10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2009
Commission File No. 000-52082

CARDIOVASCULAR SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware	No. 41-1698056
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

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

Registrant’s telephone number (651) 259-1600

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o      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 o  Non-accelerated filer   o
(Do not check if a smaller reporting company) Smaller reporting company þ 

     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

The number of shares outstanding of the registrant’s common stock as of May 12, 2009 was: Common Stock, $0.001 par value per share, 13,771,962 shares.

Cardiovascular Systems, Inc.
Consolidated Financial Statements
Table of Contents

	PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements (unaudited)		1
Consolidated Balance Sheets as of March 31, 2009 and June 30, 2008		1
Consolidated Statements of Operations for the three and nine months ended March 31, 2009 and 2008		2
Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) and Comprehensive (Loss) Income for the nine months ended March 31, 2009 and year ended June 30, 2008		3
Consolidated Statements of Cash Flows for the nine months ended March 31, 2009 and 2008		4
Notes to Consolidated Financial Statements		5
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		37
ITEM 4. Controls and Procedures		37
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings		38
ITEM 1A. Risk Factors		38
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		38
ITEM 3. Defaults Upon Senior Securities		38
ITEM 4. Submission of Matters to a Vote of Security Holders		38
ITEM 5. Other Information		39
ITEM 6. Exhibits		39
Signatures		40
Exhibit Index		41
EX-3.1
EX-10.4
EX-10.5
EX-10.11
EX-10.15
EX-10.16
EX-10.17
EX-10.19
EX-10.20
EX-10.21
EX-10.22
EX-10.23
EX-10.24
EX-10.25
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cardiovascular Systems, Inc.

Consolidated Balance Sheets

(Dollars in Thousands, except per share and share amounts)

(Unaudited)

	March 31,			June 30,
	2009			2008
ASSETS
Current assets
Cash and cash equivalents	$	37,844		$	7,595
Accounts receivable, net		8,092			4,897
Inventories		2,737			3,776
Prepaid expenses and other current assets		1,179			1,936
Total current assets		49,852			18,204
Auction rate securities put option		2,700			—
Investments, trading		19,800			—
Investments, available-for-sale		—			21,733
Property and equipment, net		1,624			1,041
Patents, net		1,265			980
Other assets		530			—
Total assets	$	75,771		$	41,958
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
Current liabilities
Current maturities of long-term debt	$	24,964		$	11,888
Accounts payable		4,841			5,851
Accrued expenses		4,438			3,467
Deferred revenue		—			116
Total current liabilities		34,243			21,322
Long-term liabilities
Long-term debt, net of current maturities		5,498			—
Redeemable convertible preferred stock warrants		—			3,986
Lease obligation and other liabilities		1,561			100
Total long-term liabilities		7,059			4,086
Total liabilities		41,302			25,408
Commitments and contingencies
Series A redeemable convertible preferred stock, no par value; authorized 3,511,269 shares, issued and outstanding 3,081,375 at June 30, 2008; aggregate liquidation value $31,230 at June 30, 2008		—			51,213
Series A-1 redeemable convertible preferred stock, no par value; authorized 1,461,220 shares at June 30, 2008; issued and outstanding 1,461,220 at June 30, 2008; aggregate liquidation value $19,862 at June 30, 2008		—			23,657
Series B redeemable convertible preferred stock, no par value; authorized 1,412,908 shares, issued and outstanding 1,412,591 at June 30, 2008; aggregate liquidation value $20,871 at June 30, 2008		—			23,372
Stockholders’ equity (deficiency)
Common stock, $0.001 par value at March 31, 2009 and no par value at June 30, 2008; authorized 100,000,000 common shares at March 31, 2009 and 45,290,000 common shares and 3,235,000 undesignated shares at June 30, 2008, respectively; issued and outstanding 13,767,757 at March 31, 2009 and 4,900,984 at June 30, 2008, respectively		14			35,933
Additional paid in capital		144,916			—
Common stock warrants		11,321			680
Accumulated deficit		(121,782	)		(118,305	)
Total stockholders’ equity (deficiency)		34,469			(81,692	)
Total liabilities and stockholders’ equity (deficiency)	$	75,771		$	41,958

The accompanying notes are an integral part of these unaudited consolidated financial statements.

1

Cardiovascular Systems, Inc.

Consolidated Statements of Operations

(Dollars in thousands, except per share and share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2009			2008			2009			2008
Revenues	$	15,115		$	7,654		$	40,766		$	12,285
Cost of goods sold		3,920			2,512			11,954			5,244
Gross profit		11,195			5,142			28,812			7,041
Expenses
Selling, general and administrative		14,253			10,095			45,626			23,276
Research and development		3,428			4,338			11,851			10,662
Total expenses		17,681			14,433			57,477			33,938
Loss from operations		(6,486	)		(9,291	)		(28,665	)		(26,897	)
Other income (expense)
Interest expense		(971	)		—			(1,831	)		—
Interest income		171			399			3,180			1,012
Decretion (accretion) of redeemable convertible preferred stock warrants		3,157			(696	)		2,991			(912	)
Gain (impairment) on investments		300			(1,023	)		(1,933	)		(1,023	)
Total other income (expense)		2,657			(1,320	)		2,407			(923	)
Net loss		(3,829	)		(10,611	)		(26,258	)		(27,820	)
Decretion (accretion) of redeemable convertible preferred stock		25,778			(14,216	)		22,781			(19,422	)
Net income (loss) available to common stockholders	$	21,949		$	(24,827	)	$	(3,477	)	$	(47,242	)
Net income (loss) per common share:
Basic	$	2.63		$	(5.45	)	$	(0.57	)	$	(11.04	)
Diluted	$	(0.32	)	$	(5.45	)	$	(0.57	)	$	(11.04	)
Weighted average common shares used in computation:
Basic		8,343,660			4,552,694			6,096,523			4,278,109
Diluted		12,048,581			4,552,694			6,096,523			4,278,109

The accompanying notes are an integral part of these unaudited consolidated financial statements.

2

Cardiovascular Systems, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) and

Comprehensive (Loss) Income

(Dollars in thousands, except per share and share amounts)

(Unaudited)

															Accumulated
															Other
	Common Stock								Additional			Accumulated			Comprehensive						Comprehensive
	Shares		Amount			Warrants			Paid In Capital			Deficit			(Loss) Income			Total			(Loss) Income
Balances at June 30, 2007		4,054,957	$	26,054		$	1,366		$	—		$	(59,716	)	$	(7	)	$	(32,303	)	$	(15,603	)
Issuance/forfeiture of restricted stock awards		525,473		1,152															1,152
Stock-based compensation related to stock options				6,229															6,229
Exercise of stock options and warrants at $1.55 — $12.37 per share		320,554		2,382			(570	)											1,812
Expiration of warrants				116			(116	)											—
Decretion (accretion) of redeemable convertible preferred stock													(19,422	)					(19,422	)
Unrealized gain on investments																7			7		$	7
Net loss													(39,167	)					(39,167	)		(39,167	)
Balances at June 30, 2008		4,900,984	$	35,933		$	680		$	—		$	(118,305	)	$	—		$	(81,692	)	$	(39,161	)
Issuance/forfeiture of restricted stock awards		86,679		2,464						1,084									3,548
Stock-based compensation related to stock options				756						627									1,383
Exercise of stock options and warrants at $1.55-$8.83 per share		92,866		640			(383	)		245									502
Issuance of common stock warrants							10,031			(8,217	)								1,814
Conversion of preferred warrants to common warrants							1,069												1,069
Expiration of warrants				76			(76	)											—
Decretion (accretion) of redeemable convertible preferred stock													22,781						22,781
Conversion of preferred stock to common stock		5,954,389		6						75,456									75,462
Merger with Replidyne, net of merger costs		2,732,839		3						35,857									35,860
To adjust common stock to par value				(39,864	)					39,864									—
Net loss													(26,258	)					(26,258	)		(26,258	)
Balances at March 31, 2009		13,767,757	$	14		$	11,321		$	144,916		$	(121,782	)	$	—		$	34,469		$	(26,258	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

Consolidated Statements Cash Flows

(Dollars in thousands, except per share and share amounts)

(Unaudited)

	Nine Months Ended
	March 31,
	2009			2008
Cash flows from operating activities
Net loss	$	(26,258	)	$	(27,820	)
Adjustments to reconcile net loss to net cash used in operations
Depreciation and amortization of property and equipment		305			183
Provision for doubtful accounts		95			133
Amortization of patents		27			44
(Decretion) accretion of redeemable convertible preferred stock warrants		(2,991	)		912
Amortization of debt discount		1,023			—
Stock-based compensation		4,931			6,222
Amortization of discount on investments		—			(52	)
Impairment on investments		1,933			1,023
Gain on auction rate securities put option		(2,700	)		—
Changes in assets and liabilities, net of merger
Accounts receivable		(3,290	)		(3,353	)
Inventories		1,039			(2,712	)
Prepaid expenses and other current assets		1,938			(1,191	)
Accounts payable		(1,446	)		2,631
Accrued expenses and other liabilities		(926	)		1,079
Deferred revenue		(116	)		517
Net cash used in operations		(26,436	)		(22,384	)
Cash flows from investing activities
Expenditures for property and equipment		(750	)		(715	)
Purchases of investments		—			(31,314	)
Sales of investments		—			19,988
Costs incurred in connection with patents		(312	)		(225	)
Cash acquired in Replidyne merger, net of transaction costs paid		37,805			—
Net cash provided (used) in investing activities		36,743			(12,266	)
Cash flows from financing activities
Proceeds from sale of redeemable convertible preferred stock		—			30,296
Payment of offering costs		—			(49	)
Issuance of common stock warrants		1,814			—
Issuance of convertible preferred stock warrants		75			—
Exercise of stock options and warrants		502			1,652
Proceeds from long-term debt		18,031			11,500
Payments on long-term debt		(480	)		(570	)
Net cash provided by financing activities		19,942			42,829
Net change in cash and cash equivalents		30,249			8,179
Cash and cash equivalents
Beginning of period		7,595			7,908
End of period	$	37,844		$	16,087

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

1. Business Overview

Company Description and Merger

     Cardiovascular Systems, Inc. was incorporated as Replidyne, Inc. in Delaware in 2000. On February 25, 2009, Replidyne, Inc. completed its reverse merger with Cardiovascular Systems, Inc., a Minnesota corporation (“CSI-MN”), in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of November 3, 2008, by and among Replidyne, Responder Merger Sub, Inc., a wholly-owned subsidiary of Replidyne (“Merger Sub”), and CSI-MN (the “Merger Agreement”). Pursuant to the Merger Agreement, Merger Sub merged with and into CSI-MN, with CSI-MN continuing after the merger as the surviving corporation and a wholly owned subsidiary of Replidyne. At the effective time of the merger, Replidyne changed its name to Cardiovascular Systems, Inc. (“CSI”) and CSI-MN changed its name to CSI Minnesota, Inc. Following the merger of Merger Sub with CSI-MN, CSI-MN merged with and into CSI, with CSI continuing after the merger as the surviving corporation. These transactions are referred to herein as the “merger.”

     Unless the context otherwise requires, all references herein to the “Company,” “CSI,” “we,” “us” and “our” refer to CSI-MN prior to the completion of the merger and to CSI following the completion of the merger and the name change, and all references to “Replidyne” refer to Replidyne prior to the completion of the merger and the name change.

     Immediately prior to the merger each share of CSI-MN’s Series A, A-1, and B convertible preferred stock automatically converted into approximately one share of CSI-MN’s common stock.

     At closing, Replidyne’s net assets, as calculated pursuant to the terms of the Merger Agreement, were approximately $37,000. Based on the amount of net assets, each outstanding share of CSI-MN’s common stock, including each share issuable upon conversion of CSI-MN Series A, Series A-1 and Series B convertible preferred stock as described above, was converted at the effective time of the merger into the right to receive 0.647 shares of Company common stock, taking into account a 1 for 10 reverse stock split approved by Replidyne’s stockholders and board of directors on February 24, 2009. All share and per share amounts reflect the effect of the conversion factor for all periods presented. Immediately following the effective time of the merger, former CSI-MN stockholders owned approximately 80.2% of the outstanding common stock of the Company, and Replidyne stockholders owned approximately 19.8% of the outstanding common stock of the Company. Options exercisable for a total of 5,681,974 shares of CSI-MN common stock (equivalent to a total of 3,676,208 shares of Company common stock) and warrants exercisable for a total of 4,836,051 shares of CSI-MN common stock (equivalent to a total of 3,128,740 shares of Company common stock) were assumed by the Company in connection with the merger.

     Immediately prior to the merger, warrants to purchase shares of CSI-MN Series A and Series B convertible preferred stock were converted into warrants to purchase shares of CSI-MN common stock at the same ratios as the preferred stock converted into common stock. Each option and warrant to purchase CSI-MN common stock outstanding at the effective time of the merger was assumed by the Company at the effective time of the merger. Each such option or warrant became an option or warrant, as applicable, to acquire that number of shares of Company common stock equal to the product obtained by multiplying the number of shares of CSI-MN common stock subject to such option or warrant by 0.647, rounded down to the nearest whole share of Company common stock. Following the merger, each such option or warrant has a purchase price per share of Company common stock equal to the quotient obtained by dividing the per share purchase price of CSI-MN common stock subject to such option or warrant by 0.647, rounded up to the nearest whole cent.

     The Company’s common stock was accepted for listing on the Nasdaq Global Market under the symbol “CSII” and trading commenced on February 26, 2009.

5

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

     The Company develops, manufactures and markets devices for the treatment of vascular diseases. The Company has completed a pivotal clinical trial in the United States to demonstrate the safety and efficacy of the Company’s Diamondback 360° orbital atherectomy system in treating peripheral arterial disease. On August 30, 2007, the U.S. Food and Drug Administration, or FDA, granted the Company 510(k) clearance to market the Diamondback 360° for the treatment of peripheral arterial disease. The Company commenced a limited commercial introduction of the Diamondback 360° in the United States in September 2007. During the quarter ended March 31, 2008, the Company began its full commercial launch of the Diamondback 360°. Prior to the merger, Replidyne was a biopharmaceutical company focused on discovering, developing, in-licensing and commercializing innovative anti-infective products.

     For the fiscal year ended June 30, 2007, the Company was considered a “development stage enterprise” as prescribed in Statement of Financial Accounting Standards (“SFAS”) No. 7, Accounting and Reporting by Development Stage Enterprises. During that time, the Company’s major emphasis was on planning, research and development, recruitment and development of a management and technical staff, and raising capital. The Company no longer considers itself a development stage enterprise as these development stage activities were completed prior to the first quarter of fiscal 2008. The Company’s management team, organizational structure and distribution channel are in place. The Company’s primary focus is on the sale and commercialization of its current product to end user customers.

     The Company believes that Replidyne did not meet the definition of a business in accordance with the Statements of Financial Accounting Standards No. 141, Business Combinations, and Emerging Issues Task Force (EITF) No. 98-3, Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business, because as of the date of merger Replidyne had reduced its employee headcount to three employees that were not engaged in development or commercialization efforts and did not transition to the combined company, and had discontinued and engaged in a process to sell or otherwise dispose of its research and development programs. As such, at the time the transaction was consummated, Replidyne’s sole business activity was liquidation through the merger. Under EITF 98-3, the total estimated purchase price is allocated to the assets acquired and liabilities assumed in connection with the transaction, based on their estimated fair values. As a result, the cost of the merger has been measured at the estimated fair value of the net assets acquired, and no goodwill has been recognized. While the accounting treatment of the transaction is an acquisition of assets and assumption of certain liabilities by the Company, the manner in which such transaction was consummated is a merger whereby former CSI-MN stockholders control the combined entity. Accordingly, consistent with guidance relating to such transactions, CSI-MN (the legal acquiree, but the accounting acquirer) is considered to be the continuing reporting entity that acquires the registrant, Replidyne (the legal acquirer, but the accounting acquiree), and therefore the transaction is considered to be a reverse merger. The merger qualified as a tax-free reorganization under provisions of Section 368(a) of the Internal Revenue Code. CSI-MN directors constitute a majority of the combined company’s board of directors and CSI-MN executive officers constitute all members of executive management of the combined company.

     The financial statements of the combined entity reflect the historical results of CSI-MN before the merger and do not include the historical financial results of Replidyne before the completion of the merger. The combined entity has changed its year-end to June 30 to correspond to the historical results of CSI-MN. Stockholders’ equity and earnings per share of the combined entity and, except as noted, all other share references have been retroactively restated to reflect the number of shares of common stock received by CSI-MN security holders in the merger, after giving effect to the difference between the par values of the capital stock of CSI-MN and Replidyne, with the offset to additional paid-in capital.

     A summary of the preliminary estimated fair value of the net assets acquired and merger costs incurred in the merger are as follows:

Description	Amount
Cash and cash equivalents	$	38,479
Prepaid expenses and other current assets		1,186
Property and equipment		138
Other assets		525
Liabilities		(3,358	)
Net assets acquired	$	36,970

6

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

     The Company incurred merger related costs of $1,110 that were recorded in additional paid in capital as part of the transaction.

     The Company has recorded a current and long-term asset of $719 related to a deposit for a portion of the vacated Replidyne office and production facility that has been subleased to two tenants. The tenants have prepaid the entire sublease amount and this prepayment has been netted against the lease liability that is included in accrued expenses and lease obligation and deferred rent on the balance sheet. The deposit is being held at an escrow agent and returned in monthly payments until lease expiration in September 2011. The Company has recorded the unreturned portion of the deposit at March 31, 2009, resulting in $278 in prepaid expenses and other current assets and $441 in other assets on the balance sheet.

     The Company has recorded a current and long-term liability of $2,469 related to Replidyne’s lease on the vacated office and production facility. The lease currently requires monthly base rent payments of $50 plus common area maintenance and operating expenses. Monthly base rent escalates over the remaining lease term to a maximum of $59 at lease expiration in September 2011. The Company has recorded the estimated net present value of the base rent, common area maintenance and operating expenses offset by estimated rental income at March 31, 2009, resulting in $995 in accrued expenses and $1,474 in lease obligation and other liabilities on the balance sheet.

2. Summary of Significant Accounting Policies

Principles of Consolidation

     The consolidated balance sheets, statements of operations, changes in stockholders’ equity (deficiency) and comprehensive (loss) income, and cash flows include the accounts of the Company and its wholly owned inactive Netherlands subsidiary, SCS B.V., after elimination of all significant intercompany transactions and accounts. SCS B.V. was formed for the purpose of conducting human trials and the development of production facilities. Operations of the subsidiary ceased in fiscal 2002; accordingly, there are no assets or liabilities included in the consolidated financial statements related to SCS B.V.

Interim Financial Statements

     The Company has prepared the unaudited interim consolidated financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. The year end consolidated balance sheet was derived from audited consolidated financial statements, but does not include all disclosures as required by accounting principles generally accepted in the United States of America. These interim consolidated financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to present fairly the Company’s consolidated financial position, the results of its operations and its cash flows for the interim periods. These interim consolidated financial statements should be read in conjunction with the consolidated annual financial statements of CSI-MN and the notes thereto included in the Form 8-K filed by the Company with the SEC on March 3, 2009. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

Concentration of Credit Risk

     Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of cash and cash equivalents, investments and accounts receivable. The Company maintains its cash and cash equivalent balances primarily with two financial institutions. At times, these balances exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in cash and cash equivalents.

Fair Value of Financial Instruments

     Effective July 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which provides a framework for measuring fair value under Generally Accepted Accounting Principles and expands disclosures about fair value measurements. In February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157, which provides a one-year deferral on the effective date of SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at least annually. Therefore, the Company has adopted the provisions of SFAS No. 157 with respect to financial assets and financial liabilities only.

7

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

     SFAS 157 classifies these inputs into the following hierarchy:

          Level 1 Inputs — quoted prices in active markets for identical assets and liabilities

          Level 2 Inputs — observable inputs other than quoted prices in active markets for identical assets and liabilities

          Level 3 Inputs — unobservable inputs

          The following table sets forth the fair value of the Company’s auction rate securities that were measured on a recurring basis as of March 31, 2009. Assets are measured on a recurring basis if they are remeasured at least annually:

	Level 3
							Auction Rate
	Available-for-			Trading			Securities Put
	Sale Securities			Securities			Option
Balance at June 30, 2008	$	21,733		$	—		$	—
Transfer to trading securities		(21,733	)		21,733			—
Unrealized loss on investments not previously recognized in earnings		—			(343	)		—
Gain on auction rate securities put option		—			—			2,700
Gain on investments		—			300			—
Impairment on investments		—			(1,890	)		—
Balance at March 31, 2009	$	—		$	19,800		$	2,700

     As of March 31, 2009, the Company believes that the carrying amounts of its other financial instruments, including accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term maturities of these instruments.

Use of Estimates

     The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

     The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition and Emerging Issues Task Force (“EITF”) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. Revenue is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) shipment of all components has occurred or delivery of all components has occurred if the terms specify that title and risk of loss pass when products reach their destination; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. The Company has no additional post-shipment or other contractual obligations or performance requirements and does not provide any credits or other pricing adjustments affecting revenue recognition once those criteria have been met. The customer has no right of return on any component once these criteria have been met. Payment terms are generally set at 30 days.

     The Company has applied EITF No. 00-21, Revenue Arrangements with Multiple Deliverables, the primary impact of which was to treat the Diamondback 360° as a single unit of accounting for initial customer orders. As such, revenues were deferred until the title and risk of loss of each Diamondback 360° component, consisting of catheters, guidewires, and a control unit, were transferred to the customer based on the shipping terms. Many initial shipments to customers also included a loaner control unit, which the Company provided, until the new control unit received clearance from the FDA and was subsequently available for sale. The loaner control units were company-owned property and the Company maintained legal title to these units. The Company recognized approximately $615,000 of revenue during the three months ended March 31, 2008 that previously had been classified as deferred revenue. The balance of deferred revenue was $517,000 as of March 31, 2008, reflecting all component shipments to customers pending receipt of a

8

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

customer purchase order and shipment of a new control unit. There was no deferred revenue balance at March 31, 2009 and no previously classified deferred revenue was recognized as revenue during the three months ended March 31, 2009.

Recent Accounting Pronouncements

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This standard clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop these assumptions. On February 12, 2008, the FASB issued FASB Staff Position, or FSP, FAS 157-2, Effective Date of FASB Statement No. 157, or FSP FAS 157-2. FSP FAS 157-2 defers the implementation of SFAS No. 157 for certain nonfinancial assets and nonfinancial liabilities. The portion of SFAS No. 157 that has been deferred by FSP FAS 157-2 will be effective for the Company beginning in the first quarter of fiscal year 2010. The Company is currently evaluating the impact of this statement. SFAS No. 157 was adopted for financial assets and liabilities on July 1, 2008 and did not have a material impact on the Company’s financial position or consolidated results of operations during the nine months ended March 31, 2009.

     In October 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active. FSP SFAS No. 157-3 clarifies the application of SFAS No. 157, which the Company adopted for financial assets and liabilities on July 1, 2008, in situations where the market is not active. The Company has considered the guidance provided by FSP SFAS No. 157-3 in its determination of estimated fair values as of March 31, 2009.

     In April 2009, the FASB issued FSP FAS 115-2, FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, providing additional guidance for an other-than-temporary impairment analysis under existing U.S. generally accepted accounting principles (“GAAP”) in determining whether the holder is likely to realize some portion of the unrealized loss on an impaired security. An investment is impaired if the fair value of the investment is less than its cost; and FSP 157-4, Determining When a Market is Not Active and a Transaction is Not Distressed, providing additional guidance on determining whether a market for a financial assets is not active and a transaction is not distressed for fair value measurements under FASB Statement No. 157, Fair Value Measurements. The implementation date is for reporting periods ending after June 15, 2009, with early implementation permitted for periods ending after March 15, 2009. The Company is currently evaluating the impact of these statements.

     In June 2008, the FASB issued Staff Position EITF 03-06-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-06-1”). FSP EITF 03-06-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method in SFAS No. 128, “Earnings per Share”. FSP EITF 03-06-1 is effective for the Company on July 1, 2009 and requires all prior-period earnings per share data to be adjusted retrospectively. The Company is currently evaluating the impact of this statement.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This standard provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 was adopted on July 1, 2008 and did not have a material impact on the Company’s financial position or consolidated results of operations during the nine months ended March 31, 2009, except that the acceptance of the rights offer from UBS, as described in Note 4, resulted in a put option with a fair value of $2,700.

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. The revised standards continue the movement toward the greater use of fair values in financial reporting. SFAS 141(R) will significantly change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods including the accounting for contingent consideration. SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS 141(R) and SFAS 160 are effective for fiscal years beginning on or after December 15, 2008 with SFAS 141(R) to be applied prospectively while SFAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of SFAS 160 shall be applied prospectively. Early adoption is prohibited for both standards. The Company is currently evaluating the impact of these statements, but expects that the adoption of SFAS No. 141(R) will have a material impact on how the Company will identify, negotiate, and value

9

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

any future acquisitions and a material impact on how an acquisition will affect its consolidated financial statements, and that SFAS No. 160 will not have a material impact on its financial position or consolidated results of operations.

3. Going Concern

     The Company’s consolidated financial statements have been prepared on the going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company had cash and cash equivalents of $7,595 and an accumulated deficit of $118,305 at June 30, 2008. During the year ended June 30, 2008, net cash used in operations amounted to $31,868. The Company has incurred negative cash flows and losses since inception. In addition, in February 2008, the Company was notified that recent conditions in the global credit markets had caused insufficient demand for auction rate securities, resulting in failed auctions for $23,000 of the Company’s auction rate securities held at June 30, 2008. These securities are currently not liquid, as the Company has an inability to sell the securities due to continued failed auctions. At June 30, 2008, the Company had obtained a margin loan for up to $12,000 that was secured by the par value of the auction rate securities. Based on operating levels at June 30, 2008, combined with limited capital resources, financing the Company’s operations required that the Company raise additional equity or debt capital prior to December 31, 2008. All of these factors raised substantial doubt about the Company’s ability to continue as a going concern as of June 30, 2008.

     Subsequent to June 30, 2008, the Company replaced the margin loan with a new loan that allowed for maximum borrowings of $23,000 secured by the par value of the auction rate securities. The Company also entered into a loan and security agreement with Silicon Valley Bank with maximum borrowings of $13,500. See Note 5 for a further description on these loans. In November 2008, the Company accepted an offer that allows it to require its auction rate securities to be purchased at par value any time during the period of June 30, 2010 through July 2, 2012. See Note 4 for a further description on this agreement.

     On February 25, 2009, the Company completed the reverse merger with Replidyne. At closing, Replidyne’s net assets, as calculated pursuant to the terms of the Merger Agreement, were approximately $37,000. At March 31, 2009, the Company had cash and cash equivalents of $37,844. The Company believes current cash and cash equivalents and available debt will be sufficient to fund working capital requirements, capital expenditures and operations for the foreseeable future. The Company intends to retain any future earnings to support operations and to finance the growth and development of our business, and we do not anticipate paying any dividends in the foreseeable future. These factors will be considered at the end of fiscal year 2009 when the Company’s independent accountants reassess the Company’s ability to continue as a going concern.

4. Selected Consolidated Financial Statement Information

Inventories

     Inventories are stated at the lower of cost or market with cost determined on a first-in, first-out (“FIFO”) method of valuation. The establishment of inventory allowances for excess and obsolete inventories is based on estimated exposure on specific inventory items.

     At March 31, 2009, and June 30, 2008, respectively, inventories were comprised of the following:

	March 31,		June 30,
	2009		2008
Inventories
Raw materials	$	1,168	$	2,338
Work in process		187		117
Finished goods		1,382		1,321
	$	2,737	$	3,776

10

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

Investments

     The Company’s investments consist solely of auction rate securities (ARS). ARS were previously classified as short-term based on their liquid nature. ARS had certain economic characteristics of short-term investments due to a rate-setting mechanism and the ability to sell them through a Dutch auction process that occurred at pre-determined intervals of less than one year.

     The Company’s ARS are AAA rated and issued primarily by state agencies and backed by student loans substantially guaranteed by the Federal Family Education Loan Program (FFELP). The federal government insures loans in the FFELP so that lenders are reimbursed at least 97% of the loan’s outstanding principal and accrued interest if a borrower defaults. Approximately 99.2% of the par value of the Company’s ARS are supported by student loan assets that are guaranteed by the federal government under the FFELP.

     The Company’s ARS are debt instruments with a long-term maturity and with an interest rate that is reset in short intervals, primarily every 28 days, through auctions. Conditions in the global credit markets have prevented the Company from liquidating its holdings of ARS because the amount of securities submitted for sale has exceeded the amount of purchase orders for such securities. When auctions for these securities fail, the investments may not be readily convertible to cash until a future auction of these investments is successful or they are redeemed by the issuer or they mature.

     In February 2008, the Company was informed that there was insufficient demand for ARS, resulting in failed auctions for $23,000 of the Company’s ARS held at June 30, 2008. Currently, these affected securities are not liquid and will not become liquid until a future auction for these investments is successful or they are redeemed by the issuer or they mature. As a result, at March 31, 2009 and at June 30, 2008, the Company has classified the fair value of the ARS as a long-term asset. Interest rates on all failed ARS were reset to a temporary predetermined “penalty” or “maximum” rate. These maximum rates are generally limited to a maximum amount payable over a 12 month period equal to a rate based on the trailing 12-month average of 90-day treasury bills, plus 120 basis points. These maximum allowable rates range from 2.7% to 4.0% of par value per year.

     The Company has collected all interest due on its ARS and has no reason to believe that it will not collect all interest due in the future. The Company expects to receive the principal associated with its ARS upon the earlier of a successful auction, their redemption by the issuer or their maturity. All ARS held by the Company continue to be AAA rated subsequent to the failed auctions that began in February 2008.

     At March 31, 2009, the Company considered three indications of fair value: 1) the fair value indicated by the secondary markets for student loan backed ARS; 2) the fair value indicated by considering the likelihood and potential timing of issuers of the ARS exercising their redemption rights at par value; and 3) the fair value based on estimates of present value of the ARS based upon expected cash flows.

     At March 31, 2009, the Company concluded that no weight should be given to the value indicated by the secondary markets for student loan backed ARS similar to those the Company holds because these markets have low transaction volumes and consist primarily of private transactions with minimal disclosure. In addition, these transactions may not be representative of the actions of typically-motivated buyers and sellers and the Company does not currently intend to sell in the secondary markets. However, the Company did consider the secondary markets for certain mortgage-backed securities to estimate the market yields attributable to the Company’s ARS, but determined that these secondary markets do not provide a sufficient basis of comparison for the ARS that the Company holds and, accordingly, attributed no weight to the values of these mortgage-backed securities indicated by the secondary markets.

     The Company also concluded that no weight should be given to the likelihood and potential timing of issuers of the ARS exercising their redemption rights at par value based on high levels of uncertainty in regards to estimating issuer call activity, so the Company attributed a weight of 100.0% to estimates of present value of the ARS based upon expected cash flows. The attribution of weights to the valuation factors required the exercise of valuation judgment. The selection of a weight of 100.0% attributed to the present value of the ARS based upon expected cash flows reflects the expectation that no certainty exists regarding how the ARS will be eventually converted to cash and this methodology represents the fair value today of a future conversion of the ARS to cash. To derive estimates of the present value of the ARS based upon expected cash flows, the Company used the securities’ expected annual interest payments, ranging from 0.3% to 2.0% of par value, representing estimated maximum annual rates under the governing documents of the ARS; annual market interest rates, ranging from 3.6% to 5.6%, based on observed traded, state sponsored, taxable

11

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

certificates rated AAA or lower and issued between March 1 and March 31, 2009; certain mortgage-backed securities and indices; and a range of expected terms to liquidity.

     The Company’s weighting of the valuation methods as of March 31, 2009 indicates an implied term to liquidity of approximately five years. The implied term to liquidity of approximately five years is a result of considering a range in possible timing of the various scenarios that would allow a holder of the ARS to convert the ARS to cash ranging from zero to ten years, with the highest probability assigned to five years.

     From mid-September 2008, UBS began to provide loans at no net cost to its clients for the par value of their ARS holdings. In addition, UBS has also committed to provide liquidity solutions to institutional investors and has agreed to purchase all or any of a remaining $10.3 billion in ARS at par value from its institutional clients beginning June 30, 2010. The value of these rights were not included in the fair value of the Company’s ARS but rather recognized as a free standing asset separate from the ARS.

     On November 7, 2008, the Company accepted an offer from UBS AG (“UBS”), providing rights related to the Company’s ARS (the “Rights”). The Rights permit the Company to require UBS to purchase the Company’s ARS at par value, which is defined for this purpose as the liquidation preference of the ARS plus accrued but unpaid dividends or interest, at any time during the period of June 30, 2010 through July 2, 2012. Conversely, UBS has the right, in its discretion, to purchase or sell the Company’s ARS at any time until July 2, 2012, so long as the Company receives payment at par value upon any sale or disposition. The Company expects to sell its ARS under the Rights. However, if the Rights are not exercised before July 2, 2012 they will expire and UBS will have no further rights or obligation to buy the Company’s ARS. So long as the Company holds ARS, they will continue to accrue interest as determined by the auction process or the terms of the ARS if the auction process fails.

     UBS’s obligations under the Rights are not secured by its assets and do not require UBS to obtain any financing to support its performance obligations under the Rights. Furthermore, UBS will only purchase up to an aggregate of $10.3 billion in ARS from its institutional clients. UBS has disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the Rights.

     The Rights represent a firm agreement in accordance with SFAS 133, which defines a firm agreement as an agreement with an unrelated party, binding on both parties and usually legally enforceable, with the following characteristics: a) the agreement specifies all significant terms, including the quantity to be exchanged, the fixed price, and the timing of the transaction, and b) the agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable. The enforceability of the Rights results in a put option and should be recognized as a free standing asset separate from the ARS. Upon acceptance of the offer from UBS on November 7, 2008, the Company recorded $2,700 as the fair value of the put option asset with a corresponding credit to interest income. The Company considered the expected time until the Rights are exercised, carrying costs of the Rights, and the expected credit risk attributes of the Rights and UBS in their valuation of the put option. The put option does not meet the definition of a derivative instrument under SFAS 133. Therefore, the Company has elected to measure the put option at fair value under SFAS 159, which permits an entity to elect the fair value option for recognized financial assets, in order to match the changes in the fair value of the ARS. As a result, unrealized gains and losses will be included in earnings in future periods. The Company expects that future changes in the fair value of the put option will approximate fair value movements in the related ARS or reflect changes in the credit risk of UBS.

     Prior to accepting the UBS offer, the Company recorded ARS as investments available-for-sale. The Company recorded unrealized gains and losses on available-for-sale securities in accumulated other comprehensive income in the stockholders’ equity (deficiency) section of the balance sheet. Realized gains and losses were accounted for on the specific identification method.

     In connection with the Company’s acceptance of the UBS offer in November 2008, resulting in the Company’s right to require UBS to purchase ARS at par value beginning on June 30, 2010, the Company transferred the ARS from investments available-for-sale to trading securities in accordance with SFAS 115. The transfer to trading securities reflects management’s intent to exercise its put option during the period June 30, 2010 to July 3, 2012. Prior to the Company’s agreement with UBS, the Company’s intent was to hold the ARS until the market recovered. At the time of transfer, the unrealized loss on the Company’s ARS was $343. This unrealized loss was included in accumulated other comprehensive (loss) income. Upon transfer to trading securities, the Company immediately recognized a loss of $343, included in impairment on investments, for the amount of the unrealized loss not previously recognized in earnings.

12

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

     In addition to the valuation procedures described above, the Company considered (i) its current inability to hold these securities for a period of time sufficient to allow for an unanticipated recovery in fair value based on the Company’s current liquidity, history of operating losses, and management’s estimates of required cash for continued product development and sales and marketing expenses, and (ii) failed auctions and the anticipation of continued failed auctions for all of the Company’s ARS. Based on the factors described above, the Company recorded a gain on investments for the three months ended March 31, 2009 of $300. The Company recorded an impairment loss of $1,933 for the nine months ended March 31, 2009, which includes $343 of an unrealized loss not previously recognized in earnings. The Company continues to monitor the market for ARS and consider its impact (if any) on the fair market value of investments.

5. Debt

Loan and Security Agreement with Silicon Valley Bank

     On September 12, 2008, the Company entered into a loan and security agreement with Silicon Valley Bank with maximum available borrowings of $13,500, which agreement was amended on February 25, 2009 and April 30, 2009. The agreement includes a $3,000 term loan, a $10,000 accounts receivable line of credit, and a $5,500 term loan that reduces the availability of funds on the accounts receivable line of credit. The terms of each of these loans are as follows:

•	The $3,000 term loan has a fixed interest rate of 10.5% and a final payment amount equal to 3.0% of the loan amount due at maturity. This term loan has a 36 month maturity, with repayment terms that include interest only payments during the first six months followed by 30 equal principal and interest payments. This term loan also includes an acceleration provision that requires the Company to pay the entire outstanding balance, plus a penalty ranging from 1.0% to 6.0% of the principal amount, upon prepayment or the occurrence and continuance of an event of default. As part of the term loan agreement, the Company granted Silicon Valley Bank a warrant to purchase 8,493 shares of Series B redeemable convertible preferred stock at an exercise price of $14.16 per share. This warrant was assigned a value of $75 for accounting purposes, is immediately exercisable, and expires ten years after issuance. The balance outstanding on the term loan at March 31, 2009 was $2,911.
•	The accounts receivable line of credit has a two year maturity and a floating interest rate equal to the prime rate, plus 2.0%, with an interest rate floor of 7.0%. Interest on borrowings is due monthly and the principal balance is due at maturity. Borrowings on the line of credit are based on 80% of eligible domestic receivables, which is defined as receivables aged less than 90 days from the invoice date along with specific exclusions for contra-accounts, concentrations, and government receivables. The Company’s accounts receivable receipts are deposited into a lockbox account in the name of Silicon Valley Bank. The accounts receivable line of credit is subject to non-use fees, annual fees, cancellation fees, and maintaining a minimum liquidity ratio. There was no balance outstanding on the line of credit at March 31, 2009.
	On April 30, 2009, the accounts receivable line of credit was amended to allow for an increase in borrowings from $5,000 to $10,000. All other terms and conditions of the original line of credit agreement remain in place. The $5,500 term loan reduces available borrowings under the line of credit agreement.
•	The term loan was originally two guaranteed term loans. One of the guaranteed term loans was for $3,000 and the other guaranteed term loan was for $2,500, each with a one year maturity. Each of the guaranteed term loans had a floating interest rate equal to the prime rate, plus 2.25%, with an interest rate floor of 7.0% (effective rate of 7.0% at March 31, 2009). Interest on borrowings was due monthly and the principal balance was due at maturity. One of the Company’s directors and stockholders and two entities who held the Company’s preferred shares and were also affiliated with two of the Company’s directors agreed to act as guarantors of these term loans. In consideration for guarantees, the Company issued the guarantors warrants to purchase an aggregate of 296,539 shares of the Company’s common stock at an exercise price of $9.28 per share. The balance outstanding on the guaranteed term loans at March 31, 2009 was $5,500 (excluding debt discount of $866).
	On April 30, 2009, the guaranteed term loans were refinanced into a $5,500 term loan that has a fixed interest rate of 9.0% and a final payment amount equal to 1.0% of the loan amount due at maturity. As a result of the refinancing, the guarantees on the original term loans have been released. This term loan has a 30 month maturity, with repayment terms that include equal monthly payments of principal and interest beginning June 1, 2009. This term loan also includes an acceleration provision that requires the Company to pay the entire outstanding balance, plus a penalty ranging from 1.0% to 3.0% of the principal amount, upon prepayment or the occurrence and continuance of an event of default. The term loan reduces available borrowings under the amended accounts receivable line of credit agreement.

13

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

The guaranteed term loans and common stock warrants were allocated using the relative fair value method. Under this method, the Company estimated the fair value of the term loans without the guarantees and calculated the fair value of the common stock warrants using the Black-Scholes method. The relative fair value of the loans and warrants were applied to the loan proceeds of $5,500, resulting in an assigned value of $3,690 for the loans and $1,810 for the warrants. The assigned value of the warrants of $1,810 is treated as a debt discount and amortized over the one year maturity of the loan.

     Borrowings from Silicon Valley Bank are collateralized by all of the Company’s assets, other than the Company’s ARS and intellectual property, and, until April 30, 2009, the investor guarantees. The borrowings are subject to prepayment penalties and financial covenants, including the Company’s achievement of minimum monthly net revenue goals. Any non-compliance by the Company under the terms of the Company’s debt arrangements could result in an event of default under the Silicon Valley Bank loan, which, if not cured, could result in the acceleration of this debt.

     Loan Payable

     On March 28, 2008, the Company obtained a margin loan from UBS Financial Services’, Inc. for up to $12,000, with a floating interest rate equal to 30-day LIBOR, plus 0.25%. The loan was secured by the $23,000 par value of the Company’s auction rate securities. The maximum borrowing amount was not set forth in the written agreement for the loan and may have been adjusted from time to time by UBS Financial Services in its sole discretion. The loan was due on demand and UBS Financial Services may have required the Company to repay it in full from any loan or financing arrangement or a public equity offering. The margin requirements were determined by UBS Financial Services but were not included in the written loan agreement and were therefore subject to change. As of June 30, 2008, the margin requirements provided that UBS Financial Services would require a margin call on this loan if at any time the outstanding borrowings, including interest, exceed $12,000 or 75% of UBS Financial Services’ estimate of the fair value of the Company’s auction rate securities. If these margin requirements were not maintained, UBS Financial Services may have required the Company to make a loan payment in an amount necessary to comply with the applicable margin requirements or demand repayment of the entire outstanding balance. As of June 30, 2008, the Company maintained these margin requirements.

     On August 21, 2008, the Company replaced this loan with a margin loan from UBS Bank USA, which increased maximum borrowings available to $23,000. This maximum borrowing amount is not set forth in the written agreement for the loan and may be adjusted from time to time by UBS Bank in its sole discretion. The margin loan bears interest at variable rates that equal the lesser of (i) 30 day LIBOR plus 1.25% or (ii) the applicable reset rate, maximum auction rate or similar rate as specified in the prospectus or other documentation governing the pledged taxable student loan auction rate securities; however, interest expense charged on the loan will not exceed interest income earned on the auction rate securities. The loan is due on demand and UBS Bank will require the Company to repay it in full from the proceeds received from a public equity offering where net proceeds exceed $50,000. In addition, if at any time any of the Company’s auction rate securities may be sold, exchanged, redeemed, transferred or otherwise conveyed for no less than their par value, then the Company must immediately effect such a transfer and the proceeds must be used to pay down outstanding borrowings under this loan. The margin requirements are determined by UBS Bank but are not included in the written loan agreement and are therefore subject to change. As of August 21, 2008, the margin requirements include maximum borrowings, including interest, of $23,000. If these margin requirements are not maintained, UBS Bank may require the Company to make a loan payment in an amount necessary to comply with the applicable margin requirements or demand repayment of the entire outstanding balance. The Company has maintained the margin requirements under the loans from both UBS entities. The outstanding balance on this loan at March 31, 2009 was $22,917 and is included in maturities during the three months ending June 30, 2009.

     As of March 31, 2009, debt maturities (including debt discount) were as follows:

Three months ending June 30, 2009	$	22,876
2010		2,820
2011		3,536
2012		1,230
Total	$	30,462
Less: Current Maturities		(24,964	)
Long-term debt	$	5,498

14

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

6. Common Stock Warrants

     Immediately prior to consummation of the merger, CSI-MN issued warrants to preferred stockholders to purchase an aggregate of 3,499,877 shares of common stock (on a pre-merger basis) at an exercise price of $5.71 per share, as contemplated by the Merger Agreement. In the merger, these warrants were converted into warrants to purchase 2,264,264 shares of Company common stock at an exercise price at $8.83 per share. The warrants were assigned a value of $8,217 for accounting purposes and were recorded as additional paid in capital as part of the merger. The warrants are immediately exercisable and expire five years after issuance.

     In connection with the merger, 439,317 fully exercisable preferred stock warrants were converted into common stock warrants. The exercise prices on these warrants range from $8.83 - $14.16 and expire at various dates through September 2018.

     During the nine months ended March 31, 2009, the Company issued the former guarantors of the Silicon Valley Bank guaranteed term loans warrants to purchase an aggregate of 296,539 shares of the Company’s common stock at an exercise price of $9.28 per share. The warrants were assigned a value of $1,810 for accounting purposes, are immediately exercisable, and expire five years after issuance.

     The following summarizes common stock warrant activity for the nine months ended March 31, 2009:

	Warrants			Price Range
	Outstanding			per Share
Warrants outstanding at June 30, 2008		158,041		$	1.55 – $12.37
Warrants issued		2,560,803		$	8.83 – $9.28
Warrants converted		439,317		$	8.83 – $14.16
Warrants exercised		(29,226	)	$	1.55 – $7.73
Warrants expired		(8,605	)	$	7.73
Warrants outstanding at March 31, 2009		3,120,330		$	1.55 – $14.16

     The following assumptions were utilized in determining the fair value of warrants issued under the Black-Scholes model:

	Nine Months Ended
	March 31,
	2009
Weighted average fair value of warrants granted	$	4.06
Risk-free interest rates		2.5% -3.0	%
Expected life	5 years
Expected volatility		46.7%-55.5	%
Expected dividends	None

7. Stock Options and Restricted Stock Awards

     The Company has a 2007 Equity Incentive Plan (the “2007 Plan”), which was assumed from CSI-MN, under which options to purchase common stock and restricted stock awards have been granted to employees, directors and consultants at exercise prices determined by the board of directors, and in connection with the merger the Company assumed options and restricted stock awards granted by CSI-MN under its 1991 Stock Option Plan (the “1991 Plan”) and 2003 Stock Option Plan (the “2003 Plan”) (the 2007 Plan, the 1991 Plan and the 2003 Plan collectively, the “Plans”). The 1991 Plan and 2003 Plan permitted the granting of incentive stock options and nonqualified options. A total of 485,250 shares of common stock were originally reserved for issuance under the 1991 Plan, but with the execution of the 2003 Plan no additional options were granted under it. A total of 2,458,600 shares of common stock were originally reserved for issuance under the 2003 Plan but with the approval of the 2007 Plan no additional options will be granted under it. The 2007 Plan originally allowed for the granting of up to 1,941,000 shares of common stock as approved by the board of directors in the form of nonqualified or incentive stock options, restricted stock awards, restricted stock unit awards, performance share awards, performance unit awards or stock appreciation rights to officers, directors, consultants and employees of the Company. The Plan was amended in February 2009 to increase the number of authorized shares to 2,509,969. The amended 2007 Plan also includes a renewal provision whereby the number of shares shall automatically be increased on the first day of each fiscal

15

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

year beginning July 1, 2008, and ending July 1, 2017, by the lesser of (i) 970,500 shares, (ii) 5% of the outstanding common shares on such date, or (iii) a lesser amount determined by the board of directors.

     The Company had granted the following amount of stock options and restricted stock awards through March 31, 2009:

	Number of
Grant Type	Shares
Service based stock options (2007 Plan)		994,351
Performance based stock options (2007 Plan)		501,425
Service based stock options (2003 Plan)		429,338
Total		1,925,114	(1)
Restricted stock units (2007 Plan)		41,905
Restricted stock awards (2007 Plan)		703,724

(1) Excludes 45,290 shares of service based stock options granted outside of the plans.

     All options granted under the Plans become exercisable over periods established at the date of grant. The option exercise price is generally not less than the estimated fair market value of the Company’s common stock at the date of grant, as determined by the Company’s management and board of directors. In addition, the Company has granted nonqualified stock options to employees, directors and consultants outside of the Plans.

     In estimating the value of the Company’s common stock for purposes of granting options and determining stock-based compensation expense prior to the merger, the Company’s management and board of directors conducted stock valuations using two different valuation methods: the option pricing method and the probability weighted expected return method. Both of these valuation methods took into consideration the following factors: financing activity, rights and preferences of the Company’s preferred stock, growth of the executive management team, clinical trial activity, the FDA process, the status of the Company’s commercial launch, the Company’s mergers and acquisitions and public offering processes, revenues, the valuations of comparable public companies, the Company’s cash and working capital amounts, and additional objective and subjective factors relating to the Company’s business. The Company’s management and board of directors set the exercise prices for option grants based upon their best estimate of the fair market value of the common stock at the time they made such grants, taking into account all information available at those times. In some cases, management and the board of directors made retrospective assessments of the valuation of the common stock at later dates and determined that the fair market value of the common stock at the times the grants were made was different than the exercise prices established for those grants. In cases in which the fair market was higher than the exercise price, the Company recognized stock-based compensation expense for the excess of the fair market value of the common stock over the exercise price.

     Stock option activity for the nine months ended March 31, 2009 is as follows:

							Weighted
	Shares Available			Number of			Average
	for Grant(a)			Options(b)			Exercise Price
Options outstanding at June 30, 2008		544,538			3,803,124		$	10.19
Shares reserved		1,965,431			—
Shares granted		(99,314	)		99,314		$	9.13
Options exercised		—			(59,524	)	$	8.12
Options forfeited or expired		—			(80,551	)	$	9.22
Options outstanding at March 31, 2009		2,410,655			3,762,363		$	10.21

(a)	Excludes the effect of options granted, exercised, forfeited or expired related to activity from options granted outside the stock option plans described above; excludes the effect of restricted stock awards granted or forfeited under the 2007 Plan.
(b)	Includes the effect of options granted, exercised, forfeited or expired from the 1991 Plan, 2003 Plan, 2007 Plan, and options granted outside the stock option plans described above.

16

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

     Options typically vest over two to three years. An employee’s unvested options are forfeited when employment is terminated; vested options must be exercised at or within 90 days of termination to avoid forfeiture. The Company determines the fair value of options using the Black-Scholes option pricing model. The estimated fair value of options, including the effect of estimated forfeitures, is recognized as expense on a straight-line basis over the options’ vesting periods. The following assumptions were used in determining the fair value of stock options granted under the Black-Scholes model:

	Nine Months Ended			Year Ended
	March 31, 2009			June 30, 2008
Weighted average fair value of options granted	$	4.66		$	5.78
Risk-free interest rates		2.82	%		2.45% – 4.63	%
Expected life	6 years			3.5 – 6 years
Expected volatility		55.5	%		43.1% – 46.4	%
Expected dividends	None			None

     The risk-free interest rate for periods within the five and ten year contractual life of the options is based on the U.S. Treasury yield curve in effect at the grant date and the expected option life. Expected volatility is based on the historical volatility of the stock of companies within the Company’s peer group.

     On December 12, 2007, the Company granted 501,425 performance based incentive stock options to certain executives. The options originally were to become exercisable in full on the third anniversary of the date of grant provided that the Company had completed its initial public offering of common stock or a change of control transaction before December 31, 2008 and shall terminate on the tenth anniversary of the date of the grant. For this purpose, “change of control transaction” was defined as an acquisition of the Company through the sale of substantially all of the Company’s assets and the consequent discontinuance of its business or through a merger, consolidation, exchange, reorganization or similar transaction. On December 12, 2008, the Company amended the vesting terms of these options to delete the aforementioned vesting terms and to provide instead that the exercisability of the options shall be conditioned upon the closing of the merger and that the options shall vest to the extent of 50% of the total shares subject to the first anniversary of the merger and for the remaining 50% on the second anniversary of the merger. The Company has calculated compensation expense of $4,716 related to the stock options that is expected to be recognized over the vesting period. The Company began recording stock-based compensation expense related to the performance based incentive stock options effective at the closing of the merger, the time at which it became probable that the options would vest.

     As of March 31, 2009, the Company had granted 703,724 restricted stock awards. The fair value of each restricted stock award was equal to the fair market value of the Company’s common stock at the date of grant. Vesting of restricted stock awards range from one to three years. The estimated fair value of restricted stock awards, including the effect of estimated forfeitures, is recognized on a straight-line basis over the restricted stock’s vesting period. Restricted stock award activity for the nine months ended March 31, 2009 is as follows:

				Weighted
	Number of			Average Fair
	Shares			Value
Restricted stock awards outstanding at June 30, 2008		525,473		$	14.68
Restricted stock awards granted		160,149		$	15.03
Restricted stock awards forfeited		(73,470	)	$	15.28
Restricted stock awards outstanding at March 31, 2009		612,152		$	14.76

     The Company also maintains its 2006 Equity Incentive Plan (the “2006 Plan”), relating to Replidyne activity prior to the merger in February 2009. A total of 794,641 shares were originally reserved under the 2006 Plan but effective with the merger no additional options will be granted under it. Options granted under the 2006 Plan were either incentive or nonqualified stock options. Incentive stock options were only granted to Replidyne employees. Nonqualified stock options were granted by Replidyne to its employees, directors, and nonemployee consultants. Generally, options granted under the 2006 Plan expired ten years from the date of grant and vested over four years. Options granted generally vested over a four year period.

17

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

     Stock option activity since the date of merger is as follows:

				Weighted
	Number			Average
	of Options			Exercise Price
Options outstanding at February 25, 2009		239,716		$	31.11
Shares granted		—		$	—
Options exercised		(4,116	)	$	6.13
Options forfeited or expired		(34,384	)	$	34.90
Options outstanding at March 31, 2009		201,216		$	30.97

8. Redeemable Convertible Preferred Stock and Convertible Preferred Stock Warrants

     The Company issued 3,081,375 shares of Series A redeemable convertible preferred stock during fiscal 2007, no par value, for total proceeds of $27,000. In addition, Series A convertible preferred stock warrants were issued to purchase 436,710 shares of Series A redeemable convertible preferred stock in connection with the sale of the Series A redeemable convertible preferred stock. The Series A convertible preferred stock warrants have a purchase price of $8.83 per share with a five-year term and were assigned an initial value of $1,767 for accounting purposes using the Black-Scholes model. The change in value of the Series A convertible preferred stock warrants due to decretion (accretion) as a result of remeasurement was $3,157 and $(696) for the three months ended March 31, 2009 and 2008, respectively, and $2,991 and $(912) for the nine months ended March 31, 2009 and 2008 respectively, and is included in the consolidated statements of operations.

     As of June 30, 2007, the Company had sold 652,377 shares of Series A-1 redeemable convertible preferred stock, no par value, for total proceeds of $8,271, net of offering costs of $34. During the period from July 2007 to September 2007, the Company sold an additional 808,843 shares of Series A-1 redeemable convertible preferred stock for total proceeds of $10,282, net of offering costs of $14.

     On December 17, 2007, the Company completed the sale of 1,412,591 shares of Series B redeemable convertible preferred stock for total proceeds of $19,963, net of offering costs of $37.

     In connection with the closing of the merger at February 25, 2009, and preparation of the Company’s financial statements as of June 30, 2008, the Company’s management and Board of Directors established what it believed to be a fair market value of the Company’s Series A, Series A-1, and Series B redeemable convertible preferred stock. This determination was based on concurrent significant stock transactions with third parties and a variety of factors, including the Company’s business milestones achieved and future financial projections, the Company’s position in the industry relative to its competitors, external factors impacting the value of the Company in its marketplace, the stock volatility of comparable companies in its industry, general economic trends and the application of various valuation methodologies.

     Changes in the current market value of the Series A, Series A-1, and Series B redeemable convertible preferred stock were recorded as decretion (accretion) of redeemable convertible preferred stock and as accumulated deficit in the consolidated statements of changes in shareholders’ equity (deficiency) and in the consolidated statements of operations as decretion (accretion) of redeemable convertible preferred stock.

     The conversion rights of the Series A, Series A-1, and Series B redeemable convertible preferred stock (collectively, the “Preferred Stock”) were as follows:

The holders of the Preferred Stock had the right to convert, at their option, their shares into common stock on a share for share basis (subject to adjustments for events of dilution). Each preferred share would be automatically converted into unregistered shares of the Company’s common stock without any Company action, thereby providing conversion of all preferred shares, upon the approval of a majority of the preferred shareholders or upon the completion of an underwritten public offering of the Company’s shares, pursuant to a registration statement on Form S-1 under the Securities Act of 1933, as amended, of which the aggregate proceeds to the Company exceeded $40,000 (a “Qualified Public Offering”). Upon conversion, each share of the Preferred Stock would be converted into one share of common stock (subject to adjustment as defined in the CSI-MN Amended and Restated Articles of Incorporation), dividends would no longer accumulate, and previously accumulated, undeclared and unpaid dividends would not be payable by the Company.

18

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

In the event the holders of the Preferred Stock elected to convert their preferred shares into shares of common stock, and those holders requested that the Company register those shares of common stock, the Company was obligated to use its best efforts to effect a registration of the Company’s common shares. In the event that the common shares were not registered, the Company was not subject to financial penalties.

     Immediately prior to the merger with Replidyne, each share of CSI-MN’s Series A, A-1, and B convertible preferred stock automatically converted into approximately one share of CSI-MN’s common stock pursuant to an agreement with the preferred shareholders. In addition, immediately prior to the merger, warrants to purchase shares of CSI-MN Series A and B convertible preferred stock were converted into warrants to purchase CSI-MN common stock outstanding at the effective time of the merger.

     Subsequent to the merger with Replidyne, the Company has 5,000,000 preferred shares authorized. There are no preferred shares issued or outstanding at March 31, 2009.

9. Commitment and Contingencies

Shturman Legal Proceedings

     The Company was party to two legal proceedings relating to a dispute with Dr. Leonid Shturman, the Company’s founder, and Shturman Medical Systems, Inc., a company owned by Dr. Shturman. One of the legal proceedings concluded on May 5, 2008, and in the other legal proceeding a settlement was reached resulting in the Company paying Dr. Shturman $50. The Company recognized the $50 expense related to the settlement of this matter during the three months ended December 31, 2008.

ev3 Legal Proceedings

     The Company is party to a legal proceeding with ev3 Inc., ev3 Endovascular, Inc. and FoxHollow Technologies, Inc., together referred to as the Plaintiffs, which filed a complaint on December 28, 2007 in the Ramsey County District Court for the State of Minnesota against the Company and former employees of FoxHollow currently employed by the Company, which complaint was subsequently amended.

19

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

     The complaint, as amended, includes seven counts, which allege as follows:

• Individual defendants violated provisions in their employment agreements with their former employer FoxHollow, barring them from misusing FoxHollow confidential information.

• Individual defendants violated a provision in their FoxHollow employment agreements barring them, for a period of one year following their departure from FoxHollow, from soliciting or encouraging employees of FoxHollow to join the Company.

• Individual defendants breached a duty of loyalty owed to FoxHollow.

• The Company and individual defendants misappropriated trade secrets of one or more of the Plaintiffs.

• All defendants engaged in unfair competition.

• The Company tortiously interfered with the contracts between FoxHollow and individual defendants by allegedly procuring breaches of the employee non-solicitation/encouragement provision in those agreements, and an individual defendant tortiously interfered with the contracts between certain individual defendants and FoxHollow by allegedly procuring breaches of the confidential information provision in those agreements.

• All defendants conspired to gain an unfair competitive and economic advantage for the Company to the detriment of the Plaintiffs.

     The Plaintiffs seek, among other forms of relief, an award of damages in an amount greater than $50, a variety of forms of injunctive relief, exemplary damages under the Minnesota Trade Secrets Act, and recovery of their attorney fees and litigation costs. Although the Company has requested the information, the Plaintiffs have not yet disclosed what specific amount of damages they claim.

     The Company is defending this litigation vigorously, and believes that the outcome of this litigation will not have a materially adverse effect on the Company’s business, operations, cash flows or financial condition. The Company has not recognized any expense related to the settlement of this matter as an adverse outcome of this action is not probable. If the Company is not successful in this litigation, it could be required to pay substantial damages and could be subject to equitable relief that could include a requirement that the Company terminate or otherwise alter the terms or conditions of employment of certain employees, including certain key sales personnel who were formerly employed by FoxHollow. In any event, the defense of this litigation, regardless of the outcome, could result in substantial legal costs and diversion of management’s time and efforts from the operation of business.

10. Earnings Per Share

Basic

     The following table presents a reconciliation of the numerators and denominators used in the basic earnings per common share computations:

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2009			2008			2009			2008
Numerator
Net loss available in basic calculation	$	(3,829	)	$	(10,611	)	$	(26,258	)	$	(27,820	)
Decretion (accretion) of redeemable convertible preferred stock(a)		25,778			(14,216	)		22,781			(19,422	)
Net income (loss) available to common stockholders	$	21,949		$	(24,827	)	$	(3,477	)	$	(47,242	)
Denominator
Weighted average common shares outstanding — basic		8,343,660			4,552,694			6,096,523			4,278,109
Net income (loss) per common share — basic	$	2.63		$	(5.45	)	$	(0.57	)	$	(11.04	)

(a) The calculation for accretion of redeemable convertible preferred stock marks the redeemable convertible preferred stock to fair value, which equals or exceeds the amount of any undeclared dividends on the redeemable convertible preferred stock.

20

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the three and nine months ended March 31, 2009 and 2008)
(dollars in thousands, except per share and share amounts)
(unaudited)

Diluted

     The following table presents a reconciliation of the numerators and denominators used in the diluted earnings per common share computations:

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2009			2008			2009			2008
Numerator
Net income (loss) available to common stockholders	$	21,949		$	(24,827	)	$	(3,477	)	$	(47,242	)
Less: (Decretion) accretion of redeemable convertible preferred stock(a)		(25,778	)		—			—			—
Net loss available in diluted calculation	$	(3,829	)	$	(24,827	)	$	(3,477	)	$	(47,242	)
Denominator
Weighted average common shares — basic		8,343,660			4,552,694			6,096,523			4,278,109
Effect of dilutive stock options and warrants(b)(c)		—			—			—			—
Conversion of redeemable convertible preferred stock(d)		3,704,921			—			—			—
Weighted average common shares outstanding — diluted		12,048,581			4,552,694			6,096,523			4,278,109
Net loss per common share —diluted	$	(0.32	)	$	(5.45	)	$	(0.57	)	$	(11.04	)

(a)	The calculation for accretion of redeemable convertible preferred stock marks the redeemable convertible preferred stock to fair value, which equals or exceeds the amount of any undeclared dividends on the redeemable convertible preferred stock. These amounts have been excluded from the calculation for the three months ended March 31, 2008, and nine months ended March 31, 2009 and 2008 because they are anti-dilutive.
(b)	At March 31, 2009 and 2008, 3,120,330 and 617,625 warrants, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these warrants has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.
(c)	At March 31, 2009 and 2008, 3,963,579 and 3,891,041 stock options, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these options has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.
(d)	The calculation of conversion of redeemable convertible preferred stock has been shown for the three months ended March 31, 2009. These shares have been excluded from the calculation for the three months ended March 31, 2008, and nine months ended March 31, 2009 and 2008 because those shares are anti-dilutive.

11. Initial Public Offering Costs

     The Company withdrew the registration statement for its initial public offering in conjunction with the announcement of the execution of the Merger Agreement in November 2008. Therefore, previously capitalized offering costs of approximately $1,700 were included in selling, general and administrative during the nine months ended March 31, 2009.

21

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

     You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing under Item 1 of Part 1. Some of the information contained in this discussion and analysis or set forth elsewhere in this quarterly report, including information with respect to our plans and strategy for our business and expected financial results, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” discussed in our Registration Statement on Form S-4 (Registration No. 333-155887) under the headings “Risks Relating to CSI and the Combined Company,” “Risks Relating to CSI’s Business and Operations,” “Risks Related to Government Regulation,” “Risks Relating to CSI’s Intellectual Property,” and “Risks Relating to Ownership of Common Stock of the Combined Company” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

OVERVIEW

     We are a medical device company focused on developing and commercializing interventional treatment systems for vascular disease. Our initial product, the Diamondback 360° Orbital Atherectomy System, is a minimally invasive catheter system for the treatment of peripheral arterial disease, or PAD.

     We were incorporated as Replidyne, Inc. in Delaware in 2000. On February 25 2009, Replidyne, Inc. completed its business combination with Cardiovascular Systems, Inc., a Minnesota corporation (“CSI-MN”), in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of November 3, 2008, by and among Replidyne, Responder Merger Sub, Inc., a wholly-owned subsidiary of Replidyne (“Merger Sub”), and CSI-MN (the “Merger Agreement”). Pursuant to the Merger Agreement, Merger Sub merged with and into CSI-MN, with CSI-MN continuing after the merger as the surviving corporation and a wholly owned subsidiary of Replidyne. At the effective time of the merger, Replidyne changed its name to Cardiovascular Systems, Inc. (“CSI”) and CSI-MN changed its name to CSI Minnesota, Inc. Following the merger of Merger Sub with CSI-MN, CSI-MN merged with and into CSI, with CSI continuing after the merger as the surviving corporation. These transactions are referred to herein as the “merger.” Unless the context otherwise requires, all references herein to the “Company,” “CSI,” “we,” “us” and “our” refer to CSI-MN prior to the completion of the merger and to CSI following the completion of the merger and the name change, and all references to “Replidyne” refer to Replidyne prior to the completion of the merger and the name change.

     At the closing of the merger, Replidyne’s net assets, as calculated pursuant to the terms of the Merger Agreement, were approximately $37.0 million. As of immediately following the effective time of the merger, former CSI-MN stockholders owned approximately 80.2% of the outstanding common stock of the combined company, and Replidyne stockholders owned approximately 19.8% of the outstanding common stock of the combined company.

     Our common stock was accepted for listing on the Nasdaq Global Market under the symbol “CSII” and trading commenced on February 26, 2009.

     Replidyne was a biopharmaceutical company focused on discovering, developing, in-licensing and commercializing innovative anti-infective products.

     CSI-MN was incorporated in Minnesota in 1989. From 1989 to 1997, we engaged in research and development on several different product concepts that were later abandoned. Since 1997, we have devoted substantially all of our resources to the development of the Diamondback 360°.

          From 2003 to 2005, we conducted numerous bench and animal tests in preparation for application submissions to the FDA. We initially focused our testing on providing a solution for coronary in-stent restenosis but later changed the focus to PAD. In 2006, we obtained an investigational device exemption from the FDA to conduct our pivotal OASIS clinical trial, which was completed in January 2007. The OASIS clinical trial was a prospective 20-center study that involved 124 patients with 201 lesions.

          In August 2007, the FDA granted us 510(k) clearance for the use of the Diamondback 360° as a therapy in patients with PAD. We commenced a limited commercial introduction of the Diamondback 360° in the United States in September 2007. This limited

22

commercial introduction intentionally limited the size of our sales force and the number of customers each member of the sales force served in order to focus on obtaining quality and timely product feedback on initial product usages.

          We market the Diamondback 360° in the United States through a direct sales force and commenced a full commercial launch in the quarter ended March 31, 2008. We expend significant capital on our sales and marketing efforts to expand our customer base and utilization per customer. We manufacture the Diamondback 360° internally at our facilities.

          As of March 31, 2009, we had an accumulated deficit of $121.8 million. We expect our losses to continue but generally decline as revenue grows as we continue our commercialization activities, develop additional product enhancements and make further regulatory submissions. To date, we have financed our operations primarily through the private placement of equity securities and completion of the merger.

     Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Since our inception, we have experienced substantial operating losses and negative cash flows from operations. We had cash and cash equivalents of $37.8 million at March 31, 2009, which was primarily acquired as a result of the merger. During the nine months ended March 31, 2009 and 2008, net cash used in operations amounted to $26.4 million and $22.4 million, respectively. In February 2008, we were notified that recent conditions in the global credit markets had caused insufficient demand for auction rate securities, resulting in failed auctions for $23.0 million of our auction rate securities held at March 31, 2009. These securities are currently not liquid, as we have an inability to sell the securities due to continued failed auctions. On March 28, 2008, we obtained a margin loan from UBS Financial Services, Inc., the entity through which we originally purchased our auction rate securities, for up to $12.0 million, which was secured by the $23.0 million par value of our auction rate securities. The outstanding balance on this loan at June 30, 2008 was $11.9 million. On August 21, 2008, we replaced this loan with a margin loan from UBS Bank USA, which increased maximum borrowings available to $23.0 million.

     In addition, on September 12, 2008, we entered into a loan and security agreement with Silicon Valley Bank with maximum available borrowings of $13.5 million. The agreement originally included a $3.0 million term loan, a $5.0 million accounts receivable line of credit, and two term loans for an aggregate of $5.5 million that are guaranteed by certain of our affiliates. On April 30, 2009, we amended the loan and security agreement to allow for borrowings of up to $10.0 million on the accounts receivable line of credit, along with replacing the $5.5 million guaranteed loans with a term loan. The amended $5.5 million term loan reduces available borrowings under the accounts receivable line of credit. See “Liquidity and Capital Resources” for further information regarding this loan.

     During the remainder of fiscal year 2009, we plan to continue to expand our sales and marketing efforts, conduct research and development of product improvements and increase our manufacturing capacity to support anticipated future growth.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

     Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect amounts reported in those statements. Our estimates, assumptions and judgments, including those related to revenue recognition, excess and obsolete inventory, stock-based compensation, preferred stock and preferred stock warrants are updated as appropriate at least quarterly. We use authoritative pronouncements, our technical accounting knowledge, cumulative business experience, judgment and other factors in the selection and application of our accounting policies. While we believe that the estimates, assumptions and judgments that we use in preparing our consolidated financial statements are appropriate, these estimates, assumptions and judgments are subject to factors and uncertainties regarding their outcome. Therefore, actual results may materially differ from these estimates.

     Some of our significant accounting policies require us to make subjective or complex judgments or estimates. An accounting estimate is considered to be critical if it meets both of the following criteria: (1) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (2) different estimates that reasonably could have been used, or changes in the estimate that are reasonably likely to occur from period to period, would have a material impact on the presentation of our financial condition, results of operations, or cash flows. We believe that the following are our critical accounting policies and estimates:

23

Revenue Recognition. We recognize revenue in accordance with SEC Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition and EITF No. 00-21, Revenue Arrangements with Multiple Deliverables. Revenue is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) shipment of all components has occurred or delivery of all components has occurred if the terms specify that title and risk of loss pass when products reach their destination; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. We have no additional post-shipment or other contractual obligations or performance requirements and do not provide any credits or other pricing adjustments affecting revenue recognition once these criteria have been met. The customer has no right of return on any component once the above criteria have been met. Payment terms are generally set at 30 days.

We have applied EITF No. 00-21, Revenue Arrangements with Multiple Deliverables, the primary impact of which was to treat the Diamondback 360° as a single unit of accounting for initial customer orders. As such, revenues were deferred until the title and risk of loss of each Diamondback 360° component, consisting of catheters, guidewires, and a control unit, were transferred to the customer based on the shipping terms. Many initial shipments to customers also included a loaner control unit, which we provided, until the new control unit received clearance from the FDA and was subsequently available for sale. The loaner control units were company-owned property and we maintained legal title to these units. We recognized approximately $615,000 of revenue during the three months ended March 31, 2008 that previously had been classified as deferred revenue. The balance of deferred revenue was $517,000 as of March 31, 2008, reflecting all component shipments to customers pending receipt of a customer purchase order and shipment of a new control unit. There was no deferred revenue balance at March 31, 2009 and no previously classified deferred revenue was recognized as revenue during the three months ended March 31, 2009.

     Investments. Our investments consist solely of auction rate securities (ARS). ARS were previously classified as short-term based on their liquid nature. ARS had certain economic characteristics of short-term investments due to a rate-setting mechanism and the ability to sell them through a Dutch auction process that occurred at pre-determined intervals of less than one year.

     Our ARS are AAA rated and issued primarily by state agencies and backed by student loans substantially guaranteed by the Federal Family Education Loan Program (FFELP). The federal government insures loans in the FFELP so that lenders are reimbursed at least 97% of the loan’s outstanding principal and accrued interest if a borrower defaults. Approximately 99.2% of the par value of the our ARS are supported by student loan assets that are guaranteed by the federal government under the FFELP.

     Our ARS are debt instruments with a long-term maturity and with an interest rate that is reset in short intervals, primarily every 28 days, through auctions. Conditions in the global credit markets have prevented us from liquidating our holdings of ARS because the amount of securities submitted for sale has exceeded the amount of purchase orders for such securities. When auctions for these securities fail, the investments may not be readily convertible to cash until a future auction of these investments is successful or they are redeemed by the issuer or they mature.

     In February 2008, we were informed that there was insufficient demand for ARS, resulting in failed auctions for $23.0 million of our ARS held at March 31, 2009 and June 30, 2008. Currently, these affected securities are not liquid and will not become liquid until a future auction for these investments is successful or they are redeemed by the issuer or they mature. As a result, at March 31, 2009 and June 30, 2008, we classified the fair value of the ARS as a long-term asset. Interest rates on all failed ARS were reset to a temporary predetermined “penalty” or “maximum” rate. These maximum rates are generally limited to a maximum amount payable over a 12 month period equal to a rate based on the trailing 12-month average of 90-day treasury bills, plus 120 basis points. These maximum allowable rates range from 2.7% to 4.0% of par value per year. We have collected all interest due on our ARS and have no reason to believe that we will not collect all interest due in the future. We expect to receive the principal associated with our ARS upon the earlier of a successful auction, their redemption by the issuer or their maturity. All ARS held by us continue to be AAA rated subsequent to the failed auctions that began in February 2008.

     At March 31, 2009, we considered three indications of fair value: 1) the fair value indicated by the secondary markets for student loan backed ARS; 2) the fair value indicated by considering the likelihood and potential timing of issuers of the ARS exercising their redemption rights at par value; and 3) the fair value based on estimates of present value of the ARS based upon expected cash flows.

     At March 31, 2009, we concluded that no weight should be given to the value indicated by the secondary markets for student loan backed ARS similar to those we hold because these markets have low transaction volumes and consist primarily of private transactions with minimal disclosure. In addition, these transactions may not be representative of the actions of typically-motivated buyers and sellers and we do not currently intend to sell in the secondary markets. However, we did consider the secondary markets

24

for certain mortgage-backed securities to estimate the market yields attributable to our ARS, but determined that these secondary markets do not provide a sufficient basis of comparison for the ARS that we hold and, accordingly, attributed no weight to the values of these mortgage-backed securities indicated by the secondary markets.

     We also concluded that no weight should be given to the likelihood and potential timing of issuers of the ARS exercising their redemption rights at par value based on high levels of uncertainty in regards to estimating issuer call activity, so we attributed a weight of 100.0% to estimates of present value of the ARS based upon expected cash flows. The attribution of weights to the valuation factors required the exercise of valuation judgment. The selection of a weight of 100.0% attributed to the present value of the ARS based upon expected cash flows reflects the expectation that no certainty exists regarding how the ARS will be eventually converted to cash and this methodology represents the fair value today of a future conversion of the ARS to cash. To derive estimates of the present value of the ARS based upon expected cash flows, we used the securities’ expected annual interest payments, ranging from 0.3% to 2.0% of par value, representing estimated maximum annual rates under the governing documents of the ARS; annual market interest rates, ranging from 3.6% to 5.6%, based on observed traded, state sponsored, taxable certificates rated AAA or lower and issued between March 1 and March 31, 2009; certain mortgage-backed securities and indices; and a range of expected terms to liquidity.

     Our weighting of the valuation methods as of March 31, 2009 indicates an implied term to liquidity of approximately five years. The implied term to liquidity of approximately five years is a result of considering a range in possible timing of the various scenarios that would allow a holder of the ARS to convert the ARS to cash ranging from zero to ten years, with the highest probability assigned to five years.

     From mid-September 2008, UBS began to provide loans at no net cost to its clients for the par value of their ARS holdings. In addition, UBS has also committed to provide liquidity solutions to institutional investors and has agreed to purchase all or any of a remaining $10.3 billion in ARS at par value from its institutional clients beginning June 30, 2010. The value of these rights were not included in the fair value of our ARS but rather recognized as a free standing asset separate from the ARS.

     On November 7, 2008, we accepted an offer from UBS AG (“UBS”), providing rights related to our ARS (the “Rights”). The Rights permit us to require UBS to purchase our ARS at par value, which is defined for this purpose as the liquidation preference of the ARS plus accrued but unpaid dividends or interest, at any time during the period of June 30, 2010 through July 2, 2012. Conversely, UBS has the right, in its discretion, to purchase or sell our ARS at any time until July 2, 2012, so long as we receive payment at par value upon any sale or disposition. We expect to sell our ARS under the Rights. However, if the Rights are not exercised before July 2, 2012 they will expire and UBS will have no further rights or obligation to buy our ARS. So long as we hold ARS, they will continue to accrue interest as determined by the auction process or the terms of the ARS if the auction process fails.

     UBS’s obligations under the Rights are not secured by its assets and do not require UBS to obtain any financing to support its performance obligations under the Rights. Furthermore, UBS will only purchase up to an aggregate of $10.3 billion in ARS from its institutional clients. UBS has disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the Rights.

     The Rights represent a firm agreement in accordance with SFAS 133, which defines a firm agreement as an agreement with an unrelated party, binding on both parties and usually legally enforceable, with the following characteristics: a) the agreement specifies all significant terms, including the quantity to be exchanged, the fixed price, and the timing of the transaction, and b) the agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable. The enforceability of the Rights results in a put option and should be recognized as a free standing asset separate from the ARS. Upon acceptance of the offer from UBS on November 7, 2008, we recorded $2,700 as the fair value of the put option asset with a corresponding credit to interest income. We considered the expected time until the Rights are exercised, carrying costs of the Rights, and the expected credit risk attributes of the Rights and UBS in our valuation of the put option. The put option does not meet the definition of a derivative instrument under SFAS 133. Therefore, we elected to measure the put option at fair value under SFAS 159, which permits an entity to elect the fair value option for recognized financial assets, in order to match the changes in the fair value of the ARS. As a result, unrealized gains and losses will be included in earnings in future periods. We expect that future changes in the fair value of the put option will approximate fair value movements in the related ARS or reflect changes in the credit risk of UBS.

     Prior to accepting the UBS offer, we recorded ARS as investments available-for-sale. We recorded unrealized gains and losses on available-for-sale securities in accumulated other comprehensive income in the stockholders’ deficiency section of the balance sheet. Realized gains and losses were accounted for on the specific identification method.

25

     In connection with our acceptance of the UBS offer in November 2008, resulting in our right to require UBS to purchase ARS at par value beginning on June 30, 2010, we transferred the ARS from investments available-for-sale to trading securities in accordance with SFAS 115. The transfer to trading securities reflects management’s intent to exercise its put option during the period June 30, 2010 to July 3, 2012. Prior to our agreement with UBS, our intent was to hold the ARS until the market recovered. At the time of transfer, the unrealized loss on our ARS was $343,000. This unrealized loss was included in accumulated other comprehensive income (loss). Upon transfer to trading securities, we immediately recognized a loss of $343,000, included in impairment on investments, for the amount of the unrealized loss not previously recognized in earnings.

     In addition to the valuation procedures described above, we considered (i) our current inability to hold these securities for a period of time sufficient to allow for an unanticipated recovery in fair value based on our current liquidity, history of operating losses, and management’s estimates of required cash for continued product development and sales and marketing expenses, and (ii) failed auctions and the anticipation of continued failed auctions for all of our ARS.

     Based on the factors described above, we recorded a gain on investments for the three months ended March 31, 2009 of $300,000. We recorded an impairment loss of $1.9 million for the nine months ended March 31, 2009, which includes $343,000 of an unrealized loss not previously recognized in earnings. We continue to monitor the market for ARS and consider its impact (if any) on the fair market value of investments.

Excess and Obsolete Inventory. We have inventories that are principally comprised of capitalized direct labor and manufacturing overhead, raw materials and components, and finished goods. Due to the technological nature of our products, there is a risk of obsolescence to changes in our technology and the market, which is impacted by exogenous technological developments and events. Accordingly, we write down our inventories as we become aware of any situation where the carrying amount exceeds the estimated realizable value based on assumptions about future demands and market conditions. The evaluation includes analyses of inventory levels, expected product lives, product at risk of expiration, sales levels by product and projections of future sales demand.

Stock-Based Compensation. We account for stock-based compensation expense in accordance with SFAS No. 123(R), Share-Based Payment, as interpreted by SAB No. 107, using the prospective application method, for the issuance of stock options to employees and directors on or after July 1, 2006. The unvested compensation costs at July 1, 2006, which relate to grants of options that occurred prior to the date of adoption of SFAS No. 123(R), are continuing to be accounted for under Accounting Principles Board (APB) No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires us to recognize stock-based compensation expense in an amount equal to the fair value of share-based payments computed at the date of grant. The fair value of all employee and director stock options is expensed in the consolidated statements of operations over the related vesting period of the options. We calculated the fair value on the date of grant using a Black-Scholes option pricing model.

To determine the inputs for the Black-Scholes option pricing model, we are required to develop several assumptions, which are highly subjective. These assumptions include:

• our common stock’s volatility;

• the length of our options’ lives, which is based on future exercises and cancellations;

• the number of shares of common stock pursuant to which options which will ultimately be forfeited;

• the risk-free rate of return; and

• future dividends.

Prior to the consummation of the merger, we used comparable public company data to determine volatility for option grants. Since we have a limited history of stock purchase and sale activity, expected volatility is based on historical data from several public companies similar to us in size and nature of operations. We will continue to use comparable public company data to determine expected volatility for option grants until our historical volatility is relevant to measure. We use a weighted average calculation to estimate the time our options will be outstanding. We estimated the number of options that are expected to be forfeited based on our historical

26

experience. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. We use our judgment and expectations in setting future dividend rates, which is currently expected to be zero.

The absence of an active market for our common stock prior to the consummation of the merger also required our management and board of directors to estimate the fair value of our common stock for purposes of granting options and for determining stock-based compensation expense. In response to these requirements, our management and board of directors estimated the fair market value of common stock at each date at which options are granted based upon stock valuations and other qualitative factors. We have conducted stock valuations using the probability weighted expected return method, or PWERM at June 30, 2008, September 30, 2008, and December 31, 2008, as of which times we had commenced significant efforts in connection with our initial public offering process or the merger and the probability of a liquidation event had increased. Accordingly, management and the board of directors determined that the PWERM would be more appropriate than the option pricing method. For the PWERM, we estimated the likely return to stockholders based upon our becoming a public company through the merger or an initial public offering, being acquired or remaining a private company, and employed comparable public company, merger and acquisition transaction, and discounted cash flow analysis. These values were adjusted and weighted based on probability of occurrence.

Our management and board of directors also considered the valuations of comparable public companies, our cash and working capital amounts, and additional objective and subjective factors relating to our business. For each valuation, our management and board of directors considered all of the factors that they considered to be relevant at the time and did not rely exclusively on any particular factors. Certain factors described with respect to each valuation represented progress in the development of our business, which reduced risk and improved the probability that we would achieve our business plan. In addition, the order in which we have described these factors in this Form 10-Q does not represent the relative importance or weight given to any of the factors.

Following the merger, our stock valuations will be based upon the market price for our common stock.

The following highlights key milestones that contributed to the valuation of the common stock in each of our valuations:

Valuation as of December 31, 2008

This valuation estimated that the fair market value of our common stock as of December 31, 2008 was $16.80 per share, taking into consideration revenues of $25.6 million for the six months ended December 31, 2008, along with the estimated valuations associated with various liquidation scenarios considered under the PWERM method, including the merger.

Valuation as of September 30, 2008

This valuation estimated that the fair market value of our common stock as of September 30, 2008 was $15.84 per share, taking into consideration revenues of $11.6 million for the three months ended September 30, 2008, along with the estimated valuations associated with various liquidation scenarios considered under the PWERM method, including the merger.

Valuation as of June 30, 2008

This valuation estimated that the fair market value of our common stock as of June 30, 2008 was $15.80 per share, taking into consideration revenues of $22.2 million for the year ended June 30, 2008 and substantial completion of additional milestones in the initial public offering process. This valuation also considered uncertain conditions in the public markets, which resulted in a slightly lower valuation of our common stock than the March 31, 2008 valuation.

Our management and board of directors set the exercise prices for option grants based upon their best estimate of the fair market value of the common stock at the time they made such grants, taking into account all information available at those times. In some cases, management and the board of directors made retrospective assessments of the valuation of the common stock at later dates and determined that the fair market value of the common stock at the times the grants were made was different than the exercise prices established for those grants. In cases in which the fair market value was higher than the exercise price, we recognized stock-based compensation expense for the excess of the fair market value of the common stock over the exercise price.

27

We have granted restricted stock awards with vesting terms ranging from 12 to 36 months. The following table sets forth the number of shares of restricted stock awarded and the fair market value of the common stock, as determined by our management and board of directors, on the dates of the restricted stock award grants:

			Fair Market Value per Share
			Assigned by Management and
Date of Restricted Stock Award Grant	Number of Shares		Board of Directors
February 25, 2009		18,013	$	7.80
December 15, 2008		25,032	$	16.65
October 21, 2008		12,403	$	16.01
July 22, 2008		104,701	$	15.80
April 22, 2008		164,081	$	15.88
April 14, 2008		48,526	$	15.88
February 14, 2008		198,759	$	14.47
December 12, 2007		132,209	$	13.05

Preferred Stock. We record the current estimated fair value of our convertible preferred stock on a quarterly basis based on the fair market value of that stock as determined by our management and board of directors. In accordance with Accounting Series Release No. 268, Presentation in Financial Statements of “Redeemable Preferred Stocks” and EITF Abstracts, Topic D-98, Classification and Measurement of Redeemable Securities, we record changes in the current fair value of our redeemable convertible preferred stock in the consolidated statements of changes in stockholders’ (deficiency) equity and comprehensive (loss) income and consolidated statements of operations as accretion of redeemable convertible preferred stock. Concurrent with the merger, all preferred stock was converted to common stock and, accordingly, was reclassified to equity.

In connection with the preparation of our financial statements, our management and board of directors established what they believe to be the fair value of the Series A convertible preferred stock, Series A-1 convertible preferred stock and Series B convertible preferred stock of CSI-MN. This determination was based on concurrent significant stock transactions with third parties and a variety of factors, including our business milestones achieved and future financial projections, our position in the industry relative to our competitors, external factors impacting the value of our stock in the marketplace, the stock volatility of comparable companies in our industry, general economic trends and the application of various valuation methodologies. The following table shows the fair market value of one share of the Series A convertible preferred stock, Series A-1 convertible preferred stock and Series B convertible preferred stock during the nine months ended March 31, 2009:

	Series A		Series A-1		Series B
Date	Convertible Preferred Stock		Convertible Preferred Stock		Convertible Preferred Stock
February 25, 2009		7.80		7.80		7.80
December 31, 2008		17.22		17.22		17.22
September 30, 2008		16.71		16.71		16.71
June 30, 2008		16.71		16.71		16.71

Preferred Stock Warrants. Freestanding warrants and other similar instruments related to shares that are redeemable are accounted for in accordance with SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, and its related interpretations. Under SFAS No. 150, the freestanding warrant that is related to our redeemable convertible preferred stock is classified as a liability on the balance sheet as of June 30, 2008. The warrant was subject to remeasurement at each balance sheet date and any change in fair value was recognized as a component of interest expense. Fair value was measured using the Black-Scholes option pricing model. Concurrent with the merger, all preferred stock warrants were converted into warrants to purchase common stock and, accordingly, the liability was reclassified to equity.

28

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts (in thousands), and, for certain line items, the changes between the specified periods expressed as percent increases or decreases:

	Three Months Ended March 31,									Nine Months Ended March 31,
							Percent									Percent
	2009			2008			Change			2009			2008			Change
Revenues	$	15,115		$	7,654			97.5	%	$	40,766		$	12,285			231.8	%
Cost of goods sold		3,920			2,512			56.1			11,954			5,244			128.0
Gross profit		11,195			5,142			117.7			28,812			7,041			309.2
Expenses:
Selling, general and administrative		14,253			10,095			41.2			45,626			23,276			96.0
Research and development		3,428			4,338			(21.0	)		11,851			10,662			11.2
Total expenses		17,681			14,433			22.5			57,477			33,938			69.4
Loss from operations		(6,486	)		(9,291	)		30.2			(28,665	)		(26,897	)		6.6
Other (expense) income:
Interest expense		(971	)		—			(100.0	)		(1,831	)		—			(100.0	)
Interest income		171			399			(57.1	)		3,180			1,012			214.2
Decretion (accretion) of redeemable convertible preferred stock warrants		3,157			(696	)		553.6			2,991			(912	)		428.0
Gain (impairment) on investments		300			(1,023	)		129.3			(1,933	)		(1,023	)		(89.0	)
Total other (expense) income		2,657			(1,320	)		301.3			2,407			(923	)		360.8
Net loss		(3,829	)		(10,611	)		63.9			(26,258	)		(27,820	)		5.6
Decretion (accretion) of redeemable convertible preferred stock		25,778			(14,216	)		281.3			22,781			(19,422	)		217.3
Net loss available to common stockholders	$	21,949		$	(24,827	)		188.4	%	$	(3,477	)	$	(47,242	)		92.6	%

Comparison of Three Months Ended March 31, 2009 with Three Months Ended March 31, 2008

     Revenues. Revenues increased by $7.5 million, or 97.5%, from $7.7 million for the three months ended March 31, 2008 to $15.1 million for the three months ended March 31, 2009. This increase was attributable to increased sales of the Diamondback 360°, which received FDA clearance in the first quarter of fiscal 2008. We expect our revenue to continue increasing as we continue to increase penetration of the U.S. PAD market and introduce new and improved products.

     We have applied EITF No. 00-21, Revenue Arrangements with Multiple Deliverables, the primary impact of which was to treat the Diamondback 360° as a single unit of accounting for initial customer orders. As such, revenues were deferred until the title and risk of loss of each Diamondback 360° component, consisting of catheters, guidewires, and a control unit, were transferred to the customer based on the shipping terms. Many initial shipments to customers also included a loaner control unit, which we provided, until the new control unit received clearance from the FDA and was subsequently available for sale. The loaner control units were company-owned property and we maintained legal title to these units. We recognized approximately $615,000 of revenue during the three months ended March 31, 2008 that previously had been classified as deferred revenue. The balance of deferred revenue was $517,000 as of March 31, 2008, reflecting all component shipments to customers pending receipt of a customer purchase order and shipment of a new control unit. There was no deferred revenue balance at March 31, 2009 and no previously classified deferred revenue was recognized as revenue during the three months ended March 31, 2009.

     Cost of Goods Sold. Cost of goods sold increased by $1.4 million, or 56.1%, from $2.5 million for the three months ended March 31, 2008 to $3.9 million for the three months ended March 31, 2009. These amounts represent the cost of materials, labor and overhead for single-use catheters, guidewires and control units, and the increase reflects our increased sales. Cost of goods sold for the three months ended March 31, 2009 and 2008 includes $92,000 and $72,000, respectively, for stock-based compensation. We expect that cost of goods sold as a percentage of revenues will decline in the future, although quarterly fluctuations could occur based on timing of new product introductions, sales mix, unanticipated warranty claims, or other unanticipated circumstances.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $4.2 million, or 41.2%, from $10.1 million for the three months ended March 31, 2008 to $14.3 million for the three months ended March 31, 2009. The primary reasons for the increase included the continued building of our sales team, including commissions of $1.2 million and personnel expenses of $2.6 million. Selling, general and administrative for the three months ended March 31, 2009 and 2008 includes $1.4 million and $1.1 million, respectively, for stock-based compensation. We expect our selling, general and administrative expenses to continue to increase due to the costs associated with expanding our sales and marketing organization to further commercialize our products, and costs associated with operating as a public company. The rate of increase, however, is expected to be lower than our rate of expected revenue growth.

29

     Research and Development Expenses. Research and development expenses decreased by $0.9 million, or 21.0%, from $4.3 million for the three months ended March 31, 2008 to $3.4 million for the three months ended March 31, 2009. Research and development expenses relate to specific projects to improve our product or expand into new markets, such as the development of new control unit, shaft designs, crown designs, and coronary clinical trials. The reduction in expense related to costs of our coronary clinical trial incurred during the three months ended March 31, 2008, and a reduction in development testing and consulting. Research and development for the three months ended March 31, 2009 and 2008 includes $220,000 and $88,000, respectively, for stock-based compensation. As we continue to expand our product portfolio within the market for the treatment of peripheral arteries and leverage our core technology into the coronary market, we expect to incur research and development expenses at a slightly higher rate than the average quarterly rate for the nine months ended March 31, 2009, although quarterly fluctuations could occur based on timing of project expenditures.

     Interest Income. Interest income decreased by $228,000, or 57.1%, from $399,000 for the three months ended March 31, 2008 to $171,000 for the three months ended March 31, 2009. The decrease was primarily due to lower average cash, cash equivalent, and investment balances along with reduced yields. Average cash and cash equivalent and investment balances were $14.1 million and $25.6 million for the three months ended March 31, 2009 and 2008, respectively.

     Interest Expense. Interest expense was $971,000 for the three months ended March 31, 2009. Interest expense for the three months ended March 31, 2009 consisted of the amortization of debt discount of $472,000, and interest on outstanding debt facilities of $499,000. There was no interest expense during the three months ended March 31, 2008.

     Decretion (Accretion) of Redeemable Convertible Preferred Stock Warrants. Decretion of redeemable convertible preferred stock warrants for the three months ended March 31, 2009 was $3.2 million. Accretion of redeemable convertible preferred stock warrants for the three months ended March 31, 2008 was $696,000. Decretion (accretion) of redeemable convertible preferred stock warrants reflects the change in estimated fair value of preferred stock warrants at the balance sheet dates. Due to the merger, decretion recognized during the three months ended March 31, 2009 reflects a change in the estimated fair value of preferred stock warrants between December 31, 2008 and February 25, 2009 (date of merger) at which time the preferred stock warrants converted to common stock warrants. Due to the conversion there will be no further decretion (accretion) recorded for these warrants in the future.

     Gain (Impairment) on Investments. Gain (impairment) on investments was $300,000 and $(1.0) million for the three months ended March 31, 2009. Gain on investments for the three months ended March 31, 2009 was due to an increase in the fair value of investments. Impairment of investments during the three months ended March 31, 2008 was due to a decrease in the fair value of investments.

     Decretion (Accretion) of Redeemable Convertible Preferred Stock. Decretion of redeemable convertible preferred stock for the three months ended March 31, 2009 was $25.8 million. Accretion of redeemable convertible preferred stock for the three months ended March 31, 2008 was $14.2 million. Decretion (accretion) of redeemable convertible preferred stock reflects the change in estimated fair value of preferred stock at the balance sheet dates. Due to the merger, decretion recognized during the three months ended March 31, 2009 reflects a change in the estimated fair value of preferred stock between December 31, 2008 and February 25, 2009 (date of merger) at which time the preferred stock converted to common stock. Due to the conversion there will be no further decretion (accretion) recorded for these shares in the future.

     Comparison of the Nine Months Ended March 31, 2009 with Nine Months Ended March 31, 2008

     Revenues. Revenues increased by $28.5 million, or 231.8%, from $12.3 million for the nine months ended March 31, 2008 to $40.8 million for the nine months ended March 31, 2009. This increase was attributable to sales of the Diamondback 360° and the related timing of FDA clearance which occurred in the first quarter of fiscal 2008.

     We have applied EITF No. 00-21, Revenue Arrangements with Multiple Deliverables, the primary impact of which was to treat the Diamondback 360° as a single unit of accounting for initial customer orders. As such, revenues were deferred until the title and risk of loss of each Diamondback 360° component, consisting of catheters, guidewires, and a control unit, were transferred to the customer based on the shipping terms. Many initial shipments to customers also included a loaner control unit, which we provided, until the new control unit received clearance from the FDA and was subsequently available for sale. The loaner control units were company-owned property and we maintained legal title to these units. We recognized $116,000 and $910,000, respectively, of revenue during the nine

30

months ended March 31, 2009 and 2008 that previously had been classified as deferred revenue. The balance of deferred revenue was $517,000 as of March 31, 2008, reflecting all component shipments to customers pending receipt of a customer purchase order and shipment of a new control unit. There was no deferred revenue balance at March 31, 2009.

     Cost of Goods Sold. Cost of goods sold increased by $6.7 million, or 128.0%, from $5.2 million for the nine months ended March 31, 2008 to $12.0 million for the nine months ended March 31, 2009. These amounts represent the cost of materials, labor and overhead for single-use catheters, guidewires and control units, and the increase reflects our increased sales. Cost of goods sold for the nine months ended March 31, 2009 and 2008 includes $367,000 and $141,000, respectively, for stock-based compensation.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $22.3 million, or 96.0%, from $23.3 million for the nine months ended March 31, 2008 to $45.6 million for the nine months ended March 31, 2009. The primary reasons for the increase included the continued building of our sales team, including commissions of $7.4 million, personnel expenses of $8.0 million, and selling expenses of $3.6 million; the building of our marketing team, contributing $1.3 million; and significant consulting and professional services, contributing $2.8 million, which includes $1.7 million in previously capitalized offering costs. Selling, general and administrative for the nine months ended March 31, 2009 and 2008 includes $4.1 million and $5.9 million, respectively, for stock-based compensation.

     Research and Development Expenses. Research and development expenses increased by $1.2 million, or 11.2%, from $10.7 million during the nine months ended March 31, 2008 to $11.9 million for the nine months ended March 31, 2009. Research and development spending increased as we continued projects to improve our product and expand into new markets, such as the development of a new control unit, shaft designs, crown designs, and coronary clinical trials. Research and development for the nine months ended March 31, 2009 and 2008 includes $441,000 and $188,000, respectively, for stock-based compensation.

     Interest Income. Interest income increased by $2.2 million, or 214.2%, from $1.0 million for the nine months ended March 31, 2008 to $3.2 million for the nine months ended March 31, 2009. The increase was primarily due to the impact of recording the put option asset of $2.7 million on our auction rate securities. This was offset by lower average cash, cash equivalents, and investment balances along with reduced yields. Average cash and cash equivalent and investment balances were $10.7 million and $23.8 million for the nine months ended March 31, 2009 and 2008, respectively.

     Interest Expense. Interest expense was $1.8 million for the nine months ended March 31, 2009. Interest expense for the nine months ended March 31, 2009 consisted of the amortization of debt discount of $1.0 million and interest on outstanding debt facilities of $784,000. There was no interest expense during the nine months ended March 31, 2008.

     Decretion (Accretion) of Redeemable Convertible Preferred Stock Warrants. Decretion of redeemable convertible preferred stock warrants for the nine months ended March 31, 2009 was $3.0 million. Accretion of redeemable convertible preferred stock warrants for the nine months ended March 31, 2008 was $912,000. Decretion (accretion) of redeemable convertible preferred stock warrants reflects the change in estimated fair value of preferred stock warrants at the balance sheet dates. Due to the merger, decretion recognized during the nine months ended March 31, 2009 reflects a change in the estimated fair value of preferred stock warrants between December 31, 2008, and February 25, 2009 (date of merger) at which time the preferred stock warrants converted to common stock warrants. Due to the conversion there will be no further decretion (accretion) recorded for these warrants in the future.

     Gain (Impairment) on Investments. Impairment on investments was $1.9 million and $1.0 million for the nine months ended March 31, 2009 and 2008. For the nine months ended March 31, 2009, there was a $1.6 million decrease in the fair value of investments, and also the recognition of $343,000 in a previously recorded other comprehensive loss. Impairment on investments of $1.0 million for the nine months ended March 31, 2008 was due to a decrease in the fair value of investments.

     Decretion (Accretion) of Redeemable Convertible Preferred Stock. Decretion of redeemable convertible preferred stock for the nine months ended March 31, 2009 was negative $22.8 million. Accretion of redeemable convertible preferred stock for the nine months ended March 31, 2008 was $19.4 million. Decretion (accretion) of redeemable convertible preferred stock reflects the change in estimated fair value of preferred stock at the balance sheet dates. Due to the merger, decretion recognized during the nine months ended March 31, 2009 reflects a change in the estimated fair value of preferred stock between December 31, 2008, and February 25, 2009 (date of merger) at which time the preferred stock converted to common stock. Due to the conversion there will be no further decretion (accretion) recorded for these shares in the future.

31

LIQUIDITY AND CAPITAL RESOURCES

          Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We had cash and cash equivalents of $37.8 million at March 31, 2009 and $7.6 million at June 30, 2008. During the nine months ended March 31, 2009, net cash used in operations amounted to $26.4 million. As of March 31, 2009, we had an accumulated deficit of $121.8 million. We have historically funded our operating losses primarily from the issuance of common and preferred stock and convertible promissory notes. We have incurred negative cash flows and net losses since inception.

          As noted above, on February 25, 2009, we completed the merger, in accordance with the terms of the Merger Agreement. At closing, Replidyne’s net assets, as calculated pursuant to the terms of the Merger Agreement, were approximately $37.0 million.

          In February 2008, we were notified that recent conditions in the global credit markets have caused insufficient demand for auction rate securities, resulting in failed auctions for $23.0 million of our auction rate securities held at March 31, 2009 and June 30, 2008. These securities are currently not liquid, as we have an inability to sell the securities due to continued failed auctions. On March 28, 2008, we obtained a margin loan from UBS Financial Services, Inc., the entity through which we originally purchased our auction rate securities, for up to $12.0 million, which was secured by the $23.0 million par value of our auction rate securities. The outstanding balance on this loan at June 30, 2008 was $11.9 million. On August 21, 2008, we replaced this loan with a margin loan from UBS Bank USA, which increased maximum borrowings available to $23.0 million. This maximum borrowing amount is not set forth in the written agreement for the loan and may be adjusted from time to time by UBS Bank in its sole discretion. The margin loan bears interest at variable rates that equal the lesser of (i) 30 day LIBOR plus 1.25% or (ii) the applicable reset rate, maximum auction rate or similar rate as specified in the prospectus or other documentation governing the pledged taxable student loan auction rate securities; however, interest expense charged on the loan will not exceed interest income earned on the auction rate securities. The loan is due on demand and UBS Bank will require us to repay it in full from the proceeds received from a public equity offering where net proceeds exceed $50.0 million. In addition, if at any time any of our auction rate securities may be sold, exchanged, redeemed, transferred or otherwise conveyed for no less than their par value, then we must immediately effect such a transfer and the proceeds must be used to pay down outstanding borrowings under this loan. The margin requirements are determined by UBS Bank but are not included in the written loan agreement and are therefore subject to change. From August 21, 2008, the date this loan was initially funded, through the date of this quarterly filing, the margin requirements included maximum borrowings, including interest, of $23.0 million. If these margin requirements are not maintained, UBS Bank may require us to make a loan payment in an amount necessary to comply with the applicable margin requirements or demand repayment of the entire outstanding balance. We have maintained the margin requirements under the loans from both UBS entities. The outstanding balance on this loan at March 31, 2009 was $22.9 million.

          In addition, on September 12, 2008, we entered into a loan and security agreement with Silicon Valley Bank with maximum available borrowings of $13.5 million, which agreement was amended on February 25, 2009 and April 30, 2009. The agreement includes a $3.0 million term loan, a $10.0 million accounts receivable line of credit, and a $5.5 million term loan that reduces availability of borrowings on the accounts receivable line of credit. The terms of each of these loans are as follows:

• The $3.0 million term loan has a fixed interest rate of 10.5% and a final payment amount equal to 3.0% of the loan amount due at maturity. This term loan has a 36 month maturity, with repayment terms that include interest only payments during the first six months followed by 30 equal principal and interest payments. This term loan also includes an acceleration provision that requires us to pay the entire outstanding balance, plus a penalty ranging from 1.0% to 6.0% of the principal amount, upon prepayment or the occurrence and continuance of an event of default. As part of the term loan agreement, we granted Silicon Valley Bank a warrant to purchase 8,493 shares of Series B redeemable convertible preferred stock at an exercise price of $14.16 per share. This warrant was assigned a value of $75,000 for accounting purposes, is immediately exercisable, and expires ten years after issuance. The balance outstanding on the term loan at March 31, 2009 was $2.9 million.

• The accounts receivable line of credit has a two year maturity and a floating interest rate equal to the prime rate, plus 2.0%, with an interest rate floor of 7.0%. Interest on borrowings is due monthly and the principal balance is due at maturity. Borrowings on the line of credit are based on 80% of eligible domestic receivables, which is defined as receivables aged less than 90 days from the invoice date along with specific exclusions for contra-accounts, concentrations, and government receivables. Accounts receivable receipts are deposited into a lockbox account in the name of Silicon Valley Bank. The

32

	accounts receivable line of credit is subject to non-use fees, annual fees, cancellation fees, and maintaining a minimum liquidity ratio. There was no balance outstanding on the line of credit at March 31, 2009.
	On April 30, 2009, the accounts receivable line of credit was amended to allow for an increase in borrowings from $5.0 million to $10.0 million. All other terms and conditions of the original line of credit agreement remain in place. The $5.5 million term loan reduces available borrowings under the line of credit agreement.
•	The term loan was originally two guaranteed term loans. One of the guaranteed term loans was for $3.0 million and the other guaranteed term loan was for $2.5 million, each with a one year maturity. Each of the guaranteed term loans had a floating interest rate equal to the prime rate, plus 2.25%, with an interest rate floor of 7.0% (effective rate of 7.0% at March 31, 2009). Interest on borrowings were due monthly and the principal balance was due at maturity. One of our directors and stockholders and two entities who held preferred shares and were also affiliated with two of our directors agreed to act as guarantors of these term loans. In consideration for guarantees, we issued the guarantors warrants to purchase an aggregate of 296,539 shares of our common stock at an exercise price of $9.28 per share. The balance outstanding on the guaranteed term loans at March 31, 2009 was $5.5 million (excluding debt discount of $0.9 million).
	On April 30, 2009, the guaranteed term loans were refinanced into a $5.5 million term loan that has a fixed interest rate of 9.0% and a final payment amount equal to 1.0% of the loan amount due at maturity. As a result of the refinancing, the guarantees on the original term loans have been released. This term loan has a 30 month maturity, with repayment terms that include equal monthly payments of principal and interest beginning June 1, 2009. This term loan also includes an acceleration provision that requires us to pay the entire outstanding balance, plus a penalty ranging from 1.0% to 3.0% of the principal amount, upon prepayment or the occurrence and continuance of an event of default. The term loan reduces available borrowings under the amended accounts receivable line of credit agreement.

               The guaranteed term loans and common stock warrants were allocated using the relative fair value method. Under this method, we estimated the fair value of the term loans without the guarantees and calculated the fair value of the common stock warrants using the Black-Scholes method. The relative fair value of the loans and warrants were applied to the loan proceeds of $5.5 million resulting in an assigned value of $3.7 million for the loans and $1.8 million for the warrants. The assigned value of the warrants of $1.8 million is treated as a debt discount and amortized over the one year maturity of the loan.

               Borrowings from Silicon Valley Bank are secured by all of our assets, other than our auction rate securities and intellectual property, and, until April 30, 2009, the investor guarantees. The borrowings are subject to prepayment penalties and financial covenants, and our achievement of minimum monthly net revenue goals. Any non-compliance by us under the terms of our debt arrangements could result in an event of default under the Silicon Valley Bank loan, which, if not cured, could result in the acceleration of this debt. Repayment terms of these borrowings include $2.9 million due in less than one year, and $5.5 million due in one to three years.

               The reported changes in cash and cash equivalents and investments for nine months ended March 31, 2009 and 2008 are summarized below.

               Cash and Cash Equivalents. Cash and cash equivalents was $37.8 million and $7.6 million at March 31, 2009 and June 30, 2008, respectively. This increase is attributable to the Replidyne net assets at the closing of the merger.

               Investments. Investments were $19.8 million and $21.7 million at March 31, 2009 and June 30, 2008, respectively.

               Our investments include AAA rated auction rate securities issued primarily by state agencies and backed by student loans substantially guaranteed by the Federal Family Education Loan Program, or FFELP. The federal government insures loans in the FFELP so that lenders are reimbursed at least 97% of the loan’s outstanding principal and accrued interest if a borrower defaults. Approximately 99.2% of the par value of our auction rate securities is supported by student loan assets that are guaranteed by the federal government under the FFELP.

               In February 2008, we were informed that there was insufficient demand for auction rate securities, resulting in failed auctions for $23.0 million of our auction rate securities held at March 31, 2009 and June 30, 2008. Currently, these affected securities are not liquid and will not become liquid until a future auction for these investments is successful, they are redeemed by the issuer, they

33

mature, or they are repurchased by UBS. As a result, at March 31, 2009, we have determined the fair value of our auction rate securities to be $19.8 million and have classified them as a long-term asset. We determined the fair value of our auction rate securities with the assistance of ValueKnowledge LLC, an independent third party valuation firm, which utilized various valuation methods and considered, among other factors, estimates of present value of the auction rate securities based upon expected cash flows, the likelihood and potential timing of issuers of the auction rate securities exercising their redemption rights at par value, the likelihood of a return of liquidity to the market for these securities and the potential to sell the securities in secondary markets.

          On November 7, 2008, we accepted an offer from UBS AG (“UBS”), providing rights related to our auction rate securities (the “Rights”). The Rights permit us to require UBS to purchase our auction rate securities at par value, which is defined for this purpose as the liquidation preference of the auction rate securities plus accrued but unpaid dividends or interest, at any time during the period of June 30, 2010 through July 2, 2012. Conversely, UBS has the right, in its discretion, to purchase or sell our auction rate securities at any time until July 2, 2012, so long as we receive payment at par value upon any sale or disposition. We expect to sell our auction rates securities under the Rights. However, if the Rights are not exercised before July 2, 2012 they will expire and UBS will have no further rights or obligation to buy our auction rate securities. At March 31, 2009, we have determined the fair value of our auction rate security rights to be $2.7 million and have classified them as a long-term asset. So long as we hold auction rate securities, they will continue to accrue interest as determined by the auction process or the terms of the auction rate securities if the auction process fails.

          For additional discussion of liquidity issues relating to our auction rate securities, see “Qualitative and Quantitative Disclosures About Market Risk.”

          Operating Activities. Net cash used in operating activities was $26.4 million and $22.4 million for the nine months ended March 31, 2009 and 2008, respectively. For the nine months ended March 31, 2009 and 2008, we had a net loss of $26.3 million and $27.8 million, respectively. Changes in working capital accounts also contributed to the net cash used in the nine months ended March 31, 2009 and 2008. Significant changes in working capital during these periods included:

• cash used by accounts receivable of $3.3 million and $3.4 million during the nine months ended March 31, 2009 and 2008, respectively;

• cash used (provided) by inventory of $(1.0) million and $2.7 million during the nine months ended March 31, 2009 and 2008, respectively;

• cash used (provided) by prepaid expenses and other current assets of $(1.9) million and $1.2 million during the nine months ended March 31, 2009 and 2008, respectively;

• cash used (provided) by accounts payable of $1.4 million and $(2.6) million during the nine months ended March 31, 2009 and 2008, respectively; and

• cash used (provided) by accrued expenses and other liabilities of $926,000 and $(1.1) million during the nine months ended March 31, 2009 and 2008, respectively.

               Investing Activities. Net cash provided (used) in investing activities was $36.7 million and $(12.3) million for the nine months ended March 31, 2009 and 2008, respectively. For the nine months ended March 31, 2009, cash acquired in the merger with Replidyne, net of transaction costs paid, was $37.8 million. For the nine months ended March 31, 2008, we purchased investments in the amount of $31.3 million. For the nine months ended March 31, 2008, we sold investments in the amount of $20.0 million. The balance of cash provided (used) in investing activities primarily related to the purchase of property and equipment. Purchases of property and equipment used cash of $750,000 and $715,000 for the nine months ended March 31, 2009 and 2008, respectively.

               Financing Activities. Net cash provided by financing activities was $19.9 million and $42.8 million in the nine months ended March 31, 2009 and 2008, respectively. Cash provided by financing activities during these periods included:

• issuance of common stock warrants of $1.8 million during the nine months ended March 31, 2009;

34

•	proceeds from long-term debt of $18.0 million and $11.5 million during the nine months ended March 31, 2009 and 2008, respectively;
•	exercise of stock options and warrants of $502,000 and $1.7 million during the nine months ended March 31, 2009 and 2008, respectively; and
•	net proceeds from the issuance of convertible preferred stock of $30.3 million in the nine months ended March 31, 2008.
	Cash used in financing activities in these periods included:
•	payment of long-term debt of $480,000 and $570,000 during the nine months ended March 31, 2009 and 2008, respectively.

              Our future liquidity and capital requirements will be influenced by numerous factors, including the extent and duration of future operating losses, the level and timing of future sales and expenditures, the results and scope of ongoing research and product development programs, working capital required to support our sales growth, the receipt of and time required to obtain regulatory clearances and approvals, our sales and marketing programs, the continuing acceptance of our products in the marketplace, competing technologies and market and regulatory developments. As of March 31, 2009, we believe our current cash and cash equivalents and available debt will be sufficient to fund working capital requirements, capital expenditures and operations for the foreseeable future. We intend to retain any future earnings to support operations and to finance the growth and development of our business, and we do not anticipate paying any dividends in the foreseeable future.

INFLATION

We do not believe that inflation has had a material impact on our business and operating results during the periods presented.

OFF-BALANCE SHEET ARRANGEMENTS

Since inception, we have not engaged in any off-balance sheet activities as defined in Item 303(a)(4) of Regulation S-K.

RECENT ACCOUNTING PRONOUNCEMENTS

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This standard clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop these assumptions. On February 12, 2008, the FASB issued FASB Staff Position, or FSP, FAS 157-2, Effective Date of FASB Statement No. 157, or FSP FAS 157-2. FSP FAS 157-2 defers the implementation of SFAS No. 157 for certain nonfinancial assets and nonfinancial liabilities. The portion of SFAS No. 157 that has been deferred by FSP FAS 157-2 will be effective for us beginning in the first quarter of fiscal year 2010. We are currently evaluating the impact of this statement. SFAS No. 157 was adopted for financial assets and liabilities on July 1, 2008 and did not have a material impact on our financial position or consolidated results of operations during the nine months ended March 31, 2009.

     In October 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active. FSP SFAS No. 157-3 clarifies the application of SFAS No. 157, which we adopted for financial assets and liabilities on July 1, 2008, in situations where the market is not active. We have considered the guidance provided by FSP SFAS No. 157-3 in our determination of estimated fair values as of March 31, 2009.

     In April 2009, the FASB issued FSP FAS 115-2, FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, providing additional guidance for an other-than-temporary impairment analysis under existing U.S. generally accepted accounting principles (“GAAP”) in determining whether the holder is likely to realize some portion of the unrealized loss on an impaired security. An investment is impaired if the fair value of the investment is less than its cost; and FSP 157-4, Determining When a Market is Not Active and a Transaction is Not Distressed, providing additional guidance on determining whether a market for a financial assets is not active and a transaction is not distressed for fair value measurements under FASB Statement No. 157, Fair Value Measurements. The implementation date is for reporting periods ending after June 15, 2009, with early implementation permitted for periods ending after March 15, 2009. We are currently evaluating the impact of these statements.

35

     In June 2008, the FASB issued Staff Position EITF 03-06-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-06-1”). FSP EITF 03-06-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method in SFAS No. 128, “Earnings per Share”. FSP EITF 03-06-1 is effective for us on July 1, 2009 and requires all prior-period earnings per share data to be adjusted retrospectively. We are currently evaluating the impact of this statement.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This standard provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 was adopted on July 1, 2008 and did not have a material impact on our financial position or consolidated results of operations during the nine months ended March 31, 2009, except that the acceptance of the rights offer from UBS, as described above, resulted in a put option with a fair value of $2.7 million.

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. The revised standards continue the movement toward the greater use of fair values in financial reporting. SFAS 141(R) will significantly change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods including the accounting for contingent consideration. SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS 141(R) and SFAS 160 are effective for fiscal years beginning on or after December 15, 2008 with SFAS 141(R) to be applied prospectively while SFAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of SFAS 160 shall be applied prospectively. Early adoption is prohibited for both standards. We are currently evaluating the impact of these statements, but expect that the adoption of SFAS No. 141(R) will have a material impact on how we will identify, negotiate, and value any future acquisitions and a material impact on how an acquisition will affect our consolidated financial statements, and that SFAS No. 160 will not have a material impact on our financial position or consolidated results of operations.

PRIVATE SECURITIES LITIGATION REFORM ACT

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Such “forward-looking” information is included in this Form 10-Q, including Item 2 of Part I, and in other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company). Forward-looking statements include all statements based on future expectations. This Form 10-Q contains forward-looking statements that involve risks and uncertainties, including our expectation that our losses will continue; our plans to continue to expand our sales and marketing efforts, conduct research and development and increase our manufacturing capacity to support anticipated future growth; the expected benefits of the Rights from UBS; our expectation of increased revenue, selling, general and administrative expenses and research and development expenses; our expectation that cost of goods sold as a percentage of revenues will decline in the future; the sufficiency of our current and anticipated financial resources; and our belief that our current cash and cash equivalents and available debt will be sufficient to fund working capital requirements, capital expenditures and operations for the foreseeable future. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on their interpretation of currently available information.

These statements involve known and unknown risks, uncertainties and other factors that may cause our results or our industry’s actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. These factors include regulatory developments in the U.S. and foreign countries; the experience of physicians regarding the effectiveness and reliability of the Diamondback 360º; competition from other devices; unanticipated developments affecting our estimates regarding expenses, future revenues and capital requirements; our inability to expand our sales and marketing organization and research and development efforts; the sufficiency of UBS’s financial resources to purchase our auction rate securities; our ability to obtain and maintain intellectual property protection for product candidates; and our actual financial resources. These and additional risks and uncertainties are described more fully in our Form S-4 filed with the SEC on

36

January 26, 2009. Copies of filings made with the SEC are available through the SEC’s electronic data gathering analysis and retrieval system (EDGAR) at www.sec.gov.

You should read these risk factors and the other cautionary statements made in this Form 10-Q as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. We cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. You should read this Form 10-Q completely. Other than as required by law, we undertake no obligation to update these forward-looking statements, even though our situation may change in the future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     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 or availability. To achieve these objectives, our investment policy allows us to maintain a portfolio of cash equivalents and investments in a variety of marketable securities, including money market funds and U.S. government securities. Our cash and cash equivalents as of March 31, 2009 include liquid money market accounts. Due to the short-term nature of these investments, we believe that there is no material exposure to interest rate risk.

     In February 2008, we were informed that there was insufficient demand for ARS, resulting in failed auctions for $23.0 million of our ARS held at March 31, 2009 and June 30, 2008. Currently, these affected securities are not liquid and will not become liquid until a future auction for these investments is successful or they are redeemed by the issuer or they mature. For discussion of the related risks, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Significant Judgments and Estimates — Investments.”

ITEM 4T. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

          Our Chief Executive Officer and Chief Financial Officer, referred to collectively herein as the Certifying Officers, are responsible for establishing and maintaining our disclosure controls and procedures. The Certifying Officers have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of March 31, 2009. Based on that review and evaluation, which included inquiries made to certain other employees of the Company, the Certifying Officers have concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures, as designed and implemented, are effective in ensuring that information relating to the Company required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

          On February 25, 2009, the Company (formerly known as Replidyne, Inc.) completed the transactions contemplated by the Agreement and Plan of Merger and Reorganization, dated as of November 3, 2008, by and among the Company, Responder Merger Sub, Inc. and Cardiovascular Systems, Inc., a Minnesota corporation (“CSI-MN”), as described above. Since the merger constitutes a “reverse acquisition” for accounting purposes, the pre-merger financial statements of CSI-MN are treated as the historical financial statements of the Company. As of the closing of the merger, the Company’s accounting and financial personnel, processes and systems were replaced by those of CSI-MN that existed before the merger, and the Company’s system of internal controls was replaced by CSI-MN’s pre-merger system of internal controls. There were no changes in the internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) of CSI-MN and, following completion of the merger, the Company during the three months ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

37

PART II. — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

          Refer to the disclosures set forth in our Registration Statement on Form S-4 (Registration No. 333-155887) under the heading “Information About CSI’s Business — Legal Proceedings.”

ITEM 1A. RISK FACTORS

          In addition to the other information set forth in this report, including the important information in “Private Securities Litigation Reform Act,” you should carefully consider the “Risk Factors” discussed in our Registration Statement on Form S-4 (Registration No. 333-155887) under the headings “Risks Relating to CSI and the Combined Company,” “Risks Relating to CSI’s Business and Operations,” “Risks Related to Government Regulation,” “Risks Relating to CSI’s Intellectual Property,” and “Risks Relating to Ownership of Common Stock of the Combined Company.” Those factors, if they were to occur, could cause our actual results to differ materially from those expressed in our forward-looking statements in this report, and materially adversely affect our financial condition or future results. Although we are not aware of any other factors that we currently anticipate will cause our forward-looking statements to differ materially from our future actual results, or materially affect the Company’s financial condition or future results, additional risks and uncertainties not currently known to us or that we currently deem to be immaterial might materially adversely affect our actual business, financial condition and/or operating results.

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

          During the quarterly period ended March 31, 2009, we sold an aggregate of 12,938 shares of common stock pursuant to the exercise of warrants with a weighted average exercise price of $1.70 per share. These sales were made in reliance on Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”).

          We also sold an aggregate of 12,940 shares of common stock pursuant to the exercise of stock options having an exercise price of $9.28 per share, and the board of directors granted an aggregate of 18,013 shares of our common stock to certain of our employees in the form of restricted stock awards and an aggregate of 99,314 shares of our common stock to certain of our employees in the form of stock options under our 2007 Equity Incentive Plan. These grants and sales were made in reliance on Section 4(2) of the Securities Act and Rule 701 thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

          None.

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

          A special meeting of the stockholders of the Company was held on February 24, 2009 to consider matters related to the proposed merger contemplated by the Agreement and Plan of Merger and Reorganization, dated as of November 3, 2008, by and among the Company, Responder Merger Sub, Inc. and Cardiovascular Systems, Inc., a Minnesota corporation (“CSI-MN”) (the “Merger Agreement”). At the special meeting, the following proposals were approved by the Company’s stockholders:

          1. To consider and vote upon a proposal to approve the issuance of Company common stock pursuant to the Merger Agreement.

          2. To authorize the Company’s board of directors to amend the Company’s restated certificate of incorporation in order to effect a reverse stock split of the issued and outstanding shares of Company common stock in a ratio of up to one for 50, if and as determined by the Company’s board of directors.

          3. To approve an amendment to the Company’s restated certificate of incorporation to change the name “Replidyne, Inc.” to “Cardiovascular Systems, Inc.”

38

          4. To approve the Company’s assumption of CSI-MN’s 2007 Equity Incentive Plan to be used by the Company following the consummation of the merger, together with an increase in the number of shares of CSI-MN common stock reserved for issuance under the plan from 3,379,397 to 3,879,397, which following the merger will be converted into shares of Company common stock, subject to further adjustment for the reverse stock split anticipated before closing of the merger.

          5. To approve an amendment to the Company’s 2006 Employee Stock Purchase Plan to (i) increase the number of shares of Company common stock reserved under the plan from 305,872 to 1,920,872, subject to further adjustment for the reverse stock split anticipated before the closing of the merger and (ii) amend the “evergreen” provisions of the plan to provide that on July 1st of each year, beginning with July 1, 2009, the share reserve under the plan automatically will be increased by a number of shares equal to the lesser of (A) one percent (1.0%) of the total number of shares of Company common stock outstanding on such date, or (B) 1,800,000 shares (subject to adjustment for the reverse stock split anticipated before the closing of the merger), unless the Company’s board of directors designates a smaller number of shares.

          6. To consider and vote upon an adjournment of the special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Proposal No. 1, 2, 3, 4 or 5.

          The following is a tabulation of the votes cast with respect to these proposals:

	Votes
Proposal	For		Against		Abstain
1		17,412,939		1,971,968		398,180
2		22,273,035		2,745,559		397,880
3		22,314,053		2,695,889		406,532
4		17,350,581		2,030,886		401,620
5		17,138,497		2,240,620		403,970
6		22,228,460		2,782,891		405,124

ITEM 5. OTHER INFORMATION

          Following the consummation of the merger, the Internal Revenue Service authorized the Company to use the pre-merger Employee Identification Number of CSI-MN, EIN 41-1698056, retroactive to the date of the merger.

ITEM 6. EXHIBITS

(a) Exhibits — See Exhibit Index on page following signatures

39

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: May 14, 2009	CARDIOVASCULAR SYSTEMS, INC.
By	/s/ David L. Martin
	David L. Martin
	President and Chief Executive Officer (Principal Executive Officer)
By	/s/ Laurence L. Betterley
	Laurence L. Betterley
	Chief Financial Officer (Principal Financial and Accounting Officer)

40

EXHIBIT INDEX

CARDIOVASCULAR SYSTEMS, INC.

FORM 10-Q

Exhibit No.	Description
3.1*	Restated Certificate of Incorporation, as amended.
3.2	Amended and Restated Bylaws.(2)
4.1	Specimen Common Stock Certificate.(2)
4.2	Form of Cardiovascular Systems, Inc. common stock warrant issued to former preferred stockholders.(2)
4.3	Registration Rights Agreement by and among Cardiovascular Systems, Inc. and certain of its stockholders, dated as of March 16, 2009.(1)
4.4	Termination of Fourth Amended and Restated Stockholders Agreement by and among Cardiovascular Systems, Inc. and certain of its stockholders, dated as of March 16, 2009.(1)
10.1	Client’s Agreement, dated March 24, 2008, by and between Cardiovascular Systems, Inc., a Minnesota corporation, and UBS Financial Services Inc.(3)
10.2	Borrower Agreement and Credit Line Agreement, dated July 24, 2008, by and between Cardiovascular Systems, Inc., a Minnesota corporation, and UBS Bank USA.(3)
10.3	Loan and Security Agreement, dated September 12, 2008, by and between Cardiovascular Systems, Inc., a Minnesota corporation, and Silicon Valley Bank.(4)
10.4*	Assumption Agreement and First Amendment to Loan and Security Agreement, dated as of February 25, 2009, by and between Silicon Valley Bank, Cardiovascular Systems, Inc. and CSI Minnesota, Inc.
10.5*	Amended and Restated Warrant to Purchase Stock, dated February 25, 2009, issued by Cardiovascular Systems, Inc. to Silicon Valley Bank.
10.6	Form of Warrant to Guarantors, dated September 12, 2008.(4)
10.7	Lease, dated September 26, 2005, by and between Cardiovascular Systems, Inc., a Minnesota corporation, and Industrial Equities Group LLC.(3)
10.8	First Amendment to the Lease, dated February 20, 2007, by and between Cardiovascular Systems, Inc., a Minnesota corporation, and Industrial Equities Group LLC.(3)
10.9	Second Amendment to the Lease, dated March 9, 2007, by and between Cardiovascular Systems, Inc., a Minnesota corporation, and Industrial Equities Group LLC.(3)
10.10	Third Amendment to the Lease, dated September 26, 2007, by and between Cardiovascular Systems, Inc., a Minnesota corporation, and Industrial Equities Group LLC.(3)
10.11*	Assumption of Lease, dated March 23, 2009 by Cardiovascular Systems, Inc.
10.12†	Employment Agreement, dated December 19, 2006, by and between Cardiovascular Systems, Inc., a Minnesota corporation, and David L. Martin.(3)
10.13†	Employment Agreement, dated April 14, 2008, by and between Cardiovascular Systems, Inc., a Minnesota corporation, and Laurence L. Betterley.(3)

41

Exhibit No.	Description
10.14†	Form of Standard Employment Agreement.(3)
10.15†*	Summary of Fiscal Year 2009 Executive Officer Base Salaries.
10.16†*	Summary of Fiscal Year 2009 Executive Officer Annual Cash Incentive Compensation.
10.17†*	Form of Director and Officer Indemnification Agreement.
10.18†	Cardiovascular Systems, Inc. Amended and Restated 2007 Equity Incentive Plan.(5)
10.19†*	Form of Incentive Stock Option Agreement under the Amended and Restated 2007 Equity Incentive Plan.
10.20†*	Form of Non-Qualified Stock Option Agreement under the Amended and Restated 2007 Equity Incentive Plan.
10.21†*	Form of Restricted Stock Agreement under the Amended and Restated 2007 Equity Incentive Plan.
10.22†*	Form of Restricted Stock Unit Agreement under the Amended and Restated 2007 Equity Incentive Plan.
10.23†*	Form of Performance Share Award under the Amended and Restated 2007 Equity Incentive Plan.
10.24†*	Form of Performance Unit Award under the Amended and Restated 2007 Equity Incentive Plan.
10.25†*	Form of Stock Appreciation Rights Agreement under the Amended and Restated 2007 Equity Incentive Plan.
10.26†	2003 Stock Option Plan of Cardiovascular Systems, Inc., a Minnesota corporation.(3)
10.27†	Form of Incentive Stock Option Agreement under the 2003 Stock Option Plan of Cardiovascular Systems, Inc., a Minnesota corporation.(3)
10.28†	Form of Nonqualified Stock Option Agreement under the 2003 Stock Option Plan of Cardiovascular Systems, Inc., a Minnesota corporation.(3)
10.29†	1991 Stock Option Plan of Cardiovascular Systems, Inc., a Minnesota corporation.(3)
10.30†	Form of Non-Qualified Stock Option Agreement outside the 1991 Stock Option Plan of Cardiovascular Systems, Inc., a Minnesota corporation.(3)
10.31†	Cardiovascular Systems, Inc. Amended and Restated 2006 Employee Stock Purchase Plan.(6)
23.1*	Consent of ValueKnowledge LLC.
31.1*	Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of President and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Filed herewith.
†	Compensatory plan or agreement.
(1)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s Current Report on Form 8-K filed on March 19, 2009.

42

(2)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s Current Report on Form 8-K filed on March 3, 2009.
(3)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from CSI Minnesota, Inc.’s Registration Statement on Form S-1, File No. 333-148798.
(4)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from CSI Minnesota, Inc.’s Registration Statement on Form 10, File No. 000-53478.
(5)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s Registration Statement on Form S-8, File No. 333-158755.
(6)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s Registration Statement on Form S-8, File No. 333-158987.

43

EX-3.1

Exhibit 3.1

CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
REPLIDYNE, INC.

     REPLIDYNE, INC. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”), hereby certifies as follows:

     FIRST: The name of the Corporation is Replidyne, Inc. A Certificate of Incorporation of the Corporation originally was filed by the Corporation with the Secretary of State of Delaware on December 6, 2000.

     SECOND: This Certificate of Amendment amends the Restated Certificate of Incorporation of the Corporation and was duly adopted by the board of directors of the Corporation in accordance with the provisions of Sections 141 and 242 of the DGCL.

     THIRD: The text of the Restated Certificate of Incorporation of the Corporation is hereby amended as follows:

     1. Article I of the Restated Certificate of Incorporation of the Corporation is hereby amended and restated as follows:

     “The name of this corporation is Cardiovascular Systems, Inc.”

     2. Article IV of the Restated Certificate of Incorporation of the Corporation is hereby amended and restated as follows:

     “A. Without regard to any other provision of this Restated Certificate of Incorporation, each one (1) share of Common Stock, either issued and outstanding or held by the corporation as treasury stock, immediately prior to the time this Certificate of Amendment becomes effective shall be and is hereby automatically reclassified and changed (without any further act) into one-tenth of a fully-paid and nonassessable share of Common Stock; provided, that no fractional shares shall be issued to any stockholder and no certificates or scrip for any such fractional shares shall be issued, each stockholder otherwise entitled to receive a fractional share shall receive the next lower whole number of shares of Common Stock, and the corporation shall pay in cash the dollar amount of such fractional shares (to the nearest whole cent), without interest, determined in each case by multiplying such fraction by the closing price of a share of Common Stock on the NASDAQ Global Market on the date immediately preceding the date on which this Certificate of Amendment becomes effective.

1.

     B. This corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the corporation is authorized to issue is one hundred and five million (105,000,000) shares. One hundred million (100,000,000) shares shall be Common Stock, each having a par value of one-tenth of one cent ($.001). Five million (5,000,000) shares shall be Preferred Stock, each having a par value of one-tenth of one cent ($.001).

     C. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby expressly authorized to provide for the issue of all or any of the shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such shares and as may be permitted by the DGCL. The Board of Directors is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any certificate of designation filed with respect to any series of Preferred Stock.

     D. Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).”

     FOURTH: Thereafter pursuant to a resolution of the board of directors of the Corporation, this Certificate of Amendment was submitted to the stockholders of the Corporation for their approval, and was duly adopted at a special meeting of the stockholders in accordance with the provisions of Section 242 of the DGCL.

2.

     IN WITNESS WHEREOF, Replidyne, Inc. has caused this Certificate of Amendment to be signed by its duly authorized officer this 25th day of February, 2009.

Replidyne, Inc.
By:	/s/ Kenneth J. Collins
	Kenneth J. Collins
	President and Chief Executive Officer

3.

RESTATED CERTIFICATE OF INCORPORATION
OF
REPLIDYNE, INC.

     REPLIDYNE, INC. (“Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “General Corporation Law”), hereby certifies as follows:

     FIRST: The name of the Corporation is Replidyne, Inc. A Certificate of Incorporation of the Corporation originally was filed by the Corporation with the Secretary of State of Delaware on December 6, 2000.

     SECOND: This Restated Certificate of Incorporation restates and integrates and further amends the Certificate of Incorporation of the Corporation, was duly adopted in accordance with the provisions of Sections 242 and 245 of the Delaware General Corporation Law, and was approved by written consent of the stockholders of the Corporation given in accordance with the provisions of Section 228 of the Delaware General Corporation Law (prompt notice of such action having been given to those stockholders who did not consent in writing).

     THIRD: The text of the Certificate of Incorporation of the Corporation is hereby restated and amended to read in its entirety as follows:

I.

     The name of this corporation is Replidyne, Inc.

II.

     The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, Wilmington, Delaware 19801, (County of New Castle). The name of the registered agent of the Corporation at such address is The Corporation Trust Company.

III.

     The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law (“DGCL”).

IV.

     A. This corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the corporation is authorized to issue is one hundred five million (105,000,000) shares. One hundred million (100,000,000) shares shall be Common Stock, each having a par value of one-tenth of

1.

one cent ($.001). Five million (5,000,000) shares shall be Preferred Stock, each having a par value of one-tenth of one cent ($.001).

     B. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby expressly authorized to provide for the issue of all of any of the shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such shares and as may be permitted by the DGCL. The Board of Directors is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any certificate of designation filed with respect to any series of Preferred Stock.

     C. Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).

V.

     For the management of the business and for the conduct of the affairs of the corporation, and in further definition, limitation and regulation of the powers of the corporation, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that:

     A.

          1. Board of Directors. The management of the business and the conduct of the affairs of the corporation shall be vested in its Board of Directors. The number of directors which shall constitute the Board of Directors shall be fixed exclusively by resolutions adopted by a majority of the authorized number of directors constituting the Board of Directors.

2.

          2. Election of Directors

               a. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, following the closing of the initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “1933 Act”), covering the offer and sale of Common Stock to the public (the “Initial Public Offering”), the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. At the first annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the closing of the Initial Public Offering, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

               b. Notwithstanding the foregoing provisions of this section, each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

          3. Vacancies. Subject to the rights of the holders of any series of Preferred Stock, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders, except as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, and not by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified.

     B.

          1. Bylaw Amendments. The Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the corporation. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the corporation.

3.

          2. The directors of the corporation need not be elected by written ballot unless the Bylaws so provide.

          3. No action shall be taken by the stockholders of the corporation except at an annual or special meeting of stockholders called in accordance with the Bylaws or by written consent or electronic transmission of stockholders in accordance with the Bylaws prior to the closing of the Initial Public Offering and following the closing of the Initial Public Offering no action shall be taken by the stockholders by written consent or electronic transmission.

          4. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the corporation shall be given in the manner provided in the Bylaws of the corporation.

VI.

     A. The liability of the directors for monetary damages shall be eliminated to the fullest extent under applicable law. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated to the fullest extent permitted by the DGCL, as so amended.

     B. Any repeal or modification of this Article VI shall be prospective and shall not affect the rights under this Article VI in effect at the time of the alleged occurrence of any act or omission to act giving rise to liability or indemnification.

VII.

     A. The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, except as provided in paragraph B. of this Article VII, and all rights conferred upon the stockholders herein are granted subject to this reservation.

     B. Notwithstanding any other provisions of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the corporation required by law or by this Certificate of Incorporation or any certificate of designation filed with respect to a series of Preferred Stock, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Articles V, VI and VII.

4.

     IN WITNESS WHEREOF, the undersigned has caused this Restated Certificate of Incorporation to be duly executed on behalf of the Corporation on July 3, 2006.

REPLIDYNE, INC.
By:	/s/ Kenneth J. Collins
	Kenneth J. Collins
	President and Chief Executive Officer

5.

EX-10.4

Exhibit 10.4

Assumption Agreement and First Amendment

to

Loan And Security Agreement

THIS ASSUMPTION AGREEMENT AND FIRST AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into as of February 25, 2009, by and between SILICON VALLEY BANK (“Bank”), CARDIOVASCULAR SYSTEMS, INC. (formerly known as Replidyne, Inc.), a Delaware corporation, for itself and as successor to Existing Borrower (“Successor Borrower”), whose address is 651 Campus Drive, Saint Paul, MN 55112, and CSI MINNESOTA, INC. (formerly known as Cardiovascular Systems, Inc.), a Minnesota corporation (“Existing Borrower”), whose address is 651 Campus Drive, Saint Paul, MN 55112. (Successor Borrower and Existing Borrower are referred to herein, jointly and severally, as “Borrower”.)

Recitals

     A. Bank and Existing Borrower have entered into that certain Loan and Security Agreement dated September 12, 2008 (as the same may from time to time be amended, modified, supplemented or restated in writing, the “Loan Agreement”).

     B. Bank has extended credit to Existing Borrower for the purposes permitted in the Loan Agreement.

     C. Existing Borrower and Successor Borrower have advised Bank that Existing Borrower shall merge into Successor Borrower, with Successor Borrower being the surviving corporation (the “Merger”).

     D. Existing Borrower and Successor Borrower have requested that the Loan Agreement and other Loan Documents be amended and supplemented in order to allow Successor Borrower to become the borrower under the Loan Agreement and other Loan Documents.

     E. Bank has agreed to so amend and supplement the Loan Agreement and other Loan Documents, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations, warranties and agreements set forth below.

Agreement

     Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2. Assumption. Effective immediately upon the Merger, Successor Borrower, without any further action, hereby assumes and agrees to perform for the benefit of Bank all of the “Obligations” (as defined in the Loan Agreement) of Existing Borrower, and Successor Borrower agrees to honor, perform and in all respects comply with all terms and provisions of all of the Loan Documents (including, without limitation, the Loan Agreement and the Term Loan B Promissory Notes) to the same extent as though Successor Borrower were named therein jointly and severally with Existing Borrower. Effective immediately upon the Merger, all references in the Loan Agreement to “Collateral” and “Obligations” shall be deemed to refer to all present and future Collateral and Obligations (as therein defined) of Successor Borrower as well as Existing Borrower, and all references in the Loan Documents to “Borrower” shall be deemed to refer to Successor Borrower for itself and as successor to Existing Borrower. For example and without limitation on the generality of the foregoing, (i) the term “Loan Documents” as defined in the Loan Agreement shall include agreements executed by Existing Borrower prior to the Merger as well as agreements executed by Successor Borrower, and (ii) Section 5.11 of the Loan Agreement which reads as follows:

No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Bank, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).

shall apply to such representations, warranties or other statements whether given by Successor Borrower upon or after the Merger or by Existing Borrower or Cardiovascular Systems, Inc. (fka Replidyne, Inc.) prior to the Merger.

3. No Offset or Counterclaim. Existing Borrower and Successor Borrower acknowledge that the Obligations are owing to Bank from Existing Borrower and, effective immediately upon the Merger, will be owing from Successor Borrower, without any defense, offset or counterclaim of any kind or nature whatsoever.

4. Grant of Security Interest. Without limiting the generality of the provisions of Section 2 above, effective immediately upon the Merger, as security for all Obligations, Successor Borrower grants to Bank a continuing security interest in, and pledges to Bank, all of the following, whether now owned or hereafter acquired, and wherever located: All of the “Collateral” (as defined in the Loan Agreement) of Successor Borrower. Effective

2

immediately upon the Merger, all references in the Loan Agreement to Collateral shall be deemed to refer to the Collateral of each of Existing Borrower and Successor Borrower.

5. Merger Consent. Reference is made to the Consent Regarding RMS Merger, dated February 25, 2009, entered into between Bank and Existing Borrower. Borrowers hereby confirm and agree to perform the covenants and conditions agreed to by Existing Borrower pursuant to such Consent.

6. Financial and Merger-Related Representations and Warranties. Borrowers represent and warrant that the financial statements and reports of Cardiovascular Systems, Inc. (fka Replidyne, Inc.) delivered to Bank and/or filed with the Securities and Exchange Commission fairly present in all material respects the financial condition and results of operations of Cardiovascular Systems, Inc. (fka Replidyne, Inc.). Borrowers represent and warrant that there has not been any deterioration in the financial condition of Cardiovascular Systems, Inc. (fka Replidyne, Inc.) that is not reflected in such financial statements and reports. Borrowers represent and warrant that they have delivered to Bank true and complete copies of the Agreement and Plan of Merger and Reorganization dated November 3, 2008, among Responder Merger Sub, Inc. (“Merger Sub”), Successor Borrower and Existing Borrower (the “Merger Agreement”), the “Company Disclosure Schedule” (as defined in the Merger Agreement), and the “Replidyne Disclosure Schedule” (as defined in the Merger Agreement), and all amendments, supplements and updates thereto. The representations and warranties of Merger Sub, Successor Borrower and Existing Borrower contained in the Merger Agreement, Company Disclosure Schedule, and Replidyne Disclosure Schedule, shall be deemed made to Bank and shall survive the “Effective Date” as defined in the Merger Agreement, and continue in favor of Bank, notwithstanding Section 10.1 of the Merger Agreement, or anything else to the contrary.

7. Modifications and Clarifications Regarding Loan Documents.

     7.1 Delay in Availability. Notwithstanding Section 2.1.1(a) of the Loan Agreement or any other provision of the Loan Documents, Bank shall have no obligation to make any Advances or allow the use of the Revolving Line for Cash Management Services (except for Cash Management Services of up to $200,000 for business credit card purposes), until Bank has received a search from the Delaware Secretary of State confirming the filing and priority of Bank’s UCC financing statement against Successor Borrower.

     7.2 Insurance. To the extent that Section 6.7 of the Loan Agreement requires any advance notice to Bank of Borrower’s insurance being changed to recognize the change of identity from Existing Borrower to Successor Borrower, such advance notice is hereby waived.

     7.3 Collateral Accounts. Reference is made to Section 6.8(a) of the Loan Agreement which reads as follows:

(a) Maintain all of its and all of its Subsidiaries’ operating and other deposit accounts, securities accounts, and any other

3

accounts at which Borrower or its Subsidiaries maintain funds or investments (including without limitation any Collateral Accounts, but excluding the Auction Rate Securities (UBS)) with Bank and Bank’s Affiliates.

Notwithstanding anything to the contrary in Section 6.8 of the Loan Agreement, Successor Borrower shall have until 30 days following the date of the Merger to close any of its accounts that are not allowed to be maintained other than with Bank and Bank’s Affiliates in accordance with Section 6.8(a) of the Loan Agreement, and during such period Borrower shall not be required to provide Control Agreements with respect to such accounts.

     7.4 Changes in Ownership. Section 7.2(c) of the Loan Agreement reads as follows:

(c) permit a change in the record or beneficial ownership of an aggregate of more than 20% of the outstanding shares of stock of Borrower, in one or more transactions, compared to the ownership of outstanding shares of stock of Borrower in effect on the date hereof (other than by the sale of Borrower’s equity securities in a public offering or to private equity investors so long as Borrower identifies to Bank the private equity investors prior to the closing of the transaction); or

Effective immediately upon the Merger, said Section 7.2(c) is hereby amended to read as follows:

(c) permit or suffer any Change in Control; or

     7.5 Assumption Agreement. The following definition is hereby added to Section 13.1 of the Loan Agreement in the appropriate alphabetical order:

“Assumption Agreement” is that certain Assumption Agreement and First Amendment to Loan and Security Agreement, dated February 25, 2009, among Bank, Cardiovascular Systems, Inc. (fka Replidyne, Inc.), and CSI Minnesota (fka Cardiovascular Systems, Inc.).

     7.6 Change in Control. The following definition is hereby added to Section 13.1 of the Loan Agreement in the appropriate alphabetical order:

“Change in Control” means any event, transaction, or occurrence as a result of which any “person” (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as an amended (the “Exchange Act”)), other than a trustee or other fiduciary holding securities under an employee benefit plan of Borrower, is or becomes a beneficial owner (within the meaning Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Borrower, representing

4

twenty percent (20%) or more of the combined voting power of Borrower’s then outstanding securities.

     7.7 Designated Deposit Account. The definition of “Designated Deposit Account” contained in Section 13.1 of the Loan Agreement reads as follows:

“Designated Deposit Account” is Borrower’s deposit account, account number                        , maintained with Bank.

Borrower and Bank acknowledge and agree that, following the Merger, Bank intends to have a new Designated Deposit Account opened with respect to Successor Borrower because Existing Borrower, for which the above-referenced Designated Deposit Account was opened, will have merged into Successor Borrower. Borrower will cooperate with the opening of such new Designated Deposit Account.

     7.8 Initial Projections. For purposes of clarity, Bank and Borrower acknowledge and agree that the “Initial Projections” as defined in Section 13.1 of the Loan Agreement shall continue to be the projections provided by Existing Borrower for purposes of entering into the Loan Agreement.

     7.9 Perfection Certificate. The definition of “Perfection Certificate” contained in Section 13.1 of the Loan Agreement reads as follows:

“Perfection Certificate” is defined in Section 5.1.

Effective immediately upon the Merger, said definition is amended to read as follows:

“Perfection Certificate” is defined in Section 5.1 provided that “Perfection Certificate” shall, (a) with reference to “Existing Borrower” (as defined in the Assumption Agreement) prior to the Merger, mean the Perfection Certificate delivered by Existing Borrower, dated September 12, 2008, (b) with reference to “Successor Borrower” (as defined in the Assumption Agreement) prior to the Merger, mean the pre-Merger Perfection Certificate delivered by Successor Borrower, dated February 25, 2009, and (c) with reference to the “Borrower” (as defined in the Assumption Agreement) upon and after the Merger, mean the post-Merger Perfection Certificate delivered by Successor Borrower, dated February 25, 2009.

8. Limitation of Amendments.

     8.1 The consents and amendments set forth in this Amendment are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term

5

or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

     8.2 This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

9. Representations and Warranties. To induce Bank to enter into this Amendment, Borrower hereby represents, warrants and agrees as follows:

     9.1 Immediately after giving effect to this Amendment and immediately after giving effect to the Merger (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof and as of the date of the Merger (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct in all material respects as of such date), and (b) no Event of Default has occurred and is continuing;

     9.2 Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

     9.3 The organizational documents of Successor Borrower previously delivered to Bank (including the amendment referenced in the Merger Consent) remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

     9.4 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

     9.5 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

     9.6 The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on either Borrower, except as already has been obtained or made; and

6

     9.7 This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

10. Expenses. Without limitation on the terms of the Loan Documents, Borrower agrees to reimburse Bank for all its reasonable costs and expenses (including reasonable attorneys’ fees) incurred in connection with this Amendment. Bank is authorized to charge said fees, costs and expenses to Borrower’s loan account or any of Borrower’s deposit accounts maintained with Bank.

11. Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

[Signature Page Follows]

7

     In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

SILICON VALLEY BANK			CARDIOVASCULAR SYSTEMS, INC.
			(fka Replidyne, Inc.)
By:	/s/ Benjaman Johnson		By:	/s/ Laurence L. Betterley
	Name:	Benjaman Johnson		Name	Laurence L. Betterly
	Title:	Deal Team Leader		Title:	Chief Financial Officer
			CSI MINNESOTA, INC.
			(fka Cardiovascular Systems, Inc.)
			By:	/s/ David L. Martin
				Name:	David L. Martin
				Title:	Chief Executive Officer

8

EX-10.5

Exhibit 10.5

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

AMENDED AND RESTATED
WARRANT TO PURCHASE STOCK

Company:	Cardiovascular Systems, Inc., a Delaware Corporation (formerly known as Replidyne, Inc.)
Number of Shares:	8,493
Class of Stock:	Common Stock
Warrant Price:	$14.16 per share
Restated Warrant Date	February 25, 2009
Issue Date:	September 12, 2008
Expiration Date:	The 10th anniversary after the Issue Date
Credit Facility:	This Warrant is issued in connection with the Term Loan A referenced in the Loan and Security Agreement dated September 12, 2008 between Silicon Valley Bank and Company (as successor by merger to Cardiovascular Systems, Inc., a Minnesota corporation.)

     Reference is made to the Warrant to Purchase Stock (the “Pre-Amendment Warrant”), with an Issue Date of September 12, 2008, by Cardiovascular Systems, Inc., a Minnesota corporation (“Original Issuer”), in favor of Silicon Valley Bank, and assigned by Silicon Valley Bank to SVB Financial Group. The Original Issuer has merged with a wholly-owned subsidiary of Company and, as a result of such merger and in accordance with Section 1.6.2(C) of the Pre-Amendment Warrant, Company has assumed the obligations of the Pre-Amendment Warrant as hereby amended and restated. This Warrant amends and restates the Pre-Amendment Warrant.

     THIS WARRANT CERTIFIES THAT, for good and valuable consideration, SVB FINANCIAL GROUP (SVB Financial Group, together with any registered holder from time to time of this Warrant or any holder of the shares issuable or issued upon exercise of this Warrant, “Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “Shares”) of the Company at the Warrant Price, all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.

ARTICLE 1. EXERCISE.

          1.1 Method of Exercise. Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as

Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Article 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

          1.2 Conversion Right. In lieu of exercising this Warrant as specified in Article 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Article 1.3.

          1.3 Fair Market Value. If the Company’s common stock is traded in a public market and the Shares are common stock, the fair market value of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering, the “price to public” per share price specified in the final prospectus relating to such offering). If the Company’s common stock is traded in a public market and the Shares are preferred stock, the fair market value of a Share shall be the closing price of a share of the Company’s common stock reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or, in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering, the initial “price to public” per share price specified in the final prospectus relating to such offering), in both cases, multiplied by the number of shares of the Company’s common stock into which a Share is convertible in accordance with the Company’s Articles of Incorporation. If the Company’s common stock is not traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.

          1.4 Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.

          1.5 Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation on surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

          1.6 Treatment of Warrant Upon Acquisition of Company.

               1.6.1 “Acquisition”. For the purpose of this Warrant, “Acquisition” means any sale, license, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own

2

less than 50% of the outstanding voting securities of the surviving entity after the transaction.

               1.6.2 Treatment of Warrant at Acquisition.

A) Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is not an asset sale and in which the sole consideration is cash, either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to exercise the Warrant, this Warrant will expire upon the consummation of such Acquisition. The Company shall provide Holder with written notice of its request relating to the foregoing (together with such reasonable information as Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition.

B) Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is an “arms length” sale of all or substantially all of the Company’s assets (and only its assets) to a third party that is not an Affiliate (as defined below) of the Company (a “True Asset Sale”), either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to exercise the Warrant, this Warrant will continue until the Expiration Date if the Company continues as a going concern following the closing of any such True Asset Sale. The Company shall provide Holder with written notice of its request relating to the foregoing (together with such reasonable information as Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition.

C) Upon the closing of any Acquisition other than those particularly described in subsections (A) and (B) above, the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price and/or number of Shares shall be adjusted accordingly.

As used herein “Affiliate” shall mean any person or entity that owns or controls directly or indirectly ten (10) percent or more of the stock of Company, any person or entity that controls or is controlled by or is under common control with such persons or entities, and each of such person’s or entity’s officers, directors, joint venturers or partners, as applicable.

ARTICLE 2. ADJUSTMENTS TO THE SHARES.

          2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on the Shares payable in common stock, or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred. If the Company subdivides the Shares by reclassification or otherwise into a greater number of

3

shares or takes any other action which increase the amount of stock into which the Shares are convertible, the number of shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

          2.2 Reclassification, Exchange, Combinations or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company’s Articles or Certificate (as applicable) of Incorporation upon the closing of a registered public offering of the Company’s common stock or other conversion in accordance with the Company’s Articles of Incorporation. The Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, substitution or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant. The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Article 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.

          2.3 Adjustments for Diluting Issuances. The Warrant Price and the number of Shares issuable upon exercise of this Warrant or, if the Shares are preferred stock, the number of shares of common stock issuable upon conversion of the Shares, shall be subject to adjustment, from time to time in the manner set forth in the Company’s Articles or Certificate of Incorporation as if the Shares were issued and outstanding on and as of the date of any such required adjustment. The provisions set forth for the Shares in the Company’s Articles or Certificate (as applicable) of Incorporation relating to the above in effect as of the Restated Warrant Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification or waiver affects the rights associated with all other shares of the same series and class as the Shares granted to Holder.

          2.4 No Impairment. The Company shall not, by amendment of its Articles or Certificate (as applicable) of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, and shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Article against impairment.

4

          2.5 Fractional Shares. No fractional Shares shall be issuable upon exercise or conversion of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the fair market value of a full Share.

          2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant Price, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.

          3.1 Representations and Warranties. The Company represents and warrants to Holder as follows:

               (a) The representations and warranties made by Original Issuer in Section 3.1 of the Pre-Amendment Warrant shall survive this amendment and restatement of the Pre-Amendment Warrant.

               (b) All Shares which may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

               (c) The Company’s capitalization table attached hereto as Schedule 1 is true and complete as of the Restated Warrant Date.

               (d) The Company’s issuance of this Warrant will not trigger any adjustment to the conversion prices of the Company’s preferred stock pursuant to the Company’s Articles of Incorporation.

          3.2 Notice of Certain Events. If at any time the Company shall plan (a) the declaration of any dividend upon its common stock payable in cash or stock or any other distribution to the holders of its common stock; (b) to offer for sale any shares of the Company’s capital stock (or other securities convertible into such capital stock), other than (i) pursuant to the Company’s stock option or other compensatory plans, (ii) in connection with commercial credit arrangements or equipment financings, or (iii) in connection with strategic transactions for purposes other than capital raising; (c) any capital reorganization or reclassification of the capital stock of the Company, or a consolidation or merger of the Company with or into, or a sale, lease, license, or other conveyance of all or substantially all its assets to, another entity or entities; (e) a voluntary or involuntary dissolution, liquidation or winding up of the Company; or (f) offer holders of registration rights the opportunity to participate in an underwritten public offering of the Company’s securities for cash; then, in any one or more of said cases, the

5

Company shall give Holder: (1) at least 20 days’ prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any of the matters referred to in (a) through (e) above, and (2) in the case of any of the matters referred to in (c) through (e) above, at least 20 days’ prior written notice of the date when the same shall take place, and (3) in the case of the matter referred to in (f) above, the same notice as is given to the holders of such registration rights. Such notice in accordance with the foregoing clause (1) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of common stock shall be entitled thereto, and such notice in accordance with the foregoing clause (2) shall also specify the date on which the holders of common stock shall be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event. Company will also provide information requested by Holder reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.

          3.3 Registration. The Company agrees that the Shares shall have certain “piggyback” and “S-3” registration rights pursuant to and as set forth in the Company’s Registration Rights Agreement dated March 16, 2009 (the “Registration Rights Agreement”), as if for such purpose Holder (and its successors and assigns to the extent permitted hereunder) were an “Investor” (as used therein) and the Shares were “Investor Securities” (as used therein). The provisions set forth in the Registration Rights Agreement relating to the above in effect as of the Restated Warrant Date may not be amended, modified or waived without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification, or waiver affects the rights associated with all other shares of the same series and class as the Shares granted to Holder. Holder, Company and the shareholders party to the Registration Rights Agreement have agreed, pursuant to the Registration Rights Agreement, that Holder will become a party thereto upon Holder’s exercise or conversion of this Warrant.

          3.4 No Shareholder Rights. Except as provided in this Warrant, Holder will not have any rights as a shareholder of the Company until the exercise of this Warrant.

ARTICLE 4. REPRESENTATIONS, WARRANTIES OF HOLDER. Holder represents and warrants to the Company as follows:

          4.1 Purchase for Own Account. This Warrant and the securities to be acquired upon exercise of this Warrant by Holder will be acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

          4.2 Disclosure of Information. Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company

6

possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

          4.3 Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

          4.4 Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

          4.5 The Act. Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.

ARTICLE 5. MISCELLANEOUS.

          5.1 Term. This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date.

          5.2 Legends. This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 [BELOW][OF THE WARRANT PURSUANT TO WHICH THESE SHARES WERE ISSUED], MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

          5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned

7

in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require SVB Financial Group to provide an opinion of counsel if the transfer is to Silicon Valley Bank or any other affiliate of SVB Financial Group. Additionally, and without limitation on the preceding sentence, if Holder proposes to make such a transfer or assignment in accordance with Rule 144 under the Act, in lieu of Holder providing an opinion of counsel in connection with any such proposed transfer or assignment, Holder may provide representations and warranties in customary form and reasonably satisfactory to the Company relating to its compliance with Rule 144, and the Company shall cause its legal counsel to issue an opinion as to the availability of an exemption under Rule 144 with respect to such proposed transfer or assignment.

          5.4 Transfer Procedure. Subject to the provisions of Article 5.3 and upon providing the Company with written notice, SVB Financial Group and any subsequent Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, (a) SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee, (b) Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable), and (c) the transferee shall agree to be bound by the restrictions on transfer contained herein and all other provisions of this Warrant to the same extent as Holder. The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case, the stock of the Company is publicly traded.

          5.5 Notices. All notices and other communications from the Company to Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or Holder, as the case may (or on the first business day after transmission by facsimile) be, in writing by the Company or such Holder from time to time. Effective upon receipt of the fully executed Warrant and the initial transfer described in Article 5.4 above, all notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

SVB Financial Group
Attn: Treasury Department
3003 Tasman Drive, HA 200
Santa Clara, CA 95054
Telephone: 408-654-7400
Facsimile: 408-496-2405

     Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

Cardiovascular Systems, Inc.
Attn: Chief Financial Officer

651 Campus Drive

8

St. Paul, Minnesota 55112-3495
Telephone: (651) 259-1600
Facsimile: (651) 259-1696

          5.6 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

          5.7 Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

          5.8 Automatic Conversion upon Expiration. In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be converted pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised or converted, and the Company shall promptly deliver a certificate representing the Shares (or such other securities) issued upon such conversion to Holder.

          5.9 Counterparts. This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

          5.10 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota, without giving effect to its principles regarding conflicts of law.

[Signature page follows.]

9

“COMPANY”
CARDIOVASCULAR SYSTEMS, INC.
By:	/s/ David Martin		By:	/s/ Laurence Betterley
	Name:	David Martin		Name:	Laurence Betterley
		(Print)			(Print)
	Title:	Chairman of the Board, President or		Title:	Chief Financial Officer, Secretary,
		Vice President			Assistant Treasurer or Assistant
					Secretary
“HOLDER”
SVB FINANCIAL GROUP
By:	/s/ Norman Cutler
	Name:	Norman Cutler
		(Print)
	Title:	Capital Markets Manager

10

SCHEDULE 1

CAPITALIZATION TABLE

Cardiovascular Systems, Inc.
Post-Merger Capitalization
February 25, 2009

	Outstanding
Common Stock		13,744,890
Stock Options		3,926,936
Warrants		3,134,036
Common Stock outstanding, fully-diluted		20,805,862

11

APPENDIX 1

NOTICE OF EXERCISE

     1. Holder elects to purchase                      shares of the Common/Series                      Preferred [strike one] Stock of                                          pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

          [or]

     1. Holder elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant. This conversion is exercised for                                          of the Shares covered by the Warrant.

     [Strike paragraph that does not apply.]

     2. Please issue a certificate or certificates representing the shares in the name specified below:

Holders Name 

(Address) 

     3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as the date hereof.

HOLDER:
By:
	Name:
	Title:
	(Date):

12

EX-10.11

Exhibit 10.11

ASSUMPTION OF LEASE

     Reference is made to the Lease between Triumph 1450 LLC (the “Lessor”) and Replidyne, Inc. (“Replidyne”), dated as of October 25, 2005, as amended August 25, 2006 (the “Lease”). In connection with the business combination transaction contemplated by that certain Agreement and Plan of Merger and Reorganization by and among Replidyne, Responder Merger Sub, Inc. and Cardiovascular Systems, Inc., a Minnesota corporation, dated as of November 3, 2008, and effective as of February 25, 2009, Cardiovascular Systems, Inc., a Delaware corporation (the “Company”), hereby assumes all of Replidyne’s obligations under the Lease and agrees to perform all of the covenants and conditions of the Lease required of Replidyne as set forth therein. This Assumption of Lease is being provided to Lessor pursuant to the terms of Section 12.2(a) of the Lease.

	COMPANY: CARDIOVASCULAR SYSTEMS, INC.
Dated: 3/19/09	By:	/s/ James E. Flaherty
		Name:	James E. Flaherty
		Its: Chief Administrative Officer

     The undersigned Lessor hereby acknowledges the foregoing Assumption of Lease.

	LESSOR: SHMAEL 9450 INVESTORS LLC
Dated: 3/23/09	By:	/s/ Jay D. Matthes
		Name:	Jay D. Matthes
		Its: Authorized Signatory

EX-10.15

Exhibit 10.15

CARDIOVASCULAR SYSTEMS, INC.
SUMMARY OF FISCAL YEAR 2009
EXECUTIVE OFFICER BASE SALARIES

Our executive officers are scheduled to receive the following annual base salaries for the fiscal year ended June 30, 2009 in their current positions:

Name and Current Position	Base Salary
David L. Martin President, Chief Executive Officer, Interim Chief Financial Officer and Director	$	395,000
Laurence L. Betterley Chief Financial Officer	$	250,000
James E. Flaherty Chief Administrative Officer	$	233,000
Robert J. Thatcher Executive Vice President	$	250,000
Paul Koehn Vice President of Manufacturing	$	206,450
Brian Doughty Vice President of Commercial Operations	$	225,000
Paul Tyska Vice President of Business Development	$	200,000
Scott Kraus Vice President of Sales	$	190,000

Other than Mr. Doughty, who was promoted from Vice President of Marketing to Vice President of Commercial Operations on April 6, 2009, and Mr. Kraus, who was promoted from Senior Sales Director to Vice President of Sales on April 6, 2009, these individuals became executive officers on February 25, 2009 in connection with the closing of the merger with Cardiovascular Systems, Inc., a Minnesota corporation (“CSI-MN”). These base salaries reflect the same base salaries paid to these individuals as executive officers of CSI-MN.

EX-10.16

Exhibit 10.16

CARDIOVASCULAR SYSTEMS, INC.
SUMMARY OF FISCAL YEAR 2009
EXECUTIVE OFFICER ANNUAL CASH INCENTIVE COMPENSATION

Effective February 25, 2009, the Company’s board of directors adopted an executive officer cash incentive compensation plan applicable to the six-month period ended June 30, 2009. This plan conditions the payment of incentive compensation to all participants upon the Company’s achievement of revenue and adjusted EBITDA financial goals. Target bonus amounts are split evenly between these two goals. None of the Company’s officers is subject to individual goals under this plan. No plan participant will receive a bonus unless the Company achieves certain minimum adjusted EBITDA goals.

Target bonus levels as a percentage of base salary for the six-month period are 75% for the President and Chief Executive Officer and 50% for the other executive officers. Depending upon the Company’s performance against the goals, participants are eligible to earn 50% to 200% of their target bonus amount for adjusted EBITDA and 50% to 150% of their target bonus amount for revenue; however, in the event of extraordinary revenue performance above the goals set by the board, the participants would receive incentive payments greater than 150% of their targets for the revenue goal based upon a formula established by the board, with no maximum payout set under the plan. The plan criteria are the same for all of the executive officers. This plan is designed to reward the executive officers for achieving and surpassing the financial goals set by the compensation committee and board of directors.

				Target Bonus for
				the Six-Month
				Period Ended June
Name	Target %			30, 2009
David L. Martin		75	%	$	148,125
President, Chief Executive Officer and Director
Laurence L. Betterley		50	%	$	62,500
Chief Financial Officer
James E. Flaherty		50	%	$	58,250
Chief Administrative Officer
Robert J. Thatcher		50	%	$	62,500
Executive Vice President
Paul Koehn		50	%	$	51,613
Vice President of Manufacturing
Brian Doughty(1)		50	%	$	53,125
Vice President of Commercial Operations
Paul Tyska(2)		50	%	$	50,000
Vice President of Business Development
Scott Kraus(2)(3)		50	%	$	23,750
Vice President of Sales

(1)	Mr. Doughty was promoted from Vice President of Marketing to Vice President of Commercial Operations on April 6, 2009. On April 29, 2009, the board of directors increased Mr. Doughty’s salary from $200,000 to $225,000 effective as of April 1, 2009. Mr. Doughty’s target bonus amount has been calculated using his average salary during the period.
(2)	The Vice President of Business Development and Vice President of Sales will also be paid sales commissions on a monthly basis. The amount of each such commission will be determined according to a formula based on sales levels.
(3)	Mr. Kraus was promoted from Senior Sales Director to Vice President of Sales on April 6, 2009. On April 29, 2009, the board of directors fixed Mr. Kraus’s salary at $190,000 for this new position and made him eligible to receive a bonus under this plan, both effective as of April 1, 2009. Mr. Kraus’s target bonus amount has been prorated for the period from April 1, 2009 through June 30, 2009.

We assumed and adopted this plan following the closing of the merger with Cardiovascular Systems, Inc., a Minnesota corporation (“CSI-MN”). The terms of the plan and the target bonuses apply to our executive officers to the same extent as when they were executive officers of CSI-MN, except for Mr. Kraus, who was not an executive officer of CSI-MN.

EX-10.17

Exhibit 10.17

INDEMNIFICATION AGREEMENT

     THIS AGREEMENT (“Agreement”), which provides for indemnification, expense advancement and other rights under the terms and conditions set forth, is made and entered into as of the 25th day of February, 2009 between Cardiovascular Systems, Inc., a Delaware corporation (the “Company”), and                                          (“Indemnitee”).

RECITALS

          WHEREAS, Indemnitee is serving as a director and/or officer of the Company, and as such is performing a valuable service for the Company; and

          WHEREAS, competent and experienced persons are becoming increasingly reluctant to serve publicly-held corporations as directors and/or officers or in other fiduciary capacities at the request of their companies unless they are provided with adequate protection through liability insurance and adequate company indemnification against risks of claims and actions against them arising out of their service to the corporation; and

          WHEREAS, the Board of Directors has determined that the ability to attract and retain qualified persons to serve as directors and/or officers is in the best interests of the Company and its stockholders, and that the Company should act to assure such persons that there will be adequate certainty of protection through insurance and indemnification against risks of claims and actions against them arising out of their service to and activities on behalf of the Company; and

          WHEREAS, Section 145 of the General Corporation Law of Delaware permits the Company to indemnify and advance expenses to its officers and directors and to indemnify and advance expenses to persons who serve at the request of the Company as directors, officers, employees, or agents of other corporations or enterprises; and

          WHEREAS, the Company has adopted provisions in its Bylaws addressing indemnification and advancement of expenses to its officers and directors, and providing that the Company may enter into indemnification agreements which specify the rights and obligations of the Company and such persons with respect to indemnification, advancement of expenses and related matters; and

          WHEREAS, the Company desires to have Indemnitee continue to serve in an Official Capacity (as defined below), and Indemnitee desires to continue so to serve the Company, provided, and on the express condition, that Indemnitee is furnished with the indemnity and other rights set forth in this Agreement;

AGREEMENT

          Now, therefore, in consideration of Indemnitee’s continued service to the Company in Indemnitee’s Official Capacity, the parties hereto agree as follows:

     1. Definitions. For purposes of this Agreement:

     (a) “Change of Control” means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 5.01 of Current Report on Form 8-K (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934 (the “Act”), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change of Control shall be deemed to have occurred if after the Effective Date (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Act) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company’s then outstanding securities without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage; (ii) the Company is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors of the surviving corporation or parent corporation (in the case of a merger in which the Company becomes a wholly-owned subsidiary of another entity) thereafter; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any new director whose election or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors.

     (b) “Official Capacity” means Indemnitee’s corporate status as an officer and/or director and any other fiduciary capacity in which Indemnitee serves the Company, its subsidiaries and affiliates, and any other entity which Indemnitee serves in such capacity at the request of the Company’s CEO, its Board of Directors or any committee of its Board of Directors. “Official Capacity” also refers to all actions which Indemnitee takes or does not take while serving in such capacity.

     (c) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification or advancement of expenses is sought by Indemnitee.

     (d) “Effective Date” means the date first above written.

     (e) “Expenses” shall include all direct and indirect costs including, but not limited to, reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, advisory fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily

2

incurred in connection with investigating, prosecuting, defending (or preparing to investigate, prosecute or defend) a Proceeding, or being or preparing to be a witness in a Proceeding.

     (f) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

     (g) “Proceeding” includes any actual or threatened inquiry, investigation, action, suit, arbitration, or any other such actual or threatened action or occurrence, whether civil, criminal, administrative or investigative, whether or not initiated prior to the Effective Date, except a proceeding initiated by an Indemnitee pursuant to Section 8 of this Agreement to enforce his or her rights under this Agreement.

     2. Service by Indemnitee. Indemnitee will serve and/or continue to serve in Indemnitee’s Official Capacity faithfully and to the best of Indemnitee’s ability so long as Indemnitee has or holds such Official Capacity. Indemnitee may at any time and for any reason resign from Indemnitee’s Official Capacity (subject to any other contractual obligation or any obligation imposed by operation of law).

     3. Indemnification.

     (a) General. Except as otherwise provided in this Agreement, the Company shall indemnify Indemnitee to the fullest extent permitted by the Delaware General Corporation Law as such law may from time to time be amended. Indemnitee shall be entitled to the indemnification provided in this Section if, by reason of his or her Official Capacity, Indemnitee is a party or is threatened to be made a party to any Proceeding or by reason of anything done or not done by Indemnitee in his or her Official Capacity. The Company shall indemnify Indemnitee against all costs, judgments, penalties, fines, liabilities, amounts paid in settlement by or on behalf of Indemnitee in any Proceeding, and Expenses actually and reasonably incurred by Indemnitee in connection with such Proceeding, if Indemnitee is determined to have met the standard of conduct set forth in Section 7(a).

     (b) Exceptions. Indemnitee shall receive no indemnification hereunder:

(i) to the extent such indemnification is expressly prohibited by Delaware law or the public policies of Delaware, the United States of America or agencies of any governmental authority in any jurisdiction governing the matter in question;

(ii) to the extent payment is actually made to Indemnitee for the amount to which Indemnitee would otherwise have been entitled under this Agreement pursuant to an insurance policy, or another indemnity agreement or arrangement from the Company or other person or entity;

3

(iii) in connection with any Proceeding, or part thereof (including claims and permissive counterclaims) initiated by Indemnitee, except a judicial proceeding pursuant to Section 8 to enforce rights under this Agreement, unless the Proceeding (or part thereof) was authorized by the Board of Directors of the Company;

(iv) with respect to any Proceeding brought by or on behalf of the Company against Indemnitee if Indemnitee failed to act in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company;

(v) with respect to any claim, issue, or matter as to which Delaware law expressly prohibits such indemnification by reason of any adjudication of liability of Indemnitee to the Company, unless and only to the extent that the Delaware Court of Chancery, or the court in which such action or suit was brought, shall determine upon application that, despite an adjudication of liability but in view of all the circumstances of the case, Indemnitee is entitled to indemnification for such Expenses as such court shall deem proper.

     4. Advancement of Expenses.

     (a) General. Except as otherwise provided in this Agreement, the Company shall advance Expenses to Indemnitee to the fullest extent permitted by the Delaware General Corporation Law as such law may from time to time be amended. Indemnitee shall be entitled to the advancement provided in this Section if, by reason of his or her Official Capacity, Indemnitee is a party or is threatened to be made a party to any Proceeding or by reason of anything done or not done by Indemnitee in his or her Official Capacity. The Company shall advance to Indemnitee Expenses actually and reasonably incurred by Indemnitee in connection with such Proceeding. Notwithstanding the foregoing, unless otherwise determined pursuant to Section 5, the Company will not advance or continue to advance Expenses to any person (except by reason of the fact that such person is or was a director of the Company in which event this sentence will not apply) in any proceeding if a determination is reasonably and promptly made (i) by the Board of Directors by a majority vote of Disinterested Directors, even though less than a quorum (ii) if there are no Disinterested Directors or the Disinterested Directors so direct, by Independent Counsel in a written opinion or (iii) by a majority vote of a committee of Disinterested Directors designated by a majority vote of Disinterested Directors, that the facts known to the decision-making party at the time such determination is made demonstrate that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Company, or, with respect to any criminal proceeding, that such person had reasonable cause to believe his conduct was unlawful.

     (b) Undertaking In Connection With Request For Advancement. As a condition precedent to the Company’s advancement of Expenses to Indemnitee, Indemnitee shall provide the Company with (a) a written affirmation by such person of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification under §145 of the Delaware General Corporation Laws, and (b) an undertaking, in substantially the form attached as Exhibit 1, by or on behalf of Indemnitee to reimburse such amount if it is finally determined, after all

4

appeals by a court of competent jurisdiction that Indemnitee is not entitled to be indemnified against such Expenses by the Company as provided by this Agreement or otherwise. Indemnitee’s undertaking to reimburse any such amounts is not required to be secured.

     (c) Exceptions. The Company shall not be obligated to advance Expenses to Indemnitee with respect to claims initiated or brought voluntarily by such Indemnitee and not by way of defense, except (i) as set forth in Section 8(e); (ii) in specific cases if the Company’s Board of Directors has approved the initiation or bringing of such a claim; or (iii) as otherwise required under Section 145 of the DGCL.

     5. Indemnification for Expenses of Successful Party.

     Notwithstanding the limitations of any other provisions of this Agreement, to the extent that Indemnitee is successful on the merits or otherwise in defense of any Proceeding, or in defense of any claim, issue or matter therein, including, without limitation, the dismissal of any action without prejudice, or if it is ultimately determined that Indemnitee is otherwise entitled to be indemnified against Expenses, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred in connection therewith. If Indemnitee is partially successful on the merits or otherwise in defense of any Proceeding, such indemnification shall be apportioned appropriately to reflect the degree of success.

     6. Indemnification for Expenses Incurred in Serving as a Witness. Notwithstanding any other provisions of this Agreement, Indemnitee shall be entitled to indemnification and advancement against all Expenses reasonably incurred for serving as a witness by reason of Indemnitee’s Official Capacity in any Proceeding with respect to which Indemnitee is not a party.

     7. Determination of Entitlement to Indemnification.

     (a) Standard of Conduct. Except as provided in Section 5 above, Indemnitee shall be entitled to indemnification pursuant to this Agreement only upon a determination that Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe that Indemnitee’s conduct was unlawful.

     (b) Manner of Determining Eligibility. Upon written request of the Indemnitee for indemnification, the entitlement of Indemnitee to such requested indemnification shall be determined by:

(i) the Board of Directors of the Company by a majority vote of Disinterested Directors (defined above), whether or not such majority constitutes a quorum; or

(ii) a committee of Disinterested Directors designated by majority vote of such Disinterested Directors, whether or not such majority constitutes a quorum; or

(iii) Independent Counsel (defined above) in a written opinion to the board of directors, or designated committee of the Board, with a copy to Indemnitee, which Independent Counsel shall be selected by majority vote of the Company’s

5

directors at a meeting at which a quorum is present, or a majority vote of the Disinterested Directors, or Committee of Disinterested Directors; or

(iv) the Company’s stockholders, by a majority vote of those in attendance at a meeting at which a quorum is present; or

(v) in the event that a Change of Control has occurred, by Independent Counsel (selected by Indemnitee) in a written opinion to the Board of Directors of the Company, a copy of which shall be delivered to the Indemnitee.

     (d) Change of Control. The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company’s Board of Directors who were directors immediately prior to such Change in Control) then with respect to all matters thereafter arising concerning the rights of the Indemnitee to indemnification under this Agreement or any other agreements, Company Bylaw, provision in the Certificate of Incorporation or any other document now or hereafter in effect relating to such indemnification, the Company shall seek legal advice only from Independent Counsel selected by Indemnitee. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

     (e) Payment of Costs of Determining Eligibility. The Company shall pay all costs associated with its determination of Indemnitee’s eligibility for indemnification.

     (f) Presumptions and Effect of Certain Proceedings. The Secretary of the Company shall, promptly upon receipt of Indemnitee’s request for indemnification, advise in writing the Board of Directors or such other person or persons empowered to make the determination requested in Section 7(b), and the Company shall thereafter promptly make such determination or initiate the appropriate process for making such determination. The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

     8. Remedies of Indemnitee.

     (a) In the event that (i) a determination is made pursuant to Section 7 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses, to the fullest extent permitted by applicable law, is not timely made pursuant to Section 4 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 7(b) or (c) of this Agreement within sixty (60) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5 or 6 of this Agreement within fifteen (15) business days after

6

receipt by the Company of written request therefor, or (v) payment of indemnification pursuant to Section 3 of this Agreement is not made within fifteen (15) business days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to seek an adjudication by the United States District Court, District of Minnesota, or the Ramsey County District Court in St. Paul, Minnesota, of Indemnitee’s right to such indemnification or advancement of Expenses. The Company shall not oppose Indemnitee’s right to seek any such adjudication.

     (b) In the event that a determination shall have been made pursuant to Section 7 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 8 shall be conducted in all respects as a de novo trial on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding commenced pursuant to this Section 8, Indemnitee shall be presumed to be entitled to indemnification under this Agreement and the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be, and the Company may not refer to or introduce into evidence any determination pursuant to Section 7 of this Agreement adverse to Indemnitee for any purpose. If Indemnitee commences a judicial proceeding pursuant to this Section 8, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 4 until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed).

     (c) Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct. If a determination shall have been made pursuant to Section 7 of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 8, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

     (d) The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 8 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

     (e) The Company shall indemnify and hold harmless Indemnitee to the fullest extent permitted by law against all expenses (including reasonable attorneys’ fees) and, if requested by an Indemnitee who has provided the affirmation and undertaking required by Section 4(b), shall (within ten (10) days after the Company’s receipt of such written request) advance to Indemnitee, to the fullest extent permitted by applicable law, such expenses (including reasonable attorneys’ fees) that are incurred by Indemnitee in connection with any judicial proceeding brought by Indemnitee (i) to enforce Indemnitee’s rights under, or to recover

7

damages for breach of, this Agreement or any other indemnification agreement or provision of the Certificate of Incorporation, or the Company’s Bylaws now or hereafter in effect; or (ii) for recovery or advances under any insurance policy maintained by any person for the benefit of Indemnitee, to the full extent Indemnitee ultimately is determined to be entitled to such indemnification, advance or insurance recovery, as the case may be.

     (f) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

     9. Continuation of Obligation of Company. All agreements and obligations of the Company contained in this Agreement shall continue during the period of Indemnitee’s Official Capacity and shall continue thereafter with respect to any Proceedings based on or arising out of Indemnitee’s Official Capacity. This Agreement shall be binding upon all successors and assigns of the Company (including any transferee of all or substantially all of its assets and any successor by merger or operation of law) and shall inure to the benefit of Indemnitee’s heirs, personal representatives and estate.

     10. Notification and Defense of Claim. Promptly after receipt by Indemnitee of notice of any Proceeding, Indemnitee will notify the Company in writing of the commencement thereof; but the omission so to notify the Company will not relieve it from any liability that it may have to Indemnitee. Notwithstanding any other provision of this Agreement, with respect to any such Proceeding of which Indemnitee notifies the Company:

     (a) Except as otherwise provided in Section 10(b), to the extent that it may wish, the Company may, separately or jointly with any other indemnifying party, assume the defense of the Proceeding. After notice from the Company to Indemnitee of its election to assume the defense of the Proceeding, the Company shall not be liable to Indemnitee under this Agreement for any Expenses subsequently incurred by Indemnitee except as otherwise provided below. Indemnitee shall have the right to employ Indemnitee’s own counsel in such Proceeding, but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized by the Company, (ii) Indemnitee shall have reasonably determined that there is a conflict of interest between the Company and Indemnitee in the conduct of the defense of the Proceeding, and such determination is supported by an opinion of qualified legal counsel addressed to the Company, or (iii) the Company shall not within sixty (60) calendar days of receipt of notice from Indemnitee in fact have employed counsel to assume the defense of the Proceeding.

     (b) The Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company, or as to which Indemnitee shall have made the determination provided for in subparagraph (a)(ii) above.

     (c) Regardless of whether the Company has assumed the defense of a Proceeding, the Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without the Company’s written consent, and the Company shall not settle any Proceeding in any manner that would impose any penalty or

8

limitation on, or require any payment from, Indemnitee without Indemnitee’s written consent. Neither the Company nor Indemnitee will unreasonably withhold its consent to any proposed settlement.

     (d) Until the Company receives notice of a Proceeding from Indemnitee, the Company shall have no obligation to indemnify or advance Expenses to Indemnitee as to Expenses incurred prior to Indemnitee’s notification of Company.

     11. Separability; Prior Indemnification Agreements.

     If any provision of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not by themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent of the parties that the Company provide protection to Indemnitee to the fullest enforceable extent provided for in this Agreement.

     12. Non-exclusivity.

     The rights conferred by this Agreement shall not be exclusive of any other right which Indemnitee may have or hereafter acquire under any applicable statute, provision of the Company’s Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding office. The indemnification provided under this Agreement shall continue as to indemnitee for any action such Indemnitee took or did not take while serving in an Official Capacity even though the Indemnitee may have ceased to serve in such Official Capacity.

     13. Non-attribution of Actions of Any Indemnitee to Any Other Indemnitee. For purposes of determining whether Indemnitee is entitled to indemnification or advancement of Expenses by the Company under this Agreement or otherwise, the actions or inactions of any other indemnitee or group of indemnitees shall not be attributed to Indemnitee.

     14. Headings; References; Pronouns. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. References herein to section numbers are to sections of this Agreement. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as appropriate.

     15. Other Provisions.

     (a) This Agreement shall be interpreted and enforced in accordance with the laws of Delaware.

9

     (b) This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced as evidence of the existence of this Agreement.

     (c) This Agreement shall not be deemed an employment contract between the Company and Indemnitee, and the Company shall not be obligated to continue Indemnitee in Indemnitee’s Official Capacity by reason of this Agreement.

     (d) Upon a payment to Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of Indemnitee to recover against any person for such liability, and Indemnitee shall execute all documents and instruments required and shall take such other actions as may be necessary to secure such rights, including the execution of such documents as may be necessary for the Company to bring suit to enforce such rights.

     (e) No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

     (f) The Company agrees to stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement and is precluded from making any assertions to the contrary.

     (g) Indemnitee’s rights under this Agreement shall extend to Indemnitee’s spouse, members of Indemnitee’s immediate family, and Indemnitee’s representative(s), guardian(s), conservator(s), estate, executor(s), administrator(s), and trustee(s), (all of whom are referred to as “Related Parties”), as the case may be, to the extent a Related Party or a Related Party’s property is subject to a Proceeding by reason of Indemnitee’s Official Capacity.

     (h) Notwithstanding anything to the contrary set forth in Section 3(b)(ii) above, the Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of expenses and/or insurance provided by an investment fund with which Indemnitee may be affiliated and certain of its affiliates (collectively, the “Fund Indemnitors”). The Company hereby agrees that (i) it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), (ii) it shall be required to advance the full amount of Expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement and the Company’s Certificate of Incorporation or Bylaws (or any other agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Fund Indemnitors, and (iii) it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of Indemnitee with respect to any

10

claim for which Indemnitee has sought indemnification or advancement of Expenses from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such indemnification, advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and Indemnitee agree that the Fund Indemnitors are express third party beneficiaries of this Section 15(h).

[Remainder of page intentionally left blank]

11

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

CARDIOVASCULAR SYSTEMS, INC.
By:
	Name:	David L. Martin
	Title:	President and Chief Executive Officer
Indemnitee

12

EXHIBIT 1

UNDERTAKING TO REPAY INDEMNIFICATION EXPENSES

     I,                                                             , agree to reimburse Cardiovascular Systems, Inc., a Delaware corporation (the “Company”), for all expenses paid to me by the Company for my defense in any civil or criminal action, suit, or Proceeding (as defined in my Indemnification Agreement with the Company), in the event, and to the extent that it shall ultimately be determined that I am not entitled to be indemnified by the Company for such expenses.

Signature

Typed Name

Office

EX-10.19

Exhibit 10.19

INCENTIVE STOCK OPTION AGREEMENT

CARDIOVASCULAR SYSTEMS, INC.
AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

     THIS AGREEMENT, made effective as of this         day of                     ,           , by and between Cardiovascular Systems, Inc., a Delaware corporation (the “Company”), and                                          (“Participant”).

WITNESSETH:

     WHEREAS, Participant on the date hereof is a key employee or officer of the Company or one of its Subsidiaries; and

     WHEREAS, the Company wishes to grant an incentive stock option to Participant to purchase shares of the Company’s Common Stock pursuant to the Company’s Amended and Restated 2007 Equity Incentive Plan (the “Plan”); and

     WHEREAS, the Administrator of the Plan has authorized the grant of an incentive stock option to Participant and has determined that, as of the effective date of this Agreement, the fair market value of the Company’s Common Stock is $              per share;

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

     1. Grant of Option. The Company hereby grants to Participant on the date set forth above (the “Date of Grant”), the right and option (the “Option”) to purchase all or portions of an aggregate of                                          (                    ) shares of Common Stock at a per share price of $                     on the terms and conditions set forth herein, and subject to adjustment pursuant to Section 14 of the Plan. This Option is intended to be an incentive stock option within the meaning of Section 422, or any successor provision, of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder, to the extent permitted under Code Section 422(d).

     2. Duration and Exercisability.

          a. General. The term during which this Option may be exercised shall terminate on                                         ,            , except as otherwise provided in Paragraphs 2(b) through 2(d) below. This Option shall become exercisable according to the following schedule:

	Cumulative Percentage
Vesting Date	of Shares

Once the Option becomes exercisable to the extent of one hundred percent (100%) of the aggregate number of shares specified in Paragraph 1, Participant may continue to exercise this Option under the terms and conditions of this Agreement until the termination of the Option as provided herein. If Participant does not purchase upon an exercise of this Option the full number of shares which Participant is then entitled to purchase, Participant may purchase upon any subsequent exercise prior to this Option’s termination such previously unpurchased shares in addition to those Participant is otherwise entitled to purchase.

          b. Termination of Employment (other than Disability or Death). If Participant’s employment with the Company or any Subsidiary is terminated for any reason other than disability or death, this Option shall completely terminate on the earlier of (i) the close of business on the three-month anniversary date of such termination of employment, and (ii) the expiration date of this Option stated in Paragraph 2(a) above. In such period following the termination of Participant’s employment, this Option shall be exercisable only to the extent the Option was exercisable on the vesting date immediately preceding such termination of employment, but had not previously been exercised. To the extent this Option was not exercisable upon such termination of employment, or if Participant does not exercise the Option within the time specified in this Paragraph 2(b), all rights of Participant under this Option shall be forfeited.

          c. Disability. If Participant’s employment terminates because of disability (as defined in Code Section 22(e), or any successor provision), this Option shall terminate on the earlier of (i) the close of business on the twelve-month anniversary date of such termination of employment, and (ii) the expiration date of this Option stated in Paragraph 2(a) above. In such period following the termination of Participant’s employment, this Option shall be exercisable only to the extent the Option was exercisable on the vesting date immediately preceding such termination of employment, but had not previously been exercised. To the extent this Option was not exercisable upon such termination of employment, or if Participant does not exercise the Option within the time specified in this Paragraph 2(c), all rights of Participant under this Option shall be forfeited.

          d. Death. In the event of Participant’s death, this Option shall terminate on the earlier of (i) the close of business on the twelve-month anniversary of the date of Participant’s death, and (ii) the expiration date of this Option stated in Paragraph 2(a) above. In such period following Participant’s death, this Option may be exercised by the person or persons to whom Participant’s rights under this Option shall have passed by Participant’s will or by the laws of descent and distribution only to the extent the Option was exercisable on the vesting date immediately preceding the date of Participant’s death, but had not previously been exercised. To the extent this Option was not exercisable upon the date of Participant’s death, or if such person or persons fail to exercise this

2

Option within the time specified in this Paragraph 2(d), all rights under this Option shall be forfeited.

     3. Manner of Exercise.

          a. General. The Option may be exercised only by Participant (or other proper party in the event of death or incapacity), subject to the conditions of the Plan and subject to such other administrative rules as the Administrator may deem advisable, by delivering within the option period written notice of exercise to the Company at its principal office. The notice shall state the number of shares as to which the Option is being exercised and shall be accompanied by payment in full of the option price for all shares designated in the notice. The exercise of the Option shall be deemed effective upon receipt of such notice by the Company and upon payment that complies with the terms of the Plan and this Agreement. The Option may be exercised with respect to any number or all of the shares as to which it can then be exercised and, if partially exercised, may be so exercised as to the unexercised shares any number of times during the option period as provided herein.

          b. Form of Payment. Subject to the approval of the Administrator, payment of the option price by Participant shall be in the form of cash, personal check, certified check or previously acquired shares of Common Stock of the Company, or any combination thereof. Any stock so tendered as part of such payment shall be valued at its Fair Market Value as provided in the Plan. For purposes of this Agreement, “previously acquired shares of Common Stock” shall include shares of Common Stock that are already owned by Participant at the time of exercise.

          c. Stock Transfer Records. As soon as practicable after the effective exercise of all or any part of the Option, Participant shall be recorded on the stock transfer books of the Company as the owner of the shares purchased, and the Company shall deliver to Participant one or more duly issued stock certificates evidencing such ownership. All requisite original issue or transfer documentary stamp taxes shall be paid by the Company.

     4. Miscellaneous.

          a. Employment or Other Relationship; Rights as Shareholder. This Agreement shall not confer on Participant any right with respect to the continuance of employment or any other relationship with the Company or any of its Subsidiaries, nor will it interfere in any way with the right of the Company to terminate such employment or relationship. Participant shall have no rights as a shareholder with respect to shares subject to this Option until such shares have been issued to Participant upon exercise of this Option. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 14 of the Plan.

          b. Securities Law Compliance. The exercise of all or any parts of this Option shall only be effective at such time as counsel to the Company shall have determined that the issuance and delivery of Common Stock pursuant to such exercise will not violate any state or federal securities or other laws. Participant may be required by the Company, as a condition

3

of the effectiveness of any exercise of this Option, to agree in writing that all Common Stock to be acquired pursuant to such exercise shall be held, until such time that such Common Stock is registered and freely tradable under applicable state and federal securities laws, for Participant’s own account without a view to any further distribution thereof, that the certificates for such shares shall bear an appropriate legend to that effect and that such shares will be not transferred or disposed of except in compliance with applicable state and federal securities laws.

          c. Mergers, Recapitalizations, Stock Splits, Etc. Except as otherwise specifically provided in any employment, change of control, severance or similar agreement executed by the Participant and the Company, pursuant and subject to Section 14 of the Plan, certain changes in the number or character of the Common Stock of the Company (through sale, merger, consolidation, exchange, reorganization, divestiture (including a spin-off), liquidation, recapitalization, stock split, stock dividend or otherwise) shall result in an adjustment, reduction or enlargement, as appropriate, in Participant’s rights with respect to any unexercised portion of the Option (i.e., Participant shall have such “anti-dilution” rights under the Option with respect to such events, but shall not have “preemptive” rights).

          d. Shares Reserved. The Company shall at all times during the option period reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.

          e. Withholding Taxes. To permit the Company to comply with all applicable federal and state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that, if necessary, all applicable federal and state payroll, income or other taxes are withheld from any amounts payable by the Company to Participant. If the Company is unable to withhold such federal and state taxes, for whatever reason, Participant hereby agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal or state law. Subject to such rules as the Administrator may adopt, the Administrator may, in its sole discretion, permit Participant to satisfy such withholding tax obligations, in whole or in part (i) by delivering shares of Common Stock, or (ii) by electing to have the Company withhold shares of Common Stock otherwise issuable to Participant, in either case having a Fair Market Value, as of the date the amount of tax to be withheld is determined under applicable tax law, equal to the minimum amount required to be withheld for tax purposes. Participant’s request to deliver shares or to have shares withheld for purposes of such withholding tax obligations shall be made on or before the date that triggers such obligations or, if later, the date that the amount of tax to be withheld is determined under applicable tax law. Participant’s request shall be approved by the Administrator and otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule 16b-3 or any successor provision, as then in effect, of the General Rules and Regulations under the Securities and Exchange Act of 1934, if applicable.

          f. Nontransferability. During the lifetime of Participant, the accrued Option shall be exercisable only by Participant or by the Participant’s guardian or other legal representative, and shall not be assignable or transferable by Participant, in whole or in part, other than by will or by the laws of descent and distribution.

4

          g. 2007 Equity Incentive Plan. The Option evidenced by this Agreement is granted pursuant to the Plan, a copy of which Plan has been made available to Participant and is hereby incorporated into this Agreement. This Agreement is subject to and in all respects limited and conditioned as provided in the Plan. All defined terms of the Plan shall have the same meaning when used in this Agreement. The Plan governs this Option and, in the event of any questions as to the construction of this Agreement or in the event of a conflict between the Plan and this Agreement, the Plan shall govern, except as the Plan otherwise provides.

          h. Lockup Period Limitation. Participant agrees that in the event the Company advises Participant that it plans an underwritten public offering of its Common Stock in compliance with the Securities Act of 1933, as amended, and that the underwriter(s) seek to impose restrictions under which certain shareholders may not sell or contract to sell or grant any option to buy or otherwise dispose of part or all of their stock purchase rights of the underlying Common Stock, Participant hereby agrees that for a period not to exceed 180 days from the prospectus, Participant will not sell or contract to sell or grant an option to buy or otherwise dispose of this Option or any of the underlying shares of Common Stock without the prior written consent of the underwriter(s) or its representative(s).

          i. Blue Sky Limitation. Notwithstanding anything in this Agreement to the contrary, in the event the Company makes any public offering of its securities and it is determined that it is necessary to reduce the number of issued but unexercised stock purchase rights so as to comply with any state securities or Blue Sky law limitations with respect thereto, and such determination is affirmed by the Board of Directors, unless the Board of Directors determines otherwise, (i) the exercisability of this Option and the date on which this Option must be exercised shall be accelerated, provided that the Company agrees to give Participant 15 days’ prior written notice of such acceleration, and (ii) any portion of this Option or any other option granted to Participant pursuant to the Plan which is not exercised prior to or contemporaneously with such public offering shall be canceled. Notice shall be deemed given when delivered personally or when deposited in the United States mail, first class postage prepaid and addressed to Participant at the address of Participant on file with the Company.

          j. Accounting Compliance. Participant agrees that, if a merger, reorganization, liquidation or other “transaction” as defined in Section 14 of the Plan occurs and Participant is an “affiliate” of the Company or any Affiliate (as defined in applicable legal and accounting principles) at the time of such transaction, Participant will comply with all requirements of Rule 145 of the Securities Act of 1933, as amended, and the requirements of such other legal or accounting principles, and will execute any documents necessary to ensure such compliance.

          k. Stock Legend. The Administrator may require that the certificates for any shares of Common Stock purchased by Participant (or, in the case of death, Participant’s successors) shall bear an appropriate legend to reflect the restrictions of Paragraph 4(b) and Paragraphs 4(g) through 4(i) of this Agreement; provided, however, that failure to so endorse any of such certificates shall not render invalid or inapplicable Paragraph 4(b) or Paragraphs 4(g) through 4(i).

5

          l. Scope of Agreement. This Agreement shall bind and inure to the benefit of the Company and its successors and assigns and Participant and any successor or successors of Participant permitted by Paragraph 2 or Paragraph 4(e) above.

          m. Arbitration. Any dispute arising out of or relating to this Agreement or the alleged breach of it, or the making of this Agreement, including claims of fraud in the inducement, shall be discussed between the disputing parties in a good faith effort to arrive at a mutual settlement of any such controversy. If, notwithstanding, such dispute cannot be resolved, such dispute shall be settled by binding arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a retired state or federal judge or an attorney who has practiced securities or business litigation for at least 10 years. If the parties cannot agree on an arbitrator within 20 days, any party may request that the chief judge of the District Court for Hennepin County, Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the provisions of this Agreement, and the commercial arbitration rules of the American Arbitration Association, unless such rules are inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitrator who may dispose of such dispute. The arbitrator shall have the authority to award any remedy or relief that a court of this state could order or grant; provided, however, that punitive or exemplary damages shall not be awarded. The arbitrator may award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees, including the arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed by the parties, the place of any arbitration proceedings shall be Hennepin County, Minnesota.

     4. Change of Control. Notwithstanding anything in the Plan or this Agreement to the contrary, this Option shall become fully vested and exercisable upon a Change of Control. For purposes of this Agreement, a “Change of Control” shall mean the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events. For purposes of this definition, a person, entity or group shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person, entity or group directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

          (a) Any person, entity or group becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (i) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other person, entity or group from the Company in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (ii) solely because the level of Ownership held by any person, entity or group (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding,

6

provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;

          (b) There is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (i) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction or (ii) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;

          (c) There is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the total gross value of the consolidated assets of the Company and its subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of total gross value of the consolidated assets of the Company and its subsidiaries to an entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition (for purposes of this Paragraph 4(c), “gross value” means the value of the assets of the Company or the value of the assets being disposed of, as the case may be, determined without regard to any liabilities associated with such assets); or

          (d) Individuals who, at the beginning of any consecutive twelve-month period, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board at any time during that consecutive twelve-month period; (provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board).

     For the avoidance of doubt, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company.

     To the extent required, the determination of whether a Change of Control has occurred shall be made in accordance with Internal Revenue Code Section 409A and the regulations, notices and other guidance of general applicability issued thereunder.

7

     ACCORDINGLY, the parties hereto have caused this Agreement to be executed on the day and year first above written.

CARDIOVASCULAR SYSTEMS, INC.
By:
	Its:
Participant

8

EX-10.20

Exhibit 10.20

NONQUALIFIED STOCK OPTION AGREEMENT

CARDIOVASCULAR SYSTEMS, INC.
AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

     THIS AGREEMENT, made effective as of this            day of                             ,              , by and between Cardiovascular Systems, Inc., a Delaware corporation (the “Company”), and                                          (“Participant”).

WITNESSETH:

     WHEREAS, Participant on the date hereof is a key employee, officer, director of or consultant or advisor to the Company or one of its Subsidiaries; and

     WHEREAS, the Company wishes to grant a nonqualified stock option to Participant to purchase shares of the Company’s Common Stock pursuant to the Company’s Amended and Restated 2007 Equity Incentive Plan (the “Plan”); and

     WHEREAS, the Administrator of the Plan has authorized the grant of a nonqualified stock option to Participant and has determined that, as of the effective date of this Agreement, the fair market value of the Company’s Common Stock is $         per share;

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

     1. Grant of Option. The Company hereby grants to Participant on the date set forth above (the “Date of Grant”), the right and option (the “Option”) to purchase all or portions of an aggregate of                                          (                    ) shares of Common Stock at a per share price of $              on the terms and conditions set forth herein, and subject to adjustment pursuant to Section 14 of the Plan. This Option is a nonqualified stock option and will not be treated as an incentive stock option, as defined under Section 422, or any successor provision, of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder.

     2. Duration and Exercisability.

          a. General. The term during which this Option may be exercised shall terminate on                                         ,                     , except as otherwise provided in Paragraphs 2(b) through 2(d) below. This Option shall become exercisable according to the following schedule:

Vesting Date Cumulative Percentage
of Shares

Once the Option becomes exercisable to the extent of one hundred percent (100%) of the aggregate number of shares specified in Paragraph 1, Participant may continue to exercise this Option under the terms and conditions of this Agreement until the termination of the Option as provided herein. If Participant does not purchase upon an exercise of this Option the full number of shares which Participant is then entitled to purchase, Participant may purchase upon any subsequent exercise prior to this Option’s termination such previously unpurchased shares in addition to those Participant is otherwise entitled to purchase.

          b. Termination of Relationship (other than Disability or Death). If Participant ceases to be [an employee] [a consultant] [a nonemployee director] of the Company or any Subsidiary for any reason other than disability or death, this Option shall completely terminate on the earlier of (i) the close of business on the three-month anniversary of the date of termination of Participant’s relationship, and (ii) the expiration date of this Option stated in Paragraph 2(a) above. In such period following such termination of Participant’s relationship, this Option shall be exercisable only to the extent the Option was exercisable on the vesting date immediately preceding the date on which Participant’s relationship with the Company or Subsidiary has terminated, but had not previously been exercised. To the extent this Option was not exercisable upon the termination of such relationship, or if Participant does not exercise the Option within the time specified in this Paragraph 2(b), all rights of Participant under this Option shall be forfeited.

          c. Disability. If Participant ceases to be [an employee] [a consultant] [a nonemployee director] of the Company or any Subsidiary because of disability (as defined in Code Section 22(e), or any successor provision), this Option shall completely terminate on the earlier of (i) the close of business on the twelve-month anniversary of the date of termination of Participant’s relationship, and (ii) the expiration date of this Option stated in Paragraph 2(a) above. In such period following such termination of Participant’s relationship, this Option shall be exercisable only to the extent the Option was exercisable on the vesting date immediately preceding the date on which Participant’s relationship with the Company or Subsidiary has terminated, but had not previously been exercised. To the extent this Option was not exercisable upon the termination of such relationship, or if Participant does not exercise the Option within the time specified in this Paragraph 2(c), all rights of Participant under this Option shall be forfeited.

          d. Death. In the event of Participant’s death, this Option shall terminate on the earlier of (i) the close of business on the twelve-month anniversary of the date of

2

Participant’s death, and (ii) the expiration date of this Option stated in Paragraph 2(a) above. In such period following Participant’s death, this Option may be exercised by the person or persons to whom Participant’s rights under this Option shall have passed by Participant’s will or by the laws of descent and distribution only to the extent the Option was exercisable on the vesting date immediately preceding the date of Participant’s death, but had not previously been exercised. To the extent this Option was not exercisable upon the date of Participant’s death, or if such person or persons fail to exercise this Option within the time specified in this Paragraph 2(d), all rights under this Option shall be forfeited.

     3. Manner of Exercise.

          a. General. The Option may be exercised only by Participant (or other proper party in the event of death or incapacity), subject to the conditions of the Plan and subject to such other administrative rules as the Administrator may deem advisable, by delivering within the option period written notice of exercise to the Company at its principal office. The notice shall state the number of shares as to which the Option is being exercised and shall be accompanied by payment in full of the option price for all shares designated in the notice. The exercise of the Option shall be deemed effective upon receipt of such notice by the Company and upon payment that complies with the terms of the Plan and this Agreement. The Option may be exercised with respect to any number or all of the shares as to which it can then be so exercised and, if partially exercised, may be exercised as to the unexercised shares any number of times during the option period as provided herein.

          b. Form of Payment. Subject to the approval of the Administrator, payment of the option price by Participant shall be in the form of cash, personal check, certified check or previously acquired shares of Common Stock of the Company, or any combination thereof. Any stock so tendered as part of such payment shall be valued at its Fair Market Value as provided in the Plan. For purposes of this Agreement, “previously acquired shares of Common Stock” shall include shares of Common Stock that are already owned by Participant at the time of exercise.

          c. Stock Transfer Records. As soon as practicable after the effective exercise of all or any part of the Option, Participant shall be recorded on the stock transfer books of the Company as the owner of the shares purchased, and the Company shall deliver to Participant one or more duly issued stock certificates evidencing such ownership. All requisite original issue or transfer documentary stamp taxes shall be paid by the Company.

     4. Miscellaneous.

          a. Employment or Other Relationship; Rights as Shareholder. This Agreement shall not confer on Participant any right with respect to the continuance of employment or any other relationship with the Company or any of its Subsidiaries, nor will it interfere in any way with the right of the Company to terminate such employment or relationship. Participant shall have no rights as a shareholder with respect to shares subject to this Option until such shares have been issued to Participant upon exercise of this Option. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or

3

other property), distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 14 of the Plan.

          b. Securities Law Compliance. The exercise of all or any parts of this Option shall only be effective at such time as counsel to the Company shall have determined that the issuance and delivery of Common Stock pursuant to such exercise will not violate any state or federal securities or other laws. Participant may be required by the Company, as a condition of the effectiveness of any exercise of this Option, to agree in writing that all Common Stock to be acquired pursuant to such exercise shall be held, until such time that such Common Stock is registered and freely tradable under applicable state and federal securities laws, for Participant’s own account without a view to any further distribution thereof, that the certificates for such shares shall bear an appropriate legend to that effect and that such shares will be not transferred or disposed of except in compliance with applicable state and federal securities laws.

          c. Mergers, Recapitalizations, Stock Splits, Etc. Except as otherwise specifically provided in any employment, change of control, severance or similar agreement executed by the Participant and the Company, pursuant and subject to Section 14 of the Plan, certain changes in the number or character of the Common Stock of the Company (through sale, merger, consolidation, exchange, reorganization, divestiture (including a spin-off), liquidation, recapitalization, stock split, stock dividend or otherwise) shall result in an adjustment, reduction or enlargement, as appropriate, in Participant’s rights with respect to any unexercised portion of the Option (i.e., Participant shall have such “anti-dilution” rights under the Option with respect to such events, but shall not have “preemptive” rights).

          d. Shares Reserved. The Company shall at all times during the option period reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.

          e. Withholding Taxes. To permit the Company to comply with all applicable federal and state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that, if necessary, all applicable federal and state payroll, income or other taxes are withheld from any amounts payable by the Company to Participant. If the Company is unable to withhold such federal and state taxes, for whatever reason, Participant hereby agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal or state law. Subject to such rules as the Administrator may adopt, the Administrator may, in its sole discretion, permit Participant to satisfy such withholding tax obligations, in whole or in part (i) by delivering shares of Common Stock, or (ii) by electing to have the Company withhold shares of Common Stock otherwise issuable to Participant, in either case having a Fair Market Value, as of the date the amount of tax to be withheld is determined under applicable tax law, equal to the minimum amount required to be withheld for tax purposes. Participant’s request to deliver shares or to have shares withheld for purposes of such withholding tax obligations shall be made on or before the date that triggers such obligations or, if later, the date that the amount of tax to be withheld is determined under applicable tax law. Participant’s request shall be approved by the Administrator and otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule 16b-3 or

4

any successor provision, as then in effect, of the General Rules and Regulations under the Securities and Exchange Act of 1934, if applicable.

          f. Nontransferability. During the lifetime of Participant, the accrued Option shall be exercisable only by Participant or by the Participant’s guardian or other legal representative, and shall not be assignable or transferable by Participant, in whole or in part, other than by will or by the laws of descent and distribution.

          g. 2007 Equity Incentive Plan. The Option evidenced by this Agreement is granted pursuant to the Plan, a copy of which Plan has been made available to Participant and is hereby incorporated into this Agreement. This Agreement is subject to and in all respects limited and conditioned as provided in the Plan. All defined terms of the Plan shall have the same meaning when used in this Agreement. The Plan governs this Option and, in the event of any questions as to the construction of this Agreement or in the event of a conflict between the Plan and this Agreement, the Plan shall govern, except as the Plan otherwise provides.

          h. Lockup Period Limitation. Participant agrees that in the event the Company advises Participant that it plans an underwritten public offering of its Common Stock in compliance with the Securities Act of 1933, as amended, and that the underwriter(s) seek to impose restrictions under which certain shareholders may not sell or contract to sell or grant any option to buy or otherwise dispose of part or all of their stock purchase rights of the underlying Common Stock, Participant hereby agrees that for a period not to exceed 180 days from the prospectus, Participant will not sell or contract to sell or grant an option to buy or otherwise dispose of this Option or any of the underlying shares of Common Stock without the prior written consent of the underwriter(s) or its representative(s).

          i. Blue Sky Limitation. Notwithstanding anything in this Agreement to the contrary, in the event the Company makes any public offering of its securities and it is determined that it is necessary to reduce the number of issued but unexercised stock purchase rights so as to comply with any state securities or Blue Sky law limitations with respect thereto, and such determination is affirmed by the Board of Directors, unless the Board of Directors determines otherwise, (i) the exercisability of this Option and the date on which this Option must be exercised shall be accelerated, provided that the Company agrees to give Participant 15 days’ prior written notice of such acceleration, and (ii) any portion of this Option or any other option granted to Participant pursuant to the Plan which is not exercised prior to or contemporaneously with such public offering shall be canceled. Notice shall be deemed given when delivered personally or when deposited in the United States mail, first class postage prepaid and addressed to Participant at the address of Participant on file with the Company.

          j. Accounting Compliance. Participant agrees that, if a merger, reorganization, liquidation or other “transaction” as defined in Section 14 of the Plan occurs and Participant is an “affiliate” of the Company or any Affiliate (as defined in applicable legal and accounting principles) at the time of such transaction, Participant will comply with all requirements of Rule 145 of the Securities Act of 1933, as amended, and the requirements of such other legal or accounting principles, and will execute any documents necessary to ensure such compliance.

5

          k. Stock Legend. The Administrator may require that the certificates for any shares of Common Stock purchased by Participant (or, in the case of death, Participant’s successors) shall bear an appropriate legend to reflect the restrictions of Paragraph 4(b) and Paragraphs 4(g) through 4(i) of this Agreement; provided, however, that failure to so endorse any of such certificates shall not render invalid or inapplicable Paragraph 4(b) or Paragraphs 4(g) through 4(i).

          l. Scope of Agreement. This Agreement shall bind and inure to the benefit of the Company and its successors and assigns and Participant and any successor or successors of Participant permitted by Paragraph 2 or Paragraph 4(e) above.

          m. Arbitration. Any dispute arising out of or relating to this Agreement or the alleged breach of it, or the making of this Agreement, including claims of fraud in the inducement, shall be discussed between the disputing parties in a good faith effort to arrive at a mutual settlement of any such controversy. If, notwithstanding, such dispute cannot be resolved, such dispute shall be settled by binding arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a retired state or federal judge or an attorney who has practiced securities or business litigation for at least 10 years. If the parties cannot agree on an arbitrator within 20 days, any party may request that the chief judge of the District Court for Hennepin County, Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the provisions of this Agreement, and the commercial arbitration rules of the American Arbitration Association, unless such rules are inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitrator who may dispose of such dispute. The arbitrator shall have the authority to award any remedy or relief that a court of this state could order or grant; provided, however, that punitive or exemplary damages shall not be awarded. The arbitrator may award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees, including the arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed by the parties, the place of any arbitration proceedings shall be Hennepin County, Minnesota.

     4. Change of Control. Notwithstanding anything in the Plan or this Agreement to the contrary, this Option shall become fully vested and exercisable upon a Change of Control. For purposes of this Agreement, a “Change of Control” shall mean the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events. For purposes of this definition, a person, entity or group shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person, entity or group directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

          (a) Any person, entity or group becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger,

6

consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (i) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other person, entity or group from the Company in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (ii) solely because the level of Ownership held by any person, entity or group (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;

          (b) There is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (i) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction or (ii) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;

          (c) There is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the total gross value of the consolidated assets of the Company and its subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of total gross value of the consolidated assets of the Company and its subsidiaries to an entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition (for purposes of this Paragraph 4(c), “gross value” means the value of the assets of the Company or the value of the assets being disposed of, as the case may be, determined without regard to any liabilities associated with such assets); or

          (d) Individuals who, at the beginning of any consecutive twelve-month period, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board at any time during that consecutive twelve-month period; (provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board).

7

     For the avoidance of doubt, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company.

     To the extent required, the determination of whether a Change of Control has occurred shall be made in accordance with Internal Revenue Code Section 409A and the regulations, notices and other guidance of general applicability issued thereunder.

     ACCORDINGLY, the parties hereto have caused this Agreement to be executed on the day and year first above written.

CARDIOVASCULAR SYSTEMS, INC.
By:
	Its:
Participant

8

EX-10.21

Exhibit 10.21

RESTRICTED STOCK AGREEMENT

CARDIOVASCULAR SYSTEMS, INC.
AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

     THIS AGREEMENT is made effective as of this ___ day of                     ,                     , by and between Cardiovascular Systems, Inc., a Delaware corporation (the “Company”), and                                          (the “Participant”).

WITNESSETH:

     WHEREAS, the Participant is, on the date hereof, a key employee, officer, director of or a consultant or advisor to of the Company or of a subsidiary of the Company; and

     WHEREAS, the Company wishes to grant a restricted stock award to the Participant for shares of the Company’s Common Stock pursuant to the Company’s Amended and Restated 2007 Equity Incentive Plan (the “Plan”); and

     WHEREAS, the Administrator of the Plan has authorized the grant of a restricted stock award to the Participant;

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

     1. Grant of Restricted Stock Award. The Company hereby grants to the Participant on the date set forth above a restricted stock award (the “Award”) for                                          (                    ) shares of Common Stock on the terms and conditions set forth herein, which shares are subject to adjustment pursuant to Section 14 of the Plan. The Company shall cause to be issued one or more stock certificates representing such shares of Common Stock in the Participant’s name, and shall hold each such certificate until such time as the risk of forfeiture and other transfer restrictions set forth in this Agreement have lapsed with respect to the shares represented by the certificate. The Company may also place a legend on such certificates describing the risks of forfeiture and other transfer restrictions set forth in this Agreement providing for the cancellation of such certificates if the shares of Common Stock are forfeited as provided in Section 2 below. Until such risks of forfeiture have lapsed or the shares subject to this Award have been forfeited pursuant to Section 2 below, the Participant shall be entitled to vote the shares represented by such stock certificates and shall receive all dividends attributable to such shares, but the Participant shall not have any other rights as a shareholder with respect to such shares.

     2. Vesting of Restricted Stock. The shares of Stock subject to this Award shall remain forfeitable until the risks of forfeiture lapse according to the following vesting schedule:

1

Vesting Date Cumulative Percentage of Shares

          b. If the Participant’s employment with the Company (or a subsidiary of the Company) ceases at any time prior to a Vesting Date for any reason, including the Participant’s voluntary resignation or retirement, the Participant shall immediately forfeit all shares of Stock subject to this Award which have not yet vested and for which the risks of forfeiture have not lapsed.

     3. General Provisions.

          a. Employment or Other Relationship. This Agreement shall not confer on the Participant any right with respect to continuance of employment or other relationship by the Company, nor will it interfere in any way with the right of the Company to terminate such employment or relationship.

          b. Securities Law Compliance. Participant shall not transfer or otherwise dispose of the shares of Stock received pursuant to this Agreement until such time as counsel to the Company shall have determined that such transfer or other disposition will not violate any state or federal securities laws. The Participant may be required by the Company, as a condition of the effectiveness of this restricted stock award, to agree in writing that all Stock subject to this Agreement shall be held, until such time that such Stock is registered and freely tradable under applicable state and federal securities laws, for Participant’s own account without a view to any further distribution thereof, that the certificates for such shares shall bear an appropriate legend to that effect and that such shares will be not transferred or disposed of except in compliance with applicable state and federal securities laws.

          c. Mergers, Recapitalizations, Stock Splits, Etc. Except as otherwise specifically provided in any employment, change of control, severance or similar agreement executed by the Participant and the Company, pursuant and subject to Section 14 of the Plan, certain changes in the number or character of the shares of Stock of the Company (through sale, merger, consolidation, exchange, reorganization, divestiture (including a spin-off), liquidation, recapitalization, stock split, stock dividend, or otherwise) shall result in an adjustment, reduction, or enlargement, as appropriate, in the number of shares subject to this Award. Any additional shares that are credited pursuant to such adjustment shall be subject to the same restrictions as are applicable to the shares with respect to which the adjustment relates.

          d. Shares Reserved. The Company shall at all times during the term of this Award reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.

2

          e. Withholding Taxes. To permit the Company to comply with all applicable federal and state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that, if necessary, all applicable federal and state payroll, income or other taxes are withheld from any amounts payable by the Company to the Participant. If the Company is unable to withhold such federal and state taxes, for whatever reason, the Participant hereby agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal or state law prior to the transfer of any certificates for the shares of Stock subject to this Award. Subject to such rules as the Administrator may adopt, the Administrator may, in its sole discretion, permit Participant to satisfy such withholding tax obligations, in whole or in part, by delivering shares of Common Stock received pursuant to this Award having a Fair Market Value, as of the date the amount of tax to be withheld is determined under applicable tax law, equal to the minimum amount required to be withheld for tax purposes. Participant’s request to deliver shares for purposes of such withholding tax obligations shall be made on or before the date that triggers such obligations or, if later, the date that the amount of tax to be withheld is determined under applicable tax law. Participant’s request shall be approved by the Administrator and otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule 16b-3 or any successor provision, as then in effect, of the General Rules and Regulations under the Securities and Exchange Act of 1934, if applicable.

          f. 2007 Equity Incentive Plan. The Award evidenced by this Agreement is granted pursuant to the Plan, a copy of which Plan has been made available to the Participant and is hereby incorporated into this Agreement. This Agreement is subject to and in all respects limited and conditioned as provided in the Plan. All defined terms of the Plan shall have the same meaning when used in this Agreement. The Plan governs this Award and, in the event of any questions as to the construction of this Agreement or in the event of a conflict between the Plan and this Agreement, the Plan shall govern, except as the Plan otherwise provides.

          g. Lockup Period Limitation. Participant agrees that in the event the Company advises Participant that it plans an underwritten public offering of its Common Stock in compliance with the Securities Act of 1933, as amended, and that the underwriter(s) seek to impose restrictions under which certain shareholders may not sell or contract to sell or grant any option to buy or otherwise dispose of part or all of their stock purchase rights of the underlying Common Stock, Participant hereby agrees that for a period not to exceed 180 days from the prospectus, Participant will not sell or contract to sell or grant an option to buy or otherwise dispose of this Agreement or any of the underlying shares of Common Stock without the prior written consent of the underwriter(s) or its representative(s).

          h. Blue Sky Limitation. Notwithstanding anything in this Agreement to the contrary, in the event the Company makes any public offering of its securities and determines, in its sole discretion, that it is necessary to reduce the number of issued but unexercised stock purchase rights so as to comply with any state securities or Blue Sky law limitations with respect thereto, the Board of Directors of the Company shall accelerate the vesting of this restricted stock award, provided that the Company gives Participant 15 days’ prior written notice of such acceleration. Notice shall be deemed given when delivered personally or when deposited in the

3

United States mail, first class postage prepaid and addressed to Participant at the address of Participant on file with the Company.

          i. Accounting Compliance. Participant agrees that, if a merger, reorganization, liquidation or other “transaction” as defined in Article IV of the Plan occurs, and Participant is an “affiliate” of the Company or any Subsidiary (as defined in applicable legal and accounting principles) at the time of such transaction, Participant will comply with all requirements of Rule 145 of the Securities Act of 1933, as amended, and the requirements of such other legal or accounting principles, and will execute any documents necessary to ensure such compliance.

          j. Stock Legend. The Administrator may require that the certificates for any shares of Common Stock purchased by Participant (or, in the case of death, Participant’s successors) shall bear an appropriate legend to reflect the restrictions of Paragraph 3(b) and Paragraphs 3(g) through 3(i) of this Agreement; provided, however, that failure to so endorse any of such certificates shall not render invalid or inapplicable Paragraph 3(b) or Paragraph 3(g) through 3(i).

          k. Scope of Agreement. This Agreement shall bind and inure to the benefit of the Company and its successors and assigns and of the Participant and any successor or successors of the Participant.

          l. Arbitration. Any dispute arising out of or relating to this Agreement or the alleged breach of it, or the making of this Agreement, including claims of fraud in the inducement, shall be discussed between the disputing parties in a good faith effort to arrive at a mutual settlement of any such controversy. If, notwithstanding, such dispute cannot be resolved, such dispute shall be settled by binding arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a retired state or federal judge or an attorney who has practiced securities or business litigation for at least 10 years. If the parties cannot agree on an arbitrator within 20 days, any party may request that the chief judge of the District Court for Hennepin County, Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the provisions of this Agreement, and the commercial arbitration rules of the American Arbitration Association, unless such rules are inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitrator who may dispose of such dispute. The arbitrator shall have the authority to award any remedy or relief that a court of this state could order or grant; provided, however, that punitive or exemplary damages shall not be awarded. The arbitrator may award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees, including the arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed by the parties, the place of any arbitration proceedings shall be Hennepin County, Minnesota.

     4. Change of Control. Notwithstanding anything in the Plan or this Agreement to the contrary, this Award shall become fully vested upon a Change of Control. For purposes of this Agreement, a “Change of Control” shall mean the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events. For purposes of this definition, a person, entity or group shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to

4

have acquired “Ownership” of securities if such person, entity or group directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

          (a) Any person, entity or group becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (i) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other person, entity or group from the Company in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (ii) solely because the level of Ownership held by any person, entity or group (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;

          (b) There is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (i) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction or (ii) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;

          (c) There is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the total gross value of the consolidated assets of the Company and its subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of total gross value of the consolidated assets of the Company and its subsidiaries to an entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition (for purposes of this Paragraph 4(c), “gross value” means the value of the assets of the Company or the value of the assets being disposed of, as the case may be, determined without regard to any liabilities associated with such assets); or

          (d) Individuals who, at the beginning of any consecutive twelve-month period, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board at any time during that consecutive twelve-month period; (provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent

5

Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board).

     For the avoidance of doubt, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company. To the extent required, the determination of whether a Change of Control has occurred shall be made in accordance with Internal Revenue Code Section 409A and the regulations, notices and other guidance of general applicability issued thereunder.

6

     ACCORDINGLY, the parties hereto have caused this Agreement to be executed on the day and year first above written.

CARDIOVASCULAR SYSTEMS, INC.
By:
	Its:
Participant

7

EX-10.22

Exhibit 10.22

RESTRICTED STOCK UNIT AGREEMENT

CARDIOVASCULAR SYSTEMS, INC.
AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

     THIS AGREEMENT, made effective as of this            day of                     , 20          , by and between Cardiovascular Systems, Inc., a Delaware corporation (the “Company”), and                                          (“Participant”).

WITNESSETH:

     WHEREAS, Participant on the date hereof is a key employee, officer, director of or consultant or advisor to the Company or one of its Subsidiaries; and

     WHEREAS, the Company wishes to grant a restricted stock unit award to Participant for shares of the Company’s Common Stock pursuant to the Company’s Amended and Restated 2007 Equity Incentive Plan (the “Plan”); and

     WHEREAS, the Administrator of the Plan has authorized the grant of a restricted stock unit award to Participant;

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

     1. Grant of Restricted Stock Unit Award; Term. The Company hereby grants to Participant on the date set forth above a restricted stock unit award (the “Award”) for            restricted stock units on the terms and conditions set forth herein. Each restricted stock unit shall entitle the Participant to receive one share of the Company’s Common Stock.

     2. Vesting of Restricted Stock Units.

          a. General. The restricted stock units subject to this Award shall remain forfeitable until the date the risks of forfeiture lapse with respect to a percentage of such units (i.e., the date such units “vest”), according to the following schedule:

	Cumulative Percentage
Vesting Date	of Units

Subject to such other terms and conditions set forth in this Agreement, the Participant shall not be entitled to the issuance of shares of Stock for any portion of the restricted stock units subject to this Award until the Administrator determines the number of restricted stock units, if any, which have vested.

          b. Termination of Relationship. If Participant ceases to be [an employee] [a consultant] [a nonemployee director] of the Company or any Subsidiary at any time during the term of the Award, for any reason, this Award shall terminate and all restricted stock units subject to this Award for which the risks of forfeiture have not lapsed shall be forfeited by Participant.

     3. Issuance of Shares. On each vesting date, the Company shall cause to be issued a stock certificate representing that number of shares of Common Stock which is equivalent to the percentage of restricted stock units for which the risks of forfeiture have lapsed, less any shares withheld for payment of taxes as provided in Section 4(d) below, and shall deliver such certificate to Participant. Until the issuance of such shares, Participant shall not be entitled to vote the shares of Common Stock represented by such restricted stock units, shall not be entitled to receive dividends attributable to such shares of Common Stock, and shall not have any other rights as a shareholder with respect to such shares.

     4. General Provisions.

          a. Employment or Other Relationship. This Agreement shall not confer on Participant any right with respect to continuance of employment or any other relationship by the Company or any of its Subsidiaries, nor will it interfere in any way with the right of the Company to terminate such employment or relationship. Nothing in this Agreement shall be construed as creating an employment contract for any specified term between Participant and the Company or any Subsidiary.

          b. Mergers, Recapitalizations, Stock Splits, Etc. Except as otherwise specifically provided in any employment, change of control, severance or similar agreement executed by the Participant and the Company, pursuant and subject to Section 14 of the Plan, certain changes in the number or character of the Common Stock of the Company (through merger, consolidation, exchange, reorganization, divestiture (including a spin-off), liquidation, recapitalization, stock split, stock dividend or otherwise) shall result in an adjustment, reduction or enlargement, as appropriate, in Participant’s rights with respect to any restricted stock units subject to this Award which continue to be subject to risks of forfeiture (i.e., Participant shall have such “anti-dilution” rights under the Award with respect to such events, but shall not have “preemptive” rights).

2

          c. Shares Reserved. The Company shall at all times during the term of this Agreement reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.

          d. Withholding Taxes. To permit the Company to comply with all applicable federal and state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that, if necessary, all applicable federal and state payroll, income or other taxes attributable to this Award are withheld from any amounts payable by the Company to the Participant. If the Company is unable to withhold such federal and state taxes, for whatever reason, the Participant hereby agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal or state law prior to the issuance of any certificates for the shares of Stock subject to this Award. Subject to such rules as the Administrator may adopt, the Administrator may, in its sole discretion, permit Participant to satisfy such withholding tax obligations, in whole or in part, by delivering shares of the Company’s Common Stock, including shares of Stock received pursuant to this Award on which the risks of forfeiture have lapsed. Such shares shall have a Fair Market Value equal to the minimum required tax withholding, based on the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to the supplemental income attributable to this Award. In no event may the Participant deliver shares having a Fair Market Value in excess of such statutory minimum required tax withholding. The Participant’s election to deliver shares or to have shares withheld for this purpose shall be made on or before the date that the amount of tax to be withheld is determined under applicable tax law. Such election shall be approved by the Administrator and otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule 16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under the Securities Exchange Act of 1934, if applicable.

          e. 2007 Equity Incentive Plan. The Award evidenced by this Agreement is granted pursuant to the Plan, a copy of which Plan has been made available to Participant and is hereby incorporated into this Agreement. This Agreement is subject to and in all respects limited and conditioned as provided in the Plan. The Plan governs this Agreement and, in the event of any questions as to the construction of this Agreement or in the event of a conflict between the Plan and this Agreement, the Plan shall govern, except as the Plan otherwise provides.

          f. Stock Legend. The Administrator may require that the certificates for any shares of Common Stock purchased by Participant (or, in the case of death, Participant’s successors) shall bear an appropriate legend to reflect the restrictions of Paragraph 4(f) of this Agreement; provided, however, that failure to so endorse any of such certificates shall not render invalid or inapplicable Paragraph 4(f).

          g. Scope of Agreement. This Agreement shall bind and inure to the benefit of the Company and its successors and assigns and Participant and any successor or successors of Participant permitted by this Agreement. This Award is expressly subject to all terms and conditions contained in the Plan and in this Agreement, and Participant’s failure to execute this Agreement shall not relieve Participant from complying with such terms and conditions.

3

          h. Arbitration. Any dispute arising out of or relating to this Agreement or the alleged breach of it, or the making of this Agreement, including claims of fraud in the inducement, shall be discussed between the disputing parties in a good faith effort to arrive at a mutual settlement of any such controversy. If, notwithstanding, such dispute cannot be resolved, such dispute shall be settled by binding arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a retired state or federal judge or an attorney who has practiced securities or business litigation for at least 10 years. If the parties cannot agree on an arbitrator within 20 days, any party may request that the chief judge of the District Court of Hennepin County, Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the provisions of this Agreement, and the commercial arbitration rules of the American Arbitration Association, unless such rules are inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitrator who may dispose of such dispute. The arbitrator shall have the authority to award any remedy or relief that a court of this state could order or grant; provided, however, that punitive or exemplary damages shall not be awarded. The arbitrator may award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees, including the arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed by the parties, the place of any arbitration proceedings shall be Hennepin County, Minnesota.

          i. Right to Amend. The Company hereby reserves the right to amend this Agreement without Participant’s consent to the extent necessary or desirable to comply with the requirements of Code Section 409A and the regulations, notices and other guidance of general application issued thereunder.

     [5. Change of Control. Notwithstanding anything in the Plan or this Agreement to the contrary, this Award shall become fully vested upon a Change of Control. For purposes of this Agreement, a “Change of Control” shall mean the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events. For purposes of this definition, a person, entity or group shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person, entity or group directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

          (a) Any person, entity or group becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (i) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other person, entity or group from the Company in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (ii) solely because the level of Ownership held by any person, entity or group (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting

4

securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;

          (b) There is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (i) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction or (ii) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;

          (c) There is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the total gross value of the consolidated assets of the Company and its subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of total gross value of the consolidated assets of the Company and its subsidiaries to an entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition (for purposes of this Paragraph 4(c), “gross value” means the value of the assets of the Company or the value of the assets being disposed of, as the case may be, determined without regard to any liabilities associated with such assets); or

          (d) Individuals who, at the beginning of any consecutive twelve-month period, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board at any time during that consecutive twelve-month period; (provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board).

     For the avoidance of doubt, the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company. To the extent required, the determination of whether a Change of Control has occurred shall be made in accordance with Internal Revenue Code Section 409A and the regulations, notices and other guidance of general applicability issued thereunder.]

5

     ACCORDINGLY, the parties hereto have caused this Agreement to be executed on the day and year first above written.

CARDIOVASCULAR SYSTEMS, INC.
By:
	Its:
Participant

6

EX-10.23

Exhibit 10.23

PERFORMANCE SHARE AWARD

CARDIOVASCULAR SYSTEMS, INC.
AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

     THIS AGREEMENT, made effective as of this                      day of                                         , 20          , by and between Cardiovascular Systems, Inc., a Delaware corporation (the “Company”), and                                          (“Participant”).

WITNESSETH:

     WHEREAS, the Participant on the date hereof is a key employee, officer, director of or consultant or advisor to the Company or one of its Subsidiaries; and

     WHEREAS, the Company wishes to grant a performance share award to Participant pursuant to the Company’s Amended and Restated 2007 Equity Incentive Plan (the “Plan”) to entitle the Participant to shares of the Company’s Common Stock upon the achievement of certain specified performance criteria; and

     WHEREAS, the Administrator has authorized the grant of such performance share award to Participant;

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

     1. Grant of Performance Share Award. The Company hereby grants to Participant on the date set forth above (the “Date of Grant”) the right to receive up to                      (                    ) Performance Shares on the terms and conditions set forth herein (the “Performance Award”).

     2. Performance Period. The Performance Period shall be the period beginning                                         , 20          , and ending                                         , 20     .

     3. Performance Objectives; Vesting. The Performance Shares subject to this Performance Award shall vest only upon the achievement of all or a portion of certain Performance Objectives, which much be achieved within the Performance Period. The Performance Objectives and the extent to which achievement of all or a portion of the Performance Objectives will result in the vesting of the Performance Shares are as follows:

-1-

		Percentage or Number of
Performance Objective(s)	Achievement	Shares Vested

Subject to such other terms and conditions set forth in this Agreement, the Participant shall not be entitled to the issuance of any portion of the Performance Shares subject to this Performance Award until the Administrator determines the number of Performance Shares, if any, which have vested.

     4. Form, Time of Issuance. The Administrator shall, within            (     ) days after the end of the Performance Period or at such earlier times as described in Paragraph 3 above, determine the number of Performance Shares that have vested pursuant to Paragraph 3 above. Such Performance Shares shall be issued in [the calendar year] [in which] [immediately following] the date such Performance Shares become vested; provided, however, that the Participant shall receive cash equal to the Fair Market Value of any fractional shares.

     5. Termination of Employment.

          a. Prior to Vesting. If, prior to the vesting of any Performance Shares, Participant ceases to be [an employee] [a consultant] [a nonemployee director] of the Company or any Subsidiary for any reason, the Participant shall forfeit all unvested Performance Shares, and this Performance Award shall terminate.

          b. After Vesting But Prior to Issuance. If Participant ceases to be [an employee] [a consultant] [a nonemployee director] of the Company or any Subsidiary for any reason after Performance Shares have vested but prior to the date such Shares are issued (as described in Section 4 hereof), then Participant (or Participant’s estate in the event of his death) shall be entitled to receive such vested Performance Shares as if such termination of employment had not occurred. The number of such Performance Shares shall be determined by the Administrator pursuant to Paragraph 3 and shall be issued at the time set forth in Paragraph 4. Upon the issuance of the vested Performance Shares, this Performance Award shall terminate.

-2-

     6. Miscellaneous.

          a. Employment or Other Relationship; Rights as Shareholder. This Agreement shall not confer on Participant any right to continuance of employment or any other relationship by the Company or any of its Subsidiaries, nor will it interfere in any way with the right of the Company to terminate such employment or relationship. Participant shall have no rights as a shareholder with respect to shares subject to this Agreement until such shares, if any, have been issued to Participant. The grant of this Award shall not prevent Participant from receiving, in the sole discretion of the Administrator, additional performance share awards for subsequent performance periods, whether or not those performance periods overlap with the Performance Period specified herein to which this Award relates.

          b. Shares Reserved. The Company shall at all times during the term of this Award reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.

          c. Mergers, Recapitalizations, Stock Splits, Etc. Except as otherwise specifically provided in any employment, change of control, severance or similar agreement executed by the Participant and the Company, the Administrator may, at any time during the Performance Period specified herein, pursuant and subject to Section 14 of the Plan, suspend, modify or terminate this Agreement or any Performance Objectives set forth in Paragraph 3 upon the occurrence of any extraordinary event which substantially effects the Company or its Subsidiary, including, but not limited to, a merger, consolidation, exchange, divestiture (including a spin-off), reorganization or liquidation of the Company or Subsidiary or the sale by the Company or its Subsidiary or substantially all of its assets and the consequent discontinuance of its business.

          d. Withholding Taxes. To permit the Company to comply with all applicable federal and state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that, if necessary, all applicable federal and state payroll, income or other taxes attributable to this Award are withheld from any amounts payable by the Company to the Participant. If the Company is unable to withhold such federal and state taxes, for whatever reason, the Participant hereby agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal or state law prior to the issuance of any certificates for the shares of Stock subject to this Award. Subject to such rules as the Administrator may adopt, the Administrator may, in its sole discretion, permit Participant to satisfy such withholding tax obligations, in whole or in part, by delivering shares of the Company’s Common Stock, including shares of Stock received pursuant to this Award. Such shares shall have a Fair Market Value equal to the minimum required tax withholding, based on the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to this Award. In no event may the Participant deliver shares, nor may the Company or any Affiliate withhold shares, having a Fair Market Value in excess of such statutory minimum required tax withholding. The Participant’s election to deliver shares or to have shares withheld for this purpose shall be made on or before the date that the amount of tax to be withheld is determined

-3-

under applicable tax law. Such election shall be approved by the Administrator and otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule 16b 3, or any successor provision, as then in effect, of the General Rules and Regulations under the Securities Exchange Act of 1934, if applicable.

          e. Nontransferability. The Performance Shares granted pursuant to this Agreement shall not be transferred, assigned or pledged in any manner by the Participant, in whole or in part, other than by will or by the laws of descent and distribution.

          f. 2007 Equity Incentive Plan. The Award evidenced by this Agreement is granted pursuant to the Plan, a copy of which has been made available to Participant and is hereby incorporated into this Agreement. This Agreement is subject to and in all respects limited and conditioned as provided in the Plan. All defined terms of the Plan shall have the same meaning when used in this Agreement. The Plan governs this Award and the Participant and, in the event of any questions as to the construction of this Agreement or of a conflict between the Plan and this Agreement, the Plan shall govern, except as the Plan otherwise provides.

          g. Stock Legend. The Administrator may require that the certificates for any shares of Common Stock issued to Participant (or, in the case of death, Participant’s successors) shall bear an appropriate legend to reflect the restrictions of Paragraph 6(f) of this Agreement; provided, however, that failure to so endorse any of such certificates shall not render invalid or inapplicable Paragraph 6(f).

          h. Scope of Agreement. This Agreement shall bind and inure to the benefit of the Company and its successors and assigns and the Participant and any successor or successors of the Participant permitted by Paragraph 5(b) above.

          i. Arbitration. Any dispute arising out of or relating to this Agreement or the alleged breach of it, or the making of this Agreement, including claims of fraud in the inducement, shall be discussed between the disputing parties in a good faith effort to arrive at a mutual settlement of any such controversy. If, notwithstanding, such dispute cannot be resolved, such dispute shall be settled by binding arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a retired state or federal judge or an attorney who has practiced securities or business litigation for at least 10 years. If the parties cannot agree on an arbitrator within 20 days, any party may request that the chief judge of the District Court for Hennepin County, Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the provisions of this Agreement, and the commercial arbitration rules of the American Arbitration Association, unless such rules are inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitrator who may dispose of such dispute. The arbitrator shall have the authority to award any remedy or relief that a court of this state could order or grant; provided, however, that punitive or exemplary damages shall not be awarded. The arbitrator may award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees, including the arbitrator’s fees, administrative

-4-

fees, travel expenses, out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed by the parties, the place of any arbitration proceedings shall be Hennepin County, Minnesota.

          j. Delay in Payment for Specified Employee. In the event this Award is subject to Code Section 409A and the Administrator determines that the Participant is a “specified employee” within the meaning of Code Section 409A, then any payment due to the Participant’s separation from service shall not be paid earlier than the first day of the seventh month immediately following such separation from service.

          k. Right to Amend. The Company hereby reserves the right to amend this Agreement without Participant’s consent to the extent necessary or desirable to comply with the requirements of Code Section 409A and the regulations, notices and other guidance of general application issued thereunder.

     ACCORDINGLY, the parties hereto have caused this Agreement to be executed on the day and year first above written.

CARDIOVASCULAR SYSTEMS, INC.
By:
	Its:
Participant

-5-

EX-10.24

Exhibit 10.24

PERFORMANCE UNIT AWARD
(CASH SETTLED)

CARDIOVASCULAR SYSTEMS, INC.
AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

     THIS AGREEMENT, made effective as of this                      day of                                          , 20       , by and between Cardiovascular Systems, Inc., a Delaware corporation (the “Company”), and                                          (“Participant”).

WITNESSETH:

     WHEREAS, the Participant on the date hereof is a key employee, officer, director of or consultant or advisor to the Company or one of its Subsidiaries; and

     WHEREAS, the Company wishes to grant a performance unit award to Participant pursuant to the Company’s Amended and Restated 2007 Equity Incentive Plan (the “Plan”) to entitle the Participant to certain benefits upon the achievement of certain specified performance criteria; and

     WHEREAS, the Administrator has authorized the grant of such performance unit award to Participant;

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

     1. Grant of Performance Unit Award. The Company hereby grants to Participant on the date set forth above (the “Date of Grant”) the right to receive up to                      (                    ) Performance Units having a value of $                     per Unit (the “Per Unit Value”) payable in cash on the terms and conditions set forth herein (the “Performance Award”).

     2. Performance Period. The Performance Period shall be the period beginning                               , 20       , and ending                     , 20       .

     3. Performance Objectives; Vesting. The Performance Units subject to this Performance Award shall vest only upon the achievement of all or a portion of certain Performance Objectives, which must be achieved during the Performance Period. The Performance Objectives and the extent to which achievement of all or a portion of the Performance Objectives will result in the vesting of the Performance Units are as follows:

-1-

		Percentage or Number of
Performance Objective(s)	Achievement	Units Vested

Subject to such other terms and conditions set forth in this Agreement, the Participant shall not be entitled to payment for any portion of the Performance Units subject to this Performance Award until the Administrator determines the number of Performance Units, if any, which have vested.

     4. Form, Time of Issuance. The Administrator shall, within                      (        ) days after the end of the Performance Period or at such earlier times as described in Paragraph 3 above, determine the number of Performance Units that have vested pursuant to Paragraph 3 above, and shall calculate the amount of cash payable to the Participant by multiplying the Per Unit Value by such number of vested Performance Units. Such amount shall be paid in [the calendar year] [in which] [immediately following] the date such Performance Units become vested.

     5. Termination of Employment.

          a. Prior to Vesting. If, prior to the vesting of any Performance Units, Participant ceases to be [an employee] [a consultant] [a nonemployee director] of the Company or any Subsidiary for any reason, the Participant shall forfeit all unvested Performance Units, and this Performance Award shall terminate.

          b. After Vesting But Prior to Issuance. If Participant ceases to be [an employee] [a consultant] [a nonemployee director] of the Company or any Subsidiary for any reason after Performance Units have vested but prior to the date payment is made to the Participant (as described in Section 4 hereof), then Participant (or Participant’s estate in the event of his death) shall be entitled to receive such payment as if such termination of employment had not occurred. The amount of such payment shall be determined by the Administrator and shall be made at the time set forth in Paragraph 4. Upon payment for the vested Performance Units, this Performance Award shall terminate.

     6. Miscellaneous.

          a. Employment or Other Relationship. This Agreement shall not confer on Participant any right to continuance of employment or any other relationship by the Company

-2-

or any of its Subsidiaries, nor will it interfere in any way with the right of the Company to terminate such employment or relationship. The grant of this Award shall not prevent Participant from receiving, in the sole discretion of the Administrator, additional performance unit awards for subsequent performance periods, whether or not those performance periods overlap with the Performance Period specified herein to which this Award relates.

          b. Mergers, Recapitalizations, Stock Splits, Etc. Except as otherwise specifically provided in any employment, change of control, severance or similar agreement executed by the Participant and the Company, the Administrator may, at any time during the Performance Period specified herein, pursuant and subject to Section 14 of the Plan, suspend, modify or terminate this Agreement or any Performance Objectives set forth in Paragraph 3 upon the occurrence of any extraordinary event which substantially affects the Company or its Subsidiary, including, but not limited to, a merger, consolidation, exchange, divestiture (including a spin-off), reorganization or liquidation of the Company or Subsidiary or the sale by the Company or its Subsidiary of substantially all of its assets and the consequent discontinuance of its business.

          c. Withholding Taxes. To permit the Company to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that, if necessary, all applicable federal and state payroll, income or other taxes are withheld from any amounts payable by the Company to the Participant. If the Company is unable to withhold such federal and state taxes, for whatever reason, the Participant hereby agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal or state law.

          d. Nontransferability. The Performance Units granted pursuant to this Agreement shall not be transferred, assigned or pledged in any manner by the Participant, in whole or in part, other than by will or by the laws of descent and distribution.

          e. 2007 Equity Incentive Plan. The Award evidenced by this Agreement is granted pursuant to the Plan, a copy of which has been made available to Participant and is hereby incorporated into this Agreement. This Agreement is subject to and in all respects limited and conditioned as provided in the Plan. All defined terms of the Plan shall have the same meaning when used in this Agreement. The Plan governs this Award and the Participant and, in the event of any questions as to the construction of this Agreement or of a conflict between the Plan and this Agreement, the Plan shall govern, except as the Plan otherwise provides.

          f. Scope of Agreement. This Agreement shall bind and inure to the benefit of the Company and its successors and assigns and the Participant and any successor or successors of the Participant permitted by Paragraph 5(b) above.

          g. Arbitration. Any dispute arising out of or relating to this Agreement or the alleged breach of it, or the making of this Agreement, including claims of fraud in the inducement, shall be discussed between the disputing parties in a good faith effort to arrive at a mutual settlement

-3-

of any such controversy. If, notwithstanding, such dispute cannot be resolved, such dispute shall be settled by binding arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a retired state or federal judge or an attorney who has practiced securities or business litigation for at least 10 years. If the parties cannot agree on an arbitrator within 20 days, any party may request that the chief judge of the District Court for Hennepin County, Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the provisions of this Agreement, and the commercial arbitration rules of the American Arbitration Association, unless such rules are inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitrator who may dispose of such dispute. The arbitrator shall have the authority to award any remedy or relief that a court of this state could order or grant; provided, however, that punitive or exemplary damages shall not be awarded. The arbitrator may award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees, including the arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed by the parties, the place of any arbitration proceedings shall be Hennepin County, Minnesota.

          h. Right to Amend. The Company hereby reserves the right to amend this Agreement without Participant’s consent to the extent necessary or desirable to comply with the requirements of Code Section 409A and the regulations, notices and other guidance of general application issued thereunder.

          i. Delay in Payment for Specified Employee. In the event this Award is subject to Code Section 409A and the Administrator determines that the Participant is a “specified employee” within the meaning of Code Section 409A, then any payment due to the Participant’s separation from service shall not be paid earlier than the first day of the seventh month immediately following such separation from service.

     ACCORDINGLY, the parties hereto have caused this Agreement to be executed on the day and year first above written.

CARDIOVASCULAR SYSTEMS, INC.
By:
	Its:
Participant

-4-

EX-10.25

Exhibit 10.25

STOCK APPRECIATION RIGHTS AGREEMENT

CARDIOVASCULAR SYSTEMS, INC.
AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN

     THIS AGREEMENT, made effective as of this ___ day of                     , 20___, by and between Cardiovascular Systems, Inc. a Delaware corporation (the “Company”), and                      (“Participant”).

WITNESSETH:

     WHEREAS, Participant on the date hereof is a key employee, officer, director of or consultant or advisor to the Company or one of its Subsidiaries; and

     WHEREAS, the Company wishes to grant a stock appreciation right to Participant to pursuant to the Company’s Amended and Restated 2007 Equity Incentive Plan (the “Plan”); and

     WHEREAS, the Administrator of the Plan has authorized the grant of a stock appreciation right to Participant and has determined that, as of the effective date of this Agreement, the fair market value of the Company’s Common Stock is $           per share;

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

     1. Grant of SAR. The Company hereby grants to Participant on the date set forth above (the “Date of Grant”), stock appreciation rights (the “SAR”) with respect to an aggregate of (                    ) shares of Common Stock at an exercise price of $           per share on the terms and conditions set forth herein, and subject to adjustment pursuant to Article IV of the Plan. [This SAR is granted in tandem with the                      Option granted to Participant on                     , 20___ (the “Tandem Option”). ]

     2. Duration and Exercisability. The term during which this SAR may be exercised shall terminate on                          , ____, except as otherwise provided in Paragraphs 2(b) through 2(d) below. This SAR shall vest and become exercisable according to the following schedule:

Vesting Date Cumulative Percentage of Shares

Once the SAR becomes exercisable to the extent of one hundred percent (100%) of the aggregate number of shares specified in Paragraph 1, Participant may continue to exercise this SAR under the terms and conditions of this Agreement until the termination of the SAR as provided herein. If Participant does not exercise this SAR with respect to the full number of shares for which Participant is then entitled to exercise this SAR, Participant may, upon any subsequent exercise prior to this SAR’s termination, exercise this SAR for such previously unexercised portion.

          b. Termination of Relationship (Other than Disability or Death). If Participant ceases to be [an employee] [a consultant] [a nonemployee director] of the Company or any Subsidiary for any reason other than disability or death, this SAR shall completely terminate on the earlier of (i) the close of business on the three-month anniversary date of such termination of employment, and (ii) the expiration date of this SAR stated in Paragraph 2(a) above. In such period following the termination of Participant’s employment, this SAR shall be exercisable only to the extent the SAR was exercisable on the vesting date immediately preceding such termination of employment, but had not previously been exercised. To the extent this SAR was not exercisable upon such termination of employment, or if Participant does not exercise the SAR within the time specified in this Paragraph 2(b), all rights of Participant under this SAR shall be forfeited.

          c. Disability. If Participant ceases to be [an employee] [a consultant] [a nonemployee director] of the Company or any Subsidiary because of disability (as defined in Code Section 22(e), or any successor provision), this SAR shall terminate on the earlier of (i) the close of business on the twelve-month anniversary date of such termination of employment, and (ii) the expiration date of this SAR stated in Paragraph 2(a) above. In such period following the termination of Participant’s employment, this SAR shall be exercisable only to the extent the SAR was exercisable on the vesting date immediately preceding such termination of employment, but had not previously been exercised. To the extent this SAR was not exercisable upon such termination of employment, or if Participant does not exercise the SAR within the time specified in this Paragraph 2(c), all rights of Participant under this SAR shall be forfeited.

          d. Death. In the event of Participant’s death, this SAR shall terminate on the earlier of (i) the close of business on the twelve-month anniversary date of the date of Participant’s

2

death, and (ii) the expiration date of this SAR stated in Paragraph 2(a) above. In such period following Participant’s death, this SAR shall be exercisable by the person or persons to whom Participant’s rights under this SAR shall have passed by Participant’s will or by the laws of descent and distribution only to the extent the SAR was exercisable on the vesting date immediately preceding the date of Participant’s death, but had not previously been exercised. To the extent this SAR was not exercisable upon the date of Participant’s death, or if such person or persons do not exercise this SAR within the time specified in this Paragraph 2(d), all rights under this SAR shall be forfeited.

     3. Manner of Exercise; Payment

          a. General. This SAR may be exercised only by Participant (or other proper party in the event of death or incapacity), subject to the conditions of the Plan and subject to such other administrative rules as the Administrator may deem advisable, by delivering written notice of exercise to the Company at its principal office. The notice shall state the number of shares as to which this SAR is being exercised. The exercise of this SAR shall be deemed effective upon receipt of such notice by the Company, and the date of such receipt shall be the “date of exercise” for all purposes under this Agreement. This SAR may be exercised with respect to any number or all of the shares as to which it can then be exercised and, if partially exercised, may be so exercised as to the unexercised shares any number of times during the term of this SAR as provided herein.

          b. Form of Payment. Upon the exercise of all or a portion of this SAR, Participant shall be entitled to [a cash payment] [that number of shares of Stock calculated using such Stock’s Fair Market Value as of the date of exercise and having an aggregate Fair Market Value] equal to (i) the excess of (A) the per share Fair Market Value of the Company’s Common Stock as of the date of exercise over (B) the per share exercise price specified in Paragraph 1 above, multiplied by (ii) the number of shares specified in the Participant’s notice of exercise.

          c. Stock Transfer Records. As soon as practicable after the effective exercise of all or any part of this SAR, Participant shall be recorded on the stock transfer books of the Company as the owner of the shares purchased, and the Company shall deliver to Participant one or more duly issued stock certificates evidencing such ownership. All requisite original issue or transfer documentary stamp taxes shall be paid by the Company.

          [d. Cancellation of Tandem Option or SAR. Notwithstanding anything in this Agreement to the contrary, the exercise of all or a portion of this SAR shall result in the cancellation of the corresponding right to purchase a like number of shares under the Tandem Option, and the exercise of all or a portion of the Tandem Option shall result in the cancellation of the corresponding right to exercise this SAR for a like number of shares. The Participant may not simultaneously exercise this SAR for a corresponding number of shares purchased through the exercise of the Tandem Option.]

3

     4. Miscellaneous.

          a. Employment or Other Relationship; Rights as Shareholder. This Agreement shall not confer on Participant any right with respect to continuance of employment or any other relationship by the Company or any of its Subsidiaries, nor will it interfere in any way with the right of the Company to terminate such employment or relationship. Participant shall have no rights as a shareholder with respect to shares subject to this SAR until such shares, if any, have been issued to Participant. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 14 of the Plan.

          b. Securities Law Compliance. The exercise of all or any parts of this SAR shall only be effective at such time as counsel to the Company shall have determined that the issuance and delivery of Common Stock pursuant to such exercise will not violate any state or federal securities or other laws. Participant may be required by the Company, as a condition of the effectiveness of any exercise of this SAR, to agree in writing that all Common Stock to be acquired pursuant to such exercise shall be held, until such time that such Common Stock is registered and freely tradable under applicable state and federal securities laws, for Participant’s own account without a view to any further distribution thereof, that the certificates for such shares shall bear an appropriate legend to that effect and that such shares will be not transferred or disposed of except in compliance with applicable state and federal securities laws.

          c. Mergers, Recapitalizations, Stock Splits, Etc. Except as otherwise specifically provided in any employment, change of control, severance or similar agreement executed by the Participant and the Company, pursuant and subject to Section 14 of the Plan, certain changes in the number or character of the Common Stock of the Company (through sale, merger, consolidation, exchange, reorganization, divestiture (including a spin-off), liquidation, recapitalization, stock split, stock dividend or otherwise) shall result in an adjustment, reduction or enlargement, as appropriate, in Participant’s rights with respect to any unexercised portion of this SAR (i.e., Participant shall have such “anti-dilution” rights under this SAR with respect to such events, but shall not have “preemptive” rights).

          d. Shares Reserved. The Company shall at all times during the term of this SAR reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.

          e. Withholding Taxes. In order to permit the Company to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to insure that, if necessary, all applicable federal and state payroll, income or other taxes are withheld from any amounts payable by the Company to Participant. If the Company is unable to withhold such federal and state taxes, for whatever reason, Participant hereby agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal or state law. Subject to such rules as the Administrator may adopt, the Administrator may, in its sole discretion, permit Participant to satisfy such withholding tax obligations, in whole or in part by delivering shares of Common Stock received pursuant to this SAR having a Fair Market Value, as of the date the amount of tax

4

to be withheld is determined under applicable tax law, equal to the minimum amount required to be withheld for tax purposes. Participant’s request to deliver shares for purposes of such withholding tax obligations shall be made on or before the date that triggers such obligations or, if later, the date that the amount of tax to be withheld is determined under applicable tax law. Participant’s request shall be approved by the Administrator and otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule 16b-3 or any successor provision, as then in effect, of the General Rules and Regulations under the Securities and Exchange Act of 1934, if applicable.

          f. Nontransferability. During the lifetime of Participant, this SAR shall be exercisable only by Participant or by the Participant’s guardian or other legal representative, and shall not be assignable or transferable by Participant, in whole or in part, other than by will or by the laws of descent and distribution.

          g. 2007 Equity Incentive Plan. The SAR evidenced by this Agreement is granted pursuant to the Plan, a copy of which Plan has been made available to Participant and is hereby incorporated into this Agreement. This Agreement is subject to and in all respects limited and conditioned as provided in the Plan. All defined terms of the Plan shall have the same meaning when used in this Agreement. The Plan governs this SAR and the Participant and, in the event of any questions as to the construction of this Agreement or in the event of a conflict between the Plan and this Agreement, the Plan shall govern, except as the Plan otherwise provides.

          h. Lockup Period Limitation. Participant agrees that in the event the Company advises Participant that it plans an underwritten public offering of its Common Stock in compliance with the Securities Act of 1933, as amended, and that the underwriter(s) seek to impose restrictions under which certain shareholders may not sell or contract to sell or grant any option to buy or otherwise dispose of part or all of their stock purchase rights of the underlying Common Stock, Participant hereby agrees that for a period not to exceed 180 days from the prospectus, Participant will not sell or contract to sell or grant an option to buy or otherwise dispose of this Option or any of the underlying shares of Common Stock without the prior written consent of the underwriter(s) or its representative(s).

          i. Blue Sky Limitation. Notwithstanding anything in this Agreement to the contrary, in the event the Company makes any public offering of its securities and it is determined that it is necessary to reduce the number of issued but unexercised stock purchase rights so as to comply with any state securities or Blue Sky law limitations with respect thereto, and such determination is affirmed by the Board of Directors, unless the Board of Directors determines otherwise, (i) the exercisability of this SAR and the date on which this SAR must be exercised shall be accelerated, provided that the Company agrees to give Participant 15 days’ prior written notice of such acceleration, and (ii) any portion of this SAR or any other option granted to Participant pursuant to the Plan which is not exercised prior to or contemporaneously with such public offering shall be canceled. Notice shall be deemed given when delivered personally or when deposited in the United States mail, first class postage prepaid and addressed to Participant at the address of Participant on file with the Company.

5

          j. Accounting Compliance. Participant agrees that, if a merger, reorganization, liquidation or other “transaction” as defined in Section 14 of the Plan occurs and Participant is an “affiliate” of the Company or any Affiliate (as defined in applicable legal and accounting principles) at the time of such transaction, Participant will comply with all requirements of Rule 145 of the Securities Act of 1933, as amended, and the requirements of such other legal or accounting principles, and will execute any documents necessary to ensure such compliance.

          k. Stock Legend. The Administrator may require that the certificates for any shares of Common Stock purchased by Participant (or, in the case of death, Participant’s successors) shall bear an appropriate legend to reflect the restrictions of Paragraph 4(b) and Paragraphs 4(g) through 4(i) of this Agreement; provided, however, that failure to so endorse any of such certificates shall not render invalid or inapplicable Paragraph 4(b) or Paragraphs 4(g) through 4(i).

          l. Scope of Agreement. This Agreement shall bind and inure to the benefit of the Company and its successors and assigns and Participant and any successor or successors of Participant permitted by Paragraph 2 or Paragraph 4(e) above.

          m. Arbitration. Any dispute arising out of or relating to this Agreement or the alleged breach of it, or the making of this Agreement, including claims of fraud in the inducement, shall be discussed between the disputing parties in a good faith effort to arrive at a mutual settlement of any such controversy. If, notwithstanding, such dispute cannot be resolved, such dispute shall be settled by binding arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a retired state or federal judge or an attorney who has practiced securities or business litigation for at least 10 years. If the parties cannot agree on an arbitrator within 20 days, any party may request that the chief judge of the District Court for Hennepin County, Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the provisions of this Agreement, and the commercial arbitration rules of the American Arbitration Association, unless such rules are inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitrator who may dispose of such dispute. The arbitrator shall have the authority to award any remedy or relief that a court of this state could order or grant; provided, however, that punitive or exemplary damages shall not be awarded. The arbitrator may award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees, including the arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed by the parties, the place of any arbitration proceedings shall be Hennepin County, Minnesota.

          n. Right to Amend. The Company hereby reserves the right to amend this Agreement without Participant’s consent to the extent necessary or desirable to comply with the requirements of Code Section 409A and the regulations, notices and other guidance of general application issued thereunder.

6

     ACCORDINGLY, the parties hereto have caused this Agreement to be executed on the day and year first above written.

CARDIOVASCULAR SYSTEMS, INC.
By:
	Its:
Participant

7

EX-23.1

Exhibit 23.1

ValueKnowledge LLC
Business Valuations/Seeking Fairness
15 Spinning Wheel Road, Suite 210, Hinsdale, IL 60521
tel: 630-655-8411 fax: 630-455-9078
www.valueknowledge.com

May 14, 2009

Cardiovascular Systems, Inc.
651 Campus Dr.
St. Paul, MN 55112

Re: Consent of ValueKnowledge LLC

Ladies and Gentlemen:

We hereby consent to the references to our firm’s name for the purpose of the incorporation by reference of such information from the Cardiovascular Systems, Inc. Form 10-Q for the quarter ended March 31, 2009 into the Registration Statements of Cardiovascular Systems, Inc. on Forms S-8 (File Nos. 333-158987, 333-158755, and 333-135954).

Sincerely,

/s/ ValueKnowledge LLC

ValueKnowledge LLC

EX-31.1

Exhibit 31.1

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David L. Martin, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Cardiovascular Systems, 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 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 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.

	By:	/s/ David L. Martin
Dated: May 14, 2009		David L. Martin
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Laurence L. Betterley, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Cardiovascular Systems, 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 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 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.

	By:	/s/ Laurence L. Betterley
Dated: May 14, 2009		Laurence L. Betterley
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (the “Report”) by Cardiovascular Systems, Inc. (“Registrant”), I, David L. Martin, the Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

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

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

	By:	/s/ David L. Martin
Dated: May 14, 2009		David L. Martin
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 (the “Report”) by Cardiovascular Systems, Inc. (“Registrant”), I, Laurence L. Betterley, the Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

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

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

	By:	/s/ Laurence L. Betterley
Dated: May 14, 2009		Laurence L. Betterley
		Chief Financial Officer