1217270v3
                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   (Mark One)

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

                   For the fiscal year ended December 31, 1999
                                       OR

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


                        For the transition period from to

                         Commission file number 1-13165

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

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

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

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

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

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

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

     None

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

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

     The  aggregate  market value of voting stock held by  nonaffiliates  of the
registrant was approximately $231,500,000 at March 24, 2000 (10,522,762 shares).
The  number of  common  shares  outstanding  at March  24,  2000 was  12,286,196
(exclusive of treasury shares).

                       Documents Incorporated By Reference


     Part III: Portions of Registrant's  Proxy Statement  relating to the Annual
Meeting of Shareholders to be filed not later than April 29, 2000.


<PAGE>

                                     PART I


Item 1. Business.

Overview

CryoLife  is the leader in the  cryopreservation  of viable  human  tissues  for
cardiovascular,  vascular and orthopaedic transplant applications,  and develops
and commercializes  additional  implantable  products,  including  bioprosthetic
cardiovascular  products  and  surgical  bioadhesives,  and  single- use medical
devices.  The  Company  estimates  that  it  provided  approximately  70% of the
cryopreserved  human tissue  implanted in the U.S. in 1998. The Company uses its
expertise in biochemistry and cell biology,  and its  understanding of the needs
of the cardiovascular,  vascular and orthopaedic surgery medical specialties, to
continue  expansion  of its core  cryopreservation  business  and to  develop or
acquire  complementary  implantable  products and technologies for these fields.
The Company develops  bioprosthetic  cardiovascular  devices including two novel
design  stentless  porcine  heart  valves  currently  marketed  in the  European
Community.   The  Company  also  develops   proprietary   implantable   surgical
bioadhesives,    including   BioGlue   surgical   adhesive,   which   it   began
commercializing for vascular applications within the European Community in April
1998.  In addition,  the Company  serves as an Original  Equipment  Manufacturer
("OEM") manufacturer,  through its Ideas For Medicine,  Inc. ("IFM") subsidiary,
of single-use medical devices for use in vascular surgical procedures.

CryoLife processes and distributes for transplantation cryopreserved human heart
valves and conduits,  human vascular tissue and human connective  tissue for the
knee.  Management  believes that  cryopreserved  human heart valves and conduits
offer  certain   advantages  over  mechanical,   synthetic  and   animal-derived
alternatives.  Depending  on the  alternative,  these  advantages  include  more
natural  functionality,  elimination of a chronic need for anti-coagulation drug
therapy,  reduced  incidence of  reoperation  and reduced  risk of  catastrophic
failure,  thromboembolism (stroke) or calcification. The Company seeks to expand
the availability of human tissue through its established relationships with over
250 tissue banks and organ procurement agencies nationwide.

CryoLife  has   developed  and  markets   outside  of  the  U.S.   bioprosthetic
cardiovascular devices for implantation, currently consisting of fixed stentless
porcine heart valves. Fixed porcine heart valves are often preferred by surgeons
for procedures  involving  elderly  patients  because they eliminate the risk of
patient  non-compliance with long-term  anti-coagulation drug therapy associated
with mechanical valves, are less expensive than human heart valves or mechanical
valves and their  shorter  longevity  is more  appropriately  matched with these
patients' life  expectancies.  Unlike most other available porcine heart valves,
the Company's  stentless  porcine heart valves do not contain  synthetic  stents
which increase the risk of endocarditis,  a debilitating  and potentially  fatal
bacterial  infection.   The  Company's   CryoLife-O'Brien  aortic  heart  valve,
currently marketed in the European Community and certain other countries outside
the U.S., is a stentless  porcine heart valve which contains a matched composite
leaflet design that  approximates  human heart valve blood flow  characteristics
and requires only a single suture line which simplifies  surgical  implantation.
The  Company's  CryoLife-Ross  pulmonary  heart valve,  another of the Company's
fixed stentless porcine valves,  is also marketed in the European  Community and
certain  countries  outside the U.S.  The  Company  has applied its  proprietary
SynerGraft  technology to its human heart valves and conduits and to some of its
stentless porcine heart valves.  SynerGraft  involves the depopulation of living
cells  from  the   structure  of  heart  tissues  to  allow  the  potential  for
repopulation of such tissue with recipient  cells.  In animal  studies,  porcine
valves which were  depopulated by the SynerGraft  process were  repopulated with
cells from the valve recipient. This process is designed to reduce calcification
of heart valves, thereby increasing longevity, and more generally to improve the
biocompatibility and functionality of such tissue. The Company believes that its
porcine heart valves, when treated with SynerGraft  technology,  will expand its
opportunity to address the broader international and U.S. heart valve markets.

CryoLife is developing  implantable  biomaterials for use as surgical  adhesives
and sealants. The Company's patent protected BioGlue surgical adhesive, designed
for cardiovascular, peripheral vascular and pulmonary applications, is a polymer
based  on a  derivative  of a blood  protein  and a  cross  linking  agent.  The
Company's  patent  protected  FibRx  surgical   sealant,   designed  for  tissue
hemostasis and suture line sealing, is a light activated, biodegradable surgical
sealant  under  development  which is based on a  derivative  of the human blood
factors  fibrinogen and thrombin.  Both of these  products may offer  advantages
over  sutures  and  staples,   including  more  effective   sealing  and  easier
application. The Company estimates that the annual worldwide market for surgical

                                       2

<PAGE>

sutures and staples in 1999 was in excess of $2 billion. The Company received CE
Mark  Certification in 1998 for use of its BioGlue surgical adhesive in vascular
applications  and began  marketing  this  product in April 1998 in the  European
Community. Following the approval of the Food and Drug Administration to conduct
human  clinical  studies  for  BioGlue  surgical  adhesive  as an adjunct in the
surgical  repair of acute  thoracic  aortic  dissections,  the Company  filed an
application  with FDA to market the  product  for this use under a  Humanitarian
Service  Exemption.  In December,  1999, the Company received US FDA approval of
the HDE and  immediately  began  marketing this product for use in the repair of
acute thoracic aortic  dissections in the U.S. pursuant to the HDE. Beginning in
1998,  the Company  began seeking to complete a potential  private  placement of
equity or equity-oriented securities to form a minority-owned subsidary company,
AuraZyme Pharmaceuticals,  LLC (AuraZyme), for the commercial development of its
photo-activated  reversible  inhibitor  technology (FibRx),  including the FibRx
adhesive. Such strategy is designed to allow the Company to continue development
of  this  technology  without  incurring  additional  research  and  development
expenditures,  other than through  Aurazyme,  and allow the Company to focus its
resources on the  commercial  development of its BioGlue  surgical  adhesive and
other  products  under  development.  As of  December  31, 1999 a portion of the
Company's  assets  relating to the  development of FibRx have been classified as
available  for sale pending the  identification  of a corporate  partner to fund
future development.

Prior to October 1, 1998 CryoLife manufactured and distributed,  through its IFM
subsidiary,   single-use  medical  devices,  including  endarterectomy  surgical
instruments,  intravascular  shunts,  infusion  ports,  accessories  utilized in
laparoscopic  procedures  and a wide  range of  single  and dual  lumen  balloon
catheters.  On September 30, 1998, the Company sold substantially all of its IFM
product line to Horizon Medical Products,  Inc. ("Horizon") pursuant to an asset
purchase agreement. As part of this agreement, the Company committed to continue
manufacturing  the IFM product line as an OEM  manufacturer of such products for
Horizon for four years. Thereafter,  responsibility for such manufacturing is to
be assumed by Horizon.  On June 22, 1999,  IFM  notified  Horizon that it was in
default  of  certain  provisions  of its OEM  Manufacturing  Agreement  with the
Company.  The  Company  has been  negotiating  with  Horizon in order to reach a
mutually  agreeable  solution to the default;  however,  due to the  significant
uncertainties related to the Company's ability to realize its investment in IFM,
the Company  determined  in the fourth  quarter of 1999 that it had  incurred an
impairment loss on its IFM assets. See "Management's Discussions and Analysis of
Financial  Condition  and Results of  Operations"  contained  elsewhere  in this
Annual Report on Form 10-K .

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


Growth Strategy

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

Continue Leadership in Cryopreservation of Human Heart Valves and Conduits.  The
Company intends to increase the market  penetration of its  cryopreserved  human
heart valves and conduits by (i) expanding  awareness of clinical  advantages of
cryopreserved  human tissues through continuing  educational efforts directed to
physicians,   prospective   heart  valve  and  conduit   recipients  and  tissue
procurement  agencies,  (ii) expanding its relationships  with the more than 250
tissue banks and procurement agencies across the U.S. which direct tissue to the
Company for cryopreservation, (iii) expanding its physician training activities,
and  (iv)  expanding  its  product  offerings  by  utilizing  the  first  of its

                                       3

<PAGE>

SynerGraft technology applications to develop depopulated human heart valves and
conduits  with antigen reduction  properties and the potential for recipient
cell repopulation.

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

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

     -    Develop and  Commercialize  Biomaterials  for  Surgical  Adhesive  and
          Sealant Applications. In the second quarter of 1998, the Company began
          commercializing  its patent protected BioGlue surgical adhesive in the
          European Community through its existing  independent  representatives.
          In April 1998 the Company received  approval under an  Investigational
          Device Exemption (IDE) to conduct clinical trials for BioGlue surgical
          adhesive in the U.S., and in December 1999 received US FDA approval to
          distribute  BioGlue  surgical  adhesive  under a  Humanitarian  Device
          Exemption  ("HDE")  for  use as an  adjunct  in the  repair  of  acute
          thoracic  aortic  dissections.  The  Company  has  received  U.S.  FDA
          approval to and will commence clinical trials under a supplemental IDE
          for use in general vascular and selected cardiac repairs.  The Company
          has formed a subsidiary to raise equity or  equity-related  capital in
          order to continue  development of its patent  protected FibRx surgical
          sealant. In addition to the adhesive and sealant applications of these
          biomaterials,  the  Company  intends to  pursue,  either  directly  or
          through   strategic   alliances,   certain   potential  drug  delivery
          applications of BioGlue surgical  adhesive and FibRx surgical sealant,
          such as administering  antibiotics,  attaching  chemotherapy  drugs to
          tumors,   delivering  growth  agents  or  delivering  bone  chips  for
          orthopaedic bone repair.

     -    Develop and Commercialize  Bioprosthetic  Cardiovascular  Devices. The
          Company  intends to leverage its expertise with stentless  human heart
          valves to expand  commercialization  of its  stentless  porcine  heart
          valves and to use its stentless porcine heart valves as a platform for
          the  development  and  commercialization  of the Company's  SynerGraft
          technology.  The Company has expanded its production  capacity for its
          bioprosthetic  cardiovascular  devices to address the increased demand
          it  is  currently  experiencing.   Separately,  the  Company's  patent
          protected  SynerGraft  technology  is being  developed  to expand  the
          target  market for the  stentless  porcine  heart valves by minimizing
          calcification  often  associated  with  porcine  tissues  and  thereby
          increasing their longevity.

     -    Leverage Existing Capability across Product Lines. The Company intends
          to apply its  expertise  with  stentless  human heart valves to expand
          commercialization of its stentless porcine heart valves and to use its
          human heart valves and conduits and its stentless porcine heart valves
          as a  platform  for  the  development  and  commercialization  of  the
          Company's  SynerGraft  technology.  New  complementary  products under
          development include modified single and double lumen balloon catheters
          for use in delivering the Company's implantable bioadhesives.

                                       4

<PAGE>

Services and Products

Cryopreservation of Human Tissue for Transplant/Living Biologic Devices

     The Company's  proprietary and patent  protected  cryopreservation  process
involves the timely and  controlled  delivery of tissue  procured  from deceased
human  donors  to the  Company,  the  screening,  disinfection,  dissection  and
cryopreservation  of the tissue by the Company,  the storage and shipment of the
cryopreserved tissue and the controlled thawing of the tissue.  Thereafter,  the
tissue is surgically implanted into a human recipient.

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

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

Human Heart Valves and  Conduits.  The Company's  revenues  have been  primarily
derived from the  cryopreservation of human heart valves and conduits for use in
reconstructive heart valve replacement surgery.  CryoLife shipped  approximately
41,100  cryopreserved  human heart valves and conduits  from 1984 through  1999.
Based on CryoLife's records of documented implants, management believes that the
Company's  success  in the  allograft  heart  valve  market  is due in  part  to
physicians'  recognition  of the  longevity  and  natural  functionality  of the
Company's  cryopreserved  human  tissues as compared to  mechanical  and porcine
heart valve alternatives in certain applications.  The Company currently applies
its cryopreservation services to human aortic, pulmonary and mitral heart valves
for  implantation  by  cardiac  surgeons.  In  addition,  the  Company  provides
cryopreserved  conduit tissue,  which is the only source of tissue  available to
surgeons who wish to perform certain specialized cardiac repair procedures. Each
of these human heart valves and  conduits  maintains a viable  tissue  structure
which more closely  resembles  and performs  like the  patient's own tissue than
non-human tissue alternatives.  In February 2000, the Company began distributing
in the U.S.  human heart valves  processed by using the first of its  SynerGraft
technology  applications,  which involves  depopulating the donor cells from the
valve to produce antigen reduction properties and the potential for repopulation
with the implant recipient's cells.


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

                                       5

<PAGE>

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

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

Blood Flow Dynamics:         normal          moderate         nearly normal     high elevation     high
                                             elevation                                             elevation
(Required Pressure) (2)      (0-5)           (10-20)          (5-15)            (10-25)            (10-30)
Mode of Failure:             gradual         gradual          expected to be    catastrophic       gradual
                                                              gradual

Longevity:                   20 years        7-10 years       expected to       20 years           10-15 years
                                                              exceed
                                                              stented porcine
                                                              valves

Increased Risk of
  Thromboembolic Events
  (strokes or other          no              occasional       expected to be    yes                occasional
  clotting):                                                  rare

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

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

Average Valve Cost in U.S.:  $7,000          $4,228           $5,500            $4,100(3)          $4,500
</TABLE>



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

(2)  Pressure measured in mm/Hg.

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

While the clinical benefits of cryopreserved  human heart valves discussed above
are relevant to all patients,  they are particularly important for (i) pediatric
patients (newborn to 14 years) who are prone to calcification of porcine tissue,
(ii) young or otherwise  active  patients  who face an increased  risk of severe
blood   loss  or  even   death  due  to  side   effects   associated   with  the
anti-coagulation drug therapy required with mechanical valves and (iii) women in
their childbearing years for whom  anti-coagulation drug therapy would interfere
with normal pregnancy.

Human  Vascular  Tissues.   The  Company   cryopreserves   human  saphenous  and
superficial  femoral  veins for use in vascular  surgeries  that  require  small
diameter  conduits (3mm to 6mm),  such as coronary bypass surgery and peripheral
vascular  reconstructions.  Failure to bypass or revascularize an obstruction in
such cases may result in death or the loss of a limb.  The  Company  believes it
offers the only available  small  diameter  conduit  product for  below-the-knee
vascular  reconstruction and shipped approximately 17,600 human vascular tissues
from 1986 through 1999.

A surgeon's  first choice for replacing  diseased or damaged  vascular tissue is
generally  the  patient's  own tissue.  However,  in cases of advanced  vascular
disease, the patient's own tissue is often unusable and the surgeon may consider
using synthetic grafts or transplanted  human vascular  tissue.  Synthetic small
diameter vascular grafts are not available for below-the-knee  surgeries and, in
other  procedures,  have a tendency  to shut down due to  occlusion  because the
synthetic  materials in these products attract cellular  material from the blood
stream which in turn closes off the vessel to normal  blood flow.  Cryopreserved
vascular  tissues  tend not to occlude as quickly  because of the presence of an
endothelial  cell lining in the donor vein which  remains  intact  following the
cryopreservation process. The Company's cryopreserved human vascular tissues are
used for coronary artery bypass surgeries,  peripheral vascular  reconstruction,
dialysis access graft replacement and venous valve transplantation.

                                       6

<PAGE>

In 1986, the Company began a program to cryopreserve  saphenous veins for use in
coronary artery bypass  surgeries.  Although the Company's  cryopreserved  human
tissue  was  used in only a  small  percentage  of the  coronary  artery  bypass
procedures  performed in 1999, the Company believes it is the only  commercially
available alternative to the patient's own tissue.

In 1989,  the Company  began a program to  cryopreserve  long segment  saphenous
veins for use in  peripheral  vascular  reconstruction.  In cases of  peripheral
arteriosclerosis,  a  cryopreserved  saphenous vein can be implanted as a bypass
graft for the  diseased  artery in order to improve  blood  flow and  maintain a
functional  limb.  Analysis  of  clinical  data has shown  that 80% of  patients
receiving  CryoLife's  preserved  vascular  tissues  in this  type  of  surgical
procedure still have the use of the affected leg three years after surgery.  The
alternative for many of these patients was amputation.

In  1996,  the  Company  began a  program  for  the  cryopreservation  of  human
superficial  femoral veins for use in dialysis  access graft  replacement  as an
alternative  for  synthetic  grafts which have a higher risk of  infection  than
human tissue.

In  1997,  the  Company  began a  program  for  the  cryopreservation  of  human
superficial femoral veins for venous valve transplant.  The  cryopreservation of
these human  tissues is designed for  patients  suffering  from  chronic  venous
insufficiency,  a condition in which the blood flow  returning to the heart from
the legs is  compromised  due to absent,  improperly  functioning  or  destroyed
venous valves.  Prior to the  introduction  of CryoLife's  cryopreserved  venous
valves, treatment for patients suffering from this ailment generally was limited
to drug therapy or compression stockings.

Human  Connective  Tissue  for the  Knee.  The  Company  provides  cryopreserved
surgical  replacements for the meniscus and the anterior and posterior  cruciate
ligaments,  which are connective tissues critical to the proper operation of the
human knee. CryoLife has shipped  approximately  11,300 human connective tissues
for the knee through 1999.

Human menisci  cryopreserved by the Company provide orthopaedic surgeons with an
alternative  treatment in cases where a patient's  meniscus has been  completely
removed.   When  a  patient  has  a  damaged  meniscus,   the  current  surgical
alternatives are to repair,  partially remove or completely remove the patient's
meniscus, with partial removal being the most common procedure. Meniscal removal
increases the risk of premature  knee  degeneration  and arthritis and typically
results  in the need for knee  replacement  surgery  at some  point  during  the
patient's life.  Management  believes that there are no synthetic menisci on the
market.

Tendons cryopreserved by the Company are used for the reconstruction of anterior
cruciate  ligaments  in cases  where the  patient's  ligaments  are  irreparably
damaged. Surgeons have traditionally removed a portion of the patient's patellar
tendon from the patient's undamaged knee for use in repairing a damaged anterior
cruciate ligament.  Tendons  cryopreserved by the Company provide an alternative
to this procedure.  Because surgeries using cryopreserved  tissue do not involve
the removal of any of the patient's own patellar  tendon,  the patient  recovery
period is typically shorter.

Other Allograft  Tissues Under  Development.  The Company has other projects for
the use of cryopreserved  human endothelial cells,  peripheral nerves and spinal
discs, in various surgical applications.

Bioprosthetic Cardiovascular Devices

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

                                       7

<PAGE>

Fixed  porcine  heart  valves are often  preferred  by surgeons  for  procedures
involving   elderly   patients  because  they  eliminate  the  risk  of  patient
non-compliance  with  anti-coagulation  drug therapy  associated with mechanical
valves,  are less expensive than allograft valves and their shorter longevity is
more appropriately matched with these patients' life expectancies.

The  Company's  SynerGraft  technology  applies to its porcine  heart valves and
involves the removal of living cells from the  structure  of  non-viable  animal
tissue to allow the  potential  repopulation  of such  tissue  with the  implant
recipient's own cells. In animal studies,  porcine valves that were  depopulated
by the SynerGraft  process were repopulated with cells from the valve recipient.
This  process is  designed  to reduce  calcification  of porcine  heart  valves,
thereby   increasing  their  longevity,   and  more  generally  to  improve  the
biocompatibility and functionality of such tissue. The Company believes that its
porcine heart valves, when treated with SynerGraft  technology,  will expand its
opportunity to address the broader international and U.S. heart valve markets.

Potential  future  SynerGraft  technology  applications  may involve  developing
stentless  porcine  heart  valves  repopulated  with viable human cells prior to
implantation.   This   technology  will  use  porcine  tissues  that  have  been
depopulated of viable animal cells using the SynerGraft process.

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

<TABLE>
<CAPTION>
<S>                                         <C>                          <C>

      Fixed Stentless Porcine Valves                Features                 Regulatory/Market Status
      ------------------------------               ------------              -------------------------
      CryoLife-O'Brien                      aortic valve of matched      currently marketed in Europe with
                                            composite leaflet design;    regulatory approval under CE Mark
                                            single suture line

      CryoLife-Ross                         pulmonary valve with         currently marketed in Europe with
                                            attached conduit             regulatory approval under CE Mark
</TABLE>


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

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

The Company plans to apply its  proprietary  SynerGraft  technology to stentless
porcine  heart  valves.  The  first of the  SynerGraft  technology  applications
involves  developing  depopulated  stentless  porcine  heart valves with antigen
reduction properties.  This technology removes viable cells from animal tissues,
thereby  reducing the transplant  recipient's  immune  response to the remaining
depopulated  tissues.  The auto-immune response typically deposits calcium which
attaches to and hardens implanted porcine heart valve tissue, a process known as
calcification,  which reduces the useful life of the implant. By removing viable
animal  cells  from the  tissue  while  maintaining  the  underlying  structural
strength of the porcine heart valve, this SynerGraft  application is designed to
provide a platform  for a patient's  own cells with the  potential  to naturally
populate the implant.

                                       8

<PAGE>

The second of the  SynerGraft  technology  applications  involves  an attempt to
develop stentless porcine heart valves repopulated with viable human cells prior
to implantation. This technology uses porcine tissues that have been depopulated
of viable animal cells using the SynerGraft process.

Implantable Biomaterials for Use as Surgical Adhesives and Sealants

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

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

In order to address the inherent limitations of sutures and staples, the Company
has developed and begun  commercializing  its BioGlue  surgical  adhesive and is
developing  its FibRx  surgical  sealant.  The  BioGlue  surgical  adhesive is a
polymeric  surgical  bioadhesive  based on a derivative of a blood protein and a
cross-linking  agent.  BioGlue surgical adhesive is  nonbiodegradable  and has a
tensile  strength  that is four to five  times that of FibRx  surgical  sealant.
Clinical  applications  for BioGlue surgical  adhesive  include  cardiovascular,
vascular,  and  pulmonary  repair.  A derivative  of the BioGlue  technology  is
BioLastic(TM),  an implantable biomaterial under development which is capable of
exchanging  oxygen and carbon  dioxide.  BioLastic is being developed for use in
reinforcing  or patching  vascular  tissue,  repairing  air leaks in lungs,  and
replacing  or sealing  holes in dura mater.  FibRx  surgical  sealant is a light
activated surgical  sealant  based on a derivative  of the human blood  factors
fibrinogen  and thrombin.  The Company  believes that FibRx is the only surgical
sealant under  development  offering ease of use to the surgeon  through  either
single-syringe  or spray  applicators.  The Company is currently seeking funding
for FibRx and other photo-activated  reversible inhibitors through AuraZyme, its
wholly  owned  subsidiary.  In March  2000,  the Company  announced  that it had
entered into an agreement  with  Viragen,  Inc. to conduct a project to research
the feasibility of site-specifc delivery and activation of Viragen's anti-cancer
proteins using the Company's light activation technology.

The following table summarizes certain important features, targeted applications
and regulatory and market status of BioGlue surgical adhesive and FibRx surgical
sealant:

<TABLE>
<CAPTION>
<S>                          <C>                                  <C>

                                  BioGlue Surgical Adhesive                   FibRx Surgical 
                                                                                 Sealant 
                             ------------------------------------ -----------------------------------------
      Composition:           animal albumin and glutaraldehyde    thrombin, fibrinogen and a thrombin
                                                                  inhibitor

      Method of Application: double syringe; mixing device        light activated single syringe; or
                             provided                             light
                                                                  activated spray applicator

      Targeted Clinical      vascular repair; anastomotic         hemostasis in cardiovascular
        Applications:        sealing; aortic                      procedures; modified tPA, drug delivery
                             dissection repair; carotid
                             endarterectomy
                             patching; tissue bonding; pulmonary
                             repair

      Performance            high tensile strength;               strength of normal human blood clot;
        Characteristics:     non-biodegradable                    biodegradable; flexible, easily
                                                                  manipulated

      Regulatory/Market
        Status
        Europe, Canada and   Approved for cardiovascular,         regulatory pathway to be determined
        certain other        vascular and pulmonary repair        pending AuraZyme funding 
        countries:           applications
                             

        United States:       FDA approved as a Humanitarian Use   regulatory pathway to be determined
                             Device for use as an adjunct in      pending AuraZyme funding
                             repair of acute thoracic aortic
                             dissections; clinical trials for
                             general vascular and selected
                             cardiac repairs will begin in second
                             quarter of 2000
</TABLE>

                                        9


<PAGE>

     The Company  estimates that the worldwide  market for surgical  sutures and
staples in 1999 was in excess of $2 billion.  The Company began shipping BioGlue
surgical  adhesive  for  distribution  in the  European  Community in the second
quarter of 1998 for use in  vascular  applications,  and in the U.S. in December
1999 pursuant to an HDE for use in repair of thoracic  aortic  dissections.  The
regulatory  pathway  for FibRx  surgical  sealant  will be  determined  upon the
funding of Aurazyme.

Single-Use Medical Devices

The  Company  serves as an OEM  manufacturer,  through  its IFM  subsidiary,  of
single-use  medical  devices  including   endarterectomy  surgical  instruments,
intravascular  shunts,  infusion  ports,  accessories  utilized in  laparoscopic
procedures  and a wide  range of single and dual lumen  balloon  catheters.  The
Company is benefiting from, and intends to utilize, its design and manufacturing
expertise in developing  single-use  medical devices for use in conjunction with
its human  tissue and  biomaterial  products.  An  example of such a  single-use
medical  device under  development  includes  families of balloon  catheters and
applicator  tips designed to assist in applying the BioGlue  surgical  adhesive.
HMP has defaulted on its OEM manufacturing agreement with IFM. See "Management's
Discussions  and  Analysis of  Financial  Condition  and Results of  Operations"
contained elsewhere in this Annual Report on Form 10-K.


Sales, Distribution and Marketing

Cryopreservation Services

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

Procurement  of Tissue.  Donated human tissue is procured  from  deceased  human
donors by organ  procurement  agencies,  tissue  banks and  subject to  required
testing and donor screening procedures.  After procurement, the tissue is packed
and shipped,  together with certain  information about the tissue and its donor,
to the  Company  in  accordance  with the  Company's  protocols.  The  tissue is
transported  to the Company's  laboratory  facilities  via  commercial  airlines
pursuant to  arrangements  with qualified  courier  services.  Timely receipt of
procured tissue is important,  as tissue that is not received promptly cannot be
cryopreserved  successfully.  The  procurement  agency  receives  a fee  for its
services, which is paid by the Company. The procurement fee and related shipping
costs are  ultimately  reimbursed  to the Company by the hospital with which the
implanting physician is associated. The Company has developed relationships with
over 250  tissue  banks  and  organ  procurement  agencies  throughout  the U.S.
Management  believes the establishment of these  relationships is critical for a
growing business in the cryopreservation  services industry and that the breadth
of these  existing  relationships  provides the Company a significant  advantage
over potential new entrants to this market.  As a result of its  maintaining and
developing  these  relationships,  the Company has  consistently  increased  its
annual human heart valve  procurement  since its inception.  The Company employs
approximately 18 individuals in the area of tissue procurement, five of whom are
employed as  procurement  relations  managers and are stationed  throughout  the
country.  The Company's central  procurement office is staffed 24 hours per day,
365 days per year.

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

                                       10

<PAGE>

Company's  comprehensive quality assurance program that includes review of donor
screening  information  and further  testing of the tissue to determine if it is
free of infectuous  diseases.  This program may identify  characteristics  which
would disqualify the tissue for cryopreservation.

Human heart valves and conduits,  vascular tissue and connective  tissue for the
knee are cryopreserved in a proprietary  freezing process conducted according to
strict Company protocols.  After the cryopreservation process, the specimens are
transferred to liquid  nitrogen  freezers for long-term  storage at temperatures
below -135(Degree)C.  The entire cryopreservation  process is rigidly controlled
by  guidelines  established  by the  Company.  The  tissue is not  released  for
distribution until all quality assurance  procedures have been satisfied and the
tissue has been determined to be suitable for transplant.

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

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

Marketing,  Educational  and Technical  Support.  The Company  maintains  active
relationships with approximately 2,000 cardiovascular,  vascular and orthopaedic
surgeons who have active practices  implanting  cryopreserved  human tissues and
markets to a broader  group of  physicians  within  these  medical  specialties.
Because  the  Company  markets  its   cryopreservation   services   directly  to
physicians,  an important aspect of increasing the distribution of the Company's
cryopreservation  services is educating  physicians on the use of  cryopreserved
human  tissue  and on proper  implantation  techniques.  Trained  field  support
personnel  provide back-up and support to implanting  institutions and surgeons.
The Company currently has over 100 independent technical service representatives
and  sub-representatives  (who deal primarily with orthopaedic  surgeons and who
are paid on a  commission  basis) as well as 41 persons  employed  as  technical
service  representatives  (who deal primarily with  cardiovascular  and vascular
surgeons and receive a base salary with a performance bonus) all of whom provide
field support.

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

In order to increase the Company's supply of human tissue for  cryopreservation,
the Company  educates and trains  procurement  agency  personnel in procurement,
dissection,  packaging  and  shipping  techniques.  The  Company  also  produces
educational  videotapes  and  coordinates  laboratory  sessions  on  procurement
techniques for  procurement  agency  personnel.  To supplement  its  educational
activities,  the Company employs  in-house  technical  specialists  that provide
technical information and assistance and maintains a staff 24 hours per day, 365
days per year for customer support.
  
                                     11

<PAGE>

Bioprosthetic Cardiovascular Devices

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

The Company markets the  CryoLife-O'Brien  and  CryoLife-Ross  stentless porcine
heart valves in the European  Community and  Australia.  The Company's  European
sales,   distribution   and   marketing   force   consists  of  21   independent
representatives,  representing each of the Benelux countries,  France,  Germany,
Greece, Denmark,  Norway, Finland, Sweden, Italy, Turkey and the United Kingdom.
Marketing  efforts are directed almost  exclusively  toward  cardiovascular  and
vascular surgeons, and the Company conducts educational seminars and conferences
to train these  surgeons  and educate them with respect to the uses and benefits
of its porcine stentless heart valves.

BioGlue Surgical Adhesive

The Company markets and distributes  its BioGlue  surgical  adhesive in the U.S.
under the HDE for use in the repair of acute thoracic aortic dissections through
its  existing  direct  technical   representatives.   The  Company  markets  and
distributes  its BioGlue  surgical  adhesive in the European  Community  through
Europa and its existing independent representatives,  and in other international
markets,  excluding  Japan,  through its existing  independent  representatives.
During 1998,  the Company  signed a five-year  exclusive  agreement with Century
Medical,  Inc. for the introduction and distribution of BioGlue in Japan.  Under
the  terms  of the  agreement,  Century  Medical  will  be  responsible  for the
applications and clearances through the Japanese Ministry of Health and Welfare.
Marketing  efforts  are  directed  almost  exclusively  toward   cardiovascular,
vascular and thoracic  surgeons,  and the Company conducts training sessions for
doctors with respect to the application and  administration  of BioGlue surgical
adhesive.

Single-Use Medical Devices

The Company serves as an OEM  manufacturer  for single-use  medical  devices for
Horizon  Medical  Products,  Inc.  The Company  plans to expand sales of its own
single-use  medical  devices,  which  include  BioGlue  extender tips and aortic
balloon  catheters,  by continuing  new product  development  and leveraging its
established  cryopreservation  services and product marketing and sales staff to
market the products.


Research and Development

The  Company  uses its  expertise  in  biochemistry  and cell  biology,  and its
understanding  of the  needs of the  cardiovascular,  vascular  and  orthopaedic
surgery  medical  specialties,  to continue to expand its core  cryopreservation
business  in the  U.S.  and to  develop  or  acquire  implantable  products  and
technologies  for these fields.  The Company seeks to identify market areas that
can benefit from  preserved  living tissues and other related  technologies,  to
develop  innovative  techniques and products within these areas, to secure their
commercial  protection,  to  establish  their  efficacy and then to market these
techniques  and products.  The Company  employs  approximately  22 people in its
research and development  department.  There are 10 PhDs with specialties in the
fields of immunology,  molecular biology,  protein chemistry,  organic chemistry
and vascular biology.

In order to expand the Company's service and product  offerings,  the Company is
currently in the process of developing or investigating several technologies and
products,   including  FibRx  surgical  sealant,   additional   applications  of
SynerGraft and additional applications of BioGlue surgical adhesive. The Company
is  currently  investigating  certain  drug  delivery  applications  for BioGlue
surgical adhesive and FibRx surgical sealant, such as administering antibiotics,
attaching  chemotherapy drugs to tumors,  delivering growth agents or delivering
bone chips for  orthopaedic  bone repair.  To the extent the Company  identifies
additional  applications for these products,  the Company may attempt to license
these   products  to  corporate   partners  for  further   development  of  such
applications  or seek funding from  outside  sources to continue the  commercial
develoment of such technologies. The Company's research and development strategy
is to allocate available resources among the Company's four core market areas of

                                       12

<PAGE>

cryopreservation  services,  bioprosthetic  cardiovascular devices,  implantable
biomaterials and single-use medical devices,  based on the size of the potential
market for any specific product candidate and the estimated development time and
cost required to bring the product to market.

Research on these and other projects is conducted in the Company's  research and
development  laboratory or at universities or clinics where the Company sponsors
research projects.  In 1997, 1998 and 1999, the Company spent approximately $3.9
million,  $4.7  million  and  $4.4  million,   respectively,   on  research  and
development  activities on new and existing products.  These amounts represented
approximately  8%, 8% and 7% of the  Company's  revenues  for  those  respective
years. The Company's research and development program is overseen by its medical
and scientific advisory boards. The Company's pre-clinical studies are conducted
at universities  and other locations  outside the Company's  facilities by third
parties  under  contract  with the Company.  In addition to these  efforts,  the
Company  may, as  situations  develop,  pursue other  research  and  development
activities.

Manufacturing and Operations

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

Human Tissue Processing

The human tissue  processing  laboratory is  responsible  for the processing and
cryopreservation  of human tissue for  transplant,  including human heart valves
and  conduits  processed by applying  SyneGraft  technology.  This  includes all
processing of heart valves and conduits,  vascular tissue and connective  tissue
for the knee supplied by CryoLife.  This laboratory contains approximately 7,700
square  feet  with  a  suite  of  seven  clean  rooms.  Currently  there  are 53
technicians employed in this area, and the laboratory is staffed for two shifts,
365 days per year. In 1999, the laboratory processed  approximately 27,300 human
tissues for distribution and transplant. The current staffing level is estimated
to be at  about  half of  total  capacity.  Increasing  this  capacity  could be
accomplished by increasing employees and expanding to three shifts.

Implantable Biomaterials for Use as Surgical Adhesives and Sealants

BioGlue   surgical   adhesive  is  presently   manufactured   at  the  Company's
headquarters  facility,  which has an annual capacity of  approximately  300,000
units. This laboratory contains  approximately  12,900 square feet,  including a
suite of 2  cleanrooms.  The Company  conducts  research  on its FibRx  surgical
sealant in the  biomedical  products  laboratory,  which is located in Marietta,
Georgia and employs 2 technicians. This laboratory contains approximately 11,000
square  feet,  including  4,000 square feet of  laboratory  space and a suite of
eight clean rooms.

Bioprosthetic Cardiovascular Devices

The  bioprosthesis  laboratory  is  responsible  for  the  manufacturing  of the
CryoLife-O'Brien  and  CryoLife-Ross  stentless porcine heart valves, as well as
for the manufacturing of SynerGraft  porcine valves.  This laboratory is located
in Marietta,  Georgia and contains  approximately 13,000 square feet, with about
3,500 square feet of laboratory space and a suite of four clean rooms for tissue
processing.  Currently,  this laboratory employs 25 technicians and is scheduled
to manufacture  approximately 1,200 CryoLife-O'Brien and CryoLife-Ross valves in
2000. The recently renovated facility's capacity is over 6,000 valves.

                                       13

<PAGE>

Single-Use Medical Devices

The  manufacturing  of single-use  medical devices is conducted at the Company's
IFM  subsidiary  located in St.  Petersburg,  Florida.  IFM moved to a renovated
30,000 square foot facility in January 1998. The Company has  approximately  105
employees  at this  facility.  In the new  facility,  a single shift can produce
approximately  300,000 units  annually with full capacity  expected to be nearly
800,000 units annually.

Quality Assurance

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

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

Cryopreservation Services

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

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

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

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

                                       14

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Bioprosthetic, Bioadhesive and Single-Use Medical Device Manufacturing

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

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

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

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

Patents, Licenses and Other Proprietary Rights

The Company  relies on a combination of patents,  trade secrets,  trademarks and
confidentiality  agreements  to protect  its  proprietary  products,  processing
technology,  rights and know-how.  The Company believes that its patents,  trade
secrets,  trademarks and technology  licensing  rights provide it with important
competitive  advantages.  The  Company  owns or has  licensed  rights to 30 U.S.
patents and 26 foreign patents, including patents relating to its technology for
human heart valve and conduit,  vascular  tissue and  connective  tissue for the
knee preservation;  tissue  revitalization prior to freezing;  tissue transport;
fibrin adhesive;  organ storage  solution;  and packaging.  Certain of the above
patents  relate to the Company's  BioGlue  surgical  adhesive and FibRx surgical
sealant. The Company has 15 pending U.S. patent applications and in excess of 43
pending  foreign  applications  that relate to areas  including  heart valve and
tissue  processing  technology and delivery of bioadhesives  for anastomosis and
other uses. In connection with the sale of the IFM product line to Horizon,  the
Company sold all patents related to such product line. There can be no assurance
that any patents  pending  will result in issued  patents.  The Company also has
exclusive  licensing rights for technology  relating to  light-sensitive  enzyme
inhibitors. The remaining duration of the Company's issued patents ranges from 2
to 17 years.  The Company has licensed from third parties  certain  technologies
used in the development of its FibRx surgical sealant and SynerGraft technology.
These licenses call for the payment of both development milestones and royalties
based on product  sales,  when and if such products are approved for  marketing.
The loss of these  licenses  could  adversely  affect the  Company's  ability to
successfully develop its FibRx surgical sealant and SynerGraft technologies.

There  can be no  assurance  that the  claims  allowed  in any of the  Company's
existing or future patents will provide competitive advantages for the Company's
products,  processes and technologies or will not be successfully  challenged or
circumvented  by competitors.  To the extent that any of the Company's  products
are not patent  protected,  the  Company's  business,  financial  condition  and
results of operations could be materially adversely affected. Under current law,
patent  applications  in the U.S. are  maintained  in secrecy  until patents are
issued and patent  applications  in foreign  countries are maintained in secrecy
for a period after filing.  The right to a patent in the U.S. is attributable to
the first to invent,  not the first to file a patent  application.  The  Company
cannot be sure that its products or  technologies  do not infringe  patents that

                                       15

<PAGE>

may be granted in the future pursuant to pending patent applications or that its
products do not infringe any patents or proprietary rights of third parties. The
Company  may  incur  substantial  legal  fees  in  defending  against  a  patent
infringement  claim or in asserting  claims against third parties.  In the event
that any  relevant  claims  of  third-party  patents  are  upheld  as valid  and
enforceable, the Company could be prevented from selling certain of its products
or could be required to obtain  licenses  from the owners of such  patents or be
required  to  redesign  its  products  to avoid  infringement.  There  can be no
assurance  that such licenses  would be available or, if available,  would be on
terms  acceptable  to the Company or that the Company would be successful in any
attempt to  redesign  its  products  or  processes  to avoid  infringement.  The
Company's  failure to obtain these  licenses or to redesign  its products  could
have a material adverse effect on the Company's  business,  financial  condition
and results of operations.

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

Competition

Cryopreserved Human Tissues and Bioprosthetic Cardiovascular Devices

The Company faces competition from non-profit tissue banks that cryopreserve and
distribute  human  tissue,  as well as from  companies  that market  mechanical,
porcine and bovine heart valves for  implantation.  Many established  companies,
some  with  resources  greater  than  those  of  the  Company,  are  engaged  in
manufacturing, marketing and selling alternatives to cryopreserved human tissue.
Management  believes  that  it  competes  favorably  with  other  entities  that
cryopreserve  human  tissue on the basis of  technology,  customer  service  and
quality assurance.  As compared to mechanical,  porcine and bovine heart valves,
management  believes  that the human heart valves  cryopreserved  by the Company
compete on the factors set forth above, as well as by providing a tissue that is
the  preferred   replacement   alternative   with  respect  to  certain  medical
conditions,  such as pediatric cardiac  reconstruction,  valve  replacements for
women in their  child-bearing  years and valve  replacements  for patients  with
endocarditis.  Although human tissue  cryopreserved  by the Company is initially
higher priced than are mechanical  alternatives,  these  alternatives  typically
require that the patient take  anti-coagulation drug therapy for the lifetime of
the  implant.  As  a  result  of  the  costs  associated  with  anti-coagulants,
mechanical  valves are generally,  over the life of the implant,  more expensive
than  tissue  cryopreserved  by  the  Company.  Notwithstanding  the  foregoing,
management believes that, to date, price has not been a significant  competitive
factor.

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

Human and Stentless  Porcine Heart  Valves.  Alternatives  to human heart valves
cryopreserved  by the Company  include  mechanical  valves,  porcine  valves and
valves  constructed  from  bovine  pericardium.  St. Jude  Medical,  Inc. is the
leading  supplier  of  mechanical   heart  valves,   and  has  a  marketing  and
distribution  arrangement with a tissue bank for supplies of cryopreserved human
heart  valves  and  St.  Jude  Medical,  Inc.,  Baxter  International  Inc.  and
Medtronics, Inc. are the leading suppliers of porcine heart valves. In addition,
management  believes  that at least three  tissue  banks offer  cryopreservation
services for human heart  valves in  competition  with the Company.  The Company

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<PAGE>

presently  distributes its stentless  porcine heart valves only outside the U.S.
These stentless porcine heart valves compete with mechanical valves, human heart
valves and processed  bovine  pericardium.  The Company is aware of at least two
other companies that offer stentless porcine heart valves.

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

Human Connective  Tissue for the Knee. The Company's  competition in the area of
connective  tissue for the knee varies  according to the tissue  involved.  When
transplant  is  indicated,   the   principal   competition   for  human  tissues
cryopreserved  by the Company are freeze-dried and fresh frozen human connective
tissues.  These  alternative  allografts  are  distributed  by  distributors  of
Osteotech,  Inc. and various tissue banks,  among others.  Ligaments and tendons
cryopreserved  by the Company  constitute  the principal  treatment  options for
injuries  which require  anterior  cruciate  ligament  repair.  To  management's
knowledge, there are presently no processed or synthetic alternatives to menisci
cryopreserved by the Company or preserved osteochondral grafts.

Implantable Biomedical Devices

The  Company   competes   with  many  domestic  and  foreign   medical   device,
pharmaceutical  and  biopharmaceutical  companies.  In the surgical adhesive and
surgical  sealant area,  the Company will compete with  existing  methodologies,
including  traditional  wound  closure  products  such as sutures  and  staples,
marketed  by  companies  such as  Johnson  &  Johnson,  United  States  Surgical
Corporation,  Sherwood,  Davis & Geck and others. Other products currently being
marketed  include  fibrin  glue  sold by  Immuno  AG,  a  subsidiary  of  Baxter
Healthcare Company,  Chemo-Sero  Therapeutic Research Institute,  Hoechst AG and
others,  and management  believes other products are under development by Baxter
Healthcare  Corporation,  Bristol-Myers Squibb Company, V.I. Technologies,  Inc.
and others.  Other  competitors in the surgical  sealant market include  Closure
Medical Corporation, B. Braun GmbH and Focal, Inc. Competitive products may also
be  under  development  by  other  large  medical  device,   pharmaceutical  and
biopharmaceutical  companies.  Many  of  the  Company's  current  and  potential
competitors have substantially  greater financial,  technological,  research and
development,  regulatory and clinical,  manufacturing,  marketing and sales, and
personnel resources than the Company.

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

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

Government Regulation

U.S. Federal Regulation

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

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<PAGE>

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

If the product does not qualify for the 510(k)  procedure  (either because it is
not  substantially  equivalent to a legally  marketed  device or because it is a
Class III device  required by the FDCA and  implementing  regulations to have an
approved application for premarket approval  ("PMA")),  the FDA must approve a
PMA application  before marketing can begin. PMA applications  must demonstrate,
among  other  matters,  that the  medical  device is safe and  effective.  A PMA
application is typically a complex submission,  usually including the results of
human  clinical  studies,  and  preparing  an  application  is  a  detailed  and
time-consuming  process.  Once a PMA application  has been submitted,  the FDA's
review may be lengthy and may include  requests for additional  data. By statute
and regulation,  the FDA may take 180 days to review a PMA application  although
such time may be extended.  Furthermore,  there can be no  assurance  that a PMA
application  will be reviewed within 180 days or that a PMA application  will be
approved by the FDA.

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

Under certain  circumstances,  where human clinical studies have established the
safety of a device, the FDA may grant a Humanitarian Device Exemption. HDE's are
granted by the FDA in an attempt to encourage the development of medical devices
for use in the treatement of rare conditions that affect small populations. If a
device is determined to be for  humanitarian use by the FDA, the manufacturer is
required  to show only that the  device is safe and has a  probable  benefit  to
patients,  but not a demonstration of safety. An approval by the FDA allows such
devices to be distributed before completion of clinical studies to establish the
effectiveness of the device.

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

                                       18

<PAGE>

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

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

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

Other Tissue.  Other than human and porcine heart valves,  none of the Company's
other tissue services or products are currently subject to regulation as medical
devices under the FDCA or FDA regulation. Heart valves are one of a small number
of  processed  human  tissues  over which the FDA has  asserted  medical  device
jurisdiction.  In July  1997,  the FDA  published  a final  rule,  which  became
effective in January 1998,  regulating  "human  tissue." The rule  clarifies and
modifies an earlier  interim rule and defines human tissue as any tissue derived
from a human body which is (i) intended for  administration to another human for
the  diagnosis,  cure,  mitigation,  treatment or prevention of any condition or
disease and (ii)  recovered,  processed,  stored or  distributed  by methods not
intended  to change  tissue  function  or  characteristics.  The FDA  definition
excludes,  among other  things,  tissue that  currently  is regulated as a human
drug,  biological product or medical device and excludes kidney,  liver,  heart,
lung,  pancreas or any other vascularized human organ. Human tissue is regulated
by the FDA in a manner the agency has  deemed  necessary  to protect  the public
health from the  transmission of HIV infection and hepatitis  infection  through
transplantation of tissue from donors with or at risk for these diseases. Unlike
certain drugs,  biologicals and medical devices,  human tissue is not subject to
premarket notification or approval by the FDA. It is likely,  moreover, that the
FDA will expand its  regulation  of processed  human  tissue in the future.  For
example,  the FDA may determine  that the veins and  connective  tissue that are
currently processed by the Company are medical devices, or the FDA may determine
to regulate human heart valves as "human tissue" or biological  products  rather
than medical devices,  but the FDA has not done so at this time.  Complying with
FDA regulatory  requirements  or obtaining  required FDA approvals or clearances
may entail  significant time delays and expenses or may not be possible,  any of
which may have a material adverse effect on the Company.  In addition,  the U.S.
Congress  has  considered  legislation  that  would  regulate  human  tissue for
transplant  or the FDA  could  impose a  separate  regulatory  scheme  for human
tissue.  Such  legislation or regulation could have a material adverse effect on
the Company.

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

Single-Use Medical Devices. The products manufactured by the Company through IFM
are regulated as Class I and Class II medical devices by the FDA. These products
require clearance under a 510(k) procedure.  All products currently manufactured
by IFM have  received a 510(k)  clearance  from the FDA.  In  addition,  the IFM
facilities  are subject to period  inspection  by the FDA, as are certain of the
Company's   records,   including  reports  on  returned  products  and  problems
associated with use of its products.

BioGlue Surgical Adhesive. BioGlue surgical adhesive is regulated as a Class III
medical device by the FDA. The Company is currently  conducting  clinical trials
for BioGlue surgical adhesive in the U.S. There can be no assurance that BioGlue
will receive FDA approval.

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<PAGE>

The Company received a Humanitarian  Device Exemption (HDE) in December 1999 for
BioGlue   surgical   adhesive  for  use  in  repair  of  acute  thoracic  aortic
dissections.  The Company  commercially  distributes  BioGlue in the US for this
indication, subject to the limitations imposed by the FDA under an HDE, and will
likely discontinue clinical trials of BioGlue under its current IDE. The Company
has  received  U.S. FDA approval to and will  commence  clinical  trials under a
supplemental IDE for BioGlue  surgical  adhesive for use in general vascular and
selected  cardiac  repairs.  If  successful,   the  Company  would  be  able  to
commercially distribute BioGlue in the US for these indications.  However, there
can be no assurance that the Company will be successful in gaining  approval for
the IDE.

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

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

State Licensing Requirements

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

Foreign Approval Requirements

Sales of medical devices and biological products outside the U.S. are subject to
foreign  regulatory  requirements  that vary  widely  from  country to  country.
Approval of a product by comparable regulatory  authorities of foreign countries
must be obtained prior to  commercialization  of the product in those countries.
The time required to obtain foreign approvals may be longer or shorter than that
required for FDA approval.  The European Community recognizes a single approval,
called  a CE  Mark,  which  allows  for  distribution  of  an  approved  product
throughout the European Community (15 countries) without additional applications
to each country. The CE Mark is awarded by third parties called Notified Bodies.
These  Notified  Bodies are  approved  and  subject  to review by the  Competent
Authorities of their respective countries.  A number of countries outside of the
European  Community accept the CE Mark in lieu of clinical data submission as an
addendum to that country's  application  process. The Company has been issued CE
Marks  issued  by  LRQA  for  the  distribution  of  its   CyroLife-O'Brien  and
CryoLife-Ross porcine heart valves, BioGlue surgical adhesive and IFM single-use
medical devices in the European  Community.  The Company's  porcine heart valves
may be exported to  specified  developed  nations,  including  countries  in the
European Community, Australia, Canada,

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Israel, Japan, New Zealand, South Africa and Switzerland if they comply with the
laws of that country and have valid marketing  authorization  by the appropriate
authority in that country.

Environmental Matters

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

Employees

At March 20, 2000 the Company had approximately  410 employees.  These employees
included  13  persons  with PhD  degrees.  None of the  Company's  employees  is
represented  by a labor  organization  or  covered  by a  collective  bargaining
agreement, and the Company has never experienced a work stoppage or interruption
due to labor disputes.  Management believes its relations with its employees are
good.

                                  RISK FACTORS

Dependence on Cryopreservation of Human Tissue

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

Intense Competition

The Company faces  competition  from other  companies  that  cryopreserve  human
tissue,  as well as companies  that market  mechanical  valves and synthetic and
animal tissue for implantation.  Management  believes that at least three tissue
banks offer cryopreservation  services for human heart valves and many companies
offer  processed  porcine  heart  valves  and  mechanical  heart  valves.  A few
companies  dominate  portions of the mechanical and porcine heart valve markets,
including St. Jude Medical, Inc., Medtronic,  Inc. and Baxter International Inc.
The Company is aware that several  companies  have  surgical  adhesive  products
under development.  Competitive  products may also be under development by other
large medical device,  pharmaceutical and biopharmaceutical  companies.  Many of

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<PAGE>

the Company's competitors have greater financial,  technical,  manufacturing and
marketing  resources than the Company and are well established in their markets.
There can be no assurance that the Company's  products and services will be able
to compete  successfully  with the  products  of these or other  companies.  Any
products  developed  by the Company that gain  regulatory  clearance or approval
will have to compete  for market  acceptance  and market  share.  Failure of the
Company to compete  effectively  could  have a  material  adverse  effect on the
Company's  business,   financial  condition  and  results  of  operations.   See
"Business-Competition."

Rapid Technological Change

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

Uncertainties Regarding Products in Development

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

The Company's  BioGlue  surgical  adhesive is currently  offered for sale in the
U.S.  pursuant to an HDE approval,  which provides for limited  distribution for
use only as an adjunct in the repair of acute thoracic aortic dissections. There
can be no  assurance  that the Company  will obtain the  necessary  approvals to
allow for general distribution of its BioGlue surgical adhesive in the U.S.

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

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

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<PAGE>

Extensive Government Regulation

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

Other allograft  tissues  processed and distributed by the Company are currently
regulated as "human tissue" under a rule  promulgated by the FDA pursuant to the
Public Health Services Act. This rule establishes requirements for donor testing
and screening of human tissue and  recordkeeping  relating to these  activities.
Although the Company's other human tissue allografts are not currently regulated
as  medical  devices,  such  tissue  may in the  future  become  subject to more
extensive  FDA  regulation,   which  could  include  PMA  or  product  licensing
requirements.

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

Most of the Company's products in development,  if successfully developed,  will
require  regulatory   approvals  from  the  FDA  and  perhaps  other  regulatory
authorities  before  they  may  be  commercially  distributed.  The  process  of
obtaining required regulatory  approvals from the FDA normally involves clinical
trials and the  preparation of an extensive PMA application and often takes many
years.  The process is expensive and can vary  significantly  based on the type,
complexity  and  novelty  of the  product.  There can be no  assurance  that any
products  developed  by the  Company,  independently  or in  collaboration  with
others,  will receive the required  approvals for  manufacturing  and marketing.
Delays in  obtaining  U.S.  or foreign  approvals  could  result in  substantial
additional  cost to the Company and adversely  affect the Company's  competitive
position.  The FDA may also place  conditions  on product  approvals  that could
restrict commercial  applications of such products.  Product marketing approvals
or clearances may be withdrawn if compliance  with  regulatory  standards is not
maintained or if problems occur following initial  marketing.  Delays imposed by
the governmental clearance process may materially reduce the period during which
the Company has the exclusive right to commercialize  patented  products.  Also,
delays or  rejections  may be  encountered  during  any stage of the  regulatory
approval  process  based  upon the  failure  of the  clinical  or other  data to
demonstrate  compliance  with,  or upon the failure of the product to meet,  the
regulatory  agency's  requirements for safety,  efficacy and quality,  and those
requirements  may  become  more  stringent  due to changes  in  applicable  law,
regulatory agency policy or the adoption of new regulations. Clinical trials may
also be delayed due to unanticipated side effects,  inability to locate, recruit
and qualify  sufficient numbers of patients,  lack of funding,  the inability to
locate or  recruit  clinical  investigation,  the  redesign  of  clinical  trial
programs,  the inability to manufacture or acquire sufficient  quantities of the
particular  product  candidate  or any other  components  required  for clinical
trials,  changes in the  Company's or its  collaborative  partners'  development
focus  and  disclosure  of trial  results  by  competitors.  Even if  regulatory
approval is obtained for any of the Company's products or services, the scope of
the approval may significantly limit the indicated usage for which such products
or services may be marketed.

                                       23

<PAGE>

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

Uncertainties Related to Patents and Protection of Proprietary Technology

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

Uncertainties Regarding Future Health Care Reimbursement

Even though the Company  does not receive  payments  directly  from  third-party
health care payors,  their reimbursement  methods and policies impact demand for
the  Company's  cryopreserved  tissue  and  other  services  and  products.  The
Company's   cryopreservation   services  may  be  particularly   susceptible  to
third-party  cost  containment  measures.  In particular,  the initial cost of a
cryopreserved  human heart  valve  generally  exceeds the cost of a  mechanical,
synthetic or animal-derived valve. The Company is unable to predict what changes
will be made in the  reimbursement  methods and policies utilized by third-party
health care payors or their effect on the Company.  Changes in the reimbursement
methods and  policies  utilized by  third-party  health care  payors,  including
Medicare,  with  respect to  cryopreserved  tissues  provided for implant by the
Company and other Company  services and products,  could have a material adverse

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<PAGE>

effect on the Company.  Significant  uncertainty  exists as to the reimbursement
status of newly  approved  health care products and services and there can be no
assurance that adequate  third-party  coverage will be available for the Company
to maintain price levels sufficient for realization of an appropriate  return on
its  investment in developing  new products.  Government  and other  third-party
payors are increasingly attempting to contain health care costs by limiting both
coverage and the level of reimbursement  for new products approved for marketing
by the FDA and by  refusing in some cases to provide  any  coverage  for uses of
approved  products for indications  for which the FDA has not granted  marketing
approval.  If adequate  coverage  and  reimbursement  levels are not provided by
government and other  third-party  payors for uses of the Company's new products
and services,  market acceptance of these products would be adversely  affected,
which could have a material adverse effect on the Company's business,  financial
condition and results of operations.

Dependence on Key Personnel

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

Product Liability and Insurance

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

Use and Disposal of Hazardous Material

The  Company's  research,  development  and  processing  activities  involve the
controlled use of small quantities of radioactive  compounds,  chemical solvents
and other  hazardous  materials.  The  Company's  activities  also  include  the
preservation  and  growth of human  cells and the  processing  of human  tissue.
Although  the  Company  believes  that  its  safety   procedures  for  handling,
processing and disposing of hazardous materials and human tissue comply with the
standards  prescribed  by  federal,  state  and local  regulations,  the risk of
accidental  contamination,  injury or disease  transmission from these materials
cannot  be  completely  eliminated.   In  the  event  of  such  an  accident  or
transmission,  the Company  could be held liable for  resulting  damages and any
liability  could  have a  material  adverse  effect on the  Company's  business,

                                       25

<PAGE>

financial condition and results of operations.  Also, any failure to comply with
applicable  regulations  could result in the imposition of penalties,  fines and
sanctions, which could have a material adverse effect on the Company's business,
financial condition and results of operations.

Volatility of Securities Prices

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

Anti-Takeover Provisions

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

Absence of Dividends

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

                           Forward-Looking Statements

This Form 10-K  includes  "forward-looking  statements"  within  the  meaning of
Section 27A of the  Securities Act of 1933, as amended (the  "Securities  Act"),
Section 21E of the  Securities  Exchange Act of 1934, as amended (the  "Exchange
Act") and the Private Securities  Litigation Reform Act of 1995. All statements,
other than statements of historical facts, included or incorporated by reference
in this Form 10-K which address  activities,  events or  developments  which the
Company  expects  or  anticipates  will or may  occur in the  future,  including
statements  regarding  the  Company's  competitive   position,   the  successful
development  of  its  SynerGraft   porcine  valves,   the  funding  to  continue
development of FibRx surgical  sealant,  other  estimated  dates relating to the
Company's proposed regulatory submissions,  the timing of the Company's clinical
trials for the  approval  of BioGlue  surgical  adhesive  for  general  vascular
repair, the timing of the completion of the expansion of the Company's corporate
headquaters and manufacturing  facilities,  the Company's expectations regarding
the  adequacy  of  current  financing  arrangements,  product  demand and market
growth,  the impact of the  introduction  of BioGlue  in the U.S.  or  marketing
opportunities for the Company's  single-use medical devices and other statements
regarding future plans and strategies,  anticipated events or trends and similar

                                       26

<PAGE>

expressions concerning matters that are not historical facts are forward-looking
statements.  These statements are based on certain assumptions and analyses made
by the  Company in light of its  experience  and its  perception  of  historical
trends,  current  conditions and expected  future  developments as well as other
factors it believes  are  appropriate  in the  circumstances.  However,  whether
actual results and developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties  which could cause
actual results to differ materially from the Company's  expectations,  including
the risk factors  discussed in this Form 10-K and other  factors,  many of which
are beyond the control of the Company.  Consequently, all of the forward-looking
statements made in this Form 10-K are qualified by these  cautionary  statements
and  there  can  be  no  assurance  that  the  actual  results  or  developments
anticipated by the Company will be realized or, even if substantially  realized,
that they will have the  expected  consequences  to or effects on the Company or
its business or operations. The Company assumes no obligation to update publicly
any such  forward-looking  statements,  whether as a result of new  information,
future events or otherwise.


I
tem 2. Properties.

The Company's facilities (other than its single use medical device manufacturing
plant) are located in suburban Atlanta,  Georgia,  and consist of three separate
locations  totaling   approximately   130,000  square  feet  of  leased  office,
laboratory and warehouse space.  Approximately  30,000 square feet are dedicated
to laboratory work areas. The primary facility, which does not include the FibRx
laboratory  and  the  bioprosthetic   manufacturing  operation,  has  four  main
laboratory facilities: human tissue processing, BioGlue manufacturing,  research
and  development,  and  microbiology.  Each of these areas consists of a general
technician work area and adjoining  "clean rooms" for work with human tissue and
for aseptic  processing.  The clean rooms are supplied with highly  filtered air
which  provides  a  near-sterile   environment.   The  human  tissue  processing
laboratory contains  approximately 7,700 square feet with a suite of seven clean
rooms. The BioGlue manufacturing laboratory contains approximately 12,900 square
feet with a suite of 2 clean rooms.  The research and development  laboratory is
approximately  5,500  square  feet  with  a  suite  of  five  clean  rooms.  The
microbiology laboratory is approximately 3,200 square feet with a suite of three
clean rooms. The FibRx laboratory facility contains  approximately 11,000 square
feet, including approximately 4,000 square feet of laboratory space with a suite
of eight clean rooms. The Company's porcine heart valves are manufactured in the
Company's bioprosthesis  laboratory,  which contains approximately 13,000 square
feet, with about 3,500 square feet of laboratory space and a suite of four clean
rooms for tissue processing. The Company manufactures single-use medical devices
at the  Company's  IFM  subsidiary  located  in St.  Petersburg,  Florida.  This
facility  is  approximately  30,000  square  feet and is leased  from the former
principal shareholder of IFM. The Company's lease on its IFM facility expires in
2007.

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


Item 3. Legal Proceedings.

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


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

Inapplicable.

                                       27

<PAGE>


Item 4A. Executive Officers of the Registrant.

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

<TABLE>
<CAPTION>
<S>                             <C>                                                       <C>

                                                                                          Date First Elected to
Name                            Age   Position                                            Present Office
-------                         ---   ---------                                           ---------------------
Steven G. Anderson               61   President, Chief Executive Officer and Chairman     February, 1984
Kirby S. Black, PhD              45   Vice President, Research and Development            July, 1995
Edwin B. Cordell, Jr., CPA       41   Vice President and Chief Financial Officer          December, 1994
David M. Fronk                   36   Vice President, Clinical Research                   December, 1998
Albert E. Heacox, PhD            49   Vice President, Laboratory Operations               June, 1995
Gerald B. Seery                  43   Vice President, Marketing                           August, 1995
James C. Vander Wyk, PhD         55   Vice President, Regulatory Affairs and Quality      February, 1996
                                      Assurance
Ronald D. McCall, Esq.           63   Director, Secretary and Treasurer                   January, 1984
</TABLE>

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

Kirby S. Black,  PhD, has served as Vice  President of Research and  Development
since July 1995. Dr. Black is responsible  for the continued  development of the
Company's  current products as well as the evaluation of new  technologies.  Dr.
Black is listed on three patents and has authored over 125  publications.  Prior
to joining the Company, Dr. Black was Director,  Medical Information and Project
Leader  from July 1993 until July 1994 at  Advanced  Tissue  Sciences,  LaJolla,
California.  Dr. Black has also held a number of positions at the  University of
California  at  Irvine,  including  Director,   Transplantation  and  Immunology
Laboratories,  Department of Surgery.  Dr. Black received his BS degree from the
University of California, Los Angeles, and his PhD degree from the University of
California at Irvine.

Edwin B.  Cordell,  Jr., CPA, has served as Vice  President and Chief  Financial
Officer of the Company since November  1994.  From August 1987 to November 1994,
Mr. Cordell served as Controller  and Chief  Financial  Officer of Video Display
Corporation,   a  publically  held  consumer   electronics   manufacturing   and
distribution  company.  Mr.  Cordell  received  his BS in  Accounting  from  the
University of Tennessee.

David M. Fronk was  appointed  to the  position  of Vice  President  of Clinical
Research in December 1998 and has been with the Company since 1992. Mr. Fronk is
responsible  for managing the preclinical  and clinical  investigations  for all
products,  as well as  monitoring  product  performance.  Prior to  joining  the
Company,  Mr. Fronk held engineering  positions with Zimmer Inc. from 1986 until
1988 and Baxter Healthcare  Corporation from 1988 until 1991. Mr Fronk served as
a market manager with Baxter  Healthcare  Corporation  from 1991 until 1992. Mr.
Fronk received his BS in Mechanical  Engineering at The Ohio State University in
1985 and his MS in Biomedical Engineering at The Ohio State University in 1986.

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

Gerald B. Seery has served as Vice President of Marketing  since August 1995 and
has been  with the  Company  since  July  1993.  Mr.  Seery is  responsible  for
developing  and  implementing  the  Company's  sales  and  marketing  plans  and
supervising all tissue procurement activities. Prior to joining the Company, Mr.
Seery held senior marketing  management positions with Meadox Medicals from 1982
until  1985,  Electro  Catheter  Corporation  from  1985  until  1989  and  Daig
Corporation  from 1992 until 1993,  accumulating  fifteen  years of  specialized
marketing  experience in cardiovascular  medical devices. Mr. Seery received his
BA  in  International  Economics  at  The  Catholic  University  of  America  in
Washington,  D.C. in 1978 and  completed  his MBA at Columbia  University in New
York in 1980.

                                       28

<PAGE>

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

Ronald D. McCall has served as a director  of the  Company and as the  Secretary
and Treasurer of the Company since January 1984.  From 1985 to the present,  Mr.
McCall has been the proprietor of the law firm of Ronald D. McCall,  Attorney At
Law, Tampa,  Florida.  Mr. McCall was admitted to the practice of law in Florida
in 1961.  Mr.  McCall  received  his BA and JD degrees  from the  University  of
Florida.

                                       29

<PAGE>


                                     PART II


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

The response to Item 5 is  incorporated  herein by reference to the  information
set forth under the  caption  "Market  Price of Common  Stock" on page 35 of the
annual shareholders report for the year ended December 31, 1999.


Item 6. Selected Financial Data.

The response to Item 6 is  incorporated  herein by reference to the  information
set forth under the caption "Selected  Financial  Information" on page 36 of the
annual shareholders report for the year ended December 31, 1999.


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

The response to Item 7 is  incorporated  herein by reference to the  information
set forth under the caption  "Management's  Discussion and Analysis" on pages 16
though 21 of the annual  shareholders  report for the year  ended  December  31,
1999.


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

The response to Item 7A is  incorporated  herein by reference to the information
set forth under the caption  "Quantitative  and  Qualitative  Disclosures  About
Market Risk" appearing on page 20 of the annual shareholders report for the year
ending December 31, 1999.


Item 8. Financial Statements and Supplementary Data.

The  report  of  independent  auditors  and  consolidated  financial  statements
included on pages 22 through 35 of the annual  shareholders  report for the year
ended December 31, 1999 are incorporated herein by reference.  Quarterly Results
of  Operations on page 37 of the annual  shareholders  report for the year ended
December 31, 1999 is incorporated herein by reference.


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

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

                                       30


<PAGE>

                                    PART III


Item 10. Directors and Executive Officers of the Registrant.

The  response  to Item  10,  applicable  to the  Directors  of the  Company,  is
incorporated  herein by reference to the information set forth under the caption
"Election  of  Directors"  in the Proxy  Statement  for the  Annual  Meeting  of
Shareholders  to be filed with the  Commission  not later  than April 29,  2000.
Information concerning executive officers is included in Part I, Item 4A of this
Form 10-K.

The response to Item 10, applicable to Section 16(a) of the Securities  Exchange
Act of 1934, as amended,  is incorporated herein by reference to the information
set forth  under the  caption  "Section  16(a)  Beneficial  Ownership  Reporting
Compliance" in the Proxy  Statement for the Annual Meeting of Shareholders to be
filed with the Commission not later than April 29, 2000.


Item 11.   Executive Compensation.

The response to Item 11 is  incorporated  herein by reference to the information
set forth under the caption "Executive  Compensation" in the Proxy Statement for
the Annual  Meeting of  Shareholders  to be filed with the  Commission not later
than April 30, 2000.


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

The response to Item 12 is  incorporated  herein by reference to the information
set forth under the captions  "Ownership of Principal  Shareholders  and Certain
Executive  Officers" and "Election of Directors" in the Proxy  Statement for the
Annual  Meeting of  Shareholders  to be filed with the Commission not later than
April 29, 2000.


Item 13.   Certain Relationships and Related Transactions.

The response to Item 13 is  incorporated  herein by reference to the information
set forth under the caption "Executive  Compensation" in the Proxy Statement for
the Annual  Meeting of  Stockholders  to be filed with the  Commission not later
than April 29, 2000.
                                     
                                       31

<PAGE>

                                     PART IV


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

The following are filed as part of this report:

     (a) 1. Financial Statements

            The  report  of  independent  auditors  and  consolidated  financial
            statements   included   on  pages  22   through  35  of  the  annual
            shareholders  report  for the  year  ended  December  31,  1999  are
            incorporated  herein by  reference  and the  report  of  independent
            auditors for each of the two years in the period ended  December 31,
            1998 is set forth below.



                         Report of Independent Auditors

The Board of Directors and Shareholders
CryoLife, Inc.

We have audited the accompanying consolidated balance sheet of CryoLife, Inc. as
of  December  31,  1998,  and the  related  consolidated  statements  of income,
shareholders'  equity,  and cash  flows for each of the two years in the  period
ended December 31, 1998. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
CryoLife,  Inc.  at  December  31,  1998,  and the  consolidated  results of its
operations  and its cash  flows  for each of the two years in the  period  ended
December 31, 1998 in conformity with accounting principles generally accepted in
the United States.

/s/ Ernst & Young LLP

Atlanta, Georgia
February 2, 1999





         2.   Financial Statement Schedule


     Independent Auditors' Report on Schedule

     Schedule II-Valuation and Qualifying Accounts

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

                                       32

<PAGE>

         3. A.   Exhibits

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

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

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

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

3.1         Restated Certificate of Incorporation of the Company.

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

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

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

                                       33

<PAGE>

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

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

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

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

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

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

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

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

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

10.9(a)     Employment  Agreement,  by and  between  the  Company  and Steven G.
            Anderson.  (Incorporated  by  reference  to  Exhibit  10.9(a) to the
            Registrant's  Annual  Report on Form 10-K for the fiscal  year ended
            December 31, 1998.)
                                       34

<PAGE>

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

10.9(c)     Employment  Agreement,  by and  between  the  Company  and  Edwin B.
            Cordell,  Jr.  (Incorporated  by reference to Exhibit 10.9(f) to the
            Registrant's  Annual  Report on Form 10-K for the fiscal  year ended
            December 31, 1994.)

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

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

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

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

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

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

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

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

10.14       Research and License Agreement by and between Medical  University of
            South  Carolina and CryoLife  dated November 15, 1985, as amended by
            Amendment to the Research and License  Agreement  dated February 25,
            1986 by and between  the  parties  and an  Addendum to Research  and
            License  Agreement by and between the parties,  dated March 4, 1986.
            (Incorporated  by  reference  to Exhibit  10.23 to the  Registrant's
            Registration Statement on Form S-1 (No. 33-56388).)
                                      
                                       35

<PAGE>

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

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

10.16(a)*   First Amendment to Lease Agreement Agreement,  dated April 18, 1995,
            between the Company and Amli Land Development-I  Limited Partnership
            dated August 6, 1999.

10.17       Funding  Agreement  between the Company and Amli Land  Development-I
            Limited Partnership dated April 18, 1995. (Incorporated by reference
            to Exhibit 10.28 to the Registrant's  Annual Report on Form 10-K for
            the fiscal year ended December 31, 1995.)

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

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

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

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

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

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

10.24(a)*   Third Amended and Restated Loan Agreement between CryoLife,  Inc, as
            Borrower and NationsBank, N.A., as Lender, dated August 30, 1996.

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

10.24(c)    Second  Modification  of Third Amended and Restated  Loan  Agreement
            dated   December  16,  1997  by  and  between  the   Registrant  and
            NationsBank,  N.A. .  (Incorporated by reference to Exhibit 10.32(b)
            to the  Registrant's  Annual Report on Form 10-K for the fiscal year
            ended December 31, 1997.)

                                       36

<PAGE>

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

10.24(d)*   Third  Modification  of Third  Amended and Restated  Loan  Agreement
            dated June 12, 1998 by and between the Registrant  and  NationsBank,
            N.A.

10.24(e)*   Fourth  Modification  of Third Amended and Restated  Loan  Agreement
            dated  December  16,  1997 by and  between  the  Company and Bank of
            America,  N.A.  and  First  Modification  of  Revolving  Note  dated
            December 31, 1999.

10.25       Reserved.

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

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

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

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

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

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

10.32*      Standard Form of Agreements  Between Owner and Design/Builder by and
            between  the  Company  and  Choate  Design and Build  Company  dated
            January 19, 2000.

13.1*       Portions of the  Registrant's  Annual Report to Shareholders for the
            year ended  December  31, 1999 which are  incorporated  by reference
            herein.

21.1*       Subsidiaries of CryoLife, Inc.

23.1*       Consent of Arthur Andersen LLP

23.2*       Consent of Ernst & Young LLP

27.1*       Financial Data Schedule

________________________________
*   Filed herewith.

                                       37

<PAGE>

     3.B. Executive Compensation Plans and Arrangements.

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

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

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

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

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

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

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

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

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

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

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

12.  Employment Agreement,  by and between the Company and Edwin B. Cordell, Jr.
     (Incorporated  by reference to Exhibit 10.9(f) to the  Registrant's  Annual
     Report on Form 10-K for the fiscal year ended December 31, 1994.)

13.  CryoLife,  Inc.  Non-Employee  Directors  Stock  Option  Plan,  as amended.
     (Incorporated by reference to Exhibit 10.15 to this form 10-K.)

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

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

16.  CryoLife,  Inc. 1998 Long-Term  Incentive Plan. (Exhibit 10.34 to this Form
     10-K).

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

                                       38

<PAGE>

          (b) Reports on Form 8-K

1.   The  Registrant  filed a  Current  Report on Form 8-K with  respect  to the
     change  in its  Independent  Auditors  with  the  Securities  and  Exchange
     Commission on June 4, 1999.

2. The Registrant filed a Current Report on Form 8-K/A with respect to the
     change  in its  Independent  Auditors  with  the  Securities  and  Exchange
     Commission on June 9, 1999.


                                       39

<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.

                                  CRYOLIFE, INC.

March 27, 2000
                                  By  /s/   Steven G. Anderson
                                      -----------------------------------------
                                      Steven G. Anderson,
                                      President, Chief Executive
                                        Officer and Chairman of
                                        the Board of Directors

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

<TABLE>
<CAPTION>
<S>                                       <C>                                        <C>



   Signature                                 Title                                    Date
  -------------                            ----------                                -------
/s/ Steven G. Anderson               President, Chief Executive Officer              March 27, 2000
-----------------------              and Chairman of the Board of Directors
Steven G. Anderson                   (Principal Executive Officer) 
                                   
                 
/s/ Edwin B. Cordell, Jr.             Vice President and Chief Financial             March 27, 2000
------------------------              Officer (Principal Financial and
Edwin B. Cordell, Jr.                 Accounting Officer)
               

/s/ Ronald D. McCall                  Director                                       March 27, 2000
------------------------
Ronald D. McCall


/s/ Benjamin H. GRAY                  Director                                       March 27, 2000
------------------------
Benjamin H. Gray


/s/ Virginia C. Lacy                  Director                                       March 27, 2000
------------------------
Virginia C. Lacy


/s/ Ronald Charles Elkins, M.D.       Director                                       March 27, 2000
--------------------------------
Ronald Charles Elkins, M.D.

/s/ Bruce j. Van dyne, M.D.           Director                                       March 27, 2000
--------------------------------
Bruce J. Van Dyne, M.D.

/s/ John M. Cook                      Director                                       March 27, 2000
--------------------------
John M. Cook

/s/ Alexander C. Schwartz, jr.        Director                                       March 27, 2000
------------------------
Alexander C. Schwartz, Jr.

</TABLE>


                                       40

<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To CryoLife, Inc.

We have audited, in accordance with auditing standards generally accepted in the
United  States,  the  consolidated  financial  statements  included in CryoLife,
Inc.'s 1999 annual report to stockholders and this Form 10-K and have issued our
report  thereon  dated  February 7, 2000.  Our audit was made for the purpose of
forming an opinion on those financial  statements taken as a whole. The schedule
listed in Item 14(a) of this Form 10-K is the  responsibility  of the  Company's
management,  is  presented  for purposes of complying  with the  Securities  and
Exchange  Commission's rules, and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic  financial  statements  and, in our opinion,  fairly  states in all
material  respects  the  financial  data  required  to be set forth  therein  in
relation to the basic financial statements taken as a whole.


ARTHUR ANDERSEN, LLP



Atlanta, Georgia
February 7, 2000





                                      S-1


1216257v1


<PAGE>

1217270v3
                                   SCHEDULE II
                         CRYOLIFE, INC. AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS

                  Years ended December 31, 1999, 1998, and 1997

<TABLE>
<CAPTION>
<S>                                              <C>                  <C>       <C>            <C>
                                                       
                                                  Balance beginning                            Balance end of
                 Description                      of period           Additions Deductions     period
---------------------------------------------     -----------------   --------- ----------     ---------------
Year ended December 31, 1999
   Allowance for doubtful accounts...........     $  256,000          $521,000  $249,000       $528,000
   Deferred preservation costs...............         53,000           235,000   137,000        151,000

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

Year ended December 31, 1997
   Allowance for doubtful accounts...........     $   94,000          $ 46,000  $ 37,000       $103,000
   Deferred preservation costs...............        278,000                --   126,000        152,000
</TABLE>

                                      S-2






                                                                   EXHIBIT 10.11

                               Terms of Agreement
                                    Between
                   Bruce J. Van Dyne, M.D. and CryoLife, Inc.


Effective Date:
November 1, 1999 - November 30, 2002

Focus of Services:
Dr. Van Dyne agrees to provide consulting services to CryoLife as needed.

Consulting Services provided will address:

*    Research  into the  clinical use of preserved  spinal  discs,  nerve tissue
     and/or  vertebral  bodies  either for open  surgery or  minimally  invasive
     surgery.

*    Facilitate  the  development  and  use of  CryoLife  products  in  clinical
     applications.

*    The presentation of clinical information at surgical congresses,  education
     and training.

Compensation

*    Daily  consulting  fee of  $1,500  paid  upon  receipt  of an  invoice  for
     services.

All travel and related expenses, incurred under this Agreement and in compliance
with corporate travel and expense guidelines and policies, will be reimbursed to
Dr. Van Dyne by CryoLife,  Inc. Such expenses are to be submitted  along with an
invoice for services as outlined above.

The undersigned  agree to the terms of the Agreement  between Bruce J. Van Dyne,
M.D. and CryoLife, Inc.



CryoLife, Inc.                               Bruce J. Van Dyne, M.D.


/s/ STEVEN G. ANDERSON                       /s/ BRUCE J. VAN DYNE, M.D.
---------------------------                  ---------------------------
Steven G. Anderson, President and CEO        Bruce J. Van Dyne, M.D.





10/26/99                                     11/1/99
---------------------------                  ---------------------------
Date                                         Date



1218386v1




                                                                EXHIBIT 10.16(a)


                       FIRST AMENDMENT TO LEASE AGREEMENT

     THIS FIRST AMENDMENT TO LEASE AGREEMENT (this "First Amendment") is entered
into  this  ______  day  of  _____________,  1999,  by  and  between  AMLI  LAND
DEVELOPMENT - I LIMITED  PARTNERSHIP,  an Illinois  limited  partnership,  whose
address is in care of AMLI  REALTY  CO.,  1945 Vaughn  Road,  Kennesaw,  Georgia
30144,  (together with its successors and assigns "Amli") and CRYOLIFE,  INC., a
Florida corporation,  whose address is 1655 Roberts Boulevard, Kennesaw, Georgia
30144 (together with its permitted assigns "Tenant").

                              W I T N E S S E T H :

     WHEREAS, Amli and Tenant entered into that certain Lease Agreement dated as
of April 14,  1995,  ("Lease")  dealing  with and  surrounding  the leasing of a
certain building and other  improvements and appurtenances  thereto as described
in the Lease ("Cryolife Phase I");

     WHEREAS,  Amli has agreed to the  construction  of an additional  two-story
office/R&D/warehouse/light  manufacturing  building and other  improvements  and
appurtenances,  including  an  interconnection  between  Cryolife  Phase  I  and
Cryolife  Phase II (as  that  term is  hereinafter  defined)  thereby  adjoining
Cryolife Phase I and Cryolife Phase II;

     WHEREAS,  for the purposes herein, the new additional  two-story office/R&D
building,  other improvements and appurtenances,  including the interconnection,
shall hereinafter be referred to as "Cryolife Phase II".

     WHEREAS,  Amli and  Cryolife  desire to enter into this First  Amendment to
amend the Lease.

     NOW,  THEREFORE,  in consideration of TEN and NO/100 ($10.00) DOLLARS,  the
premises, and other good and valuable consideration and the mutual benefits that
will be derived by the parties hereto, Amli and Tenant hereby agree as follows:

                           The recitals  hereinabove set forth are  incorporated
                  herein by reference as if totally set forth herein.
                           The Cryolife  Phase II shall be and is hereby covered
                  and governed by the Lease as hereinafter amended.
                           The  Lease  is  hereby  amended  whereby  any and all
                  references to the Pre-Occupancy and Construction  Agreement in
                  the Lease shall only refer to and apply to Cryolife Phase II.
                           The  Lease  is  hereby  amended  whereby  any and all
                  reference  to the address of Amli shall mean 1945 Vaughn Road,
                  Kennesaw,  Georgia  30144,  and any and all  reference  to the
                  address  of the  Tenant  shall  mean 1655  Roberts  Boulevard,
                  Kennesaw, Georgia 30144.

                                       1

1215727v1

<PAGE>

                           The Lease is further hereby amended as follows:

     1.   In Paragraph 1, styled Architect, on Page 1 strike "Masterson,  Fowler
          Associates,  Ltd." and  substitute  in lieu  therefor:  "An  architect
          selected  by  Tenant  ("Tenant  Architect"),   subject  to  Landlord's
          reasonable  approval,  and an  architect  selected by  Landlord,  i.e.
          Fowler & Associates,  Inc. The Tenant Architect and Landlord Architect
          shall  cooperate  and work in  conjunction  with  each  other in their
          respective  designs  and  preparations  of the  respective  plans  and
          specifications ".

     2.   In  Paragraph  1, styled  Gross  Building  Area,  on Page 3, is hereby
          deleted in its entirety and the following substitute in lieu therefor:

                    "Gross  Building  Area:  The entire area within the exterior
               base walls on each floor of Cryolife  Phase I.  Unless  otherwise
               expressly stated to the contrary,  all reference in this Lease in
               "square  feet" shall mean the square  feet of the Gross  Building
               Area of Cryolife  Phase I and  Cryolife  Phase II.  Landlord  and
               Tenant  hereby  agree that the Gross  Building  Area of  Cryolife
               Phase I, as shown on the Plans,  is 98,268 sq. ft, and such total
               shall be deemed to Gross  Building  Area of Cryolife  Phase I for
               all purposes under this Lease.

                    The Landlord and Tenant hereby agree that the Gross Building
               Area of  Cryolife  Phase  II,  as shown on the  Plans,  is 98,268
               sq.ft.  (plus an area to be determined  and agreed to by Landlord
               and Tenant for the  interconnection  between Cryolife Phase I and
               Cryolife  Phase  II once the  plans  and  specifications  for the
               interconnection  are  agreed  to and  approved  by  Landlord  and
               Tenant) and such total shall be deemed the Gross Building Area of
               Cryolife Phase II for all purposes under this Lease."

     3.   In  Paragraph  1,  styled  Land,  on Page 4, is hereby  deleted in its
          entirety and the following substitute in lieu therefor:

               "Land:  An  approximately  eleven (11) acre parcel of real estate
               located in the Park, and legally  described in Exhibit A attached
               hereto  and  made  a  part  hereof   ("Cryolife   Phase  I").  An
               approximately  nine and one-half (9.5) acre parcel of real estate
               located  in the  Park,  and  legally  described  in  Exhibit  A-1
               attached hereto and made a part hereof ("Cryolife Phase II")".

     a.   In  Paragraph  1,  styled,  Net  Rentable  Area,  on Page 5, is hereby
          deleted in its entirety and substitute in lieu therefor the following:

               "Net Rentable  Area: The Gross Building Area of Cryolife Phase I,
               less the area of the vertical  penetrations for the elevators and
               any designated stairwells within the perimeter of the Facility of
               Cryolife  Phase I (e.g.  there  being two (2)  stairwells  in the
               initial Facility of Cryolife Phase I). Landlord and Tenant hereby
               agree  that the Net  Rentable  Area of the  initial  Facility  of
               Cryolife Phase I, as shown on the Plans, is Ninety-Five  Thousand
               Two Hundred Ten  (95,210)  sq. ft. and such total shall be deemed
               the net rentable area of the Facility of Cryolife Phase I for all
               purposes under this Lease.

                                       2

<PAGE>

                    Landlord and Tenant  hereby agree that the Net Rentable Area
               of  Cryolife  Phase II,  as shown on the  Plans,  is  Ninety-Five
               Thousand Two Hundred Ten  (95,210)  sq.ft and such total shall be
               deemed the Net Rentable  Area of the  facility of Cryolife  Phase
               II, for all  purposes  under this Lease,  and  excludes a freight
               elevator  that  may be  installed  by  Tenant  at  Tenant's  sole
               expense."

                    In Paragraph 1, styled Premises, on Page 6 is hereby deleted
               in its entirety and substitute in lieu therefor the following:

               "Premises: collectively, the Land, the Facility of Cryolife Phase
               I and the  Facility  of  Cryolife  Phase II, the  interconnection
               between   Cryolife   Phase  I  and   Cryolife   Phase  II  (which
               interconnection  shall be deemed a part of Cryolife Phase II) and
               other improvements located on the Land."

     b.   In Paragraph  2, on Page 7, is hereby  deleted in its entirety and the
          following is substituted in lieu therefor:

               "2.  Agreement  to Lease.  Landlord  hereby  Leases to Tenant and
               Tenant  hereby  accepts the Land of Cryolife  Phase I, located in
               Cobb County,  Georgia,  together  with all  improvements  now and
               hereafter  located  on the Land of  Cryolife  Phase I,  including
               without  limitation  a  building  of  Ninety-Eight  Thousand  Two
               Hundred  Sixty-Eight  (98,268)  sq.  ft. of Gross  Building  Area
               constructed  thereon in accordance  with the Plans (such building
               referred to  hereinafter  as the "Facility of Cryolife Phase I"),
               for a term (the "Term")  commencing on the Commencement  Date and
               ending  ______________  months after the  Commencement  Date (the
               "Termination Date"); provided,  however, that if the Commencement
               Date is not the first (1st) day of the calendar  month,  the Term
               shall end ____________  calendar months after the first (1st) day
               of the calendar month  immediately  succeeding the calendar month
               in which the Commencement  Date occurs,  unless sooner
 terminated
               as provided herein,  subject to the agreements  herein contained.
               The parties agree and acknowledge that the Commencement  Date for
               the  Facility  of  Cryolife  Phase  I is  _____________  and  the
               Termination  Date for  Cryolife  Phase I will be the  termination
               date for Cryolife Phase II.

                    Landlord hereby Leases to Tenant, and Tenant hereby accepts,
               the Land of Cryolife Phase II,  located in Cobb County,  Georgia,
               together with all  improvements  now or hereafter  located on the
               Land Cryolife Phase II, including  without  limitation a building
               of Ninety-Eight Thousand Two Hundred Sixty-Eight (98,268) sq. ft.
               of Gross  Building Area to be  constructed  thereon in accordance
               with the Plans  pursuant  to the  Pre-Occupancy  Agreement  (such
               building  being  referred to herein as the  "Facility of Cryolife
               Phase II") for a term (the "Term") commencing on the Commencement
               Date and ending One Hundred Eighty (180) calendar months from the
               Commencement Date (the "Termination  Date");  provided,  however,
               that if the  Commencement  Date is not the first  (1st) date of a
               calendar  month,  the Term  shall end One  Hundred  Eighty  (180)
               calendar  months  after the first 1st day of the  calendar  month
               immediately   succeeding   the   calendar   month  in  which  the
               Commencement  Date occurs  unless  sooner  terminated as provided
               herein, subject to the agreements herein contained."

                                       3

<PAGE>

                    In Paragraph 3, on Page 8 the paragraph is hereby deleted in
                    its  entirety  and  the  following  is  substituted  in lieu
                    therefor:

               " 3. Commencement  Date: Except as otherwise  expressly  provided
               for  in  this   Lease  or  the   Pre-Occupancy   Agreement,   the
               "Commencement  Date " for Cryolife  Phase II shall be One Hundred
               Twenty-Two  (122)  days  after  the  later  to  occur  of (i) the
               Substantial   Completion   Date  or   (ii)   October   31,   2000
               ("Anticipated  Commencement Date"). The parties shall confirm the
               date of the Commencement  Date of Cryolife Phase II in writing as
               provided in Section 17 of the Pre-Occupancy Agreement."

                    In Paragraph  6.2, add the  following as a new  paragraph at
               the end of the paragraph:

               "Landlord  represents  that the amount of the assessments for the
               1999  calendar  year is  estimated to equal  approximately  Three
               Hundred and no/100 Dollars ($300.00) per acre".

     c.   In Paragraph  23, Page 41, add the following as a new paragraph at the
          end of the paragraph:

               "23.8  Casualty  Affecting  Cryolife  Phase I - Crolife Phase II.
               Amli and Tenant hereby acknowledge and agree that any Casualty as
               described  in  this  Paragraph  24,  which  only  affects  either
               Cryolife Phase I or Cryolife Phase II and not both Cryolife Phase
               I and Cryolife  Phase II,  Tenant can only  exercise its right of
               termination of the Lease as it relates only to the phase which is
               affected,  i.e.  either  Cryolife  Phase I or  Cryolife  Phase I,
               unless both phases,  i.e. Cryolife Phase I and Cryolife Phase II,
               are effected by such Casualty."

     d.   In Paragraph  24, Page 46, add the following as a new paragraph at the
          end of the paragraph:

               "24.7 Condemnation Affecting Cryolife Phase I - Crolife Phase II.
               Amli  and   Tenant   hereby   acknowledge   and  agree  that  any
               Condemnation  as  described  in this  Paragraph  24,  which  only
               affects  Cryolife  Phase I or  Cryolife  Phase  II and  not  both
               Cryolife  Phase I or Cryolife  Phase II, Tenant can only exercise
               its right of  termination  of the Lease as it relates only to the
               phase which is affected,  i.e. Cryolife Phase I or Cryolife Phase
               I, unless both phases,  i.e.  Cryolife  Phase I or Cryolife Phase
               II, are effected by such condemnation"

                                       4

<PAGE>

     e.   In Paragraph 37(a)(i), Page 57, the first sentence of the subparagraph
          is striken in its entirety and the  following is  substituted  in lieu
          therefor:

               "The  initial  Base Rent  payable  during  the first  year of the
               Renewal  Term shall be at a rate equal to one  hundred two (102%)
               percent  of the Base Rent  applicable  to the  Nineteenth  (19th)
               Lease Year for Cryolife Phase I and to the fifteenth (15th) Lease
               Year applicable to Cryolife Phase II".

     f.   In Paragraph 39, Page 59, is hereby deleted in its entirety.

     g.   In Paragraph 41, Page 60, is hereby deleted in its entirety.

     h.   In  Paragraph  43,  Page  61,  add  the  following  at the  end of the
          paragraph:

               "The Moving  Allowance  and Design  Allowance  described  in this
               paragraph are applicable to Cryolife Phase I".

                    Further add at the end of the  paragraph  the  following new
                    paragraph"

                    "The Landlord shall pay the Tenant (i) a moving allowance of
               Ninety-Five   Thousand   Two  Hundred  Ten  and  no/100   Dollars
               ($95,210.00) (the "Moving Allowance  Cryolife Phase II") and (ii)
               a space planning and design allowance of Ninety-Five Thousand Two
               Hundred  Ten  and  no/100  Dollars   ($95,210.00)   (the  "Design
               Allowance  Cryolife  Phase II").  The Moving  Allowance  Cryolife
               Phase II and the Design Allowance  Cryolife Phase II shall be due
               and  payable  on the  date on which  Tenant  takes  occupancy  of
               Cryolife  Phase II.  Tenant  shall  not be  required  to  provide
               verification of Tenant's actual moving expenses or space planning
               or design  expenses  in order to be  entitled  to  payment of the
               Moving Allowance of Cryolife Phase II and the Design Allowance of
               Cryolife Phase II."

                    The following shall be added as a new paragraph 44:

               "44.  Tenant  Allowance.  Landlord  shall  provide  Tenant with a
               Tenant  Improvement  Allowance  ("TIA")  in  accordance  with the
               Pre-Occupancy  Agreement  which TIA shall be fully amortized over
               the initial fifteen (15) year Term of Cryolife Phase II".

                                       5

<PAGE>

     i.   Exhibit B is hereby  deleted in its  entirety  and  Exhibit B attached
          hereto and  incorporated  herein by reference is  substituted  in lieu
          therefor.

     j.   Attached hereto as Exhibit B-1 is a Schedule of Base Rent payments for
          Cryolife  Phase  II,  which  Exhibit  B1  is  incorporated  herein  by
          reference.

     k.   In Exhibit C, the form of estoppel  letter for Cryolife Phase II shall
          refer to the year 2000 and the  Premises  shall  refer to the nine and
          one half (9.5)  acres  together  with the  Ninety-Eight  Thousand  Two
          Hundred   Sixty-Eight    (98,268)   sq.   ft.   building   (plus   the
          interconnection)  known as Cryolife Phase II Building in Barrett, Cobb
          County, Georgia.

     l.   Exhibit  E, the form of  Memorandum  of Lease for  Cryolife  Phase II,
          shall refer to the year 2000,  the First  Amendment to Lease as of the
          date of  __________,  1999,  the sq.  footage of the Cryolife Phase II
          Building  shall  be  Ninety-Eight  Thousand  Two  Hundred  Sixty-Eight
          (98,268) sq. ft. (plus the square footage within the  interconnection)
          and the term of the  Lease  shall be from the  Substantial  Completion
          date or October 31, 2000.

     m.   The following shall be added as a new paragraph 45:

               "45. Base Building and Leasehold  Improvements Cryolife Phase II:
               Landlord  shall design and build the base building  shell,  which
               shall  include but is not  necessarily  limited to the  following
               features:  a two-story  block  building over a steel frame,  with
               mirrored  glass;  sprinklers  to meet  code  (heads  turned  up);
               floor-to-ceiling  glass on five-foot centers on four sides of the
               building (adjusted for loading area);  paving,  striping,  leased
               pole  lighting,  curb and  gutter  in the  parking  lot;  parking
               commensurate with Cryolife Phase I; landscaping commensurate with
               Cryolife Phase I; design  specifications for Tenant Improvements;
               two  (2)   hydraulic   elevators   and  entry  lobby  stairs  and
               docking/receiving area similar to Cryolife Phase I.

                    As part of the  construction  of the base building shell for
               Cryolife Phase II,  Landlord shall  construct an  interconnection
               between  Cryolife Phase I building and Cryolife Phase II building
               of  approximately  seven thousand  (7,000) square feet.  Landlord
               shall be responsible for the cost of the  interconnection  not to
               exceed One Hundred Thousand and no/100 Dollars  ($100,000.00) and
               any cost over and above the first One Hundred Thousand and no/100
               Dollars ($100,000.00) for the construction of the interconnection
               shall be borne by the Tenant.  Tenant may, at its  election,  use
               Tenant Improvement  Allowance up to but not to exceed One Hundred
               Seventy-Five  Thousand and no/100 Dollars  ($175,000.00)  for the
               payment of the construction cost of the interconnection  over and
               above  the  first  One  Hundred   Thousand  and  no/100   Dollars
               ($100,000.00).

                                       6

<PAGE>

                    The leasehold  improvements  to be constructed by the Tenant
               and for which the Tenant Improvement Allowance has been allocated
               and established in the Pre-Occupancy  Agreement shall be used for
               the construction of Tenant  Improvements  over and above the base
               building  shell,  including  but not limited to: lobby  finishes;
               tenant build-out;  mechanical,  electrical,  plumbing design cost
               beyond the base  building;  interior  design fees  including  the
               preparation  of  construction  drawings for Tenant  Improvements;
               moving  allowance;  space  planning;  restrooms  beyond  stub-in;
               tenant identification signage; installation of all HVAC, plumbing
               and  electrical  systems  (beyond  minimum  required  by  code in
               compliance with mutually accrued  locations,  specifications  and
               capacity;  construction  management  by Tenant;  and  bonding and
               insurance for the construction of the Tenant Improvements.

                    The  Tenant  shall  be  responsible  for the  designing  and
               constructing  all  Tenant  Improvements,  over and above the base
               building,  and  for  providing  its own  construction  management
               services for the Tenant Improvements to be made by Tenant."

     The parties hereto hereby ratify,  affirm and confirm the Lease, as amended
     hereby, and that the Lease is in full force and effect and that the parties
     are bound by the terms and conditions of the Lease as hereby amended.


                           TENANT:

                           CRYOLIFE, INC.
                           a Florida corporation

                           By:________________________________
                              Steven G.  Anderson
                              Its Chairman, President & CEO

                                    [CORPORATE SEAL]

                              Date of Signature _________________, 1999


                           LANDLORD:

                           AMLI LAND DEVELOPMENT -
                           I LIMITED PARTNERSHIP
                           an Illinois limited partnership

                           By: AMLI REALTY CO.,
                           a Delaware corporation, its sole general partner

                           By: _______________________________
                               Philip N.  Tague
                               Executive Vice President

                                    [CORPORATE SEAL]

                               Date of Signature _____________________, 1999









                                                                EXHIBIT 10.24(a)

                    THIRD AMENDED AND RESTATED LOAN AGREEMENT


          THIS  AGREEMENT  made and  entered  into as of the 30th day of August,
1996, by and between  NATIONSBANK,  N.A. (SOUTH) ("Lender"),  a national banking
association  which is the successor by merger to Bank South,  a Georgia  banking
corporation formerly known as Bank South, N.A., and CRYOLIFE, INC. ("Borrower"),
a Florida corporation.

                              W I T N E S S E T H:

          Pursuant  to a Loan  Agreement,  dated  as of July 12,  1989,  between
Lender and  Borrower,  as amended and restated by an Amended and  Restated  Loan
Agreement,  dated as of February 20, 1992,  between Lender and Borrower,  and as
further  amended and restated by a Second  Amended and Restated Loan  Agreement,
dated as of August 4, 1994,  between  Lender  and  Borrower  (collectively,  the
"Prior Loan  Agreements"),  Lender has agreed to make certain loans available to
Borrower.  Borrower and Lender  desire to again amend and restate the Prior Loan
Agreements and are entering into this Agreement for such purpose.

          NOW,  THEREFORE,  for and in  consideration  of the  premises  and the
mutual  agreements,  warranties  and  representations  herein  made,  Lender and
Borrower agree to amend and restate the Prior Loan Agreements as follows:


          ARTICLE I - DEFINITIONS AND RULES OF CONSTRUCTION


          SECTION 101. Specific Definitions. As used herein, the following terms
shall have the following meanings:

          "Affiliate"  means any Person  directly or indirectly  controlling  or
controlled by or under direct or indirect common control with Borrower.  For the
purposes of this  definition,  "control" when used with respect to any specified
Person  means the power to direct the  management  and  policies of such Person,
directly or indirectly,  whether through the ownership of voting securities,  by
contract  or  otherwise;  and the  terms  "controlling"  and  "controlled"  have
meanings correlative to the foregoing.

          "This Agreement" means this agreement as originally  executed or as it
may  from  time  to  time  be  amended  by one or  more  written  amendments  or
modification  agreements  entered  into  pursuant to the  applicable  provisions
hereof.

          "Borrower"  shall have the meaning  given that term in the preamble to
this  Agreement,  and such term also shall  include  Borrower's  successors  and
assigns.

                                       1

<PAGE>
          "Capital  Expenditures"  shall mean  expenditures of over $10,000 each
made or liabilities incurred by Borrower for the acquisition of any fixed assets
or improvements (and any replacements, substitutions or additions thereto) which
have a useful life of more than one (1) year,  including  the direct or indirect
acquisition  of such  assets by way of  increased  product or  service  changes,
off-set items or otherwise,  and payments made during the relevant fiscal period
with  respect  to  Capitalized  Lease  Obligations,   all  as  determined  on  a
consolidated  basis;  provided,   however,  that  for  purposes  of  determining
compliance with Section 507(b),  capital expenditures for leasehold improvements
and equipment made by Borrower for its new corporate headquarters building shall
be excluded.

          "Capitalized   Lease  Obligations"  shall  mean  any  indebtedness  of
Borrower  represented  by  obligations  under a lease  that  is  required  to be
capitalized  for  financial  reporting  purposes in  accordance  with  generally
accepted  accounting  principles in effect from time to time,  and the amount of
such indebtedness shall be the capitalized amount of such obligations determined
on a  consolidated  basis  in  accordance  with  generally  accepted  accounting
principles consistently applied.

          "Collateral"  means and includes  all property  assigned or pledged to
Lender or in which  Lender  has been  granted a  security  interest  or to which
Lender  has been  granted  security  title  under  this  Agreement  or the other
Financing Documents and the proceeds thereof.

          "Contractual Obligation" of any Person shall mean any provision of any
agreement,  instrument, security, or undertaking to which such Person is a party
or by which it or any of the property owned by it is bound.

          "Credit  Expiration  Date" shall mean  September 1, 1998, as such date
may be extended, accelerated or amended pursuant to this Agreement.

          "Credit   Parties"   shall  mean,   collectively,   Borrower  and  its
Subsidiaries.

          "CryoLife  International" shall mean CryoLife  International,  Inc., a
Florida  corporation  which is a Subsidiary of Borrower,  and its successors and
assigns.

          "Current  Assets" shall mean, at any date, the amount which all of the
current  assets of Borrower  would be shown on a  consolidated  balance sheet of
Borrower at such date prepared in accordance with generally accepted  accounting
principles consistently applied.

          "Current Liabilities" shall mean, at any date, the amount at which all
of the current liabilities of Borrower would be shown on a consolidated  balance
sheet of Borrower at such date prepared in accordance  with  generally  accepted
accounting principles consistently applied.

                                       2

<PAGE>

          "Current  Maturities  of Funded Debt" shall mean,  with respect to any
particular period, the sum of all principal payments scheduled to be made during
such period in respect of the Funded Debt of Borrower (which for purposes hereof
shall include the  allocated  principal  portion of payments due on  Capitalized
Lease  Obligations,  and also shall  include  the  current  portion of any other
Funded Debt).

          "Current  Ratio"  shall  mean,  at any date,  the ratio of  Borrower's
Current Assets to its Current Liabilities at such time.

          "Debt  Coverage  Ratio"  shall mean,  with  respect to any  particular
fiscal  period  of  Borrower,  the  ratio  of (a)  Borrower's  EBITDAR  for  the
consecutive   4-quarter   period  ending  therewith  to  (b)  the  sum  (without
duplication)  of (i)  Borrower's  Current  Maturities  of  Funded  Debt  for the
immediately   succeeding  consecutive  4-quarter  period  plus  (ii)  Borrower's
Interest  Expense for the  consecutive  4-quarter  period ending  therewith plus
(iii)  Borrower's  Rental  Expense for the  immediately  succeeding  consecutive
4-quarter period, all as determined on a consolidated basis.

          "Default"  shall  mean any event  which,  with the giving of notice or
lapse of time (or both), would become an Event of Default.

          "EBIT" shall mean, for any fiscal period of Borrower,  an amount equal
to the sum of  Borrower's  Net Income (Loss) for such period plus, to the extent
subtracted in determining such Net Income (Loss),  (i) Borrower's taxes based on
income and (ii) Borrower's Interest Expense, all as determined on a consolidated
basis.

          "EBITDAR"  shall mean,  for any fiscal  period of Borrower,  an amount
equal to  Borrower's  EBIT for such  period  plus,  to the  extent  deducted  in
determining such EBIT,  Borrower's  depreciation  and amortization  expenses and
Rental Expense, all as determined on a consolidated basis.

          "Environmental Laws" shall mean all federal,  state, local and foreign
laws  relating to pollution or  protection of the  environment,  including  laws
relating  to  emissions,   discharges,   releases  or  threatened   releases  of
pollutants,   contaminants,   chemicals,  or  industrial,   toxic  or  hazardous
substances or wastes into the environment  (including without limitation ambient
air,  surface  water,  ground  water,  or land),  or  otherwise  relating to the
manufacture,   processing,  distribution,  use,  treatment,  storage,  disposal,
transport,  or handling of pollutants,  contaminants,  chemicals, or industrial,
toxic or hazardous  substances or wastes,  and any and all  regulations,  codes,
plans,  orders,  decrees,  judgments,  injunctions,  notices  or demand  letters
issued, entered, promulgated or approved thereunder.

          "ERISA"  shall mean the  Employee  Retirement  Income  Security Act of
1974, P.L. 93-406, as amended.

          "Event of Default"  shall mean any of the events  specified in Article
VII of this Agreement,  provided that any express requirement therein for notice
or lapse of time shall have been satisfied.

                                       3

<PAGE>

          "Final  Maturity  Date" shall mean September 1, 2003, as such date may
be extended, accelerated or amended pursuant to this Agreement.

          "Financing Documents" means and includes this Agreement, the Note, the
Security Agreement,  each Stock Pledge Agreement, each Subsidiary Guaranty, each
Subsidiary Security Agreement,  and any extensions,  renewals,  modifications or
substitutions thereof or therefor,  and all other associated loan and collateral
documents including, without limitation, all guaranties,  suretyship agreements,
security   agreements,   pledge   agreements,   security  deeds,   subordination
agreements,  exhibits, schedules,  attachments,  financing statements,  notices,
consents,  waivers, opinions,  letters, reports, records, title certificates and
applications  therefor,  assignments,  stock  powers  or  transfers,  documents,
instruments, information and other writings related thereto, or furnished by any
Credit Party to Lender in connection  therewith or in connection with any of the
Collateral,  including  without  limitation  any  such  documents  executed  and
delivered  pursuant  to Section 202 hereof;  provided,  however,  that this term
shall not include the Prior Loan Agreements or the Prior Security Agreements.

          "Funded Debt" shall mean, for any particular  Person, all Indebtedness
for money borrowed,  Indebtedness  secured by purchase money liens,  Capitalized
Lease Obligations,  conditional sales contracts and similar title retention debt
instruments,  all as determined  for such Person on a  consolidated  basis.  The
calculation  of Funded Debt for any  particular  Person shall include all Funded
Debt of such  Person  plus  all  Funded  Debt of  other  Persons  to the  extent
guaranteed by such Person,  to the extent  secured by any assets of such Person,
or to the extent  supported by a letter of credit issued for the account of such
Person.

          "Governmental  Authority"  means any applicable  nation or government,
any state,  local or other political  subdivision  thereof,  any court,  and any
other  entity  exercising  executive,  legislative,   judicial,  regulatory,  or
administrative functions of or pertaining to government.

          "Guaranty"  shall  mean  any  contractual  obligation,  contingent  or
otherwise,  of a Person with respect to any  Indebtedness or other obligation or
liability  of  another   Person,   including   without   limitation,   any  such
Indebtedness,   obligation  or  liability  directly  or  indirectly  guaranteed,
endorsed,  co-made or  discounted  or sold with  recourse by that Person,  or in
respect  of which  that  Person is  otherwise  directly  or  indirectly  liable,
including Contractual  Obligations (contingent or otherwise) arising through any
agreement  to purchase,  repurchase,  or  otherwise  acquire such  Indebtedness,
obligation  or liability or any security  therefor,  or any agreement to provide
funds  for the  payment  or  discharge  thereof  (whether  in the form of loans,
advances, stock purchases,  capital contributions or otherwise),  or to maintain
solvency,  assets, level of income, or other financial condition, or to make any
payment other than for value received.

          "Herein",  "hereof", and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular article, paragraph,
section or other subdivision.

                                       4

<PAGE>

          "Indebtedness" of any Person shall mean, without duplication:  (i) all
obligations  of  such  Person  which  in  accordance  with  generally   accepted
accounting  principles  consistently  applied  would be shown on a  consolidated
balance  sheet of such Person as a  liability  (including,  without  limitation,
obligations  for borrowed money and for the deferred  purchase price of property
or services,  and  obligations  evidenced by bonds,  debentures,  notes or other
similar  instruments);  (ii) all rental  obligations under leases required to be
capitalized under generally accepted accounting principles consistently applied;
(iii)  all  Guaranties  of  such  Person  (including  contingent   reimbursement
obligations  under undrawn letters of credit);  and (iv)  Indebtedness of others
secured by any Lien upon property owned by such Person, whether or not assumed.

          "Intellectual  Property  Rights"  shall  mean,  with  respect  to  any
particular Person, all patents,  patent applications,  continuation,  refile and
reissue patent applications,  trademarks,  service marks,  trademark and service
mark applications, trade names, copyrights,  copyright registrations,  copyright
applications,   trade   secrets  and  other  similar   proprietary   information
(including,  but not by way of limitation,  inventions,  technical  information,
processes, algorithms, procedures, specifications, designs, knowledge, know-how,
data and databases) now owned or hereafter acquired by such Person.

          "Interest Expense" shall mean, for any fiscal period of Borrower,  the
total interest  expense of Borrower,  as determined on a  consolidated  basis in
accordance with generally accepted accounting principles consistently applied.

          "Lender"  shall have the  meaning  given that term in the  preamble to
this  Agreement,  and such term  also  shall  include  Lender's  successors  and
assigns.

          "Leverage  Ratio"  shall mean,  at any date,  the ratio of  Borrower's
Total Liabilities to its Net Worth at such time.

          "Liabilities" means all indebtedness,  liabilities, and obligations of
Borrower of any nature whatsoever which Lender may now or hereafter have, own or
hold,  and which now or hereafter  arise under or on account of this  Agreement,
the Note or any of the other Financing  Documents and any extensions,  renewals,
modifications or substitutions thereof or therefor.

          "Lien"  shall  mean  any  mortgage,   pledge,  collateral  assignment,
security  interest,  security deposit,  encumbrance,  lien or charge of any kind
(including any agreement to give any of the foregoing,  any conditional  sale or
other title retention agreement, any lease in the nature thereof, and the filing
of or agreement to give any  financing  statement  under the Uniform  Commercial
Code of any jurisdiction,  but excluding licenses granted in the ordinary course
of the grantor's business).

          "Loans"  shall  mean any and all  Loans  made by  Lender  to  Borrower
pursuant to Section 201 hereof.

          "Maximum  Availability" shall mean $10,000,000,  as such amount may be
reduced or amended pursuant to this Agreement.

                                       5

<PAGE>

          "Net Income (Loss)" shall mean, for any fiscal period of Borrower, the
net income (or loss) of Borrower on a consolidated  basis for such period (taken
as a single accounting  period) determined in conformity with generally accepted
accounting  principles  consistently  applied,  but excluding  therefrom (to the
extent  otherwise  included  therein and without  duplication)  (i) any gains or
losses,  together with any related  provisions  for taxes,  realized by Borrower
upon any sale of its assets other than in the ordinary course of business,  (ii)
any other  non-recurring  gains or  losses,  and (iii) any income or loss of any
other Person  acquired  prior to the date such other Person becomes a Subsidiary
of  Borrower  or is  merged  into  or  consolidated  with  Borrower  or  all  or
substantially all of such other Person's assets are acquired by Borrower.

          "Net Worth" shall mean, as of any particular  date,  Borrower's  total
shareholder"s  equity (including capital stock,  additional paid-in capital, and
retained earnings after deducting  treasury stock) which would appear as such on
a consolidated  balance sheet of Borrower  prepared in accordance with generally
accepted accounting principles as then in effect.

          "Note" shall mean the  Promissory  Note  substantially  in the form of
Exhibit A  attached  hereto to be  executed  by  Borrower  in favor of Lender to
evidence the Loans, and all renewals, extensions,  modifications or replacements
thereof.

          "Person"  means  any  individual,   corporation,   partnership,  joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

          "Prior Loan Agreements"  shall have the meaning given such term in the
preamble to this Agreement.

          "Prior  Security   Agreements"  shall  mean  the  Security   Agreement
(Equipment)  and the  Security  Agreement  (Receivables/Inventory),  both  dated
December 31, 1986, executed by Borrower in favor of Lender, as amended,  and the
Equipment Security  Agreement,  dated as of August 4, 1994, executed by Borrower
in favor of Lender.

          "Purchase  Money  Indebtedness"  shall mean (i)  Indebtedness  for the
payment of all or any part of the purchase  price of any fixed assets,  (ii) any
Indebtedness  incurred for the sole purpose of financing or  refinancing  all or
any part of the purchase  price of any fixed  assets,  (iii)  Capitalized  Lease
Obligations, and (iv) any renewals,  extensions or refinancings thereof (but not
any increases in the principal amounts thereof outstanding at that time).

          "Purchase  Money  Lien"  shall  mean a Lien upon  fixed  assets  which
secures the Purchase Money  Indebtedness  relating thereto but only if such Lien
shall at all times be confined  solely to the fixed assets the purchase price of
which was financed or refinanced  through the  incurrence of the Purchase  Money
Indebtedness  secured  by such Lien and only if such Lien  secures  solely  such
Purchase Money Indebtedness.

                                       6

<PAGE>

          "Rental  Expense" shall mean,  for any fiscal period of Borrower,  the
total  rental  expense  of  Borrower  for  such  period,   as  determined  on  a
consolidated basis in accordance with generally accepted  accounting  principles
consistently  applied, and which shall include without limitation rental expense
under operating leases.

          "Revolving Loan Period" shall mean the period which runs from the date
of this Agreement until the Credit Expiration Date.

          "Security  Agreement"  shall mean the  Amended and  Restated  Security
Agreement,  substantially in the form of Exhibit B attached hereto,  executed or
to be executed by Borrower in favor of Lender pursuant to this Agreement and any
modification or replacement thereof or therefor.

          "Stock  Pledge  Agreement"  shall  mean any and all Stock  Pledge  and
Security  Agreements,  substantially in the form of Exhibit C-1 attached hereto,
executed  or to be  executed  by  Borrower  in favor of Lender  pursuant to this
Agreement and any modification or replacement thereof or therefor.

          "Subsidiary"  means,  as applied to Borrower,  (i) any  corporation of
which 50% or more of the  outstanding  stock (other than  directors'  qualifying
shares)  having  ordinary  voting  power to  elect a  majority  of its  board of
directors (or other governing body),  regardless of the existence at the time of
a  right  of the  holders  of any  class  or  classes  (however  designated)  of
securities  of such  corporation  to exercise such voting power by reason of the
happening of any  contingency,  or any  partnership  of which 50% or more of the
outstanding  partnership interests is, at the time, directly or indirectly owned
by  Borrower  or by one or more  Subsidiaries  of  Borrower,  and (ii) any other
entity which is directly or indirectly controlled or capable of being controlled
by Borrower or by one or more Subsidiaries of Borrower.

          "Subsidiary  Guaranty"  shall  mean any and all  Guaranty  Agreements,
substantially  in the form of  Exhibit  D  attached  hereto,  executed  or to be
executed by a Subsidiary of Borrower in favor of Lender and any modifications or
replacements thereof or therefor.

          "Subsidiary  Security  Agreement"  shall  mean  any and  all  Security
Agreements,  substantially in the form of Exhibit E attached hereto, executed or
to be  executed  by a  Subsidiary  of  Borrower  in  favor  of  Lender  and  any
modifications or replacements thereof or therefor.

          "Term Loan  Period"  shall mean the period  which runs from the Credit
Expiration Date through the Final Maturity Date.

          "Tissue Freezers" shall mean, collectively, the tissue freezers leased
or loaned by  Borrower to third  parties in the  ordinary  course of  Borrower's
business.

          "Total  Liabilities" shall mean, as of any particular date, the amount
which all liabilities of Borrower would be shown on a consolidated balance sheet
of  Borrower  at such  date  prepared  in  accordance  with  generally  accepted
accounting principles consistently applied.

                                       7

<PAGE>

          "Voting  Stock" shall mean the securities of any class or classes of a
corporation   the   holders  of  which  are   ordinarily,   in  the  absence  of
contingencies,  entitled to elect a majority of the corporate  directors of such
corporation (or Persons performing similar functions).

          SECTION 102.  Accounting  Terms.  All  accounting  terms not otherwise
defined herein have the meanings  assigned to them in accordance  with generally
accepted accounting principles consistently applied.

          SECTION 103.  Titles.  The titles of the Articles and Sections  herein
appear as a matter of convenience  only and shall not affect the  interpretation
hereof.

          SECTION 104.  Number and Gender.  Words  importing the singular number
hereunder  shall include the plural number and vice versa,  and any pronoun used
herein shall be deemed to cover all genders.


                             ARTICLE II - THE LOANS

          SECTION 201. The Loans. (a) From time to time upon Borrower's request,
and subject to the terms and  conditions  of this  Agreement,  Lender  agrees to
advance to Borrower  prior to the Credit  Expiration  Date amounts  which do not
exceed the Maximum Availability in aggregate outstanding principal amount at any
one time.  Advances  made by Lender  to  Borrower  under  this  Section  201 are
hereinafter  collectively called the "Loans".  Notwithstanding  anything in this
Agreement to the contrary,  the Lender shall not be obligated  hereunder to make
any Loans on or after the  earlier  of (i) the  Credit  Expiration  Date or such
later  date to which  such  expiration  date may be  extended  by  Lender in its
discretion or (ii) the date Lender pursuant to Section 801(a) hereof  terminates
its obligation to make any further Loans to Borrower  hereunder.  Subject to the
terms and conditions hereof, prior to the Credit Expiration Date,  Borrower,  at
its option, from time to time may borrow,  repay and reborrow all or any portion
of the Loans,  except that  Borrower's  right to prepay Loans  bearing  interest
based on the  Adjusted  LIBOR (as such  term is  defined  in the Note)  shall be
subject to the breakage  provisions of the Note and any such prepayment shall be
applied as provided in the Note.

          (b) The proceeds of the Loans may be used by Borrower  only to finance
acquisitions  by the Borrower and to finance  Borrower's  and its  Subsidiaries'
working capital and other general corporate needs (including  without limitation
to finance the cost of the leasehold  improvements and equipment  purchases made
or to be  made  by  Borrower  for its new  corporate  headquarters  building  in
Marietta, Georgia).

          (c) The Loans are to be evidenced  by the Note.  Interest on the Loans
will accrue at the rate or rates per annum set forth in the Note,  and principal
and interest on the Loans will be payable in the manner prescribed in the Note.

                                       8

<PAGE>

          (d)  Borrower  shall  pay to Lender  an  origination  fee for the Loan
facility  provided by Lender to Borrower under this Section 201, which fee shall
be in the amount of $5,000 (and Lender shall credit  against such sum the $5,000
commitment  letter fee previously  paid by Borrower to Lender in connection with
such  facility)  and such fee shall be deemed  fully  earned by Lender  upon the
parties' execution and delivery of this Agreement from the Borrower and shall be
non-refundable.

          (e) Borrower  shall pay to Lender unused  facility fees for Borrower's
Loan facility  hereunder  during the Revolving Loan Period computed on the daily
average  unused  portion  of the  Maximum  Availability  at a rate per  annum of
three-eighths of one percent (.375%). Such unused facility fees shall be payable
by Borrower to Lender quarterly in arrears, commencing on November 30, 1996, and
continuing to be due on the last day of each February,  May, August and November
thereafter  during the Revolving Loan Period as well as on the Credit Expiration
Date.  Notwithstanding  anything in this Section to the contrary,  however,  the
total unused  facility  fees payable by Borrower to Lender under clauses (x) and
(y) above shall not exceed the sum of $6,250 and $25,000,  respectively,  during
each of the  following two periods:  the period from the date of this  Agreement
though August 31, 1997, and the period from September 1, 1997 through the Credit
Expiration Date.

          (f) All of the Loans shall  constitute one loan by Lender to Borrower.
Lender shall maintain a loan account on its books in which shall be recorded all
Loans,  all  payments  made by Borrower  on the Loans and all other  appropriate
debits and  credits as  provided  in this  Agreement  and the Note with  respect
thereto,  including without limitation all charges,  expenses and interests. All
entries in such account shall be made in accordance with the Lender's  customary
accounting  practices  as in effect from time to time.  Lender  shall  render to
Borrower  a  monthly  statement  setting  forth  the  balance  of such  account,
including principal, interest, expenses and fees, and each such statement shall,
absence  manifest  error or  omissions,  be presumed  correct  and binding  upon
Borrower and shall constitute an account stated unless,  within thirty (30) days
after  receipt of any such  statement  from Lender,  Borrower  shall  deliver to
Lender a written objection thereto specifying the error or errors or omission or
omissions, if any, contained in such statement.

          (g) All  interest  and fees owing by Borrower to Lender  hereunder  or
under the other Financing  Documents shall be computed on the basis of a 360-day
year and the actual days elapsed

          SECTION 202.  Collateral and Guaranties.  (a) All of the Loans and the
other  Liabilities  shall be secured  pursuant to the Security  Agreement  which
shall be duly executed and  delivered by Borrower to Lender in  connection  with
this  Agreement  and pursuant to which Lender shall be granted a  first-priority
security  interest in all of  Borrower's  present or future  accounts,  contract
rights,  chattel paper, general intangibles (excluding its Intellectual Property
Rights but including the proceeds thereof),  instruments,  documents, inventory,
equipment,  fixtures, leasehold improvements,  and other assets and all proceeds
thereof  (excluding its Intellectual  Property Rights but including the proceeds

                                       9

<PAGE>

thereof). In addition,  all of the Loans and the other Liabilities shall also be
secured pursuant to a Stock Pledge Agreement which (together with an irrevocable
stock power in the form of Exhibit C-2 attached  hereto)  shall be duly executed
and  delivered  by  Borrower to Lender in  connection  with this  Agreement  and
pursuant to which Lender shall be granted a first-priority  security interest in
all of the capital stock of CryoLife International and all proceeds thereof.

          (b)  All of the  Loans  and  the  other  Liabilities  shall  be  fully
guaranteed by CryoLife  International  pursuant to a Subsidiary  Guaranty  which
shall be duly  executed  and  delivered by CryoLife  International  to Lender in
connection  with this  Agreement.  In  addition,  the  obligations  of  CryoLife
International  under such  Subsidiary  Guaranty  shall be secured  pursuant to a
Subsidiary  Security  Agreement  which shall be duly  executed and  delivered by
CryoLife International to Lender in connection with this Agreement, and pursuant
to which Lender shall be granted a  first-priority  security  interest in all of
CryoLife  International's  present or future accounts,  contract rights, chattel
paper,  general  intangibles  (excluding its  Intellectual  Property  Rights but
including the proceeds thereof),  instruments,  documents, inventory, equipment,
fixtures, leasehold improvements, and other assets and all proceed thereof.

          (c) Within ten (10) days after  Borrower's  creation or acquisition of
any  Subsidiary,  Borrower  shall  pledge  all  of the  capital  stock  of  such
Subsidiary to the Lender as additional collateral for the Liabilities,  Borrower
shall cause such  Subsidiary  to guaranty the  repayment of the  Liabilities  to
Lender,  and  Borrower  shall  cause  such  Subsidiary  to grant to the Lender a
first-priority  perfected  security  interest  in and lien on all of its  assets
(excluding its Intellectual Property Rights, but including the proceeds thereof)
as additional  collateral for the  Liabilities,  all pursuant to such Subsidiary
Guaranties,  Subsidiary Security  Agreements,  Stock Pledge Agreements and other
collateral  documents as are acceptable in all respects to the Lender.  Borrower
also shall  provide  Lender  with any and all  closing  certificates,  financing
statement filings,  opinions of counsel and other closing documents of the types
described  in Section 605 hereof as the Lender may request  with respect to such
pledge, guaranty and collateral documents.

          (d)  Borrower  shall  execute  (or cause to be  executed)  any and all
financing  statements,  fixture  filings,  certificate  of  title  applications,
collateral assignments,  stock powers or transfers, or other documents as Lender
may  reasonably  request  from time to time in order to perfect or maintain  the
perfection and priority of Lender's  security  interest in the Collateral now or
hereafter covered by the Security  Agreement,  any Stock Pledge Agreement or any
Subsidiary Security Agreement or any additional collateral documents executed by
Borrower or any Subsidiary pursuant to this Section 202.

          (e) If any of the Collateral will be located on any premises which are
leased by  Borrower  or any of its  Subsidiaries  from a third party or, if such
premises are owned by Borrower or one of its Subsidiaries, on which any creditor
(other than Lender) holds a security deed, mortgage, or deed of trust granted by
Borrower or one of its Subsidiaries,  Borrower shall cause each such third party
lessor or  creditor  to  execute  in favor of  Lender a Waiver  and  Consent  in
substantially  the form of Exhibit I  attached  hereto (or in such other form as
may be acceptable to Lender).

                                       10

<PAGE>

          SECTION 203. Agreements Regarding Interest and Other Charges. Pursuant
to the Official Code of Georgia  Annotated  Section  7-4-2,  Lender and Borrower
hereby  agree that the only  charge  imposed  or to be  imposed  by Lender  upon
Borrower  for the use of money in  connection  with the Loans is and will be the
interest  required under the Note, which interest will be at the rates which are
or will be expressed in simple interest terms in the Note as of the date of such
Note.  Borrower hereby acknowledges and agrees that Lender has not imposed on it
any minimum borrowing requirements,  reserve or escrow balances, or compensating
balances  related in any way to this Agreement.  In no event shall the amount of
interest  due and  payable  under this  Agreement,  the Note or any of the other
Financing  Documents  exceed the maximum rate of interest  allowed by applicable
law (including,  without limitation,  Official Code of Georgia Annotated Section
7-4-18) and, in the event any such payment is inadvertently  made by Borrower or
inadvertently received by Lender, such excess sum shall be credited as a payment
of principal.  It is the express  intent hereof that Borrower not pay and Lender
not receive, directly or indirectly or in any manner, interest in excess of that
which may be lawfully paid under applicable law.

          SECTION 204. Indemnity. Borrower agrees to indemnify and hold harmless
the Lender from and against any and all claims,  liabilities,  losses,  damages,
actions and demands by any party  against the Lender  arising out of the making,
holding or  administration  of the Loans or the  Collateral,  allegations of any
participation  by the Lender in the affairs of any or all of the Credit  Parties
or  allegations  that the Lender has any joint  liability with any or all of the
Credit  Parties  for  any  reason,  or any  claims  against  the  Lender  by any
shareholder of the Borrower,  unless,  with respect to the above,  the Lender is
finally  and  judicially  determined  to have  acted or failed to act with gross
negligence or to have engaged in willful misconduct.

          SECTION 205. Capital  Adequacy.  Without limiting any other provisions
of this Agreement, in the event that the Lender determines after the date hereof
that the  introduction  or change  after the date of this  Agreement of any law,
treaty,  governmental (or  quasi-governmental)  rule,  regulation,  guideline or
order regarding capital adequacy, or any change therein or in the interpretation
or application  thereof after the date of this  Agreement,  or compliance by the
Lender with any request or directive  regarding capital adequacy (whether or not
having the force of law and whether or not failure to comply  therewith would be
unlawful)  from  a  central  bank  or  governmental  authority  or  body  having
jurisdiction  which is introduced  or changed after the date of this  Agreement,
does or shall have the  effect of  reducing  the rate of return on the  Lender's
capital as a  consequence  of its  obligations  hereunder  to a level below that
which the Lender could have achieved but for such law, treaty, rule, regulation,
guideline or order or such change or compliance  (taking into  consideration the
Lender's  policies  with  respect  to capital  adequacy  and  assuming  the full
utilization of the Lender's capital immediately before such adoption,  change or
compliance) by an amount  reasonably  deemed by the Lender to be material,  then
the Lender shall promptly after its  determination of such occurrence notify the
Borrower thereof.  The Borrower agrees to pay to the Lender as an additional fee
from time to time,  within ten (10) days after written  notice and demand by the


                                       11

<PAGE>

Lender,  such  amount  as the  Lender  certifies  to be  the  amount  that  will
compensate it for such reduction in connection with its obligations hereunder. A
certificate  of the Lender  claiming  compensation  under this Section  shall be
conclusive  in the  absence of  manifest  error or fraud and shall set forth the
nature of the occurrence giving rise to such compensation, the additional amount
or amounts to be paid to it hereunder  and the method by which such amounts were
determined.  In determining such amount, the Lender may use reasonable averaging
and attribution methods.

                  ARTICLE III - REPRESENTATIONS AND WARRANTIES

          Borrower  represents and warrants to Lender that each of the following
is true, correct, complete and accurate in all respects:

          SECTION 301. Organization and Existence; Subsidiaries. (a) Borrower is
a corporation  duly organized,  validly  existing and in good standing under the
laws of the State of  Florida,  and is  qualified  to do  business  as a foreign
corporation  in the State of Georgia.  CryoLife  International  is a corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
State of Florida,  and is qualified to do business as a foreign  corporation  in
the State of Georgia.

          (b) Borrower  has no  Subsidiaries  as of the date of this  Agreement,
except for the  Subsidiaries  identified  on Schedule 301 attached  hereto,  and
Borrower  agrees  that it will not  hereafter  acquire or form any  Subsidiaries
without  giving Lender at least thirty (30) days' prior written  notice  thereof
and complying with any applicable  requirements  of Sections 202 and 503 hereof.
In the event Borrower so acquires or forms any Subsidiaries,  each Subsidiary of
Borrower  will be a corporation  duly  organized,  validly  existing and in good
standing with the laws of the state of its incorporation.

          SECTION 302.  Financial  Statements.  Each financial  statement of any
Credit Party which has been  delivered to Lender  presents  fairly the financial
condition of such Credit Party as of the date indicated  therein and the results
of its  operations for the period(s)  shown therein.  There has been no material
adverse  change in the financial  condition or operations of the Credit  Parties
taken as a whole since the date of said financial statement,  nor has any Credit
Party mortgaged,  pledged or granted a security interest in or encumbered any of
its assets since such date.

          SECTION 303. Borrower  Authority and Power. Each Credit Party has full
power  and  authority  to make,  execute  and  perform  in  accordance  with the
respective  terms  thereof each of the Financing  Documents  executed by it. The
execution  and  performance  by each  Credit  Party  of each  and  every  of the
Financing  Documents  executed by it have been duly  authorized by all requisite
action,  and each and every one of them constitutes the legal, valid and binding
obligation of such Credit Party  enforceable  in accordance  with its respective
terms.

                                       12

<PAGE>

          SECTION 304. No Defaults. Except as set forth on Schedule 304 attached
hereto,  none  of  the  Credit  Parties  is  in  default  under  any  contracts,
agreements, licenses, franchises, leases, security agreements, deeds, mortgages,
promissory notes, documents, instruments or chattel paper to which it is a party
or by  which  it or any of its  properties  or  assets  is  bound  or  affected.
Execution, delivery and performance by any Credit Party of each and every of the
Financing  Documents  executed  by it do not  violate  any  provision  of law or
regulations and does not result in a breach of or constitute a default under any
agreement, indenture or other instrument to which any Credit Party is a party or
by which any Credit Party is bound.

          SECTION  305. No Pending  Claims.  Except as disclosed on Schedule 305
attached hereto, there is no claim, action,  suit,  arbitration,  investigation,
condemnation  or other  proceeding  at law or in  equity,  or by or  before  any
federal,  state, local or other  governmental  agency, or by or before any other
agency or  arbitrator,  nor is there any judgment,  order,  writ,  injunction or
decree of any court pending, anticipated or (to Borrower's knowledge) threatened
against any Credit Party or against any of its  properties or assets which might
have a material  adverse  effect on the Credit Parties taken as a whole or their
respective  properties or assets, or which might call into question the validity
or enforceability of any of the Financing Documents,  or which might involve the
alleged violation by any Credit Party of any federal, state, local or other law,
rule or regulation;  provided,  however,  that no representation is made in this
Section 305 with respect to Environmental Laws.

          SECTION 306. No  Outstanding  Judgments.  There are no  outstanding or
unpaid judgments against any Credit Party.

          SECTION  307.  Outstanding  Securities.  All of  Borrower's  and  each
Subsidiary's  outstanding capital stock has been validly issued,  fully paid and
is  non-assessable.  Borrower is not in  violation  of any  applicable  federal,
state,  local,  or other  securities  laws and  regulations  with respect to the
issuance of any of its capital stock or any other of its securities.

          SECTION 308. Tax Returns.  Each Credit Party has filed or caused to be
filed all required federal,  state, local, or other tax returns when due and has
paid  (except as  otherwise  permitted  by Section 406 hereof) all  governmental
taxes and other charges  imposed upon it or on any of its  properties or assets.
Borrower does not know of any proposed  additional  tax  assessment  against any
Credit Party.

          SECTION 309. Franchises, Licenses, Permits, Etc. Each Credit Party has
all material franchises,  licenses,  permits, patents,  copyrights,  trademarks,
trade names, and other authority  necessary to enable it to conduct its business
as presently  conducted;  provided,  however,  that no representation is made in
this Section 309 with respect to Environmental Laws.

                                       13

<PAGE>

          SECTION 310. No Governmental Consents Required. No consent,  approval,
order, authorization,  designation, registration, declaration, or filing (except
the filing of financing  statements  or notations  of liens on  certificates  of
title) with or of any federal,  state, local, or other governmental authority or
public body on the part of any Credit Party is required in  connection  with any
Credit  Party's  execution,  delivery  or  performance  of any of the  Financing
Documents; or if required, all such prerequisites have been fully satisfied.

          SECTION 311.  ERISA  Matters.  None of the Credit Parties has incurred
any material accumulated funding deficiency within the meaning of the ERISA, and
none of the Credit  Parties has incurred  any material  liability to the Pension
Benefit Guaranty  Corporation  established under ERISA (or any successor thereto
under such Act) in  connection  with any employee  benefit plan  established  or
maintained by any of the Credit Parties.

          SECTION 312.  Regulation U and Other  Securities Law Matters.  None of
the transactions contemplated in this Agreement (including,  without limitation,
the use of the proceeds from the Loans) will violate or result in a violation of
Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations
issued pursuant thereto, including,  without limitation,  Regulations U and X of
the Board of Governors of the Federal  Reserve  System,  12 C.F.R.,  Chapter II.
Borrower  does not own or intend to carry or purchase any "margin  stock" within
the meaning of said Regulation U, including  margin stock  originally  issued by
it.  None of the  proceeds  of the Loans will be used to  purchase  or carry (or
refinance  any  borrowing  the proceeds of which were used to purchase or carry)
any  "security"  within the meaning of the  Securities  Exchange Act of 1934, as
amended.

          SECTION 313. Environmental Representations. (a) Each Credit Party has
obtained all permits, licenses and other authorizations which are required under
Environmental  Laws,  and each Credit  Party is in  compliance  in all  material
respects  with all terms and  conditions of the required  permits,  licenses and
authorizations and is also in compliance in all material respects with all other
limitations,  restrictions,  conditions, standards, prohibitions,  requirements,
obligations,  schedules and timetables contained in any applicable Environmental
Laws;

          (b)  Borrower  is not aware of,  and has not  received  notice of, any
past,  present  or  future  events,   conditions,   circumstances,   activities,


                                       14

<PAGE>

practices,  incidents, actions or plans which, with respect to any Credit Party,
may  interfere  with or prevent  such Credit  Party's  compliance  or  continued
compliance in any material respect with Environmental  Laws, or may give rise to
any material common law or legal  liability,  or otherwise form the basis of any
material  claim,  action,   demand,   suit,   proceeding,   hearing,   study  or
investigation against such Credit Party, based on or related to the manufacture,
processing,  distribution,  use,  treatment,  storage,  disposal,  transport  or
handling,  or the emission,  discharge,  release or threatened  release into the
environment, of any pollutant,  contaminant,  chemical, or industrial,  toxic or
hazardous substance or waste; and

          (c)  There is no  civil,  criminal  or  administrative  action,  suit,
demand,  claim,   hearing,   notice  or  demand  letter,  notice  of  violation,
investigation  or  proceeding  pending or  threatened  against any Credit  Party
relating in any way to Environmental Laws.

          SECTION 314.  Reaffirmation.  Each request for a Loan made by Borrower
pursuant to this  Agreement  shall  constitute an automatic  representation  and
warranty  by  Borrower  to Lender  that there does not then exist any Default or
Event of Default as well as a  reaffirmation  as of the date of such  request of
all of the  representations  and warranties of the Credit  Parties  contained in
this  Agreement and the other  Financing  Documents  (except as to those changes
otherwise consented to by Lender or contemplated herein).

                       ARTICLE IV - AFFIRMATIVE COVENANTS

          For so  long  as  this  Agreement  is in  effect,  and  unless  Lender
expressly  consents in writing otherwise or to the contrary (which consent shall
not be unreasonably withheld), Borrower hereby expressly covenants and agrees as
follows:

          SECTION 401.  Inspection and Examination.  Upon reasonable  request of
Lender,  each Credit Party shall permit during regular business hours any person
designated by Lender to inspect and examine such Credit Party's  financial books
and  records,  its  minute  books and other  business  memoranda  and  writings;
provided,  however, that so long as no Event of Default has occurred and is then
continuing  Borrower may condition  Lender's (or its  designee's)  access to any
Credit Party's  business  memoranda and writings (other than its financial books
and records) on Lender's (or such  designee's)  entering into a suitable written
confidentiality  agreement.  Each Credit Party shall make available its officers
and employees to Lender to discuss the financial affairs of such Credit Party at
such reasonable times and intervals as Lender may request, and each Credit Party
shall  promptly  confirm or furnish in reasonable  detail  whatever  information
relative to such Credit Party as Lender's authorized representative,  auditor or
counsel may reasonably request.

                                       15

<PAGE>

          SECTION  402.  Books and  Records.  Each  Credit  Party shall keep its
books,  records and accounts in accordance  with generally  accepted  accounting
principles and practices applied on a basis consistent with preceding years.

          SECTION 403.  Financial  Statements  and Other  Information.  Borrower
shall promptly  furnish to Lender:  (1) Not later than 120 days after the end of
each subsequent fiscal year, consolidated and consolidating financial statements
of the  Borrower,  to  include  balance  sheets  and  statements  of income  and
stockholders'  equity,  all in reasonable  detail,  prepared in accordance  with
generally  accepted  accounting  principles  and  certified  by  an  independent
accounting  firm  acceptable  to  Lender  and  accompanied  by a duly  completed
Compliance  Certificate  in the form of Exhibit J attached  hereto  executed  on
behalf of Borrower by its chief  financial  officer;  (2) Not later than 30 days
after and as of the end of each month (other than the final month of each fiscal
year),  consolidated financial statements of Borrower, to include balance sheets
and statements of income and  stockholders'  equity,  all in reasonable  detail,
prepared in accordance with generally accepted accounting principles (subject to
changes  resulting  from  year-end  adjustments),  and  certified  by the  chief
financial  officer of Borrower and  accompanied by a duly  completed  Compliance
Certificate  in the form of  Exhibit J  attached  hereto  executed  on behalf of
Borrower by its chief financial officer; (3) Promptly upon becoming aware of the
existence of any Default or Event of Default,  a written  notice  specifying the
nature and period of  existence  thereof and what  action  Borrower is taking or
proposes to take with respect thereto; (4)Promptly upon becoming aware that the
holder of any other evidence of indebtedness or security of any Credit Party has
given  notice or taken any other  action  with  respect to a claimed  default or
event of default or event  which,  with the giving of notice or passage of time,
or both,  would  constitute a default,  a written  notice  specifying the notice
given or action  taken by such holder and the nature of the  claimed  default or
event  and what  action  Borrower  is taking or  proposes  to take with  respect
thereto;  (5)  Promptly  upon  transmission  thereof,  copies  of all  financial
statements, proxy statements,  notices and reports as Borrower shall send to its
public shareholders,  if any, and copies of all registration  statements and all
other reports which  Borrower may file from time to time with the Securities and
Exchange  Commission or any comparable state securities  regulatory  agency; and
(6) From time to time upon request of Lender, such other information relating to
the operations,  business, and financial condition of any Credit Party as Lender
may reasonably request.

          SECTION 404.  Maintenance of Assets.  Each Credit Party shall maintain
and keep all of its  property  and assets  (other than Tissue  Freezers) in good
repair, working order and condition and shall from time to time make all needful
and proper repairs, renewals and replacements thereto subject to reasonable wear
and tear.

          SECTION  405.  Maintenance  of  Insurance.  Each  Credit  Party  shall
maintain with financially sound and reputable insurers  acceptable to Lender (i)
with reference to its property other than the Collateral, insurance against such
risks and in such amounts as is customary in the case of Persons of  established


                                       16

<PAGE>

reputations engaged in the same or similar business and similarly situated,  and
(ii)  liability  and  worker's  compensation  insurance  in such  amounts  as is
customary in the case of Persons of established  reputations engaged in the same
or similar  business and  similarly  situated  (except that the dollar amount of
each Credit Party's liability  insurance coverage must be acceptable to Lender),
and, upon request by Lender,  shall furnish  Lender copies of the policies under
which such  insurance is carried.  The Credit  Parties'  obligations  concerning
insurance of the Collateral are governed by the applicable  Financing Documents.
The Credit  Parties  shall not be  required to maintain  property  insurance  on
Tissue Freezers.

          SECTION 406. Payment of Taxes.  Each Credit Party shall punctually pay
and discharge all taxes,  assessments and governmental charges or levies imposed
upon it or upon its income or upon any of its property, as well as all claims of
any kind which, if unpaid, might by law become a Lien upon its property,  except
taxes,  assessments,  charges,  levies or claims  which are in good faith  being
timely litigated or otherwise  properly contested by such Credit Party and which
cannot become a Lien upon any of the Collateral  with priority over the security
interest of Lender or as to which such  Credit  Party has  established  reserves
satisfactory  to Lender.  Upon any Credit Party's failure to make prompt payment
of any such obligation of such Credit Party not excepted above,  Lender may, but
is  under  no  obligation  to,  pay all or any  part of the  same  or  effect  a
settlement  or  compromise  thereof in the name of such  Credit  Party;  and all
amounts so paid by Lender as well as the  expenses  incurred in  negotiating  or
attempting to negotiate a compromise or settlement will  automatically  become a
part of the  Liabilities of Borrower under this Agreement and will bear interest
from the date of such  payment at the lower of (i) the highest  rate of interest
which  Borrower  has  contracted  to pay on any of the  Liabilities  or (ii) the
highest rate permissible under applicable law.

          SECTION 407.  Environmental  Matters.  Borrower shall notify Lender in
writing, promptly upon learning thereof, of:

          (i) any  notice  that any  Credit  Party is not in  compliance  in any
material  respect with all terms and  conditions  of all  permits,  licenses and
authorizations  which are required under  Environmental Laws, or that any Credit
Party is not in compliance in any material  respect with all other  limitations,
restrictions,  conditions, standards, prohibitions,  requirements,  obligations,
schedules and timetables contained in any applicable Environmental Laws;

          (ii) any  notice of any past,  present or future  events,  conditions,
circumstances,  activities,  practices,  incidents, actions or plans which, with
respect to any Credit  Party,  may interfere  with or prevent its  compliance or
continued  compliance in any material  respect with  Environmental  Laws, or may
give  rise to any  material  common  law or  legal  liability  on its  part,  or
otherwise  form  the  basis  of  any  material  claim,  action,   demand,  suit,
proceeding,  hearing,  study or investigation against it, based on or related to
the manufacture,  processing,  distribution,  use, treatment, storage, disposal,
transport,  or  handling,  or the  emission,  discharge,  release or  threatened
release  into the  environment,  of any  pollutant,  contaminant,  chemical,  or
industrial, toxic or hazardous substance or waste; and



                                       17

<PAGE>

          (iii) any notice or claim of any  civil,  criminal  or  administrative
action,  suit,  demand,  claim,  hearing,  notice  or demand  letter,  notice of
violation, investigation, or proceeding pending or threatened against any Credit
Party relating in any way to Environmental Laws.

          SECTION 408. Primary Depository  Relationships.  To the maximum extent
permitted by applicable  law, the Credit  Parties shall  maintain  their primary
depository relationships with Lender.


                         ARTICLE V - NEGATIVE COVENANTS

          For so  long  as  this  Agreement  is in  effect,  and  unless  Lender
expressly  consents in writing otherwise or to the contrary (which consent shall
not be unreasonably withheld), Borrower hereby expressly covenants and agrees to
the following negative covenants:

          SECTION 501. Type of Business. Borrower and its Subsidiaries shall not
engage in any type of business other than the  development,  sale,  licensing or
use of medical products,  bio-technology  or tissue  engineering or any activity
reasonably incidental thereto.

          SECTION 502. Transactions with Affiliates.  None of the Credit Parties
shall  engage in any  transactions  with an  Affiliate,  except on terms no less
favorable  to  such  Credit   Party  than  could  be  obtained  in   arms-length
transactions with others.

          SECTION 503.  Merger,  Consolidation,  Acquisitions,  Etc. None of the
Credit Parties shall:  (i) transfer all or  substantially  all of its assets to,
consolidate  with  or  merge  with  any  other  Person;   (ii)  acquire  all  or
substantially  all of the  properties or capital  stock of any other Person;  or
(iii) create or acquire any  Subsidiary or enter into any  partnership  or joint
venture;  provided,  however,  that (a) any  Subsidiary of Borrower may merge or
consolidate  with, or convey all or substantially all of its assets to, Borrower
or  another   Subsidiary  of  Borrower  (but  Borrower  must  be  the  surviving
corporation  for any such  merger  or  consolidation  involving  Borrower),  (b)
Borrower may acquire all or substantially all of the properties or capital stock
of another  Person (or Borrower may form a Subsidiary to make such  acquisition)
so long as such  transaction  does not cause a violation of Section 501 above or
503(iii)(e)  below,  Borrower  complies with any and all requirements of Section
202(c)  applicable  thereto  and no other  Default or Event of Default  would be
caused  thereby,  (c)  Borrower  may  form a new  Subsidiary  so  long  as  such
transaction  does  not  cause a  violation  of  Section  501  above  or  Section
503(iii)(e) below and Borrower complies with any and all requirements of Section
202(c)  applicable  thereto  and no other  Default or Event of Default  would be
caused thereby, (d) any Credit Party may enter into a merger or consolidation in
connection with any acquisition  transaction permitted under clause (b) above so
long as such Credit Party is the  surviving  corporation  therefrom and no other
Default  or Event of  Default  would be caused  thereby,  and (e)  Borrower  may


                                       18

<PAGE>

acquire all or  substantially  all of the properties or capital stock of another
Person or create or acquire  Subsidiaries  or enter into  partnerships  or joint
ventures  so long as  Borrower's  total  investment  in all  such  acquisitions,
Subsidiaries, partnerships or joint ventures (whether in the form of cash, loans
or other property but exclusive of  contributions  or transfers of  Intellectual
Property  Rights)  does not  exceed  $7,000,000  in the  aggregate  and no other
Default or Event of Default would be caused  thereby.  Lender agrees that,  upon
request of  Borrower  from time to time (but not more  frequently  than once per
fiscal  year),  Lender  may  in  its  sole  discretion  increase  the  aforesaid
limitation on investment  set forth in clause (e) above,  which  increase  shall
become effective upon Lender's written notice to Borrower thereof.

          SECTION 504. ERISA Matters.  None of the Credit Parties shall incur or
suffer to exist any material  accumulated  funding deficiency within the meaning
of ERISA  or incur  any  material  liability  to the  Pension  Benefit  Guaranty
Corporation established under ERISA (or any successor thereto under ERISA).

          SECTION 505.  Liens.  None of the Credit Parties shall create,  incur,
assume  or suffer  to exist  any Lien of any kind  upon any of its  property  or
assets now owned or hereafter acquired,  excluding,  however, from the operation
of this  covenant:  (1) liens in  connection  with  worker's  compensation;  (2)
deposits or pledges to secure the performance of bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations,  surety
and appeal  bonds, and other  obligations of a like nature arising in the normal
and ordinary course of business; (3) mechanics',  workmen's,  materialmen's, and
other like  liens  arising in the normal  and  ordinary  course of  business  in
respect of  obligations  which are not overdue or which are being  contested  in
good  faith  by  such  Credit  Party  and as to  which  such  Credit  Party  has
established reserves  satisfactory to the Lender; (4) tax or other nonconsensual
liens,  encumbrances or charges which are being litigated or otherwise  properly
contested  in good faith by such Credit  Party and as to which such Credit Party
has established reserves satisfactory to the Lender; (5) the security interests,
security  titles  and  liens  conveyed  to  Lender  under  any of the  Financing
Documents;  (6) Purchase Money Liens securing Purchase Money Indebtedness to the
extent  permitted  under  Section  508;  and (7) any other  Liens  disclosed  on
Schedule 505 attached hereto.

          SECTION  506.  Guaranties.  None of the  Credit  Parties  shall in any
manner,  directly or indirectly,  become a guarantor of any obligation of, or an
endorser of, or otherwise  assume or become liable upon any obligations or other
indebtedness of any other Person except (i) pursuant to the Financing  Documents
or (ii) in connection  with the  depositing of checks in the normal and ordinary
course of business.

          SECTION 507.  Financial  Covenants.  Borrower shall not violate any of
the following financial covenants.

          (a)  Borrower  shall not  change  its  fiscal  year  without  Lender's
consent;



                                       19

<PAGE>

          (b)  Borrower  shall not make Capital  Expenditures  in any one fiscal
year ending on or after  December 31, 1996,  which  exceed  $2,000,000  in total
amount for such fiscal year;

          (c)  Borrower  shall not  permit its  Current  Ratio at any time on or
after the date of this Agreement to be less than 2.0 to 1.0;

          (d) Borrower  shall not permit its Leverage Ratio to exceed 1.0 to 1.0
at any time on or after the date of this Agreement;

          (e)  Borrower  shall  not  permit  its  Net  Worth  to  be  less  than
$18,000,000  at any time  during  the  period  from  the date of this  Agreement
through  December 31, 1996,  and Borrower  shall not permit its Net Worth at any
time during each fiscal year of Borrower  ending  thereafter to be less than its
minimum  required Net Worth hereunder for its immediately  preceding fiscal year
plus $500,000; and

          (f) Borrower  shall not permit its Debt Coverage  Ratio for any fiscal
quarter or year to be less than 1.3 to 1.0.

          SECTION 508.  Funded  Debt.  None of the Credit  Parties  shall incur,
assume,  or suffer to exist any Funded  Debt of such  Credit  Party,  except (i)
Funded  Debt  arising  under  this  Agreement  or  any of  the  other  Financing
Documents,  (ii) Purchase  Money  Indebtedness  not to exceed  $250,000 in total
amount for all the Credit  Parties  incurred in any fiscal  year,  and (iii) any
other Funded Debt described on Schedule 508 attached hereto.


                       ARTICLE VI - CONDITIONS TO LENDING

          All of Lender's  obligations  under this Agreement,  including without
limitation any obligation to lend or advance moneys to Borrower,  are subject to
the fulfillment of each of the following conditions at or before the date hereof
as well as at the time each Loan is requested or made hereunder:

          SECTION 601.  Representations and Warranties.  All representations and
warranties  of the Credit  Parties  contained in this  Agreement and in each and
every of the other Financing Documents are true, correct,  complete and accurate
in all material respects.

          SECTION 602.  Performance of Covenants.  The Credit Parties shall have
duly and  properly  performed in all respects  all  covenants,  agreements,  and
obligations  required  by the  terms  of  this  Agreement  or  any of the  other
Financing Documents to be performed by them.

          SECTION 603. No Violation  of Negative  Covenants.  None of the Credit
Parties has taken or permitted to be taken any actions which would conflict with
any of the provisions of Article V of this Agreement.



                                       20

<PAGE>

          SECTION  604.  No  Material  Adverse  Changes.  Since the date of this
Agreement,  no material  adverse  change  shall have  occurred in the  business,
operations,  financial  condition  or assets of the  Credit  Parties  taken as a
whole.

          SECTION 605.  Delivery of Loan  Documents.  Borrower has  delivered to
Lender, or caused to be delivered to the Lender,  duly executed  counterparts of
this  Agreement,  the Note,  and the other  Financing  Documents  required under
Sections  202(a) and 202(b),  together with the following  described  additional
documents:

          (a) Certificates  from the Secretaries of State of Florida and Georgia
issued as of the date of this Agreement (or within 45 days thereof) stating that
each of the Borrower and CryoLife  International is a corporation duly organized
(or, in the case of Georgia, is a foreign corporation  qualified to do business)
and is in good standing under the laws of such states;

          (b) A copy  (certified by the Secretary of State of Florida  within 45
days  of the  date of  this  Agreement)  of  each  of  Borrower's  and  CryoLife
International's certificate of incorporation;

          (c) A  Certificate  of the  Borrower in the form of Exhibit F attached
hereto, duly completed and executed;

          (d) A Certificate of CryoLife  International  in the form of Exhibit G
attached hereto;

          (e) An  opinion  of  counsel  for  Borrower  in the form of  Exhibit H
attached hereto;

          (f) Satisfactory  evidence of the recording of such Uniform Commercial
Code financing  statements and other  documents in such filing offices as Lender
may deem  necessary or  appropriate to perfect or maintain the perfection of the
Lender's  security  interests  under the Security  Agreement and the  Subsidiary
Security  Agreement,  as well as written  reports of  examinations of the public
records of such filing  office as the Lender may deem  necessary or  appropriate
indicating  that  there  are  no  other  Liens  of  record  covering  any of the
Collateral  covered  by  the  Security  Agreement  or  the  Subsidiary  Security
Agreement (except Liens permitted under Section 505 hereof);

          (g) Any Waivers and  Consents  required  from any landlord or creditor
under Section 202 hereof.

          (h)  Such  other  documents,  instruments  and  agreements  as  may be
reasonably required by Lender or Lender's counsel in connection with any loan or
advance hereunder.

          SECTION  606. No Default or Event of  Default.  No Default or Event of
Default shall have occurred.



                                       21

<PAGE>

          SECTION  607.  Incidental  Matters.  All  matters  incidental  to each
advance hereunder shall be reasonably satisfactory to Lender.

                         ARTICLE VII - EVENTS OF DEFAULT

          The  occurrence  of any  one or  more  of the  following  events  will
constitute an event of default (herein called an "Event of Default") by Borrower
under this Agreement.

          SECTION  701.  Failure  to  Pay   Liabilities.   Failure  of  Borrower
punctually to make payment of any amount payable to Lender, whether principal or
interest,  on any of the  Liabilities  within five (5) days of the date the same
becomes  due and  payable,  whether  at  maturity,  or at a date  fixed  for any
prepayment or partial prepayment, or by acceleration or otherwise.

          SECTION  702.  Representations  and  Warranties.   If  any  statement,
representation, or warranty of any Credit Party made in this Agreement or in any
of the other  Financing  Documents at any time  furnished by or on behalf of any
Credit Party to Lender  proves to have been untrue,  incorrect,  misleading,  or
incomplete in any material respect as of the date made.

          SECTION 703.  Negative  Covenant  Breach.  Failure of any Credit Party
punctually  and fully to perform,  observe,  discharge or comply with any of the
covenants set forth in Article V of this Agreement.

          SECTION  704.  Other  Covenant  Breach.  Failure of any  Credit  Party
punctually  and fully to perform,  observe,  discharge or comply with any of the
covenants set forth in this  Agreement  (other than Article V), which failure is
not cured within thirty (30) days after notice from Lender to Borrower.

          SECTION  705.  Other  Agreements  with  Lender.  The  occurrence  of a
default,  an event of  default  or an Event of  Default  under  any of the other
Financing  Documents or under any other  agreement to which any Credit Party and
Lender are parties or under any other instrument executed by any Credit Party in
favor of Lender,  including any loan agreements,  notes,  leases, deeds or other
documents.

          SECTION  706.  Voluntary  Bankruptcy.  If  any  Credit  Party  becomes
insolvent  as  defined  in the  Georgia  Uniform  Commercial  Code or  makes  an
assignment  for the  benefit  of  creditors;  or if any action is brought by any
Credit Party  seeking  dissolution  of such Credit Party or  liquidation  of its
assets or seeking the appointment of a trustee,  interim trustee,  receiver,  or
other  custodian  for any of its  property;  or if any Credit Party  commences a
voluntary case under the Federal  Bankruptcy Code; or if any  reorganization  or
arrangement  proceeding is  instituted  by any Credit Party for the  settlement,
readjustment, composition or extension of any of its debts upon any terms; or if
any action or petition is otherwise  brought by any Credit Party seeking similar
relief  or  alleging  that it is  insolvent  or  unable to pay its debts as they
mature.

                                       22

<PAGE>

          SECTION 707. Involuntary Bankruptcy.  If any action is brought against
any Credit Party seeking  dissolution of such Credit Party or liquidation of any
of its assets or seeking the appointment of a trustee, interim trustee, receiver
or other  custodian for any of its property,  and such action is consented to or
acquiesced in by such Credit Party or is not dismissed within sixty (60) days of
the date upon which it was  instituted;  or if any proceeding  under the Federal
Bankruptcy  Code is  instituted  against  such Credit Party and (i) an order for
relief is entered in such  proceeding or (ii) such proceeding is consented to or
acquiesced in by such Credit Party or is not dismissed within sixty (60) days of
the date upon which it was instituted;  or if any  reorganization or arrangement
proceeding  is  instituted   against  any  Credit  Party  for  the   settlement,
readjustment,  composition, or extension of any of its debts upon any terms, and
such  proceeding is consented to or acquiesced in by such Credit Party or is not
dismissed within sixty (60) days of the date upon which it was instituted; or if
any action or petition is otherwise  brought  against any Credit  Party  seeking
similar relief or alleging that it is insolvent, unable to pay its debts as they
mature, or generally not paying its debts as they become due, and such action or
petition  is  consented  to or  acquiesced  in by such  Credit  Party  or is not
dismissed within sixty (60) days of the date upon which it was brought.

          SECTION 708. Other Indebtedness.  If any Credit Party is in default on
indebtedness  to another  Person having any  outstanding  balance of $100,000 or
more or an event has  occurred  which,  with the  giving of notice or passage of
time,  or both,  will  cause  such  Credit  Party to be in  default  on any such
indebtedness to another Person.

          SECTION 709.  Material Adverse Change.  Any material adverse change in
the  Credit  Parties'  financial  condition  or  means  or  ability  to pay  the
Liabilities.

          SECTION 710. Change in Control. The acquisition after the date of this
Agreement by any Person (or by any two or more Persons acting in concert) except
Steven G. Anderson of beneficial  ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Commission) of either (i) a sufficient number of the
Voting  Stock of Borrower so that the total  number of such shares  beneficially
owned by such Person (or group of Persons  acting in concert)  equals or exceeds
twenty-five  percent (25%) of the  outstanding  Voting Stock of Borrower or (ii)
the power to direct or cause the  direction  of the  management  and policies of
Borrower  (whether  through  ownership  of voting  securities,  by  contract  or
otherwise).

                                       23

<PAGE>


                      ARTICLE VIII - REMEDIES UPON DEFAULT

          SECTION 801.  Acceleration and Other Remedies.  Upon the occurrence of
an Event of Default:

          (a) Lender may, at its option and without  prior  notice to  Borrower,
terminate  its  remaining  obligations  hereunder  to make any further  Loans to
Borrower;

          (b)  Any  of  the  Liabilities  may  (notwithstanding  any  provisions
contained  therein  or  herein to the  contrary),  at the  option of Lender  and
without  presentment,  demand,  notice or  protest of any kind (all of which are
expressly  waived by Borrower in this  Agreement),  be declared due and payable,
whereupon they immediately will become due and payable;

          (c) Lender may also,  at its option,  and without  notice or demand of
any kind,  exercise from time to time any and all rights and remedies  available
to it under this  Agreement or under any of the other  Financing  Documents,  as
well as exercise from time to time any and all rights and remedies  available to
a secured  party  when a debtor is in  default  under a  security  agreement  as
provided in the Uniform Commercial Code of Georgia, or available to Lender under
any other applicable law or in equity, including without limitation the right to
any deficiency remaining after disposition of the Collateral; and

          (d)  Borrower  shall  pay all of the  reasonable  costs  and  expenses
actually incurred by Lender in enforcing its rights under this Agreement and the
other Financing Documents.  In the event any claim under this Agreement or under
any of the other Financing  Documents is referred to an attorney for collection,
or collected by or through an attorney at law, Borrower will be liable to Lender
for all reasonable  expenses  actually  incurred by it in seeking to collect the
Liabilities or to enforce its rights hereunder, in the other Financing Documents
or in  the  Collateral,  including  without  limitation  actual  and  reasonable
attorneys' fees.

          SECTION 802.  Application of Proceeds;  Collection Costs. Any proceeds
from  disposition of any of the Collateral may be applied by Lender first to the
payment of all  reasonable  expenses  and costs  actually  incurred by Lender in
collecting  such  Liabilities,  in enforcing the rights of Lender under each and
every of the  Financing  Documents  and in  collecting,  retaking,  holding  and
preparing the Collateral for and  advertising  the sale or other  disposition of
and realizing upon the Collateral,  including without  limitation the reasonable
expenses of  liquidating  any liens or claims upon the Collateral and reasonable
attorneys'  fees (but not to exceed  actual fees  incurred) as well as all other
legal  expenses and court costs.  Any balance of such proceeds may be applied by
Lender  toward  the  payment  of such of the  Liabilities  and in such  order of
application  as the Lender  may from time to time  elect.  Lender  shall pay the
surplus,  if any, to Borrower.  Borrower  shall pay the  deficiency,  if any, to
Lender.

                                       24

<PAGE>
                           ARTICLE IX - MISCELLANEOUS

          SECTION  901.  Time  of  Essence.  Time  is of  the  essence  of  this
Agreement.

          SECTION 902. Entire Agreement. This Agreement,  together with the Note
and all of the other Financing Documents, supersedes and replaces the Prior Loan
Agreements,  the Prior Security Agreements,  and all other prior discussions and
agreements  by and between any of the Credit  Parties and Lender with respect to
the Loans or the  Collateral,  and together they  constitute the sole and entire
agreement  between the parties with  respect  thereto.  No promises,  covenants,
representations,  or  agreements  other  than  as  expressly  set  forth  in the
Financing  Documents  have been made to or with any Credit  Party,  and Borrower
represents  and  warrants  that it is not  relying on any  promises,  covenants,
representations  or  agreements,  other  than as  expressly  set  forth  in such
documents in entering into this Agreement.

          SECTION 903. Several  Counterparts.  This Agreement may be executed in
any number of counterparts each of which shall be deemed an original, and all of
such counterparts together shall constitute one and the same instrument.

          SECTION 904. Survival of Warranties.  All representations,  covenants,
and  warranties  made  in  this  Agreement,  or in any of  the  other  Financing
Documents are cumulative and in addition to those imposed by law or equity,  and
are to survive the execution  hereof,  the making of the Loans, and the delivery
hereof and of all the other Financing Documents.

          SECTION  905.  Rights  Cumulative.  All rights and remedies of Lender,
whether  provided  for  herein or in any of the  other  Financing  Documents  or
conferred by law or in equity or by statute or otherwise, are cumulative and not
alternative,  and may be enforced successively or concurrently.  The collection,
repossession,  sale or retention of any of the Collateral by Lender will not bar
an action by Lender for the  recovery of any of the  Liabilities  of Borrower to
Lender  (Borrower  having expressly agreed herein to remain fully liable for any
deficiency), nor will Lender's bringing of an action against Borrower to recover
moneys  owing  under any of the  Liabilities  bar  Lender's  right to collect or
repossess any of the Collateral.

          SECTION  906.  No Release;  Term of  Agreement.  No sale,  assignment,
transfer,   renewal,   addition,    extension,    consolidation,    subdivision,
modification,  or  substitution  of  any of  the  Liabilities,  or of any of the
Financing  Documents,  or of any  interest  thereunder,  nor any  loss,  damage,
injury,  theft,  or destruction of any of the Collateral  will release  Borrower
from its  obligations  hereunder.  The Liabilities may from time to time be paid
and Liabilities thereafter incurred, and neither this Agreement nor the security
interests and security titles conveyed under the Financing Documents shall lapse
or terminate because no Liabilities are outstanding. This Agreement shall remain
in full force and effect until such time as (i) no Liabilities  are  outstanding
and (ii) Lender is under no obligation to make any Loans hereunder to Borrower.



                                       25

<PAGE>

          SECTION 907. Waivers and Modifications. Lender will not be deemed as a
consequence of any act,  delay,  failure,  omission,  or forbearance  (including
without limitation failure to exercise its right of accelerating the maturity of
any of the Liabilities or other indulgences granted from time to time by Lender)
or for any other reason:  (1) to have waived, or to be estopped from exercising,
any of its rights or  remedies  under this  Agreement  or under any of the other
Financing  Documents,  or (2) to have modified,  changed,  amended,  terminated,
rescinded,  or  superseded  any of the terms of this  Agreement or of any of the
other Financing Documents, unless such waiver, modification,  amendment, change,
termination,  rescission, or supersession is express, in writing and signed by a
duly authorized  officer of Lender.  No single or partial  exercise by Lender of
any right or remedy will preclude other or further  exercise thereof or preclude
the  exercise  of any other  right or  remedy,  and a waiver  expressly  made in
writing on one occasion  will be effective  only in that  specific  instance and
only for the precise  purpose for which  given,  and will not be  construed as a
consent to or a waiver of any right or remedy on any future occasion.  No notice
to or demand on Borrower in any instance  will entitle  Borrower to any other or
future notice or demand in similar or other circumstances.

          SECTION 908. Waiver of  Presentment,  Etc.  Borrower hereby  expressly
waives presentment,  demand,  dishonor,  protest,  notice for payment, notice of
non-payment,  notice of dishonor,  notice of default,  notice of  compromises or
surrender  and any other  demand or notice  whatsoever  in  connection  with the
Financing Documents.

          SECTION 909. Notices.  Except as provided otherwise in this Agreement,
all notices and other  communications  under this Agreement are to be in writing
and are to be deemed to have been duly given and to be effective  upon  delivery
to the party to whom  they are  directed.  If sent by U.S.  mail,  first  class,
certified, return receipt requested, postage prepaid, and addressed to Lender or
to Borrower at their  respective  addresses set forth  beneath their  respective
signatures  below,  such  notices,  demands and other  communications  are to be
deemed to have been delivered on the second  business day after being so posted.
Either  Lender or  Borrower  may by  written  notice to the  other  designate  a
different address for receiving notices under this Agreement; provided, however,
that no such change of address will be effective until written notice thereof is
actually received by the party to whom such change of address is sent.

          SECTION 910. No Assignment by Borrower.  Borrower may not, without the
consent of Lender,  assign any of its rights or duties hereunder or under any of
the other Financing Documents.

          SECTION 911. Lender's Expenses. All statements, reports, certificates,
opinions,  and other  documents  or  information  furnished  to Lender under the
Financing  Documents  shall be  supplied  by  Borrower  without  cost to Lender.
Further,   Borrower  shall  reimburse   Lender  on  demand  for  all  reasonable
out-of-pocket  costs and expenses  (including  actual and reasonable legal fees)
incurred by the Lender or its  participants in connection with the  preparation,
establishment,   operation,   enforcement,  and  termination  of  the  Financing


                                       26

<PAGE>

Documents or the protection or  preservation of any right or claim of the Lender
with respect to the Financing  Documents;  provided,  however,  that  Borrower's
obligation to reimburse Lender for its attorney's fees and expenses  relating to
the  initial  preparation  and  establishment  of this  Agreement  and the other
Financing Documents shall not exceed $10,000.

          SECTION 912. Payment of Taxes. Borrower will pay all taxes (if any) in
connection with this Agreement,  any of the other Financing Documents, any loans
made in connection with this  Agreement,  or the issuance or ownership of any of
the Financing  Documents and in connection with any  modification of said loans,
this Agreement, or any of the other Financing Documents (excluding, however, any
taxes  imposed upon or measured by the net income of the Lender),  and will save
the  Lender  harmless  without  limitation  as  to  time  against  any  and  all
liabilities  with respect to all such taxes.  The  obligations of Borrower under
this section shall survive the payment of the Liabilities and the termination of
this Agreement.

          SECTION 913.  Demand  Liabilities.  If any of the  Liabilities  are by
their terms demand obligations, nothing contained herein shall affect, impair or
modify the demand nature of such obligations, and the occurrence of a Default or
an Event of Default shall not be a prerequisite for Lender's  requiring  payment
of such obligations.

          SECTION 914.  Set-Offs  Against  Deposits.  Upon the  occurrence of an
Event of Default  hereunder,  Lender,  without notice or demand of any kind, may
hold and set off against such of the Liabilities  (whether matured or unmatured)
as Lender may elect,  any  balance  or amount to the credit of  Borrower  in any
deposit,  agency,  reserve,  holdback or other account of any nature  whatsoever
maintained  by or on  behalf of  Borrower  with  Lender  at any of its  offices,
regardless  of whether such  accounts are general or special and  regardless  of
whether such accounts are individual or joint.

          SECTION 915. Participant Set-Off. Any Person purchasing an interest in
debt obligations  under this Agreement held by Lender may exercise all rights of
offset with respect to such interest as fully as if such Person were a holder of
debt obligations hereunder in the amount of such interest.

          SECTION 916.  Confidentiality.  Each of the parties to this  Agreement
shall use  reasonable,  good  faith  efforts to  maintain  as  confidential,  in
accordance with such Person's  normal  practices and policies for protecting its
own confidential  information,  this Agreement and the other Financing Documents
and the terms and conditions  thereof,  and all other  information  delivered to
such party in  connection  with the  transactions  contemplated  by or otherwise
pursuant to this  Agreement  that is  proprietary in nature and that was clearly
marked or labeled or otherwise  identified  as being  confidential  information;
provided, however, that each such Person may disclose information concerning the
aforesaid  Financing  Documents  or their  terms and  conditions  or such  other
confidential  information  described  above  (i) as  required  in its  counsel's
opinion  pursuant to the lawful  requirements  or  requests of any  Governmental


                                       27

<PAGE>

Authority,  (ii) as required in its  counsel's  opinion by any  governmental  or
administrative  rule,  judicial  process or subpoena,  (iii) to their respective
attorneys,  accountants,  advisers or  consultants  (but only on a  confidential
basis as provided below),  (iv) to the extent necessary in its counsel's opinion
to enforce such Person's rights or remedies or perform such Person's obligations
under any of the  Financing  Documents  or  applicable  law,  (v) to the  extent
necessary or  appropriate  in the opinion of its counsel in connection  with any
litigation  or other  proceeding  having it or any of its  Affiliates as a party
thereto,  and (vi)  Lender  may  disclose  such  information  to any  actual  or
prospective  assignee or  participant  of Lender.  If Lender or any Credit Party
discloses any  information  covered by this  subsection to any of its attorneys,
accountants,  advisers or consultants,  such Person shall advise such attorneys,
accountants,  advisers or consultants of the provisions of this Section but such
Person  shall  not  be  liable  for  any  misappropriation  or  misuse  of  such
information by such attorneys,  accountants,  consultants or advisers other than
occasioned by such  Person's own gross  negligence  or willful  misconduct.  The
obligations  of the parties  under this Section 916 shall survive until one year
after the date of any termination of this Agreement. Lender agrees, upon request
of Borrower  following any  termination  of this  Agreement,  to use  reasonable
efforts to return to Borrower any  confidential  or  proprietary  information of
Borrower  delivered  to  Lender  pursuant  to  this  Agreement  and in  Lender's
possession.

          SECTION 917.  Governing Law;  Severability.  This Agreement and all of
the other  Financing  Documents  have been  made and  delivered  in the State of
Georgia, and the terms,  provisions and performance thereof are in all respects,
including  without  limitation  all  matters  of  construction,  interpretation,
validity,  enforcement,  and performance, to be construed in accordance with and
governed by the internal laws of that State,  including  without  limitation the
Uniform Commercial Code of Georgia, as amended and in effect on the date of this
Agreement.  Wherever possible,  each provision of this Agreement and of each and
every of the other Financing Documents is to be interpreted in such manner as to
be effective and valid under  applicable  law, but if any  provision  thereof is
prohibited or invalid under such law, such provision is to be  ineffective  only
to the  extent of such  prohibition  or  invalidity,  without  invalidating  the
remainder of such provision or the remaining  provisions of this Agreement or of
any of the other Financing Documents.

          SECTION 918.  Successors  and Assigns.  All rights of Lender under the
Financing  Documents  shall inure to the benefit of its  successors and assigns.
All  obligations  of  Borrower  under the  Financing  Documents  shall  bind its
successors and permitted assigns.

                                       28

<PAGE>

          SECTION 919. Jury Trial Waiver and Consent to Jurisdiction  and Venue.
EACH PARTY TO THIS  AGREEMENT  HEREBY WAIVES ANY RIGHT SUCH PARTY MAY HAVE UNDER
ANY  APPLICABLE  LAW TO A TRIAL BY JURY WITH RESPECT TO ANY SUIT OR LEGAL ACTION
WHICH MAY BE COMMENCED BY OR AGAINST SUCH PERSON OR THE OTHER PARTIES CONCERNING
THE INTERPRETATION,  CONSTRUCTION,  VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS
AGREEMENT OR ANY OF THE OTHER FINANCING DOCUMENTS.  EACH PARTY TO THIS AGREEMENT
FURTHER AGREES AND CONSENTS TO THE  JURISDICTION OF ANY FEDERAL COURT SITTING IN
FULTON COUNTY,  GEORGIA WITH RESPECT TO ANY SUCH SUIT OR LEGAL ACTION,  AND EACH
PARTY TO THIS  AGREEMENT  FURTHER  AGREES AND  CONSENTS  TO VENUE OF ANY FEDERAL
COURT  SITTING IN FULTON  COUNTY,  GEORGIA WITH REGARD TO ANY SUCH SUIT OR LEGAL
ACTION.

          IN WITNESS WHEREOF,  Lender has executed this Agreement,  and Borrower
has executed this  Agreement  and placed its seal hereon,  all as of the day and
year first above written.

                                   BORROWER:

                                   CRYOLIFE, INC.


                                   By:
                                        ----------------------------------------
                                        President

                                   Address:  2211 New Market  Parkway
                                             Suite 142
                                             Marietta, Georgia 30067

                                        (CORPORATE SEAL)

                                   LENDER:

                                   NATIONSBANK, N.A. (SOUTH)



                                   By:
                                        ----------------------------------------
                                        Senior Vice President

                                   Address:  600  Peachtree  Street,  N.E.
                                             18th Floor
                                             Atlanta, Georgia    30308
                                             Attn: Christopher L. Jones
                                                   Senior Vice President

                                       29




                                                                EXHIBIT 10.24(d)

                              THIRD MODIFICATION OF
                    THIRD AMENDED AND RESTATED LOAN AGREEMENT


     THIS  MODIFICATION  is made  and  entered  into as of the 12th day of June,
1998, by and between CRYOLIFE,  INC., a Florida  corporation  ("Borrower"),  and
NATIONSBANK,  N.A., a national  banking  association  which is the  successor by
merger to  NationsBank,  N.A.  (South),  the  successor by merger to Bank South,
formerly known as Bank South, N.A. ("Lender").

                               Statement of Facts

     Borrower and Lender are parties to that certain  Third Amended and Restated
Loan Agreement, dated as of August 30, 1996, as amended by First Modification of
Third Amended and Restated Loan  Agreement,  dated as of April 14, 1997,  and as
further  amended by Second  Modification  of Third  Amended  and  Restated  Loan
Agreement, dated as of December 16, 1997 (the "Loan Agreement").

     Borrower  and  Lender  desire  to  further  amend  the  Loan  Agreement  as
hereinafter provided.

     NOW,  THEREFORE,  for and in  consideration  of the premises and the mutual
agreements,  warranties  and  representations  herein made, as well as $10.00 in
hand  paid by each  party  hereto to the  other,  and  other  good and  valuable
consideration,  the  receipt  and  sufficiency  which are  hereby  acknowledged,
Borrower  and Lender  agree that all  capitalized
  terms  used  herein  (and not
otherwise  defined  herein)  shall  have  the  meanings  given  them in the Loan
Agreement as herein amended and Borrower and Lender further agree as follows:

                               Statement of Terms

     1. The Loan Agreement is hereby amended  effective as of the date hereof by
deleting  from  Section  101  thereof  the   definition  of  the  term  "Maximum
Availability"  and  substituting  in  lieu  thereof  the  following  replacement
definition:

          "Maximum  Availability"  shall mean $2,000,000,  as such amount may be
     reduced or amended pursuant to this Agreement.

     2. The Loan  Agreement is hereby further  amended  effective as of the date
hereof by deleting the first  sentence of Section 201(e) thereof in its entirety
and substituting in lieu thereof the following:

     Borrower  shall pay to Lender  unused  facility  fees for  Borrower's  Loan
     facility  hereunder  during the Revolving Loan Period computed on the daily
     average unused portion of the Maximum  Availability  at a rate per annum of
     one-quarter of one percent (.25%).

     3. The Loan  Agreement is hereby  further  amended by deleting  Exhibit A-1
attached to the Loan Agreement and  substituting in lieu thereof the new Exhibit
A-1 attached hereto.

     4. The effectiveness of this Modification is subject to:

     (a)  the prior or concurrent receipt by Lender of this  Modification,  duly
          executed by Borrower;

     (b)  the prior or concurrent  receipt by Lender of a replacement  Revolving
          Note in the principal face amount of the reduced Maximum Availability;

     (c)  any and all  guarantors  of the  Loans  shall  have  consented  to the
          execution,  delivery and performance of this  Modification and the new
          Note and all of the transactions contemplated hereby by signing one or
          more  counterparts  of  this  Modification  in the  appropriate  space
          indicated below and returning same to Lender;

     (d)  the prior or concurrent receipt by Lender of a certificate of Borrower
          in the form of Exhibit B attached  hereto,  and a certificate  of each
          Guarantor in the form of Exhibit C attached hereto;

     (e)  the payment of all fees and  expenses due from  Borrower  hereunder as
          set forth in Section 7 below; and

     (f)  the  truth  and  accuracy  in  all  material  respects  of  Borrower's
          representations and warranties in Section 6 below.

     5. Except as expressly  modified herein, the Loan Agreement shall remain in
full force and effect. Nothing contained herein shall be deemed to be or operate
as a novation  or an accord and  satisfaction  of the Loan  Agreement  or of any
indebtedness arising thereunder.

     6.  Borrower  hereby  represents  and  warrants  to  Lender  that  (a) this
Modification and the  supplemental  Financing  Documents  executed in connection
herewith  have been duly  authorized,  executed and  delivered by Borrower,  (b)
after  giving  effect to this  Modification,  no Default or Event of Default has
occurred and is  continuing  as of this date and (c) all of the  representations
and  warranties  made by Borrower in the Loan  Agreement are true and correct in
all material respects on and as of the date of this Modification  (except to the
extent  that any such  representations  or  warranties  expressly  referred to a
specific  prior  date).  Any  breach  by  Borrower  of its  representations  and
warranties  contained  in this  Section  shall be an Event  of  Default  for all
purposes of the Loan Agreement.

     7. Borrower further agrees to reimburse Lender for all reasonable  expenses
(including  without  limitation  attorney's  fees)  incurred  by  Lender  in the
negotiation,   documentation  or  consummation  of  this  Modification  and  the
transactions contemplated hereby.

     8. This Modification shall be governed and construed in accordance with the
laws of the State of Georgia and this Modification shall inure to the benefit of
and shall be binding upon the parties hereto and their respective successors and
permitted assigns.

     9. This  Modification  may be executed in  multiple  counterparts,  each of
which  shall be deemed to be an  original  and all of which when taken  together
shall constitute one and the same instrument.

     IN WITNESS WHEREOF, Lender has executed this Modification, and Borrower has
executed  this  Modification  and placed its seal hereon,  all as of the day and
year first above set forth.

                                     LENDER:

                                     NATIONSBANK, N.A.



                                     By: _____________________________________
                                         Vice President


                                     BORROWER:

                                     CRYOLIFE, INC.



                                     By:_____________________________________
                                        Title:

                                                  (CORPORATE SEAL)



<PAGE>


                              CONSENT OF GUARANTOR


     All  capitalized  terms used herein and not otherwise  defined herein shall
have the  meanings  given  such terms in the Third  Amended  and  Restated  Loan
Agreement,  dated as of August 30, 1996, between CryoLife, Inc. ("Borrower") and
NationsBank,  N.A., successor by merger to NationsBank, N.A. (South) ("Lender"),
as amended (the "Loan Agreement").

     The undersigned  acknowledges that it is indebted to Lender under the terms
of the  Guaranty  Agreement,  dated  as of  August  30,  1996,  executed  by the
undersigned  in favor of Lender (the  "Guaranty"),  and that the  Guaranty is in
full force and effect as of the date hereof,  has not been  amended,  rescinded,
revoked or terminated  by such party  through the date hereof,  and continues to
constitute  the  legal,   valid  and  binding   obligation  of  the  undersigned
enforceable   against  the  undersigned  in  accordance  with  its  terms.   The
undersigned hereby confirms and reaffirms all of its obligations and liabilities
to Lender under the Guaranty  and further  confirms and agrees that  pursuant to
the Guaranty,  the undersigned has guaranteed the payment and performance of the
Revolving  Note,  the  Additional  Term  Note and each  Hedge  Agreement  now or
hereafter  in effect,  and all  obligations,  liabilities  and  indebtedness  of
Borrower arising thereunder or evidenced thereby.

     The undersigned  also consents to and approves the execution,  delivery and
performance  of the  Third  Modification  of Third  Amended  and  Restated  Loan
Agreement,  dated as of the date hereof, between Lender and Borrower (the "Third
Modification"),  the new  Revolving  Note  executed and  delivered in connection
therewith,  and all the transactions  contemplated thereby. The undersigned also
agrees that all indebtedness,  obligations and liabilities of Borrower to Lender
which may now or  hereafter  arise  under or by  reason  of the Loan  Agreement,
including without limitation Borrower's obligations in respect of Loans advanced
pursuant to the Loan  Agreement,  and all  obligations  arising  under any Hedge
Agreement,  constitute  part of the  obligations of Borrower to Lender which are
guaranteed by the undersigned under the terms and conditions of the Guaranty.

     SIGNED, SEALED AND DELIVERED as of the 12th day of June, 1998.

                                     CRYOLIFE INTERNATIONAL, INC.



                                     By:_____________________________________
                                     Title:__________________________________

                                                    (CORPORATE SEAL)




<PAGE>
                              CONSENT OF GUARANTOR


     All  capitalized  terms used herein and not otherwise  defined herein shall
have the  meanings  given  such terms in the Third  Amended  and  Restated  Loan
Agreement,  dated as of August 30, 1996, between CryoLife, Inc. ("Borrower") and
NationsBank,  N.A., successor by merger to NationsBank, N.A. (South) ("Lender"),
as amended (the "Loan Agreement").

     The undersigned  acknowledges that it is indebted to Lender under the terms
of  the  Guaranty  Agreement,  dated  as of  April  14,  1997,  executed  by the
undersigned  in favor of Lender (the  "Guaranty"),  and that the  Guaranty is in
full force and effect as of the date hereof,  has not been  amended,  rescinded,
revoked or terminated  by such party  through the date hereof,  and continues to
constitute  the  legal,   valid  and  binding   obligation  of  the  undersigned
enforceable   against  the  undersigned  in  accordance  with  its  terms.   The
undersigned hereby confirms and reaffirms all of its obligations and liabilities
to Lender under the Guaranty  and further  confirms and agrees that  pursuant to
the Guaranty,  the undersigned has guaranteed the payment and performance of the
Revolving  Note,  the  Additional  Term  Note and each  Hedge  Agreement  now or
hereafter  in effect,  and all  obligations,  liabilities  and  indebtedness  of
Borrower arising thereunder or evidenced thereby.

     The undersigned  also consents to and approves the execution,  delivery and
performance  of the  Third  Modification  of Third  Amended  and  Restated  Loan
Agreement,  dated as of the date hereof, between Lender and Borrower (the "Third
Modification"),  the new  Revolving  Note  executed and  delivered in connection
therewith,  and all the transactions  contemplated thereby. The undersigned also
agrees that all indebtedness,  obligations and liabilities of Borrower to Lender
which may now or  hereafter  arise  under or by  reason  of the Loan  Agreement,
including without limitation Borrower's obligations in respect of Loans advanced
pursuant to the Loan  Agreement,  and all  obligations  arising  under any Hedge
Agreement,  constitute  part of the  obligations of Borrower to Lender which are
guaranteed by the undersigned under the terms and conditions of the Guaranty.

     SIGNED, SEALED AND DELIVERED as of the 12th day of June, 1998.

                                     IDEAS FOR MEDICINE, INC.



                                     By:_____________________________________
                                     Title:__________________________________

                                                   (CORPORATE SEAL)






                                                                EXHIBIT 10.24(e)


                             FOURTH MODIFICATION OF
                    THIRD AMENDED AND RESTATED LOAN AGREEMENT
                                       AND
                      FIRST MODIFICATION OF REVOLVING NOTE


     THIS MODIFICATION (this  "Modification") is made and entered into as of the
31st day of December, 1999, by and between CRYOLIFE, INC., a Florida corporation
("Borrower"), and BANK OF AMERICA, N.A., a national banking association which is
the successor by merger to  NationsBank,  N.A.,  formerly known as  NationsBank,
N.A. (South),  formerly known as Bank South,  formerly known as Bank South, N.A.
("Lender").

                               Statement of Facts

     Borrower and Lender are parties to that certain  Third Amended and Restated
Loan Agreement, dated as of August 30, 1996, as amended by First Modification of
Third  Amended and  Restated  Loan  Agreement,  dated as of April 14,  1997,  as
further  amended by Second  Modification  of Third  Amended  and  Restated  Loan
Agreement,  dated as of  December  16,  1997,  and as  further  amended by Third
Modification of Third Amended and Restated Loan Agreement,  dated as of June 12,
1998 (the "Loan Agreement").

     Pursuant to the Loan  Agreement,  the  Borrower  has issued in favor of the
Lender a $2,000,000 Revolving Note, dated June 12, 1998 (the "Revolving Note").

     Borrower and Lender desire to further amend the Loan Agreement and to amend
the Revolving
 Note as hereinafter provided.

     NOW,  THEREFORE,  for and in  consideration  of the premises and the mutual
agreements,  warranties  and  representations  herein made, as well as $10.00 in
hand  paid by each  party  hereto to the  other,  and  other  good and  valuable
consideration,  the  receipt  and  sufficiency  which are  hereby  acknowledged,
Borrower  and Lender  agree that all  capitalized  terms  used  herein  (and not
otherwise  defined  herein)  shall  have  the  meanings  given  them in the Loan
Agreement as herein amended and Borrower and Lender further agree as follows:

                               Statement of Terms

     1. Section 101 of the Loan Agreement is hereby amended  effective as of the
date hereof as follows:

     (a) the date  "December  31,  1999" in the  definition  of the term "Credit
     Expiration  Date" is hereby  deleted,  and the date  "December 31, 2001" is
     substituted in lieu thereof; and

     (b) the date  "December  31,  2004" in the  definition  of the term  "Final
     Maturity  Date" is hereby  deleted,  and the date  "December  31,  2001" is
     substituted in lieu thereof.

     2. Section 403 of the Loan Agreement is hereby amended  effective as of the
date hereof by deleting  from  subpart (2) thereof the phrase "Not later than 30
days after and as of the end of each month  (other  than the final month of each
fiscal year)" and inserting in lieu thereof the following:

     "Not later than 45 days after and as of the end of each quarter (other than
     the final quarter of each fiscal year)"

     3. Section 507 of the Loan Agreement is hereby amended  effective as of the
date hereof by deleting  subpart (b) thereof in its entirety and by substituting
in lieu thereof the following:

     "Borrower shall not make Capital  Expenditures in any fiscal year, with the
     exception of fiscal year 2000, which exceeds  $5,000,000.00 in total amount
     for such year."

     4. Section 507 of the Loan Agreement is hereby amended  effective as of the
date hereof by deleting  subpart (e) thereof in its entirety and by substituting
in lieu thereof the following:

     "Borrower  shall not permit its Net Worth at any time after the date hereof
     to be less  than  $80,000,000  plus (i) 80% of the  positive  amount of net
     income of Borrower for each fiscal  quarter ending after such date and (ii)
     the amount of any  increase  in Net Worth  resulting  from the  issuance of
     stock, corporate reorganizations, recapitalizations or any similar event."
 
     5. The  Revolving  Note is  hereby  amended  by  deleting  in its  entirety
paragraph  (b) on  page 3  thereof  and by  substituting  in  lieu  thereof  the
following new paragraph (b):

     "(b) The  principal  balance of this Note shall be repayable in full on the
     Final Maturity Date (as defined in the Loan Agreement referred to below)."

     6. The effectiveness of this Modification is subject to:

     (a) the prior or concurrent  receipt by Lender of this  Modification,  duly
     executed by Borrower;

     (b) any  and all  guarantors  of the  Loans  shall  have  consented  to the
     execution,  delivery and  performance of this  Modification  and all of the
     transactions  contemplated  hereby by signing one or more  counterparts  of
     this  Modification in the  appropriate  space indicated below and returning
     same to Lender;

     (c) the prior or concurrent  receipt by Lender of a certificate of Borrower
     in the form of Exhibit A attached hereto;

     (d) the payment of all fees and expenses due from Borrower hereunder as set
     forth in Section 9 below; and

     (e)  the  truth  and  accuracy  in  all  material  respects  of  Borrower's
     representations and warranties in Section 8 below.

     7. Except as expressly modified herein,  each of the Loan Agreement and the
Revolving Note shall remain in full force and effect.  Nothing  contained herein
shall be deemed to be or operate as a novation or an accord and  satisfaction of
either the Loan Agreement or the Revolving Note or of any  indebtedness  arising
thereunder.

     8.  Borrower  hereby  represents  and  warrants  to  Lender  that  (a) this
Modification and the  supplemental  Financing  Documents  executed in connection
herewith  have been duly  authorized,  executed and  delivered by Borrower,  (b)
after  giving  effect to this  Modification,  no Default or Event of Default has
occurred and is  continuing  as of this date and (c) all of the  representations
and  warranties  made by Borrower in the Loan  Agreement are true and correct in
all material respects on and as of the date of this Modification  (except to the
extent  that any such  representations  or  warranties  expressly  referred to a
specific  prior  date).  Any  breach  by  Borrower  of its  representations  and
warranties  contained  in this  Section  shall be an Event  of  Default  for all
purposes of the Loan Agreement.

     9. Borrower further agrees to reimburse Lender for all reasonable  expenses
(including  without  limitation  attorney's  fees)  incurred  by  Lender  in the
negotiation,   documentation  or  consummation  of  this  Modification  and  the
transactions contemplated hereby.

     10. This  Modification  shall be governed and construed in accordance  with
the  laws of the  State of  Georgia  and this  Modification  shall  inure to the
benefit of and shall be binding  upon the  parties  hereto and their  respective
successors and permitted assigns.

     11. This  Modification  may be executed in multiple  counterparts,  each of
which  shall be deemed to be an  original  and all of which when taken  together
shall constitute one and the same instrument.

                [remainder of this page intentionally left blank]

    IN WITNESS WHEREOF, Lender has executed this Modification, and Borrower has
executed  this  Modification  and placed its seal hereon,  all as of the day and
year first above set forth.

                              LENDER:

                              BANK OF AMERICA, N.A.,



                              By:_____________________________________
                                    Vice President


                              BORROWER:

                              CRYOLIFE, INC.


                              By:_____________________________________
                              Name:___________________________________
                              Title:__________________________________

                                           (CORPORATE SEAL)

<PAGE>

                              CONSENT OF GUARANTOR


     All  capitalized  terms used herein and not otherwise  defined herein shall
have the  meanings  given  such terms in the Third  Amended  and  Restated  Loan
Agreement,  dated as of August 30, 1996, between CryoLife, Inc. ("Borrower") and
Bank of America, N.A., successor by merger to NationsBank,  N.A., formerly known
as NationsBank, N.A. (South) ("Lender"), as amended (the "Loan Agreement").

     The undersigned  acknowledges that it is indebted to Lender under the terms
of the  Guaranty  Agreement,  dated  as of  August  30,  1996,  executed  by the
undersigned  in favor of Lender (the  "Guaranty"),  and that the  Guaranty is in
full force and effect as of the date hereof,  has not been  amended,  rescinded,
revoked or terminated  by such party  through the date hereof,  and continues to
constitute  the  legal,   valid  and  binding   obligation  of  the  undersigned
enforceable   against  the  undersigned  in  accordance  with  its  terms.   The
undersigned hereby confirms and reaffirms all of its obligations and liabilities
to Lender under the Guaranty  and further  confirms and agrees that  pursuant to
the Guaranty,  the undersigned has guaranteed the payment and performance of the
Revolving  Note,  the  Additional  Term  Note and each  Hedge  Agreement  now or
hereafter  in effect,  and all  obligations,  liabilities  and  indebtedness  of
Borrower arising thereunder or evidenced thereby.

     The undersigned  also consents to and approves the execution,  delivery and
performance  of the Fourth  Modification  of Third  Amended  and  Restated  Loan
Agreement and First Modification of Revolving Note, dated as of the date hereof,
between Lender and Borrower (the "Fourth Modification") and all the transactions
contemplated  thereby.  The  undersigned  also  agrees  that  all  indebtedness,
obligations  and  liabilities  of Borrower to Lender  which may now or hereafter
arise under or by reason of the Loan  Agreement,  including  without  limitation
Borrower's  obligations  in  respect  of  Loans  advanced  pursuant  to the Loan
Agreement,  and all obligations  arising under any Hedge  Agreement,  constitute
part of the  obligations  of  Borrower  to Lender  which are  guaranteed  by the
undersigned under the terms and conditions of the Guaranty.

     SIGNED, SEALED AND DELIVERED as of the 31st day of December, 1999.

                                    CRYOLIFE INTERNATIONAL, INC.



                                    By:_____________________________________
                                    Name:___________________________________
                                    Title:__________________________________

                                                   (CORPORATE SEAL)


<PAGE>

                              CONSENT OF GUARANTOR


     All  capitalized  terms used herein and not otherwise  defined herein shall
have the  meanings  given  such terms in the Third  Amended  and  Restated  Loan
Agreement,  dated as of August 30, 1996, between CryoLife, Inc. ("Borrower") and
Bank of America, N.A., successor by merger to NationsBank,  N.A., formerly known
as NationsBank, N.A. (South) ("Lender"), as amended (the "Loan Agreement").

     The undersigned  acknowledges that it is indebted to Lender under the terms
of  the  Guaranty  Agreement,  dated  as of  April  14,  1997,  executed  by the
undersigned  in favor of Lender (the  "Guaranty"),  and that the  Guaranty is in
full force and effect as of the date hereof,  has not been  amended,  rescinded,
revoked or terminated  by such party  through the date hereof,  and continues to
constitute  the  legal,   valid  and  binding   obligation  of  the  undersigned
enforceable   against  the  undersigned  in  accordance  with  its  terms.   The
undersigned hereby confirms and reaffirms all of its obligations and liabilities
to Lender under the Guaranty  and further  confirms and agrees that  pursuant to
the Guaranty,  the undersigned has guaranteed the payment and performance of the
Revolving  Note,  the  Additional  Term  Note and each  Hedge  Agreement  now or
hereafter  in effect,  and all  obligations,  liabilities  and  indebtedness  of
Borrower arising thereunder or evidenced thereby.

     The undersigned  also consents to and approves the execution,  delivery and
performance  of the Fourth  Modification  of Third  Amended  and  Restated  Loan
Agreement and First Modification of Revolving Note, dated as of the date hereof,
between Lender and Borrower (the "Fourth Modification") and all the transactions
contemplated  thereby.  The  undersigned  also  agrees  that  all  indebtedness,
obligations  and  liabilities  of Borrower to Lender  which may now or hereafter
arise under or by reason of the Loan  Agreement,  including  without  limitation
Borrower's  obligations  in  respect  of  Loans  advanced  pursuant  to the Loan
Agreement,  and all obligations  arising under any Hedge  Agreement,  constitute
part of the  obligations  of  Borrower  to Lender  which are  guaranteed  by the
undersigned under the terms and conditions of the Guaranty.

     SIGNED, SEALED AND DELIVERED as of the 31st day of December, 1999.

                                     IDEAS FOR MEDICINE, INC.



                                     By:_____________________________________
                                     Name:___________________________________
                                     Title:__________________________________

                                                    (CORPORATE SEAL)



<PAGE>
                                    Exhibit A

                          CERTIFICATE OF CRYOLIFE, INC.

     The  undersigned  officers of CRYOLIFE,  INC. (the  "Borrower"),  a Florida
corporation,  hereby certify and covenant in their representative  capacities on
behalf of the Borrower as follows:

     1. The Borrower is a corporation  duly organized,  validly  existing and in
good  standing  under  the laws of the  State  of  Florida,  with all  requisite
corporate  power and authority to own,  operate and lease its  properties and to
carry  on  its  business,  and  is  duly  qualified  to  do  business  in  every
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary.

     2. The  resolutions  of the Directors of the Borrower  adopted as of August
28, 1996, March 27, 1997, December 19, 1997 and July 24, 1998, which resolutions
were previously  certified by officers of the Borrower as being true and correct
(the  "Resolutions"),  are in full force and  effect and have not been  amended,
altered or repealed as of the date hereof.  Signed  originals of the Resolutions
appear in the minute  book of the  Borrower.  The  Resolutions  were  adopted in
accordance with law and in accordance  with the By-Laws of the Borrower.  A true
and correct copy of the Borrower's  Articles of  Incorporation,  as in effect on
the date hereof, is attached hereto as Exhibit 1. A true and correct copy of the
Borrower's  By-Laws,  as in effect on the date  hereof,  is  attached  hereto as
Exhibit 2.

     3. The Borrower has duly authorized,  executed and delivered,  and approved
by all necessary  corporate action, the Fourth Modification of Third Amended and
Restated Loan Agreement and First Modification of Note, dated as of December 31,
1999,  by an  between  the  Borrower  and Bank of  America,  N.A.  (the  "Fourth
Modification"),  pursuant to, and in full compliance with,  authority granted by
the  Directors  of  the  Borrower  in  the  Resolutions.   The  Borrower  hereby
acknowledges  receipt of an executed  counterpart  or photocopy (as executed) of
the Fourth Modification.

     4. The  persons  named  below are on the date  hereof the duly  elected and
qualified  incumbents  of the  offices of the  Borrower  set forth below next to
their  respective  names,  and the  signatures  appearing  at the right of their
respective names below are the genuine signatures of such officers:

             Name and Title                                   Signature

Steven G. Anderson,    President and Chief Executive   _________________________
                       Officer

Edwin B. Cordell, Jr., Vice President and Chief        _________________________
                       Financial Officer

     5. The Borrower has the corporate power to execute the Fourth  Modification
and to perform the  obligations  required to be performed by the Borrower  under
the terms of the Fourth Modification.

     6. As of the date hereof,  and after  giving  effect to the  execution  and
delivery of the Fourth Modification,  each of the representations and warranties
of the Borrower in the Fourth  Modification  is true and correct in all material
respects  and no Default or Event of Default  (as such terms are  defined in the
Fourth  Modification or the Loan Agreement referred to therein) has occurred and
is continuing.

     7. The seal affixed to this certificate and the Fourth  Modification is the
legally adopted, proper and only official corporate seal of the Borrower.

     8. The Borrower's  chief  executive  office and principal place of business
(within   the   meaning  of   Official   Code  of  Georgia   Annotated   Section
11-9-401(1)(b)) is located in Cobb County,  Georgia and its principal  executive
office  (within the meaning of Section  6323(f) of the Internal  Revenue Code of
1986, as amended) is located in Cobb County, Georgia.

     9. The Borrower's federal taxpayer identification number is 59-2417093.

     IN WITNESS WHEREOF,  the undersigned have hereunto set their signatures and
the seal of the Borrower as of the 31st day of December, 1999.


                        ____________________________________________________
                        Steven G.  Anderson,  President and Chief  Executive
                        Officer of CryoLife, Inc.
(CORPORATE SEAL)


                        ____________________________________________________
                        Edwin B.  Cordell,  Jr.,  Vice  President  and Chief
                        Financial Officer of CryoLife, Inc.



<PAGE>


                                    EXHIBIT 1

                     See attached Articles of Incorporation




<PAGE>

                                    EXHIBIT 2

                              See attached By-Laws




1216314v1



                       Standard Form of Agreements Between
                            Owner and Design/Builder

                      AIA Document A191 - Electronic Format
                                                                                

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED  WITH RESPECT TO ITS COMPLETION OR  MODIFICATION.  AUTHENTICATION  OF
THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY USING AIA DOCUMENT D401.

Copyright  1985, (C) 1996 The American  Institute of  Architects,  1735 New York
Avenue,  NW, Washington,  DC 20006-5292.  Reproduction of the material herein or
substantial  quotation of its provisions  without the written  permission of the
AIA  violates  the  copyright  laws of the United  States and will  subject  the
violator to legal prosecution.


                                                                                

                                  1996 EDITION

                                TABLE OF ARTICLES

                                PART 1 AGREEMENT

<TABLE>
<CAPTION>
<S>                                                    <C>

1.     Design/Builder                                  6.     Dispute Resolution - Mediation and Arbitration
2.     Owner                                           7.     Miscellaneous Provisions
3.     Ownership   and  Use  of   Documents   and      8.     Termination of the Agreement
       Electronic data                                 9.     Basis of Compensation
4.     Time                                            10.    Other Conditions and Services
5.     Payments
</TABLE>


                                PART 2 AGREEMENT

<TABLE>
<CAPTION>
<S>                                                    <C>

1.     General Provisions                              8.     Changes in the Work
2.     Owner                                           9.     Correction of Work
3.     Design/Builder                                  10.    Dispute Resolution - Mediation and Arbitration
4.     Time                                            11.    Miscellaneous
 Provisions
5.     Payments                                        12.    Termination of the Agreement
6.     Protection of Persons and Property              13.    Basis of Compensation
7.     Insurance and Bonds                             14.    Other Conditions and Services
</TABLE>


                                                                                
AIA DOCUMENT A191 o  OWNER-DESIGN/BUILDER  AGREEMENT o SECOND EDITION o AIA(R) o
(C) 1996 THE  AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735  NEW YORK  AVENUE,  NW,
WASHINGTON,  DC  20006-5292 o WARNING:  Unlicensed  photocopying  violates  U.S.
copyright   laws  and  subject  to  legal   prosecution.   This   document   was
electronically produced with permission of the AIA and can be reproduced without
violation  until  the date of  expiration  as  noted  below.  

                                                    Electronic  Format A191-1996

User Document:  CRYOLIFE -- 1/19/2000.  AIA License Number 102512, which expires
on 2/5/2000 - Page #1

                                                           INITIAL______________

<PAGE>

                       Standard Form of Agreements Between
                            Owner and Design/Builder

                      AIA Document A191 - Electronic Format

This  document  comprises two separate  Agreements:  Part 1 Agreement and Part 2
Agreement.  Before  executing  the Part 1  Agreement,  the parties  should reach
substantial agreement on the Part 2 Agreement. To the extent referenced in these
Agreements,  subordinate  parallel  agreements  to A191 consist of AIA Documents
A491, Standard Form of Agreements Between Design/Builder and Contractor, and AIA
Document B901, Standard Form of Agreements Between Design/Builder and Architect.

                                PART 1 AGREEMENT

                                  1996 EDITION
                                                                                

AGREEMENT

made as of the 19th day of January in the year of Two Thousand.
(In words, indicate day, month and year.)

BETWEEN the Owner:
(Name and address)
CryoLife, Inc. 
1655 Roberts Blvd, NW 
Kennesaw, GA 30144 

and the Design/Builder:
(Name and address)
Choate Design &  Build Company 
1640 Powers Ferry Road 
Building 11, Suite 300 
Marietta, GA 30067

For the following Project:
(Include Project name, location and a summary description.)
CryoLife, Inc - Phase II Interiors 
1655 Roberts Blvd, NW 
Kennesaw, GA 30144

The  architectural  services  described  in  Article 1 will be  provided  by the
following person or entity who is lawfully licensed to practice architecture:

<TABLE>
<CAPTION>
<S>                                                <C>                            <C>

           (Name and address)                      (Registration Number)          (Relationship to Design/Builder)
Lockwood Greene Engineering, Inc.                                                 Subcontractor-Architecture
Inforum, Suite 4000, 250 Williams St.                                             & Engineering
Atlanta, GA 30303-1306
</TABLE>


Normal  structural,  mechanical  and  electrical  engineering  services  will be
provided contractually through the Architect except as indicated below:

<TABLE>
<CAPTION>
<S>                                                <C>                              <C>

     (Name, address and discipline)                (Registration Number)            (Relationship to Design/Builder)
</TABLE>


The Owner and the Design/Builder agree as set forth below.




<PAGE>

                      TERMS AND CONDITIONS-PART 1 AGREEMENT


                                    ARTICLE 1
                                 DESIGN/BUILDER

1.1 SERVICES

1.1.1 Preliminary design, budget, and schedule comprise the services required to
accomplish the  preparation and submission of the  Design/Builder's  Proposal as
well as the  preparation  and  submission of any  modifications  to the Proposal
prior to execution of the Part 2 Agreement.

1.2 RESPONSIBILITIES

1.2.1 Design  services  required by this Part 1 Agreement  shall be performed by
qualified architects and other design professionals. The contractual obligations
of such  professional  persons or entities are  undertaken  and performed in the
interest of the Design/Builder.

1.2.2 The  agreements  between  the  Design/Builder  and the persons or entities
identified in this Part 1 Agreement, and any subsequent modifications,  shall be
in writing.  These agreements,  including financial arrangements with respect to
this Project, shall be promptly and fully disclosed to the owner upon request.

1.2.3 Construction  budgets shall be prepared by qualified  professionals,  cost
estimators  or  contractors  retained  by  and  acting  in the  interest  of the
Design/Builder.

1.2.4  The  Design/Builder  shall  be  responsible  to the  Owner  for  acts and
omissions of the Design/Builder's employees, subcontractors and their agents and
employees,  and  other  persons,   including  the  Architect  and  other  design
professionals,  performing any portion of the Design/Builder's obligations under
this Part 1 Agreement.  The Design/Builder  shall be limited in liability to the
extent of the Architect's professional design liability insurance.

1.2.5 If the  Design/Builder  believes  or is  advised  by the  Architect  or by
another  design  professional  retained to provide  services on the Project that
implementation  of any  instruction  received  from  the  Owner  would  cause  a
violation of any applicable  law, the  Design/Builder  shall notify the Owner in
writing.  Neither the  Design/Builder  nor the  Architect  shall be obligated to
perform any act which either believes will violate any applicable law.

1.2.6  Nothing  contained in this Part 1 Agreement  shall  create a  contractual
relationship   between  the  Owner  and  a  person  or  entity  other  than  the
Design/Builder.

1.3 BASIC SERVICES

1.3.1 The  Design/Builder  has provided a preliminary  evaluation  (Exhibit "A",
Final  Build-Out  Interiors  dated  10/19/99) of the Owner's program and project
budget requirements, each in terms of the other.

1.3.2 The  Design/Builder  shall visit the site,  become familiar with the local
conditions,  and correlate  observable  conditions with the  requirements of the
Owner's program, schedule, and budget.

1.3.3 The Design/Builder shall review laws applicable to design and construction
of the Project;  correlate such laws with the Owner's program requirements;  and
advise the Owner if any program  requirement may cause a violation of such laws.
Necessary  changes to the Owner's  program shall be  accomplished by appropriate
written modification or disclosed as described in Paragraph 1.3.5.

1.3.4 The Design/Builder shall review with the Owner a alternative approaches to
design and construction of the Project.

1.3.5 The  Design/Builder  shall submit to the Owner a Proposal,  including  the
completed  Preliminary  Design  Documents,  a statement of the proposed contract
sum, and a proposed schedule for completion of the Project.  Preliminary  Design
Documents shall consist of preliminary design drawings,  outline  specifications
or other  documents  sufficient to establish the size,  quality and character of
the entire Project,  its architectural,  mechanical and electrical systems,  and
the  materials  and such other  elements of the  Project as may be  appropriate.
Deviations  from  the  Owner's  program  shall  be  disclosed  in the  Proposal.
[intentionally omitted] . The Part 2 Agreement is accepted herein by the Owner.

1.4 ADDITIONAL SERVICES

1.4.1 The  Additional  Services  described  under  this  Paragraph  1.4 shall be
provided  by the  Design/Builder  and paid for by the  Owner  if  authorized  or
confirmed in writing by the Owner.

1.4.2 Making  revisions in the  Preliminary  Design  Documents,  budget or other
documents when such revisions are:

     .1   inconsistent  with approvals or instructions  previously  given by the
          Owner,  including  revisions  made  necessary  by  adjustments  in the
          Owner's program or Project budget;

     .2   required by the  enactment or revision of codes,  laws or  regulations
          subsequent to the preparation of such documents; or

     .3   due to changes  required as a result of the Owner's  failure to render
          decisions in a timely manner.

1.4.3 Providing more extensive  programmatic criteria than that furnished by the
Owner as described in Paragraph 2.1. When authorized,  the Design/Builder  shall
provide  professional  services  to assist the Owner in the  preparation  of the
program. Programming services may consist of:

     .1   consulting with the Owner and other persons or entities not designated
          in this Part 1  Agreement  to define the program  requirements  of the
          Project and to review the  understanding of such requirements with the
          Owner;

     .2   documentation of the applicable requirements necessary for the various
          Project functions or operations;

     .3   providing a review and analysis of the functional  and  organizational
          relationships, requirements, and objectives for the Project;

     .4   setting  forth a  written  program  of  requirements  for the  Owner's
          approval   which   summarizes   the  Owner's   objectives,   schedule,
          constraints, and criteria.

1.4.4 Providing financial feasibility or other special studies.

1.4.5 Providing planning surveys,  site evaluations,  or comparative  studies of
prospective sites.

1.4.6 Providing special surveys,  environmental studies and submissions required
for approvals of governmental authorities or others having jurisdiction over the
Project.

1.4.7 Providing services relative to future facilities, systems, and equipment.

1.4.8 Providing  services at the Owner's  specific  request to perform  detailed
investigations of existing conditions or facilities or to make measured drawings
thereof.

1.4.9 Providing  services at the Owner's specific request to verify the accuracy
of drawings or other information furnished by the Owner.

1.4.10 Coordinating  services in connection with the work of separate persons or
entities  retained  by the Owner,  subsequent  to the  execution  of this Part 1
Agreement.

1.4.11 Providing analyses of owning and operating costs.

1.4.12 Providing  interior design and other similar services  required for or in
connection  with  the  selection,  procurement  or  installation  of  furniture,
furnishings, and related equipment.

1.4.13 [intentionally omitted]

1.4.14  Making  investigations,   inventories  of  materials  or  equipment,  or
valuations and detailed appraisals of existing facilities.

                                    ARTICLE 2
                                      OWNER

2.1 RESPONSIBILITIES

2.1.1 The Owner shall  provide full  information  in a timely  manner  regarding
requirements for the Project,  including a written program which shall set forth
the Owner's objectives, schedule, constraints and criteria.

2.1.2 The Owner shall  establish  and update an overall  budget for the Project,
including  reasonable  contingencies.  This  budget  shall  not  constitute  the
contract sum.

2.1.3  The Owner  shall  designate  a  representative  authorized  to act on the
Owner's  behalf  with  respect  to the  Project.  The  Owner or such  authorized
representative shall render decisions in a timely manner pertaining to documents
submitted  by the  Design/Builder  in order to avoid  unreasonable  delay in the
orderly and sequential progress of the Design/Builder's  services. The Owner may
obtain  independent review of the documents by a separate  architect,  engineer,
contractor,  or cost estimator under contract to or employed by the Owner.  Such
independent review shall be undertaken at the Owner's expense in a timely manner
and shall not delay the orderly progress of the Design/Builder's  services.  The
Owner designates Al Heacox/Tony Schreiber as the Owner's Representatives.

2.1.4 The Owner shall furnish surveys describing physical characteristics, legal
limitations  and utility  locations  for the site of the Project,  and a written
legal  description of the site. The surveys and legal information shall include,
as applicable,  grades and lines of streets,  alleys,  pavements,  and adjoining
property  and  structures;  adjacent  drainage;   rights-of-way,   restrictions,
easements, encroachments, zoning, deed restrictions,  boundaries and contours of
the site;  locations,  dimensions  and  necessary  data  pertaining  to existing
buildings,  other improvements and trees; and information  concerning  available
utility  services  and lines,  both public and  private,  above and below grade,
including  inverts  and  depths.  All the  information  on the  survey  shall be
referenced to a Project benchmark.

2.1.5 The Owner shall furnish the services of  geotechnical  engineers when such
services are stipulated in this Part 1 Agreement, or deemed reasonably necessary
by the  Design/Builder.  Such  services  may include but are not limited to test
borings,  test pits,  determinations of soil bearing values,  percolation tests,
evaluations of hazardous materials,  ground corrosion and resistivity tests, and
necessary  operations  for  anticipating  subsoil  conditions.  The  services of
geotechnical  engineer(s) or other  consultants  shall include  preparation  and
submission of all appropriate reports and professional recommendations.

2.1.6 The Owner shall  disclose,  to the extent known to the Owner,  the results
and reports of prior tests,  inspections  or  investigations  conducted  for the
Project involving:  structural or mechanical  systems;  chemical,  air and water
pollution;   hazardous   materials;   or  other   environmental  and  subsurface
conditions.  The  Owner  shall  disclose  all  information  known  to the  Owner
regarding  the presence of pollutants  at the  Project's  site.  The Owner shall
furnish  a  list  of  all  Owner  furnished-Owner  installed  (OFOI)  and  Owner
Furnished-Contractor  Installed  (OFCI)  equipment  completed  with cut  cheets,
drawings, diagrams, etc. The Owner shall furnish a list of "Sole Source" vendors
whose products or equipment must be used as part of the work.

2.1.7 The Owner shall furnish all legal,  accounting  and  insurance  counseling
services  as may be  necessary  at any  time  for the  Project,  including  such
auditing  services  as the Owner may  require  to  verify  the  Design/Builder's
Applications for Payment.

2.1.8 The Owner shall promptly obtain  easements,  zoning  variances,  and legal
authorizations  regarding site  utilization  where essential to the execution of
the Owner's program.

2.1.9 Those services,  information,  surveys, and reports required by Paragraphs
2.1.4 through  2.1.8 which are within the Owner's  control shall be furnished at
the Owner's expense,  and the Design/Builder  shall be entitled to rely upon the
accuracy and  completeness  thereof,  except to the extent the Owner advises the
Design/Builder to the contrary in writing.


2.1.10  If the  Owner  requires  the  Design/Builder  to  maintain  any  special
insurance  coverage,  policy,  amendment,  or  rider,  the  Owner  shall pay the
additional  cost  thereof,  except  as  otherwise  stipulated  in  this  Part  1
Agreement.

2.1.11 The Owner shall communicate with persons or entities employed or retained
by the Design/Builder  through the Design/Builder,  unless otherwise directed by
the Design/Builder.

                                    ARTICLE 3
                         OWNERSHIP AND USE OF DOCUMENTS
                               AND ELECTRONIC DATA

3.1 Drawings,  specifications, and other documents and electronic data furnished
by the  Design/Builder  are  instruments of service.  [intentionally  omitted] .
Drawings,  specifications, and other documents and electronic data are furnished
for use  solely  with  respect  to this Part 1  Agreement.  The  Owner  shall be
permitted to retain  copies,  including  reproducible  copies,  of the drawings,
specifications,  and  other  documents  and  electronic  data  furnished  by the
Design/Builder  for  information  and reference in  connection  with the Project
except as provided in Paragraphs 3.2 and 3.3.

3.2 [intentionally omitted]

3.3 If the Design/Builder  defaults in the  Design/Builder's  obligations to the
Owner,  the  Architect  shall grant a license to the Owner to use the  drawings,
specifications,  and  other  documents  and  electronic  data  furnished  by the
Architect to the Design/Builder  for the completion of the Project,  conditioned
upon the Owner's execution of an agreement to cure the Design/Builder's  default
in payment to the Architect for services  previously  performed and to indemnify
the  Architect  with  regard  to claims  arising  from such  reuse  without  the
Architect's professional involvement.

3.4  Submission  or  distribution  of the  Design/Builder's  documents  to  meet
official regulatory  requirements or for similar purposes in connection with the
Project  is not to be  construed  as  publication  in  derogation  of the rights
reserved in Paragraph 3. 1.

                                    ARTICLE 4
                                      TIME

4.1 Upon the request of the Owner, the  Design/Builder  shall prepare a schedule
for the performance of the Basic and Additional  Services which shall not exceed
the time limits  contained in Paragraph  10.1 and shall include  allowances  for
periods of time required for the Owner's  review and for approval of submissions
by authorities having jurisdiction over the Project. Exhibit "C" Schedule.

4.2 If the  Design/Builder  is delayed in the performance of services under this
Part 1 Agreement through no fault of the Design/Builder, any applicable schedule
shall be equitably adjusted.

                                    ARTICLE 5
                                    PAYMENTS

5.1 The initial  payment  provided in Article 9 shall be made upon  execution of
this Part 1  Agreement  and  credited  to the  Owner's  account as  provided  in
Subparagraph 9.1.2.

5.2  Subsequent   payments  for  Basic  Services,   Additional   Services,   and
Reimbursable  Expenses  provided  for in this  Part 1  Agreement  shall  be made
monthly on the basis set forth in Article 9.

5.3 Within ten (10) days of the  Owner's  receipt  of a properly  submitted  and
correct   Application  for  Payment,   the  Owner  shall  make  payment  to  the
Design/Builder.

5.4 Payments due the  Design/Builder  under this Part 1 Agreement  which are not
paid when due shall bear  interest  from the date due at the rate  specified  in
Paragraph  9.5,  or in the  absence  of a  specified  rate,  at the  legal  rate
prevailing where the Project is located.

                                    ARTICLE 6
                          DISPUTE RESOLUTION-MEDIATION
                                 AND ARBITRATION

6.1 Claims,  disputes or other  matters in question  between the parties to this
Part 1 Agreement  arising out of or relating to this Part 1 Agreement  or breach
thereof  shall be  subject to and  decided by  mediation  or  arbitration.  Such
mediation or arbitration  shall be conducted in accordance with the Construction
Industry Mediation or Arbitration Rules of the American Arbitration  Association
currently in effect.

6.2 In  addition to and prior to  arbitration,  the  parties  shall  endeavor to
settle  disputes by mediation.  Demand for  mediation  shall be filed in writing
with the other party to this Part 1 Agreement and with the American  Arbitration
Association. A demand for mediation shall be made within a reasonable time after
the claim, dispute or other matter in question has arisen. In no event shall the
demand  for  mediation  be made  after  the date  when  institution  of legal or
equitable  proceedings based on such claim,  dispute or other matter in question
would be barred by the applicable statute of repose or limitations.

6.3 Demand for  arbitration  shall be filed in writing  with the other  party to
this Part 1 Agreement and with the American  Arbitration  Association.  A demand
for arbitration shall be made within a reasonable time after the claim,  dispute
or other  matter in  question  has  arisen.  In no event  shall the  demand  for
arbitration  be made  after  the date  when  institution  of legal or  equitable
proceedings  based on such claim,  dispute or other matter in question  would be
barred by the applicable statutes of repose or limitations.

6.4 An arbitration  pursuant to this Paragraph may be joined with an arbitration
involving common issues of law or fact between the Design/Builder and any person
or entity with whom the Design/Builder has a contractual obligation to arbitrate
disputes.  No  other  arbitration  arising  out of or  relating  to this  Part 1
Agreement shall include,  by  consolidation,  joinder or in any other manner, an
additional  person or entity not a party to this Part 1 Agreement or not a party
to an agreement with the Design/Builder,  except by written consent containing a
specific   reference  to  this  Part  1  Agreement  signed  by  the  Owner,  the
Design/Builder and all other persons or entities sought to be joined. Consent to
arbitration  involving  an  additional  person  or entity  shall not  constitute
consent to  arbitration  of any claim,  dispute or other  matter in question not
described  in the  written  consent  or with a person  or  entity  not  named or
described therein.  The foregoing agreement to arbitrate and other agreements to
arbitrate  with an additional  person or entity duly consented to by the parties
to this Part 1 Agreement  shall be  specifically  enforceable in accordance with
applicable law in any court having jurisdiction thereof.

6.5 The award  rendered by the  arbitrator or  arbitrators  shall be final,  and
judgment may be entered upon it in accordance  with  applicable law in any court
having jurisdiction thereof.

                                    ARTICLE 7
                            MISCELLANEOUS PROVISIONS

7.1 Unless  otherwise  provided,  this Part 1 Agreement shall be governed by the
law of the place where the Project is located.

7.2 The Owner  and the  Design/Builder,  respectively,  bind  themselves,  their
partners,  successors,  assigns and legal  representatives to the other party to
this Part 1 Agreement and to the partners,  successors and assigns of such other
party with respect to all covenants of this Part 1 Agreement.  Neither the Owner
nor the  Design/Builder  shall assign this Part 1 Agreement  without the written
consent of the other.

7.3  Unless  otherwise  provided,  neither  the  design  for  nor  the  cost  of
remediation  of  hazardous   materials  shall  be  the   responsibility  of  the
Design/Builder.

7.4 [intentionally omitted] This Part 1 Agreement may be amended only by written
instrument signed by both the Owner and the Design/Builder.

7.5 Prior to the  termination  of the  services  of the  Architect  or any other
design  professional  designated  in this Part 1 Agreement,  the  Design/Builder
shall identify to the Owner in writing another architect or design  professional
with respect to whom the Owner has no  [intentionally  omitted]  objection,  who
will provide the services  originally  to have been provided by the Architect or
other design professional whose services are being terminated.

                                    ARTICLE 8
                          TERMINATION OF THE AGREEMENT

8.1 This Part 1 Agreement may be terminated by either party upon seven (7) days'
written  notice  should  the  other  party  fail  to  perform  substantially  in
accordance  with  its  terms  through  no  fault  of the  party  initiating  the
termination.

8.2 This Part 1 Agreement  may be  terminated by the Owner without cause upon at
least seven (7) days' written notice to the Design/Builder.

8.3 In the  event  of  termination  not the  fault  of the  Design/Builder,  the
Design/Builder  shall be compensated  for services  performed to the termination
date,  together with  Reimbursable  Expenses then due and Termination  Expenses.
Termination   Expenses  are  expenses  directly   attributable  to  termination,
including  a  reasonable   amount  for  overhead  and  profit,   for  which  the
Design/Builder is not otherwise compensated under this Part 1 Agreement.

                                    ARTICLE 9
                              BASIS OF COMPENSATION

The Owner shall  compensate  the  Design/Builder  in accordance  with Article 5,
Payments, and the other provisions of this Part 1 Agreement as described below.

9.1 COMPENSATION FOR BASIC SERVICES

9.1.1 FOR BASIC SERVICES, compensation shall be as follows:

9.1.2  AN  INITIAL  PAYMENT  of See  Part Two  Dollars  ($ ) shall be made  upon
execution  of this Part 1  Agreement  and  credited  to the  Owner's  account as
follows:

9.1.3 SUBSEQUENT PAYMENTS shall be as follows: See Part Two.

9.2 COMPENSATION FOR ADDITIONAL SERVICES

9.2.1 FOR ADDITIONAL SERVICES, compensation shall be as follows: See Part Two.

9.3 REIMBURSABLE EXPENSES

9.3.1  Reimbursable  Expenses  are in  addition  to  Compensation  for Basic and
Additional Services,  and include actual expenditures made by the Design/Builder
and the  Design/Builder's  employees  and  contractors  in the  interest  of the
Project, as follows:

9.3.2 FOR REIMBURSABLE  EXPENSES,  compensation  shall be a multiple of See Part
Two (  ) times the amounts expended.

9.4 DIRECT  PERSONNEL  EXPENSE is defined as the direct  salaries  of  personnel
engaged  on the  Project,  and the  portion of the cost of their  mandatory  and
customary  contributions and benefits related thereto,  such as employment taxes
and  other  statutory  employee  benefits,   insurance,  sick  leave,  holidays,
vacations, pensions, and similar contributions and benefits.

9.5 INTEREST PAYMENTS

9.5.1 The rate of interest  for past due  payments  shall be as follows:  1% per
month.

(Usury laws and  requirements  under the Federal  Truth in Lending Act,  similar
state and local  consumer  credit laws and other  regulations at the Owner's and
Design/Builder's  principal  places of business,  at the location of the Project
and elsewhere may affect the validity of this  provision.  Specific legal advice
should be obtained with respect to deletion, modification or other requirements,
such as written disclosures or waivers.)

9.6  IF  THE  SCOPE  of  the  Project  is  changed  materially,  the  amount  of
compensation shall be equitably adjusted.

9.7 The  compensation  set forth in this  Part 1  Agreement  shall be  equitably
adjusted if through no fault of the  Design/Builder  the services  have not been
completed within Exhibit "C" ( ) months of the date of this Part 1 Agreement.

                                   ARTICLE 10
                          OTHER CONDITIONS AND SERVICES

10.1 The Basic  Services to be performed  shall be commenced on and,  subject to
authorized adjustments and to delays not caused by the Design/Builder,  shall be
completed in (Exhibit "C") calendar  days. The  Design/Builder's  Basic Services
consist of those  described  in  Paragraph  1.3 as part of Basic  Services,  and
include normal professional engineering and preliminary design services,  unless
otherwise indicated.

10.2 Services  beyond those  described in Paragraph 1.4 are as follows:  (Insert
descriptions of other services,  identify  Additional  Services  included within
Basic  Compensation  and  modifications  to the payment and  compensation  terms
included in this Agreement.)

10.3 The Owner's preliminary program,  budget, and other documents,  if any, are
enumerated as follows:

Title                                                        Date

Exhibit "A" - CryoLife, Inc. Final Build-Out Interiors dated 10/19/99.
Exhibit "B" - Contract Breakdown (One Page).
Exhibit "C" - Preliminary Project Schedule.
Exhibit "D" - List of Shell Drawings - Phase I (One Page).
Exhibit "El" - Lockwood Greene - Hourly Rate Compensation (One Page).
Exhibit "E2" - Lockwood Greene - Reimbursable Expenses (One Page).


This Agreement entered into as of the day and year first written above.

OWNER                                     DESIGN BUILDER


/s/ Albert E. Heacox                      /s/ Wm. M. Choate 
--------------------------------          --------------------------------------
(Signature)                               (Signature)

Al Heacox, VP - Lab Operators             Choate Design & Build Company
--------------------------------          --------------------------------------
Cryolife, Inc.                            (Printed name and title)
--------------------------------
(Printed name and title)

<PAGE>
                       Standard Form of Agreements Between
                            Owner and Design/Builder

                      AIA Document A191 - Electronic Format

This document  comprises two separate  Agreements:  Part 1 Agreements and Part 2
Agreement.  Before  executing  the Part 1  Agreement,  the parties  should reach
substantial agreement on the Part 2 Agreement. To the extent referenced in these
Agreements,  subordinate  parallel  agreements  to A191 consists of AIA Document
A491, Standard Form of Agreements Between Design/Builder and Contractor, and AIA
Document B901, Standard Form of Agreements Between Design/Builder and Architect.

                                PART 2 AGREEMENT

                                  1996 EDITION
                                                                               
AGREEMENT

made as of the 19th day of January in the year of Two Thousand.
(In words, indicate day, month and year.)

BETWEEN the Owner:
(Name and address)
CryoLife Inc.
1655 Roberts Blvd, NW
Kennesaw, GA 30144

and the Design/Builder:
(Name and address)
Choate Design & Build Company
1640 Powers Ferry Road
Building 11, Suite 300
Marietta, GA 30067

For the following Project:
(Include Project name, location and a summary description.)
CryoLife, Inc. - Phase II Interiors
1655 Roberts Blvd, NW
Kennesaw, GA 30144

The  architectural  services  described  in  Article 3 will be  provided  by the
following person or entity who is lawfully licensed to practice architecture:

<TABLE>
<CAPTION>
<S>                                       <C>                              <C>

  (Name and address)                      (Registration Number)            (Relationship to Design/Builder)
Lockwood Greene Engineering, Inc.                                             Subcontractor-Architecture
Inforum, Suite 4000, 250 Williams St.                                              & Engineering
Atlanta, GA 30303-1306
</TABLE>


Normal  mechanical  and  electrical   engineering   services  will  be  provided
contractually  through the Architect except as indicated below:  

<TABLE>
<CAPTION>
<S>                             <C>                   <C>
(Name.  address and discipline) (Registration Number) (Relationship to Design/Builder) 
</TABLE>


The Owner and the Design/Builder agree as set forth below.

<PAGE>

                                    ARTICLE 1
                               GENERAL PROVISIONS

1.1 BASIC DEFINITIONS

1.1.1 The Contract  Documents  consist of the Part 1 Agreement to the extent not
modified by this Part 2 Agreement,  this Part 2 Agreement,  the Design/Builder's
Proposal  and  written  addenda to the  Proposal  identified  in Article 14, the
Construction  Documents  approved by the Owner in accordance  with  Subparagraph
3.2.3 and  Modifications  issued after  execution  of this Part 2  Agreement.  A
Modification  is a Change Order or a written  amendment to this Part 2 Agreement
signed by both parties,  or a Construction  Change Directive issued by the Owner
in accordance with Paragraph 8.3.

1.2.2 The term  "Work"  means the  construction  and  services  provided  by the
Design/Builder to fulfill the Design/Builder's obligations.

1.2 EXECUTION, CORRELATION AND INTENT

1.2.1 It is the  intent  of the  Owner  and  Design/Builder  that  the  Contract
Documents include all items necessary for proper execution and completion of the
Work.  The Contract  Documents  are  complementary,  and what is required by one
shall be as binding as if required  by all;  performance  by the  Design/Builder
shall be required only to the extent  consistent  with and reasonably  inferable
from the Contract  Documents as being necessary to produce the intended results.
Words that have well-known technical or construction  industry meanings are used
in the Contract Documents in accordance with such recognized meanings.

1.2.2 If the  Design/Builder  believes  or is  advised  by the  Architect  or by
another  design  professional  retained to provide  services on the Project that
implementation  of any  instruction  received  from  the  Owner  would  cause  a
violation of any applicable  law, the  Design/Builder  shall notify the Owner in
writing.  Neither the  Design/Builder  nor the  Architect  shall be obligated to
perform any act which either believes will violate any applicable law.

1.2.3  Nothing  contained in this Part 2 Agreement  shall  create a  contractual
relationship  between  the  Owner  and any  person  or  entity  other  than  the
Design/Builder.

1.3 OWNERSHIP AND USE OF DOCUMENTS

1.3.1  Drawings,   specifications,  and  other  documents  and  electronic  data
furnished  by the  Design/Builder  are  instruments  of service.  [intentionally
omitted] . Drawings, specifications, and other documents and electronic data are
furnished for use solely with respect to this Part 2 Agreement.  The Owner shall
be permitted to retain copies,  including  reproducible copies, of the drawings,
specifications,  and  other  documents  and  electronic  data  furnished  by the
Design/Builder  for  information  and reference in  connection  with the Project
except as provided in Subparagraphs 1.3.2 and 1.3.3.

1.3.2  Drawings,   specifications,  and  other  documents  and  electronic  data
furnished  by the  Design/Builder  shall  not be used by the  Owner or others on
other projects,  for additions to this Project or for completion of this Project
by others,  except by agreement in writing and with appropriate  compensation to
the Design/Builder, unless the Design/Builder is adjudged to be in default under
this Part 2 Agreement or under any other subsequently executed agreement.

1.3.3 If the Design/Builder defaults in the Design/Builder's  obligations to the
Owner,  the  Architect  shall grant a license to the Owner to use the  drawings,
specifications,  and  other  documents  and  electronic  data  furnished  by the
Architect   to  the   Design/Builder   for  the   completion   of  the  Project,
[intentionally omitted] .

1.3.4  Submission  or  distribution  of the  Design/Builder's  documents to meet
official regulatory  requirements or for similar purposes in connection with the
Project  is not to be  construed  as  publication  in  derogation  of the rights
reserved in Subparagraph 1.3.1.

                                    ARTICLE 2
                                      OWNER

2.1 The Owner shall designate a representative  authorized to act on the Owner's
behalf with respect to the Project. The Owner or such authorized  representative
shall  examine  documents  submitted  by the  Design/Builder  and  shall  render
decisions in a timely manner and in accordance with the schedule accepted by the
Owner. The Owner may obtain  independent  review of the Contract  Documents by a
separate architect, engineer, contractor, or cost estimator under contract to or
employed  by the Owner.  Such  independent  review  shall be  undertaken  at the
Owner's  expense in a timely manner and shall not delay the orderly  progress of
the  Work.  The  Owner  designates  Al  Heacox/Tony  Schreiber  as  the  Owner's
Representatives.

2.2 The Owner may appoint an on-site project  representative to observe the Work
and to have such other responsibilities as the Owner and Design/Builder agree in
writing.

2.3 The Owner shall cooperate with the  Design/Builder  in securing building and
other permits, licenses and inspections.  The Owner shall not be required to pay
the fees for such permits, licenses and inspections unless the cost of such fees
is excluded from the Design/Builder's Proposal.

2.4 The Owner shall furnish services of land surveyors,  geotechnical engineers,
and other  consultants  for subsoil,  air and water  conditions,  in addition to
those  provided  under the Part 1  Agreement,  when  such  services  are  deemed
necessary  by the  Design/Builder  to  properly  carry out the  design  services
required by this Part 2 Agreement.

2.5 The Owner shall disclose,  to the extent known to the Owner, the results and
reports of prior tests,  inspections or investigations conducted for the Project
involving:  structural or mechanical systems; chemical, air and water pollution;
hazardous materials; or other environmental and subsurface conditions. The Owner
shall  disclose all  information  known to the Owner  regarding  the presence of
pollutants at the Project's site.

2.6 The Owner  shall  furnish all legal,  accounting  and  insurance  counseling
services  as may be  necessary  at any  time  for the  Project,  including  such
auditing  services  as the Owner may  require  to  verify  the  Design/Builder's
Applications for Payment.

2.7 Those services, information,  surveys and reports required by Paragraphs 2.4
through  2.6 which are within the  Owner's  control  shall be  furnished  at the
Owner's  expense,  and the  Design/Builder  shall be  entitled  to rely upon the
accuracy and  completeness  thereof,  except to the extent the Owner advises the
Design/Builder to the contrary in writing.

2.8 If the Owner requires the  Design/Builder  to maintain any special insurance
coverage,  policy,  amendment, or rider, the Owner shall pay the additional cost
thereof, except as otherwise stipulated in this Part 2 Agreement.

2.9 If the Owner observes or otherwise becomes aware of a fault or defect in the
Work or  nonconformity  with the  Design/Builder's  Proposal or the Construction
Documents,   the  Owner  shall  give  prompt   written  notice  thereof  to  the
Design/Builder.

2.10 The Owner shall, at the request of the  Design/Builder,  prior to execution
of this Part 2 Agreement  and promptly upon request  thereafter,  furnish to the
Design/Builder reasonable evidence that financial arrangements have been made to
fulfill the Owner's obligations under the Contract.

2.11 The Owner shall  communicate with persons or entities  employed or retained
by the Design/Builder  through the Design/Builder,  unless otherwise directed by
the Design/Builder.

                                    ARTICLE 3
                                 DESIGN/BUILDER

3.1 SERVICES AND RESPONSIBILITIES

3.1.1 Design  services  required by this Part 2 Agreement  shall be performed by
qualified architects and other design professionals. The contractual obligations
of such  professional  persons or entities are  undertaken  and performed in the
interest of the Design/Builder.

3.1.2 The  agreements  between  the  Design/Builder  and the persons or entities
identified in this Part 2 Agreement, and any subsequent modifications,  shall be
in writing.  These agreements,  including financial arrangements with respect to
this Project, shall be promptly and fully disclosed to the Owner upon request.

3.1.3  The  Design/Builder  shall  be  responsible  to the  Owner  for  acts and
omissions of the Design/Builder's employees, subcontractors and their agents and
employees,  and other  persons,  including  the  Architect  to the extent of the
Architect's  professional  design  liability  and  other  design  professionals,
performing  any portion of the  Design/Builder's  obligations  under this Part 2
Agreement.

3.2 BASIC SERVICES

3.2.1 The Design/Builder's Basic Services are described below and in Article 14.

3.2.2 The Design/Builder  shall designate a representative  authorized to act on
the Design/Builder's behalf with respect to the Project.

3.2.3 The  Design/Builder  shall submit  Construction  Documents  for review and
approval  by  the  Owner.   Construction   Documents   may   include   drawings,
specifications,  and other documents and electronic data setting forth in detail
the requirements for construction of the Work, and shall:


     .1   be consistent with the intent of the Design/Builder's Proposal;

     .2   provide information for the use of those in the building trades; and

     .3   include   documents   customarily   required  for  regulatory   agency
          approvals.

3.2.4 The Design/Builder, with the assistance of the Owner, shall file documents
required  to obtain  necessary  approvals  of  governmental  authorities  having
jurisdiction over the Project.

3.2.5 Unless otherwise  provided in the Contract  Documents,  the Design/Builder
shall provide or cause to be provided and shall pay for design services,  labor,
materials,  equipment, tools, construction equipment and machinery, water, heat,
utilities, transportation and other facilities and services necessary for proper
execution and completion of the Work, whether temporary or permanent and whether
or not incorporated or to be incorporated in the Work.

3.2.6  The  Design/Builder  shall be  responsible  for all  construction  means,
methods, techniques, sequences and procedures, and for coordinating all portions
of the Work under this Part 2 Agreement.

3.2.7 The  Design/Builder  shall keep the Owner  informed  of the  progress  and
quality of the Work.

3.2.8 The Design/Builder shall be responsible for correcting Work which does not
conform to the Contract Documents.

3.2.9 The  Design/Builder  warrants to the Owner that  materials  and  equipment
furnished  under the Contract  will be of good quality and new unless  otherwise
required or permitted by the Contract  Documents,  that the construction will be
free from faults and defects,  and that the  construction  will conform with the
requirements  of the Contract  Documents.  Construction  not conforming to these
requirements,  including substitutions not properly approved by the Owner, shall
be corrected in accordance with Article 9.

3.2.10 The Design/Builder shall pay all sales,  consumer,  use and similar taxes
which had been  legally  enacted at the time the  Design/Builder's  Proposal was
first  submitted  to the Owner,  and shall secure and pay for building and other
permits and governmental fees, licenses and inspections necessary for the proper
execution and completion of the Work which are either customarily  secured after
execution of a contract for construction or are legally required at the time the
Design/Builder's Proposal was first submitted to the Owner.

3.2.11 The  Design/Builder  shall comply with and give notices required by laws,
ordinances,  rules, regulations and lawful orders of public authorities relating
to the Project.

3.2.12 The  Design/Builder  shall pay  royalties  and license  fees for patented
designs,  processes or products. The Design/Builder shall defend suits or claims
for infringement of patent rights and shall hold the Owner harmless from loss on
account  thereof,  but shall not be responsible  for such defense or loss when a
particular design,  process or product of a particular  manufacturer is required
by the Owner.  However, if the Design/Builder has reason to believe the use of a
required  design,  process  or  product  is an  infringement  of a  patent,  the
Design/Builder  shall be  responsible  for such loss unless such  information is
promptly furnished to the Owner.

3.2.13 The Design/Builder shall keep the premises and surrounding area free from
accumulation of waste materials or rubbish caused by operations  under this Part
2 Agreement. At the completion of the Work, the Design/Builder shall remove from
the site waste materials,  rubbish,  the  Design/Builder's  tools,  construction
equipment, machinery, and surplus materials.

3.2.14  The  Design/Builder  shall  notify  the  Owner  when the  Design/Builder
believes  that the Work or an  agreed  upon  portion  thereof  is  substantially
completed. If the Owner concurs, the Design/Builder shall issue a Certificate of
Substantial  Completion which shall establish the Date of Substantial Completion
which  shall  establish  the Date of  Substantial  Completion,  shall  state the
responsibility of each party for security,  maintenance, heat, utilities, damage
to the Work and  insurance,  shall  include a list of items to be  completed  or
corrected and shall fix the time within which the Design/Builder  shall complete
items listed therein.  Disputes between the Owner and  Design/Builder  regarding
the Certificate of Substantial  Completion  shall be resolved in accordance with
provisions of Article 10.

3.2.15 The  Design/Builder  shall  maintain at the site for the Owner one record
copy of the drawings,  specifications,  product data,  samples,  shop  drawings,
Change Orders and other  modifications,  in good order and regularly  updated to
record the  completed  construction.  These shall be delivered to the Owner upon
completion of construction and prior to final payment.

3.3 ADDITIONAL SERVICES

3.3.1 The  services  described in this  Paragraph  3.3 are not included in Basic
Services  unless so  identified in Article 14, and they shall be paid for by the
Owner as provided in this Part 2 Agreement,  in addition to the compensation for
Basic Services.  The services  described in this Paragraph 3.3 shall be provided
only if authorized or confirmed in writing by the Owner.

3.3.2  Making  revisions  in drawings,  specifications,  and other  documents or
electronic data when such revisions are required by the enactment or revision of
codes,  laws or regulations  subsequent to the  preparation of such documents or
electronic data.

3.3.3 Providing  consultation  concerning replacement of Work damaged by fire or
other cause during construction,  and furnishing services required in connection
with the replacement of such Work.

3.3.4  Providing  services  in  connection  with a public  hearing,  arbitration
proceeding  or legal  proceeding,  except  where the  Design/Builder  is a party
thereto.

3.3.5 Providing coordination of construction performed by the Owner's own forces
or separate  contractors  employed by the Owner,  and  coordination  of services
required in connection with construction performed and equipment supplied by the
Owner.

3.3.6  Preparing a set of  reproducible  record  documents  or  electronic  data
showing significant changes in the Work made during construction.

3.3.7  Providing  assistance in the  utilization of equipment or systems such as
preparation  of  operation  and  maintenance  manuals,  training  personnel  for
operation and maintenance [intentionally omitted] .

                                    ARTICLE 4
                                      TIME

4.1 Unless otherwise  indicated,  the Owner and the Design/Builder shall perform
their  respective  obligations  expeditiously  as is consistent  with reasonable
skill and care and the orderly progress of the Project.

4.2 Time limits stated in the Contract Documents are of the essence. The Work to
be performed under this Part 2 Agreement shall commence upon receipt of a notice
to proceed unless  otherwise  agreed and,  subject to authorized  Modifications,
Substantial  Completion  shall be achieved on or before the date  established in
Article 14.

4.3  Substantial  Completion  is the stage in the  progress of the Work when the
Work or designated  portion thereof is sufficiently  complete in accordance with
the  Contract  Documents  so the Owner can  occupy or  utilize  the Work for its
intended use.

4.4 Based on the  Design/Builder's  Proposal,  a construction  schedule shall be
provided consistent with Paragraph 4.2 above.

4.5 If the  Design/Builder is delayed at any time in the progress of the Work by
an act or neglect of the  Owner,  Owner's  employees,  or  separate  contractors
employed by the Owner,  or by changes ordered in the Work, or by labor disputes,
fire,  unusual delay in deliveries,  adverse  weather  conditions not reasonably
anticipatable,    unavoidable    casualties   or   other   causes   beyond   the
Design/Builder's   control,   or  by  delay  authorized  by  the  Owner  pending
arbitration,  or by other  causes which the Owner and  Design/Builder  agree may
justify  delay,  then the Contract Time shall be  reasonably  extended by Change
Order.

                                    ARTICLE 5
                                    PAYMENTS

5.1 PROGRESS PAYMENTS

5.1.1 The  Design/Builder  shall deliver to the Owner itemized  Applications for
Payment in such detail as indicated in Article 14.

5.1.2 Within ten (10) days of the Owner's  receipt of a properly  submitted  and
correct   Application  for  Payment,   the  Owner  shall  make  payment  to  the
Design/Builder.

5.1.3 The  Application  for Payment  shall  constitute a  representation  by the
Design/Builder  to the Owner that the design and construction have progressed to
the point  indicated;  the quality of the Work covered by the  application is in
accordance with the Contract  Documents;  and the  Design/Builder is entitled to
payment in the amount requested.

5.1.4 Upon receipt of payment from the Owner, the Design/Builder  shall promptly
pay the Architect,  other design professionals and each contractor the amount to
which  each is  entitled  in  accordance  with the  terms  of  their  respective
contracts.

5.1.5 The Owner shall have no  obligation  under this Part 2 Agreement to pay or
to be  responsible  in any way for  payment  to the  Architect,  another  design
professional, or a contractor performing portions of the work.

5.1.6  Neither  progress  payment nor partial or entire use or  occupancy of the
Project by the Owner shall  constitute  an  acceptance of Work not in accordance
with the Contract Documents.

5.1.7 The Design/Builder  warrants that title to all construction  covered by an
Application  for  Payment  will  pass to the  Owner  no  later  than the time of
payment.  The  Design/Builder   further  warrants  that  upon  submittal  of  an
Application for Payment all  construction  for which payments have been received
from the Owner shall be free and clear of liens,  claims,  security interests or
encumbrances  in favor of the  Design/Builder  or any  other  person  or  entity
performing  construction  at the  site  or  furnishing  materials  or  equipment
relating to the construction.

5.1.8  At  the  time  of  Substantial  Completion,   the  Owner  shall  pay  the
Design/Builder  the  retainage,  if any,  less  reasonable  cost to  correct  or
complete  incorrect or incomplete Work. Final payment of such withheld sum shall
be made upon correction or completion of such Work.

Insert A:

5.2 FINAL PAYMENT

5.2.1 Neither final payment nor amounts retained, if any, shall become due until
the  Design/Builder  submits to the Owner (1) an affidavit that payrolls,  bills
for materials and equipment,  and other indebtedness connected with the Work for
which the Owner or Owner's  property might be  responsible  or encumbered  (less
amounts  withheld by the Owner)  have been paid or  otherwise  satisfied;  (2) a
certificate  evidencing  that  insurance  required by the Contract  Documents to
remain in force  after  final  payment  is  currently  in effect and will not be
canceled or allowed to expire until at least 30 days' prior  written  notice has
been given to the Owner; (3) a written statement that the  Design/Builder  knows
of no  substantial  reason that the insurance will not be renewable to cover the
period  required by the Contract  Documents;  (4) consent of surety,  if any, to
final payment; and (5) if required by the Owner, other data establishing payment
or satisfaction of obligations, such as receipts, releases and waivers of liens,
claims,  security interests or encumbrances arising out of the Contract,  to the
extent and in such form as may be  designed  by the Owner.  If a  contractor  or
other person or entity  entitled to assert a lien  against the Owner's  property
refuses to furnish a release or waiver required by the Owner, the Design/Builder
may furnish a bond satisfactory to the Owner to indemnify the Owner against such
lien.  If  such  lien  remains   unsatisfied   after   payments  are  made,  the
Design/Builder  shall  indemnify  the  Owner  for all loss and  cost,  including
reasonable  attorneys' fees incurred as a result of such lien. (6) Completion of
all punch list items.

5.2.2 When the Work has been  completed and the contract  fully  performed,  the
Design/Builder  shall submit a final  application for payment to the Owner,  who
shall make final payment within 30 days of receipt.

5.2.3 The making of final  payment  shall  constitute  a waiver of claims by the
Owner except those arising from:

     .1   liens,  claims,  security interests or encumbrances arising out of the
          Contract and unsettled;

     .2   failure of the Work to comply with the  requirements  of the  Contract
          Documents; or

     .3   terms of special warranties required by the Contract Documents.

5.2.4 Acceptance of final payment shall constitute a waiver of all claims by the
Design/Builder  except those  previously  made in writing and  identified by the
Design/Builder  as unsettled at the time of final  Application for Payment.  The
Owner shall reserve the right to review the  Design/Builder's  accounting  files
for up to 12 months after the date of Substantial Completion.

5.3 INTEREST PAYMENTS

5.3.1 Payments due the Design/Builder  under this Part 2 Agreement which are not
paid when due shall bear  interest  from the date due at the rate  specified  in
Article 13, or in the absence of a specified  rate, at the legal rate prevailing
where the Project is located.

                                    ARTICLE 6
                       PROTECTION OF PERSONS AND PROPERTY

6.1 The  Design/Builder  shall be responsible  for  initiating,  maintaining and
providing  supervision of all safety precautions and programs in connection with
the performance of this Part 2 Agreement.

6.2 The Design/Builder shall take reasonable  precautions for the safety of, and
shall provide  reasonable  protection to prevent damage,  injury or loss to: (1)
employees  on the Work and other  persons who may be affected  thereby;  (2) the
Work and materials and equipment to be incorporated therein,  whether in storage
on or off the site, under care, custody, or control of the Design/Builder or the
Design/Builder's  contractors;  and (3) other  property at or adjacent  thereto,
such as  trees,  shrubs,  lawns,  walks,  pavements,  roadways,  structures  and
utilities not designated for removal relocation, or replacement in the course of
construction.

6.3 The  Design/Builder  shall give  notices  and comply with  applicable  laws,
ordinances,  rules,  regulations and lawful orders of public authorities bearing
on the safety of persons or property or their protection from damage,  injury or
loss.

6.4 The Design/Builder  shall promptly remedy damage and loss (other than damage
or loss insured under  property  insurance  provided or required by the Contract
Documents)  to  property  at  the  site  caused  in  whole  or in  part  by  the
Design/Builder,  a  contractor  of the  Design/Builder  or  anyone  directly  or
indirectly  employed  by any of them,  or by anyone  for whose  acts they may be
liable.

                                    ARTICLE 7
                               INSURANCE AND BONDS

7.1 DESIGN/BUILDER'S LIABILITY INSURANCE

7.1.1 The  Design/Builder  shall  purchase  from and  maintain,  in a company or
companies  lawfully  authorized to do business in the  jurisdiction in which the
Project is located,  such  insurance  as will  protect the  Design/Builder  from
claims set forth below which may arise out of or result  from  operations  under
this  Part  2  Agreement  by  the  Design/Builder  or  by a  contractor  of  the
Design/Builder,  or by anyone directly or indirectly employed by any of them, or
by anyone for whose acts any of them may be liable:

     .1   claims  under  workers'  compensation,  disability  benefit  and other
          similar  employee  benefit laws that are  applicable to the Work to be
          performed;

     .2   claims for damages because of bodily injury,  occupational sickness or
          disease, or death of the Design/Builder's employees;

     .3   claims for damages because of bodily injury,  sickness or disease,  or
          death of persons other than the Design/Builder's employees;

     .4   claims for damages covered by usual personal injury liability coverage
          which are sustained (1) by a person as a result of an offense directly
          or   indirectly   related  to   employment   of  such  person  by  the
          Design/Builder or (2) by another person;

     .5   claims for damages,  other than to the Work itself,  because of injury
          to  or  destruction  of  tangible  property,  including  loss  of  use
          resulting therefrom;

     .6   claims  for  damages  because of bodily  injury,  death of a person or
          property  damage  arising out of  ownership,  maintenance  or use of a
          motor vehicle; and


     .7   claims involving  contractual  liability  insurance  applicable to the
          Design/Builder's obligations under Paragraph 11.5.

7.1.2 The insurance required by Subparagraph 7.1.1 shall be written for not less
than limits of liability  specified in this Part 2 Agreement or required by law,
whichever  coverage is greater.  Coverages,  whether written on an occurrence or
claims-made  basis,  shall  be  maintained  without  interruption  from  date of
commencement  of the Work until date of final  payment  and  termination  of any
coverage required to be maintained after final payment.

7.1.3  Certificates  of Insurance  acceptable to the Owner shall be delivered to
the  Owner  immediately  after  execution  of  this  Part  2  Agreement.   These
Certificates  and the insurance  policies  required by this  Paragraph 7.1 shall
contain a provision  that  coverages  afforded  under the  policies  will not be
canceled or allowed to expire until at least 30 days' prior  written  notice has
been  given  to the  Owner.  If any of the  foregoing  insurance  coverages  are
required to remain in force  after  final  payment,  an  additional  certificate
evidencing continuation of such coverage shall be submitted with the application
for  final  payment.  Information  concerning  reduction  of  coverage  shall be
furnished by the  Design/Builder  with reasonable  promptness in accordance with
the Design/Builder's information and belief.

7.2 OWNER'S LIABILITY INSURANCE

7.2.1 The Owner shall be responsible  for purchasing and maintaining the Owner's
usual liability insurance. Optionally, the Owner may purchase and maintain other
insurance for  self-protection  against  claims which may arise from  operations
under this Part 2 Agreement.  The  Design/Builder  shall not be responsible  for
purchasing and maintaining  this optional  Owner's  liability  insurance  unless
specifically required by the Contract Documents.

7.3 PROPERTY INSURANCE

7.3.1 Unless  otherwise  provided  under this Part 2 Agreement,  the Owner shall
purchase and  maintain,  in a company or companies  authorized to do business in
the jurisdiction in which the principal improvements are to be located, property
insurance  upon the Work to the full  insurable  value  thereof on a replacement
cost basis  without  optional  deductibles.  Such  property  insurance  shall be
maintained,  unless  otherwise  provided in the Contract  Documents or otherwise
agreed in writing by all  persons and  entities  who are  beneficiaries  of such
insurance,  until final payment has been made or until no person or entity other
than the  Owner has an  insurable  interest  in the  property  required  by this
Paragraph 7.3 to be insured,  whichever is earlier. This insurance shall include
interests of the Owner, the Design/Builder, and their respective contractors and
subcontractors in the Work.

7.3.2 Property  insurance  shall be on an all-risk  policy form and shall insure
against the perils of fire and extended  coverage  and  physical  loss or damage
including,   without  duplication  of  coverage,  theft,  vandalism,   malicious
mischief, collapse, falsework,  temporary buildings and debris removal including
demolition  occasioned by enforcement of any applicable legal requirements,  and
shall  cover  reasonable  compensation  for the  services  and  expenses  of the
Design/Builder's  Architect and other professionals required as a result of such
insured loss.  Coverage for other perils shall not be required unless  otherwise
provided in the Contract Documents.

7.3.3 If the Owner does not intend to purchase such property  insurance required
by this Part 2 Agreement and with all of the  coverages in the amount  described
above, the Owner shall so inform the Design/Builder prior to commencement of the
construction.  The  Design/Builder  may then effect insurance which will protect
the interests of the Design/Builder and the Design/Builder's  contractors in the
construction,  and by appropriate Change Order the cost thereof shall be charged
to the Owner. If the  Design/Builder is damaged by the failure or neglect of the
Owner to purchase or maintain insurance as described above, then the Owner shall
bear all reasonable costs properly attributable thereto.

7.3.4 Unless  otherwise  provided,  the Owner shall  purchase and maintain  such
boiler and  machinery  insurance  required by this Part 2  Agreement  or by law,
which shall  specifically  cover such insured  objects during  installation  and
until final acceptance by the Owner.  This insurance shall include  interests of
the  Owner,   the   Design/Builder,   the   Design/Builder's   contractors   and
subcontractors in the Work, and the Design/Builder's  Architect and other design
professionals. The Owner and the Design/Builder shall be named insureds.

7.3.5 A loss insured under the Owner's  property  insurance shall be adjusted by
the Owner as trustee and made payable to the Owner as trustee for the  insureds,
as their  interests  may  appear,  subject  to  requirements  of any  applicable
mortgagee  clause  and of  Subparagraph  7.3.10.  The  Design/Builder  shall pay
contractors their shares of insurance  proceeds received by the  Design/Builder,
and by appropriate agreement, written where legally required for validity, shall
require contractors to make payments to their subcontractors in similar manner.

7.3.6  Before an  exposure  to loss may  occur,  the Owner  shall  file with the
Design/Builder a copy of each policy that includes insurance  coverages required
by this  Paragraph  7.3.  Each policy  shall  contain all  generally  applicable
conditions,  definitions,  exclusions and endorsements  related to this Project.
Each policy  shall  contain a provision  that the policy will not be canceled or
allowed to expire until at least 30 days' prior written notice has been given to
the Design/Builder.

7.3.7 If the  Design/Builder  requests in writing that insurance for risks other
than those  described  herein or for other  special  hazards be  included in the
property insurance policy, the Owner shall, if possible,  obtain such insurance,
and the cost  thereof  shall be charged  to the  Design/Builder  by  appropriate
Change Order.

7.3.8 The Owner and the  Design/Builder  waive all rights against each other and
the  Architect  and other  design  professionals,  contractors,  subcontractors,
agents and  employees,  each of the other,  for damages  caused by fire or other
perils to the extent  covered by property  insurance  obtained  pursuant to this
Paragraph 7.3 or other property  insurance  applicable to the Work,  except such
rights  as they may have to  proceeds  of such  insurance  held by the  Owner as
trustee.  The  Owner or  Design/Builder,  as  appropriate,  shall  require  from
contractors and subcontractors by appropriate agreements,  written where legally
required for validity, similar waivers each in favor of other parties enumerated
in this Paragraph 7.3. The policies shall provide such waivers of subrogation by
endorsement  or otherwise.  A waiver of  subrogation  shall be effective as to a
person or entity even though that person or entity would  otherwise  have a duty
of indemnification,  contractual or otherwise, did not pay the insurance premium
directly or indirectly, and whether or not the person or entity had an insurable
interest in the property damaged.

7.3.9 If required in writing by a party in interest, the Owner as trustee shall,
upon  occurrence of an insured  loss,  give bond for proper  performance  of the
Owner's  duties.  The cost of required bonds shall be charged  against  proceeds
received as fiduciary. The Owner shall deposit in a separate account proceeds so
received,  which the Owner shall distribute in accordance with such agreement as
the parties in interest may reach, or in accordance with an arbitration award in
which case the procedure  shall be as provided in Article 10. If after such loss
no other special agreement is made, replacement of damaged Work shall be covered
by appropriate Change Order.

7.3.10  The Owner as  trustee  shall have power to adjust and settle a loss with
insurers  unless one of the parties in interest shall object in writing,  within
five (5) days after occurrence of loss to the Owner's exercise of this power; if
such  objection be made, the parties shall enter into dispute  resolution  under
procedures  provided in Article 10. If  distribution  of  insurance  proceeds by
arbitration is required, the arbitrators will direct such distribution.

7.3.11  Partial  occupancy  or use  prior to  Substantial  Completion  shall not
commence until the insurance company or companies  providing  property insurance
have consented to such partial occupancy or use by endorsement or otherwise. The
Owner and the  Design/Builder  shall take reasonable  steps to obtain consent of
the  insurance  company or  companies  and shall  not,  without  mutual  written
consent,  take any action with  respect to partial  occupancy  or use that would
cause cancellation, lapse or reduction of coverage.

7.4 LOSS OF USE INSURANCE

7.4.1 The Owner, at the Owner's option, may purchase and maintain such insurance
as will insure the Owner against loss of use of the Owner's property due to fire
or other hazards,  however caused. The Owner waives all rights of action against
the  Design/Builder  for  loss  of  use  of  the  Owner's  property,   including
consequential losses due to fire or other hazards, however caused.

                                    ARTICLE 8
                               CHANGES IN THE WORK

8.1 CHANGES

8.1.1  Changes in the Work may be  accomplished  after  execution of this Part 2
Agreement,  without  invalidating  this  Part  2  Agreement,  by  Change  Order,
Construction Change Directive,  or order for a minor change in the Work, subject
to the limitations stated in the Contract Documents.

8.1.2 A Change  Order  shall be based upon  agreement  between the Owner and the
Design/Builder;  a  Construction  Change  Directive  may be  issued by the Owner
without the agreement of the Design/Builder;  an order for a minor change in the
Work may be issued by the Design/Builder alone.

8.1.3 Changes in the Work shall be performed under applicable  provisions of the
Contract  Documents,  and the  Design/Builder  shall  proceed  promptly,  unless
otherwise provided in the Change Order,  Construction Change Directive, or order
for a minor change in the Work.

8.1.4 If unit prices are stated in the Contract Documents or subsequently agreed
upon,  and if quantities  originally  contemplated  are so changed in a proposed
Change Order or  Construction  Change  Directive  that  application of such unit
prices to quantities of Work  proposed  will cause  substantial  inequity to the
Owner or the  Design/Builder,  the  applicable  unit prices  shall be  equitably
adjusted.

8.2 CHANGE ORDERS

8.2.1 A Change Order is a written instrument  prepared by the Design/Builder and
signed by the Owner and the Design/Builder,  stating their agreement upon all of
the following:

     .1   a change in the Work;

     .2   the amount of the adjustment, if any, in the Contract Sum; and

     .3   the extent of the adjustment, if any, in the Contract Time.

8.2.2  If the  Owner  requests  a  proposal  for a change  in the Work  from the
Design/Builder and subsequently  elects not to proceed with the change, a Change
Order shall be issued to reimburse the Design/Builder for any costs incurred for
estimating services, design services or preparation of proposed revisions to the
Contract Documents.

8.3 CONSTRUCTION CHANGE DIRECTIVES

8.3.1 A Construction  Change Directive is a written order prepared and signed by
the Owner,  directing a change in the Work prior to agreement on adjustment,  if
any, in the Contract Sum or Contract Time, or both.

8.3.2  Except as  otherwise  agreed by the  Owner  and the  Design/Builder,  the
adjustment  to the Contract Sum shall be  determined  on the basis of reasonable
expenditures  and  savings  of those  performing  the Work  attributable  to the
change,  including  the  expenditures  for design  services and revisions to the
Contract  Documents.  In case of an increase in the Contract Sum, the cost shall
include a  reasonable  allowance  for  overhead  and profit.  In such case,  the
Design/Builder  shall keep and  present an  itemized  accounting  together  with
appropriate  supporting data for inclusion in a Change Order.  Unless  otherwise
provided in the Contract Documents, costs for these purposes shall be limited to
the following:

     .1   costs of labor,  including social  security,  old age and unemployment
          insurance,  fringe  benefits  required  by  agreement  or custom,  and
          workers' compensation insurance;

     .2   costs  of  materials,  supplies  and  equipment,   including  cost  of
          transportation, whether incorporated or consumed;

     .3   rental  costs of  machinery  and  equipment  exclusive  of hand tools,
          whether rented from the Design/Builder or others;

     .4   costs of premiums for all bonds and insurance  permit fees, and sales,
          use or similar taxes;

     .5   additional  costs of supervision and field office  personnel  directly
          attributable to the change; and fees paid to the Architect,  engineers
          and other professionals.

8.3.3 Pending final  determination of cost to the Owner,  amounts not in dispute
may be included in Applications for Payment.  The amount of credit to be allowed
by the Design/Builder to the Owner for deletion or change which results in a net
decrease in the Contract Sum will be actual net cost.  When both  additions  and
credits  covering related Work or  substitutions  are involved in a change,  the
allowance  for  overhead  and  profit  shall be  figured on the basis of the net
increase, if any, with respect to that change.

8.3.4 When the Owner and the  Design/Builder  agree upon the  adjustments in the
Contract Sum and Contract Time,  such agreement  shall be effective  immediately
and shall be recorded by  preparation  and  execution of an  appropriate  Change
Order.

8.4 MINOR CHANGES IN THE WORK

8.4.1 The  Design/Builder  shall have  authority  to make  minor  changes in the
Construction  Documents  and  construction  consistent  with the  intent  of the
Contract  Documents  when such minor  changes do not involve  adjustment  in the
Contract  Sum or  extension  of the  Contract  Time.  The  Design/Builder  shall
promptly  inform the Owner,  in writing,  of minor  changes in the  Construction
Documents and construction.

8.5 CONCEALED CONDITIONS

8.5.1 If  conditions  are  encountered  at the site which are (1)  subsurface or
otherwise  concealed  physical  conditions  which differ  materially  from those
indicated in the Contract  Documents,  or (2) unknown physical  conditions of an
unusual nature which differ  materially from those ordinarily found to exist and
generally  recognized  as inherent in  construction  activities of the character
provided for in the Contract Documents, then notice by the observing party shall
be given to the other party promptly  before  conditions are disturbed and in no
event later than 21 days after first observance of the conditions.  The Contract
Sum shall be equitably  adjusted for such  concealed  or unknown  conditions  by
Change  Order upon claim by either  party made within 21 days after the claimant
becomes aware of the conditions.

8.6 REGULATORY CHANGES

8.6.1 The  Design/Builder  shall be compensated for changes in the  construction
necessitated  by the  enactment  or  revisions  of  codes,  laws or  regulations
subsequent to the submission of the Design/Builder's Proposal.

                                    ARTICLE 9
                               CORRECTION OF WORK

9.1 The  Design/Builder  shall  promptly  correct Work  rejected by the Owner or
known by the  Design/Builder  to be  defective  or  failing  to  conform  to the
requirements  of the  Contract  Documents,  whether  observed  before  or  after
Substantial  Completion and whether or not  fabricated,  installed or completed.
The Design/Builder  shall bear costs of correcting such rejected Work, including
additional testing and inspections.

9.2 If, within one (1) year after the date of Substantial Completion of the Work
or,  after the date for  commencement  of  warranties  established  in a written
agreement between the Owner and the Design/Builder, or by terms of an applicable
special warranty required by the Contract Documents, any of the Work is found to
be not in  accordance  with the  requirements  of the  Contract  Documents,  the
Design/Builder  shall correct it promptly after receipt of a written notice from
the Owner to do so unless the Owner has previously  given the Design/  Builder a
written acceptance of such condition.

9.3 Nothing contained in this Article 9 shall be construed to establish a period
of limitation with respect to other obligations which the  Design/Builder  might
have under the Contract  Documents.  Establishment of the time period of one (1)
year as described in Subparagraph 9.2 relates only to the specific obligation of
the  Design/Builder  to correct the Work,  and has no  relationship  to the time
within which the obligation to comply with the Contract  Documents may be sought
to be  enforced,  nor to the time within which  proceedings  may be commenced to
establish the  Design/Builder's  liability with respect to the  Design/Builder's
obligations other than specifically to correct the Work.

9.4 If the  Design/Builder  fails to correct  nonconforming  Work as required or
fails to carry out Work in accordance with the Contract Documents, the Owner, by
written order signed personally or by an agent  specifically so empowered by the
Owner in writing,  may order the Design/Builder to stop the Work, or any portion
thereof,  until the  cause for such  order  has been  eliminated;  however,  the
Owner's  right to stop the Work shall not give rise to a duty on the part of the
Owner to exercise the right for benefit of the  Design/Builder  or other persons
or entities.

9.5 If the  Design/Builder  defaults  or  neglects  to  carry  out  the  Work in
accordance  with the  Contract  Documents  and fails within seven (7) days after
receipt of written notice from the Owner to commence and continue  correction of
such  default or neglect with  diligence  and  promptness,  the Owner may give a
second  written  notice to the  Design/Builder  and,  seven  (7) days  following
receipt  by the  Design/Builder  of  that  second  written  notice  and  without
prejudice to other remedies the Owner may have,  correct such  deficiencies.  In
such case an  appropriate  Change Order shall be issued  deducting from payments
then or  thereafter  due the  Design/  Builder,  the  costs of  correcting  such
deficiencies.  If the payments then or thereafter due the Design/Builder are not
sufficient to cover the amount of the deduction,  the  Design/Builder  shall pay
the  difference  to the  Owner.  Such  action by the Owner  shall be  subject to
dispute resolution procedures as provided in Article 10.

                                   ARTICLE 10
                              DISPUTE RESOLUTION--
                            MEDIATION AND ARBITRATION

10.1 Claims,  disputes or other matters in question  between the parties to this
Part 2 Agreement  arising out of or relating to this Part 2 Agreement  or breach
thereof  shall be  subject to and  decided by  mediation  or  arbitration.  Such
mediation or arbitration  shall be conducted in accordance with the Construction
Industry Mediation or Arbitration Rules of the American Arbitration  Association
currently in effect.

10.2 In addition to and prior to  arbitration,  the  parties  shall  endeavor to
settle  disputes by mediation.  Demand for  mediation  shall be filed in writing
with the other party to this Part 2 Agreement and with the American  Arbitration
Association. A demand for mediation shall be made within a reasonable time after
the claim,  dispute,  or other matter in question has arisen.  In no event shall
the demand for  mediation  be made after the date when  institution  of legal or
equitable  proceedings based on such claim,  dispute or other matter in question
would be barred by the applicable statutes of repose or limitations.

10.3 Demand for  arbitration  shall be filed in writing  with the other party to
this Part 2 Agreement and with the American  Arbitration  Association.  A demand
for arbitration shall be made within a reasonable time after the claim,  dispute
or other  matter in  question  has  arisen.  In no event  shall the  demand  for
arbitration  be made  after  the date  when  institution  of legal or  equitable
proceedings  based on such claim,  dispute or other matter in question  would be
barred by the applicable statutes of repose or limitations.

10.4 An  arbitration  pursuant to this Article may be joined with an arbitration
involving common issues of law or fact between the Design/Builder and any person
or entity with whom the Design/Builder has a contractual obligation to arbitrate
disputes.  No  other  arbitration  arising  out of or  relating  to this  Part 2
Agreement shall include,  by  consolidation,  joinder or in any other manner, an
additional  person or entity not a party to this Part 2 Agreement or not a party
to an agreement with the Design/Builder,  except by written consent containing a
specific   reference  to  this  Part  2  Agreement  signed  by  the  Owner,  the
Design/Builder and any other person or entities sought to be joined.  Consent to
arbitration  involving  an  additional  person  or entity  shall not  constitute
consent to  arbitration  of any claim,  dispute or other  matter in question not
described  in the  written  consent  or with a person  or  entity  not  named or
described therein.  The foregoing agreement to arbitrate and other agreements to
arbitrate  with an additional  person or entity duly consented to by the parties
to this Part 2 Agreement  shall be  specifically  enforceable in accordance with
applicable law in any court having jurisdiction thereof.

10.5 The award  rendered by the arbitrator or  arbitrators  shall be final,  and
judgment may be entered upon it in accordance  with  applicable law in any court
having jurisdiction thereof.

                                   ARTICLE 11
                            MISCELLANEOUS PROVISIONS

11.1 Unless otherwise  provided,  this Part 2 Agreement shall be governed by the
law of the place where the Project is located.

11.2 SUBCONTRACTS

11.2.1 The Design/Builder, as soon as practicable after execution of this Part 2
Agreement,  shall  furnish to the Owner in writing  the names of the  persons or
entities the  Design/Builder  will engage as  contractors  for the Project.  The
Owner will be given 5 days to approve  the  Subcontractors  and  Entities of the
Design/Builder  or show a reasonable  objection for rejection of a Subcontractor
or  Entity.  After  Owner's  approval,  the  Design/Builder  may not  release  a
Subcontractor  or entity  without  written  approval from the Owner,  unless the
Subcontractor  or entity  fails to perform the work as outlined in the  Contract
Documents.

11.3 WORK BY OWNER OR OWNER'S CONTRACTORS

11.3.1  The Owner  reserves  the right to  perform  construction  or  operations
related to the  Project  with the  Owner's  own  forces,  and to award  separate
contracts in connection with other portions of the Project or other construction
or  operations  on  the  site  under  conditions  of  insurance  and  waiver  of
subrogation  identical  to the  provisions  of  this  Part 2  Agreement.  If the
Design/Builder  claims that delay or additional cost is involved because of such
action by the Owner, the Design/Builder  shall assert such claims as provided in
Subparagraph 11.4.

11.3.2  The  Design/Builder   shall  afford  the  Owner's  separate  contractors
reasonable  opportunity  for  introduction  and storage of their  materials  and
equipment and  performance of their  activities and shall connect and coordinate
the Design/Builder's  construction and operations with theirs as required by the
Contract Documents.

11.3.3 Costs caused by delays or by  improperly  timed  activities  or defective
construction shall be borne by the party responsible therefor.

11.4 CLAIMS FOR DAMAGES

11.4.1 If  either  party to this Part 2  Agreement  suffers  injury or damage to
person or property  because of an act or omission of the other party,  of any of
the other party's employees or agents, or of others for whose acts such party is
legally liable, written notice of such injury or damage, whether or not insured,
shall be given to the other party within a reasonable time not exceeding 21 days
after first observance. The notice shall provide sufficient detail to enable the
other party to  investigate  the matter.  If a claim of additional  cost or time
related to this claim is to be asserted, it shall be filed in writing.

11.5 INDEMNIFICATION

11.5.1  To the  fullest  extent  permitted  by  law,  the  Design/Builder  shall
indemnify  and hold  harmless  the Owner,  Owner's  consultants,  and agents and
employees of any of them from and against claims,  damages, losses and expenses,
including but not limited to attorneys'  fees,  arising out of or resulting from
performance of the Work,  provided that such claim,  damage,  loss or expense is
attributable  to bodily injury,  sickness,  disease or death, or to injury to or
destruction of tangible  property (other than the Work itself) including loss of
use  resulting  therefrom,  but only to the extent caused in whole or in part by
negligent acts or omissions of the Design/Builder, anyone directly or indirectly
employed by the  Design/Builder or anyone for whose acts the  Design/Builder may
be liable,  regardless of whether or not such claim,  damage, loss or expense is
caused in part by a party  indemnified  hereunder.  Such obligation shall not be
construed to negate, abridge, or reduce other rights or obligations of indemnity
which would otherwise exist as to a party or person  described in this Paragraph
11.5.

11.5.2 In claims against any person or entity  indemnified  under this Paragraph
11.5  by an  employee  of the  Design/Builder,  anyone  directly  or  indirectly
employed by the  Design/Builder or anyone for whose acts the  Design/Builder may
be liable, the indemnification obligation under this Paragraph 11.5 shall not be
limited by a limitation on amount or type of damages,  compensation  or benefits
payable  by  or  for  the  Design/Builder  under  workers'   compensation  acts,
disability benefit acts or other employee benefit acts.

11.6 SUCCESSORS AND ASSIGNS

11.6.1  The Owner  and  Design/Builder,  respectively,  bind  themselves,  their
partners,  successors,  assigns and legal  representatives to the other party to
this Part 2 Agreement and to the partners,  successors and assigns of such other
party with respect to all covenants of this Part 2 Agreement.  Neither the Owner
nor the  Design/Builder  shall assign this Part 2 Agreement  without the written
consent  of the  other.  The  Owner may  assign  this  Part 2  Agreement  to any
institutional lender providing  construction  financing,  and the Design/Builder
agrees to  execute  all  consents  reasonably  required  to  facilitate  such an
assignment.  If  either  party  makes  such  an  assignment,  that  party  shall
nevertheless  remain legally  responsible for all obligations  under this Part 2
Agreement, unless otherwise agreed by the other party.

11.7 TERMINATION OF PROFESSIONAL DESIGN SERVICES

11.7.1 Prior to termination of the services of the Architect or any other design
professional  designated  in this Part 2  Agreement,  the  Design/Builder  shall
identify to the Owner in writing another architect or other design  professional
with respect to whom the Owner has no  objection,  who will provide the services
originally to have been  provided by the Architect or other design  professional
whose  services  are  being  terminated.   Owner  must  approve  termination  of
Architect.

11.8 EXTENT OF AGREEMENT

11.8.1 This Part 2 Agreement  represents the entire agreement  between the Owner
and the  Design/Builder  and supersedes prior  negotiations,  representations or
agreements, either written or oral. This Part 2 Agreement may be amended only by
written instrument and signed by both the Owner and the Design/Builder.

                                   ARTICLE 12
                          TERMINATION OF THE AGREEMENT

12.1 TERMINATION BY THE OWNER

12.1.1  This Part 2  Agreement  may be  terminated  by the  Owner  upon 14 days'
written notice to the Design/Builder in the event that the Project is abandoned.
If such  termination  occurs,  the Owner shall pay the  Design/Builder  for Work
completed and for proven loss sustained upon materials,  equipment,  tools,  and
construction equipment and machinery, including reasonable profit and applicable
damages.

12.1.2 If the Design/Builder defaults or persistently fails or neglects to carry
out the Work in accordance  with the Contract  Documents or fails to perform the
provisions of this Part 2 Agreement,  the Owner may give written notice that the
Owner intends to terminate this Part 2 Agreement. If the Design/Builder fails to
correct the defaults, failure or neglect within seven (7) days after being given
notice, the Owner may then give a second written notice and, after an additional
seven (7) days,  the Owner may without  prejudice to any other remedy  terminate
the employment of the  Design/Builder and take possession of the site and of all
materials,  equipment,  tools and construction  equipment and machinery  thereon
owned by the Design/Builder and finish the Work by whatever method the Owner may
deem expedient. If the unpaid balance of the Contract Sum exceeds the expense of
finishing the Work and all damages  incurred by the Owner,  such excess shall be
paid to the  Design/Builder.  If the  expense  of  completing  the  Work and all
damages  incurred by the Owner exceeds the unpaid  balance,  the  Design/Builder
shall pay the difference to the Owner. This obligation for payment shall survive
termination of this Part 2 Agreement.

12.2 TERMINATION BY THE DESIGN/BUILDER

12.2.1 If the Owner fails to make payment when due, the  Design/Builder may give
written  notice  of the  Design/Builder's  intention  to  terminate  this Part 2
Agreement.  If the Design/Builder fails to receive payment within seven (7) days
after receipt of such notice by the Owner, the  Design/Builder may give a second
written  notice and,  seven (7) days after receipt of such second written notice
by the Owner,  may  terminate  this Part 2 Agreement  and recover from the Owner
payment  for Work  executed  and for proven  losses  sustained  upon  materials,
equipment, tools, and construction equipment and machinery, including reasonable
profit and applicable damages.

                                   ARTICLE 13
                              BASIS OF COMPENSATION

The Owner shall  compensate  the  Design/Builder  in accordance  with Article 5,
Payments, and the other provisions of this Part 2 Agreement as described below.

13.1 COMPENSATION

13.1.1  For the  Design/Builder's  performance  of the  Work,  as  described  in
Paragraph 3.2 and including any other  services  listed in Article 14 as part of
Basic  Services,  the Owner shall pay the  Design/Builder  in current  funds the
Contract Sum as follows: Exhibit "B".

13.1.2 For Additional Services,  as described in Paragraph 3.3 and including any
other services listed in Article 14 as Additional  Services,  compensation shall
be as follows:

13.2 REIMBURSABLE EXPENSES

13.2.1  Reimbursable  Expenses are in addition to the compensation for Basic and
Additional Services,  and include actual expenditures made by the Design/Builder
and the  Design/Builder's  employees  and  contractors  in the  interest  of the
Project, as follows:

13.2.2 FOR REIMBURSABLE EXPENSES,  compensation shall be a multiple of ( ) times
the amounts expended.

13.3 INTEREST PAYMENTS

13.3.1 The rate of interest  for past due payments  shall be as follows:  1% per
month.

(Usury laws and  requirements  under the Federal  Truth in Lending Act,  similar
State and local  consumer  credit laws and other  regulations at the Owner's and
Design/Builder's  principal  places of business,  at the location of the Project
and elsewhere may affect the validity of this  provision.  Specific legal advice
should be obtained with respect to deletion, modification or other requirements,
such as written disclosures or waivers.)

                                   ARTICLE 14
                          OTHER CONDITIONS AND SERVICES

14.1 The Basic  Services to be performed  shall be commenced on and,  subject to
authorized   adjustments  and  to  delays  not  caused  by  the  Design/Builder,
Substantial  Completion  shall be achieved in the Contract  Time of ( ) calendar
days.

14.2 The Basic Services beyond those described in Article 3 are as follows:

14.3 Additional Services beyond those described in Article 3 are as follows:

14.4 The  Design/Builder  shall submit an Application for Payment on the ( ) day
of each month.

14.5 The Design/Builder's Proposal includes the following documents:

(List the documents by specific title and date; include any required performance
and payment bonds.)

Title                                                       Date

Exhibit "A" - CryoLife, Inc. Final Build-Out Interiors dated 10/19/99.
Exhibit "B" - Contract Breakdown (One Page).
Exhibit "C" - Preliminary Project Schedule.
Exhibit "D" - List of Shell Drawings - Phase I (One Page).
Exhibit "E1" - Lockwood Greene - Hourly Rate Compensation (One Page).
Exhibit "E2" - Lockwood Greene - Reimbursable  Expenses (One Page)This Agreement
entered into as of the day and year first written above.

OWNER                                     DESIGN BUILDER


/s/ Albert E. Heacox                      /s/ Wm. M. Choate 
--------------------------------          --------------------------------------
(Signature)                               (Signature)

Al Heacox, VP - Lab Operators             Choate Design & Build Company
--------------------------------          --------------------------------------
Cryolife, Inc.                            (Printed name and title)
--------------------------------          Wm. M. Choate
(Printed name and title)                  President






Item 5. Market for Registrant's Equity and Related Stockholder Matters - page 35
of annual shareholder report below:

MARKET PRICE OF COMMON STOCK

The Company's Common Stock is traded under the symbol "CRY." The following table
sets forth,  for the periods  indicated,  the intra-day high and low sale prices
per share of Common Stock on the NYSE.

    1999                    High                   Low
    ---------------------- ----------------------  ----------------------
    First quarter           12 3/4                 10 1/4
    Second quarter          12 5/8                 10
    Third quarter           15 1/4                 11 1/4
    Fourth quarter          13 7/8                 11 1/16
    ----------------------- ---------------------- ----------------------

    1998                    High                   Low
    ----------------------- ---------------------- ----------------------
    First quarter           17 15/16               12 1/4
    Second quarter          18 1/4                 14 3/4
    Third quarter           16 1/4                 12 1/16
    Fourth quarter          15 11/16               9 3/16
    ----------------------- ---------------------- ----------------------

Item 6. Selected Financial Data - page 36 of annual shareholder report below:

                         SELECTED FINANCIAL INFORMATION
                (In thousands except per share data) December 31,

<TABLE>
<CAPTION>
<S>                                                      <C>         <C>          <C>         <C>         <C>


OPERATIONS                                                  1999        1998         1997        1996       1995
-------------------------------------------------------- ----------- ------------ ----------- ----------- ----------
   Revenues                                                 $66,722      $60,691     $50,571     $36,866    $29,226
   Net income                                                 4,451        6,486       4,725       3,927      2,202
   Research and development as a percentage of revenues        6.6%         7.8%        7.8%        7.6%       9.0%

EARNINGS PER SHARE1,2
-------------------------------------------------------- ----------- ------------ ----------- ----------- ----------
   Basic                                                      $0.36        $0.54       $0.49       $0.41      $0.23
   Diluted                                                    $0.36        $0.53       $0.48       $0.40      $0.23

YEAR-END FINANCIAL POSITION
-------------------------------------------------------- ----------- ------------ ----------- ----------- ----------
   Total assets                                             $94,023      $98,390     $54,402     $34,973    $24,132
   Working capital                                           59,928       62,310      19,478      10,787     15,217
   Long-term liabilities                                      6,177        8,577      17,846       2,799         --
   Shareholders' equity                                      80,226       80,421      30,227      24,929     20,465
   Current
 ratio                                                9:1          8:1         4:1         3:1        5:1
   Shareholders' equity per diluted common share1,2           $6.40        $6.56       $3.04       $2.52      $2.14
</TABLE>



1    Reflects adjustment for the 2-for-1 stock split effected June 28, 1996.

2    Presented,  and  where  appropriate,  restated  to  conform  to  Statement 
     128 requirements.

                                       1

<PAGE>


Item 7. Management's Discussion and Analysis of Financial Conditions and Results
of Operations - page 16-21 of annual shareholder report below:

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

Overview

CryoLife, Inc. was organized in 1984 to address market opportunities in the area
of biological implantable products and materials, and today is the leader in the
cryopreservation  of viable  human  tissue  for  cardiovascular,  vascular,  and
orthopedic applications. The Company began cryopreserving aortic heart valves in
1984,  pulmonary  heart valves in 1986,  and mitral  heart  valves in 1995.  The
Company has also  expanded  into the  cryopreservation  of other  human  tissue,
including vascular tissue and connective tissue of the knee.

The Company pays a fee to an organ procurement agency or tissue bank at the time
such  organization  consigns human tissue to the Company.  The Company generates
revenues  from  cryopreservation  services  by charging  hospitals a fee,  which
covers the Company's  services,  the associated  procurement fee, and applicable
shipping  expenses.  The Company  records  revenue upon shipping  tissue.  Costs
associated with the procurement, processing, and storage of tissue are accounted
for as deferred  preservation costs on the Company's  consolidated balance sheet
and are expensed when the tissue is shipped.  The Company  continually  monitors
cryopreserved  tissue in its  possession  to  determine  its  viability.  Tissue
determined not to be suitable for implantation is disposed of and the associated
deferred  preservation  costs are  expensed.  As part of an effort to reduce its
working   capital  needs,   while   simultaneously   facilitating   the  use  of
cryopreserved  tissue, the Company consigns liquid nitrogen freezers to a number
of hospitals. The Company retains ownership of the liquid nitrogen freezers and,
consequently,   incurs  associated   depreciation  charges.  The  hospitals  are
responsible  for operating  expenses  related to the use of the liquid  nitrogen
freezers.

The Company has  expanded,  and intends to continue to expand,  its portfolio of
products and  services.  Much of this  expansion has been  accomplished  through
acquisitions  of  intellectual  property and  businesses.  In 1992,  the Company
purchased for $730,000 the exclusive distribution rights for a line of stentless
aortic  porcine heart valves and in 1996  purchased for $275,000 a patent for an
advanced  design  stentless  pulmonary  porcine  heart valve,  both of which the
Company currently markets in Europe,  South America,  the Middle East, and South
Africa.  In 1996,  the  Company  purchased  the patent for  BioGlue,  a surgical
adhesive which the Company  currently  markets in North America,  Europe,  South
America,  Asia,  South Africa,  and the Middle East.  In 1996,  the Company also
acquired the assets of UCFI, a tissue processor, for $750,000 in cash and a $1.3
million note. In 1997, the Company acquired Ideas for Medicine, Inc. ("IFM") and
its line of  single-use  medical  devices for $4.5  million in cash,  and a $5.0
million convertible debenture.

On September 30, 1998 the Company completed the sale of substantially all of the
IFM product line and certain  related assets to Horizon Medical  Products,  Inc.
("HMP")  for $15  million  in cash  pursuant  to an  asset  purchase  agreement.
Concurrently,  IFM and HMP signed a  Manufacturing  Agreement (the  "Agreement")
which provides for the manufacture by IFM of specified minimum dollar amounts of
IFM  products  to be  purchased  exclusively  by HMP over each of the four years
following the sale.  Thereafter,  responsibility for such manufacturing is to be
assumed by HMP. The Company  recorded a deferred  gain at the  transaction  date
totaling $2.9 million, representing the selling price less the net book value of
the assets sold,  which  included $7.7 million of goodwill,  net of  accumulated
amortization,  and the costs related to the sale. The gain was deferred  because
the sale and the manufacturing  agreements represent, in the aggregate, a single
transaction  for which the related income should be recognized  over the term of
the  Agreement.  Accordingly,  the deferred  gain is being  amortized in cost of
goods sold over the four-year  term of the  manufacturing  agreement in a manner
which is expected to result in  approximately  equal  margins over the four-year
period on the products manufactured and sold by IFM to HMP. During 1999 and 1998
amortization   of  deferred   revenue   totaled  $1.2   million  and   $387,000,
respectively.  As more fully discussed under nonrecurring charges in the Results
of Operations section, HMP defaulted on the Agreement in June of 1999.

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

                                       2

<PAGE>

Results of Operations

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

Revenues  increased 10% to $66.7 million in 1999 from $60.7 million in 1998. The
increase in revenues was  primarily  due to increased  acceptance in the medical
community of  cryopreserved  tissues,  the Company's  ability to procure greater
amounts  of  tissue,  price  increases  for  certain  cryopreservation  services
instituted  during the third quarter of 1998 which continued during 1999, a full
year of BioGlue  international  revenue in 1999 as  compared  to nine  months in
1998, and revenues attributable to the Company's  introduction of osteoarticular
grafts in January 1999.  These increases in revenues have been offset by certain
decreases in revenues as discussed below.

Revenues from human heart valve and conduit cryopreservation  services decreased
6% to $29.0  million in 1999 from $30.8  million in 1998,  representing  44% and
51%,  respectively,  of total  revenues  during such  periods.  This decrease in
revenues resulted from an 8% decrease in the number of heart allograft shipments
primarily  resulting  from a 9% decrease in the number of pulmonary  heart valve
shipments due to a decrease in the number of Ross procedures being performed and
competitive  price  pressures  on pulmonary  valves.  In a Ross  procedure,  the
patient's  pulmonary valve is transplanted  into the aortic position and a human
pulmonary allograft is transplanted into the patient's  pulmonary position.  The
Company has  attempted  to promote  the  positive  clinical  results of the Ross
procedure by hosting  science forums around the country with its  cardiovascular
surgeon customers.  Although we are currently unable to predict the annual trend
in pulmonary heart valve shipments,  shipments through March 10, 2000 are up 12%
over shipments through March 10, 1999.

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

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

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

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

Revenues from BioGlue surgical  adhesive  increased 93% to $1.7 million for 1999
from $883,000 in 1998,  representing 2% and 1%, respectively,  of total revenues
during such  periods.  The  increase in revenues is due to a 95% increase in the
volume of BioGlue  shipments due to increased  product  awareness as a result of
the introduction of BioGlue in international markets in April of 1998, increased
surgeon training, and the receipt of the CE mark approval for the use of BioGlue
for pulmonary indications in Europe in March 1999.

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

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

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

                                       3

<PAGE>

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

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

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

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

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

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

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

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

Revenues  increased 20% to $60.7 million in 1998 from $50.6 million in 1997. The
increase in revenues was  primarily  due to increased  acceptance in the medical
community of  cryopreserved  tissues,  the Company's  ability to procure greater
amounts  of tissue,  price  increases  for  certain  cryopreservation  services,
revenues  attributable  to the  Company's  line of  single-use  medical  devices
following the IFM acquisition in March of 1997, and revenues attributable to the
Company's  introduction of BioGlue surgical adhesive in international markets in
April 1998.

Revenues from human heart valve and conduit cryopreservation  services increased
6% to $30.8  million in 1998 from $29.0  million in 1997,  representing  51% and
57%,  respectively,  of total  revenues  during such  periods.  This increase in
revenues  was  primarily  due to a 6% increase in the number of heart  allograft
shipments  due to an  increased  demand  and the  Company's  ability  to procure
greater amounts of tissue.

                                       4

<PAGE>

Revenues from human vascular tissue  cryopreservation  services increased 36% to
$14.3  million in 1998 from $10.5  million  in 1997,  representing  24% and 21%,
respectively,  of total revenues during such periods.  This increase in revenues
was  primarily  due  to a 37%  increase  in the  number  of  vascular  allograft
shipments  due to an  increased  demand  and the  Company's  ability  to procure
greater amounts of tissue.

Revenues from human  connective  tissue for the knee  cryopreservation  services
increased  63% to $7.7 million in 1998 from $4.7  million in 1997,  representing
13% and 9%, respectively,  of total revenues during such periods.  This increase
in revenues  was  primarily  due to a 50%  increase  in the number of  allograft
shipments due to increased  demand and the Company's  ability to procure greater
amounts  of  tissue.  Additional  revenue  increases  resulted  from  a  greater
proportion of the 1998 shipments consisting of cryopreserved menisci, which have
a  significantly  higher  per  unit  revenue  than the  Company's  cryopreserved
tendons, and price increases for the cryopreservation of menisci and tendons.

Revenues  from IFM  increased  1% to $5.7  million in 1998 from $5.6  million in
1997,  representing  9% and 11%,  respectively,  of total  revenues  during such
periods.  This increase in revenues was due to 1998 having two additional months
of IFM revenue  than 1997 due to the IFM  acquisition  closing on March 5, 1997,
partially  offset by the sale of the IFM product  line to HMP  pursuant to which
the Company became an OEM manufacturer of such products on October 1, 1998.

Revenues from bioprosthetic  cardiovascular devices increased 33% to $798,000 in
1998 from  $576,000  in 1997,  representing  1% of total  revenues  during  such
periods.  This  increase in revenues was  primarily due to a 36% increase in the
number  of  bioprosthetic  cardiovascular  device  shipments  due  to  increased
manufacturing capacity. Revenues in 1998 also benefited from the introduction of
the CryoLife-Ross Pulmonary Valve into international markets in October 1998.

Revenues from BioGlue were $883,000 for 1998. The Company introduced the product
into international markets in April 1998.

Grant  revenues  increased  to  $512,000  in 1998 from  $162,000  in 1997.  This
increase in grant revenues is primarily  attributable to the SynerGraft research
and development programs.

Other income increased to $1,078,000 in 1998 from $290,000 in 1997. Other income
in 1998  relates  primarily  to  proceeds  from the sale of the  Company's  port
product line.

Cost of cryopreservation  services and products aggregated $25.3 million in 1998
compared to $17.8 million in 1997,  representing 42% and 35%,  respectively,  of
total cryopreservation and product revenues. The increase in 1998 of the cost of
cryopreservation  services and products as a percentage of revenues results from
a lesser  portion of 1998  revenues  being  derived  from human  heart valve and
conduit  cryopreservation  services,  which  carry  significantly  higher  gross
margins  than other  cryopreservation  services,  from  increased  manufacturing
overhead costs associated with the Company's new manufacturing facilities,  from
the  switch  in  October  of 1998 to OEM  manufacturing  of  single-use  medical
devices, which generates lower gross margins than cryopreservation  services and
lower gross margins than the IFM products generated prior to the sale of the IFM
product line, compared with ten months of IFM sales in 1997, and from a one-time
charge  of  $500,000   associated   with  the  start-up  of  the   bioprosthetic
cardiovascular  device  manufacturing  facility.  The  increase  in the  cost of
cryopreservation services and products as a percentage of revenues was partially
offset by a decrease in the IFM products  sold in 1998 relative to those sold in
1997, which generate lower gross margins than cryopreservation services, and the
impact of the fourth  quarter  amortization  of deferred gain resulting from the
sale of the IFM product  line,  which has the impact of  reducing  cost of goods
sold.

General,  administrative,  and marketing expenses increased 16% to $23.9 million
in  1998,  compared  to  $20.5  million  in  1997,  representing  40%  and  41%,
respectively,  of total  cryopreservation  and product revenues in such periods.
The increase in expenditures in 1998 resulted from expenses  incurred to support
the increase in revenues and costs  associated with the  introduction of BioGlue
into international markets.

Research  and  development  expenses  increased  19% to $4.7  million  in  1998,
compared to $3.9 million in 1997,  representing 8% of total cryopreservation and
product  revenues for each period.  Research and  development  spending  relates
principally  to  the  Company's  focus  on  its   bioadhesives   and  SynerGraft
technologies.

Net  interest  income was $820,000 in 1998  compared to net interest  expense of
$970,000 in 1997. This variance is due to the repayment of certain  indebtedness
with the proceeds from the follow-on equity offering completed in April 1998, as
well as the conversion of a portion of a convertible debenture into common stock
of the Company, and the receipt of interest income on the invested proceeds from
the Offering.

                                       5

<PAGE>

The decline in the effective  income tax rate to 25% in 1998 from 38% in 1997 is
due to the  implementation of certain income tax planning  strategies  including
the  recognition  of  approximately  $600,000 of research  and  development  tax
credits  during the fourth  quarter of 1998,  during which  period  studies were
completed which quantified the amounts related thereto.

Seasonality

The demand for the  Company's  human heart  valve and  conduit  cryopreservation
services is  seasonal,  with peak demand  generally  occurring in the second and
third quarters. Management believes this trend for human heart valve and conduit
cryopreservation  services  is  primarily  due to the high  number of  surgeries
scheduled during the summer months.  Management  believes the trends experienced
by the  Company  for its human  connective  tissue of the knee  cryopreservation
services  indicate this business may also be seasonal  because it is an elective
procedure  which may be performed less  frequently  during the fourth  quarter's
holiday  season.   However,   the  demand  for  the  Company's  vascular  tissue
cryopreservation  services,  bioprosthetic  cardiovascular  devices,  single-use
medical  devices,  and BioGlue  surgical  adhesive does not appear to experience
seasonal trends.

Liquidity and Capital Resources

At December 31, 1999 net working  capital was $59.9  million,  compared to $62.3
million at December  31,  1998,  with a current  ratio of 9 to 1. The  Company's
primary capital requirements arise out of general working capital needs, capital
expenditures  for facilities and equipment,  funding of research and development
projects,  and a common stock repurchase plan approved by the board of directors
in October of 1998.  The  Company  historically  has funded  these  requirements
through  bank  credit  facilities,  cash  generated  by  operations,  and equity
offerings.

Net cash provided by operating  activities was $1.0 million in 1999, as compared
to net cash  provided by  operating  activities  of $1.2  million in 1998.  This
decrease  primarily  resulted  from 1) an  increase  in the  growth of  deferred
preservation   costs  due  to  the  inventory   build  up  associated  with  the
introduction of new product lines,  and 2) an increase in the amount of accounts
payable liquidated in the first quarter of 1999 as compared to the first quarter
of  1998  due to  the  expansion  of the  BioGlue  manufacturing  laboratory  at
corporate  headquarters,  partially  offset  by 1) an  increase  in  net  income
excluding  the  nonrecurring  charge of $2.4  million,  2) a decrease in prepaid
expenses,  and 3) an increase in accrued  expenses  due to an increase in tissue
procurement.

Net cash used in investing  activities  was $3.3 million in 1999, as compared to
$18.9 million in 1998. This decrease in cash used was primarily  attributable to
a  decrease  in capital  expenditures  and in  purchases  of  marketable  equity
securities  during 1999,  partially  offset by the absence of proceeds  from the
sale of the IFM product line in 1999, as compared to 1998.

Net cash used in financing  activities  was $4.5 million in 1999, as compared to
net cash provided by financing activities of $30.5 million in 1998. The 1998 net
cash inflow was primarily  attributable to a follow-on  equity offering in March
of 1998  that  generated  proceeds  of $45.4  million,  partially  offset by the
repayment  of  borrowings  on the  Company's  bank loans,  and accrued  interest
thereon,  totaling  $13.3  million.  The Company used funds in 1999 primarily to
increase repurchases of treasury stock.

Management  is currently  seeking to complete a potential  private  placement of
equity  or  equity-oriented  securities  to form a  subsidiary  company  for the
commercial  development of its serine proteinase light activation  technologies.
This strategy, if successful,  will allow an affiliated entity to fund the light
activation  technology  and should  expedite the  commercial  development of its
blood  clot  dissolving  and  surgical  sealant  product   applications  without
additional  research and  development  expenditures  by the Company  (other than
through the affiliated company).  This strategy,  if successful,  will favorably
impact the Company's  liquidity  going  forward.  The Company has ceased further
development  of light  activation  technology  pending the  identification  of a
corporate partner to fund future development. The Company began its search for a
corporate  partner in October  1998 and  anticipates  locating a partner  during
fiscal 2000. As of December 31, 1999, the Company classified  approximately $1.5
million  of  equipment  and  other  assets  related  to  the  light   activation
technologies as being held for sale.

The Company  anticipates  that current cash and  marketable  securities and cash
generated  from  operations  will  be  sufficient  to  meet  its  operating  and
development  needs for at least the next 12 months,  including  the expansion of
the Company's corporate headquarters and manufacturing facilities. Additionally,
the Company currently maintains a $2.0 million  unrestricted line of credit that
expires on December  31, 2001.  However,  the  Company's  future  liquidity  and
capital  requirements  beyond that period  will  depend upon  numerous  factors,
including the timing of the Company's receipt of FDA approvals to begin clinical
trials for its products  currently in  development,  the  resources  required to

                                       6

<PAGE>

further develop its marketing and sales  capabilities if and when those products
gain approval,  the resources required to expand its corporate  headquarters and
manufacturing  facility, and the extent to which the Company's products generate
market  acceptance  and demand.  There can be no assurance  the Company will not
require additional  financing or will not seek to raise additional funds through
bank facilities,  debt or equity offerings,  or other sources of capital to meet
future requirements.  These additional funds may not be available when needed or
on terms  acceptable to the Company,  which could have a material adverse effect
on the Company's business, financial condition, and results of operations.

I
tem 7A. Quantitative and Qualitative Disclosures About Market Risk - page 20 of
annual shareholder report below:

The Company's  interest  income and expense are most sensitive to changes in the
general level of U.S.  interest rates. In this regard,  changes in U.S. interest
rates affect the  interest  earned on the  Company's  cash  equivalents  of $5.0
million and short-term  investments of $15.9 million in municipal obligations as
of December  31,  1999,  as well as interest  paid on its debt.  To mitigate the
impact of fluctuations in U.S. interest rates, the Company  generally  maintains
80% to 90% of its debt as fixed  rate in  nature.  As a result,  the  Company is
subject to a risk that  interest  rates will  decrease  and the  Company  may be
unable to refinance its debt.

                                        7

<PAGE>


Item 8.  Financial  Statements  and  Supplementary  Data - pages 22-35 of annual
shareholder report below:


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 

To CryoLife, Inc.:

     We have audited the  accompanying  consolidated  balance sheet of CRYOLIFE,
INC.  AND  SUBSIDIARIES  as of December  31,  1999 and the related  consolidated
statements  of income,  shareholders'  equity,  and cash flows for the year then
ended.  These  financial  statements  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements  based on our audit.  The  financial  statements of the Company as of
December  31,  1998 and for each of the two years ended  December  31, 1998 were
audited by other  auditors  whose  report  dated  February 2, 1999  expressed an
unqualified opinion on those statements.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of CryoLife, Inc. and subsidiaries
as of December 31, 1999 and the results of their operations and their cash flows
for the year then  ended in  conformity  with  accounting  principles  generally
accepted in the United States.

ARTHUR ANDERSEN, LLP

Atlanta, Georgia
February 7, 2000




                                       8

<PAGE>

                                 CryoLife, Inc.
                           Consolidated Balance Sheets
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
<S>                                                                                      <C>                 <C>

ASSETS
December 31,                                                                                    1999              1998
---------------------------------------------------------------------------------------- ------------------- ---------------

Current assets:
---------------------------------------------------------------------------------------- ------------------- ---------------
Cash and cash equivalents                                                                            $6,128         $12,885
Marketable securities, at market                                                                     24,403          26,713
Receivables:
    Trade accounts, less allowance for doubtful accounts of
   $528 in 1999 and $256 in 1998                                                                     11,694          10,733
     Income taxes                                                                                        31              71
     Other                                                                                              608             383
---------------------------------------------------------------------------------------- ------------------- ---------------
Total receivables                                                                                    12,333          11,187
---------------------------------------------------------------------------------------- ------------------- ---------------

Deferred preservation cost                                                                           17,652          14,239
Inventories                                                                                           4,597           3,385
Prepaid expenses                                                                                      1,454           1,945
Deferred income taxes                                                                                   983           1,348
---------------------------------------------------------------------------------------- ------------------- ---------------
Total current assets                                                                                 67,550          71,702
---------------------------------------------------------------------------------------- ------------------- ---------------

Property and equipment:
---------------------------------------------------------------------------------------- ------------------- ---------------
Equipment                                                                                            11,882          12,145
Furniture and fixtures                                                                                3,147           3,011
Leasehold improvements                                                                               14,487          14,254
Construction in progress                                                                              1,001           2,266
---------------------------------------------------------------------------------------- ------------------- ---------------
                                                                                                     30,517          31,676
Less accumulated depreciation and amortization                                                       11,843          10,216
---------------------------------------------------------------------------------------- ------------------- ---------------
 Net property and equipment                                                                          18,674          21,460

Other assets:
---------------------------------------------------------------------------------------- ------------------- ---------------

Goodwill, less accumulated amortization
  of $311 in 1999 and $215 in 1998                                                                    1,590           1,685
Patents, less accumulated amortization
   of $794 in 1999 and $660 in 1998                                                                   2,363           2,216
Other, less accumulated amortization
  of $742 in 1999 and $566 in 1998                                                                    2,449           1,327
Deferred income taxes                                                                                 1,399              --
---------------------------------------------------------------------------------------- ------------------- ---------------
Total assets                                                                                        $94,025         $98,390
---------------------------------------------------------------------------------------- ------------------- ---------------
</TABLE>


See accompanying notes to consolidated financial statements.

                                       9

<PAGE>

                                 CryoLife, Inc.
                           Consolidated Balance Sheets
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
<S>                                                                               <C>            <C>

LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,                                                                             1999           1998
--------------------------------------------------------------------------------- -------------- -------------

Current liabilities:
--------------------------------------------------------------------------------- -------------- -------------
Accounts payable                                                                           $975        $1,655
Accrued expenses                                                                          2,145         2,968
Accrued compensation                                                                        913           726
Accrued fees to technical service representatives                                           248           459
Accrued procurement fees                                                                  2,874         1,806
Current maturities of capital lease obligation                                              180           224
Current maturities of long-term debt                                                        287           516
Deferred income                                                                              --         1,038
--------------------------------------------------------------------------------- -------------- -------------
Total current liabilities                                                                 7,622         9,392
--------------------------------------------------------------------------------- -------------- -------------
Deferred income, less current amount                                                         --         1,525
Deferred income taxes                                                                        --           410
Capital lease obligations, less current maturities                                        1,534         1,714
Convertible debenture                                                                     4,393         4,393
Other long-term debt                                                                        250           535
--------------------------------------------------------------------------------- -------------- -------------
Total liabilities                                                                        13,799        17,969
--------------------------------------------------------------------------------- -------------- -------------
Commitments and Contingencies

Shareholders' equity:
   Preferred stock $.01 par value per share;
     authorized 5,000 shares including 2,000
     shares of series A junior participating preferred stock;
     no shares issued                                                                        --            --
   Common stock  $.01 par value per share;
     authorized 50,000 shares; issued 13,361
     shares in 1999 and 1998                                                                134           134
   Additional paid-in capital                                                            64,425        64,347
   Retained earnings                                                                     23,564        19,113
   Deferred compensation                                                                    (57)           --
   Accumulated other comprehensive income                                                  (785)          139
   Treasury stock; 1,134 shares in 1999 and 845
     shares in 1998, at cost                                                             (7,055)       (3,312)
--------------------------------------------------------------------------------- -------------- -------------
Total shareholders' equity                                                               80,226        80,421
--------------------------------------------------------------------------------- -------------- -------------

--------------------------------------------------------------------------------- -------------- -------------
Total liabilities and shareholders' equity                                              $94,025       $98,390
--------------------------------------------------------------------------------- -------------- -------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       10


<PAGE>
                                 CryoLife, Inc.
                         Consolidated Income Statements
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
<S>                                                               <C>                <C>             <C>

Year Ended
December 31,                                                                 1999              1998            1997
----------------------------------------------------------------- ------------------ --------------- ----------------

Revenues:
----------------------------------------------------------------- ------------------ --------------- ----------------
   Preservation services and products                                       $65,845         $60,179          $50,409
   Research grants and licenses                                                 877             512              162
----------------------------------------------------------------- ------------------ --------------- ----------------
                                                                             66,722          60,691           50,571
----------------------------------------------------------------- ------------------ --------------- ----------------
Costs and Expenses:
----------------------------------------------------------------- ------------------ --------------- ----------------
   Preservation services and products                                        30,170          25,303          17,764
   General, administrative, and marketing                                    24,693          23,907          20,548
   Research and development                                                   4,396           4,708           3,946
   Nonrecurring charges                                                       2,355              --              --
   Interest expense                                                             387             670             978
   Interest income                                                           (1,556)         (1,490)             (8)
   Other income, net                                                           (224)         (1,078)           (290)
----------------------------------------------------------------- ------------------ --------------- ---------------
                                                                             60,221          52,020          42,938
----------------------------------------------------------------- ------------------ --------------- ---------------
Income before income taxes                                                    6,501           8,671           7,633
Income tax expense                                                            2,050           2,185           2,908
----------------------------------------------------------------- ------------------ --------------- ---------------
Net income                                                                   $4,451          $6,486          $4,725
----------------------------------------------------------------- ------------------ --------------- ---------------
Earnings per share:
----------------------------------------------------------------- ------------------ --------------- ---------------
   Basic                                                                     $ 0.36          $ 0.54          $ 0.49
----------------------------------------------------------------- ------------------ --------------- ---------------
   Diluted                                                                   $ 0.36          $ 0.53          $ 0.48
----------------------------------------------------------------- ------------------ --------------- ---------------
Weighted average shares outstanding:
----------------------------------------------------------------- ------------------ --------------- ---------------
   Basic                                                                     12,341          11,974           9,642
----------------------------------------------------------------- ------------------ --------------- ---------------
   Diluted                                                                   12,533          12,264           9,942
----------------------------------------------------------------- ------------------ --------------- ---------------
</TABLE>


See accompanying notes to consolidated financial statements.

                                       11

<PAGE>
                                 CryoLife, Inc.
                      Consolidated Statements of Cash Flows
                                 (in thousands)

<TABLE>
<CAPTION>
<S>                                                                      <C>             <C>             <C>
Year Ended December 31,                                                         1999           1998            1997
------------------------------------------------------------------------ --------------- --------------- ---------------
Net cash flows from operating activities:
------------------------------------------------------------------------ --------------- --------------- ---------------
   Net income                                                                 $4,451         $6,486          $4,725
   Adjustments to reconcile net income to net cash
     flows provided by (used in) operating activities:
     Deferred income recognized                                               (1,176)          (387)             --
     Gain on sale of marketable equity securities                               (112)            (4)             --
     Depreciation of property and equipment                                    2,854          2,586           1,842
     Amortization                                                                300            905             814
     Provision for doubtful accounts                                             121            176              46
     Deferred income taxes                                                      (970)        (1,948)            972
     Nonrecurring charges                                                      2,355             --              --
     Changes in operating assets and liabilities:
       Trade and other receivables                                            (1,707)        (1,797)           (533)
       Income taxes                                                               40            771            (438)
       Deferred preservation costs                                            (3,413)        (1,982)         (5,079)
       Inventories                                                            (2,882)        (3,010)           (864)
       Prepaid expenses and other assets                                         491           (706)           (506)
       Accounts payable                                                         (686)           295          (2,756)
       Accrued expenses                                                        1,321           (158)           (468)
------------------------------------------------------------------------ --------------- --------------- ---------------
   Net cash flows provided by (used in) operating activities                     987          1,227          (2,245)
------------------------------------------------------------------------ --------------- --------------- ---------------
Net cash flows from investing activities:
------------------------------------------------------------------------ --------------- --------------- ---------------
   Capital expenditures                                                       (3,853)        (6,693)         (5,059)
   Cash paid for acquisitions, net of cash acquired                               --             --          (4,418)
   Net proceeds from sale of IFM product line                                     --         15,000              --
   Other assets                                                                 (452)          (752)           (148)
   Purchases of marketable securities                                         (5,123)       (34,063)             --
   Sales of marketable securities                                              6,149          7,604               3
------------------------------------------------------------------------ --------------- --------------- ---------------
   Net cash flows used in investing activities                                (3,279)       (18,904)         (9,622)
------------------------------------------------------------------------ --------------- --------------- ---------------
Net cash flows from financing activities:
------------------------------------------------------------------------ --------------- --------------- ---------------
     Principal payments of debt                                                 (514)       (13,990)         (6,607)
     Proceeds from debt issuance                                                  --          1,680          16,643
     Principal payments on obligations under capital leases                     (224)          (203)             --
     Proceeds from exercise of options and issuance of stock                     571         46,298             567
     Purchase of treasury stock                                               (4,296)        (3,350)             --
     Net payments on notes receivable from shareholders                           --             16               5
------------------------------------------------------------------------ --------------- --------------- ---------------
     Net cash flows (used in) provided by financing activities:               (4,463)        30,451          10,608
------------------------------------------------------------------------ --------------- --------------- ---------------
Increase (decrease) in cash                                                   (6,755)        12,774          (1,259)
Effect of exchange rate changes on cash                                           (2)            --              --
Cash and cash equivalents, beginning of year                                  12,885            111           1,370
------------------------------------------------------------------------ --------------- --------------- ---------------
Cash and cash equivalents, end of year                                        $6,128        $12,885            $111
------------------------------------------------------------------------ --------------- --------------- ---------------
Supplemental  disclosures  of cash flow  information - cash paid during the year
for:
------------------------------------------------------------------------------------------------------------------------
Interest                                                                        $369           $742            $920
Income taxes                                                                   3,816          3,568           2,380
------------------------------------------------------------------------ --------------- --------------- ---------------
Noncash investing and financing activities:
   Establishing capital lease obligation                                         $--         $2,141             $--
------------------------------------------------------------------------ --------------- --------------- ---------------
   Debt conversion into common stock                                             $--           $608             $--
------------------------------------------------------------------------ --------------- --------------- ---------------
   Purchase of property and equipment
     in accounts payable                                                          $6           $185            $440
------------------------------------------------------------------------ --------------- --------------- ---------------
   Net cash paid for acquisition                                                 $--            $--          $1,768
   Cost in excess of assets acquired                                              --             --           8,541
   Liabilities assumed                                                            --             --            (891)
   Notes issued for assets acquired                                               --             --          (5,000)

------------------------------------------------------------------------ --------------- --------------- ---------------
   Fair value of assets acquired                                                 $--            $--          $4,418
------------------------------------------------------------------------ --------------- --------------- ---------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       12

<PAGE>
                                 CryoLife, Inc.
    Consolidated Statements of Shareholders' Equity and Comprehensive Income
                                 (in thousands)

<TABLE>
<CAPTION>
<S>                   <C>            <C>        <C>       <C>           <C>         <C>         <C>      <C>          <C>

                      Common Shares                                                                       Notes
                       Outstanding   Additional                        Unrealized                         Receivable     Total
                          Shares      Paid-In   Retained   Deferred    Gains on     Translation Treasury   From        Shareholders'
                          Amount     Capital    Earnings   Compsation  Investments   Gain        Stock    Shareholders   Equity     
-------------------   -------------  ---------- --------  ------------  ----------- ----------- -------- ------------ -------------
Balance at December
31, 1996               9,567  $ 101  $  17,128  $ 7,902   $        --   $       (1) $       --  $  (180) $       (21) $      24,929
------------------     -------------  ---------- --------  ------------  ----------- ----------- -------- ------------ -------------
Net income                --    --          --    4,725            --           --          --       --           --         4,725
Unrealized gains on
 investments              --    --          --       --            --            1          --       --           --             1
                                                                                                                      --------------
Comprehensive income                                                                                                        4,726
Exercise of options      105       1        298        --            --          --         --        --          --          299
Employee stock     
 purchase plan            30      --        268        --            --          --         --        --          --          268
Additions to     
 shareholder notes        --      --         --        --            --          --         --        --         (21)         (21)
Payments on      
 shareholder notes        --      --         --        --            --          --         --        --          26           26
-------------------   -------------  ---------- --------  ------------  ----------- ----------- -------- ------------ -------------
Balance at December
 31, 1997              9,702    102     17,694   12,627            --           --          --     (180)         (16)       30,227
-------------------   -------------  ---------- --------  ------------  ----------- ----------- -------- ------------ -------------
Net income                --     --         --    6,486            --           --          --       --           --         6,486
Unrealized gains on
 investments              --     --         --       --            --          139          --       --           --           139
                                                                                                                      -------------
Comprehensive income                                                                                                         6,625
Follow-on equity
offering, net of $703
 of offering costs     2,976     30     45,417       --            --           --          --       --           --        45,447
Exercise of options      100      1        338       --            --           --          --      121           --           460
Employee stock
 purchase plan            31     --        294       --            --           --          --       97           --           391
Convertible debenture     50      1        604       --            --           --          --       --           --           605
Purchase of treasury
 stock                  (343)    --         --       --            --           --          --   (3,350)          --        (3,350)
Payment on      
 shareholder note         --     --         --       --            --           --          --       --           16            16
-------------------   -------------  ---------- --------  ------------  ----------- ----------- -------- ------------ -------------
Balance at December
 31, 1998             12,516    134     64,347   19,113            --          139          --   (3,312)          --        80,421
-------------------   -------------  ---------- --------  ------------  ----------- ----------- -------- ------------ -------------
Net income                --     --         --    4,451            --           --          --       --           --         4,451
Unrealized losses on
 investments              --     --         --       --            --         (922)         --       --           --          (922)
Translation
 adjustment               --     --         --       --            --           --          (2)      --           --            (2)
                                                                                                                      -------------
Comprehensive income                                                                                                         3,527
Exercise of options       49     --       (126)      --            --           --          --      305           --           179
Employee stock
 purchase plan            40     --        144       --            --           --          --      248           --           392
Issuance of stock
 options to a 
 nonemployee              --     --         60       --           (60)          --          --       --           --            --
Amortization of de-
 ferred compensation      --     --         --       --             3           --          --       --           --             3
Purchase of treasury 
 stock                  (378)    --         --       --            --           --          --   (4,296)          --        (4,296)
-------------------   -------------  ---------- --------  ------------  ----------- ----------- -------- ------------ -------------
Balance at December
 31, 1999             12,227  $134   $  64,425  $23,564   $       (57)  $     (783) $       (2) $(7,055) $        --  $     80,226
-------------------  =============  ========== ========  ============  =========== =========== ======== ============ =============
</TABLE>

See   accompanying   notes   to consolidated financial statements.

                                       13

<PAGE>

                        CRYOLIFE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Summary of Significant Accounting Policies

Nature of Business
Founded  in  1984,  CryoLife,   Inc.  (the  "Company")  is  the  leader  in  the
cryopreservation  of viable human tissues for transplant,  and is developing and
commercializing additional implantable and single-use nonimplantable devices for
use in vascular,  cardiovascular,  and orthopaedic applications. The Company has
one primary business  segment,  cryopreservation  of human tissues,  marketed in
North  and  South  America,   Europe,  and  Asia.  The  Company's  bioprosthetic
implantable  products include stentless porcine heart valves marketed in Europe,
South  America,  the Middle East,  and South  Africa,  as well as a  proprietary
project to  transplant  human cells onto the  structure  of animal  tissue.  The
Company also serves as an original equipment manufacturer for single-use medical
devices  for use in  vascular  surgical  procedures.  In  addition,  the Company
develops  proprietary  implantable  bioadhesives,   including  BioGlue  surgical
adhesive,  which  it  has  begun  commercializing  for  vascular  and  pulmonary
applications in North America,  Europe,  South America,  Asia, South Africa, and
the Middle East.  International revenues were $4.0 million for 1999 and 1998 and
were $2.7 million in 1997. Net sales by product for the years ended December 31,
1999, 1998, and 1997 were as follows:

<TABLE>
<CAPTION>
<S>                                                  <C>               <C>                <C>

                                                           1999              1998               1997
                                                     ----------------- ------------------ -----------------
             Cryopreservation services:
                 Heart valve and conduit                     $29,043           $30,836            $29,046
                 Vascular tissue                              19,273            14,270             10,469
                 Connective tissue                            11,200             7,720              4,727
                                                     ---------------   ---------------    ---------------
             Total cryopreservation services                  59,516            52,826             44,242

             Bioprosthetic products                              955               798                576
             Single-use medical devices                        3,717             5,672              5,591
             BioGlue surgical adhesive                         1,657               883                ---
</TABLE>


Principles of Consolidation
The consolidated  financial  statements  include the accounts of the Company and
its subsidiaries. All significant intercompany balances are eliminated.

Reclassifications
Certain  prior  year  balances  have been  reclassified  to  conform to the 1999
presentation.

Use of Estimates
The  consolidated  financial  statements  have been prepared in conformity  with
generally accepted accounting  principles and, as such, include amounts based on
informed  estimates  and  judgments of management  with  consideration  given to
materiality. Actual results could differ from those estimates.

Cash and cash equivalents
Cash   equivalents   consist   primarily  of  highly  liquid   investments  with
insignificant  interest  rate risk and maturity  dates of 90 days or less at the
time of acquisition.  The carrying value of cash equivalents  approximates  fair
value.

Marketable Securities
The  Company  maintains  cash  equivalents  and  investments  in several  large,
well-capitalized  financial  institutions,  and the Company's  policy  disallows
investment  in any  securities  rated less than  "investment-grade"  by national
rating services.

Management  determines the appropriate  classification of debt securities at the
time of purchase and  reevaluates  such  designations  as of each balance  sheet
date.  Debt securities are classified as  held-to-maturity  when the Company has
the  positive   intent  and  ability  to  hold  the   securities   to  maturity.
Held-to-maturity  securities are stated at amortized  cost.  Debt securities not
classified as  held-to-maturity  or trading and marketable equity securities not
classified as trading are classified as  available-for-sale.  Available-for-sale
securities  are  stated at their  fair  values,  with the  unrealized  gains and
losses,  net of tax, reported in a separate  component of shareholders'  equity.
The  amortized  cost of debt  securities  classified  as  available-for-sale  is
adjusted for  amortization  of premiums and  accretion of discounts to maturity.

                                       14

<PAGE>

Such  amortization is included in investment  income.  Realized gains and losses
and  declines in value judged to be other than  temporary on  available-for-sale
securities  are included in investment  income.  The cost of securities  sold is
based  on  the  specific   identification  method.  Interest  and  dividends  on
securities classified as available-for-sale  are included in interest income. At
December 31, 1999 and 1998, all marketable equity securities and debt securities
were designated as available-for-sale.

Deferred Preservation Costs and Revenue Recognition
Tissue is procured from deceased human donors by organ procurement organizations
and tissue  banks which  consign the tissue to the  Company for  processing  and
preservation.  Preservation  costs  related to tissue  held by the  Company  are
deferred until shipment to the implanting hospital.  Deferred preservation costs
consist primarily of laboratory  expenses,  tissue  procurement fees, fringe and
facility  allocations,  and freight-in charges,  and are stated at average cost,
determined annually, on a first-in,  first-out basis. When the tissue is shipped
to the  implanting  hospital,  revenue is  recognized  and the related  deferred
preservation  costs are  charged to  operations.  The  Company  does not require
collateral or other security for its receivables.

Inventories
Inventories  are  comprised  of  single-use   medical   devices,   bioprosthetic
implantable products,  and implantable  bioadhesives and are valued at the lower
of cost (first-in, first-out) or market.

Property and Equipment
Property and  equipment  are stated at cost.  Depreciation  is provided over the
estimated  useful  lives  of the  assets,  generally  five  to ten  years,  on a
straight-line  basis.  Leasehold  improvements  are amortized on a straight-line
basis over the lease term or the estimated useful lives of the assets, whichever
is shorter.

Assets Held for Sale
As of December 31, 1999,  other assets  included  approximately  $1.5 million of
equipment  and other assets  related to the  Company's  FibRx  technologies.  In
January  1999,  the Company  ceased  further  development  of FibRx  pending the
identification  of a corporate partner to fund future  development.  The Company
continues to actively pursue a strategic partner for the FibRx technologies. The
nonrecurring  charge taken in the fourth quarter of 1999 includes  approximately
$158,000 in costs associated with the location of a corporate partner.

Intangible Assets
Goodwill  resulting from business  acquisitions  is amortized on a straight-line
basis over 20 years.  Patent costs are amortized over the expected  useful lives
of the  patents  (primarily  17 years)  using the  straight-line  method.  Other
intangibles, which consist primarily of manufacturing rights and agreements, are
being amortized over the expected useful lives of the related assets  (primarily
five years).

The Company periodically evaluates the recoverability of noncurrent tangible and
intangible  assets and measures the amount of  impairment,  if any, by assessing
current  and future  levels of income  and cash flows as well as other  factors,
such as business trends and prospects and market and economic conditions.

Income Taxes
Deferred  income tax assets and  liabilities  are  recognized for the future tax
consequences   attributable  to  temporary  differences  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective  tax bases.  Deferred tax assets and  liabilities  are measured using
enacted  income tax rates  expected  to apply to taxable  income in the years in
which those temporary differences are expected to be recovered or settled.

Research Grant and License Revenues
Revenues from research grants are recognized in the period the associated  costs
are incurred. License revenues are recognized in the period the cash is received
and all licensor obligations have been fulfilled.

Earnings Per Share
In 1997 the Financial  Accounting  Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("Statement 128").  Statement
128 replaced the  calculation  of primary and fully  diluted  earnings per share
with basic and diluted  earnings per share.  Unlike primary  earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants, and
convertible  securities.  Diluted  earnings  per  share is very  similar  to the
previously  reported  fully diluted  earnings per share.  All earnings per share
amounts for all periods have been presented and, where appropriate,  restated to
conform to the Statement 128 requirements.

                                       15

<PAGE>

Comprehensive Income
In 1997 the Financial  Accounting  Standards Board issued Statement of Financial
Accounting  Standards  No. 130,  "Reporting  Comprehensive  Income"  ("Statement
130"),   which   established   standards   for  the  reporting  and  display  of
comprehensive   income  and  its   components  in  a  full  set  of  comparative
general-purpose  financial  statements.  The statement  became effective for the
Company in 1998.  Comprehensive income is defined in Statement 130 as net income
plus other comprehensive  income,  which, under existing  accounting  standards,
includes  foreign  currency  items,  minimum pension  liability  adjustments and
unrealized  gains  and  losses  on  certain   investments  in  debt  and  equity
securities.  Comprehensive  income  disclosures are included in the Consolidated
Statements of Shareholders' Equity and Comprehensive Income.

2.  Follow-On Equity Offering

On  April 3,  1998 the  Company  completed  a  follow-on  equity  offering  (the
"Offering")  of  2,588,000  new  shares of its  common  stock  resulting  in net
proceeds of $39.4  million.  On April 16, 1998 the Company  issued an additional
387,500  shares of common  stock  pursuant  to the  underwriters'  overallotment
option  resulting in $6.0 million of additional  net proceeds to the Company.  A
portion of the net  proceeds was used to repay $13.3  million of  principal  and
interest outstanding under the Company's bank loans.

3. Ideas for Medicine, Inc.

On March 5, 1997 the  Company  acquired  the stock of Ideas for  Medicine,  Inc.
("IFM"),   a  medical  device  company   specializing  in  the  manufacture  and
distribution of single-use  medical devices,  for consideration of approximately
$4.5 million in cash and  approximately  $5.0 million in convertible  debentures
plus related  expenses.  The cash portion of the purchase  price was financed by
borrowings  under the Company's  revolving term loan agreement.  Pursuant to the
purchase agreement, an additional  consideration of $700,000 was paid in January
2000. The acquisition was accounted for as a purchase;  accordingly, the results
of  operations  have  been  included  in the  accompanying  consolidated  income
statements from the date of acquisition. Based on the allocation of the purchase
price,  the Company's  unaudited  condensed pro forma results of operations  for
1997,  assuming  consummation  of the  purchase  as of January  1, 1997,  are as
follows (in thousands, except per share data):

                                                            1997
                                                      ----------------
Revenues                                                      $52,082
Net income                                                      4,756
Earnings per share:
  Basic                                                         $0.49
  Diluted                                                        0.48

In connection with this acquisition,  the Company also entered into a consulting
agreement with the former majority shareholder of IFM requiring monthly payments
to such shareholder of approximately $17,000 until March 2002.

On September 30, 1998 the Company completed the sale of substantially all of the
IFM product line and certain  related assets to Horizon Medical  Products,  Inc.
("HMP")  for $15  million  in cash  pursuant  to an  asset  purchase  agreement.
Concurrently,  IFM and HMP signed a  Manufacturing  Agreement (the  "Agreement")
which provides for the manufacture by IFM of specified minimum dollar amounts of
IFM  products  to be  purchased  exclusively  by HMP over each of the four years
following the sale.  Thereafter,  responsibility for such manufacturing is to be
assumed by HMP.

The Company  recorded  deferred  income at the  transaction  date  totaling $2.9
million,  representing  the selling  price less the net book value of the assets
sold, which included $7.7 million of goodwill, net of accumulated  amortization,
and the costs related to the sale. The income was deferred  because the sale and
manufacturing  agreements represent,  in the aggregate, a single transaction for
which the related income should be recognized over the term of the manufacturing
agreement.  Accordingly, the deferred income is being reflected in cost of goods
sold over the  four-year  term of the Agreement in a manner which is expected to
result in approximately  equal margins over the four-year period on the products
manufactured  and  sold by IFM to HMP.  During  1999 and  1998  amortization  of
deferred income totaled $1.2 million and $387,000, respectively.

On June 22, 1999 IFM notified  HMP that it was in default of certain  provisions
of the Agreement.  Specifically,  HMP is in violation of the payment  provisions
contained within the Agreement,  which calls for inventory  purchases to be paid
for  within  45 days  of  delivery.  Additionally,  HMP is in  violation  due to
nonpayment of interest related to such past due accounts receivable.

After  notification  of the default,  HMP indicated to the Company that it would
not be able to meet and has not met the minimum purchase  requirements  outlined
in the Agreement.  The Company has been negotiating with HMP in order to reach a
mutually  agreeable  solution to the default;  however,  due to the  significant
uncertainties related to the Company's ability to realize its investment in IFM,
the  Company  determined  that it had  incurred  an  impairment  loss on its IFM

                                       16

<PAGE>

assets.  In calculating the amount of the impairment  loss,  management used its
best  estimate to  determine  the  realizable  value of its  increase in working
capital  due to the HMP  default  and the  recoverability  of  IFM's  long-lived
assets,  consisting  primarily of leasehold  improvements  and  equipment.  As a
result,  management  recorded a $2.1 million  impairment loss on working capital
and a $2.6 million impairment loss on leasehold improvements.  Additionally, the
Company offset the above charges with $2.5 million of deferred  income  recorded
in  connection  with the sale of the IFM  product  line to HMP.  The net  pretax
effect of the above  nonrecurring  charges is $2.2 million and has been included
under the caption "Nonrecurring charges" in the accompanying Consolidated Income
Statements.

At December 31, 1999,  after  recognition  of the  impairment  loss,  IFM assets
consist of $800,000 of accounts  receivable,  $1.7  million of  inventory,  $1.6
million of a  building,  and  $360,000 of  equipment.  Management  believes  any
potential resolution to the default on the manufacturing agreement will not have
a material adverse impact on the Company's future operating results.

4.  Marketable Securities

The following is a summary of available-for-sale securities (in thousands):

<TABLE>
<CAPTION>
<S>                                  <C>               <C>               <C>

                                                          Unrealized        Estimated
                                                        Holding Losses     Market Value
December 31, 1999                          Cost
                                     ----------------- ----------------- -----------------
Municipal obligations                $         20,223  $          (226)  $         19,997
Equity securities                               9,444             (959)             8,485
                                     ----------------  ----------------  ----------------
                                     $         29,667  $        (1,185)  $         28,482
                                     ================  ================  ================

                                                          Unrealized        Estimated
                                                        Holding Gains      Market Value
December 31, 1998                          Cost
                                     ----------------- ----------------- -----------------
Municipal obligations                $         24,963  $            35   $         24,998
Equity securities                              10,440              175             10,615
                                     ----------------  ----------------  ----------------
                                     $         35,403  $           210   $         35,613
                                     ================  ================  ================
</TABLE>



The  gross  realized  gains on sales of  available-for-sale  securities  totaled
$112,000 and $4,000 in 1999 and 1998, respectively. Differences between cost and
market of a $1.2 million loss (less  deferred  taxes of $403,000) and a $210,000
gain (less  deferred  taxes of $71,000) are included as a separate  component of
shareholders' equity as of December 31, 1999 and 1998, respectively.

At December  31, 1999 and 1998,  approximately  $4.1  million and $8.9  million,
respectively,  of debt securities with original maturities of 90 days or less at
their acquisition dates were included in cash and cash equivalents.  At December
31,  1999 no  investments  had a  maturity  date  between 90 days and 1 year and
approximately $15.9 million of investments mature between 1 and 5 years.

5.  Inventories

Inventories at December 31 are comprised of the following (in thousands):


                                  1999                 1998
                           -------------------- -------------------
Raw materials                           $1,555              $1,296
Work -in process                           578               1,037
Finished goods                           2,464               1,052
                           -------------------- -------------------
                                        $4,597              $3,385
                           ==================== ===================

                                       17

<PAGE>

6.  Long-Term Debt

Long-term debt at December 31 consists of the following (in thousands):

<TABLE>
<CAPTION>
<S>                                                                    <C>               <C>

                                                                             1999              1998
                                                                       ----------------- ------------------

7% convertible debenture, due in March 2002                                      $4,393             $4,393

8.25% note payable due in equal annual installments of $250,000
                                                                                    500                750

Note  payable  due in  2000  with  an  effective  interest  rate
of 8%,  net of unamortized discount of $3,000 in 1999 and $29,000
in 1998
                                                                                     37                301
                                                                       ----------------- ------------------


                                                                                  4,930              5,444
Less current maturities                                                             287                516
                                                                       ----------------- ------------------
Total long-term debt                                                             $4,643             $4,928
                                                                       ----------------- ------------------
</TABLE>


On August 30, 1996 the Company  executed a $10 million  revolving loan agreement
(the "Loan  Agreement") with a bank which, as amended on June 12, 1998,  permits
the  Company to borrow up to $2.0  million  at either  the bank's  prime rate of
interest (8.5% at December 31, 1999) or at adjusted LIBOR,  as defined,  plus an
applicable  LIBOR margin.  The Loan Agreement  expires on December 31, 2001. The
Loan Agreement contains certain restrictive covenants including, but not limited
to,  maintenance of certain  financial  ratios and a minimum  tangible net worth
requirement. The Loan Agreement is secured by substantially all of the Company's
assets,  including IFM's stock but excluding intellectual  property.  Commitment
fees are paid based on the unused portion of the facility.

In March  1997  the  Company  issued a $5.0  million  convertible  debenture  in
connection with the IFM  acquisition.  The debenture bears interest at 7% and is
due in March 2002. The debenture is convertible into common stock of the Company
at any time  prior to the due date at $12.08 per common  share.  In  conjunction
with the Offering,  $607,000 of the  convertible  debenture  was converted  into
50,000 shares of the Company's common stock on March 30, 1998.

On September 12, 1996 the Company acquired the assets of United Cryopreservation
Foundation,  Inc. ("UCFI"),  a processor and distributor of cryopreserved  human
heart valves and  saphenous  veins for  transplant.  The Company  issued a $1.25
million note in  connection  with the  acquisition.  The note bears  interest at
prime, as adjusted annually on the anniversary date of the acquisition.

In April  1996  the  Company  issued  a  $910,000  noninterest  bearing  note in
connection with the acquisition of its BioGlue  technology.  The note is payable
in three annual  installments  of $290,000,  plus a final  payment of $40,000 at
maturity.

Scheduled  maturities  of long-term  debt for the next five years are as follows
(in thousands):

                       2000                      $287
                       2001                       250
                       2002                     4,393
                                                -----
                                               $4,930

7.  Fair Values of Financial Instruments

Statement of Financial  Accounting  Standards No. 107,  "Disclosures  about Fair
Value of Financial Instruments", requires the Company to disclose estimated fair
values for its financial  instruments.  The carrying  amounts of receivables and
accounts payable approximate their fair values due to the short-term maturity of
these  instruments.   The  carrying  value  of  the  Company's  other  financial
instruments approximated fair value at December 31, 1999 and 1998.

8.  Leases

The Company leases equipment,  furniture,  and office space under various leases
with terms of up to 15 years.  Commencing  January 5, 1998 IFM leased office and
manufacturing  facilities  under a capital  lease for $24,125 per month  through
January 2008 from the former majority shareholder of IFM. Certain leases contain

                                       18

<PAGE>

escalation  clauses and renewal options for additional  periods.  Future minimum
lease payments under noncancelable leases as of December 31, 1999 are as follows
(in thousands):

<TABLE>
<CAPTION>
<S>                                                     <C>                             <C>

                                                            Capitalized                      Operating
                                                              Leases                          Leases
       2000                                             $             310               $           1,422
       2001                                                           290                           1,324
       2002                                                           290                             975
       2003                                                           290                             952
       2004                                                           290                             933
       Thereafter                                                     868                          11,342
       --------------------------------------------------------------------------------------------------
       Total minimum lease payments                                 2,338               $          16,948
                                                                                        =================
       Less amount representing interest                              624
       ------------------------------------------------------------------ 
       Present value of net minimum
         lease payments                                             1,714
       Less current portion                                           180
       ------------------------------------------------------------------ 
                                                        $           1,534
       ==================================================================
</TABLE>


Property  acquired  under  capital  leases at December 31, 1999  consists of the
following (in thousands):


       Buildings                                        $           1,987
       Furniture and fixtures                                         150
                                                        -----------------
                                                                    2,137
       Accumulated depreciation                                       529
                                                        $           1,608
                                                        =================

Total rental expense for operating  leases  amounted to $1,457,000,  $1,321,000,
and $1,282,000 for 1999, 1998, and 1997, respectively.

9.  Stock Option Plans

The  Company  has stock  option  plans  which  provide  for grants of options to
employees  and  directors to purchase  shares of the  Company's  common stock at
exercise prices generally equal to the fair values of such stock at the dates of
grant,  which generally become  exercisable over a five-year  vesting period and
expire within ten years of the grant dates.  Under the 1993  Employee  Incentive
Stock  Option  Plan,  the 1998  Long-Term  Incentive  Plan,  and the amended and
restated  Nonemployee  Director's  Plan, the Company has authorized the grant of
options  of  up to  700,000,  300,000,  and  396,000  shares  of  common  stock,
respectively.  As of December 31, 1999 and 1998,  there were 383,000 and 569,000
shares of common stock reserved for future  issuance  under the Company's  stock
option plans. A summary of stock option transactions under the plans follows:

<TABLE>
<CAPTION>
<S>                                           <C>                <C>                  <C>

                                                                     Exercise            Weighted Average
                                                  Shares              Price               Exercise Price
                                              ---------------    -----------------    ------------------------
Outstanding at December 31, 1996                  708,000            $2.25-18.43                   $7.36
Granted                                           201,000            10.25-15.88                   11.97
Exercised                                        (105,000)             2.25-7.50                    2.85
Canceled                                          (50,000)            2.25-16.75                   10.06
                                              ---------------
Outstanding at December 31, 1997                  754,000             3.00-18.43                    8.95
Granted                                           331,000            12.00-17.13                   15.48
Exercised                                        (103,000)            3.12-10.25                    4.80
Canceled                                         (155,000)            3.12-18.43                   16.03
                                              ---------------
Outstanding at December 31, 1998                  827,000             3.00-17.13                   10.73
Granted                                           335,000            11.88-17.13                   13.86
Exercised                                         (49,000)            3.00-10.25                    3.66
Canceled                                         (100,000)           10.25-17.13                   16.94
                                              ---------------
Outstanding at December 31, 1999                1,013,000            $3.00-17.13                  $11.49
                                              ===============
</TABLE>


                                       19

<PAGE>


The following table summarizes  information concerning currently outstanding and
exercisable options:

<TABLE>
<CAPTION>
<S>                 <C>              <C>                    <C>            <C>                <C>

                           Options Outstanding                                   Options Exercisable
-------------------------------------------------------------------------- ---------------------------------

                                       Weighted Average       Weighted                          Weighted
Range of Exercise                          Remaining           Average                           Average
      Prices            Number         Contractual Life       Exercise          Number          Exercise
                      Outstanding                               Price         Exercisable         Price
------------------- ---------------- ---------------------- -------------- ------------------ --------------
      $3.00-10.25       341,000               1.1               $6.26           284,000           $5.92
      11.28-12.75       351,000               5.0               12.36           112,000           12.05
      13.50-17.13       321,000               4.5               16.11           219,000           16.49
                    ----------------                                       ------------------
      $3.00-17.13     1,013,000               3.5               11.49           615,000          $10.79
                    ================                                       ==================
</TABLE>


In September  1999,  the Company  granted  options to a nonemployee  to purchase
12,000  shares of common  stock at an  exercise  price of $12.31 per  share.  In
connection with the issuance of these options, the Company recognized $60,000 as
deferred  compensation  for the  estimated  fair value of the options.  Deferred
compensation is amortized ratably over the vesting period of the options.

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
"Accounting  for Stock Issued to Employees"  and related  interpretations  ("APB
25") in accounting for its employee stock options  because,  as discussed below,
the alternative fair value accounting  provided for under Statement of Financial
Accounting  Standards  No.  123,   "Accounting  for  Stock-Based   Compensation"
("Statement  123"),  requires  use of  option  valuation  models  that  were not
developed for use in valuing  employee stock options.  Under APB 25, because the
exercise  price of the Company's  employee stock options equals the market price
of the underlying  stock on the date of the grant,  no  compensation  expense is
recognized.

Pro forma information regarding net income and earnings per share is required by
Statement 123, which also requires that the  information be determined as if the
Company has  accounted  for its employee  stock  options  granted  subsequent to
December 31, 1994 under the fair value method of that statement. The fair values
for these  options were  estimated  at the dates of grant using a  Black-Scholes
option pricing model with the following weighted-average assumptions:

<TABLE>
<CAPTION>
<S>                                                   <C>               <C>              <C>

                                                            1999             1998              1997
                                                      ----------------- ---------------- -----------------
Expected dividend yield                                          0%               0%               0%
Expected stock price volatility                                .540             .520             .533
Risk-free interest rate                                       5.78%            5.30%            5.75%
Expected life of options                                   3.6Years        3.8 Years        4.7 Years
</TABLE>


The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective assumptions,  including the expected stock price volatility.  Because
the  Company's  employee  stock  options  have   characteristics   significantly
different  from those of traded  options and because  changes in the  subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

                                       20

<PAGE>

For purposes of pro forma disclosures,  the estimated fair values of the options
are amortized to expense over the options'  vesting  periods.  The Company's pro
forma information follows (in thousands, except per share data):

<TABLE>
<CAPTION>
<S>                                                   <C>              <C>               <C>

                                                           1999              1998              1997
                                                      ---------------- ----------------- -----------------
Net income--as reported                                        $4,451            $6,486            $4,725
Net income--pro forma                                          $3,421            $5,705            $4,164
Earnings per share--as reported:
   Basic                                                       $ 0.36            $ 0.54            $ 0.49
   Dilutive                                                    $ 0.36            $ 0.53            $ 0.48
Earnings per share--pro forma:
   Basic                                                       $ 0.28            $ 0.48            $ 0.43
   Dilutive                                                    $ 0.27            $ 0.47            $ 0.42
</TABLE>


Other information concerning stock options follows:

<TABLE>
<CAPTION>
<S>                                                   <C>              <C>               <C>

                                                           1999              1998              1997
                                                      ---------------- ----------------- -----------------
Weighted  average  fair  value  of  options  granted
   during the year                                              $5.62             $6.54             $6.69
Number   of   shares   as  to  which   options   are
   exercisable at end of year                                 615,000           505,000           308,000
</TABLE>


Because  Statement  123 is  applicable  only to options  granted  subsequent  to
December 31, 1994, its pro forma effect is not fully reflected until 1999.

10.  Shareholder Rights Plan

On November 27, 1995 the Board of Directors adopted a shareholder rights plan to
protect  long-term share value for the Company's  shareholders.  Under the plan,
the Board declared a distribution of one Right for each outstanding share of the
Company's  Common  Stock  to  shareholders  of  record  on  December  11,  1995.
Additionally,  the Company has further  authorized  and directed the issuance of
one Right with  respect to each  Common  Share  that  shall  become  outstanding
between  December  11, 1995 and the  earliest of the  Right's  exercise  date or
expiration date. Each Right entitles the registered  holder to purchase from the
Company  one-tenth of a share of a newly created  Series A Junior  Participating
Preferred  Stock at an  exercise  price of $100.  The  Rights,  which  expire on
November 27, 2005, may be exercised only if certain  conditions are met, such as
the  acquisition  of 15% or more of the  Company's  Common  Stock by a person or
affiliated group ("Acquiring Person").

In the event the Rights  become  exercisable,  each Right will enable the owner,
other than the  Acquiring  Person,  to  purchase,  at the Right's  then  current
exercise price,  that number of shares of Common Stock with a market value equal
to twice the exercise price. In addition,  unless the Acquiring Person owns more
than 50% of the outstanding  shares of Common Stock,  the Board of Directors may
elect to  exchange  all  outstanding  Rights  (other  than  those  owned by such
Acquiring  Person)  at an  exchange  ratio of one  share  of  Common  Stock,  or
one-tenth of a Preferred Share, per Right.

11.  Stock Repurchase

On October 14, 1998, the Company's Board of Directors  authorized the Company to
purchase up to 1 million shares of its common stock. The purchase of shares will
be made from time -to time in open market or privately  negotiated  transactions
on such terms as management deems appropriate. As of December 31, 1999 and 1998,
the Company had  purchased  721,000 and  343,000  shares,  respectively,  of its
common stock for an  aggregate  purchase  price of  $7,646,000  and  $3,350,000,
respectively.

12.  Employee Benefit Plans

The Company has a 401(k) savings plan (the "Plan") providing retirement benefits
to all employees who have completed at least six months of service.  The Company
makes matching contributions of 50% of each participant's  contribution up to 5%
of each participant's salary. Total company contributions approximated $351,000,
$241,000, and $139,000 for 1999, 1998, and 1997, respectively. Additionally, the
Company may make  discretionary  contributions to the Plan that are allocated to
each participant's  account.  No such  discretionary  contributions were made in
1999, 1998, or 1997.

On May 16, 1996 the Company's shareholders approved the CryoLife,  Inc. Employee
Stock Purchase Plan (the "ESPP").  The ESPP allows eligible  employees the right
to purchase  common stock on a quarterly basis at the lower of 85% of the market
price  at the  beginning  or end of  each  three-month  offering  period.  As of
December 31, 1999 and 1998 there were 503,000 and 543,000, respectively,  shares
of common  stock  reserved  under the ESPP and there had been 97,000 and 57,000,
respectively, shares issued under the plan.

                                       21

<PAGE>

13. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):

<TABLE>
<CAPTION>
<S>                                                              <C>                <C>             <C>

                                                                     1999              1998              1997
                                                                 --------------     ------------    ----------------
  Numerator for basic and diluted earnings per share -- income
     available to common shareholders                                   $4,451           $6,486              $4,725
                                                                 ==============     ============    ================

  Denominator for basic earnings per share - weighted-average           12,341           11,974               9,642
     basis
  Effect of dilutive stock options                                         192              290                 300
                                                                 --------------     ------------    ----------------
  Denominator for diluted earnings per share -- adjusted                12,533           12,264               9,942
     weighted-average shares
                                                                 ==============     ============    ================
  Basic earnings per share                                              $ 0.36           $ 0.54              $ 0.49
                                                                 ==============     ============    ================
  Diluted earnings per share                                            $ 0.36           $ 0.53              $ 0.48
                                                                 ==============     ============    ================
</TABLE>


14.  Income Taxes

Income tax expense consists of the following (in thousands):

<TABLE>
<CAPTION>
<S>                                                   <C>                <C>               <C>

                                                            1999               1998             1997
                                                      ------------------ ----------------- ----------------
Current:
  Federal                                                        $2,912            $3,854           $1,533
  State                                                              95               279              403
                                                      ------------------ ----------------- ----------------
                                                                  3,007             4,133            1,936
Deferred                                                           (957)           (1,948)             972
                                                      ------------------ ----------------- ----------------
                                                                 $2,050            $2,185           $2,908
                                                      ================== ================= ================
</TABLE>


Such  amounts  differ from the amounts  computed  by applying  the U.S.  federal
income tax rate of 34% to pretax income as a result of the following (in
thousands):

<TABLE>
<CAPTION>
<S>                                                   <C>                <C>               <C>

                                                            1999              1998             1997
                                                      ------------------ ----------------- ----------------

Tax expense at statutory rate                                  $2,210            $2,947            $2,593
Increase (reduction) in income taxes
 resulting from:
    Change in valuation allowance for
    deferred tax assets                                            --                --               (30)
    Entertainment expenses                                         47                90                42
    State income taxes, net of federal                            163               173               266
      benefit
    Nontaxable interest income                                   (232)              (63)               --
    Research and development credits                             (100)             (585)               --
    State and local tax refunds                                    --              (256)               --
    Other                                                         (38)             (121)               37
                                                      ------------------ ----------------- ----------------
                                                               $2,050            $2,185            $2,908
                                                      ================== ================= ================
</TABLE>


                                       22

<PAGE>

The tax  effects  of  temporary  differences  which  give rise to  deferred  tax
liabilities and assets at December 31 are as follows (in thousands):

<TABLE>
<CAPTION>
<S>                                                                     <C>              <C>

                                                                             1999              1998
                                                                        ---------------- -----------------
Long-term deferred tax assets (liabilities):
   Impairment of IFM long-lived assets                                        $993               $--
   Intangible assets                                                           579               547
   Property                                                                   (556)           (1,537)
   Deferred income                                                              --               580
                                                                        ---------------- -----------------
                                                                             1,016              (410)
Current deferred tax assets (liabilities):
   Impairment of IFM inventory                                                 634                --
   Unrealized gain on marketable securities                                    403               (71)
   Allowance for bad debts                                                     201                97
   Accrued expenses                                                             98               872
   Deferred income                                                              --               394
   Deferred preservation costs and inventory reserves                           57                20
   Other                                                                       (27)               36
                                                                        ---------------- -----------------
                                                                             1,366             1,348
                                                                        ---------------- -----------------
Net deferred tax assets                                                     $2,382              $938
                                                                        ================ =================
</TABLE>


At December 31, 1999,  the Company has recorded a net deferred tax asset of $2.4
million.  Realization  of the net deferred tax asset is dependent on  generating
sufficient  taxable  income  in  future  periods.  Although  realization  is not
ensured,  management  believes that it is more likely than not that the deferred
tax asset will be realized.

15.  Executive Insurance Plan

Pursuant to a supplemental life insurance program for certain executive officers
of the Company, the Company and the executives share in the premium payments and
ownership of insurance  policies on the lives of such executives.  The Company's
aggregate premium  contributions under this program were $33,000,  $43,000,  and
$38,000 for 1999, 1998, and 1997, respectively.

16.  Equipment on Loan to Implanting Hospitals

The Company consigns liquid nitrogen freezers with certain implanting  hospitals
for tissue  storage.  The freezers are the property of the Company.  At December
31, 1999  freezers with a total cost of  approximately  $1.8 million and related
accumulated  depreciation  of  approximately  $1.0  million  were located at the
implanting  hospitals'  premises.  Depreciation  is provided  over the estimated
useful lives of the freezers on a straight-line basis.

17.  Transactions with Related Parties

The Company expensed $60,000,  $68,000, and $65,000 during 1999, 1998, and 1997,
respectively, relating to services performed by a law firm whose sole proprietor
is a  member  of the  Company's  Board of  Directors  and a  shareholder  of the
Company.   The  Company   expensed   $64,000  and  $75,000  in  1999  and  1998,
respectively,  relating  to  consulting  services  performed  by a member of the
Company's  Board of Directors  and a  shareholder  of the  Company.  The Company
expensed $195,000, $210,000, and $175,000 in 1999, 1998, and 1997, respectively,
relating to consulting services performed by a shareholder of the Company.

                                       23

<PAGE>


                    SELECTED QUARTERLY FINANCIAL INFORMATION
                      (In thousands except per share data)


<TABLE>
<CAPTION>
<S>                                                      <C>         <C>          <C>         <C>         <C>

------------------------------------------- ----------- ------------ ----------- ----------- -----------
REVENUES                                          Year      First       Second      Third       Fourth
                                                            Quarter     Quarter     Quarter     Quarter
------------------------------------------- ----------- ------------ ----------- ----------- -----------
                                                  1999      $16,325     $17,395     $16,529     $16,473
                                                  1998       14,561      15,554      16,014      14,562
                                                  1997       10,413      12,723      14,641      13,092
NET INCOME
------------------------------------------- ----------- ------------ ----------- ----------- -----------
                                                  1999       $1,380      $1,727      $1,714      $ (370)
                                                  1998        1,172       2,048       1,902       1,364
                                                  1997          952       1,160       1,458      $1,155
EARNINGS PER SHARE - DILUTED1,2
------------------------------------------- ----------- ------------ ----------- ----------- -----------
                                                  1999        $0.11       $0.14       $0.14     $ (0.03)
                                                  1998         0.12        0.16        0.15        0.11
                                                  1997         0.10        0.12        0.15        0.12

</TABLE>


1    Reflects adjustment for the 2-for-1 stock split effected June 28, 1996.

2    Presented,  and  where  appropriate,  restated  to  conform  to  Statement 
     128 requirements.

                                       24




                                                                    EXHIBIT 21.1


                         SUBSIDIARIES OF CRYOLIFE, INC.




Subsidiary                                   Jurisdiction
-----------                                  -------------

Ideas for Medicine, Inc.                     Florida
CryoLife Technology, Inc.                    Nevada
CryoLife Foreign Sales, Inc.                 Barbados
CryoLife Europa, LTD.                        United Kingdom     






                                                                 EXHIBIT 23.1


                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS



     As independent public  accountants,  we hereby consent to the incorporation
by  reference  of our reports  dated  February 7, 2000,  appearing on pages 8 of
Exhibit  13.1 and S-1 of this Form 10-K,  into the  Company's  previously  filed
Registration  Statement  File  Nos.  33-83996,  33-84048,  333-03513,  333-75535
333-59853, 333-59849, 333-06141, and 333-34025.


ARTHUR ANDERSEN, LLP



Atlanta, Georgia
March 27, 2000








                                                                    EXHIBIT 23.2

                         CONSENT OF INDEPENDENT AUDITORS






We consent to the use of our report dated February 2, 1999,  with respect to the
consolidated  financial  statements  of  CryoLife,  Inc. for the two years ended
December 31, 1998, included in this Annual Report (Form 10-K).

Our audits also  included the  financial  statement  schedule of CryoLife,  Inc.
listed in Item  14(a) for each of the years in the  period  ended  December  31,
1998.  This  schedule is the  responsibility  of the Company's  management.  Our
responsibility is to express an opinion based on our audits. In our opinion,  as
of the date of our report referred to in the preceding paragraph,  the financial
statement  schedule  referred to above, when considered in relation to the basic
financial statements taken as a whole,  presents fairly in all material respects
the  information  set forth  therein  for each of the years in the period  ended
December 31, 1998.

We also consent to the incorporation by reference in Registration Statements No.
33-83996, 33-84048, 333-03513,  333-59853,  333-59849, 333-06141, 333-75535, and
333-34025,   of  our  report  dated  February  2,  1999,  with  respect  to  the
consolidated  financial  statements  and our report  included  in the  preceding
paragraph  with respect to the  financial
  statement  schedule  included in this
Annual  Report  (Form 10-K) of CryoLife,  Inc.  for the year ended  December 31,
1999.



Atlanta, Georgia                            /s/ Ernst & Young, LLP
March 27, 2000



<TABLE> <S> <C>


<ARTICLE>                     5
<LEGEND>
THIS  SCHEDULE  CONTAINS  SUMMARY  FINANCIAL   INFORMATION  EXTRACTED  FROM  THE
FINANCIAL STATEMENTS OF CRYOLIFE, INC. FOR THE YEAR ENDED DECEMBER 31, 1999, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK>                         0000784199         
<NAME>                        CRYOLIFE, INC.
       
<S>                                        <C>

<PERIOD-TYPE>                              12-MOS
<FISCAL-YEAR-END>                              DEC-31-1999
<PERIOD-START>                                 JAN-01-1999
<PERIOD-END>                                   DEC-31-1999

<CASH>                                          6,128,000
<SECURITIES>                                   24,403,000
<RECEIVABLES>                                  11,694,000
<ALLOWANCES>                                      528,000
<INVENTORY>                                     4,597,000
<CURRENT-ASSETS>                               67,550,000
<PP&E>                                         30,517,000
<DEPRECIATION>                                 11,843,000
<TOTAL-ASSETS>                                 94,025,000
<CURRENT-LIABILITIES>                           7,622,000
<BONDS>                                         6,644,000
<PREFERRED-MANDATORY>                                   0
<PREFERRED>                                             0
<COMMON>                                          134,000
<OTHER-SE>                                     80,092,000
<TOTAL-LIABILITY-AND-EQUITY>                   94,025,000
<SALES>                                         6,329,000
<TOTAL-REVENUES>                               66,722,000
<CGS>                                           5,754,000
<TOTAL-COSTS>                                  30,170,000
<OTHER-EXPENSES>                               30,051,000
<LOSS-PROVISION>                                  121,000
<INTEREST-EXPENSE>                                387,000
<INCOME-PRETAX>                                 6,501,000
<INCOME-TAX>                                    2,050,000
<INCOME-CONTINUING>                             4,451,000
<DISCONTINUED>                                          0
<EXTRAORDINARY>                                         0
<CHANGES>                                               0
<NET-INCOME>                                    4,451,000
<EPS-BASIC>                                         .36
<EPS-DILUTED>                                         .36
        


</TABLE>