Exhibit 10.112
CIVIL, SETTLEMENT AGREEMENT
I. PARTIES
This Settlement Agreement ("Agreement") is entered into by and between the
United States of America, acting through the United States Department of Justice
and the United States Attorney's Office for the Northern District of California,
on behalf of the Office of Inspector General ("OIG-HHS") of the United States
Department of Health and Human Services ("HHS"); the United States Office of
Personnel Management ("OPM"); the United States Department of Defense TRICARE
Management Activity ("TMA"); the United States Department of Defense, Defense
Logistics Agency ("DLA"), on behalf of the Defense Supply Center- Philadelphia
("DSCP") (collectively "the United States"); InterMune, Inc. ("InterMune"), a
Delaware corporation with its principal place of business in Brisbane,
California; and Joan Gallagher ("Relator") (hereafter referred to as "the
Parties"), through their authorized representatives.
II. PREAMBLE
As a preamble to this Agreement, the Parties agree to the following:
A. WHEREAS, at all relevant times, InterMune distributed, marketed and sold
pharmaceutical products in the United States, including a drug it sold under
the trade name Actimmune®;
B. WHEREAS, on or about July 9, 2004, Relator Joan Gallagher filed a qui tam
action in the United States District Court for the Eastern District of
Pennsylvania, captioned United States of America ex rel. Joan Gallagher v.
InterMune, Inc., Civil Action No. 04 CV 3249 (E.D. Pa.). On October 7, 2004,
the qui tam action was transferred to the United States District Court for
the Northern District of California ("Court"), now captioned United States
of America ex rel. Joan Gallagher v. InterMune, Inc., C 04-4323 MHP (N.D.
Cal.)(the "Civil Action");
C. WHEREAS InterMune has agreed to enter into a Deferred Prosecution Agreement
("DPA") with the United States Attorney for the Northern District of
California. The United States has filed an Information in the United States
District Court for the Northern District of California (the "Court")
charging InterMune with One Count of doing an act, with intent to defraud or
mislead, with respect to a drug while the drug was held for sale after
shipment in interstate commerce that results in the drug being misbranded,
in violation of Title 2 1, United States Code, Section 33 1(k) (the
"Information");
D. WHEREAS, the United States and InterMune will file with the Court the DPA,
which states that the Department of Justice will recommend to the Court that
prosecution of InterMune for the conduct charged in the Information be
deferred for a period of 2 years from the date the Court approves the DPA
and that the Department of Justice will seek dismissal with release of the
Information thereafter if InterMune is in compliance with all of its
obligations under the DPA;
E. WHEREAS, InterMune has entered into or will be entering into separate
settlement agreements ("Medicaid State Settlement Agreements") with the
states which will be receiving settlement funds from InterMune pursuant to
Paragraph 1(c) below for the Covered Conduct described in Paragraph G below
(hereinafter referred to as the "Medicaid Participating States");
F. WHEREAS, the United States and the Medicaid Participating States allege that
InterMune caused to be submitted claims for payment for Actimmune to
Medicaid Programs, established pursuant to or in connection with Title XIX
of the Social Security Act ("Act"), 42 U.S.C. §§ 1396-1396y (the "Medicaid
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Program"); and the United States further alleges that InterMune caused to be
submitted claims for payment of Actimmune to the Medicare Program, 42 U.S.C.
§§ 1395-1395hhh, TRICARE Program (formerly known as the Civilian Health and
Medical Program of the Uniformed Services ("CHAMPUS")), 10 U.S.C. §§
l071-1110, which is administered by the Department of Defense through TMA,
and to the Federal Employees Health Benefits Program ("FEHBP"), 5 U.S.C. §§
8901-8914, and that InterMune caused purchases of Actimmune by the
Department of Veterans Affairs ("DVA") and DSCP;
G. WHEREAS, the United States contends that it has claims under the False
Claims Act, 31 U.S.C. §§ 3729-3733, and that it and the Medicaid
Participating States (hereinafter collectively referred to as the
"Government") have certain other civil claims against InterMune for
allegedly engaging in the following conduct with respect to the marketing,
promotion and sale of Actimmune:
(i) The Government contends that between January 1, 2001 and June 30, 2003,
InterMune knowingly and willfully promoted the sale and use of Actimmune for the
treatment of idiopathic pulmonary fibrosis ("IPF"), a use for which Actimmune
had not been approved by the United States Food and Drug Administration ("FDA"),
and knowingly caused the submission of claims to the Government as described in
subparagraph (v) below. Actimmune has only been approved by the FDA to treat two
rare diseases, chronic granulomatous disease and severe, malignant
osteopetrosis;
(ii) The Government contends that notwithstanding the fact that InterMune's
Phase 111 clinical trial of Actimmune for the treatment of IPF failed to
establish statistically significant benefits on its primary endpoint or any of
its secondary endpoints, including overall
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survival, certain former InterMune employees encouraged InterMune sales force
personnel to inform physicians that Actimmune demonstrated a survival benefit in
mild to moderate IPF patient populations, and certain former sales force
personnel did so;
(iii) The Government contends that InterMune's promotion of Actimmune for
IPF violated the Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 331(a) & (d);
(iv) The Government contends that the use of Actimmune for IPF was not a
"medically accepted indication" pursuant to 42 U.S.C. § 1396r-8(k)(6);
(v) The Government further contends that the conduct described in the
foregoing subparagraphs (i) through (iv) resulted in claims for Actimmune being
submitted to the Medicaid, Medicare, FEHBP and TRICARE Programs, and in DVA and
DSCP purchasing Actimmune for dispensing to patients for an unapproved
indication, between January 1, 2001 and June 30, 2005, in violation of the False
Claims Act, 31 U.S.C. §§ 3729-3733.
InterMune's conduct as described in the Civil Action, the DPA and in Preamble
Paragraph G of this Agreement is hereafter referred to as the "Covered Conduct."
H. WHEREAS, the United States also contends that it has certain administrative
claims against InterMune for engaging in the Covered Conduct, as specified
in Paragraphs 5-8 below;
I. WHEREAS, the United States and the Relator have reached an agreement with
respect to the Relator's claim of entitlement under 31 U.S.C. § 3730(d) to a
share of the proceeds of this Agreement;
J. WHEREAS, the Relator and InterMune have reached an agreement with respect to
the Relator's claim of entitlement under 31 U.S.C. § 3730(d) to attorneys'
fees and costs;
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K. WHEREAS, this Agreement is neither an admission of facts or liability by
InterMune (with the exception of such admissions as InterMune makes in
connection with the DPA referenced in Paragraph C above and accepted by the
Court) nor a concession by the Government that its claims are not well
founded; and
L. WHEREAS, to avoid the delay, expense, inconvenience and uncertainty of
protracted litigation of these claims, the Parties mutually desire to reach
a full and final settlement as set forth in this Agreement.
III. TERMS AND CONDITIONS
NOW, THEREFORE, in reliance on the representations contained herein and in
consideration of the mutual promises, covenants, and obligations in this
Agreement, and for good and valuable consideration, receipt of which is hereby
acknowledged, the Parties agree as follows:
1. InterMune shall pay to the United States and the Medicaid Participating
States, collectively, the sum of thirty-six million, nine hundred forty-four
thousand, forty-three dollars ($36,944,043), plus any interest that may have
accrued between November 1, 2006 and the Effective Date of this Agreement at a
rate of 5% per annum ("Settlement Amount"). On the Effective Date of this
Agreement, as defined in paragraph 32 herein, this sum shall constitute a debt
due and immediately owing to the United States and the Participating States.
InterMune shall discharge its debt to the United States and the Medicaid
Participating States under the following terns and conditions:
a. InterMune shall pay to the United States the principal sum of
$30,249,229 (the "Federal Settlement Amount"). InterMune shall pay the Federal
Settlement Amount, plus
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interest accrued thereon at the rate of 5% per annum, in accordance with the
payment schedule attached hereto as Exhibit A ("Payment Schedule"). Within
10 days after the Effective Date of this Agreement, InterMune shall pay the
United States the initial fixed payment in the amount of $4,093,925 ("Initial
Payment"), plus any interest that may have accrued between November 1, 2006 and
the Effective Date, and thereafter make principal payments with interest
according to the schedule in Exhibit A.
b. All payments set forth in this Paragraph l(a) shall be made to the
United States by electronic funds transfer pursuant to written instructions
provided by the Office of the United States Attorney for the Northern District
of California. The entire principal balance of the Federal Settlement Amount or
any portion thereof, plus any interest accrued on the principal as of the date
of any prepayment, may be prepaid without penalty.
c. InterMune shall pay to the Medicaid Participating States the sum of
$6,694,814 ("Medicaid State Settlement Amount"). InterMune shall pay the
Medicaid State Settlement Amount, plus interest accrued thereon at the rate of
5% per annum, in accordance with the Payment Schedule found at Exhibit A. Within
10 days after the Effective Date of this Agreement, InterMune shall set aside
$906,075, plus any interest that may have accrued between November 1, 2006 and
the Effective Date, into an interest-bearing account of its own choosing
("deposit account") as agreed upon between InterMune and the National
Association of Medicaid Fraud Control Units Settlement Team (the "NAMFCU Team")
and, upon reaching agreements with, and obtaining release from each of the
Medicaid Participating States and receipt of written payment instructions from
the NAMFCU Team, shall pay the State Settlement Amount plus any additional
interest earned in the deposit account as directed by each settling Medicaid
Participating State. Upon reaching final agreements with, and obtaining release
from
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the Medicaid Participating States, InterMune shall thereafter make fixed pro
rata payments according to the schedule in Exhibit A and as directed by each
settling Medicaid Participating State. The entire principal balance of the
Medicaid State Settlement Amount or any portion thereof, plus any interest
accrued on the principal as of the date of any prepayment, may be prepaid
without penalty.
d. InterMune shall pay attorneys' fees to the Relator in the amount of
$40,000. This amount shall be paid as an electronic funds transfer to the
Relator's attorney (to be allocated in accordance with their instructions) no
later than seven (7) business days after the stipulations of dismissal are filed
as set forth in Paragraph 13.
2. If the Court does not accept the DPA as described in Preamble Paragraph D
or refuses to impose the agreed upon disposition for whatever reason, this
Agreement shall be null and void at the option of either the United States or
InterMune. If either the United States or InterMune exercises this option, which
option shall be exercised by notifying all Parties, through counsel, in writing
within ten (10) business days of the Court's decision, the Parties will not
object to the voiding of this Agreement and the Agreement will be deemed
rescinded. If this Agreement is rescinded, InterMune will not plead, argue or
otherwise raise any defenses under the theories of statute of limitations,
laches, estoppel or similar theories, to any such civil or administrative
claims, actions or proceedings relating to the Covered Conduct which are brought
by the United States within 90 calendar days of notification to all other
Parties of that rescission, except to the extent such defenses were available
before the Effective Date of this Agreement.
3. Subject to the exceptions in Paragraphs 4, 5, 6, 7 and 8, in consideration
of the obligations of InterMune set forth in this Agreement, conditioned upon
InterMune's payment in full of the Settlement Amount, subject to Paragraph 20
below (concerning bankruptcy
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proceedings commenced within 91 days of the Effective Date of this Agreement, as
defined below), and subject to the Court's approval of the DPA described in
Preamble Paragraph D, the United States, on behalf of itself, and its officers,
agents, agencies, and departments, as set forth above, hereby fully and finally
releases InterMune, its predecessors, subsidiaries, corporate parents and
affiliates, successors and assigns, and current or former officers, directors,
and employees, except as excluded in Paragraph 4, below, from any civil or
administrative monetary claim that the United States has against InterMune under
the False Claims Act, 3 1 U.S.C. §§ 3729-3733; the Program Fraud Civil Remedies
Act, 31 U.S.C. §§ 3801-38 12; the Civil Monetary Penalties Law, 42 U.S.C. §
1320a-7a; any statutory provision applicable to the federally-funded programs in
this Agreement for which the Civil Division, United States Department of
Justice, has actual and present authority to assert and compromise pursuant to
28 C.F.R. Part 0, Subpart I, § 0.45(d); and common law claims for fraud, payment
by mistake, unjust enrichment or disgorgement for the Covered Conduct.
4. Notwithstanding any term of this Agreement, the United States specifically
does not herein release any person or entity from any of the following claims or
liabilities: (a) any potential criminal, civil or administrative claims arising
under Title 26, U.S. Code (Internal Revenue Code); (b) any criminal liability;
(c) any potential liability to the United States (or any agencies thereof) for
any conduct other than the Covered Conduct; (d) any claims based upon
obligations created by this Agreement; (e) except as explicitly stated in
Paragraphs 5, 6, 7 and 8 of this Agreement, any administrative liability,
including mandatory exclusion from Federal health care programs; (f) any express
or implied warranty claims or other claims for defective or deficient products
and services; (g) any claims for personal injury or property damage or for other
consequential damages arising from the Covered Conduct; (h) any claim based on a
failure
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to deliver items or services due; or (i) any civil or administrative claims
against individuals, including current and former directors, officers, and
employees of InterMune, its predecessors, subsidiaries, and its corporate parent
and affiliates, who, related to the Covered Conduct, receive written
notification that they are the target of a criminal investigation, are
criminally indicted or charged, or are convicted, or who enter into a criminal
plea agreement.
5. In consideration of the obligations of InterMune set forth in this
Agreement and in the Corporate Integrity Agreement ("CIA"), conditioned upon
InterMune's payment in full of the Settlement Amount, and subject to
Paragraph 20 below (concerning bankruptcy proceedings commenced within 91 days
of the effective date of this Agreement), the OIG-HHS agrees to release and
refrain from instituting, directing, or maintaining any administrative action
seeking exclusion against InterMune from Medicare, Medicaid or other Federal
health care programs (as defined in 42 U.S.C. § 1320a-7b(f)) under 42 U.S.C. §
1320a-7a (Civil Monetary Penalties Law), or 42 U.S.C. §§ 1320a-7(b)(7)
(permissive exclusion for fraud, kickbacks, and other prohibited activities),
for the Covered Conduct except as reserved in Paragraph 4 above, and as reserved
in this Paragraph. The OIG-HHS expressly reserves all rights to comply with any
statutory obligations to exclude InterMune from the Medicare, Medicaid, or other
Federal health care programs under 42 U.S.C. § 1320a-7(a) (mandatory exclusion)
based upon the Covered Conduct. Nothing in this Paragraph precludes the OIG-HHS
from taking action against entities or persons, or for conduct and practices,
for which claims have been reserved in Paragraph 4, above. InterMune will
immediately begin implementing its obligations under the CIA upon execution of
this Agreement.
6. In consideration of the obligations of InterMune set forth in this
Agreement, conditioned upon InterMune's full payment of the Settlement Amount,
and subject to Paragraph
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20 below (concerning bankruptcy proceedings commenced within 91 days of the
effective date of this Agreement or any payment under this Agreement), TMA
agrees to release and refrain from instituting, directing, or maintaining any
administrative action seeking exclusion or suspension from the TRICARE Program
against InterMune and its predecessors, subsidiaries, corporate parents,
affiliates, successors and assigns, or its current directors, officers or
employees under 32 C.F.R. § 199.9 for the Covered Conduct, except as reserved in
Paragraph 4 above, and as reserved in this Paragraph. TMA expressly reserves its
authority to exclude InterMune under 32 C.F.R. § 199.9 (f)(l)(i)(A),
(f)(l)(i)(B), and (f)(l)(iii), based upon the Covered Conduct. Nothing in this
Paragraph precludes TMA or the TRICARE Program from taking action against
entities or persons, or for conduct and practices, for which claims have been
reserved in Paragraph 4, above.
7. In consideration of the obligations of InterMune in this Agreement,
conditioned upon InterMune's full payment of the Settlement Amount, and subject
to Paragraph 20 below (concerning bankruptcy proceedings commenced within
91 days of the Effective Date of this Agreement or any payment under this
Agreement), OPM agrees to release and refrain from instituting, directing, or
maintaining any administrative action seeking debarment from FEHBP against
InterMune and its predecessors, subsidiaries, corporate parents, affiliates,
successors and assigns, or its current directors, officers or employees under 5
U.S.C. § 8902a or 5 C.F.R. Part 970 for the Covered Conduct, except as reserved
in Paragraph 4, above. OPM expressly reserves all rights to comply with any
statutory obligations to debar InterMune from the FEHBP under 5 U.S.C. §
8902a(b) (mandatory debarment) based upon the Covered Conduct. Nothing in this
Paragraph precludes OPM from taking action against entities or persons, or for
conduct and practices, for which claims have been reserved in Paragraph 4,
above.
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8. In consideration of the obligations of InterMune set forth in this
Agreement, conditioned upon InterMune's full payment of the Settlement Amount,
and subject to Paragraph 20 below (concerning bankruptcy proceedings commenced
within 91 days of the effective date of this Agreement or any payment under this
Agreement), DSCP/DLA agrees to defer to the OIG-HHS for any contractor integrity
issues arising from this settlement and the Covered Conduct. Nothing in this
Paragraph precludes DLA from taking action against entities or persons, or for
conduct and practices, for which claims have been reserved in Paragraph 4,
above.
9. Relator and her heirs, successors, attorneys, agents, and assigns agree
not to object to this Agreement and agree and confirm that settlement of this
Civil Action, and the payment schedule set forth in Exhibit A, is fair, adequate
and reasonable under all the circumstances, agree not to challenge this
Agreement pursuant to 31 U.S.C. § 3730(c)(2)(B), and expressly waive the
opportunity for a hearing on any objection to this Agreement pursuant to 31
U.S.C. § 3730(c)(2)(B).
10. Upon her receipt of the pro rata share of the Initial Payment, the
Relator, individually, and for her heirs, successors, agents and assigns, fully
and finally releases, waives, and forever discharges the United States, its
agencies (including, but not limited to, the OIG-HHS, TMA, OPM, DVA, and DLA),
employees, servants, and agents from any claims arising from or relating to 31
U.S.C. § 3730 from any claims arising from the filing of the qui tam civil
action, and from any other claims for a share of the Federal Settlement Amount,
and in full settlement of any claims Relator may have under this Agreement. This
Agreement does not resolve or in any manner affect any claims the United States
has or may have against the Relator
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arising under Title 26, U.S. Code (Internal Revenue Code), or any claims arising
under this Agreement.
11. The United States agrees to pay the Relator $5,748,160 as her share of
the proceeds pursuant to 31 U.S.C. § 3730(d)(the "Relator's Share"). The United
States will pay the Relator her pro rata share of each payment that InterMune
pays the United States under the Payment Schedule set forth in Exhibit A. The
United States will pay the Relator her pro rata share within 21 days of the
United States' receipt of each payment from InterMune. The Relator expressly
understands and agrees that the United States is only liable to the Relator for
funds actually received or collected by the United States.
12. Conditioned upon InterMune's full payment of the Settlement Amount, the
Relator, individually, and for her heirs, successors, agents and assigns, fully
and finally releases, waives, and forever discharges InterMune, its
predecessors, subsidiaries, corporate parents and affiliates, successors and
assigns, and current or former officers, directors, and employees, from any
claims that the Relator has or may have that arises under or relates to any of
the allegations in the Civil Action and/or the Covered Conduct, including claims
for attorney's fees, expense and costs pursuant to 31 U.S.C. § 3730(d). The
Relator hereby represents and warrants that no other individual is entitled to
assert any matter released in this paragraph in or through the Relator's right.
13. Upon execution of this Agreement by all parties, the United States will
file a notice of intervention in the qui tam action and advise the Court that
the parties have reached a civil settlement. Upon receipt of the full payments
described in Paragraph l(a) and (c) above and in Exhibit A, the United States
and Relator shall promptly sign and file in the Civil Action a
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Joint Stipulation of Dismissal with prejudice of the Civil Action pursuant to
the terms of the Agreement.
14. In consideration of the obligations of the United States set forth in
this Agreement, InterMune and its predecessors, subsidiaries, corporate parents
and affiliates fully and finally release the United States, its agencies
(including, but not limited to, HHS, TMA, OPM and DVA), employees, servants, and
agents from any claims (including attorneys' fees, costs, and expenses of every
kind and however denominated) which they have asserted, could have asserted, or
may assert in the future against the United States, its agencies, employees,
servants, and agents, related to or arising from the United States' criminal and
civil investigations of the Civil Action and the Covered Conduct.
15. In consideration of the obligations of the Relator set forth in this
Agreement, InterMune, and its predecessors, subsidiaries, corporate parents and
affiliates, and all of their agents, successors and assigns, hereby fully and
finally release the Relator and her respective heirs, successors, assigns,
agents and attorneys from any claims they have asserted, could have asserted, or
may assert in the future against the Relator arising from the filing of the
Civil Action and the United States' criminal and civil investigations of the
Civil Action and the Covered Conduct.
16. The Settlement Amount shall not be decreased as a result of the denial of
claims for payment now being withheld from payment by any Federal or State
payer, related to the Covered Conduct; and InterMune shall not resubmit to any
Federal or State payer any previously denied claims related to the Covered
Conduct, and shall not appeal any such denials of claims.
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17. InterMune agrees to the following:
a. Unallowable Costs Defined: that all costs (as defined in the Federal
Acquisition Regulations (FAR) 48 C.F.R. § 31.205-47 and in Titles XVIII and XIX
of the Social Security Act, 42 U.S.C. §§ 1395-1395hhh and 1396-1396y, and the
regulations and official program directives promulgated thereunder) incurred by
or on behalf on InterMune, its present or former officers, directors, employees,
shareholders, and agents in connection with: (1) the matters covered by this
Agreement and the related DPA; (2) the United States' civil and criminal
investigation of the matters covered by this Agreement; (3) InterMune's
investigation, defense, and any corrective actions undertaken in direct response
to the United States' civil and criminal investigations in connection with the
matters covered by this Agreement (including attorneys' fees); (4) the
negotiation and performance of this Agreement, the DPA, and the Medicaid State
Settlement Agreement, (5) the payments made to the United States or any State
pursuant to this Agreement, the DPA, or the Medicaid State Settlement Agreement
and any payments that InterMune may make to Relator; (6) the negotiation of, and
the obligations undertaken pursuant to the CIA, including to (i) retain an
independent review organization to perform annual reviews as described in
Section III.D of the CIA; and (ii) prepare and submit reports to the OIG-HHS,
are unallowable costs on Government contracts with DVA, DLA and other agencies
and under the Medicare Program, Medicaid Program, TRICARE Program, and FEHBP.
However, nothing in this Paragraph affects the status of costs that are not
allowable based on any other authority applicable to InterMune. (All costs
described or set forth in this Paragraph 17(a) are hereafter, "unallowable
costs").
b. Future Treatment of Unallowable Costs: If applicable, these unallowable
costs will be separately estimated and accounted for by InterMune, and it will
not charge such
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unallowable costs directly or indirectly to any contracts with the United States
or any State Medicaid Program, or seek payment for such unallowable costs
through any cost report, cost statement, information statement, or payment
request submitted by them or any of their subsidiaries to Medicare, Medicaid,
TRICARE, FEHBP, DLA or DVA.
c. Treatment of Unallowable Costs Previously Submitted for Payment: If
applicable, InterMune further agrees that within 90 days of the Effective Date
of this Agreement, it will identify to applicable Medicare and TRICARE fiscal
intermediaries, carriers, and/or contractors, and Medicaid, DLA, DVA, and FEHBP
fiscal agents, any unallowable costs (as defined in this Paragraph) included in
payments previously sought from the United States, or any State Medicaid
Program, including, but not limited to, payments sought in any cost reports,
cost statements, information reports, or payment requests already submitted by
InterMune or any of its subsidiaries, and will request, and agree, that such
cost reports, cost statements, information reports, or payment requests, even if
already settled, be adjusted to account for the effect of the inclusion of the
unallowable costs. InterMune agrees that the United States, at a minimum, will
be entitled to recoup from InterMune any overpayment plus applicable interest as
a result of the inclusion of such unallowable costs on previously-submitted cost
reports, information reports, cost statements, or requests for payment. Any
payment due after the adjustments have been made shall be paid to the United
States pursuant to the direction of the Department of Justice, and/or the
affected agencies. The United States reserves its rights to disagree with any
calculations submitted by InterMune or any of its subsidiaries on the effect of
inclusion of unallowable costs (as defined in this Paragraph) on InterMune's or
any of its subsidiaries' cost reports, cost statements, or information reports.
Nothing in this Agreement shall constitute a
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waiver of the rights of the United States to examine or reexamine the
unallowable costs described in this Paragraph.
18. InterMune agrees that it will not seek payment for any of the health care
billings covered by this Agreement from any health care beneficiaries or their
parents or sponsors. InterMune waives any causes of action against these
beneficiaries or their parents or sponsors based upon the claims for payment
covered by this Agreement.
19. InterMune expressly warrants that it has reviewed its financial situation
and that it is currently solvent within the meaning of 11 U.S.C. §§ 547(b)(3)
and 548(a)(l)(B)(ii)(I), and expects to remain solvent following the payments to
the United States hereunder. Further, the Parties expressly warrant that, in
evaluating whether to execute this Agreement, the Parties (a) have intended that
the mutual promises, covenants and obligations set forth herein constitute a
contemporaneous exchange for new value given to InterMune, within the meaning of
11 U.S.C. § 547(c)(l), and (b) have concluded that these mutual promises,
covenants and obligations do, in fact, constitute such a contemporaneous
exchange.
20. In the event InterMune or any other party commences, within 91 days of
the Effective Date of this Agreement (defined below), or of any payment made
hereunder, any case, proceeding, or other action under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, (a) seeking to have
any order for relief of InterMune's debts, or seeking to adjudicate InterMune as
bankrupt or insolvent, or (b) seeking appointment of a receiver, trustee,
custodian or other similar official for InterMune for all or any substantial
part of its assets, InterMune agrees as follows:
a. InterMune's obligations under this Agreement may not be avoided pursuant
to 11 U.S.C. § 547 or 548, and InterMune will not argue or otherwise take the
position
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in any such case, proceeding or action that: (i) InterMune's obligations under
this Agreement may be avoided under 11 U.S.C. § 547 or 548; (ii) InterMune was
insolvent at the time this Agreement was entered into, or became insolvent as a
result of the payment made to the United States hereunder; or (iii) the mutual
promises, covenants and obligations set forth in this Agreement do not
constitute a contemporaneous exchange for new value given to InterMune;
b. In the event that InterMune's obligations hereunder are avoided for any
reason, including, but not limited to, the exercise of a trustee's avoidance
powers under the Bankruptcy Code, the United States, at its sole option, may
rescind the releases in this Agreement, and bring any civil and/or
administrative claim, action or proceeding against InterMune for the claims that
would otherwise be covered by the releases provided in this Agreement. If the
United States chooses to do so, InterMune agrees that, for purposes only of any
case, action, or proceeding referenced in the first clause of this Paragraph,
(i) any such claims, actions or proceedings brought by the United States
(including any proceedings to exclude InterMune from participation in Medicare,
Medicaid, or other Federal Health Care programs) are not subject to an
"automatic stay" pursuant to 11 U.S.C. Section 362(a) as a result of the action,
case or proceeding described in the first clause of this Paragraph, and that
InterMune will not argue or otherwise contend that the United States' claims,
actions or proceedings are subject to an automatic stay; (ii) that InterMune
will not plead, argue or otherwise raise any defenses under the theories of
statute of limitations, laches, estoppel or similar theories, to any such civil
or administrative claims, actions or proceedings which are brought by the United
States within 30 calendar days of written notification to InterMune that the
releases herein have been rescinded pursuant to this Paragraph, except to the
extent such defenses were available before the Effective Data of this Agreement;
and (iii) the United States
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and the Participating States have valid claims against InterMune in at least the
aggregate amount of the Settlement Amount and they may pursue their claims,
inter alia, in the case, action or proceeding referenced in the first clause of
this Paragraph, as well as in any other case, action, or proceeding; and
c. InterMune acknowledges that its agreement in this Paragraph is provided
in exchange for valuable consideration provided in this Agreement.
21. In the event that InterMune fails to pay any and all of the payments owed
pursuant to this Agreement within 30 calendar days of the due date ("Default"),
any dismissals as to InterMune shall, at the United States' option, be null and
void, and the Settlement Amount referenced in Paragraph 1 above, less any
payments already made, shall become immediately due and payable and shall bear
interest at the Medicare interest rate (per 42 C.F.R. part 405.378) as of the
date of Default until payment of the Settlement Amount is made in full.
Furthermore, in the event of a breach of the payment provisions as described
in the preceding paragraph, the United States may at its option: 1) rescind its
releases; 2) offset the remaining unpaid balance of the Settlement Amount from
any amounts due and owing to InterMune by any department, agency, or agent of
the United States at the time of Default; 3) reinstitute an action or actions
against InterMune in this Court; and 4) InterMune agrees not to contest any
draw, offset, or collection action undertaken by the United States pursuant to
this Paragraph, either administratively or in any court.
In the event of a Default of any payment under this Agreement, InterMune
agrees to pay the United States all reasonable costs of collection and
enforcement of this Agreement, including attorneys' fees and expenses. In the
event the United States reinstitutes an action under this Paragraph, InterMune
expressly agrees not to plead, argue, or otherwise raise any defense under
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the theories of statute of limitations, laches, estoppel, or similar theories,
to any civil or administrative claims, which: (a) are filed by the United States
within 30 calendar days of written notification to InterMune that this Agreement
has been made a nullity, and (b) relates to the Covered Conduct, except to the
extent these defenses were available on September 4, 2006.
22. In the event of Default as defined in Paragraph 21 above, OIG-HHS may
exclude InterMune from participating in all Federal health care programs until
InterMune pays the Settlement Amount and reasonable costs as set forth in
Paragraphs 1 and 21 above. OIG- HHS will provide written notice of any such
exclusion to InterMune. InterMune waives any further notice of the exclusion
under 42 U.S.C. § 1320a-7(b)(7), and agrees not to contest such exclusion either
administratively or in any state or federal court. Reinstatement to program
participation is not automatic. If at the end of the period of exclusion
InterMune wishes to apply for reinstatement, InterMune must submit a written
request for reinstatement to the OIG in accordance with the provisions of 42
C.F.R. §§ 1001.3001-.3005. InterMune will not be reinstated unless and until the
OIG approves such request for reinstatement.
23. InterMune has provided financial statements to the United States and the
United States has relied on the accuracy and completeness of these financial
statements in reaching this Agreement. If the United States learns that the
historical financial statements contained in InterMune SEC filings made between
May 2005, and the Effective Date, either (a) failed to disclose a material
non-contingent asset or assets in which InterMune had an interest (a "Material
Nondisclosure"); or (b) contained any other knowing, material misrepresentation
or omission regarding the financial condition of InterMune (a "Knowing Material
Misrepresentation"), the United States may at its option pursue relief under
this Paragraph 23 as follows: (a) the United States shall provide InterMune with
written notice of the nature of the Material Nondisclosure or
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Knowing Material Misrepresentation; (b) within ten (10) calendar days of the
date of the written notice, InterMune shall provide the United States, in
writing, with any explanation it may have regarding the Material Nondisclosure
or Knowing Material Misrepresentation referenced in the written notice; (c) if
unsatisfied with InterMune's explanation, as determined in its sole and absolute
discretion, the United States may file an action seeking relief under this
Paragraph 23 in which action the United States shall bear the burden of
establishing by a preponderance of the evidence the Material Nondisclosure or
Knowing Material Misrepresentation; (d) if the court finds a Material
Nondisclosure or Knowing Material Misrepresentation, then - (i) the Settlement
Amount shall be increased by one hundred percent (100%) of the amount of the
Material Nondisclosure or Knowing Material Misrepresentation; (ii) the remaining
unpaid principal portion of the Settlement Amount (including the increase
specified in subparagraph (d)(i) above) shall become accelerated and immediately
due and payable, with interest at a simple rate of 5% from the Effective Date of
this Agreement to the date of the court finding, and at the Medicare interest
rate (per 42 C.F.R. part 405.378) from the date of the court finding until the
date of payment; (iii) the United States may offset the remaining unpaid balance
of the Settlement Amount (inclusive of interest and the increase specified in
subparagraph (d)(i) above) from any amounts due and owing to InterMune by any
department, agency, or agent of the United States; and (iv) InterMune shall
immediately pay the United States all reasonable costs incurred in the action
seeking relief under this Paragraph 23, including attorney's fees and expenses.
24. If, after the Effective Date of this agreement and before the company has
made all payments required pursuant to Paragraph 1 of this Agreement, the
company obtains a cumulative total of more than $150,000,000.00 in cash
financing from (1) license fees and milestone payments paid to the company
pursuant to partnering agreements, (2) external debt financing,
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and/or (3) external equity financing, the company shall notify the United States
and apply twenty percent (20%) of the excess over $150,000,000.00 ("excess cash
amount") to make advance payments against the Settlement Amount. The company
shall make the advance payment(s) first by paying the outstanding principal owed
(plus any interest accrued on that principal through the advance payment date)
in 2011 and shall continue to make such advance payments in reverse
chronological order until the excess cash amount is reduced to zero. The payment
schedule referenced in Exhibit A shall remain in effect until the balance of the
Settlement Amount is paid off. Cash financing, for purposes of this paragraph,
is limited to the sources enumerated in the first sentence of this paragraph and
shall expressly exclude any increase in operating revenues after the Effective
Date or reimbursement of research or development expenses from a partner.
Advance payments made by the company pursuant to this paragraph shall not exceed
$10,000,000.00 in any single calendar year. Further, in the event InterMune is
sold (either through an asset sale or an equity sale) or merged into another
non-affiliated entity, then all remaining payments owed pursuant to the
Settlement Agreement, are accelerated and become immediately due and payable.
In addition to notifying the United States when it has obtained more than
$150,000,000 in cash financing, InterMune will be required to provide the United
States with notice within ten days of each financing arrangement or agreement
(agreement) it obtains after the Effective Date of the settlement after the
cumulative financing described in the preceding paragraph totals $150,000,000,
along with a copy of each such financing agreement. InterMune further agrees
that it shall pay the U.S. all amounts required under this provision within
10 days following receipt of external financing which causes a prepayment under
this paragraph. Amounts that are due under this paragraph and not paid when due
will be considered amounts in Default. Default
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amounts are subject to the Default provisions (except that Default will be
effective immediately and not within 30 days of the due date) contained in this
Settlement Agreement as specified in paragraph 21, including the Default rate of
interest at the Medicare interest rate (per 42 C.F.R. part 405.378) beginning as
of the date of Default until payment of the Settlement Amount is made in full.
25. InterMune waives and will not assert any defenses it may have to any
criminal prosecution or administrative action relating to the Covered Conduct
that may be based in whole or in part on a contention that, under the Double
Jeopardy Clause in the Fifth Amendment of the Constitution, or under the
Excessive Fines Clause in the Eighth Amendment of the Constitution, this
Agreement bars a remedy sought in such criminal prosecution or administrative
action.
26. The Parties each represent that this Agreement is freely and voluntarily
entered into without any degree of duress or compulsion whatsoever.
27. Except as otherwise stated herein, this Agreement is intended to be for
the benefit of the Parties only, and by this instrument the Parties do not
release any claims against any other person or entity.
28. Nothing in any provision of this Agreement constitutes an agreement by
the United States, InterMune or the Relator concerning the characterization of
the Settlement Amount or the relator's share for purposes of the Internal
Revenue Laws, Title 26 of the United States Code.
29. Except as expressly provided in this Agreement, each party to this
Agreement will bear its own legal and other costs incurred in connection with
this matter, including the preparation and performance of this Agreement.
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30. This Agreement is governed by the laws of the United States. The Parties
agree that the United States District Court for the Northern District of
California shall retain jurisdiction over this Agreement until all the terms and
conditions have been completely satisfied. The Parties agree that the exclusive
jurisdiction and venue for any dispute arising between and among the Parties
under this Agreement will be the United States District Court for the Northern
District of California, including any dispute regarding Relator's share of the
settlement, except that disputes arising under the CIA shall be resolved through
the dispute resolution provisions set forth in the CIA.
31. The undersigned InterMune signatories represent and warrant that they are
authorized by their Board of Directors to execute this Agreement. The
undersigned signatory or signatories for the Relator represents and warrants
that he is authorized to execute this Agreement on behalf of the Relator. The
undersigned United States signatories represent that they are signing this
Agreement in their official capacities and they are authorized to execute this
Agreement on behalf of the United States through their respective agencies and
departments, and, in the case of the OIG-HHS and TMA, on behalf of their
respective Departments.
32. This Agreement is effective on the later of (1) the date of signature of
the last signatory to the Agreement, or (2) the date the Court approves the DPA
as described in Preamble Paragraph D (the "Effective Date"). Facsimiles of
signatures shall constitute acceptable binding signatures for purposes of this
Agreement.
33. This Agreement shall be binding on all successors, transferees, heirs and
assigns of the Parties.
34. This Agreement and Exhibit A attached hereto, together with the CIA, and
the DPA described in Preamble Paragraphs C and D, constitute the complete
agreement between the
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Parties with regard to the Covered Conduct. This Agreement may not be amended
except by written consent of all the Parties, except that only InterMune and
OIG-HHS must agree in writing to a modification of the CIA, without the consent
of any other party to this Agreement or the DPA.
35. InterMune and the Relator hereby consent to the United States' disclosure
of this Agreement, and information about this Agreement, to the public.
36. This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which shall constitute one and the same
Agreement.
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UNITED STATES OF AMERICA
By: /s/ ALEX G. TSE
Dated:
ALEX G. TSE
Assistant United States Attorney
United States Attorney's Office
Northern District of Columbia
By: /s/ ANDY J. MAO
Dated:
ANDY J. MAO
Trial Attorney
Commercial Litigation Branch
Civil Division
United States Department of Justice
By: /s/ GREGORY E. DEMSKE
Dated:
GREGORY E. DEMSKE
Assistant Inspector General for Legal Affairs
Office of Counsel to the Inspector General
Office of Inspector General
U.S. Department of Health and Human Services
By: /s/ LAUREL C. GILLESPIE
Dated:
LAUREL C. GILLESPIE
Deputy General Counsel
TRICARE Management Activity
United States Department of Defense
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By: /s/ KATHLEEN McGETTIGAN
Dated:
KATHLEEN McGETTIGAN
Deputy Associate Director
Center for Retirement & Insurance Services
United States Office of Personnel Management
By: /s/ J. DAVID COPE
Dated:
J. DAVID COPE
Assistant Inspector General for Legal Affairs \
United States Office of Personnel Management
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By: /s/ LAUREL C. GILLESPIE
Dated:
LAUREL C. GILLESPIE
Deputy General Counsel
TRICARE Management Activity
United States Department of Defense
By: /s/ SUSAN CHADICK
Dated:
SUSAN CHADICK
Deputy General Counsel
Defense Logistics Agency
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INTERMUNE, INC.
By: /s/ ROBIN STEELE
Dated:
Robin Steele, General Counsel
InterMune, Inc.
By: /s/ ETHAN M. POSNER
Dated:
ETHAN M. POSNER
Covington & Burling LLP
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RELATOR
By: /s/ JOAN GALLAGHER
Dated:
JOAN GALLAGHER
By: /s/ JOHN A. BERANBAUM
Dated:
JOHN A. BERANBAUM
Beranbaum Menken Ben-Asher & Biermann LLP
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EXHIBIT A: PAYMENT SCHEDULE
TOTAL PAYMENT
Year Payment Interest at 5% Principal Balance
36,944,043.50
11/1/2006 5,000,000.00 - 5,000,000.00 31,944,043.50
11/1/2007 5,000,000.00 1,597,202.18 3,402,797.83 28,541,245.68
11/3/2008 6,500,000.00 1,427,062.28 5,072,937.72 23,468,307.96
11/2/2009 7,000,000.00 1,173,415.40 5,826,584.60 17,641,723.36
11/1/2010 9,000,000.00 882,086.17 8,117,913.83 9,523,809.52
11/1/2011 10,000,000.00 476,190.48 9,523,809.52 0.00
Total 42,500,000.00 36,944,043.50
PAYMENT TO THE UNITED STATES
Year Payment Interest at 5% Principal Balance
30,249,228.50
11/1/2006 4,093,924.98 - 4,093,924.98 26,155,303.52
11/1/2007 4,093,924.98 $ 1,307,765 2,786,159.80 23,369,143.72
11/3/2008 5,322,102.47 $ 1,168,457 4,153,645.29 19,215,498.43
11/2/2009 5,731,494.97 $ 960,775 4,770,720.05 14,444,778.38
11/1/2010 7,369,064.96 $ 722,239 6,646,826.04 7,797,952.34
11/1/2011 8,187,849.96 $ 389,898 7,797,952.34 0.00
Total 34,798,362.32 4,549,133.82 30,249,228.50
PAYMENT TO THE MEDICAID PARTICIPATING STATES
Year Payment Interest at 5% Principal Balance
6,694,815.00
11/1/2006 906,075.02 - 906,075.02 5,788,739.98
11/1/2007 906,075.02 $ 289,437 616,638.02 5,172,101.96
11/3/2008 1,177,897.53 $ 258,605 919,292.43 4,252,809.53
11/2/2009 1,268,505.03 $ 212,640 1,055,864.55 3,196,944.97
11/1/2010 1,630,935.04 $ 159,847 1,471,087.79 1,725,857.18
11/1/2011 1,812,150.04 $ 86,293 1,725,857.18 0.00
Total 7,701,637.68 1,006,822.68 6,694,815.00
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