0001021408-01-507896.txt : 20011018 0001021408-01-507896.hdr.sgml : 20011018 ACCESSION NUMBER: 0001021408-01-507896 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20011010 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERASENSE INC CENTRAL INDEX KEY: 0001073695 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 943267373 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-64456 FILM NUMBER: 1755461 BUSINESS ADDRESS: STREET 1: 1360 S LOOP RD STREET 2: SUITE 2000 CITY: SAN FRANCISCO STATE: CA ZIP: 94502 BUSINESS PHONE: 5107495400 MAIL ADDRESS: STREET 1: 1360 S LOOP RD CITY: SAN FRANCISCO STATE: CA ZIP: 94502 S-1/A 1 ds1a.txt AMENDMENT #6 TO FORM S-1 As filed with the Securities and Exchange Commission on October 10, 2001 Registration No. 333-64456 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- AMENDMENT NO. 6 TO FORM S-1 REGISTRATION STATEMENT Under The Securities Act of 1933 --------------- THERASENSE, INC. (Exact name of Registrant as specified in its charter) --------------- Delaware 3841 94-3267373 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number)
TheraSense, Inc. 1360 South Loop Road Alameda, California 94502 (510) 749-5400 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) --------------- W. Mark Lortz President and Chief Executive Officer TheraSense, Inc. 1360 South Loop Road Alameda, California 94502 (510) 749-5400 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------- Copies to: Karen A. Dempsey, Esq. Faye H. Russell, Esq. Alexander D. Phillips, Esq. Jeffrey C. Thacker, Esq. Helen E. Quinn, Esq. Jason M. Hannon, Esq. Vicente P. Reyes, Esq. Brobeck, Phleger & Harrison LLP Wilson Sonsini Goodrich & Rosati 12390 El Camino Real Professional Corporation San Diego, California 92130 One Market, Spear Street Tower, Suite 3300 (858) 720-2500 San Francisco, California 94105 (415) 947-2000
--------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] --------------- CALCULATION OF REGISTRATION FEE ----------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------
Proposed Maximum Title of Each Class of Proposed Maximum Aggregate Securities to be Amount to be Offering Price Offering Amount of Registered Registered (1) Per Share Price (2) Registration Fee (3) ----------------------------------------------------------------------------------------------- Common Stock, $0.001 par value................. 6,900,000 $20.00 $138,000,000.00 $34,500.00 ----------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------
(1) Includes 900,000 shares which the underwriters have the option to purchase to cover over-allotments, if any. (2) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. (3) This amount was previously paid. --------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS This amendment incorporates by reference Amendment No. 5 to Registration Statement on Form S-1 (File No. 333-64456). This amendment is being filed solely to file Exhibits 10.7, 10.7(b), 10.11, 10.12, 10.14, 10.15 and 10.17 hereto. II-1 Item 16. Exhibits and Financial Statement Schedules. (a) Exhibits
Exhibit Number Description of Document ------- ----------------------- *1.1 Form of Purchase Agreement *3.1(a) Certificate of Incorporation of TheraSense, Inc., a Delaware corporation, as currently in effect *3.1(b) Amended and Restated Certificate of Incorporation of TheraSense, Inc. to be filed upon completion of the offering *3.2(a) Bylaws of TheraSense, Inc. as currently in effect *3.2(b) Amended and Restated Bylaws of TheraSense, Inc. as in effect upon completion of the offering *4.1 Specimen Common Stock Certificate *5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation *10.1 1997 Stock Plan and forms of agreements thereunder *10.2 2001 Stock Plan and forms of agreements thereunder *10.3 2001 Employee Stock Purchase Plan and forms of agreement thereunder *10.4 Form of Director and Executive Officer Indemnification Agreement *10.5 Employment Letter from TheraSense, Inc. to W. Mark Lortz, dated as of October 6, 1997 *+10.6 Technology Purchase Agreement between TheraSense, Inc. and E. Heller & Co. dated as of October 10, 2000 +10.7 Cooperative Development Agreement between TheraSense, Inc. and Facet Technologies LLC (f/k/a Gainor Medical North America LLC), dated as of December 1, 1998 *10.7(a) First Amendment to Cooperative Development Agreement between TheraSense, Inc. and Facet Technologies LLC (f/k/a Gainor Medical North America LLC), effective June 1, 2001. +10.7(b) Master Purchase Agreement between TheraSense, Inc. and Facet Technologies LLC effective June 1, 2001. *10.8 Standard Industrial/Commercial Single-Tenant Lease between TheraSense, Inc. and PlyProperties, a Partnership, dated as of February 26, 1999, and addendum thereto *+10.9 Master Purchase Agreement between TheraSense, Inc. and Flextronics International USA, Inc., dated as of November 3, 1999 *+10.10 Assignment of Patent Rights and Technology by and among Board of Regents of the University of Texas System, an agency of the State of Texas, Dr. Adam Heller and E. Heller & Company dated August 1, 1991 +10.11 First Amendment, dated March 19, 1998, to the Agreement entitled Assignment of Patent Rights and Technology by and among Board of Regents of the University of Texas System, an agency of the State of Texas, Dr. Adam Heller, E. Heller & Company and TheraSense, Inc. dated August 1, 1991
II-2
Exhibit Number Description of Document ------- ----------------------- +10.12 License Agreement between TheraSense, Inc. and Asulab SA., dated February 23, 2000 *+10.13 Warehouse Distribution Contract between TheraSense, Inc. and Livingston Healthcare Service, Inc., dated March 15, 2000 +10.14 International Distributor Agreement between TheraSense, Inc. and Nipro Corporation, dated April 1, 2001 +10.15 International Distributor Agreement between TheraSense, Inc. and Disetronic Handels AG, dated September 13, 2000 *+10.16 Management Services Agreement between TheraSense, Inc. and ICT Group, Inc., dated January 31, 2000 and revised April 4, 2000 +10.17 License Agreement between TheraSense, Inc. and Unilever PLC dated February 10, 2000 *10.18 Promissory Note dated March 5, 1999 for the principal aggregate amount of $72,495 issued by W. Mark Lortz to TheraSense, Inc. *10.19 Promissory Note dated July 30, 1998 for the principal aggregate amount of $17,500 issued by Charles T. Liamos to TheraSense, Inc. *10.20 Promissory Note dated March 5, 1999 for the principal aggregate amount of $15,187.50 issued by Charles T. Liamos to TheraSense, Inc. *10.21 Promissory Note dated September 1, 1999 for the principal aggregate amount of $61,250 issued by Charles T. Liamos to TheraSense, Inc. *10.22 Promissory Note dated December 1, 1997 for the principal aggregate amount of $62,650 issued by W. Mark Lortz to TheraSense, Inc. *10.23 Amended and Restated Investors Rights Agreement by and among holders of TheraSense Preferred Stock and TheraSense, Inc., dated January 23, 2001, as amended *10.24 First Amendment to the Agreement Entitled Sponsored Research Agreement No. UTA 98-0296 entered into as of October 10, 2000, by and between TheraSense, Inc. and the Board of Regents of the University of Texas System on behalf of the University of Texas at Austin. *10.25 Form of Change of Control Agreement between TheraSense, Inc. and each Vice President of TheraSense, Inc. *23.1 Consent of PricewaterhouseCoopers LLP, independent accountants *23.2 Consent of Counsel (included in exhibit 5.1) *24.1 Power of Attorney
------------------------------- + Confidential treatment has been requested for portions of this exhibit * Previously filed (b) Financial Statement Schedules The following schedule was previously filed: Schedule II--Valuation and Qualifying Accounts Other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, TheraSense, Inc. has duly caused this Amendment No. 6 to the Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Alameda, State of California, on the 10th day of October, 2001. THERASENSE, INC. /s/ W. Mark Lortz By: _________________________________ W. Mark Lortz President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 6 to the Registration Statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ W. Mark Lortz President, Chief Executive October 10, 2001 ______________________________________ Officer and Director W. Mark Lortz (Principal Executive Officer) /s/ Charles T. Liamos Chief Financial Officer and October 10, 2001 ______________________________________ Vice President (Principal Charles T. Liamos Financial and Accounting Officer) *Annette J. Campbell-White Director October 10, 2001 ______________________________________ Annette J. Campbell-White *Mark J. Gainor Director October 10, 2001 ______________________________________ Mark J. Gainor *Ross A. Jaffe, M.D. Director October 10, 2001 ______________________________________ Ross A. Jaffe, M.D. *Michael M. McNamara Director October 10, 2001 ______________________________________ Michael M. McNamara *Robert R. Momsen Director October 10, 2001 ______________________________________ Robert R. Momsen *Ephraim Heller Director October 10, 2001 ______________________________________ Ephraim Heller *Richard P. Thompson Director October 10, 2001 ______________________________________ Richard P. Thompson
/s/ W. Mark Lortz *By: ____________________________ W. Mark Lortz (Attorney-In-Fact) II-4 EXHIBIT INDEX
Exhibit Number Description of Document ------- ----------------------- *1.1 Form of Purchase Agreement *3.1(a) Certificate of Incorporation of TheraSense, Inc., a Delaware corporation, as currently in effect *3.1(b) Amended and Restated Certificate of Incorporation of TheraSense, Inc. to be filed upon completion of the offering *3.2(a) Bylaws of TheraSense, Inc. as currently in effect *3.2(b) Amended and Restated Bylaws of TheraSense, Inc. as in effect upon completion of the offering *4.1 Specimen Common Stock Certificate *5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation *10.1 1997 Stock Plan and forms of agreements thereunder *10.2 2001 Stock Plan and forms of agreements thereunder *10.3 2001 Employee Stock Purchase Plan and forms of agreement thereunder *10.4 Form of Director and Executive Officer Indemnification Agreement *10.5 Employment Letter from TheraSense, Inc. to W. Mark Lortz, dated as of October 6, 1997 *+10.6 Technology Purchase Agreement between TheraSense, Inc. and E. Heller & Co. dated as of October 10, 2000 +10.7 Cooperative Development Agreement between TheraSense, Inc. and Facet Technologies LLC (f/k/a Gainor Medical North America LLC), dated as of December 1, 1998 *10.7(a) First Amendment to Cooperative Development Agreement between TheraSense, Inc. and Facet Technologies LLC (f/k/a Gainor Medical North America LLC), effective June 1, 2001. +10.7(b) Master Purchase Agreement between TheraSense, Inc. and Facet Technologies LLC effective June 1, 2001. *10.8 Standard Industrial/Commercial Single-Tenant Lease between TheraSense, Inc. and PlyProperties, a Partnership, dated as of February 26, 1999, and addendum thereto *+10.9 Master Purchase Agreement between TheraSense, Inc. and Flextronics International USA, Inc., dated as of November 3, 1999 *+10.10 Assignment of Patent Rights and Technology by and among Board of Regents of the University of Texas System, an agency of the State of Texas, Dr. Adam Heller and E. Heller & Company dated August 1, 1991 +10.11 First Amendment, dated March 19, 1998, to the Agreement entitled Assignment of Patent Rights and Technology by and among Board of Regents of the University of Texas System, an agency of the State of Texas, Dr. Adam Heller, E. Heller & Company and TheraSense, Inc. dated August 1, 1991 +10.12 License Agreement between TheraSense, Inc. and Asulab S.A., dated February 23, 2000 *+10.13 Warehouse Distribution Contract between TheraSense, Inc. and Livingston Healthcare Services, Inc., dated March 15, 2000 +10.14 International Distributor Agreement between TheraSense, Inc. and Nipro Corporation, dated April 1, 2001
II-5
Exhibit Number Description of Document ------- ----------------------- +10.15 International Distributor Agreement between TheraSense, Inc. and Disetronic Handels AG, dated September 13, 2000 *+10.16 Management Services Agreement between TheraSense, Inc. and ICT Group, Inc., dated January 31, 2000 and revised April 4, 2000 +10.17 License Agreement between TheraSense, Inc. and Unilever PLC dated February 10, 2000 *10.18 Promissory Note dated March 5, 1999 for the principal aggregate amount of $72,495 issued by W. Mark Lortz to TheraSense, Inc. *10.19 Promissory Note dated July 30, 1998 for the principal aggregate amount of $17,500 issued by Charles T. Liamos to TheraSense, Inc. *10.20 Promissory Note dated March 5, 1999 for the principal aggregate amount of $15,187.50 issued by Charles T. Liamos to TheraSense, Inc. *10.21 Promissory Note dated September 1, 1999 for the principal aggregate amount of $61,250 issued by Charles T. Liamos to TheraSense, Inc. *10.22 Promissory Note dated December 1, 1997 for the principal aggregate amount of $62,650 issued by W. Mark Lortz to TheraSense, Inc. *10.23 Amended and Restated Investors Rights Agreement by and among holders of TheraSense Preferred Stock and TheraSense, Inc., dated January 23, 2001, as amended *10.24 First Amendment to the Agreement Entitled Sponsored Research Agreement No. UTA 98-0296 entered into as of October 10, 2000, by and between TheraSense, Inc. and the Board of Regents of the University of Texas System on behalf of the University of Texas at Austin. *10.25 Form of Change of Control Agreement between TheraSense, Inc. and each Vice President of TheraSense, Inc. *23.1 Consent of PricewaterhouseCoopers LLP, independent accountants *23.2 Consent of Counsel (included in exhibit 5.1) *24.1 Power of Attorney
------------------------------- + Confidential treatment has been requested for portions of this exhibit * Previously filed II-6 EX-10.7 3 dex107.txt COOPERATIVE DEVELOPMENT AGREEMENT [CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION] Exhibit 10.7 COOPERATIVE DEVELOPMENT AGREEMENT Parties: Gainor Medical North America, LLC ("Gainor") TheraSense, Inc. ("TheraSense") 2205 Highway 42 North 1311 Harbor Bay Parkway P.O. Box 353 Suite 2000 McDonough, Georgia 30253-0353 Alameda, CA 94502 Attn: Bill Taylor Attn: Charlie Liamos Phone: (770) 474-4414 Phone: (510) 749-5436 Fax: (770) 474-6214 Fax: (510) 749-5438 This Agreement is entered into as of December 1, 1998 by and between Gainor, a Georgia limited liability company, and TheraSense, a California corporation, Recitals TheraSense has developed certain patented and non-patented technologies related to measurement of glucose levels in humans. Gainor is in the business of designing and manufacturing microsampling products for use in connection with measurement of glucose levels. Gainor and TheraSense wish to enter into a cooperative arrangement for the development of two new systems and related marketable products for simplified measurement of glucose levels utilizing the TheraSense technologies. The first system, referred to as "Colossus" is intended to be a minimally invasive monitoring technique utilizing an electrochemical method of measuring blood glucose proprietary to TheraSense. This method requires a significantly smaller blood sample than current technologies. Gainor will develop new microsampling methods and devices for this system. The second system, referred to as "Messenger" is intended to be a resident glucose monitoring system utilizing an electrochemical device shallowly embedded in the abdomen or other part of the body for constant monitoring of glucose levels: Gainor will develop methods and devices for introducing the device into the patient. Agreement In furtherance of the above goals, and in consideration of the mutual covenants contained in this Agreement and other valuable consideration, the receipt and sufficiency of which are acknowledged by the parties, Gainor and TheraSense agree as follows: 1. Definitions. The following terms as used in this Agreement shall ----------- have the following meanings: 1.1 "Confidential Information" shall mean any competitively ------------------------ sensitive or secret business, marketing, financial or technical information of Gainor or TheraSense, including the terms of this Agreement and all other agreements and communications between Gainor and TheraSense. Confidential Information shall not include information which is (i) generally known to the public or readily ascertainable from public sources (other than as a result of a breach of confidentiality hereunder), (ii) independently developed by the receiving party without reference to or reliance on any Confidential Information of the disclosing party, as demonstrated by written records of the receiving party, or (iii) obtained from an independent third party who created or acquired such information without reference to or reliance on Confidential Information. 1.2 "Products" shall mean all marketable products which result from -------- the Projects. 1.3 "Projects" means the two new glucose monitoring systems -------- (including the Gainor Components) being developed by TheraSense, currently referred to as "Colossus" and "Messenger" as more particularly described in the Recitals above and in the Project Plan. 1.4 "Project Plan" is defined in Section 2.4. ------------ 1.5 "Project Managers" are defined in Section 2.2. ---------------- 1.6 "Steering Committee" is defined in Section 2.3. ------------------ 1.7 "Technology or Technologies" shall mean collectively all -------------------------- inventions, devices, processes, methods, techniques and associated intellectual property rights. 1.8 "Force Majeure" shall mean any act of God, earthquake, fire, ------------- natural disaster, accident, act of government, or an act that is beyond the control of either party. 2. Development. ----------- 2.1 General. Gainor shall work with TheraSense to develop certain ------- components (the "Gainor Components") of two new glucose monitoring systems being developed by TheraSense, currently referred to as "Colossus" and "Messenger". 2.2 Project Managers. Each party shall appoint a Project Manager, ---------------- who shall be responsible for managing the Project. The initial Project Managers are listed on Exhibit A attached hereto. --------- 2.3 Steering Committee. In addition to the Project Managers, the ------------------ parties shall form a Steering Committee consisting of senior management of each party. The Steering Committee shall be responsible for the success of the Projects, resolve all disputes between the Project Managers, and approve all changes to the Project Plan. 2.4 Project Plan. The Project Plan shall be attached to this ------------ agreement as Exhibit A. The Project Plan shall set forth, at a minimum: a list --------- of the Gainor Components; the development and management responsibilities of each party; the development schedule for the Gainor Components and the projects; the resources to be provided by each party (including personnel, facilities, Technology and capital investment); the specifications for the Gainor Components; and the budget for each of the Gainor Components setting forth projected development costs, capital expenditures, projected sales, manufacturing costs, and normal margins. -2- 2.5 Revision of Project Plan. The Project Managers shall meet ------------------------ periodically at times and places to be mutually agreed upon, but no less than once per quarter. The Project Plan may be amended from time to time to reflect the results of such meetings, and as necessary from time to time to reflect changes in Technology, development schedule, cost estimates, and other changes. In the event of significant cost overruns or changes in the base assumptions upon which the Project Plan was prepared, the development of the Gainor Components will be reassessed and the Project Plan may be revised. Suggested revisions to the Project Plan may only be submitted to the steering committee by the mutual agreement of the Project Managers, who shall work together in good faith to keep the Project Plan up to date and accurate. All amendments to the Project Plan must be approved by the Steering Committee as evidenced by the signature of each member of the Steering Committee on an amended Project Plan. 2.6 Cooperation. Unless or until a Project is discontinued as ----------- provided in Section 11 hereof, each party shall cooperate fully with the other, and use its best efforts to further the development of the Gainor Components and the Projects. Each party shall provide such information regarding preexisting technologies as the other shall require to fulfill its obligations hereunder. 2.7 Subcontracting. Gainor may subcontract portions of its rights -------------- and responsibilities hereunder to ***, and/or *** but only to the extent specifically set forth in the Project Plan. 2.8 Gainor agrees to give TheraSense' marketing and sales organization access to Gainor's *** and ***. The senior executive officer of the Gainor Medical *** business will determine the extent of this access, if any, and will provide it to TheraSense at no cost, other than those associated with the marketing and distribution expenses. Due to ***, no *** or *** will be given to TheraSense. Any access allowed will be coordinated and given through the Gainor Medical *** business. 3.0 Manufacturing. In exchange for its efforts under this ------------- Agreement, Gainor shall have the exclusive worldwide right for a period of seven years from the date of this agreement to manufacture, or have manufactured, the Gainor Components. Gainor and TheraSense shall work jointly to develop a control plan for Gainor's manufacturing process to obtain process improvements with the ultimate goal to achieve within reasonable economic limits process capability index (Cpk) of 1.67 or higher on all key parameters of the Product Specifications. Gainor agrees to implement process improvements and process validations using Process Failure Mode Effect analysis (FMEA) for each step of the process. *** will be responsible to fund the manufacturing tooling required to satisfy the delivery requirements outlined in the manufacturing and supply agreement for the Gainor Components. Gainor Components produced by Gainor shall be supplied solely to TheraSense or such other manufacturing and/or distribution channels as TheraSense may designate. Terms for manufacturing and distributing the Gainor Components and other components to be produced by Gainor shall be set forth in a manufacturing and supply agreement after the viability of each Project has been proven from a technological and economic standpoint. Pricing for the Gainor Components shall be as set forth in the project plan based on cost, manufacturing equipment amortization, and normal Gainor margins. ***, but will be addressed separately as detailed in the Funding section below. *** Confidential treatment requested -3- 4. Funding. Each party will fund its own development efforts and pay ------- all of its own costs and expenses. Each party will make such investments as reasonably necessary to successfully complete each Project. Gainor shall arrange for the capital necessary to develop manufacturing capacities for the Gainor Components. Each party shall provide the other with such financial and technical information regarding the Projects as the other shall reasonably request, including: total expenditures incurred to date for the Projects; monthly and quarterly budgets for future expenditures; and expected sources of funding and financing for completion of the Projects. Upon request, TheraSense shall provide Gainor with its most recent balance sheets showing capital available for completion of the Projects. *** for the Gainor Components. TheraSense shall pay to Gainor, in addition to payment for the Gainor Components under the manufacturing and supply agreement, *** for each of the first *** Colossus systems shipped by TheraSense to its distribution channel. If sales to TheraSense of the Gainor Components exceed a cumulative total of ***, then TheraSense shall receive a payment (credit) of *** divided into *** equal installments to be paid over the *** period) after achieving such goal. In the event that market conditions are such that *** the Gainor Components, TheraSense agrees to an adjustment in the amount of the credit to be issued, based on the following scale: ***. In the event this agreement is terminated, the licensing or royalty fees described in Section 11, Termination, will account for any payments after termination rather than the methods described in this section. 5. Marketing. TheraSense or assigns, or marketing and/or distribution --------- partners will be responsible for the marketing, sale and distribution of the all Products. 6. Intellectual Property. All Technologies owned or developed solely by --------------------- a party and its employees and agents, whether prior to or subsequent to the date of this Agreement, and all related intellectual property rights, shall remain the exclusive property of such party. Each party hereby grants the other such rights and license in and to use such Technology as the other shall reasonably require to exercise its rights and fulfill its obligations hereunder, including the right of TheraSense to sell Products. Technologies developed jointly by Gainor and TheraSense shall be jointly owned. This Section shall survive any termination of this agreement. 7. Exclusivity. TheraSense shall work exclusively with Gainor for ----------- development of the Gainor Components. Gainor shall not supply the Gainor Components to any third party without the written consent of TheraSense. Neither party shall use the jointly owned Technologies outside of the Projects(other than pursuant to the sale of Products by TheraSense) without the written consent of and Proper compensation to the other party. Notwithstanding the foregoing, neither party shall be precluded from using the general know-how gained during the development of the Projects under this Agreement. Gainor shall not be precluded from developing any Technology for any third party, provided Gainor does not use the Technology owned by TheraSense or the Intellectual Property developed specifically for the Gainor Components. *** Confidential treatment requested -4- 8. Inventions, Patents and Trademarks. ---------------------------------- 8.1 Notice. Each party shall promptly notify the other upon the ------ making, conceiving or reducing to practice of any patentable invention or discovery related to the Projects. 8.2 Right to Patent. Each party shall have the sole right to --------------- prepare, file, prosecute, maintain and extend patent applications and patents concerning all patentable Technology owned by such party, as determined under Section 6, provided each party shall give notice to the other of its intent to patent any technology concerning the projects prior to filing. If such party elects not to file, prosecute or maintain patent applications or ensuing patents or certain claims encompassed by such patent applications or ensuing patents in any country with respect to any invention or discovery related to the Projects, then the other party may elect to do so on the developing party's behalf. Such party shall give notice to the developer and owner of the patentable Technology of its intent to so prepare, file and prosecute a patent, and the owner shall have 30 days to choose to take such action on its own behalf, and take significant action toward doing so. At the end of such notice period, if the owner has not taken such action, the non-owner may do so. 8.3 Joint Patents. TheraSense and Gainor shall mutually agree upon ------------- which party shall be responsible to prepare, file, prosecute, maintain and extend patent applications and patents concerning all patentable inventions and discoveries owned jointly by Gainor and TheraSense. If the parties cannot agree, then Gainor shall have the right to apply for such patents using counsel of its choice, in consultation with TheraSense. 8.4 Protection of Ability to Patent. Neither party shall take any ------------------------------- action which would have a material adverse effect on the patentability of any newly developed Technology or improvement to any Technology, including any public sale or disclosure thereof, until the parties either file an application or mutually agree not to pursue a patent. 9. Regulatory Approval. TheraSense will be responsible for regulatory ------------------- approval of the Products, with such assistance from Gainor as TheraSense shall reasonably request, on terms to be agreed upon. 10. Confidentiality. Each party shall at all times keep confidential all --------------- Confidential Information of the other. Neither party shall permit or authorize access to or disclosure of the other party's Confidential Information to any person or entity other than (i) employees (including temporary contract employees, engineers and developers) who have signed confidentiality agreements with protection substantially similar to that contained in this Agreement and professional advisors under a professional obligation of confidentiality (including lawyers, accountants, financial advisors, and sources of funding) with a "need to know" such information, (ii) independent contractors who have signed confidentiality agreements with protection substantially similar to that contained in this agreement, provided that each party shall have the right to approve (approval not to be unreasonably withheld) in advance all contractors who are given access to the Confidential Information of such party and (iii) governmental regulatory authorities, to the extent required for compliance with applicable laws, and subject to such protective measures as may be available to preserve the confidentiality of such information following disclosure. Each party shall promptly -5- notify the other in writing of the existence of any unauthorized knowledge, possession or use of the other party's Confidential Information by any person or entity. 11. Termination. ----------- 11.1 Voluntary Termination. Gainor may terminate its development --------------------- obligations under this Agreement with respect to either or both Projects with 90 days written notice to TheraSense upon a reasonable determination by Gainor that the resources required to develop the Gainor Components for such Project will materially exceed the projections set forth in the Project Plan or has elected not to enter into a manufacturing agreement for strategic reasons. (The inability of Gainor and TheraSense to come to terms, i.e. price, etc., on a manufacturing agreement is not considered a strategic reason for not entering the agreement.) Upon such termination, (i) Gainor shall no longer be responsible for development of the Gainor Components for such Project, (ii) In the case that such termination occurs on or before August 31, 1999, TheraSense shall have the right to Purchase a fully paid up license, for the purpose, of developing, manufacturing and selling products which measure glucose (as distinct from micro sampling products) all Gainor Technology developed prior to termination and all jointly owned technology for a payment of *** of the *** prior to the voluntary termination *** election, (iii) In the case that termination occurs after August 31, 1999, TheraSense may license from Gainor the technology of Gainor required for TheraSense or its nominee to complete the Gainor Components for such Project, (iv) Gainor shall be entitled to utilize on a *** basis the Gainor Technology and jointly owned Technology developed prior to termination for the purpose of developing, manufacturing and selling micro sampling products (as distinct from products which measure glucose). 11.2 Termination by TheraSense on Default of Gainor. ---------------------------------------------- (a) Gainor Event of Default. The following shall constitute ----------------------- an Event of Default by Gainor: (i) Gainor discontinues its development work on the Gainor Components for either Project for any reason other than as set forth in 11.1 above. (ii) Gainor is unwilling or unable to complete the Gainor Components for a Project or any Products substantially within the time periods and budget set forth in the Project Plan. (iii) Gainor (prior to execution of a definitive manufacturing and supply agreement) is unwilling or unable to manufacture and supply the Gainor Components for completed products in the amounts, within the quality or upon the time frame required to avoid a material adverse effect upon TheraSense. (iv) Gainor otherwise materially breaches its obligations hereunder. (b) Result of Gainor Event of Default. Upon an Event of --------------------------------- Default by Gainor, TheraSense shall provide written notice to Gainor of such occurrence, and Gainor shall have 30 days to cure such problem or breach, or reach a mutual agreement with TheraSense for *** Confidential treatment requested -6- remedying same or this Agreement shall be terminated. Upon the expiration of such 30 day period, if Gainor has not cured the Event of Default of otherwise reached agreement with TheraSense, (i) TheraSense may continue development of the Gainor Components on its own, or Contract for a third party to continue development of the Gainor Components, (ii) TheraSense shall have the right to use all Technologies developed and owned by Gainor for such discontinued Project and all jointly owned Technologies developed for such Project to finish, use, manufacture, market and distribute the Products. Gainor shall provide to TheraSense such technical and other information regarding the Gainor Components, including technical and development plans and documentation, as TheraSense may require to exercise its rights under this Section. As an alternative to terminating this Agreement, but without effecting the other rights granted in the immediately proceeding sentence, following an Event of Default described in Section 11.2(a)(iii). TheraSense may utilize additional suppliers to obtain Gainor Components. TheraSense shall compensate Gainor for its work through such termination at a reasonable royalty rate consistent with industry standards, and the level of completion of the Gainor Components at such time. 11.3 Termination by Gainor on Default of TheraSense. ---------------------------------------------- (a) TheraSense Event of Default. The following shall --------------------------- constitute an Event of Default by TheraSense: (i) TheraSense discontinues either Project for any reason. (ii) TheraSense is unwilling or unable to complete a Project or any Products under a Project substantially within the time periods and budget set forth in the Project Plan. (iii) TheraSense is unwilling or unable to manufacture, market and distribute the Products within a reasonable amount of time following completion of the Products and obtaining any necessary regulatory approvals. (iv) TheraSense otherwise materially breaches its obligations hereunder. (b) Result of TheraSense Event of Default. Upon an Event of ------------------------------------- Default by TheraSense, Gainor may terminate its obligations with respect to such Project by providing written notice thereof to TheraSense, who shall have 30 days to cure such Event of Default, or reach a mutual agreement with Gainor for remedying same or this agreement shall be terminated. Upon the expiration of such 30 day period, if TheraSense has not cured the Event of Default of otherwise reached agreement with Gainor, (i) Gainor shall have the right use all Technologies owned by Gainor and all jointly owned Technologies developed for such Project for any purpose with no further obligation to TheraSense, and (ii) Gainor shall continue to have the exclusive right to manufacture the Gainor Components if a Project ever produces marketable Projects. TheraSense shall provide to Gainor such technical and other information regarding such Projects and all related Products, including technical and development plans and documentation, as Gainor may require to exercise its rights under this Section. Gainor shall compensate TheraSense for use of jointly developed and owned Technology used in any product completed and sold by Gainor at a reasonable -7- royalty rate consistent with industry standards based on the amount of such Technology included in any such finished product. 12. Right to Perform. Each party hereby represents to the other that it ---------------- has the necessary rights and licenses to enter into and perform under the terms of this Agreement and to grant such rights and licenses as it has agreed to grant hereunder. Each party shall notify the other promptly upon discovering that any of its Technology related to the Projects is or may be infringing upon the rights of any third party, and shall promptly notify the other if it believes or receives notice that any third party is infringing on any its technologies. 13. Indemnification. Each party shall indemnify and hold the other party --------------- harmless from and against any and all claims, judgments, liabilities and damages arising out of (i) any claim that the Technology of the indemnifying party infringes any patent, trade secret or other intellectual property right of a third party or (ii) any negligent act, error or omission by the indemnifying party, its employees, agents, servants or representatives in the performance of its duties and obligations hereunder. In the event any such claim is made, the party to be indemnified (the "Indemnitee") shall immediately notify the ---------- indemnifying party (the "Indemnitor"). The Indemnitor shall have the right to control the defense of such claim with counsel of its choice and shall bear all cost and expense of such defense. The Indemnitee shall allow the Indemnitor to control the defense of such claims, shall cooperate as reasonably necessary in the defense of any such claim at the expense of the Indemnitor, and may participate in the defense with counsel of its choice at Indemnitee's cost. If the Indemnitor fails to vigorously defend Indemnitee. Indemnitee may assume such defense with counsel of its own choice. To the extent a claim is based on infringement by Technology jointly owned by both parties, each party shall bear the cost and expense of its own defense, and shall indemnify, reimburse and hold the other party harmless to the extent that it is determined that such infringement is not attributable to such other party or such other party's Technology. 14. Dispute Resolution. ------------------ 14.1 Negotiation. The Steering Committee shall negotiate in good ----------- faith to resolve any dispute under this Agreement. If the Steering Committee cannot agree, the dispute shall be referred to appropriate senior management of each party for resolution, and such senior management shall negotiate in good faith to resolve such dispute. 14.2 Arbitration. If a claim, controversy or dispute between the ----------- parties cannot be resolved within a reasonable time period as set forth above, either party may demand that such matter be submitted to final and binding arbitration. Issuance of an arbitration demand shall suspend the effect of any default entailed by such claim, controversy or dispute and any judicial or administrative proceedings instituted in connection therewith, for the duration of the arbitration proceedings. Arbitration shall be governed by the Commercial Arbitration Rules of the American Arbitration Association (the "AAA"). Arbitration shall be conducted by three arbitrators. Each party shall choose one arbitrator within 10 days of the arbitration demand. The final arbitrator shall be chosen by the first two within 10 days of their appointment. If the first two arbitrators cannot agree, the third arbitrator shall be chosen by AAA. The arbitrator or arbitrators shall evaluate all outstanding claims and dispute, determine the relative fault of each party, and deliver its or their decision within 60 days of the date of receipt of the arbitration demand, specifying such remedy -8- (including money damages) as shall (a) fully implement the intent and purposes of this Agreement and (b) indemnify and hold harmless the non-breaching party from all losses, costs and expenses (including costs of arbitration and reasonable attorneys' fees) resulting from the default. Termination or limitation of either party's rights to its Technology, or any associated intellectual property rights may not be awarded under any circumstances. The right to demand arbitration and to receive damages and obtain other available remedies as provided hereunder shall be the exclusive remedy in the event an arbitration demand is made. The parties hereby consent to the enforcement in the courts of each state where each party resides or maintains assets of any arbitral judgment or award rendered pursuant to this Section. 15. General. ------- 15.1 Notices. Notices shall be deemed given as of receipt as shown ------- by the records of FedEx, UPS, registered US Mail, or other courier service, or fax with a confirmation notice, if properly addressed as first set forth above. Either party may change their address by notice in compliance with this section. 15.2 Assignment. This Agreement shall not be assignable by either ---------- party to any third party without the written consent of the other party hereto; except that either party may assign this Agreement without the other party's consent to an entity that acquires substantially all of the business or assets of the assigning party whether by merger, transfer of assets, or otherwise. Upon a permitting assignment of this Agreement, all references herein to the assigning party shall be deemed references to the parry to whom the Agreement is so assigned. 15.3 Waiver. The failure of either party to enforce any term of ------ this Agreement shall not constitute a waiver of either party's right to enforce every term of this Agreement. 15.4 Enforcement. If either party brings an action under this ----------- Agreement (including appeal), the prevailing party shall be entitled to recover reasonable attorneys' fees and costs. 15.5 Enforceability. Should any provision of this Agreement be held -------------- by a court of competent jurisdiction or arbitration authority to be unenforceable, the remaining provisions of this Agreement shall not be affected or impaired thereby except to the extent necessary to give effect, as close as possible to the intent of the parties as expressed herein. 15.6 Choice Of Law. This agreement shall be governed by and ------------- construed under the laws of the state of Georgia, excluding its conflict of laws rules. 15.7 Force Majeure. Neither party shall be in default by reason of ------------- any failure in the performance of this Agreement, other than a failure to make payment when due or to comply with restrictions upon the use of the other's Technology, if such failure arises out of any act, event or circumstance beyond the reasonable control of such parry, whether or not otherwise foreseeable. The party so affected will resume performance as soon as reasonably possible, 15.8 Headings and Captions. The headings and captions appearing in --------------------- this Agreement are inserted only as a matter of convenience and in no way limit the scope or affect the meaning of any section. -9- 15.9 Employees. Neither party shall hire or solicit for hire any --------- employee of the other without the express written consent of the other party. 15.10 Prior Agreements, Amendment. This Agreement constitutes the --------------------------- entire agreement between the parties and supersedes all prior understandings and agreements between them regarding the content hereof, and may not be modified or amended except in writing signed by authorized representatives of both parties. IN WITNESS WHEREOF, the undersigned parties have executed this Agreement as of the date first set forth above. Gainor Medical North America, LLC TheraSense, Inc. By: /s/ Mark J. Gainor By: /s/ W. Mark Lortz ------------------------------------ ---------------------------------- Mark J. Gainor W. Mark Lortz ------------------------------------ ---------------------------------- ____ Print Name Print Name Chairman & CEO President & CEO ------------------------------------ ---------------------------------- Print Title Print Title 12/18/98 12/17/98 ------------------------------------ ---------------------------------- Date Date -10- EXHIBIT A TheraSense/Gainor Medical Cooperative Development Agreement Project Plan - CONFIDENTIAL This project plan is intended to outline the key components of the cooperative development efforts relative to Colossus blood acquisition and Messenger sensor delivery. The initial released revision of this document will be attached to the cooperative development agreement (contract), and updated revisions to the project plan can only be made by the Steering Committee as evidenced by their signatures on an amended project plan. Project Definitions: Colossus: Colossus is a minimally invasive blood glucose measurement system. It is considered minimally invasive because the blood volume required to fill the sensor is *** which is about *** the volume of the lowest volume meter system currently on the market. This minimal blood requirement enables the end user to obtain the sample from sites other than the finger, thus allowing for the possibility of less painful blood sampling. The first generation Colossus system is considered non-integrated, as it will utilize lancets and a lancing device to obtain the blood sample. The end user will then place the sensor into the blood sample for acquisition of the blood. The second generation Colossus is planned as ***. Messenger: Messenger is an in-dwelling glucose measurement system. One sensor is inserted into the skin in a position such as the abdomen for a three-day duration. The sensor then will have the ability to make continuous glucose readings. Development & Management Responsibilities: Gainor Medical will establish an internal project team for the TheraSense projects. This team will include a project manager, engineers and designers. Additional support will come from the group Director. All strategic business issues will be addressed and approved by the group Director. Colossus - Blood Acquisition Gainor will lead the efforts in the blood acquisition portion of the project, working with TheraSense in the integration of this portion into the total system. Gainor and TheraSense will jointly define all specifications and requirements relative to the blood acquisition portion of the project. For the non-integrated system, Gainor Medical will perform studies to determine if commercially available devices or slight variations thereof can consistently obtain an off finger blood sample greater than 300 l in an acceptable amount of time without manipulation. The final acceptance criteria have not been finalized but will *** Confidential treatment requested EXHIBIT A TheraSense/Gainor Medical Cooperative Development Agreement Project Plan - CONFIDENTIAL include a success rate equal to or exceeding that of current conventional finger puncture methods used in conjunction with conventional meter/strip systems. The acceptance criteria for *** have not been finalized but will include a success rate per sensor to equal or exceeding that of conventional strips on the market today. After the lancing device is *** the sensor will ***. In this configuration, the lancing and sensor are *** prior to each test. A secondary approach may be utilized if ***. In this secondary approach, the lancet and sensor would be ***, but the sensor would still ***. Messenger - Sensor Delivery Gainor will perform the development efforts on the adhesive mount, inserter mechanism, and the introducer by taking the design input and current design concepts generated by TheraSense and further developing them. The acceptance criteria for this system are not yet finalized either, however the intent is to design the *** such that it is ***. The secondary plan is to design the *** such that only the ***, and the *** is ***. Cost, size, and portability are all factors in this decision. At the current time, the location of the final production assembly is unknown. Initial thoughts are for total *** assembly at ***, but this opens several other questions relative to the *** of the *** prior to ***. This item is TBD. Overall Schedule: The key milestones are noted in the project schedule attached. The project managers maintain the detailed schedule, and it is updated periodically as needed. Substantial changes to the product availability from the dates listed above must be approved by the Steering Committee, as evidenced by their signatures on an amended project schedule. Resources: The development budget for Gainor Medical for these projects is an aggregate of ***. Gainor and Gainor's manufacturing partners ***. Using these budgetary figures, it is expected that Gainor will supply *** on these projects, a portion of which were in place as of August 31. The search for additional personnel is underway, and is expected to conclude within several weeks. TheraSense will provide a project manager or coordinator for the projects to interface with Gainor. *** Confidential treatment requested -2- EXHIBIT A TheraSense/Gainor Medical Cooperative Development Agreement Project Plan - CONFIDENTIAL Projected Sales & Manufacturing Costs: The sale price to TheraSense will be based on ***. There will be *** in the sale of these items. This *** will occur separately as defined in the cooperative development agreement. Project Managers: The project managers for both projects as of October 1998 are Michael Lipoma, Gainor Medical, and Jeff Funderburk, TheraSense. Steering Committee: Bill Taylor of Gainor Medical and Fred Colman of TheraSense are the members of the Steering Committee as of December 1998. This project plan has been reviewed and approved by: /s/ Fred Colman 12-17-98 ---------------------------------- ------------------- Fred Colman Date Vice President, Engineering TheraSense, Inc. /s/ Bill Taylor 12-18-98 ---------------------------------- ------------------- Bill Taylor Date Director, Product Technology Group Gainor Medical North America, LLC *** Confidential treatment requested -3- EXHIBIT A TheraSense/Gainor Medical Cooperative Development Agreement Project Plan - Confidential Milestone Description Estimated Finish Dates *** *** Confidential treatment requested -4- EX-10.7B 4 dex107b.txt MASTER PURCHASE AGREEMENT EXHIBIT 10.7B [CONFIDENTIAL TREATMENT REQUESTED, CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION] MASTER PURCHASE AGREEMENT Manufacturing and Supply This Master Purchase Agreement is effective as of June 1, 2001 (the "Effective Date"), by and between TheraSense, Inc., a Delaware corporation having its principal place of business at 1360 South Loop Road, Alameda, California 94502 ("TheraSense") and Facet Technologies, LLC, a Georgia limited liability company, having a place of business at 1850 Parkway Place, 9th Floor, Marietta, Georgia 30067 ("Facet"). RECITALS WHEREAS, Facet is a leader in the field of manufacturing lancing devices and lancets for the diagnostic testing market; and WHEREAS, TheraSense develops and manufactures advanced blood glucose monitoring devices for diabetics; and WHEREAS, TheraSense wishes to contract with Facet to manufacture certain Products (as hereinafter defined) for use with the Freestyle blood glucose monitoring device, as defined and described in the Specifications provided as Exhibit B hereto, and to purchase the resulting Products from Facet; and WHEREAS, Facet agrees to manufacture and supply such Products to TheraSense; NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties agree to the terms and conditions specified below as follows: AGREEMENT The terms and conditions of this agreement and Exhibits A and B hereof (collectively the "Agreement") and any Purchase Order(s) issued hereunder, shall govern all sale and purchase transactions pertaining to the Products, that may be entered into by TheraSense and Facet from time to time hereafter, unless expressly otherwise agreed in writing. 1. DEFINITIONS 1.1 "Acceptance" shall mean the successful completion of a mutually agreed upon inspection and test procedure for Products which confirms that the tested Product meets the Specifications (as defined hereinafter). 1.2 "Affiliate" shall mean any entity that directly or indirectly controls, is under common control with, or is controlled by, one of the parties to this Agreement. An entity shall be deemed to be in control of another entity only if, and for so long as, it owns or controls more than fifty-one percent (51%) of the shares of the subject entity entitled to vote in the election of the -1- directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority). 1.3 "Cooperative Development Agreement" shall mean that certain Cooperative Development Agreement between the parties dated as of December 1, 1998, as amended. 1.4 "Engineering Change" shall mean any mechanical or process change to any Product, including injection molding, or the manufacturing kitting, or assembly process for any Product. An Engineering Change includes changes originating from TheraSense or Facet that could affect the safety, performance, reliability, serviceability, appearance, dimensions, tolerances, materials, and composition of any bill of material of any Product. 1.5 "FDA" shall mean the United States Department of Health and Human Services' Food and Drug Administration. 1.6 "Force Majeure" shall mean any act of God, earthquake, fire, natural disaster, accident, act of government, or an act that is beyond the reasonable control of either party. 1.7 "Product" shall mean the lancing devices, as developed under the CDA, and lancets for the Freestyle systems. Additional Products may be added with the agreement of both parties. 1.8 "Product Improvements" shall mean any modifications to the Products or manufacturing assembly process including system kiting to enhance performance and/or provide comparable performance at lower cost. All Product Improvements must be approved in writing by TheraSense prior to implementation. 1.9 "Purchase Order" shall mean written order(s) from TheraSense to Facet for the Products, specifically referencing this Agreement and including the description, quantity, shipping destination, and required delivery date at the destination. 1.10 "Specifications" shall mean the mutually agreed upon specifications for the Products and packaging. 1.11 "TheraSense" as used herein shall mean TheraSense and/or its authorized subcontractor(s), when referring to the ordering or delivery of or payment for Products. TheraSense subcontractors must be authorized in writing solely by TheraSense and all purchases by such parties shall be credited against the volume of TheraSense purchases. 2. SUPPLY REQUIREMENTS 2.1 During the term of this Agreement, Facet shall supply TheraSense with those quantities of the Products ordered by TheraSense in a Purchase Order submitted to Facet pursuant to this Agreement. The Products shall comply with the Specifications and all jointly developed quality plans. -2- 2.2 In consideration of the services and support provided by Facet under the Cooperative Development Agreement, TheraSense agrees to purchase the Products exclusively from Facet for a period of six (6) years from the Effective Date. 2.3 Facet and TheraSense shall work jointly to develop a quality plan for Facet's manufacturing line with the ultimate goal to achieve within reasonable economic limits a process capability index (Cpk) of 1.67 or higher on all key parameters of the Product Specifications. 2.4 Facet agrees to implement process improvements and process validations using the TheraSense process control methodology as outlined below. TheraSense will provide appropriate support and training to support this process. [***] 2.5 Facet shall share process data with TheraSense by submitting Certificates of Compliance that include process control charts if required by TheraSense, for every Product shipment. 3. FORECASTS AND ORDERS Starting on the Effective Date, and every three (3) months thereafter, TheraSense shall provide Facet with a non-binding written forecast of TheraSense's expected needs for the Products for no less than a six (6) month period from the date thereof (the "Forecast"). At least quarterly, TheraSense shall place a three (3) month Purchase Order with Facet for the Products. 4. MATERIAL PROCUREMENT 4.1 Purchase Orders. TheraSense's accepted Purchase Orders will --------------- constitute authorization for Facet to procure, using standard purchasing practices, the components, materials and supplies necessary for the manufacture of Products ("Inventory") covered by such Purchase Orders. 4.2 Special Inventory. Subject to the conditions below, Facet may ----------------- purchase, in amounts beyond the amount necessary to fill accepted Purchase Orders, the components, materials, and supplies: (i) which require greater than ninety (90) days from the time they are ordered to the time they are delivered to Facet ("Long Lead Time Components") plus thirty (30) days to account for the order, shipment, receipt and manufacturing and, (ii) purchased in quantities above the currently required amount in order to achieve price targets ("Economic Order Inventory"), and (iii) purchased in excess of current requirements because of minimum lot sizes available from manufacturers ("Minimum Order Inventory"). Collectively, these components, materials, and supplies are termed "Special Inventory." -3- *** Confidential Treatment Requested 4.3 Safety Stock. In recognition of TheraSense's desire to have a ------------ ready supply of Products, Facet agrees to maintain a raw materials inventory at its facility in an amount equivalent to *** of TheraSense's *** usage. Such inventory will be modified from time to time based upon TheraSense's actual usage over the preceding [***]. All materials for TheraSense shall be cycled through this inventory on a FIFO basis. TheraSense's obligation and sole liability for this service shall be to purchase any such inventory at Facet's cost plus associated overhead expense upon termination or expiration of this Agreement or cancellation of any Purchase Order per 4.5, and provided Facet is not able to otherwise use such inventory. Facet shall use reasonable commercial efforts to eliminate or reduce this inventory at the approaching expiration of this Agreement. 4.4 Quantity Increases and Shipment Schedule Changes. For any accepted ------------------------------------------------ Purchase Order, TheraSense may (i) increase the quantity of Products or (ii) reschedule the quantity of Products and their delivery date. Any Purchase Order quantities increased or rescheduled pursuant to this Section may not be subsequently increased or rescheduled without the prior written approval of Facet. Although Facet will use reasonable commercial efforts to satisfy TheraSense's requested quantity increases or schedule changes, Facet's obligation to do so is subject to material availability and TheraSense's agreement to reimburse Facet for any extra costs incurred by Facet to meet a quantity increase or schedule change. If there are extra costs required to meet a quantity increase or schedule change, Facet will seek approval from TheraSense to pay any extra costs required in advance of incurring such costs. 4.5 Cancellation. TheraSense may not cancel any portion of the ------------ quantity of an accepted Purchase Order without Facet's prior written approval, which shall not be unreasonably withheld. If the parties agree upon a cancellation, TheraSense will pay Facet for Products, Inventory, and Special Inventory affected by the cancellation as follows: (i) *** of the contract price for all finished Products in Facet's possession and on order from non-cancelable Purchase Orders (ii) *** of the cost of all Inventory and Special Inventory in Facet's possession and on order from non-cancelable Purchase Orders (iii) any supplier cancellation charges incurred with respect to Inventory and Special Inventory accepted for cancellation by the supplier; and (iv) expenses incurred by Facet related to labor and equipment specifically put in place to support TheraSense's Purchase Orders. Facet will use reasonable commercial efforts to cancel pending orders for such inventory, and to otherwise mitigate the amounts payable by TheraSense in case of cancellation. 5. ENGINEERING CHANGES 5.1 TheraSense Requests. TheraSense may request, in writing, that ------------------- Facet incorporate an Engineering Change into any Product. Such request will include a description of the proposed Engineering Change sufficient to permit Facet to evaluate its feasibility, impacts, and cost. Facet's evaluation shall be in writing and shall estimate the costs and time of implementation and the impact on the manufacturing, delivery schedule, and pricing of the Product and shall be delivered to TheraSense within fifteen (15) days of receiving the request. TheraSense shall have thirty (30) days after receipt of Facet's evaluation to decide whether or not to implement the requested Engineering Change. Facet will not be obligated to proceed with the engineering change until the parties have agreed upon the changes to the Product's Specifications, delivery schedule and Product pricing and upon the implementation costs to be borne by TheraSense including, without limitation, the cost of -4- *** Confidential Treatment Requested Inventory, Special Inventory and safety stock on-hand and on-order that becomes obsolete. Facet will use reasonable commercial efforts to implement all TheraSense required changes per TheraSense requests. 5.2 Facet Requests. If Facet desires to make any Engineering Change, -------------- it will notify TheraSense not less than six (6) months prior to such change, unless conditions not in Facet's control preclude this from happening, to enable TheraSense to determine conformity of the changed Product with TheraSense's manufacturing requirements and obligations with respect to regulatory authorities. If Facet changes any Product or process to create non-conforming Product or Product which fails to conform to TheraSense's regulatory constraints, further processing needs, or performance standards for finished goods, then Facet agrees to continue to supply unchanged Product for the duration of the Agreement or until TheraSense can alter its process, standards for finished goods or seek appropriate regulatory approval to accommodate the changed Product or process. ECO implementation shall otherwise follow the standard Facet procedure. 6. PURCHASE PRICE TheraSense's purchase price with respect to the Products shall be as specified in Exhibit A. The price for Products to be manufactured will be set [***] for the *** and *** thereafter by reviewing actual component and assembly costs at Facet and making adjustments to take account of the changes and the resultant changes necessary to maintain Facet's [***]. All prices quoted are exclusive of federal, state and local excise, sales, use and similar taxes, and any duties, and TheraSense shall be responsible for all such items. 7. DELIVERY 7.1 Packaging; Shipping; Risk of Loss. Purchases of Products made --------------------------------- hereunder by Purchase Orders shall be F.O.B. Seller's factory in McDonough, GA. TheraSense will specify the carrier and shipments will be made freight collect. Title and risk of loss of Products shall pass to TheraSense at the F.O.B. point. Partial shipments, with TheraSense prior approval, will be accepted. A certificate of conformance shall accompany each shipment made hereunder. All Products delivered pursuant to the terms of this Agreement shall be suitably packed for shipment in accordance with TheraSense's Specifications, marked for shipment to TheraSense's destination specified in the applicable Purchase Order and delivered to a carrier or forwarding agent. 7.2 Late Delivery. Facet shall use its reasonable commercial efforts ------------- to maintain 100% on time delivery of Products. Facet shall notify TheraSense as soon as practicable if for any reason Facet fails to comply, or anticipates that it may fail to comply, with the terms of this Agreement or of a Purchase Order (including but not limited to failure to meet a delivery date required in the Purchase Order, provided that such delivery date has been accepted and agreed to by Facet, or delivery of less than the required quantity of Products). If Facet fails to deliver any Product (other than as a result of a Force Majeure event as set forth in Section 18.1 herein), then, TheraSense may request and Facet shall agree to work any necessary overtime at no additional cost to TheraSense to minimize such delay, or TheraSense may request Facet to ship the Product by premium transportation at no additional cost to TheraSense and Facet will comply with such request. -5- *** Confidential Treatment Requested 7.3 Delivery Documentation. Facet shall include an invoice for every ---------------------- delivery of Products which includes the following information for every unit of Product delivered: a complete noun description in the English language, a statement as to the country of origin of the goods; TheraSense's Purchase Order number, the value of the Products therein; Facet's identification number, or in the absence of such number, the full address of Facet; and the terms of sale. 8. PAYMENTS 8.1 Invoice payment terms applicable to Purchase Orders issued hereunder shall be net thirty (30) days FOB Facet. In addition to the invoice documentation to accompany each delivery of Product, for payment purposes, Facet shall issue an invoice directly to TheraSense upon Product shipment. Payment for other costs to be paid by TheraSense hereunder shall be made within thirty (30) days of Facet's invoice. All payments shall be made in lawful U.S. currency. 9. WARRANTY 9.1 Facet warrants that the Products will be new, merchantable, free from material defects in materials and workmanship and will conform to the Specifications under normal and intended use for a period of [***] after acceptance by TheraSense. This express limited warranty does not apply to (a) materials consigned or supplied by TheraSense to Facet; (b) or Product that has been abused, damaged, altered or misused by any person or entity after the title passes to TheraSense. With respect to first articles, prototypes, pre-production units, test units or other similar Products, Facet makes no representations or warranties whatsoever. Upon any failure of a Product to comply with the above warranty, Facet's sole obligation, and TheraSense's sole remedy, is for Facet, at its option, to promptly repair or replace such unit and return it to TheraSense freight pre-paid. TheraSense shall return Products covered by the warranty freight pre-paid after completing a failure report and obtaining a return material authorization number from Facet to be displayed on the shipping container. 9.2 Facet further represents and warrants that its supplying of Products to TheraSense under this Agreement does not conflict with any other agreement to which Facet is a party. 9.3 Facet further represents and warrants that it has, and shall maintain during the term of this Agreement, adequate equipment and facilities to meet TheraSense's demand for Products as represented in TheraSense's Forecast as described in Section 3 of this Agreement. 9.4 Facet has stated that its manufacturing facilities are EN46001 registered and Facet will use all commercially reasonable efforts to assure that such facilities and any new Facet facilities used for the production of Product will continue to be registered under EN46001 during the term of this Agreement. "Registered" as used herein shall mean certified and approved. Facet shall notify TheraSense in writing within thirty (30) days of any change in certification status. 9.5 Facet further warrants that title to all Products shipped to TheraSense or drop shipped directly to TheraSense's customers pursuant to this Agreement shall pass to TheraSense or a TheraSense customer, as the case may be, free and clear of any liens, charges, encumbrances, -6- *** Confidential Treatment Requested restrictions or rights created in, by or against the Products or against Facet. Provided that TheraSense has paid all associated fees for the Products, TheraSense and TheraSense's customers shall have quiet enjoyment of the Products. 9.6 Facet further warrants that: (a) it shall comply in all material respects with all legal requirements in fulfilling its obligations under this Agreement, including, but not limited to, lawful manufacturing practices and its treatment of its personnel and compliance; (b) there are no lawsuits, claims, suits, proceedings or investigations pending or, to Facet's knowledge, threatened against or affecting Facet in respect of its operations or processes used therein, nor to Facet's knowledge, is there any basis for the same; and (c) there is no action, suit or proceeding pending or, to Facet's knowledge, threatened which questions the legality of the transactions contemplated by this Agreement. Facet warrants that it owns, holds or possesses and shall maintain all material licenses, franchises, permits, privileges, immunities, approvals and other authorizations from a governmental body which are necessary to entitle it to carry on and conduct its operations as contemplated herein. 9.7 Facet warrants that all equipment used in the manufacturing and planning of TheraSense Products is Year 2000 compliant. 9.8 Facet warrants that it shall maintain design history files and device history records for all Products and retain these records for five (5) years after the products are last manufactured by Facet. Facet will also provide TheraSense access to these records upon request. 9.9 OTHER THAN THE WARRANTIES IN THIS SECTION 9, FACET MAKES NO OTHER WARRANTIES OR CONDITIONS ON THE PRODUCTS, EXPRESS, IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR COMMUNICATION WITH CUSTOMER, AND FACET SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 10. REGULATORY REQUIREMENTS During the term of this Agreement Facet will: A. Comply with the pertinent Quality System Regulations ("QSR") as such may be determined by the FDA and all applicable United States government regulatory requirements. B. Submit to periodic quality audits; TheraSense's Quality Assurance department may, at its sole option, perform audits of Facet's compliance with Quality System Regulations, with the quality control requirements specified herein and attached hereto as Exhibit C, together with any other quality systems and specifications mutually agreed upon. Facet acknowledges that the preceding sentence granting TheraSense certain audit rights in no way relieves Facet of any of its obligations under this Agreement, nor shall such provision require TheraSense to conduct any such audits. -7- (1) Any audits shall be conducted during normal business hours after reasonable notice (a minimum of four weeks) to Facet and not more frequently than once in any one hundred twenty (120) day period, except that TheraSense may conduct a limited audit in less than one hundred twenty (120) days of a previous audit for the limited purpose of reviewing any deficiencies discovered in a previous audit. (2) Any out of compliance observations noted during these audits must be corrected expeditiously. Facet shall, within thirty (30) days following receipt of an audit report that recommends corrective actions, provide TheraSense with a corrective action plan and schedule for carrying it out. (3) Following a TheraSense quality audit, Facet will be assigned an overall rating of acceptable, marginal or unacceptable. In the event Facet receives an unacceptable rating TheraSense will re- audit Facet within six (6) months. [***] unacceptable ratings by TheraSense will result in Facet's disqualification and termination of production. Any such termination shall be deemed to result from a breach of this Agreement by Facet and the provisions of Section 15 of this Agreement shall apply. (4) Facet agrees to provide to TheraSense any observations and corrective actions implemented as the result of any audits conducted by the FDA. (5) Facet shall have the right to refuse access to areas where Facet customer confidentiality issues may arise. 11. ACCEPTANCE 11.1 Acceptance testing shall be performed by TheraSense in accordance with the procedures agreed upon in writing by the parties and incorporated in the Specifications. TheraSense shall notify Facet of any defects or non- conformance as soon as reasonably possible after same are discovered by TheraSense, and Facet shall have an opportunity to inspect and test the Product claimed to be defective or non-conforming. Facet agrees to promptly replace (at no additional charge to TheraSense) any Product supplied to TheraSense hereunder which does not fully comply with the Specifications. Upon the successful completion of Acceptance testing, the Product will be considered accepted. If, within ten (10) business days after receipt, TheraSense does not reject the Product or notify Facet that it will reject it, then such Product will be deemed accepted. 11.2 Except as set forth in Section 11.1, TheraSense shall not be obligated to accept or pay for any Product that does not comply with the Specifications or any rules or regulations referred to above. TheraSense's failure to inspect, test, or reject any particular shipment shall not constitute a waiver by TheraSense of any of its rights to inspect and reject any subsequent shipment, or of Facet's responsibilities to provide subsequent shipments of Product in accordance with the Specifications. Facet shall not be liable for Product altered outside of its factory by someone other than Facet or for Product subjected, by an entity other than Facet, to misuse, abuse, improper alteration, accident or negligence in use, storage, transportation or handling. -8- *** Confidential Treatment Requested Notwithstanding the above, Facet shall not be responsible in any way for modifications to the Product made by TheraSense during TheraSense's subsequent manufacturing process. 12. LIMITATION OF LIABILITY EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT AND FOR INTENTIONAL ACTS OR GROSS NEGLIGENCE, UNDER NO CIRCUMSTANCE WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE DESIGN, MANUFACTURE, PACKAGING, DELIVERY, STORAGE OR USE OF THE PRODUCT. 13. INTELLECTUAL PROPERTY INDEMNIFICATION 13.1 Facet and TheraSense agree to promptly notify each other of any assertion, claim, or action, whether actual or potential, alleging that Product, or use of Product for its intended purpose, infringes any intellectual property right of a third party (a "Claim") to the extent they have knowledge of the same. TheraSense shall defend, indemnify and hold harmless Facet, its directors, officers, agents and employees from and against any and loss, liability, damages, costs and expenses (including, without limitation, reasonable attorneys' fees) related to a Claim. Administration of any Claim shall be governed by Section 14.4 below. 13.2 Should TheraSense decide any redesign is necessary due to an actual or potential Claim, then so long as the redesign will result in only modifications to existing molds (e.g., mold inserts), Facet agrees to expeditiously work to redesign the Products [***] and any modifications to the tooling [***]. If any such additional redesign would require more than slight modifications to existing molds, then Facet and TheraSense agree to negotiate in good faith any cost associated with the additional redesign and new tooling. 13.3 THIS SECTION 13 STATES THE PARTIES' TOTAL RESPONSIBILITIES, LIABILITIES, AND REMEDIES TO ONE ANOTHER FOR ANY ACTUAL OR ALLEGED INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTIES. 14. GENERAL INDEMNITY 14.1 Indemnification by Facet. Facet shall hold harmless and ------------------------ indemnify TheraSense, its directors, officers, agents, and employees, from any and all third party claims, suits, losses and expenses, including attorneys' fees, provided that any such claim, suit, loss or expense is attributable to bodily injury, sickness, disease, or death, or injury to property which is caused by Facet's failure to comply with federal, state or local law including but not limited to the Civil Rights Act of 1964, 42 U.S.C. (S) 2000e et. seq. ("Title VII"), the Age Discrimination in Employment Act, 29 U.S.C. (S) 621 et. seq., the American with Disabilities Act, the Civil Rights Act of 1966, the Civil Rights Act of 1991, Executive Order 11246, as amended, and any other statute, regulation or ordinance prohibiting illegal discrimination or retaliation. Except as otherwise provided in this Agreement, Facet shall defend, indemnify and hold harmless TheraSense, its directors, officers, -9- *** Confidential Treatment Requested employees, and agents from and against any and all claims, injuries, liabilities, judgments, and damages, including but not limited to property damage, personal injury and death, including all reasonable costs and expenses (including, without limitation, reasonable attorneys' fees), as a result, whether direct or indirect, of any injury or damage to a third party caused or alleged to be caused solely on account of Facet's failure to meet manufacturing workmanship Specifications. Notwithstanding the foregoing, Facet shall not be required to defend any claim based upon: the use of the Product by TheraSense as part of any procedure or in testing or experimenting other than with the prior written agreement of Facet. 14.2 Indemnification by TheraSense. Except as otherwise provided in ----------------------------- this Agreement, TheraSense shall defend, indemnify and hold harmless Facet, its directors, officers, agents and employees, from and against any and all claims, injuries, liabilities, judgments, and damages, including but not limited to property damage, personal injury and death, including all reasonable costs and expenses (including, without limitation, reasonable attorneys' fees), as a result, whether direct or indirect, of any injury or damage to a third party caused or alleged to be caused on account of any alleged defect of any Product, other than a defect related to workmanship for which Facet has indemnified TheraSense under Section 14.1. 14.3 Limits to Indemnification. These obligations to defend and ------------------------- indemnify (in Sections 14.l and 14.2) do not extend to claims, injuries or damages to the extent resulting from the negligent or intentional conduct, act, omission or obligation of the party seeking indemnification. 14.4 Administration of Third-Party Claims. The indemnified party ------------------------------------ agrees to cooperate with the indemnifying party in the defense of any third- party claim, lawsuit or action and to make available to each other at the indemnifying party's expense such of the documents, employees and expertise as are necessary in defense of any such action. Each party agrees to notify the other of any third-party claim, suit or action promptly upon learning that same is within the scope of the indemnification set forth herein. If the indemnifying party acknowledges in writing its obligation to indemnify the party seeking indemnification with respect to a third-party claim, lawsuit or action, the indemnifying party shall be entitled to undertake the defense thereof by representatives of its own choosing reasonably satisfactory to the indemnified party. The indemnified party and any party hereto shall have the right to participate in any such defense with advisory counsel of its own choosing at its expense. If the indemnifying party fails to vigorously defend the party seeking indemnification, such party may assume such defense with counsel of its own choosing. 15. TERM AND TERMINATION 15.1 Term. The term of this Agreement shall commence on the ---- Effective Date and shall continue for six (6) years thereafter (the "Initial Term") unless earlier terminated as provided in Section 15.2. 15.2 Termination. This Agreement may be terminated by either party: ----------- (a) if the other party defaults in any payment to the terminating party and such default continues for a period of fifteen (15) days after the delivery of written notice thereof by the non-defaulting party to the other party, (b) if the other party defaults in the performance of any other material term or condition of this Agreement and such default continues for a period of sixty (60) days after the delivery of -10- written notice thereof by the terminating party to the other party, or (c) commences a voluntary or has involuntary proceeding commenced under any federal or state, law or similar law and if involuntary, such is not set aside within sixty (60) days of its being commenced; (ii) appoints or is appointed a receiver, trustee or similar official or a general assignment for the benefit of such party's creditors; (iii) proceeds to dissolve, wind up or liquidate; or (iv) becomes unable to pay its debts either because it is subject to a suspension of payments order, bankruptcy, or other insolvency proceeding. Termination of this Agreement for any reason shall not affect the obligations of either party that exist as of the date of termination. Upon termination under Section 15.2, TheraSense shall be responsible for the finished Products, Inventory, and Special Inventory in existence at the date of termination or expiration in the same manner as for cancellations as set forth in Section 4.5. Notwithstanding termination or expiration of this Agreement for any cause, Sections 2.2, the last two sentences of Section 4.3, 9, 12, 13, 14, 15.2, 16, 17 and 18 shall survive said termination or expiration. 16. CONFIDENTIALITY 16.1 Facet and TheraSense both agree that in the performance of this contract there may be the need for one or the other party to disclose its confidential information to the other. 16.2 "Confidential Information" shall include information supplied to the receiving party in written form and clearly marked "Confidential" and information disclosed orally, provided that the disclosing party provides within thirty (30) days of the first disclosure a document that identifies the topic of the information considered confidential and states that it is "Confidential." 16.3 Each party agrees to keep Confidential Information transferred to it in strict confidence and not to disclose or otherwise use such information for any purpose other than determining conformance to Specifications, processing Products into TheraSense's products or otherwise fulfilling its obligations under this Agreement without the prior written consent of the other party. All such documents provided by the disclosing party containing Confidential Information shall at either party's request be returned to it except that one (1) copy shall be retained by counsel for that party to ensure compliance hereunder. 16.4 The above notwithstanding, each party's obligation of the confidence with respect to the Confidential Information disclosed hereunder, shall not include: (1) Information which, at the time of disclosure to the receiving party is published, known publicly or is otherwise in the public domain; (2) Information which, after disclosure to the receiving party is published or becomes known publicly or otherwise becomes part of the public domain, through no fault of the receiving party; (3) Information, which, prior to the time of disclosure to the receiving party, was known to the receiving party, as evidenced by its written records; -11- (4) Information which has been or is disclosed to the receiving party in good faith by a third party who was not, or is not, under any obligation of confidence or secrecy to the receiving party at the time said third party discloses to the receiving party; and (5) Information which is independently developed by or on behalf of the receiving party, without reliance on the Information received hereunder. 16.5 The above provisions notwithstanding, each party agrees to keep in strict confidence and not to disclose the identity, interest and participation of the other party in the work or evaluation and the relationship of the parties hereunder except to the extent as required by law. 16.6 Each party represents that it is under no obligation to any third party that would interfere with its disclosing the Confidential Information to the other party and, further, that any Confidential Information which it transmits or otherwise discloses to the other party is not information with respect to which that party is under any obligation to keep confidential or which that party knows to be the proprietary property of any third party. 16.7 Unless specifically provided in this Agreement, no right to use any Confidential Information disclosed hereunder, either express or implied is granted by either party. Confidentiality will remain in effect for a period of five (5) years after the expiration of this Agreement or any extension of it. 16.8 Except as required by securities laws, Facet shall not issue any publicity, news release, technical article or other public announcement relating to this Agreement and the products or services of TheraSense without, in any case obtaining the prior written consent of TheraSense. 17. DISPUTES TheraSense's Director of Purchasing and Facet's Business Development representative shall initially review any and all disputes between the parties relating to this Agreement. The two individuals shall meet and conduct good faith discussions to attempt to resolve the dispute. If they are unsuccessful, review shall be escalated to the TheraSense Vice President of Operations and Facet's Vice President of Marketing, who shall conduct a similar good faith meeting. If still unsuccessful after a reasonable time, the matter will be escalated to the TheraSense President and the President of Facet for a good faith meeting to attempt to resolve the dispute. If settlement has not been reached thereafter, then the dispute shall be settled by binding arbitration as provided in section 14.2 of the Cooperative Development Agreement. 18. GENERAL 18.1 Force Majeure. Neither party will be deemed in default of this ------------- Agreement to the extent that performance of its obligations or attempts to cure any breach are delayed or prevented by reason of a Force Majeure, provided that such party gives the other party written notice thereof promptly and, in any event, within ten (10) days of discovery thereof and uses its commercially reasonable efforts to continue to so perform or cure. In the event of such a Force Majeure, the time -12- for performance or cure will be extended for a period equal to the duration of the Force Majeure, but in no event more than sixty (60) calendar days. 18.2 Assignment. The rights and liabilities of the parties hereto ---------- will bind and inure to the benefit of their respective Affiliates, successors, executors and administrators, as the case may be; provided that, as TheraSense has specifically contracted for Facet's services, Facet may not assign its obligations, other than as specified herein, under this Agreement either in whole or in part, without the prior written consent of TheraSense. Any attempted assignment in violation of the provisions of this Section 18.2 will be void. Notwithstanding the foregoing, Facet may subcontract part of its manufacturing obligations hereunder to [***] to the same extent as it currently subcontracts such obligations to such parties without TheraSense's prior consent. Any additional or replacement subcontractors or any subcontracting to [***] of any of Facet's manufacturing obligations not currently subcontracted to such parties will be subject to TheraSense's approval, which approval TheraSense will not unduly withhold or delay. 18.3 Severability. If for any reason a court of competent ------------ jurisdiction finds any provision of this Agreement, or portion thereof, to be unenforceable, that provision of this Agreement shall be enforced to the maximum extent permissible so as to effect the intent of the parties, and the remainder of this Agreement shall continue if full force and effect. 18.4 No Waiver. All rights and remedies conferred under this --------- Agreement or by any other instrument or law shall be cumulative, and may be exercised singularly or concurrently. Failure by either party to enforce any provision of this Agreement shall not be deemed a waiver of future enforcement of that or any other provision. 18.5 Notices. All notices required or permitted under this Agreement ------- will be in writing, will reference this Agreement and will be deemed given when: (i) delivered personally; (ii) when sent by confirmed telex or facsimile; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) day after deposit with a commercial overnight carrier, with written verification of receipt. All communications will be sent to the addresses set forth below to or such other address as may be designated by a party by giving written notice to the other party pursuant to this Section 18.5: TheraSense, Inc. Facet Technologies, LLC 1360 South Loop Road 1850 Parkway Place, 9th Floor Alameda, California 94502 Marietta, Georgia 30067 Attn: John Purlee Attn: President Director of Purchasing With a copy to: Facet Technologies, LLC c/o Matria Healthcare, Inc. 1850 Parkway Place, 12th Floor Marietta, Georgia 30067 Attn: General Counsel -13- *** Confidential Treatment Requested 18.6 Compliance with Laws and Regulations. Facet and TheraSense ------------------------------------ agree to comply with all Federal, State and local laws and regulations that are applicable to the Products in the Territory in which the Products are intended for use. 18.7 Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the United States and the State of Georgia, as applied to agreements entered into and to be performed entirely within Georgia. Any and all disputes between the parties relating in any way to the entering into of this Agreement and/or the validity, construction, meaning, enforceability, or performing of this Agreement or any of its provisions, or the intent of its provisions, or any dispute relating to patent validity or infringement arising under this Agreement shall be settled by arbitration as provided in Section 17 hereof. 18.8 Interpretation. This Agreement will be fairly interpreted in -------------- accordance with its terms and without any strict construction in favor of or against either party. The headings and captions are included for reference purposes only and do not affect the interpretation of the provisions hereof. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which shall be deemed to constitute only one Agreement. When used herein, the word "including" will not be construed as limiting. 18.9 Status. The relationship between Facet and TheraSense is that ------ of independent contractors. Neither is the legal representative, agent, partner, joint venturer or employee of the other for any purpose whatsoever, and has no right or authority to create any obligations of any kind or to make any representations or warranties, whether express or implied, in respect of the other or to bind the other in any respect whatsoever. This Agreement shall be deemed to have been drafted by both parties. 18.10 Reports. Each month during the term of this Agreement, Facet ------- shall provide the TheraSense buyer with a report of the deliveries made that month, cumulative deliveries to date, and amount of raw materials available in inventory. 18.11 Complete Agreement. This Agreement, in conjunction with the ------------------ Cooperative Development Agreement, including all Exhibits and any Purchase Order(s) issued hereunder (but only with respect to Product quantities, shipping destination and required delivery dates), constitute the entire Agreement between the parties in connection with the subject matter hereof, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, between the parties. The preprinted terms and conditions on TheraSense's Purchase Order or any acknowledgment of Facet shall be inapplicable to Products delivered hereunder. No amendment to or modification of this Agreement will be binding unless in writing and signed by a duly authorized representative of both parties. -14- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the date first written above. TheraSense, Inc. Facet Technologies, LLC By: /s/ John M. Purlee By: /s/ William C. Taylor --------------------------- -------------------------------- Name: John M. Purlee Name: William C. Taylor ------------------------- ------------------------------ Title: Director of Purchasing Title: President ------------------------ ----------------------------- Date: 7/18/01 Date: 7/18/01 ------------------------- ------------------------------ -15- EXHIBIT A PRODUCT PRICING --------------- Part Number Description Pricing ----------- ----------- ------- PRT 00148-001 Lancing Device Warranty Kit *** PRT 00178-001 Lancing Device Assy (Proto Mold) *** PRT 00178-001 Lancing Device Assy (Prod Mold less than 1.2MM) *** PRT 00178-001 Lancing Device Assy (Prod Mold less than 1.2MM) *** PRT 00202-001 Lancets, 100 Count Box *** PRT 00207-001 Lancing Device Replacement Cap Bagged *** PRT 00192-001 Lancets, 10 Count Bag *** PRT 00596 Arm Cap Bag of 20 *** PRT 00597 Finger Cap Bag of 20 *** PRT 00598 Lancing Device Box of 40 *** PRT 00604 Lancets Bags Box of 25 *** *** Confidential Treatment Requested EXHIBIT B PRODUCTS/SPECIFICATIONS ----------------------- Low Volume High Volume High Volume Mold Part #S Mold Part #S Revs. Body Top 0204001 PRT00556 Revision A Body Bottom 0205001 PRT00555 Revision A Lancet Holder 0206001 PRT00557 Revision A Arm Cap 0207001 PRT00558 Revision A Depth Wheel 0208001 PRT00559 Revision A Button 0209001 PRT00560 Revision A Arming Part 0210001 PRT00561 Revision A Arming Chassis 0211001 PRT00562 Revision A Retraction Spring 0212001 0212001 Revision C Drive Spring 0213001 0213001 Revision F Finish Device SKU 0178001 PRT00178001 Revision E Number Revision levels may change in the future. EXHIBIT C QUALITY CONTROL REQUIREMENTS ---------------------------- There are no additional quality requirements beyond what is stated in the contract or on the drawing. EX-10.11 5 dex1011.txt 1ST AMEND TO ASSIGNMENT OF PATENT RIGHTS & TECH [CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.] Exhibit 10.11 FIRST AMENDMENT TO THE AGREEMENT ENTITLED "ASSIGNMENT OF PATENT RIGHTS AND TECHNOLOGY" ENTERED INTO AUGUST 1, 1991 BETWEEN THE UNIVERSITY OF TEXAS, ADAM HELLER, AND E. HELLER AND COMPANY (THE "AMENDMENT") WHEREAS, under the August 1, 1991, agreement entitled "Assignment of Patent Rights and Technology" (hereafter "Assignment"), and Exhibit A hereto, the Board of Regents of the University of Texas System on behalf of The University of Texas at Austin (hereafter collectively referred to as "Assignor") assigned to E. Heller and Company ("Assignee") its right, title, and interest in, to, and under the Patent Rights and the Technology (as such terms are defined in the Assignment); and WHEREAS, under Paragraph 3.1 of the Assignment the parties agreed that in return for its assignment of rights, Assignor would be compensated as noted in the event Patent Rights, the Technology, and the Know-How are sold, licensed, or otherwise disposed of for value to a third party or parties; and under Paragraph 3.2 of the Assignment the parties also agreed that Assignor would be compensated for a to-be-negotiated amount should Assignee elect to itself manufacture, sell, or otherwise dispose of for value Licensed Products and Licensed Processes (as such terms are defined in the Assignment) and which are derived from the Patent Rights, the Technology, and the Know-How; and WHEREAS, since the effective date of the Assignment, Assignee has invested approximately *** in research and development of biosensors within the scope of the Technology, Patent Rights, and Know-How, and estimates that an additional investment of approximately *** will be necessary to complete product development and enter into clinical trials, and Assignee, on behalf of itself and its Affiliates (as defined below), has now elected to manufacture, sell, or otherwise dispose of for value, including sublicensing, the Patent Rights, Technology, Know-How, Licensed Products, and Licensed Processes; and WHEREAS, Assignor and Assignee now desire to amend Paragraphs 3.1 and 3.2 and certain other paragraphs of the Assignment and specifically set out herein the mutually agreed compensation due Assignor for Assignee's disposition for value of the Patent Rights, the Technology, the Know-How, Licensed Products and Licensed Processes. NOW, THEREFORE, in consideration of the covenants and agreements herein contained the parties agree as follows: 1. All capitalized terms not defined in this Amendment shall have the meaning given to them in the Assignment. 2. Section 1.2 is amended to read in its entirety as follows: 1.2 Patent Rights. The term "Patent Rights" as used herein shall mean ------------- Assignor's rights in all inventions and intellectual property disclosed in the patent applications patents and other invention disclosures listed on Exhibit B and Exhibit C hereto, including all U.S. and *** Confidential treatment requested foreign patent applications including provisional applications, and all divisions, continuations, continuations in-part, and substitutions thereof; all foreign patent applications corresponding to the preceding applications; and all U.S. and foreign patents issuing on any of the preceding applications, including extensions, reissues, and re- examinations. 3. Section 1.3 is amended to read in its entirety as follows: 1.3 Know-How. The term "Know How" as used herein shall mean -------- Assignor's rights in all ideas, inventions, data, trade secrets, instructions, processes, formulas, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, manufacturing (including but not limited to processes, yields, reagants and conditions relating to compound manufacture) data and information, owned or controlled by Assignor existing as of the last signature date of this Assignment which are generally not known, and which are necessary or useful for the manufacture of Licensed Products. Excluded from Know-How are any inventions included with Patent Rights. 4. Section 1.4 is amended to read in its entirety as follows: 1.4 Licensed Products. The term "Licensed Products" as used herein ----------------- shall mean any product which (i) is covered by a Valid Claim in the country such product is made or sold, or (ii) incorporates in material part or is made using the Technology, Know-How, Licensed Processes or Other Intellectual Property. For the avoidance of doubt, subject to the foregoing, a Licensed Product unit shall mean any instrument or associated disposable. 5. Article 1 is amended to add new Section 1.7 as follows: 1.7 Affiliate. The term "Affiliate" as used herein shall mean any --------- corporation or other entity which is directly or indirectly controlling, controlled by or under the common control with a party hereto. For the purposes of this definition, "control" shall mean the direct or indirect ownership of at least fifty percent (50%) of the outstanding shares or other voting rights of the subject entity to elect directors, or if not meeting the preceding, any entity owned or controlled by or owning or controlling at the maximum control or ownership right permitted in the country where such entity exists. 6. Article 1 is amended to add new Section 1.8 as follows: 1.8 Net Sales. The term "Net Sales" as used herein shall mean the --------- gross revenues received by Assignee, its Affiliates or sublicensees from sales of Licensed Products, less (i) normal and customary rebates, and cash and trade discounts, actually taken, (ii) sales, value-added, use and/or other excise taxes or duties actually paid, (iii) outbound transportation charges prepaid or allowed, (iv) import and/or export duties actually paid, and (v) amounts allowed or credited due to returns. 7. Article 1 is amended to add new Section 1.9 as follows: 1.9 Valid Claim. The term "Valid Claim" as used herein shall mean (i) ----------- a claim of an issued and unexpired patent included within the Patent Rights which has not been disclaimed -2- or admitted to be invalid or unenforceable through reissue or otherwise, or (ii) a claim of a pending application within the Patent Rights provided that not more than five (5) years have elapsed from the date the claim takes priority for filing purposes. 8. Article 1 is amended to add new Section 1.10 as follows: 1.10 Dominating Patent. The term "Dominating Patent" as used herein ----------------- shall mean an unexpired patent which is owned by a third party covering Licensed Products made and sold by Assignee or its sublicensees under circumstances such that Assignee or its sublicensee has no commercially reasonable alternative but to obtain a license under such patent in order to make, use or commercialize a Licensed Product. 9. Article 1 is amended to add new Section 1.11 as follows: 1.11 Other Intellectual Property. The term "Other Intellectual --------------------------- Property" as used herein shall mean Board's rights in any biosensor related inventions (whether or not patentable), improvements, discoveries, developments, original works of authorship, software, trade secrets, Know-How made, conceived, reduced to practice or otherwise developed, by an employee of Assignor pursuant to either (i) a consulting agreement entered into by such employee and EHC or its sublicensee; or (ii) any similar agreement between an employee of the University of Texas at Austin and Assignee, and all intellectual property rights therein and thereto, shall be subject to the Assignment in Section 2.1 below. 10. Section 2.1 is amended to read in its entirety as follows: 2.1 Assignment by Assignor. Assignor hereby transfers, assigns, ---------------------- sells, and conveys to Assignee, its successors and assigns, the entire right, title and interest throughout the world in and to the Patent Rights, Technology, Know-How, and Other Intellectual Property subject only to: (a) any rights of the United States Government which may exist now or in the future due to a research funding agreement to which the United States Government may be a party; and (b) the terms and conditions of this Agreement. 11. Article 3 is amended to read in its entirety as follows: 3.1 Royalties. In consideration for the Assignment herein, Assignee --------- shall pay to Assignor the greater of (i) an annual minimum royalty of twenty thousand dollars or (ii) royalties on Net Sales of Licensed Products sold by Assignee, an Affiliate or its sublicensees which are within the scope of a Valid Claim as follows: Numbers of Licensed Royalty Rate Products Sold Worldwide During the Term ------------ --------------------------------------- *** of Net Sales 1-100,000 *** of Net Sales 100,001-200,000 *** of Net Sales 200,001-and above *** Confidential treatment requested -3- Any minimum annual royalty payable hereunder shall be fully creditable against any running royalty payable to Assignor during such year. 3.2 Sublicense Payment. In addition to the royalties subject to ------------------ Section 3.1 above, Assignee shall pay to Assignor *** received by Assignee and its Affiliates from licensees and sublicensees of the Patent Rights, Know-How, Technology or Other Intellectual Property. Notwithstanding the foregoing, it is understood and agreed that Assignor shall not be entitled to any portion of amounts received from licensees or sublicensees for equity in Assignee less than *** of fair market value, debt financing, research and development funding, the license or sublicense of any intellectual property other than the Patent Rights, Know-how, Technology or Other Intellectual Property, or reimbursement for patent or other expenses, and to be determined in a manner consistent with generally accepted accounting principles (GAAP). 3.3 Royalties on Combination Products. In the event that a Licensed --------------------------------- Product is sold by Assignee, an Affiliate or its sublicensee in combination as a single product with another product whose sale and use are not within the scope of a Valid Claim in the country for which the combination product is sold, Net Sales from such sales for purposes of calculating the amounts due under Section 3.1 above shall be calculated by multiplying the Net Sales of that combination by the fraction A/(A + B), where A is the gross selling price of the Licensed Product sold separately and B is the gross selling price of the other product sold separately. In the event that no such separate sales are made by Assignee, an Affiliate or its sublicensee, Net Sales for royalty determination shall be as reasonably allocated by Assignee, an Affiliate or its sublicensee between such Licensed Product and such other product, based upon their relative importance and proprietary protection. Notwithstanding the above, in no event shall Assignor receive a royalty of less *** of the running royalty amount per unit of Licensed Product due under Section 3.1 above. 3.4 Third Party Royalty Offset. In the event Assignee, an Affiliate -------------------------- or its sublicensee enters into a license agreement with any third party with respect to a Dominating Patent or to settle a claim of infringement or misappropriation of any intellectual property of a third party relating to the practice or use of the Technology and or Know-How, Assignee, an Affiliate or its sublicensee may offset any payments made in accordance with such license agreements against any amounts of running royalties owned by Assignee pursuant to Article 3 herein up to a maximum of *** of the amount otherwise due to such third party; provided, however that in no event will the running royalties due to Assignor be lower than the following: Royalty Rate Number of Licensed Products Sold Worldwide ------------ ------------------------------------------ During the Term --------------- *** of Net Sales 1-100,000 *** of Net Sales 100,001-200,000 *** of Net Sales 200,001 - and above -4- *** Confidential treatment requested In addition, in such event, the amounts due to Assignor under Section 3.2 above shall be reduced by an amount equal to *** the amount paid to such third party. 3.5 One Royalty. No more than one royalty payment shall be due with ----------- respect to a sale of a particular Licensed Product. No multiple royalties shall be payable because any Licensed Product, or its manufacture, use or sale is covered by more than one Valid Claim. No royalty shall be payable under this Article 3 with respect to Licensed Products distributed for use in research and/or development, in clinical trials or as promotional samples. 3.6 Royalty Term. Royalties due under this Article 3 shall be payable ------------ on a country-by-country and Licensed Product-by-Licensed Product basis until the expiration of the last-to-expire issued Valid Claim covering such Licensed Product in such country, or if no such Valid Claim issued in a country, until the fifth anniversary of the first commercial sale of a Licensed Product in such country. 3.7 In the event Assignee engages in litigation and/or settlement negotiations to advance a claim it makes that a third party is infringing on Licensed Products and/or Licensed Processes, *** on any litigation or settlement recovery by Assignee will be paid to Assignor; provided, however, that Assignee shall be entitled to first deduct reasonable and documented attorney's and other professional fees, expert fees, court costs, and other reasonable expenses incurred by Assignee in such litigation and/or settlement activities. 12. Section 4.2 is amended to read in its entirety as follows: 4.2 Payments and Reports. The first annual minimum royalty payment of -------------------- twenty thousand dollars ($20,000) shall be due and payable to Assignor within 30 days of the date of the last signature on this Amendment. Thereafter, minimum annual royalty payments, when due, shall be due and payable within thirty (30) days after the end of the applicable year. All running royalties payable hereunder by Assignee shall be due within thirty (30) days following the end of each respective semi-annual reporting period, which ending dates shall be June 30 and December 31 for each successive year. Each report will accurately identify income and expenses in sufficient form and detail so as to enable Assignor to determine the royalties due for such semi-annual period, and shall be mailed to the following: Office of the Executive Vice President and Provost, The University of Texas at Austin, Main Building 201, Austin, Texas 78712-1111, ATTN: Patricia C. Ohlendorf, with a copy to the Office of Technology Licensing and Intellectual Property at the address listed in 16.3 herein. Checks shall be made payable to The University of Texas at Austin. Except as expressly provided herein, all amounts payable hereunder shall be payable in United States dollars without deductions for taxes, assessments, fees, or charges of any kind. 13. Article 15 is amended to read in its entirety as follows: 15.1 Assignment. Neither party may assign this Assignment without the ---------- prior consent of the other, which consent shall not be unreasonably withheld; provided, however, Assignee may assign this Assignment in connection with a transfer of all or substantially all of its *** Confidential treatment requested -5- assets relating to this Assignment, whether by sale, merger, operation of law or otherwise. This Assignment shall be binding upon and inure to the benefit of the parties and their successors and assigns. 14. New Article 16 is added as follows: MISCELLANEOUS ------------- 16.1 Affiliate Rights/Obligations. Assignee shall have the right to extend ---------------------------- the provisions of the Assignment regarding the right to manufacture, sell, or otherwise dispose of for value, including licensing and sublicensing, the Patent Rights, Technology, Know-How, Other Intellectual Property, Licensed Products, and Licensed Processes, to any Affiliate, provided such Affiliate consents to be bound by the Assignment to the same extent as Assignee. Further, Assignee shall have the right to extend the provisions of this Amendment in their entirety to any Affiliate, provided such Affiliate consents to be bound by the applicable provisions of this Amendment to the same extent as Assignee. 16.2 Entire Agreement. The Assignment and this Amendment constitute the ---------------- entire and only agreement between the parties with respect to the Patent Rights, Technology, Know-How, Other Intellectual Property, Licensed Products, and Licensed Processes, and all other prior negotiations, representations, agreements, and understandings are superseded hereby. No agreement altering or supplementing the terms of the Assignment may be made except by means of a written document signed by a duly authorized representative of each party. 16.3. Notices. Any notices under this Assignment or shall be given by ------- prepaid, first class, certified mail, return receipt requested, addressed as follows (or such other address as may be given from time to time under the terms of this provision): in the case of Assignor - with a copy to - BOARD OF REGENTS OFFICE OF THE EXECUTIVE The University of Texas System VICE PRESIDENT & PROVOST 201 West 7th Street The University of Texas at Austin Austin, Texas 78701 Austin, Texas 78712-1111 ATTN: System Intellectual Property Office ATTN: Patricia C. Ohlendorf with a copy to - OFFICE OF TECHNOLOGY LICENSING AND INTELLECTUAL PROPERTY The University of Texas at Austin MCC Building Suite 1.9A 3925 West Braker Lane Austin, Texas 78759 ATTN: Director
-6- or in the case of Assignee - E. HELLER AND COMPANY 1311 Harbor Bay Parkway, Suite 1000 Alameda, California 94502 ATTN: Ephraim Heller 16.4 LIMITATION OF LIABILITY. SUBJECT TO ARTICLE XIV OF THE ----------------------- ASSIGNMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES ARISING OUT OF THIS ASSIGNMENT, HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY 16.5 Right to Independently Develop. Nothing in this Assignment will ------------------------------ impair Assignee's right to independently acquire, license, develop for itself, or have others develop for it, technology or intellectual property performing the same or similar functions as the Know-How or the Patent Rights, or the Other Intellectual Property, or to market and distribute licensed products based on such other intellectual property and technology. 16.6 Further Assurances. At any time or from time to time on and after ------------------ the date of this Assignment, Assignor shall at the request and sole expense of Assignee (i) deliver to Assignee such records, data or other documents consistent with the provisions of this Assignment, (ii) execute, and deliver or cause to be delivered, all such consents, documents or further instruments of transfer or license, and (iii) take or cause to be taken all such actions, as Assignee may reasonably deem necessary or desirable in order for Assignee to obtain the full benefits of the Assignment and Amendment and the transactions contemplated hereby. 16.7 Severability. In the event that any provisions of this Assignment ------------ are determined to be invalid or unenforceable by a court of competent jurisdiction, the remainder of the Assignment shall remain in full force and effect without said provision. The parties shall in good faith negotiate a substitute clause for any provision declared invalid or unenforceable which shall most nearly approximate the intent of the parties in entering this Assignment. 16.8 Modification; Waiver. This Assignment may not be altered, amended -------------------- or modified in any way except by a writing signed by both parties. The failure of a party to enforce any provision of the Assignment shall not be construed to be a waiver of the right of such party to thereafter enforce that provision or any other provision or right. 15. Except as specifically modified or amended hereby, the Assignment shall remain in full force and effect and, as so modified or amended, is hereby ratified, confirmed and approved. No provision of this Amendment may be modified or amended except expressly in a writing signed by both parties nor shall any terms be waived except expressly in a writing signed by the party charged therewith. This Amendment shall be governed in accordance with the laws of the State of Texas, without regard to principles of conflicts of laws. -7- IN WITNESS WHEREOF, this Amendment effective as of March 19, 1998, is hereby executed by the duly authorized representatives of the parties on the date indicated below in duplicate, each of which shall be deemed an original and together shall form one and the same instrument. BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM E. HELLER AND COMPANY /s/ Ray Farabee /s/ Ephraim Heller --------------------------------------- ------------------------------- Ray Farabee Ephraim Heller Vice Chancellor and General Counsel President Date: 4/7/98 Date: 3/19/98 ---------------------------------- -------------------------- APPROVED AS TO CONTENT ADAM HELLER /s/ Patricia C. Ohlendorf /s/ Adam Heller --------------------------------------- ------------------------------- Patricia C. Ohlendorf Adam Heller Counsel to the President Date: 3/19/98 -------------------------- Vice Provost Date: 3/27/98 ---------------------------------- APPROVED AS TO FORM /s/ Georgia Harper --------------------------------------- Name: Georgia Harper ---------------------------------- Office of General Counsel Date: 4/7/98 ---------------------------------- -8- EXHIBIT A [See Exhibit 10.10] EXHIBIT B (See attached) COLLEGE OF ENGINEERING THE UNIVERSITY OF TEXAS AT AUSTIN Department of Chemical Engineering, Austin, Texas 78712-1062 Adam Heller January 6, 1997 Ernest Cockrell, Sr. Chair Telephone: (512) 471-8874 FAX: (512) 471-8799 e-mail: heller@che.utexas.edu To: Dr. Paulette Braeutigam, Technology Licensing Coordinator From: Adam Heller Dear Paulette: This letter follows your discussion with Ephraim wherein you agreed to cover in the current agreement between The University of Texas at Austin and E. Heller & Company all presently existing intellectual property relating to biosensors that originated in my group. These include the following: US Patents Issued: ----------------- The already issued patents are: US 5,543,326 - Biosensor including chemically modified enzymes. US 5,356,786 - Interferant eliminating biosensor US 5,320,725 - Electrode and Method for the detection of hydrogen peroxide. US 5,264,105 - Enzyme electrodes. US 5,264,104 - Enzyme electrodes. US 5,262,305 - Interferant eliminating biosensor. US 5,262,035 - Enzyme electrodes. U.S. Patents Currently Prosecuted: --------------------------------- (1) Thermostable Biosensors ----------------------- The pending patent application discloses biosensors (methods and compositions) transducing biochemical concentrations into electrical signals at temperatures exceeding 37 (degree) C. The claims to be allowed are now negotiated with the Patent Examiner. Part of the material, where we report operation of a thermostable biosensor based on electrical connection of reaction centers of soybean peroxidase, was published [A Thermostable Biosensor of Hydrogen Peroxide, Vreeke, M.S., Yong, K.T., and Heller, A., Anal.Chem 67, 4247-4249 (1995)]. The hydrogen peroxide sensing biosensor operated continuously for weeks with no loss at 45 (degree) C and for hours at 75 (degree) C. The peroxide sensing layer of this biosensor was combined with enzymes that generated hydrogen peroxide in glucose and lactate sensors. The sensor of glucose operated for 10 days with only about 10% loss in activity and of lactate for about a week. A paper submitted is likely to appear in Analytical Chemistry in March, 1997. (Electrochemical Glucose and Lactate Sensors Based on "Wired" Thermostable Soybean Peroxidase Operating Continuously and Stably at 37 (degree) C, Kenausis, G., Chen., Q., and Heller, A. Submitted to Analytical Chemistry, 1996]. In the most stable group of sensors to date, we have immobilized the enzyme that catalyzes the reaction of oxygen with the analyte in a matrix containing silica, which we prefer to form by a sol-gel process from a molecular precursor of silica, such as a polyalkoxysilane. The immobilization of enzymes in sol-gel silica has been known from the work of others. We have, however, made two discoveries. First, that glycoprotein enzymes, such as glucose oxidase, can be made particularly thermostable by sol-gel immobilization in silica. Glucose oxidase, an example of a glycoprotein enzyme, withstands heating to 98 (degree) C for 10 min when immobilized. We have also discovered that while non- glycoprotein enzymes are much less stable in these matrices, they can be drastically stabilized in the sol-gel matrix by incorporating also a polymer. An example of such stabilization is that of lactate oxidase by poly(N-vinyl imidazole). When the two are co-incorporated in sol-gel silica, the lactate oxidase remains active after heating to 90 (degree) C for 10 min. We now know that different enzymes require different polymers for their stabilization in silica. The sol-gel silicas loaded with enzymes, that are hard solids, have been made into membranes and tested in glucose and lactate sensors. In these the oxidase enzymes generated the hydrogen peroxide, while electrically "wired" thermostable peroxidase transduced the hydrogen peroxide flux into a current by catalyzing the electroreduction of hydrogen peroxide to water. These exceptionally stable sensors have now also been miniaturized. They were incorporated in (galvanostatically etched) recesses in 0.3mm O.D. polymer insulated gold and palladium wires to form glucose sensors that, with mass transport controlling (e.g. dimethyl siloxane elastomer) layers that are permeable to oxygen and with a biocompatible layer of crosslinked (derivatized) poly(ethylene oxide) constitute our most stable in vitro and in vivo glucose sensors to date. From the in vitro data we project already that these systems will yield subcutaneously worn glucose sensors with useful lives exceeding one month. The above material will be subject to a continuation-in-part filing. Amperometric DNA and Oligonucleotide Sensors: --------------------------------------------- We have published a first paper on the sensing of hybridization of a model 30- base oligonucleotide as an electrical current [Direct Enzyme-Amplified Electrical Recognition of a 30-Base Model Oligonucleoutide, de Lumley-Woodyear, T., Campbell, C.N., Heller, A., J.Am.Chem.Soc. 118, 5504-5505 (1996)]. More recently we succeeded also in sensing of a natural 800-base oligonucleotide. We are currently considering whether to invest in a separate filing on the amperometric detection of oligonucleotide and DNA hybridization. A different application of the thermostable hydrogen peroxide sensors is in their use in selective sensing of oligonucleotides and DNA. For the first time we have in hand an electrically connected thermostable enzyme that can be used as a label of DNA strand. When its hybrid denatures or melts, the electrical connection of the thermostable peroxidase to the electrode surface is lost. Thus, the denaturing of an oligonucleotide or DNA hybrid (double helix) might be tracked with the thermostable enzyme. This would signal, through decline of the electrical current upon heating, the denaturing of the double strand and reveal the temperatures where denaturing starts and where it is complete. This temperature is known to be sensitive to the number of defects, i.e. the number of mismatched nucleotide pairs. In vivo Sensors: --------------- A patent application, some claims of which have been allowed, has been filed; continuations-in-part are planned. Innovations include: Components, physical structure and dimensions. The sensing layer is shielded and the sensors have at least two layer. One is a transducing layer, converting a biochemical flux into an electrical signal, that functions also in the absence of oxygen and has no leachable components. The second is a biocompatible layer that swells in an aqueous solution, increasing its volume by at least 20%. The preferred embodiment has three layers, the central layer limiting the mass transport of the analyte and thereby expanding the range of concentrations measured. The preferred sensors have diameters smaller than 0.5 mm, preferable smaller than 0.3 mm and are subcutaneously implanted. Papers published including part of the material on these sensors are: Design and optimization of a selective subcutaneously implantable glucose electrode based on "wired" glucose oxidase, Csoregi, E., Schmidtke, D.W. and Heller, A. Analytical Chemistry, 67, 1240-1244 (1995). Design, Characterization, and One- Point In Vivo Calibration of a Subcutaneously Implanted Glucose Electrode, Csoregi, E., Quinn, C.P., Schmidtke, D.W., Lindquist, S.-E., Pishko, M.V., Ye, L., Katakis, I., Hubbell, J.A. and Heller, A., Analytical Chemistry, 66, 3131- 3138 (1994). In vivo sensors of this type, containing a thermostable transduction layer were discussed above. -2- Another type of novel sensor was made by placing a non-corroding wire, coated in part with a transducing layer, and having no leachable component in a microdialysis or microfiltration fiber, made of a biocompatible material. Preferably, the transducing layer is overcoated with a mass transport limiting membrane. The overall diameter is about 0.5 mm or less. Polysulfone microfiltration fibers and cellulose acetate/polysulfone mass transport limiting layers were used. The sensing systems may have a skin electrode, i.e. a counter-reference electrode, such as a silver/silver chloride electrode, on the skin. The use of skin electrodes was described in our papers, Statistics for Critical Clinical Decision Making Based on Readings of Pairs of Implanted Sensors, Schmidtke, D., Pishko, M.V., Quinn, C.P., and Heller, A., Analytical Chemistry, 68, 2845-2849 (1996), and also in Kinetics of Glucose Delivery to Subcutaneous Tissue in Rats Measured with 0.3mm Amperometric Microsensors, Quinn, C.P., Pishko, M.V., Schmidtke, D.W., Ishikawa, M., Wagner, J.G., Raskin, P., Hubell, J.A. and Heller, A., Am.J.Physiol. 269 (Endocrinol.Metab. 32) E155-E161 (1995). On the basis of the information contained in our paper Statistics for Critical Clinical Decision Making Based on Readings of Pairs of Implanted Sensors, Schmidtke, D., Pishko, M.V., Quinn, C.P., and Heller, A., Analytical Chemistry, 68, 2485-2489 (1996), we are seeking patent protection on using in vivo redundant sensors; on the method of selecting pairs of sensor readings that are valid for one-point calibration in vivo, discriminating these from those that are not; and for defining pairs of sensor readings that will trigger an alarm signaling hypoglycemia, hyperglycemia, excessively fast rise, or excessively fast decline of glucose levels, or of sensor malfunction and statistical algorithms for the selection of valid readings. We are also seeking to patent the method of calibrating a sensor in vivo by withdrawal of one sample of blood and its independent analysis described in the papers of Csoregi, E., Schmidtke, D.W., and Heller, A. Analytical Chemistry, 67, 1240-1244 (1995); and of Csoregi, E., Quinn, C.P., Schmidtke, D.W., Lindquist, S.-E., Pishko, M.V., Ye, L., Katakis, I., Hubbell, J.A. and Heller, A., Analytical Chemistry, 66, 3131-3138 (1994). We have shown that after perturbing the venous glucose concentration by injection of glucose or insulin, the change in the subcutaneous glucose concentration lags behind the blood concentration. For glucose injection the lag is glucose dose dependent (Kinetics of Glucose Delivery to Subcutaneous Tissue in Rats Measured with 0.3mm Amperometric Microsensors, Quinn, C.P., Pishko, M.V., Schmidtke, D.W., Ishikawa, M., Wagner, J.G., Raskin, P., Hubbell, J.A. and Heller, A., Am.J.Physiol. 269 (Endocinol.Metab. 32) E155-E161 (1995)) and is in the 9-13 min range; for insulin injection the lag is much longer (15-40 min) (David W. Schmidtke, Ph.D. Thesis, The University of Texas at Austin, December, 1996). We shall seek to protect the algorithms relating blood with subcutaneous glucose concentrations. We have observed that after insulin injection the dynamic difference between subcutaneous and blood glucose concentration is high. Our method will exclude a period of about 30-90 min., preferably of about 40 min. following an insulin injection from the periods in which the sensor is calibrated in vivo. We have published work on miniature electronics, including a biopotentiostat, for glucose sensing in vivo [Battery Powered Miniature Bioporentiostats for Amperometric Biosensors, Quinn, C.P., Wagner, J.G., Heller, A., and Yarnitzky, C.M., Instrumentation Science & Technology, 24, 263-275 -3- (1996)] and are currently building a system with a miniature transmitter. The electronics have been miniaturized to be wrist-worn. We have shown that there are preferred sites for implanting glucose sensors in humans. One of the preferred sites is the back of the hand above the knuckles and below the wrist. The sensors' output when in the hand or another extremity is (outside) temperature dependent, wherefore an algorithm correcting for the sensor temperature is useful. We have recently demonstrated that a useful biocompatible layer for our in vivo sensors can be made by crosslinking a polyamine, such as an amineterminated dendrimer, wherein the crosslinkers may be polyethylene oxide chains, the polyethylene oxide having amine-reactive and functions such as active esters of N-hydroxy succinimide. This adds to our claims of biosensors that are made with a biocompatible gel that swells in water, to include gels made by reacting two materials, at least one of which has poly(ethylene oxide) chains. Sensors for Bioreactors: ----------------------- We have built and tested sensors for bioreactors. The glucose sensor built does not require oxygen for its operation. It is placed in a sterilizable sleeve having a non-fouling membrane. The sensor was designed to minimize the volume of the fluid contained in the sleeve's compartment behind the sterilizable membrane in which the periodically replaced sensor is sited. Sensors were replaced without risking infection of the broth with a foreign organism. Air Oxidizable Redox Polymers and Redox Couples: ------------------------------------------------ We have observed that on some redox polymers used to connect enzymes to electrodes molecular oxygen can be catalytically electroreduced. The importance of such electroreduction is in that it provides another method for sensing oxygen amperometrically, but, more importantly, in allowing maintenance of the redox centers of the polymer predominantly in their oxidized state simply by storing the biosensors in air or in any other oxygen containing atmosphere. We have found that electrodes modified with poly(N-vinyl imidazole), and preferably with the [Os(bpy)2 CL] +/2+ complex (where bpy is bipydrine, phenantholine or a derivative of these) of poly(N-vinyl imidazole) are oxygen reduction catalysts. As a result of the Os redox centers in these are maintained dominantly as in the Os(III) oxidation state. In general, the more reducing the Os complexes bound to poly(N-vinyl imidazole), the better they catalyze O2 reduction. Thus (Os(dmo'bpy)2 Cl] +/2+ complexed poly(N-vinyl imidazole), where dmo-bpy is 4,4'- dimethoxy-2,2'-bipyridine is an excellent O2 reduction catalyst. Less effective catalysis of O2 reduction was observed also with poly(4-vinyl pyridine) complexes of osmium and with osmium ligands like 4,4'-dimethyl-2,2'-bipyridine. It is possible that non-polymeric imidazole complexes, such as [Os(Im)(dmo-bpy)2 Cl] are also maintained by oxygen in the oxidized state, [Os(Im)(dmo-bpy) 2 Cl] +. The ability to maintain Os centers in the oxidized state is an advantage in biosensors where charge passed is measured or where the current after a defined elapsed time is measured. The signal from such sensors is less dependent on storage (residual enzyme activity) or temperature. -4- Redox Polymers and Synthesis of Polymers: ---------------------------------------- New enzyme wiring redox polymers were described in four articles [(a) 'Wiring' of glucose oxidase and lactate oxidase within a hydrogel made with poly(vinyl pyridine) complexed with [Os(4,4'dimethoxy-2,2'-bipyridine)2 Cl]+/2+ Kenausis, G., Taylor, C. and Heller, A., J. Chem. Soc., Faraday Transactions, 92, 4131- 4136 (1996); (b) "Wiring" of Glucose Oxidase within a Hydrogel made with Polyvinyl Imidazole Complexed with [(Os-4,4'-dimethoxy 2,2'-bypyridine)Cl]+/2+ Chris Taylor, Gregg Kenausis, Ioanis Katakis, and Adam Heller, J.Electroanalytical Chemistry 396, 511-515 (1995); (c) Polyacrylamide Based Redox Polymer for Connecting Redox Centers of Enzymes to Electrodes, De Lumley- Woodyear, T., Rocca, P., Lindsay, J., Dror, Y., Freeman, A., and Heller, A., Analytical Chemistry 67, 1332-1338 (1995); (d) Glucose Electrodes Based on Crosslinked [OS(bpy)2Cl]+/2+ Complexed Poly(1-Vinylimidazole) Films, Ohara, T.J., Heller, A., Anal.Chem. 65, 3512-3517 (1993)]. Some of the new polymers were designed to have redox potentials shifted in the negative direction, so as to reduce the unwanted electrooxidation of easy to oxidize constituents of biological fluids, like ascorbate and acetaminophen. Others were designed to reduce the positive charge on the chains, so as to lessen the permeation of interfering anions (ascorbate, urate) and the non-specific binding of biologically important polyanions (oligonucleotides, DNA, some enzymes). It was found that the quality of the electrical connection of redox enzymes to electrodes critically depends on the extent of branching and crosslinking of the enzyme-wiring redox polymers. Such branching and crosslinking takes place when in polymer-nitrogen bound [Os(bpy)2 Cl]2+/+ centers, denoted as poly-[N - OS(bpy)2 Cl]+/2+ the chloride in the inner coordination sphere is exchanged by a second nitrogen of polymer chain. Branching and crosslinking occur by formation of poly [N - Os(bpy)2- N]2+/1+ embranes poly links. By introducing rigorously anhydrous synthetic and storage conditions and by monitoring the progress of the desired complex formation in its preparation, dominantly linear polymers that "wire" the enzymes more effectively were prepared. New Crosslinkers: ---------------- Novel crosslinkers have been used. These have usually a poly(ethylene oxide) sequence, terminated by functions reacting with amines such as N- hydroxysuccinimide esters, suberimidates, dichlorotriazine etc. Others are similar, but have polymethylene chains. Through using these crosslinkers we are making hydrogels that swell less, adhere better to electrodes, and are less subject to loss from the electrode surface by shear. Novel Enzymes and their "wires": ------------------------------- In collaboration with colleagues at the University of Glasgow, Scotland, we have started work on glutamine electrodes based on wiring of glutamine oxidase. At Austin and also in collaboration with colleagues at the University of Lund in Sweden on wiring oligosaccharide dehydrogenase we used polymeric "wires" that do not have a net positive charge and on polymers having anionic and cationic zones. Membranes: --------- -5- The formation of membranes to (a) extend the sensing range of electrodes; (b) reduce the electrooxidation of interferants; (c) control the ratio of the fluxes of O2 and the analyte (e.g. glucose) to the electrode surface has been studied. Methods of casting miniature membranes (e.g. of cellulose acetate from cyclohexanone, of polysulfone from tetrahydrofuran) and of their mixtures, and also of crosslinking polydimethyl siloxanes to form oxygen "breathing" elastomeric micromembranes were developed. Immunosensors: ------------- We have built immunosensors based on wiring of immunolabeling enzymes. In one group of these, no separation or washings are required; in others the substrate of the immunolabeling peroxidase, hydrogen peroxide, is generated in situ by air oxidation of a substrate such as choline with an immobilized enzyme such as choline oxidase. Choline oxidase, as well as a small number of other oxidases is not "wired" in our hydrogels, thus performing its usual catalysis without interfering with the amperometric assay. An example of the immunosensors developed is an electrode modified with a film consisting of a redox hydrogel capable of "wiring" a peroxidase, an antibody and choline oxidase. The electrode is exposed to the solution tested for antigen, then to a peroxidase labeled antibody solution also containing choline. When the antigen is present, "sandwich" formation causes electrical connection of the labeling peroxidase and electroreduction of the H2 O2 generated in the air oxidation of choline to betaine. Antibodies are detected through incorporation of antigens in the redox polymer and choline oxidase containing gel, exposure to the solution tested for the antibody, to which choline and the peroxidase-labeled antigen were added. With my regards and best wishes for 1997, /s/ Adam Heller Adam Heller AH:n -6- EX-10.12 6 dex1012.txt LICENSE AGREEMENT BET THERASENSE AND ASULAB [CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION] Exhibit 10.12 LICENSE AGREEMENT ----------------- This License Agreement (the "Agreement"), effective as of February 23, 2000 (the "Effective Date"), is entered by and between ASULAB SA., organized under the laws of Switzerland, with offices at Rue des Sors 3, CH-2074 Marin, Switzerland ("Asulab"), AND THERASENSE, Inc., a California corporation with principal place of business at 1360 South Loop Road, Alameda, CA 94502, USA ("TheraSense"). BACKGROUND ---------- A. Asulab owns certain Patent Rights (as defined below) relating to sensors for measuring analyte levels in body fluids; and B. TheraSense desires to obtain a license under the Patent Rights, and Asulab desires to grant such a license to TheraSense, on the terms and conditions herein. NOW THEREFORE, Asulab and TheraSense agree as follows: 2 1. DEFINITIONS ----------- 1.1 "Affiliate" means any corporation or other entity, which is directly or --------- indirectly controlling, controlled by or under the common control with Asulab or TheraSense. For the purpose of this Section 1.1, "control" shall mean the direct or indirect ownership of at least fifty percent (50%) of the outstanding shares or other voting rights of the subject entity to elect the majority of the directors, or the maximum percentage control or ownership rights permitted under the law of the relevant country. 1.2 "Confidential Information" shall mean ------------------------ a) any proprietary or confidential information or material in tangible form disclosed hereunder that is marked as "Confidential" at the time it is delivered to the receiving party, or b) proprietary or confidential information disclosed orally hereunder which is identified as confidential or proprietary when disclosed and such disclosure of confidential information is confirmed in writing within thirty (30) days by the disclosing party. 1.3 "Patent Rights" shall mean the patents and patent applications listed on -------------- Exhibit A and all directly related patents and patent applications filed in any country worldwide necessary for development and commercialization of the Products (including all reissues, extensions, substitutions, reexaminations, supplementary protection certificates and the like, patents of addition, provisionals, continuations, continuations-in-part, divisionals, reissues, and foreign counterparts thereof). 1.4 "Field" means analytical and diagnostic instruments for diabetes ----- monitoring. 1.5 "FreeStyle" means a system for the in vitro monitoring of glucose using a --------- test strip manufactured by TheraSense which coulometrically measures less than 0.4 microliters of body fluid. For the avoidance of doubt FreeStyle does not include the electronic meter for TheraSense's in vivo glucose sensor. 3 1.6 "Licensed Product" means any current or future product, which is within the ---------------- scope of an issued Valid Claim or was within the scope of an issued Valid Claim. Each individual disposable test strip shall be counted as one Licensed Product. 1.7 "Net Sales" means the gross revenues actually received by TheraSense or its --------- Affiliates form a third party from sales of Licensed Products, less a) normal and customary rebates, and cash and trade discounts, actually taken; b) sales, use and/or other excise taxes or duties actually paid; c) amounts allowed or credited due to returns. For purposes of clarification in the event that sales are made through distributors, Net Sales shall be based on gross revenues actually received by TheraSense from the Distributors less the discounts listed above. 1.8 "Territory" means the entire world. --------- 1.9 "Valid Claim" means ----------- a) a claim of an issued and unexpired patent included within the Patent Rights which has not been held unenforceable or invalid by a court or other governmental agency of competent jurisdiction, and which has not been disclaimed or admitted to be invalid or unenforceable through reissue or otherwise; or b) a claim of a pending patent application within the Patent Rights. 2. LICENSE ------- 2.1 Grant to TheraSense ------------------- Asulab hereby grants to TheraSense and its Affiliates a non-exclusive license under Patent Rights to make, import, have imported, use, sell, have sold and offer for sale the Licensed Products in the Territory for use in the Field. 4 2.2 Limitation of Rights -------------------- 2.2.1 Notwithstanding the rights granted in Section 2.1, TheraSense agrees that: a) the deposition of electron transfer mediators onto a Licensed Product shall only be performed by TheraSense or TheraSense Affiliates; and b) the package for Licensed Product shall be marked with a trademark, trade name or brand name owned by TheraSense or a TheraSense Affiliate. Sales of Licensed Product marked with a trademark, trade name or brand name of a company other than TheraSense or a TheraSense Affiliate shall require Asulab's prior written approval. Such an approval may be withheld without reasons. Notwithstanding the foregoing, TheraSense and its distributors shall mark all Licensed Product in accord with local laws and regulations. 2.2.2 Notwithstanding the rights granted in Section 2.1, Asulab agrees that TheraSense may contract with third parties to manufacture and supply one or more components, including the synthesis of chemicals, necessary or useful in the manufacture of the Licensed Products for use in the Field. 2.2.3 TheraSense does not have the right to sublicense the Patent Rights. 3. CONSIDERATION ------------- 3.1 Commercialization of Asulab System ---------------------------------- TheraSense shall conduct in-house clinical testing, clinical trials, market research, and preparation and submission of FDA 510k application for the Asulab system. Upon execution of a mutually agreeable distribution agreement between Asulab and TheraSense, TheraSense shall market the Asulab System to major US retailers. TheraSense shall use its best reasonable efforts to commercialize the Asulab System with one or more major retailers in North America. For a period of two (2) years from the Effective Date, Asulab shall work exclusively with TheraSense on the marketing of the Asulab System in North America. For a period of two (2) years from the Effective Date, Asulab shall not directly or indirectly engage in 5 discussions with North American retailers or marketing partners (other than TheraSense) regarding the sale of the Asulab system in North America. 3.2 Royalties --------- In consideration of the license granted herein, for each calendar year beginning in 2000 TheraSense shall pay to Asulab the greater of: 3.2.1 a minimum royalty of *** for the year 2000, *** for the year 2001, and *** for each calendar year thereafter (such minimum royalties to be paid at the end of each calendar year); or 3.2.2 a running royalty based on Net Sales of all Licensed Products. The royalty rate on Net Sales of Licensed Products shall be as follows: a) *** until TheraSense files 510k application with the US FDA for clearance to market the in vitro glucose monitoring system provided by Asulab to TheraSense on November 24, 1999 (the "Asulab System"); then b) *** until the US FDA approves TheraSense's 510k application to market the Asulab System; then c) *** until a total of Licensed Products are sold in the Territory in any calendar year; then d) *** for the remainder of that calendar year and in all years thereafter. In the event that: i) TheraSense reasonably cannot submit a 510k application to the US FDA on the Asulab System within nine (9) months of the Effective Date, ii) the US FDA rejects TheraSense's application to market the Asulab System; or *** Confidential treatment requested 6 iii) the Asulab System cannot reasonably be expected to be commercialized, in spite of ThereSense having used its best efforts to obtain FDA approval, and the responsibility for event i), ii) or iii) belongs primarily to Asulab (for example, due to product performance, product availability, patent encumbrances, etc.), then the royalty rate shall begin at *** and drop to *** as soon as *** Licensed Products are sold and follow from there on what is specified in Section 3.2.2 c) and d). For sales in countries where there are no issued Valid Claims, the royalty rate shall be equal to *** of the royalty rates specified herein above in this Section 3.2.2 for sales in countries in which a Valid Claim exists if the Licensed Product originates also from a country without Valid Claim. If however the Valid Claim exists either in the country of origin or in the country of destination of the Licensed Product, the royalty rate shall be *** of the rates specified herein above in Section 3.2.2. If the Valid Claim exists in both the country of origin and the country of destination, the royalty rate shall be the *** according to Section 3.2.2 herein above. 3.3. Combination Products -------------------- In the event that a test strip that is a Licensed Product is sold in combination as a single product with another component or other product whose manufacture, sale and use are not covered by a claim within the Patent Rights for which the combination product is sold, Net Sales from such sales for purposes of calculating the amounts due under Sections 3.2 above shall be as reasonably allocated between such Licensed Product and such component or other product, based upon their relative importance and proprietary protection. Combination Products currently contemplated by TheraSense and the corresponding royalty rates are listed in Exhibit B. 3.4 One Royalty ----------- No more than one royalty payment shall be due with respect to a sale of a particular Licensed Product. No multiple royalties shall be payable because any Licensed Product, or its manufacture, sale or use is covered by more *** Confidential treatment requested 7 than one Valid Claim. No royalty shall be payable under Section 3.2 above with respect to Licensed Products distributed for use in research and/or development, in clinical trials or as promotional samples, unless they are sold or distributed against a counter-benefit. 3.5 Royalty Term ------------ Royalties due under this Article 3 shall be payable on a Licensed Product-by-Licensed Product basis until the expiration of the last-to- expire issued Valid Claim covering such Licensed Product. 3.6 Payments, Reports and Records ----------------------------- 3.6.1 Payments; Currency ------------------ TheraSense agrees to pay all running royalties due to Asulab within sixty (60) days after the last day of each half-calendar year in which they accrue. If the running royalty accrued in a given calendar year is less than the minimum royalty for that calendar year, the difference shall be paid within sixty (60) days after the last day of the calendar year. All payments due hereunder shall be paid in United States dollars. 3.6.2 Taxes ----- The royalty payments to Asulab shall be net of taxes. In case taxes are due, TheraSense shall guarantee that it will correctly declare and pay such taxes that are to be withheld for the sale of Licensed Products in the country of the sales. 3.6.3 Royalty Reports --------------- TheraSense shall deliver to Asulab within sixty (60) days after the end of each half-calendar year in which Licensed Products are sold a report setting forth in reasonable detail the calculation of the royalties payable Asulab for such half-calendar year, including the Licensed Products sold per country and the net Sales thereof. Such reports shall be Confidential Information of TheraSense subject to Article 5 herein. 8 3.7 Books and Records ----------------- TheraSense and its Affiliates shall maintain accurate books and records which enable the calculation of royalties payable hereunder to be verified. TheraSense shall retain the books and record for each half-calendar year period for three (3) years after the submission of the corresponding report under Section 3.6.3 hereof. Upon thirty (30) days prior notice to TheraSense, independent accountants selected by Asulab reasonably acceptable to TheraSense, after entering into a confidentiality agreement with TheraSense, may have access to TheraSense's books and records during TheraSense's normal business hours at mutually agreed times to conduct a review or audit once per calendar year, for the sole purpose of verifying the accuracy of TheraSense's payments and compliance with this Agreement. The audit will be limited to TheraSense's books and records documenting Net Sales and royalty calculations. 3.8 FreeStyle Meter Manufacturing ----------------------------- During the term of the Agreement, in the event that TheraSense determines that it would like to sell an electronic meter utilizing a *** for use with FreeStyle test strip Licensed Product, then TheraSense shall solicit bids for the design and manufacture of the *** and the meter. In the event that TheraSense wishes to perform the design or manufacture of the *** and the meter then TheraSense may submit an internal bid for some or all of the project. Asulab shall have a right of first bid and last call for the design and manufacture of the *** and meter to be sold in Europe. In order for Asulab's bid not to be accepted by TheraSense, the bid of TheraSense or a third party must be equivalent or superior to the specifications, quality, delivery, price and other terms that are proposed in Asulab's bid. Asulab's bid shall be due on the same date as the third parties' bids. 4. DILIGENCE --------- Commercially Reasonable Efforts ------------------------------- TheraSense agrees to use best efforts to develop and commercialize the Licensed Products and obtain such approvals as may be necessary for the sale of the *** Confidential treatment requested 9 Licensed Products in the Territory. TheraSense may conduct such activities itself or through third parties. 5. CONFIDENTIALITY --------------- 5.1 Confidential Information ------------------------ Each party agrees not to use the Confidential Information disclosed to it by the other party for its own use or for any purpose except to carry out discussions concerning, and the undertaking of, any business relationship between the two; except to the extent that such Confidential Information: a) was already known to the receiving party, other than under obligation of confidentiality, at the time of such disclosure; b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving party; c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving party in breach of this agreement; d) was independently developed by the receiving party as demonstrated by documented evidence prepared contemporaneously with such independent development; e) was subsequently lawfully disclosed to the receiving party by a person other than a party hereto. Neither party will disclose any Confidential Information of the other party to third parties except those directors, officers, employees, consultants and agents who are required to have the information in order to carry out the business relationship. Each party has had or will have those directors, officers, employees, consultants and agents to whom Confidential Information of the other party is disclosed or who have access to Confidential Information of the other party sign a Non-Disclosure Agreement in content substantially similar to the terms of this Article 5. Each party agrees that it will take all reasonable measures to protect the secrecy of and avoid disclosure 10 or use of Confidential Information of the other party in order to prevent it from falling into the public domain or the possession of persons other than those persons authorized hereunder to have any such information, which, measures shall include the highest degree of care that either party utilizes to protect its own Confidential Information of a similar nature. Each party agrees to notify the other party in writing of any misuse or misappropriation of such Confidential Information of the other party which may come to its attention. 5.2 Mandatory Disclosure -------------------- In the event that either party or their respective directors, officers, employees, consultants or agents are requested or required by legal process to disclose any of the confidential Information of the other party, the party required to make such disclosure shall give prompt notice so that the other party may seek a protective order or other appropriate relief. In the event that such protective order is not obtained, the party required to make such disclosure shall disclose only that portion of the Confidential Information which its counsel advises that it is legally required to disclose. 5.3 Return of Materials ------------------- Upon termination of this Agreement for any reason, any materials or documents which have been furnished by one party to the other will be promptly returned, accompanied by all copies of such documentation, except for one copy which may be retained by each party's legal department to monitor its compliance with this Agreement. 5.4 Term ---- The commitments of either party under this Article 5 shall survive termination of this Agreement, and shall continue for a period of five (5) years following the termination date of this Agreement. 5.5 Confidential Terms ------------------ Each party agrees not to disclose any terms of this Agreement to any third party without the consent of the other party; provided disclosures may be made as required by securities or other applicable laws, or to a party's 11 accountants, attorneys and other professional advisors, or by TheraSense to actual or prospective investors or corporate partners. 6. REPRESENTATIONS AND WARRANTIES ------------------------------ 6.1 Asulab ------ Asulab represents and warrants that a) it is a corporation duly organized, validly existing and in good standing under the laws of Switzerland; and b) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of Asulab; and c) as of the Effective Date, it has the right to grant the rights and licenses granted herein, and the Patent Rights are free and clear of any lien, encumbrance or security interest; d) it has not previously granted, and will not grant during the term of this Agreement, any exclusive license on the Patent Rights, or any portion thereof; and e) as of the Effective Date, there are no threatened or pending actions, lawsuits, claims or arbitration proceedings in any way relating to the Patent Rights. 6.2 TheraSense ---------- TheraSense represent and warrants that a) it is a corporation duly organized, validly existing and in good standing under the laws of the State of California; and b) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of TheraSense. 12 7. PROSECUTION AND ENFORCEMENT --------------------------- 7.1 Asulab's Responsibilities ------------------------- Asulab shall have the sole right to control the preparation, filing, prosecution and maintenance of the Patent Rights, and any interference or opposition proceeding relating thereto, using patent counsel of its choice and at its sole expense; provided Asulab shall keep .TheraSense informed of the preparation, filing, prosecution, and/or maintenance of the Patent Rights, and TheraSense may provide to Asulab substantive comment and input thereon. 7.2 Enforcement ----------- If either party hereto becomes aware that any Patent Rights are being or have been infringed by any third party, such party shall promptly notify the other party hereto in writing describing the facts relating thereto in reasonable detail. Asulab shall decide what actions will be taken to enforce the Patent Rights, it being understood that TheraSense shall assist Asulab upon request and at Asulab's expense. 7.3 Infringement Claims ------------------- If the practice by TheraSense of the license granted herein results in any allegation or claim of infringement of an intellectual property right of third party against TheraSense, TheraSense shall have the right to defend any such claim, suit or proceeding, at its own expense, by counsel of its own choice and shall have the right and authority to settle any such suit; provided, however, Asulab shall cooperate with TheraSense, at TheraSense's reasonable request and expense, in connection with the defense of such claim. If the Patent Rights are concerned Asulab shall have the right to decide on the actions to be taken and shall bear the related expenses. 8. DISPUTE RESOLUTION ------------------ 8.1 Mediation --------- If a dispute arises out of or relates to this contract, or the breach thereof, and if said dispute cannot be settled through negotiation, the parties agree first to 13 try in good faith to settle the dispute by mediation under the mediation rules of the International Chamber of Commerce before resorting to arbitration, litigation, or some other dispute resolution procedures. 8.2 Arbitration ----------- If the parties are unable to resolve any dispute, controversy or claim between them arising out of or relating to the validity, construction, enforceability or performance of this Agreement, including disputes relating to alleged breach or to termination of this Agreement (each, a "Dispute"), the Dispute shall be settled by binding arbitration conducted in Frankfurt, Germany, pursuant to the Arbitration Rules of the International Chamber of Commerce then in effect by one (1) arbitrator appointed in accordance with such rules. The arbitrator shall, in rendering its decision, apply the substantive law of Switzerland, without regard to its conflict of laws provisions. All proceedings and documents will be in the English language. 9. INDEMNIFICATION --------------- 9.1 Indemnification of Asulab ------------------------- TheraSense shall indemnify, defend and hold harmless Asulab, its Affiliates and its directors, officers and employees (each an "Asulab Indemnitee") from and against any and all liabilities, damages, losses, costs or expenses (including reasonable attorneys' and professional fees and other expenses of litigation and/or arbitration) (a "Liability") resulting from a claim, suit or proceeding (any of the foregoing, a "Claim") brought by a third party against an Asulab Indemnitee or one its Affiliate's Indemnitee, arising from or occurring as a result of activities performed by TheraSense in connection with the development, manufacture, sale or use of any Licensed Product, except to the extent caused by the negligence or willful misconduct of Asulab. 9.2 Indemnification Procedures -------------------------- In the event that an Indemnitee intends to claim indemnification under this Article 9 it shall promptly notify the other party (the "Indemnitor") in writing of such alleged Liability. The Indemnitor shall have the sole right to control the 14 defense and/or settlement thereof, provided that the indemnified party may participate in any such proceeding with counsel of its choice and at its own expense. The indemnity agreement in this Article 9 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the consent of the Indemnitor, which consent shall not be withheld unreasonably. The Indemnitee under this Article 9, its employees and agents, shall cooperate fully with the Indemnitor and its legal representatives and provide full information in the investigation of any Claim covered by this indemnification. Neither party shall be liable for any costs or expenses incurred by the other party without its prior written authorization. 10. TERM AND TERMINATION -------------------- 10.1 Term ---- The term of this Agreement shall commence on the Effective Date, and unless earlier terminated as provided in this Article 10, shall continue in full force and effect on a Licensed Product-by-Licensed Product basis until the life of the last to expire patents under the Patent Rights. 10.2 Permissive Terminations ----------------------- Beginning two (2) years from the Effective Date, TheraSense may terminate this Agreement with one hundred and twenty (120) days prior written notice to Asulab. In the event that TheraSense terminates this Agreement under this Section 10.2, TheraSense shall refrain from using the Patent Rights in whatever form. 10.3 Termination for Cause --------------------- In the event one party has materially breached or defaulted in the performance of any of its obligations hereunder, and such breach or default has continued for sixty (60) days after written notice thereof was provided to the breaching or defaulting party by the non-breaching or non-defaulting party, the other party may terminate this Agreement. Any termination shall become effective at the end of such sixty (60) days period unless the 15 breaching or defaulting party has cured any such breach or default prior to the expiration of the sixty (60) day period; provided, however, if TheraSense receives notification from Asulab of a material breach and if TheraSense notifies Asulab in writing within thirty (30) days of receipt of such default notice that it disputes the asserted default, the matter will be submitted to arbitration as provided in Article 8 of this Agreement. In such event, Asulab shall not have the right to terminate this Agreement until it has been determined in such arbitration proceeding that TheraSense materially breached this Agreement, and TheraSense fails to cure such breach within sixty (60) days after the conclusion of such arbitration proceeding. 10.4 Termination for Insolvency -------------------------- If voluntary or involuntary proceedings by or against TheraSense are instituted in bankruptcy under any insolvency law, or a receiver or custodian is appointed for TheraSense, or proceedings are instituted by or against TheraSense for corporate reorganization or the dissolution of TheraSense, which proceedings if involuntary, shall not have been dismissed within one hundred and eighty (180) days after the date of filing, or if TheraSense makes an assignment for the benefit of creditors, or substantially all of the assets of TheraSense are seized or attached and not released within one hundred and eighty (180) days thereafter, Asulab may immediately terminate this Agreement effective upon notice of such termination. 10.5 Effect of Termination --------------------- 10.5.1 Accrued rights and Obligations ------------------------------ Termination of this Agreement for any reason shall not release any party hereto from any liability which, at the time of such termination, has already accrued to the other party or which is attributable to a period prior to such termination, nor preclude either party from pursuing any rights and remedies it may have hereunder or at law or in equity which accrued or are based upon any event occurring prior to such termination. 16 10.5.2 Stock on Hand ------------- In the event this Agreement is terminated for any reason, TheraSense shall have the right to sell or otherwise dispose of the Stock of any licensed Product then on hand, within a period of 6 months, subject to Article 3. 10.6 Survival -------- Section 7.2, 7.3, 10.5 and 10.6 and Articles 5,6,8,9 and 11 of this Agreement shall survive termination of this Agreement for any reason. 11. MISCELLANEOUS ------------- 11.1 Governing Law ------------- This Agreement, and any proceeding subject to Article 8, shall be governed by and construed in accordance with the laws of Switzerland. 11.2 Independent Contractors ----------------------- The relationship of the parties hereto is that of independent contractors. The parties hereto are not deemed to be agents, partners or joint ventures of the other for any purpose as a result of this Agreement or the transactions contemplated thereby. 11.3 Assignment ---------- The parties agree that their rights and obligations under this Agreement shall not be delegated, transferred or assigned to a third party without prior written consent of the other party hereto; provided TheraSense may assign this Agreement, without Asulab's consent (a) to its Affiliates, and (b) to an entity that acquires all or substantially all of the business of assets of TheraSense to which this Agreement pertains, whether by merger, reorganization, acquisition, sale or otherwise. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. 17 11.4 Rights to Develop Independently ------------------------------- Nothing in this Agreement will impair TheraSense's right to independently acquire, license, develop for itself, or have develop for it, intellectual property and technology performing similar functions as the Patent Rights or to market and distribute Licensed Products or other products based on such other intellectual property and technology. 11.5 Notices ------- Any required notices hereunder shall be given in writing by certified mail or international express delivery service (e.g. DHL) at the address of each party below, or to such other address as either party may substitute by written notice. Notice shall be deemed served when delivered or, if delivery is not accomplished by reason or some fault of the addressee, when tendered. If to Asulab SA: Asulab SA Rue des Sors 3 CH-2074 Marin Switzerland Attn. Dr. Rudolf Dinger, Director Copy to Dr. Hanspeter Rentsch, General Counsel of Swatch Group, Seevorstadt 6, CH-2501 Biel, Switzerland If to TheraSense: TheraSense Inc. 1360 South Loop Road Alameda, CA 94502, USA Attn. Ephraim Heller, Vice President of Business Development 11.6 Force Majeure ------------- Neither party shall lose any rights hereunder or be liable to the other party for damages or losses (except for payment obligations) on account of failure of performance by the defaulting party if the failure is occasioned by war, strike, fire, Act of God, earthquake, flood, lockout, embargo, governmental acts or orders or restrictions, failure of suppliers, or any other reason where failure to perform is beyond the reasonable control and not caused by the negligence, 18 intentional conduct or misconduct of the nonperforming party and such party has exerted all reasonable efforts to avoid or remedy such force majeure; provided, however, that in no event shall a party be required to settle any labor dispute or disturbance. 11.7 Compliance with Laws -------------------- Each party shall furnish to the other party any information requested or required by that party during the term of this Agreement or any extensions hereof to enable that party to comply with the requirements of any U.S. or foreign, state and/or government agency. 11.8 Severability, Waiver -------------------- In the event that any provisions of this Agreement are determined to be invalid or unenforceable by a court of competent jurisdiction, the remainder of the Agreement shall remain in full force and effect without said provision. The parties shall in good faith negotiate a substitute clause for any provision declared invalid or unenforceable, which shall most nearly approximate the intent of the parties in entering this Agreement. The failure of a party to enforce any provision of the Agreement shall not be construed to be a waiver of the right of such party to thereafter enforce that provision or any other provision or right. 11.9 Entire Agreement, Modification ------------------------------ This Agreement sets forth the entire Agreement and understanding of the parties with respect to the subject matter hereof, and supersedes all prior discussions, agreements and writings in relating thereto. This Agreement may not be altered, amended or modified in any way except by a writing signed by both parties. 11.10 Counterparts ------------ This Agreement may be executed in two counterparts, each of which shall be deemed an original and which together shall constitute one instrument. IN WITNESS WHEREOF, Asulab and TheraSense have executed this Agreement by their respective duly authorized representatives. Marin, 21, February 2000 Alameda, 23 Feb 2000 ----------------- ----------- Asulab SA __________________ TheraSense Inc. ____________ /s/ Signature Illegible /s/ Signature Illegible By: ------------------------ By: ------------------------ Print Name: W. SALATHE R. DINGER Print Name: Ephraim Heller ---------------------- -------------- Title DIRECTOR MANG. DIRECTOR Title: Vice President, Business Development ------------------------------ ------------------------------------
EXHIBIT A Asulab Mediator Patents and Patent Applications Title: Mono, bis or tris(substituted 2,2'-bipyridine) iron, ruthemium, osmium ----- or vanadium complexes and their methods of preparation -------------------------------------------------------------------------------- Country Application Application Patent Date of or region number date number grant -------------------------------------------------------------------------------- Europe* 92903806.5 19.02.1992 0 526 603 04.12.1996 -------------------------------------------------------------------------------- Australia 12441/92 19.02.1992 657 307 09.03.1995 -------------------------------------------------------------------------------- Canada 2,080,834.9 19.02.1992 2,080,834 21.12.1999 -------------------------------------------------------------------------------- Japan 503783/92 19.02.1992 2855481 27.11.1998 -------------------------------------------------------------------------------- USA 07/949,485 19.02.1992 5,393,903 28.02.1995 -------------------------------------------------------------------------------- * BE, CH/LI, DE, FR, GB, IT and NL French priority patent application No 91 02199 of February 21, 1991 now abandoned in favor of European patent designating France. Title: Sensor for measuring the amount of a component in solution ----- -------------------------------------------------------------------------------- Country Application Application Patent Date of or region number date number grant -------------------------------------------------------------------------------- Europe* 92903775.2 19.02.1992 0 526 602 02.01.1997 -------------------------------------------------------------------------------- Australia 12219/92 19.02.1992 656 360 02.02.1995 -------------------------------------------------------------------------------- Canada 2,808,840-3 19.02.1992 2,080,840 06.04.1999 -------------------------------------------------------------------------------- Japan 503902/92 19.02.1992 2770250 17.04.1998 -------------------------------------------------------------------------------- USA 07/938,219 19.02.1992 5,378,628 03.01.1995 -------------------------------------------------------------------------------- * BE, CH/LI, DE, FR, GB, IT and NL French priority patent application No 91 02200 of February 21, 1991 now abandoned in favor of European patent designating France. Title: Sensor for measuring the amount of a component in solution ----- -------------------------------------------------------------------------------- Country Application Application Patent Date of or region number date number grant -------------------------------------------------------------------------------- France 91 07404 14.06.1991 91 07404 10.11.1994 -------------------------------------------------------------------------------- Title: Transition metal complexes having 2,2'-bipyridine ligands substituted by ----- at least one ammonium alkyl radical -------------------------------------------------------------------------------- Country Application Application Patent Date of or region number date number grant -------------------------------------------------------------------------------- France 92 15214 15.12.1992 92 15214 28.07.1995 -------------------------------------------------------------------------------- Europe* 93119597.8 06.12.1993 0 602 488 31.03.1999 -------------------------------------------------------------------------------- Australia 52404/93 14.12.1993 665 327 21.12.1995 -------------------------------------------------------------------------------- *** -------------------------------------------------------------------------------- *** -------------------------------------------------------------------------------- USA 08/166,977 14.12.1993 5,410,059 25.04.1995 -------------------------------------------------------------------------------- * BE, CH/LI, DE, GB, IT and NL *** *** *** Confidential treatment requested EXHIBIT B --------- COMBINATION PRODUCTS Combination Products shall include a starter kit that includes at least a glucose meter and Licensed Products. The royalty due on sales of Licensed Products included in such a starter kit shall be calculated based on a price of $0.25 per Licensed Product. EX-10.14 7 dex1014.txt INTERNATIONAL DISTRIBUTOR AGREEMENT [CONFIDENTIAL TREATMENT REQUESTED, CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.] Exhibit 10.14 INTERNATIONAL DISTRIBUTOR AGREEMENT This INTERNATIONAL DISTRIBUTOR AGREEMENT (the "Agreement") is entered into effective April 1, 2001 (the "Effective Date") by and between TheraSense, Inc., a Delaware corporation with a principal place of business at 1360 South Loop Road, Alameda, California 94502, USA ("TheraSense") and Nipro Corporation, a corporation organized under the laws of Japan, with a principal place of business at 3-9-3, Honjo-Nishi, Kita-ku, Osaka, Japan ("Nipro"). BACKGROUND A. TheraSense is the owner of the FreeStyle Products (as defined below) useful in monitoring blood glucose levels and desires to engage a marketing and distribution partner which can (i) assist it in obtaining regulatory and reimbursement approvals to market the FreeStyle Products, and (ii) promote, market and distribute the FreeStyle Products; and B. Nipro desires to purchase from TheraSense, and TheraSense desires to sell to Nipro, the FreeStyle Products for resale in the Territory (as defined below); and C. Nipro desires to distribute and sell the FreeStyle Products to Customers (as defined below) in the Territory. NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows: 1. DEFINITIONS 1.1 "Affiliate" shall mean any corporation or other entity which is --------- directly or indirectly controlling, controlled by or under common control with TheraSense or Nipro. For the purpose of this Agreement, "control" shall mean the direct or indirect ownership of fifty percent (50%) or more of the outstanding shares or other voting rights of the subject entity to elect directors, or if not meeting the preceding, any entity owned or controlled by or owning or controlling at the maximum control or ownership right permitted in the country where such entity exists. 1.2 "Competing Product" shall mean any system used for the measurement of ----------------- glucose levels for purposes of diagnosis, monitoring or treatment of diabetes melitus. 1.3 "Confidential Information" shall mean, subject to the provisions of ------------------------ Article 10 hereof, (i) any proprietary or confidential information or material in tangible form disclosed hereunder that is marked as "Confidential" at the time it is delivered to the receiving party, or (ii) proprietary or confidential information disclosed orally hereunder which is identified as confidential or proprietary when disclosed and such disclosure of confidential information is confirmed in writing within thirty (30) days by the disclosing party. 1.4 "Customers" shall mean Nipro's customers solicited by Nipro, its --------- Affiliates or its Subdistributors within the Territory. 1.5 "Field of Use" shall mean single use, disposable, in vitro tests for ------------ monitoring glucose in human body fluids. It is understood that Field of Use does not include Strips intended for use with a continuous glucose monitoring system, such as TheraSense's Messenger product. 1.6 "FreeStyle Products(s)" shall mean those products intended for sale in --------------------- the Territory, as listed in Exhibit A attached hereto. Subject to Section 2.3, the Freestyle Products listed in Exhibit A may be changed, discontinued or added to by TheraSense. 1.7 "Kissei" shall mean the Kissei Pharmaceutical Corporation, a ------ corporation organized under the laws of Japan, with its principal place of business at 19-48 Yoshino, Matsumoto, Nagano 399, Japan. -2- 1.8 "Subdistributor" shall mean a third party to whom Nipro has granted -------------- the right to distribute the FreeStyle Products under Section 2.2 hereof. 1.9 "Territory" shall mean, as of the Effective Date, Japan. --------- 2. FREESTYLE APPOINTMENT AND AUTHORITY OF NIPRO 2.1 Appointment and Authority. ------------------------- 2.1.1 Exclusive Distributor. Subject to the terms and conditions --------------------- herein, TheraSense hereby appoints Nipro as TheraSense's exclusive and sole distributor and marketing partner for the FreeStyle Products in the Territory in the Field of Use, and Nipro hereby accepts such appointment. TheraSense agrees not to sell the FreeStyle Products to anyone for delivery in the Territory in the Field of Use or with knowledge that the FreeStyle Products are being purchased for use or resale in the Territory in the Field of Use. Likewise, Nipro agrees not to sell the Freestyle Products to anyone for delivery outside the Territory, or inside the Territory outside the Field of Use, or with knowledge that the FreeStyle Products are being purchased for use or resale outside the Territory, or inside the Territory outside the Field of Use. 2.1.2 Nipro's sole authority shall be to purchase FreeStyle Products from TheraSense and to promote, market and resell such FreeStyle Products for delivery to Customers in the Territory in the Field of Use in accordance with the terms of this Agreement. Nipro shall not have the authority to make any commitments whatsoever on behalf of TheraSense. 2.1.3 Notwithstanding the rights granted to Nipro to distribute the FreeStyle Products hereunder, Nipro shall have no right to advertise, solicit sales, promote, market, sell or otherwise dispose of (i) the FreeStyle Products outside the Territory, or (ii) any TheraSense products, other than the FreeStyle Products in the Field of Use, in the Territory. -3- 2.2 Subdistributors. Subject to the provisions of this Section 2.2, Nipro --------------- may appoint one or more third parties, with a reputation for competence and ethical behavior, within any portion of the Territory to distribute the FreeStyle Products in the Field of Use. Within twenty (20) days after the appointment of such Subdistributor, Nipro shall notify TheraSense of the identity of such Subdistributor. Nipro shall not sell or otherwise transfer the FreeStyle Products to any Subdistributor until such Subdistributor enters into a form of written agreement ("Subdistributor Agreement") with Nipro, binding the Subdistributor to terms and conditions substantially similar to those terms and conditions agreed upon by Nipro in this Agreement. Further, Nipro shall only grant Subdistributors the right to make sales of the FreeStyle Products in the Territory in the Field of Use. Nipro agrees to terminate a Subdistributor's right to distribute the FreeStyle Products promptly upon becoming aware that such Subdistributor, or its authorized distributor(s) or reseller(s), is selling or otherwise distributing the FreeStyle Products in violation of its Subdistributor Agreement. Each Subdistributor Agreement shall contain provisions making TheraSense a direct and intended third party beneficiary of such Subdistributor Agreement. 2.3 FreeStyle Product Changes. ------------------------- 2.3.1 Changes in the FreeStyle Products. TheraSense shall notify --------------------------------- Nipro as soon as reasonably feasible of any intended material change, discontinuation or addition to the FreeStyle Products supplied under this Agreement. The features, function and/or appearance of any such FreeStyle Product may be materially technically improved by TheraSense with three (3) months prior written notice to Nipro so long as such improved product meets or exceeds the Product Specification for such product, as listed in Exhibit E. TheraSense may make non-material changes in such FreeStyle Products, including without limitation changing components of a FreeStyle Product, without written notice to Nipro. The Freestyle Products may be discontinued by TheraSense only with Nipro's prior written consent, such consent not to be unreasonably withheld. -4- 2.3.2 New Versions of the FreeStyle Products. TheraSense shall notify -------------------------------------- Nipro as soon as reasonably feasible of any new versions of the FreeStyle Products that TheraSense intends to make available for commercial sale in the Territory (each a "New Version"); provided, it is understood and agreed that New Versions shall not include any implantable glucose sensors developed and/or commercialized by TheraSense. Upon TheraSense's notice to Nipro of the availability of a particular New Version, the parties shall use their best efforts to agree on transfer prices and other terms under which Nipro may obtain the right to market and sell such New Version in the Territory. In the event the parties are unable to agree on such terms within *** of TheraSense's notice to Nipro, such New Versions shall not be added to this Agreement and TheraSense shall be free to market and promote such New Version in the Territory; provided, TheraSense shall not enter into a written agreement with or sell to any third party to resell such New Version in the Territory for transfer prices and terms more favorable to such third party than the final transfer prices and terms rejected by Nipro. 2.3.3 Implantable Glucose Sensors. TheraSense agrees to keep Nipro ---------------------------- reasonably advised of TheraSense's progress with developing an implantable glucose sensor, and in the event TheraSense intends to make such sensor available for commercial sale in the Territory, TheraSense will provide Nipro an opportunity to offer its distribution services in the Territory for such sensor, which offer TheraSense is free to accept or reject without exception. 2.4 Reservation of Rights. Except as expressly provided in this Article --------------------- 2, no right, title, or interest is granted, whether express or implied, by TheraSense to Nipro, and nothing in this Agreement shall be deemed to grant to Nipro rights in any products or technology other than the FreeStyle Products in the Territory, nor shall any provision of this Agreement be deemed to restrict TheraSense's right to exploit technology, know-how, patents, or any other intellectual property rights relating to the FreeStyle Products in products other than the FreeStyle Products in the Territory. TheraSense reserves the right to appoint other authorized distributors or resellers outside the Territory provided that they are prohibited -5- *** Confidential treatment requested from selling or delivering FreeStyle Products in the Territory. TheraSense agrees to terminate a distributor or reseller's right to distribute FreeStyle Products promptly upon becoming aware that the distributor or reseller is selling or distributing the FreeStyle Products, directly or indirectly, in the Territory. TheraSense also reserves the right to appoint third parties to distribute the FreeStyle Products and New Versions inside the Territory in fields of use other than the Field of Use. It is further understood and agreed that TheraSense may distribute products, other than the FreeStyle Products, in the Territory, either directly or indirectly, for any and all uses. In addition TheraSense reserves the right to sell Strips in the Territory, either directly or through third parties, solely for use in calibrating a continuous glucose monitoring system ("CGMS"), provided TheraSense will only market and sell such Strips for use with such CGMS. In no event shall TheraSense sell and otherwise transfer more than *** Strips per CGMS sensor sold or otherwise transferred. 2.5 Conflict of Interest. During the term of this Agreement, Nipro agrees -------------------- not to promote, market, or sell a Competing Product in the Field of Use in the Territory. 2.6 Independent Contractors. The relationship of TheraSense and Nipro ----------------------- established by this Agreement is that of independent contractors, and nothing contained in this Agreement shall be construed to (i) give either party the power to direct and control the day-to-day activities of the other, (ii) constitute the parties as partners, joint venturers, co-owners or otherwise as participants in a joint venture or common undertaking, or (iii) allow either party to create or assume any obligation on behalf of the other for any purpose whatsoever. All financial and other obligations associated with either party's business are the sole responsibility of the party. -6- *** Confidential treatment requested 3. CONSIDERATION 3.1 Signature Payments. In partial consideration of the distribution ------------------- rights granted herein, upon the Effective Date of this Agreement, Nipro shall pay to TheraSense a nonrefundable (except as provided for in Section 12.6.2), noncreditable payment of Five Million U.S. Dollars (U.S. $5,000,000). 3.2 TheraSense Product Prices. ------------------------- 3.2.1 TheraSense Products. For each FreeStyle Product purchased from ------------------- TheraSense, Nipro shall pay to TheraSense an amount equal to the transfer price set forth in Exhibit B (the "Transfer Price"). All prices are in U.S. Dollars with terms FCA (Incoterms 2000) the Shipping Location (as defined in Section 5.5 below). The difference between the Transfer Price and Nipro's price to its Customers shall be Nipro's sole remuneration for distribution of the FreeStyle Products. The Transfer Prices set forth in Exhibit B shall remain in effect from the Effective Date until the *** of the Effective Date. Thereafter, TheraSense has the right to *** revise the Transfer Prices with *** advance written notice to Nipro; provided, any such increase shall not *** averaged over the preceding calendar year. Such revisions shall apply to all orders received after the effective date of revision. 3.2.2 Transfer Price Adjustments. By December 1 of each calendar year -------------------------- Nipro shall provide to TheraSense a non-binding written estimate of its requirements of Strips (as defined in Exhibit A) for the upcoming calendar year (the "Estimated Annual Volume"). The Estimated Annual Volume shall be used to establish the Transfer Price for the Strips for the first quarter of the upcoming year. Thereafter, upon Nipro's submission of each quarterly forecast to TheraSense, if either party concludes that the annual purchase of Strips will be higher or lower than the Estimated Annual Volume so as to cause a different Transfer Price to obtain, the parties will agree on a price change for Strips for future shipments in such quarter. The objective of each quarterly price change will be to minimuze year-end credits or rebates between the parties. -7- *** Confidential treatment requested Notwithstanding the foregoing, in no event shall Nipro be obligated to pay, or TheraSense be entitled to receive, more or less than the corresponding amount set forth on Exhibit B for the actual number of Strips purchased by Nipro in each calendar year. Within 30 days after the end of each calendar year, Nipro or TheraSense shall pay to the other any amounts due relating to underpayments accrued or overpayments made with respect to the Strips in such calendar year. 3.2.3 Government Reimbursements. The parties recognize that the ------------------------- market price for Strips in the Territory may change up or down as a result of changes in the Japan government reimbursement policies. Nipro shall promptly inform TheraSense in writing, documenting any such changes in the reimbursement policies for hospital or clinic blood glucose testing which would affect the price Nipro would actually receive for sales of Strips. In the event such *** would result in a ***, the parties shall ***. Notwithstanding the foregoing, in no event shall such an *** be made more than ***. 3.2.4 Payment for TheraSense Products. TheraSense shall submit an ------------------------------- invoice to Nipro upon each shipment of FreeStyle Products ordered by Nipro and as set forth below in Section 5.5. The invoice shall cover the Transfer Price for the FreeStyle Products in a given shipment plus any freight, taxes or other costs incident to the purchase or shipment initially paid by TheraSense but to be borne by Nipro. The invoiced amounts for FreeStyle Products shipped shall be due in full net thirty (30) days upon the later of receipt by Nipro of the FreeStyle Products or the invoice. -8- *** Confidential treatment requested 3.2.5 Delinquency. In the event that Nipro's account becomes more ----------- than sixty (60) days overdue, TheraSense may, in its sole discretion, require that Nipro pay for all future orders through an irrevocable letter of credit drawn on a major commercial bank and delivered to TheraSense at least thirty (30) days prior to requested delivery date, and TheraSense shall have no obligation to deliver any FreeStyle Products until it receives such letter of credit from Nipro. 3.3 Payment Method. Nipro shall make payments to TheraSense under this -------------- Agreement by wire transfer to a bank account designated by TheraSense. All payments due hereunder shall be paid in U.S. dollars. 4. SUPPLY OF PRODUCTS; PACKAGING AND LABELING 4.1 Supply of FreeStyle Products. Subject to terms of this Agreement, ---------------------------- including without limitation Article 5, TheraSense shall sell the FreeStyle Products (Meters, Strips (pre-packaged in vials and boxes), Lancing Devices and Control Solution (each as defined in Exhibit A)) to Nipro in bulk. 4.2 Supply of Lancets. Nipro shall be responsible for obtaining the ----------------- lancets (a disposable head placed in the Lancing Device for use in piercing the skin of the patient to be tested, each a "Lancet") to be used in conjunction with the FreeStyle Products. Lancets obtained by Nipro shall meet mutually agreed upon specifications. 4.3 Product Packaging and Labeling. ------------------------------ 4.3.1 Strip Packaging and Labeling. Strips shall be delivered to ---------------------------- Nipro pursuant to Section 5.4 below, in a package, including without limitation vials or boxes, (the "Strip Package") containing the Strips together with an insert. Both the Strip Package and the insert shall be labeled as follows: "Manufactured by TheraSense" and "Distributed by Nipro" and shall carry both the TheraSense and Nipro logo (or at Nipro's prior reasonable notice and election, Nipro's name and logo shall be -9- *** Confidential treatment requested replaced by "Kissei"). Unless otherwise instructed by TheraSense in writing, Nipro shall deliver the Strips to its Customers only as part of an unopened Strip Package. 4.3.2 Product, Packaging and Labeling. Nipro shall be responsible for ------------------------------- packaging and labeling (including without limitation any final packaging and labeling), (i) each FreeStyle Product (other than the Strip Package) supplied to Nipro by TheraSense hereunder, (ii) the Lancets, and (iii) all printed materials to be inserted within or upon such packaging, in each case, subject to TheraSense's prior review and written approval, such approval not to be unreasonably withheld (the "Packaging Materials"). Once a particular Packaging Material has been approved by TheraSense, it may be used by Nipro without further approval from TheraSense. Nipro shall be also responsible for ensuring that all FreeStyle Products and Lancets are packaged and labeled in accordance with the requirements of all applicable regulatory authorities in Japan, including without limitation the requirements set forth by the Japan Ministry of Health and Welfare ("JMHW"). Except for the addition of information required by applicable laws and regulations, Nipro shall not re-label FreeStyle Products supplied to Nipro by TheraSense hereunder without the prior written consent of TheraSense. 4.4 Proprietary Notices. ------------------- 4.4.1 Marking. All FreeStyle Products and their Packaging Materials ------- distributed by Nipro in the Territory shall be marked with any appropriate patent number, TheraSense's name and trademarks ("Trademarks", as listed in Exhibit D) and the name of either Nipro or Kissei; provided, the Strips contained within the Strip Package shall only be marked with TheraSense's Trademark(s). FreeStyle Products and their Packaging Materials shall be marked with TheraSense Trademarks in at least equal prominence to Nipro's marks. Nipro, its Affiliates and its Subdistributors shall not remove, alter, cover or obfuscate any of the Trademarks or other proprietary rights notices placed or embedded by TheraSense on any FreeStyle Product or Strip Package or any of the items contained therein. TheraSense -10- reserves the right to modify the Trademarks or substitute alternative marks for any or all of the Trademarks at any time ***. In addition, Nipro agrees to use those Trademarks in connection with the FreeStyle Products as may be directed in writing by TheraSense. 4.4.2 Use. During the term of this Agreement, Nipro may indicate --- to the public that it is an authorized distributor of the FreeStyle Products and to advertise and promote to Customers (within the Territory) the FreeStyle Products under the Trademarks. 4.4.3 Approval of Representations. All representations of the --------------------------- Trademarks that Nipro intends to use shall first be submitted to TheraSense for approval (which shall not be unreasonably withheld) of design, color, and other details or shall be exact copies of those used by TheraSense. Nipro agrees to fully comply with all reasonable guidelines communicated by TheraSense concerning use of its Trademarks. Nipro may not mark the FreeStyle Products, the Strip Package or their Packaging Materials with the Trademarks of any third party, other than Kissei, without the prior written consent of TheraSense; which consent shall not be unreasonably withheld. If any of TheraSense's Trademarks are to be used in conjunction with another trademark on or in relation to the FreeStyle Products, Strip Package or their Packaging Materials, then the Trademarks shall be presented at least equally legibly, equally prominently, and of equal or greater size than the other but nevertheless separated from the other so that each appears to be a mark in its own right, distinct from the other mark. 4.4.4 Retained Rights. Nipro acknowledges that the requirement --------------- that the Trademarks appear on all packages and only in accordance with TheraSense's directions are intended to ensure that all of the goodwill created by the marketing and use of the FreeStyle Products in the Territory will accrue for the benefit of TheraSense and that all use of the Trademarks, and any goodwill associated therewith, shall inure to TheraSense. Nothing contained in this Agreement shall grant to Nipro any right, title or interest in the Trademarks, whether or not specifically recognized or perfected under applicable laws, and -11- *** Confidential treatment requested Nipro irrevocably assigns to TheraSense all such right, title, and interest, if any, in any Trademarks. Without limiting the foregoing, TheraSense shall retain the worldwide right to use such Trademarks for its own co-marketing efforts and for the distribution/sale of other products. At no time during or after the term of this Agreement shall Nipro challenge or assist others to challenge the Trademarks or the registration thereof or attempt to register any trademarks, marks or trade names confusingly similar to those of TheraSense. 5. TERMS OF PURCHASE OF FREESTYLE PRODUCTS BY NIPRO 5.1 Solicitation and Placement of Orders from Customers. Nipro shall --------------------------------------------------- be responsible for marketing and soliciting orders for FreeStyle Products from Customers in the Territory, in the Field of Use. 5.2 Terms and Conditions. All orders of FreeStyle Products by Nipro -------------------- from TheraSense during the term of this Agreement shall be subject to the terms of this Agreement. Nothing contained in any purchase order, order acknowledgement, or like document submitted by either party to the other shall in any way modify or add to the terms and conditions in this Agreement. 5.3 Forecasts. Beginning on the Effective Date and thereafter --------- by the end of each ***, Nipro shall provide to TheraSense a good faith, non- binding written forecast of the number of units of FreeStyle Products that Nipro expects to purchase in each *** over the following *** ("Forecasts"). Subject to Section 5.4 below, the parties acknowledge that the Forecasts are for TheraSense's planning purposes only and shall not be binding upon the parties. Nipro and TheraSense shall meet, by telephone or in person, no less frequently than *** to review Forecasts. 5.4 Order and Acceptance. On a month-to-month and FreeStyle -------------------- Product-by-FreeStyle Product basis, Nipro shall submit orders for units of FreeStyle Products so that such orders are received -12- *** Confidential treatment requested by TheraSense at least *** prior to its requested date of receipt of such units of FreeStyle Products. Unless otherwise mutually agreed, Nipro shall be obligated to purchase each month no less than *** of the amount of FreeStyle Products forecasted for such month in its current Forecast ("Binding Forecasts"). No order shall be binding upon TheraSense until accepted by TheraSense in writing but TheraSense agrees to accept Nipro's purchase orders for quantities of FreeStyle Products ordered by Nipro in a month up to *** of the Binding Forecast for such month. Once accepted by TheraSense, Nipro may cancel or reschedule purchase orders for FreeStyle Products only with TheraSense's prior written approval. Nipro will use commercially reasonable efforts to place orders for FreeStyle Products in an even and regular fashion so as to allow for efficient scheduling of FreeStyle Products production and warehousing. In the event TheraSense receives a purchase order less than *** in advance of the requested receipt date or for a quantity that is greater than *** of the Binding Forecast for a month, TheraSense will use commercially reasonable best efforts to ship such FreeStyle Products to Nipro on the date and in the quantity requested by Nipro; provided, TheraSense shall have no liability to Nipro with respect to such orders that do not meet the requirement of this Section 5.4 and are not accepted by TheraSense. 5.5 Shipping. All FreeStyle Products delivered pursuant to the terms -------- of this Agreement shall be suitably packed in TheraSense's standard shipping cartons, and marked for shipment at the address of Nipro, as provided in Nipro's purchase order, for delivery within ten (10) days (excluding weekends) to Nipro, FCA (Incoterms 2000) TheraSense's facility currently located at the address listed for TheraSense in Article 16 of this Agreement or such other location as TheraSense may designate (the "Shipping Location"), at which time risk of loss shall pass to Nipro. All expenses related to shipment from the United States to Japan, including without limitation, exportation and importation fees, customs duties and tariffs, freight, insurance, and other shipping expenses, as well as any special packing expense, shall -13- *** Confidential treatment requested be paid by Nipro. Nipro shall have the right to specify a carrier at the time it places its order but, if it does not do so, TheraSense may choose the mode of shipment and carrier. 5.6 Acceptance of FreeStyle Products. TheraSense shall certify that -------------------------------- each shipment of FreeStyle Products meets the product specifications listed in Exhibit E (the "Product Specifications"). Nipro shall have the right to inspect all FreeStyle Products promptly upon receipt thereof for conformance with the Product Specifications. Any FreeStyle Products not rejected by Nipro within thirty (30) days will be deemed accepted. TheraSense will, at its election, either repair or replace rejected defective FreeStyle Products within thirty (30) days of receipt thereof. In the event Nipro rejects any FreeStyle Products, Nipro shall be required to demonstrate that such product does not meet a commercially material specification set forth in Exhibit E. The warranty for such products shall continue independent of such acceptance or rejection. 6. WARRANTY 6.1 Warranty to Customer. Any warranty set forth in this Section 6.1 -------------------- shall run directly from TheraSense to Customers. Subject to this Section 6.1, TheraSense shall promptly replace any FreeStyle Product that does not meet one or more of its warranties. 6.1.1 Nipro Obligations. Nipro shall have responsibility for ----------------- handling Customer returns for non-conforming FreeStyle Products under the warranty. TheraSense shall refer all Customer warranty issues to Nipro for resolution. Nipro shall make no warranties with respect to any of the FreeStyle Products that exceed the warranty made by TheraSense. In the event TheraSense is unable to replace at its expense a faulty product, TheraSense's sole and exclusive liability and Nipro's exclusive remedy shall be to credit Nipro's account for Nipro's original landed cost for the FreeStyle Product or, in the case of Nipro packaged FreeStyle Product, the inventory value according to Nipro's inventory -14- accounting or, in the case of FreeStyle Products returned by a Customer, in accordance with Section 6.1.5. 6.1.2 TheraSense Limited Warranty. TheraSense warrants to --------------------------- Customers that upon delivery, FCA the shipping location, and during the warranty period for the FreeStyle Products, as set forth on the product label and/or insert (as provided by TheraSense), FreeStyle Products: (i) will meet the agreed upon Product Specifications as set forth in Exhibit E, (ii) will be free from defects in design, materials and workmanship, (iii) will be of merchantable quality and fit for the purpose for which they are intended, and (iv) will comply with all applicable laws in the place of manufacture. 6.1.3 Warranty Limitations. The warranties in Sections 6.1.1 and -------------------- 6.1.2 shall not apply to FreeStyle Products that have been modified or altered in any manner by anyone other than by or on behalf of TheraSense, or to defects caused (i) through no fault of TheraSense during shipment to or from Nipro; (ii) by the use or operation in an application or environment other than that intended or recommended by TheraSense; (iii) by service by anyone other than employees of, or persons approved in writing by, TheraSense; (iv) by accident, negligence, misuse, other than normal electrical stress, or other causes other than normal use; or (v) by storage, usage or handling in any manner inconsistent with the FreeStyle Products label provided by TheraSense. Replacement FreeStyle Products supplied under this warranty shall carry only the unexpired portion of the original warranty. TheraSense shall not be liable for misbranding with respect to any product labeling or package insert text provided or used by Nipro, or any translation thereof and TheraSense shall not be liable for any adulteration or failure to meet the Product Specifications due to handling or packaging of the FreeStyle Products by Nipro, its Affiliates, its Subdistributors or agents. 6.1.4 Exclusion of Other Warranties. EXCEPT FOR THE LIMITED ----------------------------- WARRANTIES PROVIDED IN SECTIONS 6.1.1, 6.1.2 AND 6.1.3 ABOVE, THERASENSE GRANTS NO OTHER -15- WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED, BY STATUTE, IN ANY COMMUNICATION WITH NIPRO OR ITS CUSTOMERS, OR OTHERWISE, REGARDING THE FREESTYLE PRODUCTS, AND THERASENSE SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, AND NONINFRINGEMENT. EXCEPT AS PROVIDED EXPRESSLY IN THIS AGREEMENT AND/OR THERASENSE'S WARRANTY, THERASENSE DOES NOT WARRANT THAT OPERATION OF THE FREESTYLE PRODUCTS WILL BE UNINTERRUPTED OR ERROR- FREE. THERASENSE NEITHER ASSUMES NOR AUTHORIZES ANY OTHER PERSON TO ASSUME ANY OTHER LIABILITIES ARISING OUT OF OR IN CONNECTION WITH THE SALE OR USE OF ANY FREESTYLE PRODUCT. ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ANY PERSON OR ENTITY, INCLUDING EMPLOYEES OR REPRESENTATIVES OF THERASENSE, THAT ARE INCONSISTENT HEREWITH SHALL BE DISREGARDED AND SHALL NOT BE BINDING UPON THERASENSE OR ITS THIRD PARTY SUPPLIERS. 6.1.5 Limitation of Liability. THERASENSE'S LIABILITY UNDER ITS ----------------------- CUSTOMER WARRANTY SHALL BE LIMITED TO A REFUND OF THE CUSTOMER'S PURCHASE PRICE TO NIPRO, IN WHICH CASE NIPRO WILL REFUND SUCH AMOUNT TO THE CUSTOMER, AND A REFUND OF NIPRO'S SHIPPING COSTS WITH RESPECT TO THE DEFECTIVE FREESTYLE PRODUCT. IN NO EVENT SHALL THERASENSE BE LIABLE TO NIPRO OR ANY THIRD PARTY FOR LOST PROFITS, THE COST OF PROCUREMENT OF SUBSTITUTE GOODS BY THE CUSTOMER, OR FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES FOR BREACH OF WARRANTY. THIS LIMITATION SHALL APPLY EVEN WHERE THERASENSE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE AND NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED REMEDY STATED HEREIN. -16- 6.2 Representation and Warranties by and between Nipro and TheraSense. ----------------------------------------------------------------- 6.2.1 Warranty to TheraSense. Nipro represents and warrants to ---------------------- TheraSense that: (i) it is a corporation duly organized validly existing and in good standing under the laws of Japan; (ii) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of Nipro. 6.2.2 Warranty to Nipro. TheraSense represents and warrants to ----------------- Nipro that: (i) it is a company duly organized validly existing and in good standing under the laws of the State of Delaware; (ii) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of TheraSense; (iii) it has the right to grant Nipro the exclusive distribution rights in the Territory as specified in Section 2.1.1 and, to the best of its knowledge, it has the right to grant the other rights granted herein; and (iv) subject to Sections 6.1.3 and 6.1.4, upon delivery, FCA the Shipping Location, the Freestyle Products will (a) meet the agreed upon Product Specifications as set forth in Exhibit E, (b) will be free from defects in manufacturing, materials and workmanship, (c) will be of merchantable quality and fit for the purpose for which they are intended, and (d) will comply with all applicable laws in the place of manufacture. 7. ADVERTISING, MARKETING AND PROMOTION 7.1 Advertising and Promotions. Nipro, its Affiliates and -------------------------- Subdistributors shall bear all expenses associated with the marketing, sales and customer support of the FreeStyle Products in the Territory. Promptly upon receipt of all necessary Approvals (as defined in Section 8.1), Nipro shall, at its own expense, (i) use commercially reasonable efforts to promote the sale and distribution of the FreeStyle Products to Customers in the Territory, and (ii) use commercially reasonable efforts to realize the maximum sales potential for the FreeStyle Products to Customers in the Territory. Such commercially reasonable efforts by Nipro may include without limitation the following: -17- (a) maintenance of an adequate and experienced sales force; (b) dedication of sufficient product and project management, marketing and customer support resources to pursue the market opportunities for the product in the Territory; (c) the preparation of promotional aids and materials; (d) the translation of clinical, technical, packaging, advertising, and promotional materials into the primary language(s) within the Territory; provided, however, that TheraSense shall own all rights in and to such translations, subject to the Translation Repayment (as defined in Section 7.2.2 below); (e) advertising the FreeStyle Products in professional and consumer publications within the Territory; (f) participating in congresses, symposia, and exhibitions within the Territory; (g) systematically identifying and targeting key customers and making sales calls on such customers within the Territory. (h) sponsoring technical papers and presentations. (i) organization of user panels to provide insight into customer decision making. In addition to the foregoing, Nipro shall (i) use reasonable efforts, at its own expense, to maintain a sufficient inventory of FreeStyle Products and to fulfill forecast demand for FreeStyle Products within -18- the Territory; and (ii) act so as to establish and maintain a favorable reputation of the FreeStyle Products and marks in the Territory. 7.2 Nipro Materials. --------------- 7.2.1 Nipro Materials. Nipro shall provide to TheraSense for --------------- purposes of review, comment and approval by TheraSense, English language translations of any and all promotional, advertising and educational materials and programs, package data sheets, and other literature relating to the FreeStyle Products at least fifteen (15) days prior to the commercial release of such materials or commencement of such programs for the purpose of: (i) enabling TheraSense to comply with regulations applicable to such materials; and (ii) ensuring that such materials correspond with TheraSense's product policies. 7.2.2 Effect of Termination. It is recognized that Nipro shall --------------------- experience significant expenses related to the translation of materials for clinical, technical, packaging, advertising, and promotional reasons. Upon expiration or any termination of this Agreement. TheraSense shall have all rights to take over and use the translations made by Nipro, and Nipro shall fully cooperate with TheraSense to make such translations available for the free and full use by TheraSense or its agent, subject to the following: (a) in the event this Agreement is terminated by Nipro due to TheraSense's material breach, or in the event TheraSense elects not to extend the term of this Agreement pursuant to Section 12.1.2, or in the event TheraSense terminates this Agreement for Nipro's failure to meet the Annual Minimum Purchase Obligations (as defined in Section 8.5) in any year, TheraSense shall pay Nipro the cost of such translations, up to a maximum amount of *** (the "Translation Repayment"), as evidenced by copies of the invoices for such translation which Nipro will provide TheraSense no later than six (6) months from the Effective Date; or -19- *** Confidential treatment requested (b) in the event this Agreement is terminated by TheraSense due to Nipro's material breach, or in the event Nipro elects not to extend the term of this Agreement pursuant to Section 12.1.2, TheraSense shall have no obligation to pay the Translation Repayment. 7.3 TheraSense Collaboration. TheraSense will collaborate with Nipro ------------------------ in the development of all marketing and promotional materials. TheraSense will, at its own expense, provide Nipro with: 7.3.1 such marketing and technical assistance and promotional materials (in English) as TheraSense may in its reasonable discretion consider necessary to assist with the promotion of the FreeStyle Products; 7.3.2 training for Nipro's personnel in connection with the marketing, sale, installation, maintenance and support of the FreeStyle Products during the *** period following the Effective Date; provided, TheraSense's personnel shall spend no more than *** of their time per *** in providing such training unless the parties agree to provide additional training; 7.3.3 reasonable access to TheraSense support personnel by Nipro's support personnel to assist Nipro in providing customer support. 8. ADDITIONAL OBLIGATIONS OF NIPRO 8.1 Registrations, Licenses and Permits. ----------------------------------- 8.1.1 If and as required from time to time under the laws of the Territory, Nipro, at Nipro's expense, shall perform clinical trials and obtain all registrations, licenses, permits, import approvals, reimbursement approvals, and other legal or administrative items required to comply with the laws and regulations of the Territory for importation, sale and distribution of the FreeStyle Products, and gain reimbursement for such sales (collectively "Approvals"). Nipro shall provide to TheraSense, for -20- *** Confidential treatment requested TheraSense's unrestricted use, complete copies of all clinical trials, protocols, data, analyses and other information, as well as applications, and all registrations, licenses, permits, and approval obtained therefrom relating to the FreeStyle Products. 8.1.2 TheraSense will provide Nipro with all information, data, materials and product samples in its possession necessary to obtain Approvals. In the event that disclosure of TheraSense trade secrets are required for the Approvals, TheraSense will provide such trade secret information directly to the Japan regulatory authorities. 8.1.3 All Approvals will be in Nipro's name unless otherwise agreed by the parties or required by law. Upon the expiration, cancellation, or termination of this Agreement, Nipro shall transfer such Approvals to TheraSense or TheraSense's agent so that TheraSense will be able to continue to sell FreeStyle Products and be reimbursed for FreeStyle Products in the Territory, subject to the following: (a) in the event this Agreement is terminated by Nipro due to TheraSense's material breach, or in the event TheraSense elects not to extend the term of this Agreement pursuant to Section 12.1.2, or in the event TheraSense terminates this Agreement for Nipro's failure to meet the Annual Minimum Purchase Obligations in any year, TheraSense shall pay Nipro *** to compensate Nipro for the direct expenses paid by Nipro to obtain and transfer such Approvals (the "Approval Compensation"); or (b) in the event this Agreement is terminated by TheraSense due to Nipro's material breach, or in the event Nipro elects not to extend the term of this Agreement pursuant to Section 12.1.2, TheraSense shall have no obligation to pay the Approval Compensation. -21- *** Confidential treatment requested 8.2 Health and Safety Laws and Regulations. In performing its -------------------------------------- obligations under this Agreement, Nipro shall comply fully with any and all applicable health and safety laws and regulations of the Territory as they relate to the FreeStyle Products. In addition, Nipro shall monitor the appropriate information sources closely for changes in such laws and regulations, and other requirements in the Territory relating to the distribution of the FreeStyle Products in the Territory, and notify TheraSense promptly in writing of any and all such changes. 8.3 Sales and Inventory Records. Nipro agrees to maintain a sales and --------------------------- inventory record showing, at a minimum, date sold, quantity, serial number or lot number, shipment information, and the buyers' names and addresses of each of the FreeStyle Products sold, as well as the quarter-end inventory position on hand for each of the FreeStyle Products. Such records shall be kept at Nipro's principal place of business for at least three (3) years following the end of the calendar quarter to which they pertain. This information shall be made available to TheraSense at TheraSense's request solely to satisfy ISO certification, regulatory, and/or administrative requirements. 8.4 Sales Reports. At the end of each calendar quarter, Nipro will ------------- provide TheraSense with a quarterly report including the following information: (a) monthly net sales in units of Meters to Customers in the Territory; (b) monthly net sales in units of Strips to Customers in the Territory (c) monthly net sales in Yen of FreeStyle Products other than Meters and Strips to Customers in the Territory; (d) reporting of monthly Meter placements (units) made free of charge to Customers; -22- Nipro shall also include in this quarterly report a description of any developments regarding the market, competitors, government authorities, or other material developments which Nipro judges to be of importance to the success of FreeStyle Products, or otherwise important for TheraSense to know. 8.5 Annual Minimum Purchase Obligations. Nipro shall purchase no less ----------------------------------- than the amount of Strips listed on Exhibit C for sale in the Territory in each calendar year (the "Annual Minimum Purchase Obligations"). TheraSense shall have the right, at its option, to terminate this Agreement for cause pursuant to Section 12.2 hereof, in the event that (i) Nipro fails to meet the Annual Minimum Purchase Obligation of Strips in any year; or (ii) Nipro fails to *** at least *** of the Annual Minimum Purchase Obligation in any year beginning in ***. 8.6 Books and Records. At TheraSense's request, Nipro, its Affiliates, ----------------- and its Subdistributors agree to furnish a full and detailed statement of such party's business and operations (but only to the extent it relates to the Nipro relationship created hereby), including, without limitation, any and all sales and inventory records required to be kept pursuant to this Agreement, but solely to satisfy ISO certification, regulatory, and/or administrative requirements. 8.7 Business Review; Semi-Annual Business Plans. ------------------------------------------- 8.7.1 Semi-Annual Business Plans. TheraSense and Nipro shall meet, -------------------------- in person, no less frequently than once every six months to review Nipro's business plan for marketing and distributing the FreeStyle Products in the Territory. Such business plan shall include, without limitation, promotion strategy and tactics, and sales and other marketing plans. TheraSense shall have the right to review and comment on such business plan. -23- *** Confidential treatment requested 8.7.2 Business Review. The parties will meet at least annually to --------------- review developments in the marketplace, including pricing, competitive developments, regulatory and administrative changes, and other factors important to success of the FreeStyle Products in the Territory. 8.8 Customer Support. Nipro shall maintain knowledgeable sales, ---------------- marketing, and support personnel to provide instructions to Customers in the Territory in the use of the FreeStyle Products. Upon Nipro's request, TheraSense shall provide a reasonable level of assistance with technical information and training of Nipro and Kissei employees for the FreeStyle Products. Any expenses related to such activities shall be borne by Nipro. 8.9 Medical Device Reporting. ------------------------ 8.9.1 Reporting. Pursuant to governmental medical device reporting --------- regulations (e.g. the FDA's Medical Device Reporting (MDR) Regulations, the European Medical Device Vigilance Guidelines, and any other applicable medical device reporting regulations in Japan), TheraSense is required to report to the applicable agency information that reasonably suggests that the FreeStyle Products may have caused or contributed to a death or serious injury or has malfunctioned and that the device would be likely to cause or contribute to a death or serious injury if the malfunction were to recur. Each of TheraSense and Nipro agree to supply to the other any such information promptly after becoming aware of it so that each of TheraSense and Nipro can comply with governmental reporting requirements. 8.9.2 Recall Cooperation. In the event of any potential recall of ------------------ FreeStyle Product in the Territory, Nipro will consult with TheraSense as to the actions which shall be taken with respect to Customers and with respect to government authorities in implementing such recall, including without limitation, in locating, and retrieving if necessary, recalled FreeStyle Products from Customers. Nipro and TheraSense shall reach agreement on such actions prior to the product recall implementation; -24- provided, neither party shall unreasonably withhold agreement to such actions, and the parties shall observe all legal and regulatory requirements which apply to such recall. 8.9.3 Recall Expenses. In the event of a recall of a FreeStyle --------------- Product, whether required or voluntary, the recall shall be at Nipro's cost and expense in the Territory and at TheraSense's cost and expense outside the Territory. Notwithstanding the foregoing, in the event that a recall is primarily due to a manufacturing defect in the FreeStyle Products which requires the replacement of FreeStyle Products, then TheraSense shall provide to Nipro replacement FreeStyle Products free of charge. 8.9.4 Records. Nipro shall maintain records of sales of FreeStyle ------- Products by lot number and by third-party (including without limitation distributors, wholesalers, and retailers) to whom such product was sold or otherwise transferred. Upon TheraSense's request, Nipro shall provide TheraSense with access to such records in the event of a FreeStyle Products recall or other quality related issue. Nipro shall be responsible for obtaining all records of its sales to end users in the event of a FreeStyle Products recall or other quality related issue. Nipro shall make available to TheraSense for inspection Nipro's process and records for adverse event and other regulatory reporting purposes at mutually agreed upon times and further shall ensure that Nipro's processes comply with all applicable laws and regulations in the Territory. 8.10 Product Complaints. Nipro shall promptly investigate and monitor ------------------ all Customer and/or regulatory complaints and/or correspondence concerning the use of the FreeStyle Products in the Territory. Nipro shall use commercially reasonable efforts to advise TheraSense of all complaints alleging patient injury promptly, if possible within twenty four (24) hours, but not more than five (5) days business days following the date Nipro receives such complaint, and of all other complaints relating to the FreeStyle Products as promptly as possible but not more than five (5) business days following the date Nipro receives such complaint. In addition, within fifteen (15) calendar days following the date -25- Nipro receives such complaint, Nipro shall also provide TheraSense with a materially complete written report relating thereto. Any notice to TheraSense under this Section 8.10 shall be sent via facsimile and overnight delivery service to the attention of TheraSense's Vice President of Regulatory Affairs or to such other address or person as TheraSense may designate by notice. 8.11 Notification of Unauthorized Use. Nipro shall promptly notify -------------------------------- TheraSense in writing upon its discovery of any unauthorized use or infringement of the FreeStyle Products and/or TheraSense's patent, copyright, trademark or other intellectual property rights with respect thereto. TheraSense shall have the sole and exclusive right to bring an infringement action or proceeding against a third party, but TheraSense shall use its commercially reasonable judgment in determining its enforcement actions. In the event that TheraSense brings such an action or proceeding, Nipro shall provide commercially reasonable cooperation and provide commercially reasonable information and assistance to TheraSense and its counsel in connection with any such action or proceeding; provided that TheraSense shall reimburse Nipro for any direct costs (such as reasonable attorney's fees) incurred by Nipro. 8.12 Nipro Improvements. ------------------ 8.12.1 In the event that Nipro makes a commercially important improvement to the FreeStyle Products (an "Improvement"), then TheraSense shall have a "right of first refusal" to negotiate the rights to such improvement on commercially reasonable terms. For purposes of clarity, examples of Improvements would include without limitation: ***. 8.12.2 Prior to offering an Improvement to a third party, Nipro shall offer the Improvement to TheraSense by providing TheraSense with at least the same level of information that -26- *** Confidential treatment requested Nipro would provide to any third party. TheraSense shall have *** to review such information and provide written notification to Nipro regarding its decision to enter into negotiations for the right to such Improvement. If written notice is given that TheraSense does not want to enter into negotiations for a license, or written notice is not given by TheraSense within said *** period, TheraSense will have waived its right of first refusal to license the applicable Improvement, and Nipro will be free to license such Improvement to any third party without further obligation to TheraSense. If TheraSense provides written notice of its desire to enter into negotiations, the parties shall have a *** period from the date of TheraSense's notice to Nipro to conclude a definitive license agreement in good faith with respect to the applicable Improvement. If the parties cannot conclude an agreement in said *** timeframe, and do not mutually agree to extend such negotiation period, Nipro shall be free to license such Improvement to any third party, as long as the terms of such license are not materially better than those offered to TheraSense. 9. ADDITIONAL OBLIGATIONS OF THERASENSE 9.1 Supply of Products. TheraSense shall be responsible for the ------------------ manufacture of FreeStyle Products for sale to Nipro. 9.2 Telephone Marketing and Technical Support. During TheraSense's ----------------------------------------- normal business hours, TheraSense shall provide, in English, a reasonable level of telephone marketing and technical support to employees of Nipro who have been trained by TheraSense to answer Nipro's questions related to FreeStyle Products. 9.3 Intellectual Property Rights Maintenance. ---------------------------------------- 9.3.1 Patent and Trademark Prosecution. TheraSense will be -------------------------------- responsible for maintaining all patents, Trademarks and trade names and/or diligently prosecuting all patent applications -27- *** Confidential treatment requested covering the FreeStyle Products in the Territory. TheraSense shall use its reasonable commercial judgment in determining the level and extent of patent protection to pursue in the Territory. 9.3.2 Remedies for Injunction. If sale of the FreeStyle Products in ----------------------- the Territory is enjoined due to any third party claim that the FreeStyle Products or the trademark infringe the intellectual property rights of the third party, then TheraSense may at its option and expense, (i) procure a license for Nipro to continue selling FreeStyle Products, (ii) replace or modify the FreeStyle Products to render them non-infringing; or (iii) if it is not commercially reasonable to take the actions specified in items (i) and (ii), terminate this Agreement with *** written notice to Nipro and repurchase from Nipro the FreeStyle Products in Nipro's inventory as of the date of such termination at Nipro's fully landed cost of such FreeStyle Products; provided, however, that in such event, solely for purposes of Section 12.6.2, the date of termination shall be considered to be the date the injunction is effective (as such date may be extended by any stay or appeal of such injunction). 10. CONFIDENTIALITY 10.1 Except as expressly provided herein, the parties agree that for five (5) years after the disclosure of any Confidential Information by one (1) of the parties to the other hereto pursuant to this Agreement, the receiving party shall keep completely confidential and shall not publish or otherwise disclose and shall not use for any purpose except for the purposes contemplated by this Agreement such Confidential Information, except that to the extent that it can be established by the receiving party by competent proof that such Confidential Information: (a) was already known to the receiving party, other than under an obligation of confidentiality, at the time of disclosure; (b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving party; -28- *** Confidential treatment requested (c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving party in breach of this Agreement; (d) was independently developed by the receiving party as demonstrated by documented evidence prepared contemporaneously with such independent development; or (e) was subsequently lawfully disclosed to the receiving party by a person other than a party hereto. 10.2 Permitted Use and Disclosures. Each party hereto may use or ----------------------------- disclose information disclosed to it by the other party to the extent such use or disclosure is reasonably necessary in complying with applicable governmental regulations or otherwise submitting information to tax or other governmental authorities, conducting clinical trials, or otherwise exercising its rights hereunder, provided that if a party is required to make any such disclosure of another party's confidential information, other than pursuant to a confidentiality agreement, it will give reasonable advance notice to the latter party of such disclosure and, except to the extent inappropriate in the case of patent applications, will use its best efforts to secure confidential treatment of such information prior to its disclosure (whether through protective orders or otherwise). 10.3 Public Disclosure. Except as otherwise required by law, neither ----------------- party shall issue a press release or make any other public disclosure of the terms of this Agreement without the prior approval of such press release or public disclosure. Each party shall submit any such press release or public disclosure to the other party, and the receiving party shall have ten (10) business days to review and approve any such press release or public disclosure, which approval shall not be unreasonably withheld. If the receiving party does not respond in writing within such ten (10) business day period, the press release or public disclosure shall be deemed approved. -29- 10.4 Confidential Terms. Except as expressly provided herein, each party ------------------ agrees not to disclose any terms of this Agreement to any third party without the consent of the other party; provided, disclosures may be made as required by securities or other applicable laws, or on a strict need to know basis to actual or prospective investors, or to a party's accountants, attorneys and other professional advisors; provided further, however, prior to making any disclosure regarding securities or other applicable laws, the terms of this Agreement shall be redacted by mutual agreement of the parties. 11. INDEMNITY; INSURANCE; LIMITATION OF LIABILITY 11.1 Indemnification of Nipro. ------------------------ 11.1.1 TheraSense shall indemnify, defend, and hold harmless Nipro and its directors, officers and employees (each an "Nipro Indemnitee") from and against any and all liabilities, damages, losses, costs or expenses (including attorneys' and professional fees and other expenses of litigation and/or arbitration) (a "Liability") resulting from a claim, suit or proceeding made or brought by a third party against a Nipro Indemnitee arising from defects in materials, workmanship, design or packaging of the FreeStyle Products, except for matters for which Nipro is to indemnify TheraSense pursuant to Section 11.2.1. 11.1.2 TheraSense shall defend, or at its option settle, any claims brought against Nipro by third parties as a result of any infringement by the FreeStyle Products of any U.S. or foreign patent, trade name, trademark, service mark or copyright existing under the laws of the Territory, and shall reimburse Nipro for any judgments, damages, cost or expenses payable by Nipro to a party bringing such action together with reasonable attorneys' fees relating thereto. If the FreeStyle Products, or any part thereof, are, or in the opinion of TheraSense become, the subject of any claim for infringement of such third party patent, trademarks, or copyrights, or if it is adjudicatively determined that the FreeStyle Products, or any part thereof, infringe any such third party patent trademark, or copyright, then -30- TheraSense may, at its option and expense, either (i) procure for Nipro the right under such third party patent, trademark or copyright to sell or use, as appropriate, the FreeStyle Products (or in the case of trademark infringement, substitute a different trademark) or (ii) replace or modify the FreeStyle Products or parts thereof in Nipro's possession, with other suitable and reasonably equivalent technology or parts so that the FreeStyle Products become non-infringing or (iii) if it is not commercially reasonable to take the actions specified in items (i) or (ii) immediately preceding, terminate this Agreement with ninety (90) days written notice. 11.1.3 Notwithstanding the provisions of Section 11.1.2 above, TheraSense assumes no liability for (i) infringements relating to any assembly, circuit, combination, method or process made by anyone other than by or on authority of TheraSense in which any of the FreeStyle Products may be used where the FreeStyle Products when used alone would not result in such an infringement; (ii) infringements involving the modification or servicing of the FreeStyle Products, or any part thereof, done by anyone other than by or on authority of TheraSense unless such modification or servicing was done by TheraSense; (iii) any trademark infringements involving any marking or branding of the FreeStyle Products not applied by TheraSense or at the request of TheraSense or involving any marking or branding applied at the request of Nipro or any marking or branding with Nipro or Kissei's trademarks; or (iv) modification of any FreeStyle Products other than with TheraSense's written consent. 11.1.4 The foregoing provisions of this Section 11.1 state the entire liability and obligations of TheraSense, and the exclusive remedy of Nipro and its Customers, with respect to any alleged product liability claim or other matter covered by Section 11.1.1 related to the FreeStyle Products, or any alleged infringement of any patents, copyrights, trademarks or other intellectual property rights by the FreeStyle Products or any part thereof. -31- 11.2 Indemnification of TheraSense. ----------------------------- 11.2.1 Nipro shall indemnify, defend and hold harmless TheraSense and its directors, officers, employees and agents and the successors and assigns of any of the foregoing (each a "TheraSense Indemnitee") from any and all claims, losses, costs, liabilities or expenses (including, without limitation, attorneys' fees and other expenses of litigation) (a "Liability") resulting from a claim, suit or proceeding made or brought by a third party against a TheraSense Indemnitee arising out of (a) defects in the FreeStyle Products sold by Nipro resulting from any action of Nipro, its Affiliates and their Subdistributors, (b) FreeStyle Products claims, whether written or oral, made by Nipro in its advertising, promotion, sale, or distribution of any of the FreeStyle Products beyond those made by TheraSense, (c) the labeling, packaging, storage or other handling, distribution or sale of the FreeStyle Products by Nipro, its Affiliates or its Subdistributors except to the extent required by TheraSense pursuant to this Agreement, or (d) any claim alleging noncompliance by Nipro with Japan laws and regulations in the Territory which are equivalent to the U.S. FDC&A. 11.2.2 Nipro shall defend, or at its option settle, any claims brought against TheraSense by third parties as a result of any infringement by the FreeStyle Products of any U.S. or foreign trademark, trade name, or service mark existing under the laws of the Territory, and shall reimburse TheraSense for any judgments, damages, cost or expenses payable by TheraSense to a party bringing such action together with reasonable attorneys' fees relating thereto as a result of marking or branding the FreeStyle Products with Nipro trademarks. If the FreeStyle Products, or any part thereof, are, or in the opinion of Nipro become, the subject of any claim for infringement of such third party trademarks, trade names or service marks, or if it is adjudicatively determined that the FreeStyle Products, or any part thereof, infringe any such third party trademarks, trade names or service marks, Nipro may substitute a new Nipro trademark, trade name or service mark to be used to sell or use, as appropriate, the FreeStyle Products. -32- 11.2.3 The foregoing provisions of this Section 11.2 state the entire liability and obligations of Nipro, and the exclusive remedy of TheraSense, with respect to any product liability or other matter covered by Section 11.2.1 or any alleged infringement of any trademarks, trade names or service marks by the FreeStyle Products or any part thereof. 11.3 Indemnification Procedure. A party that intends to claim ------------------------- indemnification (the "Indemnitee") under this Article 11 shall promptly notify the other party (the "Indemnitor") in writing of any claim, complaint, suit, proceeding or cause of action with respect to which the Indemnitee intends to claim such indemnification (for purposes of this Section 11.3, each a "Claim"), and the Indemnitor shall have sole control of the defense and/or settlement thereof; provided that the Indemnitee shall have the right to participate, at its own expense, with counsel of its own choosing in the defense and/or settlement of such Claim. The indemnification obligations of the parties under this Article 11 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the consent of the Indemnitor, which consent shall not be withheld or delayed unreasonably. The failure to deliver written notice to the Indemnitor within a reasonable time after the commencement of any such Claim shall relieve the Indemnitor of its liability to the Indemnitee under this Article 11, only to the extent that the failure is prejudicial to its ability to defend such action, but the omission so to deliver written notice to the Indemnitor shall not relieve the Indemnitor of any liability to any Indemnitee otherwise than under this Article 11. The Indemnitee under this Article 11, and its employees, at the Indemnitor's request and expense, shall provide full information and reasonable assistance to Indemnitor and its legal representatives with respect to such Claims covered by this indemnification. It is understood that only Nipro may claim indemnity under this Article 11 (on its own behalf or on behalf of an Nipro Indemnitee), and other Nipro Indemnitees may not directly claim indemnity hereunder. Likewise, it is understood that only TheraSense may claim indemnity under this Article 11 (on its own behalf or on -33- behalf of a TheraSense Indemnitee), and other TheraSense Indemnitees may not directly claim indemnity hereunder. 11.4 Insurance. During the term of this Agreement, each party shall --------- maintain liability insurance policies, including without limitation, product liability insurance coverage, in commercially adequate amounts. TheraSense's policy shall name Nipro as an additional insured and contain an endorsement to provide Nipro with at least thirty (30) days prior written notice of any cancellation or nonrenewal of such policy. Each party shall furnish to the other party copies of such policies. 11.5 LIMITED LIABILITY. ----------------- 11.5.1 EXCEPTING THE PROVISIONS OF SECTION 12.6.2, THERASENSE'S LIABILITY ARISING OUT OF THIS AGREEMENT, THE TERMINATION THEREOF, AND/OR SALE OF THE FREESTYLE PRODUCTS SHALL BE LIMITED TO THE AMOUNT OF TEN MILLION DOLLARS (USD $10,000,000). 11.5.2 IN NO EVENT SHALL THERASENSE OR NIPRO BE LIABLE TO THE OTHER OR ANY OTHER ENTITY FOR LOST PROFITS, OR ANY OTHER SPECIAL, CONSEQUENTIAL, OR INCIDENTAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY ARISING OUT OF THIS AGREEMENT, OR ANY TERMINATION THEREOF, WHETHER BASED IN CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE. THESE LIMITATIONS SHALL APPLY WHETHER OR NOT THERASENSE OR NIPRO HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN OR IN THE WARRANTY FOUND IN THE FREESTYLE PRODUCTS. -34- 12. TERM AND TERMINATION 12.1 Initial Term. ------------ 12.1.1 Initial Term. The initial term of this Agreement shall ------------ commence on the Effective Date and shall continue in force until five (5) years from the Effective Date, unless terminated earlier under the provisions of this Article 12 (the "Initial Term"). 12.1.2 Extended Term. Beginning in fourth (4th) year of this ------------- Agreement, and each year thereafter, the term of this Agreement may be extended by up to an additional three (3) years (each an "Extended Term") as follows: (a) At any time during the last three (3) months of the fourth (4th) year, either party may notify the other party that it would like to extend the term by an additional rolling three (3) years (i.e. to add years 6, 7, and 8 to the initial five (5) years). The parties shall then meet and agree to the Annual Minimum Purchase Obligation of Strips that shall apply for each additional year. If the parties so agree, this Agreement shall be so extended. (b) Provided that the parties agreed to extend this Agreement at the end of the fourth (4th) year and this Agreement is then still in effect, during the last three (3) months of any subsequent year, the parties may meet to extend the term by an additional rolling three (3) years (e.g., in the last three (3) months of the fifth (5th) year, the parties may agree to add years 7, 8 and 9, and so forth). During any Extended Term, all the terms of this Agreement shall apply, including without limitation Section 8.5. (c) Notwithstanding anything to the contrary, neither party is obligated to agree on a new Annual Minimum Purchase Obligation of Strips; provided, however, that if the parties are unable to agree on such new Annual Minimum Purchase Obligation for the extension years prior to -35- the end of the three (3) month period, TheraSense shall be free to enter into a distribution agreement with any third party following termination of this agreement but only if the new agreement contains annual minimum purchase obligations greater than those offered to and rejected by Nipro prior to the end of the three (3) month period. 12.2 Termination for Cause. If either party defaults in the --------------------- performance of any provision of this Agreement, then the non-defaulting party may give written notice to the defaulting party that if the default is not cured within ninety (90) days the Agreement will be terminated. If the non-defaulting party gives such notice and the default is not cured during the ninety (90) day period, then the Agreement shall automatically terminate at the end of that period. In addition, this Agreement shall automatically terminate if Nipro fails to pay TheraSense in accordance with Sections 3.1 or 3.2 and such failure shall have continued for thirty (30) days after written notice thereof was provided to Nipro by TheraSense. 12.3 Termination for Insolvency. This Agreement may be terminated by -------------------------- either party effective immediately upon written notice (i) upon the institution by or against the other party of insolvency, receivership or bankruptcy proceedings or any other proceedings for the settlement of the other party's debts under United States, California or Japan law, (ii) upon the other party's making an assignment for the benefit of creditors, or (iii) upon the other party's dissolution or ceasing to do business. 12.4 Termination Relating to ***. --------------------------- 12.4.1 ***. TheraSense may, at its sole discretion, terminate --- this Agreement with *** notice if Nipro (i) shall directly or indirectly ***, or otherwise ***, or (ii) ***, without TheraSense's prior written consent. -36- *** Confidential treatment requested 12.4.2 ***. Should Nipro decide to make a ***, or sell a ***, --- it shall so notify TheraSense in writing not later than *** prior to the first ***. Nipro's obligation to provide such notice, shall survive termination of this Agreement by TheraSense pursuant to Section 12.2 or Section 12.4.1. 12.5 Termination Relating to Sales Outside Territory. ----------------------------------------------- 12.5.1 In addition to any other rights or remedies available to TheraSense, TheraSense shall have the right to terminate this Agreement upon thirty (30) days prior written notice to Nipro if Nipro is selling the FreeStyle Products in commercial quantities, (i) for delivery outside the Territory or (ii) with knowledge that the FreeStyle Products are being purchased for use or resale outside the territory, unless Nipro cures such breach within such thirty (30) day period. 12.5.2 In the event either TheraSense or Nipro become aware that any Nipro Affiliate or Subdistributor (including without limitation distributors, wholesalers, and retailers) has directly or indirectly resold or reshipped any of the FreeStyle Products outside the Territory in commercial quantities, it shall notify the other party in writing. In the event that either of the parties determine that such Nipro Affiliate or Subdistributor (including without limitation distributors, wholesalers, and retailers) knew or should have known that such FreeStyle Products were ultimately being resold or reshipped outside the Territory, it shall notify the other party and Nipro shall take all necessary action to stop such activities, including without limitation terminating the right of such third party to distribute and sell FreeStyle Products, in accordance with its agreement with the Subdistributor. -37- *** Confidential treatment requested 12.6 Effect of Termination. --------------------- 12.6.1 Accrued Obligations. Expiration or termination of this ------------------- Agreement for any reason shall not release any party hereto from any liability which, at the time of such termination, has already accrued to the other party or which is attributable to a period prior to such termination nor preclude either party from pursuing any rights and remedies it may have hereunder or at law or in equity with respect to any breach of this Agreement. It is understood and agreed that monetary damages may not be a sufficient remedy for any breach of this Agreement and that the non-breaching party may be entitled to injunctive relief as a remedy for any such breach. Such remedy shall not be deemed to be the exclusive remedy for any such breach of this Agreement, but shall be in addition to all other remedies available at law or in equity. 12.6.2 Signature Payment. If during the Initial Term, ----------------- TheraSense terminates this Agreement pursuant to Section 9.3.2 or 11.1.2, or Nipro terminates this Agreement pursuant to Section 12.2 due to TheraSense's material breach, TheraSense shall repay to Nipro a portion of the Signature Payment paid by Nipro to TheraSense pursuant to Section 3.1 as follows: (a) immediately prior to the effective date of Termination the parties shall determine the number of full years remaining in the Initial Term; and (b) for each full year remaining in the Initial Term, TheraSense shall repay to Nipro Five Hundred Thousand Dollars (USD $500,000). (c) Except as provided for in this Section 12.6.2, TheraSense shall have no obligation to repay any of the Signature Payment to Nipro. 12.6.3 Approvals. Upon any termination or expiration of this --------- Agreement, Nipro shall (and shall ensure that its Affiliates and Subdistributors shall): (i) assign to TheraSense all right, title and -38- interest to the Approvals (as defined in Section 8.1), and (ii) execute those documents, as reasonably requested by TheraSense, necessary to document and/or perfect the assignment of such registrations, approvals and government authorizations. TheraSense shall have the exclusive right to use all such registrations, licenses or permits upon expiration or termination of this Agreement for any reason. In the event that the Approvals cannot be transferred to TheraSense or its designated agent in time for the uninterrupted continuation of sales of FreeStyle Product in the Territory, Nipro shall cooperate with TheraSense to assure continued supply until such time as Approvals are transferred so as to allow continued FreeStyle Product supply. 12.6.4 Inventory. Within twenty (20) days after the effective --------- date of termination of this Agreement, Nipro shall use its reasonable efforts to provide TheraSense with a complete inventory of FreeStyle Products in Nipro's possession, in transit to Nipro from TheraSense or otherwise in Nipro's control. Upon any expiration or other termination of this Agreement, TheraSense may inspect Nipro's FreeStyle Products inventory and audit Nipro's records. 12.6.5 Products. Upon termination of this Agreement, TheraSense -------- shall have the option, at its sole discretion, to repurchase or have purchased by its agent, all or part of Nipro or sub-distributor inventories of saleable FreeStyle Product. In such case, TheraSense or its agent shall pay Nipro its original landed cost for the Product so repurchased, or in the case of Nipro packaged FreeStyle Product, the inventory value of such repurchased goods according to Nipro's inventory accounting. 12.6.6 Return of Materials. All of TheraSense's trademarks, ------------------- marks, trade names, patents, and copyrights, and all designs, drawings, formulas or other data, photographs, samples, literature, and sales and promotional aids of every kind related to the FreeStyle Products provided by TheraSense, shall remain the property of TheraSense. Within thirty (30) days after the effective date of termination of this Agreement, Nipro shall destroy all tangible items bearing, containing, or contained in, -39- any of the foregoing, in its possession or control and provide written certification of such destruction, or prepare such tangible items for shipment to TheraSense, as TheraSense may direct, at TheraSense's expense. Nipro shall not make or retain any copies of any confidential items or information which may have been entrusted to it. Effective upon the termination of this Agreement, Nipro shall cease to use all trademarks and trade names of TheraSense. During the term of this Agreement and after any termination or expiration of this Agreement, TheraSense shall have the right to continue to use and disclose for any purpose any and all clinical trial results and other data relating to the FreeStyle Products. 12.6.7 Transition. Upon termination of this Agreement, Nipro shall use ---------- commercially reasonable efforts to cooperate with TheraSense to effect a smooth and orderly transition in the sale of FreeStyle Products in the Territory. After the effective termination date, Nipro shall refer all FreeStyle Products inquiries to TheraSense and shall provide commercially reasonable cooperation to any newly-appointed distributors. 12.6.8 No Renewal, Extension or Waiver. Acceptance of any order from, ------------------------------- or sale of, any FreeStyle Products to Nipro after the date of termination of this Agreement shall not be construed as a renewal or extension hereof, or as a waiver of termination by TheraSense. 12.7 Survival. The provisions of Sections 2.4, 2.6, 3.2.4, 3.3, 4.4.4, 5.6, -------- 6.1, 7.2.2, 8.1.3, 8.3, 8.6, 8.9, 8.10, 8.12 (but only with respect to Improvements reduced to practice prior to the effective date of termination), 12.4.2, 12.6, and 12.7 and Articles 10, 11 (but only to the extent such indemnity claim arises from act or omissions that occurred prior to the effective date of termination), 13 and 14 shall survive the expiration or termination of this Agreement for any reason. All other rights and obligations of the parties shall cease upon termination of this Agreement. -40- 13. DISPUTE RESOLUTION 13.1 Chief Executive Officers. If a dispute, controversy or claim between ------------------------ the parties arising out of or relating to the validity, construction, enforceability or performance of this Agreement, including disputes relating to alleged breach or to termination of this Agreement (each, a "Dispute"), either Nipro or TheraSense may, by written notice to the other, have such dispute referred to the General Manager of Nipro, or his designee, and to the Vice President of International Business Development of TheraSense, or his designee for resolution. If, within thirty (30) days of such written notification of a Dispute, no resolution is agreed between the parties, the dispute will be presented to the Chief Executive Officer of Nipro, and the President of TheraSense for resolution. If, within sixty (60) days of written notification of a Dispute, no resolution is agreed, then either party may notify the other party that it invokes resolution of the dispute by binding arbitration in the manner described in Section 13.2 ("ADR"). 13.2 Arbitration. ----------- 13.2.1 Any Dispute that cannot be settled amicably by agreement of the parties pursuant to Section 13.1 above shall be finally settled by binding arbitration in the manner described in this Section 13.2. The ADR shall be conducted pursuant to then obtaining Rules of Arbitration of the London Court of International Arbitration, by which each party hereto agrees to be bound. Notwithstanding those rules, the ADR shall be held in London, England by a single arbitrator, provided that at the request of any party, the arbitration shall be conducted by a panel of three (3) arbitrators, with one (1) arbitrator chosen by each of TheraSense and Nipro and the third appointed by the other two (2) arbitrators. The parties shall use their best efforts to select the arbitrator(s) within ninety (90) days of the initiation of ADR. It is understood and agreed that the filing by a party of an action that is subject to this Section 13.2, whether in court or in arbitration, shall constitute an "initiation" of ADR. Each party agrees that any such action filed in court shall be stayed pending the outcome of the related ADR. The -41- arbitrator(s) selected in accordance with this Section 13.2 are referred to herein as the "Panel" and shall be comprised of independent experts with experience in the field of the dispute. 13.2.2 All ADR proceedings, including without limitation the filing of any documents, papers, and/or motions relating thereto, shall be made in the English language. In the event of any dispute concerning the construction or meaning of such documents, papers and/or motions, reference shall be made only to such documents, papers and/or motions as written in English and not to any translation into any other language. 13.2.3 The decision and/or award rendered by the Panel shall be written (specifically stating the Panel's findings of facts as well as the reasons upon which the Panel's decision is based), final and nonappealable (except for an alleged act of corruption or fraud on the part of the Panel) and may be entered in any court of competent jurisdiction. The parties agree that, any provision of applicable law notwithstanding, they will not request, and the Panel shall have no authority to award, punitive or exemplary damages against any party. The Panel shall have the authority to grant injunctive relief and order specific performance. The Panel shall determine what discovery will be permitted, consistent with the goal of limiting the cost and time which the parties must expend for discovery; provided the Panel shall permit such discovery as they deem necessary to permit an equitable resolution of the dispute. Evidence need not be obtained in the presence of the Panel. At the arbitration hearing, each party may make written and oral presentations to the Panel, present testimony and written evidence, and examine witnesses. The costs of any arbitration, including administrative fees and fees of the Panel, shall be shared equally by the parties. Each party shall bear the cost of its own attorneys' fees and expert fees. The parties and the Panel shall use their best efforts to complete any such arbitration within one (1) year after the appointment of the Panel, unless a party can demonstrate to the Panel that the complexity of the issues or other reasons warrant the extension of the time table. In such case, the Panel may extend such time table as reasonably required. The Panel shall, in rendering its decision, apply the substantive law of -42- the State of Delaware, without regard to its conflict of laws provisions, except that the interpretation of and enforcement of this Section 13.2 shall be governed by the Rules of Arbitration of the International Chamber of Commerce. No party shall initiate arbitration hereunder unless it has attempted to resolve the dispute in accordance with Section 13.1. 13.2.4 Injunctive Relief. This Section 13.2 shall not be construed to ----------------- prohibit either party from seeking preliminary or permanent injunctive relief, restraining order or degree of specific performance in any court of competent jurisdiction to the extent not prohibited by this Agreement. For avoidance of doubt, any such equitable remedies provided under this Section 13.2 shall be cumulative and not exclusive and are in addition to any other remedies, which either party may have under this Agreement or applicable law. 14. MISCELLANEOUS 14.1 Governing Law. This Agreement, and any proceeding subject to Article ------------- 13, shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflicts of laws. 14.2 Independent Contractors. The relationship of the parties hereto is ----------------------- that of independent contractors. The parties hereto are not deemed to be agents, partners or joint venturers of the other for any purpose as a result of this Agreement or the transactions contemplated thereby. 14.3 U.S. Export Control. Nipro certifies that unless prior written ------------------- authorization is obtained from the U.S. Bureau of Export Administration or the U.S. Export Administration Regulations explicitly permit the re-export without such authorization, it will not export, re-export, or transship, directly or indirectly, the FreeStyle Products, documentation, technical assistance, or any media in which any of the foregoing is contained, or other technology provided hereunder or the direct product thereof, to any -43- country as to which the U.S. Government has placed an embargo against the shipment of products, software or technology which embargo is in effect during the term of this Agreement. 14.4 Assignment. The parties agree that their rights and obligations under ---------- this Agreement shall not be delegated, transferred or assigned to a third party without prior written consent of the other party hereto; provided either party may assign this Agreement, without the other party's consent (a) to its Affiliates, and (b) to an entity that acquires all or substantially all of the business or assets of the assigning party to which this Agreement pertains, whether by merger, reorganization, acquisition, sale or otherwise. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. -44- 14.5 Notices. All notices required or permitted hereunder shall be given in ------- writing addressed to the respective parties as set forth below and shall either be (i) personally delivered, (ii) sent by internationally-recognized private express courier; or (iii) sent by facsimile, with a confirmation copy sent within one (1) business day thereafter by internationally-recognized private express courier. Notices shall be deemed to have been given on the date of receipt if delivered personally, or two (2) days after deposit with an express courier, or upon transmission if sent by facsimile with a confirmation copy sent as provided herein. Either party may change its address for purposes hereof by written notice to the other in accordance with the provisions of this Section. The addresses for the parties are as follows: If to Nipro: Nipro Corporation 3-9-3, Honjo-Nishi, Kita-ku Osaka, Japan Attention: CEO If to TheraSense: TheraSense, Inc. 1360 South Loop Road Alameda, CA 94502 USA Attention: CEO 14.6 Force Majeure. Neither party shall lose any rights hereunder or be ------------- liable to the other party for damages or losses (except for payment obligations) on account of failure of performance by the defaulting party if the failure is occasioned by war, strike, fire, Act of God, earthquake, flood, lockout, embargo, governmental acts or orders or restrictions, or any other reason where failure to perform is beyond the reasonable control and not caused by the negligence, intentional conduct or misconduct of the nonperforming party and such party has exerted all reasonable efforts to avoid or remedy such force majeure; provided, however, that in no event shall a party be required to settle any labor dispute or disturbance. -45- 14.7 Advice of Counsel. TheraSense and Nipro have each consulted counsel ----------------- of their choice regarding this Agreement, and each acknowledges and agrees that this Agreement shall not be deemed to have been drafted by one party or another and will be construed accordingly. 14.8 Compliance with Laws. Each party shall furnish to the other party any -------------------- information requested or required by that party during the term of this Agreement or any extensions hereof to enable that party to comply with the requirements of any U.S. or foreign, state and/or government agency. 14.9 Further Assurances. At any time or from time to time on and after the ------------------ date of this Agreement, Nipro shall at the request of TheraSense (i) deliver to TheraSense such records, data or other documents consistent with the provisions of this Agreement, (ii) execute, and deliver or cause to be delivered, all such consents, documents or further instruments of transfer or license, and (iii) take or cause to be taken all such actions, as TheraSense may reasonably deem necessary or desirable in order for TheraSense to obtain the full benefits of this Agreement and the transactions contemplated hereby. 14.10 Severability; Waiver. In the event that any provisions of this -------------------- Agreement are determined to be invalid or unenforceable by a court of competent jurisdiction, the remainder of the Agreement shall remain in full force and effect without said provision. The parties shall in good faith negotiate a substitute clause for any provision declared invalid or unenforceable, which shall most nearly approximate the intent of the parties in entering this Agreement. The failure of a party to enforce any provision of the Agreement shall not be construed to be a waiver of the right of such party to thereafter enforce that provision or any other provision or right. 14.11 Entire Agreement; Modification. This Agreement sets forth the entire ---------------- agreement and understanding of the parties with respect to the subject matter hereof, and supersedes all prior discussions, agreements and writings in relating thereto. This Agreement may not be altered, amended or modified in any way except by a writing signed by both parties. -46- 14.12 Counterparts. This Agreement may be executed in two counterparts, ------------ each of which shall be deemed an original and which together shall constitute one instrument. IN WITNESS WHEREOF, Nipro and TheraSense have executed this Agreement by their respective duly authorized representatives. NIPRO CORPORATION THERASENSE, INC. /s/ Signature /s/ Signature By:_______________________________ By:______________________________ Print Name:_______________________ Print Name:______________________ Title:____________________________ Title:___________________________ -47- EXHIBIT A FREESTYLE PRODUCTS As of the Effective Date, the FreeStyle Products include the following five (5) products: 1. "System Kit" shall mean one Meter and one Lancing Device for packaging ---------- by Nipro into a FreeStyle starter kit. 2. "Control Solution" shall mean a glucose solution for testing the ---------------- operation of the FreeStyle Meter and Strips. 3. "Lancing Device" shall mean a lancing device which is used to bring -------------- blood to the surface of a patient's skin and which is physically separate from the Meter. 4. "Meter" shall mean a meter whose sole function is to coulometrically ----- measure blood glucose levels. 5. "Strips" shall mean a package of strips which are loaded into the Meter ------ and used to acquire a blood sample of less than 0.4 microliters from the surface of a patient's skin. (The Strips are currently offered in packages of 50 and 100; such quantities are subject to change). EXHIBIT B TRANSFER PRICE Pricing Details System Kit ---------- The bulk price for one Meter and one Lancing Device for packaging by Nipro into a FreeStyle starter kit shall be ***. FreeStyle Test Strips Prices ---------------------------- The price of Strips (packaged in vials) is: Annual Sales Volume Price (number of Strips) Per Strip ----------------------------------------- ----------- *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** Control Solution ---------------- The price of a single vial of Control Solution is ***. *** Confidential treatment requested EXHIBIT C ANNUAL MINIMUM PURCHASE OBLIGATION Calendar Year Minimum Purchase Obligation ----------------------------- -------------------------------- *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** ***. *** Confidential treatment requested EXHIBIT D THERASENSE TRADEMARKS THERASENSE Japan Trademark Application No. 90261/1998 Int'l Class 10 FREESTYLE Japan Trademark Application No. 58692/2000 Int'l Class 10 TheraSense agrees to provide Nipro with registration numbers as they become available. TheraSense will use commercially reasonable efforts to register the above marks in the Territory. TheraSense and Nipro agree that this list of trademarks is not exhaustive and that trademarks may be added to this list from time to time by TheraSense. In the event that TheraSense is precluded from using a selected trademark, TheraSense and Nipro shall jointly select a new TheraSense trademark under which the FreeStyle Products shall be marketed in the Territory. TheraSense shall promptly apply to register the trademark in the Territory or secure rights as necessary to use the trademark. Such trademark shall be added to this Exhibit D. EXHIBIT E PRODUCT SPECIFICATIONS Product Performance Criteria FreeStyle Products shall meet the following specifications when tested using the test procedures in TheraSense document #DOC00482 "FreeStyle Strip Verification Report", as this document may be updated by TheraSense. -------------------------------------------------------------------------- Hematocrit range *** -------------------------------------------------------------------------- Operating temperature range *** -------------------------------------------------------------------------- Acetaminophen error *** -------------------------------------------------------------------------- Ascorbate error *** -------------------------------------------------------------------------- Urate error *** -------------------------------------------------------------------------- Glucose range *** -------------------------------------------------------------------------- Accuracy *** -------------------------------------------------------------------------- Lot Acceptance Criteria The Strips shall meet the following specifications when tested by the Receiving Party using the test procedures in TheraSense documents #DOC00346 and #DOC00436 "FreeStyle Strip Calibration Procedures", as these documents may be updated by TheraSense. ------------------------------------------------------------------------- RMS standard deviation at low glucose level *** ------------------------------------------------------------------------- RMS coefficient of variation at medium glucose level *** ------------------------------------------------------------------------- RMS coefficient of variation at high glucose level *** ------------------------------------------------------------------------- *** Confidential treatment requested EX-10.15 8 dex1015.txt INTERNATIONAL DISTRIBUTOR AGREEMENT [CONFIDENTIAL TREATMENT REQUESTED, CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.] Exhibit 10.15 INTERNATIONAL DISTRIBUTOR AGREEMENT This INTERNATIONAL DISTRIBUTOR AGREEMENT (the "Agreement") is entered into effective September 13, 2000 (the "Effective Date") by and between TheraSense, Inc, a California corporation with a principal place of business at 1360 South Loop Road, Alameda, California 94502, USA ("TheraSense") and Disetronic Handels AG, a corporation organized under the laws of Switzerland, with a principal place of business at Brunnmattstrasse 6, CH-3401 Burgdorf, Switzerland ("Disetronic"). BACKGROUND ---------- A. TheraSense is the owner of the FreeStyle Products (as defined below) useful in monitoring blood glucose levels and desires to engage a marketing and distribution partner which can (i) assist it in obtaining regulatory approvals to market the FreeStyle Product, and (ii) market and distribute the FreeStyle Products. B. Disetronic desires to purchase from TheraSense, and TheraSense desires to sell to Disetronic, the FreeStyle Products for resale in the FreeStyle Territory (as defined below); and C. Disetronic desires to distribute and sell, through certain Affiliates and/or Subdistributors, the FreeStyle Products to Customers (as defined below) in the FreeStyle Territory; and NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows: 1. DEFINITIONS 1.1 "Affiliate" shall mean any corporation or other entity which is --------- directly or indirectly controlling, controlled by or under common control with TheraSense or Disetronic. For the purpose of this Agreement, "control" shall mean the direct or indirect ownership of fifty percent (50%) or more of the outstanding shares or other voting rights of the subject entity to elect directors, or if not meeting the preceding, any entity owned or controlled by or owning or controlling at the maximum control or ownership right permitted in the country where such entity exists. 1.2 "Binding Forecasts" shall mean the amount of each FreeStyle Product ----------------- estimated in each *** Forecast for the *** appearing in each Forecast. 1.3 "CGMS" shall mean a continuous glucose monitoring system. ---- 1.4 "Confidential Information" shall mean, subject to the provisions of ------------------------ Article 11 hereof, (i) any proprietary or confidential information or material in tangible form disclosed hereunder that is marked as "Confidential" at the time it is delivered to the receiving party, or (ii) proprietary or confidential information disclosed orally hereunder which is identified as confidential or proprietary when disclosed and such disclosure of confidential information is confirmed in writing within thirty (30) days by the disclosing party. 1.5 "Customers" shall mean end-user customers of Disetronic, its --------- Affiliates or its Subdistributors within the European Territory, and Pump Customers within the US Territory. -1- Initials: ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED 1.6 "Disetronic Trademarks" shall mean any trademarks of Disetronic and/or --------------------- its Affiliates, including without limitation, any trade names and service marks of Disetronic and/or its Affiliates. 1.7 "Dispute" shall mean any dispute, controversy or claim between ------- TheraSense and Disetronic arising out of or relating to the validity, construction, enforceability or performance of this Agreement, including disputes relating to alleged breach or to termination of this Agreement 1.8 "FDA" shall mean the U.S. Food and Drug Administration. --- 1.9 "Field of Use" shall mean single use, disposable, in vitro glucose ------------ monitoring strips utilizing a sample volume of less than 0.4 microliters. It is understood that Field of Use does not include Strips intended for use with a continuous glucose monitoring system. 1.10 "Forecasts" shall mean a written forecast of the number of units of --------- FreeStyle Products that Disetronic expects to purchase in each *** over the following *** ("Forecasts"), which Forecasts shall indicate on a *** basis the number of units of each Freestyle Product identified by its stock keeping unit ("SKU") and its number associated with such product for inventory purposes. 1.11 "FreeStyle Product(s)" shall mean those products listed in Exhibit A -------------------- attached hereto. TheraSense shall notify Disetronic as soon as reasonably feasible of any intended material change, discontinuation or addition to the Products listed on Exhibit A. (i) The features, function and appearance of the FreeStyle Products listed in Exhibit A may be materially technically improved by TheraSense with *** prior written notice to Disetronic so long as the improved products meet or exceed the Product Specifications. TheraSense may make non- material changes in the FreeStyle products, such as changing components, without written notice to Disetronic. (ii) The Freestyle Products listed in Exhibit A may be discontinued by TheraSense only with Disetronic's prior written consent, such consent not to be unreasonably withheld. If the parties agree to discontinue a FreeStyle Product listed on Exhibit A, and TheraSense does not replace such FreeStyle Product with a product that meets or exceeds the Product Specifications, then TheraSense and Disetronic shall engage in good faith discussions regarding an amendment to this Agreement, such amendment potentially including changes to the Minimum Purchase Obligations in Exhibit C or termination of the Agreement. (iii) Additional products may be added by TheraSense to the FreeStyle Products listed in Exhibit A only with Disetronic's prior written consent, such consent not to be unreasonably withheld. 1.12 "FreeStyle Territory" shall mean, as of the Effective Date, the ------------------- European Territory and the U.S. Territory. 1.12.1 "European Territory" shall mean Switzerland, Germany, Austria, ------------------ The Netherlands, Denmark, Sweden, Norway, and Finland. 1.12.2 "U.S. Territory" shall mean the United States, Canada and -------------- Mexico. -2- Initials: ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED 1.13 "Minimum Purchase Obligations" shall mean the amount of Strips listed ---------------------------- on Exhibit C. 1.14 "National Registration(s)" shall mean national registration(s) for ------------------------ the FreeStyle Products, on a country-by-country basis, for countries selected by Disetronic within the European Territory. 1.15 "Net Revenues" shall mean the net sales derived by Disetronic from ------------ the sale of the FreeStyle Products in the European Territory, less the following amounts incurred in the sale of such FreeStyle Products: (i) trade, standard, or quantity discounts given; (ii) any rebates and retroactive price reductions given; (iii) the cost of any packaging, shipping and handling, (iv) any sales, use, and/or other excise taxes or duties actually paid, including without limitation VAT, (v) any amounts actually allowed or credited due to product rejections or returns, and (vi) any write-offs or allowances for bad debt. 1.16 "Other Distributor" shall mean a third party with whom TheraSense has ----------------- entered into a written agreement granting such third party the right to distribute one or more FreeStyle Products in any country within the European Union (such agreement to not include distribution rights in any country within the European Territory, other than passive sales rights as required by European Union laws and regulations). 1.17 "Other Distribution Agreement" shall mean a written agreement between ---------------------------- TheraSense and an Other Distributor granting the Other Distributor the right to distribute one or more FreeStyle Products in any country within the European Union (such countries to not include any country within the European Territory). 1.18 "Package" shall mean the System Kit package or the Strip package, as ------- applicable. 1.19 "Payment" shall mean the lesser of (i) *** or (ii) *** of ------- Disetronic's *** over the last *** immediately preceding termination of this Agreement. 1.20 "Product Specifications" shall mean the specifications set forth in ---------------------- Exhibit E. 1.21 "Promotional Materials and Programs" shall mean any and all ---------------------------------- promotional, advertising and educational materials and programs, package data sheets, and other literature relating to the FreeStyle Products. 1.22 "Pump Customers" shall mean Disetronic's end user customers to whom -------------- Disetronic, its Affiliates or Subdistributors have sold or otherwise transferred a Disetronic insulin pump, an infusion set, an insulin pen system, insulin pen- needles or infusion port systems. 1.23 "Receiving Party" shall mean the recipient of a shipment of FreeStyle --------------- Product sent directly from TheraSense. The Receiving Party shall be Disetronic, an Affiliate or a Subdistributor. 1.24 "Sales and Inventory Records" shall mean a point-of-sale and --------------------------- inventory record showing, at a minimum, date sold, quantity, price, serial number, shipment information, and the buyers' names and addresses of each of the FreeStyle Products sold, as well as the quarter-end inventory position on hand for each of the FreeStyle Products. -3- Initials: ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED 1.25 "Shipping Location" shall mean TheraSense's facility currently ----------------- located at the address listed for TheraSense in Section 15.4 of this Agreement or such other location as TheraSense may designate. 1.26 "Subdistributor" shall mean a third party whom Disetronic has granted -------------- the right to distribute the FreeStyle Products under Section 2.2 hereto. Unless expressly provided otherwise herein, such Subdistributors shall include wholesalers and retailers. 1.27 "Subdistributor Agreement" shall mean a written agreement between ------------------------ Disetronic and a Subdistributor binding the Subdistributor to terms and conditions substantially similar to those terms and conditions agreed upon by Disetronic in this Agreement 1.28 "TheraSense Trademarks" shall mean the TheraSense trademarks, marks, --------------------- logos and trade names listed on Exhibit D hereto, as modified by TheraSense pursuant to Article 10. 1.29 "Transfer Price" shall mean the transfer prices set forth in Exhibit -------------- B. All prices are in U.S. Dollars. 2. FREESTYLE APPOINTMENT AND AUTHORITY OF DISETRONIC 2.1 Appointment and Authority. 2.1.1 Exclusive Distributor. Subject to the terms and conditions --------------------- herein, TheraSense hereby appoints Disetronic as TheraSense's exclusive distributor for the FreeStyle Products in the European Territory in the Field of Use, and Disetronic hereby accepts such appointment. 2.1.2 Non-Exclusive Distributor. Subject to the terms and conditions ------------------------- herein, TheraSense hereby appoints Disetronic as TheraSense's non-exclusive distributor for the FreeStyle Products to Disetronic's Pump Customers in the U.S. Territory in the Field of Use, and Disetronic hereby accepts such appointment. 2.1.3 Disetronic's sole authority shall be to purchase FreeStyle Products from TheraSense and to promote, market and resell such FreeStyle Products for delivery to Customers in the FreeStyle Territory in the Field of Use in accordance with the terms of this Agreement. Disetronic may promote, market and resell such FreeStyle products in the European Territory for delivery to Customers in the Field of Use directly and through Subdistributors. Disetronic may promote, market and resell such FreeStyle products in the U.S. Territory for delivery to Customers in the Field of Use directly and through Subdistributors, but not through wholesalers and retailers. 2.1.4 Notwithstanding the rights granted to Disetronic to distribute the FreeStyle Products hereunder, Disetronic shall have no right to directly: (a) solicit sales or sell the FreeStyle Products to end users in the U.S. Territory other than to Pump Customers; (b) advertise, solicit sales, promote market or sell TheraSense products, other than the FreeStyle Products in the Field of Use, in the FreeStyle Territory; -4- Initials: ____ ____ (c) solicit orders from persons or entities located outside the FreeStyle Territory for Freestyle Products or other TheraSense products; (d) sell in the U.S. Territory FreeStyle Products that were purchased for the European Territory. It is understood and agreed by Disetronic that failure to comply with the terms of this Section 2.1.4 shall be deemed a material breach of this Agreement subject to the provisions of Sections 13.2 and 13.5 herein. 2.1.5 It is understood and agreed that Disetronic may appoint one or more of its Affiliates to perform any of its obligations under this Agreement, except as provided in Sections 3.2 and 7.4, provided such Affiliate enters into a Subdistributor Agreement as set forth in Section 2.2. below. 2.2 Subdistributors. Subject to the provisions of Section 2.1.3 and this --------------- Section 2.2, Disetronic may appoint one or more third parties within any portion of the FreeStyle Territory to distribute the FreeStyle Products in the Field of Use to Customers. Within ten (10) days after the appointment of such Subdistributor, Disetronic shall notify TheraSense of the identity of such Subdistributor. Except for the case where a Subdistributor is a wholesaler or retailer (provided, such exception shall not apply where such wholesaler or retailer is a Disetronic Affiliate), Disetronic shall not sell or otherwise transfer the FreeStyle Products to any Subdistributor until such Subdistributor enters into a Subdistributor Agreement. Notwithstanding the preceding ***. Disetronic shall only grant Subdistributors the right to make sales of the FreeStyle Products to Customers in the FreeStyle Territory in the Field of Use. Disetronic hereby guarantees the performance of each Subdistributor with the provisions set forth in this Section 2.2. When Disetronic receives a purchase order from a wholesaler or retailer, Disetronic shall include in its acknowledgement of such purchase order a statement that the FreeStyle Products are not to be repackaged, relabeled, or reshipped outside of the European Territory . In the event Disetronic becomes aware, or has reason to believe, that a Subdistributor (including a wholesaler or retailer) is relabeling, repackaging or reshipping product outside of the European Territory (except reshipping to any country within the European Union as part of a passive sale), Disetronic shall promptly notify TheraSense and shall take corrective action to halt such impermissible practice, including without limitation terminating such retailer's right to sell FreeStyle Products. 2.3 Reservation of Rights. Except as expressly provided in this Agreement, --------------------- no right, title, or interest is granted, whether express or implied, by TheraSense to Disetronic. Nothing in this Agreement shall be deemed to grant to Disetronic rights in any products or technology other than the FreeStyle Products, nor shall any provision of this Agreement be deemed to restrict TheraSense's right to exploit technology, know-how, patents, or any other intellectual property rights relating to the FreeStyle Products in products other than the FreeStyle Products. Subject to Section 3.5, TheraSense reserves the right to appoint other authorized distributors or resellers of the FreeStyle Products outside the European Territory and other authorized non-exclusive distributors or resellers of the FreeStyle Products in the U.S. Territory. TheraSense also reserves the right to appoint third parties to distribute the FreeStyle Products inside the FreeStyle Territory in fields of use other than the Field of Use; for example, TheraSense reserves the right to sell Strips, either directly or through third parties, solely for use in calibrating a CGMS, provided TheraSense will only market and sell or otherwise transfer such Strips for use with such CGMS and in no event shall TheraSense sell and otherwise transfer more than five (5) -5- Initials: ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED Strips per CGMS sensor sold or otherwise transferred. Disetronic and TheraSense acknowledge that this Agreement does not prohibit passive sales of FreeStyle Products by either party to Customers within the FreeStyle Territory. It is further understood and agreed that TheraSense may distribute products, other than the FreeStyle Product, in the European Territory, either directly or indirectly, for any and all uses. TheraSense agrees that it will not by itself, or through a third party, actively promote, market or solicit the sale of FreeStyle Products in the Field of Use in the European Territory, unless TheraSense acknowledges Disetronic as TheraSense's exclusive distributor in conjunction with such promotion and/or marketing. 2.4 Conflict of Interest. Disetronic shall pursue reasonable sales -------------------- policies and procedures to realize the maximum sales potential for the FreeStyle Products in the FreeStyle Territory. Disetronic agrees that if Disetronic Trademarks should appear on any in vitro disposable glucose monitoring product or associated meter product in the FreeStyle Territory, this would constitute a conflict of interest with respect to Disetronic's obligations to market and promote the FreeStyle Product, and Disetronic warrants to TheraSense that no Disetronic Trademarks currently appear on any glucose monitoring product. During the term of this Agreement, Disetronic and its Affiliates shall not place any Disetronic Trademarks on any in vitro disposable glucose monitoring product or associated meter product, other than FreeStyle Products, within the FreeStyle Territory. Notwithstanding the foregoing, Disetronic Trademarks may appear on a ***, where such *** is not *** as a *** for regular patient *** using *** and *** but it *** only for *** use in improving *** profiles. If TheraSense does not obtain the IVD-CE mark for the FreeStyle Product by ***, the parties shall discuss in good faith amending the terms of this Article 2 provided that TheraSense's failure to obtain such IVD-CE mark is not due to Disetronic's failure to meet its obligations. 2.5 Independent Contractors. The relationship of TheraSense and Disetronic ----------------------- established by this Agreement is that of independent contractors, and nothing contained in this Agreement shall be construed to (i) give either party the power to direct and control the day-to-day activities of the other, (ii) constitute the parties as partners, joint venturers, co-owners or otherwise as participants in a joint venture or common undertaking, and (iii) allow either party to create or assume any obligation on behalf of the other for any purpose whatsoever. 3. CONSIDERATION 3.1 Signature Payments. In partial consideration of the rights granted ------------------ herein, ten (10) days after the Effective Date, Disetronic shall pay to TheraSense a nonrefundable pre-payment for FreeStyle Product stock to be ordered, of One Million Five Hundred Thousand U.S. Dollars (U.S. $1,500,000) ("Prepayment"). As Disetronic orders Freestyle Product stock under this Agreement, the payments for such stock shall be credited against the Prepayment until the Prepayment has been exhausted. 3.2 Equity Investment. It is understood and agreed by the parties that ----------------- within ten (10) days of the Effective Date of this Agreement Disetronic Holding AG, the parent Company of Disetronic, shall pay to TheraSense Two Million Five Hundred Thousand U.S. dollars (U.S. $2,500,000) and (i) TheraSense shall enter into, and deliver to Disetronic Holding AG, the convertible promissory note attached hereto as Exhibit G; and (ii) Disetronic Holding AG and TheraSense shall sign the note purchase agreement attached hereto as Exhibit F. Disetronic hereby guarantees that Disetronic Holding AG will perform according to the terms of such convertible promissory note and such note purchase agreement. -6- Initials: ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED 3.3 FreeStyle Product Prices. ------------------------ 3.3.1 FreeStyle Products. For each FreeStyle Product purchased from ------------------ TheraSense, Disetronic shall pay to TheraSense an amount equal to the Transfer Price. The difference between the Transfer Price and Disetronic's price to its Customers shall be Disetronic's sole remuneration for distribution of the FreeStyle Products. The Transfer Prices set forth in Exhibit B shall remain in effect from the Effective Date until the first year anniversary of the Effective Date. Thereafter, Disetronic and TheraSense agree to renegotiate in good faith the Transfer Prices if inflation as measured by the U.S. producer price index increases by more than *** during any one year period, which renegotiated Transfer Prices shall reflect the intent of the parties as set forth herein. 3.3.2 Transfer Price Adjustments. By October 31 of each calendar -------------------------- year Disetronic shall provide to TheraSense a non-binding written estimate of its sales of FreeStyle Products for the upcoming calendar year. These estimates shall be used to establish the Transfer Price for the upcoming year. In the event that Strip (as defined in Exhibit A) purchases in the first six (6) months of any calendar year for the European Territory are less than *** of the level required to achieve the Transfer Price established for that year in the European Territory, then (i) TheraSense may raise the Transfer Price for additional purchases by Disetronic of Strips in such calendar year to a level consistent with purchases equal to twice the actual Strip quantities purchased in the first half, and (ii) Disetronic shall immediately pay TheraSense the amount corresponding to the underpayment accrued in the first half of the calendar year. Within 30 (thirty) days after the end of each calendar year, Disetronic or TheraSense shall pay to the other any amounts due relating to underpayments accrued or overpayments made in such calendar year. 3.3.3 Payment for FreeStyle Products. TheraSense shall submit an ------------------------------ invoice to Disetronic upon each shipment of FreeStyle Products ordered by Disetronic and as set forth below in Section 4.5. The invoice shall cover the Transfer Price for the FreeStyle Product in a given shipment plus any freight, taxes or other costs incident to the purchase or shipment initially paid by TheraSense but to be borne by Disetronic. The invoiced amounts for FreeStyle Products shipped shall be due in full net thirty (30) days upon the later of receipt by Disetronic of the FreeStyle Products or the invoice. For FreeStyle Product repaired or replaced under Section 4.6, the invoiced amounts for such FreeStyle Products shall be due in full net thirty (30) days upon receipt by Disetronic of such repaired or replaced FreeStyle Products. 3.4 Payment Method. Disetronic shall make payments to TheraSense under -------------- this Agreement in immediately available funds to a bank account designated by TheraSense. All payments due hereunder shall be paid in U.S. dollars. Any payments due hereunder which are not paid within five (5) days of the date such payments are due shall be subject to a service charge of one per cent (1.0%) per month, calculated on the number of days such payment is delinquent. This Section 3.4 shall in no way limit any other remedies available to TheraSense. Disetronic shall pay all of TheraSense's costs and expenses (including reasonable attorneys' fees) to enforce and preserve TheraSense's rights under this Section 3.4. 3.5 Other Distributor Transfer Prices. In the event that TheraSense enters --------------------------------- in to an Other Distribution Agreement with an Other Distributor, the transfer price for such FreeStyle Products to such Other Distributor shall be as follows: -7- Initials: ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED (a) in the event that the Strips to be distributed by an Other Distributor are *** the Meters distributed by Disetronic in the European Territory, the prices in the volume-based transfer price schedule for such Strips to such Other Distributor shall be *** than the prices for *** sales volumes in then current *** as of the effective date of such Other Distribution Agreement; or (b) in the event that the Strips to be distributed by an Other Distributor are *** the Meters distributed by Disetronic in the European Territory, the transfer price for such Strips to such Other Distributor shall be determined *** and may, ***, be set ***. 3.6 Taxes. ----- (a) Any and all amounts payable hereunder by Disetronic do not include any government taxes (including without limitation sales, use, excise, withholding, and value-added taxes) or duties imposed by any governmental agency that are applicable to the export, import, or purchase of the a Products (other than taxes on the net income of TheraSense), and Disetronic shall bear all such government taxes and duties (including, without limitation, sales, withholding, value-added and similar taxes). When TheraSense has the legal obligation to collect and/or pay such taxes, the appropriate amount shall be added to Disetronic's invoice and paid by Disetronic, unless Disetronic provides TheraSense with a valid tax exemption certificate authorized by the appropriate taxing authority. (b) All payments by Disetronic specified hereunder (including those under this Article 3) are expressed as net amounts and shall be made free and clear of, and without reduction for, any withholding taxes. Any such taxes which are otherwise imposed on payments to TheraSense or Disetronic shall be the sole responsibility of Disetronic. 4. TERMS OF PURCHASE OF FREESTYLE PRODUCTS BY DISETRONIC 4.1 Solicitation and Placement of Orders from Customers. Disetronic shall --------------------------------------------------- be responsible for marketing and soliciting orders for FreeStyle Products from Customers in the FreeStyle Territory. 4.2 Terms and Conditions. All orders of FreeStyle Products by Disetronic -------------------- from TheraSense during the term of this Agreement shall be subject to the terms of this Agreement. Nothing contained in any purchase order or the like document submitted by Disetronic to TheraSense shall in any way modify or add to the terms and conditions in this Agreement. 4.3 Forecasts. Beginning on the Effective Date and thereafter by the end --------- of each ***, Disetronic shall provide to TheraSense a Forecast. 4.4 Order and Acceptance. -------------------- 4.4.1 Disetronic shall submit orders for units of FreeStyle Products so that such orders are received by TheraSense at least *** prior to the requested shipment date of such units of FreeStyle Products. Disetronic shall be obligated to purchase no less than *** of the Binding Forecasts. TheraSense is obligated to accept Disetronic's purchase orders within five (5) working days after receipt thereof provided that the quantities of FreeStyle Products ordered by Disetronic in a calendar quarter are not greater than *** above the full amount requested -8- Initials: ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED by Disetronic in the Binding Forecasts for such calendar quarter ("Accepted Quantity") and such order is received by TheraSense at least *** prior to the requested shipment date. Subject to the foregoing, no order for quantities greater than a given Accepted Quantity shall be binding upon TheraSense unless and until accepted by TheraSense in writing, and TheraSense shall have no liability to Disetronic with respect to purchase orders that are not accepted. For example: if Disetronic delivers a Forecast on April 1, 2001, requesting 1000 units of Freestyle Product with SKU Number XYZ for the calendar quarter beginning July 1, 2001, then Disetronic shall be obligated to purchase no less than *** of such FreeStyle Product with SKU Number XYZ in the calendar quarter beginning July 1, 2001; and, TheraSense shall accept Disetronic's purchase order in such calendar quarter, provided that TheraSense received the purchase order *** in advance of the requested shipment date, and further provided that the quantity of such FreeStyle Products with SKU Number XYZ ordered by Disetronic for the calendar quarter beginning July 1, 2001 is not greater than ***. 4.4.2 Once accepted by TheraSense, Disetronic may cancel or reschedule purchase orders for FreeStyle Products only with TheraSense's prior written approval. Disetronic will use commercially reasonable efforts to place orders for FreeStyle Products in an even and regular fashion so as to allow for efficient scheduling of FreeStyle Product production and warehousing. In the event TheraSense receives a purchase order less than *** in advance of the requested shipment date or for a quantity that is greater than *** above the Binding Forecasts, TheraSense will use commercially reasonable efforts to ship such FreeStyle Products to Disetronic on the date and in the quantity requested by Disetronic. 4.4.3 TheraSense shall promptly inform Disetronic when it expects a shipment of an Accepted Quantity to Disetronic to be delayed. In the event that TheraSense fails to have available for shipment to Disetronic substantially all quantities of FreeStyle Products specified in an Accepted Quantity within *** after the requested shipment date specified in such Accepted Quantity, TheraSense agrees to credit to Disetronic *** of the aggregate *** of the ordered but undelivered FreeStyle Products in such Accepted Quantity. 4.5 Shipping. For all shipments of FreeStyle Products to Disetronic, -------- TheraSense may choose the mode of shipment and carrier unless Disetronic specifies a carrier in the purchase order. All FreeStyle Products delivered pursuant to the terms of this Agreement shall be suitably packed in TheraSense's standard shipping cartons, and marked for shipment at the address of Disetronic, its Affiliate, or its Subdistributor, as applicable, as provided in Disetronic's purchase order, for delivery within ten (10) days (excluding weekends) to Disetronic, its Affiliate, or its Subdistributor, as applicable, EXW (Incoterms 2000) the Shipping Location, at which time risk of loss shall pass to Disetronic. TheraSense shall promptly notify Disetronic of any changes to the Shipping Location. All customs, freight, insurance, and other shipping expenses, as well as any special packing expense, shall be paid by Disetronic. 4.6 Acceptance of FreeStyle Products. FreeStyle Product shipped by -------------------------------- TheraSense to Disetronic shall conform with the Product Specifications. Upon receipt of a FreeStyle Product shipment, the Receiving Party shall have the right to inspect such FreeStyle Products promptly upon receipt thereof for conformance with the Product Performance Criteria and the Lot Acceptance Criteria in set forth in Exhibit E. Any FreeStyle Products not rejected within thirty (30) days will be deemed accepted. TheraSense will, at its election, either repair or replace defective FreeStyle Products within thirty (30) -9- Initials: ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED days of receipt thereof. In the event Disetronic, its Affiliate or Subdistributor rejects any FreeStyle Products, Disetronic shall be required to demonstrate that such FreeStyle Product does not meet a specification set forth in the Product Performance Criteria or the Lot Acceptance Criteria set forth in Exhibit E. 4.7 Product Packaging and Labeling. ------------------------------ 4.7.1 Product, Packaging and Labeling. TheraSense shall deliver each ------------------------------- FreeStyle Product to Disetronic, its Affiliate, or its Subdistributor, as instructed by Disetronic in each in purchase order. Each FreeStyle Product shall be delivered in a Package containing the FreeStyle Product together with a Strip package insert and/or a System Kit owners booklet. (a) For FreeStyle Product sold to Disetronic for the European Territory, the Package, System Kit owners booklet, Strip packages and Strip package insert shall be labeled to indicate that the product is manufactured by TheraSense and distributed by Disetronic, and shall carry both the TheraSense and Disetronic Trademarks. With respect to the FreeStyle Product Meter, the front will contain the TheraSense Trademarks and the trademark "Disetronic", with TheraSense's Trademarks (combined, if more than one) in equal prominence to "Disetronic". The back of the FreeStyle Product Meter shall be labeled to indicate that the product is manufactured by TheraSense and distributed by Disetronic, and shall indicate Disetronic's customer service telephone number. (b) For FreeStyle Product sold to Disetronic for the U.S. Territory, the Package and the System Kit owners booklet shall carry both the TheraSense and Disetronic Trademarks. With respect to the FreeStyle Product Meter, the front will contain the TheraSense Trademarks and the name "Disetronic", with T heraSense's Trademarks (combined, if more than one) in equal prominence to the trademark "Disetronic". The back of the FreeStyle Product Meter shall be labeled with TheraSense's name and shall indicate TheraSense's customer service telephone number. (c) For the FreeStyle Territory, unless otherwise instructed by TheraSense, Disetronic shall deliver all FreeStyle Products to its Customers only as part of an unopened Package. Disetronic shall not repackage FreeStyle Products supplied to Disetronic by TheraSense hereunder without the prior written consent of TheraSense. In addition, except for the addition of information required by applicable laws and regulations, Disetronic shall not re-label FreeStyle Products supplied to Disetronic by TheraSense hereunder without the prior written consent of TheraSense. Subject to Section 7.4, TheraSense shall be responsible for ensuring that all FreeStyle Products are packaged and labeled in accordance with the requirements set forth by the FDA or comparable regulatory authorities for each country within the European Territory. (d) Restriction of Rights. TheraSense agrees that TheraSense's --------------------- use of the Disetronic trademarks shall be in conformance with Disetronic guidelines for its trademarks; provided, Disetronic has provided such guidelines to TheraSense within a reasonable time prior to TheraSense marking the FreeStyle Products with such Disetronic trademarks. In addition, TheraSense acknowledges that except as expressly provided in this Agreement, Disetronic grants no other rights, title, or interest with respect to Disetronic's trademarks. 4.7.2 Proprietary Notices. Disetronic, its Affiliates and its ------------------- Subdistributors shall not remove, alter, cover or obfuscate any logo, trademark notice or other proprietary rights notices placed or embedded by TheraSense on or in any Package or any of the items contained therein. -10- Initials: ____ ____ 4.7.3 Authorized Representative. To the extent permitted by law, labeling ------------------------- concerning the Authorized Representative shall be placed at the end of product documentation, such as the owners booklet and Strip package insert, rather than on the Meter or packaging. 5. WARRANTY 5.1 Warranty to Customer. Any warranty set forth in this Section 5.1 -------------------- shall run directly from TheraSense to the Customer. 5.1.1 Disetronic Obligations. Disetronic shall have responsibility ---------------------- for handling Customer returns for allegedly non-conforming FreeStyle Products. Disetronic shall make no warranties with respect to any of the FreeStyle Products that exceed the warranty made by TheraSense to its customers. The warranty made by TheraSense to its customers may be changed by TheraSense at its sole discretion; as of the Effective Date, TheraSense warrants the Meters for five years. Disetronic shall receive an initial pool of warranty Meters *** for use solely to replace allegedly faulty Meters. Thereafter, Disetronic will forecast and order warranty Meters and Strips at no charge. In the event TheraSense is unable to replace an allegedly faulty product, TheraSense's sole and exclusive liability and Disetronic's exclusive remedy shall be to credit Disetronic's account for the net amount actually paid for any such FreeStyle Product. Disetronic shall dispose of returned FreeStyle Product as instructed by TheraSense. In the event the parties should not agree as to whether a certain Freestyle Product is faulty, then the parties shall select an independent laboratory which shall test such Product for conformance to the applicable Product Specification. The party whose position does not prevail upon such laboratory testing shall pay the costs associated with such testing. 5.1.2 Limited Warranty by TheraSense. TheraSense warrants that upon ------------------------------ delivery, EXW the Shipping Location, and during the warranty period for the FreeStyle Products, as set forth on the product label and/or insert for such FreeStyle Products, the FreeStyle Products (i) will meet the agreed upon Product Specifications as set forth in Exhibit E, (ii) will be free from defects in manufacturing, materials and workmanship, (iii) will be of merchantable quality and fit for the purpose for which they are intended, and (iv) will comply with all applicable laws for the U.S. and for each country within the European Territory. 5.1.3 Warranty Limitations. The warranties in Section 5.1.1 and 5.1.2 -------------------- shall not apply to FreeStyle Products that have been modified or altered in any manner by anyone other than TheraSense, or to defects caused (i) through no fault of TheraSense during shipment to or from Disetronic; (ii) by the use or operation in an application or environment other than that intended or recommended by TheraSense in the owners booklet provided by TheraSense to Disetronic for translation; (iii) by service by anyone other than employees of, or persons approved in writing by, TheraSense; (iv) by accident, negligence, misuse, other than normal electrical stress, or other causes other than normal use as described in the owners booklet provided by TheraSense to Disetronic for translation; or (v) by storage, usage or handling in any manner inconsistent with the FreeStyle Product label. Replacement FreeStyle Products supplied under this warranty shall carry only the unexpired portion of the original warranty. TheraSense shall not be liable for misbranding with respect to any product labeling or package insert text provided or used by Disetronic, or any translation thereof and TheraSense shall not be liable for any adulteration or failure to meet the FreeStyle Product Specifications due to handling or packaging of the FreeStyle Products by Disetronic, its Affiliates, its Subdistributors or agents. -11- Initials: ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED 5.1.4 Exclusion of Other Customer Warranties. EXCEPT FOR THE LIMITED -------------------------------------- WARRANTY PROVIDED IN SECTION 5.1 ABOVE, THERASENSE GRANTS NO OTHER WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED, BY STATUTE, IN ANY COMMUNICATION WITH DISETRONIC OR ITS CUSTOMERS, OR OTHERWISE, REGARDING THE FREESTYLE PRODUCTS, AND THERASENSE SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, AND NONINFRINGEMENT. THERASENSE DOES NOT WARRANT THAT OPERATION OF THE FREESTYLE PRODUCTS WILL BE UNINTERRUPTED OR ERROR-FREE. THERASENSE NEITHER ASSUMES NOR AUTHORIZES ANY OTHER PERSON TO ASSUME ANY OTHER LIABILITIES ARISING OUT OF OR IN CONNECTION WITH THE SALE OR USE OF ANY FREESTYLE PRODUCT. ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ANY PERSON OR ENTITY, INCLUDING EMPLOYEES OR REPRESENTATIVES OF THERASENSE, THAT ARE INCONSISTENT HEREWITH SHALL BE DISREGARDED AND SHALL NOT BE BINDING UPON THERASENSE OR ITS THIRD PARTY SUPPLIERS. 5.1.5 Limitation of Liability. THERASENSE'S LIABILITY UNDER THE ----------------------- WARRANTY SHALL BE LIMITED TO A REFUND OF THE CUSTOMER'S PURCHASE PRICE. IN NO EVENT SHALL THERASENSE BE LIABLE TO DISET RONIC OR ANY THIRD PARTY FOR LOST PROFITS, THE COST OF PROCUREMENT OF SUBSTITUTE GOODS BY THE CUSTOMER, OR FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES FOR BREACH OF WARRANTY. THIS LIMITATION SHALL APPLY EVEN WHERE THERASENSE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE AND NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED REMEDY STATED HEREIN. 5.2 Representations and Warranties by and between Disetronic and TheraSense. 5.2.1 Warranty to TheraSense. Disetronic represents and warrants to ---------------------- TheraSense that: (i) it is a corporation duly organized validly existing and in good standing under the laws of Switzerland; (ii) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of Disetronic. 5.2.2 Warranty to Disetronic. TheraSense represents and warrants to ---------------------- Disetronic that: (i) it is a company duly organized validly existing and in good standing under the laws of the State of California; (ii) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of TheraSense; (iii) to the best of its knowledge it has the right to grant the rights and licenses granted herein; (iv) it has obtained consent from Asulab for TheraSense and Disetronic to cobrand the FreeStyle Products as set forth in this Agreement; (v) it will obtain and maintain all facility licenses necessary to manufacture the FreeStyle Products; and (vi) subject to Section 5.1.3 and 5.1.4, upon delivery, EXW the Shipping Location, the Freestyle Products will (a) meet the agreed upon Product Specifications as set forth in Exhibit E, (b) will be free from defects in manufacturing, materials and workmanship, (c) will be of merchantable quality and fit for the purpose for which they are intended, and (d) will comply with all applicable laws for the U.S. and for each country within the European Territory. 6. ADVERTISING, MARKETING AND PROMOTION -12- Initials: ____ ____ 6.1 Advertising and Promotions. Disetronic shall, at its own expense, (i) -------------------------- use commercially reasonable efforts to promote the sale and distribution of the FreeStyle Products to Customers in the FreeStyle Territory, and (ii) use commercially reasonable efforts to realize the maximum sales potential for the FreeStyle Products to Customers in the FreeStyle Territory. Such commercially reasonable efforts by Disetronic shall include without limitation the following: 6.1.1 maintenance of an adequate and experienced sales force for such purposes, such as Disetronic's existing insulin pump sales force, in the respective countries in the Freestyle Territory; 6.1.2 dedication of sufficient product and project management, marketing and financial resources to pursue the market opportunities for the product in the FreeStyle Territory; 6.1.3 provide adequate contact with existing and potential Customers within the European Territory and with Pump Customers within the U.S. Territory on a regular basis, consistent with good business practice; 6.1.4 assessment of Customers' requirements for Freestyle Products, including modifications and improvements thereto, in terms of quality, design, functional capability, and other features; 6.1.5 the preparation of promotional materials in the primary languages within the European Territory; 6.1.6 the translation of all user and technical manuals into the primary languages within the European Territory; 6.1.7 advertising the FreeStyle Products in trade and other relevant publications; 6.1.8 participating in appropriate trade shows at which FreeStyle Products are displayed by Disetronic; provided that if such trade shows are outside of the FreeStyle Territory, Disetronic shall obtain prior written approval from TheraSense, such approval not to be unreasonably withheld; and 6.1.9 making sales calls on physicians within the FreeStyle Territory. In addition to the foregoing, Disetronic shall (i) within *** of the Effective Date in the European Territory, offer a System Kit (as defined in Exhibit A hereto) at a *** price to Customers in the European Territory (but in no event greater than *** per System Kit); (ii) within *** of the Effective Date in the U.S. Territory, offer a System Kit (as defined in Exhibit A hereto) at a *** price (but in no event greater than *** per System Kit) to Pump Customers in the U.S. Territory using offer materials agreed to by TheraSense in writing; and (iii) use reasonable efforts, at its own expense, to maintain a sufficient inventory of FreeStyle Products and to fulfill forecast demand for FreeStyle Products within the FreeStyle Territory. 6.2 Disetronic Materials. Disetronic shall provide to TheraSense for -------------------- purposes of review, comment and approval by TheraSense any and all Promotional Materials and Programs at least *** prior to the commercial release of such Promotional Materials and Programs; provided that -13- Initials: ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED once a particular Promotional Material and Program has been approved in writing by TheraSense, no further approval from TheraSense shall be required for such Promotional Material and Program, and Disetronic may make as many publications of such particular approved Promotional Material and Program as Disetronic elects. The parties agree and acknowledge that such review by TheraSense shall be targeted at ensuring (i) TheraSense's ability to comply with any regulations applicable to Promotional Materials, and (ii) that the Promotional Materials and Programs correspond with TheraSense's marketing activities. Within ten (10) working days after receipt of any such proposed Promotional Materials and Programs from Disetronic, TheraSense shall provide comment and/or notice of approval or non-approval to Disetronic. 6.3 TheraSense Collaboration. TheraSense will collaborate with Disetronic ------------------------ in the development of all Disetronic's marketing and promotional materials for FreeStyle Product. TheraSense shall acknowledge Disetronic's exclusive distributorship in all marketing and promotional materials prepared by TheraSense for use in the European Territory in the Field of Use. All such materials shall be submitted to Disetronic for its approval. In addition, TheraSense will, at its own expense, provide Disetronic with: 6.3.1 such marketing and technical assistance and promotional materials (in English) as TheraSense may in its reasonable discretion consider necessary to assist with the promotion of the FreeStyle Product; 6.3.2 training in the U.S. for Disetronic's personnel in connection with the marketing, sale, installation, maintenance and support of the FreeStyle product; provided, however, that during the six (6) month period following the Effective Date TheraSense's personnel spend no more than *** providing such training; 6.3.3 reasonable access to TheraSense maintenance and support personnel to assist Disetronic's support personnel in providing maintenance and support centers. 7. ADDITIONAL OBLIGATIONS OF DISETRONIC 7.1 Standard Sales Report. Disetronic and TheraSense shall mutually agree --------------------- on a standard sales report to be provided to TheraSense on a monthly basis during the term of the Agreement; provided that such standard sales report shall consist only of aggregate data identifying by distributor, country and product, the quantities of particular FreeStyle Products sold in such prior month. In no event shall such standard sales report be required to disclose any information which would cause or allow any particular individual to be personally identifiable. 7.2 Sales and Inventory Records. Disetronic agrees to maintain Sales and --------------------------- Inventory Records. Such Sales and Inventory Records shall be kept at Disetronic's principal place of business for at least three (3) years following the end of the calendar quarter to which they pertain. 7.3 Minimum Purchase Obligations ---------------------------- 7.3.1 Disetronic shall purchase no less than the Minimum Purchase Obligations for sale in the European Territory in each calendar year; provided, Disetronic's obligation to purchase such amounts shall not commence until the earlier of (a) Disetronic obtaining National Registrations in ***. In the event Disetronic does not obtain such -14- Initials: ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED National Registrations until *** Disetronic's Minimum Purchase Obligations for year 2001 shall be *** (e.g. if such National Registrations are not obtained until ***, Disetronic shall only be obligated to purchase *** in 2001). *** of the Minimum Purchase Obligations shall be purchased in the first six months of the calendar year. 7.3.2 Disetronic and TheraSense agree to renegotiate the Minimum Purchase Obligations in the event that (i) Disetronic sells less than *** of the amount of *** in the European Territory in any year, and (ii) such sales shortfall is primarily attributable to TheraSense alone (e.g., inability to deliver FreeStyle Product to Disetronic for more than 30 days with no fault attributable to Disetronic, or a product recall due to a product defect) or due to a fundamental technological, regulatory or economic change in market conditions beyond the reasonable control of Disetronic (e.g., cessation of reimbursement by appropriate agencies in countries within the European Territory). 7.3.3 Disetronic and TheraSense agree that in the event that IVD-CE mark for FreeStyle Products is not obtained by *** the time period for achieving the Minimum Purchase Obligations set forth in Exhibit C for 2001 will be extended by the number of days between June 30, 2001 and the date on which TheraSense obtains the IVD-CE mark for FreeStyle Products, and that the dates for meeting the Minimum Purchase Obligations set forth in Exhibit C for years 2002 - 2005 shall be extended accordingly. For example, in the event that TheraSense obtains the IVD-CE mark on *** then Disetronic shall be obligated to purchase *** strips during the period between *** and ***; *** strips during the period between *** and ***; *** strips during the period between *** and ***; etc. In the event that IVD-CE mark for FreeStyle Products is not obtained by *** then Disetronic and TheraSence agree to ***. 7.3.4 Without limiting the foregoing, within *** from the end of a calendar year, TheraSense shall give Disetronic notice of any failure by Disetronic to meet Minimum Purchase Obligations in such prior calendar year. Subject to the foregoing, if Disetronic fails to meet the Minimum Purchase Obligations during the *** of the *** or in any *** thereafter of the Initial Term (as defined in Section 13.1 below), TheraSense shall have the right, at its option, to terminate this Agreement for cause pursuant to Section 13.2 hereof. 7.4 Registrations, Licenses and Permits. ----------------------------------- 7.4.1 National Registrations and IVD Registration. The parties agree ------------------------------------------- and understand that (i) in December 2003, the IVD (98/79/EC) will become mandatory; (ii) until December 2003, National Registrations can be obtained and used; and (iii) Products already in the distribution chain in December 2003 can continue to be sold until December 2005. (a) Before CE-Marking according to IVD (98/79/EC). --------------------------------------------- (i) Disetronic, shall use its best efforts to obtain National Registrations in TheraSense's name (unless national regulations require the Registration to be in Disetronic's name) by December 31, 2000. It is understood and agreed by the parties that Disetronic's Affiliate, Disetronic Medical Systems AG, and/or Disetronic shall be the exclusive entity or entities responsible for obtaining such National Registrations; provided that if a National Registration must by -15- Initials: ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED law be obtained by an entity other than Disetronic or Disetronic Medical Systems AG, then (i) Disetronic shall guarantee and hereby guarantees the performance of such other entity, and (ii) such other entity shall enter into a written agreement, binding such other party to terms and conditions substantially similar to the terms and conditions of this Agreement. If required by a regulatory agency to accomplish National Registration in a particular country in the European Territory, for each such country, TheraSense shall send to Disetronic within fourteen (14) days after Disetronic's request, those FreeStyle Products and copies of documents including but not limited to development files, production files, study protocols and results that are necessary to obtain such National Registration. It is understood and agreed by the parties that any such FreeStyle Products, documents, files, protocols and/or results are Confidential Information of TheraSense and subject to the terms of Article 11 herein. If and as required from time to time under the laws of any country or other jurisdiction within the European Territory, Disetronic, *** shall perform clinical trials and obtain all additional registrations, licenses and permits required to comply with the laws and regulations of each country in the European Territory for importation, sale and distribution of the FreeStyle Product; provided, however, that no activities in connection with obtaining such registrations, licenses or permits shall be initiated by Disetronic without TheraSense's prior written approval. Disetronic shall provide to TheraSense complete copies of all clinical trial protocols, data, analyses and other information, as well as applications, and all registrations, licenses and permits obtained therefrom relating to the FreeStyle Products. To the extent permitted by law, all registrations, approvals, and government authorizations obtained by Disetronic in the European Territory with respect to the FreeStyle Products shall be in the name of TheraSense. (ii) Upon (i) Disetronic obtaining a registration, approval, license, permit or authorization in the European Territory, and/or (ii) upon the expiration, cancellation, or termination of this Agreement, all registrations, approvals, and government authorizations shall be transferred and delivered to, and shall inure to the benefit of TheraSense or its designee, to the extent that this is permissible under applicable law, at no cost to TheraSense other than lawfully imposed transfer fees. Where any National Registration, registration, license, permit, approval and/or government authorization must by law be obtained in Disetronic, its Affiliate's, or Subdistributor's name, Disetronic shall (and shall ensure that its Affiliates and Subdistributors shall): (i) assign to TheraSense all right, title and interest to such National Registration, registration, license, permit, approval and/or government authorizations, and/or (ii) execute those documents, as requested by TheraSense, necessary to document and/or perfect the assignment of such National Registration, registration, license, approval and/or government authorization. TheraSense shall have the exclusive right to use all such National Registrations, registrations, licenses, permits, and/or governmental authorizations if this Agreement is terminated for any reason other than TheraSense's material breach of this Agreement. (iii) TheraSense warrants that the FreeStyle Meters are, at the time they are delivered to Disetronic, in Conformity with the provisions of the EMC Directive (89/336/EEC) and shall establish a corresponding Conformity declaration with the first shipment of such Meters. (iv) TheraSense shall sell and deliver to Disetronic by September 30, 2000 or as soon thereafter as reasonably possible approximately 100 FreeStyle Meters calibrated to a whole blood reference, for use by Disetronic in obtaining national registrations for the FreeStyle Products. Such Meters are not required to carry the Disetronic trademark specified in Section 4.7. (b) After CE-Marking according to IVD (98/79/EC). -------------------------------------------- -16- Initials _____ _____ *** CONFIDENTIAL TREATMENT REQUESTED (i) TheraSense shall appoint an Authorized Representative for FreeStyle Products. (ii) TheraSense shall be responsible for obtaining the IVD-CE Mark for the applicable FreeStyle Products. TheraSense shall use commercially reasonable efforts to obtain such CE mark by June 30, 2001. At TheraSense's request, Disetronic shall provide reasonable assistance to TheraSense in obtaining the CE mark. Disetronic will be considered as TheraSense's exclusive distributor of the FreeStyle Products in the Field of Use in the European Territory. (c) TNO Guidelines. TheraSense will use its commercially -------------- reasonable efforts to meet TNO Guidelines as required and necessary, by June 30, 2001 based on tests conducted by TheraSense or by a third party authorized in writing by TheraSense to conduct the tests. If TheraSense is unable to meet the required and necessary TNO Guidelines and is unable to obtain the IVD-CE mark by June 30, 2001 then TheraSense and Disetronic shall engage in good faith discussions regarding an amendment to the Minimum Purchase Obligations in Exhibit C. (d) Registrations, Licenses and Permits in the US Territory. ------------------------------------------------------- Disetronic will be considered as TheraSense's non-exclusive distributor of the FreeStyle Products in the Field of Use in the U.S. Territory. 7.4.2 EMC Conformity. The parties agree and understand that -------------- FreeStyle Products must be in compliance with the EMC Directive (89/336/EEC) as of the date FreeStyle Products are first shipped from TheraSense to Disetronic for purposes of commercial sale under this Agreement. 7.5 Health and Safety Laws and Regulations. Disetronic shall comply -------------------------------------- fully with any and all laws and regulations of the FreeStyle Territory applicable to distributors, as such laws relate to the FreeStyle Products. Notwithstanding the foregoing, for any country in which a national European registration for Freestyle Products is in Disetronic's name, Disetronic shall comply fully with any and all laws and regulations applicable to such registrant in such country. In addition, until such time as TheraSense obtains a CE Mark for FreeStyle Products, Disetronic shall monitor the appropriate information sources closely for changes in such laws and regulations, and other requirements in the European Territory relating to the distribution of the FreeStyle Products in the European Territory, and shall use its best efforts to notify TheraSense promptly in writing of any and all such changes. 7.6 Feedback. Disetronic, its Affiliates and its Subdistributors shall -------- timely provide in writing to TheraSense feedback it receives from Customers in the FreeStyle Territory relating to how the FreeStyle Products could be improved to meet the needs of various market segments. TheraSense may, at its option, use such feedback to implement changes in the Freestyle Products. If TheraSense elects not to implement changes based on such feedback, TheraSense and Disetronic agree to discuss in good faith the terms under which Disetronic may be permitted to implement such changes to the FreeStyle Products. In the event Disetronic conceives of or reduces to practice an invention relating to FreeStyle Products and any Confidential Information disclosed by TheraSense to Disetronic under this Agreement during the Term, inventorship and ownership of such invention shall be determined ***. Where Disetronic is the sole owner of such invention, ***. Subject to the foregoing, TheraSense shall own all right, title and interest to -17- Initials: ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED any changes *** to the FreeStyle Products, where such change is based on ***. 7.7 Semi-Annual Business Plans. TheraSense and Disetronic shall meet, in -------------------------- person, no less frequently than once every six months to review Disetronic's business plan for marketing and distributing the FreeStyle Products in the FreeStyle Territory. Such business plan shall include, without limitation, promotion strategy and tactics, and sales and other marketing plans. TheraSense shall have the right to review and comment on such business plan. 7.8 Quarterly Meetings. TheraSense and Disetronic shall meet, in ------------------ person, or by telephone, no less frequently than once every calendar quarter to review and discuss, as necessary: (i) FreeStyle Products (including any changes, discontinuations, and additions thereto); (ii) Forecasts of the FreeStyle Products; (iii) Product Specifications (including any changes thereto); (iv) FreeStyle Product warranties (including any changes thereof); (v) patent and intellectual property rights relating to the feedback provided under Section 7.5 (vi) each party's trademarks, trade names and service marks relating to FreeStyle Products, (vii) each party's promotional, marketing and advertising materials relating to the FreeStyle Products in the FreeStyle Territory, and (viii) changes in reimbursement policies and requirements in the European Territory relating to the distribution of the FreeStyle Products that have come to the attention of Disetronic. 7.9 Customer Support. Disetronic shall maintain knowledgeable ---------------- sales, marketing, and support personnel to provide instructions to Customers in the European Territory in the use of the FreeStyle Products. Upon Disetronic's request, at agreed times, TheraSense shall provide a reasonable level of assistance with technical information and training of Disetronic employees for the FreeStyle Products. Any expenses related to such activities shall be borne by Disetronic. Upon TheraSense's request and with Disetronic's consent, TheraSense may provide direct support to Disetronic's Customers and Disetronic will provide TheraSense with such Customers' names and information as TheraSense may reasonably request in order for TheraSense to provide such support to such Customers. 7.10 Medical Device Reporting. Pursuant to governmental medical device ------------------------ reporting regulations (e.g. the FDA's Medical Device Reporting (MDR) Regulations, the European Medical Device Vigilance Guidelines, and any other applicable medical device reporting regulations), TheraSense is required to report to the applicable agency information that reasonably suggests that a FreeStyle Product may have caused or contributed to the death or serious injury or has malfunctioned and that the device would be likely to cause or contribute to a death or serious injury if the malfunction were to recur. Each of TheraSense and Disetronic agree to supply to the other any such information promptly after becoming aware of it so that each of TheraSense and Disetronic can comply with governmental reporting requirements. It is understood and agreed that reporting to TheraSense shall be within twenty-four (24) hours to enable TheraSense to comply with FDA reporting requirements. Disetronic agrees to use its best efforts to promptly retrieve and return to TheraSense any individual FreeStyle Product which Disetronic has reported to TheraSense or a governmental agency. In the event that TheraSense is required by any regulatory agency to recall a FreeStyle Product, or if TheraSense or a regulatory authority initiates a FreeStyle Product recall, Disetronic shall cooperate with and assist TheraSense and its Authorized Representative in locating, and retrieving if necessary, recalled FreeStyle Products from Customers. Recalls shall be at Disetronic's cost and expense in the European Territory and at TheraSense's cost and expense in the U.S. Territory. Notwithstanding the foregoing, in the event that a recall is primarily due to a FreeStyle Product manufacturing defect then TheraSense shall provide to Disetronic replacement FreeStyle Product at no charge. Disetronic shall maintain records of sales of -18- Initials ____ ____ *** CONFIDENTIAL TREATMENT REQUESTED FreeStyle Products by lot number and by end user to whom such product was sold or otherwise transferred. Upon TheraSense's request, Disetronic shall provide TheraSense with access to such records in the event of a FreeStyle Product recall or other quality related issue. Disetronic shall be responsible for obtaining all records of its sales to end users in the event of a FreeStyle Product recall or other quality related issue. Disetronic shall make available to TheraSense for inspection Disetronic's process and records for adverse event and other regulatory reporting purposes at mutually agreed upon times and further shall ensure that Disetronic's processes comply with all applicable laws and regulations in the FreeStyle Territory. 7.11 Product Complaints. Disetronic shall promptly investigate and monitor ------------------ all Customer and/or regulatory complaints and/or correspondence concerning the use of the FreeStyle Products in the FreeStyle Territory. Disetronic shall advise TheraSense of all complaints alleging patient injury within twenty four (24) hours, and of all other complaints relating to the FreeStyle Products as promptly as possible but not more than five (5) business day following the date Disetronic receives such complaint. In addition, within fifteen (15) calendar days following the date Disetronic receives such complaint, Disetronic shall also provide TheraSense with a materially complete written report relating thereto. Any notice to TheraSense under this Section 7.11 shall be sent via facsimile and email to the attention of TheraSense's Vice President of Regulatory Affairs or to such other address or person as TheraSense may designate by notice. Receipt of both (i) a legible facsimile and (ii) an email shall constitute legal notice under this Section 7.11, and such notice shall be deemed given upon the latter of (i) or (ii) if not simultaneously dated. Without limiting the effectiveness of legal notice by facsimile and email as set forth above, if requested by the notified party, the notifying party shall also send such notice via overnight delivery. If Disetronic fails to submit timely any report pursuant to this Section 7.11, TheraSense may require that Disetronic pay in full prior to shipment of any orders by TheraSense until such report is submitted. 7.12 Notification of Unauthorized Use. Disetronic shall promptly notify -------------------------------- TheraSense in writing upon its discovery of any unauthorized use or infringement of the FreeStyle Products and/or TheraSense's patent, copyright, trademark or other intellectual property rights with respect thereto. TheraSense shall have the sole and exclusive right to bring an infringement action or proceeding against a third party, and, in the event that TheraSense brings such an action or proceeding, Disetronic shall cooperate and provide full information and assistance to TheraSense and its counsel in connection with any such action or proceeding; provided that TheraSense shall reimburse Disetronic for any expenses (including but not limited to reasonable attorney's fees) incurred by Disetronic. 7.13 Audits. TheraSense shall have the right to audit Disetronic solely ------ for the purpose of enabling TheraSense to comply with legal or regulatory requirements, including ISO requirements. 8. ADDITIONAL OBLIGATIONS OF THERASENSE 8.1 Supply of Products. TheraSense shall be responsible for the ------------------ manufacture of FreeStyle Products for sale to Disetronic. 8.2 New Versions of FreeStyle Products. TheraSense shall provide ---------------------------------- Disetronic with new versions of FreeStyle Products. Disetronic and TheraSense shall use their best efforts to agree on transfer prices for such new versions of FreeStyle Products. If the parties cannot agree on transfer prices then such new versions shall not be included on Exhibit A. For purposes of clarity, the parties understand that new versions of FreeStyle Products do not include any TheraSense products falling -19- Initials: ____ ____ outside of the scope of the FreeStyle Products as defined in Exhibit A, including without limitation implantable glucose sensors and glucose sensors coupled to insulin delivery devices. 8.3 Telephone Marketing and Technical Support. During TheraSense's normal ----------------------------------------- business hours, and in order to answer Disetronic's questions related to FreeStyle Products, TheraSense shall provide a reasonable level of telephone marketing and technical support to employees of Disetronic who have been trained by TheraSense or by Disetronic, provided that where the training was provided by Disetronic, such training received prior approval from TheraSense. 8.4 Intellectual Property Rights Maintenance-Patent and Trademark ------------------------------------------------------------- Prosecution. TheraSense will be responsible for maintaining all patents, ----------- TheraSense Trademarks and trade names and/or diligently prosecuting all patent applications covering the FreeStyle Products in the FreeStyle Territory. TheraSense shall use its reasonable commercial judgment in determining the level and extent of patent protection to pursue in the FreeStyle Territory. In the event TheraSense elects to abandon a particular issued patent or trademark registration covering a Freestyle Product in a particular country in the European Territory, TheraSense will notify Disetronic of such election. Disetronic shall have the right, within thirty (30) days of such notice, to elect to pay the on-going fees and costs associated with maintaining such patent or trademark registration. Notwithstanding the foregoing, any such patent or trademark registration shall be maintained in TheraSense's name. 8.5 Quality Systems Regulations. TheraSense will manufacture, design and --------------------------- label FreeStyle Products for the U.S. Territory in accordance with the then governing U.S. FDA Quality Systems Regulations, and for the European Territory in accordance with the then governing European Union Quality Systems Regulations. 8.6 Audits. Disetronic shall have the right to audit TheraSense solely for ------ the purpose of enabling Disetronic to comply with legal or regulatory requirements, including ISO requirements. 9. LIMITED LIABILITY TO DISETRONIC AND OTHERS. EXCEPT AS PROVIDED IN SECTION 13.7.7, THERASENSE'S LIABILITY ARISING OUT OF THIS AGREEMENT, THE TERMINATION THEREOF, AND/OR SALE OF THE FREESTYLE PRODUCTS SHALL BE LIMITED TO THE GREATER OF (1) ONE MILLION U.S. DOLLARS ($U.S. 1,000,000), OR (2) THE AMOUNT PAID BY DISETRONIC FOR FREESTYLE PRODUCTS UNDER THIS AGREEMENT. IN NO EVENT SHALL THERASENSE BE LIABLE TO DISETRONIC, ITS AFFILIATES, ITS DISTRIBUTORS AND/OR ANY OTHER ENTITY FOR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS, LOST PROFITS, OR ANY OTHER SPECIAL, CONSEQUENTIAL, OR INCIDENTAL DAMAGES ("INDIRECT DAMAGES"), INCLUDING ANY "INDIRECT DAMAGES" THAT DISETRONIC HAS AGREED TO INDEMNIFY, DEFEND AND/OR HOLD HARMLESS OF ITS AFFILIATES, SUBDISTRIBUTORS AND/OR ANY OTHER ENTITY, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY ARISING OUT OF THIS AGREEMENT WHETHER BASED IN CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE. THESE LIMITATIONS SHALL APPLY WHETHER OR NOT THERASENSE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN OR IN THE WARRANTY FOUND IN THE FREESTYLE PRODUCTS. 10. TRADEMARKS -20- Initials:____ ____ 10.1 License. In conjunction with the distribution and sale of each ------- FreeStyle Product, TheraSense hereby grants Disetronic a non-exclusive license in the U.S. Territory and an exclusive license in the European Territory to use the relevant TheraSense Trademarks, identified on Exhibit D as modified by TheraSense pursuant to this Article 10, in the FreeStyle Territory during the Term. Notwithstanding the foregoing, TheraSense reserves the right to use such TheraSense Trademarks (a) outside the European Territory, (b) inside the European Territory with respect to passive sales and CGMS products pursuant to Section 2.3 (including any promoting, marketing, and/or selling such CGMS product), and (c) to promote, market, and/or sell any products, other than FreeStyle Products in the European Territory. Such license(s) shall terminate at the earlier of (i) the end of the term of this Agreement, or (ii) the termination of Disetronic's right to distribute the FreeStyle Products. TheraSense reserves the right to modify TheraSense Trademarks or substitute alternative marks for any or all of the TheraSense Trademarks at any time upon ninety (90) days prior written notice where such notice is commercially reasonable, and in no event upon less than thirty (30) days prior written notice. In addition, Disetronic agrees to use those TheraSense Trademarks in connection with FreeStyle Products as may be designated in writing by TheraSense. TheraSense shall retain the worldwide right to use such TheraSense Trademarks for its own co-marketing efforts and for the distribution/sale of other products. Disetronic acknowledges that except as expressly provided herein, TheraSense grants Disetronic no other rights, title, or interest under or relating to TheraSense's trademarks, trade names or service marks. 10.2 Use. During the term of this Agreement, Disetronic shall have the --- right to indicate to the public that it is an authorized distributor of the FreeStyle Products and to advertise and promote to Customers (within the FreeStyle Territory) the FreeStyle Products under the TheraSense Trademarks. Disetronic shall not alter or remove any Trademark applied to the FreeStyle Products. Except as set forth in this Article 10, nothing contained in this Agreement shall grant to Disetronic any right, title or interest in the TheraSense Trademarks, whether or not specifically recognized or perfected under applicable laws, and Disetronic irrevocably assigns to TheraSense all such right, title, and interest, if any, in any TheraSense Trademarks. At no time during or after the term of this Agreement shall Disetronic challenge or assist others to challenge the TheraSense Trademarks or the registration thereof or attempt to register any trademarks, marks or trade names confusingly similar to those of TheraSense. 10.3 Approval of Representations. All representations of the TheraSense --------------------------- Trademarks that Disetronic intends to use (1) shall first be submitted to TheraSense for approval (which shall not be unreasonably withheld) of design, color, and other details, or (2) shall be exact copies of those used by TheraSense. Disetronic agrees to fully comply with all reasonable guidelines, if any, communicated by TheraSense concerning use of the TheraSense Trademarks. Disetronic may not mark the FreeStyle Products packaging materials with the trademarks of any third party without the prior written consent of TheraSense; which consent may be withheld at TheraSense's sole discretion. If any of TheraSense's Trademarks are to be used in conjunction with another trademark on or in relation to the FreeStyle Products, then the TheraSense Trademarks shall be presented at least equally legibly, equally prominently, and of equal or greater size than the other but nevertheless separated from the other so that each appears to be a mark in its own right, distinct from the other mark. 10.4 TheraSense use of Trademarks. During the term of this Agreement, ---------------------------- TheraSense shall not use a TheraSense Trademark on any in vitro glucose monitoring product distributed for sale in the European Territory, other than a FreeStyle Product, except as provided in Section 2.3. TheraSense reserves the right to use all other TheraSense marks, trademarks, trade names and service marks on any and all TheraSense product. -21- Initials:____ ____ 11. CONFIDENTIALITY 11.1 Except as expressly provided herein, the parties agree that for five (5) years after the disclosure of any Confidential Information by one (1) of the parties to the other hereto pursuant to this Agreement, the receiving party shall keep completely confidential and shall not publish or otherwise disclose and shall not use for any purpose except for the purposes contemplated by this Agreement such Confidential Information, except that to the extent that it can be established by the receiving party by competent proof that such Confidential Information: (a) was already known to the receiving party, other than under an obligation of confidentiality, at the time of disclosure; (b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving party; (c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving party in breach of this Agreement; (d) was independently developed by the receiving party as demonstrated by documented evidence prepared contemporaneously with such independent development; or (e) was subsequently lawfully disclosed to the receiving party by a person other than a party hereto. 11.2 Permitted Use and Disclosures. Each party hereto may use or ----------------------------- disclose information disclosed to it by the other party to the extent such use or disclosure is reasonably necessary in complying with applicable governmental regulations or otherwise submitting information to tax or other governmental authorities, conducting clinical trials, or otherwise exercising its rights hereunder, provided that if a party is required to make any such disclosure of another party's confidential information, other than pursuant to a confidentiality agreement, it will give reasonable advance notice to the latter party of such disclosure and, save to the extent inappropriate in the case of patent applications, will use its best efforts to secure confidential treatment of such information prior to its disclosure (whether through protective orders or otherwise). 11.3 Public Disclosure. Except as otherwise required by law, neither ----------------- party shall issue a press release or make any other public disclosure of the terms of this Agreement without the prior approval of such press release or public disclosure. Each party shall submit any such press release or public disclosure to the other party, and the receiving party shall have ten (10) business days to review and approve any such press release or public disclosure, which approval shall not be unreasonably withheld. If the receiving party does not respond in writing within such ten (10) business day period, the press release or public disclosure shall be retransmitted by the issuing party to the attention of the President of the receiving party. If the receiving party does not respond to such retransmission within five (5) business days the press release or public disclosure shall be deemed approved. 11.4 Confidential Terms. Except as expressly provided herein, each ------------------ party agrees not to disclose any terms of this Agreement to any third party without the consent of the other party; provided, disclosures may be made as required by securities or other applicable laws, or on a strict need to know -22- Initials:____ ____ basis to actual or prospective investors, or to a party's accountants, attorneys and other professional advisors; provided further, however, prior to making any disclosure regarding securities or other applicable laws, the terms of this Agreement shall be redacted by mutual agreement of the parties. 12. INDEMNITY 12.1 Indemnification of Disetronic. ----------------------------- 12.1.1 TheraSense shall indemnify, defend, and hold harmless Disetronic, its Affiliates and Subdistributors, and their directors, officers and employees (each an "Disetronic Indemnitee") from and against any and all liabilities, damages, losses, costs or expenses (including attorneys' fees and other expenses of litigation and/or arbitration) (a "Liability") resulting from a claim, suit or proceeding made or brought by a third party against a Disetronic Indemnitee arising from (i) defects in materials, workmanship, manufacturing, labeling or packaging of the FreeStyle Products by TheraSense if such defects can be attributed to TheraSense's responsibility and could not be detected by Disetronic through use of due diligence in the tests or inspection of the FreeStyle Products before its delivery to Customers or end users, and/or (ii) any claim of noncompliance by TheraSense with the U.S. or foreign laws and regulations in the FreeStyle Territory, except to the extent caused by a Disetronic Indemnitee. 12.1.2 TheraSense shall defend, or at its option settle, any claims brought against Disetronic by third parties as a result of any infringement by the FreeStyle Products of any U.S. or foreign patent, trademark, trade name, service mark, or copyright existing under the laws of the FreeStyle Territory, and shall reimburse Disetronic for any judgments, damages, cost or expenses payable by Disetronic to a party bringing such action together with reasonable attorneys' fees relating thereto. Disetronic agrees that TheraSense shall be relieved of its obligations under this Section 12.1.2 unless Disetronic notifies TheraSense promptly in writing of and gives TheraSense proper and full information and assistance to settle or defend any such claims. If the FreeStyle Products, or any part thereof, are, or in the opinion of TheraSense become, the subject of any claim for infringement of such third party patent, trademark, trade name, service mark, or copyrights, or if it is adjudicatively determined that the FreeStyle Products, or any part thereof, infringe any such third party patent, or copyright, then TheraSense may, at its option and expense, either (i) procure for Disetronic the right under such third party patent, trademark, trade name, service mark or copyright to sell or use, as appropriate, the FreeStyle Products (or in the case of trademark infringement, substitute a different trademark, trade name or service mark), or (ii) replace or modify the FreeStyle Products or parts thereof in Disetronic's possession, with other suitable and reasonably equivalent technology or parts so that the FreeStyle Products become non-infringing or (iii) if it is not commercially reasonable to take the actions specified in items (i) or (ii) immediately preceding, terminate this Agreement with ninety (90) days written notice. 12.1.3 Notwithstanding the provisions of Section 12.1.2 above, TheraSense assumes no liability for (i) infringements relating to any assembly, circuit, combination, method or process in which any of the FreeStyle Products may be used where the FreeStyle Products when used alone would not result in such an infringement; (ii) infringements involving the modification or servicing of the FreeStyle Products, or any part thereof, unless such modification or servicing was done by TheraSense; (iii) any trademark infringements involving any marking or branding of the FreeStyle Products not applied by TheraSense or involving any marking or branding applied at the request of Disetronic or any marking or branding with the Disetronic trademarks; or (iv) the modification of any FreeStyle Products other than with TheraSense's written consent. -23- Initials:____ ____ 12.1.4 The foregoing provisions of this Section 12.1 state the entire liability and obligations of TheraSense, and the exclusive remedy of Disetronic and its Customers, with respect to any alleged product liability claim related to the FreeStyle Products, or any alleged infringement of any patents, copyrights, trademarks or other intellectual property rights by the FreeStyle Products or any part thereof. 12.2 Indemnification of TheraSense. ----------------------------- 12.2.1 Disetronic shall indemnify, defend and hold harmless TheraSense and its directors, officers, employees and agents and the successors and assigns of any of the foregoing (each a "TheraSense Indemnitee") from any and all damages, losses, costs, liabilities or expenses (including, without limitation, attorneys' fees and other expenses of litigation and/or arbitration) (a "Liability") resulting from a claim, suit or proceeding made or brought by a third party against a TheraSense Indemnitee arising out of (a) defects in the FreeStyle Products sold by Disetronic except those defects which can be attributed to TheraSense, (b) FreeStyle Product claims, whether written or oral, made by Disetronic in its advertising, promotion, sale, or distribution of any of the FreeStyle Products, (c) the labeling, packaging, storage or other handling of the FreeStyle Products by Disetronic, or (d) any claim of noncompliance by Disetronic with the U.S. or foreign laws and regulations in the FreeStyle Territory, except to the extent caused by a TheraSense Indemnitee. 12.2.2 Disetronic shall defend, or at its option settle, any claims brought against TheraSense by third parties as a result of any infringement by the FreeStyle Products of any U.S. or foreign trademark, trade name, or service mark existing under the laws of the FreeStyle Territory, and shall reimburse TheraSense for any judgments, damages, cost or expenses payable by TheraSense to a party bringing such action together with reasonable attorneys' fees relating thereto as a result of marking or branding the FreeStyle Products with Disetronic trademarks. TheraSense agrees that Disetronic shall be relieved of its obligations under this Section 12.2.2 unless TheraSense notifies Disetronic promptly in writing of and gives Disetronic proper and full information and assistance to settle or defend any such claims. If the FreeStyle Products, or any part thereof, are, or in the opinion of Disetronic become, the subject of any claim for infringement of such third party trademarks, trade names or service marks, or if it is adjudicatively determined that the FreeStyle Products, or any part thereof, infringe any such third party trademarks, trade names or service marks, Disetronic may substitute a new Disetronic trademark, trade name or service mark to be used to sell or use, as appropriate, the FreeStyle Products. 12.2.3 The foregoing provisions of this Section 12.2 state the entire liability and obligations of Disetronic, and the exclusive remedy of TheraSense and its Customers, with respect to any alleged infringement of any trademarks, trade names or service marks by the FreeStyle Products or any part thereof. 13. TERM AND TERMINATION 13.1 Initial Term. The initial term of this Agreement shall commence on ------------ the Effective Date and shall continue in force until five (5) years from the Effective Date, unless terminated earlier under the provisions of this Article 13 (the "Initial Term"). At the end of the Initial Term, this Agreement shall automatically renew for subsequent three-year terms unless written notice of termination is given by either party to the other party at least one (1) year prior to the Agreement's then-current expiration date. -24- Initials:____ ____ 13.2 Termination for Cause. If either party defaults in the performance --------------------- of any provision of this Agreement, then the non-defaulting party may give written notice to the defaulting party that if the default is not cured within ninety (90) days the Agreement will be terminated. If the non-defaulting party gives such notice and the default is not cured during the ninety (90) day period, then the Agreement shall automatically terminate at the end of that period. In addition, this Agreement shall automatically terminate if Disetronic fails to pay TheraSense in accordance with Sections 3.1, 3.2 and/or 3.3 and such failure shall have continued for thirty (30) days after written notice thereof was provided to Disetronic by TheraSense. 13.3 Termination for Disetronic and TheraSense Insolvency. This ---------------------------------------------------- Agreement may be terminated by TheraSense or Disetronic effective immediately upon written notice to the other party (i) upon the institution by or against the other party of insolvency, receivership or bankruptcy proceedings or any other proceedings for the settlement of the other party's debts under United States, California or Swiss law, unless such other party timely contests such proceedings, (ii) upon the other party's making an assignment for the benefit of creditors, or (iii) upon the other party's dissolution or ceasing to do business. 13.4 Termination Relating to ***. TheraSense may, at its sole --------------------------- discretion, terminate this Agreement with *** notice if *** should appear or any ***. 13.5 Termination Relating to Sales Outside FreeStyle Territory. In --------------------------------------------------------- addition to any other rights or remedies available to TheraSense, TheraSense shall have the right to terminate this Agreement upon thirty (30) days written notice to Disetronic if TheraSense has reasonable belief as established by contemporaneous written documentation that (i) Disetronic has directly or indirectly resold or reshipped any of the FreeStyle Products outside the FreeStyle Territory in commercial quantities, provided that Disetronic knew or should have known that such FreeStyle Products were ultimately being resold or reshipped outside the FreeStyle Territory; or (ii) Disetronic has sold FreeStyle Product in the U.S. Territory that was purchased by Disetronic for sale in the European Territory. During such thirty (30) day notice period, Disetronic shall have the opportunity to dispute such claim and the parties agree to discuss in good faith the resolution thereof. 13.6 Termination Relating to Acquisition. The parties agree that ----------------------------------- notwithstanding Section 15.3 below: (a) Disetronic may, upon three (3) months prior written notice to TheraSense, terminate this Agreement if an entity acquires all or substantially all of TheraSense's business assets to which this Agreement pertains, whether by merger, acquisition, sale or otherwise and such entity sells or offers for sale insulin pumps, infusion sets or pens; and (b) TheraSense may, upon three months prior written notice to Disetronic, terminate this Agreement if an entity acquires all or substantially all of Disetronic's business assets to which this Agreement pertains, whether by merger, acquisition, sale or otherwise and such entity sells or offers for sale products designed for glucose monitoring. Without limiting the foregoing, each party shall provide prompt written notice to the other party in the event that such party has been acquired. Within ninety (90) days of such notice, the notified party shall elect whether to terminate this Agreement as set forth above. 13.7 Effect of Termination. --------------------- -25- Initials:____ ____ *** CONFIDENTIAL TREATMENT REQUESTED 13.7.1 Accrued Obligations. Expiration or termination of this ------------------- Agreement for any reason shall not release any party hereto from any liability which, at the time of such termination, has already accrued to the other party or which is attributable to a period prior to such termination nor preclude either party from pursuing any rights and remedies it may have hereunder or at law or in equity with respect to any breach of this Agreement. It is understood and agreed that monetary damages may not be a sufficient remedy for any breach of this Agreement and that the non-breaching party may be entitled to injunctive relief as a remedy for any such breach. Such remedy shall not be deemed to be the exclusive remedy for any such breach of this Agreement, but shall be in addition to all other remedies available at law or in equity. 13.7.2 Inventory. Within thirty (30) days after the effective date --------- of termination of this Agreement, Disetronic shall use its reasonable efforts to provide TheraSense with a complete inventory of FreeStyle Products in Disetronic's possession, in transit to Disetronic from TheraSense or otherwise in Disetronic's control. Upon any expiration or other termination of this Agreement, TheraSense may inspect Disetronic's FreeStyle Product inventory and audit Disetronic's records. 13.7.3 Return of Materials. All trademarks, marks, trade names, ------------------- patents, copyrights, designs, drawings, formulas or other data, photographs, samples, literature, and sales and promotional aids of every kind related to the FreeStyle Products or provided by TheraSense shall remain the property of TheraSense. Within thirty (30) days after the effective date of termination of this Agreement, Disetronic shall destroy all tangible items bearing, containing, or contained in, any of the foregoing, in its possession or control and provide written certification of such destruction, or prepare such tangible items for shipment to TheraSense, as TheraSense may direct, at TheraSense's expense. Disetronic shall not make or retain any copies of any confidential items or information which may have been entrusted to it. Notwithstanding the foregoing, Disetronic may retain only those samples and documents required for Disetronic to comply with legal, regulatory and product liability requirements then in effect. Disetronic shall provide to TheraSense a list of all such materials required to be kept in Disetronic's possession. Effective upon the termination of this Agreement, Disetronic shall cease to use all trademarks and trade names of TheraSense. During the term of this Agreement and after any termination or expiration of this Agreement, TheraSense shall have the right to continue to use and disclose for any purpose any and all clinical trial results and other data relating to the FreeStyle Products. 13.7.4 Products. In the event of breach by Disetronic of this -------- Agreement, Disetronic shall cease selling any FreeStyle Products and shall destroy all remaining inventory at the time of such breach. Subject to the foregoing, upon expiration of this Agreement, or termination wholly unrelated to any breach of this Agreement by Disetronic, Disetronic may continue selling in the FreeStyle Territory any FreeStyle Products which were in Disetronic's inventory at the time of such expiration or termination of the Agreement. 13.7.5 Limitation on Liability. Subject to Section 13.7.7, in the ----------------------- event of termination by either party in accordance with any of the provisions of this Agreement, neither party shall be liable to the other because of such termination, for compensation, reimbursement or damages on account of the loss of prospective profits or anticipated sales or on account of expenditures, investments, leases, inventory or commitments in connection with the business or goodwill of TheraSense or Disetronic. 13.7.6 Transition. Upon termination of this Agreement, Disetronic ---------- shall (i) diligently cooperate with TheraSense to effect a smooth and orderly transition in the sale of FreeStyle Products in -26- Initials:____ ____ the FreeStyle Territory, and (ii) refer all FreeStyle Product Customer support inquiries to TheraSense, or to TheraSense's then-authorized customer support provider. 13.7.7 Payment Upon Termination. Within thirty (30) days of the ------------------------ effective date of termination of this Agreement, TheraSense shall pay to Disetronic the Payment. It is understood and agreed that such Payment shall only be due in the event this Agreement is permissively terminated by TheraSense (by providing written notice to Disetronic) pursuant to Section 13.1, or terminated by Disetronic pursuant to Section 13.2 due to TheraSense's breach or pursuant to Section 13.3 due to TheraSense's insolvency. In addition, within thirty (30) days of termination or expiration of this Agreement, Disetronic shall deliver to TheraSense all Sales and Inventory Records (as described in Section 7.1) and a report which shall identify all outstanding leads for sales of Products and a description of the status of any other sales activities regarding the FreeStyle Products. Disetronic and TheraSense agree to observe the applicable privacy laws relating to the data provided. TheraSense agrees that it shall not provide such data to any company producing and distributing insulin pumps and/or infusion sets. In the event TheraSense elects to develop and/or commercialize an insulin pump and/or infusion set, TheraSense also agrees that is shall not use such data in conjunction with such development and/or commercialization. 13.7.8 No Renewal, Extension or Waiver. Acceptance of any order ------------------------------- from, or sale of, any FreeStyle Products to Disetronic after the date of termination of this Agreement shall not be construed as a renewal or extension hereof, or as a waiver of termination by TheraSense. 13.8 Survival. The provisions of Sections 2.5, 3.2, 3.3.3, 3.4, 4.6, -------- 4.7.2, 7.2, 7.4.1(a)(ii), 7.10, 7.11, 10.2, 13.7 and 13.8, Articles 5, 9, 11, 12 (to the extent such claims arise from acts or omissions that occurred out of Products supplied to Disetronic prior to expiration or termination of this Agreement), 14 and 15, and Exhibits F and G shall survive the expiration or termination of this Agreement for any reason. All other rights and obligations of the parties shall cease upon termination of this Agreement. 14. DISPUTE RESOLUTION 14.1 Mediation. If a dispute arises out of or relates to this contract, --------- or the breach thereof, including a dispute noticed under Sections 13.2 through 13.5, the parties agree that before filing any claim in arbitration as set forth below, the parties shall first to try in good faith to settle the dispute by engaging in a meeting in Minneapolis, Minnesota, for a minimum of forty-eight (48) hours, where including without limitation, the CEO's (or the equivalent thereof) of both parties shall be present. Such meeting shall take place within twenty (20) days of any notice of dispute under this Agreement. 14.2 Arbitration. Subject to Section 14.1, if the parties are unable to ----------- resolve a Dispute, the Dispute shall be settled by binding arbitration conducted in Minneapolis, Minnesota pursuant to the Commercial Arbitration Rules of the American Arbitration Association then in effect by one (1) arbitrator appointed in accordance with such rules. The decision and/or award rendered by the arbitrator shall be written (specifically stating the arbitrator's findings of facts as well as the reasons upon which the arbitrator's decision is based), final and nonappealable (except for an alleged act of corruption or fraud on the part of the arbitrator) and may be entered in any court of competent jurisdiction. The parties agree that, any provision of applicable law notwithstanding, they will not request, and the arbitrator shall have no authority to award, punitive or exemplary damages against any party. The arbitrator shall have the authority to grant injunctive relief and order specific performance. The arbitrator shall determine what discovery will be permitted, consistent with the goal of limiting the cost and time which the parties -27- Initials:____ ____ must expend for discovery; provided the arbitrator shall permit such discovery as they deem necessary to permit an equitable resolution of the dispute. Evidence need not be obtained in the presence of the arbitrator. At the arbitration hearing, each party may make written and oral presentations to the arbitrator, present testimony and written evidence, and examine witnesses. The costs of any arbitration, including administrative fees and fees of the arbitrator, shall be shared equally by the parties. Each party shall bear the cost of its own attorneys' fees and expert fees. The parties and the arbitrator shall use their best efforts to complete any such arbitration within one (1) year after the appointment of the Panel, unless a party can demonstrate to the arbitrator that the complexity of the issues or other reasons warrant the extension of the time table. In such case, the Panel may extend such time table as reasonably required. The arbitrator shall, in rendering its decision, apply the substantive law of the State of California, without regard to its conflict of laws provisions, except that the interpretation of and enforcement of this Section 14.2 shall be governed by the U.S. Federal Arbitration Act. Pending the establishment of the arbitral tribunal or pending the arbitral tribunal's determination of the merits of the controversy, either party may seek from a court of competent jurisdiction any interim or provisional relief that may be necessary to protect the rights or property of that party. 15. MISCELLANEOUS 15.1 Governing Law. This Agreement, any dispute arising therefrom, and ------------- any proceeding subject to Article 14, shall be governed by and construed in accordance with the laws of the State of California, without reference to principles of conflicts of laws. 15.2 Independent Contractors. The relationship of the parties hereto is ----------------------- that of independent contractors. The parties hereto are not deemed to be agents, partners or joint venturers of the other for any purpose as a result of this Agreement or the transactions contemplated thereby. 15.3 Assignment. Subject to Section 13.6, the parties agree that their ---------- rights and obligations under this Agreement shall not be delegated, transferred or assigned to a third party without prior written consent of the other party hereto; provided TheraSense may assign this Agreement, without Disetronic's consent (a) to its Affiliates, and (b) to an entity that acquires all or substantially all of the business of assets of TheraSense to which this Agreement pertains, whether by merger, reorganization, acquisition, sale or otherwise. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. 15.4 Notices. Any required notices hereunder shall be given in writing ------- by email and by facsimile at the address of each party below, or to such other address as either party may substitute by written notice. Notice shall be deemed served when delivered or, if delivery is not accomplished by reason or some fault of the addressee, when tendered. If to Disetronic: Disetronic Handels AG Brunnmattstrasse 6 CH-3401 Burgdorf Switzerland Attention: Senior Corporate Attorney Swiss Telephone Number: (+41) 34 427-1111 Website: www.disetronic.com If to TheraSense: TheraSense, Inc. -28- Initials:____ ____ 1360 South Loop Road Alameda, CA 94502 USA Attention: Vice President, Business Development U.S. Telephone Number: (510) 749-5400 Website: www.therasense.com 15.5 Force Majeure. Neither party shall lose any rights hereunder or ------------- be liable to the other party for damages or losses (except for payment obligations) on account of failure of performance by the defaulting party if the failure is occasioned by war, strike, fire, Act of God, earthquake, flood, lockout, embargo, governmental acts or orders or restrictions, or any other reason where failure to perform is beyond the reasonable control and not caused by the negligence, intentional conduct or misconduct of the nonperforming party and such party has exerted all reasonable efforts to avoid or remedy such force majeure; provided, however, that in no event shall a party be required to settle any labor dispute or disturbance. 15.6 Insurance. Each party shall, at all times during the term of this --------- Agreement, maintain a product liability insurance policy with commercially reasonable amounts of insurance in annual amounts of no less than Five Million U.S. Dollars (U.S. $5,000,000) per occurrence, and each party shall list the other and its Affiliates as named insureds. 15.7 Advice of Counsel. TheraSense and Disetronic have each consulted ----------------- counsel of their choice regarding this Agreement, and each acknowledges and agrees that this Agreement shall not be deemed to have been drafted by one party or another and will be construed accordingly. 15.8 Compliance with Laws. Each party shall furnish to the other party -------------------- any information requested or required by that party during the term of this Agreement or any extensions hereof to enable that party to comply with the requirements of any U.S. or foreign, state and/or government agency. 15.9 Further Assurances. At any time or from time to time on and after ------------------ the date of this Agreement, Disetronic shall at the request of TheraSense (i) deliver to TheraSense such records, data or other documents consistent with the provisions of this Agreement, (ii) execute, and deliver or cause to be delivered, all such consents, documents or further instruments of transfer or license, and (iii) take or cause to be taken all such actions, as TheraSense may reasonably deem necessary or desirable in order for TheraSense to obtain the full benefits of this Agreement and the transactions contemplated hereby. 15.10 Severability; Waiver. In the event that any provisions of this -------------------- Agreement are determined to be invalid or unenforceable by a court of competent jurisdiction, the remainder of the Agreement shall remain in full force and effect without said provision. The parties shall in good faith negotiate a substitute clause for any provision declared invalid or unenforceable, which shall most nearly approximate the intent of the parties in entering this Agreement. The failure of a party to enforce any provision of the Agreement shall not be construed to be a waiver of the right of such party to thereafter enforce that provision or any other provision or right. 15.11 Entire Agreement; Modification. This Agreement sets forth the ------------------------------ entire agreement and understanding of the parties with respect to the subject matter hereof, and supersedes all prior discussions, agreements and writings in relating thereto. This Agreement may not be altered, amended or modified in any way except by a writing signed by both parties. -29- Initials:____ ____ 15.12 Counterparts. This Agreement may be executed in two counterparts, ------------ each of which shall be deemed an original and which together shall constitute one instrument. 15.13 Future Cooperation. The parties agree to discuss development of a ------------------ broader relationship between them, potentially including other products not covered by this Agreement, such as implantable glucose sensors and glucose monitoring devices coupled with insulin delivery devices. The terms of such broader relationship, if any, shall be subject to the negotiation of a separate agreement. IN WITNESS WHEREOF, Disetronic and TheraSense have executed this Agreement by their respective duly authorized representatives. DISETRONIC HANDELS AG THERASENSE, INC. /s/ Signature /s/ Signature By:____________________________ By: __________________________ Print Name:____________________ Print Name:___________________ Title:_________________________ Title: _______________________ -30- Initials:____ ____ CONFIDENTIAL 13 September 2000 EXHIBIT A FREESTYLE PRODUCTS As of the Effective Date, The FreeStyle Products include the following six (6) products: 1. "System Kit" shall mean a product that consists of 1 Meter, 10 Strips, 1 ---------- Lancing Device, 1 Finger Cap, 10 Lancets, 1 Carrying Case, 1 Log Book, 1 Quick Reference Card, 1 Owners Booklet; where "Finger Cap" shall mean cap for the ---------- Lancing Device designed for lancing the finger rather than the arm. 2. "Lancer" shall mean a disposable head placed in a lancing device for use ------ in piercing the patient's skin. 3. "Control Solution" shall mean a glucose solution for testing the ---------------- operation of the FreeStyle Meter and Strips. 4. "Lancing Device" shall mean a lancing device which is used to bring -------------- blood to the surface of a patient's skin and which is physically separate from the Meter. 5. "Meter" shall mean a meter whose sole function is to coulometrically ----- measure blood glucose levels. 6. "Strips" shall mean a package of strips which are located into the Meter and used to acquire a blood sample of less than 0.4 microliters from the surface of a patient's skin. (The Strips are currently offered in packages of 50 and 100; such quantities are subject to change). CONFIDENTIAL 13 September 2000 EXHIBIT B TRANSFER PRICE Pricing Details System Kit ---------- The price of a System Kit for sale in the FreeStyle Territory is *** (includes 1 Meter, 10 Strips, 1 Lancing Device, 1 Finger Cap, 10 Lancets, 1 Carrying Case, 1 Log Book, 1 Quick reference Card, 1 Owners Booklet). Strips ------ The price of Strips ordered for the US Territory is ***. The price of Strips ordered for the European Territory is: Annual Sales Volume Price (number of Strips) Per Strip ------------------- --------- *** *** *** *** *** *** *** *** *** *** *** *** Lancing Devices, Lancets and Control Solution --------------------------------------------- The following prices are valid for the following products for sale in the FreeStyle Territory when not purchased as part of a System Kit: Lancing Devices *** per lancing device Lancets *** per box if 100 lancets Control Solution *** per bottle of control solution *** Confidential treatment requested Initials: -------- CONFIDENTIAL 13 September 2000 EXHIBIT C ANNUAL MINIMUM PURCHASE OBLIGATION FOR THE EUROPEAN TERRITORY Minimum Calendar Year Purchase Obligation ------------- ------------------- *** *** Confidential treatment requested. CONFIDENTIAL 13 September 2000 EXHIBIT D THERASENSE TRADEMARKS TheraSense . EU Registration #00960120 filed October 19, 1998 . US serial number 75/542,727 filed August 25, 1998 . Canada serial number 894,025 filed October 22, 1998 FreeStyle (registrations pending) . US serial number 75/697,764 filed May 4, 1999 The Technology of Caring (registration pending) . U.S. serial number 75/793,921 filed September 7, 1999 NanoSample . Not filed TheraSense agrees to provide Disetronic with the registration numbers and the countries and the countries to which they correspond as such information becomes available. TheraSense will use commercially reasonable efforts to register the above trademarks in the European territory. TheraSense and Disetronic shall agree by October 31, 2000 on the TheraSense brand name under which the FreeStyle Products will be marketed in the European Territory. TheraSense shall promptly apply to register the TheraSense brand name or secure the necessary rights to use the TheraSense brand name. Disetronic agrees to assign all of its right, title and interest, if any, in such TheraSense brand name to TheraSense. Such brand name shall be added to Exhibit D. In the event that TheraSense is precluded from using the selected TheraSense brand name then TheraSense and Disetronic shall select a new TheraSense brand name under which the FreeStyle Products will be marketed in the European Territory. If TheraSense notifies Disetronic of such new TheraSense brand name on or before January 31, 2001 then Disetronic shall bear all of its own costs associated with the change to the new TheraSense brand name. If TheraSense notifies Disetronic of such new TheraSense brand name after January 31, 2001 then TheraSense shall reimburse Disetronic for Disetronic's direct costs associated with necessary changes in the Promotional Materials and Programs, up to a limit of one hundred and fifty thousand U.S. dollars ($150,000). -4- Initials: ----- ----- CONFIDENTIAL 13 September 2000 EXHIBIT E PRODUCT SPECIFICATIONS Product Performance Criteria The FreeStyle Products shall meet the following specification when tested using the test procedures in the attached TheraSense document #DOC00482 "FreeStyle Strip Verification report", as this document may be updated by TheraSense. Hematocrit range *** Operating temperature range *** Acetaminophen error *** Ascorbate error *** User error *** Glucose range *** Accuracy *** Lot Acceptance Criteria The Strips shall meet the following specifications when tested by the Receiving Party using the test procedures in the attached TheraSense document $DOC00345 "FreeStyle Strip Calibration Procedure", as this document may be updated by TheraSense. RMS standard deviation at low glucose level *** RMS coefficient of variation at medium glucose level *** RMS coefficient of variation at high glucose level *** TNO Precision Guidelines Until such time as TheraSense obtains the IVD-CE mark for the FreeStyle Products, all Strips shipped by TheraSense to Disetronic for sale in the European Territory shall conform (in TheraSense's release testing) with the guideline on permissible coefficient of variation specified in paragraph 5.2.2 (b) of the TNO Centre for Medical Technology's publication entitled "Quality Guideline, Non-Implantable Portable Blood Glucose Monitors for Self Monitoring" dated February 1991. After TheraSense obtains the IVD-CE mark for the FreeStyle products, TheraSense will comply with the relevant, applicable IVD-CE mark criteria as required. *** Confidential treatment requested EX-10.17 9 dex1017.txt LICENSE AGREEMENT THERASENSE AND UNILEVER [CONFIDENTIAL TREATMENT REQUESTED, CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION] AGREEMENT EXHIBIT 10.17 This Agreement is made on 10 February 2000 between: UNILEVER PLC, an English company having its principal place of business at Unilever House, Blackfriars, London EC4P 4BQ, England, and UNILEVER NV a Netherlands company having its principal place of business at Weena 455, 3013 AL Rotterdam, Netherlands (hereinafter collectively "Unilever") and: THERASENSE INC, a California corporation having its principal place of business at 1360 South Loop Road, Alameda, California 94502, United States (hereinafter "Licensee") WHEREAS: ------- A. Unilever is in possession directly or indirectly of certain Patent Rights relating to biosensors. B. The Licensee has requested a non-exclusive licence under the Unilever Patent Rights, and the parties have agreed thereto on the terms hereinafter set forth. NOW THEREFORE IT IS HEREBY AGREED: --------------------------------- 1. DEFINITIONS: ----------- 1.1 "Affiliate" shall mean any company which owns, is owned by or is commonly owned with the Licensee. Ownership shall mean the control of the voting rights attaching to over 50% of the voting shares of the company concerned. - 2 - 1.2 "Patent Rights" shall mean the Unilever patent applications and patents set forth in the Schedule hereto, and patents based on or claiming priority from any of those patent applications and patents, as well as any substitution, division, continuation, continuation-in-part, re-examination or reissue thereof. 1.3 "Territory" shall mean all countries where the Patent Rights are valid and subsisting. 1.4 "Licensed Product" shall mean any electrochemical biosensor for analysis of markers for diabetes in a liquid sample, covered by or made in accordance with, or adapted for use as claimed in any granted patent or published patent application within the Patent Rights. 1.5 The "Effective Date" shall mean the date of this Agreement. 1.6 "First Commercial Sale" shall mean the first offering for sale by the Licensee or its Affiliates of Licensed Product for immediate delivery to an unrelated third party, and shall not include the building up of inventories at Licensee or Affiliates or pre-introduction announcements of anticipated products of Licensee. 2. GRANT OF LICENCE ---------------- 2.1 Unilever hereby grants to the Licensee and Licensee hereby accepts with effect from the Effective Date a non-exclusive *** licence under the Patent Rights in the Territory to make, have made for it, use and sell Licensed Products according to the terms set out in this Agreement. 2.2 There will be no right to sub-licence without prior written consent of Unilever. *** Confidential Treatment Requested. - 3 - 2.3 The licence to the Licensee shall not be assigned or otherwise transferred in whole or in part to any third party, except that the rights and obligations of the Licensee may be exercised by Affiliates, provided that the Licensee will remain wholly responsible and accountable to Unilever for the performance by each Affiliate of any such rights and obligations and the Licensee shall inform Unilever in writing before any Affiliate is nominated to exercise such rights and obligations. 3. *** ROYALTY FEE ----------------- 3.1 In consideration of the licence rights to be granted by Unilever in Clause 2 hereof, Licensee will pay to Unilever by bank transfer to the account identified in Clause 4.1 hereof, non-returnable payments as follows: *** upon signature of this Agreement; *** within 10 days after the date of the First Commercial Sale, or on 15th March 2000, whichever shall be earlier; *** *** *** The Licensee shall promptly notify Unilever in writing to the address in clause 6.3, the date when the second payment is to be made. *** Confidential Treatment Requested -4- 4. ACCOUNTS -------- 4.1 All payments due hereunder shall be made in US Dollars by bank credit transfer to: Correspondent Bank: Citibank, New York Swift address: *** For the account of: CITIBANK, London Swift address: *** In favour of: Unilever UKCR Account: *** or otherwise as Unilever shall direct. Unilever NV hereby confirm that Unilever PLC may make a valid and binding receipt on its behalf. Any payments which are sent to Unilever more than fifteen (15) days beyond their due dates as indicated in clause 3.1, shall bear interest at fifteen (15) percent per annum from the date on which payment was due to the date on which payment is received by Unilever. 4.2 All payments provided for under this Agreement shall be made to Unilever in full, provided however that in the event and only to the extent that any sum payable hereunder is subject to direct taxes levied or assessed by any government authority under the law of the country from which the remittance is made, and a treaty exists with that country and the country where the remittance is received or there is other provision for the avoidance of double taxation, the Licensee has the right to deduct from the payment any such taxes and the Licensee shall for each such deduction provide to Unilever a certificate or other documentary evidence executed by the appropriate official or relevant government authority to enable Unilever to claim relief from double taxation on such payments. All payments due under this Agreement are exclusive of value added tax, or equivalent taxes where applicable. *** Confidential Treatment Requested -5- 5. TERMINATION ----------- 5.1 The Licensee may terminate the licence granted in this Agreement at any time upon ninety (90) days written notice subject to payment of paid-up royalty as indicated in clause 3.1 until the actual date of termination. 5.2 Upon any default by the Licensee in the performance of any material obligation to be performed under the Agreement, Unilever may give written notice specifying the matter in default, and unless the default is cured within sixty (60) days following the giving of notice, Unilever may forthwith terminate the Agreement and the licence rights granted hereunder. 5.3 Unilever may terminate the licence rights of the Licensee forthwith if the Licensee shall be declared bankrupt or shall enter into liquidation or receivership or equivalent state. 5.4 In the event that Licensee challenges, directly or indirectly, any Patent Right outside the territory of the USA, Unilever shall have the right to terminate the license under this Patent Right immediately in the country in which the Patent Right is challenged. 5.5 In all instances, in the event that Licensee challenges any Patent Right in any country in the Territory, including the USA, Licensee will still be obliged to continue paying the royalties due under this Patent Right as set forth in Clause 3. 5.6 Unilever may terminate the licence rights of the Licensee forthwith if the Licensee manufactures, uses or sells any product which is covered by the Patent Rights in the country of such manufacture, use or sale, other than a Licensed Product. Such termination will be effective thirty (30) days after Unilever provides written notice to Licensee. - 6 - specifying breach of this provision, unless during such notice period the default is cured by Licensee. 5.7 Termination pursuant to Clauses 5.1 to 5.6 hereof shall not relieve either party of any obligations accrued prior to the termination, nor rescind or give rise to any right to rescind anything done or any payments made hereinunder prior to the time of such termination. 5.8 Unless sooner terminated as provided above, the license rights granted hereunder shall continue until expiration of the last to expire of the patents within the Patent Rights. 6. GENERAL PROVISIONS ------------------ 6.1 This Agreement supersedes all previous oral and written agreements between the parties, and this Agreement constitutes complete resolution of all issues relating to the Patent Rights and is the only and entire understanding existing between the parties with respect to the subject matter of this Agreement. Any amendment thereto shall be in writing and signed by the parties. 6.2 The provisions of this Agreement shall be deemed separable, and if any part of this Agreement is rendered void, invalid, or unenforceable, such rendering shall not affect the validity or enforceability of the remainder of the Agreement unless the part or parts which are void, invalid or unenforceable shall substantially impair the value of the whole Agreement to either party. 6.3 All notices and reports shall be sent to the parties at the addresses shown below. Such notice or report shall be deemed received when sent addressed to the party at the address shown below by recorded delivery or registered mail or by express service prepaid or by facsimile or telex confirmed by mail within seven (7) days. The addresses for - 7 - notices and reports may be changed by timely written notice to the other party. For the Licensee: VP Business Development THERASENSE Inc 1360 South Loop Road Alameda CA 94502 United States For Unilever: The Senior Agreements Officer UNILEVER PLC Patent Division Colworth House Sharnbrook Bedfordshire MK44 1LQ England 6.4 Unilever PLC and Unilever NV represent and warrant that they own all right title and interest in and to the Patent Rights or are otherwise authorised to enter into this Agreement, and that the patent applications in the Patent Rights were made in good faith, and Unilever is not aware of grounds which invalidate the Patent Rights, but Unilever expressly do not warrant the validity of any of the Patent Rights. 6.5 Unilever expressly does not warrant that any Licensed Product is free from infringement of any third party patent or other intellectual property rights. The Licensee accepts full responsibility for the manufacture, use and sale of all Licensed Products and Unilever shall not be liable to the Licensee or any Affiliate or any customers thereof for the consequences of such manufacture, use or sale, and the Licensee shall defend, hold harmless and indemnify Unilever from any and all damages, costs (including reasonable attorney's fees) or judgements of any kind which arise from such manufacture, use or sale of Licensed Product. -8- 6.6 The Licensee shall not make any use of the Unilever name or any trademark of Unilever or of any of its subsidiaries or affiliates, in connection with the manufacture, use, promotion or sale of Licensed Products or otherwise without the prior written consent of Unilever. 6.7 The parties hereto shall keep the terms of this Agreement confidential and shall not now or hereafter divulge these terms to any third party except: (a) with the prior written consent of the other party; or (b) to any governmental body having jurisdiction to call therefor; provided, however that the disclosing party shall consult with the other party prior to any disclosure and the two parties shall cooperate in good faith to minimise any unnecessary disclosure to such government body; or (c) subject to (d) below, as otherwise may be required by law or legal process, including to legal and financial advisors in their capacity of advising a party in such matters; or (d) during the course of litigation so long as the disclosure of such terms and conditions are restricted in the same manner as is the confidential information of other litigating parties and so long as (a) the restrictions are embodied in a court-entered Protective Order and (c) the disclosing party informs the other party in writing at least ten (10) days in advance of the disclosure; or (e) in confidence to legal counsel, accountants, banks and financing sources and their advisors solely in connection with bona fide financial transaction, or - 9 - (f) as required to comply with regulatory requirements of any governmental or quasi-governmental institution. 6.8 No licence is hereby granted to the Licensee for making any Product falling within the Patent Rights other than the Licensed Product. 6.9 In the performance of their obligations under this Agreement, the status of the parties, including its employees and agents, shall be that of independent contractors and not as employees or agents, or fiduciaries of the other party, and as such, neither party shall have the right to make any commitments for or on behalf of the other party. Nothing in this Agreement shall create any association, partnership or joint venture between the parties. 6.10 Failure by either party to enforce any provision of this Agreement shall not be construed as a waiver of such provision and shall not affect the validity of the Agreement or any part thereof or the right of that party to enforce any provision thereof. 6.11 This Agreement shall be deemed to be made in and shall be construed in accordance with the laws of England for all matters (other than scope and validity of the Patent Rights which shall be construed and governed in accordance with the laws of the jurisdiction in which the Patent Rights have been granted). - 10 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in three originals. UNILEVER PLC BY: SIGNATURE HERE ---------------------------------------- TITLE: ---------------------------------------- UNILEVER NV BY (1): SIGNATURE HERE ---------------------------------------- TITLE: ---------------------------------------- BY (2): SIGNATURE HERE ---------------------------------------- TITLE: ---------------------------------------- THERASENSE, INC. BY: SIGNATURE HERE ---------------------------------------- TITLE: Vice President, Business Development ---------------------------------------- Granted Rights - P3043/100 --------------------------
------------------------------------------------------------------------------------------ COUNTRY NUMBER EXPIRY DATE ------------------------------------------------------------------------------------------ European 470649 23 Jul 2007 ------------------------------------------------------------------------------------------ - designated states under the European patent are: - ------------------------------------------------------------------------------------------ France 470649 23 Jul 2007 ------------------------------------------------------------------------------------------ Germany 3752278.7 23 Jul 2007 ------------------------------------------------------------------------------------------ Italy 470649 23 Jul 2007 ------------------------------------------------------------------------------------------ Netherlands 470649 23 Jul 2007 ------------------------------------------------------------------------------------------ Spain 470649 23 Jul 2007 ------------------------------------------------------------------------------------------ Sweden 470649 23 Jul 2007 ------------------------------------------------------------------------------------------ Switzerland 470649 23 Jul 2007 ------------------------------------------------------------------------------------------ United Kingdom 470649 23 Jul 2007 ------------------------------------------------------------------------------------------
AGR20657 SCHEDULE -------- Granted rights - P3003/2 ------------------------
------------------------------------------------------------------------------------------ COUNTRY NUMBER EXPIRY DATE ------------------------------------------------------------------------------------------ Australia 588245 12 Jun 2005 ------------------------------------------------------------------------------------------ Canada 1231136 05 Jan 2005 ------------------------------------------------------------------------------------------ Japan 2527933 12 Jun 2005 ------------------------------------------------------------------------------------------ USA 5141868 25 Aug 2005 ------------------------------------------------------------------------------------------ European 170375 12 Jun 2005 ------------------------------------------------------------------------------------------ - designated states under the European patent are: - ------------------------------------------------------------------------------------------ France 170375 12 Jun 2005 ------------------------------------------------------------------------------------------ Germany 3577748 12 Jun 2005 ------------------------------------------------------------------------------------------ Italy 170375 12 Jun 2005 ------------------------------------------------------------------------------------------ Netherlands 170375 12 Jun 2005 ------------------------------------------------------------------------------------------ Sweden 170375 12 Jun 2005 ------------------------------------------------------------------------------------------ Switzerland 170375 12 Jun 2005 ------------------------------------------------------------------------------------------ United Kingdom 170375 12 Jun 2005 ------------------------------------------------------------------------------------------
Granted rights - P3043 ----------------------
------------------------------------------------------------------------------------------ COUNTRY NUMBER EXPIRY DATE ------------------------------------------------------------------------------------------ European 255291 23 Jul 2007 ------------------------------------------------------------------------------------------ - designated states under the European patent are: - ------------------------------------------------------------------------------------------ Austria E77697 23 Jul 2007 ------------------------------------------------------------------------------------------ Belgium 255291 23 Jul 2007 ------------------------------------------------------------------------------------------ France 255291 23 Jul 2007 ------------------------------------------------------------------------------------------ Germany 3779967 23 Jul 2007 ------------------------------------------------------------------------------------------ Greece 3005757 23 Jul 2007 ------------------------------------------------------------------------------------------ Italy 255291 23 Jul 2007 ------------------------------------------------------------------------------------------ Netherlands 255291 23 Jul 2007 ------------------------------------------------------------------------------------------ Spain 255291 23 Jul 2007 ------------------------------------------------------------------------------------------ Sweden 255291 23 Jul 2007 ------------------------------------------------------------------------------------------ Switzerland 255291 23 Jul 2007 ------------------------------------------------------------------------------------------ United Kingdom 255291 23 Jul 2007 ------------------------------------------------------------------------------------------