Commitments and Contingencies

Long-Term Debt

In November 2012, we entered into a loan and security agreement (the “Loan Agreement”) that provides for (i) a $15.0 million revolving line of credit and (ii) a total term loan of up to $20.0 million (the "Term Loan"), in both cases, to be used for general corporate purposes. The borrowings under the Loan Agreement are collateralized by a first priority security interest in substantially all of our assets with a negative pledge on our intellectual property.

The revolving line of credit is an interest-only financing that bears an interest rate equal to the prime rate plus 0.5% and requires repayment of principal at the maturity date of November 2015. Under the revolving line of credit, available funds, which were up to $15.0 million as of December 31, 2014 can be drawn at any time, and repaid funds can be redrawn. No amounts have been drawn against the revolving line of credit.

Per the Loan Agreement, $7.0 million was advanced under the Term Loan at the funding date in November 2012 and up to $13.0 million in additional funds was available upon our request until September 30, 2013 (the "Draw Period"). In August 2013, the Loan Agreement was amended to change the Draw Period for the additional funds under the Term Loan to January 1, 2014 through March 31, 2014, at which time the Draw Period expired unused. The Term Loan bears a fixed interest rate equal to the three-year treasury rate at the time of advance plus 6.94% and requires payment of interest only for the first year and amortized payments of interest and principal thereafter through the maturity date of November 2016. The aggregate debt issuance costs and fees incurred with respect to the issuance of the Loan Agreement were $1.1 million. These costs have been capitalized as debt issuance costs on our consolidated balance sheet as other assets. Fees related to the revolving line of credit are being amortized through the maturity date of November 2015. Issuance costs and fees related to the term loan are being amortized through the maturity date of November 2016 using the effective interest method. As of December 31, 2014, the remaining unamortized issuance costs and fees totaled $0.3 million. Principal repayment obligations under the Loan Agreement as of December 31, 2014 were as follows (in millions):



Fiscal Year Ending
2015	$	2.3
2016	2.3
Total	$	4.6

Leases

In April 2006, we entered into an office lease agreement for facilities located in San Diego, California. In August 2010, we entered into a First Amendment to Office Lease (the “First Lease Amendment”) with Kilroy Realty, L.P. (the “Landlord”) with respect to facilities in the buildings at 6340 Sequence Drive and 6310 Sequence Drive, each in San Diego, California, and on October 1, 2014, we entered into a Second Amendment to Office Lease (the “Second Lease Amendment”) which added the building at 6290 Sequence Drive in San Diego, California to our lease and extended the lease term related to the buildings at 6340 Sequence Drive and 6310 Sequence Drive, and 6290 Sequence Drive, each in San Diego, California (the “Buildings”).

Under the Second Lease Amendment, we will continue to lease approximately 129,000 square feet in the current locations at 6340 Sequence Drive and 6310 Sequence Drive, and leased an additional 45,000 square feet at 6290 Sequence Drive, for a total of approximately 174,000 square feet of space. We also retain the right and obligation to lease an additional 45,000 square feet in the 6290 Sequence Drive location (the “Additional Space”). The amended lease term extends through March 2022 and we have an option to renew the lease upon the expiration of the initial term for two additional five-year terms by giving notice to the Landlord prior to the end of the initial term of the lease and any extension period, if applicable. Provided we are not in default under the Second Lease Amendment and the Second Lease Amendment is still in effect, we generally have the right to terminate the lease starting at the 55^th month of the Second Lease Amendment.

These facility leases have annual rental increases ranging from approximately 2.5% to 4%. The difference between the straight-line expense over the term of the lease and actual amounts paid are recorded as deferred rent. In September 2008, our subsidiary in Sweden entered into a three-year lease for a small shared office space, which has since been renewed for two additional three-year terms through September 2017 and has a quarterly adjustment clause for rent to increase or decrease in proportion to changes in consumer prices. In July 2012, our subsidiary SweetSpot entered into a five-year lease for a small office space in a multi-tenant commercial building in Portland, Oregon. Rental obligations, excluding real estate taxes, operating costs, and tenant improvement allowances, under all lease agreements as of December 31, 2014 were as follows (in millions):



Fiscal Year Ending
2015	3.1
2016	3.6
2017	4.0
2018	5.0
2019	5.2
Thereafter	11.8
Total	$	32.7

Total rent expense for the twelve months ended December 31, 2014, 2013 and 2012 was $3.6 million, $3.0 million and $2.5 million, respectively.

Litigation

Commencing on August 11, 2005, Abbott instituted various patent infringement proceedings against us in the United States District Court for the District of Delaware. In these proceedings Abbott sought, among other things, a declaratory judgment that our continuous glucose monitoring systems infringe certain patents held by Abbott.

On July 2, 2014, the Abbott Settlement Agreement was entered into in full settlement of all pending patent infringement legal proceedings brought by Abbott against us. In accordance with the Abbott Settlement Agreement, on July 7, 2014, the parties filed a joint stipulation of dismissal of all pending legal proceedings, which was granted by the court on July 11, 2014.

The Abbott Settlement Agreement does not obligate us to pay any royalties or any other form of financial compensation. The Abbott Settlement Agreement provides for a royalty-free, worldwide, non-exclusive, non-sublicensable cross-license of certain patents. We received a limited license from Abbott to the patents that Abbott has alleged that we infringed (and other Abbott patents that claim priority to such patents). We granted to Abbott a limited license of certain patents with an actual filing date prior to January 1, 2005 (and other of our patents that claim priority to such patents). In addition, each settlement party agreed not to (1) sue the other settlement party for patent infringement based on certain of their respective continuous glucose monitoring products, and (2) challenge any patent or patent application held by the other settlement party, subject to certain limited exceptions, in each case, until March 31, 2021. The cross-license and mutual covenant not to sue granted to each settlement party do not apply to the type of sensor technology used by the other settlement party.

In the event of a change of control, the settlement party that is not acquired in the change of control (the “Non-Acquired Party”) shall be paid a one-time continuation fee of $25.0 million. If the Non-Acquired Party is not paid the continuation fee within 30 days after the effective date of such change of control, then the license granted by, and all covenants of, the Non-Acquired Party shall expire 30 days after the effective date of the change of control, but the license granted by, and all covenants of, the settlement party that is acquired shall survive such expiration.

From time to time, we are subject to various claims and suits arising out of the ordinary course of business, including commercial and employment related matters. In addition, from time to time, we may bring claims or initiate lawsuits against various third parties with respect to matters arising out of the ordinary course of our business, including commercial and employment related matters. We do not expect that the resolution of these matters would, or will, have a material adverse effect or material impact on our consolidated financial position.

Purchase Commitments

We are party to various purchase arrangements related to our manufacturing and development activities including materials used in our glucose monitoring systems. As of December 31, 2014, we had firm purchase commitments with vendors totaling $18.0 million due within one year. There are no material purchase commitments due beyond one year.