EXHIBIT 10.8

GLANCY BINKOW & GOLDBERG LLP
Lionel Z. Glancy #134180
Peter A. Binkow #173848
Michael Goldberg #188669
Susan Kepfer #141724
1801 Ave. of the Stars Suite 311
Los Angeles, California 90067
Tel: (310) 201-9150
Fax: (310) 201-9160

Attorneys for Lead Plaintiff and the
Settlement Class

Additional Counsel Listed On Signature Page

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

             
In re INTERMUNE, INC. SECURITIES
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LITIGATION
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    )     Master File No. C-03-2954-SI

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    )     CLASS ACTION

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This Document Relates To:
    )      

    )     STIPULATION OF SETTLEMENT
ALL ACTIONS.
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      This Stipulation of Settlement dated as of May 6, 2005 (the
“Stipulation”), is made and entered into by and among the Settling Parties (as
defined further in Subsection 1.22 of Section IV hereof) to the above-entitled
Litigation: (i) the Lead Plaintiff (on behalf of himself and each of the
Settlement Class Members), by and through his counsel of record in the
Litigation; and (ii) the Defendants, by and through their counsel of record in
the Litigation. The Stipulation is intended by the Settling Parties to fully,
finally and forever resolve, discharge and settle the Released Claims, upon and
subject to the terms and conditions hereof.

I. THE LITIGATION

      On and after June 1, 2003, the following actions were filed in the United
States District Court for the Northern District of California as securities
class actions on behalf of purchasers of InterMune, Inc. common stock during a
respective defined period of time:

             

  Abbreviated Case Name   Case Number   Date Filed

           
(a)
  Lombardi v. InterMune, Inc., et al.   C-03-3068   06/01/03

           
(b)
  Johnson v. Harkonen et al.   C-03-2954   06/25/03

           
(c)
  Mahoney, Jr. v. InterMune, Inc., et al.   C-03-3273   07/14/03

These actions were consolidated for all purposes by an Order of the Court filed
November 6, 2003. The consolidated actions are referred to herein collectively
as the “Litigation.”

      The operative complaint in the Litigation is the Second Amended and
Consolidated Class Action Complaint for Violations of Federal Securities Laws
(the “Complaint”), filed August 23, 2004. The Complaint alleges violations of
§§10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder on behalf of a class of purchasers of InterMune common
stock during the period January 7, 2003 through June 11, 2003 (the “Class” and
the “Class Period”).

II. DEFENDANTS’ DENIALS OF WRONGDOING AND LIABILITY

      The Defendants have denied and continue to deny each and all of the claims
and contentions alleged by the Lead Plaintiff in the Complaint. The Defendants
expressly have denied and continue to deny all charges of wrongdoing or
liability against them arising out of any of the conduct, statements, acts or
omissions alleged, or that could have been alleged, in the

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Litigation. The Defendants also have denied and continue to deny, inter alia,
the allegations that the Lead Plaintiff or the Settlement Class have suffered
damage, that the price of InterMune common stock was artificially inflated by
reasons of alleged misrepresentations, non-disclosures or otherwise, and that
the Lead Plaintiff or the Settlement Class were harmed by the conduct alleged in
the Complaint.

      Nonetheless, the Defendants have concluded that further conduct of the
Litigation would be protracted and expensive, and that it is desirable that the
Litigation be fully and finally settled in the manner and upon the terms and
conditions set forth in this Stipulation. The Defendants also have taken into
account the uncertainty and risks inherent in any litigation, especially in
complex cases like this Litigation. The Defendants have, therefore, determined
that it is desirable and beneficial to them that the Litigation be settled in
the manner and upon the terms and conditions set forth in this Stipulation.

III. CLAIMS OF THE LEAD PLAINTIFF AND BENEFITS OF SETTLEMENT

      This case was brought as a class action alleging that the Defendants made
false and misleading statements about sales of Actimmune, InterMune’s lead
product, resulting in the artificial inflation of the price of InterMune common
stock during the Class Period, and that shareholders who purchased InterMune’s
common stock while it was inflated were injured when the misleading nature of
Defendants’ statements was revealed and the price of the stock dropped.

      The Lead Plaintiff believes that the claims asserted in the Litigation
have merit and that the evidence developed to date supports those claims.
However, the Lead Plaintiff recognizes and acknowledges the expense and delay of
continued proceedings necessary to prosecute the Litigation against the
Defendants through trial and through appeals. The Lead Plaintiff also has taken
into account the uncertain outcome and the risk of any litigation, especially in
complex actions such as this Litigation, including the possibility that the
claims herein could be dismissed before trial, as well as the difficulties and
delays inherent in such litigation. The Lead Plaintiff also is mindful of the
inherent problems of proof under and possible defenses to the securities law
violations asserted in the Litigation, including the difficulties that he may
face in attempting to prove that Defendants’ misleading statements were the
cause of Settlement Class Members’

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damages. Further, the Settling Parties negotiated additional consideration to be
allocated to Settling Class Members who purchased InterMune stock during an
additional period beyond that included in the Complaint, August 8, 2002 through
January 6, 2003, for whom the above-referenced litigation problems would be more
pronounced.

      The Lead Plaintiff believes that the settlement set forth in the
Stipulation confers substantial benefits upon the Settlement Class. Based on
their evaluation, the Lead Plaintiff and Lead Counsel have determined that the
settlement set forth in the Stipulation is in the best interests of the Lead
Plaintiff and the Settlement Class.

IV. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

      NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the Lead
Plaintiff (for himself and the Settlement Class Members) and the Defendants, by
and through their respective counsel or attorneys of record, that, subject to
the approval of the Court, the Litigation and the Released Claims shall be
finally and fully compromised, settled and released, and the Litigation shall be
dismissed with prejudice, as to all Defendants, upon and subject to the terms
and conditions of the Stipulation, as follows.

      1. Definitions

      As used in the Stipulation the following terms have the meanings specified
below:

      1.1. “Authorized Claimant” means any Settlement Class Member whose claim
for recovery has been allowed, in whole or in part, pursuant to the terms of the
Stipulation.

      1.2. “Claimant” means any Settlement Class Member who files a Proof of
Claim in such form and manner, and within such time, as the Court shall
prescribe.

      1.3. “Claims Administrator” means the firm of Complete Claims Solutions,
Inc.

      1.4. “Defendants” means InterMune and the Individual Defendants.

      1.5. “Effective Date” means the first date by which all of the events and
conditions specified in ¶7.1 of the Stipulation have been met and have occurred.

      1.6. “Escrow Agent” means Ira A. Schochet.

      1.7. “Final” means when (i) three (3) business days shall expired after
the time in which to appeal the Judgment has passed without any appeal having
been taken (which date shall

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be deemed to be thirty-three (33) days following the entry of the Judgment,
unless the date to take such an appeal shall have been extended by Court order
or otherwise, or unless the 33rd day falls on a weekend or a Court holiday, in
which case the date for purposes of this Stipulation shall be deemed to be the
next business day after such 33rd day); or (ii) if such an appeal is taken,
three (3) business days after the determination of that appeal in such a manner
as to permit the consummation of the settlement substantially in accordance with
the terms and conditions of this Stipulation. For purposes of this paragraph, an
“appeal” shall not include any appeal that concerns only the issue of attorneys’
fees and reimbursement of costs, reimbursement of Lead Plaintiff’s costs and
expenses, or the Plan of Allocation of the Settlement Fund.

      1.8. “Individual Defendants” means W. Scott Harkonen and Sharon
Surrey-Barbari.

      1.9. “InterMune” means InterMune, Inc.

      1.10. “Judgment” means the judgment to be entered by the Court,
substantially in the form attached hereto as Exhibit B.

      1.11. “Lead Counsel” means Goodkind Labaton Rudoff & Sucharow LLP.

      1.12. “Lead Plaintiff” means Lance A. Johnson.

      1.13. “Person” means an individual, corporation, partnership, limited
partnership, association, joint stock company, estate, legal representative,
trust, unincorporated association, government or any political subdivision or
agency thereof, and any business or legal entity and their spouses, heirs,
predecessors, successors, representatives, or assignees.

      1.14. “Plan of Allocation” means a plan or formula of allocation of the
Settlement Fund whereby the Settlement Fund shall be distributed to Authorized
Claimants after payment of expenses of notice and administration of the
settlement, Taxes and Tax Expenses and such attorneys’ fees, attorneys’ and Lead
Plaintiff’s costs and expenses, and interest as may be awarded by the Court. Any
Plan of Allocation is not part of the Stipulation and Defendants and their
Related Parties shall have no responsibility therefore or liability with respect
thereto.

      1.15. “Related Parties” means each of a Defendant’s past or present
directors, officers, employees, partners, insurers, co-insurers, reinsurers,
controlling shareholders, attorneys, accountants or auditors, investment
advisors, personal or legal representatives, predecessors,

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successors, parents, subsidiaries, divisions, joint ventures, assigns, spouses,
heirs, related or affiliated entities, any entity in which a Defendant has a
controlling interest, any members of an Individual Defendant’s immediate family,
or any trust of which the Individual Defendant is the settlor or which is for
the benefit of the Individual Defendant’s family.

      1.16. “Released Claims” shall collectively mean all claims (including
“Unknown Claims” as defined in ¶1.23 hereof), demands, rights, liabilities and
causes of action of every nature and description whatsoever, known or unknown,
whether or not concealed or hidden, asserted or that might have been asserted,
including, without limitation, claims for negligence, gross negligence, breach
of duty of care and/or breach of duty of loyalty, fraud, breach of fiduciary
duty, or violations of any state or federal statutes, rules or regulations, by
the Lead Plaintiff or any Settlement Class Member against the Defendants arising
out of, relating to, or in connection with the purchase of InterMune common
stock by the Lead Plaintiff or any Settlement Class Member during the Settlement
Class Period.

      1.17. “Released Persons” means each and all of the Defendants and each and
all of their Related Parties.

      1.18. “Settlement Class” means all Persons who purchased InterMune common
stock during the period between August 8, 2002 and June 11, 2003, inclusive.
Excluded from the Settlement Class are Defendants, members of the immediate
families of the Individual Defendants, any entity in which any Defendant has or
had a controlling interest, current or former directors and officers of
InterMune, and the legal representatives, heirs, successors, or assigns of any
such excluded person or entity. Also excluded from the Settlement Class are
those Persons who timely and validly request exclusion from the Settlement Class
pursuant to the Notice of Pendency and Proposed Settlement of Class Action.

      1.19. “Settlement Class Member” or “Member of the Settlement Class” mean a
Person who falls within the definition of the Settlement Class as set forth in
¶1.18 of the Stipulation.

      1.20. “Settlement Class Period” means the period commencing on August 8,
2002 through June 11, 2003, inclusive.

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      1.21. “Settlement Fund” means the principal amount of Ten Million Four
Hundred Thousand Dollars ($10,400,000) in cash to be paid by one or more wire
transfers to the Escrow Agent pursuant to ¶2.1 of this Stipulation, plus all
interest earned thereon pursuant to ¶¶2.1, 2.2 and 2.6.

      1.22. “Settling Parties” means, collectively, each of the Defendants and
the Lead Plaintiff on behalf of himself and Settlement Class Members.

      1.23. “Unknown Claims” shall collectively mean all claims, demands,
rights, liabilities, and causes of action of every nature and description which
the Lead Plaintiff or any Settlement Class Member does not know or suspect to
exist in his, her or its favor at the time of the release of the Released
Persons which, if known by him, her or it, might have affected his, her or its
settlement with and release of the Released Persons, or might have affected his,
her or its decision not to object to this settlement.

      2. The Settlement

          a. The Settlement Fund

      2.1. The principal amount of $10,400,000 in cash shall be transferred by
or on behalf of Defendants to the Escrow Agent within 28 days after execution of
this Stipulation. If the agreed upon sum is not timely transferred to the Escrow
Agent, the untransferred portion shall bear interest at 8% per annum from the
date due until such amount, plus the accumulated interest, is transferred to the
Escrow Agent. Within 10 days of execution of the Stipulation, Lead Counsel shall
provide to InterMune’s counsel wire transfer instructions for the transfer of
the Settlement Fund to the Escrow Agent.

          b. The Escrow Agent

      2.2. The Escrow Agent shall invest the Settlement Fund deposited pursuant
to ¶2.1 hereof in instruments backed by the full faith and credit of the United
States Government or fully insured by the United States Government or an agency
thereof and shall reinvest the proceeds of these instruments as they mature in
similar instruments at their then-current market rates, or if approved by Lead
Counsel, may invest the Settlement Fund in money market funds of any of the

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one hundred largest banks in the United States. The Settling Defendants shall
bear no risks related to investment of the Settlement Funds.

      2.3. The Escrow Agent shall not disburse the Settlement Fund except as
provided in the Stipulation, by an order of the Court, or with the written
agreement of counsel for Defendants.

      2.4. Subject to further order and/or direction as may be made by the
Court, the Escrow Agent is authorized to execute such transactions on behalf of
the Settlement Class Members as are consistent with the terms of the
Stipulation.

      2.5. All funds held by the Escrow Agent shall be deemed and considered to
be in custodia legis of the Court, and shall remain subject to the jurisdiction
of the Court, until such time as such funds shall be distributed pursuant to the
Stipulation and/or further order(s) of the Court.

      2.6. Within five (5) days after payment of the Settlement Fund to the
Escrow Agent pursuant to ¶2.1 hereof, the Escrow Agent may establish a
“Class Notice and Administration Fund,” and may deposit up to $100,000 from the
Settlement Fund in it. The Class Notice and Administration Fund may be used by
Lead Counsel to pay costs and expenses reasonably and actually incurred in
connection with providing notice to the Settlement Class, locating Settlement
Class Members, administering and distributing the Settlement Fund to Authorized
Claimants, processing Proof of Claim and Release forms and paying escrow fees
and costs, if any. The Class Notice and Administration Fund may also be invested
and earn interest as provided for in ¶2.2 of this Stipulation. In no event shall
Defendants or their Related Parties have any responsibility for or liability
with respect to the Escrow Agent or its actions or the Class Notice and
Administration Fund.

          c. Taxes

      2.7. 1. Settling Parties and the Escrow Agent agree to treat the
Settlement Fund as being at all times a “qualified settlement fund” within the
meaning of Treas. Reg. §1.468B-1. In addition, the Escrow Agent shall timely
make such elections as necessary or advisable to carry out the provisions of
this ¶2.7, including the “relation-back election” (as defined in Treas. Reg.

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§1.468B-1) back to the earliest permitted date. Such elections shall be made in
compliance with the procedures and requirements contained in such regulations.
It shall be the responsibility of the Escrow Agent to timely and properly
prepare and deliver the necessary documentation for signature by all necessary
parties, and thereafter to cause the appropriate filing to occur.

          (a) For the purpose of §468B of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder, the “administrator” shall
be the Escrow Agent. The Escrow Agent shall timely and properly file all
informational and other tax returns necessary or advisable with respect to the
Settlement Fund (including without limitation the returns described in Treas.
Reg. §1.468B-2(k)). Such returns (as well as the election described in ¶2.7(a)
hereof) shall be consistent with this ¶2.7 and in all events shall reflect that
all Taxes (including any estimated Taxes, interest or penalties) on the income
earned by the Settlement Fund shall be paid out of the Settlement Fund as
provided in ¶2.7(c) hereof.

          (b) All (a) Taxes (including any estimated Taxes, interest or
penalties) arising with respect to the income earned by the Settlement Fund,
including any Taxes or tax detriments that may be imposed upon the Defendants or
their Related Parties with respect to any income earned by the Settlement Fund
for any period during which the Settlement Fund does not qualify as a “qualified
settlement fund” for federal or state income tax purposes (“Taxes”), and
(b) expenses and costs incurred in connection with the operation and
implementation of this ¶2.7 (including, without limitation, expenses of tax
attorneys and/or accountants and mailing and distribution costs and expenses
relating to filing (or failing to file) the returns described in this ¶2.7)
(“Tax Expenses”), shall be paid out of the Settlement Fund; in no event shall
the Defendants or their Related Parties have any responsibility for or liability
with respect to the Taxes or the Tax Expenses. The Escrow Agent shall indemnify
and hold each of the Defendants and their Related Parties harmless for Taxes and
Tax Expenses (including, without limitation, Taxes payable by reason of any such
indemnification). Further, Taxes and Tax Expenses shall be treated as, and
considered to be, a cost of administration of the Settlement Fund and shall be
timely paid by the Escrow Agent out of the Settlement Fund without prior order
from the Court and the Escrow Agent shall be obligated (notwithstanding anything
herein to the contrary) to

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withhold from distribution to Authorized Claimants any funds necessary to pay
such amounts including the establishment of adequate reserves for any Taxes and
Tax Expenses (as well as any amounts that may be required to be withheld under
Treas. Reg. §1.468B-2(1)(2)); neither the Defendants nor their Related Parties
are responsible therefor nor shall they have any liability with respect thereto.
The parties hereto agree to cooperate with the Escrow Agent, each other, and
their tax attorneys and accountants to the extent reasonably necessary to carry
out the provisions of this ¶2.7.

          (c) For the purpose of this ¶2.7, references to the Settlement Fund
shall include both the Settlement Fund and the Class Notice and Administration
Fund and shall also include any earnings thereon.

          d. Termination of Settlement

      2.8. In the event that the Stipulation is not approved, or is terminated,
canceled, or otherwise fails to become effective in accordance with its terms,
the Settlement Fund (including accrued interest) less expenses actually incurred
or due and owing in connection with the settlement provided for herein shall be
refunded pro rata to the entities contributing to the Settlement Fund, as
provided in ¶7.3 below.

      3. Notice Order and Settlement Hearing

      3.1. Promptly after execution of the Stipulation, the Settling Parties
shall submit the Stipulation together with its Exhibits to the Court and shall
apply for entry of an order (the “Notice Order”), substantially in the form of
Exhibit A hereto, requesting, inter alia, the preliminary approval of the
settlement set forth in the Stipulation, the certification of the Settlement
Class for settlement purposes, and approval for mailing the Notice of Pendency
and Proposed Settlement of Class Action (the “Notice”) substantially in the form
of Exhibit A-1 hereto and publication of a summary notice substantially in the
form of Exhibit A-3 hereto. The Notice shall include the general terms of the
settlement set forth in the Stipulation, the proposed Plan of Allocation, the
general terms of the Attorneys’ Fee, and Attorneys’ and Lead Plaintiff’s
Reimbursement of Expense, Applications and the date of the Settlement Hearing.

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      3.2. Lead Counsel shall request that after notice is given, the Court hold
a hearing (the “Settlement Hearing”) and approve the settlement of the
Litigation as set forth herein. At or after the Settlement Hearing, Lead Counsel
also will request that the Court approve the proposed Plan of Allocation and the
Fee and Reimbursement of Expense Applications.

      4. Releases

      4.1. With respect to any and all Released Claims, including but not
limited to Unknown Claims, the Settling Parties stipulate and agree that, upon
the Effective Date, the Lead Plaintiff shall expressly waive, and each of the
Settlement Class Members shall be deemed to have waived, and by operation of the
Judgment shall have waived, the provisions, rights and benefits of California
Civil Code §1542, which provides:

      A general release does not extend to claims which the creditor does not
know or suspect to exist in his or her favor at the time of executing the
release, which if known by him or her must have materially affected his or her
settlement with the debtor.

The Lead Plaintiff shall expressly and each of the Settlement Class Members
shall be deemed to have, and by operation of the Judgment shall have, expressly
waived any and all provisions, rights and benefits conferred by any law of any
state or territory of the United States, or principle of common law, which is
similar, comparable or equivalent to California Civil Code §1542. The Lead
Plaintiff and Settlement Class Members may hereafter discover facts in addition
to or different from those which he, she or it now knows or believes to be true
with respect to the subject matter of the Released Claims, but the Lead
Plaintiff shall expressly fully, finally and forever settle and release, and
each Settlement Class Member, upon the Effective Date, shall be deemed to have,
and by operation of the Judgment shall have, fully, finally, and forever settled
and released, any and all Released Claims, known or unknown, suspected or
unsuspected, contingent or non-contingent, whether or not concealed or hidden,
which now exist, or heretofore have existed, upon any theory of law or equity
now existing or coming into existence in the future, including, but not limited
to, conduct which is negligent, intentional, with or without malice, or a breach
of any duty, law or rule, without regard to the subsequent discovery or

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existence of such different or additional facts. The Lead Plaintiff
acknowledges, and the Settlement Class Members shall be deemed by operation of
the Judgment to have acknowledged, that the foregoing waiver was separately
bargained for and a key element of the settlement of which this release is a
part.

      4.2. Upon the Effective Date, as defined in ¶1.5 hereof, the Lead
Plaintiff and each of the Settlement Class Members shall be deemed to have, and
by operation of the Judgment shall have, fully, finally, and forever released,
relinquished and discharged all Released Claims against the Released Persons,
whether or not such Settlement Class Member executes and delivers a Proof of
Claim and Release form.

      4.3. The Proof of Claim and Release to be executed by Settlement
Class Members shall release all Released Claims against the Released Persons and
shall be substantially in the form contained in Exhibit A-2 hereto.

      4.4. Upon the Effective Date, as defined in ¶1.5 hereof, each of the
Released Persons shall be deemed to have, and by operation of the Judgment shall
have, fully, finally, and forever released, relinquished and discharged each and
all of the Settlement Class Members and their counsel from all claims (including
Unknown Claims) arising out of, relating to, or in connection with the
institution, prosecution, assertion, settlement or resolution of the Litigation
or the Released Claims.

  5.   Administration and Calculation of Claims, Final Awards and Supervision
and Distribution of Settlement Fund

      5.1. Under the supervision of Lead Counsel, the Claims Administrator shall
administer and calculate the claims submitted by Settlement Class Members.

      5.2. The Settlement Fund shall be applied as follows:

          (a) to pay the Taxes and Tax Expenses described in ¶2.7 hereof;

          (b) to pay all the costs and expenses reasonably and actually incurred
in connection with providing notice, locating Settlement Class Members,
administering and

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distributing the Settlement Fund to Authorized Claimants, processing Proof of
Claim and Release forms and paying escrow fees and costs, if any;

          (c) to pay attorneys’ fees and expenses, and Lead Plaintiff’s
expenses, with interest thereon (the “Fee and Expense Awards”), if and to the
extent allowed by the Court; and

          (d) to distribute the balance of the Settlement Fund (the “Net
Settlement Fund”) to Authorized Claimants as allowed by the Stipulation, the
Plan of Allocation, or the Court.

      5.3. Upon the Effective Date and thereafter, and in accordance with the
terms of the Stipulation, the Plan of Allocation, or such further approval and
further order(s) of the Court as may be necessary or as circumstances may
require, the Net Settlement Fund shall be distributed to Authorized Claimants,
subject to and in accordance with the following.

      5.4. Within ninety (90) days after the mailing of the Notice or such other
time as may be set by the Court, each Person claiming to be an Authorized
Claimant shall be required to submit to the Claims Administrator a completed
Proof of Claim and Release, substantially in the form of Exhibit A-2 hereto,
signed under penalty of perjury and supported by such documents as are specified
in the Proof of Claim and Release and as are reasonably available to the
Authorized Claimant.

      5.5. Except as otherwise ordered by the Court, all Settlement
Class Members who fail to timely submit a Proof of Claim and Release within such
period, or such other period as may be ordered by the Court, or otherwise
allowed, shall be forever barred from receiving any payments pursuant to the
Stipulation and the settlement set forth herein, but will in all other respects
be subject to and bound by the provisions of the Stipulation, the releases
contained herein, and the Judgment.

      5.6. The Net Settlement Fund shall be distributed to the Authorized
Claimants substantially in accordance with a Plan of Allocation to be described
in the Notice and approved by the Court. If there is any balance remaining in
the Net Settlement Fund after six (6) months from the date of distribution of
the Net Settlement Fund (whether by reason of tax refunds, uncashed checks or
otherwise), the Claims Administrator, acting under the supervision of Lead

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Counsel, shall, if feasible, reallocate such balance among Authorized Claimants
in an equitable and economic fashion. Thereafter, any balance which still
remains in the Net Settlement Fund shall be donated to an appropriate non-profit
organization, subject to approval by the Court.

      5.7. This is not a claims-made settlement and, if all conditions of the
Stipulation are satisfied and the settlement becomes Final, no portion of the
Settlement Fund will be returned to the Defendants or their insurers. The
Defendants and their Related Parties shall have no responsibility for, interest
in, or liability whatsoever with respect to the distribution of the Net
Settlement Fund, the Plan of Allocation, the determination, administration, or
calculation of claims, the payment or withholding of Taxes or Tax Expenses, or
any losses incurred in connection therewith.

      5.8. No Person shall have any claim against Lead Counsel, the Claims
Administrator or other entity designated by Lead Counsel based on distributions
made substantially in accordance with the Stipulation and the settlement
contained herein, the Plan of Allocation, or further order(s) of the Court.

      5.9. It is understood and agreed by the Settling Parties that any proposed
Plan of Allocation of the Net Settlement Fund including, but not limited to, any
adjustments to an Authorized Claimant’s claim set forth therein, is not a part
of the Stipulation and is to be considered by the Court separately from the
Court’s consideration of the fairness, reasonableness and adequacy of the
settlement set forth in the Stipulation, and any order or proceeding relating to
the Plan of Allocation shall not operate to terminate or cancel the Stipulation
or affect the finality of the Court’s Judgment approving the Stipulation and the
settlement set forth therein, or any other orders entered pursuant to the
Stipulation.

      6. Applications for Fees and Reimbursement of Expenses

      6.1. Counsel for plaintiffs, separately or together, and Lead Plaintiff
may submit applications (the “Fee and Expense Applications”) for distributions
to them from the Settlement Fund for: (a) an award of attorneys’ fees;
(b) reimbursement to the attorneys of actual expenses, including the fees of any
experts or consultants, incurred in connection with prosecuting the Litigation;
(c) reimbursement to Lead Plaintiff of the costs and expenses he incurred
directly

            STIPULATION OF SETTLEMENT – C-03-2954-SI   13

 

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related to his representation of the Class and the Settlement Class, in an
amount not to exceed three thousand , nine hundred and eighteen dollars
($3,918), and plus any interest on such fees and expenses at the same rate and
for the same periods as earned by the Settlement Fund (until paid), as may be
awarded by the Court.

      6.2. The fees and expenses, as awarded by the Court, shall be paid to
plaintiffs’ counsel and Lead Plaintiff from the Settlement Fund, as ordered,
immediately after the Court executes an order awarding such fees and expenses.
In the event that the Effective Date does not occur, or the Judgment or the
order making the Attorneys Fee and Expense Award, or the Lead Plaintiff Expense
Award, is reversed or modified, or the Stipulation is canceled or terminated for
any other reason, and in the event that the Attorney Fee and Expense Award
and/or the Lead Plaintiff Expense Award has been paid to any extent, then
plaintiffs’ counsel, and/or the Lead Plaintiff, shall within five (5) business
days from receiving notice from Defendants’ counsel or from a court of
appropriate jurisdiction, refund to the Settlement Fund the fees and expenses
previously paid to either or both of them from the Settlement Fund plus interest
thereon at the same rate as earned on the cash portion of the Settlement Fund in
an amount consistent with such reversal or modification.

      6.3. The procedure for and the allowance or disallowance by the Court of
any applications by plaintiffs’ counsel for attorneys’ fees and expenses,
including the fees of experts and consultants, and by Lead Plaintiff for
reimbursement of costs and expenses, to be paid out of the Settlement Fund, are
not part of the settlement set forth in the Stipulation, and are to be
considered by the Court separately from the Court’s consideration of the
fairness, reasonableness and adequacy of the settlement set forth in the
Stipulation, and any order or proceedings relating to the Fee and Expense
Applications, or any appeal from any order relating thereto or reversal or
modification thereof, shall not operate to terminate or cancel the Stipulation,
or affect or delay the finality of the Judgment approving the Stipulation and
the settlement of the Litigation set forth therein.

      6.4. Defendants and their Related Parties shall have no responsibility for
or liability with respect to any payment of attorneys’ fees and expenses to
plaintiffs’ counsel, and

            STIPULATION OF SETTLEMENT – C-03-2954-SI   14

 

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reimbursement of the Lead Plaintiff’s expenses, over and above payment from the
Settlement Fund.

  7.   Conditions of Settlement, Effect of Disapproval, Cancellation or
Termination

      7.1. The Effective Date of the Stipulation shall be conditioned on the
occurrence of all of the following events:

          (a) Defendants or their insurers have timely made their contributions
to the Settlement Fund as required by ¶2.1 hereof;

          (b) the Court has entered the Notice Order, as required by ¶3.1
hereof;

          (c) the Court has entered the Judgment, or a judgment substantially in
the form of Exhibit B hereto; and

          (d) the Judgment has become Final, as defined in ¶1.7 hereof.

      7.2. Upon the occurrence of all of the events referenced in ¶7.1 hereof,
any and all remaining interest or right of Defendants in or to the Settlement
Fund, if any, shall be absolutely and forever extinguished. If all of the
conditions specified in ¶7.1 hereof are not met, then the Stipulation shall be
canceled and terminated subject to ¶7.4 hereof unless Lead Counsel and counsel
for Defendants and their insurers mutually agree in writing to proceed with the
Stipulation.

      7.3. Unless otherwise ordered by the Court, in the event the Stipulation
shall terminate, or be canceled, or shall not become effective for any reason,
within forty-five (45) calendar days after the occurrence of such event and in
accordance with the terms of ¶2.8 hereof, the Settlement Fund (including accrued
interest), plus any amount then remaining in the Class Notice and Administration
Fund (including accrued interest), less expenses and any costs which have either
been disbursed pursuant to ¶2.6 hereof or are determined to be chargeable to the
Class Notice and Administration Fund, shall be refunded by the Escrow Agent to
the respective entities that contributed to the Settlement Fund, pursuant to
written instructions from InterMune. At the request of counsel to InterMune, the
Escrow Agent or its designee shall apply for any tax refund owed on the
Settlement Fund and pay the proceeds, after deduction of any fees or

            STIPULATION OF SETTLEMENT – C-03-2954-SI   15

 

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expenses incurred in connection with such application(s) for refund, pursuant to
written direction from InterMune.

      7.4. In the event that the Stipulation is not approved by the Court or the
settlement set forth in the Stipulation is terminated or fails to become
effective in accordance with its terms, the Settling Parties shall be restored
to their respective positions in the Litigation as of the day immediately
preceding the date of execution of this Stipulation. In such event, the terms
and provisions of the Stipulation, with the exception of ¶¶2.7, 2.8, 7.3-7.5
hereof, shall have no further force and effect with respect to the Settling
Parties and shall not be used in this Litigation or in any other proceeding for
any purpose, and any judgment or order entered by the Court in accordance with
the terms of the Stipulation shall be treated as vacated, nunc pro tunc. No
order of the Court or modification or reversal on appeal of any order of the
Court concerning the Plan of Allocation or the amount of any attorneys’ fees and
expenses awarded by the Court to plaintiffs’ counsel, or reimbursement of
expenses to the Lead Plaintiff, shall constitute grounds for cancellation or
termination of the Stipulation.

      7.5. If the Effective Date does not occur, or if the Stipulation is
terminated pursuant to its terms, neither the Lead Plaintiff nor plaintiffs’
counsel shall have any obligation to repay any amounts actually and properly
disbursed from the Class Notice and Administration Fund. In addition, any
expenses already incurred and properly chargeable to the Class Notice and
Administration Fund pursuant to ¶2.6 hereof at the time of such termination or
cancellation, but which have not been paid, shall be paid by the Escrow Agent in
accordance with the terms of the Stipulation prior to the balance being refunded
in accordance with ¶¶2.8 and 7.3 hereof.

      7.6. If a case is commenced in respect to any Defendant under Title 11 of
the United States Code (Bankruptcy), or a trustee, receiver or conservator is
appointed under any similar law, and in the event of the entry of a final order
of a court of competent jurisdiction determining the transfer of the Settlement
Fund, or any portion thereof, by or on behalf of such Defendant to be a
preference, voidable transfer, fraudulent transfer or similar transaction, then,
as to such Defendant, the releases given and Judgment entered in favor of such
Defendant pursuant to this Stipulation shall be null and void.

            STIPULATION OF SETTLEMENT – C-03-2954-SI   16

 

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      7.7. Each of the Defendants warrants and represents that he or it is not
“insolvent” within the meaning of 11 U.S.C. §101(32) as of the time this
Stipulation is executed and as of the time any payments are transferred or made
as required by this Stipulation.

      8. Miscellaneous Provisions

      8.1. Lead Plaintiff and Lead Counsel may conduct discovery for the sole
purpose of confirming the fairness and adequacy of the settlement. Such
discovery shall be negotiated among the parties, and may continue until July 1,
2005. Until that date, Lead Counsel may terminate the settlement, solely based
upon a reasonable and good faith determination that the facts adduced in the
course of such discovery suggest that the settlement is not fair and reasonable.
Notice of termination shall be given to counsel for Defendants by (1) electronic
mail or facsimile and (2) first class mail, no later than 5:00 p.m. Pacific Time
on July 8, 2005, after which date the termination right shall no longer exist.

      8.2. If prior to the Settlement Hearing, Persons who otherwise would be
Members of the Settlement Class have requested exclusion from the Settlement
Class in accordance with the requirements set forth in the Notice, and such
Persons in the aggregate purchased shares of InterMune stock in excess of the
number of shares specified in a separate supplemental agreement between the
Settling Parties (the “Supplemental Agreement”), Settling Defendants shall have
the option to terminate this Stipulation in accordance with the procedures set
forth in the Supplemental Agreement. The Supplemental Agreement will not be
filed with the Court unless and until a dispute among the Settling Parties
concerning its interpretation or application arises.

      8.3. The Settling Parties (a) acknowledge that it is their intent to
consummate this agreement; and (b) agree to cooperate to the extent reasonably
necessary to effectuate and implement all terms and conditions of the
Stipulation and to exercise their reasonable best efforts to accomplish the
foregoing terms and conditions of the Stipulation.

      8.4. The Settling Parties intend this settlement to be a final and
complete resolution of all disputes between them with respect to the Litigation.
The settlement compromises claims which are contested and shall not be deemed an
admission by any Settling Party as to the merits

            STIPULATION OF SETTLEMENT – C-03-2954-SI   17

 

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of any claim or defense. The Final Judgment will contain a statement that during
the course of the Litigation, the parties and their respective counsel at all
times complied with the requirements of Federal Rule of Civil Procedure 11.
While retaining their right to deny liability, the Defendants agree that the
amount paid to the Settlement Fund and the other terms of the settlement were
negotiated in good faith by the Settling Parties, and reflect a settlement that
was reached voluntarily after consultation with competent legal counsel and the
assistance of an experienced mediator. The Settling Parties reserve their right
to rebut, in a manner that such party determines to be appropriate, any
contention made in any public forum that the Litigation was brought or defended
in bad faith or without a reasonable basis.

      8.5. Neither the Stipulation nor the settlement contained therein, nor any
act performed or document executed pursuant to or in furtherance of the
Stipulation or the settlement: (a) is or may be deemed to be or may be used as
an admission of, or evidence of, the validity of any Released Claim, or of any
wrongdoing or liability of the Defendants; or (b) is or may be deemed to be or
may be used as an admission of, or evidence of, any fault or omission of any of
the Defendants in any civil, criminal or administrative proceeding in any court,
administrative agency or other tribunal. Defendants may file the Stipulation
and/or the Judgment in any action that may be brought against them in order to
support a defense or counterclaim based on principles of res judicata,
collateral estoppel, release, good faith settlement, judgment bar or reduction
or any other theory of claim preclusion or issue preclusion or similar defense
or counterclaim.

      8.6. All agreements made and orders entered during the course of the
Litigation relating to the confidentiality of information shall survive this
Stipulation.

      8.7. All of the Exhibits to the Stipulation are material and integral
parts hereof and are fully incorporated herein by this reference.

      8.8. The Stipulation may be amended or modified only by a written
instrument signed by or on behalf of all Settling Parties or their respective
successors-in-interest.

      8.9. The Stipulation and the Exhibits attached hereto constitute the
entire agreement among the parties hereto and no representations, warranties or
inducements have been made to

            STIPULATION OF SETTLEMENT – C-03-2954-SI   18

 

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any party concerning the Stipulation or its Exhibits other than the
representations, warranties and covenants contained and memorialized in such
documents. Except as otherwise provided herein, each party shall bear its own
costs.

      8.10. Lead Counsel, on behalf of the Settlement Class, are expressly
authorized by the Lead Plaintiff to take all appropriate action required or
permitted to be taken by the Settlement Class pursuant to the Stipulation to
effectuate its terms and also are expressly authorized to enter into any
modifications or amendments to the Stipulation on behalf of the Settlement Class
which they deem appropriate.

      8.11. Each counsel or other Person executing the Stipulation or any of its
Exhibits on behalf of any party hereto hereby warrants that such Person has the
full authority to do so.

      8.12. The Stipulation may be executed in one or more counterparts. All
executed counterparts and each of them shall be deemed to be one and the same
instrument. A complete set of original executed counterparts shall be filed with
the Court.

      8.13. The Stipulation shall be binding upon, and inure to the benefit of,
the successors and assigns of the parties hereto.

      8.14. The Court shall retain jurisdiction with respect to implementation
and enforcement of the terms of the Stipulation, and all parties hereto submit
to the jurisdiction of the Court for purposes of implementing and enforcing the
settlement embodied in the Stipulation.

      8.15. The Stipulation and the Exhibits hereto shall be considered to have
been negotiated, executed and delivered, and to be wholly performed, in the
State of California, and the rights and obligations of the parties to the
Stipulation shall be construed and enforced in accordance with, and governed by,
the internal, substantive laws of the State of California without giving effect
to that State’s choice-of-law principles.

      IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be
executed, by their duly authorized attorneys dated as of May 6, 2005.

            STIPULATION OF SETTLEMENT – C-03-2954-SI   19

 

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/s/ Ira A. Schochet
  /s/ William S. Freeman
 
   
Ira A. Schochet
  William S. Freeman
Richard T. Joffe
  Cooley Godward LLP
GOODKIND LABATON RUDOFF
  5 Palo Alto Square
& SUCHAROW, LLP
  3000 El Camino Real
100 Park Avenue, 12th Floor
  Palo Alto, CA 94306-2155
New York, NY 10017-5563
   
 
   
Counsel for Lead Plaintiff and the
  Counsel for Defendants
Settlement Class
   

GLANCEY BINKOW & GOLDBERG LLP
Lionel Z. Glancy #134180
Peter A. Binkow #173848
Michael Goldberg #188669
Susan Kupfer #141724
1801 Ave. of the Stars, Suite 311
Los Angeles, CA 90067
Tel: (310) 201-9150
Fax: (310) 201-9160

Local Counsel for Lead Plaintiff and the Settlement Class

LERACH COUGHLIN STOIA & ROBBINS LLP
Kimberly C. Epstein
Eli R. Greenstein
100 Pine Street, Suite 2000
San Francisco, CA 94111
Tel: (415) 288-4545
Fax: (415) 288-4534

ROY L. JACOBS
292 Madison Avenue – 15th Avenue
New York, NY 10016
Tel: (646) 742-9860
Fax: (212) 504-8343

Additional Counsel for Lead Plaintiff and the Settlement Class

            STIPULATION OF SETTLEMENT – C-03-2954-SI   20

 

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

             
In re INTERMUNE, INC. SECURITIES
    )     Master File No. C-03-2954-SI
LITIGATION
    )      

    )     CLASS ACTION
 
           
 
    )      
This Document Relates To:
    )     [PROPOSED] ORDER PRELIMINARILY

    )     APPROVING SETTLEMENT AND
ALL ACTIONS.
    )     PROVIDING FOR NOTICE
 
    )      

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          EXHIBIT A

 

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      WHEREAS, a consolidated class action is pending before the Court entitled
In re InterMune Inc. Securities Litigation, Master File No. C-03-2954-SI (the
“Litigation”);

      WHEREAS, the Court has received the Stipulation of Settlement dated as of
May ___, 2005 (the “Stipulation”), that has been entered into by the Lead
Plaintiff and Defendants, and the Court has reviewed the Stipulation and its
attached Exhibits; and

      WHEREAS, the parties having made application, pursuant to Federal Rule of
Civil Procedure 23(e), for an order preliminarily approving the settlement of
this Litigation, in accordance with the Stipulation which, together with the
Exhibits annexed thereto sets forth the terms and conditions for a proposed
settlement of the Litigation and for dismissal of the Litigation with prejudice
upon the terms and conditions set forth therein; and the Court having read and
considered the Stipulation and the Exhibits annexed thereto; and

      WHEREAS, all defined terms contained herein shall have the same meanings
as set forth in the Stipulation;

      NOW, THEREFORE, IT IS HEREBY ORDERED:

      1. The Court does hereby preliminarily approve the Stipulation and the
settlement set forth therein, subject to further consideration at the Settlement
Hearing described below.

      2. A hearing (the “Settlement Hearing”) shall be held before this Court on
___, 2005, at ___a.m., at the United States Courthouse, 450 Golden Gate Avenue,
San Francisco, California, to determine whether the proposed settlement of the
Litigation on the terms and conditions provided for in the Stipulation is fair,
reasonable and adequate to the Settlement Class and should be approved by the
Court; whether a Judgment as provided in ¶1.10 of the Stipulation should be
entered herein; whether the proposed Plan of Allocation should be approved; and
to determine the amount of fees and expenses that should be awarded to
plaintiffs’ counsel and the amount of expenses that should be awarded to the
Lead Plaintiff. The Court may adjourn the Settlement Hearing without further
notice to Members of the Settlement Class.

      3. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, the Court
preliminarily certifies, for purposes of effectuating this settlement, a
Settlement Class of all Persons who purchased or acquired InterMune common stock
during the period between August 8, 2002 and June

 

[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT     AND PROVIDING FOR NOTICE
— C-03-2954-SI   - 1 -

 

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11, 2003, inclusive. Excluded from the Settlement Class are Defendants, members
of the immediate families of the Individual Defendants, any entity in which any
Defendant has or had a controlling interest, current or former directors and
officers of InterMune, and the legal representatives, heirs, successors, or
assigns of any such excluded person or entity. Also excluded from the Settlement
Class are those Persons who timely and validly request exclusion from the
Settlement Class pursuant to the Notice of Pendency and Proposed Settlement of
Class Action. The certification of the Settlement Class shall be binding only
with respect to the settlement of the Litigation.

      4. With respect to the Settlement Class, this Court preliminarily finds
for purposes of effectuating this settlement that (a) the Members of the
Settlement Class are so numerous that joinder of all Settlement Class Members in
the Litigation is impracticable; (b) there are questions of law and fact common
to the Settlement Class which predominate over any individual questions; (c) the
claims of the Lead Plaintiff are typical of the claims of the Settlement Class;
(d) the Lead Plaintiff and Lead Counsel have fairly and adequately represented
and protected the interests of all of the Settlement Class Members; and (e) a
class action is superior to other available methods for the fair and efficient
adjudication of the controversy, considering: (i) the interests of the Members
of the Settlement Class in individually controlling the prosecution of the
separate actions; (ii) the extent and nature of any litigation concerning the
controversy already commenced by Members of the Settlement Class; (iii) the
desirability or undesirability of continuing the litigation of these claims in
this particular forum; and (iv) the difficulties likely to be encountered in the
management of the Litigation.

      5. The Court approves, as to form and content, the Notice of Pendency and
Proposed Settlement of Class Action (the “Notice”), the Proof of Claim and
Release form (the “Proof of Claim”), and Summary Notice for publication annexed
as Exhibits A-1, A-2 and A-3 hereto, and finds that the mailing and distribution
of the Notice and publishing of the Summary Notice substantially in the manner
and form set forth in ¶¶6-7 of this Order meet the requirements of Federal Rule
of Civil Procedure 23 and due process, and is the best notice practicable under
the circumstances and shall constitute due and sufficient notice to all Persons
entitled thereto.

      [PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT     AND PROVIDING FOR
NOTICE — C-03-2954-SI   - 2 -

 

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      6. Pursuant to Rule 53(c) of the Federal Rules of Civil Procedure, the
Court appoints the firm of Complete Claims Solutions, Inc., principally located
at 319 Clematis Street, Suite 300, West Palm Beach, Florida (“Claims
Administrator”) to supervise and administer the notice procedure as well as the
processing of claims as more fully set forth below:

      (a) Not later than ___, 2005 (the “Notice Date”), Lead Counsel shall cause
a copy of the Notice and the Proof of Claim, substantially in the forms annexed
as Exhibits A-1 and A-2, to be mailed by first class mail to all Settlement
Class Members who can be identified with reasonable effort;

      (b) Not later than ___, 2005, Lead Counsel shall cause the Summary Notice
to be published once in Investor’s Business Daily; and

      (c) At least seven (7) calendar days prior to the Settlement Hearing, Lead
Counsel shall cause to be served on Defendants’ counsel and filed with the Court
proof, by affidavit or declaration, of such mailing and publishing.

      7. Nominees who purchased InterMune common stock during the period
beginning August 8, 2002 through June 11, 2003, inclusive, shall send the Notice
and the Proof of Claim to all beneficial owners of such InterMune common stock
within ten (10) days after receipt thereof, or send a list of the names and
addresses of such beneficial owners to the Claims Administrator within ten
(10) days of receipt thereof, in which event the Claims Administrator shall
promptly mail the Notice and Proof of Claim to such beneficial owners. Lead
Counsel shall, if requested, reimburse banks, brokerage houses or other nominees
solely for their reasonable out-of-pocket expenses incurred in providing notice
to beneficial owners who are Settlement Class Members out of the Class Notice
and Administration Fund, which expenses would not have been incurred except for
the sending of such notice, subject to further order of this Court with respect
to any dispute concerning such compensation.

      8. All Members of the Settlement Class shall be bound by all
determinations and judgments in the Litigation concerning the settlement,
whether favorable or unfavorable to the Settlement Class.

      [PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT     AND PROVIDING FOR
NOTICE — C-03-2954-SI   - 3 -

 

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      9. Settlement Class Members who wish to participate in the settlement
shall complete and submit Proof of Claim forms in accordance with the
instructions contained therein. Unless the Court orders otherwise, all Proof of
Claim forms must be submitted no later than ninety (90) days from the Notice
Date. Any Settlement Class Member who does not timely submit a Proof of Claim
within the time provided for shall be barred from sharing in the distribution of
the proceeds of the Net Settlement Fund, unless otherwise ordered by the Court.

      10. Any Person who desires to request exclusion from the Settlement Class
shall do so within the time set forth and in the manner described in the Notice.
All Persons who submit valid and timely Requests for Exclusion in the manner set
forth in the Notice shall have no rights under the Stipulation, shall not share
in the distribution of the Net Settlement Fund, and shall not be bound by the
Stipulation or the Judgment entered in the Litigation. Lead Counsel shall cause
the Claims Administrator to transmit all Requests for exclusion by fax or
electronic delivery to counsel for Defendants within two business days of
receipt by the Claims Administrator.

      11. Any Member of the Settlement Class may enter an appearance in the
Litigation, at their own expense, individually or through counsel of their own
choice. If they do not enter an appearance, they will be represented by Lead
Counsel.

      12. Any Member of the Settlement Class may appear and show cause, if he,
she or it has any reason, why the proposed settlement of the Litigation should
or should not be approved as fair, reasonable and adequate, why a judgment
should or should not be entered thereon, why the Plan of Allocation should or
should not be approved, or why attorneys’ fees and expenses should or should not
be awarded to plaintiffs’ counsel, or expenses awarded to the Lead Plaintiff;
provided, however, that no Settlement Class Member or any other Person shall be
heard or entitled to contest the approval of the terms and conditions of the
proposed settlement, or, if approved, the Judgment to be entered thereon
approving the same, or the order approving the Plan of Allocation, or the
attorneys’ fees and expenses to be awarded to Lead Counsel, or the expenses
awarded to the Lead Plaintiff, unless that Person has delivered by hand or sent
by first class mail written objections and copies of any papers and briefs such
that they are received on or before ___, 2005, by: Ira A. Schochet, Goodkind
Labaton Rudoff & Sucharow LLP, 100 Park Avenue, New York, NY 10017-

      [PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT     AND PROVIDING FOR
NOTICE — C-03-2954-SI   - 4 -

 

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5563; and William S. Freeman, Cooley Godward LLP, 5 Palo Alto Square, 3000 El
Camino Real, Palo Alto, CA 94306-2155, and filed said objections, papers and
briefs with the Clerk of the United States District Court for the Northern
District of California, on or before ___, 2005. Any Member of the Settlement
Class who does not make his, her or its objection in the manner provided shall
be deemed to have waived such objection and shall forever be foreclosed from
making any objection to the fairness or adequacy of the proposed settlement as
set forth in the Stipulation, to the Plan of Allocation, or to the award of
attorneys’ fees and expenses to plaintiffs’ counsel, unless otherwise ordered by
the Court.

      13. All funds held by the Escrow Agent shall be deemed and considered to
be in custodia legis of the Court, and shall remain subject to the jurisdiction
of the Court, until such time as such funds shall be distributed pursuant to the
Stipulation and/or further order(s) of the Court.

      14. Lead Plaintiff and Lead Counsel may conduct discovery for the sole
purpose of confirming the fairness and adequacy of the proposed settlement. Such
discovery shall be negotiated among the parties, and may continue until July 1,
2005. Until that date, Lead Counsel may terminate the settlement, solely based
upon a reasonable and good faith determination that the facts adduced in the
course of such discovery suggest that the settlement is not fair and reasonable.
Notice of termination shall be given to counsel for Defendants (1) by electronic
mail or facsimile and (2) first-class mail, no later than 5:00 p.m. Pacific Time
on July 8, 2005, after which date the termination right shall no longer exist.

      15. All papers in support of the settlement, the Plan of Allocation, and
the application by plaintiffs’ counsel for attorneys’ fees or reimbursement of
expenses shall be filed and served seven (7) calendar days before the Settlement
Hearing.

      16. Neither Defendants nor their Related Parties shall have any
responsibility for or liability with respect to the Plan of Allocation or any
application for attorneys’ fees or reimbursement of expenses submitted by
plaintiffs’ counsel, or for reimbursement of expenses by the Lead Plaintiff, and
such matters will be considered separately from the fairness, reasonableness and
adequacy of the settlement.

      [PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT     AND PROVIDING FOR
NOTICE — C-03-2954-SI   - 5 -

 

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      17. At or after the Settlement Hearing, the Court shall determine whether
the Plan of Allocation proposed by Lead Counsel, and any applications for
attorneys’ fees or reimbursement of expenses shall be approved.

      18. All reasonable expenses incurred in identifying and notifying
Settlement Class Members, as well as administering the Settlement Fund, shall be
paid as set forth in the Stipulation. In the event the settlement is not
approved by the Court, or otherwise fails to become effective, neither the Lead
Plaintiff nor Lead Counsel shall have any obligation to repay any amounts
actually and properly disbursed from the Class Notice and Administration Fund.

      19. Neither the Stipulation, nor any of its terms or provisions, nor any
of the negotiations or proceedings connected with it, shall be construed as an
admission or concession by Defendants or their Related Parties of the truth of
any of the allegations in the Litigation, or of any liability, fault, or
wrongdoing of any kind.

      20. The Court reserves the right to adjourn the date of the Settlement
Hearing without further notice to the Members of the Settlement Class, and
retains jurisdiction to consider all further applications arising out of or
connected with the proposed settlement. The Court may approve the settlement,
with such modifications as may be agreed to by the Settling Parties, if
appropriate, without further notice to the Settlement Class.

         
DATED:
       

       

      THE HONORABLE SUSAN ILLSTON

      UNITED STATES DISTRICT JUDGE

Submitted by:

GLANCY BINKOW & GOLDBERG LLP
Lionel Z. Glancy #134180
Peter A. Binkow #173848
Michael Goldberg #188669
Susan Kupfer #141724
1801 Ave. of the Stars, Suite 311
Los Angeles, CA 90067
Tel: (310) 201-9150
Fax: (310) 201-9160

Local Counsel for Lead Plaintiff and the Settlement Class

      [PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT     AND PROVIDING FOR
NOTICE — C-03-2954-SI   - 6 -

 

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GOODKIND LABATON RUDOFF & SUCHAROW LLP
Ira A. Schochet
Richard T. Joffe
100 Park Avenue
New York, NY 10017
Tel: (212) 907-0700
Fax: 818-0477

Lead Counsel for Lead Plaintiff and the Settlement Class

LERACH COUGHLIN STOIA & ROBBINS LLP
Kimberly C. Epstein
Eli R. Greenstein
100 Pine Street, Suite 2000
San Francisco, CA 94111
Tel: (415) 288-4545
Fax: (415) 288-4534

ROY L. JACOBS
292 Madison Avenue – 15th Floor
New York, NY 10016
Tel: (646) 742-9860
Fax: (212) 504-8343

Additional Counsel for Lead Plaintiff and the Settlement Class

      [PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENT     AND PROVIDING FOR
NOTICE — C-03-2954-SI   - 7 -

 

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

             
In re INTERMUNE, INC. SECURITIES
    )     Master File No. C-03-2954-SI
LITIGATION
    )      

    )     CLASS ACTION
 
           

    )      
This Document Relates To:
    )     NOTICE OF PENDENCY AND PROPOSED

    )     SETTLEMENT OF CLASS ACTION
                    ALL ACTIONS.
    )      

    )     EXHIBIT A-1
 
           

 

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IF YOU PURCHASED INTERMUNE, INC. (“INTERMUNE”) COMMON STOCK BETWEEN AUGUST 8,
2002 AND JUNE 11, 2003, YOU COULD GET A PAYMENT FROM A CLASS ACTION SETTLEMENT.

      A federal court authorized this Notice to be sent to you. This is not a
solicitation from a lawyer.

      Security and Time Period: InterMune, Inc. (“InterMune”) common stock
purchased between August 8, 2002 and June 11, 2003.

      Settlement Fund: $10,400,000 in cash. Your recovery will depend on the
amount of stock you purchased and the timing of your purchases and any sales. It
will also depend on the number of eligible shares that participate in the
settlement and when those share were purchased and sold. Assuming that all of
the InterMune investors who purchased shares during the relevant period and
suffered damages participate in this settlement, the estimated average recovery
per share will be approximately $0.27 before deduction of court-approved fees
and expenses. See Paragraph 9 in the Basic Information section for additional
information concerning, among other things, the allocation of the Settlement
Fund based on the relative strength of the claims at two different times during
the Class Period.

      Reasons for Settlement: Provides for a substantial dollar recovery whole
avoiding the costs and risks associated with continued litigation, including
danger of no recovery.

      If the Case Had Not Settled: Continuing with the case could have resulted
in dismissal or loss at trial. The two sides do not agree on the amount of money
that could have been won if the Lead Plaintiff prevailed at trial. The parties
disagree about: (1) the method for determining whether InterMune stock was
artificially inflated during the relevant period, and if so, the extent of that
inflation; (2) the amount of any such inflation; (3) whether the various facts
alleged by the Lead Plaintiff were materially false or misleading; (4) whether
the various facts alleged by the Lead Plaintiff influenced the trading price of
InterMune common stock during the relevant period; and (5) whether the facts
alleged were material, false, misleading or otherwise actionable under the
securities laws.

      Fees and Expenses: Plaintiffs’ counsel have not received any payment for
their work investigating the facts, conducting this litigation and negotiating
the settlement on behalf of the Lead

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Plaintiff and the Settlement Class. Plaintiffs’ counsel will ask the court for
attorneys’ fees not to exceed 25% of the Settlement Fund and reimbursement of
out-of-pocket expenses not to exceed $225,000 to be paid from the Settlement
Fund. In addition, the Lead Plaintiff, Lance A. Johnson, incurred costs and
expenses directly related to the representation of the class in the amount of
$3, 918 for which he will seek reimbursement. If the above amounts are requested
and approved by the Court, the average cost per share will be approximately
$0.08.

      Deadlines:

     
Submit Claim:
                      , 2005
Request Exclusion:
                      , 2005
File Objection:
                      , 2005

      Court Hearing on Fairness of Settlement:                     , 2005

      More Information: www.CompleteClaimSolutions.com/Intermune/ or

     
Claims Administrator:
  Lead Counsel:
InterMune Securities Litigation
   
c/o Complete Claim Solutions, Inc.
  Ira A. Schochet, Esq.
P.O. Box 24623
  Richard T. Joffe, Esq.
West Palm Beach, FL 33416
  GOODKIND LABATON RUDOFF
Hotline: 888-299-7522
    & SUCHAROW, LLP

  100 Park Avenue, 12th Floor

  New York, NY 10017-5563

  •   Your legal rights are affected whether you act, or don’t act. Read this
Notice carefully.

YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT:

     
SUBMIT A CLAIM FORM
  The only way to get a payment from this Settlement.
 
   
EXCLUDE YOURSELF
  Get no payment. This is the only option that allows you to commence or
participate in another lawsuit against the Defendants relating to the legal
claims in this case.
 
   
OBJECT
  You may write to the Court if you don’t like this settlement.
 
   
GO TO A HEARING
  You may ask to speak in Court about the fairness of this settlement.
 
   
DO NOTHING
  Get no payment; forfeit right to sue in another action.

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  •   These rights and options — and the deadlines to exercise them — are
explained in this Notice.     •   The Court in charge of this case must decide
whether to approve the settlement. Payments will be made if the Court approves
the settlement and, if there are any appeals, after appeals are resolved. Please
be patient.

BASIC INFORMATION

1.  Why Did I Get This Notice Package?

      You or someone in your family may have purchased shares of InterMune
common stock between August 8, 2002 and June 11, 2003.

      The Court sent you this Notice because you have a right to know about a
proposed settlement of a class action lawsuit, and about all of your options,
before the Court decides whether to approve the settlement. If the Court
approves it and after any objections or appeals are resolved, the Claims
Administrator appointed by the Court will make the payments that the settlement
allows.

      This package explains the lawsuit, the settlement, your legal rights, what
benefits are available, who is eligible for them, and how to get them.

      The Court in charge of the case is the United States District Court for
the Northern District of California, and the case is known as In re InterMune,
Inc. Securities Litigation, Master File No. C-03-2954-SI. The person who sued is
called the Lead Plaintiff, and the company and the individuals he sued,
InterMune, W. Scott Harkonen and Sharon Surrey-Barbari, are called the
Defendants.

2.  What Is This Lawsuit About?

      This case was brought as a class action alleging that the Defendants made
false and misleading statements about sales of Actimmune, InterMune’s lead
product, resulting in the artificial inflation of the price of InterMune common
stock between August 8, 2002 and June 11, 2003. The Lead Plaintiff also alleges
that investors who purchased InterMune’s common stock during that period were
injured when the misleading nature of Defendants’ statements was revealed and
the price of the stock dropped.

      The Lead Plaintiff alleges that Defendants knowingly or recklessly
misrepresented: (1) the number of patients taking Actimmune during the first
quarter of 2003, (2) the response of the

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medical community to the data from key clinical trials of Actimmune, (3) the
status of InterMune’s sales force, and (4) whether InterMune’s sales practices
violated Food and Drug Administration regulations.

      Defendants assert that the allegations of the complaint are without merit.
All Defendants deny that they did anything wrong, and contend that if the case
were to proceed to trial, they would prevail.

3.  Why Is This a Class Action?

      In a class action, one or more people called class representatives (in
this case the court-appointed Lead Plaintiff, Lance A. Johnson), sue on behalf
of people who have similar claims. Here, all these people, together, are called
a Settlement Class or Settlement Class Members. In a class action, one court
resolves the issues for all Settlement Class Members at the same time, except
for those who voluntarily exclude themselves from the Settlement Class. Judge
Susan Illston is in charge of this class action.

4.  Why Is There a Settlement?

      The Court did not decide in favor of Lead Plaintiff or Defendants.
Instead, both sides agreed to a settlement based on a compromise of the claims
and defenses. That way, they avoid the cost and risk of a trial, and eligible
Settlement Class Members who make a valid claim will get compensation.

      The settlement was arrived at through arms-length negotiations, assisted
by an experienced mediator. The Lead Plaintiff and his attorneys agreed to the
settlement terms after considering the results of their factual and legal
investigation of the Settlement Class’ claims. In addition, as part of their due
diligence, counsel for the Lead Plaintiff and the Settlement Class will review
additional discovery materials obtained from defendants to further confirm the
adequacy and fairness of the settlement. In connection with that discovery, the
Lead Plaintiff obtained the limited right to terminate the settlement up until
July 8, 2005.

      Based on their investigation and discovery of the claims, the experience
that the Lead Plaintiffs’ attorneys have in litigating similar complex actions,
the procedural protections provided by the settlement terms, and the valuable
consideration that the Settlement Class can obtain from the settlement, the Lead
Plaintiff and his attorneys think the settlement is best for all Settlement
Class Members.

      NOTICE OF PENDENCY AND PROPOSED     SETTLEMENT OF CLASS ACTION —
C-03-2954-SI   -4-

 

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WHO IS IN THE SETTLEMENT

      To see if you will get money from this settlement, you first have to
determine if you are a Settlement Class Member.

5.  How Do I Know If I Am Part of the Settlement?

      The Settlement Class includes all persons who purchased InterMune common
stock between August 8, 2002, and June 11, 2003, except those persons and
entities that are excluded, as described below.

6.  What Are The Exceptions to Being Included?

      You are not a Settlement Class Member if you are a Defendant, a member of
the immediate family of one of the individual defendants listed in question 1,
an entity in which any Defendant has or had a controlling interest, a current or
former director or officer of InterMune, or a legal representative, heir,
successor, or assign of any excluded party.

      If you sold InterMune common stock between August 8, 2002 and June 11,
2003, that alone does not make you a Settlement Class Member. You are a
Settlement Class Member only if you PURCHASED InterMune common stock between
August 8, 2002 and June 11, 2003.

7.  I’m Still Not Sure if I Am Included.

      If you are still not sure whether you are included, you can ask for free
help. You can call the claims administrator, Complete Claim Solutions, Inc., at
888-299-7522 for more information. Or you can fill out and return the claim form
described in question 10, to see if you qualify.

THE SETTLEMENT BENEFITS — WHAT YOU GET

8.  What Does the Settlement Provide?

      Defendants and their insurance carriers have agreed to pay $10.4 million
in cash in settlement of this case. These funds will be distributed to eligible
Settlement Class Members who send in valid claim forms, after payment of
court-approved legal fees and attorney and Lead Plaintiff expenses

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and the costs of claims administration, including the costs of printing and
mailing this Notice and the cost of publishing newspaper notice.

9.  How Much Will My Payment Be?

      Because the facts of the case have shown that the claims of Settlement
Class Members who purchased in the earlier part of the Settlement Class Period
are substantially weaker than the claims of those who purchased later, two funds
will be established to pay eligible claimants.

      The first fund (“Fund I”) will be in the gross amount of $800,000 and will
be used to pay eligible claimants who purchased shares of InterMune during the
period August 8, 2002, through January 6, 2003. The second fund (“Fund II”) will
be in the amount of $9.6 million and will be used to pay eligible claimants who
purchased shares of InterMune stock during the period January 7, 2003, through
June 11, 2003.

      Your share of the funds will depend on (a) the number of valid claim forms
that Settlement Class Members send in (the fewer the number of Settlement Class
members who choose to participate in the Settlement, the larger will be the
recovery for each participating Settlement Class Member) and (b) how many shares
of stock you purchased during the relevant period and when you bought and sold
them.

      In order to recover damages, you must have suffered an actual monetary
loss on the shares of InterMune stock that you purchased during the Settlement
Class Period. That is, (i) for shares that you purchased and sold during the
Settlement Class Period, the purchase price must have been greater than the
sales price; or (ii) for shares that you purchased during the Settlement Class
Period and held at the end of that period, the purchase price must have been
greater than $17.25 a share. A claim will be calculated as follows:

  A.   For shares you purchased between August 8, 2002, and January 6, 2003, and
:

  1.   sold prior to the close of business on June 11, 2003, your recognized
loss shall be the purchase price minus the sales price, multiplied by 10%;    
2.   held as of the close of business on June 11, 2003, your recognized loss
shall be the lesser of:

  a.   the purchase price minus $17.25 per share, multiplied by 10%; or

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  b.   $0.79 per share.

  B.   For shares you purchased between January 7, 2003, and June 11, 2003, and:

  1.   sold prior to the close of business on June 11, 2003, your recognized
loss shall be the purchase price minus the sales price, multiplied by 10%.    
2.   held as of the close of business on June 11, 2003, your recognized loss
shall be the lesser of:

  a.   the purchase price minus $17.25 per share; or     b.   $7.85 per share.

      For purposes of determining which shares of InterMune stock purchased
during the Class Period were (i) sold at a profit at any time during the
Class Period, (ii) sold at a loss at any time during the Class Period, or
(iii) were retained at the close of business on June 11, 2005, all sales of
InterMune stock shall be matched on a “first-in, first-out” (“FIFO”) basis
against prior purchases during the Class Period.

      The date of purchase or sale is the “contract” or “trade” date as
distinguished from the “settlement date.”

      The payment you get will reflect your pro rata share of the amount in the
relevant settlement fund (as a fraction, your recognized loss divided by the
total of all recognized losses for the relevant fund) after deduction of
court-approved fees and expenses. Depending on the number of eligible shares
that participate in the settlement and when those shares were purchased and
sold, the estimated average payment will be approximately $0.06 per share in
Fund I and approximately $0.38 per share in Fund II before deduction of
court-approved fees and expenses (with an approximate average cost per share of
$0.016 for Fund I and $0.10 for Fund II). The number of claimants who send in
claims varies widely from case to case. You could get more or less money per
share than described above.

HOW YOU GET A PAYMENT — SUBMITTING A CLAIM FORM

10.  How Will I Get a Payment?

      To qualify for payment, you must be an eligible Settlement Class Member
and you must send in a claim form. A claim form is enclosed with this Notice.
Read the instructions carefully, fill out

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the form, include all the documents the form asks for, sign it, and mail it in
the enclosed envelope postmarked no later than                     , 2005.

11.  When Will I Get My Payment?

      The Court will hold a hearing on                     , 2005, to decide
whether to approve the settlement. If Judge Illston approves the settlement,
there may be appeals. It is always uncertain whether these appeals can be
resolved, and resolving them can take time, perhaps several years. Everyone who
sends in a claim form will be informed of the determination with respect to
their claim. Please be patient.

12.  What Am I Giving Up to Get a Payment or Stay in the Settlement Class?

      Unless you exclude yourself, you are staying in the Settlement Class, and
that means that you cannot sue, continue to sue, or be part of any other lawsuit
against the Defendants about the same legal and factual issues in this case. It
also means that all of the Court’s orders will apply to you and legally bind you
and, in return for your participation in the Settlement, you will release your
claims in this case against the Defendants. The terms of the release are
included in the claim form that is enclosed.

EXCLUDING YOURSELF FROM THE SETTLEMENT

      If you don’t want a payment from this settlement, but you want to keep the
right to sue or continue to sue the Defendants on your own about the same legal
and factual issues in this case, then you must take steps to get out of the
Settlement Class. This is called excluding yourself from, or is sometimes
referred to as opting out of, the Settlement Class.

13.  How Do I Get Out of the Settlement Class?

      To exclude yourself from the Settlement Class, you must send a letter by
mail stating that you want to be excluded from In re InterMune, Inc. Securities
Litigation, Master File No. C-03-2954-SI. You must include your name, address,
telephone number, your signature, and the number of shares of InterMune common
stock you purchased between August 8, 2002 and June 11, 2003, the number of
shares sold during this time period, if any, and the dates of such purchases and
sales. You must mail your exclusion request postmarked no later than
                    , 2005 to:

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InterMune Securities Litigation
c/o Complete Claim Solutions, Inc.
P.O. Box 24623
West Palm, Beach, Florida 33416

      You cannot exclude yourself on the phone or by e-mail. If you ask to be
excluded, you are not eligible to get any settlement payment, and you cannot
object to the settlement. You will not be legally bound by anything that happens
in this lawsuit.

14.  If I Do Not Exclude Myself, Can I Sue the Defendants for the Same Thing
Later?

      No. Unless you exclude yourself, you give up any right to sue the
Defendants for the claims resolved by this settlement. If you have a pending
lawsuit against any of the Defendants, speak to your lawyer in that case
immediately. Remember, the exclusion deadline is                     , 2005.

15.  If I Exclude Myself, Can I Get Money from This Settlement?

      No. If you exclude yourself, do not send in a claim form. But, you may
sue, continue to sue, or be part of a different lawsuit against the Defendants.

THE LAWYERS REPRESENTING YOU

16.  Do I Have a Lawyer in This Case?

      The Court appointed the law firm of Goodkind Labaton Rudoff & Sucharow,
LLP to represent you and other Settlement Class Members.

      These lawyers are called Lead Counsel. You will not be charged for these
lawyers’ work. If you want to be represented by your own lawyer, you may hire
one at your own expense.

17.  How Will the Lawyers Be Paid?

      Lead Plaintiff’s counsel, including Lead Counsel, will ask the Court for
attorneys’ fees not to exceed 25% of the Settlement Fund (an average of $0.07
per share) and for reimbursement of out-of-pocket expenses up to $225,000 ($0.01
per share), which were advanced in connection with the Litigation. In addition,
the Lead Plaintiff will ask the Court for reimbursement of certain costs and
expenses directly incurred in connection with his representation of the Class in
the amount of $3, 918. Such sums as may be approved by the Court will be paid
from the Settlement Fund. Settlement Class Members are not personally liable for
any such fees or expenses.

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      The attorneys’ fees and expenses requested, to the extent they are awarded
by the Court, will be the only payment to plaintiffs’ counsel for their efforts
in achieving this settlement and for their risk in undertaking this
representation on a wholly contingent basis. To date, plaintiffs’ counsel have
not been paid for their services for conducting this litigation on behalf of the
Lead Plaintiff and the Settlement Class or for their substantial out-of-pocket
expenses. The fee requested, if awarded, will compensate plaintiffs’ counsel for
their work and risk in achieving the settlement and is well within the range of
fees awarded to class counsel under similar circumstances in other cases of this
type. The Court may award less than this amount.

OBJECTING TO THE SETTLEMENT

      You can tell the Court that you don’t agree with the settlement or some
part of it.

18.  How Do I Tell the Court that I Don’t Like the Settlement?

      If you are a Settlement Class Member, you can object to the settlement if
you don’t like any part of it. You can give reasons why you think the Court
should not approve it. The Court will consider your views. To object, you must
send a letter saying that you object to the settlement in In re InterMune, Inc.
Securities Litigation, Master File No. C-03-2954-SI. Be sure to include your
name, address, telephone number, your signature, the number of shares of
InterMune common stock purchased and sold between August 8, 2002 and June 11,
2003, and the reasons you object to the settlement. Any objection to the
settlement must be mailed or delivered such that it is received by each of the
following no later than                     , 2005:

Court:

Clerk of the Court
UNITED STATES OF DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
United States Courthouse
450 Golden Gate Avenue
San Francisco, CA 94102

Lead Counsel for Lead Plaintiff and the Settlement Class:

GOODKIND LABATON RUDOFF
  & SUCHAROW, LLP
100 Park Avenue, 12th Floor
New York, NY 10017-5563
Attn: Ira A. Schochet, Esq.

      NOTICE OF PENDENCY AND PROPOSED     SETTLEMENT OF CLASS ACTION —
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Counsel for all Defendants:

Cooley Godward LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attn: William S. Freeman, Esq.

19.  What’s the Difference Between Objecting and Excluding?

      Objecting is simply telling the Court that you don’t like something about
the settlement. You can object only if you stay in the Settlement Class.
Excluding yourself is telling the Court that you don’t want to be part of the
Settlement Class. If you exclude yourself, you have no basis to object because
the case no longer affects you.

THE COURT’S FAIRNESS HEARING

      The Court will hold a hearing to decide whether to approve the settlement.
You may attend and you may ask to speak, but you don’t have to.

20.  When and Where Will the Court Decide Whether to Approve the Settlement?

      The Court will hold a fairness hearing at                      a.m., on
                    , 2005, at the United States Courthouse, 450 Golden Gate
Avenue, San Francisco, California. At this hearing the Court will consider
whether the settlement is fair, reasonable, and adequate. If there are
objections, the Court will consider them. Judge Illston will listen to people
who have asked to speak at the hearing. The Court will also consider how much to
pay to plaintiffs’ counsel and the extent to which counsel and Lead Plaintiff
will be reimbursed for their costs and expenses . The Court may decide these
issues at the hearing or take them under consideration and decide them at a
later time. We do not know how long these decisions will take.

21.  Do I have to Come to the Hearing?

      No. Lead Counsel will answer questions Judge Illston may have. But, you
are welcome to come at your own expense. If you send an objection, you don’t
have to come to Court to talk about it. As long as you mailed your written
objection on time, the Court will consider it. You may also pay your own lawyer
to attend, but it is not necessary.

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22.  May I Speak at the Hearing?

      You may ask the Court for permission to speak at the Fairness Hearing. To
do so, you must send a letter saying that it is your intention to appear in In
re InterMune, Inc. Securities Litigation, Master File No. C-03-2954-SI. Be sure
to include your name, address, telephone number, your signature, and the number
of shares of InterMune common stock purchased between August 8, 2002 and
June 11, 2003. Your notice of intention to appear must be postmarked no later
than                     , 2005, and be sent to the Clerk of the Court, Lead
Counsel, and Defendants’ counsel, at the three addresses listed in question 18.
You cannot speak at the hearing if you exclude yourself from the Settlement
Class.

IF YOU DO NOTHING

23.  What Happens if I Do Nothing at All?

      If you do nothing, you’ll get no money from this settlement. But, unless
you exclude yourself, you won’t be able to start a lawsuit, continue with a
lawsuit, or be part of any other lawsuit against the Defendants about the same
legal or factual issues in this case.

GETTING MORE INFORMATION

24.  Are There More Details About the Settlement?

      This Notice summarizes the proposed settlement. More details are in the
Stipulation of Settlement dated as of May ___, 2005. You can get a copy of the
Stipulation of Settlement by visiting the website of Lead Counsel at
www.glrslaw.com, or from the Clerk’s office at the United States District Court
for the Northern District of California, 450 Golden Gate Avenue, San Francisco,
CA during regular business hours.

25.  How Do I Get More Information?

      You can call 888-299-7522 or write to InterMune Securities Litigation, c/o
Complete Claim Solutions, Inc., P.O. Box 24623, West Palm Beach, FL, 33416, or
visit the website at www.CompleteClaimSolutions.com/InterMune/ .

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DO NOT TELEPHONE THE COURT REGARDING THIS NOTICE

SPECIAL NOTICE TO NOMINEES

      If you hold shares of any InterMune common stock purchased between
August 8, 2002 and June 11, 2003 as nominee for a beneficial owner, then, within
ten (10) days after you receive this Notice, you must either: (1) send a copy of
this Notice by first class mail to all such Persons; or (2) provide a list of
the names and addresses of such Persons to the Claims Administrator:

InterMune Securities Litigation
c/o Complete Claim Solutions, Inc.
P.O. Box 24623
West Palm Beach, FL 33416

      If you choose to mail the Notice and Proof of Claim yourself, you may
obtain from the Claims Administrator (without cost to you) as many additional
copies of this Notice and Proof of Claim as you will need to complete the
mailing.

      Regardless of whether you choose to complete the mailing yourself or elect
to have the mailing performed for you, you may obtain reimbursement for or
advancement of reasonable administrative costs actually incurred or expected to
be incurred in connection with forwarding the Notice and which would not have
been incurred but for the obligation to forward the Notice, upon submission of
appropriate documentation to the Claims Administrator.

             
DATED:
      , 2005   BY ORDER OF THE COURT

           

          UNITED STATES DISTRICT COURT NORTHERN

          DISTRICT OF CALIFORNIA

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

             
In re INTERMUNE, INC. SECURITIES LITIGATION

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    )
)     Master File No. C-03-2954-SI 
This Document Relates To:
    )     CLASS ACTION
ALL ACTIONS.
    )
)
)     PROOF OF CLAIM AND RELEASE

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    )     EXHIBIT A-2

 

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I. GENERAL INSTRUCTIONS

      1. To recover as a member of the class based on your claims in the action
entitled In re InterMune, Inc. Securities Litigation, Master File
No. C-03-2954-SI (the “Litigation”), you must complete and, on page ___hereof,
sign this Proof of Claim and Release. If you fail to file a properly addressed
(as set forth in paragraph 3 below) Proof of Claim and Release, your claim may
be rejected and you may be precluded from any recovery from the Settlement Fund
created in connection with the proposed settlement of the Litigation.

      2. Submission of this Proof of Claim and Release, however, does not assure
that you will share in the proceeds of settlement in the Litigation. The Claims
Administrator will review your Proof of Claim to determine if you are entitled
to a distribution.

      3. YOU MUST MAIL YOUR COMPLETED AND SIGNED PROOF OF CLAIM AND RELEASE
POSTMARKED ON OR BEFORE _________, 2005, ADDRESSED AS FOLLOWS:

InterMune Securities Litigation
c/o Complete Claim Solutions, Inc.
P.O. Box 24623
West Palm Beach, FL 33416

    If you are NOT a Member of the Settlement Class, as defined in the Notice of
Pendency and Proposed Settlement of Class Action (“Notice”), DO NOT submit a
Proof of Claim and Release form.

      4. If you are a Member of the Settlement Class, you are bound by the terms
of any judgment entered in the Litigation, WHETHER OR NOT YOU SUBMIT A PROOF OF
CLAIM AND RELEASE FORM.

II. DEFINITIONS

      1. “Defendants” means InterMune and the Individual Defendants.

      2. “Individual Defendants” means W. Scott Harkonen and Sharon
Surrey-Barbari.

      3. “Released Persons” means each and all of the Defendants and each and
all of their Related Parties.

PROOF OF CLAIM AND RELEASE — C-03-2954-SI   -1-

 

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III. CLAIMANT IDENTIFICATION

      1. If you purchased InterMune common stock and held the certificate(s) in
your name, you are the beneficial purchaser as well as the record purchaser. If,
however, as is more typical, the certificate(s) were registered in the name of a
third party, such as a nominee or brokerage firm, you are the beneficial
purchaser and the third party is the record purchaser.

      2. Use Part I of this form entitled “Claimant Identification” to identify
yourself as the purchaser of the InterMune common stock that forms the basis of
this claim. THIS CLAIM MUST BE FILED BY THE ACTUAL BENEFICIAL PURCHASER OR
PURCHASERS, OR THE LEGAL REPRESENTATIVE OF SUCH PURCHASER OR PURCHASERS OF THE
INTERMUNE COMMON STOCK UPON WHICH THIS CLAIM IS BASED.

      3. All joint purchasers must sign this claim. Executors, administrators,
guardians, conservators and trustees must complete and sign this claim on behalf
of Persons represented by them and their authority must accompany this claim and
their titles or capacities must be stated. The Social Security (or taxpayer
identification) number and telephone number of the beneficial owner may be used
in verifying the claim. Failure to provide the foregoing information could delay
verification of your claim or result in rejection of the claim.

IV. CLAIM FORM

      1. Use Part II of this form entitled “Schedule of Transactions in
InterMune Common Stock” to supply all required details of your transaction(s) in
InterMune common stock. If you need more space or additional schedules, attach
separate sheets giving all of the required information in substantially the same
form. Sign and print or type your name on each additional sheet.

      2. On the schedules, provide all of the requested information with respect
to all of your purchases and all of your sales of InterMune common stock which
took place at any time beginning August 8, 2002 through June 11, 2003, inclusive
(the “Settlement Class Period”), whether such transactions resulted in a profit
or a loss. Failure to report all such transactions may result in the rejection
of your claim.

PROOF OF CLAIM AND RELEASE — C-03-2954-SI   -2-

 

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      3. List each transaction in the Settlement Class Period separately and in
chronological order, by trade date, beginning with the earliest. You must
accurately provide the month, day and year of each transaction you list.

      4. Broker confirmations or other documentation of your transactions in
InterMune common stock should be attached to your claim. Failure to provide this
documentation could delay verification of your claim or result in rejection of
your claim.

      5. The above requests are designed to provide the minimum amount of
information necessary to process the most simple claims. The Claims
Administrator may request additional information as required to efficiently and
reliably calculate your losses. In some exceptional cases where the Claims
Administrator cannot perform the calculation accurately or at a reasonable cost
to the Settlement Class with the information provided, the Claims Administrator
may condition acceptance of the claim upon the production of additional
information and/or the hiring of an accounting expert at the Claimant’s cost.

PROOF OF CLAIM AND RELEASE — C-03-2954-SI   -3-

 

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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
In re InterMune, Inc. Securities Litigation
Master File No. C-03-2954-SI
PROOF OF CLAIM
Must be Postmarked No Later Than:
          , 2005
Please Type or Print

PART I: CLAIMANT IDENTIFICATION

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Beneficial Owner’s Name (First, Middle, Last)

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Street Address

     

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

City
  State                                 Zip Code
 
   

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

 

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

Foreign Province
  Foreign Country
 
   

         

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

 

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

  Individual
Social Security Number or
       
Taxpayer Identification Number
 

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

  Corporation/Other
 
       

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

 

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

  (work)
Area Code
  Telephone Number    
 
       

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

 

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

  (home)
Area Code
  Telephone Number    

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Record Owner’s Name (if different from beneficial owner listed above); e.g.
bokerage firm, bank, nominee, etc.

PROOF OF CLAIM AND RELEASE — C-03-2954-SI   -4-

 

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PART II: SCHEDULE OF TRANSACTIONS IN INTERMUNE COMMON STOCK

A.  Number of shares of InterMune common stock held by you at the beginning of
trading on August 8, 2002: _________

B.  InterMune Common Stock Purchases (August 8, 2002 – June 11, 2003,
inclusive):

                                          Trade Date   Number of   Purchase
Price   Total Mo. Day Year   Shares Purchased   Per Share   Purchase Price*
1.
        1.           1.           1.      

                                       
2.
        2.           2.           2.      

                                       
3.
        3.           3.           3.      

                                       

C.  InterMune Common Stock Sales (August 8, 2002 – June 11, 2003, inclusive):

                                          Trade Date   Number of   Sale Price  
Total Mo. Day Year   Shares Sold   Per Share   Sales Price*
1.
        1.           1.           1.      

                                       
2.
        2.           2.           2.      

                                       
3.
        3.           3.           3.      

                                       

D.   Number of shares of InterMune common stock held at close of trading on
June 11, 2003: _________

If you require additional space, attach extra schedules in the same format as
above. Sign and print your name on each additional page.

YOU MUST READ AND SIGN THE RELEASE ON PAGE ______.

     

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* Excluding Taxes, Fees and Commissions.

PROOF OF CLAIM AND RELEASE — C-03-2954-SI   -5-

 

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V. SUBMISSION TO JURISDICTION OF COURT AND ACKNOWLEDGMENTS

      I submit this Proof of Claim and Release under the terms of the
Stipulation of Settlement dated as of May ___, 2005 (“Stipulation”) described in
the Notice. I also submit to the jurisdiction of the United States District
Court for the Northern District of California, with respect to my claim as a
Settlement Class Member (as defined in the Notice) and for purposes of enforcing
the release set forth herein. I further acknowledge that I am bound by and
subject to the terms of any judgment that may be entered in the Litigation. I
agree to furnish additional information to Lead Counsel to support this claim if
required to do so. I have not submitted any other claim covering the same
purchases or sales of InterMune common stock during the Settlement Class Period
and know of no other Person having done so on my behalf.

VI. RELEASE

      1. I hereby acknowledge full and complete satisfaction of, and do hereby
fully, finally and forever settle, release, relinquish and discharge, all of the
Released Claims against each and all of the Defendants and each and all of their
“Related Parties,” defined as each of a Defendant’s past or present directors,
officers, employees, partners, insurers, co-insurers, reinsurers, controlling
shareholders, attorneys, accountants or auditors, investment advisors, personal
or legal representatives, predecessors, successors, parents, subsidiaries,
divisions, joint ventures, assigns, spouses, heirs, related or affiliated
entities, any entity in which a Defendant has a controlling interest, any
members of an Individual Defendant’s immediate family, or any trust of which the
Individual Defendant is the settlor or which is for the benefit of the
Individual Defendant’s family.

      2. “Released Claims” shall collectively mean all claims (including
“Unknown Claims” as defined below), demands, rights, liabilities and causes of
action of every nature and description whatsoever, known or unknown, whether or
not concealed or hidden, asserted or that might have been asserted, including,
without limitation, claims for negligence, gross negligence, breach of duty of
care and/or breach of duty of loyalty, fraud, breach of fiduciary duty, or
violations of any state or federal statutes, rules or regulations, by the Lead
Plaintiff or any Settlement Class Member against the Defendants arising out of,
relating to, or in connection with the purchase of InterMune common

PROOF OF CLAIM AND RELEASE — C-03-2954-SI   -6-

 

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

 

stock by the Lead Plaintiff or any Settlement Class Member during the Settlement
Class Period and any and all claims arising out of, relating to, or in
connection with the settlement or resolution of this matter.

      3. “Unknown Claims” shall collectively mean all claims, demands, rights,
liabilities, and causes of action of every nature and description which the Lead
Plaintiff or any Settlement Class Member does not know or suspect to exist in
his, her or its favor at the time of the release of the Released Persons which,
if known by him, her or it, might have affected his, her or its settlement with
and release of the Released Persons, or might have affected his, her or its
decision not to object to this settlement. With respect to any and all Released
Claims, the Settling Parties stipulate and agree that, upon the Effective Date,
the Lead Plaintiff shall expressly waive, and each of the Settlement
Class Members shall be deemed to have waived, and by operation of the Judgment
shall have waived, the provisions, rights and benefits of California Civil Code
§1542, which provides:

      A general release does not extend to claims which the creditor does not
know or suspect to exist in his or her favor at the time of executing the
release, which if known by him or her must have materially affected his or her
settlement with the debtor.

The Lead Plaintiff shall expressly and each of the Settlement Class Members
shall be deemed to have, and by operation of the Judgment shall have, expressly
waived any and all provisions, rights and benefits conferred by any law of any
state or territory of the United States, or principle of common law, which is
similar, comparable or equivalent to California Civil Code §1542. The Lead
Plaintiffs and Settlement Class Members may hereafter discover facts in addition
to or different from those which he, she or it now knows or believes to be true
with respect to the subject matter of the Released Claims, but the Lead
Plaintiff shall expressly fully, finally and forever settle and release, and
each Settlement Class Member, upon the Effective Date, shall be deemed to have,
and by operation of the Judgment shall have, fully, finally, and forever settled
and released, any and all Released Claims, known or unknown, suspected or
unsuspected, contingent or non-contingent, whether or not concealed or hidden,
which now exist, or heretofore have existed, upon any theory of law or equity
now existing or coming into existence in the future, including, but not limited
to, conduct which is negligent, intentional, with or without malice, or a breach
of any duty, law or rule,

PROOF OF CLAIM AND RELEASE — C-03-2954-SI   -7-

 

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

 

without regard to the subsequent discovery or existence of such different or
additional facts. The Lead Plaintiff acknowledges, and the Settlement
Class Members shall be deemed by operation of the Judgment to have acknowledged,
that the foregoing waiver was separately bargained for and a key element of the
settlement of which this release is a part.

      4. This release shall be of no force or effect unless and until the Court
approves the Stipulation and it becomes effective on the Effective Date.

      5. I (We) hereby warrant and represent that I (we) have not assigned or
transferred or purported to assign or transfer, voluntarily or involuntarily,
any matter released pursuant to this release or any other part or portion
thereof.

      6. I (We) hereby warrant and represent that I (we) have included
information about all of my (our) transactions in InterMune common stock that
occurred during the Settlement Class Period as well as the number of shares of
InterMune common stock held by me (us) at the opening of trading on August 8,
2002, and at the close of trading on June 11, 2003.

PROOF OF CLAIM AND RELEASE — C-03-2954-SI   -8-

 

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SUBSTITUTE FORM W-9

Request for Taxpayer Identification Number (“TIN”) and Certification

PART I

NAME:     

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

Check appropriate box:

                     
o
  Individual/Sole Proprietor       o   Pension Plan
o
  Corporation   o   Partnership   o   Trust
o
  IRA   o   Other        

      Enter TIN on appropriate line.

  •   For individuals, this is your Social Security Number (“SSN”).     •   For
sole proprietors, you must show your individual name, but your may also enter
your business or “doing business as” name. You may enter either your SSN or your
Employer Identification Number (“EIN”).     •   For other entities, it is your
EIN.

             
______ - ______ - ______
  or   ___ - _____________________    
Social Security Number
      Employer Identification Number    

PART II

For Payees Exempt from Backup Withholding

      If you are exempt from backup withholding, enter your correct TIN in
Part I and write “exempt” on the following line:                     

PART III

Certification

UNDER THE PENALTY OF PERJURY, I (WE) CERTIFY THAT:

     
1.
  The number shown on this form is my correct TIN; and
 
   
2.
  I (we) certify that I am (we are) NOT subject to backup withholding under the
provisions of Section 3406 (a)(1)(C) of the Internal Revenue Code because: (a) I
am (we are) exempt from backup withholding; or (b) I (we) have not been notified
by the Internal Revenue Service that I am (we are) subject to backup withholding
as a result of a failure to report all interest or dividends; or (c) the
Internal Revenue Service has notified me (us) that I am (we are) no longer
subject to backup withholding.
 
   
NOTE:
  If you have been notified by the Internal Revenue Service that you are subject
to backup withholding, you must cross out Item 2 above.

PROOF OF CLAIM AND RELEASE — C-03-2954-SI   -9-

 

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      SEE ENCLOSED FORM W-9 INSTRUCTIONS

The Internal Revenue Service does not require your consent to any provision of
this document other than the certification required to avoid backup withholding.

      I declare under penalty of perjury under the laws of the United States of
America that the foregoing information supplied by the undersigned is true and
correct.

             
Executed this
                                          
                                                                day of  
                                                  
                              ,

          (Month/Year)

         
in
                                                 ,  
                                                                             
                 .

          (City)   (State/Country)

     

 

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

 
  (Sign your name here)
 
   

 

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

  (Type or print your name here)
 
   

 

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

  (Capacity of person(s) signing, e.g., Beneficial Purchaser, Executor or
Administrator)

ACCURATE CLAIMS PROCESSING TAKES A

SIGNIFICANT AMOUNT OF TIME.

THANK YOU FOR YOUR PATIENCE.

Reminder Checklist:

      1. Please sign the above release and declaration.

      2. Remember to attach supporting documentation, if available.

      3. Do not send original stock certificates.

      4. Keep a copy of your claim form for your records.

      5. If you desire an acknowledgment of receipt of your claim form, please
send it Certified Mail, Return Receipt Requested.

      6. If you move, please send us your new address.

PROOF OF CLAIM AND RELEASE — C-03-2954-SI   -10-

 

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

             
In re INTERMUNE, INC. SECURITIES
    )     Master File No. C-03-2954-SI
LITIGATION
    )      

    )     CLASS ACTION
 
           
 
    )      
This Document Relates To:
    )     SUMMARY NOTICE

    )      
ALL ACTIONS.
    )     EXHIBIT A-3
 
    )      

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

           

 

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

 

     
TO:
  ALL PERSONS WHO PURCHASED INTERMUNE, INC. (“INTERMUNE”) COMMON STOCK, DURING
THE PERIOD BEGINNING AUGUST 8, 2002 THROUGH JUNE 11, 2003, INCLUSIVE

      YOU ARE HEREBY NOTIFIED, pursuant to an Order of the United States
District Court for the Northern District of California, that a hearing will be
held on ___, 2005, at ___a.m., before the Honorable Susan Illston at the United
States Courthouse, 450 Golden Gate Avenue, San Francisco, California, for the
purpose of determining (1) whether the proposed settlement of the claims in the
Litigation for the sum of $10,400,000 in cash should be approved by the Court as
fair, reasonable and adequate; (2) whether, thereafter, this Litigation should
be dismissed with prejudice as set forth in the Stipulation of Settlement dated
as of May ___, 2005; (3) whether the Plan of Allocation is fair, reasonable and
adequate and therefore should be approved; and (4) whether the application of
plaintiffs’ counsel for the payment of attorneys’ fees and reimbursement of
expenses incurred in connection with this Litigation, and the application of
Lead Plaintiff for reimbursement of expenses incurred in connection with this
Litigation, should be approved.

      If you purchased or acquired InterMune common stock during the period
August 8, 2002 through June 11, 2003, inclusive, your rights may be affected by
the settlement of this Litigation. If you have not received a detailed Notice of
Pendency and Proposed Settlement of Class Action and a copy of the Proof of
Claim and Release, you may obtain copies by writing to InterMune Securities
Litigation, c/o Complete Claim Solutions, Inc. P.O. Box 24623, West Palm Beach,
FL 33416, or by visiting the website www.CompleteClaimSolutions.com/Intermune/ .
If you are a Settlement Class Member, in order to share in the distribution of
the Net Settlement Fund, you must submit a Proof of Claim and Release postmarked
no later than ___, 2005, establishing that you are entitled to recovery.

      If you desire to be excluded from the Settlement Class, you must submit a
Request for Exclusion postmarked, or actually received by the Claims
Administrator, by ___, 2005, in the manner and form explained in the detailed
Notice referred to above. All Members of the Settlement Class who have not
requested exclusion from the Settlement Class will be bound by any judgment
entered in the Litigation pursuant to the Stipulation of Settlement.

       

SUMMARY NOTICE — C-03-2954-SI   - 1 -

 

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

 

      Any objection to the settlement must be mailed or delivered such that it
is received by each of the following no later than ___, 2005:

CLERK OF THE COURT
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
United States Courthouse
450 Golden Gate Avenue
San Francisco, CA 94102

Lead Counsel for Plaintiffs:

GOODKIND LABATON RUDOFF
     & SUCHAROW, LLP
100 Park Avenue, 12th Floor
New York, NY 10017-5563
Attn: Ira A. Schochet, Esq.

Counsel for Defendants:

Cooley Godward LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attn: William S. Freeman, Esq.

PLEASE DO NOT CONTACT THE COURT OR THE CLERK’S OFFICE REGARDING THIS NOTICE. If
you have any questions about the settlement, you may contact Lead Counsel at the
address listed above.

             
DATED:
   

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

  , 2005     

          BY ORDER OF THE COURT

          UNITED STATES DISTRICT COURT

          NORTHERN DISTRICT OF CALIFORNIA

       

SUMMARY NOTICE — C-03-2954-SI   - 2 -

 

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

             
In re INTERMUNE, INC. SECURITIES
    )     Master File No. C-03-2954-SI
LITIGATION
    )      

    )     CLASS ACTION
 
           

    )      
This Document Relates To:
    )     [PROPOSED] FINAL JUDGMENT AND

    )     ORDER OF DISMISSAL WITH PREJUDICE
                    ALL ACTIONS.
    )      

    )     EXHIBIT B
 
           

 

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

 

      This matter came before the Court for hearing pursuant to an Order of this
Court, dated                     , 2005, on the application of the Settling
Parties for approval of the settlement set forth in the Stipulation of
Settlement dated as of May ___, 2005 (the “Stipulation”). Due and adequate
notice having been given of the settlement as required in said Order, and the
Court having considered all papers filed and proceedings held herein and
otherwise being fully informed in the premises and good cause appearing
therefore, IT IS HEREBY ORDERED, ADJUDGED AND DECREED that:

      1. This Judgment incorporates by reference the definitions in the
Stipulation, and all terms used herein shall have the same meanings set forth in
the Stipulation.

      2. This Court has jurisdiction over the subject matter of the Litigation
and over all parties to the Litigation, including all Members of the Settlement
Class.

      3. Except as to any individual claim of those Persons (identified in
Exhibit 1 attached hereto) who have validly and timely requested exclusion from
the Settlement Class, the Litigation and all claims contained therein, including
all of the Released Claims, are dismissed with prejudice as to the Lead
Plaintiff and the other Members of the Settlement Class, and as against each and
all of the Released Persons. The parties are to bear their own costs, except as
otherwise provided in the Stipulation.

      4. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, this Court
hereby approves the settlement set forth in the Stipulation and finds that said
settlement is, in all respects, fair, reasonable and adequate to, and is in the
best interests of, the Lead Plaintiff, the Settlement Class and each of the
Settlement Class Members. This Court further finds the settlement set forth in
the Stipulation is the result of arm’s-length negotiations between experienced
counsel representing the interests of the Lead Plaintiff, the Settlement
Class Members and the Defendants. Accordingly, the settlement embodied in the
Stipulation is hereby approved in all respects and shall be consummated in
accordance with its terms and provisions. The Settling Parties are hereby
directed to perform the terms of the Stipulation.

      5. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, the Court
hereby certifies, for purposes of effectuating this settlement, a Settlement
Class of all Persons who

      [PROPOSED] FINAL JUDGMENT AND ORDER OF     DISMISSAL WITH PREJUDICE —
C-03-2954-SI   -1-

 

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

 

purchased or acquired InterMune common stock during the period between August 8,
2002 and June 11, 2003, inclusive. Excluded from the Settlement Class are
Defendants, members of the immediate families of the Individual Defendants, any
entity in which any Defendant has or had a controlling interest, current or
former directors and officers of InterMune , and the legal representatives,
heirs, successors, or assigns of any such excluded person or entity. Also
excluded from the Settlement Class are those Persons who timely and validly
requested exclusion from the Settlement Class pursuant to the Notice of Pendency
and Proposed Settlement of Class Action, as identified in Exhibit 1 hereto.

      6. With respect to the Settlement Class, this Court finds for the purposes
of effectuating this settlement that (a) the Members of the Settlement Class are
so numerous that joinder of all Settlement Class Members in the Litigation is
impracticable; (b) there are questions of law and fact common to the Settlement
Class which predominate over any individual questions; (c) the claims of the
Lead Plaintiff are typical of the claims of the Settlement Class; (d) the Lead
Plaintiff and Lead Counsel have fairly and adequately represented and protected
the interests of all of the Settlement Class Members; and (e) a class action is
superior to other available methods for the fair and efficient adjudication of
the controversy, considering: (i) the interests of the Members of the Settlement
Class in individually controlling the prosecution of the separate actions; (ii)
the extent and nature of any litigation concerning the controversy already
commenced by Members of the Settlement Class: (iii) the desirability or
undesirability of continuing the litigation of these claims in this particular
forum; and (iv) the difficulties likely to be encountered in the management of
the Litigation.

      7. Upon the Effective Date, the Lead Plaintiff and each of the Settlement
Class Members shall be deemed to have, and by operation of the Judgment shall
have, fully, finally, and forever released, relinquished and discharged all
Released Claims against the Released Persons, whether or not such Settlement
Class Member executes and delivers a Proof of Claim and Release form.

      8. All Settlement Class Members are hereby forever barred and enjoined
from prosecuting the Released Claims against the Released Persons.

      [PROPOSED] FINAL JUDGMENT AND ORDER OF     DISMISSAL WITH PREJUDICE —
C-03-2954-SI   -2-

 

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

 

      9. Upon the Effective Date hereof, each of the Released Persons shall be
deemed to have, and by operation of this Judgment shall have, fully, finally,
and forever released, relinquished and discharged each and all of the Settlement
Class Members and their counsel from all claims (including unknown claims),
arising out of, relating to, or in connection with the institution, prosecution,
assertion, settlement or resolution of the Litigation or the Released Claims.

      10. The distribution of the Notice of Pendency and Proposed Settlement of
Class Action and the publication of the Summary Notice as provided for in the
Order Preliminarily Approving Settlement and Providing for Notice constituted
the best notice practicable under the circumstances, including individual notice
to all Members of the Settlement Class who could be identified through
reasonable effort. Said Notice provided the best notice practicable under the
circumstances of those proceedings and of the matters set forth therein,
including the proposed settlement set forth in the Stipulation, to all Persons
entitled to such notice, and said Notice fully satisfied the requirements of
Federal Rule of Civil Procedure 23, the requirements of due process, and any
other applicable law.

      11. Any plan of allocation submitted by Lead Counsel or any order entered
regarding the attorneys’ fee and expense application and the Lead Plaintiff
expense application shall in no way disturb or affect this Final Judgment and
shall be considered separate from this Final Judgment.

      12. Neither the Stipulation nor the settlement contained therein, nor any
act performed or document executed pursuant to or in furtherance of the
Stipulation or the settlement: (a) is or may be deemed to be or may be used as
an admission of, or evidence of, the validity of any Released Claim, or of any
wrongdoing or liability of the Defendants; or (b) is or may be deemed to be or
may be used as an admission of, or evidence of, any fault or omission of any of
the Defendants in any civil, criminal or administrative proceeding in any court,
administrative agency or other tribunal. Defendants may file the Stipulation
and/or the Judgment in any other action that may be brought against them in
order to support a defense or counterclaim based on principles of res judicata,
collateral estoppel, release, good faith settlement, judgment bar or reduction
or any other theory of claim preclusion or issue preclusion or similar defense
or counterclaim.

      13. Without affecting the finality of this Judgment in any way, this Court
hereby retains continuing jurisdiction over: (a) implementation of this
settlement and any award or distribution of

      [PROPOSED] FINAL JUDGMENT AND ORDER OF     DISMISSAL WITH PREJUDICE —
C-03-2954-SI   -3-

 

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

 

the Settlement Fund, including interest earned thereon; (b) disposition of the
Settlement Fund; (c) hearing and determining applications for attorneys’ fees
and expenses in the Litigation and for reimbursement of the Lead Plaintiff’s
costs and expenses incurred in the Litigation; and (d) all parties hereto for
the purpose of construing, enforcing and administering the Stipulation.

      14. The Court finds that during the course of the Litigation, the Settling
Parties and their respective counsel at all times complied with the requirements
of Federal Rule of Civil Procedure 11.

      15. In the event that the settlement does not become effective in
accordance with the terms of the Stipulation or the Effective Date does not
occur, or in the event that the Settlement Fund, or any portion thereof, is
returned to the Defendants, then this Judgment shall be rendered null and void
to the extent provided by and in accordance with the Stipulation and shall be
vacated and, in such event, all orders entered and releases delivered in
connection herewith shall be null and void to the extent provided by and in
accordance with the Stipulation.

         
DATED:
       

       

      THE HONORABLE SUSAN ILLSTON

      UNITED STATES DISTRICT JUDGE

Submitted by:

GLANCY BINKOW & GOLDBERG LLP
Lionel Z. Glancy #134180
Peter A. Binkow #173848
Michael Goldberg #188669
Susan Kupfer #141724
1801 Ave. of the Stars, Suite 311
Los Angeles, CA 90067
Tel: (310) 201-9150
Fax: (310) 201-9160

Local Counsel for Lead Plaintiff and the Settlement Class

GOODKIND LABATON RUDOFF & SUCHAROW LLP
Ira A. Schochet
Richard T. Joffe
100 Park Avenue
New York, NY 10017
Tel: (212) 907-0700
Fax: 818-0477

Lead Counsel for Lead Plaintiff and the Settlement Class

      [PROPOSED] FINAL JUDGMENT AND ORDER OF     DISMISSAL WITH PREJUDICE —
C-03-2954-SI   -4-

 

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LERACH COUGHLIN STOIA & ROBBINS LLP
Kimberly C. Epstein
Eli R. Greenstein
100 Pine Street, Suite 2000
San Francisco, CA 94111
Tel: (415) 288-4545
Fax: (415) 288-4534

ROY L. JACOBS
292 Madison Avenue — 15th Floor
New York, NY 10016
Tel: (646) 742-9860
Fax: (212) 504-8343

Additional Counsel for Lead Plaintiff and the Settlement Class

      [PROPOSED] FINAL JUDGMENT AND ORDER OF     DISMISSAL WITH PREJUDICE —
C-03-2954-SI   -5-

 

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

             
In re INTERMUNE, INC. SECURITIES LITIGATION
    )     Master File No. C-03-2954-SI

    )      

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    )     CLASS ACTION

    )      
This Document Relates To:
    )     STIPULATION OF SETTLEMENT

    )      
ALL ACTIONS.
    )      

    )      

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    )      

SUPPLEMENTAL AGREEMENT

      Pursuant to the Stipulation of Settlement between the Plaintiff Class and
Defendants W. Scott Harkonen, Sharon Surrey-Barbari and InterMune, Inc., dated
as of May ___, 2005 (the “Settlement Stipulation”), this Supplemental Agreement
is made by and among the parties to the Settlement Stipulation.

      1. All terms used in this Supplemental Agreement shall have the same
meanings as in the Settlement Stipulation.

      2. Subject to the provisions of paragraph 3 hereof, Defendants, together,
shall have the option to terminate the Settlement in the event Persons who would
otherwise be members of the Settlement Class elect to be excluded from the
Settlement Class, such that more than ten per cent (10%) of the shares of
InterMune stock that would be eligible to receive a recovery under the terms of
the Stipulation, an aggregate number that Lead Plaintiff has determined equals
38.5 million shares, have been excluded from the Settlement.

      3. It is expressly understood and agreed that the only persons and
entities who may file requests for exclusion at this time are those persons and
entities who would otherwise be members of the Settlement Class.

      4. Lead Counsel shall cause the Claims Administrator to transmit all
Requests for exclusion by fax or electronic delivery to counsel for Defendants
within two business days of receipt by the Claims Administrator.

 

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      5. If Defendants elect to exercise the option to terminate the Settlement,
written notice of such election must be provided to Plaintiff’s Counsel on or
before five calendar days prior to the Settlement Fairness Hearing.

      6. In the event that Defendants file a written notice of intent to
terminate the Settlement, Defendants may withdraw their election by providing
written notice of such withdrawal, by fax or electronic delivery, to Plaintiff’s
Counsel no later than 5:00 P.M. Pacific Time on the day prior to the Settlement
Fairness Hearing, or by such later date as shall be agreed upon in writing as
between Plaintiffs’ Counsel and counsel for Defendants.

      7. If Defendants elect to terminate, Plaintiffs’ Counsel may, within five
days of receipt of such notice of intention (or such longer period as shall be
agreed upon in writing between Plaintiffs’ Counsel and counsel for Defendants),
review the validity of any request for exclusion and may attempt to cause
retraction or withdrawal of any request for exclusion. If, within the five day
period (or any longer period agreed upon in writing), Plaintiffs’ Counsel
succeeds in causing the filing of retractions or withdrawals of a sufficient
number of requests for exclusion such that the number of shares represented by
the remaining requests for exclusion does not constitute grounds for termination
of participation, then any such termination by Defendants shall automatically be
deemed to be a nullity. To retract or withdraw a prior request for exclusion, a
member of the Settlement Class must file a signed, written notice with the Court
stating the person’s or entity’s desire to retract or withdraw his, her, or its
request for exclusion and that person’s or entity’s desire to be bound by any
judgment and settlement in this action; provided, however, that the filing of
such written notice may be effected by Plaintiff’s Counsel, as long as it is
personally executed by the Settlement Class Member.

      8. If Defendants elect to terminate, and such termination is not withdrawn
or nullified, the Settlement Stipulation shall be withdrawn and terminated and
deemed null and void in accordance with its provisions.

DATED:                     , 2005

 

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GOODKIND LABATON RUDOFF
& SUCHAROW LLP

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

Ira A. Schochet
Richard T. Joffe
100 Park Avenue
New York, New York 10017
Tel: (212) 907-0700
Fax: 818-0477

Attorneys for Lead Plaintiff
And the Settlement Class

COOLEY GODWARD LLP

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

William S. Freeman
Mary Beth O’Connor
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Tel: (650) 843-5000
Fax: (650) 849-7400

Attorneys for Defendants
W. Scott Harkonen
Sharon Surrey-Barbari
InterMune, Inc.