8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 9, 2009

Cardiovascular Systems, Inc.

(Exact name of Registrant as Specified in its Charter)

Delaware
(State or Other Jurisdiction of Incorporation)

000-52082
(Commission File Number) 41-1698056
(IRS Employer
Identification No.)

651 Campus Drive
St. Paul, Minnesota 55112-3495
(Address of Principal Executive Offices and Zip Code)

(651) 259-1600
(Registrant’s telephone number, including area code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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

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

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

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

TABLE OF CONTENTS

	Item 1.01. Entry into a Material Definitive Agreement.
	Item 2.03 Creation of a Direct Financial Obligation or an Obligation under            an Off-Balance Sheet Arrangement of a Registrant.
	Item 8.01 Other Events.
	Item 9.01 Financial Statements and Exhibits.
EXHIBIT INDEX
EX-99.1

Item 1.01. Entry into a Material Definitive Agreement.

     Effective on September 9, 2009, Cardiovascular Systems, Inc. (“CSI”) entered into the Build-To-Suit Lease Agreement (the “Lease Agreement”) with the Pearland Economic Development Corporation (the “PEDC”) for the construction and lease of an approximately 46,000 square foot production facility located in Pearland, Texas (the “Facility”). The Facility will primarily accommodate CSI’s additional manufacturing activities.

     The Lease Agreement provides that the PEDC will lease the Facility and the land immediately surrounding the Facility (the “Leased Premises”) to CSI for an initial term of ten years, beginning the later of the date of “Substantial Completion” of the project (as that term is defined in the Lease Agreement) or April 1, 2010 (the “Commencement Date”). Annual fixed rent payments are $414,000 for each of the first five years of the initial term and $460,000 for each of the last five years of the initial term. Rent is payable in monthly installments beginning thirty days after the Commencement Date. CSI will also be responsible for paying the future taxes and operating expenses on the Leased Premises. Upon an event of default under the Lease Agreement, CSI will be liable for the difference between the balance of the rent owed for the remainder of the term and the fair market rental value of the Leased Premises for such period.

     CSI has the option to renew the lease for up to two additional periods of five years each. If CSI elects to exercise one or both of these options, the rent for such extended terms will be set at the prevailing market rental rates at such times, as determined in the Lease Agreement. After the Commencement Date and until shortly before the tenth anniversary of the Commencement Date, CSI will have the option to purchase all, but not less than all, of the Leased Premises at fair market value, as determined in the Lease Agreement. Further, within six years of the Commencement Date and subject to certain conditions, CSI has options to cause the PEDC to make two additions or expansions to the Facility of a minimum of 34,000 and 45,000 square feet each.

     CSI and the PEDC previously entered into a Corporate Job Creation Agreement (the “Job Creation Agreement”), dated June 17, 2009 (the “Effective Date”). The Job Creation Agreement provided CSI with $3.5 million in cash incentive funds upon signing the Lease Agreement, which CSI received on or about September 9, 2009. The PEDC will provide CSI with an additional $2.0 million of cash incentive funds (collectively with the $3.5 million that CSI previously received, the “Cash Incentives”), in the following amounts and upon achievement of the following milestones:

• $1.2 million, upon the hiring of the 75^th full-time employee at the Facility; and

• $0.8 million, upon the hiring of the 125^th full-time employee at the Facility.

In order to retain all of the Cash Incentives, beginning one year and 90 days after the Commencement Date, CSI must not have fewer than 25 full-time employees at the Facility for more than 120 consecutive days. Failure to meet this requirement will result in an obligation to make reimbursement payments to the PEDC in the following percentages during the following time periods:

• 100% of all the Cash Incentives received, if the failure occurs within 24 months from the Effective Date;

• 60% of all the Cash Incentives received, if the failure occurs between 24 and 36 months from the Effective Date;

• 40% of all the Cash Incentives received, if the failure occurs between 36 and 48 months from the Effective Date; and

• 20% of all the Cash Incentives received, if the failure occurs between 48 and 60 months from the Effective Date.

CSI will not have any reimbursement requirements for the Cash Incentives after 60 months from the Effective Date.

     The Job Creation Agreement also provides CSI with a $1.5 million award that is expected to be funded in part by a grant from the State of Texas for which CSI has applied through the Texas Enterprise Fund program (the “TEF Award”). The PEDC has committed, by resolution, to guarantee the TEF Award and will make payment to CSI for the difference between $1.5 million and the actual grant amount from the State of Texas. CSI expects that the grant from the State of Texas for the TEF Award will also be subject to reimbursement if CSI fails to meet certain job creation targets, as will be established and agreed to by CSI and the State of Texas.

     CSI has granted the PEDC a security interest in CSI’s furniture and equipment at the Facility (the “Pearland Collateral”) to secure any reimbursement obligations that CSI may incur under the Job Creation Agreement. On September 9, 2009, the PEDC and Silicon Valley Bank (“SVB”) entered into a Subordination Agreement, pursuant to which the PEDC agreed to subordinate its security interest to the security interests held by SVB in the Pearland Collateral. CSI and SVB had previously entered into that certain Loan and Security Agreement, dated September 12, 2008 (the “SVB Loan Agreement”), in which CSI granted SVB a continuing security interest in substantially all of CSI’s then owned and future assets. In addition, CSI and SVB entered into a letter agreement dated September 9, 2009 (the “SVB Pearland Letter Agreement”), in which CSI agreed to provide notice to SVB if the PEDC ever ceased being the owner or the landlord of the Facility. CSI also agreed that an “Event of Default” would occur under the SVB Loan Agreement, if (i) SVB or CSI ever received a notice from the PEDC that a default had occurred under the Job Creation Agreement and that within 30 days, SVB did not receive a written notice from the PEDC that the default had been cured, or (ii) SVB received notice from the PEDC that CSI had vacated the Facility.

     The TEF Award and the Cash Incentives are gross amounts that are subject to and will be reduced by a 15% commission payable to CSI’s site selection consultant. Additionally, the foregoing description of the material terms of the Lease Agreement, the Job Creation Agreement and the SVB Pearland Letter Agreement does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to the full text of the Lease Agreement, the Job Creation Agreement and the SVB Pearland Letter Agreement.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

     The information set forth in Item 1.01 of this Current Report is incorporated in this Item 2.03 by reference in its entirety.

Item 8.01 Other Events.

     On October 5, 2009, CSI issued a press release announcing that CSI had entered into the agreements described in Item 1.01 above. A copy of the press release is filed herewith as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(a)	Financial Statements: None.
(b)	Pro Forma Financial Information: None.
(c)	Shell Company Transactions: None.
(d)	Exhibits:

                         Exhibit 99.1 Press Release dated October 5, 2009.

     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 hereunto duly authorized.

Date: October 5, 2009

CARDIOVASCULAR SYSTEMS, INC.
By:	/s/ Laurence L. Betterley
	Laurence L. Betterley
	Chief Financial Officer

EXHIBIT INDEX

Cardiovascular Systems, Inc.
Form 8-K Current Report

Exhibit Number		Description
	99.1	Press Release dated October 5, 2009.

EX-99.1

Exhibit 99.1

CARDIOVASCULAR SYSTEMS ANNOUNCES PLANS FOR
SECOND MANUFACTURING FACILITY

New Facility Expands CSI’s Capacity to Produce Peripheral Arterial Disease Systems

Second Site Reduces Business Interruption Risk

St. Paul, Minn., Oct. 5, 2009 — Cardiovascular Systems, Inc. (CSI; Nasdaq: CSII), a medical device company developing and commercializing innovative interventional treatment systems for vascular disease, has signed a 10-year lease agreement for a new 46,000-square-foot manufacturing facility in Pearland, Texas. The facility is being built for CSI and will support the production of its Diamondback 360^® PAD System, a minimally invasive catheter for treating peripheral arterial disease (PAD), and other products.

“As demand builds for our Diamondback 360°, we need additional manufacturing capacity to accommodate our growth, and multiple facilities to minimize business interruption risk,” said Robert J. Thatcher, CSI executive vice president. “We received numerous proposals for facility locations. The State of Texas and City of Pearland put together the most attractive economic package, allowing us to expand quickly into a second facility. We look forward to continuing our partnership with Texas local and state offices, and launching manufacturing operations there.”

CSI could hire approximately 250 employees over the course of five years to work at the Texas facility and manufacture the Diamondback 360°. The company will also continue its manufacturing operations in Minnesota, where it currently employs more than 100 people, including its headquarters staff, which also has been expanding. In addition, CSI has more than 120 sales professionals across the United States.

“CSI’s expansion in Texas is further proof that Texas remains the best state in the nation for business. Our reasonable and predictable regulatory climate, low taxes, skilled and educated workforce, and programs, such as the Texas Enterprise Fund, all come together to strengthen the state’s economy by attracting jobs and capital investment,” Governor Rick Perry said. “This investment in CSI is expected to bring hundreds of jobs to Texans in the Pearland area and expand our state’s already thriving medical technology sector.”

“Our region is well served with the addition of Cardiovascular Systems’ manufacturing facility in Pearland,” said Jeff Moseley, president and CEO of the Greater Houston Partnership, primary business advocate for the 10-county Houston region. “Coupled with the world-famous Texas Medical Center, CSI greatly expands our medical portfolio and strengthens the region’s stature with global companies for innovation, research and cutting-edge technology.”

“Pearland EDC welcomes CSI to our business community,” said Fred Welch, executive director for Pearland Economic Development Corporation. “Our investment in this development agreement is the result of our focus on attracting solid companies with strong growth prospects.”

(more)

Cardiovascular Systems, Inc.
Oct. 5, 2009
Page 2

CSI has reported seven quarters of sequential revenue growth since the company commercially launched the Diamondback 360° in 2007. For the fiscal fourth quarter ended June 30, 2009, revenue rose to $15.7 million, a 59-percent increase over the prior-year period. Additionally, at the end of fiscal 2009, 556 hospitals were using the Diamondback 360°, up significantly from 183 a year earlier. More than 15,000 procedures have been performed using the Diamondback 360°.

CSI received $3.5 million upon the signing of the lease and could receive up to an additional $3.5 million over five years as milestones are met. CSI expects to begin operations in the facility during the first half of calendar 2010. Pearland was selected as the best location for the Diamondback 360° facility after an extensive search process lead by Ecodev, LLC, a site selection firm recognized for successfully uniting companies and communities in partnerships for sustainable economic growth.

About Cardiovascular Systems, Inc.

Cardiovascular Systems, Inc., based in St. Paul, Minn., is a medical device company focused on developing and commercializing interventional treatment systems for vascular disease. The company’s Diamondback 360^® PAD System treats calcified and fibrotic plaque in arterial vessels throughout the leg, and addresses many of the limitations associated with existing surgical, catheter and pharmacological treatment alternatives. In August 2007, the U.S. FDA granted 510(k) clearance for the use of the Diamondback 360° as a therapy for PAD (peripheral arterial disease), and CSI commenced a U.S. product launch in September 2007. Since then, nearly 600 hospitals across the United States have adopted the system. For more information visit the company’s Web site at www.csi360.com.

Safe Harbor

Certain statements in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are provided under the protection of the safe harbor for forward-looking statements provided by that Act. For example, statements in this press release regarding (i) CSI’s need for additional manufacturing capacity to accommodate its growth; (ii) the number of employees to be hired at the Texas facility; (iii) the amounts to be paid to CSI upon the achievement of milestones; and (iv) the timing of CSI’s commencement of operations in Texas, are forward looking statements. These statements involve risks and uncertainties which could cause results to differ materially from those projected, including, but not limited to, unanticipated delays in the construction of the facility; CSI’s actual employee and manufacturing needs; CSI’s ability to meet milestones for additional funds; demand for CSI’s products and CSI’s financial performance; general economic conditions; and other factors detailed from time to time in CSI’s SEC reports, including its Form 10-K for the fiscal year ended June 30, 2009. CSI encourages you to consider all of these risks, uncertainties and other factors carefully in evaluating the forward-looking statements contained in this release. As a result of these matters, changes in facts, assumptions not being realized or other circumstances, CSI’s actual results may differ materially from the expected results discussed in the forward-looking statements contained in this release. The forward-looking statements made in this release are made only as of the date of this release, and CSI undertakes no obligation to update them to reflect subsequent events or circumstances.

Contacts:

For Cardiovascular Systems, Inc.:
Investor Relations
(651) 259-2800
investorrelations@csi360.com

Cardiovascular Systems, Inc.
Oct. 5, 2009
Page 3

Padilla Speer Beardsley:
Marian Briggs	Nancy A. Johnson
(612) 455-1742	(612) 455-1745
mbriggs@psbpr.com	njohnson@psbpr.com

For Pearland Economic Development Corporation:
Fred Welch
(281) 652-1627

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