Exhibit 10.01

Issuer Call Option Transaction

March 6, 2007

To:                    DexCom, Inc.

5555 Oberlin Drive

San Diego, CA 92121

Attention: Steven J. Kemper, Chief Financial Officer

From:            Capital Ventures International

By: Heights Capital Management, Inc., Its Authorized Agent

101 California Street, Suite 3250

San Francisco, CA 94111

Ladies and Gentlemen:

The purpose of this letter agreement (this “Confirmation”) is to confirm the
terms and conditions of the Transaction entered into between Party A and Party B
on the Trade Date specified below (the “Transaction”). This Confirmation
constitutes a “Confirmation” as referred to in the Agreement specified below.

1.               THIS CONFIRMATION IS SUBJECT TO, AND INCORPORATES, THE
DEFINITIONS AND PROVISIONS OF THE 2000 ISDA DEFINITIONS (INCLUDING THE ANNEX
THERETO) (THE “2000 DEFINITIONS”) AND THE DEFINITIONS AND PROVISIONS OF THE 2002
ISDA EQUITY DERIVATIVES DEFINITIONS (THE “EQUITY DEFINITIONS”, AND TOGETHER WITH
THE 2000 DEFINITIONS, THE “DEFINITIONS”), IN EACH CASE AS PUBLISHED BY THE
INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC. (“ISDA”).  IN THE EVENT OF
ANY INCONSISTENCY BETWEEN THE 2000 DEFINITIONS AND THE EQUITY DEFINITIONS, THE
EQUITY DEFINITIONS WILL GOVERN.

This Confirmation evidences a complete and binding agreement between Party A and
Party B as to the terms of the Transaction to which this Confirmation relates. 
The parties may agree to negotiate an agreement in the form of the ISDA Form. 
Until any such time, this Confirmation, together with all other documents
referring to the ISDA Form (each a “Confirmation”) confirming Transactions
entered into between us (notwithstanding anything to the contrary in a
Confirmation), shall supplement, form a part of, and be subject to an agreement
in the form of the ISDA Form as if we had executed an agreement in such form
(but without any election in the Schedule) on the Trade Date of the first such
Transaction between us.  This Confirmation shall be subject to an agreement (the
“Agreement”) in the form of the 2002 ISDA Master Agreement (the “ISDA Form”) as
if Party A and Party B had executed an agreement in such form (without any
Schedule but with the elections set forth in this Confirmation).  For the
avoidance of doubt, the Transaction shall be the only transaction under the
Agreement.

All provisions contained in, or incorporated by reference to, the Agreement will
govern this Confirmation except as expressly modified herein.  In the event of
any inconsistency between this Confirmation and either the Definitions or the
Agreement, this Confirmation shall govern.

In this Confirmation, “Party A” means Capital Ventures International, and
“Party B” means DexCom, Inc.

2.               THE GENERAL TERMS RELATING TO THE TRANSACTION ARE AS FOLLOWS:

 

Option Style:

European

 

 

Option Seller:

Party A

 

 

Option Buyer:

Party B

 

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Option Multiple Exercise:

Not Applicable

 

 

Strike Price:

$7.80

 

 

Cap Price:

$9.00

 

 

Trade Date:

March 6, 2007

 

 

Effective Date:

March 9, 2007

 

 

Option Type:

Call

 

 

Issuer:

DexCom, Inc.

 

 

Shares:

The shares of common stock of the Issuer, par value $0.001 per Share (Ticker
Symbol: DXCM)

 

 

Number of Options:

1,923,076

 

 

Option Entitlement:

One Share per Option

 

 

Market Disruption Event:

Section 6.3(a) of the Equity Definitions is hereby amended by replacing
clause (ii) thereof in its entirety with the following: “(ii) an Exchange
Disruption, or” and inserting immediately following clause (iii) thereof the
following: “; in each case that the Calculation Agent determines is material.”

 

 

Relevant Price:

VWAP Price

 

 

VWAP Price:

The “Volume Weighted Average Price” per Share on such day, as displayed on
Bloomberg Page “DXM.UQ<equity>AQR” (or any successor thereto) for the Issuer
with respect to the period from 9:30 a.m. to 4:00 p.m. (New York City time) on
such day, as determined by the Calculation Agent. If no price at such time is
available, or there is a Market Disruption Event on such Expiration Date, the
Calculation Agent shall determine the VWAP Price in a commercially reasonable
manner.

 

 

Premium:

$893,638.

 

 

Premium Payment Date:

March 9, 2007

 

 

Exchange:

The Nasdaq Global market

 

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Related Exchange:

Any exchange on which options or futures on the relevant Shares are traded.

 

 

Clearance System:

DTC

 

 

Calculation Agent:

Party A. Whenever the Calculation Agent acts or makes a determination, it will
do so in good faith and in a commercially reasonable manner consistent with its
obligations under the Equity Definitions.

 

 

Procedure for Exercise:

 

 

 

Expiration Time:

The close of trading on the Exchange

 

 

Expiration Date:

Each of the thirty (30) consecutive Scheduled Trading Days occurring immediately
prior to September 6, 2007. If any Expiration Date shall not be an Exchange
Business Day, such Expiration Date shall be postponed to the immediately
succeeding Exchange Business Day and the corresponding Expiration Date for each
subsequent Daily Number of Options shall be moved back an equal number of
Exchange Business Days reflecting such postponement.

 

 

Daily Number of Options:

One-thirtieth of the Number of Options.

 

 

Automatic Exercise:

Applicable

 

 

Settlement Terms:

 

 

 

Settlement Method Election:

Applicable; provided (i) that any such election shall apply to all Exercise
Dates (in accordance with the terms below) and may be for Cash Settlement or Net
Share Settlement, (ii) that in order to elect Net Share Settlement, Party B must
provide written notice to Party A at least ten (10) Exchange Business Days prior
to the first Exercise Date, and (iii) absent such an election, the Transaction
shall be settled on a Cash Settlement basis.

 

 

Settlement Date:

For all Daily Number Options exercised or deemed exercised on each Expiration
Date, the third Exchange Business Day following the final Expiration Date.

 

 

Cash Settlement:

If Cash Settlement applies, then, notwithstanding any contrary terms of Article
9 of the Equity Definitions, for any Daily Number of Options exercised or deemed

 

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exercised on any Exercise Date, Party A shall pay, on the Settlement Date, the
Cash Settlement Amount to Party B. The Cash Settlement Amount shall be
determined as follows:

 

 

(i)

If the Settlement Price is less than or equal to the Strike Price, then the Cash
Settlement Amount shall equal zero.

 

 

 

 

(ii)

If the Settlement Price is greater than the Strike Price but less than the Cap
Price, then the Cash Settlement Amount shall equal the product of (i) the Daily
Number of Options, (ii) the Option Entitlement and (iii) the Settlement Price
minus the Strike Price.

 

 

 

If the Settlement Price is greater than or equal to the Cap Price, then the Cash
Settlement Amount shall equal the product of (i) the Daily Number of Options,
(ii) the Option Entitlement and (iii) the Cap Price minus the Strike Price. For
the avoidance of any doubt, Party B shall not owe to Party A any cash amount as
a result of Cash Settlement.

 

 

Net Share Settlement:

If Net Share Settlement applies, then Party A shall deliver a number of whole
Shares equal to (x) the Cash Settlement Amount divided by (y) the stock price of
the Shares as determined by Party A (such quotient to be rounded down to the
nearest whole deliverable share) (the “Number of Whole Shares”). Party A also
shall pay an additional cash amount equal to the cash value of any fractional
Shares remaining after rounding down to the Number of Whole Shares. The delivery
of the Number of Whole Shares and the cash value of any fractional Shares shall
be made on the Settlement Date. For the avoidance of doubt, Party B shall not
owe to Party A any Shares as a result of any Net Share Settlement of the
transaction.

 

 

Cash Settlement Payment Date:

For all Daily Number of Options exercised or deemed exercised on each Exercise
Date, the third Exchange Business Day following the final Expiration Date.

 

 

Settlement Currency:

USD

 

 

Settlement Price:

For any Daily Number of Options, the VWAP Price of the Shares on the relevant
Expiration Date determined by Calculation Agent at the Expiration Time on the
relevant Expiration Date for such Daily Number of Options. If no

 

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price at such time is available, or there is a Market Disruption Event on such
Expiration Date, the Calculation Agent shall determine the Settlement Price in a
commercially reasonable manner.

 

 

Failure to Deliver:

Applicable

 

 

Other Applicable Provisions:

To the extent Party A is obligated to deliver Shares hereunder, the provisions
of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 (except that the Representation and
Agreement contained in Section 9.11 of the Equity Definitions shall be modified
by excluding any representations therein relating to restrictions, obligations,
limitations or requirements under applicable securities laws as a result of the
fact that Party B is the issuer of the Shares) and 9.12 of the Equity
Definitions will be applicable as if “Physical Settlement” applied to the
Transaction.

 

 

Restricted Certificated Shares:

Notwithstanding anything to the contrary in the Equity Definitions, Party A may
deliver, in whole or in part, any Shares required to be delivered to Party B
hereunder in the form of restricted securities under the Securities Act (as
defined below) and/or in certificated form in lieu of delivery through the
Clearance System. With respect to any such certificated Shares, the
Representation and Agreement contained in Section 9.11 of the Equity Definitions
shall be modified by deleting the remainder of the provision after the word
“encumbrance” in the fourth line thereof.

 

 

Adjustments:

 

 

 

Method of Adjustment:

Calculation Agent Adjustment

 

 

Extraordinary Events:

 

 

 

Consequences of Merger Events and Tender Offers:

 

 

 

(a) Share-for-Share:

Modified Calculation Agent Adjustment

 

 

(b) Share-for-Other:

Cancellation and Payment (Calculation Agent
Determination)

 

 

(c) Share-for-Combined:

Component Adjustment; provided that Cancellation and Payment (Calculation Agent
Determination) shall apply in

 

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the event that the Calculation Agent determines that no adjustments that it
could make with respect to the Transaction to account for the Merger Event or
Tender Offer, as applicable, would produce a commercially reasonable result.

 

 

Tender Offer:

Applicable

 

 

Delisting, Nationalization or Insolvency:

Cancellation and Payment (Calculation Agent
Determination)

 

Additional Disruption Events:

(a) Change in Law:

Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is
hereby amended by (i) replacing the phrase “the interpretation” in the third
line thereof with the phrase “or announcement or statement of the formal or
informal interpretation” and (ii) immediately following the word “Transaction”
in clause (X) thereof, adding the phrase “in the manner contemplated by the
Hedging Party on the Trade Date”.

 

 

(b) Failure to Deliver:

Applicable

 

 

(c) Insolvency Filing:

Applicable

 

 

(d) Hedging Disruption:

Applicable

 

 

(e) Increased Cost of Hedging:

Applicable

 

 

(f) Loss of Stock Borrower:

Applicable

 

 

Maximum Stock Loan Rate:

2%

 

 

Hedging Party:

For all applicable Additional Disruption Events, Party A

 

 

Determining Party:

For all applicable Additional Disruption Events, Party A

 

 

Non-Reliance:

Applicable

 

 

Agreements and Acknowledgments Regarding Hedging Activities:

Applicable

 

 

Additional Acknowledgments:

Applicable

 

3.               IF ANY OF THE TRANSACTIONS CONTEMPLATED BY THE PURCHASE
AGREEMENT AMONG PARTY B AND PIPER JAFFRAY & CO., DATED AS OF MARCH 6, 2007 (THE
“PURCHASE AGREEMENT”) RELATING TO THE PURCHASE OF 4.75% CONVERTIBLE SENIOR NOTES
DUE

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2027 (THE “NOTES”) OF PARTY B BY PIPER JAFFRAY & CO. SHALL FAIL TO CLOSE AS A
RESULT OF A BREACH BY PARTY B OF ITS OBLIGATIONS THEREUNDER, IN WHICH CASE THE
ENTIRETY OF THIS TRANSACTION SHALL TERMINATE AUTOMATICALLY AND PARTY B SHALL BE
THE SOLE AFFECTED PARTY AND THIS TRANSACTION SHALL BE THE SOLE AFFECTED
TRANSACTION. IF THE TRANSACTIONS CONTEMPLATED BY THE PURCHASE AGREEMENT SHALL
FAIL TO CLOSE FOR ANY REASON ON OR BEFORE THE EFFECTIVE DATE OTHER THAN THOSE
SET FORTH IN THE PREVIOUS SENTENCE, THEN THE ENTIRETY OF THIS TRANSACTION SHALL
TERMINATE AUTOMATICALLY AND NO PAYMENTS SHALL BE REQUIRED HEREUNDER.  IF PARTY A
DOES NOT PURCHASE AT LEAST $25.0 MILLION FACE AMOUNT OF NOTES ON OR BEFORE THE
EFFECTIVE DATE, THEN, AT THE OPTION OF PARTY A, THE ENTIRETY OF THIS TRANSACTION
SHALL TERMINATE AND NO PAYMENTS SHALL BE REQUIRED HEREUNDER.  FOR PURPOSES OF
DETERMINING LOSS IN RELATION TO A TERMINATION UNDER THE FIRST SENTENCE OF THIS
SECTION 3, IT SHALL BE ASSUMED THAT ALL CONDITIONS TO THE EXERCISE OF THESE
OPTIONS HAVE OCCURRED.

4.               CALCULATIONS AND PAYMENT ON EARLY TERMINATION AND ON CERTAIN
EXTRAORDINARY EVENTS.  IF PARTY A SHALL OWE PARTY B ANY AMOUNT PURSUANT TO
SECTIONS 12.6, 12.7 OR 12.9 OF THE EQUITY DEFINITIONS (EXCEPT IN THE EVENT OF AN
INSOLVENCY OR A NATIONALIZATION, IN EACH CASE, IN WHICH THE CONSIDERATION OR
PROCEEDS TO BE PAID TO HOLDERS OF SHARES CONSISTS SOLELY OF CASH) OR PURSUANT TO
SECTION 6(D)(II) OF THE AGREEMENT (EXCEPT IN THE EVENT OF AN EVENT OF DEFAULT IN
WHICH PARTY B IS THE DEFAULTING PARTY OR A TERMINATION EVENT IN WHICH PARTY B IS
THE AFFECTED PARTY, THAT RESULTED FROM AN EVENT OR EVENTS WITHIN PARTY B’S
CONTROL) (A “PAYMENT OBLIGATION”), PARTY B SHALL HAVE THE RIGHT, IN ITS SOLE
DISCRETION, TO REQUIRE PARTY A TO SATISFY ANY SUCH PAYMENT OBLIGATION BY THE
SHARE TERMINATION ALTERNATIVE (AS DEFINED BELOW) BY GIVING IRREVOCABLE
TELEPHONIC NOTICE TO PARTY A, CONFIRMED IN WRITING WITHIN ONE SCHEDULED TRADING
DAY, BETWEEN THE HOURS OF 9:00 A.M. AND 12:00 P.M. NEW YORK CITY TIME ON THE
RELEVANT ANNOUNCEMENT DATE OR EARLY TERMINATION DATE, AS APPLICABLE (“NOTICE OF
SHARE TERMINATION”).  UPON SUCH NOTICE OF SHARE TERMINATION, THE FOLLOWING
PROVISIONS SHALL APPLY ON THE SCHEDULED TRADING DAY IMMEDIATELY FOLLOWING THE
RELEVANT ANNOUNCEMENT DATE OR EARLY TERMINATION DATE, AS APPLICABLE:

Share Termination Alternative:

Applicable and means that Party A shall deliver to Party B the Share Termination
Delivery Property on the date on which the Payment Obligation would otherwise be
due pursuant to Section 12.7 or 12.9 of the Equity Definitions or Section
6(d)(ii) of the Agreement, as applicable (the “Share Termination Payment Date”),
in satisfaction of the Payment Obligation.

 

 

Share Termination Delivery Property:

A number of Share Termination Delivery Units, as calculated by the Calculation
Agent, equal to the Payment Obligation divided by the Share Termination Unit
Price. The Calculation Agent shall adjust the Share Termination Delivery
Property by replacing any fractional portion of a security therein with an
amount of cash equal to the value of such fractional security based on the
values used to calculate the Share Termination Unit Price.

 

 

Share Termination Unit Price:

The value of property contained in one Share Termination Delivery Unit on the
date such Share Termination Delivery Units are to be delivered as Share
Termination Delivery Property, as determined by the Calculation Agent in its
discretion by commercially reasonable means and notified by the Calculation
Agent to Party A at the time of notification of the Payment Obligation.

 

 

Share Termination Delivery Unit:

In the case of a Termination Event, Event of Default or Delisting, one Share or,
in the case of an Insolvency or Nationalization, a unit consisting of the number
or amount of each type of property received by a holder of one Share (without
consideration of any requirement to pay cash or other consideration in lieu of
fractional amounts of any securities) in such Insolvency or Nationalization. If
such Insolvency or Nationalization involves a choice of consideration to be
received by

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holders, such holder shall be deemed to have elected to receive the maximum
possible amount of cash.

Failure to Deliver:

Applicable

 

Other applicable provisions:If Share Termination Alternative is applicable, the
provisions of Sections 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions
will be applicable as if “Physical Settlement” were applicable, except that all
references to “Shares” shall be read as references to “Share Termination
Delivery Units”; provided that the Representation and Agreement contained in
Section 9.11 of the Equity Definitions shall be modified by excluding any
representations therein relating to restrictions, obligations, limitations or
requirements under applicable securities laws as a result of the fact that Buyer
is the issuer of any Share Termination Delivery Units (or any part thereof).

 

5.               ADDITIONAL AGREEMENTS, REPRESENTATIONS AND COVENANTS:

(A)          PARTY B HEREBY REPRESENTS AND WARRANTS TO PARTY A, ON EACH DAY FROM
THE TRADE DATE TO AND INCLUDING THE BUSINESS DAY FOLLOWING THE DATE ON WHICH
PARTY A IS ABLE TO INITIALLY COMPLETE A HEDGE OF ITS POSITION CREATED BY THIS
TRANSACTION, THAT PARTY B HAS PUBLICLY DISCLOSED ALL MATERIAL INFORMATION
NECESSARY FOR PARTY B TO BE ABLE TO PURCHASE OR SELL SHARES IN COMPLIANCE WITH
APPLICABLE FEDERAL SECURITIES LAWS AND THAT IT HAS PUBLICLY DISCLOSED ALL
MATERIAL INFORMATION WITH RESPECT TO ITS CONDITION (FINANCIAL OR OTHERWISE).

(B)         IF PARTY B WOULD BE OBLIGATED TO RECEIVE CASH FROM PARTY A PURSUANT
TO THE TERMS OF THIS AGREEMENT FOR ANY REASON WITHOUT HAVING HAD THE RIGHT TO
ELECT TO RECEIVE SHARES IN SATISFACTION OF SUCH PAYMENT OBLIGATION, THEN PARTY B
MAY ELECT THAT PARTY A DELIVER TO PARTY B A NUMBER OF SHARES HAVING A CASH VALUE
EQUAL TO THE AMOUNT OF SUCH PAYMENT OBLIGATION (SUCH NUMBER OF SHARES TO BE
DELIVERED TO BE DETERMINED BY THE CALCULATION AGENT ACTING IN A COMMERCIALLY
REASONABLE MANNER TO DETERMINE THE NUMBER OF SHARES THAT COULD BE PURCHASED OVER
A REASONABLE PERIOD OF TIME WITH THE CASH EQUIVALENT OF SUCH PAYMENT
OBLIGATION). SETTLEMENT RELATING TO ANY DELIVERY OF SHARES PURSUANT TO THIS
PARAGRAPH (B) SHALL OCCUR WITHIN A REASONABLE PERIOD OF TIME.

(C)          PARTY B SHALL DELIVER TO THE PARTY A AN OPINION OR OPINIONS OF
COUNSEL WITH RESPECT TO THE MATTERS SET FORTH ON ANNEX 1 HERETO ON OR BEFORE THE
EFFECTIVE DATE.

(D)         IN ADDITION TO THE REPRESENTATIONS AND WARRANTIES IN THE AGREEMENT
AND THOSE CONTAINED ELSEWHERE HEREIN, PARTY B REPRESENTS AND WARRANTS TO AND FOR
THE BENEFIT OF, AND AGREES WITH, PARTY A AS FOLLOWS:

(i)             (A) On the Effective Date, the Shares or securities that are
convertible into, or exchangeable or exercisable for Shares, are not, and shall
not be, subject to a “restricted period,” as such term is defined in
Regulation M (“Regulation M”) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and (B) Party B shall not engage in any
“distribution,” as such term is defined in Regulation M, other than a
distribution meeting the requirements of the exceptions set forth in sections
101(b)(10) and 102(b)(7) of Regulation M, until the second Exchange Business Day
immediately following the Trade Date.

(ii)            Party B is not entering into this Confirmation to create actual
or apparent trading activity in the Shares (or any security convertible into or
exchangeable for Shares) or to manipulate the price of the Shares (or any
security convertible into or exchangeable for Shares) or otherwise in violation
of the Exchange Act.

(iii)           Without limiting the generality of Section 3(a)(iii) of the
Agreement, the Transaction will not violate Rule 13e-1 or Rule 13e-4 under the
Exchange Act.

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(iv)           Prior to the Effective Date, Party B shall deliver to Party A a
resolution of Party B’s board of directors authorizing the Transaction and such
other certificate or certificates as Party A shall reasonably request.

(v)            Party B is not, and after giving effect to the transactions
contemplated hereby will not be, required to register as an “investment company”
as such term is defined in the Investment Company Act of 1940, as amended.

(vi)           On the Trade Date (A) the assets of Party B at their fair
valuation exceed the liabilities of Party B, including contingent liabilities,
(B) the capital of Party B is adequate to conduct the business of Party B and
(C) Party B has the ability to pay its debts and obligations as such debts
mature and does not intend to, or does not believe that it will, incur debt
beyond its ability to pay as such debts mature.

(vii)          Party B acknowledges its responsibilities under applicable
federal securities laws, including without limitation Rule 10b-5 under the
Exchange Act, in relation to the Transaction.

(E)          EACH OF PARTY A AND PARTY B AGREES AND REPRESENTS THAT IT IS AN
“ELIGIBLE CONTRACT PARTICIPANT” AS DEFINED IN SECTION 1A(12) OF THE U.S.
COMMODITY EXCHANGE ACT, AS AMENDED.  THE PARTIES HERETO FURTHER AGREE AND
ACKNOWLEDGE (A) THAT THIS CONFIRMATION IS (I) A “SECURITIES CONTRACT,” AS SUCH
TERM IS DEFINED IN SECTION 741(7) OF THE BANKRUPTCY CODE, WITH RESPECT TO WHICH
EACH PAYMENT AND DELIVERY HEREUNDER IS A “SETTLEMENT PAYMENT,” AS SUCH TERM IS
DEFINED IN SECTION 741(8) OF THE BANKRUPTCY CODE, AND (II) A “SWAP AGREEMENT,”
AS SUCH TERM IS DEFINED IN SECTION 101(53B) OF THE BANKRUPTCY CODE, WITH RESPECT
TO WHICH EACH PAYMENT AND DELIVERY HEREUNDER IS A “TRANSFER,” AS SUCH TERM IS
DEFINED IN SECTION 101(54) OF THE BANKRUPTCY CODE, AND (B) THAT PARTY A IS
ENTITLED TO THE PROTECTIONS AFFORDED BY, AMONG OTHER SECTIONS, SECTIONS
362(B)(6), 362(B)(17), 546(E), 546(G), 555 AND 560 OF THE BANKRUPTCY CODE.

(F)            PARTY B INTENDS THAT ALL DOCUMENTATION WITH RESPECT TO THIS
TRANSACTION IS INTENDED TO QUALIFY THIS TRANSACTION AS AN EQUITY INSTRUMENT FOR
PURPOSES OF SFAS 150 AND EITF 00-19.  PARTY A ACKNOWLEDGES AND AGREES THAT THIS
CONFIRMATION IS NOT INTENDED TO CONVEY TO IT RIGHTS WITH RESPECT TO THE
TRANSACTION THAT ARE SENIOR TO THE CLAIMS OF COMMON STOCKHOLDERS IN THE EVENT OF
PARTY B’S BANKRUPTCY.  FOR THE AVOIDANCE OF DOUBT, THE PARTIES AGREE THAT THE
PRECEDING SENTENCE SHALL NOT APPLY AT ANY TIME OTHER THAN DURING PARTY B’S
BANKRUPTCY TO ANY CLAIM ARISING AS A RESULT OF A BREACH BY PARTY B OF ANY OF ITS
OBLIGATIONS UNDER THIS CONFIRMATION OR THE AGREEMENT.

6.               STAGGERED SETTLEMENT:

If Party A determines reasonably and in good faith that the sum of (i) the
number of Shares required to be delivered to Party B hereunder on any Cash
Settlement Payment Date, and (ii) any other Shares beneficially owned by Party
A, would exceed 4.9% of all outstanding Shares, then Party A may, by notice to
Party B on or prior to such Cash Settlement Payment Date (a “Nominal Settlement
Date”), elect to deliver the Shares comprising the related Cash Settlement
Amount (in the case of Net Share Settlement) on two or more dates (each, a
“Staggered Settlement Date”) as follows:

(A)          IN SUCH NOTICE, PARTY A WILL SPECIFY TO PARTY B THE RELATED
STAGGERED SETTLEMENT DATES (THE FIRST OF WHICH WILL BE SUCH NOMINAL SETTLEMENT
DATE AND THE LAST OF WHICH WILL BE NO LATER THAN THE TWENTIETH (20TH) EXCHANGE
BUSINESS DAY FOLLOWING SUCH NOMINAL SETTLEMENT DATE) AND THE NUMBER OF SHARES
THAT IT WILL DELIVER ON EACH STAGGERED SETTLEMENT DATE;

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(B)         THE AGGREGATE NUMBER OF SHARES THAT PARTY A WILL DELIVER TO PARTY B
HEREUNDER ON ALL SUCH STAGGERED SETTLEMENT DATES WILL EQUAL THE NUMBER OF SHARES
THAT PARTY A WOULD OTHERWISE BE REQUIRED TO DELIVER ON SUCH NOMINAL SETTLEMENT
DATE; AND

(C)          IF THE NET SHARE SETTLEMENT TERMS SET FORTH ABOVE WERE TO APPLY ON
THE NOMINAL SETTLEMENT DATE, THEN THE NET SHARE SETTLEMENT TERMS WILL APPLY ON
EACH STAGGERED SETTLEMENT DATE, EXCEPT THAT THE SHARES COMPRISING THE CASH
SETTLEMENT AMOUNT WILL BE ALLOCATED AMONG SUCH STAGGERED SETTLEMENT DATES AS
SPECIFIED BY PARTY A IN THE NOTICE REFERRED TO IN CLAUSE (A) ABOVE.

Notwithstanding anything herein to the contrary, Party A shall be entitled to
deliver Shares to Party B from time to time prior to the date on which Party A
would be obligated to deliver them to Party B pursuant to the Net Share
Settlement terms set forth above, and Party B agrees to credit all such early
deliveries against Party A’s obligations hereunder in the direct order in which
such obligations arise. To the extent Party A receives or is entitled to receive
any distribution or payment in respect of Shares by reason of Party A’s being a
holder of record of such Shares on any date after the Nominal Settlement Date
which Party A would have delivered to Party B on such Nominal Settlement Date
but for the provisions of this Section 6, Party A shall deliver such
distribution or payment to Party B at the time Party A delivers the related
Shares to Party B in accordance with this Section 6, if such distribution or
payment has already been received by Party A at such time, or within a
reasonable period of time following Party A’s receipt of the distribution or
payment, if such distribution or payment has not already been received by
Party A at the time Party A delivers the related Shares to Party B in accordance
with this Section 6.

7.               TRANSFER.  PARTY B SHALL NOT TRANSFER OR ASSIGN ITS RIGHTS OR
OBLIGATIONS HEREUNDER AND UNDER THE AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT
OF PARTY A.  PARTY A MAY TRANSFER OR ASSIGN WITHOUT PARTY B’S CONSENT ITS RIGHTS
AND OBLIGATIONS HEREUNDER AND UNDER THE AGREEMENT, IN WHOLE OR IN PART, TO (I)
ANY OF ITS AFFILIATES OR (II) ANY THIRD PARTY WITH AN INVESTMENT GRADE RATING
FOR ITS LONG TERM, UNSECURED AND UNSUBORDINATED INDEBTEDNESS BY STANDARD AND
POOR’S RATING GROUP, INC. OR ITS SUCCESSOR (“S&P”), OR BY MOODY’S INVESTOR
SERVICE, INC. (“MOODY’S”) OR, IF EITHER S&P OR MOODY’S DO NOT RATE SUCH DEBT, AT
LEAST AN EQUIVALENT RATING OR BETTER BY A SUBSTITUTE AGENCY RATING MUTUALLY
AGREED BY PARTY B AND PARTY A.

8.               DISPOSITION OF HEDGE SHARES.  PARTY B HEREBY AGREES THAT IF, IN
THE GOOD FAITH REASONABLE JUDGMENT OF PARTY A OR ISSUER, BASED ON THE ADVICE OF
COUNSEL, THE SHARES (THE “HEDGE SHARES”) ACQUIRED BY PARTY A FOR THE PURPOSE OF
HEDGING ITS OBLIGATIONS PURSUANT TO THE TRANSACTION CANNOT BE SOLD IN THE PUBLIC
MARKET BY PARTY A WITHOUT REGISTRATION UNDER THE SECURITIES ACT, PARTY B SHALL,
AT ITS ELECTION: (I) IN ORDER TO ALLOW PARTY A TO SELL THE HEDGE SHARES IN A
REGISTERED OFFERING, MAKE AVAILABLE TO PARTY A AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT TO COVER THE RESALE OF SUCH HEDGE SHARES AND
(A) ENTER INTO AN AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO PARTY A,
SUBSTANTIALLY IN THE FORM OF AN UNDERWRITING AGREEMENT FOR UNDERWRITTEN
FOLLOW-ON OFFERINGS OF EQUITY SECURITIES OF COMPANIES OF COMPARABLE SIZE,
MATURITY AND LINES OF BUSINESS, (B) PROVIDE ACCOUNTANT’S “COMFORT” LETTERS IN
CUSTOMARY FORM FOR UNDERWRITTEN FOLLOW-ON OFFERINGS OF EQUITY SECURITIES OF
COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS, (C) PROVIDE
DISCLOSURE OPINIONS OF NATIONALLY RECOGNIZED OUTSIDE COUNSEL TO PARTY B AS ARE
CUSTOMARILY REQUESTED IN CONNECTION WITH UNDERWRITTEN FOLLOW-ON OFFERS OF EQUITY
SECURITIES OF COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS, (D)
PROVIDE OTHER CUSTOMARY OPINIONS, CERTIFICATES AND CLOSING DOCUMENTS CUSTOMARY
IN FORM FOR UNDERWRITTEN FOLLOW-ON OFFERS OF EQUITY SECURITIES OF COMPANIES OF
COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS AND (E) AFFORD PARTY A A
REASONABLE OPPORTUNITY TO CONDUCT A “DUE DILIGENCE” INVESTIGATION WITH RESPECT
TO PARTY B CUSTOMARY IN SCOPE FOR UNDERWRITTEN FOLLOW-ON OFFERS OF EQUITY
SECURITIES OF COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS;
PROVIDED, HOWEVER, THAT IF PARTY A, IN ITS SOLE REASONABLE DISCRETION, IS NOT
SATISFIED WITH ACCESS TO DUE DILIGENCE MATERIALS, THE RESULTS OF ITS DUE
DILIGENCE INVESTIGATION, OR THE PROCEDURES AND DOCUMENTATION FOR THE REGISTERED
OFFERING REFERRED TO ABOVE, THEN CLAUSE (II) OF THIS SECTION 8(C) SHALL APPLY;
PROVIDED THAT PARTY A HAS GIVEN THE PARTY B REASONABLE NOTICE OF ITS
DETERMINATION AND

10

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PROVIDED THE PARTY B WITH REASONABLE OPPORTUNITY TO SATISFY PARTY A’S CONCERNS;
(II) IN ORDER TO ALLOW PARTY A TO SELL THE HEDGE SHARES IN A PRIVATE PLACEMENT
ENTER INTO A PRIVATE PLACEMENT AGREEMENT SUBSTANTIALLY SIMILAR TO PRIVATE
PLACEMENT PURCHASE AGREEMENTS CUSTOMARY FOR PRIVATE PLACEMENTS OF EQUITY
SECURITIES OF COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS, IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO PARTY A, INCLUDING CUSTOMARY
REPRESENTATIONS, COVENANTS, BLUE SKY AND OTHER GOVERNMENTAL FILINGS AND/OR
REGISTRATIONS, INDEMNITIES TO PARTY A, DUE DILIGENCE RIGHTS (FOR PARTY A OR ANY
DESIGNATED BUYER OF THE HEDGE SHARES FROM PARTY A), OPINIONS AND CERTIFICATES
AND SUCH OTHER DOCUMENTATION AS IS CUSTOMARY FOR PRIVATE PLACEMENTS AGREEMENTS,
ALL REASONABLY ACCEPTABLE TO PARTY A (IN WHICH CASE, THE CALCULATION AGENT SHALL
MAKE ANY ADJUSTMENTS TO THE TERMS OF THE TRANSACTION THAT ARE NECESSARY, IN ITS
REASONABLE JUDGMENT, TO COMPENSATE PARTY A FOR ANY DISCOUNT FROM THE PUBLIC
MARKET PRICE OF THE SHARES INCURRED ON THE SALE OF HEDGE SHARES IN A PRIVATE
PLACEMENT).

9.               ACCOUNT DETAILS:

Payments to Party A:

 

To be advised

Payments to Party B:

 

To be advised

Deliveries to Party B:

 

To be advised

 

10.         WAIVER OF JURY TRIAL.  EACH OF PARTY B AND PARTY A HEREBY
IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THE TRANSACTION OR THE ACTIONS OF PARTY B OF ITS
AFFILIATES OR PARTY A OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR
ENFORCEMENT HEREOF

11.         GOVERNING LAW.  THE AGREEMENT AND THIS CONFIRMATION SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.  THE PARTIES HERETO IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND
THE UNITED STATES COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH
ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN,
AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

12.         SPECIAL PROVISIONS FOR COUNTERPARTY PAYMENTS:  THE PARTIES HEREBY
AGREE THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN OR IN THE AGREEMENT,
IN THE EVENT THAT AN EARLY TERMINATION DATE (WHETHER AS A RESULT OF AN EVENT OF
DEFAULT OR A TERMINATION EVENT) OCCURS OR IS DESIGNATED WITH RESPECT TO ANY
TRANSACTION AND, AS A RESULT, PARTY B OWES TO PARTY A AN AMOUNT CALCULATED UNDER
SECTION 6(E) OF THE AGREEMENT (CALCULATED AS IF THE TRANSACTIONS BEING
TERMINATED ON SUCH EARLY TERMINATION DATE WERE THE SOLE TRANSACTIONS UNDER THE
AGREEMENT), SUCH AMOUNT SHALL BE DEEMED TO BE ZERO.

11

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Please confirm that the foregoing correctly sets forth the terms of your
agreement by signing and returning this Confirmation.

 

Very truly yours,

 

 

 

 

 

CAPITAL VENTURES INTERNATIONAL

 

BY: HEIGHTS CAPITAL MANAGEMENT, INC,

 

Its Authorized Agent

 

(Party A)

 

 

By:

/s/ Martin Kobinger

 

 

Name:

Martin Kobinger

 

 

Title:

Investment Manager

 

 

Confirmed as of the date first written above:

DEXCOM, INC. (Party B)

 

 

By:

/s/ Steven J. Kemper

 

Name:

Steven J. Kemper

Title:

Chief Financial Officer

 

12

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ANNEX  I

Matters to be covered in Opinion of Counsel to the Issuer (the “Party B”)

1.             The Party B is validly existing as a corporation in good standing
under the laws of the State of Delaware.

2.             The Party B has the requisite corporate power and authority to
enter into the Issuer Call Option Transaction (for purposes of this Annex 1, the
“Agreement”) and to carry out the Transactions contemplated thereby.

3.             The execution and delivery by the Party B of the Agreement, and
the performance by the Party B of its obligations under the Agreement, have been
duly authorized by all necessary corporate action on the part of the Party B.

4.             The Issuer Call Option Transaction has been duly authorized,
executed and delivered by the Party B.

5.             No consent, approval or authorization of, or registration, filing
or declaration with, any governmental or public body or authority is required in
connection with the execution, delivery or performance by the Party B of the
Agreement.

6.             The execution, delivery and performance by the Party B of the
Issuer Call Option Transaction and compliance by the Party B with the terms and
provisions thereof will not, whether with or without the giving of notice or
lapse of time or both, result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (A) any material indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate
charter or by-laws, or any other agreement or instrument to which the Party B or
any subsidiary is bound or by which the Party B or any subsidiary or any of
their respective properties may be bound or affected [agreements to be listed on
a schedule], or (B) any Delaware or federal law, statute, rule, regulation or
order or any judgment, order, writ or decree of any governmental agency or body
or any court having jurisdiction over the Party B or any of its properties.

7.             Neither the Party B nor any subsidiary is an “investment company”
or a company “controlled” by an “investment company”, in each case within the
meanings ascribed to such terms in the Investment Company Act of 1940, as
amended, nor is the Party B or any subsidiary subject to regulation under said
Act.

13

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Issuer Call Option Transaction

March 6, 2007

To:                    DexCom, Inc.

5555 Oberlin Drive

San Diego, CA 92121

Attention: Steven J. Kemper, Chief Financial Officer

From:            Capital Ventures International

By: Heights Capital Management, Inc., Its Authorized Agent

101 California Street, Suite 3250

San Francisco, CA 94111

Ladies and Gentlemen:

The purpose of this letter agreement (this “Confirmation”) is to confirm the
terms and conditions of the Transaction entered into between Party A and Party B
on the Trade Date specified below (the “Transaction”). This Confirmation
constitutes a “Confirmation” as referred to in the Agreement specified below.

1.               THIS CONFIRMATION IS SUBJECT TO, AND INCORPORATES, THE
DEFINITIONS AND PROVISIONS OF THE 2000 ISDA DEFINITIONS (INCLUDING THE ANNEX
THERETO) (THE “2000 DEFINITIONS”) AND THE DEFINITIONS AND PROVISIONS OF THE 2002
ISDA EQUITY DERIVATIVES DEFINITIONS (THE “EQUITY DEFINITIONS”, AND TOGETHER WITH
THE 2000 DEFINITIONS, THE “DEFINITIONS”), IN EACH CASE AS PUBLISHED BY THE
INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC. (“ISDA”).  IN THE EVENT OF
ANY INCONSISTENCY BETWEEN THE 2000 DEFINITIONS AND THE EQUITY DEFINITIONS, THE
EQUITY DEFINITIONS WILL GOVERN.

This Confirmation evidences a complete and binding agreement between Party A and
Party B as to the terms of the Transaction to which this Confirmation relates. 
The parties may agree to negotiate an agreement in the form of the ISDA Form. 
Until any such time, this Confirmation, together with all other documents
referring to the ISDA Form (each a “Confirmation”) confirming Transactions
entered into between us (notwithstanding anything to the contrary in a
Confirmation), shall supplement, form a part of, and be subject to an agreement
in the form of the ISDA Form as if we had executed an agreement in such form
(but without any election in the Schedule) on the Trade Date of the first such
Transaction between us.  This Confirmation shall be subject to an agreement (the
“Agreement”) in the form of the 2002 ISDA Master Agreement (the “ISDA Form”) as
if Party A and Party B had executed an agreement in such form (without any
Schedule but with the elections set forth in this Confirmation).  For the
avoidance of doubt, the Transaction shall be the only transaction under the
Agreement.

All provisions contained in, or incorporated by reference to, the Agreement will
govern this Confirmation except as expressly modified herein.  In the event of
any inconsistency between this Confirmation and either the Definitions or the
Agreement, this Confirmation shall govern.

In this Confirmation, “Party A” means Capital Ventures International, and
“Party B” means DexCom, Inc.

2.               THE GENERAL TERMS RELATING TO THE TRANSACTION ARE AS FOLLOWS:

Option Style:

European

 

 

Option Seller:

Party A

 

 

Option Buyer:

Party B

 

14

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Option Multiple Exercise:

Not Applicable

 

 

Strike Price:

$7.80

 

 

Cap Price:

$12.00

 

 

Trade Date:

March 6, 2007

 

 

Effective Date:

March 9, 2007

 

 

Option Type:

Call

 

 

Issuer:

DexCom, Inc.

 

 

Shares:

The shares of common stock of the Issuer, par value $0.001 per Share (Ticker
Symbol: DXCM)

 

 

Number of Options:

1,923,076

 

 

Option Entitlement:

One Share per Option

 

 

Market Disruption Event:

Section 6.3(a) of the Equity Definitions is hereby amended by replacing
clause (ii) thereof in its entirety with the following: “(ii) an Exchange
Disruption, or” and inserting immediately following clause (iii) thereof the
following: “; in each case that the Calculation Agent determines is material.”

 

 

Relevant Price:

VWAP Price

 

 

VWAP Price:

The “Volume Weighted Average Price” per Share on such day, as displayed on
Bloomberg Page “DXM.UQ<equity>AQR” (or any successor thereto) for the Issuer
with respect to the period from 9:30 a.m. to 4:00 p.m. (New York City time) on
such day, as determined by the Calculation Agent.  If no price at such time is
available, or there is a Market Disruption Event on such Expiration Date, the
Calculation Agent shall determine the VWAP Price in a commercially reasonable
manner.

 

 

Premium:

$2,394,868.

 

 

Premium Payment Date:

March 9, 2007

 

 

Exchange:

The Nasdaq Global market

 

15

--------------------------------------------------------------------------------

 

Related Exchange:

Any exchange on which options or futures on the relevant Shares are traded.

 

 

Clearance System:

DTC

 

 

Calculation Agent:

Party A. Whenever the Calculation Agent acts or makes a determination, it will
do so in good faith and in a commercially reasonable manner consistent with its
obligations under the Equity Definitions.

 

 

Procedure for Exercise:

 

 

 

Expiration Time:

The close of trading on the Exchange

 

 

Expiration Date:

Each of the thirty (30) consecutive Scheduled Trading Days occurring immediately
prior to March 6, 2008. If any Expiration Date shall not be an Exchange Business
Day, such Expiration Date shall be postponed to the immediately succeeding
Exchange Business Day and the corresponding Expiration Date for each subsequent
Daily Number of Options shall be moved back an equal number of Exchange Business
Days reflecting such postponement.

 

 

Daily Number of Options:

One-thirtieth of the Number of Options.

 

 

Automatic Exercise:

Applicable

 

 

Settlement Terms:

 

 

 

Settlement Method Election:

Applicable; provided (i) that any such election shall apply to all Exercise
Dates (in accordance with the terms below) and may be for Cash Settlement or Net
Share Settlement, (ii) that in order to elect Net Share Settlement, Party B must
provide written notice to Party A at least ten (10) Exchange Business Days prior
to the first Exercise Date, and (iii) absent such an election, the Transaction
shall be settled on a Cash Settlement basis.

 

 

Settlement Date:

For all Daily Number Options exercised or deemed exercised on each Expiration
Date, the third Exchange Business Day following the final Expiration Date.

 

 

Cash Settlement:

If Cash Settlement applies, then, notwithstanding any contrary terms of Article
9 of the Equity Definitions, for any Daily Number of Options exercised or deemed

 

16

--------------------------------------------------------------------------------

 

exercised on any Exercise Date, Party A shall pay, on the Settlement Date, the
Cash Settlement Amount to Party B. The Cash Settlement Amount shall be
determined as follows

 

 

 

(i)

If the Settlement Price is less than or equal to the Strike Price, then the Cash
Settlement Amount shall equal zero.

 

 

 

 

(ii)

If the Settlement Price is greater than the Strike Price but less than the Cap
Price, then the Cash Settlement Amount shall equal the product of (i) the Daily
Number of Options, (ii) the Option Entitlement and (iii) the Settlement Price
minus the Strike Price.

 

 

 

 

If the Settlement Price is greater than or equal to the Cap Price, then the Cash
Settlement Amount shall equal the product of (i) the Daily Number of Options,
(ii) the Option Entitlement and (iii) the Cap Price minus the Strike Price. For
the avoidance of any doubt, Party B shall not owe to Party A any cash amount as
a result of Cash Settlement

 

 

Net Share Settlement:

If Net Share Settlement applies, then Party A shall deliver a number of whole
Shares equal to (x) the Cash Settlement Amount divided by (y) the stock price of
the Shares as determined by Party A (such quotient to be rounded down to the
nearest whole deliverable share) (the “Number of Whole Shares”). Party A also
shall pay an additional cash amount equal to the cash value of any fractional
Shares remaining after rounding down to the Number of Whole Shares. The delivery
of the Number of Whole Shares and the cash value of any fractional Shares shall
be made on the Settlement Date. For the avoidance of doubt, Party B shall not
owe to Party A any Shares as a result of any Net Share Settlement of the
transaction.

 

 

Cash Settlement Payment Date:

For all Daily Number of Options exercised or deemed exercised on each Exercise
Date, the third Exchange Business Day following the final Expiration Date.

 

 

Settlement Currency:

USD

 

 

Settlement Price:

For any Daily Number of Options, the VWAP Price of the Shares on the relevant
Expiration Date determined by Calculation Agent at the Expiration Time on the
relevant Expiration Date for such Daily Number of Options. If no

 

17

--------------------------------------------------------------------------------

 

price at such time is available, or there is a Market Disruption Event on such
Expiration Date, the Calculation Agent shall determine the Settlement Price in a
commercially reasonable manner.

 

 

Failure to Deliver:

Applicable

 

 

Other Applicable Provisions:

To the extent Party A is obligated to deliver Shares hereunder, the provisions
of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 (except that the Representation and
Agreement contained in Section 9.11 of the Equity Definitions shall be modified
by excluding any representations therein relating to restrictions, obligations,
limitations or requirements under applicable securities laws as a result of the
fact that Party B is the issuer of the Shares) and 9.12 of the Equity
Definitions will be applicable as if “Physical Settlement” applied to the
Transaction.

 

 

Restricted Certificated Shares:

Notwithstanding anything to the contrary in the Equity Definitions, Party A may
deliver, in whole or in part, any Shares required to be delivered to Party B
hereunder in the form of restricted securities under the Securities Act (as
defined below) and/or in certificated form in lieu of delivery through the
Clearance System. With respect to any such certificated Shares, the
Representation and Agreement contained in Section 9.11 of the Equity Definitions
shall be modified by deleting the remainder of the provision after the word
“encumbrance” in the fourth line thereof.

 

 

Adjustments:

 

 

 

Method of Adjustment:

Calculation Agent Adjustment

 

 

Extraordinary Events:

 

 

 

Consequences of Merger Events and Tender Offers:

 

 

 

(a) Share-for-Share:

Modified Calculation Agent Adjustment

 

 

(b) Share-for-Other:

Cancellation and Payment (Calculation Agent Determination)

 

 

(c) Share-for-Combined:

Component Adjustment; provided that Cancellation and Payment (Calculation Agent
Determination) shall apply in

 

18

--------------------------------------------------------------------------------

 

 

the event that the Calculation Agent determines that no adjustments that it
could make with respect to the Transaction to account for the Merger Event or
Tender Offer, as applicable, would produce a commercially reasonable result.

 

 

Tender Offer:

Applicable

 

 

Delisting, Nationalization or Insolvency:

Cancellation and Payment (Calculation Agent
Determination)

 

Additional Disruption Events:

(a) Change in Law:

Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is
hereby amended by (i) replacing the phrase “the interpretation” in the third
line thereof with the phrase “or announcement or statement of the formal or
informal interpretation” and (ii) immediately following the word “Transaction”
in clause (X) thereof, adding the phrase “in the manner contemplated by the
Hedging Party on the Trade Date”.

 

 

(b) Failure to Deliver:

Applicable

 

 

(c) Insolvency Filing:

Applicable

 

 

(d) Hedging Disruption:

Applicable

 

 

(e) Increased Cost of Hedging:

Applicable

 

 

(f) Loss of Stock Borrower:

Applicable

 

 

Maximum Stock Loan Rate:

2%

 

 

Hedging Party:

For all applicable Additional Disruption Events, Party A

 

 

Determining Party:

For all applicable Additional Disruption Events, Party A

 

 

Non-Reliance:

Applicable

 

 

Agreements and Acknowledgments Regarding Hedging Activities:

Applicable

 

 

Additional Acknowledgments:

Applicable

 

3.               IF ANY OF THE TRANSACTIONS CONTEMPLATED BY THE PURCHASE
AGREEMENT AMONG PARTY B AND PIPER JAFFRAY & CO., DATED AS OF MARCH 6, 2007 (THE
“PURCHASE AGREEMENT”) RELATING TO THE PURCHASE OF 4.75% CONVERTIBLE SENIOR NOTES
DUE

19

--------------------------------------------------------------------------------

2027 (THE “NOTES”) OF PARTY B BY PIPER JAFFRAY & CO. SHALL FAIL TO CLOSE AS A
RESULT OF A BREACH BY PARTY B OF ITS OBLIGATIONS THEREUNDER, IN WHICH CASE THE
ENTIRETY OF THIS TRANSACTION SHALL TERMINATE AUTOMATICALLY AND PARTY B SHALL BE
THE SOLE AFFECTED PARTY AND THIS TRANSACTION SHALL BE THE SOLE AFFECTED
TRANSACTION. IF THE TRANSACTIONS CONTEMPLATED BY THE PURCHASE AGREEMENT SHALL
FAIL TO CLOSE FOR ANY REASON ON OR BEFORE THE EFFECTIVE DATE OTHER THAN THOSE
SET FORTH IN THE PREVIOUS SENTENCE, THEN THE ENTIRETY OF THIS TRANSACTION SHALL
TERMINATE AUTOMATICALLY AND NO PAYMENTS SHALL BE REQUIRED HEREUNDER.  IF PARTY A
DOES NOT PURCHASE AT LEAST $25.0 MILLION FACE AMOUNT OF NOTES ON OR BEFORE THE
EFFECTIVE DATE, THEN, AT THE OPTION OF PARTY A, THE ENTIRETY OF THIS TRANSACTION
SHALL TERMINATE AND NO PAYMENTS SHALL BE REQUIRED HEREUNDER.  FOR PURPOSES OF
DETERMINING LOSS IN RELATION TO A TERMINATION UNDER THE FIRST SENTENCE OF THIS
SECTION 3, IT SHALL BE ASSUMED THAT ALL CONDITIONS TO THE EXERCISE OF THESE
OPTIONS HAVE OCCURRED.

4.               CALCULATIONS AND PAYMENT ON EARLY TERMINATION AND ON CERTAIN
EXTRAORDINARY EVENTS.  IF PARTY A SHALL OWE PARTY B ANY AMOUNT PURSUANT TO
SECTIONS 12.6, 12.7 OR 12.9 OF THE EQUITY DEFINITIONS (EXCEPT IN THE EVENT OF AN
INSOLVENCY OR A NATIONALIZATION, IN EACH CASE, IN WHICH THE CONSIDERATION OR
PROCEEDS TO BE PAID TO HOLDERS OF SHARES CONSISTS SOLELY OF CASH) OR PURSUANT TO
SECTION 6(D)(II) OF THE AGREEMENT (EXCEPT IN THE EVENT OF AN EVENT OF DEFAULT IN
WHICH PARTY B IS THE DEFAULTING PARTY OR A TERMINATION EVENT IN WHICH PARTY B IS
THE AFFECTED PARTY, THAT RESULTED FROM AN EVENT OR EVENTS WITHIN PARTY B’S
CONTROL) (A “PAYMENT OBLIGATION”), PARTY B SHALL HAVE THE RIGHT, IN ITS SOLE
DISCRETION, TO REQUIRE PARTY A TO SATISFY ANY SUCH PAYMENT OBLIGATION BY THE
SHARE TERMINATION ALTERNATIVE (AS DEFINED BELOW) BY GIVING IRREVOCABLE
TELEPHONIC NOTICE TO PARTY A, CONFIRMED IN WRITING WITHIN ONE SCHEDULED TRADING
DAY, BETWEEN THE HOURS OF 9:00 A.M. AND 12:00 P.M. NEW YORK CITY TIME ON THE
RELEVANT ANNOUNCEMENT DATE OR EARLY TERMINATION DATE, AS APPLICABLE (“NOTICE OF
SHARE TERMINATION”).  UPON SUCH NOTICE OF SHARE TERMINATION, THE FOLLOWING
PROVISIONS SHALL APPLY ON THE SCHEDULED TRADING DAY IMMEDIATELY FOLLOWING THE
RELEVANT ANNOUNCEMENT DATE OR EARLY TERMINATION DATE, AS APPLICABLE:

Share Termination Alternative:
                                                                   Applicable
and means that Party A shall deliver to Party B the Share Termination Delivery
Property on the date on which the Payment Obligation would otherwise be due
pursuant to Section 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii)
of the Agreement, as applicable (the “Share Termination Payment Date”), in
satisfaction of the Payment Obligation.

Share Termination Delivery Property:                                  A number
of Share Termination Delivery Units, as calculated by the Calculation Agent,
equal to the Payment Obligation divided by the Share Termination Unit Price. 
The Calculation Agent shall adjust the Share Termination Delivery Property by
replacing any fractional portion of a security therein with an amount of cash
equal to the value of such fractional security based on the values used to
calculate the Share Termination Unit Price.

Share Termination Unit Price:
                                                                           The
value of property contained in one Share Termination Delivery Unit on the date
such Share Termination Delivery Units are to be delivered as Share Termination
Delivery Property, as determined by the Calculation Agent in its discretion by
commercially reasonable means and notified by the Calculation Agent to Party A
at the time of notification of the Payment Obligation.

Share Termination Delivery Unit:
                                                        In the case of a
Termination Event, Event of Default or Delisting, one Share or, in the case of
an Insolvency or Nationalization, a unit consisting of the number or amount of
each type of property received by a holder of one Share (without consideration
of any requirement to pay cash or other consideration in lieu of fractional
amounts of any securities) in such Insolvency or Nationalization.  If such
Insolvency or Nationalization involves a choice of consideration to be received
by

20

--------------------------------------------------------------------------------

 

holders, such holder shall be deemed to have elected to receive the maximum
possible amount of cash.

 

 

Failure to Deliver:

Applicable

 

 

 

Other applicable provisions:If Share Termination Alternative is applicable, the
provisions of Sections 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity Definitions
will be applicable as if “Physical Settlement” were applicable, except that all
references to “Shares” shall be read as references to “Share Termination
Delivery Units”; provided that the Representation and Agreement contained in
Section 9.11 of the Equity Definitions shall be modified by excluding any
representations therein relating to restrictions, obligations, limitations or
requirements under applicable securities laws as a result of the fact that Buyer
is the issuer of any Share Termination Delivery Units (or any part thereof).

 

5.               ADDITIONAL AGREEMENTS, REPRESENTATIONS AND COVENANTS:

(A)          PARTY B HEREBY REPRESENTS AND WARRANTS TO PARTY A, ON EACH DAY FROM
THE TRADE DATE TO AND INCLUDING THE BUSINESS DAY FOLLOWING THE DATE ON WHICH
PARTY A IS ABLE TO INITIALLY COMPLETE A HEDGE OF ITS POSITION CREATED BY THIS
TRANSACTION, THAT PARTY B HAS PUBLICLY DISCLOSED ALL MATERIAL INFORMATION
NECESSARY FOR PARTY B TO BE ABLE TO PURCHASE OR SELL SHARES IN COMPLIANCE WITH
APPLICABLE FEDERAL SECURITIES LAWS AND THAT IT HAS PUBLICLY DISCLOSED ALL
MATERIAL INFORMATION WITH RESPECT TO ITS CONDITION (FINANCIAL OR OTHERWISE).

(B)         IF PARTY B WOULD BE OBLIGATED TO RECEIVE CASH FROM PARTY A PURSUANT
TO THE TERMS OF THIS AGREEMENT FOR ANY REASON WITHOUT HAVING HAD THE RIGHT TO
ELECT TO RECEIVE SHARES IN SATISFACTION OF SUCH PAYMENT OBLIGATION, THEN PARTY B
MAY ELECT THAT PARTY A DELIVER TO PARTY B A NUMBER OF SHARES HAVING A CASH VALUE
EQUAL TO THE AMOUNT OF SUCH PAYMENT OBLIGATION (SUCH NUMBER OF SHARES TO BE
DELIVERED TO BE DETERMINED BY THE CALCULATION AGENT ACTING IN A COMMERCIALLY
REASONABLE MANNER TO DETERMINE THE NUMBER OF SHARES THAT COULD BE PURCHASED OVER
A REASONABLE PERIOD OF TIME WITH THE CASH EQUIVALENT OF SUCH PAYMENT
OBLIGATION). SETTLEMENT RELATING TO ANY DELIVERY OF SHARES PURSUANT TO THIS
PARAGRAPH (B) SHALL OCCUR WITHIN A REASONABLE PERIOD OF TIME.

(C)          PARTY B SHALL DELIVER TO THE PARTY A AN OPINION OR OPINIONS OF
COUNSEL WITH RESPECT TO THE MATTERS SET FORTH ON ANNEX 1 HERETO ON OR BEFORE THE
EFFECTIVE DATE.

(D)         IN ADDITION TO THE REPRESENTATIONS AND WARRANTIES IN THE AGREEMENT
AND THOSE CONTAINED ELSEWHERE HEREIN, PARTY B REPRESENTS AND WARRANTS TO AND FOR
THE BENEFIT OF, AND AGREES WITH, PARTY A AS FOLLOWS:

(i)            (A) On the Effective Date, the Shares or securities that are
convertible into, or exchangeable or exercisable for Shares, are not, and shall
not be, subject to a “restricted period,” as such term is defined in
Regulation M (“Regulation M”) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and (B) Party B shall not engage in any
“distribution,” as such term is defined in Regulation M, other than a
distribution meeting the requirements of the exceptions set forth in sections
101(b)(10) and 102(b)(7) of Regulation M, until the second Exchange Business Day
immediately following the Trade Date.

(ii)           Party B is not entering into this Confirmation to create actual
or apparent trading activity in the Shares (or any security convertible into or
exchangeable for Shares) or to manipulate the price of the Shares (or any
security convertible into or exchangeable for Shares) or otherwise in violation
of the Exchange Act.

21

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(iii)          Without limiting the generality of Section 3(a)(iii) of the
Agreement, the Transaction will not violate Rule 13e-1 or Rule 13e-4 under the
Exchange Act.

(iv)          Prior to the Effective Date, Party B shall deliver to Party A a
resolution of Party B’s board of directors authorizing the Transaction and such
other certificate or certificates as Party A shall reasonably request.

(v)           Party B is not, and after giving effect to the transactions
contemplated hereby will not be, required to register as an “investment company”
as such term is defined in the Investment Company Act of 1940, as amended.

(vi)          On the Trade Date (A) the assets of Party B at their fair
valuation exceed the liabilities of Party B, including contingent liabilities,
(B) the capital of Party B is adequate to conduct the business of Party B and
(C) Party B has the ability to pay its debts and obligations as such debts
mature and does not intend to, or does not believe that it will, incur debt
beyond its ability to pay as such debts mature.

(vii)         Party B acknowledges its responsibilities under applicable
federal securities laws, including without limitation Rule 10b-5 under the
Exchange Act, in relation to the Transaction.

(E)          EACH OF PARTY A AND PARTY B AGREES AND REPRESENTS THAT IT IS AN
“ELIGIBLE CONTRACT PARTICIPANT” AS DEFINED IN SECTION 1A(12) OF THE U.S.
COMMODITY EXCHANGE ACT, AS AMENDED.  THE PARTIES HERETO FURTHER AGREE AND
ACKNOWLEDGE (A) THAT THIS CONFIRMATION IS (I) A “SECURITIES CONTRACT,” AS SUCH
TERM IS DEFINED IN SECTION 741(7) OF THE BANKRUPTCY CODE, WITH RESPECT TO WHICH
EACH PAYMENT AND DELIVERY HEREUNDER IS A “SETTLEMENT PAYMENT,” AS SUCH TERM IS
DEFINED IN SECTION 741(8) OF THE BANKRUPTCY CODE, AND (II) A “SWAP AGREEMENT,”
AS SUCH TERM IS DEFINED IN SECTION 101(53B) OF THE BANKRUPTCY CODE, WITH RESPECT
TO WHICH EACH PAYMENT AND DELIVERY HEREUNDER IS A “TRANSFER,” AS SUCH TERM IS
DEFINED IN SECTION 101(54) OF THE BANKRUPTCY CODE, AND (B) THAT PARTY A IS
ENTITLED TO THE PROTECTIONS AFFORDED BY, AMONG OTHER SECTIONS, SECTIONS
362(B)(6), 362(B)(17), 546(E), 546(G), 555 AND 560 OF THE BANKRUPTCY CODE.

(F)            PARTY B INTENDS THAT ALL DOCUMENTATION WITH RESPECT TO THIS
TRANSACTION IS INTENDED TO QUALIFY THIS TRANSACTION AS AN EQUITY INSTRUMENT FOR
PURPOSES OF SFAS 150 AND EITF 00-19.  PARTY A ACKNOWLEDGES AND AGREES THAT THIS
CONFIRMATION IS NOT INTENDED TO CONVEY TO IT RIGHTS WITH RESPECT TO THE
TRANSACTION THAT ARE SENIOR TO THE CLAIMS OF COMMON STOCKHOLDERS IN THE EVENT OF
PARTY B’S BANKRUPTCY.  FOR THE AVOIDANCE OF DOUBT, THE PARTIES AGREE THAT THE
PRECEDING SENTENCE SHALL NOT APPLY AT ANY TIME OTHER THAN DURING PARTY B’S
BANKRUPTCY TO ANY CLAIM ARISING AS A RESULT OF A BREACH BY PARTY B OF ANY OF ITS
OBLIGATIONS UNDER THIS CONFIRMATION OR THE AGREEMENT.

6.               STAGGERED SETTLEMENT:

If Party A determines reasonably and in good faith that the sum of (i) the
number of Shares required to be delivered to Party B hereunder on any Cash
Settlement Payment Date, and (ii) any other Shares beneficially owned by Party
A, would exceed 4.9% of all outstanding Shares, then Party A may, by notice to
Party B on or prior to such Cash Settlement Payment Date (a “Nominal Settlement
Date”), elect to deliver the Shares comprising the related Cash Settlement
Amount (in the case of Net Share Settlement) on two or more dates (each, a
“Staggered Settlement Date”) as follows:

(A)          IN SUCH NOTICE, PARTY A WILL SPECIFY TO PARTY B THE RELATED
STAGGERED SETTLEMENT DATES (THE FIRST OF WHICH WILL BE SUCH NOMINAL SETTLEMENT
DATE AND THE LAST OF WHICH WILL BE NO LATER THAN THE TWENTIETH (20TH) EXCHANGE
BUSINESS DAY FOLLOWING SUCH NOMINAL SETTLEMENT DATE) AND THE NUMBER OF SHARES
THAT IT WILL DELIVER ON EACH STAGGERED SETTLEMENT DATE;

22

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(B)         THE AGGREGATE NUMBER OF SHARES THAT PARTY A WILL DELIVER TO PARTY B
HEREUNDER ON ALL SUCH STAGGERED SETTLEMENT DATES WILL EQUAL THE NUMBER OF SHARES
THAT PARTY A WOULD OTHERWISE BE REQUIRED TO DELIVER ON SUCH NOMINAL SETTLEMENT
DATE; AND

(C)          IF THE NET SHARE SETTLEMENT TERMS SET FORTH ABOVE WERE TO APPLY ON
THE NOMINAL SETTLEMENT DATE, THEN THE NET SHARE SETTLEMENT TERMS WILL APPLY ON
EACH STAGGERED SETTLEMENT DATE, EXCEPT THAT THE SHARES COMPRISING THE CASH
SETTLEMENT AMOUNT WILL BE ALLOCATED AMONG SUCH STAGGERED SETTLEMENT DATES AS
SPECIFIED BY PARTY A IN THE NOTICE REFERRED TO IN CLAUSE (A) ABOVE.

Notwithstanding anything herein to the contrary, Party A shall be entitled to
deliver Shares to Party B from time to time prior to the date on which Party A
would be obligated to deliver them to Party B pursuant to the Net Share
Settlement terms set forth above, and Party B agrees to credit all such early
deliveries against Party A’s obligations hereunder in the direct order in which
such obligations arise. To the extent Party A receives or is entitled to receive
any distribution or payment in respect of Shares by reason of Party A’s being a
holder of record of such Shares on any date after the Nominal Settlement Date
which Party A would have delivered to Party B on such Nominal Settlement Date
but for the provisions of this Section 6, Party A shall deliver such
distribution or payment to Party B at the time Party A delivers the related
Shares to Party B in accordance with this Section 6, if such distribution or
payment has already been received by Party A at such time, or within a
reasonable period of time following Party A’s receipt of the distribution or
payment, if such distribution or payment has not already been received by
Party A at the time Party A delivers the related Shares to Party B in accordance
with this Section 6.

7.               TRANSFER.  PARTY B SHALL NOT TRANSFER OR ASSIGN ITS RIGHTS OR
OBLIGATIONS HEREUNDER AND UNDER THE AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT
OF PARTY A.  PARTY A MAY TRANSFER OR ASSIGN WITHOUT PARTY B’S CONSENT ITS RIGHTS
AND OBLIGATIONS HEREUNDER AND UNDER THE AGREEMENT, IN WHOLE OR IN PART, TO (I)
ANY OF ITS AFFILIATES OR (II) ANY THIRD PARTY WITH AN INVESTMENT GRADE RATING
FOR ITS LONG TERM, UNSECURED AND UNSUBORDINATED INDEBTEDNESS BY STANDARD AND
POOR’S RATING GROUP, INC. OR ITS SUCCESSOR (“S&P”), OR BY MOODY’S INVESTOR
SERVICE, INC. (“MOODY’S”) OR, IF EITHER S&P OR MOODY’S DO NOT RATE SUCH DEBT, AT
LEAST AN EQUIVALENT RATING OR BETTER BY A SUBSTITUTE AGENCY RATING MUTUALLY
AGREED BY PARTY B AND PARTY A.

8.               DISPOSITION OF HEDGE SHARES.  PARTY B HEREBY AGREES THAT IF, IN
THE GOOD FAITH REASONABLE JUDGMENT OF PARTY A OR ISSUER, BASED ON THE ADVICE OF
COUNSEL, THE SHARES (THE “HEDGE SHARES”) ACQUIRED BY PARTY A FOR THE PURPOSE OF
HEDGING ITS OBLIGATIONS PURSUANT TO THE TRANSACTION CANNOT BE SOLD IN THE PUBLIC
MARKET BY PARTY A WITHOUT REGISTRATION UNDER THE SECURITIES ACT, PARTY B SHALL,
AT ITS ELECTION: (I) IN ORDER TO ALLOW PARTY A TO SELL THE HEDGE SHARES IN A
REGISTERED OFFERING, MAKE AVAILABLE TO PARTY A AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT TO COVER THE RESALE OF SUCH HEDGE SHARES AND
(A) ENTER INTO AN AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO PARTY A,
SUBSTANTIALLY IN THE FORM OF AN UNDERWRITING AGREEMENT FOR UNDERWRITTEN
FOLLOW-ON OFFERINGS OF EQUITY SECURITIES OF COMPANIES OF COMPARABLE SIZE,
MATURITY AND LINES OF BUSINESS, (B) PROVIDE ACCOUNTANT’S “COMFORT” LETTERS IN
CUSTOMARY FORM FOR UNDERWRITTEN FOLLOW-ON OFFERINGS OF EQUITY SECURITIES OF
COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS, (C) PROVIDE
DISCLOSURE OPINIONS OF NATIONALLY RECOGNIZED OUTSIDE COUNSEL TO PARTY B AS ARE
CUSTOMARILY REQUESTED IN CONNECTION WITH UNDERWRITTEN FOLLOW-ON OFFERS OF EQUITY
SECURITIES OF COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS, (D)
PROVIDE OTHER CUSTOMARY OPINIONS, CERTIFICATES AND CLOSING DOCUMENTS CUSTOMARY
IN FORM FOR UNDERWRITTEN FOLLOW-ON OFFERS OF EQUITY SECURITIES OF COMPANIES OF
COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS AND (E) AFFORD PARTY A A
REASONABLE OPPORTUNITY TO CONDUCT A “DUE DILIGENCE” INVESTIGATION WITH RESPECT
TO PARTY B CUSTOMARY IN SCOPE FOR UNDERWRITTEN FOLLOW-ON OFFERS OF EQUITY
SECURITIES OF COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS;
PROVIDED, HOWEVER, THAT IF PARTY A, IN ITS SOLE REASONABLE DISCRETION, IS NOT
SATISFIED WITH ACCESS TO DUE DILIGENCE MATERIALS, THE RESULTS OF ITS DUE
DILIGENCE INVESTIGATION, OR THE PROCEDURES AND DOCUMENTATION FOR THE REGISTERED
OFFERING REFERRED TO ABOVE, THEN CLAUSE (II) OF THIS SECTION 8(C) SHALL APPLY;
PROVIDED THAT PARTY A HAS GIVEN THE PARTY B REASONABLE NOTICE OF ITS
DETERMINATION AND

23

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PROVIDED THE PARTY B WITH REASONABLE OPPORTUNITY TO SATISFY PARTY A’S CONCERNS;
(II) IN ORDER TO ALLOW PARTY A TO SELL THE HEDGE SHARES IN A PRIVATE PLACEMENT
ENTER INTO A PRIVATE PLACEMENT AGREEMENT SUBSTANTIALLY SIMILAR TO PRIVATE
PLACEMENT PURCHASE AGREEMENTS CUSTOMARY FOR PRIVATE PLACEMENTS OF EQUITY
SECURITIES OF COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS, IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO PARTY A, INCLUDING CUSTOMARY
REPRESENTATIONS, COVENANTS, BLUE SKY AND OTHER GOVERNMENTAL FILINGS AND/OR
REGISTRATIONS, INDEMNITIES TO PARTY A, DUE DILIGENCE RIGHTS (FOR PARTY A OR ANY
DESIGNATED BUYER OF THE HEDGE SHARES FROM PARTY A), OPINIONS AND CERTIFICATES
AND SUCH OTHER DOCUMENTATION AS IS CUSTOMARY FOR PRIVATE PLACEMENTS AGREEMENTS,
ALL REASONABLY ACCEPTABLE TO PARTY A (IN WHICH CASE, THE CALCULATION AGENT SHALL
MAKE ANY ADJUSTMENTS TO THE TERMS OF THE TRANSACTION THAT ARE NECESSARY, IN ITS
REASONABLE JUDGMENT, TO COMPENSATE PARTY A FOR ANY DISCOUNT FROM THE PUBLIC
MARKET PRICE OF THE SHARES INCURRED ON THE SALE OF HEDGE SHARES IN A PRIVATE
PLACEMENT).

9.               ACCOUNT DETAILS:

Payments to Party A:

To be advised

 

 

Payments to Party B:

To be advised

 

 

Deliveries to Party B:

To be advised

 

10.         WAIVER OF JURY TRIAL.  EACH OF PARTY B AND PARTY A HEREBY
IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THE TRANSACTION OR THE ACTIONS OF PARTY B OF ITS
AFFILIATES OR PARTY A OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR
ENFORCEMENT HEREOF

11.         GOVERNING LAW.  THE AGREEMENT AND THIS CONFIRMATION SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.  THE PARTIES HERETO IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND
THE UNITED STATES COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH
ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN,
AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

12.         SPECIAL PROVISIONS FOR COUNTERPARTY PAYMENTS:  THE PARTIES HEREBY
AGREE THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN OR IN THE AGREEMENT,
IN THE EVENT THAT AN EARLY TERMINATION DATE (WHETHER AS A RESULT OF AN EVENT OF
DEFAULT OR A TERMINATION EVENT) OCCURS OR IS DESIGNATED WITH RESPECT TO ANY
TRANSACTION AND, AS A RESULT, PARTY B OWES TO PARTY A AN AMOUNT CALCULATED UNDER
SECTION 6(E) OF THE AGREEMENT (CALCULATED AS IF THE TRANSACTIONS BEING
TERMINATED ON SUCH EARLY TERMINATION DATE WERE THE SOLE TRANSACTIONS UNDER THE
AGREEMENT), SUCH AMOUNT SHALL BE DEEMED TO BE ZERO.

24

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Please confirm that the foregoing correctly sets forth the terms of your
agreement by signing and returning this Confirmation.

Very truly yours,

 

 

 

 

 

 

 

 

CAPITAL VENTURES INTERNATIONAL

 

 

BY: HEIGHTS CAPITAL MANAGEMENT, INC,

 

 

Its Authorized Agent

 

 

(Party A)

 

 

 

 

 

 

 

 

By:

 

/s/ Martin Kobinger

 

Name:

Martin Kobinger

 

Title:

Investment Manager

 

 

 

 

 

 

 

 

 

 

Confirmed as of the date first written above:

DEXCOM, INC. (Party B)

By:

/s/ Steven J. Kemper

 

Name:

Steven J. Kemper

Title:

Chief Financial Officer

 

25

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ANNEX I

Matters to be covered in Opinion of Counsel to the Issuer (the “Party B”)

1.             The Party B is validly existing as a corporation in good standing
under the laws of the State of Delaware.

2.             The Party B has the requisite corporate power and authority to
enter into the Issuer Call Option Transaction (for purposes of this Annex 1, the
“Agreement”) and to carry out the Transactions contemplated thereby.

3.             The execution and delivery by the Party B of the Agreement, and
the performance by the Party B of its obligations under the Agreement, have been
duly authorized by all necessary corporate action on the part of the Party B.

4.             The Issuer Call Option Transaction has been duly authorized,
executed and delivered by the Party B.

5.             No consent, approval or authorization of, or registration, filing
or declaration with, any governmental or public body or authority is required in
connection with the execution, delivery or performance by the Party B of the
Agreement.

6.             The execution, delivery and performance by the Party B of the
Issuer Call Option Transaction and compliance by the Party B with the terms and
provisions thereof will not, whether with or without the giving of notice or
lapse of time or both, result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (A) any material indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate
charter or by-laws, or any other agreement or instrument to which the Party B or
any subsidiary is bound or by which the Party B or any subsidiary or any of
their respective properties may be bound or affected [agreements to be listed on
a schedule], or (B) any Delaware or federal law, statute, rule, regulation or
order or any judgment, order, writ or decree of any governmental agency or body
or any court having jurisdiction over the Party B or any of its properties.

7.             Neither the Party B nor any subsidiary is an “investment company”
or a company “controlled” by an “investment company”, in each case within the
meanings ascribed to such terms in the Investment Company Act of 1940, as
amended, nor is the Party B or any subsidiary subject to regulation under said
Act.

 

26

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Issuer Call Option Transaction

March 6, 2007

To:                    DexCom, Inc.

5555 Oberlin Drive

San Diego, CA 92121

Attention: Steven J. Kemper, Chief Financial Officer

From:            Capital Ventures International

By: Heights Capital Management, Inc., Its Authorized Agent

101 California Street, Suite 3250

San Francisco, CA 94111

Ladies and Gentlemen:

The purpose of this letter agreement (this “Confirmation”) is to confirm the
terms and conditions of the Transaction entered into between Party A and Party B
on the Trade Date specified below (the “Transaction”). This Confirmation
constitutes a “Confirmation” as referred to in the Agreement specified below.

1.               THIS CONFIRMATION IS SUBJECT TO, AND INCORPORATES, THE
DEFINITIONS AND PROVISIONS OF THE 2000 ISDA DEFINITIONS (INCLUDING THE ANNEX
THERETO) (THE “2000 DEFINITIONS”) AND THE DEFINITIONS AND PROVISIONS OF THE 2002
ISDA EQUITY DERIVATIVES DEFINITIONS (THE “EQUITY DEFINITIONS”, AND TOGETHER WITH
THE 2000 DEFINITIONS, THE “DEFINITIONS”), IN EACH CASE AS PUBLISHED BY THE
INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC. (“ISDA”).  IN THE EVENT OF
ANY INCONSISTENCY BETWEEN THE 2000 DEFINITIONS AND THE EQUITY DEFINITIONS, THE
EQUITY DEFINITIONS WILL GOVERN.

This Confirmation evidences a complete and binding agreement between Party A and
Party B as to the terms of the Transaction to which this Confirmation relates. 
The parties may agree to negotiate an agreement in the form of the ISDA Form. 
Until any such time, this Confirmation, together with all other documents
referring to the ISDA Form (each a “Confirmation”) confirming Transactions
entered into between us (notwithstanding anything to the contrary in a
Confirmation), shall supplement, form a part of, and be subject to an agreement
in the form of the ISDA Form as if we had executed an agreement in such form
(but without any election in the Schedule) on the Trade Date of the first such
Transaction between us.  This Confirmation shall be subject to an agreement (the
“Agreement”) in the form of the 2002 ISDA Master Agreement (the “ISDA Form”) as
if Party A and Party B had executed an agreement in such form (without any
Schedule but with the elections set forth in this Confirmation).  For the
avoidance of doubt, the Transaction shall be the only transaction under the
Agreement.

All provisions contained in, or incorporated by reference to, the Agreement will
govern this Confirmation except as expressly modified herein.  In the event of
any inconsistency between this Confirmation and either the Definitions or the
Agreement, this Confirmation shall govern.

In this Confirmation, “Party A” means Capital Ventures International, and
“Party B” means DexCom, Inc.

2.               THE GENERAL TERMS RELATING TO THE TRANSACTION ARE AS FOLLOWS:

Option Style:

European

 

 

Option Seller:

Party A

 

 

Option Buyer:

Party B

 

27

--------------------------------------------------------------------------------

 

 

Option Multiple Exercise:

Not Applicable

 

 

Strike Price:

$7.80

 

 

Cap Price:

$14.00

 

 

Trade Date:

March 6, 2007

 

 

Effective Date:

March 9, 2007

 

 

Option Type:

Call

 

 

Issuer:

DexCom, Inc.

 

 

Shares:

The shares of common stock of the Issuer, par value $0.001 per Share (Ticker
Symbol: DXCM)

 

 

Number of Options:

1,923,076

 

 

Option Entitlement:

One Share per Option

 

 

Market Disruption Event:

Section 6.3(a) of the Equity Definitions is hereby amended by replacing
clause (ii) thereof in its entirety with the following: “(ii) an Exchange
Disruption, or” and inserting immediately following clause (iii) thereof the
following: “; in each case that the Calculation Agent determines is material.”

 

 

Relevant Price:

VWAP Price

 

 

VWAP Price:

The “Volume Weighted Average Price” per Share on such day, as displayed on
Bloomberg Page “DXM.UQ<equity>AQR” (or any successor thereto) for the Issuer
with respect to the period from 9:30 a.m. to 4:00 p.m. (New York City time) on
such day, as determined by the Calculation Agent. If no price at such time is
available, or there is a Market Disruption Event on such Expiration Date, the
Calculation Agent shall determine the VWAP Price in a commercially reasonable
manner.

 

 

Premium:

$3,242,722.

 

 

 

 

Premium Payment Date:

March 9, 2007

 

 

Exchange:

The Nasdaq Global market

 

28

--------------------------------------------------------------------------------

 

Related Exchange:

Any exchange on which options or futures on the relevant Shares are traded.

 

 

Clearance System:

DTC

 

 

Calculation Agent:

Party A. Whenever the Calculation Agent acts or makes a determination, it will
do so in good faith and in a commercially reasonable manner consistent with its
obligations under the Equity Definitions.

 

 

Procedure for Exercise:

 

 

 

Expiration Time:

The close of trading on the Exchange

 

 

Expiration Date:

Each of the thirty (30) consecutive Scheduled Trading Days occurring immediately
prior to September 6, 2008. If any Expiration Date shall not be an Exchange
Business Day, such Expiration Date shall be postponed to the immediately
succeeding Exchange Business Day and the corresponding Expiration Date for each
subsequent Daily Number of Options shall be moved back an equal number of
Exchange Business Days reflecting such postponement.

 

 

Daily Number of Options:

One-thirtieth of the Number of Options.

 

 

Automatic Exercise:

Applicable

 

 

Settlement Terms:

 

 

 

Settlement Method Election:

Applicable; provided (i) that any such election shall apply to all Exercise
Dates (in accordance with the terms below) and may be for Cash Settlement or Net
Share Settlement, (ii) that in order to elect Net Share Settlement, Party B must
provide written notice to Party A at least ten (10) Exchange Business Days prior
to the first Exercise Date, and (iii) absent such an election, the Transaction
shall be settled on a Cash Settlement basis.

 

 

Settlement Date:

For all Daily Number Options exercised or deemed exercised on each Expiration
Date, the third Exchange Business Day following the final Expiration Date.

 

 

Cash Settlement:

If Cash Settlement applies, then, notwithstanding any contrary terms of Article
9 of the Equity Definitions, for any Daily Number of Options exercised or deemed

 

29

--------------------------------------------------------------------------------

 

exercised on any Exercise Date, Party A shall pay, on the Settlement Date, the
Cash Settlement Amount to Party B. The Cash Settlement Amount shall be
determined as follows:

 

 

 

(i)

If the Settlement Price is less than or equal to the Strike Price, then the Cash
Settlement Amount shall equal zero.

 

 

 

 

(ii)

If the Settlement Price is greater than the Strike Price but less than the Cap
Price, then the Cash Settlement Amount shall equal the product of (i) the Daily
Number of Options, (ii) the Option Entitlement and (iii) the Settlement Price
minus the Strike Price.

 

 

 

 

If the Settlement Price is greater than or equal to the Cap Price, then the Cash
Settlement Amount shall equal the product of (i) the Daily Number of Options,
(ii) the Option Entitlement and (iii) the Cap Price minus the Strike Price. For
the avoidance of any doubt, Party B shall not owe to Party A any cash amount as
a result of Cash Settlement.

 

 

Net Share Settlement:

If Net Share Settlement applies, then Party A shall deliver a number of whole
Shares equal to (x) the Cash Settlement Amount divided by (y) the stock price of
the Shares as determined by Party A (such quotient to be rounded down to the
nearest whole deliverable share) (the “Number of Whole Shares”). Party A also
shall pay an additional cash amount equal to the cash value of any fractional
Shares remaining after rounding down to the Number of Whole Shares. The delivery
of the Number of Whole Shares and the cash value of any fractional Shares shall
be made on the Settlement Date. For the avoidance of doubt, Party B shall not
owe to Party A any Shares as a result of any Net Share Settlement of the
transaction.

 

 

Cash Settlement Payment Date:

For all Daily Number of Options exercised or deemed exercised on each Exercise
Date, the third Exchange Business Day following the final Expiration Date.

 

 

Settlement Currency:

USD

 

 

Settlement Price:

For any Daily Number of Options, the VWAP Price of the Shares on the relevant
Expiration Date determined by Calculation Agent at the Expiration Time on the
relevant Expiration Date for such Daily Number of Options. If no

 

30

--------------------------------------------------------------------------------

 

price at such time is available, or there is a Market Disruption Event on such
Expiration Date, the Calculation Agent shall determine the Settlement Price in a
commercially reasonable manner.

 

 

Failure to Deliver:

Applicable

 

 

Other Applicable Provisions:

To the extent Party A is obligated to deliver Shares hereunder, the provisions
of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 (except that the Representation and
Agreement contained in Section 9.11 of the Equity Definitions shall be modified
by excluding any representations therein relating to restrictions, obligations,
limitations or requirements under applicable securities laws as a result of the
fact that Party B is the issuer of the Shares) and 9.12 of the Equity
Definitions will be applicable as if “Physical Settlement” applied to the
Transaction.

 

 

Restricted Certificated Shares:

Notwithstanding anything to the contrary in the Equity Definitions, Party A may
deliver, in whole or in part, any Shares required to be delivered to Party B
hereunder in the form of restricted securities under the Securities Act (as
defined below) and/or in certificated form in lieu of delivery through the
Clearance System. With respect to any such certificated Shares, the
Representation and Agreement contained in Section 9.11 of the Equity Definitions
shall be modified by deleting the remainder of the provision after the word
“encumbrance” in the fourth line thereof.

 

 

Adjustments:

 

 

 

Method of Adjustment:

Calculation Agent Adjustment

 

 

Extraordinary Events:

 

 

 

Consequences of Merger Events and Tender Offers:

 

 

 

(a) Share-for-Share:

Modified Calculation Agent Adjustment

 

 

(b) Share-for-Other:

Cancellation and Payment (Calculation Agent Determination)

 

 

(c) Share-for-Combined:

Component Adjustment; provided that Cancellation and Payment (Calculation Agent
Determination) shall apply in

 

31

--------------------------------------------------------------------------------

 

the event that the Calculation Agent determines that no adjustments that it
could make with respect to the Transaction to account for the Merger Event or
Tender Offer, as applicable, would produce a commercially reasonable result.

Tender Offer:

Applicable

 

 

Delisting, Nationalization or Insolvency:

Cancellation and Payment (Calculation Agent Determination)

 

 

Additional Disruption Events:

(a) Change in Law:

Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is
hereby amended by (i) replacing the phrase “the interpretation” in the third
line thereof with the phrase “or announcement or statement of the formal or
informal interpretation” and (ii) immediately following the word “Transaction”
in clause (X) thereof, adding the phrase “in the manner contemplated by the
Hedging Party on the Trade Date”.

 

 

(b) Failure to Deliver:

Applicable

 

 

(c) Insolvency Filing:

Applicable

 

 

(d) Hedging Disruption:

Applicable

 

 

(e) Increased Cost of Hedging:

Applicable

 

 

(f) Loss of Stock Borrower:

Applicable

 

 

Maximum Stock Loan Rate:

2%

 

 

Hedging Party:

For all applicable Additional Disruption Events, Party A

 

 

Determining Party:

For all applicable Additional Disruption Events, Party A

 

 

Non-Reliance:

Applicable

 

 

Agreements and Acknowledgments Regarding Hedging Activities:

Applicable

 

 

Additional Acknowledgments:

Applicable

 

 

 

3.               IF ANY OF THE TRANSACTIONS CONTEMPLATED BY THE PURCHASE
AGREEMENT AMONG PARTY B AND PIPER JAFFRAY & CO., DATED AS OF MARCH 6, 2007 (THE
“PURCHASE AGREEMENT”) RELATING TO THE PURCHASE OF 4.75% CONVERTIBLE SENIOR NOTES
DUE

32

--------------------------------------------------------------------------------

2027 (THE “NOTES”) OF PARTY B BY PIPER JAFFRAY & CO. SHALL FAIL TO CLOSE AS A
RESULT OF A BREACH BY PARTY B OF ITS OBLIGATIONS THEREUNDER, IN WHICH CASE THE
ENTIRETY OF THIS TRANSACTION SHALL TERMINATE AUTOMATICALLY AND PARTY B SHALL BE
THE SOLE AFFECTED PARTY AND THIS TRANSACTION SHALL BE THE SOLE AFFECTED
TRANSACTION. IF THE TRANSACTIONS CONTEMPLATED BY THE PURCHASE AGREEMENT SHALL
FAIL TO CLOSE FOR ANY REASON ON OR BEFORE THE EFFECTIVE DATE OTHER THAN THOSE
SET FORTH IN THE PREVIOUS SENTENCE, THEN THE ENTIRETY OF THIS TRANSACTION SHALL
TERMINATE AUTOMATICALLY AND NO PAYMENTS SHALL BE REQUIRED HEREUNDER.  IF PARTY A
DOES NOT PURCHASE AT LEAST $25.0 MILLION FACE AMOUNT OF NOTES ON OR BEFORE THE
EFFECTIVE DATE, THEN, AT THE OPTION OF PARTY A, THE ENTIRETY OF THIS TRANSACTION
SHALL TERMINATE AND NO PAYMENTS SHALL BE REQUIRED HEREUNDER.  FOR PURPOSES OF
DETERMINING LOSS IN RELATION TO A TERMINATION UNDER THE FIRST SENTENCE OF THIS
SECTION 3, IT SHALL BE ASSUMED THAT ALL CONDITIONS TO THE EXERCISE OF THESE
OPTIONS HAVE OCCURRED.

4.               CALCULATIONS AND PAYMENT ON EARLY TERMINATION AND ON CERTAIN
EXTRAORDINARY EVENTS.  IF PARTY A SHALL OWE PARTY B ANY AMOUNT PURSUANT TO
SECTIONS 12.6, 12.7 OR 12.9 OF THE EQUITY DEFINITIONS (EXCEPT IN THE EVENT OF AN
INSOLVENCY OR A NATIONALIZATION, IN EACH CASE, IN WHICH THE CONSIDERATION OR
PROCEEDS TO BE PAID TO HOLDERS OF SHARES CONSISTS SOLELY OF CASH) OR PURSUANT TO
SECTION 6(D)(II) OF THE AGREEMENT (EXCEPT IN THE EVENT OF AN EVENT OF DEFAULT IN
WHICH PARTY B IS THE DEFAULTING PARTY OR A TERMINATION EVENT IN WHICH PARTY B IS
THE AFFECTED PARTY, THAT RESULTED FROM AN EVENT OR EVENTS WITHIN PARTY B’S
CONTROL) (A “PAYMENT OBLIGATION”), PARTY B SHALL HAVE THE RIGHT, IN ITS SOLE
DISCRETION, TO REQUIRE PARTY A TO SATISFY ANY SUCH PAYMENT OBLIGATION BY THE
SHARE TERMINATION ALTERNATIVE (AS DEFINED BELOW) BY GIVING IRREVOCABLE
TELEPHONIC NOTICE TO PARTY A, CONFIRMED IN WRITING WITHIN ONE SCHEDULED TRADING
DAY, BETWEEN THE HOURS OF 9:00 A.M. AND 12:00 P.M. NEW YORK CITY TIME ON THE
RELEVANT ANNOUNCEMENT DATE OR EARLY TERMINATION DATE, AS APPLICABLE (“NOTICE OF
SHARE TERMINATION”).  UPON SUCH NOTICE OF SHARE TERMINATION, THE FOLLOWING
PROVISIONS SHALL APPLY ON THE SCHEDULED TRADING DAY IMMEDIATELY FOLLOWING THE
RELEVANT ANNOUNCEMENT DATE OR EARLY TERMINATION DATE, AS APPLICABLE:

Share Termination Alternative:

Applicable and means that Party A shall deliver to Party B the Share Termination
Delivery Property on the date on which the Payment Obligation would otherwise be
due pursuant to Section 12.7 or 12.9 of the Equity Definitions or Section
6(d)(ii) of the Agreement, as applicable (the “Share Termination Payment Date”),
in satisfaction of the Payment Obligation

 

 

Share Termination Delivery Property:

A number of Share Termination Delivery Units, as calculated by the Calculation
Agent, equal to the Payment Obligation divided by the Share Termination Unit
Price. The Calculation Agent shall adjust the Share Termination Delivery
Property by replacing any fractional portion of a security therein with an
amount of cash equal to the value of such fractional security based on the
values used to calculate the Share Termination Unit Price

 

 

Share Termination Unit Price:

The value of property contained in one Share Termination Delivery Unit on the
date such Share Termination Delivery Units are to be delivered as Share
Termination Delivery Property, as determined by the Calculation Agent in its
discretion by commercially reasonable means and notified by the Calculation
Agent to Party A at the time of notification of the Payment Obligation

 

 

Share Termination Delivery Unit:

In the case of a Termination Event, Event of Default or Delisting, one Share or,
in the case of an Insolvency or Nationalization, a unit consisting of the number
or amount of each type of property received by a holder of one Share (without
consideration of any requirement to pay cash or other consideration in lieu of
fractional amounts of any securities) in such Insolvency or Nationalization. If
such Insolvency or Nationalization involves a choice of consideration to be
received by

33

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holders, such holder shall be deemed to have elected to receive the maximum
possible amount of cash.

 

 

Failure to Deliver:

Applicable

 

 

Other applicable provisions:

If Share Termination Alternative is applicable, the provisions of Sections 9.8,
9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if
“Physical Settlement” were applicable, except that all references to “Shares”
shall be read as references to “Share Termination Delivery Units”; provided that
the Representation and Agreement contained in Section 9.11 of the Equity
Definitions shall be modified by excluding any representations therein relating
to restrictions, obligations, limitations or requirements under applicable
securities laws as a result of the fact that Buyer is the issuer of any Share
Termination Delivery Units (or any part thereof).

 

5.               ADDITIONAL AGREEMENTS, REPRESENTATIONS AND COVENANTS:

(A)          PARTY B HEREBY REPRESENTS AND WARRANTS TO PARTY A, ON EACH DAY FROM
THE TRADE DATE TO AND INCLUDING THE BUSINESS DAY FOLLOWING THE DATE ON WHICH
PARTY A IS ABLE TO INITIALLY COMPLETE A HEDGE OF ITS POSITION CREATED BY THIS
TRANSACTION, THAT PARTY B HAS PUBLICLY DISCLOSED ALL MATERIAL INFORMATION
NECESSARY FOR PARTY B TO BE ABLE TO PURCHASE OR SELL SHARES IN COMPLIANCE WITH
APPLICABLE FEDERAL SECURITIES LAWS AND THAT IT HAS PUBLICLY DISCLOSED ALL
MATERIAL INFORMATION WITH RESPECT TO ITS CONDITION (FINANCIAL OR OTHERWISE).

(B)         IF PARTY B WOULD BE OBLIGATED TO RECEIVE CASH FROM PARTY A PURSUANT
TO THE TERMS OF THIS AGREEMENT FOR ANY REASON WITHOUT HAVING HAD THE RIGHT TO
ELECT TO RECEIVE SHARES IN SATISFACTION OF SUCH PAYMENT OBLIGATION, THEN PARTY B
MAY ELECT THAT PARTY A DELIVER TO PARTY B A NUMBER OF SHARES HAVING A CASH VALUE
EQUAL TO THE AMOUNT OF SUCH PAYMENT OBLIGATION (SUCH NUMBER OF SHARES TO BE
DELIVERED TO BE DETERMINED BY THE CALCULATION AGENT ACTING IN A COMMERCIALLY
REASONABLE MANNER TO DETERMINE THE NUMBER OF SHARES THAT COULD BE PURCHASED OVER
A REASONABLE PERIOD OF TIME WITH THE CASH EQUIVALENT OF SUCH PAYMENT
OBLIGATION). SETTLEMENT RELATING TO ANY DELIVERY OF SHARES PURSUANT TO THIS
PARAGRAPH (B) SHALL OCCUR WITHIN A REASONABLE PERIOD OF TIME.

(C)          PARTY B SHALL DELIVER TO THE PARTY A AN OPINION OR OPINIONS OF
COUNSEL WITH RESPECT TO THE MATTERS SET FORTH ON ANNEX 1 HERETO ON OR BEFORE THE
EFFECTIVE DATE.

(D)         IN ADDITION TO THE REPRESENTATIONS AND WARRANTIES IN THE AGREEMENT
AND THOSE CONTAINED ELSEWHERE HEREIN, PARTY B REPRESENTS AND WARRANTS TO AND FOR
THE BENEFIT OF, AND AGREES WITH, PARTY A AS FOLLOWS:

(i)            (A) On the Effective Date, the Shares or securities that are
convertible into, or exchangeable or exercisable for Shares, are not, and shall
not be, subject to a “restricted period,” as such term is defined in
Regulation M (“Regulation M”) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and (B) Party B shall not engage in any
“distribution,” as such term is defined in Regulation M, other than a
distribution meeting the requirements of the exceptions set forth in sections
101(b)(10) and 102(b)(7) of Regulation M, until the second Exchange Business Day
immediately following the Trade Date.

(ii)           Party B is not entering into this Confirmation to create actual
or apparent trading activity in the Shares (or any security convertible into or
exchangeable for Shares) or to manipulate the price of the Shares (or any
security convertible into or exchangeable for Shares) or otherwise in violation
of the Exchange Act.

34

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(iii)          Without limiting the generality of Section 3(a)(iii) of the
Agreement, the Transaction will not violate Rule 13e-1 or Rule 13e-4 under the
Exchange Act.

(iv)          Prior to the Effective Date, Party B shall deliver to Party A a
resolution of Party B’s board of directors authorizing the Transaction and such
other certificate or certificates as Party A shall reasonably request.

(v)           Party B is not, and after giving effect to the transactions
contemplated hereby will not be, required to register as an “investment company”
as such term is defined in the Investment Company Act of 1940, as amended.

(vi)          On the Trade Date (A) the assets of Party B at their fair
valuation exceed the liabilities of Party B, including contingent liabilities,
(B) the capital of Party B is adequate to conduct the business of Party B and
(C) Party B has the ability to pay its debts and obligations as such debts
mature and does not intend to, or does not believe that it will, incur debt
beyond its ability to pay as such debts mature.

(vii)         Party B acknowledges its responsibilities under applicable
federal securities laws, including without limitation Rule 10b-5 under the
Exchange Act, in relation to the Transaction.

(E)          EACH OF PARTY A AND PARTY B AGREES AND REPRESENTS THAT IT IS AN
“ELIGIBLE CONTRACT PARTICIPANT” AS DEFINED IN SECTION 1A(12) OF THE U.S.
COMMODITY EXCHANGE ACT, AS AMENDED.  THE PARTIES HERETO FURTHER AGREE AND
ACKNOWLEDGE (A) THAT THIS CONFIRMATION IS (I) A “SECURITIES CONTRACT,” AS SUCH
TERM IS DEFINED IN SECTION 741(7) OF THE BANKRUPTCY CODE, WITH RESPECT TO WHICH
EACH PAYMENT AND DELIVERY HEREUNDER IS A “SETTLEMENT PAYMENT,” AS SUCH TERM IS
DEFINED IN SECTION 741(8) OF THE BANKRUPTCY CODE, AND (II) A “SWAP AGREEMENT,”
AS SUCH TERM IS DEFINED IN SECTION 101(53B) OF THE BANKRUPTCY CODE, WITH RESPECT
TO WHICH EACH PAYMENT AND DELIVERY HEREUNDER IS A “TRANSFER,” AS SUCH TERM IS
DEFINED IN SECTION 101(54) OF THE BANKRUPTCY CODE, AND (B) THAT PARTY A IS
ENTITLED TO THE PROTECTIONS AFFORDED BY, AMONG OTHER SECTIONS, SECTIONS
362(B)(6), 362(B)(17), 546(E), 546(G), 555 AND 560 OF THE BANKRUPTCY CODE.

(F)            PARTY B INTENDS THAT ALL DOCUMENTATION WITH RESPECT TO THIS
TRANSACTION IS INTENDED TO QUALIFY THIS TRANSACTION AS AN EQUITY INSTRUMENT FOR
PURPOSES OF SFAS 150 AND EITF 00-19.  PARTY A ACKNOWLEDGES AND AGREES THAT THIS
CONFIRMATION IS NOT INTENDED TO CONVEY TO IT RIGHTS WITH RESPECT TO THE
TRANSACTION THAT ARE SENIOR TO THE CLAIMS OF COMMON STOCKHOLDERS IN THE EVENT OF
PARTY B’S BANKRUPTCY.  FOR THE AVOIDANCE OF DOUBT, THE PARTIES AGREE THAT THE
PRECEDING SENTENCE SHALL NOT APPLY AT ANY TIME OTHER THAN DURING PARTY B’S
BANKRUPTCY TO ANY CLAIM ARISING AS A RESULT OF A BREACH BY PARTY B OF ANY OF ITS
OBLIGATIONS UNDER THIS CONFIRMATION OR THE AGREEMENT.

6.               STAGGERED SETTLEMENT:

If Party A determines reasonably and in good faith that the sum of (i) the
number of Shares required to be delivered to Party B hereunder on any Cash
Settlement Payment Date, and (ii) any other Shares beneficially owned by Party
A, would exceed 4.9% of all outstanding Shares, then Party A may, by notice to
Party B on or prior to such Cash Settlement Payment Date (a “Nominal Settlement
Date”), elect to deliver the Shares comprising the related Cash Settlement
Amount (in the case of Net Share Settlement) on two or more dates (each, a
“Staggered Settlement Date”) as follows:

(A)          IN SUCH NOTICE, PARTY A WILL SPECIFY TO PARTY B THE RELATED
STAGGERED SETTLEMENT DATES (THE FIRST OF WHICH WILL BE SUCH NOMINAL SETTLEMENT
DATE AND THE LAST OF WHICH WILL BE NO LATER THAN THE TWENTIETH (20TH) EXCHANGE
BUSINESS DAY FOLLOWING SUCH NOMINAL SETTLEMENT DATE) AND THE NUMBER OF SHARES
THAT IT WILL DELIVER ON EACH STAGGERED SETTLEMENT DATE;

35

--------------------------------------------------------------------------------

(B)         THE AGGREGATE NUMBER OF SHARES THAT PARTY A WILL DELIVER TO PARTY B
HEREUNDER ON ALL SUCH STAGGERED SETTLEMENT DATES WILL EQUAL THE NUMBER OF SHARES
THAT PARTY A WOULD OTHERWISE BE REQUIRED TO DELIVER ON SUCH NOMINAL SETTLEMENT
DATE; AND

(C)          IF THE NET SHARE SETTLEMENT TERMS SET FORTH ABOVE WERE TO APPLY ON
THE NOMINAL SETTLEMENT DATE, THEN THE NET SHARE SETTLEMENT TERMS WILL APPLY ON
EACH STAGGERED SETTLEMENT DATE, EXCEPT THAT THE SHARES COMPRISING THE CASH
SETTLEMENT AMOUNT WILL BE ALLOCATED AMONG SUCH STAGGERED SETTLEMENT DATES AS
SPECIFIED BY PARTY A IN THE NOTICE REFERRED TO IN CLAUSE (A) ABOVE.

Notwithstanding anything herein to the contrary, Party A shall be entitled to
deliver Shares to Party B from time to time prior to the date on which Party A
would be obligated to deliver them to Party B pursuant to the Net Share
Settlement terms set forth above, and Party B agrees to credit all such early
deliveries against Party A’s obligations hereunder in the direct order in which
such obligations arise. To the extent Party A receives or is entitled to receive
any distribution or payment in respect of Shares by reason of Party A’s being a
holder of record of such Shares on any date after the Nominal Settlement Date
which Party A would have delivered to Party B on such Nominal Settlement Date
but for the provisions of this Section 6, Party A shall deliver such
distribution or payment to Party B at the time Party A delivers the related
Shares to Party B in accordance with this Section 6, if such distribution or
payment has already been received by Party A at such time, or within a
reasonable period of time following Party A’s receipt of the distribution or
payment, if such distribution or payment has not already been received by
Party A at the time Party A delivers the related Shares to Party B in accordance
with this Section 6.

7.               TRANSFER.  PARTY B SHALL NOT TRANSFER OR ASSIGN ITS RIGHTS OR
OBLIGATIONS HEREUNDER AND UNDER THE AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT
OF PARTY A.  PARTY A MAY TRANSFER OR ASSIGN WITHOUT PARTY B’S CONSENT ITS RIGHTS
AND OBLIGATIONS HEREUNDER AND UNDER THE AGREEMENT, IN WHOLE OR IN PART, TO (I)
ANY OF ITS AFFILIATES OR (II) ANY THIRD PARTY WITH AN INVESTMENT GRADE RATING
FOR ITS LONG TERM, UNSECURED AND UNSUBORDINATED INDEBTEDNESS BY STANDARD AND
POOR’S RATING GROUP, INC. OR ITS SUCCESSOR (“S&P”), OR BY MOODY’S INVESTOR
SERVICE, INC. (“MOODY’S”) OR, IF EITHER S&P OR MOODY’S DO NOT RATE SUCH DEBT, AT
LEAST AN EQUIVALENT RATING OR BETTER BY A SUBSTITUTE AGENCY RATING MUTUALLY
AGREED BY PARTY B AND PARTY A.

8.               DISPOSITION OF HEDGE SHARES.  PARTY B HEREBY AGREES THAT IF, IN
THE GOOD FAITH REASONABLE JUDGMENT OF PARTY A OR ISSUER, BASED ON THE ADVICE OF
COUNSEL, THE SHARES (THE “HEDGE SHARES”) ACQUIRED BY PARTY A FOR THE PURPOSE OF
HEDGING ITS OBLIGATIONS PURSUANT TO THE TRANSACTION CANNOT BE SOLD IN THE PUBLIC
MARKET BY PARTY A WITHOUT REGISTRATION UNDER THE SECURITIES ACT, PARTY B SHALL,
AT ITS ELECTION: (I) IN ORDER TO ALLOW PARTY A TO SELL THE HEDGE SHARES IN A
REGISTERED OFFERING, MAKE AVAILABLE TO PARTY A AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT TO COVER THE RESALE OF SUCH HEDGE SHARES AND
(A) ENTER INTO AN AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO PARTY A,
SUBSTANTIALLY IN THE FORM OF AN UNDERWRITING AGREEMENT FOR UNDERWRITTEN
FOLLOW-ON OFFERINGS OF EQUITY SECURITIES OF COMPANIES OF COMPARABLE SIZE,
MATURITY AND LINES OF BUSINESS, (B) PROVIDE ACCOUNTANT’S “COMFORT” LETTERS IN
CUSTOMARY FORM FOR UNDERWRITTEN FOLLOW-ON OFFERINGS OF EQUITY SECURITIES OF
COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS, (C) PROVIDE
DISCLOSURE OPINIONS OF NATIONALLY RECOGNIZED OUTSIDE COUNSEL TO PARTY B AS ARE
CUSTOMARILY REQUESTED IN CONNECTION WITH UNDERWRITTEN FOLLOW-ON OFFERS OF EQUITY
SECURITIES OF COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS, (D)
PROVIDE OTHER CUSTOMARY OPINIONS, CERTIFICATES AND CLOSING DOCUMENTS CUSTOMARY
IN FORM FOR UNDERWRITTEN FOLLOW-ON OFFERS OF EQUITY SECURITIES OF COMPANIES OF
COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS AND (E) AFFORD PARTY A A
REASONABLE OPPORTUNITY TO CONDUCT A “DUE DILIGENCE” INVESTIGATION WITH RESPECT
TO PARTY B CUSTOMARY IN SCOPE FOR UNDERWRITTEN FOLLOW-ON OFFERS OF EQUITY
SECURITIES OF COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS;
PROVIDED, HOWEVER, THAT IF PARTY A, IN ITS SOLE REASONABLE DISCRETION, IS NOT
SATISFIED WITH ACCESS TO DUE DILIGENCE MATERIALS, THE RESULTS OF ITS DUE
DILIGENCE INVESTIGATION, OR THE PROCEDURES AND DOCUMENTATION FOR THE REGISTERED
OFFERING REFERRED TO ABOVE, THEN CLAUSE (II) OF THIS SECTION 8(C) SHALL APPLY;
PROVIDED THAT PARTY A HAS GIVEN THE PARTY B REASONABLE NOTICE OF ITS
DETERMINATION AND

36

--------------------------------------------------------------------------------

PROVIDED THE PARTY B WITH REASONABLE OPPORTUNITY TO SATISFY PARTY A’S CONCERNS;
(II) IN ORDER TO ALLOW PARTY A TO SELL THE HEDGE SHARES IN A PRIVATE PLACEMENT
ENTER INTO A PRIVATE PLACEMENT AGREEMENT SUBSTANTIALLY SIMILAR TO PRIVATE
PLACEMENT PURCHASE AGREEMENTS CUSTOMARY FOR PRIVATE PLACEMENTS OF EQUITY
SECURITIES OF COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS, IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO PARTY A, INCLUDING CUSTOMARY
REPRESENTATIONS, COVENANTS, BLUE SKY AND OTHER GOVERNMENTAL FILINGS AND/OR
REGISTRATIONS, INDEMNITIES TO PARTY A, DUE DILIGENCE RIGHTS (FOR PARTY A OR ANY
DESIGNATED BUYER OF THE HEDGE SHARES FROM PARTY A), OPINIONS AND CERTIFICATES
AND SUCH OTHER DOCUMENTATION AS IS CUSTOMARY FOR PRIVATE PLACEMENTS AGREEMENTS,
ALL REASONABLY ACCEPTABLE TO PARTY A (IN WHICH CASE, THE CALCULATION AGENT SHALL
MAKE ANY ADJUSTMENTS TO THE TERMS OF THE TRANSACTION THAT ARE NECESSARY, IN ITS
REASONABLE JUDGMENT, TO COMPENSATE PARTY A FOR ANY DISCOUNT FROM THE PUBLIC
MARKET PRICE OF THE SHARES INCURRED ON THE SALE OF HEDGE SHARES IN A PRIVATE
PLACEMENT).

9.               ACCOUNT DETAILS:

Payments to Party A:

To be advised

 

 

Payments to Party B:

To be advised

 

 

Deliveries to Party B:

To be advised

 

10.         WAIVER OF JURY TRIAL.  EACH OF PARTY B AND PARTY A HEREBY
IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THE TRANSACTION OR THE ACTIONS OF PARTY B OF ITS
AFFILIATES OR PARTY A OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR
ENFORCEMENT HEREOF

11.         GOVERNING LAW.  THE AGREEMENT AND THIS CONFIRMATION SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.  THE PARTIES HERETO IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND
THE UNITED STATES COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH
ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN,
AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

12.         SPECIAL PROVISIONS FOR COUNTERPARTY PAYMENTS:  THE PARTIES HEREBY
AGREE THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN OR IN THE AGREEMENT,
IN THE EVENT THAT AN EARLY TERMINATION DATE (WHETHER AS A RESULT OF AN EVENT OF
DEFAULT OR A TERMINATION EVENT) OCCURS OR IS DESIGNATED WITH RESPECT TO ANY
TRANSACTION AND, AS A RESULT, PARTY B OWES TO PARTY A AN AMOUNT CALCULATED UNDER
SECTION 6(E) OF THE AGREEMENT (CALCULATED AS IF THE TRANSACTIONS BEING
TERMINATED ON SUCH EARLY TERMINATION DATE WERE THE SOLE TRANSACTIONS UNDER THE
AGREEMENT), SUCH AMOUNT SHALL BE DEEMED TO BE ZERO.

Please confirm that the foregoing correctly sets forth the terms of your
agreement by signing and returning this Confirmation.

Very truly yours,

 

 

 

 

 

 

 

 

CAPITAL VENTURES INTERNATIONAL

 

 

BY: HEIGHTS CAPITAL MANAGEMENT, INC,

 

 

Its Authorized Agent

 

 

(Party A)

 

 

 

 

 

 

 

 

By:

 

/s/ Martin Kobinger

 

Name:

Martin Kobinger

 

Title:

Investment Manager

 

 

 

 

 

 

Confirmed as of the date first written above:

DEXCOM, INC. (Party B)

By:

Steven J. Kemper

 

Name:

Steven J. Kemper

Title:

Chief Financial Officer

 

37

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ANNEX I

Matters to be covered in Opinion of Counsel to the Issuer (the “Party B”)

1.             The Party B is validly existing as a corporation in good standing
under the laws of the State of Delaware.

2.             The Party B has the requisite corporate power and authority to
enter into the Issuer Call Option Transaction (for purposes of this Annex 1, the
“Agreement”) and to carry out the Transactions contemplated thereby.

3.             The execution and delivery by the Party B of the Agreement, and
the performance by the Party B of its obligations under the Agreement, have been
duly authorized by all necessary corporate action on the part of the Party B.

4.             The Issuer Call Option Transaction has been duly authorized,
executed and delivered by the Party B.

5.             No consent, approval or authorization of, or registration, filing
or declaration with, any governmental or public body or authority is required in
connection with the execution, delivery or performance by the Party B of the
Agreement.

6.             The execution, delivery and performance by the Party B of the
Issuer Call Option Transaction and compliance by the Party B with the terms and
provisions thereof will not, whether with or without the giving of notice or
lapse of time or both, result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (A) any material indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate
charter or by-laws, or any other agreement or instrument to which the Party B or
any subsidiary is bound or by which the Party B or any subsidiary or any of
their respective properties may be bound or affected [agreements to be listed on
a schedule], or (B) any Delaware or federal law, statute, rule, regulation or
order or any judgment, order, writ or decree of any governmental agency or body
or any court having jurisdiction over the Party B or any of its properties.

7.             Neither the Party B nor any subsidiary is an “investment company”
or a company “controlled” by an “investment company”, in each case within the
meanings ascribed to such terms in the Investment Company Act of 1940, as
amended, nor is the Party B or any subsidiary subject to regulation under said
Act.

38

--------------------------------------------------------------------------------

Issuer Call Option Transaction

March 6, 2007

To:

DexCom, Inc.

 

5555 Oberlin Drive

 

San Diego, CA 92121

 

Attention: Steven J. Kemper, Chief Financial Officer

 

From:

Capital Ventures International

 

By: Heights Capital Management, Inc., Its Authorized Agent

 

101 California Street, Suite 3250

 

San Francisco, CA 94111

 

 

 

 

Ladies and Gentlemen:

The purpose of this letter agreement (this “Confirmation”) is to confirm the
terms and conditions of the Transaction entered into between Party A and Party B
on the Trade Date specified below (the “Transaction”). This Confirmation
constitutes a “Confirmation” as referred to in the Agreement specified below.

1.               THIS CONFIRMATION IS SUBJECT TO, AND INCORPORATES, THE
DEFINITIONS AND PROVISIONS OF THE 2000 ISDA DEFINITIONS (INCLUDING THE ANNEX
THERETO) (THE “2000 DEFINITIONS”) AND THE DEFINITIONS AND PROVISIONS OF THE 2002
ISDA EQUITY DERIVATIVES DEFINITIONS (THE “EQUITY DEFINITIONS”, AND TOGETHER WITH
THE 2000 DEFINITIONS, THE “DEFINITIONS”), IN EACH CASE AS PUBLISHED BY THE
INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC. (“ISDA”).  IN THE EVENT OF
ANY INCONSISTENCY BETWEEN THE 2000 DEFINITIONS AND THE EQUITY DEFINITIONS, THE
EQUITY DEFINITIONS WILL GOVERN.

This Confirmation evidences a complete and binding agreement between Party A and
Party B as to the terms of the Transaction to which this Confirmation relates. 
The parties may agree to negotiate an agreement in the form of the ISDA Form. 
Until any such time, this Confirmation, together with all other documents
referring to the ISDA Form (each a “Confirmation”) confirming Transactions
entered into between us (notwithstanding anything to the contrary in a
Confirmation), shall supplement, form a part of, and be subject to an agreement
in the form of the ISDA Form as if we had executed an agreement in such form
(but without any election in the Schedule) on the Trade Date of the first such
Transaction between us.  This Confirmation shall be subject to an agreement (the
“Agreement”) in the form of the 2002 ISDA Master Agreement (the “ISDA Form”) as
if Party A and Party B had executed an agreement in such form (without any
Schedule but with the elections set forth in this Confirmation).  For the
avoidance of doubt, the Transaction shall be the only transaction under the
Agreement.

All provisions contained in, or incorporated by reference to, the Agreement will
govern this Confirmation except as expressly modified herein.  In the event of
any inconsistency between this Confirmation and either the Definitions or the
Agreement, this Confirmation shall govern.

In this Confirmation, “Party A” means Capital Ventures International, and
“Party B” means DexCom, Inc.

2.               THE GENERAL TERMS RELATING TO THE TRANSACTION ARE AS FOLLOWS:

Option Style:

European

 

 

Option Seller:

Party A

 

 

Option Buyer:

Party B

 

39

--------------------------------------------------------------------------------

 

Option Multiple Exercise:

Not Applicable

 

 

Strike Price:

$7.80

 

 

Cap Price:

$18.50

 

 

Trade Date:

March 6, 2007

 

 

Effective Date:

March 9, 2007

 

 

Option Type:

Call

 

 

Issuer:

DexCom, Inc.

 

 

Shares:

The shares of common stock of the Issuer, par value $0.001 per Share (Ticker
Symbol: DXCM)

 

 

Number of Options:

1,923,076

 

 

Option Entitlement:

One Share per Option

 

 

Market Disruption Event:

Section 6.3(a) of the Equity Definitions is hereby amended by replacing
clause (ii) thereof in its entirety with the following: “(ii) an Exchange
Disruption, or” and inserting immediately following clause (iii) thereof the
following: “; in each case that the Calculation Agent determines is material.”

 

 

Relevant Price:

VWAP Price

 

 

VWAP Price:

The “Volume Weighted Average Price” per Share on such day, as displayed on
Bloomberg Page “DXM.UQ<equity>AQR” (or any successor thereto) for the Issuer
with respect to the period from 9:30 a.m. to 4:00 p.m. (New York City time) on
such day, as determined by the Calculation Agent. If no price at such time is
available, or there is a Market Disruption Event on such Expiration Date, the
Calculation Agent shall determine the VWAP Price in a commercially reasonable
manner.

 

 

Premium:

$4,418,772.

 

 

Premium Payment Date:

March 9, 2007

 

 

Exchange:

The Nasdaq Global market

 

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Related Exchange:

Any exchange on which options or futures on the relevant Shares are traded.

 

 

Clearance System:

DTC

 

 

Calculation Agent:

Party A. Whenever the Calculation Agent acts or makes a determination, it will
do so in good faith and in a commercially reasonable manner consistent with its
obligations under the Equity Definitions.

Procedure for Exercise:

 

 

 

Expiration Time:

The close of trading on the Exchange

 

 

Expiration Date:

Each of the thirty (30) consecutive Scheduled Trading Days occurring immediately
prior to March 6, 2009. If any Expiration Date shall not be an Exchange Business
Day, such Expiration Date shall be postponed to the immediately succeeding
Exchange Business Day and the corresponding Expiration Date for each subsequent
Daily Number of Options shall be moved back an equal number of Exchange Business
Days reflecting such postponement.

 

 

Daily Number of Options:

One-thirtieth of the Number of Options.

 

 

Automatic Exercise:

Applicable

 

 

Settlement Terms:

 

 

 

Settlement Method Election:

Applicable; provided (i) that any such election shall apply to all Exercise
Dates (in accordance with the terms below) and may be for Cash Settlement or Net
Share Settlement, (ii) that in order to elect Net Share Settlement, Party B must
provide written notice to Party A at least ten (10) Exchange Business Days prior
to the first Exercise Date, and (iii) absent such an election, the Transaction
shall be settled on a Cash Settlement basis.

 

 

Settlement Date:

For all Daily Number Options exercised or deemed exercised on each Expiration
Date, the third Exchange Business Day following the final Expiration Date.

 

 

Cash Settlement:

If Cash Settlement applies, then, notwithstanding any contrary terms of Article
9 of the Equity Definitions, for any Daily Number of Options exercised or deemed

 

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exercised on any Exercise Date, Party A shall pay, on the Settlement Date, the
Cash Settlement Amount to Party B. The Cash Settlement Amount shall be
determined as follows:

 

 

 

(i)

If the Settlement Price is less than or equal to the Strike Price, then the Cash
Settlement Amount shall equal zero.

 

 

 

(ii)

If the Settlement Price is greater than the Strike Price but less than the Cap
Price, then the Cash Settlement Amount shall equal the product of (i) the Daily
Number of Options, (ii) the Option Entitlement and (iii) the Settlement Price
minus the Strike Price. .

 

 

 

If the Settlement Price is greater than or equal to the Cap Price, then the Cash
Settlement Amount shall equal the product of (i) the Daily Number of Options,
(ii) the Option Entitlement and (iii) the Cap Price minus the Strike Price. For
the avoidance of any doubt, Party B shall not owe to Party A any cash amount as
a result of Cash Settlement

 

 

Net Share Settlement:

If Net Share Settlement applies, then Party A shall deliver a number of whole
Shares equal to (x) the Cash Settlement Amount divided by (y) the stock price of
the Shares as determined by Party A (such quotient to be rounded down to the
nearest whole deliverable share) (the “Number of Whole Shares”). Party A also
shall pay an additional cash amount equal to the cash value of any fractional
Shares remaining after rounding down to the Number of Whole Shares. The delivery
of the Number of Whole Shares and the cash value of any fractional Shares shall
be made on the Settlement Date. For the avoidance of doubt, Party B shall not
owe to Party A any Shares as a result of any Net Share Settlement of the
transaction.

 

 

Cash Settlement Payment Date:

For all Daily Number of Options exercised or deemed exercised on each Exercise
Date, the third Exchange Business Day following the final Expiration Date.

 

 

Settlement Currency:

USD

 

 

Settlement Price:

For any Daily Number of Options, the VWAP Price of the Shares on the relevant
Expiration Date determined by Calculation Agent at the Expiration Time on the
relevant Expiration Date for such Daily Number of Options. If no

 

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price at such time is available, or there is a Market Disruption Event on such
Expiration Date, the Calculation Agent shall determine the Settlement Price in a
commercially reasonable manner.

Failure to Deliver:

Applicable

 

 

Other Applicable Provisions:

To the extent Party A is obligated to deliver Shares hereunder, the provisions
of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 (except that the Representation and
Agreement contained in Section 9.11 of the Equity Definitions shall be modified
by excluding any representations therein relating to restrictions, obligations,
limitations or requirements under applicable securities laws as a result of the
fact that Party B is the issuer of the Shares) and 9.12 of the Equity
Definitions will be applicable as if “Physical Settlement” applied to the
Transaction.

 

 

Restricted Certificated Shares:

Notwithstanding anything to the contrary in the Equity Definitions, Party A may
deliver, in whole or in part, any Shares required to be delivered to Party B
hereunder in the form of restricted securities under the Securities Act (as
defined below) and/or in certificated form in lieu of delivery through the
Clearance System. With respect to any such certificated Shares, the
Representation and Agreement contained in Section 9.11 of the Equity Definitions
shall be modified by deleting the remainder of the provision after the word
“encumbrance” in the fourth line thereof.

 

 

Adjustments:

 

 

 

Method of Adjustment:

Calculation Agent Adjustment

 

 

Extraordinary Events:

 

 

 

Consequences of Merger Events and Tender Offers:

 

 

 

(a) Share-for-Share:

Modified Calculation Agent Adjustment

 

 

(b) Share-for-Other:

Cancellation and Payment (Calculation Agent Determination)

 

 

(c) Share-for-Combined:

Component Adjustment; provided that Cancellation and Payment (Calculation Agent
Determination) shall apply in

 

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the event that the Calculation Agent determines that no adjustments that it
could make with respect to the Transaction to account for the Merger Event or
Tender Offer, as applicable, would produce a commercially reasonable result.

 

 

Tender Offer:

Applicable

 

 

Delisting, Nationalization or Insolvency:

Cancellation and Payment (Calculation Agent Determination)

 

 

 

Additional Disruption Events:

(a) Change in Law:

Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is
hereby amended by (i) replacing the phrase “the interpretation” in the third
line thereof with the phrase “or announcement or statement of the formal or
informal interpretation” and (ii) immediately following the word “Transaction”
in clause (X) thereof, adding the phrase “in the manner contemplated by the
Hedging Party on the Trade Date”.

 

 

(b) Failure to Deliver:

Applicable

 

 

(c) Insolvency Filing:

Applicable

 

 

(d) Hedging Disruption:

Applicable

 

 

(e)Increased Cost of Hedging:

Applicable

 

 

(f) Loss of Stock Borrower:

Applicable

 

 

Maximum Stock Loan Rate:

2%

 

 

Hedging Party:

For all applicable Additional Disruption Events, Party A

 

 

Determining Party:

For all applicable Additional Disruption Events, Party A

 

 

Non-Reliance:

Applicable

 

 

Agreements and Acknowledgments Regarding Hedging Activities:

Applicable

 

 

Additional Acknowledgments:

Applicable

 

 

 

3.               IF ANY OF THE TRANSACTIONS CONTEMPLATED BY THE PURCHASE
AGREEMENT AMONG PARTY B AND PIPER JAFFRAY & CO., DATED AS OF MARCH 6, 2007 (THE
“PURCHASE AGREEMENT”) RELATING TO THE PURCHASE OF 4.75% CONVERTIBLE SENIOR NOTES
DUE

44

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2027 (THE “NOTES”) OF PARTY B BY PIPER JAFFRAY & CO. SHALL FAIL TO CLOSE AS A
RESULT OF A BREACH BY PARTY B OF ITS OBLIGATIONS THEREUNDER, IN WHICH CASE THE
ENTIRETY OF THIS TRANSACTION SHALL TERMINATE AUTOMATICALLY AND PARTY B SHALL BE
THE SOLE AFFECTED PARTY AND THIS TRANSACTION SHALL BE THE SOLE AFFECTED
TRANSACTION. IF THE TRANSACTIONS CONTEMPLATED BY THE PURCHASE AGREEMENT SHALL
FAIL TO CLOSE FOR ANY REASON ON OR BEFORE THE EFFECTIVE DATE OTHER THAN THOSE
SET FORTH IN THE PREVIOUS SENTENCE, THEN THE ENTIRETY OF THIS TRANSACTION SHALL
TERMINATE AUTOMATICALLY AND NO PAYMENTS SHALL BE REQUIRED HEREUNDER.  IF PARTY A
DOES NOT PURCHASE AT LEAST $25.0 MILLION FACE AMOUNT OF NOTES ON OR BEFORE THE
EFFECTIVE DATE, THEN, AT THE OPTION OF PARTY A, THE ENTIRETY OF THIS TRANSACTION
SHALL TERMINATE AND NO PAYMENTS SHALL BE REQUIRED HEREUNDER.  FOR PURPOSES OF
DETERMINING LOSS IN RELATION TO A TERMINATION UNDER THE FIRST SENTENCE OF THIS
SECTION 3, IT SHALL BE ASSUMED THAT ALL CONDITIONS TO THE EXERCISE OF THESE
OPTIONS HAVE OCCURRED.

4.               CALCULATIONS AND PAYMENT ON EARLY TERMINATION AND ON CERTAIN
EXTRAORDINARY EVENTS.  IF PARTY A SHALL OWE PARTY B ANY AMOUNT PURSUANT TO
SECTIONS 12.6, 12.7 OR 12.9 OF THE EQUITY DEFINITIONS (EXCEPT IN THE EVENT OF AN
INSOLVENCY OR A NATIONALIZATION, IN EACH CASE, IN WHICH THE CONSIDERATION OR
PROCEEDS TO BE PAID TO HOLDERS OF SHARES CONSISTS SOLELY OF CASH) OR PURSUANT TO
SECTION 6(D)(II) OF THE AGREEMENT (EXCEPT IN THE EVENT OF AN EVENT OF DEFAULT IN
WHICH PARTY B IS THE DEFAULTING PARTY OR A TERMINATION EVENT IN WHICH PARTY B IS
THE AFFECTED PARTY, THAT RESULTED FROM AN EVENT OR EVENTS WITHIN PARTY B’S
CONTROL) (A “PAYMENT OBLIGATION”), PARTY B SHALL HAVE THE RIGHT, IN ITS SOLE
DISCRETION, TO REQUIRE PARTY A TO SATISFY ANY SUCH PAYMENT OBLIGATION BY THE
SHARE TERMINATION ALTERNATIVE (AS DEFINED BELOW) BY GIVING IRREVOCABLE
TELEPHONIC NOTICE TO PARTY A, CONFIRMED IN WRITING WITHIN ONE SCHEDULED TRADING
DAY, BETWEEN THE HOURS OF 9:00 A.M. AND 12:00 P.M. NEW YORK CITY TIME ON THE
RELEVANT ANNOUNCEMENT DATE OR EARLY TERMINATION DATE, AS APPLICABLE (“NOTICE OF
SHARE TERMINATION”).  UPON SUCH NOTICE OF SHARE TERMINATION, THE FOLLOWING
PROVISIONS SHALL APPLY ON THE SCHEDULED TRADING DAY IMMEDIATELY FOLLOWING THE
RELEVANT ANNOUNCEMENT DATE OR EARLY TERMINATION DATE, AS APPLICABLE:

Share Termination Alternative:

Applicable and means that Party A shall deliver to Party B the Share Termination
Delivery Property on the date on which the Payment Obligation would otherwise be
due pursuant to Section 12.7 or 12.9 of the Equity Definitions or Section
6(d)(ii) of the Agreement, as applicable (the “Share Termination Payment Date”),
in satisfaction of the Payment Obligation.

 

 

Share Termination Delivery Property:

A number of Share Termination Delivery Units, as calculated by the Calculation
Agent, equal to the Payment Obligation divided by the Share Termination Unit
Price. The Calculation Agent shall adjust the Share Termination Delivery
Property by replacing any fractional portion of a security therein with an
amount of cash equal to the value of such fractional security based on the
values used to calculate the Share Termination Unit Price.

 

 

Share Termination Unit Price:.

The value of property contained in one Share Termination Delivery Unit on the
date such Share Termination Delivery Units are to be delivered as Share
Termination Delivery Property, as determined by the Calculation Agent in its
discretion by commercially reasonable means and notified by the Calculation
Agent to Party A at the time of notification of the Payment Obligation

 

 

Share Termination Delivery Unit:

In the case of a Termination Event, Event of Default or Delisting, one Share or,
in the case of an Insolvency or Nationalization, a unit consisting of the number
or amount of each type of property received by a holder of one Share (without
consideration of any requirement to pay cash or other consideration in lieu of
fractional amounts of any securities) in such Insolvency or Nationalization. If
such Insolvency or Nationalization involves a choice of consideration to be
received by

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holders, such holder shall be deemed to have elected to receive the maximum
possible amount of cash.

 

 

Failure to Deliver:

Applicable

 

 

Other applicable provisions:

If Share Termination Alternative is applicable, the provisions of Sections 9.8,
9.9, 9.10, 9.11 and 9.12 of the Equity Definitions will be applicable as if
“Physical Settlement” were applicable, except that all references to “Shares”
shall be read as references to “Share Termination Delivery Units”; provided that
the Representation and Agreement contained in Section 9.11 of the Equity
Definitions shall be modified by excluding any representations therein relating
to restrictions, obligations, limitations or requirements under applicable
securities laws as a result of the fact that Buyer is the issuer of any

 

 

Share Termination Delivery Units (or any part thereof).

5.               ADDITIONAL AGREEMENTS, REPRESENTATIONS AND COVENANTS:

(A)          PARTY B HEREBY REPRESENTS AND WARRANTS TO PARTY A, ON EACH DAY FROM
THE TRADE DATE TO AND INCLUDING THE BUSINESS DAY FOLLOWING THE DATE ON WHICH
PARTY A IS ABLE TO INITIALLY COMPLETE A HEDGE OF ITS POSITION CREATED BY THIS
TRANSACTION, THAT PARTY B HAS PUBLICLY DISCLOSED ALL MATERIAL INFORMATION
NECESSARY FOR PARTY B TO BE ABLE TO PURCHASE OR SELL SHARES IN COMPLIANCE WITH
APPLICABLE FEDERAL SECURITIES LAWS AND THAT IT HAS PUBLICLY DISCLOSED ALL
MATERIAL INFORMATION WITH RESPECT TO ITS CONDITION (FINANCIAL OR OTHERWISE).

(B)         IF PARTY B WOULD BE OBLIGATED TO RECEIVE CASH FROM PARTY A PURSUANT
TO THE TERMS OF THIS AGREEMENT FOR ANY REASON WITHOUT HAVING HAD THE RIGHT TO
ELECT TO RECEIVE SHARES IN SATISFACTION OF SUCH PAYMENT OBLIGATION, THEN PARTY B
MAY ELECT THAT PARTY A DELIVER TO PARTY B A NUMBER OF SHARES HAVING A CASH VALUE
EQUAL TO THE AMOUNT OF SUCH PAYMENT OBLIGATION (SUCH NUMBER OF SHARES TO BE
DELIVERED TO BE DETERMINED BY THE CALCULATION AGENT ACTING IN A COMMERCIALLY
REASONABLE MANNER TO DETERMINE THE NUMBER OF SHARES THAT COULD BE PURCHASED OVER
A REASONABLE PERIOD OF TIME WITH THE CASH EQUIVALENT OF SUCH PAYMENT
OBLIGATION). SETTLEMENT RELATING TO ANY DELIVERY OF SHARES PURSUANT TO THIS
PARAGRAPH (B) SHALL OCCUR WITHIN A REASONABLE PERIOD OF TIME.

(C)          PARTY B SHALL DELIVER TO THE PARTY A AN OPINION OR OPINIONS OF
COUNSEL WITH RESPECT TO THE MATTERS SET FORTH ON ANNEX 1 HERETO ON OR BEFORE THE
EFFECTIVE DATE.

(D)         IN ADDITION TO THE REPRESENTATIONS AND WARRANTIES IN THE AGREEMENT
AND THOSE CONTAINED ELSEWHERE HEREIN, PARTY B REPRESENTS AND WARRANTS TO AND FOR
THE BENEFIT OF, AND AGREES WITH, PARTY A AS FOLLOWS:

(i)            (A) On the Effective Date, the Shares or securities that are
convertible into, or exchangeable or exercisable for Shares, are not, and shall
not be, subject to a “restricted period,” as such term is defined in
Regulation M (“Regulation M”) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and (B) Party B shall not engage in any
“distribution,” as such term is defined in Regulation M, other than a
distribution meeting the requirements of the exceptions set forth in sections
101(b)(10) and 102(b)(7) of Regulation M, until the second Exchange Business Day
immediately following the Trade Date.

(ii)           Party B is not entering into this Confirmation to create actual
or apparent trading activity in the Shares (or any security convertible into or
exchangeable for Shares) or to manipulate the price of the Shares (or any
security convertible into or exchangeable for Shares) or otherwise in violation
of the Exchange Act.

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(iii)          Without limiting the generality of Section 3(a)(iii) of the
Agreement, the Transaction will not violate Rule 13e-1 or Rule 13e-4 under the
Exchange Act.

(iv)          Prior to the Effective Date, Party B shall deliver to Party A a
resolution of Party B’s board of directors authorizing the Transaction and such
other certificate or certificates as Party A shall reasonably request.

(v)           Party B is not, and after giving effect to the transactions
contemplated hereby will not be, required to register as an “investment company”
as such term is defined in the Investment Company Act of 1940, as amended.

(vi)          On the Trade Date (A) the assets of Party B at their fair
valuation exceed the liabilities of Party B, including contingent liabilities,
(B) the capital of Party B is adequate to conduct the business of Party B and
(C) Party B has the ability to pay its debts and obligations as such debts
mature and does not intend to, or does not believe that it will, incur debt
beyond its ability to pay as such debts mature.

(vii)         Party B acknowledges its responsibilities under applicable
federal securities laws, including without limitation Rule 10b-5 under the
Exchange Act, in relation to the Transaction.

(E)          EACH OF PARTY A AND PARTY B AGREES AND REPRESENTS THAT IT IS AN
“ELIGIBLE CONTRACT PARTICIPANT” AS DEFINED IN SECTION 1A(12) OF THE U.S.
COMMODITY EXCHANGE ACT, AS AMENDED.  THE PARTIES HERETO FURTHER AGREE AND
ACKNOWLEDGE (A) THAT THIS CONFIRMATION IS (I) A “SECURITIES CONTRACT,” AS SUCH
TERM IS DEFINED IN SECTION 741(7) OF THE BANKRUPTCY CODE, WITH RESPECT TO WHICH
EACH PAYMENT AND DELIVERY HEREUNDER IS A “SETTLEMENT PAYMENT,” AS SUCH TERM IS
DEFINED IN SECTION 741(8) OF THE BANKRUPTCY CODE, AND (II) A “SWAP AGREEMENT,”
AS SUCH TERM IS DEFINED IN SECTION 101(53B) OF THE BANKRUPTCY CODE, WITH RESPECT
TO WHICH EACH PAYMENT AND DELIVERY HEREUNDER IS A “TRANSFER,” AS SUCH TERM IS
DEFINED IN SECTION 101(54) OF THE BANKRUPTCY CODE, AND (B) THAT PARTY A IS
ENTITLED TO THE PROTECTIONS AFFORDED BY, AMONG OTHER SECTIONS, SECTIONS
362(B)(6), 362(B)(17), 546(E), 546(G), 555 AND 560 OF THE BANKRUPTCY CODE.

(F)            PARTY B INTENDS THAT ALL DOCUMENTATION WITH RESPECT TO THIS
TRANSACTION IS INTENDED TO QUALIFY THIS TRANSACTION AS AN EQUITY INSTRUMENT FOR
PURPOSES OF SFAS 150 AND EITF 00-19.  PARTY A ACKNOWLEDGES AND AGREES THAT THIS
CONFIRMATION IS NOT INTENDED TO CONVEY TO IT RIGHTS WITH RESPECT TO THE
TRANSACTION THAT ARE SENIOR TO THE CLAIMS OF COMMON STOCKHOLDERS IN THE EVENT OF
PARTY B’S BANKRUPTCY.  FOR THE AVOIDANCE OF DOUBT, THE PARTIES AGREE THAT THE
PRECEDING SENTENCE SHALL NOT APPLY AT ANY TIME OTHER THAN DURING PARTY B’S
BANKRUPTCY TO ANY CLAIM ARISING AS A RESULT OF A BREACH BY PARTY B OF ANY OF ITS
OBLIGATIONS UNDER THIS CONFIRMATION OR THE AGREEMENT.

6.               STAGGERED SETTLEMENT:

If Party A determines reasonably and in good faith that the sum of (i) the
number of Shares required to be delivered to Party B hereunder on any Cash
Settlement Payment Date, and (ii) any other Shares beneficially owned by Party
A, would exceed 4.9% of all outstanding Shares, then Party A may, by notice to
Party B on or prior to such Cash Settlement Payment Date (a “Nominal Settlement
Date”), elect to deliver the Shares comprising the related Cash Settlement
Amount (in the case of Net Share Settlement) on two or more dates (each, a
“Staggered Settlement Date”) as follows:

(A)          IN SUCH NOTICE, PARTY A WILL SPECIFY TO PARTY B THE RELATED
STAGGERED SETTLEMENT DATES (THE FIRST OF WHICH WILL BE SUCH NOMINAL SETTLEMENT
DATE AND THE LAST OF WHICH WILL BE NO LATER THAN THE TWENTIETH (20TH) EXCHANGE
BUSINESS DAY FOLLOWING SUCH NOMINAL SETTLEMENT DATE) AND THE NUMBER OF SHARES
THAT IT WILL DELIVER ON EACH STAGGERED SETTLEMENT DATE;

47

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(B)         THE AGGREGATE NUMBER OF SHARES THAT PARTY A WILL DELIVER TO PARTY B
HEREUNDER ON ALL SUCH STAGGERED SETTLEMENT DATES WILL EQUAL THE NUMBER OF SHARES
THAT PARTY A WOULD OTHERWISE BE REQUIRED TO DELIVER ON SUCH NOMINAL SETTLEMENT
DATE; AND

(C)          IF THE NET SHARE SETTLEMENT TERMS SET FORTH ABOVE WERE TO APPLY ON
THE NOMINAL SETTLEMENT DATE, THEN THE NET SHARE SETTLEMENT TERMS WILL APPLY ON
EACH STAGGERED SETTLEMENT DATE, EXCEPT THAT THE SHARES COMPRISING THE CASH
SETTLEMENT AMOUNT WILL BE ALLOCATED AMONG SUCH STAGGERED SETTLEMENT DATES AS
SPECIFIED BY PARTY A IN THE NOTICE REFERRED TO IN CLAUSE (A) ABOVE.

Notwithstanding anything herein to the contrary, Party A shall be entitled to
deliver Shares to Party B from time to time prior to the date on which Party A
would be obligated to deliver them to Party B pursuant to the Net Share
Settlement terms set forth above, and Party B agrees to credit all such early
deliveries against Party A’s obligations hereunder in the direct order in which
such obligations arise. To the extent Party A receives or is entitled to receive
any distribution or payment in respect of Shares by reason of Party A’s being a
holder of record of such Shares on any date after the Nominal Settlement Date
which Party A would have delivered to Party B on such Nominal Settlement Date
but for the provisions of this Section 6, Party A shall deliver such
distribution or payment to Party B at the time Party A delivers the related
Shares to Party B in accordance with this Section 6, if such distribution or
payment has already been received by Party A at such time, or within a
reasonable period of time following Party A’s receipt of the distribution or
payment, if such distribution or payment has not already been received by
Party A at the time Party A delivers the related Shares to Party B in accordance
with this Section 6.

7.               TRANSFER.  PARTY B SHALL NOT TRANSFER OR ASSIGN ITS RIGHTS OR
OBLIGATIONS HEREUNDER AND UNDER THE AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT
OF PARTY A.  PARTY A MAY TRANSFER OR ASSIGN WITHOUT PARTY B’S CONSENT ITS RIGHTS
AND OBLIGATIONS HEREUNDER AND UNDER THE AGREEMENT, IN WHOLE OR IN PART, TO (I)
ANY OF ITS AFFILIATES OR (II) ANY THIRD PARTY WITH AN INVESTMENT GRADE RATING
FOR ITS LONG TERM, UNSECURED AND UNSUBORDINATED INDEBTEDNESS BY STANDARD AND
POOR’S RATING GROUP, INC. OR ITS SUCCESSOR (“S&P”), OR BY MOODY’S INVESTOR
SERVICE, INC. (“MOODY’S”) OR, IF EITHER S&P OR MOODY’S DO NOT RATE SUCH DEBT, AT
LEAST AN EQUIVALENT RATING OR BETTER BY A SUBSTITUTE AGENCY RATING MUTUALLY
AGREED BY PARTY B AND PARTY A.

8.               DISPOSITION OF HEDGE SHARES.  PARTY B HEREBY AGREES THAT IF, IN
THE GOOD FAITH REASONABLE JUDGMENT OF PARTY A OR ISSUER, BASED ON THE ADVICE OF
COUNSEL, THE SHARES (THE “HEDGE SHARES”) ACQUIRED BY PARTY A FOR THE PURPOSE OF
HEDGING ITS OBLIGATIONS PURSUANT TO THE TRANSACTION CANNOT BE SOLD IN THE PUBLIC
MARKET BY PARTY A WITHOUT REGISTRATION UNDER THE SECURITIES ACT, PARTY B SHALL,
AT ITS ELECTION: (I) IN ORDER TO ALLOW PARTY A TO SELL THE HEDGE SHARES IN A
REGISTERED OFFERING, MAKE AVAILABLE TO PARTY A AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT TO COVER THE RESALE OF SUCH HEDGE SHARES AND
(A) ENTER INTO AN AGREEMENT, IN FORM AND SUBSTANCE SATISFACTORY TO PARTY A,
SUBSTANTIALLY IN THE FORM OF AN UNDERWRITING AGREEMENT FOR UNDERWRITTEN
FOLLOW-ON OFFERINGS OF EQUITY SECURITIES OF COMPANIES OF COMPARABLE SIZE,
MATURITY AND LINES OF BUSINESS, (B) PROVIDE ACCOUNTANT’S “COMFORT” LETTERS IN
CUSTOMARY FORM FOR UNDERWRITTEN FOLLOW-ON OFFERINGS OF EQUITY SECURITIES OF
COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS, (C) PROVIDE
DISCLOSURE OPINIONS OF NATIONALLY RECOGNIZED OUTSIDE COUNSEL TO PARTY B AS ARE
CUSTOMARILY REQUESTED IN CONNECTION WITH UNDERWRITTEN FOLLOW-ON OFFERS OF EQUITY
SECURITIES OF COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS, (D)
PROVIDE OTHER CUSTOMARY OPINIONS, CERTIFICATES AND CLOSING DOCUMENTS CUSTOMARY
IN FORM FOR UNDERWRITTEN FOLLOW-ON OFFERS OF EQUITY SECURITIES OF COMPANIES OF
COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS AND (E) AFFORD PARTY A A
REASONABLE OPPORTUNITY TO CONDUCT A “DUE DILIGENCE” INVESTIGATION WITH RESPECT
TO PARTY B CUSTOMARY IN SCOPE FOR UNDERWRITTEN FOLLOW-ON OFFERS OF EQUITY
SECURITIES OF COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS;
PROVIDED, HOWEVER, THAT IF PARTY A, IN ITS SOLE REASONABLE DISCRETION, IS NOT
SATISFIED WITH ACCESS TO DUE DILIGENCE MATERIALS, THE RESULTS OF ITS DUE
DILIGENCE INVESTIGATION, OR THE PROCEDURES AND DOCUMENTATION FOR THE REGISTERED
OFFERING REFERRED TO ABOVE, THEN CLAUSE (II) OF THIS SECTION 8(C) SHALL APPLY;
PROVIDED THAT PARTY A HAS GIVEN THE PARTY B REASONABLE NOTICE OF ITS
DETERMINATION AND

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PROVIDED THE PARTY B WITH REASONABLE OPPORTUNITY TO SATISFY PARTY A’S CONCERNS;
(II) IN ORDER TO ALLOW PARTY A TO SELL THE HEDGE SHARES IN A PRIVATE PLACEMENT
ENTER INTO A PRIVATE PLACEMENT AGREEMENT SUBSTANTIALLY SIMILAR TO PRIVATE
PLACEMENT PURCHASE AGREEMENTS CUSTOMARY FOR PRIVATE PLACEMENTS OF EQUITY
SECURITIES OF COMPANIES OF COMPARABLE SIZE, MATURITY AND LINES OF BUSINESS, IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO PARTY A, INCLUDING CUSTOMARY
REPRESENTATIONS, COVENANTS, BLUE SKY AND OTHER GOVERNMENTAL FILINGS AND/OR
REGISTRATIONS, INDEMNITIES TO PARTY A, DUE DILIGENCE RIGHTS (FOR PARTY A OR ANY
DESIGNATED BUYER OF THE HEDGE SHARES FROM PARTY A), OPINIONS AND CERTIFICATES
AND SUCH OTHER DOCUMENTATION AS IS CUSTOMARY FOR PRIVATE PLACEMENTS AGREEMENTS,
ALL REASONABLY ACCEPTABLE TO PARTY A (IN WHICH CASE, THE CALCULATION AGENT SHALL
MAKE ANY ADJUSTMENTS TO THE TERMS OF THE TRANSACTION THAT ARE NECESSARY, IN ITS
REASONABLE JUDGMENT, TO COMPENSATE PARTY A FOR ANY DISCOUNT FROM THE PUBLIC
MARKET PRICE OF THE SHARES INCURRED ON THE SALE OF HEDGE SHARES IN A PRIVATE
PLACEMENT).

9.               ACCOUNT DETAILS:

Payments to Party A:

To be advised

 

 

Payments to Party B:

To be advised

 

 

Deliveries to Party B:

To be advised

 

10.         WAIVER OF JURY TRIAL.  EACH OF PARTY B AND PARTY A HEREBY
IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THE TRANSACTION OR THE ACTIONS OF PARTY B OF ITS
AFFILIATES OR PARTY A OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR
ENFORCEMENT HEREOF

11.         GOVERNING LAW.  THE AGREEMENT AND THIS CONFIRMATION SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.  THE PARTIES HERETO IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND
THE UNITED STATES COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH
ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN,
AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

12.         SPECIAL PROVISIONS FOR COUNTERPARTY PAYMENTS:  THE PARTIES HEREBY
AGREE THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN OR IN THE AGREEMENT,
IN THE EVENT THAT AN EARLY TERMINATION DATE (WHETHER AS A RESULT OF AN EVENT OF
DEFAULT OR A TERMINATION EVENT) OCCURS OR IS DESIGNATED WITH RESPECT TO ANY
TRANSACTION AND, AS A RESULT, PARTY B OWES TO PARTY A AN AMOUNT CALCULATED UNDER
SECTION 6(E) OF THE AGREEMENT (CALCULATED AS IF THE TRANSACTIONS BEING
TERMINATED ON SUCH EARLY TERMINATION DATE WERE THE SOLE TRANSACTIONS UNDER THE
AGREEMENT), SUCH AMOUNT SHALL BE DEEMED TO BE ZERO.

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Please confirm that the foregoing correctly sets forth the terms of your
agreement by signing and returning this Confirmation.

Very truly yours,

 

 

 

 

 

 

 

 

 

 

 

CAPITAL VENTURES INTERNATIONAL

 

 

 

BY: HEIGHTS CAPITAL MANAGEMENT, INC,

 

 

 

Its Authorized Agent

 

 

 

(Party A)

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Martin Kobinger

 

Name:

Martin Kobinger

 

 

Title:

Investment Manager

 

 

 

 

 

 

 

 

 

Confirmed as of the date first written above:

DEXCOM, INC. (Party B)

By:

/s/ Steven J. Kemper

 

Name:

Steven J. Kemper

Title:

Chief Financial Officer

 

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ANNEX I

Matters to be covered in Opinion of Counsel to the Issuer (the “Party B”)

1.             The Party B is validly existing as a corporation in good standing
under the laws of the State of Delaware.

2.             The Party B has the requisite corporate power and authority to
enter into the Issuer Call Option Transaction (for purposes of this Annex 1, the
“Agreement”) and to carry out the Transactions contemplated thereby.

3.             The execution and delivery by the Party B of the Agreement, and
the performance by the Party B of its obligations under the Agreement, have been
duly authorized by all necessary corporate action on the part of the Party B.

4.             The Issuer Call Option Transaction has been duly authorized,
executed and delivered by the Party B.

5.             No consent, approval or authorization of, or registration, filing
or declaration with, any governmental or public body or authority is required in
connection with the execution, delivery or performance by the Party B of the
Agreement.

6.             The execution, delivery and performance by the Party B of the
Issuer Call Option Transaction and compliance by the Party B with the terms and
provisions thereof will not, whether with or without the giving of notice or
lapse of time or both, result in a breach or violation of any of the terms and
provisions of, or constitute a default under, (A) any material indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate
charter or by-laws, or any other agreement or instrument to which the Party B or
any subsidiary is bound or by which the Party B or any subsidiary or any of
their respective properties may be bound or affected [agreements to be listed on
a schedule], or (B) any Delaware or federal law, statute, rule, regulation or
order or any judgment, order, writ or decree of any governmental agency or body
or any court having jurisdiction over the Party B or any of its properties.

7.             Neither the Party B nor any subsidiary is an “investment company”
or a company “controlled” by an “investment company”, in each case within the
meanings ascribed to such terms in the Investment Company Act of 1940, as
amended, nor is the Party B or any subsidiary subject to regulation under said
Act.

 

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