Document:

Loan Modification Agreement

Exhibit 10.22

 

LOAN MODIFICATION AGREEMENT

This Loan Modification Agreement is entered into as of April 1, 2004, by and between SILICON VALLEY BANK, a California chartered bank ("Bank"), with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office at 4410 Arapahoe Avenue, Suite 200, Boulder, CO 80303, and eCollege.com (“eCollege”), whose address is 4900 South Monaco Street, Denver, Colorado 80237, and DataMark, Inc. (“DataMark”), whose address is 2305 President’s Drive, Salt Lake City, UT 84120 (hereinafter eCollege and DataMark shall be referred to collectively as the "Borrowers" and individually as a “Borrower”). 

1.   DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing by Borrowers to Bank, Borrowers are or may be indebted to Bank pursuant to, among other documents, a Loan and Security Agreement, dated as of October 30, 2003, as it may be amended from time to time (the “Loan Agreement”). The Loan Agreement provided for, among other things, a Committed Revolving Line in the original principal amount of up to Ten Million Dollars ($10,000,000) and a Term Loan of up to Three Million Dollars ($3,000,000). Defined terms used but not otherwise defined herein shall have the same meanings as set forth in the Loan Agreement.

Hereinafter, all indebtedness owing by Borrowers to Bank shall be referred to as the "Indebtedness."

2.   DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured by the Collateral, as described in the Loan Agreement and in the Intellectual Property Security Agreements. 

Hereinafter, the above-described security documents, together with all other documents securing repayment of the Indebtedness shall be referred to as the "Security Documents". Hereinafter, the Security Documents, together with all other documents evidencing or securing the Indebtedness shall be referred to as the "Existing Loan Documents".

3.   DESCRIPTION OF CHANGE IN TERMS.

Modification(s) to Loan Agreement.

1.    Section 6.2 entitled “Financial Statements, Reports, Certificates” is amended by changing subsection (a)(i) thereof to read as follows:

 

(a) Borrowers will deliver to Bank: (i) as soon as available, but no later than 30 days (but through the period ending 9/30/04, no later than 40 days) after the last day of each month, company prepared consolidated and consolidating balance sheets and income statements covering the operations of eCollege and its Subsidiaries during the period certified by a Responsible Officer of eCollege and in a form acceptable to Bank;

2.     Section 6.2 entitled “Financial Statements, Reports, Certificates” is amended by changing subsection (c) thereof to read as follows:

(c) Within 30 days (but through the period ending 9/30/04, within 40 days) after the last day of each month, Borrowers will deliver to Bank with the monthly financial statements a Compliance Certificate signed by a Responsible Officer of eCollege in the form of Exhibit D.

3.     Section 6.7 entitled “Financial Covenants” is amended by changing subsection (i) thereof entitled “Quick Ratio (Adjusted)” to read as follows:

(i)   Quick Ratio (Adjusted). A ratio of Quick Assets to Current Liabilities minus Deferred Revenue and any Quarter-End Advance of at least 1.30 to 1.00 through 3/31/04, and of at least 1.50 to 1.00 at 4/30/04 and thereafter.

4.     Section 6.7 entitled “Financial Covenants” is amended by changing subsection (iii) thereof entitled “Debt Service Coverage Ratio” to add the following sentence at the end thereof:

       For purposes hereof “interest expense” shall exclude non-current, non-cash and non-recurring interest expense items and shall include only actual cash paid interest expense items.

5.    Section 13.1 entitled “Definitions” is amended by adding the following definition therein to read as follows:

   “Quarter-End Advance” is an Advance made on the last Business Day of a fiscal quarter which Advance remains outstanding no longer than 3 Business Days following the date such Advance is made and the proceeds of which remain on deposit at Bank during the period such Advance is outstanding.

6.       Section 13.1 entitled “Definitions” is amended by changing the following definitions therein to read as follows:

“Deferred Revenue” is all amounts received in advance of performance under a maintenance contract and not yet recognized as revenue, and other amounts received from or billed to customers in excess of revenue that has been earned, including customer advances or deposits that customers are required to pay for services, where such payments received are recorded as customer advances (liability) until the revenue is recognized as earned.

"Tangible Net Worth" is, on any date, the consolidated total assets (excluding proceeds of any Quarter-End Advance) of eCollege and its Subsidiaries minus, (i) any amounts attributable to (a) goodwill, (b) intangible items such as unamortized debt discount and expense, Patents, trade and service marks and names, Copyrights and research and development expenses except prepaid expenses, and (c) reserves not already deducted from assets, and (ii) Total Liabilities excluding all Subordinated Debt and excluding any Quarter-End Advance.

7.   Exhibit D attached hereto shall be substituted for that attached to the Loan Agreement.

4.   CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.

5.   PAYMENT OF EXPENSES. Borrowers shall pay Bank all of Bank’s out-of-pocket expenses in connection with this Loan Modification Agreement.

6.   NO DEFENSES. Borrowers (and each guarantor and pledgor signing below) agrees that, as of the date hereof, they have no defenses against the obligations to pay any amounts under the Indebtedness.

7.   CONTINUING VALIDITY. Borrowers (and each guarantor and pledgor signing below) understand and agree that in modifying the existing Indebtedness, Bank is relying upon Borrowers’ representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Bank's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Bank and Borrowers to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Bank in writing. Unless expressly released herein, no maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement. The terms of this paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan modification agreements.

8.    CONDITIONS. The effectiveness of this Loan Modification Agreement is conditioned upon receipt by Bank of a fully executed counterpart hereof.

This Loan Modification Agreement is executed as of the date first written above.

 

	
BORROWERS:
	
 
	
 
	
BANK:

	
eCollege.com.
	
 
	
 
	
SILICON VALLEY BANK

	
By: /s/ Douglas H. Kelsall
	
 
	
 
	
By: /s/ Frank Amoroso

	

			

	
Name: Douglas H. Kelsall
	
 
	
 
	
Name: Frank Amoroso

	
Title: President and COO
	
 
	
 
	
Title: VP

	 	 	 	 
	
DataMark, Inc.
	
 
	
 
	
 

	
By: /s/ Douglas H. Kelsall
	
 
	
 
	
 

	

			
	
Name: Douglas H. Kelsall
	
 
	
 
	
 

	
Title: Assistant TreasurerExhibit 10.73

 

$150,000,000

 

 

INTERMUNE, INC.

 

.25% CONVERTIBLE NOTES DUE 2011

 

 

PURCHASE AGREEMENT

 

 

February 10, 2004

 

EXECUTION COPY

 

 

February 10,
2004

 

Morgan Stanley & Co.
Incorporated

Banc of America Securities LLC

Credit Suisse First Boston LLC

Harris Nesbitt Corp.

RBC Capital Markets Corporation

c/o Morgan Stanley & Co. Incorporated

1585 Broadway

New York, New York 10036

 

Dear Sirs and Mesdames:

 

InterMune,
Inc., a Delaware corporation (the “Company”),
proposes to issue and sell to the several purchasers named in Schedule I
hereto (the “Initial Purchasers”)
$150,000,000 principal amount of its .25% Convertible Notes due 2011 (the “Firm Securities”) to be issued pursuant to
the provisions of an Indenture dated as of February 17, 2004 (the “Indenture”) between the Company and Bank of
New York, as Trustee (the “Trustee”).  The Company also proposes to issue and sell
to the Initial Purchasers not more than an additional $20,000,000 principal
amount of its .25% Convertible Notes due 2011 (the “Additional Securities”) if and to the extent that the Initial
Purchasers shall have determined to exercise the right to purchase such .25%
Convertible Notes due 2011 granted to the Initial Purchasers in Section 2
hereof.  The Firm Securities and the
Additional Securities are hereinafter collectively referred to as the “Securities”.  The Securities will be convertible into shares of common stock,
par value $0.001 per share, of the Company (the “Common Stock”) together with
the rights evidenced by such common stock to the extent provided in the Rights
Agreement, dated as of July 17, 2001, as amended, between the Company and
Mellon Investor Services LLC (unless such rights shall have been redeemed or
terminated previously) (the “Underlying
Securities”).

 

The Securities
and the Underlying Securities will be offered without being registered under
the Securities Act of 1933, as amended (the “Securities
Act”), to qualified institutional buyers in compliance with the
exemption from registration provided by Rule 144A under the Securities Act.

 

The Initial
Purchasers and their direct and indirect transferees will be entitled to the
benefits of a Registration Rights Agreement dated the Closing Date (as defined
herein) between the Company and the Initial Purchasers (the “Registration Rights Agreement”).

 

 

In connection
with the sale of the Securities, the Company has prepared an offering
memorandum (the “Preliminary Memorandum”) and will prepare a final offering
memorandum (the “Final Memorandum” and with the Preliminary Memorandum, each a
“Memorandum”) including or
incorporating by reference a description of the terms of the Securities and the
Underlying Securities, the terms of the offering and a description of the
Company.  As used herein, the term
“Memorandum” shall include the documents incorporated by reference therein. The
terms “supplement,” “amendment”
and “amend” as used herein with
respect to the Memorandum shall include all documents deemed to be incorporated
by reference in the Memorandum that are filed subsequent to the date of the
Memorandum with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”).

 

1.        Representations
and Warranties. The Company represents and warrants to, and agrees
with, you that:

 

(a)           (i) Each document, if any, filed or to be
filed pursuant to the Exchange Act and incorporated by reference in the
Memorandum complied or will comply when so filed in all material respects with
the Exchange Act and the applicable rules and regulations of the Commission
thereunder and (ii) the Memorandum, in the form used by the Initial Purchasers
to confirm sales and on the Closing Date (as defined in Section 4), will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in the Memorandum based upon information relating to
any Initial Purchaser furnished to the Company in writing by such Initial
Purchaser expressly for use therein.

 

(b)           As of the date of this Agreement, the
Company has an authorized capitalization as set forth under the heading
entitled “Actual” in the section of the Memorandum entitled “Capitalization”
and, as of the time of purchase the Company shall have an authorized
capitalization as set forth under the heading entitled “As adjusted” in the
section of the Memorandum entitled “Capitalization”; all of the issued and
outstanding shares of capital stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable, have been issued
in compliance with all federal and state securities laws and were not issued in
violation of any preemptive right, resale right, right of first refusal or
similar right;

 

(c)           The Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the State
of

 

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Delaware, with full power and authority to
own, lease and operate its properties and conduct its business as described in
the Memorandum;

 

(d)           the Company is duly qualified to do business
as a foreign corporation in good standing in each jurisdiction where the
ownership or leasing of its properties or the conduct of its business requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the business, properties, financial condition or
results of operation of the Company and its Subsidiaries (as hereinafter
defined) taken as a whole (a “Material Adverse Effect”).  The Company has no subsidiaries other than
InterMune Europe Limited, a company registered in England and Wales, and
InterMune Canada, Inc., a Canadian corporation (collectively, the “Subsidiaries”);
the Subsidiaries do not currently conduct any operations; the Subsidiaries are
not, either individually or collectively, material to the Company’s business,
operations or financial condition; other than the Subsidiaries, the Company
does not own, directly or indirectly, any shares of stock or any other equity
or long-term debt securities of any corporation or have any equity interest in
any firm, partnership, joint venture, association or other entity; complete and
correct copies of the certificate of incorporation and of the by-laws (or other
equivalent corporate governance documents) of the Company and all amendments
thereto have been delivered to you, and no changes therein will be made
subsequent to the date hereof and prior to the time of purchase or, if later,
the additional time of purchase; each Subsidiary has been duly incorporated and
is validly existing as a corporation in good standing (to the extent applicable
in the relevant jurisdiction of incorporation) under the laws of the
jurisdiction of its incorporation, with full corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Memorandum; each Subsidiary is duly qualified to do business as a
foreign corporation in good standing in each jurisdiction where the ownership
or leasing of the properties or the conduct of its business requires such
qualification, except where the failure to so qualify would not have a Material
Adverse Effect; all of the issued and outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly issued, are
fully paid and non-assessable and (except as otherwise described in this
Section 1(d)) are owned by the Company subject to no security interest, other
encumbrance or adverse claims; no options, warrants or other rights to
purchase, agreements or other obligations to issue or other rights to convert
any obligation into shares of capital stock or ownership interests in the
Subsidiaries are outstanding.

 

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(e)           Each of the Company and each of its
Subsidiaries is in compliance in all material respects with the laws, orders,
rules, regulations and directives issued or administered by such jurisdictions.

 

(f)            Neither the Company nor any of its
Subsidiaries is in breach of its respective certificate of incorporation or
by-laws or equivalent corporate governance documents, as the case may be, or in
material breach of or in default under (nor has any event occurred which with
notice, lapse of time, or both would result in any material breach of, or
constitute a default under), any obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, bank loan or credit
agreement or other evidence of indebtedness, or any lease, contract or other
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their properties are bound; and the
issuance and sale of the Securities and the execution and delivery of and
performance by the Company of its obligations under this Agreement, the
Indenture, the Registration Rights Agreement and the Securities and the
consummation of the transactions contemplated thereby will not conflict with,
or result in any breach of any provisions of the charter or by-laws of the
Company or any of its Subsidiaries and will not conflict with or result in any
material breach of or constitute a default under (nor constitute any event
which with notice, lapse of time, or both would result in any material breach
of, or constitute a default under), any provision of any license, indenture,
mortgage, deed of trust, bank loan or credit agreement or other evidence of
indebtedness, or any lease, contract or other agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which any of them or
their respective properties may be bound or affected, or under any federal,
state, local or foreign law, regulation or rule or any decree, judgment or
order applicable to the Company or any of its Subsidiaries.

 

(g)           This Agreement has been duly authorized,
executed and delivered by the Company and is a legal, valid and binding
agreement of the Company enforceable in accordance with its terms.

 

(h)           The authorized capital stock of the Company
conforms as to legal matters to the description thereof contained in the
Memorandum.

 

(i)            No approval, authorization, consent or
order of or filing with any national, state or local governmental or regulatory
commission, board, body, authority or agency is required in connection with the
issuance and sale of the Securities and the Underlying Securities or the
consummation or performance by the Company of the transactions as contemplated
by or obligations under this Agreement, the Indenture, the Registration Rights
Agreement or the Securities other than (i) the filing

 

4

 

and effectiveness of any registration
statement contemplated in the Registration Rights Agreement, (ii) a
Notification Form for Listing of Additional Shares and a Notification Form for
a Change in the Number of Shares Outstanding, each to be filed with the Nasdaq
Stock Market and (iii) any necessary qualification under the securities or blue
sky laws of the various jurisdictions in which the Securities are being offered
by the Initial Purchasers and by federal or state securities laws with respect
to the Company’s obligations under the Registration Rights Agreement.

 

(j)            The Securities have been duly authorized
and, when executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers in accordance
with the terms of this Agreement, will be valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors’ rights generally
and equitable principles of general applicability, and will be entitled to the
benefits of the Indenture and the Registration Rights Agreement pursuant to
which such Securities are to be issued.

 

(k)           Ernst & Young LLP, whose reports on the
financial statements of the Company are incorporated by reference in the
Memorandum, are independent certified public accountants as required by the
Securities Act.

 

(l)            The Company and each of its Subsidiaries
has all necessary licenses, authorizations, consents and approvals and has made
all necessary filings required under any federal, state, local or foreign law,
regulation or rule, and has obtained all necessary authorizations, consents and
approvals from other persons, in order to conduct their respective businesses,
except where the failure to do so would not have a Material Adverse Effect;
neither the Company nor any of its Subsidiaries is in violation of, or in
default under, any such license, authorization, consent or approval or any
federal, state, local or foreign law, regulation or rule or any decree, order
or judgment applicable to the Company or any of its Subsidiaries, the effect of
which could have a Material Adverse Effect.

 

(m)          All legal or governmental proceedings,
contracts, leases or documents of a character required to be described in or
filed with any document incorporated by reference in the Memorandum have been
so described or filed or incorporated as required.

 

(n)           The Underlying Securities issuable upon
conversion of the Securities have been duly authorized and reserved and, when
issued upon conversion of the Securities in accordance with the terms of the
Securities, will be validly issued, fully paid and non-assessable (except in
each case

 

5

 

to the extent that the Company will be
effectively required under the terms of the Securities to settle any conversion
of the Securities in cash) and the issuance of the Underlying Securities will
not be subject to any preemptive or similar rights.

 

(o)           Each of the Indenture and the Registration
Rights Agreement has been duly authorized, executed and delivered by, and
(assuming the due authorization, execution and delivery thereof by the other
parties thereto) is a valid and binding agreement of, the Company, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors’ rights generally and equitable principles of
general applicability and except as rights to indemnification and contribution
under the Registration Rights Agreement may be limited under applicable law.

 

(p)           Except as disclosed in the Memorandum, there
are no actions, suits, claims, investigations or proceedings pending or
threatened to which the Company or any of its Subsidiaries or any of their
respective officers is a party or of which any of their properties is subject
at law or in equity, or before or by any federal, state, local or foreign
governmental or regulatory commission, board, body, authority or agency which
could result in a judgment, decree or order having a Material Adverse Effect on
the Company and its Subsidiaries, taken as a whole or on the power or ability
of the Company to perform its obligations under this Agreement, the Indenture,
the Registration Rights Agreement or the Securities or prevent consummation of
the transactions contemplated by the Memorandum.

 

(q)           Since the date of the Company’s last audited
financial statements, there has not occurred any material adverse change, or
any development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the business or operations of the
Company and its Subsidiaries, taken as a whole, other than as set forth in the
Memorandum.

 

(r)            The Company is not, and after giving effect
to the offering and sale of the Securities and the application of the proceeds
thereof as described in the Memorandum will not be, required to register as an
“investment company” as such term is defined in the Investment Company Act of
1940, as amended.

 

(s)           The Company has obtained the agreement of
each of its directors and officers, subject to certain specified exceptions, to
a Lock Agreement as set forth in Exhibit C hereto for a period of 90 days
after the date of the Memorandum.

 

6

 

(t)            Neither the Company nor any affiliate (as
defined in Rule 501(b) of Regulation D under the Securities Act, an “Affiliate”) of the Company has directly, or
through any agent, (i) sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as defined in the Securities
Act) which is or will be integrated with the sale of the Securities in a manner
that would require the registration under the Securities Act of the Securities
or (ii) offered, solicited offers to buy or sold the Securities by any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.

 

(u)           Except as described in the Memorandum, the
Company owns, or has obtained valid and enforceable licenses for, or other
rights to use, the inventions, patent applications, patents, trademarks (both
registered and unregistered), tradenames, copyrights and trade secrets
described in the Memorandum as being owned or licensed by it, which the Company
reasonably believes are necessary for the conduct of its business
(collectively, the “Intellectual Property”) and which the
failure to own, license or have such rights could have a Material Adverse
Effect.  Except as described in the
Memorandum, (i) the Company believes that there are no third parties who have
or will be able to establish their rights to any Intellectual Property, except
for the ownership rights of the owners of the Intellectual Property which is
licensed to the Company; (ii) to the Company’s knowledge there is no
infringement by third parties of any Intellectual Property; (iii) there is
no pending or, to the Company’s knowledge, threatened action, suit, proceeding
or claim by others challenging the Company’s rights in or to any Intellectual
Property, and the Company is unaware of any facts which would form a reasonable
basis for any such claim; (iv) there is no pending or, to the Company’s
knowledge, threatened action, suit, proceeding or claim by others challenging
the validity or scope of any Intellectual Property, and the Company is unaware
of any facts which would form a reasonable basis for any such claim;
(v) there is no pending or, to the Company’s knowledge, threatened action,
suit, proceeding or claim by others that the Company infringes or otherwise
violates any patent, trademark, copyright, trade secret or other proprietary
rights of others, and the Company is unaware of any facts which would form a
reasonable basis for any such claim; (vi) to the Company’s knowledge there
is no patent or patent application which contains claims that interfere with
the issued or pending claims of any of the Intellectual Property which could
have a Material Adverse Effect; and (vii) there is no prior art of which
the Company is aware that may render any patent application included in the
Intellectual Property unpatentable

 

7

 

which has not been disclosed to the U.S. Patent
and Trademark Office which could have a Material Adverse Effect.

 

(v)           The Company has filed with the U.S. Food and
Drug Administration (the “FDA”), and all applicable foreign, state
and local regulatory bodies, and received approval of, all registrations,
applications, licenses, requests for exemptions, permits and other regulatory
authorizations necessary to conduct the Company’s business as it is described
in the Memorandum; the Company is in compliance in all material respects with
all such registrations, applications, licenses, requests for exemptions,
permits and other regulatory authorizations, and all applicable FDA, foreign,
state and local rules, regulations, guidelines and policies, including, but not
limited to, applicable FDA, foreign, state and local rules, regulations and
policies relating to good manufacturing practice (“GMP”) and good laboratory
practice (“GLP”); the Company has no reason to believe that any party
granting any such registration, application, license, request for exemption,
permit or other authorization is considering limiting, suspending or revoking
the same and knows of no basis for any such limitation, suspension or
revocation.

 

(w)          The human clinical trials, animal studies and
other preclinical tests conducted by the Company or in which the Company has
participated that are described in the Memorandum or the results of which are
referred to in the Memorandum, and such studies and tests conducted on behalf
of the Company, were and, if still pending, are being conducted in all material
respects in accordance with experimental protocols, procedures and controls
generally used by qualified experts in the preclinical or clinical study of new
drugs or diagnostics as applied to comparable products to those being developed
by the Company; the descriptions of the results of such studies, test and
trials contained in the Memorandum are accurate and complete in all material
respects, and except as set forth in the Memorandum, the Company has no
knowledge of any other trials, studies or tests, the results of which the
Company believes reasonably call into question the clinical trial results
described or referred to in the Memorandum when viewed in the context in which
such results are described and the clinical state of development; and the
Company has not received any notices or correspondence from the FDA or any
other domestic or foreign governmental agency requiring the termination,
suspension or modification (other than such modifications as are normal in the
regulations, any such modifications which are material have been disclosed to
you) of any animal studies, preclinical tests or clinical trials conducted by
or on behalf of the Company or in which the Company has participated that are
described in the Memorandum or the results of which are referred to in the
Memorandum.

 

8

 

(x)            The Company has good and marketable title
to all the properties and assets reflected as owned in the financial statements
referred to in Section 1(jj) below (or elsewhere in the Memorandum), in
each case free and clear of any security interests, mortgages, liens,
encumbrances, equities, claims and other defects, except such as do not materially
and adversely affect the value of such property and do not materially interfere
with the use made or proposed to be made of such property by the Company.  The real property, improvements, equipment
and personal property held under lease by the Company are held under valid and
enforceable leases, with such exceptions as are not material to the Company,
and the Company does not have any notice of any claim of any sort that has been
asserted by anyone adverse to the rights of the Company under any of the leases
or subleases referred to above, or affecting or questioning the rights of the
Company to the continued possession of the leased or subleased premises under
any such lease or sublease, except for such notices or claims as would not reasonably
be expected to have a Material Adverse Effect.

 

(y)           The Company and each Subsidiary has filed
all necessary federal, state and foreign income and franchise tax returns and
has paid all taxes required to be paid by it and, if due and payable, any
related or similar assessment, fine or penalty levied against it. The Company
has made adequate charges, accruals and reserves in the applicable financial
statements referred to in Section 1(jj) below in respect of all federal,
state and foreign income and franchise taxes for all periods as to which the
tax liability of the Company has not been finally determined.

 

(z)            The Company and each Subsidiary is insured
by recognized, financially sound and reputable institutions with policies in
such amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for its business including, but not limited to,
policies covering product liability, clinical trials and real and personal
property owned or leased by the Company and each Subsidiary against theft,
damage, destruction, acts of vandalism and earthquakes.  The Company has no reason to believe that it
will not be able (i) to renew existing insurance coverage for it and its
Subsidiaries as and when such policies expire or (ii) to obtain comparable
coverage from similar institutions as may be necessary or appropriate to
conduct its business and its Subsidiaries’ respective businesses as now
conducted and at a cost that would not have a Material Adverse Effect.  Neither the Company nor any Subsidiary has
been denied any insurance coverage which it has sought or for which it has applied.

 

(aa)         It is not necessary in connection with the
offer, sale and delivery of the Securities to the Initial Purchasers in the
manner

 

9

 

contemplated by this Agreement to register the
Securities under the Securities Act or to qualify the Indenture under the Trust
Indenture Act of 1939, as amended.

 

(bb)         There are no business relationships or
related-party transactions involving the Company or any of its Subsidiaries or
any other person required to be described in any document incorporated by
reference in the Memorandum which have not been described as required.

 

(cc)         Neither the Company nor any of its
Subsidiaries nor, to the best of the Company’s knowledge, any employee or agent
of the Company or any of its Subsidiaries, has made any contribution or other
payment to any official of, or candidate for, any federal, state or foreign
office in violation of any law or of the character required to be disclosed in
any document incorporated by reference in the Memorandum.

 

(dd)         The Securities satisfy the requirements set
forth in Rule 144A(d)(3) under the Securities Act.

 

(ee)         Except as would not, individually or in the
aggregate, have a Material Adverse Effect: (i)  neither the Company nor
any of its Subsidiaries is in violation of any federal, state, local or foreign
law or regulation relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or wildlife, including without limitation,
laws and regulations relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum and petroleum products (collectively, “Hazardous
Materials”), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, “Environmental Laws”), which violation includes,
but is not limited to, noncompliance with any permits or other governmental
authorizations required for the operation of the business of the Company or any
of its Subsidiaries under applicable Environmental Laws, or noncompliance with
the terms and conditions thereof, nor has the Company or any of its
Subsidiaries received any written communication, whether from a governmental
authority, citizens group, employee or otherwise, that alleges that the Company
or any of its Subsidiaries is in violation of any Environmental Law;
(ii) there is no claim, action or cause of action filed with a court or
governmental authority, no investigation with respect to which the Company or
any of its Subsidiaries has received written notice, and no written notice by
any person or entity alleging potential liability for investigatory costs,
cleanup costs, governmental responses costs, natural resources damages,
property damages, personal injuries, attorneys’ fees or

 

10

 

penalties arising out of, based on or
resulting from the presence, or release into the environment, of any Hazardous
Materials at any location owned, leased or operated by the Company or any of
its Subsidiaries, now or in the past (collectively, “Environmental Claims”),
pending or, to the best of the Company’s knowledge, threatened against the
Company or any of its Subsidiaries or any person or entity whose liability for
any Environmental Claim the Company or any of its Subsidiaries has retained or
assumed either contractually or by operation of law; (iii) the Company and
each Subsidiary has all permits, authorizations and approvals required under
any applicable Environmental Laws and is in compliance with their requirements;
and (iv) to the best of the Company’s knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge, presence or
disposal of any Hazardous Materials, that reasonably could result in a
violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company or any of its Subsidiaries or against
any person or entity whose liability for any Environmental Claim the Company or
any of its Subsidiaries has retained or assumed either contractually or by operation
of law.

 

(ff)           The Company and any “employee benefit plan”
(as defined under the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and published interpretations thereunder
(collectively, “ERISA”)) established or maintained by the Company or its
“ERISA Affiliates” (as defined below) are in compliance in all material
respects with ERISA.  “ERISA
Affiliate” means, with respect to the Company, any member of any
group of organizations described in Sections 414(b), (c), (m) or (o) of
the Internal Revenue Code of 1986, as amended, and the regulations and
published interpretations thereunder (the “Code”) of which the Company is a
member.  No “reportable event” (as
defined under ERISA) has occurred or is reasonably expected to occur with
respect to any “employee benefit plan” established or maintained by the Company
or any of its ERISA Affiliates.  No
“employee benefit plan” established or maintained by the Company or any of its
ERISA Affiliates, if such “employee benefit plan” were terminated, would have
any “amount of unfunded benefit liabilities” (as defined under ERISA).  Neither the Company nor any of its ERISA
Affiliates has incurred or reasonably expects to incur any liability under
(i) Title IV of ERISA with respect to termination of, or withdrawal
from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or
4980B of the Code.  Each “employee
benefit plan” established or maintained by the Company or any of its ERISA
Affiliates that is intended to be qualified under Section 401(a) of the
Code is so qualified and nothing has occurred, whether by action or failure to
act, which would cause the loss of such qualification.

 

11

 

(gg)         The Company has established and maintained
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and
15d-15) that are adequate and effective and designed to ensure that material
information relating to the Company, including its consolidated subsidiaries,
is made known to its chief executive officer and chief financial officer by
others within those entities.

 

(hh)         The Company maintains a system of accounting
controls sufficient to provide reasonable assurances that (a) transactions are
executed in accordance with management’s general or specific authorization, (b)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (c) access to assets is permitted only in
accordance with management’s general or specific authorization and (d) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

 

(ii)           There are no outstanding subscriptions,
rights, warrants, options, calls, convertible securities, commitments of sale
or liens granted or issued by the Company or any of its subsidiaries relating
to or entitling any person to purchase or otherwise to acquire any shares of
the capital stock of the Company or any of its subsidiaries, except as
otherwise disclosed in the Memorandum and except for options granted to
directors and employees of the Company and its subsidiaries in the ordinary
course of business since December 31, 2002.

 

(jj)           The consolidated financial statements
included or incorporated by reference in the Memorandum, together with related
schedules and notes, present fairly the consolidated financial position,
results of operations and changes in financial position of the Company and its
subsidiaries on the basis stated therein at the respective dates or for the
respective periods to which they apply; such statements and related schedules
and notes have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as
disclosed therein; and the other financial and statistical information and data
set forth in the Memorandum are, in all material respects, accurately presented
and prepared on a basis consistent with such financial statements and the books
and records of the Company.

 

(kk)         There are no existing or, to the knowledge of
the Company, threatened labor disputes with the employees of the Company or its
subsidiaries which would have a material adverse effect on the Company and its
subsidiaries, taken as a whole.

 

12

 

(ll)           To
the knowledge of the Company’s President and Chief Executive Officer, Executive
Vice-President Legal Affairs and Executive Vice-President of Commercial
Operations, the Company and each Subsidiary is in compliance in all material
respects with all federal, state and local fraud and abuse, anti-kickback and false
claims laws, rules, regulations and administrative interpretations
(collectively “Healthcare Laws”), applicable to it, including without
limitation, Title XVIII of the Social Security Act, 42 U.S.C. Sections
1395-1395ccc (the Medicare statute); Title XIX of the Social Security Act, 42
U.S.C. Sections 1396 et seq. (the Medicaid statute); the Federal
Programs Anti-Kickback Statute, 42 U.S.C. Section 1320a-7b(b); the Stark Law,
42 U.S.C. Section 1395nn; the False Claims Act, 31 U.S.C. Sections 3729 et
seq. (as amended); the Program Fraud Civil Remedies Act, 31 U.S.C. Section
3801 et seq.; the federal Anti-Kickback Act, 42 U.S.C. Sections 52 et
seq.; the Civil Monetary Penalties Law, 42 U.S.C. Section 1320a-7a; and the
Criminal Penalties Law for Acts Involving Federal Health Care Programs, 42
U.S.C. Section 1320a-7b; and all applicable implementing regulations.  Except as described in the Memorandum, the
Company is not a party to or the subject of and, to the Company’s knowledge,
has not been threatened to be made a party to or the subject of any claim,
action, suit, proceeding, hearing, inquiry, audit or investigation by or before
any governmental entity responsible for enforcing any Healthcare Law.

 

2.             Agreements
to Sell and Purchase.  The
Company hereby agrees to sell to the several Initial Purchasers, and each
Initial Purchaser, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees, severally
and not jointly to purchase from the Company the respective principal amount of
Firm Securities set forth in Schedule I hereto opposite its name at a
purchase price of 97% of the principal amount thereof (the “Purchase Price”) plus accrued interest, if
any, to the Closing Date.

 

On the basis
of the representations and warranties contained in this Agreement, and subject
to its terms and conditions, the Company agrees to sell to the Initial
Purchasers the Additional Securities, and the Initial Purchasers shall have the
right to purchase, severally and not jointly, up to $20,000,000 principal
amount of Additional Securities at the Purchase Price plus accrued interest, if
any, to the date of payment and delivery. The Initial Purchasers may exercise
this right in whole or from time to time in part by giving written notice not
later than 30 days after the date of this Agreement.  Any exercise notice shall specify the principal amount of
Additional Securities to be purchased by the Initial Purchasers and the date on
which such Additional Securities are to be purchased.  On each day, if any, that Additional Securities are to be
purchased (an “Option Closing Date”), each Initial Purchaser agrees,
severally and not jointly, to purchase the principal amount of Additional
Securities (subject to such

 

13

 

adjustments to eliminate fractional
Securities as you may determine) that bears the same proportion to the total
principal amount of Additional Securities to be purchased on such Option
Closing Date as the principal amount of Firm Securities set forth in Schedule I
opposite the name of such Initial Purchaser bears to the total principal amount
of Firm Securities.  Each purchase date
must be at least one business day after the written notice is given and may not
be earlier than the closing date for the Firm Securities nor later than ten
business days after the date of such notice. 

 

The Company
hereby agrees that, without the prior written consent of Morgan Stanley &
Co. Incorporated on behalf of the Initial Purchasers, it will not, during the
period ending 90 days after the date of the Memorandum, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of, directly or indirectly, any shares
of common stock of the Company or any securities convertible into or
exercisable or exchangeable for common stock of the Company or (ii) enter into
any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of the common stock of the
Company, whether any such transaction described in clause (i) or (ii) above is
to be settled by delivery of common stock or such other securities, in cash or
otherwise.  The foregoing sentence shall
not apply to (A) the sale of the Securities under this Agreement, (B) the
issuance by the Company of any shares of common stock issuable pursuant to the
Company’s employee stock purchase plan, upon the exercise of an option or
warrant or upon conversion of the Securities or of a security outstanding on
the date hereof and (C) options to purchase Common Stock, restricted stock
awards or stock bonus awards granted in the ordinary course of business to
employees, officers or directors of, or consultants or advisors to, the Company
or any subsidiary pursuant to stock option plans or other arrangements that are
approved by the Board of Directors of the Company; provided however that no
such options or restricted stock awards shall vest or become exercisable for
shares of Common Stock and not more than 100,000 shares of Common Stock
pursuant to such stock bonus awards may be sold by the recipient thereof prior
to the date which is 90 days after the date of the Memorandum.  

 

3.             Terms
of Offering. You have advised the Company that the Initial
Purchasers will make an offering of the Securities purchased by the Initial
Purchasers hereunder on the terms to be set forth in the Memorandum, as soon as
practicable after this Agreement is entered into as in your judgment is
advisable.

 

4.             Payment
and Delivery. Payment for the Firm Securities shall be made by wire
transfer to the Company in Federal or other funds immediately available in New
York City against delivery of such Firm Securities for the account of the
several Initial Purchasers at 10:00 a.m., New York City time, on

 

14

 

February 17, 2004, or at such other time
on the same or such other date, not later than February 24, 2004, as shall
be designated in writing by you.  The
time and date of such payment are hereinafter referred to as the “Closing Date.”

 

Payment for
any Additional Securities shall be made to the Company in Federal or other
funds immediately available in New York City against delivery of such
Additional Securities for the respective accounts of the several Initial
Purchasers at 10:00 a.m., New York City time, on the date specified in the
corresponding notice described in Section 2 or at such other time on the same
or on such other date, in any event not later than March 24, 2004, as
shall be designated in writing by you. 

 

The Securities
shall be in definitive form or global form, as specified by you, and registered
in such names and in such denominations as you shall request in writing not
later than one full business day prior to the Closing Date or the applicable
Option Closing Date, as the case may be. The Securities shall be delivered to
you on the Closing Date or an Option Closing Date, as the case may be, for the
respective accounts of the several Initial Purchasers, with any transfer taxes
payable in connection with the transfer of the Securities to the Initial
Purchaser duly paid, against payment of the Purchase Price therefor plus accrued
interest, if any, to the date of payment and delivery.

 

5.             Conditions to the Initial Purchasers’ Obligations.  The several obligations of the Initial
Purchasers to purchase and pay for the Firm Securities on the Closing Date are
subject to the following conditions:

 

(a)           Subsequent to the execution and delivery of
this Agreement and prior to the Closing Date:

 

(i)           there shall not have occurred any
downgrading, nor shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded the Company or any of
the Company’s securities or in the rating outlook for the Company by any
“nationally recognized statistical rating organization,” as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act; and 

 

(ii)          there shall not have occurred any change, or
any development involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Memorandum provided
to prospective purchasers of the Securities that, in your judgment, is material
and adverse and that makes it, in your judgment, impracticable to market

 

15

 

the Securities on the terms and in the manner
contemplated in the Memorandum.

 

(b)           The Initial Purchasers shall have received
on the Closing Date a certificate, dated the Closing Date and signed by an
executive officer of the Company, to the effect set forth in Section 5(a)(i)
and to the effect that the representations and warranties of the Company
contained in this Agreement are true and correct as of the Closing Date and
that the Company has complied with all of the agreements and satisfied all of
the conditions on its part to be performed or satisfied hereunder on or before
the Closing Date.

 

The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.

 

(c)           The Initial Purchaser shall have received on
the Closing Date an opinion of Cooley Godward LLP, outside corporate counsel
for the Company, dated as of the Closing Date to the effect set forth in
Exhibit A and an opinion of Stephen Rosenfield, General Counsel for the
Company to the effect set forth in Exhibit A-2, and opinions of each of:
(i) Cooley Godward LLP, intellectual property counsel for the Company,
(ii) Merchant & Gould P.C., counsel for the Company,
(iii) Bozicevic, Field & Francis, LLP, intellectual property
counsel for the Company, (iv) Knobbe, Martens, Olson & Bear, LLP,
intellectual property counsel for the Company, (v) Sidley Austin
Brown & Wood, LLP and Affiliated Partnerships, intellectual property
counsel for the Company, and (vi) Marshall, Gerstein & Brown,
LLP, intellectual property counsel for the Company, in each case dated the
Closing Date, in form and substance reasonably satisfactory to counsel for the
Initial Purchasers.  Such opinions shall
be rendered to the Initial Purchasers at the request of the Company and shall
so state therein.

 

(d)           The Initial Purchasers shall have received
on the Closing Date an opinion of each of Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C. and Davis Polk & Wardwell, counsel for the Initial
Purchasers, dated the Closing Date, to the effect set forth in Exhibits B-1 and
B-2.

 

(e)           The Initial Purchasers shall have received
on each of the date hereof and the Closing Date a letter, dated the date hereof
or the Closing Date, as the case may be, in form and substance satisfactory to
the Initial Purchasers, from Ernst & Young LLP, independent public
accountants, containing statements and information of the type ordinarily
included in accountants’ “comfort letters” to underwriters with respect to the
financial statements and certain financial information contained in or

 

16

 

incorporated by reference into the
Memorandum; provided that the
letter delivered on the Closing Date shall use a “cut-off date” not earlier
than the date hereof.

 

(f)            The “lock-up” agreements, each
substantially in the form of Exhibit C hereto, between you and the executive
officers and directors of the Company relating to sales and certain other
dispositions of shares of common stock or certain other securities, delivered
to you on or before the date hereof, shall be in full force and effect on the
Closing Date.

 

The several
obligations of the Initial Purchasers to purchase Additional Securities
hereunder are subject to the delivery to you on the applicable Option Closing
Date of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization, execution and authentication of
the Additional Securities to be sold on such Option Closing Date and other
matters related to the execution and authentication of such Additional
Securities.

 

6.             Covenants of the Company. In further
consideration of the agreements of the Initial Purchasers contained in this
Agreement, the Company covenants with each Initial Purchaser as follows:

 

(a)           To furnish to you in New York City, without
charge, prior to 10:00 a.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
Section 6(c), as many copies of the Memorandum, any documents incorporated by
reference therein and any supplements and amendments thereto as you may
reasonably request.

 

(b)           Before amending or supplementing the
Memorandum, to furnish to you a copy of each such proposed amendment or
supplement and not to use any such proposed amendment or supplement to which
you reasonably object.

 

(c)           If, during such period after the date hereof
and prior to the date on which all of the Securities shall have been sold by the
Initial Purchasers, any event shall occur or condition exist as a result of
which it is necessary to amend or supplement the Memorandum in order to make
the statements therein, in the light of the circumstances when the Memorandum
is delivered to a purchaser, not misleading, or if, in the opinion of counsel
for the Initial Purchasers, it is necessary to amend or supplement the
Memorandum to comply with applicable law, forthwith to prepare and furnish, at
its own expense, to the Initial Purchasers, either amendments or supplements to
the Memorandum so that the statements in the Memorandum as so amended or
supplemented will not, in the light of

 

17

 

the circumstances when the Memorandum is
delivered to a purchaser, be misleading or so that the Memorandum, as amended
or supplemented, will comply with applicable law.

 

(d)           To endeavor to qualify the Securities for
offer and sale under the securities or Blue Sky laws of such jurisdictions as
you shall reasonably request; provided, however, that the Company will not be
required to qualify to do business in any jurisdiction in which it is not then
so qualified, to file any general consent to service of process or to taxation
in any jurisdiction where it is not then so subject.

 

(e)           Whether or not the transactions contemplated
in this Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses, if any, incident to the performance of its
obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company’s counsel and the Company’s accountants in connection
with the issuance and sale of the Securities and all other fees or expenses in
connection with the preparation of the Memorandum and all amendments and
supplements thereto, including all printing costs associated therewith, and the
delivering of copies thereof to the Initial Purchasers, in the quantities
herein above specified, (ii) all costs and expenses related to the transfer and
delivery of the Securities to the Initial Purchasers, including any transfer or
other taxes payable thereon, (iii) the cost of printing or producing any Blue
Sky memorandum in connection with the offer and sale of the Securities under
state securities laws and all expenses in connection with the qualification of
the Securities for offer and sale under state securities laws as provided in
Section 6(d) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Initial Purchasers in connection with such
qualification and in connection with the Blue Sky memorandum, (iv) any fees
charged by rating agencies for the rating of the Securities, (v) the fees and
expenses, if any, incurred in connection with the admission of the Securities
for trading in PORTAL or any appropriate market system, (vi) the costs and
charges of the Trustee and any transfer agent, registrar or depositary, (vii)
the cost of the preparation, issuance and delivery of the Securities, (viii)
the costs and expenses of the Company relating to investor presentations on any
“road show” undertaken in connection with the marketing of the offering of the
Securities, including, without limitation, expenses associated with the
production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with the
prior approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants, and the
cost of any aircraft chartered in connection with the road show, (ix) the
document production charges and expenses associated with printing this
Agreement and (x) all other costs and expenses incident to the

 

18

 

performance of the obligations of the Company
hereunder for which provision is not otherwise made in this Section.  It is understood, however, that except as
provided in this Section, Section 8, and the last paragraph of Section 10, the
Initial Purchasers will pay all of their costs and expenses, including fees and
disbursements of its counsel, transfer taxes payable on resale of any of the
Securities by them and any advertising expenses connected with any offers they
may make.

 

(f)            Neither the Company nor any Affiliate will
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in the Securities Act) which could be integrated
with the sale of the Securities in a manner which would require the
registration under the Securities Act of the Securities.

 

(g)           Not to solicit any offer to buy, or offer or
sell, the Securities or the Underlying Securities by means of any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.

 

(h)           While any of the Securities or the
Underlying Securities remain “restricted securities” within the meaning of the
Securities Act, to make available, upon request, to any seller of such
Securities the information specified in Rule 144A(d)(4) under the Securities
Act, unless the Company is then subject to Section 13 or 15(d) of the Exchange
Act.

 

(i)            If requested by you, to use its reasonable
best efforts to permit the Securities to be designated as PORTAL securities in
accordance with the rules and regulations adopted by the National Association
of Securities Dealers, Inc. relating to trading in the PORTAL Market.

 

(j)            During the period of two years after the
Closing Date or any Option Closing Date, if later, the Company will not, and
will not permit any of its affiliates (as defined in Rule 144 under the
Securities Act) to resell any of the Securities or the Underlying Securities
which constitute “restricted securities” under Rule 144 that have been
reacquired by any of them.

 

(k)           Not to take any action prohibited by
Regulation M under the Exchange Act in connection with the distribution of the
Securities contemplated hereby.

 

7.             Offering of Securities; Restrictions on Transfer.  (a) Each Initial Purchaser, severally and
not jointly, represents and warrants that such Initial

 

19

 

Purchaser is a qualified institutional buyer
as defined in Rule 144A under the Securities Act (a “QIB”).  The Initial
Purchasers, severally and not jointly, agree with the Company that (i) it will
not solicit offers for, or offer or sell, such Securities by any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act and (ii) it
will solicit offers for such Securities only from, and will offer such
Securities only to, persons that it reasonably believes to be QIBs that in
purchasing such Securities are deemed to have represented and agreed as
provided in the Memorandum under the caption “Transfer Restrictions”.

 

8.             Indemnity and Contribution.  (a) The Company agrees to indemnify and hold
harmless each Initial Purchaser, each person, if any, who controls any Initial
Purchaser within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, and each affiliate of any Initial Purchaser
within the meaning of Rule 405 under the Securities Act from and against any
and all losses, claims, damages and liabilities (including, without limitation,
any legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Memorandum (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Initial Purchaser furnished to
the Company in writing by such Initial Purchaser expressly for use therein.

 

(b)           Each Initial Purchaser
agrees, severally and not jointly, to indemnify and hold harmless the Company,
its directors, its officers and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to the Initial Purchaser, but only with reference to information relating to
such Initial Purchaser furnished to the Company in writing by such Initial
Purchaser through you expressly for use in the Memorandum.

 

(c)           In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 8(a) or
8(b), such person (the “indemnified party”)
shall promptly notify the person against whom such indemnity may be sought (the
“indemnifying party”) in writing
and the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of

 

20

 

such counsel related to such proceeding. In
any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the indemnifying
party shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel at its standard non-premium rates) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Morgan Stanley
& Co. Incorporated, in the case of parties indemnified pursuant to Section
8(a), and by the Company, in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment that is indemnifiable
pursuant to Section 8(a) or 8(b), as the case may be.  Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the
second and third sentences of this paragraph, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement.  No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such proceeding.

 

(d)           To the extent the
indemnification provided for in Section 8(a) or 8(b) is unavailable to an
indemnified party or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one

 

21

 

hand and the Initial Purchasers on the other
hand from the offering of the Securities or (ii) if the allocation provided by
clause 8(d)(i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company on the one hand and of
the Initial Purchasers on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Initial Purchasers on the other hand in
connection with the offering of the Securities shall be deemed to be in the
same respective proportions as the net proceeds from the offering of the
Securities (before deducting expenses) received by the Company and the total
discounts and commissions received by the Initial Purchasers bear to the
aggregate offering price of the Securities. The relative fault of the Company on
the one hand and of the Initial Purchasers on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or by the
Initial Purchasers and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.  The Initial Purchasers’
respective obligations to contribute pursuant to this Section 8 are several in
proportion to the respective principal amount of Securities they have purchased
hereunder, and not joint.

 

(e)           The Company and the
Initial Purchasers agree that it would not be just or equitable if contribution
pursuant to this Section 8(d) were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in
Section 8(d). The amount paid or payable by an indemnified party as a result of
the losses, claims, damages and liabilities referred to in Section 8(d) shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities resold by it in the initial placement of such Securities were
offered to investors exceeds the amount of any damages that such Initial
Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The remedies provided for in this
Section 8 are not exclusive and shall not limit any rights or remedies which
may otherwise be available to any indemnified party at law or in equity.

 

22

 

(f)            The indemnity and
contribution provisions contained in this Section 8 and the representations,
warranties and other statements of the Company and the Initial Purchasers
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation
made by or on behalf of the Initial Purchasers, any person controlling any
Initial Purchaser or any affiliate of any Initial Purchaser or by or on behalf
of the Company, its officers or directors or any person controlling the Company
and (iii) acceptance of and payment for any of the Securities.

 

9.             Termination. The Initial Purchasers may
terminate this Agreement by notice given to the Company, if after the execution
and delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on, or by, as the
case may be, any of the New York Stock Exchange, the American Stock Exchange,
the Nasdaq National Market, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a material disruption in securities settlement,
payment or clearance services in the United States shall have occurred, (iv)
any moratorium on commercial banking activities shall have been declared by
Federal or New York State authorities or (v) there shall have occurred any
outbreak or escalation of hostilities, or any change in financial markets or
any calamity or crisis that, in your judgment, is material and adverse and
which, singly or together with any other event specified in this clause (v),
makes it, in your judgment, impracticable or inadvisable to proceed with the
offer, sale or delivery of the Securities on the terms and in the manner
contemplated in the Memorandum.

 

10.           Effectiveness; Defaulting Initial Purchasers.  This Agreement shall become effective upon
the execution and delivery hereof by the parties hereto.

 

If, on the
Closing Date, or an Option Closing Date, as the case may be, any one or more of
the Initial Purchasers shall fail or refuse to purchase Securities that it or
they have agreed to purchase hereunder on such date, and the aggregate
principal amount of Securities which such defaulting Initial Purchaser or
Initial Purchasers agreed but failed or refused to purchase is not more than
one-tenth of the aggregate principal amount of Securities to be purchased on
such date, the other Initial Purchasers shall be obligated severally in the
proportions that the principal amount of Firm Securities set forth opposite
their respective names in Schedule I bears to the aggregate principal
amount of Firm Securities set forth opposite the names of all such
non-defaulting Initial Purchasers, or in such other proportions as you may
specify, to purchase the Securities which such defaulting Initial Purchaser or
Initial Purchasers agreed but failed or refused to purchase on such date; provided that in no event shall the
principal amount of Securities that any Initial Purchaser has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 10 by
an amount in excess of

 

23

 

one-ninth of such principal amount of
Securities without the written consent of such Initial Purchaser. If, on the
Closing Date any Initial Purchaser or Initial Purchasers shall fail or refuse
to purchase Firm Securities which it or they have agreed to purchase hereunder
on such date and the aggregate principal amount of Securities with respect to
which such default occurs is more than one-tenth of the aggregate principal
amount of Firm Securities to be purchased on such date, and arrangements
satisfactory to you and the Company for the purchase of such Firm Securities
are not made within 36 hours after such default, this Agreement shall terminate
without liability on the part of any non-defaulting Initial Purchaser or of the
Company. In any such case either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Memorandum or in any other documents
or arrangements may be effected.  If, on
an Option Closing Date, any Initial Purchaser or Initial Purchasers shall fail
or refuse to purchase Additional Securities and the aggregate principal amount
of Additional Securities with respect to which such default occurs is more than
one-tenth of the aggregate principal amount of Additional Securities to be
purchased on such Option Closing Date, the non-defaulting Initial Purchasers
shall have the option to (a) terminate their obligation hereunder to purchase
the Additional Securities to be sold on such Option Closing Date or (b)
purchase not less than the principal amount of Additional Securities that such
non-defaulting Initial Purchasers would have been obligated to purchase in the
absence of such default.  Any action
taken under this paragraph shall not relieve any defaulting Initial Purchaser
from liability in respect of any default of such Initial Purchaser under this
Agreement.

 

If this
Agreement shall be terminated by the Initial Purchasers, or any of them,
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Initial Purchasers or such limited Purchasers
as have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Initial Purchaser in connection with this
Agreement or the offering contemplated hereunder.

 

11.           Counterparts. 
This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

 

12.           Applicable Law.  This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York.

 

24

 

13.           Headings.  The
headings of the sections of this Agreement have been inserted for convenience
of reference only and shall not be deemed a part of this Agreement.

 

 

	
   

  	
  Very truly
  yours,

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INTERMUNE,
  INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen
  N. Rosenfield

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Stephen N.
  Rosenfield

  
	
   

  	
   

  	
  Title:

  	
  Executive
  Vice President of

  Legal Affairs

  
						

 

25

 

	
  Accepted as
  of the date hereof

  
	
   

  
	
  Morgan
  Stanley & Co. Incorporated

  Banc of America Securities LLC

  Credit Suisse First Boston Corporation

  Harris Nesbitt Corp.

  RBC Capital Markets Corporation

  
	
  By:

  	
  Morgan Stanley
  & Co. Incorporated

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Bryan W.
  Andrzejewski

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

26

 

SCHEDULE I

 

	
  Initial
  Purchaser

  	
   

  	
  Firm
  Securities to be Purchased

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Morgan Stanley & Co. Incorporated

  	
   

  	
  $

  	
  97,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Banc of America Securities LLC

  	
   

  	
  $

  	
  37,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Credit Suisse First Boston LLC

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Harris Nesbitt Corp.

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  RBC Capital Markets Corporation

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  150,000,000

  	
   

  

 

 

EXHIBIT A

 

CORPORATE OPINION OF COOLEY GODWARD LLP

 

The corporate
opinion of Cooley Godward LLP to be delivered pursuant to Section 5(c) of
the Purchase Agreement shall be to the effect that:

 

A.            The Company has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware, with full corporate power and
authority to own, lease and operate its properties and conduct its business as
described in the Memorandum and to execute and deliver and perform its
obligations under each of the Purchase Agreement, Registration Rights
Agreement, Indenture and the Securities.

 

B.            The Company is duly
qualified to do business and in good standing in the State of California, and,
to the best of our knowledge, in each other jurisdiction of the United States,
if any, in which it conducts its business and in which the failure, individually
or in the aggregate, to be so qualified would have a Material Adverse Effect.

 

C.            The Purchase Agreement
has been duly authorized, executed and delivered by the Company.

 

D.            Each of the
Registration Rights Agreement and Indenture have been duly authorized, executed
and delivered by, and is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws related to or affecting the rights and remedies of creditors
or by general equitable principles and except as rights to indemnification may
be limited by applicable laws or public policy.

 

E.             The Underlying
Securities reserved for issuance upon conversion of the Securities have been
duly authorized and reserved and, when issued upon conversion of the Securities
in accordance with the terms of the Indenture, will be duly and validly
authorized and issued, fully paid and nonassessable, except in each case to the
extent that the Company is effectively required under the terms of the
Securities to settle any conversion of the Securities in cash.

 

F.             The Securities are in
the form contemplated by the Indenture, have been duly authorized by the
Company for issuance and sale pursuant to the Purchase Agreement and the
Indenture and, when executed by the Company and authenticated by the Trustee in
the manner provided in the Indenture, and delivered against payment of the
purchase price therefor, will constitute valid and

 

 

binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting enforcement of the
rights and remedies of creditors or by general equitable principles.

 

G.            The statements in the
Memorandum under the caption “Material United States Federal Income Tax
Consequences” insofar as such statements constitute a summary of the federal
tax laws of the United States, are accurate in all material respects.

 

H.            The statements in the
Memorandum under the captions “Description of Notes,” “Description of Capital
Stock,” “Plan of Distribution” and “Transfer Restrictions” insofar as such
statements constitute summaries of legal matters, the charter or by-law
provisions of the Company, documents or legal proceedings fairly summarize, in
all material respects, the matters referred to therein.

 

I.              There are no
preemptive rights, rights of first refusal or other similar rights to subscribe
for or to purchase any of the Underlying Securities pursuant to: (i) the
Delaware General Corporation Law, (ii) the Company’s certificate of
incorporation, (iii) the Company’s by-laws, (iv) any agreement or other
instrument binding upon the Company that is filed as an exhibit to a document
incorporated by reference in the Memorandum or (v) any agreement or other
instrument binding the Company as set forth in Exhibit A hereto which the
Company has advised such counsel will be filed as an exhibit to the next annual
report on Form 10-K or the next periodic report on Form 10-Q and which was
executed by the Company between October 1, 2003 and immediately prior to the
Closing Date.  

 

J.             The Company has an
authorized capitalization as set forth under the caption “Description of
Capital Stock” in the Memorandum and the certificates for the underlying shares
are in due and proper form under the Delaware General Corporation Law.

 

K.            The capital stock of
the Company conforms to the description thereof contained in or incorporated by
reference into the Memorandum.

 

L.             The documents
incorporated by reference in the Memorandum and any further amendment or
supplement to any such incorporated document made by the Company prior to the
date hereof (other than the financial statements and related schedules therein,
as to which we express no opinion), when they became effective or were filed
with the Commission, as the case may be, complied as to form in all material
respects with the requirements of the Securities Act or the

 

2

 

Exchange Act, as applicable, and the rules
and regulations of the Commission thereunder.

 

M.           No approval,
authorization, consent or order of or filing with any federal or state
governmental or regulatory commission, board, body, authority or agency is required
in connection with the Company’s execution, delivery and performance of the
Purchase Agreement, the Registration Rights Agreement or the Indenture or the
issuance and delivery of the Securities or the Underlying Securities or the
consummation of the transactions contemplated thereby other than  (i) the filing and effectiveness of any
registration statement contemplated by the Registration Rights Agreement and
performance by the Company of its obligations under the Registration Rights
Agreement and (ii) a Notification Form for Listing of Additional Shares and a
Notification Form for a Change in the Number of Shares Outstanding, each to be
filed with the Nasdaq Stock Market (except that we express no opinion as to any
necessary qualification under the state securities or blue sky laws of the various
jurisdictions in which the Securities are being offered by the Initial
Purchasers.

 

N.            The execution and
delivery of the Purchase Agreement, the Registration Rights Agreement, the
Securities and the Indenture by the Company and the performance by the Company
of its obligations thereunder and the consummation by the Company of the
transactions contemplated thereby do not and will not conflict with, nor result
in any breach of, nor constitute a default under (nor constitute any event
which with notice, lapse of time, or both, would result in any breach of or
constitute a default under): (i) any provisions of the certificate of incorporation
or by-laws of the Company, (ii) any provision of any agreement or other
instrument binding upon the Company that is filed as an exhibit to a document
incorporated by reference in the Memorandum or any agreement or other
instrument binding upon the Company (as set forth in Exhibit A hereto)
which the Company has advised such counsel will be filed as an exhibit to the
next annual report on Form 10-K or periodic report on Form 10-Q and was
executed by the Company between October 1, 2003 and immediately prior to the
Closing Date. 

 

O.            The Company is not in
violation of its certificate of incorporation; to the best of our knowledge,
since January 1, 2001, the Company has not taken any action that
constitutes a material violation of its by-laws; and, to the best of our
knowledge, the Company has not received any notice of any breach of or default
any agreement or other instrument binding upon the Company that is filed as an
exhibit to a document incorporated by reference in the Memorandum or any
agreement or other instrument binding upon the Company (as set forth in
Exhibit A hereto) which the Company has advised such counsel will be filed
as an exhibit to the next annual report on Form 10-K or periodic report on Form
10-Q and was executed by the Company between October 1, 2003 and immediately
prior to the Closing Date.

 

3

 

P.             To the best of our
knowledge, there are no actions, suits, claims, investigations or proceedings
pending or overtly threatened against the Company or any of its Subsidiaries,
or to which any of their respective properties is subject, before any court or
before any federal, state or foreign governmental or regulatory commission,
board, body, authority or agency or any arbitration panel other than
proceedings that are described in the Memorandum or any document incorporated
by reference in the Memorandum and proceedings that would not have a Material
Adverse Effect on the Company.  

 

Q.            The Company is not,
and after receipt of payment for the Securities will not be, an “investment
company” within the meaning of the Investment Company Act.

 

R.            Assuming the accuracy
of the representations, warranties and covenants of the Company and the Initial
Purchasers contained in the Purchase Agreement, no registration of the
Securities under the Securities Act, and no qualification of an indenture under
the Trust Indenture Act with respect thereto, is required in connection with
the purchase of the Securities by the Initial Purchasers or the initial resale
of the Securities by the Initial Purchasers in the manner contemplated by the
Purchase Agreement other than any registration or qualification that may be
required in connection with the Registration Rights Agreement.

 

S.             The statements in the
Company’s Current Report on Form 8-K filed on February 9, 2004, under the
caption “Business – License and Other Agreements,” in so far as such statements
constitute summaries of contracts, licenses or agreements, fairly presents in
all material respects, the contracts, licenses and agreements described
therein.

 

******

 

In connection with the preparation of the
Memorandum, we have participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants of the Company and representatives of the Initial Purchasers at
which the contents of the Memorandum were discussed and, although we are not
passing upon and do not assume responsibility for the accuracy, completeness or
fairness of the statements contained in the Memorandum (except as and to the
extent stated in the first clause of paragraph (J) and in paragraph (K)), on
the basis of the foregoing nothing has come to our attention that causes us to
believe that the Memorandum as of its date or at the Closing Date contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading (it being
understood that we express no opinion with respect

 

4

 

to the financial statements and schedules and
other financial and statistical data included in the Memorandum or any
amendments or supplements thereto).

 

******

 

5

 

EXHIBIT A-2

 

OPINION OF STEPHEN ROSENFIELD, 

GENERAL COUNSEL OF THE COMPANY

 

The opinion of
Stephen Rosenfield to be delivered pursuant to Section 5(c) of the
Purchase Agreement shall be to the effect that:

 

A.            The outstanding shares
of capital stock of the Company have been duly and validly authorized and
issued, and are fully paid and nonassessable.

 

 

EXHIBIT B-1

 

OPINION OF MINTZ, LEVIN, COHN, FERRIS,

GLOVSKY AND POPEO, P.C.

 

The opinion of
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. to be delivered pursuant to
Section 5(d) of the Purchase Agreement shall be to the effect that:

 

A.            The Purchase Agreement
has been duly authorized, executed and delivered by the Company.

 

B.            Each of the Indenture
and the Registration Rights Agreement has been duly authorized, executed and
delivered by, and is a valid and binding agreement of, the Company, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors’ rights generally and equitable principles of
general applicability, and except as rights to indemnification and contribution
under the Registration Rights Agreement may be limited under applicable law.

 

C.            Nothing has come to
the attention of such counsel to cause such counsel to believe that (except for
the financial statements and financial schedules and other financial and
statistical data, as to which such counsel need not express any belief) the
Memorandum when issued contained, or as of the date such opinion is delivered
contains, any untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

 

With respect
to the matters referred to in the paragraph above, Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C. may state that their beliefs are based upon their
participation in the preparation of the Memorandum (and any amendments or
supplements thereto) and review and discussion of the contents thereof
(including the review of, but not participation in the preparation of, the
incorporated documents), but are without independent check or verification
except as specified.

 

D.            Based upon the
representations, warranties and agreements of the Company in the Purchase
Agreement and of the Initial Purchasers in Section 7 of the Purchase Agreement,
it is not necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers under the Purchase Agreement or in
connection with the initial resale of such Securities by the Initial Purchasers
in accordance with Section 7 of the Purchase Agreement to register the
Securities under the Securities Act of 1933 or to qualify the Indenture under
the Trust

 

 

Indenture Act of 1939, it being understood
that no opinion is expressed as to any subsequent resale of any Security or
Underlying Security.

 

E.             The issuance of the
Underlying Securities will not be subject to any preemptive or similar rights

 

2

 

EXHIBIT B-2

 

OPINION OF DAVIS POLK & WARDWELL

 

The opinion of
Davis Polk & Wardwell to be delivered pursuant to Section 5(d) of the
Purchase Agreement shall be to the effect that:

 

A.            The statements
relating to legal matters or documents included in the Memorandum under the
captions “Description of Notes,” “Plan of Distribution” and “Transfer
Restrictions,” fairly summarize in all material respects such matters or
documents.

 

B.            The Securities have
been duly authorized by the Company and, when executed and authenticated in
accordance with the provisions of the Indenture and delivered to and paid for
by the Initial Purchasers in accordance with the terms of the Purchase
Agreement, will be valid and binding obligations of the Company, enforceable in
accordance with their terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors’ rights generally and equitable principles of
general applicability, and will be entitled to the benefits of the Indenture
and the Registration Rights Agreement pursuant to which such Securities are to
be issued.

 

C.            The Underlying
Securities issuable upon conversion of the Securities have been duly authorized
and reserved and, when issued upon conversion of the Securities in accordance
with the terms of the Securities, will be validly issued, fully paid and non-assessable,
except to the extent that the Company is effectively required under the terms
of the Securities to settle any conversion of the Securities in cash.

 

 

EXHIBIT C

 

FORM OF LOCK-UP LETTER

 

February        , 2004

 

Morgan Stanley & Co. Incorporated

2725 Sand Hill Road, Suite 200

Menlo Park, CA 94025

 

Dear Sirs and Mesdames:

 

The
undersigned understands that Morgan Stanley & Co. Incorporated (“Morgan
Stanley”)  proposes to enter
into a Purchase Agreement (the “Purchase Agreement”) with InterMune, Inc.,
a Delaware corporation (the “Company”), providing for the offering (the
“Offering”)
of up to $170,000,000 in aggregate principal amount of the Company’s
Convertible Senior Notes due 2011 (the “Notes”),
on the terms and subject to the conditions set forth in the Purchase
Agreement.  The Notes will be
convertible into fully paid and nonassessable shares of common stock of the
Company, par value $.001 per share (the “Common  Stock”).

 

In recognition
of the benefit that such an offering will confer upon the undersigned as a
shareholder of the Company, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned
agrees with each Initial Purchaser (as defined in the Purchase Agreement) that,
without the prior written consent of Morgan Stanley, it will not, during the
period commencing on the date hereof and ending 90 days after the date of the
Purchase Agreement, (1) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (2) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of Common Stock, whether
any such transaction described in clause (1) or (2) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise.  The foregoing sentence shall not apply to
(a) transactions relating to shares of Common Stock or other securities
acquired in open market transactions after the completion of the Offering, (b)
transactions relating to shares of Common Stock acquired pursuant to the
Company’s Employee Stock Purchase Plan or (c) sales of shares of Common Stock
pursuant to preplanned trading programs intended to comply with Rule 10b5-1
under the Securities Exchange Act of 1934, as amended (the

 

 

“Exchange Act”), that are effective as of the
date hereof.  Notwithstanding the
foregoing, (i) gifts and transfers by will or intestacy or (ii) transfers to
(A) the undersigned’s members, partners, affiliates or immediate family or (B)
a trust, the beneficiaries of which are the undersigned and/or members of the
undersigned’s immediate family, shall not be prohibited by this agreement;
provided that (x) the donee or transferee agrees in writing to be bound by the
foregoing in the same manner as it applies to the undersigned and (y) if the
donor or transferor is a reporting person subject to Section 16(a) of the
Exchange Act, any gifts or transfers made in accordance with this paragraph
shall not require such person to, and such person shall not voluntarily, file a
report of such transaction on Form 4 under the Exchange Act.  “Immediate family” shall mean the spouse,
lineal descendents, father, mother, brother or sister of the transferor and the
father, mother, brother or sister of the transferor’s spouse.  In addition, the undersigned agrees that,
without the prior written consent of Morgan Stanley, it will not, during the
period commencing on the date hereof and ending 90 days after the date of the
Purchase Agreement, make any demand for or exercise any right with respect to,
the registration of any shares of Common Stock or any security convertible into
or exercisable or exchangeable for Common Stock.  The undersigned also agrees and consents to the entry of stop transfer
instructions with the Company’s transfer agent and registrar against the
transfer of the undersigned’s shares of Common Stock except in compliance with
the foregoing restrictions.

 

The
undersigned understands that the Company and Morgan Stanley are relying upon
this Lock-Up Agreement in proceeding toward the consummation of the
Offering.  The undersigned further
understands that this Lock-Up Agreement is irrevocable and shall be binding
upon the undersigned’s heirs, legal representatives, successors and assigns.

 

This agreement
will terminate and be of no further force or effect if the Purchase Agreement
is not executed on or prior to March 15, 2004.

 

Whether or not
the Offering actually occurs depends on a number of factors, including market
conditions.  Any Offering will only be
made pursuant to the Purchase Agreement, the terms of which are subject to
negotiation between the Company and the initial purchasers thereunder.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

  

 

2

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