UNITED STATES
                 SECURITIES AND EXCHANGE COMMISSION
                       WASHINGTON, D.C. 20549

                               FORM 10-K

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

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

For the fiscal year ended                   Commission File No.
   December 31, 1996                                 0-15443

                       THERAGENICS CORPORATION
       (Exact name of registrant as specified in its charter)

        Delaware                          58-1528626
(State of incorporation)     (I.R.S. Employer Identification Number)

      5325 Oakbrook Parkway
       Norcross, Georgia                              30093
(Address of principal executive offices)            (Zip Code)

Registrant's telephone number, including area code:(770) 381-8338

    Securities registered pursuant to Section 12(b) of the Act:
Title of each class     Name of each exchange on which registerer
        None                               None

    Securities registered pursuant to Section 12(g) of the Act:
                        Title of Class
 Common Stock,  par value $.01 per share, together with the  associated
               Common Stock Purchase Rights

   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 for 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.  YES    X      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 _____.

   As of March 18, 1997 the aggregate market value of the common 
stock of the registrant held by non-affiliates of the registrant,  
as determined by reference to the closing  price of the Common Stock 
as  reported  on the Nasdaq  National Market system, was $244,272,249.
<PAGE>

    As of March 18,  1997 the number of shares of common stock, $.01 par value,
outstanding was 11,843,503.

    Documents incorporated by  Reference:  Proxy Statement for the resigtrant's
1997 Annual Meeting of Stockholders - to be filed with the Securities and
Exchange Commission not later than 120 days after December 31, 1996, is
incorporated by reference in Part III herein.
<PAGE>

Part I

Item 1.  BUSINESS

General

    Theragenics Corporation  ("Theragenics" or the "Company") is a leader in the
production and marketing of implantable  radiation devices used in the treatment
of  prostate  cancer.  The  Company  produces  and  markets   TheraSeed(R),   an
FDA-licensed device based on Pd-103, a radioactive isotope.  Management believes
the Company is the only  producer of Pd-103 for use in medical  devices.  In the
treatment of prostate cancer, TheraSeeds(R) are implanted into the prostate in a
one-time,  minimally invasive  procedure.  The radiation emitted by the seeds is
contained  within the immediate  prostate area,  killing the tumor while sparing
surrounding organs.  TheraSeed(R) has been shown in independent clinical studies
to offer success rates that are comparable to or better than other  conventional
therapies,  while being associated with a reduced incidence of side effects.  In
addition,  TheraSeed(R)  offers significant quality of life and cost advantages.
Since  1987,  TheraSeed(R)  has been used by  physicians  in nearly 300  centers
across the United States in approximately 13,000 procedures for prostate cancer,
including   approximately  4,000  procedures  in  1996.  Sales  of  TheraSeed(R)
increased  65% in 1995  and 58% in 1996  due to  reliable  production  from  the
Company's  cyclotron-based   manufacturing  process  and  increased  demand  for
TheraSeed(R) as a result of significantly  increased  marketing  efforts and the
release of favorable clinical data. TheraSeed(R) has also been used on a limited
basis to treat cancers of the pancreas, lung, head, neck, oral cavity, brain and
eye.

  On February 24, 1997, the Company entered into a letter of intent with Indigo
Medical, Inc., a subsidiary of Johnson & Johnson, stating the intent to grant to
Indigo the exclusive  worldwide  right to market and sell  TheraSeed(R)  for the
treatment of prostate cancer.  The letter of intent is subject to the completion
of definitive  documentation  and approval by the respective Boards of Directors
of the Company and Indigo. Management believes the proposed alliance with Indigo
would provide for sales growth and  international  expansion  while allowing the
Company to focus its resources on  maintaining  its leadership in the production
of Pd-103 for prostate  cancer  treatment and other potential  applications.  By
leveraging the extensive worldwide marketing  capability of Indigo and Johnson &
Johnson,  the  Company  would  eliminate  the  need  to  develop  an  extensive,
vertically integrated sales, marketing and education and training network.

  Theragenics  received an FDA license for TheraSeed(R) in 1986 and commenced  
product  sales in 1987.  The  Company  has been  profitable  in every quarter  
since  1991.  In  1992,  management  increased  its  control  over  the
manufacture of  TheraSeed(R)  by integrating  into the Company the production of
<PAGE>

Pd-103. This significantly increased capacity for the production of TheraSeed(R)
while maintaining quality and regulatory compliance.

Industry Overview

Prostate Cancer

  Prostate  cancer is the most common form of cancer,  and the second  leading
cause of cancer deaths,  in men. It is expected to account for approximately 43%
of all cancers to be diagnosed in men during 1997.  Based on industry  data, the
Company  estimates  that the cost of  treating  prostate  cancer  exceeded  $3.0
billion in the United States in 1995. The American Cancer Society  estimates new
cases of prostate cancer grew 30% in 1996 to 317,000 from 244,000 cases in 1995,
with deaths  associated  with the disease  estimated  to have grown to 41,400 in
1996 from 40,000 in 1995.  Principal reasons for the significant increase in new
cases have been advances in diagnostic technology and increased media attention,
including  publicity  regarding several highly visible individuals who have made
public their battles with the disease.  Estimates by the United States Bureau of
Census indicate that the number of men most prone to prostate  cancer,  those 40
to 80 years old,  will grow to 55  million by 2006 from 45 million in 1996.  The
Company  estimates its market share in the  treatment of localized,  early-stage
prostate cancer to be approximately 2.5%.

  The prostate is a walnut-sized  gland surrounding the male urethra,  located
below the bladder and adjacent to the rectum.  The two most  prevalent  prostate
diseases are benign prostatic  hyperplasia ("BPH") and prostate cancer. BPH is a
non-cancerous enlargement of the innermost part of the prostate. Prostate cancer
is a malignant  tumor that begins most often in the  periphery of the gland and,
like other forms of cancer, may spread beyond the prostate to other parts of the
body. If left  untreated,  prostate  cancer can metastasize to the lung or bone,
resulting  in death.  The  following  table  summarizes  the  various  stages of
prostate cancer.

       Classification                   Stage of Progression
              A                Clinically unsuspected
              B                Tumor confined to the prostate gland (localized)
              C                Tumor outside prostate capsule
              D                Metastasized into pelvic lymph nodes
             D2                Metastasized into distant lymph nodes,
                               organs, soft tissues or bone

Source:  American Urological Association Today

  Prostate cancer can grow slowly or quickly and  virulently,  and its cause and
potential  methods of prevention are currently  unknown.  The risk of developing
prostate cancer increases with age. By way of comparison,  studies indicate that
one in five men in the United States can expect to develop the disease,  whereas
one in eight women in the United States may expect to contract breast cancer.
With prompt treatment, the long-term outlook for men with localized, 
early-stage prostate cancer is considered favorable.

<PAGE>

  Approximately  58% of new prostate cancer diagnoses are defined to be at the
localized  stage of the  disease.  Prostate  cancer is  typically  curable  when
detected early, but the lack of early-stage  symptoms makes diagnosis difficult.
Until 1988, the best method of routine  examination  had been the digital rectal
exam,  which  requires the existence of solid tumors for  detection.  In 1988, a
diagnostic  test was developed that  determines the amount of prostate  specific
antigen ("PSA") present in the blood.  PSA is found in a protein secreted by the
prostate,  and elevated levels of PSA are associated with either  prostatitis (a
noncancerous  inflammatory  condition) or a proliferation of cancer cells in the
prostate. The widespread acceptance of the PSA test greatly improved physicians'
ability  to  diagnose  prostate  cancer  at an  early  stage  and  significantly
increased  the number of new cases  diagnosed  annually.  Industry  studies have
shown that the PSA test can detect prostate cancer as many as five years earlier
than the digital  rectal  exam.  The PSA test is  currently  part of the routine
medical  check-up  for prostate  assessment.  Transrectal  ultrasound  tests and
biopsies  are  typically  performed  on patients  with  elevated PSA readings to
confirm the existence of cancer.

Treatment Options

  In  addition  to  seeding,  prostate  cancer  can be  treated  with  radical
prostatectomy ("RP"), external beam radiation therapy ("EBRT"), hormone therapy,
chemotherapy and watchful waiting. Some of these therapies may be combined.  The
treatments  that have been most  successful are those that remove or kill all of
the cancerous tissue while avoiding excessive damage to the surrounding  healthy
tissue.  When the  cancerous  tissue is not  completely  eliminated,  the cancer
typically returns to the primary site, often with metastases to other areas. The
following  is a summary of  treatment  options for  prostate  cancer  other than
seeding.

    Radical  Prostatectomy is a major surgical procedure that involves the 
complete removal of the prostate gland.  This procedure has been used for 30 
years and is considered  to be the standard  medical treatment for early-stage,
localized tumors.  RP typically requires a three to seven day hospital stay and 
a lengthy recovery period (generally four to six weeks). Side effects include  
impotence and  incontinence.  The cost of RP ranges from $20,000 to $30,000 per 
procedure, excluding treatment for side effects and postoperative complications.
Approximately 120,000 men underwent RP in 1995.

    External Beam Radiation Therapy involves directing a beam of radiation at
the prostate gland to destroy  tumorous tissue and has been a common  technique
for  treating  many kinds of cancer  since the 1950s.  EBRT has  typically  been
reserved for  early-stage  prostate  cancer in locally  advanced cases where the
patient  presents an  inappropriate  surgical  risk.  The therapy  consists of a
series of daily  treatments  usually  lasting  from six to eight  weeks.  Rectal
<PAGE>


complications  resulting  from damage to the rectal wall caused by the radiation
beam as it travels to the prostate are the most common side  effects.  Principal
side effects also include  incontinence  and  impotence,  but these side effects
generally occur with less frequency than they do following RP. EBRT is estimated
to cost  between  $12,000  to  $15,000  per  patient.  Approximately  35,000 men
underwent EBRT in 1995.

  Ancillary   Therapies,   primarily   consisting   of  hormone   therapy  and
chemotherapy,  are used to slow the growth of cancer and reduce tumor size,  but
are  generally not intended to be curative.  Ancillary  therapies are often used
during advanced stages of the disease to extend life and relieve symptoms.  Side
effects of hormonal  drug  therapy  include  increased  development  of breasts,
impotence  and  decreased  libido.  In addition,  many  hormone  pharmaceuticals
artificially lower PSA levels in patients,  which can interfere with staging the
disease and  monitoring  its  progress.  Side  effects of  chemotherapy  include
nausea, hair loss and fatigue.  Drug therapy and chemotherapy require long-term,
repeated administration of medication on an outpatient basis.

  Watchful Waiting is recommended by some physicians in certain  circumstances
based on the severity and growth rate of the disease,  as well as on the age and
life  expectancy of the patient.  The aim of watchful  waiting is to monitor the
patient,  treat some of the attendant  symptoms and  determine  when more active
intervention is required.  Watchful waiting requires  periodic  physician visits
and PSA monitoring.

  In  addition  to the  treatment  options  described  above,  other  forms of
treatment are being developed and tested in clinical trials. Cryosurgery,  which
freezes and destroys  diseased  tissue,  has been used to treat prostate cancer,
but to the Company's knowledge has not demonstrated a long-term curative effect.
Photon  radiosurgery,  a  developmental  stage  form  of  treatment  that  emits
low-energy  x-rays from a probe and irradiates the tumor from the inside out, is
undergoing  clinical  studies for the  treatment  of  metastatic  brain  tumors.
Clinical trials for prostate cancer are not anticipated to begin until late 1997
or early 1998.

The Theragenics Solution

  Theragenics  produces  and  markets  TheraSeed(R),  an  FDA-licensed device
currently used principally in seeding for the treatment of prostate  cancer.  In
this application, TheraSeeds(R) are implanted throughout the prostate gland in a
minimally invasive surgical technique under ultrasound  guidance.  The radiation
emitted by the seeds is contained  within the immediate  prostate area,  killing
the tumor while  sparing  surrounding  organs.  The seeds,  whose  capsules  are
biocompatible,  are not removed after  delivering  their  radiation  dose to the
prostate.  TheraSeed(R) is best suited for solid localized tumors and is usually
classified as a treatment for early-stage disease.
<PAGE>

  Management believes  TheraSeed(R) offers significant  advantages over RP and
EBRT.  Recent  multi-year  clinical studies indicate that seeding offers success
rates that are  comparable  to or better  than  those of RP or EBRT and  reduced
complication  rates.  In  addition,  the  TheraSeed(R)  treatment  is a one-time
outpatient procedure with a two to three day recovery period. By comparison,  RP
is an inpatient procedure typically accompanied by a three to seven day hospital
stay and a four to six week  recovery  period,  and EBRT  involves  six to eight
weeks of daily radiation  treatments.  Treatment with TheraSeed(R) costs $10,000
to $15,000 per procedure,  which is substantially  lower than the cost of RP and
comparable to the cost of EBRT. In addition,  management  believes  TheraSeed(R)
offers   significant   competitive   advantages   over  I-125,   an  alternative
radioisotope  used in  seeding,  as a result of  Pd-103's  higher  dose rate and
shorter half-life.

  TheraSeed(R) is a radioactive "seed"  approximately 4.5 millimeters long and
0.81 millimeters  wide, or approximately  the size of a grain of rice. Each seed
consists  of  a  biocompatible   titanium  capsule  containing  the  radioactive
substance  Pd-103.  The half-life of Pd-103,  or the time required to reduce the
emitted radiation to one-half of its initial level, is 17 days, resulting in the
loss of almost all radioactivity in less than four months.

Treatment Protocol

  Prostate  cancer  patients  electing  seed therapy first undergo a transrectal
ultrasound  test or CT scan,  which  generates  a  two-dimensional  image of the
prostate that is transformed into a three-dimensional image. With the assistance
of a computer  program,  a treatment plan is designed that calculates the number
and  placement  of the seeds  required  for the best  possible  distribution  of
radiation to the prostate.

  Once the implant  model has been  constructed,  the procedure is scheduled and
the seeds are ordered. The number of seeds implanted ranges from 40 to 100, with
the number of seeds  varying  with the size of the  prostate.  The  procedure is
usually performed under local anesthesia in an outpatient setting. An ultrasound
probe is first  positioned  in the  rectum to guide  needle  placement  and seed
location.  Correct needle placement is facilitated by a template,  or grid, that
covers the perineum  (the area between the scrotum and rectum  through which the
needles are inserted) and is attached to the ultrasound  probe.  Implant needles
loaded with seeds are assigned to the appropriate template holes as indicated in
the treatment  plan. Each needle is guided through the template and then through
the perineum to its  predetermined  position  within the  prostate  under direct
ultrasound  visualization.  The seeds are  implanted  as the needle is withdrawn
from the prostate.  When all seeds have been inserted,  the ultrasound  image is
again reviewed to verify seed placement.

  An experienced  practitioner typically performs the procedure in approximately
60 to 90 minutes,  with the patient often returning home at day's end.  Recovery

<PAGE>

time is typically  two to three days. In contrast,  RP generally  requires up to
three hours to perform,  with a three to seven-day  hospital  stay and a typical
recovery period of four to six weeks.  EBRT requires daily outpatient  radiation
treatments  for a  period  of six to eight  weeks.  Seeding  has been  used as a
treatment  for  prostate  cancer  since the early  1970s,  when I-125 seeds were
implanted  in prostate  tumors  under open  surgery.  However,  this "free hand"
technique fell into disfavor because the seeds were often  haphazardly  arranged
leading  to  inhomogeneous  dosimetry,   with  suboptimal  antitumor  effect  in
underdosed areas and significant damage to collateral  tissues,  particularly in
the urethra and rectum,  in overdosed areas.  Clinical results indicate that the
computer  modeling and  advanced  imaging and other  techniques  used in seeding
today have virtually eliminated these drawbacks.

Clinical Results

  Strong Efficacy  Results.  Clinical data indicates that seeding offers success
rates that are  comparable  to or better  than  those of RP or EBRT.  In a study
described in Urology Times in September 1994, Drs. John Blasko and Haakon Ragde
of the Northwest Tumor Institute in Seattle,  Washington, found, in a study of 
298 men with early-stage  prostate cancer, an actuarial local control rate of
96%, after treatment with either Pd-103 or I-125 seed implantation.  A study  
published in 1995 by Drs. Blasko and Ragde found  100% of the 111 patients  
treated with TheraSeed(R) for  localized early-stage prostate cancer showed no 
localized prostate cancer after treatment follow-up  ranging from 12-73 months,
with a median  follow-up of 32 months.  The actuarial disease-free  rate at 54 
months was 89%.  Updating their previous study on patients treated with Pd-103 
or I-125 for a paper prepared for the First  International  Consultation on 
Prostate Cancer organized by the World Health  Organization  in June 1996,  
Drs.  Blasko and Ragde  found a  seven-year actuarial local  disease-free rate 
of 97% for 320 patients treated for localized early-stage prostate cancer. They 
also presented therein an eight-year actuarial local disease-free rate of 87% 
for 188 patients who were considered to represent higher  risks of  locally  
advanced  prostate  cancer  and were  treated  with a combination  of Pd-103 or 
I-125  seeding and a modified dose of EBRT. A study by Dr. Michael Dattoli of 
University  Community  Hospital,  Tampa,  Florida and Dr. Kent Wallner of 
Memorial  Sloan-Kettering  Cancer  Center,  New York,  New York, published in 
the  International  Journal of  Radiation  Oncology,  Biology  and Physics in 
July 1996  found a  three-year  actuarial  freedom  from  biochemical failure  
(based  on PSA  scores)  of  79%  among  73  patients  with  clinically
localized,  high risk prostate  cancer who were treated with EBRT in combination
with Pd-103.  This compares  favorably to results  reported for patients treated
with conventional dose EBRT alone.  These locally advanced cases are significant
because  RP  guidelines  would  not  classify  them  as  suitable  for  surgical
treatment.

  Reduced  Incidence of Side  Effects.  Because  TheraSeed(R)  delivers a highly
concentrated  and confined dose of radiation  directly to the prostate,  healthy
surrounding  tissues and organs are spared excessive  radiation  exposure.  This

<PAGE>

results in  significantly  fewer and less severe side effects and  complications
than are incurred with other conventional  therapies.  RP generally results in a
50-90% impotence rate and a 2-65%  incontinence rate, and EBRT generally results
in  impotence  and  incontinence  rates of 40-60% and 10-25%,  respectively.  In
contrast, according to the 1995 study by the Northwest Tumor Institute described
above,  it was reported that 85% of seed therapy  patients under 70 years of age
who were potent before the procedure remained so. In addition,  patients who had
not  had a  previous  transurethral  prostate  resection  ("TURP")  suffered  no
incontinence.  Patients having a previous TURP have  compromised  urinary tracts
and can experience higher rates of incontinence.  Patients receiving seeding can
expect  some  urinary  urgency  post-implantation  as the  Pd-103  delivers  its
radiation dose.

  Lower  Treatment Cost. The total cost of seeding is  approximately  $10,000 to
$15,000 per  procedure.  This is  approximately  one-half  the cost of RP, which
ranges  from  $20,000 to  $30,000,  excluding  treatment  for side  effects  and
post-operative  complications,  and is  comparable  to the cost of  EBRT,  which
ranges from $12,000 to $15,000 for a six-to-eight week course of treatment.



<PAGE>
  The following  table compares the methods of treatment  discussed above with a
minimum of five-year outcomes data:
<TABLE>
<CAPTION>
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
                                                                            External Beam
                                         Radical Prostatectomy           Radiation Therapy                  Seeding
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
                                                                         Outpatient procedure           One-time outpatient
                                           Inpatient procedure with      with daily treatments for      procedure lasting
                                           3-7 day hospital stay         6-8 weeks                      60-90 minutes
Nature of Treatment
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
<S>                                         <C>                          <C>                               <C>
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
Targeted Cancer Stage                            A and B                      A, B and C                       A and B
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
Five Year Success   Rate(a)                       78-83%                          50%                          80-100%
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
Recovery Period                            Generally 4-6 weeks           None after 6-8 weeks                 2-3 days
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
Impotence Rate(b)                                 50-90%                        40-60%                          5-15%
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
Incontinence Rate(b)                              2-65%                         10-25%                          0-2%
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
Cost Per Procedure                           $20,000-$30,000                $12,000-$15,000                $10,000-$15,000
-------------------------------------- ----------------------------- ------------------------------ ------------------------------
</TABLE>

(a) Calculated as the percent of patients disease-free after five years. Rates
    may be actuarially computed.
(b) The  percent  of  patients  with  normal  continence  and  potency  prior to
    treatment not preserving such  attributes.  Excludes  patients with previous
    TURPs.

  Management  believes  TheraSeed(R)  represents  the best  available  form of
seeding. Another radioactive isotope, Iodine-125 ("I-125"), is also commercially
available  as a  permanent  implant.  TheraSeed(R)  is  the  first  commercially
available  alternative isotope to I-125 since I-125's introduction in the 1970s.
Management believes I-125 and Pd-103 are used with relatively equal frequency in

<PAGE>

substantially all prostate cancer seeding procedures. Another technique known as
"temporary  seeding," which involves the temporary placement of an Iridium-based
source  in or near a  tumor,  is  used  in a very  small  percentage  of  cases.
Management  believes Pd-103 has the following  advantages over I-125: (i) Pd-103
delivers  three  times  the dose rate of I-125,  which can yield  advantages  in
treating  aggressive  cancers,  (ii)  Pd-103  has  approximately  one-third  the
half-life of I-125,  which shortens  radiation induced side effects and exposure
to medical personnel in treatment  follow-up;  and (iii) unlike I-125, Pd-103 is
nontoxic and non-volatile as it decays.  Management is not aware of any clinical
studies directly comparing the efficacy of Pd-103 and I-125.

Strategy

  In  an  effort  to  enhance  market  penetration  and  maintain  technological
leadership in the field of  radiological  treatment of diseases,  the Company is
implementing  the following  strategies.  In the event the Company enters into a
definitive agreement with Indigo, management anticipates that Indigo will assume
and expand upon certain of the strategic initiatives described below.

    o   Increase  Physician  Awareness  of  Seeding  and  TheraSeed(R).
        Physician  acceptance  is  critical  to  the increased  use of seeding
        as a form of  treatment  for  prostate  cancer.  The  primary
        physician for the treatment  of  prostate  cancer is the  urologist.
        RP has a long  history as the  treatment  of choice for early-stage,
        localized prostate  cancer and  urologists  are  accustomed  to
        performing  this procedure. Compelling  long-term  outcomes data is
        therefore key to the development of physician  interest in seeding as
        an alternative form of prostate cancer  treatment.  To promote such
        interest,  the Company is publishing the results of recent  clinical
        studies  illustrating TheraSeed(R)'s  effectiveness  in  treating
        prostate cancer and is supporting  related  research  and  publication
        efforts  by  physicians using  TheraSeed(R). Management  recognizes
        the  importance of well-trained  physicians and the need for quality
        training in advancing  the growth of this  product  and is  exploring
        opportunities toward this end.  Management  has historically  lent
        financial  support to  training  centers  and expects to  continue
        this  practice.  By increasing  physician awareness of TheraSeed(R) and
        its  effectiveness in treating  prostate  cancer,  the Company plans to
        increase demand for TheraSeed(R) within the medical community.

    o   Maintain A Strong Commitment to Providing Cancer Information Services to
        Patients. Management believes that patients are taking an active role in
        choosing  their  medical  treatment.  In response  to this,  Theragenics
        intends  to  maintain  its  efforts to  increase  patient  awareness  of

<PAGE>
        alternative treatments and the importance of second opinions through its
        Cancer  Information  Center  as  well as  other  avenues  of  increasing
        awareness.

    o   Maintain  Technological  Leadership.  Management believes the Company is
        the only  producer of  Pd-103-based  radioactive  seeds.  The  Company's
        strategy  is  to be a  technological  leader  in  the  cancer  treatment
        industry and believes its proprietary  technology possesses  performance
        advantages  over  competitive  seed  technology.  The Company  will also
        continue to focus on  production  technology  to maintain  leadership in
        this area.

    o   Explore and Evaluate  Opportunities  for Strategic  Alliances.  The
        Company is  negotiating  the terms of a strategic alliance with Indigo
        
 <PAGE>
        
        Medical, Inc., a subsidiary of Johnson & Johnson,  and has stated an
        intent to grant to Indigo  the  exclusive  worldwide  right to market
        and sell  TheraSeed(R) for the  treatment  of prostate  cancer.
        Management  believes  this  alliance  will enable the Company to focus
        its  resources on maintaining  its leadership in the production of
        Pd-103 for prostate  cancer  treatment and other potential
        applications  without  being  required to develop an extensive,
        vertically  integrated  sales,  marketing, education and training
        network.  Synergies with large  healthcare-related  companies may be
        identified and Theragenics may pursue strategic  relationships  with
        such companies on its own or through its relationship with Indigo.
        Such relationships  could relate to marketing,  product  development,
        supply,  distribution, research or other aspects of the Company's
        operations.  Potential  strategic  allies  include  large
        pharmaceutical  or  medical  device  companies,  health  maintenance
        organizations, outpatient  treatment centers and companies, hospitals,
        research centers,  universities,  start-up companies or other entities.
        Management  believes the  Company's  long-term  growth and strong
        competitive  position  could be enhanced through  such  alliances or
        affiliations  and intends to actively  seek  suitable  opportunities
        for such relationships.

    o   Promote Seeding to Health Care Payors.  A substantial  portion of the
        cost of prostate cancer  treatment in the United  States is  currently
        reimbursed  by the  Medicare  program and other third party  payors.
        The amount of  reimbursement  for  prostate  cancer  treatment  is
        likely to have a  significant  impact on the decisions of urologists,
        oncologists  and other health care providers  regarding  treatment
        options.  The Company has been  actively  engaged in efforts to ensure
        that adequate and fair  reimbursement  for seeding is available for the
        doctors  performing the procedure.  The Company has long-standing
        relationships  with patient  advocacy  groups  that  share  with the
        Company  a desire to  ensure  unrestricted  access to the TheraSeed(R)
        treatment alternative.  The Company plans to continue  these
        activities as they relate to the Company's business.

    o   Explore New Distribution Channels and Product  Applications.  Management
        believes significant  long-term  international  marketing  opportunities
        exist for TheraSeed(R). Although no meaningful overseas market currently
        exists  for the  product,  management  believes  a variety  of  factors,
        including  international  introduction  of the PSA test,  may  create an
        international  market  for  TheraSeed(R)  in the  future.  In  addition,
        although the Company has focused  primarily on prostate  cancer to date,
        management  believes  TheraSeed(R)  could be used  increasingly to treat
        other forms of cancer,  including  cancers of the pancreas,  lung, head,
        neck, oral cavity,  brain and eye.  Management  plans to support
        programs to identify additional  oncological and  non-oncological  uses
        for  TheraSeed(R) and Pd-103.

Production

    The production of TheraSeed(R) is dependent upon the availability of Pd-103,
as well as  Rhodium-103  ("Rh-103"),  titanium,  graphite  and  lead.  With  the
exception of Pd-103,  all of these raw materials are relatively  inexpensive and
readily available from third party suppliers.

    Pd-103 is a radioactive  isotope that can be produced by neutron bombardment
of  Pd-102  in a  nuclear  reactor,  or by  proton  bombardment  of  Rh-103 in a
cyclotron.  Following the production of Pd-103 from Rh-103 in the cyclotron, the
Pd-103 is harvested from the cyclotron and moved through a number of proprietary
production processes until it reaches its final seed form used by doctors.

    Until 1993,  the Company  used the neutron  bombardment  method of producing
Pd-103.  Under this  method,  the  Company was  required to contract  with third
parties for the enrichment services necessary to produce a useable feed material
for  production of Pd-103 in a nuclear  reactor.  Additionally,  the Company was
dependent  upon a  university  and a United  States  government  reactor for the
irradiation of this feed material to yield Pd-103.  The government  facility was
subject to increasing political  uncertainty  regarding its control and funding,
and neither the university nor the government  facility operated on a commercial
timetable.  These  factors  combined  to limit the  Company's  ability to obtain
Pd-103 on a timely and consistent basis.

    To increase its control over timely and consistent availability, quality and
cost of Pd-103, the Company turned to the proton bombardment method of producing
Pd-103.  To  accomplish  this  alternative  method of  production,  the  Company
contracted  in 1992 for the purchase of a cyclotron  for in-house  production of
Pd-103.  After the cyclotron was delivered and reliable production of Pd-103 was
proven, the Company  discontinued its reliance on outside vendors for enrichment
and irradiation services.

    The Company has three cyclotrons in production and is currently installing 
a fourth,  which is scheduled to become operational during the first quarter of
1997. The Company has ordered four additional  cyclotrons for  installation in
fiscal 1998. The Company's cyclotrons are designed, built, installed and tested

<PAGE>

by a Belgian  company specializing in the construction of such  equipment.  A
number of proprietary  design  modifications are incorporated in the cyclotrons.
These modifications are subject to confidentiality agreements with the cyclotron
manufacturer and the Company's own personnel.

    Due to the highly  sophisticated and technical nature of the equipment, the
Company  has  encountered  delays and  difficulties  in  the   construction,
installation  and testing of its cyclotrons.  Management  cannot be certain that
such problems will not occur in connection with the  construction,  installation
and testing of the cyclotrons to be installed in 1998.

    Cyclotron  operations  constitute  only one  component  of the  TheraSeed(R)
manufacturing  process.   Because  the  production  of  TheraSeed(R)  is  highly
sensitive and labor intensive,  management is focusing significant attention and
effort on  automating  and  otherwise  improving  all  aspects of the  Company's
manufacturing  process.  Although the  automation  process is difficult and time
consuming,  management  believes  it will  improve  efficiency,  further  reduce
radiation exposure to personnel and provide additional  production  capacity for
TheraSeed(R).

Marketing

    The  Company's  marketing  program  is  aimed  at  increasing  awareness  of
TheraSeed(R)  within the medical community and the potential patient population,
as well as adding value to its customers' medical practices.

    Strategic Alliance.  The Company recently entered into a letter of intent 
with Indigo Medical, Inc., a subsidiary of Johnson & Johnson, stating the 
intent to grant to Indigo the exclusive  worldwide  right to market and sell  
Theraseed(R) for the treatment of prostate  cancer.  Indigo would also assume  
responsibility for the education and training of urologists,  radiation  
oncologists  and other personnel  involved  in the use of  TheraSeed(R).  The  
letter  of  intent  also contemplates  that Indigo will have a first right of 
negotiation with respect to additional uses of TheraSeed(R)  and other products 
that may be developed by the Company.

  Management  believes the proposed alliance with Indigo would provide for sales
growth and  international  expansion  while  allowing  the  Company to focus its
resources on maintaining its leadership in the production of Pd-103 for prostate
cancer treatment and other potential  applications.  By leveraging the extensive
worldwide  marketing  capability  of Indigo and  Johnson & Johnson,  the Company
would eliminate the need to develop an extensive,  vertically  integrated sales,
marketing  and  education  and  training  network.  No  assurance  can be given,
however,  that the Company and Indigo will enter into a definitive  agreement or
that it will have the anticipated effect on the Company's operations.

<PAGE>

  Education/Awareness.  Bringing  attention to prostate cancer and its treatment
alternatives is a primary focus of the Company's  marketing program.  As part of
its pull marketing  strategy,  the Company works to disseminate  prostate cancer
information  through general  interest stories in the print and broadcast media.
To accomplish this strategy,  the Company uses its own in-house network of media
contacts as well as public relation firms.  Theragenics  also has an advertising
program aimed at men over 50 that promotes options for the treatment of prostate
cancer and stresses the  importance  of  alternative  treatments  and  obtaining
second opinions.  The Company also staffs its own Cancer  Information  Center to
answer questions about the TheraSeed(R)  treatment and assist cancer patients in
locating physicians trained in seeding. Representatives of the Company regularly
attend trade shows and conventions where the Company is visible to large numbers
of urologists, radiation oncologists and patients.

    Advocacy. The Company has supported the writing and publication of a book by
a TheraSeed(R)  patient,  aided patient  support groups,  sponsored  speakers on
prostate cancer,  and has been active with cancer  information  hotlines such as
the American Cancer  Society.  Theragenics has fought and continues to fight for
adequate reimbursement for seed implantation from Medicare and other third party
payors.  Theragenics  has also advocated  treatment  opportunities  for military
veterans.

    Scholarship. The Company actively supports the writing of scholarly articles
by doctors using  TheraSeed(R)  and the publication of these articles in medical
journals. The Company also supports and encourages doctors using TheraSeed(R) to
present papers to and speak at seminars and symposiums on prostate disease.

    Customer  Service.  The  Company  performs  a  value-added  service  to  the
physician  customer by directing  patients seeking  additional  information from
Theragenics'  Cancer  Information Center to one of the nearly 300 centers across
the United  States  performing  the  TheraSeed(R)  treatment.  Theragenics  also
provides assistance to physicians newly trained in the TheraSeed(R) treatment by
providing  the  doctor  or  the  medical  center  with  consultative  advice  on
increasing the visibility of the practice and the new treatment  being performed
there.  Theragenics retains a company  specializing in medical  reimbursement to
assist its  customers  in  obtaining  adequate  reimbursement  from third  party
payors.

    Physician Training. Management recognizes the marketing benefits that can be
generated  by a  well-trained  seeding  physician  population  and the  need for
quality training to achieve that end.  Physicians are currently trained at three
seeding education centers across the United States.

<PAGE>

TheraSphere (R)

    Theragenics has also  participated in the development of  TheraSphere(R),  a
microscopic radioactive glass sphere designed for the treatment of liver cancer.
The Company holds a worldwide  exclusive license from the University of Missouri
for the use of the technology  required to produce  TheraSphere(R).  The Company
has granted to Nordion  International,  Inc.  ("Nordion") an exclusive worldwide
sublicense  to  manufacture,   distribute  and  sell   TheraSphere(R)   for  any
application.  TheraSphere(R)  has been approved for distribution in Canada,  but
has not been approved by the FDA for  distribution  in the United States.  Under
the  terms of the  sublicense,  Nordion  has  agreed  to  obtain  the  necessary
regulatory approvals for distribution of TheraSphere(R) in the United States and
other  countries.   The  commercial   development  and  regulatory  approval  of
TheraSphere(R) is still in its early stages,  and management does not anticipate
significant revenues from TheraSphere(R) within the foreseeable future.

    A  TheraSphere(R)   treatment  dose  contains   approximately  five  million
yttrium-90  glass  spheres  that are each  approximately  half the diameter of a
human hair.  The  radiation  dose is delivered to the tumor by  introducing  the
TheraSphere(R) by catheter into the hepatic artery, which carries arterial blood
to the liver.  Because of greater blood flow to tumors compared to healthy liver
tissue, the microspheres  concentrate in the capillaries  feeding the tumor. The
concentration  of microspheres  in healthy tissue is much lower.  Because of the
ability  to place the  radiation  source in such close  proximity  to the tumor,
TheraSphere(R)  can  deliver a  radiation  dose to the tumor cells five times as
strong as that which can be delivered via external beam radiation.

Patents and Licenses; Trade Secrets

    The  Company's   success  is  dependent  upon   protecting  its  proprietary
technology  for  the  production  of  Pd-103.  The  Company  relies  in  part on
combinations of patent, trademark and trade secrecy laws, along with contractual
provisions, to protect its intellectual property rights and its technology.  The
effectiveness of these various types of protection can be limited,  however,  by
variations in laws and  enforcement  procedures  from country to country.  It is
possible  that  competitors  may  independently  develop  similar  technology or
otherwise obtain access to the Company's intellectual property assets.

    The Company  holds  United  States  patents  directed to Pd-103 based on its
production  using both  cyclotrons  and nuclear  reactors.  The Company also has
corresponding patents in Canada, South Africa, Japan and the 10 countries of the
European  patent  convention,  and a PCT patent  application  on file for Japan,
Australia,  New Zealand, Canada, and Europe (representing 16 European countries)

<PAGE>

as well as a direct  filing in Mexico.  The Company may file  additional  patent
applications from time to time and considers the ownership of patents important,
but not  necessarily  essential, to its operations.  The Company  also uses a
strategy of  confidentiality  agreements  and trade secret  treatment to provide
primary  protection  to a number  of  proprietary  design  modifications  in the
cyclotrons, as well as various production processes.

    The Company also holds a worldwide  exclusive license from the University of
Missouri  for the  use of  technology  required  for  producing  TheraSphere(R).
Theragenics holds the rights to all improvements  developed by the University of
Missouri  on this  technology.  The  Company,  in  turn,  sublicenses  exclusive
worldwide rights to this technology and all improvements to Nordion. Pursuant to
its license agreement with the University of Missouri,  the Company is obligated
to pay the  University  the greater of a fixed annual  amount or a percentage of
the gross sales amount derived from the sale of TheraSphere(R).

    Theragenics holds patents for technology  concerning methods for delivery of
TheraSphere(R)  in  several  countries,  including  the United  States,  Canada,
Australia,  Argentina,  South Africa and the 10 countries of the European patent
convention,  and has patent  applications on file in other countries,  including
Japan. The Company exclusively licenses this technology to Nordion for worldwide
use.

    The Company  relies to a significant  degree on trade  secrets,  proprietary
know-how and technological  advances that are either not patentable or which the
Company chooses not to patent.  In particular,  the Company has designed certain
modifications to its cyclotrons as well as various production  processes that it
deems to be proprietary.  The Company seeks to protect non-patented  proprietary
information,  in part, by confidentiality  agreements with suppliers,  employees
and consultants.

Competition

  The Company competes in a market  characterized  by technological  innovation,
extensive research efforts and significant competition. In general, TheraSeed(R)
competes with conventional  methods of treating  localized cancer such as RP and
EBRT. RP currently  represents the standard  medical  treatment for early-stage,
localized  prostate cancer. RP has a long history of favorable  clinical results
and physicians have developed a high degree of familiarity and comfort with this
procedure.  EBRT is also a  well-established  method of treatment  and is widely
accepted  for  patients  who do not  represent  a good  surgical  risk or  whose
prostate  cancer has advanced  beyond the stage for which surgical  treatment is
indicated.  RP and EBRT are therefore well  entrenched in the medical  community
and in the  universities and schools  providing  medical  education.  Management
believes  that if  general  conversion  from  these  established  procedures  to
TheraSeed(R)  treatment  does  occur,  such  conversion  will be the result of a

<PAGE>

combination of equivalent or better efficacy,  reduced incidence of side effects
and  complications,  lower cost,  other  quality of life issues and  pressure by
health care providers and patients.

    In addition,  I-125 is  commercially  available  as a permanent  implant and
competes with TheraSeed(R).  Management  believes I-125 and Pd-103 are used with
relatively equal frequency in prostate cancer seeding  procedures.  I-125's dose
rate is approximately  one-third that of Pd-103,  however,  and its half-life is
three times longer.  Management  believes Pd-103 enjoys a competitive  advantage
over I-125  based on:  (i) a higher  dose rate,  which can yield  advantages  in
treating aggressive cancers, (ii) a shorter half-life,  which shortens radiation
induced side effects and exposure to medical  personnel in treatment  follow-up;
and (iii) Pd-103 is nontoxic and non-volatile as it decays.  Management is aware
of no other similar  radioactive  products competing directly with TheraSeed(R).
Although a small  Belgium  start-up  company has announced its intent to produce
Pd-103 for medical devices, to management's  knowledge,  Theragenics is the only
company in the world that commercially produces Pd-103 for medical devices.

    Many companies,  both public and private, are researching new and innovative
methods of treating cancer. In addition,  many companies,  including many large,
well-known pharmaceutical, medical device and chemical companies, are engaged in
radiological pharmaceutical and device research. Significant developments by any
of these  companies  could  lessen or  eliminate  the demand  for the  Company's
products.

Government Regulation

    The Company's  present and intended  future  activities in the  development,
manufacture  and sale of cancer  therapy  products are subject to various  laws,
regulations,  regulatory approvals and guidelines. Within the United States, the
Company's  therapeutic  radiological  devices must comply with the U.S.  Federal
Food, Drug and Cosmetic Act, which is enforced by the FDA.

    Before a new device can be marketed in the United States,  the  manufacturer
generally  must obtain  either (i) FDA  clearance of a  pre-market  notification
under  Section  510(k) of the  Federal  Food,  Drug &  Cosmetic  Act or (ii) FDA
approval of a pre-market approval application (a "PMA"). Following submission of
the 510(k),  the  manufacturer  may not market the new device  until an order is
issued by the FDA  finding  the  device to be  "substantially  equivalent"  to a
legally marketed medical device (a "predicate  device").  The 510(k) process can
be lengthy and expensive and the issuance of such clearance is often  uncertain.
If a new device is not eligible for clearance  under the 510(k)  process,  a PMA
application must be filed with and approved by the FDA before the product may be
marketed.  The PMA process requires the performance of extensive clinical trials
to determine safety and efficacy,  is significantly more complex,  expensive and
time  consuming  than the 510(k)  process and  typically  requires five to seven
years. In countries in which the Company's products are not currently  approved,
the use or sale of the Company's  commercial  products will require approvals by

<PAGE>

government  agencies  comparable  to the FDA.  The  Company is also  required to
adhere to applicable FDA regulations for Good Manufacturing Practices, including
extensive record keeping and reporting and periodic inspections of manufacturing
facilities. Similar requirements are imposed in other countries.

    The Company  obtained FDA 510(k)  clearance  in 1986 to market  TheraSeed(R)
for, in general, the treatment of localized solid tumors. A new 510(k) clearance
is  required  for any  modifications  in the device or its  labeling  that could
significantly affect the safety or effectiveness of the original product.  Under
the FDA's regulatory scheme, the decision whether to seek 510(k) clearance for a
modified  device  is  left  to the  manufacturer  in  the  first  instance,  and
management has thus far determined that no such clearance has been required. The
FDA has the right to review and revoke  510(k)  clearance at any time. A PMA may
be required for future products or for future modifications to TheraSeed(R).

    The Company's handling of radioactive  materials is governed by the State of
Georgia in agreement with the NRC. The users of  TheraSeed(R)  are also required
to possess  licenses issued either by the states in which they reside or the NRC
(depending upon which state is involved and which of two possible  processes are
used by the Company to produce TheraSeed(R)). Use licenses also will be required
by some of the foreign  jurisdictions in which the Company may attempt to market
its  products.   Although  the  regulatory   standards  applicable  to  products
containing  radioactive  materials  produced as a by-product of nuclear  fission
reactions are uniform nationally,  uniform regulatory  standards do not exist at
the present  time with  respect to  TheraSeed(R)  as  produced by the  Company's
current  manufacturing  process.  To  date,  these  standards  have  imposed  no
impediment  to  marketing  and  management  anticipates  they  will  not pose an
impediment unless the regulatory environment changes or new rulings are adopted.
Furthermore,  the  Company's  expansion  plans  require  the  Company  to secure
additional  permits  and  licenses  from a number of  environmental,  health and
safety regulatory  agencies.  The Company believes,  but cannot assure,  that it
will be able to acquire  the  permits  and  licenses  necessary  for its planned
expansion  of its  manufacturing  capacity  in  accordance  with  the  Company's
timetable for its expansion.  The Company to date has not experienced  delays in
licensing any of its facilities or cyclotrons.

    The Company is required under its radioactive  materials license to maintain
radiation  control and radiation  safety  personnel,  procedures,  equipment and
processes, and to monitor its facilities and its employees and contractors.  The
Company  is also  required  to  provide  financial  assurance  that  end-of-life
radiological  decommissioning  of its cyclotrons and other  radioactive areas of
its property that contain radioactive materials will be adequately funded by the
Company.  The Company has so far been  successful  in  explaining to the Georgia
Department  of  Natural  Resources  that it will  not  have  to  dispose  of its

<PAGE>

cyclotrons,  but  instead  will be able to sell them for re-use if its ceases to
operate  them.  Thus,  the  Company is only  required  to  estimate  and provide
financial   assurance  for  the  end-of-life   remediation  and  disposal  costs
associated with ancillary structures, such as plumbing, laboratory equipment and
chemical processing facilities.  The Company's decommissioning  obligations will
increase  as its  production  capacity  is  expanded.  Moreover,  if the Georgia
Department  of Natural  Resources  were to require that the Company  include the
cost of decommissioning its cyclotrons in its financial assurance demonstration,
the  amount  of  money  required  to be  set  aside  by  the  Company  to  cover
decommissioning costs could dramatically increase.

    The Company disposes of low level radioactive  waste to licensed  commercial
radioactive  waste  treatment or disposal  facilities for  incineration  or land
disposal.  The amount of radioactive waste generated by the Company's operations
will increase following implementation of the Company's planned expansion of its
production capacity. There is a high degree of regulatory uncertainty associated
with commercial radioactive waste disposal facilities, and the cost of disposing
of radioactive waste has increased dramatically in recent years. To mitigate the
impact of a potential  moratorium on radioactive waste disposal at the Company's
current  disposal  site,  the  Company  sought and  received a license  from the
Georgia  Department of Natural Resources for temporary on-site storage capacity.
The  Company  believes  that it would  be able to  obtain  additional  licensure
necessary to enable it to continue  production for a substantial  period of time
in the event its current waste disposal  contractor ceases to be able to receive
the Company's waste and an alternative  disposal site is not readily  available.
The Company also handles nonradioactive chemical substances in the normal course
of its  manufacturing  operations that are subject to a broad range of state and
federal  environmental  regulations,  and which could cause harm to humans or to
the environment if improperly handled or released to the environment. Management
believes the Company is in  compliance  with all state and federal  regulations.
The Company provides training and monitoring of its personnel with two full time
regulatory  and  safety  officers  to  facilitate  the  proper  handling  of all
materials.

Employees

    As of December 31, 1996, the Company had 59 full-time  employees  (including
executive  personnel).  Of  this  total,  37 were  engaged  in  development  and
production of the Company's  products.  The remainder  were engaged in marketing
and general corporate activities. The Company's employees are not represented by
a union or a collective  bargaining  unit,  and  management  considers  employee
relations to be good.

Item 2.  Properties

    The  Company  owns a 15,245  square-foot,  single-story  building in Buford,
Georgia,  leases  a  10,752  square-foot,  single-story  building  in  Norcross,

<PAGE>

Georgia,  and leases a 2,692 square-foot suite of offices in a four-story office
building in Norcross, Georgia. The larger Norcross facility houses the Company's
assembly,   shipping,  marketing  and  administrative  operations,  the  smaller
Norcross facility provides executive office space and the Buford facility houses
the Company's  cyclotrons and its raw material processing  operations.  In 1996,
the  Company  purchased  30  acres  of land  adjacent  to its  Buford  facility.
Management  plans to use this  land for  long-term  expansion  of the  Company's
production  facilities as manufacturing  expands to meet increasing sales demand
and eventually  plans to relocate all functions  currently  housed in the leased
Norcross  facilities to the facilities  planned for construction on the 30 acres
of land adjacent to its current Buford facility.

Item 3.  Legal Proceedings

    There  are  currently  no  material  legal  proceedings  pending  or, to the
knowledge of management, threatened against the Company.

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

  The Company did not submit any matter to a vote of its security holders during
the fourth quarter of calendar 1996.

PART II

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

  The  Company's  Common  Stock is traded over the  counter and  reported on the
Nasdaq National Market  ("Nasdaq").  The trading symbol for the Company's Common
Stock is "THRX." The high and low prices as reported on Nasdaq for the Company's
Common Stock for each quarterly period in 1995 and 1996 are as follows:
<TABLE>
<CAPTION>

                                                        High      Low
<S>                                                    <C>       <C>
                                    1995
First Quarter......................................    $3.75     $2.25
Second Quarter.....................................     6.50      3.13
Third Quarter......................................     6.38      4.88
Fourth Quarter.....................................    12.50      4.88

                                    1996
First Quarter......................................    12.25      7.00
Second Quarter.....................................    18.63      8.63
Third Quarter......................................    19.25     11.75
Fourth Quarter.....................................    25.63     16.00
</TABLE>

  As of March 18,  1997,  the closing  price of the  Company's  Common Stock was
$20-5/8 per share.  Also, as of that date, there were  approximately 743 holders
of record of the Company's  Common Stock.  The number of record holders does not

<PAGE>

reflect the number of beneficial  owners of the Company's  Common Stock for whom
shares are held by depositary trust companies, brokerage firms and others.

  On February 14, 1997, The Company's Board of Directors  adopted a Stockholder
Rights Plan (the "Rights Plan"). The Rights Plan contains  provisions to protect
the Company's  stockholders in the event of an unsolicited  offer to acquire the
Company,  including  offers  that do not treat  all  stockholders  equally,  the
acquisition in the open market of shares  constituting  control without offering
fair value to all stockholders and other coercive, unfair or inadequate takeover
bids and  practices  that could  impair the ability of the board of Directors to
represent  stockholders' interests fully. Pursuant to the Rights Plan, the Board
of  Directors  declared  and paid a  dividend  of one  share  purchase  right (a
"Right")  for each  outstanding  share of  Common  Stock  held of  record  as of
February 28, 1997.  The Rights,  which will expire in February  2007,  initially
will be represented by, and traded  together with, the Common Stock.  The Rights
are not currently execisable and do not become exercisable unless certain events
occur,  including the acquisition of, or commencement of a tender offer for, 15%
or more of the  outstanding  Common Stock.  Each Right  represents  the right to
purchase  from the  Company  one share of Common  Stock at a  purchase  price of
$120.00,  subject to adjustment.  In the event certain  triggering events occur,
including the  acquisition of 20% or more of the  outstanding  Common Stock each
Right that is not held by the 20% or more stockholder will entitle its holder to
purchase  additional  shares of Common  Stock having a market value of twice the
purchase price. As a result, the Rights Plan could add substantially to the cost
of acquiring the Company,  and  consequently  could delay or prevent a change in
control of the Company. These effects could adversely affect the market price of
the Common Stock. Prior to the time the Rights become exercisable,  the Board of
Directors  may redeem the Rights at a  redemption  price of $.01 per Right.  The
description and terms of the Rights are set forth in a Rights Agreement dated as
of February 17, 1997 by and between the Company and SunTrust Bank,  Atlanta,  as
Rights Agent.

Dividend Policy

    The Company has never  declared or paid a cash dividend on its Common Stock.
It is the present  policy of the Board of  Directors  to retain all  earnings to
support  operations  and  to  finance  expansion.  Consequently,  the  Board  of
Directors does not  anticipate  declaring or paying cash dividends on the Common
Stock in the foreseeable  future.  The Company's  current credit facility limits
the amount of  dividends  payable on the Common Stock to a maximum of 25% of the
Company's  annual net income  after tax.  Decisions on the payment and amount of
future  dividends  on the Common Stock will depend on the  Company's  results of
operations,  capital  requirements  and financial  condition and other  relevant
factors as determined by the Board of Directors.

<PAGE>

Item 6.  Selected Financial Data

  The selected  financial  data set forth below as of December 31, 1995 and 1996
and for each of the years in the three-year  period ended December 31, 1996 have
been derived from the  financial  statements of the Company  included  elsewhere
herein,  which have been audited by Grant  Thornton LLP,  independent  certified
public  accountants.  The selected  financial data as of December 31, 1992, 1993
and 1994 and for each of the years in the  two-year  period  ended  December 31,
1993 have been derived from the financial statements of the Company,  which have
been audited by Grant  Thornton LLP but are not  included  herein.  The selected
financial data set forth below should be read in conjunction  with the financial
statements of the Company and related notes thereto and "Management's Discussion
and  Analysis  of  Financial  Condition  and  Results  of  Operations"  included
elsewhere herein.


<PAGE>


<TABLE>
<CAPTION>

                                       Year Ended December 31,
                                       -----------------------
                           1992        1993         1994      1995       1996
                           ----        ----         ----      ----       ----
                        (Dollars and shares in thousands, except per share data)
<S>                      <C>         <C>          <C>       <C>       <C>
Statement of Earnings
Data:
Product sales            $4,379      $4,091       $4,723    $7,782    $12,257
Licensing fees               --          --           --        85        100
                          -----      ------       ------    ------     ------
                          4,379       4,091        4,723     7,867     12,357

Cost of product sales     1,227       1,678        1,791     2,645      3,736
Selling, general and
administrative            1,639       1,607        1,844     2,396      3,198
Research and
  development                63          36           15        18          7
                          -----      ------       ------    ------     ------
                          2,929       3,321        3,650     5,059      6,941
Other income (expense)       68         (86)         110        64         36
                          -----      ------       ------    ------     ------
Net earnings before
income taxes,
extraordinary credit
and cumulative effect
of change in accounting
principle                 1,518         684        1,183     2,872      5,452
Income tax expense          582         254          453     1,100      2,067
                          -----      ------       ------    ------     ------
Net earnings before
extraordinary credit
and change in accounting
method                      936         430          730     1,772      3,385
Extraordinary credit        556          --           --        --         --
Change in accounting
method                       --       2,860           --        --         --
                          -----      ------       ------    ------     ------
Net earnings             $1,492      $3,290       $  730    $1,772     $3,385
                         ======      ======       ======    ======     ======
Earnings per common
share before
extraordinary credit
and change in
accounting method        $ 0.08      $ 0.04       $ 0.06    $ 0.15     $ 0.28
Earnings per common
share                    $ 0.13      $ 0.28       $ 0.06    $ 0.15     $ 0.28
Weighted average
shares                   11,431      11,709       11,583    11,759     12,259
</TABLE>

<TABLE>
<CAPTION>

                                         Year Ended December 31,
                           1992        1993         1994      1995       1996
                           ----        ----         ----      ----       ----
                                         (In thousands)
<S>                      <C>         <C>          <C>       <C>        <C>
Balance Sheet Data:
Cash and short-term
investments              $2,928      $3,083       $2,317    $3,266     $2,986
Property, plant and
equipment, net            3,404       5,647        8,458    10,073     17,586
Total assets              7,851      12,619       14,169    16,878     23,689
Long-term debt,
including current
installments                 --       1,330        1,989     1,519      3,458
Shareholders' equity      7,445      11,034       11,810    14,769     19,385
</TABLE>


<PAGE>

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS
         OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

  Theragenics  was founded in 1981 and is engaged in the manufacture and sale of
TheraSeed(R),  a rice-sized device used for the treatment of localized  prostate
cancer  in a  one-time,  minimally  invasive  procedure.  In 1986,  the  Company
received FDA clearance for its principal product,  TheraSeed(R),  for use in any
solid  localized  tumor.  Sales  increased  65% in 1995  and 58% in 1996  due to
reliable  production  from the Company's  cyclotrons  and  increased  demand for
TheraSeed(R) as a result of significantly  increased  marketing  efforts and the
release  of  favorable  clinical  data  relating  to the  use  of  TheraSeed(R).
TheraSeed(R) has been used in an estimated 13,000 procedures for prostate cancer
since 1987, including approximately 4,000 procedures in 1996.

  Production of Pd-103, the radioisotope  supplying the therapeutic radiation of
TheraSeed(R),  has always been a controlling  factor in the Company's efforts to
generate  sales.  Until 1993,  the Company  used a  manufacturing  process  that
required it to contract  with third  parties for  enrichment  services that were
necessary  to produce a useable  feed  material  for  production  of Pd-103 in a
nuclear reactor.  Additionally,  the Company was dependent on a university and a
United States  government  reactor for the  irradiation of this feed material to
yield Pd-103.  These factors  combined to limit the  availability of Pd-103 on a
timely and consistent basis.

  To increase its control over the timely and consistent  availability,  quality
and cost of Pd-103,  the Company  converted to an alternative means of producing
Pd-103 using a cyclotron.  In 1992, the Company contracted for the purchase of a
cyclotron for in-house  production of Pd-103.  After the cyclotron was delivered
and reliable production of Pd-103 was demonstrated, the Company discontinued its
reliance on outside vendors for enrichment and irradiation services.

  In view of the scale of the  investment  necessary to add  cyclotrons  and the
Company's  limited access to debt and equity  capital,  the Company  undertook a
slow and  measured  roll-out of its  TheraSeed(R)  product.  Management  focused
primarily  on the  careful  development  of  relationships  with  the  physician
community and on ensuring that the Company's production  capabilities could meet
demand for its product.  The Company  added  additional  cyclotrons  in 1995 and
1996, and a fourth  cyclotron is scheduled to become  operational in early 1997.
Because a cyclotron does not become available for production until approximately
18 months after it is ordered, the accuracy of the Company's long-term plans can
significantly affect its results of operations. The delivery of cyclotrons prior
to a  commensurate  increase in demand could  adversely  impact  margins,  while

<PAGE>

inadequate  cyclotron  capacity could limit the Company's ability to meet demand
and achieve maximum sales growth.

  The Company has recently  commenced a $20.0 million capital  expansion project
that includes the purchase of four additional cyclotrons and the construction of
new  production  and  administrative  facilities.  Although no assurances can be
given,  management expects that one new cyclotron will become operational during
each quarter of fiscal 1998.  Management intends to apply a substantial  portion
of the net  proceeds  from an offering of two  million  shares of the  Company's
Common Stock,  planned  for  completion  by the end of March  1997,  toward  the
purchase of the  cyclotrons to be installed in fiscal 1998 and use the remainder
for working capital and other corporate purposes as appropriate.  See "Liquidity
and Capital Resources."

    On  February  24,  1997,  the Company  entered  into a letter of intent with
Indigo Medical,  Inc., a subsidiary of Johnson & Johnson,  stating the intent to
grant to Indigo the exclusive  worldwide  right to market and sell  Theraseed(R)
for the treatment of prostate cancer.  Under the terms of the proposed alliance,
the  Company  will  receive a fixed  price per seed sold by Indigo in the United
States and will  participate  in any unit price  increases  above a fixed  gross
sales  price.  Indigo would also assume  responsibility  for the  education  and
training of urologists,  radiation  oncologists and other personnel  involved in
the use of  TheraSeed(R).  The Company will continue to be  responsible  for all
manufacturing  and  distribution  for  TheraSeed(R).  The terms of international
collaboration would be negotiated in the future.

    Should a  definitive  agreement  be  reached,  management  expects  that the
alliance would result in higher sales volume that would offset the reduced price
received  by  the  Company  for  its  product  and  would  provide  avenues  for
international  expansion.  Based on the  Company's  ability to utilize  Indigo's
sales, marketing and education and training network, management also anticipates
that an  alliance  with  Indigo  would  significantly  reduce the  increases  in
selling,  general and administrative expense that would be necessary to generate
and respond to any future sales increases. In addition,  management expects that
increased volume would require the Company to purchase additional cyclotrons and
plans to order additional  cyclotrons at a rate  commensurate with demand in the
event a definitive  agreement with Indigo is reached. No assurance can be given,
however,  that the Company and Indigo will  successfully  negotiate or execute a
definitive  agreement  or  that it  will  have  the  anticipated  effect  on the
Company's results of operations.

Results of Operations

Year Ended December 31, 1996 Compared to Year Ended
December 31, 1995

  Product  sales were $12.3 million in 1996 compared to $7.8 million in 1995, an
increase of $4.5 million, or 57.7%. This increase was due to increased shipments

<PAGE>

of  TheraSeed(R)  as  a  result  of  reliable   production  from  the  Company's
cyclotron-based manufacturing process and increased demand for TheraSeed(R) as a
result of significantly increased marketing efforts and the release of favorable
clinical data. During the periods presented,  the Company engaged in significant
marketing efforts to educate both physicians and patients as to the availability
of this treatment option. Sales also reflect that the Company had two cyclotrons
available to meet sales demand throughout 1996 as compared to only one cyclotron
until April 1995.

  Licensing  fees  represent  royalty  payments  with  respect to the  Company's
licensed TheraSphere(R) technology. Management does not expect licensing fees to
become  material in the  foreseeable  future.  See Note F of Notes to  Financial
Statements.

  Cost of product  sales was $3.7  million in 1996  compared to $2.6  million in
1995, an increase of $1.1 million,  or 42.3%. This increase was due primarily to
incremental  staffing and  cyclotron  related  costs.  Staffing  increases  were
necessary to respond to and anticipate sales growth.  Cyclotron  operating costs
and depreciation  increased as the Company's second cyclotron ran for the entire
year and the third  cyclotron was placed in service.  The third  cyclotron  came
on-line  behind  schedule  in the  fourth  quarter  of 1996 and is  experiencing
start-up difficulties.  As cyclotrons come on-line, margins decline because each
machine  represents  excess  capacity  for a  period  while  carrying  its  full
component of fixed costs,  including  depreciation.  As a percentage  of product
sales, cost of product sales decreased from 34.0% in 1995 to 30.5% in 1996. This
decrease  resulted from economies of scale,  offset in part by margin  pressures
related to bringing the third cyclotron into production.

  Selling,  general and administrative expense was $3.2 million in 1996 compared
to $2.4  million in 1995,  an  increase of  $803,000,  or 33.5%.  This  increase
reflects higher  expenditures in a number of areas to support  increased  sales.
Marketing  expenditures   increased,  as  did  staffing  costs  in  response  to
increasing  workloads and  responsibilities  brought on by growth. Some salaries
were increased to maintain competitiveness in the marketplace and thereby retain
and attract  key  employees.  Additionally,  as head count  grew,  space  became
limited in the  Company's  two  facilities.  The  Company  rented and  outfitted
off-site  administrative  space at  additional  expense.  Also,  an  increase in
overall  asset size resulted in higher  insurance and property tax costs.  Other
support expenses grew in direct response to sales and asset size.  Despite these
increases,  selling,  general and administrative  expense as a percentage of net
sales decreased from 30.8% in 1995 to 26.1% in 1996 due to economies of scale.

  During  the  periods  presented,  the  Company  had no ongoing  pure  research
function.  Development  of processes  incorporated  in the Company's  production
operations is incorporated in the  manufacturing  area and therefore is included

<PAGE>

in the cost of goods sold category.  Management may choose to develop a research
and development program if and when appropriate opportunities are identified and
resources are in place.

  Other income (expense)  during the periods  presented  consist  principally of
interest  income,  interest expense and write off of unamortized loan costs as a
result of loan refinancing.

  The  Company's  effective  income  tax  rate  in  both  1996  and  1995  was
approximately 38%.

Year Ended December 31, 1995 Compared to Year Ended
December 31, 1994

  Product  sales were $7.8 million in 1995  compared to $4.7 million in 1994, an
increase of $3.1 million, or 64.8%. This increase was due to reliable production
from the Company's  cyclotron-based  manufacturing  process and increased demand
for TheraSeed(R) as a result of significantly  increased  marketing  efforts and
the release of favorable  clinical  data.  During 1994,  sales efforts  remained
conservative  while  the  Company  addressed  the  lingering  impact of the 1993
change-over from  reactor-produced  to  cyclotron-produced  Pd-103 and a lengthy
period of unexpected  downtime on the Company's first cyclotron during the third
quarter  of  1993.  In 1993  and the  first  half of  1994,  management  delayed
increasing  marketing efforts until reliable cyclotron  production of Pd-103 was
demonstrated.  Once  demonstrated,  the  Company  instituted  a more  aggressive
marketing  program in mid-1994.  Product sales for 1995  reflected the favorable
impact of this increased marketing effort.

    Cost of product  sales was $2.6 million in 1995  compared to $1.8 million in
1994,  an  increase of  $855,000,  or 47.8%.  This  increase  resulted  from the
increase in  TheraSeed(R)  sales.  As a  percentage  of product  sales,  cost of
product  sales  decreased  from 37.9% in 1994 to 34.0% in 1995,  primarily  as a
result of increased  utilization of production  capacity and economies of scale,
partially offset by increased depreciation.

    Selling,  general  and  administrative  expense  was  $2.4  million  in 1995
compared  to $1.8  million in 1994,  an  increase of  $552,000,  or 29.9%.  This
increase was due primarily to increased advertising and public relations expense
to support activities  associated with increased sales.  Headcount expenses also
increased in response to the additional workload created by the higher sales. As
a percentage of net sales, selling, general and administrative expense decreased
from 39.0% in 1994 to 30.8% in 1995 due to economies of scale.

    Income Taxes.  The Company's effective income tax rate in both 1995 and
1994 was approximately 38%.

<PAGE>

Liquidity and Capital Resources

  During 1994,  1995 and 1996,  the  Company's  principal  cash needs related to
capital   spending   to  increase   manufacturing   capacity.   To   manufacture
TheraSeed(R),  the Company purchases,  installs and operates  cyclotrons,  which
involves  significant capital investment.  The Company has funded its operations
over  this  period   principally  from  cash  flows  from  operations  and  bank
borrowings.

  The Company had cash and short-term  investments of $2.3 million, $3.3 million
and $3.0  million at December  31, 1994,  1995 and 1996,  respectively.  Working
capital  was  $1.3  million  at  December  31,  1996,   including  $3.5  million
representing  borrowings against the Company's credit facility. This compares to
$3.7 million at year end 1995, which included $511,000  representing the current
portion of long-term  obligations.  The Company's credit facility allows for the
conversion of, at the Company's option, the entire outstanding  balance borrowed
against the credit  facility  to be  converted  to a  five-year  term loan on or
before June 30, 1997,  provided the Company equals or exceeds certain  financial
ratios.  See Note E of Notes to  Financial  Statements.  The  Company  currently
satisfies these conditions. If the Company were to meet these ratios on June 30,
1997,  and choose to convert the  December 31, 1996 balance of $3.5 million to a
five-year term loan, the pro forma restated working capital at December 31, 1996
would equal approximately $4.4 million.

  Cash provided by operating activities was $1.6 million,  $3.4 million and $5.7
million  during  1994,  1995 and 1996,  respectively.  These  amounts  represent
primarily  net income and  adjustments  for  deferred  income  tax  expense  and
depreciation  and  amortization  expense,  offset  in  part by  adjustments  for
increases in accounts receivable related to sales growth.

  Cash used in  investing  activities  was $3.1  million,  $2.4 million and $8.6
million in 1994, 1995 and 1996, respectively,  consisting in each of these years
primarily of purchases of property  and  equipment.  Spending in 1994  primarily
represented  progress  payments  on a project to add a second  cyclotron  to the
Company's  manufacturing  facility. This project began in 1993 and was completed
in  1995.  Spending  in  1995  represents  the  beginning  of a  project  to add
cyclotrons three and four to the facility, while spending in 1996 represents the
continuation  of the project to add  cyclotrons  three and four to the facility,
the  purchase  of 30 acres  of land  for the  Company's  expansion  project  and
spending  on an  assembly  automation  project.  The  expansion  project for the
addition of  cyclotrons  three and four that began in 1995 is  estimated to cost
approximately  $9.0 million and be  completed  in early 1997.  As of January 23,
1997, approximately $8,500,000 has been spent on this expansion project.

  On December 27, 1996, the Company  entered into agreements for the purchase of
four additional cyclotrons. These four cyclotrons are part of a larger expansion
project   that  will  also   include  new   cyclotron,   product   assembly  and
administrative facilities.  Upon completion of the project, the Company plans to

<PAGE>

consolidate  its entire  workforce at this one site. As of January 23, 1997, the
Company had already spent approximately $2.5 million on this project. Management
estimates the total cost of the project to be approximately $20.0 million.

    Cash provided  (used) by financing  activities  was $659,000,  ($21,000) and
$2.6 million in 1994,  1995 and 1996,  respectively.  Cash flows from  financing
activities relates principally to bank borrowings and repayments thereof and, in
1995 and 1996, proceeds from the exercise of stock options and warrants.  In the
third  quarter of 1994,  Theragenics  received  funding on a $2.1  million  loan
secured by the Company's  cyclotron  facility  including a second cyclotron (the
"1994 Term Loan"). The 1994 Term Loan was to mature in 1998 and bore an interest
rate of 8.47% per annum.  Of the $2.1 million loan, $1.4 million was used to pay
off an  outstanding  balance  under an existing  long-term  financing  while the
remainder was used to provide  partial  financing for the purchase of the second
cyclotron  and the  facility  expansion  to house it. As of  December  8,  1996,
approximately $1.0 million remained outstanding on the 1994 Term Loan.

    In December 1995, the Company  amended and restated its existing bank credit
facility.  The  amended and  restated  bank credit  facility  (the "Bank  Credit
Facility") initially consisted of a $1.0 million receivables credit facility and
an additional $2.0 million  revolving credit facility.  The Bank Credit Facility
was  subsequently  increased to $5.0 million.  On December 9, 1996,  the Company
amended and restated  the Bank Credit  Facility.  The amended and restated  Bank
Credit  Facility (the "Second  Credit  Facility")  consisted of an $11.0 million
revolving credit facility. Partial proceeds from the Second Credit Facility were
used to pay off the $1.0 million balance on the 1994 Term Loan, while borrowings
under the Bank Credit  Facility were rolled over to the Second Credit  Facility.
Borrowings under the Second Credit Facility are secured by substantially  all of
the Company's  assets.  The Second Credit Facility  contains  certain  covenants
limiting the payment of dividends, the amount of annual capital expenditures and
the  incurrence  of  additional  debt and  requires the  maintenance  of certain
minimum financial ratios. As of December 31, 1996, the Company was in compliance
with all of such covenants.  Borrowings  under the Second Credit Facility may be
made, at the Company's option, at an interest rate equal to the London Interbank
Offered  Rate  ("LIBOR")  plus 2% or the  lender's  prime  rate as  defined.  At
year-end,  $3.5 million was outstanding against the Second Credit Facility.  The
Second Credit  Facility  terminates  on June 30, 1997. At that time,  the entire
amount outstanding  against the credit facility may, at the Company's option, be
converted  to a  five-year  term loan  provided  certain  financial  ratios  are
attained. No assurances can be made that the Company will attain these ratios or
if it does that it will  choose to convert  said  balance to the term loan.  See
Note E of Notes to Financial Statements.

  The  Company  has  filed a  registration  statement  with the  Securities  and
Exchange Commission with respect to an underwritten public offering of 2,300,000

<PAGE>

shares of Common Stock by the Company (including an option for 300,000 shares 
that may be exercised by the underwriters to cover over-allotments, if any).  
The Company intends to utilize a portion of the net proceeds for the purchase 
of four  additional  cyclotrons  during the next two  fiscal  years and to  
construct  facilities  to house the  cyclotrons, assembly  facilities and 
additional  executive and administrative  office space. The  remaining proceeds
will be  used  for  working  capital  and for  general corporate   purposes,   
including   but  not  limited  to  expenses  or  capital expenditures incurred 
in the  purchase  of  additional  cyclotrons,  marketing, research  and  
development  and  automation.  Management  believes  that the net proceeds of 
the secondary  offering  planned for completion by the end of March, 1997,  
together with current cash balances,  cash from future operations and the
Second  Credit  Facility,  will be  sufficient  to meet its working  capital and
capital expenditure requirements for at least the next 24 months.

    This document contains certain forward-looking statements within the meaning
of the Private  Securities Litigation  Reform Act of 1995, including  statements
regarding  the letter of intent with Indigo  Medical,  Inc.,  trends  implied by
prostate cancer  incidence and treatment data,  future costs of sales,  selling,
general and administrative  expenses, the sufficiency of the Company's liquidity
and capital  resources,  and statements  regarding matters other than historical
facts.   These   forward-looking   statements  are  subject  to  certain  risks,
uncertainties  and other  factors  which  could cause  actual  results to differ
materially  from  those   anticipated,   including  risks  associated  with  the
management  of growth,  government  regulation of the  therapeutic  radiological
pharmaceutical and device business, dependence on health care professionals, and
competition from conventional and newly developed methods of treating  localized
cancer.


<PAGE>

Quarterly Results

  The following table sets forth certain  consolidated  statements of operations
data for each of the Company's last eight  quarters.  This  unaudited  quarterly
information  has  been  prepared  on  the  same  basis  as  the  annual  audited
information  presented  elsewhere  in this Form 10K,  reflects  all  adjustments
(consisting  only of normal,  recurring  adjustments)  necessary in management's
opinion for a fair  presentation  of the information for the periods covered and
should be read in conjunction  with the financial  statements and notes thereto.
The operating results for any quarter are not necessarily  indicative of results
for any future period.

<TABLE>
<CAPTION>
                                                      1995                             1996
                                                      ----                             ----
                     First       Second      Third      Fourth       First     Second     Third     Fourth
                       Qtr          Qtr        Qtr         Qtr         Qtr        Qtr       Qtr        Qtr
                       ---          ---        ---         ---         ---        ---       ---        ---
                  (Dollars and shares in thousands, except per share data)
<S>                 <C>         <C>          <C>        <C>         <C>        <C>       <C>        <C>

Total revenues      $1,834      $1,912       $1,926     $2,195      $2,798     $2,727    $3,144     $3,688
                    ------      ------       ------     ------      ------     ------    ------     ------
Cost of product
sales                  635         639          665       706         753         888       958      1,137
Selling,
general and
administrative         604         674          607       511         693         771       722      1,012                    
Research and
Development              7           7            3         1           1           1         1          4
Other income
(expense)               28          29           28       (21)         27          26        17        (34)
                    ------      ------       ------    ------      ------      ------    ------      ------
Net earnings before
income taxes           616         621          679       956       1,378       1,093     1,480      1,501
Income tax expense     234         236          258       372         524         415       562        566
                    ------      ------       ------    ------      ------      ------    ------     ------

Net earnings        $  382      $  385       $  421    $  584      $  854      $  678    $  918     $  935
                    ======      ======       ======    ======      ======      ======    ======     ======
Earnings per
common share        $ 0.03      $ 0.03       $ 0.04    $ 0.05      $ 0.07      $ 0.06    $ 0.07     $ 0.08
Weighted average
shares              11,539      11,784       11,937    12,134      12,106      12,204    12,298     12,372

</TABLE>
                       
Inflation

  Management  does not believe that the relatively  moderate levels of inflation
which  have been  experienced  in the United  States in recent  years have had a
significant effect on the Company's net sales or profitability.

Item 8.  Financial Statements and Supplementary Data

           See Index to Financial Statements and following pages.

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

           Not Applicable
<PAGE>

PART III

Item 10. Directors and Executive Officers of Registrant*

Item 11. Executive Compensation*

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

Item 13. Certain Relationships and Related Transactions*
------------------------------
   *The  information  called for by Items 10, 11, 12 and 13 is omitted from this
    Report and is incorporated by reference to the definitive Proxy Statement to
    be filed by the Company not later than 120 days after December 31, 1996, the
    close of its fiscal year.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on

Form 8-K.

     a) The following documents are filed as part of this Report.

          1. Financial Statements
             See index to financial statements.
 
          2. Financial Schedules
             See the index to financial statements.

          3. Exhibits

              3.1  -    Certificate of Incorporation (1)
              3.2  -    Certificate of Amendment to Certificate
                        of Incorporation (1)
              3.3  -    Certificate of Amendment to Certificate
                        of Incorporation (1)
              3.4  -    By-Laws (1)
                        4.1 - See  Exhibits  3.1 - 3.4  for  provisions  in  the
                        Company's   Certificate  of  Incorporation  and  By-Laws
                        defining the rights of holders of the Company's Common
                        Stock.
              4.2  -    Form of Warrant issued to the
                        Representatives of the Underwriters of the
                        Company's Public Offering (1)
              4.3  -    Warrant Agreements dated May 1, 1989 between the
                        Company and James Devas (4)
              4.4  -    Warrant Agreement dated May 8, 1993 between
                        the Company and James Devas
             10.1  -    License Agreement with University of
                        Missouri, as amended (1)
             10.2  -    Agreement with Atomic Energy of Canada, Ltd. (1)
            
<PAGE>

             10.3  -    Reassignment and Release Agreement among the Company,
                        John L. Russell, Jr., and Georgia Tech Research
                        Institute (1)
             10.4  -    1986 Incentive and Non-Incentive Stock
                        Option Plan (1)
             10.5  -    Letter of Agreement between the Company and
                        Yale-New Haven Hospital (2)
             10.6  -    Lease between the Company and T. Rowe Price
                        Realty Income Fund II dated July 14, 1988 (2)
             10.7  -    Form of Purchase Agreement between the
                        Company and ten institutional investors (3)
             10.8  -    Form of Custody Agreement between the
                        Company and IBJ Schroder Bank & Trust
                        Company (3)
             10.9  -    1990 Incentive and Non-Incentive Stock
                        Option Plan (5)*
             10.10 -    Employment Agreement of John V. Herndon
                        dated June 4, 1990 (5)
             10.11 -    Employment Agreement of Bruce W. Smith (5)
             10.12 -    Purchase Agreement between Theragenics
                        Corporation and Production Equipment
                        Manufacturer (6)
             10.13 -    Term Loan and Security Agreement between
                        Theragenics Corporation and Heller
                        Financial, Inc. (7)
             10.14 -    Purchase Agreement between Theragenics
                        Corporation and Production Equipment
                        Manufacturer (8)
             10.15 -    Amendment to Purchase Agreement between
                        Theragenics Corporation and Production
                        Equipment Manufacturer (9)
             10.16 -    Employment Agreement of John V. Herndon
                        dated August 1, 1993 (9)*
             10.17 -    Employment Agreement of M. Christine Jacobs
                        dated as of August 1, 1996.
             10.18 -    Lease between the Company and T. Rowe Price
                        Realty Income Fund II dated January 1, 1994
                        (9)
             10.19 -    Term Loan and Security Agreement between
                        Theragenics Corporation and Bank South, N.A (10)
             10.20 -    Agreement with Nordion International Inc.
                        (11)
             10.21 -    Purchase Agreements between Theragenics
                        Corporation and Production Equipment
                        Manufacturer (12)
             10.22 -    Line of Credit Facility and Revolving
                        Credit Facility between Theragenics Corporation
                        and Bank South, N.A. (13)
             10.23(a)   Purchase Agreement dated December 27, 1996 between
                        Theragenics Corporation and Ion Beam Applications
                        s.a. (14)
             10.23(b)   Purchase Agreement dated December 27, 1996
                        between Theragenics Corporation and Ion Beam
                        Applications s.a. (14)
<PAGE>
             
             10.23(c)   Purchase Agreement dated December 27, 1996
                        between Theragenics Corporation and Ion Beam
                        Applications s.a. (14)
             10.23(d)   Purchase Agreement dated December 27, 1996 between
                        Theragenics Corporation and Ion Beam Applications
                        s.a. (14)
             10.24 -    Second Amended and Restated Loan and Security Agreement
                        by and between Theragenics Corporation and NationsBank,
                        N.A. (South), Dated as of December 9, 1996 (14)
             10.25 -    Rights Agreement dated as of February 17, 1997
                        between the Company and SunTrust Bank, Atlanta (15)
             10.26 -    Theragenics Corporation 1995 Stock Option Plan (16)
             24.1  -    Consent of Independent Public Accountants
                        for Incorporation by Reference of Audit
                        Statement into Registration Statement

*    Management contract or compensatory plan or arrangement idendified
     pursuant to Item 14(a)(3) of Form 10-K

(1)  Incorporated by reference to the exhibits filed with the
     Company's registration statement on Form S-1, File No.
     33-7097, and post-effective amendments thereto.
(2)  Incorporated  by  reference  to the exhibits to the report on Form 10-K for
     the period ended December 31, 1988.
(3)  Incorporated  by  reference  to the exhibits to the report on Form 10-Q for
     the period ended June 30, 1989.
(4)  Incorporated  by  reference  to the exhibits to the report on Form 10-K for
     the period ended December 31, 1989.
(5)  Incorporated  by  reference  to the exhibits to the report on Form 10-K for
     the period ended December 31, 1990.
(6)  Incorporated  by  reference  to the exhibits to the report on Form 10-K for
     the period ended December 31, 1991.
(7)  Incorporated  by  reference  to the exhibits to the report on Form 10-K for
     the period ended December 31, 1992.
(8)  Incorporated  by  reference  to the exhibits to the report on Form 10-Q for
     the period ended June 30, 1993.
(9)  Incorporated  by  reference  to the exhibits to the report on Form 10-K for
     the period ended December 31, 1993.
(10) Incorporated  by  reference  to the exhibits to the report on Form 10-K for
     the period ended December 31, 1994.
(11) Incorporated  by  reference to the exhibits to the report on Form 8-K dated
     March 23, 1995.
(12) Incorporated  by  reference to the exhibits to the report on Form 8-K dated
     June 29, 1995.
(13) Incorporated  by  reference  to the exhibits to the report on Form 10-K for
     the period ended December 31, 1995.
(14) Incorporated  by  reference to the exhibits to the report on Form 8-K dated
     January 13, 1997.
(15) Incorporated  by reference to the exhibits to the Company's Registration
     Statement on Form 8-A filed February 27, 1997.
(16) Footnote  incorporated  by reference to the exhibits to the Registration
     Statement on Form S-8, File #333-15313.

<PAGE>

         (b) Reports on Form 8-K

             The  Company  filed a report on Form 8-K dated  January  13,  1997,
             reporting the signing of four  agreements  each for the purchase of
             one  cyclotron and the signing of an agreement for a Line of Credit
             Facility and Revolving Credit Facility between Theragenics
             Corporation and NationsBank, N.A. (South).


<PAGE>


                            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.
                                  THERAGENICS CORPORATION
                                       (Registrant)

                                  By:/s/ M. Christine Jacobs
                                     M. Christine Jacobs
                                     Chief Executive Officer
Dated: March 18, 1997
       Norcross, Georgia

     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.

Name                      Title                           Date

/s/ M. Christine Jacobs   Chief Executive Officer         3/18/97
M. Christine Jacobs       (Principal Executive Officer);
                          Director

/s/ Bruce W. Smith        Chief Financial Officer,        3/18/97
Bruce W. Smith            Treasurer (Principal
                          Financial Officer) and
                          Secretary

/s/ Charles Klimkowski    Director, Chairman              3/18/97
Charles Klimkowski


/s/ John V. Herndon       Director                        3/18/97
John V. Herndon


/s/ Orwin L. Carter       Director                        3/18/97
Orwin L. Carter


/s/ Peter A.A. Saunders   Director                        3/18/97
Peter A.A. Saunders


/s/ Otis W. Brawley       Director                        3/18/97
Otis W. Brawley



<PAGE>




                       THERAGENICS CORPORATION

                          TABLE OF CONTENTS


                                                           Page

    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ................37
    (For the periods ended December 31, 1994, 1995 and 1996)

    FINANCIAL STATEMENTS

    Balance Sheets - December 31, 1995 and 1996 .............38

    Statements of Earnings for the Three Years Ended
    December 31, 1996 .......................................39

    Statement of Shareholders' Equity for
    the Three Years Ended December 31, 1996 .................40

    Statements of Cash Flows for the Three Years Ended
    December 31, 1996 .......................................42

    NOTES TO FINANCIAL STATEMENTS ...........................44



<PAGE>



                 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                              Board of Directors
                           Theragenics Corporation

    We have audited the balance  sheets of  Theragenics  Corporation (a Delaware
corporation)  as of December 31, 1995 and 1996,  and the related  statements  of
earnings,  shareholders'  equity,  and cash flows for each of the three years in
the  period  ended  December  31,  1996.  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 audits.

    We conducted  our audits in  accordance  with  generally  accepted  auditing
standards.  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 our audits provide 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 Theragenics  Corporation as
of December 31, 1995 and 1996,  and the results of its  operations  and its cash
flows for each of the three years in the period  ended  December  31,  1996,  in
conformity with generally accepted accounting principles.

GRANT THORNTON LLP

Atlanta, Georgia
January 16, 1997


<PAGE>
<TABLE>
<CAPTION>

                           THERAGENICS CORPORATION

                                BALANCE SHEETS
                                 December 31,

                                                       1995                1996
                                                   --------            --------
<S>                                             <C>                <C>

ASSETS
CURRENT ASSETS
  Cash and short-term investments........         $3,266,338         $2,986,123
  Trade accounts receivable..............          1,335,645          2,258,936
  Inventories............................            166,955            229,298
  Prepaid expenses and other current
  assets.................................             67,521            133,625
                                                  ----------         ----------
          Total current assets...........          4,836,459          5,607,982
PROPERTY, PLANT AND EQUIPMENT -- AT COST
  Building and improvements..............          1,690,045          3,333,728
  Leasehold improvements.................            138,978            138,978
  Machinery and equipment................          8,203,256         11,522,064
  Office furniture and equipment.........             44,721             65,057
                                                  ----------         ----------
                                                  10,077,000         15,059,827
  Less accumulated depreciation..........          2,194,164          3,237,684
                                                  ----------         ----------
                                                   7,882,836         11,822,143
  Land...................................             49,485            525,372
  Construction in progress...............          2,140,894          5,238,056
                                                  ----------         ----------
                                                  10,073,215         17,585,571
OTHER ASSETS
  Deferred income tax asset..............          1,810,000            360,000
  Patent costs...........................             90,704             80,685
  Other..................................             67,804             55,183
                                                  ----------         ----------
                                                   1,968,508            495,868
                                                  ----------         ----------
                                                 $16,878,182        $23,689,421
                                                  ==========         ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Current portion of long-term debt......            511,362          3,458,436
  Trade accounts payable.................            348,191            330,375
  Accrued salaries, wages and payroll
  taxes                                              225,138            459,421
  Other current liabilities                           15,935             56,677
                                                  ----------         ----------
Total current liabilities................          1,100,626          4,304,909
LONG-TERM DEBT...........................          1,008,135                 --
COMMITMENTS AND CONTINGENCIES............                 --                 --
SHAREHOLDERS' EQUITY
  Common stock --  authorized  50,000,000  
  shares of $.01 par value;  issued and
  outstanding, 11,394,785 in 1995 and
  11,814,278 in 1996 113,948.............             113,948           118,143
  Additional paid-in capital.............          16,390,170        17,616,560
  Retained earnings (accumulated deficit)          (1,734,697)        1,649,809
                                                   ----------        ----------
                                                   14,769,421        19,384,512
                                                   ----------        ----------
                                                  $16,878,182       $23,689,421
                                                   ==========        ==========
</TABLE>

The accompanying notes are an integral part of these statements.


<PAGE>
<TABLE>
<CAPTION>


                                 THERAGENICS CORPORATION

                                  STATEMENTS OF EARNINGS
                                  Year ended December 31,
<S>                          <C>               <C>               <C>

                                 1994              1995               1996
                             ----------        ----------         ----------
Revenue
  Product sales...........   $4,723,107        $7,781,962        $12,257,165
  Licensing fees..........           --            85,431            100,000
                             ----------        ----------         ----------
                              4,723,107         7,867,393         12,357,165
                             ----------        ----------         ----------
Costs and expenses
  Cost of product sales...    1,790,450         2,645,730          3,735,669
  Selling, general and
    administrative .......    1,844,239         2,395,846          3,198,663
  Research and development       15,268            17,954              6,952
                             ----------        ----------         ----------
                              3,649,957         5,059,530          6,941,284
                             ----------        ----------         ----------
Other income (expense)
  Interest income.........      135,888           143,424            126,953
  Interest expense........           --           (51,967)           (84,517)
  Other...................      (25,673)          (26,995)            (6,311)
                             ----------        ----------         ----------
                                110,215            64,462             36,125
                             ----------        ----------         ----------
Net earnings before
income taxes.............     1,183,365         2,872,325          5,452,006

Income tax expense.......       453,000         1,100,000          2,067,500
                             ----------        ----------         ----------

Net earnings.............    $  730,365        $1,772,325         $3,384,506
                             ==========        ==========         ==========

Earnings per common share    $      .06        $      .15         $      .28
                             ----------        ----------         ----------

Weighted average shares...   11,582,793        11,759,178         12,259,214
</TABLE>


The accompanying notes are an integral part of these statements.


<PAGE>
<TABLE>
<CAPTION>


---------------------------------------------------------------------------------------------------------------------

                        STATEMENT OF SHAREHOLDERS' EQUITY
                   For the three years ended December 31, 1996

                                         Common Stock
                                                                                    Retained
                                                       Par           Additional     Earnings
                                     Number of        Value            Paid-in     (accumulated
                                      Shares           $.01            Capital       deficit)           Total
                                    ----------      ---------       -----------    ------------     ------------

<S>                                 <C>            <C>               <C>             <C>              <C>

Balance, December 31, 1993......... $10,912,937    $   109,129       $15,161,942     $(4,237,387)     $11,033,684
  Exercise of stock options........      49,900            499            49,401              --           49,900
  Common stock redeemed............        (950)           (10)           (3,890)             --           (3,900)
  Net earnings for the year........          --             --                --         730,365          730,365
                                     ----------    -----------       ------------    -----------      -----------

Balance, December 31, 1994.........  10,961,887        109,618        15,207,453      (3,507,022)      11,810,049

Exercise of stock options..........     450,000          4,500           576,370              --          580,870
  Common stock redeemed............     (17,102)          (170)         (106,653)             --         (106,823)
  Income tax benefit from stock
  options exercised................          --             --           713,000              --          713,000
  Net earnings for the year........          --             --                --       1,772,325        1,772,325
                                     ----------    -----------       -----------     -----------      -----------
Balance, December 31, 1995.........  11,394,785        113,948        16,390,170      (1,734,697)      14,769,421

Exercise of stock options..........     391,216          3,912           648,242              --          652,154
  Exercise of warrants.............      40,000            400           299,600              --          300,000
  Common stock redeemed............     (11,723)          (117)         (250,079)             --         (250,196)
  Income tax benefit from stock
  options exercised................          --             --           528,627              --          528,627
  Net earnings for the year........          --             --                --       3,384,506        3,384,506
                                     ----------    -----------      ------------     -----------      -----------
Balance, December 31, 1996.........  11,814,278      $ 118,143       $17,616,560     $ 1,649,809      $19,384,512
                                     ==========    ===========      ============     ===========      ===========
</TABLE>

The accompanying notes are an integral part of this statement.


<PAGE>
<TABLE>
<CAPTION>


                           THERAGENICS CORPORATION
                            STATEMENTS OF CASH FLOWS
                             Year ended December 31,

                                             1994           1995           1996
                                        ---------     ----------     ----------
<S>                                    <C>            <C>            <C>
Cash flows from operating activities:
  Net earnings.......................    $730,365     $1,772,325     $3,384,506
  Adjustments to reconcile net
    earnings to net cash provided
    by operating activities:
    Deferred income tax expense......     433,000      1,082,000      1,972,000
    Depreciation and amortization         571,615        828,072      1,114,919
    Loss on disposal of property
    and equipment....................       1,571          1,677            --
    Change in assets and liabilities:
    Accounts receivable .............    (197,133)      (603,221)      (923,291)
    Inventories......................     (32,834)        25,206        (62,343)
    Prepaid expenses and other current
    assets...........................      22,448         24,280        (66,104)
    Other assets.....................        (200)            --             --
    Trade accounts payable...........      78,402        121,982        (17,816)
    Accrued salaries, wages and
    payroll taxes....................      21,400        115,006        234,283
    Other current liabilities........      14,942        (17,214)        47,369
                                        ---------     ----------    -----------
      Net cash provided by operating
      activities.....................   1,643,576      3,350,113      5,683,523
                                        ---------     ----------     ----------

Cash flows from investing activities:
  Purchase and construction of
  property and equipment.............. (3,376,967)    (2,426,961)    (8,555,876)
  Maturities of marketable
  securities..........................    309,765         50,000             --
  Patent costs........................       (587)        (3,632)            --
                                       ----------     ----------     ----------
      Net cash used by investing
      activities...................... (3,067,789)    (2,380,593)    (8,555,876)
                                       ----------     ----------     ----------
Cash flows from financing activities:
  Proceeds from long-term debt........  2,100,000             --      2,450,225
  Repayment of long-term debt......... (1,441,320)      (469,622)      (511,286)
  Proceeds from exercise of stock
  options and warrants ...............     49,900        580,870        952,154
  Payment for redemption of common
  stock...............................     (3,900)      (106,823)      (250,196)
  Debt issue costs....................    (46,025)       (25,070)       (48,759)
                                       ----------     ----------     ----------
      Net cash (used) provided by
      financing activities............    658,655        (20,645)     2,592,138
                                       ----------     ----------     ----------

Net increase (decrease) in cash and
short-term investments................  (765,558)        948,875       (280,215)

Cash and short-term investments at
beginning of year....................   3,083,021       2,317,463     3,266,338
                                       ----------      ----------    ----------

Cash and short-term investments at
end of year..........................  $2,317,463      $3,266,338    $2,986,123
                                       ==========      ==========    ==========


</TABLE>
<PAGE>

             Supplemental Schedule of Non Cash Financing Activities

   During  1995 and 1996,  the Company  realized an income tax benefit  from the
   exercise and early  disposition  of certain  stock  options,  resulting in an
   increase in the deferred tax asset and additional paid in capital of $713,000
   and $528,627, respectively.
<TABLE>
<CAPTION>

                      Supplementary Cash Flow Disclosure
     <S>                             <C>           <C>             <C>
     Interest paid, net of
     amounts capitalized...          $    --       $ 53,843        $ 82,324
     Income taxes paid.....           21,500         14,858          98,755
</TABLE>

   The accompanying notes are an integral part of these statements.


<PAGE>


                         NOTES TO FINANCIAL STATEMENTS
                          December 31, 1995 and 1996

NOTE A -- ORGANIZATION AND DESCRIPTION OF BUSINESS

    Theragenics  Corporation  (the  "Company") was organized in November 1981 to
develop,  manufacture,  and market radiological pharmaceuticals and devices used
in the treatment of cancer.  The Company  manufactures and markets primarily one
product,  which is used in the treatment of cancer. Use of the Company's product
is regulated by the U.S. Food and Drug  Administration  (FDA). The Company sells
its  product  primarily  to  hospitals,  physicians  and  other  health  service
providers in the United States.  The Company  therefore is directly  affected by
changes  in  technology,  as it  may  apply  to  cancer  treatment,  and  by FDA
regulations and the well being of the health care industry.

NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:

1. Use of Estimates

    In preparing  financial  statements in conformity  with  generally  accepted
accounting principles ("GAAP"), management is required to make certain estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period. Actual results
could differ from those estimates.

2. Accounts Receivable

    The  Company  considers   accounts   receivable  to  be  fully  collectible;
accordingly,  no allowance for doubtful accounts is required.  If amounts become
uncollectible,  they will be charged to operations  when that  determination  is
made.

3. Inventories

    Inventories  are stated at the lower of cost or market.  Cost is  determined
using the  specific  identification  method  which  approximates  the  first-in,
first-out (FIFO) method. Inventories consist primarily of work in process.

4. Property, Equipment, Depreciation and Amortization

    Property and  equipment  are recorded at historical  cost.  Depreciation  is
provided for in amounts  sufficient to relate the cost of depreciable  assets to
operations  over  their  estimated  services  lives  on a  straight-line  basis.

<PAGE>

Depreciation and amortization  expense related to property and equipment charged
to operations was approximately $564,000, $810,000 and $1,044,000 for 1994, 1995
and 1996, respectively. Estimated services lives are as follows:

       Building and improvements............................30 years
       Machinery, leasehold improvements,
       furniture and equipment........................... 5-10 years

  A significant portion of the Company's  depreciable assets are utilized in the
production of its product.  Management  periodically evaluates the realizability
of its  depreciable  assets  in  light  of  its  current  industry  environment.
Management  believes that no impairment of depreciable assets exists at December
31, 1996. It is possible,  however,  that management's  estimates concerning the
realizability of the Company's  depreciable assets could change in the near term
due to changes in the technological and regulatory environment.

5. Patent Costs

  The Company  capitalizes  the costs of patent  applications  for its products.
Amortization  is computed on a straight line basis over the  estimated  economic
lives of the  patents,  commencing  at the date of grant of the related  patent.
Patent  costs are net of  accumulated  amortization  of $37,276  and  $47,295 at
December 31, 1995 and 1996,  respectively.  Amortization related to patent costs
charged to operations  was  approximately  $7,800,  $8,000 and $10,000 for 1994,
1995 and 1996, respectively.

6. Income Taxes

  The Company  accounts for income taxes using the asset and  liability  method.
Under this method,  deferred tax assets and  liabilities  are recognized for the
future tax  consequences  attributable  to  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 tax rates applied to taxable  income.  The effect on deferred tax assets
and  liabilities  of a change in tax rates is recognized in income in the period
that includes the enactment date. A valuation allowance is provided for deferred
tax assets when it is more likely than not that the asset will not be realized.


7. Research and Development Costs

  The costs of research and development and consumable supplies and materials to
be used for the development of the Company's intended products are expensed when
incurred.

8. Advertising

  The Company expenses the cost of advertising as incurred.  Advertising expense

<PAGE>

for the years ended December 31, 1994, 1995 and 1996 was approximately  $16,000,
$139,000, and $229,000, respectively.

9. Net Earnings Per Common Share

    Net earnings per common  share is based on the  weighted  average  number of
common shares and common equivalent shares outstanding during each period.

    Fully diluted  information is not presented,  as fully diluted  earnings per
share is not materially different from the primary earnings per share presented.

10. Stock Based Compensation

    The Company's stock option plans are accounted for under the intrinsic value
method in which compensation  expense is recognized for the amount, if any, that
the fair value of the underlying  common stock exceeds the exercise price at the
date of grant.

11. Statements of Cash Flows

    For  purposes of  reporting  cash  flows,  cash and  short-term  investments
include  cash  on  hand,  cash in  banks  and  commercial  paper  with  original
maturities of less than 90 days.

12. Fair Value of Financial Instruments

    The Company's  financial  instruments  include cash,  cash  equivalents  and
long-term  debt.  The carrying value of cash and cash  equivalents  approximates
fair value due to the  relatively  short period to maturity of the  instruments.
The carrying  value of the Company's  long-term  obligations  approximates  fair
value  based  upon  borrowing  rates  currently  available  to the  Company  for
borrowings with comparable maturities.

NOTE C -- CONSTRUCTION IN PROGRESS

    Construction  in  progress  represents  payments  made for  construction  of
manufacturing equipment and facilities expansion.  Total cost of this project is
expected to be  approximately  $20,000,000  and is expected to be  completed  in
various stages through 1998.

    Construction of equipment and facilities totaling  approximately  $3,800,000
and   $4,900,000   were   completed  and  placed  in  service  during  1995  and
1996,respectively.

NOTE D -- INCOME TAXES

    The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>

                               1994              1995            1996
                          ---------        ----------      ----------
 <S>                       <C>             <C>             <C>

 Current tax expense        $20,000           $18,000         $95,500
 Deferred tax expense       433,000         1,082,000       1,972,000
                           --------        ----------      ----------
                           $453,000        $1,100,000      $2,067,500
                           ========        ==========      ==========
</TABLE>
<PAGE>

    The Company's  temporary  differences result in a deferred income tax asset,
summarized as follows:
<TABLE>
<CAPTION>

                                                            December 31,
                                                     1995                 1996
                                                     ----                 ----
<S>                                            <C>                   <C>

Deferred tax assets:
  Net operating loss carryforwards..........   $2,240,000            $ 870,000
  Tax credit carryforwards..................       90,000              174,000
  Nondeductible accruals and allowances.....       38,000               50,000
  Other.....................................        7,000               14,000
                                                ---------            ---------
       Gross deferred tax asset.............    2,375,000            1,108,000
Deferred tax liabilities:
  Depreciation..............................      565,000              748,000
                                               ----------            ---------
       Net deferred tax asset...............   $1,810,000            $ 360,000
                                               ==========            =========
</TABLE>

    The  significant  portion  of the  net  operating  loss  carryforwards  were
incurred  while  the  Company  was  in the  development  stage.  Upon  receiving
clearance  to  market  its  "Theraseed"  product  from  the  U.S.  Food and Drug
Administration   (FDA)  in  1986,  the  Company   commenced   manufacturing  and
distribution of its product in 1987.  Since emerging from the development  stage
in 1989,  the  Company  has  utilized  approximately  $7,500,000  of  these  net
operating loss  carryforwards  through  December 31, 1996 by generating  taxable
income.  In order to realize  the  income tax  benefit  from the  remaining  net
operating loss  carryforwards at December 31, 1996, it will be necessary for the
Company to generate future taxable income of approximately $2,300,000,  prior to
the  expiration of the net operating  loss  carryforward  periods.  Based on the
Company's results of operations  subsequent to receiving FDA clearance to market
its product,  and on expected future results of operations,  management believes
that  currently  it is more likely than not that the income tax  benefits of the
net  operating  loss  carryforwards  will be  realized  within the  carryforward
period.  The amount of the deferred tax asset  considered  realizable,  however,
could be reduced in the near term if estimates of future  taxable  income during
the carryforward period are reduced.

    The  provision  for  income  taxes  differs  from the  amount of income  tax
determined by applying the applicable federal rates due to the following:
<TABLE>
<CAPTION>


                                                  Year ending December 31,
                                             1994          1995          1996
                                             ----          ----          ----
<S>                                      <C>         <C>           <C>
Tax at applicable federal rate of 34%    $402,000      $977,000    $1,854,000
State tax, net                             47,000       115,000       208,000
Other                                       4,000         8,000         5,500
                                         --------    ----------     ---------
                                         $453,000    $1,100,000    $2,067,500
                                         ========    ==========    ==========
</TABLE>

    The Tax Reform Act of 1986  enacted an  alternative  minimum  tax system for
corporations  (the  "AMT").  AMT is imposed at a 20% rate on the  Company's  AMT
income which is determined by making  statutory  adjustments to regular  taxable
income. A company pays the greater of the taxes computed under the "regular" tax
system or the AMT system.  Because AMT net operating loss carryforwards may only

<PAGE>

be utilized to offset 90% of the AMT income,  the Company was subject to the AMT
in 1994,  1995 and 1996,  resulting  in an  alternative  minimum tax of $20,000,
$18,000 and  $95,500,  respectively.  These  amounts will be allowed as a credit
carryover to reduce the regular tax liability in future years, but not below the
AMT of such years.

    At December 31, 1996, the Company had approximate net federal operating loss
carryforwards for regular tax and AMT purposes as follows:
<TABLE>
<CAPTION>

                                      Net operating             Net operating
Year of expiration                    loss (regular)             loss (AMT)
<S>                                   <C>                       <C>
                                      --------------            -------------
2004........................            $1,698,000                 $234,000
2005........................               591,000                  554,000
                                      --------------            -------------
                                        $2,289,000                 $788,000
                                      ==============            =============
</TABLE>

NOTE E -- NOTES PAYABLE

    In December 1996, the Company  entered into an amended and restated loan and
security  agreement (the "loan  agreement") with a financial  institution.  This
loan agreement  incorporated the Company's existing term loan and line of credit
(the "1995 loan  agreement") with the same financial  institution,  which had an
outstanding  balance  of  approximately  $1,050,000.  The  1995  loan  agreement
required monthly payments of $51,862, including interest at 8.47%.

    The  loan  agreement  provides  for a  revolving  credit  facility  of up to
$11,000,000.  Interest on outstanding borrowings is payable monthly at the prime
rate or at the  LIBOR  rate plus 2%  (effective  rate of 8.25% at  December  31,
1996).  At December 31, 1996,  $3,458,436  was  outstanding  under the revolving
credit facility.

    All  outstanding  borrowings  under the loan  agreement  are due on June 30,
1997.  However,  the  outstanding  principal  can be  repaid  over  sixty  equal
consecutive  monthly  installments,  commencing July 31, 1997, provided that the
Company  meets the term-out  requirements  as specified  in the  agreement.  The
term-out requirements  include,  among other things, the attainment of a certain
minimum net worth and other  financial  ratios for the quarter  ending March 31,
1997.  Commencing on June 30, 1997 the interest rate on  outstanding  borrowings
will be the  prime  rate or,  at the  Company's  option,  the  LIBOR  rate  plus
1.75%-2.25% or a rate based on U.S. Treasury bills plus 2%-2.5%. The rate margin
on the  LIBOR and  Treasury  rates are based  upon the  Company's  debt  service
coverage ratio, as defined in the loan agreement.

    Outstanding  borrowings  under  the loan  agreement  are  collateralized  by
substantially  all of the Company's  assets.  Provisions  of the loan  agreement
limit the amount of annual  capital  expenditures,  the incurrence of additional
debt and,  among  other  things,  require  the  maintenance  of certain  minimum
financial  ratios.  The loan agreement  also limits the number of  manufacturing
systems the Company can order and purchase, based upon quarterly revenues. As of
December 31, 1996, the Company was in compliance with the provisions of the loan
agreement. 

<PAGE>

NOTE F -- COMMITMENTS AND CONTINGENCIES

Licensing Agreement

    The Company  holds a worldwide  exclusive  license  from the  University  of
Missouri  for the use of  technology,  patented by the  University,  used in the
Company's  "TheraSphere(R)"  product.  The licensing  agreement provides for the
payment  of  royalties  based on the  level of  sales  and on lump sum  payments
received pursuant to a licensing agreement with Nordion International, Inc. (see
below).

    The Company has granted certain of its worldwide  rights under the licensing
agreement  with the  University  of  Missouri  to  Nordion  International,  Inc.
("Nordion"),  a Canadian  company which is a producer,  marketer and supplier of
radioisotope  products  and  related  equipment.  Under the  Nordion  agreement,
entered  into on March 23,  1995,  the Company  has  received  certain  lump sum
payments  and will  receive a licensing  fee for each  geographic  area in which
Nordion  receives  new drug  approval.  The  Company  will also be entitled to a
percentage  of  future  revenues  earned  by  Nordion  as  royalties  under  the
agreement.  Royalties  from this  agreement  for each of the three  years in the
period ended December 31, 1996 were not significant.

    In 1995 and 1996, the Company received  approximately  $85,000 and $100,000,
respectively,  from  Nordion  for  the  right  to  use  certain  patents  and to
manufacture,   distribute,   and  sell  "TheraSphere(R)"  for  all  applications
worldwide.

Letter of Credit

    The Company has a letter of credit  outstanding for  approximately  $315,000
relating to regulatory requirements.

Lease Commitment

    The Company  leases  space under two  noncancelable  leases  which expire in
December 1998 and February  1999.  Approximate  minimum lease payments under the
leases are as follows: 1997, $112,000; 1998, $114,000; 1999, $7,500.

    Rent expense was  approximately  $61,000,  $61,500 and $76,000 for the years
ended December 31, 1994, 1995 and 1996, respectively.



<PAGE>


NOTE G -- STOCK OPTIONS AND WARRANTS
Stock Options

    The Company's board of directors has approved three stock option plans which
in aggregate cover up to 2,200,000 shares of common stock. The plans provide for
the  expiration  of options  ten years from the date of grant and  requires  the
exercise  price of the  options  granted to be at least  equal to 100% of market
value on the date granted.  Stock option transaction for each of the three years
in the period ended December 31, 1996 are summarized below:
<TABLE>
<CAPTION>

                          1994                            1995                              1996
                          ----                            ----                              ----
                                  Weighted                       Weighted                            Weighted
                                   Average                        Average                             Average
                                  Exercise                       Exercise                            Exercise

                       Shares       Price            Shares        Price             Shares            Price
<S>                 <C>             <C>           <C>              <C>              <C>                <C>
Outstanding
beginning
of year........     1,258,116       $2.05         1,226,716        $2.09             997,716           $3.11
Granted........        40,000        2.50           221,000         5.38             220,000           15.92
Exercised......       (49,900)       1.00          (450,000)        1.29            (391,216)           2.21
Forfeited......       (21,500)       2.74                --           --                  --              --
                    ----------      -----         ---------        -----            --------           -----
Outstanding end
 of year.......     1,226,716       $2.09           997,716        $3.11             826,500           $7.22
                    ==========      =====         =========        =====            ========           =====
</TABLE>

    The following table summarizes  information about stock options  outstanding
at December 31, 1996:
<TABLE>
<CAPTION>

            Options Outstanding                    Options Exercisable
                                                                        Number
                   Number                               Weighted    Exercisable at     Weighted
 Range of       Outstanding at    Weighted Average       Average                        Average
 Exercise        December 31,       Remaining                         December 31,
 Price             1996          Contractual Life       Exercise         1996          Exercise
 --------       --------------   ----------------        Price      --------------      Price
                                                        --------                       --------
<S>              <C>                  <C>               <C>             <C>             <C>

 $1.00 - 3.50    245,000               3.9               $1.83          232,600         $1.75
 $5.38 - 6.38    361,500               8.7                5.54          189,500          5.56
$15.25 -16.88    220,000              10.0               15.99           12,000         16.88
                 -------              ----               -----          -------         -----
                 826,500               7.6               $7.22          434,100         $3.83
                 =======              ====               =====          =======         =====
</TABLE>


<PAGE>


    The Company  follows the practice of  recording  amounts  received  upon the
exercise of options by crediting common stock and additional capital. No charges
are  reflected  in the  statements  of  operations  as a result  of the grant or
exercise  of  options.  The  Company  realizes  an income tax  benefit  from the
exercise or early disposition of certain stock options.  This benefit results in
an increase to the  deferred  tax asset and an  increase in  additional  paid-in
capital.

    The Company  uses the  intrinsic  value method in  accounting  for its stock
option plans. In applying this method, no compensation cost has been recognized.
Had compensation cost for the Company's stock option plans been determined based
on the fair value at the grant dates for awards under those plans, the Company's
net earnings and earnings per share would have resulted in the pro forma amounts
indicated below: 
<TABLE>
<CAPTION>

                                                      1995               1996
                                                      ----               ----
<S>                                             <C>                <C>
Net earnings
As reported.....................................$1,772,325         $3,384,506
Pro forma....................................... 1,750,736          3,015,123
Primary earnings per share
As reported.....................................      $.15               $.28
Pro forma.......................................        15                .25
</TABLE>

    Fully diluted information is not presented,  as reported and pro forma fully
diluted earnings per share is not materially different from the primary earnings
per share presented.

    For purposes of the pro forma amounts  above,  the fair value of each option
grant was estimated on the date of grant using the Black-Scholes options-pricing
model with the following  weighted-average  assumptions  used for grants in 1995
and 1996,  respectively;  expected  volatility  of 70% for each year,  risk-free
interest rates of 5.86%, and 6.15%-6.46%;  and expected lives of 5-7 years and 7
years.

Warrants

    During 1996,  40,000 warrants were  exercised,  resulting in proceeds to the
Company of $225,000.  The Company also has warrants  outstanding at December 31,
1996 covering  60,000 shares of common stock.  The warrants are exercisable at a
price of $7.50 per share and expire in May 1999.

NOTE H -- MAJOR CUSTOMERS

    During  1994,   there  were  sales  to  one  major   customer  that  equaled
approximately  ten  percent  of  sales.  During  1995 and  1996,  there  were no
customers which individually comprised ten percent of sales.

<PAGE>

NOTE I -- EMPLOYEE BENEFIT PLAN

    The  Company  sponsors  a defined  contribution  401(k)  Plan  covering  all
employees  with at least six months of service and at least 21 years of age. The
Plan  permits  participants  to defer a portion  of their  compensation  through
payroll deductions.  The Company may, at its discretion,  contribute to the Plan
on behalf of participating employees.  Company discretionary  contributions were
approximately   $27,700,   $39,700  and   $14,100  for  1994,   1995  and  1996,
respectively.



<PAGE>



THERAGENICS CORPORATION

INDEX TO EXHIBITS

                                                        Page No.

10.17    Employment Agreement of M. Christine               53
         Jacobs

24.1     Consent of Independent Public Accountants          73
         for Incorporation by Regerence of Audit
         Statement into Registration Statement

<PAGE>


EMPLOYMENT AGREEMENT


         THIS  AGREEMENT  entered  into  this 1st day of  August,  1996,  by and
between THERAGENICS CORPORATION,  a Delaware Corporation (hereinafter called the
"Company") and M.  CHRISTINE  JACOBS,  an individual  residing at 2460 Peachtree
Road,  N.W.,  Apartment 1212,  Atlanta,  Georgia 30305  (hereinafter  called the
"Executive").


W I T N E S S E T H:


WHEREAS,  the  Company  and the  Executive  desire  to  enter  into an
employment  agreement to establish the rights and  obligations  of the Executive
and the Company in such employment relationship;


WHEREAS,  the terms of this  Agreement  have been  approved by the  Compensation
Committee  of the Board of  Directors of the  Company;  NOW,  THEREFORE,  and in
consideration  of the mutual  covenants  herein  contained,  the Company and the
Executive hereby mutually agree as follows:

 1.  Employment and Duties.  The Company  hereby employs the Executive,  and the
Executive  hereby  accepts  employment  with  the  Company  upon the  terms  and
conditions  hereinafter set forth.  The Executive shall serve the Company as its
President and Chief  Executive  Officer.  In such capacity,  the Executive shall
have all powers,  duties,  and obligations as are normally  associated with such
position.  The Executive  shall further perform such other duties related to the
business of the Company as may from time to time be reasonably  requested of her
by the  Company's  Board of  Directors.  The  Executive  shall devote all of her
skills,  time,  and  attention  solely and  exclusively  to said position and in
furtherance of the business and interests of the Company except for:

                (a) time spent in managing her personal, financial and legal
               affairs and serving on corporate, civic or charitable  boards or
               committees,  in each case only if and  to  the  extent  not
               substantially   interfering   with   the   performance   of  such
               responsibilities, and

                (b) periods of vacation to which she is entitled.

               Executive shall promptly notify the Company of her  election or
               appointment to any corporate, civic or charitable boards or 
               committees on or after the date of this Agreement.

 2. Term of Employment. The term of employment shall begin, or be deemed to have
begun, on August 1, 1996 (the  "Effective  Date") and shall expire on July 31,
1999,  subject, however, to prior termination or to extension,  as  herein

<PAGE>

provided.  On each August 1st while this Agreement is in force, the term of this
Agreement  shall  automatically  be extended  so that new term of the Agreement
expires three years from such date, unless either party notifies the other party
in  writing  of an intent  not to renew at least  ninety  (90) days prior to the
applicable August 1st.

 3. Base Salary.  For such  services,  the  Executive  shall  receive an initial
annual base salary (the "Base Salary") of  $200,000.00,  which shall be reviewed
annually by the  Compensation  Committee of the Board of Directors and which may
be  increased,  but  not  decreased,  by the  Company  during  the  term of this
Agreement.  In the event that the Company increases the Executive's initial Base
Salary,  the amount of the initial Base Salary,  together with any  increase(s),
shall  be  her  Base  Salary.   The  Base  Salary  shall  be  payable  in  equal
installments,  no less  frequently  than  semi-monthly,  in accordance  with the
Company's regular payroll practices.

 4. Bonus.  For each fiscal year of the Company  during which she is employed by
the Company on the last day of the fiscal year, the Executive  shall be eligible
to receive an annual bonus ("Annual  Bonus") under the bonus plan established by
the  Compensation  Committee of the Board for the  Executive.  Such Annual Bonus
shall be  determined  by the  Compensation  Committee of the Board.  Each Annual
Bonus  shall be paid in cash as soon as  practical  after the year for which the
Annual Bonus is earned or awarded,  unless electively  deferred by the Executive
pursuant  to any  deferral  programs or  arrangements  that the Company may make
available to the Executive.

 5. Fringe  Benefits.  The Company shall further  provide the Executive with all
health  and life  insurance  coverages,  sick  leave  and  disability  programs,
tax-qualified retirement plans, stock option plans, paid holidays and vacations,
expense reimbursement policies, moving and relocation policies, perquisites, and
such other fringe benefits of employment as the Company may provide from time to
time to actively  employed  senior  executives  of the Company who are similarly
situated.  Notwithstanding the preceding  provisions of this Paragraph 5, during
the term of this  Agreement  (including  extensions  thereof) the Company  shall
provide the Executive;

                (a)  reimbursement  for all reasonable  expenses incurred by the
               Executive  in  connection  with  the  conduct  of  the  Company's
               business on presentation  of reasonable and appropriate  receipts
               and in accordance with the Company's regular reimbursement policy
               applicable to senior executives;

                (b)  an individual disability insurance policy, at the Company's
               expense, in addition to the long-term  disability plan maintained
               by the  Company  generally  for  its  employees,  which  provides
               long-term  disability insurance which replaces at least $6,000 of
               the Executive's monthly Base Salary; and

<PAGE>

                (c)  a minimum of four (4) weeks of paid vacation per year.

 6. Termination of Employment.

                (a)  Termination of Employment Other Than by Executive. 
               The Executive's employment hereunder may be terminated by the 
               Company without any breach of this Agreement under the following
               circumstances:

                              (1)   Death   or   Disability.   The   Executive's
                             employment   hereunder  shall  terminate  upon  her
                             death,  and may be terminated by the Company in the
                             event of her Disability for a continuous  period of
                             at least one hundred  eighty  (180) days,  provided
                             that the  Executive  does not  return  to work on a
                             substantially  full-time  basis within  thirty (30)
                             days after  Notice of  Termination  is given by the
                             Company  pursuant to the  provisions  of Paragraphs
                             6(c) and  6(d)(2).  A return  to work of less  than
                             thirty (30) days shall not  interrupt a  continuous
                             period of Disability.

                              (2)    Cause.  The Company may terminate the 
                             Executive's employment hereunder for Cause.

                              (3)    Without Cause. The Company may terminate 
                             the Executive's employment hereunder without Cause.

                (b)  Termination of Employment by Executive.  The 
               Executive may terminate her employment at any time with or 
               without Good Reason.

                (c)  Notice of Termination. Any termination of the Executive's
               employment by the Company  hereunder,  or by the Executive  other
               than   termination   upon  the   Executive's   death,   shall  be
               communicated by written Notice of Termination to the other party.
               For purposes of this Agreement, a "Notice of Termination" means a
               notice that shall indicate the specific termination  provision in
               this  Agreement  relied upon,  and shall set forth in  reasonable
               detail the facts and circumstances claimed to provide a basis for
               termination of the Executive's  employment under the provision so
               indicated.  The  failure  by the  Executive  to set  forth in the
               Notice of Termination any fact or circumstance  which contributes
               to a  showing  of Good  Reason  shall  not waive any right of the
               Executive hereunder or preclude the Executive from asserting such
               fact or circumstance in enforcing her rights hereunder.

                (d)  Date of Termination.  "Date of Termination" means:

<PAGE>

                              (1)   If the Executive's employment is terminated 
                             by her death, the date of her
                             death.

                              (2) If the Executive's employment is terminated by
                             the Company as a result of  Disability  pursuant to
                             Paragraph  6(a)(1),  the date that is  thirty  (30)
                             days after Notice of Termination is given; provided
                             the  Executive  shall  not  have  returned  to  the
                             performance  of her  duties  on a  full-time  basis
                             during such thirty (30) day period.

                              (3) If the Executive terminates her employment for
                             Good Reason  pursuant to Paragraph  6(b),  the date
                             that is ten (10) days after  Notice of  Termination
                             is given  (provided  that the Company does not cure
                             such event during the ten (10) day period).

                              (4) If the  Executive  terminates  her  employment
                             other  than for Good  Reason,  the date that is two
                             (2) weeks  after  Notice of  Termination  is given;
                             provided,  in the sole  discretion  of the Company,
                             such date may be any earlier  date after  Notice of
                             Termination is given.

                              (5) If the Executive's employment is terminated by
                             the  Company  without  Cause  pursuant  to  Section
                             6(a)(3),  the  date  that  is two (2)  weeks  after
                             Notice of Termination is given.

                              (6) If the Executive's employment is terminated by
                             the  Company  for  Cause   pursuant  to   Paragraph
                             6(a)(2),   the  date  on  which   the   Notice   of
                             Termination is given.

 7. Amounts Payable Upon  Termination of Employment or During  Disability.  Upon
the  termination of the  Executive's  employment  with the Company,  the Company
shall have the following  obligations  (including the obligation to pay the cost
of all benefits provided by the applicable benefit plan to the Executive and the
Executive's  family under this Section 7, except normal  employee  contributions
required by the applicable benefit plan of other  participating  executives with
comparable  responsibilities),  provided, however, that any item paid or payable
under this  Agreement  shall be  reduced  by any  amount  paid or payable to the
Executive  and the  Executive's  family with respect to the same type of payment
under any severance  plan or policy now  maintained or at any time in the future
maintained by the Company. For this purpose, any payment under this Agreement or
any severance plan or policy made over time shall be discounted to present value
at the Interest  Rate before  reducing any payment  under this  Agreement by any
amount paid or payable to the Executive under such severance plan or policy.

<PAGE>

                (a) Death.  If the  Executive's  employment is terminated by her
               death,   the  Executive's   beneficiary  (as  designated  by  the
               Executive in writing  with the Company  prior to her death) shall
               be  entitled  to  payment  of  all  Accrued  Obligations.  Unless
               otherwise directed by the Executive all Accrued Obligations shall
               be paid to the  Executive's  beneficiaries  in a lump sum in cash
               within  thirty  (30)  days  of the  Date of  Termination.  In the
               absence of a beneficiary designation by the Executive, or, if the
               Executive's   designated   beneficiary   does  not   survive  the
               Executive,  benefits  described in this  Paragraph  7(a) shall be
               paid to the Executive's  estate.  In addition,  all stock options
               that have been  granted to the  Executive at least one year prior
               to the date of her death (measured from the date of grant of each
               such stock  option)  shall be and become  fully vested and may be
               executed by the estate of the Executive for a period equal to the
               earlier  to occur of five (5) years from the date of the death of
               the Executive or the date the option would have otherwise expired
               without regard to the Executive's  death or other  termination of
               employment. If the Executive dies before the first anniversary of
               the date of grant of any stock options,  the  Executive's  estate
               may  exercise  any stock  options  which  were then  vested for a
               period  equal to the  earlier to occur of five (5) years from the
               date of the death of the  Executive  or the date the option would
               have expired  without  regard to the  Executive's  death or other
               termination of employment.

                (b)  Disability.

                              (1) During any period that the Executive  fails to
                             perform  her  duties   hereunder  as  a  result  of
                             incapacity   due  to  physical  or  mental  illness
                             ("Disability Period"), the Executive shall continue
                             to  receive  her base  salary  at the rate  then in
                             effect  for such  period  until her  employment  is
                             terminated pursuant to Paragraph 6(a)(1); provided,
                             however,  that  payments  of Base Salary so made to
                             the  Executive  shall be  reduced by the sum of the
                             amounts, if any, that were payable to the Executive
                             at or before  the time of any such  salary  payment
                             under any  disability  benefit plan or plans of the
                             Company  and that were not  previously  applied  to
                             reduce any payment of Base Salary.

                              (2) Upon her termination of employment  because of
                             Disability (as described in Paragraph 6(a)(1)), the
                             Executive  shall be  entitled to the  payments  and
                             benefits  described  in  Paragraph  7(a)  as if the
                             Executive has died on her Date of  Termination.  In
                             the  event of the  Executive's  death  prior to the
                             
<PAGE>

                             time that all payments  described in Paragraph 7(a)
                             have been  completed,  such  payments  and benefits
                             shall be paid to the  Executive's  beneficiary  (as
                             designated  pursuant to Paragraph 7(a)), or, in the
                             absence  of  a  beneficiary   designation   of  the
                             designated   beneficiary   does  not   survive  the
                             Executive, to the Executive's estate.

                              (3) The Executive and the Executive's family shall
                             be entitled to receive disability and other welfare
                             plan benefits (other than continued group long-term
                             disability   coverage)   generally   available   to
                             executives  with  comparable   responsibilities  or
                             positions  for a period of two (2)  years  from the
                             Date  of  Termination  at  the  same  cost  to  the
                             Executive  as is  charged to such  executives  from
                             time to time for comparable coverage.

                (c)  Termination  by Company  Without  Cause,  or Termination by
               Executive  for  Good  Reason.  In  the  event  that  the  Company
               terminates  the  Executive's  employment  without  Cause  or  the
               Executive  terminates  her  employment for Good Reason before the
               expiration of the term of this Agreement, including any extension
               thereof,  the  Executive  shall  be  entitled  to  the  following
               payments and benefits:

                              (1) Those described in Paragraph 7(a) as if the 
                             Executive had died on her Date of Termination.

                              (2) Payment of an amount equal to two (2) years of
                             the Base Salary  applicable to the Executive on the
                             Date of  Termination,  payable  in six  (6)  equal,
                             consecutive  monthly  installments   commencing  no
                             later  than  thirty  (30)  days  after  the Date of
                             Termination .

                              (3) All outstanding  options,  stock grants, share
                             of restricted stock or any other equity,  incentive
                             compensation  shall be and become  fully vested and
                             nonforfeitable.

                              (4) The Executive and the Executive's family shall
                             be entitled to receive welfare plan benefits (other
                             than continued group long-term disability coverage)
                             generally  available to executives  with comparable
                             responsibilities  or positions  for a period of two
                             (2) years from the Date of  Termination at the same
                             cost  to  the  Executive  as  is  charged  to  such
                             executives   from  time  to  time  for   comparable
                             coverage.

                (d)  Termination by Executive Other Than for Good Reason, or 
               Termination by Company for Cause.  In the event that the 
               
<PAGE>

               Executive terminates her employment other than for Good Reason 
               or the Company terminates her employment for Cause, the
               Executive shall not be entitled to any compensation except as 
               set forth below:

                              (1) Any Base  Salary  that is accrued  but unpaid,
                             any  vacation  that is accrued but unused,  and any
                             business  expenses that are unreimbursed -- all, as
                             of the Date of Termination.

                              (2)  Any  other   rights  and  benefits  (if  any)
                             provided  under  plans and  programs of the Company
                             (excluding  any  bonus   program),   determined  in
                             accordance with the applicable terms and provisions
                             of such plans and programs.

                (e) No Duty to Mitigate Damages.  After any Date of Termination,
               the Executive shall have no obligation to seek other  employment,
               but  shall  have the  right  to be  otherwise  employed,  and any
               compensation of any type whatsoever  received by the Executive in
               connection  with  such  employment  shall  not be  offset  by the
               Company  against any of the obligations of the Company under this
               Agreement.

 8.  Restrictive Covenants.  The Executive agrees that, during the term of this
Agreement, including an extension thereof, and for a period of two (2) years 
thereafter, she shall not, directly or indirectly:

                (a) on  Executive's  own behalf or on behalf of any other person
               or entity,  solicit,  contact,  call upon,  communicate  with, or
               attempt  to  communicate  with any  person  or  entity  who was a
               customer of the Company at any time  within the  two-year  period
               ending on the Date of  Termination or any  representative  of any
               such  customer  of the  Company,  with the  intent or  purpose of
               selling or providing of any product or service  competitive  with
               any product or service sold or provided or under  development  by
               the  Company  during  the  period  of two (2)  years  immediately
               preceding  termination  of  Executive's  employment  and which is
               still  being  offered  by or is still  under  development  by the
               Company; and

                (b)  employ  or  attempt  to employ  or  assist  anyone  else in
               employing in any  Competing  Business any person who, at any time
               within  the  period  commencing  one  year  prior  to the Date of
               Termination   and  ending  two  (2)  years   after  the  Date  of
               Termination,  was,  is or shall  be an  employee  of the  Company
               (whether or not such  employment is full-time or is pursuant to a
               written contract with the Company).
<PAGE>

 9. Confidential Information.  The Executive agrees that:

                (a)  during  the term of this  Agreement  and,  with  respect to
               Confidential  Information,   for  a  period  of  five  (5)  years
               following  her  Date of  Termination,  or with  respect  to Trade
               Secrets, for so long as the respective information qualifies as a
               trade secret under  applicable law, she will receive and hold all
               Company Information in trust and in strictest confidence;

                (b)  she  will  use her  best  effort  to  protect  the  Company
               Information  from disclosure and will in no event take any action
               causing any Company  Information to lose its character as Company
               Information; and

                (c) except as  required by  Executive's  duties in the course of
               employment by the Company,  she will not, directly or indirectly,
               use,  publish,  disseminate  or  otherwise  disclose  any Company
               Information to any third party without the prior written  consent
               of the Company,  which may be withheld in the Company's  absolute
               discretion.

All documents or tangible or intangible materials,  including computer data,  
provided to or obtained by Executive  during the course of  employment by
the Company which contain  Company  Information  are the property of the Company
(collectively,  the  "Materials").  Executive will not remove from the Company's
premises or copy or reproduce any Materials (except as Executive's employment by
the Company shall require),  and at the  termination of Executive's  employment,
regardless  of the reason for such  termination,  Executive  will leave with the
Company,  or  immediately  return to the  Company,  all  Materials  or copies or
reproductions thereof in Executive's possession, power or control.

 10. Acknowledgement; Remedies.

                (a) Executive has carefully  considered the nature and extent of
               the restrictions  upon her and the rights and remedies  conferred
               to the  Company  under  Sections 8 and 9 of this  Agreement,  and
               hereby  acknowledges  and agrees that the same are  reasonable in
               time, necessary to protect the business, interests and properties
               of the Company, are designed to eliminate competition which would
               be unfair to the Company,  do not stifle the  inherent  skill and
               experience  of   Executive,   would  not  operate  as  a  bar  to
               Executive's sole means of support,  are fully required to protect
               the  legitimate  interests  of the  Company  and do not  confer a
               benefit  upon the Company  disproportionate  to the  detriment of
               Executive.

                (b) In the event of any violation of the  provisions of Sections
               8 or  9 of  this  Agreement  by  Executive,  the  parties  hereby
               recognize and  acknowledge  that remedy at law will be inadequate
               and the  Company  may  suffer  irreparable  injury.  Accordingly,
               
<PAGE>

               Executive consents to injunctive and other appropriate  equitable
               relief  upon  the  institution  of  proceedings  therefor  by the
               Company  in order to  protect  the  Company's  rights  under such
               Sections. Such relief shall be in addition to any other relief to
               which  the  Company  may be  entitled  at law  or in  equity.  In
               addition,  any breach of the covenants contained in Sections 8 or
               9  hereof  shall be  treated  the  same as a  termination  by the
               Company  for Cause and shall  entitle  the  Company  to cease the
               provision  of any welfare  plan  benefits  being  afforded to the
               Executive or her family after the  termination  of her employment
               with the Company,  cease any payments to be made to the Executive
               pursuant to this  Agreement in connection  with such  termination
               (other  than  accrued and unpaid  Base  Salary and  vacation)  or
               recover from the  Executive  any payments  made to the  Executive
               under this Agreement in respect of such  termination  (other than
               accrued Base Salary and vacation). In no event shall such actions
               preclude  the Company from any  equitable  relief to which it may
               otherwise be entitled and such remedies shall be cumulative.

 11. Certain Further Payments by the Company.

                (a) Tax Reimbursement  Payment.  In the event that any amount or
               benefit paid or  distributed  to the  Executive by the Company or
               any  Affiliated  Company,  whether  pursuant to this Agreement or
               otherwise (collectively,  the "Covered Payments"),  is or becomes
               subject to the tax (the "Excise  Tax") imposed under Section 4999
               of the Code or any similar tax that may hereafter be imposed, the
               Company  shall pay to the  Executive,  at the time  specified  in
               Section 11(e) below,  the Tax  Reimbursement  Payment (as defined
               below).  The Tax  Reimbursement  Payment is defined as an amount,
               which  when  added to the  Covered  Payments  and  reduced by any
               Excise Tax on the Covered  Payments  and any  federal,  state and
               local income tax and Excise Tax on the Tax Reimbursement  Payment
               provided for by this  Agreement  (but without  reduction  for any
               federal,  state or local income or employment tax on such Covered
               Payments),  shall be equal  to the sum of (i) the  amount  of the
               Covered Payments,  and (ii) an amount equal to the product of any
               deductions  disallowed  for  federal,  state or local  income tax
               purposes  because  of  the  inclusion  of the  Tax  Reimbursement
               Payment in the Executive's  adjusted gross income and the highest
               applicable  marginal  rate of  federal,  state  or  local  income
               taxation,  respectively,  for the calendar  year in which the Tax
               Reimbursement Payment is to be made.

                (b) Determining Excise Tax. For purposes of determining whether 
               any of the Covered Payments will be subject to the Excise Tax 
               and the amount of such Excise Tax,
<PAGE>

                              (1)  such  Covered  Payments  will be  treated  as
                             "parachute  payments" within the meaning of Section
                             280G of the Code, and all  "parachute  payments" in
                             excess  of the  "base  amount"  (as  defined  under
                             Section 280G(b)(3) of the Code) shall be treated as
                             subject to the Excise  Tax,  unless,  and except to
                             the extent  that,  in the opinion of the  Company's
                             independent certified public accountants, which, in
                             the case of Covered  Payments made after the Change
                             of Control Date, shall be the Company's independent
                             certified public accountants appointed prior to the
                             Change of Control Date, or tax counsel  selected by
                             such accountants (the "Accountants"),  such Covered
                             Payments  (in  whole  or in  part)  either  do  not
                             constitute   "parachute   payments"   or  represent
                             reasonable   compensation  for  services   actually
                             rendered (within the meaning of Section  280G(b)(4)
                             of the Code) in excess  of the  "base  amount",  or
                             such "parachute payments" are otherwise not subject
                             to such Excise Tax, and

                              (2) the  value  of any  non-cash  benefits  or any
                             deferred  payment or benefit shall be determined by
                             the  Accountants in accordance  with the principles
                             of Section 280G of the Code.

                (c)  Applicable Tax Rates and Deductions.  For purposes of 
               determining the amount of the Tax Reimbursement Payment, the 
               Executive shall be deemed:

                              (1) to pay  federal  income  taxes at the  highest
                             applicable marginal rate of federal income taxation
                             for   the   calendar   year   in   which   the  Tax
                             Reimbursement Payment is to be made,

                              (2) to pay any  applicable  state and local income
                             taxes at the highest  applicable  marginal  rate of
                             taxation  for the  calendar  year in which  the Tax
                             Reimbursement  Payment  is to be  made,  net of the
                             maximum  reduction  in federal  income  taxes which
                             could be obtained  from the deduction of such state
                             or  local  taxes if paid in such  year  (determined
                             without regard to  limitations on deductions  based
                             upon the amount of the  Executive's  adjusted gross
                             income), and

                              (3) to have  otherwise  allowable  deductions  for
                             federal,  state and local  income tax  purposes  at
                             least  equal to  those  disallowed  because  of the
                             inclusion of the Tax  Reimbursement  Payment in the
                             Executive's adjusted gross income.

                (d)  Subsequent  Events.  In the event  that the  Excise  Tax is
               subsequently  determined by the  Accountants  to be less than the
               amount  taken  into  account  hereunder  in  calculating  the Tax
<PAGE>
               
               Reimbursement  Payment  made,  the  Executive  shall repay to the
               Company,  at the time that the  amount of such  reduction  in the
               Excise Tax is finally  determined,  the portion of such prior Tax
               Reimbursement  Payment that has been paid to the  Executive or to
               federal, state or local tax authorities on the Executive's behalf
               and that  would not have been  paid if such  Excise  Tax had been
               applied in initially calculating such Tax Reimbursement  Payment,
               plus  interest  on the  amount  of  such  repayment  at the  rate
               provided in Section  1274(b)(2)(B)  of the Code.  Notwithstanding
               the foregoing,  in the event any portion of the Tax Reimbursement
               Payment  to be  refunded  to the  Company  has  been  paid to any
               federal,  state or local tax authority,  repayment  thereof shall
               not be required until actual refund or credit of such portion has
               been made to the Executive,  and interest  payable to the Company
               shall not exceed  interest  received or credited to the Executive
               by such tax authority  for the period it held such  portion.  The
               Executive and the Company shall mutually agree upon the course of
               action to be pursued (and the method of  allocating  the expenses
               thereof) if the Executive's good faith claim for refund or credit
               is denied.

In  the  event  that  the  Excise  Tax  is  later  determined  by  the
Accountants  to exceed the amount taken into  account  hereunder at the time the
Tax Reimbursement  Payment is made (including,  but not limited to, by reason of
any payment the existence or amount of which cannot be determined at the time of
the Tax  Reimbursement  Payment),  the  Company  shall  make an  additional  Tax
Reimbursement Payment in respect of such excess (which Tax Reimbursement Payment
shall  include any  interest or penalty  payable with respect to such excess) at
the time that the amount of such excess is finally determined.

                (e)  Date of  Payment.  The  portion  of the  Tax  Reimbursement
               Payment  attributable  to a Covered  Payment shall be paid to the
               Executive  within ten (10) business days following the payment of
               the  Covered  Payment.  If the  amount of such Tax  Reimbursement
               Payment (or portion  thereof) cannot be finally  determined on or
               before the date on which payment is due, the Company shall pay to
               the   Executive  an  amount   estimated  in  good  faith  by  the
               Accountants  to be the minimum  amount of such Tax  Reimbursement
               Payment  and shall pay the  remainder  of such Tax  Reimbursement
               Payment (which Tax  Reimbursement  Payment shall include interest
               at the rate  provided  in Section  1274(b)(2)(B)  of the Code) as
               soon as the amount  thereof  can be  determined,  but in no event
               later than  forty-five  (45)  calendar  days after payment of the
               related  Covered  Payment.  In the event  that the  amount of the
               estimated   Tax   Reimbursement   Payment   exceeds   the  amount
               subsequently  determined  to have been due,  such excess shall be
               repaid or refunded  pursuant to the  provisions  of Section 11(d)
               above.
<PAGE>

 12. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
the  Executive's  continuing  or future  participation  in any  benefit,  bonus,
incentive  or  other  plan or  program  provided  by the  Company  or any of its
Affiliated Companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise  prejudice such rights as the Executive may have under
any other  agreements with the Company or any Affiliated  Companies,  including,
but not limited to stock option or restricted  stock  agreements.  Amounts which
are vested  benefits or which the  Executive  is  otherwise  entitled to receive
under any plan or  program  of the  Company or any  Affiliated  Companies  at or
subsequent to the Date of Termination  shall be payable in accordance  with such
plan or program.

 13. Full Settlement. Except as provided in Section 10, the Company's obligation
to make the payments provided for in this Agreement and otherwise to perform its
obligations  hereunder  shall not be affected by any  circumstances,  including,
without  limitation,  any set-off,  counterclaim,  recoupment,  defense or other
right which the Company may have  against  the  Executive  or others  whether by
reason of the subsequent  employment of the Executive or otherwise.  In no event
shall the  Executive be obligated to seek other  employment by way of mitigation
of the amounts  payable to the  Executive  under any of the  provisions  of this
Agreement.  In the event that the Executive shall in good faith give a Notice of
Termination  for Good Reason and it shall  thereafter  be  determined  that Good
Reason did not take place,  the  employment of the Executive  shall,  unless the
Company and the Executive  shall  otherwise  mutually  agree,  be deemed to have
terminated,  at the date of giving  such  purported  Notice of  Termination,  by
mutual consent of the Company and the Executive  and,  except as provided in the
last preceding  sentence,  the Executive shall be entitled to receive only those
payments and benefits which she would have been entitled to receive at such date
had she terminated her employment voluntarily at such date under this Agreement.

 14. Definitions.

                (a) "Accountants" shall have the meaning set forth in Section 
               11(b).

                (b) "Accrued  Obligations"  shall mean (i) the Executive's  full
               Base Salary through the Date of Termination,  (ii) the product of
               the Annual Bonus paid to the  Executive  for the last full fiscal
               year of the Company and a fraction, the numerator of which is the
               number of days in the current fiscal year of the Company  through
               the Date of  Termination,  and the  denominator  of which is 365,
               (iii)  any  compensation  previously  deferred  by the  Executive
               (together with any accrued earnings  thereon) and not yet paid by
               the Company and any accrued vacation pay for the current year not
               yet paid by the  Company,  (iv) any amounts or benefits  owing to
               the Executive or to the Executive's  beneficiaries under the then
               applicable  employee benefit plans or policies of the Company and
               
<PAGE>
               
               (v) any  amounts  owing to the  Executive  for  reimbursement  of
               expenses  properly incurred by the Executive prior to the Date of
               Termination  and which are  reimbursable  in accordance  with the
               reimbursement policy of the Company described in Section 5(a).

                (c) "Affiliated Company" shall mean any company controlling, 
               controlled by or under common control with the Company.

                (d) "Annual Bonus" shall have the meaning set forth in 
                    Section 4.

                (e) "Base Salary" shall have the meaning set forth in Section 3.

                (f) "Board" shall mean the Board of Directors of the Company.

                (g) "Cause" shall mean either:

                               (1)  any act that constitutes, on the part of 
                             the Executive, (A) fraud, dishonesty or a felony 
                             and (B) that directly results in material injury
                             to the Company;

                               (2)  Executive's  conduct as the  President
                             and  Chief  Executive  Officer  of the  Company  is
                             grossly  inappropriate  and demonstrably  likely to
                             lead  to  material   injury  to  the  Company,   as
                             determined  by the  Board  reasonably  and in  good
                             faith; or

                               (3)  the Executive otherwise materially breaches 
                             this Agreement;

provided,  however,  that in the case of Clause (2) or (3) above, such conduct 
shall not constitute  Cause unless the Board shall have delivered to the
Executive  notice  setting  forth with  specificity  (A) the  conduct  deemed to
qualify as Cause,  (B) reasonable  action that would remedy such objection,  and
(C) a  reasonable  time  (not less  than  thirty  (30)  days)  within  which the
Executive may take such remedial action,  and the Executive shall not have taken
such specified remedial action within such specified reasonable time.

                (h) A "Change of Control" means:

                              (1) the acquisition by any  individual,  entity or
                             group  (within the  meaning of Section  13(d)(3) or
                             14(d)(2) of the Securities Exchange Act of 1934, as
                             amended  (the  "Exchange  Act"))  (a  "Person")  of
                             beneficial  ownership  (within  the meaning of Rule
                             13d-3 promulgated under the Exchange Act) of voting
                             securities   of   the   corporation    where   such
                             
<PAGE>

                             acquisition  causes such person to own  thirty-five
                             percent (35%) or more of the combined  voting power
                             of the then  outstanding  voting  securities of the
                             Company  entitled to vote generally in the election
                             of  directors  (the  "Outstanding   Company  Voting
                             Securities");  provided, however, that for purposes
                             of this Subsection (A), the following  acquisitions
                             shall  not be  deemed  to  result  in a  Change  of
                             Control:  (i) any  acquisition  directly  from  the
                             Company, (ii) any acquisition by the Company, (iii)
                             any  acquisition  by any employee  benefit plan (or
                             related  trust)  sponsored  or  maintained  by  the
                             Company  or  any  corporation   controlled  by  the
                             Company or (iv) any  acquisition by any corporation
                             pursuant  to  a  transaction   that  complies  with
                             clauses  (i),  (ii)  and  (iii) of  Subsection  (3)
                             below; and provided,  further, that if any Person's
                             beneficial  ownership  of the  Outstanding  Company
                             Voting  Securities  reaches or exceeds  thirty-five
                             percent   (35%)  as  a  result  of  a   transaction
                             described  in clause  (i) or (ii)  above,  and such
                             Person subsequently  acquires beneficial  ownership
                             of  additional  voting  securities  of the Company,
                             such subsequent  acquisition shall be treated as an
                             acquisition   that   causes   such  Person  to  own
                             thirty-five   percent   (35%)   or   more   of  the
                             Outstanding Company Voting Securities; or

                              (2)   individuals  who  as  of  the  date  hereof,
                             constitute the Board (the "Incumbent  Board") cease
                             for any reason to constitute at least a majority of
                             the Board;  provided,  however, that any individual
                             becoming a director  subsequent  to the date hereof
                             whose  election,  or nomination for election by the
                             Company's  shareholders,  was approved by a vote of
                             at  least   two-thirds   of  the   directors   then
                             comprising the Incumbent  Board shall be considered
                             as  though  such  individual  were a member  of the
                             Incumbent Board,  but excluding,  for this purpose,
                             any such  individual  whose  initial  assumption of
                             office   occurs   as  a  result  of  an  actual  or
                             threatened  election  contest  with  respect to the
                             election or removal of directors or other actual or
                             threatened  solicitation  of proxies or consents by
                             or on behalf of a Person other than the Board; or

                              (3)  the  approval  by  the  shareholders  of  the
                             Company    of   a    reorganization,    merger   or
                             consolidation  or sale or other  disposition of all
                             or  substantially  all of the assets of the Company
                             ("Business  Combination")  or, if  consummation  of
                             such Business  Combination is subject,  at the time
                             of such approval by shareholders, to the consent of
                             any   government  or   governmental   agency,   the
                             
<PAGE>

                             obtaining of such  consent  (either  explicitly  or
                             implicitly by  consummation);  excluding,  however,
                             such a Business  Combination  pursuant to which (i)
                             all or  substantially  all of the  individuals  and
                             entities  who were  the  beneficial  owners  of the
                             Outstanding  Company Voting Securities  immediately
                             prior  to such  Business  Combination  beneficially
                             own,  directly  or  indirectly,  more  than 60% of,
                             respectively, the then outstanding shares of common
                             stock  and the  combined  voting  power of the then
                             outstanding  voting  securities  entitled  to  vote
                             generally in the election of directors, as the case
                             may be,  of the  corporation  resulting  from  such
                             Business    Combination     (including,     without
                             limitation,  a corporation that as a result of such
                             transaction    owns   the   Company   or   all   or
                             substantially  all of the  Company's  assets either
                             directly  or through one or more  subsidiaries)  in
                             substantially   the  same   proportions   as  their
                             ownership,   immediately  prior  to  such  Business
                             Combination  of  the  Outstanding   Company  Voting
                             Securities,  (ii) no Person (excluding any employee
                             benefit  plan (or related  trust) of the Company or
                             such  corporation   resulting  from  such  Business
                             Combination)   beneficially   owns,   directly   or
                             indirectly,  thirty-five  percent (35%) or more of,
                             respectively, the then outstanding shares of common
                             stock  of  the  corporation   resulting  from  such
                             Business  Combination or the combined  voting power
                             of the then outstanding  voting  securities of such
                             corporation   except  to  the   extent   that  such
                             ownership existed prior to the Business Combination
                             and (iii) at least a majority of the members of the
                             board of  directors  of the  corporation  resulting
                             from such Business  Combination were members of the
                             Incumbent Board at the time of the execution of the
                             initial  agreement,  or of the action of the Board,
                             providing for such Business Combination; or

                              (4)  approval by the shareholders of the Company 
                             of a complete liquidation or dissolution of the 
                             Company.

Notwithstanding the foregoing, no Change of Control shall be deemed to have 
occurred for purposes of this  Agreement by reason of any actions or events
in which the Executive participates in a capacity other than in her capacity as
Executive (or as a director of the Company or a Subsidiary, where applicable).

                (i)  "Change  of  Control  Date"  shall mean the date on which a
               Change of Control shall be deemed to have occurred.
<PAGE>

                (j)  "Code" shall mean the Internal Revenue Code of 1986, as 
               amended.

                (k)  "Company Information" means Confidential Information and 
               Trade Secrets.

                (l)  "Competing  Business"  means any business engaging in the
               exploitation  or  development  of   radiological   pharmaceutical
               products  or  devices  for the  treatment  of  cancer in a manner
               similar to the Company's products.

                (m)  "Confidential  Information"  means  confidential  data  and
               confidential  information relating to the business of the Company
               (which  does  not  rise to the  status  of a trade  secret  under
               applicable law) which is or has been disclosed to Executive or of
               which  Executive  became aware as a consequence of or through her
               employment  with the  Company  and which has value to the Company
               and is not  generally  known  to its  competitors  and  which  is
               designated   by  the   Company  as   confidential.   Confidential
               Information  shall not include any data or  information  that (i)
               has been  voluntarily  disclosed  to the  general  public  by the
               Company,  (ii) has been independently  developed and disclosed to
               the  general  public by  others,  or (iii)  otherwise  enters the
               public domain through lawful means.

                (n)  "Date of Termination" shall have the meaning set forth in 
               Section 6(d).

                (o)  "Disability"  shall mean disability which would entitle the
               Executive to receive full long-term disability benefits under the
               Company's  long-term   disability  plan  on  terms  substantially
               similar to those of the long-term disability plan as in effect on
               the date of this Agreement.

                (p)  "Excise Tax" shall have the meaning as set forth in 
               Section 11(a).

                (q)  "Good  Reason"  shall  mean  the  occurence  of  one of the
               following  events  (provided the Company does not cure such event
               on a  retroactive  basis to the extent  possible  within ten (10)
               days  following  its  receipt  of  the   Executive's   Notice  of
               Termination):

                              (1) The Executive's title, position,  authority or
                             responsibilities        (including        reporting
                             responsibilities  and  authority)  are changed in a
                             materially adverse manner.

                              (2) The Executive's base salary is reduced for any
                             reason   other   than  in   connection   with   the
                             termination of her employment.
<PAGE>

                              (3) For any reason other than in  connection  with
                             the termination of the Executive's employment,  the
                             Company   materially  reduces  any  fringe  benefit
                             provided to the Executive under Section 5 below the
                             level of such  fringe  benefit  provided  generally
                             other   actively   employed    similarly   situated
                             executives  of  the  Company.  Notwithstanding  the
                             foregoing,   if  the   Company   agrees   to  fully
                             compensate  the  Executive  for any  such  material
                             reduction  for a period  ending on the  earlier  to
                             occur of (i) the date  such  fringe  benefit  is no
                             longer   provided   to  other   actively   employed
                             similarly  situated  executives  of the  Company or
                             (ii)  four (4)  years,  then such  event  shall not
                             constitute Good Reason.

                              (4) A change of over  fifty  (50)  miles in either
                             the  Executive's  principal  place of employment or
                             the headquarters of the Company other than a change
                             to the  Metropolitan  Atlanta,  Georgia  area or to
                             Buford, Georgia or another location in Hall County,
                             Georgia as is presently  being  contemplated by the
                             Company.

                              (5) The Company otherwise materially breaches,  or
                             is unable to  perform  its  obligations  under this
                             Agreement.

                              (6) The occurrence of a Change of Control.

Notwithstanding  the foregoing,  the occurrence of one of the event in
Paragraphs  (1) through (6) hereof shall not be  considered  Good Reason for the
Executive's  termination,  unless the Executive delivers a Notice of Termination
pursuant to Paragraphs 6(c) and 6(d)(3) hereof,  within one hundred eighty (180)
days after the  Executive  has  actual  notice of the  occurrence  of any of the
events listed in Paragraphs (1) through (6) hereof.

                (r) "Interest  Rate" shall mean the interest rate payable on one
               year Treasury Bills in effect on the day that is 30 business days
               (days other than  Saturday,  Sunday or legal holidays in the City
               of New York) prior to the Date of Termination.

                (s) "Notice of Termination" shall have the meaning as set forth 
               in Section 6(c).

                (t) "Subsidiary" shall mean any majority owned subsidiary of 
               the Company.

                (u) "Tax Reimbursement Payment" shall have the meaning set 
               forth in Section 11(a).
<PAGE>

                (v) "Trade  Secrets" means  information of the Company,  without
               regard to form,  including,  but not  limited  to,  technical  or
               nontechnical data, formulas,  patterns,  compilations,  programs,
               devices,  methods,  techniques,  drawings,  processes,  financial
               data,  financial  plans,  product  or  service  plans or lists of
               actual or potential  customers or suppliers which is not commonly
               known by or  available  to the public and which  information  (1)
               derives  economic  value,  actual  or  potential,  from not being
               generally known to, and not being readily ascertainable by proper
               means by, other  persons who can obtain  economic  value from its
               disclosure  or use;  and (2) is the  subject of efforts  that are
               reasonable under the circumstances to maintain its secrecy.

 15. Assignment and Survivorship of Benefits.  The rights and obligations of the
Company under this Agreement shall inure to the benefit of, and shall be binding
upon,  the  successors  and assigns of the Company.  If the Company shall at any
time be  merged  or  consolidated  into,  or  with,  any  other  company,  or if
substantially  all of the  assets of the  Company  are  transferred  to  another
company,  then the provisions of this Agreement  shall be binding upon and inure
to the benefit of the company  resulting from such merger or consolidation or to
which such assets have been  transferred,  and this provision shall apply in the
event of any subsequent merger, consolidation, or transfer.

 16.  Notices.  Any notice given to either party to this  Agreement  shall be in
writing,  and shall be deemed to have been given when  delivered  personally  or
sent  by  certified  mail,  postage  prepaid,  return  receipt  requested,  duly
addressed  to the party  concerned,  at the address  indicated  below or to such
changed address as such party may subsequently give notice of:

                             If to the Company:

                             Theragenics Corporation
                             Oakbrook Parkway
                             Norcross, Georgia 30093
                             Attn: Board of Directors

                             with a copy to:

                             Powell, Goldstein, Frazer & Murphy
                             Sixteenth Floor
                             Peachtree Street, N.E.
                             Atlanta, Georgia 30303
                             Attn: Richard Miller, Esq.


                             If to the Executive:

                             Christine Jacobs
                             Peachtree Road, N.W.
                             Apartment 1212
                             Atlanta, Georgia 30305
<PAGE>

                             with a copy to:

                             Lightmas & Delk
                             Suite 1150
                             The Peachtree
                             Peachtree Street, N.E.
                             Atlanta, Georgia 30309
                             Attn:  Frank Lightmas, Esq.

 17. Indemnification.  The Executive shall be indemnified by the Company, to 
the extent provided in the case of officers under the Company's Certificate of 
Incorporation or Bylaws, to the maximum extent permitted under applicable law.

 18. Taxes.  Anything in this  Agreement to the contrary  notwithstanding,  all
payments  required to be made hereunder by the Company to the Executive shall be
subject to  withholding  of such  amounts  relating  to taxes as the Company may
reasonably  determine that it should withhold  pursuant to any applicable law or
regulations.  In lieu of withholding such amounts, in whole or in part, however,
the Company may, in its sole  discretion,  accept other provision for payment of
taxes, provided that is satisfied that all requirements of the law affecting its
responsibilities to withhold such taxes have been satisfied.

 19. Enforcement of Rights.  All legal and other fees and expenses,  including,
without  limitation,  any  arbitration  expenses,  incurred by the  Executive in
connection  with seeking to obtain or enforce any right or benefit  provided for
in this Agreement, or in otherwise pursuing any right or claim, shall be paid by
the Company,  to the extent  permitted by law,  provided  that the  Executive is
successful  in whole or in part as to such  claims as the result of  litigation,
arbitration, or settlement.

     In the event that the  Company  refuses or  otherwise  fails to make a
payment when due and it is ultimately  decided that the Executive is entitled to
such payment, such payment shall increased to reflect an interest equivalent for
the period of delay,  compounded  annually,  equal to four (4) percentage points
over the Interest Rate in effect as of the date the payment was first due.

 20.  Governing  Law/Captions/Severance.  This  Agreement  shall be construed in
accordance with, and pursuant to, the laws of the State of Georgia. The captions
of this Agreement shall not be part of the provisions  hereof, and shall have no
force or effect.  The  invalidity or  unenforceability  of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.  Except as otherwise specifically provided in this paragraph,
the failure of either party to insist in any instance on the strict  performance
of any provision of this Agreement or to exercise any right  hereunder shall not
constitute a waiver of such provision or right in any other instance.


 21. Entire  Agreement/Amendment.  This instrument contains the entire agreement
of the parties relating to the subject matter hereof,  and the parties have made
no agreement,  representations,  or warranties relating to the subject matter of
this Agreement  that are not set forth herein.  This Agreement may be amended at
any time by written  agreement of both  parties,  but it shall not be amended by
oral agreement.

          IN WITNESSETH WHEREOF, the parties have executed this Agreement on the
date first above written.

                                          THERAGENICS CORPORATION


                                          By:   /s/  Bruce W. Smith 

ATTEST:                                   Title: Secretary, Treasurer 
                                                 & Chief Financial Officer

/s/ Ronald A. Warren
 
Title: Assistant Secretary 

[CORPORATE SEAL]


                                           EXECUTIVE:


                                           /s/ M. Christine Jacobs

                                           M. CHRISTINE JACOBS




<PAGE>

Exhibit 24.1


CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
Theragenics Corporation

We hereby consent to the incorporation by reference of our report dated January
16, 1997,  appearing  in your  Annual  Report on form  10-K for the year ended
December 31, 1996, in the Company's Registration Statement on Form S-8, file 
numbers 333-15313 and 33-40737.

GRANT THORNTON LLP

Alanta, Georgia
March 19, 1997