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

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                                    FORM 8-K
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                                 CURRENT REPORT
                     PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

        DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 1, 2005

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

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


                                                                                  
                FLORIDA                                 1-13165                              59-2417093
     (State or Other Jurisdiction              (Commission File Number)                     (IRS Employer
           of Incorporation)                                                             Identification No.)


              1655 ROBERTS BOULEVARD, N.W., KENNESAW, GEORGIA 30144
               (Address of principal executive office) (zip code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 419-3355

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          (Former name or former address, if changed since last report)

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

     Check the  appropriate  box below if the Form 8-K  filing  is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

|_|  Written  communications  pursuant to Rule 425 under the  Securities Act (17
     CFR 230.425)

|_|  Soliciting  material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
     240.14a-12)

|_|  Pre-commencement   communications  pursuant  to  Rule  14d-2(b)  under  the
     Exchange Act (17 CFR 240.14d-2(b))

|_|  Pre-commencement   communications  pursuant  to  Rule  13e-4(c)  under  the
     Exchange Act (17 CFR 240.13e-4(c))

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SECTION 1 REGISTRANT'S BUSINESS AND OPERATIONS.
ITEM 1.01. ENTERING INTO A MATERIAL DEFINITIVE AGREEMENT.

Settlement of Shareholder Derivative Action

     As previously reported, a shareholder derivative action was filed in August
2002 in the Superior Court of Gwinnett County,  Georgia,  against CryoLife, as a
nominal  defendant,  and seven  persons who were  directors  prior to that time,
including  Steven G.  Anderson,  the Chairman and Chief  Executive  Officer.  On
January 16, 2003 another  purported  derivative  suit alleging claims similar to
those of the  Gwinnett  County  suit was filed in the  Superior  Court of Fulton
County by  complainant  Robert F.  Frailey.  In October 2003 the two  derivative
suits were  consolidated into one action in the Superior Court of Fulton County,
and a consolidated  amended  complaint was filed.  Albert E. Heacox,  Ph.D.,  an
executive officer of the Company, was originally named as a defendant, but later
released.  James C. Vander Wyk, formerly an executive officer of the Company and
D. Ashley Lee, the Company's Chief Operating Officer and Chief Financial Officer
were eventually added to the action.

     As a result of the  anticipated  settlement of the  shareholder  derivative
litigation  the Company  accrued an  anticipated  expense of $3.5 million in the
first quarter as a component of accrued expenses and other liabilities, and $3.5
million in other  receivables  as of March 31,  2005,  representing  amounts the
Company expected to recover from the insurance carriers.

     The  parties  resolved  the  remaining  open  issues,  and  entered  into a
settlement  agreement in the form of a  stipulation  of  settlement on August 1,
2005,  which was then  submitted to the Court for approval.  The  stipulation of
settlement  is  attached  hereto as  Exhibit  10.1 and  herein  incorporated  by
reference.  The terms of the settlement include resolution of the claims against
the Company and the individual  defendants and a cash payment of $3.5 million to
cover the plaintiffs' attorneys' fees and expenses, which the Company expects to
recover from the insurance carriers.

     The Company and its management  also agreed to several changes in corporate
governance, including the following:

     o    The size of the CryoLife  Board of Directors  will be increased by one
          additional seat within 90 days after court approval of the settlement.
          The new seat is to be  allocated  to a  director  with  experience  in
          regulatory affairs,  and selected after giving priority  consideration
          to one or more nominees proposed by the Plaintiffs.

     o    The Board will appoint a new committee  with a majority of independent
          directors  to oversee its  regulatory  affairs  and quality  assurance
          relating to new and existing biopharmaceutical  products. On August 1,
          2005,  the  Board  of  Directors   appointed  three  members  of  this
          committee.  They are  Bruce J. Van  Dyne,  M.D.,  Chairman,  Ronald C.
          Elkins,  M.D., and Ronald D. McCall. The Board anticipates  appointing
          the new director as the fourth member of this committee.

     o    The Company will begin  expensing stock options in accordance with FAS
          123R in the quarter  preceding the quarter in which such  expensing is
          required, subject to certain conditions.



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     o    The  Board  will  adopt  a  resolution  on  compensation   principles,
          including a limitation on severance,  separation and benefit  payments
          of three times base salary plus  bonuses and  guaranteed  benefits for
          the CEO and other  employees  at the Vice  President  level or higher.

     o    At least  50% of  directors'  annual  fees  shall be paid in  CryoLife
          stock,  computed  as  including  the fair value of stock  grants,  the
          amount expensed in the case of option grants, and amounts paid in cash
          to cure taxes or option grants.

     o    Directors  must be no older than 75 to be  nominated  for  election or
          re-election by the Board.

     o    The Audit Committee will require its independent auditor to rotate the
          Company's audit partner every four years.

     The  arrangement  provides for other changes in corporate  governance,  and
also includes formal  commitments to continue to follow other specified existing
policies and practices.  The agreement will remain in effect for four years from
the date of court approval of the final settlement, unless CryoLife shares cease
to be publicly traded.

     There can be no assurance  that Court  approval  will be obtained,  and the
terms could change.  If the  agreement  fails to become  effective,  the parties
shall be restored to their respective positions in the litigation as of April 4,
2005.

Material Relationships

     There are no  material  relationships  between  the  Company and any of the
parties to the settlement  agreement,  other than holdings in Company securities
by plaintiff  shareholders and the employment  relationships  with,  holdings in
Company  securities  by, and other  relationships  with  defendant  officers and
directors of the Company  disclosed in the Company's  most recently  filed proxy
statement and periodic reports.

ITEM 9.01  FINANCIAL STATEMENTS AND EXHIBITS.

     (a) Financial Statements.

     (b) Pro Forma Financial Information.

     (c) Exhibits.

         Exhibit Number        Description
         --------------        -----------
         10.1                  Stipulation of Settlement dated August 1, 2005



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                                   SIGNATURES

     Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,
CryoLife,  Inc.  has duly  caused  this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                        CRYOLIFE, INC.



Date:  August 5, 2005                   By:  /s/ D. A. Lee
                                             ----------------------------------
                                             Name:  D. Ashley Lee
                                             Title: Executive  Vice  President,
                                             Chief  Operating  Officer and Chief
                                             Financial Officer


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