10-Q

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

Form 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2008
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-52082

REPLIDYNE, INC.

(Exact name of registrant as specified in its charter)

Delaware	84-1568247
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
1450 Infinite Drive,	80027
Louisville, Colorado	(Zip Code)
(Address of principal executive offices)

303-996-5500

Registrant’s telephone number, including area code:

None

(Former name, former address and former fiscal year, if changed since last report)

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 þ  No o

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

Large accelerated filer o Accelerated filer þ Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at July 31, 2008
Common Stock, $.001 par value per share	27,102,239 shares

TABLE OF CONTENTS

Item		Page
	PART I
1.	Financial Statements (unaudited)		3
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
3.	Quantitative and Qualitative Disclosures About Market Risk		31
4.	Controls and Procedures		32
	PART II
1.	Legal Proceedings		32
1A.	Risk Factors		32
2.	Unregistered Sales of Equity Securities and Use of Proceeds		48
3.	Defaults Upon Senior Securities		49
4.	Submission of Matters to a Vote of Security Holders		49
5.	Other Information		49
6.	Exhibits		49
Separation Agreement- Peter Letendre
Consulting Agreement- Peter Letendre
Seperation Agreement- Roger Echols
Consulting Agreement- Roger Echols
Certification of Principal Executive Officer by Rule 13a-14(a)
Certification of Principal Financial Officer by Rule 13a-14(a)
Section 1350 Certification 1350

2

PART I

ITEM 1.   FINANCIAL STATEMENTS

REPLIDYNE, INC.

CONDENSED BALANCE SHEETS

(unaudited)

(in thousands, except par value)

	June 30,			December 31,
	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	40,746		$	43,969
Short-term investments		23,970			46,297
Prepaid expenses and other current assets		1,177			2,429
Total current assets		65,893			92,695
Property and equipment, net		1,105			1,905
Other assets		80			90
Total assets	$	67,078		$	94,690
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	12,201		$	12,255
Total current liabilities		12,201			12,255
Other long-term liabilities		—			31
Total liabilities		12,201			12,286
Commitments and contingencies (Note 5)
Stockholders’ equity:
Common stock, $0.001 par value. Authorized 100,000 shares; issued 27,136 and 27,085 shares; outstanding 27,100 and 27,077 shares at June 30, 2008 and December 31, 2007, respectively		27			27
Treasury stock, $0.001 par value; 36 and 8 shares at June 30, 2008 and December 31, 2007, respectively, at cost		(1	)		(1	)
Additional paid-in capital		191,769			191,570
Accumulated other comprehensive income		59			96
Accumulated deficit		(136,977	)		(109,288	)
Total stockholders’ equity		54,877			82,404
Total liabilities and stockholders’ equity	$	67,078		$	94,690

The accompanying notes are an integral part of the condensed financial statements.

3

REPLIDYNE, INC.

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

	Three Months					Six Months
	Ended					Ended
	June 30,					June 30,
	2008			2007		2008			2007
Revenue	$	—		$	55,647	$	—		$	58,571
Costs and expenses:
Research and development		14,444			8,364		22,062			17,811
Sales, general and administrative		4,666			3,280		6,619			6,815
Total costs and expenses		19,110			11,644		28,681			24,626
Income (loss) from operations		(19,110	)		44,003		(28,681	)		33,945
Investment income and other, net		380			1,487		992			2,993
Net income (loss)	$	(18,730	)	$	45,490	$	(27,689	)	$	36,938
Net income (loss)—basic	$	(0.69	)	$	1.71	$	(1.02	)	$	1.39
Net income (loss)—diluted	$	(0.69	)	$	1.65	$	(1.02	)	$	1.34
Weighted average common shares outstanding — basic		27,029			26,677		27,022			26,649
Weighted average common shares outstanding — diluted		27,029			27,651		27,022			27,612

The accompanying notes are an integral part of the condensed financial statements.

4

REPLIDYNE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Six Months Ended
	June 30,
	2008			2007
Cash flows from operating activities:
Net income (loss)	$	(27,689	)	$	36,938
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		640			810
Share-based compensation		44			1,388
Discounts and premiums on short-term investments		112			625
Loss on sale, disposition or impairment of property and equipment		158			—
Other		—			5
Changes in operating assets and liabilities:
Receivable from Forest Laboratories		—			4,634
Prepaid expenses and other assets		1,263			88
Accounts payable and accrued expenses		73			(1,259	)
Deferred revenue		—			(56,176	)
Other long-term liabilities		(31	)		(12	)
Net cash used in operating activities		(25,430	)		(12,959	)
Cash flows from investing activities:
Purchases of short-term investments classified as available-for-sale		(7,923	)		(10,350	)
Purchases of short-term investments classified as held-to-maturity		(1,453	)		(44,796	)
Maturities of short-term investments classified as available-for-sale		3,999			48,841
Maturities of short-term investments classified as held-to-maturity		27,555			51,890
Acquisitions of property and equipment		(3	)		(155	)
Proceeds from sale of property and equipment		3			7
Net cash provided by investing activities		22,178			45,437
Cash flows from financing activities:
Proceeds from issuance of common stock from the exercise of stock options		14			47
Proceeds from issuance of common stock under the employee stock purchase plan		32			225
Purchase of unvested restricted stock from employees		(17	)		—
Net cash provided by financing activities		29			272
Net increase (decrease) in cash and cash equivalents		(3,223	)		32,750
Cash and cash equivalents:
Beginning of period		43,969			24,091
End of period	$	40,746		$	56,841

The accompanying notes are an integral part of the condensed financial statements.

5

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

1.   NATURE OF BUSINESS

Replidyne, Inc. (Replidyne or the Company) is a biopharmaceutical company focused on discovering, developing and in-licensing anti-infective products. The Company’s lead product candidate is REP3123, an investigational narrow-spectrum antibacterial agent for the treatment of Clostridium difficile (C. difficile) bacteria and C. difficile infection (CDI). Replidyne is also pursuing the development of other novel anti-infective programs based on its bacterial DNA replication inhibitor technology. The Company’s operating strategy is directed to pursuing strategic alternatives, the consummation of which cannot be assured. The Company is considering strategic alternatives that include the merger or acquisition of some or all of its assets, and could reduce or change its current focus on the development of anti-infective product candidates.

2.   ACCOUNTING POLICIES

Unaudited Interim Financial Statements

The condensed balance sheet as of June 30, 2008, condensed statements of operations for the three and six months ended June 30, 2008 and 2007, and cash flows for the six months ended June 30, 2008 and 2007 and related disclosures, respectively, have been prepared by the Company, without an audit, in accordance with generally accepted accounting principles for interim information. Accordingly, they do not contain all of the information and footnotes required by generally accepted accounting principles for complete financial statements. All disclosures as of June 30, 2008 and for the three and six months ended June 30, 2008 and 2007, presented in the notes to the condensed financial statements are unaudited. In the opinion of management, all adjustments, which include only normal recurring adjustments, considered necessary to present fairly the financial condition as of June 30, 2008 and results of operations for the three and six months ended June 30, 2008 and 2007 and cash flows for the six months ended June 30, 2008 and 2007 have been made. These interim results of operations for the three and six months ended June 30, 2008 are not indicative of the results that may be expected for the full year ended December 31, 2008. The December 31, 2007 balance sheet and related disclosures were derived from audited financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

Fair Value of Financial Instruments

Statement of financial accounting standards (SFAS) No. 157, Fair Value Measurements (SFAS 157) establishes a fair value hierarchy that requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS 157’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect the Company’s market assumptions. SFAS 157 classifies these inputs into the following hierarchy:

Level 1 Inputs — Quoted prices for identical instruments in active markets.

Level 2 Inputs — Quoted prices for similar instruments in active markets; and quoted prices for identical or similar instruments in markets that are not active.

Level 3 Inputs — Instruments with primarily unobservable value drivers.

6

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

As of June 30, 2008, those assets and liabilities that are measured at fair value on a recurring basis consisted of the Company’s short-term securities it classifies as available-for-sale. The Company believes that the carrying amounts of its other financial instruments, including cash and cash equivalents and accounts payable and accrued expenses, approximate their fair value due to the short-term maturities of these instruments. At June 30, 2008, the Company’s fair value hierarchies for its financial assets, which require fair value measurement on a recurring basis under SFAS 157 and include cash equivalents, are as follows, in thousands:

	Level 1		Level 2		Total
Money market funds	$	16,531	$	—	$	16,531
Commercial paper		—		9,778		9,778
U.S. bank and corporate notes		—		14,126		14,126
U.S. government agencies		—		17,879		17,879
Total	$	16,531	$	41,783	$	58,314

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with initial maturities of three months or less to be cash equivalents. Cash equivalents are carried at amortized cost, which approximates market value.

Short-Term Investments

Short-term investments are investments with a maturity of more than three months when purchased. At June 30, 2008, initial contractual maturities of the Company’s short-term investments were less than two years for investments classified as available-for-sale and less than nine months for investments classified as held-to-maturity. At June 30, 2008, the weighted average days to maturity was less than one year for investments classified as available-for-sale and less than two months for investments classified as held-to-maturity.

Management determines the classification of securities at purchase based on its intent. In accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, the Company classifies its securities as held-to-maturity or available-for-sale. Held-to-maturity securities are those which the Company has the positive intent and ability to hold to maturity and are reported at amortized cost. Available-for-sale securities are those the Company may decide to sell if needed for liquidity, asset/liability management, or other reasons.

Available-for-sale securities are recorded at estimated fair value. The estimated fair value amounts are determined by the Company using available market information. Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and are reported as a separate component of other comprehensive loss until realized. Cost is adjusted for amortization of premiums and accretion of discounts from the date of purchase to maturity. Such amortization is included in investment income and other. Realized gains and losses and declines in value judged to be other than temporary on available-for-sale securities are also included in investment income and other. The cost of securities sold is based on the specific-identification method. Any decline in the market value of any available-for-sale security results in a reduction in carrying amount as these securities are reported at fair value. The impairment is charged to earnings and a new cost basis for the security is established. To determine whether an impairment is other than temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to period end, and forecasted performance of the investee. No impairments were recorded as a result of this analysis during the three and six months ended

7

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

June 30, 2008 or 2007. The Company’s investments were classified as follows at June 30, 2008 and December 31, 2007 (in thousands):

	June 30, 2008		December 31, 2007
Available-for-sale securities — recorded at fair value	$	20,016	$	16,213
Held-to-maturity securities — recorded at amortized cost		3,954		30,084
Total short-term investments	$	23,970	$	46,297

The following is a summary of the types of short-term investments classified as available-for-sale securities (in thousands):

	June 30, 2008				December 31, 2007
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
U.S. government agencies	$	5,877	$	5,890	$	3,998	$	4,005
U.S. bank and corporate notes		14,080		14,126		12,119		12,208
	$	19,957	$	20,016	$	16,117	$	16,213

Unrealized holding gains and losses on available-for-sale securities as of June 30, 2008 were $0.1 million and $29 thousand, respectively. Unrealized holding gains and losses on available-for-sale securities as of December 31, 2007 were $0.1 million and $7 thousand, respectively. Net unrealized holding gains or losses are recorded in accumulated other comprehensive income.

The following is a summary of short-term investments classified as held-to-maturity securities (in thousands):

	June 30, 2008				December 31, 2007
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
U.S. bank and corporate notes	$	3,954	$	3,957	$	30,084	$	30,091

Unrealized holding gains and losses on held-to-maturity investments as of June 30, 2008 were $4 thousand and $1 thousand, respectively. Unrealized holding gains and losses on held-to-maturity investments as of December 31, 2007 were $10 thousand and $3 thousand, respectively.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and short-term investments. Cash, cash equivalents and investments consist of commercial paper, corporate and bank notes, U.S. government securities and money market funds all held with financial institutions.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally three to seven years. Leasehold improvements are amortized over the shorter of the life of the lease or the estimated useful life of the assets. Repairs and maintenance costs are expensed as incurred.

Long-Lived Assets and Impairments

The Company periodically evaluates the recoverability of its long-lived assets in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and, if appropriate, reduces the

8

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

carrying value whenever events or changes in business conditions indicate the carrying amount of the assets may not be fully recoverable. SFAS No. 144 requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds the fair value, and in the case of assets classified as held-for-sale, fair value is adjusted for costs to sell such assets. The Company has not yet generated positive cash flows from operations on a sustained basis, and such cash flows may not materialize for a significant period in the future, if ever. Additionally, the Company may make changes to its business plan that will result in changes to the expected cash flows from long-lived assets. As a result, it is reasonably possible that future evaluations of long-lived assets may result in impairment.

Accrued Expenses

As part of the process of preparing its financial statements, the Company is required to estimate accrued expenses. This process involves identifying services that third parties have performed on the Company’s behalf and estimating the level of service performed and the associated cost incurred on these services as of each balance sheet date in the Company’s financial statements. Examples of estimated accrued expenses include contract service fees, such as amounts due to clinical research organizations, professional service fees, such as attorneys and independent accountants, and investigators in conjunction with preclinical and clinical trials, and fees payable to contract manufacturers in connection with the production of materials related to product candidates. Estimates are most affected by the Company’s understanding of the status and timing of services provided relative to the actual level of services incurred by the service providers. The date on which certain services commence, the level of services performed on or before a given date, and the cost of services is often subject to judgment. The Company is also party to agreements which include provisions that require payments to the counterparty under certain circumstances. Additionally, the Company may be required to estimate and accrue for certain loss contingencies related to litigation or arbitration claims. The Company develops estimates of liabilities using its judgment based upon the facts and circumstances known and accounts for these estimates in accordance with accounting principles involving accrued expenses generally accepted in the U.S.

Restructuring Liabilities

The Company has and may continue to restructure its operations to better align its resources with its operating and strategic plans. Restructuring charges can include amounts related to employee severance, employee benefits, property impairment and other costs. The Company is often required to use estimates and assumptions when determining the amount and in which period to record charges and obligations related to restructuring activities.

Segments

The Company operates in one segment. Management uses one measure of profitability and does not segment its business for internal reporting purposes.

Clinical Trial Expenses

The Company records clinical trial expenses based on estimates of the services received and efforts expended pursuant to contracts with clinical research organizations (CROs) and other third party vendors associated with its clinical trials. The Company contracts with third parties to perform a range of clinical trial activities in the ongoing development of its product candidates. The terms of these agreements vary and may result in uneven payments. Payments under these contracts depend on factors such as the achievement of certain defined milestones, the successful enrollment of patients and other events. The objective of the Company’s clinical trial accrual policy is to match the recording of expenses in its financial statements to the actual services received and efforts expended. In doing so, the Company relies on information from CROs and

9

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

its clinical operations group regarding the status of its clinical trials to calculate the accrual for clinical expenses at the end of each reporting period.

Share-Based Compensation

The Company accounts for share-based compensation in accordance with SFAS No. 123(R), Share-Based Payment, which was adopted on January 1, 2006 under the prospective transition method. The Company selected the Black-Scholes option pricing model as the most appropriate valuation method for option grants with service and/or performance conditions. The Black-Scholes model requires inputs for risk-free interest rate, dividend yield, volatility and expected lives of the options. Since the Company has a limited history of stock purchase and sale activity, expected volatility is based on historical data from several public companies similar in size and nature of operations to the Company. The Company will continue to use historical volatility and other similar public entity volatility information until its historical volatility is relevant to measure expected volatility for option grants. The Company estimates forfeitures based upon historical forfeiture rates and assumptions regarding future forfeitures. The Company will adjust its estimate of forfeitures if actual forfeitures differ, or are expected to differ, from such estimates. Based on an analysis of historical forfeiture rates and assumptions regarding future forfeitures, the Company applied an annual forfeiture rate of 20% and 4.33% during the six months ended June 30, 2008 and 2007, respectively. The increase in the forfeiture rate during 2008 is primarily attributable to the Company’s recent organizational restructurings and future expectations. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant for a period commensurate with the expected term of the grant. The expected term (without regard to forfeitures) for options granted represents the period of time that options granted are expected to be outstanding and is derived from the contractual terms of the options granted and historical and expected option exercise behaviors.

During the three months ended June 30, 2008 and 2007, the fair value of share-based awards for employee stock option awards was estimated using the Black-Scholes option pricing model and the following weighted average assumptions:

	Three Months Ended June 30,
	2008	2007
Risk-free interest rate	1.91%	4.46%
Expected life	1.00 yrs	3.05 yrs
Expected volatility	75%	75%
Expected dividend yield	0%	0%

Stock options granted by the Company to its employees are generally structured to qualify as “incentive stock options” (ISOs). Under current tax regulations, the Company does not receive a tax deduction for the issuance, exercise or disposition of ISOs if the employee meets certain holding requirements. If the employee does not meet the holding requirements, a disqualifying disposition occurs, at which time the Company will receive a tax deduction. The Company does not record tax benefits related to ISOs unless and until a disqualifying disposition occurs. In the event of a disqualifying disposition, the entire tax benefit is recorded as a reduction of income tax expense. The Company has not recognized any income tax benefit or related tax asset for share-based compensation arrangements as the Company does not believe, based on its history of operating losses, that it is more likely than not it will realize any future tax benefit from such tax deductions.

Under SFAS 123(R), the estimated fair value of share-based compensation, including stock options granted under the Company’s Equity Incentive Plan and discounted purchases of common stock by employees under the Employee Stock Purchase Plan, is recognized as compensation expense. The estimated fair value of stock options is expensed over the requisite service period as discussed above. Compensation expense under the Company’s Employee Stock Purchase Plan is calculated based on participant elected contributions and

10

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

estimated fair values of the common stock and the purchase discount at the date of the offering. See Note 9 for further information on share-based compensation under these plans. Share-based compensation included in the Company’s statements of operations was as follows (in thousands):

	Three Months				Six Months
	Ended				Ended
	June 30,				June 30,
	2008		2007		2008			2007
Research and development	$	193	$	384	$	73		$	604
Sales, general and administrative		242		500		(29	)		784
	$	435	$	884	$	44		$	1,388

The decrease in share-based compensation expense in 2008 was primarily related to a change in the Company’ s estimate of expected forfeitures. As noted above, the Company bases its estimate of expected forfeitures on historical forfeiture rates and assumptions regarding future forfeitures. During the six months ended June 30, 2008, the Company applied an expected annual forfeiture rate of 20% as compared to an expected forfeiture rate of 4.33% applied during the six months ended June 30, 2007. The increase in the expected forfeiture rate is primarily attributable to increased forfeitures as a result of the Company’s recent organizational restructurings and future expectations.

SFAS No. 123(R) is applied only to awards granted or modified after the required effective date of January 1, 2006. Awards granted prior to the Company’s implementation of SFAS No. 123(R) are accounted for under the recognition and measurement provisions of APB Opinion No. 25 and related interpretations.

For stock options granted as consideration for services rendered by nonemployees and for options that continue to vest upon a change in status from employee to nonemployee, the Company recognizes compensation expense in accordance with the requirements of SFAS 123(R), Emerging Issues Task Force (EITF) Issue No. 96-18, Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services and EITF No. 00-18, Accounting Recognition for Certain Transactions involving Equity Instruments Granted to Other Than Employees, as amended. The Company has estimated the fair value of share-based payments issued to nonemployees based on the estimated fair value of the stock options granted. The Company has historically determined that this basis was more reliably determinable than estimating the fair value of the services received. The estimated fair value of options granted to nonemployees is expensed over the service period (which is generally equal to the period over which the options vest) and remeasured each reporting date until the options vest or performance is complete.

If an employee becomes a nonemployee and continues to vest in an option grant under its original terms, the option is treated as an option granted to a nonemployee prospectively, provided the individual is required to continue providing services. The option is accounted for prospectively under EITF No. 96-18 such that the fair value of the option is remeasured at each reporting date until the earlier of i) the performance commitment date or ii) the date the services have been completed. Only the portion of the newly measured cost attributable to the remaining requisite service period is recognized as compensation cost prospectively from the date of the change in status.

The fair value of share-based payments issued to nonemployees during the three months ended June 30, 2008 was estimated using the Black-Scholes option pricing model and the following weighted average assumptions: i) risk-free interest rate of 4.05%, ii) contractual life of 10 years, iii) volatility of 75% and iv) no expected dividends. The Company recognized share-based compensation expense relating to nonemployee options of $0.1 million for the three and six months ended June 30, 2008. No amounts were recognized in 2007.

11

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

Comprehensive Income (Loss)

The Company applies the provisions of SFAS No. 130, Reporting Comprehensive Income, which establishes standards for reporting comprehensive loss and its components in financial statements. The Company’s comprehensive income (loss) is comprised of its net income (loss) and unrealized gains and losses on securities available-for-sale. For the three months ended June 30, 2008 and 2007, comprehensive income (loss) was $(18.9) million and $45.4 million, respectively. For the six months ended June 30, 2008 and 2007, comprehensive income (loss) was $(27.7) million and $36.9 million, respectively.

Income Taxes

The Company accounts for income taxes pursuant to SFAS No. 109, Accounting for Income Taxes, which requires the use of the asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is recorded to the extent it is more likely than not that a deferred tax asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

Based on an analysis of historical equity transactions under the provisions of Section 382 of the Internal Revenue Code, the Company believes that ownership changes have occurred at two points since its inception. These ownership changes limit the annual utilization of the Company’s net operating losses in future periods. The Company’s only significant deferred tax assets are its net operating loss carryforwards. The Company has provided a valuation allowance for its entire net deferred tax asset since its inception as, due to uncertainty as to future utilization of its net operating loss carryforwards, due primarily to its history of operating losses, the Company has concluded that it is more likely than not that its deferred tax asset will not be realized.

FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109, defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At the adoption date of January 1, 2007, the Company had no unrecognized tax benefits which would affect its effective tax rate if recognized. At June 30, 2008, the Company had no unrecognized tax benefits. The Company classifies interest and penalties arising from the underpayment of income taxes in the statements of operations as general and administrative expenses. At June 30, 2008, the Company has no accrued interest or penalties related to uncertain tax positions. The tax years 2003 to 2006 federal returns remain open to examination, and the tax years 2002 to 2006 remain open to examination by other taxing jurisdictions to which the Company is subject.

Net Income (Loss) Per Share

Net income (loss) per share is computed using the weighted average number of shares of common stock outstanding and is presented for basic and diluted net income (loss) per share. Basic net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period, excluding common stock subject to vesting provisions. Diluted net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period increased to include, if dilutive, the number of additional common shares that would have been outstanding if the potential common shares had been issued or restrictions lifted on restricted stock. The dilutive effect of

12

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

common stock equivalents such as outstanding stock options, warrants and restricted stock is reflected in diluted net loss per share by application of the treasury stock method.

Potentially dilutive securities representing approximately 4.0 million and 1.7 million shares of common stock for the three months ended June 30, 2008 and 2007, respectively, and 4.0 million and 1.3 million shares of common stock for the six months ended June 30, 2008 and 2007, respectively, were excluded from the computation of diluted earnings per share for these periods because their effect would have been antidilutive. Potentially dilutive securities include stock options, warrants, shares to be purchased under the employee stock purchase plan and restricted stock.

Research and Development

Research and development costs are expensed as incurred. These costs consist primarily of salaries and benefits, licenses to technology, supplies and contract services relating to the development of new products and technologies, allocated overhead, clinical trial and related clinical manufacturing costs, and other external costs.

The Company has historically produced clinical and commercial grade product in its Colorado facility and through third parties. Prior to filing for regulatory approval of its products for commercial sale, and such regulatory approval being assessed as probable, these costs are expensed when incurred as research and development expense.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS 157. SFAS 157 defines fair value, establishes a framework for measuring fair value in applying generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies whenever an entity is measuring fair value under other accounting pronouncements that require or permit fair value measurement. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, but the FASB provided a one year deferral for implementation of the standard for non-financial assets and liabilities. The Company adopted SFAS 157 effective January 1, 2008 for all financial assets and liabilities. The adoption did not have a material impact on the Company’s financial statements. The Company does not expect that the remaining provisions of SFAS 157, when adopted, will have a material impact on its financial statements.

3.   PROPERTY AND EQUIPMENT

Property and equipment at June 30, 2008 and December 31, 2007 consists of the following (in thousands):

	June 30,			December 31,
	2008			2007
Equipment and software	$	3,967		$	5,011
Furniture and fixtures		618			700
Leasehold improvements		2,222			2,220
		6,807			7,931
Less: accumulated depreciation and amortization		(5,702	)		(6,026	)
Property and equipment, net	$	1,105		$	1,905

Depreciation and amortization expense was $0.4 million for each of the three month periods ended June 30, 2008 and 2007. During the six months ended June 30, 2008 and 2007, depreciation and amortization expense was $0.6 million and $0.8 million, respectively.

13

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

4.   ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses at June 30, 2008 and December 31, 2007 consist of the following (in thousands):

	June 30,		December 31,
	2008		2007
Accounts payable — trade	$	2,418	$	4,553
Accrued restructuring costs		1,569		1,378
Accrued employee compensation, benefits, withholdings and taxes		418		1,737
Accrued clinical trial costs		2,410		1,227
Accrued manufacturing supply agreement fees and termination costs		2,687		2,641
Accrued estimated arbitration settlement costs		1,738		—
Other accrued expenses		961		719
	$	12,201	$	12,255

5.   COMMITMENTS AND CONTINGENCIES

Indemnifications

The Company has agreements whereby it indemnifies directors and officers for certain events or occurrences while the director or officer is, or was, serving in such capacity at the Company’s request. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited.

Employment Agreements

The Company has entered into employment agreements with its chief executive officer and certain other executive officers that provide for base salary, eligibility for bonuses and other generally available benefits. The employment agreements provide that the Company may terminate the employment of the executive at any time with or without cause. If an executive is terminated by the Company without cause or such executive resigns for good reason, as defined, then such executive is entitled to receive a severance package consisting of salary continuation for a period of twelve months (or eighteen months with respect to its chief executive officer) from the date of termination among other benefits. If such termination occurs one month before or thirteen months following a change of control, then the executive is entitled to: i) salary continuation for a period of twelve months (or eighteen months with respect to its chief executive officer and chief scientific officer) from the date of termination, ii) a bonus equal to the average of such executive’s annual bonuses for the two years prior to the change in control termination (or one and a half times the average with respect to the chief executive officer), iii) acceleration of vesting of all of the executive’s outstanding unvested options to purchase the Company’s common stock, iv) and other benefits.

In addition, the Company has entered into retention bonus agreements with its chief financial officer and senior vice president of corporate development. The agreements provide that each such executive is eligible to receive both: i) a cash bonus in the amount of $0.1 million (Retention Bonuses), provided that the executive remains employed by the Company through September 30, 2008, and ii) a cash bonus in an amount of not less than $0.1 million and not greater than $0.2 million (Transaction Bonuses), which final amount will be determined by the Company’s board of directors in its sole discretion, provided that such executive remains employed by the Company through the consummation of a strategic transaction. In the event that the executive is terminated by the Company without cause or such executive resigns for good reason prior to September 30, 2008, such executive will become entitled to the Retention Bonus. The Retention Bonuses are amortized to expense over the expected six month service period. Management evaluates the probability of triggering the

14

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

Transaction Bonuses each quarter and, when the bonuses are deemed to be probable of being incurred, the Company will begin expensing the Transaction Bonuses accordingly. To date, no amounts related to the Transaction Bonuses have been recorded in the Company’ s financial statements.

During 2007 the Company established a severance benefit plan that defines termination benefits for eligible employees. The severance plan does not apply to employees who have entered into separate employment agreements with the Company. Under the severance plan, employees whose employment is terminated without cause are provided a severance benefit of between nine and eighteen weeks pay, based on their employee grade level as defined by the Company, plus an additional two weeks pay for each year of service. Employees are also entitled to receive other benefits such as health insurance during the period of severance under the plan.

Asubio Pharma License Agreement

On June 20, 2008, the Company notified Asubio Pharma Co., Ltd., or Asubio Pharma, of its decision to terminate the license agreement with Asubio Pharma to develop and commercialize faropenem medoxomil in the U.S. and Canada. In accordance with the terms of the license agreement, the Company became obligated to pay Asubio Pharma a termination fee of ¥375 million ($3.6 million as paid in June 2008). During the three months ended June 30, 2008, the Company recorded the termination fee as research and development expense and paid this fee to Asubio Pharma.

Asubio Pharma and Nippon Soda Supply Agreement

On June 20, 2008 the Company notified Asubio Pharma, and Nippon Soda Company Ltd., or Nippon Soda, of its decision to terminate the supply agreement for the exclusive supply of the Company’s commercial requirements of the active pharmaceutical ingredient in faropenem medoxomil. Upon termination, the Company became obligated to pay Nippon Soda unpaid delay compensation fees totaling ¥99.2 million (approximately $0.9 million at June 30, 2008) through the effective date of termination of the supply agreement. In addition, the Company also became obligated to reimburse Nippon Soda for certain engineering costs totaling ¥64.4 million (approximately $0.6 million as of June 30, 2008). During the second quarter of 2008, the Company recorded as research and development expense the full amount of its obligation to reimburse Nippon Soda for engineering costs. The Company had previously accrued amounts due for delayed compensation through June 30, 2008. At June 30, 2008, the Company had an aggregate liability recorded in its financial statements for these amounts due to Nippon Soda totaling $1.5 million which was paid in full in July 2008.

MEDA Supply Agreement and Arbitration

In 2005, the Company and MEDA Manufacturing GmbH (formerly Tropon GmbH), or MEDA, entered into a supply agreement for production of 300 mg adult tablets of faropenem medoxomil, which was amended in 2006. Under the terms of the supply agreement, the Company was required to buy all of its requirements for 300 mg adult faropenem medoxomil tablets from MEDA until cumulative purchases exceeded €22 million (approximately $34.8 million at June 30, 2008). Beginning in 2006, the Company became obligated to make €2.3 million (approximately $3.6 million at June 30, 2008) in annual minimum purchases of 300 mg adult tablets from MEDA. If in any year the Company did not satisfy its minimum purchase commitments, the Company was required to pay MEDA the shortfall amount. Additionally, the agreement provided that, upon termination, the Company would be required to compensate MEDA for documented costs to decontaminate its facility up to a maximum of €1.7 million (approximately $2.7 million at June 30, 2008).

In 2006, the agreement was amended and the Company’s obligations for purchase commitments and facility decontamination costs were suspended and deemed satisfied by Forest Laboratories pursuant to an agreement between MEDA and Forest Laboratories. In February 2007, concurrent with Forest Laboratories’

15

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

termination of its supply agreement with MEDA, the previously suspended provisions in the Company’s agreement with MEDA were no longer suspended, and the Company’s obligations to MEDA with respect to purchase commitments and facility decontamination costs were no longer waived. Following this termination, in April 2007, the Company provided notice to MEDA of its termination of the supply agreement between MEDA and the Company in accordance with the termination provisions of the agreement as future clinical development of faropenem medoxomil adult tablets would use 600 mg dosing. As this notice occurred before the effective date of the termination of the Company’s collaboration agreement with Forest Laboratories, the Company believes that Forest Laboratories, under the terms of the collaboration agreement, is responsible for supply chain obligations related to faropenem medoxomil, including minimum purchase commitments and decontamination obligations under the MEDA agreement, through May 7, 2007 (the termination date of the collaboration agreement). In the fourth quarter of 2007, MEDA invoiced the Company for 2007 minimum purchase fees. In the first quarter of 2008, the Company paid the portion of minimum purchase fees incurred through May 11, 2007, the effective date of termination of the supply agreement, plus interest and has invoiced Forest Laboratories for the portion which pertained to the period through May 7, 2007.

In May 2008, MEDA filed a demand for arbitration and amended its demand in July 2008 after the Company terminated its license agreement with Asubio Pharma and relinquished all rights to the faropenem medoxomil program. In its amended demand, MEDA claims that the Company terminated the supply agreement in June 2008 when it returned the faropenem medoxomil program to Asubio Pharma and did not have the right to terminate the supply agreement in April 2007. The Company believes that it had the right to terminate the agreement in April 2007. However, if it is determined in arbitration that the agreement was not terminated until June 2008, the Company would be required to pay MEDA up to €2.7 million ($4.2 million at June 30, 2008) plus interest for additional minimum purchases fees and may not be able to recover amounts incurred (up to €1.7 million or $2.7 million at June 30, 2008) to reimburse MEDA for costs to decontaminate its facility from Forest Laboratories under the collaboration agreement. During the second quarter of 2008, the Company recorded as research and development expense €1.7 million ($2.7 million at June 30, 2008) related to its obligation to reimburse MEDA for costs to decontaminate its facility, representing the maximum amount of the Company’s obligation to MEDA for decontamination of the MEDA facility. The Company’s accrual is based on information provided by MEDA that they intend to decontaminate the facility and that actual decontamination costs are expected to exceed the limit specified in the agreement. In accordance with the Company’s agreement with Forest Laboratories in effect at the time of the termination of the MEDA agreement, upon receipt of documentation of decontamination costs from MEDA, the Company will invoice Forest Laboratories. At June 30, 2008, the Company also recorded as general and administrative expenses €1.1 million ($1.7 million at June 30, 2008) which represents the Company’s estimate of possible outcomes, within a range of possible outcomes, from the arbitration or as a result of a settlement reached between the parties. While the Company believes that it has acted in accordance with the terms of the supply agreement, estimates related to these matters are volatile and as such, it is reasonably possible that these estimates could change in the near term resulting in a future adjustment to the Company’s accrual of €2.8 million ($4.4 million at June 30, 2008). Based on the arbitration provisions of the contract, the Company expects the arbitration process to be completed in the second half of 2008.

Other

The Company entered into an arrangement with an investment bank to provide investment banking services. Under the terms of the agreement, the Company may incur transaction fees of at least $4 million and up to $6 million based on the value of a completed license or strategic transaction, as defined.

16

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

6.   RESTRUCTURING CHARGES

In the fourth quarter of 2007, the Company announced a restructuring of its operations to align its organization with its strategic priorities. As a result of this restructuring in the fourth quarter of 2007, the Company reduced its headcount, primarily in administrative, clinical, commercial and regulatory functions. The Company recognized expense related to this restructuring of $1.4 million in 2007, which was primarily for employee severance and related benefits.

The following table summarizes activity in the restructuring accrual for the first six months of 2008 related to the 2007 restructuring (in thousands):

	Severance
	and
	Related
	Benefits			Other			Total
Remaining costs accrued at December 31, 2007	$	1,353			25		$	1,378
Cash payments		(1,305	)		(25	)		(1,330	)
Non-cash adjustments		(33	)		—			(33	)
Remaining costs accrued at June 30, 2008	$	15			—		$	15

In April and June 2008 the Company completed additional restructurings of its operations under which it recorded $2.5 million of expense in the second quarter of 2008. These restructurings of operations included the termination of 23 employees from the clinical, commercial, research and administrative functions of the Company and the closure of the Company’s office in Milford, Connecticut. In addition, the Company discontinued enrollment in its placebo-controlled Phase III clinical trial of faropenem medoxomil in patients with acute exacerbations of chronic bronchitis. The charges associated with the restructuring included approximately $2.1 million of cash expenditures for employee related severance benefits, $0.1 million of cash expenditures for facility related costs and $0.3 million for non-cash expenses related primarily to accelerated depreciation of certain property and equipment.

The following table summarizes activity in the restructuring accrual for the first six months of 2008 related to the 2008 restructurings (in thousands):

	Severance
	and
	Related
	Benefits
Costs incurred through June 30, 2008		2,132
Cash payments		(507	)
Non-cash adjustments		(56	)
Remaining costs accrued at June 30, 2008	$	1,569

7.   EMPLOYEE BENEFIT PLANS

The Company has a 401(k) plan and matches an amount equal to 50 percent of employee contributions, limited to $2 thousand per participant annually. The Company provided matching contributions under this plan of $8 thousand and $29 thousand during the three months ended June 30, 2008 and 2007, respectively, and $0.1 million during each of the six months ended June 30, 2008 and 2007.

8.   COMMON STOCK

The Company’s Certificate of Incorporation, as amended and restated on July 3, 2006, authorizes the Company to issue 105,000,000 shares of $0.001 par value stock which is comprised of 100,000,000 shares of

17

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

common stock and 5,000,000 shares of preferred stock. Each share of common stock is entitled to one vote on each matter properly submitted to the stockholders of the Company for their vote. The holders of common stock are entitled to receive dividends when and as declared or paid by the board of directors, subject to prior rights of the preferred stockholders, if any.

Common Stock Warrants

In connection with the issuance of debt and convertible notes in 2002 and 2003, the Company issued warrants to certain lenders and investors to purchase shares of the Company’s then outstanding redeemable convertible preferred stock. The warrants were initially recorded as liabilities at their fair value. In July 2006, upon completion of the Company’s initial public offering, all outstanding preferred stock warrants were automatically converted into common stock warrants and reclassified to equity at the then current fair value. As of June 30, 2008 and December 31, 2007, warrants for the purchase of 53,012 shares of common stock were outstanding and exercisable with exercise prices in the range of $4.90 to $6.13 per share.

9.   SHARE-BASED COMPENSATION

Stock Option Plan

The Company’s Equity Incentive Plan, as amended (the Option Plan), provides for issuances of up to 7,946,405 shares of common stock for stock option grants. Options granted under the Option Plan may be either incentive or nonqualified stock options. Incentive stock options may only be granted to Company employees. Nonqualified stock options may be granted by the Company to its employees, directors, and non-employee consultants. Generally, options granted under the Option Plan expire ten years from the date of grant and generally vest over four years. Options granted in prior years generally vest 25% on the first anniversary from the grant date and ratably in equal monthly installments over the remaining 36 months. Options granted in the current year generally vest in equal monthly installments over 48 months. This plan is considered a compensatory plan and subject to the provisions of SFAS No. 123(R).

Stock options outstanding at June 30, 2008, changes during the six months then ended and options exercisable at June 30, 2008 are presented below (share amounts in thousands):

						Weighted
				Weighted		Average
	Number			Average		Remaining		Aggregate
	of			Exercise		Contractual		Intrinsic
	Shares			Price		Term (Years)		Value
								(In millions)
Options outstanding at January 1, 2008		2,880		$	4.42
Granted		1,569			1.83
Exercised		(23	)		0.60
Forfeited		(470	)		4.28
Options outstanding at June 30, 2008		3,956		$	3.43		8.20		—
Options exercisable at June 30, 2008		1,335		$	3.82		6.91		—

18

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

The following table provides additional information regarding outstanding options to purchase the Company’s common stock at June 30, 2008 (shares presented in thousands):

	Stock Options Outstanding
			Weighted
			Average				Stock Options
			Remaining				Exercisable
	Number of		Contractual		Exercise		Number of		Exercise
Exercise Price	Shares		Life (Years)		Price		Shares		Price
$0.49		17		3.62	$	0.49		17	$	0.49
0.61		383		6.32		0.61		312		0.61
1.32		34		5.83		1.32		28		1.32
1.37		41		9.85		1.37		—		—
1.40		40		9.84		1.40		5		1.40
1.64		60		9.79		1.64		15		1.64
1.86		1,217		9.60		1.86		61		1.86
3.19		823		7.29		3.19		319		3.19
5.20		163		7.69		5.20		92		5.20
5.35		823		8.33		5.35		280		5.35
5.40		7		9.09		5.40		—		—
5.46		49		8.86		5.46		39		5.46
5.54		24		8.77		5.54		7		5.54
6.11		5		9.30		6.11		—		—
6.18		27		7.59		6.18		12		6.18
8.97		105		6.27		8.97		65		8.97
9.00		7		0.05		9.00		7		9.00
9.38		6		0.18		9.38		6		9.38
9.51		3		0.18		9.51		3		9.51
9.64		50		8.29		9.64		21		9.64
10.00		72		7.60		10.00		46		10.00
		3,956			$	3.43		1,335	$	3.82

The weighted average grant date fair value of options granted to employees during the three months ended June 30, 2008 and 2007 was $0.41 and $2.58 per share, respectively and during the six months ended June 30, 2008 and 2007 was $1.09 and $2.75 per share, respectively. The total intrinsic value of options exercised during the three months ended June 30, 2008 and 2007 was $13 thousand and $0.1 million, respectively and during the six months ended June 30, 2008 and 2007 was $21 thousand and $0.1 million, respectively.

Performance Options

In March 2008, the Company issued 400,000 options with performance conditions at an exercise price of $1.86 per share to certain of its executives. These options vest in full, subject to the sole discretion of the Board of Directors, immediately prior to the consummation of either: i) a strategic alliance or partnership with an unaffiliated third party that relates to the development and commercialization of faropenem medoxomil, which license was returned to Asubio Pharma in June 2008, or ii) another strategic transaction. Vested options continue to be exercisable three years following termination of the employee’s continued service with the

19

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

Company. The Company evaluates the probability of meeting the performance objectives on a quarterly basis and has not recognized any share-based compensation expense associated with these awards to date.

Restricted Shares of Common Stock

The Company had granted to certain employees options to purchase shares of its common stock that were eligible to be exercised prior to vesting, provided that the shares issued upon such exercise are subject to restrictions which will be released consistent with the original option vesting period. In the event of termination of the service of an employee, the Company may repurchase all unvested shares from the optionee at the original issue price.

The table below provides a summary of restricted stock activity during the six months ended June 30, 2008 (in thousands):

Restricted, non-vested shares outstanding at January 1, 2008	223
Shares vested upon release of restrictions	(169	)
Restricted stock repurchased upon termination of employment	(28	)
Restricted, non-vested shares outstanding at June 30, 2008	26

Share-Based Compensation — Stock Options

During the three months ended June 30, 2008 and 2007, the Company recognized share-based compensation expense of $0.4 million and $0.9 million, respectively, and during the six months ended June 30, 2008 and 2007 recognized $44 thousand and $1.4 million, respectively. As of June 30, 2008, the Company had $2.3 million of total unrecognized compensation costs (or $1.2 million net of expected forfeitures) from options granted to employees under the Option Plan to be recognized over a weighted average remaining period of 1.74 years. Additionally, as of June 30, 2008, the Company had $0.1 million of total unrecognized share-based compensation costs (net of expected forefeitures) from options granted with performance conditions.

Nonemployee Options

During the three and six months ended June 30, 2008, the Company granted 100,000 stock options to certain former employees in their new capacity as consultants to the Company at exercise prices equal to the fair value of the underlying shares of common stock on the date of grant. The options vest over eight months and have a contractual life of ten years. Additionally, certain former employees who have changed their status with the Company from employee to nonemployee, have met the continued service requirements of the Company’s equity incentive plan and have continued to vest in options previously granted to them as employees. Vesting continues until their continued service to the Company ceases. The Company recorded $0.1 million in compensation expense during the three and six months ended June 30, 2008 related to the nonemployee options, and will re-measure compensation expense until these options vest. Under the current estimate of fair value, the Company expects to recognize the remaining expense related to nonemployee stock options of $0.2 million in 2008.

Employee Stock Purchase Plan

The Company has reserved approximately 306,000 shares of its common stock for issuance under its Employee Stock Purchase Plan (the Purchase Plan). The Purchase Plan allows eligible employees to purchase common stock of the Company at the lesser of 85% of its market value on the offering date or the purchase date as established by the board of directors. Employee purchases are funded through after-tax payroll deductions, which participants can elect from one percent to twenty percent of compensation, subject to the

20

REPLIDYNE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS — (Continued)

federal limit. The Purchase Plan is considered a compensatory plan and subject to the provisions of SFAS No. 123(R). To date, approximately 140,000 shares have been issued pursuant to the Purchase Plan. During the three months ended June 30, 2008 and 2007, the Company recognized $10 thousand and $0.1 million in share-based compensation expense, respectively and during the six months ended June 30, 2008 and 2007 recognized $26 thousand and $0.1 million, respectively.

10.   INCOME TAXES

SFAS No. 109 requires that a valuation allowance be provided if it is more likely than not that some portion or all of the Company’s deferred tax assets will not be realized. The Company’s ability to realize the benefit of its deferred tax assets will depend on the generation of future taxable income through profitable operations. Due to the uncertainty of future profitable operations, the Company has recorded a full valuation allowance against its net deferred tax assets.

21

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements. Examples of these statements include, but are not limited to, statements regarding the following: the timing and implications of our ongoing review of strategic alternatives; the outcome of our responses to the FDA with regard to the Warning Letter issued to us in February 2008 and subsequent related communications; the timing and implications of obtaining regulatory approval of any of our product candidates; the progress of our research programs, including clinical testing; our ability to identify new product candidates; the potential of any product candidates to lead to the development of commercial products; our anticipated timing for initiation or completion of our future clinical trials for any of our product candidates and expectations regarding future results of such trials; other statements regarding our future product development activities and plans to develop or acquire and commercialize product candidates, regulatory strategies and clinical strategies, including our intent to develop or seek regulatory approval for our product candidates in specific indications; our future expenditures for research and development and the conduct of clinical trials; the ability of our third-party manufacturing parties to support our requirements for drug supply; the extent to which our intellectual property rights may protect our technology and product candidates; the size and growth of the potential markets for our product candidates and our plans to develop our sales and marketing capabilities to serve those markets; the rate and degree of market acceptance of any future products; the success of competing drugs that are or become available; our plans and ability to enter into collaboration arrangements; any statements regarding our future financial performance, results of operations or sufficiency of capital resources to fund our operating requirements; and any other statements that are other than statements of historical fact. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us and described in Part II, Item 1A of this Quarterly Report on Form 10-Q and our other filings with the SEC. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

The following discussion and analysis should be read in conjunction with the unaudited financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Overview

We are a biopharmaceutical company focused on discovering, developing and in-licensing innovative anti-infective products. Our lead product candidate, REP3123, is an investigational narrow spectrum antibacterial agent for the treatment of Clostridium difficile, or C. difficile, bacteria and C. difficile-infection, or CDI, a healthcare concern for elderly and hospitalized patients. We are also pursuing the development of other novel compounds that inhibit bacterial DNA replication, which we believe represents a potentially promising drug target in antibiotic development.

Our operating strategy is directed to pursuing strategic alternatives, the consummation of which cannot be assured. We are considering strategic alternatives that include the merger or acquisition of some or all of our assets, and could reduce or change our current focus on the development of anti-infective product candidates.

In December 2005, we submitted a new drug application, or NDA, for faropenem medoxomil for the following adult indications: acute bacterial sinusitis; community-acquired pneumonia; acute exacerbation of

22

chronic bronchitis; and uncomplicated skin and skin structure infections. In October 2006, the FDA issued a non-approvable letter with respect to our NDA citing the need for further clinical studies for all indications, including studies using a superiority design for acute bacterial sinusitis and acute exacerbation of chronic bronchitis, more extensive microbiologic confirmation and consideration of alternate dosing regimens. A superiority design trial requires demonstrating that a product candidate is superior to placebo or an approved treatment. Historically, all of our trials were conducted using a non-inferiority design, which required these trials to demonstrate that a product candidate is not significantly less effective than an approved treatment. On January 22, 2008, we received a Warning Letter from the FDA related to our NDA filed in December 2005 for faropenem medoxomil citing certain conditions found by the FDA during their review of our role as the applicant of the NDA. Specifically, the Warning Letter noted that certain raw data, descriptions and analysis supporting clinical trials included in the NDA were not available for the FDA’s review and had not been obtained or reviewed by us prior to submission of the NDA. In March 2008, we formally responded to the FDA with regard to the Warning Letter. In a letter dated June 2008, the FDA made further inquiries of us related to our March 2008 response. In July 2008, we responded to the FDA’s further inquiry. Additionally, in July 2008, we withdrew our NDA and closed investigational new drug applications, or IND’s, for faropenem medoxomil and REP8839 with the FDA.

In April 2008, we discontinued enrollment in our Phase III placebo-controlled clinical trial for treatment of acute exacerbation of chronic bronchitis with faropenem medoxomil, which represented our only ongoing clinical trial with faropenem medoxomil, to conserve our cash.

In May 2008, we were served with a Demand for Arbitration (the “Demand”) from MEDA Manufacturing GmbH, or MEDA, alleging that we breached certain of our obligations under a Supply Agreement dated April 4, 2005, between us and MEDA (the “Supply Agreement”). MEDA amended the Demand in July 2008 following our termination of our license agreement for faropenem medoxomil with Asubio Pharma Co., Ltd, or Asubio Pharma. On April 27, 2007, we provided notice to MEDA of our termination of the Supply Agreement in accordance with the termination provisions of the Supply Agreement. We believe that we do not have obligations to MEDA under the Supply Agreement beyond May 11, 2007. The amended Demand seeks damages for breach of contract in the amount of €2.7 million (approximately $4.2 million at June 30, 2008) plus interest on such amounts and reimbursement of MEDA’s attorney fees and other costs incurred in the proceeding represented by the Demand. If the April 2007 termination of the Supply Agreement is determined to be ineffective, we would remain obligated for future decontamination fees of up to €1.7 million (approximately $2.7 million at June 30, 2008). We intend to vigorously defend ourselves against the allegations made in the amended Demand and, based on the arbitration provisions of the contract, we expect the arbitration process to be completed in the second half of 2008.

In June 2008, we announced our decision to terminate our license agreement with Asubio Pharma, Co., Ltd, or Asubio Pharma, for the development and commercialization of faropenem medoxomil in the U.S. and Canada. In conjunction with this decision, we also announced our decision to terminate our supply agreement with Asubio Pharma and Nippon Soda Co., Ltd, or Nippon Soda, for production of the active pharmaceutical ingredient in faropenem medoxomil. These decisions were made as a result of our being unable to secure a partner for the faropenem medoxomil program. As a result of these decisions, we incurred: i) a license termination fee of ¥375 million ($3.6 million) which was paid to Asubio Pharma in June 2008, ii) a charge of ¥64 million (approximately $0.6 million at June 30, 2008) to reimburse Nippon Soda for certain engineering costs and iii) a charge of ¥99 million (approximately $0.9 million at June 30, 2008) for the portion of annual delay compensation payable to Nippon Soda through the effective date of termination of the supply agreement. The delay compensation to Nippon Soda was accrued in 2007. Amounts due to Nippon Soda referred to above were paid in July 2008.

We are developing REP3123, our investigational narrow spectrum antibacterial agent to treat C. difficile bacteria and C. difficile-infection. C. difficile is a Gram-positive bacterium that causes diarrhea and other intestinal conditions, such as colitis, and is a major cause of morbidity among the elderly and hospitalized patients. People generally contract C. difficile-infections through the ingestion of C. difficile spores after coming into contact with a contaminated item or surface. These spores then germinate, grow and multiply in the digestive tract. In in vitro preclinical studies, REP3123 displayed an ability to inhibit growth of the

23

C. difficile bacterium and prevent the bacterium from forming the spores that allow it to be spread from person to person, but without inhibiting other key organisms that are essential for normal intestinal functioning. Also in preclinical studies, REP3123 exhibited signs it may be able to stop the production of destructive intestinal toxins caused by C. difficile bacteria. These results suggest that REP3123 has the potential to reduce C. difficile-infection outbreaks and relapse rates through reducing the presence of C. difficile spores and reduce the severity of, or possibly even prevent, C. difficile-infections through inhibiting the growth of or stopping production of toxins caused by C. difficile bacteria. We retain worldwide rights to REP3123.

We are also developing assays that identify compounds that inhibit bacterial DNA replication. The compounds may be useful to treat bacterial infections. We believe that bacterial DNA replication is an attractive target system for new antibacterial drugs because it is an essential cellular process and stalled DNA replication can trigger cell death. Our assays allow for efficient screening of large libraries of small molecules and are designed to mimic the bacterial DNA replication systems of numerous bacteria, with the goal of identifying novel inhibitors of bacterial DNA replication. We have identified compounds that are able to inhibit bacterial DNA replication in these assays. We believe that the novel mechanism of action of our technology may reduce the risk that bacteria will be resistant to drugs based on this technology. We are currently optimizing the initial inhibitors identified in the assays.

We have incurred significant operating losses since our inception on December 6, 2000, and, as of June 30, 2008, we had an accumulated deficit of $137 million. We have generated no revenue from product sales to date. We have funded our operations to date principally from the sale of our securities and amounts received from Forest Laboratories under our former collaboration and commercialization agreement. Although we reported net income during the second quarter of 2007 and for the year ended December 31, 2007 as a result of the termination of our agreement with Forest Laboratories, we expect to incur substantial operating losses for the next several years as we pursue the development of our programs.

Three Months Ended June 30, 2008 and 2007

Revenue

We reported no revenue during the second quarter of 2008 compared to $55.6 million for the second quarter of 2007. Revenue recognized during the second quarter of 2007 included $55.2 million of license revenue, representing amortization of $60 million in upfront and milestone payments recognized upon the termination of our former collaboration and commercialization agreement with Forest Laboratories in the second quarter of 2007. Revenue recognized during the second quarter of 2007 also included $0.4 million of contract revenue for activities funded under our agreement with Forest Laboratories.

Research and Development Expense

Research and development expenses were $14.4 million for the second quarter of 2008 as compared to $8.4 million for the second quarter of 2007. Research and development expenditures made to advance our product candidates and other research efforts were as follows (in thousands):

	Three Months
	Ended
	June 30,				Change
	2008		2007		$			%
Faropenem medoxomil	$	10,499	$	4,783	$	5,716			120	%
REP8839		64		1,208		(1,144	)		(95	)%
Other research and development		3,881		2,373		1,508			64	%
	$	14,444	$	8,364	$	6,080			73	%

Costs to support our faropenem medoxomil program totaled $10.5 million in the second quarter of 2008 as compared to $4.8 million during the second quarter of 2007. In June 2008, we terminated our license agreement with Asubio Pharma, as well as our supply agreement with Asubio Pharma and Nippon Soda. As a result of these actions, we recorded charges of $4.2 million during the second quarter of 2008 related to

24

amounts due upon termination of these agreements. Additionally, we recorded a charge of $2.7 million during the second quarter of 2008 related to the obligation to reimburse MEDA for costs to decontaminate its facility. These increases were partially offset by a reduction of $1.0 million in internal and external clinical and non-clinical development costs. During the second quarter of 2008, our clinical activities related to faropenem medoxomil were limited to steps required to complete patient monitoring and database analysis for our Phase III clinical trial for the treatment of acute exacerbation of chronic bronchitis, which was discontinued in April 2008. We expect to incur additional costs for required patient monitoring and database analysis until the final clinical report is filed with the U.S. Food and Drug Administration, or FDA, which is expected in the third quarter of 2008.

In the second quarter of 2008, costs to support our REP8839 program were $0.1 million compared to $1.2 million in the second quarter of 2007. Costs related to this program have decreased significantly due to our decision to suspend this program in the fourth quarter of 2007.

In the second quarter of 2008, other research and development costs were $3.9 million compared to $2.4 million in the second quarter of 2007. Costs of external preclinical research increased by $1.2 million to advance our C. difficile, or REP3123, and DNA replication inhibition programs. Costs of internal research and development personnel in support of these programs also increased by $0.3 million during the second quarter of 2008.

During the second quarter ended June 30, 2008 we incurred approximately $1.2 million in restructuring charges which are included in the costs associated with our clinical programs as described above. These charges consisted primarily of severance payments due to impacted personnel.

Clinical development timelines, likelihood of success and associated costs are uncertain and therefore vary widely. On an on-going basis we make determinations as to which research and development projects to pursue and how much funding to direct toward each project. Due to the risks inherent in the clinical trial and research process, development completion dates and costs will vary significantly for each product candidate and are difficult to estimate. The lengthy regulatory approval process for our current and potential product candidates requires substantial additional resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals for our product candidates could cause the costs of our research and development to increase and have a material adverse effect on our results of operations. We cannot be certain if and when any cash flows from our current product candidates will commence.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $4.7 million for the second quarter of 2008, compared to $3.3 million for the second quarter of 2007. The increase of $1.4 million is primarily the result €1.1 million ($1.7 million at June 30, 2008) recorded during the second quarter of 2008 related to our arbitration with MEDA. The amount represents our estimate of the outcome, within a range of possible outcomes, of the arbitration or as a result of a settlement reached between the parties. This increase was partially offset by $0.2 million in lower personnel related costs, excluding share-based compensation, following restructuring actions in the fourth quarter of 2007 and second quarter of 2008. Additionally, as a result of our restructured operations, actual and expected forfeitures of stock options increased, resulting in a decrease of $0.3 million in share-based compensation during the second quarter of 2008 as compared to the second quarter of 2007. During the remainder of 2008, we expect that selling, general and administrative expenses will be lower than 2007 levels.

Investment Income and Other, net

Investment income and other was $0.4 million for the second quarter of 2008, compared to $1.5 million for the second quarter of 2007. The decrease was primarily due to lower overall cash available for investing in 2008 compared to the second quarter of 2007.

25

Six Months Ended June 30, 2008 and 2007

Revenue

We reported no revenue during the six months ended June 30, 2008 compared to $58.6 million for the six months ended June 30, 2007. Revenue recognized during the six months ended June 30, 2007 included $56.2 million of license revenue, representing amortization of $60 million in upfront and milestone payments recognized upon the termination of our former collaboration and commercialization agreement with Forest Laboratories in the second quarter of 2007. Revenue recognized during the six months ended June 30, 2007 also included $2.4 million of contract revenue for activities funded under our agreement with Forest Laboratories.

Research and Development Expense

Research and development expenses were $22.1 million for the six months ended June 30, 2008 as compared to $17.8 million for the six months ended June 30, 2007. Research and development expenditures made to advance our product candidates and other research efforts were as follows (in thousands):

	Six Months
	Ended
	June 30,				Change
	2008		2007		$			%
Faropenem medoxomil	$	14,049	$	10,945	$	3,104			28	%
REP8839		261		2,624		(2,363	)		(90	)%
Other research and development		7,752		4,242		3,510			83	%
	$	22,062	$	17,811	$	4,251			24	%

Costs to support our faropenem medoxomil program totaled $14.0 million in the six months ended June 30, 2008 compared to $10.9 million of costs incurred during the six months ended June 30, 2007. In June 2008, we terminated our license agreement with Asubio Pharma, as well as our supply agreement with Asubio Pharma and Nippon Soda. As a result of these actions, we recorded charges of $4.2 million during the six months ended June 30, 2008 related to amounts due under these agreements. Additionally, we recorded a charge of $2.7 million during the six months ended June 30, 2008 related to the obligation to reimburse MEDA for costs to decontaminate its facility. These increases were partially offset by a reduction of $3.1 million in internal and external clinical and non-clinical development costs incurred during the six months ended June 30, 2008. In 2008, our development activities were limited to one Phase III clinical trial for the treatment of acute exacerbation of chronic bronchitis. In April 2008, this trial was discontinued and our activities were reduced to completing steps required to complete patient monitoring and database analysis for the trial. We expect to incur additional costs for required patient monitoring and database analysis until the final clinical report is filed with the U.S. Food and Drug Administration, or FDA, which is expected in the third quarter of 2008.

In the six months ended June 30, 2008, costs to support our REP8839 program were $0.3 million compared to $2.6 million in the six months ended June 30, 2007. Costs related to this program have decreased significantly due to our decision to suspend this program in the fourth quarter of 2007.

In the six months ended June 30, 2008, other research and development costs were $7.8 million compared to $4.2 million in the six months ended June 30, 2007. Costs of external preclinical research increased by $2.7 million to advance our C. difficile, or REP3123, and DNA replication inhibition programs. Costs of internal research and development personnel in support of these programs also increased by $0.6 million during the six months ended June 30, 2008.

During the six months ended June 30, 2008 we incurred approximately $1.2 million in restructuring charges which are included in the costs associated with our clinical programs as described above. These charges consisted primarily of severance payments due to impacted personnel.

26

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $6.1 million for the six months ended June 30, 2008 compared to $6.8 million for the six months ended June 30, 2007. The decrease of $0.7 million is primarily the result of $0.9 million in lower personnel related costs, excluding share-based compensation, following several organizational restructurings. Additionally, as a result of our restructured operations, actual and expected forfeitures of stock options increased, resulting in a decrease of $0.8 million in share-based compensation during the six months ended June 30, 2008 compared to the six months ended June 30, 2007. These decreases were partially offset by €1.1 million ($1.7 million at June 30, 2008) recorded during the six months ended June 30, 2008 related to our arbitration with MEDA. The amount represents our estimate of the outcome, within a range of possible outcomes, of the arbitration or as a result of a settlement reached between the parties.

Investment Income and Other, net

Investment income and other was $1.0 million for the six months ended June 30, 2008, compared to $3.0 million for the six months ended June 30, 2007. The decrease was primarily due to lower overall cash available for investing in 2008 compared to the first half of 2007.

Liquidity and Capital Resources

At June 30, 2008, we had $64.7 million in cash, cash equivalents and short-term investments. We have accumulated significant aggregate operating losses since our inception and at June 30, 2008 we had an accumulated deficit of $136.5 million. We have funded our operations to date principally from private placements of equity securities and convertible notes totaling $121.5 million, amounts received from Forest Laboratories under our former collaboration and commercialization agreement totaling $74.6 million and net proceeds from the initial public offering of our common stock totaling $44.5 million.

In 2005, we entered into a supply agreement with MEDA for the production of 300 mg adult tablets of faropenem medoxomil, which was amended in 2006. We were required to buy all of our requirements for 300 mg adult faropenem medoxomil tablets from MEDA until cumulative purchases exceeded €22 million (approximately $34.8 million at June 30, 2008). Beginning in 2006, we became obligated to make €2.3 million (approximately $3.6 million at June 30, 2008) in annual minimum purchases of 300 mg adult tablets from MEDA. If in any year we did not satisfy our minimum purchase commitments, we were required to pay MEDA the shortfall amount. Additionally, the agreement provided that, upon termination, we would be required to compensate MEDA for documented costs to decontaminate its facility up to a maximum of €1.7 million (approximately $2.7 million at June 30, 2008). Based on the arbitration provisions of the contract, we expect the arbitration process to be completed in the second half of 2008.

In 2006, the supply agreement with MEDA was amended and our obligations for purchase commitments and facility decontamination costs were suspended and deemed satisfied by Forest Laboratories pursuant to an agreement between MEDA and Forest Laboratories. In February 2007, concurrent with Forest Laboratories’ termination of its supply agreement with MEDA, the previously suspended provisions in our agreement with MEDA were no longer suspended, and our obligations to MEDA with respect to purchase commitments and facility decontamination costs were no longer waived. Following this termination, in April 2007, we provided notice to MEDA of our termination of the supply agreement between us and MEDA in accordance with the termination provisions of the agreement as future clinical development of faropenem medoxomil adult tablets would use 600 mg dosing. As this notice occurred before the effective date of the termination of our collaboration agreement with Forest Laboratories, we believe that Forest Laboratories, under the terms of the collaboration agreement, is responsible for supply chain obligations related to faropenem medoxomil, including minimum purchase commitments through May 7, 2007 (the term of the collaboration agreement) and decontamination obligations under the MEDA agreement. In the fourth quarter of 2007, MEDA invoiced us for 2007 minimum purchase fees. In the first quarter of 2008, we paid the portion of minimum purchase fees incurred through May 11, 2007, the effective date of our termination of the supply agreement, plus interest.

27

In May 2008, MEDA filed a demand for arbitration and amended its demand in July 2008 shortly after we terminated our license agreement with Asubio Pharma and relinquished all rights to the faropenem medoxomil program. In its amended demand, MEDA claims that we terminated the supply agreement in June 2008 when we returned the faropenem medoxomil program to Asubio Pharma and did not have the right to terminate the supply agreement in April 2007. We believe that we had the right to terminate the agreement in April 2007. However, if it is determined in arbitration that the agreement was not terminated until June 2008, we would be required to pay MEDA up to €2.7 million ($4.2 million at June 30, 2008) plus interest for additional minimum purchases fees and may not be able to recover amounts incurred (up to €1.7 million or $2.7 million at June 30, 2008) to reimburse MEDA for costs to decontaminate its facility from Forest Laboratories under the collaboration agreement. During the second quarter of 2008, we recorded as research and development expense €1.7 million ($2.7 million at June 30, 2008) related to our obligation to reimburse MEDA for costs to decontaminate its facility, representing the maximum amount of our obligation to MEDA for decontamination of its facility. Our accrual is based on information provided by MEDA that they intend to decontaminate the facility and that actual decontamination costs are expected to exceed the limit specified in the agreement. In accordance with our agreement with Forest Laboratories in effect at the time of terminating the MEDA agreement, upon receipt of documentation of decontamination costs from MEDA, we will invoice Forest Laboratories. At June 30, 2008, we also recorded as general and administrative expenses €1.1 million ($1.7 million at June 30, 2008) which represents our estimate of possible outcomes, within a range of possible outcomes, from the arbitration or as a result of a settlement reached between the parties. While we believe that we have acted in accordance with the terms of the supply agreement, estimates related to these matters are volatile and as such, it is reasonably possible that these estimates could change in the near term resulting in a future adjustment to our accrual of €2.8 million ($4.4 million at June 30, 2008). Based on the arbitration provisions of the contract, we expect the arbitration process to be completed in the second half of 2008.

In May 2007, we entered into an arrangement with an investment bank to provide investment banking services. Under the terms of the agreement, we may incur transaction fees of at least $4 million and up to $6 million based on the value of a completed license or strategic transaction as defined.

We have entered into employment agreements with our chief executive officer and certain other executive officers that provide for base salary, eligibility for bonuses and other generally available benefits. The employment agreements provide that we may terminate the employment of the executive at any time with or without cause. If an executive is terminated without cause or such executive resigns for good reason, as defined, then the executive is entitled to receive a severance package consisting of salary continuation for a period of twelve months (or eighteen months with respect to our chief executive officer) from the date of termination among other benefits. If such termination occurs one month before or thirteen months following a change of control, then the executive is entitled to: i) salary continuation for a period of twelve months (or eighteen months with respect to our chief executive officer and chief scientific officer) from the date of termination, ii) a bonus equal to the average of the executive’s annual bonuses for the two years prior to the change in control termination (or one and a half times the average with respect to the chief executive officer), iii) acceleration of vesting of all of the executive’s outstanding unvested options to purchase our common stock, iv) and other benefits.

Additionally, we entered into retention bonus agreements with our chief financial officer and chief senior vice president of corporate development. The agreements provide that each such executive is eligible to receive both: i) a cash bonus in the amount of $0.1 million (Retention Bonus), provided that the officer remains employed by us through September 30, 2008, and ii) a cash bonus in an amount of not less than $0.1 million and not greater than $0.2 million, which final amount will be determined by our board of directors in its sole discretion, provided that such executive remains employed by us through the consummation of a strategic transaction. In the event that the executive is terminated without cause or such executive resigns for good reason prior to September 30, 2008, such executive will become entitled to the Retention Bonus.

During 2007 we established a severance benefit plan that defines termination benefits for all eligible employees, as defined, not under an employment contract, if the employee is terminated without cause. Under this plan, employees whose employment is terminated without cause are provided a severance benefit of

28

between nine and eighteen weeks pay, based on their employee grade level, as defined, plus an additional two weeks pay for each year of service.

We have not yet commercialized our product candidates or generated any revenue from product sales. We anticipate that we will continue to incur substantial net losses in the next several years as we develop our products, conduct and complete clinical trials, pursue additional product candidates, expand our clinical development team and corporate infrastructure and prepare for the potential commercial launch of our product candidates.

The pace and outcome of our discovery research program are difficult to predict. These projects may require several years and substantial expenditures to complete and may ultimately be unsuccessful. If we enter into third party collaborations or acquire new product candidates, the timing and amounts of any related licensing cash flows or expenses are likely to be highly variable. As a result, we anticipate that our quarterly results will fluctuate for the foreseeable future. In view of this variability and of our limited operating history, we believe that period-to-period comparisons of our operating results are not meaningful and you should not rely on them as indicative of our future performance.

Based on the current status of our product development and commercialization plans, we believe that our current cash, cash equivalents, short-term investments and interest earned on these balances will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures through at least the next 12 months. This forecast of the period in which our financial resources will be adequate to support operations is a forward-looking statement and involves risks, uncertainties and assumptions. Our actual results and the timing of selected events may differ materially from those anticipated as a result of many factors, including but not limited to those discussed under “Risk Factors” in Part II, Item 1A of this quarterly report.

Our future capital uses and requirements depend on a number of factors, including but not limited to the following:

•  the rate of progress and cost of our preclinical studies, clinical trials and other research and development activities;

•  the scope and number of clinical development and research programs we pursue;

•  the costs, timing and outcomes of regulatory approvals;

•  the costs of establishing or contracting for marketing and sales capabilities, including the establishment of our own sales force;

•  the extent to which we acquire or in-license new products, technologies or businesses;

•  the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

•  the costs of defending any litigation or arbitration claims related to our material agreements; and

•  the terms and timing of any additional collaborative, strategic partnership or licensing agreements that we may establish.

If our available cash, cash equivalents, short-term investments and interest earned on these balances are insufficient to satisfy our liquidity requirements, or if we develop additional products or pursue additional applications for our products or conduct additional clinical trials beyond those currently contemplated, we may seek to sell additional equity or debt securities or acquire a credit facility. The sale of additional equity may result in additional dilution to our stockholders. If we raise additional funds through the issuance of debt securities, those securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. We may require additional capital beyond our currently forecasted amounts. Any such required additional capital may not be available on reasonable terms, if at all. If we are unable to obtain additional financing, we may be required to modify our planned research, development and commercialization strategy, which could adversely affect our business.

29

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, contingent assets and liabilities, revenues, expenses and related disclosures. Actual results may differ from these estimates. Our significant accounting policies are described in Note 2 of “Notes to Condensed Financial Statements” included elsewhere in this report. We believe the following accounting policies affect our more significant judgments and estimates used in the preparation of our condensed financial statements.

Clinical Trial and Other Accrued Expenses

As part of the process of preparing our financial statements, we are required to estimate accrued expenses. This process involves identifying services that third parties have performed on our behalf and estimating the level of service performed and the associated cost incurred on these services as of each balance sheet date in our financial statements. We are party to agreements which include provisions that require payments to the counterparty under certain circumstances. Additionally, we are required to asses and, if appropriate, accrue for certain loss contingencies related to litigation or arbitration claims. We develop estimates of liabilities using our judgment based upon the facts and circumstances known and account for these estimates in accordance with accounting principles involving accrued expenses generally accepted in the U.S. In regards to our clinical trials, we record expenses based on estimates of the services received and efforts expended pursuant to contracts with clinical research organizations (CROs) and other third party vendors associated with our clinical trials. We contract with third parties to perform a range of clinical trial activities in the ongoing development of our product candidates. The terms of these agreements vary and may result in uneven payments. Payments under these contracts depend on factors such as the achievement of certain defined milestones, the successful enrollment of patients and other events. The objective of our clinical trial accrual policy is to match the recording of expenses in our financial statements to the actual services received and efforts expended. In doing so, we rely on information from CROs and our clinical operations group regarding the status of our clinical trials to calculate our accrual for clinical expenses at the end of each reporting period. Our estimates and assumptions could differ significantly from the amounts that we actually may incur.

Share-Based Compensation

We have adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment (SFAS 123(R)), which requires compensation costs related to share-based transactions, including employee stock options, to be recognized in the financial statements based on fair value. We adopted SFAS 123(R) using the prospective method. Under this method, compensation cost is recognized based on the fair value of all share-based awards granted or modified on or after January 1, 2006.

We selected the Black-Scholes option pricing model as the most appropriate valuation method for option grants with service and/or performance conditions. The Black-Scholes model requires inputs for risk-free interest rate, dividend yield, volatility and expected lives of the options. Since the Company has a limited history of stock activity, expected volatility is based on historical data from several public companies similar in size and value to us. We will continue to use a weighted average approach using historical volatility and other similar public entity volatility information until our historical volatility is sufficient for use to measure expected volatility for future option grants. We estimate the forfeiture rate based on historical data. Based on an analysis of historical forfeitures, we applied an annual forfeiture rate of 20% during the six months ended June 30, 2008. The forfeiture rate is re-evaluated on a quarterly basis. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected lives for options granted represents the period of time that options granted are expected to be outstanding and is derived from historical exercise behavior.

During the second quarter of 2008, we estimated the fair value of options granted to employees as of the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions.

30

Expected volatility was estimated to be 75%. The weighted average risk free interest rate was 1.91% and the dividend yield was 0.00%. The weighted average expected lives for each individual vesting tranche under the graded vesting attribution method discussed below was estimated to be 1.00 year.

For stock options granted as consideration for services rendered by nonemployees and for options that continue to vest upon a change in status from employee to nonemployee, the Company recognizes compensation expense in accordance with the requirements of SFAS 123(R), Emerging Issues Task Force (EITF) Issue No. 96-18, Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services and EITF 00-18, Accounting Recognition for Certain Transactions involving Equity Instruments Granted to Other Than Employees, as amended.

We have estimated the fair value of share-based payments issued to nonemployees based on the estimated fair value of the stock options granted. We have historically determined that this basis was more reliably determinable than estimating the fair value of the services received. The estimated fair value of options granted to nonemployees is expensed over the service period (which is generally equal to the period over which the options vest) and remeasured each reporting date until the options vest or performance is complete.

If an employee becomes a nonemployee and continues to vest in an option grant under its original terms, the option is treated as an option granted to a nonemployee prospectively, provided the individual is required to continue providing services. The option is accounted for prospectively under EITF No. 96-18 such that the fair value of the option is remeasured at each reporting date until the earlier of i) the performance commitment date or ii) the date the services have been completed. Only the portion of the newly measured cost attributable to the remaining requisite service period is recognized as compensation cost prospectively from the date of the change in status.

The fair value of share-based payments issued to nonemployees during the quarter ended June 30, 2008 was estimated using the Black-Scholes option pricing model and the following weighted average assumptions: i) risk-free interest rate of 4.05%, ii) contractual life of 10 years, iii) volatility of 75% and iv) no expected dividends. We recognized share-based compensation expense relating to nonemployee options of $0.1 million for the three and six months ended June 30, 2008. No amounts were recognized in 2007.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in applying generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies whenever an entity is measuring fair value under other accounting pronouncements that require or permit fair value measurement. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007; however, the FASB provided a one year deferral for implementation of the standard for non-financial assets and liabilities. We adopted SFAS 157 effective January 1, 2008 for all financial assets and liabilities. The adoption did not have a material impact on our financial statements. We do not expect that the remaining provisions of SFAS 157, when adopted, will have a material impact on our financial statements.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk is primarily limited to our cash, cash equivalents, and short-term investments. We have attempted to minimize risk by investing in quality financial instruments, primarily money market funds, federal agency notes, commercial paper, bank and corporate debt securities and U.S. treasury notes, with no security having an effective duration in excess of two years. The primary objective of our investment activities is to preserve our capital for the purpose of funding operations while at the same time maximizing the income we receive from our investments without significantly increasing risk. To achieve these objectives, our investment policy allows us to maintain a portfolio of cash equivalents and short-term investments in a variety of marketable securities, including U.S. government, money market funds and under certain circumstances, derivative financial instruments. Our cash and cash equivalents as of June 30, 2008 included a liquid

31

money market account. The securities in our investment portfolio are classified as available-for-sale or held-to-maturity and are, due to their short-term nature, subject to minimal interest rate risk.

ITEM 4.   CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.  As of the end of the period covered by this report, our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (“Exchange Act”). Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2008, our chief executive officer and chief financial officer concluded that, as of such date, the Company’s disclosure controls and procedures are effective at providing reasonable assurance that all material information required to be included in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting.  No changes in our internal control over financial reporting occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1.   LEGAL PROCEEDINGS

We are not currently a party to any legal proceedings. However, we are currently party to arbitration proceedings with MEDA Manufacturing GmbH, or MEDA. In May 2008, we were served with a Demand for Arbitration (the “Demand”), as filed by MEDA with the American Arbitration Association International Centre for Dispute Resolution, from alleging that we breached certain of our obligations under a Supply Agreement dated April 4, 2005, between us and MEDA (the “Supply Agreement”). MEDA amended its Demand in July 2008, following our termination of our license agreement for faropenem medoxomil with Asubio Pharma Co., Ltd, or Asubio Pharma. On April 27, 2007, we provided notice to MEDA of our termination of the Supply Agreement in accordance with the termination provisions of the Supply Agreement. We believe that we do not have obligations to MEDA under the Supply Agreement beyond May 11, 2007. The amended Demand seeks damages for breach of contract in the amount of €2.7 million (approximately $4.2 million at June 30, 2008) plus interest on such amounts and reimbursement of MEDA’s attorney fees and other costs incurred in the proceeding represented by the Demand. If the April 2007 termination of the Supply Agreement is determined to be ineffective, we would remain obligated for future decontamination fees of up to €1.7 million (approximately $2.7 million at June 30, 2008). We intend to vigorously defend ourselves against the allegations made in the amended Demand and based on the arbitration provisions of the contract, we expect the arbitration process to be completed in the second half of 2008.

ITEM 1A.   RISK FACTORS

You should carefully consider the risks described below, which we believe are the material risks of our business. Our business could be harmed by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. In assessing these risks, you should also refer to the other information contained in our SEC filings, including our financial statements and related notes. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. We are relying upon the safe harbor for all forward-looking statements in this Report, and any such statements made by or on behalf of the Company are qualified by reference to the following cautionary statements, as well as to those set forth elsewhere in this Report.

32

We are currently pursuing strategic alternatives that include the merger or acquisition of some or all of our assets, which may divert attention from the development of our current product candidates or cause us to shift our focus to other assets or product candidates that have not yet been identified. The failure to enter into a strategic transaction or entering into a strategic transaction may materially and adversely affect our business.

Our operating strategy includes pursuing strategic alternatives. The strategic alternatives that we consider may involve a merger or acquisition of some or all of our assets. Such a transaction could involve a complete divestment of our current product candidates or the addition of assets and product candidates to our research and development pipeline that are currently unknown and therefore cannot be evaluated today. We cannot assure you that any of such additional assets or product candidates will be profitable or well-received by the market. Our board of directors and management team have devoted and will need to devote substantial time and resources to the consideration and implementation of any such strategic alternatives. We have altered our product development strategy in an effort to maximize the strategic opportunities that may be available for us. In addition, the failure to enter into a strategic transaction or close an announced strategic transaction may materially and adversely affect our business. Further, upon review of the strategic transactions available to us, our board of directors and management may conclude that we enter into a plan of liquidation, and after settlement of all identified outstanding liabilities, distribute net cash proceeds to our then current shareholders. Our failure to enter into a strategic transaction could cause us to implement future restructurings that would result in the further downsizing of our operations and disruption to our business.

We have received a Warning Letter from the FDA for our NDA filed in December 2005 for faropenem medoxomil, our former product candidate that had been licensed from Asubio Pharma. Failure to resolve the matters addressed in the Warning Letter could negatively impact our ability to undertake clinical trials for our other product candidates or complete future IND and NDA submissions.

On January 22, 2008, we received a Warning Letter from the Division of Scientific Investigation of the FDA, or DSI, informing us of objectionable conditions found during its investigation of our role as applicant for our NDA for faropenem medoxomil. The FDA’s observations were based on its establishment inspection reports following on site inspections in conjunction with the FDA’s review of our NDA. Specifically DSI cited that we failed to make available the underlying raw data from the investigation for the FDA’s audit and failed to provide the FDA adequate descriptions and analyses of any other data or information relevant to the evaluation of the safety and effectiveness of faropenem medoxomil obtained or otherwise received by us from any source derived from clinical investigations. The clinical trials that supported our NDA were conducted by Bayer as a previous licensee of faropenem medoxomil. In June 2008, DSI made further inquires of us related to our previous responses to their observations in the Warning Letter. In July 2008, we communicated to the FDA our decision to terminate our license for faropenem medoxomil with Asubio Pharma and withdrew the NDA from consideration by the FDA. We also informed DSI of these actions. In a communication dated July 22, 2008 the FDA commented that since we have active Investigational New Drug applications, or IND’s, and ongoing clinical trials the issues raised in the Warning Letter remained open. Following receipt of this communication, we withdrew all of our open IND’s which relate to faropenem medoxomil and REP8839, and are closing out our remaining clinical trial reports in connection with our clinical trial using faropenem medoxomil for treatment of acute exacerbations of chronic bronchitis for which patient enrollment was stopped in April 2008. If we are unable to sufficiently establish to the FDA that future clinical trials conducted by us would be in accordance with FDA regulations, we may be subject to enforcement action by the FDA including being subject to the FDA’s Application Integrity Policy. This policy would require third party validation of the integrity of the raw data underlying any of our future filings to the FDA before those filings would be accepted for consideration. Such a requirement would be onerous and require significant additional time and expense for the clinical development and potential approval of our product candidates. Further, we could be subject to additional actions from the FDA that may negatively impact our ability to enter into clinical trials or submit an IND or NDA in the future.

33

If lawsuits or arbitration proceedings arising as a result of termination of collaboration or other commercial contracts are successfully brought against us, we may incur substantial liabilities and may be unable to commercialize our product candidates.

The interpretation of the terms of our collaboration and commercial agreements may be the subject of disagreement between us and our collaborators and other commercial partners that could result in lawsuits and/or arbitration proceedings. If former partners or other parties to our commercial contracts are successful in lawsuits or arbitration proceedings, we may incur judgments against us that could have a material impact on our financial position, limit our ability to complete development of and launch commercially our product candidates, and be a distraction to our business.

Between February 6, 2007 and May 7, 2007, we operated under the termination provisions of our collaboration agreement with Forest Laboratories. On April 27, 2007, under the termination provisions of our agreement with Forest Laboratories, we terminated our agreement with MEDA for the manufacture of 300 mg tablets of faropenem medoxomil. MEDA has disputed our right to terminate the agreement on the basis indicated in our notice of termination and contend that the agreement remained in place until the date we terminated our license agreement with Asubio Pharma, thereby terminating the entire faropenem medoxomil development program. We believe we have acted in accordance with the terms of these and other commercial agreements. MEDA has demanded an arbitration hearing to resolve this dispute. The result of an arbitration hearing is binding in accordance with the arbitration provisions of the agreement. If it is determined in an arbitration that we have obligations to MEDA under the agreement beyond May 11, 2007, then we may incur additional costs up to €2.7 million ($4.2 million as of June 30, 2008) plus interest. At June 30, 2008, we accrued for €1.1 million ($1.7 million at June 30, 2008) in amounts we may become obligated to pay as an outcome of the arbitration or as a result of a settlement reached between the parties.

Our drug discovery approach and technologies and our product candidates are unproven and in very early stages of development, which may not allow us to establish or maintain a clinical development pipeline or successful collaborations, and may never result in the discovery or development of commercially viable products.

Following our decision to terminate our license for faropenem medoxomil, we are dependent upon the success of the other product candidates in our pipeline or other compounds we may in-license. All of our existing product candidates and development stage programs are in preclinical development. We are dependent on the potential success of our internal discovery research programs and product candidates. Development of REP8839, one of our product candidates that has completed its Phase I clinical trials, was suspended by us due to the incremental investment that would be required to optimize the formulation of REP8839 and the niche initial target market being addressed by the product. As a significant part of our growth strategy, we intend to develop and commercialize additional products and product candidates through our discovery research program. A significant portion of the research that we are conducting involves new and unproven technologies, and may not result in the discovery or development of commercially viable products. Research programs to identify new disease targets and product candidates require substantial technical, financial and human resources whether or not we ultimately identify any candidates. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development. The process of successfully discovering product candidates is expensive, time-consuming and unpredictable, and the historical rate of failure for drug candidates is extremely high. Data from our current research programs may not support the clinical development of our lead compounds or other compounds from these programs, and we may not identify any compounds suitable for recommendation for clinical development. Moreover, any compounds we recommend for clinical development may not be effective or safe for their designated use, which would prevent their advancement into clinical trials and impede our ability to maintain or expand our clinical development pipeline. If we are unable to identify new product candidates or advance our lead compounds into clinical development, we may not be able to establish or maintain a clinical development pipeline or generate product revenue. Our ability to identify new compounds and advance them into clinical development also depends upon our ability to fund our research and development operations, and we cannot be certain that additional funding will be available on acceptable terms, or at all. There is no

34

guarantee that we will be able to successfully advance any product candidates identified through our discovery research program into clinical trials or successfully develop any product candidate we advance into clinical trials for commercial sale. If we are unable to develop suitable potential product candidates through internal research programs or are not able to advance the development of our early stage product candidates REP3123 and DNA replication inhibition, our business will suffer and we may be unable to grow our business.

We are at an early stage of development as a company, with no current sources of revenue, and we may never generate future revenue or become profitable.

We are a biopharmaceutical company that emerged from the development stage in February 2006 and have a limited operating history. Currently, we have no products approved for commercial sale and, to date, we have not generated any revenue from product sales. Our ability to generate revenue depends heavily on:

•  successfully developing or obtaining a collaboration partner for our anti-bacterial agent addressing C. difficile bacteria and C. difficile-associated disease, REP3123, or our DNA replication inhibition program; and

•  successfully commercializing any product candidates for which we receive FDA approval.

Our existing product candidates and development programs will require extensive additional clinical evaluation, regulatory approval, significant marketing efforts and substantial investment before they can provide us with any revenue. If we do not receive regulatory approval for and successfully commercialize our product candidates, we will be unable to generate any royalty revenue from product sales for many years, if at all. If we are unable to generate revenue, we will not become profitable, and we may be unable to continue our operations.

We have incurred significant operating losses since inception and anticipate that we will incur continued losses for the foreseeable future.

We have experienced significant operating losses since our inception in December 2000. At June 30, 2008, we had an accumulated deficit of approximately $137 million. We have generated no revenue from product sales to date. We have funded our operations to date principally from the sale of our securities and payments by Forest Laboratories under our former collaboration agreement. As a result of the suspension of our clinical development of faropenem medoxomil, our prospects for near term future revenues are substantially uncertain. We expect to continue to incur substantial additional operating losses for the next several years as we pursue our clinical trials and research and development efforts. Because of the numerous risks and uncertainties associated with developing and commercializing antibiotics, we are unable to predict the extent of any future losses. We may never have any significant future revenue or become profitable on a sustainable basis.

If we fail to obtain additional financing, we may be unable to complete the development and commercialization of our product candidates, or continue our research and development programs.

Our operations have consumed substantial amounts of cash since inception. We currently expect to spend substantial amounts to:

•  continue our research and development programs;

•  license or acquire additional product candidates; and

•  launch and commercialize any product candidates for which we receive regulatory approval, including building our own sales force to address certain markets.

We do not expect that our current capital resources will be sufficient to fund the complete development of our product candidates generated from our discovery research program. To date, our sources of cash have been limited primarily to the proceeds from the sale of our securities and payments by Forest Laboratories under our former collaboration agreement. As a result of the suspension of our clinical development of faropenem medoxomil, our prospects for near term future revenues are substantially uncertain. We are currently using our cash and cash equivalents, short-term investments and interest earned on these balances toward the funding necessary to support our planned activities. If the funds provided from existing resources

35

are insufficient to satisfy our future capital needs, or if we develop, in-license or acquire additional products or product candidates or pursue additional applications for our product candidates, we may seek to sell additional equity or debt securities. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants, such as limitations on our ability to incur additional indebtedness, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back or discontinue the development and/or commercialization of one or more of our product candidates. We also may be required to:

•  seek collaborators for our product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; and

•  relinquish or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves.

If we fail to enter into new strategic collaborations, we may have to reduce or delay our rate of product development and commercialization and/or increase our expenditures.

Our business model is based in part upon entering into strategic collaborations for discovery and/or development of some of our product candidates. Our strategy to develop and commercialize our products includes entering into various relationships with pharmaceutical or biotechnology companies to advance our programs. We may not be able to negotiate any of our collaborations on acceptable terms. If we are not able to establish collaborative arrangements, we may have to reduce or delay further development of some of our programs and/or increase our expenditures and undertake the development activities at our own expense. If we are not able to establish and maintain strategic collaborations on acceptable terms:

•  the development of our current or future product candidates may be reduced in scope, terminated or delayed which would require us to further reduce the number of our employees;

•  our cash expenditures related to development of our current or future product candidates would increase significantly;

•  we may be required to hire additional employees or otherwise develop expertise, such as sales and marketing expertise, for which we have not budgeted;

•  we will bear all of the risk related to the development of each of our current and future product candidates; and

•  we may be unable to meet demand for any future products that we may develop.

In this event, we would likely be required to limit the size or scope of one or more of our programs.

Securing a strategic partner to develop and commercialize our product candidates may require us to relinquish valuable rights and will render us dependent on the efforts of any future partners, over which we would have limited control, and if our collaborations are unsuccessful, our potential to develop and commercialize product candidates and to generate future revenue from our product candidates would be significantly reduced.

In order to secure a strategic partner to develop and commercialize our product candidates, we may be required to relinquish valuable rights to our potential products or proprietary technologies. If we are able to identify and reach agreement with collaborators for our product candidates, those relationships will be subject to a number of risks, including:

•  collaborators may not pursue further development and commercialization of compounds resulting from collaborations or may elect not to renew research and development programs;

•  collaborators may delay clinical trials, under fund a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials, or require the development of a new formulation of a product candidate for clinical testing;

36

•  a collaborator with marketing and distribution rights to one or more of our product candidates may not commit sufficient resources to the marketing and distribution of any future products, limiting our potential revenues from the commercialization of these products;

•  disputes may arise delaying or terminating the research, development or commercialization of our product candidates, or result in significant litigation or arbitration;

•  strategic partners could develop drugs which compete with our future products, if any;

•  strategic partners could turn their focus away from anti-infective products and community respiratory tract infection indications;

•  strategic partners could fail to effectively manage manufacturing relationships with suppliers;

•  contracts with strategic partners may not provide significant protection or may be difficult to enforce if a strategic partner fails to perform; and

•  if an arrangement with a strategic partner expires or is terminated, we may not be able to replace it or the terms on which we replace it may be unacceptable.

If as a result of our financial condition or other factors we enter into a strategic collaboration while a drug candidate program is in early preclinical development, we may not generate as much near or long-term revenue from such program as we could have generated if we had the resources to further independently develop such program. In addition, if we raise additional funds through licensing arrangements, it may be necessary to relinquish potentially valuable rights to our potential products or proprietary technologies, or grant licenses on terms that are not favorable to us.

Any of our product candidates that we advance into clinical trials are subject to extensive regulation, which can be costly and time consuming, cause unanticipated delays, or prevent the receipt of the required approvals to commercialize our product candidates.

The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, export, marketing and distribution of any of our product candidates that we advance into clinical trials are subject to extensive regulation by the FDA in the U.S. and by comparable governmental authorities in foreign markets. Currently, we have completed preclinical testing of REP3123. In the U.S. and in many foreign jurisdictions, rigorous preclinical testing and clinical trials and an extensive regulatory review process must be successfully completed before a new drug can be sold. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. Clinical testing is expensive, can take many years to complete and its outcome is uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through initial clinical testing. The time required to obtain approval by the FDA is unpredictable but typically takes many years following the commencement of clinical trials, depending upon numerous factors. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change. We have not obtained regulatory approval for any product candidate.

Our product candidates may fail to receive regulatory approval for many reasons, including the following:

•  we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for a particular indication;

•  the results of clinical trials may not meet the level of statistical significance required by the FDA or other regulatory authorities for approval;

•  the FDA or other regulatory authorities may disagree with the design of our clinical trials;

•  we may be unable to demonstrate that a product candidate’s benefits outweigh its risks;

•  we may be unable to demonstrate that the product candidate presents an advantage over existing therapies, or over placebo in any indications for which the FDA requires a placebo-controlled trial;

37

•  the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

•  the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a new drug application or to obtain regulatory approval in the U.S. or elsewhere;

•  the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies;

•  we may not be able to satisfactorily address the objectionable conditions identified in the Warning Letter we received from the FDA in January 2008; and

•  the approval policies or regulations of the FDA or comparable foreign regulatory authorities may change.

The FDA or comparable foreign regulatory authorities might decide that our data is insufficient for approval and require additional clinical trials or other studies. Furthermore, even if we do receive regulatory approval to market a commercial product, any such approval may be subject to limitations on the indicated uses for which we may market the product. It is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain the appropriate regulatory approvals necessary for us or our collaborators to begin selling them.

Also, recent events have raised questions about the safety of marketed drugs and may result in increased cautiousness by the FDA in reviewing new drugs based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals and more stringent product labeling requirements. Further, the FDA has been granted new authority to require additional clinical trials of license holders of pharmaceutical products, including post approval clinical trials, and modify previously approved product labels under the FDA Amendments Act of 2007 that was enacted September 2007. Any delay in obtaining, or inability to obtain, applicable regulatory approvals would prevent us from commercializing our product candidates.

If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop our product candidates, conduct our clinical trials and commercialize our product candidates.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel and on our ability to develop and maintain important relationships with leading academic institutions, clinicians and scientists. We are highly dependent upon our senior management and scientific staff, particularly Kenneth Collins, our President and Chief Executive Officer, Nebojsa Janjic, Ph.D., our Chief Scientific Officer, Mark Smith, our Chief Financial Officer, and Donald Morrissey, our Senior Vice President of Corporate Development. In May 2008 and April 2008, respectively, we eliminated the positions of Roger Echols, M.D., our Chief Medical Officer and Peter Letendre, PharmD., our Chief Commercial Officer, in conjunction with a restructuring of our operations. The loss of services of any of Mr. Collins, Dr. Janjic, Mr. Smith or Mr. Morrissey could delay or prevent the successful completion of our strategy or development of our product candidates.

Competition for qualified personnel in the biotechnology and pharmaceutical fields is intense. We will need to hire additional personnel should we expand our clinical development and commercial activities. In addition, we may be required to grant significant amounts of share-based compensation to certain individuals to attract them, which could increase the related non-cash compensation expense. We may not be able to attract and retain qualified personnel on acceptable terms. We do not carry “key person” insurance covering any members of our senior management. Each of our officers and key employees may terminate his or her employment at any time without notice and without cause or good reason.

We may need to modify the size of our organization, and we may experience difficulties in managing either growth or restructuring.

We are a small company with 27 full time employees as of June 30, 2008. As our development and commercialization plans and strategies develop, we may need to either reduce or expand the size of our employee base for managerial, operational, sales, financial and other reasons. In December 2007, we undertook

38

an organizational restructuring that reduced the number of employees in the clinical, commercial, administrative and research functions by 27 employees. In April and June 2008 we undertook further restructurings of our operations that reduced our commercial, clinical and administrative staff by a total of 23 employees. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees. Future restructuring activities may involve significant changes to our drug development and growth strategies, our commercialization plans and other operational matters, including a significant reduction in our employee base. Any future restructuring activity could result in disruption to our business, adversely affecting the morale of our employees and making it more difficult to retain qualified personnel. Also, our management may have to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing either growth or restructuring activities. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to effectively manage any future growth or restructuring, as the case may be. To that end, we must be able to:

•  manage our development efforts effectively;

•  manage our clinical trials effectively;

•  integrate additional management, administrative, manufacturing and sales and marketing personnel, or reorganize these personnel;

•  maintain sufficient administrative, accounting and management information systems and controls; and

•  hire and train additional or replacement qualified personnel.

We may not be able to accomplish these tasks, and our failure to accomplish any of them could harm our financial results.

We currently have no sales organization. If we are unable to establish a direct sales force in the U.S. to promote our product candidates, the commercial opportunity for our product candidates may be diminished.

We currently have no sales organization. If we elect to rely on third parties to sell our product candidates in the U.S., we may receive less revenue than if we sold our product candidates directly. In addition, we may have little or no control over the sales efforts of those third parties. In the event we are unable to develop our own sales force or collaborate with a third party to sell our product candidates, we may not be able to commercialize our product candidates which would negatively impact our ability to generate revenue.

The commercial success of our product candidates will depend upon attaining significant market acceptance of these products among physicians, patients, health care payors and the medical community.

None of our product candidates has been commercialized for any indication. Even if approved for sale by the appropriate regulatory authorities, physicians may not prescribe our product candidates, in which case we would not generate revenue or become profitable. Market acceptance of our product candidates by physicians, health care payors and patients will depend on a number of factors, including:

•  the clinical indications for which the product candidate is approved;

•  acceptance by physicians and patients of each product candidate as a safe and effective treatment;

•  perceived advantages over alternative treatments;

•  the cost of treatment in relation to alternative treatments, including numerous generic antibiotics;

•  the extent to which the product candidate is approved for inclusion on formularies of hospitals and managed care organizations;

•  the extent to which bacteria develop resistance to the product candidate, thereby limiting its efficacy in treating or managing infections;

•  whether the product candidate is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy for particular infections;

•  the availability of adequate reimbursement by third parties;

39

•  relative convenience and ease of administration; and

•  prevalence and severity of side effects.

Even if our product candidates ultimately obtain regulatory approval, many of the above factors may be adversely impacted by the historical difficulty of obtaining any such approval and may create a negative perception among physicians and health care payors of the advantages or efficacy of our product candidates.

If product liability lawsuits are successfully brought against us or any future collaboration partners, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face an inherent risk of product liability lawsuits related to the testing of our product candidates, and will face an even greater risk if product candidates are introduced commercially. An individual may bring a liability claim against us if one of our product candidates causes, or merely appears to have caused, an injury. If we cannot successfully defend ourselves against the product liability claim, we may incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

•  decreased demand for our product candidates;

•  injury to our reputation;

•  withdrawal of clinical trial participants;

•  significant litigation costs;

•  substantial monetary awards to or costly settlement with patients;

•  product recalls;

•  loss of revenue; and

•  the inability to commercialize our product candidates.

We are highly dependent upon consumer perceptions of us, and the safety and quality of our products. We could be adversely affected if we are subject to negative publicity. We could also be adversely affected if any of our products or any similar products distributed by other companies prove to be, or are asserted to be, harmful to consumers. Also, because of our dependence upon consumer perceptions, any adverse publicity associated with illness or other adverse effects resulting from consumers’ use or misuse of our products or any similar products distributed by other companies could have a material adverse impact on our results of operations.

We have global clinical trial liability insurance that covers our clinical trials up to a $10.0 million annual aggregate limit. Our current or future insurance coverage may prove insufficient to cover any liability claims brought against us. We intend to expand our insurance coverage to include the sale of commercial products if marketing approval is obtained for our product candidates. In addition, because of the increasing costs of insurance coverage, we may not be able to maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise.

We may be required to suspend or discontinue clinical trials due to side effects or other safety risks that could preclude approval of our product candidates.

Our clinical trials may be suspended at any time for a number of reasons. We may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to participants. In addition, regulatory agencies may order the temporary or permanent discontinuation of our clinical trials at any time if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk to participants.

Many antibiotics can produce significant side effects. Side effects associated with many current antibiotics include kidney and liver toxicities, heart rhythm abnormalities, photosensitivity, rash, and excessive flushing of the skin and central nervous system toxicities, such as seizures. Later clinical trials in a larger patient population could reveal other side effects. These or other side effects could interrupt, delay or halt clinical trials of our product candidates and could result in the FDA or other regulatory authorities stopping further development of or denying approval of our product candidates for any or all targeted indications. Even if we

40

believe our product candidates are safe, our data is subject to review by the FDA, which may disagree with our conclusions. Moreover, we could be subject to significant liability if any volunteer or patient suffers, or appears to suffer, adverse health effects as a result of participating in our clinical trials.

We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates.

We have agreements with third-party contract research organizations to provide monitors for and to manage data for our clinical programs. We and our contract research organizations are required to comply with current Good Clinical Practices, or GCPs, regulations and guidelines enforced by the FDA for all of our products in clinical development. The FDA enforces GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or our contract research organizations fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our marketing applications. We cannot ensure that, upon inspection, the FDA will determine that any of our clinical trials comply with GCPs. In addition, our clinical trials must be conducted with product produced under cGMP regulations, and will require a large number of test subjects. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

Our contract research organizations have the right to terminate their agreements with us in the event of an uncured material breach. In addition, some of our contract research organizations have an ability to terminate their respective agreements with us if it can be reasonably demonstrated that the safety of the subjects participating in our clinical trials warrants such termination, if we make a general assignment for the benefit of our creditors, or if we are liquidated. If any of our relationships with these third-party contract research organizations terminate, we may not be able to enter into arrangements with alternative contract research organizations. If contract research organizations do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.

If we fail to gain and maintain approval for our product candidates in international markets, our market opportunities will be limited.

Sales of our product candidates outside of the U.S. will be subject to foreign regulatory requirements governing clinical trials and marketing approval. Even if the FDA grants marketing approval for a product candidate, comparable regulatory authorities of foreign countries must also approve the manufacturing or marketing of the product candidate in those countries. Approval in the U.S., or in any other jurisdiction, does not ensure approval in other jurisdictions. Obtaining foreign approvals could result in significant delays, difficulties and costs for us and require additional trials and additional expenses. Regulatory requirements can vary widely from country to country and could delay the introduction of our products in those countries. Clinical trials conducted in one country may not be accepted by other countries and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. None of our product candidates is approved for sale in international markets and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with these regulatory requirements or to obtain and maintain required approvals, our target market will be reduced and our ability to generate revenue will be diminished.

We may not be able to enter into acceptable agreements to market and commercialize our product candidates in international markets.

If appropriate regulatory approvals are obtained, we intend to commercialize our product candidates in international markets through collaboration arrangements with third parties. If we decide to sell our product candidates in international markets, we may not be able to enter into any arrangements on favorable terms or

41

at all. In addition, these arrangements could result in lower levels of income to us than if we marketed our product candidates entirely on our own. If we are unable to enter into a marketing arrangement for our product candidates in international markets, we may not be able to develop an effective international sales force to successfully commercialize those products in international markets. If we fail to enter into marketing arrangements for our products and are unable to develop an effective international sales force, our ability to generate revenue would be limited.

Even if we receive regulatory approval for our product candidates, we will be subject to ongoing significant regulatory obligations and oversight.

If we receive regulatory approval to sell our product candidates, the FDA and foreign regulatory authorities may impose significant restrictions on the indicated uses or marketing of such products, or impose ongoing requirements for post-approval studies. Following any regulatory approval of our product candidates, we will be subject to continuing regulatory obligations, such as safety reporting requirements, and additional post-marketing obligations, including regulatory oversight of the promotion and marketing of our products. If we become aware of previously unknown problems with any of our product candidates here or overseas or at our contract manufacturers’ facilities, a regulatory agency may impose restrictions on our products, our contract manufacturers or on us, including requiring us to reformulate our products, conduct additional clinical trials, make changes in the labeling of our products, implement changes to, or obtain re-approvals of, our contract manufacturers’ facilities, or withdraw the product from the market. In addition, we may experience a significant drop in the sales of the affected products, our reputation in the marketplace may suffer and we may become the target of lawsuits, including class action suits. Moreover, if we fail to comply with applicable regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution. Any of these events could harm or prevent sales of the affected products or could substantially increase the costs and expenses of commercializing and marketing these products.

Our corporate compliance program cannot guarantee that we are in compliance with all potentially applicable regulations.

The development, manufacturing, pricing, marketing, sales, and reimbursement of our product candidates, together with our general operations, are subject to extensive regulation by federal, state and other authorities within the U.S. and numerous entities outside of the U.S. If we fail to comply with any of these regulations, we could be subject to a range of regulatory actions, including suspension or termination of clinical trials, the failure to approve a product candidate, restrictions on our product candidates or manufacturing processes, withdrawal of products from the market, significant fines, or other sanctions or litigation, and exclusion of our products from the Medicare/Medicaid payment system. As a publicly traded company we are subject to significant regulations, including the Sarbanes-Oxley Act of 2002, some of which have only recently been adopted, and all of which are subject to change. While we have developed and instituted a corporate compliance program based on what we believe are the current best practices and continue to update the program in response to newly implemented or changing regulatory requirements, we cannot ensure that we are or will be in compliance with all potentially applicable regulations. For example, we cannot assure that in the future our management will not find a material weakness in connection with its annual review of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We also cannot ensure that we could correct any such weakness to allow our management to assess the effectiveness of our internal control over financial reporting as of the end of our fiscal year in time to enable our independent registered public accounting firm to attest that such assessment will have been fairly stated in our annual reports filed with the Securities and Exchange Commission or attest that we have maintained effective internal control over financial reporting as of the end of our fiscal year, when required. If we fail to comply with the Sarbanes-Oxley Act or any other regulations we could be subject to a range of consequences, including restrictions on our ability to sell equity or otherwise raise capital funds, significant fines, enforcement or other civil or criminal actions by the Securities and Exchange Commission or delisting by the NASDAQ Global Market or other sanctions or litigation. In addition, if we disclose any material weakness in our internal control over financial reporting or other consequence of failing to comply with applicable regulations, this may cause our stock price to decline.

42

Reimbursement may not be available for our product candidates, which could diminish our sales or affect our ability to sell any future products profitably.

Market acceptance and sales of our product candidates will depend on reimbursement policies and may be affected by future health care reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs they will pay for and establish reimbursement levels. We cannot be sure that reimbursement will be available for any of our product candidates. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our products. We have not commenced efforts to have our product candidates reimbursed by government or third-party payors. If reimbursement is not available or is available only to limited levels, we may not be able to commercialize our products.

In both the U.S. and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably. In particular, the Medicare Modernization Act of 2003 added an outpatient prescription drug benefit to Medicare, which became effective on January 1, 2006. Drug benefits under this provision are administered through private plans that negotiate price concessions from pharmaceutical manufacturers. We cannot be certain that our product candidates will successfully be placed on the list of drugs covered by particular health plans or plan formularies, nor can we predict the negotiated price for our product candidates, which will be determined by market factors. With respect to Medicaid, the Deficit Reduction Act of 2005 made several changes to the way pharmacies are reimbursed under Medicaid, most of which went into effect on January 1, 2007. These changes could lead to reduced drug prices. Many states have also created preferred drug lists and include drugs on those lists only when the manufacturers agree to pay a supplemental rebate. If our product candidates are not included on these preferred drug lists, physicians may not be inclined to prescribe them to their Medicaid patients.

As a result of legislative proposals and the trend towards managed health care in the U.S., third-party payors are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement of new drugs. They may also refuse to provide any coverage of uses of approved products for medical indications other than those for which the FDA has granted market approvals. As a result, significant uncertainty exists as to whether and how much third-party payors will reimburse patients for their use of newly-approved drugs, which in turn will put pressure on the pricing of drugs. The availability of numerous generic antibiotics at lower prices than branded antibiotics can also be expected to substantially reduce the likelihood of reimbursement of branded antibiotic product candidates. We expect to experience pricing pressures in connection with the sale of our products due to the trend toward managed health care, the increasing influence of health maintenance organizations and additional legislative proposals.

Risks Related to our Intellectual Property

It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection.

Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of our product candidates, and the methods used to manufacture them, as well as successfully defending these patents against third-party challenges. Our ability to protect our product candidates from unauthorized making, using, selling, offering to sell or importation by third-parties is dependent upon the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.

The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date in the U.S. The biotechnology patent situation outside the U.S. is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the U.S. and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our licensed patents, our patents or in third-party patents.

43

The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

•  others may be able to make compounds that are similar to our product candidates but that are not covered by the claims of our licensed patents, or for which we are not licensed under our license agreements;

•  we or our licensors might not have been the first to make the inventions covered by our pending patent application or the pending patent applications and issued patents of our licensors;

•  we or our licensors might not have been the first to file patent applications for these inventions;

•  others may independently develop similar or alternative technologies or duplicate any of our technologies;

•  it is possible that our pending patent applications will not result in issued patents;

•  our issued patents and the issued patents of our licensors may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges by third-parties;

•  we may not develop additional proprietary technologies that are patentable; or

•  the patents of others may have an adverse effect on our business.

We also may rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third-party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the U.S. are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable to protect our rights to, or use, our technology.

If we choose to go to court to stop someone else from using the inventions claimed in our patents or our licensed patents, that individual or company has the right to ask the court to rule that these patents are invalid and/or should not be enforced against that third-party. These lawsuits are expensive and would consume time and other resources even if we were successful in stopping the infringement of these patents. In addition, there is a risk that the court will decide that these patents are not valid and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of these patents is upheld, the court will refuse to stop the other party on the ground that such other party’s activities do not infringe our rights to these patents.

Furthermore, a third-party may claim that we or our manufacturing or commercialization partners are using inventions covered by the third-party’s patent rights and may go to court to stop us from engaging in our normal operations and activities, including making or selling our product candidates. These lawsuits are costly and could affect our results of operations and divert the attention of managerial and technical personnel. There is a risk that a court would decide that we or our commercialization partners are infringing the third-party’s patents and would order us or our partners to stop the activities covered by the patents. In addition, there is a risk that a court will order us or our partners to pay the other party damages for having violated the other party’s patents. We have indemnified our commercial partners against patent infringement claims. The biotechnology industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our products or methods of use either do not infringe the patent claims of the relevant patent and/or that the patent claims are invalid, and we may not be able to do this. Proving invalidity, in particular, is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.

44

Because some patent applications in the U.S. may be maintained in secrecy until the patents are issued, because patent applications in the U.S. and many foreign jurisdictions are typically not published until eighteen months after filing, and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our licensors’ issued patents or our pending applications or our licensors’ pending applications, or that we or our licensors were the first to invent the technology. Our competitors may have filed, and may in the future file, patent applications covering technology similar to ours. Any such patent application may have priority over our or our licensors’ patent applications and could further require us to obtain rights to issued patents covering such technologies. If another party has filed a U.S. patent application on inventions similar to ours, we may have to participate in an interference proceeding declared by the U.S. Patent and Trademark Office to determine priority of invention in the U.S. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our U.S. patent position with respect to such inventions.

Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.

Risks Related to Ownership of our Common Stock

The market price of our common stock is highly volatile.

Prior to June 28, 2006, there was no public market for our common stock. We cannot assure you that an active trading market for our common stock will exist at any time. You may not be able to sell your shares quickly or at the market price if trading in our common stock is not active. The trading price of our common stock has been highly volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including:

•  announcement of FDA approval or non-approval of our product candidates, or specific label indications for their use, or delays in the FDA review process;

•  actions taken by regulatory agencies with respect to our product candidates, clinical trials, manufacturing process or sales and marketing activities;

•  termination of significant agreements;

•  changes in laws or regulations applicable to our products, including but not limited to, clinical trial requirements for approvals;

•  the success of our development efforts and clinical trials;

•  the success of our efforts to acquire or in-license additional products or product candidates;

•  developments concerning future collaborations, including but not limited to, those with our sources of manufacturing supply and our commercialization partners;

•  actual or anticipated variations in our quarterly operating results;

•  announcements of technological innovations by us, our collaborators or our competitors;

•  new products or services introduced or announced by us or our commercialization partners, or our competitors and the timing of these introductions or announcements;

•  actual or anticipated changes in earnings estimates or recommendations by securities analysts;

•  conditions or trends in the biotechnology and biopharmaceutical industries;

•  announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

•  general economic and market conditions and other factors that may be unrelated to our operating performance or the operating performance of our competitors;

•  changes in the market valuations of similar companies;

45

•  sales of common stock or other securities by us or our stockholders in the future;

•  additions or departures of key scientific or management personnel;

•  the outcome of litigation or arbitration claims;

•  developments relating to proprietary rights held by us or our competitors;

•  disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

•  trading volume of our common stock;

•  the announcement of or other developments related to a strategic transaction; and

•  sales of our common stock by us or our stockholders.

In addition, the stock market in general and the market for biotechnology and biopharmaceutical companies in particular have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially adversely affect our business and financial condition.

We are at risk of securities class action litigation or may become subject to stockholder activism efforts that each could cause material disruption to our business.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and biopharmaceutical companies have experienced significant stock price volatility in recent years. Further, certain influential institutional investors and hedge funds have taken steps to involve themselves in the governance and strategic direction of certain companies that were perceived to be operating sub-optimally due to governance or strategic related disagreements with such stockholders. Our stock price decreased significantly following our announcement that the FDA had issued a non-approvable letter for faropenem medoxomil, our former product candidate. If we face such litigation or stockholder activism efforts due to this development or any future development affecting us, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

Our principal stockholders and management own a significant percentage of our stock and are able to exercise significant influence over matters subject to stockholder approval.

Our executive officers, directors and principal stockholders, together with their respective affiliates, currently own a significant percentage of our voting stock, including shares subject to outstanding options and warrants, and we expect this group will continue to hold a significant percentage of our outstanding voting stock. Accordingly, these stockholders will likely be able to have a significant impact on the composition of our board of directors and continue to have significant influence over our operations. This concentration of ownership could have the effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could have a material and adverse effect on the market value of our common stock.

We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the Securities and Exchange Commission and the NASDAQ Global Market, have imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have

46

increased our legal and financial compliance costs and made some activities more time-consuming and costly. For example, these rules and regulations have made it more difficult and more expensive for us to obtain director and officer liability insurance coverage.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our testing, or the subsequent testing by our independent registered public accounting firm, when required, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 may require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and have had to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by NASDAQ, the SEC or other regulatory authorities, which would require additional financial and management resources.

Substantial sales of our common stock in the public market could cause our stock price to fall.

Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.

Certain holders of shares of our common stock and warrants to purchase shares of our common stock are entitled to rights with respect to the registration of their shares under the Securities Act. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

We expect that significant additional capital will be required in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock in more than one transaction, stockholders who purchase stock may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to existing stockholders. Pursuant to our 2006 Equity Incentive Plan, our management is authorized to grant stock options to our employees, directors and consultants, and our employees are eligible to participate in our 2006 Employee Stock Purchase Plan. The number of shares available for future grant under our 2006 Equity Incentive Plan can, subject to approval of our board of directors, increase each April 1 by the lesser of five percent of the number of total outstanding shares of our common stock on December 31 of the preceding year or 1,325,448 shares, subject to the ability of our board of directors to reduce such increase. Additionally, the number of shares reserved for issuance under our 2006 Employee Stock Purchase Plan can, subject to approval of our board of directors, increase each April 1 by the lesser of one percent of the number of total outstanding shares of our common stock on December 31 of the prior year or 101,957 shares, subject to the ability of our board of directors to reduce such increase. In addition, we also have warrants outstanding to purchase shares of our common stock. Our stockholders will incur dilution upon exercise of any outstanding stock options or warrants.

47

All of the shares of common stock sold in our initial public offering are freely tradable without restrictions or further registration under the Securities Act of 1933, as amended, except for any shares purchased by our affiliates as defined in Rule 144 under the Securities Act. Rule 144 defines an affiliate as a person who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, us and would include persons such as our directors and executive officers.

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

Under Section 382 of the Internal Revenue Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. We believe that, based on an analysis of historical equity transactions under the provisions of Section 382, ownership changes have occurred at two points since our inception. These ownership changes will limit the annual utilization of our net operating losses in future periods. We do not believe, however, that these ownership changes will result in the loss of any of our net operating loss carryforwards existing on the date of each of the ownership changes. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership, and such changes may result in the loss of net operating loss carryforwards on such ownership change date.

Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders.

Provisions in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders. These provisions include:

•  authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;

•  limiting the removal of directors by the stockholders;

•  prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;

•  eliminating the ability of stockholders to call a special meeting of stockholders; and

•  establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.

In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by our board of directors. This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or beneficial to our stockholders.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Recent Sales of Unregistered Equity Securities

None.

Issuer Purchases Of Equity Securities

							Maximum Number (or
						Total Number of	Approximate Dollar
						Shares Purchased as	Value) of Shares
						Part of Publicly	That May Yet Be
	Total Number of			Average Price		Announced Plans or	Purchased Under the
Period	Shares Purchased			Paid per Share		Programs	Plans or Programs
6/23/08		744	(1)	$	0.61	None	Not Applicable
6/30/08		7,647	(1)	$	0.61	None	Not Applicable

48

(1) Repurchase of unvested restricted stock from an employee at cost.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Our annual meeting of stockholders was held on May 8, 2008. At the meeting, our stockholders voted to elect Daniel J. Mitchell and Geoffrey Duyk, M.D., Ph.D. to serve on the Board of Directors until the 2011 Annual Meeting of Stockholders and until their successors are elected and qualified and ratified the appointment of KPMG LLP as our independent auditors for the fiscal year ending December 31, 2008.

The results of voting from the stockholders who voted was as follows:

On the election of Daniel J. Mitchell our stockholders voted: For: 22,385,651, Against: None, Withheld: 411,647

On the election of Geoffrey Duyk, M.D., Ph.D. our stockholders voted: For: 21,973,775, Against: None, Withheld: 823,523.

On the ratification and approval of KPMG LLP our stockholders voted: For: 22,662,517 Against: 133,192, Abstain: 1,589.

In addition to the directors elected above, Kenneth J. Collins, Kirk K. Calhoun, Augustine Lawlor and Edward Brown continued to serve as directors after the annual meeting.

ITEM 5.   OTHER INFORMATION

Not applicable.

ITEM 6.   EXHIBITS

Exhibit
Number			Description of Document
	10	.22+*	Separation Agreement, dated as of April 15, 2008, by and between the Registrant and Peter Letendre
	10	.23+*	Consulting Agreement, dated as of April 16, 2008, by and between the Registrant and Peter Letendre
	10	.24+*	Separation Agreement, dated as of May 1, 2008, by and between the Registrant and Roger Echols
	10	.25+*	Consulting Agreement, dated as of May 2, 2008, by and between the Registrant and Roger Echols
	31	.1	Certification of principal executive officer required by Rule 13a-14(a)
	31	.2	Certification of principal financial officer required by Rule 13a-14(a)
	32	.1	Section 1350 Certification
	+		Indicates management contract or compensatory plan.
	*		Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

49

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.

REPLIDYNE, INC.

By:  /s/  Mark L. Smith

Mark L. Smith

Chief Financial Officer, Treasurer

(Principal Financial and Accounting Officer)

Date: August 5, 2008

50

Exhibit Index

Exhibit
Number			Description of Document
	10	.22+*	Separation Agreement, dated as of April 15, 2008, by and between the Registrant and Peter Letendre
	10	.23+*	Consulting Agreement, dated as of April 16, 2008, by and between the Registrant and Peter Letendre
	10	.24+*	Separation Agreement, dated as of May 1, 2008, by and between the Registrant and Roger Echols
	10	.25+*	Consulting Agreement, dated as of May 2, 2008, by and between the Registrant and Roger Echols
	31	.1	Certification of principal executive officer required by Rule 13a-14(a)
	31	.2	Certification of principal financial officer required by Rule 13a-14(a)
	32	.1	Section 1350 Certification
	+		Indicates management contract or compensatory plan.
	*		Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

51

EX-10.22

[ * * * ]   CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

EXHIBIT 10.22

SEPARATION AGREEMENT

     This Separation Agreement (this “Agreement”) is dated as of April 15, 2008 (the “Effective Date”), and is entered into by and between Replidyne, Inc. (the “Company”), and Peter Letendre (“Executive” and, together with the Company, the “Parties”).

RECITALS

     WHEREAS, Executive has been employed by the Company as Chief Commercial Officer of the Company pursuant to an Employment Agreement by and between the Company and Executive dated as of April 4, 2006, as amended, June 15, 2007, (the “Employment Agreement”);

     WHEREAS, the parties have determined that Executive shall terminate his employment as Chief Commercial Officer effective April 15, 2008 (the “Separation Date”), and, in connection with such separation, the Parties have agreed to settle any and all related agreements between the Parties and their affiliates in the manner set forth herein; and

     WHEREAS, except as expressly set forth herein, the Parties intend that this Agreement shall supersede and replace all other understandings and agreements, whether oral or written regarding Executive’s employment with the Company, including but not limited, to the Employment Agreement,

     NOW THEREFORE, in consideration of the promises and mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are expressly acknowledged, the Parties agree and promise as follows:

Section 1. Termination. Effective on the Separation Date, Executive shall terminate his employment as the Chief Commercial Officer of the Company.

Section 2. Termination Benefits.  Pursuant to Section 10(d) of the Employment Agreement, upon execution of this Agreement and of the release attached hereto as Exhibit B (“Release”), Executive shall be entitled to receive the following Severance Benefits:

     (a) Severance Payment. The Company shall pay to Executive the equivalent of twelve (12) months of his Base Salary as in effect immediately prior to the Separation Date, payable on the same basis and at the same time as previously paid and subject to all applicable tax withholdings and other deductions, commencing on the first regularly scheduled pay date following the Effective Date of the Release;

     (b) Health Insurance. The Company shall pay the premiums of Executive’s group health insurance COBRA continuation coverage, including coverage for Executive’s eligible dependents, for a maximum period of twelve (12) months following the Separation Date; provided, however, that (i) the Company shall pay premiums for Executive’s eligible dependents

only for coverage for which those eligible dependents were enrolled immediately prior to the Separation Date; and (ii) the Company’s obligation to pay such premiums shall cease immediately upon Executive’s eligibility for comparable group health insurance provided by a new employer of Executive.

     (c) Outplacement Services. Although the Company is under no obligation to do so, in further consideration for the promises and agreements contained herein, the Company agrees to pay the cost for Executive to participate in up to six (6) months of outplacement services with Right Management Inc. up to a maximum amount of $7,500 if initiated no later than three (3) months following the Termination Date of the Consulting Agreement.

     (d) Accrued Obligations.  On the Separation Date, the Company shall pay Executive all earned but unpaid Base Salary through the Separation Date and reimburse Executive for any reasonable unreimbursed expenses incurred in accordance with Company policy.  Additionally, Executive shall be entitled to a payment for all accrued but unused vacation that Executive has accrued through the Separation Date.

Section 6. Consulting Agreement. The Parties agree that immediately following the Separation Date, the Company will require the use of Executive’s marketing and commercialization expertise to assist it in the evaluation of potential partnership opportunities. Accordingly, Executive agrees to enter into a Consulting Agreement with the Company attached hereto as Exhibit C.

Section 7. Other Compensation and Benefits. Executive acknowledges that, except as expressly provided in this Agreement, including the Consulting Agreement, he has not earned and will not receive any additional pay or salary, incentive compensation, severance, equity interests or options, or benefits after the Separation Date, with the exception of any vested right he may have under the express terms of a written ERISA-qualified benefit plan (e.g., 401(k) account). In particular, but without limitation, Executive agrees that he is not owed any bonus, incentive compensation, or commissions.

Section 8. Return Of Company Property. By the close of business on the Separation Date, with the exception of the “Retained Property” (described herein), Executive agrees to return to the Company all Company documents (and all copies thereof, in whole or in part) and other Company property which Executive has in his possession or control, including, but not limited to, Company files, notes, drawings, records, plans, forecasts, reports, studies, analyses, proposals, agreements, engineering information, test data and materials, financial information, research and development information, sales and marketing information, customer information and databases, contact information, operational and personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including, but not limited to, computers, facsimile machines, mobile telephones, servers), credit cards, entry cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part). Executive agrees that he will make a diligent search to locate any such documents, property and information within the timeframe referenced above. If Executive has used any personally owned computer, server, or e-mail system to receive, store, review, prepare or transmit any Company confidential or proprietary data, materials or information, Executive

2

agrees to provide the Company with a computer-useable copy of such information and then permanently delete and expunge such Company confidential or proprietary information from those systems within five (5) business days after the Separation Date; and Executive agrees to provide the Company access to Executive’s system as requested to verify that the necessary copying and/or deletion is done. Except for the Retained Property described herein, Executive agrees that, after the Separation Date, Executive will neither use nor possess Company property. For purposes of this Agreement, Retained Property shall mean all documents, files and other information technology devices provided to Executive by the Company in order to perform the Consulting Duties as set forth in Exhibit C of this Agreement. At the conclusion of the Consulting Agreement, Executive shall have the opportunity to purchase such devices at their depreciated fair market value.

Section 9. Confidential Information and Restrictive Covenants.  Executive acknowledges that the confidentiality obligations and restrictive covenants set forth in the Company’s Proprietary Information and Inventions Agreement, attached to the Employment Agreement and hereto as Exhibit A shall remain in full force and effect following the Separation Date and Executive further agrees to comply with the terms of such obligations and restrictive covenants.

Section 8. Release.  Notwithstanding anything herein to the contrary, Executive shall not be entitled to any benefits pursuant to this Agreement prior to the time in which he executes a full general release of claims against the Company and its affiliates substantially in the form attached to the Employment Agreement and hereto as Exhibit B.

Section 10. Non-Disparagement.  Executive agrees that, except as required by applicable law, or compelled by process of law, at any time following the date hereof, neither Executive, nor anyone acting on his behalf, shall hereafter make any derogatory, disparaging or critical statement about the Company, the Company’s subsidiaries or affiliates, or any of the Company’s current officers, directors, employees, or shareholders or any persons who were officers, directors, employees, or shareholders of the Company.  The Company agrees that, except as required by applicable law, or compelled by process of law, neither it, nor anyone acting on its behalf, shall hereafter make any derogatory, disparaging or critical statement about the Executive.

Section 11. Cooperation by Executive. Following the Separation Date, Executive will reasonably cooperate in all reasonable respects with the Company and its affiliates in connection with any and all existing or future litigation, actions or proceedings (whether civil, criminal, administrative, regulatory, or otherwise) brought by or against the Company or any of its affiliates, to the extent the Company reasonably deems Executive’s cooperation necessary.  Executive shall be reimbursed for all reasonable out-of-pocket expenses incurred by his as a result of such cooperation.

Section 12. Indemnification.  The Company acknowledges that (a) its by-laws (or those of one or more of its affiliates) contain provisions indemnifying directors and officers to the fullest extent permitted by applicable law and (b) Executive is covered by such provisions (as such provisions are in effect on the Separation Date) to the extent permitted by applicable law even after the Separation Date with respect to such matters occurring during the course of Executive’s

3

employment before the Separation Date, subject to the terms of such by-law provisions (as such provisions are in effect on the Separation Date).

Section 13. Confidentiality of Agreement.  Executive hereby agrees to keep the terms of this Agreement confidential; provided, that the obligations of Executive under this Section 13 shall not apply to disclosures required by applicable law, regulation or order of a court or governmental agency, to Executive’s counsel, or to Executive’s immediate family.

Section 14. Opportunity for Advice.  By signing this Agreement, Executive acknowledges that with the advice of the Company, he has had a reasonable opportunity to consider advice from his legal counsel.  Fully understanding these terms, Executive is entering into this Agreement knowingly and voluntarily.

Section 15. Entire Agreement.  This Agreement, including its Exhibits, represents the entire agreement of the parties with respect to Executive’s engagement and termination thereof, and supersedes all prior negotiations, discussions, correspondence, communications, understandings and agreements between the parties relating to the subject matter of this Agreement, including but not limited to the Employment Agreement.

Section 16. Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.

Section 17. Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

Section 18. Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

[Remainder of page intentionally left blank.]

4

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

/s/ Peter Letendre
Peter Letendre
REPLIDYNE, INC.
By:	/s/ Kenneth J. Collins
	Kenneth J. Collins
Title:	Chief Executive Officer

5

Exhibit A

MANAGER, EXECUTIVE PERSONNEL OR ASSISTANTS’
PROPRIETARY INFORMATION, INVENTIONS,
NON-COMPETITION, AND NON-SOLICITATION AGREEMENT

     This Manager, Executive Personnel or Assistants’ Proprietary Information, Inventions, Non-competition, and Non-solicitation Agreement (“Agreement”) is made in consideration for my employment or continued employment by Replidyne, Inc. or its subsidiaries or affiliates (the “Company”), and the compensation now and hereafter paid to me. I hereby agree as follows:

1. Nondisclosure.

1.1 Recognition of Company’s Rights; Nondisclosure. At all times during my employment and thereafter, I will hold in strictest confidence and will not disclose, use, lecture upon or publish any of the Company’s Proprietary Information (defined below), except as such disclosure, use or publication may be required in connection with my work for the Company, or unless an officer of the Company expressly authorizes such in writing. I will obtain Company’s written approval before publishing or submitting for publication any material (written, verbal, or otherwise) that relates to my work at Company and/or incorporates any Proprietary Information. I hereby assign to the Company any rights I may have or acquire in such Proprietary Information and recognize that all Proprietary Information shall be the sole property of the Company and its assigns.

1.2 Proprietary Information. The term “Proprietary Information” shall mean any and all confidential and/or proprietary knowledge, data or information of the Company. By way of illustration but not limitation, Proprietary Information includes (a) trade secrets, inventions, mask works, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques (hereinafter collectively referred to as “Inventions”); and (b) information regarding plans for research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and (c) information regarding the skills and compensation of other employees of the Company. Notwithstanding the foregoing, it is understood that, at all such times, I am free to use information which is generally known in the trade or industry, which is not gained as result of a breach of this Agreement, and my own, skill, knowledge, know-how and experience to whatever extent and in whichever way I wish.

1.3 Third Party Information. I understand, in addition, that the Company has received and in the future will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of my employment and thereafter, I will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than Company personnel who need to know such information in connection with their work for the Company) or use, except in connection with my work for the Company, Third Party Information unless expressly authorized by an officer of the Company in writing.

1.4 No Improper Use of Information of Prior Employers and Others. During my employment by the Company I will not improperly use or disclose any confidential information or trade secrets, if any, of any former employer or any other person to whom I have an obligation of confidentiality, and I will not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom I have an obligation of confidentiality unless consented to in writing by that former employer or person. I will use in the performance of my duties only information which is generally known and used by persons with training and experience comparable to my own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.

2. Assignment of Inventions.

2.1 Proprietary Rights. The term “Proprietary Rights” shall mean all trade secret, patent, copyright, mask work and other intellectual property rights throughout the world.

2.2 Prior Inventions. Inventions, if any, patented or unpatented, which I made prior to the

commencement of my employment with the Company are excluded from the scope of this Agreement. To preclude any possible uncertainty, I have set forth on Exhibit A (Previous Inventions) attached hereto a complete list of all Inventions that I have, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice prior to the commencement of my employment with the Company, that I consider to be my property or the property of third parties and that I wish to have excluded from the scope of this Agreement (collectively referred to as “Prior Inventions”). If disclosure of any such Prior Invention would cause me to violate any prior confidentiality agreement, I understand that I am not to list such Prior Inventions in Exhibit A but am only to disclose a cursory name for each such invention, a listing of the party(ies) to whom it belongs and the fact that full disclosure as to such inventions has not been made for that reason. A space is provided on Exhibit A for such purpose. If no such disclosure is attached, I represent that there are no Prior Inventions. If, in the course of my employment with the Company, I incorporate a Prior Invention into a Company product, process or machine, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to make, have made, modify, use and sell such Prior Invention. Notwithstanding the foregoing, I agree that I will not incorporate, or permit to be incorporated, Prior Inventions in any Company Inventions without the Company’s prior written consent.

2.3 Assignment of Inventions. Subject to Sections 2.4, and 2.6, I hereby assign and agree to assign in the future (when any such Inventions or Proprietary Rights are first reduced to practice or first fixed in a tangible medium, as applicable) to the Company all my right, title and interest in and to any and all Inventions (and all Proprietary Rights with respect thereto) whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by me, either alone or jointly with others, during the period of my employment with the Company. Inventions assigned to the Company, or to a third party as directed by the Company pursuant to this Section 2, are hereinafter referred to as “Company Inventions.”

2.4 Nonassignable Inventions. I recognize that this Agreement will not be deemed to require assignment of any invention which was developed entirely on my own time without using the Company’s equipment, supplies, facilities, or trade secrets and neither related to the Company’s actual or anticipated business, research or development, nor resulted from work performed by me for the Company (“Nonassignable Inventions”).

2.5 Obligation to Keep Company Informed. During the period of my employment and for six months after the last day of my employment with the Company, I will promptly disclose to the Company fully and in writing all Inventions authored, conceived or reduced to practice by me, either alone or jointly with others. In addition, I will promptly disclose to the Company all patent applications filed by me or on my behalf within a year after termination of employment. At the time of each such disclosure, I will advise the Company in writing of any Inventions that I believe are Nonassignable Inventions and I will at that time provide to the Company in writing all evidence necessary to substantiate that belief. The Company will keep in confidence and will not use for any purpose or disclose to third parties without my consent any confidential information disclosed in writing to the Company pursuant to this Agreement relating to Inventions that have been identified as Nonassignable Inventions.

2.6 Government or Third Party. I also agree to assign all my right, title and interest in and to any particular Invention to a third party, including without limitation the United States, as directed by the Company.

2.7 Works for Hire. I acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of my employment and which are protectable by copyright are “works made for hire,” pursuant to United States Copyright Act (17 U.S.C., Section 101).

2.8 Enforcement of Proprietary Rights. I will assist the Company in every proper way to obtain, and from time to time enforce, United States and foreign Proprietary Rights relating to Company Inventions in any and all countries. To that end I will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, I will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. My obligation to assist the Company with respect to

Proprietary Rights relating to such Company Inventions in any and all countries shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate after my termination for the time actually spent by me at the Company’s request on such assistance.

In the event the Company is unable for any reason, after reasonable effort, to secure my signature on any document needed in connection with the actions specified in the preceding paragraph, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, which appointment is coupled with an interest, to act for and in my behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by me. I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.

3. No Conflicts or Solicitation. I acknowledge that during my employment I will have access to and knowledge of Proprietary Information. I also acknowledge that during my employment with the Company, I have held and/or will hold a management or executive position or am, or will be, an assistant to a manager or executive. To protect the Company’s Proprietary Information, I agree that during the period of my employment by the Company I will not, without the Company’s express written consent, engage in any other employment or business activity directly related to the business in which the Company is now involved or becomes involved, nor will I engage in any other activities which conflict with my obligations to the Company. To protect the Company’s Proprietary Information, and because of the position in the Company that I hold, I agree that during my employment with the Company whether full-time or part-time and for a period of one year after my last day of employment with the Company, I will not (a) directly or indirectly solicit or induce any employee of the Company to terminate or negatively alter his or her relationship with the Company or (b) directly or indirectly solicit the business of any client or customer of the Company (other than on behalf of the Company) or (c) directly or indirectly induce any client, customer, supplier, vendor, consultant or independent contractor of the Company to terminate or negatively alter his, her or its relationship with the Company. I agree that the geographic scope of the non-solicitation should include the “Restricted Territory” (as defined below). If any restriction set forth in this Section is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

4. Covenant Not to Compete. I acknowledge that during my employment I will have access to and knowledge of Proprietary Information. I also acknowledge that during my employment with the Company, I have held and/or will hold a management or executive position or am, or will be, an assistant to a manager or executive. To protect the Company’s Proprietary Information, and because of the position in the Company that I may hold, I agree that during my employment with the Company whether full-time or part-time and for a period of one year after my last day of employment with the Company, I will not directly or indirectly personally participate or engage in (whether as an employee, consultant, proprietor, partner, director or otherwise), or have any ownership interest in, or participate in the financing, operation, management or control of, any person, firm, corporation or business that engages in a “Restricted Business” in a “Restricted Territory” (as defined below). It is agreed that ownership of (i) no more than one percent (1%) of the outstanding voting stock of a publicly traded corporation, or (ii) any stock I presently own shall not constitute a violation of this provision.

4.1 Reasonable. I agree and acknowledge that the time limitation on the restrictions in this paragraph, combined with the geographic scope, is reasonable. I also acknowledge and agree that this paragraph is reasonably necessary for the protection of Company’s Proprietary Information as defined in paragraph 1.2 herein, that through my employment I shall receive adequate consideration for any loss of opportunity associated with the provisions herein, and that these provisions provide a reasonable way of protecting Company’s business value which will be imparted to me. If any restriction set forth in this paragraph 4 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

4.2 As used herein, the terms:

     (i) “Restricted Business” shall mean the design, development, marketing, commercialization or sales of any anti-infective products, anti-bacterials, or other biopharmaceutical products that directly compete in the marketplace with any such product then sold by the Company or then in development by the Company and projected to be sold within one (1) year of my last day of employment with the Company.

     (ii) “Restricted Territory” shall mean any state, county, or locality in the United States in which the Company conducts business and any other country, city, state, jurisdiction, or territory in which the Company does business.

5. Records. I agree to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any other form that may be required by the Company) of all Proprietary Information developed by me and all Inventions made by me during the period of my employment at the Company, which records shall be available to and remain the sole property of the Company at all times.

6. No Conflicting Obligation. I represent that my performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement to keep in confidence information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict herewith.

7. Return Of Company Materials. When I leave the employ of the Company, I will deliver to the Company any and all drawings, notes, memoranda, specifications, devices, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Inventions, Third Party Information or Proprietary Information of the Company. I further agree that any property situated on the Company’s premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice.

8. Legal And Equitable Remedies. Because my services are personal and unique and because I may have access to and become acquainted with the Proprietary Information of the Company, the Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement.

9. Notices. Any notices required or permitted hereunder shall be given to the appropriate party at the address specified below or at such other address as the party shall specify in writing. Such notice shall be deemed given upon personal delivery to the appropriate address or if sent by certified or registered mail, three days after the date of mailing.

10. Notification Of New Employer. In the event that I leave the employ of the Company, I hereby consent to the notification of my new employer of my rights and obligations under this Agreement.

11. General Provisions.

11.1 Governing Law; Consent to Personal Jurisdiction and Exclusive Forum. This Agreement will be governed by and construed according to the laws of the State of Colorado without regard to conflicts of law principles. I hereby expressly understand and consent that my employment is a transaction of business in the State of Colorado and constitutes the minimum contacts necessary to make me subject to the personal jurisdiction of the federal courts located in the State of Colorado, and the state courts located in the County of Boulder County, Colorado, for any lawsuit filed against me by Company arising from or related to this Agreement. I agree and acknowledge that any controversy arising out of or relating to this Agreement or the breach thereof, or any claim or action to enforce this Agreement or portion thereof, or any controversy or claim requiring interpretation of this Agreement must be brought in a forum located within the State of Colorado.

11.2 Severability. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. If moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.

11.3 Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.

11.4 Survival. The provisions of this Agreement shall survive the termination of my employment and the assignment of this Agreement by the Company to any successor in interest or other assignee.

11.5 No Employment Rights. I agree and understand that my employment is at-will which means I or the company each have the right to terminate my employment at will, with or without advanced notice and with or without cause. I further agree and understand that nothing in this Agreement shall confer any right with respect to continuation of employment by the Company, nor shall it interfere in any way with my right or the Company’s right to terminate my employment at any time, with or without cause.

11.6 Waiver. No waiver by the Company of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement shall be construed as a waiver of any other right. The Company shall not be required to give notice to enforce strict adherence to all terms of this Agreement.

11.7 Entire Agreement. The obligations pursuant to Sections 1 through 4 and Sections 6 and 7 (including all subparts) of this Agreement shall apply to any time during which I was previously employed, or am in the future employed, by the Company as a consultant if no other agreement governs nondisclosure and assignment of inventions during such period. This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement

          This Agreement shall be effective as of the first day of my employment with the Company, namely: March 17, 2005.

          I have read this Agreement carefully and understand its terms. I have completely filled out exhibit a to this Agreement.

Dated: April 4, 2006

/s/ Peter Letendre

Signature

Peter W. Letendre

Printed Name

Accepted and agreed to:

EXHIBIT B

RELEASE

In exchange for the consideration provided to me by this Agreement that I am not otherwise entitled to receive, I hereby generally and completely release the Company and its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions related to my employment with the Company or the termination of that employment, including, but not limited to: (1) all claims related to my compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (2) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (3) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (4) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), and the Colorado state law (as amended). Notwithstanding the foregoing, nothing contained in this Release is intended to release the Company from any claim arising out of or with regard to: (i) any payment to be made to me by the Company in connection the termination of employment as contemplated by the Employment Agreement, or (ii) any statutory obligation that the Company may have with regard to the continuation of benefits.

ADEA Waiver and Release. I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA, as amended. I also acknowledge that the consideration given for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my waiver and release does not apply to any rights or claims that may arise after the execution date of this Agreement; (b) I have been advised that I have the right to consult with an attorney prior to executing this Agreement; (c) I have been given twenty-one (21) days to consider this Agreement; (d) I have seven (7) days following the execution of this Agreement by the parties to revoke the Agreement; and (e) this Agreement will not be effective until the date upon which the revocation period has expired, which will be the eighth day after this Agreement is executed by you, provided that the Company has also executed this Agreement by that date (“Effective Date”). The parties acknowledge and agree that revocation by you of the ADEA Waiver and Release is not effective to revoke your waiver or release of any other claims pursuant to this Agreement.

By: /s/ Peter Letendre Date: April 15, 2008

7

EXHIBIT C

REPLIDYNE, INC.
CONSULTANT AGREEMENT FOR
Peter Letendre

     This Consultant Agreement (“Agreement”) is entered into by and between Peter Letendre, an individual (“Consultant”), and Replidyne, Inc., (the “Company”), effective as of April 16, 2008 (“Effective Date”).

     Whereas, the Company is a biopharmaceutical company currently focused on developing and commercializing innovative anti-infective products, including but not limited to faropenem medoxomil (collectively, the “Products”);

     Whereas, Consultant, having been involved with the Company since 2005 and serving as the Company’s Chief Commercial Officer, is a significant source of knowledge and expertise about the Company’s business and its potential clinical development and commercialization strategies for the Products;

     Whereas, the parties have agreed that Consultant shall be retained as a Consultant to allow the Company to retain the benefit of Consultant’s knowledge and expertise; and

     Whereas, the Company terminated Consultant’s full time employment with the Company effective April 15, 2008 pursuant to a Separation Agreement with an Effective Date of April 15, 2008 and the parties hereby desire to mutually agree upon the terms and conditions of Consultant’s consulting relationship with the Company.

     Now, Therefore, in consideration of the mutual promises and covenants contained herein, it is agreed by and between the parties as follows:

1. Consulting Relationship.

     1.1 Consulting Services. As part of the services provided by Consultant to the Company pursuant to this Agreement, Consultant will:

          (a) Advise and consult with the Company on strategic planning and partnership opportunities related to the Products; and

          (b) Participate in discussions and negotiations with potential partnership prospects;

          (c) Perform such other services that relate to Consultant’s areas of expertise and which the Company’s executive officers believe would be beneficial to the Company (collectively, the “Consulting Services”).

8

     1.2 Performance. As and when requested from time to time by the Company’s President and Chief Executive Officer, Kenneth Collins or his delegates, Consultant agrees to provide services to the Company under this Agreement. The time commitment required for Consulting Services under this Agreement will generally not exceed 40 hours per month from April 16, 2008 until July 31, 2008 (“Initial Consulting Period”) and will generally not exceed 20 hours per month from August 1, 2008 until December 31, 2008 or at such earlier or later date as agreed to by the Company and Consultant pursuant to Section 6.1 herein (“Termination Date”), although the time commitment required during any specific monthly period may vary from the time commitment required in other periods. Consultant will render the Consulting Services to the best of his ability. The manner and means by which Consultant chooses to perform the Consulting Services are in Consultant’s sole discretion and control. Consultant agrees to exercise the highest degree of professionalism, and to utilize his best efforts, skills, expertise and creative talents in performing such Consulting Services. In performing Consulting Services, Consultant agrees to provide his own equipment, tools and other materials in addition to the Retained Property provided to him by the Company. Consultant shall perform his Consulting Services in a timely and professional manner consistent with industry standards. Consultant agrees to provide the Consulting Services at the times reasonably requested by the Company; provided that, the Company will reasonably cooperate with Consultant in the event that he has conflicts in connection with other obligations, whether such obligations are work related or personal. Consultant may not subcontract or otherwise delegate his obligations under this Agreement without the Company’s prior written consent.

2. Compensation.

     2.1 Consulting Fees. In consideration of his agreement to provide the Consulting Services hereunder, during the Initial Consulting Period, Consultant will be paid an amount equal to $10,000 for each full month of Consulting Services rendered to the Company during the Initial Consulting Period. Consulting Fees shall be pro rated for any partial months of work during the Initial Consulting Period. From the end of the Initial Consulting Period through the Termination Date, and for any hours in excess of forty hours per month during the Initial Consulting Period, Consultant will be compensated at a rate of $300 per hour. Consultant agrees to submit a monthly invoice to the Company for approval detailing all consulting hours worked in the prior month.

     2.2 Stock Options. As further consideration of his agreement to provide Consulting Services hereunder, subject to the approval of the Company’s Compensation Committee, the Company will provide Consultant with a non-qualified stock option grant to purchase up to 40,000 shares of Company common stock at the fair market value of the stock as of the date of grant pursuant to the Company’s 2006 Equity Incentive Plan (“Consulting Option”). The Consulting Option shall vest over the course of the Consulting Agreement in eight (8) equal monthly installments and shall have an exercise period of up to three (3) years from Termination Date of this Consulting Agreement. The stock options previously granted to Consultant during his employment with the Company shall continue to vest for so long as Consultant continues to provide Continuous Service to the Company as defined in the Company’s 2006 Equity Incentive Plan. Consultant understands and acknowledges that on July 15, 2008, all options previously granted to Consultant shall become NonQualified Options. Consultant is advised to seek

9

independent tax or accounting advice with regard to the exercise and tax treatment of any vested options.

     2.3 Partnering Bonus. In the event that prior to the Termination Date, the Company concludes a faropenem partnership with [ * * * ], Consultant will be eligible to receive a one time lump sum Partnering Bonus equal to $250,000, provided that Consultant is actively providing Consulting Services through the date of the execution of the partnering agreement with [ * * * ].

     2.4 Expenses. Consultant shall receive, against presentation of proper receipts and vouchers, reimbursement for direct and reasonable out-of-pocket expenses incurred by him in connection with the performance of services hereunder, according to the policies of the Company.

3. Independent Contractor Status.

     Consultant’s relationship with the Company will be that of an independent contractor and nothing in this Agreement should be construed to create a partnership, joint venture, or employer-employee relationship. Consultant is not the agent of the Company and is not authorized to make any representation, contract, or commitment on behalf of the Company. Consultant will not be entitled to any of the benefits that the Company may make available to its employees. Because Consultant is an independent contractor, the Company will not withhold or make payments for income taxes; social security; make unemployment insurance or disability insurance contributions; or obtain workers’ compensation insurance on Consultant’s behalf with respect to any payment made pursuant to this Agreement. Consultant agrees to accept exclusive liability for complying with applicable state and federal laws governing self-employed individuals, including obligations such as payment of taxes, social security, disability and other contributions based on compensation paid to Consultant. Consultant hereby agrees to indemnify and defend the Company against any and all claims for such taxes or contributions, including penalties and interest due with respect to all payments under this Agreement.

4. Proprietary Information Obligations. Consultant understand and agrees that the terms of his Proprietary Information Agreement, attached as Exhibit A to the Separation Agreement of even date, remain in full force and effect during the term of this Consulting Agreement and are fully incorporated herein by reference.

5. Other Activities.

     5.1 Other Services. Consultant is free to enter any contract to provide services to other business entities, except any contract that would tend to induce Consultant to violate this Agreement. Further, during the term of this Agreement, Consultant will not, without the prior written consent of the Company, perform any services related to the development, preparation, manufacture, marketing or sale of any drugs or therapeutics that may reasonably be considered to compete with any Products, whether on behalf of his own interest or that of any other person or entity.

10

6. Term; Termination.

     6.1 Term. Unless sooner terminated in accordance with this Section 6 or mutually extended, the term of this Agreement shall commence on the Effective Date and shall terminate on December 31, 2008. Notwithstanding the foregoing, this Agreement shall automatically terminate immediately upon (i) Just Cause (as defined below) or (ii) consummation of a Change in Control.

     6.2 Termination for Just Cause. The Company may terminate this Agreement immediately in its sole discretion for Just Cause. In the event the Company terminates this Agreement pursuant to this Section 6.2, the Company shall be entitled to cease any further payments under the terms of this Consulting Agreement and shall reimburse Consultant for any business expenses that were incurred but not reimbursed as of the date of termination. As used in this Agreement, “Just Cause” shall mean the occurrence of one or more of the following: (i) Consultant’s conviction of a felony or a crime involving moral turpitude or dishonesty; (ii) Consultant’s participation in a fraud or act of dishonesty against the Company; (iii) Consultant’s intentional and material damage to the Company’s property; (iv) Consultant’s material breach of any provision of this Agreement that is not remedied by Consultant within fourteen (14) days of written notice of such breach from the Board of Directors; (v) Consultant’s failure to perform the Consulting Services in accordance with Section 1.2 hereof at the times reasonably requested by the Company; or (vi) Consultant’s failure to execute the Separation Agreement, including Exhibit B, within twenty-one (21) days of receipt of the Separation Agreement.

     6.3 Termination by Consultant. Consultant may terminate this Agreement at his convenience upon ten (10) days prior written notice to the Company. In the event the Consultant terminates this Agreement pursuant to this Section 6.3, the Company shall be entitled to cease any further payments under the terms of this Consulting Agreement and shall reimburse Consultant for any business expenses that were incurred but not reimbursed as of the date of termination

     6.4 Change in Control. In the event that the Company consummates a Change in Control (as defined in the 2006 Equity Incentive Plan) prior to the Termination Date of this Agreement, then, notwithstanding anything contained in Consultant’s stock option agreements or the Company’s 2006 Equity Incentive Plan to the contrary, the vesting of all of Consultant’s then outstanding stock options shall be accelerated in full and such options shall become fully vested and exercisable in accordance with the Company’s 2006 Equity Incentive Plan.

     6.5 Return of Company Property. Upon termination of the Agreement or earlier as requested by the Company, Consultant will deliver to the Company any and all drawings, notes, photographs, memoranda, specifications, samples, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Work Product or Proprietary Information of the Company. Consultant further agrees that any property situated on the Company’s premises and owned by the Company, including work and storage areas or filing cabinets, is subject to inspection by Company personnel at any time with or without notice.

11

7. General Provisions.

     7.1 Notices. Any notices provided hereunder must be in writing and will be deemed effective upon the earlier of personal delivery (including personal delivery by facsimile), the third day after mailing by first class mail, or the day following delivery by overnight courier, to the Company at its primary office location and to Consultant at his address and facsimile number as provided by Consultant to the Company in writing.

     7.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction to the extent possible in conformance with the intent of the parties expressed herein.

     7.3 Waiver. If either party should waive any breach of any provisions of this Agreement, he or it will not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

     7.4 Complete Agreement. This Agreement constitutes the complete, final, and exclusive embodiment of the entire agreement between Consultant and the Company with regard to the subject matter contained herein. It is entered into without reliance on any promise or representation, and it cannot be modified or amended except in a writing signed by an officer of the Company and Consultant. Each party has carefully read this Agreement, has been afforded the opportunity to be advised of its meaning and consequences by his or its respective attorneys, and signed the same of his or its own free will.

     7.5 Counterparts. This Agreement may be executed in two counterparts, each of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.

     7.6 Headings. The headings of the sections hereof are inserted for convenience only and will not be deemed to constitute a part hereof nor to affect the meaning thereof.

     7.7 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Consultant and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Consultant may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the written consent of the Company, which will not be withheld unreasonably.

     7.8 Attorney Fees. If either party brings any action to enforce his or its rights hereunder, the prevailing party in any such action will be entitled to recover his or its reasonable attorneys fees and costs incurred in connection with such action.

12

     7.9 Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the State of Colorado.

Peter Letendre,			Replidyne, Inc.
an Individual
Sign:	/s/ Peter Letendre	By:		/s/ Kenneth J. Collins
				Kenneth J. Collins
				President & Chief Executive Officer
Date: April 15, 2008

13

EX-10.23

[ * * * ]   CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

EXHIBIT 10.23

REPLIDYNE, INC.
CONSULTANT AGREEMENT FOR
Peter Letendre

     This Consultant Agreement (“Agreement”) is entered into by and between Peter Letendre, an individual (“Consultant”), and Replidyne, Inc., (the “Company”), effective as of April 16, 2008 (“Effective Date”).

     Whereas, the Company is a biopharmaceutical company currently focused on developing and commercializing innovative anti-infective products, including but not limited to faropenem medoxomil (collectively, the “Products”);

     Whereas, Consultant, having been involved with the Company since 2005 and serving as the Company’s Chief Commercial Officer, is a significant source of knowledge and expertise about the Company’s business and its potential clinical development and commercialization strategies for the Products;

     Whereas, the parties have agreed that Consultant shall be retained as a Consultant to allow the Company to retain the benefit of Consultant’s knowledge and expertise; and

     Whereas, the Company terminated Consultant’s full time employment with the Company effective April 15, 2008 pursuant to a Separation Agreement with an Effective Date of April 15, 2008 and the parties hereby desire to mutually agree upon the terms and conditions of Consultant’s consulting relationship with the Company.

     Now, Therefore, in consideration of the mutual promises and covenants contained herein, it is agreed by and between the parties as follows:

1. Consulting Relationship.

     1.1 Consulting Services. As part of the services provided by Consultant to the Company pursuant to this Agreement, Consultant will:

          (a) Advise and consult with the Company on strategic planning and partnership opportunities related to the Products; and

          (b) Participate in discussions and negotiations with potential partnership prospects;

          (c) Perform such other services that relate to Consultant’s areas of expertise and which the Company’s executive officers believe would be beneficial to the Company (collectively, the “Consulting Services”).

     1.2 Performance. As and when requested from time to time by the Company’s President and Chief Executive Officer, Kenneth Collins or his delegates, Consultant agrees to provide services to the Company under this Agreement. The time commitment required for Consulting Services under this Agreement will generally not exceed 40 hours per month from April 16, 2008 until July 31, 2008 (“Initial Consulting Period”) and will generally not exceed 20 hours per month from August 1, 2008 until December 31, 2008 or at such earlier or later date as agreed to by the Company and Consultant pursuant to Section 6.1 herein (“Termination Date”), although the time commitment required during any specific monthly period may vary from the time commitment required in other periods. Consultant will render the Consulting Services to the best of his ability. The manner and means by which Consultant chooses to perform the Consulting Services are in Consultant’s sole discretion and control. Consultant agrees to exercise the highest degree of professionalism, and to utilize his best efforts, skills, expertise and creative talents in performing such Consulting Services. In performing Consulting Services, Consultant agrees to provide his own equipment, tools and other materials in addition to the Retained Property provided to him by the Company. Consultant shall perform his Consulting Services in a timely and professional manner consistent with industry standards. Consultant agrees to provide the Consulting Services at the times reasonably requested by the Company; provided that, the Company will reasonably cooperate with Consultant in the event that he has conflicts in connection with other obligations, whether such obligations are work related or personal. Consultant may not subcontract or otherwise delegate his obligations under this Agreement without the Company’s prior written consent.

2. Compensation.

     2.1 Consulting Fees. In consideration of his agreement to provide the Consulting Services hereunder, during the Initial Consulting Period, Consultant will be paid an amount equal to $10,000 for each full month of Consulting Services rendered to the Company during the Initial Consulting Period. Consulting Fees shall be pro rated for any partial months of work during the Initial Consulting Period. From the end of the Initial Consulting Period through the Termination Date, and for any hours in excess of forty hours per month during the Initial Consulting Period, Consultant will be compensated at a rate of $300 per hour. Consultant agrees to submit a monthly invoice to the Company for approval detailing all consulting hours worked in the prior month.

     2.2 Stock Options. As further consideration of his agreement to provide Consulting Services hereunder, subject to the approval of the Company’s Compensation Committee, the Company will provide Consultant with a non-qualified stock option grant to purchase up to 40,000 shares of Company common stock at the fair market value of the stock as of the date of grant pursuant to the Company’s 2006 Equity Incentive Plan (“Consulting Option”). The Consulting Option shall vest over the course of the Consulting Agreement in eight (8) equal monthly installments and shall have an exercise period of up to three (3) years from Termination Date of this Consulting Agreement. The stock options previously granted to Consultant during his employment with the Company shall continue to vest for so long as Consultant continues to provide Continuous Service to the Company as defined in the Company’s 2006 Equity Incentive Plan. Consultant understands and acknowledges that on July 15, 2008, all options previously granted to Consultant shall become NonQualified Options. Consultant is advised to seek

independent tax or accounting advice with regard to the exercise and tax treatment of any vested options.

     2.3 Partnering Bonus. In the event that prior to the Termination Date, the Company concludes a faropenem partnership with [ * * * ], Consultant will be eligible to receive a one time lump sum Partnering Bonus equal to $250,000, provided that Consultant is actively providing Consulting Services through the date of the execution of the partnering agreement with [ * * * ].

     2.4 Expenses. Consultant shall receive, against presentation of proper receipts and vouchers, reimbursement for direct and reasonable out-of-pocket expenses incurred by him in connection with the performance of services hereunder, according to the policies of the Company.

3. Independent Contractor Status.

     Consultant’s relationship with the Company will be that of an independent contractor and nothing in this Agreement should be construed to create a partnership, joint venture, or employer-employee relationship. Consultant is not the agent of the Company and is not authorized to make any representation, contract, or commitment on behalf of the Company. Consultant will not be entitled to any of the benefits that the Company may make available to its employees. Because Consultant is an independent contractor, the Company will not withhold or make payments for income taxes; social security; make unemployment insurance or disability insurance contributions; or obtain workers’ compensation insurance on Consultant’s behalf with respect to any payment made pursuant to this Agreement. Consultant agrees to accept exclusive liability for complying with applicable state and federal laws governing self-employed individuals, including obligations such as payment of taxes, social security, disability and other contributions based on compensation paid to Consultant. Consultant hereby agrees to indemnify and defend the Company against any and all claims for such taxes or contributions, including penalties and interest due with respect to all payments under this Agreement.

4. Proprietary Information Obligations. Consultant understand and agrees that the terms of his Proprietary Information Agreement, attached as Exhibit A to the Separation Agreement of even date, remain in full force and effect during the term of this Consulting Agreement and are fully incorporated herein by reference.

5. Other Activities.

     5.1 Other Services. Consultant is free to enter any contract to provide services to other business entities, except any contract that would tend to induce Consultant to violate this Agreement. Further, during the term of this Agreement, Consultant will not, without the prior written consent of the Company, perform any services related to the development, preparation, manufacture, marketing or sale of any drugs or therapeutics that may reasonably be considered to compete with any Products, whether on behalf of his own interest or that of any other person or entity.

6. Term; Termination.

     6.1 Term. Unless sooner terminated in accordance with this Section 6 or mutually extended, the term of this Agreement shall commence on the Effective Date and shall terminate on December 31, 2008. Notwithstanding the foregoing, this Agreement shall automatically terminate immediately upon (i) Just Cause (as defined below) or (ii) consummation of a Change in Control.

     6.2 Termination for Just Cause. The Company may terminate this Agreement immediately in its sole discretion for Just Cause. In the event the Company terminates this Agreement pursuant to this Section 6.2, the Company shall be entitled to cease any further payments under the terms of this Consulting Agreement and shall reimburse Consultant for any business expenses that were incurred but not reimbursed as of the date of termination. As used in this Agreement, “Just Cause” shall mean the occurrence of one or more of the following: (i) Consultant’s conviction of a felony or a crime involving moral turpitude or dishonesty; (ii) Consultant’s participation in a fraud or act of dishonesty against the Company; (iii) Consultant’s intentional and material damage to the Company’s property; (iv) Consultant’s material breach of any provision of this Agreement that is not remedied by Consultant within fourteen (14) days of written notice of such breach from the Board of Directors; (v) Consultant’s failure to perform the Consulting Services in accordance with Section 1.2 hereof at the times reasonably requested by the Company; or (vi) Consultant’s failure to execute the Separation Agreement, including Exhibit B, within twenty-one (21) days of receipt of the Separation Agreement.

     6.3 Termination by Consultant. Consultant may terminate this Agreement at his convenience upon ten (10) days prior written notice to the Company. In the event the Consultant terminates this Agreement pursuant to this Section 6.3, the Company shall be entitled to cease any further payments under the terms of this Consulting Agreement and shall reimburse Consultant for any business expenses that were incurred but not reimbursed as of the date of termination

     6.4 Change in Control. In the event that the Company consummates a Change in Control (as defined in the 2006 Equity Incentive Plan) prior to the Termination Date of this Agreement, then, notwithstanding anything contained in Consultant’s stock option agreements or the Company’s 2006 Equity Incentive Plan to the contrary, the vesting of all of Consultant’s then outstanding stock options shall be accelerated in full and such options shall become fully vested and exercisable in accordance with the Company’s 2006 Equity Incentive Plan.

     6.5 Return of Company Property. Upon termination of the Agreement or earlier as requested by the Company, Consultant will deliver to the Company any and all drawings, notes, photographs, memoranda, specifications, samples, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Work Product or Proprietary Information of the Company. Consultant further agrees that any property situated on the Company’s premises and owned by the Company, including work and storage areas or filing cabinets, is subject to inspection by Company personnel at any time with or without notice.

7. General Provisions.

     7.1 Notices. Any notices provided hereunder must be in writing and will be deemed effective upon the earlier of personal delivery (including personal delivery by facsimile), the third day after mailing by first class mail, or the day following delivery by overnight courier, to the Company at its primary office location and to Consultant at his address and facsimile number as provided by Consultant to the Company in writing.

     7.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction to the extent possible in conformance with the intent of the parties expressed herein.

     7.3 Waiver. If either party should waive any breach of any provisions of this Agreement, he or it will not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

     7.4 Complete Agreement. This Agreement constitutes the complete, final, and exclusive embodiment of the entire agreement between Consultant and the Company with regard to the subject matter contained herein. It is entered into without reliance on any promise or representation, and it cannot be modified or amended except in a writing signed by an officer of the Company and Consultant. Each party has carefully read this Agreement, has been afforded the opportunity to be advised of its meaning and consequences by his or its respective attorneys, and signed the same of his or its own free will.

     7.5 Counterparts. This Agreement may be executed in two counterparts, each of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.

     7.6 Headings. The headings of the sections hereof are inserted for convenience only and will not be deemed to constitute a part hereof nor to affect the meaning thereof.

     7.7 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Consultant and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Consultant may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the written consent of the Company, which will not be withheld unreasonably.

     7.8 Attorney Fees. If either party brings any action to enforce his or its rights hereunder, the prevailing party in any such action will be entitled to recover his or its reasonable attorneys fees and costs incurred in connection with such action.

     7.9 Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the State of Colorado.

Peter Letendre,		Replidyne, Inc.
an Individual
Sign:	/s/ Peter Letendre	By:	/s/ Kenneth J. Collins
			Kenneth J. Collins
			President & Chief Executive Officer
Date:	April 15, 2008

EX-10.24

[ * * * ]   CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

EXHIBIT 10.24

SEPARATION AGREEMENT

     This Separation Agreement (this “Agreement”) is dated as of May 1, 2008 (the “Effective Date”), and is entered into by and between Replidyne, Inc. (the “Company”), and Roger Echols (“Executive” and, together with the Company, the “Parties”).

RECITALS

     WHEREAS, Executive has been employed by the Company as Chief Medical Officer of the Company pursuant to an Employment Agreement by and between the Company and Executive dated as of April 19, 2006, as amended, June 15, 2007, (the “Employment Agreement”);

     WHEREAS, the parties have determined that Executive shall terminate his employment as Chief Medical Officer effective May 1, 2008 (the “Separation Date”), and, in connection with such separation, the Parties have agreed to settle any and all related agreements between the Parties and their affiliates in the manner set forth herein; and

     WHEREAS, except as expressly set forth herein, the Parties intend that this Agreement shall supersede and replace all other understandings and agreements, whether oral or written regarding Executive’s employment with the Company, including but not limited, to the Employment Agreement,

     NOW THEREFORE, in consideration of the promises and mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are expressly acknowledged, the Parties agree and promise as follows:

Section 1. Termination. Effective on the Separation Date, Executive shall terminate his employment as the Chief Medical Officer of the Company.

Section 2. Termination Benefits.  Pursuant to Section 10(d) of the Employment Agreement, upon execution of this Agreement and of the release attached hereto as Exhibit B (“Release”), Executive shall be entitled to receive the following Severance Benefits:

     (a) Severance Payment. The Company shall pay to Executive the equivalent of twelve (12) months of his Base Salary as in effect immediately prior to the Separation Date, payable on the same basis and at the same time as previously paid and subject to all applicable tax withholdings and other deductions, commencing on the first regularly scheduled pay date following the Effective Date of the Release;

     (b) Health Insurance. The Company shall pay the premiums of Executive’s group health insurance COBRA continuation coverage, including coverage for Executive’s eligible dependents, for a maximum period of twelve (12) months following the Separation Date;

provided, however, that (i) the Company shall pay premiums for Executive’s eligible dependents only for coverage for which those eligible dependents were enrolled immediately prior to the Separation Date; and (ii) the Company’s obligation to pay such premiums shall cease immediately upon Executive’s eligibility for comparable group health insurance provided by a new employer of Executive.

     (c) Outplacement Services. Although the Company is under no obligation to do so, in further consideration for the promises and agreements contained herein, the Company agrees to pay the cost for Executive to participate in up to six (6) months of outplacement services with Right Management Inc. up to a maximum amount of $7,500, if initiated within three (3) months following the Termination Date of the Consulting Agreement.

     (d) Accrued Obligations.  On the Separation Date, the Company shall pay Executive all earned but unpaid Base Salary through the Separation Date and reimburse Executive for any reasonable unreimbursed expenses incurred in accordance with Company policy.  Additionally, Executive shall be entitled to a payment for all accrued but unused vacation that Executive has accrued through the Separation Date.

Section 6. Consulting Agreement. The Parties agree that immediately following the Separation Date, the Company will require the use of Executive’s medical and clinical expertise to assist it in the evaluation of potential partnership opportunities. Accordingly, Executive agrees to enter into a Consulting Agreement with the Company attached hereto as Exhibit C.

Section 7. Other Compensation and Benefits. Executive acknowledges that, except as expressly provided in this Agreement, including the Consulting Agreement, he has not earned and will not receive any additional pay or salary, incentive compensation, severance, equity interests or options, or benefits after the Separation Date, with the exception of any vested right he may have under the express terms of a written ERISA-qualified benefit plan (e.g., 401(k) account). In particular, but without limitation, Executive agrees that he is not owed any bonus, incentive compensation, or commissions.

Section 8. Return Of Company Property. By the close of business on the Separation Date, with the exception of the “Retained Property” (described herein), Executive agrees to return to the Company all Company documents (and all copies thereof, in whole or in part) and other Company property which Executive has in his possession or control, including, but not limited to, Company files, notes, drawings, records, plans, forecasts, reports, studies, analyses, proposals, agreements, engineering information, test data and materials, financial information, research and development information, sales and marketing information, customer information and databases, contact information, operational and personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including, but not limited to, computers, facsimile machines, mobile telephones, servers), credit cards, entry cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part). Executive agrees that he will make a diligent search to locate any such documents, property and information within the timeframe referenced above. If Executive has used any personally owned computer, server, or e-mail system to receive, store, review, prepare or transmit any Company confidential or proprietary data, materials or information, Executive

2

agrees to provide the Company with a computer-useable copy of such information and then permanently delete and expunge such Company confidential or proprietary information from those systems within five (5) business days after the Separation Date; and Executive agrees to provide the Company access to Executive’s system as requested to verify that the necessary copying and/or deletion is done. Except for the Retained Property described herein, Executive agrees that, after the Separation Date, Executive will neither use nor possess Company property. For purposes of this Agreement, Retained Property shall mean all documents, files and other information technology devices provided to Executive by the Company in order to perform the Consulting Duties as set forth in Exhibit C of this Agreement. At the conclusion of the Consulting Agreement, Executive shall have the opportunity to purchase such devices at their depreciated fair market value.

Section 9. Confidential Information and Restrictive Covenants.  Executive acknowledges that the confidentiality obligations and restrictive covenants set forth in the Company’s Proprietary Information and Inventions Agreement, attached to the Employment Agreement and hereto as Exhibit A shall remain in full force and effect following the Separation Date and Executive further agrees to comply with the terms of such obligations and restrictive covenants.

Section 8. Release.  Notwithstanding anything herein to the contrary, Executive shall not be entitled to any benefits pursuant to this Agreement prior to the time in which he executes a full general release of claims against the Company and its affiliates substantially in the form attached to the Employment Agreement and hereto as Exhibit B.

Section 10. Non-Disparagement.  Executive agrees that, except as required by applicable law, or compelled by process of law, at any time following the date hereof, neither Executive, nor anyone acting on his behalf, shall hereafter make any derogatory, disparaging or critical statement about the Company, the Company’s subsidiaries or affiliates, or any of the Company’s current officers, directors, employees, or shareholders or any persons who were officers, directors, employees, or shareholders of the Company.  The Company agrees that, except as required by applicable law, or compelled by process of law, neither it, nor anyone acting on its behalf, shall hereafter make any derogatory, disparaging or critical statement about the Executive.

Section 11. Cooperation by Executive. Following the Separation Date, Executive will reasonably cooperate in all reasonable respects with the Company and its affiliates in connection with any and all existing or future litigation, actions or proceedings (whether civil, criminal, administrative, regulatory, or otherwise) brought by or against the Company or any of its affiliates, to the extent the Company reasonably deems Executive’s cooperation necessary.  Executive shall be reimbursed for all reasonable out-of-pocket expenses incurred by his as a result of such cooperation.

Section 12. Indemnification.  The Company acknowledges that (a) its by-laws (or those of one or more of its affiliates) contain provisions indemnifying directors and officers to the fullest extent permitted by applicable law and (b) Executive is covered by such provisions (as such provisions are in effect on the Separation Date) to the extent permitted by applicable law even after the Separation Date with respect to such matters occurring during the course of Executive’s

3

employment before the Separation Date, subject to the terms of such by-law provisions (as such provisions are in effect on the Separation Date).

Section 13. Confidentiality of Agreement.  Executive hereby agrees to keep the terms of this Agreement confidential; provided, that the obligations of Executive under this Section 13 shall not apply to disclosures required by applicable law, regulation or order of a court or governmental agency, to Executive’s counsel, or to Executive’s immediate family.

Section 14. Opportunity for Advice.  By signing this Agreement, Executive acknowledges that with the advice of the Company, he has had a reasonable opportunity to consider advice from his legal counsel.  Fully understanding these terms, Executive is entering into this Agreement knowingly and voluntarily.

Section 15. Entire Agreement.  This Agreement, including its Exhibits, represents the entire agreement of the parties with respect to Executive’s engagement and termination thereof, and supersedes all prior negotiations, discussions, correspondence, communications, understandings and agreements between the parties relating to the subject matter of this Agreement, including but not limited to the Employment Agreement.

Section 16. Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.

Section 17. Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

Section 18. Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

[Remainder of page intentionally left blank.]

4

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

/s/ Roger Echols
Roger Echols
REPLIDYNE, INC.
By:	/s/ Kenneth J. Collins
	Kenneth J. Collins
Title:	Chief Executive Officer

5

Exhibit A

MANAGER, EXECUTIVE PERSONNEL OR ASSISTANTS’
PROPRIETARY INFORMATION, INVENTIONS,
NON-COMPETITION, AND NON-SOLICITATION AGREEMENT

     This Manager, Executive Personnel or Assistants’ Proprietary Information, Inventions, Non-competition, and Non-solicitation Agreement (“Agreement”) is made in consideration for my employment or continued employment by Replidyne, Inc. or its subsidiaries or affiliates (the “Company”), and the compensation now and hereafter paid to me. I hereby agree as follows:

1. Nondisclosure.

1.1 Recognition of Company’s Rights; Nondisclosure. At all times during my employment and thereafter, I will hold in strictest confidence and will not disclose, use, lecture upon or publish any of the Company’s Proprietary Information (defined below), except as such disclosure, use or publication may be required in connection with my work for the Company, or unless an officer of the Company expressly authorizes such in writing. I will obtain Company’s written approval before publishing or submitting for publication any material (written, verbal, or otherwise) that relates to my work at Company and/or incorporates any Proprietary Information. I hereby assign to the Company any rights I may have or acquire in such Proprietary Information and recognize that all Proprietary Information shall be the sole property of the Company and its assigns.

1.2 Proprietary Information. The term “Proprietary Information” shall mean any and all confidential and/or proprietary knowledge, data or information of the Company. By way of illustration but not limitation, Proprietary Information includes (a) trade secrets, inventions, mask works, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques (hereinafter collectively referred to as “Inventions”); and (b) information regarding plans for research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and (c) information regarding the skills and compensation of other employees of the Company. Notwithstanding the foregoing, it is understood that, at all such times, I am free to use information which is generally known in the trade or industry, which is not gained as result of a breach of this Agreement, and my own, skill, knowledge, know-how and experience to whatever extent and in whichever way I wish.

1.3 Third Party Information. I understand, in addition, that the Company has received and in the future will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of my employment and thereafter, I will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than Company personnel who need to know such information in connection with their work for the Company) or use, except in connection with my work for the Company, Third Party Information unless expressly authorized by an officer of the Company in writing.

1.4 No Improper Use of Information of Prior Employers and Others. During my employment by the Company I will not improperly use or disclose any confidential information or trade secrets, if any, of any former employer or any other person to whom I have an obligation of confidentiality, and I will not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom I have an obligation of confidentiality unless consented to in writing by that former employer or person. I will use in the performance of my duties only information which is generally known and used by persons with training and experience comparable to my own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.

2. Assignment of Inventions.

2.1 Proprietary Rights. The term “Proprietary Rights” shall mean all trade secret, patent, copyright, mask work and other intellectual property rights throughout the world.

2.2 Prior Inventions. Inventions, if any, patented or unpatented, which I made prior to the

commencement of my employment with the Company are excluded from the scope of this Agreement. To preclude any possible uncertainty, I have set forth on Exhibit A (Previous Inventions) attached hereto a complete list of all Inventions that I have, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice prior to the commencement of my employment with the Company, that I consider to be my property or the property of third parties and that I wish to have excluded from the scope of this Agreement (collectively referred to as “Prior Inventions”). If disclosure of any such Prior Invention would cause me to violate any prior confidentiality agreement, I understand that I am not to list such Prior Inventions in Exhibit A but am only to disclose a cursory name for each such invention, a listing of the party(ies) to whom it belongs and the fact that full disclosure as to such inventions has not been made for that reason. A space is provided on Exhibit A for such purpose. If no such disclosure is attached, I represent that there are no Prior Inventions. If, in the course of my employment with the Company, I incorporate a Prior Invention into a Company product, process or machine, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to make, have made, modify, use and sell such Prior Invention. Notwithstanding the foregoing, I agree that I will not incorporate, or permit to be incorporated, Prior Inventions in any Company Inventions without the Company’s prior written consent.

2.3 Assignment of Inventions. Subject to Sections 2.4, and 2.6, I hereby assign and agree to assign in the future (when any such Inventions or Proprietary Rights are first reduced to practice or first fixed in a tangible medium, as applicable) to the Company all my right, title and interest in and to any and all Inventions (and all Proprietary Rights with respect thereto) whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by me, either alone or jointly with others, during the period of my employment with the Company. Inventions assigned to the Company, or to a third party as directed by the Company pursuant to this Section 2, are hereinafter referred to as “Company Inventions.”

2.4 Nonassignable Inventions. I recognize that this Agreement will not be deemed to require assignment of any invention which was developed entirely on my own time without using the Company’s equipment, supplies, facilities, or trade secrets and neither related to the Company’s actual or anticipated business, research or development, nor resulted from work performed by me for the Company (“Nonassignable Inventions”).

2.5 Obligation to Keep Company Informed. During the period of my employment and for six months after the last day of my employment with the Company, I will promptly disclose to the Company fully and in writing all Inventions authored, conceived or reduced to practice by me, either alone or jointly with others. In addition, I will promptly disclose to the Company all patent applications filed by me or on my behalf within a year after termination of employment. At the time of each such disclosure, I will advise the Company in writing of any Inventions that I believe are Nonassignable Inventions and I will at that time provide to the Company in writing all evidence necessary to substantiate that belief. The Company will keep in confidence and will not use for any purpose or disclose to third parties without my consent any confidential information disclosed in writing to the Company pursuant to this Agreement relating to Inventions that have been identified as Nonassignable Inventions.

2.6 Government or Third Party. I also agree to assign all my right, title and interest in and to any particular Invention to a third party, including without limitation the United States, as directed by the Company.

2.7 Works for Hire. I acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of my employment and which are protectable by copyright are “works made for hire,” pursuant to United States Copyright Act (17 U.S.C., Section 101).

2.8 Enforcement of Proprietary Rights. I will assist the Company in every proper way to obtain, and from time to time enforce, United States and foreign Proprietary Rights relating to Company Inventions in any and all countries. To that end I will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, I will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. My obligation to assist the Company with respect to

Proprietary Rights relating to such Company Inventions in any and all countries shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate after my termination for the time actually spent by me at the Company’s request on such assistance.

In the event the Company is unable for any reason, after reasonable effort, to secure my signature on any document needed in connection with the actions specified in the preceding paragraph, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, which appointment is coupled with an interest, to act for and in my behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by me. I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.

3. No Conflicts or Solicitation. I acknowledge that during my employment I will have access to and knowledge of Proprietary Information. I also acknowledge that during my employment with the Company, I have held and/or will hold a management or executive position or am, or will be, an assistant to a manager or executive. To protect the Company’s Proprietary Information, I agree that during the period of my employment by the Company I will not, without the Company’s express written consent, engage in any other employment or business activity directly related to the business in which the Company is now involved or becomes involved, nor will I engage in any other activities which conflict with my obligations to the Company. To protect the Company’s Proprietary Information, and because of the position in the Company that I hold, I agree that during my employment with the Company whether full-time or part-time and for a period of one year after my last day of employment with the Company, I will not (a) directly or indirectly solicit or induce any employee of the Company to terminate or negatively alter his or her relationship with the Company or (b) directly or indirectly solicit the business of any client or customer of the Company (other than on behalf of the Company) or (c) directly or indirectly induce any client, customer, supplier, vendor, consultant or independent contractor of the Company to terminate or negatively alter his, her or its relationship with the Company. I agree that the geographic scope of the non-solicitation should include the “Restricted Territory” (as defined below). If any restriction set forth in this Section is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

4. Covenant Not to Compete. I acknowledge that during my employment I will have access to and knowledge of Proprietary Information. I also acknowledge that during my employment with the Company, I have held and/or will hold a management or executive position or am, or will be, an assistant to a manager or executive. To protect the Company’s Proprietary Information, and because of the position in the Company that I may hold, I agree that during my employment with the Company whether full-time or part-time and for a period of one year after my last day of employment with the Company, I will not directly or indirectly personally participate or engage in (whether as an employee, consultant, proprietor, partner, director or otherwise), or have any ownership interest in, or participate in the financing, operation, management or control of, any person, firm, corporation or business that engages in a “Restricted Business” in a “Restricted Territory” (as defined below). It is agreed that ownership of (i) no more than one percent (1%) of the outstanding voting stock of a publicly traded corporation, or (ii) any stock I presently own shall not constitute a violation of this provision.

4.1 Reasonable. I agree and acknowledge that the time limitation on the restrictions in this paragraph, combined with the geographic scope, is reasonable. I also acknowledge and agree that this paragraph is reasonably necessary for the protection of Company’s Proprietary Information as defined in paragraph 1.2 herein, that through my employment I shall receive adequate consideration for any loss of opportunity associated with the provisions herein, and that these provisions provide a reasonable way of protecting Company’s business value which will be imparted to me. If any restriction set forth in this paragraph 4 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

4.2 As used herein, the terms:

     (i) “Restricted Business” shall mean the design, development, marketing, commercialization or sales of any anti-infective products, anti-bacterials, or other biopharmaceutical products that directly compete in the marketplace with any such product then sold by the Company or then in development by the Company and projected to be sold within one (1) year of my last day of employment with the Company.

     (ii) “Restricted Territory” shall mean any state, county, or locality in the United States in which the Company conducts business and any other country, city, state, jurisdiction, or territory in which the Company does business.

5. Records. I agree to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any other form that may be required by the Company) of all Proprietary Information developed by me and all Inventions made by me during the period of my employment at the Company, which records shall be available to and remain the sole property of the Company at all times.

6. No Conflicting Obligation. I represent that my performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement to keep in confidence information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict herewith.

7. Return Of Company Materials. When I leave the employ of the Company, I will deliver to the Company any and all drawings, notes, memoranda, specifications, devices, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Inventions, Third Party Information or Proprietary Information of the Company. I further agree that any property situated on the Company’s premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice.

8. Legal And Equitable Remedies. Because my services are personal and unique and because I may have access to and become acquainted with the Proprietary Information of the Company, the Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement.

9. Notices. Any notices required or permitted hereunder shall be given to the appropriate party at the address specified below or at such other address as the party shall specify in writing. Such notice shall be deemed given upon personal delivery to the appropriate address or if sent by certified or registered mail, three days after the date of mailing.

10. Notification Of New Employer. In the event that I leave the employ of the Company, I hereby consent to the notification of my new employer of my rights and obligations under this Agreement.

11. General Provisions.

11.1 Governing Law; Consent to Personal Jurisdiction and Exclusive Forum. This Agreement will be governed by and construed according to the laws of the State of Colorado without regard to conflicts of law principles. I hereby expressly understand and consent that my employment is a transaction of business in the State of Colorado and constitutes the minimum contacts necessary to make me subject to the personal jurisdiction of the federal courts located in the State of Colorado, and the state courts located in the County of Boulder County, Colorado, for any lawsuit filed against me by Company arising from or related to this Agreement. I agree and acknowledge that any controversy arising out of or relating to this Agreement or the breach thereof, or any claim or action to enforce this Agreement or portion thereof, or any controversy or claim requiring interpretation of this Agreement must be brought in a forum located within the State of Colorado.

11.2 Severability. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. If moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.

11.3 Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.

11.4 Survival. The provisions of this Agreement shall survive the termination of my employment and the assignment of this Agreement by the Company to any successor in interest or other assignee.

11.5 No Employment Rights. I agree and understand that my employment is at-will which means I or the company each have the right to terminate my employment at will, with or without advanced notice and with or without cause. I further agree and understand that nothing in this Agreement shall confer any right with respect to continuation of employment by the Company, nor shall it interfere in any way with my right or the Company’s right to terminate my employment at any time, with or without cause.

11.6 Waiver. No waiver by the Company of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement shall be construed as a waiver of any other right. The Company shall not be required to give notice to enforce strict adherence to all terms of this Agreement.

11.7 Entire Agreement. The obligations pursuant to Sections 1 through 4 and Sections 6 and 7 (including all subparts) of this Agreement shall apply to any time during which I was previously employed, or am in the future employed, by the Company as a consultant if no other agreement governs nondisclosure and assignment of inventions during such period. This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement

     This Agreement shall be effective as of the first day of my employment with the Company, namely:                     , 2006.

     I have read this Agreement carefully and understand its terms. I have completely filled out exhibit a to this Agreement.

Dated: April 19, 2006

/s/ Roger Echols

Signature

Roger M. Echols

Printed Name

Accepted and agreed to:

EXHIBIT B

RELEASE

In exchange for the consideration provided to me by this Agreement that I am not otherwise entitled to receive, I hereby generally and completely release the Company and its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions related to my employment with the Company or the termination of that employment, including, but not limited to: (1) all claims related to my compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (2) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (3) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (4) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), and the Colorado state law (as amended). Notwithstanding the foregoing, nothing contained in this Release is intended to release the Company from any claim arising out of or with regard to: (i) any payment to be made to me by the Company in connection the termination of employment as contemplated by the Employment Agreement, or (ii) any statutory obligation that the Company may have with regard to the continuation of benefits.

ADEA Waiver and Release. I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA, as amended. I also acknowledge that the consideration given for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my waiver and release does not apply to any rights or claims that may arise after the execution date of this Agreement; (b) I have been advised that I have the right to consult with an attorney prior to executing this Agreement; (c) I have been given twenty-one (21) days to consider this Agreement; (d) I have seven (7) days following the execution of this Agreement by the parties to revoke the Agreement; and (e) this Agreement will not be effective until the date upon which the revocation period has expired, which will be the eighth day after this Agreement is executed by you, provided that the Company has also executed this Agreement by that date (“Effective Date”). The parties acknowledge and agree that revocation by you of the ADEA Waiver and Release is not effective to revoke your waiver or release of any other claims pursuant to this Agreement.

By: /s/ Roger Echols Date: May 1, 2008

7

EXHIBIT C

REPLIDYNE, INC.
CONSULTANT AGREEMENT FOR
Roger Echols

     This Consultant Agreement (“Agreement”) is entered into by and between Roger Echols, an individual (“Consultant”), and Replidyne, Inc., (the “Company”), effective as of May 2, 2008 (“Effective Date”).

     Whereas, the Company is a biopharmaceutical company currently focused on developing and commercializing innovative anti-infective products, including but not limited to faropenem medoxomil (collectively, the “Products”);

     Whereas, Consultant, having been involved with the Company since 2004 and serving as the Company’s Chief Medical Officer, is a significant source of knowledge and expertise about the Company’s business and its potential clinical development and commercialization strategies for the Products;

     Whereas, the parties have agreed that Consultant shall be retained as a Consultant to allow the Company to retain the benefit of Consultant’s knowledge and expertise; and

     Whereas, the Company terminated Consultant’s full time employment with the Company effective May 1, 2008 pursuant to a Separation Agreement with an Effective Date of May 1, 2008 and the parties hereby desire to mutually agree upon the terms and conditions of Consultant’s consulting relationship with the Company.

     Now, Therefore, in consideration of the mutual promises and covenants contained herein, it is agreed by and between the parties as follows:

1. Consulting Relationship.

     1.1 Consulting Services. As part of the services provided by Consultant to the Company pursuant to this Agreement, Consultant will:

          (a) Advise and consult with the Company on clinical development and regulatory strategies related to the Products; and

          (b) Advise and consult with the Company on strategic planning;

          (c) Perform such other services that relate to Consultant’s areas of expertise and which the Company’s executive officers believe would be beneficial to the Company (collectively, the “Consulting Services”).

     1.2 Performance. As and when requested from time to time by the Company’s President and Chief Executive Officer, Kenneth Collins or his delegates, Consultant agrees to

provide services to the Company under this Agreement. The time commitment required for Consulting Services under this Agreement will generally not exceed 40 hours per month from May 2, 2008 until July 31, 2008 (“Initial Consulting Period”) and will generally not exceed 20 hours per month from August 1, 2008 until December 31, 2008 or at such earlier or later date as agreed to by the Company and Consultant pursuant to Section 6.1 herein (“Termination Date”), although the time commitment required during any specific monthly period may vary from the time commitment required in other periods. Consultant will render the Consulting Services to the best of his ability. The manner and means by which Consultant chooses to perform the Consulting Services are in Consultant’s sole discretion and control. Consultant agrees to exercise the highest degree of professionalism, and to utilize his best efforts, skills, expertise and creative talents in performing such Consulting Services. In performing Consulting Services, Consultant agrees to provide his own equipment, tools and other materials in addition to the Retained Property provided to him by the Company. Consultant shall perform his Consulting Services in a timely and professional manner consistent with industry standards. Consultant agrees to provide the Consulting Services at the times reasonably requested by the Company; provided that, the Company will reasonably cooperate with Consultant in the event that he has conflicts in connection with other obligations, whether such obligations are work related or personal. Consultant may not subcontract or otherwise delegate his obligations under this Agreement without the Company’s prior written consent.

2. Compensation.

     2.1 Consulting Fees. In consideration of his agreement to provide the Consulting Services hereunder, during the Initial Consulting Period, Consultant will be paid an amount equal to $10,000 for each full month of Consulting Services rendered to the Company during the Initial Consulting Period. The Consulting Fees will be pro rated for any partial months of service. From the end of the Initial Consulting Period through the Termination Date, and for any hours in excess of forty hours per month during the Initial Consulting Period, Consultant will be compensated at a rate of $300 per hour. Consultant agrees to submit a monthly invoice to the Company for approval detailing all consulting hours worked in the prior month.

     2.2 Stock Options. As further consideration of his agreement to provide Consulting Services hereunder, subject to the approval of the Company’s Compensation Committee, the Company will provide Consultant with a non-qualified stock option grant to purchase up to 40,000 shares of Company common stock at the fair market value of the stock as of the date of grant pursuant to the Company’s 2006 Equity Incentive Plan (“Consulting Option”). The Consulting Option shall vest over the course of the Consulting Agreement in eight (8) equal monthly installments and shall have an exercise period of up to three (3) years from Termination Date of this Consulting Agreement. The stock options previously granted to Consultant during his employment with the Company shall continue to vest for so long as Consultant continues to provide Continuous Service to the Company as defined in the Company’s 2006 Equity Incentive Plan. Consultant understands and acknowledges that on July 31, 2008, all options previously granted to Consultant shall become NonQualified Options. Consultant is advised to seek independent tax or accounting advice with regard to the exercise and tax treatment of any vested options.

8

     2.3 Partnering Bonus. In the event that prior to the Termination Date, the Company concludes a faropenem partnership with [ * * * ], Consultant will be eligible to receive a one time lump sum Partnering Bonus equal to $125,000, provided that Consultant is actively providing Consulting Services through the date of the execution of the partnering agreement with [ * * * ].

     2.4 Expenses. Consultant shall receive, against presentation of proper receipts and vouchers, reimbursement for direct and reasonable out-of-pocket expenses incurred by him in connection with the performance of services hereunder, according to the policies of the Company.

3. Independent Contractor Status.

Consultant’s relationship with the Company will be that of an independent contractor and nothing in this Agreement should be construed to create a partnership, joint venture, or employer-employee relationship. Consultant is not the agent of the Company and is not authorized to make any representation, contract, or commitment on behalf of the Company. Consultant will not be entitled to any of the benefits that the Company may make available to its employees. Because Consultant is an independent contractor, the Company will not withhold or make payments for income taxes; social security; make unemployment insurance or disability insurance contributions; or obtain workers’ compensation insurance on Consultant’s behalf with respect to any payment made pursuant to this Agreement. Consultant agrees to accept exclusive liability for complying with applicable state and federal laws governing self-employed individuals, including obligations such as payment of taxes, social security, disability and other contributions based on compensation paid to Consultant. Consultant hereby agrees to indemnify and defend the Company against any and all claims for such taxes or contributions, including penalties and interest due with respect to all payments under this Agreement.

4. Proprietary Information Obligations. Consultant understand and agrees that the terms of his Proprietary Information Agreement, attached as Exhibit A to the Separation Agreement of even date, remain in full force and effect during the term of this Consulting Agreement and are fully incorporated herein by reference.

5. Other Activities.

     5.1 Other Services. Consultant is free to enter any contract to provide services to other business entities, except any contract that would tend to induce Consultant to violate this Agreement. Further, during the term of this Agreement, Consultant will not, without the prior written consent of the Company, perform any services related to the development, preparation, manufacture, marketing or sale of any drugs or therapeutics that may reasonably be considered to compete with any Products, whether on behalf of his own interest or that of any other person or entity.

6. Term; Termination.

     6.1 Term. Unless sooner terminated in accordance with this Section 6 or mutually extended, the term of this Agreement shall commence on the Effective Date and shall terminate on December 31, 2008. Notwithstanding the foregoing, this Agreement shall automatically

9

terminate immediately upon (i) Just Cause (as defined below) or (ii) consummation of a Change in Control.

     6.2 Termination for Just Cause. The Company may terminate this Agreement immediately in its sole discretion for Just Cause. In the event the Company terminates this Agreement pursuant to this Section 6.2, the Company shall be entitled to cease any further payments under the terms of this Consulting Agreement and shall reimburse Consultant for any business expenses that were incurred but not reimbursed as of the date of termination. As used in this Agreement, “Just Cause” shall mean the occurrence of one or more of the following: (i) Consultant’s conviction of a felony or a crime involving moral turpitude or dishonesty; (ii) Consultant’s participation in a fraud or act of dishonesty against the Company; (iii) Consultant’s intentional and material damage to the Company’s property; (iv) Consultant’s material breach of any provision of this Agreement that is not remedied by Consultant within fourteen (14) days of written notice of such breach from the Board of Directors; (v) Consultant’s failure to perform the Consulting Services in accordance with Section 1.2 hereof at the times reasonably requested by the Company; or (vi) Consultant’s failure to execute the Separation Agreement, including Exhibit B, within twenty-one (21) days of receipt of the Separation Agreement.

     6.3 Termination by Consultant. Consultant may terminate this Agreement at his convenience upon ten (10) days prior written notice to the Company. In the event the Consultant terminates this Agreement pursuant to this Section 6.3, the Company shall be entitled to cease any further payments under the terms of this Consulting Agreement and shall reimburse Consultant for any business expenses that were incurred but not reimbursed as of the date of termination

     6.4 Change in Control. In the event that the Company consummates a Change in Control (as defined in the 2006 Equity Incentive Plan) prior to the Termination Date of this Agreement, then, notwithstanding anything contained in Consultant’s stock option agreements or the Company’s 2006 Equity Incentive Plan to the contrary, the vesting of all of Consultant’s then outstanding stock options shall be accelerated in full and such options shall become fully vested and exercisable in accordance with the Company’s 2006 Equity Incentive Plan.

     6.5 Return of Company Property. Upon termination of the Agreement or earlier as requested by the Company, Consultant will deliver to the Company any and all drawings, notes, photographs, memoranda, specifications, samples, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Work Product or Proprietary Information of the Company. Consultant further agrees that any property situated on the Company’s premises and owned by the Company, including work and storage areas or filing cabinets, is subject to inspection by Company personnel at any time with or without notice.

7. General Provisions.

     7.1 Notices. Any notices provided hereunder must be in writing and will be deemed effective upon the earlier of personal delivery (including personal delivery by facsimile), the third day after mailing by first class mail, or the day following delivery by overnight courier, to the Company at its primary office location and to Consultant at his address and facsimile number as provided by Consultant to the Company in writing.

10

     7.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction to the extent possible in conformance with the intent of the parties expressed herein.

     7.3 Waiver. If either party should waive any breach of any provisions of this Agreement, he or it will not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

     7.4 Complete Agreement. This Agreement constitutes the complete, final, and exclusive embodiment of the entire agreement between Consultant and the Company with regard to the subject matter contained herein. It is entered into without reliance on any promise or representation, and it cannot be modified or amended except in a writing signed by an officer of the Company and Consultant. Each party has carefully read this Agreement, has been afforded the opportunity to be advised of its meaning and consequences by his or its respective attorneys, and signed the same of his or its own free will.

     7.5 Counterparts. This Agreement may be executed in two counterparts, each of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.

     7.6 Headings. The headings of the sections hereof are inserted for convenience only and will not be deemed to constitute a part hereof nor to affect the meaning thereof.

     7.7 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Consultant and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Consultant may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the written consent of the Company, which will not be withheld unreasonably.

     7.8 Attorney Fees. If either party brings any action to enforce his or its rights hereunder, the prevailing party in any such action will be entitled to recover his or its reasonable attorneys fees and costs incurred in connection with such action.

11

     7.9 Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the State of Colorado.

Roger Echols,		Replidyne, Inc.
an Individual
Sign:	/s/ Roger Echols	By:	/s/ Kenneth J. Collins
			Kenneth J. Collins
			President & Chief Executive Officer

Date: May 1, 2008

12

EX-10.25

[ * * * ]   CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

EXHIBIT 10.25

REPLIDYNE, INC.
CONSULTANT AGREEMENT FOR
Roger Echols

     This Consultant Agreement (“Agreement”) is entered into by and between Roger Echols, an individual (“Consultant”), and Replidyne, Inc., (the “Company”), effective as of May 2, 2008 (“Effective Date”).

     Whereas, the Company is a biopharmaceutical company currently focused on developing and commercializing innovative anti-infective products, including but not limited to faropenem medoxomil (collectively, the “Products”);

     Whereas, Consultant, having been involved with the Company since 2004 and serving as the Company’s Chief Medical Officer, is a significant source of knowledge and expertise about the Company’s business and its potential clinical development and commercialization strategies for the Products;

     Whereas, the parties have agreed that Consultant shall be retained as a Consultant to allow the Company to retain the benefit of Consultant’s knowledge and expertise; and

     Whereas, the Company terminated Consultant’s full time employment with the Company effective May 1, 2008 pursuant to a Separation Agreement with an Effective Date of May 1, 2008 and the parties hereby desire to mutually agree upon the terms and conditions of Consultant’s consulting relationship with the Company.

     Now, Therefore, in consideration of the mutual promises and covenants contained herein, it is agreed by and between the parties as follows:

1. Consulting Relationship.

     1.1 Consulting Services. As part of the services provided by Consultant to the Company pursuant to this Agreement, Consultant will:

          (a) Advise and consult with the Company on clinical development and regulatory strategies related to the Products; and

          (b) Advise and consult with the Company on strategic planning;

          (c) Perform such other services that relate to Consultant’s areas of expertise and which the Company’s executive officers believe would be beneficial to the Company (collectively, the “Consulting Services”).

     1.2 Performance. As and when requested from time to time by the Company’s President and Chief Executive Officer, Kenneth Collins or his delegates, Consultant agrees to provide services to the Company under this Agreement. The time commitment required for Consulting Services under this Agreement will generally not exceed 40 hours per month from May 2, 2008 until July 31, 2008 (“Initial Consulting Period”) and will generally not exceed 20 hours per month from August 1, 2008 until December 31, 2008 or at such earlier or later date as agreed to by the Company and Consultant pursuant to Section 6.1 herein (“Termination Date”), although the time commitment required during any specific monthly period may vary from the time commitment required in other periods. Consultant will render the Consulting Services to the best of his ability. The manner and means by which Consultant chooses to perform the Consulting Services are in Consultant’s sole discretion and control. Consultant agrees to exercise the highest degree of professionalism, and to utilize his best efforts, skills, expertise and creative talents in performing such Consulting Services. In performing Consulting Services, Consultant agrees to provide his own equipment, tools and other materials in addition to the Retained Property provided to him by the Company. Consultant shall perform his Consulting Services in a timely and professional manner consistent with industry standards. Consultant agrees to provide the Consulting Services at the times reasonably requested by the Company; provided that, the Company will reasonably cooperate with Consultant in the event that he has conflicts in connection with other obligations, whether such obligations are work related or personal. Consultant may not subcontract or otherwise delegate his obligations under this Agreement without the Company’s prior written consent.

2. Compensation.

     2.1 Consulting Fees. In consideration of his agreement to provide the Consulting Services hereunder, during the Initial Consulting Period, Consultant will be paid an amount equal to $10,000 for each full month of Consulting Services rendered to the Company during the Initial Consulting Period. The Consulting Fees will be pro rated for any partial months of service. From the end of the Initial Consulting Period through the Termination Date, and for any hours in excess of forty hours per month during the Initial Consulting Period, Consultant will be compensated at a rate of $300 per hour. Consultant agrees to submit a monthly invoice to the Company for approval detailing all consulting hours worked in the prior month.

     2.2 Stock Options. As further consideration of his agreement to provide Consulting Services hereunder, subject to the approval of the Company’s Compensation Committee, the Company will provide Consultant with a non-qualified stock option grant to purchase up to 40,000 shares of Company common stock at the fair market value of the stock as of the date of grant pursuant to the Company’s 2006 Equity Incentive Plan (“Consulting Option”). The Consulting Option shall vest over the course of the Consulting Agreement in eight (8) equal monthly installments and shall have an exercise period of up to three (3) years from Termination Date of this Consulting Agreement. The stock options previously granted to Consultant during his employment with the Company shall continue to vest for so long as Consultant continues to provide Continuous Service to the Company as defined in the Company’s 2006 Equity Incentive Plan. Consultant understands and acknowledges that on July 31, 2008, all options previously granted to Consultant shall become NonQualified Options. Consultant is advised to seek independent tax or accounting advice with regard to the exercise and tax treatment of any vested options.

     2.3 Partnering Bonus. In the event that prior to the Termination Date, the Company concludes a faropenem partnership with [ * * * ], Consultant will be eligible to receive a one time lump sum Partnering Bonus equal to $125,000, provided that Consultant is actively providing Consulting Services through the date of the execution of the partnering agreement with [ * * * ].

     2.4 Expenses. Consultant shall receive, against presentation of proper receipts and vouchers, reimbursement for direct and reasonable out-of-pocket expenses incurred by him in connection with the performance of services hereunder, according to the policies of the Company.

3. Independent Contractor Status.

Consultant’s relationship with the Company will be that of an independent contractor and nothing in this Agreement should be construed to create a partnership, joint venture, or employer-employee relationship. Consultant is not the agent of the Company and is not authorized to make any representation, contract, or commitment on behalf of the Company. Consultant will not be entitled to any of the benefits that the Company may make available to its employees. Because Consultant is an independent contractor, the Company will not withhold or make payments for income taxes; social security; make unemployment insurance or disability insurance contributions; or obtain workers’ compensation insurance on Consultant’s behalf with respect to any payment made pursuant to this Agreement. Consultant agrees to accept exclusive liability for complying with applicable state and federal laws governing self-employed individuals, including obligations such as payment of taxes, social security, disability and other contributions based on compensation paid to Consultant. Consultant hereby agrees to indemnify and defend the Company against any and all claims for such taxes or contributions, including penalties and interest due with respect to all payments under this Agreement.

4. Proprietary Information Obligations. Consultant understand and agrees that the terms of his Proprietary Information Agreement, attached as Exhibit A to the Separation Agreement of even date, remain in full force and effect during the term of this Consulting Agreement and are fully incorporated herein by reference.

5. Other Activities.

     5.1 Other Services. Consultant is free to enter any contract to provide services to other business entities, except any contract that would tend to induce Consultant to violate this Agreement. Further, during the term of this Agreement, Consultant will not, without the prior written consent of the Company, perform any services related to the development, preparation, manufacture, marketing or sale of any drugs or therapeutics that may reasonably be considered to compete with any Products, whether on behalf of his own interest or that of any other person or entity.

6. Term; Termination.

     6.1 Term. Unless sooner terminated in accordance with this Section 6 or mutually extended, the term of this Agreement shall commence on the Effective Date and shall terminate on December 31, 2008. Notwithstanding the foregoing, this Agreement shall automatically

terminate immediately upon (i) Just Cause (as defined below) or (ii) consummation of a Change in Control.

     6.2 Termination for Just Cause. The Company may terminate this Agreement immediately in its sole discretion for Just Cause. In the event the Company terminates this Agreement pursuant to this Section 6.2, the Company shall be entitled to cease any further payments under the terms of this Consulting Agreement and shall reimburse Consultant for any business expenses that were incurred but not reimbursed as of the date of termination. As used in this Agreement, “Just Cause” shall mean the occurrence of one or more of the following: (i) Consultant’s conviction of a felony or a crime involving moral turpitude or dishonesty; (ii) Consultant’s participation in a fraud or act of dishonesty against the Company; (iii) Consultant’s intentional and material damage to the Company’s property; (iv) Consultant’s material breach of any provision of this Agreement that is not remedied by Consultant within fourteen (14) days of written notice of such breach from the Board of Directors; (v) Consultant’s failure to perform the Consulting Services in accordance with Section 1.2 hereof at the times reasonably requested by the Company; or (vi) Consultant’s failure to execute the Separation Agreement, including Exhibit B, within twenty-one (21) days of receipt of the Separation Agreement.

     6.3 Termination by Consultant. Consultant may terminate this Agreement at his convenience upon ten (10) days prior written notice to the Company. In the event the Consultant terminates this Agreement pursuant to this Section 6.3, the Company shall be entitled to cease any further payments under the terms of this Consulting Agreement and shall reimburse Consultant for any business expenses that were incurred but not reimbursed as of the date of termination

     6.4 Change in Control. In the event that the Company consummates a Change in Control (as defined in the 2006 Equity Incentive Plan) prior to the Termination Date of this Agreement, then, notwithstanding anything contained in Consultant’s stock option agreements or the Company’s 2006 Equity Incentive Plan to the contrary, the vesting of all of Consultant’s then outstanding stock options shall be accelerated in full and such options shall become fully vested and exercisable in accordance with the Company’s 2006 Equity Incentive Plan.

     6.5 Return of Company Property. Upon termination of the Agreement or earlier as requested by the Company, Consultant will deliver to the Company any and all drawings, notes, photographs, memoranda, specifications, samples, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Work Product or Proprietary Information of the Company. Consultant further agrees that any property situated on the Company’s premises and owned by the Company, including work and storage areas or filing cabinets, is subject to inspection by Company personnel at any time with or without notice.

7. General Provisions.

     7.1 Notices. Any notices provided hereunder must be in writing and will be deemed effective upon the earlier of personal delivery (including personal delivery by facsimile), the third day after mailing by first class mail, or the day following delivery by overnight courier, to the Company at its primary office location and to Consultant at his address and facsimile number as provided by Consultant to the Company in writing.

     7.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction to the extent possible in conformance with the intent of the parties expressed herein.

     7.3 Waiver. If either party should waive any breach of any provisions of this Agreement, he or it will not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

     7.4 Complete Agreement. This Agreement constitutes the complete, final, and exclusive embodiment of the entire agreement between Consultant and the Company with regard to the subject matter contained herein. It is entered into without reliance on any promise or representation, and it cannot be modified or amended except in a writing signed by an officer of the Company and Consultant. Each party has carefully read this Agreement, has been afforded the opportunity to be advised of its meaning and consequences by his or its respective attorneys, and signed the same of his or its own free will.

     7.5 Counterparts. This Agreement may be executed in two counterparts, each of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.

     7.6 Headings. The headings of the sections hereof are inserted for convenience only and will not be deemed to constitute a part hereof nor to affect the meaning thereof.

     7.7 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Consultant and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Consultant may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the written consent of the Company, which will not be withheld unreasonably.

     7.8 Attorney Fees. If either party brings any action to enforce his or its rights hereunder, the prevailing party in any such action will be entitled to recover his or its reasonable attorneys fees and costs incurred in connection with such action.

     7.9 Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the State of Colorado.

Roger Echols,		Replidyne, Inc.
an Individual
Sign:	/s/ Roger Echols	By:	/s/ Kenneth J. Collins
			Kenneth J. Collins
			President & Chief Executive Officer

Date: May 1, 2008

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Kenneth J. Collins, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Replidyne, Inc.;

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 quarterly 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 the registrant’s board of directors or (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.

/s/  Kenneth J. Collins

Kenneth J. Collins

President and Chief Executive Officer

(Principal Executive Officer)

Date: August 5, 2008

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Mark L. Smith, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Replidyne, Inc.;

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 quarterly 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 the registrant’s board of directors or (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.

/s/  Mark L. Smith

Mark L. Smith

Chief Financial Officer, Treasurer

(Principal Financial and Accounting Officer)

Date: August 5, 2008

EX-32.1

EXHIBIT 32.1

CERTIFICATION

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), Kenneth J. Collins, Chief Executive Officer of Replidyne, Inc. (the “Company”), and Mark L. Smith, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2008, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

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

/s/  Kenneth J. Collins

Kenneth J. Collins

Chief Executive Officer

(Principal Executive Officer)

/s/  Mark L. Smith

Mark L. Smith

Chief Financial Officer

(Principal Financial and Accounting Officer)

Dated: August 5, 2008

A signed original of this written statement required by Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. § 1350, as adopted) has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission (“SEC”) or its staff upon request. This certification “accompanies” the Form 10-Q to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.