Document:

<PAGE>

                                                                   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-
<PAGE>

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-

<PAGE>

         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 [***] thereafter, TheraSense
shall provide Facet with a non-binding written forecast of TheraSense's expected
needs for the Products for no less than a [***] period from the date thereof
(the "Forecast"). At least [***], TheraSense shall place a [***] 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
<PAGE>

         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 [***]. 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

<PAGE>

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
[***] by reviewing actual component and assembly costs at Facet and making
adjustments to take account of the changes and the resultant changes necessary
to [***]. 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 [***]. 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 [***]. 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
<PAGE>

         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 [***]. 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
<PAGE>

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-

<PAGE>

          (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
<PAGE>

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
<PAGE>

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-

<PAGE>

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-

<PAGE>

                (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-

<PAGE>

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
<PAGE>

          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-

<PAGE>

     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-

<PAGE>

                                   EXHIBIT A

                                PRODUCT PRICING
                                ---------------

Part Number     Description                                      Pricing

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

   ***          Lancing Device Warranty Kit                        ***
   ***          Lancing Device Assy (Proto Mold)                   ***
   ***          Lancing Device Assy (Prod Mold less than 1.2MM)    ***
   ***          Lancing Device Assy (Prod Mold less than 1.2MM)    ***
   ***          Lancets, 100 Count Box                             ***
   ***          Lancing Device Replacement Cap Bagged              ***
   ***          Lancets, 10 Count Bag                              ***
   ***          Arm Cap Bag of 20                                  ***
   ***          Finger Cap Bag of 20                               ***
   ***          Lancing Device Box of 40                           ***
   ***          Lancets Bags Box of 25                             ***

*** Confidential Treatment Requested
<PAGE>

                                   EXHIBIT B

                            PRODUCTS/SPECIFICATIONS
                            -----------------------

                      Low Volume        High Volume        High Volume
                     Mold Part #S       Mold Part #S          Revs.

Body Top                 ***                ***                ***
Body Bottom              ***                ***                ***
Lancet Holder            ***                ***                ***
Arm Cap                  ***                ***                ***
Depth Wheel              ***                ***                ***
Button                   ***                ***                ***
Arming Part              ***                ***                ***
Arming Chassis           ***                ***                ***
Retraction Spring        ***                ***                ***
Drive Spring             ***                ***                ***
Finish Device SKU        ***                ***                ***
Number                   ***                ***                ***

Revision levels may change in the future.

*** Confidential Treatment Requested
<PAGE>

                                   EXHIBIT C

                          QUALITY CONTROL REQUIREMENTS
                          ----------------------------

     There are no additional quality requirements beyond what is stated in the
contract or on the drawing.<PAGE>

[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.]

                                                                    EXHIBIT 10.9

                           MASTER PURCHASE AGREEMENT

                FOR Electronic Assembly & System Kit Packaging

     This Master Purchase Agreement is effective as of November 3, 1999 (the
"Effective Date"), by and between TheraSense, Inc., a California corporation
having its principal place of business at 1360 South Loop Road Alameda,
California 94502, ("TheraSense") and Flextronics International USA Inc.,
corporation, having a place of business at 2090 Fortune Drive San Jose, CA
95131.

                                   RECITALS

     WHEREAS, Flextronics is a leader in the field of contract manufacturing for
electrical devices and provider of engineering services related to device
manufacturing design, and has the manufacturing system capability to provide
warehousing and distribution services;

     WHEREAS, TheraSense develops and manufactures advanced blood glucose
monitoring devices for diabetics;

     WHEREAS, TheraSense wishes to contract with Flextronics for certain
engineering design and manufacturing services for TheraSense's new Messenger and
Freestyle blood glucose monitoring devices, as defined and described in the
Specifications provided as Exhibit C hereto, and to purchase the resulting
products from Flextronics; and

     WHEREAS, Flextronics desires to provide such services and products for
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 through C hereof,
(collectively the "Agreement") and any Purchase Order(s) issued hereunder, shall
govern all sale and purchase transactions, pertaining to the subject matter
hereof, that may be entered into by TheraSense and Flextronics, 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 (as defined hereinafter)
which confirms that the tested Product meets the Specifications (as defined
hereinafter). Acceptance testing shall be performed by TheraSense at Flextronics
facilities in Fremont California.

          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
<PAGE>

directors (or, in the case of an entity that is not a corporation, for the
election of the corresponding managing authority).

          1.3  "Engineering Change" shall mean any mechanical, radio frequency
design, electrical software, electromechanical or process change to any
Product(s), including printed circuit boards, or the manufacturing, kiting, or
assembly process for any Product. An Engineering Change includes changes
originating from TheraSense or Flextronics which would affect the safety,
performance, reliability, serviceability, appearance, dimensions, tolerances,
materials, and composition of any bill of material of the Product (as
hereinafter defined).

          1.4  "FDA" shall mean the United States Department of Health and Human
Services Food and Drug Administration.

          1.5  "Flextronics' Proprietary Rights" shall mean all of Flextronics'
trade secrets, know-how and the like which are for or are used in the
manufacture of the Product or any Product Improvements or Engineering Changes,
including any technology or know-how property incidental thereto, such as
technical information, data, specifications, drawings, manuals and the like and
shall include any patents or patent rights Flextronics may acquire with respect
to the foregoing. However, the foregoing specifically excludes technical
information, data, specifications, drawings, manuals and the like, as well as
any patents, patent rights, or other intellectual property owned or provided by
TheraSense.

          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  "Manufacturing Services" shall mean the assembly, packaging, and
kitting of the electronic components manufactured by Flextronics.

          1.8  "Product" shall mean the electronic assemblies for the Messenger
or Freestyle systems as described in Exhibit C.

          1.9  "Product Improvements" shall mean any modifications to the
Product 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.

          1.10 "Purchase Order" shall mean written order(s) from TheraSense to
Flextronics for the Product, specifically referencing this Agreement and
including the description, quantity, shipping destination, and requited delivery
date at the destination.

          1.11 "Specifications" shall mean the mutually agreed upon
specifications (including storage requirements) for the electronic assemblies
for the Messenger and Freestyle systems, as set forth in Exhibit C.

          1.12 "Quality Plan" shall mean the mutually agreed upon in-process and
final product test and inspection plans as set forth in Exhibit D.

                                      -2-
<PAGE>

          1.13 "Territory" shall mean North America.

     2.   Supply Requirements.
          -------------------

          2.1  During the term of this Agreement, Flextronics shall supply
TheraSense with those quantities of the Product ordered by TheraSense in a
Purchase Order submitted to Flextronics pursuant to this Agreement. The Product
shall comply with the Specifications and all jointly developed Quality Plans

          2.2  In consideration for the services and support provided by
Flextronics during the development of the Messenger and Freestyle product lines,
the projected business volume offered to Flextronics hereunder, and competitive
pricing offered to TheraSense hereunder. TheraSense agrees, to purchase all its
Manufacturing Services for the Messenger and Freestyle product lines exclusively
from Flextronics for a period of five (5) years from the Effective Date.
TheraSense shall not be obligated hereunder if the Products fail to conform in
all respects to the Specifications, this Agreement is terminated pursuant to
Section 15, or, in market based benchmarking, Flextronics fails to maintain
competitive pricing to warrant such exclusivity. Flextronics and TheraSense
shall work jointly to develop a Quality Plan for Flextronics' 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.

     Flextronics agrees to implement process improvements and process
validations using the TheraSense process control methodology as outlined below.
          ***
          2.3  Flextronics shall share process data with TheraSense by
submitting Certificates of Analysis that include process control charts, for
every Product shipment.

     3.   Forecasts and Orders.  Starting on the Effective Date, and every three
          --------------------
(3) months thereafter, TheraSense shall provide Flextronics with a non-binding
written forecast of TheraSense's expected needs for the Product for no less than
a six (6) month period from the date thereof (the "Forecast"). At least
semiannually, TheraSense shall place a binding six (6) month Purchase Order with
Flextronics for the Product.

     4.   Material Procurement.
          --------------------

          4.1  Purchase Orders.  TheraSense's accepted Purchase Orders will
               ---------------
constitute authorization for Flextronics 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, Flextronics
               -----------------
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 Flextronics ("Long Lead Time Components") plus 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

*** Confidential treatment requested

                                      -3-
<PAGE>

("Minimum Order Inventory"). Collectively, these components, materials, and
supplies are termed "Special Inventory".

               (1)  Flextronics may purchase Long Lead-Time Components
sufficient to meet requirements for the Purchase Orders and Forecast in effect
at the time Flextronics places an order with its supplier.

               (2)  Flextronics may reasonably purchase Minimum Order Inventory
as required by its suppliers' minimum order requirements.

               (3)  Flextronics may purchase Economic Order Inventory only upon
the prior approval of TheraSense.

               (4)  Flextronics will, from time to time, hold Long Lead-Time
Components and finished goods in inventory to increase TheraSense's production
flexibility. The components and quantities of all such inventory will be
mutually agreed to in writing by the parties prior to Flextronics placing such
items into inventory.

               (5)  TheraSense will be responsible for all non-cancelable/non-
returnable materials as procured on TheraSense's behalf to support Purchase
Orders and Forecasts subject to Section 4.2.

               (6)  TheraSense will be responsible for all Inventory and Special
Inventory purchased by Flextronics under this Section but subject to the
conditions provided elsewhere in this Agreement.

          4.3  Delivery.  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.

          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 as provided in
the table below:

     Maximum Allowable Variance From Purchase Order Quantities/Delivery Dates
     ------------------------------------------------------------------------
          # of days before    Allowable          Maximum           Maximum
          Delivery Date       Quantity           Reschedule        Reschedule
          on Purchase         Increases          Quantity          Period
                              -----------------  ----------------  -------------
          Order               ***                ***               ***
          ------------------
          ***

*** Confidential treatment requested

                                      -4-
<PAGE>

     Any purchase order quantities increased or rescheduled pursuant to this
Section may not be subsequently increased or rescheduled without the prior
written approval of Flextronics.  Quantity increases of a greater percentage may
be provided if agreed to by both parties.  All other changes in quantity or
shipment date require Flextronics' prior written consent. Inventory excess to
original schedule shall be subject to an inventory carrying charge of *** for
the price of finished Product. Although Flextronics will use reasonable
commercial efforts to satisfy TheraSense's requested quantity increases,
Flextronics' ability to do so is subject to material availability. Should
TheraSense require increases beyond the above, a TheraSense owned buffer stock
of Long Lead-Time Components may be required. The components and quantities of
all such inventory will be agreed to separately in writing by both Flextronics
and TheraSense If there are extra costs required to meet a schedule increase in
excess of the above limits, Flextronics will seek approval from TheraSense in
advance of incurring such costs. If the forecast for any period is significantly
less than the previous forecast supplied over the same period, so that
Flextronics has inventory for TheraSense with no requirements, that amount will
be considered canceled and TheraSense will be responsible for any Special
Inventory purchased or ordered by Flextronics to support the forecast.

     4.5  Cancellation.  TheraSense may not cancel any portion of the quantity
          ------------
of an accepted purchase order without Flextronics' prior written approval, which
shall not be unreasonably withheld. If the parties agree upon a cancellation,
TheraSense will pay Flextronics for Products, Inventory, and Special Inventory
affected by the cancellation as follows: (i) *** of the contract price for all
finished Products in Flextronics' possession; (ii) *** of the cost of all
Inventory and Special Inventory in Flextronics' possession and not returnable to
the supplier or usable for other Flextronics products, whether in raw form or
work in process, *** (iii) *** of the cost of all Inventory and Special
Inventory on order and not cancelable and not otherwise usable for other
Flextronics products, ***; (iv)***; and (v) ***. Flextronics will use reasonable
commercial efforts to return unused Inventory and Special Inventory and 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
               -------------------
Flextronics incorporate an Engineering Change into the Product. Such request
will include a description of the proposed Engineering Change sufficient to
permit Flextronics to evaluate its feasibility, impacts, and cost. Flextronics'
evaluation shall be in writing and shall state 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 ten (10) days
of receiving the request. TheraSense shall have thirty (30) days after receipt
of Flextronics' evaluation to decide whether or not to implement the requested
Engineering Change. Flextronics 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 the TheraSense including, without
limitation, the cost of Inventory and Special Inventory on-hand and on-order
that becomes obsolete.

*** Confidential treatment requested

                                      -5-
<PAGE>

Flextronics will use best efforts to implement all TheraSense required changes
per TheraSense requests.

          5.2  Flextronics Requests.  If Flextronics desires to make any
               --------------------
Engineering Change (including manufacturing processes, raw materials and
suppliers thereof), it will notify TheraSense not less than six (6) months prior
to such change to enable TheraSense to determine conformity of the changed
Product with TheraSense's manufacturing requirements and obligations with
respect to regulatory authorities. If Flextronics changes the Product or process
to create non-conforming Product or Product which falls to conform to
TheraSense's regulatory constraints, further processing needs, or performance
standards for finished goods, then Flextronics 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 take seek appropriate
regulatory approval to accommodate the changed Product or process. ECO
implementation shall otherwise follow the standard Flextronics procedure.

     6.   Purchase Price
          --------------

     TheraSense's target purchase price with respect to the Product shall be as
specified in Exhibit B.  The price for Products to be manufactured will be set
quarterly for the first year and semi-annually thereafter by reviewing actual
component and assembly costs at Flextronics and making adjustments based upon
the changes.  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.  Payment for any Products, Manufacturing
Services or other costs to be paid by TheraSense hereunder is due thirty (30)
days net form the date of the shipment therefor and shall be made in lawful U.S.
currency. TheraSense agrees to pay *** on all late payments. Furthermore, if
TheraSense is in arrears more than thirty (30) days for two (2) consecutive
months with respect to payments, Flextronics may require prepayment from
TheraSense or may delay shipments or suspend work until assurances of payment
satisfactory to Flextronics are received.

     7.   Delivery
          --------

          7.1  Purchases of Product made hereunder by Purchase Orders shall
initially be F.O.B. Seller's factory in Fremont, CA. During this initial period,
TheraSense will specify the carrier and shipments will be made freight collect.
TheraSense and Flextronics agree to establish a Kanban system whereby
Flextronics will keep an amount to be determined of finished product at it's
facility awaiting shipment to TheraSense customers. Upon completion of this,
payment terms will become five (5) days net from the date product is completed
and transferred into the Kanban. Such change will include a separate price to
cover freight charges paid by Seller and any other justifiable costs incurred by
Seller. Title and risk of loss of Product 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.

          7.2  Late Delivery.  Time is of the essence with regard to deliveries
               -------------
of Product purchased hereunder. Flextronics shall use its best efforts to
maintain 100% on-time delivery of Products. Flextronics shall notify TheraSense
as soon as practicable if for any reason Flextronics fails to comply, or
anticipates that it may fail to comply with the terms of this Agreement or of a

*** Confidential treatment requested

                                      -6-
<PAGE>

Purchase Order (including but not limited to failure to meet a delivery date
required in the Purchase Order or delivery of less than the required quantity of
Products). If Flextronics fails to deliver any Product (other than as a result
of a Force Majeure event as set forth in Section 20.1 herein), then, TheraSense
may request and Flextronics shall agree to work any necessary overtime at no
additional cost to TheraSense to minimize such delay, or TheraSense may request
Flextronics to ship the Product by premium transportation at no additional cost
to TheraSense and Flextronics will comply with such request.

          7.3  Delivery Documentation.  Flextronics 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; Flextronics' identification
number, or in the absence of such number, the full address of Flextronics; 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 Flextronics. In addition to the
invoice documentation to accompany each delivery of Product, for payment
purposes, Flextronics shall issue an invoice directly to TheraSense upon Product
shipment. The parties will use reasonable commercial efforts to incorporate an
electronic data interchange process to allow for wire transfer of funds at that
time.

          8.2  Upon Flextronics' request at any time during the term of this
Agreement, Customer agrees to *** to minimize the financial risk to Flextronics
for its performance of Work under this Agreement. ***. The calculation shall be
based upon the purchase order. ***shall be determined mutually by Flextronics
and Customer. Flextronics will, in good faith, review Customer's ***. Customer
agrees to provide all necessary financial information required ***.

     9.   Warranty
          --------

          9.1  Flextronics warrants that the Product 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 (6) six months
after acceptance by TheraSense. Materials used in the Product are warranted to
the same extent that the original manufacturer warrants the materials. This
express limited warranty does not apply to (a) materials consigned or supplied
by TheraSense to Flextronics; (b) defects resulting from TheraSense's
Specifications or the design of the Products; or (c) 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, Flextronics makes no
representations or warranties whatsoever.

*** Confidential treatment requested

                                      -7-
<PAGE>

Notwithstanding anything else in this Agreement, Flextronics assumes no
liability for, or obligation related to, the performance, accuracy,
specifications, failure to meet specifications or defects of or due to tooling,
designs, or instructions produced or supplied by TheraSense and TheraSense shall
be liable for costs or expenses incurred by Flextronics related thereto. Upon
any failure of a Product to comply with the above warranty, Flextronics' sole
obligation, and TheraSense's sole remedy, is for Flextronics, at its option, to
promptly repair or replace such unit and return it to TheraSense freight pre-
pad. TheraSense shall return Products covered by the warranty freight pre-paid
after completing a failure report and obtaining a return material authorization
number from Flextronics to be displayed on the shipping container.

          9.2  Flextronics further represents and warrants that its supplying of
Product to TheraSense under this Agreement does not conflict with any other
agreement to which Flextronics is a party and, further, that the Product
supplied hereunder does not, to the best off Flextronics' knowledge, infringe
the proprietary rights of any third party.

          9.3  Flextronics further represents and warrants that it has, and
shall maintain during the term of this Agreement, adequate equipment and
facilities to guarantee sufficient manufacturing capacity to meet TheraSense's
demand for Product as represented in TheraSense's Forecast as described in
Section 3 of this Agreement.

          9.4  Flextronics has stated that its manufacturing facilities are ISO
9002 registered and Flextronics will use all commercially reasonable efforts to
assure that such facilities and any new Flextronics facilities used for the
production of Product will continue to be registered under ISO 9002 during the
term of this Agreement. "Registered" as used herein shall mean certified and
approved.

          9.5  Flextronics 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, restrictions or
rights created in, by or against the Products or against Flextronics, except any
Proprietary Rights of Flextronics identified in writing to TheraSense in the
Products, if any. 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  Flextronics 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
Flextronics' knowledge, threatened against or affecting Flextronics in respect
of its operations or processes used therein, nor to Flextronics' knowledge, is
there any basis for the same; and (c) there is no action, suit or proceeding
pending or, to Flextronics' knowledge, threatened which questions the legality
of the transactions contemplated by this Agreement. Flextronics 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.

                                      -8-
<PAGE>

          9.7  Flextronics warrants that all equipment used in the manufacturing
and planning of TheraSense Products is Year 2000 compliant.

          9.8  OTHER THAN THE WARRANTEES IN THIS SECTION 9, FLEXTRONICS 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
FLEXTRONICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR CONDITIONS OF OR
FITNESS FOR A PARTICULAR PURPOSE.

     10.  Regulatory Requirements
          -----------------------

     During the term of this Agreement Flextronics will:

          A.   Comply with the pertinent Quality System Regulations ("QSR") as
               such may be determined by the United States Department of Health
               and Human Services Food and Drug Administration 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
               Flextronics' compliance with Quality System Regulations, with the
               quality control requirements specified herein and attached hereto
               as Exhibit D, together with any other quality systems and
               specifications mutually agreed upon.  Flextronics acknowledges
               that the preceding sentence granting TheraSense certain audit
               rights in no way relieves Flextronics of any of its obligations
               under this Agreement, nor shall such provision require TheraSense
               to conduct any such audits.

               (1)  Any audits shall be conducted during normal business hours
                    after reasonable notice (a minimum of two weeks) to
                    Flextronics 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.  Flextronics 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, Flextronics will be
                    assigned an overall rating of acceptable, marginal or
                    unacceptable.  In the event Flextronics receives an
                    unacceptable rating TheraSense will re-audit Flextronics
                    within six (6) months.  ***

*** Confidential treatment requested

                                      -9-
<PAGE>

               (4)  Flextronics agrees to provide to TheraSense any observations
                    and corrective actions implemented as the result of any
                    audits conducted by the FDA.

               (5)  Flextronics shall have the right to refuse access to areas
                    where Flextronics 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 Flextronics of any defects or non-
conformance as soon as reasonably possible after same are discovered by
TheraSense, and Flextronics shall have an opportunity to inspect and test the
Product claimed to be defective or non-conforming. Flextronics 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 Flextronics that it will reject them, 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 Flextronics' responsibilities to provide subsequent shipments,
of Product in accordance with the Specifications. With the exception of
TheraSense's manufacturing processes required to use the Product, Flextronics
shall not be liable for Product altered outside of its factory by someone other
than Flextronics or for Product subjected, by an entity other than Flextronics,
to misuse, abuse, improper alteration, accident or negligence in use, storage,
transportation or handling. Notwithstanding the above, Flextronics 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, NEITHER PARTY WILL 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.

                                      -10-
<PAGE>

     13.  Intellectual Property Indemnification
          -------------------------------------

          13.1   Indemnification by TheraSense.  Flextronics agrees to notify
                 -----------------------------
TheraSense promptly of all claims actions, whether actual or potential, alleging
that the Product infringes on the intellectual property rights of any third
party (a "Claim"). TheraSense shall defend and indemnify Flextronics against any
Claim and will have the sole expense and control of the defense of any Claim.
Flextronics shall give TheraSense, at TheraSense's expense, all assistance
reasonably requested in defending or settling a Claim. Notwithstanding the
foregoing, TheraSense shall not be required to defend any Claim based upon, (i)
the use of the Product by Flextronics as part of any procedure or in testing or
experimenting other than with the prior written agreement of TheraSense.

          13.2   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 Flextronics. Flextronics 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 Flextronics' 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, Flextronics shall
defend, indemnify and hold TheraSense, its, directors, officers, employees, and
agents harmless 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
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
Flextronics' failure to meet manufacturing workmanship Specifications.

          14.2   Indemnification by TheraSense.  Except as otherwise provided in
                 -----------------------------
this Agreement, TheraSense shall defend, idemnify and hold harmless Flextronics
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 attorney 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 the Product,
other than a defect related to workmanship.

          14.3   Limits to Indemnification.  These obligations to defend and
                 -------------------------
indemnify (in 14.1, 14.2 & 14.3) 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.

                                      -11-
<PAGE>

          14.4  Cooperation. The indemnified party agrees to cooperate with the
                -----------
indemnifying party in the defense of any such 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 such action.
Each party agrees to notify the other of such a claim or suit promptly upon
learning that same is within the scope of the indemnification set forth herein.
The Indemnifying party shall control the management of any such claim or suit.

     15.  Term and Termination
          --------------------

          15.1  Term. The term of this Agreement shall commence on the
                ----
Effective Date and shall continue for five (5) years thereafter (the "Initial
Term") unless earlier terminated as provided in Section 15.2 or 20.1. After the
expiration of the Initial Term hereunder (unless this Agreement has been earlier
terminated) this Agreement shall be automatically renewed for separate but
successive one-year terms (each a "Renewal Term").

          15.2  Termination. This Agreement may be terminated by either party:
                -----------
(a) for any reason upon a one (1) year written notice to the other, or (b) 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, (c) 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 written notice thereof by the terminating party
to the other party, or (d) 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, Pursuant to Section 20.1 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 mariner as for
cancellations as set forth in Section 4.5. Notwithstanding termination or
expiration of this Agreement, Sections 9, 12, 15, and 20 shall survive said
termination or expiration.

          15.3  After following the dispute resolution procedure set forth in
Section 19, TheraSense may following the initial twelve (12) months of this
Agreement and upon six (6) months notice, terminate this Agreement for
convenience without liability except for the raw materials inventory, work in
process, unamortized Flextronics Development Funding and production special
tooling charges and Product on order, in transit or received, but not paid for
as of the date of termination.

     16.  Raw Materials Inventory
          -----------------------

          In recognition of TheraSense's desire to have a ready supply of
Products, Flextronics agrees to maintain a raw materials inventory at its
facility (excluding solvents, water and certain other processing aids that are
commonly available) in an amount equivalent to ***. Such inventory will be
modified from time to time based upon TheraSense's actual usage ***. All
materials for TheraSense shall be cycled through this inventory on an FIFO
basis. TheraSense's obligation and sole liability for this service shall be to
purchase any such inventory at Flextronics' cost plus associated overhead
expense upon termination or expiration of this Agreement or cancellation of any
purchase order per 4.3, and provided Flextronics is not able to otherwise use
such inventory. Flextronics shall use reasonable commercial efforts to eliminate
or reduce this inventory at the approaching expiration of this Agreement.

*** Confidential treatment requested

                                      -12-
<PAGE>

     17.  Confidentiality
          ---------------

          17.1  Flextronics 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.

          17.2  "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."

          17.3  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.

          17.4  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;

                (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.

                                      -13-
<PAGE>

          17.5  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.

          17.6  Each party represents that it is under no obligation to any
third party that would interfere with its disclosing the above-described
Information to the other party and further, that any 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.

          17.7  Except as specifically provided in this Agreement, no right to
use any Information disclosed hereunder, either express or implied, is granted
by either party.

          17.9  The obligations of confidentiality and nonuse set forth herein
shall remain in effect for a period of five (5) years after the expiration of
this Agreement or any extension of it.

          17.10 Flextronics 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.

     18.  Patents and Trademarks
          ----------------------

          18.1  It is agreed that all patentable inventions made, conceived or
acquired by TheraSense relating to the Product will be the exclusive property of
TheraSense. TheraSense will pay all expenses relating to the securing and
maintaining of appropriate patent protection with respect to such patentable
inventions. It shall be in the sole discretion of TheraSense to determine what
patent protection, if any, on such invention should be sought and/or maintained.
TheraSense shall grant to Flextronics a non-exclusive, royalty-free license,
without the right to sublicense, under such patents, to make, use and sell
products not used in the medical industry, using relevant technology, which
license shall expire upon termination or expiration of this Agreement.

     19.  Disputes
          --------

     The Director of Purchasing and Flextronics' 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 Director of Purchasing and
Flextronics' 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 Vice President of Operations and the President of
Flextronics 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. Such arbitration shall be conducted in San Francisco,
California in accordance with the then current rules of the American Arbitration
Association with a panel of three arbitrators. Each party shall choose one
member of the panel, and both shall agree on the third member of the panel. The
arbitrators shall be selected from the National Panel of Arbitrators of the
American Arbitration Association. Reasonable discovery as determined by the
arbitrators shall apply to the arbitration proceeding. The laws of the State of
California shall apply to the arbitration proceedings. Judgment

                                      -14-
<PAGE>

upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The prevailing party, as determined by the arbitration
panel, shall have its arbitration costs and reasonable attorney fees paid by the
other party.

     20.  General
          -------

          20.1  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 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.

          20.2  Assignment. The rights and liabilities of the parties hereto
                ----------
will bind and inure to the benefit to their respective successors, executors and
administrators, as the case may be; provided that, as TheraSense has
specifically contracted for Flextronics' services, Flextronics may not assign or
delegate 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 20.2 will be
void.

          20.3  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.

          20.4  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.

          20.5  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 20.5:

                TheraSense, Inc.                  Flextronics, International
                1360 South Loop Road              2090 Fortune Drive
                Alameda CA 94502                  San Jose CA 95131
                Attn.: John Purlee                Attn-: Greg Keese
                Director of Purchasing            Director Business Development

                                      -15-
<PAGE>

          20.6  Compliance with Laws and Regulations. Flextronics 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.

          20.7  Governing Law. This Agreement shall be governed by and construed
                -------------
in accordance with the laws of the United States and the State of California, as
applied to agreements entered into and to be performed entirely within
California between California residents excluding its choice of law principals.
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.

          20.8  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. When the application warrants, the term "TheraSense" shall mean
"TheraSense and/or its authorized subcontractors" and the term "Flextronics"
shall mean "Flextronics or its authorized subcontractors".

          20.9  Status. The relationship between Flextronics 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.

          20.10 Reports. Each month during the term of this Agreement,
                -------
Flextronics 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.

          20.11 Complete Agreement. This Agreement, including all Exhibits and
                ------------------
any Purchase Order(s) issued hereunder, 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. In the event of a conflict, this Agreement shall
take precedence over the preprinted terms and conditions on the reverse side of
TheraSense's Purchase Order or any acknowledgment of Flextronics. No amendment
to or modification of this Agreement will be binding unless in writing and
signed by a duly authorized representative of both parties.

                                      -16-
<PAGE>

     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.                        Flextronics International USA, Inc.

By: /s/ W. Mark Lortz                   By: /s/ illegible signature
    ----------------------------            ----------------------------

Name: W. Mark Lortz                     Name: __________________________
     ---------------------------

Title: President & CEO                  Title: _________________________
       -------------------------

Date: Dec. 7, 1999                      Date: __________________________
      --------------------------

                                      -17-
<PAGE>

                                   EXHIBIT A

                     PRODUCT AND MANUFACTURING DEVELOPMENT

     In support of TheraSense's development of the Freestyle and Messenger
System Flextronics will provide the following services in accordance with the
terms outlined below:

                                                          Projected
Service                      Terms                        Expenses
--------------------------   ---------------------------  ----------------------
PCB Layout                   Net thirty (30) days from   ***
                             invoice

RF Design Services (*)       *** of total expenses Net    ***
                             30 *** (as described below)

Digital Design
(Including Test Engineering
And other engineering
Services)
        Digital Design       *** of total expenses Net    ***
                             30 *** (as described below)

        Test Engineering     *** of total expenses Net    ***
                             30 *** (as described below)

Mechanical Design            *** of total expenses Net    ***
                             30 *** (as described below)

Test Equipment Development
& Procurement
 . Std. Material O/H &
  Markup                                                  ***
 . Equipment Capital Cost
  100% amortized. (Cost to
  be preapproved by
  TheraSense)                                             ***
 . Total Amortized amount
  not to exceed                                           ***

Prototype Assembly (*)
        Freestyle            1000 units @ *** unit
        Messenger            1000 units @ *** unit

(*) Flextronics to provide prototype labor and overhead *** as long as
TheraSense utilizes Flextronics' RF design services in the development of these
products. Flextronics will provide ***.

Flextronics will provide TheraSense a quarterly summary of the total expenses
incurred for the project and the balance in the deferred expenses. Flextronics
will add a *** cost of money factor *** on the deferred expense balance and
recover *** deferred expense balance over the first two years of production and
sale by TheraSense of first *** systems manufactured which ever occurs first. In
the event TheraSense sales volume does not reach

*** Confidential treatment requested

<PAGE>

*** units in the first two years of manufacturing the un-amortized balance
of deferred expenses will be converted to a loan, and repaid over a period not
to exceed 15 months for the date the loan is originated.

In addition to the services and manufacturing support Flextronics will provide
in the development of the colossus and messenger products, Flextronics will also
work with TheraSense to Co-develop the information management interfaces to
process manufacturing production releases and sales order/TheraSense
distribution processing.

*** Confidential treatment requested

                                      -2-
<PAGE>

                                   EXHIBIT B

                                PRODUCT PRICING

     Meter Assembly target price based upon the following cost data supplied by
Flextronics.  This cost does not include any ancillary products or packaging of
any type.  The cost will be revised as these items are identified and added to
the cost of the product.

     Meter Only              ***               ***           ***
--------------------------------------------------------------------------------
 Product Costs               ***               ***           ***

 Material Cost               ***               ***           ***
 Attrition/Other
 Subtotal Material

 Material Overhead           ***               ***           ***
 Freight
 Total Material O/H,
 Other

 Direct Labor (PCBA)         ***               ***           ***
 Direct Labor Overhead
 Subtotal Labor/Overhead

 Test Labor                  ***               ***           ***
 Test Labor Overhead
 Subtotal Test/Overhead

 Sales, G&A                  ***               ***           ***
 Profit

 Final Selling Price         ***               ***           ***
--------------------------------------------------------------------------------

*** Confidential treatment requested
<PAGE>

                                   EXHIBIT C

                     PRODUCT DEFINITION AND SPECIFICATIONS

                          (METER ASSEMBLY, FREESTYLE)

                     Exploded View of FreeStyle Meter

Included in this diagram is the following text (from left-to-right and
top-to-bottom):

THE INFORMATION CONTAINED IN THIS DRAWING IS THE SOLE PROPERTY OF THERASENSE,
INC. ANY REPRODUCTION IN PART OR WHOLE WITHOUT THE WRITTEN PERMISSION OF
THERASENSE, INC. IS PROHIBITED.

                                   REVISIONS

             <TABLE>
             <S>     <C>                           <C>
             REV.    DESCRIPTION                   REV. BY:

             F       SEE ECO 00225                 C. Ray
             G       SEE ECO 00245                 C. Ray
             H       SEE ECO 00378                 C. Ray
             J       SEE ECO 00421                 C. Ray
             K       SEE ECO 00486                 C. Ray
             L       SEE ECO 00696                 E.C.S.
             M       DELETE ITEM 10 AND NOTE 4     C. Ray
</TABLE>

The following items are labeled on the exploded view of the FreeStyle
Meter:

1) or 11) [SEE BOM] REF:PWB FAB, METER ELECT

2) REF: METER TOP/LENS ASSEMBLY

3) REF: BOTTOM METER

4) REF: BATTERY DOOR/LABEL ASSEMBLY

5) REF: KEYCAP, SWITCH, INTEGRATED

6)[2] REF: LABEL METER BODY

7) REF: BATTERY, 1.5V AAAA (2 REQD.)

8) REF. SPACER, CAPACITOR SUPPORT

9)[2] REF: SHIELD, BATTERY COMPARTMENT

[3] REMOVE THE PROTECTIVE POLYETHYLENE COVER FROM THE TOP OF THE LCD BEFORE
    PLACING THE PWB ASSEMBLY INTO THE METER CASE.

[2] ITEMS 8, 9 USED ON PRT 00234-000 ONLY.

[1] ITEM 8 [SPACER CAPACITOR SUPPORT] TO BE PLACED ONTO SUPER-CAD OF ITEM 1
    (PWBA, FREESTYLE) PRIOR TO PLACING ITEM 1 INTO THE METER CASE.

NOTES: (UNLESS SPECIFIED OTHERWISE)

<PAGE>

                    Graphic of a cardboard box containing
                       pre-packaged FreeStyle System Kits

Included in this diagram is the following text
(from left-to-right and top-to-bottom):

THE INFORMATION CONTAINED IN THIS DRAWING IS THE SOLE
PROPERTY OF THERASENSE, INC. ANY REPRODUCTION IN PART OR WHOLE
WITHOUT THE WRITTEN PERMISSION OF THERASENSE, INC. IS PROHIBITED.

PRT 00225-001 THRU -007 ONLY

THERASENSE INC.
DWG. NO. PRT 00225 REV. J
SCALE 1:1      SIZE C      SHEET 2 OF 3

<PAGE>

     Exploded View of various components of the FreeStyle system kit

INCLUDED IN THE DIAGRAM IS THE FOLLOWING TEXT FROM LEFT-TO-RIGHT AND
TOP-TO-BOTTOM:

THE INFORMATION CONTAINED IN THIS DRAWING IS THE SOLE PROPERTY OF THERASENSE,
INC. ANY REPRODUCTION IN PART OR WHOLE WITHOUT THE WRITTEN PERMISSION OF
THERASENSE, INC. IS PROHIBITED.

                                   REVISIONS
<TABLE>
<CAPTION>
REV.                        DESCRIPTION                                REV. BY:
<S>              <C>                                                <C>
A                 RELEASE FOR PROTOTYPE                                 C. RAY
B                 SEE ECO00191 FOR CHANGES                              C. RAY
C                 SEE ECO00211 FOR CHANGES                              C. RAY
D                 ADD NOTE 1, ADD ITEM 23, ZONE E, ADD ITEMS 21, 22
                  AND 23 TO BOM. REMOVED DASH H O TAB BLOCK.            C. RAY
E                 REVISE NOTE 1 - ADD ITEM 25 TO BOM.                   C. RAY
F                 REVISE ORDER OF POLYBAG (ITEM 16) CONTENT 5;          J.V.F.
                  SEE E.C.O.
G                 SEE ECO; SHEET 2 ZONE B4 ADDED NOTE; ADDED SHEET 3    E.C.S.
H                 SEE ECO; PHOTO ADDED FOR SHEET 3                      E.C.S.
J                 SEE ECO; ADDED NOTE 2                                 J.V.F.
</TABLE>

THE FOLLOWING STEPS AND ITEMS WERE PROVIDED:

STEP 1 - INSERT LITERATURE AND CARDS INTO POLY BAG

 16) POLYBAG, ZIPPER RESEALABLE
 ORDER OF POLYBAG CONTENTS (FIRST PAGES MUST ALWAYS FACE SAME DIRECTION)
 23) INSERT, GETTING STARTED
  3) OWNERS MANUAL
 19) CARD REBATE
 12) CARD, WARRANTY
  7) LOG BOOK
  8) CARD, QUICK REFERENCE WARRANTY

STEP 2. ASSEMBLE METER AND LANCING DEVICE IN TRAY

 18) LABEL, WARNING
  6) COVER, TRAY, SYSTEM KIT
  7) METER ASSEMBLY
  5) TRAY, INNER SYSTEMS KIT
 14) LANCING DEVICE

STEP 3. GROUP MAJOR COMPONENTS

 11) CARRYING CASE ASSEMBLY PACK ITEMS
 15) LANCETS, BAGGED
 24) FINGER CAP, BAGGED INSIDE CARRYING CASE

STEP 4. INSERT COMPONENTS INTO OUTER CARTON

  2) OUTER CARTON, SYSTEM KIT
  SIDE CUT-AWAY FOR CLARITY
  4) CARTON ASSEMBLY, STRIPS
  9) CONTROL SOLUTION KIT

STEP 5. FOLD TAB AND INSERT STRIPS AND CONTROL SOLUTION BOXES.

 17) LABEL, TAMPERPROOF PLACED AT THIS LOCATION
 20) STICKER, REBATE (NOT SHOWN)
     TO BE PLACED APPROX. WHERE SHOWN.
 20) LABEL, CARTON, SYSTEM KIT PLACED WHERE SHOWN

2. PLACE A "PARTIAL" STICKER ON THE TOP SURFACE OF ANY SHIPPER THAT DOES NOT
CONTAIN THE COMPLETE NUMBER OF SYSTEM KITS. A STANDARD STICKER MAY BE USED WITH
A MINIMUM SIZE OF 1X3.

1. COMPLETED SYSTEM KIT TO BE INSERTED INTO ITEM 21 WITH LABEL UP.
   NOTES: (UNLESS SPECIFIED OTHERWISE)

<TABLE>
<CAPTION>
PART NUMBER                   DESCRIPTION
<S>                         <C>
PRT 00225-001                 FREESTYLE SYSTEM, NO REBATE
PRT 00225-002                 FREESTYLE SYSTEM, $40 REBATE
PRT 00225-003                 FREESTYLE SYSTEM, $25 REBATE
PRT 00225-004                 FREESTYLE SYSTEM, $50 REBATE
PRT 00225-005                 FREESTYLE SYSTEM, $40 REBATE
PRT 00225-006                 FREESTYLE SYSTEM, $25 REBATE
PRT 00225-007                 FREESTYLE SYSTEM, $50 REBATE
</TABLE>

UNLESS OTHERWISE SPECIFIED        CAD GENERATED               THERASENSE, INC.
DIMENSIONS ARE IN INCHES.         DRAWING:
TOLERANCES ARE:                   DO NOT MANUALLY UPDATE.
                                  DO NOT SCALE DRAWING

DECIMALS      ANGLES             ORIGINATOR (20)          DATE

 XX .01          1"                 C. RAY              12/22/99
XXX .005

MATERIAL                                                 DESCRIPTION:
                                                         SYSTEM KIT
FINISH

REF 2D CAD FILE: SYSTEM KIT                              DWG. NO. PRT 00225
REF 3D CAN FILE: SYSTEM KIT                              REV. J

                                                         VERSION: 6
                                                         VERSION: 6

                                                         SCALE 1:2
                                                         SIZE C
                                                         SHEET 1 OF 3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00029-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00029-of-00352.parquet"}]]