10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: December 31, 2008

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: 0-27120

Kensey Nash Corporation

(Exact name of registrant as specified in its charter)

Delaware	36-3316412
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

735 Pennsylvania Drive, Exton, Pennsylvania 19341

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (484) 713-2100

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

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller Reporting Company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of January 31, 2009, there were 11,512,752 outstanding shares of Common Stock, par value $.001, of the registrant.

KENSEY NASH CORPORATION

QUARTER ENDED DECEMBER 31, 2008

INDEX

			PAGE
PART I - FINANCIAL INFORMATION
	Item 1.	Condensed Consolidated Financial Statements
		Balance Sheets as of December 31, 2008 (Unaudited) and June 30, 2008	3
		Statements of Income for the three and six months ended December 31, 2008 and 2007 (Unaudited)	4
		Statement of Stockholders’ Equity for the six months ended December 31, 2008 (Unaudited)	5
		Statements of Cash Flows for the six months ended December 31, 2008 and 2007 (Unaudited)	6
		Notes to Condensed Consolidated Financial Statements (Unaudited)	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
	Item 4.	Controls and Procedures	41
PART II - OTHER INFORMATION
	Item 1A.	Risk Factors	43
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
	Item 4.	Submission of Matters to a Vote of Security Holders	43
	Item 6.	Exhibits	45
SIGNATURES			46
EXHIBITS

2

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

KENSEY NASH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31, 2008			June 30, 2008
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	63,232,161		$	48,706,232
Investments (See Note 2)		8,087,540			14,789,909
Trade receivables, net of allowance for doubtful accounts of $13,512 and $14,713 at December 31, 2008 and June 30, 2008, respectively		6,712,766			6,617,156
Royalties receivable		7,239,436			7,010,404
Other receivables (including approximately $9,500 and $1,379,000 at December 31, 2008 and June 30, 2008, respectively, due from employees)		181,341			2,020,295
Inventory (See Note 3)		10,646,009			9,270,864
Deferred tax asset, current portion		3,153,428			4,277,864
Prepaid expenses and other		2,189,095			1,859,958
Total current assets		101,441,776			94,552,682
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land		4,883,591			4,883,591
Building		46,275,739			45,869,376
Machinery, furniture and equipment		29,489,015			28,494,805
Construction in progress		601,560			498,283
Total property, plant and equipment		81,249,905			79,746,055
Accumulated depreciation		(22,845,164	)		(20,147,747	)
Net property, plant and equipment		58,404,741			59,598,308
OTHER ASSETS:
Deferred tax asset, non-current portion		627,746			—
Acquired patents and other intangibles, net of accumulated amortization of $5,188,759 and $4,788,389 at December 31, 2008 and June 30, 2008, respectively (See Note 5)		3,157,607			3,807,977
Goodwill (See Note 7)		4,366,273			4,366,273
Other non-current assets		96,729			103,324
Total other assets		8,248,355			8,277,574
TOTAL	$	168,094,872		$	162,428,564
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	2,624,415		$	2,049,318
Accrued expenses (See Note 8)		4,838,928			6,922,904
Other current liabilities		58,818			686,267
Current portion of debt (See Note 9)		1,399,997			1,399,997
Deferred revenue		742,517			601,131
Total current liabilities		9,664,675			11,659,617
OTHER LIABILITIES:
Long-term debt (See Note 9)		32,083,333			32,783,333
Deferred revenue, non-current		735,551			304,939
Deferred tax liability, non-current		—			420,598
Other non-current liabilities (See Note 9)		6,675,477			2,690,421
Total liabilities		49,159,036			47,858,908
COMMITMENTS AND CONTINGENCIES		—			—
STOCKHOLDERS’ EQUITY:
Preferred stock, $.001 par value, 100,000 shares authorized, no shares issued or outstanding at December 31, 2008 and June 30, 2008		—			—
Common stock, $.001 par value, 25,000,000 shares authorized, 11,512,752 and 11,640,221 shares issued and outstanding at December 31, 2008 and June 30, 2008, respectively		11,513			11,640
Capital in excess of par value		71,825,932			75,242,265
Retained earnings		51,506,423			41,018,596
Accumulated other comprehensive loss		(4,408,032	)		(1,702,845	)
Total stockholders’ equity		118,935,836			114,569,656
TOTAL	$	168,094,872		$	162,428,564

See notes to condensed consolidated financial statements.

3

KENSEY NASH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three Months Ended December 31,						Six Months Ended December 31,
	2008			2007			2008			2007
REVENUES:
Net sales
Biomaterial sales	$	13,097,049		$	11,484,912		$	25,768,987		$	21,652,211
Endovascular sales		877,874			1,661,951			1,669,660			3,026,181
Total net sales		13,974,923			13,146,863			27,438,647			24,678,392
Royalty income		6,822,905			6,491,063			13,508,864			12,561,951
Total revenues		20,797,828			19,637,926			40,947,511			37,240,343
OPERATING COSTS AND EXPENSES:
Cost of products sold		6,493,026			6,177,524			12,206,481			11,821,673
Research and development		4,539,173			3,959,591			8,962,922			8,891,595
Selling, general and administrative		2,119,628			5,929,374			4,405,227			13,505,966
Total operating costs and expenses		13,151,827			16,066,489			25,574,630			34,219,234
INCOME FROM OPERATIONS		7,646,001			3,571,437			15,372,881			3,021,109
OTHER INCOME/(EXPENSE):
Interest income		338,616			474,567			817,360			807,593
Interest expense		(545,097	)		(300,672	)		(1,044,372	)		(403,259	)
Other income		34,683			22,023			183,033			17,928
Total other (expense)/income - net		(171,798	)		195,918			(43,979	)		422,262
INCOME BEFORE INCOME TAX		7,474,203			3,767,355			15,328,902			3,443,371
Income tax expense		(2,233,933	)		(1,159,188	)		(4,841,075	)		(1,057,548	)
NET INCOME	$	5,240,270		$	2,608,167		$	10,487,827		$	2,385,823
BASIC EARNINGS PER SHARE	$	0.45		$	0.22		$	0.90		$	0.20
DILUTED EARNINGS PER SHARE	$	0.44		$	0.21		$	0.87		$	0.19
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		11,633,990			12,108,682			11,700,891			12,037,997
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		11,934,095			12,645,134			12,122,547			12,633,529

See notes to condensed consolidated financial statements.

4

KENSEY NASH CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

	Common Stock					Capital in Excess of Par			Retained			Accumulated Other Comprehensive			Comprehensive		Total
	Shares		Amount			Value			Earnings			Loss			Income/(Loss)
BALANCE, JUNE 30, 2008	11,640,221		$	11,640		$	75,242,265		$	41,018,596		$	(1,702,845	)			$	114,569,656
Exercise/issuance of:
Stock options	263,497			264			4,628,397											4,628,661
Nonvested stock awards	10,405			10			(10	)										—
Stock repurchase (See Note 12)	(401,371	)		(401	)		(10,448,075	)										(10,448,476	)
Tax benefit/(deficiency) from exercise/issuance of:
Stock options							1,466,230											1,466,230
Nonvested stock awards							(38,948	)										(38,948	)
Employee stock-based compensation:
Stock options							814,543											814,543
Nonvested stock awards							161,530											161,530
Net income										10,487,827					10,487,827			10,487,827
Change in unrealized loss on investments (net of tax)										(2,110	)		(2,110	)	(2,110	)
Interest rate swap unrealized loss (net of tax)													(2,703,077	)	(2,703,077	)		(2,703,077	)
Comprehensive income															7,782,640
BALANCE, DECEMBER 31, 2008 (Unaudited)	11,512,752		$	11,513		$	71,825,932		$	51,506,423		$	(4,408,032	)			$	118,935,836

See notes to condensed consolidated financial statements.

5

KENSEY NASH CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Six Months Ended December 31,
	2008			2007
OPERATING ACTIVITIES:
Net income	$	10,487,827		$	2,385,823
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,454,170			3,561,788
Stock-based compensation (See Note 13):
Stock options		762,917			1,247,519
Nonvested stock awards		190,312			1,883,761
Cash-settled stock appreciation rights		(627,449	)		1,302,063
Tax benefit/(deficiency) from exercise/issuance of:
Stock options		1,466,230			1,837,165
Nonvested stock awards		(38,948	)		(181,429	)
Excess tax benefits from share-based payment arrangements		(977,325	)		(1,134,192	)
Cash-settled stock appreciation rights (SARs) exercise/repurchase/other		—			(1,567,231	)
Deferred income taxes		1,563,102			(1,405,782	)
Income on disposal/retirement of property, plant and equipment		(9,231	)		(3,388	)
Changes in assets and liabilities which provided/(used) cash:
Accounts receivable		140,334			(938,617	)
Prepaid expenses and other current assets		(357,919	)		(559,986	)
Inventory		(1,375,145	)		(1,862,397	)
Accounts payable and accrued expenses		(1,457,253	)		(276,070	)
Deferred revenue, current		141,386			274,660
Other current liabilities		—			441,971
Deferred revenue, non-current		430,612			(51,777	)
Other non-current liabilities		(202,702	)		349,852
Net cash provided by operating activities		13,590,918			5,303,733
INVESTING ACTIVITIES:
Additions to property, plant and equipment		(1,546,477	)		(1,907,928	)
Additional MacroPore Biosurgery, Inc. acquisition costs		—			(62,298	)
Purchase of proprietary rights		—			(150,000	)
Sale of investments		6,650,000			8,320,000
Purchase of investments		—			(23,307,354	)
Net cash provided by/(used) in investing activities		5,103,523			(17,107,580	)
FINANCING ACTIVITIES:
Repayments of long term debt		(700,000	)		(116,667	)
Proceeds from secured commercial mortgage		—			27,000,000
Stock repurchase (See Note 12)		(10,448,476	)		(8,853,889	)
Excess tax benefits from share-based payment arrangements		977,325			1,134,192
Proceeds from exercise of stock options		6,002,639			3,592,602
Net cash (used)/provided by financing activities		(4,168,512	)		22,756,238
EFFECT OF EXCHANGE RATE ON CASH		—			72,647
INCREASE IN CASH		14,525,929			11,025,038
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		48,706,232			7,087,969
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	63,232,161		$	18,113,007
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest (net of interest capitalized of $74,648 and $36,965 at December 31, 2008 and 2007, respectively)	$	1,045,383		$	345,915
Cash paid for income taxes	$	1,446,121		$	—
Retirement of fully depreciated property, plant and equipment	$	115,563		$	131,300
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITY:
Increase in prepaid expense related to non-employee nonvested awards	$	—		$	115,013

SUPPLEMENTAL DISCLOSURE OF FINANCING INFORMATION:

During the year ended June 30, 2006, the Company entered into a Secured Commercial Mortgage with Citibank, F.S.B. The Mortgage which is secured by the Company’s facility and land, had provided the Company with the ability to take aggregate advances up to $35 million through November 25, 2007, all of which has been taken. (See Note 9).

See notes to condensed consolidated financial statements.

6

KENSEY NASH CORPORATION

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Condensed Consolidated Financial Statements

Principles of Consolidation and Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (U.S. GAAP) for complete annual financial statements. The accompanying financial information reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. The results of operations for the three and six month periods ended December 31, 2008 are not necessarily indicative of the results to be expected for the full year. These Condensed Consolidated Financial Statements should be read in conjunction with the consolidated statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2008 (fiscal 2008).

The Condensed Consolidated Statements of Income for the three and six month periods ended December 31, 2008 and 2007 have been reclassified to reflect aggregated selling, general and administrative expenses, which were previously separated as two line items. These costs have been aggregated due to the elimination of the Company’s direct sales and marketing efforts for its endovascular products after the sale of these product lines to The Spectranetics Corporation in May of 2008. There was no impact on amounts presented for income from operations.

Revenue Recognition

Sales Revenue

The Company recognizes revenue under the provisions of Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition (SAB 104), which superseded SAB No. 101, Revenue Recognition in Financial Statements (SAB 101). In addition, the Company follows the provisions of Emerging Issues Task Force Issue 00-21, Revenue Arrangements with Multiple Deliverables (EITF 00-21), for certain collaborative arrangements containing multiple revenue elements which were entered into, or materially amended, after June 30, 2003. Sales revenue is generally recognized when the products are shipped or the services are completed. Advance payments received for products or services are recorded as deferred revenue and are generally recognized when the product is shipped or services are performed. The Company reduces sales revenue for estimated customer returns and other allowances, including credits and discounts. The Company had net sales returns provisions, credits and discounts of $10,000 and $26,000 for the three and six months ended December 31, 2008. For the three and six month periods ended December 31, 2007, there were net sales returns provisions, credits and discounts of $10,618 and $13,216, respectively.

Royalty Income

The Company generally recognizes its royalty revenue at the end of each month, when the relevant net total end-user product sales dollars are reported to the Company for the month. Royalty payments are generally received within 45 days after the end of each calendar quarter.

Geographic Information

The Company’s revenues are categorized geographically below. Revenues are attributed to a country based on the location of the customer. The Company’s business is not directly dependent on foreign operations, as the Company’s sales to customers outside the U.S. are not significant. However, a portion of the Company’s revenues, including sales and royalties, are dependent on U.S. based customers selling to end-users outside the U.S. No one country where the Company sells its products, other than the U.S., represented more than 10% of the Company’s revenues. In addition, all of the Company’s long-lived assets are located in the U.S.:

	Revenues for the three month period ended December 31,				Revenues for the six month period ended December 31,
	2008		2007		2008		2007
United States	$	20,586,767	$	18,849,010	$	40,651,970	$	35,896,810
Foreign countries		211,061		788,916		295,541		1,343,533
Total	$	20,797,828	$	19,637,926	$	40,947,511	$	37,240,343

7

Earning Per Share

Earnings per share are calculated in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share (SFAS 128), which requires the Company to report both basic and diluted earnings per share (EPS). Basic and diluted EPS are computed using the weighted average number of shares of Common Stock outstanding, with common equivalent shares from options and nonvested stock awards included in the diluted computation when their effect is dilutive. Options and nonvested stock awards to purchase shares of the Company’s Common Stock that were outstanding for the three and six months ended December 31, 2008 and 2007, but were not included in the computation of diluted EPS because the options and nonvested stock awards would have been antidilutive, are shown in the table below:

	Three months ended December 31,				Six Months Ended December 31,
	2008		2007		2008		2007
Number of Options and Awards		1,123,334		823,839		743,156		376,030
Option and Award Price Range	$	23.45 - $35.71	$	27.80 - $34.36	$	28.02 - $35.71	$	22.93 - $34.36

New Accounting Pronouncements

Adopted:

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 establishes a standard definition for fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements, effective for financial statements issued for fiscal years beginning after November 15, 2007, which for the Company is its 2009 fiscal year. In September 2008, the FASB issued FSP 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active, to provide clarification of the application of SFAS 157 in a market that is not active and to provide an example to illustrate key considerations in determining the fair value of a financial asset in such a non-active market. The adoption of SFAS 157 did not have a material impact on the Company’s financial position, results of operations or cash flows. See Note 10 for information and a discussion relating to the Company’s adoption of SFAS 157 as of July 1, 2008 for financial assets and financial liabilities.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007, which for the Company is its 2009 fiscal year. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. On July 1, 2008, the Company elected not to apply SFAS 159 to measure any financial assets or liabilities at fair value other than those which were previously recorded at fair value under existing accounting literature.

In June 2007, the FASB ratified the consensus reached by the EITF on Issue 07-3, Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities (EITF 07-3). The scope of EITF 07-3 is limited to nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities pursuant to an executory contractual arrangement. Nonrefundable advance payments for future research and development activities for materials, equipment, facilities and purchased intangible assets that have an alternative future use (in research and development projects or otherwise) will continue to be recognized in accordance with the guidance in SFAS 2. Refundable advance payments for future research and development activities are excluded from the scope of EITF 07-3. EITF 07-3 is effective for fiscal years beginning after December 15, 2007 and applies to new contracts entered into on, or after, the effective date. On July 1, 2008, the Company’s adoption of EITF 07-3 did not have a material impact on the Company’s financial position, results of operations or cash flows.

8

To Be Adopted:

In November 2007, the FASB ratified the consensus reached by the EITF on Issue 07-1: Accounting for Collaborative Arrangements Related to the Development and Commercialization of Intellectual Property (EITF 07-1). This issue is effective for financial statements issued for fiscal years beginning after December 15, 2008, which for the Company is its 2010 fiscal year. This issue will require the Company to disclose the nature and purpose of its collaborative arrangements in its annual financial statements, its rights and obligations under its collaborative arrangements, the stage of the underlying endeavor’s life cycle, the Company’s accounting policies for the arrangements and the statement of income classification and amount of significant financial statement amounts related to the collaborative arrangements. This issue will require the Company to apply EITF 07-1 as a change in accounting principle through retrospective application to all prior periods for all collaborative arrangements existing as of the effective date. The Company has not yet assessed the impact the adoption of EITF 07-1 will have on its financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 141 (Revised), Business Combinations (SFAS 141(R)). SFAS 141(R) applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more businesses (the acquiree), including those sometimes referred to as “true mergers” or “mergers of equals” and combinations achieved without the transfer of consideration, for example, by contract alone or through the lapse of minority veto rights. SFAS 141(R) is effective prospectively for business combinations for which the acquisition date is on or after fiscal years beginning on or after December 15, 2008, which for the Company is its 2010 fiscal year. The Company has not yet assessed the impact the adoption of SFAS 141(R) will have on its financial position, results of operations or cash flows.

In February 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2). FSP 157-2 delays the effective date of SFAS 157 for certain non-financial assets and non-financial liabilities recognized or disclosed at fair value on a non-recurring basis, for which the effective date is fiscal years beginning after November 15, 2008, which for the Company is its 2010 fiscal year. The Company has not yet assessed the impact the adoption of FSP No. 157-2 will have on its financial position, results of operations or cash flows.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. The statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008, which for the Company is its third quarter of fiscal 2009 ending March 31, 2009. The Company does not expect that the adoption of SFAS 161 will have a material impact on its financial position, results of operations or cash flows.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS 162). SFAS 162 identifies the sources for U.S. GAAP and lists the categories in descending order. An entity should follow the highest category of GAAP applicable for each of its accounting transactions. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company does not expect that the adoption of SFAS 162 will have a material effect on the Company’s financial position, results of operations or cash flows.

Note 2 – Investments

Investments as of December 31, 2008 consisted of high quality municipal obligations. In accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS 115), the Company has classified its entire investment portfolio as available-for-sale marketable securities with secondary or resale markets, and as such, its portfolio is reported at fair value with unrealized gains and losses included in stockholders’ equity (see Note 11) and realized gains and losses included in other income. The fair value of available-for-sale marketable securities is obtained from broker quotes based on identical or similar assets in the municipal bond market. The following is a summary of available-for-sale marketable securities as of December 31, 2008 and June 30, 2008:

	December 31, 2008
Description	Amortized Cost		Gross Unrealized					Fair Value
			Gain		Loss
Municipal Obligations	$	8,193,652	$	36,714	$	(142,826	)	$	8,087,540
Total Investments	$	8,193,652	$	36,714	$	(142,826	)	$	8,087,540

9

	June 30, 2008
Description	Amortized Cost		Gross Unrealized					Fair Value
			Gain		Loss
Municipal Obligations	$	14,891,581	$	37,233	$	(138,905	)	$	14,789,909
Total Investments	$	14,891,581	$	37,233	$	(138,905	)	$	14,789,909

The Company’s investments included in the municipal obligations category as of December 31, 2008 have maturities ranging from less than one year to approximately four years.

Certain investment securities included in the municipal obligations category shown below currently have fair values less than their amortized costs and, therefore, contain unrealized losses. The Company has evaluated these securities and has determined that the decline in value is not related to any Company or industry specific event. As of December 31, 2008, there were 5 out of 10 investment securities with unrealized losses. The Company anticipates full recovery of amortized costs with respect to these securities at maturity or sooner in the event of a more favorable market interest rate environment. The lengths of time the securities have been in a continuous unrealized loss position, aggregated within the municipal obligations category, as of December 31, 2008 were as follows:

	Loss < 12 months					Loss > or equal to 12 months					Total
Description	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Municipal Obligations	$	4,021,566	$	(111,380	)	$	1,015,315	$	(31,446	)	$	5,036,881	$	(142,826	)
Total Investments	$	4,021,566	$	(111,380	)	$	1,015,315	$	(31,446	)	$	5,036,881	$	(142,826	)

Note 3 – Inventory

Inventory is stated at the lower of cost (determined by the average cost method, which approximates first-in, first-out) or market value. Inventory includes the cost of material, labor and overhead utilized in the processing of the Company’s products and was as follows as of December 31, 2008 and June 30, 2008:

	December 31, 2008			June 30, 2008
Raw materials	$	7,538,986		$	6,875,782
Work in process		2,129,060			1,625,821
Finished goods		2,237,462			1,917,114
Gross inventory		11,905,508			10,418,717
Provision for inventory obsolescence		(1,259,499	)		(1,147,853	)
Inventory	$	10,646,009		$	9,270,864

Adjustments to inventory are made at the individual part level for estimated excess, obsolescence or impaired balances, to reflect inventory at the lower of cost or market. Factors influencing these adjustments include: changes in demand, rapid technological changes, product life cycle and development plans, component cost trends, product pricing, physical deterioration and quality concerns. Revisions to these adjustments would be required if any of these factors differ from the Company’s estimates.

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Note 4 – Select Customer Agreements

St Jude Medical, Inc.

The License Agreements – Under two License Agreements (one each for U.S. and foreign territories), St. Jude Medical has exclusive worldwide rights to manufacture and market the Angio-Seal^TM Vascular Closure Device (the Angio-Seal). Under the License Agreements, the Company receives an approximate 6% royalty on the sales price of every Angio-Seal unit sold by St. Jude Medical.

The Component Supply Contract – Under a supply contract executed with St. Jude Medical in 2005, the Company is the exclusive supplier of 100% of the collagen plug and at least 30% of the bioresorbable polymer anchor components for the Angio-Seal over the term of the agreement, which expires in December 2010. As part of the agreement, the Company received a $1.0 million origination fee upon execution, as consideration for the Company’s ongoing investments in collagen research and development. As of December 31, 2008, the Company had recognized $833,842 of this origination fee and the remaining $166,158 was recorded as deferred revenue and will be recognized over the remaining period of the contract.

Orthovita, Inc.

In fiscal 2003, the Company entered into a development, manufacturing and supply agreement with Orthovita under which the Company develops and commercializes products based on Orthovita’s proprietary Vitoss® bone graft substitute material in combination with the Company’s proprietary biomaterials (the Orthovita Agreement). Under the Orthovita Agreement, the products are co-developed. The Company manufactures the products and Orthovita markets and sells the products worldwide. Also under the Orthovita Agreement, the Company receives a royalty payment on all co-developed Vitoss®, Vitoss® Foam and Vitoss® Bioactive Foam products based upon Orthovita’s total end-user net sales of such products.

In a separate transaction in August 2004, the Company acquired proprietary rights of a third party having rights in the Vitoss technology. This acquisition included the economic rights of the third party, which include a royalty on all products sold containing the Vitoss technology, up to a total royalty amount to be recognized of $4,035,782.

Note 5 – Acquired Patents and Other Intangibles

The costs of internally developed patents are expensed when incurred due to the long development cycle for products and the Company’s inability to measure the recoverability of these costs when incurred. From time to time, the Company has acquired portfolios of patents that it believes are beneficial and complimentary to the Company’s existing intellectual property and material processing knowledge platform. These acquisitions have included a portfolio of puncture closure patents in November 1997, patents acquired in the asset purchase of THM Biomedical, Inc. (THM) in 2000, certain intellectual property and other rights related to the Vitoss product line acquired from a third party inventor in 2004, intangible assets acquired as part of the purchase of certain assets of IntraLuminal Therapeutics, Inc. (ILT) in 2006 (divested in May 2008 in conjunction with the sale of the Company’s Endovascular business, see Note 18) and most recently, certain assets of MacroPore Biosurgery, Inc. (MacroPore) in 2007 (See Note 6), as well as other smaller purchases.

The Company amortizes the entire cost of acquired patents and intangible assets over their respective remaining periods of economic benefit, ranging from approximately 1 to 8 years as of December 31, 2008. The gross carrying amount of such patents and intangible assets, as of December 31, 2008, was $8,346,366, with accumulated amortization of $5,188,759.

Amortization expense on these patents and intangible assets was $226,008 and $456,519 for the three and six month periods ended December 31, 2008, respectively. For the three and six month periods ended December 31, 2007, there was $269,691 and $539,467, respectively, of amortization expense on these patents and intangible assets. The table below details the estimated amortization expense as of December 31, 2008, for the next five fiscal years on the patents and intangible assets acquired by the Company:

Fiscal year ending June 30,	Amortization Expense
2009	$	894,578
2010		872,746
2011		907,763
2012		628,533
2013		176,278

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Note 6 – Acquisitions

MacroPore Biosurgery, Inc. In May 2007, the Company acquired certain assets of MacroPore, a leading developer of bioresorbable products targeted for spinal, craniofacial and orthopaedic surgery applications, for approximately $3.2 million cash plus acquisition costs of $187,988. The acquisition had been accounted for under the purchase method of accounting and MacroPore’s results of operations have been included in those of the Company since the date of acquisition.

The valuation of the purchase price allocation represents the estimated fair market value based on risk-adjusted cash flows related to the identifiable assets, with the excess of the cost over net assets acquired allocated to goodwill. Management is responsible for the valuation and considered a number of factors, including internal and third party valuations and appraisals.

The following is a summary of the purchase price allocation:

Inventory	$	56,535
Machinery, furniture and equipment		574,482
Intangible asset (customer relationship)		1,650,000
Excess of cost over net assets acquired (goodwill)		1,081,970
	$	3,362,987

The identified customer relationship intangible asset of $1,650,000 is being amortized over the five-year term of the manufacturing, development and supply agreement with a leading orthopaedic device company. The gross carrying amount of the acquired intangible asset at December 31, 2008 was $1,650,000 with accumulated amortization of $522,500. Amortization expense on the acquired intangible assets was $82,500 and $165,000 for the three and six months ended December 31, 2008, respectively. For the three and six month periods ended December 31, 2007, there was $82,500 and $165,167, respectively, of amortization expense on these intangible assets and is included within selling, general and administrative expense.

Note 7 - Goodwill

The Company accounts for goodwill under the provisions of SFAS 142, Goodwill and Other Intangible Assets (FAS 142). Under SFAS 142, goodwill is not amortized but is subject to annual impairment tests. The Company has established its annual impairment testing date as June 30 of each fiscal year. The most recent tests as of June 30, 2008, 2007 and 2006 indicated that goodwill was not impaired.

Goodwill represents the excess of cost over the fair market value of the identifiable net assets of THM, a company acquired in September 2000, and from MacroPore, acquired in May 2007 (See Note 6).

The net carrying amount of $4,366,273 for goodwill remained unchanged for the period ended December 31, 2008 from the year ended June 30, 2008.

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Note 8 – Accrued Expenses

As of December 31, 2008 and June 30, 2008, accrued expenses consisted of the following:

	December 31, 2008		June 30, 2008
Accrued payroll and related compensation	$	2,183,458	$	3,474,027
Accrued Spectranetics transaction closing costs (See Note 18)		1,517,457		2,659,858
Other		1,138,013		789,019
Total	$	4,838,928	$	6,922,904

Note 9 – Debt

Secured Commercial Mortgage - On May 25, 2006, the Company entered into an agreement for a Secured Commercial Mortgage (the Mortgage) with Citibank, F.S.B. The Mortgage provided the Company with the ability to take aggregate advances of up to $35 million through November 25, 2007 (the Draw Period) and is secured by the Company’s facility and land in Exton, Pennsylvania. On May 25, 2006 and November 23, 2007, the Company took $8 million and $27 million advances, respectively, under the Mortgage, both of which bear interest at LIBOR plus a 0.82% Loan Credit Spread. Under the Mortgage, the Company was required to pay interest only on the outstanding principal amount during the Draw Period. Beginning December 25, 2007, the Company began paying principal and interest based on a 25 year straight-line amortization schedule. At December 31, 2008, the outstanding Mortgage balance, net of principal payments, was $33.5 million.

The Mortgage contains various conditions to borrowing, including affirmative, restrictive and financial maintenance covenants. Certain of the more significant covenants require the Company to maintain a Minimum Fixed Charge Coverage Ratio of EBITDA (as defined in the Mortgage) to debt service equal to or greater than 1.50 – to – 1.0; and an interest rate hedge of at least 50 percent of the outstanding principal balance of the Mortgage through an interest rate protection product reasonably acceptable to Citibank, F.S.B.

Interest Rate Swap Agreement - In order to hedge its interest rate risk under the Mortgage, the Company entered into a $35 million aggregate 10-year fixed interest rate swap agreement (the Swap) with Citibank, N.A. The Swap is secured by the Company’s facility and land in Exton, Pennsylvania. The Company is using the Swap as a cash flow hedge of the Company’s interest payments under the Mortgage. The Swap converts the variable LIBOR portion of the Mortgage payments to a fixed rate of 6.44% (5.62% fixed interest rate plus a 0.82% Loan Credit Spread).

The Swap is classified as a cash flow hedge due to the hedging of forecasted interest rate payments in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, No. 138 and No. 149 (SFAS 133) and is recorded in the Condensed Consolidated Balance Sheets at fair value. As such, the Company performs a mark-to-market adjustment at the end of each period. In establishing the fair value, the Company includes and evaluates dealer quotes, the counterparty’s ability to settle the asset or liability and its creditworthiness, additionally, current interest rates, collateralization of the Mortgage and the Swap by the land and building and any adverse Company or industry specific events that would impact the fair value measurement are considered.

As of December 31, 2008 and June 30, 2008, the fair value of the Swap was in an unrealized loss position of $6,675,476 ($4,339,059, net of tax) and $2,487,718 ($1,635,984, net of tax), respectively, with the gross loss position included in other non-current liabilities and the net of tax position included in Accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets. This value represents the estimated amount the Company would receive or pay to terminate agreements.

If the conditions underlying the Swap or the hedge item do not change, the Swap will be considered to be highly effective in accordance with SFAS 133, with all changes in fair value included in other comprehensive loss. The effective portion of the Swap gains or losses, due to changes in fair value, are recorded as a component of Accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The Company utilizes the Hypothetical Derivative Method in determining hedge effectiveness each period. Transactions that would cause ineffectiveness and result in the Company reclassifying the ineffective portion into current earnings would include the prepayment of the Mortgage. Interest expense under the Swap is recorded in earnings at the fixed rate set forth in the Swap.

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For the three and six month periods ended December 31, 2008, no amounts were recognized in current earnings due to ineffectiveness or amounts excluded from the assessment of hedge effectiveness. No amount was recognized in prior year earnings due to ineffectiveness or amounts excluded from the assessment of hedge effectiveness for the three and six month periods ended December 31, 2007. The Company does not anticipate any material unrealized losses to be recognized within the subsequent 12 months as the anticipated transactions under the Mortgage and Swap occur.

Note 10 – Fair Value of Financial Assets and Financial Liabilities

Effective July 1, 2008, the Company adopted the provisions of SFAS 157 for financial assets and financial liabilities. SFAS 157 defines fair value as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. SFAS 157 establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy.

The levels of the hierarchy are described below:

• Level 1 - Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 - Inputs that are other than quoted prices in active markets for identical assets and liabilities, inputs that are quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are either directly or indirectly observable; and

• Level 3 - Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2008:

	Fair Value Measurements as of December 31, 2008
	Level 1		Level 2		Level 3
Assets
Money market funds (a)	$	62,223,879	$	—	$	—
Available-for-sale marketable securities:
Municipal bonds (See Note 2)	$	—	$	8,087,540	$	—
Total Assets	$	62,223,879	$	8,087,540	$	—
Liabilities
Interest rate swap (See Note 9)	$	—	$	6,675,476	$	—
Total Liabilities	$	—	$	6,675,476	$	—

(a) The Company’s money market funds are classified along with the Company’s cash balances as Cash and cash equivalents within the Condensed Consolidated Balance Sheets. Money market funds are valued at quoted prices in active markets.

Note 11 – Comprehensive Income/(Loss)

The Company accounts for comprehensive income/(loss) under the provisions of SFAS No. 130, Reporting Comprehensive Income (SFAS 130). Accordingly, Accumulated other comprehensive loss is shown in the Condensed Consolidated Statements of Stockholders’ Equity as of December 31, 2008 and June 30, 2008, and is comprised of net unrealized gains and losses on the Company’s available-for-sale marketable securities and the Swap, as well as, foreign currency translation adjustments for the prior fiscal year. The net tax benefit for the six months ended December 31, 2008 and for the fiscal year ended June 30, 2008 of other comprehensive income/(loss) was $1,487,011 and $697,758, respectively.

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Note 12 – Stock Repurchase Program

From time to time, the Company has made repurchases of its stock, as authorized by various programs established by the Company’s Board of Directors. On September 25, 2007, the Company announced that its Board of Directors approved a stock repurchase program that replaced the Company’s existing program and allowed the Company to repurchase up to a total of $25 million of its issued and outstanding shares of Common Stock. On June 23, 2008, the Company announced that its Board of Directors had approved a new stock repurchase program to provide the Company with more flexibility to buy its own shares. The new stock repurchase program allowed the Company to repurchase up to an additional $10 million of its issued and outstanding shares of Common Stock. Neither stock repurchase program had a specified expiration date. The repurchase programs did not require the Company to purchase any specific number of shares. Any purchases under the programs were dependent on market conditions and could have been commenced or suspended at any time or from time to time without prior notice.

During the quarter ended December 31, 2008, the Company repurchased and retired 401,371 shares of Common Stock that were settled at a cost to the Company of $10,430,627, or an average market price per share of $25.99, using available cash. Commission and other related administrative costs associated with the stock repurchases totaled $16,054 and $1,795, respectively, during the quarter ended December 31, 2008. The stock repurchases were executed under the remainder of the $25 million repurchase plan and the $10 million repurchase plan, and marked the completion of both of the Company’s existing stock repurchase programs. No shares were repurchased during the first quarter ended September 30, 2008. During the six month period ended December 31, 2007, the Company repurchased and retired 323,350 shares of Common Stock that were settled at a cost of $8,840,955, or an average market price per share of $27.34, using available cash. An additional 13,851 shares were repurchased in December 2007, but settled in January 2008 at a cost of $413,803, or an average market price per share of $29.88.

Note 13 – Stock-Based Compensation

Total stock-based compensation expense for the three and six month periods ended December 31, 2008 was $32,099 and $325,780, respectively. For the three and six month periods ended December 31, 2007 stock-based compensation expense was $726,282 and $4,433,343, respectively. Stock-based compensation for the six month period ended December 31, 2007 included an accelerated vesting charge of $2,974,033 as described below (See – Accelerated Vesting of All Equity Awards). The total income tax benefit recognized on the Condensed Consolidated Statements of Income for stock-based compensation costs was $11,235 and $114,023 for the three and six month periods ended December 31, 2008, respectively. The income tax benefit recognized in the Condensed Consolidated Statements of Income for stock-based compensation expense for the three and six months ended December 31, 2007 was $246,936 and $1,507,337, respectively. Compensation expense related to stock-based awards is classified on the Condensed Consolidated Statements of Income within the same line items as salary or consulting expense with respect to the award recipients, and is recorded over the awards’ relevant vesting periods. Compensation expense related to stock-based awards granted to the members of the Board of Directors is recorded as a component of Selling, general and administrative expense on the Condensed Consolidated Statements of Income.

On December 10, 2008, the Company held its 2008 Annual Meeting of Stockholders at which the Stockholders of the Company considered and approved the Company’s Seventh Amended and Restated Kensey Nash Corporation Employee Incentive Compensation Plan (the Employee Plan). The Employee Plan became effective immediately upon the stockholders’ approval. The Employee Plan authorized an additional 700,000 shares of the Company’s Common Stock for issuance under the Employee Plan of which only 100,000 shares may be issued as nonvested stock, bonus stock or stock-based awards other than stock options or cash-settled stock appreciation rights (SARs).

As of December 31, 2008, the total number of shares authorized for issuance under the Employee Plan was 5,400,000, of which options to purchase a total of 1,708,737 shares of the Company’s Common Stock at a weighted average exercise price of $24.07 were outstanding, 67,634 nonvested stock awards were outstanding, options to purchase a total of 2,862,055 shares of the Company’s Common Stock had previously been exercised/issued, and 761,574 shares remained available for new awards.

The Company also has a Non-employee Directors’ Stock Option Plan (the Directors’ Plan). As of December 31, 2008 a total of 410,000 shares were authorized for issuance under the Directors’ Plan. Nonqualified options to purchase a total of 281,000 shares of the Company’s Common Stock at a weighted average exercise price of $20.85 were outstanding, and options to purchase a total of 129,000 shares of the Company’s Common Stock had previously been exercised under the Directors’ Plan. As a result, no shares are available for new awards and no unrecognized compensation cost remains under the Directors’ Plan. Awards previously granted to non-employee directors are now granted under the Employee Plan.

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Accelerated Vesting of All Equity Awards

As a result of a “change in control” as defined in the Employee Plan, on August 30, 2007 all then outstanding unvested stock options, cash-settled stock appreciation rights (SARs) and non-vested stock awards outstanding under the Employee Plan vested (and, in the case of stock options and SARs, became exercisable) in full. This “change in control” was triggered by the acquisition on August 30, 2007 by affiliates of Ramius Capital Group, L.L.C. of more than 20 percent of the Company’s outstanding Common Stock, as reported by Ramius in filings with the SEC.

As part of the accelerated vesting, unvested stock option grants to purchase 114,405 shares of the Company’s Common Stock became fully vested and exercisable. Of these options, non-employee members of the Board of Directors held options to purchase 37,500 shares, and non-executive employees held options to purchase the remaining 76,905 shares. There were no unvested stock options held by executive officers. Compensation expense of $920,131 that would otherwise have been recorded over a weighted average period of 1.85 years, or $607,286 net of related tax effects, was recognized as an accelerated vesting charge primarily during the quarter ended September 30, 2007.

In addition, 283,690 SARs also became fully vested and exercisable on August 30, 2007. Of these SARs, 179,690 awards were granted to non-executive employees at a stock price of $29.88 and the remaining 104,000 SAR awards were granted to executive officers at a stock price of $31.36. An accelerated vesting charge of $429,760, or $283,642 net of related tax effects, was recognized during the first quarter ended September 30, 2007 with respect to the SARs.

In addition, a total of 94,537 shares of nonvested stock awards became fully vested and were released at a market value of $23.97 per share, the closing price of the Company’s Common Stock on August 30, 2007. Non-employee members of the Board of Directors held 34,780 shares, 45,031 shares were held by executive officers, and other employees held the remaining 14,726 shares. Compensation expense of $1,624,143, or $1,071,934 net of related tax effects, that otherwise would have been recorded over a weighted average period of 1.36 years was recognized during the first quarter ended September 30, 2007 as an accelerated vesting charge with respect to the nonvested stock awards.

Stock Options

Stock options have been granted to employees and members of the Board of Directors of the Company, as well as non-employee outside consultants. For the three and six months ended December 31, 2008, the Company recognized expense of $472,167 and $762,917 respectively related to stock options. For the three and six months ended December 31, 2007, the Company recognized expense of $192,940 and $1,247,519 (including the accelerated vesting charge of $920,131 for the six month period as described above), respectively, related to stock options. As of December 31, 2008, there was $5,232,899 of unrecognized compensation cost related to unvested stock options granted under the Employee Plan. That cost is expected to be recognized over a weighted-average period of 2.41 years.

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A summary of the stock option activity under both plans for the six months ended December 31, 2008, is as follows:

	Employee Plan						Directors’ Plan
	Shares		Weighted Avg Exercise Price		Aggregate Intrinsic Value		Shares		Weighted Avg Exercise Price		Aggregate Intrinsic Value
Balance at June 30, 2008	1,639,044		$	21.62	$	17,547,996	310,500		$	20.43	$	3,607,560
Granted	334,970		$	32.10			—		$	—
Cancelled	(31,280	)	$	29.03			—		$	—
Exercised	(233,997	)	$	17.70			(29,500	)	$	16.47
Balance at December 31, 2008	1,708,737		$	24.07	$	3,483,270	281,000		$	20.85	$	554,308
Shares vested + expected to vest	1,666,743		$	23.90	$	3,483,270	281,000		$	20.85	$	554,308
Exercisable portion	1,246,897		$	21.56	$	3,483,270	281,000		$	20.85	$	554,308
Available for future grant	761,574						—

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model that uses the weighted average assumptions noted in the following table. Options are exercisable over a maximum term of 10 years from the date of grant and typically vest over periods of zero to three years from the grant date. Expected volatilities are based on historical volatility of the Company’s Common Stock, and other factors. The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected terms of options are derived from historical exercise behavior and represent the periods of time that options granted are expected to be outstanding.

	Six Months Ended December 31,
	2008		2007
Dividend yield	0	%	0	%
Expected volatility	35	%	35	%
Risk-free interest rate	1.140% - 3.492	%	4.286	%
Expected lives:	0.25 - 6.28		6.33

During the six months ended December 31, 2008, the Company granted options with exercise prices equal to the fair market value of the Company’s Common Stock on the respective grant dates, to purchase 334,970 shares of the Company’s Common Stock to employees of the Company. These options were valued at an average of $11.49 per share on the grant date using the fair value assumptions listed above and will be expensed over a zero to three-year vesting period.

The following table summarizes significant option groups outstanding under both the Employee Plan and Directors’ Plan and related weighted average exercise price and remaining contractual life information as of December 31, 2008:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Shares at December 31, 2008	Remaining Contractual Life	Wghtd Avg Exercise Price		Number of Shares at December 31, 2008	Wghtd Avg Exercise Price
$8.750 - $14.580	732,014	2.34	$	13.92	732,014	$	13.92
$18.940 - $30.150	697,953	6.28	$	26.26	538,383	$	25.74
$30.460 - $35.710	559,770	7.48	$	33.00	257,500	$	33.76
	1,989,737				1,527,897

Nonvested Stock Awards

Nonvested stock awards have been granted to the non-employee members of the Board of Directors and a non-employee outside consultant pursuant to the Employee Plan. Fair value is based upon the closing price of the Company’s Common Stock on the date of grant. For the three and six months ended December 31, 2008, the Company recognized expense of $106,748 and

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$190,312, respectively, related to nonvested stock awards. For the three and six months ended December 31, 2007, the Company recognized expense of $27,850 and $1,883,761 (including an accelerated vesting charge of $1,624,143 for the six month period as described above) respectively, related to nonvested stock awards. As of December 31, 2008, there was an estimated $1,400,000 of unrecognized compensation cost related to nonvested stock awards granted under the Employee Plan. That cost is expected to be recognized over a weighted average period of 2.60 years.

The following table outlines the nonvested stock awards activity for the six months ended December 31, 2008.

	Nonvested Stock Awarded Under the Employee Plan
	Shares		Weighted Average Price Per Share
Balance at June 30, 2008	31,199		$	29.37
Granted:
Non-employee Directors	46,840			17.72
Issued:
Executive officers & management
Non-employee Directors	(10,405	)		29.37
Balance at December 31, 2008	67,634		$	21.30

Since December 2005, all nonvested stock grants awarded to non-employee members of the Board of Directors were to vest solely on continuation of service, subject to acceleration as discussed above. Nonvested shares are generally forfeited upon termination of employment or service.

Cash-Settled Stock Appreciation Rights (SARs)

SARs have been granted to executive officers and eligible non-executive employees of the Company. Each award, when granted, provides the participant with the right to receive payment in cash, upon exercise, for the appreciation in market value of a share of the Company’s Common Stock over the award’s exercise price. The exercise price of a SAR is equal to the closing market price of the Company’s Common Stock on the date of grant. For the three and six months ended December 31, 2008 the Company recognized a total decrease to expense of $546,816 and $627,449, respectively due to the change in the fair value of SARs primarily due to the decline of the Company’s stock price. For the three and six months ended December 31, 2007 the Company recognized expense of $505,492 and $1,302,063, respectively, related to SARs, which included an accelerated vesting charge of $429,760.

On November 14, 2007, the Company offered to buy back the then outstanding SARs from all current eligible non-executive employees, excluding the executive officers, at the fair market value (Buyout Price) based on the closing price of the Company’s Common Stock on December 14, 2007. This offer resulted in the Company purchasing 173,940 SARs at a Buyout Price of $6.47 per SAR for a total of $1,125,392 (excluding the Company’s portion of payroll taxes) paid to the participating eligible non-executive employees, which represented approximately 99% participation by eligible non-executive employees holding the SARs then outstanding.

As of December 31, 2008, the average fair market value of each of the remaining SARs was $0.62 and the related liability for all remaining SARs was $58,818. These SARs will continue to be remeasured at each reporting period until all awards are settled.

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The following table outlines cash-settled SAR award activity for the six months ended December 31, 2008.

	Shares		Weighted Average Price Per Share
Balance at June 30, 2008	104,700		$	31.35
Granted	—			—
Exercised	—			—
Cancelled	(10,000	)		31.36
Balance at December 31, 2008	94,700		$	31.35

The fair value of each SAR is estimated on the date of grant using the Black-Scholes option-pricing model that uses the weighted average assumptions noted in the following table. SARs are exercisable over a maximum term of five years from the date of grant and were to vest over a period three years from the grant date, subject to acceleration as discussed above. Expected volatilities are based on historical volatility of the Company’s Common Stock and other factors. The Company uses historical data to estimate SAR employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of cash-settled SARs has been determined using the simplified method in accordance with Question 6 of SEC SAB 107 Topic 14.0.2, “Expected Term,” until such time that historical exercise behavior can be established. The Company believes that this calculation provides a reasonable estimate of the expected term. On December 12, 2007, SAB 110 was issued to extend the simplified method beyond 2007 for those companies that have concluded that their own historical exercise experience is not sufficient to provide a reasonable basis. The risk-free rate for periods within the contractual life of the SAR is based on U.S. treasuries with constant maturities in effect at the time of grant.

	Six Months Ended December 31,
	2008		2007
Dividend yield	0	%	0	%
Expected volatility	35	%	35	%
Risk-free interest rate	0.615% - 2.451	%	3.10% - 4.86	%
Expected lives	1.38 - 1.59		1.88 - 2.85

Cash-settled SARs awarded in stock-based payment transactions are accounted for under SFAS No. 123(R) Share-Based Payment (SFAS 123(R)), which classifies these awards as liabilities. Accordingly, the Company records these awards as a component of Other current liabilities on the Condensed Consolidated Balance Sheets. For liability awards, the fair value of the award, which determines the measurement of the liability on a balance sheet, is remeasured at each reporting period until the award is settled. Fluctuations in the fair value of the liability award are recorded as increases or decreases in compensation cost, either immediately or over the remaining service period, depending on the vested status of the award. (See “Accelerated Vesting of All Equity Awards” above).

Note 14 – Retirement Plan

The Company has a voluntary 401(k) Salary Reduction Plan and Trust (the 401(k) Plan) in which all employees who are at least 21 years of age are eligible to participate. The Company provides a 50% discretionary matching contribution on up to 6% of an employee’s total salaried compensation, for all employee contributions. Employer contributions to the 401(k) plan for the three and six months ended December 31, 2008 were $120,400 and $221,161, respectively. In the three and six months ended December 31, 2007, employer contributions were $116,913 and $238,878, respectively.

Note 15 – Opportunity Grant

In November 2004, the Company was awarded a $500,000 grant under the Opportunity Grant Program of the Department of Community and Economic Development of the Commonwealth of Pennsylvania (the Department). This grant was awarded to the Company for the job-creating economic development opportunities created by the Company’s construction of its new facility within the state of Pennsylvania. The grant was conditioned upon the following: (1) the Company would create 238 full-time jobs within five years, beginning April 1, 2003, (2) the Company would invest at least $54,250,000 in total project costs, including, but not limited to, land, equipment and building construction within three years, beginning July 19, 2004 and (3) the Company would operate at its new facility for a minimum of five years from the date of grant.

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As a result of the Company’s decision to discontinue its embolic protection platform (See Note 17) and the recent sale of the Endovascular business (See Note 18), the job creation condition under the grant program was not completely fulfilled. Although the Company had exceeded the required investment in its facility and had continued to meet the occupancy criterion, the Company petitioned the Department in reference to its failure to meet the job creation criterion. In August 2008, the Company received a letter from the Department imposing a charge of $150,000 to satisfy the breach under the grant. The Company paid the assessed charge during the quarter ended September 30, 2008.

The Company recognized $133,784 of deferred revenue as a component of Other income on the Condensed Consolidated Statements of Income during the six months ended December 31, 2008, as a result of the August 2008 satisfaction payment regarding the Opportunity Grant. No revenue was recognized related to this grant for the six months ended December 31, 2007, due to management’s uncertainty of the Company’s ability to meet the job creation criterion.

Note 16 – Income Taxes

The Company accounts for taxes under the provisions of SFAS No. 109, Accounting for Income Taxes, (SFAS 109).

The Company adopted the provisions of FIN 48 on July 1, 2007. In connection with the adoption, the Company recorded a net decrease to retained earnings of $204,615 and reclassified certain previously recognized deferred tax attributes as FIN 48 liabilities. The amount of unrecognized tax benefits at December 31, 2008 was $144,805, of which $144,758 would impact the Company’s tax rate, if recognized. Upon the initial adoption of FIN 48 at July 1, 2007, the Company recorded $18,330 for potential interest and penalties for unrecognized tax benefits. Interest and penalties are included in Interest expense and Other income respectively on the Condensed Consolidated Statements of Income. Additional interest and penalties of $3,908 and $7,957 were recorded for the three and six months ended December 31, 2008, respectively. Interest and penalties of $3,208 and $7,562 were recorded for the three and six months ended December 31, 2007, respectively.

Changes in the Company’s uncertain tax positions for the six months ended December 31, 2008 were as follows:

Balance at June 30, 2008	$	193,132
Increase in unrecognized tax benefit for prior periods		23,203
Decrease in unrecognized tax benefit for prior periods		(409	)
Settlements		(71,121	)
Balance at December 31, 2008	$	144,805

The Company and its subsidiaries file U.S. federal and various state income tax returns. The Company is no longer subject to U.S. federal or Pennsylvania income tax examination for years prior to fiscal 2005 due to the expiration of applicable statutes of limitation. The Company does not expect the total amount of unrecognized tax benefits to change significantly in the next 12 months.

As a result of the October 2008 Congressional approval of an extension of the Research and Experimentation (R&E) Tax Credit, the Company recorded a retroactive adjustment of approximately $123,000 to its tax provision during the quarter ended December 31, 2008. The adjustment reflected the fact that the legislation is retroactive to January 1, 2008 and therefore, reduced the Company’s effective tax rate for the second quarter of fiscal 2009. The Company’s effective tax rate for each of the third and fourth quarters of fiscal 2009 will include the related quarter’s R&E Tax Credit effect on the tax provision.

As of June 30, 2008, the Company had a state net operating loss (NOL) carryforward totaling $60.0 million, which will expire at various times through 2027, and no longer had a federal NOL carryforward. The Company has recorded a full valuation allowance against the state net operating losses of $60.0 million. The Company no longer has a foreign NOL as a result of the sale of its Endovascular business.

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Note 17 – Discontinuance of Embolic Protection Platform

On July 10, 2007, the Company announced that it had ceased all activities on its embolic protection platform (this includes the TriActiv® FX and ProGuard™ product lines), including the PROGUARD clinical trial, product manufacturing, sales and marketing, and research and development activities. This strategic decision was made to reduce costs, provide for better resource allocation for both the Company’s Endovascular and Biomaterials businesses and allow the Company’s sales force to focus more on the Company’s thrombectomy and chronic total occlusion platforms. The Company believed that the changing embolic protection market dynamics were negative, particularly in the carotid market, and that the cost to participate effectively in these markets was too high to warrant further investment.

The Company recognized asset impairment and other related charges totaling approximately $5.0 million before taxes. These charges include cash charges primarily related to severance, clinical trial and other contract termination costs totaling approximately $0.4 million in the aggregate. These charges also include non-cash charges totaling approximately $4.6 primarily related to abandonment of inventory and machinery and equipment. Of the approximately $5.0 million in charges, approximately $4.7 million (including $4.6 million of non-cash asset impairment charges and $0.1 million of cash charges) was recorded in the fourth quarter ended June 30, 2007, and the remaining $323,728 was recognized in the first quarter of fiscal 2008. Charges for fiscal 2008 were presented within the Company’s Condensed Consolidated Statements of Income for the six months ended December 31, 2007 from continuing operations as depicted in the table below:

	For the Three Months Ended September 30, 2007
Operating costs and expenses:
Cost of products sold	$	154,726
Research and development		92,630
Selling, general and administrative		76,372
	$	323,728

Severance Charges

The decision was communicated to affected employees on July 10, 2007, which resulted in a net reduction of 11 personnel with employee severance costs of $0.2 million. These severance costs were recognized in the Company’s Condensed Consolidated Financial Statements during the first quarter of fiscal 2008.

Asset Impairment Charges

The Company recorded pre-tax charges in its fourth quarter of fiscal 2007 for the abandonment of certain embolic protection machinery and equipment of approximately $1.3 million. The Company also recorded inventory and other related embolic protection charges of approximately $3.0 million. In addition, charges of approximately $0.3 million for PROGUARD clinical trial assets were incurred in that quarter.

Contract Termination Charges

During the fourth quarter of fiscal 2007, the Company incurred pre-tax charges of approximately $0.1 million for contract termination and other embolic protection related charges. The remaining contract termination costs of approximately $0.1 million, including a reduction in clinical trial expenses of $0.1 million, were recognized in the first quarter of fiscal 2008. Cash charges related to contract termination and other embolic protection related charges totaled approximately $0.2 million in the fourth quarter of fiscal 2007.

Note 18 – Sale of Endovascular Business

On May 30, 2008, the Company completed the sale of its Endovascular business to The Spectranetics Corporation (Spectranetics). The strategic decision to sell the Endovascular business was made to maximize the value of the Company’s Endovascular business by forming a strategic relationship with Spectranetics, which the Company believes is well positioned to maximize the adoption of the Company’s technologies in the thrombus removal and chronic total occlusion markets. This relationship is similar to the Company’s other partnerships in the biomaterials market and allows the Company to focus on its core competencies in research and development, regulatory, clinical development and manufacturing, while utilizing the strengths of the partners’ existing well-established sales and marketing organizations.

Pursuant to an Asset Purchase Agreement, dated May 12, 2008, the Company sold to Spectranetics the assets related to the QuickCat™, ThromCat® and Safe-Cross® product lines, including the stock of its European subsidiary Kensey Nash Europe GmbH, for a $10.0 million cash payment at closing, with an opportunity for up to an additional $8.0 million in research and

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development milestone payments, a $6.0 million cumulative sales milestone payment and additional royalty payments based on future sales of the ThromCat and Safe-Cross products after the transition of manufacturing of the products from the Company to Spectranetics. These payments and other related agreements are described below.

On May 30, 2008, the Company and Spectranetics also entered into a Manufacturing and Licensing Agreement pursuant to which the Company will manufacture for Spectranetics the endovascular products acquired by Spectranetics under the Asset Purchase Agreement for a minimum of six months for QuickCat and for an initial three year period for ThromCat and Safe-Cross, and Spectranetics will purchase such products exclusively from the Company for specified time periods, ranging from a minimum of six months for QuickCat to three years for ThromCat and Safe-Cross. The arrangement to manufacture ThromCat and Safe-Cross may be extended beyond the initial three-year manufacturing period by agreement of the parties. During the manufacturing period, Spectranetics will pay transfer prices for the products based on the Company’s cost to manufacture such products plus a percentage of the end-user sales price of the ThromCat and Safe-Cross products. Additionally, after the Company’s manufacture of the ThromCat and Safe-Cross products is transferred to Spectranetics, Spectranetics will be obligated to pay the Company a royalty on the end-user sales of such products. The amount of this royalty will be based upon the timing and reason for the manufacturing transfer and, in certain cases, upon the amount of revenue generated by the ThromCat and Safe-Cross products during the applicable year. The royalty is subject to reduction depending upon the scope of the patent protection obtained for the ThromCat product. After the Company’s manufacture of the QuickCat product has transferred to Spectranetics, Spectranetics will have no obligation to make additional payments to the Company related to future sales of the QuickCat product.

Also, on May 30, 2008 the Company and Spectranetics entered into a Development and Regulatory Services Agreement pursuant to which the Company will conduct work to develop and obtain regulatory approvals for certain next-generation Safe-Cross and ThromCat products at the Company’s expense on behalf of Spectranetics. Spectranetics will own all intellectual property resulting from this development work. If clinical studies are required to obtain approval from the Food and Drug Administration (FDA) for those next-generation products, the costs will be shared equally by the Company and Spectranetics. Spectranetics will pay the Company up to $8.0 million upon completion of such product development activities and regulatory approvals for certain of the next-generation products.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes included in this report and our audited consolidated financial statements and the related notes contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2008, as filed with the Securities and Exchange Commission.

This discussion and analysis below contains forward-looking statements relating to future events or our future financial performance. These statements are only predictions and actual events or results may differ materially. In evaluating such statements, you should carefully consider the various factors identified in this report which could cause actual results to differ materially from those expressed in, or implied by, any forward-looking statements, including those set forth under the heading “CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS” at the end of this Item 2 in this Quarterly Report on Form 10-Q.

OVERVIEW

Kensey Nash Corporation is a medical device company known for innovative product development and unique technology in the fields of resorbable biomaterials and endovascular devices used in a wide variety of medical procedures. We provide an extensive range of products into multiple medical markets, primarily in the cardiovascular markets and the orthopaedic markets of sports medicine, spine and extremities. Most of the products are based on our significant expertise in the design, development, manufacturing and processing of resorbable biomaterials. We sell our products through strategic partners and do not sell direct to the end-user. We have also developed and commercialized a series of innovative endovascular products and recently completed the sale of these product lines to The Spectranetics Corporation (Spectranetics) in May 2008. Although we recently sold this portfolio of products to Spectranetics, we still participate directly in the future success of these products through a Manufacturing and Licensing Agreement and a Development and Regulatory Services Agreement, which were entered into in connection with the sale transaction (see below for additional discussion). Our revenues consist of two components: net sales, which includes biomaterials products and endovascular products, and royalty income.

Net Sales

Biomaterial Sales

As pioneers in the field of resorbable biomaterials, we have developed significant expertise in the design, development, manufacture and processing of resorbable biomaterials for medical applications. Our biomaterials products, specifically polymer and collagen based products, are components of, in most cases, finished goods sold by numerous other companies pursuant to contractual arrangements. We sell our biomaterials products to over 30 companies that sell them into the end-user marketplace. Our largest biomaterials customers include St. Jude Medical, to which we supply Angio-Seal™ Vascular Closure Device (Angio-Seal) components; Arthrex, Inc., to which we supply a broad range of sports medicine and trauma products; and Orthovita, Inc., to which we supply products for use in repair of the spine and orthopaedic trauma injuries. We also supply biomaterials products and development expertise to other orthopaedic companies including, Medtronic, Inc., Zimmer, Inc., Biomet Sports Medicine, Inc., Johnson & Johnson, Inc. and its subsidiaries, Stryker Corporation and BioMimetic Therapeutics, Inc. We plan to continue to expand relationships with companies targeting new markets, including general, pelvic and urological surgery.

Although a majority of our biomaterials sales are currently concentrated among a few strategic customers, the number of customers has been increasing over the last several years. The relationship with these customers and partners is generally long-term and contractual in nature, with contracts specifying development and regulatory responsibilities, the specifications of the product to be supplied, and pricing. We often work with customers and potential customers at very early stages of feasibility and provide significant input into co-development types of programs. Once a product is approved for sale, we generally provide our customers fully packaged and sterilized products ready for their further distribution or, as in the case with Angio-Seal components, provide a bioresorbable product that is ready to be incorporated into a finished device. Our products often represent a key strategic source for these customers and partners. In many cases, our proprietary technology is incorporated into the product and cannot be replicated by other companies.

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The sale of Angio-Seal components to St. Jude Medical and sales of biomaterial orthopaedic products, including products with applications in sports medicine and spine, continue to be our primary source of revenue. The table below shows the trends in our Angio-Seal component and orthopaedic product sales for the six months ended December 31, 2008 and December 31, 2007, by presenting such sales as a percentage of our total biomaterial sales:

Sales of	Six months ended 12/31/08		% of Biomaterial Sales		Six months ended 12/31/07		% of Biomaterial Sales		% Change Prior Period to Current Period
Orthopaedic Products	$	15,094,443	59	%	$	13,376,274	62	%	13	%
Angio-Seal Components		9,168,691	36	%		7,222,546	33	%	27	%
Other Products		1,505,853	5	%		1,053,391	5	%	43	%
Total Net Sales - Biomaterial	$	25,768,987	100	%	$	21,652,211	100	%	19	%

Our orthopaedic product sales increased 13% in the first six months of fiscal 2009 over the comparable prior fiscal year six month period. This was due to an increase in sales of our current product lines, in part due to an increase in our customer base, and new product lines for our current customers. We expect sales of our orthopaedic products to increase in fiscal 2009 as compared to fiscal 2008 primarily due to new product launches with current customers, such as the new Vitoss® Bioactive Foam product line with Orthovita.

Our net sales in the orthopaedic portion of our business are dependent on several factors, including (1) the success of our current partners in the orthopaedic markets of sports medicine, spine and extremities, (2) the continued acceptance of biomaterials-based products in these markets, as well as expanded future acceptance of such products, and (3) our ability to offer new products and technologies and to attract new partners in these markets. Due to these dependencies, and/or other factors, sales to our orthopaedic customers can vary significantly from quarter to quarter.

We manufacture two of the key resorbable components of the Angio-Seal device for St. Jude Medical, 100% of their supply requirements for the collagen plug and at least 30% of their requirements for the polymer anchors, under a supply contract that expires in December 2010. Sales to St. Jude Medical are highly dependent on ordering patterns of components used in the manufacturing of the Angio-Seal device by St. Jude Medical and can vary significantly from quarter to quarter. This variation in ordering patterns is evidenced by our component sales growth of 27% in the six months ended December 31, 2008 over the comparable prior fiscal year six month period, compared to St. Jude’s end-user sales growth rate of 3%, which was also negatively impacted by foreign currency exchange, during the same comparable six month period. We expect sales of Angio-Seal components to increase in fiscal 2009 as compared to fiscal 2008 due to an anticipated increase in St. Jude end-user sales for the comparable period.

Endovascular Sales

Over the last several years, we have devoted significant resources to developing and bringing proprietary endovascular products to market in the U.S. and Europe. These products are focused in the emerging market segments of thrombus (blood clot) management and chronic total occlusions (CTOs) (a complete vessel blockage common in both coronary and peripheral vessels) and are sold primarily to interventional cardiologists, but may also be used by interventional radiologists and vascular surgeons. Sales of endovascular products decreased to 6% of total net sales in the six months ended December 31, 2008 from 12% in the comparable prior fiscal year six month period due to the reduced transfer price to our partner Spectranetics compared to the direct to market price reflected in the prior fiscal year figures.

In May 2008, we completed the sale of our Endovascular business to Spectranetics. This transaction included the sale of the ThromCat®, QuickCat™ and Safe-Cross® product lines in consideration for a $10.0 million cash payment at closing, with an opportunity for up to an additional $8.0 million in research and development milestone payments, a $6.0 million cumulative sales milestone payment and additional royalty payments based on future sales of the ThromCat and Safe-Cross products after the transition of manufacturing of the products from us to Spectranetics.

Our Endovascular Relationship with Spectranetics

In connection with the sale of our Endovascular business to Spectranetics in May 2008, we entered into a Manufacturing and Licensing Agreement and a Development and Regulatory Services Agreement, under which we will continue to participate in bringing current and next generation endovascular products to the market.

Manufacturing and Licensing Agreement—Under the terms of the Manufacturing and Licensing Agreement we will manufacture the ThromCat and Safe-Cross products for Spectranetics for an initial three-year period. After the three-year initial manufacturing period for the ThromCat and Safe-Cross products, the parties have the ability to negotiate an extension to the Manufacturing and Licensing Agreement; otherwise, the manufacturing will transfer to Spectranetics.

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The terms of this Agreement also provided that we would manufacture the QuickCat product for a minimum of six months, after which manufacturing may transition to Spectranetics. Although the minimum initial six month QuickCat manufacturing term has expired as of December 2008, we continue to manufacture the QuickCat device for Spectranetics on an as-needed basis, as requested by Spectranetics. All products are transferred to Spectranetics under this agreement at pre-defined transfer prices and are classified as product sales in the period shipped. At such time as the manufacturing transfers to Spectranetics, we will begin to earn a royalty on end-user sales of every ThromCat and Safe-Cross unit sold by Spectranetics. Spectranetics will have no obligation to make additional payments to us related to future sales of the QuickCat product. Royalty percentages vary and are dependent on the cause of the transfer of manufacturing. Royalties received will be presented within the Royalty income line of our Condensed Consolidated Statements of Income in the period earned.

We will continue to recognize endovascular product sales revenue as we ship products to Spectranetics for the duration of the Manufacturing and Licensing Agreement. These sales will, however, be at a reduced transfer price compared with the direct to market price reflected in our historic sales figures.

Development and Regulatory Services Agreement – Under the Development and Regulatory Services Agreement, we will continue to perform defined development activities in pursuit of various approvals for next generation endovascular products. All costs related to these activities will be expensed as incurred within the Research and development expenses line of our Condensed Consolidated Statements of Income. The agreement also calls for the equal sharing of any human clinical trial costs in pursuit of next generation or expanded indication devices. Upon receipt of Food and Drug Administration (FDA) approval, European CE Mark approval or achievement of related goals for the new versions of the products, we will receive pre-defined milestone payments of up to an aggregate amount equal to $8.0 million, over an anticipated four-year period. These milestones will be recorded as revenue and recognized over the period of the agreement (including through the date of receipt of the latest expected regulatory approvals and, or, completion of product development activities). The term of this agreement is anticipated to be approximately four years. In October 2008, we announced the accomplishment of the first milestone under this agreement, the development of the next generation Safe-Cross System, which resulted in a $1.0 million payment to us in October 2008 and our recognition of $135,000 in revenue in the three months ended December 31, 2008 and is expected to result in the recognition of an additional $115,000 in revenue during the remainder of fiscal 2009. We anticipate the completion of one additional milestone in the remaining six months of fiscal 2009.

Spectranetics is exclusively responsible for worldwide sales and marketing of the entire endovascular product line.

See “Item 1A. Risk Factors – Our strategic endovascular relationship could be negatively impacted by adverse results of the FDA and U.S. Immigration and Customs Enforcement (ICE) investigation of Spectranetics” contained in our annual report on Form 10-K for the fiscal year ended June 30, 2008.

Royalty Income

We also derive a significant portion of our revenue and profitability from royalty income from proprietary products that we have developed or co-developed.

Angio-Seal^TM Royalty Income. Our Company was the inventor and original developer of the Angio-Seal™, a vascular closure device that reduces recovery time and enhances patient comfort following both diagnostic and therapeutic cardiovascular catheterizations. St. Jude Medical has the exclusive worldwide rights for the development, manufacturing and sales and marketing of the Angio-Seal device, pursuant to an agreement which provides us with an approximate 6% royalty on all end-user product sales. The Angio-Seal device is currently the leading product in sales volume in the vascular closure device market, generating over $360 million in revenue for St. Jude Medical during our fiscal 2008. We anticipate sales of the Angio-Seal device to continue a modest growth pattern, based on forecasted continued procedure growth, St. Jude Medical’s continued expansion in international markets and its success marketing new generations of the product, including most recently, the introduction of the Evolution^TM Device. Royalty income earned from St. Jude Medical was $10.6 million in the six months ended December 31, 2008, compared to $10.4 million for the same period of fiscal 2008, a 2% increase. St. Jude’s end-user sales of the Angio-Seal during the six months ended December 31, 2008 were negatively impacted by foreign currency exchange rates as compared to foreign currency exchange rates of the comparable prior year period.

Vitoss® Foam, Vitoss®, and Vitoss® Bioactive Foam Royalty Income. Since 2003, we have partnered with Orthovita, Inc. to co-develop and commercialize a series of unique and proprietary bone void filler products, branded Vitoss Foam, the first of

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which was launched in March 2004. We receive a fixed royalty on Orthovita’s end-user sales of Vitoss Foam products, which are targeted for use in the orthopaedic market. In addition, in August 2004 we entered into an agreement to acquire the proprietary rights of a third party inventor of the Vitoss technology for $2.6 million (the Assignment Agreement). Under the Assignment Agreement, we receive an additional royalty from Orthovita on the end-user sales of all Orthovita products containing the Vitoss technology up to a total royalty to be received of $4.0 million, with $1.5 million remaining to be received as of December 31, 2008. We believe the unique technology associated with the Vitoss Foam products, the recent successful introduction of the new Vitoss Bioactive Foam products, and the growing orthopaedic market will result in the Orthovita component of our Royalty income of our Condensed Consolidated Statements of Income becoming more significant over the remainder of the current fiscal year and beyond. Royalty income earned from Orthovita was $2.8 million in the six months ended December 31, 2008, compared to $2.1 million for the same period of fiscal 2008, representing a 33% increase.

We have other royalty generating relationships, none of which materially contributes to revenue at this time, but which we expect to provide increased revenue as the related products gain market acceptance and additional products are commercialized.

Stock-Based Compensation

The following table summarizes stock-based compensation expense/(benefit) under SFAS No. 123(R) Share-Based Payment (SFAS 123(R)) within each operating expense category of our Condensed Consolidated Statements of Income for the three months ended December 31, 2008 and 2007:

	Three Months Ended December 31,
	2008			2007
Cost of products sold	$	142,643		$	139,439
Research and development		(22,962	)		290,763
Selling, general and administrative		(87,582	)		296,080
Total stock-based compensation expense	$	32,099		$	726,282

Stock-based compensation expense for the three months ended December 31, 2008 consists of (a) stock options granted to employees, non-employee members of our Board of Directors, as well as non-employee outside consultants, (b) nonvested stock awards granted to non-employee members of our Board of Directors, a non-employee outside consultant, and (c) cash-settled stock appreciation rights (SARs) granted to executive officers and other non-executive eligible employees of our Company. Total stock-based compensation expense for the three months ended December 31, 2008 was impacted primarily by a decrease in cash-settled SARs expense due to the change in the fair value of our cash-settled SARs, which were remeasured based on, amongst other factors, our closing stock price on December 31, 2008. We cannot predict the market value of our Common Stock at the time of exercise for these grants, nor the magnitude of exercises at any particular time over the terms of these grants. These SARs will continue to be remeasured at each reporting period until all awards are settled. Fluctuations in the fair value of the liability award are recorded as increases or decreases in compensation cost, either immediately or over the remaining service period, depending on the vested status of the award. See Note 13 (Stock-Based Compensation) to the Condensed Consolidated Financial Statements included in this Form 10-Q for additional information concerning our stock-based compensation.

Acceleration of Stock Awards

As we publicly announced on September 26, 2007, there was a “Change in Control” as defined in our Fifth Amended and Restated Kensey Nash Corporation Employee Incentive Compensation Plan, as amended and then in effect (the Employee Plan). As a result, all outstanding unvested stock options, cash-settled stock appreciation rights (SARs) and nonvested stock held by executive officers, employees, directors and others under this plan automatically became vested (and, in the case of options and SARs, exercisable) in full. The accelerated vesting resulted in a non-cash charge of approximately $3.0 million, or $0.16 per share tax affected, primarily during the prior fiscal year quarter ended September 30, 2007. The acceleration removed all future equity compensation expense related to the then outstanding stock options and nonvested shares under the plan as of the date of acceleration. However, all remaining SARs, including the rights in which the vesting was accelerated, will continue to be marked to market on a quarterly basis, as required under generally accepted accounting principles in the U.S. (U.S. GAAP) and equity compensation expense will be incurred with respect to all new stock compensation awards granted after this event. See “Liquidity and Capital Resources- Stock Appreciation Rights (SARs) Buyback Program” below.

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The charge represented a significant portion of our operating expenses in the six months ended December 31, 2007 and, therefore, we have broken it out in the table below to show the amounts of the acceleration of stock-based compensation charges included within each operating expense category of our Condensed Consolidated Statements of Income for the six months ended December 31, 2007.

The following table summarizes stock-based compensation expense under SFAS 123(R) in our Condensed Consolidated Financial Statements for the six months ended December 31, 2008 and 2007:

	As Reported Stock-Based Compensation		Pre-acceleration Stock-Based Compensation		Acceleration of Stock Awards Charge		As Reported Stock-Based Compensation
	Six Months Ended December 31, 2008		Six Months Ended December 31, 2007
Cost of products sold	$	207,718	$	237,931	$	251,732	$	489,663
Research and development		73,244		577,998		834,682		1,412,680
Selling, general and administrative		44,818		643,381		1,887,619		2,531,000
Total stock-based compensation expense	$	325,780	$	1,459,310	$	2,974,033	$	4,433,343
Diluted EPS	$	0.02	$	0.08	$	0.16	$	0.23

Discontinuance of Embolic Protection Platform

As announced on July 10, 2007, we made a strategic decision to cease all activities related to our embolic protection platform, including the PROGUARD clinical trial, product manufacturing, sales and marketing, and research and development activities. As a result of this action, we recorded certain charges in our fourth quarter of fiscal 2007 totaling approximately $4.7 million, or $0.25 per share tax-effected. All of the remaining charges, related to severance and clinical trial closeout costs, were recorded in our first quarter of fiscal 2008 and totaled approximately $324,000, or $0.02 per share tax-effected. All charges related to the discontinuance are presented within our results of operations in fiscal 2008 and fiscal 2007. We do not anticipate any further charges related to this decision.

The following table is presented to show the amounts of the discontinuance of embolic protection charges included within each category of our Condensed Consolidated Statements of Income for the six months ended December 31, 2007:

	Discontinuance of Embolic Protection Charges Six months Ended December 31, 2007
Cost of products sold	$	154,726
Research and development		92,630
Selling, general and administrative		76,372
Total discontinuance of embolic protection charges	$	323,728

CRITICAL ACCOUNTING POLICIES

Our “critical accounting policies” are those that require application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about matters that are inherently uncertain and may change in future periods. We have identified the following as our critical accounting policies: revenue recognition, accounting for stock-based compensation, accounting for investments in debt and equity securities, valuation of financial instruments, inventory valuation and income taxes.

Revenue Recognition. We recognize revenue under the provisions of Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition (SAB 104), which superseded SAB No. 101, Revenue Recognition in Financial Statements (SAB 101). We also follow the provisions of Emerging Issues Task Force Issue 00-21, Revenue Arrangements with Multiple Deliverables (EITF 00-21), for certain collaborative arrangements containing multiple revenue elements which were entered into, or materially amended, after June 30, 2003.

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Sales Revenue. Sales revenue is generally recognized when the related product is shipped or the service is completed. Advance payments received for products or services are generally recorded as deferred revenue and are recognized when the product is shipped or services are performed; the timing of the performance of such services could be subjective. We reduce sales for estimated customer returns, discounts and other allowances, if applicable. Our products are primarily manufactured according to our customers’ specifications and are therefore subject to return only for failure to meet those specifications.

Royalty Revenue. Royalty revenue is recognized as the related product is sold by our customers to end-users. We recognize substantially all of our royalty revenue at the end of each month, in accordance with our customer agreements. See Note 1 (Revenue Recognition) to the Condensed Consolidated Financial Statements included in this Form 10-Q for additional information concerning our royalty revenue recognition.

Accounting for Stock-Based Compensation. We use various forms of equity-based compensation, including stock options, nonvested stock grants, and cash-settled SARs, as a major part of our compensation programs to retain and provide incentives to our management team members and other employees.

• Fair values of option grants are estimated on the date of grant using the Black-Scholes option-pricing model that uses weighted average assumptions. Expected volatilities are based on the historical volatility of our Common Stock, as well as, other factors. We use historical data to estimate option exercise and employee termination behavior within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options is derived from historical exercise behavior and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on U.S. treasuries with constant maturities in effect at the time of grant.

• Nonvested stock granted to non-employee members of our Board of Directors and a non-employee consultant is accounted for using the fair value method under SFAS 123(R). Fair value for nonvested stock grants is based upon the closing price of our Common Stock on the date of the grant.

• Cash-settled SARs awarded in stock-based payment transactions are accounted for under SFAS 123(R), which classifies these awards as liabilities. Accordingly, we record these awards as a component of Other current liabilities on our Condensed Consolidated Balance Sheets. The fair value of each SAR is estimated on the date of grant using the Black-Scholes option-pricing model that uses weighted average assumptions. Expected volatilities are based on the historical volatility of our Common Stock, as well as, other factors. For liability awards, the fair value of the award, which determines the measurement of the liability on our Condensed Consolidated Balance Sheet, is remeasured at each reporting period until the award is settled. Fluctuations in the fair value of the liability award are recorded as increases or decreases in compensation cost, either immediately or over the remaining service period, depending on the vested status of the award. We use historical data to estimate employee termination within the valuation model; employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of cash-settled SARs has been determined using the simplified method in accordance with Question 6 of SEC Staff Accounting Bulletin Topic 14.0.2, “Expected Term” (SAB 107), until such time that historical exercise behavior can be established. On December 12, 2007, SAB 110 was issued to extend the simplified method beyond 2007 for those companies that have concluded that their own historical exercise experience is not sufficient to provide a reasonable basis. We have reached this conclusion and believe that this simplified method provides a reasonable estimate of the expected term.

Revisions to any of our estimates or methodologies could cause a material impact to our financial statements.

Accounting for Investments in Debt and Equity Securities. In accordance with the SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS 115), we have classified our entire investment portfolio as available-for-sale marketable securities with secondary or resale markets and report the portfolio at fair value with unrealized gains and losses included in stockholders’ equity and realized gains and losses included in other income. We currently have investment securities with fair values that are less than their amortized cost and, therefore, contain unrealized losses. We have evaluated these securities and have determined that the decline in value is not related to any event of our Company or industry specific event. We anticipate full recovery of amortized costs with respect to these securities at maturity or sooner in the event of a more favorable market interest rate

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environment. Revisions to our classification of these investments and/or a determination other than the anticipation of a full recovery of the amortized costs at maturity or sooner could result in our realizing gains and/or losses on these investments and, therefore, have a material impact on our financial statements.

Valuation of Financial Instruments. Effective July 1, 2008, we adopted the provisions of SFAS 157 for financial assets and liabilities which provides guidance for using fair value to measure financial assets and liabilities by defining fair value as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. SFAS 157 establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy. For further discussion regarding the fair value of financial assets and liabilities, see Note 10 (Fair Value of Financial Assets and Financial Liabilities) to the Condensed Consolidated Financial Statements included in this Form 10-Q.

Inventory Valuation. Our inventory is stated at the lower of cost or market value. Adjustments to inventory are made at the individual part level for estimated excess, obsolescence or impaired balances, to reflect inventory at the lower of cost or market. Factors influencing these adjustments include changes in demand, rapid technological changes, product life cycle and development plans, component cost trends, product pricing, physical deterioration and quality concerns. Revisions to these adjustments would be required if any of these factors differ from our estimates.

Income Taxes. Our estimated effective tax rate typically includes the impact of certain estimated research and development tax credits and non-taxable interest income. Material changes in, or differences from, our estimates could impact our effective tax rate.

RESULTS OF OPERATIONS

Comparison of Three Months Ended December 31, 2008 and 2007

Total Revenues. Total revenues increased 6% to $20.8 million in the three months ended December 31, 2008 from $19.6 million in the three months ended December 31, 2007.

Total Net Sales. Net sales of products increased 6% to $14.0 million for the three months ended December 31, 2008, compared to net sales of $13.1 million for the three months ended December 31, 2007. We had a $1.6 million, or 14%, increase in our biomaterial sales offset by a $784,000, or 47%, decrease in our endovascular sales.

Biomaterials Sales. Biomaterial sales were $13.1 million in the period, a 14% increase compared to $11.5 million in the same period of the prior fiscal year. Biomaterials sales includes revenue recognized from products shipped as well as revenue generated from product development programs with biomaterials customers. The biomaterial sales increase was primarily due to an increase in sales of Angio-Seal components to St. Jude Medical compared to the prior fiscal year three month period. Sales to St. Jude Medical were $5.2 million in the quarter ended December 31, 2008 compared to $3.4 million in the same prior fiscal year quarter. The fluctuations in component sales in any given period are not always indicative of the change in end-user sales of the Angio-Seal by St. Jude Medical for the same period, due to variations in ordering patterns of the components used in the manufacturing of the Angio-Seal device by St. Jude, inventory stocking and supplements to St. Jude’s production, as well as the impact of foreign currency exchange on end-user sales.

Orthopaedic product sales were $7.1 million in the period compared to $7.2 million in the same period of the prior fiscal year. The orthopaedic product sales remained consistent as a result of an increase in sports medicine product sales, offset by a decrease in spine product sales. Sports medicine product sales increased $548,000, or 18%, to $3.7 million in the three months ended December 31, 2008, from $3.1 million in the three months ended December 31, 2007, primarily due to stronger sales of existing products. Sales of spine products of $3.3 million in the three months ended December 31, 2008 decreased by $570,000, or 15%, from $3.8 million primarily due to weaker sales of one of our bone void filler products.

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Endovascular Sales. Endovascular sales were $878,000 in the period, a 47% decrease compared to sales of $1.7 million in the same period of the prior fiscal year. Endovascular sales include revenue recognized from products shipped, as well as revenue generated from product development programs with Spectranetics. The three months ended December 31, 2008 represented the second full quarter of endovascular product sales to Spectranetics following our completion of the sale of our Endovascular business in May 2008. These sales are at a reduced transfer price compared to the direct to market price reflected in our historical sales figures. The decrease in endovascular sales in the quarter ended December 31, 2008 over the comparable prior fiscal year quarter is a direct result of this reduced transfer price, as overall net unit sales to Spectranetics increased compared to prior fiscal year end-user unit sales. In addition, in October 2008, we announced the accomplishment of the first milestone under this agreement, the development of the next generation Safe-Cross System, which resulted in a $1.0 million payment received by us in October 2008 and our recognition of $135,000 in revenue in the three months ended December 31, 2008.

Royalty Income. Royalty income increased 5% to $6.8 million in the three months ended December 31, 2008 from $6.5 million in the three months ended December 31, 2007.

Royalty income from St. Jude Medical’s Angio-Seal end-user sales for the quarter ended December 31, 2008 of $5.4 million was consistent with $5.4 million of royalty income in the three months ended December 31, 2007. End-user sales of the Angio-Seal in the quarter ended December 31, 2008 increased 1% over the same quarter ended December 31, 2007, despite the negative impact of foreign currency exchange. Royalties for the three months ended December 31, 2008 were negatively impacted by current quarter foreign currency exchange rates compared to foreign currency exchange rates of the comparable prior period.

Royalty income from Orthovita’s Vitoss, Vitoss Foam and Vitoss Bioactive Foam products end-user sales increased 28% to $1.4 million during the three months ended December 31, 2008 from $1.1 million in the three months ended December 31, 2007. End-user sales of our co-developed Vitoss Foam and Vitoss Bioactive Foam products increased 44% in the quarter ended December 31, 2008 compared to the comparable prior fiscal year quarter. The recent successful introduction of the new Vitoss Bioactive Foam products, as well as the continued sales of existing Vitoss Foam products by Orthovita in the end-user marketplace, contributed to the increase in royalty income.

Cost of Products Sold.

As Reported	Three Months Ended 12/31/08			Three Months Ended 12/31/07			% Change Prior Period to Current Period
Cost of products sold	$	6,493,026		$	6,177,524		5	%
Gross Margin		54	%		53	%

Cost of products sold was $6.5 million for the three months ended December 31, 2008, a $316,000, or 5%, increase from $6.2 million for the three months ended December 31, 2007. Gross margin on net sales for the three months ended December 31, 2008 was 54% compared to gross margin on net sales of 53% for the three months ended December 31, 2007. The increase in cost of products sold in the three months ended December 31, 2008 compared to the three months ended December 31, 2007, was primarily related to the increase in sales. The gross margin in the three months ended December 31, 2007 was affected by start-up costs associated with the Safe-Cross product line as we initiated and continued to refine the manufacturing process on this new product line.

In the three months ended December 31, 2008, we experienced improvement in the costs of manufacturing our biomaterials products, related primarily to increased volume compared to prior periods, but these improvements were offset in part by continued lower margins on our endovascular products due to our reduced pricing structure with Spectranetics (see “Our Endovascular Relationship with Spectranetics” above). For the remainder of fiscal 2009, we believe that the overall gross margin on sales will remain substantially consistent with the three month period ended December 31, 2008. We will continue to seek process improvements and process automation in both biomaterials and endovascular platforms to achieve further improvement of the overall gross margin on sales.

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Research and Development Expense.

As Reported	Three Months Ended 12/31/08			Three Months Ended 12/31/07			% Change Prior Period to Current Period
Research & Development	$	4,539,173		$	3,959,591		15	%
% of Revenue		22	%		20	%

Research and development expense was $4.5 million for the three months ended December 31, 2008, a $580,000, or 15%, increase from $4.0 million for the three months ended December 31, 2007. During the quarter ended December 31, 2008, biomaterials research and development expenses increased by $608,000 over the comparable prior fiscal year three month period. The increase in biomaterials research and development expenses was due to design and development expenses related to the increased concentration in our articular cartilage regeneration matrix, extracellular matrices (ECM) and our porous resorbable interbody spacer projects. Partially offsetting these costs was a decrease in equity compensation expense from a favorable mark-to-market adjustment on our cash-settled SARs.

Research and development expenses were 22% and 20% of total revenues for the three months ended December 31, 2008 and 2007, respectively. We believe research and development expenditures in total will increase as a percentage of revenues in fiscal 2009 over fiscal 2008 as we increase our biomaterials development efforts, primarily related to our cartilage repair program. During the three months ended December 31, 2008, we furthered the cartilage preclinical studies for a U.S. clinical trial and are planning to file an IDE submission in the second half of fiscal 2009. In addition, we are focusing on our research and development activities surrounding our extracellular matrices technology, as well as other development projects utilizing our proprietary biomaterial technologies. Our endovascular product research and development expenses are also expected to stay substantially consistent in fiscal 2009 compared to fiscal 2008 due to our continued development of new generations of both the ThromCat and Safe-Cross devices per our Development and Regulatory Services Agreement with Spectranetics.

Selling, General and Administrative Expense.

As Reported	Three Months Ended 12/31/08			Three Months Ended 12/31/07			% Change Prior Period to Current Period
Selling, General and Administrative	$	2,119,628		$	5,929,374		(64	)%
% of Revenue		10	%		30	%

Selling, general and administrative expense was $2.1 million for the three months ended December 31, 2008, a decrease of $3.8 million, or 64%, from $5.9 million for the three months ended December 31, 2007. The Condensed Consolidated Statements of Income for the three month periods ended December 31, 2008 and 2007 have been reclassified to reflect aggregated selling, general and administrative expenses, which were previously separated into two line items. These costs have been aggregated due to the elimination of our direct sales and marketing efforts for our endovascular products after the sale of these product lines to Spectranetics in May of 2008.

The decrease in selling, general and administrative expense was primarily due to the elimination of our direct sales and marketing efforts for our endovascular products after the sale of these product lines to Spectranetics. During the second quarter of fiscal 2008, approximately $3.7 million was spent on sales and marketing efforts, which were not incurred in the second quarter of fiscal 2009. General and administrative expenses of $2.1 million for the quarter ended December 31, 2008 remained fairly consistent decreasing $86,000, or 4%, compared to $2.2 million for the quarter ended December 31, 2007. This was a result of a $255,000 decrease in personnel costs related to a favorable mark-to-market on our cash-settled SARs. This decrease was offset by a $175,000 increase in professional fees, including legal, audit and tax and Board of Director fees.

Interest Income & Interest Expense. Interest income decreased by 29% to $339,000 for the three months ended December 31, 2008 from $475,000 for the three months ended December 31, 2007. This decrease was due to the effect of lower interest rates partially offset by a 54% increase in our average cash and investment balances during the period ended December 31, 2008 over the comparable prior fiscal year three month period.

Interest expense during the three months ended December 31, 2008 was $545,000, an increase of 81% from $301,000 during the same period of the prior fiscal year. In November 2007, we borrowed the remaining $27.0 million available under our Mortgage with Citibank, F.S.B., increasing our outstanding balance to $35.0 million from $8.0 million and thereby increasing our interest expense for the quarter ended December 31, 2008 over the comparable prior year period. The Mortgage is hedged by a fixed interest rate Swap bearing interest of 6.44%. The Mortgage balance was $33.5 million as of December 31, 2008. See Note 9 to the Condensed Consolidated Financial Statements included in this Form 10-Q for additional information concerning our Mortgage and Swap.

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Other Income/Loss. Other non-operating income was $35,000 in the three months ended December 31, 2008, an increase of 57% from non-operating income of $22,000 in the three months ended December 31, 2007. This non-operating income primarily represents non-operating items, including gain/loss on foreign currency exchange and gain/loss on sale of assets.

Income Tax Expense. Our tax expense for the three months ended December 31, 2008 was approximately $2.2 million, resulting in an effective tax rate of approximately 30%. As a result of the October 2008 Congressional approval of an extension of the Research & Experimentation (R&E) Tax Credit, we recorded retroactive adjustments to our tax provision during our second fiscal quarter ended December 31, 2008. The adjustments reflect that the tax credit is retroactive to January 1, 2008 and, therefore, reduced our effective tax rate to approximately 30% for the second quarter of fiscal 2009. We anticipate our effective tax rate for each of the third and fourth quarters of fiscal 2009 will be approximately 33%, including the related quarter’s R&E Tax Credit effect on the tax provision and, therefore, the net effective tax rate for fiscal 2009 will be approximately 32%. See Note 16 to the Condensed Consolidated Financial Statements included in this Form 10-Q for additional information concerning our effective tax rate.

Comparison of Six Months Ended December 31, 2008 and 2007

Total Revenues. Total revenues increased 10% to $40.9 million in the six months ended December 31, 2008 from $37.2 million in the six months ended December 31, 2007.

Total Net Sales. Net sales of products increased 11% to $27.4 million for the six months ended December 31, 2008, compared to net sales of $24.7 million for the six months ended December 31, 2007. We had a 19% increase in our biomaterials sales and a 45% decrease in our endovascular sales.

Biomaterials Sales. Biomaterial sales were $25.8 million in the six month period ended December 31, 2008, a 19% increase from $21.7 million in the same period of the prior fiscal year. Biomaterial sales include revenue recognized from products shipped as well as revenue generated from product development programs with biomaterials customers. Sales of Angio-Seal components to St. Jude Medical increased 27% to $9.2 million in the six months ended December 31, 2008, compared to $7.2 million in the six months ended December 31, 2007. The fluctuations in component sales in any given period are not always indicative of the change in end-user sales of the Angio-Seal by St. Jude Medical for the same period, due to variations in ordering patterns of the components used in the manufacturing of the Angio-Seal device by St. Jude, inventory stocking and supplements to St. Jude production, as well as the impact of foreign currency exchange on end-user sales.

Additionally, orthopaedic sales increased $1.7 million compared to the same prior fiscal year six month period. The orthopaedic product sales increase was primarily the result of sports medicine products, which increased 18% to $7.7 million in the six months ended December 31, 2008, from $6.5 million in the six months ended December 31, 2007. The increase in sales of sports medicine products was primarily attributable to new product launches and stronger sales of existing products. In addition, spine product sales increased 7% to $7.0 million in the six months ended December 31, 2008, from $6.6 million in the six months ended December 31, 2007. The increase in sales of spine products was primarily attributable to strong sales of current and new product lines to Orthovita, cancellation fees charged to a customer for research and development work performed, offset, in part, by weaker sales of one of our bone void filler products.

Endovascular Sales. Endovascular sales were $1.7 million in the six months ended December 31, 2008, a 45% decrease compared to endovascular sales of $3.0 million in the same period of the prior fiscal year. Endovascular sales include revenue recognized from products shipped, as well as revenue generated from product development programs with Spectranetics. During the six months ended December 31, 2008, endovascular product sales to Spectranetics were at a reduced transfer price compared to the direct to market price reflected in our historical sales figures. The decrease in endovascular sales in the six months ended December 31, 2008 over the comparable prior fiscal year six month period is a direct result of this reduced transfer price, as overall net unit sales to Spectranetics increased as compared to end-user unit sales in the comparable period of the prior fiscal year. In addition, in October 2008, we announced the accomplishment of the first milestone under this agreement, the development of the next generation Safe-Cross System, which resulted in a $1.0 million payment received by us in October 2008 and our recognition of $135,000 in revenue in the six months ended December 31, 2008.

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Royalty Income. Royalty income increased 8% to $13.5 million in the six months ended December 31, 2008 from $12.6 million in the six months ended December 31, 2007.

St. Jude Medical Angio-Seal royalty income increased 2% to $10.6 million for the six months ended December 31, 2008 compared to $10.4 million in the six months ended December 31, 2007. End-user sales of the Angio-Seal increased 3% in the six months ended December 31, 2008 over the same prior period ended December 31, 2007, despite the negative impact of foreign currency exchange rates.

Orthovita royalty income increased 33% to $2.8 million during the six months ended December 31, 2008 compared to $2.1 million in the six months ended December 31, 2007. End-user sales of our co-developed Vitoss Foam and Vitoss Bioactive Foam products increased 47% in the six months ended December 31, 2008 compared to the comparable prior fiscal year six month period. The recent successful introduction of the new Vitoss Bioactive Foam products, as well as the continued strong sales of existing Vitoss Foam products by Orthovita in the end-user marketplace, contributed to the increase in royalty income.

Cost of Products Sold.

As Reported	Six Months Ended 12/31/08			Six Months Ended 12/31/07			% Change Prior Period to Current Period
Cost of products sold	$	12,206,481		$	11,821,673		3	%
Gross Margin		56	%		52	%

Cost of products sold was $12.2 million for the six months ended December 31, 2008, a $385,000, or 3%, increase from $11.8 million for the six months ended December 31, 2007. Gross margin on net sales for the six months ended December 31, 2008 was 56% compared to gross margin on net sales of 52% for the six months ended December 31, 2007. Costs of products sold for the six months ended December 31, 2007 included a charge of $252,000 for the acceleration of equity based awards and $155,000 in charges related to the discontinuance of the embolic protection platform. Had these charges not been incurred, as adjusted gross margin on net sales would have been 54% instead of 52% as reported gross margin on net sales for the six months ended December 31, 2007.

Special charges included within Cost of Products Sold	Six Months Ended 12/31/08		Six Months Ended 12/31/07
Acceleration of equity based awards	$	—	$	251,732
Discontinuance of embolic protection platform		—		154,726
Total Special Charges	$	—	$	406,458

	Six Months Ended 12/31/08 (as reported)			Six Months Ended 12/31/07 (as adjusted*)			% Change Prior Period to Current Period
Cost of products sold	$	12,206,481		$	11,415,215		7	%
Gross Margin		56	%		54	%

* See “Supplemental Non-GAAP Financial Measures and Reconciliations” below.

Excluding the special charges described above, the increase in cost of products sold of $791,000, or 7%, in the six months ended December 31, 2008 compared to the six months ended December 31, 2007, was primarily related to the increase in sales. The increase in gross margin, excluding these charges, in the six months ended December 31, 2008 was due in part to product mix, as well as, higher volumes, process improvements and automation. The gross margin in the prior six months ended December 31, 2007 was affected by start-up costs associated with the Safe-Cross product line as we initiated and continued to refine the manufacturing process on this new product line. For the remainder of fiscal 2009, we believe that our overall gross margin on sales will remain substantially consistent with the gross margins experienced in the three months ended December 31, 2008. We expect continued improvement of our gross margin on sales from continuing higher volumes in both biomaterials and endovascular platforms as well as process

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improvements and process automation, but that these improvements will be offset, in part, by continued lower margins on our endovascular products due to our reduced pricing structure with Spectranetics (see “Our Endovascular Relationship with Spectranetics” above)

Research and Development Expense.

As Reported	Six Months Ended 12/31/08			Six Months Ended 12/31/07			% Change Prior Period to Current Period
Research & Development	$	8,962,922		$	8,891,595		1	%
% of Revenue		22	%		24	%

Research and development expense was $9.0 million for the six months ended December 31, 2008, a $71,300, or 1%, increase from $8.9 million for the six months ended December 31, 2007. Research and development expense for the six months ended December 31, 2007 included a charge of $835,000 for the acceleration of equity based awards and $93,000 in charges related to the discontinuance of the embolic protection platform.

Special charges included within Research & Development	Six Months Ended 12/31/08		Six Months Ended 12/31/07
Acceleration of equity based awards	$	—	$	834,682
Discontinuance of embolic protection platform		—		92,630
Total Special Charges	$	—	$	927,312

	Six Months Ended 12/31/08 (as reported)			Six Months Ended 12/31/07 (as adjusted*)			% Change Prior Period to Current Period
Research & Development	$	8,962,922		$	7,964,283		13	%
% of Revenue		22	%		21	%

* See “Supplemental Non-GAAP Financial Measures and Reconciliations” below.

Excluding the special charges described above, the resulting increase in research and development expense was approximately $1.0 million in the six months ended December 31, 2008, compared to the six months ended December 31, 2007. Excluding these charges, biomaterials and endovascular research and development expenses increased for the six months ended December 31, 2008 by $884,000 and $115,000, respectively, over the comparable prior fiscal year six month period. The increase in biomaterials research and development expenses compared to the adjusted biomaterial biomaterials research and development expenses was due to design and development expenses related to the commencement of and increased concentration in our articular cartilage regeneration matrix, extracellular matrices (ECM) and our porous resorbable interbody spacer projects and expenses incurred in connection with a customer cancellation of research and development projects. Partially offsetting these costs was a decrease in equity compensation expense related to a favorable mark-to-market adjustment on our cash-settled SARs. The increase in endovascular research and development expense compared to the adjusted endovascular research and development expenses was primarily due to an increase in outside services and design and development expenses related to our research and development projects for Spectranetics under the Development and Regulatory Services Agreement.

Excluding the special charges described above, research and development expenses were 22% and 21% of total revenues for the six months ended December 31, 2008 and 2007, respectively. We believe research and development expenditures in total will increase as a percentage of revenues in fiscal 2009 over fiscal 2008 as we increase our biomaterials development efforts, primarily related to our cartilage repair program. During the six months ended December 31, 2008 we furthered the cartilage preclinical studies for a U.S. clinical trial and are planning to file an IDE submission in the second half of fiscal 2009. In addition, we are focusing on our research and development activities surrounding our extracellular matrices technology, as well as other development projects utilizing our proprietary biomaterial technologies. Our endovascular product research and development expenses are expected to stay substantially consistent in fiscal 2009 compared to fiscal 2008 due to our continued development of new generations of both the ThromCat and Safe-Cross devices per our Development and Regulatory Services Agreement with Spectranetics. We also expect to achieve one additional milestone payment in fiscal 2009, pursuant to agreements with Spectranetics, which relate to endovascular research and development expenditures.

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Selling, General and Administrative Expense.

As Reported	Six Months Ended 12/31/08			Six Months Ended 12/31/07			% Change Prior Period to Current Period
Selling, General and Administrative	$	4,405,227		$	13,505,966		(67	)%
% of Revenue		11	%		36	%

Selling, general and administrative expense was $4.4 million for the six months ended December 31, 2008, a decrease of $9.1 million, or 67%, from $13.5 million for the six months ended December 31, 2007. The Condensed Consolidated Statements of Income for the six months ended December 31, 2008 and 2007 have been reclassified to reflect aggregated selling, general and administrative expenses, which were previously separated as two line items. These costs have been aggregated due to the elimination of our direct sales and marketing efforts for our endovascular products after the sale of these product lines to Spectranetics in May of 2008. Selling, general and administrative expense for the six months ended December 31, 2007 included a charge of $1.9 million for the acceleration of stock awards and $76,000 in charges related to the discontinuance of the embolic protection platform.

Special charges included within Selling, General and Administrative	Six Months Ended 12/31/08		Six Months Ended 12/31/07
Acceleration of equity based awards	$	—	$	1,887,619
Discontinuance of embolic protection platform		—		76,372
Total Special Charges	$	—	$	1,963,991

	Six Months Ended 12/31/08 (as reported)			Six Months Ended 12/31/07 (as adjusted*)			% Change Prior Period to Current Period
Selling, General and Administrative	$	4,405,227		$	11,541,975		(62	)%
% of Revenue		11	%		31	%

* See “Supplemental Non-GAAP Financial Measures and Reconciliations” below.

Excluding the special charges described above, the decrease in selling, general and administrative expense was $7.1 million in the six months ended December 31, 2008, compared to the six months ended December 31, 2007. This decrease in selling, general and administrative expense compared to the adjusted selling, general and administrative expenses was primarily due to the elimination of our direct sales and marketing efforts for our endovascular products after the sale of these product lines to Spectranetics in May of 2008. During the first six months of fiscal 2008, approximately $7.2 million was spent on sales and marketing efforts, which were not incurred in the first six months of fiscal 2009. General and administrative expenses of $4.4 million for the six months ended December 31, 2008 remained fairly consistent decreasing $17,000 compared to $4.4 million for the six months ended December 31, 2007. This was a result of a $368,000 decrease in personnel costs related to the favorable mark-to-market adjustment on our cash-settled SARs. This decrease was offset by a $332,000 increase in professional fees, including legal, audit and tax and Board of Director fees.

Interest Income & Interest Expense. Interest income increased by 1% to $817,000 for the six months ended December 31, 2008 from $808,000 for the six months ended December 31, 2007. This increase was due primarily to a 42% increase in our average cash and investment balance during the period ended December 31, 2007 over the comparable prior fiscal year six month period, offset by the effect of lower interest rates.

Interest expense during the six months ended December 31, 2008 was $1.0 million compared to $403,000 during the same period of the prior fiscal year. In November 2007, we borrowed the remaining $27.0 million of cash under the Mortgage with Citibank, F.S.B., increasing our outstanding balance to $35.0 million compared to $8.0 million and thereby increasing our interest expense for the six

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month period ended December 31, 2008 over the comparable prior year period. The Mortgage is hedged by a fixed interest rate Swap bearing interest of 6.44%. The Mortgage balance was $33.5 million as of December 31, 2008. See Note 9 to the Condensed Consolidated Financial Statements included in this Form 10-Q for additional information concerning our Mortgage and Swap.

Other Income. Other non-operating income was $183,000 in the six months ended December 31, 2008, an increase of $165,000 from $18,000 for the six months ended December 31, 2007. This non-operating income for the six months ended December 31, 2008 was due to the final settlement of outstanding items related to our Opportunity Grant Program of the Department of Community and Economic Development of the Commonwealth of Pennsylvania Governor’s Action Team. See Note 15 to the Condensed Consolidated Financial Statements included in this Form 10-Q for additional information concerning the Opportunity Grant. The non-operating income for the six months ended December 31, 2007 represented non-operating items, including gain/loss on foreign currency exchange and gain/loss on sale of assets.

Income Tax Expense. Our tax expense for the six months ended December 31, 2008 was approximately $4.8 million, resulting in an effective tax rate of approximately 32%. As a result of the October 2008 Congressional approval of an extension of the R&E Tax Credit, we recorded retroactive adjustments to our tax provision during our second fiscal quarter ended December 31, 2008. The adjustments reflect that the tax credit is retroactive to January 1, 2008 and, therefore, our year-to-date effective tax rate is approximately 32% for the six months ended December 31, 2008. We anticipate our effective tax rate for each of the third and fourth quarters of fiscal 2009 will be approximately 33%, including the related quarter’s R&E Tax Credit effect on the tax provision and therefore the net effective tax rate for fiscal 2009 will be approximately 32%. See Note 16 to the Condensed Consolidated Financial Statements included in this Form 10-Q for additional information concerning our effective tax rate.

LIQUIDITY AND CAPITAL RESOURCES

Our cash, cash equivalents and investments were $71.3 million as of December 31, 2008, an increase of $7.8 million from our balance of $63.5 million at June 30, 2008, the end of our prior fiscal year. Our working capital was $91.8 million as of December 31, 2008, an increase of $8.9 million from our working capital of $82.9 million at June 30, 2008.

Operating Activities

Net cash provided by our operating activities was $13.6 million in the six months ended December 31, 2008. For the six months ended December 31, 2008, we had net income of $10.5 million, non-cash depreciation and amortization of $3.5 million, a change in deferred income taxes of $1.6 million, which was primary the result of the change in our non-current deferred tax assets related to the decrease in the fair value of our Swap, and a net effect of non-cash employee stock-based compensation and related tax events of $0.8 million.

Cash used in operations as a result of changes in asset and liability balances was $2.7 million. This amount was the result of the decrease in accounts payable of $1.5 million and an increase in inventory purchases of $1.4 million. These changes in assets and liabilities were offset, in part, by the decrease in other non-current liabilities of approximately $200,000, related to the recognition of revenue from the Opportunity Grant.

Investing Activities

Cash provided by investing activities was $5.1 million for the six months ended December 31, 2008. This amount was the result of $6.6 million of bond maturities within our investment portfolio, offset by $1.5 million in capital spending to continue to expand our research and development and manufacturing capabilities and improve our information technology systems.

Financing Activities

Cash used in financing activities was $4.2 million for the six months ended December 31, 2008. This amount was primarily the result of $10.4 million in Common Stock repurchases and $700,000 in repayments of long-term debt, offset by $6.9 million in cash proceeds from the net effect of the exercise of stock-based awards.

Debt

We have a Secured Commercial Mortgage (the Mortgage) with Citibank, F.S.B. which provided us with the ability to take aggregate advances up to $35.0 million through the Draw Period for which we had taken these advances prior to December 31, 2008. The Mortgage contains various conditions to borrowing, including affirmative, restrictive and financial maintenance covenants for which we are in compliance with these covenants as of December 31, 2008. See Note 9 to the Condensed Consolidated Financial Statements included in this Form 10-Q for additional information concerning the significant requirements of the covenants.

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Stock Repurchase Program

On September 25, 2007, we announced that our Board of Directors had approved a stock repurchase program to provide us with more flexibility to purchase our own shares of Common Stock. This program replaced our then existing stock repurchase program and allowed us to repurchase up to a total of $25.0 million of our issued and outstanding shares of Common Stock. On June 23, 2008 we announced that our Board of Directors had approved an additional stock repurchase program in order to provide us with more flexibility to buy our own shares. That additional stock repurchase program allowed us to repurchase up to an additional $10.0 million of our issued and outstanding shares of Common Stock. During fiscal 2008, we repurchased and retired a total of 867,839 shares of Common Stock for a total cost of $24.4 million, or an average market price per share of $28.15, using available cash.

During the six months ended December 31, 2008, we repurchased and retired 401,371 shares of Common Stock at a total cost of $10.4 million, or an average market price of $25.99 per share, using available cash. The stock repurchases were executed under the remainder of the $25 million repurchase plan and the $10 million repurchase plan, marking the completion of both of our existing stock repurchase programs. As of December 31, 2008, we had 11,512,752 shares of Common Stock outstanding. We financed repurchases using available cash, liquid investments and cash from operations. See Part II. Item 2 (Unregistered Sales of Equity Securities and Use of Proceeds) in this Form 10-Q.

Stock Appreciation Rights (SARs) Buyback Program

We granted cash-settled SAR awards to eligible employees during the quarter ended September 30, 2006. Each award, when granted, provided the participant with the right to receive payment in cash, upon exercise, for the appreciation in market value of a share of our Common Stock over the award’s exercise price. The exercise price of a SAR is equal to the closing market price of our Common Stock on the date of grant. The SARs were exercisable over a maximum term of five years from the date of grant and vested over a period of three years from the grant date. The first one-third of these grants was scheduled to vest during our quarter ended September 30, 2007. During the quarter ended September 30, 2007, the vesting of all equity based awards was accelerated due to the “Change in Control” as defined under the Employee Plan. See Note 13 to the Condensed Consolidated Financial Statements included in this Form 10-Q for additional information concerning the accelerated vesting of all outstanding equity awards. Therefore, all outstanding cash-settled SARs are available for exercise and are subject to quarterly mark-to-market adjustments.

On November 14, 2007, in an effort to reduce our exposure to this liability, we offered to buy back the then outstanding SARs from all current eligible employees, excluding our executive officers, at the fair market value (“Buyout Price”) based on the closing price of our Common Stock on December 14, 2007, the settlement date. This offer resulted in our purchase of 173,940 SARs at a Buyout Price of $6.47 per SAR for a total of $1.1 million (net of our portion of payroll taxes) paid to the participating eligible employees. The remaining SARs will continue to be remeasured at each reporting period until all awards are settled. We cannot predict the market value of our Common Stock at the time of exercise for these grants, nor the magnitude of exercises at any particular time over the terms of these grants.

General

We plan to continue to increase our research and development activities for our biomaterial products and continue our research and development activities for our endovascular products based on our development contract with Spectranetics. Because we sold our endovascular product lines to Spectranetics, the portion of our operating expense specifically related to endovascular sales and marketing efforts has been eliminated in fiscal 2009.

We believe our current cash and investment balances and expected future cash generated from operations will be sufficient to meet our operating, financing, and capital requirements for the next 12 months. Although we believe our cash and investment balances will also be sufficient on a longer term basis, that will depend on numerous factors, including: market acceptance of our existing and future products; the successful commercialization of products in development; the costs associated with that commercialization; progress in our product development efforts; the magnitude and scope of such efforts; progress with pre-clinical studies, future clinical trials and product clearance by the FDA and other agencies; the cost and timing of our efforts to expand our manufacturing, sales, and marketing capabilities; the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; competing technological and market developments; and the development of strategic alliances for the marketing of certain of our products.

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The terms of any future equity financing we undertake may be dilutive to our stockholders and the terms of any debt financing may contain restrictive covenants that limit our ability to pursue certain courses of action. Our ability to obtain financing is dependent on the status of our future business prospects, as well as conditions prevailing in the relevant capital markets. No assurance can be given that any additional financing will be available to us, or will be available to us on acceptable terms, should such a need arise.

Presented below is a summary of our contractual obligations as of December 31, 2008:

	Payments Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Contractual Obligations
Long-Term Debt Obligations (1):
Secured Commercial Mortgage ($35 million)	$	59,730,892	$	3,555,763	$	6,807,925	$	6,448,475	$	42,918,729
Purchase Obligations:
Contractual Commitments for Capital Expenditures (2)(3)		1,354,456		1,354,456		—		—		—
FIN 48 Tax Obligations (4)		33,164		33,164		—		—		—
Total Contractual Obligations	$	61,118,512	$	4,943,383	$	6,807,925	$	6,448,475	$	42,918,729

These obligations are related to the Mortgage and agreements to purchase goods or services that are enforceable and legally binding.

(1) The long-term debt obligations consist of principal and interest on the Mortgage of $33.5 million as of December 31, 2008. In accordance with U.S. GAAP, the interest obligations are not recorded on our Condensed Consolidated Balance Sheet. See Note 9 to the Condensed Consolidated Financial Statements included in this Form 10-Q.

(2) These obligations consist of open purchase orders for capital items primarily for the continued expansion of our research and development and manufacturing capabilities.

(3) In accordance with U.S. GAAP, these obligations are not recorded on our Condensed Consolidated Balance Sheets.

(4) Liabilities for uncertain tax positions in the aggregate amount of $144,672 have been omitted from the table above due to an inability to reliably estimate the period of cash settlement of these liabilities.

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SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

Kensey Nash Corporation

Non-GAAP Financial Measures and Reconciliations

Total Net Sales, Total Revenue, Operating Costs and Expenses and

Selected Financial Ratios

				Non-GAAP Adjustments
	As Reported for Six Months Ended December 31, 2007			Embolic Protection Discontinuance (a) 2007			One-Time Equity Acceleration (a) 2007			As Adjusted for Six Months Ended December 31, 2007
Total net sales	$	24,678,392		$	—		$	—		$	24,678,392
Total revenues	$	37,240,343		$	—		$	—		$	37,240,343
Operating costs and expenses:
Cost of products sold	$	11,821,673		$	(154,726	)	$	(251,732	)	$	11,415,215
Research and development		8,891,595			(92,630	)		(834,682	)		7,964,283
Selling, general and administrative		13,505,966			(76,372	)		(1,887,619	)		11,541,975
Total operating costs and expenses	$	34,219,234		$	(323,728	)	$	(2,974,033	)	$	30,921,473
Gross Margin on Total Net Sales		52	%		1	%		1	%		54	%
R&D as a % of Total Revenue		24	%		(1	)%		(2	)%		21	%
SG&A as a % of Total Revenue		36	%		0	%		(5	)%		31	%

Note: To supplement our Management Discussion and Analysis presented in accordance with GAAP, we use non-GAAP measures of operating expense line items, which are adjusted from our GAAP results to exclude certain expenses. These non-GAAP adjustments are provided to enhance the user’s overall understanding of our historical and current financial performance and our prospects for the future. We believe the non-GAAP results provide useful information to both management and investors by excluding certain expenses that we believe are not indicative of our core operating results. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with accounting principles generally accepted in the United States.

In this Form 10-Q, we have adjusted our GAAP results for the six months ended December 31, 2007 for the discontinuance of our embolic protection platform and accelerated vesting of stock awards. We excluded the impact of write-offs of inventory, certain dedicated embolic protection equipment, and other assets related to our decision in June 2007 to discontinue the embolic protection product line. Additional charges related to severance and clinical trial closeout costs were recorded during the first six months of fiscal 2008, as set forth in the reconciliation. We excluded the impact of the acceleration of vesting of the stock awards from the results of the first six months of fiscal 2008 due to the “Change in Control” as defined in our equity compensation plan on August 30, 2007 when Ramius Capital Group, L.L.C. and its affiliates acquired more than 20 percent of the Company’s outstanding Common Stock. We believe that these adjustments provide investors with alternative numbers for comparison of our results for the six month periods ended December 31, 2007 and 2008, consistent with how management assesses our relative performance between periods.

(a) Net income for the six months ended December 31, 2007 includes $3.0 million in net charges ($2.0 million in after-tax charges, or $0.16 per share tax -effected) for the acceleration of stock awards and approximately $324,000 in charges ($215,000 in after-tax charges, or $0.02 per share tax-effected), related to the discontinuation of the Company’s embolic protection platform, both of which were incurred during the first quarter of fiscal 2008.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. We have based these forward-looking statements largely on our current expectations and projections about future events and trends affecting our business. In this report, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “plan” and similar expressions, as they relate to Kensey Nash Corporation, our business or our management, are intended to identify forward-looking statements, but they are not the exclusive means of identifying them.

A number of risks, uncertainties and other factors could cause our actual results, performance, financial condition, cash flows, prospects and opportunities to differ materially from those expressed in, or implied by, the forward-looking statements. These risks, uncertainties and other factors, most of which have been described in greater detail in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2008 include but are not limited to the following:

• our reliance on revenues, including both royalty income and product sales, from the Angio-Seal product line;

• our reliance on four customers (St. Jude Medical, Arthrex, Inc., Orthovita, Inc. and The Spectranetics Corporation) for a majority of our revenues;

• the performance of St. Jude Medical as the manufacturer, marketer and distributor of the Angio-Seal product;

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• the performance of The Spectranetics Corporation as the marketer and distributor of the endovascular products;

• our dependence on the continued growth and success of our biomaterials products and customers;

• the competitive markets for our products and our ability to respond more quickly than our competitors to new or emerging technologies and changes in customer requirements;

• the acceptance of our products by the medical community or new technology introduced replacing our products;

• our strategic endovascular relationship could be negatively impacted by adverse results of the FDA and U.S. Immigration and Customs Enforcement (ICE) investigation of The Spectranetics Corporation;

• the loss of, or interruption of supply from, key vendors;

• the completion of additional clinical trials in both the U.S. and Europe to support regulatory approval of future generations of our products;

• our ability to scale up the manufacturing of our products to accommodate the respective sales volume;

• our dependence on our customers for planning their inventories, marketing and obtaining regulatory approval for their products;

• our dependence on key vendors and personnel;

• our use of hazardous materials, which could expose us to future environmental liabilities;

• international market risks that can harm future international sales of our products;

• our ability to expand our management systems and controls to support anticipated growth;

• potential dilution of ownership interests of our stockholders by stock issuances in future acquisitions or strategic alliances;

• the unpredictability of our future operating results and trading price of our stock from quarter to quarter;

• risks related to future market acceptance of our biomaterials or endovascular partners’ products;

• risks related to product recalls of and other manufacturing issues relating to our partners’ biomaterials or endovascular products;

• risks related to our intellectual property, including patent and proprietary rights and trademarks;

• risks related to our industry, including potential for litigation, product liability claims, ability to obtain reimbursement for our products and our products’ exposure to extensive government regulation;

• adherence and compliance with corporate governance laws, regulations and other obligations affecting our business;

• general economic and business conditions, nationally, internationally and within our markets; and

• future market acceptance of our biomaterials or endovascular partners’ products.

Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this report. Our results of operations in any past period should not be considered indicative of the results to be expected for future periods. Fluctuations in operating results may also result in fluctuations in the price of our Common Stock.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our interest income and expense are sensitive to changes in the general level of interest rates. In this regard, changes in interest rates affect the interest earned on our cash, cash equivalents and investments, as well as the fair value of our Swap.

Investment Portfolio

Our investment portfolio consists primarily of high quality municipal securities all of which have maturities ranging from less than one year to approximately four years. We mitigate default risk by investing in what we believe are safe and high credit quality securities and by monitoring the credit rating of investment issuers. Our portfolio includes only marketable securities with secondary or resale markets. We have an audit-committee-approved investment strategy, which currently limits the duration and types of our investments. These available-for-sale marketable securities are subject to interest rate risk and decreases in market value if interest rates increase. As of December 31, 2008, our total investment portfolio consisted of approximately $8.1 million of investments. While our investments may be sold at any time because the portfolio includes available-for-sale marketable securities with secondary or resale markets, we generally hold securities until the earlier of their call date or their maturity. Therefore, we do not expect our results of operations or cash flows to be materially impacted due to a sudden change in interest rates. Additional information regarding our investments is located in Note 2 to the Condensed Consolidated Financial Statements included in this 10-Q.

Debt

On May 25, 2006, we entered into a $35.0 million aggregate ten-year fixed interest rate swap agreement (the Swap), with Citibank, N.A., to manage the market risk from changes in interest rates under the Mortgage. As of December 31, 2008 we had taken the full $35.0 million advance under the Mortgage (See Note 9 to the Condensed Consolidated Financial Statements included in this Form 10-Q). Our objective and strategy for undertaking the Swap was to hedge our exposure to variability in cash flows and interest expense associated with the future interest rate payments under the Mortgage and to reduce our interest rate risk in the event of an unfavorable interest rate environment. Therefore, we do not expect our results of operations or cash flows to be materially impacted due to a sudden change in interest rates. Additional information regarding the Swap is located in Note 9 – under the heading “Interest Rate Swap Agreement” to the Condensed Consolidated Financial Statements included in this Form 10-Q.

Foreign Currency Exchange Rate Risk

The Company’s business is not directly dependent on foreign operations as the Company’s sales to customers outside the U.S. are not significant. However, a portion of the Company’s total revenues, including sales and royalties, are dependent on U.S. based customers selling to end-users outside the U.S. There is a risk related to the changes in foreign currency exchange rates as it relates to our royalties paid to us in U.S. dollars for which royalties are received on end-user sales within foreign countries. We are currently not taking any affirmative steps to hedge the risk of fluctuations in foreign currency exchange rates. We are continuing to grow the business as to not be reliant on royalty income that is subject to fluctuations in exchange rates. We do not expect our financial position, results of operations or cash flows to be materially impacted due to a sudden change in foreign currency exchange rates fluctuations relative to the U.S. Dollar.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial and Accounting Officer, of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported accurately and within the time frames specified in the SEC’s rules and forms and that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial and Accounting Officer, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective at the reasonable assurance level.

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Changes In Internal Control Over Financial Reporting

There were not any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on the Effectiveness of Controls

Our management does not expect that our disclosure controls and procedures or our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no controls can provide absolute assurance that misstatements due to error or fraud will not occur, and no evaluation of any such controls can provide absolute assurance that control issues and instances of fraud, if any, within our Company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies and procedures.

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Part II – OTHER INFORMATION

Item 1A. Risk Factors.

The Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2008 includes a detailed discussion of our risk factors. There are no material changes from the risk factors previously disclosed under the caption “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2008 except that:

The following risk factors are hereby added:

Our strategic endovascular relationship with Spectranetics could be negatively impacted by changes in management of Spectranetics

Spectranetics announced on October 22, 2008 the appointment of Emile J. Geisenheimer, its chairman, to the additional roles of President and Chief Executive Officer, following the resignation of John G. Schulte as President, Chief Executive Officer and director of Spectranetics. Three additional employees have also left Spectranetics. Our business, including revenues derived from endovascular sales, may be adversely impacted by the change in management if such change diverts focus and attention away from selling the endovascular products we sold to Spectranetics, and which we continue to develop and manufacture for Spectranetics.

Our financial position, results of operations or cash flows may be negatively impacted by the recent financial crisis

The recent financial troubles affecting the banking system and financial markets and the going concern threats to investment banks and other financial institutions have resulted in a tightening in the credit markets, a low level of liquidity in many financial markets, and extreme volatility in fixed income, credit and equity markets. There could be a number of follow-on effects from the credit crisis on our business, including insolvency of key suppliers resulting in product delays; inability of customers to obtain credit to finance purchases of our products and/or customer insolvencies; and counterparty failures negatively impacting our debt and treasury operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table contains information about our purchases of our equity securities during October, November, and December 2008:

Period	Total number of shares purchased *	Average price paid per share		Amount remaining for future repurchase (1) (a)
October 1-31, 2008	280,852	$	26.61	$	3,100,528
November 1-30, 2008	120,519		24.54		—
December 1-31, 2008	—		—		—
Total	401,371	$	25.99	$	—

* All shares purchased under a publicly announced plan.

(1) Represents maximum amount that may be purchased under the current programs.

(a) The September 25, 2007 Stock Repurchase Plan allowed up to $25 million Common Stock to be repurchased; had no expiration and as of September 30, 2008 had $573,301 available for repurchases. The June 23, 2008 Stock Repurchase Plan allowed up to $10 million Common Stock to be repurchased; had no expiration and as of September 30, 2008 had the entire $10 million available for repurchases. Both plans were active as of September 30, 2008. As of December 31, 2008, the Company has completed both of the previously existing stock repurchase programs.

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

The Company’s 2008 Annual Meeting of Stockholders was held on December 10, 2008. At the Annual Meeting, the Company’s stockholders (i) elected Douglas G. Evans, P.E., C. McCollister Evarts, M.D., and Walter R. Maupay as Class I Directors to the Company’s Board of Directors for a term of three years expiring at the 2011 Annual Meeting of Stockholders, (ii) approved the Seventh Amended and Restated Kensey Nash Corporation Employee Incentive Plan, and (iii) ratified the appointment by the

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Company’s board of directors of Deloitte & Touche LLP as the independent auditors of the Company’s financial statements for the fiscal year ending June 30, 2009. The following summarizes the voting results for such actions:

	Votes For	Votes Withheld	Votes Against	Abstentions	Broker Non-Votes
Election of Class I Directors:
Douglas G. Evans, P.E.	10,996,802	382,861	—	—	—
C. McCollister Evarts, M.D.	10,982,276	397,387	—	—	—
Walter R. Maupay	10,996,924	382,739	—	—	—
Approval of the Seventh Amended and Restated Kensey Nash Corporation Employee Incentive Compensation Plan	8,100,547	—	2,450,251	28,088	800,777
Ratification of the Appointment of Deloitte & Touche LLP	11,039,818	—	339,121	724	—

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Item 6. Exhibits.

10.1	Amended and Restated Employment Agreement dated January 1, 2009, by and between Kensey Nash Corporation and M. Kevin Carouge.
10.2	Amended and Restated Employment Agreement dated January 1, 2009, by and between Kensey Nash Corporation and Todd M. DeWitt.
10.3	Amended and Restated Employment Agreement dated January 1, 2009, by and between Kensey Nash Corporation and Russell T. Kronengold, Ph.D.
10.4	Amended and Restated Employment Agreement dated January 1, 2009, by and between Kensey Nash Corporation and James T. Rauth, P.E.
10.5	Seventh Amended and Restated Kensey Nash Corporation Employee Incentive Compensation Plan. (1)
10.6	Form of Stock Option Agreement. (2)
10.7	Form of Restricted Stock Agreement. (3)
10.8	Separation and General Release Agreement. (4)
10.9	First Amendment to Separation and General Release Agreement. (5)
10.10	Amended and Restated Employment Agreement for Joseph W. Kaufmann, Chief Executive Officer. (6)
10.11	Amended and Restated Employment Agreement for Douglas G. Evans, P.E., Chief Operating Officer. (7)
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a).
31.2	Certification of Principal Financial and Accounting Officer pursuant to Exchange Act Rule 13a-14(a).
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) This exhibit is incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on December 16, 2008.

(2) This exhibit is incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on December 16, 2008.

(3) This exhibit is incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on December 16, 2008.

(4) This exhibit is incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on December 16, 2008.

(5) This exhibit is incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K filed with the SEC on December 16, 2008.

(6) This exhibit is incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on January 7, 2009.

(7) This exhibit is incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on January 7, 2009.

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SIGNATURES

Pursuant to the requirements 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.

	KENSEY NASH CORPORATION
Date: February 9, 2009	By:	/s/ Ryan D. Lake, CPA
		Ryan D. Lake, CPA
		Director of Finance (Principal Financial and Accounting Officer )

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EX-10.1

Exhibit 10.1

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”), is made and entered into as of January 1, 2009 (the “Effective Date”) by and between Kensey Nash Corporation, a Delaware corporation (the “Company”), and M. Kevin Carouge (“Executive”). Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to such terms in Exhibit C.

WHEREAS, the Company and Executive entered into that certain employment agreement dated as of November 1, 2006 and the First Amendment to such employment agreement effective as of November 1, 2008, which extended such employment agreement through December 31, 2008 (collectively, the “Initial Agreement”);

WHEREAS, the Company and Executive desire to amend and restate such employment agreement as set forth herein, primarily for the purpose of compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, the Company wishes to continue to retain Executive as an executive employee, and Executive wishes to remain employed by the Company in such capacity, all upon the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual covenants of the parties hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. EMPLOYMENT OF EXECUTIVE. The Company engages and employs Executive in an executive capacity and Executive accepts such employment and agrees to act as an employee of the Company in accordance with the terms of employment hereinafter specified. Executive shall hold the office of Vice President, Biomaterials Market Development and shall, subject to the direction and supervision of the Chief Executive Officer (“CEO”) and the Chief Operating Officer (“COO”), (a) have the responsibilities and authority customarily associated with such office, and (b) perform such other duties and responsibilities as the CEO and the COO shall from time to time assign to him. Executive agrees to diligently and faithfully serve the Company and to devote his best efforts, his full business time and his highest talents and skills to the furtherance and success of the Company’s business.

2. COMPENSATION. As full and complete compensation to Executive for all services to be rendered by Executive hereunder, the Company shall pay Executive as follows:

(a) The Company shall, during the Employment Term (as defined in Paragraph 3(a)), pay or cause to be paid to Executive a base salary at the rate of $195,000 per annum, or Executive’s most recent per annum base salary, whichever is greater (the “Base Salary”). Such Base Salary shall be paid in periodic installments at the discretion of the Company (but not less frequently than monthly) in accordance with the Company’s normal mode of executive salary payment.

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(b) The Company may, during the Employment Term (as defined in Paragraph 3(a)), pay or cause to be paid to Executive an annual cash bonus not to exceed 60% of Executive’s Base Salary for the applicable Performance Period. Such annual cash bonus, if any, shall be paid following the end of the applicable Performance Period, but in no event shall such annual cash bonus be paid later than March 15 following the calendar year in which the applicable Performance Period ends (e.g., the annual cash bonus for the Performance Period ending June 30, 2009 must be paid no later than March 15, 2010). The amount of Executive’s cash bonus will be determined on an annual basis, in connection with the applicable Company bonus compensation plan (a “Bonus Plan”) and based upon specified goals and objectives, at the discretion of the Board/Company’s Compensation Committee. In addition, Restricted Stock, Stock Options and other equity-based awards may be awarded to Executive in accordance with the applicable Company incentive compensation plan (an “Incentive Plan”).

3. TERM OF EMPLOYMENT; SEVERANCE.

(a) The term of Executive’s employment under this Agreement (the “Employment Term”) shall commence on the Effective Date and shall expire on the earliest to occur of the following dates: (i) two (2) years after such date; (ii) the effective date of Executive’s termination of employment by the Company, including any termination by the Company for Cause; (iii) the effective date of Executive’s termination of employment due to his Retirement or resignation, including, but not limited to, a termination by Executive for Good Reason following a Change in Control; and (iv) the date of Executive’s death; provided, however, that the Employment Term may be extended in additional one (1) year increments prior to its expiration by mutual written agreement of the parties hereto. Any such extension shall also be referred to in this Agreement as the Employment Term. In the event that the Employment Term expires due to non-renewal of this Agreement and Executive’s employment with the Company continues, such employment shall be at-will; provided, however, that Executive’s obligations under Paragraphs 6 through 10 hereof shall continue in full force and effect.

(b) Termination of Executive’s employment pursuant to this Agreement, voluntary termination of employment or non-renewal of this Agreement shall not constitute a waiver of any of Executive’s obligations hereunder that survive termination hereof, including without limitation those arising under Paragraphs 6 through 10 inclusive hereof.

(c) In the event Executive’s employment is terminated by the Company without Cause prior to a Change in Control during the Employment Term, the Company shall pay to Executive on the terms described below a severance fee equal to the greater of (x) any amount of Base Salary remaining until the second anniversary of the Effective Date and a payment equal to one Estimated Bonus for each year of the original two-year Employment Term for which Executive has not yet received such a bonus payment and to which Executive would otherwise be entitled but for such termination, or (y) twelve (12) months worth of Executive’s Base Salary and a payment equal to one Estimated Bonus. Such severance fee shall be paid (subject to the provision below) in a lump sum cash payment within sixty (60) days following the Termination Date, subject to Executive executing, returning to the Company and not revoking a Release Agreement and such Release Agreement becoming effective and irrevocable no later than fifty-five (55) days following Executive’s Termination Date. Additionally, Executive shall continue to be eligible to receive those severance fringe benefits enumerated in Exhibit

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B hereof (the “Continuation Benefits”) (subject to Paragraph 3(i)) for a period of time up to the second anniversary of the Effective Date (i.e., the remainder of the original two-year Employment Term) or twelve (12) months, whichever is longer following Executive’s Termination Date; provided, however, that such Continuation Benefits must constitute COBRA Continuation Coverage in order for Executive to be eligible to receive such Continuation Benefits.

In addition, subject to the terms of the applicable Incentive Plan, upon the termination of Executive’s employment by the Company without Cause during the Employment Term, all of Executive’s Stock Options and Restricted Stock shall immediately vest and such Stock Options shall remain exercisable for a period of one (1) year from Executive’s Termination Date (the “Extended Exercise Period”); provided, however, the Extended Exercise Period shall not be extended beyond the original term of the Stock Option provided for in the applicable Grant Agreement or Incentive Plan. Upon the expiration of the Extended Exercise Period, all of Executive’s outstanding and unexercised Stock Options shall be immediately cancelled.

(d) In the event Executive’s employment is terminated either by the Company with Cause or by Executive other than for reasons provided in Paragraph 3(e) below during the Employment Term, the Company shall have no further obligations hereunder or otherwise with respect to Executive’s employment following the Termination Date, except for (i) the payment of Executive’s Base Salary accrued through the Termination Date, and (ii) in the case of Executive’s termination due to Retirement, the provisions of Paragraph 3(h), if applicable.

(e) In the event, upon or following a Change in Control, the Company terminates Executive’s employment for a reason other than Cause or Executive quits his employment with the Company for Good Reason during the Employment Term, the Company shall pay to Executive on the terms described below a severance fee equal to the greater of (x) the amount Executive would be entitled to receive under Paragraph 3(c) of this Agreement for a termination without Cause, or (y) the sum of (A) one and one half (1 ¹/2) times his regular Base Salary or one and one half (1 ¹/2) times his most recent per annum Base Salary, whichever is greater, and (B) a payment in an amount equal to one and one half (1 ¹/2 ) times an Estimated Bonus. Such severance fee shall be paid (subject to the proviso below) in a lump sum cash payment within sixty (60) days following the Termination Date, subject to Executive executing, returning to the Company and not revoking a Release Agreement, and such Release Agreement becoming effective and irrevocable, no later than fifty-five (55) days following Executive’s Termination Date.

Additionally, Executive shall continue to be eligible to receive the Continuation Benefits (subject to Paragraph 3(i)) for a period of up to twenty-four (24) months following Executive’s Termination Date; provided, however, that such Continuation Benefits must constitute COBRA Continuation Coverage in order for Executive to be eligible to receive such Continuation Benefits.

In addition, subject to the terms of the applicable Incentive Plan, upon a Change in Control that occurs during the Employment Term, vesting of all unvested Stock Options granted and Restricted Stock awarded to Executive shall accelerate such that Executive shall be immediately one hundred percent (100%) vested in all equity awarded. Upon or following a Change in Control, subject to the terms of the

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applicable Incentive Plan, in the event of Executive’s termination without Cause or Executive’s resignation for Good Reason during the Employment Term, Executive’s Stock Options shall remain exercisable for a period of one (1) year from Executive’s Termination Date (the “Extended Exercise Period”); provided, however, the Extended Exercise Period shall not be extended beyond the original term of the Stock Option provided for in the applicable Grant Agreement or Incentive Plan. Upon the expiration of the Extended Exercise Period, all of Executive’s outstanding and unexercised Stock Options shall be immediately cancelled.

(f) In the event the Employment Term ends pursuant to Paragraph 3(a)(i), the Company shall have no further obligations hereunder and Executive’s employment shall be at-will in accordance with Paragraph 3(a).

(g) In the event any payments or benefits received by Executive in connection with his termination of employment or otherwise (which payments shall include, without limitation, the vesting of an equity award or other non-cash benefit or property), whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Company or any affiliated company (collectively, the “Total Payments”) would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code, or any similar tax as may hereafter be imposed (the “Excise Tax”), the provisions as attached in Exhibit D shall apply.

(h) In the event Executive’s employment is terminated by Executive due to Executive’s Retirement during the Employment Term, subject to the terms of the applicable Incentive Plan, Executive’s Stock Options that are vested as of the Termination Date shall remain exercisable for a period of one (1) year from the Termination Date (the “Extended Exercise Period”); provided, however, the Extended Exercise Period shall not be extended beyond the original term of the Stock Option provided for in the applicable Grant Agreement or Incentive Plan. Upon the expiration of the Extended Exercise Period, all of Executive’s remaining outstanding and unexercised Stock Options shall be immediately cancelled.

(i) The Continuation Benefits Executive is eligible to receive, if any, under Paragraph 3(c) or 3(e), will cease immediately upon Executive becoming gainfully employed and being eligible for benefits at his new place of employment. Executive shall notify the Company in writing promptly after Executive’s commencement of such other employment.

(j) Executive agrees that he shall not be entitled to receive any severance fee or other benefits under this Agreement if Executive breaches any of his obligations arising under Paragraphs 8 through 10 hereof. Executive acknowledges that until a Release Agreement is timely executed, delivered to the Company and the applicable revocation period (if any) expires, the Company will not be obligated to make any severance payments or provide any other benefits due under this Agreement following Executive’s Termination Date or Separation from Service. Executive further acknowledges that if either or both of the following occur: (x) the Release Agreement is not timely executed and delivered to the Company, and/or (y) the applicable revocation period (if any) does not expire without revocation of the Release Agreement by Executive as provided in this Agreement, the severance payments and other benefits described in Paragraph 3(c) or 3(e) (as applicable) shall be forfeited. Any

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severance paid pursuant to this Agreement shall be in addition to any other compensation or benefits to which Executive may be entitled under any other plan, program or payroll practice of the Company, other than any applicable severance plan of the Company.

(k) The Company shall not be required to provide additional accruals or contributions under any retirement plan qualified under Section 401(a) of the Internal Revenue Code following Executive’s Termination Date.

(l) The provision of any severance fringe benefit as described in this Agreement shall terminate upon the death of Executive if such death occurs prior to the completion of such payments or benefits.

(m) Notwithstanding anything to the contrary herein provided, if Executive is considered a “specified employee” (as defined in Treasury Regulation Section 1.409A-1(i)) as of the Termination Date, no payment or benefits under this Agreement, if and to the extent such payment or benefits constitute deferred compensation, shall be paid or provided before the date that is six (6) months after Executive’s Separation from Service (or upon Executive’s death, if earlier) (the “Delay Period”). Any deferred compensation owed to Executive during the Delay Period, and for which payment is not otherwise provided, shall be accumulated by the Company and paid to Executive on the first business day after the end of the Delay Period. The foregoing restriction on the payment of amounts to Executive during the Delay Period shall not apply to the payment of employment taxes.

4. FRINGE BENEFITS.

(a) During the Employment Term, Executive shall be entitled to participate in all health insurance and retirement benefit programs normally available to other executives of the Company holding positions similar to that of Executive (subject to all applicable eligibility rules thereof), as from time to time in effect, and Executive shall also be eligible to receive the benefits listed on Exhibit A hereto.

(b) During the Employment Term, Executive shall be entitled to paid vacation as listed in Exhibit A. Executive shall make good faith efforts to schedule such vacations so as to least conflict with the conduct of the Company’s business and shall give the Company adequate advance notice of his planned absences. Unless otherwise required by applicable law, accumulated, unused vacation time for executives of the Company is not vested and will not be paid to Executive either while employed or upon Executive’s termination of employment.

5. REIMBURSEMENTS. During the Employment Term, the Company shall reimburse Executive for all business-related expenses incurred by Executive at the Company’s direction. Executive shall submit to the Company expense reports in compliance with established Company guidelines.

6. INVENTIONS. Executive agrees, on behalf of himself, his heirs and personal representatives, that he will promptly communicate, disclose and transfer to the Company free of all encumbrances and

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restrictions (and will execute and deliver any papers and take any action at any time deemed necessary by the Company to further establish such transfer) all inventions and improvements relating to Company’s business originated or developed by Executive solely or jointly with others during the term of his employment with the Company. Such inventions and improvements shall belong to the Company whether or not they are patentable and whether or not patent applications are filed thereon. Such transfer shall include all patent rights (if any) to such inventions or improvements in the United States and in all foreign countries. Executive further agrees, at the request of Company, to execute and deliver, at any time during the term of his employment with the Company or after his Termination Date, all assignments and other lawful papers (which will be prepared at the Company’s expense) relating to any aspect of the prosecution of such patent applications and rights in the United States and foreign countries.

7. EXPOSURE TO PROPRIETARY INFORMATION.

(a) Executive acknowledges and agrees that during the course of his employment by Company, he will be in continuous contact with customers, suppliers and others doing business with the Company throughout the world. Executive further acknowledges that the performance of his duties in connection with his employment with the Company will expose him to data and information concerning the business and affairs of the Company, including but not limited to information relative to the Company’s proprietary rights and technology, patents, financial statements, sales programs, pricing programs, profitability analyses and profit margin information, customer buying patterns, needs and inventory levels, supplier identities and other related matters, and that all of such data and information (collectively “the Proprietary Information”) is vital, sensitive, confidential and proprietary to Company.

(b) In recognition of the special nature of his employment with the Company, including but not limited to his special access to the Proprietary Information, and in consideration of his employment, Executive agrees to the covenants and restrictions set forth in Paragraphs 8 through 10 inclusive hereof. As used in Paragraphs 6 though 10, the term “Company” shall include, where applicable, any parent, subsidiary, sub-subsidiary, or affiliate of Company.

8. USE OF PROPRIETARY INFORMATION. Executive acknowledges that the Proprietary Information constitutes a protectable business interest of Company, and covenants and agrees that during his employment with the Company and after his Termination Date, he shall not, directly or indirectly, whether individually, as a director, stockholder, owner, partner, employee or agent of any business, or in any other capacity, make known, disclose, furnish, make available or utilize any of the Proprietary Information, other than in the proper performance of his duties during his employment with the Company. Executive’s obligations under this Paragraph 8 with respect to particular Proprietary Information shall terminate only at such time (if any) as the Proprietary Information in question becomes generally known to the public other than through a breach of Executive’s obligations hereunder.

9. RESTRICTION AGAINST COMPETITION AND EMPLOYING OR SOLICITING COMPANY EMPLOYEES, CUSTOMERS OR SUPPLIERS. Executive covenants and agrees that during Executive’s employment (both during the Employment Term and thereafter, if applicable) and

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for the twelve month period immediately following Executive’s Termination Date (the “Restricted Period”), he shall not, directly or indirectly, whether individually, as a director, stockholder, partner, owner, employee or agent of any business, or in any other capacity, (i) engage in a business substantially similar to that which is conducted by the Company in any market area in which such business is operated; (ii) solicit any party who is or was a customer or supplier of the Company on the Termination Date or at any time during the six month period immediately prior thereto for the sale or purchase of any type or quantity of products sold by or used in the business of the Company on the Termination Date or at any time within such six month period; or (iii) solicit for employment any person who was or is an employee of the Company on the Termination Date or at any time during the twelve month period immediately prior thereto.

If at any time prior to the end of the Restricted Period, the Company determines that Executive is engaging in Competition, the Company shall have the right to immediately terminate further payments and benefits hereunder, and Executive shall reimburse the Company for the gross amount of any severance benefits previously paid pursuant to Paragraph 3 of this Agreement. In addition, upon any such breach, Executive shall pay to the Company an amount equal to the aggregate “spread” on all Stock Options exercised on or after the Termination Date (for this purpose “spread” in respect of any Stock Option shall mean the product of the number of shares as to which such Stock Option has been exercised on or after the Termination Date multiplied by the difference between the closing price of the Company’s common stock on the exercise date (or if such common stock did not trade on the NASDAQ Global Select Market on the exercise date, the most recent date on which such common stock did so trade) and the option price of the Stock Option).

If Executive engages in Competition at any time during the Restricted Period, Executive shall return all payments paid under Paragraph 3, and the Company shall be entitled to enforce the return of any payments previously paid to Executive under Paragraph 3 of this Agreement.

10. RETURN OF COMPANY MATERIALS UPON TERMINATION. Executive acknowledges that all price lists, sales manuals, catalogs, binders, customer lists and other customer information, supplier lists, financial information, and other records or documents containing Proprietary Information prepared by Executive or coming into his possession by virtue of his employment by the Company is and shall remain the property of the Company and that upon his Termination Date, Executive shall return immediately to the Company all such items in his possession, together with all copies thereof.

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11. EQUITABLE REMEDIES.

(a) Executive acknowledges and agrees that the covenants set forth in Paragraphs 6 through 10 inclusive hereof survive the expiration of the Employment Term; are reasonable and necessary for the protection of the Company’s business interests; will cause irreparable injury to the Company if breached by Executive; and that in the event of Executive’s actual or threatened breach of any such covenants, the Company will have no adequate remedy at law. Executive accordingly agrees that in the event of any actual or threatened breach by him of any of said covenants, the Company shall be entitled to immediate injunctive and other equitable relief, without bond and without the necessity of showing actual monetary damages. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of any damages which it is able to prove.

(b) Each of the covenants in Paragraphs 6 through 10 inclusive hereof shall be construed as independent of any other covenants or other provisions of this Agreement.

(c) In the event of any judicial determination that any of the covenants set forth in Paragraphs 6 through 10 inclusive hereof is not fully enforceable, it is the intention and desire of the parties that the court treat said covenants as having been modified to the extent deemed necessary by the court to render them reasonable and enforceable, and that the court enforce them to such extent.

12. LIFE INSURANCE. The Company may at its discretion and at any time apply for and procure as owner and for its own benefit and at its own expense, insurance on the life of Executive in such amounts and in such form or forms as the Company may choose. Executive shall cooperate with the Company in procuring such insurance and shall, at the request of Company, submit to such medical examinations, supply such information and execute such documents as may be required by the insurance company or companies to whom the Company has applied for such insurance. Executive shall have no interest whatsoever in any such policy or policies.

13. NOTICES. Any notice required or permitted pursuant to the provisions of this Agreement shall be deemed to have been properly given if in writing and when sent by United States mail, certified or registered, postage prepaid, when sent by facsimile or when personally delivered, addressed as follows:

If to Company:

Kensey Nash Corporation

735 Pennsylvania Drive

Exton, PA 19341

Attention: Joseph W. Kaufmann

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With a copy to:

Katten Muchin Rosenman LLP

525 West Monroe Street

Chicago, IL 60661-3693

Attention: David R. Shevitz, Esq.

If to Executive, to the address most recently on file with the Company

Each party shall be entitled to specify a different address for the receipt of subsequent notices by giving written notice thereof to the other party in accordance with this Paragraph 13.

14. WAIVER OF BREACHES. No waiver of any breach of any of the terms, provisions or conditions of this Agreement shall be construed or held to be a waiver of any other breach, or a waiver of, acquiescence in or consent to any further or succeeding breach thereof.

15. ASSIGNMENT. This Agreement shall not be assignable by either party without the written consent of the other; provided, however, that this Agreement shall be assignable by the Company to any corporation or entity that purchases substantially all of the assets of or succeeds to the business of the Company (a “Successor Employer”), and the Company agrees to cause this Agreement to be assumed by any Successor Employer as a condition to such purchase or succession. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns.

16. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws and judicial decisions of the Commonwealth of Pennsylvania.

17. SEVERABILITY. If any term or provision of this Agreement shall be held to be invalid or unenforceable, the remaining terms and provisions hereof shall not be affected thereby.

18. SOURCE OF PAYMENTS. The Benefits under this Agreement shall be unfunded, and the Company’s obligation under this Agreement shall constitute an unsecured promise of severance pay.

19. MISCELLANEOUS. Paragraph headings herein are for convenience only and shall not affect the meaning or interpretation of the contents hereof. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings between the parties and all prior obligations of the Company with respect to the employment of Executive by the Company or the payment to Executive of compensation of any kind whatsoever, including, without limitation, the Initial Agreement. No supplement or modification of this Agreement shall be binding unless in writing and signed by both parties hereto. This Agreement may be executed in counterparts, each of which shall be deemed an original and when taken together shall constitute one agreement.

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first hereinabove set forth.

/s/ M. Kevin Carouge
M. Kevin Carouge
KENSEY NASH CORPORATION
By:	/s/ Douglas E. Evans, P.E.
Title:	Chief Operating Officer

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Exhibit A

Benefits

Health/prescription, dental, and vision insurance equal to that provided for all other full-time exempt Kensey Nash Corporation employees.

Life insurance providing coverage equal to one year’s Base Salary or $200,000, whichever is less.

Short-term disability insurance equal to that provided for all other full-time exempt Kensey Nash Corporation employees.

Long-term disability benefits at 40% of Base Salary.

Supplemental long-term disability insurance.

Three weeks annual vacation accrued at 10 hours per month. Unless otherwise required by law, accumulated, unused vacation time for executives of the Company is not vested and will not be paid to Executive either while employed or upon Executive’s Termination Date.

Six days annual personal leave.

Eleven holidays each year.

401(k) Plan.

A-1

Exhibit B

Severance Fringe Benefits

Health/prescription, dental, and vision insurance equal to that provided for all other full-time exempt Kensey Nash Corporation employees.

B-1

Exhibit C

For purposes of this Agreement, the following terms are defined as set forth below:

“Board” shall mean the Board of Directors of Kensey Nash Corporation.

“Cause” for termination shall be deemed to exist upon (i) a determination by the CEO that Executive has committed an act of fraud, embezzlement or other act of dishonesty which would reflect adversely on the integrity of the Company or if Executive is convicted of any criminal statute involving breach of fiduciary duty or moral turpitude; (ii) a reasonable determination by the CEO that Executive has failed to discharge his duties in a reasonably satisfactory manner which failure is not cured by Executive within thirty (30) days after delivery of written notice to Executive specifying the nature of such failure; (iii) the death of Executive; (iv) a mental or physical disability of Executive which renders Executive, in the reasonable opinion of the CEO, unable to effectively perform his duties hereunder for a substantially continuous period of one hundred eighty (180) days; or (v) Executive’s voluntary termination of his employment hereunder other than as a result of a breach of the Company’s obligations hereunder.

“Change in Control.” For the purpose of this Agreement, a “Change in Control” shall occur if:

(a) any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, or any syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange Act (other than shareholders holding more than 20% of the Company’s voting securities as of the effective date of the Company’s Incentive Plan), is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities entitled to vote in the election of directors of the Company; or

(b) during any period of two consecutive years (not including any period prior to the effective date of the Company’s Incentive Plan), individuals who at the beginning of such period constituted the Board and any new directors, whose election by the Board or nomination for election by the stockholders of the Company was approved by a vote of at least three quarters of the directors then still in office who either were directors at the beginning of the period or whose election or nomination was previously so approved, cease for any reason to constitute at least a majority thereof; or

(c) all or substantially all of the assets of the Company are liquidated or distributed.

“COBRA Continuation Coverage” means the medical, dental and vision care benefits that Executive and his “qualifying family members” (defined below) elect and are eligible to receive upon Executive’s Termination Date pursuant to Code Section 4980B and Section 601 et seq. of

C-1

the Employee Retirement Income Security Act of 1974, as amended. For this purpose, Executive’s “qualifying family members” are his spouse and dependent children to the extent they are eligible for, and elect to receive, continuation coverage under such Section 4980B and Section 601 et seq. Notwithstanding any other provision of this Agreement to the contrary (except for Paragraph 3(i)), COBRA Continuation Coverage under this Agreement shall terminate for any individual when it terminates under the terms of the applicable benefit plan of the Company in accordance with such Section 4980B and Section 601 et seq.

“Competition” means, for the Payment Period, (i) employment by, being a consultant to, being an officer or director of, or being connected in any manner with, any entity or person in the business of the Company or any affiliate which competes in any market in which the Company does business, either directly or indirectly, (ii) disclosing, using, transferring or selling to any such entity any confidential or proprietary information of the Company or any affiliate, (iii) soliciting or attempting to solicit an employee or former employee of the Company for employment, (iv) diverting or attempting to divert any business or customer of the Company or any affiliate of the Company, or (v) refusing to cooperate with the Company or any affiliate of the Company by making himself available to assist the Company or any affiliate, or testify on behalf of the Company or any affiliate of the Company, in any action, suit, or proceeding, whether civil, criminal or administrative.

“Estimated Bonus” means an amount equal to the average of the value of the cash bonuses received by Executive for the last two full fiscal years for which Executive has received such cash bonuses, if any, prior to Executive’s Termination Date.

“Good Reason” means (i) a material diminution in Executive’s base compensation as in effect as of the date of the Change in Control, (ii) a material diminution in Executive’s responsibilities as in effect as of the date of the Change in Control; or (iii) a relocation of Executive’s location of employment as of the date of the Change in Control that is more than 50 miles from such location.

“Grant Agreement” means an agreement between Executive and the Company which grants Executive a Stock Option, Restricted Stock or other equity award under an Incentive Plan.

“Performance Period” shall mean the Company’s fiscal year beginning on July 1 and ending on June 30 the following year.

“Stock Option” means a stock option granted under an Incentive Plan to Executive.

“Release Agreement” means a release agreement, in the form substantially attached as Exhibit E, releasing any and all claims arising out of Executive’s employment and termination of such employment.

“Restricted Stock” means a restricted stock award granted under an Incentive Plan to Executive.

C-2

“Retirement” shall have the meaning as set forth in the applicable Incentive Plan or, if not defined in the applicable Incentive Plan, it shall mean Executive’s termination of employment upon or after his attaining (i) age 65 or (ii) age 55 with the accrual of 10 years of service.

“Termination Date” means the date that Executive incurs a termination of employment with the Company, regardless of whether the Employment Term has expired or is still in effect.

“Separation from Service” means the date, on or following Executive’s Termination Date, that Executive incurs a “separation from service” as such term is defined under Section 409A of the Code and any applicable IRS or Treasury guidance released thereunder.

C-3

Exhibit D

Excise Tax Gross-up Payment

(1) In the event that the Total Payments (as defined in Paragraph 3(g) of the Agreement) cause Executive’s “parachute payments” within the meaning of Section 280G(b)(2) of the Code to equal or to exceed three times the Executive’s “base amount” within the meaning of Section 280G(b)(3) of the Code (the “Trebled Base Amount”) by an amount which is not greater than 10% of the Trebled Base Amount, the Total Payments shall be reduced (or eliminated) such that no portion of the Total Payments is subject to the Excise Tax (as defined in Paragraph 3(g) of the Agreement). Reductions shall be made first to those Total Payments arising under the terms of this Agreement.

(2) In the event that the Total Payments cause the parachute payments to exceed 110% of the Trebled Base Amount, the Company shall pay to the Executive at the time specified below, an additional amount determined as set forth below (the “Gross-up Payment”). The Gross-up Payment shall be made with respect to the amount which equals 100% of the Executive’s “excess parachute payments” subject to the Excise Tax. The Gross-up Payment shall be an amount such that the net amount retained by Executive with respect to the Total Payments after reduction for any Excise Tax on the Total Payments and any federal, state and local income or employment tax and Excise Tax payable by the Executive on the Gross-up Payment hereunder (provided that such amount is actually paid when due) shall be equal to the amount of the Total Payments that the Executive would retain if the Total Payments did not constitute parachute payments.

(3) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of any Excise Tax:

(a) The Total Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except that to the extent that, in the written opinion of independent legal counsel, compensation consultants or auditors of nationally recognized standing (“Independent Advisors”) selected by the Company and reasonably acceptable to Executive, the Total Payments (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax;

(b) The amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (i) the total amount of the Total Payments or (ii) the total amount of excess parachute payments within the

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meaning of Section 280G(b)(1) of the Code (after applying Paragraph 3(a) above); and

(c) The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

(4) The Gross-up Payment provided for above or any payment made under this Exhibit D shall be paid no later than the end of Executive’s taxable year following the taxable year in which Executive remits the Excise Tax to the applicable taxing authority; provided, however, that, to the extent that such Gross-Up Payment constitutes deferred compensation under Code Section 409A that is payable on account of Executive’s Separation from Service and such Gross-up Payment is subject to the six (6) month delay provisions of Section 409A of the Code and Treasury Regulation Section 1.409A-3(i)(2), such payment shall be subject to the payment delay provisions of Paragraph 3(m). In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder in the Gross-up Payment, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined (but, if previously paid to the taxing authorities, not prior to the time the amount of such reduction is refunded to Executive or otherwise realized as a benefit by Executive) the portion of the Gross-up Payment that would not have been paid if such Excise Tax had been applied to initially calculating the Gross-up Payment, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross Up Payment), the Company shall pay an additional Gross Up Payment and shall indemnify and hold Executive harmless in respect of such excess (plus any interest and penalties with respect to such excess) at the time that the amount of such excess is finally determined, but in no event shall any such Gross-up Payment(s) be made later than the end of Executive’s taxable year following the taxable year in which Executive remits the Excise Tax to the applicable taxing authority.

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Exhibit E

GENERAL RELEASE AGREEMENT

This General Release Agreement (the “Release Agreement”) is made by and between Kensey Nash Corporation, a Delaware corporation (the “Company”), and M. Kevin Carouge (“Executive”) to ensure the protection of the Company and its business, and the protection of the Executive, and to fully settle and resolve any and all issues and disputes arising out of Executive’s employment with and separation from the Company.

WHEREAS, Executive and the Company desire to avoid litigation and controversy and fully settle and compromise any and all claims, charges, actions, causes of action and disputed issues of law and fact that Executive has, had or may have against the Company, as of the date of this Release Agreement.

NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements set forth below and in the employment agreement previously entered into by and between Executive and the Company (the “Employment Agreement”), the receipt and sufficiency of which are hereby acknowledged, Executive and the Company agree as follows:

1. Separation Date. Executive’s employment with the Company is terminated effective             , 20     (the “Separation Date”). Executive agrees to return all Company property to the Company no later than the Separation Date. Except as specifically provided below, Executive shall not be entitled to receive any compensation or other benefits of employment following the Separation Date.

2. Consideration of Company. In consideration for the releases and covenants by Executive in this Release Agreement, the Company agrees that following the expiration of the revocation period described in Paragraph 11 below, if Executive has not exercised his right of revocation, the Company will provide Executive with the following:

[Amount to be determined in accordance with Paragraph 3 of the Employment Agreement at the time of Separation.]

3. Executive Release of Rights and Agreement Not to Sue. Executive (defined for purposes of this Paragraph 3 and Paragraphs 6-10 of the Employment Agreement as Executive and Executive’s agents, representatives, attorneys, assigns, heirs, executors, and administrators) fully and unconditionally releases the Company, its subsidiaries and affiliates, and any of their past or present employees, agents, insurers, attorneys, administrators, officers, directors, shareholders, divisions, predecessors, successors, employee benefit plans, and the sponsors, fiduciaries, or administrators of the such employee benefit plans (collectively, the “Released Parties”) from, and agrees not to bring any action, proceeding or suit against any of the Released Parties regarding, any and all liability, claims, demands, actions, causes of action, suits, grievances, debts, sums of money, agreements, promises, damages, back and front pay, costs, expenses, attorneys’ fees, and remedies of any type, including

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without limitation those arising or that may have arisen out of or in connection with Executive’s employment with or termination of employment from the Company, including but not limited to claims, actions or liability under: (1) Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Act of 1866, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Workers Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act of 1974, the Pennsylvania Human Relations Act, and the Pennsylvania Wage Payment and Collection Law, in each case as such act may be amended; (2) any other federal, state or local statute, ordinance, or regulation regarding employment, termination of employment, or discrimination in employment; and (3) the common law of any state relating to employment contracts, wrongful discharge, defamation, wages or any other matter; provided, however, that said release and agreement not to sue shall not prohibit Executive from bringing an action, proceeding or suit arising out of the Company’s breach of any representation, warranty, or obligation set forth in this Release Agreement.

4. Preservation of Employment Agreement. Notwithstanding any other provision of this Release Agreement, Executive acknowledges and agrees that the provisions of the Employment Agreement, to which this Release Agreement is attached as Exhibit E, shall remain in full force and effect, and Executive agrees to continue to be bound by the terms therein, including, but not limited to, Paragraphs 6-10.

5. No Reinstatement or Reemployment. Executive waives reinstatement and reemployment and agrees never to apply for employment or otherwise seek to be hired, rehired, employed, reemployed, or reinstated by the Company, its subsidiaries, or any of their affiliates.

6. No Disparagement or Encouragement of Claims. Except as required by lawful subpoena or other legal obligation, Executive agrees not to make any oral or written statement that disparages or places the Company and its affiliates (including any of their past or present officers, employees, products or services) in a false or negative light, or to encourage or assist any person or entity who may or who has filed a lawsuit, claim or complaint against the Released Parties (as defined in Paragraph 3 above). If Executive receives any subpoena or becomes subject to any legal obligation that implicates this Paragraph 6, Executive will provide prompt written notice of that fact to the Company with a copy to Katten Muchin Rosenman LLP at the addresses provided in Paragraph 13 of the Employment Agreement, and will enclose a copy of the subpoena and any other documents describing the legal obligation.

7. Non-Admission/Inadmissibility. This Release Agreement does not constitute an admission by the Company that any action it took with respect to Executive was wrongful, unlawful or in violation of any local, state, or federal act, statute, or constitution, or susceptible of inflicting any damages or injury on Executive, and the Company specifically denies any such wrongdoing or violation. This Release Agreement is entered into solely to resolve fully all matters related to or arising out of Executive’s employment with and termination from the Company, and its execution and implementation may not be used as evidence and shall not be admissible in a subsequent proceeding of any kind, except one alleging a breach of this Release Agreement.

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8. Violation of Release Agreement. If Executive or the Company prevails in a legal or equitable action claiming that the other party has breached this Release Agreement, the prevailing party shall be entitled to recover from the other party the reasonable attorneys’ fees and costs incurred by the prevailing party in connection with such action.

9. Severability. The provisions of this Release Agreement shall be severable and the invalidity of any provision shall not affect the validity of the other provisions; provided, however, that upon a finding by a court of competent jurisdiction that any release or agreement in Paragraph 3 is illegal, void or unenforceable, Executive agrees to execute promptly a release, waiver and/or covenant that is legal and enforceable to the extent permitted by law.

10. Governing Law and Jurisdiction. This Release Agreement shall be governed by and construed in accordance with the laws and judicial decisions of the State of Pennsylvania, without regard to its principles of conflicts of laws.

11. Revocation Period. Executive has the right to revoke his release of claims under the Age Discrimination in Employment Act described in Paragraph 3 (the “ADEA Release”) for up to seven days after Executive signs it. In order to do so, Executive must sign and send a written notice of his revocation decision to the Company with a copy to Katten Muchin Rosenman LLP at the addresses provided in Paragraph 13 of the Employment Agreement, and that written notice must be received by the Company no later than the eighth day after Executive signed this Release Agreement. If Executive revokes the ADEA Release, Executive will not be entitled to any of the consideration from the Company described in Paragraph 2 above.

12. Voluntary Execution of Release Agreement. Executive acknowledges that:

a. Executive has carefully read this Release Agreement and fully understands its meaning;

b. Executive had the opportunity to take up to twenty-one (21) days after receiving this Release Agreement to decide whether to sign it;

c. Executive understands that the Company is herein advising him, in writing, to consult with an attorney before signing it;

d. Executive is signing this Release Agreement, knowingly, voluntarily, and without any coercion or duress; and

e. everything Executive is receiving for signing this Release Agreement is described in the Release Agreement itself, and no other promises or representations have been made to cause Executive to sign it.

13. Entire Agreement. This Release Agreement contains the entire agreement and understanding between Executive and the Company concerning the matters described herein, and

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supersedes all prior agreements, discussions, negotiations, and understandings between the Company and Executive; provided, however, that the Employment Agreement to which this Release Agreement is attached as Exhibit E is specifically preserved in accordance with Paragraph 4 above. The terms of this Release Agreement cannot be changed except in a subsequent document signed by Executive and an authorized representative of the Company.

Kensey Nash Corporation
By:
Dated:	, 20
M. Kevin Carouge
Dated:	, 20

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EX-10.2

Exhibit 10.2

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”), is made and entered into as of January 1, 2009 (the “Effective Date”) by and between Kensey Nash Corporation, a Delaware corporation (the “Company”), and Todd M. DeWitt (“Executive”). Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to such terms in Exhibit C.

WHEREAS, the Company and Executive entered into that certain employment agreement dated as of January 1, 2007 (the “Initial Agreement”);

WHEREAS, the Company and Executive desire to amend and restate such employment agreement as set forth herein, primarily for the purpose of compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, the Company wishes to continue to retain Executive as an executive employee, and Executive wishes to remain employed by the Company in such capacity, all upon the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual covenants of the parties hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. EMPLOYMENT OF EXECUTIVE. The Company engages and employs Executive in an executive capacity and Executive accepts such employment and agrees to act as an employee of the Company in accordance with the terms of employment hereinafter specified. Executive shall hold the office of Vice President of Biomaterials and shall, subject to the direction and supervision of the Chief Executive Officer (“CEO”) and the Chief Operating Officer (“COO”), (a) have the responsibilities and authority customarily associated with such office, and (b) perform such other duties and responsibilities as the CEO and the COO shall from time to time assign to him. Executive agrees to diligently and faithfully serve the Company and to devote his best efforts, his full business time and his highest talents and skills to the furtherance and success of the Company’s business.

2. COMPENSATION. As full and complete compensation to Executive for all services to be rendered by Executive hereunder, the Company shall pay Executive as follows:

(a) The Company shall, during the Employment Term (as defined in Paragraph 3(a)), pay or cause to be paid to Executive a base salary at the rate of $192,000 per annum, or Executive’s most recent per annum base salary, whichever is greater (the “Base Salary”). Such Base Salary shall be paid in periodic installments at the discretion of the Company (but not less frequently than monthly) in accordance with the Company’s normal mode of executive salary payment.

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(b) The Company may, during the Employment Term (as defined in Paragraph 3(a)), pay or cause to be paid to Executive an annual cash bonus not to exceed 60% of Executive’s Base Salary for the applicable Performance Period. Such annual cash bonus, if any, shall be paid following the end of the applicable Performance Period, but in no event shall such annual cash bonus be paid later than March 15 following the calendar year in which the applicable Performance Period ends (e.g., the annual cash bonus for the Performance Period ending June 30, 2009 must be paid no later than March 15, 2010). The amount of Executive’s cash bonus will be determined on an annual basis, in connection with the applicable Company bonus compensation plan (a “Bonus Plan”) and based upon specified goals and objectives, at the discretion of the Board/Company’s Compensation Committee. In addition, Restricted Stock, Stock Options and other equity-based awards may be awarded to Executive in accordance with the applicable Company incentive compensation plan (an “Incentive Plan”).

3. TERM OF EMPLOYMENT; SEVERANCE.

(a) The term of Executive’s employment under this Agreement (the “Employment Term”) shall commence on the Effective Date and shall expire on the earliest to occur of the following dates: (i) two (2) years after such date; (ii) the effective date of Executive’s termination of employment by the Company, including any termination by the Company for Cause; (iii) the effective date of Executive’s termination of employment due to his Retirement or resignation, including, but not limited to, a termination by Executive for Good Reason following a Change in Control; and (iv) the date of Executive’s death; provided, however, that the Employment Term may be extended in additional one (1) year increments prior to its expiration by mutual written agreement of the parties hereto. Any such extension shall also be referred to in this Agreement as the Employment Term. In the event that the Employment Term expires due to non-renewal of this Agreement and Executive’s employment with the Company continues, such employment shall be at-will; provided, however, that Executive’s obligations under Paragraphs 6 through 10 hereof shall continue in full force and effect.

(b) Termination of Executive’s employment pursuant to this Agreement, voluntary termination of employment or non-renewal of this Agreement shall not constitute a waiver of any of Executive’s obligations hereunder that survive termination hereof, including without limitation those arising under Paragraphs 6 through 10 inclusive hereof.

(c) In the event Executive’s employment is terminated by the Company without Cause prior to a Change in Control during the Employment Term, the Company shall pay to Executive on the terms described below a severance fee equal to the greater of (x) any amount of Base Salary remaining until the second anniversary of the Effective Date and a payment equal to one Estimated Bonus for each year of the original two-year Employment Term for which Executive has not yet received such a bonus payment and to which Executive would otherwise be entitled but for such termination, or (y) twelve (12) months worth of Executive’s Base Salary and a payment equal to one Estimated Bonus. Such severance fee shall be paid (subject to the proviso below) in a lump sum cash payment within sixty (60) days following the Termination Date, subject to Executive executing, returning to the Company and not revoking a Release Agreement and such Release Agreement becoming effective and irrevocable no later than fifty-five (55) days following Executive’s Termination Date. Additionally, Executive shall continue to be eligible to receive those severance fringe benefits enumerated in Exhibit B hereof (the “Continuation Benefits”) (subject to Paragraph 3(i)) for a period of time up to the second anniversary of the Effective Date (i.e., the remainder of the original two-year Employment Term) or twelve (12)

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months, whichever is longer following Executive’s Termination Date; provided, however, that such Continuation Benefits must constitute COBRA Continuation Coverage in order for Executive to be eligible to receive such Continuation Benefits.

In addition, subject to the terms of the applicable Incentive Plan, upon the termination of Executive’s employment by the Company without Cause during the Employment Term, all of Executive’s Stock Options and Restricted Stock shall immediately vest and such Stock Options shall remain exercisable for a period of one (1) year from Executive’s Termination Date (the “Extended Exercise Period”); provided, however, the Extended Exercise Period shall not be extended beyond the original term of the Stock Option provided for in the applicable Grant Agreement or Incentive Plan. Upon the expiration of the Extended Exercise Period, all of Executive’s outstanding and unexercised Stock Options shall be immediately cancelled.

(d) In the event Executive’s employment is terminated either by the Company with Cause or by Executive other than for reasons provided in Paragraph 3(e) below during the Employment Term, the Company shall have no further obligations hereunder or otherwise with respect to Executive’s employment following the Termination Date, except for (i) the payment of Executive’s Base Salary accrued through the Termination Date, and (ii) in the case of Executive’s termination due to Retirement, the provisions of Paragraph 3(h), if applicable.

(e) In the event, upon or following a Change in Control, the Company terminates Executive’s employment for a reason other than Cause or Executive quits his employment with the Company for Good Reason during the Employment Term, the Company shall pay to Executive on the terms described below a severance fee equal to the greater of (x) the amount Executive would be entitled to receive under Paragraph 3(c) of this Agreement for a termination without Cause, or (y) the sum of (A) one and one half (1 ¹/2) times his regular Base Salary or one and one half (1 ¹/2) times his most recent per annum Base Salary, whichever is greater, and (B) a payment in an amount equal to one and one half (1 ¹/2 ) times an Estimated Bonus. Such severance fee shall be paid (subject to the proviso below) in a lump sum cash payment within sixty (60) days following the Termination Date, subject to Executive executing, returning to the Company and not revoking a Release Agreement, and such Release Agreement becoming effective and irrevocable, no later than fifty-five (55) days following Executive’s Termination Date.

Additionally, Executive shall continue to be eligible to receive the Continuation Benefits (subject to Paragraph 3(i)) for a period of up to twenty-four (24) months following Executive’s Termination Date; provided, however, that such Continuation Benefits must constitute COBRA Continuation Coverage in order for Executive to be eligible to receive such Continuation Benefits.

In addition, subject to the terms of the applicable Incentive Plan, upon a Change in Control that occurs during the Employment Term, vesting of all unvested Stock Options granted and Restricted Stock awarded to Executive shall accelerate such that Executive shall be immediately one hundred percent (100%) vested in all equity awarded. Upon or following a Change in Control, subject to the terms of the applicable Incentive Plan, in the event of Executive’s termination without Cause or Executive’s resignation for Good Reason during the Employment Term, Executive’s Stock Options shall remain exercisable for a period of one (1) year from Executive’s Termination Date (the “Extended Exercise Period”); provided, however, the Extended Exercise Period shall not be extended beyond the original

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term of the Stock Option provided for in the applicable Grant Agreement or Incentive Plan. Upon the expiration of the Extended Exercise Period, all of Executive’s outstanding and unexercised Stock Options shall be immediately cancelled.

(f) In the event the Employment Term ends pursuant to Paragraph 3(a)(i), the Company shall have no further obligations hereunder and Executive’s employment shall be at-will in accordance with Paragraph 3(a).

(g) In the event any payments or benefits received by Executive in connection with his termination of employment or otherwise (which payments shall include, without limitation, the vesting of an equity award or other non-cash benefit or property), whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Company or any affiliated company (collectively, the “Total Payments”) would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code, or any similar tax as may hereafter be imposed (the “Excise Tax”), the provisions as attached in Exhibit D shall apply.

(h) In the event Executive’s employment is terminated by Executive due to Executive’s Retirement during the Employment Term, subject to the terms of the applicable Incentive Plan, Executive’s Stock Options that are vested as of the Termination Date shall remain exercisable for a period of one (1) year from the Termination Date (the “Extended Exercise Period”); provided, however, the Extended Exercise Period shall not be extended beyond the original term of the Stock Option provided for in the applicable Grant Agreement or Incentive Plan. Upon the expiration of the Extended Exercise Period, all of Executive’s remaining outstanding and unexercised Stock Options shall be immediately cancelled.

(i) The Continuation Benefits Executive is eligible to receive, if any, under Paragraph 3(c) or 3(e), will cease immediately upon Executive becoming gainfully employed and being eligible for benefits at his new place of employment. Executive shall notify the Company in writing promptly after Executive’s commencement of such other employment.

(j) Executive agrees that he shall not be entitled to receive any severance fee or other benefits under this Agreement if Executive breaches any of his obligations arising under Paragraphs 8 through 10 hereof. Executive acknowledges that until a Release Agreement is timely executed, delivered to the Company and the applicable revocation period (if any) expires, the Company will not be obligated to make any severance payments or provide any other benefits due under this Agreement following Executive’s Termination Date or Separation from Service. Executive further acknowledges that if either or both of the following occur: (x) the Release Agreement is not timely executed and delivered to the Company, and/or (y) the applicable revocation period (if any) does not expire without revocation of the Release Agreement by Executive as provided in this Agreement, the severance payments and other benefits described in Paragraph 3(c) or 3(e) (as applicable) shall be forfeited. Any severance paid pursuant to this Agreement shall be in addition to any other compensation or benefits to which Executive may be entitled under any other plan, program or payroll practice of the Company, other than any applicable severance plan of the Company.

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(k) The Company shall not be required to provide additional accruals or contributions under any retirement plan qualified under Section 401(a) of the Internal Revenue Code following Executive’s Termination Date.

(l) The provision of any severance fringe benefit as described in this Agreement shall terminate upon the death of Executive if such death occurs prior to the completion of such payments or benefits.

(m) Notwithstanding anything to the contrary herein provided, if Executive is considered a “specified employee” (as defined in Treasury Regulation Section 1.409A-1(i)) as of the Termination Date, no payment or benefits under this Agreement, if and to the extent such payment or benefits constitute deferred compensation, shall be paid or provided before the date that is six (6) months after Executive’s Separation from Service (or upon Executive’s death, if earlier) (the “Delay Period”). Any deferred compensation owed to Executive during the Delay Period, and for which payment is not otherwise provided, shall be accumulated by the Company and paid to Executive on the first business day after the end of the Delay Period. The foregoing restriction on the payment of amounts to Executive during the Delay Period shall not apply to the payment of employment taxes.

4. FRINGE BENEFITS.

(a) During the Employment Term, Executive shall be entitled to participate in all health insurance and retirement benefit programs normally available to other executives of the Company holding positions similar to that of Executive (subject to all applicable eligibility rules thereof), as from time to time in effect, and Executive shall also be eligible to receive the benefits listed on Exhibit A hereto.

(b) During the Employment Term, Executive shall be entitled to paid vacation as listed in Exhibit A. Executive shall make good faith efforts to schedule such vacations so as to least conflict with the conduct of the Company’s business and shall give the Company adequate advance notice of his planned absences. Unless otherwise required by applicable law, accumulated, unused vacation time for executives of the Company is not vested and will not be paid to Executive either while employed or upon Executive’s termination of employment.

5. REIMBURSEMENTS. During the Employment Term, the Company shall reimburse Executive for all business-related expenses incurred by Executive at the Company’s direction. Executive shall submit to the Company expense reports in compliance with established Company guidelines.

6. INVENTIONS. Executive agrees, on behalf of himself, his heirs and personal representatives, that he will promptly communicate, disclose and transfer to the Company free of all encumbrances and restrictions (and will execute and deliver any papers and take any action at any time deemed necessary by the Company to further establish such transfer) all inventions and improvements relating to Company’s business originated or developed by Executive solely or jointly with others during the term of his employment with the Company. Such inventions and improvements shall belong to the Company whether or not they are patentable and whether or not patent applications are filed thereon. Such transfer shall include all patent rights (if any) to such inventions or improvements in the United States

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and in all foreign countries. Executive further agrees, at the request of Company, to execute and deliver, at any time during the term of his employment with the Company or after his Termination Date, all assignments and other lawful papers (which will be prepared at the Company’s expense) relating to any aspect of the prosecution of such patent applications and rights in the United States and foreign countries.

7. EXPOSURE TO PROPRIETARY INFORMATION.

(a) Executive acknowledges and agrees that during the course of his employment by Company, he will be in continuous contact with customers, suppliers and others doing business with the Company throughout the world. Executive further acknowledges that the performance of his duties in connection with his employment with the Company will expose him to data and information concerning the business and affairs of the Company, including but not limited to information relative to the Company’s proprietary rights and technology, patents, financial statements, sales programs, pricing programs, profitability analyses and profit margin information, customer buying patterns, needs and inventory levels, supplier identities and other related matters, and that all of such data and information (collectively “the Proprietary Information”) is vital, sensitive, confidential and proprietary to Company.

(b) In recognition of the special nature of his employment with the Company, including but not limited to his special access to the Proprietary Information, and in consideration of his employment, Executive agrees to the covenants and restrictions set forth in Paragraphs 8 through 10 inclusive hereof. As used in Paragraphs 6 though 10, the term “Company” shall include, where applicable, any parent, subsidiary, sub-subsidiary, or affiliate of Company.

8. USE OF PROPRIETARY INFORMATION. Executive acknowledges that the Proprietary Information constitutes a protectable business interest of Company, and covenants and agrees that during his employment with the Company and after his Termination Date, he shall not, directly or indirectly, whether individually, as a director, stockholder, owner, partner, employee or agent of any business, or in any other capacity, make known, disclose, furnish, make available or utilize any of the Proprietary Information, other than in the proper performance of his duties during his employment with the Company. Executive’s obligations under this Paragraph 8 with respect to particular Proprietary Information shall terminate only at such time (if any) as the Proprietary Information in question becomes generally known to the public other than through a breach of Executive’s obligations hereunder.

9. RESTRICTION AGAINST COMPETITION AND EMPLOYING OR SOLICITING COMPANY EMPLOYEES, CUSTOMERS OR SUPPLIERS. Executive covenants and agrees that during Executive’s employment (both during the Employment Term and thereafter, if applicable) and for the twelve month period immediately following Executive’s Termination Date (the “Restricted Period”), he shall not, directly or indirectly, whether individually, as a director, stockholder, partner, owner, employee or agent of any business, or in any other capacity, (i) engage in a business substantially similar to that which is conducted by the Company in any market area in which such business is operated; (ii) solicit any party who is or was a customer or supplier of the Company on the Termination Date or at any time during the six month period immediately prior thereto for the sale or purchase of any type or quantity of products sold by or used in the business of the Company on the Termination Date or at any time within such six month period; or (iii) solicit for employment any

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person who was or is an employee of the Company on the Termination Date or at any time during the twelve month period immediately prior thereto.

If at any time prior to the end of the Restricted Period, the Company determines that Executive is engaging in Competition, the Company shall have the right to immediately terminate further payments and benefits hereunder, and Executive shall reimburse the Company for the gross amount of any severance benefits previously paid pursuant to Paragraph 3 of this Agreement. In addition, upon any such breach, Executive shall pay to the Company an amount equal to the aggregate “spread” on all Stock Options exercised on or after the Termination Date (for this purpose “spread” in respect of any Stock Option shall mean the product of the number of shares as to which such Stock Option has been exercised on or after the Termination Date multiplied by the difference between the closing price of the Company’s common stock on the exercise date (or if such common stock did not trade on the NASDAQ Global Select Market on the exercise date, the most recent date on which such common stock did so trade) and the option price of the Stock Option).

If Executive engages in Competition at any time during the Restricted Period, Executive shall return all payments paid under Paragraph 3, and the Company shall be entitled to enforce the return of any payments previously paid to Executive under Paragraph 3 of this Agreement.

10. RETURN OF COMPANY MATERIALS UPON TERMINATION. Executive acknowledges that all price lists, sales manuals, catalogs, binders, customer lists and other customer information, supplier lists, financial information, and other records or documents containing Proprietary Information prepared by Executive or coming into his possession by virtue of his employment by the Company is and shall remain the property of the Company and that upon his Termination Date, Executive shall return immediately to the Company all such items in his possession, together with all copies thereof.

11. EQUITABLE REMEDIES.

(a) Executive acknowledges and agrees that the covenants set forth in Paragraphs 6 through 10 inclusive hereof survive the expiration of the Employment Term; are reasonable and necessary for the protection of the Company’s business interests; will cause irreparable injury to the Company if breached by Executive; and that in the event of Executive’s actual or threatened breach of any such covenants, the Company will have no adequate remedy at law. Executive accordingly agrees that in the event of any actual or threatened breach by him of any of said covenants, the Company shall be entitled to immediate injunctive and other equitable relief, without bond and without the necessity of showing actual monetary damages. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of any damages which it is able to prove.

(b) Each of the covenants in Paragraphs 6 through 10 inclusive hereof shall be construed as independent of any other covenants or other provisions of this Agreement.

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(c) In the event of any judicial determination that any of the covenants set forth in Paragraphs 6 through 10 inclusive hereof is not fully enforceable, it is the intention and desire of the parties that the court treat said covenants as having been modified to the extent deemed necessary by the court to render them reasonable and enforceable, and that the court enforce them to such extent.

12. LIFE INSURANCE. The Company may at its discretion and at any time apply for and procure as owner and for its own benefit and at its own expense, insurance on the life of Executive in such amounts and in such form or forms as the Company may choose. Executive shall cooperate with the Company in procuring such insurance and shall, at the request of Company, submit to such medical examinations, supply such information and execute such documents as may be required by the insurance company or companies to whom the Company has applied for such insurance. Executive shall have no interest whatsoever in any such policy or policies.

13. NOTICES. Any notice required or permitted pursuant to the provisions of this Agreement shall be deemed to have been properly given if in writing and when sent by United States mail, certified or registered, postage prepaid, when sent by facsimile or when personally delivered, addressed as follows:

If to Company:

Kensey Nash Corporation

735 Pennsylvania Drive

Exton, PA 19341

Attention: Joseph W. Kaufmann

With a copy to:

Katten Muchin Rosenman LLP

525 West Monroe Street

Chicago, IL 60661-3693

Attention: David R. Shevitz, Esq.

If to Executive, to the address most recently on file with the Company

Each party shall be entitled to specify a different address for the receipt of subsequent notices by giving written notice thereof to the other party in accordance with this Paragraph 13.

14. WAIVER OF BREACHES. No waiver of any breach of any of the terms, provisions or conditions of this Agreement shall be construed or held to be a waiver of any other breach, or a waiver of, acquiescence in or consent to any further or succeeding breach thereof.

15. ASSIGNMENT. This Agreement shall not be assignable by either party without the written consent of the other; provided, however, that this Agreement shall be assignable by the Company to any corporation or entity that purchases substantially all of the assets of or succeeds to the business of the Company (a “Successor Employer”), and the Company agrees to cause this Agreement

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to be assumed by any Successor Employer as a condition to such purchase or succession. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns.

16. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws and judicial decisions of the Commonwealth of Pennsylvania.

17. SEVERABILITY. If any term or provision of this Agreement shall be held to be invalid or unenforceable, the remaining terms and provisions hereof shall not be affected thereby.

18. SOURCE OF PAYMENTS. The Benefits under this Agreement shall be unfunded, and the Company’s obligation under this Agreement shall constitute an unsecured promise of severance pay.

19. MISCELLANEOUS. Paragraph headings herein are for convenience only and shall not affect the meaning or interpretation of the contents hereof. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings between the parties and all prior obligations of the Company with respect to the employment of Executive by the Company or the payment to Executive of compensation of any kind whatsoever, including, without limitation, the Initial Agreement. No supplement or modification of this Agreement shall be binding unless in writing and signed by both parties hereto. This Agreement may be executed in counterparts, each of which shall be deemed an original and when taken together shall constitute one agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first hereinabove set forth.

/s/ Todd M. DeWitt
Todd M. DeWitt
KENSEY NASH CORPORATION
By:	/s/ Douglas E. Evans, P.E.
Title:	Chief Operating Officer

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Exhibit A

Benefits

Health/prescription, dental, and vision insurance equal to that provided for all other full-time exempt Kensey Nash Corporation employees.

Life insurance providing coverage equal to one year’s Base Salary or $200,000, whichever is less.

Short-term disability insurance equal to that provided for all other full-time exempt Kensey Nash Corporation employees.

Long-term disability benefits at 40% of Base Salary.

Supplemental long-term disability insurance.

Three weeks annual vacation accrued at 10 hours per month. Unless otherwise required by law, accumulated, unused vacation time for executives of the Company is not vested and will not be paid to Executive either while employed or upon Executive’s Termination Date.

Six days annual personal leave.

Eleven holidays each year.

401(k) Plan.

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Exhibit B

Severance Fringe Benefits

Health/prescription, dental, and vision insurance equal to that provided for all other full-time exempt Kensey Nash Corporation employees.

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Exhibit C

For purposes of this Agreement, the following terms are defined as set forth below:

“Board” shall mean the Board of Directors of Kensey Nash Corporation.

“Cause” for termination shall be deemed to exist upon (i) a determination by the CEO that Executive has committed an act of fraud, embezzlement or other act of dishonesty which would reflect adversely on the integrity of the Company or if Executive is convicted of any criminal statute involving breach of fiduciary duty or moral turpitude; (ii) a reasonable determination by the CEO that Executive has failed to discharge his duties in a reasonably satisfactory manner which failure is not cured by Executive within thirty (30) days after delivery of written notice to Executive specifying the nature of such failure; (iii) the death of Executive; (iv) a mental or physical disability of Executive which renders Executive, in the reasonable opinion of the CEO, unable to effectively perform his duties hereunder for a substantially continuous period of one hundred eighty (180) days; or (v) Executive’s voluntary termination of his employment hereunder other than as a result of a breach of the Company’s obligations hereunder.

“Change in Control.” For the purpose of this Agreement, a “Change in Control” shall occur if:

(a) any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, or any syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange Act (other than shareholders holding more than 20% of the Company’s voting securities as of the effective date of the Company’s Incentive Plan), is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities entitled to vote in the election of directors of the Company; or

(b) during any period of two consecutive years (not including any period prior to the effective date of the Company’s Incentive Plan), individuals who at the beginning of such period constituted the Board and any new directors, whose election by the Board or nomination for election by the stockholders of the Company was approved by a vote of at least three quarters of the directors then still in office who either were directors at the beginning of the period or whose election or nomination was previously so approved, cease for any reason to constitute at least a majority thereof; or

(c) all or substantially all of the assets of the Company are liquidated or distributed.

“COBRA Continuation Coverage” means the medical, dental and vision care benefits that Executive and his “qualifying family members” (defined below) elect and are eligible to receive upon Executive’s Termination Date pursuant to Code Section 4980B and Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as amended. For this purpose, Executive’s “qualifying family members” are his spouse and dependent children to the extent they

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are eligible for, and elect to receive, continuation coverage under such Section 4980B and Section 601 et seq. Notwithstanding any other provision of this Agreement to the contrary (except for Paragraph 3(i)), COBRA Continuation Coverage under this Agreement shall terminate for any individual when it terminates under the terms of the applicable benefit plan of the Company in accordance with such Section 4980B and Section 601 et seq.

“Competition” means, for the Payment Period, (i) employment by, being a consultant to, being an officer or director of, or being connected in any manner with, any entity or person in the business of the Company or any affiliate which competes in any market in which the Company does business, either directly or indirectly, (ii) disclosing, using, transferring or selling to any such entity any confidential or proprietary information of the Company or any affiliate, (iii) soliciting or attempting to solicit an employee or former employee of the Company for employment, (iv) diverting or attempting to divert any business or customer of the Company or any affiliate of the Company, or (v) refusing to cooperate with the Company or any affiliate of the Company by making himself available to assist the Company or any affiliate, or testify on behalf of the Company or any affiliate of the Company, in any action, suit, or proceeding, whether civil, criminal or administrative.

“Estimated Bonus” means an amount equal to the average of the value of the cash bonuses received by Executive for the last two full fiscal years for which Executive has received such cash bonuses, if any, prior to Executive’s Termination Date.

“Good Reason” means (i) a material diminution in Executive’s base compensation as in effect as of the date of the Change in Control, (ii) a material diminution in Executive’s responsibilities as in effect as of the date of the Change in Control; or (iii) a relocation of Executive’s location of employment as of the date of the Change in Control that is more than 50 miles from such location.

“Grant Agreement” means an agreement between Executive and the Company which grants Executive a Stock Option, Restricted Stock or other equity award under an Incentive Plan.

“Performance Period” shall mean the Company’s fiscal year beginning on July 1 and ending on June 30 the following year.

“Stock Option” means a stock option granted under an Incentive Plan to Executive.

“Release Agreement” means a release agreement, in the form substantially attached as Exhibit E, releasing any and all claims arising out of Executive’s employment and termination of such employment.

“Restricted Stock” means a restricted stock award granted under an Incentive Plan to Executive.

“Retirement” shall have the meaning as set forth in the applicable Incentive Plan or, if not defined in the applicable Incentive Plan, it shall mean Executive’s termination of employment upon or after his attaining (i) age 65 or (ii) age 55 with the accrual of 10 years of service.

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“Termination Date” means the date that Executive incurs a termination of employment with the Company, regardless of whether the Employment Term has expired or is still in effect.

“Separation from Service” means the date, on or following Executive’s Termination Date, that Executive incurs a “separation from service” as such term is defined under Section 409A of the Code and any applicable IRS or Treasury guidance released thereunder.

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Exhibit D

Excise Tax Gross-up Payment

(1) In the event that the Total Payments (as defined in Paragraph 3(g) of the Agreement) cause Executive’s “parachute payments” within the meaning of Section 280G(b)(2) of the Code to equal or to exceed three times the Executive’s “base amount” within the meaning of Section 280G(b)(3) of the Code (the “Trebled Base Amount”) by an amount which is not greater than 10% of the Trebled Base Amount, the Total Payments shall be reduced (or eliminated) such that no portion of the Total Payments is subject to the Excise Tax (as defined in Paragraph 3(g) of the Agreement). Reductions shall be made first to those Total Payments arising under the terms of this Agreement.

(2) In the event that the Total Payments cause the parachute payments to exceed 110% of the Trebled Base Amount, the Company shall pay to the Executive at the time specified below, an additional amount determined as set forth below (the “Gross-up Payment”). The Gross-up Payment shall be made with respect to the amount which equals 100% of the Executive’s “excess parachute payments” subject to the Excise Tax. The Gross-up Payment shall be an amount such that the net amount retained by Executive with respect to the Total Payments after reduction for any Excise Tax on the Total Payments and any federal, state and local income or employment tax and Excise Tax payable by the Executive on the Gross-up Payment hereunder (provided that such amount is actually paid when due) shall be equal to the amount of the Total Payments that the Executive would retain if the Total Payments did not constitute parachute payments.

(3) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of any Excise Tax:

(a) The Total Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except that to the extent that, in the written opinion of independent legal counsel, compensation consultants or auditors of nationally recognized standing (“Independent Advisors”) selected by the Company and reasonably acceptable to Executive, the Total Payments (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax;

(b) The amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (i) the total amount of the Total Payments or (ii) the total amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying Paragraph 3(a) above); and

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(c) The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

(4) The Gross-up Payment provided for above or any payment made under this Exhibit D shall be paid no later than the end of Executive’s taxable year following the taxable year in which Executive remits the Excise Tax to the applicable taxing authority; provided, however, that, to the extent that such Gross-Up Payment constitutes deferred compensation under Code Section 409A that is payable on account of Executive’s Separation from Service and such Gross-up Payment is subject to the six (6) month delay provisions of Section 409A of the Code and Treasury Regulation Section 1.409A-3(i)(2), such payment shall be subject to the payment delay provisions of Paragraph 3(m). In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder in the Gross-up Payment, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined (but, if previously paid to the taxing authorities, not prior to the time the amount of such reduction is refunded to Executive or otherwise realized as a benefit by Executive) the portion of the Gross-up Payment that would not have been paid if such Excise Tax had been applied to initially calculating the Gross-up Payment, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross Up Payment), the Company shall pay an additional Gross Up Payment and shall indemnify and hold Executive harmless in respect of such excess (plus any interest and penalties with respect to such excess) at the time that the amount of such excess is finally determined, but in no event shall any such Gross-up Payment(s) be made later than the end of Executive’s taxable year following the taxable year in which Executive remits the Excise Tax to the applicable taxing authority.

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Exhibit E

GENERAL RELEASE AGREEMENT

This General Release Agreement (the “Release Agreement”) is made by and between Kensey Nash Corporation, a Delaware corporation (the “Company”), and Todd M. DeWitt (“Executive”) to ensure the protection of the Company and its business, and the protection of the Executive, and to fully settle and resolve any and all issues and disputes arising out of Executive’s employment with and separation from the Company.

WHEREAS, Executive and the Company desire to avoid litigation and controversy and fully settle and compromise any and all claims, charges, actions, causes of action and disputed issues of law and fact that Executive has, had or may have against the Company, as of the date of this Release Agreement.

NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements set forth below and in the employment agreement previously entered into by and between Executive and the Company (the “Employment Agreement”), the receipt and sufficiency of which are hereby acknowledged, Executive and the Company agree as follows:

1. Separation Date. Executive’s employment with the Company is terminated effective             , 20     (the “Separation Date”). Executive agrees to return all Company property to the Company no later than the Separation Date. Except as specifically provided below, Executive shall not be entitled to receive any compensation or other benefits of employment following the Separation Date.

2. Consideration of Company. In consideration for the releases and covenants by Executive in this Release Agreement, the Company agrees that following the expiration of the revocation period described in Paragraph 11 below, if Executive has not exercised his right of revocation, the Company will provide Executive with the following:

[Amount to be determined in accordance with Paragraph 3 of the Employment Agreement at the time of Separation.]

3. Executive Release of Rights and Agreement Not to Sue. Executive (defined for purposes of this Paragraph 3 and Paragraphs 6-10 of the Employment Agreement as Executive and Executive’s agents, representatives, attorneys, assigns, heirs, executors, and administrators) fully and unconditionally releases the Company, its subsidiaries and affiliates, and any of their past or present employees, agents, insurers, attorneys, administrators, officers, directors, shareholders, divisions, predecessors, successors, employee benefit plans, and the sponsors, fiduciaries, or administrators of the such employee benefit plans (collectively, the “Released Parties”) from, and agrees not to bring any action, proceeding or suit against any of the Released Parties regarding, any and all liability, claims, demands, actions, causes of action, suits, grievances, debts, sums of money, agreements, promises, damages, back and front pay, costs, expenses, attorneys’ fees, and remedies of any type, including without limitation those arising or that may have arisen out of or in connection with Executive’s employment with or termination of employment from the Company, including but not limited to

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claims, actions or liability under: (1) Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Act of 1866, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Workers Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act of 1974, the Pennsylvania Human Relations Act, and the Pennsylvania Wage Payment and Collection Law, in each case as such act may be amended; (2) any other federal, state or local statute, ordinance, or regulation regarding employment, termination of employment, or discrimination in employment; and (3) the common law of any state relating to employment contracts, wrongful discharge, defamation, wages or any other matter; provided, however, that said release and agreement not to sue shall not prohibit Executive from bringing an action, proceeding or suit arising out of the Company’s breach of any representation, warranty, or obligation set forth in this Release Agreement.

4. Preservation of Employment Agreement. Notwithstanding any other provision of this Release Agreement, Executive acknowledges and agrees that the provisions of the Employment Agreement, to which this Release Agreement is attached as Exhibit E, shall remain in full force and effect, and Executive agrees to continue to be bound by the terms therein, including, but not limited to, Paragraphs 6-10.

5. No Reinstatement or Reemployment. Executive waives reinstatement and reemployment and agrees never to apply for employment or otherwise seek to be hired, rehired, employed, reemployed, or reinstated by the Company, its subsidiaries, or any of their affiliates.

6. No Disparagement or Encouragement of Claims. Except as required by lawful subpoena or other legal obligation, Executive agrees not to make any oral or written statement that disparages or places the Company and its affiliates (including any of their past or present officers, employees, products or services) in a false or negative light, or to encourage or assist any person or entity who may or who has filed a lawsuit, claim or complaint against the Released Parties (as defined in Paragraph 3 above). If Executive receives any subpoena or becomes subject to any legal obligation that implicates this Paragraph 6, Executive will provide prompt written notice of that fact to the Company with a copy to Katten Muchin Rosenman LLP at the addresses provided in Paragraph 13 of the Employment Agreement, and will enclose a copy of the subpoena and any other documents describing the legal obligation.

7. Non-Admission/Inadmissibility. This Release Agreement does not constitute an admission by the Company that any action it took with respect to Executive was wrongful, unlawful or in violation of any local, state, or federal act, statute, or constitution, or susceptible of inflicting any damages or injury on Executive, and the Company specifically denies any such wrongdoing or violation. This Release Agreement is entered into solely to resolve fully all matters related to or arising out of Executive’s employment with and termination from the Company, and its execution and implementation may not be used as evidence and shall not be admissible in a subsequent proceeding of any kind, except one alleging a breach of this Release Agreement.

8. Violation of Release Agreement. If Executive or the Company prevails in a legal or equitable action claiming that the other party has breached this Release Agreement, the prevailing party shall be entitled to recover from the other party the reasonable attorneys’ fees and costs incurred by the prevailing party in connection with such action.

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9. Severability. The provisions of this Release Agreement shall be severable and the invalidity of any provision shall not affect the validity of the other provisions; provided, however, that upon a finding by a court of competent jurisdiction that any release or agreement in Paragraph 3 is illegal, void or unenforceable, Executive agrees to execute promptly a release, waiver and/or covenant that is legal and enforceable to the extent permitted by law.

10. Governing Law and Jurisdiction. This Release Agreement shall be governed by and construed in accordance with the laws and judicial decisions of the State of Pennsylvania, without regard to its principles of conflicts of laws.

11. Revocation Period. Executive has the right to revoke his release of claims under the Age Discrimination in Employment Act described in Paragraph 3 (the “ADEA Release”) for up to seven days after Executive signs it. In order to do so, Executive must sign and send a written notice of his revocation decision to the Company with a copy to Katten Muchin Rosenman LLP at the addresses provided in Paragraph 13 of the Employment Agreement, and that written notice must be received by the Company no later than the eighth day after Executive signed this Release Agreement. If Executive revokes the ADEA Release, Executive will not be entitled to any of the consideration from the Company described in Paragraph 2 above.

12. Voluntary Execution of Release Agreement. Executive acknowledges that:

a. Executive has carefully read this Release Agreement and fully understands its meaning;

b. Executive had the opportunity to take up to twenty-one (21) days after receiving this Release Agreement to decide whether to sign it;

c. Executive understands that the Company is herein advising him, in writing, to consult with an attorney before signing it;

d. Executive is signing this Release Agreement, knowingly, voluntarily, and without any coercion or duress; and

e. everything Executive is receiving for signing this Release Agreement is described in the Release Agreement itself, and no other promises or representations have been made to cause Executive to sign it.

13. Entire Agreement. This Release Agreement contains the entire agreement and understanding between Executive and the Company concerning the matters described herein, and supersedes all prior agreements, discussions, negotiations, and understandings between the Company and Executive; provided, however, that the Employment Agreement to which this Release Agreement is attached as Exhibit E is specifically preserved in accordance with Paragraph 4 above. The terms of this Release Agreement cannot be changed except in a subsequent document signed by Executive and an authorized representative of the Company.

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Kensey Nash Corporation
By:
Dated:	, 20
Todd M. DeWitt
Dated:                                         , 20

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EX-10.3

Exhibit 10.3

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”), is made and entered into as of January 1, 2009 (the “Effective Date”) by and between Kensey Nash Corporation, a Delaware corporation (the “Company”), and Russell T. Kronengold, Ph.D. (“Executive”). Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to such terms in Exhibit C.

WHEREAS, the Company and Executive entered into that certain employment agreement dated as of May 11, 2006 (the “Initial Agreement”);

WHEREAS, the Company and Executive desire to amend and restate such employment agreement as set forth herein, primarily for the purpose of compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, the Company wishes to continue to retain Executive as an executive employee, and Executive wishes to remain employed by the Company in such capacity, all upon the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual covenants of the parties hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. EMPLOYMENT OF EXECUTIVE. The Company engages and employs Executive in an executive capacity and Executive accepts such employment and agrees to act as an employee of the Company in accordance with the terms of employment hereinafter specified. Executive shall hold the office of Vice President of Research, Biomaterials and shall, subject to the direction and supervision of the Chief Executive Officer (“CEO”) and the Chief Operating Officer (“COO”), (a) have the responsibilities and authority customarily associated with such office, and (b) perform such other duties and responsibilities as the CEO and the COO shall from time to time assign to him. Executive agrees to diligently and faithfully serve the Company and to devote his best efforts, his full business time and his highest talents and skills to the furtherance and success of the Company’s business.

2. COMPENSATION. As full and complete compensation to Executive for all services to be rendered by Executive hereunder, the Company shall pay Executive as follows:

(a) The Company shall, during the Employment Term (as defined in Paragraph 3(a)), pay or cause to be paid to Executive a base salary at the rate of $179,000 per annum, or Executive’s most recent per annum base salary, whichever is greater (the “Base Salary”). Such Base Salary shall be paid in periodic installments at the discretion of the Company (but not less frequently than monthly) in accordance with the Company’s normal mode of executive salary payment.

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(b) The Company may, during the Employment Term (as defined in Paragraph 3(a)), pay or cause to be paid to Executive an annual cash bonus not to exceed 60% of Executive’s Base Salary for the applicable Performance Period. Such annual cash bonus, if any, shall be paid following the end of the applicable Performance Period, but in no event shall such annual cash bonus be paid later than March 15 following the calendar year in which the applicable Performance Period ends (e.g., the annual cash bonus for the Performance Period ending June 30, 2009 must be paid no later than March 15, 2010). The amount of Executive’s cash bonus will be determined on an annual basis, in connection with the applicable Company bonus compensation plan (a “Bonus Plan”) and based upon specified goals and objectives, at the discretion of the Board/Company’s Compensation Committee. In addition, Restricted Stock, Stock Options and other equity-based awards may be awarded to Executive in accordance with the applicable Company incentive compensation plan (an “Incentive Plan”).

3. TERM OF EMPLOYMENT; SEVERANCE.

(a) The term of Executive’s employment under this Agreement (the “Employment Term”) shall commence on the Effective Date and shall expire on the earliest to occur of the following dates: (i) two (2) years after such date; (ii) the effective date of Executive’s termination of employment by the Company, including any termination by the Company for Cause; (iii) the effective date of Executive’s termination of employment due to his Retirement or resignation, including, but not limited to, a termination by Executive for Good Reason following a Change in Control; and (iv) the date of Executive’s death; provided, however, that the Employment Term may be extended in additional one (1) year increments prior to its expiration by mutual written agreement of the parties hereto. Any such extension shall also be referred to in this Agreement as the Employment Term. In the event that the Employment Term expires due to non-renewal of this Agreement and Executive’s employment with the Company continues, such employment shall be at-will; provided, however, that Executive’s obligations under Paragraphs 6 through 10 hereof shall continue in full force and effect.

(b) Termination of Executive’s employment pursuant to this Agreement, voluntary termination of employment or non-renewal of this Agreement shall not constitute a waiver of any of Executive’s obligations hereunder that survive termination hereof, including without limitation those arising under Paragraphs 6 through 10 inclusive hereof.

(c) In the event Executive’s employment is terminated by the Company without Cause prior to a Change in Control during the Employment Term, the Company shall pay to Executive on the terms described below a severance fee equal to the greater of (x) any amount of Base Salary remaining until the second anniversary of the Effective Date and a payment equal to one Estimated Bonus for each year of the original two-year Employment Term for which Executive has not yet received such a bonus payment and to which Executive would otherwise be entitled but for such termination, or (y) twelve (12) months worth of Executive’s Base Salary and a payment equal to one Estimated Bonus. Such severance fee shall be paid (subject to the proviso below) in a lump sum cash payment within sixty (60) days following the Termination Date, subject to Executive executing, returning to the Company and not revoking a Release Agreement and such Release Agreement becoming effective and irrevocable no later than fifty-five (55) days following Executive’s Termination Date. Additionally, Executive shall continue to be eligible to receive those severance fringe benefits enumerated in Exhibit B hereof (the “Continuation Benefits”) (subject to Paragraph 3(i)) for a period of time up to the second anniversary of the Effective Date (i.e., the remainder of the original two-year Employment Term) or twelve (12)

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months, whichever is longer following Executive’s Termination Date; provided, however, that such Continuation Benefits must constitute COBRA Continuation Coverage in order for Executive to be eligible to receive such Continuation Benefits.

In addition, subject to the terms of the applicable Incentive Plan, upon the termination of Executive’s employment by the Company without Cause during the Employment Term, all of Executive’s Stock Options and Restricted Stock shall immediately vest and such Stock Options shall remain exercisable for a period of one (1) year from Executive’s Termination Date (the “Extended Exercise Period”); provided, however, the Extended Exercise Period shall not be extended beyond the original term of the Stock Option provided for in the applicable Grant Agreement or Incentive Plan. Upon the expiration of the Extended Exercise Period, all of Executive’s outstanding and unexercised Stock Options shall be immediately cancelled.

(d) In the event Executive’s employment is terminated either by the Company with Cause or by Executive other than for reasons provided in Paragraph 3(e) below during the Employment Term, the Company shall have no further obligations hereunder or otherwise with respect to Executive’s employment following the Termination Date, except for (i) the payment of Executive’s Base Salary accrued through the Termination Date, and (ii) in the case of Executive’s termination due to Retirement, the provisions of Paragraph 3(h), if applicable.

(e) In the event, upon or following a Change in Control, the Company terminates Executive’s employment for a reason other than Cause or Executive quits his employment with the Company for Good Reason during the Employment Term, the Company shall pay to Executive on the terms described below a severance fee equal to the greater of (x) the amount Executive would be entitled to receive under Paragraph 3(c) of this Agreement for a termination without Cause, or (y) the sum of (A) one and one half (1 ¹/2) times his regular Base Salary or one and one half (1 ¹/2) times his most recent per annum Base Salary, whichever is greater, and (B) a payment in an amount equal to one and one half (1 ¹/2 ) times an Estimated Bonus. Such severance fee shall be paid (subject to the proviso below) in a lump sum cash payment within sixty (60) days following the Termination Date, subject to Executive executing, returning to the Company and not revoking a Release Agreement, and such Release Agreement becoming effective and irrevocable, no later than fifty-five (55) days following Executive’s Termination Date.

Additionally, Executive shall continue to be eligible to receive the Continuation Benefits (subject to Paragraph 3(i)) for a period of up to twenty-four (24) months following Executive’s Termination Date; provided, however, that such Continuation Benefits must constitute COBRA Continuation Coverage in order for Executive to be eligible to receive such Continuation Benefits.

In addition, subject to the terms of the applicable Incentive Plan, upon a Change in Control that occurs during the Employment Term, vesting of all unvested Stock Options granted and Restricted Stock awarded to Executive shall accelerate such that Executive shall be immediately one hundred percent (100%) vested in all equity awarded. Upon or following a Change in Control, subject to the terms of the applicable Incentive Plan, in the event of Executive’s termination without Cause or Executive’s resignation for Good Reason during the Employment Term, Executive’s Stock Options shall remain exercisable for a period of one (1) year from Executive’s Termination Date (the “Extended Exercise Period”); provided, however, the Extended Exercise Period shall not be extended beyond the original

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term of the Stock Option provided for in the applicable Grant Agreement or Incentive Plan. Upon the expiration of the Extended Exercise Period, all of Executive’s outstanding and unexercised Stock Options shall be immediately cancelled.

(f) In the event the Employment Term ends pursuant to Paragraph 3(a)(i), the Company shall have no further obligations hereunder and Executive’s employment shall be at-will in accordance with Paragraph 3(a).

(g) In the event any payments or benefits received by Executive in connection with his termination of employment or otherwise (which payments shall include, without limitation, the vesting of an equity award or other non-cash benefit or property), whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Company or any affiliated company (collectively, the “Total Payments”) would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code, or any similar tax as may hereafter be imposed (the “Excise Tax”), the provisions as attached in Exhibit D shall apply.

(h) In the event Executive’s employment is terminated by Executive due to Executive’s Retirement during the Employment Term, subject to the terms of the applicable Incentive Plan, Executive’s Stock Options that are vested as of the Termination Date shall remain exercisable for a period of one (1) year from the Termination Date (the “Extended Exercise Period”); provided, however, the Extended Exercise Period shall not be extended beyond the original term of the Stock Option provided for in the applicable Grant Agreement or Incentive Plan. Upon the expiration of the Extended Exercise Period, all of Executive’s remaining outstanding and unexercised Stock Options shall be immediately cancelled.

(i) The Continuation Benefits Executive is eligible to receive, if any, under Paragraph 3(c) or 3(e), will cease immediately upon Executive becoming gainfully employed and being eligible for benefits at his new place of employment. Executive shall notify the Company in writing promptly after Executive’s commencement of such other employment.

(j) Executive agrees that he shall not be entitled to receive any severance fee or other benefits under this Agreement if Executive breaches any of his obligations arising under Paragraphs 8 through 10 hereof. Executive acknowledges that until a Release Agreement is timely executed, delivered to the Company and the applicable revocation period (if any) expires, the Company will not be obligated to make any severance payments or provide any other benefits due under this Agreement following Executive’s Termination Date or Separation from Service. Executive further acknowledges that if either or both of the following occur: (x) the Release Agreement is not timely executed and delivered to the Company, and/or (y) the applicable revocation period (if any) does not expire without revocation of the Release Agreement by Executive as provided in this Agreement, the severance payments and other benefits described in Paragraph 3(c) or 3(e) (as applicable) shall be forfeited. Any severance paid pursuant to this Agreement shall be in addition to any other compensation or benefits to which Executive may be entitled under any other plan, program or payroll practice of the Company, other than any applicable severance plan of the Company.

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(k) The Company shall not be required to provide additional accruals or contributions under any retirement plan qualified under Section 401(a) of the Internal Revenue Code following Executive’s Termination Date.

(l) The provision of any severance fringe benefit as described in this Agreement shall terminate upon the death of Executive if such death occurs prior to the completion of such payments or benefits.

(m) Notwithstanding anything to the contrary herein provided, if Executive is considered a “specified employee” (as defined in Treasury Regulation Section 1.409A-1(i)) as of the Termination Date, no payment or benefits under this Agreement, if and to the extent such payment or benefits constitute deferred compensation, shall be paid or provided before the date that is six (6) months after Executive’s Separation from Service (or upon Executive’s death, if earlier) (the “Delay Period”). Any deferred compensation owed to Executive during the Delay Period, and for which payment is not otherwise provided, shall be accumulated by the Company and paid to Executive on the first business day after the end of the Delay Period. The foregoing restriction on the payment of amounts to Executive during the Delay Period shall not apply to the payment of employment taxes.

4. FRINGE BENEFITS.

(a) During the Employment Term, Executive shall be entitled to participate in all health insurance and retirement benefit programs normally available to other executives of the Company holding positions similar to that of Executive (subject to all applicable eligibility rules thereof), as from time to time in effect, and Executive shall also be eligible to receive the benefits listed on Exhibit A hereto.

(b) During the Employment Term, Executive shall be entitled to paid vacation as listed in Exhibit A. Executive shall make good faith efforts to schedule such vacations so as to least conflict with the conduct of the Company’s business and shall give the Company adequate advance notice of his planned absences. Unless otherwise required by applicable law, accumulated, unused vacation time for executives of the Company is not vested and will not be paid to Executive either while employed or upon Executive’s termination of employment.

5. REIMBURSEMENTS. During the Employment Term, the Company shall reimburse Executive for all business-related expenses incurred by Executive at the Company’s direction. Executive shall submit to the Company expense reports in compliance with established Company guidelines.

6. INVENTIONS. Executive agrees, on behalf of himself, his heirs and personal representatives, that he will promptly communicate, disclose and transfer to the Company free of all encumbrances and restrictions (and will execute and deliver any papers and take any action at any time deemed necessary by the Company to further establish such transfer) all inventions and improvements relating to Company’s business originated or developed by Executive solely or jointly with others during the term of his employment with the Company. Such inventions and improvements shall belong to the Company whether or not they are patentable and whether or not patent applications are filed thereon. Such transfer shall include all patent rights (if any) to such inventions or improvements in the United States

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and in all foreign countries. Executive further agrees, at the request of Company, to execute and deliver, at any time during the term of his employment with the Company or after his Termination Date, all assignments and other lawful papers (which will be prepared at the Company’s expense) relating to any aspect of the prosecution of such patent applications and rights in the United States and foreign countries.

7. EXPOSURE TO PROPRIETARY INFORMATION.

(a) Executive acknowledges and agrees that during the course of his employment by Company, he will be in continuous contact with customers, suppliers and others doing business with the Company throughout the world. Executive further acknowledges that the performance of his duties in connection with his employment with the Company will expose him to data and information concerning the business and affairs of the Company, including but not limited to information relative to the Company’s proprietary rights and technology, patents, financial statements, sales programs, pricing programs, profitability analyses and profit margin information, customer buying patterns, needs and inventory levels, supplier identities and other related matters, and that all of such data and information (collectively “the Proprietary Information”) is vital, sensitive, confidential and proprietary to Company.

(b) In recognition of the special nature of his employment with the Company, including but not limited to his special access to the Proprietary Information, and in consideration of his employment, Executive agrees to the covenants and restrictions set forth in Paragraphs 8 through 10 inclusive hereof. As used in Paragraphs 6 though 10, the term “Company” shall include, where applicable, any parent, subsidiary, sub-subsidiary, or affiliate of Company.

8. USE OF PROPRIETARY INFORMATION. Executive acknowledges that the Proprietary Information constitutes a protectable business interest of Company, and covenants and agrees that during his employment with the Company and after his Termination Date, he shall not, directly or indirectly, whether individually, as a director, stockholder, owner, partner, employee or agent of any business, or in any other capacity, make known, disclose, furnish, make available or utilize any of the Proprietary Information, other than in the proper performance of his duties during his employment with the Company. Executive’s obligations under this Paragraph 8 with respect to particular Proprietary Information shall terminate only at such time (if any) as the Proprietary Information in question becomes generally known to the public other than through a breach of Executive’s obligations hereunder.

9. RESTRICTION AGAINST COMPETITION AND EMPLOYING OR SOLICITING COMPANY EMPLOYEES, CUSTOMERS OR SUPPLIERS. Executive covenants and agrees that during Executive’s employment (both during the Employment Term and thereafter, if applicable) and for the twelve month period immediately following Executive’s Termination Date (the “Restricted Period”), he shall not, directly or indirectly, whether individually, as a director, stockholder, partner, owner, employee or agent of any business, or in any other capacity, (i) engage in a business substantially similar to that which is conducted by the Company in any market area in which such business is operated; (ii) solicit any party who is or was a customer or supplier of the Company on the Termination Date or at any time during the six month period immediately prior thereto for the sale or purchase of any type or quantity of products sold by or used in the business of the Company on the Termination Date or at any time within such six month period; or (iii) solicit for employment any

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person who was or is an employee of the Company on the Termination Date or at any time during the twelve month period immediately prior thereto.

If at any time prior to the end of the Restricted Period, the Company determines that Executive is engaging in Competition, the Company shall have the right to immediately terminate further payments and benefits hereunder, and Executive shall reimburse the Company for the gross amount of any severance benefits previously paid pursuant to Paragraph 3 of this Agreement. In addition, upon any such breach, Executive shall pay to the Company an amount equal to the aggregate “spread” on all Stock Options exercised on or after the Termination Date (for this purpose “spread” in respect of any Stock Option shall mean the product of the number of shares as to which such Stock Option has been exercised on or after the Termination Date multiplied by the difference between the closing price of the Company’s common stock on the exercise date (or if such common stock did not trade on the NASDAQ Global Select Market on the exercise date, the most recent date on which such common stock did so trade) and the option price of the Stock Option).

If Executive engages in Competition at any time during the Restricted Period, Executive shall return all payments paid under Paragraph 3, and the Company shall be entitled to enforce the return of any payments previously paid to Executive under Paragraph 3 of this Agreement.

10. RETURN OF COMPANY MATERIALS UPON TERMINATION. Executive acknowledges that all price lists, sales manuals, catalogs, binders, customer lists and other customer information, supplier lists, financial information, and other records or documents containing Proprietary Information prepared by Executive or coming into his possession by virtue of his employment by the Company is and shall remain the property of the Company and that upon his Termination Date, Executive shall return immediately to the Company all such items in his possession, together with all copies thereof.

11. EQUITABLE REMEDIES.

(a) Executive acknowledges and agrees that the covenants set forth in Paragraphs 6 through 10 inclusive hereof survive the expiration of the Employment Term; are reasonable and necessary for the protection of the Company’s business interests; will cause irreparable injury to the Company if breached by Executive; and that in the event of Executive’s actual or threatened breach of any such covenants, the Company will have no adequate remedy at law. Executive accordingly agrees that in the event of any actual or threatened breach by him of any of said covenants, the Company shall be entitled to immediate injunctive and other equitable relief, without bond and without the necessity of showing actual monetary damages. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of any damages which it is able to prove.

(b) Each of the covenants in Paragraphs 6 through 10 inclusive hereof shall be construed as independent of any other covenants or other provisions of this Agreement.

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(c) In the event of any judicial determination that any of the covenants set forth in Paragraphs 6 through 10 inclusive hereof is not fully enforceable, it is the intention and desire of the parties that the court treat said covenants as having been modified to the extent deemed necessary by the court to render them reasonable and enforceable, and that the court enforce them to such extent.

12. LIFE INSURANCE. The Company may at its discretion and at any time apply for and procure as owner and for its own benefit and at its own expense, insurance on the life of Executive in such amounts and in such form or forms as the Company may choose. Executive shall cooperate with the Company in procuring such insurance and shall, at the request of Company, submit to such medical examinations, supply such information and execute such documents as may be required by the insurance company or companies to whom the Company has applied for such insurance. Executive shall have no interest whatsoever in any such policy or policies.

13. NOTICES. Any notice required or permitted pursuant to the provisions of this Agreement shall be deemed to have been properly given if in writing and when sent by United States mail, certified or registered, postage prepaid, when sent by facsimile or when personally delivered, addressed as follows:

If to Company:

Kensey Nash Corporation

735 Pennsylvania Drive

Exton, PA 19341

Attention: Joseph W. Kaufmann

With a copy to:

Katten Muchin Rosenman LLP

525 West Monroe Street

Chicago, IL 60661-3693

Attention: David R. Shevitz, Esq.

If to Executive, to the address most recently on file with the Company

Each party shall be entitled to specify a different address for the receipt of subsequent notices by giving written notice thereof to the other party in accordance with this Paragraph 13.

14. WAIVER OF BREACHES. No waiver of any breach of any of the terms, provisions or conditions of this Agreement shall be construed or held to be a waiver of any other breach, or a waiver of, acquiescence in or consent to any further or succeeding breach thereof.

15. ASSIGNMENT. This Agreement shall not be assignable by either party without the written consent of the other; provided, however, that this Agreement shall be assignable by the Company to any corporation or entity that purchases substantially all of the assets of or succeeds to the business of the Company (a “Successor Employer”), and the Company agrees to cause this Agreement

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to be assumed by any Successor Employer as a condition to such purchase or succession. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns.

16. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws and judicial decisions of the Commonwealth of Pennsylvania.

17. SEVERABILITY. If any term or provision of this Agreement shall be held to be invalid or unenforceable, the remaining terms and provisions hereof shall not be affected thereby.

18. SOURCE OF PAYMENTS. The Benefits under this Agreement shall be unfunded, and the Company’s obligation under this Agreement shall constitute an unsecured promise of severance pay.

19. MISCELLANEOUS. Paragraph headings herein are for convenience only and shall not affect the meaning or interpretation of the contents hereof. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings between the parties and all prior obligations of the Company with respect to the employment of Executive by the Company or the payment to Executive of compensation of any kind whatsoever, including, without limitation, the Initial Agreement. No supplement or modification of this Agreement shall be binding unless in writing and signed by both parties hereto. This Agreement may be executed in counterparts, each of which shall be deemed an original and when taken together shall constitute one agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first hereinabove set forth.

/s/ Russell T. Kronengold, Ph.D.
Russell T. Kronengold, Ph.D.
KENSEY NASH CORPORATION
By:	/s/ Douglas E. Evans, P.E.
Title:	Chief Operating Officer

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Exhibit A

Benefits

Health/prescription, dental, and vision insurance equal to that provided for all other full-time exempt Kensey Nash Corporation employees.

Life insurance providing coverage equal to one year’s Base Salary or $200,000, whichever is less.

Short-term disability insurance equal to that provided for all other full-time exempt Kensey Nash Corporation employees.

Long-term disability benefits at 40% of Base Salary.

Supplemental long-term disability insurance.

Three weeks annual vacation accrued at 10 hours per month. Unless otherwise required by law, accumulated, unused vacation time for executives of the Company is not vested and will not be paid to Executive either while employed or upon Executive’s Termination Date.

Six days annual personal leave.

Eleven holidays each year.

401(k) Plan.

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Exhibit B

Severance Fringe Benefits

Health/prescription, dental, and vision insurance equal to that provided for all other full-time exempt Kensey Nash Corporation employees.

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Exhibit C

For purposes of this Agreement, the following terms are defined as set forth below:

“Board” shall mean the Board of Directors of Kensey Nash Corporation.

“Cause” for termination shall be deemed to exist upon (i) a determination by the CEO that Executive has committed an act of fraud, embezzlement or other act of dishonesty which would reflect adversely on the integrity of the Company or if Executive is convicted of any criminal statute involving breach of fiduciary duty or moral turpitude; (ii) a reasonable determination by the CEO that Executive has failed to discharge his duties in a reasonably satisfactory manner which failure is not cured by Executive within thirty (30) days after delivery of written notice to Executive specifying the nature of such failure; (iii) the death of Executive; (iv) a mental or physical disability of Executive which renders Executive, in the reasonable opinion of the CEO, unable to effectively perform his duties hereunder for a substantially continuous period of one hundred eighty (180) days; or (v) Executive’s voluntary termination of his employment hereunder other than as a result of a breach of the Company’s obligations hereunder.

“Change in Control.” For the purpose of this Agreement, a “Change in Control” shall occur if:

(a) any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, or any syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange Act (other than shareholders holding more than 20% of the Company’s voting securities as of the effective date of the Company’s Incentive Plan), is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities entitled to vote in the election of directors of the Company; or

(b) during any period of two consecutive years (not including any period prior to the effective date of the Company’s Incentive Plan), individuals who at the beginning of such period constituted the Board and any new directors, whose election by the Board or nomination for election by the stockholders of the Company was approved by a vote of at least three quarters of the directors then still in office who either were directors at the beginning of the period or whose election or nomination was previously so approved, cease for any reason to constitute at least a majority thereof; or

(c) all or substantially all of the assets of the Company are liquidated or distributed.

“COBRA Continuation Coverage” means the medical, dental and vision care benefits that Executive and his “qualifying family members” (defined below) elect and are eligible to receive upon Executive’s Termination Date pursuant to Code Section 4980B and Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as amended. For this purpose, Executive’s “qualifying family members” are his spouse and dependent children to the extent they

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are eligible for, and elect to receive, continuation coverage under such Section 4980B and Section 601 et seq. Notwithstanding any other provision of this Agreement to the contrary (except for Paragraph 3(i)), COBRA Continuation Coverage under this Agreement shall terminate for any individual when it terminates under the terms of the applicable benefit plan of the Company in accordance with such Section 4980B and Section 601 et seq.

“Competition” means, for the Payment Period, (i) employment by, being a consultant to, being an officer or director of, or being connected in any manner with, any entity or person in the business of the Company or any affiliate which competes in any market in which the Company does business, either directly or indirectly, (ii) disclosing, using, transferring or selling to any such entity any confidential or proprietary information of the Company or any affiliate, (iii) soliciting or attempting to solicit an employee or former employee of the Company for employment, (iv) diverting or attempting to divert any business or customer of the Company or any affiliate of the Company, or (v) refusing to cooperate with the Company or any affiliate of the Company by making himself available to assist the Company or any affiliate, or testify on behalf of the Company or any affiliate of the Company, in any action, suit, or proceeding, whether civil, criminal or administrative.

“Estimated Bonus” means an amount equal to the average of the value of the cash bonuses received by Executive for the last two full fiscal years for which Executive has received such cash bonuses, if any, prior to Executive’s Termination Date.

“Good Reason” means (i) a material diminution in Executive’s base compensation as in effect as of the date of the Change in Control, (ii) a material diminution in Executive’s responsibilities as in effect as of the date of the Change in Control; or (iii) a relocation of Executive’s location of employment as of the date of the Change in Control that is more than 50 miles from such location.

“Grant Agreement” means an agreement between Executive and the Company which grants Executive a Stock Option, Restricted Stock or other equity award under an Incentive Plan.

“Performance Period” shall mean the Company’s fiscal year beginning on July 1 and ending on June 30 the following year.

“Stock Option” means a stock option granted under an Incentive Plan to Executive.

“Release Agreement” means a release agreement, in the form substantially attached as Exhibit E, releasing any and all claims arising out of Executive’s employment and termination of such employment.

“Restricted Stock” means a restricted stock award granted under an Incentive Plan to Executive.

“Retirement” shall have the meaning as set forth in the applicable Incentive Plan or, if not defined in the applicable Incentive Plan, it shall mean Executive’s termination of employment upon or after his attaining (i) age 65 or (ii) age 55 with the accrual of 10 years of service.

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“Termination Date” means the date that Executive incurs a termination of employment with the Company, regardless of whether the Employment Term has expired or is still in effect.

“Separation from Service” means the date, on or following Executive’s Termination Date, that Executive incurs a “separation from service” as such term is defined under Section 409A of the Code and any applicable IRS or Treasury guidance released thereunder.

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Exhibit D

Excise Tax Gross-up Payment

(1) In the event that the Total Payments (as defined in Paragraph 3(g) of the Agreement) cause Executive’s “parachute payments” within the meaning of Section 280G(b)(2) of the Code to equal or to exceed three times the Executive’s “base amount” within the meaning of Section 280G(b)(3) of the Code (the “Trebled Base Amount”) by an amount which is not greater than 10% of the Trebled Base Amount, the Total Payments shall be reduced (or eliminated) such that no portion of the Total Payments is subject to the Excise Tax (as defined in Paragraph 3(g) of the Agreement). Reductions shall be made first to those Total Payments arising under the terms of this Agreement.

(2) In the event that the Total Payments cause the parachute payments to exceed 110% of the Trebled Base Amount, the Company shall pay to the Executive at the time specified below, an additional amount determined as set forth below (the “Gross-up Payment”). The Gross-up Payment shall be made with respect to the amount which equals 100% of the Executive’s “excess parachute payments” subject to the Excise Tax. The Gross-up Payment shall be an amount such that the net amount retained by Executive with respect to the Total Payments after reduction for any Excise Tax on the Total Payments and any federal, state and local income or employment tax and Excise Tax payable by the Executive on the Gross-up Payment hereunder (provided that such amount is actually paid when due) shall be equal to the amount of the Total Payments that the Executive would retain if the Total Payments did not constitute parachute payments.

(3) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of any Excise Tax:

(a) The Total Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except that to the extent that, in the written opinion of independent legal counsel, compensation consultants or auditors of nationally recognized standing (“Independent Advisors”) selected by the Company and reasonably acceptable to Executive, the Total Payments (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax;

(b) The amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (i) the total amount of the Total Payments or (ii) the total amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying Paragraph 3(a) above); and

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(c) The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

(4) The Gross-up Payment provided for above or any payment made under this Exhibit D shall be paid no later than the end of Executive’s taxable year following the taxable year in which Executive remits the Excise Tax to the applicable taxing authority; provided, however, that, to the extent that such Gross-Up Payment constitutes deferred compensation under Code Section 409A that is payable on account of Executive’s Separation from Service and such Gross-up Payment is subject to the six (6) month delay provisions of Section 409A of the Code and Treasury Regulation Section 1.409A-3(i)(2), such payment shall be subject to the payment delay provisions of Paragraph 3(m). In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder in the Gross-up Payment, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined (but, if previously paid to the taxing authorities, not prior to the time the amount of such reduction is refunded to Executive or otherwise realized as a benefit by Executive) the portion of the Gross-up Payment that would not have been paid if such Excise Tax had been applied to initially calculating the Gross-up Payment, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross Up Payment), the Company shall pay an additional Gross Up Payment and shall indemnify and hold Executive harmless in respect of such excess (plus any interest and penalties with respect to such excess) at the time that the amount of such excess is finally determined, but in no event shall any such Gross-up Payment(s) be made later than the end of Executive’s taxable year following the taxable year in which Executive remits the Excise Tax to the applicable taxing authority.

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Exhibit E

GENERAL RELEASE AGREEMENT

This General Release Agreement (the “Release Agreement”) is made by and between Kensey Nash Corporation, a Delaware corporation (the “Company”), and Russell T. Kronengold, Ph.D. (“Executive”) to ensure the protection of the Company and its business, and the protection of the Executive, and to fully settle and resolve any and all issues and disputes arising out of Executive’s employment with and separation from the Company.

WHEREAS, Executive and the Company desire to avoid litigation and controversy and fully settle and compromise any and all claims, charges, actions, causes of action and disputed issues of law and fact that Executive has, had or may have against the Company, as of the date of this Release Agreement.

NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements set forth below and in the employment agreement previously entered into by and between Executive and the Company (the “Employment Agreement”), the receipt and sufficiency of which are hereby acknowledged, Executive and the Company agree as follows:

1. Separation Date. Executive’s employment with the Company is terminated effective             , 20     (the “Separation Date”). Executive agrees to return all Company property to the Company no later than the Separation Date. Except as specifically provided below, Executive shall not be entitled to receive any compensation or other benefits of employment following the Separation Date.

2. Consideration of Company. In consideration for the releases and covenants by Executive in this Release Agreement, the Company agrees that following the expiration of the revocation period described in Paragraph 11 below, if Executive has not exercised his right of revocation, the Company will provide Executive with the following:

[Amount to be determined in accordance with Paragraph 3 of the Employment Agreement at the time of Separation.]

3. Executive Release of Rights and Agreement Not to Sue. Executive (defined for purposes of this Paragraph 3 and Paragraphs 6-10 of the Employment Agreement as Executive and Executive’s agents, representatives, attorneys, assigns, heirs, executors, and administrators) fully and unconditionally releases the Company, its subsidiaries and affiliates, and any of their past or present employees, agents, insurers, attorneys, administrators, officers, directors, shareholders, divisions, predecessors, successors, employee benefit plans, and the sponsors, fiduciaries, or administrators of the such employee benefit plans (collectively, the “Released Parties”) from, and agrees not to bring any action, proceeding or suit against any of the Released Parties regarding, any and all liability, claims, demands, actions, causes of action, suits, grievances, debts, sums of money, agreements, promises, damages, back and front pay, costs, expenses, attorneys’ fees, and remedies of any type, including without limitation those arising or that may have arisen out of or in connection with Executive’s employment with or termination of employment from the Company, including but not limited to

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claims, actions or liability under: (1) Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Act of 1866, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Workers Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act of 1974, the Pennsylvania Human Relations Act, and the Pennsylvania Wage Payment and Collection Law, in each case as such act may be amended; (2) any other federal, state or local statute, ordinance, or regulation regarding employment, termination of employment, or discrimination in employment; and (3) the common law of any state relating to employment contracts, wrongful discharge, defamation, wages or any other matter; provided, however, that said release and agreement not to sue shall not prohibit Executive from bringing an action, proceeding or suit arising out of the Company’s breach of any representation, warranty, or obligation set forth in this Release Agreement.

4. Preservation of Employment Agreement. Notwithstanding any other provision of this Release Agreement, Executive acknowledges and agrees that the provisions of the Employment Agreement, to which this Release Agreement is attached as Exhibit E, shall remain in full force and effect, and Executive agrees to continue to be bound by the terms therein, including, but not limited to, Paragraphs 6-10.

5. No Reinstatement or Reemployment. Executive waives reinstatement and reemployment and agrees never to apply for employment or otherwise seek to be hired, rehired, employed, reemployed, or reinstated by the Company, its subsidiaries, or any of their affiliates.

6. No Disparagement or Encouragement of Claims. Except as required by lawful subpoena or other legal obligation, Executive agrees not to make any oral or written statement that disparages or places the Company and its affiliates (including any of their past or present officers, employees, products or services) in a false or negative light, or to encourage or assist any person or entity who may or who has filed a lawsuit, claim or complaint against the Released Parties (as defined in Paragraph 3 above). If Executive receives any subpoena or becomes subject to any legal obligation that implicates this Paragraph 6, Executive will provide prompt written notice of that fact to the Company with a copy to Katten Muchin Rosenman LLP at the addresses provided in Paragraph 13 of the Employment Agreement, and will enclose a copy of the subpoena and any other documents describing the legal obligation.

7. Non-Admission/Inadmissibility. This Release Agreement does not constitute an admission by the Company that any action it took with respect to Executive was wrongful, unlawful or in violation of any local, state, or federal act, statute, or constitution, or susceptible of inflicting any damages or injury on Executive, and the Company specifically denies any such wrongdoing or violation. This Release Agreement is entered into solely to resolve fully all matters related to or arising out of Executive’s employment with and termination from the Company, and its execution and implementation may not be used as evidence and shall not be admissible in a subsequent proceeding of any kind, except one alleging a breach of this Release Agreement.

8. Violation of Release Agreement. If Executive or the Company prevails in a legal or equitable action claiming that the other party has breached this Release Agreement, the prevailing party shall be entitled to recover from the other party the reasonable attorneys’ fees and costs incurred by the prevailing party in connection with such action.

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9. Severability. The provisions of this Release Agreement shall be severable and the invalidity of any provision shall not affect the validity of the other provisions; provided, however, that upon a finding by a court of competent jurisdiction that any release or agreement in Paragraph 3 is illegal, void or unenforceable, Executive agrees to execute promptly a release, waiver and/or covenant that is legal and enforceable to the extent permitted by law.

10. Governing Law and Jurisdiction. This Release Agreement shall be governed by and construed in accordance with the laws and judicial decisions of the State of Pennsylvania, without regard to its principles of conflicts of laws.

11. Revocation Period. Executive has the right to revoke his release of claims under the Age Discrimination in Employment Act described in Paragraph 3 (the “ADEA Release”) for up to seven days after Executive signs it. In order to do so, Executive must sign and send a written notice of his revocation decision to the Company with a copy to Katten Muchin Rosenman LLP at the addresses provided in Paragraph 13 of the Employment Agreement, and that written notice must be received by the Company no later than the eighth day after Executive signed this Release Agreement. If Executive revokes the ADEA Release, Executive will not be entitled to any of the consideration from the Company described in Paragraph 2 above.

12. Voluntary Execution of Release Agreement. Executive acknowledges that:

a. Executive has carefully read this Release Agreement and fully understands its meaning;

b. Executive had the opportunity to take up to twenty-one (21) days after receiving this Release Agreement to decide whether to sign it;

c. Executive understands that the Company is herein advising him, in writing, to consult with an attorney before signing it;

d. Executive is signing this Release Agreement, knowingly, voluntarily, and without any coercion or duress; and

e. everything Executive is receiving for signing this Release Agreement is described in the Release Agreement itself, and no other promises or representations have been made to cause Executive to sign it.

13. Entire Agreement. This Release Agreement contains the entire agreement and understanding between Executive and the Company concerning the matters described herein, and supersedes all prior agreements, discussions, negotiations, and understandings between the Company and Executive; provided, however, that the Employment Agreement to which this Release Agreement is attached as Exhibit E is specifically preserved in accordance with Paragraph 4 above. The terms of this Release Agreement cannot be changed except in a subsequent document signed by Executive and an authorized representative of the Company.

E-3

Kensey Nash Corporation
By:
Dated:	, 20
Russell T. Kronengold, Ph.D.
Dated:                                         , 20

E-4

EX-10.4

Exhibit 10.4

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”), is made and entered into as of January 1, 2009 (the “Effective Date”) by and between Kensey Nash Corporation, a Delaware corporation (the “Company”), and James T. Rauth, P.E. (“Executive”). Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to such terms in Exhibit C.

WHEREAS, the Company and Executive entered into that certain employment agreement dated as of May 11, 2006 (the “Initial Agreement”);

WHEREAS, the Company and Executive desire to amend and restate such employment agreement as set forth herein, primarily for the purpose of compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); and

WHEREAS, the Company wishes to continue to retain Executive as an executive employee, and Executive wishes to remain employed by the Company in such capacity, all upon the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual covenants of the parties hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. EMPLOYMENT OF EXECUTIVE. The Company engages and employs Executive in an executive capacity and Executive accepts such employment and agrees to act as an employee of the Company in accordance with the terms of employment hereinafter specified. Executive shall hold the office of Vice President of Operations and shall, subject to the direction and supervision of the Chief Executive Officer (“CEO”) and the Chief Operating Officer (“COO”), (a) have the responsibilities and authority customarily associated with such office, and (b) perform such other duties and responsibilities as the CEO and the COO shall from time to time assign to him. Executive agrees to diligently and faithfully serve the Company and to devote his best efforts, his full business time and his highest talents and skills to the furtherance and success of the Company’s business.

2. COMPENSATION. As full and complete compensation to Executive for all services to be rendered by Executive hereunder, the Company shall pay Executive as follows:

(a) The Company shall, during the Employment Term (as defined in Paragraph 3(a)), pay or cause to be paid to Executive a base salary at the rate of $188,000 per annum, or Executive’s most recent per annum base salary, whichever is greater (the “Base Salary”). Such Base Salary shall be paid in periodic installments at the discretion of the Company (but not less frequently than monthly) in accordance with the Company’s normal mode of executive salary payment.

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(b) The Company may, during the Employment Term (as defined in Paragraph 3(a)), pay or cause to be paid to Executive an annual cash bonus not to exceed 60% of Executive’s Base Salary for the applicable Performance Period. Such annual cash bonus, if any, shall be paid following the end of the applicable Performance Period, but in no event shall such annual cash bonus be paid later than March 15 following the calendar year in which the applicable Performance Period ends (e.g., the annual cash bonus for the Performance Period ending June 30, 2009 must be paid no later than March 15, 2010). The amount of Executive’s cash bonus will be determined on an annual basis, in connection with the applicable Company bonus compensation plan (a “Bonus Plan”) and based upon specified goals and objectives, at the discretion of the Board/Company’s Compensation Committee. In addition, Restricted Stock, Stock Options and other equity-based awards may be awarded to Executive in accordance with the applicable Company incentive compensation plan (an “Incentive Plan”).

3. TERM OF EMPLOYMENT; SEVERANCE.

(a) The term of Executive’s employment under this Agreement (the “Employment Term”) shall commence on the Effective Date and shall expire on the earliest to occur of the following dates: (i) two (2) years after such date; (ii) the effective date of Executive’s termination of employment by the Company, including any termination by the Company for Cause; (iii) the effective date of Executive’s termination of employment due to his Retirement or resignation, including, but not limited to, a termination by Executive for Good Reason following a Change in Control; and (iv) the date of Executive’s death; provided, however, that the Employment Term may be extended in additional one (1) year increments prior to its expiration by mutual written agreement of the parties hereto. Any such extension shall also be referred to in this Agreement as the Employment Term. In the event that the Employment Term expires due to non-renewal of this Agreement and Executive’s employment with the Company continues, such employment shall be at-will; provided, however, that Executive’s obligations under Paragraphs 6 through 10 hereof shall continue in full force and effect.

(b) Termination of Executive’s employment pursuant to this Agreement, voluntary termination of employment or non-renewal of this Agreement shall not constitute a waiver of any of Executive’s obligations hereunder that survive termination hereof, including without limitation those arising under Paragraphs 6 through 10 inclusive hereof.

(c) In the event Executive’s employment is terminated by the Company without Cause prior to a Change in Control during the Employment Term, the Company shall pay to Executive on the terms described below a severance fee equal to the greater of (x) any amount of Base Salary remaining until the second anniversary of the Effective Date and a payment equal to one Estimated Bonus for each year of the original two-year Employment Term for which Executive has not yet received such a bonus payment and to which Executive would otherwise be entitled but for such termination, or (y) twelve (12) months worth of Executive’s Base Salary and a payment equal to one Estimated Bonus. Such severance fee shall be paid (subject to the proviso below) in a lump sum cash payment within sixty (60) days following the Termination Date, subject to Executive executing, returning to the Company and not revoking a Release Agreement and such Release Agreement becoming effective and irrevocable no later than fifty-five (55) days following Executive’s Termination Date. Additionally, Executive shall continue to be eligible to receive those severance fringe benefits enumerated in Exhibit B hereof (the “Continuation Benefits”) (subject to Paragraph 3(i)) for a period of time up to the second anniversary of the Effective Date (i.e., the remainder of the original two-year Employment Term) or twelve (12)

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months, whichever is longer following Executive’s Termination Date; provided, however, that such Continuation Benefits must constitute COBRA Continuation Coverage in order for Executive to be eligible to receive such Continuation Benefits.

In addition, subject to the terms of the applicable Incentive Plan, upon the termination of Executive’s employment by the Company without Cause during the Employment Term, all of Executive’s Stock Options and Restricted Stock shall immediately vest and such Stock Options shall remain exercisable for a period of one (1) year from Executive’s Termination Date (the “Extended Exercise Period”); provided, however, the Extended Exercise Period shall not be extended beyond the original term of the Stock Option provided for in the applicable Grant Agreement or Incentive Plan. Upon the expiration of the Extended Exercise Period, all of Executive’s outstanding and unexercised Stock Options shall be immediately cancelled.

(d) In the event Executive’s employment is terminated either by the Company with Cause or by Executive other than for reasons provided in Paragraph 3(e) below during the Employment Term, the Company shall have no further obligations hereunder or otherwise with respect to Executive’s employment following the Termination Date, except for (i) the payment of Executive’s Base Salary accrued through the Termination Date, and (ii) in the case of Executive’s termination due to Retirement, the provisions of Paragraph 3(h), if applicable.

(e) In the event, upon or following a Change in Control, the Company terminates Executive’s employment for a reason other than Cause or Executive quits his employment with the Company for Good Reason during the Employment Term, the Company shall pay to Executive on the terms described below a severance fee equal to the greater of (x) the amount Executive would be entitled to receive under Paragraph 3(c) of this Agreement for a termination without Cause, or (y) the sum of (A) one and one half (1 ¹/2) times his regular Base Salary or one and one half (1 ¹/2) times his most recent per annum Base Salary, whichever is greater, and (B) a payment in an amount equal to one and one half (1 ¹/2 ) times an Estimated Bonus. Such severance fee shall be paid (subject to the proviso below) in a lump sum cash payment within sixty (60) days following the Termination Date, subject to Executive executing, returning to the Company and not revoking a Release Agreement, and such Release Agreement becoming effective and irrevocable, no later than fifty-five (55) days following Executive’s Termination Date.

Additionally, Executive shall continue to be eligible to receive the Continuation Benefits (subject to Paragraph 3(i)) for a period of up to twenty-four (24) months following Executive’s Termination Date; provided, however, that such Continuation Benefits must constitute COBRA Continuation Coverage in order for Executive to be eligible to receive such Continuation Benefits.

In addition, subject to the terms of the applicable Incentive Plan, upon a Change in Control that occurs during the Employment Term, vesting of all unvested Stock Options granted and Restricted Stock awarded to Executive shall accelerate such that Executive shall be immediately one hundred percent (100%) vested in all equity awarded. Upon or following a Change in Control, subject to the terms of the applicable Incentive Plan, in the event of Executive’s termination without Cause or Executive’s resignation for Good Reason during the Employment Term, Executive’s Stock Options shall remain exercisable for a period of one (1) year from Executive’s Termination Date (the “Extended Exercise Period”); provided, however, the Extended Exercise Period shall not be extended beyond the original

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term of the Stock Option provided for in the applicable Grant Agreement or Incentive Plan. Upon the expiration of the Extended Exercise Period, all of Executive’s outstanding and unexercised Stock Options shall be immediately cancelled.

(f) In the event the Employment Term ends pursuant to Paragraph 3(a)(i), the Company shall have no further obligations hereunder and Executive’s employment shall be at-will in accordance with Paragraph 3(a).

(g) In the event any payments or benefits received by Executive in connection with his termination of employment or otherwise (which payments shall include, without limitation, the vesting of an equity award or other non-cash benefit or property), whether pursuant to the terms of this Agreement or any other plan, arrangement, or agreement with the Company or any affiliated company (collectively, the “Total Payments”) would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code, or any similar tax as may hereafter be imposed (the “Excise Tax”), the provisions as attached in Exhibit D shall apply.

(h) In the event Executive’s employment is terminated by Executive due to Executive’s Retirement during the Employment Term, subject to the terms of the applicable Incentive Plan, Executive’s Stock Options that are vested as of the Termination Date shall remain exercisable for a period of one (1) year from the Termination Date (the “Extended Exercise Period”); provided, however, the Extended Exercise Period shall not be extended beyond the original term of the Stock Option provided for in the applicable Grant Agreement or Incentive Plan. Upon the expiration of the Extended Exercise Period, all of Executive’s remaining outstanding and unexercised Stock Options shall be immediately cancelled.

(i) The Continuation Benefits Executive is eligible to receive, if any, under Paragraph 3(c) or 3(e), will cease immediately upon Executive becoming gainfully employed and being eligible for benefits at his new place of employment. Executive shall notify the Company in writing promptly after Executive’s commencement of such other employment.

(j) Executive agrees that he shall not be entitled to receive any severance fee or other benefits under this Agreement if Executive breaches any of his obligations arising under Paragraphs 8 through 10 hereof. Executive acknowledges that until a Release Agreement is timely executed, delivered to the Company and the applicable revocation period (if any) expires, the Company will not be obligated to make any severance payments or provide any other benefits due under this Agreement following Executive’s Termination Date or Separation from Service. Executive further acknowledges that if either or both of the following occur: (x) the Release Agreement is not timely executed and delivered to the Company, and/or (y) the applicable revocation period (if any) does not expire without revocation of the Release Agreement by Executive as provided in this Agreement, the severance payments and other benefits described in Paragraph 3(c) or 3(e) (as applicable) shall be forfeited. Any severance paid pursuant to this Agreement shall be in addition to any other compensation or benefits to which Executive may be entitled under any other plan, program or payroll practice of the Company, other than any applicable severance plan of the Company.

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(k) The Company shall not be required to provide additional accruals or contributions under any retirement plan qualified under Section 401(a) of the Internal Revenue Code following Executive’s Termination Date.

(l) The provision of any severance fringe benefit as described in this Agreement shall terminate upon the death of Executive if such death occurs prior to the completion of such payments or benefits.

(m) Notwithstanding anything to the contrary herein provided, if Executive is considered a “specified employee” (as defined in Treasury Regulation Section 1.409A-1(i)) as of the Termination Date, no payment or benefits under this Agreement, if and to the extent such payment or benefits constitute deferred compensation, shall be paid or provided before the date that is six (6) months after Executive’s Separation from Service (or upon Executive’s death, if earlier) (the “Delay Period”). Any deferred compensation owed to Executive during the Delay Period, and for which payment is not otherwise provided, shall be accumulated by the Company and paid to Executive on the first business day after the end of the Delay Period. The foregoing restriction on the payment of amounts to Executive during the Delay Period shall not apply to the payment of employment taxes.

4. FRINGE BENEFITS.

(a) During the Employment Term, Executive shall be entitled to participate in all health insurance and retirement benefit programs normally available to other executives of the Company holding positions similar to that of Executive (subject to all applicable eligibility rules thereof), as from time to time in effect, and Executive shall also be eligible to receive the benefits listed on Exhibit A hereto.

(b) During the Employment Term, Executive shall be entitled to paid vacation as listed in Exhibit A. Executive shall make good faith efforts to schedule such vacations so as to least conflict with the conduct of the Company’s business and shall give the Company adequate advance notice of his planned absences. Unless otherwise required by applicable law, accumulated, unused vacation time for executives of the Company is not vested and will not be paid to Executive either while employed or upon Executive’s termination of employment.

5. REIMBURSEMENTS. During the Employment Term, the Company shall reimburse Executive for all business-related expenses incurred by Executive at the Company’s direction. Executive shall submit to the Company expense reports in compliance with established Company guidelines.

6. INVENTIONS. Executive agrees, on behalf of himself, his heirs and personal representatives, that he will promptly communicate, disclose and transfer to the Company free of all encumbrances and restrictions (and will execute and deliver any papers and take any action at any time deemed necessary by the Company to further establish such transfer) all inventions and improvements relating to Company’s business originated or developed by Executive solely or jointly with others during the term of his employment with the Company. Such inventions and improvements shall belong to the Company whether or not they are patentable and whether or not patent applications are filed thereon. Such transfer shall include all patent rights (if any) to such inventions or improvements in the United States

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and in all foreign countries. Executive further agrees, at the request of Company, to execute and deliver, at any time during the term of his employment with the Company or after his Termination Date, all assignments and other lawful papers (which will be prepared at the Company’s expense) relating to any aspect of the prosecution of such patent applications and rights in the United States and foreign countries.

7. EXPOSURE TO PROPRIETARY INFORMATION.

(a) Executive acknowledges and agrees that during the course of his employment by Company, he will be in continuous contact with customers, suppliers and others doing business with the Company throughout the world. Executive further acknowledges that the performance of his duties in connection with his employment with the Company will expose him to data and information concerning the business and affairs of the Company, including but not limited to information relative to the Company’s proprietary rights and technology, patents, financial statements, sales programs, pricing programs, profitability analyses and profit margin information, customer buying patterns, needs and inventory levels, supplier identities and other related matters, and that all of such data and information (collectively “the Proprietary Information”) is vital, sensitive, confidential and proprietary to Company.

(b) In recognition of the special nature of his employment with the Company, including but not limited to his special access to the Proprietary Information, and in consideration of his employment, Executive agrees to the covenants and restrictions set forth in Paragraphs 8 through 10 inclusive hereof. As used in Paragraphs 6 though 10, the term “Company” shall include, where applicable, any parent, subsidiary, sub-subsidiary, or affiliate of Company.

8. USE OF PROPRIETARY INFORMATION. Executive acknowledges that the Proprietary Information constitutes a protectable business interest of Company, and covenants and agrees that during his employment with the Company and after his Termination Date, he shall not, directly or indirectly, whether individually, as a director, stockholder, owner, partner, employee or agent of any business, or in any other capacity, make known, disclose, furnish, make available or utilize any of the Proprietary Information, other than in the proper performance of his duties during his employment with the Company. Executive’s obligations under this Paragraph 8 with respect to particular Proprietary Information shall terminate only at such time (if any) as the Proprietary Information in question becomes generally known to the public other than through a breach of Executive’s obligations hereunder.

9. RESTRICTION AGAINST COMPETITION AND EMPLOYING OR SOLICITING COMPANY EMPLOYEES, CUSTOMERS OR SUPPLIERS. Executive covenants and agrees that during Executive’s employment (both during the Employment Term and thereafter, if applicable) and for the twelve month period immediately following Executive’s Termination Date (the “Restricted Period”), he shall not, directly or indirectly, whether individually, as a director, stockholder, partner, owner, employee or agent of any business, or in any other capacity, (i) engage in a business substantially similar to that which is conducted by the Company in any market area in which such business is operated; (ii) solicit any party who is or was a customer or supplier of the Company on the Termination Date or at any time during the six month period immediately prior thereto for the sale or purchase of any type or quantity of products sold by or used in the business of the Company on the Termination Date or at any time within such six month period; or (iii) solicit for employment any

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person who was or is an employee of the Company on the Termination Date or at any time during the twelve month period immediately prior thereto.

If at any time prior to the end of the Restricted Period, the Company determines that Executive is engaging in Competition, the Company shall have the right to immediately terminate further payments and benefits hereunder, and Executive shall reimburse the Company for the gross amount of any severance benefits previously paid pursuant to Paragraph 3 of this Agreement. In addition, upon any such breach, Executive shall pay to the Company an amount equal to the aggregate “spread” on all Stock Options exercised on or after the Termination Date (for this purpose “spread” in respect of any Stock Option shall mean the product of the number of shares as to which such Stock Option has been exercised on or after the Termination Date multiplied by the difference between the closing price of the Company’s common stock on the exercise date (or if such common stock did not trade on the NASDAQ Global Select Market on the exercise date, the most recent date on which such common stock did so trade) and the option price of the Stock Option).

If Executive engages in Competition at any time during the Restricted Period, Executive shall return all payments paid under Paragraph 3, and the Company shall be entitled to enforce the return of any payments previously paid to Executive under Paragraph 3 of this Agreement.

10. RETURN OF COMPANY MATERIALS UPON TERMINATION. Executive acknowledges that all price lists, sales manuals, catalogs, binders, customer lists and other customer information, supplier lists, financial information, and other records or documents containing Proprietary Information prepared by Executive or coming into his possession by virtue of his employment by the Company is and shall remain the property of the Company and that upon his Termination Date, Executive shall return immediately to the Company all such items in his possession, together with all copies thereof.

11. EQUITABLE REMEDIES.

(a) Executive acknowledges and agrees that the covenants set forth in Paragraphs 6 through 10 inclusive hereof survive the expiration of the Employment Term; are reasonable and necessary for the protection of the Company’s business interests; will cause irreparable injury to the Company if breached by Executive; and that in the event of Executive’s actual or threatened breach of any such covenants, the Company will have no adequate remedy at law. Executive accordingly agrees that in the event of any actual or threatened breach by him of any of said covenants, the Company shall be entitled to immediate injunctive and other equitable relief, without bond and without the necessity of showing actual monetary damages. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of any damages which it is able to prove.

(b) Each of the covenants in Paragraphs 6 through 10 inclusive hereof shall be construed as independent of any other covenants or other provisions of this Agreement.

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(c) In the event of any judicial determination that any of the covenants set forth in Paragraphs 6 through 10 inclusive hereof is not fully enforceable, it is the intention and desire of the parties that the court treat said covenants as having been modified to the extent deemed necessary by the court to render them reasonable and enforceable, and that the court enforce them to such extent.

12. LIFE INSURANCE. The Company may at its discretion and at any time apply for and procure as owner and for its own benefit and at its own expense, insurance on the life of Executive in such amounts and in such form or forms as the Company may choose. Executive shall cooperate with the Company in procuring such insurance and shall, at the request of Company, submit to such medical examinations, supply such information and execute such documents as may be required by the insurance company or companies to whom the Company has applied for such insurance. Executive shall have no interest whatsoever in any such policy or policies.

13. NOTICES. Any notice required or permitted pursuant to the provisions of this Agreement shall be deemed to have been properly given if in writing and when sent by United States mail, certified or registered, postage prepaid, when sent by facsimile or when personally delivered, addressed as follows:

If to Company:

Kensey Nash Corporation

735 Pennsylvania Drive

Exton, PA 19341

Attention: Joseph W. Kaufmann

With a copy to:

Katten Muchin Rosenman LLP

525 West Monroe Street

Chicago, IL 60661-3693

Attention: David R. Shevitz, Esq.

If to Executive, to the address most recently on file with the Company

Each party shall be entitled to specify a different address for the receipt of subsequent notices by giving written notice thereof to the other party in accordance with this Paragraph 13.

14. WAIVER OF BREACHES. No waiver of any breach of any of the terms, provisions or conditions of this Agreement shall be construed or held to be a waiver of any other breach, or a waiver of, acquiescence in or consent to any further or succeeding breach thereof.

15. ASSIGNMENT. This Agreement shall not be assignable by either party without the written consent of the other; provided, however, that this Agreement shall be assignable by the Company to any corporation or entity that purchases substantially all of the assets of or succeeds to the business of the Company (a “Successor Employer”), and the Company agrees to cause this Agreement

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to be assumed by any Successor Employer as a condition to such purchase or succession. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns.

16. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws and judicial decisions of the Commonwealth of Pennsylvania.

17. SEVERABILITY. If any term or provision of this Agreement shall be held to be invalid or unenforceable, the remaining terms and provisions hereof shall not be affected thereby.

18. SOURCE OF PAYMENTS. The Benefits under this Agreement shall be unfunded, and the Company’s obligation under this Agreement shall constitute an unsecured promise of severance pay.

19. MISCELLANEOUS. Paragraph headings herein are for convenience only and shall not affect the meaning or interpretation of the contents hereof. This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings between the parties and all prior obligations of the Company with respect to the employment of Executive by the Company or the payment to Executive of compensation of any kind whatsoever, including, without limitation, the Initial Agreement. No supplement or modification of this Agreement shall be binding unless in writing and signed by both parties hereto. This Agreement may be executed in counterparts, each of which shall be deemed an original and when taken together shall constitute one agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first hereinabove set forth.

/s/ James T. Rauth, P.E.
James T. Rauth, P.E.
KENSEY NASH CORPORATION
By:	/s/ Douglas E. Evans, P.E.
Title:	Chief Operating Officer

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Exhibit A

Benefits

Health/prescription, dental, and vision insurance equal to that provided for all other full-time exempt Kensey Nash Corporation employees.

Life insurance providing coverage equal to one year’s Base Salary or $200,000, whichever is less.

Short-term disability insurance equal to that provided for all other full-time exempt Kensey Nash Corporation employees.

Long-term disability benefits at 40% of Base Salary.

Supplemental long-term disability insurance.

Three weeks annual vacation accrued at 10 hours per month. Unless otherwise required by law, accumulated, unused vacation time for executives of the Company is not vested and will not be paid to Executive either while employed or upon Executive’s Termination Date.

Six days annual personal leave.

Eleven holidays each year.

401(k) Plan.

A-1

Exhibit B

Severance Fringe Benefits

Health/prescription, dental, and vision insurance equal to that provided for all other full-time exempt Kensey Nash Corporation employees.

B-1

Exhibit C

For purposes of this Agreement, the following terms are defined as set forth below:

“Board” shall mean the Board of Directors of Kensey Nash Corporation.

“Cause” for termination shall be deemed to exist upon (i) a determination by the CEO that Executive has committed an act of fraud, embezzlement or other act of dishonesty which would reflect adversely on the integrity of the Company or if Executive is convicted of any criminal statute involving breach of fiduciary duty or moral turpitude; (ii) a reasonable determination by the CEO that Executive has failed to discharge his duties in a reasonably satisfactory manner which failure is not cured by Executive within thirty (30) days after delivery of written notice to Executive specifying the nature of such failure; (iii) the death of Executive; (iv) a mental or physical disability of Executive which renders Executive, in the reasonable opinion of the CEO, unable to effectively perform his duties hereunder for a substantially continuous period of one hundred eighty (180) days; or (v) Executive’s voluntary termination of his employment hereunder other than as a result of a breach of the Company’s obligations hereunder.

“Change in Control.” For the purpose of this Agreement, a “Change in Control” shall occur if:

(a) any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, or any syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange Act (other than shareholders holding more than 20% of the Company’s voting securities as of the effective date of the Company’s Incentive Plan), is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities entitled to vote in the election of directors of the Company; or

(b) during any period of two consecutive years (not including any period prior to the effective date of the Company’s Incentive Plan), individuals who at the beginning of such period constituted the Board and any new directors, whose election by the Board or nomination for election by the stockholders of the Company was approved by a vote of at least three quarters of the directors then still in office who either were directors at the beginning of the period or whose election or nomination was previously so approved, cease for any reason to constitute at least a majority thereof; or

(c) all or substantially all of the assets of the Company are liquidated or distributed.

“COBRA Continuation Coverage” means the medical, dental and vision care benefits that Executive and his “qualifying family members” (defined below) elect and are eligible to receive upon Executive’s Termination Date pursuant to Code Section 4980B and Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as amended. For this purpose, Executive’s “qualifying family members” are his spouse and dependent children to the extent they

C-1

are eligible for, and elect to receive, continuation coverage under such Section 4980B and Section 601 et seq. Notwithstanding any other provision of this Agreement to the contrary (except for Paragraph 3(i)), COBRA Continuation Coverage under this Agreement shall terminate for any individual when it terminates under the terms of the applicable benefit plan of the Company in accordance with such Section 4980B and Section 601 et seq.

“Competition” means, for the Payment Period, (i) employment by, being a consultant to, being an officer or director of, or being connected in any manner with, any entity or person in the business of the Company or any affiliate which competes in any market in which the Company does business, either directly or indirectly, (ii) disclosing, using, transferring or selling to any such entity any confidential or proprietary information of the Company or any affiliate, (iii) soliciting or attempting to solicit an employee or former employee of the Company for employment, (iv) diverting or attempting to divert any business or customer of the Company or any affiliate of the Company, or (v) refusing to cooperate with the Company or any affiliate of the Company by making himself available to assist the Company or any affiliate, or testify on behalf of the Company or any affiliate of the Company, in any action, suit, or proceeding, whether civil, criminal or administrative.

“Estimated Bonus” means an amount equal to the average of the value of the cash bonuses received by Executive for the last two full fiscal years for which Executive has received such cash bonuses, if any, prior to Executive’s Termination Date.

“Good Reason” means (i) a material diminution in Executive’s base compensation as in effect as of the date of the Change in Control, (ii) a material diminution in Executive’s responsibilities as in effect as of the date of the Change in Control; or (iii) a relocation of Executive’s location of employment as of the date of the Change in Control that is more than 50 miles from such location.

“Grant Agreement” means an agreement between Executive and the Company which grants Executive a Stock Option, Restricted Stock or other equity award under an Incentive Plan.

“Performance Period” shall mean the Company’s fiscal year beginning on July 1 and ending on June 30 the following year.

“Stock Option” means a stock option granted under an Incentive Plan to Executive.

“Release Agreement” means a release agreement, in the form substantially attached as Exhibit E, releasing any and all claims arising out of Executive’s employment and termination of such employment.

“Restricted Stock” means a restricted stock award granted under an Incentive Plan to Executive.

“Retirement” shall have the meaning as set forth in the applicable Incentive Plan or, if not defined in the applicable Incentive Plan, it shall mean Executive’s termination of employment upon or after his attaining (i) age 65 or (ii) age 55 with the accrual of 10 years of service.

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“Termination Date” means the date that Executive incurs a termination of employment with the Company, regardless of whether the Employment Term has expired or is still in effect.

“Separation from Service” means the date, on or following Executive’s Termination Date, that Executive incurs a “separation from service” as such term is defined under Section 409A of the Code and any applicable IRS or Treasury guidance released thereunder.

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Exhibit D

Excise Tax Gross-up Payment

(1) In the event that the Total Payments (as defined in Paragraph 3(g) of the Agreement) cause Executive’s “parachute payments” within the meaning of Section 280G(b)(2) of the Code to equal or to exceed three times the Executive’s “base amount” within the meaning of Section 280G(b)(3) of the Code (the “Trebled Base Amount”) by an amount which is not greater than 10% of the Trebled Base Amount, the Total Payments shall be reduced (or eliminated) such that no portion of the Total Payments is subject to the Excise Tax (as defined in Paragraph 3(g) of the Agreement). Reductions shall be made first to those Total Payments arising under the terms of this Agreement.

(2) In the event that the Total Payments cause the parachute payments to exceed 110% of the Trebled Base Amount, the Company shall pay to the Executive at the time specified below, an additional amount determined as set forth below (the “Gross-up Payment”). The Gross-up Payment shall be made with respect to the amount which equals 100% of the Executive’s “excess parachute payments” subject to the Excise Tax. The Gross-up Payment shall be an amount such that the net amount retained by Executive with respect to the Total Payments after reduction for any Excise Tax on the Total Payments and any federal, state and local income or employment tax and Excise Tax payable by the Executive on the Gross-up Payment hereunder (provided that such amount is actually paid when due) shall be equal to the amount of the Total Payments that the Executive would retain if the Total Payments did not constitute parachute payments.

(3) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of any Excise Tax:

(a) The Total Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except that to the extent that, in the written opinion of independent legal counsel, compensation consultants or auditors of nationally recognized standing (“Independent Advisors”) selected by the Company and reasonably acceptable to Executive, the Total Payments (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax;

(b) The amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (i) the total amount of the Total Payments or (ii) the total amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying Paragraph 3(a) above); and

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(c) The value of any non-cash benefits or any deferred payment or benefit shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

(4) The Gross-up Payment provided for above or any payment made under this Exhibit D shall be paid no later than the end of Executive’s taxable year following the taxable year in which Executive remits the Excise Tax to the applicable taxing authority; provided, however, that, to the extent that such Gross-Up Payment constitutes deferred compensation under Code Section 409A that is payable on account of Executive’s Separation from Service and such Gross-up Payment is subject to the six (6) month delay provisions of Section 409A of the Code and Treasury Regulation Section 1.409A-3(i)(2), such payment shall be subject to the payment delay provisions of Paragraph 3(m). In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder in the Gross-up Payment, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined (but, if previously paid to the taxing authorities, not prior to the time the amount of such reduction is refunded to Executive or otherwise realized as a benefit by Executive) the portion of the Gross-up Payment that would not have been paid if such Excise Tax had been applied to initially calculating the Gross-up Payment, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross Up Payment), the Company shall pay an additional Gross Up Payment and shall indemnify and hold Executive harmless in respect of such excess (plus any interest and penalties with respect to such excess) at the time that the amount of such excess is finally determined, but in no event shall any such Gross-up Payment(s) be made later than the end of Executive’s taxable year following the taxable year in which Executive remits the Excise Tax to the applicable taxing authority.

D-2

Exhibit E

GENERAL RELEASE AGREEMENT

This General Release Agreement (the “Release Agreement”) is made by and between Kensey Nash Corporation, a Delaware corporation (the “Company”), and James T. Rauth, P.E. (“Executive”) to ensure the protection of the Company and its business, and the protection of the Executive, and to fully settle and resolve any and all issues and disputes arising out of Executive’s employment with and separation from the Company.

WHEREAS, Executive and the Company desire to avoid litigation and controversy and fully settle and compromise any and all claims, charges, actions, causes of action and disputed issues of law and fact that Executive has, had or may have against the Company, as of the date of this Release Agreement.

NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements set forth below and in the employment agreement previously entered into by and between Executive and the Company (the “Employment Agreement”), the receipt and sufficiency of which are hereby acknowledged, Executive and the Company agree as follows:

1. Separation Date. Executive’s employment with the Company is terminated effective             , 20     (the “Separation Date”). Executive agrees to return all Company property to the Company no later than the Separation Date. Except as specifically provided below, Executive shall not be entitled to receive any compensation or other benefits of employment following the Separation Date.

2. Consideration of Company. In consideration for the releases and covenants by Executive in this Release Agreement, the Company agrees that following the expiration of the revocation period described in Paragraph 11 below, if Executive has not exercised his right of revocation, the Company will provide Executive with the following:

[Amount to be determined in accordance with Paragraph 3 of the Employment Agreement at the time of Separation.]

3. Executive Release of Rights and Agreement Not to Sue. Executive (defined for purposes of this Paragraph 3 and Paragraphs 6-10 of the Employment Agreement as Executive and Executive’s agents, representatives, attorneys, assigns, heirs, executors, and administrators) fully and unconditionally releases the Company, its subsidiaries and affiliates, and any of their past or present employees, agents, insurers, attorneys, administrators, officers, directors, shareholders, divisions, predecessors, successors, employee benefit plans, and the sponsors, fiduciaries, or administrators of the such employee benefit plans (collectively, the “Released Parties”) from, and agrees not to bring any action, proceeding or suit against any of the Released Parties regarding, any and all liability, claims, demands, actions, causes of action, suits, grievances, debts, sums of money, agreements, promises, damages, back and front pay, costs, expenses, attorneys’ fees, and remedies of any type, including without limitation those arising or that may have arisen out of or in connection with Executive’s employment with or termination of employment from the Company, including but not limited to

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claims, actions or liability under: (1) Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Act of 1866, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Workers Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act of 1974, the Pennsylvania Human Relations Act, and the Pennsylvania Wage Payment and Collection Law, in each case as such act may be amended; (2) any other federal, state or local statute, ordinance, or regulation regarding employment, termination of employment, or discrimination in employment; and (3) the common law of any state relating to employment contracts, wrongful discharge, defamation, wages or any other matter; provided, however, that said release and agreement not to sue shall not prohibit Executive from bringing an action, proceeding or suit arising out of the Company’s breach of any representation, warranty, or obligation set forth in this Release Agreement.

4. Preservation of Employment Agreement. Notwithstanding any other provision of this Release Agreement, Executive acknowledges and agrees that the provisions of the Employment Agreement, to which this Release Agreement is attached as Exhibit E, shall remain in full force and effect, and Executive agrees to continue to be bound by the terms therein, including, but not limited to, Paragraphs 6-10.

5. No Reinstatement or Reemployment. Executive waives reinstatement and reemployment and agrees never to apply for employment or otherwise seek to be hired, rehired, employed, reemployed, or reinstated by the Company, its subsidiaries, or any of their affiliates.

6. No Disparagement or Encouragement of Claims. Except as required by lawful subpoena or other legal obligation, Executive agrees not to make any oral or written statement that disparages or places the Company and its affiliates (including any of their past or present officers, employees, products or services) in a false or negative light, or to encourage or assist any person or entity who may or who has filed a lawsuit, claim or complaint against the Released Parties (as defined in Paragraph 3 above). If Executive receives any subpoena or becomes subject to any legal obligation that implicates this Paragraph 6, Executive will provide prompt written notice of that fact to the Company with a copy to Katten Muchin Rosenman LLP at the addresses provided in Paragraph 13 of the Employment Agreement, and will enclose a copy of the subpoena and any other documents describing the legal obligation.

7. Non-Admission/Inadmissibility. This Release Agreement does not constitute an admission by the Company that any action it took with respect to Executive was wrongful, unlawful or in violation of any local, state, or federal act, statute, or constitution, or susceptible of inflicting any damages or injury on Executive, and the Company specifically denies any such wrongdoing or violation. This Release Agreement is entered into solely to resolve fully all matters related to or arising out of Executive’s employment with and termination from the Company, and its execution and implementation may not be used as evidence and shall not be admissible in a subsequent proceeding of any kind, except one alleging a breach of this Release Agreement.

8. Violation of Release Agreement. If Executive or the Company prevails in a legal or equitable action claiming that the other party has breached this Release Agreement, the prevailing party shall be entitled to recover from the other party the reasonable attorneys’ fees and costs incurred by the prevailing party in connection with such action.

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9. Severability. The provisions of this Release Agreement shall be severable and the invalidity of any provision shall not affect the validity of the other provisions; provided, however, that upon a finding by a court of competent jurisdiction that any release or agreement in Paragraph 3 is illegal, void or unenforceable, Executive agrees to execute promptly a release, waiver and/or covenant that is legal and enforceable to the extent permitted by law.

10. Governing Law and Jurisdiction. This Release Agreement shall be governed by and construed in accordance with the laws and judicial decisions of the State of Pennsylvania, without regard to its principles of conflicts of laws.

11. Revocation Period. Executive has the right to revoke his release of claims under the Age Discrimination in Employment Act described in Paragraph 3 (the “ADEA Release”) for up to seven days after Executive signs it. In order to do so, Executive must sign and send a written notice of his revocation decision to the Company with a copy to Katten Muchin Rosenman LLP at the addresses provided in Paragraph 13 of the Employment Agreement, and that written notice must be received by the Company no later than the eighth day after Executive signed this Release Agreement. If Executive revokes the ADEA Release, Executive will not be entitled to any of the consideration from the Company described in Paragraph 2 above.

12. Voluntary Execution of Release Agreement. Executive acknowledges that:

a. Executive has carefully read this Release Agreement and fully understands its meaning;

b. Executive had the opportunity to take up to twenty-one (21) days after receiving this Release Agreement to decide whether to sign it;

c. Executive understands that the Company is herein advising him, in writing, to consult with an attorney before signing it;

d. Executive is signing this Release Agreement, knowingly, voluntarily, and without any coercion or duress; and

e. everything Executive is receiving for signing this Release Agreement is described in the Release Agreement itself, and no other promises or representations have been made to cause Executive to sign it.

13. Entire Agreement. This Release Agreement contains the entire agreement and understanding between Executive and the Company concerning the matters described herein, and supersedes all prior agreements, discussions, negotiations, and understandings between the Company and Executive; provided, however, that the Employment Agreement to which this Release Agreement is attached as Exhibit E is specifically preserved in accordance with Paragraph 4 above. The terms of this Release Agreement cannot be changed except in a subsequent document signed by Executive and an authorized representative of the Company.

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Kensey Nash Corporation
By:
Dated:	, 20
James T. Rauth, P.E.
Dated:	, 20

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Joseph W. Kaufmann, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Kensey Nash Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 9, 2009	/s/ Joseph W. Kaufmann
	Joseph W. Kaufmann
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Ryan D. Lake, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Kensey Nash Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 9, 2009	/s/ Ryan D. Lake, CPA
	Ryan D. Lake, CPA
	Director of Finance (Principal Financial and Accounting Officer )

EX-32.1

Exhibit 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Kensey Nash Corporation (the “Company”) on Form 10-Q for the quarter ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph W. Kaufmann, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 9, 2009	/s/ Joseph W. Kaufmann
	Joseph W. Kaufmann
	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Kensey Nash Corporation (the “Company”) on Form 10-Q for the quarter ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ryan D. Lake, Principal Financial and Accounting Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 9, 2009	/s/ Ryan D. Lake, CPA
	Ryan D. Lake, CPA
	Director of Finance (Principal Financial and Accounting Officer)