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Diane P. Sullivan (appearance pro hac vice)
Adam S. Tolin (appearance pro hac vice)
WEIL, GOTSHAL & MANGES LLP
17 Hulfish St., Suite 201
Princeton, NJ 08542
Tel: 609-986-1120
diane.sullivan@weil.com
David R. Singh (appearance pro hac vice)
Bambo Obaro (appearance pro hac vice)
WEIL, GOTSHAL & MANGES LLP
201 Redwood Shores Parkway
Redwood Shores, CA 94065
Tel: 650-802-3000
david.singh@weil.com
bambo.obaro@weil.com
Patricia Lee Refo (SBN 017032)
Brianna L. Long (SBN 032309)
SNELL & WILMER LLP
One Arizona Center
400 East Van Buren Street, Suite 1900
Phoenix, AZ 85004
Tel: 602-382-6100
prefo@swlaw.com
bllong@swlaw.com
Attorneys for Defendants
Walgreens Boots Alliance, Inc. and
Walgreen Arizona Drug Company
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
In re
Arizona THERANOS, INC., Litigation
Case No. 2:16-cv-02138-PHX-HRH
(Consolidated with:
No. 2:16-cv-2373-HRH
No. 2:16-cv-2660-HRH
- and -
No. 2:16-cv-2775-HRH)
DEFENDANTS WALGREENS
BOOTS ALLIANCE, INC. AND
WALGREEN ARIZONA DRUG
COMPANY’S JOINDER AND
MOTION TO DISMISS;
MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT
THEREOF
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TABLE OF CONTENTS
I. JOINDER ................................................................................................................. 1
II. INTRODUCTION .................................................................................................... 1
III. FACTUAL BACKGROUND .................................................................................. 2
IV. LEGAL STANDARD FOR MOTION TO DISMISS UNDER RULE
12(B)(6) .................................................................................................................... 5
V. PLAINTIFFS FAIL TO STATE A COGNIZABLE CLAIM AGAINST
WALGREENS ......................................................................................................... 6
A. Plaintiffs Fail to State A Claim For Battery Or Medical Battery
Against Walgreens (Counts III and XVI) .................................................... 6
1. Plaintiffs Have Failed To Allege That Walgreens Caused A
Harmful Or Offensive Contact With Plaintiffs .................................. 7
2. Plaintiffs’ Battery Claims Must Be Dismissed Because They
Have Not Alleged Plausible Facts Establishing A Lack of
Consent ............................................................................................... 8
3. Plaintiffs Have Not Pled That Defendants Made Any
Misrepresentations That Go To The Nature Of The Invasion
Of Their Interests Or The Extent Of The Harm To Be
Expected ........................................................................................... 10
B. Plaintiffs Fail to State a Claim for a Violation of the Human Subjects
Act (Count XVII) ........................................................................................ 13
C. Plaintiffs Fail To State A Cause Of Action For Aiding And Abetting
A Fraud Against Walgreens (Count VIII) .................................................. 15
D. Plaintiffs Fail To State A Cause Of Action For Conspiracy (Civil or
RICO) Against Walgreens (Counts IX and X)............................................ 18
E. Plaintiffs Have Not Alleged Facts Establishing A Joint Venture or
Agency Relationship Between Walgreens and Theranos ........................... 20
VI. CONCLUSION ...................................................................................................... 22
i
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TABLE OF AUTHORITIES
Page(s)
Cases
BAE Sys. Mobility & Prot. Sys., Inc. V. ArmorWorks Enterprises, LLC,
No. CV-08-1697-PHX-JAT, 2011 WL 1192987 (D. Ariz. Mar. 28, 2011) ................ 17
Barba v. Seung Heun Lee,
No. CV 09-1115-PHX-SRB, 2009 WL 8747368 (D. Ariz. Nov. 4, 2009) .................. 19
Bell Atl. Corp. v. Twombly,
550 U.S. 544 (2007) ....................................................................................................... 5
Bohnert v. Mitchell,
No. CV-08-2303-PHX-LOA, 2010 WL 4269569 (D. Ariz. Oct. 26, 2010) .................. 7
Brown v. John C. Lincoln Health Network,
No. 1 CA-CV 14-0814, 2016 WL 2893739 (Ariz. Ct. App. May 17, 2016) ................. 6
Cathemer v. Hunter,
27 Ariz. App. 780, 558 P.2d 975 (1976) ........................................................................ 9
Cobbs v. Grant,
8 Cal.3d 229, 104 Cal. Rptr. 505, 502 P.2d 1 (1972) .................................................... 8
Daum v. SpineCare Med. Grp., Inc.,
52 Cal. App. 4th 1285, 61 Cal. Rptr. 2d 260 (1997) .......................................... 9, 10, 12
Dawson v. Withycombe,
216 Ariz. 84, 163 P.3d 1034 (Ct. App. 2007) ............................................ 15, 16, 17, 18
Doan v. Singh,
617 F. App’x 684 (9th Cir. 2015) ................................................................................ 10
Duncan v. Scottsdale Med. Imaging, Ltd.,
205 Ariz. 306, 70 P.3d 435 (2003) ................................................................... 6, 8, 9, 11
Epstein v. Wash. Energy Co.,
83 F.3d 1136 (9th Cir. 1996) ....................................................................................... 16
Fayer v. Vaughn,
649 F.3d 1061 (9th Cir. 2011) ....................................................................................... 6
Federico v. Maric,
224 Ariz. 34, 226 P.3d 403 (Ct. App. 2010) ................................................................ 17
ii
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Gorney v. Meaney,
214 Ariz. 226, 150 P.3d 799 (Ct. App. 2007) ................................................................ 8
Hales v. Pittman,
118 Ariz. 305, 576 P.2d 493 (1978) ............................................................................... 6
Hamilton v. Tiffany & Bosco PA,
No. CV-14-00708-PHX-GMS, 2014 WL 4162362 (D. Ariz. Aug. 20, 2014) .............. 6
Hearns v. R.J. Reynolds Tobacco Co.,
279 F. Supp. 2d 1096 (D. Ariz. 2003) ......................................................................... 18
Hillis v. Heineman,
2009 WL 2222709 (D. Ariz. July 23, 2009) ................................................................ 19
Huntman v. Danek Medical, Inc.,
No. 97–2155–IEG (RBB), 1998 WL 663362 (S.D. Cal. July 24, 1998) ..................... 14
Johnson v. Am.’s Wholesale Lender, No. CV-14-00201-PHX-SRB, 2014 WL 12550550
(D. Ariz. Apr. 3, 2014) ................................................................................................. 18
Johnson v. Pankratz,
196 Ariz. 621, 2 P.3d 1266 (Ct. App. 2000) .................................................................. 7
Kearns v. Ford Motor Co.,
567 F.3d 1120 (9th Cir. 2009) ..................................................................................... 10
Kidron v. Movie Acquisition Corp.,
40 Cal. App. 4th 1571 (1995) ...................................................................................... 19
Marceau v. Int’l Bhd. of Elec. Workers,
618 F. Supp. 2d 1127 (D. Ariz. 2009) ......................................................................... 18
Minotto v. Van Cott,
No. 1 CA-CV 15-0159, 2016 WL 3030129 (Ariz. Ct. App. May 26, 2016) ............... 17
Odom v. Microsoft Corp.,
486 F.3d 541 (9th Cir. 2007) ....................................................................................... 11
People v. Austin,
23 Cal. App. 4th 1596 (1994) ...................................................................................... 19
People v. Palmer,
24 Cal. 4th 856, 15 P.3d 234 (2001) ............................................................................ 19
Perez v. Nidek Co.,
711 F.3d 1109 (9th Cir. 2013) ............................................................................... 13, 14
iii
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Rice v. Brakel,
233 Ariz. 140, 310 P.3d 16 (Ct. App. 2013) ...................................................... 9, 11, 12
S. Union Co. v. Sw. Gas Corp.,
165 F. Supp. 2d 1010 (D. Ariz. 2001) ......................................................................... 19
Shaw v. Hahn,
56 F.3d 1128 (9th Cir. 1995) ......................................................................................... 6
Stern v. Charles Schwab & Co.,
No. CV-09-1229-PHX-DGC, 2009 WL 3352408 (D. Ariz. Oct. 16, 2009) ............... 17
Tilousi v. Arizona State University,
No. 04-CV-1290-PCT-FJM, 2005 WL 6199562 (D. Ariz. Mar. 3, 2005) .................. 12
Wyatt v. Union Mortgage Co.,
24 Cal. 3d 773 (1979) .................................................................................................. 19
Statutes
California Health and Safety Code .............................................................................. 13, 14
Federal Rules of Civil Procedure 9(b) ............................................................................... 10
Federal Rule of Civil Procedure 12(b)(6) .................................................................. 5, 6, 22
Food, Drug, and Cosmetic Act ................................................................................ 2, 14, 15
Human Subjects Act .......................................................................................... 2, 13, 14, 15
RICO .................................................................................................................................. 18
Other Authorities
Restatement (Second) of Torts § 13 (1965) ........................................................................ 7
Restatement (Second) of Torts § 14 (1965) ........................................................................ 7
Restatement (Second) of Torts § 892B(2) ......................................................................... 11
iv
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF
I. JOINDER
Defendants Walgreens Boots Alliance, Inc. and Walgreen Arizona Drug Company
(collectively “Walgreens”) concur and join in Theranos’s Motion to Dismiss. The bases
for dismissal specified therein are equally applicable to Walgreens. Walgreens also writes
separately here to raise additional reasons why Plaintiffs’ First Amended Consolidated
Class Action Complaint (hereinafter “Amended Complaint” or “ACAC”) does not allege
plausible facts sufficient to state a claim against Walgreens.
II. INTRODUCTION
The Amended Complaint is Plaintiffs’ second attempt at stating a claim upon
which relief can be granted. But it suffers from the same fatal deficiencies as Plaintiffs’
initial complaint. Even worse, it overreaches beyond their initial complaint, with
implausible new claims intended to ratchet up the potential attorneys’ fee award in a case
with only limited putative damages at issue and transform a simple case of alleged
consumer fraud into a personal injury action. Specifically, faced with the reality that
Theranos collected only a relatively modest amount of money from the putative class,
plaintiffs now seek damages for emotional and personal injury resulting from purported
battery, medical battery, and unlawful medical experimentation. With no factual or legal
basis, Plaintiffs assert these claims against not only Theranos, but also against Walgreens.
As set forth below, Plaintiffs have not alleged sufficient facts to support these claims
against any defendant, much less Walgreens, and the claims should be dismissed.
First, Plaintiffs’ battery and medical battery claims, which are based on an
implausible new theory of liability, fail because the allegations in the Amended Complaint
concede that Plaintiffs consented to the blood draws and Plaintiffs have failed to allege
sufficient plausible facts to support a claim that their consent was ineffective. Because
Arizona and California law is unequivocal that consent defeats a claim of battery and/or
medical battery, Plaintiffs’ admitted consent to the very procedure that was performed
defeats their battery and medical battery claims.
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Second, Plaintiffs’ California Protection of Human Subjects in Medical Experiment
Act (the “Human Subjects Act”) claim fails because Plaintiff A.R.1 was not subjected to a
“medical experiment” within the meaning of the Human Subject Act given that (1) the
blood draws and tests at issue were reasonably related to maintaining or improving the
patient’s health and (2) neither Walgreens nor Theranos were engaged in a clinical trial
under the Food, Drug, and Cosmetic Act (“FDCA”) or state law.
Third, Plaintiffs’ aiding and abetting and civil conspiracy claims against Walgreens
fail because Plaintiffs did not plead any facts, much less plausible ones, to establish that
Walgreens had actual knowledge of the commission of the purported fraud by Theranos,
or to even support an inference of such knowledge. At best, Plaintiffs allege that
Walgreens should have investigated further, or had reason to suspect, that Theranos’s
blood testing technology was unreliable (assuming it was). But such allegations do not
establish an aiding and abetting or civil conspiracy cause of action, which requires
allegations of plausible facts establishing actual knowledge of an underlying tort.
Accordingly, Walgreens respectfully requests that the Court dismiss Plaintiffs’
Amended Complaint in its entirety for the reasons set forth in Theranos’s Motion to
Dismiss as well as this separate Motion.
III. FACTUAL BACKGROUND2
Walgreens is a pharmacy-led health and well-being enterprise, which, among other
segments, operates the Walgreens retail pharmacy chain in the United States. See ACAC
¶24. Walgreens entered into a contractual relationship with Theranos to supply
Theranos’s proprietary blood testing technology on-site at certain Walgreens stores in
Arizona and California. Id. ¶41. Plaintiffs allege that Theranos, a blood testing company,
was founded in 2003 by Elizabeth Holmes and that Theranos claimed to have developed
“disruptive” technology to make blood testing faster and less invasive. Id. ¶31,
1 The Amended Complaint asserts this claim only on behalf of Plaintiff A.R. See
ACAC ¶ 505.
2 This statement of facts is based on the allegations in Plaintiffs’ Amended
Complaint, which are assumed true solely for purposes of this Motion.
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40. Plaintiffs allege that Theranos purported to have developed technology to test blood
through its “Edison” device, which was allegedly able to reliably conduct hundreds of
blood tests outside a lab with a few drops of blood from a patient’s finger. Id. ¶32.
Theranos sold its new “tiny blood test” at Wellness Centers at Walgreens pharmacies in
Arizona and California and at Theranos-owned Wellness Centers in Arizona and
California. Id. ¶23. Plaintiffs allege that the tests offered at the Wellness Centers were
prematurely marketed and sold to consumers while the tests were still in the “beta” stage
in order to assist in research and further product development. Id. ¶¶5, 34. Plaintiffs also
allege that while they each voluntarily submitted to the administration of one or more
blood draws of some kind, the draws were taken without their effective consent because
“Defendants” “misrepresented and concealed the essential purpose of the blood draws and
other clinical procedures.” Id. ¶¶115, 496.
The vast majority of the Amended Complaint improperly conflates Walgreens,
Theranos, Elizabeth Holmes, and Ramesh “Sunny” Balwani, referring to them collectively
as “Defendants.” Indeed, while Plaintiffs recite a long story about the purported
inaccuracy or unreliability of Theranos’s blood testing technology, the alleged fact that
the Theranos tests were used to gather data for use in research and development, and how
Plaintiffs were allegedly battered and physically injured as a result of the blood tests; the
factual allegations directed at Walgreens specifically are sparse.
The crux of the very few allegations against Walgreens is that it housed the
Wellness Centers at its pharmacies pursuant to a contract between Theranos and
Walgreens, and that Walgreens was aware of “red flags” with the technology before and
during its contractual relationship with Theranos. See generally id. ¶¶ 44-50. But even
Plaintiffs admit that Walgreens engaged third parties in an effort to verify the reliability of
the technology and did not have the right to review the blood testing data collected in the
Wellness Centers after they were up and running. Id. ¶¶45, 46. Plaintiffs acknowledge
that before entering into the contract with Theranos, Walgreens enlisted the assistance of a
Johns Hopkins University scientist to evaluate the Edison blood test, and also sent “a
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delegation” to Theranos’s lab, including an outside consulting firm, Collaborate LLC, to
independently verify the accuracy of the lab testing technology. Id. Plaintiffs further
allege that Walgreens “sent two executives and a retired Quest Diagnostics Corp.
executive to Theranos to review quality-control data” to follow-up on the prior work done
by the Johns Hopkins scientist and Collaborate LLC. Id. ¶50. Plaintiffs then contend that
these efforts raised “red flags” and allege that Walgreens ignored them. Id. ¶¶43, 48. But
Plaintiffs do not plead any specific facts demonstrating that Walgreens was actually aware
that Theranos’s blood testing technology was inaccurate or unreliable or being used to
gather research data. See generally id. Indeed, Plaintiffs do not allege a single fact that
supports the conclusory allegation that Walgreens was aware of red flags regarding the
reliability of the tests. Id.
On the contrary, Plaintiffs assert that Walgreens was repeatedly denied access to
the information necessary to reach such conclusions. “Although a Johns Hopkins
University scientist had requested, on Walgreens’s behalf, that Theranos provide his
researchers with an Edison device so that they could verify the technology for Walgreens
. . . the device was never provided. Instead, Walgreens got a prototype which the Johns
Hopkins team tried to evaluate, but the prototype was useless. . . . As a result, there was
no way to compare results from the prototype Edison device to the results of other
commercially-available tests.” Id. ¶45. In addition, as to the efforts by an independent
party, Collaborate LLC, the consulting lab experts were “chaperoned during the entire
visit, including during visits to the restroom, and were not allowed access to Theranos’s
lab area or Edison technology.” Id. ¶47. And further, as to the visit to Theranos by
Walgreens’s executives and a retired Quest executive, Plaintiffs allege that “[a]ccording to
reports, the retired Quest executive stated that they were not allowed inside Theranos’s
lab, and while they were led to believe the data they reviewed was from an Edison device,
Theranos did not confirm that it was.” Id. ¶50. 3 Finally, Plaintiffs concede that
3 The only “specific allegations” Plaintiffs make regarding Walgreens’s knowledge
of Theranos’s own activities is that Walgreens allegedly did discover problems with
“Theranos’s information management systems meant to keep track of patients.” Id. ¶47.
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Walgreens did not have the right to review the clinical data collected at the Wellness
Centers—a fact that undercuts the argument that Walgreens was aware of any reliability
issues with the test results. Id. ¶52.
Thus, even according to Plaintiffs’ own allegations, Walgreens engaged in
considerable due diligence, but was denied access to the information that would have
proven Theranos’s blood testing technology to be flawed (assuming it is) and that the tests
were being used to gather data for further research and development. Moreover, although
the Amended Complaint generally alleges that “Walgreens agreed to make available
Walgreens employees who would facilitate the sale and performance of Theranos testing
services” (see, e.g., id. ¶411 (emphasis added)) and that “Defendants” collectively
performed blood draws at the Wellness Centers (see id. ¶492), Plaintiffs do not
specifically allege that a Walgreens employee physically performed any of the named
Plaintiff’s blood draws, and it is implausible that the five separate defendants collectively
performed the task of administering the blood draws on the named Plaintiffs.
As described below and in Theranos’s Motion, Plaintiffs’ Amended Complaint
must be dismissed for failure to state a claim under Federal Rule of Civil Procedure
12(b)(6).
IV. LEGAL STANDARD FOR MOTION TO DISMISS UNDER RULE 12(B)(6)
A complaint must be dismissed for failure to state a claim under Rule 12(b)(6) if
the plaintiff either fails to state a cognizable legal theory or has not alleged sufficient facts
to support a cognizable legal theory. See Fed. R. Civ. P. 12(b)(6); Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 562-63 (2007). A pleading that offers “labels and conclusions”
or “a formulaic recitation of the elements of a cause of action will not do.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citation omitted). The
complaint must allege facts which, when taken as true, raise more than a speculative right
to relief. Twombly, 550 U.S. at 555. The Court need not accept as true allegations
However, even if this allegation were true, it is not an allegation regarding the reliability
of the testing.
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contradicted by judicially noticeable facts, see Hamilton v. Tiffany & Bosco PA, No. CV-
14-00708-PHX-GMS, 2014 WL 4162362, at *2 (D. Ariz. Aug. 20, 2014); rather, “[i]n
deciding whether to dismiss a claim under Fed. R. Civ. P. 12(b)(6), a court may look
beyond the plaintiff’s complaint to matters of public record.” Shaw v. Hahn, 56 F.3d
1128, 1129 n.1 (9th Cir. 1995). Nor do courts “assume the truth of legal conclusions
merely because they are cast in the form of factual allegations.” Fayer v. Vaughn, 649
F.3d 1061, 1064 (9th Cir. 2011) (internal citation omitted).
V. PLAINTIFFS FAIL TO STATE A COGNIZABLE CLAIM AGAINST
WALGREENS
A. Plaintiffs Fail to State A Claim For Battery Or Medical Battery Against
Walgreens (Counts III and XVI)
To state a claim for common law battery, a plaintiff must allege that a defendant
“intentionally engage[d] in an act that result[ed] in harmful or offensive contact with the
person of another.” Duncan v. Scottsdale Med. Imaging, Ltd., 205 Ariz. 306, 309, 70 P.3d
435, 438 (2003) (citing Restatement (Second) of Torts §§ 13, 18 (1965)); see also Brown
v. John C. Lincoln Health Network, No. 1 CA-CV 14-0814, 2016 WL 2893739, at *2
(Ariz. Ct. App. May 17, 2016), review denied (Feb. 14, 2017). Moreover, in Arizona, “a
health care provider commits a common law battery on a patient if a medical procedure is
performed without the patient’s consent.” Duncan, 205 Ariz. at 309, 70 P.3d at 438
(citing Hales v. Pittman, 118 Ariz. 305, 310, 576 P.2d 493, 498 (1978)). Accordingly,
neither a battery nor a medical battery claim can stand “when consent is given.” Id.
Here Plaintiffs have failed to state a cause of action for battery or medical battery
against Walgreens because Plaintiffs have not alleged that Walgreens (as opposed to
Theranos, another defendant, or some other individual or entity) actually performed the
blood draws at issue. Additionally, Plaintiffs have conceded that each named Plaintiff did
consent to have his or her blood drawn and they have failed to allege plausible facts
sufficient to establish that their consent was ineffective. Therefore, Plaintiffs’ battery and
medical battery claims against Walgreens must be dismissed.
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1. Plaintiffs Have Failed To Allege That Walgreens Caused A
Harmful Or Offensive Contact With Plaintiffs
To establish a battery claim, a plaintiff must allege that the defendant “intentionally
caused a harmful or offensive contact with the plaintiff to occur.” Johnson v. Pankratz,
196 Ariz. 621, 623, 2 P.3d 1266, 1268 (Ct. App. 2000); see also Restatement (Second) of
Torts § 13 (1965). As such, a plaintiff must allege that a defendant actually committed an
“offensive touching” or, at least, caused a contact with the plaintiff. Bohnert v. Mitchell,
No. CV-08-2303-PHX-LOA, 2010 WL 4269569, at *11 (D. Ariz. Oct. 26, 2010) (“[T]o
establish the tort of battery, Plaintiff must show that [defendant] ‘intentionally caused a
harmful or offensive contact’ with Plaintiff’s person.” (internal citations omitted)).
Here, Plaintiffs have failed to allege that Walgreens “caused a harmful or offensive
contact” upon the Plaintiffs, or even that Walgreens made contact with the Plaintiffs.4
Rather, Plaintiffs allege that the Defendants, collectively, committed a battery and/or
medical battery. Plaintiffs claim that they submitted to blood draws “performed by
Defendants which involved Defendants penetrating their skin and tissue to draw
blood. . . .” See ACAC ¶339. Moreover, while Plaintiffs literally allege that the
Defendants, collectively, performed the blood draws, it is implausible that the five
separate Defendants performed Plaintiffs’ blood draws together; the task of performing a
blood draw is a discrete task which could not have been performed collectively, much less
by five defendants (including three separate corporate defendants). Accordingly, because
Plaintiffs have failed to allege that Walgreens (as opposed to Theranos or another actor)
actually made any physical contact or touching with the Plaintiffs, they have failed to state
4 Restatement (Second) of Torts § 14 (1965) states that “[t]o make the actor liable
for a battery, the harmful bodily contact must be caused by an act done by the person
whose liability is in question.” The word “act” as used in this section “denote[s] an
exertion of the will manifested in the external world.” Id. at cmt. b. As such, this provision
aims to distinguish “purely reflexive” movements from those acts carried out with the
intention to cause harm to another. Id. This principle is illustrated with the following
example: “A pushes B against C, knocking C down and breaking his leg. A, and not B, is
subject to liability to C.” Id. Applying this standard here, Plaintiffs have failed to allege
plausible facts sufficient to state a claim that Walgreens “caused” Theranos or another
party to commit an offensive or harmful contact.
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a prima facie claim for the intentional tort of battery and medical battery as against
Walgreens.
2. Plaintiffs’ Battery Claims Must Be Dismissed Because They Have
Not Alleged Plausible Facts Establishing A Lack of Consent
A claim for medical battery is not the same as a claim for medical malpractice
based upon a lack of informed consent. The former is an intentional tort where the
provider allegedly performs a medical procedure to which the patient has not consented
and the latter is a claim that a healthcare provider did not adequately disclose the risks and
alternative treatments prior to performing the procedure. See Gorney v. Meaney, 214
Ariz. 226, 228, 150 P.3d 799, 801 n.1 (Ct. App. 2007). Here, although Counts Three and
Sixteen of the Amended Complaint are entitled “Battery” and “Medical Battery,”
respectively, these claims are inappropriately premised on an alleged lack of informed
consent, not a complete lack of consent. Therefore, Plaintiffs have wholly failed to state a
cause of action for the intentional torts of battery and medical battery.
In Duncan v. Scottsdale, a seminal case addressing a “medical battery” claim, the
Arizona Supreme Court held that an action for the lack of consent sounds in battery, while
a claim for lack of informed consent sounds in negligence. 205 Ariz. at 310, 70 P.3d at
439. In so doing, the Court adopted the reasoning of the California Supreme Court in
Cobbs v. Grant, 8 Cal.3d 229, 104 Cal. Rptr. 505, 502 P.2d 1 (1972)—“a health care
provider commits a common law battery on a patient if a medical procedure is performed
without the patient’s consent. A battery claim is defeated, however, when consent is
given.” Id. at 309, 70 P.3d at 438 (internal citations omitted). In other words, a battery
claim is reserved for only those cases where a medical procedure was performed without
the patient’s consent. Id.
To be effective, the consent “must be ‘to the particular conduct, or substantially the
same conduct.”’ Id. at 311, 70 P.3d at 440 (quoting Restatement (Second) of Torts
§ 892A(2)(b)). The Court in Duncan held that “when the patient gives permission to
perform one type of treatment and the doctor performs another, the requisite element of
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deliberate intent to deviate from the consent given is present.” Id. at 310, 70 P.3d at 439.
For example, “a patient who agrees to a blood test . . . does not thereby consent to a spinal
puncture, or the removal of his tonsils.” Cathemer v. Hunter, 27 Ariz. App. 780, 783, 558
P.2d 975, 978 (1976). On the other hand, when a patient consents to a blood test and a
blood test is subsequently performed, he or she has, indeed, consented to that procedure or
one that is substantially the same. See Rice v. Brakel, 233 Ariz. 140, 143–44, 310 P.3d
16, 19–20 (Ct. App. 2013) (holding that the plaintiff failed to establish a genuine issue of
material fact as to his alleged lack of consent since it was “undisputed that he signed a
consent for the operation he received to be performed by [the defendant]”).
Plaintiffs’ battery and medical battery claims here fail because Plaintiffs admit that
they consented to the very “touching” that forms the basis of their battery claims,
conceding that they “submitted to blood draws performed by Defendants which involved
Defendants penetrating their skin and tissue to draw blood.” ACAC ¶¶339, 492. In other
words, Plaintiffs consented to a blood draw either by finger prick or through a
conventional venous blood draw, and those are precisely the procedures that were
administered to Plaintiffs by an unspecified defendant or other actor. As such, Plaintiffs
have not, and cannot, allege that the procedures to which they consented and which were
administered constituted a different procedure or one that was performed in a substantially
different manner than that to which they consented. Duncan, 205 Ariz. at 311. Even
standing alone, this is a sufficient basis to dismiss Plaintiffs’ battery and medical battery
claims. See Duncan, at 309, 70 P.3d at 438 (“A battery claim is defeated, however, when
consent is given.”).5
5 Plaintiffs’ consent in this case is distinguishable from the limited consent given by
the patient in Duncan. In Duncan, the issue was not whether plaintiff consented to the
touching — an injection — but rather whether plaintiff consented to receive the specific
drug that was administered. The patient had consented to the administration of painkillers
by injection; however, she specifically rejected the use of the drug fentanyl, and instructed
that only morphine or demerol could be used. 205 Ariz. at 308, 70 P.3d at 437. The nurse
explicitly misrepresented to the patient that he would be administering morphine, when in
actuality he administered fentanyl. Id. at 308-309. Here, Plaintiffs do not allege that their
consent to the blood draw was conditioned on the promise that their blood samples would
not be used for any other purpose. Nor do they allege that Walgreens expressly told them
that their blood samples would not be used for any experimental purpose. See Daum v.
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As alleged in the Amended Complaint, Plaintiffs’ claim is not that Walgreens
committed an intentional tort “where the provider performs a medical procedure to which
the patient has not consented.” Indeed, by Plaintiffs’ own admissions, each patient
voluntarily reported to the Wellness Centers to have their blood tested, they consented to
either a finger prick or venous blood draw being performed, and their blood was indeed
tested in that manner. Plaintiffs’ complaint is that they were allegedly not adequately
informed of Theranos’s purported plan to use their blood samples to further develop the
Edison technology. See ACAC ¶340. As such, the gravamen of Plaintiffs’ claim is that
their blood samples were used by Theranos in a manner that was not disclosed to them
subsequent to the exact procedure to which they gave explicit consent was performed.
Critically, however, Plaintiffs do not allege that the procedure they received deviated from
that to which they consented. Their allegations thus fall well short of stating a claim of
battery. See, e.g., Daum v. SpineCare Med. Grp., Inc., 61 Cal. Rptr. 2d 260, 276 (1997)
(finding that where the plaintiff consented to surgery using a certain implant, and that
implant was used, “[a]ny failure to disclose the investigational status of the device did not
involve intentional deviation by [the doctor] from the consent given by [plaintiff]”).
3. Plaintiffs Have Not Pled That Defendants Made Any
Misrepresentations That Go To The Nature Of The Invasion Of
Their Interests Or The Extent Of The Harm To Be Expected
Acknowledging that they did consent to have their blood drawn, Plaintiffs contend
that Defendants induced them to consent to the blood draws through fraud, concealment,
and substantial misrepresentations about the procedures they consented to. See ACAC
¶342.6 However, because the alleged misrepresentations Plaintiffs rely upon do not relate
SpineCare Med. Grp., Inc., 52 Cal. App. 4th 1285, 1313, 61 Cal. Rptr. 2d 260, 276 (1997)
(finding that where the plaintiff consented to surgery using a certain implant, and that
implant was used, “[a]ny failure to disclose the investigational status of the device did not
involve intentional deviation by [the doctor] from the consent given by [plaintiff]”).
6 As detailed in Theranos’s Motion to Dismiss, Plaintiffs’ battery and medical
battery claims are “grounded in fraud,” and are therefore subject to Rule 9(b)’s heightened
pleading standard. See Doan v. Singh, 617 F. App’x 684, 685 (9th Cir. 2015). Yet, to the
extent that Plaintiffs allege that their consent was not effective because Defendants’
fraudulent representations induced that consent (ACAC ¶342), Plaintiffs failed to allege
the “who, what, when, where, and how” of the allegedly fraudulent conduct. See Kearns v.
Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009). Plaintiffs have not adequately pled
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to the actual procedure performed on Plaintiffs or the nature of harm to be expected from
the procedure, this contention also fails and cannot salvage Plaintiffs’ battery claims.
Although courts have held that consent may be ineffective in certain cases if induced by
fraud or misrepresentation, for the consent to be rendered ineffective, the allegedly
misleading statement must relate to the “nature of the invasion of his interests or the
extent of the harm to be expected from it.” Duncan, 205 Ariz. at 311, 70 P.3d at 440
(quoting Restatement (Second) of Torts § 892B(2)); see also Rice, 233 Ariz. at 143–44,
310 P.3d at 19–20. This conclusion is also supported by the Restatement (Second) of
Torts § 892B(2), which states:
If the person consenting to the conduct of another is induced to
consent by a substantial mistake concerning the nature of the
invasion of his interests or the extent of the harm to be expected from
it and the mistake is known to the other or is induced by the other’s
misrepresentation, the consent is not effective for the unexpected
invasion or harm.
Id. (emphasis added). Indeed, in Rice v. Brakel, the court expressly declined to “create an
alternative and automatic source of liability under a battery cause of action when a patient
claims that a doctor failed to disclose, without specific inquiry from the patient,
indeterminate factors before performing a procedure, arguably creating a mistake of fact
or misrepresentation that vitiates the patient’s consent.” 233 Ariz. at 144, 310 P.3d at 20
(finding that plaintiff had “cited no affidavit or deposition testimony stating that
[defendant] misrepresented the nature of the procedure to him, that he did not generally
consent to [defendant] performing the procedure, or that [defendant] exceeded the scope
of the procedure to which he consented”). The court explained that “[t]o do so would
essentially circumvent the informed consent doctrine, which our supreme court has stated
who made the alleged misrepresentations, when they were made, and the content of those
statements. See Odom v. Microsoft Corp., 486 F.3d 541, 553 (9th Cir. 2007). Rather,
Plaintiffs baldly allege that the Defendants, collectively, induced them to consent to the
blood draws through fraud, concealment, and misrepresentations about the procedures to
which they consented.
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unequivocally must be pleaded under a negligence theory.” Id. (citing Duncan, 205 Ariz.
at 310, 70 P.3d at 439).
Tilousi v. Arizona State University is also directly on point. In Tilousi, the
defendants obtained blood samples from the plaintiff tribe members “ostensibly to be used
to study diabetes within the tribe.” No. 04-CV-1290-PCT-FJM, 2005 WL 6199562, at *1
(D. Ariz. Mar. 3, 2005). The plaintiffs, however, alleged that the samples were actually
used “for research on unrelated topics such as schizophrenia, inbreeding, and ancient
human population migrations.” Id. Plaintiffs alleged that they would not have consented
to provide their blood samples had they known they would be used in other studies. Id.
The court rejected plaintiffs’ position, finding instead that the plaintiffs—like the named
plaintiffs here—“consented to having blood drawn and were fully aware of the character
of the contact.” Id. at *2. Thus, the Court concluded that plaintiffs’ consent was “not
made ineffective even if defendants did make fraudulent representations to induce that
consent.” Id; see also Daum, 61 Cal. Rptr. 2d at 276 (holding that where the plaintiff
consented to surgery using a certain implant, and that implant was used, “[a]ny failure to
disclose the investigational status of the device did not involve intentional deviation by
[the doctor] from the consent given by [plaintiff]”).
As in Tilousi and Daum, Plaintiffs here have utterly failed to allege any facts that
would support a finding that their express consent was ineffective. In support of their
claims, Plaintiffs contend that Defendants failed to disclose that they had “prematurely
rushed Theranos testing services to market, the procedures that Plaintiffs and the Class
submitted to were experimental in nature and being use by Defendants for research and
product development, and the essential purpose of the blood draws and procedures that
Plaintiffs and the Class submitted to was to aid in Defendant’s research and product
development.” See ACAC ¶340. However, none of these statements relate to the “nature
of the invasion of [Plaintiffs’] interests or the extent of the harm to be expected” from the
administration of the blood draws. Indeed, none of the statements identified by Plaintiffs
relate to the actual blood draw procedure being performed or any side effects or harm that
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would directly result from the procedure. Accordingly, Plaintiffs’ contentions that
Defendants induced them to consent to the blood draws through fraud, concealment, and
substantial misrepresentations about the procedures they consented to do not salvage
Plaintiffs’ battery claims.
B. Plaintiffs Fail to State a Claim for a Violation of the Human Subjects
Act (Count XVII)
To state a claim under the Human Subjects Act, a plaintiff must allege that, without
obtaining the requisite consent, (a) the treatment provided was not “reasonably related to
maintaining or improving the health of the subject or otherwise directly benefiting the
subject”; (b) the treatment involved “investigational use of a drug or device as provided in
Sections 111590 and 111595 [of the California Health and Safety Code]”; or (c) defendant
withheld medical treatment from a human subject “for any purpose other than
maintenance or improvement” of the patient’s health. Perez v. Nidek Co., 711 F.3d 1109,
1114 (9th Cir. 2013) (citing Cal. Health & Safety Code § 24174). Here, Plaintiffs have
failed to allege that Plaintiff A.R.’s blood draws satisfy any of the above definitions of a
“medical experiment” such that Walgreens was obligated to obtain the statutorily
mandated consent.
While Plaintiffs describe the Theranos blood tests as “experimental,” such that
Defendants were obligated to comply with certain disclosure requirements of the Human
Subjects Act (the “Act”), the procedure was simply not “experimental” under § 24174(a)
of the Act, which requires a showing that the defendant engaged in the “practice or
research of medicine in a manner not reasonably related to maintaining or improving the
health of the subject or otherwise directly benefiting the subject.” Cal. Health & Safety
Code § 24174(a). As an initial matter, and as Plaintiffs concede, the tests offered by
Theranos “included tests concerning critical medical and health issues including, but not
limited to cancer, heart disease, diabetes, kidney disease, auto-immune disorders, and
viruses.” ACAC ¶30. Therefore, the tests were “reasonably related to maintaining or
improving the health of the subject or otherwise directly benefiting the subject.”
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The Ninth Circuit’s decision in Perez v. Nidek Co. is instructive on this point. See
711 F.3d at 1112–16. In Perez, the plaintiff sought and received laser eye surgery to
correct farsightedness. Id. at 1112. Plaintiff alleged that at the time of the surgery, he did
not know that the FDA had not approved the laser for this use. Id. Plaintiff further
alleged that the defendant–doctors engaged in a scheme to modify the approved laser eye
surgery to enable it to correct farsightedness before it was approved for that purpose. Id.
The Ninth Circuit held that the laser eye surgeries fell “well outside the scope of
subsection (a) [of the Act]” since the plaintiff conceded that the surgeries had a
therapeutic purpose. Id. at 1115.
The blood tests also cannot be considered “experimental” under § 24174(b) of the
Human Subjects Act, which defines “medical experiment” as “[t]he investigational use of
a drug or device as provided in Sections 111590 and 111595 [of the California Health and
Safety Code].” The sections referenced in § 24174(b)—111590 and 111595—govern,
respectively, investigations (commonly referred to as “clinical trials”) conducted in
accordance with the requirements of the United States Federal Food, Drug, and Cosmetic
Act (“FDCA”) and investigations conducted under conditions specified by state law. See
Perez, 711 F.3d at 1116. In Perez, the court also rejected the plaintiffs’ claims that the
defendants violated Section 24174(b) of the Act. The plaintiffs claimed that the
defendants “knew and understood that the Lasers were being used on Plaintiffs and the
Class without their informed consent to be subjected to the investigational use of the
Laser, and without including them in a sanctioned clinical trial.” Id. The court observed
that plaintiffs’ undoing was in admitting that they were not participants in an officially
sanctioned clinical trial. Id. (citing Huntman v. Danek Medical, Inc., No. 97–2155–IEG
(RBB), 1998 WL 663362, at *6–*7 (S.D. Cal. July 24, 1998) (finding that, because there
was no evidence that the plaintiff was part of an Investigational Device Exemption, the
defendant did not need to comply with the informed consent provisions of the
Investigational Device Exemption regulations)). In other words, Section 24174(b), “by its
terms, applies only to investigations conducted under the requirements of the FDCA or
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state law” and, therefore, the disclosure requirements also only apply to such
investigations. Id.
Here, Plaintiffs have failed to allege that either Theranos or Walgreens was
conducting an investigation pursuant to the requirements of the FDCA or state law.
Plaintiffs merely allege in a conclusory fashion that the blood draws were “devices”
employed for “medical experiments.” See ACAC ¶¶509-511. This allegation is
insufficient to deem the blood draws “experimental” under the Section 24174(b) of the
Human Subject Act.
In short, because the blood draws were “reasonably related to maintaining or
improving the health” of Plaintiff A.R., and because Walgreens was not conducting an
investigation of the blood tests under the FDCA or state laws, Walgreens was not required
to comply with the disclosure standards set forth in the Act. Therefore, any failure to do
so does not constitute a violation of the Human Subjects Act.
C. Plaintiffs Fail To State A Cause Of Action For Aiding And Abetting A
Fraud Against Walgreens (Count VIII)
Plaintiffs’ aiding and abetting claim is predicated on Theranos, Holmes and
Balwani’s alleged torts. For all of the reasons set forth in Theranos’s Motion to Dismiss,
Plaintiffs fail to adequately plead a tort against Theranos, Holmes and Balwani (the
“Theranos Defendants”). Accordingly, the aiding and abetting claim against Walgreens
must be dismissed. See Dawson v. Withycombe, 216 Ariz. 84, 102, 163 P.3d 1034, 1052
(Ct. App. 2007) (noting that an aiding and abetting claim requires an underlying tort). But
even if Plaintiffs did sufficiently plead a tort claim against any of the Theranos
Defendants, which they have not, their aiding and abetting claim against Walgreens
should still fail.
To state a claim for aiding and abetting a tort, a plaintiff must plead that: (1) the
primary tortfeasor committed a tort that caused injury to the plaintiff; (2) the defendant
knew that the primary tortfeasor’s conduct constituted a breach of duty; and (3) the
defendant substantially assisted or encouraged the primary tortfeasor in the achievement
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of the breach. See Dawson, 216 Ariz. at 102, 162 P.3d at 1052 (emphasis
added). Because “this theory of liability depends upon proof of scienter, it must be shown
that the defendants knew the conduct they allegedly aided and abetted was a tort.” Id.
(emphasis added).
Plaintiffs’ allegations in support of their aiding and abetting claim against
Walgreens do not come close to meeting this standard. Rather, Plaintiffs’ allegations
actually preclude their claim. Indeed, while Plaintiffs conclusorily assert that Walgreens
“knew that . . . Theranos’s testing was not reliable,” ACAC ¶396, the facts alleged in the
Amended Complaint suggest that Walgreens lacked the means to obtain such
knowledge. Plaintiffs allege that Walgreens was not provided the requisite information to
determine if Theranos’s blood testing technology was accurate and reliable. See ACAC at
36. Specifically, Plaintiffs allege that, in response to Walgreens’s request to evaluate the
Edison device, Theranos refused to provide the device and provided a
“prototype.” Id. According to Plaintiffs, “[a]s a result[,] there was no way [for
Walgreens] to compare results from the prototype Edison device to the results of other
commercially-available tests.” Id. By asserting that Walgreens was denied the knowledge
and information to establish the reliability of Theranos’s blood test technology, Plaintiffs
are precluded from asserting that Walgreens had actual knowledge of the Theranos
Defendants’ alleged wrongdoing and their aiding and abetting claim must be dismissed.
In an attempt to circumvent this fatal flaw, Plaintiffs assert that “Walgreens knew
and/or knowingly and deliberately failed to discover, that Theranos’s testing was not
reliable, and that Theranos laboratories were not compliant with applicable laws and
regulatory standards, and presented an immediate danger to patient safety.” ACAC
¶288. But that conclusory allegation does not salvage Plaintiffs’ aiding and abetting
claim. See Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996)
(“[C]onclusory allegations of law and unwarranted inferences are insufficient to defeat a
motion to dismiss for failure to state a claim.”). While courts applying Arizona law can
infer that a defendant had knowledge of the tort, “an inference of knowledge will not be
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made lightly.” Federico v. Maric, 224 Ariz. 34, 36, 226 P.3d 403, 405 (Ct. App.
2010). Moreover, “[k]nowledge of suspicious activity is not enough.” Stern v. Charles
Schwab & Co., No. CV-09-1229-PHX-DGC, 2009 WL 3352408, at *8 (D. Ariz. Oct. 16,
2009).
Nor are Plaintiffs’ allegations that Walgreens had “doubts” about and/or failed to
“verify” the accuracy of the tests sufficient to state an aiding and abetting claim. See id.
(“These alleged facts, taken as true, show no more than did the facts in Dawson. They
may suggest that Wells Fargo engaged in poor business practices, but they do not show
that Wells Fargo knew, generally or specifically, that the Bennetts were perpetrating a
fraud. Knowledge of suspicious activity is not enough. The Sterns have failed to plead
the scienter required for aiding and abetting liability under Arizona law.”); Minotto v. Van
Cott, No. 1 CA-CV 15-0159, 2016 WL 3030129, at *4 (Ariz. Ct. App. May 26, 2016)
(dismissing plaintiff’s aiding and abetting claim where the complaint did not affirmatively
plead that the defendant “knew” the primary tortfeasor’s statements were false, only that
the defendant “should have known” (emphasis in original)); cf. BAE Sys. Mobility & Prot.
Sys., Inc. v. ArmorWorks Enterprises, LLC, No. CV-08-1697-PHX-JAT, 2011 WL
1192987, at *11 (D. Ariz. Mar. 28, 2011) (holding that plaintiff’s evidence presented in
support of its aiding and abetting a fraud claim was insufficient to survive summary
judgment because “[e]ven if Armor Holdings was aware of the representations made by
Alanx, there is no evidence establishing that Armor Holdings knew those representations
were in pursuit of a fraudulent scheme”). Plaintiffs’ claim that Walgreens allegedly
“looked the other way” is similarly insufficient. See Dawson, 216 Ariz. at 103, 162 P.3d
at 1053 (“To infer awareness of the fraudulent scheme from [Plaintiff’s] characterization
of what [Defendants] knew and thought is to pile inference upon inference, which
stretches the evidence presented beyond the bounds of circumstantial evidence.”).
Dawson is a factually similar and instructive case. In Dawson, the plaintiff brought
suit against Goett, the CEO of Futech Interactive Products, Inc., alleging that he
fraudulently misrepresented the company’s financial prospects so that the plaintiff would
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issue the company a loan. See id. Plaintiff also brought an aiding and abetting claim
against two other directors of the company, Turner and Withycombe, alleging that “they
knew Goett was dishonest and that [the company] was in poor financial condition and
they nonetheless sent Goett out to procure a loan.” Id. The court held that the fact “[t]hat
Turner and Withycombe were aware of [the company’s] financial condition and of Goett’s
dishonest character, and were aware that he was soliciting funds from Dawson, indicates
poor judgment and risky business practices. It does not, however, rise to the level of
scienter required for aiding and abetting, specifically that they were aware that Goett did
or would in fact use fraudulent statements as a means of procuring the
loan.” Id. (emphasis in original). The Dawson court held that the evidence presented was
insufficient to establish that the directors had the requisite knowledge to prove aiding and
abetting. Id.
In short, Plaintiffs have not alleged facts or circumstances sufficient to show that
Walgreens actually knew that Theranos’s conduct in selling its blood tests was fraudulent,
assuming that it was, and such knowledge cannot be inferred on these facts. Accordingly,
Plaintiffs’ aiding abetting claim should be dismissed.
D. Plaintiffs Fail To State A Cause Of Action For Conspiracy (Civil or
RICO) Against Walgreens (Counts IX and X)
As detailed in Section IV of Theranos’s Motion, Plaintiffs’ conspiracy claims fail
because (1) Plaintiffs have failed to allege that an underlying tort was committed (Johnson
v. Am.’s Wholesale Lender, No. CV-14-00201-PHX-SRB, 2014 WL 12550550, at *3 (D.
Ariz. Apr. 3, 2014) (“Under Arizona law, there is no independent tort for conspiracy.”)),
and (2) Plaintiffs have failed to sufficiently allege that Defendants entered into an
agreement to accomplish an unlawful goal. Marceau v. Int’l Bhd. of Elec. Workers, 618
F. Supp. 2d 1127, 1171 (D. Ariz. 2009) (“Importantly, a conspirator must have been
aware of the essential nature and scope of the enterprise and intended to participate in it.”
(internal citations omitted)); Hearns v. R.J. Reynolds Tobacco Co., 279 F. Supp. 2d 1096,
1117 (D. Ariz. 2003) (“[F]or a civil conspiracy to occur, two or more people must agree to
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accomplish an unlawful purpose or to accomplish a lawful object by unlawful means,
causing damages.”); Barba v. Seung Heun Lee, No. CV 09-1115-PHX-SRB, 2009 WL
8747368, at *8 (D. Ariz. Nov. 4, 2009) (finding that plaintiff failed to allege any facts
showing that “Defendants actually agreed with each other to commit tortious acts”).
With respect to the agreement element, while Plaintiffs allege that the parties
entered into a lawful commercial partnership to sell blood tests inside Walgreens’ stores
(ACAC ¶ 41) and that Walgreens was generally aware of Theranos’ alleged misconduct
(id. ¶288), Plaintiffs do not allege that Walgreens “actually agreed” with Theranos to
defraud consumers. Hillis v. Heineman, 2009 WL 2222709, at *4 (D. Ariz. July 23, 2009)
(emphasis in original). This is fatal to Plaintiffs’ conspiracy claims.
Additionally, as with Plaintiffs’ aiding and abetting claim, Plaintiffs have failed to
plead any plausible facts establishing that Walgreens had actual knowledge of the
Theranos Defendants’ alleged torts. To state a claim for conspiracy, Plaintiffs must plead
that Walgreens had knowledge that the underlying acts were wrong or tortious. See S.
Union Co. v. Sw. Gas Corp., 165 F. Supp. 2d 1010, 1020 (D. Ariz. 2001). “To be liable
for tortious conduct by a coconspirator, ‘[t]he conspiring defendants must also have
actual knowledge that a tort is planned and concur in the tortious scheme with knowledge
of its unlawful purpose.” Id. (emphasis added) (quoting Kidron v. Movie Acquisition
Corp., 40 Cal. App. 4th 1571, 1582 (1995) (noting that there are no appreciable and
critical differences between California and Arizona conspiracy law)). In other words,
Plaintiffs must allege that “[t]he conspiring defendants [had] actual knowledge that a tort
[was] planned and concur in the tortious scheme with knowledge of its unlawful purpose.”
Kidron v. Movie Acquisition Corp., 40 Cal. App. 4th 1571, 1582 (1995) (citing Wyatt v.
Union Mortgage Co., 24 Cal. 3d 773, 784-86 (1979) (“a plaintiff is entitled to damages
from those defendants who concurred in the tortious scheme with knowledge of its
unlawful purpose”)); People v. Austin, 23 Cal. App. 4th 1596 (1994), disapproved on
other grounds by People v. Palmer, 24 Cal. 4th 856, 15 P.3d 234 (2001) (“without
knowledge of the illegal purpose there is no basis for inferring an agreement”)). As with
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their aiding and abetting claim, Plaintiffs have failed to adequately allege that Walgreens
was actually aware of the Theranos Defendants’ alleged torts. To the contrary, Plaintiffs
themselves allege that Walgreens was kept in the dark by the Theranos Defendants, and
the Theranos Defendants prevented Walgreens from independently verifying the tests.
See ACAC ¶¶ 44–50, 52.
Therefore, Plaintiffs have failed to plead plausible facts establishing an agreement
to accomplish an unlawful objective or that Walgreens had actual knowledge of the
Theranos Defendants’ alleged torts, and Plaintiffs’ conspiracy claims against Walgreens
should be dismissed.
E. Plaintiffs Have Not Alleged Facts Establishing A Joint Venture or
Agency Relationship Between Walgreens and Theranos
In an apparent attempt to buttress their sparse allegations against Walgreens,
Plaintiffs make a single conclusory allegation in the Amended Complaint that, “[b]ased
upon information and belief, . . . Theranos was acting as the agent and co-venturer of
Walgreens, [and] that Walgreens was acting as agent and co-venturer of Theranos.” See
ACAC ¶ 27. However, Plaintiffs allege no plausible facts in support of this allegation,
and allegations based upon “information and belief” without sufficient factual content to
make the claim plausible are insufficient to survive a motion to dismiss. See Kerr v. First
Franklin, 2012 WL 4359082, at *2 (D. Ariz. 2012) (“Threadbare recitals of the elements
of a cause of action, supported by mere conclusory statements, do not suffice to state a
claim upon which relief can be granted. Moreover, in deciding a 12(b)(6) motion to
dismiss, the court is not bound to accept as true a legal conclusion couched as a factual
allegation.”) (internal citations and quotations omitted); see also Becker v. Wells Fargo
Bank, No. 2:12-cv-501 KJM CDK, 2013 WL 3242249, *3 (E.D. Cal. June 25, 2013)
(“Even a claim made on information and belief must contain sufficient factual content that
makes the claim plausible.”). Moreover, Plaintiffs do not allege plausible facts sufficient
to establish a joint venture or agency relationship between Walgreens and Arizona under
applicable law. The agreement between Walgreen Co. and Theranos – the Amended and
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Restated Theranos Master Services Agreement dated June 5, 2012 (the “MSA”) – is
governed by Delaware law. See Declaration of David R. Singh in Support of the Motion
to Dismiss filed concurrently herewith (“Singh Decl.”), at Ex. A, § 26. Under Delaware
law, an essential element of a joint venture is an agreement to enter into a joint
venture. See In re Coffee Associates, Inc., Civ. A. No. 12950, 19 Del. J. Corp. L. 1165, *5
(Del. Ch. Dec. 3, 1993); Satellite Fin. Planning Corp. v. First Nat. Bank of Wilmington,
633 F. Supp. 386, 401 (D. Del. 1986) (ruling on a motion to dismiss that “[t]he Operating
Agreement also created no partnership or joint venture between plaintiffs and defendants.
. . . Here the Operating Agreement plainly describes Satellite Financial as an ‘independent
contractor’”). Moreover, the parties’ intention under the plain language of an agreement
controls. See Salamone v. Gorman, 106 A.3d 354 (Del. 2014) (“Under standard rules of
contract interpretation, a court must determine the intent of the parties from the language
of the contract.”). Here, the MSA unambiguously states that “the relationship of the
parties under this Agreement will not be construed to create any other relationship, as
partners, joint venturers, principal and agent, or otherwise” and it contains a merger
provision specifying that the MSA constitutes the entire agreement between the parties
and that no agreement or understanding varying or extending the same shall be binding
upon either party unless in a written document signed by both parties. Singh Decl., at Ex.
A, § 26(a)-(b).7 Therefore, given Plaintiffs’ failure to allege plausible facts establishing a
joint venture or agency relationship and the unambiguous language of the MSA,
Plaintiffs’ allegations of a joint venture or agency relationship are baseless and Plaintiffs
may not survive a motion to dismiss by attempting to impute alleged conduct by
Theranos, Holmes, and/or Balwani to Walgreens.
7 The court can consider the full terms of the MSA in ruling on Walgreens’s 12(b)(6)
motion pursuant to the incorporation by reference doctrine. “Even if a document is not
attached to a complaint, it may be incorporated by reference into a complaint if the
plaintiff refers extensively to the document or the document forms the basis of the
plaintiff's claim.” PageMasters, Inc. v. Autodesk, Inc., No. CV-08-00553-PHX-RCB,
2009 WL 825810, at *1 (D. Ariz. Mar. 30, 2009) (citing U.S. v. Ritchie, 342 F.3d 903, 908
(9th Cir.2003)). Plaintiffs refer extensively to the nature of the contractual relationship
between Theranos and Walgreens and discuss specific terms of the contract, but do not
attach the MSA to the Amended Complaint. See, e.g., ACAC ¶ 41, 52.
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VI. CONCLUSION
For the foregoing reasons, in addition to the reasons set forth in Theranos’s Motion
to Dismiss, Walgreens respectfully requests that the Court dismiss Plaintiffs’ Amended
Consolidated Class Action Complaint in its entirety pursuant to Rule 12(b)(6).
DATED this 17 day of March, 2017.
By: /s/ David R. Singh
David R. Singh (Pro Hac Vice)
Bambo Obaro (Pro Hac Vice)
WEIL, GOTSHAL & MANGES LLP
201 Redwood Shores Parkway
Redwood Shores, CA 94065
Diane Sullivan (Pro Hac Vice)
Adam S. Tolin (Pro Hac Vice)
WEIL, GOTSHAL & MANGES LLP
17 Hulfish St., Suite 201
Princeton, NJ 08542
Patricia Lee Refo
Brianna L. Long
SNELL & WILMER LLP
One Arizona Center
400 E. Van Buren St., Suite 1900
Phoenix, AZ 85004-2202
Attorneys for Walgreens Boots Alliance, Inc.
and Walgreen Arizona Drug Company
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CERTIFICATE OF SERVICE
I hereby certify that on the 17th day of March, 2017, I electronically transmitted
the foregoing document to the U.S. District Court Clerk’s Office using the CM/ECF
System for filing and transmittal of a Notice of Electronic Filing of the foregoing was
electronically sent to the CM/ECF registrants in this matter.
/s/ Amber Miller
WEIL:\96047928\17\79495.0091
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EXHIBIT A
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AMENDED AND RESTATED
THERANOS MASTER SERVICES AGREEMENT
Whereas the parties entered into the Theranos Master Purchase Agreement ("Original Agreement") dated July 30,
2010;
Whereas the parties agree that because of certain changes in circumstances, it is necessary to terminate the Original
Agreement and replace it with this Agreement (as defined below;
This Amended and Restated Master Services Agreement ("Agreement") dated June 2.._, 2012 ("Effective Date") is by
and between:
WALGREEN$
Full Legal Name Walgreen Co.
Jurisdiction of Illinois
Incorporation
Principal Business 200 Wilmot Road
Address Deerfield, IL 60015
Company Phone 847.914.2500
Number
Company Fax Number 847.914.2804
THE RAN OS
Full Legal Name Theranos, Inc.
Jurisdiction of Delaware
Incorporation
Principal Business 3200 Hillview Avenue
Address Palo Alto, CA 94304
Company Phone 650-838-9292
Number
Company_Fax Number 650-838-9165
This Agreement is comprised of:
Schedule A: Program Overview
Schedule B: Service Terms and Conditions
Schedule C: Support and Maintenance Terms
Schedule D: Walgreens Service Pricing
Schedule E: Definitions
Schedule F: Pilot
Schedule G: HIPAA Business Associate Agreement
Schedule H-1: Convertible Promissory Note
Client Wade Miquelon
Signatory
Executive Vice President & Chief Financial
Title Officer
847.315.3090
Telephone
wade.miquelon@walgreens.com
Email
Thera nos Elizabeth Holmes
Siqnatorv
President and CEO
Title
650-470-6111
Telephone
eholmes@theranos.com
Email
Schedule H-2: Certificate Evidencing Right to Purchase Convertible Promissory Note
Schedule 1: Theranos Pharmaceutical Clinical Trials Infrastructure
Schedule J: Test Menu
The parties agree to the terms set forth in this Agreement, including each attached Schedule, each of which is fully incorporated
herein by reference. This Agreement may be signed in counterparts each of which will be deemed an original and together shall
constitute one and the same Agreement.
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,-;-;W-;-;;A7L-;;:G""'R;;;-EE;;;;Nc;-:;;;-C-=c0-. --------
(Authorized Representative • Signature) .~ Signature)
(Authorized Representative - Printed) (Authorized Representative - Printed)
(Title) (Title)
Theranos and Walgreens Confidential and Proprietary -2-
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WALGREEN CO. THERANOS, INC. ,.
(Authorized Representative- Signature)
(Authorized Representative - Printed)
(Title) (Title)
Theranos and Walgreens Confidential and Proprietary -2-
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SCHEDULE A
PROGRAM OVERVIEW
This Schedule sets forth the Program, including the objectives of the Program and shall be used only for illustrative
purposes. The terms and conditions governing this Schedule are set forth in Schedule B, attached. Schedule A is
intended to be used for each parties understanding of the relationship and shall not govern nor bind either party's actions.
If and to the extent this Schedule provides additional terms and/or conflicting terms to the terms and conditions set forth in
Schedule B, the terms of Schedule B will prevail. The capitalized terms as used in this Agreement are defined in
Schedule E, attached.
1. Intentionally Deleted.
2. Program Objectives. The objectives of this Program include:
a. Make testing less invasive, faster and far more accessible, effective, and actionable by introducing a
more cost-effective, blood testing service at Walgreens stores and Walgreens' other clinical operations
nationwide (which, by example, include, but are not limited to infusion centers and CSG/ESG clinics).
Other types of specimens collected will be nasal and throat swabs as well as urine samples.
b. Empower Walgreens to play a more active role in patient health management and well-being. Theranos
Systems include a decision support system, which will be accessible through the touch screens on the
devices, including any on-site interface provided by Theranos, or through the web browser. This
decision support system will deliver real-time, actionable information to the clinicians in the pharmacy
and other Walgreens clinical locations by providing analysis, interpretations and recommendations
based on patient test results.
c. Generate health care cost savings by reducing direct out-of-pocket costs of lab tests and visits.
d. Early intervention and reduced hospitalization through early detection of the onset of disease.
e. Introduce a new revenue stream for Walgreens through this disruptive technology and associated
services.
3. Phased Disruption. As Theranos continues to develop disruptive technology, the parties agree to discuss terms by
which such innovations can be made commercially available through Walgreens. Notwithstanding the previous, the
parties acknowledge the mutual desire to bring Theranos' technology to market as quickly as is reasonably possible.
With that in mind, at the commencement of this Agreement, it is the parties' intention for Walgreens to act as a patient
service center and collect blood samples via finger-stick technology, small samples of urine, saliva, feces, or swabs,
with laboratory testing to be performed by Theranos at a CLIA certified offsite laboratory ("PSC Phase"). At such
point that the Theranos System is approved for use in a retail setting by appropriate regulatory bodies, the parties will
determine which Walgreens locations, if any, should deploy the Theranos System, with Theranos acting as the CLIA
certified laboratory at the retail and/or employer setting ("Onsite Phase").
4. Program Managers. Each party will assign a program manager to this Program. The responsibilities of each party's
program manager include: (i) serve as the interface between the other party; (ii) develop a mutually agreed upon
detailed business plan including milestones, projections/forecasts and deliverables, and success/acceptance criteria
for each milestone (details of the business plan and any applicable schedule shall be memorialized in an amendment
to this Agreement); (iii) ensure that Theranos and Walgreens have committed the necessary resources necessary to
meet the objectives and timeline of the Program; (iv) prepare regularly-scheduled status reports on the Program, on
an agreed-upon time-frame; (v) identify, schedule and confirm availability of resources, including management, to
provide agreed-upon services and deliverables; and (vi) assist in resolving issues, and escalate, as appropriate,
within the other party. The parties acknowledge that the Program Plan is subject to change as the Program
progresses. Notwithstanding anything to the contrary in this Schedule A, all terms of the relationship shall be detailed
in Schedules B through J or by an amendment to this Agreement.
5. Reviews. The appropriate Program Managers and Representatives from each party will meet on at least a bi-weekly
basis at least until the Pilot commences, to develop the project and review the entire status of the Program.
[remainder of page intentionally left blank]
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SCHEDULE 8
SERVICE TERMS AND CONDITIONS
1. Scope. The terms and conditions set forth in this Schedule apply to this Agreement, including each attached
Schedule or other attachment. To the extent a Schedule or other attachment provides additional terms and/or
conflicting terms to the terms and conditions set forth in this Schedule B, the terms of this Schedule B will prevail.
2. Service Fee Guarantee. During the PSC Phase, Theranos agrees that no other United States retail pharmacy,
grocer, mass merchant, or physician office(s) will be able to procure the right to act as a PSC for Theranos or the
right to obtain services from Theranos as they relate to the collection of specimens for service(s) for a compensation
amount per Test that exceeds the compensation amount available to Walgreens for those services. Any promotional
strategic contracts with thought leaders, physicians or charitable work shall not be subject to the Service Fee
Guarantee, provided service fees paid for such services below the Walgreens fee, are not material to Theranos for
any given twelve (12) month period.
With respect to Predictive Tests, the parties agree that Theranos shall have an independent auditor, acceptable to
Walgreens, certify to Walgreens that the service fee provided to Walgreens during the PSC Phase conforms with this
Section 2. Should the results of such audit show that Walgreens was paid a lesser service fee than what is provided
for in this Section, Theranos shall supplement such service fee within thirty (30) days of such certification. Said
certification shall be made twice: Within sixty (60) days of the date that is six (6) months after the date Walgreens'
exclusivity period on each new Predictive Test completes, and within sixty (60) days of the date that is twelve (12)
months after the date Walgreens' exclusivity period on such Test completes.
3. Exclusivity.
a. Central Labs and PBMs. Theranos agrees not to make the Theranos System available for sale to, distribution to, or
for use (through collection of blood samples, other specimens or otherwise) in delivering Tests to (a) any central lab
company (including but not limited to Quest Diagnostics Inc., Laboratory Corporation of America Holdings, and all
their related entities, as well as any other non-hospital company doing business as a centralized commercial
laboratory), and (b) any pharmacy benefit manager (PBM) (including but not limited to Medea Health Solutions Inc.,
Express Scripts, Inc., and all their related entities, as well as any other company doing business as a pharmacy
benefit manager). Notwithstanding the previous, the following exception shall apply: in geographic areas where
Theranos has not yet launched through Walgreens stores, the above restriction around central lab companies shall
not apply until Theranos launches through Walgreens stores in a given geography.
b. Retail Pharmacies, Grocers and Mass Merchants. For all retail pharmacy companies (for purposes of this
Agreement, the retail drug store division of CVS Caremark Corporation will be considered as a retail pharmacy),
grocers, and retail mass merchants, including, but not limited to Wai-Mart Stores, Inc., and its related entities ("Wai-
Mart"), Theranos may provide testing services as follows:
i. For Routine and Specialty Tests: For the PSC Phase, six (6) months after successful completion of the
Pilot, and, if Walgreens commits to proceed with the Onsite Phase within sixty (60) days of notice by
Thera nos, along with written evidence that the FDA has no objections to the commercial use of the
Theranos System in a retail pharmacy setting, six (6) months from that date of initiation of the Onsite Phase.
Assuming Walgreens decides to proceed to the Onsite Phase, the parties shall work together to plan scale,
provided that the parties agree that the initiation of the Onsite Phase shall take place at the end of the sixty
(60) day notice period;
ii. For Theranos Predictive Tests: Twelve (12) months after the date that each of the following new Tests are
available: diabetes/pre-diabetes, congestive heart failure, women's cancer and men's cancer. For purposes
of this Section, available shall mean the date upon which Theranos secures a major payor's reimbursement
for such Test, provided that such Test is not available on a direct to consumer basis. For purposes of this
Agreement, the term "major payor" shall mean one of any of the following companies: UnitedHealth Group,
WeiiPoint, Inc., Kaiser Foundation Group, Aetna Group, Humana Group, HCSC, Coventry Corp., Highmark
Group, Independence Blue Cross Group, and Blue Shield of CA Group. To illustrate this exclusivity,
assume a women's cancer test is made available to Walgreens on 1/1/2011. Walgreens' exclusivity right to
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secure and offer said test would expire on 1/1/2012. Then if a men's cancer test is introduced on 1/1/2012,
Walgreens' exclusivity right to secure and offer said test would expire on 1/1/2013.
Any tests developed after the execution of this Agreement that are not specifically listed in the definitions of Specialty and
Predictive Tests/Cartridges and are subject to development or licensing agreements with pharmaceutical companies
and/or United States or foreign government agencies will not be subject to the exclusivity terms listed above.
For purposes of this Agreement, one other United States retail grocer, but specifically excluding any mass merchant,
selected by Theranos in its discretion, and its related entities will not be subject to Schedule B, Section 3.b. During the
time of exclusivity, Theranos retains the right to pilot with other companies. Such pilots shall be no greater in number of
stores or locations than as defined in Schedule F.
c. Walgreens Exclusivity Provided that Theranos is able to perform all Routine and Specialty Tests and any
other predictive test that are commercially available in a given jurisdiction with equivalent test quality, pricing and
patient service as compared to existing laboratory service providers, Walgreens agrees that it shall not offer
laboratory services in Walgreens stores. Notwithstanding the previous, the following exceptions shall apply: (i) To
the extent Theranos is not able to offer Routine and Specialty Tests, and/or other commercially available predictive
tests in a given jurisdiction, then Theranos shall have a period of three (3) months to secure necessary regulatory
agency approvals to provide such Routine and Specialty Tests and/or predictive tests; (ii) sale of over the
counter/point of care tests which are available without a clinician order, shall not be applicable to the exclusivity
provided in this subsection (c). Should Theranos fail to obtain such regulatory agency approvals, Theranos shall
contract with a local provider of laboratory services, such provider to have obtained all necessary regulatory
approvals necessary to provide laboratory services, to provide such test(s) at Walgreens. Should Theranos not be
able to reach an agreement with a local provider of laboratory services, Walgreens shall have the right to work with
other providers of laboratory services for all tests in that jurisdiction. Notwithstanding the previous sentence, to the
extent that Theranos can provide laboratory services in a given jurisdiction, Walgreens shall still rely on Theranos to
provide laboratory services for the tests it is authorized to perform. At such time that Theranos obtains the ability to
provide services in the jurisdiction at issue, at equivalent levels of quality, pricing and services as compared to the
existing laboratory service providers and provides notice to Walgreens of the same, Walgreens agrees that it will not
renew its contract with the alternate service provider and will transition its lab offerings back to Theranos in a period
of not greater than ninety (90) days; and (iii) To the extent any of Walgreens' employer clients direct Walgreens to
contract with another laboratory service provider, the above exclusive shall not apply to the patients that Walgreens
serves under that contract. During the term, Walgreens agrees that it shall not operate as a laboratory. Except as
otherwise provided for in this Agreement as it relates to over the counter/point of care tests available without a
clinician order, or in instances in which Theranos cannot provide services, Walgreens agrees that it shall not direct
patients of the Theranos laboratory to non-Thera nos laboratory services.
4. First Announcement Rights. Theranos will not authorize any other United States retail pharmacy, grocer, or mass
merchant to announce availability of the newly Available Cartridges and/or Tests before Walgreens, in accordance
with and as applicable under the Exclusivity terms described more fully in Schedule B, Section 3.
5. Theranos Pharmaceutical Clinical Trials Infrastructure. As part of its ongoing business partnerships with
pharmaceutical companies, Theranos will extend its clinical trials infrastructure to include Walgreens stores so that
pharmaceutical clinical trial patients will have the option to have their specimens collected at a Walgreens location.
Following execution of this Agreement, Thera nos and Walgreens will negotiate the terms and conditions between
Theranos and Walgreens for the clinical trial work which will then be described and agreed upon in writing in
Schedule I.
6. Innovation Fee.
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(a) Walgreens agrees to pay to Theranos an Innovation Fee ("Innovation Fee") for up to $100 million dollars. The
Innovation fee is being paid to Theranos in exchange for the following terms granted to Walgreens in this Agreement:
(i) exclusivity; (ii) price protection; (iii) first announcement rights; infrastructure costs associated with building out the
Theranos laboratory structure to support Walgreens' scale; and other good and valuable consideration. Distribution of
the Innovation Fee shall be as follows:
(i) $25 million shall be distributed to Theranos within five (5) days of the due diligence items/visits
detailed in 6(b) below, being completed;
(ii) $25 million shall be distributed to Theranos within five (5) days of reaching ten (1 0) patients
per store per day on average during the pilot;
(iii) Upon successful Pilot completion and initiation of Program launch, Walgreens shall commit to
a final distribution of $50 million.
(b) Within thirty (30) days of the Effective Date for items (i-iii and vi), and seventy-five (75) days for items (iv-v),
Thera nos shall make available or provide access to the following due diligence items for Walgreens' review. Upon
receipt, and confirmation of these due diligence items, Walgreens will direct the escrow agent to release the initial
$25 million distribution:
(i) Covered Lives- Theranos shall provide written evidence of contracts with payors that provide
coverage in the Pilot Market. Such written evidence shall demonstrate Theranos' ability to process
claims, bill and reimburse Walgreens for its services within the Pilot Market;
(ii) Test Menu- Thera nos will provide Walgreens with a copy of the Test Menu (incorporated as
Schedule J) and operations manual that the Theranos trained Walgreens technician will utilize during
the PSC.
(iii) Laboratory in Good Standing- Thera nos shall provide to Walgreens copies of the CLIA inspection
report and any interim exception reports, proficiency testing results for all tests on the Test Menu, and
any correlation studies.
(iv) PSC Expectations- Theranos shall provide Walgreens with a written copy of the standard
operating procedures/protocol expectations for the PSC. Additionally, Theranos shall provide to
Walgreens the front end IT requirements consisting of screen shots PSC personnel will use and/or
required fields for patient data entry. After Walgreens' initial review of the materials, Walgreens shall
provide its initial comments, and the parties shall work together to mutually revise the materials as is
necessary.
(v) Facilities Visit- Theranos shall permit Walgreens' staff to visit the following Theranos facilities: lab
operations, call center, IT and billing. During the visit, Walgreens shall not have unfettered access to
Theranos' facilities, but rather, the visit shall include opportunities for Walgreens to confirm for itself in a
visual sense that Theranos has the capabilities to carry out its obligations under this Agreement. For
purposes of clarity, such visit will not be for purposes of an audit, but rather to see the Theranos
ope:-ations in action.
(vi) Pricing/Fee/Collectability- The parties shall confirm the Pricing detailed in Section 11 below and the
Innovation Fee are consistent with the fair market values for such Pricing and Innovation Fee.
Walgreens will engage a third party consultant to determine the fair market value of the services
provided by Walgreens to Theranos and the Innovation Fee provided to Theranos ("FMV Study").
Further, the parties shall agree upon the appropriate measure in order to measure collectability as it
relates to the initial $25M payment.
(c) If Theranos realizes at least $1.75 billion in net revenue domestically from laboratory services it provides at all of
its laboratory locations that utilize the Theranos System within twelve (12) months after the date that Theranos Tests
are available in at least 1 ,000 Walgreens locations, Thera nos will earn $50 million of the Innovation Fee. If the final
$50 million distribution is made and Theranos realizes at least $2.5 billion in net revenue from laboratory locations
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that utilize the Theranos System within eighteen (18) months after the date that Theranos Tests are available in at
least 1 ,000 Walgreens locations, Theranos will earn the second $50 million of the Innovation Fee. If the
aforementioned milestones are not realized, Theranos will refund the entire Innovation Fee dollar for dollar back to
Walgreens on a per test consumed basis, with at least $50 million being credited in the first twelve (12) months after
Program launch. For purposes of clarity, the refund per patient shall be the Theranos Fee divided by the number of
patients actually served during the applicable time period
7. Ordering. All Theranos Tests will be ordered electronically using Theranos software and/or equipment in the
stores or ESG location, and Theranos will be able to receive and process this electronic order. As soon as is
reasonably possible, and to the extent possible, the Walgreens' systems and Theranos' systems will be integrated in
order to provide a seamless patient experience and optimizing operations by reduce dual entry for laboratory services
as well as other Walgreens services (e.g. pharmacy, Take Care Clinics, etc.).
8. Scheduling and Cancellation. Intentionally Deleted.
9. Invoicing. Walgreens will issue invoices to Theranos as follows:
Deliverable Invoice
(as applicable)
Services At the beginning of each month, as may be amended
from time to time based on mutual agreement of the
parties in writing. The invoice will specify by CPT
code the number of successful Tests that generated
a Result performed during prior calendar month, by
store location, multiplied by the pricing for each such
Test as set forth on Schedule D.
10. Payment. Commencing with the Pilot Phase through the first twelve (12) months post Pilot, Thera nos shall
compensate Walgreens Services as described in Section 15 of this Agreement, as follows: within seven (7) days of
receipt of payment from the payor or patient. After the first twelve (12) months post Pilot, Theranos shall compensate
Walgreens for Walgreens Services no later than forty-five (45) days after Walgreens has collected said specimen.
If after ten (1 0) days written notice to Theranos that a payment is overdue and such Invoice remains unpaid, late
payments will be charged interest at 1% per month until paid in full (or, if less, the maximum allowed under applicable
law).
11. Pricing.
The parties agree that Walgreens shall receive, a fair market value fee for the Walgreens Services, which the parties
estimate will fall within a range of $10.00-$16.00/per patient ("the Pricing"). The price to be agreed upon by the
parties will not include applicable taxes, or custom duties. Based on the results of the FMV Study, Walgreens and
Theranos shall amend this Agreement, upon terms to be mutually agreed upon, by including pricing based on the
services provided by Walgreens in Schedule D, including a procedure to deal with any inability to realize pricing.
Should the parties be unable to agree upon pricing, the parties shall engage in the process laid out in Section 24(b) of
this Agreement.
12. Discounts. The parties agree that any discounts or reductions in price offered or provided to Walgreens hereunder
are intended to comply with all applicable federal, state and local laws, statutes, rules and regulations, as such are
amended from time to time, including but not limited to the Federal Anti-Kickback Statute [42 U.S.C. 1320a-7b(b)],
and specifically the Discount Safe Harbor under the Federal Anti-Kickback Statute and its implementing regulations
(the "Discount Safe Harbor"), as well as similar State law exceptions. Thus, with respect to the foregoing, the parties
shall comply with all relevant obligations under the Discount Safe Harbor as well as all similar State law exceptions.
The parties shall do nothing to impede the other party's ability to meet all of its obligations under the Discount Safe
Harbor and any similar State law safe harbors and exceptions as contemplated herein. The parties shall take all
necessary steps to comply with the Discount Safe Harbor and any similar State law safe harbors and exceptions.
The parties agree to timely produce any information or documentation requested or that is required for purposes of
compliance with the Discount Safe Harbor and similar State law safe harbors and exceptions.
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13. Currency. All prices and fees set forth in this Agreement are stated in U.S. dollars. Payment will be in U.S. dollars.
14. Theranos Services. Theranos shall provide Walgreens with the services set forth in this Section 14.
a. Limitation. Theranos will ensure that, with respect to Walgreens Customers, the Theranos System will only be
utilized to perform Ordered Tests, provided that Theranos shall run calibration tests remotely on the Theranos
System. At such time that direct to consumer testing is approved by the applicable regulatory body, Walgreens will
collect samples ordered directly by patients and Theranos will provide laboratory services for such samples.
b. Reports.
i. Generation. Theranos will use commercially reasonable efforts to generate a Result for each Ordered Test.
ii. Transmission. Theranos will use commercially reasonable efforts to, within one (1) hour of generating a
Result, transmit the Report to the Ordering Practitioner either by a secure website portal, secure electronic
transmission or facsimile. In accordance with the relevant provisions in this Agreement, all Results
provided to clinicians from samples collected at Walgreens, will be provided to Walgreens. Results from
other Tests not performed at Walgreens Locations will only be provided to Walgreens upon receipt of patient
consent and in compliance with HIPAA and all applicable federal and state regulations. Theranos agrees
that any patient authorization or consent that it may seek to obtain from a potential Walgreens patient will
not include any provision offering the patient the opportunity to block, prohibit or in any way restrict release
of the Report to Walgreens. Theranos agrees that it will use commercially reasonable efforts to deliver
Reports to authorized Ordering Practitioners within four (4) hours of the sample arriving at the laboratory.
iii. Critical Values. In the event a Result reflects one or more values at such variance with normal as to be
potentially life-threatening ("Critical Value"), Theranos will be solely responsible for notifying the appropriate
personnel according to its obligations as a CLIA-certified lab under federal and state law and using
commercially reasonable efforts to verify that the Ordering Practitioner received notification of the Critical
Value. Should direct to consumer testing be made available under this Agreement, Theranos shall notify the
patient directly of any Result that is classified as a Critical Value.
iv. Consultation. Theranos will maintain a toll-free phone number and email address that Ordering
Practitioners can contact with questions or requests for professional consultation regarding a Report. The
toll-free number shall, at a minimum, be staffed 7 days per week from 5 am to 11 pm central. Thera nos will
ensure that all requests for professional consultation are responded to promptly by an appropriately licensed
and qualified health care professional.
v. Public Health Reporting. To the extent required by state or local law and/or regulations applicable to each
Walgreens location utilizing the Theranos System, Theranos will prepare and submit any and all Reports, or
other information or forms that may be required to disclose to a health department or other government
agency as a result of performing certain Tests.
vi. Ownership and Retention. For the duration of this Agreement and in accordance with: (a) the terms set
forth in the HIPAA Business Associate Agreement attached hereto as Schedule G; (b) federal and state laws
governing document retention by health care providers; and (c) Medicare, Medicaid and all other third-party
payor document retention requirements, Theranos will electronically maintain and store all Reports.
vii. Walgreens' Retention Right: Walgreens, without first obtaining patient consent, may maintain, use and
disclose Reports for purposes of complying with applicable federal and state legal requirements including,
but not limited, to: (i) licensure; (ii) record retention; (iii) patient privacy and confidentiality; (iv) Medicare,
Medicaid and any other federal or state health care programs; (v) subpoena or court order.
c. Billing. The following shall apply during the PSC Phase. Should the parties agree to provide
laboratory services in the Onsite Phase, the parties will agree on mutually acceptable billing terms.
i. Provider. The parties acknowledge and agree that Theranos will be the provider of clinical laboratory
services under this Agreement. Theranos acknowledges and agrees that Walgreens will be the provider of
the specimen collection services performed at Walgreen's locations. As the provider of laboratory services,
all claims for payment submitted to patients and/or third-party payors will be submitted by Theranos.
Walgreens acknowledges and agrees that it will not submit under its name or tax id number any claims for
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payment to any customers or third-party payors for Tests. Walgreens shall look solely to Theranos for
payment of the items and services it provides to patients pursuant to this Agreement.
d. HIPAA. The parties acknowledge that as a result of providing the services described above in Sections 14.b and c,
each party will be acting as a Business Associate of the other party and will contemporaneously with this Agreement
execute the HIPAA Business Associate Agreement attached hereto as Schedule G.
15. Walgreens Services. Walgreens will assign to Theranos specifically trained technicians ("Walgreen Technicians")
utilizing a training and certification program provided by Theranos. These technicians will provide laboratory patient
services, as directed by Theranos during such times that Walgreens is interacting with a patient in order to provide
patient services. Walgreen Technicians will professionally handle the patients needing laboratory services. Walgreen
Technicians will draw blood using the finger stick technique; Walgreen Technicians will collect the proper other
specimens according to the directions provided by Theranos. Walgreen Technicians will also obtain the patient's
demographic and insurance information, which will be entered into the system that is available. If applicable, the
Walgreen Technician will collect any co-pay. In addition the Walgreen Technician will take the order that came from
the practitioner and enter the information from that form into the system. The Walgreen Technician will then provide
information to the patient about how the patient can obtain results of the testing. The Walgreen Technician will
properly store and prepare the specimen for pick-up according to the directions provided by Theranos. At the
completion of the patient interaction, the Walgreen Technician will prepare the area for the next patient.
i. Patient Service Centers. Walgreens locations serving as Theranos Patient Service Centers will be patient
service centers which provide for the collection and processing of human blood, urine, feces, or other
matrices for analysis by Theranos' CLIA certified laboratory. The physical locations for Theranos Patient
Service Centers must conform to Theranos standards, with the parties to agree upon any deviations on a
site specific basis. The parties agree that they shall memorialize such standards in writing. Theranos
laboratory supervisors or designated supervisory qualified staff will oversee the sites and make monthly on-
site visits to each Theranos Patient Service Center. Theranos laboratory personnel will perform on-site
inspections of all Theranos Patient Service Centers on an ongoing basis.
ii. Patient Service Center Personnel. Walgreens technicians selected by Thera nos and Walgreens will act as
operators of the Theranos CLIA laboratory. Said technicians will be certified by the Theranos CLIA
laboratory for the performance of sample collection and processing. All certifications must be complete prior
to launch of the Theranos infrastructure in Walgreens Locations. All Theranos trained and certified
technicians in Walgreens Locations will be trained in Theranos Procedure Manuals and Accession Records
for specimen collection stations. Only certified Theranos technicians following approved Theranos protocols
may collect samples and interact with patients in Theranos Patient Service Centers. The Theranos Patient
Service Centers may not be used to collect samples for any non-Theranos laboratory tests. For purposes of
clarity, the parties acknowledge that as of the date of this Agreement, Walgreens is conducting health
testing screening. Such screening shall not violate this subsection, provided that the testing activities are
performed in a matter such that the patient will not perceive the service to be a Theranos service.
The parties agree and acknowledge, that when required by law, clinicians working at Walgreens' ESG/CSG locations will
give patients the option to have their laboratory services performed at a lab/P$C of their choosing.
16. Delivery.
Theranos shall deliver sample tubes, lancets/blood collecting devices (finger stick devices), bandages and all other
necessary supplies to Walgreens locations on an as needed basis. Walgreens will notify Theranos when it has 20%
remaining stock of collection vessels/finger stick devices available for use. Theranos shall deliver replacement
supplies within 1days of receipt of such notice.
17. Shipment. Theranos shall arrange for specimens to be picked up at least once per day, and in locations that collect
at least 50 specimens per day before Noon local time, there shall be at least two pick-ups per day
With respect to the Onsite Phase, the following shall apply: In the absence of specific shipping instructions from
Walgreens, Theranos will ship by the method it deems most advantageous. Transportation costs will be at Theranos'
sole cost and expense, unless Walgreens requests special shipping instructions. If Walgreens requests special
shipment, the associated costs will be collect, or, if prepaid, will be subsequently invoiced to Walgreens. Unless
otherwise specified, the Cartridges will be shipped in Theranos' standard commercial packaging, with each cartridge
and cartridge package properly labeled. When special packaging is, in the reasonable opinion of Theranos, required
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under the circumstances, Theranos will issue an invoice to Walgreens for the cost of the same. In the event any of
Theranos' production facilities are located in close proximity to Walgreens' distribution centers, special facilities can
be provided for direct transfer of Cartridges into Walgreens' distribution centers.
18. Devices.
a. Any Devices, Cartridges and other Deliverable s provided by Theranos to Walgreens, including, but not limited to any
finger stick collection devices, shall only be used by Walgreens' employees, contractors and/or agents for Walgreens'
internal business purposes, solely for use at Walgreens' Locations. Walgreens agrees to take all reasonable steps to
protect the Devices from theft or use contrary to the provisions of this Agreement. Walgreens agrees not to
disassemble or otherwise reverse engineer the Devices or any component thereof. Walgreens is not authorized to
sell, rent, transfer, license, or distribute the Devices or Cartridges or any other Deliverable, unless specifically
authorized by Theranos in writing.
b. Theranos shall at all times retain ownership of the Devices; provided however that Walgreens assumes the entire risk
of loss, damage, theft or destruction of the Devices while they are in the possession of Walgreens and shall pay the
full cost of any Devices not returned in good condition (ordinary wear and tear excepted). Prior to the
commencement of the Onsite Phase, Theranos will provide Walgreens with a statement certifying the cost
component value of the Device for Walgreens' insurance purposes. As Theranos develops upgrades and
enhancements to the Devices, the parties will agree on a deployment schedule for such next-generation Devices.
Walgreens shall permit any authorized representative of Theranos to inspect the Devices, during normal business
hours after first sending written notice of such inspection prior to the return of such Devices to Theranos, at
Walgreens' facilities or any other location at which the particular Program is being conducted. If Walgreens is unable
to return the Devices in accordance with this Agreement, Walgreens will permit Theranos, on dates and times to be
agreed upon, to access Walgreens' premises for the purposes of repossessing such Devices.
c. If Walgreens experiences any problems with the deployed Devices, then, subject to Walgreens' responsibilities in
Section 17.b, Theranos will repair or replace the Device as soon as reasonably possible after being notified of the
problem, in accordance with Schedule C.
d. Upon expiration or termination of this Agreement, Walgreens shall ensure that all Walgreens employees, contractors
and/or agents cease using the Devices and Client Accessible Software, and Walgreens shall return to Theranos all
authorization codes allowing users to access the Software, TheranOS, and all Devices as set forth in Section 23.d.
19. Warranty.
a. During the Onsite Phase the following shall apply: All Cartridges provided to Walgreens will be new and will contain
the functionality, and will operate in accordance with, and conform to, the applicable specifications with shelf life of at
least 90% of useful life as further specified in the procurement documentation. Walgreens will maintain the
Cartridges in the environment specified in the Documentation that ships with the Cartridges or is otherwise made
available to Walgreens.
b. Each party warrants that: (i) it has the legal authority to enter into this Agreement; and (ii) the execution, delivery, and
performance of this Agreement by it and its obligations hereunder do no conflict with any agreement, instrument or
understanding to which it is a party or by which it may be bound.
c. Each party will perform its obligations under this Agreement: (i) in a timely and professional manner; (ii) in
conformance with that level of care and skill ordinarily exercised by other professional companies or a similar size
and in similar circumstances; and (iii) in compliance in all material respects with all applicable laws.
d. Disclaimer. EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, THERANOS EXPRESSLY
DISCLAIMS ALL OTHER EXPRESS, IMPLIED, OR OTHER WARRANTIES, INCLUDING THE WARRANTIES OF
NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
20. Licenses.
a. Theranos License Grant. Theranos hereby grants to Walgreens a non-exclusive, worldwide, multi-site,
enterprise wide, royalty free, non-transferable license, without the right to sublicense, to use, in accordance with,
and solely to perform its obligations in this Agreement and only for the term of this Agreement: (a) Software
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installed on Ordering Devices, solely for use of the Device by Walgreens employees, contractors and agents who
are obligated in writing by confidentiality obligation at least as protective of Theranos and its Confidential
Information as this Agreement; and (b) Software related to the TheranOS which may be accessed through the
Devices or at a designated website or IP address, disc, programs or other designated location ("Client
Accessible Software"). In this Agreement, "Software" means computer programs, object code and related
materials, in machine readable or printed form, including the TheranOS, and any updates or upgrades thereto.
The term "Software" also includes updates, enhancements and new versions delivered pursuant to this
Agreement. Without Walgreen's prior written approval, Theranos will not use in performing the Services, and the
Deliverables will not incorporate, link to, call, or depend in any way upon, any software or other intellectual
property that is subject to an Open Source or Copyleft license (including the GNU General Public License) or any
other agreement that may give rise to any third party's right to use any Deliverables or to limit Walgreen's right to
use, such software and other intellectual property in any respect.
b. Ownership. Theranos and its licensors shall at all times retain sole and exclusive ownership of all Software and,
as between the parties, all Software is Theranos Confidential Information. Walgreens shall use commercially
reasonable efforts to prevent unauthorized access to, or use of, the Software, and notify Theranos promptly of
any such unauthorized use. Walgreens shall not: (a) allow access to the Client Accessible Software by more
than the number of concurrent users agreed upon in writing by the parties, (b) disassemble, decompile or
otherwise reverse engineer the Software, (c) modify, copy (except for backup, archival, distribution of software to
authorized users, disaster recovery, testing, training and other similar uses), sell, rent, transfer, reproduce or
distribute the Software, except as specifically provided in the Agreement, (d) use the Software to provide
processing services to third parties or otherwise use the Software on a "service bureau" basis, or (e) create
Internet "links" to or from the Software, or "frame" or "mirror" any of Walgreens' content which forms part of the
Software. Walgreens shall at all times comply with terms and conditions applicable to third party software
provided with the Software. Theranos reserves all rights in the Software not expressly granted herein.
c. Walgreens License Grant. Walgreens hereby grants to Theranos a perpetual, irrevocable, worldwide, royalty-
free, and non-exclusive license to integrate, use and disclose in TheranOS Walgreens' data provided under,
related to or generated in connection with this Agreement for use in Thera nOS' analytical engine to the extent
permitted by law, provided that where applicable under federal and state law, Theranos obtain patient consent to
use such data and that Theranos does not disclose, and any resulting analyses do not contain, any personally
identifying information regarding individuals or any information identifying Walgreens or Walgreens compounds,
except in connection with the provision of any Professional Services to Walgreens under this Agreement.
d. Lab Certifications. Prior to commencement of the Pilot, Theranos shall provide a copy of the full CLIA
Inspection report and PT results to Walgreens for its review. Only, In the event the report is not made available
to Walgreens, or should Walgreens, in its reasonable discretion, determine that such report contains information
which calls into question any significant quality issues with the Theranos methodology. then Walgreens, at its
cost, shall have the right to conduct an internal correlation study to verify the Theranos platform sensitivity and
specificity with respect to the Test Menu offered by Theranos. A copy of the Test Menu is attached to this
Agreement as Schedule J. Walgreens and Theranos will mutually agree upon the third party/research institution
to assist Walgreens with this study if necessary. Prior to commencement of any work on Walgreens' behalf,
such third party shall enter into a binding non-disclosure agreement with Theranos. Should Theranos receive
notice of an inspection and/or the results of an inspection that could potentially impact Walgreens' ability to
provide services under this Agreement, then Theranos agrees that it shall provide a copy of such inspection
report and where relevant, PT results to Walgreens. If after written notice to Thera nos, there exists any issue
that impacts Walgreens' ability to provide services to Theranos under this Agreement, or that impacts the patient
experience and such issue remains uncured after thirty days' written notice, then Walgreens shall have the right
to visit the relevant portions of Theranos' facilities (including, but not limited to, laboratory facilities, call center,
billing, logistics) in order to better understand the issue and the steps being taken to resolve such issue.
e. Property Ownership/Use.
(i) Walgreens will not use, disclose, share or sell Theranos Intellectual Property, including Processed Data,
to other individuals or entities, except as otherwise specified in this Agreement;
(ii) Walgreens, will not, without first obtaining Theranos' consent, which consent shall not be unreasonably
withheld, use the Theranos Systems, Results, Reports or Processed Data with, or for the benefit of,
pharmaceutical companies or payors to design, and subsequently implement programs, which are
directed and funded by the respective pharmaceutical company or payor, relating to programs for
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approved or developing pharmaceuticals, including usage or new indications that have not been
approved by the applicable regulatory body, provided that Walgreens shall not need consent from
Theranos in order to administer Tests based on Federal requirements and/or drug labeling. Walgreens
may use the Theranos System for its proprietary and internally administered Medication
Compliance/Adherence, Medication Persistence, MTM or other clinical management programs that do
not require consent as detailed above, provided that Walgreens will not give pharmaceutical companies
possession of Results and Reports.
Subject to a Non-Disclosure agreement, pharmaceutical companies will have the right to receive
summarized results and have the right to visually inspect the de-identified Results in order to verify the
summarized results. Walgreens agrees that any disclosure of the summarized results shall restrict
against any further use, sale or disclosure of such results to a third party. Walgreens shall, on a semi-
annual basis, inform Theranos of the active Medication Compliance/Adherence, Medication
Persistence, MTM programs and other clinical management programs that do not require Theranos'
consent, or have been consented to by Theranos that Walgreens is currently engaged in. The parties
agree and acknowledge that Theranos' consent shall not be necessary to enter into a program with a
pharmaceutical company that necessitates that a Test be performed prior to any dispensation of
medications based on Federal requirements or drug labeling.
Walgreens and Theranos agree that they shall engage in discussions during the Pilot to reach mutually
acceptable terms and conditions by which Walgreens may share data with Theranos used in connection
with the Medication Compliance/Adherence, Medication Persistence and MTM programs for the limited
purpose of strengthening the overall accuracy and clinical quality of the algorithms used in the Thera nos
System. Theranos agrees that any information licensed to Theranos will be limited to use in Theranos'
model.
(iii) Subject to patient consent and with the exception of anonymous testing, Theranos hereby provides
Walgreens a perpetual, irrevocable, worldwide license to use and add Results which are collected at
Walgreens Locations to its clinical databases and use said Results to provide medical care to its
customers, provided such Result is not disclosed and no access is provided for any purpose to another
entity besides Walgreens except as specified below.
(iv) With respect to pharmaceutical companies, provided Walgreens obtains the patient's consent,
Walgreens will only use de-identified Results and Processed Data for marketing and selling clinical
programs, research programs or as otherwise agreed. Walgreens will not give these entities possession
of the de-identified Results or Processed Data. Subject to a Non-Disclosure agreement, pharmaceutical
companies would have the ability to receive summarized results and could look over the de-identified
Results so that they could verify the summarized results. Walgreens agrees that any disclosure of
summarized results shall restrict against any further use, sale or disclosure of such results.
(v) Notwithstanding anything to the contrary in Section 19(d)(ii), the parties agree that with respect to
payors, including employers and the government who are not currently paying for tests, Walgreens may
use de-identified Results and Processed Data for marketing and selling clinical programs, so long as
Walgreens will not give these entities possession of the detailed de-identified Results and Processed
Data.
(vi) Intentionally Deleted.
(vii) Provided Walgreens obtains the patient's consent, Walgreens may sublicense Results and Reports to
employers for employee health screening, drug screening, and other similar employment related
programs, provided that the use of these Results and Reports is restricted to assessing compliance with
a company's human resource policies for each specific patient for whom such Results and Reports are
provided in accordance with federal and state laws. Walgreens agrees that any disclosure of identified
Results or Processed Data shall restrict against any further use, sale, disclosure or sublicensing of such
Results or Reports, including any blinding, aggregating, or analysis of the Results and Reports.
(viii) Provided Walgreens obtains the patient's consent to do so, any Results or Processed Data shared with
academic researchers will be provided under a clear NDA that will not allow them to do data mining. For
clarity, these Results or Processed Data cannot be used for developing or identifying new biomarkers,
including without limitation for purposes of monitoring disease progression or regression. Any such
biomarkers which are identified or other intellectual property developed in association with Theranos
data are the sole and exclusive property of Theranos.
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(ix) To the extent such Results or Processed Data have not been previously published, any publications
around such Results or Processed Data shared in strategic clinical relationships must be approved in
writing by Theranos and where required by Theranos must acknowledge Theranos as a contributor.
Notwithstanding the previous, Theranos agrees, that to the extent such publication will not result in the
disclosure of Theranos confidential information, that it shall not unreasonably withhold its consent to
such publication.
(x) As between Walgreens and Theranos: (a) all data on Theranos Systems, including Results and
Reports, and (b) all inventions and improvements developed in connection with the Deliverables or as a
result of the services provided by Theranos to Walgreens during the term of this Agreement and
thereafter, whether by Walgreens or Theranos, or by the parties jointly, if solely, directed to: (i) any part
or the whole of the Theranos System or any improvements thereto, including, without limitation, the
TheranOS analytical engine and the algorithms therein; or (ii) the generation of assays for use in
conjunction with the Theranos System, shall be the sole and exclusive property of Theranos.
Walgreens shall promptly disclose to Theranos in writing any inventions described in the preceding
sentence, and Walgreens hereby assigns to Theranos any right, title or interest it may have in such
inventions.
f. Confidentiality.
i. Use and Protection. Each party will use a commercially reasonable degree of care to maintain all
Confidential Information of the other in trust and confidence and will neither disclose to any third party
nor use any Confidential Information of the other for any unauthorized purpose or without the other
party's express prior written consent. Each party may only disclose Confidential Information of the other
to those of Recipient's employees and representatives on a need-to-know basis, and may use such
Confidential Information only to the extent required to perform this Agreement. Confidential Information
may not be used for any purpose or in any manner that would constitute a violation of any laws or
regulations, including, without limitation, the export control laws of the United States. Unless otherwise
stated in this Agreement, no rights or licenses to intellectual property in Confidential Information is
granted by either party to the other under this Agreement, whether express, implied or otherwise.
Unless otherwise stated in this Agreement, all Confidential Information will remain the property of the
Discloser (and its licensors, if any), including, but not limited to, any right to make, use or sell any
product embodying any Confidential Information. All Confidential Information disclosed under this
Agreement is provided on an "AS IS" basis, with no warranty, assurance, guarantee or
inducement of any kind. In addition, Recipient shall be entitled to disclose Confidential Information to
the extent required in response to a valid order of a court or other governmental body or is otherwise
required by law to be disclosed, provided Recipient, as the responding party, gives sufficient notice to
Discloser to enable it to take protective measures.
ii. Terms of Agreement. Notwithstanding the foregoing, either party may disclose the terms or conditions
of this Agreement only: (a) on a need-to-know and confidential basis to its legal, financial, and other
professional advisors to the extent such disclosure is reasonably necessary, (b) as required by any
court or other governmental body; (c) as otherwise required by law, including applicable securities and
other law and regulation, including rules or regulations of any applicable securities exchange; (d) during
the course of litigation so long as the disclosure of such terms and conditions are restricted in the same
manner as is the confidential information of other litigating parties and so long as (1) the restrictions are
embodied in a court-entered protective order limiting disclosure to outside counsel and (2) the
disclosing party informs the other party in writing at least ten (1 0) business days in advance of the
disclosure and discusses the nature and contents of the disclosure, in good faith, with the other party
and (e) only on a need-to-know and confidential basis, to a third party in connection with an equity
investment in such party, a merger, consolidation or similar transaction by such party, or the sale of all
or substantially all of the assets of such party. In addition, Walgreens shall not disclose any of the
terms or conditions of Section 3.a or 3.b of this Schedule B except, and only to the extent, it must do so
pursuant to one of the preceding exceptions and only after informing Theranos in writing at least ten
(1 0) business days in advance of the disclosure and discussing the nature confidentiality, and contents
of the disclosure, in good faith, with Theranos, provided that Walgreens shall not be prevented from
making said disclosure if a judicial and/or governmental order demands production prior to such ten (1 0)
business day notice period expiring.
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iii. Term of Confidentiality. The obligations imposed on Recipient shall survive until such time as
Discloser's Confidential Information disclosed to Recipient under this Agreement becomes publicly
available and/or made generally known through no action or inaction of Recipient or its
Representatives. Recipient and its Representatives will return or destroy/erase all of Discloser's
Confidential Information, including any and all information in whatever form generated making use of or
reflecting Discloser's Confidential Information, except one copy for archival purposes, within thirty (30)
business days of request of Discloser, or thirty (30) business days from termination or expiration of this
Agreement.
iv. Confidentiality Protocol. Should Walgreens desire to communicate with any third parties in order to
cultivate a larger customer base as it relates to the Theranos System and/or Tests offered by Theranos,
Walgreens, prior to engaging in such discussions shall do the following: (i) Walgreens shall have the
receiving party sign a Non-Disclosure Agreement (in a form to be approved by Theranos and
Walgreens). Theranos' identity will not be revealed until the agreement has been executed by both
Walgreens and the receiving party; (ii) Walgreens will submit the form to Theranos, along with notations
of any deviations from the agreed upon form; (iii) Within ten (1 0) days of receiving the NDA, Theranos
shall either provide Walgreens with a signed copy, or advise in writing as to why the NDA is
unacceptable. The parties shall separately agree on a set of materials that can be provided to third
parties upon execution of a mutually acceptable NDA.
21. Convertible Note. In partial consideration for Walgreens' commitments set forth in this Agreement,
within fourteen days of the Effective Date, Walgreens shall have the right to purchase, or cause its affiliate WVC
Investments, LLC to purchase, a convertible promissory note in the principal amount of $40 million in substantially the
form set forth in Schedule H-1 (the "Convertible Note"). The Convertible Note shall bear interest at the rate of 0.79% and
shall mature on the Maturity Date (as such term is defined in the Convertible Note). The outstanding principal on the
Convertible Note will be convertible into Series C-1 preferred shares (the "Series C-1 ") of Thera nos upon the occurrence
of a Conversion Event (as such term is defined in the Convertible Note). Upon conversion, Walgreens' preferred shares
will have certain Dividend, Liquidation, and Conversion Rights as set forth in Theranos' charter in the form provided to
Walgreens. To exercise its right to purchase the Convertible Note within the time period described above, Walgreens shall
execute and deliver to the Company a certificate in the form set forth on Schedule H-2.
22. Indemnification.
22.1 Defense and Indemnification. (i)Theranos will defend, indemnify and hold harmless Walgreens and its
Affiliates, and their respective personnel, successors and assigns ("Walgreens lndemnitees"), against any
claims, demands, suits, or causes of action by third parties, (the "Claims"), to the extent resulting or claimed
to result from (a) any act or omission of Theranos or its personnel under or in connection with this
Agreement; (b) any breach of this Agreement (including any Procurement Document and/or inaccurate or
improper claims submissions caused by the TheranOS billing software) by Theranos or its personnel; (c) the
violation of any intellectual property rights of Third Parties caused by Theranos, its personnel or resulting
from Walgreens's use of the Theranos System, Services, Devices or Deliverables; (d) any malpractice,
misdiagnosis and/or wrongful diagnosis or any other claim caused by a Test; or (e) the violation by Theranos
or its Personnel of any law or regulation, provided that Theranos shall have no liability or obligation with
respect to such Claim to the extent the Claim results from (1) any act or omission of Walgreens or its
personnel (including without limitation the modification or combination of Deliverables or other items by or for
Walgreens); (2) breach of this Agreement by Walgreens; (3) the violation by Walgreens of any law or
regulation; or (4) misuse, failure to properly use, or improper disclosure by Walgreens or its personnel of any
data provided by Theranos or generated or otherwise available in connection with the Theranos System or
this Agreement. Theranos will not be liable for damage to third parties to the extent such damage was
caused by the negligence or willful misconduct of Walgreens as determined in a final, non-appealable order
of a court of competent jurisdiction. (ii) Walgreens will defend, indemnify and hold harmless Theranos and
its Affiliates, and their respective personnel, successors and assigns ("Theranos lndemnitees") against all
liabilities, damages, awards, losses, costs and expenses (including costs and attorney's fees) arising out of
any claims, demands, suits or causes of action by third parties ("Claims"), which result or are claimed to
result in whole or in part from (a) any act or omission of Walgreens or its personnel (including without
limitation the modification or combination of Deliverable or other items by or for Walgreens); (b) breach of
this Agreement by Walgreens; (c) the violation by Walgreens of any law or regulation; or (d) misuse, failure
to properly use, or improper disclosure by Walgreens or its personnel of any data provided by Theranos or
generated or otherwise available in connection with the Theranos System or this Agreement. However,
Walgreens will not be liable for damage to third parties to the extent such damage was caused by the
negligence or willful misconduct of Theranos as determined in a final, non-appealable order of a court of
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competent jurisdiction. (iii) Notwithstanding anything to the contrary, (a) to the extent that any Claim subject
to Section 21.1 (i) is brought by a Third Party against both parties, Theranos will have the duty to defend
Walgreens, provided that Theranos will not be responsible for the defense costs to the extent such Claim
was caused by the negligence or willful misconduct of Walgreens as determined in a final, non-appealable
order of a couri of competent jurisdiction; and (b) to the extent that any Claim solely subject to Section
21.1 (ii) is brought by a Third Party against both parties, Walgreens will have the duty to defend Theranos,
provided that Walgreens will not be responsible for the defense costs to the extent such Claim was caused
by the negligence or willful misconduct of Theranos as determined in a final, non-appealable order of a court
of competent jurisdiction.
22.2 Infringement. In the event the Theranos System is held to constitute an infringement, or if
Walgreens is enjoined from using the Theranos System, Theranos, at its own expense, will first use reasonable
and prompt efforts to: (a) procure for Walgreens the right to continue to use the Theranos System; (b) modify the
Theranos System so that it is non-infringing and of at least equivalent performance and functionality; (c) provide
functionally equivalent replacement product(s) to Walgreens; or (d) upon adequate showing to Walgreens that
none of the foregoing options are commercially feasible pay to Walgreens a liquidated damage as follows: (i)
Between the date this Agreement is fully executed and the end of the Pilot, Walgreens shall be entitled to $0.00
as a liquidated damage; (ii) Between the end of the Pilot, and as applicable, the refund of the payment of
Walgreens first $50 million of the Innovation Fee commitment, Walgreens shall be entitled to receive the lesser
of actual damages incurred as a result of such termination, or $20,000,0000; and (iii) After as applicable, the
refund of the payment of Walgreen's second $50 million Innovation Feet, Walgreens shall be entitled to receive
the lesser of actual damages incurred as a result of such termination, or $40,000,000. Walgreens's rights under
this Section will be in addition to and will not limit Walgreens's rights under the Section regarding Defense and
Indemnification above. Except as otherwise contemplated in this Agreement, this Section regarding Indemnity
does not apply to any infringement caused by any combination of any Theranos System with any item not
supplied by Theranos or any modification of any Theranos System other than by Theranos. For purposes of this
section "actual damages incurred" shall not include indirect, incidental, or consequential damages of any kind or
nature whatsoever. Actual damages shall include, but not be limited to, run-rate labor losses, capex, and
investments made to individual Walgreens' locations to accommodate the Theranos System.
22.3 Procedures. The indemnifying party has the right to control the defense and settlement of any Claim;
provided, however, that the other party will have the right to participate in such defense, at its expense,
and in selection of counsel, and to approve any settlement proposed by the indemnifying party (such
approval not to be unreasonably withheld or delayed). Upon the indemnifying party's' request, the other
party will reasonably cooperate in such defense and the indemnifying party will reimburse the party for
its reasonable out-of-pocket expenses in providing such cooperation. Each party will provide prompt
notification of any Claim; provided, however, that any reasonable delay by such party in giving such
notice will not relieve the indemnifying party of its obligations pursuant to this Section regarding
Indemnity, except to the extent that the indemnifying party demonstrates actual damage caused by
such delay.
22.4 Independent Obligation. The obligations of each party to defend, indemnify and hold harmless, their
respective indemnified parties under this Section regarding Indemnity, will be independent of each other
and any other obligation of the parties hereunder, provided that this Section 21 shall constitute
Theranos' sole obligation and liability, and Walgreens' exclusive remedy, with respect to Third Party
claims for violation of any intellectual property rights.
23. Limitation of Liability. In no event shall either party be liable to the other party or any other person or entity for
any costs of substitute products or services or special, exemplary, indirect, incidental, consequential or punitive damages
of any kind or nature whatsoever (including, without limitation, lost revenues, profits, savings or business, or contribution
or indemnity in respect of any claim against the party) or loss of records or data, whether in an action based on contract,
warranty, strict liability, tort (including, without limitation, negligence) or otherwise, even if such party has been informed in
advance of the possibility of such damages or such damages could have been reasonably foreseen by such party. In no
event shall Theranos' liability to Walgreens or any other person or entity arising out of or in connection with this
Agreement or the Services exceed $40,000,000, whether such liability is based on an action in contract, warranty, strict
liability or tort (including, without limitation, negligence) or otherwise. In no event shall Walgreen's liability to Theranos or
any other person or entity arising out of or in connection with this Agreement or the Services exceed $40,000,000,
whether such liability is based on an action in contract, warranty, strict liability or tort (including, without limitation,
negligence) or otherwise. Notwithstanding the foregoing, the limitations of liability and disclaimers of damages set forth in
this Section will not apply to claims: (i) resulting from fraud or willful or intentional conduct of, or bodily injury (including
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death) or property damage caused by, a party; (ii) that are the subject of indemnification under this Agreement; (iii)
for breach of a Party's confidentiality obligations under this Agreement or (iv) for violation of any intellectual property rights
of Third Parties caused by Theranos, its personnel or resulting from Walgreens' use of the Theranos System, Services or
Deliverables. Except as otheiWise allowed under this Agreement, Walgreens liability to Thera nos shall not be limited with
respect to claims regarding Walgreen's use or misuse of Theranos Intellectual Property, trade secrets and/or Confidential
Information. Notwithstanding the foregoing, Walgreens shall not be liable to Theranos to the extent such damage was
caused by the acts or omissions of Theranos as determined in a final, non-appealable order of a court of competent
jurisdiction. The limitations specified in this Section will survive and apply even if any limited remedy specified in this
Agreement is found to have failed of its essential purpose.
24. Term and Termination.
a. Term. Assuming this Agreement is not terminated pursuant to Section 24(c) below, this Agreement will
be in effect until three (3) years from successful completion of the Pilot. At the end each year of the
Term, the Term of this Agreement shall automatically extend for one (1) additional year, unless either
party provides written notice to the other of its intent not to renew at least ninety (90) days prior to the
anniversary date of the day upon which the Pilot was completed. For purposes of clarity, assume the
following example: The Pilot is successfully completed on January 1, 2013. The term would then run
through and including December 31, 2016. Unless either party gives notice to the other 90 days prior to
December 31, 2014, the Term would automatically extend to December 31, 2017.
b. Termination due to unsatisfactory Pilot or inability to realize Pricing. Should Walgreens or
Theranos determine that the success criteria for the Pilot has not been satisfied, Walgreens or
Theranos shall have the right to terminate this Agreement. Should Theranos terminate the
Agreement, Theranos shall , within fourteen days of providing notice of termination, refund the
Innovation Fee, and Theranos shall have the option to repurchase the Convertible Note detailed in
Section 21 of this Agreement. Should Walgreens terminate the Agreement, Walgreens shall forgive
$25 million of the Innovation Fee, and Thera nos shall pay off the remaining balance as detailed below in
24(d)(i). Further, if Walgreens terminates the Agreement, Thera nos shall have the option to repurchase
the Convertible Note detailed in Section 21 of this Agreement. In the event the parties fail to agree on
either of the following issues: (i) failure to agree on the fair market fee to be paid to Walgreens within
fourteen (14) days of receipt of the FMV Report; and (ii) failure to agree to agree on revisions to Pricing
within ninety (90) days after one party notifies the other in writing of a need to revise Pricing due to a
governmental action, including, but not limited to, an audit, investigation, inquiry, change of law,
issuance of new guidance or interpretation of law, then either party shall have the right to terminate this
Agreement.
c. Termination for Cause. If either party breaches a material provision of this Agreement and fails to
cure such breach within thirty (30) calendar days after receiving written notice of the breach, the non-
breaching party shall have the right to terminate this Agreement at any time until such cure; provided if
a breach cannot be cured within thirty (30) calendar days but is capable of cure, the breaching party will
not be in default if, within thirty (30) calendar days of receiving notice of breach, in good faith, it begins
and continues to attempt to cure the breach. In such case, the breaching party will have a reasonable
time to cure the breach, but not to exceed sixty (60) days, before being in default. Notwithstanding
anything to the contrary herein, Walgreens' breach of payment obligation constitutes a default ten (1 0)
business days after written notice from Theranos that the payment is due. Should Walgreens fail to
make such payment, or fail to respond in writing with its good faith objection to such invoice within such
ten (1 0) day notice period, then Theranos shall have the right to terminate this Agreement immediately.
d. Obligations upon Termination.
i. Theranos' Obligations to Walgreens:
1. In the event Walgreens terminates this Agreement pursuant to Sections 24.b or 24.c
or Theranos terminates this Agreement pursuant to Section 23.b, then within one
hundred eighty (180) calendar days of the termination date Theranos will refund the
Innovation Fee as detailed in subsections (b), as applicable, and (c).
ii. Walgreens' Obligations to Theranos:
1. In the event this Agreement is terminated by Theranos pursuant to Section 24.c
Theranos shall retain the initial $25 million distribution of the Innovation Fee ..
iii. Upon termination, Theranos may enter Walgreens' facilities, at a time and date to be
reasonably agreed upon, and remove the Devices installed on Walgreens' premises.
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f. Survival of Provisions. Those Sections entitled "Reports," "Devices," "Warranty," "Licenses
Sections b, c, d, and e," "Indemnification," "Limitation of Liability," "Term and Termination,"
"Miscellaneous" Schedule E ("Definitions") , and all accrued payment obligations of Walgreens, shall
survive the expiration or termination of this Agreement for any reason.
25. Marketing/Sales. The parties agree that during the term of the Agreement, Theranos shall be
responsible for sales/marketing efforts with respect to physician sales. Walgreens shall bear responsibility for
sales/marketing efforts within/to Walgreens' locations. The parties shall each be responsible for sales/marketing
efforts with respect to consumer marketing. The parties agree that prior to the commencement of the Pilot a
sales/marketing playbook shall be developed and agreed upon. Such playbook will lay out the framework by which
each party will carry out its sales/marketing efforts and the messaging that will be used by each respective party. All
Theranos locations will be branded with the Theranos name and meet Theranos service center standards.
26. Miscellaneous.
Governing Law/Venue. This Agreement will be interpreted and governed by the laws of the State of Delaware without
reference to its conflict of laws principles. The parties irrevocably consent to the sole and exclusive jurisdiction of and
venue in the district court for Delaware.
a. Independent Contractor. Thera nos is an independent contractor, and the relationship of the parties under this
Agreement will not be construed to create any other relationship, as partners, joint venturers, principal and agent, or
otherwise. Neither party has the authority to represent the other as to any matters.
b. Entire Agreement. The terms and conditions contained in this Agreement, including all Schedules, constitute the
entire agreement between the parties and supersede all previous agreements and understandings, whether oral or
written, between the parties hereto with respect to the subject matter of this Agreement and no agreement or
understanding varying or extending the same shall be binding upon either party unless in a written document signed
by both parties.
c. Force Majeure. Non-performance of either party, except Walgreens' payment obligation, shall be excused to the
extent that performance is rendered impossible by any other reason where failure to perform is beyond the
reasonable control of the non-performing party. Notwithstanding the previous, the parties acknowledge and agree
that if non-performance due to a force majeure event exceeds ninety (90) days, then on written notice to the party
suffering the force majeure event at any time prior to resumption of performance by such party, the other party shall
be entitled to terminate this Agreement.
d. Assignment. Neither party may assign, delegate or otherwise transfer this Agreement or any of its rights or
obligations under this Agreement without the other party's prior written approval, which approval will not be
unreasonably withheld, delayed or conditioned. Any such attempt to do so will be ineffective. Notwithstanding the
foregoing, either party may assign, delegate or otherwise transfer this Agreement by operation of law or otherwise, to:
(i) any person or entity that becomes a successor entity, in connection with a change of control (which will include a
direct or indirect transfer of all or substantially all of the party's' stock or assets to a third-party, a merger,
reorganization or other such transaction) or (ii) a sister company or wholly-owned subsidiary. Notwithstanding any
Change of Control, the parties agree that any successor entity will comply with the terms of this Agreement.
e. Notices. All notices and other communications pertaining to this Agreement will be in writing and will be deemed
delivered upon personal delivery, or refusal of delivery, via certified mail, return receipt requested, postage prepaid.
All notices of communications between Walgreens and Thera nos pertaining to this Agreement will be directed to the
address specified on cover page of this Agreement, or such other address as a party may specify.
f. Prevailing Party. In any suit or proceeding relating to this Agreement the prevailing party will have the right to
recover from the other its costs and reasonable fees and expenses of attorneys, accountants, and other professionals
incurred in connection with the suit of proceeding, including costs, fees and expenses upon appeal.
g. Amendment; Waiver. No modification to this Agreement, or any waiver of any rights shall be effective unless
assented to in writing by the party to be charged and shall not constitute the waiver of any other right hereunder or
any subsequent breach or default.
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h. Severability. If any portion of this Agreement is held invalid or to be out of compliance with federal or state law, the
parties agree that such invalidity shall not affect the validity of the remaining portions of this Agreement, and the
parties shall seek in good faith if possible to agree to substitute for the invalid provision a valid provision that most
closely approximates the economic effect and intent of the invalid provision.
i. Publicity. Neither party will use the name(s), trademark(s) or trade name(s), whether registered or not, of the other
party in publicity or press releases or advertising or in any manner (except as such disclosure may be required by
applicable law or the rules or regulations of any applicable securities exchange or regulatory or governmental
authority to which the relevant party is subject or submits, wherever situated), including customer lists, without that
party's prior written consent. Consent of Walgreens shall not be valid unless obtained from Walgreen's Chief
Information Officer and Director of Corporate Communications, which consent may be withheld in Walgreen's sole
discretion.
j. Export and Import Requirements. Theranos will prepare, maintain and, to the extent required under applicable law,
submit to the applicable customs authorities, all necessary information and documentation to comply with the
applicable customs and export and import requirements of each country from which any software, products, or other
materials developed under this Agreement will be exported and each country into which they will be imported.
Theranos will comply with all other applicable customs, technical compliance and country of origin requirements of
each country into which any software, products, or other materials are to be imported.
k. Compliance With Laws. Each party will comply with all applicable laws, ordinances, rules, and regulations
governing its duties or responsibilities under this Agreement, including but not limited to, all United States and foreign
export control laws or regulations. Without limiting the generality of the foregoing, each party represents that in the
performance of its obligations under this Agreement, it will fully comply with the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA") and the standards issued by the US Department of Health and Human Services
at 45 C.F.R. Parts 160 and 164, to protect the security and privacy of individually identifiable health information
generated by or received from the other party, whether such party is acting in the capacity of a covered entity,
business associate, health care provider or any other capacity ..
o. EEOC Compliance. In connection with its performance of the Agreement, Theranos shall comply with
the applicable provisions of Executive Order 11246 and the regulations issued pursuant thereto
(generally Part 60-1 of Title 41 of the Code of Federal Regulations), unless exempted by said
regulations, particularly the provisions of the Equal Opportunity Clause (41 CFR Section 60-1.4(a)),
which are incorporated herein by reference; the provisions and regulations pertaining to
nondiscrimination and affirmative action in employment (41 CFR Sections 60-1.4, 1.40, 1.41 and 1.42),
and the filing of Standard Form 100 (EE0-1). Theranos certifies, in accordance with the requirements
of 41 CFR Section 60-1.8), that its facilities for employees are not segregated. In addition, unless
exempted by said regulations, Theranos shall comply with the applicable provisions of the Affirmative
Action Clause for Workers with Disabilities (41 CFR Section 60-741.5), and for Special Disabled
Veterans and Veterans of the Vietnam Era (41 CFR Section 60-250.5), which are also incorporated
herein by reference.
p. Insurance. Theranos will maintain at its expense the following insurance during the term of this
Agreement:
(i) Workers' Compensation in the statutory limits required by the state or states in which work is
performed under this Agreement (including all/other states endorsement) and Employers' Liability with
minimum limits of $1 ,000,000;
(ii) Commercial General Liability with minimum limits of $2,000,000 per occurrence and
$4,000,000 in the aggregate (to include bodily injury, property damage, products/completed operations,
and contractual liability on a blanket basis for liability assumed hereunder); (iii) Excess liability
insurance with minimum limits of $5,000,000 in the aggregate; and
(iv) Professional Liability (errors & omissions) with minimum limits of $2,000,000.
q. Policy Requirements. . All policies will be primary and at Theranos' sole expense. Walgreens will be
included as an additional insured on all coverage listed above with the exception of Workers'
Compensation and Professional Liability. All policies will include provisions that the insurers waive the
rights of recovery or subrogation against Walgreens. Insurance coverage will be in a form and carrier
acceptable to Walgreens with a minimum A.M. Best rating of A-/IX or higher. The insolvency,
bankruptcy or failure of any insurance company shall not relieve Theranos of any of its obligations
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herein. Within fourteen (14) days of a request by Walgreens, Theranos shall provide certified copies of
the actual policies of insurance including all endorsements and riders. If any of the above policies are
written on a "claims-made" basis, Theranos shall (i) ensure that continuous coverage is maintained or
an extended coverage period will be exercised for a period of not less than three (3) years beyond the
expiration or termination of this Agreement; and (ii) in the event a "claims-made" policy is not renewed
or replaced, ensure that such policy must have an extended reporting period of three (3) years.
r. Theranos Data Security Reviews. Theranos will conduct its own periodic reviews or examinations of
its data security procedures, consistent with prevailing industry good practices. If any such review or
examination indicates that the procedures have or are likely to fail, Theranos will promptly notify
Walgreens, providing pertinent details to the extent reasonable so that Walgreens can take steps to
avoid or minimize the adverse impacts. Theranos will also take reasonable steps to correct the errors
or problems as soon as reasonably possible or otherwise cooperate reasonably with Walgreens to
resolve the situation. Furthermore, prior to and as a condition of Theranos bringing any hardware
device onto Walgreen's premises to connect to Walgreen's internal computer network, Theranos shall
provide Walgreens with a complete inventory of all such hardware devices, including manufacturer,
model name and number, device type, and Media Access Control (MAC) address of each such device.
Walgreens shall at all times have the right to physically inspect any hardware device that is or has been
connected to Walgreen's internal computer network in order to ensure compliance with provision of this
Section 26.r.
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SCHEDULE C
THERANOS SYSTEM SUPPORT AND MAINTENANCE TERMS
1. Support and Maintenance: Hardware and Software. Theranos and Walgreens will work together prior to Pilot
initiation to cement the workflow around implementation of these Services.
1.1 Client Services.
Theranos, at its cost, will use commercially reasonable efforts to provide Walgreens Users 24x7 Hardware and Software
support and maintenance. Support and maintenance services include, but are not limited to, use of and access to the
Software and TheranOS, and associated enhancements and updates; on-demand, interactive services; and diagnosis of
problems or issues associated with the Hardware or Software and resolution of verifiable problems. Thera nos will
designate a dedicated Client Solutions manager to Walgreens. The Client Solutions manager will be responsible for
assisting in the management of Walgreens' support and maintenance requests. Support and maintenance services will
be available by telephone, email, and via TheranOS Real-Time Support online. In responding to Walgreens' support
inquiries, Theranos will use the guidelines set forth in this Schedule.
1.2 Reactive Incident Management Guidelines.
Theranos, at its cost, will or will direct a service provider to use commercially reasonable efforts to respond to Walgreens'
inquiry on a same-day basis via email or phone. Each inquiry will be assigned a priority level (set forth below), and
Service Provider will use commercially reasonable efforts to resolve the request in accordance with the associated
timelines:
• Priority 1 - Use of the Theranos System, as that term is defined in this Agreement, is severely
impacted. Important features/critical functions are not available, or system freezes or crashes. These
situations will be treated as emergencies; reasonable efforts are made to respond to Priority 1 service
requests within one (1) hour. Client Solutions will work 24x7 with Walgreens until the issue is resolved
or as long as useful progress can be made and fixes can be applied.
• Priority 2- Walgreens experiences a minor loss of service or request information, an enhancement, or
documentation clarification but there is no impact on the operation of the Software. Reasonable efforts
are made to respond to Priority 2 service requests within 3 business hours. Examples of Priority 2
support inquiries include: help with web portal access, and instructions on using the TheranOS features.
Service Provider will use commercially reasonable efforts to update Walgreens via email or phone (if
email is not available) on the status of the inquiry and resolution within one business day.
3. Deployment Services.
At Walgreens' written request, as noted on a purchase order, Theranos, at its cost shall deploy and install the Devices on
Walgreens' premises.
4. Training.
Theranos and Walgreens will mutually agree upon the scope of training that Theranos will offer to Walgreens at no cost to
Walgreens.
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SCHEDULED
WALGREENS SERVICE PRICING
PRICING TO BE AGREED UPON
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SCHEDULE E
DEFINITIONS
Capitalized terms, as used within this Agreement, including any Schedule or attachment, have the following
meanings, unless otherwise indicated:
1. "Affiliate" means any legal entity(ies) which is directly or indirectly controlled by or under common Control with a
party or Controls a party to this Agreement but only so long as such control exists.
2. "Assay" means any method used for the detection of an analyte (e.g., a biomarker) or multiplexed set of analytes
and/or measuring their concentration in a matrix, including, but not limited to, human blood.
3. "Calibration" means processes and controls for optimizing the performance of the Theranos System which do not
require running of any Tests that are not ordered tests.
4. "Cartridge" means Theranos' analytical chips containing biological fluid processing technology and Assays to
measure, among other matters, the concentration of specific analytes, including biomarkers in a biological fluid
sample.
5. "Change of Control" means (i) any reorganization, merger or consolidation of the Company, other than a
transaction or series of related transactions in which the holders of the voting securities of the Company outstanding
immediately prior to such transaction or series of related transactions retain, immediately after such transaction or
series of related transactions, at least a majority of the total voting power represented by the outstanding voting
securities of the Company or such other surviving or resulting entity or (ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company.
6. "Client Accessible Software" means Software related to the TheranOS which may be accessed through the
Devices or at a designated website or IP address, disc, programs or other designated location ("Client Accessible
Software").
7. "Confidential Information" means this Agreement, all information Discloser discloses to Recipient in connection
with the performance of this Agreement. Confidential Information may not be marked as such at the time of
disclosure and will still be considered Confidential Information so long as Discloser identified or designated the
information as confidential at the time of disclosure (or like designation), or Discloser disclosed the information in
circumstances of confidence, or the information would be understood by the parties exercising reasonable business
judgment to be confidential. "Confidential Information" does not include information which: (a) is or becomes
generally known through no fault of Recipient; (b) is known to Recipient without restriction on disclosure, at the time
of disclosure, as evidenced by its records; (c) is hereafter furnished to Recipient by a third party as a matter of right
and without restriction on disclosure; (d) is independently developed by Recipient without any breach of this
Agreement or, (e) is otherwise necessary to establish rights or enforce obligations under this Agreement, but only to
the extent that any such disclosure is necessary. Results and Reports shall be included in the definition of
Theranos' Confidential Information, provided that such classification shall not reduce Walgreens' rights of use as
described within this Agreement.
8. "Control, Controls or Controlled" mean owning or controlling directly or indirectly more than 50% of shares,
partnership interests, membership shares, ownership interests or voting rights of such controlling or controlled entity.
9. "Device" means Theranos' analyzer, the Theranos patient interface and sample collection tools.
10. "Deliverable" means any Hardware, Software, Cartridge, Device, Theranos System, Support and Maintenance
Services and/or training to be provided by Theranos to Walgreens under this Agreement.
11. "Delivery Date" means the date on which Theranos will ship the Cartridges to Walgreens, or otherwise make the
Deliverable available to Walgreens at Theranos' manufacturing facilities.
12. "Discloser" means the party disclosing Confidential Information.
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13. "Documentation" means user manuals and technical notes for the Theranos System regarding the use and
maintenance of the Theranos System.
14. "Hardware" means equipment and hardware Theranos is to deliver pursuant to this Agreement.
15. "Medication Compliance/Adherence" means the act of conforming to the recommendations made by the clinician
with respect to timing, dosage, and frequency of medication taking within the guidelines approved by the FDA or as
set forth in that medication's labeling.
16. "Medication Persistence" means the duration of time from initiation to discontinuation of administration of
medications.
17. "MTM" or "Medication Therapy Management" means services provided by Walgreens in order to help consumers
get the best results from medications through enhancing consumer understanding of medication therapy, increasing
consumer adherence to medications, controlling costs, and preventing drug complications, conflicts, and
interactions.
18. "Ordered Tests" means Tests that were: (i) ordered or authorized by an Ordering Practitioner or other individual
permitted under federal and state law to order clinical laboratory tests; and (ii) initiated by a Walgreens employee or
agent by entering the Tests specified on the order into the Device.
19. "Ordering Practitioner" means a licensed physician, osteopathic physician, physician assistant, nurse practitioner,
or any other health care professional who is authorized under federal and state law to order clinical laboratory tests
and who ordered one or more Tests.
20. "Pilot" means the pilot program as set forth in Schedule F.
21. "Payment Refund Obligation" means the conditional obligation to refund the pre-purchase payments if the pilot is
not successful.
22. "Payment Refund Obligation Termination" means the earlier of (i) the date on which the success criteria for the
pilot have been satisfied, or (ii) the date on which Theranos has refunded the amounts due under the Payment
Refund Obligation.
23. "Predictive Test" means a test for diabetes/pre-diabetes, congestive heart failure, women's caner, men's cancer or
other such Theranos proprietary test.
24. "Processed Data" means information generated by Theranos utilizing Theranos IP such as predictive modeling.
25. "Program" means the project outlined in Schedule A, but shall not include the Pilot for purposes of the Innovation
Fee.
26. "PSC" means patient service center.
27. "Recipient" means the party receiving Confidential Information from Discloser.
28. "Report(s)" means the collective Routine Reports, Specialty Test Results and Predictive Results provided to
Walgreens.
29. "Representatives" mean each party's employees, directors, officers, contractors, consultants, stockholders and
agents.
30. "Result{s)" means the collective Routine and/or Specialty Results, and Predictive Results provided to Walgreens.
31. "Routine "Test" means a combination of one or more Assays that match existing Current Procedural Terminology
(CPT) codes for laboratory analyses as defined by the American Medical Association.
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32. "Services" means all services related to the Cartridges, Tests, and Theranos System described in this Agreement
including but not limited to the services described in Schedule B, Section 14 and Schedule C.
33. "Software" means computer programs, object code and related materials, in machine readable or printed form,
including the TheranOS, and any updates or upgrades thereto .. The term "Software" also includes updates,
enhancements and new versions delivered pursuant to this Agreement.
34. "Specialty Test" means laboratory tests, including, but not limited to, influenza/strep, pregnancy, fertility, pre-
natal/trimester, STD, compliance, drug efficacy and all available esoteric Tests (the parties agree that they will
memorialize the CPT codes that are include all Specialty Tests as such codes become available).
35. "Support and Maintenance Services(s)" means support and maintenance services that Theranos will may provide
Walgreens, as more fully set forth in Schedule C.
36. "Test" means a) in the context of routine laboratory analyses: a combination of one or more Assays that match
existing Current Procedural Terminology (CPT) codes for laboratory analyses as defined by the American Medical
Association and that have been granted CLIA-waived status by FDA or b) in the context of Predictive tests: a
Cartridge, software program, information system or any other product necessary to perform a Predictive test that
has been granted CLIA-waived status by FDA.
37. "TheranOS" means Theranos' ambulatory bioinformatics communication system, database, analytical engine,
algorithms and methodologies, web or device accessible Software, and related statistical and other analysis
methods, data, data repositories and technologies.
38. "Theranos Intellectual Property" means all algorithms, analytical methodologies, data collection processes,
software, hardware, Results, Reports, and Processed Data.
39. "Theranos System" means the system comprising the Assays, Cartridges, Device(s), and the TheranOS, and any
other components developed by or for Theranos facilitating the operation of any of the foregoing, alone or in any
combination.
40. "Routine Results" means the numerical outcome (raw data points) of a Routine laboratory Test originated at a
Walgreens' Location.
41. "Routine Report" means the documentation provided to the ordering clinician and Walgreens for a laboratory test
originated at a Walgreens Location. A Report for a Routine test is made up of the following three (3) components:
(i) a Routine Result; (ii) trending information for that given patient and (iii) analysis, including, but not limited to,
predictive modeling.
42. "Specialty Result" or Predictive Result" means the documentation provided to the ordering clinician and
Walgreens for a Specialty Test or Predictive Test originated at a Walgreens Location. A Specialty or Predictive
Result is made up of analysis only.
43. "Walgreens" means Walgreen Co. and its wholly owned subsidiaries.
44. "Walgreens Location" means a clinical or retail location including employer sites and academic research centers.
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SCHEDULE F
PILOT
Theranos and Walgreens will enter into a written Pilot agreement on mutually acceptable terms. The terms of the Pilot
agreement shall address the following objectives:
Exceeding customer expectations for lab Services;
Evaluating operating feasibility of delivering the Services within Walgreens locations;
Evaluating the capacity/capability of supporting systems
Ensuring payors will pay for lab Tests and that A/R will be collected.
The Pilot agreement will include, but not be limited to, the following provisions:
Agreement.
The Pilot will include all Routine and Specialty tests as specified in Schedule B, Section 2 of the
The services will be offered in all stores (including 24 hour stores) in the pilot market to be mutually
agreed upon between the parties ("Pilot Market"). The services will be available during normal store
hours.
The Pilot for store locations will commence no sooner than September 15, 2012, provided that the
following three criteria must be met: (i) Theranos shall first obtain all necessary approvals to provide
laboratory services in the State of California; (i) payor coverage that will be reasonably expected to
produce the 15 patient average per day per store goal; and (ii) Theranos must show Walgreens, to its
reasonable satisfaction, that the Theranos System is fully functional and operational, including, but not
limited to, billing software necessary to support the Pilot markets, and that Theranos' ability to process
Tests is adequate to support reaching the 15 patient average per store per day goal. While the Parties
intend the Pilot to start no sooner than September 15, 2012 the actual start date of the Pilot will be
agreed upon and memorialized by the parties once these three (3) requirements are satisfied. The
Services will be offered for a period of 90 days unless extended in writing upon mutual agreement of
both parties if the success criteria below have not yet been met. At such time as Theranos has satisfied
the above requirements, Theranos shall provide written notice to Walgreens of the same. Walgreens
shall commence the Pilot within forty-five (45) days of such notice. In order for Pilot to commence,
Theranos must accredit the PSC locations and staff and all such locations must meet Theranos Lab
Standards as defined in this Agreement. Both parties agree that they shall make commercially
reasonable efforts to ensure that the Pilot will commence after September 15, 2012, but no later than
February 1, 2013.
The services will be offered in at least one (1) Employer Solutions Group ("ESG") locations. The Pilot
for the ESG location will commence on a mutually agreeable date.
Should Theranos fail to meet its requirements under this Schedule F prior to April 1, 2013, Walgreens
shall have the option to terminate this Agreement pursuant to Schedule B, Section 24(c). Should
Theranos comply with the requirements under this Schedule F and Walgreens fails to commence the
Pilot, then Theranos shall have the option to terminate this Agreement.
The following criteria, among other criteria developed and agreed upon in writing by the parties, will be utilized to evaluate
pilot success for purposes of Schedule B, Section 24(b) and 24(d)(i) of this Agreement. When the following criteria have
been met, the pilot will be deemed successful. Both parties will confirm pilot success in writing and Walgreens will notify
Theranos in writing of its intent to proceed with deployment at whatever pace Walgreens deems appropriate within thirty
(30) calendar days from successful pilot completion:
Walgreens Service Fee received during the pilot timeframe shall be at least $10.00 per patient, in
accordance with the Pricing agreed upon per the terms of this Agreement.
Other criteria mutually agreed to in writing by both parties prior to the commencement of the pilot.
National rollout criteria:
Ass:.Jming adequate payor coverage, Theranos must demonstrate to Walgreens' reasonable satisfaction
that it can support 1 OO,OOOTests per day within three (3) months after successful completion of the Pilot
to support full roll out of the program post Pilot. In a subsequent amendment, the parties shall
document terms regarding national roll-out schedule, expectations, etc.
• Theranos and Walgreens mutually agree upon expansion criteria for nationwide rollout of the program
post Pilot.
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Should the Pilot success criteria not be initially met within ninety (90) days of the Pilot commencement, the parties agree
that they shall not terminate this Agreement, so long as at least three (3) patients per day have had laboratory services
provided at Walgreens. In good faith, the parties shall work together to identify the problems that prevented the Pilot from
being successful. If after twelve (12) months of continued efforts to address the issues identified in the Pilot, the parties
are unable to resolve the Pilot issues, the parties will have the right to terminate this Agreement pursuant to Section 24(c)
of this Agreement.
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SCHEDULE G
HIPAA BUSINESS ASSOCIATE AGREEMENT
TO COME.
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SCHEDULE H-1
CONVERTIBLE PROMISSORY NOTE
THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT, OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT
SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THERANOS, INC.
CONVERTIBLE PROMISSORY NOTE
$40,000,000 [DATE]
FOR VALUE RECEIVED, Theranos, Inc., a Delaware corporation (the "Company") promises to pay to WVC
Investments, LLC ("Investor"), or its registered assigns, in lawful money of the United States of America the principal sum
of Forty Million Dollars ($40,000,000), or such lesser amount as shall equal the outstanding principal amount hereof,
together with interest from the date of this Convertible Promissory Note (this "Note") on the unpaid principal balance. All
unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due
and payable on the Maturity Date (as defined below) in accordance with the terms hereof. This Note is issued pursuant to
that certain Amended and Restated Theranos Master Services Agreement by and between the Company and Investor
dated L!d._5IL Z... ] (the "Agreement"). All capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Agreement.
The following is a statement of the rights of Investor and the conditions to which this Note is subject, and to
which Investor, by the acceptance of this Note, agrees:
1. Payments.
(a) Interest. This Note shall bear interest at the rate of 0.79% per annum, which interest shall accrue
annually. Accrued interest on this Note shall be payable on the Maturity Date.
(b) The "Maturity Date" shall be the earlier of:
i. the date of the Company's Initial Public Offering;
ii. the effective date of a Change of Control;
iii. one hundred eighty (180) calendar days from the date of receipt by the Company of
Investor's written demand for repayment of this Note pursuant to this Section 1 (b)(iii),
which demand may be made only if the Company does not meet the mutually agreed-
upon success criteria for the Pilot set forth in Schedule F of the Agreement; or
iv. the date that is ten years after the date of the Note .
(c) Prepayment. The Company shall not have the right to prepay any portion of principal or accrued
interest under this Note except with the express written consent of Investor unless and only to the
extent that the Company and/or the Investor have determined that the Pilot contemplated by the
Agreement is unsuccessful.
2. Conversion.
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(a) Optional Conversion. At any time prior to repayment by the Company of the Note, if services are
being offered in at least 1 ,000 Investor locations (as contemplated in the Agreement), Investor may
elect to convert all or any party of the outstanding principal amount up to $20,000,000 of this Note
into fully paid and non-assessable shares of the Company's Series C-1 Preferred Stock at the
Conversion Price, provided, however, that upon conversion 50% of the converted amount must
come from Tranche 1 and 50% from Tranche 2 until such time as Tranche 1 is exhausted. At any
time prior to repayment by the Company of the Note, if services are being offered in at least 2,500
locations (as contemplated in the Agreement) Investor may elect to convert all or any part of the
remaining outstanding principal amount of this Note into fully paid and non-assessable shares of
the Company's Series C-1 Preferred Stock at the Conversion Price, provided, however, that upon
conversion 50% of the converted amount must come from Tranche 1 and 50% from Tranche 2 until
such time as Tranche 1 is exhausted. Investor's election to convert shall be evidenced by
Investor's delivery to the Company of written notice of Investor's intention to convert. All accrued
and unpaid interest on this Note shall be paid in full in cash and not in shares of capital stock upon
the occurrence of a conversion pursuant to a Company Event. If Investor elects to convert the Note
following receipt by Investor of notice of a Company event pursuant to Section 2(b) hereof and for
any reason the Company Event described in any such notice does not occur, such election to
convert by Investor shall be rescinded and shall be null and void.
(b) Notice of Company Events. The Company shall give written notice to Investor of the anticipated
occurrence of any Company Event. Such written notice of the anticipated occurrence of a
Company Event shall be given not less than fifteen (15) days and not more than thirty (30) days
prior to the actual occurrence of a Company Event
(c) Conversion Procedure.
i. Conversion Pursuant to Section 2(a). Before Investor shall be entitled to convert this Note
into shares of Series C-1 Preferred Stock, it shall surrender this Note (or a notice to the
effect that the original Note has been lost, stolen or destroyed and an agreement
acceptable to the Company whereby the holder agrees to indemnify the Company from
any loss incurred by it in connection with this Note) and give written notice to the
Company at its principal corporate office of the election to convert the same pursuant to
Section 2(a). Upon such conversion of this Note, the Company and the Investor hereby
agree to execute and deliver to one another a purchase agreement and other ancillary
agreements, with customary representations and warranties and transfer restrictions
(including, without limitation, the Amended and Restated Investors' Rights Agreement, the
Amended and Restated Co-Sale Agreement and the Amended and Restated Voting
Agreement). The Company shall, as soon as practicable thereafter, issue and deliver to
such Investor a certificate or certificates for the number of shares to which Investor shall
be entitled upon such conversion, including a check payable to Investor for any cash
amounts payable as described in Section 2(c)(ii). Any conversion of this Note pursuant to
Section 2(a) shall be deemed to be effective upon the earlier to occur of (i) the tenth day
following the Company's receipt of Investor's written notice of its intention to convert, and
(ii) immediately prior to the occurrence of the Company Event, and on and after such date
the Persons entitled to receive the shares issuable upon such conversion shall be treated
for all purposes as the record holder of such shares.
ii. Fractional Shares; Interest; Effect of Conversion. No fractional shares shall be issued
upon conversion of this Note. In lieu of the Company issuing any fractional shares to the
Investor upon the conversion of this Note, the Company shall pay to Investor an amount
equal to the product obtained by multiplying the applicable conversion price by the fraction
of a share not issued pursuant to the previous sentence. The Company shall pay to
Investor any interest accrued on the amount converted and on the amount to be paid to
Company pursuant to the previous sentence in cash and not in shares of capital stock
upon the conversion of this Note. Upon conversion of this Note in full and the payment of
the amounts specified in this paragraph, Company shall be forever released from all its
obligations and liabilities under this Note and this Note shall be deemed of no further force
or effect, whether or not the original of this Note has been delivered to the Company for
cancellation.
Theranos and Walgreens Confidential and Proprietary -29-
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3. Definitions. As used in this Note, the following capitalized terms have the following meanings:
"Amended and Restated Co-Sale Agreement" shall mean that certain Amended and Restated Co-Sale
Agreement by and among the Company and the other signatories thereto dated as of July 1, 2010. as such
agreement may be amended from time to time.
"Amended and Restated Investors' Rights Agreement" shall mean that certain Amended and Restated
Investors' Rights Agreement by and among the Company and the other signatories thereto dated as of July 1,
2010. as such agreement may be amended from time to time.
"Amended and Restated Voting Agreement" shall mean that certain Amended and Restated Voting
Agreement by and among the Company and the other signatories thereto dated as of July 1, 2010. as such
agreement may be amended from time to time.
"Change of Control" shall mean (i) any reorganization, merger or consolidation of the Company
(excluding any sale of stock for capital raising purposes), other than a transaction or series of related
transactions in which the holders of the voting securities of the Company outstanding immediately prior to such
transaction or series of related transactions retain, immediately after such transaction or series of related
transactions, as a result of shares in the Company held by such holders prior to such transaction or series of
related transactions, at least a majority of the total voting power represented by the outstanding voting securities
of the Company or such other surviving or resulting entity; (ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company
"Company Event" shall mean the Company's Initial Public Offering, a Change of Control, a dissolution
of the Company, other event of liquidation, declaration of a Series C-1 Dividend or other events agreed upon in
writing by the Company.
"Conversion Price" shall mean $15.00 per share, as may be adjusted from time to time for stock splits,
stock dividends or similar events with respect to the Series C-1 Preferred Stock.
"Initial Public Offering" shall mean the closing of the Company's first firm commitment underwritten initial
public offering of the Company's Common Stock pursuant to a registration statement filed under the Securities
Act.
"Investor" shall mean the Person specified in the introductory paragraph of this Note or any Person who
shall at the time be the registered holder of this Note.
"Person" shall mean and include an individual, a partnership, a corporation (including a business trust),
a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or
a governmental authority.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series C-1 Dividend" shall mean any dividend, whether in the form of cash, property or securities,
payable or paid to the holders of the Company's Series C-1 Preferred Stock. For the avoidance of doubt, C-1
Dividends do not include any stock re-purchases.
"Tranche 1" shall mean $10,000,000 of the principal amount of this Note.
"Tranche 2" shall mean $30,000,000 of the principal amount of this Note.
"Tranche 1 Conversion Price" shall mean $15.00 per share, as may be adjusted from time to time for
stock splits, stock dividends or similar events with respect to the Series C-1 Preferred Stock.
'Tranche 2 Conversion Price" shall mean $75.00 per share, as may be adjusted from time to time for
stock splits, stock dividends or similar events with respect to the Series C-1 Preferred Stock.
Theranos and Walgreens Confidential and Proprietary -30-
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4. Investor Representations. Investor represents and warrant to the Company as follows:
(a) Binding Obligation. Investor has full legal capacity, power and authority to execute and deliver this
Note and to perform its obligations hereunder. This Note constitutes a valid and binding obligation
of Investor, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or
other laws of general application relating to or affecting the enforcement of creditors' rights
generally and general principles of equity.
(b) Securities Law Compliance. Investor has been advised that the Note and the underlying securities
have not been registered under the Securities Act, or any state securities laws and, therefore,
cannot be resold unless they are registered under the Securities Act and applicable state securities
laws or unless an exemption from such registration requirements is available. Investor is aware that
the Company is under no obligation to effect any such registration with respect to the Note or the
underlying securities or to file for or comply with any exemption from registration, except as may be
provided in the Amended and Restated Investors' Rights Agreement. Investor has not been formed
solely for the purpose of making this investment and is purchasing the Note for its own account for
investment, not as a nominee or agent, and not with a view to, or for resale in connection with, the
distribution thereof, and Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. Investor has such knowledge and experience in financial and
business matters that Investor is capable of evaluating the merits and risks of such investment, is
able to incur a complete loss of such investment without impairing Investor's financial condition and
is able to bear the economic risk of such investment for an indefinite period of time. Investor is an
"accredited investor" as such term is defined in Rule 501 of Regulation D under the Securities Act
and shall submit to the Company such further assurances of such status as may be reasonably
requested by the Company. The principal place of business of Investor is correctly set forth
beneath Investor's name on the signature page hereto.
5. Miscellaneous.
(a) Successors and Assigns; Transfer of this Note or Securities Issuable on Conversion Hereof.
i. Subject to the restrictions on transfer described in this Section 5(a), the rights and
obligations of the Company and Investor shall be binding upon and benefit the
successors, assigns, heirs, administrators and transferees of the parties.
ii. Neither this Note nor any of the rights, interests or obligations hereunder may be
assigned, in whole or in part, by the Investor to any legal entity or person, other than a
wholly-owned direct or indirect subsidiary of Investor. In the event Investor intends to
assign any rights, interests or obligations under this Note to a wholly-owned direct or
indirect subsidiary, Investor shall give Company no less than thirty (30) calendar days'
prior written notice.
iii. Neither this Note nor any of the rights, interests or obligations hereunder may be
assigned, by operation of law or otherwise, in whole or in part, by the Company without
the prior written consent of the Investor.
(b) Waiver and Amendment. Any provision of this Note may be amended, waived or modified upon the
written consent of the Company and the Investor.
(c) Notices. All notices, requests, demands, consents, instructions or other communications required
or permitted hereunder shall be in writing and faxed, mailed or delivered to each party at the
respective addresses of the parties as set forth in the signature page to this Note. All such notices
and communications will be deemed effectively given the earlier of (i) when received, (ii) when
delivered personally, (iii) one business day after being delivered by facsimile (with receipt of
appropriate confirmation), (iv) one business day after being deposited with an overnight courier
service of recognized standing or (v) four days after being deposited in the U.S. mail, first class with
postage prepaid.
(d) Payment. Unless converted into the Company's equity securities pursuant to the terms hereof,
payment shall be made in lawful tender of the United States.
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(e) Governing Law. This Note and all actions arising out of or in connection with this Note shall be
governed by and construed in accordance with the laws of the State of Delaware, without regard to
the conflicts of law provisions of the State of Delaware, or of any other state.
(f) Counterparts. This Note may be executed in any number of counterparts and by different parties
on separate counterparts, each of which, when executed and delivered, shall be deemed to be an
original, and all of which, when taken together, shall constitute but one and the same Note.
The Company has caused this Note to be issued as of the date first written above.
Acknowledged and accepted by Investor:
WVC INVESTMENTS, LLC
By: Nam __ e_: ________________________________ _
Thera nos and Walgreens Confidential and Proprietary
THERANOS, INC.,
a Delaware
-32-
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(e) Governing Law. This Note and all actions arising out of or in connection with this Note shall be
governed by and construed in accordance with the laws of the State of Delaware, without regard to
the conflicts of law provisions of the State of Delaware, or of any other state.
(f) Counterparts. This Note may be executed in any number of counterparts and by different parties
on separate counterparts, each of which, when executed and delivered, shall be deemed to be an
original, and all of which, when taken together, shall constitute but one and the same Note.
The Company has caused this Note to be issued as of the date first written above.
THERANOS, INC.,
a Delaware corporation
By: ____________ _
Name:
Its: _____________ _
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