amounts").

1. Interest.

(a) The unpaid principal  balance of the Interest Bearing Amount shall
bear simple  interest at the rate of nine percent (9%) per annum  (computed
on the basis of a 360-day year of twelve 30-day months).

(b) The Discount Amounts shall bear no interest so long as Maker makes
all  payments  under this Note on a timely  basis.  All  payments  shall be
considered to have been made on a "timely  basis" unless Maker  defaults in
any payment of principal or interest  when the same becomes due and payable
and such  default  continues  for a period  of ten (10)  days  after  Maker
receives written notice of such default from Holder.

(c) If Maker  fails to make any  payment  under  this Note on a timely
basis, the remaining unpaid principal balance of the Principal Amount shall
bear interest at eighteen percent (18%) per annum.

2. Payment of Principal.

(a) This Note shall be payable in monthly  installments  of  principal
and interest of One Hundred Forty  Thousand  Dollars  ($140,000)  per month
until all principal and interest due under the Interest  Bearing  Amount is
paid in full. The first payment under this Note shall be due on October 15,
2000,  and  thereafter  the monthly  payments shall be due on the fifteenth
(15th) day of each month.

(b) If Maker makes the Scheduled Payment pursuant to Section 3 of this
Note prior to April 3, 2001,  Holder shall  forgive the  Scheduled  Payment
Discount  Amount,  and the  Principal  Amount shall be reduced by an amount
equal to the Scheduled Payment Discount Amount as of the date Horizon makes
the Scheduled Payment.

(c) If Maker makes all  payments on a timely  basis until such time as
the principal  balance of the Interest  Bearing  Amount is paid in full (by
payment, set-off, adjustment or otherwise), Holder shall forgive the Timely
Payment  Discount  Amount and the entire  Principal  Amount shall be deemed
paid in full.

(d) In the event that  Maker  fails to qualify  for  forgiveness  of a
Discount Amount, Maker shall continue to make monthly payments of principal
and interest of One Hundred Forty  Thousand  Dollars  ($140,000) per month,
until all principal and interest due under such Discount  Amount is paid in
full.

(e) Payments of principal and interest hereunder shall be made at such
place as Holder may designate and shall be in immediately  available  funds
in  lawful  money  of  the  United  States.   All  payments,   prepayments,
adjustments and set-offs  (excluding  forgiveness of the Discounts pursuant
to  Section  2(b) or 2(c)  above) in  respect of this Note shall be applied
first to accrued interest, then to the outstanding principal balance of the
Interest Bearing Amount, and then, if not forgiven pursuant to Section 2(b)
and/or (c) above,  to the  outstanding  principal  balance of the  Discount
Amount(s).

3.  Scheduled  Payment.  Maker agrees to pay under this Note the sum of One
Million Dollars  ($1,000,000) (the "Scheduled  Payment") upon the earlier of (i)
the closing of one or more equity  financings  which result in  consideration to
Maker of at least Fifteen  Million Dollars  ($15,000,000)  in exchange for Maker
common and/or  preferred  stock or (ii) April 3, 2001.  Upon payment by Maker of
the Scheduled Payment prior to April 3, 2001, Holder shall forgive the Scheduled
Payment Discount Amount in accordance with Section 2(b) above.

4.  Prepayment.  Any  prepayment of this Note in part or in whole is hereby
permitted  without  premium or  penalty.  Interest  shall cease to accrue on all
amounts which are prepaid.

5.  Adjustment  or Set-off of Note.  This Note is being issued  pursuant to
that certain Asset Purchase Agreement (the "Asset Purchase Agreement"), dated as
of October 9, 2000, by and among Maker and Payee.  This Note shall be subject to
adjustment  and  set-off as provided in the Asset  Purchase  Agreement,  and the
Principal Amount of this Note shall be reduced if required pursuant to the Asset
Purchase  Agreement.  In the event of any such  reduction,  this  Note  shall be
amended and restated to reflect such reduction and this original Note shall have
no force and effect.  Contemporaneously with the return of this original Note to
Maker,  Maker shall  deliver the amended and restated  Note to Holder.  Any such
reduction in the principal  amount of this Note shall be deemed to have occurred
on the date of this Note if the  reduction  is based on (i) an  adjustment  made

2

pursuant to Section 2.3 of the Asset Purchase Agreement, (ii) an adjustment made
pursuant  to  Section  2.4  of  the  Asset  Purchase  Agreement,   or  (iii)  an
indemnification  claim by Maker against Payee which is set off under Section 9.3
of the Asset Purchase Agreement relating to a breach of the  representations and
warranties set forth in Section  4.4(a) or (c) of the Asset  Purchase  Agreement
with respect to the Fixed Assets or Inventory  (as such terms are defined in the
Asset Purchase  Agreement),  and, in which case,  Maker shall receive credit for
and shall offset under this Section 4 any interest payments to be made following
such  reduction by an amount equal to any interest  overpayment  resulting  from
such reduction.

6. Event of Default.  Each of the following  shall  constitute an "Event of
Default"  hereunder:  (a) the failure of Maker to pay any amounts when due under
this Note, (b) the voluntary or involuntary  bankruptcy or receivership of Maker
or the  assignment  for the benefit of  creditors of the assets of Maker and (c)
the default of Maker under Section  11.1(a) of that certain  Sublease  Agreement
dated as of October 9, 2000, by and between Maker and Payee.  Upon the existence
or occurrence of any Event of Default, all indebtedness  evidenced by this Note,
including  without  limitation  the principal  and all accrued  interest and all
costs of collection  (including without limitation  reasonable  attorneys' fees)
actually  incurred may be declared due and payable  without  notice or demand of
any kind.

7. Subordination.  This Note shall be subordinated to the Bank Indebtedness
of Maker  (as  defined  in  Section  3.3(b) of the  Asset  Purchase  Agreement),
pursuant to that certain Subordination  Agreement,  dated as of October 9, 2000,
by and between  Payee and Bank of  America,  N.A.  and any future  subordination
agreements as contemplated in Section 3.3(b) of the Asset Purchase Agreement.

8.  Security.  The  obligations  of Maker  under this  Promissory  Note are
secured  pursuant  to that  certain  Security  Agreement,  dated  as of the date
hereof, by and between Maker and Payee.

9. Miscellaneous.

(a) It is the intent of Maker and Holder not to violate any federal or
state  law,  rule  or  regulation  pertaining  either  to  usury  or to the
contracting for or charging or collecting of interest, and Maker and Holder
agree  that,  should  any  provision  of this  Note  or any  act  performed
hereunder  violate  any such law,  rule or  regulation,  then the excess of
interest  contracted  for or charged or collected  over the maximum  lawful
rate of interest shall be applied to the outstanding principal indebtedness
due to Holder by Maker under this Note.

(b) This Promissory Note has not been registered  under the Securities
Act of 1933, as amended, or under any applicable state law. This Promissory
Note may not be offered for sale,  sold,  transferred  or pledged except in
compliance with the Securities Act of 1933, as amended,  and any applicable
state laws.

(c)  Maker  waives  presentment  and  demand  for  payment,  notice of
dishonor, protest and notice of protest of this Note, and all other notices
in  connection  with the  delivery,  acceptance,  performance,  default  or
enforcement of this Note.

3

(d) No  modification  or waiver of any provision of this Note, nor any
departure by Maker  therefrom,  shall in any event be effective  unless the
same  shall be in writing  and then such  modification  or waiver  shall be
effective only in the specific instance for the specific purpose given.

(e)  Should  any  part or  provision  of this  Note  require  judicial
interpretation,  Maker and Holder  agree that the court  interpreting  such
part or provision shall not apply a presumption that the terms hereof shall
be more  strictly  construed  against  one  party by  reason of the rule of
construction  that a document is to be more strictly  construed against the
party that itself or through its agent  prepared the same,  it being agreed
that Maker and Holder have both  participated  in the  preparation  of this
Note.

(f) If any part or  provision  contained in this Note shall be invalid
or unenforceable under applicable law, then such part or provision shall be
ineffective  only to the  extent  of such  invalidity  (without  in any way
affecting the remaining  parts of such part or provision or the other parts
or provisions of this Note).

(g) The rights,  powers and  remedies  provided  to Holder  herein are
cumulative and not exclusive of any right,  power or remedy provided at law
or in  equity.  Failure  or  forbearance  of Holder to  exercise  any right
hereunder or otherwise granted at law or equity shall not affect or release
Maker from its  liability  hereunder  and shall not  constitute a waiver of
such  right  unless so stated  by  Holder in  writing  and then only in the
specific instance and for the specific purpose given.

(h) This Note will be governed by and construed in accordance with the
domestic laws of the State of Georgia.

(i) Time is of the essence under this Note.

IN WITNESS  WHEREOF,  this Note has been  executed  on the date first above
written.

HORIZON MEDICAL PRODUCTS, INC.

By:  
----------------------------------------
Name:
Title:
Address for Notices to Payee:

Ideas for Medicine, Inc.
c/o CryoLife, Inc.
1655 Roberts Blvd., N.W.
Kennesaw, Georgia 30144
Attention: Vice President of Finance

4

Exhibit B

Form of CryoLife Guaranty

See attached.

CRYOLIFE, INC. GUARANTY

For good and valuable consideration,  the receipt and adequacy of which are
hereby acknowledged,  CryoLife, Inc., a Florida corporation ("CryoLife"), hereby
guarantees to Horizon Medical Products, Inc., a Georgia corporation ("Horizon"),
the  complete  performance  and payment by Ideas for  Medicine,  Inc., a Florida
corporation  ("IFM"),  of IFM's  obligations and liabilities under (i) the Asset
Purchase  Agreement,  dated as of October , 2000, by and between IFM and Horizon
(the "Purchase  Agreement"),  including without limitation any obligation of IFM
pursuant to Section 9 of the Purchase  Agreement,  (ii) the Sublease  Agreement,
dated as of  October , 2000,  by and  between  IFM and  Horizon  (the  "Sublease
Agreement"),  and (iii) the Consent to Sublease,  dated as of October , 2000, by
and among Horizon,  IFM and Secret  Promise,  Ltd. (the "Sublease  Consent," and
together  with  the  Purchase  Agreement  and the  Sublease,  collectively,  the
"Agreements").

CryoLife hereby waives notice of, and proof of reliance by Horizon upon and
acceptance of, CryoLife's  guaranty herein, and of non-performance by IFM of any
of its  obligations  under the Agreements and of any other notices or demands of
any kind whatsoever.  Horizon and IFM may enter into any amendment,  assignment,
waiver,  or  modification  of the  Agreements,  whether  or not such  amendment,
assignment,  waiver,  or modification  would in any way increase or decrease the
extent of CryoLife's  obligations  hereinafter,  without notice to or consent of
CryoLife and without  thereby  releasing  CryoLife  hereunder.  CryoLife  hereby
guarantees the performance and payment of any of IFM's  obligations set forth in
any such amendment as if the provisions of such amendment were set forth in full
in the Agreements. The obligations of CryoLife under this paragraph shall not be
released or affected by voluntary or  involuntary  proceedings by or against IFM
in  bankruptcy  or for  reorganization  or other relief under any  bankruptcy or
insolvency law.  CryoLife's  guaranty shall continue to be effective or shall be
reinstated automatically, as the case may be, if at any time any payment, or any
part thereof,  by IFM is rescinded or must otherwise be returned by Horizon upon
the insolvency, bankruptcy,  dissolution,  liquidation, or reorganization of IFM
as though any such payment had not been made.

CryoLife  covenants  and  agrees  that  it  shall  be  fully  bound  by the
provisions of Section 11 of the Purchase Agreement.

CryoLife  hereby waives any right of CryoLife  under Georgia law to require
that an action be  brought  against  IFM first  before any action may be brought
against CryoLife.

CryoLife represents and warrants to Horizon that:

(a) CryoLife is a corporation duly organized, validly existing, and in
good standing  under the laws of Florida,  and has the requisite  corporate
power and authority to execute and deliver this Guaranty and the documents,
agreements, and certificates (collectively, the "CryoLife Documents") which
are  required to be executed  and  delivered  by CryoLife  pursuant to this
Guaranty  and to perform in all  respects  its  obligations  hereunder  and
thereunder.  CryoLife is duly  qualified  or licensed to do business and in
good standing in each  jurisdiction  in which the nature of its business or

5

the  character  of the  assets  owned or  leased  by  CryoLife  makes  such
qualification  or  licensing  necessary,  except where the failure to be so
qualified or licensed  would not impair or otherwise  adversely  affect the
transactions contemplated hereunder.

(b) The execution,  delivery, and performance of this Guaranty and the
CryoLife  Documents  have been duly  authorized by all requisite  corporate
action on the part of CryoLife.  This  Guaranty has been duly  executed and
delivered by CryoLife and constitutes,  and each of the CryoLife  Documents
when  executed  and  delivered  will  constitute,  the  valid  and  binding
obligation of CryoLife, enforceable in accordance with and subject to their
respective   terms,   except  as   limited   by   bankruptcy,   insolvency,
reorganization,  and similar laws  affecting the  enforcement of creditors'
rights or contractual obligations generally.  The execution,  delivery, and
performance by CryoLife of this Guaranty and the CryoLife Documents and the
consummation of the transactions  contemplated hereby and thereby will not:
(i) violate any provision of the Certificate of  Incorporation or Bylaws of
CryoLife;  (ii)  violate  any  provision  of  any  judicial,  arbitral,  or
administrative  order, award,  judgment,  or decree applicable to CryoLife;
(iii)  conflict  with or  constitute  a  default  under  any  agreement  or
instrument  to which  CryoLife  is a party or by  which it is  bound;  (iv)
violate, in any material respect, any applicable law, rule,  ordinance,  or
regulation  applicable to CryoLife;  or (v) require  CryoLife to obtain the
consent,  approval,  or  authorization  of, or require CryoLife to file any
certificate,  notice,  application,  report,  or other  document  with, any
federal,  state, or local governmental  authority or agency or other person
or entity.

(c) There are no judicial, arbitral, or administrative actions, suits,
or proceedings or, to the knowledge of CryoLife, any investigations pending
against  CryoLife which would, if adversely  determined,  prevent,  hinder,
delay, or otherwise  adversely  affect the consummation of the transactions
contemplated  hereby.  CryoLife  is  not a  party  to  or  subject  to  the
provisions  of any  order,  decree,  or  judgment  of any  court  or of any
governmental  agency which may  prevent,  hinder,  or  otherwise  adversely
affect the consummation of the transactions contemplated by the Agreements.

This Guaranty  shall be governed by and  construed in  accordance  with the
laws of the State of Georgia without reference to its principles of conflicts of
law.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF,  the undersigned has caused the Guaranty to be executed
and delivered as of the date of the foregoing Agreements.

CRYOLIFE, INC.

By:  
---------------------------------------
Name:
Title:

Exhibit G

FORM OF MANUFACTURING, ASSEMBLY AND PACKAGING AGREEMENT

THIS  MANUFACTURING,  ASSEMBLY AND PACKAGING AGREEMENT (the "Agreement") is
made this _____ day of  October,  2000 by and  between  CryoLife,  Inc.,  having
offices at 1655 Roberts Blvd., Kennesaw, Georgia 30144 ("CryoLife"), and Horizon
Medical  Products,  Inc., a Georgia  corporation,  having offices at One Horizon
Way, Manchester, Georgia 31816 ("Horizon").

W I T N E S S E T H:

WHEREAS,  CryoLife  has  conceived  and  developed  unique and  proprietary
medical products,  including  components and packaging related thereto which are
described on Exhibit A (hereinafter the "CryoLife Products");

WHEREAS,  Horizon has the capabilities to manufacture,  assemble,  package,
and ship the CryoLife Products (hereinafter the "Services");

WHEREAS, CryoLife desires to engage Horizon to perform the Services;

NOW,  THEREFORE,  in  consideration  of the mutual  promises and  covenants
herein contained, the parties hereto agree as follows:

1. COMPENSATION

A. In consideration hereof, CryoLife hereby agrees to pay Horizon an amount
equal to the actual direct labor costs  incurred by Horizon in  connection  with
the  provision  of the  Services,  plus  overhead at a rate of $32.50 per direct
labor hour.

B. The rates set forth herein are exclusive of any federal, state, or local
taxes and  CryoLife  shall be  responsible  for the  payment  of all such  taxes
(excluding taxes based on Horizon's income).

2. CRYOLIFE DUTIES

A.  Within  five  business  days  following  execution  of this  Agreement,
CryoLife shall provide to Horizon a purchase  order (the  "Purchase  Order") for
the BioGlue  components and allograft  packaging to be manufactured,  assembled,
packaged,  and  shipped  during  the term of this  Agreement.  For  assembly  of
CryoPaks,  CryoLife  will notify  Horizon from time to time of required  CryoPak
shipments via an electronic system. In the event Horizon anticipates any problem
in performing the services in accordance with the Purchase Order,  Horizon shall
notify  CryoLife within ten days following  receipt of such Purchase Order,  and
the parties shall negotiate in good faith to resolve any such problems and reach
a Purchase Order acceptable to both parties.

B. CryoLife shall provide  Horizon with the raw materials  required for the
performance  of the  Services,  including,  without  limitation,  the  materials
described  on  Exhibit B;  provided,  however,  Horizon  shall  manufacture  the
connector for the BioGlue  extender tips.  Such materials  shall be delivered to
Horizon in accordance with the Raw Materials  Schedule (as defined in Section 3B
below)  provided  by  Horizon.  To the  extent  CryoLife  fails to  provide  raw
materials in accordance with such Schedule,  the delivery date for the items for
which the related raw  materials  were delayed shall be extended by an amount of
time equal to the delay in delivery of the raw materials.

C.   CryoLife's   Purchasing   Manager   shall   be   CryoLife's'   primary
representative with respect to issues arising under this Agreement. CryoLife may
change their representative upon written notice to Horizon.

D.  During  the  term of this  Agreement  and for a period  of three  years
following   termination  hereof,   CryoLife  shall  maintain  product  liability
insurance of not less than  $5,000,000  per  occurrence  and  $5,000,000  in the
aggregate to cover the CryoLife  Products and the distribution and sale thereof.
Such insurance policy shall name CryoLife as the named insured and Horizon as an
additional  insured.  CryoLife  shall  provide to Horizon  within 15 days of the
execution  of  this  Agreement  a  Certificate  of  Insurance   evidencing  such
insurance.

E.  CryoLife  shall  be  responsible  for  freight  costs  associated  with
transporting  the BioGlue  components  and  allograft  packaging  to the company
designated by CryoLife for sterilization  services (the  "Sterilizing  Company")
and/or  CryoLife.  Shipments  of CryoPaks  as  designated  by CryoLife  shall be
charged to CryoLife's account with United Parcel Service.  Horizon shall provide
to CryoLife reasonable  documentation evidencing the freight costs to be born by
CryoLife pursuant to this Section.

F. CryoLife shall be responsible for handling,  and Horizon shall direct to
CryoLife,  all  customer  complaints  in respect of the  CryoLife  Products.  In
addition,  CryoLife  shall be  responsible  for any medical  device or vigilance
reports  required to be filed with the United States Food & Drug  Administration
or any notified body in respect of the CryoLife Products.

3. HORIZON'S DUTIES

A. During the term of this  Agreement,  Horizon shall assemble and maintain
in inventory  CryoPaks in the amounts  described  herein for distribution to the
organ  and  tissue  procurement  organizations  designated  by  CryoLife  or  as
otherwise  designated by CryoLife.  Horizon shall maintain in inventory a number
of assembled  CryoPaks  equal to that number which is 15% of CryoLife's  average
monthly  requirements  for CryoPaks during the three month period  preceding the
date  hereof.   Horizon  shall  ship  CryoPaks   within  two  business  days  of
notification from CryoLife.  Horizon shall provide CryoLife with confirmation of
such shipments as they occur.

B.  Horizon  shall  fulfill  the  mutually  agreed upon  Purchase  Order in
accordance with the terms thereof.

2

C. Within ten days following  agreement with respect to the Purchase Order,
Horizon shall provide to CryoLife a written list (the "Raw Materials  Schedule")
of the raw  materials  required to fulfill the  Purchase  Order and the dates by
which  such  raw  materials  are  needed  in order  to meet  the  delivery  date
therefore.  To the extent Horizon  anticipates that additional raw materials are
needed to assemble and maintain the Inventory of CryoPaks in accordance with 3A,
Horizon shall provide  CryoLife with a Raw  Materials  Schedule  describing  the
items needed, the amount of items needed, and the date such items are needed.

D. Horizon shall provide to CryoLife on or before the fifth business day of
each month during the term hereof a written report on the status of the services
being  performed  and the  quantity  of raw  materials,  work in  progress,  and
finished  goods,  utilizing the CryoLife  assembly,  lot, and item numbers.  The
monthly  report shall  describe any raw  materials  returned to stock during any
production run and any rejects (with  explanation)  for any  production  run. In
addition, the report shall indicate the number of quality control samples and/or
rejects associated with any production run.

E.  Horizon  shall  manufacture,  assemble,  package and ship the  CryoLife
Products in accordance  with the processes and  procedures  ("CryoLife  Standard
Operating  Procedures") utilized by IFM prior to the date hereof and provided by
CryoLife  to Horizon  in writing or  electronically.  Any  changes  proposed  by
Horizon to the manufacturing,  assembly and packaging processes or the materials
or supplies used in connection  therewith must be  communicated  to CryoLife and
approved by CryoLife in writing prior to the  implementation  of the change.  To
the  extent  CryoLife  implements  a change  to  CryoLife's  Standard  Operating
Procedures,  CryoLife  shall be  responsible  for any  validation or engineering
costs  incurred by Horizon in  connection  with such change.  As  instructed  by
CryoLife,  Horizon shall ship the CryoLife  Products to the Sterilizing  Company
designated  by  CryoLife.  Horizon  shall  prepare a packing  list to  accompany
shipments to the Sterilizing  Company.  The packing list shall include quantity,
catalog  number,  description  and  lot  number  of all  items  included  in the
shipment.  The packing list shall also  include  shipment  instructions  for the
CryoLife Products once sterilized.

F.  During  the  term of this  Agreement  and for a period  of three  years
following termination hereof, Horizon shall maintain general liability insurance
(including  products/completed  operations  liability  coverage and  contractual
liability coverage) of not less than $5,000,000 per occurrence and $5,000,000 in
the aggregate. Such insurance policy shall name Horizon as the named insured and
CryoLife as an additional  insured.  Further,  Horizon shall  maintain  property
insurance in amounts  sufficient to reimburse  CryoLife for the full replacement
cost of the raw  materials,  work in process,  and finished  goods  inventory of
CryoLife  Products  located on  Horizon's  premises in the event of  destruction
while located on Horizon's  premises as a result of fire,  theft,  etc.  Horizon
shall provide to CryoLife  within 15 days of the  execution of this  Agreement a
Certificate of Insurance evidencing the Insurance required hereby.

G.  During  the term of this  Agreement,  Horizon  shall  not  manufacture,
assemble or package for any third party any medical products or components which
are  substantially  similar in function,  design or use to the CryoLife Products
without the prior written consent of CryoLife.

3

H.  Horizon's  Vice  President of  Operations  shall be  Horizon's  primary
representative with respect to issues arising under this Agreement.  Horizon may
change their representative upon written notice to CryoLife.

4. CONFIDENTIALITY

By virtue of the  performance of the Services  pursuant to this  Agreement,
Horizon shall have access to information that is confidential and proprietary to
CryoLife  ("Confidential  Information").   Confidential  Information  shall  not
include information which (a) is or becomes part of the public domain through no
act or omission of Horizon;  (b) was in Horizon's lawful possession prior to the
date of this  Agreement  as  evidenced  by its written  records and had not been
obtained by Horizon  either  directly or  indirectly  from  CryoLife;  or (c) is
lawfully  disclosed  to  Horizon  by  a  third  party  without   restriction  on
disclosure.  Horizon  agrees,  both  during  the  term  of  this  Agreement  and
thereafter,  to hold the Confidential Information in confidence.  Horizon agrees
not to make  CryoLife's  Confidential  Information  available in any form to any
third party or to use CryoLife's Confidential  Information for any purpose other
than the implementation of this Agreement. Horizon agrees to take all reasonable
steps to ensure that  CryoLife's  Confidential  Information  is not disclosed or
distributed  by its  employees or agents in violation of the  provisions of this
Agreement.  This Section 4 shall survive for a period of two years following the
termination  or  expiration  of  this  Agreement;   provided,  with  respect  to
Confidential  Information  that  constitutes  a trade secret under  Georgia law,
Horizon's  obligations  hereunder shall survive for the longer of (i) two years,
or (ii) so long as such Confidential Information remains a trade secret.

5. EQUIPMENT AND INTELLECTUAL PROPERTY

A.  During  the  term  of this  Agreement,  Horizon  may use the  equipment
designated  on Exhibit C (the  "Equipment")  at no charge to Horizon but only in
connection  with the  manufacture,  assembly,  packaging,  and  shipping  of the
CryoLife Products as provided hereunder.  Normal wear and tear and deterioration
are the responsibility of CryoLife.  Repair or replacement of the Equipment will
be the responsibility of CryoLife.

B.  CryoLife  hereby  grants  to  Horizon  the  license  to use  CryoLife's
Confidential Information,  including its processes,  procedures,  methodologies,
know-how,  trade secrets and other intellectual  property rights utilized in the
manufacturing,  assembly,  and packaging of the CryoLife  Products in connection
with the performance of the Services hereunder.

C.  CryoLife  retains  all  right,  title,  and  interest  in  and  to  the
Confidential Information and CryoLife Products,  including,  without limitation,
all patent,  copyright,  trademark,  trade dress, and trade secret right related
thereto and including all derivative works and rights to create derivative works
thereof.

4

6. REPRESENTATIONS AND WARRANTIES OF HORIZON

A. Horizon  warrants that it is authorized to enter into this Agreement and
that its  performance  thereof  will not  conflict  with any other  agreement of
Horizon.

B.  Horizon  warrants  that  the  Services  will  be  performed  (i)  in  a
professional  and competent  manner in accordance with industry  standards,  and
(ii) in accordance  with the rules and  regulations  of the United States Food &
Drug Administration ("FDA"),  including,  without limitation,  the FDA's current
good manufacturing practices and procedures and quality systems regulations,  as
well is the standards of the International Organization of Standardization.

C.  EXCEPT  AS SET  FORTH  HEREIN,  HORIZON  MAKES  NO  REPRESENTATIONS  OR
WARRANTIES  EXPRESS OR IMPLIED,  INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.

7. AUDIT FOR INVENTORIES AND QUALITY

CryoLife  has the right to inspect  and audit the  quality of the  Services
with reasonable notice to Horizon.

8. TERM OF THE AGREEMENT

This Agreement  shall  commence  effective as of October 1, 2000 and extend
through December 31, 2000 unless sooner terminated as provided herein.

9. INDEMNIFICATION

A. Horizon agrees to indemnify and hold harmless CryoLife and its officers,
employees, agents and assigns from and against any and all liabilities,  claims,
demands, suits, actions, causes of action or any other legal proceedings arising
out of, or related in any way to, (i) any grossly  negligent or intentional  act
or  omission  by  Horizon  arising  out  of  or  in  connection  with  Horizon's
performance of the Services under this Agreement, (ii) any failure of Horizon to
perform the Services in accordance with CryoLife's Standard Operating Procedures
and the warranty set forth in Section  6B(ii),  and (iii) the failure of Horizon
to comply with the laws,  rules or regulations  ("Laws") of the FDA or any other
governmental authority applicable to Horizon in connection with the manufacture,
assembly, packaging and shipment of the CryoLife Products hereunder.  Horizontal
agrees to pay all losses,  damages  (actual  and  exemplary),  costs,  expenses,
invoices and bills (including  reasonable  attorneys' fees) incurred by CryoLife
and its  officers,  employees,  agents  and  assigns  as a  result  of any  such
negligent or intentional act or omission by Horizon.

B. CryoLife agrees to indemnify and hold harmless Horizon and its officers,
employees, agents and assigns from and against any and all liabilities,  claims,
demands, suits, actions, causes of action or any other legal proceedings arising
out of or related in any way to, (i) any grossly or intentional  act or omission
by CryoLife  arising out of or in connection  with CryoLife  performance  of its
obligations under this Agreement,  (ii) except for actions for which CryoLife is
entitled  to  indemnification  under  Section  8(a)  hereof,  the  distribution,
marketing  or sale of the  CryoLife  Products  or any  defect  in the  design or
specifications  for the  CryoLife  Products  or  CryoLife's  Standard  Operating

5

Procedures, and (iii) the failure of CryoLife to comply with the Laws of the FDA
or any other  governmental  authority  applicable to CryoLife in connection with
the sale of the  CryoLife  Products  by  CryoLife.  CryoLife  agrees  to pay all
losses,  damages (actual and  exemplary),  costs,  expenses,  invoices and bills
(including  reasonable  attorneys'  fees)  incurred by Horizon and its officers,
employees,  agents and assigns as a result of any such  negligent or intentional
act or omission by CryoLife.

C. Promptly after receipt by Horizon or CryoLife (hereinafter  collectively
referred  to as an  "Indemnified  Party")  of  notice  by a third  party  of any
complaint or the  commencement of any action or proceeding with respect to which
indemnification  is being sought hereunder,  such Indemnified Party shall notify
Horizon or CryoLife,  whoever is the  appropriate  indemnifying  party hereunder
(the  "Indemnifying  Party"),  of such complaint or of the  commencement of such
action or  proceeding;  provided,  however,  that the  failure  to so notify the
Indemnifying  Party shall not relieve the Indemnifying  Party from liability for
such claim arising  otherwise  than under this  Agreement and such failure to so
notify  the  Indemnifying  Party  shall  relieve  the  Indemnifying  Party  from
liability which the  Indemnifying  Party may have hereunder with respect to such
claim only to the extent  that,  such failure to notify the  Indemnifying  Party
results in the  forfeiture  by the  Indemnifying  Party of rights  and  defenses
otherwise  available to the  Indemnifying  Party with respect to such claim. The
Indemnifying  Party shall have the right, upon written notice to the Indemnified
Party,  to assume  the  defense  of such  action or  proceeding,  including  the
employment of counsel  reasonably  satisfactory to the Indemnified Party and the
payment of the fees and  disbursements of such counsel.  In the event,  however,
that the  Indemnifying  Party  declines  or falls to assume  the  defense of the
action  or  proceeding  or to  employ  counsel  reasonably  satisfactory  to the
Indemnified  Party,  in either case in a timely  manner,  then such  Indemnified
Party may  employ  counsel  to  represent  or  defend  it in any such  action or
proceeding  and the  Indemnifying  Party  shall  pay  the  reasonable  fees  and
disbursements of such counsel incurred; provided, however, that the Indemnifying
Party shall not be required to pay the fees and  disbursements  of more than one
counsel for all Indemnified  Parties in any Jurisdiction in any single action or
proceeding. In any action or proceeding with respect to which indemnification is
being  sought  hereunder,  the  Indemnified  Party  or the  Indemnifying  Party,
whichever is not  assuming  the defense of such action,  shall have the right to
participate in such litigation and to retain its own counsel at such party's own
expense.  The Indemnifying  Party or the Indemnified  Party, as the case may be,
shall at all times use reasonable  efforts to keep the Indemnifying Party or the
Indemnified Party, as the case may be, reasonably apprised of the status for the
defense  of any),  action  the  defense  of which  they are  maintaining  and to
cooperate  in good faith with each other with respect to the defense of any such
action.

D. No  Indemnified  Party may settle or compromise  any claim or consent to
the entry of any judgment with respect to which  indemnification is being sought
hereunder  without the prior written consent of the Indemnifying  Party,  unless
such settlement, compromise or consent includes all unconditional release of the
Indemnifying Party from all liability arising out of such claim. An Indemnifying
Party may not,  without  the prior  written  consent of the  Indemnified  Party,
settle or  comprise  any claim or  consent  to the  entry of any  judgment  with
respect  to  which   indemnification  is  being  sought  hereunder  unless  such
settlement,  compromise  or consent  includes  an  unconditional  release of the
Indemnified  Party  from all  liability  arising  out of such claim and does not
contain  any  equitable  order,  judgment  or term which in any manner  affects,
restrains or interferes with the business of the Indemnified Party or any of the
Indemnified Party's respective affiliates.

6

E. In the  event  an  Indemnified  Party  shall  claim a right  to  payment
pursuant to this Agreement,  such Indemnified Party shall send written notice of
such claim to the appropriate  Indemnifying Party. Such notice shall specify the
basis for such claim.  As promptly as possible after the  Indemnified  Party has
given such notice, such Indemnified Party and the appropriate Indemnifying Party
shall  establish  the merits  and  amount of such  claim (by  mutual  agreement,
litigation,  arbitration  or  otherwise)  and,  within five business days of the
final  determination  of the merits and amount of such claim,  the  Indemnifying
Party shall deliver to the Indemnified  Party in immediately  available funds an
amount equal to such claim as determined hereunder.

10. TERMINATION RIGHTS

A. Either party may terminate  this  Agreement on 10 business days' written
notice to the other party in the event of a breach of any material  provision of
this Agreement by such other party,  provided that the breaching  party fails to
cure such breach during the 10-day period.

B. Upon  termination or expiration of this Agreement,  Horizon shall return
to CryoLife,  at  CryoLife's  cost,  all raw  materials,  work in progress,  and
finished  goods  inventory of the CryoLife  Products in its possession as of the
date of such termination or expiration, along with any Equipment.

11. GENERAL

A.  Amendment.  This  Agreement may be modified only by a written  document
signed by duly authorized representatives of the parties.

B. Force  Majeure.  A party  shall not be liable for, a failure or delay in
the  performance  of any of its  obligations  under  this  Agreement  where such
failure or delay is the result of fire, flood, or other natural disaster, act of
God, war, embargo, riot, labor dispute,  unavailability of raw materials, or the
intervention of any government authority, providing that the party failing in or
delaying its performance  promptly  notifies the other party of its inability to
perform and states the reason for such inability.

C.  Assignment.  This  Agreement  may not be assigned  by any party  hereto
without the written consent of the other party. Subject to the foregoing, all of
the terms and provisions of this  Agreement  shall be binding upon, and inure to
the  benefit  of, and shall be  enforceable  by, the  respective  successor  and
assigns of the parties hereto.

D.  Counterparts.  This Agreement may be executed  simultaneously in two or
more  counterparts,  each of which shall be deemed an original  and all of which
together shall constitute but one and the same instrument.

7

E. Choice of Law. This  Agreement,  and the rights and  obligations  of the
parties,  shall be interpreted  and governed in accordance  with the laws of the
State of Georgia, without giving effect to its conflicts of law provisions.

F.  Waiver.  Should  either of the parties  fail to exercise or enforce any
provision of this Agreement, or waive any right to respect thereto, such failure
or waiver shall not be construed as constituting a waiver or a continuing waiver
of its rights to enforce any other provision or right.

G.  Severability.  If any  provision of this  Agreement or the  application
thereof for any reason shall be declared invalid or unenforceable, the remainder
of this Agreement shall not be affected,  and each remaining  provision shall be
valid and enforceable to the fullest extent.

H.  Limitation of Liability.  IN NO EVENT SHALL ANY PARTY BE LIABLE FOR ANY
INDIRECT,  SPECIAL,  INCIDENTAL OR CONSEQUENTIAL  DAMAGES RESULTING FROM ANOTHER
PARTY'S  PERFORMANCE  OR  FAILURE  TO  PERFORM  UNDER  THIS  AGREEMENT,  OR  THE
FURNISHING,  PERFORMANCE,  OR USE OF ANY GOODS OR SERVICES SOLD PURSUANT HERETO,
WHETHER DUE TO BREACH OF CONTRACT, BREACH OF WARRANTY,  NEGLIGENCE OR OTHERWISE,
REGARDLESS OF WHETHER THE NONPERFORMING  PARTY WAS ADVISED OF THE POSSIBILITY OF
SUCH  DAMAGES OR NOT. IN NO EVENT SHALL  HORIZON'S  LIABILITY  HEREUNDER  EXCEED
$5,000,000  (THE "CAP  AMOUNT");  PROVIDED THE  PROVISIONS  OF SECTION 9A(i) AND
9A(iii) SHALL NOT BE SUBJECT TO THE CAP AMOUNT, AND THERE SHALL BE NO LIMITATION
ON THE INDEMNIFICATION  OBLIGATIONS OF HORIZON ARISING UNDER OR PURSUANT TO SUCH
SECTIONS.

I.  Effect.  The  headings  and  sub-headings   contained  herein  are  for
information  purposes only and shall have no effect upon the intended purpose or
interpretation of the provisions of this Agreement.

J. Entire Agreement.  This Agreement,  the Asset Purchase Agreement of even
date  herewith  between  Horizon and IFM, and the  Exhibits  hereto and thereto,
constitute  the entire  agreement  and  understanding  between the parties  with
respect  to the  subject  matter  of this  Agreement  and  integrates  all prior
discussions and proposals  (whether oral or written) between them related to the
subject matter hereof.

K. No  Partnership  Or Agent  Created.  The  relationship  of  Horizon  and
CryoLife  shall  be  that  of  independent  contractors  only.  Nothing  in this
Agreement   shall  be   construed  as  ranking  one  party  an  agent  or  legal
representative  of the other or  otherwise  as having the power or  authority to
bind the other in any manner.

L. Binding Effect. This Agreement and the rights and obligations  hereunder
shall be  binding  upon and inure to the  benefit of the  parties  hereto and to
their respective successors and permitted assigns.

8

M.  Notices.  Any  notice  to be made  in  connection  with  any  right  or
obligation  arising  under this  Agreement  shall be  provided  by (a)  personal
delivery  (including  delivery by Federal Express or similar  reputable  express
courier), (b) telecopy, with written confirmation of receipt received and a copy
sent by the method described in (a), or (c) registered by one party to the other
at the following  addresses.  Said notices shall be deemed to be effective  upon
receipt by the receiving party thereof.

Horizon:                  Horizon Medical Products, Inc.
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
Attention:  Robert M. Dodge
Fax:  404/264/9919

with copies to:           Nat G. Slaughter, III
Slaughter & Virgin, P.C.
400 Colony Square; Suite 1110
1201 Peachtree Street, N.E.
Atlanta, Georgia 30361
Fax:  404/872-7879

and                       King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention:  Jon R. Harris, Jr.
Fax:  404/572-5100

CryoLife:                 CryoLife, Inc.
1655 Roberts Blvd., N.W.
Kennesaw, Georgia 30144
Attention:  Vice President of Finance
Fax:  770/590-3754

with a copy to:           Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attention:  Clinton D. Richardson
Fax: 404/873-8665

Either  party may change its address by written  notice given to the other party
in the manner set forth above.

N.  Attorneys  Fees.  If any  action at law or in equity  is  necessary  to
enforce the terms of this Agreement,  the prevailing  party shall be entitled to
reasonable  attorney fees, costs and expenses in addition to any other relief to
which such prevailing party may be entitled.

9

O.  Survival.  The  provisions of Sections 2D, 3F, 4, 5C, 9, 10B, 11E, 11H,
11J, 11N, and 11O shall survive any termination of this Agreement.

P. Key Employee. If, the event of the termination of the employment of Rick
Howard  (excluding a termination  of Howard by Horizon),  CryoLife  shall,  upon
Horizon's request,  make the services of Bill Wright available to Horizon for up
to one day per week for the remaining term of the Agreement to assist Horizon in
meeting its obligations hereunder. Provided, however, that Horizon shall pay any
and all travel costs  associated  with the  provision  of such  services by Bill
Wright.

IN WITNESS  WHEREOF,  the parties  hereto,  intending  to be legally  bound
hereby,  have each caused to be affixed  hereto its or his/her hand and seal the
day indicated.

CryoLife, Inc.                          Horizon Medical Products, Inc.

By:                                     By:
--------------------------------         --------------------------------
Title:                                  Title:
--------------------------------         --------------------------------
Date:                                   Date:
--------------------------------         --------------------------------

10

Exhibit H

Form of Transition Services Agreement

See attached.

Exhibit H

FORM OF TRANSITION SERVICES AGREEMENT

This TRANSITION  SERVICES AGREEMENT  ("Agreement") is entered into this 9th
day of October,  2000 by and among  Horizon  Medical  Products,  Inc., a Georgia
corporation (the  "Company"),  Ideas for Medicine,  Inc., a Florida  corporation
(the "Seller") and wholly-owned subsidiary of CryoLife,  Inc. ("Provider").  The
Seller,  Provider  and the  Company  may each be referred to herein as a "Party"
and/or the "Parties" as the case may require.

RECITALS

WHEREAS,  the Company  and Seller  have  entered  into that  certain  Asset
Purchase  Agreement,  dated as of October  9, 2000  (hereinafter  the  "Purchase
Agreement");

WHEREAS,  pursuant to the terms and  conditions of the Purchase  Agreement,
the Company  intends to purchase the Seller's  business as a going concern,  and
the Company proposes to assume certain of the liabilities and obligations of the
Seller;

WHEREAS,  the Seller is in the medical device  manufacturing  business (the
"Business");

WHEREAS, after the Closing Date, the Company will operate the Business,

WHEREAS,  prior  to  the  date  hereof,  the  Seller,  Provider  and  their
affiliates have provided the Business with certain services, and

WHEREAS,  in order to support the continued and uninterrupted  operation of
the  Business  following  the  Closing,  the  parties  desire to enter into this
Agreement, pursuant to which the Provider will provide, for the time periods and
consideration  described below,  certain of the services that have been provided
by the  Seller,  Provider  and their  affiliates  to the  Business  prior to the
Closing Date.

NOW,   THEREFORE,   in  furtherance  of  the  foregoing   premises  and  in
consideration of the mutual covenants and obligations  hereinafter set forth the
parties hereto, intending to be legally bound hereby do agree as follows:

ARTICLE I
DEFINITIONS

1.1 The  "Closing  Date"  shall be the date of closing of the  transactions
described in the Purchase Agreement.

1.2 Capitalized  terms not otherwise  defined herein shall have the meaning
set forth in the Purchase Agreement.

1

ARTICLE 2
SERVICES TO BE PROVIDED BY THE SELLER AND PROVIDER

Following  the  Closing  Date,  Provider  shall  provide to the Company the
services  (individually or collectively referred to herein as, the "Service(s)")
set forth on  Exhibit A for the term of this  Agreement  as set forth in Section
7.1 hereof.

ARTICLE 3
TERMS OF SERVICE

3.1 The  attached  Exhibit A of  Services  are  subject to change  with the
Parties'  mutual written consent with respect to which the Parties agree to deal
with one another in good faith in  considering  changes.  The Parties  have made
good  faith  efforts  as of the date  hereof to  identify  each  Service  and to
otherwise complete the content of Exhibit A to this Agreement.

3.2 The Company is contracting  for provision of the Services on an "as-is"
basis.  It  will be at  Provider's  discretion  as to  whether  enhancements  or
modifications  to these systems will be made available to the Company.  Provider
shall not be obligated to make any  modifications  to Provider's  systems at the
Company's  request,  except as the parties  may agree in writing.  To the extent
that it is necessary for the Company to provide  information and/or materials to
Provider in order for Provider to perform the Services, the Company will provide
such information and/or materials in a timely manner.

3.3 The Services  rendered by Provider  hereunder  are to be provided at no
cost to the Company in consideration for the discount provided by the Company to
Provider as  reflected  in that certain  Manufacturing,  Assembly and  Packaging
Agreement, dated as of October 9, 2000, by and between the Company and Provider.
Costs to support the ultimate  separation  of the Company from  Provider and the
implementation  of the  Company's own  independent  systems and services will be
paid  entirely  by the  Company.  Provider  agrees to  cooperate  as  reasonably
requested by the Company in order to effectuate such separation.

ARTICLE 4
ADDITIONAL SERVICES

In addition to the specific  services and facilities  described  above, the
Parties  acknowledge that there may be additional  services and facilities which
have not been  identified  herein but which have been used by the Business prior
to the Closing  Date and which  shall  continue to be required or desired by the
Company  until  December 31,  2000,  or such later date as the Parties may agree
upon. If any such additional services or facilities are identified and requested
by the Company,  the Seller and the Company shall  negotiate with one another in
good faith over the terms and provisions of furnishing the services.

2

ARTICLE 5
LIMITATION OF LIABILITY; INDEMNIFICATION

5.1 Limitation of Liability.

(a)  Provider  shall not have any  liability  to the  Company for any loss,
damage, cost, or expense,  including without limitation,  any special, indirect,
incidental or consequential  damages,  of the Company  allegedly  arising out of
Provider's  performance  of the  services  to be provided by Articles 2, 3 and 4
hereof or Provider's acts or omission in connection with its performance of such
services;  provided,  however,  that this provision shall not apply if: (i) such
loss,  cost  or  expense  arises  out of (A) an act of  fraud,  embezzlement  or
criminal  activity by Provider or (B) willful  misconduct or gross negligence by
Provider; or (ii) such loss, cost or expense arises from the failure (other than
by reason of an event of force majeure,  as provided for in Section 10.2 hereof)
or refusal of Provider to comply in any material respect with, and to perform in
any material  respect its  obligations  under,  this  Agreement  within ten (10)
business days after  Provider  receives  written notice of such failure from the
Company.

(b) The  liability of Provider  under Section  5.1(a)(ii)  shall not exceed
Fifty  Thousand  Dollars  ($50,000).  No claim under Section  5.1(a)(ii)  may be
asserted by the Company  after the  ninetieth  (90th) day  following the date of
termination of this Agreement.

5.2 Indemnification.  The Company shall indemnify Provider,  and shall hold
Provider  harmless  against,  any  loss,  damage,  cost  or  expense  (including
reasonable  fees)  which  Provider  may sustain or incur by reason of any claim,
demand,  suit or recovery by any third party allegedly arising out of Provider's
performance  of the  services  to be  provided  by Articles 2, 3 and 4 hereof or
Provider's acts or omissions in connection with its performance of such services
except in any instance in which Provider would have any liability  under Section
5.1 hereof.

ARTICLE 6
NO WARRANTY

The level and quality of the  Services  shall be provided in good faith and
at a level and quality  comparable  to that  performed by Provider  prior to the
date of this Agreement.  EXCEPT AS OTHERWISE SET FORTH HEREIN, PROVIDER MAKES NO
REPRESENTATION  OR  WARRANTY  WHATSOEVER  WITH  RESPECT  TO THE  SERVICES  TO BE
PROVIDED  HEREUNDER  INCLUDING IMPLIED  WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.

3

ARTICLE 7
TERM AND TERMINATION

7.1 The term of this  Agreement  shall begin on the Closing Date.  Services
shall be  provided  by  Provider  hereunder  until  December  31,  2000,  unless
otherwise specified herein or in Exhibit A attached hereto.

7.2 Subject to the provisions of Exhibit A attached hereto, the Company may
terminate any Service(s) provided pursuant to this Agreement on thirty (30) days
prior written notice to Provider, unless otherwise specified in such Exhibit. If
the Company elects to terminate a service, it will bear the costs of interfacing
any new system to the remaining  Provider systems which it continues to use. The
Company shall be liable for any  outstanding  purchase  orders placed with third
parties by Provider at the direction of the Company and on the Company's  behalf
prior to Provider's receipt of the aforesaid written notice of termination.

7.3 Prior to termination  of this  Agreement,  the Parties shall  cooperate
with one another to maintain an orderly transfer of Services provided  hereunder
and shall provide necessary assistance for an orderly transfer thereof.

7.4 Article 5 of this Agreement shall survive the termination hereof.

ARTICLE 8
PAYMENT

8.1 Any  out-of-pocket  expense  paid to a third  party,  by  Provider as a
result of Services  provided  hereunder  by  Provider  to the  Company  shall be
invoiced in Provider's  customary  form and detail and reimbursed by the Company
to Provider; provided, however, that any such expenses which individually exceed
$1,000 must be approved in advance by the Company,  except for expenses incurred
in  connection  with the  following  services  which are hereby  approved by the
Company:  (i)  continuation  of  AT&T  long  distance  and  TI  services,   (ii)
continuation  of the services of GTE / Verizon,  and (iii) retention of Internet
and frame relay connectivity.

8.2  Payment  terms are net,  thirty  (30) days from date of  invoice,  and
payments shall be made in United States Dollars.

ARTICLE 9
CONFIDENTIALITY

The  Parties  acknowledge  that  in the  course  of  performance  of  their
respective  obligations  pursuant  to this  Agreement,  each may obtain  certain
confidential  and/or  proprietary  information of the other or its affiliates or
customers,  including  the terms and  conditions of this  Agreement.  Each Party
hereby  agrees  that  all  information  communicated  to it by  the  other,  its
affiliates or customers,  whether before or after the Closing Date, was received
in strict  confidence  and shall be kept in strict  confidence and shall be used
only in accordance with this Agreement,  and shall not be disclosed by the other

4

Party,  its agents or employees  without the prior written  consent of the first
Party.  In the event that either  Party either  determines  on the advice of its
counsel that it is required to disclose any  information  pursuant to applicable
law,  or  receives  any  demand  under  lawful  process to  disclose  or provide
information of the other Party that is subject to the confidentiality provisions
hereof,  such  Party  shall  notify  the other  Party  prior to  disclosing  and
providing such  information and shall cooperate at the expense of the requesting
Party in seeking any reasonable protective  arrangements requested by such other
Party.  Subject to the  foregoing,  the Party that  receives  such  request  may
thereafter  disclose or provide  information to the extent  required by such law
(as so advised by counsel) of by lawful process.  Furthermore, the Parties shall
take  reasonable  steps  necessary  to ensure that all  information  and records
relating  to the  business  of  Provider  and  the  Company  are  kept  strictly
confidential. Notwithstanding the above, this Agreement imposes no obligation on
either Party with respect to  information  that is or becomes a matter of public
knowledge through no fault of that Party, is rightfully obtained by either Party
from a third  party  not in  violation  of any  duty of  confidentiality,  or is
independently  developed by either Party without reference to any proprietary or
confidential information of the other Party.

ARTICLE 10
GENERAL

10.1 Amendment.  This Agreement may be modified only by a written  document
signed by duly authorized representatives of the Parties.

10.2 Force  Majeure.  A Party shall not be liable for a failure or delay in
the  performance  of any of its  obligations  under  this  Agreement  where such
failure or delay is the result of fire, flood, or other natural disaster, act of
God, war, embargo, riot, labor dispute,  unavailability of raw materials, or the
intervention of any government authority, providing that the Party failing in or
delaying its performance  promptly  notifies the other Party of its inability to
perform and states the reason for such inability.

10.3  Assignment.  This  Agreement  may not be assigned by any Party hereto
without the written consent of the other Party. Subject to the foregoing, all of
the terms and provisions of this  Agreement  shall be binding upon, and inure to
the  benefit  of, and shall be  enforceable  by, the  respective  successor  and
assigns of the Parties hereto.

10.4 Counterparts.  This Agreement may be executed simultaneously in two or
more  counterparts,  each of which shall be deemed an original  and all of which
together shall constitute but one and the same instrument.

10.5 Choice Of Law. This  Agreement,  and the rights and obligations of the
Parties,  shall be interpreted  and governed in accordance  with the laws of the
State of Georgia, without giving effect to its conflicts of law provisions.

5

10.6 Waiver.  Should  either of the Parties fail to exercise or enforce any
provision of this Agreement, or waive any right in respect thereto, such failure
or waiver shall not be construed as constituting a waiver or a continuing waiver
of its rights to enforce any other provision or right.

10.7  Severability.  If any provision of this Agreement or the  application
thereof for any reason shall be declared invalid or unenforceable, the remainder
of this Agreement shall not be affected,  and each remaining  provision shall be
valid and enforceable to the fullest extent.

10.8  Limitation  Of  Liability.  EXCEPT AS SET FORTH IN SECTION 5.1, IN NO
EVENT  SHALL  ANY PARTY BE  LIABLE  FOR ANY  INDIRECT,  SPECIAL,  INCIDENTAL  OR
CONSEQUENTIAL  DAMAGES RESULTING FROM ANOTHER PARTY'S  PERFORMANCE OR FAILURE TO
PERFORM UNDER THIS  AGREEMENT,  OR THE  FURNISHING,  PERFORMANCE,  OR USE OF ANY
GOODS OR SERVICES  SOLD  PURSUANT  HERETO,  WHETHER  DUE TO BREACH OF  CONTRACT,
BREACH  OF  WARRANTY,  NEGLIGENCE  OR  OTHERWISE,   REGARDLESS  OF  WHETHER  THE
NONPERFORMING PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR NOT.

10.9  Effect.  The  headings  and  sub-headings  contained  herein  are for
information  purposes only and shall have no effect upon the intended purpose or
interpretation of the provisions of this Agreement.

10.10 Entire  Agreement.  This  Agreement,  the Purchase  Agreement and the
Exhibits and Schedules  hereto and thereto,  constitute the entire agreement and
understanding  between the Parties  with  respect to the subject  matter of this
Agreement and integrates all prior  discussions  and proposals  (whether oral or
written) between them related to the subject matter hereof.

10.11 No Partnership Or Agent Created. The relationship of Provider and the
Company shall be that of independent contractors only. Nothing in this Agreement
shall be construed as ranking one party an agent or legal  representative of the
other or  otherwise  as having the power or  authority  to bind the other in any
manner.

10.12  Binding  Effect.  This  Agreement  and the  rights  and  obligations
hereunder  shall be binding  upon and inure to the benefit of the Parties and to
their respective successors and permitted assigns.

10.13  Notices.  Any  notice  to be made in  connection  with any  right or
obligation  arising  under this  Agreement.  shall be provided  by (a)  personal
delivery  (including  delivery by Federal Express or similar  reputable  express
courier), (b) telecopy, with written confirmation of receipt received and a copy
sent by the method  described in (a), or (c) registered mail by one party to the
other at the following  addresses.  Said notices shall be deemed to be effective
upon receipt by the receiving party thereof.

6

Company:                  Horizon Medical Products, Inc.
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
Attention:  Robert M. Dodge
Fax:  404/264/9919

With copies to:           Nat G. Slaughter, III
Slaughter & Virgin, P.C.
400 Colony Square; Suite 1110
1201 Peachtree Street, N.E.
Atlanta, Georgia 30361
Fax:  404/872-7879

and:                      King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention:  Jon R. Harris, Jr.
Fax:  404/572-5100

Seller:                   Ideas for Medicine, Inc.
c/o CryoLife, Inc.
1655 Roberts Blvd., N.W.
Kennesaw, Georgia 30144
Attention:  Vice President of Finance
Fax:  770/590-3754

With a copy to:           Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attention:  Clinton D. Richardson
Fax: 404/873-8665

Provider:                 CryoLife, Inc.
1655 Roberts Blvd., N.W.
Kennesaw, Georgia 30144
Attention:  Vice President of Finance
Fax:  770/590-3754

Either  party may change its address by written  notice  given to the other
Party in the manner set forth above.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS  WHEREOF,  each of the Parties has caused this  Agreement  to be
duly executed as of the day and year first above written.

HORIZON MEDICAL PRODUCTS, INC.

By: 
--------------------------------
Name:
Title:

IDEAS FOR MEDICINE, INC.

By: 
--------------------------------
Name:
Title:

CRYOLIFE, INC.

By: 
--------------------------------
Name:
Title:

Exhibit I

Form of Security Agreement

See attached.

Exhibit I

FORM OF SECURITY AGREEMENT

THIS  SECURITY  AGREEMENT  ("Agreement")  is made as of the day of October,
2000, by HORIZON MEDICAL PRODUCTS,  INC., a Georgia  corporation  ("Horizon") in
favor of IDEAS FOR  MEDICINE,  INC., a Florida  corporation  (together  with its
successors, assigns and transferees, "IFM").

PRELIMINARY STATEMENT

This  Agreement is made to secure all of the  following  (individually  and
collectively the "Indebtedness"):

Payment of the principal  balance,  together with  interest,  costs and all
other sums, to be paid according to that certain  Promissory  Note ("Note"),  by
Horizon to IFM, made as of the date of this Agreement by Horizon,  together with
any and all extensions, renewals,  modifications,  substitutions or replacements
thereof;  and the performance of the covenants and obligations of Horizon due or
to  become  due to IFM  under  this  Agreement  and/or  under  any and all other
documents and instruments  evidencing and/or securing payment of all amounts due
under the Note  (collectively,  the "Loan Documents"),  and the repayment of all
costs,  expenses,  advances and other sums  incurred  and/or  expended by IFM in
connection with performance of those covenants and obligations.

In consideration of the above facts and the mutual promises of the parties,
and as security for the purposes  stated above and elsewhere in this  Agreement,
the parties agree as follows:

1.  Grant of  Security  Interest.  Horizon  hereby  grants  IFM a  security
interest in the following described property  (collectively,  the "Collateral"):

(i)  presently  existing  and  hereafter  arising  accounts,  contract
rights, and all other forms of obligations owing to Borrower arising out of
the  sale or  lease of goods or the  rendition  of  services  by  Borrower,
whether or not  earned by  performance,  and any and all credit  insurance,
guaranties,  and  other  Security  therefor,  as  well  as all  merchandise
returned  to or  reclaimed  by Borrower  relating  to any of the  foregoing
(collectively, "Accounts");

(ii)  present  and  future  general  intangibles  and  other  personal
property  (including  choses  or things in  action,  goodwill,  blueprints,
drawings,  purchase orders,  customer lists, monies due or recoverable from
pension  funds,  route  lists,  monies due under any  royalty or  licensing
agreements,   infringement  claims,  computer  programs,   computer  discs,
computer tapes, literature,  reports, catalogs deposit accounts,  insurance
premium rebates,  tax refunds,  and tax refund claims) other than (A) goods
and Accounts relating to any of the foregoing, or (B) patents, trade names,
trademarks,    servicemarks,   or   copyrights   (collectively,    "General
Intangibles");

(iii)   present  and  future   letters  of  credit,   notes,   drafts,
instruments, certificated and uncertificated securities, documents, leases,
and  chattel  paper  relating  to  any  of  the  foregoing   (collectively,
"Negotiable Collateral");

(iv) present and future  inventory in which Borrower has any interest,
including  goods held for sale or lease or to be furnished under a contract
of service and all of Borrower's present and future raw materials,  work in
process,  finished  goods,  and packing and  shipping  materials,  wherever
located, and any documents of title representing any of the above, relating
to any of the foregoing (collectively, "Inventory");

(v) present and hereafter acquired machinery,  machine tools,  motors,
equipment,  furniture,  furnishings,  fixtures,  vehicles  (including motor
vehicles  and  trailers),  tools,  parts,  dies,  jigs,  goods  (other than
consumer goods or farm products), and any interest in any of the foregoing,
and all attachments,  accessories,  accessions, additions, and improvements
to any of the foregoing, wherever located (collectively, "Equipment");

(vi) substitutions,  replacements,  additions,  accessions,  proceeds,
products  to or of  any of  the  foregoing  (other  than  substitutions  or
replacements  of  Equipment  after  the date  hereof),  including,  but not
limited to,  proceeds of insurance  covering any of the  foregoing,  or any
portion thereof, and any and all Accounts, General Intangibles,  Negotiable
Collateral,  Inventory,  Equipment,  money,  deposits,  accounts,  or other
tangible  or  intangible   property   resulting  from  the  sale  or  other
disposition of the Accounts,  General Intangibles,  Negotiable  Collateral,
Inventory,  Equipment,  or any portion thereof or interest  therein and the
proceeds thereof.

Notwithstanding  anything to the contrary contained herein, Horizon's grant of a
security  interest  is  only  as to (i)  the  Accounts,  Negotiable  Collateral,
Inventory,  and  Equipment  acquired  pursuant to that  certain  Asset  Purchase
Agreement  between Horizon and IFM dated as of May 19, 1998 (the "First Purchase
Agreement"), that certain Asset Purchase Agreement between Horizon and IFM dated
as of September 30, 1998 (the "Second Purchase  Agreement"),  (ii) the Accounts,
General Intangibles,  Negotiable Collateral,  Inventory,  and Equipment acquired
pursuant to that certain Asset  Purchase  Agreement  between  Horizon and IFM of
even date herewith (the "Third Purchase  Agreement"),  and (iii)  substitutions,
replacements,  additions,  accessions,  proceeds,  products  to or of any of the
foregoing (other than  substitutions or replacements of Equipment after the date
hereof) (the "Pledged Assets").  IFM's security interest shall not attach to any
property of Horizon other than the Pledged Assets.

2. WARRANTIES AND REPRESENTATIONS. Horizon warrants and covenants to IFM as
follows:

(a) Payment of Indebtedness.  Horizon will pay the Indebtedness and perform
all  obligations  related to the  Indebtedness  when due,  whether by  maturity,
acceleration or otherwise.

2

(b)  Authority.  This  Agreement  is the valid and  binding  obligation  of
Horizon,  enforceable  in  accordance  with  its  terms  except  as  limited  by
creditors'  rights and equity.  Horizon is organized and validly existing and in
good standing under the laws of the State of Georgia and the execution, delivery
and  performance  of this  Agreement  has been duly  authorized by all necessary
action of Horizon's board of directors, and will not violate Horizon's governing
instruments or other material agreements.

(c) Name; Address;  Location of Collateral.  Horizon's name and address and
the location of the Collateral are accurately set forth on the signature page of
this Agreement.

(d)  Title to  Collateral.  Horizon  has good and  marketable  title to the
Collateral.   Horizon  will  keep  the  Collateral  free  of  all  other  liens,
encumbrances  and security  interests  and will defend  title to the  Collateral
against all claims and demands of all persons at any time  claiming any interest
in the  Collateral  except for the security  interest  associated  with the Bank
Indebtedness  (as defined in the Third Asset Purchase  Agreement as set forth in
(a) that certain Subordination Agreement ("Subordination  Agreement"),  dated of
even date  herewith,  by and between Bank of America,  N.A. and IFM, and (b) any
future   subordination   agreements   entered  into  in   connection   therewith
(collectively, the "Security Interest").

(e)  Priority of Security  Interest.  The  execution  and  delivery of this
Agreement  creates a valid  security  interest in the  Collateral,  and upon the
filing of a UCC-1  financing  statement with (i) the Clerk of the Superior Court
of any county in the State of  Georgia  and (ii) the  Secretary  of State of the
State of Florida,  IFM will have a  perfected  second  security  interest in the
Collateral,  subject to no other lien,  encumbrance or security  interest except
for the  Security  Interest  to the extent one can perfect by filing a financing
statement under Article 9 of the UCC and except for rights of Landlord under the
Commercial Lease Agreement or Florida law.

(f) Financing  Statements.  Horizon will execute financing  statement(s) in
form acceptable to IFM and will pay the cost of filing financing statement(s) in
all public  offices  wherever  filing is deemed  reasonably  necessary by IFM. A
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a  financing  statement  under the UCC and may be filed by IFM in any  filing
office.

(g) Payment of Taxes and Insurance Premiums. Horizon shall pay when due and
before any interest,  collection fees or penalties accrue, all taxes,  expenses,
assessments,  liens or other charges  (collectively,  "Taxes")  which may now or
hereafter  be levied or  assessed  against  the  Collateral  unless  Horizon  is
contesting  such Taxes in good faith and has maintained  adequate  reserves with
respect to the payment thereof.  Horizon shall also obtain and pay for insurance
for the  Collateral  in an amount  consistent  with  industry  standards  and/or
reasonably acceptable to IFM. Horizon shall furnish proof of payment of taxes or
insurance upon request of IFM.

3

(h) Maintenance of Collateral.  Horizon will maintain the Equipment in good
condition  and repair,  ordinary wear and tear  excepted.  Horizon will promptly
inform IFM of any material loss or diminution in value of the Collateral.

3.  PROHIBITION  ON TRANSFER OR  MODIFICATION.  Horizon shall not transfer,
sell, assign,  lease or modify the Collateral or any interest therein,  any part
thereof  without the prior written  consent of IFM,  except for the transfer set
forth in the Third Asset  Purchase  Agreement.  Notwithstanding  the  foregoing,
Horizon may use and/or sell the Collateral if the same is in the ordinary Course
of Horizon's business and on customary terms and at usual prices.

4. PROHIBITION ON CHANGE OF NAME,  ORGANIZATION OR LOCATION.  Horizon shall
not assume a different name,  conduct its business at any location other than as
appears in this  Agreement,  nor change the  location  of any of the  Collateral
without,  in each  instance,  obtaining the prior written  consent of IFM thirty
(30) days prior to any such event.  Horizon  agrees to execute any amendments to
financing  statement(s)  required  in  connection  with  this  Section 4 in form
acceptable to IFM, and will pay the filing fees and costs  actually  incurred by
IFM in connection with any such amendments.

5.  EXAMINATION  OF RECORDS  AND  COLLATERAL.  Horizon  shall keep full and
accurate  records related to the  Collateral,  and such records shall be open to
inspection and duplication by IFM at all reasonable  times upon reasonable prior
notice. Upon reasonable notice to Horizon and at reasonable times, IFM may enter
upon any  property  owned by or in the  possession  of Horizon  to  examine  and
inspect the  Collateral.  Horizon shall provide IFM as soon as practicable  with
any information  concerning the Collateral as IFM may reasonably  request at any
time.

6.  REIMBURSEMENT  OF  EXPENSES.   Horizon  shall  reimburse  IFM  for  all
reasonable costs and expenses,  including  reasonable  attorneys' fees, actually
incurred by IFM in enforcing the rights of IFM under this  Agreement  except for
inspection  of  records.  All costs,  expenses  and fees of any nature for which
Horizon is obligated to reimburse or indemnify IFM are part of the  Indebtedness
secured by this Agreement and are payable upon demand, unless expressly provided
otherwise,  with interest until repaid at the highest rate charged on any of the
Indebtedness (but not to exceed the maximum rate permitted by law).

7. RIGHTS AND  OBLIGATIONS  OF IFM. In the event that Horizon  fails to pay
taxes,  maintain  insurance or perform any other  obligation  arising under this
Agreement,  IFM may pay or perform such obligation(s) for the account of Horizon
and the same shall be added to the Indebtedness and shall be immediately due and
payable  together with interest at the highest rate charged by IFM on any of the
Indebtedness  (but not to exceed the maximum rate  permitted by law).  IFM shall
not be liable  for any loss to the  Collateral  nor shall  such loss  reduce the
balance due.

8. INDEMNIFICATION.  Horizon shall indemnify and save IFM harmless from all
claims, obligations,  costs, expenses,  including attorneys' fees, and causes of
action or other  rights  asserted  against  IFM and  relating  to breach of this
Agreement by Horizon.

4

9. EVENTS OF DEFAULT AND REMEDIES.

(a) Events of Default.  Any of the following  events shall, for purposes of
this Agreement, constitute an "Event of Default":

(i) Failure by Horizon to pay any amount  owing on or with  respect to
the Indebtedness when due, whether by maturity,  acceleration or otherwise,
which  failure  continues  for ten  (10)  days  after  the due date of such
amount.

(ii) Any failure by Horizon to comply  with,  or breach by Horizon of,
any of the non-monetary terms,  provisions,  warranties or covenants of any
Note, this Agreement or the other Loan Documents,  which failure  continues
for thirty  (30) days after the date of written  notice to Horizon  (or any
Guarantor) from IFM of such failure.

(iii) The  insolvency  of  Horizon  or the  admission  in  writing  of
Horizon's or any guarantor's inability to pay debts as they mature.

(iv) Any material  statement,  representation  or information  made or
furnished by or on behalf of Horizon to IFM in connection with or to induce
IFM  to  provide  any  of the  Indebtedness  shall  prove  to be  false  or
materially misleading when made or furnished.

(v)  Institution  of bankruptcy,  reorganization,  insolvency or other
similar  proceedings  by or  against  Horizon,  unless,  in the  case  of a
petition  filed against  Horizon,  the same is dismissed  within sixty (60)
days of filing.

(vi)  The  issuance  or  filing  of any  judgment,  attachment,  levy,
garnishment  or the  commencement  of any  related  proceeding  upon  or in
respect to Horizon or the  Collateral in which the amount of such judgment,
attachment,  levy,  garnishment or the amount in controversy in any related
proceeding exceed $50,000.

(vii) Dissolution, merger or consolidation in which Horizon is not the
surviving entity,  termination of existence,  insolvency, or assignment for
the benefit of creditors of or by Horizon.

(viii) Any  failure  by  Horizon  to comply  with or breach by Horizon
(after giving of any required  notice) and expiration of an applicable cure
period) Sublease  Agreement (the  "Sublease"),  by and between IFM of event
date herewith.

(b) Remedies  Upon Event of Default.  Upon the  occurrence  of any Event of
Default, IFM shall have the following rights:

(i)  Declare  all or  part  of the  Indebtedness  immediately  due and
payable.

(ii) Horizon  agrees,  upon request of IFM, to assemble the Collateral
and make it  available to IFM at any place which is  reasonably  convenient
for  Horizon  and IFM.  Horizon  grants  IFM  permission  to enter upon any
premises owned or occupied by Horizon for the purpose of taking  possession
of the Collateral.

5

(iii)  Subject  to the  rights  of Bank of  America,  N.A.  under  the
Subordination Agreement, IFM shall have the right to take possession of the
Collateral,  with or without  demand,  and with or without  process of law.
Subject  to the rights of Bank of  America,  N.A.  under the  Subordination
Agreement,  IFM shall have the right to sell and dispose of the  Collateral
and to distribute  the proceeds  according to law. In  connection  with the
right of IFM to take possession of the Collateral,  IFM may take possession
of any  other  items of  property  in or on the  Collateral  at the time of
taking  possession and hold them for Horizon without  liability on the part
of IFM. If there is any statutory  requirement for notice, that requirement
shall be met if IFM shall  send  notice to  Horizon  at least ten (10) days
prior to the date of sale,  disposition  or other event  giving rise to the
required notice. Horizon shall be liable for any deficiency remaining after
disposition of the Collateral.

(iv) IFM shall also have any one or more of the  rights  and  remedies
under  the  UCC  or at  law  or  equity  to  enforce  the  payment  of  the
Indebtedness.

(c) Remedies Generally.

(i) All  remedies  provided  for in Section 9(b) shall be available to
the extent not  prohibited  by law.  Each remedy  shall be  cumulative  and
additional  to any other remedy of IFM at law, in equity or by statute.  No
delay or omission to exercise any right or power  accruing upon any default
or Event  of  Default  shall  impair  any  such  right or power or shall be
construed to be a waiver of, or acquiescence  in, any such default or Event
of Default.

(ii)  IFM  may  waive  any  Event  of  Default  and  may  rescind  any
declaration  of maturity of payments on the  Indebtedness.  In case of such
waiver or rescission  Horizon and IFM shall be restored to their respective
former positions and rights under this Agreement.  Any waiver by IFM of any
default or Event of Default shall be in writing and shall be limited to the
particular  default  waived  and  shall  not be  deemed  to waive any other
default.

(d) Application of Proceeds. Any proceeds received by IFM from the exercise
of  remedies  pursuant  to Section  9(b) of this  Agreement  shall be applied as
follows:

(i) First,  to pay all costs and expenses  incidental  to the leasing,
foreclosure,  sale or other disposition of the Collateral.  These costs and
expenses shall include,  without limit, any costs and expenses  incurred by
IFM (including,  without limit,  attorneys' fees and disbursements actually
incurred),  and any taxes and  assessments or other liens and  encumbrances
prior to the lien of this Agreement.

6

(ii)  Second,  to all sums  expended or  incurred by IFM,  directly or
indirectly  in  carrying  out any term,  covenant or  agreement  under this
Agreement or any related  document,  together  with interest as provided in
this Agreement.

(iii) Third, to the payment of the  Indebtedness.  If the proceeds are
insufficient to fully pay the Indebtedness,  then application shall be made
first  to  late  charges  and  interest  accrued  and  unpaid,  then to any
applicable  prepayment premium,  and then to unpaid fees and other charges,
then to the outstanding principal balance.

(iv)  Fourth,  any  surplus  remaining  shall be paid to Horizon or to
whomsoever may be lawfully entitled.

(e)  Further  Actions.  Promptly  upon the  request of IFM,  Horizon  shall
execute,  acknowledge  and  deliver  any and  all  further  documents,  security
agreements,  financing statements and assurances, and do or cause to be done all
further  acts as IFM  may  acquire  to  confirm  and  protect  the  lien of this
Agreement or otherwise to accomplish the purposes of this Agreement.

(f)  Attorneys  Fees.  Any reference in this  Agreement to attorneys'  fees
shall refer to reasonable fees, charges, costs and expenses of outside attorneys
and  paralegals  actually  incurred,  whether  or not a suit  or  proceeding  is
instituted,  and  whether  incurred at the trial court  level,  on appeal,  in a
bankruptcy,  administrative or probate proceeding, in consultation with counsel,
or otherwise.

10. TERMINATION OF FINANCING  STATEMENTS.  IFM shall execute and deliver to
Horizon, within ten (10) business days after the written request of Horizon, UCC
termination  statements  with  respect  to  the  Collateral  secured  hereunder,
provided  that (a)  Horizon  shall not be in  default  under  any of the  terms,
covenants or conditions of any document or instrument evidencing or securing the
Indebtedness;  (b) the outstanding  principal balance of any Note, together with
interest,  premiums,  costs and all other sums on that amount,  shall be paid in
full; and (c) all termination  statements  shall be prepared by IFM at Horizon's
expense.  Upon the filing of such termination  statements in accordance with the
applicable provisions of the UCC, this Agreement shall be terminated.

11. MISCELLANEOUS.

(a) Governing Law. This Agreement shall be construed  according to the laws
of the State of Georgia.

(b)  Successors  and  Assigns.  This  Agreement  shall be binding  upon the
successors  and  assigns of Horizon  including,  without  limit,  any Horizon in
possession or trustee in bankruptcy  for Horizon,  and the rights and privileges
of IFM under this  Agreement  shall inure to the benefit of its  successors  and
assigns. This shall not be deemed a consent by IFM to a conveyance by Horizon of
all or any part of the Collateral or of any ownership interest in Horizon.

7

(c) Notices.  Notice from one party to another  relating to this  Agreement
shall be made pursuant to the Note.

(d)  Entire  Agreements;  Amendments.  This  Agreement.  the  Subordination
Agreement, and the Third Asset Purchase Agreement, and any agreement to which it
refers state all rights and  obligations  of the parties and supersede all other
agreements (oral or written) with respect to the security  interests  granted by
this  Agreement.  Any amendment of this Agreement  shall be in writing and shall
require the signature of Horizon and IFM.

(e) Partial Invalidity. The invalidity or unenforceability of any provision
of this  Agreement  shall not  affect  the  validity  or  enforceability  of the
remaining provisions of this Agreement.

(f) Inspections. Any inspection,  audit, appraisal or examination by IFM or
its agents of the Collateral or of  information  or documents  pertaining to the
Collateral  is for the sole  purpose of  protecting  IFM's  interest  under this
Agreement  and is not for the  benefit  or  protection  of  Horizon or any third
party.

(g)  Automatic   Reinstatement.   Notwithstanding   any  prior  revocation,
termination, surrender or discharge of this Agreement, the effectiveness of this
Agreement shall automatically continue or be reinstated,  as the case may be, in
the event that:

(i) Any  payment  received  or credit  given by IFM in  respect of the
Indebtedness  is  determined  to  be a  preference,  impermissible  setoff,
fraudulent  conveyance,  diversion of trust funds, or otherwise required to
be returned to Horizon or any third  party  under any  applicable  state or
federal law,  including,  without limit,  laws  pertaining to bankruptcy or
insolvency,  in which case this  Agreement  shall be  enforceable as if any
such payment or credit had not been  received or given,  whether or not IFM
relied upon this payment or credit or changed its position as a consequence
of it.

(ii) In the event of continuation or  reinstatement of this Agreement,
Horizon  agrees  upon  demand by IFM to  execute  and  deliver to IFM those
documents which IFM determines are appropriate to further  evidence (in the
public records or otherwise) this continuation or  reinstatement,  although
the  failure  of  Horizon  to do  so  shall  not  affect  in  any  way  the
reinstatement or  continuation.  If Horizon does not execute and deliver to
IFM such documents upon demand,  IFM and each officer of IFM is irrevocably
appointed  (which  appointment  is coupled with an  interest)  the true and
lawful attorney of Horizon (with full power of substitution) to execute and
deliver such documents in the name and on behalf of Horizon.

(h) Assignment.  This Agreement is freely assignable,  in whole or in part,
by IFM without  notice to or consent of Horizon.  IFM shall be fully  discharged
from all responsibility  accruing hereunder from and after the effective date of
any such assignment.  IFM's assignee shall, to the extent of the assignment,  be
vested with all the powers and rights of IFM hereunder  (including those granted
under Section 9 hereof or otherwise with respect to the Collateral),  and to the
extent of such assignment the assignee may fully enforce such rights and powers,
and all  references  to IFM  shall  mean and refer to such  assignee.  IFM shall
retain all rights and powers  hereby given not so assigned,  transferred  and/or
delivered.  Horizon  hereby waives all defenses which Horizon may be entitled to
assert against IFM's assignee with respect to liability accruing hereunder prior
to the effective date of any assignment of IFM's  interest  herein.  Horizon may
not, in whole or in part,  directly or indirectly,  assign this Agreement or its
rights hereunder or delegate its duties hereunder without, in each instance, the
specific prior written  consent of IFM, which consent may be withheld or delayed
in IFM's sole discretion.

8

Horizon  has  executed  this  Agreement  on the day and  year  first  above
written.

Horizon's  principal  place  of  business  is  located  in  the  County  of
Meriwether, State of Georgia.

Collateral is located at: 3101 37th Avenue North, St. Petersburg, Florida.

HORIZON:

HORIZON MEDICAL PRODUCTS, INC.

By:  
------------------------------------------
Its: 
------------------------------------------

1343496v1

Exhibit 3.3

ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
CRYOLIFE, INC.

TO:      Department of State
Tallahassee, Florida  32304

Pursuant to the  provisions of Section  607.10025 of the Florida  Statutes,
the undersigned  corporation  adopts the following  Articles of Amendment to its
Articles of Incorporation:

1. The name of the corporation is CRYOLIFE, INC.

2. The following  amendments of the Articles of Incorporation  were adopted
by the directors of the  corporation  on the 20th day of November,  2000, in the
manner prescribed by the Florida General Corporation Act, Section 607.10025.

Paragraph  a(1) of Article V of the  Articles  of  Incorporation  is hereby
deleted in its entirety and the following is substituted therefor:

ARTICLE V
Capital Stock

(A) (1) The number of shares of capital  stock  authorized  to be issued by
this corporation  shall be Seventy-Five  Million  (75,000,000)  shares of common
stock,  each with a par value of One Cent  ($.01) and Five  Million  (5,000,000)
shares of preferred stock, each with a par value of One Cent ($.01).  The shares
of preferred stock may be divided into and issued in series.

3. The amendment of the Articles of Incorporation does not adversely affect
the rights or preferences  of the holders of outstanding  shares of any class or
series of stock and does not result in the percentage of authorized  shares that
remain unissued after the division exceeding the percentage of authorized shares
that were unissued  before the division.  There is no reduction in the par value
of the Common Stock by reason of the Stock Distribution.

4. The total number of shares of Common Stock of the corporation  that have
been issued or are outstanding  are 13,381,053.  On December 20, 2000, the Board
of Directors  adopted a Resolution  approving a three for two stock split by way
of a stock  dividend of CryoLife,  Inc.'s  Common Stock $.01 par value  ("Common
Stock")  including shares of Common Stock held in Treasury to be accomplished by
the  issuance on December 27, 2000 of one  additional  share of  authorized  but
unissued  Common  Stock  for  every  two  shares  of  Common  Stock  issued  and
outstanding  on  December  8,  2000.  After the stock  dividend,  there  will be
20,071,579 shares of Common Stock issued and outstanding.

5. The effective date of the division is December 27, 2000.

6. This  amendment of the Articles of  Incorporation  is made in connection
with the division of Common Stock and is permitted by Section  607.10025 without
shareholder approval.

IN WITNESS WHEREOF, the foregoing Articles of Amendment are executed by the
President,  STEVEN G. ANDERSON and attested by RONALD D. MCCALL, as Secretary of
CryoLife, on the 7th day of December, 2000.

WITNESSES:

/s/  Felicia E. Trott               /s/ Steven G. Anderson               
---------------------------------        ---------------------------------------
Steven G. Anderson
President and CEO
/s/  Janie Brewer                   CryoLife, Inc.
---------------------------------

/s/  Felicia E. Trott               /s/ Ronald D. McCall                 
---------------------------------        ---------------------------------------
Ronald D. McCall, Esq.
Secretary
/s/  Janie Brewer                   CryoLife, Inc.
---------------------------------

2

COUNTY OF COBB
STATE OF GEORGIA

I HEREBY  CERTIFY  that before me, the  undersigned  authority,  personally
appeared  STEVEN G. ANDERSON,  as President of CRYOLIFE,  INC., to me well known
and who acknowledged  that he executed the foregoing  instrument this 7th day of
December, 2000, for the uses and purposes stated.

/s/ Suzanne K. Gabbert            
-----------------------------------
Notary Public

My commission expires:

COUNTY OF COBB
STATE OF GEORGIA

I HEREBY CERTIFY that before me, the undersigned authority,  personally
appeared RONALD D. MCCALL, as Secretary of CRYOLIFE,  INC., to me well known and
who  acknowledged  that he executed  the  foregoing  instrument  this 7th day of
December, 2000, for the uses and purposes stated.

/s/ Suzanne K. Gabbert            
-----------------------------------
Notary Public

My commission expires:

1343964v1

Exhibit 10.9(c)

EMPLOYMENT AGREEMENT

In consideration of the promises hereinafter contained,  CryoLife,  Inc., a
Florida  corporation  ("we," "our" and "us") and David Ashley Lee ("you") hereby
agree as of this 12th day of December 1994 to the following:

1. Employment. We hereby employ you and you hereby accept employment on the
terms and conditions set forth below. Your duties and compensation are set forth
on the Exhibit attached hereto.

2. Extent of  Services.  During your  employment,  you agree to devote your
full and  exclusive  time and  attention  to your  employment  duties and not to
engage in any other  business  activity  which  conflicts  or competes  with our
business or which reduces your  effectiveness  in  performing  your duties under
this Agreement unless you have first obtained our prior written consent.

3.  Benefits and Absences.  You are entitled to all benefits  offered by us
for  which  you  meet  the  eligibility  requirements.  You are  subject  to the
obligations  concerning  absences  due to  disability,  sick  leave,  and  other
absences,  described in the current  benefit  summary  schedule,  and as revised
hereafter.

4. Term and Termination. Your employment shall commence on the date of this
Agreement.  Both you and we shall  have the right upon  giving 30 days'  written
notice to the other to terminate with or without cause the employment under this
Agreement.  However,  if one party to this Agreement  terminates the employment,
the other  party may at his  option  effect  the  separation  immediately.  This
Agreement  shall  automatically  terminate  in the  event  of your  death.  Such
automatic  termination  shall  discharge  both  parties  hereto from any and all
further liability or responsibility to the other under this Agreement.

5. Right to Change  Duties.  We reserve  the right to change the nature and
scope  of your  duties.  In the  event  of any  transfer  to  another  corporate
facility,  we shall  defray the  reasonable  cost of  transporting  you and your
family with household furnishings to your new location.

6. Secrecy and  Noncompetition.  Your  employment and continued  employment
with us is  conditioned  upon your signing our standard  Secrecy and  Noncompete
Agreement  whose terms and  agreements  you agree to be bound by. You agree that
under no condition will any breach or infraction of this Agreement be assertable
as a defense to any action or  responsibility  incurred by you under the Secrecy
and Noncompete Agreement.

7. Your  Warranties.  You present and warrant  that you will not utilize or
disclose any trade secrets or  proprietary  information of others to us and that
the only  secrecy  and/or  noncompetition  agreements  you have with  others are
identified on the attached exhibit.

8.  Miscellaneous.  This Agreement may not be changed or terminated orally,
and no change, termination or attempted waiver of the provisions hereof shall be
binding  unless in writing  and signed by the parties  against  whom the same is
sought to be enforced;  provided,  however,  that the  compensation  paid to you
hereunder  may be increased at any time by us without in any way  affecting  any
other term or  condition of this  Agreement  which in all other  respects  shall
remain in force and effect.  This Agreement shall be governed by the laws of the
State of Georgia.

IN WITNESS  WHEREOF,  this  Agreement has been duly executed on the day and
year first above written.

CRYOLIFE, INC.

By:   /s/ Steven G. Anderson 
------------------------------------------

Its:  President    
------------------------------------------

EMPLOYEE

/s/ D.A. Lee
-----------------------------------------------

Exhibit to Employment Agreement

Duties: Controller
-------------------------------

-------------------------------

-------------------------------

-------------------------------

Compensation:                     $5,208.33 Monthly/Plus Company
-------------------------------
Fringe Benefits
-------------------------------

Secrecy and
Noncompetition
Agreements
With Others*:
-------------------------------

-------------------------------

-------------------------------

-------------------------------

-------------------------------

(*Copies of these must be
promptly provided to CryoLife)

1344210v1

Exhibit 10.16(b)

RESTATEMENT AND AMENDMENT TO FUNDING AGREEMENT

THIS  RESTATEMENT  AND FIRST  AMENDMENT TO FUNDING  AGREEMENT  (this "First
Amendment")  is entered into this 6th day of August,  1999,  by and between AMLI
LAND DEVELOPMENT - I LIMITED PARTNERSHIP, an Illinois limited partnership, whose
address is in care of AMLI REALTY CO., 1945 Vaughn Road, Kennesaw, Georgia 30144
(together with its successors and assigns "Amli") and CRYOLIFE,  INC., a Florida
corporation,  whose address is 1655 Roberts Boulevard,  Kennesaw,  Georgia 30144
(together with its permitted successors and assigns "Tenant").

W I T N E S S E T H:

WHEREAS,  Amli and  Tenant  entered  into that  certain  Funding  Agreement
("Agreement"),  dated as of April 14,  1995,  dealing with and  surrounding  the
construction  of a certain  building and other  improvements  and  appurtenances
thereto as described in the Agreement ("Cryolife Phase I");

WHEREAS, Amli and Cryolife have agreed to the construction of an additional
two-story office/R&D/warehouse/light manufacturing building and improvements and
appurtenances thereto, including an interconnection between Cryolife Phase I and
Cryolife  Phase II (as  that  term is  hereinafter  defined)  thereby  adjoining
Cryolife  Phase I and  Cryolife  Phase II  ("Cryolife  Phase  II") and desire to
restate and amend the Agreement as it relates to Cryolife Phase II;

WHEREAS,  Amili and Cryolife  desire to enter into this First  Amendment to
restate and amend the Agreement. 

NOW,  THEREFORE,  for  and in  consideration  of TEN  AND  NO/100  ($10.00)
DOLLARS, the premises, and other good and valuable consideration, and the mutual
benefits  that will be derived by the  parties  hereto,  Amli and Tenant  hereby
agree as follows:

1.   The  recitals   hereinabove  set  forth  are  incorporated  herein  by
reference as if totally set forth herein.

2.   The Agreement is hereby incorporated herein by reference and is hereby
restated in total, except as herein amended.

3.   The Cryolife  Phase II shall be and is hereby  covered and governed by
the Agreement.

4.   The Agreement as restated is hereby amended as follows:

a.   In the Paragraph styled Land on Page 4, delete the following "The
term "Land" means an  approximately 11 acre parcel of real estate
located in the Park, and legally  described on Exhibit A attached
to the Lease" and  substitute in lieu therefor the following "The
term "Land" means an approximately 9.5 acre parcel of real estate
located  in the Park,  and  legally  described  in  Exhibit  A-1,
attached to the Lease."

b.   In the  Paragraph  styled  Lease on Page 4, strike the  following
"The term  "Lease"  shall  mean that  certain  Lease of even date
herewith  between the Landlord and the Tenant" and  substitute in
lieu  therefor the  following  "The Term "Lease"  shall mean that
certain  Restated  and  First  Amendment  to Lease  of even  date
herewith between the Landlord and the Tenant."

c.   In Article II, Paragraph  2.2(a),  on Page 6, in the last line of
the  Paragraph  strike  "April 1,  1997" and  substitute  in lieu
therefor "March 1, 2001."

2

d.   In Article III,  Paragraph 3.3 (a), on Page 9, in the 4th line up
from the  bottom  of the  Paragraph  strike  "June 1,  1996"  and
substitute in lieu therefor "October 31, 2000."

e.   In Article III,  Paragraph 3.5, on Page 10 the following is added
as a new paragraph  (iii):  "(iii) Provided that Tenant is not in
default  hereunder,  under the  Lease or under the  Pre-Occupancy
Agreement,  any  savings by Tenant of the $25.00 per square  foot
allowance   for   Tenant   Improvements   in  any  phase  of  the
construction of the Tenant Improvements may be used in subsequent
phases of Tenant Improvements."

f.   In  Article  V,  5.1(e) on Page 15, in the 5th and 6th lines from
the top of the Paragraph  strike "2100 River Edge Parkway,  Suite
420,  Atlanta,  Georgia  30328" and  substitute  in lieu therefor
"1945 Vaughn  Road,  Kennesaw,  Georgia  30144," and the 7th line
from the top of the  Paragraph  strike "2211 New Market  Parkway,
Suite  142,  Marietta,  Georgia  30067,  and  substitute  in lieu
therefor" 1655 Roberts Boulevard, Kennesaw, Georgia 30144."

g.   In Article VI, 6.1(i)(3) on Page 17, in the 2nd line from the top
of the Paragraph  strike  "April 1, 1997" and  substitute in lieu
therefor "March 1, 2001," and in  subparagraph  (j) first line of
the  Paragraph  strike  "April 1,  1997" and  substitute  in lieu
therefor "March 1, 2001."

3

h.   In  Exhibit  A in the  1st  Paragraph  in the  last  line  of the
Paragraph strike "1995" and substitute in lieu therefor "1999."

i.   In  Exhibit B in the 1st  Paragraph,  2nd line of this  Paragraph
strike "1995" and substitute in lieu therefor "1999."

j.   In  Exhibit C in the 1st  Paragraph,  last line of the  Paragraph
strike "1995" and substitute in lieu therefor "1999."

k.   In  Exhibit  F in the 1st  Paragraph,  2nd line of the  Paragraph
strike "1995" and substitute in lieu therefor "1999."

The parties  hereto  hereby  ratify,  affirm and confirm the  Agreement  as
restated  and as  amended  hereby  and that the  Agreement  is in full force and
effect and that the parties are hereby bound by the terms and conditions of this
Agreement, as amended.

IN WITNESS WHEREOF,  Amli and Tenant have caused this First Amendment to be
duly executed under seal as of the date here first above written.

TENANT:

CRYOLIFE, INC.,
a Florida corporation

By: /s/ Steven G. Anderson             
----------------------------------------
Steven G. Anderson
Its Chairman, President & CEO

[CORPORATE SEAL]

Date of Signature:  8-3-99

4

AMLI LAND DEVELOPMENT -
I LIMITED PARTNERSHIP,
an Illinois limited partnership

By:  AMLI REALTY CO.
a Delaware corporation, 
its sole general partner

By:  /s/ Phillip N. Tague
---------------------------------
Philip N. Tague
Executive Vice President

[CORPORATE SEAL]

Date of Signature: 8-6-99

5
1343488v1

Exhibit 10.34

SUBLEASE AGREEMENT

This  SUBLEASE  (the  "Sublease")  is entered into as of the 9th day of October,
2000, between IDEAS FOR MEDICINE,  INC., formerly known as CryoLife  Acquisition
Corporation,  a Florida  corporation  (herein called "IFM") and HORIZON  MEDICAL
PRODUCTS, INC., a Georgia corporation (herein called "Horizon"),  both hereafter
called the "Parties".

1.   DEMISE

IFM hereby  sublets to  Horizon  and  Horizon  subleases  from IFM the  Premises
described in Paragraph 2 herein, which is the Demised Premises leased by IFM, as
Tenant, from Secret Promise, Ltd., as successor-in-interest to J. Crayton Pruitt
Family Trust u/t/a 9/17/76, ("Landlord") under that certain lease dated March 5,
1997, as amended,  which is  incorporated  herein,  by  reference,  and which is
hereinafter,  collectively  with  any and  all  amendments,  referred  to as the
"Lease."  Defined terms used herein but not otherwise  defined herein shall have
the meaning set forth in the Lease.

2.   DESCRIPTION OF SPACE

The premises (the "Premises")  subject to this Sublease consists of that certain
tract or parcel of land more particularly described on Exhibit A attached hereto
and made a part hereof,  together with all improvements  erected thereon and all
appurtenances thereunto belonging.

3.   TERM OF SUBLEASE

The term (the "Sublease  Term") of this Sublease shall be for a period ending on
the date that the Lease  Term  expires  or is earlier  terminated,  if  earlier.
Notwithstanding  anything to the contrary  expressed or implied in this Sublease
or in the Lease,  Horizon hereby  acknowledges  and agrees that it shall have no
right to exercise any election,  right or  opportunity of Tenant under the Lease
to renew or extend the term of the Lease,  nor shall  Horizon  have any right to
holdover or continue in  occupancy  of the  Premises  after  termination  of the
Lease,  except as expressly set forth herein to the contrary.  At the expiration
of the initial  Term of the Lease,  Horizon  shall be entitled to request IFM to
extend  the Term of the Lease in  accordance  with the terms of Section 5 of the
Lease. Horizon shall provide such request to IFM in writing not more than ninety
(90) nor less  than  thirty  (30)  days  prior to the last  date by which IFM is
permitted to provide to Landlord a notice of election to extend under the Lease.
If IFM refuses to so extend it shall so notify  Horizon within fifteen (15) days
after receipt of Horizon's notice, and then, with Landlord's prior consent,  and
provided that Landlord agrees in writing that (i) IFM is or shall be released as
of the  expiration  of the then  current  Lease  Term and shall not be or remain
liable during the succeeding  Extension Option Term or Terms, and (ii) CryoLife,
Inc.  ("CryoLife"),  IFM's sole  shareholder,  is or shall be released  from its
obligations  under the  Guaranty  executed  by  CryoLife in favor of Landlord in
connection  with the Lease as of the  expiration  of the then current Lease Term
and shall not be liable during the  succeeding  Extension  Option Term or Terms.
IFM shall  assign all of its right,  title and  interest in and to the Lease and
the Premises to Horizon upon the  expiration or  termination of the then current
Lease Term. Alternatively, if IFM does not elect to extend then Horizon shall be

free to negotiate with Landlord for a new, direct lease of the Premises. Horizon
hereby  acknowledges  that IFM has no duty or obligation to extend the lease for
the benefit of Horizon,  that  Landlord has no duty or  obligation  to negotiate
with  Horizon with respect to a new lease,  and that  Landlord's  consent to any
assignment to Horizon may be granted or withheld by Landlord in accordance  with
the provisions of Section 23 of the Lease.

4.   SUBLEASE RENT

Horizon  agrees to pay to IFM as "Rent" for the  Premises all amounts due by IFM
to Landlord under the Lease including, but not limited to, monthly "Base Rental"
(as  defined  and  prescribed  in the  Lease),  together  with any and all other
"Additional  Rental",  rents,  sums and other  charges due and payable under the
Lease as set forth therein. With respect to Base Rental payments and any and all
other  payments  due on or  before  the first  (1st) day of the month  under the
Lease,  under this Sublease such  payments  shall be due and payable  monthly in
advance on the twentieth (20th) day of each calendar month immediately preceding
the calendar  month of the term of this Sublease for which such Rent is due. The
payment  of Rent for the month of October  2000 shall be due and  payable as and
when this Sublease is executed by Horizon,  and shall be pro rated on a per diem
basis for the partial  month.  As to any and all other  payments due and payable
under the Lease,  for purposes of this Sublease  such payments  shall be due and
payable  to  Horizon  to IFM on the date  which is ten  (10)  days  prior to the
applicable due date for such payment under the Lease.

If any  payment  or  installment  of Rent is not paid as and when due under this
Sublease, and if such failure is not cured within ten (10) days thereafter, then
such Rent payment shall be due and payable together with an administrative  late
charge  handling  fee equal to One Hundred  Dollars  ($100.00).  Horizon  hereby
acknowledges  and agrees that (i) IFM shall not be  obligated to accept any late
payment,  (ii) IFM  shall  not be deemed  to have  waived  such  late  charge by
acceptance  of any  subsequent  Rent payment which fails to include such charge,
and (iii) any and all past due Rent shall,  in addition,  bear interest from the
date  which is ten (10)  days  after  the date due until the date paid at a rate
("Default  Interest Rate") equal to the lesser of eighteen  percent (18%) simple
interest per annum or the highest rate allowed by law.

5.   HOLDOVER

There shall be absolutely no holdover  permitted by Horizon after the expiration
or  termination  of this  Sublease.  Any holdover  after the  expiration of this
Sublease  concurrently  with the  expiration  of the term of the Lease  shall be
conclusively deemed to be as a tenant at will or at sufferance of Landlord under
the Lease,  and not by, through or under IFM under this  Sublease.  Any holdover
after the earlier  termination  of the term hereof  prior to the  expiration  or
termination  of the term of the Lease  shall be  conclusively  deemed to be as a
tenant at will or at  sufferance of IFM under this  Sublease.  Any such holdover
tenancy under  Landlord may  thereafter be terminated by Landlord,  and any such
holdover tenancy under IFM may be thereafter terminated by IFM, at any time from
and after the date it  commences  and/or as provided by the laws of the State of
Florida.  Notwithstanding  the  foregoing,  the Rent  during  the  period of any
holdover  under IFM shall  increase to one hundred  twenty-five  percent  (125%)
times the Rent due payable under the Lease. Further, Horizon hereby acknowledges
and agrees that its indemnity of IFM and of Landlord under Section 6 below shall

2

include,  without  limitation,  any and all claims,  demands,  causes of action,
damages,  costs and expenses  (including  without  limitation  reasonable actual
attorneys'  fees and costs)  arising out of or resulting  directly or indirectly
from Horizon's  holdover.  Notwithstanding  the foregoing,  Horizon shall not be
liable  to IFM  for any  consequent,  special,  indirect,  or  punitive  damages
hereunder,  except to the extent  that  damages (if any) owed by IFM to Landlord
may be so characterized.

6.   HORIZON TO COMPLY WITH LEASE AGREEMENT TERMS, INDEMNITIES

6.1 Horizon  agrees to perform and observe the covenants,  conditions,  and
terms  set  forth in the Lease on the part of the  tenant  to be  performed  and
observed  (including  without  limitation  Sections  9-11  thereof),  except the
covenant  for the  payment of Base  Rental  (and any rent tax  imposed  thereon)
reserved in the Lease,  and to indemnify,  defend (using counsel  selected by or
acceptable  to IFM for such purpose) and hold the Landlord and IFM each harmless
from and against any and all claims,  demands,  causes of action, damages, costs
and expenses (including without limitation reasonable actual attorneys' fees and
costs) arising out of or resulting  directly or indirectly  from IFM's breach of
or default under the Lease or this Sublease, unless caused by or resulting from,
directly or indirectly, any act or omission, breach or default of Horizon.

7.   SERVICES AND UTILITIES

Horizon shall pay any and all charges for utilities and services as set forth in
the Lease. In the event that IFM has any utility  deposits or other deposits for
services,  Horizon shall  reimburse IFM for the amounts thereof or shall replace
the same with deposits  funded by Horizon  within thirty (30) days after written
request from IFM to do so.

8.   USE FOR BUSINESS PURPOSES

The premises  subleased herein are to be used for the business  purposes set out
in the Lease and for no other use or purpose whatsoever.

9.   ALTERATIONS

Horizon  shall  not  undertake  or  commence  any   alterations,   additions  or
improvements  to the Premises  without  having first  obtained the prior written
consent of IFM hereunder and, to the extent applicable,  the consent or approval
of Landlord under the Lease.

10.  WAIVER OF ONE BREACH NOT WAIVER OF OTHERS

Waiver of one breach of a term,  condition,  or  covenant  of this  Sublease  by
either party hereto shall be limited to the particular instance and shall not be
deemed to be a waiver of future breaches of the same or other terms, conditions,
or covenants.

3

11.  TERMINATION AND REENTRY BY IFM ON HORIZON'S DEFAULT

11.1 Horizon shall be in default under this Sublease upon the occurrence of
any of the following acts, events or conditions:

(a) The Base Rental,  Additional  Rental or any other sum of money  payable
under this  Sublease is not paid when due,  and such failure is not cured within
ten (10) days  after  written  notice  from IFM to  Horizon  thereof  (provided,
however,  that IFM shall not be obligated to provide to Horizon a notice of such
failure to the  opportunity  to cure same after such  notice more than three (3)
times in any period of twelve (12) consecutive months;

(b) Horizon  shall abandon or vacate all or any portion of the Premises and
ceases paying Rent;

(c) The  failure or refusal of  Horizon,  at any time  during the  Sublease
Term,  to fulfill or perform any other  covenant,  agreement  or  obligation  of
Horizon  hereunder if such failure or refusal shall continue without  correction
for a period of twenty  (20) days after  notice  thereof  to Horizon  (provided,
however, that if such covenant,  agreement or obligation shall be of such nature
that it can be fulfilled or performed and if Horizon in good faith  commences to
fulfill or perform  same  within  said  twenty  (20) day period  exercising  due
diligence,  a default by Horizon shall not be deemed to have occurred if Horizon
commences to diligently  pursue the  fulfillment or performance of the covenant,
agreement  or  obligation   during  such  20-day  period  and  shall  thereafter
continuously and diligently proceed therewith until completion within sixty (60)
total days);

(d) An attempt to assign, sub-sublease or further transfer Horizon's rights
or interests  hereunder  shall occur without the prior written  approval of IFM,
except as set forth in that certain Assignment of Sublease of even date herewith
among Horizon, Bank of America, N.A., and IFM.

(e) The  initiation of any  proceeding  whereupon the estate or interest of
Horizon in the Premises,  or any portion thereof,  or in this Sublease is levied
upon or attached if such proceeding is not vacated,  discharged or bonded within
thirty (30) days after the date of such levy or attachment;

(f) The  entry  of any  decree  or  order  for  relief  by a  court  having
jurisdiction in the Premises in respect of Horizon in an involuntary  case under
the federal  bankruptcy  laws,  as now or  hereafter  constituted,  or any other
applicable federal or state bankruptcy,  insolvency or other similar law, or the
appointment   of  a  receiver,   liquidator,   assignee,   custodian,   trustee,
sequestrator (or similar official) of Horizon or for any substantial part of the
assets  of  Horizon,  or the  entry of any  decree  or  order  with  respect  to
winding-up or liquidation of the affairs of Horizon, if any such decree or order
continues unstayed and in effect for a period of sixty (60) consecutive days;

(g) The  commencement  by Horizon  of a  voluntary  case under the  federal
bankruptcy  laws,  as now or  hereafter  constituted,  or any  other  applicable
federal or state bankruptcy,  insolvency or other similar law, or the consent by

4

Horizon to the appointment of or possession by a receiver, liquidator, assignee,
trustee,  custodian,  sequestrator (or other similar official) of Horizon or for
any substantial part of the assets of Horizon, or any assignment made by Horizon
for the  benefit of  creditors,  and such case or  proceeding  is not  dismissed
within sixty (60) days; or

(h) A default by Horizon under that certain Promissory Note from Horizon in
favor  of IFM  dated  as of  even  date  herewith  in the  principal  amount  of
$5,945,216  (as that note may be amended or replaced) and a failure to cure such
default as set forth therein.

11.2 Upon the  occurrence  of a default  by Horizon  as  described  in this
Sublease,  IFM shall have the option to pursue any one or more of the  following
remedies  without  notice or demand  whatsoever,  and in addition to, and not in
limitation  of any other remedy or right  permitted to it by law of in equity or
by this Sublease:

(a) IFM, with or without terminating this Sublease and without waiving such
default,  may perform,  correct or repair any condition which shall constitute a
failure on Horizon's part to keep,  observe,  perform or satisfy such condition,
and IFM may take, on behalf of Horizon,  whatever  steps IFM deems  necessary to
cure such default.  IFM may reenter the Premises for such purposes without being
liable for  prosecution  or any claim for damages  therefor,  and Horizon  shall
fully reimburse and compensate IFM on demand for all costs and expenses incurred
by IFM in such performance,  correction or repair, including without limitation,
accrued  interest  from the date of demand  until date of payment at the Default
Interest Rate, and such sums shall be deemed to be Additional Rental hereunder;

(b)  IFM  may  terminate  this  Sublease,  in  which  event  Horizon  shall
immediately  surrender  the Premises to IFM, and if Horizon  fails to do so, IFM
may,  without  prejudice  to any other  remedy it may have,  enter upon and take
possession of the Premises and expel or remove  Horizon and any other person who
may be  occupying  said  premises  or any part  thereof in  accordance  with all
applicable laws and without breaching the peace;

(c) IFM may recover possession of the Premises, with or without terminating
this  Sublease,  at IFM's option,  in the manner  prescribed  by any  applicable
statute, including without limitation, statutes relating to summary process. Any
demand for the Rent,  reentry for conditions  broken, and any and all notices to
quit,  including  without  limitation,  the notice required by the provisions of
Section 83.20, Florida Statutes,  or any similar statutes,  or other formalities
of any nature, to which Horizon may be entitled, are hereby specifically waived.
In any  possessory  action for nonpayment of Rent or other charge due hereunder,
Horizon expressly waives any defense other than payment. Horizon's obligation to
pay Rent is independent of any duty or obligation of IFM under this Sublease;

(d) IFM may relet the Premises upon such terms and  conditions and for such
rental as IFM deems  advisable,  without  thereby  avoiding or terminating  this
Sublease, and Horizon shall remain liable for any and all Rent and other charges
and expenses hereunder.  For the purpose of reletting, IFM is authorized to make
such repairs or alterations to the Premises  and/or to remove or store Horizon's
or other  occupants'  possessions as may be necessary in the sole  discretion of
IFM for the purpose of such  reletting,  and if a sufficient sum is not realized
from such  reletting  (after  payment of all costs and expenses of such repairs,
alteration or storage and the expense of such  reletting  and the  collection of

5

rent accruing  therefrom)  each month to equal the Rent,  then Horizon shall pay
such deficiency each month upon demand therefor. Actions to collect such amounts
may be  brought  from  time to  time,  on one or  more  occasions,  without  the
necessity of IFM's  waiting until the  expiration  of the Sublease  Term. In the
event of termination of the Sublease or repossession of the Premises for default
as described in this Sublease, IFM shall use commercially  reasonable efforts to
relet the Premises, or a portion thereof, and to collect rental after reletting;
and in the event of  reletting,  IFM may relet the whole or any  portion  of the
Premises,  as agent for Horizon or for IFM's own account,  for any period to any
sublease and for any use and purpose;

(e) IFM may declare  immediately  due and payable  the then  present  value
(calculated  with a  discount  factor or eight  percent  (8%) per  annum) of the
difference  between (x) the entire amount of Base Rental.  Additional Rental and
other charges and  assessments  which in IFM's  reasonable  determination  would
become due and payable during the remainder of the Sublease Term (in the absence
of the termination of this Sublease),  and (y) the then fair market value of the
Premises for the remainder of the Sublease Term.  Upon the  acceleration of such
amounts, Horizon agrees to pay the same at once, in addition to all Rent, costs,
charges,  assessments,  and reimbursements  theretofore due: provided,  however,
that such  payment  shall not  constitute  a penalty  or  forfeiture,  but shall
constitute liquidated damages for Horizon's failure to comply with the terms and
provisions of this Sublease (IFM and Horizon  agreeing that IFM's actual damages
in such event are  difficult to ascertain and that the amount set forth above is
a reasonable  estimate  thereof).  In computing such liquidated  damages,  there
shall be added to such  deficiency any  reasonable  expenses as IFM may incur in
connection with reletting,  such as court costs,  reasonable attorneys' fees and
disbursements,   brokerage  fees  and  preparing  the  Premises  for  reletting.
Furthermore,  such amount  shall be construed  as  liquidated  damages and shall
constitute a debt provable in bankruptcy or receivership; and/or

(f) Alter all locks and other  security  devices  at the  Premises  without
terminating this Sublease.

In the event that IFM shall have taken possession of the Premises  pursuant
to the authority herein granted,  then IFM shall have the right to keep in place
and use all of the furniture,  fixtures and equipment at the Premises, including
without  limitation  that which is owned by or subleased to Horizon,  and at all
times prior to any  foreclosure  thereon by IFM or  repossession  thereof by any
lessor  thereof or third party  having a lien  thereon.  IFM shall also have the
right to remove from the Premises (without the necessity of obtaining a distress
warrant,  writ of  sequestration  or other legal  process) all or any portion of
such furniture, fixtures, equipment and other property located thereon and place
same in storage at any  premises  within  the  county in which the  Premises  is
located; and in such event, Horizon shall be liable to IFM for costs incurred by
IFM in connection with such removal and storage and shall indemnify and hold IFM
harmless from all loss,  damage,  cost, expense and liability in connection with
such removal and storage. IFM shall also have the right to relinquish possession
of all or any portion of such furniture,  fixtures, equipment and other property
to any person  ("Claimant")  claiming to be entitled to  possession  thereof who
presents to IFM a copy of any instrument  represented to IFM by Claimant to have

6

been executed by Horizon (or any predecessor of Horizon)  granting  Claimant the
right  under  various  circumstances  to  take  possession  of  such  furniture,
fixtures,  equipment or other property, without the necessity on the part of IFM
to  inquire  into  the  authenticity  of said  instrument's  copy  of  Horizon's
signature thereon and without the necessity of IFM's making any investigation or
inquiry as to the  validity of the  factual or legal  basis upon which  Claimant
purports to act.  Horizon  agrees to indemnify  and hold IFM  harmless  from all
costs,  expense,  loss, damage and liability incident to IFM's relinquishment of
possession of all or any portion of such furniture, fixtures, equipment or other
property to  Claimant.  The rights of IFM herein  stated shall be in addition to
any and all  other  rights  which  IFM  has or may  hereafter  have at law or in
equity, and Horizon stipulates and agrees that the rights herein granted IFM are
commercially reasonable. IFM shall in no event be liable to Horizon,  including,
without  limitation,  liability for trespass or conversion,  with respect to any
actions  taken  pursuant  to this  Section  11.2 so long as same  are  taken  in
accordance with all applicable laws.

11.3 No course of dealing  between  IFM and  Horizon or any  failure or
delay on the part of IFM in  exercising  any  rights of IFM under  Section  11.2
hereof or under any other  provisions of this Sublease shall operate as a waiver
of any  rights  of  IFM  hereunder,  at law or in  equity  or  under  any  other
provisions of this  Sublease,  nor shall any waiver of a default on one occasion
operate  as a waiver  of any  subsequent  default  or of any other  default.  No
express waiver shall affect any condition,  covenant,  rule, or regulation other
than the one  specified in such waiver and that one only for the time and in the
manner specifically stated. The exercise by IFM of any one or more of the rights
and remedies provided in this Sublease shall not prevent the subsequent exercise
by IFM of any one or more of the other rights and remedies herein provided.  All
remedies  provided for in this Sublease are  cumulative and may, at the election
of IFM, be exercised alternatively, successively, or in any other manner and are
in addition  to any other  rights  provided  for or allowed by law or in equity.
After  default,  the  acceptance of Rent (or any portion  thereof) or failure to
re-enter by IFM shall not be held to be a waiver of its rights to terminate this
Sublease or of any other rights under this  Sublease or applicable  statue,  and
IFM may  re-enter and take  possession  of the  Premises,  or exercise any other
right and remedy, as if no Rent had been accepted after such default.

11.4  Exercise by IFM of any one or more  remedies  under Section 11 or
otherwise  available shall not be deemed to be an acceptance of surrender of the
Premises  by Horizon  whether by  agreement  or by  operation  of law,  it being
understood that such surrender can be effected only by the written  agreement of
IFM and Horizon or  otherwise as  permitted  by law. No  alteration  of locks or
other security  devices and no removal or other exercise of dominion by IFM over
the property of Horizon or others at the Premises  shall be deemed  unauthorized
or constitute a conversion, Horizon hereby consenting, after any default, to the
aforesaid  exercise of dominion over Horizon's  property  within the Premises so
long  as  IFM  complies   with  all  Florida  laws   pertaining   to  distraint,
dispossessory,  detainer or other remedial actions of landlords not waived under
this  Sublease.  All  claims  for  damages  by  reason of such  re-entry  and/or
repossession  and/or  alteration of locks or other  security  devices and hereby
waived,  as are all  claims  for  damages  by  reason of any  distress  warrant,
forcible detainer proceedings,  sequestration proceedings or other legal process
so  long  as IFM  complies  with  all  Florida  laws  pertaining  to  distraint,
dispossessory,  detainer or other remedial actions of landlords not waived under
this Sublease. No such reentry or taking possession of the Premises by IFM shall

7

be construed as an election on IFM's part to terminate this  Sublease,  unless a
written  notice of such  intention  be given by IFM to  Horizon  or  unless  the
termination  thereof be decreed by a court of  competent  jurisdiction.  Horizon
agrees that any re-entry by IFM which is made pursuant to a judgment obtained in
forcible  detainer  proceedings  or other  legal  proceedings  will not make IFM
liable for trespass.

12.  LITIGATION COSTS

If any legal action is filed to enforce this Sublease,  or any part thereof, the
prevailing shall be entitled to recover  reasonable  actual  attorneys' fees and
costs of the action.

13.  APPLICABLE LAW, VENUE, AND SERVICE

In interpreting  this Sublease and in determining the right of the Parties under
it, the laws of the State of Florida shall apply.  Venue shall lie in the county
in which the Premises is located.

Personal service either within or without such state shall be sufficient to give
personal jurisdiction to any court in which an action is filed for litigation of
rights under this Sublease.

14.  SURRENDER OF PREMISES AND KEYS

Horizon agrees that at the  expiration or termination of this Sublease,  it will
quit and  surrender the Premises in the condition set forth in the Lease upon an
expiration  or  termination,  without  notice,  and will deliver to IFM all keys
belonging to the Premises.

15.  REMOVAL OF PROPERTY BY IFM

If IFM  re-enters  the  Premises  or  takes  possession  of them  before  normal
expiration of this Sublease in accordance  with its terms,  any and all personal
property  of  Horizon  not  removed  within  ten (10) days of such  re-entry  or
repossession  (and to the  extent IFM has  changed  the  locks,  it will  permit
Horizon access to the Premises for such purposes) shall be  conclusively  deemed
to have been abandoned by Horizon and IFM shall have the right to cause the same
to be removed and disposed of in any manner it deems  necessary or  appropriate,
including without limitation  throwing the same away, at Horizon's sole cost and
expense.

16.  HORIZON'S INSOLVENCY, BANKRUPTCY, RECEIVERSHIP OR ASSIGNMENT FOR CREDITORS

If IFM cannot  terminate this Sublease or Horizon's right of possession  because
of the application of bankruptcy or similar laws,  then Horizon,  as a debtor in
possession  or on behalf of any  trustee  for  Horizon,  shall:  (i)  within the
statutory time,  assume or reject this Sublease and (ii) not seek or request any
extension of adjournment of any application to assume or reject this Sublease by
IFM.  In such  event,  Horizon or any  trustee  for Horizon may only assume this
Sublease if (A) it cures or provides  adequate  assurance  that it will promptly
cure any default  hereunder,  (B) it compensates or provides adequate  assurance
that it will  promptly  compensate  IFM for  any  actual  pecuniary  loss to IFM

8

resulting from Horizon's defaults, including without limitation accrued interest
at the Default  Interest Rate and  attorneys'  fees as a result of such default,
and (C) it provides adequate  assurance or performance  during the Sublease Term
of all of the terms,  covenants and  provisions of this Sublease to be performed
by  Horizon.  In no event  after  the  assumption  of this  Sublease  shall  any
then-existing  default  remain  uncured for a period in excess of the earlier of
ten (10)  days or the time  period  set  forth  herein.  Adequate  assurance  of
performance shall include,  without  limitation,  adequate  assurance (1) of the
source of payment of Rent  reserved  hereunder,  and (2) that the  assumption of
this  Sublease  will not breach any  provision  hereunder,  and will not cause a
breach of any other sublease,  financing  agreement or master agreement relating
to the Building.

17.  NOTICES

All notices,  demands,  requests,  elections,  consents or other  communications
required or permitted to be given  pursuant to the terms of this Sublease  shall
be in  writing,  signed by the party  making  the same,  and shall be  delivered
personally or by overnight mail service or courier, or by certified mail, return
receipt requested,  postage or other delivery costs prepaid,  to the other party
hereto,  at the  addresses  set forth  below.  The date of such  notice or other
communication  shall be the date of personal  delivery,  the date of delivery if
deposited  with Federal  Express or other  overnight or same day mail service or
courier,  or the date  delivery,  refusal to accept  delivery  or  inability  to
deliver as evidenced on the return  receipt,  if sent by certified  mail. If any
date on which any notice or election  is required to be given or made  hereunder
falls on a  Saturday,  Sunday or legal  holiday,  then,  the date on which  such
notice or  election is required  to be given or made  hereunder  shall,  for all
purposes,  be deemed to be the next  following  business  day. Any notice to IFM
shall be addressed as follows:

Ideas for Medicine, Inc.
c/o CryoLife, Inc.
1655 Roberts Boulevard
Kennesaw, Georgia 30144
Attn:  Vice President of Finance

with a copy to:                    Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attn:  Clinton D. Richardson, Esq.

and if given to Horizon, shall be addressed to:

Horizon Medical Products, Inc.
Seven North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
Attn: Robert M. Dodge, 
Chief Financial Officer

9

with copies to:                    Slaughter & Virgin, P.C.
400 Colony Square, Suite 1110
1201 Peachtree Street, N.E.
Atlanta, Georgia 30361
Attn:  Nat G. Slaughter, III

and                       King & Spalding
191 Peachtree Street, N.E.
Suite 4600
Atlanta, Georgia 30303-1763
Attn:  Jon R. Harris, Jr., Esq.

or such other  address(es)  as IFM or Horizon may from time to time designate in
writing on not less than twenty (20) days prior to written notice to the other.

18.  SUBLEASE APPLICABLE TO HEIRS, SUCCESSORS AND ASSIGNS

The terms,  conditions,  and  covenants of this  Sublease  shall inure to and be
binding on the heirs, successors, and administrators,  executors, and assigns of
the Parties hereto, except as otherwise herein provided.

19.  NO ASSIGNMENT OR FURTHER SUBLEASE WITHOUT CONSENT

Horizon  shall not sell or assign  this  Sublease  or any part  thereof,  or any
interest  therein,  or further sublease the same  (collectively,  a "Transfer"),
without written  consent of both IFM and Landlord.  Any attempt to do so without
such consent shall be conclusively deemed to be void and/or shall be a breach of
this Sublease. IFM agrees that it shall not unreasonably withhold,  condition or
delay its consent to a proposed Transfer, provided that the following conditions
have been  satisfied:  (i)  Horizon is not then in breach or default  under this
Sublease,  nor has any event or  condition  occurred  which,  with the giving of
notice or the passage of time,  or both,  could  constitute a default by Horizon
under this  Sublease,  (ii)  Landlord  has given its  consent in writing  (or is
deemed to have given its  consent) to the  proposed  Transfer  for all  purposes
under the Lease, (iii) provided that Bank of America,  N.A.  ("Bank"),  is still
the  holder  and  assignee  of  the  assignment   instrument  discussed  in  the
parenthetical  in item (iv) below.  Bank has given its consent in writing to the
proposed Transfer,  and (iv) that certain Promissory Note referred to in Section
11.1 (h) above has been paid in full by Horizon to IFM  (provided,  however,  if
the  proposed  Transfer  is to Bank  pursuant  to that  certain  "Assignment  of
Sublease  (Sublessee's  Interest)"  by and  between  Horizon  and Bank  which is
attached as Exhibit A to that certain "Lessor  Subordination  and Consent" being
executed and  delivered  substantially  of even date herewith by IFM in favor of
Bank,  then this condition (iv) shall not be applicable).  Horizon  acknowledges
that IFM is obligated to give to Landlord thirty (30) days' prior written notice
of any proposed  Transfer.  Horizon agrees to give IFM at least thirty-five (35)
days' prior written notice of any proposed Transfer,  and to provide to Landlord
and to Bank a concurrent  copy of any notice  given by Horizon to IFM  hereunder
with respect to a proposed Transfer.

10

20.  CONDITION OF THE PREMISES

The Premises are delivered to Horizon in an "as-is"  condition,  with no work to
be performed by, or at the cost of, IFM, and no representations or warranties of
any kind, express or implied, by IFM to Horizon. Horizon hereby acknowledges and
agrees that it has had such time and  opportunity as it has deemed  necessary or
appropriate  to visit,  examine and inspect the  Premises,  and has received and
reviewed a copy of the Lease, and hereby approves the same in all respects.

11

IN WITNESS  WHEREOF,  the parties  herein have hereunto set their hands and
seals and have  caused this  Sublease  to be  executed by their duly  authorized
officers as of the day and year first above written.

IFM:

IDEAS FOR MEDICINE, INC.

/s/ D.A. Lee
-------------------------------------
By: D.A. Lee
---------------------------------
Its:VP - Finance and CFO
---------------------------------

Horizon:

HORIZON MEDICAL PRODUCTS, INC.

/s/ William E. Peterson, Jr.
-------------------------------------
By: William E. Peterson, Jr.
---------------------------------
Its:President
---------------------------------

12

LEGAL DESCRIPTION

EXHIBIT "A"

A tract of land located in and being a portion of the  Northwest  1/4 of Section
11 Township  South,  Range 16 East,  and also being  portions  of the  following
subdivision recorded in the Public Records of Pinelias County, Florida:

NORTON'S SUBDIVISION NO. 2, Plat Book 9, page 2;

PONCE De LEON PARK, Plat Book 12, page 47;

RIDGE CREST, Plat Book 8, page 23;

Said tract being more particularly described as follows:

Beginning at the Northeast  corner of lands  described in Official  Records Book
4755, page 2019, thence North  89(0)51'39(0)  West along the North line thereof,
175.74  feet to a  point  on the  Westerly  line  of  Block  4 of said  NORTON'S
SUBDIVISION NO. 2 as extended  Southeasterly;  thence North  44(0)23'39(0)  West
along said line 240.10 feet to a point of  intersection  with the Southerly line
of Block 6 of said  NORTON'S  SUBDIVISION  NO. 2 as  extended  Easterly;  thence
leaving said Westerly line North  89(0)59'22(0)  West along said  Southerly line
225.24 feet; thence leaving said line North  00(0)05'38(0) East along a Westerly
line of lands  described in Official  Records Book 1703, page 158, a distance of
125.20 feet to a point on the Northerly  line of Lot 2, Block 6 of said NORTON'S
SUBDIVISION NO. 2; thence North 89(0)59'22(0) West along said line, 1.98 feet to
the  Northwest  corner of said Lot 2; thence  North  45(0)15'52(0)  West along a
Westerly  line of lands  described in Official  Records  Book 1703,  page 158, a
distance  of 85.26  feet to a point on the  Southerly  line of Lot 1, Block 5 of
said  NORTON'S  SUBDIVISION  NO. 2; thence North  89(0)54'30(0)  West along said
line,  169.73 feet to the Southwest corner of Lot 2 of said block;  thence North
00(0)23'59(0)  East along the Westerly line of said lot, 8.18 feet to a point of
intersection  with the Southerly line of Block 8 of said RIDGE CREST as extended
Easterly;  thence North  89(0)36'33(0)  West along said line,  62.76 feet to the
Southeast  corner  of  Lot  14,  Block  8 of  said  RIDGE  CREST;  thence  North
00(0)17'36(0)  East  along the  Easterly  line of said lot.  125.02  feet to the
Northeasterly  corner  thereof;   thence  North  89(0)57'46(0)  West  along  the
Northerly  line of said Block 8, a distance of 103.00 feet,  thence leaving said
line  North  00(0)57'57(0)  East  along a Westerly  line of lands  described  in
Official Records Book 1703, page 158, a distance of 20.02 feet to a point on the
Southerly  line  of  Lot  12,  Block  7  of  said  RIDGE  CREST,   thence  South
89(0)59'01(0)  East along said line, 102.95 feet to the Southeasterly  corner of
Lot 14 of said block;  thence North  00(0)21'03(0)  East along the Easterly line
thereof,  75.94 feet;  thence  leaving  said line and along an Easterly  line of
lands  described in Official  Records  Book 4051,  page 1262 the  following  two
courses:  1) North 44(0)22'59(0) West, 467.97 feet; 2) North 38(0)16'33(0) West,
41.51  feet;  thence  North  43(0)48'04(0)  West along a Westerly  line of lands
described  in Official  Records  Book 1703,  page 158, a distance of 86.68 feet,
thence  leaving  said  line and along an  Easterly  line of lands  described  in
Official  Records  Book 4051,  page 1262 the  following  two  courses:  1) North
44(0)06'45(0)  West, 110.12 feet; 2) North  45(0)34'36(0) East, 219.50 feet to a
point 29.85 feet  Southwesterly of the centerline of an existing railroad track;
thence South 44(0)23'31(0) East. 1728.97 feet along a line parallel to and 29.85
feet  Southwesterly  of the  centerline  of said  railroad  track said line also
parallel  to and  19.20  feet  Southwesterly  of the  Northeasterly  edge  of an
existing concrete platform;  thence leaving said line South  45(0)36'29(0) West,
19.97 feet to the Point of Beginning.

END OF LEGAL DESCRIPTION

1343496

Exhibit 10.35

TERMS OF AGREEMENT
BETWEEN
RONALD C. ELKINS, M.D. AND CRYOLIFE, INC.

EFFECTIVE DATE: 
January 2, 2001 - December 31, 2003 with option to renew.

FOCUS OF SERVICES:
Ronald C. Elkins, M.D. agrees to provide twelve consulting days per 12
month Period. Consulting Services will address:

o    the  clinical  use of BioGlue in cardiac  and  vascular  surgery,
either in open surgery or minimally invasive surgery.

o    the development of catheter(s) and related products to facilitate
the use of BioGlue in these clinical applications.

o    the  presentation of clinical  information at surgical  meetings,
educational  symposia  and  other  surgical  congresses  for  the
purpose of surgeon education and training.

o    the  clinical  use of  SynerGraft  heart  valves,  O'Brien  heart
valves, CryoGraft-SG and CryoValve-SG.

COMPENSATION:

o    Annual consulting fee of $100,000.00 paid monthly.

o    Royalty of 5% on net sales of products which are invented  solely
by you and which  receive a patent  and which are  developed  and
marketed as a result of this relationship.  If these products are
invented in  conjunction  with another  party,  a royalty of 2.5%
will  be paid on net  sales.  

o    Royalty of 3% on net sales of products which are invented  solely
by you which do not receive a patent, but which are developed and
marketed as a result of this relationship.  If these products are
invented in  conjunction  with another  party,  a royalty of 1.5%
will be paid on net sales.

Payment of all travel and related  expenses  incurred  under this Agreement
and in compliance with corporate travel and expense guidelines and policies.

The undersigned  agree to the terms of this Agreement  between Ronald C. Elkins,
M.D. and CryoLife, Inc.

/s/ Steven G. Anderson  Date: 11-1-00       /s/ Ronald C. Elkins Date:  11-7-00
Steven G. Anderson                          Ronald C. Elkins, M.D.
President and CEO-CryoLife, Inc.

1343019

Exhibit 10.36

-----------------------------------

CRYOLIFE, INC.

and

CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.

Rights Agent

RIGHTS AGREEMENT

Dated as of November 27, 1995

---------------------------------------

TABLE OF CONTENTS

PAGE

Section 1.  Certain Definitions................................................1

Section 2.  Appointment of Rights Agent........................................4

Section 3.  Issue of Right Certificates........................................4

Section 4.  Form of Right Certificates.........................................6

Section 5.  Countersignature and Registration..................................6

Section 6.  Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen

Right Certificates.................................................6

Section 7.  Exercise of Rights; Purchase Price; Expiration Date of Rights......7

Section 8.  Cancellation and Destruction of Right Certificates.................9

Section 9.  Availability of Preferred Shares...................................9

Section 10. Preferred Shares Record Date..................................... 11

Section 11. Adjustment of Purchase Price, Number of Shares or Number
of Rights....................................................... .11

Section 12. Certificate of Adjusted Purchase Price or Number of Shares........18

Section 13. Consolidation, Merger or Sale or Transfer of Assets or 
Earning Power.....................................................18

i

Section 14.  Fractional Rights and Fractional Shares..........................19

Section 15.  Rights of Action.................................................20

Section 16.  Transfer and Ownership of Rights and Rights Certificates.........21

Section 17.  Right Certificate Holder Not Deemed a Stoc \w \xkholder..........21

Section 18.  Concerning the Rights Agent......................................21

Section 19.  Merger or Consolidation or Change of Name of Rights Agent........22

Section 20.  Duties of Rights Agent...........................................23

Section 21.  Chanmge of Rights Agent..........................................24

Section 22.  Issuance of New Right Certificates...............................25

Section 23.  Redemption.......................................................26

Section 24.  Exchange.........................................................26

Section 25.  Notice of Certain Events.........................................28

Section 26.  Notices..........................................................28

Section 27.  Supplements and Amendments.......................................29

Section 28.  Successors.......................................................29

ii

Section 29.  Benefits of this Agreement; Actions by the
Board of Directors, etc..........................................29

Section 30.  Severability.....................................................30

Section 31.  Governing Law....................................................30

Section 32.  Counterparts.....................................................30

Section 33.  Descriptive Headings.............................................31

iii

Agreement, dated as of November 27, 1995, between CryoLife, Inc., a Florida
corporation (the "Company"),  and Chemical Mellon Shareholder  Services,  L.L.C.
(the "Rights Agent").

WHEREAS,  the Board of Directors of the Company has authorized and declared
a dividend of one  preferred  share  purchase  right (a "Right") for each Common
Share (as hereinafter  defined) of the Company  outstanding on December 11, 1995
(the "Record Date");

WHEREAS,  each Right  represents  the right to purchase one  one-tenth of a
Preferred  Share (as  hereinafter  defined),  upon the terms and  subject to the
conditions herein set forth; and

WHEREAS,  the Company has further  authorized  and directed the issuance of
one Right with  respect to each  Common  Share  that  shall  become  outstanding
between  the  Record  Date  and  the  earliest  of the  Distribution  Date,  the
Redemption Date and the Expiration Date (as such terms are hereinafter defined).

NOW THEREFORE,  in consideration of the premises and the mutual  agreements
herein set forth, the parties hereby agree as follows:

Section  1.  Certain  Definitions.  For  purposes  of this  Agreement,  the
following terms have the meanings indicated:

(a)  "Acquiring  Person" shall mean any Person (as such term is hereinafter
defined)  who  or  which,  together  with  all  Affiliates  and  Associates  (as
hereinafter  defined)  of  such  Person,  shall  be  the  Beneficial  Owner  (as
hereinafter  defined) of 15% or more of the Common  Shares of the  Company  then
outstanding,  but shall not include the Company,  any Subsidiary (as hereinafter
defined)  of the  Company,  any  employee  benefit  plan of the  Company  or any
Subsidiary of the Company,  or any entity  holding Common Shares for or pursuant
to the terms of any such plan.  Notwithstanding  the foregoing,  no Person shall
become an "Acquiring Person" as the result of an acquisition of Common Shares by
the Company which, by reducing the number of shares  outstanding,  increases the
proportionate  number of shares beneficially owned by such Person to 15% or more
of the Common Shares of the Company then outstanding; provided, however, that if
a Person shall become the  Beneficial  Owner of 15% or more of the Common Shares
of the Company then  outstanding by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the Beneficial Owner of
any additional Common Shares of the Company, then such Person shall be deemed to
be an  "Acquiring  Person".  Notwithstanding  the  foregoing,  if the  Board  of

1

Directors  of the  Company  determines  in good  faith  that a Person  who would
otherwise  be an  "Acquiring  Person",  as  defined  pursuant  to the  foregoing
provisions of this paragraph (a), has become such inadvertently, and such Person
divests in an orderly fashion but as promptly as practicable a sufficient number
of Common Shares so that such Person would no longer be an  "Acquiring  Person,"
as defined  pursuant the foregoing  provisions of this  paragraph (a), then such
Person shall not be deemed to be an "Acquiring  Person" for any purposes of this
Agreement.

(b)  "Affiliate",  and  "Associate"  shall  have  the  respective  meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations  under
the  Securities  Exchange Act of 1934, as amended (the  "Exchange  Act"),  as in
effect on the date of this Agreement.

(c) Unless  otherwise  specifically  provided,  "agreement"  refers to both
written and oral agreements.

(d) A Person shall be deemed the "Beneficial  Owner" of and shall be deemed
to "beneficially own" any securities:

(i) which such Person or any of such Person's Affiliates or Associates
is deemed to  "beneficially  own",  within the meaning of Rule 13d-3 of the
General Rules and  Regulations  under the Exchange Act, as in effect on the
date of this Agreement;

(ii)  which  such  Person  or  any  of  such  Person's  Affiliates  or
Associates has (A) the right to acquire  (whether such right is exercisable
immediately  or only after the passage of time)  pursuant to any agreement,
arrangement or  understanding,  or upon the exercise of conversion  rights,
exchange rights, rights (other than these Rights),  warrants or options, or
otherwise;  provided,  however,  that a  Person  shall  not be  deemed  the
Beneficial Owner of, or to beneficially own,  securities  tendered pursuant
to a tender or exchange offer made by or on behalf of such Person or any of
such Person's  Affiliates or Associates until such tendered  securities are
accepted for purchase or exchange; or (B) the right to vote pursuant to any
agreement,  arrangement or understanding;  provided, however, that a Person
shall not be deemed the Beneficial  Owner of, or to  beneficially  own, any
security  if the  agreement,  arrangement  or  understanding  to vote  such
security (1) arises solely from a revocable  proxy or consent given to such
Person in response to a public proxy or consent  solicitation made pursuant
to,  and  in  accordance   with,  the  applicable   rules  and  regulations
promulgated  under the Exchange Act and (2) is not also then  reportable on
Schedule  13D  under  the  Exchange  Act (or any  comparable  or  successor
report); or

(iii) which are  beneficially  owned,  directly or indirectly,  by any
other Person with which such Person or any of such  Person's  Affiliates or
Associates has any agreement,  arrangement or understanding for the purpose
of acquiring,  holding,  voting (except to the extent  contemplated  by the
proviso to Section 1(d)(ii)(B) above) or disposing of any securities of the
Company.

Notwithstanding  anything in this  definition  of  Beneficial  Ownership  to the
contrary,  the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities  then  issued  and  outstanding  together  with  the  number  of such

2

securities not then actually issued and  outstanding  which such Person would be
deemed to own beneficially  hereunder.  Notwithstanding  the foregoing,  nothing
contained in this definition shall cause a Person ordinarily engaged in business
as an  underwriter  of  securities  to  be  the  "Beneficial  Owner"  of,  or to
"beneficially  own," any  securities  acquired  in a bona  fide firm  commitment
underwriting pursuant to an underwriting agreement with the Company.

(e) "Business Day" shall mean any day other than a Saturday, a Sunday, or a
day on which banking institutions in Pennsylvania are authorized or obligated by
law or executive order to close.

(f) "Close of Business" on any given date shall mean 5:00 P.M., Pittsburgh,
Pennsylvania time, on such date; provided,  however,  that if such date is not a
Business Day it shall mean 5:00 P.M., Pittsburgh, Pennsylvania time, on the next
succeeding Business Day.

(g) "Common  Shares" when used with reference to the Company shall mean the
shares of common  stock,  par value  $.01 per  share,  of the  Company.  "Common
Shares" when used with reference to any Person other than the Company shall mean
the capital stock (or equity  interest)  with the greatest  voting power of such
other Person entitled to vote generally in the election of all directors of such
other  Person or the equity  securities  or other equity  interest  having power
(whether or not  exercised)  to control or direct the  management  of such other
Person or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.

(h)  "Distribution  Date"  shall  have the  meaning  set forth in Section 3
hereof.

(i) "Expiration Date" shall have the meaning set forth in Section 7 hereof.

(j) "Person" shall mean any individual,  firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.

(k) "Preferred  Shares" shall mean shares of Series A Junior  Participating
Preferred  Stock, par value $.01 per share, of the Company having the rights and
preferences  set forth in the Form of  Articles  of  Amendment  attached to this
Agreement as Exhibit A.

(l) "Redemption Date" shall have the meaning set forth in Section 7 hereof.

(m)  "Shares  Acquisition  Date"  shall  mean  the  first  date  of  public
announcement by the Company or an Acquiring Person that a Person,  together with
all Affiliates and Associates of such Person, has become an Acquiring Person.

(n)  "Subsidiary"  of any Person shall mean any corporation or other entity
of which a majority  of the  voting  power of the voting  equity  securities  or
equity interest is owned, directly or indirectly, by such Person.

3

Section 2.  Appointment of Rights Agent.  The Company  hereby  appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date be the
holders  of the  Common  Shares)  in  accordance  with the terms and  conditions
hereof,  and the Rights Agent hereby accepts such  appointment.  The Company may
from time to time  appoint  such  co-Rights  Agents as it may deem  necessary or
desirable.

Section 3. Issue of Right  Certificates.  (a) Until the  earlier of (i) the
tenth day after the Shares  Acquisition  Date or (ii) the tenth Business Day (or
such later date as may be determined  by action of the Board of Directors  prior
to such time as any Person  becomes an Acquiring  Person)  after the date of the
commencement  by any Person  (other  than the  Company,  any  Subsidiary  of the
Company,  any employee  benefit plan of the Company or of any  Subsidiary of the
Company or any entity  holding Common Shares for or pursuant to the terms of any
such  plan) of, or of the first  public  announcement  of the  intention  of any
Person  (other than the Company,  any  Subsidiary  of the Company,  any employee
benefit  plan of the Company or of any  Subsidiary  of the Company or any entity
holding  Common  Shares  for or  pursuant  to the  terms  of any  such  plan) to
commence,  a tender or exchange offer the  consummation of which would result in
any Person  becoming the Beneficial  Owner of Common Shares  aggregating  15% or
more of the then  outstanding  Common Shares  (including  any such date which is
after the date of this  Agreement  and prior to the issuance of the Rights;  the
earlier of such dates being herein referred to as the "Distribution  Date"), (x)
the Rights will be evidenced  (subject to the provisions of Section 3(b) hereof)
by the  certificates  for Common  Shares  registered in the names of the holders
thereof (which  certificates shall also be deemed to be Right  Certificates) and
not by  separate  Right  Certificates,  and  (y)  the  right  to  receive  Right
Certificates will be transferable only in connection with the transfer of Common
Shares.  As soon as practicable  after the  Distribution  Date, the Company will
prepare and  execute,  the Rights Agent will  countersign,  and the Company will
send or cause to be sent (or the  Rights  Agent  will,  if  requested,  send) by
first-class,  insured,  postage-prepaid  mail,  to each record  holder of Common
Shares as of the Close of Business on the  Distribution  Date, at the address of
such  holder  shown on the  records  of the  Company,  a Right  Certificate,  in
substantially the form of Exhibit B hereto (a "Right  Certificate"),  evidencing
one  Right  for  each  Common  Share so held.  As of the  Distribution  Date and
thereafter, the Rights will be evidenced solely by such Right Certificates.

4

(b) On the Record Date, or as soon as practicable  thereafter,  the Company
will  send a copy of a  Summary  of  Rights to  Purchase  Preferred  Shares,  in
substantially  the form of  Exhibit  C hereto  (the  "Summary  of  Rights"),  by
first-class,  postage-prepaid mail, to each record holder of Common Shares as of
the Close of Business on the Record Date, at the address of such holder shown on
the records of the  Company.  With  respect to  certificates  for Common  Shares
outstanding as of the Record Date, until the Distribution  Date, the Rights will
be evidenced by such certificates registered in the names of the holders thereof
together  with a copy of the  Summary  of  Rights  attached  thereto.  Until the
Distribution  Date (or the  earlier  of the  Redemption  Date or the  Expiration
Date),  the  surrender  for  transfer  of  any  certificate  for  Common  Shares
outstanding on the Record Date,  with or without a copy of the Summary of Rights
attached  thereto,  shall also constitute the transfer of the Rights  associated
with the Common Shares represented thereby.

(c)  Certificates  for Common Shares which become  outstanding  (including,
without limitation, reacquired Common Shares referred to in the last sentence of
this  paragraph  (c)) after the  Record  Date but prior to the  earliest  of the
Distribution  Date,  the  Redemption  Date or the  Expiration  Date  shall  have
impressed on, printed on, written on or otherwise  affixed to them the following
legend:

This  certificate  also  evidences  and entitles the holder  hereof to
certain rights as set forth in a Rights  Agreement  between  CryoLife,
Inc. and Chemical Mellon  Shareholder  Services,  L.L.C.,  dated as of
November  27, 1995 (the  "Rights  Agreement"),  the terms of which are
hereby incorporated herein by reference and a copy of which is on file
at the principal  executive  offices of CryoLife,  Inc.  Under certain
circumstances,  as set forth in the Rights Agreement, such Rights will
be evidenced by separate  certificates and will no longer be evidenced
by this  certificate.  CryoLife,  Inc. will mail to the holder of this
certificate  a copy  of the  Rights  Agreement  without  charge  after
receipt of a written request therefor. Under certain circumstances, as
set forth in the  Rights  Agreement,  Rights  issued to any Person who
becomes an Acquiring  Person (as defined in the Rights  Agreement) may
become null and void.

With respect to such  certificates  containing the foregoing  legend,  until the
Distribution  Date, the Rights associated with the Common Shares  represented by
such  certificates  shall  be  evidenced  by such  certificates  alone,  and the
surrender  for  transfer  of any such  certificate  shall  also  constitute  the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Company  purchases  or acquires  any Common  Shares after the
Record Date but prior to the Distribution  Date, any Rights associated with such
Common  Shares shall be deemed  cancelled  and retired so that the Company shall

5

not be entitled to exercise any Rights  associated  with the Common Shares which
are no longer outstanding. Notwithstanding this paragraph (c), the omission of a
legend shall not effect the  enforceability of any part of this Rights Agreement
or the rights of any holder of Rights.

Section  4. Form of Right  Certificates.  The Right  Certificates  (and the
forms of election to purchase  Preferred  Shares and of assignment to be printed
on the reverse  thereof) shall be  substantially in the form as Exhibit B hereto
and may have such  marks of  identification  or  designation  and such  legends,
summaries or endorsements  printed  thereon as the Company may deem  appropriate
and as are not inconsistent with the provisions of this Agreement,  or as may be
required to comply with any applicable  law or with any rule or regulation  made
pursuant  thereto or with any rule or regulation of any stock  exchange on which
the Rights may from time to time be listed,  or to conform to usage.  Subject to
the provisions of Sections 7, 11 and 22 hereof, the Right Certificates, whenever
issued,  shall  entitle  the  holders  thereof to  purchase  such  number of one
one-tenths  of a Preferred  Share as shall be set forth therein at the price per
one one-tenth of a Preferred Share set forth therein (the "Purchase Price"), but
the number of one  one-tenths of a Preferred  Share and the Purchase Price shall
be subject to adjustment as provided herein.

Section 5.  Countersignature  and Registration.  (a) The Right Certificates
shall be  executed on behalf of the  Company by its  Chairman of the Board,  its
Chief  Executive  Officer,  its President,  any of its Vice  Presidents,  or its
Treasurer, either manually or by facsimile signature, shall have affixed thereto
the  Company's  seal or a  facsimile  thereof,  and  shall  be  attested  by the
Secretary  or an  Assistant  Secretary  of the  Company,  either  manually or by
facsimile signature.  The Right Certificates shall be manually  countersigned by
the Rights Agent and shall not be valid for any purpose unless so countersigned.
In case any  officer  of the  Company  who shall  have  signed  any of the Right
Certificates   shall   cease  to  be  such   officer  of  the   Company   before
countersignature  by the Rights  Agent and issuance and delivery by the Company,
such Right Certificates,  nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right  Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by  any  person  who,  at the  actual  date  of  the  execution  of  such  Right
Certificate,  shall  be a proper  officer  of the  Company  to sign  such  Right
Certificate,  although at the date of the execution of this Rights Agreement any
such person was not such an officer.

(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal  office,  books for  registration  and transfer of the
Right  Certificates  issued  hereunder.  Such  books  shall  show the  names and
addresses of the  respective  holders of the Right  Certificates,  the number of
Rights  evidenced on its face by each of the Right  Certificates and the date of
each of the Right Certificates.

Section  6.  Transfer,   Split  Up,   Combination  and  Exchange  of  Right
Certificates;  Mutilated,  Destroyed,  Lost or Stolen  Right  Certificates.  (a)
Subject to the provisions of Sections 7(e) and 14 hereof,  at any time after the

6

Close of  Business  on the  Distribution  Date,  and at or prior to the Close of
Business on the earlier of the Redemption Date or the Expiration Date, any Right
Certificate or Right Certificates  (other than Right  Certificates  representing
Rights that have become void  pursuant to Section  7(e) hereof or that have been
exchanged pursuant to Section 24 hereof) may be transferred,  split up, combined
or exchanged for another Right Certificate or Right Certificates,  entitling the
registered  holder to  purchase a like number of one  one-tenths  of a Preferred
Share as the Right Certificate or Right  Certificates  surrendered then entitled
such holder to purchase.  Any registered holder desiring to transfer,  split up,
combine or exchange any Right Certificate or Right  Certificates shall make such
request in writing  delivered to the Rights Agent, and shall surrender the Right
Certificate  or Right  Certificates  to be  transferred,  split up,  combined or
exchanged at the  principal  office of the Rights  Agent.  Thereupon  the Rights
Agent shall, subject to Sections 7(e) and 14 hereof,  countersign and deliver to
the person entitled thereto a Right  Certificate or Right  Certificates,  as the
case  may  be,  as so  requested.  The  Company  may  require  payment  of a sum
sufficient  to cover  any tax or  governmental  charge  that may be  imposed  in
connection  with any  transfer,  split  up,  combination  or  exchange  of Right
Certificates.

(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory  to them of the loss,  theft,  destruction or mutilation of a Right
Certificate,  and,  in case of  loss,  theft or  destruction,  of  indemnity  or
security  reasonably  satisfactory  to  them,  and,  at the  Company's  request,
reimbursement  to the Company and the Rights  Agent of all  reasonable  expenses
incidental  thereto,  and upon surrender to the Rights Agent and cancellation of
the Right  Certificate  if  mutilated,  the Company  will make and deliver a new
Right  Certificate  of like  tenor  to the  Rights  Agent  for  delivery  to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.

(c) Notwithstanding any other provisions hereof, the Company and the Rights
Agent may amend this Agreement to provide for uncertified  Rights in addition to
or in place of Rights evidenced by Right Certificates.

Section 7. Exercise of Rights;  Purchase Price;  Expiration Date of Rights.
(a) Subject to Section 7(e) and except as otherwise  provided in this Agreement,
the registered holder of any Right Certificate may exercise the Rights evidenced
thereby  (except as otherwise  provided  herein) in whole or in part at any time
after the Distribution  Date upon surrender of the Right  Certificate,  with the
form of election to purchase on the reverse side thereof duly  executed,  to the
Rights Agent at the principal office of the Rights Agent,  together with payment
of the Purchase  Price for each one  one-tenth of a Preferred  Share as to which
the  Rights  are  exercised,  at or prior to the  earliest  of (i) the  close of
business on November 27, 2005 (the  "Expiration  Date"),  (ii) the time at which
the Rights are  redeemed  as  provided  in  Section 23 hereof  (the  "Redemption
Date"),  or (iii) the time at which such  Rights are  exchanged  as  provided in
Section 24 hereof.

(b) The  Purchase  Price  for  each  one  one-tenth  of a  Preferred  Share
purchasable  pursuant to the exercise of a Right shall initially be $100.00, and

7

shall be subject to adjustment from time to time as provided in Section 11 or 13
hereof and shall be payable in lawful  money of the United  States of America in
accordance with paragraph (c) below.

(c) Upon receipt of a Right Certificate  representing  exercisable  Rights,
with the form of election to purchase duly  executed,  accompanied by payment of
the  Purchase  Price for the shares to be  purchased  and an amount equal to any
applicable  transfer  tax  required  to be paid  by the  holder  of  such  Right
Certificate in accordance  with Section 9 hereof by certified  check,  cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon  promptly (i) either (A)  requisition  from any transfer  agent of the
Preferred Shares certificates for the number of Preferred Shares to be purchased
and the Company hereby irrevocably  authorizes its transfer agent to comply with
all such  requests,  or (B)  requisition  from the depositary  agent  depositary
receipts  representing such number of one one-tenths of a Preferred Share as are
to be purchased (in which case certificates for the Preferred Shares represented
by such receipts  shall be deposited by the transfer  agent with the  depositary
agent) and the Company hereby  directs the depositary  agent to comply with such
request, (ii) when appropriate,  requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional  shares in accordance  with Section
14 hereof,  (iii) after receipt of such  certificates  or  depositary  receipts,
cause the same to be delivered to or upon the order of the registered  holder of
such Right Certificate, registered in such name or names as may be designated by
such holder and (iv) when  appropriate,  after receipt,  deliver such cash to or
upon the order of the registered holder of such Right Certificate.

(d) In case the registered  holder of any Right  Certificate shall exercise
less than all the Rights evidenced thereby,  a new Right Certificate  evidencing
Rights  equivalent to the Rights  remaining  unexercised  shall be issued by the
Rights Agent to the registered  holder of such Right  Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.

(e) Notwithstanding  anything in this Rights Agreement to the contrary, any
rights  that are at anytime  beneficially  owned by an  acquiring  Person or any
Affiliate or  Associate  of an  acquiring  Person shall be null and void and not
transferable,  and  any  holder  of any  such  Right  (including  any  purported
transferee  or  subsequent  holders)  shall  not have any right to  exercise  or
transfer  any such  Right.  No Rights  Certificate  shall be issued  pursuant to
Section 3 that represents Rights beneficially owned by an Acquiring Person whose
Rights  would be void  pursuant to the  preceding  sentence or any  Associate or
Affiliate  thereof;  no Right  Certificate  shall be issued at any time upon the
transfer  of any  Rights  to an  Acquiring  Person  whose  Rights  would be void
pursuant to the preceding  sentence or any Associate or Affiliate  thereof or to
any nominee of such  Acquiring  Person,  Associate or  Affiliate;  and any Right
Certificate  delivered to the Rights  Agent for transfer to an Acquiring  Person
whose  Rights  would  be  void  pursuant  to the  preceding  sentence  shall  be
cancelled.

(f)  Notwithstanding  anything in this Rights  Agreement  to the  contrary,

8

neither the Rights Agent nor the Company  shall be  obligated  to undertake  any
action with respect to a registered  holder of any Right  Certificates  upon the
occurrence of any purported  exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the certificate  contained
in the form of election to purchase  set forth on the reverse  side of the Right
Certificate  surrendered  for such exercise and (ii)  provided  such  additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.

(g) The Company may temporarily suspend, for a period of time not to exceed
90 calendar days after the Distribution  Date, the  exercisability of the Rights
in order to prepare and file a registration  statement under the Securities Act,
on  appropriate  form,  with respect to the Preferred  Shares  purchasable  upon
exercise  of the  Rights  and  permit  such  registration  statement  to  become
effective;  provided,  however,  that no such suspension  shall remain effective
after,  and the Rights  shall  without any further  action of the Company or any
other Person  become  exercisable  immediately  upon the  effectiveness  of such
registration  statement.  Upon any such  suspension,  the Company  shall issue a
public  announcement  stating  that the  exercisability  of the  Rights has been
temporarily suspended and shall issue a further public announcement at such time
as the suspension is no longer in effect.  Notwithstanding  any provision herein
to the contrary,  the Rights shall not be exercisable in any jurisdiction if the
requisite   qualification  under  the  Blue  Sky  or  securities  laws  of  such
jurisdiction  shall not have been  obtained or the  exercise of the Rights shall
not be permitted under applicable law.

Section 8.  Cancellation and Destruction of Right  Certificates.  All Right
Certificates  surrendered  for the  purpose  of  exercise,  transfer,  split up,
combination or exchange shall,  and any Right  Certificate  representing  Rights
that shall  become null and void and  nontransferable  pursuant to Section  7(e)
surrendered or presented for any purpose shall, if surrendered to the Company or
to any of its agents,  be delivered to the Rights Agent for  cancellation  or in
cancelled  form, or, if  surrendered to the Rights Agent,  shall be cancelled by
it,  and no Right  Certificates  shall  be  issued  in lieu  thereof  except  as
expressly  permitted  by any of the  provisions  of this Rights  Agreement.  The
Company shall deliver to the Rights Agent for cancellation  and retirement,  and
the  Rights  Agent  shall so cancel  and  retire,  any other  Right  Certificate
purchased or acquired by the Company  otherwise than upon the exercise  thereof.
The Rights Agent shall deliver all cancelled Right  Certificates to the Company,
or shall,  at the written  request of the Company,  destroy such cancelled Right
Certificates,  and in such case  shall  deliver  a  certificate  of  destruction
thereof to the Company.

Section 9. Availability of Preferred Shares.  (a) The Company covenants and
agrees  that  it  will  cause  to be  reserved  and  kept  available  out of its
authorized  and unissued  Preferred  Shares or any Preferred  Shares held in its
treasury,  the number of Preferred  Shares that will be sufficient to permit the
exercise in full of all  outstanding  Rights in  accordance  with Section 7. The
Company  covenants  and  agrees  that it will  take  all such  action  as may be
necessary to ensure that all Preferred  Shares delivered upon exercise of Rights
shall,  at the time of delivery of the  certificates  for such Preferred  Shares

9

(subject to payment of the Purchase Price),  be duly and validly  authorized and
issued and fully paid and  nonassessable  shares.  The Company further covenants
and agrees  that it will pay when due and  payable any and all federal and state
transfer  taxes and charges  which may be payable in respect of the  issuance or
delivery of the Right  Certificates or of any Preferred Shares upon the exercise
of Rights.  The Company shall not, however,  be required to pay any transfer tax
which  may  be  payable  in  respect  of  any  transfer  or  delivery  of  Right
Certificates to a person other than, or the issuance or delivery of certificates
or depositary  receipts for the  Preferred  Shares in a name other than that of,
the registered holder of the Right Certificate evidencing Rights surrendered for
exercise or to issue or to deliver any  certificates or depositary  receipts for
Preferred  Shares upon the  exercise of any Rights until any such tax shall have
been paid (any such tax being payable by the holder of such Right Certificate at
the  time of  surrender)  or  until it has  been  established  to the  Company's
reasonable satisfaction that no such tax is due.

(b) In the event that there shall not be sufficient Preferred Shares issued
but not  outstanding  or  authorized  but  unissued  to permit the  exercise  or
exchange of Rights in  accordance  with  Section 11, the Company  covenants  and
agrees  that it will  take all such  action  as may be  necessary  to  authorize
additional Preferred Shares for issuance upon the exercise or exchange of Rights
pursuant  to Section  11;  provided,  however,  that if the Company is unable to
cause the authorization of additional  Preferred Shares, then the Company shall,
or in lieu of seeking any such  authorization,  the  Company  may, to the extent
necessary and permitted by applicable  law and any  agreements or instruments in
effect prior to the Distribution Date to which it is a party, (A) upon surrender
of a Right,  pay cash equal to the Purchase  Price in lieu of issuing  Preferred
Shares and  requiring  payment  therefor,  (B) upon due  exercise of a Right and
payment of the Purchase Price for each Preferred Share as to which such Right is
exercised,  issue  equity  securities  having a value  equal to the value of the
Preferred  Shares  which  otherwise  would have been  issuable  pursuant to this
Agreement, which value shall be determined by a nationally recognized investment
banking  firm  selected by the Board of Directors of the Company or (C) upon due
exercise of a Right and payment of the Purchase Price for each  Preferred  Share
as to which such Right is  exercised,  distribute  a  combination  of  Preferred
Shares,  cash and/or other  equity  and/or debt  securities  having an aggregate
value equal to the value of the Preferred Shares which otherwise would have been
issuable pursuant to Section 11, which value shall be determined by a nationally
recognized  investment  banking  firm  selected by the Board of Directors of the
Company. To the extent that any legal or contractual  restrictions  (pursuant to
agreements or instruments in effect prior to the  Distribution  Date to which it
is party)  prevent the Company from paying the full amount payable in accordance
with the foregoing  sentence,  the Company shall pay to holders of the Rights as
to which such payments are being made all amounts which are not then  restricted
on a pro rata  basis as such  payments  become  permissible  under such legal or
contractual restrictions until such payments have been paid in full.

(c) So long as the Preferred  Shares issuable upon the exercise or exchange
of Rights are to be listed on any  national  securities  exchange,  the  Company
covenants and agrees to use its best efforts to cause,  from and after such time

10

as the Rights become exercisable or exchangeable,  all Preferred Shares reserved
for such issuance to be listed on such securities  exchange upon official notice
of issuance upon such exercise or exchange.

(d) The Company further  covenants and agrees that it will pay when due and
payable any and all Federal and state  transfer  taxes and charges  which may be
payable in respect of the issuance or delivery of Right  Certificates  or of any
Preferred  Shares or Common  Shares or other  securities  upon the  exercise  or
exchange of the Rights.  The Company shall not, however,  be required to pay any
transfer  tax which may be payable in respect of any  transfer  or  delivery  of
Right  Certificates  to a Person  other than,  or in respect of the  issuance or
delivery of  certificates  for the  Preferred  Shares or Common  Shares or other
securities,  as the case may be, in a name other  than that of,  the  registered
holder of the Right Certificate  evidencing  Rights  surrendered for exercise or
exchange or to issue or deliver any  certificates for Preferred Shares or Common
Shares or other securities, as the case may be, upon the exercise or exchange of
any Rights  until any such tax shall have been paid (any such tax being  payable
by the holder of such Right  Certificate  at the time of  surrender) or until it
has been established to the Company's satisfaction that no such tax is due.

Section 10.  Preferred  Shares  Record Date.  Each person in whose name any
certificate for Preferred Shares is issued upon the exercise of Rights shall for
all  purposes  be deemed to have  become the  holder of record of the  Preferred
Shares  represented  thereby on, and such  certificate  shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the  Purchase  Price (and any  applicable  transfer  taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Shares transfer books of the Company are closed, such person
shall be deemed to have  become  the record  holder of such  shares on, and such
certificate  shall be  dated,  the next  succeeding  Business  Day on which  the
Preferred  Shares transfer books of the Company are open.  Prior to the exercise
of the Rights evidenced thereby,  the holder of a Right Certificate shall not be
entitled  to any  rights of a holder of  Preferred  Shares  for which the Rights
shall be  exercisable,  including,  without  limitation,  the right to vote,  to
receive dividends or other  distributions or to exercise any preemptive  rights,
and shall not be  entitled  to  receive  any  notice of any  proceedings  of the
Company, except as provided herein.

Section 11.  Adjustment  of Purchase  Price,  Number of Shares or Number of
Rights. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.

(a) (i) In the event the  Company  shall at any time after the date of this
Agreement  (A) declare a dividend on the Preferred  Shares  payable in Preferred
Shares,  (B)  subdivide  the  outstanding  Preferred  Shares,  (C)  combine  the
outstanding  Preferred  Shares into a smaller number of Preferred  Shares or (D)
issue any shares of its capital  stock in a  reclassification  of the  Preferred
Shares (including any such  reclassification  in connection with a consolidation
or merger in which the  Company is the  continuing  or  surviving  corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in effect

11

at the time of the record  date for such  dividend or of the  effective  date of
such subdivision,  combination or  reclassification,  and the number and kind of
shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right  exercised  after such time shall be entitled to
receive the aggregate  number and kind of shares of capital stock which, if such
Right had been exercised  immediately  prior to such date and at a time when the
Preferred  Shares  transfer  books of the Company were open, he would have owned
upon such  exercise  and been  entitled  to receive by virtue of such  dividend,
subdivision,  combination or  reclassification;  provided,  however,  that in no
event shall the  consideration to be paid upon the exercise of one Right be less
than the  aggregate  par value of the  shares of  capital  stock of the  Company
issuable upon exercise of one Right.

(ii)  Subject  to  Section  24 of this  Agreement,  in the event any Person
becomes an  Acquiring  Person,  each  holder of a Right,  except as  provided in
Section 7(e), shall thereafter have a right to receive, upon exercise thereof at
a price equal to the then current Purchase Price multiplied by the number of one
one-tenths  of a  Preferred  Share  for  which a Right is then  exercisable,  in
accordance  with the terms of this  Agreement  and in lieu of Preferred  Shares,
such number of Common  Shares of the Company as shall equal the result  obtained
by (x)  multiplying  the  then  current  Purchase  Price  by the  number  of one
one-tenths of a Preferred  Share for which a Right is then  exercisable  and (y)
dividing  that  product by 50% of the then Current Per Share Market Price of the
Company's  Common  Shares  (determined  pursuant to Section 11(d) hereof) on the
date of the  occurrence  of such event (such number of shares being  hereinafter
referred  to as the  "Adjustment  Shares").  In the event that any Person  shall
become an Acquiring Person and the Rights shall then be outstanding, the Company
shall not take any  action  which  would  eliminate  or  diminish  the  benefits
intended to be afforded by the Rights.

(iii) In the event that there shall not be sufficient  Common Shares issued
but not outstanding or authorized but unissued to permit the exercise in full of
the Rights in  accordance  with the  foregoing  subparagraph  (ii),  the Company
shall, to the extent  permitted by applicable law and regulation,  (a) determine
the excess of (1) the value of the Adjustment  shares issuable upon the exercise
of a Right  (computed using the Current Per Share Market Price used to determine
the number of  Adjustment  Shares) (the  "Current  Value') over (2) the Purchase
Price (such excess is herein referred to as the "Spread"),  and (B) with respect
to each Right, make adequate  provision to substitute for the Adjustment Shares,
upon the exercise of the Rights and payment of the  applicable  Purchase  Price,
(1) cash,  (2) a reduction  in the  Purchase  Price,  (3) Common  Stock or other
equity  securities of the Company  (including,  without  limitation,  shares, or
units  of  shares,  of  preferred  stock  (including,  without  limitation,  the
Preferred  Stock) that the Board of Directors of the Company has  determined  to
have the same value as shares of Common Stock (such  shares of  preferred  stock
are herein referred to as "Common Stock  Equivalents")),  (4) debt securities of
the Company, (5) other assets or (6) any combination of the foregoing, having an
aggregate value equal to the Current Value,  where such aggregate value has been
determined  by the Board of Directors of the Company  based upon the advice of a
nationally recognized investment banking firm selected by the Board of Directors

12

of the Company;  provided,  however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within 30 days following
the  later of (x) the  first  Distribution  Date  and (y) the date on which  the
Company's  right of  redemption  pursuant to Section 23(a) expires (the later of
(x) and (y) being referred to herein as the "Flip-In  Trigger  Date"),  then the
Company  shall be obligated  to deliver,  upon the  surrender  for exercise of a
Right and without  requiring  payment of the  Purchase  Price,  shares of Common
Stock (to the extent  available)  and then,  if  necessary,  cash,  which shares
and/or  cash  have an  aggregate  value  equal to the  Spread.  If the  Board of
Directors  of the Company  shall  determine in good faith that it is likely that
sufficient  additional  shares of Common Stock could be authorized  for issuance
upon  exercise in full of the Rights,  the 30-day  period set forth above may be
extended  to the extent  necessary,  but not more than 90 days after the Flip-In
Trigger  Date, in order that the Company may seek  shareholder  approval for the
authorization of such additional shares (such period, as it may be extended, the
"Substitution  Period").  To the extent  that the Company  determines  that some
action  need be taken  pursuant to the first  and/or  second  sentences  of this
Section  11(a)(iii),  the Company  (x) shall  provide,  subject to Section  7(e)
hereof, that such action shall apply uniformly to all outstanding Rights,and (y)
may  suspend  the  exercisability  of the  Rights  until the  expiration  of the
Substitution  Period in order to seek any  authorization  of  additional  shares
and/or to decide the  appropriate  form of  distribution  to be made pursuant to
such first sentence and to determine the value thereof. In the event of any such
suspension,  the Company  shall  issue a public  announcement  stating  that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. For purposes
of this Section  11(a)(iii),  the value of the Common Stock shall be the Current
Market Price Per Share of the Common  Stock on the Flip-In  Trigger Date and the
value of any Common Stock  Equivalents shall be deemed to have the same value as
the Common Stock on such date.

(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of  Preferred  Shares  entitling  them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase  Preferred Shares (or shares having the same rights,  privileges and
preferences  as  the  Preferred  Shares  ("equivalent   preferred  shares"))  or
securities convertible into Preferred Shares or equivalent preferred shares at a
price per Preferred Share or equivalent  preferred share (or having a conversion
price per share, if a security  convertible  into Preferred Shares or equivalent
preferred  shares)  less than the then  Current  Per Share  Market  Price of the
Preferred Shares (as defined in Section 11(d)) on such record date, the Purchase
Price to be in effect after such record date shall be determined by  multiplying
the  Purchase  Price  in  effect  immediately  prior  to such  record  date by a
fraction,  the  numerator  of which  shall be the  number  of  Preferred  Shares
outstanding  on such record date plus the number of  Preferred  Shares which the
aggregate  offering  price  of the  total  number  of  Preferred  Shares  and/or
equivalent  preferred  shares so to be offered  (and/or  the  aggregate  initial
conversion price of the convertible  securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number of
Preferred  Shares  outstanding on such record date plus the number of additional

13

Preferred  Shares  and/or   equivalent   preferred  shares  to  be  offered  for
subscription  or purchase  (or into which the  convertible  securities  so to be
offered are initially  convertible);  provided,  however, that in no event shall
the  consideration  to be paid upon the  exercise  of one Right be less than the
aggregate par value of the shares of capital stock of the Company  issuable upon
exercise  of one  Right.  In  case  such  subscription  price  may be  paid in a
consideration part or all of which shall be in a form other than cash, the value
of such  consideration  shall be as  determined  in good  faith by the  Board of
Directors of the Company,  whose determination shall be described in a statement
filed with the Rights Agent.  Preferred  Shares owned by or held for the account
of the  Company  shall not be deemed  outstanding  for the  purpose  of any such
computation.  Such adjustment shall be made successively  whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued,  the  Purchase  Price shall be adjusted to be the  Purchase  Price which
would then be in effect if such record date had not been fixed.

(c) In case the  Company  shall  fix a  record  date  for the  making  of a
distribution  to all  holders  of  the  Preferred  Shares  (including  any  such
distribution  made in  connection  with a  consolidation  or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription  rights or warrants  (excluding those referred
to in Section  11(b)  hereof),  the  Purchase  Price to be in effect  after such
record date shall be  determined  by  multiplying  the Purchase  Price in effect
immediately  prior to such  record date by a fraction,  the  numerator  of which
shall be the then Current Per Share Market Price of the Preferred Shares on such
record  date,  less the fair market  value (as  determined  in good faith by the
Board of Directors of the Company,  whose  determination shall be described in a
statement filed with the Rights Agent) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription  rights or warrants
applicable to one  Preferred  Share and the  denominator  of which shall be such
Current Per Share Market Price of the Preferred Shares; provided,  however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the  aggregate par value of the shares of capital stock of the Company
to be  issued  upon  exercise  of one  Right.  Such  adjustments  shall  be made
successively  whenever  such a record date is fixed;  and in the event that such
distribution  is not so made,  the Purchase  Price shall again be adjusted to be
the  Purchase  Price  which  would then be in effect if such record date had not
been fixed.

(d) (i) For the purpose of any  computation  hereunder,  the  "Current  Per
Share  Market  Price" of any  security  (a  "Security"  for the  purpose of this
Section  11(d)(i))  on any date  shall be deemed to be the  average of the daily
closing  prices per share of such Security for the 30  consecutive  Trading Days
(as such term is hereinafter  defined) immediately prior to such date; provided,
however,  that in the  event  that the  Current  Per Share  Market  Price of the
Security is determined  during a period following the announcement by the issuer
of such Security of (A) a dividend or distribution  on such Security  payable in
shares of such Security or securities  convertible into such shares,  or (B) any
subdivision,  combination or  reclassification of such Security and prior to the
expiration  of 30 Trading Days after the  ex-dividend  date for such dividend or

14

distribution,   or  the  record  date  for  such  subdivision,   combination  or
reclassification,  then,  and in each such case,  the Current  Per Share  Market
Price shall be  appropriately  adjusted to reflect the current  market price per
share  equivalent of such Security.  The closing price for each day shall be the
last sale price,  regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices,  regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities  listed or admitted to trading on the New York Stock  Exchange or,
if the  Security  is not  listed or  admitted  to  trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national  securities exchange
on which the  security is listed or  admitted to trading or, if the  Security is
not listed or admitted to trading on any national securities exchange,  the last
quoted  price or, if not so  quoted,  the  average of the high bid and low asked
prices in the  over-the-counter  market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
system  then in use,  or, if on any such date the  Security is not quoted by any
such organization,  the average of the closing bid and asked prices as furnished
by a professional  market maker making a market in the Security  selected by the
Board of Directors of the Company.  The term  "Trading  Day" shall mean a day on
which the principal national securities exchange on which the Security is listed
or  admitted  to  trading is open for the  transaction  of  business  or, if the
Security  is not  listed or  admitted  to  trading  on any  national  securities
exchange, a Business Day.

(ii) For the purpose of any computation  hereunder,  the "Current Per Share
Market Price" of the Preferred Shares shall be determined in accordance with the
method set forth in Section  11(d)(i).  If the Preferred Shares are not publicly
traded,  the "Current Per Share Market Price" of the  Preferred  Shares shall be
conclusively deemed to be no more than the Current Per Share Market Price of the
Common Shares as determined pursuant to Section 11(d)(i) (appropriately adjusted
to reflect any stock  split,  stock  dividend or similar  transaction  occurring
after the date hereof)  multiplied  by one tenth,  with such  adjustment to such
price as is  determined  in good  faith by the Board of  Directors  to take into
account the differences  between Common Share and Preferred  Shares  (including,
without limitation,  differences in voting rights). If neither the Common Shares
nor the Preferred Shares are publicly held or so listed or traded,  "Current Per
Share Market  Price" shall mean the fair value per share as  determined  in good
faith by the Board of  Directors of the Company,  whose  determination  shall be
described in a statement filed with the Rights Agent.

(e) No  adjustment  in the  Purchase  Price shall be  required  unless such
adjustment  would require an increase or decrease of at least 1% in the Purchase
Price;  provided,  however, that any adjustments which by reason of this Section
11(e) are not  required  to be made  shall be  carried  forward  and taken  into
account in any subsequent  adjustment.  All  calculations  under this Section 11
shall be made to the  nearest  cent or to the nearest  one ten  thousandth  of a
Preferred Share or one thousandth of any other share or security as the case may
be.  Notwithstanding  the first sentence of this Section  11(e),  any adjustment

15

required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the  transaction  which requires such  adjustment or (ii)
the date of the expiration of the right to exercise any Rights.

(f) If as a result of an adjustment  made pursuant to Section 11(a) hereof,
the holder of any Right  thereafter  exercised  shall become entitled to receive
any  shares  of  capital  stock of the  Company  other  than  Preferred  Shares,
thereafter  the number of such other shares so  receivable  upon exercise of any
Right shall be subject to adjustment  from time to time in a manner and on terms
as nearly  equivalent  as  practicable  to the  provisions  with  respect to the
Preferred  Shares  contained in Section  11(a) through (c),  inclusive,  and the
provisions  of Sections  7, 9, 10 and 13 with  respect to the  Preferred  Shares
shall apply on like terms to any such other shares.

(g)  All  Rights  originally  issued  by  the  Company  subsequent  to  any
adjustment  made to the Purchase  Price  hereunder  shall  evidence the right to
purchase,  at the adjusted  Purchase  Price,  the number of one  one-tenths of a
Preferred  Share  purchasable  from time to time  hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.

(h) Unless the Company  shall have  exercised  its  election as provided in
Section  11(i),  upon each  adjustment of the Purchase  Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding  immediately
prior to the making of such adjustment  shall  thereafter  evidence the right to
purchase,  at the adjusted  Purchase  Price,  that number of one one-tenths of a
Preferred  Share  (calculated  to the nearest one ten  thousandth of a Preferred
Share)  obtained by (i)  multiplying (x) the number of one one-tenths of a share
covered by a Right  immediately  prior to this  adjustment  by (y) the  Purchase
Price in effect  immediately  prior to such adjustment of the Purchase Price and
(ii)  dividing  the  product  so  obtained  by  the  Purchase  Price  in  effect
immediately after such adjustment of the Purchase Price.

(i) The  Company  may elect on or after the date of any  adjustment  of the
Purchase  Price  to  adjust  the  number  of  Rights,  in  substitution  for any
adjustment in the number of one one-tenths of a Preferred Share purchasable upon
the exercise of a Right. Each of the Rights outstanding after such adjustment of
the number of Rights shall be exercisable  for the number of one one-tenths of a
Preferred  Share  for which a Right was  exercisable  immediately  prior to such
adjustment.  Each Right held of record prior to such adjustment of the number of
Rights  shall  become  that  number of Rights  (calculated  to the  nearest  one
thousandth)  obtained by dividing the Purchase Price in effect immediately prior
to adjustment of the Purchase Price by the Purchase Price in effect  immediately
after  adjustment  of the  Purchase  Price.  The  Company  shall  make a  public
announcement  of its  election  to adjust the number of Rights,  indicating  the
record date for the  adjustment,  and,  if known at the time,  the amount of the
adjustment  to be made.  This record date may be the date on which the  Purchase
Price is adjusted or any day  thereafter,  but, if the Right  Certificates  have

16

been  issued,  shall  be at  least 10 days  later  than  the date of the  public
announcement.  If Right  Certificates have been issued,  upon each adjustment of
the number of Rights  pursuant to this  Section  11(i),  the Company  shall,  as
promptly as  practicable,  cause to be distributed to holders of record of Right
Certificates  on such  record  date Right  Certificates  evidencing,  subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right  Certificates  held by such holders prior to the date of  adjustment,  and
upon  surrender  thereof,  if required by the  Company,  new Right  certificates
evidencing  all the Rights to which such  holders  shall be entitled  after such
adjustment.  Right  Certificates so to be distributed shall be issued,  executed
and  countersigned  in the manner provided for herein and shall be registered in
the names of the  holders of record of Right  Certificates  on the  record  date
specified in the public announcement.

(j)  Irrespective  of any adjustment or change in the Purchase Price or the
number of one one-tenths of a Preferred  Share issuable upon the exercise of the
Rights, the Right Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number of one one-tenths of a Preferred Share
which were expressed in the initial Right Certificates issued hereunder.

(k) Before  taking any action that would cause an  adjustment  reducing the
Purchase  Price  below  one  one-tenth  of the then par  value,  if any,  of the
Preferred  Shares  issuable upon exercise of the Rights,  the Company shall take
any corporate  action which may, in the opinion of its counsel,  be necessary in
order  that  the  Company   may  validly  and  legally   issue  fully  paid  and
nonassessable Preferred Shares at such adjusted Purchase Price.

(l) In any case in which this Section 11 shall  require that an  adjustment
in the  Purchase  Price be made  effective  as of a record  date for a specified
event,  the Company may elect to defer  until the  occurrence  of such event the
issuing  to the holder of any Right  exercised  after  such  record  date of the
Preferred  Shares and other capital stock or securities of the Company,  if any,
issuable  upon  such  exercise  over and above the  Preferred  Shares  and other
capital stock or securities of the Company,  if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however,  that the  Company  shall  deliver  to such  holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.

(m)  Anything  in this  Section  11 to the  contrary  notwithstanding,  the
Company  shall be entitled to make such  reductions  in the Purchase  Price,  in
addition to those adjustments  expressly  required by this Section 11, as and to
the extent that it in its sole  discretion  shall  determine  to be advisable in
order that any  consolidation or subdivision of the Preferred  Shares,  issuance
wholly for cash of any Preferred  Shares at less than the current  market price,
issuance wholly for cash of Preferred  Shares or securities which by their terms
are  convertible  into  or  exchangeable  for  Preferred  Shares,  dividends  on

17

Preferred Shares payable in Preferred  Shares or issuance of rights,  options or
warrants referred to hereinabove in Section 11(b), hereafter made by the Company
to holders of its Preferred Shares shall not be taxable to such stockholders.

(n) In the  event  that at any time  after the date of this  Agreement  and
prior to the  Distribution  Date,  the  Company  shall  (i)  declare  or pay any
dividend  on the  Common  Shares  payable  in  Common  Shares  or (ii)  effect a
subdivision,   combination   or   consolidation   of  the   Common   Shares  (by
reclassification  or otherwise  than by payment of  dividends in Common  Shares)
into a greater or lesser number of Common Shares,  then in any such case (A) the
number of one one-tenth of a Preferred Share  purchasable  after such event upon
proper  exercise of each Right shall be determined by multiplying  the number of
one  one-tenth of a Preferred  Share so  purchasable  immediately  prior to such
event by a  fraction,  the  numerator  of which is the  number of Common  Shares
outstanding  immediately  before such event and the  denominator of which is the
number of Common Shares  outstanding  immediately after such event, and (B) each
Common  Share  outstanding  immediately  after such event shall have issued with
respect  to it that  number  of  Rights  which  each  Common  Share  outstanding
immediately  prior to such event had issued with respect to it. The  adjustments
provided for in this Section  11(n) shall be made  successively  whenever such a
dividend is declared or paid or such a subdivision, combination or consolidation
is effected.

Section 12.  Certificate  of Adjusted  Purchase  Price or Number of Shares.
Whenever  an  adjustment  is made as  provided  in Section 11 or 13 hereof,  the
Company shall promptly (a) prepare a certificate  setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the  Rights  Agent and with each  transfer  agent for the  Common  Shares or the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section 25 hereof.  The
Rights Agent shall be fully protected in relying on any such  certificate and on
any adjustment therein contained.

Section 13. Consolidation,  Merger or Sale or Transfer of Assets or Earning
Power.  In the event,  directly  or  indirectly,  at any time after a Person has
become an Acquiring  Person,  (a) the Company shall  consolidate  with, or merge
with and into,  any other  Person,  (b) any Person  shall  consolidate  with the
Company,  or  merge  with  and into the  Company  and the  Company  shall be the
continuing or surviving  corporation of such merger and, in connection with such
merger,  all or part of the Common Shares shall be changed into or exchanged for
stock or other  securities  of any other  Person (or the Company) or cash or any
other property,  or (c) the Company shall sell or otherwise  transfer (or one or
more of its  Subsidiaries  shall  sell or  otherwise  transfer),  in one or more
transactions,  assets or earning power  aggregating 50% or more of the assets or
earning  power of the  Company  and its  Subsidiaries  (taken as a whole) to any
other  Person  other  than  the  Company  or one  or  more  of its  wholly-owned
Subsidiaries,  then, and in each such case,  proper  provision  shall be made so
that  each  holder  of a Right  (except  as  otherwise  provided  herein)  shall
thereafter have the right to receive, upon the exercise thereof at a price equal

18

to the then current Purchase Price multiplied by the number of one one-tenths of
a Preferred Share for which a Right is then exercisable,  in accordance with the
terms of this Agreement and in lieu of Preferred  Shares,  such number of Common
Shares of such other Person  (including  the Company as successor  thereto or as
the surviving corporation) as shall equal the result obtained by (A) multiplying
the then current  Purchase  Price by the number of one  one-tenth of a Preferred
Share for which a Right is then exercisable and dividing that product by (B) 50%
of the then Current Per Share  Market  Price of the Common  Shares of such other
Person (determined pursuant to Section 11(d) hereof) on the date of consummation
of such consolidation,  merger, sale or transfer; (ii) the issuer of such Common
Shares  shall  thereafter  be liable for,  and shall  assume,  by virtue of such
consolidation,  merger, sale or transfer,  all the obligations and duties of the
Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be
deemed to refer to such  issuer;  and (iv) such  issuer  shall  take such  steps
(including,  but not limited to, the  reservation of a sufficient  number of its
Common  Shares in  accordance  with  Section 9 hereof) in  connection  with such
consummation  as may be  necessary  to assure that the  provisions  hereof shall
thereafter be  applicable,  as nearly as  reasonably  may be, in relation to the
Common  Shares  thereafter  deliverable  upon the  exercise of the  Rights.  The
Company shall not consummate any such  consolidation,  merger,  sale or transfer
unless  prior  thereto  the  Company and such  issuer  shall have  executed  and
delivered to the Rights Agent a supplemental agreement so providing. The Company
shall not enter into any  transaction of the kind referred to in this Section 13
if at the time of such transaction there are any rights,  warrants,  instruments
or securities  outstanding or any agreements or arrangements  which, as a result
of the  consummation  of such  transaction,  would  eliminate  or  substantially
diminish the benefits  intended to be afforded by the Rights.  The provisions of
this Section 13 shall similarly apply to successive mergers or consolidations or
sales or other transfers.

Section 14. Fractional Rights and Fractional  Shares. (a) The Company shall
not be required to issue fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such fractional Rights, there shall
be paid to the registered holders of the Right Certificates with regard to which
such fractional  Rights would otherwise be issuable,  an amount in cash equal to
the same fraction of the current market value of a whole Right. For the purposes
of this Section  14(a),  the current  market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such  fractional  Rights would have been otherwise  issuable.  The closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day,  the average of the closing bid and asked  prices,
regular  way,  in  either  case  as  reported  in  the  principal   consolidated
transaction  reporting  system with respect to securities  listed or admitted to
trading  on the New York  Stock  Exchange  or, if the  Rights  are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated  transaction  reporting system with respect to securities listed on
the  principal  national  securities  exchange on which the Rights are listed or
admitted  to trading  or, if the Rights are not listed or admitted to trading on
any national  securities  exchange,  the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,

19

as reported  by NASDAQ or such other  system then in use or, if on any such date
the Rights are not quoted by any such  organization,  the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company.  If on any such
date no such market  maker is making a market in the  Rights,  the fair value of
the Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.

(b) The Company  may,  but shall not be required  to,  issue  fractions  of
Preferred  Shares upon  exercise of the Rights (other than  fractions  which are
integral  multiples  of one  one-tenth  of a Preferred  Share) or to  distribute
certificates  which evidence  fractional  Preferred Shares (other than fractions
which are integral  multiples of one one-tenth of a Preferred Share).  Fractions
of Preferred Shares in integral  multiples of one one-tenth of a Preferred Share
may, at the  election of the  Company,  be  evidenced  by  depositary  receipts,
pursuant to an  appropriate  agreement  between  the  Company  and a  depositary
selected by it; provided,  that such agreement shall provide that the holders of
such depositary  receipts shall have all the rights,  privileges and preferences
to which  they  are  entitled  as  beneficial  owners  of the  Preferred  Shares
represented by such depositary receipts.  In lieu of fractional Preferred Shares
that are not integral  multiples  of one  one-tenth  of a Preferred  Share,  the
Company may elect to pay to the registered  holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to the
same  fraction of the  current  market  value of one  Preferred  Share.  For the
purposes of this Section 14(b),  the current  market value of a Preferred  Share
shall be the closing price of a Preferred  Share (as determined  pursuant to the
second  sentence of Section  11(d)(i)  hereof)  for the Trading Day  immediately
prior to the date of such exercise.

(c) The holder of a Right by the acceptance of the Right  expressly  waives
his right to  receive  any  fractional  Rights  or any  fractional  shares  upon
exercise of a Right (except as provided above).

Section  15.  Rights of  Action.  All  rights of action in  respect of this
Agreement,  excepting  the  rights of action  given to the  Rights  Agent  under
Section 18 hereof, are vested in the respective  registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares),  without the consent of the Rights
Agent  or of the  holder  of any  other  Right  Certificate  (or,  prior  to the
Distribution Date, of the Common Shares), may, on his own behalf and for his own
benefit,  enforce, and may institute and maintain any suit, action or proceeding
against  the Company to enforce,  or  otherwise  act in respect of, his right to
exercise the Rights  evidenced by such Right  Certificate in the manner provided
in such Right Certificate and in this Agreement.  Without limiting the foregoing
or  any  remedies  available  to  the  holders  of  Rights,  it is  specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the  obligations  under,  and  injunctive  relief  against  actual or threatened
violations of the  obligations  of any Person  subject to, this  Agreement.  Any

20

holder of Rights who  prevails  in an action to enforce the  provisions  of this
Rights Agreement shall be entitled to recover the reasonable costs and expenses,
including attorneys' fees, incurred in such action.

Section 16. Transfer and Ownership of Rights and Rights  Certificates.  (a)
Prior  to the  Distribution  Date,  the  Rights  will  be  transferable  only in
connection  with the transfer of the Common  Shares;  and the Rights  associated
with the Common Shares shall be  automatically  transferred upon the transfer of
the Common Shares.

(b)  After  the  Distribution   Date,  the  Right   Certificates   will  be
transferable,  subject to Section 7(e), only on the registry books of the Rights
Agent if surrendered at the principal office of the Rights Agent,  duly endorsed
or accompanied by a proper instrument of transfer.

(c) The Company and the Rights Agent may deem and treat the person in whose
name the Right  Certificate (or, prior to the Distribution  Date, the associated
Common Shares  certificate)  is registered as the absolute  owner thereof and of
the Rights  evidenced  thereby  (notwithstanding  any  notations of ownership or
writing on the Right  Certificates or the associated  Common Shares  certificate
made by anyone  other than the  Company or the  Rights  Agent) for all  purposes
whatsoever,  and neither  the Company nor the Rights  Agent shall be affected by
any notice to the contrary.

Section 17. Right Certificate  Holder Not Deemed a Stockholder.  No holder,
as such, of any Right Certificate  shall be entitled to vote,  receive dividends
or be deemed,  for any purpose,  the holder of the Preferred Shares or any other
securities  of the Company  which may at any time be issuable on the exercise of
the Rights  represented  thereby,  nor shall anything contained herein or in any
Right  Certificate  be  construed  to  confer  upon  the  holder  of  any  Right
Certificate,  as  such,  any of the  rights  of a  stockholder  of the  Company,
including,  without limitation,  any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof,  or to give
or withhold consent to any corporate action, or to receive notice of meetings or
other  actions  affecting  stockholders,   or  to  receive  dividends  or  other
distributions or subscription  rights,  or otherwise,  until the Right or Rights
evidenced by such Right Certificate shall have been exercised in accordance with
the provisions hereof.

Section 18.  Concerning the Rights Agent.  (a) The Company agrees to pay to
the  Rights  Agent  reasonable  compensation  for all  services  rendered  by it
hereunder and, from time to time, on demand of the Rights Agent,  its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this  Agreement and the exercise and  performance of its duties
hereunder. The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its  administration  of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the  Company,   instrument  of  assignment  or  transfer,   power  of  attorney,
endorsement,   affidavit,  letter,  notice,  direction,   consent,  certificate,

21

statement,  or other  paper or  document  believed by it to be genuine and to be
signed, executed and, where necessary,  verified or acknowledged,  by the proper
person or  persons,  or  otherwise  upon the  advice of  counsel as set forth in
Section 20 hereof.

(b) The Company  agrees to indemnify and to hold the Rights Agent  harmless
against any loss,  liability,  damage or expense (including  reasonable fees and
expenses of legal counsel)  which the Rights Agent may incur  resulting from its
actions as Rights Agent pursuant to this Rights  Agreement;  provided,  however,
that the Rights Agent shall not be  indemnified or held harmless with respect to
any such loss,  liability,  damage or expense  incurred by the rights Agent as a
result  of,  or  arising  out of,  its  own  negligence,  bad  faith  or  wilful
misconduct.  In no case shall the Company be liable with  respect to any action,
proceeding,  suite or claim  against the Rights  Agent  unless the Rights  Agent
shall have notified the Company,  by letter or by facsimile confirmed by letter,
of the  assertion of any action,  proceeding,  suit or claim  against the Rights
Agent,  promptly  after the Rights Agent shall have notice of any such assertion
of an action, proceeding,  suit or claim or have been served with the summons or
other first legal process  giving  information as to the nature and basis of the
action, proceeding,  suit or claim. The Company shall be entitled to participate
at its own expense in the defense of any such action, proceeding, suit or claim,
and, if the Company so elects,  the Company shall assume the defense of any such
action,  proceeding,  suit or claim.  In the event that the Company assumes such
defense, the Company shall not thereafter be liable for the fees and expenses of
any  additional  counsel  retained by the Rights  Agent,  so long as the Company
shall retain counsel  satisfactory  to the Rights Agent,  in the exercise of its
reasonable  judgment,  to defend such  action,  proceeding,  suit or claim.  The
Rights Agent agrees not to settle any litigation in connection  with any action,
proceeding, suit or claim with respect to which it may seek indemnification from
the Company without the prior written consent of the Company. Section 19. Merger
or  Consolidation  or Change of Name of Rights Agent.  (a) Any corporation  into
which the Rights Agent or any successor Rights Agent may be merged or with which
it  may be  consolidated,  or any  corporation  resulting  from  any  merger  or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party,  or any  corporation  succeeding to the stock transfer or corporate trust
powers of the Rights Agent or any successor Rights Agent, shall be the successor
to the Rights Agent under this Agreement  without the execution or filing of any
paper or any  further act on the part of any of the  parties  hereto;  provided,
that such  corporation  would be eligible for appointment as a successor  Rights
Agent  under the  provisions  of  Section  21  hereof.  In case at the time such
successor  Rights Agent shall succeed to the agency  created by this  Agreement,
any of the Right  Certificates  shall have been countersigned but not delivered,
any  such  successor  Rights  Agent  may  adopt  the   countersignature  of  the
predecessor  Rights Agent and deliver such Right  Certificates so countersigned;
and in case at that  time any of the  Right  Certificates  shall  not have  been
countersigned,   any  successor   Rights  Agent  may   countersign   such  Right
Certificates  either in the name of the predecessor  Rights Agent or in the name
of the  successor  Rights Agent;  and in all such cases such Right  Certificates
shall  have  the full  force  provided  in the  Right  Certificates  and in this
Agreement.

Section 19. Merger or  Consolidation or Change of Name of Rights Agent. (a)
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated,  or any corporation  resulting from
any merger or  consolidation  to which the Rights Agent or any successor  Rights
Agent shall be a party, or any  corporation  succeeding to the stock transfer or
corporate trust powers of the Rights Agent or any successor Rights Agent,  shall
be the successor to the Rights Agent under this Agreement  without the execution
or  filing  of any paper or any  further  act on the part of any of the  parties
hereto;  provided,  that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. In case at the
time such  successor  Rights Agent shall  succeed to the agency  created by this
Agreement,  any of the Right  Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor  Rights Agent and deliver such Right  Certificates so countersigned;
and in case at that  time any of the  Right  Certificates  shall  not have  been
countersigned,   any  successor   Rights  Agent  may   countersign   such  Right
Certificates  either in the name of the predecessor  Rights Agent or in the name

22

of the  successor  Rights Agent;  and in all such cases such Right  Certificates
shall  have  the full  force  provided  in the  Right  Certificates  and in this
Agreement.

(b) In case at any time the name of the Rights  Agent  shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered,  the Rights Agent may adopt the countersignature  under its prior
name and deliver Right  Certificates so countersigned;  and in case at that time
any of the Right  Certificates  shall not have been  countersigned,  the  Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right  Certificates shall have the full
force provided in the Right Certificates and in this Agreement.

Section 20. Duties of Rights Agent.  The Rights Agent undertakes the duties
and  obligations  imposed  by  this  Agreement  upon  the  following  terms  and
conditions,  by all of which the Company and the holders of Right  Certificates,
by their acceptance thereof, shall be bound:

(a) The  Rights  Agent may  consult  with legal  counsel  (who may be legal
counsel  for the  Company),  and the opinion of such  counsel  shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.

(b)  Whenever in the  performance  of its duties under this  Agreement  the
Rights  Agent  shall  deem it  necessary  or  desirable  that any fact or matter
(including,  without limitation,  the identity of an Acquiring Person) be proved
or established by the Company prior to taking or suffering any action hereunder,
such  fact or  matter  (unless  other  evidence  in  respect  thereof  be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a  certificate  signed by any one of the  Chairman  of the  Board,  the Chief
Executive  Officer,  the  President,  any Vice  President,  the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.

(c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for its own negligence, bad faith or willful misconduct.

(d) The  Rights  Agent  shall not be liable  for or by reason of any of the
statements  of fact or  recitals  contained  in this  Agreement  or in the Right
Certificates (except its countersignature  thereof) or be required to verify the
same, but all such  statements and recitals are and shall be deemed to have been
made by the Company only.

(e) The Rights  Agent shall not be under any  responsibility  in respect of
the validity of this Agreement or the execution and delivery  hereof (except the
due  execution  hereof by the Rights  Agent) or in respect  of the  validity  or
execution of any Right Certificate (except its  countersignature  thereof);  nor

23

shall it be  responsible  for any  breach  by the  Company  of any  covenant  or
condition contained in this Agreement or in any Right Certificate;  nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights  becoming void pursuant to Section 7(e) hereof) or any  adjustment in the
terms of the Rights  (including the manner,  method or amount thereof)  provided
for in Section  3, 11, 13, 23 or 24, or the  ascertaining  of the  existence  of
facts that would require any such change or  adjustment  (except with respect to
the exercise of Rights evidenced by Right  Certificates after actual notice that
such change or  adjustment  is  required);  nor shall it by any act hereunder be
deemed  to make  any  representation  or  warranty  as to the  authorization  or
reservation of any Preferred  Shares to be issued  pursuant to this Agreement or
any Right  Certificate or as to whether any Preferred  Shares will, when issued,
be validly authorized and issued, fully paid and nonassessable.

(f) The  Company  agrees that it will  perform,  execute,  acknowledge  and
deliver or cause to be performed, executed,  acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying  out or  performing  by the Rights Agent of
the provisions of this Agreement.

(g)  The  Rights  Agent  is  hereby   authorized  and  directed  to  accept
instructions  with respect to the  performance of its duties  hereunder from any
one of the Chairman of the Board,  the Chief Executive  officer,  the President,
any Vice President,  the Secretary or the Treasurer of the Company, and it shall
not be liable for any action taken or suffered by it in good faith in accordance
with  instructions  of any such officer or for any delay in acting while waiting
for those instructions.

(h) The Rights Agent and any stockholder,  director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other  securities
of the Company or become pecuniarily  interested in any transaction in which the
Company  may be  interested,  or  contract  with or lend money to the Company or
otherwise  act as fully and freely as though it were not Rights Agent under this
Agreement.  Nothing  herein  shall  preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.

(i) The Rights  Agent may execute and  exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its  attorneys  or  agents,  and the Rights  Agent  shall not be  answerable  or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the  Company  resulting  from any such  act,  default,
neglect or misconduct,  provided  reasonable care was exercised in the selection
and continued employment thereof.

Section  21.  Change of Rights  Agent.  The Rights  Agent or any  successor
Rights Agent may resign and be discharged  from its duties under this  Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Preferred Shares by registered or certified mail, and to
the  holders of the Right  Certificates  by  first-class  mail.  The Company may

24

remove the Rights  Agent or any  successor  Rights Agent upon 30 days' notice in
writing,  mailed to the Rights Agent or successor  Rights Agent, as the case may
be, and to each  transfer  agent of the  Common  Shares or  Preferred  Shares by
registered or certified  mail, and to the holders of the Right  Certificates  by
first-class  mail.  If the  Rights  Agent  shall  resign or be  removed or shall
otherwise become  incapable of acting,  the Company shall appoint a successor to
the Rights Agent.  If the Company shall fail to make such  appointment  within a
period  of 30 days  after  giving  notice of such  removal  or after it has been
notified  in writing of such  resignation  or  incapacity  by the  resigning  or
incapacitated Rights Agent or by the holder of a Right Certificate (or, prior to
the  Distribution  Date,  of the Common  Shares)  (who shall,  with such notice,
submit his Right Certificate or, prior to the Distribution Date, the certificate
representing  his  Common  Shares,  for  inspection  by the  Company),  then the
registered holder of any Right Certificate (or, prior to the Distribution  Date,
of the Common Shares) may apply to any court of competent  jurisdiction  for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court,  shall be a  corporation  organized and doing
business  under  the laws of the  United  States  or of the  State of New  York,
Pennsylvania  or Florida (or of any other state of the United  States so long as
such  corporation  is authorized to do business as a banking  institution in the
State of New York,  Pennsylvania or Florida, in good standing,  having an office
in the State of New York,  Pennsylvania  or Florida,  which is authorized  under
such laws to exercise corporate trust or stock transfer powers and is subject to
supervision or  examination  by federal or state  authority and which has at the
time of its  appointment  as Rights  Agent a combined  capital and surplus of at
least $50 million;  provided,  that the principal  transfer agent for the Common
Shares  shall  in  any  event  be  qualified  to  be  the  Rights  Agent.  After
appointment,  the  successor  Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent  without  further  act or deed;  but the  predecessor  Rights  Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance,  conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment   the  Company  shall  file  notice  thereof  in  writing  with  the
predecessor  Rights  Agent  and each  transfer  agent of the  Common  Shares  or
Preferred Shares, and mail a notice thereof in writing to the registered holders
of the Right  Certificates  (or, prior to the  Distribution  Date, of the Common
Shares). Failure to give any notice provided for in this Section 21, however, or
any defect therein, shall not affect the legality or validity of the resignation
or removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.

Section 22. Issuance of New Right Certificates.  Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary,  the Company may,
at its option,  issue new Right  Certificates  evidencing Rights in such form as
may be approved by its Board of  Directors to reflect any  adjustment  or change
made in  accordance  with the  provisions  of this  Agreement.  In addition,  in
connection with the issuance or sale of Common Shares following the Distribution
Date and prior to the earlier of the Redemption  Date and the  Expiration  Date,
the Company (A) shall,  with respect to Common Shares so issued or sold pursuant

25

to the exercise of stock options or under any employee plan or  arrangement,  or
upon the  exercise,  conversion or exchange of  securities,  notes or debentures
issued by the Company and (B) may, in any other  case,  if deemed  necessary  or
appropriate by the Board of Directors of the Company,  issue Right  Certificates
representing  the appropriate  number of Rights in connection with such issuance
or sale; provided,  however,  that (i) no such Right Certificate shall be issued
if, and to the extent  that,  the Company  shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Company or the Person to whom such Right  Certificate  would be issued,  and
(ii) no such Right  Certificate  shall be issued  if,  and to the  extent  that,
appropriate  adjustments  shall otherwise have been made in lieu of the issuance
thereof.

Section 23.  Redemption.  (a) The Board of Directors of the Company may, at
its option,  at any time prior to such time as any Person  becomes an  Acquiring
Person,  redeem  all but not  less  than all the then  outstanding  Rights  at a
redemption price of $.001 per Right, appropriately adjusted to reflect any stock
split,  stock dividend or similar  transaction  occurring  after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
The  redemption of the Rights by the Board of Directors may be made effective at
such time,  on such basis and with such  conditions as the Board of Directors in
its sole  discretion  may  establish.  The Company,  at its option,  may pay the
Redemption Price either in cash or in Common Shares,  or other securities of the
Company deemed by the Board of Directors of the Company,  in the exercise of its
sole discretion, to be at least equivalent in value to the Redemption Price.

(b)  Immediately  upon the action of the Board of  Directors of the Company
ordering  the  redemption  of the Rights,  and  without  any further  action and
without any notice, the right to exercise the Rights will terminate and the only
right  thereafter  of the holders of Rights  shall be to receive the  Redemption
Price. Within 10 Business Days after the action of the Board of Directors of the
Company  ordering the  redemption of the Rights,  (i) the Company shall promptly
give public notice of any such redemption;  provided,  however, that the failure
to give, or any defect in, any such notice shall not affect the validity of such
redemption  and (ii) mail a notice of  redemption to all the holders of the then
outstanding  Rights at their last  addresses  as they appear  upon the  registry
books of the Rights Agent or, prior to the  Distribution  Date,  on the registry
books of the transfer agent for the Common Shares.  The notice, if mailed in the
manner herein provided,  shall be conclusively presumed to have been duly given,
whether or not the holder of Rights received such notice.  In any case,  failure
to give such  notice by mail,  or any defect in the  notice,  to any  particular
holder of Rights  shall not  effect the  sufficiency  of the notice to the other
holders of Rights. Each such notice of redemption will state the method by which
the payment of the Redemption Price will be made.

Section 24. Exchange. (a) The Board of Directors of the Company may, at its
option, at any time after any Person becomes an Acquiring  Person,  exchange all
or part of the then outstanding and exercisable  Rights (which shall not include
Rights that have become void pursuant to the  provisions of Section 7(e) hereof)

26

for  Common  Shares  at an  exchange  ratio  of  one  Common  Share  per  Right,
appropriately  adjusted to reflect any stock  split,  stock  dividend or similar
transaction   occurring  after  the  date  hereof  (such  exchange  ratio  being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors  shall not be  empowered  to effect such  exchange at any
time after any Person  (other than the Company,  any  Subsidiary of the Company,
any employee benefit plan of the Company or any such  Subsidiary,  or any entity
holding  Common Shares for or pursuant to the terms of any such plan),  together
with all Affiliates and Associates of such Person,  becomes the Beneficial Owner
of 50% or more of the Common Shares then outstanding.

(b)  Immediately  upon the action of the Board of  Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and  without any  further  action and without any notice,  the right to exercise
such Rights shall  terminate  and the only right  thereafter of a holder of such
Rights shall be to receive  that number of Common  Shares equal to the number of
such Rights held by such holder  multiplied by the Exchange  Ratio.  The Company
shall promptly give public notice of any such exchange;  provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange.  The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein  provided shall be deemed given,  whether or not the holder  receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common  Shares  for  Rights  will be  effected  and,  in the event of any
partial  exchange,  the number of Rights  which will be  exchanged.  Any partial
exchange  shall be effected  pro rata based on the number of Rights  (other than
Rights which have become void pursuant to the provisions of Section 7(e) hereof)
held by each holder of Rights.

(c) In the event that there shall not be  sufficient  Common  Shares issued
but not  outstanding or authorized but unissued to permit any exchange of Rights
as  contemplated  in accordance with this Section 24, the Company shall take all
such  action as may be  necessary  to  authorize  additional  Common  Shares for
issuance upon exchange of the Rights. In the event the Company shall, after good
faith effort, be unable to take all such action as may be necessary to authorize
such additional  Common Shares,  the Company shall  substitute,  for each Common
Share that would  otherwise be issuable  upon  exchange of a Right,  a number of
Preferred Share or fraction thereof such that the Current Per Share Market Price
of one  Preferred  Share  multiplied  by such number or fraction is equal to the
Current Per Share Market Price of one Common Share as of the date of issuance of
such Preferred Shares or fraction thereof.

(d) The Company  shall not be required to issue  fractions of Common Shares
or to distribute  certificates which evidence  fractional Common Shares. In lieu
of such  fractional  Common  Shares,  the  Company  shall pay to the  registered
holders of the Right  Certificates  with regard to which such fractional  Common

27

Shares would  otherwise be issuable an amount in cash equal to the same fraction
of the current  market value of a whole Common  Share.  For the purposes of this
paragraph  (d),  the current  market  value of a whole common Share shall be the
closing price of a Common Share (as determined  pursuant to the second  sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.

Section 25. Notice of Certain Events. (a) In case the Company shall propose
(i) to pay any  dividend  payable  in stock of any class to the  holders  of its
Preferred  Shares  or to make  any  other  distribution  to the  holders  of its
Preferred Shares (other than a regular  quarterly cash dividend),  (ii) to offer
to the holders of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional  Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a  reclassification  involving only the subdivision
of outstanding  Preferred  Shares),  (iv) to effect any  consolidation or merger
into or with, or to effect any sale or other  transfer (or to permit one or more
of its  subsidiaries  to  effect  any  sale or other  transfer),  in one or more
transactions,  of 50% or more of the assets or earning  power of the Company and
its  Subsidiaries  (taken as a whole)  to, any other  Person,  (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any  dividend  on the  Common  Shares  payable  in Common  Shares or to effect a
subdivision,   combination   or   consolidation   of  the   Common   Shares  (by
reclassification  or otherwise  than by payment of dividends in Common  Shares),
then,  in each such  case,  the  Company  shall  give to each  holder of a Right
Certificate,  in  accordance  with Section 26 hereof,  a notice of such proposed
action,  which  shall  specify  the record  date for the  purposes of such stock
dividend,  or  distribution  of rights or  warrants,  or the date on which  such
reclassification,    consolidation,   merger,   sale,   transfer,   liquidation,
dissolution,  or  winding  up is to take  place  and the  date of  participation
therein by the holders of the Common Shares and/or Preferred Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause  (i) or (ii)  above at least 10 days prior to the record  date
for determining holders of the Preferred Shares for purposes of such action, and
in the case of any such other action,  at least 10 days prior to the date of the
taking of such  proposed  action  or the date of  participation  therein  by the
holders of the Common Shares and/or  Preferred  Shares,  whichever  shall be the
earlier.

(b) In case the event set forth in Section  11(a)(ii)  hereof  shall occur,
then the Company shall as soon as practicable  thereafter give to each holder of
a Right  Certificate,  in  accordance  with  Section 26 hereof,  a notice of the
occurrence  of such  event,  which  notice  shall  describe  such  event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.

Section 26. Notices.  Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Shares) to or on the Company shall
be  sufficiently  given or made if sent by first-class  mail,  postage  prepaid,
addressed  (until another  address is filed in writing with the Rights Agent) as
follows:

28

CryoLife, Inc.
Suite 142
2211 New Market Parkway
Marietta, Georgia  30067
Attention: Corporate Secretary

Subject to the provisions of Section 21 hereof,  any notice or demand authorized
by this  Agreement  to be given or made by the  Company  or by the holder of any
Right Certificate (or, prior to the Distribution  Date, of the Common Shares) to
or on the  Rights  Agent  shall  be  sufficiently  given  or  made  if  sent  by
first-class mail, postage prepaid,  addressed (until another address is filed in
writing with the Company) as follows:

Chemical Mellon Shareholder Services, L.L.C.
Four Station Square, 3rd Floor
Pittsburgh, Pennsylvania  15219
Attention: Rights Agent

Notices  or  demands  authorized  by this  Agreement  to be given or made by the
Company or the  Rights  Agent to the  holder of any Right  Certificate  shall be
sufficiently  given  or  made  if sent by  first-class  mail,  postage  prepaid,
addressed  to such holder at the address of such holder as shown on the registry
books of the Company.

Section 27.  Supplements and Amendments.  The Company may from time to time
supplement or amend this Agreement  without the approval of any holders of Right
Certificates  in order to cure any  ambiguity,  to  correct  or  supplement  any
provision contained herein which may be defective or inconsistent with any other
provisions  herein,  or to make any other  provisions with respect to the Rights
which the  Company may deem  necessary  or  desirable,  any such  supplement  or
amendment  to be  evidenced  by a writing  signed by the  Company and the Rights
Agent; provided, however, that from and after such time as any Person becomes an
Acquiring Person,  this Agreement shall not be amended in any manner which would
adversely  affect the  interests of the holders of Rights (other than those held
by the Acquiring Person). Without limiting the foregoing, the Company may at any
time prior to such time as any Person  becomes an  Acquiring  Person  amend this
Agreement  to lower the  thresholds  set forth in Sections  1(a) and 3(a) to not
less than the sum of .001% and the largest  percentage of the outstanding Common
Shares then known by the Company to be  beneficially  owned by any Person (other
than the Company,  any Subsidiary of the Company,  any employee  benefit plan of
the Company or any  Subsidiary  of the  Company,  or any entity  holding  Common
Shares for or pursuant to the terms of any such plan).

Section 28. Successors.  All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.

29

Section 29. Benefits of this Agreement;  Actions by the Board of Directors,
etc. (a) Nothing in this  Agreement  shall be construed to give to any person or
corporation other than the Company,  the Rights Agent and the registered holders
of the Right  Certificates  (and,  prior to the  Distribution  Date,  the Common
Shares) any legal or equitable right, remedy or claim under this Agreement;  but
this Agreement shall be for the sole and exclusive  benefit of the Company,  the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares).

(b) Except as explicitly  otherwise provided in this Rights Agreement,  the
Board of Directors of the Company shall have the  exclusive  power and authority
to, except to the extent rights or power are explicitly  allocated to the Rights
Agent hereunder,  to administer this Rights Agreement and to exercise all rights
and powers  specifically  granted to the Board of Directors of the Company or to
the  Company,  as may be  necessary  or  advisable  to  administer  this  Rights
Agreement,  including,  without  limitation,  the  right  and  power to make all
determinations  deemed  necessary or advisable  for the  administration  of this
Rights Agreement.  (Including,  without limitation, a determination to redeem or
not redeem the Rights or to amend this Rights Agreement, and whether there is an
Acquiring Person).

(c) Nothing  contained  in this Rights  Agreement  shall be deemed to be in
derogation  of the  obligation  of the  Board of  Directors  of the  Company  to
exercise its fiduciary duty.  Without limiting the foregoing,  nothing contained
herein shall be construed to suggest or imply that the Board of Directors  shall
not be entitled to reject any tender  offer,  or to  recommend  that  holders of
Common Shares reject any tender offer,  or to take any other action  (including,
without limitation, the commencement,  prosecution, defense or settlement of any
litigation  and the  submission  of additional  or  alternative  offers or other
proposals) with respect to any tender offer that the Board of Directors believes
is necessary or appropriate in the exercise of such fiduciary duty.

Section 30. Severability.  If any term, provision,  covenant or restriction
of this  Agreement  is  held  by a court  of  competent  jurisdiction  or  other
authority  to be invalid,  void or  unenforceable,  the  remainder of the terms,
provisions,  covenants and  restrictions  of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.

Section 31. Governing Law. This Agreement and each Right Certificate issued
hereunder  shall be deemed to be a contract  made under the laws of the State of
Florida and for all purposes  shall be governed by and  construed in  accordance
with the laws of such State  applicable  to contracts  to be made and  performed
entirely within such State.

Section 32.  Counterparts.  This Agreement may be executed in any number of
counterparts and each of such  counterparts  shall for all purposes be deemed to
be an original,  and all such counterparts shall together constitute but one and
the same instrument.

30

Section  33.  Descriptive  Headings.  Descriptive  headings  of the several
Sections of this  Agreement  are  inserted  for  convenience  only and shall not
control or affect the meaning or construction of any of the provisions hereof.

IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed and attested, all as of the day and year first above written.

CRYOLIFE, INC.

By:  /s/ Steven G. Anderson
------------------------------------------

Title: President/CEO
------------------------------------------

CHEMICAL MELLON SHAREHOLDER
SERVICES, L.L.C.

By:  /s/ Tracie Vicki
------------------------------------------

Title: Vice President
------------------------------------------

31

Exhibit A
FORM
of
AMENDMENT TO ARTICLES OF INCORPORATION
to create a series of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
CRYOLIFE, INC.
------------------

To the Department of State
State of Florida

Pursuant to the provisions of Sections 607.1006 and 607.0602 of the Florida
Business  Corporation Act (the "Act"),  the corporation  hereinafter  named (the
"Corporation") does hereby adopt the following Articles of Amendment.

1. The name of the corporation is CryoLife, Inc.

2. A new paragraph (c) of Article V of the Articles of Incorporation of the
Corporation is hereby added to the Articles of Incorporation which shall read as
follows:

"(c) There shall be a series of Preferred  Stock,  par value $.01 per share (the
"Preferred Stock"),  of the Corporation with the following  designated number of
shares, relative rights, preferences, and limitations thereof:

(1) Designation  and Amount.  The shares of such series shall be designated
as "Series A Junior  Participating  Preferred  Stock"  (the  "Series A Preferred
Stock") and the number of shares constituting the Series A Preferred Stock shall
be two million  (2,000,000)  shares of the five million  (5,000,000)  authorized
preferred shares.  The two million  (2,000,000)  Series A Preferred Stock shares
shall be reserved for issuance in connection with the exercise of certain rights
granted  pursuant to a Rights  Agreement,  dated as of November 27, 1995, by and
between the Corporation and Chemical Mellon  Shareholder  Services,  L.L.C.,  as
Rights Agent thereunder.  Such number of shares may be increased or decreased by
resolution of the Board of Directors;  provided,  that no decrease  shall reduce
the  number  of shares of  Series A  Preferred  Stock to a number  less than the
number of shares  then  outstanding  plus the  number  of  shares  reserved  for
issuance upon the exercise of  outstanding  options,  rights or warrants or upon
the  conversion  of  any  outstanding   securities  issued  by  the  Corporation
convertible into Series A Preferred Stock.

(2) Dividends and Distributions.

(A)  Subject to the rights of the  holders of any shares of any series
of  Preferred  Stock (or any similar  stock)  ranking  prior and superior to the
Series A Preferred  Stock with  respect to  dividends,  the holders of shares of
Series A Preferred  Stock,  in preference  to the holders of Common  Stock,  par
value $.01 per share (the "Common Stock"), of the Corporation,  and of any other
junior  stock,  shall be entitled to  receive,  when,  as and if declared by the
Board of Directors  out of funds legally  available  for the purpose,  quarterly
dividends  payable  in cash on the  first  day of  March,  June,  September  and
December in each year (each such date being  referred to herein as a  "Quarterly
Dividend Payment Date`), commencing on the first Quarterly Dividend Payment Date

after the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $.10 or (b)  subject to the  provision  for  adjustment  hereinafter  set
forth,  10 times the  aggregate per share amount of all cash  dividends,  and 10
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions,  other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by  reclassification
or  otherwise),  declared on the Common  Stock since the  immediately  preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment  Date,  since the first  issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock  payable in shares of Common  Stock,  or
effect a subdivision or combination or consolidation  of the outstanding  shares
of Common Stock (by  reclassification or otherwise than by payment of a dividend
in shares of Common  Stock) into a greater or lesser  number of shares of Common
Stock,  then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled  immediately  prior to such event under clause (b)
of the  preceding  sentence  shall be adjusted by  multiplying  such amount by a
fraction,  the  numerator  of which is the  number of  shares  of  Common  Stock
outstanding  immediately  after such event and the  denominator  of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

(B) The Corporation  shall declare a dividend or distribution on the Series
A Preferred  Stock as  provided  in  paragraph  (A) above  immediately  after it
declares a dividend or  distribution  on the Common Stock (other than a dividend
payable in shares of Common  Stock);  provided that, in the event no dividend or
distribution  shall have been  declared  on the Common  Stock  during the period
between any Quarterly  Dividend  Payment Date and the next subsequent  Quarterly
Dividend  Payment  Date,  a dividend of $.10 per share on the Series A Preferred
Stock  shall  nevertheless  be payable  on such  subsequent  Quarterly  Dividend
Payment Date.

(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A  Preferred  Stock  from the  Quarterly  Dividend  Payment  Date next
preceding  the date of issue of such  shares,  unless  the date of issue of such
shares is prior to the  record  date for the first  Quarterly  Dividend  Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such  shares,  or unless the date of issue is a  Quarterly  Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Preferred  Stock entitled to receive a quarterly  dividend
and before such Quarterly  Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative  from such Quarterly  Dividend
Payment Date.  Accrued but unpaid  dividends shall not bear interest.  Dividends
paid on the shares of Series A Preferred  Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a  share-by-share  basis among all such shares at the time
outstanding.  The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred  Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.

2

(3) Voting Rights.  The holders of shares of Series A Preferred Stock shall
have the following voting rights:

(A) Subject to the provision for  adjustment  hereinafter  set forth,  each
share of Series A Preferred  Stock shall entitle the holder  thereof to one vote
on all matters  submitted to a vote of the stockholders of the  Corporation.  In
the event the  Corporation  shall at any time declare or pay any dividend on the
Common  Stock  payable in shares of Common  Stock,  or effect a  subdivision  or
combination  or  consolidation  of the  outstanding  shares of Common  Stock (by
reclassification  or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common  Stock,  then in each
such case the  number of votes per share to which  holders of shares of Series A
Preferred Stock were entitled  immediately prior to such event shall be adjusted
by multiplying  such number by a fraction,  the numerator of which is the number
of shares of Common  Stock  outstanding  immediately  after  such  event and the
denominator  of  which is the  number  of  shares  of  Common  Stock  that  were
outstanding immediately prior to such event.

(B) Except as otherwise  provided  herein,  in any other document or filing
creating  a series of  Preferred  Stock or any  similar  stock,  or by law,  the
holders  of shares  of Series A  Preferred  Stock and the  holders  of shares of
Common  Stock and any other  capital  stock of the  Corporation  having  general
voting  rights  shall vote  together as one class on all matters  submitted to a
vote of stockholders of the Corporation.

(C) Except as set forth herein, or as otherwise provided by law, holders of
Series A Preferred  Stock shall have no special  voting rights and their consent
shall not be  required  (except to the  extent  they are  entitled  to vote with
holders of Common Stock as set forth herein) for taking any corporate action.

(4) Certain Restrictions.

(A)  Whenever  quarterly  dividends  or other  dividends  or  distributions
payable on the Series A Preferred  Stock as provided  in  subparagraph  2 are in
arrears,   thereafter   and  until  all   accrued  and  unpaid   dividends   and
distributions,  whether or not declared,  on shares of Series A Preferred  Stock
outstanding shall have been paid in full, the Corporation shall not:

(i)  declare  or pay  dividends,  or make any other  distributions,  on any
shares of stock  ranking  junior  (either as to dividends  or upon  liquidation,
dissolution or winding up) to the Series A Preferred Stock;

(ii)  declare or pay  dividends,  or make any other  distributions,  on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred  Stock,  except dividends

3

paid ratably on the Series A Preferred  Stock and all such parity stock on which
dividends  are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;

(iii) redeem or purchase or otherwise acquire for  consideration  shares of
any  stock  ranking  junior  (either  as  to  dividends  or  upon   liquidation,
dissolution  or winding up) to the Series A Preferred  Stock,  provided that the
Corporation may at any time redeem,  purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon  dissolution,  liquidation or winding up)
to the Series A Preferred Stock; or

(iv) redeem or purchase or otherwise  acquire for  consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity with the
Series A Preferred  Stock,  except in accordance  with a purchase  offer made in
writing or by  publication  (as  determined  by the Board of  Directors)  to all
holders  of such  shares  upon  such  terms  as the  Board of  Directors,  after
consideration of the respective  annual dividend rates and other relative rights
and  preferences of the respective  series and classes,  shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.

(B) The  Corporation  shall not permit any subsidiary of the Corporation to
purchase  or  otherwise  acquire  for  consideration  any shares of stock of the
Corporation   unless  the  Corporation   could,  under  paragraph  (A)  of  this
subparagraph  4,  purchase or otherwise  acquire such shares at such time and in
such manner.

(5) Reacquired  Shares. Any shares of Series A Preferred Stock purchased or
otherwise  acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation  become authorized but unissued shares of Preferred Stock and
may be  reissued  as part of a new  series of  Preferred  Stock  subject  to the
conditions and restrictions on issuance set forth herein,  in the Certificate of
Incorporation, or in any other document or filing creating a series of Preferred
Stock or any similar stock or as otherwise required by law.

(6)   Liquidation,   Dissolution  or  Winding  Up.  Upon  any  liquidation,
dissolution or winding up of the Corporation,  no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation,  dissolution or winding up) to the Series A Preferred Stock unless,
prior  thereto,  the  holders of shares of Series A  Preferred  Stock shall have
received $10.00 per share,  plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided  that the  holders  of  shares  of Series A  Preferred  Stock  shall be
entitled to receive an aggregate amount per share,  subject to the provision for
adjustment  hereinafter set forth,  equal to 10 times the aggregate amount to be
distributed  per share to  holders  of shares  of  Common  Stock,  or (2) to the
holders of shares of stock  ranking on a parity  (either as to dividends or upon
liquidation,  dissolution  or  winding  up) with the Series A  Preferred  Stock,
except  distributions  made ratably on the Series A Preferred Stock and all such

4

parity stock in proportion to the total amounts to which the holders of all such
shares are entitled  upon such  liquidation,  dissolution  or winding up. In the
event the  Corporation  shall at any time  declare  or pay any  dividend  on the
Common  Stock  payable in shares of Common  Stock,  or effect a  subdivision  or
combination  or  consolidation  of the  outstanding  shares of Common  Stock (by
reclassification  or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common  Stock,  then in each
such case the aggregate  amount to which holders of shares of Series A Preferred
Stock were entitled  immediately prior to such event under the proviso in clause
(1) of the preceding  sentence shall be adjusted by multiplying such amount by a
fraction  the  numerator  of which is the  number  of  shares  of  Common  Stock
outstanding  immediately  after such event and the  denominator  of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

(7)  Consolidation,  Merger,  etc. In case the Corporation shall enter into
any consolidation,  merger, combination or other transaction in which the shares
of Common Stock are  exchanged  for or changed  into other stock or  securities,
cash  and/or  any other  property,  then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 10 times the  aggregate  amount of stock,  securities,  cash and/or any
other  property  (payable in kind),  as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time  declare or pay any  dividend on the Common  Stock  payable in
shares of Common Stock, or effect a subdivision or combination or  consolidation
of the outstanding shares of common stock (by reclassification or otherwise than
by  payment of a dividend  in shares of Common  Stock)  into a greater or lesser
number of shares of Common Stock, then in each such case the amount set forth in
the  preceding  sentence  with  respect to the  exchange  or change of shares of
Series A  Preferred  Stock shall be  adjusted  by  multiplying  such amount by a
fraction,  the  numerator  of which is the  number of  shares  of  Common  Stock
outstanding  immediately  after such event and the  denominator  of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event. In the event both this  subparagraph 7 and subparagraph 2 appear to apply
to a transaction, this subparagraph 7 will control.

(8) No Redemption;  No Sinking Fund. The shares of Series A Preferred Stock
shall not be redeemable; provided, however, that the Corporation may purchase or
otherwise  acquire  outstanding  shares of Series A Preferred  Stock in the open
market or by offer to any  holder  or  holders  of shares of Series A  Preferred
Stock.  The  shares of Series A  Preferred  Stock  shall  not be  subject  to or
entitled to the operation of a retirement or sinking fund.

(9) Rank.  The Series A Preferred  Stock shall  rank,  with  respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Corporation's  Preferred Stock, unless the Board of Directors
shall specifically  determine otherwise in fixing the powers,  preferences,  and
relative, participating, optional and other special rights of the shares of such
series and the qualifications, limitations and restrictions thereof.

5

(10) Fractional Shares. The Series A Preferred Stock shall be issuable upon
exercise of the Rights issued  pursuant to the Rights  Agreement in whole shares
or in any  fraction of a share that is one  one-tenth of a share or any integral
multiple of such fraction which shall entitle the holder,  in proportion to such
holders  fractional  shares,  to  receive  dividends,  exercise  voting  rights,
participate  in  distributions  and to have the  benefit of all other  rights of
holders  of  Series  A  Preferred  Stock.  In lieu  of  fractional  shares,  the
Corporation,  prior to the first issuance of a share or a fraction of a share of
Series A Preferred  Stock,  may elect (1) to make a cash  payment as provided in
the Rights  Agreement  for  fractions  of a share other than one  one-tenth of a
share  or any  integral  multiple  thereof  or (2) to issue  depository  receipt
evidencing  such  authorized  fraction  of a share of Series A  Preferred  Stock
pursuant to an appropriate  agreement  between the  Corporation and a depository
selected by the Corporation; provided that such agreement shall provide that the
holders of such  depository  receipts shall have all the rights,  privileges and
preferences  to which they are  entitled  as  holders of the Series A  Preferred
Stock.

(11) Amendment.  These Articles of Incorporation  of the Corporation  shall
not be amended in any manner which would  materially alter or change the powers,
preferences  or special  rights of the Series A Preferred  Stock so as to affect
them  adversely  without  the  affirmative  vote  of  the  holders  of at  least
two-thirds  of the  outstanding  shares  of  Series A  Preferred  Stock,  voting
together as a single class."

3. The date of adoption of the  aforesaid  amendment  was November 27,
1995.

4.  The  aforesaid  amendments  were  duly  adopted  by the  board  of
directors of the  Corporation  without any  shareholder  action.  No shareholder
action was required in connection with the adoption of the aforesaid  amendments
pursuant to the provisions of Section 607.0602 of the Act.

6

5. The effective time and date of these Articles of Amendment shall be
at 9:00 a.m. on November ____, 1995.

Executed on November 27, 1995.

CRYOLIFE, INC.

_________________________________ 
Steven G. Anderson, President
and Director

Attest:

CRYOLIFE, INC.

_____________________________                                            
Ronald D. McCall, Secretary 
and Director

7

Exhibit B

Form of Right Certificate

Certificate No. R-                                                  _____ Rights

NOT  EXERCISABLE  AFTER  NOVEMBER 27, 2005 OR EARLIER IF  REDEMPTION OR EXCHANGE
OCCURS.  THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001 PER RIGHT AND TO EXCHANGE
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.

Right Certificate

CRYOLIFE, INC.

This certifies that _________________________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of 1995 (the "Rights Agreement"), between, CryoLife, Inc., a
Florida corporation (the "Company"),  and Chemical Mellon Shareholder  Services,
L.L.C., (the "Rights Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 P.M., Pittsburgh,  Pennsylvania time, on November 27, 2005 at the principal
office of the Rights  Agent,  or at the office of its successor as Rights Agent,
one  one-tenth  of  a  fully  paid  non-assessable  share  of  Series  A  Junior
Participating  Preferred  Stock,  par  value  $.01  per  share  (the  "Preferred
Shares"),  of the Company, at a purchase price of $100.00 per one one-tenth of a
Preferred Share (the "Purchase Price"),  upon presentation and surrender of this
Right  Certificate  with the Form of  Election to Purchase  duly  executed.  The
number of Rights  evidenced  by this  Right  Certificate  (and the number of one
one-tenths of a Preferred Share which may be purchased upon exercise hereof) set

forth above, and the Purchase Price set forth above, are the number and Purchase
Price as of ________________, 1995, based on the Preferred Shares as constituted
at such date. As provided in the Rights  Agreement,  the Purchase  Price and the
number of one  one-tenths of a Preferred  Share which may be purchased  upon the
exercise  of the Rights  evidenced  by this  Right  Certificate  are  subject to
modification and adjustment upon the happening of certain events.

This Right  certificate  is subject  to all of the  terms,  provisions  and
conditions of the Rights Agreement,  which terms,  provisions and conditions are
hereby  incorporated  herein by  reference  and made a part  hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations,  duties and  immunities  hereunder  of the
Rights Agent, the Company and the holders of the Right  Certificates.  Copies of
the  Rights  Agreement  are on file at the  principal  executive  offices of the
Company and the above-mentioned offices of the Rights Agent.

This Right  Certificate,  with or without  other Right  Certificates,  upon
surrender at the  principal  office of the Rights  Agent,  may be exchanged  for
another  Right  Certificate  or  Right  Certificates  of  like  tenor  and  date
evidencing  Rights  entitling the holder to purchase a like aggregate  number of
Preferred  Shares as the  Rights  evidenced  by the Right  Certificate  or Right
Certificates  surrendered  shall have entitled such holder to purchase.  If this
Right  Certificate  shall be exercised in part,  the holder shall be entitled to
receive upon surrender  hereof another Right  Certificate or Right  Certificates
for the number of whole Rights not exercised.

Subject to the provisions of the Rights Agreement,  the Rights evidenced by
this  Certificate  (i) may be redeemed by the Company at a  redemption  price of
$.001  per  Right or (ii)  may be  exchanged  in whole or in part for  Preferred
Shares or shares of the Company's Common Stock, par value $.01 per share.

No  fractional  Preferred  Shares will be issued  upon the  exercise of any
Right or Rights  evidenced  hereby  (other  than  fractions  which are  integral
multiples of one one-tenth of a Preferred  Share,  which may, at the election of
the Company,  be evidenced by depositary  receipts),  but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.

No holder of this Right  Certificate  shall be  entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred  Shares or of
any other  securities  of the  Company  which may at any time be issuable on the
exercise hereof,  nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder  hereof,  as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof,  or to give or
withhold  consent to any corporate  action,  or to receive notice of meetings or
other  actions  affecting   stockholders  (except  as  provided  in  the  Rights
Agreement), or to receive dividends or subscription rights, or otherwise,  until
the  Right or  Rights  evidenced  by this  Right  Certificate  shall  have  been
exercised as provided in the Rights Agreement.

This Right  Certificate  shall not be valid or  obligatory  for any purpose
until it shall have been countersigned by the Rights Agent.

WITNESS the facsimile  signature of the proper  officers of the Company and
its corporate seal. Dated as of _____________, 1995.

ATTEST:                                  CRYOLIFE, INC.

____________________________             By_____________________________

Countersigned:

CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.

By__________________________
Authorized Signature

Form of Reverse Side of Right Certificate

FORM OF ASSIGNMENT

(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)

FOR  VALUE  RECEIVED   ______________________  hereby  sells,  assigns  and
transfers unto _________________________________________________________________
(Please print name and  address of  transferee)  
____________________________________________  this Right  Certificate,  together
with  all  right,  title  and  interest  therein,  and does  hereby  irrevocably
constitute  and appoint  _________________________  Attorney,  to  transfer  the
within Right  Certificate on the books of the  within-named  Company,  with full
power of substitution.

Dated:_______________________, 1995

________________________________________
Signature

Signature Guaranteed:

Signatures  must be  guaranteed  by a member firm of a registered  national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.

______________________________

The undersigned  hereby  certifies that the Rights  evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).

________________________________________
Signature

Form of Reverse Side of Right Certificate -- continued

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise
Rights represented by the Right
Certificate.)

To:________________________, INC.

The     undersigned     hereby     irrevocably     elects    to    exercise
_______________________ Rights represented by this Right Certificate to purchase
the Preferred Shares issuable upon the exercise of such Rights and requests that
certificates for such Preferred Shares be issued in the name of:

Please insert social security
or other identifying number

____________________________________
(Please print name and address)

____________________________________

If such  number of Rights  shall not be all the Rights  evidenced  by this Right
Certificate,  a new Right  Certificate for the balance  remaining of such Rights
shall be registered in the name of and delivered to:

Please insert social security
or other identifying number

____________________________________
(Please print name and address)

____________________________________

Dated:  ______________________, 1995

___________________________________
Signature

Signature Guaranteed:

Signatures  must be  guaranteed  by a member firm of a registered  national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.

Form of Reverse Side of Right Certificate -- continued

_____________________________

The undersigned  hereby  certifies that the Rights  evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).

__________________________________
Signature

NOTICE

The signature in the Form of Assignment or Form of Election to Purchase, as
the case may be, must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.

In the event the certification set forth above in the Form of Assignment or
the Form of  Election to  Purchase,  as the case may be, is not  completed,  the
Company  and the  Rights  Agent  will deem the  beneficial  owner of the  Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate  thereof (as defined in the Rights  Agreement) and such  Assignment or
Election to Purchase will not be honored.

Exhibit C

SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES

On November  27,  1995,  the Board of  Directors  of  CryoLife,  Inc.  (the
"Company") declared a dividend of one preferred share purchase right (a "Right")
for each  outstanding  share of  common  stock,  par value  $.01 per share  (the
"Common Shares"),  of the Company.  The dividend is payable on December 11, 1995
(the  "Record  Date") to the  stockholders  of record on that  date.  Each Right
entitles the  registered  holder to purchase from the Company one one-tenth of a
share of Series A Junior Participating Preferred Stock, par value $.01 per share
(the "Preferred Shares"), of the Company at a price of $100.00 per one one-tenth
of a  Preferred  Share  (the  "Purchase  Price"),  subject  to  adjustment.  The
description  and terms of the  Rights are set forth in a Rights  Agreement  (the
"Rights   Agreement")  between  the  Company  and  Chemical  Mellon  Shareholder
Services, L.L.C. as Rights Agent (the "Rights Agent").

Until the earlier to occur of (i) 10 days  following a public  announcement
that a person  or group of  affiliated  or  associated  persons  (an  "Acquiring
Person") have acquired  beneficial  ownership of 15% or more of the  outstanding
Common  Shares or (ii) 10 business days (or such later date as may be determined
by action of the Board of Directors prior to such time as any person or group of
affiliated  persons becomes an Acquiring  Person) following the commencement of,
or  announcement  of an intention to make, a tender offer or exchange  offer the
consummation  of which would result in the  beneficial  ownership by a person or
group of 15% or more of the outstanding Common Shares (the earlier of such dates
being  called the  "Distribution  Date"),  the Rights  will be  evidenced,  with
respect to any of the Common  Share  certificates  outstanding  as of the Record
Date,  by such Common  Share  certificate  with a copy of this Summary of Rights
attached thereto.

The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the Common Shares.  Until the Distribution Date (or earlier redemption
or expiration  of the Rights),  new Common Share  certificates  issued after the
Record Date upon  transfer  or new  issuance  of Common  Shares  will  contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier  redemption  or  expiration  of the Rights),  the surrender for
transfer of any  certificates  for Common  Shares  outstanding  as of the Record
Date,  even  without  such  notation or a copy of this  Summary of Rights  being
attached  thereto,  will also  constitute the transfer of the Rights  associated
with the Common Shares  represented by such certificate.  As soon as practicable
following the Distribution  Date,  separate  certificates  evidencing the Rights
("Right  Certificates") will be mailed to holders of record of the Common Shares
as of the close of business on the  Distribution  Date and such  separate  Right
Certificates alone will evidence the Rights.

The Rights are not exercisable until the Distribution Date. The Rights will
expire on November 27, 2005 (the "Expiration Date"),  unless the Expiration Date
is  extended  or unless the Rights are  earlier  redeemed  or  exchanged  by the
Company, in each case, as described below.

The Purchase  Price  payable,  and the number of Preferred  Shares or other
securities  or  property  issuable,  upon  exercise of the Rights are subject to
adjustment  from time to time to  prevent  dilution  (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or  warrants  to  subscribe  for or  purchase  Preferred  Shares at a price,  or
securities  convertible into Preferred Shares with a conversion price, less than
the  then-current  market  price  of the  Preferred  Shares  or  (iii)  upon the
distribution to holders of the Preferred  Shares of evidences of indebtedness or
assets  (excluding  regular  periodic  cash  dividends  paid out of  earnings or
retained  earnings or dividends  payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).

The number of  outstanding  Rights and the  number of one  one-tenths  of a
Preferred  Share  issuable  upon  exercise  of each  Right are also  subject  to
adjustment  in the  event  of a stock  split  of the  Common  Shares  or a stock
dividend  on the  Common  Shares  payable  in  Common  Shares  or  subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.

Preferred  Shares  purchasable  upon  exercise  of the  Rights  will not be
redeemable.  Each  Preferred  Share will be entitled  to a minimum  preferential
quarterly  dividend  payment  of $.10  per  share  but  will be  entitled  to an
aggregate  dividend of 10 times the dividend  declared per Common Share.  In the
event of liquidation,  the holders of the Preferred Shares will be entitled to a
minimum  preferential  liquidation  payment  of  $10.00  per  share  but will be
entitled to an aggregate  payment of 10 times the payment made per Common Share.
Each Preferred  Share will have 1 vote,  voting together with the Common Shares.
Finally, in the event of any merger, consolidation or other transaction in which
Common Shares are exchanged, each Preferred Share will be entitled to receive 10
times the amount  received  per Common  Share.  These  rights are  protected  by
customary antidilution provisions.

Because of the nature of the Preferred  Shares,  dividend,  liquidation and
voting  rights,  the value of the one  one-tenth  interest in a Preferred  Share
purchasable  upon  exercise of each Right  should  approximate  the value of one
Common Share.

In the event that the  Company is  acquired  in a merger or other  business
combination  transaction  or 50% or more of its  consolidated  assets or earning
power are sold after a person or group has become an  Acquiring  Person,  proper
provision  will be made so that  each  holder  of a  Right,  other  than  Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter  have the right to  receive,  upon the  exercise  thereof at the then
current  exercise  price of the Right,  that number of shares of common stock of

2

the acquiring  company which at the time of such  transaction will have a market
value of two times the exercise price of the Right. In the event that any person
or group of affiliated or associated persons becomes an Acquiring Person, proper
provision  shall be made so that  each  holder  of a Right,  other  than  Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter  have the right to receive upon exercise that number of Common Shares
having a market value of two times the exercise price of the Right.

At any time after any person or group becomes an Acquiring Person and prior
to the  acquisition  by such  person or group of 50% or more of the  outstanding
Common  Shares,  the Board of  Directors  of the Company may exchange the Rights
(other than Rights  owned by such person or group which will have become  void),
in whole or in part, at an exchange ratio of one Common Share,  or one one-tenth
of a  Preferred  Share  (or of a share of a class  or  series  of the  Company's
preferred stock having equivalent rights, preferences and privileges), per Right
(subject to adjustment).

With  certain  exceptions,  no  adjustment  in the  Purchase  Price will be
required until  cumulative  adjustments  require an adjustment of at least 1% in
such Purchase Price.

No fractional  Preferred  Shares will be issued (other than fractions which
are integral  multiples of one one-tenth of a Preferred Share, which may, at the
election of the  Company,  be  evidenced  by  depository  receipts)  and in lieu
thereof,  an  adjustment  in cash will be made based on the market  price of the
Preferred Shares on the last trading day prior to the date of exercise.

At any time prior to the  acquisition by a person or group of affiliated or
associated  persons of  beneficial  ownership of 15% or more of the  outstanding
Common  Shares,  the Board of  Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.001 per Right (the "Redemption  Price").
The  redemption  of the Rights may be made  effective at such time on such basis
with  such  conditions  as the Board of  Directors  in its sole  discretion  may
establish.  Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.

The terms of the Rights may be  amended  by the Board of  Directors  of the
Company without the consent of the holders of the Rights, including an amendment
to lower certain  thresholds  described  above to not less than the sum of .001%
and the largest  percentage of the  outstanding  Common Shares then known to the
Company  to be  beneficially  owned by any  person  or group  of  affiliated  or
associated persons,  except that from and after such time as any person or group
of  affiliated  or  associated  persons  becomes  an  Acquiring  Person  no such
amendment may adversely affect the interests of the holders of the Rights.

Until a Right is  exercised,  the  holder  thereof,  as such,  will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.

3

A copy of the  Rights  Agreement  has been filed  with the  Securities  and
Exchange Commission as an Exhibit to a Registration  Statement on Form 8-K dated
_______________,  1995.  A copy of the Rights  Agreement  is  available  free of
charge from the Company. This summary description of the Rights does not purport
to be complete  and is  qualified  in its  entirety by  reference  to the Rights
Agreement, which is hereby incorporated herein by reference.

4

262388

Exhibit 10.37

CRYOLIFE INTERNATIONAL, INC.

International Distribution Agreement

This  Agreement  (the  "Agreement")  consists  of  this  page  and  the
Schedules  identified  below which together  constitute your complete  agreement
with  CryoLife  International,  Inc.  (the  "Company")  relating to the Products
listed on Schedule A. This Agreement  will become  effective as of the date
of its signing (the "Effective Date"). This Agreement replaces any prior oral or
written  communications  regarding the subject  matter  hereof  between you (the
"Distributor") and Company. The schedules included in this Agreement are:

Schedule A          Products and Territory
Schedule B          Inventory and Minimum Purchase Requirements
Schedule C          Non-Company Products Carried and Not Carried by
Distributor
Schedule D          Distributor's Duties
Schedule E          Terms and Conditions
Schedule F          Marks

By signing below and in consideration of the mutual covenants  contained in
this Agreement, Company and Distributor agree to the terms of this Agreement.

Agree to:

Distributor: Century Medical, Inc.       Company:  CryoLife International, Inc.

/s/ Mitsunari Suzuki                     /s/ Gerald B. Seery   
----------------------------------      -----------------------------------
Mitsunari Suzuki                         Gerald B. Seery
President/CEO                            Senior Vice President, Marketing
Century Medical, Inc.                    CryoLife International, Inc.

Type of Organization (circle one):       ----------------------------------
corporation, partnership, LLC,  Steven G. Anderson
proprietor, individual          President and CEO
CryoLife, Inc.

Date:  September 17, 1998

Address: 1655 Roberts Boulevard, N.W., Kennesaw, GA  30144

Schedule A

PRODUCTS AND TERRITORY

DISTRIBUTOR NAME: Century Medical, Inc.

Products:

BioGlue Surgical Adhesive, including any line extensions, modifications
and improvements thereto.

Territory:

The country of Japan (the "Territory").

2

SCHEDULE B

INVENTORY AND MINIMUM PURCHASE REQUIREMENTS

DISTRIBUTOR NAME: Century Medical, Inc.

Product Stocking Requirements:

Minimum 2 months inventory maintained at all times.

Minimum Purchase Requirements,  subject to Product reimbursement existing in the
Territory for the Indications  (as defined in Schedule E,  subsection  6(c)), by
Contract Year:

PRODUCT LINE                  YEAR 1      YEAR 2      YEAR 3
------      ------      ------

BioGlue Surgical Adhesive     $350,000    $600,000    $750,000

Ninety (90) days prior to the  beginning of Contract Year 4 and ninety (90) days
prior to the beginning of each Contract Year thereafter, Distributor and Company
will negotiate  Minimum  Purchase  Requirements  for the  immediately  following
Contract Year taking into  consideration  such factors as the previous  Contract
Year's sales of Products in the Territory,  Distributor's inventory level of the
Products,  competition  and  competitive  trends  and other such  factors  which
pertain to the market and  marketability of the Products.  In the event that the
parties are unable to agree upon a Minimum  Purchase  Requirement  for  Contract
Year 4 or any Contract Year  thereafter,  the Minimum  Purchase  Requirement for
Contract  Year 4 or any  subsequent  Contract  Year shall be the  greater of the
product of (a) 1.15 times the Minimum  Purchase  Requirement for the immediately
preceding  Contract  Year, or (b) 1.15 times  Distributor's  actual  purchase of
Product for the immediately preceding Contract Year.

For purposes of this  Agreement,  the term "Contract Year" shall mean the twelve
(12) month period  commencing on the first day of the first full month following
the date that all medical registrations required for distribution of Products in
the Territory are approved,  and all import permits required for the importation
of  Products  into  the  Territory  are  issued  by the  appropriate  government
authorities.

If, at the time of  reimbursement  of the  Product is  established,  the Product
price, as provided in Section 3(a) of Schedule E is greater than an amount equal
to thirty-five percent (35%) of the reimbursement amount, then the parties shall
meet  and  in  good  faith  review  pricing  levels  and  the  Minimum  Purchase
Requirements.  Nothing in the foregoing sentence, however, shall require Company
to supply any  Product to  Distributor  at a price that would  result in Company
achieving an unacceptable profit margin, as determined by Company.

Product Prices:  

As provided in Section 3(a) of Schedule E.

3

SCHEDULE C

NON-COMPANY PRODUCTS
CARRIED AND NOT CARRIED BY DISTRIBUTOR

DISTRIBUTOR NAME:  Century Medical, Inc.

I.   Competitive  products  Distributor  may  continue to  represent  within the
Territory:

In addition to Products,  Distributor  may  represent,  sell and  distribute the
products  listed below which are or may be competitive  with Products  (describe
fully the manufacturer's name, product name and applications of all products and
services):

----------------------------------- ---------------------------------------------------------
Manufacturer                        Products
----------------------------------- ---------------------------------------------------------

Radiology & Imaging Products
Parker Laboratories                 Ultrasound Gels and Electrode Creams
Graphic Controls                    ECG & EEG Electrodes
CIVCO Medical Instruments           Ultrasound Accessories, Biopsy needle guides
----------------------------------- ---------------------------------------------------------

Critical Care Products
Ballad Medical                      Closed Tracheal Suctioning Tube
Diametrics Medical                  Point of Care Blood Gas Analysis System
Integra LifeSciences                Integra(R)Artificial Skin, Helistat & Helitene
----------------------------------- ---------------------------------------------------------

Cardiovascular Products
Millar Instruments                  Pressure Transducer, Catheter Doppler system
ATS Medical                         Open Pivot Bi-leaflet Heart Valve
Cordis-Webster                      Electrophysiology Catheters
EP Medsystems                       EP Workmate(TM)Recording System & EP-3(TM)
B. Braun Medical                    Cardiac Stimulator
Vena Cava Filter
----------------------------------- ---------------------------------------------------------

Interventional Neurology
Phoenix Biomedical                  NeuroSurgery and Hunter(TM)Tendon Implants
Integra LifeSciences                DuraGen dura Regeneration Template
----------------------------------- ---------------------------------------------------------

Orthopedics Products
Wright Medical Technologies         Artificial Joint prosthetics, Trauma, Sports Medicine,
Bone Growth Substitutes
Cross Medical Products              Synergy(TM)Universal Spinal Fixation Devices
Encore Orthopedics                  Tru-Flex(TM)Intermedular Nail Products
----------------------------------- ---------------------------------------------------------

Surgical Products
Hemostatix Medical Devices          Shaw(TM) Scalpel
Aaron Medical Industries            Electrodes
Genzyme                             Aortic Punch Gabbay-Frator Suture Guide
----------------------------------- ---------------------------------------------------------

Urology/Women's Healthcare
VIDAMed International               TUNA(TM)Transurethral RF Ablation for BPH
----------------------------------- ---------------------------------------------------------

4

II.  Specific Non Company products  Distributor  agrees not to distribute within
the Territory:

In addition to the general  prohibition  against carrying  competitive  products
within the Territory  contained in Section 12(a) of the Terms and Conditions set
forth in Schedule E Distributor  agrees not to represent the following  specific
products and services:

1.       Any product or services by Shelheigh.
2.       Any products or services by Tissuemed.
3.       Any bioadhesives (excluding synthetic adhesives).

5

SCHEDULE D

DISTRIBUTOR'S DUTIES

DISTRIBUTOR NAME:  Century Medical, Inc.

Distributor  shall,  at its sole  expense,  use its best  efforts to develop and
expand the sale of Products within the Territory. In addition, Distributor shall
be responsible for the following, at its own expense:

1. Payment Terms. As provided in Section 3(e) of Schedule E.

2. Facilities and Personnel.  Distributor will appoint a product specialist
in BioGlue  Surgical  Adhesive within sixty (60) days after the expected date of
import license  approvals for the Products.  Distributor  shall maintain  office
space and facilities,  and hire and train such other  professional and competent
personnel, as may be required to carry out its obligations under this Agreement.
As requested by Company,  Distributor  will  participate in any training courses
which  Company may  conduct  for  Distributor's  benefit;  will  attend  special
meetings; and will attend local trade shows which Distributor deems appropriate.

3. Visits.  When Company  desires to conduct  field work in the  Territory,
Distributor  will plan an  effective  schedule  of  appointments  and  otherwise
provide  reasonable  assistance  to Company  personnel  for the  duration of the
visit.

4. Reports and Forecasts.  Distributor  will make accurate  quarterly sales
reports to Company, in a form acceptable to Company, which details Distributor's
sales of  Products  within the  Territory.  Distributor  will make such  reports
within  fifteen (15) days  following  the end of each quarter.  As  periodically
required by  Company,  Distributor  will  provide to Company  other  reports and
forecasts and such other information as Company may reasonably request.  Company
has the right to verify the  information  in such reports and it, or its agents,
shall be given access to  Distributor's  books and records for such purpose upon
reasonable notice during normal business hours.

5.  Product  Stocking  Requirements.  Distributor  must meet or exceed  all
Product stocking  requirements and Minimum Purchase  Requirements  identified or
determined in the manner provided in Schedule B.

6. Maintenance of Inventory.  Within thirty (30) days following the date of
approval for import  licenses for the Products,  subject to Company's  supply to
Distributor of adequate Promotional Materials (as defined below), and continuing
until  the   termination   of  this   Agreement,   Distributor   will   maintain
representative  and adequate stocks of Products in locations  commensurate  with
the market and  Distributor's  sales, in order to ensure adequate and timely and
prompt delivery of "off the shelf" Products to customers at all times.

7. Promotional  Materials.  Distributor must maintain an adequate inventory
of Company's  current sales material and samples  ("Promotional  Materials") and
must use the  Promotional  Materials in an  efficient  and  effective  manner to
promote the sale of Products in the Territory. Distributor must obtain Company's
written  approval for the use of materials other than the Promotional  Materials
to promote Products. Distributor will prepare accurate translations of Company's
Promotional Materials into the languages utilized in the Territory and will make
such translations  available to Company.  Unless otherwise  agreed,  Distributor
will use the trademarks or tradenames  identified on Schedule F (the "Marks") on
all  Promotional  Materials.  This Agreement  grants no right to use the Company
name or any of the Marks as part of Distributor's  corporate or tradename or for
any  purpose  other  than as  authorized  by  Company  for use with  Promotional
Materials,  accurate  translations  of  promotional  Materials,  and  substitute
Promotional Material which has been approved by Company. Distributor will use no
other trademarks,  servicemarks,  tradenames or identifying markings to describe
or identify any Products without the prior written consent of Company.

8. Aftermarket Support.  Distributor will provide full and complete service
incident to the sale of Products in the Territory in accordance  with  Company's

6

commercially reasonable instructions. As instructed by Company, Distributor will
assist  Company in  fulfilling  warranty  obligations,  if any,  relating to the
Products for all customers  located in the Territory and Company will  reimburse
Distributor for any out of pocket expenses incurred in connection therewith.

9.  Performance  and  Changes.  Distributor  will  communicate  promptly to
Company  ongoing  information  regarding the performance of Products and any and
all  modifications,  design changes or improvements of Products suggested by any
customer or employee or agent of Distributor, and Distributor hereby agrees that
Company will be and will remain the  exclusive  owner of such  improvements  and
information.

10. Compliance with Company Policies.  Distributor,  to the extent informed
and instructed by Company,  must comply, and must cause its employees and agents
to comply,  with all policies  established by Company from time to time, as well
as  with  Company's  educational,   commercial,   and  engineering  instructions
respecting Products.

11.   General.   Distributor   must  maintain  an  overall   credit  rating
satisfactory to Company; conduct its business in an ethical manner; make payment
for  Products in a timely  fashion;  accurately  represent  Products in terms of
function  and  performance;  and  promptly  report in  writing  to  Company  any
suspected  Product  defects  or  safety  problems,  or any  customer  complaints
concerning Products.

7

SCHEDULE E

TERMS AND CONDITIONS

1. Appointments.  (a) Appointments.  Distributor shall act as the exclusive
importer and distributor of Company's Products within the Territory. Distributor
will use its best efforts to promote the sale of Products  within the Territory.
Company  agrees  that it will not:  (i) grant the same  rights to another  party
during the term of this  Agreement;  (ii) directly or  indirectly  make sales of
Products in the Territory,  except through  Distributor;  or (iii) make sales of
Products  outside of the  Territory to any party whom Company  knows  intends to
resell Products into the Territory.

(b) Conditions.  Distributor  shall maintain an office in the Territory and
shall  conduct  all of its  business  in its own name.  Distributor  may appoint
subdistributors to make sales of Products within the Territory on such terms and
conditions as Distributor  determines to be necessary to fulfill its obligations
under this  Agreement;  provided that no such  appointment  or delegation  shall
relieve Distributor from any obligations hereunder.

(c)  Relationship.  Nothing contained in this Agreement shall constitute or
create a  relationship  of  employer/employee,  principal/agent,  joint venture,
partnership,  or any other  relationship  between Company and Distributor  other
than that of independent contractor.

2. Activity Outside the Territory. Distributor will restrict its promotion,
marketing  and  sale of  Products  to the  Territory  in order  to  ensure  that
appropriate attention is being devoted to customers in the Territory and to meet
the  Minimum  Purchase  Requirements  (defined  in  Section  5). To  ensure  the
foregoing,  Distributor shall not solicit, accept or fulfill orders for Products
from any  person or entity  located  outside  the  Territory,  or  establish  or
maintain either a branch or  distribution  depot for the purpose of distribution
of any Product outside the Territory.

3. Product  Purchases.  (a) Prices.  Distributor's  purchase  price for all
Products shall be the prices set out in the export price schedule of Company for
Products sold to unaffiliated third parties in effect as of the time of shipment
of Products.  Company  shall have the right to change the export price  schedule
for Products sold to unaffiliated third parties in its sole discretion,  but any
accepted  orders  shall be  filled at the  prices  stated  in the  export  price
schedule  effective at the date of the  acceptance of such order.  Company shall
provide  Distributor with sixty (60) days' prior notice of any price change, and
Distributor will have sixty (60) days following the date of such notice to order
at the existing price.

(b) Purchase Orders.  Distributor  shall issue to Company a purchase order,
in English,  which shall  specify:  (i) the Product,  including item numbers and
part  numbers  if shown for that item in the  export  price  schedule;  (ii) the
price; (iii) requested delivery schedule;  and (iv) exact "ship to" and "invoice
to" place of  business.  Company,  in its sole  discretion,  shall  confirm such
purchase order in writing by transmitting  to Distributor an order  confirmation
or by notifying  Distributor of its decision to reject such purchase  order.  If
Distributor  does not receive a valid order  confirmation,  the  purchase  order
shall be deemed  rejected.  The terms contained in this Agreement,  the purchase
order, and any order  confirmation  given by Company,  together with any written
amendments signed by both parties, shall govern the sale of Products;  provided,
however, that the terms of this Agreement shall supersede all inconsistent terms
in the purchase  order. No purchase order or order  confirmation  shall serve to
amend this  agreement,  regardless of whether or not such document was signed by
an employee of Company. Orders placed by telephone,  facsimile, or in person are
to be  confirmed  through a written  purchase  order to Company  by  Distributor
within the shortest  practicable  time  thereafter.  Company shall have the sole
right to accept  or  reject  at  Company's  home  office  any and all  orders of
Products.  Notwithstanding the foregoing,  in the event that Company rejects any
bona fide  purchase  order  submitted  by  Distributor  in  compliance  with the
provisions set forth herein,  any Minimum  Purchase  Requirement  then in effect
pursuant to Section 5(a) will be adjusted accordingly.

(c) Shipment.  Products  shall be shipped  F.O.B.  Kennesaw.  Company shall
endeavor to ship  Distributor's  orders of any Product within a reasonable time,
subject to the  limitations of the prevailing  laws and regulations of Company's
or  Distributor's  governments  and to forces  outside  the  control of Company.
Company must deliver Products meeting the Company's  specifications  and quality

8

standards  in effect at the time of  shipment  and with a minimum  shelf life of
twenty four (24) months.  Distributor  acknowledges that Company may appoint any
wholly  owned  subsidiary  or  Company's  parent  corporation  to make  sales of
Products to Distributor,  subject to the terms and conditions of this Agreement;
provided,  however, that no such appointment or delegation shall relieve Company
from any of its obligations hereunder.

(d)  Returns.  Company  does not  guarantee  the sale of any Product in the
Territory  and shall not accept  any  returns of any  Product  except  under the
following conditions:

(i)  Distributor  has  notified  Company in writing of any alleged  defects
rendering any Product  unsalable not later than fourteen (14) days from the date
of arrival of such Product at Distributor's warehouse in the Territory.

(ii) At  Company's  request,  Distributor  promptly  returns the  allegedly
defective  Product to Company or provides such other  evidence of the deficiency
of the  Product  to  Company,  all as  Company  shall  specify.  Credit  for any
defective  Product shall issue only if, and only to the extent,  that  Company's
examination  shall confirm that the Product is defective and that such defect is
not the result of any  mishandling of the Product after the Product is delivered
Free Carrier Company's point of shipment.

(iii) Company  reserves the right,  at its  discretion,  to replace free of
charge any Product  found to be defective  with the same  quantity of Product in
good,  saleable   condition,   transferring  the  replacement  to  Distributor's
facilities at Company's point of shipment which shall be the Company's  expense.
Distributor  will advise Company of any information in its possession  regarding
mishandling,  damage, deterioration,  alteration, or modification of any Product
or its  packaging.  Distributor  will follow  Company's  instructions  to return
Products  or to  otherwise  dispose of them,  and will not ship  Products  until
receiving such instructions.

(e) Payment.  All payments due by  Distributor  hereunder  shall be made by
Distributor  net sixty  (60) days from the later of date of  invoice  or date of
delivery of the Products Free Carrier Company's point of shipment which shall be
the Company's  plant or warehouse in the United States.  All such payments shall
be made in U.S. Dollars by wire transfer to an account or accounts designated by
the Company.  This provision shall survive any termination or expiration of this
Agreement.

4. Changes and Recalls. (a) Changes. The Company reserves the right to make
changes or to discontinue manufacture or sale of the Product.

(b) Recalls.  Only Company shall be permitted to determine  whether or when
to make a recall of a Product.  Company will notify  Distributor of the "recall"
and Distributor,  at Company's sole expense, agrees to cooperate with Company in
all  reasonable  ways to  accomplish  the "recall"  and to remove such  recalled
Products from the market.  This cooperation  shall include but not be limited to
the obligation to pick up all recalled Products from customers. Company reserves
the right to replace "recalled" Products with equivalent Products.

5. Minimum Purchase Requirement.  (a) For any Contract Year (as hereinafter
defined),  in which  Distributor fails to purchase at least the minimum purchase
requirement  for Products set forth in Schedule B hereto for such  Contract Year
(each, a "Minimum Purchase Requirement" and, collectively, the "Minimum Purchase
Requirements"),  Company  shall have the right to terminate  this  Agreement for
cause upon written  notice to  Distributor;  provided  that  Company  shall have
provided  notice of such failure to  Distributor  within one (1) month after the
end of such  Contract  Year  and  Distributor  shall  not have  made  sufficient
additional  purchases  of Product  from the  Company  during the three (3) month
period  immediately  after the end of such Contract Year (the "Catch Up Period")
to fulfill such Minimum Purchase Requirement had such purchases been made during
the prior  Contract Year (the "Catch Up  Purchases").  The parties agree that in
order to prevent double counting of purchases,  any Catch Up Purchases  counted,
pursuant  to  the  preceding   sentence,   toward  meeting  a  Minimum  Purchase
Requirement  for the Contract Year prior to the Contract Year in which they were
actually  purchased  will not be counted  toward  meeting the  Minimum  Purchase
Requirement  for the  Contract  Year in which they are  actually  made.  Company
agrees to engage in reasonable  discussions with Distributor during the Catch Up
Period  regarding  whether  Company  will  accept  any  remedy  other than those

9

identified  above  for  Distributor's  failure  to  make  the  Minimum  Purchase
Requirements, and in such discussions Company agrees to consider such factors as
Distributor's  previous  Contract Year's sales,  inventory  level,  competition,
competitive  trends and other  factors  which  impact the  marketability  of the
Products.  Nothing in this  paragraph  shall require  Company or  Distributor to
accept an alternative remedy.

(b) For purposes of this Agreement, the term "Contract Year" shall mean the
twelve  (12) month  period  commencing  on the first day of the first full month
following the date that all medical  registrations  required for distribution of
Products in the Territory are approved,  and all import permits required for the
importation  of  Products  into the  Territory  are  issued  by the  appropriate
government authorities.

(c) Company  recognizes that a substantial  lead time is required to obtain
import  license  approvals  for Product  specification  changes and Company will
endeavor to its best ability to give Distributor as much advance notification as
is reasonably  possible of Product  specification  changes. In the event Company
discontinues  the  manufacture  or sale of Products or in the event of a Product
specification   change  or  Product  recall,   Distributor's   Minimum  Purchase
Requirements under Schedule B hereto shall be amended and adjusted accordingly.

6.  Compliance  with  Laws.  (a) Local Law.  Distributor  will at all times
during  the  term of  this  Agreement  comply  with  all  laws  and  regulations
applicable  to its business in the  Territory.  Distributor  represents  that it
knows of no provision of law or regulations in the Territory  applicable to this
Agreement   which  would  render  any  provision  of  this   Agreement  void  or
unenforceable  or which would entitle  Distributor to any right to  compensation
which is not specified herein.

(b) Import Licenses and Other Approvals. Distributor shall, at its expense,
obtain  any and all  import  licenses  and  governmental  approvals  that may be
necessary  to permit the sale by Company  and the  purchase  by  Distributor  of
Products  for  resale  into the  Territory.  Distributor  will  comply  with all
registration  requirements in the Territory, and will obtain such approvals from
the governmental authorities of the Territory as may be necessary to comply with
any and all governmental laws, regulations, and orders that may be applicable to
Distributor by reason of its execution of or performance  under this  Agreement,
including any requirement to be registered as Company's independent  distributor
or  representative  with any governmental  authority,  and including any and all
laws,  regulations,  or  orders  that  govern or affect  the  ordering,  export,
shipment,   import,  sale  (including  government  procurement),   delivery,  or
redelivery of Products in the Territory.

(c)  Conduct  of  Trials,   Etc.  The  parties  anticipate  that  obtaining
governmental  approval  within the Territory for the importation of the Products
by Company to  Distributor  for resale in the Territory will require the conduct
of clinical trials (the "Clinical Trials") within the Territory. Distributor and
Company shall jointly  establish the  guidelines,  parameters and procedures for
the Clinical Trials, and such Clinical Trials will be conducted at Distributor's
expense and under Distributor's  supervision.  Distributor's  application to the
Japanese  Ministry  of Health and  Welfare to begin the  Clinical  Trials  shall
include  requests for the  indications  (the  "Indications")  of vascular repair
(including  dissecting Aortic aneurysm,  suture of Aortic incision,  anastomosis
between Aorta and artificial  graft,  and anastomosis of  Aorta-Coronary  bypass
graft),  adjunctive air leak elimination  during lung volume reduction  surgery,
bronchial  plural  fistula,  cancer and  adjunctive  suture  repair for  trachea
anastomosis  and other  thoracic  applications,  and liver  repair,  subject  to
confirmation of the efficacy for use on the liver. Distributor agrees to provide
Company  with  periodic  English  language  progress  reports on the conduct and
results of the Clinical  Trials as well as copies of all test results,  reports,
correspondence   and  filings  made  in  connection  with  the  Clinical  Trials
(collectively,  the  "Reports").  Whenever  possible,  Distributor  will provide
Company with English language copies of the Reports.

(d) Questionable  Payments.  Distributor certifies that neither it, nor any
of its  directors,  officers,  employees,  or agents is an official,  agent,  or
employee  of any  government  or  governmental  agency or  political  party or a
candidate for any  political  office on the  Effective  Date of this  Agreement.
Distributor shall not, directly or indirectly,  in the name of, on behalf of, or
for the  benefit of Company  offer,  promise,  or  authorize  to pay, or pay any
compensation,  or give anything of value to, any official, agent, or employee of
any government or  governmental  agency,  or to any political  party or officer,
employee,  or agent  thereof.  Distributor  shall require each of its directors,
officers, employees, and agents to comply with the provisions of this subsection
6(d). Any breach of the provisions of this subsection 6(d) shall entitle Company
to  terminate  this  Agreement  for  cause  effective  immediately  on notice to
Distributor.  Distributor shall promptly notify Company of the occurrence of any
event that would or may result in an exception to the representations  contained
in this subsection 6(d).

10

(e) Health,  Safety,  and Environmental  Standards;  Labeling.  Distributor
agrees  to  advise   Company   fully  with   respect  to  all  health,   safety,
environmental,  and other  standards,  specifications,  and  other  requirements
imposed  by law,  regulation,  or  order  in the  Territory  and  applicable  to
Products.  Distributor shall also advise Company of all instructions,  warnings,
and labels  applicable to Products  that are necessary or desirable  under laws,
regulations,  or  practices  in the  Territory.  Company  shall be  entitled  to
increase  the prices  charged to  Distributor  for Products  immediately  by the
amount of any  increase  in  Company's  cost of  manufacturing  attributable  to
compliance  with  any  such  safety   standards,   specifications,   labels,  or
requirements.

(f)  Documentation  and Assurances.  Distributor shall furnish Company with
such  documentation as Company may request to confirm  Distributor's  compliance
with  this  Section 6 and  Distributor  agrees  that it shall not  engage in any
course of conduct that, in Company's  reasonable belief,  would cause Company to
be in violation of the laws of any jurisdiction.

7. Warranty, Insurance and Assistance in Litigation.

(a) Limited Company Warranty. Company warrants that any Product supplied to
Distributor  will be manufactured in compliance with the Product  specifications
and, in all material  respects,  manufactured  in compliance with all applicable
rules, regulations, statutes and ordinances of the country of manufacture and of
the Territory. In addition, to the best of its ability,  Company will supply all
Products to  Distributor  free from  defects in material,  design,  workmanship,
manufacture,  treatment, packaging,  instruction manuals, and labels, warning or
otherwise.  Company will provide,  when requested by Distributor,  certification
that, to the best of its knowledge,  it is in compliance  with U.S. and Japanese
laws,  statutes,  rules,  and  regulations  and relevant  orders relating to the
manufacturing,  use, distribution and sale of the Products. All Products sold to
Distributor  will  be  sold  free  from  security  interests,   liens  or  other
encumbrances. COMPANY MAKES NO OTHER EXPRESS OR IMPLIED WARRANTIES WHATSOEVER.

(b) Company  Insurance.  Company  shall,  at its own expense,  maintain the
product liability  insurance  identified below with respect to the Products sold
hereunder  to  cover  any and all  losses,  damages  (actual,  consequential  or
indirect),  liabilities,  penalties,  claims,  demands,  suits or  actions,  and
related costs and expenses of any kind (including, without limitation,  expenses
of  investigation,  counsel fees,  judgments and  settlements) for injury to, or
death of, any person or property  damage or any other loss suffered or allegedly
suffered by any person or entity and arising out of or otherwise  in  connection
with the Products sold by Company to Distributor  under this Agreement.  Company
shall  maintain  insurance  with a Five  Million  U.S.  Dollars  ($5,000,000.00)
combined  single limit for bodily injury and property  damage per  occurrence in
the aggregate.  Company shall add Distributor as an additional named insured and
furnish  Distributor  with copies of all applicable  insurance  policies,  which
insurance  shall not be canceled,  modified or reduced without the prior written
consent of Distributor.

(c) Assistance in Litigation. If any claim is made or any suit or action is
instituted  against  Distributor  arising out of or otherwise in connection with
any  defect or alleged  defect of the  Products  sold by Company to  Distributor
under this  Agreement,  Company shall,  without  limiting the general  indemnity
provided by Section 9, at its own expense and upon request by  Distributor:  (i)
investigate or research the causes of accidents, occurrences, injuries or losses
affecting any person or property as a result of the manner in which the Products
are designed, manufactured, treated, packaged, labeled, delivered, sold or used,
and use its best efforts to correct or eliminate such causes within a reasonable
period;  and (ii)  provide to  Distributor  any and all  assistance  (including,
without limitation, technical and other information,  documents, data, materials
and  witnesses)  which  are,  in the  opinion  of  Distributor  or its  counsel,
necessary or useful for  Distributor's  defense of such claim, suit or action in
relation to Products sold by Company to  Distributor  hereunder.  This Section 7
shall survive any termination or expiration of this Agreement.

8. Limitations of Liability.  COMPANY'S LIABILITY IN RESPECT OF PRODUCTS IS
LIMITED  TO  THAT  SET  FORTH  IN  SECTIONS  7 AND 9 AND  IN ANY  OTHER  WRITTEN
WARRANTIES  ISSUED IN WRITING BY  COMPANY.  COMPANY  MAKES NO OTHER  WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO PRODUCTS. DISTRIBUTOR AGREES NOT TO MAKE ANY
REPRESENTATIONS  AND/OR  WARRANTIES  IN RESPECT OF PRODUCTS  EXCEPT AS EXPRESSLY
STATED IN THE APPLICABLE WRITTEN WARRANTY ISSUED BY COMPANY.

11

NO  REPRESENTATION OR WARRANTY IS MADE AS TO FITNESS FOR ANY PURPOSE OR
MERCHANTABILITY.

9. Indemnifications.  (a) Indemnity by Company. Company agrees to indemnify
Distributor  against  any  liability  resulting  from (i) an act,  omission,  or
negligence  of  Company in the  manufacture,  processing,  handling,  promoting,
marketing, representing, or delivering of Products pursuant to this Agreement or
(ii) any default of Company under this Agreement.

(b)  Indemnity by  Distributor.  Distributor  agrees to  indemnify  Company
against any  liability  resulting  from (i) an act,  omission,  or negligence of
Distributor in the storage, handling,  promoting,  marketing,  representing,  or
delivering  of  Products  pursuant  to this  Agreement  or (ii) any  default  of
Distributor under this Agreement.

(c)  Notice and  Defense of  Indemnified  Claims.  In each case,  the party
receiving  the  indemnity  (the  "Indemnified  Party")  will  notify  the  party
providing the indemnity (the "Indemnifying Party") promptly of any claim against
Indemnified  Party to which any such  indemnity  may apply and, if  Indemnifying
Party chooses an adequate provision to compensate Indemnified Party in the event
of an adverse result,  Indemnified Party will allow  Indemnifying  Party to have
control of the defense of any action relating  thereto and  negotiations for its
settlement,  provided  Indemnified  Party is allowed to  participate  at its own
expense.  Indemnifying  Party will  maintain  adequate  liability  insurance for
claims it provides indemnification for hereunder.

(d) Survival. The provisions of this Section 9 shall survive any expiration
or termination of this Agreement.

10.  No  Lost  Profits  or  Consequential   Damages.   NOTWITHSTANDING  ANY
REPRESENTATION,  WARRANTY,  UNDERTAKING OR OTHER PROVISION, TERM OR CONDITION OF
THIS  AGREEMENT,  EXPRESS OR IMPLIED,  COMPANY WILL NOT BE LIABLE TO DISTRIBUTOR
FOR ANY LOSS OF PROFITS OR  CONSEQUENTIAL OR INDIRECT LOSS OR DAMAGE ARISING OUT
OF OR IN CONNECTION  WITH THE INABILITY OF COMPANY TO SUPPLY ITS PRODUCTS OR THE
SUPPLY OF DEFECTIVE PRODUCTS.

11. Protection of Intellectual Property and Confidentiality  Agreement. (a)
Protection of Company's Intellectual Property/Information and Ideas. Distributor
acknowledges Company's exclusive right, title and interest in Company's patents,
trademarks,  trade names,  emblem,  designs,  models and methods of presentation
relating  to  Products  in  the  Territory  or  elsewhere   (the   "Intellectual
Property").  Distributor  acknowledges Company has certain ideas and information
concerning  financial  matters  and  trade  secrets  and  corporate  proprietary
information,  written and unwritten (the  "Information and Ideas") which Company
is willing to disclose to Distributor from time to time as it becomes  necessary
to promote the purposes of this Agreement.  Distributor  will not at any time do
or cause to be done any act or thing which directly or indirectly  challenges or
impairs the  Intellectual  Property or the  Information  and Ideas.  Distributor
agrees,  during the term and following  termination of this  Agreement,  that it
will not disclose any  Intellectual  Property or Information and Ideas, nor will
it make or cause to be made any use of the Intellectual  Property or Information
and Ideas,  except in the proper performance of its duties under this Agreement.
Distributor is not prohibited  hereby from disclosing or using any  Intellectual
Property or Information and Ideas which  subsequently  become part of the public
domain through no breach of this Agreement and through no fault of  Distributor.
Distributor  agrees to take all  reasonable  steps,  including  the insertion of
relevant  clauses in  contracts  of  employment,  to prevent  disclosure  of the
Intellectual Property and Information and Ideas by  sub-representatives,  agents
and/or  employees of Distributor,  and to safeguard and protect all Intellectual
Property and Information and Ideas from damage, theft or loss or from perusal by
unauthorized  persons,  except as may be  required by law.  Company  warrants to
Distributor  that  it  possesses  all  necessary  rights  and  title  to use the
Intellectual Property in connection with the Products.

(b) No Rights Vest in Distributor.  Distributor will not acquire any right,
title or  interest in the  Intellectual  Property  or  Information  and Ideas by
virtue  of the  execution  or  performance  of this  Agreement,  nor at any time
describe or represent itself to others as having such right,  title or interest.
Should any Territory law or regulation vest Distributor with any rights in or to

12

any of the Intellectual  Property or Information and Ideas,  Distributor  hereby
assigns and agrees to assign to Company all such rights  contemporaneously  with
their  vesting.  Distributor  shall  promptly  notify  Company  of any  and  all
infringements  of the  Intellectual  Property or Information  and Ideas of which
Distributor  becomes  aware  within the  Territory,  and will assist  Company in
taking action against any such  infringements at Company's  expense.  Subject to
the limited rights of Distributor  under Section 16(d) below,  Distributor shall
cease  using  the  Intellectual  Property  or  Information  and  Ideas  upon any
expiration or termination  of this  Agreement.  Distributor  shall not remove or
alter any labeling on the Products.

(c)  Mutual  Duty  to  Preserve   Confidentiality   of  Other  Confidential
Information.  Without  the prior  written  consent of the  supplying  party,  no
receiving  party,  its  officers,  agents,  or  employees  shall,  in any manner
whatsoever  for  use in any  way for its  own  account  or for any  third  party
disclose  or  communicate  to  any  third  party,  any  technical,  engineering,
manufacturing,  business,  financial,  or other  information  and know how,  but
excluding any  Intellectual  Property or Information  and Ideas already  covered
under  subsection  (a)  above  (hereinafter  referred  to as  the  "Confidential
Information")  generated by any party hereto and acquired directly or indirectly
by any other party.  Nothing in this subsection (b) shall prevent  disclosure or
use of information  (i) already known to any receiving  party;  (ii) which is or
becomes public knowledge  without the fault of the receiving party;  (iii) which
is properly  acquired by the receiving party from a third party having the legal
right  to such  information;  (iv)  is  required  to be  disclosed  by a  proper
governmental or judicial  authority;  or (iv) as required or as may be desirable
in connection  with a financing of Company or  Distributor.  No receiving  party
shall,  in any manner  whatsoever  for use in any way for its own account or for
the account of any third party,  disclose or communicate to any third party, any
Confidential  Information  for any purpose except for the purpose for which such
Confidential  Information was supplied, and such receiving party will take every
reasonable precaution to protect the confidentiality of such information.

(d) Other  Obligations.  Each  party  acknowledges  that any  breach of any
obligation under this Section is likely to cause or threaten irreparable harm to
the other  party,  and  accordingly,  each party  agrees  that in such event the
non-breaching  party  shall be  entitled  to  equitable  relief to  protect  its
interests,  including,  but not limited to, preliminary and permanent injunctive
relief.  Upon  expiration or  termination  of this  Agreement,  each party shall
return to the other party all Confidential  Information,  Intellectual  Property
and Information and Ideas in the receiving party's possession and control.  This
Section 11 shall survive any expiration or termination of this Agreement.

12. Other Obligations and Activities of Distributor. In addition to any and
all obligations and/or permitted activities recited elsewhere in this Agreement:

(a)  Representation  of Other Products.  During the term of this Agreement,
Distributor  will not  represent  or  distribute,  directly or  indirectly,  the
products of any other  manufacturer  or producer which in the opinion of Company
compete  with any  Products  promoted by  Distributor  hereunder  (collectively,
"Competitive  Products"),  nor shall  Distributor  manufacture  any  Competitive
Products,  directly  or  indirectly.   Competitive  Products,  include,  without
limitation,  those Products identified on Part II of Schedule C. Notwithstanding
the foregoing,  Distributor  may represent,  sell and distribute the competitive
products listed on Part I of Schedule C. It is acknowledged and agreed, however,
that  Distributor may represent,  promote and sell other lines of health related
services and devices. Distributor shall furnish Company before execution of this
Agreement or at time of execution a list of all  products  currently  handled by
Distributor  and shall  update  the list from time to time as  Distributor  adds
products to its distribution business.

(b)  Duties  of the  Distributor.  Distributor  understands  and  agrees to
perform  each and all of the  activities  listed  and  described  in  Schedule D
(Distributor's Duties).

13. Other Obligations and Activities of Company. In addition to any and all
obligations and/or permitted activities recited elsewhere in this Agreement:

(a)  Provision  of  Information.  Company  may  provide  without  charge to
Distributor,   reasonable   information  concerning  the  technical  aspects  of
Products, their use, and the like, in writing and/or oral presentations.

13

(b) Seminar  Cooperation.  Company will  cooperate  with  Distributor  to a
reasonable  extent in the sponsorship and planning of technical  seminars in the
Territory on Products.

(c) Market  Surveys.  Company may furnish,  without charge to  Distributor,
market surveys and related  information  prepared by Company or by third parties
pertaining to the market for Products in the Territory.  Distributor  will treat
same as Information and Ideas in accordance with the provisions of Section 11.

(d)  Advertisement  Assistance.  From time to time,  Company may  advertise
Products  in  publications  circulated  in  the  Territory,  and  may  refer  to
Distributor by name in such  advertisements.  Distributor hereby consents to the
use  of  its  name  in  such  advertisements  and  for  similar  purposes.  Such
advertising  shall in all  events  use  Company's  logo  and  trade  name(s)  or
trademarks  in such manner as to protect  same.  In no event  shall  Distributor
modify or change Company's name or trade name(s) and or trademarks.

(e) Access to Company  Personnel.  Company shall provide  Distributor  with
reasonable  access to and  assistance  from its  technical,  sales,  and service
personnel, as Company deems appropriate. Such assistance shall be without charge
to Distributor except as may be otherwise mutually agreed.

(f)  Regulatory  Updates.  Company  will  provide  Distributor  with prompt
updates on all  regulatory  issues known to Company  which could  reasonably  be
expected to adversely  affect the sale and marketing of Products by  Distributor
in the Territory.

(g)  Technical  Information.  Company  will provide  Distributor  with such
information, technical descriptions, drawings, data, specifications, service and
instructions  for use  manuals,  quality  control  audits,  facility  inspection
reports  issued by government  regulators or  recognized  international  quality
control auditors, and so forth, relating to the Products in Company's possession
and  control  as may be  reasonably  required  by  Distributor  to obtain and to
maintain import permits or continuing approval from the appropriate governmental
authorities in order to distribute the Products in the Territory.

(h) Related Regulatory Actions. Company will promptly notify Distributor of
any of the  following  adverse types of actions taken with respect to Company or
the Products by regulators in other  jurisdictions  which Company believes could
reasonably be expected to adversely  affect the sale or marketing of Products by
Distributor  in the  Territory:  (i) any  facility  inspection  resulting in any
notice of  infraction,  warning or other  action,  (ii)  voluntary  or mandatory
recalls or withdrawal of Products,  (iii)  administrative or court  proceedings,
(iv) any changes of factory  location,  (v) changes in method of  sterilization,
packaging,  materials,  design or other  specifications of Products and (vi) any
similar matters.

(i)  Trademark  Registration.  Subject  to Section 6 hereof,  Company  will
register and maintain in the Territory all  trademarks  used in connection  with
the Products.

(j) Referrals.  Company will promptly  refer to Distributor  all orders and
inquiries for the Products in the Territory received by Company.

(k) Non-Competition.  During the term of this Agreement and for a period of
twelve  (12) months  after the  termination  or  expiration  of this  Agreement,
neither  party,  their  affiliates,  successors  and assigns  shall  solicit for
employment any personnel employed by the other party.

14.  Products  Modification.  Subject to Section 5(c),  Company may, at any
time and from time to time and without recourse on  Distributor's  part, add to,
delete from, or modify any or all of the Products.

15. Force Majeure.  Neither Company nor Distributor will have any liability
for any  failure or delay in  performing  any  obligation  under this  Agreement
(except the obligation to make payments promptly when and as due) if the failure
or delay results from force  majeure,  understood as a cause which is beyond the
control  of  either  party and one which  could not have been  avoided  with the
exercise of due care. The party claiming force majeure will give the other party
written notice of the cause within fifteen (15) days after  occurrence  thereof,
and  will  exercise  reasonable   diligence  to  remove  the  cause  and  resume
performance.  If  Company  is the  affected  party,  it may  equitably  allocate
production  and  delivery  of  affected  Products  among  its  Distributors  and
customers.

14

16. Term of Agreement;  Termination.  (a) Term.  The term of this Agreement
shall  be for an  initial  period  commencing  on the  Effective  Date  of  this
Agreement  and  expiring  on the date five (5) years after the first date of the
first Contract Year (the "Initial Period").  This Agreement may be automatically
extended  by the  parties  for  additional  five (5) year  period(s)  (each,  an
"Extension  Period") upon mutual written  agreement that the parties have agreed
on Minimum  Purchase  Requirements  for the Products for such Extension  Period.
Notice of  requested  extension  shall be made by either  party to the other not
less  than  ninety  (90)  days  prior to the end of the  Initial  Period  or any
Extension Period. For purposes of this Agreement, the term "Term" shall refer to
the Initial Period and any and all Extension  Periods thereof in accordance with
this Section. This Agreement may be earlier terminated at any time as follows:

(i) in the manner provided in Section 5(a); or

(ii) by either  party for  cause  upon the  giving of not less than 30 days
prior written  notice of intent to terminate to the other party,  and failure of
the party  receiving  such notice to cure the cause stated in such notice to the
reasonable satisfaction of the notifying party by the end of such 30 day period;
provided,  however,  that the  foregoing  right  to cure  shall  not  apply to a
material  breach that has been  notified to the  breaching  party on two or more
prior  occasions or to any material  breach after the  breaching  party has been
notified of any three prior  material  breaches.  For purposes of this  Section,
"cause" means the other party's  material  breach of a duty or obligation  under
this  Agreement,  other than as provided in Section  5(a).  For the avoidance of
doubt and without  prejudice  to whether  other acts might  constitute  material
breach, the parties agree that the violation of any of the provisions  contained
in Sections 2, 3(c),  6(a),  6(b),  6(d),  6(e), 11 and 12(a) shall constitute a
material breach; or

(iii) by either party  forthwith on written  notice of  termination  to the
other  party  for  the  other  party's  voluntary  or  involuntary  petition  of
bankruptcy,  or insolvency,  or winding up of its operations; or in the event of
nationalization,  in whole or  part,  of the  other  party;  or in the  event of
acquisition  of all or part of the  assets of  Distributor  by a  competitor  of
Company in respect of Products;  or in the event of Distributor's  assignment or
attempted  assignment  of  this  Agreement  or  any  of its  rights,  duties  or
obligations  hereunder  without  Company's prior written consent,  except as set
forth in  Section  17(c);  or in the event of  introduction  or  passage  of any
legislation  in the Territory  which would grant to  Distributor  greater rights
upon termination of this Agreement than Distributor would presently have; or

(iv)  immediately  by written  notice from  Company  following  notice from
Distributor  pursuant to  sub-paragraphs  (i),  (ii) or (iii) above,  or after a
breach by Distributor of the provisions of Section 6 or Section 11 above.

(b) Effect of Termination. During the period of notice of termination under
Subsection 16(a)(i), (ii) or (iii), the party giving notice may withhold its own
performance  (except in respect of the  payment of any amount then due and owing
to the other party)  unless the other party cures or acts with due  diligence to
cure the breach or failure,  but such cure or due diligence  shall not in and of
itself operate to cancel the notice of termination  which must be  affirmatively
canceled by the party originally  giving notice.  During the period of notice of
termination without cause, each party shall diligently perform all of its duties
and obligations under this Agreement.

(c) Rights of Company.  Upon  expiration or termination of this  Agreement,
Company may (at any time  thereafter)  appoint a new  Distributor of Products in
the  Territory.  The  following  obligations  of  Distributor  will  survive and
continue after any expiration or termination of this  Agreement,  subject to the
rights of Distributor under 16(d):

(i) to immediately return to Company all documents,  or other informational
and advertising materials in tangible form relating to the Intellectual Property
or Information and Ideas, supplied to Distributor by Company;

(ii) to continue to make any payments owed to Company promptly when due;

(iii) to  thereafter  abstain from using or disclosing to third parties the
Intellectual Property or Information and Ideas for so long as the same is not in
the public domain or for so long as the same is in the public domain due only to
the default of Distributor, whichever period is longer;

15

(iv) to  cease  promoting  Products  and  give  appropriate  notice  to all
sub-distributors and agents in the Territory of such fact;

(v) to diligently and expediently  take all necessary steps to transfer the
medical  registrations  and import permits (the "Shonin(s)") for the Products to
the  Company or to any third  party  located in the  Territory,  as  notified by
Company, that is authorized and legally entitled to hold the Shonin(s).  Company
agrees to reimburse  Distributor for all of Distributor's out of pocket expenses
related to Distributor [obtaining and maintaining] [transferring] the Shonin(s).
[For purposes of this section,  "out of pocket expenses" shall include,  without
limitation,  Product costs, documentation and Product testing fees, patient fees
paid  to the  institution  performing  the  clinical  trial,  fees  paid  to the
institutions  to perform and conduct the clinical  trial  including  issuance of
final reports,  meeting expenses,  clinical trial product  liability  insurance,
post marketing  surveillance fees, etc.  Specifically excluded from reimbursable
"out of pocket expenses" are Distributor overhead, salary and travel expenses in
the Territory.] Any such reimbursable out of pocket expenses owed to Distributor
upon  termination or expiration of this Agreement  shall become  immediately due
and payable.

During  the  period  that  the   Shonin(s)  is  in  the  process  of  being
transferred, Distributor agrees to otherwise cooperate with Company by importing
and  reselling  the  Products  to  Company's  next   authorized  and  designated
distributor at  Distributor's  fully landed cost for the Products plus a mark-up
of ten percent  (10%).  The general  purchase and sales terms of this  Agreement
will  govern the sale of  Products  to such  distributor  during  this  transfer
period. Company expressly agrees to indemnify Distributor for any non-payment by
Company's  next  distributor  for Products so resold by  Distributor  or for any
non-performance  of Distributor out of  Distributor's  immediate  control during
this transfer period.

(vi) to continue to indemnify Company in respect to all matters as to which
indemnification by Distributor is required by this Agreement; and

(vii) to continue to observe any obligation otherwise expressly provided in
this Agreement to survive expiration or termination.

(d) Rights of  Distributor.  The following  obligations of the Company will
survive and continue  after any expiration  and  termination of this  Agreement,
subject to the rights of the Company under 16(c):

(i) to  thereafter  abstain from using or  disclosing  to third parties any
Confidential  Information of  Distributor  for so long as the same is not in the
public domain or for so long as the same is in the public domain due only to the
default of the Company, whichever is longer;

(ii) to make any payments to  Distributor  required by Section  16(c)(v) or
Section 16(e);

(iii) to continue  to  indemnify  Distributor  in respect to all matters to
which indemnification by company is required by this Agreement; and

(iv) to continue to observe any obligations otherwise expressly provided in
this Agreement to survive expiration or termination.

(e)  Inventory   Repurchases.   Upon  termination  or  expiration  of  this
Agreement,  Company and Distributor each have the option of causing  Distributor
to return for refund of the original  purchase price paid by Distributor  all of
Distributor's  remaining  inventory of Products which are in saleable condition.
If neither party elects the option in the preceding  sentence,  Distributor  may
continue to sell such  remaining  inventory in the  Territory for a period which
shall not exceed six (6) months  following the date of termination or expiration
of this Agreement,  at which date Distributor's  remaining saleable inventory of
the  Products  shall be  returned  to Company  for full  refund of the  original
purchase  price of the  Products.  Company shall refund  Distributor's  purchase
price for returned Product within sixty (60) days after Company's receipt of any
Product returned by Distributor pursuant to this Section 16(e). The refund shall
be effected by wire  transfer to an account  designated by  Distributor  at such
time.  Regardless of the option  elected,  Distributor  must return to Company a
complete set of  traceability  reports within thirty (30) days of termination or

16

expiration  of  this  Agreement.  For  purposes  of  this  provision,  "saleable
condition"  means  the  Product  must  be in  the  original  factory  packaging,
undamaged, currently sterile and with a remaining shelf life of at least six (6)
months.

This  provision  shall  survive  any  expiration  or  termination  of  this
Agreement.

(f) Limitation of Post Termination Liability. Without limiting any remedy a
party  may  have at law or at  equity  in  connection  with the  breach  of this
Agreement by the other party neither party to this Agreement  shall be liable to
the other by reason of the  termination  or  expiration  of this  Agreement  for
compensation,  reimbursement,  or damages on account of any loss of  prospective
profits,  or  anticipated  sales or on  account  of  expenditures,  investments,
leases,  or other  commitments  relating  to the  business or goodwill of either
party.

17. General.

(a) Notice. Any notice or other communication required or permitted by this
Agreement  must be given in writing and must be delivered  by personal  delivery
(including  personal  delivery  by  internationally   recognized  and  reputable
overnight courier,  such as Federal Express, DHL, or similar overnight courier),
first class mail  (registered  or  certified),  or telecopy (with a copy sent by
personal  delivery or first class mail),  at the postal  address of the party as
set forth herein or such other  changed  address of the party as to which notice
has been  given,  and will be deemed as  having  been  given  when  received  or
delivered.

(b) Set Off. Company reserves the right to set off any amounts  Distributor
owes to Company  against any amount  Company owes to  Distributor  to the extent
acceptable to regulators in the Territory.

(c) Binding;  Assignment.  This Agreement  shall be binding on Distributor,
Company, and their respective successors and assigns;  provided,  however, that,
subject to Section  1(b),  any  assignment  of this  Agreement  by  Distributor,
whether by operation of law or otherwise,  without the prior written  consent of
Company  is void.  Any  assignment  of this  Agreement  by  Company,  whether by
operation of law or otherwise, without the prior written consent of Distributor,
is void: provided, that Company may assign this Agreement without consent in the
event of a sale or transfer of all or substantially  all of the stock or Product
device   assets  of  Company,   to  the  purchaser  of  such  stock  or  assets.
Notwithstanding  anything in this  Agreement  to the  contrary,  Company  hereby
agrees that any direct or indirect  sale,  assignment  or transfer of  Company's
rights to manufacture  Products to any third party in a manner that prevents the
Company from  fulfilling its  obligations  to  Distributor  under this Agreement
shall be  subject  to such  third  party  becoming  obliged  through  such sale,
assignment  or transfer to the terms of this  Agreement to the same extent,  and
subject to the same duties and obligations, as Company.

(d) Entire Agreement;  Modification;  Waiver.  This Agreement  contains the
entire  agreement  between the parties with respect to the subject matter of the
Agreement and shall supersede and terminate all prior  agreements,  commitments,
or understandings,  whether oral or written,  related to the Products. No waiver
or  modification  of any of the  provisions of this  Agreement  shall be binding
unless it is in writing and signed by the parties.  Any waiver of any  condition
on any one occasion shall not constitute a waiver on any subsequent occasion.

(e) Arbitration. All disputes,  controversies,  claims or differences which
may arise  between  the  parties  hereto  arising out of or in relation to or in
connection  with this  Agreement  or any  breach  thereof  shall be  settled  by
arbitration  conducted in accordance with the Commercial  Arbitration Rules (the
"Rules") and supplementary  Procedures for International  Commercial Arbitration
(the "Supplementary  Procedures") of the American  Arbitration  Association,  in
effect on July 1, 1996. Whenever any dispute,  controversy,  claim or difference
which may be submitted to arbitration  under this subsection  arises between the
parties hereto, either party hereby may give to the other party hereto notice of
its  intention  to submit such  dispute,  controversy,  claim or  difference  to
arbitration.  Such  arbitration  shall take  place in New York  City,  New York,
United States of America,  before a single arbitrator agreed upon by the parties
to the  arbitration.  In the event the parties to the  arbitration  cannot agree
upon an  arbitrator  within  twenty  (20) days after  either  party's  notice to
arbitrate,  such arbitration shall take place in Atlanta, Georgia, United States
of  America,  if  initiated  and  brought  by  Distributor,  or Tokyo,  Japan if
initiated and brought by Company,  before a single  arbitrator  appointed by the
American Arbitration  Association in accordance with the Rules and Supplementary
Procedures.

17

The parties  hereto agree that each party to the  arbitration  is to pay an
equal part of the deposit fixed by the American  Arbitration  Association or the
arbitrator. The determinations of such arbitrator will be final and binding upon
the parties to the  arbitration,  and  judgment  upon the award  rendered by the
arbitrator may be entered in any court having  jurisdiction,  or application may
be made to such  court for a  judicial  acceptance  of the award and an order of
enforcement,  as the case may be. The arbitrator shall set forth the grounds for
his decision in the award. The parties acknowledge and agree that this Agreement
and any award  rendered  pursuant  to it shall be  governed  by the 1958  United
Nations  Convention  on the  Recognition  and  Enforcement  of Foreign  Arbitral
Awards.

The arbitrator  shall apply the law of the State of Georgia,  United States
of America, as to both substantive and procedural  questions,  but excepting any
State of Georgia  rule which would  result in judicial  failure to enforce  this
arbitration provision or any portion thereof.

All  proceedings  before the  arbitrator  shall be conducted in the English
language.  All documents and papers  submitted to the arbitrator shall be in the
English  language or accompanied  by a competent  English  language  translation
thereof.

(g)  Controlling  Language.  This  Agreement  has  been  written,  and  all
discussions  leading up to this  Agreement have been  conducted,  in the English
language which both parties thoroughly understand. Each party represents that it
has read and fully  understands  this  Agreement,  and  further  agrees that all
notices and other correspondence or communications  between the parties relating
to or under this Agreement will be made solely in the English language.

(h)  Independent  Contractor.  Distributor  shall operate as an independent
contractor and nothing  contained in this Agreement shall be deemed or construed
to recreate an employer/employee,  principal/agent,  joint venture, partnership,
or fiduciary relationship between the parties.

(i) Taxes.  Distributor  shall be  responsible  for paying all sales,  use,
transactional,  importation,  or other  value  added  taxes  (other  than  taxes
measured  by the net income of Company)  resulting  from the  completion  of the
transactions in the Territory contemplated by this Agreement.

(j) Authority. EACH OF THE SIGNATORIES INDIVIDUALLY REPRESENTS AND WARRANTS
THAT HE HAS THE REQUISITE  POWER AND  AUTHORITY TO ENTER INTO THIS  AGREEMENT ON
BEHALF OF THE PARTY FOR WHICH HE SIGNS AND THAT THE PARTY HAS THE FULL POWER AND
AUTHORITY TO FULLY PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT.

(k) Waivers. Either party's delay or failure to enforce any right or remedy
available to it under this Agreement or at law for Distributor's material breach
of or repeated  failure to perform a duty or an  obligation  hereunder  will not
constitute  a waiver  of such  right or  remedy  in  respect  of the same or any
subsequent breach of failure.

(l) Severability.  If any provision of this Agreement is held by a court of
competent  jurisdiction to be invalid or  unenforceable,  such provision will be
severed from this Agreement  without affecting the validity or enforceability of
any of the remaining provisions.

(m)  Heading  and  Captions.  Headings  and  captions  used  herein are for
convenience only and are not to be deemed part of this Agreement.

(n) Counterparts.  This Agreement may be executed in multiple counterparts,
each of which shall be an original,  and all of which together shall  constitute
one and the same instrument.

(o)  Further  Assurances.  The  parties  agree to execute  any and all such
further  agreements,  instruments  or  documents,  and to take  any and all such
further  action as may be necessary  or  desirable  to carry out the  provisions
hereof and to effectuate the proposes of this  Agreement.  Company hereby agrees
that any direct or indirect sale,  assignment or transfer of Company's rights to
manufacture Products to any third party in manner that prevents the Company from
fulfilling its obligations to Distributor  under this Agreement shall be subject
to such third party becoming  obliged through such sale,  assignment or transfer
to the terms of this Agreement to the same extent and subject to the same duties
and obligations as Company.

18

SCHEDULE F

MARKS

`                                     19
1343979v1

Exhibit 13

Item 5. Market for Registrant's  Equity and Related  Stockholder Matters - page
35 of annual shareholder report below:

MARKET PRICE OF COMMON STOCK

The Company's Common Stock is traded under the symbol "CRY." The following table
sets forth,  for the periods  indicated,  the intra-day high and low sale prices
per share of Common Stock on the NYSE.

2000                                                              High                 Low
----------------------------------------------------------------- -------------------- -------------------
First Quarter                                                     16 5/12               7 1/2
Second Quarter                                                    16 1/4               10 3/8
Third Quarter                                                     23 1/8               14 7/8
Fourth Quarter                                                    35 7/8               17 5/6
----------------------------------------------------------------- -------------------- -------------------

1999                                                              High                 Low
----------------------------------------------------------------- -------------------- -------------------
First Quarter                                                      8 1/2                6 5/6
Second Quarter                                                    12 5/12               6 2/3
Third Quarter                                                     10 1/6                7 1/2
Fourth Quarter                                                     9 1/4                7 3/8
----------------------------------------------------------------- -------------------- -------------------

Reflects adjustment for 3-for-2 stock split effected December 27, 2000.

1

Item 6. Selected Financial Data - page 36 of annual shareholder report below:

SELECTED FINANCIAL INFORMATION
--------------------------------------------------------------------------------------------------------------------
(In thousands except percentages and per share data) December 31,

OPERATIONS                                        2000          1999          1998          1997           1996
--------------------------------------------- ------------- ------------- ------------- -------------- -------------
Revenues                                     $77,096       $66,722      $60,691         $50,571        $36,866
Net Income                                     7,817         4,451        6,486           4,725          3,927
Research and development as a
percentage of revenues                        6.8%          6.6%         7.8%            7.8%           7.6%

EARNINGS PER SHARE 1,2
--------------------------------------------- ------------- ------------- ------------- -------------- -------------
Basic                                         $ 0.42        $ 0.24       $ 0.36          $ 0.33         $ 0.28
Diluted                                       $ 0.41        $ 0.24       $ 0.35          $ 0.32         $ 0.26

YEAR-END FINANCIAL POSITION
--------------------------------------------- ------------- ------------- ------------- -------------- -------------
Total assets                                $112,009       $94,025      $98,390         $54,402        $34,973
Working capital                               68,449        59,597

62,310          19,478         10,787
Long-term liabilities                         11,905         6,177        8,577          17,846          2,799
Shareholders' equity                          89,395        80,226       80,421          30,227         24,929
Current ratio                                    7:1           9:1          8:1             4:1            3:1
Shareholders' equity per diluted
common share 1,2                            $ 4.65        $ 4.27       $ 4.38          $ 2.03         $ 1.68

1    Reflects adjustment for the 3-for-2 stock split effected December 27, 2000.

2    Reflects adjustment for the 2-for-1 stock split effected June 28, 1996.

1343997v1

2

Item 8. Financial  Statements and Supplementary  Data - pages 22-37 of annual
shareholder report below:

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO CRYOLIFE, INC.:

We  have  audited  the  accompanying   consolidated  balance  sheet  of
CRYOLIFE,  INC.  AND  SUBSIDIARIES  as of December  31,  2000 and 1999,  and the
related consolidated statements of income,  shareholders' equity, and cash flows
for  each of the two  years  then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion  on  these  financial  statements  based  on our  audit.  The  financial
statements of the Company as of December 31, 1998, and for each of the two years
ended  December 31,  1998,  were  audited by other  auditors  whose report dated
February 2, 1999 expressed and unqualified opinion on those statements.

We conducted our audits in accordance with auditing standards generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principals  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audit provides a reasonable  basis
for our opinion.

In our opinion,  the  financial  statements  referred to above  present
fairly, in all material respects,  the financial position of CryoLife,  Inc. and
subsidiaries  as of  December  31,  2000  and  1999  and the  results  of  their
operations  and their cash flows for each of the two years  ended  December  31,
2000 in conformity with accounting  principles  generally accepted in the United
States.

ARTHUR ANDERSEN, LLP
Atlanta, Georgia
February 7, 2001

1344382v1

3

CryoLife, Inc.
Consolidated Balance Sheets
(in thousands, except per share data)

ASSETS
December 31,                                                                      2000                1999
----------------------------------------------------------------------------------------------------------

Current assets:                                                                                           
----------------------------------------------------------------------------------------------------------
Cash and cash equivalents                                              $        17,480    $          6,128
Marketable securities, at market                                                21,234              24,403
Receivables:
Trade accounts, less allowance for doubtful accounts of
$85 in 2000 and $528 in 1999                                              11,454              11,694
Note receivable, less allowance of $723                                     1,833                  --
Income taxes                                                                  574                  31
Other                                                                         711                 608
----------------------------------------------------------------------------------------------------------
Total receivables                                                               14,572              12,333
----------------------------------------------------------------------------------------------------------

Deferred preservation costs                                                     20,311              17,652
Inventories                                                                      3,994               4,597
Prepaid expenses                                                                   893               1,123
Deferred income taxes                                                              674                 983
----------------------------------------------------------------------------------------------------------
Total current assets                                                            79,158              67,219
----------------------------------------------------------------------------------------------------------

Property and equipment:                                                                                   
----------------------------------------------------------------------------------------------------------
Equipment                                                                    12,911              11,882
Furniture and fixtures                                                        4,327               3,147
Leasehold improvements                                                       14,149              14,487
Construction in progress                                                      8,219               1,001
----------------------------------------------------------------------------------------------------------
39,606              30,517
Less accumulated depreciation and amortization                               14,027              11,843
----------------------------------------------------------------------------------------------------------
Net property and equipment                                                25,579              18,674
----------------------------------------------------------------------------------------------------------

Other assets:                                                                                             
----------------------------------------------------------------------------------------------------------
Note receivable, less allowance of $241                                            643                  --
Goodwill, less accumulated amortization
of $405 in 2000 and $311 in 1999                                               1,495               1,590
Patents, less accumulated amortization
of $850 in 2000 and $794 in 1999                                              2,540               2,363
Other, less accumulated amortization
of $436 in 2000 and $742 in 1999                                               2,423               2,780
Deferred income taxes                                                              171               1,399
----------------------------------------------------------------------------------------------------------
Total assets                                                           $       112,009    $         94,025
----------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

4

CryoLife, Inc.
Consolidated Balance Sheets
(in thousands, except per share data)

LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,                                                                      2000                1999
----------------------------------------------------------------------------------------------------------

Current liabilities:                                                                                      
----------------------------------------------------------------------------------------------------------
Accounts payable                                                       $         2,914    $            975
Accrued expenses                                                                 1,054               1,595
Accrued compensation                                                             2,097               1,711
Accrued procurement fees                                                         3,537               2,874
Current maturities of capital lease obligation                                     173                 180
Current maturities of long-term debt                                               934                 287
----------------------------------------------------------------------------------------------------------
Total current liabilities                                                       10,709               7,622
----------------------------------------------------------------------------------------------------------

Capital lease obligations, less current maturities                               1,361               1,534
Convertible debenture                                                            4,393               4,393
Bank line of credit, less current maturities                                     6,151                  --
Other long-term debt                                                                --                 250
----------------------------------------------------------------------------------------------------------
Total liabilities                                                               22,614              13,799
----------------------------------------------------------------------------------------------------------

Commitments and Contingencies

Shareholders' equity:
Preferred stock $.01 par value per share;
authorized 5,000 shares including 2,000
shares of series A junior participating preferred stock;
no shares issued                                                               --                  --
Common stock  $.01 par value per share;
authorized 75,000 shares; issued 20,077 in 2000 and
20,041 shares in 1999                                                         201                 200
Additional paid-in capital                                                 64,936              64,359
Retained earnings                                                            31,381              23,564
Deferred compensation                                                           (45)                (57)
Accumulated other comprehensive income                                       (1,088)               (785)
Treasury stock; 1,356 shares in 2000 and 1,701
shares in 1999, at cost                                                    (5,990)             (7,055)
----------------------------------------------------------------------------------------------------------
Total shareholders' equity                                                      89,395              80,226
----------------------------------------------------------------------------------------------------------

Total liabilities and shareholders' equity                             $       112,009    $         94,025
----------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

5

CryoLife, Inc.
Consolidated Income Statements
(in thousands, except per share data)

Year Ended
December 31,                                                         2000           1999             1998
---------------------------------------------------------------------------------------------------------

Revenues:                                                                                                
---------------------------------------------------------------------------------------------------------
Preservation services and products                     $      76,480  $      65,845  $        60,179
Research grants and licenses                                     616            877              512
---------------------------------------------------------------------------------------------------------
77,096         66,722           60,691
---------------------------------------------------------------------------------------------------------
Costs and Expenses:                                                                                      
---------------------------------------------------------------------------------------------------------
Preservation services and products                            33,347         30,170           25,303
General, administrative, and marketing                        28,731         24,693           23,907
Research and development                                       5,207          4,396            4,708
Nonrecurring charges                                              --          2,355               --
Interest expense                                                 299            387              670
Interest income                                               (1,952)        (1,556)          (1,490)
Other income, net                                               (169)          (224)          (1,078)
----------------------------------------------------------------------------------------------------------
65,463         60,221           52,020
---------------------------------------------------------------------------------------------------------
Income before income taxes                                         11,633          6,501            8,671
Income tax expense                                                  3,816          2,050            2,185
---------------------------------------------------------------------------------------------------------
Net income                                                  $       7,817  $       4,451  $         6,486
---------------------------------------------------------------------------------------------------------
Earnings per share:
-------------------
Basic                                                  $        0.42  $        0.24  $          0.36
---------------------------------------------------------------------------------------------------------
Diluted                                                $        0.41  $        0.24  $          0.35
---------------------------------------------------------------------------------------------------------
Weighted average shares outstanding:
Basic                                                         18,541         18,512           17,961
---------------------------------------------------------------------------------------------------------
Diluted                                                       19,229         18,800           18,396
---------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

6

CryoLife, Inc.
Consolidated Statements of Cash Flows
(in thousands)

Year Ended December 31,                                              2000           1999             1998
---------------------------------------------------------------------------------------------------------
Net cash flows from operating activities:                                                                
---------------------------------------------------------------------------------------------------------
Net income                                             $       7,817  $       4,451  $         6,486
Adjustments to reconcile net income to net cash
flows provided by operating activities:
Deferred income recognized                                    --         (1,176)            (387)
Gain on sale of marketable equity securities                  --           (112)              (4)
Depreciation of property and equipment                     3,023          2,854            2,586
Amortization                                                 199            300              905
Provision for doubtful accounts                               21            121              176
Deferred income taxes                                      1,658           (970)          (1,948)
Nonrecurring charges                                          --          2,355               --
Tax effect of non-qualified option exercises                 595             --               --
Changes in operating assets and liabilities:
Trade and other receivables                             469         (1,707)          (1,797)
Income taxes                                           (543)            40              771
Deferred preservation costs                          (2,659)        (3,413)          (1,982)
Inventories                                          (1,433)        (2,882)          (3,010)
Prepaid expenses and other assets                       230            822             (706)
Accounts payable                                      1,095           (686)             295
Accrued expenses                                       (193)         1,321             (158)
----------------------------------------------------------------------------------------------------------
Net cash flows provided by operating activities               10,279          1,318            1,227
---------------------------------------------------------------------------------------------------------
Net cash flows from investing activities:                                                                
---------------------------------------------------------------------------------------------------------
Capital expenditures                                          (9,491)        (3,853)          (6,693)
Net proceeds from sale of IFM product line                        --             --           15,000
Other assets                                                      43           (783)            (752)
Purchases of marketable securities                            (5,729)        (5,123)         (34,063)
Sales of marketable securities                                 8,542          6,149            7,604
---------------------------------------------------------------------------------------------------------
Net cash flows used in investing activities                   (6,635)        (3,610)         (18,904)
----------------------------------------------------------------------------------------------------------
Net cash flows from financing activities:                                                                
---------------------------------------------------------------------------------------------------------
Principal payments of debt                                      (287)          (514)         (13,990)
Proceeds from debt issuance                                    6,835             --            1,680
Proceeds from note receivable                                    360             --               --
Principal payments on obligations under capital leases          (180)          (224)            (203)
Proceeds from exercise of options and issuance of stock        1,660            571           46,298  
Purchase of treasury stock                                      (612)        (4,296)          (3,350)
Net payments on notes receivable from shareholders                --             --               16
---------------------------------------------------------------------------------------------------------
Net cash flows provided by (used in) financing activities      7,776         (4,463)          30,451
---------------------------------------------------------------------------------------------------------
Increase (decrease) in cash                                        11,420         (6,755)          12,774
Effect of exchange rate changes on cash                               (68)            (2)              --
---------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year                        6,128         12,885              111
---------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                      $      17,480  $       6,128  $        12,885
---------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information - 
cash paid during the year for:                       
---------------------------------------------------------------------------------------------------------
Interest                                                    $         471  $         369  $           742
Income taxes                                                        2,215          3,816            3,568
---------------------------------------------------------------------------------------------------------
Non cash investing and financing activities:
Establishing capital lease obligation                  $          --  $          --  $         2,141
---------------------------------------------------------------------------------------------------------
Debt conversion into common stock                      $          --  $          --  $           608
---------------------------------------------------------------------------------------------------------
Purchase of property and equipment
in accounts payable                                  $         844  $           6  $           185
---------------------------------------------------------------------------------------------------------
Tax effects of non-qualified option exercises        $         595  $          --  $            --
---------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

7

CryoLife, Inc.
Consolidated Statements of Shareholders' Equity
(in thousands)

Notes
Common Shares   Additional                         Accumulated            Receivable     Total
Outstanding    Paid-In    Retained   Deferred        Other     Treasury     From     Shareholders'
Shares   Amount  Capital   Earnings Compensation  Comprehensive   Stock   Shareholders   Equity
Income
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997   14,553      $154    $17,642  $12,627           $--           $--    $(180)       $(16)      $30,227
-----------------------------------------------------------------------------------------------------------------------------------
Net income                         --        --         --    6,486            --            --        --          --        6,486
Unrealized gains on         
investments                        --        --         --       --            --           139        --          --          139
-------------
Comprehensive income                                                                                                         6,625
Follow-on equity offering,
net of $703 of offering
costs                         4,464        44     45,403       --            --            --        --          --       45,447
Exercise of options               150         1        338       --            --            --       121          --          460
Employee stock purchase plan       46        --        294       --            --            --        97          --          391
Convertible debenture              75         1        604       --            --            --        --          --          605
Purchase of treasury stock      (514)        --         --       --            --            --   (3,350)          --      (3,350)
Payment on shareholder note        --        --         --       --            --            --        --          16           16
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998   18,774       200     64,281   19,113            --           139   (3,312)          --       80,421
-----------------------------------------------------------------------------------------------------------------------------------
Net income                         --        --         --    4,451            --            --        --          --        4,451
Unrealized losses on
investments                      --        --         --       --            --         (922)        --          --        (922)
Translation adjustment             --        --         --       --            --           (2)        --          --          (2)
-------------
Comprehensive income                                                                                                         3,527
Exercise of options                74        --      (126)       --            --            --       305          --          179
Employee stock purchase plan       60        --        144       --            --            --       248          --          392
Issuance of stock options 
to a nonemployee                 --        --         60       --          (60)            --        --          --           --
Amortization of deferred
compensation                     --        --         --       --             3            --        --          --            3
Purchase of treasury stock      (567)        --         --       --            --            --   (4,296)          --      (4,296)
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999   18,341       200     64,359   23,564          (57)         (785)   (7,055)          --       80,226
-----------------------------------------------------------------------------------------------------------------------------------
Net income                         --        --         --    7,817            --            --        --          --        7,817
Unrealized losses on   
investments                      --        --         --       --            --         (235)        --          --        (235)
Translation adjustment             --        --         --       --            --          (68)        --          --         (68)
-------------
Comprehensive income                                                                                                         7,514
Exercise of options               392         1        338       --            --            --     1,389          --        1,728
Employee stock purchase plan       66        --        239       --            --            --       288          --          527
Amortization of deferred
compensation                     --        --         --       --            12            --        --          --           12
Purchase of treasury stock       (78)        --         --       --            --            --     (612)          --        (612)
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000   18,721      $201    $64,936  $31,381         $(45)      $(1,088)  $(5,990)         $--       89,395
===================================================================================================================================

See accompanying notes to consolidated financial statements.

8

CRYOLIFE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Summary of Significant Accounting Policies

Nature of Business

Founded  in  1984,  CryoLife,   Inc.  (the  "Company")  is  the  leader  in  the
preservation  of viable human  tissues for  transplant,  and is  developing  and
commercializing   additional   implantable   devices   for   use  in   vascular,
cardiovascular,  and orthopaedic  applications.  The Company's  primary business
segment, cryopreservation of human tissues, marketed in North and South America,
Europe,  and Asia. The Company develops  proprietary  implantable  bioadhesives,
including  BioGlue surgical  adhesive,  which it has begun  commercializing  for
vascular and pulmonary  applications  in North America,  Europe,  South America,
Asia,   South  Africa,   and  the  Middle  East.  In  addition,   the  Company's
bioprosthetic  implantable  products  include  stentless  porcine  heart  valves
marketed in Europe, South America, the Middle East, Canada, and South Africa, as
well as a proprietary  project to  transplant  human cells onto the structure of
animal  tissue.  Until  October  9,  2000,  the  Company  served as an  original
equipment  manufacturer  for  single-use  medical  devices  for use in  vascular
surgical procedures.  International  revenues were $5.1 million in 2000 and $4.0
million in 1999 and 1998.  Net revenues by product for the years ended  December
31, 2000, 1999, and 1998 were as follows:

2000              1999               1998
----------------- ------------------ -----------------
Preservation services:
Heart valve tissue                            $29,685           $29,043            $30,836
Vascular tissue                                21,279            19,273             14,270
Connective tissue                              16,132            11,200              7,720
---------------   ---------------    ---------------
Total preservation services                        67,096            59,516             52,826

BioGlue surgical adhesive                           6,405             1,657                883
Single-use medical devices                          2,208             3,717              5,672
Bioprosthetic products                                771               955                798
---------------   ---------------    ---------------
$76,480           $65,845            $60,179
===============   ===============    ===============

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its  wholly-owned  subsidiaries.   All  significant  intercompany  balances  are
eliminated.

Reclassifications

Certain  prior  year  balances  have been  reclassified  to  conform to the 2000
presentation.

Use of Estimates

The  preparation  of  the  accompanying  consolidated  financial  statements  in
conformity with accounting  principles  generally  accepted in the United States
requires  management to make estimates and assumptions  that affect the reported
amounts of assets and  liabilities  and disclosure of contingent  liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  periods.  Actual results could differ from those
estimates.

9

Revenue Recognition

Revenues for  preservation  services are  recognized as services are  performed.
Revenues from medical  devices and other products are recognized at the time the
product is shipped or title passes  pursuant to customer  terms.  Revenues  from
research grants are recognized in the period the associated  costs are incurred,
and license  revenues  are  recognized  in the period  cash is received  and all
licensor  obligations  have been fulfilled.  Amounts  recognized as revenues are
fixed and collectibility of the related receivables is reasonably assured.

Cash and cash equivalents

Cash   equivalents   consist   primarily  of  highly  liquid   investments  with
insignificant  interest  rate risk and maturity  dates of 90 days or less at the
time of acquisition.  The carrying value of cash equivalents  approximates  fair
value.

Marketable Securities

The  Company  maintains  cash  equivalents  and  investments  in several  large,
well-capitalized  financial  institutions,  and the Company's  policy  disallows
investment  in any  securities  rated less than  "investment-grade"  by national
rating services.

Management  determines the appropriate  classification of debt securities at the
time of purchase and  reevaluates  such  designations  as of each balance  sheet
date.  Debt securities are classified as  held-to-maturity  when the Company has
the  positive   intent  and  ability  to  hold  the   securities   to  maturity.
Held-to-maturity  securities are stated at amortized  cost.  Debt securities not
classified as  held-to-maturity  or trading and marketable equity securities not
classified as trading are classified as  available-for-sale.  Available-for-sale
securities  are  stated at their  fair  values,  with the  unrealized  gains and
losses,  net of tax, reported in a separate  component of shareholders'  equity.
The  amortized  cost of debt  securities  classified  as  available-for-sale  is
adjusted for  amortization  of premiums and  accretion of discounts to maturity.
Such  amortization is included in investment  income.  Realized gains and losses
and  declines in value judged to be other than  temporary on  available-for-sale
securities  are included in investment  income.  The cost of securities  sold is
based  on  the  specific   identification  method.  Interest  and  dividends  on
securities classified as available-for-sale  are included in interest income. At
December 31, 2000 and 1999, all marketable equity securities and debt securities
were designated as available-for-sale.

Deferred Preservation Costs

Tissue is procured from deceased human donors by organ procurement organizations
and tissue  banks which  consign the tissue to the  Company for  processing  and
preservation.  Preservation  costs  related to tissue  held by the  Company  are
deferred until shipment to the implanting hospital.  Deferred preservation costs
consist primarily of laboratory  expenses,  tissue  procurement fees, fringe and
facility  allocations,  and  freight-in  charges,  and are stated on a first-in,
first-out basis.

Inventories

Inventories  are  comprised  of  single-use   medical   devices,   bioprosthetic
implantable products,  and implantable  bioadhesives and are valued at the lower
of cost (first-in, first-out) or market.

Property and Equipment

Property and  equipment  are stated at cost.  Depreciation  is provided over the
estimated  useful  lives  of the  assets,  generally  five  to ten  years,  on a
straight-line  basis.  Leasehold  improvements  are amortized on a straight-line
basis over the lease term or the estimated useful lives of the assets, whichever
is shorter.

10

Intangible Assets

Goodwill  resulting from business  acquisitions  is amortized on a straight-line
basis over 20 years.  Patent costs are amortized over the expected  useful lives
of the  patents  (primarily  17 years)  using the  straight-line  method.  Other
intangibles, which consist primarily of manufacturing rights and agreements, are
being amortized over the expected useful lives of the related assets  (primarily
five years).

The Company periodically evaluates the recoverability of noncurrent tangible and
intangible  assets and measures the amount of  impairment,  if any, by assessing
current  and future  levels of income  and cash flows as well as other  factors,
such as business trends and prospects and market and economic conditions.

Long-lived Assets

The Company records  impairment  losses on long-lived  assets in operations when
events and  circumstances  indicate  that the assets  might be impaired  and the
undiscounted  cash flows estimated to be generated by those assets are less than
the carrying amount of those assets.

Income Taxes

Deferred  income tax assets and  liabilities  are  recognized for the future tax
consequences   attributable  to  temporary  differences  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective  tax bases.  Deferred tax assets and  liabilities  are measured using
enacted  income tax rates  expected  to apply to taxable  income in the years in
which those temporary differences are expected to be recovered or settled.

Stock Split

On November 27,  2000,  the Board of Directors  declared a  three-for-two  stock
split,  effected in the form of a stock dividend,  payable on December 27, 2000,
to  shareholders  of  record  on  December  8,  2000.  All  share  and per share
information  in the  accompanying  consolidated  financial  statements  has been
adjusted to reflect such split.

Comprehensive Income

Statement  of  Financial   Accounting   Standards  (SFAS)  No.  130,  "Reporting
Comprehensive Income" ("Statement 130"), establishes standards for the reporting
and  display  of  comprehensive  income  and  its  components  in a full  set of
comparative general-purpose financial statements. The statement became effective
for the Company in 1998. Comprehensive income is defined in Statement 130 as net
income  plus  other  comprehensive  income,  which,  under  existing  accounting
standards,   includes   foreign  currency  items,   minimum  pension   liability
adjustments and unrealized  gains and losses on certain  investments in debt and
equity  securities.   Comprehensive  income  disclosures  are  included  in  the
Consolidated Statements of Shareholders' Equity.

New Accounting Pronouncement

On January 1, 2001, the Company was required to adopt SFAS No. 133,  "Accounting
for  Derivative  Instruments  and  Hedging  Activities"  ("Statement  133"),  as
amended.  Statement  133  requires  the  Company  to  recognize  all  derivative
instruments on the balance sheet at fair value,  and changes in the derivative's
fair value must be  recognized  currently  in  earnings  or other  comprehensive
income, as applicable.  The adoption of Statement 133 impacts the accounting for
the Company's forward-starting interest rate swap agreement.

The Company maintains a construction line of credit,  which converts to floating
rate debt (i.e.,  term loan) upon  completion  of the expansion of the Company's
corporate  headquarters (Note 5). This floating rate debt exposes the Company to
changes in interest rates going forward.  On March 16, 2000, the Company entered
into  $4  million  in  notional  amounts  of a  forward-starting  interest  swap

11

agreement  that  take  effect on June 1,  2001.  This  swap  agreement  has been
designated  as a cash  flow  hedge  to  effectively  convert  a  portion  of its
anticipated term loan balance to a fixed rate basis, thus reducing the impact of
interest rate changes on future income.  This agreement  involves the receipt of
floating rate amounts in exchange for fixed rate interest payments over the life
of the agreement without an exchange of the underlying  principal  amounts.  The
differential  to be paid or  received is accrued as  interest  rates  change and
recognized  as an  adjustment  to  interest  expense  related to the debt.  Upon
adoption  of SFAS  133 in 2001,  the  Company  recorded  an  unrealized  loss of
approximately  $175,000 related to the interest rate swap, which was recorded as
part of long-term  liabilities and accumulated other  comprehensive  income. The
reclassification  of any gains or losses  associated with the interest rate swap
into the statement of income is anticipated  to occur upon the various  maturity
dates of the interest rate swap agreement, which expires in 2006.

During 1999, the Securities and Exchange Commission released Staff Bulletin 101,
"Revenue Recognition in Financial Statements" which clarifies the basic criteria
for  recognizing  revenue.  The Company  adopted this bulletin during the fourth
quarter 2000.  The adoption of this  bulletin did not have a material  impact on
the consolidated financial statements.

2. Ideas for Medicine, Inc.

On March 5, 1997 the  Company  acquired  the stock of Ideas for  Medicine,  Inc.
("IFM"),   a  medical  device  company   specializing  in  the  manufacture  and
distribution of single-use  medical devices,  for consideration of approximately
$4.5 million in cash and  approximately  $5.0 million in convertible  debentures
plus related  expenses.  The cash portion of the purchase  price was financed by
borrowings  under the Company's  revolving term loan agreement.  Pursuant to the
purchase agreement, an additional  consideration of $700,000 was paid in January
2000.  In  connection  with this  acquisition,  the Company  also entered into a
consulting  agreement  with the former  majority  shareholder  of IFM  requiring
monthly payments to such shareholder of approximately $17,000 until March 2002.

On September 30, 1998 the Company completed the sale of substantially all of the
IFM product line and certain  related assets to Horizon Medical  Products,  Inc.
("HMP")  for $15  million  in cash  pursuant  to an  asset  purchase  agreement.
Concurrently,  IFM and HMP signed a  Manufacturing  Agreement (the  "Agreement")
which provided for the manufacture by IFM of specified minimum dollar amounts of
IFM  products  to be  purchased  exclusively  by HMP over each of the four years
following the sale. Thereafter,  responsibility for such manufacturing was to be
assumed by HMP.

The Company  recorded  deferred  income at the  transaction  date  totaling $2.9
million,  representing  the selling  price less the net book value of the assets
sold, which included $7.7 million of goodwill, net of accumulated  amortization,
and the costs related to the sale. The income was deferred  because the sale and
manufacturing agreements represented, in the aggregate, a single transaction for
which the related income should be recognized over the term of the manufacturing
agreement.  Accordingly, the deferred income was reflected in cost of goods sold
during  1999 and 1998 to  maintain  margins  that would have been  approximately
equal over the four-year  period of the  Agreement on the products  manufactured
and sold by IFM to HMP.  During 1999 and 1998  amortization  of deferred  income
totaled $1.2 million and $387,000, respectively.

On June 22, 1999 IFM notified  HMP that it was in default of certain  provisions
of the Agreement.  Specifically,  HMP was in violation of the payment provisions

12

contained within the Agreement,  which called for inventory purchases to be paid
for  within  45 days of  delivery.  Additionally,  HMP was in  violation  due to
nonpayment of interest related to such past due accounts receivable.

After  notification  of the default,  HMP indicated to the Company that it would
not be able to meet and did not meet the minimum purchase  requirements outlined
in the  Agreement.  At December 31,  1999,  the Company  determined  that it had
incurred  an  impairment   loss  on  its  IFM  assets  due  to  the  significant
uncertainties related to the Company's ability to realize its investment in IFM.
In  calculating  the amount of the  impairment  loss,  management  used its best
estimate to determine the  realizable  value of its increase in working  capital
due to the HMP  default  and the  recoverability  of  IFM's  long-lived  assets,
consisting  primarily  of leasehold  improvements  and  equipment.  As a result,
management recorded a $2.1 million impairment loss on working capital and a $2.6
million  impairment loss on leasehold  improvements.  Additionally,  the Company
offset the above  charges  with $2.5  million of  deferred  income  recorded  in
connection  with the sale of the IFM product line to HMP. The net pretax  effect
of the above  nonrecurring  charges was $2.2 million and has been included under
the caption  "Nonrecurring  charges"  in the  accompanying  Consolidated  Income
Statements.  At December 31, 1999, after recognition of the impairment loss, IFM
assets consisted of $800,000 of accounts receivable,  $1.7 million of inventory,
$1.6 million of building, and $360,000 of equipment.

On October 9, 2000 the Company sold substantially all of the remaining assets of
IFM to HMP. The assets consisted primarily of inventory, equipment and leasehold
improvements.  The  transaction  provides  for HMP to pay the Company the sum of
approximately $5.9 million,  payable in equal monthly  installments of principal
and interest of $140,000.  The note  consists of a portion,  approximately  $3.8
million, which bears interest at 9% per year, and a non-interest-bearing portion
of approximately  $2.1 million.  The note also requires an additional $1 million
principal  payment at any time prior to April 3, 2001. If the $1 million payment
is made when due, and no other defaults exist under the note, then $1 million of
the  non-interest-bearing  portion of the note will be forgiven. In addition, at
such time as the principal  balance has been paid down to $1.1 million and there
have been no defaults under the promissory  note, the remainder of the note will
be forgiven and the note will be canceled.

In addition, CryoLife has entered into a sublease agreement with HMP under which
HMP  has  assumed  responsibility  for  the IFM  manufacturing  facility.  Also,
substantially all of the employees of IFM have become employees of HMP.

3.  Marketable Securities

The following is a summary of available-for-sale securities (in thousands):

Unrealized        Estimated
Holding          Market
December 31, 2000                           Cost              Losses           Value
----------------- ----------------- -----------------
Municipal obligations                 $         17,789  $            (2)  $         17,787
Equity securities                                9,889           (1,540)             8,349
----------------  ----------------  ----------------
$         27,678  $        (1,542)  $         26,136
================  ================  ================

Unrealized        Estimated
Holding            Market
December 31, 1999                           Cost             Losses            Value
----------------- ----------------- -----------------
Municipal obligations                 $         20,223  $          (226)  $         19,997
Equity securities                                9,444             (959)             8,485
----------------  ----------------  ----------------
$         29,667  $        (1,185)  $         28,482
================  ================  ================

13

The gross realized gains on sales of  available-for-sale  securities  totaled $0
and $112,000 in 2000 and 1999, respectively. Differences between cost and market
of a $1.5 million  (less  deferred  taxes of  $524,000)  and a $1.2 million loss
(less  deferred  taxes of  $403,000)  are  included as a separate  component  of
shareholders' equity as of December 31, 2000 and 1999, respectively.

At December  31, 2000 and 1999,  approximately  $4.9  million and $4.1  million,
respectively,  of debt securities with original maturities of 90 days or less at
their acquisition dates were included in cash and cash equivalents.  At December
31, 2000  approximately  $8.3 million of  investments  mature within 90 days, no
investments  had a maturity date between 90 days and 1 year,  and  approximately
$21.2 million of investments mature between 1 and 5 years.

4.  Inventories

Inventories at December 31 are comprised of the following (in thousands):

2000                 1999
-------------------- -------------------
Raw materials                            $1,796              $1,555
Work in process                             405                 578
Finished goods                            1,793               2,464
-----               -----
$3,994              $4,597
======              ======

5.  Long-Term Debt

Long-term debt at December 31 consists of the following (in thousands):

2000              1999
----------------    --------------
Line of credit  bearing  interest  equal to the Adjusted LIBOR plus 2%,
to be adjusted monthly.  Upon the earlier of completion of construction
of the Company's expanded  headquarters or June 30, 2001, the line will
convert to a 5 year term loan bearing  interest at Adjusted  LIBOR plus
1.5%.                                                                             $6,835                 --

7% convertible debenture, due in March 2002                                        4,393              4,393

8.25% note payable due in equal annual installments of $250,000                      250                500

Note payable due in 2000 with an effective  interest rate of 8%, net of 
unamortized discount of $3,000 in 1999                                                --                 37
----------------    --------------
11,478              4,930

Less current maturities                                                              934                287
----------------    --------------
Total long-term debt                                                             $10,544             $4,643
================    ==============

14

As amended on June 12, 1998, the Company  executed a $10 million  revolving loan
agreement (the "Loan Agreement") with a bank which permits the Company to borrow
up to $2.0 million at either the bank's prime rate of interest (9.5% at December
31, 2000) or at adjusted LIBOR, as defined, plus an applicable LIBOR margin. The
Loan Agreement expires on December 31, 2001. The Loan Agreement contains certain
restrictive  covenants  including,  but not limited to,  maintenance  of certain
financial  ratios  and a  minimum  tangible  net  worth  requirement.  The  Loan
Agreement is secured by  substantially  all of the Company's  assets,  excluding
intellectual  property.  Commitment fees are paid based on the unused portion of
the facility.

On April 25, 2000 the Company entered into a loan agreement  ("Line  Agreement")
which  permits  the  Company to borrow up to $8  million  under a line of credit
during the expansion of the Company's corporate  headquarters.  Borrowings under
the line of credit  bear  interest  equal to the  Adjusted  LIBOR  plus 2% to be
adjusted monthly (8.8% at December 31, 2000).  Upon the earlier of completion of
construction  or June 30,  2001,  the line of credit will be converted to a term
loan to be paid in 60 equal  monthly  installments  of principal  plus  interest
computed  at  Adjusted  LIBOR plus 1.5%.  The Line  Agreement  contains  certain
restrictive  covenants  including,  but not limited to,  maintenance  of certain
financial  ratios  and a  minimum  tangible  net  worth  requirement.  The  Line
Agreement is secured by substantially  all of the Company's assets. A commitment
fee of $20,000 was paid when the Company  entered  into the Line  Agreement.  At
December 31, 2000,  $1.2 million was available to be borrowed  under the line of
credit.

In March  1997  the  Company  issued a $5.0  million  convertible  debenture  in
connection with the IFM  acquisition.  The debenture bears interest at 7% and is
due in March 2002. The debenture is convertible into common stock of the Company
at any time prior to the due date at $8.05 per common share. In conjunction with
the  Company's  follow-on  equity  offering  in April of 1998,  $607,000  of the
convertible  debenture was converted into 75,000 shares of the Company's  common
stock on March 30, 1998.

On September 12, 1996 the Company acquired the assets of United Cryopreservation
Foundation,  Inc. ("UCFI"),  a processor and distributor of cryopreserved  human
heart valves and  saphenous  veins for  transplant.  The Company  issued a $1.25
million note in  connection  with the  acquisition.  The note bears  interest at
prime, as adjusted annually on the anniversary date of the acquisition.

Scheduled  maturities  of long-term  debt for the next five years are as follows
(in thousands):

2001                       $934
2002                      5,760
2003                      1,367
2004                      1,367
2005                      1,367
Thereafter                        683
-------
$11,478

6.    Fair Values of Financial Instruments

Statement of Financial  Accounting  Standards No. 107,  "Disclosures  about Fair
Value of Financial Instruments", requires the Company to disclose estimated fair
values for its financial  instruments.  The carrying  amounts of receivables and
accounts payable approximate their fair values due to the short-term maturity of
these  instruments.   The  carrying  value  of  the  Company's  other  financial
instruments approximated fair value at December 31, 2000 and 1999.

15

7.  Commitments and Contingencies

Leases

The Company leases equipment,  furniture,  and office space under various leases
with  terms of up to 19 years.  Commencing  January 5, 1998 the  Company  leased
office and manufacturing  facilities under a capital lease for $24,125 per month
with an  interest  rate at 8% per annum  through  January  2008 from the  former
majority  shareholder of IFM. This lease is subject to a sublease agreement with
HMP as discussed in footnote number 2. Certain leases contain escalation clauses
and renewal options for additional periods.  Future minimum lease payments under
noncancelable leases as of December 31, 2000 are as follows (in thousands):

Capitalized                      Operating
Leases                          Leases     
--------------------------------------------------------------------------------------------------
2001                                             $             290               $           2,061
2002                                                           290                           1,947
2003                                                           290                           1,942
2004                                                           290                           1,896
2005                                                           290                           1,905
Thereafter                                                     579                          20,779
--------------------------------------------------------------------------------------------------
Total minimum lease payments                                 2,029               $          30,530
=================
Less amount representing interest                              495
------------------------------------------------------------------
Present value of net minimum
lease payments                                             1,534
Less current portion                                           173
------------------------------------------------------------------
$           1,361
==================================================================

Property  acquired  under  capital  leases at December 31, 2000  consists of the
following (in thousands):

Buildings                                        $           1,987
Accumulated depreciation                                       596
-----------------
$           1,391
=================

Total rental expense for operating  leases  amounted to $1,478,000,  $1,457,000,
and  $1,321,000,  for 2000,  1999, and 1998,  respectively.  Total rental income
under the sublease  with HMP was $95,000 in 2000.  No rental income was received
in 1999 and 1998.

Litigation, Claims, and Assessments

The Company is party to various legal  proceedings  arising in the normal course
of  business,  most of which  involve  claims for  personal  injury and property
damage incurred in connection with its operations.  Management believes that the
outcome of its various legal proceedings will not have a material adverse effect
on the Company's financial position or results of operations.

16

8.  Stock Option Plans

The  Company  has stock  option  plans  which  provide  for grants of options to
employees  and  directors to purchase  shares of the  Company's  common stock at
exercise prices generally equal to the fair values of such stock at the dates of
grant,  which generally become  exercisable over a five-year  vesting period and
expire within ten years of the grant dates.  Under the 1993  Employee  Incentive
Stock  Option  Plan,  the 1998  Long-Term  Incentive  Plan,  and the amended and
restated  Nonemployee  Director's  Plan, the Company has authorized the grant of
options  of up to  1,050,000,  900,000,  and  594,000  shares of  common  stock,
respectively.  As of December 31, 2000 and 1999,  there were 994,000 and 575,000
shares of common stock reserved for future  issuance  under the Company's  stock
option plans. A summary of stock option transactions under the plans follows:

Exercise            Weighted Average
Shares              Price               Exercise Price
--------------    -----------------    --------------------
Outstanding at December 31, 1997                  1,131,000           $2.00-12.29                   $5.96
Granted                                             496,000            8.00-11.50                   10.35
Exercised                                          (155,000)            2.08-6.83                    3.20
Canceled                                           (232,000)           2.08-12.29                   10.69
--------------    -----------------    --------------------
Outstanding at December 31, 1998                  1,240,000            2.00-11.50                    7.17
Granted                                             503,000            7.92-11.42                    9.24
Exercised                                           (74,000)            2.00-6.83                    2.44
Canceled                                           (150,000)           6.83-11.42                   11.30
--------------    -----------------    --------------------
Outstanding at December 31, 1999                  1,519,000            2.33-11.50                    7.67
Granted                                             492,000           11.50-29.15                   13.99
Exercised                                          (416,000)            2.33-9.00                    3.85
Canceled                                            (45,000)            6.83-9.00                    8.64
--------------    -----------------    --------------------
Outstanding at December 31, 2000                  1,550,000           $5.67-29.15                  $10.67
==============    =================    ====================

The following table summarizes  information concerning currently outstanding and
exercisable options:

Options Outstanding                                    Options Exercisable
---------------------------------------------------------------------------- --------------------------------

Weighted Average       Weighted                         Weighted
Remaining           Average                          Average
Range of Exercise          Number         Contractual          Exercise          Number         Exercise
Prices               Outstanding           Life               Price        Exercisable         Price
-------------------- ----------------- ---------------------- -------------- ----------------- --------------
$       5.67-8.21             393,000           2.8               $7.52          291,000           $7.46
8.23-11.42             506,000           3.6                9.64          275,000           10.56
11.50-11.63             556,000           4.9               11.56          225,000           11.50
12.92-29.15              95,000           6.1               24.04               --              --
-----------------                                       -----------------
$5.67-29.15           1,550,000           4.0              $10.67          791,000           $9.69
=================                                       =================

In September  1999,  the Company  granted  options to a nonemployee  to purchase
18,000  shares of common  stock at an  exercise  price of $8.21  per  share.  In
connection with the issuance of these options, the Company recognized $60,000 as

17

deferred  compensation  for the  estimated  fair value of the options.  Deferred
compensation is amortized ratably over the vesting period of the options.

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
"Accounting  for Stock Issued to Employees"  and related  interpretations  ("APB
25") in accounting for its employee stock options  because,  as discussed below,
the alternative fair value accounting  provided for under Statement of Financial
Accounting  Standards  No.  123,   "Accounting  for  Stock-Based   Compensation"
("Statement  123"),  requires  use of  option  valuation  models  that  were not
developed for use in valuing  employee stock options.  Under APB 25, because the
exercise  price of the Company's  employee stock options equals the market price
of the underlying  stock on the date of the grant,  no  compensation  expense is
recognized.

Pro forma information regarding net income and earnings per share is required by
Statement  123,  which  requires  that the  information  be determined as if the
Company has  accounted  for its employee  stock  options  granted under the fair
value method of that statement. The fair values for these options were estimated
at the  dates of grant  using a  Black-Scholes  option  pricing  model  with the
following weighted-average assumptions:

2000              1999             1998
----------------- ----------------- ----------------
Expected dividend yield                                       0%                0%               0%
Expected stock price volatility                              .540              .540             .520
Risk-free interest rate                                     6.39%             5.78%             5.30%
Expected life of options                                    4.3 Years         3.6 Years         3.8 Years

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective assumptions,  including the expected stock price volatility.  Because
the  Company's  employee  stock  options  have   characteristics   significantly
different  from those of traded  options and because  changes in the  subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures,  the estimated fair values of the options
are amortized to expense over the options'  vesting  periods.  The Company's pro
forma information follows (in thousands, except per share data):

2000             1999              1998
----------------- ---------------- -----------------
Net income--as reported                                          $7,817           $4,451            $6,486
Net income--pro forma                                            $6,634           $3,421            $5,705
Earnings per share--as reported:
Basic                                                         $ 0.42           $ 0.24            $ 0.36
Dilutive                                                      $ 0.41           $ 0.24            $ 0.35
Earnings per share--pro forma:
Basic                                                         $ 0.36           $ 0.19            $ 0.32
Dilutive                                                      $ 0.35           $ 0.18            $ 0.31

Other information concerning stock options follows:

2000              1999              1998
---------------- ----------------- -----------------
Weighted   average  fair  value  of  options  granted
during the year                                               $6.97             $3.75             $4.36
Number   of   shares   as  to   which   options   are
exercisable at end of year                                  791,000           923,000           757,000

18

9.  Shareholder Rights Plan

On November 27, 1995 the Board of Directors adopted a shareholder rights plan to
protect  long-term share value for the Company's  shareholders.  Under the plan,
the Board declared a distribution of one Right for each outstanding share of the
Company's  Common  Stock  to  shareholders  of  record  on  December  11,  1995.
Additionally,  the Company has further  authorized  and directed the issuance of
one Right with  respect to each  Common  Share  that  shall  become  outstanding
between  December  11, 1995 and the  earliest of the  Right's  exercise  date or
expiration date. Each Right entitles the registered  holder to purchase from the
Company   one-thirtieth   of  a  share  of  a  newly  created  Series  A  Junior
Participating  Preferred  Stock at an exercise price of $100. The Rights,  which
expire on November 27, 2005,  may be exercised  only if certain  conditions  are
met, such as the  acquisition of 15% or more of the Company's  Common Stock by a
person or affiliated group ("Acquiring Person").

In the event the Rights  become  exercisable,  each Right will enable the owner,
other than the  Acquiring  Person,  to  purchase,  at the Right's  then  current
exercise price,  that number of shares of Common Stock with a market value equal
to twice the exercise price times the number of one-tenth of a share of Series A
Junior Participating Preferred Stock for which the Right is then exercisable. In
addition,  unless the  Acquiring  Person  owns more than 50% of the  outstanding
shares of  Common  Stock,  the Board of  Directors  may  elect to  exchange  all
outstanding  Rights  (other  than those  owned by such  Acquiring  Person) at an
exchange ratio of one share of Common Stock per Right appropriately  adjusted to
reflect any stock split, stock dividend or similar transaction.

10.  Stock Repurchase

On October 14, 1998, the Company's Board of Directors  authorized the Company to
purchase up to 1.5 million  shares of its common  stock.  The purchase of shares
will  be  made  from  time-to-time  in  open  market  or  privately   negotiated
transactions on such terms as management deems  appropriate.  As of December 31,
2000,  1999 and 1998,  the Company had  purchased  an  aggregate  of  1,159,000,
1,081,000 and 514,000 shares, respectively, of its common stock for an aggregate
purchase price of $8,258,000, $7,646,000 and $3,350,000, respectively.

11.  Employee Benefit Plans

The Company has a 401(k) savings plan (the "Plan") providing retirement benefits
to all employees who have completed at least six months of service.  The Company
makes matching contributions of 50% of each participant's  contribution up to 5%
of each participant's salary. Total company contributions approximated $407,000,
$351,000,  and $241,000, for 2000, 1999, and 1998,  respectively.  Additionally,
the Company may make discretionary  contributions to the Plan that are allocated
to each participant's account. No such discretionary  contributions were made in
2000, 1999, or 1998.

On May 16, 1996 the Company's shareholders approved the CryoLife,  Inc. Employee
Stock Purchase Plan (the "ESPP").  The ESPP allows eligible  employees the right
to purchase  common stock on a quarterly basis at the lower of 85% of the market
price  at the  beginning  or end of  each  three-month  offering  period.  As of
December 31, 2000 and1999 there were 688,000 and 754,000,  respectively,  shares
of common stock  reserved under the ESPP and there had been 212,000 and 146,000,
respectively, shares issued under the plan.

19

12. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):

2000                1999               1998
-----------------    ---------------    ----------------
Numerator for basic and diluted earnings
per share -- income available to common
shareholders                                         $7,817             $4,451              $6,486
=================    ===============    ================

Denominator for basic earnings per share -
weighted-average shares                              18,541             18,512              17,961
Effect of dilutive stock options                           688                288                 435
-----------------    ---------------    ----------------
Denominator for diluted earnings per share
- adjusted weighted-average shares                   19,229             18,800              18,396
=================    ===============    ================
Basic earnings per share                                $ 0.42             $ 0.24              $ 0.36
=================    ===============    ================
Diluted earnings per share                              $ 0.41             $ 0.24              $ 0.35
=================    ===============    ================

13.  Income Taxes

Income tax expense consists of the following (in thousands):

2000               1999              1998
------------------ ------------------ ---------------
Current:
Federal                                                         $2,272             $2,912          $3,854
State                                                             (114)               108             279
------------------ ------------------ ---------------
2,158              3,020           4,133
Deferred                                                           1,658               (970)         (1,948)
------------------ ------------------ ---------------
$3,816             $2,050          $2,185
================== ================== ===============

20

Such  amounts  differ from the amounts  computed  by applying  the U.S.  federal
income  tax rate of 34% to  pretax  income  as a  result  of the  following  (in
thousands):

2000              1999             1998
------            ------           ------
Tax expense at statutory rate                                $3,955            $2,210           $2,947
Increase (reduction) in income taxes
Resulting from:
Entertainment expenses                                       47                47               90
State income taxes, net of federal                          231               163              173
Benefit
Nontaxable interest income                                 (264)             (232)             (63)
Research and development credits                           (125)             (100)            (585)
State and local tax refunds                                  --                --             (256)
Other                                                       (28)              (38)            (121)
------            ------           ------
$3,816            $2,050           $2,185
======            ======           ======

The tax  effects  of  temporary  differences  which  give rise to  deferred  tax
liabilities and assets at December 31 are as follows (in thousands):

2000              1999
----------------- ----------------
Long-term deferred tax (liabilities) assets:
Property                                                                        $(756)            (556)
Intangible assets                                                                 538              579
Impairment of IFM long-lived assets                                                --              993
---------------   --------------
(218)            1,016
Current deferred tax assets (liabilities):
Impairment of IFM inventory                                                        --              634
Unrealized gain on marketable securities                                          524              403
Allowance for bad debts                                                           398              201
Accrued expenses                                                                  104               98
Deferred preservation costs and inventory reserves                                 87               57
Other                                                                             (50)             (27)
---------------   --------------
1,063            1,366
---------------   --------------
Net deferred tax assets                                                             $845           $2,382
===============   ==============

At December  31,  2000,  the Company has  recorded a net  deferred  tax asset of
$845,000.  Realization  of the net deferred tax asset is dependent on generating
sufficient  taxable  income  in  future  periods.  Although  realization  is not
ensured,  management  believes that it is more likely than not that the deferred
tax asset will be realized.

14.  Executive Insurance Plan

Pursuant to a supplemental life insurance program for certain executive officers
of the Company, the Company and the executives share in the premium payments and
ownership of insurance  policies on the lives of such executives.  The Company's
aggregate premium  contributions under this program were $53,000,  $33,000,  and
$43,000, for 2000, 1999, and 1998, respectively.

21

15.  Equipment on Loan to Implanting Hospitals

The Company consigns liquid nitrogen freezers with certain implanting  hospitals
for tissue  storage.  The freezers are the property of the Company.  At December
31, 2000  freezers with a total cost of  approximately  $1.9 million and related
accumulated  depreciation  of  approximately  $1.2  million  were located at the
implanting  hospitals'  premises.  Depreciation  is provided  over the estimated
useful lives of the freezers on a straight-line basis.

16.  Transactions with Related Parties

The Company expensed $78,000, $60,000, and $68,000, during 2000, 1999, and 1998,
respectively, relating to services performed by a law firm whose sole proprietor
is a  member  of the  Company's  Board of  Directors  and a  shareholder  of the
Company.  The Company expensed  $102,000,  $64,000 and $75,000 in 2000, 1999 and
1998, respectively, relating to consulting services performed by a member of the
Company's  Board of Directors  and a  shareholder  of the  Company.  The Company
expensed $150,000, $195,000, and $210,000 in 2000, 1999, and 1998, respectively,
relating to consulting services performed by a shareholder of the Company.

1343740

22

SELECTED QUARTERLY FINANCIAL INFORMATION
-------------------------------------------------------------------------------------------------------------------
(In thousands except per share data)

First         Second        Third         Fourth
REVENUES                                          Year       Quarter       Quarter       Quarter        Quarter
----------------------------------------------- ---------- ------------- ------------- ------------- --------------
2000       $19,623      $19,454        $19,524         $18,495
1999        16,325       17,395         16,529          16,473
1998        14,561       15,554         16,014          14,562

NET INCOME
----------------------------------------------- ---------- ------------- ------------- ------------- --------------
2000        $1,604       $1,979         $2,308          $1,926
1999         1,380        1,727          1,714           (370)
1998         1,172        2,048          1,902           1,364

EARNINGS PER SHARE - DILUTED 1
----------------------------------------------- ---------- ------------- ------------- ------------- --------------
2000        $ 0.09       $ 0.10         $ 0.12          $ 0.10
1999          0.07         0.09           0.09          (0.02)
1998          0.08         0.10           0.10            0.07

1    Reflects adjustment for the 3-for-2 stock split effected December 27, 2000.

1343997v1

23

EXHIBIT 21.1

SUBSIDIARIES OF CRYOLIFE, INC.

Subsidiary                                           Jurisdiction
----------                                           ------------

Ideas for Medicine, Inc.                             Florida
CryoLife Technology, Inc.                            Nevada
CryoLife Foreign Sales, Inc.                         Barbados
CryoLife Europa, LTD.                                United Kingdom
AuraZyme Pharmaceuticals, Inc.                       Florida

1345645

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent  public  accountants,  we hereby consent to the  incorporation by
reference  of our reports  dated  February 7, 2001,  appearing on page 35 of the
Company's 2000 Annual Report and incorporated  into Exhibit 13.1 and page S-1 of
this Form 10-K, into the Company's previously filed Registration  Statement File
Nos. 333-16581, 33-83996, 33-84048, 333-03513,  333-59853, 333-59849, 333-06141,
333-34025, 333-75535, and 333-47310.

/s/ Arthur Andersen LLP

Atlanta, Georgia
March 27, 2001

1344867

Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the use of our report  dated  February 2, 1999 with respect to the
consolidated financial statements of CryoLife,  Inc. for the year ended December
31, 1998, included in this Annual Report (Form 10-K).

Our audits,  also included the financial  statement  schedule of CryoLife,  Inc.
listed in Item 14(a) for the year ended December 31, 1998.  This schedule is the
responsibility of the Company's management.  Our responsibility is to express an
opinion  based on our  audits.  In our  opinion,  as of the  date of our  report
referred  to in  the  preceding  paragraph,  the  financial  statement  schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole,  presents fairly in all material  respects the information set
forth therein for the year ended December 31, 1998.

We also consent to the incorporation by reference in Registration Statements No.
333-75535,  33-83996,  33-84048,  333-03513,  333-39849,  333-06141,  333-34025,
333-75535,  and 333-47310, of our report dated February 2, 1999, with respect to
the consolidated  financial  statements and our report included in the preceding
paragraph  with respect to the  financial  statement  schedule  included in this
Annual  Report  (Form 10-K) of CryoLife,  Inc.  for the year ended  December 31,
2000.

Ernst & Young LLP

Atlanta, Georgia
March 27, 2001

1345123