Document:

cryolife8k102208ex10.htm

    Exhibit
10.1

     

    CHANGE
OF CONTROL AGREEMENT

    

    This CHANGE OF CONTROL AGREEMENT (this
“Agreement”) dated as of the 24th day of October, 2008 is by and between
CRYOLIFE, INC., a Florida corporation (“CryoLife” or the “Company”) and D.
Ashley Lee (the “Officer”).

    

    W I T N E S S E T H:

    

    WHEREAS, the Board of Directors of the
Company upon the recommendation of the Compensation Committee, has determined
that it is in the best interests of the Company and its shareholders to enter
into this Change of Control Agreement in order to assure that the Company will
have the continued dedication of Officer, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined herein) of the Company;
and

    

    WHEREAS, Officer has determined that it
is in the best interests of Officer to enter into this Agreement;

    

    NOW, THEREFORE, in consideration of the
premises, the promises hereinafter set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
both parties, it is hereby agreed as follows:

    

               1.           CERTAIN
DEFINITIONS.

    

    (a) “Effective Date” means
the first date during the Change of Control Period (as defined herein) on which
a Change of Control occurs.  Notwithstanding anything in this
Agreement to the contrary, if the Officer’s employment with the Company is
terminated by the Company without Cause or by Officer for Good Reason (as such
terms are defined herein) within the six (6) month period prior to the date on
which the Change of Control occurs and if such Change of Control is consummated
(such a termination of employment, an “Anticipatory Termination”), then for all
purposes of this Agreement the “Effective Date” means the date immediately prior
to the date of such termination of employment.

    

    (b) “Change of Control
Period” means the period commencing on the date hereof and ending on
September 1, 2011; provided,
however, that, commencing on September 1, 2011, and each three-year
anniversary of such date (such date and each such three-year anniversary
thereof, the “Renewal Date”) unless previously terminated, the Change of Control
Period shall be automatically extended so as to terminate three (3) years from
such Renewal Date, unless, at least thirty (30) days prior to the next Renewal
Date, the Company shall give notice to the Officer that the Change of Control
Period shall not be so extended.

    

    (c) “Affiliated Company”
means any company controlled by, controlling or under common control with the
Company.

    

    (d) “Change of Control”
means a change in the ownership or effective control of, or in the ownership of
a substantial portion of the assets of, the Company, as described in paragraphs
(i) through (iii) below.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (i)           Change in Ownership of the
Company.  A change in the ownership of the Company shall occur
on the date that any one person, or more than one person acting as a group
(within the meaning of paragraph (iv)), other than a group of which Officer is a
member, acquires ownership of the Company stock that, together with the Company
stock held by such person or group, constitutes more than 50% of the total
voting power of the stock of the Company.

    

                 (A)           If
any one person or more than one person acting as a group (within the meaning of
paragraph (iv)), other than a group of which Officer is a member,  is
considered to own more than 50% of the total voting power of the stock of the
Company, the acquisition of additional the Company stock by such person or
persons shall not be considered to cause a change in the ownership of the
Company or to cause a change in the effective control of the Company (within the
meaning of paragraph (ii) below).

    

               (B)           An
increase in the percentage of the Company stock owned by any one person, or
persons acting as a group (within the meaning of paragraph (iv)), as a result of
a transaction in which the Company acquires its stock in exchange for property,
shall be treated as an acquisition of stock for purposes of this paragraph
(i).

    

               (C)           Except
as provided in (B) above, the provisions of this paragraph (i) shall apply only
to the transfer or issuance of the Company stock if such stock remains
outstanding after such transfer or issuance.

     

    (ii)           Change in Effective Control
of the Company.

    

    (A)           A
change in the effective control of the Company shall occur on the date that
either of (1) or (2) below occurs:

    

               (1)           Any
one person, or more than one person acting as a group (within the meaning of
paragraph (iv)), other than a group of which Officer is a member, acquires (or
has acquired during the 12 month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the Company
possessing 30% or more of the total voting power of the stock of the Company;
or

    

               (2)           A
majority of the members of the the Company Board of Directors are replaced
during any 12 month period by Directors whose appointment or election is not
endorsed by a majority of the Board of Directors prior to the date of the
appointment or election.

    

    (B)           A
change in effective control of the Company also may occur with respect to any
transaction in which either of the Company or the other entity involved in a
transaction experiences a Change of Control event described in paragraphs (i) or
(iii).

    

    (C)           If
any one person, or more than one person acting as a group (within the meaning of
paragraph (iv)), is considered to effectively control the Company (within the
meaning of this paragraph (ii)), the acquisition of additional control of the
Company by the same person or persons shall not be considered to cause a change
in the effective control of the Company (or to cause a change in the ownership
of the Company within the meaning of paragraph (i)).

     

     

    
      
        
        

      

      
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    (iii)           Change in Ownership of a
Substantial Portion of the Company’s Assets.  A change in the
ownership of a substantial portion of the Company’s assets shall occur on the
date that any one person, or more than one person acting as a group (within the
meaning of paragraph (iv)), other than a group of which Officer is a member,
acquires (or has acquired during the 12 month period ending on the date of the
most recent acquisition by such person or persons) assets from the Company that
have a total gross fair market value (within the meaning of paragraph (iii)(B))
equal to or more than 40% of the total gross fair market value of all of the
assets of the Company immediately prior to such acquisition or
acquisitions.

     

    (A)           A
transfer of the Company’s assets shall not be treated as a change in the
ownership of such assets if the assets are transferred to one or more of the
following:

    

               (1)           A
shareholder of the Company (immediately before the asset transfer) in exchange
for or with respect to the Company stock;

    

               (2)           An
entity, 50% or more of the total value or voting power of which is owned,
directly or indirectly, by the Company;

    

               (3)           A
person, or more than one person acting as a group (within the meaning of
paragraph (iv)) that owns, directly or indirectly, 50% or more of the total
value or voting power of all of the outstanding stock of the Company;
or

    

               (4)           An
entity, at least 50% of the total value or voting power of which is owned,
directly or indirectly, by a person described in paragraph
(iii)(A)(3).

    

    For
purposes of this paragraph (iii)(A), and except as otherwise provided, a
person’s status is determined immediately after the transfer of
assets.

    

     (B)           For
purposes of this paragraph (iii), gross fair market value means the value of all
the Company assets, or the value of the assets being disposed of, determined
without regard to any liabilities associated with such assets.

    

    (iv)        For
purposes of this Section 1(d), persons shall be considered to be acting as a
group if they are owners of an entity that enters into a merger, consolidation,
purchase, or acquisition of assets, or similar business transaction with the
Company.  If a person, including an entity shareholder, owns stock in
the Company and another entity with which the Company enters into a merger,
consolidation, purchase, or acquisition of stock, or similar business
transaction, such shareholder shall be considered to be acting as a group with
the other shareholders in a corporation only to the extent of the ownership in
that corporation prior to the transaction giving rise to the change and not with
respect to the ownership interest in the other corporation.  Persons
shall not be considered to be acting as a group solely because they purchase or
own stock of the Company at the same time, or as a result of the same public
offering of the Company’s stock.

     

    
 

    
      
        
        

      

      
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    2.           EMPLOYMENT.

    

    Officer and the Company acknowledge
that the employment of the Officer by the Company is “at will” and Officer shall
have no rights under this Agreement unless Officer is terminated by the Company
without Cause or by the Officer with Good Reason during the period commencing on
the Effective Date and ending on the second anniversary of such
date.

    

    3.           TERMS OF AT WILL
EMPLOYMENT.

    

    (a) During
the term of his or her employment by the Company, and excluding any periods of
vacation and sick leave to which the Officer is entitled, the Officer agrees to
devote reasonable attention and time to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities assigned to the
Officer by the Board of Directors or the Chief Executive Officer, to use the
Officer’s reasonable best efforts to perform faithfully and efficiently such
responsibilities.

    

    (b) During
the term of this Agreement, the Officer will not, without the prior written
consent of the Company, directly or indirectly other than in the performance of
the duties hereunder, render services of a business, professional or commercial
nature to any other person or firm, whether for compensation or otherwise,
except: (i) with respect to any noncompetitive family businesses of the Officer
for which the rendering of such services will not have an adverse effect upon
Officer’s performance of his duties and obligations hereunder; (ii) that Officer
shall be permitted to engage in charitable and community affairs provided that
such activities do not interfere with the performance of his duties and
responsibilities enumerated herein; and (iii) to give attention to Officer’s
investments provided that such activities do not interfere with the performance
of his duties and responsibilities enumerated herein.

    

    4.           TERMINATION OF
EMPLOYMENT.

    

    (a)           Cause.  For
purposes of this Agreement, “Cause” shall mean:

    

    
      	
              (i)  

            	
              an
      intentional act of fraud, embezzlement, theft or any other material
      violation of law that occurs during or in the course of the Officer’s
      employment with the Company;

            

    

    

    
      	
              (ii)  

            	
              intentional
      damage by Officer to the Company’s
assets;

            

    

    

    
      	
              (iii)  

            	
              intentional
      disclosure by Officer of the Company’s confidential information contrary
      to the Company policies;

            

    

    

    
      	
              (iv)  

            	
              material
      breach of the Officer’s obligations under this
  Agreement;

            

    

    

    
      	
              (v)  

            	
              intentional
      engagement by the Officer in any activity which would constitute a breach
      of the Officer’s duty of loyalty or of the Officer’s assigned
      duties;

            

    

    

    
      	
              (vi)  

            	
              intentional
      breach by the Officer of any of the Company’s policies and
      procedures;

            

    

    

    
      	
              (vii)  

            	
              the
      willful and continued failure by Officer to perform the Officer’s assigned
      duties (other than as a result of incapacity due to physical or mental
      illness); or

            

    

    

    
      	
              (viii)  

            	
              willful
      conduct by the Officer that is demonstrably and materially injurious to
      the Company, monetarily or
otherwise.

            

    

     

     

    
      
        
        

      

      
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    (b)           Good
Reason.  For purposes of this Agreement, “Good Reason” shall
mean the assignment to the Officer, without the Officer’s consent, of any duties
materially inconsistent with the Officer’s position (including changes in
status, offices, or titles and any change in the Officer’s reporting
requirements that would cause Officer to report to an officer  who is
junior in seniority to the officer to whom Officer reports), authority, duties
or responsibilities, determined as of the later of the date of this Agreement or
the date of any modification to Officer’s position (including status, offices,
titles and reporting requirements, as described above), authority, duties or
responsibilities that is agreed to by Officer, or any other action by the
Company that results in a material diminution in such position, authority,
duties, responsibilities or Officer’s aggregate compensation, excluding for this
purpose an isolated, insubstantial and inadvertent action taken in good faith
and which is remedied by the Company within thirty (30) days after receipt of
notice thereof given by the Officer (each of these an “Event” for purposes of
this Section 4(b)).  Officer must notify the Company of any Event that
constitutes Good Reason within ninety (90) days following Officer’s knowledge of
the existence of such Event or such Event shall not constitute Good Reason under
this Agreement.

    

    (c)           Notice of
Termination.  Any termination by the Company for Cause, or by
the Officer for Good Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 11(b) of this
Agreement.  For purposes of this Agreement, a “Notice of Termination”
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Officer’s employment under the provision so indicated and
(iii) specifies the termination date (which date shall not be more than thirty
(30) days after the giving of such notice; provided, however, if Officer
is terminating for Good Reason such date shall not be less than thirty (30) nor
more than forty-five (45) days after giving of such notice).  The
failure by the Officer or the Company to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Officer or the Company, respectively, hereunder
or preclude the Officer or the Company, respectively, from asserting such fact
or circumstance in enforcing the Officer’s or the Company’s rights
hereunder.

    

    (e) Date of
Termination.  “Date of Termination” means the date of receipt
of the Notice of Termination, or any later date specified therein, as the case
may be. The Company and the Officer shall take all steps necessary (including
with regard to any post-termination services by the Officer) to ensure that any
termination described in this Section 4 constitutes a “separation from service”
within the meaning of Section 409A of the Code, and notwithstanding anything
contained herein to the contrary, the date on which the separation from service
takes place shall be the “Date of Termination.”

    

    (f)  Covenants Necessary to the
Company’s Business.

    

    (i)           Non-Solicitation of
Customers.  The Officer covenants and agrees that, during the
term of this Agreement and for a period of one (1) year following the
termination of this Agreement Officer will not, either directly or indirectly,
in competition with the Company Business (as defined below), solicit, entice or
recruit for a Competing Business (as defined below), attempt to solicit, entice
or recruit for a Competing Business, or attempt to divert or appropriate to a
Competing Business, any actual or prospective customer of the Company with whom
Officer had contact on behalf of the Company.  For the purposes of
this Agreement, “Company Business” shall mean the business of (A) processing
cardiac or vascular tissues, (B) marketing biological glue or protein
hydrogel technology products, (C) marketing transport or other solutions for use
with human organs to be transplanted and/or (D) marketing hemostatic agents for
use in surgeries.  “Competing Business” shall mean any person or
entity that engages in a commercial business that is the same as or
substantially similar to the Company Business, and only that portion of the
business that is in competition with the Company Business.

     

     

    
      
        
        

      

      
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    (ii)           Non-Solicitation of
Employees.  Officer covenants and agrees that, during the term
of this Agreement for a period of one (1) year following the Date of
Termination, Officer will not, either directly or indirectly, solicit, entice,
encourage, cause, or recruit any person employed by the Company and with whom
Officer had contact during Officer’s employment with the Company to leave such
person’s employment with the Company to join a Competing Business.

    

    (iii)           Consideration for
Covenants.  Officer covenants and agrees that the payment of
any Severance Payment (as defined in Section 5(e)) shall be subject to and
expressly conditioned upon Officer’s compliance with the covenants set forth in
subparagraphs (i) and (ii) above.  Should Officer fail to comply with
these covenants, the Company shall not be required to make the Severance Payment
(or any portion of the Severance Payment that remains unpaid), and the Officer
shall be required to repay any portion of the Severance Payment that the Officer
has already received from the Company.

    

    

    5.           OBLIGATIONS OF THE COMPANY UPON
TERMINATION.

    

    (a)           If,
during the two year period commencing on the Effective Date and ending on the
second anniversary
of the Effective Date, (i) the Company shall terminate the Officer’s employment
without Cause, or (ii) the Officer shall terminate employment for Good Reason,
then the Company shall pay to Officer the Severance Payment (defined
below).

    

    (b) Severance
Payment.  The “Severance Payment” shall be an amount equal to
two (2) times the aggregate of Officer’s base salary as of the Date of
Termination and bonus compensation for the year in which the termination of
employment occurs. For purposes of determining Officer’s bonus compensation for
purposes of this Section 5(b), if the Date of Termination occurs before the
awarding of bonuses for the year in which the Date of Termination occurs, the
bonus compensation component of the Severance Payment shall be computed based on
Officer’s most recent awarded bonus.  Bonus compensation shall include
both the Annual Bonus paid in cash and the value of any non-cash bonuses, such
as options or restricted stock. Any such options will be valued pursuant to the
Black Scholes valuation method as of the grant date, using the same assumptions
used by the Company in computing the FAS 123R charge for the options, and any
shares of restricted stock will be valued at the closing price of the the
Company Common Stock on The New York Stock Exchange on the date of
issuance.  The Company’s annual option and restricted stock grants
shall not be deemed to be bonus compensation unless they are specifically
designated as such by the the Company Compensation Committee.  For the
sake of clarification, all cash paid and any shares issued in payment of all or
a portion of the bonus pursuant to the Company’s Officer Incentive Plan shall be
bonus compensation for purposes of this Agreement for the year in which paid or
issued. The Severance Payment shall be payable to Officer as
follows:

     

     

    
      
        
        

      

      
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    (i)           The
Severance Payment, if any is due hereunder, shall be paid to Officer in a lump
sum not later than thirty (30) days following Officer’s Date of
Termination. 

    

    (ii)           In
the event of an Anticipatory Termination, the Severance Payment shall be paid to
Officer in a lump sum not later than thirty (30) days following the date of the
Change of Control.

    

    Notwithstanding
the foregoing, if any amount paid pursuant to this Section 5(b) is deferred
compensation withing the meaning of Section 409A of the Code and as of the Date
of Termination Officer is a Specified Employee, amounts that would otherwise be
payable during the six-month period immediately following the Date of
Termination shall instead be paid, with interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Code, on
the first business day after the date that is six months following Officer’s
“separation from service” within the meaning of Section 409A of the Code (the
“Delayed Payment Date”).   As used in this Agreement, the term
“Specified Employee” means a “specified employee” as defined in Section
409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended (the “Code”).
By way of clarification, “specified employee” means a “key employee” (as defined
in Section 416(i) of the Code, disregarding Section 416(i)(5) of the Code) of
the Company.  Officer shall be treated as a key employee if the
Officer meets the requirement of Section 416(i)(1)(A)(i), (ii), or (iii) at any
time during the twelve (12) month period ending on an “identification
date”.  For purposes of any “Specified Employee” determination
hereunder, the “identification date” shall mean the last day of each calendar
year.

    

    6.           FULL SETTLEMENT.

    

    In no event shall the Officer be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Officer under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Officer
obtains other employment.  The Company agrees to pay, to the full
extent permitted by law, all legal fees and expenses which the Officer may
reasonably incur as a result of any contest by the Company or Officer with
respect to liability under or the interpretation of the validity or
enforceability of, any provision of this Agreement, but only in the event and to
the extent that (i) the Officer receives a final, non-appealable judgment in his
favor in any such action or receives a final judgment in his favor that has not
been appealed by the Company within 30 days of the date of the judgment; or (ii)
the parties agree to dismiss any such action upon the Company’s payment of the
sums allegedly due the Officer or performance of the covenants by the Company
allegedly breached by it.

    

    7.           LIMITATION OR EXPANSION OF
BENEFITS.

    

    (a) In the event it shall be determined
that all or any portion of any benefit, payment, acceleration right or
distribution by the Company to or for the benefit of the Officer (whether
payable or distributable pursuant to the terms of this Agreement or otherwise)
is treated as an “excess parachute payment” (as defined in Section 280G(b)(1) of
the Code) which is subject to the excise tax imposed by Section 4999 of the Code
(such excise tax, the “Excise Tax”), then the Company shall pay to Officer an
additional amount of cash (a “Gross-Up Payment”) equal to the amount necessary
to cause the amount of the aggregate after-tax compensation and benefits
received by the Officer hereunder (after payment of the excise tax under Section
4999 of the Code with respect to any excess parachute payment, and any state and
federal income and employment taxes with respect to the Gross-Up Payment) to
equal the aggregate after-tax compensation and benefits the Officer would have
received if the Excise Tax had not been imposed. The Gross Up Payment shall be
paid to Officer on the date that is thirty (30) days prior to the date on which
the Excise Tax with respect to any excess parachute payment is due.  A
nationally recognized public accounting firm selected by the Company shall
initially determine, at the Company’s expense, whether an “excess parachute
payment” will be made to Officer, and if so, the amount of the Gross-Up
Payment.  In the event of a subsequent claim by the Internal Revenue
Service that, if successful, would result in Officer’s liability for an Excise
Tax in excess of the amount covered by any previous Gross-Up Payment, the
Officer shall promptly notify the Company in writing of such
claim.  If the Company elects to contest such claim, it shall so
notify the Officer and shall bear and pay directly or indirectly all costs and
expenses of contesting the claim (including additional interest and penalties
incurred in connection with such action), and shall indemnify and hold Officer
harmless, on an after-tax basis, for any excise, income, or employment tax,
including interest and penalties with respect thereto, imposed as a result of
the Company’s payment of costs of the contest. Officer shall cooperate fully
with the Company in the defense of any such IRS claim.  If, as a
result of the Company’s action with respect to a claim, Officer receives a
refund of any amount paid by the Company with respect to such claim, Officer
shall promptly pay such refund to the Company.  In the event the IRS
claim is finally determined to result in the imposition of additional Excise Tax
on Officer, the Company shall make an additional Gross-Up Payment with respect
to any such additional Excise Tax.

     

     

    
      
        
        

      

      
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    (b) Anything in this Agreement to the
contrary notwithstanding, aggregate severance, separation and/or similar
payments made to Officer pursuant to this Agreement and otherwise shall be
limited to the equivalent of Officer’s salary paid during the three (3)
completed fiscal years ended prior to the Date of Termination, including bonuses
and guaranteed benefits paid during those years. If necessary, any Gross-Up
Payment will be reduced in order to comply with this provision.

    

    8.           CONFIDENTIAL
INFORMATION.

    

    The Officer and the Company are parties
to one or more separate agreements respecting confidential information, trade
secrets, inventions and non-competition (collectively, the “IP Agreements”). The
parties agree that the IP Agreements shall not be superseded or terminated by
this Agreement and shall survive any termination of this Agreement; provided,
however, that to the extent that there is any conflict or overlap between the
provisions of this Agreement and any of the IP Agreements, those provisions that
provide the Company with the greatest rights and protections shall
control.

    

    

    

    
      
        
        

      

      
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    9.           SUCCESSORS.

    

    (a) This Agreement is personal to the
Officer and without the prior written consent of the Company shall not be
assignable by the Officer otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Officer’s legal representatives.

    

    (b) This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and
assigns.

    

    (c) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.  As used in this Agreement,
“the Company” shall mean CryoLife as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.

    

    10.           COMPLIANCE
WITH SECTION 409A.

    

    (a)           This
Agreement is intended to comply with, or otherwise be exempt from, Section 409A
of the Code and any regulations and Treasury guidance promulgated
thereunder.

    

    (b)           The
Company and Officer agree that they will execute any and all amendments to this
Agreement as they mutually agree in good faith may be necessary to ensure
compliance with Section 409A of the Code.

    

    (c)           The
Company makes no representation or warranty as to the tax effect of any of the
preceding provisions, and the provisions of this Agreement shall not be
construed as a guarantee by the Company of any particular tax effect to Officer
under this Agreement.  the Company shall not be liable to Officer or
any other person for any payment made under this Agreement which is determined
to result in the imposition of an excise tax, penalty or interest under Section
409A of the Code, nor for reporting in good faith any payment made under this
Agreement as an amount includible in gross income under Section 409A of the
Code.

    

    11.           MISCELLANEOUS.

    

    (a) This Agreement shall be governed by
and construed in accordance with the laws of the State of Georgia, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force and effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

    

    (b) All notices and other
communications hereunder shall be in writing and shall be given by hand delivery
(which shall include delivery via Federal Express or UPS) to the other party or
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

     

     

    
      
        
        

      

      
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                        If
      to the Officer:

                      
	 
      	 
      
	 
      	
                        D.
      Ashley Lee

                      
	 
      	
                        4365 N. Buckhead
      Dr., NE

                      
	 
      	
                        Atlanta,
      Georgia  30342

                      
	 
      	 
      
	 
      	
                        If
      to the Company:

                      
	 
      	 
      
	 
      	
                        CryoLife,
      Inc.

                      
	 
      	
                        1655
      Roberts Boulevard, N.W,

                      
	 
      	
                        Kennesaw,
      Georgia 30144

                      
	 
      	
                        Attention:  Chief
      Executive Officer

                      
	 
      	
                        Facsimile:
      (770)
590-3754

                      

              

            

          

        

      

    

    

    or to
such other address as either party shall have furnished to the other in writing
in accordance herewith. Notice and communications shall be effective when
actually received by the addressee.

    

    (c) If any provision of this Agreement
or the application of any provision hereof to any person or circumstance is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision to any other person or circumstance shall not
be affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent) necessary to
make it valid, enforceable and legal; provided, however, if the provision so
held to be invalid, unenforceable or otherwise illegal cannot be reformed so as
to be valid and enforceable, then it shall be severed from, and shall not affect
the enforceability of, the remaining provisions of the Agreement.

    

    (d) The Company may withhold from any
amounts payable under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable law or
regulation.

    

    (e) This Agreement embodies the entire
agreement between the parties with respect to the subject matter addressed
herein, except as specifically set forth in Section 9 above.  From and
after the Effective Date, this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof.

    

    

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

     

    IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the date first above written.

     

    
      
        
          
            
              
                
                  	 	/s/
      D.A. Lee   	 
	 	 D.
      Ashley Lee	 
	 	 	 	 
	
                           

                        	
                          By:
      

                        	/s/ Steven
      G. Anderson	 
	 	 Steven
      G. Anderson	 
	 	 Chairman,
      President and CEO	 
	 	 	 	 

                

              

            

          

        

      

    
      
         

      

      
        11EXHIBIT 10.1

                                    AGREEMENT

            THIS AGREEMENT is made as of October 27, 2008 by and among the
following parties (individually a "Party" and collectively the "Parties"):

            (1) Gyrodyne Company of America, Inc., a New York corporation (the
      "Company");

            (2) the following parties (each individually a "Bulldog Investor"
      and collectively the "Bulldog Investors"): Full Value Partners L.P., a
      Delaware limited partnership ("Full Value"), Opportunity Partners L.P., an
      Ohio limited partnership ("Opportunity Partners"), Opportunity Income Plus
      Fund L.P., a Delaware limited partnership ("Opportunity Income"), Full
      Value Offshore Partners L.P., a Cayman Islands exempted limited
      partnership ("Offshore"), Full Value Special Situations Fund L.P., a
      Delaware limited partnership ("Special Situations"), Kimball & Winthrop,
      Inc., an Ohio corporation and general partner of Opportunity Partners,
      Full Value Advisors LLC, a New Jersey limited liability company and
      general partner of Full Value and Offshore, Spar Advisors, LLC, a New York
      limited liability company and general partner of Opportunity Income, Full
      Value Special Situations Fund GP LLC, a Delaware limited liability company
      and general partner of Special Situations, Bulldog Investors, a "doing
      business as" name for Full Value and Opportunity Partners, Mr. Phillip
      Goldstein, Mr. Andrew Dakos and each Affiliate and Associate of each of
      the foregoing; and

            (3) Mr. Naveen Bhatia.

Capitalized terms used herein but not otherwise defined shall have the meaning
set forth in Article 5 of this Agreement.

                                    RECITALS

            A. As of the date of this Agreement, the Bulldog Investors
Beneficially Own, and have the right to vote, 225,246 shares of the Company's
common stock, par value $1.00 (the "Company Common Stock"), representing
approximately 17.46% of the outstanding Company Common Stock;

            B. Upon the recommendation of the Bulldog Investors, the Company's
Nominating Committee has considered and recommended the nomination of Mr. Bhatia
for election as a director of the Company at the 2008 Annual Meeting of
Shareholders of the Company (the "2008 Annual Meeting") and the Board of
Directors of the Company (the "Board") has considered the Nominating Committee's
recommendation that Mr. Bhatia be nominated for election as a director; and

            C. Concurrent with the execution and delivery of this Agreement, Mr.
Bhatia has agreed to enter into a Confidentiality Agreement with the Company.

                                    ARTICLE 1

                      BOARD COMPOSITION AND RELATED MATTERS

            Section 1.1. The Company represents and warrants to the other
Parties that the Board, in connection with its approval of this Agreement and
subject to the execution and delivery of this Agreement by all Parties, has
resolved to nominate Mr. Bhatia for election as a director of the Company at the
2008 Annual Meeting to serve in the class of directors with terms ending in 2011
and to recommend (and not withdraw such recommendation) to the shareholders of
the Company that they vote for Mr. Bhatia at the 2008 Annual Meeting.

            Section 1.2. Mr. Bhatia hereby confirms:

            (a) his consent to serve on the Board if elected pursuant to Section
1.1 hereof; and

            (b) his agreement to fully comply with any and all policies and
procedures of the Company, including corporate governance and insider trading
policies, as the same may be amended from time to time; provided that the effect
of any such policy or procedure does not discriminate among members of the Board
or require any director to violate the law or breach such director's fiduciary
duties under applicable law.

                                    ARTICLE 2

                        ACTIONS BY THE BULLDOG INVESTORS

            Section 2.1. The Bulldog Investors shall not, without the prior
written consent of the Board specifically expressed in a written resolution
adopted by a majority vote of the entire Board:

            (a) consistent with the terms of the Rights Agreement, dated as of
August 10, 2004, by and between Gyrodyne Company of America, Inc. and Registrar
and Transfer Company, as Rights Agent which generally restricts the acquisition
of Beneficial Ownership of 20% or more of the Company's Voting Securities,
acquire, offer or propose to acquire, or agree to acquire (except by way of
stock dividends or other distributions or offerings made available to holders of
Voting Securities generally on a pro rata basis, provided that any such
securities so received will be subject to the provisions hereof), directly or
indirectly, whether by purchase, tender or exchange offer, through the
acquisition of control of another Person, by joining a partnership, limited
partnership, syndicate or other "group" as defined under Section 13(d) of the
1934 Act or otherwise, any Voting Securities, or otherwise become the Economic
Owner of any such securities, if after giving effect to such acquisition the
Bulldog Investors individually or together with any other Person with whom the
Bulldog Investors have any agreement, understanding or arrangement with respect
to Voting Securities, would be the Economic Owner of 20% or more of the
Company's outstanding Voting Securities; provided that for the purposes of
computing the Economic Ownership at the time of any purchase, the number of
outstanding Voting Securities will be determined by the latest available Company
filing with the Securities and Exchange Commission (the "SEC"); and further
provided that notwithstanding any provision of this Agreement to the contrary,
the Bulldog Investors shall not be required to divest any Voting Securities if
they become the Economic Owner of 20% or more of the Company's outstanding
Voting Securities solely due to a reduction in the number of Voting Securities
outstanding.

            (b) solicit proxies or written consents of shareholders, or any
other person with the right to vote or power to give or withhold consent in
respect of Voting Securities, or conduct, encourage, participate or engage in,
or otherwise seek to influence in any manner, any other type of referendum
(binding or non-binding) with respect to any matter, or from the holders of
Voting Securities or any other person with the right to vote or power to give or
withhold consent in respect of Voting Securities, or make, or in any way
participate, influence or engage in (other than by voting their Voting
Securities in a manner that does not violate this Agreement), any "solicitation"
of any "proxy" (as such terms are used in the proxy rules of the SEC), consent
or other authority to vote any Voting Securities, with respect to any matter, or
participate directly or indirectly in any contested solicitation with respect to
the Company, including without limitation relating to the removal or the
election of directors;

            (c) form or join in a partnership, limited partnership, syndicate or
other group, including without limitation a "group" as defined under Section
13(d) of the 1934 Act, with respect to Voting Securities, or otherwise support
or participate in any effort by a third party with respect to the matters set
forth in Section 2.1(b), or deposit any Voting Securities in a voting trust or
subject any Voting Securities to any voting agreement, other than solely with
other Bulldog Investors with respect to Voting Securities now or hereafter
Beneficially Owned by them or pursuant to this Agreement;

            (d) act, alone or in concert with others, to seek to control or
influence, in any manner, the management, the Board or the policies of the
Company or nominate any person as a director of the Company who is not nominated
by the then incumbent directors of the Company or propose any matter to be voted
upon by the shareholders of the Company;

            (e) make any public announcement with respect to, or submit a
proposal for, or offer of (with or without conditions) any Extraordinary
Transaction of or involving the Company or the securities or assets of the
Company;

            (f) seek to have called, or cause to be called, any meeting of
shareholders of the Company;

            (g) make any public demand to inspect the books and records of the
Company or demand a copy of the Company's stock ledger list, including pursuant
to any statutory rights that the Bulldog Investors may have;

            (h) make, or cause to be made, any statement or announcement that
relates to and constitutes an ad hominem attack on, or relates to and otherwise
disparages, the Company, its officers or its directors or any person who has
served as an officer or director of the Company on or following the date of this
Agreement: (i) in any document or report filed with or furnished to the SEC or
any other governmental agency, (ii) in any press release or other publicly
available format (including on the Internet), (iii) to any journalist or member
of the media (including without limitation, in a television, radio, newspaper or
magazine interview) or (iv) in any letter or other communication to or with any
shareholder of the Company;

            (i) request the Company to amend, waive or terminate any provision
of this Agreement (including this sentence);

            (j) take any action which will require the Company to make a public
announcement regarding the possibility of an Extraordinary Transaction;

            (k) make any proposal (including publicly disclose or discuss any
proposal) or have any discussions or communications, or enter into any
arrangements, understandings or agreements (whether written or oral) with, or
advise, finance, assist or encourage, any other Person in connection with any of
the foregoing, or make any investment in or enter into any arrangement with, any
other Person that engages, or offers or proposes to engage, in any of the
foregoing; or

            (l) take or cause or induce others to take any action inconsistent
with any of the foregoing.

            Section 2.2. The Bulldog Investors will cause all Voting Securities
for which they have the right to vote as of the record date for any meeting of
shareholders to be present for quorum purposes and to be voted at any such
meeting for the election of directors in the manner recommended by the Board.

            Section 2.3. The Bulldog Investors will be released from the
obligations set forth in this Article 2 on the date that is thirty (30) days
before the last date on which a shareholder of the Company may submit
nominations for the Board in connection with the 2011 Annual Meeting of
Shareholders of the Company.

                                    ARTICLE 3

                             ACTIONS BY THE COMPANY

            Section 3.1. Unless and until the Bulldog Investors are released
from their obligations under Article II pursuant to Section 2.3 hereof, the
Company shall not make, or cause to be made, any statement or announcement that
relates to and constitutes an ad hominem attack on, or relates to and otherwise
disparages, any of the Bulldog Investors, any of their officers, directors,
partners or members or any person who has served as an officer, director,
partner or member of any of the Bulldog Investors: (i) in any document or report
filed with or furnished to the SEC or any other governmental agency, (ii) in any
press release or other publicly available format (including on the Internet),
(iii) to any journalist or member of the media (including without limitation, in
a television, radio, newspaper or magazine interview) or (iv) in any letter or
other communication to or with any shareholder of the Company.

                                    ARTICLE 4

                     CERTAIN REPRESENTATIONS AND WARRANTIES

            Section 4.1. The Company represents and warrants to each of the
other Parties that:

            (a) the Company's execution, delivery and performance of this
Agreement has been approved by the Board and does not violate its Restated
Certificate of Incorporation, its Amended and Restated Bylaws or the New York
Business Corporation Law, or any agreement to which it is a party; and

            (b) this Agreement constitutes the Company's valid and binding
obligation, enforceable against it in accordance with the terms thereof.

            Section 4.2. Each of the Bulldog Investors represents and warrants
to the Company that:

            (a) if the Bulldog Investor making such representation and warranty
is not a natural person, its execution, delivery and performance of this
Agreement has been approved by its respective general partner, managing member,
board of directors, trustee or other governing body or authority, as the case
may be, and does not violate its respective organizational or constituent
document;

            (b) its execution, delivery and performance of this Agreement does
not violate any agreement to which it is a party or any of its constituent
documents;

            (c) this Agreement constitutes its valid and binding obligation,
enforceable against it in accordance with the terms thereof;

            (d) it has consulted with counsel of its choice in connection with
its decision to enter into and be bound by this Agreement or waived its right to
so consult;

            (e) Recital A to this Agreement is a true statement of the aggregate
number of Voting Securities Beneficially Owned by the Bulldog Investors; and

            (f) the Bulldog Investors and Mr. Bhatia have no agreement to
acquire, hold, vote or dispose of any Voting Securities of the Company.

            Section 4.3. Mr. Bhatia represents and warrants to the Company that:

            (a) the execution, delivery and performance of this Agreement does
not violate any agreement to which he is a party;

            (b) this Agreement constitutes a valid and binding obligation,
enforceable against him in accordance with the terms thereof;

            (c) he has consulted with counsel of his choice in connection with
his decision to enter into and be bound by this Agreement; and

            (d) Mr. Bhatia and the Bulldog Investors have no agreement to
acquire, hold, vote or dispose of any Voting Securities of the Company.

                                    ARTICLE 5

                   CERTAIN ANNOUNCEMENTS AND OTHER DISCLOSURES

            Section 5.1. The Company shall announce this Agreement and the
material terms hereof by means of a mutually agreed upon press release in the
form attached hereto as Exhibit A (the "Press Release") as soon as practicable
on or after the date hereof.

            Section 5.2. Except as set forth in Section 5.1, neither the
Company, Mr. Bhatia nor the Bulldog Investors shall make any public announcement
or statement concerning this Agreement or comment on this Agreement; provided,
however, that any Party may make such announcement, statement or comment
concerning this Agreement as is required by law or the rules of any stock
exchange; provided further, however, that such announcement may only be made
with the prior written consent of the other Parties, such consent not to be
unreasonably withheld.

                                    ARTICLE 6

                               CERTAIN DEFINITIONS

            Section 6.1. In addition to the other definitions contained
elsewhere in this Agreement, the following terms shall have the meanings
specified below for the purposes hereof:

            "Affiliate" has the meaning ascribed to it in Rule 12b-2 promulgated
under the 1934 Act.

            "Associate" has the meaning ascribed to it in Rule 12b-2 promulgated
under the 1934 Act.

            "Beneficial Owner" and "Beneficially Own" have the same meanings as
set forth in Rule 13d-3 promulgated by the SEC under the Exchange Act; provided,
however, that for purposes of this Agreement, any option, warrant, right,
conversion privilege or arrangement to purchase, acquire or vote Voting
Securities, regardless of the time period during, or the time at which, it may
be exercised, and regardless of the consideration paid, shall be deemed to give
the holder thereof beneficial ownership of the Voting Securities to which it
relates.

            "Economic Owner" and "Economically Own" will have the same meanings
as "Beneficial Owner" and "Beneficially Own," except that a Person will also be
deemed to economically own and to be the economic owner of (i) all shares of
Company Common Stock that such Person has the right to acquire pursuant to the
exercise of any rights in connection with any securities or any agreement,
regardless of when such rights may be exercised and whether they are conditional
and (ii) all shares of Company Common Stock in which the Person has any economic
interest, including, without limitation, pursuant to any short positions, profit
interests, options, hedging transactions, borrowed or loaned shares, swaps or
other derivative security, contract or instruction in any way related to the
price of shares of Company Common Stock.

            "Extraordinary Transaction" means any merger, consolidation,
business combination, tender or exchange offer, restructuring, liquidation,
recapitalization, dissolution, or similar transaction involving the Company.

            "1934 Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC under such statute.

            "Person" means a natural person or any legal, commercial or
governmental entity, including, but not limited to, a corporation, partnership,
joint venture, trust, limited liability company, group acting in concert or any
person acting in a representative capacity.

            "Voting Securities" means any securities of the Company entitled, or
which may be entitled, to vote in the election of directors, or securities
convertible into or exercisable or exchangeable for such securities, whether or
not subject to passage of time or other contingencies.

                                    ARTICLE 7

                                  MISCELLANEOUS

            Section 7.1. Entire Agreement. This Agreement constitutes the entire
agreement of the Parties with respect to its subject matter and supersedes any
and all prior representations, agreements or understandings, whether written or
oral, between or among any of them with respect to such subject matter. This
Agreement may be amended only by a written agreement duly executed by the
Parties.

            Section 7.2. Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be in writing and shall be deemed validly given, made or
served, if (a) given by telecopy, when such telecopy is transmitted to the
telecopy number set forth below and the appropriate confirmation is received or
(b) if given by any other means, when actually received during normal business
hours at the address specified in this subsection:

            if to the Company:

                  Gyrodyne Company of America, Inc.
                  1 Flowerfield, Suite 24
                  St. James, New York 11780
                  Facsimile: (631) 584-7075
                  Attention: Stephen V. Maroney, President and
                             Chief Executive Officer

            with a copy to:

                  Cadwalader, Wickersham & Taft LLP
                  One World Financial Center
                  New York, New York 10281
                  Facsimile: (212) 504-6666
                  Attention: Dennis J. Block, Esq.

            if to the Bulldog Investors:

                  Bulldog Investors
                  60 Heritage Drive
                  Pleasantville, New York 10570
                  Facsimile: (914) 747-2150  (201) 556-0097
                  Attention: Phillip Goldstein
                             Andrew Dakos

            if to Naveen Bhatia:

                  1251 Avenue of the Americas, Suite 936
                  New York, NY 10020
                  Facsimile: (212) 554-2522

            Section 7.3. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York.

            Section 7.4. Assignment. This Agreement may not be assigned by any
Party without the prior written consent of the other Parties. This Agreement
shall be binding upon, and inure to the benefit of, the respective successors
and permitted assigns of the Parties. This Agreement shall confer no rights or
benefits upon any Person other than the Parties.

            Section 7.5. Waiver. Any waiver by any Party of a breach of any
provision of this Agreement shall not be deemed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement.

            Section 7.6. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original but all of which shall
together constitute a single instrument.

            Section 7.7. Authorized Representative. Each of the Bulldog
Investors hereby appoints Mr. Goldstein as the authorized representative of such
Bulldog Investor for all purposes of this Agreement (including, without
limitation, the giving of binding approvals and waivers) and the Company shall
be entitled to deal with Mr. Goldstein accordingly.

            Section 7.8. Remedies. (a) Each Party hereto hereby acknowledges and
agrees, on behalf of itself and its Affiliates, that irreparable harm would
occur in the event any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties will be entitled to specific relief
hereunder, including an injunction or injunctions to prevent and enjoin breaches
of the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any state or federal court in New York County in the State
of New York, in addition to any other remedy to which they may be entitled at
law or in equity. Any requirements for the securing or posting of any bond with
such remedy are hereby waived.

            (b) Each Party hereto agrees, on behalf of itself and its
Affiliates, that any actions, suits or proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby will be brought solely
and exclusively in any state or federal court in New York County in the State of
New York (and the parties agree not to commence any action, suit or proceeding
relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by U.S. registered mail to the respective
addresses set forth in Section 7.2 will be effective service of process for any
such action, suit or proceeding brought against any Party in any such court.
Each Party, on behalf of itself and its Affiliates, irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby, in the state or federal courts in New York County in the State of New
York, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an improper or inconvenient forum.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>

            IN WITNESS WHEREOF, this Agreement has been executed by each of the
Parties, through their respective duly authorized representative, as of the date
first above written.

GYRODYNE COMPANY OF AMERICA, INC.      FULL VALUE PARTNERS L.P.

                                       By: Full Value Advisors LLC, General
                                           Partner

By: /s/ Stephen V. Maroney             By: /s/ Phillip Goldstein
    --------------------------------       ------------------------------------
    Name: Stephen V. Maroney               Name: Phillip Goldstein
    Title: President and Chief             Title: Managing Member
           Executive Officer

                                       OPPORTUNITY PARTNERS L.P.

                                       By: Kimball & Winthrop, Inc.,
                                           General Partner

                                       By: /s/ Phillip Goldstein
                                           -------------------------------------
                                           Name: Phillip Goldstein
                                           Title: President

                                       OPPORTUNITY INCOME PLUS FUND L.P.

                                       By: Spar Advisors, LLC, General
                                           Partner

                                       By: /s/ Phillip Goldstein
                                           -------------------------------------
                                           Name: Phillip Goldstein
                                           Title: Managing Member

                                       FULL VALUE OFFSHORE PARTNERS L.P.

                                       By: Full Value Advisors LLC, General
                                           Partner

                                       By: /s/ Phillip Goldstein
                                           -------------------------------------
                                           Name: Phillip Goldstein
                                           Title: Managing Member

                                       FULL VALUE SPECIAL SITUATIONS FUND L.P.

                                       By: Full Value Special Situations Fund
                                           GP LLC, General Partner

                                       By: /s/ Phillip Goldstein
                                           -------------------------------------
                                           Name: Phillip Goldstein
                                           Title: Managing Member

                                       FULL VALUE ADVISORS LLC

                                       By: /s/ Phillip Goldstein
                                           -------------------------------------
                                           Name: Phillip Goldstein
                                           Title: Managing Member

                                       KIMBALL & WINTHROP, INC.

                                       By: /s/ Phillip Goldstein
                                           -------------------------------------
                                           Name: Phillip Goldstein
                                           Title: President

                                       SPAR ADVISORS, LLC

                                       By: /s/ Phillip Goldstein
                                           -------------------------------------
                                           Name: Phillip Goldstein
                                           Title: Managing Member

                                       FULL VALUE SPECIAL SITUATIONS FUND GP LLC

                                       By: /s/ Phillip Goldstein
                                           -------------------------------------
                                           Name: Phillip Goldstein
                                           Title: Managing Member

                                       /s/ Phillip Goldstein
                                       -----------------------------------------
                                       PHILLIP GOLDSTEIN

                                       /s/ Andrew Dakos
                                       -----------------------------------------
                                       ANDREW DAKOS

                                       /s/ Naveen Bhatia
                                       -----------------------------------------
                                       NAVEEN BHATIA

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