Document:

<PAGE>

                                                                   EXHIBIT 10.9

                           DISTRIBUTORSHIP AGREEMENT

The agreement, made and entered into to be effective as of the 20 day of August
                                                               --        ------
by and between:

                                LXN Corporation
                                6325 Lusk Boulevard
                                San Diego, CA 92121

A corporation organized under the laws of the state of DE, hereinafter referred
                                                       --
to as SUPPLIER; and

                                PSS World Medical
                                4345 South Point Avenue
                                Jacksonville, FL 32216

A company organized under the laws of the state of Florida, hereinafter referred
to as DISTRIBUTOR.

                                  WITNESSETH

WHEREAS, SUPPLIER desires to sell and/or market its products through the use of
an exclusive distributor; and

WHEREAS, DISTRIBUTOR desires to purchase the SUPPLIER's products for resale to
customers; and

WHEREAS, the parties desire to enter into a distributorship agreement governing
their relationship;

NOW, THEREFORE, in consideration of the mutual terms and conditions set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:

1.0  PRODUCT

     1.1 Products: The Products covered by this Agreement are those products set
         --------
         forth and attached hereto in Exhibit A ("Products"), manufactured by or
         for SUPPLIER. Exhibit A may be amended from time to time by mutual
         consent of the parties.

     1.2 Shelf Life: SUPPLIER represents and warrants that all Products with a
         ----------
         limited shelf life have been so indicated on Exhibit A with the useful
         life of each Product stated in months from the date of manufacture.

     1.3 MSDS: SUPPLIER shall provide required Material Safety Data Sheets for
         ----
         any Product containing hazardous chemicals as required by Federal,
         state or local law.

2.0  GRANT OF RIGHTS

     2.1 Distribution Rights: SUPPLIER hereby appoints DISTRIBUTOR and
         -------------------
         DISTRIBUTOR accepts the appointment as the exclusive distributor of the
         Products during the term and pursuant to the provisions of this
         Agreement; provided, however, that DISTRIBUTOR shall be SUPPLIER's sole
         "National Physician Office" of the Products during the term of this
         Agreement. The term "National Physician Office" shall be understood to
         be comprised of DISTRIBUTOR's selling products to physician's offices
         across state boundaries through sole ownership of formal affiliations.

     2.2 Territory: The territory in which the DISTRIBUTOR has the exclusive
         ---------
         right to sell and distribute the products shall be USA.
                                                            ---

<PAGE>

     2.3  SUPPLIER Distribution Rights: Supplier reserves right to sell the
          ----------------------------
          Products in the Territory to customers refusing to buy from
          distributor, SUPPLIER will sell product at list price and will charge
          freight. Supplier will use its best efforts to encourage customers to
          buy from Distributor.

3.0  ORDERS; VOLUME

     3.1  Orders: DISTRIBUTOR shall make purchases by submitting firm purchase
          ------
          orders to SUPPLIER. A rolling ninety (90) day forecast shall be
          submitted by DISTRIBUTOR to SUPPLIER by the 5th day of every month.

     3.2  Volume: DISTRIBUTOR's estimated twelve (12) month [purchase volume]
          ------
          [sales-at-cost] is set forth in Exhibit B. SUPPLIER acknowledges that
          this is a non-binding estimate only, and not a commitment to purchase.
          DISTRIBUTOR and SUPPLIER will evaluate effectiveness of this agreement
          every ninety (90) days. DISTRIBUTOR agrees to purchase a minimum per
          quarter as detailed in Exhibit B without return privledges.

     3.3  Sole Remedy: SUPPLIER's remedy for DISTRIBUTOR's failure to purchase
          -----------
          the estimated volume of Products as referenced in Exhibit B shall be
          the termination of the exclusivity provision of this Agreement. The
          over-achievement by DISTRIBUTOR of estimated purchase volume in any
          period (quarterly) shall be applied toward DISTRIBUTOR's achievement
          in the following period. SUPPLIER agrees to give DISTRIBUTOR 30 days
          right to cure.

     3.4  Incentives: Corporate incentives will be developed annually as set
          ----------
          forth ion exhibit C. Incentives will be determined 60 days prior to
          the close of the initial 12 month period for the following 12 month
          period. Incentives will be based on the prior 12 months actual base
          purchases.
<PAGE>

4.0  SHIPPING AND DELIVERY

     4.1  Shipping:  SUPPLIER shall ship all Products F.O.B. Destination,
          --------
          freights prepaid. SUPPLIER shall ship Products to DISTRIBUTOR.

     4.2  Overstocked Inventory:  DISTRIBUTOR shall review its inventory at
          ---------------------
          lease [in each calendar quarter] and identify those Products which it
          considers, in its reasonable discretion, to be excess inventory.
          DISTRIBUTOR shall notify the SUPPLIER in writing, describing such
          Products, and Supplier shall, exchange with replacement product, at
          SUPPLIER's expense. Except product purchased to meet minimums in
          exhibit B.

     4.3  Obsolete Inventory:  Any Products owned by DISTRIBUTOR and rendered
          ------------------
          unsalable, in DISTRIBUTOR's reasonable opinion, due to: (i) a change
          in any Product specification, (ii) discontinuation or elimination by
          SUPPLIER of any Product from its product offering, (iii) release by
          SUPPLIER of any improved or updated version of any Product, or (iv)
          any other cause outside of DISTRIBUTOR's control, shall be repurchased
          from DISTRIBUTOR by SUPPLIER at the price paid for such Product(s) by
          DISTRIBUTOR. SUPPLIER shall additionally pay for return freight and
          related transportation and insurance charges for all such Products.

     4.4  Expired Stock Returns: SUPPLIER agrees to accept all DISTRIBUTOR's
          ---------------------
          unsold, expired Products for return at its facility, and agrees to
          credit DISTRIBUTOR at DISTRIBUTOR'S cost less [***] of all returned,
                                                        -----
          expired, Products. DISTRIBUTOR is responsible for transportation
          charges to the SUPPLIER; thereafter all costs associated with such
          Products shall be the sole responsibility of SUPPLIER.

     4.5  Delivery: SUPPLIER shall ship all Products for which it has received a
          --------
          firm purchase order within thirty (30) days of order receipt. SUPPLIER
                                     -----------
          agrees that time is of the essence regarding its delivery of Products.

5.0  SALES AND MARKETING SUPPORT

     5.1  Training: SUPPLIER shall provide to DISTRIBUTOR'S sales personnel, at
          --------
          DISTRIBUTOR'S premises or such other location as the parties may
          agree, such training in the demonstration and use of the Products as
          may be reasonably requested by DISTRIBUTOR, and for such training
          purposes shall make available, at SUPPLIERS'S expense, all necessary
          instructors, training material and Products for demonstration.
          DISTRIBUTOR shall provide transportation and lodging expenses for
          DISTRIBUTOR personnel for the training of DISTRIBUTOR representatives
          by SUPPLIER. DISTRIBUTOR shall provide product training to customers,
          SUPPLIER will assist via customer/technical services phone.

     5.2  Technical Support: SUPPLIER shall provide technical support to
          ------------------
          DISTRUBUTOR'S sales personnel and customers, and promptly provide to
          DISTRIBUTOR such additional technical information developed or
          acquired by SUPPLIER from time to time as may reasonably be expected
          to be of assistance to DISTRIBUTOR in fulfilling its obligations
          hereunder. SUPPLIER shall provide at its own expense a toll free long
          distance telephone service for sales and customer support.

     5.3  Literature: SUPPLIER shall provide, at its expense, reasonable
          ----------
          quantities of such instruction manuals and point of sale literature as
          may, from time to time, be requested by DISTRIBUTOR for use in
          connection with the marketing, sale and distribution of the Products.
          Subject to DISTRIBUTOR's prior written approval, DISTRIBUTOR's name
          may be incorporated in SUPPLIER's advertising literature intended for
          distribution by DISTRIBUTOR's sales representatives. If requested to
          do so by DISTRIBUTOR,

[***] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>

      SUPPLIER shall furnish DISTRIBUTOR with suitable copy and photographs for
      use by DISTRIBUTOR in cataloging the Products.

5.4   Samples: SUPPLIER shall provide DISTRIBUTOR with Product samples during
      -------
      the term of this Agreement to assist DISTRIBUTOR with its marketing and
      sales efforts relative to the Products. The number of samples will be
      negotiated on a quarterly basis by both parties.

5.5   Demonstration Units: SUPPLIER shall, at its sole cost and expense,
      -------------------
      provide DISTRIBUTOR with Products to be used for demonstration purposes
      and training during the term of this Agreement. The number of
      demonstration Products to be provided under this provision shall be
      calculated as follows:

      150 units/per quarter. The units will be shipped directly to the branch
      -----------------------------------------------------------------------
      offices as directed by the DISTRIBUTOR and may not exceed 750 over the
      ----------------------------------------------------------------------
      term of this contract.
      ---------------------

      SUPPLIER reserves the right to affix a marking to such Products indicting
      that such Products are "For Demonstration Purposes Only". Such marking
      shall not be removed or obliterated by DISTRIBUTOR. Upon termination or
      non-renewal of this Agreement, DISTRIBUTOR shall, at its election either:
      (i) return all or any part of such demonstration Products to SUPPLIER in
      substantially the same condition as received, reasonable wear and tear
      excluded, and pay the return freight therefore; or (ii) purchase all or
      any part of such demonstration Products from SUPPLIER at SUPPLIER's then-
      applicable book value, as demonstrated by clear and convincing evidence.

5.6   Promotion: DISTRIBUTOR shall make diligent efforts to market, sell and
      ---------
      distribute the Products during the term. DISTRIBUTOR will provide quotas
      to its sales management team on SUPPLIER's Products where DISTRIBUTOR will
      report to supplier quarterly the progress to quotas.

5.7   DISTRIBUTOR agrees to distribute marketing materials and supporting other
      products offered of SUPPLIER's related products to all of DISTRIBUTOR's
      related customer. DISTRIBUTOR will provide detailed reports as to the
      efforts.

5.8   DISTRIBUTOR shall submit to SUPPLIER sales reports by customer name,
      address, city, state, and zipcode with product purchased, invoiced amount
      and quantity electronically by the 10th of every month for the prior month
      at no charge to SUPPLIER.

5.9   DISTRIBUTOR shall make a diligent effort to distribute market materials of
      SUPPLIER's consumer product for the term of this Agreement.

5.10  As part of agreement, supplier will be allowed to attend Distributors
      National Sales Meeting at no expense to the supplier with the exception of
      travel and lodging.

5.11  Distributor will have suppliers products on quarterly promotion (Platinum
      Plus or similar programs) once per 12 month period of the contract at the
      Distributors expense. Additional promotions will be at the suppliers
      discretion and expense.

<PAGE>

      5.12   Distributor will feature Suppliers products in annual catalogs and
             other promotional flyers at the Distributors expense.

6.0   PRICE AND PAYMENT TERMS

      6.1   Price:  SUPPLIER shall supply and ship Product at the prices or at
            -----
            the discount(s) shown in Exhibit A through December 31, 2000. ("Firm
            Price Period").

      6.2   Distributor Pricing:  SUPPLIER represents and warrants that the
            -------------------
            prices and terms at which the Products are and will be sold to
            DISTRIBUTOR pursuant to this Agreement shall be no less favorable
            than those made available to the SUPPLIER's most favored
            distributor(s).

      6.3   Price Increases: After the expiration of the Firm Price Period,
            ---------------
            prices may be increased no more than twice in any contract year.
            SUPPLIER shall give at least ninety (60) days prior written notice
            to the DISTRIBUTOR of any price increase. Shipments shall be billed
            at the price in effect at time of order placement.

      6.4   Payment Terms: Payment terms shall be F.O.B. - 30 days from the date
            -------------
            of receipt of an accurate invoice. DISTRIBUTOR shall not be in
            breach of the Agreement unless payment from the DISTRIBUTOR is more
            than fifteen (15) days overdue.

      6.5   Resale:  DISTRIBUTOR shall be entitled to resell Products on such
            ------
            terms as it may, in its sole discretion, determine, including
            without limitation price, returns, credit and discounts.

      6.6   Special Pricing: SUPPLIER shall negotiate in good faith with
            ---------------
            DISTRIBUTOR, to provide special pricing (i) on any large quantity
            order for Products which may be requested by DISTRIBUTOR's
            customers.

7.0   TERM AND TERMINATION

      7.1   Term: The initial term of this Agreement shall be from the effective
            ----
            date first set forth above for a term of 36 months. After the
            expiration of the initial term, either party may terminate the
            Agreement upon ninety (90) days prior written notice.

      7.2   Termination:  Notwithstanding the foregoing, this Agreement may be
            -----------
            terminated for cause at any time as follows:

            (i)     In the event of material default or material breach of the
                    terms of this Agreement by either party, written notice
                    thereof may be given to the defaulting party. Thereafter,
                    the defaulting party shall have thirty (30) days to cure
                    said breach. In the event that said breach has not been
                    cured within said thirty (30) day period, the non-defaulting
                    party may terminate this Agreement on or within a reasonable
                    period after the expiration of the cure period.
            (ii)    In the event of nationalization, expropriation, liquidation
                    or bankruptcy of, or an assignment for the benefit of
                    creditors or insolvency of either party.
            (iii)   If supplier changes ownership
            (iv)    If the quarterly minimum set forth in exhibit B are not met,
                    either party may terminate with a 60 day written notice.

8.0   PROCEDURES OF TERMINATION
<PAGE>

     8.1  Procedures: Upon the termination of this Agreement, except for cause
          ----------
          pursuant to Section 7.2 (ii), SUPPLIER shall continue to honor
          DISTRIBUTOR's orders for Products up to the effective date of
          termination and for a period of sixty (60) days thereafter, provided
          such orders are no greater than ten percent (10%) above the quantities
          established during the sixty (60) days prior to the date of the notice
          of termination, and DISTRIBUTOR shall pay for all such Products on the
          terms and conditions of this Agreement.

     8.2  Survival: The right and duties of each party under this Agreement and
          --------
          the Exhibits hereto in respect of performance prior to termination
          shall survive and be enforceable in accordance with the terms of this
          Agreement.

     8.3  Existing Inventory: Upon termination of this Agreement by the
          ------------------
          SUPPLIER, SUPPLIER shall repurchase from DISTRIBUTOR, at DISTRIBUTOR's
          request and at DISTRIBUTOR's current cost therefore, such Products as
          are then owned by DISTRIBUTOR. Upon termination of this Agreement by
          DISTRIBUTOR, DISTRIBUTOR will own existing inventories and have no
          return authorization.

9.0  WARRANTIES, INDEMNITY, RECALL AND INSURANCE

     9.1  Warranties: In addition to the warranties of SUPPLIER set forth in
          ----------
          this Agreement and in the Continuing Guaranty which is attached hereto
          as Exhibit D, SUPPLIER warrants that the Products will conform to the
          specifications set forth in SUPPLIER's product literature and Exhibit
          A; that they will comply and be manufactured, packaged, sterilized (if
          applicable), labeled and shipped by SUPPLIER in compliance with all
          applicable federal, state and local laws, orders, regulations and
          standards; and that they will be merchantable and fit for their
          intended purpose. Supplier will provide a complete indemnification by
          Supplier of Distributor relating to any claims with respect to
          defective products and product liability. Supplier will name
          Distributor as an additional insured under a vendor endorsement.

          All Products shall include SUPPLIER's warranty statement containing
          the customer's warranty. All SUPPLIER Products shall be warranted to
          DISTRIBUTOR's customer against defects in materials and workmanship,
          including parts and labor, under normal use for a period of three (3)
                                                                      ---------
          year(s). SUPPLIER warrants that the Products have been thoroughly
          tested before shipment and that, if applicable, they are free of
          mechanical and electrical defects. The warranty period becomes
          effective at the earlier of installation or fifteen (15) days from
          date of shipment to the DISTRIBUTOR's customer. DISTRIBUTOR shall
          request customers to present reasonably acceptable documentation
          verifying the effective warranty date.

10.0 TRADEMARKS

     10.1 Trademark License: SUPPLIER hereby grants to DISTRIBUTOR the
          -----------------
          royalty-free right to use SUPPLIER's trademarks on SUPPLIER's Products
          during the term of this Agreement, it being expressly understood that
          if DISTRIBUTOR elects to use SUPPLIER's trademarks during the term of
          the Agreement, DISTRIBUTOR shall properly do so and shall discontinue
          the use of such trademarks in any new published material following the
          termination hereof. Following the termination of this Agreement,
          SUPPLIER grants DISTRIBUTOR the right to continue to use its
          trademarks in connection with sale or service of Products purchased by
          DISTRIBUTOR during the term of this Agreement. DISTRIBUTOR disclaims
          any rights to SUPPLIER'S trademarks other than the said
<PAGE>

          license. Supplier will indemnify Distributor for trademark or patent
          issues related to Suppliers products.

11.0 CONFIDENTIALITY

     The parties expressly agree to hold as confidential ("Confidential
     Information") the existence and terms of this Agreement as well as any
     information which is designated in writing by the disclosing party as
     confidential, provided such information is clearly marked as confidential,
     and the disclosing party obtains a signed receipt or agreement from the
     receiving party acknowledging that such information is confidential. In the
     event Confidential Information is exchanged according to these guidelines,
     such information will be retained by the other party in confidence for a
     period of two (2) years following the termination of this Agreement. The
     transmittal of such information is and shall be upon the express condition
     that the information is to be used solely to effectuate this Agreement; and
     the receiving party shall not use, publish or disclose said information, in
     whole or in part, for any purpose other than that stated herein. SUPPLIER
     expressly acknowledges and agrees that DISTRIBUTOR's customer names,
     address and key contacts are and shall be the Confidential Information of
     DISTRIBUTOR. Notwithstanding the foregoing, the above restrictions on
     disclosure and use shall not apply to any information which the party can
     show by written evidence, was known to it at the time of receipt, of which
     may be obtained from third parties who are not bound by a confidentiality
     agreement, or which is in the public domain.

12.0 MISCELLANEOUS

     12.1 Force Majeure: The obligations of either party to perform under this
          --------------
          Agreement shall be excused during each period of delay if such delay
          arises from any cause or causes which are reasonably beyond the
          control of the party obligated to perform, including, but not limited
          to, the following: acts of God, acts or omissions of any government,
          or any rules, regulations or orders of any governmental authority or
          any officer, department, agency or instrumentality thereof; fire,
          storm, flood, earthquake, insurrection, riot, invasion or strikes. The
          affected party shall use its best efforts to remedy the effects of
          such force majeure. Any force majeure shall not excuse performance by
          the party, but shall postpone performance, unless such force majeure
          continues for a period in excess of ninety (90) days. In such event,
          the party seeking performance may cancel its obligations hereunder.

     12.2 Assignment: Neither this Agreement nor any right or obligation
          ----------
          hereunder is assignable or transferable by either party in whole or in
          part without the prior written consent of the other party which shall
          not be unreasonably withheld, and any such purported assignment
          without such consent shall be void, except that either party shall
          have the right to assign this Agreement and its rights and obligations
          hereunder, without obtaining the prior written consent of the other
          party, to any entity (other than a competitor of the other party
          hereto) with which the assigning party (a) merges, (b) sells a
          substantial part of its assets or businesses, or (c) sells a
          substantial part of its assets or business relating to the Products.

     12.3 Notices: Any notice required by this Agreement shall be in writing and
          -------
          shall be deemed sufficient if given personally or by registered or
          certified mail, postage prepaid, or by any nationally recognized
          overnight delivery service, addressed to the party to be notified at
          the address set forth in the initial paragraph of this Agreement.
          Either party may, by notice to the other, change its address for
          receiving such notices.

<PAGE>

12.4  Entire Agreement:  This Agreement, including exhibits, constitutes the
      ----------------
      entire agreement between the parties relating to the subject matter hereof
      and cancels and supersedes all prior agreements and understandings,
      whether written or oral, between the parties with respect to such subject
      matter.

12.5  Existing Obligations:  SUPPLIER warrants that the terms of this Agreement
      --------------------
      do not violate any existing obligations or contracts of SUPPLIER. SUPPLIER
      shall protect, defend, indemnify, and hold harmless DISTRIBUTOR from and
      against any claims, demands, liabilities or actions which are hereafter
      made or brought against DISTRIBUTOR and which allege any such violation.

12.6  Modifications, Waiver:  No amendment, modification or claimed waiver of
      ---------------------
      the terms of this Agreement shall be binding on either party unless
      reduced to writing and signed by an authorized officer of the party to be
      bound. In ordering and delivery of the Products, the parties may employ
      their standard forms, but nothing in those forms shall be construed to
      modify or amend the terms of this Agreement.

12.7  Relationship of the Parties:  This Agreement does not constitute either
      ---------------------------
      party as the agent or legal representative of the other for any purpose
      whatsoever.

12.8  Public Announcements:  Except as may be required by law, SUPPLIER shall
      --------------------
      not issue or cause to be issued any press release or public announcement
      or otherwise disclose the existence of this Agreement or the transactions
      contemplated hereby except as and to the extent that DISTRIBUTOR and its
      parent jointly agree, in writing.

12.9  Governing Laws:  This Agreement shall be governed by and construed in
      --------------
      accordance with the laws of the Commonwealth of Pennsylvania.

IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives.

                                                LXN Corporation

                                                By: /s/ Michael A. Beeuwseart
                                                        ------------------------
                                                Title:  President
                                                        ------------------------
                                                Date:   8/20/99
                                                        ------------------------

                                                Physicians Sales & Service

                                                By: /s/ D.J. Harpe
                                                        ------------------------
                                                Title:  Chief Sales Mktg Officer
                                                        ------------------------
                                                Date:   8/20/99
                                                        ------------------------
<PAGE>

                                                                       Exhibit A

Duet(R) Glucose Control System
--------------------------------------------------------------------------------
Authorized LXN Physician Sales & Service Price List*
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Distributor    Minimum       Case Qty
Item #     UPC#       Product                                    Packaging        MSRP         Price     Re-order QTY  Price (10/cs)
<C>     <C>           <S>                                       <C>             <C>         <C>          <C>           <C>
====================================================================================================================================
Duet(R) Monitor
====================================================================================================================================
                      Duet(TM) ProPak for Healthcare
                      Professionals        (NDC 8054 0100 06)
10006   64218210006   Includes: Duet Glucose Control Monitor       each         [***]          [***]           4         [***]
                      with soft case, 25 Glucose Test Strips,
                      16 GlucoProtein Test Strips, 16 Blood
                      Sampling Straws, Checkstrip, Duet
                      Glucose Control Solution, GlucoProtein
                      Control Solutions (2), User's Guide,
                      AAA Batteries (installed).
====================================================================================================================================
Duet(R) Test Strips
====================================================================================================================================
                      Duet(TM) Glucose Test Strips
20002   64218220002   50's                 (NDC 8054 0200 02)   2X25 per vial   [***]          [***]        1 case       [***]
20003   64218220003   100's                (NDC 8054 0200 03)   4X25 per vial   [***]          [***]        1 case       [***]
------------------------------------------------------------------------------------------------------------------------------------
                      GlucoProtein(TM) Test Strips
30003   64218230003   16's                 (NDC 8054 0300 03)    2X8 per vial   [***]          [***]        1 case       [***]
====================================================================================================================================
Duet(R) Supplies
====================================================================================================================================
                      Duet(TM) Glucose Control Solution
20004   64218220004   2mL                  (NDC 8054 0200 04)     each vial     [***]          [***]        1 case       [***]
------------------------------------------------------------------------------------------------------------------------------------
                      GlucoProtein(TM) Control Solution
30004   64218230004   2X1mL                (NDC 8054 0300 04)     each vial     [***]          [***]        1 case       [***]
====================================================================================================================================
Call 1-888-LXN-TEST (596-8378)
====================================================================================================================================
</TABLE>
Terms: NET 30 days                           Initial stocking order required
                                             Inquire re: minimums and incentives
Effective: October 1, 1999
* Prices subject to change                                 Minimum reorder: $500
                                      LXN
                         THE DIABETES CONTROL COMPANY
--------------------------------------------------------------------------------
                  6325 Lusk Boulevard . San Diego, CA  02121
(C)1998 LXN Corporation ML-0016

[***] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

<PAGE>

Exhibit B: Minimums to be met on a quarterly basis beginning October 1,
1999--September 30, 2000

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
   Item      Item #    Cost    Minimum    Extended       LXN's      LXN's
                              Units per   Cost per      current     Extended
                               Quarter    quarter      quarterly    price to
                                                     volume/units   distributors
--------------------------------------------------------------------------------
<S>          <C>      <C>     <C>         <C>        <C>            <C>
ProPak       10006    [***]    [***]      [***]          450        [***]
GP 16        30003    [***]    [***]      [***]          5625       [***]
Glucose 50   20002    [***]    [***]      [***]          1200       [***]

Total                                     [***]                     [***]
--------------------------------------------------------------------------------
</TABLE>

[***] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

<PAGE>

                                                                       Exhibit C

                         Corporate Contract Proposal:
                             Additional Incentives
                         Oct 1, 1999 -- Sept 30, 2000

                .   Annual Net                 .   Incentive
                    Purchases                      Percentage

                .   [***]                      .   [***]%
                .   [***]                      .   [***]%
                .   [***]                      .   [***]%
                .   [***]                      .   [***]%

[***] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.<PAGE>

                                                                   EXHIBIT 10.10
[LOGO]
LXN Corporation                                             CONFIDENTIAL
The Diabetes Control Company                           Distribution Agreement

________________________________________________________________________________

This Agreement is established between LXN Corporation, 6325 Lusk Boulevard, San
Diego, CA 92121, USA, hereinafter referred to as "LXN", and:

          Firm Name:          PolyMedica Corporation / Liberty Medical Supply
                              ------------------------------------------------
          Address #1          11 State Street
                              ------------------------------------------------
          Address #2
                              ------------------------------------------------
          City, State, Zip    Woburn, MA 01801
                              ------------------------------------------------
          Phone #             781-933-2020
                              ------------------------------------------------
          Fax #               781-938-6950
                              ------------------------------------------------
          Contact:            Steven Lee, Chairman/CEO
                              ------------------------------------------------

hereinafter referred to as "LIBERTY." LXN and LIBERTY do hereby agree as
follows:

I.   THE PRODUCTS -- All LXN labeled instruments, reagents, supplies and
consumable products manufactured for or by LXN, as listed in Exhibit A, shall be
referred to as the "Products." Product specifications are subject to change at
any time, and LXN agrees to notify LIBERTY in writing of any such change. LXN
may withdraw or replace any Product from its current Price List without
suspending the Provisions of this Agreement.

II.  APPOINTMENT AND TERRITORY -- Until canceled or terminated, LXN hereby
appoints LIBERTY as a Distributor of the Products within the "Area of Coverage"
set forth herein. The appointment of the Area of Coverage shall not be
assignable or transferable in any manner*and is subject to the following
limitations:

1.   The designated Area of Coverage will be: for the express use by LIBERTY's
     patients only. This will include mail order, retail, or other patients
     serviced by LIBERTY within the 50 United States and Puerto Rico. Area of
     Coverage will not include the right to have product on the retail shelf.

2.   LIBERTY agrees not to knowingly resell Products outside the said Area of
     Coverage without the prior written consent of LXN. Failure to comply will
     be cause for termination of this Agreement as described in Section VII.

III. LXN RESPONSIBILITIES -- LXN agrees to meet the following responsibilities:

1.   Provide Product in the most timely and reasonable manner.

2.   Provide Product warranty coverage, as specified in the Product
     documentation.

3.   Maintain 24 hour / 7 days per week toll-free telephone service for
     technical service and customer inquiries.

4.   Invoice shipments of the Product to LIBERTY at the prices shown in Exhibit
     A.

5.   LXN agrees to build and sequester inventory in order to provide LIBERTY
     with a reasonable level of safety stock.

6.   LXN will provide a reasonable amount of support literature, in sufficient
     quantities, for LIBERTY's customers.

          * except that PolyMedica may assign this Agreement to any entity which
            shall have or acquire a controlling interest in it or to a
            subsidiary or joint venture in which PolyMedica shall directly or
            indirectly have control,

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The Diabetes Control Company                      Distribution Agreement

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7.   LXN will absorb product returned from LIBERTY's customers.
8.   LIBERTY will have observation rights to ensure that LXN is achieving its
     goals for increasing production capacity. LIBERTY shall provide LXN with
     five-(5) business days notice of their desire to visit LXN.
9.   LXN will provide Liberty the option of choosing [***] for the Products. In
     the event LIBERTY chooses to [***], both parties agree to negotiate a
     mutually acceptable agreement covering such product.

IV.  LIBERTY RESPONSIBILITIES -- LIBERTY agrees to meet the following
     responsibilities:

1.   Maintain adequate inventory, as mutually agreed upon, to meet customer
     demand, adhering to stated pricing and payment terms, and rotating stock on
     a FIFO basis.
2.   Use reasonable efforts to promote Products and to correctly use all LXN
     trademarks.
3.   Provide customary levels of customer service and make no claims about the
     Products other than those stated in LXN's literature and specifications.
4.   Adhere to LXN's written policies, provided to Liberty, for managing the
     return and/or recall of Products, including record-keeping of meter sales.
5.   Provide prompt oral notice to LXN Customer Service, followed by written
     notification within 48 hours, of any custom-reported adverse incidents
     involving the Products
6.   Comply with all Federal, State and local laws and regulations applicable to
     the sale of the Products.
7.   Hold in strict confidence, except as required by law, all information
     received from LXN that is designated as "Confidential" for a period of two
     (2) years after the termination of cancellation of this Agreement, apart
     from such information that is publicly know of independently discovered by
     the recipient. Such information includes, but is not restricted to:
     pricing, terms of this agreement, and any attachment or exhibit to this
     agreement.
8.   LIBERTY agrees not to perform [***] for a period of three (3) years from
     the effective date of this agreement unless this agreement is terminated
     under the provisions outlined section VII.
9.   LIBERTY shall provide, by the first day of each month, a six-month rolling
     forecast of meter requirements for LXN's planning purposes. The first three
     months of the rolling forecast shall be considered a firm purchase order
     from LIBERTY.
10.  Provide LXN with Quarterly Sales Tracking Reports (Distributor Cost), to
     include product, quantity and zip code, no later than the 10/th/ of the
     following month. These reports should be provided to LXN electronically and
     at no charge to LXN. The information will be used for the purposes of
     monitoring LIBERTY sales performance, Product acceptance by patients,
     return rates, and compensating LXN Sales Personnel.

V.   DELIVERY AND PAYMENT TERMS

1.   LIBERTY orders are subject to reasonable acceptance in part or in full by
     LXN.
2.   LXN may hold shipments if amounts owed by LIBERTY to LXN are past due.
3.   Special shipping requests, such as drop shipments and next day air
     deliveries will be honored upon LIBERTY's request and at the responsibility
     of the LIBERTY.

                                    Page 2

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SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

<PAGE>

[LOGO]
LXN Corporation                                                 CONFIDENTIAL
The Diabetes Control Company                              Distribution Agreement

________________________________________________________________________________

4.   During the first six months following the initial shipment of Product to
     LIBERTY, all invoices are due net 17 days from the invoice date.
     Thereafter, all invoices are due net 90 days from the invoice date.
5.   All shipments are FOB Palm City, FL.

VI.  WARRANTY HANDLING & RETURNED GOODS

1.   Repairs and Warranty fulfillment shall be performed, in a timely manner,
     only by LXN and only pursuant to its policies.
2.   LIBERTY shall promptly refer all end-user complaints or warranty claims to
     LXN's Customer Service Department (which currently is U.S. toll-free:
     1-888-LXN-TEST).
3.   LIBERTY complaints or warranty claims shall be directed to LXN's Customer
     Service Department. Prior to the return of any product to LXN, a Returned
     Goods Authorization number (RGA#) shall be obtained from LXN by LIBERTY.

VII. CANCELLATION, TERMINATION, SEVERABILITY

1.   The term of this agreement shall be 3 (three) years unless terminated
     earlier.
2.   This agreement may be terminated prior to the expiration of the term:
     a.  At any time upon mutual consent of both parties in writing.
     b.  Upon thirty (30) days written notice by either party if the other party
         shall fail to perform its duties or obligations under this agreement
         and does not remedy such failure within thirty (30) days of receipt of
         written notice by the failing party.
3.   It is agreed that such cancellation or termination will not impose any
     liability to LIBERTY, and neither will it release LIBERTY from obligations
     defined in Section IV (Items 2 - 7) and V (Item 4) above.
4.   At time of cancellation or termination by LIBERTY, without cause, LIBERTY
     assumes responsibility of any inventory in stock or in transit unless
     specified by LXN in writing prior to termination.
5.   At time of cancellation or termination by LXN, without cause, LXN assumes
     responsibility of any inventory in stock at LIBERTY or in transit.
6.   LIBERTY shall discontinue use of LXN's trademarks and thereafter not use
     trade names directly or indirectly in connection with its business except
     as to dispose of remaining inventory in a timely manner.
7.   Any provision of this Agreement which is finally determined by competent
     court or government agency to be prohibited or unenforceable in any
     jurisdiction will, as to such provision and jurisdiction only, be deemed
     severed to the extent of such prohibition and unenforceability and subject
     to such severance, and this Agreement will continue in effect in accordance
     with its other terms and conditions.

VIII. LIBERTY AS INDEPENDENT CONTRACTOR - The appointment of LIBERTY, pursuant
to this Agreement, shall not in any way constitute LIBERTY as an agent or legal
representative of LXN for

                                    Page 3

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any purpose whatsoever. LIBERTY is not granted any right or authority to assume
or create any obligation or responsibility, expressed or implied, on behalf of
or in the name of LXN or to bind LXN in any manner whatsoever.

IX. INDEMNITY

1.   LXN shall indemnify, defend and hold LIBERTY harmless from and against any
     and all claims, liabilities, losses and damages asserted by any person
     relating to or in any way connected with the possession, use or operation
     of the PRODUCT(S).
2.   LXN shall indemnify, defend and hold LIBERTY harmless from and against any
     and all claims, liabilities, losses and damages asserted by any persons,
     together with all costs, expenses or liabilities relating thereto
     (including reasonable attorney fees), based on a claim of infringement of a
     United States or foreign patent and/or trademark resulting from or relating
     to the manufacture, sales, operation or use of PRODUCT(S) or any
     component(s) thereof.
3.   LIBERTY shall indemnify and hold harmless LXN from and against any and all
     claims arising from any breach or default in the performance of any
     obligations on LIBERTY's part to be performed under the terms of this
     Agreement or arising from any negligence or other conduct of LIBERTY or any
     of LIBERTY's agents, contractors, dealers, salesmen, employees or other
     representatives, and from and against all costs, attorney's fees, expenses
     and liabilities incurred in the defense of any such claim or any action or
     proceeding brought thereon; and in case any action or proceeding be brought
     against LXN by reason or such claim.
4.   LIBERTY as material part of the consideration to LXN, hereby assumes all
     risk of damage to property or injury to persons arising out of the
     activities of distributor and its agents, dealers, salespersons and
     representatives under this Agreement and the activities of LIBERTY and from
     any cause whatsoever, and LIBERTY hereby waives all claims in respect
     hereof against LXN.

     X. FORCE MAJEURE -- Neither party shall incur liability under the terms of
     this Agreement from actions caused by circumstances beyond the reasonable
     control of the party concerned. Such circumstances shall include, but not
     be limited to, Acts of God or the public enemy, fire, flood, earthquake,
     windstorm, war, government regulations, restrictions, directions or
     requests, accidents, labor disputes, shortage of or inability to obtain
     material, equipment, transportation, license or permissions.

     XI. MISCELLANEOUS -- This Agreement contains the entire Agreement between
     the parties hereto within the matters covered herein. No modification,
     alteration, amendment or addendum to this Agreement shall be valid unless
     made in writing and signed by the authorized representatives of both LXN
     and LIBERTY.

     Any dispute that arises between the parties with respect to the performance
     of this Agreement shall be submitted to binding arbitration by the American
     Arbitration Association (or such other arbitration

                                    Page 4

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  [LOGO OF LXN CORPORATION]                                   CONFIDENTIAL
The Diabetes Control Company                             Distribution Agreement

________________________________________________________________________________

organization agreed to in writing by the parties hereto) to be determined and
resolved by said association under its rules and procedures in effect at the
time of submission.

This agreement shall be deemed in effect upon LXN's receipt of one (1) fully
executed copy of the same from LIBERTY.

LXN:   /s/ Michael A. Beeuwsaert     LIBERTY: /s/ Warren K. Trowbridge
       -------------------------              ----------------------------

By:    MICHAEL A. BEEUWSAERT         By:      WARREN K. TROWBRIDGE
       -------------------------              ---------------------

Title: PRESIDENT & CEO               Title:   President
       -------------------------              ---------------------

Date:   1/12/00                      Date:      1/7/00
       -------------------------              ---------------------

                                    Page 5
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[LOGO OF LXN CORPORATION]                                   CONFIDENTIAL
The Diabetes Control Company                            Distribution Agreement
--------------------------------------------------------------------------------

                                   EXHIBIT A

                              PRODUCTS & PRICING

--------------------------------------------------------------------------------
          PRODUCT                 ANNUAL    PRICE             ADDITIONAL
                                 PURCHASE    PER                TERMS
                                  VOLUME
--------------------------------------------------------------------------------
LXN Glucose only system kit        All       NC             See Note 1 below
--------------------------------------------------------------------------------
LXN Glucose test strips - Btls     All      [***]
of 50 strips
--------------------------------------------------------------------------------
LXN Glucose controls - Btl         All      [***]
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Note 1: [***]

                                    Page 6

[***] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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