INTERMUNE INC
EXHIBIT 10.3
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>f30670exv10w3.htm
<DESCRIPTION>EXHIBIT 10.3
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;10.3</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">RETENTION PAYMENT AGREEMENT
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following agreement (the &#147;Agreement&#148;) between InterMune, Inc. and John Hodgman
(&#147;Executive&#148;), provides for payment of specified sums as compensation (&#147;Retention Payments&#148;). This
Agreement does not change the at-will nature of Executive&#146;s employment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<U>Retention Payments.</U> Executive shall be eligible to earn each Retention Payment
listed below, by: (a)&nbsp;being employed on the date listed next to the Retention Payment; (b)&nbsp;not
being in a PIP Period (&#147;PIP Period&#148; is defined in Paragraph 4(a) below) on the date listed next to
the Retention Payment; and (c)&nbsp;if Executive has resigned or been given notice of termination
without Cause (&#147;Cause&#148; is defined in Paragraph 4(b) below) but remains employed during a notice
period, assisting in an Orderly Transition of Duties (&#147;Orderly Transition of Duties&#148; is defined in
Paragraph 4(c) below). Notwithstanding condition (b), Executive shall be eligible to earn any
Retention Payments not earned because Executive was in a PIP Period (&#147;Suspended Payments&#148;) by
remaining employed by InterMune, Inc. through the expiration of the PIP Period, at which time any
Suspended Payments will be paid to the Executive. Retention Payments are in addition to
Executive&#146;s regular compensation package and are not to be considered &#147;bonus&#148; compensation.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Date Retention Payment May Be Earned</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Amount</TD>
</TR>

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<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">July&nbsp;30, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">October&nbsp;30, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February&nbsp;28, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">June&nbsp;30, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">65,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">September&nbsp;30, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">65,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;1, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">55,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">April&nbsp;1, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
</TR>
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</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<U>Disposition of Suspended Payments and Remaining Unearned Retention Payments Upon
Termination of Employment </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. <U>Voluntary Resignation/Termination for Cause.</U> If Executive voluntarily resigns from
employment with InterMune, Inc., or Executive&#146;s employment is terminated with Cause, Executive
shall not be eligible to receive Remaining Unearned Retention Payments (&#147;Remaining Unearned
Retention Payments&#148; is defined at Paragraph 4(d) below) following the effective date of the
resignation or termination for Cause. Executive shall not be eligible to earn any Suspended
Payments if the effective date of either a voluntary resignation or termination for Cause occurs
during a PIP Period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. <U>Termination of Employment Without Cause.</U> In the event InterMune, Inc. terminates
Executive&#146;s employment without Cause or eliminates Executive&#146;s position, InterMune, Inc. shall pay
to Executive any Suspended Payments and/or Remaining Unearned Retention
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Payments. Payment of Suspended Payments and/or Remaining Unearned Retention Payments under this
Paragraph 2(b) shall be: (i)&nbsp;made only in such amount as results in Executive&#146;s receiving the
lesser of all Remaining Unearned Retention Payments and/or Suspended Payments or $320,000; (ii)
contingent upon Executive&#146;s execution of a release of claims against InterMune, Inc., which release
shall be in a form acceptable to InterMune, Inc. in its sole discretion; and, (iii)&nbsp;made in a lump
sum within ten (10)&nbsp;business days following Executive&#146;s delivery to InterMune, Inc. of Executive&#146;s
signature upon such release.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. <U>Termination Due to Death or Disability.</U> Executive shall not be eligible to earn
any Remaining Unearned Retention Payments or Suspended Payments in the event Executive dies before
earning any Remaining Unearned Retention Payments or during a PIP Period. If Executive resigns due
to incapacitation as a result of a long term medical disability or similar unforeseen
circumstances, InterMune, Inc. may, in its sole discretion, pay to Executive any or all Remaining
Unearned Retention Payments and/or Suspended Payments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<U>Effect of Change in Control.</U> Except as provided in this Paragraph&nbsp;3, this
Agreement shall remain in effect upon a Change in Control (&#147;Change in Control&#148; is defined in
Paragraph 4(e) below), and Executive shall remain eligible to earn Retention Payments as set forth
above. However, if within 12&nbsp;months of a Change in Control, Executive&#146;s employment is terminated
without Cause, or Executive resigns for &#147;Good Reason&#148; (&#147;Good Reason&#148; is defined in paragraph 4(f)
below), then InterMune, Inc. or its successor shall pay to Executive the lesser of all Remaining
Unearned Retention Payments and/or Suspended Payments or $320,000. Payment of Suspended Payments
and/or Remaining Unearned Retention Payments under this Paragraph&nbsp;3 shall be made in a lump sum
within ten (10)&nbsp;business days following the effective date of the resignation or termination of
employment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;<U>Definitions.</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. <U>PIP Period.</U> For purposes of this Agreement, &#147;PIP Period&#148; shall mean the period
commencing on the date an Executive becomes subject to a Performance Improvement Plan (&#147;PIP&#148;), and
ending after sixty continuous days of employment with InterMune, Inc. following the removal of that
PIP.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. <U>Cause.</U> For purposes of this Agreement, &#147;Cause&#148; shall mean any of the following:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Willful refusal to follow lawful and reasonable corporate policy or a
directive made by the CEO; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Willful failure to assist in Orderly Transition of Duties; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Willful failure, gross neglect or refusal to perform duties; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Failure to adequately perform job duties while on a PIP or to accomplish
removal of a PIP within a reasonable timeframe specified by the CEO; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Willful act that materially injures the reputation or business of the
Company; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Willful breach of confidentiality that has a material adverse affect on the
Company; or</TD>
</TR>

</TABLE>
</DIV>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Fraud or embezzlement; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Indictment for criminal activity.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. <U>Orderly Transition of Duties.</U> For purposes of this Agreement, &#147;Orderly Transition
of Duties&#148; shall mean that Executive has given to the Chief Executive Officer of InterMune, Inc.
(the &#147;CEO&#148;) at least three (3)&nbsp;months advance notice of voluntary termination of employment and has
performed, to the satisfaction of the CEO, in the CEO&#146;s sole discretion, the duties reasonably
expected of a departing executive, including but not limited to the following:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Executive shall assist with the identification and recruitment of a
qualified consultant or contractor to fill Executive&#146;s position during
recruitment of a replacement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Executive shall cooperate with InterMune, Inc. in the recruitment of a
replacement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Executive shall complete specific tasks as reasonably assigned by InterMune,
Inc. to assist in transition to the consultant, contractor or replacement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Executive shall conduct himself or herself in a professional and productive
manner during the transition period.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. <U>Remaining Unearned Retention Payments.</U> For purposes of this Agreement, &#147;Remaining
Unearned Retention Payments&#148; shall mean any Retention Payments not yet earned because the date
associated with the Retention Payment has not occurred as of the date of the relevant date of
determination.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. <U>Change in Control.</U> For purposes of this Agreement, &#147;Change in Control&#148; shall mean
any of the following:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A sale or other disposition of all or substantially all of the securities or
assets of the Company; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A merger or consolidation in which the Company is not the surviving
corporation and which results in a change in the majority ownership of
InterMune, Inc., or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="5%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A reverse merger in which the Company is the surviving corporation but the
shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, and which results in a change in the majority
ownership of InterMune, Inc.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. <U>Good Reason.</U> For purposes of this Agreement, &#147;Good Reason&#148; shall mean either: (a)
a material diminution in Executive&#146;s duties, title or compensation following a Change in Control;
or (b)&nbsp;a requirement that Executive relocate more than fifty (50)&nbsp;miles from Company&#146;s Home Office
location following a Change in Control.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. <U>Company&#146;s Home Office.</U> The Company&#146;s Home Office location is 3280 or 3260 Bayshore
Boulevard, Brisbane, California 94005.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<U>General Provisions.</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. <U>Amendments</U>. No amendment or modification of this Agreement shall be effective
unless made in writing and signed by the parties to this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. <U>No Waiver</U>. No term or condition of this Agreement shall be deemed to have been
waived, except by a statement in writing signed by the party against whom enforcement of the waiver
is sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated,
shall operate only as to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that specifically waived.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. <U>Counterparts</U>. This Agreement may be executed in any number of counterparts, and
such counterparts executed and delivered, each as an original, shall constitute one and the same
instrument.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. <U>Severability</U>. To the extent that any portion of any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted and the remainder of such
provision and of this Agreement shall be unaffected and shall continue in full force and effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. <U>Captions and Headings</U>. The captions and paragraph headings used in this Agreement
are for convenience of reference only and shall not affect the construction or interpretation of
this Agreement or any of its provisions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. <U>Notices</U>. All notices, requests, demands and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have been duly given (i)
upon receipt, if delivered personally or via courier, (ii)&nbsp;upon confirmation of receipt, if given
by facsimile provided that another copy is sent by another means permitted by this subsection
within two (2)&nbsp;business days thereafter, and (iii)&nbsp;on the third business day following mailing, if
mailed first-class, postage prepaid, registered or certified mail as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">If to Company to:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">InterMune, Inc.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Robin Steele</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">General Counsel</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3280 Bayshore Boulevard</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Brisbane, CA 94005</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">If to Employee to:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">John Hodgman</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">14737 Eastview Drive</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Los Gatos, CA 95032</TD>
</TR>
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</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Any party may designate another address or person for receipt of notices by giving notice of such
designation in accordance with this subsection.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. <U>Governing Law</U>. The parties agree that this Agreement will be governed by the laws
of the State of California.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. <U>Entire Agreement</U>. This Agreement contains the entire agreement of the parties
relating to Retention Payments and supersedes any and all prior verbal or written agreements and
understandings on the subject. This Agreement is intended to apply only to the Retention Payments,
and is not intended to modify or supersede any unrelated written agreement Executive may have with
InterMune, Inc., including but not limited to Executive&#146;s Offer Letter, Amendment to Offer Letter
Re Severance Pay and Change in Control, and Stock Option Agreements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <U>Section&nbsp;409A.</U> This Agreement is not intended to provide for any deferral of
compensation subject to Section&nbsp;409A of the Internal Revenue Code of 1986 as amended (the &#147;Code&#148;)
and, accordingly, the benefits provided pursuant to this Agreement are intended to be paid not
later than the later of: (i)&nbsp;the fifteenth day of the third month following Executive&#146;s first
taxable year in which such benefit is no longer subject to a substantial risk of forfeiture, and
(ii)&nbsp;the fifteenth day of the third month following the first taxable year of InterMune, Inc. in
which such benefit is no longer subject to a substantial risk of forfeiture, as determined in
accordance with Section&nbsp;409A of the Code and any Treasury Regulations and other guidance issued
thereunder. The date determined under this subsection is referred to as the &#147;Short-Term Deferral
Date.&#148; Notwithstanding anything to the contrary herein, in the event that any benefits provided
pursuant to this Agreement are not actually or constructively received by Executive on or before
the Short-Term Deferral Date, to the extent such benefit constitutes a deferral of compensation
subject to Section&nbsp;409A of the Code, then if Executive is a &#147;specified employee,&#148; as defined in
Section&nbsp;409A(a)(2)(B)(i) of the Code, with respect to InterMune, Inc. and its affiliates, and as
necessary to avoid the imposition of adverse tax consequences to Executive under Section&nbsp;409A of
the Code, such benefit shall be paid upon the date which is six months after the date of
Executive&#146;s &#147;separation from service&#148; (as defined in Section&nbsp;409A of the Code and any Treasury
Regulations and other guidance issued thereunder), or, if earlier, the date of Executive&#146;s death.
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By their signatures below, InterMune, Inc. and Executive agree to and accept the above terms
and conditions.
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<DIV align="left" style="font-size: 10pt; margin-top: 12pt">InterMune, Inc.
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By
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    <TD align="left" valign="top">/s/ Daniel&nbsp;G. Welch&nbsp;</TD>
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    <TD align="left" valign="top">5/24/07&nbsp;</TD>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Executive</DIV></TD>
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    <TD align="left" valign="top">/s/ John Hodgman&nbsp;</TD>
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    <TD align="left" valign="top">Dated:</TD>
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    <TD align="left" valign="top">5/24/07&nbsp;</TD>
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