Document:

exv10w31

 

Exhibit 10.31

CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN

THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN

OMITTED AND FILED SEPARATELY WITH THE

SECURITIES AND EXCHANGE COMMISSION PURSUANT TO

RULE 24B-2 OF THE SECURITIES EXCHANGE

ACT OF 1934, AS AMENDED.

SUPPLY AGREEMENT

Between

ASH STEVENS, INC.

and

PHARMION CORPORATION

Dated: March 31, 2005

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	Sec.	 	 	 	Page	 
	 
	 	Essential Terms and Conditions	 	 	1	 
	 
	 	 	 	 	 	 
	1.
	 	Supply and Purchase of Compound	 	 	2	 
	 
	 	 	 	 	 	 
	2.
	 	Rolling Forecast; Safety Stock	 	 	4	 
	 
	 	 	 	 	 	 
	3.
	 	Shipment of Compound	 	 	5	 
	 
	 	 	 	 	 	 
	4.
	 	Termination; Licenses	 	 	7	 
	 
	 	 	 	 	 	 
	5.
	 	Compound Changes; Starting Materials	 	 	10	 
	 
	 	 	 	 	 	 
	6.
	 	Regulatory Responsibilities	 	 	12	 
	 
	 	 	 	 	 	 
	7.
	 	Quality Assurance	 	 	14	 
	 
	 	 	 	 	 	 
	8.
	 	Health and Safety Procedures	 	 	15	 
	 
	 	 	 	 	 	 
	9.
	 	Warranties and Indemnifications	 	 	15	 
	 
	 	 	 	 	 	 
	10.
	 	Insurance	 	 	17	 
	 
	 	 	 	 	 	 
	11.
	 	Confidentiality and Proprietary Rights	 	 	18	 
	 
	 	 	 	 	 	 
	12.
	 	Compliance With Law	 	 	20	 
	 
	 	 	 	 	 	 
	13.
	 	Other Provisions	 	 	20	 
	 
	 	 	 	 	 	 
	 
	 	Table of Exhibits	 	 	24	 

					
	 
	 
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SUPPLY AGREEMENT

     THIS SUPPLY AGREEMENT (the “Agreement”) is made effective as of March 31, 2005 (“Effective
Date”) between:

	(1)  	ASH STEVENS, INC., a Michigan corporation with its principal place of
business at 5861 John C. Lodge Freeway, Detroit, Michigan 48202-3398 USA (“Ash
Stevens”); and
	 
	(2)  	PHARMION CORPORATION, a Delaware corporation with its principal office at 2525 28th
St., Suite 200, Boulder, CO 80301 USA (“Pharmion”).

Pharmion and Ash Stevens are sometimes individually referred to herein as a “Party” and
collectively as the “Parties”.

In consideration of the mutual agreements set forth herein, and other good and valuable
consideration the receipt and sufficiency of which are acknowledged, the Parties, intending to be
legally bound, hereby agree as follows:

 ESSENTIAL TERMS AND CONDITIONS

The following are contractual essential terms and conditions collected together here solely for the
convenience of the Parties:

	A.  	General. Ash Stevens desires to manufacture and supply to Pharmion the compound
azacitidine (“Compound”, which is also known as 5-azacitidine) in accordance with the
specifications referenced in Exhibit A hereto (the “Specifications”). Pharmion
desires to purchase Compound from Ash Stevens for use or for inclusion in human pharmaceutical
products for development, sale or other commercialization by Pharmion and its affiliates and
licensees.
	 
	B.  	Prices and Payment. Prices for Compound are as specified in Exhibit B
hereto. Terms of payment are net 30 days from delivery to Pharmion of Compound and Ash
Stevens’ invoice.
	 
	C.  	Term and Termination. The initial term of this Agreement (the “Initial Term”) begins
on the Effective Date and ends on May 31, 2011 (the “Initial Term Expiration Date”), unless
earlier terminated by either Party pursuant to the provisions of this Agreement. The Term of
this Agreement shall automatically be renewed for additional periods of two (2) years (each an
“Automatic Extension Period”) unless either Party provides notice of its desire for this
Agreement to expire at least one (1) year in advance of the relevant expiration date (a
“Notice of Termination”). Upon the request of either Party made during the last year of the
Initial Term, the Parties shall discuss in good faith their plans and intent for the renewal
of this Agreement for any Automatic Extension Period. This Agreement may be terminated as
provided in Section 4(b) hereof.

					
	 
	 
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	D.  	The Parties are also parties to that certain Process Development and Validation Agreement
dated as of October 15, 2001, as amended by the First Amendment to Confidentiality Agreement
and Process Development and Validation Agreement dated May 28, 2003 (the “Process Agreement”)
and that certain Confidentiality Agreement dated as of October 15, 2001, as amended by the
First Amendment to Confidentiality Agreement and Process Development and Validation Agreement
dated May 28, 2003 (the “Confidentiality Agreement”).

TERMS AND CONDITIONS

	 	1.  	SUPPLY AND PURCHASE OF COMPOUND

          (a) General. Subject to and in accordance with the provisions of this Agreement, Ash
Stevens shall manufacture and supply Compound to Pharmion (and Pharmion’s affiliates and licensees,
as authorized and directed in writing by Pharmion from time to time subject to the rights of Ash
Stevens under Section 1(g), hereinafter “Pharmion Designees”), as ordered by Pharmion pursuant to
this Section 1. As authorized and directed by Pharmion, Pharmion Designees may exercise the rights
of Pharmion pursuant to this Agreement pertaining to the supply of Compound. All sales of Compound
to Pharmion and Pharmion Designees shall be subject to the terms and conditions of this Agreement.

          (b) Exclusivity.

	 	(i)  	Supplies by Ash Stevens. Ash Stevens shall exclusively manufacture and
supply Compound to Pharmion and Pharmion Designees pursuant to this Agreement. Ash
Stevens shall not during the Term of this Agreement (both during and after the
Exclusivity Period (as defined below)) and for a period of five (5) years after
expiration of the Term or termination pursuant to an uncured material breach by Ash
Stevens of this Agreement, sell or provide Compound to any other person or entity
anywhere in the world (the “Territory”).
	 
	 	(ii)  	Purchases by Pharmion. Pharmion and Pharmion Designees shall
exclusively purchase its requirements of the Compound for the Territory from Ash
Stevens from the Effective Date until the Initial Term Expiration Date (the
“Exclusivity Period”). After the Exclusivity Period and during any Automatic Extension
Period, Pharmion and Pharmion Designees in their sole discretion may either (i)
purchase from Ash Stevens all of its requirements of Compound for the Territory, or
(ii) purchase a portion, or none of, its requirements of Compound for the Territory.
Notwithstanding the foregoing, the Exclusivity Period shall terminate in the event that
a Supply Shortage (as defined in Section 2(c) below) has occurred and Ash Stevens has
failed to remedy the Supply Shortage as provided in Section 4(e) of this Agreement.

          (c) Orders. Pharmion and Pharmion Designees may order Compound from Ash Stevens by
placing written purchase orders during the Term of this Agreement (“Orders”). During the Term Ash
Stevens shall accept all such Orders which are for quantities which are not

					
	 
	 
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more than 120% of the quantities specified by Pharmion and Pharmion Designees in the then-current
Rolling Forecast (as defined in Section 2(a) hereof) for the relevant period, and shall acknowledge
promptly (and in any event within ten (10) business days) each Order in writing and confirm the
delivery dates and the destinations specified in the relevant Order. During the Term, Ash Stevens
shall timely make delivery on Orders for which the delivery date
specified is at least [... *** ...] after the date of the Order. In the event of any inconsistencies
between the terms of this Agreement and any Order issued by Pharmion and Pharmion Designees
hereunder or any acceptance thereof by Ash Stevens, the terms of this Agreement shall govern.

          (d) Force Majeure. Neither Party shall be considered in default of the performance of
any obligation hereunder to the extent that the performance of such obligation is prevented or
delayed by fire, flood, earthquake, explosion, strike, acts of terrorism, war, insurrection,
embargo, government requirement, civil or military authority, act of God, or any other event,
occurrence or condition which is not caused, in whole or in part, by that Party, and which is
beyond the reasonable control of that Party (each a “Force Majeure Event”); provided,
however, that Ash Stevens shall notify Pharmion promptly of anticipated delivery delays and shall
use commercially reasonable efforts to fill delayed Orders as soon as possible. Pharmion may cancel
any Order, in whole or in part, which is delayed more than thirty (30) days after the delivery date
in such Order, but only if Ash Stevens has performed no work on such Order. For the avoidance of
doubt, any failure by suppliers to Ash Stevens to timely deliver starting materials, ingredients,
resources and services used to make the Compound when properly ordered by Ash Stevens shall be
considered a Force Majeure Event.

          (e) Purchase Prices and Payment. Prices for Compound are as specified in Exhibit
B hereto. Ash Stevens shall invoice Pharmion for the purchase price of all quantities of
Compound purchased hereunder concurrently with Ash Stevens’s shipment thereof to Pharmion, or for
the safety stock of Compound specified in Section 2(b) hereof, when such Compound is placed in such
safety stock for Pharmion by Ash Stevens. All amounts properly invoiced by Ash Stevens hereunder
shall be due and payable thirty (30) days from Pharmion receipt of such invoices. Payment may be
made by corporate check or by wire transfer of funds to such account in the name of Ash Stevens as
Ash Stevens may designate by notice to Pharmion. Unless otherwise agreed by Ash Stevens in
writing, all payment for Compound purchased by Pharmion Designees shall be charged and invoiced to
the account of Pharmion and Pharmion shall pay all such invoices in accordance with the terms set
forth herein.

          (f) No Diligence Requirement for Pharmion. Nothing in this Agreement or any other
agreement between the Parties shall obligate Pharmion to commence or continue manufacture of
products incorporating Compound, or otherwise commercialize the Compound or such products. If
Pharmion permanently discontinues the manufacture of products incorporating Compound, then Orders
which have been issued by Pharmion and accepted by Ash Stevens shall not be deemed to be cancelled,
and the Parties shall fulfill their respective obligations related to such Orders as provide herein
unless otherwise agreed in writing.

          (g) Pharmion shall be the guarantor of, and be fully responsible for, all payment and other
obligations incurred by Pharmion Designees for Orders. Upon any failure by any Pharmion Designee
to pay amounts owing to Ash Stevens or otherwise fail to perform its

					
	 
	 
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obligations hereunder, Ash Stevens shall be entitled to full and prompt compensation by
Pharmion for all outstanding payment and other obligations incurred by Pharmion Designees for
Orders. In consideration for the right of Pharmion Designees to have Orders filled by Ash Stevens
hereunder, Pharmion hereby agrees to indemnify and hold harmless Ash Stevens from and against any
and all losses, obligations, liabilities and expenses (including attorneys’ fees) for claims,
demands, actions and proceedings arising in connection with Orders by any Pharmion Designee if such
losses, obligations, liabilities and expenses would be indemnified by Pharmion pursuant to Section
9(c) hereof if Pharmion were the purchaser of the Compound. Notwithstanding anything herein to the
contrary, Ash Stevens may in its sole discretion require that each Pharmion Designee that is not an
affiliate of Pharmion enter into a supply agreement on substantially the same terms as this
Agreement as a condition to submitting any Order hereunder.

	 	2.  	ROLLING FORECAST; SAFETY STOCK

          (a) Rolling Forecast. Pharmion shall provide Ash Stevens with a twelve (12) month
rolling delivery forecast of the quantity of Compound that Pharmion and Pharmion Designees intends
to purchase from Ash Stevens in the periods specified (the “Rolling Forecast”). The first six
months of the Rolling Forecast (the “Firm Period”) shall be binding, subject to the next sentence,
and the last six months of the Rolling Forecast (the “Estimate Period”) shall be non-binding.
Pharmion shall update the Rolling Forecast every three (3) months; provided, however, in each such
update, Pharmion may (i) revise (increase or decrease) the Rolling Forecast for the Estimate
Period, and (ii) increase the Rolling Forecast for the Firm Period by a maximum of  [... *** ...] from the quantities specified in the most recent prior Rolling Forecast but may not decrease
such forecast quantities, unless otherwise agreed to in writing by Ash Stevens. Pharmion shall
inform Ash Stevens as soon as possible if Pharmion reasonably expects that Orders for Compound
would vary significantly (more than 20%) from the Rolling Forecast but while Ash Stevens will
endeavor to satisfy Pharmion’s increased demand using commercially reasonable efforts, it is
understood and agreed that Ash Stevens shall in no event be obligated to deliver quantities of
Compound in excess of those quantities properly forecast in accordance with this Section 2(a).

          (b) Safety Stock. During the Term of this Agreement, as directed by Pharmion in its
Orders, Ash Stevens shall manufacture and maintain a “safety stock” of Compound. Pharmion shall
have discretion to determine the quantity of such safety stock from time to time, which shall
become the property of Pharmion upon payment in full therefor in accordance with this Agreement.
For the avoidance of doubt, quantities of Compound Pharmion wishes to have maintained as a safety
stock shall be subject to the forecasting procedures set forth in Section 2(a). Ash Stevens, when
shipping Compound to Pharmion in accordance with this Agreement, shall manage such safety stock
with its own inventories of Compound on a “first in, first out” basis to maximize shelf life and
minimize spoilage. Ash Stevens shall properly store all inventories of Compound (including such
safety stock) prior to delivery pursuant to Section 3 hereof in accordance with the Specifications,
cGMPs and the instructions of Pharmion; such storage shall be at Ash Stevens’ cost, except for the
storage of such safety stock (for time periods after the date the relevant quantities of the
Compound are released into safety stock until delivered to Pharmion) for which Pharmion shall pay
Ash Stevens [... *** ...]. Title to such safety stock shall pass to
Pharmion upon payment by

					
	 
	 
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Pharmion for such safety stock pursuant to Section 1(e) hereof. Ash Stevens shall segregate
from other inventory and clearly mark such safety stock as the property of Pharmion, and shall not
permit any lien, claim or encumbrance to apply to such safety stock. Risk of loss for such safety
stock shall pass to Pharmion when actually delivered in accordance with Section 3 hereof. Pharmion
may require Ash Stevens to ship such safety stock as directed by Pharmion at any time, at
Pharmion’s expense pursuant to Section 3. Ash Stevens shall be entitled to invoice Pharmion for
such safety stock storage charges and Pharmion shall pay all such invoices net 30 days from
delivery of Ash Stevens’ invoice. In addition to the quantities of Compound held as safety stock
as directed by Pharmion as contemplated by the foregoing, to further protect against shortages, Ash
Stevens shall at its own expense maintain its own safety stock of Compound corresponding to not
less than the greater of (i) [... *** ...], and
(ii) [... *** ...] of the aggregate
quantities ordered by Pharmion in the immediately preceding twelve (12) month period, with [... *** ...] of such additional safety stock levels to be achieved not later than nine (9)
months after the Effective Date, and the full requirements of such additional safety stock levels
to be achieved not later than eighteen (18) months after the Effective Date.

          (c) A “Supply Shortage” shall occur if, at any time during the Term, the quantities of
Compound supplied by Ash Stevens to Pharmion or Pharmion Designees, as applicable, are less than
(i) [... *** ...] of the quantities specified in Orders accepted by Ash Stevens over a period
of three (3) consecutive months (the “[... *** ...] Trigger”); or (ii) [... *** ...] of the quantities
specified in Orders accepted by Ash Stevens over a period of four
(4) consecutive months (the “[... *** ...] Trigger”), or (iii) [... *** ...] of the quantities specified in Orders accepted by
Ash Stevens over a period of six (6) consecutive months (the “[... *** ...] Trigger), where in each case such
quantities were properly forecast and ordered by Pharmion or Pharmion Designees in accordance with
this Section 2. In the event of a Supply Shortage, the provisions of Section 4(e) shall apply.

	 	3.  	SHIPMENT OF COMPOUND

          (a) Shipment. Deliveries of Compound shall be EXW (“Ex Works”, INCOTERMS 2000) Ash
Stevens shipping dock. Upon the request of Pharmion, Ash Stevens shall at Pharmion’s expense ship
Compound to such location in the United States of America as may be specified by Pharmion in the
relevant Order. Pharmion may not specify delivery locations outside of the United States of
America without the prior written agreement of Ash Stevens. Ash Stevens shall ship the Compound
via carriers which have mutually agreed upon. Unless otherwise agreed to in writing, Pharmion
shall pay all freight charges. Ash Stevens shall include a packing list in each shipment of the
Compound providing the following information: (i) Purchase Order No.; (ii) Compound Code; (iii)
Quantity; and (iv) Ash Stevens Lot Number; and the shipment shall include the Certificate of
Analysis and Certificate of Compliance (confirming that the Compound has been manufactured in
accordance with cGMPs). Ash Stevens shall also mail a copy of each packing list to the destination
and to Pharmion (to the address specified by Pharmion, which may be different from the destination)
for each shipment at the time of shipment. Ash Stevens shall comply with Pharmion’s or its
designee’s Receiving Requirements,

					
	 
	 
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as further described in Exhibit C hereto without additional charge. Risk of loss for
Compound shall pass to Pharmion when Compound is received by the carrier at Ash Stevens’ shipping
dock.

          (b) Short Quantities. After receipt of each shipment of the Compound, Pharmion or its
authorized representatives shall conduct a quantity count of such shipment. Pharmion shall notify
Ash Stevens in writing of any obvious shortage in quantity of any shipment of the Compound within
thirty (30) days after such receipt (a “Notice of Short Quantity”). A shipment of the Compound is
to be considered to have fulfilled the quantity specified in the relevant Order if Pharmion or its
representatives does not notify Ash Stevens about any objections within such time periods.

          (c) Defects. Pharmion and its representatives shall have the right, but not the
obligation, to inspect and test the quality of any shipment of the Compound pursuant to Section
7(b) (Pharmion Inspection) hereof. Ash Stevens acknowledges and agrees that (i) each shipment of
the Compound shall be tested and inspected by Ash Stevens prior to release in accordance with the
Specifications and cGMPs pursuant to Section 7(a) (Release by Ash Stevens) hereof, (ii) Ash Stevens
shall provide Pharmion with a certificate of analysis and other proper release documentation for
each shipment of the Compound, (iii) Pharmion and Pharmion Designees may rely upon such certificate
of analysis and other release documentation related to each shipment of the Compound, (iv) Ash
Stevens at its cost shall make and retain “retention samples” for each shipment of the Compound, as
required by Section 6(f) (Retention) hereof, and (v) Ash Stevens shall not be released of its
obligations under this Agreement related to any shipment of the Compound which has not been
inspected or tested by Pharmion or its representatives. If Pharmion or Pharmion Designee at any
time rejects a shipment of Compound, written notice thereof shall be provided to Ash Stevens.

          (d) Disputes. If there is a dispute as to whether any portion of any shipment of the
Compound is not in compliance with the requirements of this Agreement, such dispute shall be
resolved by having a representative of Pharmion observe the performance of the analytical testing
by Ash Steven’s personnel or by having Ash Stevens observe the performance of the analytical
testing by Pharmion’s personnel. If the discrepancy results cannot be resolved in this manner, the
testing shall be performed by an independent, mutually acceptable, qualified third party. If
analytical testing results from Ash Stevens retention samples are different from analytical testing
results from Pharmion retention samples when contemporaneously obtained in the same laboratory,
then the results from the Ash Stevens retention samples shall govern and control.

          (e) Replacements; Refunds; Exclusive Remedies for Quantities. If a shipment is
properly rejected by Pharmion, Ash Stevens will schedule another production run as soon as
commercially reasonable thereafter and will deliver a new shipment if so requested in writing by
Pharmion. In the event that Ash Stevens is unable to deliver a replacement shipment of Compound
that conforms to the Specification, Ash Stevens shall refund any money paid by Pharmion for such
shipment. Notwithstanding anything in this Agreement to the contrary, this Section 3(e) and
Sections 4(b)(iii), 4(e) and Section 6(e) are the sole and exclusive remedies available to Pharmion
and Pharmion Designees for any failure by Ash Stevens to supply Compound that meets the
Specification, including, without limitation, any breach of the warranties and covenants provided
by Ash Stevens in Section 9(a), or for a Supply Shortage,

					
	 
	 
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however, the foregoing shall not be construed to limit the indemnification obligations of
either Party.

	 	4.  	TERMINATION; LICENSES

          (a) Term. The term of this Agreement (the “Term”) shall be the Initial Term, together
with any applicable Automatic Extension Period(s), unless earlier terminated pursuant to Section
4(b) hereof.

          (b) Termination. This Agreement may be terminated prior to the expiration of the
Initial Term or the current Automatic Extension Period, as relevant, as follows, but for no other
reason:

	 	(i)  	For Cause. Either Party may terminate this Agreement for any material
breach by the other Party ninety (90) days after a written notice containing details of
the breach has been provided to the other Party, if the breach remains uncured at the
end of the notice period; provided however, that the foregoing shall not apply to
Supply Shortages (for which separate provision has been made hereunder).
	 
	 	(ii)  	For Bankruptcy. Either Party may terminate this Agreement effective
immediately with written notice to the other Party if the other Party shall file for
bankruptcy, shall be adjudicated bankrupt, shall take advantage of applicable
insolvency laws, shall make an assignment for the benefit of creditors, shall be
dissolved or shall have a receiver appointed for its property.
	 
	 	(iii)  	For Quality Concerns. Pharmion shall have the right to terminate this
Agreement immediately if Ash Stevens has been determined under the procedures in
Section 3(d) to be in material breach of any of its warranties contained in Section 9
and such breach has not been corrected in the manner provided in this Agreement to the
reasonable satisfaction of Pharmion.
	 
	 	(iv)  	Termination for Disbarment. Either Party may terminate this Agreement
effective immediately upon notice if at any time during the Term the Other Party
becomes debarred. Each Party shall notify the other Party immediately if at any time
during the Term the Party or any of its officers or employees becomes debarred, or
receives notice of action or threat of action with respect to its, his, or her
debarment.

          (c) Fulfillment of Orders. If this Agreement is terminated as provided above by
Pharmion, then (i) Pharmion may cancel without liability all outstanding Orders for which delivery
has not been completed, as determined by Pharmion in its sole discretion, and (ii) such termination
will not relieve Ash Stevens of its obligation to deliver Compound ordered by Pharmion prior to the
effective date of termination (except to the extent Orders are so cancelled by Pharmion).

          (d) Survival. Upon the expiration or termination of this Agreement for any reason,
the following provisions of this Agreement shall survive in accordance with their terms:

					
	 
	 
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Sections 2(b) (Safety Stock), 3(c) (Defects), 3(d) (Disputes), 3(e) (Replacements; Refunds),
4(c) (Fulfillment of Orders), 4(e) (Back-up Supply and Licenses), 6(b) (Regulatory Filings), 6(e)
(Recalls), 6(f) (Retention), 6(g) (Further Cooperation), 7(b) (Pharmion Inspection) (such
inspections after the expiration or termination of this Agreement and shall be at mutually
agreeable times, with Pharmion paying Ash Stevens a fee of $200 per hour during such inspections
(as such fee may be increased annually by Ash Stevens by not more than 5% per year)), 7(c)
(Complaints), 8 (Health and Safety), 9 (Warranties and Indemnifications), 11 (Confidentiality and
Proprietary Rights), 12 (Compliance with Law) and 13 (Other Provisions). The provisions of the
Quality Agreement, as expressly specified therein to survive, shall also survive the expiration or
termination of this Agreement and the Quality Agreement.

          (e) Back-up Supply and Licenses. If a Supply Shortage occurs under Section 2(c) and
written notice of same by Pharmion to Ash Stevens has been given, then Ash Stevens shall have the
opportunity to correct the Supply Shortage by supplying those quantities of Compound specified in
Orders (which Orders had been properly forecast and submitted by Pharmion or Pharmion Designees and
duly accepted by Ash Stevens) which quantities Ash Stevens had failed to supply and which failure
resulted in triggering one of three alternative definitions of “Supply Shortage” as set forth in
Section 2(c). From the date that the notice of a Supply Shortage is given, Ash Stevens shall have
the following periods of time as applicable to correct the Supply Shortage: (i) [... *** ...] if
due to the [... *** ...] Trigger, (ii) [... *** ...] if due to the [... *** ...] Trigger, and (iii) [... *** ...] if
due to the [... *** ...] Trigger. If Ash Stevens has failed to correct the Supply Shortage within the
applicable time period, then the Exclusivity Period shall terminate and Pharmion shall be entitled
to exercise back-up supply rights under this Section 4(e) (the “Back-up Supply Rights”) and
Pharmion shall thereafter be free to establish and utilize one or more alternative suppliers for
the Compound. Upon failure by Ash Stevens to correct the Supply Shortage within the applicable
time period, the Exclusivity Period shall terminate and shall not be considered to be reinstated
merely because Ash Stevens manages to correct the Supply Shortage after the applicable time period
for so doing has expired.

     Upon termination of the Exclusivity Period pursuant to this Section 4(e) and subject to the
conditions and limitations set forth below in this Section 4(e), at the request of Pharmion, Ash
Stevens shall provide such cooperation and assistance to Pharmion as reasonably required to
establish such supplier(s) designated by Pharmion by written notice to Ash Stevens (each a “Back-up
Supplier”). Any third party supplier who has received Ash Stevens’ process trade secrets or
proprietary confidential information pertaining to the Compound (as disclosed for example in Ash
Steven’ development report for the Compound, any batch production record for the Compound or within
the CMC sections of the relevant NDA submissions to the FDA) from Pharmion or an affiliate of
Pharmion, either directly or indirectly, shall for the purpose of payment of the Fee be deemed also
to be a “Back-up Supplier”. Such cooperation and assistance may include reasonable assistance to
facilitate the preparation of registrations, permits, qualifications and approvals from the
relevant regulatory authorities so that such Back-up Supplier(s) shall be enabled to satisfy
regulatory requirements necessary to commence manufacture and supply of Compound to Pharmion. Ash
Stevens shall be responsible for all of its own reasonable costs and expenses incurred in
association with rendering such cooperation and assistance. Upon termination of the Exclusivity
Period pursuant to this Section 4(e) and subject to the provisions of this Section 4(e), at the
request of Pharmion, Ash Stevens shall

					
	 
	 
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transfer to the Back-up Supplier(s) designated by Pharmion all Ash Stevens know-how or other
confidential information within Ash Stevens’ possession that is necessary for the manufacture of
Compound, provided that such Back-up Supplier(s) shall have entered into a confidentiality
agreement with Ash Stevens in form and substance reasonably satisfactory to Ash Stevens for
purposes of appropriately and reasonably protecting the confidentiality and restricting the use of
any such Ash Stevens know-how or other confidential information.

     Ash Stevens hereby grants to Pharmion the following licenses (which together with the balance
of this Section 4(e) shall survive the expiration or termination of this Agreement for any reason),
subject to Pharmion’s compliance with the terms and conditions of this Agreement which pertain to
the rights granted in such licenses (the “Licenses”):

	 	(i)  	From and after the Effective Date, a nonexclusive, royalty free license for the
Territory, with the right to sublicense, to use all information and intellectual
property rights owned or licensed by Ash Stevens, including Ash Stevens’ Inventions, to
research, develop, make, have made, use, distribute, sell and otherwise commercialize
products which include Compound.
	 
	 	(ii)  	From and after the earlier of (A) the expiration or earlier termination of the
Exclusivity Period, or (B) the expiration or earlier termination of this Agreement for
any reason, a nonexclusive, royalty-free (except for any Fee payable hereunder) license
for the Territory, with the right to sublicense, to use all information and
intellectual property rights owned or licensed by Ash Stevens, including Ash Stevens’
Inventions, to research, develop, make, have made, use, distribute, sell and otherwise
commercialize Compound.

     Except as expressly provided below, during the Fee Period (as defined below), Pharmion shall
pay to Ash Stevens a fee of [... *** ...] of Compound (the “Fee”) for all
quantities of Compound purchased or otherwise received from any Back-up Supplier(s) by Pharmion,
its affiliates (including Pharmion Designees which are affiliates of Pharmion) and Pharmion
Designees, and each of their respective licensee, sublicensees and any other third parties which
derive their right to market and sell products containing the Compound from Pharmion or a Pharmion
affiliate or a licensee of either of the foregoing (collectively, the “Covered Compound
Purchasers”), either directly or indirectly. The Fee payable for any calendar quarter (or portion
thereof) during the Fee Period shall be paid within ninety (90) days after the end of such calendar
quarter and be accompanied by a report detailing the quantities of Compound sourced from third
parties during such quarter and the calculation of the Fee payable for such quarter. The Fee will
be payable during the period beginning immediately following any early termination of the
Exclusivity Period (i.e. before its scheduled expiry on May 31, 2011) and ending on May 31, 2011
(the “Fee Period”), except as expressly provided below.

     The obligation to pay the Fee shall be suspended for a period two years immediately following
any early termination of the Exclusivity Period (i.e. before its scheduled expiry on May 31, 2011)
due to a Supply Shortage pursuant to this Section 4(e) that Ash Stevens has failed to correct
within the applicable time period herein provided for so doing.

					
	 
	 
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     The Fee shall not be payable if Ash Stevens has materially breached its obligations under this
Section 4(e), and failed to promptly cure such breach upon notice thereof, to transfer to the
Back-up Supplier(s) the necessary know-how and confidential information and to provide cooperation
and assistance as reasonably required, it being understood however that Ash Stevens shall be
considered not to be in material breach of such obligations where the Back-up Supplier(s) has been
unable or unwilling to receive or to make effective use of the information or assistance offered by
Ash Stevens.

     The Fee shall not be payable in the event that the uncorrected Supply Shortage or uncured
material breach of this Agreement by Ash Stevens is demonstrably due to Ash Stevens’ intentional
breach of its obligations to manufacture and supply quantities of the Compound as properly
forecasted, ordered and accepted hereunder (for example, because of Ash Stevens decides to allocate
production capacity reserved for the production of the Compound for Pharmion to a different
compound for another of its customers or fails to order necessary supplies). For the avoidance of
doubt, the Fee shall remain payable for any termination of this Agreement under circumstances other
than as set forth in the foregoing sentence.

     The Fee shall not be payable in respect of any Compound purchased after May 31, 2011.

     Notwithstanding any provision in this Agreement to the contrary, Ash Stevens shall be entitled
to suspend (during any period of payment default) the Licenses under clause (ii) above, if sixty
(60) days after written notice has been given to Pharmion of any failure to pay any amount on
account of the Fee that is due and owing, such amount remains unpaid, provided that Pharmion may
avoid such suspension if the Fee amounts disputed in good faith are deposited in escrow and
supplemented as appropriate pending resolution of the dispute following the audit process provided
in Section 13(o) hereof.

	 	5.  	COMPOUND CHANGES; STARTING MATERIALS

          (a) Compound Changes.

	 	(i)  	Approval Rights. Pharmion, in its sole discretion, shall have the sole
right and authority to make and approve changes in the Specifications or the Compound;
provided, however, that Ash Stevens shall have limited rights as provided in clause
5(a)(iii) to change suppliers of certain starting materials which do not have a
supplier specified in the Specifications. As used in this Section 5, “Change
Expenses” shall mean the costs to both Parties of making changes in the
Specifications or the Compound, including, but not limited to, validation and
development costs, capital expenditure costs and costs for any packaging components or
other materials rendered unusable as a result of such changes; to the extent possible,
the Parties shall agree upon the amount of Change Expenses in advance of the
implementation of any such change. For purposes of Change Expenses, each Party shall
account for the value of the time of its personnel at the rate of Two Hundred Dollars
(US$200) per hour (as such fee may be increased annually by each Party by not more than
5% per year).

					
	 
	 
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	 	(ii)  	Required Changes. Ash Stevens shall promptly (and in any event within
the time period specified by the applicable regulatory authority, or if no such time
period is specified, within thirty (30) calendar days unless another suitable time
period is mutually agreed by the Parties) make any change in the Specifications or the
Compound required to address the requirements of regulatory authorities approved by
Pharmion. Change Expenses for changes required to address the requirements of
regulatory authorities shall be (i) paid for by Pharmion pursuant to clause 5(a)(iv)
hereof if directed to the Compound specifically, or (ii) paid for by Ash Stevens
pursuant to clause 5(a)(iii) hereof if directed to the operations of Ash Stevens
generally (i.e., such modifications or changes are applicable to both the Compound and
one or more other products manufactured by Ash Stevens). Any net cost decreases per
kilogram for the Compound (after deduction of all Change Expenses) resulting from such
changes shall be allocated as follows: [... *** ...].
	 
	 	(iii)  	Discretionary Changes Requested by Ash Stevens. Ash Stevens shall
notify Pharmion in advance and in writing, by submitting to Pharmion the form
substantially as attached as Exhibit D, of any proposed change that Ash Stevens
desires to make in the Specifications or the Compound or its components. No such
change shall be made without Pharmion’s prior written approval pursuant to clause
5(a)(i), which approval (i) shall not be unreasonably withheld to change suppliers of
certain starting materials which do not have a supplier specified in the Specifications
or to make other changes that create no regulatory consequence for Pharmion, or (ii)
may be withheld in Pharmion’s sole discretion for any other change. Change Expenses
for any such changes requested by Ash Stevens (including costs to Pharmion) shall be
paid by Ash Stevens without an increase in the prices for the Compound. Any net cost
decreases per kilogram for the Compound resulting from such changes (after Ash Stevens
has first fully recovered all of its investment in Change Expenses) shall be allocated
as follows: [... *** ...].
	 
	 	(iv)  	Discretionary Changes Requested by Pharmion. Pharmion may require that
Ash Stevens make changes to the Specifications, materials, fabrication, manufacturing
or packaging processes, provided that Pharmion shall consult with Ash Stevens prior to
any such change regarding the feasibility and Change Expenses, to confirm among other
things that such changes may be safely implemented at Ash Stevens’ facilities and are
changes permitted under applicable law. Change Expenses for any such changes requested
by Pharmion (including costs to Ash Stevens) shall be paid by Pharmion. In the event
that raw materials costs or conversion costs are materially increased (as shall be
documented and established by Ash Stevens) by such change, then the prices for the
Compound shall be increased by an equal amount of such cost increases. Any net cost
decreases per kilogram for the Compound resulting from such changes (after Pharmion has
first fully recovered all of its investment in Change Expenses) shall be allocated as
follows: [... *** ...].

					
	 
	 
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          (b) Second Sources for Key Starting Materials. The Parties acknowledge that as of the
Effective Date there is only once source of the following two (2) starting materials for the
Compound: 5-Azacytosine and tetra-O-acetyl—D-ribofuranose (the “Key Starting Materials”).
In the event that either such source for a Key Starting Material, for whatever reason, ceases to be
available during the Term, Ash Stevens at Ash Steven’s cost shall use commercially reasonable
efforts to obtain and validate a replacement source including manufacture of the Key Starting
Material 5-Azacytosine by Ash Stevens if Pharmion so requests.

          (c) Safety Stock of Key Starting Materials. During the Term, Ash Stevens at Ash
Stevens’ cost shall obtain and maintain a “safety stock” of each Key Starting Material. The
quantities of such safety stocks shall be sufficient for [... *** ...] of the quantities
forecasted by Pharmion in its most recent Rolling Forecast.

	 	6.  	REGULATORY RESPONSIBILITIES

          (a) Quality Agreement. The “Quality Agreement” attached hereto as Exhibit
E is incorporated into this Agreement by this reference as if the provisions of the Quality
Agreement were fully set forth herein. In the event of any conflict between the provisions of this
Agreement and the Quality Agreement, the provisions of this Agreement shall govern.

          (b) Regulatory Filings. Pharmion shall be responsible for complying with all
applicable regulatory requirements relating to the sale or use of the Compound within the
Territory, including pre-market filings, marketing approval submissions, and other requirements of
the United States Food and Drug Administration and other regulatory authorities and obtaining a CE
Mark in Europe.

          (c) CMC Sections. Pharmion will maintain, at its cost, all regulatory filings,
including without limitation the Common Technical Document, for the Products. Pharmion will
provide Ash Stevens with a copy of the regulatory file sections relevant to chemical manufacturing,
testing by Ash Stevens, release, and all updates. Pharmion is responsible for preparing
manufacturing, chemistry, and controls (“CMC”) sections of Regulatory submissions made by
Pharmion. Ash Stevens may be required to assist in preparation of regulatory submissions related
to CMC conducted at Ash Stevens and in answering any questions brought to Pharmion from Regulatory
Authorities as a result of submissions made by Pharmion.

          (d) Batch Records. Ash Stevens will maintain the master batch records, the batch
record specifications and the test records for the Compound. Suggestions for changes may originate
from either Ash Stevens or Pharmion and will be documented by change notices (“CNs”), subject to
Pharmion’s written approval of each CN, such approval not to be unreasonably withheld. The
approval list for CNs will include a Pharmion representative in addition to Ash Stevens normal
internal list. Any documentation to support the decision on the changes will be maintained by
Pharmion and Ash Stevens. If a change is to be made to the master batch record, Ash Stevens will
document it by a Change Order based on the CN.

          (e) Recalls. Each Party shall notify the other of any information, whether received
directly or indirectly, which might affect the marketability, safety or effectiveness of the
Compound and/or which might result in the Recall or seizure of the Compound or products

					
	 
	 
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incorporating the Compound. For purposes of this Agreement, a “Recall” shall mean any
action: (i) by Pharmion to recover title to or possession of quantities of products incorporating
the Compound sold or shipped to third parties (including, without limitation, the voluntary
withdrawal of products incorporating the Compound from the market) or (ii) by any regulatory
authorities to detain or destroy any products incorporating the Compound. “Recall” shall
also include the election by Pharmion to refrain from selling or shipping quantities of such
products to third parties which would have been subject to a Recall if sold or shipped. The
Parties shall take all appropriate corrective actions, and shall cooperate in the investigations,
related to a Recall. In the event that a Recall results from any cause or event arising from the
defective manufacture, storage or handling of Compound determined in accordance with Section 3(d)
to constitute a breach by Ash Stevens of this Agreement, Ash Stevens shall be responsible for all
documented out-of-pocket expenses of Pharmion related to such Recall up to a maximum of [... *** ...]. For purposes of this Agreement, the expenses of Recall shall include
the expenses of notification and destruction or return of the Recalled products, all other
documented out-of-pocket costs incurred in connection with such Recall and the replacement of the
Recalled products.

          (f) Retention. Ash Stevens shall maintain and retain for a period ending five (5)
years following the end of the applicable calendar year in which a Lot reaches the end of its shelf
life (or such longer period as may be required by law):

	 	(i)  	true and accurate books and records relating to its performance under this
Agreement, including without limitation records of the manufacture, testing and
shipping of Compound, at Ash Stevens’ cost;
	 
	 	(ii)  	samples of Compound and starting materials as are necessary to (A) comply with
regulatory requirements applicable to Ash Stevens or Pharmion, and (B) assist with
resolving product complaints and other similar investigations, at Ash Stevens-’ cost;
and
	 
	 	(iii)  	supplies of qualified Azacitidine reference standard for the use of Pharmion
and Pharmion Designees for analytical testing of Compound and finished products
incorporating Compound, for purchase by Pharmion from time to time in its discretion
for the prices specified in Exhibit F hereto.

Pharmion or an independent testing laboratory nominated by Pharmion may inspect and test Ash
Stevens’s samples relating to Compound in accordance with standard industry practice upon
reasonable written request.

          (g) Further Cooperation. The Parties shall cooperate with one another as may be
reasonably necessary or appropriate to satisfy all governmental requirements and obtain all needed
permits, approvals and licenses with respect to the development, manufacture, storage, packaging,
marketing and sale of products incorporating the Compound. Such cooperation shall include, without
limitation, communicating with regulatory authorities and making available as promptly as
practicable all information, documents and other materials which result from the performance by Ash
Stevens of its services hereunder which Pharmion is required to submit or which Pharmion may
otherwise reasonably request in connection with governmental filings

 

					
	 
	 
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relating to the Compound or products incorporating the Compound. Ash Stevens shall not be paid
any additional compensation to provide such assistance during the Term, but shall be paid after the
Term a fee of $200 per hour per employee providing services for such cooperation (as such fee may
be increased annually by Ash Stevens by not more than 5% per year) as approved in advance by
Pharmion; the costs and expenses of such cooperation, if applicable, shall be subject to the
Parties’ mutual agreement.

	 	7.  	QUALITY ASSURANCE

          (a) Release by Ash Stevens. All Compound shall meet the Specifications and shall be
subjected to a quality control inspection and final release by Ash Stevens in accordance with Ash
Stevens’ quality control standards and in compliance with cGMPs. As used in this Agreement, the
term “cGMPs” means current good manufacturing practices as required by any applicable
regulatory authority in the Territory, including without limitation pursuant to Parts 210 and 211
of Title 21 of the United States Code of Federal Regulations, the EU Good Manufacturing Guidelines,
the International Conference on Harmonization Guidelines (including without limitation Section Q7A)
and any other applicable laws, guidelines and/or regulations, together with the latest FDA and
other applicable guidance documents pertaining to manufacturing and quality control practice, all
as updated, amended and revised from time to time.

          (b) Pharmion Inspection. Pharmion will have the right to inspect or audit the Compound
for integrity and adherence to the Specifications and the requirements of this Agreement. If any
of the Compound of a continuous production run or shipment (a “Lot”) fails to meet Ash
Stevens’ warranties or to conform to the Specifications or the requirements of this Agreement,
Pharmion may return such Lot at Ash Stevens’ expense for credit, refund or replacement. If
Pharmion or any customer of Pharmion rejects or returns products incorporating Compound to Pharmion
as a result of Compound performance problems, Pharmion shall notify Ash Stevens in writing within
thirty (30) days. At Pharmion’s option and at Ash Stevens expense, Pharmion shall receive a
credit, refund or replacement for such Compound. If Ash Stevens so requests, Pharmion will return
any such Compound to Ash Stevens at Ash Stevens’ expense. The provisions of this Section 7(b)
shall not limit Pharmion’s other rights hereunder.

          (c) Complaints. In the event that either Party receives any complaint regarding the
Compound, it shall notify the other Party promptly. Ash Stevens shall evaluate each such complaint
and respond to Pharmion in writing. Pharmion may also evaluate each such complaint. Pharmion
shall have the sole right to conduct all follow-up and communication with third parties as it deems
appropriate.

          (d) Quality Audits. Ash Stevens shall permit Pharmion and its representatives to
review periodically Ash Stevens’ production and quality control procedures and records and to
inspect Ash Stevens’ facilities at reasonable times with a representative of Ash Stevens present in
order to assure satisfaction of the requirements of this Agreement. Such reviews and inspections
shall not be more frequent than once per year, provided that the frequency of such reviews and
inspections which are conducted for any reasonable cause shall not be limited, including without
limitation in the event that (i) Ash Stevens shall receive a “Warning Letter” from the FDA relating
to the manufacture, packaging or labeling of Compound by Ash Stevens,

					
	 
	 
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(ii) Pharmion has rejected a shipment of Compound for a mutually agreed upon failure to meet
Specifications, or (iii) Pharmion or Ash Stevens shall have received a series of complaints (i.e.,
2 or more complaints relating to manufacturing only of Compound) from third parties relating to the
manufacturing process for Compound.

          (e) Regulatory Inspections. Ash Stevens will notify Pharmion immediately of, and
shall permit, any inspection of its facilities by a federal, state or local regulatory agency as
well as the results of such inspection. Pharmion shall have the right to be present at any such
inspection to the extent that such inspection is specifically related to the Compound.

          (f) Compliance with cGMPs. Ash Stevens shall at its cost provide manufacturing
engineering services and develop and validate all processes that are required to ensure that the
Compound conforms to and is manufactured in accordance with Ash Stevens quality standards and
cGMPs.

	 	8.  	HEALTH AND SAFETY PROCEDURES

          Ash Stevens at its cost shall implement and maintain health and safety procedures for the
protection of personnel and the environment related to the performance of its obligations under
this Agreement and for the handling of any materials or hazardous waste used in or generated by the
manufacture and supply of the Compound. Ash Stevens shall comply with all applicable laws related
to the performance of its obligations under this Agreement. Ash Stevens shall indemnify Pharmion
pursuant to Section 9(d) hereof for any claim or damage, including without limitation employee
injury and environmental contamination, arising out of or related to the handling of such materials
or waste.

	 	9.  	WARRANTIES AND INDEMNIFICATIONS

          (a) Warranties by Ash Stevens. Ash Stevens represents, warrants and covenants to
Pharmion as follows:

	 	(1)  	Quality of Compound. All Compound shall, as of the date of shipment to
Pharmion:

	 	(A)  	meet the Specifications and have been manufactured in
accordance with the Specifications, as then in effect, and requirements
specified by Pharmion under this Agreement;
	 
	 	(B)  	have been manufactured in accordance with the then-current
cGMPs and the laws and regulations applicable to the manufacture of Compound;
	 
	 	(C)  	not be adulterated or misbranded within the meaning of the
United States Federal Food, Drug and Cosmetic Act (the “Act”), as amended, and
any similar federal, state or local laws or regulations; and
	 
	 	(D)  	not be an article which may not, under the provisions of the
Act, be introduced into interstate commerce.

					
	 
	 
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	 	(2)  	No Liens. All Compound shall not be subject to any liens, security
interests or any other encumbrances.

          (b) Mutual Warranties. Each Party represents and warrants to the other as follows:

	 	(1)  	Power and Authorization. It has all requisite power and authority
(corporate and otherwise) to enter into this Agreement and has duly authorized by all
necessary action the execution and delivery hereof by the officer or individual whose
name is signed on its behalf below.
	 
	 	(2)  	No Conflict. Its execution and delivery of this Agreement and the
performance of its obligations hereunder do not and will not conflict with or result in
a breach of or a default under its organizational instruments or any other agreement,
instrument, order, law or regulation applicable to it or by which it may be bound.
	 
	 	(3)  	Enforceability. This Agreement has been duly and validly executed and
delivered by it and constitutes its valid and legally binding obligation, enforceable
in accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency or other laws of general application relating to or affecting the
enforcement of creditors’ rights and except as enforcement is subject to general
equitable principles.
	 
	 	(4)  	Qualified Personnel. Each Party shall engage and employ only
professionally qualified personnel to perform the services contemplated hereunder.
Neither Party shall use the services of any person debarred or suspended under the Act.
Neither Party has as of the Effective Date and covenants that they shall not during
the Term hire, as an officer or an employee, any person who has been convicted of a
felony under the laws of the United States of America for conduct relating to the
regulation of any drug product under the Act.

          (c) Indemnity by Pharmion. Pharmion will indemnify and hold harmless Ash Stevens and
Ash Stevens’ suppliers, affiliates, directors, officers, employees, agents and contractors (the
“Ash Stevens Group”) against any and all claims, actions, causes of action, liabilities,
losses, costs, damages or expenses (including reasonable attorneys’ fees) to the extent arising out
of or in consequence of: (1) the breach by Pharmion of its covenants, representations, warranties
and other obligations hereunder, (2) the negligence and/or willful misconduct of a member of the
Pharmion Group, (3) any intellectual property infringement claim which relates to aspects of the
Compound, such as composition of matter and methods of use of Compound, that

					
	 
	 
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are owned or practiced by Pharmion, (4) use by or on behalf of Pharmion of Compound for
clinical trials, or (5) the use, marketing, promotion, sale, advertising, or distribution of any
product containing Compound; provided, however, that Pharmion shall not be obligated to indemnify
any member of the Ash Stevens Group from any liability to the extent indemnified by Ash Stevens
pursuant to Section 9(d) (Indemnity by Ash Stevens) hereof.

          (d) Indemnity by Ash Stevens. Ash Stevens will indemnify and hold harmless Pharmion
and Pharmion’s suppliers, affiliates, directors, officers, employees, agents and contractors (the
“Pharmion Group”) against any and all claims, actions, causes of action, liabilities,
losses, costs, damages or expenses (including reasonable attorneys’ fees) to the extent arising out
of or in consequence of (1) the breach by Ash Stevens of its covenants, representations, warranties
and other obligations hereunder, (2) the negligence and/or willful misconduct of a member of the
Ash Stevens Group, and (3) any intellectual property infringement claim which relates to
manufacturing aspects of the Compound, such as Ash Stevens’ manufacturing process, that are owned
or practiced by Ash Stevens; provided, however, that Ash Stevens shall not be obligated to
indemnify any member of the Pharmion Group from any liability to the extent indemnified by Pharmion
pursuant to Section 9(c) (Indemnity by Pharmion) hereof.

          (e) Indemnity Procedures. Each of the Ash Stevens Group and the Pharmion Group
seeking indemnification under Section 9(c) and 9(d), respectively, shall give the indemnifying
Party prompt written notice of any claims made pursuant to Section 9(c) and 9(d), respectively,
including any claims asserted or made by any governmental authority or other third party, for which
the indemnifying Party might be liable under the foregoing indemnification, together with the
opportunity to defend, negotiate and settle such claims. Each of the Ash Stevens Group and the
Pharmion Group seeking indemnification will cooperate fully with the indemnifying Party in
defending or otherwise resolving any such action, and each indemnified Party in any such action may
at its option and expense be represented in such action. Neither Pharmion nor Ash Stevens shall be
responsible or bound by any compromise made by the other Party without their prior written consent,
which shall not be unreasonably withheld.

          (f) Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES ARISING
OUT OF OR RELATED TO THIS AGREEMENT.

          (g) Disclaimer of warranties. EXCEPT FOR THE WARRANTIES SET FORTH IN THIS SECTION 9,
(i) ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
FITNESS FOR A PARTICULAR PURPOSE AND MERCHANTABILITY, ARE EXPRESSLY DISCLAIMED, and (ii) PHARMION
ACKNOWLEDGES AND AGREES THAT ASH STEVENS MAKES NO REPRESENTATION OR WARRANTY WITH REGARD TO THE
COMPOUND OR ANY PRODUCT INCLUDING THE COMPOUND AS TO ITS SAFETY OR EFFICACY AS A PHARMACEUTICAL
PREPARATION, OR AS TO ITS SUITABILITY FOR USE IN HUMANS.

	 	10.  	INSURANCE

					
	 
	 
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          (a) Ash Stevens Insurance. Ash Stevens shall obtain and maintain, at all times during
the Term of this Agreement, (i) commercial general liability insurance, including product liability
insurance, with financially secure admitted carriers, with limits of not less than Three Million
Dollars ($3,000,000) per occurrence and Three Million Dollars ($3,000,000) in the aggregate, in
either case to cover the indemnification obligations of Ash Stevens under Section 7(d), which shall
name Pharmion as an additional insured, and (ii) workers’ compensation insurance with policy limits
of One Million Dollars ($1,000,000). If requested, Ash Stevens shall furnish to Pharmion
certificates of such insurance in force from time to time during the term hereof, including
renewals and replacements of such coverage.

          (b) Pharmion Insurance. Pharmion shall obtain and maintain, at all times during the
Term of this Agreement, (i) commercial general liability insurance, including product liability
insurance, with financially secure admitted carriers, or self insurance with appropriate reserves,
with limits of not less than Ten Million Dollars ($10,000,000) per occurrence and Ten Million
Dollars ($10,000,000) in the aggregate, in either case to cover the indemnification obligations of
Pharmion under Section 7(c), which shall name Ash Stevens as an additional insured, and (ii)
workers’ compensation insurance with policy limits of One Million Dollars ($1,000,000). If
requested, Pharmion shall furnish to Ash Stevens certificates of such insurance in force from time
to time during the Term hereof, including renewals and replacements of such coverage.

	 	11.  	CONFIDENTIALITY AND PROPRIETARY RIGHTS

          (a) Prior Agreements. The Parties acknowledge and agree that the confidentiality
obligations of the Confidentiality Agreement and Process Agreement shall be expressly superseded by
the provisions of this Section 11. All confidential information disclosed under either the
Confidentiality Agreement or the Process Agreement going forward from the Effective Date of this
Agreement shall be treated as Confidential Information hereunder.

          (b) Confidential Information. The Parties recognize that, in connection with the
performance of this Agreement, each Party (the “Disclosing Party”) may disclose
Confidential Information (as defined below) to the other Party (the “Receiving Party”).
For purposes of this Agreement “Confidential Information” means proprietary data,
information and materials (whether owned by the Disclosing Party or a third party to whom the
Disclosing Party owes a nondisclosure obligation), excluding such data, information and materials
that: (A) were known to the Receiving Party at the time of the disclosure by the Disclosing Party
as indicated by the Receiving Party’s contemporaneous written records; (B) has become publicly
known through no wrongful act of the Receiving Party; (C) has rightfully been received by the
Receiving Party from a third party without a duty of confidentiality; or (D) was independently
developed by the Receiving Party without reference to the Disclosing Party’s Confidential
Information.

          (c) Scope of Use and Disclosure. The Receiving Party agrees (i) not to use any such
Confidential Information for any purpose other than in the performance of its obligations or
exercise of its rights under this Agreement and (ii) not to disclose any such Confidential
Information, except (1) to its employees, contractors, or other bona fide commercial partners who
are reasonably required to have the Confidential Information in connection herewith and are subject
to confidentiality agreements no less restrictive than this Agreement; (2) to its agents,

					
	 
	 
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representatives, lawyers, and other advisers that have a need to know such Confidential
Information; (3) pursuant to, and to the extent of, a request or order by a governmental authority,
provided, however, that prior to any such requested or ordered disclosure, the Receiving Party
shall give the Disclosing Party reasonable advance notice of any such disclosure and shall
cooperate with Disclosing Party in protecting against any such disclosure and/or obtaining a
protective order narrowing the scope of such disclosure and/or use of the Confidential Information
of Discloser; and/or (4) to the extent authorized by the Disclosing Party in advance in writing.
The Receiving Party shall take the same degree of care that it uses to protect its own confidential
and proprietary information and materials of similar nature and importance (but in no event less
than reasonable care) to protect the confidentiality and avoid the unauthorized use or disclosure
of the Confidential Information of the Disclosing Party. The restrictions of this Section 11(c)
shall apply (i) without limitation by time for all Confidential Information of Pharmion of a
technical nature that normally would be included within a “Common Technical Document”, or (ii) for
a period of five (5) years following the expiration or termination of this Agreement for all other
Confidential Information.

          (d) Pharmion Materials. Pharmion shall own and retain all right, title and interest in
and to all information, documents and tangible and intangible materials which Pharmion provides to
Ash Stevens in connection with this Agreement.

          (e) Work Products. Pharmion shall have the non-exclusive right to use all
information, documents and tangible and intangible materials which result from the performance by
Ash Stevens of the services contemplated by this Agreement (including, without limitation, data,
test results, measurements, quantitative and qualitative analyses, processes, samples, and
inventions and technology relating to the Compound).

          (f) Inventions. All information relating to any innovation, improvement, development,
discovery, computer program, device, trade secret, method, know-how, process, technique or the
like, whether or not written or otherwise fixed in any form or medium, regardless of the media on
which contained and whether or not patentable or copyrightable (collectively, “Inventions”)
relating to the Compound which are conceived, reduced to practice, or created solely by Ash
Stevens and/or its affiliates or agents in the course of performing services under this Agreement
(including any background or preexisting technology of Ash Stevens which Ash Stevens so employs),
shall be owned by Ash Stevens. All Inventions relating to the Compound which are conceived,
reduced to practice, or created solely by Pharmion and/or its affiliates or agents (including any
background or preexisting technology of Pharmion which Pharmion shares with Ash Stevens hereunder),
shall be owned by Pharmion. Pharmion shall and hereby does grant to Ash Stevens and its affiliates
a royalty-free, non-exclusive license during the Term, without the right to sub-license, to use
and/or practice all such Pharmion-owned Inventions solely to manufacture the Compound hereunder.
Each Party shall be solely responsible for the costs of filing, prosecution and maintenance of
patents and patent applications on its own Inventions. Either Party shall give the other Party
written notice, as promptly as practicable, of all Inventions which can reasonably be deemed to
constitute improvements or other modifications to the Compound or processes or technology owned or
otherwise controlled by such Party.

					
	 
	 
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          (g) Trademarks. Pharmion shall retain all right, title and interest arising under the
U.S. Trademark Act and all other applicable laws in the trademarks and trade names related to or
associated with the Compound and products incorporating the Compound and in all other trademarks
and trade names which may be adopted with respect to the Compound and products incorporating the
Compound.

          (h) Survival. This Section 11 shall survive (subject to the five (5) year survival
limitation in Section 11(c)) after any termination or expiration of this Agreement.

	 	12.  	COMPLIANCE WITH LAW

          Each Party shall act in compliance with all applicable laws, regulations and orders relating
to its performance under this Agreement, including without limitation as related to the
manufacture, storage and commercialization of the Compound.

	 	13.  	OTHER PROVISIONS

          (a) Entire Agreement. This Agreement, together with the Process Agreement and
Confidentiality Agreement, contain the entire agreement between the Parties relating to the subject
matter of this Agreement and any other understandings between the Parties relating to the subject
matter of this Agreement are superseded by this Agreement. If there is an inconsistency in the
terms of this Agreement and the Process Agreement or the Confidentiality Agreement, the provisions
of this Agreement shall control. It is agreed that Sections 11 and 17 of the Process Agreement
shall terminate as of the Effective Date notwithstanding anything to the contrary in the Process
Agreement. None of the terms of this Agreement shall be deemed to be waived or amended by either
Party unless such a waiver or amendment specifically references this Agreement and is in writing
signed by the Party to be bound.

          (b) Notices. All notices and demands required or permitted to be given or made
pursuant to this Agreement shall be in writing and effective when personally given or when placed
in an envelope and deposited in the United States certified mail, return receipt requested and
postage prepaid, addressed as follows:

	 	 	 
	If to Pharmion:

	 	If to Ash Stevens:

	 	 	 
	Pharmion Corporation

	 	Ash Stevens, Inc.
	2525 28th Street, Suite 200

	 	5861 John C. Lodge Freeway
	Boulder, CO 80301 USA

	 	Detroit, MI 48202-3398 USA
	Attention: President

	 	Attention: President

	 	 	 
	With a copy to:

	 	With a copy to:

	 	 	 
	Pharmion Corporation

	 	Morrison & Foerster LLP
	Corporate Woods Bldg 14, Suite 240

	 	425 Market Street
	8717 W. 110th Street

	 	San Francisco CA, 95104
	Overland Park, KS 66210 USA

	 	Attention: Key Shin
	Attention: Joe Como
	 	 

					
	 
	 
	 	SUPPLY AGREEMENT
	 	Page 20 of 25

 

 

or to such other address as to which either Party may notify the other. For the avoidance of
doubt, receipt of notice by Key Shin at Morrison & Foerster LLP shall not constitute effective
notice to Ash Stevens hereunder.

          (c) Assignment. This Agreement shall be binding upon and inure to the benefit of the
Parties, their successors and permitted assigns. This Agreement, including the rights of each
Party hereunder and the delegation of the duties of a Party hereunder, shall be assignable: (i) by
Pharmion, in whole or in part, without the consent of Ash Stevens, to any affiliate of Pharmion;
(ii) by Pharmion, in whole or in part, without the consent of Ash Stevens, in connection with the
sale or license of rights related to a drug product which incorporates the Compound; (iii) by
either Party, in whole or in part, with the written consent of the other Party; or (iv) by either
Party, in whole but not in part, without the consent of the other Party, to the purchaser of
substantially all the assets of its business to which this Agreement relates; provided, however,
that any such permitted assignee shall execute and deliver to the other Party a written undertaking
to observe and perform the duties of the assigning Party hereunder, and provided, further, that the
assigning Party shall not be released of any liability hereunder by any such assignment. Any
attempted assignment that does not comply with the terms of this Section 13(c) shall be void.

          (d) Governing Law. This Supply Agreement is deemed to have been executed in and shall
be governed by and construed according to the laws of the State of Michigan, applicable to
contracts made and to be performed in that State. Each Party hereby submits to the non-exclusive
jurisdiction of the courts of the State of Michigan for purposes of resolving any dispute. If
particular portions of this Supply Agreement are ruled unenforceable, such portions shall be
deleted and all other terms and conditions of this Supply Agreement shall remain in full force and
effect.

          (e) Publicity. Nothing in this Agreement shall be deemed to give either Party any
rights to use the other Party’s trademarks or trade names without the other Party’s prior specific,
written consent. Neither Party shall publicly refer to the other Party or the existence of this
Agreement in any promotional materials, business plans, investment memoranda, or announcements
without the other Party’s prior specific, written consent, provided, however, that the foregoing
shall not restrict either Party from making any disclosure as may be reasonably necessary to comply
with applicable laws. Notwithstanding the foregoing, either Party may include the following
statement in public disclosures: “Ash Stevens, Inc. is the manufacturer of the active
pharmaceutical ingredient 5-azacitidine for the product Vidaza marketed by Pharmion, Inc.”

          (f) Independent Contractors. The relationship of the Parties under this Supply
Agreement shall be and at all times remains one of independent contractors. No Party is an
employee, agent or legal representative of any other Party or shall have any authority to assume or
create obligations on any other Party’s behalf.

          (g) Further Assurances. The Parties agree to negotiate in good faith and execute such
additional documents and to perform all such other and further acts as may be necessary or
desirable to carry out the purposes and intents of this Agreement.

					
	 
	 
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          (h) Third Parties. This Agreement is not intended to confer upon any non-party rights
or remedies hereunder, except as may be received or created as part of a valid assignment.

          (i) Severability. All of the provisions of this Agreement are intended to be distinct
and severable. If any provision of this Agreement is or is declared to be invalid or unenforceable
in any jurisdiction, it shall be ineffective in such jurisdiction only to the extent of such
invalidity or unenforceability. Such invalidity or unenforceability shall not affect either the
balance of such provision, to the extent it is not invalid or unenforceable, or the remaining
provisions hereof, nor render invalid or unenforceable such provision in any other jurisdiction.

          (j) Interpretation. The Parties hereto acknowledge and agree that: (i) each Party and
its representatives have reviewed and negotiated the terms and provisions of this Agreement and
have contributed to its revision; (ii) the rule of construction to the effect that any ambiguities
are resolved against the drafting Party shall not be employed in the interpretation of this
Agreement; and (iii) the terms and provisions of this Agreement shall be construed fairly as to
each Party hereto and not in favor of or against either Party regardless of which Party was
generally responsible for the preparation of this Agreement.

                (k) Headings. The headings of articles and sections have been included for convenience
only and shall not be considered in interpreting this Agreement.

                    (l) Incorporation of Exhibits. All exhibits referenced herein are hereby made a part
of this Agreement.

          (m) Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, and all of which together shall constitute one and the
same Agreement. This Agreement may be executed and delivered via electronic facsimile transmission
with the same force and effect as if it were executed and delivered by the Parties simultaneously
in the presence of one another.

          (o) Audits. From and after the time that the Fee becomes payable under this Agreement,
Pharmion and its affiliates (including without limitation any Pharmion Designees which may be
affiliates of Pharmion) (each an “Audited Party” and collectively the “Audited Parties”), shall
keep and maintain accurate books and records to verify the quantities of Compound sourced from
Back-up Supplier(s) by the Audited Parties during a reporting period as may be reasonably required
to confirm the amounts payable under Section 4(e) on account of the Fee with respect to such
reporting period. The Audited Parties shall preserve such books and records for a period of three
(3) years after the end of the period covered by such books and records, which obligation shall
survive for three (3) years after expiration or termination of this Agreement. Ash Stevens shall
have the right, on thirty (30) calendar days advance written notice and not more than once in any
twelve (12) month period, to have an independent accounting firm reasonably acceptable to such
Audited Party examine such books and records of the Audited

					
	 
	 
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Party solely to verify the accuracy of the Fee reports and the amount of payments made by the
Audited Party hereunder during the preceding four (4) quarterly reporting periods. The accounting
firm shall execute a confidentiality agreement with the Audited Party in a form mutually acceptable
to the Parties that prohibits the accounting firm from disclosing or using information obtained in
connection with the audit other than the disclosure to Ash Stevens of the amount of any
underpayment or overpayment. Any such audit shall be conducted during the Audited Party’s regular
business hours, in such a manner so as not to interfere with the Audited Party’s normal business
activities, and shall be at Ash Stevens’ expense, provided that if such audit reveals an
underpayment of more than five percent (5%) during any reporting period, the Audited Party shall
pay the costs of the audit. Pharmion shall either (i) cause to have included similar audit rights
as provided herein in all agreements with Covered Compound Purchasers , or (ii) another mechanism
reasonably and mutually agreeable to the Parties, so as to permit Ash Stevens to confirm Fee
amounts payable to Ash Stevens for quantities of the Compound sourced from Back-up Suppliers (other
than Ash Stevens).

     IN WITNESS WHEREOF, authorized representatives of the Parties have executed this Supply
Agreement.

	 	 	 	 	 	 	 
	Ash Stevens, Inc.	 	Pharmion Corporation
	 
	By:

	 	/s/ Stephen A. Monk
	 	By:
	 	/s/ Judith A. Hemberger
	 
	Name:

	 	Stephen A. Monk, Ph.D.
	 	Name:
	 	Judith A. Hemberger, Ph.D.
	 
	Title:

	 	President and CEO
	 	Title:
	 	Executive VP/COO

EXHIBITS A-F ATTACHED HERETO ARE AN ESSENTIAL PART

OF THIS SUPPLY AGREEMENT.

					
	 
	 
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TABLE OF EXHIBITS

	 	 	 	 	 
	Cross	 	 
	Reference 	 	Exhibit
	Summary

	 	A
	 	Specifications
	 
	 	 	 	 
	Summary

	 	B
	 	Compound Pricing
	 
	 	 	 	 
	Section 3

	 	C
	 	Receiving Requirements
	 
	 	 	 	 
	Section 5(a)

	 	D
	 	Supplier Notice of Change
	 
	 	 	 	 
	Section 6(a)

	 	E
	 	Form of Quality Agreement
	 
	 	 	 	 
	Section 6(f)(iii)

	 	F
	 	Prices for Qualified Azacitidine Reference Standard

					
	 
	 
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EXHIBIT A

Specifications

	1.  	As specified in that certain document titled “Ash Stevens Inc. Company Confidential Final
Product Specifications & Test Record Form for Azacitidine (1 page) attached hereto, which is
incorporated herein by this reference.
	 
	2.  	As specified in that certain “Common Technical Document” dated as of December 26, 2003
attached hereto, which is incorporated herein by this reference.

* * * * *

					
	 
	 
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EXHIBIT B

Compound Pricing 

Price per kilo as of the Effective Date (the “Price”): [... *** ...].

The Price shall be adjusted only as follows:

	1.  	PPI Adjustment. On an annual basis (as of the beginning of each calendar year) to
reflect any increase or decrease in the Producer Price Index NAICS #325412P (Pharmaceutical
preparations) (“PPI”) for the most recent prior year.
	 
	2.  	Certain Starting Materials. On an annual basis, to the extent that the cost of the
three following starting materials, in the aggregate for all three starting materials, (as
appropriately weighted in accordance with the quantity of each used in making a unit weight of
Compound) increases or decreases in an amount in excess of the cumulative increase or decrease
in the PPI from the Effective Date, due to market circumstances beyond Ash Steven’s reasonable
control.

	 	 	 	 	 
	Starting Material	 	Costs as of Effective Date	 	Quantity/Yield
	Azacytosine

	 	[... *** ...]
	 	[... *** ...]
	 
	 	 	 	 
	Ribose Tetraacetate

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

	 
	 	 	 	 
	Trimethylsilyltrifuoramethly Sulfonate

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

	3.  	Changes to the Specifications. As provided in Section 5(a) (Compound Changes) of the
Agreement.

* * * * *

					
	 
	 
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*** Confidential Treatment Requested

 

 

EXHIBIT C

Pharmion

Receiving Requirements

* * * * *

BEN VENUE

REQUIREMENTS

For Customers Supplying Material

11/02N 4/03R 10/03R

PRIOR TO SHIPPING MATERIAL TO BVL, THE CUSTOMER IS REQUIRED TO:

	1.  	Contact BVL Materials Management to obtain a PO number to aid in proper
receipt of your materials at each of our warehouse locations (See proper address’s
below)
	 
	2.  	Each shipment must contain a packing slip that includes:

	 	•  	Material Description
	 
	 	•  	BVL PO Number
	 
	 	•  	BVL Item Number
	 
	 	•  	Customer Lot Number
	 
	 	•  	Quantity per Lot, number of containers (gross, tare & net, for each container per
lot for chemicals)

	   	In addition to the packing slip, the following should be included with the shipment:

	 	•  	C of A for Chemicals
	 
	 	•  	Release criteria (if applicable) for materials not tested by BVL
	 
	 	•  	Product Name/lot number, that Materials are to be consumed in (only applicable if
items are not FIFO)
	 
	 	•  	Containers, packages, pallets, etc., properly identified with lot numbers, weights
and quantities

BVL Materials Management contacts;

	 	 	 
	Receipt Contract

	 	Subsequent Contacts
	Tracie McCray, Materials Clerk

	 	Annette Semon, Materials Supervisor
	TMcCray@cle.boehringer-ingelheim.com

	 	Asemon@cle.boehringer-ingelheim.com
	440-232-3320 x 4306

	 	440-201-3223

BVL Warehouse Delivery hours for 300 Northfield Road are Monday thru Friday 7:30 a.m. – 5:00 p.m.

	 	•  	(LABELS, CHEMICALS, ETC.)

					
	 
	 
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	•

	 	Shipping Address:
	 	Problems with deliveries & arrival times please contact:
	

	 	Ben Venue Laboratories
	 	Delivery Contact
	

	 	300 Northfield Road
	 	Brian Barber, Warehouse Supervisor
	

	 	Bedford, Ohio 44146
	 	440-724-2587 Cell Phone
	

	 	 	 	440-232-3320 ext. 3643

BVL Delivery hours for Tread Road are 8:00 a.m. to 2:00 p.m. Monday thru Friday or by appointment
only

	 	•  	Vials, Stoppers, Seals, (Printed) Shelf Cartons, Unit Cartons, Corrugated Shippers and
non-Printed Corrugated Shippers

	 	 	 	 	 	 	 	 	 
	•

	 	Shipping Address:
	 	BVL DISTRIBUTION CENTER	 	 	 	 
	

	 	 	 	19200 TREAT ROAD	 	 	 	 
	

	 	 	 	WALTON HILLS, OHIO 44146
	 	 		 

Warehouse Manager, Jim Kelly 440-201-3629

* * * * *

					
	 
	 
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EXHIBIT D

Supplier Notice Of Change

MODERATE/MAJOR CHANGE APPROVAL FORM

	 	 	 
	CHANGE REFERENCE NUMBER

	 

LOT NUMBERS ASSIGNED TO QUALIFYING BATCHES:

	 
	 

	 
	 

	 
	 

SECTION A: REVIEW OF PROPOSED CHANGE

1. SUMMARIZE CHANGE:

II. SUMMARIZE SUPPORTING DATA: (Attach production batch records and other production data (i.e.
yield, economic impact) from qualifying runs, analytical results, comparison of quality vs. current
production and regulatory specifications.)

					
	 
	 
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III. ITEMS AFFECTED BY CHANGE (check all that apply):

	 	 	 	 	 
	Process Validation

	 	o	 	 
	Batch Records

	 	o	 	 
	Specification

	 	o	 	 
	Test Method

	 	o	 	 
	Calibration

	 	o	 	 
	Equipment

	 	o	 	 
	Software Validation

	 	o	 	 
	Hardware Validation

	 	o	 	 
	Regulatory filings

	 	o	 	 
	Other

	 	o
	 	describe                     

SECTION B: APPROVAL FOR PERMANENT CHANGE

Obtain final approval from the client (attach all correspondence to and from the client)

	 	 	 	 	 	 	 
	By

	 	 
	 	(DRA)
	 	Date

I. Approval is granted o

II. Approval is denied o

	 	 	 
	REASON(S)

	 	 

	 	 	 	 	 	 	 
	By

	 	 
	 	(QA)
	 	Date

III. SIGNATURES REQUIRED:

	 	 	 	 	 
	Production or Project Manager

	 	 
	Date	 

	 	 	 	 	 
	Quality Control

	 	 
	Date	 

	 	 	 	 	 
	Drug Regulatory Affairs

	 	 
	Date	 

	 	 	 	 	 
	Client (fax copy ok)

	 	 
	Date	 

	 	 	 	 	 
	Quality Assurance

	 	 
	Date	 

					
	 
	 
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EXHIBIT E

Quality Agreement

Quality Requirements for the Manufacture and Supply of Product

	1.  	Manufacturing Standards

	 	1.1.  	Product Definition

	 	1.1.1.  	Product and Starting Materials will be manufactured and tested in accordance with
the manufacturing batch records and test methods that will be generated by Ash
Stevens and approved by “Company”. The batch records will be those used for batches
produced by Ash Stevens and agreed to by “Company”. Development work may dictate
changes to production procedures, material specifications and analytical methods.
Such changes require approval of “Company” and Ash Stevens.

	 	1.2.  	Supply of Starting Materials

	 	1.2.1.  	Ash Stevens will supply all materials for the manufacture of Product. Ash Stevens
will only use materials that have been released by its Quality Assurance (QA)
department and are in full compliance with the Specifications. Ash Stevens will take
samples of all API Starting Materials and retain such samples for a minimum of five
(5) years after the date the sample was taken, or for a longer period, as reasonably
requested by “Company” or as required by applicable law or regulation or as otherwise
agreed to by the parties. Sample disposal for API Starting Materials is to be
approved prior to disposal at the end of five (5) year period or such longer period
as may apply. “Company” shall have the right to take possession of such samples at
the end of such five (5) year period or such longer period as may apply, or request
Ash Stevens to continue to store such samples.

	 	1.3.  	Batch Numbering

	 	1.3.1.  	Ash Stevens will assign unique batch numbers for the Product in accordance with Ash
Stevens Standard Operating Procedures (SOPs).

	 	1.4.  	Processing Responsibilities

	 	1.4.1.  	Ash Stevens will manufacture and inspect the Product in strict accordance with Good
Manufacturing Practices, as set forth in the United States Code of Federal
Regulations (specifically, 21 CFR 210 and 211 and the recently adopted ICH Guidance
Q7a) and The Rules Governing Medicinal Products in the European Community — Volume IV
as amended and updated from time to time, and all other applicable regulatory
requirements.

					
	 
	 
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	 	1.5.  	Reprocessing

	 	1.5.1.  	Ash Stevens shall not reprocess a batch without the prior written consent of a
Quality Representative of Ash Stevens and a Quality Representative of “Company”. The
Quality Representatives for “Company” and Ash Stevens are listed at the end of this
Appendix. Reprocessing shall mean introducing Starting Materials and/or Product that
does not conform to established standards or Specifications back into manufacture by
repeating a step that is part of the manufacturing process.

	 	1.6.  	Changes to the Manufacturing Process

	 	1.6.1.  	Ash Stevens will not make any material changes to the manufacturing process
relating to the Starting Materials or the Product without obtaining the “Company”
Quality Representative’s prior written approval. A material change is defined as any
change that:
	 
	 	  	a) may affect the quality, purity, identity or strength of the Starting Materials or
the Product; and/or
	 
	 	  	b) would result in changing or modifying the Specifications, test methods, SOPs or
batch records relating to the Starting Materials or the Product.
	 
	 	1.6.2  	A formal Change Control process in conformance with a mutually agreed SOP
shall be set up between Ash Stevens and “Company”. As part of this process, the two
parties shall inform each other of any proposal to change significant items of
process, equipment or test, or any item specifically mentioned in the Regulatory
Dossier.

	 	1.7.  	Storage of Product

	 	1.7.1.  	Starting Materials and Product will be stored at temperatures to be specified by
“Company”.

	2.  	Testing

	 	2.1.  	General Testing

	 	2.1.1.  	In-process testing and release testing of Starting Materials, Raw Materials and
Product will be the responsibility of Ash Stevens in accordance with the test methods
agreed to by “Company”. Ash Stevens will transfer the methods and write test methods
and assay qualification protocols that will be approved by the “Company” Quality
Representative.

	 	2.2.  	Provision of Samples to “Company”

					
	 
	 
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	 	2.2.1.  	In the event that “Company” requests samples of the Product, Starting Materials
and/or supplies of in-process materials for testing and/or storage, such samples will
be shipped by Ash Stevens to “Company” under the shipping conditions specified by
“Company”.

	 	2.3.  	Packaging Specification

	 	2.3.1.  	Labeling and packaging of Starting Materials and Product will comply with the batch
records, SOPs and written instructions, as recommended by Ash Stevens and agreed to
by “Company”, as appropriate.

	 	2.4.  	Retains

	 	2.4.1.  	Ash Stevens agrees to store all retained samples for API as specified in the
Specifications and Test Record form for that specific material. The quantity of
retain samples will be as specified on Ash Stevens’ Specification and Test Record
form provided that the quantity is sufficient to perform three full tests of the item
shall be retained. API retain samples will be maintained and retained by Ash Stevens
for a period ending five years following the end of the calendar year in which the
Product lot including such API reaches the end of it’s shelf life.
	 
	 	2.4.2.  	“Company” shall be responsible for maintaining the routine, post-marketing and
stability testing program for Product to ICH guidelines. Upon request, “Company”
will provide to Ash Stevens updated summaries of the stability testing program as
required to permit Ash Stevens to meet its regulatory compliance obligations.

	3.  	Quality Responsibilities

	 	3.1.  	Process Deviations

	 	3.1.1.  	Any major unplanned deviations in manufacture (including non-conforming test
results) discovered by Ash Stevens shall be reported to “Company’s” Quality
Representative within five (5) business days after the discovery thereof. Ash Stevens
will provide documentation to “Company’s” Quality Representative of all major
deviations. “Company” will make every reasonable effort to review a temporary change
request or quality deviation within five (5) business days, either giving approval or
disapproval to proceed to Ash Stevens or requisitioning additional information and/or
a joint investigation. “Company” QA will review all deviations as part of the
release process. The resolutions of the deviations must be approved jointly by Ash
Stevens’ and “Company’s” Quality Representatives.

					
	 
	 
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	 	3.2.  	Failure Investigations

	 	3.2.1.  	Ash Stevens shall be responsible for investigating any test result or in-process
test, which fails to meet Specification. Each investigation must give rise to an
explanation and/or corrective action, which must be reviewed and approved by Ash
Steven’s Quality Assurance Department. The investigation must document the effect of
any failure on the safety, efficacy or quality of Product. To support this assurance,
additional sampling, testing and checks may be required and these must be recorded in
the batch file.

	 	3.3.  	Documentation

	 	3.3.1.  	Ash Stevens will make available all testing data, batch documentation and
deviations/investigations associated with the batch within (5) business days after
Ash Stevens QA has completed review of the batch production and control records. The
time for release of product typically shall not exceed thirty (30) business days
after the completion of processing.

	 	3.4.  	Statement of Release

	 	3.4.1.  	The final Release of the Product is the responsibility of Ash Stevens. Consistent
with regulatory guidance, Product may not be shipped until the Release process is
complete. Test samples may be made available to “Company” or to “Company’s” agent
prior to release of the bulk batch, at “Company’s” request.
	 
	 	3.4.2.  	A senior person qualified and responsible for quality assurance for Ash Stevens
will sign a Certificate of Conformity and a Certificate of Analysis confirming that
Product has been made and tested in accordance with the Master Batch Record and with
all provisions hereof this Agreement. The Certificate of Analysis must give full
analytical results and the specification limits for each batch and must be supplied
with each delivery of each batch of Product.

	 	3.5.  	Retention of Records

	 	3.5.1.  	Records relating to manufacture shall be maintained by Ash Stevens in accordance
with the Agreement.

	 	3.6.  	Approval of Ash Stevens Documentation

	 	3.6.1.  	All Ash Stevens SOPs and documentation relating to the manufacture of Starting
Materials and Product will be made available to “Company” for inspection upon request
by “Company”. All batch records, Starting Materials Specifications, Intermediate
Product Specification and Final Product Specifications will be approved in advance by
“Company”.

	 	3.7.  	Access by “Company” Representatives

					
	 
	 
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	 	3.7.1.  	Upon “Company’s” request, Ash Stevens will permit “Company” to have one or more
representatives present in the Facility to observe manufacture of Starting Materials
and Product in accordance with the Agreement.

	 	3.8.  	Performance of Quality Audits

	 	3.8.1.  	Ash Stevens will permit “Company’s” Quality Representative or his/her designees to
enter Ash Stevens’s Facility upon reasonable notice during regular business hours for
the purpose of performing quality audits of the Facilities used in the manufacture,
storage, analysis and shipping of Starting Materials and Product.

	 	3.9.  	Validation

	 	3.9.1.  	Ash Stevens shall be responsible for ensuring that the manufacturing process and
analytical methodologies are validated. The aim of this validation is to ensure that
the process is capable of consistently achieving Product’s acceptance specifications
using validated analytical methods.
	 
	 	3.9.2.  	Ash Stevens shall be responsible for ensuring that adequate cleaning is carried out
between batches of different products to prevent cross contamination. The cleaning
process shall be validated. The validation shall be updated to cover any new products
made in the same facilities as those for Product for “Company”.
	 
	 	3.9.3.  	Ash Stevens shall be responsible for the qualification of all relevant utility,
equipment, computer systems and facilities associated with the manufacture, storage or
testing of Product.

	 	3.10.  	Laboratories

	 	3.10.1.  	Ash Stevens shall be responsible for ensuring that all laboratories, including
contract laboratories, are compliant with relevant cGMP’s, including Good Laboratory
Practices and are qualified in all of the methodology associated with Product.

	4.  	Shipping and Transport of Product

	 	4.1.  	Ash Stevens will pack and ship Starting Materials and Product according to
Ash Stevens’ SOPs and “Company’s” instructions for quantities and consignees.
Instructions should be provided at least five (5) business days prior to the desired
date of receipt. Shipments from Ash Stevens will routinely be made on Monday,
Tuesday, Wednesday or Thursday to preclude weekend handling by agents.

	5.  	Regulatory Inspections

					
	 
	 
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	 	5.1.  	Notification of Regulatory Inspections

	 	5.1.1.  	Each party will notify the other within twenty-four (24) hours after becoming aware
of any regulatory inspections of Facility that involve Product. Both Parties will
notify each other of any issues that affect regulatory approval, filings or continued
supply of Product.

	 	5.2.  	Review of Regulatory Finding

	 	5.2.1.  	Ash Stevens agrees that “Company” may review and approve all regulatory findings or
communications between Ash Stevens and any authority that directly affect the
Product.

	6.  	Communication

	 	6.1.  	All communication affecting the Quality Requirements shall be between the Quality
Representatives, except as otherwise stated in the Agreement.

	7.  	Conflict Resolution

	 	7.1.  	Any disputes or conflicts relating to these Quality Requirements will be resolved by
Ash Stevens and “Company” Quality Representatives in a timely and equitable manner and in
compliance with all applicable regulatory requirements and in accordance with cGMPs, as
applicable. Such resolutions shall be in writing and will be signed by an Ash Stevens and
a “Company” Quality Representative.

	8.  	Quality Information to be Provided

	 	8.1.  	Data provided to “Company” by Ash Stevens upon request only applies to “Company’s”
materials, data, not other ASI projects.
	 
	 	8.2.  	Ash Stevens will provide “Company” with an Annual Product Review according to the
requirements defined by the “Company”.

	9.  	Trade Secrets and Proprietary Information

	 	9.1.  	Production Procedures, Specifications and Test Methods developed specifically and
uniquely for preparation of the Product may not be divulged to third parties, with the
exception of regulatory bodies, without the express written consent of the management of
Ash Stevens and “Company”.

	10.  	Complaints

	 	10.1.  	The “Company” shall be responsible for coordinating the investigation of any
complaints about Pharmaceutical products made from Product and shall notify Ash

					
	 
	 
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	 	   	Stevens of any complaint which may impact Product’s quality and may be due to the
manufacture, to the quality of any component or to testing of the Product.
	 
	 	10.2.  	Ash Stevens shall investigate and provide a rapid initial response and a full report
as soon as possible and in any event as to enable “Customer” to meet any required
regulatory timeframe.
	 
	 	10.3.  	If Ash Stevens receives any complaint directly it shall promptly notify “Company”.
	 
	 	10.4.  	“Company” shall be responsible for all activities relating to medical surveillance and
reporting to authorities.

	11.  	Changes to Quality Requirements

	 	11.1.  	These Quality Requirements or any part of them may only be changed by the
signed and dated written agreement of the parties.

Authorized Quality Representatives of the Parties

The following represents the list of people allowed to approve change to these Quality Requirements
(“Quality Representatives”). Any change must be signed by both parties’ Quality Representative.

“Company” Quality Representatives:

	   	Quality Assurance Manager

Quality Assurance Director

Vice President, Global Manufacturing

Authorized Ash Stevens Quality Representatives:

	 	 	 
	Senior Quality Assurance Associate

	 	Senior Quality Assurance Associate
	 
	 	 
	Quality Assurance Associate

	 	Quality Control Manager
	 
	 	 
	Vice President, Quality
	 	 

					
	 
	 
	 	SUPPLY AGREEMENT
	 	 

 

 

ACKNOWLEDGED, ACCEPTED AND AGREED TO:

“Company”, Inc.

	 	 	 
	By: /s/ Judith A. Hemberger
	 	 
	

	 	 
	(Signature)
	 	 
	 
	 	 
	Name: Judith A. Hemberger
	 	 
	

	 	 
	(Print/Type)
	 	 
	 
	 	 
	Title: Executive VP/COO

Date: 15 April 2005

	 	 
	 
	 	 
	Ash Stevens, Inc.
	 	 
	 
	 	 
	By: /s/ Stephen A. Monk

(Signature)

	 	 
	 
	 	 
	Name: Stephen A. Monk
	 	 
	

	 	 
	(Print/Type)
	 	 
	 
	 	 
	Title: President & CEO
	 	 
	 
	 	 
	Date: March 31, 2005
	 	 

					
	 
	 
	 	SUPPLY AGREEMENT
	 	 

 

 

EXHIBIT F

Prices for Qualified Azacitidine Reference Standard

Price for qualified Compound reference standard per kilo as of the Effective Date (the
“Reference Standard Price”): [... *** ...].

The Reference Standard Price shall be adjusted only as follows:

	1.  	PPI Adjustment. On an annual basis (as of the beginning of each calendar year) to
reflect any increase or decrease in the Producer Price Index NAICS #325412P (Pharmaceutical
preparations) (“PPI”) for the most recent prior year.
	 
	2.  	Changes to the Specifications. As provided in Section 5(a) (Compound Changes) of the
Agreement.

* * * * *

					
	 
	 
	 	SUPPLY AGREEMENT
	 	 

*** Confidential Treatment Requestedexv10w8

 

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

	 	 	)	 	 	 
	LITIGATION

	 	 	)	 	 	 
	

	 	 	)	 	 	Master File No. C-03-2954-SI
	

	 	 	)	 	 	 
	

	 	 	)	 	 	 
	

	 	 	)	 	 	CLASS ACTION
	

	 	 	)	 	 	 
	This Document Relates To:

	 	 	)	 	 	 
	

	 	 	)	 	 	STIPULATION OF SETTLEMENT
	ALL ACTIONS.

	 	 	)	 	 	 
	

	 	 	)	 	 	 
	

	 	 	)	 	 	 

STIPULATION OF SETTLEMENT – C-03-2954-SI

 

 

      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

STIPULATION OF SETTLEMENT – C-03-2954-SI

 

 

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’

					
	 	 	 	 	 
	
	 	STIPULATION OF SETTLEMENT – C-03-2954-SI
	 	2

 

 

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

					
	 	 	 	 	 
	
	 	STIPULATION OF SETTLEMENT – C-03-2954-SI
	 	3

 

 

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,

					
	 	 	 	 	 
	
	 	STIPULATION OF SETTLEMENT – C-03-2954-SI
	 	4

 

 

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.

					
	 	 	 	 	 
	
	 	STIPULATION OF SETTLEMENT – C-03-2954-SI
	 	5

 

 

      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

					
	 	 	 	 	 
	
	 	STIPULATION OF SETTLEMENT – C-03-2954-SI
	 	6

 

 

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.

					
	 	 	 	 	 
	
	 	STIPULATION OF SETTLEMENT – C-03-2954-SI
	 	7

 

 

§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

					
	 	 	 	 	 
	
	 	STIPULATION OF SETTLEMENT – C-03-2954-SI
	 	8

 

 

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.

					
	 	 	 	 	 
	
	 	STIPULATION OF SETTLEMENT – C-03-2954-SI
	 	9

 

 

      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

					
	 	 	 	 	 
	
	 	STIPULATION OF SETTLEMENT – C-03-2954-SI
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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

					
	 	 	 	 	 
	
	 	STIPULATION OF SETTLEMENT – C-03-2954-SI
	 	11

 

 

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

					
	 	 	 	 	 
	
	 	STIPULATION OF SETTLEMENT – C-03-2954-SI
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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

 

 

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

 

 

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

 

 

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

 

 

      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

 

 

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

 

 

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

 

 

	 	 	 
	/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

 

 

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
	 

	 	 	)	 	 	 
	

	 	 	 	 	 	 
	

	 	 	 	 	 	EXHIBIT A

 

 

      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 -

 

 

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 -

 

 

      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 -

 

 

      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 -

 

 

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 -

 

 

      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 -

 

 

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 -

 

 

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
	 
	 	 	 	 	 	 

 

 

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

			
	 	 	 
	NOTICE OF PENDENCY AND PROPOSED	 	 
	SETTLEMENT OF CLASS ACTION — C-03-2954-SI
	 	-1-

 

 

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.

			
	 	 	 
	NOTICE OF PENDENCY AND PROPOSED	 	 
	SETTLEMENT OF CLASS ACTION — C-03-2954-SI
	 	-2-

 

 

	 	•  	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

			
	 	 	 
	NOTICE OF PENDENCY AND PROPOSED	 	 
	SETTLEMENT OF CLASS ACTION — C-03-2954-SI
	 	-3-

 

 

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-

 

 

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

			
	 	 	 
	NOTICE OF PENDENCY AND PROPOSED	 	 
	SETTLEMENT OF CLASS ACTION — C-03-2954-SI
	 	-5-

 

 

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

			
	 	 	 
	NOTICE OF PENDENCY AND PROPOSED	 	 
	SETTLEMENT OF CLASS ACTION — C-03-2954-SI
	 	-6-

 

 

	 	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

			
	 	 	 
	NOTICE OF PENDENCY AND PROPOSED	 	 
	SETTLEMENT OF CLASS ACTION — C-03-2954-SI
	 	-7-

 

 

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:

			
	 	 	 
	NOTICE OF PENDENCY AND PROPOSED	 	 
	SETTLEMENT OF CLASS ACTION — C-03-2954-SI
	 	-8-

 

 

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.

			
	 	 	 
	NOTICE OF PENDENCY AND PROPOSED	 	 
	SETTLEMENT OF CLASS ACTION — C-03-2954-SI
	 	-9-

 

 

      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 — C-03-2954-SI
	 	-10-

 

 

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.

			
	 	 	 
	NOTICE OF PENDENCY AND PROPOSED	 	 
	SETTLEMENT OF CLASS ACTION — C-03-2954-SI
	 	-11-

 

 

		
	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/ .

			
	 	 	 
	NOTICE OF PENDENCY AND PROPOSED	 	 
	SETTLEMENT OF CLASS ACTION — C-03-2954-SI
	 	-12-

 

 

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

			
	 	 	 
	NOTICE OF PENDENCY AND PROPOSED	 	 
	SETTLEMENT OF CLASS ACTION — C-03-2954-SI
	 	-13-

 

 

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

	 	 	 	 	 	 	 
	In re INTERMUNE, INC. SECURITIES LITIGATION

	 	 	)
)	 	 	Master File No. C-03-2954-SI 
	This Document Relates To:

	 	 	)	 	 	CLASS
ACTION
	ALL
ACTIONS.

	 	 	)

)

)	 	 	PROOF OF CLAIM AND RELEASE
	

	 	 	)	 	 	EXHIBIT A-2

 

 

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-

 

 

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.

			
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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.

			
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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

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

Street Address

	 	 	 
	

	 	

	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	 	 

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
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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 ______.

	   	 

	* Excluding Taxes, Fees and Commissions.

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

			
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	 	-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
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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
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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-

 

 

      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-

 

 

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 -

 

 

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-

 

 

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-

 

 

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

	 	 	 	 	 	 	 
	In re INTERMUNE, INC. SECURITIES LITIGATION

	 	 	)	 	 	Master File No. C-03-2954-SI
	

	 	 	)	 	 	 
	

	 	 	)	 	 	CLASS ACTION
	

	 	 	)	 	 	 
	This Document Relates To:

	 	 	)	 	 	STIPULATION OF SETTLEMENT
	

	 	 	)	 	 	 
	ALL ACTIONS.

	 	 	)	 	 	 
	

	 	 	)	 	 	 
	

	 	 	)	 	 	 

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.

 

 

      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

 

 

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.

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