International Distributor Agreement W/ Nipro Corp.

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.


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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.


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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 *** 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.


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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 ***, 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; ***.


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


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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. ***


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.


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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 ***. Thereafter, TheraSense has the right to ***.


3.2.2 Transfer Price Adjustments. By *** Nipro shall provide to
-------------------------- TheraSense a non-binding written estimate of its requirements of Strips (as defined in Exhibit A) for *** the *** shall be used to establish the Transfer Price for the Strips ***. Thereafter, upon Nipro's submission of *** to TheraSense, if either party concludes ***


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***. 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. *** after the end of each calendar year, Nipro or TheraSense ***.


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. ***.


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.


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3.2.5 Delinquency. In the event that Nipro's account becomes
----------- ***.


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


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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


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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


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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 ***
--------- 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 *** ("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


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by TheraSense *** 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 *** 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 *** 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 *** in advance of the requested receipt date or for a quantity that is *** 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


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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 ...