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

  






 













 




	
  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

  






 



 2
 









 




	
  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

  






 



 3
 









 


	
  

  	
  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

  



 



 4
 









 




	
  

  	
  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

  






 



 5
 









 


	
  

  	
  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



 6
 









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

  




 7
 









 


	
  

  	
  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.



 8
 









(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;



 9
 









(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
 









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
 









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
 









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















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
 









 


	
  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
 









(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
 









(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
 









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
 









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
 









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















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
 









 


	
  

  	
  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
 









(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
 









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

  



 



 40
 









 


	
  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 

  



 



 41
 









 


	
  

  	
  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 

  



 



 42
 









 


	
  

  	
  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 

  



 



 43
 









 




	
  

  	
  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
 









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

  




 45
 









 


	
  

  	
  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.



 46
 









(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
 









(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



 48
 









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.



 49
 









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

  



 



 50
 









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.


 



 51