Modification No. 3 to Loan and Security Agreement, dated as of June 30, 2012



 EXHIBIT 10.54 
 MODIFICATION NO. 3 TO LOAN AND SECURITY AGREEMENT 
 This Modification
No. 3 to Loan and Security Agreement (“Modification”) is entered into as of June 30, 2012 (the “Modification No. 3 Effective Date”), by and between Partners for Growth III, L.P., a Delaware limited
partnership with its principal place of business at 150 Pacific Avenue, San Francisco, California 94111 (“PFG”) and Cardiovascular Systems, Inc., Inc., a Delaware corporation with its principal place of business at 651 Campus Drive,
St. Paul, MN 55112 (“Borrower”). 
 WHEREAS, PFG and Borrower entered into that certain Loan and Security
Agreement dated as of April 14, 2010 (the “Loan Agreement”) and certain other Security Documents (as defined below), pursuant to which Borrower has borrowed and PFG has loaned pursuant to Convertible Promissory Notes up to
$4,000,000 at any one time outstanding; 
 WHEREAS, the parties entered into that certain Modification No. 1 to Loan and
Security Agreement dated as of August 23, 2011 (the “First Modification”); 
 WHEREAS, the parties entered
into that certain Modification No. 2 to Loan and Security Agreement dated as of December 27, 2011 (the “Second Modification” and, together with the First Modification, the “Prior Modifications”); 

WHEREAS, Borrower and the Senior Lender are amending the Senior Loan Documents and such amendment requires a facilitating amendment of
the Loan Agreement; 
 NOW THEREFORE, the parties hereby agree as follows: 

1. DESCRIPTION OF EXISTING INDEBTEDNESS: Borrower is indebted to PFG for Obligations pursuant to the Loan Documents. The Loan Agreement provides
for the issuance of up to $5,000,000 in Notes to PFG from time to time, of which an aggregate principal amount of $5,000,000 in Notes are issued and outstanding on the date of this Modification. Defined terms used but not otherwise defined herein
shall have the same meanings set forth in the Loan Agreement. 
 2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by
the Collateral, as described in the Loan Agreement and an Intellectual Property Security Agreement of even date therewith. The above-described security documents, together with all other documents securing repayment of the Obligations, shall be
referred to herein as the “Security Documents”. Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations are referred to as the “Existing Loan Documents”.

 3. MODIFICATION TO LOAN AGREEMENT. The Schedule is hereby amended as follows: 

3.1 Section 1(d). Section 1(d) which prior to the Modification No. 3 Effective Date read as follows
(italicized for ease of reference): 
  

	 “ (d) Amortization Trigger:  
	 If Borrower should fail to maintain a Liquidity Ratio (as defined below) of at least 1.5 : 1.0, measured monthly, PFG may elect to amortize all or (at PFG’s sole option) part of the
Loan, over a 24-month period from the date such PFG election is made (the “Amortization Right”), which Amortization Right must be exercised, if at all, not later than the twentieth
(20th)










	 	 
Business Day following the date PFG receives the Borrower report certifying compliance (or failure to comply) with the Liquidity Ratio and, if PFG so elects, Borrower shall thereafter commence to
make monthly payments of principal and interest on all then outstanding Notes in conformity with the amortization schedule notified at such time by PFG. PFG may suspend Borrower’s obligation to make amortized payments at any time upon notice in
its sole discretion. If PFG at any time exercises the Amortization Right, PFG’s obligation to make Loans to Borrower under Section 1(a) of this Schedule (other than the initial Note) and Borrower’s right to request borrowings under
this Agreement shall terminate. 


  

	 	“Liquidity Ratio” shall mean the ratio of (a) Borrower’s Cash and Cash Equivalents held with the Senior Lender and its
Affiliates plus Borrower’s Eligible Accounts under the Senior Debt Documents, divided by (b) the sum of the outstanding principal amount of Indebtedness to the Senior Lender (including any amounts used for Cash Management Services
as defined in the Senior Loan Documents), plus the face amount of any outstanding letters of credit under the Senior Debt Documents (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve, each as defined in the Senior
Loan Documents), plus the FX Reduction Amount (as defined in the Senior Loan Documents), plus all other indebtedness for borrowed money (other than the UBS Loans and the Subordinated Debt to PFG) or the deferred price of property or services (other
than unsecured indebtedness to trade creditors incurred in the ordinary course of business).” 

 shall be
replaced in its entirety with and read prospectively with effect from the Modification No. 3 Effective Date, as follows: 
  

	 “ (d) Amortization Trigger:  
	If Borrower should fail to maintain a Liquidity Ratio (as defined in Section 5(a) of this Schedule) of at least 1.5 : 1.0, measured monthly, PFG may elect to amortize all or (at PFG’s
sole option) part of the Loan, over a 24-month period from the date such PFG election is made (the “Amortization Right”), which Amortization Right must be exercised, if at all, not later than the twentieth (20th) Business Day
following the date PFG receives the Borrower report certifying compliance (or failure to comply) with the Liquidity Ratio (as defined in Section 5(a) of this Schedule) and, if PFG so elects, Borrower shall thereafter commence to make monthly
payments of principal and interest on all then outstanding Notes in conformity with the amortization schedule notified at such time by PFG. PFG may suspend Borrower’s obligation to make amortized payments at any time upon notice in its sole
discretion. If PFG at any time exercises the Amortization Right, PFG’s obligation to make Loans to Borrower under Section 1(a) of this Schedule (other than the initial Note) and Borrower’s right to request borrowings under this
Agreement shall terminate.” 

 3.2 Liquidity Ratio. The Liquidity Ratio covenant set forth in
Section 5(a) of the Schedule which prior to the Modification No. 3 Effective Date read as follows (italicized for ease of reference): 








	 “ (a) Liquidity Ratio: 
	Borrower shall maintain at all times a Liquidity Ratio of greater than 1.5 to 1.0. 

  

	 	“Liquidity Ratio” is the ratio of (a) Borrower’s unrestricted Cash and Cash Equivalents held with the Senior Lender plus Borrower’s Eligible
Accounts permitted as such under the Senior Loan Documents, divided by (b) the sum of the outstanding principal amount of all monetary obligations owed to the Senior Lender, plus all other indebtedness for borrowed money (other than the
Subordinated Debt to PFG and amounts owed under Bank Services Agreements) or the deferred price of property or services (other than unsecured indebtedness to trade creditors incurred in the ordinary course of business). Capitalized terms used in the
definition of Liquidity Ratio and not defined in this Agreement have their meanings as set forth in the Senior Loan Documents.” 

 shall be replaced in its entirety with and read prospectively with effect from the Modification No. 3 Effective Date, as follows: 

 

	 “ (a) Liquidity Ratio: 
	Borrower shall maintain at all times a Liquidity Ratio of greater than 1.25 to 1.0. 

  

	 	“Liquidity Ratio” is the ratio of (a) Borrower’s unrestricted Cash and Cash Equivalents held with the Senior Lender (and its affiliates) plus
Borrower’s Net Accounts Receivable, divided by (b) the sum of outstanding Credit Extensions under the Senior Loan Documents, plus all sums owed by Borrower in connection with Bank Services. Capitalized terms used in the foregoing
definition of Liquidity Ratio and not defined in this Agreement have their meanings as set forth in the Senior Loan Documents as in effect on the Modification No. 3 Effective Date, without regard to waiver of any provision thereof by the Senior
Lender. 

  

	 	For purposes of the foregoing definition of Liquidity Ratio, the term “Net Accounts Receivable” means the accounts receivable of Borrower recorded in
accordance with GAAP on the balance sheet of Borrower as of the end of the most recent monthly reporting period, net of any reserves for doubtful accounts, as reported to the Senior Lender.” 


3.3 EBITDA; Fixed Charge Coverage Ratio. The EBITDA and Fixed Charge Coverage Ratio covenants set forth in Section 5(b) of the Schedule
which prior to the Modification No. 3 Effective Date read as follows (italicized for ease of reference): 
  

	 “(b) EBITDA: 
	 EBITDA, as of the last day of each month, for the three month period ending as of last day of such month, of not less than Negative Two Million, Five Hundred Thousand Dollars
(-$2,500,000); provided that, from and after the date Borrower has maintained a Fixed Charge Coverage Ratio in excess of 










	 	 
1.5 to 1.00 for two consecutive fiscal quarters, thereafter Borrower shall not be required to meet the foregoing EBITDA covenant and, thereafter, Borrower shall, instead, be required to maintain
a Fixed Charge Coverage Ratio in excess of 1.25 to 1.00 at all times. 


  

	 	“EBITDA” shall mean (a) Net Income, minus any non-cash income, plus (b) Interest Expense, plus (c) to the extent
deducted in the calculation of Net Income, depreciation expense and amortization expense, plus (d) income tax expense, plus (e) stock-based compensation expense (to the extent not payable in cash), plus (f) non-cash expenses incurred
from applying GAAP to the terms of this Agreement and related Warrant and to the Senior Debt and related warrant issued under the Senior Loan Documents, plus (g) any other non-cash charges.” 


shall be replaced in its entirety with and read prospectively with effect from June 30, 2012, as follows: 

 

	 “(b) EBITDA; Fixed Charge Coverage Ratio: 
	Borrower shall maintain EBITDA as of the last day of each month, for the three month period ending as of the last day of such month, of not less than the amount corresponding to the period
containing such month set forth in the following chart (parentheses surrounding amounts in the chart designate negative amounts); provided that, from and after the date Borrower has maintained a Fixed Charge Coverage Ratio in excess of 1.50 to 1.00
for two consecutive fiscal quarters, thereafter Borrower shall not be required to meet the foregoing EBITDA covenant, and thereafter Borrower shall, instead, be required to maintain a Fixed Charge Coverage Ratio in excess of 1.25 to 1.00 at all
times.” 

  

					
	 Period
	  	Minimum
EBITDA	 
	 June 1, 2012 – December 31, 2012
	  	($	5,000,000	) 
	 January 1, 2013 – March 31, 2013
	  	($	4,250,000	) 
	 April 1, 2013 – December 31, 2013
	  	($	3,500,000	) 
	 January 1, 2014 – March 31, 2014
	  	($	2,750,000	) 
	 April 1, 2014 – June 30, 2014
	  	($	2,000,000	) 
	 July 1, 2014 – September 30, 2014
	  	($	1,250,000	) 
	 October 1, 2014 – December 31, 2014
	  	($	500,000	) 

  

	 	“EBITDA” shall mean (a) Net Income, minus any non-cash income, plus (b) Interest Expense, plus (c) to the extent deducted in the
calculation of Net Income, depreciation expense and amortization expense, plus (d) income tax expense, plus (e) stock-based compensation expense (to the extent not payable in cash), plus (f) non-cash expenses incurred from applying
GAAP to the terms of this Agreement and related Warrant and to the Senior Debt and related warrant issued under the Senior Loan Documents, plus (g) any other non-cash charges.” 








 4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect
the changes described above. 
 5. PAYMENT OF LOAN FEE AND EXPENSES. Borrower shall pay to PFG all of PFG’s reasonable and documented
out-of-pocket costs and expenses in connection with this Modification. 
 6. BORROWERS’ REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants that: 
 (a) immediately upon giving effect to this Modification (i) except for the matters set
forth in Exhibit A and in the capitalization table appended hereto as Exhibit B, the representations and warranties contained in the Loan Agreement are true, accurate and complete in all material respects as of the date hereof (except to the extent
such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (ii) no Event of Default has occurred and is continuing; 

(b) Borrower has the corporate power and authority to execute and deliver this Amendment and to perform its obligations under the
Existing Loan Documents, as amended by this Modification; 
 (c) the certificate of incorporation, bylaws and other
organizational documents of Borrower delivered to PFG remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect; 

(d) the execution and delivery by Borrower of this Modification and the performance by Borrower of its obligations under the Existing
Loan Documents, as amended by this Modification, have been duly authorized by all necessary corporate action on the part of Borrower; 
 (e) this Modification has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against it in accordance with the terms of this Modification, 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; 

(f) as of the date hereof, Borrower has no defenses against its obligation to repay the Obligations and it has no claims of any kind
against PFG. Borrower acknowledges that PFG has acted in good faith and has conducted in a commercially reasonable manner its relationship with such Borrower in connection with this Modification and in connection with the Existing Loan Documents;

 (g) the Security Documents relating to Intellectual Property either disclose an accurate, complete and current listing of all
Collateral that consists of Intellectual Property or Borrower has included revised and updated Intellectual Property schedules as part of an update to the Representations required in Section 8 of this Modification; and 







 (h) as of the date hereof, except for the matters set forth in Exhibits A and B hereto,
Borrower ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in the Representations dated as of August 8, 2011, and as of the date Borrower makes a request to issue a Note on or after the date hereof,
Borrower shall ratify, confirm and reaffirm, all and singular, the terms and disclosures contained in the Representations dated as of August 8, 2011 as modified by Exhibits A and B hereto, and shall acknowledge, confirm and agree that the
disclosures and information Borrower provided to PFG in Part A—Sections 1-6 (except as further noted in this sentence) and Part B—Sections 11, 12 and 13 of the Representations shall not have changed as of the date of such borrowing
request, and all other Sections of the Representations, including Part A Section 3(d),(e) (g) and (i) shall have not changed as of such borrowing request in any material respect or, if the Representations require additional disclosure
in order to be true, accurate and complete as of the date hereof, Borrower shall have provided the update to the Representations required in Section 8 hereof. 
 Borrower understands and acknowledges that PFG is entering into this Modification in reliance upon, and in partial consideration for, the above representations and warranties, and agrees that such
reliance is reasonable and appropriate. 
 7. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the existing
Obligations, PFG is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Modification, the terms of the Existing Loan Documents remain
unchanged and in full force and effect. PFG’s agreement to modifications to the existing Obligations in no way shall obligate PFG to make any future consents, waivers or modifications to the Obligations. Nothing in this Modification shall
constitute a satisfaction of the Obligations or a waiver of any default under the Existing Loan Documents. It is the intention of PFG and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is
expressly released by PFG in writing. Unless expressly released herein, no maker, endorser, or guarantor will be released by virtue of this Modification. The terms of this paragraph apply not only to this Modification, but also to all subsequent
loan modification agreements. 
 8. CONDITIONS. The effectiveness of this Modification is conditioned upon each of: 

(a) Execution and Delivery. Borrower shall have duly executed and delivered to PFG a counterpart of this Modification and a true
and correct copy of the Senior Loan Documents, as amended to the Modification No. 3 Effective Date. 
 (b) Payment of PFG
Expenses. Borrower shall have paid upon demand all PFG expenses (including all reasonable attorneys’ fees and expenses) incurred in connection with this Modification in accordance with Section 5 hereof. 

(c) Updates to Borrower Information. On or prior to the date of any request for borrowing on or after the date hereof, Borrower
shall have certified its compliance with Section 6(h), or, if required to render Part A—Sections 1-6 (except Section 3(d),(e) (g) and (i)) and Part B—Section 11 of the Representations identified in Section 7(i) hereof
true, correct, accurate and complete as of the date hereof, and all other Sections of the Representations, including Part A Section 3(d),(e) (g) and (i) true, correct, accurate and complete in all material respects as of the date of
such borrowing request, shall have delivered to PFG true and current information and versions of such documents. 
 (d) No
Default under Senior Debt Documents. There shall be no default under the Senior Debt Documents that has not been cured or waived. 







 (e) SVB Subordination. PFG and the Senior Lender shall have entered into an amendment
to or ratification of their existing Subordination Agreement reflecting the amendment to the Senor Loan Documents. 
 9. FURTHER
ASSURANCES. Borrower agrees to execute such further documents and instruments and to take such further actions as PFG may request in its good faith business judgment to carry out the purposes and intent of this Modification. 

10. INTEGRATION; CONSTRUCTION. The Loan Agreement, the Prior Modifications, this Modification and any documents executed in connection therewith
and herewith contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, offers and negotiations, oral or written, with respect thereto and no extrinsic evidence
whatsoever may be introduced in any judicial or arbitration proceeding, if any, involving this Modification; provided, however, that any financing statements or other agreements or instruments filed by PFG with respect to Borrower shall remain in
full force and effect. The quotation marks around modified clauses set forth herein and any differing font styles in which such clauses are presented herein are for ease of reading only and shall be ignored for purposes of construing and
interpreting this Modification. This Modification is subject to the General Provisions of Section 8 of the Loan Agreement. 
 11.
GOVERNING LAW; VENUE. THIS MODIFICATION SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. Borrower and PFG submit to the exclusive jurisdiction of the State and Federal courts in
San Francisco County, California, in connection with any proceeding or dispute arising in connection herewith. 
 This
Modification is executed as of the date first written above. 
 [Signature Page Follows] 








									
	Borrower:	 		 	PFG:
			
	    Cardiovascular Systems, Inc.	 		 	PARTNERS FOR GROWTH III, L.P.
					
	    By	 	/s/ Laurence L. Betterley	 		 	By	 	/s/ Jason Georgatos
		 	Chief Financial Officer	 		 	Name:	 	Jason Georgatos
	  
     By
	 	  
 /s/ James E.
Flaherty
	 		 	Title:	 	 Manager, Partners for Growth III, LLC,
 Its General Partner

		 	Secretary or Ass’t Secretary	 		 	 

 Signature Page Modification No. 3 to Loan and Security Agreement 







 EXHIBIT A 
 EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES 
 A. Litigation 

1. Michael Kallok. On July 18, 2011, the Company received a demand letter from legal counsel for Michael Kallok, a former officer, director
and consultant to the Company, claiming that Mr. Kallok is entitled to 42,594 shares of the Company’s common stock or, alternatively, the value of those shares as of July 15, 2011, which was $610,798. Mr. Kallok asserts that the
Company improperly deemed such shares forfeited under a restricted stock agreement with Mr. Kallok. The Company disagrees with Mr. Kallok’s claim and the parties are moving forward with arbitration to resolve this matter. 

2. Litigation in Switzerland. In July 2009, the Company commenced a lawsuit in Switzerland against Dr. Leonid Shturman (“Dr.
Shturman”), primarily to halt the grant proceedings before the European Patent Office. The Company asserted that it was the owner of the counterweight invention included in the European patent application No. 06 745 024.7 filed by
Dr. Shturman. On April 15, 2011, Dr. Shturman’s widow, Leila Nadirashvili, filed a writ to dismiss the Company’s lawsuit based on res judicata and collateral estoppel, alleging that the claims in Switzerland are identical to
a previously-dismissed lawsuit in Minnesota. The Company successfully defeated the motion. On June 21, 2012 the parties reached a settlement whereby Ms. Nadirashvili assigned the patent application to the Company. 

3. Litigation in the United States District Court in Minnesota. On August 24, 2011, Leila Nadirashvili was substituted as plaintiff in a
lawsuit in the United States District Court in Minnesota. The lawsuit seeks to enjoin the litigation in Switzerland discussed above. Ms. Nadirashvili declined the Company’s offer of settlement. In December 2011, the Court dismissed the
lawsuit on the grounds that the Court lacked jurisdiction. 
 4. Litigation in the United States District Court in Minnesota. On
August 24, 2011, Leila Nadirashvili commenced a lawsuit against the Company in the United States District Court in Minnesota. In the lawsuit, Ms. Nadirashvili is asserting declaration of patent ownership, slander of title, tortious
interference with prospective business relations, and unfair competition in violation of Minnesota Statute § 324D.44. In December 2011, the Court dismissed the lawsuit on the grounds that the Court lacked jurisdiction. 

5. Litigation in the United States District Court in Minnesota. In February 2012, Ms. Nadirashvili re-filed her lawsuit against the Company
in Hennepin County District Court. The Company removed the lawsuit to the United States District Court in Minnesota. In the lawsuit, Ms. Nadirashvili seeks a declaration that she is the sole owner of six United States patents that have issued
naming Dr. Leonid Shturman as the sole inventor. In addition, Ms. Nadirashvili has asserted claims for slander of title, tortious interference with prospective business relations, and unfair competition. Ms. Nadirashvili seeks an
unspecified sum of damages. The Company asserted counterclaims seeking a declaration that the patents are invalid, imposition of a constructive trust, and unjust enrichment damages. A settlement conference has been scheduled to occur on
August 14, 2012. 
 B. Officers and Directors 
 1. Scott Kraus has been replaced as Vice President of Sales by Jim Briedenstein. 
 2. Paul
Koehn’s title has been changed from Vice President of Manufacturing to Vice President of Quality and Manufacturing. 
 3. Dr. Geoffrey
Hartzler passed away on March 10, 2012 and so no longer serves as a director. 







 EXHIBIT B 
 Capitalization Table 6/20/2012 
  

									
	 	  	Total Shares	 	  	%	 
	 Common Stock
	  	 	19,977,693	  	  	 	80.5	% 
			
	 Options Outstanding
	  	 	2,398,695	  	  	 	9.7	% 
	 Warrants Outstanding
	  	 	2,438,784	  	  	 	9.8	% 
		  	  
	  
	 	  	  
	  
	 
	 Total Options and Warrants
	  	 	4,837,479	  	  	 	19.5	% 
		  	  
	  
	 	  	  
	  
	 
	 Total All Securities
	  	 	24,815,172	  	  	 	100.0	% 
		  	  
	  
	 	  	  
	  
	 

 There are 604,126 remaining shares available for grant under the 2007 Equity Plan. 

There are 90,709 available shares for purchase through the Employer Stock purchase plan. 
 The Company has $5.0MM in outstanding loans under a convertible debt facility with Partners for Growth III, L.P. (PFG). At any time prior to the maturity date, PFG may at its option convert any of the
outstanding loans into shares of the Company’s common stock at the applicable conversion price. In aggregate, the outstanding loans can be converted into 363,794 shares of the Company’s common stock. 

DETAIL 
  

																	
	 	  	Loan Bal	 	  	Con price	 	  	Shares	 	  	 	 
	 $3.5M Note (conversion price $13.64 per share)
	  	 	3,500,000	  	  	$	13.64	  	  	 	256,598	  	  	$	3,500,000.00	  
					
	 $0.5M Note ( conversion price $15.30 per share)
	  	 	500,000	  	  	$	15.30	  	  	 	32,680	  	  	$	500,000.00	  
					
	 $1.0M Note ( conversion price $13.42 per share)
	  	 	1,000,000	  	  	$	13.42	  	  	 	74,516	  	  	$	1,000,000.00	  
		  				  				  	  
	  
	 	  	  
	  
	 
		  	 	5,000,000	  	  				  	 	363,794	  	  	$	5,000,000.00	  
	 Weighted Avg
	  				  				  	$	13.74