Exhibit 10.1

SETTLEMENT AGREEMENT AND RELEASE

This Settlement Agreement and Release (“Agreement”) is entered into by CryoLife,
Inc. (“CryoLife”) and St. Paul Mercury Insurance Company (“St. Paul”).  CryoLife
and St. Paul are collectively referred to herein as the “Parties.”

RECITALS

WHEREAS, St. Paul issued Excess Policy No. 590CM0484 to CryoLife, with effective
dates of coverage from May 1, 2002 to May 1, 2003 (the “Policy”);

WHEREAS, the Policy was excess of $10 million in underlying coverage provided by
the primary policy issued by National Union Fire Insurance Company ($5 million)
and a first-layer excess policy issued by Zurich Insurance Company ($5 million)
(collectively, the “Underlying Policies”);

WHEREAS, CryoLife also had a third layer of excess coverage, excess of the
Underlying Policies, provided by Royal Indemnity Company (“Royal”), in the
amount of $5 million (“Royal Policy”);

WHEREAS, in July 2002, a securities class action lawsuit styled In re CryoLife,
Inc. Securities Litigation; Civil Action No. 1:02-CV-1868-BBM in the United
States District Court for the Northern District of Georgia Atlanta Division (the
“Securities Lawsuit”) was filed against CryoLife and several of its directors
and officers;

WHEREAS, in January 2003, a shareholder derivative lawsuit styled Farley v.
Anderson, et al., Case No. 2003-CV-64109 in the Superior Court of Fulton County,
Georgia (the “Derivative Lawsuit”) was filed against several of CryoLife’s
directors and officers;

WHEREAS, CryoLife submitted the Securities Lawsuit and Derivative Lawsuit for
coverage consideration under the Underlying Policies, the Policy, and the Royal
Policy;

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WHEREAS, following mediation in July 2004, CryoLife demanded that its insurers
settle the Securities Lawsuit for $16 million;

WHEREAS, St. Paul declined to tender its excess policy’s limits of liability to
settle the Securities Lawsuit for $16 million;

WHEREAS, the settlement offer in the Securities Lawsuit was withdrawn soon
thereafter;

WHEREAS, on April 4, 2005, CryoLife settled the Derivative Lawsuit for $3.5
million;

WHEREAS, on July 21, 2005, CryoLife settled the Securities Lawsuit for $23.25
million, consisting of $19.5 million in cash and $3.75 million in CryoLife
stock;

WHEREAS, the Parties dispute whether St. Paul acted properly by not tendering
the Policy’s limits of liability to settle the Securities Lawsuit in July 2004
(the “Coverage Dispute”);

WHEREAS, the Parties participated in mediation of the Coverage Dispute on May
18, 2006, but were unable to reach agreement;

WHEREAS, the Parties desire to avoid the cost, expense and uncertainty of
litigation and/or mediation and therefore enter into this Agreement to discharge
all claims, controversies or disputes between or among them arising from the
Securities Lawsuit, the Derivative Lawsuit, the Coverage Dispute and the Policy,
according to the following terms and conditions contained in this Agreement.

AGREEMENTS AND RELEASES

Now, therefore, in consideration of the foregoing recitals and the mutual
covenants and promises hereafter set forth, this Agreement is hereby made and
confirmed between the Parties as follows:

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1.             Payment by St. Paul

In consideration of the releases set forth below, St. Paul agrees to pay
CryoLife TWO MILLION, TWO HUNDRED FIFTY THOUSAND DOLLARS and No/100
($2,250,000.00) (the “Settlement Amount”).  St. Paul shall remit the Settlement
Amount to CryoLife in the form of a check payable to “Bondurant, Mixson &
Elmore, LLP, in Trust for CryoLife, Inc.” to the offices of Bondurant, Mixson &
Elmore, LLP, 3900 One Atlantic Center, 1201 West Peachtree Street, N.W.,
Atlanta, Georgia 30309 within five (5) days of the undersigned parties executing
and delivering this Agreement to Neil Dilloff, DLA Piper US LLP, 6225 Smith
Avenue, Baltimore, MD 21209-3600 and Darren Summerville, Bondurant, Mixson &
Elmore, LLP, 3900 One Atlanta Center, 1201 West Peachtree Street, N.W., Atlanta,
Georgia 30309.

2.             Full Compliance of All Obligations

CryoLife hereby confirms, stipulates and agrees that upon execution of and
performance of the obligations set forth in this Agreement, St. Paul will have
fully and completely satisfied all obligations, requirements and duties owed to
CryoLife and all other Insureds under the Policy, under common law, statute, or
otherwise, relating to the matters released herein, including without limitation
the Securities Lawsuit, the Derivative Lawsuit, the Coverage Dispute and the
Policy.

3.             Mutual Releases

In consideration of the recitals set forth herein, execution of this Agreement,
payment of the Settlement Amount and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, CryoLife, on its behalf
and on behalf of any and all other insured persons, entities or organizations
who claim or who may claim any right under the Policy, covenants not to sue St.
Paul and releases, acquits and forever discharges St. Paul, its present,

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former and future parent companies, managers, divisions, subsidiaries,
affiliates, associates, representatives, predecessors, successors, heirs,
owners, assigns, directors, agents, attorneys, third party administrators,
partners, principals, officers, employees, trustees, representatives, insurers,
reinsurers and all other persons, natural and corporate, in privity with it,
separately or severally, from any and all past, present or future claims,
demands, suits or causes of action of any kind whatsoever, including but not
limited to claims for coverage and indemnification, at common law, statutory, or
otherwise, which CryoLife has or might have, known or unknown, arising out of
the Securities Lawsuit, the Derivative Lawsuit, the Coverage Dispute or the
Policy, specifically including all claims for reimbursement or indemnification
of all fees or costs arising from or related in any way to the defense and
settlement of the Securities Lawsuit, the Derivative Lawsuit or the Coverage
Dispute.

This Agreement specifically includes, but is not limited to, any claims or
causes of action for compensatory, punitive or statutory damages based upon any
alleged breach of the duty of good faith and fair dealing, unfair claims
settlement practices, violation of any statute, including without limitation
O.C.G.A. § 33-4-6, and any other applicable provision of the Georgia Insurance
Code, or any other acts, omissions, obligations, requirements and duties in any
way arising out of, relating to, or in consequence of the Securities Lawsuit,
the Derivative Lawsuit, the Coverage Dispute and the Policy.

In consideration of the recitals set forth herein, execution of this Agreement,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, St. Paul, on its behalf and on behalf of all persons
released in CryoLife’s foregoing release of St. Paul, covenants not to sue and
releases, acquits and forever discharges CryoLife and all persons giving
releases in CryoLife’s foregoing release of St. Paul, separately or severally,
from any and

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all past, present or future claims, demands, suits or causes of action of any
kind whatsoever, known or unknown, arising out of the Securities Lawsuit, the
Derivative Lawsuit, the Coverage Dispute or the Policy, specifically including
all claims for reimbursement or recoupment of any amounts paid by St. Paul in
the Securities Lawsuit or the Derivative Lawsuit.

4.             Indemnity Agreement

CryoLife agrees to defend, indemnify, and hold harmless St. Paul and all persons
released by CryoLife pursuant to Paragraph 3 , from any future claims, demands,
suits or causes of action of any kind whatsoever that arise as a result of
CryoLife’s prosecution of any claim or claims against Royal for its actions or
omissions in connection with the Securities Lawsuit, the Derivative Lawsuit, the
Coverage Dispute or the Policy.

5.                                      Ownership of Claims

The Parties warrant and represent that they have actual authority to release the
claims they purport to release and that they have not and will not assign any
interest in the claims, demands, obligations or causes of action referred to in
this Agreement or any rights arising out of the Policy to any other person or
entity.

6.                                      Confidentiality

This Agreement, and the terms and information contained herein, and all
negotiations and communications in connection herewith (collectively, the
“Confidential Material”) shall be kept confidential and shall not be disclosed
to anyone under any circumstances except as required by law or order of a
court.  The Parties shall keep each other fully and promptly advised of any
efforts to require the disclosure of the Confidential Material.  In the event
that either party receives any subpoena, discovery request or similar document
which could result in disclosure of the Confidential Material, before any
Confidential Material is disclosed, notice of the

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information request shall be given to the other party in sufficient time to give
that party an opportunity to file a Motion to Quash, or, in the alternative, a
Motion for Protective Order, and in no event later than seven (7) days after
receipt of the subpoena, discovery request, or similar document.  Notice shall
be given by both certified mail and facsimile as follows:

To St. Paul:

Neil J. Dilloff

DLA Piper US LLP

6225 Smith Avenue

Baltimore, MD 21209-3600

Fax: (410) 580-3138

To CryoLife, Inc.:

Darren Summerville

Bondurant, Mixson & Elmore, LLP

1201 West Peachtree Street, NW

Suite 3900

Atlanta, GA 30309

Fax: (404) 881-4111

This Confidential Material shall be deemed to fall within the protection
afforded compromises and offers to compromise by the Georgia Rules of Evidence
and the Federal Rules of Evidence.

The Parties further acknowledge and agree that CryoLife, notwithstanding the
confidentiality provisions of this section, has reporting obligations under
securities law to acknowledge receipt of the Settlement Amount as a “material”
event.  The Parties agree to collaborate and agree on disclosure language
sufficient to protect the Parties’ mutual interest in confidentiality, while
simultaneously satisfying CryoLife’s independent reporting obligations. The
agreement of the disclosure language shall be in writing.  No party shall
unreasonably withhold its agreement to the disclosure language.

Willful violation of the confidentiality provisions of this Agreement, if proven
by clear and convincing evidence, shall subject the violating party to
liquidated damages in the amount of Twenty-Five Thousand and no/100 ($25,000)
Dollars, plus reasonable attorneys’ fees and costs

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associated with proving the violation.  These liquidated damages provisions
shall not apply to any of mandatory reporting requirements referenced in the
preceding paragraph.

7.                                      No Admission of Coverage

In executing this Agreement, the Parties do not admit or concede any issues
regarding coverage under the Policy.  Further, no action by St. Paul in handling
the claims alleged in the Securities Lawsuit and the Derivative Lawsuit and in
executing this Agreement or otherwise will be construed by the Parties as
demonstrating or evidencing in any way that the Policy or any other identical or
similar insurance policy issued by St. Paul or its related companies provides
coverage for any of the matters or claims released herein or any similar matters
or claims.  The Parties also agree that this Settlement is a compromise of
disputed claims and that the payment made and other consideration given in
settlement thereof are not to be construed as an admission of any fact, law,
wrongdoing or liability on the part of any Party released in Paragraph 3 of this
Agreement.

8.             Successors

It is understood and agreed that this Agreement shall be binding upon the
Parties and their respective heirs, representatives, successors and assigns,
including without limitation any other insurers for CryoLife.

9.             Entire Agreement

This Agreement constitutes the entire agreement between the Parties and
supersedes any and all prior agreements, arrangements, or understandings.  No
other understandings, statements, promises, compromises, representations or
inducements contrary to the terms set forth herein exist.

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10.          Severability

In the event that any of the provisions of this Agreement are deemed to be
invalid and unenforceable, those provisions shall be severable from the
remainder of this Agreement.

11.          Change in Known Facts

The Parties understand, acknowledge and agree that if any fact now believed to
be true is found hereafter to be other than or different from that which is now
believed, each party hereto expressly assumes the risk of such difference in
fact and agrees that this Agreement shall be and will remain effective
notwithstanding any such difference in fact.

12.          Authority

The Parties warrant and represent that they have agreed to the terms of this
Agreement, are authorized to enter into this Agreement and are competent to
execute this Agreement.

13.          Acknowledgement of Legal Advice

The Parties acknowledge that they have read and fully and completely understand
each and every term of this Agreement, and execute the Agreement of their own
free will and accord for the purposes of the consideration set forth. 
Furthermore, the Parties confirm, with respect to each of the terms and
provisions of this Agreement, that they have conferred with their respective
attorneys concerning the effect and obligations imposed thereby and that they
fully understand them.

14.          Agreement Not to Prosecute Claims

CryoLife further agrees that it will not prosecute or assist in the prosecution
of any legal proceeding against St. Paul or any other persons, natural and
corporate, in privity with them, or any one of them, separately or severally,
which has as a purpose the recovery of any matter released or waived under this
Agreement, including losses arising in any way out of the facts and

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circumstances giving rise to the Securities Lawsuit and the Derivative Lawsuit. 
CryoLife further warrants that it will not assist any insurance company or
syndicate in any claim of contribution, indemnity, subrogation, allocation
and/or apportionment against St. Paul arising out of the Securities Lawsuit, the
Derivative Lawsuit, the Coverage Dispute or the Policy.

15.          Attorneys’ Fees and Costs

The Parties agree and acknowledge that they will bear their own attorneys’ fees
and costs arising from or relating to the Securities Lawsuit, the Derivative
Lawsuit, the Coverage Dispute, this Agreement and all matters referenced herein,
except as provided in Paragraph 6 of this Agreement in the event of a proven
willful violation of the confidentiality provisions of this Agreement.

16.          Governing Law

The laws of the State of Georgia shall govern any dispute concerning the terms
and enforceability of this Agreement.

17.          Headings

The Parties agree and acknowledge that all headings contained in this Agreement
are used solely for the convenience of the Parties and are not to be interpreted
as part of this Agreement.

18.          Multiple Counterparts

This Agreement may be executed by the Parties in multiple counterparts, each of
which shall be deemed an original and all of which together shall constitute the
same agreement.

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Date: September 25, 2006

CRYOLIFE, INC.

 

 

 

 

 

By:

/s/ D. Ashley Lee

 

 

 

Authorized Representative

 

 

 

 

 

Printed Name:

D. Ashley Lee

 

 

 

 

STATE OF GEORGIA

§

 

 

 

§

 

 

COUNTY OF Cobb

§

 

 

 

BEFORE ME, the undersigned Notary Public, on this day personally appeared D.
Ashley Lee, authorized representative for CryoLife, Inc., who after being duly
sworn by me, stated on oath that he/she read and executed this Settlement
Agreement and Release for the purposes and consideration herein expressed.

SIGNED this 25th day of September, 2006.

 

/s/ Suzanne K. Gabbert

 

 

Notary Public in and for the

 

State of Georgia

 

 

Notary Public, Cobb County, Georgia

 

My Commission Expires:

My Commission Expires Sept. 13, 2006

 

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Date: 9/22/06

ST. PAUL MERCURY INSURANCE

 

 

COMPANY

 

 

 

 

 

By:

/s/ William J. Kobokovich

 

 

 

Authorized Representative

 

 

 

 

 

Printed Name:

William J. Kobokovich, Jr.

 

 

 

 

STATE OF MARYLAND

§

 

 

 

§

 

 

COUNTY OF BALTIMORE

§

 

 

 

 

 

 

 

BEFORE ME, the undersigned Notary Public, on this day personally appeared
William J. Kobokovich, Jr., the authorized representative for St. Paul Mercury
Insurance Company, who after being duly sworn by me, stated on oath that he/she
read and executed this Settlement Agreement and Release for the purposes and
consideration herein expressed.

SIGNED this 22nd day of September, 2006.

/s/ Lori D. Myers

 

LORI D. MYERS

 

Notary Public in and for the

 

NOTARY PUBLIC

 

State of Maryland

 

CARROLL COUNTY

 

 

 

MARYLAND

 

My Commission Expires:

1/1/08

 

 

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