Document:

Exhibit 10.65

 

September 24, 2003

 

Mr. Daniel G. Welch

44 Shields Road

Darien, CT 06820

 

Dear Dan:

 

On behalf of InterMune, Inc. (the “Company”) and the Board of Directors
(“BOD”), we are pleased to offer you the position of President and Chief
Executive Officer, reporting to the BOD and to become a member of the BOD.  Your place of employment will be at the
Company’s headquarters in Brisbane, California.  Should you accept this offer, your first day of employment will
be September 25, 2003 (“Start Date”).

 

The key terms of your employment will be as follows:

 

1.               Base Salary.  You will receive a base salary of $43,750.00
per month, paid on a semi-monthly basis. 
This is the annual equivalent of $525,000 per year.  Your salary will be reviewed in
March 2004 by the Compensation Committee of the BOD with the other
Executive Staff members and based on your performance you will be considered
for a full annual merit increase.  In
subsequent years, your base salary will be reviewed by the Compensation
Committee of the BOD on an annual basis for possible increases.  (The annualized base salary to be paid,
together with any subsequent increases thereto, shall be referred to herein as
the “Base Salary”).

 

2.               Annual Bonus.  In addition, you will be eligible for an
annual bonus based on the attainment of corporate goals established between the
BOD and you, which goals may be adjusted during the performance period by
mutual consent between you and the BOD. 
Your annual target bonus will be 75% (or such greater percentage as the
BOD may approve) of your Base Salary (“Target Bonus”), and your maximum annual
bonus will be 200% of your Target Bonus based on BOD established
initiatives.  The 2003 annual bonus
opportunity will be calculated at 25% (one quarter) of the Target Bonus (or
$98,438) and is guaranteed.  The annual
bonus for any fiscal year will be paid out in the first quarter of the
immediate following fiscal year.

 

3.               Equity.  You will be granted an option to purchase
625,000 shares of the Company’s common stock (the “Options”) at the closing
price per share of the Company’s common stock on September 24, 2003,
pursuant to the Company’s 2000 Equity Investment Plan.  The Options shall have a ten (10) year term
and shall vest in 48 equal monthly installments over four years, provided,
however that the first 12 installments shall not vest until one year from the
Start Date.  Your vesting will begin on
the Start Date.  In the event of your
termination of employment with the Company for any reason, all vested Options
must be exercised within 12 months of your termination date.  Subject to shareholder approval of
additional shares to be used for stock option purchases, you will be granted
additional Options in May, 2004 at a level consistent with your position and
past practices of the Company.  As with
Base Salary and annual bonus compensation, the Compensation Committee of the
BOD, consistent with the Executive Staff’s review, will review your stock
position annually for the purposes of granting future stock options to you on a
basis no less favorable than those granted to other senior executives of the
Company. Such a review normally takes place in March of each year.  The terms and conditions of the Options
shall be governed by a separate agreement you will be asked to sign (the “Stock
Option Agreement”).

 

4.               Relocation.

 

(a)                                  The Company will retain a
relocation company (Executive Relocation) to provide you with the following
services: area orientation, full packing services, pick-up and delivery,
household goods transportation and full value protection of goods, transport of
(2) automobiles, storage in transit for 60 days, temporary housing for up to 6
months, if

 

1

 

required, and home sale/purchase
assistance (Buyer Value Option).  A
summary of terms and coverage of services is attached hereto.  The relocation expenses will be paid by the
Company and is subject to repayment in full if your employment is terminated by
the Company for Cause or you voluntarily resign without Good Reason (as such
terms are defined herein) before one year from the Start Date.  For purposes of this paragraph 4(a), all
payments will be made on a grossed-up basis for income tax purposes.

 

(b)                                 In addition, to assist you in
the move from Darien, CT to the San Francisco Bay Area, you will be provided
with a 4-year Cost of Living/Housing Differential Payment (“COLA”).  The amount of the COLA will be paid to you
in equal monthly installments, whereby you will receive a total of $67,027 in
the first year of employment, $50,270 in the second year of employment, $33,513
in the third year of employment and $16,756 in the fourth year of employment.
All calculations are made in conjunction with Runzheimer and Executive
Relocation methodologies.    For
purposes of this paragraph 4(b), at the end of each calendar year the Company
will gross-up for income tax purposes the portion of the COLA payment which was
used to pay for your non-deductible expenses.

 

5.               Employee
Benefits.  As a full-time employee
of the Company, you will be eligible for the Company’s standard benefits
package including medical, dental, vision, the Employee Stock Purchase program,
401K Retirement Plan, 11 paid holidays and our Flexible Spending Plan, among
other coverages. You are entitled to four (4) weeks of paid vacation. Your
position is exempt, and you will not be eligible for overtime.

 

6.               Definitions.  For purposes of this letter, the following
definitions shall apply:

 

Resignation with “Good Reason” means a termination of your employment
following the occurrence of one or more of the following events:

 

•                  Adverse
change in your title, duties or responsibilities;

•                  Reduction
in your Base Salary or Target Bonus levels;

•                  Failure
of successor company to assume the obligations contained in this letter or any
stock option agreement between you and the Company;

•                  A
relocation of the Company’s headquarters outside of the San Francisco Bay       Area; or

•                  A
material breach of any of the terms of this letter.

 

All other terminations initiated by you (other than death or
Disability) shall be deemed to be a Resignation without Good Reason.

 

Termination “for Cause” means a termination of your employment by the
Company based on a determination that any one or more of the following has
occurred:

 

•                  Willful
refusal to follow lawful and reasonable corporate policy of BOD directives;

•                  Willful
failure, gross neglect or refusal to perform duties;

•                  Willful
act that intentionally and materially injures the reputation or business of the
Company;

•                  Willful
breach of confidentiality that has a material adverse affect on the Company

•                  Fraud
or embezzlement; or

•                  Indictment
for criminal activity.

 

For purposes of this definition, no act or failure to act shall be
considered “willful” unless it was done or omitted to be done not in good
faith, and shall not include any act or failure to act resulting from your
Disability.  Furthermore, a termination
for Cause shall not take effect unless you are given written notice by the
Company of its intention to terminate you for Cause, and is given to you within
90 days of the Company’s learning of such act or acts or failure or failures to
act.  You shall then have 20 days after
the date that such written notice has been given to you in

 

2

 

which to cure such conduct, to the extent such cure is possible.  If you fail to cure such conduct, you shall
then be entitled to a hearing before the BOD at which you and your counsel are
entitled to appear.  Such hearing shall
be held within 25 days of such notice to you, provided you request such hearing
within 10 days of the written notice from the Company of the intention to
terminate you for Cause.  If, within
five days following such hearing, you are furnished written notice by the BOD
confirming that, in its judgment, grounds for Cause on the basis of the
original notice exist, you shall then be terminated for Cause.  For purposes of such determination by the
BOD, at least 75% of the BOD voting on the issue of your termination must find
that there was grounds on which to terminate you for Cause.

 

Any
termination initiated by the Company for reasons other than those described
above and not made in accordance with the above procedures shall be considered
a “Termination without Cause”.

 

“Disability”
shall mean that you have become physically or mentally incapable of performing
your duties for a period of 180 consecutive days.  The determination regarding the existence and expected or actual
duration of such incapacity shall be made by a health professional mutually
acceptable to you and the Company.  The
Company shall provide 30 days’ written notice of a termination due to
Disability.

 

“Change
in Control” shall have the same meaning as that used in the Company’s 2000
Equity Incentive Plan.

 

7.                                       Termination

 

If you resign from the Company without Good
Reason or if you are terminated with Cause, you will be entitled to:

 

•                  Any
accrued but unpaid Base Salary or Target Bonus (“Accrued Obligations”)

•                  If
you are terminated for Cause due to indictment for criminal activities, and you
are later adjudicated innocent of the charges on which you were indicted or the
indictment is subsequently quashed, you shall also be entitled at the time of
such adjudication or quashing to: (i) 2 times the sum of your Base Salary and
Target Bonus at the time of such termination for Cause, and (ii) an amount
equal to the product of (x) the number of Options that would have become vested
if your termination had been considered a termination without Cause and (y) the
difference between the exercise price of such Options and the highest closing
price of the Company’s common stock during the year following your date of
termination, in each case with interest from the date of termination at the
prevailing prime rate.

 

If you resign from the Company with Good
Reason or if you are terminated without Cause, you will be entitled to the
following payments (payable in lump sum within 30 days of your termination) and
benefits:

 

•                  Accrued
Obligations;

•                  2
times the sum of your Base Salary plus Target Bonus;

•                  Continuation
of your medical, dental and health insurance (as in effect immediately prior to
your termination) for a period of 24 months following your termination (or
until you secure similar insurance coverage with a future employer, if earlier);

•                  If
the termination occurs prior to a Change in Control, two years’ worth of
accelerated vesting of your Options.

•                  If
the termination occurs on or after a Change in Control, accelerated vesting of
all Options.

 

If your employment terminates due to death or
Disability, you or your estate will be entitled to:

 

3

 

•                Accrued
Obligations;

•                Two
years’ worth of accelerated vesting of your Options from the date of  your death or Disability.

 

Regardless of the reason, in the event that your position as President
and Chief Executive Officer terminates, you agree to concurrently resign as a
member of the BOD and as an officer and director of any of the Company’s
subsidiaries and affiliates, unless both the BOD and you agree otherwise.

 

8.                                       Change
In Control.  Notwithstanding
anything in this letter to the contrary, upon the occurrence of a Change in
Control within one year of your Start Date and in the absence of your
termination or resignation, you will be entitled to two years’ worth of
accelerated vesting of your Options from the date of the Change in Control plus
a number of Options equal to 625,000 multiplied by a fraction, the numerator of
which is the number of whole or partial months worked, and the denominator of
which is 48.  If the Change in Control
occurs on or after the first anniversary of your Start Date and in the absence
of your termination or resignation, all of your Options will vest.

 

9.                                       Arbitration.  You and the Company agree to arbitrate before
a single neutral arbitrator, in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
(“AAA”) and California law, any disputes regarding this letter or your
employment with the Company.  Such
arbitration will take place in the San Francisco Bay Area. The Company will pay
your reasonable costs and expenses incurred in the arbitration unless the
Company prevails on all merits.

 

10.                                 Excise
Tax Gross-Up.  To the extent that
you incur an excise tax as a result of taxes imposed on you under
Section 4999 of the Internal Revenue Code of 1986, the Company shall
gross-up such payments to make you whole on an after-tax basis.

 

11.                                 Miscellaneous.

 

As a condition of your employment, you will be
required to provide proof of U.S. citizenship or that you are legally entitled
to work in the United States, and to execute and be bound by the terms of the
enclosed Proprietary Information and Inventions Agreement, attached hereto.  In that regard, please be aware that Company
policy prohibits all employees from bringing to the Company, or using in
performance of their responsibilities at the Company, any confidential
information, trade secrets, or proprietary material or processes of any
previous employer.  Employment with the
Company is at will, is not for any specific term and can be terminated by you
or the Company at any time for any reason with or without cause (subject to the
terms of this letter) and is subject to acceptable reference checks and our
standard company background investigation.

 

Upon your written acceptance of this offer, the terms described in this
letter and in the Proprietary Information and Inventions Agreement (which you
must also sign) shall be the terms of your employment, superseding and
terminating any other employment agreements or understandings with InterMune,
whether written or oral.  Any additions
or modifications of these terms must be in writing and signed by you and an
authorized officer of the Company.

 

Again, let me indicate how pleased we are to extend this offer, and how
much we at InterMune look forward to working with you. Fred Schreiber, our
SVP-HR and I along with all the Board members have enjoyed our recent
conversations and we believe that you will find this an exciting and
challenging position in a dynamic and growing company.

 

Should you have any questions about the above offer
terms, please advise. Please accept this offer by signing and returning the
enclosed duplicate original of this letter via Fed Ex to Fred and faxing a copy
of this email after signing to him as well at (415) 508-0755.

 

	
  Very truly yours,

  
	
   

  
	
  /s/ Bill Ringo

  	
   

  
	
  Bill Ringo

  
	
  Executive Director, Chairman of the Board and Interim CEO

  
	
   

  

 

4

 

	
  UNDERSTOOD AND ACCEPTED:

  
	
   

  
	
  /s/ Daniel Welch

  	
  9/24/03

  	
   

  
	
  Dan Welch

  	
  Date

  

 

5

 

INTERMUNE, INC.

 

EMPLOYEE PROPRIETARY INFORMATION

AND INVENTIONS AGREEMENT

 

In consideration of my
employment or continued employment by INTERMUNE, INC. (the “Company”), and the
compensation now and hereafter paid to me, I hereby agree as follows:

 

1.                                  NONDISCLOSURE

 

1.1                               Recognition
of Company’s Rights; Nondisclosure. 
At all times during my employment and thereafter, I will hold in
strictest confidence and will not disclose, use, lecture upon or publish any of
the Company’s Proprietary Information (defined below), except as such
disclosure, use or publication may be required in connection with my work for
the Company, or unless an officer of the Company expressly authorizes such in
writing.  I will obtain Company’s
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. 
I hereby assign to the Company any rights I may have or acquire in such
Proprietary Information and recognize that all Proprietary Information shall be
the sole property of the Company and its assigns.

 

1.2                               Proprietary
Information.  The term “Proprietary
Information” shall mean any and all confidential and/or proprietary
knowledge, data or information of the Company. 
By way of illustration but not limitation, “Proprietary Information”
includes (a) trade secrets, inventions, mask works, ideas, processes,
formulas, source and object codes, data, programs, other works of authorship,
know-how, improvements, discoveries, developments, designs and techniques
(hereinafter collectively referred to as “Inventions”); and (b) information
regarding plans for research, development, new products, marketing and selling,
business plans, budgets and unpublished financial statements, licenses, prices
and costs, suppliers and customers; and (c) information regarding the skills
and compensation of other employees of the Company.  Notwithstanding the foregoing, it is understood that, at all such
times, I am free to use information which is generally known in the trade or
industry, which is not gained as result of a breach of this Agreement, and my
own, skill, knowledge, know-how and experience to whatever extent and in
whichever way I wish.

 

1.3                               Third
Party Information.  I understand, in
addition, that the Company has received and in the future will receive from
third parties confidential or proprietary information (“Third Party Information”)
subject to a duty on the Company’s part to maintain the confidentiality of such
information and to use it only for certain limited purposes.  During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless expressly
authorized by an officer of the Company in writing.

 

1.4                               No
Improper Use of Information of Prior Employers and Others.  During my employment by the Company I will
not improperly use or disclose any confidential information or trade secrets,
if any, of any former employer or any other person to whom I have an obligation
of confidentiality, and I will not bring onto the premises of the Company any
unpublished documents or any property belonging to any former employer or any
other person to whom I have an obligation of confidentiality unless consented
to in writing by that former employer or person.  I will use in the performance of my duties only information which
is generally known and used by persons with training and experience comparable
to my own, which is common knowledge in the industry or otherwise legally in
the public domain, or which is otherwise provided or developed by the Company.

 

2.                                  ASSIGNMENT
OF INVENTIONS.

 

2.1                               Proprietary
Rights.  The term “Proprietary
Rights” shall mean all trade secret, patent, copyright, mask work
and other intellectual property rights throughout the world.

 

2.2                               Prior
Inventions.  Inventions, if any,
patented or unpatented, which I made prior to the commencement of my employment
with the Company are excluded from the scope of this Agreement.  To preclude any possible uncertainty, I have
set forth on Exhibit B

 

6

 

(Previous Inventions) attached
hereto a complete list of all Inventions that I have, alone or jointly with
others, conceived, developed or reduced to practice or caused to be conceived,
developed or reduced to practice prior to the commencement of my employment
with the Company, that I consider to be my property or the property of third
parties and that I wish to have excluded from the scope of this Agreement
(collectively referred to as “Prior Inventions”).  If disclosure of any such Prior Invention
would cause me to violate any prior confidentiality agreement, I understand
that I am not to list such Prior Inventions in Exhibit B but am only
to disclose a cursory name for each such invention, a listing of the party(ies)
to whom it belongs and the fact that full disclosure as to such inventions has
not been made for that reason. A space is provided on Exhibit B for such
purpose.  If no such disclosure is
attached, I represent that there are no Prior Inventions.  If, in the course of my employment with the
Company, I incorporate a Prior Invention into a Company product, process or
machine, the Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license (with rights to
sublicense through multiple tiers of sublicensees) to make, have made, modify,
use and sell such Prior Invention. 
Notwithstanding the foregoing, I agree that I will not incorporate, or
permit to be incorporated, Prior Inventions in any Company Inventions without
the Company’s prior written consent.

 

2.3                               Assignment
of Inventions.  Subject to Sections
2.4, and 2.6, I hereby assign and agree to assign in the future (when any such
Inventions or Proprietary Rights are first reduced to practice or first fixed
in a tangible medium, as applicable) to the Company all my right, title and
interest in and to any and all Inventions (and all Proprietary Rights with respect
thereto) whether or not patentable or registrable under copyright or similar
statutes, made or conceived or reduced to practice or learned by me, either
alone or jointly with others, during the period of my employment with the
Company.  Inventions assigned to the
Company, or to a third party as directed by the Company pursuant to this
Section 2, are hereinafter referred to as “Company Inventions.”

 

2.4                               Nonassignable
Inventions.  This Agreement does not
apply to an Invention which qualifies fully as a nonassignable Invention under
Section 2870 of the California Labor Code (hereinafter “Section 2870”).  I have reviewed the notification on Exhibit A
(Limited Exclusion Notification) and agree that my signature acknowledges
receipt of the notification.

 

2.5                               Obligation
to Keep Company Informed.  During
the period of my employment and for six (6)
months after termination of my employment with the Company, I will
promptly disclose to the Company fully and in writing all Inventions authored,
conceived or reduced to practice by me, either alone or jointly with
others.  In addition, I will promptly
disclose to the Company all patent applications filed by me or on my behalf within a year after termination of employment.  At the time of each such disclosure, I will
advise the Company in writing of any Inventions that I believe fully qualify
for protection under Section 2870; and I will at that time provide to the
Company in writing all evidence necessary to substantiate that belief.  The Company will keep in confidence and will
not use for any purpose or disclose to third parties without my consent any
confidential information disclosed in writing to the Company pursuant to this
Agreement relating to Inventions that qualify fully for protection under the
provisions of Section 2870.  I will
preserve the confidentiality of any Invention that does not fully qualify for
protection under Section 2870.

 

2.6                               Government
or Third Party.  I also agree to
assign all my right, title and interest in and to any particular Company Invention
to a third party, including without limitation the United States, as directed
by the Company.

 

2.7                               Works
for Hire.  I acknowledge that all
original works of authorship which are made by me (solely or jointly with
others) within the scope of my employment and which are protectable by
copyright are “works made for hire,” pursuant to United States Copyright Act
(17 U.S.C., Section 101).

 

2.8                               Enforcement
of Proprietary Rights.  I will
assist the Company in every proper way to obtain, and from time to time
enforce, United States and foreign Proprietary Rights relating to Company
Inventions in any and all countries.  To
that end I will execute, verify and deliver such documents and perform such
other acts (including appearances as a witness) as the Company may reasonably
request for use in

 

7

 

applying for, obtaining,
perfecting, evidencing, sustaining and enforcing such Proprietary Rights and
the assignment thereof.  In addition, I
will execute, verify and deliver assignments of such Proprietary Rights to the
Company or its designee.  My obligation
to assist the Company with respect to Proprietary Rights relating to such
Company Inventions in any and all countries shall continue beyond the
termination of my employment, but the Company shall compensate me at a
reasonable rate after my termination for the time actually spent by me at the
Company’s request on such assistance.

 

In the event the Company is unable for any
reason, after reasonable effort, to secure my signature on any document needed
in connection with the actions specified in the preceding paragraph, I hereby
irrevocably designate and appoint the Company and its duly authorized officers
and agents as my agent and attorney in fact, which appointment is coupled with
an interest, to act for and in my behalf to execute, verify and file any such
documents and to do all other lawfully permitted acts to further the purposes
of the preceding paragraph with the same legal force and effect as if executed
by me.  I hereby waive and quitclaim to
the Company any and all claims, of any nature whatsoever, which I now or may
hereafter have for infringement of any Proprietary Rights assigned hereunder to
the Company.

 

3.                                      RECORDS.  I agree to keep and maintain adequate and current records (in
the form of notes, sketches, drawings and in any other form that may be
required by the Company) of all Proprietary Information developed by me and all
Inventions made by me during the period of my employment at the Company, which
records shall be available to and remain the sole property of the Company at
all times.

 

4.                                      ADDITIONAL ACTIVITIES.  I agree that during the period of my
employment by the Company I will not, without the Company’s express written
consent, engage in any employment or business activity which is competitive
with, or would otherwise conflict with, my employment by the Company.  I agree further that for the period of my
employment by the Company and for two (2) years after the date of termination
of my employment by the Company, I will not directly or indirectly solicit,
induce, or attempt to solicit or induce, any employee or independent contractor
of the Company to leave the Company or to provide services to any other person
or entity.

 

5.                                      NO CONFLICTING OBLIGATION.  I represent that my performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep in confidence information acquired by me in
confidence or in trust prior to my employment by the Company.  I have not entered into, and I agree I will
not enter into, any agreement either written or oral in conflict herewith.

 

6.                                      RETURN OF COMPANY DOCUMENTS.  When I leave the employ of the Company, I
will deliver to the Company any and all drawings, notes, memoranda,
specifications, devices, formulas, and documents, together with all copies
thereof, and any other material containing or disclosing any Company
Inventions, Third Party Information or Proprietary Information of the Company.  I further agree that any property belonging
to the Company (including without limitation computer hard drives, disks,
back-up tapes or other storage media; and desks, filing cabinets or other work
areas) is subject to inspection by Company personnel at any time without further
notice.  I agree that I have no
expectation of privacy in such areas and hereby consent to any such
searches.  Prior to leaving, I will
cooperate with the Company in completing and signing the Company’s termination
statement.

 

7.                                      LEGAL AND EQUITABLE REMEDIES.  I understand and agree that because I will
have access to and become acquainted with the Proprietary Information of the
Company, the Company would be irreparably harmed by a breach of this Agreement.  Therefore, the Company shall have the right
to enforce this Agreement and any of its provisions by injunction, specific
performance or other equitable relief, without bond and without prejudice to
any other rights and remedies that the Company may have for a breach of this
Agreement.

 

8.                                      NOTICES.  Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as
the party shall specify in writing. 
Such notice shall be deemed given upon personal delivery to the
appropriate address or if sent by certified or registered mail, three (3) days
after the date of mailing.

 

8

 

9.                                      NOTIFICATION OF NEW EMPLOYER.  In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my rights
and obligations under this Agreement.

 

10.                           GENERAL PROVISIONS.

 

10.1                        Governing
Law; Consent to Personal Jurisdiction. 
This Agreement will be governed by and construed according to the laws
of the State of California, as such laws are applied to agreements entered into
and to be performed entirely within California between California
residents.  I hereby expressly consent
to the personal jurisdiction of the state and federal courts located in San
Francisco County, California for any lawsuit filed there against me by Company
arising from or related to this Agreement.

 

10.2                        Severability.  In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. 
If moreover, any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, it shall be construed by limiting and
reducing it, so as to be enforceable to the extent compatible with the
applicable law as it shall then appear.

 

10.3                        Successors
and Assigns.  This Agreement will be
binding upon my heirs, executors, administrators and other legal
representatives and will be for the benefit of the Company, its successors, and
its assigns.

 

10.4                        Survival.  The provisions of this Agreement shall
survive the termination of my employment and the assignment of this Agreement
by the Company to any successor in interest or other assignee.

 

10.5                        Employment.  I agree and understand that nothing in this
Agreement shall confer any right with respect to continuation of employment by
the Company, nor shall it interfere in any way with my right or the Company’s
right to terminate my employment at any time, with or without cause, and with
or without advance notice.

 

10.6                        Waiver.  No waiver by the Company of any breach of
this Agreement shall be a waiver of any preceding or succeeding breach.  No waiver by the Company of any right under
this Agreement shall be construed as a waiver of any other right.  The Company shall not be required to give
notice to enforce strict adherence to all terms of this Agreement.

 

10.7                        Entire
Agreement.  The obligations pursuant
to Sections 1 and 2 of this Agreement shall apply to any time during which I
was previously employed, or am in the future employed, by the Company as an
independent contractor or consultant if no other agreement governs
nondisclosure and assignment of inventions during such period.  This Agreement is the final, entire and
exclusive agreement of the parties with respect to the subject matter hereof
and supersedes all prior communications between me and the Company on the
subjects contained herein.  No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, will be effective unless in writing and signed by me and
a duly authorized officer of the Company. 
Any subsequent change or changes in my duties, salary or compensation
will not affect the validity or scope of this Agreement.

 

9

 

This Agreement shall be effective as of the
first day of my employment with the Company, namely:  September 25, 2003.

 

I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.  I HAVE COMPLETELY FILLED OUT EXHIBITS A
AND B TO THIS AGREEMENT.

 

 

	
  /s/ Daniel Welch

  	
   

  
	
  (Signature)

  
	
   

  	
   

  
	
  Daniel Welch

  	
   

  
	
  (Printed Name)

  	
   

  
	
   

  	
   

  
	
  Address:

  	
  3280 Bayshore Blvd.

  	
   

  
	
   

  	
  Brisbane, CA  94005

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated: 
  

  	
   9/25/03

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACCEPTED AND AGREED TO:

  	
   

  
	
   

  	
   

  
	
  INTERMUNE, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Fred Schreiber

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   SVP
  - HR

  	
   

  
	
   

  	
   

  
	
  Address:

  	
  3280 Bayshore Blvd.

  	
   

  
	
   

  	
  Brisbane, CA  94005

  	
   

  
	
   

  	
   

  
	
  Dated: 

  	
   9/25/03

  	
   

  	
   

  
									

 

10

 

EXHIBIT A

 

LIMITED EXCLUSION NOTIFICATION

 

THIS IS TO NOTIFY you
in accordance with Section 2872 of the California Labor Code that the
foregoing Agreement between you and the Company does not require you to assign
or offer to assign to the Company any invention that you developed entirely on
your own time without using the Company’s equipment, supplies, facilities or
trade secret information except for those inventions that either:

 

1.                                      Relate
at the time of conception or reduction to practice of the invention to the
Company’s business, or actual or demonstrably anticipated research or
development of the Company;

 

2.                                      Result
from any work performed by you for the Company.

 

To the extent a provision in the foregoing
Agreement purports to require you to assign an invention otherwise excluded
from the preceding paragraph, the provision is against the public policy of
this state and is unenforceable.

 

This limited exclusion does not apply to any
patent or invention covered by a contract between the Company and the United
States or any of its agencies requiring full title to such patent or invention
to be in the United States.

 

I ACKNOWLEDGE RECEIPT of
a copy of this notification.

 

	
   

  	
  By:

  	
  /s/ Daniel
  G. Welch

  
	
   

  	
   

  	
  (PRINTED NAME OF
  EMPLOYEE)

  
	
   

  	
   

  	
  Daniel G.
  Welch

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  9/25/03

  
	
   

  	
   

  	
   

  
	
  WITNESSED BY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Fred Schreiber

  	
   

  
	
  (PRINTED NAME OF REPRESENTATIVE)

  	
   

  	
   

  
								

 

A-1

 

EXHIBIT B

 

	
  TO:

  	
  INTERMUNE, INC.

  
	
   

  	
   

  
	
  FROM:

  	
  Daniel G. Welch

  	
   

  
	
   

  	
   

  
	
  DATE:

  	
   

  	
   

  
	
   

  	
   

  
	
  SUBJECT:

  	
  Previous Inventions

  

 

 

1.                                       Except
as listed in Section 2 below, the following is a complete list of all inventions
or improvements relevant to the subject matter of my employment by INTERMUNE, INC. (the “Company”) that have been made
or conceived or first reduced to practice by me alone or jointly with others
prior to my engagement by the Company:

 

ý                                No
inventions or improvements.

 

o                                See
below:

 

	
   

  
	
   

  
	
   

  

 

o                          Additional sheets attached.

 

2.                                       Due to a prior
confidentiality agreement, I cannot complete the disclosure under
Section 1 above with respect to inventions or improvements generally
listed below, the proprietary rights and duty of confidentiality with respect
to which I owe to the following party(ies):

 

	
   

  	
  Invention or Improvement

  	
   

  	
  Party(ies)

  	
   

  	
  Relationship

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

o                          Additional sheets attached.

 

2Exhibit 10.66

 

CONSULTING
AGREEMENT AND MUTUAL RELEASES

 

This Consulting Agreement and Mutual Releases (hereinafter “Agreement”)
is freely entered into by InterMune, Inc. (hereinafter the “Company”) and Scott
Harkonen (hereinafter “Harkonen”), collectively, the “Parties”, in
consideration of the commitments and payments either set forth or expressly
referenced in this Agreement.

 

1.                                       Subject
only to both the specific exceptions expressly set forth in this Agreement and
the Company’s timely and complete performance of its obligations both to
deposit and have timely released to Harkonen the Escrow Amount with the Escrow
Agent (as those terms are defined in Paragraph 10(a) herein) (each of which is
a condition precedent for Harkonen’s waivers and releases herein), Harkonen, on
behalf of himself, and his respective past and/or future spouses (if any),
family members, agents, heirs, estate, executors, administrators, insurers,
attorneys, successors and assigns (hereinafter collectively with Harkonen, the
“Harkonen Releasees”), hereby fully releases, acquits and forever discharges
the Company, and all of its past and present parent companies, affiliates,
subsidiaries, related companies, predecessors, successors, assigns and
transferees, and each of their past and present agents, officers, directors,
attorneys, stockholders, partners, and employees (hereinafter collectively,
“Company Releasees”), from and against any and all claims, complaints, rights,
demands, actions, suits, contracts, torts, promises, agreements, debts,
obligations, liability, damages, judgments, rights and demands, and causes of
action, whether asserted or unasserted, of any and every kind, nature and
character whatsoever, known or unknown, which the Harkonen Releasees have or
have had against the Company Releasees including, but not limited to, those
arising from or in any way connected with or relating to:

 

(a)                                  Harkonen’s
employment, change in employment status (Harkonen resigned his employment with
the Company effective June 30, 2003) (hereinafter the “Employment
Resignation Date”), lack of employment, resignation of employment or
resignation from the Company’s Board of Directors and alleged injuries;

 

(b)                                 The
Employment Agreement between Harkonen and the Company, effective
October 15, 1998 (“Original Agreement”), and each amendment thereto
(collectively referred to herein as the “Employment Agreement”), except as to
its surviving terms therein (if any) and the severance payments the Company
acknowledges have been paid or remain due to Harkonen (the latter as confirmed
in the Parties letter agreement on July 14, 2003).

 

(c)                                  All
other acts or omissions of the Company Releasees heretofore occurring on or
before the Board Resignation Date (as defined in Paragraph 11 herein); and

 

(d)                                 Any
other Harkonen claims under any and all federal, state or local law,
constitution or regulations regarding either employment, employment benefits or
employment discrimination or retaliation; statutory theories, including
discrimination laws including, but not limited to, Title VII of the Civil
Rights Act of 1964, as amended, the California Fair Employment and Housing Act,
as amended, the California Constitution, the Age Discrimination in Employment
Act (“ADEA”), as amended, the Family and Medical Leave Act, as amended, the
California Family Rights Act, as amended, and any other laws or regulations
concerning discrimination or retaliation on the basis of race, color, creed,
religion, age, sex, marital status, physical or mental disability or handicap,
national origin or ancestry.

 

2.                                       Since
Harkonen is 40 years of age or older, he is hereby informed that he has or may
have specific rights and/or claims under the ADEA, and he agrees and
understands that:

 

(a)                                  In
consideration of the benefits and release of claims provided to Harkonen as set
forth in this Agreement, which are, at least in part, in addition to anything
of value to which Harkonen is already entitled, he specifically waives any
rights and/or claims under ADEA to the extent that such rights and/or claims
arose prior to the Board Resignation Date;

 

(b)                                 Harkonen
does not waive any rights or claims under the ADEA that may arise after the
Board Resignation Date;

 

(c)                                  Harkonen
has been advised that he has 21 days after receipt of this Agreement within
which to consider this Agreement’s terms and he has consulted with counsel of
his own choice prior to executing this Agreement;

 

(d)                                 As
also agreed by the Company, Harkonen (alone) has seven days after the execution
of this Agreement within which he may revoke this Agreement;

 

1

 

(e)                                  In
order to revoke this Agreement, Harkonen must deliver to the General Counsel of
the Company, on or before 7 days after the execution of this Agreement, a
letter stating that he is revoking this Agreement;

 

(f)                                    This
Agreement shall not become effective or enforceable until the eighth day
following the date that the Parties have executed this Agreement provided that
Harkonen (alone) does not revoke this Agreement on or before 7 days after the
execution of this Agreement as set forth immediately above (the “Effective
Date”);

 

(g)                                 Harkonen
has not been subject to any undue or improper influence interfering with the
exercise of his free will in deciding whether to execute this Agreement; and

 

(h)                                 Harkonen
has carefully read and fully understands all of the provisions of this
Agreement, knowingly and voluntarily agrees to all of the terms set forth in
this Agreement, and acknowledges that in entering into this Agreement, is not
relying on any representation, promise or inducement made by the Company or its
attorneys with the exception of those promises expressly contained in and/or
referenced in this Agreement.

 

3.                                       Each
Party represents that he/it has no pending legal or administrative claims
against the other Party and that he/it has not filed any actions in any forum
against the other Party.

 

4.                                       The
Company agrees that, except as expressly set forth herein, Harkonen’s
obligations in the Agreement represent settlement in full of all outstanding
obligations owed to the Company Releasees by (and any and all actual and/or
potential, known or unknown claims by the Company against) the Harkonen
Releasees.  The Company, on its own
behalf and (to the fullest extent allowed) on behalf of its affiliates,
divisions, subsidiaries, related companies, predecessor and/or successor
companies, assigns, transferees, and each of their past and present agents,
officers, directors, insurers, attorneys, shareholders, partners, and
employees; hereby each (subject only to the specific exceptions expressly set
forth herein) fully release, acquit and forever discharge the Harkonen
Releasees from and against any and all claims, complaints, rights, demands,
actions, suits, contracts, torts, promises, agreements, debts, obligations, liability,
damages, judgments, rights and demands, and causes of action, whether asserted
or unasserted, of any and every kind, nature and character whatsoever, known or
unknown, which the Company Releasees have, have had and/or may have had against
the Harkonen Releasees including, but not limited to, those arising from or in
any way connected with or relating to any and all acts, facts or omissions of
the Harkonen Releasees heretofore occurring on or before the Board Resignation
Date. .

 

5.                                       The
Parties understand and agree that the releases in this Agreement are full and
final releases covering all known and unknown, suspected or unsuspected
injuries, debts, claims or damages as to the released matters only.  The Parties expressly waive any and all
rights or benefits that the Parties may now have as to the released matters,
under the terms of Section 1542 of the California Civil Code and any
similar law of any state or territory in the United States.  Said section provides as follows:

 

“A GENERAL RELEASE DOES NOT EXTEND TO
CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

 

The Parties fully understand that, if any fact with
respect to any matter covered in the releases is found hereinafter to be other
than or different from the facts now believed by the Parties to be true, the
Parties expressly accept and assume that the releases shall be and remain
effective, notwithstanding such difference in facts unless such alleged fact is
falsely represented as such in this Agreement. 
Each Party, being aware of said code section, agrees to expressly waive
any rights each Party may have thereunder, as well as under any other statute
or common law principles of similar effect, as to the subject matter covered by
this Agreement only.  Nevertheless, none
of the waivers and releases anywhere in this Agreement shall waive, release,
apply to and/or limit in any way either: 
(1) Harkonen’s legally vested rights (if any) already earned during
Harkonen’s employment, officership and board membership with the Company until
his roles’ termination (or beyond, but only if so allowed under either a
pre-existing Company agreement, benefit plan, policy or pursuant to applicable
law): a) under any benefit plan of the Company (e.g., under any medical plan,
stock option plan, employee stock purchase plan or 401(k) plan), b) pursuant to
any Company insurance policies, c) Harkonen’s rights (to the extent otherwise
qualified) to workers’ compensation, unemployment compensation, ERISA right and
any and all rights which cannot be legally waivable under applicable federal or
state law, and d) Harkonen’s pre-existing contractual severance-related
compensation

 

2

 

and benefits as confirmed
in the Parties’ letter agreement of July 14, 2003; (2) Harkonen’s rights
to indemnification, duty to defend and/or to be held harmless (all on an
on-going payment basis) by the Company (with respect to all of his prior,
existing and continuing capacities with, and efforts for, the Company) pursuant
to all agreements or contracts in any written form (including, but not limited
to, the acknowledged Indemnity Agreement 
between the Parties (the form of which was attached to Company SEC
filings), applicable Company insurance policies, statutes, corporate bylaws
and/or articles of incorporation or common law obligations including, but not
limited to, with respect to the following matters:  Lombardi v. InterMune, Inc., et al. (U.S.D.C. for the Northern
District of California, Case No. C-03-3068-MJJ); Johnson v. Harkonen, et al.
(U.S.D.C. for the Northern District of California, Case No. C-03-2954-MEJ); SEC
Confidential Informal Investigation (Case No. MSF-2713); Adler v. Harkonen, et
al. (San Mateo County (Cal.) Superior Court Case No. CIV 433125); Mahoney v.
InterMune, Inc. et al. (U.S.D.C. for the Northern District of California, Case
No. C-03-3273 SI); and any such other existing or future actions whether
related to any of the above (collectively, the “Securities Litigation”) or
otherwise involving Harkonen’s past, present or future employment, board or
consulting relationships with the Company; the Company specifically confirms
that, among other things, Harkonen is entitled to, and will receive from the
Company to the maximum extent legally
allowed by law, full indemnification, duty to defend and to be held
harmless by it (including, without limitation, providing full payment for all reasonable
fees and costs incurred by separate legal counsel of Harkonen’s own choosing;
provided that such legal counsel has been approved in advance (the Wilson,
Sonsini firm already has been approved) and in writing by the Company’s
applicable insurance carrier) in connection with the Securities Litigation (all
together the “Indemnity Contract”); (3) the Parties’ rights to enforce this
Agreement; and (4) each Party’s rights to claims for either the other Party’s
(and associated Releasees’) acts or omissions that occur after the Board
Resignation Date or any unreleased claims.

 

6.                                       Harkonen
agrees that he will only direct any inquiries to the Company from any third
parties to any Company employee who, at the time of such inquiry, is employed
at the Company as a Senior Vice President or above.  If any such Company employee receives such an inquiry from a
third party, except as otherwise authorized by Harkonen in writing or as
required by law, the employee shall inform the inquiring party that the
Company’s policy permits him or her to disclose only the following
information:  (a) the facts and dates of
Harkonen’s employment, director and consulting relationship (i.e., CEO,
Chairman of the Board, Company founder and consultant); (b) Harkonen’s base
salary as of the Employment Resignation Date; (c) that Harkonen’s resignation
from the Company resulted from the Company’s decision to change direction in
its leadership; and (d) Harkonen did an excellent job at establishing the
Company’s presence in its industry.

 

7.                                       Harkonen
agrees not to knowingly initiate application or reapplication for employment at
any time with the Company, or any other subsidiary or related company.  In the event Harkonen unknowingly initiates
application or reapplication for a position with such company, such company is
under no obligation to hire Harkonen.

 

8.                                       Except
as expressly set forth herein, it is agreed that each Party is to bear its or
his own attorneys’ fees and costs.

 

9.                                       On
the Board Resignation Date, the Company shall issue a mutually- agreed upon (as
to the changes in Harkonen’s relationship with the Company only) press release.

 

10.                                 In
further consideration of Harkonen’s waiver and releases herein, the Company
also agrees to provide and/or do the following:

 

(a)                                  Upfront
Payment.  The Company agrees that it
will immediately deposit (on the day of the Board Resignation Date) with U.S.
Bank National Association (“Escrow Agent”) a total of $282,500.00 (“Escrow
Amount”) on behalf of the Company.  On
the first business day following the Effective Date, the Escrow Agent shall
distribute to Harkonen the Escrow Amount. 
If, for any reason, Harkonen revokes this Agreement as permitted under
Paragraph 2(d) herein, the Escrow Agent shall immediately distribute the Escrow
Amount to the Company.  The Company and
Harkonen agree to execute any reasonable agreements with the Escrow Agent (such
as that agreement signed by the Parties earlier today) necessary to appoint the
Escrow Agent and to permit the Escrow Agent to hold and disburse the Escrow Amount
to Harkonen or the Company as set forth herein.  The payment will not be subject to any withholdings or other
set-offs of any kind and the Company shall be fully responsible for all fees
and costs owed to the Escrow Agent.  The
Company agrees to timely and accurately report to Harkonen and the government
the payments on Forms 1099 MISC.  The
payment represents part of the

 

3

 

consideration for
Harkonen’s release of all claims not subject to withholding.

 

(b)                                 Consulting.  From the Employment Resignation Date through
and until June 30, 2004 (the “Consulting Period”), Harkonen has been and
will continue to be reasonably available to assist reasonably and directly the
Company’s Chief Executive Officer during regular business hours at mutually
agreeable pre-scheduled times following advanced written request (including
e-mail) for up to 10 total hours per full month.  Upon the Company’s request and by mutual agreement, Harkonen may
(but is not obligated to) work beyond the 10 hours per full month, at the rate
of $500.00 per hour for each additional hour worked.  During the Consulting Period, Harkonen has been and will continue
to be retained by the Company as an independent contractor and not as an
employee of the Company or in any other capacity.  The Company represents
that its comprehensive general liability insurance policy e applies to
Harkonen’s consulting assistance and that he shall not be responsible to pay
any deductible or retention amount under such insurance policy.  Throughout the Consulting Period and
thereafter, Harkonen will remain free to pursue and engage in any and all
legally permissible activities including, without limitation, other consulting
opportunities and employment, provided that Harkonen does not render any
services as an employee, consultant or otherwise to any individual or entity
that breaches any of the other obligations (to the extent applicable to
him)  otherwise set forth in the
proprietary information agreement described in Paragraph 13 herein.

 

(c)                                  Further
Non-Equity Compensation.  Whether or
not Harkonen is fully or only partially utilized, or not utilized further at
all by the Company as a consultant, the Company will further pay Harkonen a
total of $405,000.00 in nine equal payments of $45,000.00, the first payment of
which shall be paid on the Effective Date and the remaining eight payments of
which shall be paid on the 15th of each month beginning in the month
immediately following the month in which the Effective Date occurs.  These payments will not be subject to any
withholdings or other set-offs of any kind. 
The Company agrees to timely and accurately report to Harkonen and the
government the payments on Forms 1099 MISC.

 

(d)                                 Equity
Compensation.

 

(i)                                     Restricted
Stock.  The Company represents that
that as of the Effective Date, (A) Harkonen has vested in full as to six
hundred ninety thousand (690,000) shares of Common Stock of the Company
purchased pursuant to the Common Stock Purchase Agreement between the Parties
dated as of April 27, 1999 (as amended February 23, 2000)(the
“Restricted Shares”), (B) all restrictions and conditions related to the
Restricted Shares imposed by the Company pursuant to the Common Stock Purchase
Agreement (including, without limitation, rights of first refusal and rights of
repurchase) have terminated and any legends which may have been previously
endorsed on the certificate or certificates evidencing the Restricted Shares
have been removed, and (C) to the extent it has not already done so, the Escrow
Agent named by the Parties in the Joint Escrow Instructions of April 27,
1999 shall be instructed to deliver any such certificate or certificates
evidencing the Restricted Shares to Harkonen or (at his direction) his
authorized representative.

 

(ii)                                  Stock
Options.

 

(A)                              The
Company represents  that as of the
Effective Date, Harkonen holds a total of six option grants to purchase an
aggregate of four hundred twenty thousand (420,000) shares of Common Stock of
the Company (the “Option Shares”) pursuant to the InterMune, Inc. 2000 Equity
Incentive Plan, as amended (the “Plan”). 
The Company further represents that, as of September 12, 2003,
Harkonen has vested in the right to purchase 154,999 Option Shares, as fully
set out on Exhibit A hereto.

 

(B)                                For
purposes of the Plan, Harkonen shall be deemed to continue to be rendering
“Continuous Service” to the Company while he holds himself available in
accordance with the terms of this Agreement during the Consulting Period and
will consequently continue to vest during that period.  The Parties agree that Harkonen shall
continue to vest in his Option Shares otherwise pursuant to the terms set out
in his individual option grants.  To the
extent that Harkonen wishes to exercise “incentive stock options” under Internal
Revenue Code (“Code”) Section 422 (“ISOs”) and receive ISO tax treatment,
the Company acknowledges that he may do so for three (3) months from the
Employment Resignation Date. 
Thereafter, ISOs will be treated as nonstatutory stock options, as required
by the Code.

 

(C)                                Except
as to anything to the contrary contained herein, the other terms and conditions
of the Plan and the option agreements governing the stock options granted to
Harkonen shall continue to apply in full force and effect at all times in the
future, including with respect to the post-termination exercise periods set out
therein.

 

(e)                                  Company
Publications.  At all applicable
times, the Company will continue to list Harkonen as the Company’s founder and
original CEO and Board Chairman in a positive light on all Company website(s)
and outside and internal publications and presentations to the extent and at
such times as the Company

 

4

 

elects to identify the
Company’s original management and/or its founding and early year operations
history.

 

(f)                                    COBRA
Payment.  If Harkonen elects to
continue medical, dental and vision insurance coverage for him and his eligible
dependants pursuant to COBRA after his Employment Resignation Date, the Company
shall pay and/or reimburse for such COBRA payments from the Employment
Resignation Date through and until the earlier of:  (i) June 30, 2004 or (ii) the date that Harkonen
becomes employed with any third party that provides such insurance coverage.
Harkonen agrees that within two days of the date that he becomes employed with
any third party that provides such insurance coverage, he shall send a written
notice to the Company’s General Counsel of such employment.  If Harkonen is not employed with any third party
at the end of the Consulting Period, he may continue COBRA insurance coverage
for him and his eligible dependants to the extent eligible under COBRA at his
own expense.

 

(g)                                 Equipment.  After the Company has promptly (within five
days of Harkonen’s return of such) downloaded and deleted all Company files and
(if any) its proprietary software (other than that which the Company deems
necessary for Harkonen’s consulting work) on the laptop computer , fax machine,
printer, Palm Pilot, and the Blackberry previously provided for Harkonen’s use,
the Company will return them to Harkonen in full working condition for his
personal use and free and clear ownership along with the related items
previously made available to his therewith (e.g., non-Company proprietary
software and operating system, power cords, manuals).

 

(h)                                 Expense
Reimbursement.  The Company will
reimburse Harkonen for all reasonable and necessary Company-related business
expenses incurred through and until the Board Resignation Date, provided that
Harkonen delivers to the Company any documentation necessary to substantiate
such expenses.  The Company will also,
within 15 days after its receipt of written documentation of Harkonen’s prior
payments, reimburse Harkonen for his financial planning and/or legal services
(the latter above and beyond the Company’s legal cost obligations as outlined
in Paragraphs 5 and 10(b) above) incurred by Harkonen through and until
July 31, 2004, up to a combined maximum total of $50,000.00.

 

11.                                 On
September 25, 2003, which is the date that the Parties executed and
exchanged this Agreement  (the “Board
Resignation Date”), Harkonen agrees to voluntarily resign as a member of the
Board of Directors of the Company, InterMune Europe, Ltd. and InterMune Canada,
Inc. by executing and delivering to the Company’s Secretary (by facsimile
sufficient) three resignation letters regarding his resignation from the
respective three entities and that his resignation from the three entities
shall be in full force and effect on the Board Resignation Date.

 

12.                                 Subject
to Paragraph 10(g) above, Harkonen hereby represents and warrants that he will
make every good faith effort to return to the Company within ten business days
of the Board Resignation Date all Company property including, but not limited
to, personal computers, laptops, fax machines, scanners, copiers,
diskettes/CDs, software programs and data compiled with the use of those
programs, software passwords or codes, cellular phones, credit cards, telephone
charge cards, manuals, building keys and passes, sales brochures, marketing
materials, business or marketing plans, reports, projections, and any and all
other Company property previously or currently held or used by Harkonen that is
or was related to Harkonen’s employment with the Company (the “Company
Property”), except to the extent Harkonen is legally allowed to have and retain
such (e.g., compensation and benefits materials and other materials to which he
has and/or has had access rights). 
Harkonen agrees that if he discovers any other Company Property in his
possession in the future, he will promptly return such materials to the Company
and such voluntary return shall not be considered a breach of this Agreement.

 

13.                                 Harkonen
further agrees and understands that he shall remain bound (to the extent
applicable) by the Proprietary Information and Inventions Agreement he executed
on April 21, 1999.

 

14.                                 This
Agreement is binding on and for the benefit of Harkonen, the Company, the
Company Releasees and the Harkonen Releasees, whenever (and to the fullest
extent) the context requires.  The
Parties agree that the consideration and obligations herein provided by the
Parties are for the benefit of and fully releases all the Company Releasees and
the Harkonen Releasees as to the subject matter covered by the releases.  If any term or condition of this Agreement
is determined to be overbroad or invalid, the remainder of the provisions shall
remain in full force and effect.

 

15.                                 The
execution and delivery of this Agreement or any payments or the performance of
any acts in connection therewith shall not be deemed by either the Company
Releasees or the Harkonen Releasees that any Party at any time performed or
failed to perform any act, which performance or failure to perform was or is in

 

5

 

violation of any of the
Parties’ rights and/or which performance or failure to perform gives rise to
any valid claim for damages or any other relief whatsoever.  It is the sole purpose of this Agreement to avoid
the expense and vexation of further litigation in compromising the disputed
claims.

 

16.                                 This
Agreement, in combination with all other expressly referenced agreements
therein, to the extent modified herein or not and which are expressly
referenced herein, constitutes the entire agreement and understanding between
the Parties, and supersedes and replaces any contrary other prior agreements or
understandings, whether oral or written, between and among them with respect to
the subject matters of this Agreement.  
The provisions of this Agreement may not be waived, altered, amended, or
repealed in whole or in part except upon the prior written consent of Harkonen
and a majority of the Company’s Board of Directors.

 

17.                                 The
Parties understand and agree that the only payments and benefits Harkonen is
entitled to receive from the Company are expressly set forth or referenced in
this Agreement and that, except for such payments and benefits, Harkonen shall
have no rights to any other such payments and benefits.

 

18.                                 This
Agreement shall be construed and enforced in accordance with the laws of the
State of California.

 

19.                                 The
Parties declare that prior to execution of this Release, the Parties have
consulted with counsel of the Parties’ respective choices.  The Parties further apprised themselves of
sufficient relevant information, through sources of the Parties’ own selection,
in order that the Parties might intelligently exercise the Parties’ own
judgment in deciding whether to execute the Agreement and in deciding on the
contents hereof.  The Parties further
declare this decision is not predicated or influenced by any declarations or
representations of the other Parties other than may be expressly set forth or
referenced in this Agreement.

 

20.                                 If
any suit is brought relating to this Agreement or any alleged breach of it
(with the exception of a claim brought by Harkonen challenging the validity of
this Release under ADEA as amended by OWBPA), the prevailing Party in such suit
shall be entitled to all remedies and reimbursement for costs, expenses and
attorneys’ fees incurred by it.

 

21.                                 The
Parties each represent and warrant that the undersigned have the authority and
capacity to act on behalf of (and to bind) themselves and all who may claim
through them to the terms and conditions of this Agreement.  Each Party warrants and represents that
there are no liens or claims of lien or assignments in law or equity or
otherwise of or against any of the claims or causes of action released herein.

 

22.                                 Each
Party agrees to refrain from defamation, libel or slander of the other Party or
tortious interference with the contracts and relationships of the other Party.

 

23.                                 This
Agreement may be executed in counterparts and by facsimile, and each
counterpart and facsimile shall have the same force and effect as an original
and shall constitute an effective, binding agreement on the part of each of the
undersigned, upon receipt of the original or faxed copy of the counterpart
signed by the other Parties and/or the other Party’s legal counsel.

 

24.                                 The
Parties expressly state that each has read this Agreement, with the assistance
of the Parties’ respective counsel of choice, and each understands all of its
terms, and that the preceding paragraphs (and any other agreements expressly
referenced, whether or not modified, herein) recite the sole consideration and
understandings between the Parties regarding the subject matter of this
Agreement.  Harkonen states that he has
been given up to twenty-one (21) days to consider the contents of this
Agreement, if he wishes, that he has been advised to consult legal counsel, and
that he has been advised that he may revoke this Agreement within seven (7)
days of signing it.  The contents of
this Agreement have been explained to the Parties by the Parties’ respective
counsel of choice.  The Parties agree
that each is executing this Agreement voluntarily as of the dates set forth
below with full knowledge of its significance.

 

6

 

	
  Accepted by:

  	
   

  
	
   

  	
   

  
	
  Dated:
  September 25, 2003

  	
  /s/ W. Scott
  Harkonen

  	
   

  
	
   

  	
  Scott
  Harkonen, an Individual

  
	
   

  	
   

  
	
  Accepted by:

  	
   

  
	
   

  	
   

  
	
  Dated:
  September 25, 2003

  	
  InterMune,
  Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Sharon
  Surrey-Barbari

  	
   

  
	
   

  	
  Sharon
  Surrey-Barbari

  
	
   

  	
  Senior Vice
  President, Finance and Administration and

  Chief Financial Officer

  
					

 

7

 

EXHIBIT A

 

HARKONEN OPTIONS

 

	
  Original

  Classification

  	
   

  	
  Option

  Price

  	
   

  	
  Original

  Option Shares

  Granted

  	
   

  	
  As of
  9/12/03

  Option shares

  	
   

  	
  As of
  6/03/04

  Option shares

  	
   

  
	
  Vested

  	
   

  	
  Unvested

  	
   

  	
  Vested

  	
   

  	
  Unvested

  	
   

  
	
  Non-qual

  	
   

  	
  $

  	
  25.00

  	
   

  	
  105,500

  	
   

  	
  73,000

  	
   

  	
  32,500

  	
   

  	
  102,500

  	
   

  	
  17,500

  	
   

  
	
  ISO

  	
   

  	
  $

  	
  25.00

  	
   

  	
  14,500

  	
   

  	
  7,000

  	
   

  	
  7,500

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Non-qual

  	
   

  	
  $

  	
  43.60

  	
   

  	
  3,121

  	
   

  	
  74,962

  	
   

  	
  101,917

  	
   

  	
  108,749

  	
   

  	
  71,251

  	
   

  
	
  ISO

  	
   

  	
  $

  	
  43.60

  	
   

  	
  176,879

  	
   

  	
  37

  	
   

  	
  3,084

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Non-qual

  	
   

  	
  $

  	
  18.70

  	
   

  	
  117,161

  	
   

  	
  0

  	
   

  	
  117,161

  	
   

  	
  42,499

  	
   

  	
  77,501

  	
   

  
	
  ISO

  	
   

  	
  $

  	
  18.70

  	
   

  	
  2,839

  	
   

  	
  0

  	
   

  	
  2,839

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Total shares

  	
   

  	
   

  	
   

  	
  420,000

  	
   

  	
  154,999

  	
   

  	
  265,001

  	
   

  	
  253,748

  	
   

  	
  166,252

  	
   

  

 

1

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