Exhibit
10.1


SETTLEMENT
AGREEMENT AND RELEASE


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


RECITALS


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


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


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


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


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


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









 



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


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


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the settlement offer in the Securities Lawsuit was withdrawn soon thereafter;


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


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


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


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


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


AGREEMENTS
AND RELEASES


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









 



1.             Payment by St. Paul


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


2.             Full Compliance of All Obligations


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


3.             Mutual Releases 


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









 



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


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


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









 



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


4.             Indemnity Agreement


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


5.                                      Ownership of Claims


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


6.                                      Confidentiality


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









 



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


To St. Paul:


Neil J. Dilloff


DLA Piper US LLP


6225 Smith Avenue


Baltimore, MD 21209-3600


Fax: (410) 580-3138


To CryoLife, Inc.:


Darren Summerville


Bondurant, Mixson & Elmore, LLP


1201 West Peachtree Street, NW


Suite 3900


Atlanta, GA 30309


Fax: (404) 881-4111


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


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


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









 



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


7.                                      No Admission of Coverage


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


8.             Successors


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


9.             Entire Agreement


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









 



10.          Severability


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


11.          Change
in Known Facts


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


12.          Authority


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


13.          Acknowledgement of Legal Advice


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


14.          Agreement Not to Prosecute Claims


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









 



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


15.          Attorneys’ Fees and Costs


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


16.          Governing
Law


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


17.          Headings


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


18.          Multiple
Counterparts


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









 



 


	
  Date: September 25, 2006

  	
  CRYOLIFE, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ D. Ashley
  Lee

  	
   

  
	
   

  	
   

  	
  Authorized Representative

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Printed Name:

  	
  D. Ashley Lee

  	
   

  
	
   

  	
   

  	
   

  
	
  STATE OF GEORGIA

  	
  §

  	
   

  	
   

  
	
   

  	
  §

  	
   

  	
   

  
	
  COUNTY OF Cobb

  	
  §

  	
   

  	
   

  
						



 


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


SIGNED
this 25th day of September, 2006.


 


	
  

  	
  /s/ Suzanne K.
  Gabbert

  	
   

  
	
   

  	
  Notary Public in and for the

  
	
   

  	
  State of Georgia

  
	
   

  
	
   

  	
  Notary Public,
  Cobb County, Georgia

  
	
   

  	
  My Commission Expires:

  	
  My Commission
  Expires Sept. 13, 2006

  
				



 









 



 


	
  Date: 9/22/06

  	
  ST. PAUL MERCURY INSURANCE

  	
   

  
	
   

  	
  COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William J. Kobokovich

  	
   

  
	
   

  	
   

  	
  Authorized Representative

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Printed Name:

  	
  William J. Kobokovich, Jr.

  	
   

  
	
   

  	
   

  	
   

  
	
  STATE OF MARYLAND

  	
  §

  	
   

  	
   

  
	
   

  	
  §

  	
   

  	
   

  
	
  COUNTY OF BALTIMORE

  	
  §

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						



 


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


SIGNED
this 22nd day of September, 2006.


	
  

  	
  /s/ Lori D. Myers

  	
   

  
	
  LORI D. MYERS

  	
   

  	
  Notary Public in and for the

  	
   

  
	
  NOTARY
  PUBLIC

  	
   

  	
  State of Maryland

  	
   

  
	
  CARROLL COUNTY

  	
   

  	
   

  	
   

  
	
  MARYLAND

  	
   

  	
  My Commission Expires:

  	
  1/1/08