In thousands, except shares data

Certain confidential information in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

RESTRUCTURING AGREEMENT

TABLE OF CONTENTS

RESTRUCTURING AGREEMENT

      AGREEMENT dated as of September 28, 2004 by and among Aradigm Corporation, a corporation duly organized and existing under the law of the State of California (“Aradigm”), Novo Nordisk A/S, a company duly organized and existing under the law of Denmark (“Novo Nordisk”) and Novo Nordisk Delivery Technologies, Inc., a corporation duly organized and existing under the law of the State of Delaware (“Novo Nordisk Delivery Technologies, Inc.”). Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article 1.

WITNESSETH:

      WHEREAS, Aradigm and Novo Nordisk desire to restructure their existing arrangements regarding, among other things, the development and commercialization of the Development Program (as such term is defined in the Amended and Restated License Agreement) as set forth in this Agreement; and

      WHEREAS, it is intended that the foregoing shall be effected on the terms and subject to the applicable conditions contained herein and in the other Transaction Agreements.

      NOW, THEREFORE, in consideration of the premises set forth above and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

      SECTION 1.01.     Definitions. (a) The following terms, as used herein, shall have the following meanings:

      “Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such other Person. For the purposes hereof “control” shall mean the power to direct or cause the direction of the management and the policies of any Person, whether through the ownership of a majority of the outstanding voting securities of such Person, by contract or otherwise.

      “Amended and Restated License Agreement” shall mean the Amended and Restated License Agreement, to be entered into as of the Closing, by and between Aradigm and Novo Nordisk, in the form attached hereto as Exhibit A.

      “Amended and Restated Stock Purchase Agreement” shall mean the Amended and Restated Stock Purchase Agreement, to be entered into as of the Closing, by and between Aradigm, Novo Nordisk and Novo Nordisk Pharmaceuticals, Inc., in the form attached hereto as Exhibit F.

      “Aradigm Balance Sheet” shall mean the unaudited balance sheet of Aradigm as of June 30, 2004.

      “Aradigm Balance Sheet Date” shall mean June 30, 2004.

      “Aradigm Employee Stock Purchase Plan” shall mean the employee stock purchase plan of Aradigm as in effect immediately prior to the date hereof.

      “Aradigm Intellectual Property Rights” shall mean the Aradigm Patent Rights, the Aradigm Selected Pulmonary Delivery Patent Rights and the Aradigm Know-How, as each is defined in the Amended and Restated License Agreement.

      “Aradigm Material Adverse Effect” shall mean (i) an effect on the condition (financial or otherwise), business, assets, results of operations or prospects of Aradigm, which impairs, or is reasonably likely to impair, the ability of Aradigm to perform in any material respect any of its obligations under the Transaction Agreements or (ii) a material adverse effect on the business opportunity represented by the Development Program.

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      “Asset Purchase Agreement” shall mean the Asset Purchase Agreement, to be entered into as of the Closing, by and between Aradigm and Novo Nordisk Delivery Technologies, Inc., in the form attached hereto as Exhibit B.

      “Assignment Agreements” shall mean the Assignment Agreements, to be entered into as of the Closing, by and among Aradigm, Novo Nordisk Delivery Technologies, Inc. and the other parties thereto, in the forms attached hereto as Exhibit H.

      “Authorization” shall mean any waiver, amendment, consent, approval, license, franchise, permit (including construction permits), certificate, exemption, variance or authorization of, expiration or termination of any waiting period requirement (including pursuant to the HSR Act) or other action by, or notice, filing, registration, qualification, declaration or designation with, any Person (including any Governmental Authority).

      “Business Day” shall mean a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York or Copenhagen, Denmark are authorized or required by law to close.

      “CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and any rules or regulations promulgated thereunder.

      “Competition Law” shall mean the European Commission Merger Regulation, Sherman Act, the Clayton Act, the HSR Act, the Federal Trade Commission Act and all other Laws that are designed or intended to prohibit, restrict or regulate (a) mergers, acquisitions or other business combinations or (b) actions having the purpose or effect of monopolization or restraint of trade or lessening of competition.

      “Contract Manufacturing Agreement” shall mean the Contract Manufacturing Agreement, to be entered into as of Closing, by and between Aradigm, Novo Nordisk and Novo Nordisk Delivery Technologies, Inc., in the form attached hereto as Exhibit D.

      “Co-Existence Agreement” shall mean the Co-Existence Agreement dated as of June 23, 2003 by and between Aradigm and Novo Nordisk.

      “Development and License Agreement” shall mean the Development and License Agreement dated as of June 2, 1998, as amended, by and between Aradigm and Novo Nordisk.

      “Development Program” shall have the meaning set forth in the Amended and Restated License Agreement.

      “Development Program Employee” shall mean any employee of Aradigm listed on Schedule 1 to the Letter Agreement.

      “Employee Transition Plan” shall have the meaning set forth in the Letter Agreement.

      “Environmental Laws” shall mean any federal, state, local or foreign law (including common law), treaty, judicial decision, regulation, rule, judgment, order, decree, injunction, permit or governmental restriction or any agreement with any Governmental Authority or other third party, whether now or hereafter in effect, relating to the environment, human health and safety or to pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials.

      “Environmental Liabilities” shall mean any and all liabilities arising in connection with or in any way relating to Aradigm (or any predecessor of Aradigm or any prior owner of all or part of its business and assets), any property now or previously owned, leased or operated by Aradigm, the Development Program (as currently or previously conducted), the Transferred Assets or any activities or operations occurring or conducted at the Real Property (including offsite disposal), whether accrued, contingent, absolute, determined, determinable or otherwise, which (i) arise under or relate to any Environmental Law and (ii) relate to actions occurring or conditions existing on or prior to the Closing Date (including any matter disclosed or required to be disclosed in Schedule 3.20).

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      “Environmental Permits” shall mean all permits, licenses, franchises, certificates, approvals and other similar authorizations of governmental authorities relating to or required by Environmental Laws and affecting, or relating in any way to, the Development Program, the Real Property and the Transferred Assets.

      “Estimated Purchase Price” shall mean the sum of the book values of the equipment set forth in Part I of Annex 1 to Exhibit A to the Asset Purchase Agreement as reflected on the accounting books and records of Aradigm in accordance with GAAP as of the date hereof that would be included in the Purchased Assets if the Closing were to occur on the date hereof.

      “Excluded Assets” shall have the meaning set forth in the Asset Purchase Agreement.

      “Excluded Liabilities” shall have the meaning set forth in the Asset Purchase Agreement.

      “GAAP” shall mean generally accepted accounting principles in the United States.

      “Governmental Authority” shall mean any supranational, national, state, municipal or local government, political subdivision or other governmental department, court, commission, board, bureau, agency, instrumentality, or other authority thereof, or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority, whether domestic or foreign, or any official of any of the foregoing.

      “Hazardous Substances” shall mean any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable corrosive, reactive or otherwise hazardous substance, waste or material or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics including petroleum, its derivatives, by-products and other hydrocarbons, and any substance, waste or material regulated under any Environmental Law.

      “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

      “Intellectual Property Rights” shall mean (i) national and multinational statutory invention registrations, patents and patent applications (including all reissues, divisions, continuations, continuations-in-part, extensions and reexaminations thereof) registered or applied for in the United States and/or all other nations throughout the world, all improvements to the inventions disclosed in each such registration, patent or patent application, (ii) copyrights (whether or not registered) and registrations and applications for registration thereof in the United States and/or all other nations throughout the world, including all derivative works, moral rights, renewals, extensions, reversions or restorations associated with such copyrights, now or hereafter provided by law, regardless of the medium of fixation or means of expression, and (iii) trade secrets and know-how (including manufacturing and production processes, firmware, data and techniques and research and development information).

      “Joint Steering Committee” shall have the meaning set forth in the Development and License Agreement.

      “Judgment” shall mean any judicial decision, judgment, writ, order, injunction, stipulation, award or decree of any court, judge, justice or magistrate, including any bankruptcy court or judge or the arbitrator in any binding arbitration, and any order of or by any Governmental Authority.

      “Law” shall mean any foreign or domestic law, statute, code, ordinance, rule, regulation, treaty, Judgment or principles of common law or equity (including negligence and strict liability) enacted, entered, promulgated or applied by a Governmental Authority.

      “Letter Agreement” shall mean the letter agreement entered into as of the date hereof by and among Aradigm, Novo Nordisk and Novo Nordisk Delivery Technologies, Inc.

      “Lien” shall mean, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance or other adverse claim of any kind in respect of such property or asset. For the purposes of this Agreement and the other Transaction Agreements, a Person shall be deemed to own subject to a Lien any property or asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

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      “Manufacturing and Supply Agreement” shall mean the Manufacturing and Supply Agreement dated as of October 22, 2001 by and between Aradigm and Novo Nordisk.

      “1933 Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

      “1934 Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

      “Patent Cooperation Agreement” shall mean the Patent Cooperation Agreement dated as of October 22, 2001 by and between Aradigm and Novo Nordisk.

      “Person” shall mean an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

      “Purchased Assets” shall have the meaning set forth in the Asset Purchase Agreement.

      “Purchase Price” shall have the meaning set forth in the Asset Purchase Agreement.

      “Quality Agreement” shall mean the Quality Agreement, to be entered into as of the Closing, by and between Aradigm and Novo Nordisk Delivery Technologies, Inc., in the form attached hereto as Exhibit E.

      “Required Shareholder Approvals” shall mean the approval of the Transactions (i) in accordance with the law of the State of California and the certificate of incorporation, bylaws and certificate of designation of Aradigm by (A) the common shareholders and the preferred shareholders of Aradigm, voting together as a class and (B) the preferred shareholders of Aradigm, voting separately as a class and (ii) by a majority of the votes cast by proxy or in person by the common shareholders and the preferred shareholders of Aradigm, voting together as a class, at the special shareholders’ meeting of Aradigm at which the vote described in (i)(A) above will be held, without counting votes cast by Novo Nordisk Pharmaceuticals, Inc. and Novo Nordisk.

      “Signing Date” shall mean the day and year first above written.

      “Stock Purchase Agreement” shall mean the Stock Purchase Agreement dated as of October 22, 2001 by and between Novo Nordisk Pharmaceuticals, Inc. and Aradigm.

      “Sublease Agreement” shall mean the Sublease Agreement, to be entered into as of the Closing, by and among Aradigm and Novo Nordisk Delivery Technologies, Inc., in the form attached hereto as Exhibit C.

      “Transactions” shall mean the transactions contemplated by the Transaction Agreements.

      “Transaction Agreements” shall mean the Amended and Restated License Agreement, the Asset Purchase Agreement, the Sublease Agreement, the Contract Manufacturing Agreement, the Quality Agreement, the Amended and Restated Stock Purchase Agreement, the Letter Agreement, the Transition Services Agreement and the Assignment Agreements.

      “Transferred Assets” shall mean the Purchased Assets, but excluding the Excluded Assets.

      “Transition Services Agreement” shall mean the Transition Services Agreement, to be entered into as of the Closing, by and between Aradigm and Novo Nordisk Delivery Technologies, Inc., in the form attached hereto as Exhibit G.

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      (b) Each of the following terms is defined in the Section set forth opposite such term:

      SECTION 1.02.     Other Definitional And Interpretative Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Appendices, Articles, Sections, Exhibits and Schedules are to Appendices, Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.

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      SECTION 1.03.     Knowledge Of Aradigm. References in this Agreement or in any of the other Transaction Agreements to the “knowledge” or “best knowledge” or any similar expression of Aradigm shall be the actual knowledge, after due and diligent inquiry, of the individuals listed on Schedule 1.03.

ARTICLE 2

PRE-CLOSING ACTIVITIES: CLOSING; THE TRANSACTIONS;

      SECTION 2.01.     Pre-closing Activities.

      (a) Aradigm, Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. agree that, prior to the Closing Date, they will discuss, in good faith, and subject to applicable Competition Laws, the transfer of applicable know-how and the provision of other assistance by Aradigm to Novo Nordisk and its Affiliates for the conduct of the Development Program.

      (b) Part I of Annex 1 to Exhibit A to the Asset Purchase Agreement contains the list of equipment, the location thereof, the book value thereof as reflected on the accounting books and records of Aradigm in accordance with GAAP as of the date hereof that would be included in the Purchased Assets if the Closing were to occur on the date hereof, and the Estimated Purchase Price. The Parties agree to update such list periodically (but not less than monthly) during the period from the date hereof until Closing to reflect (i) the addition of equipment purchased by Aradigm for use in the Development Program with the prior written approval of Novo Nordisk, (ii) downward adjustments that may be required under GAAP, including normal depreciation and amortization, to correctly state the book value of such equipment on the accounting books and records of Aradigm as of the date that is three (3) Business Days prior to the Closing Date and (iii) changes otherwise agreed by the Parties. The final version of Annex 1 to Exhibit A to the Asset Purchase Agreement shall be completed by the Parties no later than three (3) Business Days prior to the Closing Date, and shall be used to determine the Purchase Price.

      (c) Aradigm shall provide notice to Novo Nordisk Delivery Technologies, Inc. no later than two (2) Business Days prior to the Closing Date regarding the account with a U.S. bank to which Novo Nordisk Delivery Technologies, Inc. shall deliver the Purchase Price on the Closing Date.

      SECTION 2.02.     Closing. (a) The closing (the “Closing”) of the Transactions shall take place at the offices of Aradigm, as soon as possible, but in no event later than five (5) Business Days, following the satisfaction or waiver (and notice thereof to the parties) of the conditions precedent set forth in Article 9 below (other than conditions that by their nature are to be satisfied at the Closing and will in fact be satisfied at the Closing), or such other date as the parties shall agree. At the Closing, the transactions described in Section 2.02(b) below shall be deemed to occur simultaneously. The date on which the Closing occurs is referred to as the “Closing Date”.

      (b) At the Closing, the parties shall execute all of the Transaction Agreements to which such entities are parties that were not previously executed and, to the extent contemplated therein, consummate the Transactions.

      SECTION 2.03.     Effect of closing. Effective as of the Closing Date, the Manufacturing and Supply Agreement and the Patent Cooperation Agreement shall terminate and be of no further force and effect.

      SECTION 2.04.     Post-closing Activities.

      (a) After the Closing, Aradigm agrees that it will cooperate with and allow Novo Nordisk Delivery Technologies, Inc. reasonable access to any of its personnel who have knowledge of the Development Program such that Novo Nordisk Delivery Technologies, Inc. may, to its reasonable satisfaction, become informed as to the operation, transition and specifications of the Development Program and the Purchased Assets.

      (b) At any time after the Closing, each Party may (upon reasonable prior written notice to the other Party) request the ability to copy and/or certify documents that are in the possession of the other Party and that, in the case of a request by Novo Nordisk or Novo Nordisk Delivery Technologies, Inc., relate to the

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      (c) Novo Nordisk Delivery Technologies, Inc. agrees to reimburse Aradigm for fifty percent (50%) of the replacement cost to Aradigm of purchasing the equipment listed on Schedule 2.04(c).

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF ARADIGM

      Aradigm represents and warrants to Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. as of the date hereof and as of the Closing Date that:

      SECTION 3.01.     Corporate Existence and Power. Aradigm is a corporation duly incorporated, validly existing and in good standing under the laws of the State of California and has all corporate powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted. Aradigm has heretofore delivered to Novo Nordisk true and complete copies of the certificate of incorporation and bylaws of Aradigm as currently in effect.

      SECTION 3.02.     Corporate Authorization. The execution, delivery and performance by Aradigm of the Transaction Agreements and the consummation of the Transactions are within Aradigm’s corporate powers and, except for the Required Shareholder Approvals, have been duly authorized by all necessary corporate action on the part of Aradigm. This Agreement constitutes, and when executed each other Transaction Agreement will constitute, a valid and binding agreement of Aradigm enforceable against Aradigm in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, moratorium or similar laws of general application relating to or affecting creditors’ rights or by general principles of equity.

      SECTION 3.03.     Governmental Authorization. The execution, delivery and performance by Aradigm of the Transaction Agreements and the consummation of the Transactions require no action by or in respect of, or filing with, any Governmental Authority other than (i) compliance with any applicable requirements of any Competition Law; (ii) compliance with applicable requirements of Environmental Laws; and (iii) compliance with any applicable requirements of the 1933 Act, the 1934 Act and any other applicable securities laws, whether U.S., state or foreign.

      SECTION 3.04.     Noncontravention. The execution, delivery and performance by Aradigm of the Transaction Agreements and the consummation of the Transactions do not and will not (i) violate the certificate of incorporation, bylaws or certificate of designation of Aradigm, (ii) assuming compliance with the matters referred to in Section 3.03, violate any applicable Law, (iii) assuming the obtaining of all Required Consents (as defined below) and Other Consents (as defined below), constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation, or to a loss of any benefit relating to the Development Program to which Aradigm is entitled under any provision of any agreement or other instrument binding upon Aradigm or by which any of the Transferred Assets is or may be bound or (iv) result in the creation or imposition of any Lien on the Real Property or any Transferred Asset, other than Permitted Liens (as defined below).

      SECTION 3.05.     Required and Other Consents. (a) Schedule 3.05(a) sets forth each agreement, contract or other instrument binding upon Aradigm or any Permit (as defined below) (including any Environmental Permit) requiring a consent or other action by any Person as a result of the execution, delivery and performance by Aradigm of the Transaction Agreements, except such consents or actions as would not, individually or in the aggregate, have an Aradigm Material Adverse Effect if not received or taken by the Closing Date (the “Required Consents”).

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      (b) Schedule 3.05(b) sets forth each other consent or action by any Person (the “Other Consents”) under such agreements, contracts or other instruments or such Permits that is necessary with respect to the execution, delivery and performance by Aradigm of the Transaction Agreements.

      SECTION 3.06.     Absence of Certain Changes. Since the Aradigm Balance Sheet Date, the Development Program has been conducted in the ordinary course consistent with past practices and there has not been:

      SECTION 3.07.     No Undisclosed Material Liabilities. There are no liabilities of Aradigm of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than:

      SECTION 3.08.     Material Contracts. (a) Except for the Transaction Agreements, the Development and License Agreement, the Patent Cooperation Agreement, the Stock Purchase Agreement, the Manufacturing

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      (b) Each Contract disclosed in any Schedule or required to be disclosed pursuant to this Section is a valid and binding agreement of Aradigm and is in full force and effect, and neither Aradigm nor, to the knowledge of Aradigm, any other party thereto is in default or breach in any material respect under the terms of any such Contract, and, to the knowledge of Aradigm, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute any event of default thereunder. True and complete copies of each such Contract that is listed in Part II of Annex 1 to Exhibit A to the Asset Purchase Agreement have been delivered to Novo Nordisk.

      SECTION 3.09.     Litigation. There is no action, suit, investigation or proceeding pending against Aradigm, the Development Program, the Real Property or any Transferred Asset before any court or arbitrator or before or by any Governmental Authority or, to the knowledge of Aradigm, any basis therefor or threat thereof, which, individually or in the aggregate, could reasonably be expected to have an Aradigm Material Adverse Effect or which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Transactions.

      SECTION 3.10.     Compliance with Laws and Court Orders. Aradigm is not in violation of, has not since June 2, 1998 violated, and to the knowledge of Aradigm is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any Law or Authorization applicable to the Real Property, the Transferred Assets or the conduct of the Development Program.

      SECTION 3.11.     Properties. (a) Schedule 3.11(a) correctly describes all leasehold interests in real property to be subleased pursuant to the Sublease Agreement to Novo Nordisk Delivery Technologies, Inc. and assigned to Novo Nordisk Delivery Technologies, Inc. pursuant to the Assignment Agreements (collectively, the “Real Property”), which Aradigm leases, any title insurance policies and surveys with respect thereto in the possession of Aradigm, and any Liens thereon, specifying the name of the lessor, the lease term and basic annual rent.

      (b) Schedule 3.11(b) correctly describes all personal property included in the Transferred Assets, including machinery, equipment (including computer hardware, computer software and other computer parts

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      (c) Aradigm has good and marketable, indefeasible, fee simple title to, or, in the case of the Real Property or leased personal property, has valid leasehold interests in, the Transferred Assets and the Real Property. No Real Property or Transferred Asset is subject to any Lien, except:

      (d) There are no developments affecting the Real Property or any of the Transferred Assets pending or, to the knowledge of Aradigm threatened, which might materially detract from the value or materially interfere with any present or intended use by Novo Nordisk Delivery Technologies, Inc. of such Real Property or Transferred Assets.

      (e) All leases of Real Property or personal property are in good standing and are valid, binding and enforceable in accordance with their respective terms and there does not exist under any such lease any default or any event which with notice or lapse of time or both would constitute a default.

      (f) To the knowledge of Aradigm, the plants, buildings and structures included in the Real Property and the Transferred Assets currently have access to (1) public roads or valid easements over private streets or private property for such ingress to and egress from all such plants, buildings and structures and (2) water supply, storm and sanitary sewer facilities, telephone, gas and electrical connections, fire protection, drainage and other public utilities, in each case as is necessary for the conduct of the Development Program as it has heretofore been conducted and as planned to be conducted by Novo Nordisk Delivery Technologies, Inc. None of the structures on the Real Property encroaches upon real property of another Person, and no structure of any other Person substantially encroaches upon any Real Property.

      (g) To the knowledge of Aradigm, the Real Property, and its continued use, occupancy and operation as currently used, occupied and operated, does not constitute a nonconforming use under any applicable building, zoning, subdivision and other land use and similar laws, regulations and ordinances.

      SECTION 3.12.     Title to the Transferred Assets. Upon consummation of the Transactions, Novo Nordisk Delivery Technologies, Inc. will have acquired good and marketable title in and to, or a valid leasehold interest in, each of the Transferred Assets, free and clear of all Liens, except for Permitted Liens.

      SECTION 3.13.     Intellectual Property. (a) Schedule 3.13(a)(i) contains a true and complete list of the patents and patent rights included within the Aradigm Patent Rights. Schedule 3.13(a)(ii) contains a true and complete list of all agreements (whether written or otherwise, including license agreements, research agreements, development agreements, distribution agreements, settlement agreements, consent to use agreements and covenants not to sue) to which Aradigm or any of its Affiliates is a party or otherwise bound, granting or restricting any right to use, exploit or practice any Aradigm Intellectual Property Rights in connection with the Development Program as currently conducted.

      (b) To the knowledge of Aradigm, the Aradigm Intellectual Property Rights constitute all the Intellectual Property Rights necessary for the Development Program as currently conducted (other than Intellectual Property Rights of Novo Nordisk). Except as set forth in the Development and License Agreement and the Patent Cooperation Agreement, Aradigm knows of no restrictions on the disclosure, use, license, sublicense or transfer of the Aradigm Intellectual Property Rights as contemplated by the Amended and Restated License Agreement. The consummation of the Transactions will not alter, impair or extinguish

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      (c) To the knowledge of Aradigm, neither Aradigm nor any of its Affiliates has infringed, misappropriated or otherwise violated any Intellectual Property Right of any third party. There is no claim, action, suit, investigation or proceeding pending against, or, to the knowledge of Aradigm, threatened against or affecting, the Development Program or any of the Transferred Assets (1) based upon, or challenging or seeking to deny or restrict, the rights of Aradigm in any of the Aradigm Intellectual Property Rights, (2) alleging that the use of the Aradigm Intellectual Property Rights or any services provided, processes used or products manufactured, used, imported or sold with respect to the Development Program conflict with, misappropriate, infringe or otherwise violate any Intellectual Property Right of any third party or (3) alleging that Aradigm or any Affiliate of Aradigm infringed, misappropriated or otherwise violated any Intellectual Property Right of any third party. Neither Aradigm nor any of its Affiliates has received from any third party a written offer: (a) in which such third party states that a license may be necessary to avoid infringement of such third party’s patents or (b) for which Aradigm sought advice from an independent outside patent counsel with respect to the question of infringement.

      (d) None of the Aradigm Intellectual Property Rights that is material to the operation of the Development Program has been adjudged invalid or unenforceable in whole or part, and, to the knowledge of Aradigm, all patents that are part of such Aradigm Intellectual Property Rights are valid and enforceable.

      (e) Aradigm holds all right, title and interest in and to all Aradigm Intellectual Property Rights, free and clear of any Lien. In each case where a patent or patent application or copyright registration or copyright application included in the Aradigm Intellectual Property Rights is held by assignment, the assignment has been duly recorded with the Governmental Authority from which the patent or registration issued or before which the application or application for registration is pending.

      (f) To the knowledge of Aradigm, no Person has infringed, misappropriated or otherwise violated any Aradigm Intellectual Property Right. Aradigm has taken reasonable steps in accordance with normal industry practice to maintain the confidentiality of all confidential Intellectual Property Rights. None of the Intellectual Property Rights that are material to the Development Program and the value of which to the Development Program is contingent upon maintaining the confidentiality thereof, has been disclosed other than to employees, representatives and agents of Aradigm and its licensees, all of whom are bound by written confidentiality agreements substantially in the form previously disclosed to Novo Nordisk.

      (g) None of the patents and patent applications included in the Aradigm Intellectual Property Rights that are material to the Development Program has been the subject of an interference, protest, public use proceeding or third party re-examination request.

      SECTION 3.14.     Insurance Coverage. Aradigm has furnished to Novo Nordisk Delivery Technologies, Inc. a list of all insurance policies and fidelity bonds relating to the Transferred Assets, the business and operations of the Development Program and its officers and employees. There is no claim by Aradigm pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds or in respect of which such underwriters have reserved their rights. All premiums payable under all such policies and bonds have been timely paid, Aradigm has otherwise complied fully with the terms and conditions of all such policies and bonds and such policies and bonds are in full force and effect. Aradigm does not know of any threatened termination of coverage under any of such policies or bonds. After the Closing Aradigm shall continue to have coverage under such policies and bonds with respect to events occurring prior to the Closing.

      SECTION 3.15.     Licenses and Permits. Schedule 3.15 correctly describes each license (other than those listed on Schedule 3.13(a)), franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the Development Program (the “Permits”) together with the name of the Governmental Authority issuing such Permit. Except as set forth on Schedule 3.15, (i) the Permits are valid and in full force and effect, (ii) Aradigm is not in default, and no condition exists that with notice or lapse of time or both would constitute a default, under the Permits and (iii) none of the Permits will, assuming the

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      SECTION 3.16.     Inventories and Supplies. Since the Aradigm Balance Sheet Date, the inventories and supplies related to the Development Program have been maintained in the ordinary course of business.

      SECTION 3.17.     Documents. None of the documents or information delivered to the shareholders of Aradigm in connection with the Transactions, including the Aradigm Proxy Statement (as defined below) (except for any information contained therein that is provided in writing by Novo Nordisk specifically for such purpose), contains or will contain, as applicable, any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein not misleading.

      SECTION 3.18.     Finders’ Fees. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Aradigm who might be entitled to any fee or commission from Novo Nordisk or any of its Affiliates in connection with the Transactions.

      SECTION 3.19.     Employees. Schedule 1 to the Letter Agreement sets forth a true and complete list of (i) the names, titles, annual salaries and other compensation of all Development Program Employees to be offered employment by Novo Nordisk Delivery Technologies, Inc. and (ii) the wage rates for non-salaried Development Program Employees to be offered employment by Novo Nordisk Delivery Technologies, Inc. (by classification). Other than as separately communicated in writing to Novo Nordisk, none of such Development Program Employees has indicated to Aradigm that he intends to resign or retire as a result of the Transactions or otherwise within one year after the Closing Date.

      SECTION 3.20.     Environmental Compliance. (a)

      (b) There has been no environmental investigation, study, audit, test, review or other analysis conducted which Aradigm has in its possession in relation to any Transferred Asset or Real Property which has not been

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      (c) None of the Transferred Assets is located in New Jersey or Connecticut.

      (d) For purposes of this Section 3.20, the term “Aradigm” shall include any entity which is, in whole or in part, a predecessor of Aradigm.

      SECTION 3.21.     Representations. The representations and warranties of Aradigm contained in this Agreement, disregarding all qualifications and exceptions contained therein relating to materiality or Aradigm Material Adverse Effect, are true and correct with only such exceptions as would not in the aggregate be reasonably likely to have an Aradigm Material Adverse Effect.

      SECTION 3.22.     Compliance With Existing Agreements. Aradigm is in compliance in all material respects with the terms and conditions of the Development and License Agreement (other than as such terms and conditions have been modified by the Joint Steering Committee), the Patent Cooperation Agreement, the Stock Purchase Agreement, the Manufacturing and Supply Agreement and the Co-Existence Agreement.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF NOVO NORDISK

      Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. jointly and severally represent and warrant to Aradigm as of the date hereof and as of the Closing Date that:

      SECTION 4.01.     Corporate Existence and Power. Each of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. is a corporation duly incorporated, validly existing and, in the case of Novo Nordisk Delivery Technologies, Inc., in good standing under the Laws of the State of Delaware, and each of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. has all corporate powers and all material governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted.

      SECTION 4.02.     Corporate Authorization. The execution, delivery and performance by each of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. of the Transaction Agreements to which it is a party and the consummation of the Transactions to which it is a party are within the corporate powers of each of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. and have been duly authorized by all necessary corporate action on the part of each of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. This Agreement constitutes, and when executed each other Transaction Agreement to which it is a party will constitute, a valid and binding agreement of each of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. enforceable against each of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, moratorium or similar laws of general application relating to or affecting creditors’ rights or by general principles of equity.

      SECTION 4.03.     Governmental Authorization. The execution, delivery and performance by each of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. of the Transaction Agreements to which it is a party and the consummation of the Transactions to which it is a party require no material action by or in respect of, or material filing with, any Governmental Authority other than (i) in compliance with any Competition Law and (ii) in compliance with any applicable requirements of the 1933 Act, the 1934 Act and any other applicable securities laws, whether federal, state or foreign.

      SECTION 4.04.     Noncontravention. The execution, delivery and performance by each of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. of the Transaction Agreements to which it is a party and the consummation of the Transactions to which it is a party do not and will not (i) violate the charter or bylaws of either of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. or (ii) assuming compliance with the matters referred to in Section 4.03, violate any applicable material Law.

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      SECTION 4.05.     Litigation. There is no action, suit, investigation or proceeding pending against, or to the knowledge of Novo Nordisk, threatened against or affecting, Novo Nordisk or Novo Nordisk Delivery Technologies, Inc. before any court or arbitrator or before or by any Governmental Authority which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Transactions.

      SECTION 4.06.     Finders’ Fees. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Novo Nordisk or Novo Nordisk Delivery Technologies, Inc. who might be entitled to any fee or commission from Aradigm or any of its Affiliates upon consummation of the Transactions.

      SECTION 4.07.     Information. None of the information provided in writing by Novo Nordisk to Aradigm to be included in the Aradigm Proxy Statement contains or will contain, as applicable, any untrue statement of a material fact, or omits to state a material fact necessary to make such information misleading.

      SECTION 4.08.     Compliance with Existing Agreements. Each of Novo Nordisk and its Affiliates is in compliance in all material respects with the terms and conditions of the Development and License Agreement (other than as such terms and conditions have been modified by the Joint Steering Committee), the Patent Cooperation Agreement, the Stock Purchase Agreement, the Manufacturing and Supply Agreement and the Co-Existence Agreement.

ARTICLE 5

COVENANTS OF ARADIGM

      Aradigm agrees that:

      SECTION 5.01.     Conduct of the Development Program. From the date hereof until the Closing Date, Aradigm shall conduct the Development Program in accordance with the Development and License Agreement in the ordinary course consistent with past practices and shall use its best efforts to preserve intact the business organizations and relationships with third parties relevant to the Development Program and to keep available the services of the Development Program Employees. Without limiting the generality of the foregoing, from the date hereof until the Closing Date, Aradigm will not:

      SECTION 5.02.     Access to Information. (a) From the date hereof until the Closing Date, Aradigm will (i) give Novo Nordisk, its counsel, financial advisors, auditors and other authorized representatives full access to the offices, properties, books and records of Aradigm relating to the Development Program, (ii) furnish to Novo Nordisk, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information relating to the Development Program as such Persons may reasonably request and (iii) instruct the employees and counsel of Aradigm to cooperate with Novo Nordisk in its investigation of the Development Program; provided that, any such access by Novo Nordisk, its counsel, financial advisors, auditors and other authorized representatives shall not unreasonably interfere with the conduct of Aradigm’s business (other than the Development Program). Novo Nordisk will hold, and will use best efforts to cause its officers, directors, employees, auditors, counsel, consultants, financial advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of Law, all confidential documents and information concerning Aradigm and the Development

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      (b) On and after the Closing Date, Aradigm will afford promptly to Novo Nordisk and its agents reasonable access to its books of account, financial and other records, information, employees and auditors to the extent necessary or useful for Novo Nordisk in connection with any audit, investigation, dispute or litigation or any other reasonable business purpose relating to the Development Program; provided that, any such access by Novo Nordisk shall not unreasonably interfere with the conduct of the business of Aradigm.

      SECTION 5.03.     Notices of Certain Events. Aradigm shall promptly notify Novo Nordisk of:

      SECTION 5.04.     Shareholder Votes. Aradigm shall cause the required meetings of its common and preferred shareholders to be duly called and held as soon as reasonably practicable for the purpose of approving the Transactions. The board of directors of Aradigm shall, subject to their fiduciary duties under applicable Law as advised by counsel, recommend adoption of the Transactions by Aradigm’s common and preferred shareholders, voting together as a class, and by Aradigm’s preferred shareholders, voting separately as a class. In connection with such meeting (i) Aradigm will promptly prepare and file with the SEC, will use its best efforts to have cleared by the SEC and will thereafter mail to its common and preferred shareholders as promptly as practicable a proxy statement and all other proxy materials for such meeting (the “Aradigm Proxy Statement”) as may be required by applicable law; (ii) Aradigm will use its best efforts to obtain the Required Shareholder Approvals; and (iii) Aradigm will otherwise comply with all legal requirements applicable to such meetings. Aradigm will provide Novo Nordisk with ten (10) Business Days to review and comment on the information regarding the Transactions, Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. contained in the Aradigm Proxy Statement prior to any filing thereof with the SEC and prior to the date on which such materials are first published, sent or given to Aradigm’s common and preferred shareholders and shall use its reasonable efforts to reflect any such comments in the Aradigm Proxy Statement.

ARTICLE 6

COVENANTS OF NOVO NORDISK

      Each of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. jointly and severally agrees that:

      SECTION 6.01.     Access. On and after the Closing Date, each of Novo Nordisk and Novo Nordisk Delivery Technologies Inc. will afford promptly to Aradigm and its agents reasonable access to its properties, books, records, employees and auditors to the extent relating to or involved in the Development Program and necessary to permit Aradigm to determine any matter relating to its rights and obligations hereunder or to any

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      SECTION 6.02.     Information. Each of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. shall provide promptly all information reasonably requested by Aradigm for inclusion in, or for use in preparing, the Aradigm Proxy Statement.

ARTICLE 7

COVENANTS OF THE PARTIES

      The parties agree that:

      SECTION 7.01.     Best Efforts; Further Assurances. Subject to the terms and conditions of this Agreement, each of the parties hereto will use their respective best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable Laws to consummate the Transactions as soon as practicable. Each of the parties hereto agrees to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the Transactions, including without limitation to vest in Novo Nordisk Delivery Technologies, Inc. good and marketable title or valid leasehold interests in the Transferred Assets. Each of the parties hereto agrees to cooperate with the other parties hereto to identify any documentation meeting the criteria set forth in subsection (e) of Part II of Annex 1 to Exhibit A to the Asset Purchase Agreement, such that such documentation forms part of the Transferred Assets.

      SECTION 7.02.     Certain Filings. The parties hereto shall cooperate with one another (i) in determining whether any action by or in respect of, or filing with, any Governmental Authority is required, or any Authorizations are required to be obtained from parties to any material contracts, in connection with the consummation of the Transactions and (ii) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such Authorizations.

      SECTION 7.03.     Public Announcements. The parties hereto agree to consult with each other before issuing any press release or making any public statement with respect to the Transaction Agreements or the Transactions and, except for any press releases and public statements the making of which may be required by applicable Law or any listing agreement with any national securities exchange, will not issue any such press release or make any such public statement prior to such consultation; provided that, the parties hereto agree that the press release set forth on Appendix A shall be released on the date hereof and that Aradigm shall furnish such press release to the United States Securities and Exchange Commission on Form 8-K.

      SECTION 7.04.     Confidentiality.

      (a) Each party agrees that it shall use, and that it shall cause any Person to whom Confidential Information is disclosed pursuant to clause (i) below to use, the Confidential Information only in connection with the Transaction Agreements and not for any other purpose.

      (b) Each party further acknowledges and agrees that it shall not disclose any Confidential Information to any Person, except that Confidential Information may be disclosed:

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      (c) Nothing contained herein shall prevent the use (subject, to the extent possible, to a protective order) of Confidential Information in connection with the assertion or defense of any claim by or against any party.

      (d) For purposes of this Section 7.04, “Confidential Information” means any information concerning this Agreement or the parties’ respective rights and obligations hereunder; provided that, the term “Confidential Information” does not include information that (i) is or becomes generally available to the public other than as a result of a disclosure by a party or its partners, directors, officers, employees, agents, counsel, investment advisers or representatives (all such persons being collectively referred to as “Representatives”) in violation of this Agreement or any of the Transaction Agreements, (ii) is or was available to such party on a non-confidential basis (as demonstrated by the written records of such party) prior to its disclosure to such party by the other party or (iii) was or becomes available to such party on a non-confidential basis from a source other than the other party, which source is or was (at the time of receipt of the relevant information) not, to the best of such party’s knowledge, bound by a confidentiality agreement with (or other confidentiality obligation to) the other party or another Person.

      SECTION 7.05.     Warn Act. The parties agree to cooperate in good faith to determine whether any notification may be required under the Worker Adjustment and Retraining Notification Act (the “WARN Act”) and/or the Law of the State of California as a result of the Transactions. Novo Nordisk will be responsible for providing any notification that may be required under the WARN Act with respect to any Development Program Employees. Aradigm will be responsible for providing any notification that may be required under the WARN Act with respect to any employees of Aradigm who are not Development Program Employees.

      SECTION 7.06.     Nonsolicitation. Except as provided in the Letter Agreement, Aradigm, Novo Nordisk, and Novo Nordisk Delivery Technologies, Inc. each agree that for a period of three (3) full years after the Signing Date, neither it nor any of its respective Affiliates shall solicit, directly or indirectly, for employment, in the case of Aradigm, any Development Program Employee that is hired by Novo Nordisk Delivery Technologies, Inc. in accordance with this Agreement, and, in the case of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc., any other employee of Aradigm; provided that, nothing in this Section 7.06 shall prohibit any Party from carrying out general solicitation of employment in any newspaper, magazine, trade publication, electronic medium or other media. The Parties acknowledge that irreparable harm would result from any breach of this Section 7.06 and that there would be no adequate remedy at law or in damages to compensate for any such breach. The Parties agree that each Party shall be entitled to injunctive relief requiring specific performance of this Section 7.06 by the other Party or any of its Affiliates.

      SECTION 7.07.     Compliance with Existing Agreements. Novo Nordisk and its Affiliates and Aradigm shall each comply in all material respects with the terms and conditions of the Development and License Agreement, the Patent Cooperation Agreement, the Stock Purchase Agreement, the Manufacturing and Supply Agreement and the Co-Existence Agreement.

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ARTICLE 8

EMPLOYEE BENEFITS

      SECTION 8.01.     Employment Offers.

      (a) Novo Nordisk Delivery Technologies, Inc. will make offers of employment to all active Development Program Employees with employment to commence with Novo Nordisk Delivery Technologies, Inc. as of the Closing Date. Development Program Employees who accept Novo Nordisk Delivery Technologies, Inc.’s offer of employment and report to work as of the Closing Date shall be “Transferred Development Program Employees.”

      (b) For purposes of this Agreement, any Development Program Employee who is not actively at work on the Closing Date due to a short-term absence for vacation, holiday, illness or injury of shorter duration than would satisfy the eligibility requirements to receive benefits under Aradigm’s disability plans, jury duty or bereavement leave, shall be deemed to be actively employed on the Closing Date. With respect to any Development Program Employee who is on an Approved Leave of Absence as of the Closing Date, Novo Nordisk Delivery Technologies, Inc. shall make an offer of employment to such Development Program Employee effective as of the date on which such Development Program Employee presents himself or herself to Novo Nordisk Delivery Technologies, Inc. for active employment following the Closing Date and within sixteen (16) weeks (or such longer time period as is required under the applicable Laws of the State of California) from the Closing Date to the same extent, if any, as Aradigm would be required to reemploy such Development Program Employee in accordance within applicable law. Employees on “Approved Leave of Absence” means Development Program Employees absent from work on the Closing Date and unable to perform their regular job duties under approved plans or policies of the employer or in accordance with the Family Medical Leave Act or similar state statutes or regulations or military leave under the Uniformed Services Employment and Reemployment Rights Act.

      (c) For the avoidance of doubt, Aradigm will retain any and all liabilities and obligations in respect of (i) Transferred Development Program Employees relating to employee benefits, compensation or otherwise, existing, accrued or resulting from actions or omissions on or prior to the Closing Date and (ii) the Development Program Employee Plans (as defined below), regardless of when the claim arises.

      (d) Novo Nordisk Delivery Technologies, Inc. or one of its Affiliates will recognize all service of the Transferred Development Program Employees with Aradigm or any of its Affiliates for purposes of eligibility to participate, vesting, severance and vacation accrual in those employee benefit plans in which the Transferred Development Program Employees are enrolled by Novo Nordisk Delivery Technologies, Inc. or one of its Affiliates immediately after the Closing.

      SECTION 8.02.     Employee Benefits Definitions. The following terms, as used herein, have the following meanings:

      “Code” shall mean the Internal Revenue Code of 1986, as amended.

      “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

      “ERISA Affiliate” of any entity shall mean any other entity which, together with such entity, would be treated as a single employer under Section 414 of the Internal Revenue Code of 1986, as amended.

      SECTION 8.03.     Employee Benefits Representations. Aradigm hereby represents and warrants to Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. that:

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      SECTION 8.04.     Employee Benefits Covenants. From the date hereof until the Closing Date:

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      SECTION 8.05.     No Third Party Beneficiaries. No provision of this Agreement shall create any third party beneficiary or other rights in any employee or former employee (including any beneficiary or dependent thereof) of Aradigm or of any of its subsidiaries in respect of continued employment (or resumed employment) with either Novo Nordisk Delivery Technologies, Inc. or any of its Affiliates, and no provision of this Agreement shall create any such rights in any such persons in respect of any benefits that may be provided, directly or indirectly, under any Development Program Employee Plan or any plan or arrangement which may be established by Novo Nordisk Delivery Technologies, Inc. or any of its Affiliates. No provision of this Agreement shall constitute a limitation on the rights of Novo Nordisk Delivery Technologies, Inc. or any of its Affiliates after the Closing Date to amend, modify or terminate any of its plans or arrangements or to terminate any of its employees.

ARTICLE 9

CONDITIONS TO CLOSING

      SECTION 9.01.     Conditions to Obligations of the Parties. The obligations of the parties hereto to consummate the Closing are subject to the satisfaction of the following conditions:

      SECTION 9.02.     Conditions to Obligations of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. The obligation of each of Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. to consummate the Closing is subject to the satisfaction of the following further conditions:

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      SECTION 9.03.     Conditions to Obligation of Aradigm. The obligation of Aradigm to consummate the Closing is subject to the satisfaction of the following further conditions:

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ARTICLE 10

SURVIVAL; INDEMNIFICATION

      SECTION 10.01.     Survival. The representations and warranties of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing until the third anniversary of the Closing Date; provided that, the representations and warranties in Sections 3.01, 3.02, 3.03, 3.04 and 3.20 and Article 8 shall survive indefinitely or until the latest date permitted by law. The covenants and agreements of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing indefinitely or for the shorter period explicitly specified therein. Notwithstanding the preceding sentence, any breach of a covenant, agreement, representation or warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to the preceding sentence, if written notice of the inaccuracy thereof giving rise to such right of indemnity shall have been given in accordance with Section 10.03 to the party against whom such indemnity may be sought prior to such time.

      SECTION 10.02.     Indemnification. (a) Effective at and after the Closing, Aradigm hereby indemnifies Novo Nordisk and its Affiliates against and agrees to hold each of them harmless from any and all damage, loss, liability and expense (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses in connection with any action, suit or proceeding whether involving a third-party claim or a claim solely between the parties hereto and any incidental, indirect or consequential damages, losses, liabilities or expenses) (“Damages”) incurred or suffered by Novo Nordisk or any of its Affiliates arising out of:

      (b) Effective at and after the Closing, Novo Nordisk hereby indemnifies Aradigm and its Affiliates against and agrees to hold each of them harmless from any and all Damages incurred or suffered by Aradigm or any of its Affiliates arising out of any Warranty Breach or breach of covenant or agreement made or to be performed by Novo Nordisk or Novo Nordisk Delivery Technologies, Inc. pursuant to this Agreement.

      SECTION 10.03.     Procedures. The party seeking indemnification under Section 10.02 (the “Indemnified Party”) agrees to give prompt notice to the party against whom indemnity is sought (the “Indemnifying Party”) of the assertion of any claim, or the commencement of any suit, action or proceeding in respect of which indemnity may be sought under Section 10.02, which notice shall include a brief description of the

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ARTICLE 11

TERMINATION

      Section 11.01.     Grounds for Termination. This Agreement may be terminated at any time prior to the Closing:

      The party desiring to terminate this Agreement pursuant to clauses 11.01(b) and 11.01(c) shall give written notice of such termination to the other parties.

      SECTION 11.02.     Effect of Termination.

      (a) If this Agreement is terminated as permitted by Section 11.01, such termination shall be without liability of any party (or any stockholder or shareholder (as applicable), director, officer, employee, agent, consultant or representative of such party) to the other parties to this Agreement; provided that, if such termination shall result from the (i) willful failure of any party to fulfill a condition to the performance of the obligations of any other party, (ii) failure to perform a covenant of this Agreement or (iii) breach by any party of any representation or warranty or agreement contained herein, such party shall be fully liable for any and all Damages incurred or suffered by the other parties as a result of such failure or breach. The provisions of Sections 5.02(b), 7.04, 11.02, 12.02, 12.03, 12.05 and 12.06 shall survive any termination hereof pursuant to Section 11.01.

      (b) For the avoidance of doubt, if this Agreement is terminated as permitted by Section 11.01, the Development and License Agreement, the Patent Cooperation Agreement, the Manufacturing and Supply Agreement and the Stock Purchase Agreement shall continue in full force and legal effect.

ARTICLE 12

MISCELLANEOUS

      SECTION 12.01.     Notices. Any notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given,

      if to Aradigm, to:

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      with a copy to:

      if to Novo Nordisk or Novo Nordisk Delivery Technologies, Inc., to:

      and

or to such other addresses and telecopier numbers as may from time to time be notified by any party to the other parties hereunder. All such notices, requests and other communications shall be deemed to have been delivered within seven (7) Business Days after dispatch and notice sent by telex or telefax shall be deemed to have been delivered within twenty-four (24) hours after dispatch. Notice of change of address shall be effective upon receipt.

      SECTION 12.02.     Amendments and Waivers. (a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.

      (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Law.

      SECTION 12.03.     Expenses. Except as otherwise provided herein, all costs and expenses incurred in connection with the Transaction Agreements shall be paid by the party incurring such cost or expense.

      SECTION 12.04.     Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that, no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto; except that Novo Nordisk Delivery Technologies, Inc. may transfer or assign, in whole or from time to time in part, to one or more of its Affiliates, the right to purchase or lease all or a portion of the Transferred Assets and the Real Property, but no such transfer or assignment will relieve Novo Nordisk Delivery Technologies, Inc. of its obligations hereunder.

      SECTION 12.05.     Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of New York.

      SECTION 12.06.     Jurisdiction. The parties agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with this Agreement shall be brought in the United States District Court for the Southern District of New York or any New York State court sitting in New York City, so long as one of such courts shall have subject matter jurisdiction over such suit, action or

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      SECTION 12.07.     Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT.

      SECTION 12.08.     Counterparts; Third Party Beneficiaries; Effectiveness. 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. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.

      SECTION 12.09.     Entire Agreement. This Agreement, the other Transaction Agreements, the Co-Existence Agreement and, until the Closing, if any, the Development and License Agreement, the Patent Cooperation Agreement, the Manufacturing and Supply Agreement and the Stock Purchase Agreement, constitute the entire agreement between the parties hereto with respect to the subject matter of this Agreement and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter.

      SECTION 12.10.     Bulk Sales Laws. Novo Nordisk and Aradigm each hereby waive compliance by Aradigm with the provisions of the “bulk sales,” “bulk transfer” or similar laws of any state. Aradigm agrees to indemnify and hold Novo Nordisk harmless against any and all claims, losses, damages, liabilities, costs and expenses incurred by Novo Nordisk or any of its Affiliates as a result of any failure to comply with any such “bulk sales,” “bulk transfer” or similar laws.

      SECTION 12.11.     Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

      SECTION 12.12.     Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in United States District Court for the Southern District of New York or any New York State court sitting in New York City, in addition to any other remedy to which they are entitled at law or in equity; provided that, the last two (2) sentences of Section 7.06 shall apply to specific performance of the terms of Section 7.06.

[SIGNATURE PAGE FOLLOWS]

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      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

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EXHIBIT A

[AMENDED AND RESTATED LICENSE AGREEMENT]

A-1

Certain confidential information in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

AMENDED AND RESTATED

dated as of

                    , 2004

between

ARADIGM CORPORATION

and

NOVO NORDISK A/S

A-2

TABLE OF CONTENTS

A-3

A-4

A-5

AMENDED AND RESTATED LICENSE AGREEMENT

      This AMENDED AND RESTATED LICENSE AGREEMENT (the “Agreement”) is entered into as of                     , 2004 by and between Aradigm Corporation, a corporation duly organized and existing under the laws of the State of California (“Aradigm”) and Novo Nordisk A/S, a company duly organized and existing under the laws of Denmark (“Novo Nordisk”).

      WHEREAS, Novo Nordisk and Aradigm entered into a Development and License Agreement dated as of June 2, 1998, as amended by Amendment No. 1 thereto dated as of October 22, 2001 (the “Development and License Agreement”) to develop a system for pulmonary delivery of insulin (and potentially other compounds) and under which Aradigm granted to Novo Nordisk an exclusive, world-wide license under certain patent rights and “know-how,” to use, market, distribute, sell and sublicense products resulting from such development program in the Field (as defined herein and therein);

      WHEREAS, Aradigm, Novo Nordisk and Novo Nordisk Delivery Technologies, Inc., a corporation duly organized and existing under the laws of the State of Delaware (“Novo Nordisk Delivery Technologies, Inc.”) are parties to a Restructuring Agreement dated as of September 28, 2004 (the “Restructuring Agreement”) pursuant to which they have agreed to restructure their existing arrangements regarding the development, production and commercialization of the Development Program (as defined herein) and to certain other matters as set forth therein; and

      WHEREAS, the amendment and restatement of the Development and License Agreement is a precondition to performance on the part of Aradigm, Novo Nordisk and Novo Nordisk Delivery Technologies, Inc. of their respective obligations under the Restructuring Agreement.

      NOW, THEREFORE, in consideration of the premises set forth above and for other good and valuable consideration, receipt of which is hereby acknowledged, the Parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

      SECTION 1.01.     Definitions.

      The following terms, as used herein, shall have the following meanings:

      “Affiliates” shall have the meaning set forth in the Restructuring Agreement.

      “Alternative Technology” shall mean any pulmonary drug delivery technology that may be covered by the Aradigm Selected Pulmonary Delivery Patent Rights, but that (a) does not use any Aradigm Know-How and (b) is not claimed by any Aradigm Patent Rights.

      “Alternative Technology Effective Date” means the date that is the earlier of (a) three (3) years after the delivery (without subsequent withdrawal) as permitted under Section 2.07(c)) by Novo Nordisk to Aradigm of an Alternative Technology Notice for a product using a specific insulin or insulin analog class described in such Alternative Technology Notice and (b) the granting of Regulatory Approval for such product.

      “Alternative Technology Notice” means written notice provided by Novo Nordisk to Aradigm pursuant to Section 2.07(c) stating that Novo Nordisk intends to commence commercialization of a product using an Alternative Technology to deliver insulin and insulin analogs.

      “Aradigm Background IPR” shall mean any and all knowledge, information, expertise, results, improvements or inventions (whether patentable or not), and all related intellectual property rights, Made Jointly by the Parties or individually by one (1) of the Parties as a part of the Development Program under the Development and License Agreement prior to the Effective Date and which relate to the Packaged Product (except as specified with respect to the Program Compounds, formulations thereof or the interactions between materials and such formulations) and the Device. The Aradigm Background IPR shall be included within the Aradigm Patent Rights or Aradigm Know-How, as applicable.

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      “Aradigm Know-How” shall mean all knowledge, information and expertise made or developed by Aradigm prior to the Effective Date related to the development and production of the Device, the Packaged Product and the Program Compounds (introduced into the Development Program prior to the Effective Date), whether or not covered by Aradigm Patent Rights or any other industrial or intellectual property right of Aradigm, including but not limited to clinical data, technical data, experimental results, specifications, techniques, methods, processes and written materials.

      “Aradigm New IPR” shall mean any and all knowledge, information, expertise, results, improvements or inventions, whether patentable or not, and all related intellectual property rights, that are made or developed after the Effective Date and prior to the termination of this Agreement, and that: (a) are Made Jointly by Novo Nordisk and Aradigm or by Aradigm alone and that relate solely to any Device (including without limitation the manufacturing thereof) and/or Packaged Product (including without limitation the manufacturing thereof, except as specified with respect to the Program Compounds, formulations thereof or the interactions between materials and such formulations); or (b) are made or developed by Aradigm alone and that relate solely to any method of treatment within the Field (including without limitation medical data, algorithms for dosing, models for predicting dosing and/or optimizing treatment, clinical data and patient data).

      “Aradigm Patent Rights” shall mean any and all of Aradigm’s patents and patent applications possessed by Aradigm prior to the Effective Date (other than the Aradigm Selected Pulmonary Delivery Patent Rights) related to the Device, the Packaged Product and the Program Compounds introduced into the Development Program prior to the Effective Date, including (a) the patents and patent applications listed on Schedule 3.13(a)(i) to the Restructuring Agreement, (b) patents and patent applications relating to the development, production and use of the Device, the Packaged Product, and the Program Compounds introduced into the Development Program prior to the Effective Date, and (c) all continuations, continuations-in-part, divisionals or re-issues of such patents and patent applications and any patents issuing thereon or extensions thereof or any foreign counterparts thereof. Extensions of patents shall include: (i) extensions under the U.S. Patent Term Restoration Act, (ii) extensions of patents under the Japanese Patent Law, (iii) Supplementary Protection Certificates for members of the European Patent Convention and other countries in the European Economic Area and (iv) similar extensions under any applicable law in the Territory.

      “Aradigm Selected Pulmonary Delivery Patent Rights” shall mean the patent claims listed in Appendix A and Obvious Variants thereof.

      “Baselines” shall mean the forecast amounts of Net Sales of the Insulin Compound Packaged Products and the Device separately communicated to Aradigm prior to the date hereof and “Baseline” shall mean the forecast amount for any particular calendar year following First Marketing of the Insulin Compound Packaged Products and the Device by any member of the Novo Nordisk Affiliate Group or any permitted sublicensees thereof.

      “Broad Regulatory Approval” shall mean, with respect to Packaged Products and the Device, Regulatory Approval authorizing marketing thereof for the treatment of patients with diabetes mellitus (type 1 and type 2).

      “Business Day” shall mean a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.

      “Co-Existence Agreement” shall have the meaning set forth in the Restructuring Agreement.

      “Development Program” shall mean the development of the Packaged Product and the Device, including the pre-clinical and clinical development programs required for registration and approval of the Packaged Product and the Device in the Territory conducted by the Parties under the Development and License Agreement prior to the Effective Date, and as thereafter conducted by Novo Nordisk in accordance with this Agreement.

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      “Device” shall mean: (a) any pulmonary delivery device that (i) has been developed in the course of the Development Program prior to the Effective Date, and (ii) is based on the device technology described by the Aradigm Patent Rights or utilizing Aradigm Know-How; and (b) any improved or later generation version thereof, in each case, together with any accessories, used to administer any Program Compound contained in a disposable unit dose package, developed in the course of the Development Program after the Effective Date.

      “Diligent Efforts” shall mean, with respect to efforts of any Party hereto, no less than the efforts that such Party applies to: (a) development, manufacture or commercialization of its own compounds or products with similar regulatory requirements and market potential; and (b) prosecution, maintenance and/or defense of intellectual property rights of similar importance.

      “Effective Date” shall mean the date hereof.

      “Field” shall mean pulmonary administration of insulin, insulin analogs and any other compounds whose principal therapeutic effect is to control blood glucose levels in humans, including but not limited to glucagon-like peptide (“GLP”), GLP-1 and analogs of GLP.

      “First Marketed Product and Device” shall be deemed to mean the first of any of the following products for which First Marketing by any member of the Novo Nordisk Affiliate Group or any permitted sublicensees thereof shall have occurred: (1) the Insulin Compound Packaged Product and the Device, (2) any Packaged Product (relating to Program Compounds other than the Insulin Compound) and the Device and (3) any products using an Alternative Technology to deliver a specific insulin or insulin analog class (in such case, only to the extent that royalties are payable under Section 2.07(e)(i)).

      “First Marketing” shall mean the making available for sale of the applicable product in commercial quantities for the first time in any country in the Territory.

      “First Marketing Commencement Date” shall mean the date on which the applicable First Marketing shall have commenced.

      [****]

      “Insulin Compound” shall mean recombinant human insulin.

      “Insulin Compound Packaged Product” shall mean the disposable unit dose packages developed in the course of the Development Program containing Insulin Compound, packaged for use with the Device for pulmonary delivery of such Insulin Compound.

      “Joint Marketing Partners” shall mean any co-marketers, co-promoters and/or rental sales forces.

      “Later Marketed Product and Device” shall be deemed to mean any and all of the following products for which First Marketing by any member of the Novo Nordisk Affiliate Group or any permitted sublicensees thereof shall have occurred following First Marketing of the First Marketed Product and Device: (1) the Insulin Compound Packaged Product and the Device, (2) any Packaged Product (relating to Program Compounds other than the Insulin Compound) and the Device or (3) any products using an Alternative Technology to deliver a specific insulin or insulin analog class (in such case, only to the extent that royalties are payable under Section 2.07(e)(i)).

      “Know-How” shall mean the Aradigm Know-How and Novo Nordisk Know-How, collectively.

      “Made Jointly” shall mean “made jointly” as such term is interpreted under applicable U.S. patent law.

      “Net Sales” shall mean the invoiced gross revenue from sales of the applicable product, when invoiced to any third party in an arm’s length transaction less: (a) Trade, cash and/or quantity discounts or rebates, if any; (b) Credits or allowances given for rejection or return of such products previously sold as well as the cost of replacement products, including shipping and other incidental charges related thereto; (c) Any tax or governmental charge other than income tax levied on the sale thereof or customs duties associated therewith;

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      “Novo Nordisk Affiliate Group” shall mean Novo Nordisk and its Affiliates, collectively.

      “Novo Nordisk Background IPR” shall mean any and all knowledge, information, expertise, results, improvements or inventions (whether patentable or not), and all related intellectual property rights, Made Jointly by the Parties or individually by one (1) of the Parties as a part of the Development Program under the Development and License Agreement prior to the Effective Date and which relate to any Program Compound, formulations thereof or the interactions between materials and such formulations, but excluding aspects of the formulation relating to the aerosolization of the Program Compounds. The Novo Nordisk Background IPR shall be included within the Novo Nordisk Patent Rights or Novo Nordisk Know-How, as applicable.

      “Novo Nordisk Know-How” shall mean all knowledge, information and expertise made or developed by Novo Nordisk prior to the Effective Date related to the Insulin Compound or that Novo Nordisk otherwise has contributed (or will contribute) to the Development Program, whether or not covered by Novo Nordisk Patent Rights or any other industrial or intellectual property right of Novo Nordisk, including but not limited to technical data, experimental results, specifications, techniques, methods, processes and written materials.

      “Novo Nordisk New IPR” shall mean (a) any and all knowledge, information, expertise, results, improvements or inventions, whether patentable or not, and all related intellectual property rights, made or developed by Novo Nordisk alone as a part of the Development Program after the Effective Date and prior to the termination of this Agreement that relate solely to any Device (including without limitation the manufacturing thereof) and/or Packaged Product (including without limitation the manufacturing thereof); (b) any and all knowledge, information, expertise, results, improvements or inventions, whether patentable or not, and all related intellectual property rights, Made Jointly by Novo Nordisk and Aradigm or by Novo Nordisk alone as a part of the Development Program after the Effective Date and prior to the termination of this Agreement and which relate solely to any method of treatment within the Field (including without limitation medical data, algorithms for dosing, models for predicting dosing and/or optimizing treatment, clinical data and patient data); and (c) any and all results, improvements or inventions, whether patentable or not, and all related intellectual property rights, Made Jointly by Novo Nordisk and Aradigm, by Aradigm alone or by Novo Nordisk alone as a part of the Development Program after the Effective Date and prior to the termination of this Agreement and which relate to any Program Compound, formulations thereof or the interactions between materials and such formulations.

      “Novo Nordisk Patent Rights” shall mean any and all of Novo Nordisk’s patents and patent applications possessed by Novo Nordisk prior to the Effective Date related to any Program Compound, including (a) patents and patent applications relating to the production, development and use of any Program Compound and (b) all continuations, continuations-in-part, divisionals or re-issues of such patents and patent applications and any patents issuing thereon or extensions thereof or any foreign counterparts thereof. Extensions of patents shall include: (i) extensions under the U.S. Patent Term Restoration Act, (ii) extensions under the Japanese Patent Law, (iii) Supplementary Protection Certificates for members of the European Patent Convention and other countries in the European Economic Area and (iv) similar extensions under any applicable law in the Territory.

      “Obvious Variant” shall mean any patent claim for which the United States Patent and Trade Office could properly issue a double patenting rejection in respect of the specific claims of the patents listed in Appendix A if the claim in question were presented by itself in a new patent application owned by Aradigm. For non-U.S. patent and non-U.S. patent applications, a claim that is an Obvious Variant of one (1) or more claims listed in Appendix A is any claim that, if it were presented in a new U.S. patent application owned by Aradigm, could properly be the subject of a double patenting rejection by the United States Patent and Trade Office. For the avoidance of doubt, Obvious Variants of the claims listed in Appendix A shall be included in the license granted under Section 3.02.

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      “Packaged Product” shall mean any disposable unit dose package developed in the course of the Development Program containing the Insulin Compound or other Program Compounds, packaged for use with the Device for pulmonary delivery of such Insulin Compound or other Program Compounds.

      “Parties” shall mean the parties hereto and “Party” shall mean any one of the parties hereto.

      “Patent Rights” shall mean the Aradigm Patent Rights, patent rights under the Aradigm New IPR, Aradigm Selected Pulmonary Patent Rights, Novo Nordisk Patent Rights and patent rights under the Novo Nordisk New IPR, collectively.

      “Person” shall mean an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

      “Program Compounds” shall mean the Insulin Compound and any other insulin compounds, insulin analog compounds and non-insulin compounds included in the Development Program by Novo Nordisk in its sole discretion.

      “Regulatory Approval” shall mean the granting of a commercial marketing authorization for (a) a Packaged Product for delivery of a Program Compound using the Device, (b) the Device or (c) any product based on any Alternative Technology, as the case may be.

      “Regulatory Submission” shall mean the filing of an application for a commercial marketing authorization for (a) a Packaged Product for delivery of a Program Compound using the Device, (b) the Device or (c) any product based on any Alternative Technology, as the case may be.

      “Stage 1 Commercialization Period” shall mean the period commencing on the applicable First Marketing Commencement Date and ending on the third anniversary thereof.

      “Stage 2 Commercialization Period” shall mean the period commencing on the expiration of the applicable Stage 1 Commercialization Period and ending on the first anniversary thereof.

      “Stage 3 Commercialization Period” shall mean the period commencing on the expiration of the applicable Stage 2 Commercialization Period and ending on the termination of this Agreement; provided that, in the event of a termination by Novo Nordisk pursuant to either or both of Section 10.02 and Section 10.04, the Stage 3 Commercialization Period shall end on the later of (A) the date that is ten (10) years from the First Marketing of any Packaged Product and the Device, or another pulmonary product, as the case may be, and (B) the expiration date of the last patent required to cover the Packaged Product and the Device, or another pulmonary product, as the case may be, and the development, manufacturing, use, marketing, distribution, sale, offer for sale, importation and/or exportation thereof in and from the Territory.

      “Status Report” shall mean the status report on the Development Program to be provided by Novo Nordisk to Aradigm at meetings of the Review Committee as contemplated by Section 2.04(f) in a form consistent with Novo Nordisk’s practice.

      “Territory” shall include any and all countries of the world.

      “Transaction Agreements” shall have the meaning set forth in the Restructuring Agreement.

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      SECTION 1.02.     Other Defined Terms. Each of the following terms is defined in the Section set forth opposite such term:

      SECTION 1.03.     Other Definitional and Interpretative Provisions. Unless specified otherwise, in this Agreement the obligations of any Party consisting of more than one person are joint and several. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Appendices, Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Appendices, Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.

ARTICLE 2

RIGHTS AND OBLIGATIONS OF THE PARTIES

      SECTION 2.01.     Development Program. Novo Nordisk shall conduct the Development Program in its sole discretion and at its own expense.

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      SECTION 2.02.     Review Committee. The Parties shall establish a Review Committee (“Review Committee”) within thirty (30) calendar days of the Effective Date. The first meeting of such Review Committee shall be held no later than April 1, 2005. The Review Committee shall

      SECTION 2.03.     Obligations Of The Parties In Respect Of The Review Committee. (a) The Parties agree that during the meetings of the Review Committee at which the semi-annual technology review required under Section 2.04 shall take place, they shall disclose and provide reasonable details relating to: (i) intellectual property rights and/or know-how with potential application in the Field in general and in later generation Packaged Products and Devices in particular; and (ii) plans, programs, results and ongoing developments that could lead to or result in Aradigm New IPR or Novo Nordisk New IPR, as applicable, including Aradigm New IPR and Novo Nordisk New IPR relating to later generation Packaged Products and Devices. For the avoidance of doubt, the obligation of Novo Nordisk to disclose and provide reasonable details under this Section 2.03 shall extend only to plans, programs, results and ongoing developments within the Development Program.

      (b) After Aradigm discloses and provides reasonable details relating to its intellectual property rights with potential application in the Field in accordance with Section 2.03(a), the Parties shall discuss and determine in good faith whether or not such intellectual property rights constitute Aradigm New IPR, Novo Nordisk New IPR or neither. In the event such determination requires further research and/or development to evaluate the utility of such intellectual property rights within the Development Program, the Parties shall agree in writing to the scope and design of such research and/or development activities pursuant to consulting arrangements as contemplated by Section 2.04(c) below. The Parties shall discuss in good faith and agree whether or not any knowledge, information, expertise, results, improvements or inventions, whether patentable or not, and all related intellectual property rights, made or developed by Aradigm solely, Novo Nordisk solely, or Aradigm and Novo Nordisk jointly arising out of any such further research and/or development following disclosure of such Aradigm intellectual property rights constitute Aradigm New IPR, Novo Nordisk New IPR or neither. In the event the Parties determine that the Aradigm intellectual property rights have applications outside the Development Program or have applications both inside and outside the Development Program, upon written request by Novo Nordisk to Aradigm, Aradigm shall in good faith consider granting, but shall have no obligation to grant, a license under such intellectual property rights to Novo Nordisk for applications outside of the Development Program on terms to be agreed in writing between the Parties.

      (c) Novo Nordisk shall provide Aradigm with a copy of a presentation relating to any Status Report to be delivered at a Review Committee meeting at least ten (10) days prior to such Review Committee meeting.

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      SECTION 2.04.     Responsibilities Of The Review Committee. The Review Committee shall be responsible for the following matters:

      SECTION 2.05.     Diligent Efforts. Novo Nordisk agrees that it will use its Diligent Efforts to develop and commercialize the Insulin Compound Packaged Product and the Device, including without limitation the following:

For purposes of this Section 2.05, any reference to amounts in U.S. dollars to be funded or expended by Novo Nordisk shall be calculated on a pro rata basis for any calendar year in which this Agreement is not in full force and effect for the entire calendar year based on the actual number of days elapsed prior to the end of such calendar year.

      SECTION 2.06.     Use Restrictions. Aradigm shall use Insulin Compounds supplied by Novo Nordisk, the Novo Nordisk Know-How and the know-how included within Novo Nordisk New IPR only as provided for in this Agreement. Novo Nordisk shall use the Aradigm Know-How and know-how included within Aradigm New IPR only as provided for in this Agreement.

      SECTION 2.07.     Alternative Technology. (a) Subject to the terms of this Agreement, Novo Nordisk shall have the right to develop and commercialize products based on Alternative Technology for pulmonary delivery of insulin, insulin analogs, and non-insulin compounds within the Field.

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      (b) In the event that Novo Nordisk commences clinical trials in humans for any product based on any Alternative Technology to deliver a non-insulin compound (a “Non-Insulin Compound”), such Non Insulin Compound will then be excluded from the Field, and Aradigm shall have the right to research, develop and/or commercialize (directly or through licensees) products based on Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights, Aradigm New IPR and/or Aradigm Know-How to deliver such Non-Insulin Compound or any compound that is in the same chemical class as such Non-Insulin Compound; provided that, Aradigm shall not be entitled to any license, including any implied license, under any patent rights or know-how of Novo Nordisk covering such Non-Insulin Compound. Novo Nordisk shall notify Aradigm in writing prior to the first dosing of the first patient in the first such clinical trial, if any.

      (c) Aradigm hereby acknowledges that: (i) subject to the terms of this Agreement, Novo Nordisk may be simultaneously conducting research and development alone or in collaboration with third parties on products using an Alternative Technology to deliver insulin and insulin analogs; and (ii) Novo Nordisk may supply insulin and insulin analogs to third parties free of charge for use in such third parties’ clinical studies using such third parties’ pulmonary delivery technology in exchange for rights in such technology in the Field; provided that, notwithstanding the foregoing, in the event that Novo Nordisk is conducting research on and developing any products using any Alternative Technology to deliver a specific insulin or insulin analog class, Novo Nordisk shall provide an Alternative Technology Notice to Aradigm of its intention to commence commercialization of such product at least three (3) years prior to First Marketing of such product; provided further that, Novo Nordisk shall not deliver any Alternative Technology Notice within twelve (12) months of the Effective Date. The Alternative Technology Notice may be withdrawn by Novo Nordisk, without penalty, for a specific insulin or insulin analog class at any time during the twelve (12) months following delivery of the Alternative Technology Notice.

      (d) From receipt of the Alternative Technology Notice until, if applicable, such notice is withdrawn as permitted under Section 2.07(c), the licenses described in Section 3.01 and Section 3.02 shall become non-exclusive to the extent necessary to permit Aradigm to discuss the product opportunity with potential marketing partners, prepare for potential development activities, and/or engage in exploratory trials, for the delivery of the specific insulin or insulin analog class that is the subject of such Alternative Technology Notice. In the event that Novo Nordisk has not withdrawn such Alternative Technology Notice within twelve (12) months as permitted under Section 2.07(c), the licenses described in Section 3.01 and Section 3.02 shall become non-exclusive, and the license described in Section 3.04(b) shall include the Field, to the extent necessary to enable Aradigm, alone or in collaboration with one (1) marketing partner, to develop and, from and after the Alternative Technology Effective Date, to commercialize devices and/or dose packages for the delivery of the specific insulin or insulin analog class that is the subject of such Alternative Technology Notice. Thereafter, for each Alternative Technology Notice delivered by Novo Nordisk, Aradigm may engage one (1) additional marketing partner in accordance with the procedures, for the purposes, on the timetables and subject to the limitations, set forth in this Section 2.07. Notwithstanding anything else contained herein, if Novo Nordisk withdraws the Alternative Technology Notice for a specific insulin or insulin analog class at any time during the twelve (12) months following delivery of the Alternative Technology Notice, then the licenses granted under Section 3.01 and Section 3.02 shall become exclusive again with respect to the specific insulin or insulin analog class that is the subject of such withdrawn Alternative Technology Notice.

      (e) No later than two (2) years after receipt of the Alternative Technology Notice, without subsequent withdrawal by Novo Nordisk, Aradigm may elect, by notifying Novo Nordisk in writing, to market, either alone or in collaboration with one (1) marketing partner, an insulin or insulin analog class that it would have the right to commercialize from and after the Alternative Technology Effective Date.

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      (f) To the extent that Novo Nordisk obtains Regulatory Approval of any product using any Alternative Technology prior to the expiration of three (3) years following delivery of an Alternative Technology Notice for such product to Aradigm pursuant to Section 2.07(c), Aradigm and Novo Nordisk agree to negotiate in good faith regarding the potential for Novo Nordisk to commence First Marketing of such product using any Alternative Technology prior to the expiration of such three (3) year period; provided that, nothing in this Section 2.07(f) shall serve to limit in any way Aradigm’s rights or obligations hereunder or to provide Novo Nordisk with a right to commence First Marketing of any product using any Alternative Technology until the expiration of three (3) years following delivery of the Alternative Technology Notice for such product to Aradigm pursuant to Section 2.07(c).

      SECTION 2.08.     Noncompetition. For so long as the license granted to Novo Nordisk under Section 3.01 is exclusive in the Field, except for activities and agreements otherwise expressly permitted under this Agreement, Aradigm shall be prohibited from entering into any agreement with any third party with respect to any activities within the Field, and shall not conduct any work program in the Field with Insulin Compound or any other Program Compound provided by any third party supplier without the prior written consent of Novo Nordisk.

      SECTION 2.09.     Product Liability. Subject to the terms of this Section 2.09, product liabilities that are incurred prior to the first Regulatory Submission will be allocated between the Parties based on the fault or relative fault of the Parties. If negligence or fault cannot be so determined or allocated, then such liability shall be borne 80% by Novo Nordisk and 20% by Aradigm. Until the first Regulatory Submission, Aradigm shall be responsible for product liability to the extent such liability is attributable to: (a) any failure by Aradigm prior to the Effective Date to manufacture the Packaged Product and/or the Device in accordance with applicable standards and practices; (b) defects or flaws in design that are caused by Aradigm until the subsystem of the Packaged Product and/or Device as to which any such defect or flaw in design relates shall have been validated and verified by Novo Nordisk; or (c) Aradigm’s negligence. Following the first Regulatory Submission, Novo Nordisk shall assume responsibility for all product liability arising out of the conduct of the Development Program and the practice by any member of the Novo Nordisk Affiliate Group of the licenses granted to Novo Nordisk in this Agreement and Aradigm shall have no responsibility for any product liability arising out of the practice by any agent or permitted sublicensees of any member of the Novo Nordisk Affiliate Group of the licenses granted to Novo Nordisk in this Agreement.

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ARTICLE 3

GRANT OF LICENSE

      SECTION 3.01.     License. Subject to the terms of this Agreement, Aradigm hereby grants Novo Nordisk a world-wide, exclusive, royalty-bearing license under the Aradigm Patent Rights (including applicable Aradigm Background IPR), Aradigm Selected Pulmonary Delivery Patent Rights, Aradigm New IPR and Aradigm Know-How (including applicable Aradigm Background IPR) to (a) develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export any Packaged Product and the Device in and from the Territory for use within the Field, with the right to sublicense its customers and Joint Marketing Partners pursuant to Section 3.03, and (b) otherwise exercise and perform its rights and obligations under this Agreement.

      SECTION 3.02.     Additional License Under Aradigm Selected Pulmonary Delivery Patent Rights. (a) Subject to the terms of this Agreement, Aradigm hereby grants Novo Nordisk a world-wide, exclusive, royalty-bearing license, under the Aradigm Selected Pulmonary Delivery Patent Rights to develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export products described in an Alternative Technology Notice that are covered by the Aradigm Selected Pulmonary Delivery Patent Rights in and from the Territory for use within the Field, with the right to sublicense its customers and Joint Marketing Partners pursuant to Section 3.03.

      (b) For purposes of this Section 3.02, the patent claims listed in Appendix A, including “Obvious Variants” of those claims as defined herein, are the only claims that Novo Nordisk will be licensing under this section and this license will not imply a license to any other patent claim held by Aradigm either issued, pending or in a future patent yet to be filed, unless such patent claim is an Obvious Variant of the patents listed in Appendix A. Novo Nordisk expressly disclaims any right to license the Aradigm Patent Rights, including patents (other than patents also listed in Appendix A and Obvious Variants thereof) listed in Schedule 3.13(a)(i) of the Restructuring Agreement by reason of the license granted under Section 3.02. Novo Nordisk acknowledges that some of the non-licensed patent claims contained in the Aradigm Patent Rights, including the patents (other than patents also listed in Appendix A and Obvious Variants thereof) listed in Schedule 3.13(a)(i) of the Restructuring Agreement may be required to gain freedom to operate but that nevertheless there is no implied license thereunder granted to Novo Nordisk.

      SECTION 3.03.     Sublicense. Subject to the terms of this Agreement, Aradigm hereby grants Novo Nordisk the right to sublicense its customers and Joint Marketing Partners, under Novo Nordisk’s licenses under the Aradigm Patent Rights (including applicable Aradigm Background IPR), Aradigm Selected Pulmonary Delivery Patent Rights, Aradigm New IPR and Aradigm Know-How (including applicable Aradigm Background IPR) in this Agreement (as applicable) to: (a) use any Packaged Product and the Device and (b) market, distribute, sell, offer to sell, import and/or export any Packaged Product and the Device, so long as said items were bought from any member of the Novo Nordisk Affiliate Group or from a Joint Marketing Partner.

      SECTION 3.04.     Additional Licenses. (a) Subject to the terms of this Agreement, Aradigm shall and hereby does grant Novo Nordisk a perpetual, world-wide, non-exclusive, royalty-free license under any Aradigm New IPR Made Jointly by Novo Nordisk and Aradigm to develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export any product outside the Field, with the right to sublicense its customers and Joint Marketing Partners pursuant to Section 3.03.

      (b) Subject to the terms of this Agreement, Novo Nordisk shall and hereby does grant Aradigm a perpetual, world-wide, non-exclusive, royalty-free license under any Novo Nordisk New IPR that relate solely to any Device (or manufacturing thereof) and/or Packaged Product (or manufacturing thereof, except the Program Compounds, formulations thereof and the interactions between materials and such formulations) to develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export any product outside the Field, with a right to sublicense. Such right to sublicense shall be royalty-bearing (such royalty to be determined in accordance with the provisions set forth in Section 5.03(a)) to the extent that (i) Aradigm

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      (c) Subject to the terms of this Agreement, Novo Nordisk shall and hereby does grant Aradigm a perpetual, world-wide, non-exclusive, royalty-free license under any Novo Nordisk New IPR Made Jointly by Novo Nordisk and Aradigm relating solely to any method of treatment to develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export any product outside the Field.

      (d) Aradigm hereby agrees not to object to or disagree with the use by Novo Nordisk of the AERIX trademark pursuant to the terms of the Co-Existence Agreement.

      SECTION 3.05.     Publicly Available Information. For the avoidance of doubt, nothing contained in this Agreement shall preclude any member of the Novo Nordisk Affiliate Group from using any publicly-available knowledge, information and expertise related to or disclosed in the Patent Rights or that is otherwise publicly-available.

ARTICLE 4

SUPPLY

      SECTION 4.01.     Novo Nordisk Supply Obligations. Novo Nordisk agrees that it will use its reasonable efforts to obtain consent from third party suppliers to permit Aradigm to purchase inventory at a cost no greater to Aradigm than the cost to Novo Nordisk so long as (i) the inventory is identical to inventory purchased by Novo Nordisk for exclusive use in the Development Program and (ii) the delivery of such inventory is consistent in all respects with the delivery of inventory ordered by Novo Nordisk. Notwithstanding the foregoing, Novo Nordisk shall not be responsible for ordering, invoicing, logistical support or warehousing of the inventory purchased by Aradigm in accordance with this Section 4.01 and Aradigm shall be responsible for any and all actions relating to such ordering, invoicing, logistical support and warehousing.

ARTICLE 5

ROYALTY PAYMENTS

      SECTION 5.01.     Royalty Payments. (a) In consideration of the license and marketing rights granted by Aradigm in accordance with Section 3.01 and Section 3.02, Novo Nordisk shall pay to Aradigm:

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      (b) In consideration of the license and marketing rights granted by Aradigm in accordance with Section 3.01 and Section 3.02, Novo Nordisk shall also pay to Aradigm (i) five and one-quarter percent (5.25%) of Net Sales of any Later Marketed Product and Device by any member of the Novo Nordisk Affiliate Group or any permitted sublicensees thereof during the Stage 1 Commercialization Period; and (ii) six percent (6.00%) of Net Sales of any Later Marketed Product and Device by any member of the Novo Nordisk Affiliate Group or any permitted sublicensees thereof during the Stage 2 Commercialization Period and the Stage 3 Commercialization Period; provided that: in the event that such Later Marketed Product and Device is the Insulin Compound Packaged Product and the Device and that Net Sales thereof exceed the Baseline in any year during the Stage 2 Commercialization Period and the Stage 3 Commercialization Period, Novo Nordisk shall pay to Aradigm six percent (6.00%) of such Net Sales of such Insulin Compound Packaged Product and the Device up to and including the applicable Baseline in such year plus six and three-tenths percent (6.30%) of Net Sales (if any) of such Insulin Compound Packaged Product and the Device in excess of the applicable Baseline in such year.

      SECTION 5.02.     Royalty Payments Schedule. Payments due in accordance with Section 5.01 and any royalty payments due under Articles 2 and 10 shall be payable within forty-five (45) days after January 1, April 1, July 1 and October 1 of each calendar year in which such royalties are due under this Agreement. The Party with a royalty payment obligation hereunder shall provide the other Party with a reconciliation report in a form to be agreed between the Parties showing the calculation of Net Sales for each calendar year within seventy-five (75) days after the end of such year. In the event that a reconciliation report demonstrates that a Party (the “Royalty Paying Party”) shall have paid an amount in excess of or less than the royalty payments due under Section 5.01 or Articles 2 or 10, as the case may be, then the other Party (the “Royalty Receiving Party”) shall pay to the Royalty Paying Party such excess amount, or the Royalty Paying Party shall pay to the Royalty Receiving Party the difference between the amount otherwise due hereunder and the amount such Royalty Paying Party shall have paid in accordance with the first sentence of this Section 5.02, as the case may be.

      SECTION 5.03.     Additional Royalty Provisions. (a) Any reference to “royalty-bearing” or to a “royalty” shall mean, unless otherwise expressly established in this Agreement, a royalty or other compensation that will be negotiated in good faith between the Parties in respect of the applicable patent(s) included within the licensed intellectual property rights. Each such royalty will be agreed on a case-by-case basis, taking into account the non-exclusive or exclusive term, the importance of the originator’s invention and the strength and commercial importance of the applicable intellectual property rights (including the effect of any trade secret status of any Aradigm Know-How or Novo Nordisk Know-How, as the case may be). Additionally, the payment schedules, audit and other provisions of this Article 5 shall apply to the extent practicable, unless otherwise agreed by the Parties in writing.

      (b) For the avoidance of doubt, in no event shall either Aradigm pay a royalty to Novo Nordisk or Novo Nordisk pay a royalty to Aradigm, respectively, for Novo Nordisk New IPR or Aradigm New IPR, respectively, if such Novo Nordisk New IPR or Aradigm New IPR, respectively, is Made Jointly.

      (c) Following the expiration of the last to expire of the Aradigm Patents Rights, Aradigm Selected Pulmonary Delivery Patent Rights, and patents included in the Aradigm New IPR, if: (i) Novo Nordisk experiences a material reduction in the gross margins of products bearing royalties under this Agreement in the United States, any member state of the European Union and/or Japan as a result of pricing actions by competitors who, had such patents not expired, would be infringing one (1) or more of the Aradigm Patents Rights, Aradigm Selected Pulmonary Delivery Patent Rights or patents included in the Aradigm New IPR;

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      SECTION 5.04.     Record Keeping. Each Party shall maintain, for a period of three (3) years following the last day of the year to which such records and other financial information relate, complete and correct records of Net Sales and other financial information that it deems necessary to determine such Net Sales and shall report such information as it deems relevant along with each royalty payment made to the other Party in accordance with this Article 5 .

      SECTION 5.05.     Audit Right. (a) Aradigm may, no more than once in respect of each calendar year, at Aradigm’s expense, appoint an independent auditor (the “Independent Auditor”) reasonably acceptable to Novo Nordisk to review the payments made by Novo Nordisk to Aradigm in accordance with the provisions set forth in Articles 2, 5 and 10 in such calendar year. In the event the Independent Auditor determines that additional amounts are due to Aradigm, Novo Nordisk shall pay such additional amounts to Aradigm and, to the extent that such additional amounts represent at least five percent (5.00%) of the total amounts paid to Aradigm under Section 5.02 in respect of such calendar year, shall reimburse Aradigm for the fees and expenses of the Independent Auditor. In the event the Independent Auditor determines that additional amounts are due to Aradigm representing less than five percent (5.00%) of the total amounts paid to Aradigm under Section 5.02 in any calendar year, then Novo Nordisk shall have no obligation to reimburse Aradigm for the fees and expenses of the Independent Auditor.

      (b) Novo Nordisk may, no more than once in respect of each calendar year, at Novo Nordisk’s expense, appoint an Independent Auditor reasonably acceptable to Aradigm to review the payments made (if any) by Aradigm to Novo Nordisk in accordance with the provisions set forth in Articles 2, 5 and 10 in such calendar year. In the event the Independent Auditor determines that additional amounts are due to Novo Nordisk, Aradigm shall pay such additional amounts to Novo Nordisk and, to the extent that such additional amounts represent at least five percent (5.00%) of the total amounts paid to Novo Nordisk under Section 5.02 in respect of such calendar year, shall reimburse Novo Nordisk for the fees and expenses of the Independent Auditor. In the event the Independent Auditor determines that additional amounts representing less than five percent ( 5.00%) of the total amounts paid to Novo Nordisk under Section 5.02 in any calendar year are due to Novo Nordisk, then Aradigm shall have no obligation to reimburse Novo Nordisk for the fees and expenses of the Independent Auditor.

      SECTION 5.06.     Withholding Taxes. Under no circumstances shall either Party be required to pay any amount in excess of or in addition to the payments agreed under this Agreement. If any payment made by either Party under this Agreement is subject to withholding tax, such withholding tax shall be borne by the other Party and shall be deducted from any such payments made. Each Party shall support the other Party in its efforts of minimizing any such withholding taxes and reasonably provide such other Party with relevant information about documentation needed to reduce the withholding tax to a legal minimum or to secure applicable credits in respect thereof.

      SECTION 5.07.     Currency. Payments under this Agreement in respect of Net Sales made, and amounts expended, in currencies other than U.S. dollars shall be calculated on the average daily exchange rate for the applicable year-to-date period (i.e., from January 1 of each year to the last Business Day of the financial quarter in which such payment is made) for exchanging such currency into U.S. dollars at the rate for buying U.S. dollars published in the Wall Street Journal.

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ARTICLE 6

INTELLECTUAL PROPERTY

      SECTION 6.01.     Aradigm Intellectual Property Rights. (a) Except as provided in this Article 6, Aradigm shall remain the sole owner of all Aradigm Background IPR, Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights, Aradigm Know-How and Aradigm New IPR and shall use Diligent Efforts to maintain and defend such Aradigm Background IPR, Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights, Aradigm Know-How and Aradigm New IPR.

      (b) Aradigm shall be responsible for filing, maintaining and defending any patents filed based on Aradigm Background IPR and will timely inform Novo Nordisk of its intentions, activities and filings in this respect. Aradigm will grant Novo Nordisk a perpetual, world-wide, non-exclusive, royalty-free license under the Aradigm Background IPR, to develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export any product outside the field of pulmonary delivery, with the right to sublicense. Should Aradigm decide not to patent an invention included in the Aradigm Background IPR in any country, or should Aradigm decide to abandon any such patent or patent application in any country, then Novo Nordisk shall have the right to do so at its expense. In such case, Novo Nordisk shall in its sole discretion have the option of becoming the owner thereof or, in the alternative, an exclusive licensee thereof pursuant to Section 6.06. If Novo Nordisk elects to become the owner of any patent or patent application based on such Aradigm Background IPR, Novo Nordisk shall grant Aradigm a royalty-free license thereunder to develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export any product for the life of the patent (and such license shall be limited to products outside the Field for so long as Novo Nordisk’s license under Section 3.01 remains exclusive as to any Aradigm Patent Right and, thereafter, outside and inside the Field), with the right to sublicense.

      SECTION 6.02.     Novo Nordisk Intellectual Property Rights. (a) Except as provided in this Article 6, Novo Nordisk shall remain the sole owner of all Novo Nordisk Background IPR, Novo Nordisk Patent Rights, Novo Nordisk Know-How and Novo Nordisk New IPR.

      (b) Novo Nordisk shall be responsible for filing, maintaining and defending any patents filed based on Novo Nordisk Background IPR and will timely inform Aradigm of its intentions, activities and filings in this respect. Novo Nordisk will grant Aradigm a perpetual, world-wide, non-exclusive, royalty-free license under the Novo Nordisk Background IPR (to the extent such Novo Nordisk Background IPR relates to the Insulin Compound), to develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export any product outside the Field, with the right to sublicense. Should Novo Nordisk decide not to patent an invention included in the Novo Nordisk Background IPR in any country, or should Novo Nordisk decide to abandon any such patent or patent application in any country, then Aradigm shall have the right to do so at its expense. In such case, Aradigm shall in its sole discretion have the option of becoming the owner thereof or, in the alternative, an exclusive licensee thereof pursuant to Section 6.06. If Aradigm elects to become the owner of any patent or patent application based on such Novo Nordisk Background IPR, Aradigm shall grant Novo Nordisk a royalty-free license thereunder to develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export any product within the Field, with the right to sublicense.

      (c) Novo Nordisk shall have the option to take ownership of [****] (which is included in Aradigm Background IPR as of the Effective Date) and any divisionals, reissues or continuations thereof or become an exclusive licensee thereof pursuant to Section 6.06. In the event that Novo Nordisk provides Aradigm with written notice that it wishes to take ownership of such patent applications, then Aradigm shall take all reasonably requested steps to consummate such transfer of ownership and Novo Nordisk will grant Aradigm the license described in Section 6.02(b) to develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export any product outside the Field, with right to sublicense, with respect to [****] and any divisionals, reissues or continuations thereof.

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      SECTION 6.03.     Notice by Aradigm. (a) During the term of this Agreement, Aradigm shall provide written notice to Novo Nordisk of any results, improvements or inventions relevant to the Field prior to public disclosure of such results, improvements or inventions in order to enable Novo Nordisk to determine, upon consultation with Aradigm, the best method of protecting such results, improvements or inventions.

      (b) Aradigm shall provide periodically, but no less than twice per calendar year, to Novo Nordisk a list of results, improvements or inventions made by Aradigm relevant to the Field (including without limitation changes to the manufacturing process).

      (c) Aradigm shall provide reasonable access to its employees, contractors and suppliers to enable Novo Nordisk to perform intellectual property audits once per calendar year to ensure that adequate protection is sought and maintained for intellectual property developed by Aradigm within the Field or relevant to the Field. In the event that Novo Nordisk determines, as a result of its intellectual property audit or otherwise, that patent applications should be filed in any country, Novo Nordisk shall request Aradigm to pursue such patent applications; provided that, to the extent that Aradigm reasonably refuses such request, and solely with respect to any Aradigm New IPR under which Novo Nordisk is licensed pursuant to Section 3.01, Novo Nordisk shall have the right to file any such patent applications. In such case, Novo Nordisk shall in its sole discretion have the option of becoming the owner thereof or, in the alternative, an exclusive licensee thereof pursuant to Section 6.06. If Novo Nordisk elects to become the owner of any patent or patent application based on such Aradigm Background IPR, Novo Nordisk shall grant Aradigm a royalty-free license thereunder to develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export any product for the life of the patent (provided that, such license shall be limited to products outside the Field for so long as Novo Nordisk’s license under Section 3.01 remains exclusive as to any Aradigm Patent Right and thereafter, outside and inside the Field), with the right to sublicense. Aradigm shall use its Diligent Efforts to cause its employees and contractors to assist in prosecuting any patent applications requested by Novo Nordisk in accordance with this Section 6.03(c).

      (d) Novo Nordisk shall be entitled to bring or enter any litigation in the defense and enforcement of any patents filed by Novo Nordisk following Aradigm’s abandonment of such patent or patent application as contemplated in Section 6.01(b), Section 6.02(b) or Section 6.03(c) in respect of the activities of any infringer thereof in the Field or any patents licensed exclusively to Novo Nordisk under Section 6.06. Aradigm agrees to be joined as a party, and Novo Nordisk agrees to pay Aradigm’s reasonable litigation costs.

      SECTION 6.04.     Notice by Novo Nordisk. (a) During the term of this Agreement, Novo Nordisk shall provide written notice to Aradigm of any results, improvements or inventions relevant to the Development Program (other than any results, improvements or inventions relevant to formulation of compounds or to the interactions between materials and formulation of compounds) prior to public disclosure of such results, improvements or inventions to enable Aradigm to determine, upon consultation with Novo Nordisk, the best method of protecting the results, improvements or inventions.

      (b) Novo Nordisk shall provide periodically, but no less than twice per calendar year, to Aradigm a list of results, improvements or inventions made by Novo Nordisk relevant to the Development Program (other than any results, improvements or inventions relating to formulation of compounds or to the interactions between materials and formulation of compounds).

      (c) Novo Nordisk shall provide reasonable access to its employees, contractors and suppliers who are (or have been within one (1) year of the time at which such access is requested by Aradigm) working on the Development Program to enable Aradigm to perform intellectual property audits once per calendar year to ensure that adequate protection is sought and maintained for intellectual property developed by Novo Nordisk relevant to the Development Program (other than any results, improvements or inventions relating to formulation of compounds or to the interactions between materials and formulation of compounds). In the event that Aradigm determines, as a result of its intellectual property audit or otherwise, that patent applications should be filed in any country, Aradigm shall request Novo Nordisk to pursue such patent applications; provided that, to the extent that Novo Nordisk reasonably refuses such request, and solely with respect to any Novo Nordisk New IPR licensed under Section 3.04(b) and (c), Aradigm shall have the right to file any such patent applications. In such case, Aradigm shall in its sole discretion have the option of

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      (d) Aradigm shall be entitled to bring or enter any litigation in the defense and enforcement of any patents filed by Aradigm following Novo Nordisk’s abandonment of such patent or patent application as contemplated in Section 6.02(b) or Section 6.04(c) in respect of the activities of any infringer thereof outside the Field or any patents licensed exclusively to Aradigm under Section 6.06. Novo Nordisk agrees to be joined as a party, and Aradigm agrees to pay Novo Nordisk’s reasonable litigation costs.

      SECTION 6.05.     Pursuit of Patents. (a) The Parties agree that Aradigm’s counsel shall continue to file, prosecute and maintain all Aradigm Background IPR, Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights and Aradigm New IPR that are in each case in the Field, [****] and continuation applications related thereto. Aradigm shall keep Novo Nordisk reasonably informed of the progress of the applications and shall provide Novo Nordisk with copies of all substantive communications between Aradigm and the United States Patent and Trademark Office (or any other relevant patent authority). Furthermore, Aradigm shall provide Novo Nordisk with a reasonable opportunity to comment on proposed strategies and responses relating to such prosecution in the Field prior to their implementation by Aradigm’s counsel.

      (b) Aradigm’s costs for preparing, filing and prosecuting additional patent applications in respect of patents included within Aradigm Background IPR pursuant to Section 6.05(a), and the costs of maintaining any patents that may issue from such applications, shall be shared equally (i.e., 50/50) between Novo Nordisk and Aradigm. In the event that one (1) or more patents that are part of the Aradigm Background IPR serve as the basis for recovery of damages or other monetary award pursuant to a suit, action or proceeding under Section 7.02, then any amounts received by either Party from such recovery or award shall first be used to reimburse Aradigm and Novo Nordisk for their respective expenses related to the suit, action or proceeding, then to reimburse the Parties for the preparation, prosecution and maintenance costs of such patents or patent applications (to the extent incurred pursuant to this Section 6.05(b) and not previously reimbursed), and after such reimbursement any additional amounts shall be shared 1:2 by Aradigm and Novo Nordisk respectively. Further, if Aradigm licenses such patents outside the Field, or obtains damages or other recovery by enforcing such patents outside the Field, then, after Aradigm has recovered its duly documented internal and external costs of enforcing such patents, 50% of the amount of license fees reasonably allocable to the licensing of such patents, and 50% of the amount of such damages or other recovery, shall be paid to Novo Nordisk until such time as Novo Nordisk has received an amount equal to the amount of the costs of preparing, filing and maintaining such patents (and respective applications) that were paid by Novo Nordisk hereunder, and were not previously otherwise reimbursed.

      (c) In the event that Novo Nordisk does not agree that a particular patent application should be prepared, filed or prosecuted pursuant to Section 6.05(a), Aradigm’s costs for preparing and prosecuting such application, and the costs of maintaining any patents that may issue from such application, shall be the sole responsibility of Aradigm; and any amounts received by Aradigm resulting from the granting of licenses and/or recovery of damages or other monetary awards shall belong to Aradigm. Should Aradigm decide to abandon any patent application or patent that is filed, prosecuted or maintained pursuant to this Section 6.05, Novo Nordisk shall in its sole discretion have the option of becoming the owner thereof or, in the alternative, an exclusive licensee thereof pursuant to Section 6.06. If Novo Nordisk elects to become the owner of any patent or patent application, Novo Nordisk shall grant Aradigm a royalty-free license thereunder to develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export any product for the life of the patent (provided that, such license shall be limited to products outside the Field for so long as Novo

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      SECTION 6.06.     License Option In Lieu Of Ownership. In each case in which a Party has the right pursuant to this Article 6 of becoming the owner of a patent or patent application that the other Party has refused to file or otherwise decided to abandon, the Party having such right may elect (in its sole discretion and by notifying the other Party in writing) to become the exclusive licensee thereof rather than becoming the owner. If this election is made, then: (a) the electing Party will prepare, file, prosecute and/or maintain (as applicable) such patent application or patent at the electing Party’s direction and sole expense; (b) the non-electing Party shall, and hereby does, grant the electing Party a worldwide, exclusive, royalty-free license under such patent application or patent, where the scope and duration of such license will be equivalent to the scope and duration of rights such electing Party would have had if it became the owner of such patent application or patent under the applicable section of this Article 6; and (c) the non-electing Party shall continue to own such patent application or patent and shall retain for itself the same rights to the extent it would have been granted in the form of a non-exclusive license, with a right to sublicense, had the electing Party become the owner of such patent or patent application under the applicable section of this Article 6.

ARTICLE 7

PATENT COOPERATION

      SECTION 7.01.     Enforcement of Patent Rights. (a) If Aradigm or Novo Nordisk, as the case may be, becomes aware of (i) an actual or potential infringement of any of the Patent Rights by a third party practicing in the Field or an actual or potential infringement of Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights or patent rights under the Aradigm New IPR by a third party practicing outside the Field, or (ii) the fact that a third party practicing inside or outside the Field is challenging the enforceability or validity of any of the Patent Rights, Aradigm or Novo Nordisk, as the case may be, shall so notify Novo Nordisk or Aradigm, as the case may be, in writing within fifteen (15) days. The notice shall set forth the relevant facts (to the extent known by the notifying Party) in reasonable detail.

      (b) If Aradigm or Novo Nordisk, as the case may be, is served by a third party with legal process initiating any proceeding alleging (i) non-infringement of any Patent Rights by such third party practicing in the Field, (ii) that such third party practicing inside or outside the Field is challenging the enforceability or validity of any Patent Rights or (iii) anything that would adversely affect the other Party’s rights under this Agreement, including allegations of co-ownership, co-inventorship, or implied or explicit license, Aradigm or Novo Nordisk, as the case may be, shall so notify Novo Nordisk or Aradigm, as the case may be, in writing within five (5) days.

      SECTION 7.02.     Initiation of Action Relating to Patents. (a) With respect to Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights or Aradigm New IPR that are licensed exclusively to Novo Nordisk hereunder, except for those which Novo Nordisk has the option of exclusively licensing under Section 6.06 in lieu of ownership, when action is deemed necessary or advisable by Novo Nordisk and Aradigm to prevent infringement of such Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights or Aradigm New IPR by a third party practicing or making preparations to practice within the Field, to enforce such Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights or Aradigm New IPR against such third party practicing or making preparations to practice within the Field, and/or to defend against an action by a third party practicing or making preparations to practice within the Field challenging the enforceability or the validity or asserting the non-infringement of such Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights or Aradigm New IPR, then Novo Nordisk shall have the right (but not the obligation) to initiate any action or conduct any such suit. Aradigm shall have the right to join, at its own expense, such action and/or suit and to be represented in such action and/or suit by its own counsel. Furthermore, if Aradigm is required under applicable law to join any such suit, action, or proceeding, or if the failure of Aradigm to be a party to such suit, action, or proceeding would in the opinion of counsel to Novo Nordisk result in dismissal thereof, Aradigm shall execute all papers and perform such other acts as may be reasonably required to permit the litigation to be conducted, and Novo Nordisk shall reimburse

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      (b) If either (x) Novo Nordisk and Aradigm agree in accordance with the provisions set forth in Section 7.02(a) above that action is necessary, but Novo Nordisk does not commence such action within sixty (60) days of such agreement, or (y) in respect of an Aradigm Patent Right that is not a Field Claim (as defined below), Aradigm believes that action is necessary as to such Patent Right, but Novo Nordisk does not agree in the discussions above that action is necessary, then in either case Aradigm shall have the right to initiate and conduct, at its expense, an independent action against the third party infringer of the Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights or Aradigm New IPR in the Field. If Aradigm subsequently ceases to continue (other than by settlement) an action initiated or conducted under this Section 7.02(b), or such action is dismissed voluntarily or involuntarily, then Novo Nordisk shall have the right, but not the obligation to initiate, continue, and/or conduct, at its expense and subject to all other applicable provisions of this Section 7.02, an action as permitted by law against the third party in respect of its activities in the Field within sixty (60) days of Aradigm’s ceasing to continue its action against such third party or of such dismissal. For purposes of this Section 7.02(b), a “Field Claim” is a claim in the Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights or patent rights under the Aradigm New IPR that expressly and directly is limited to activities in the Field. For purposes of Section 7.02(a) and (b), Novo Nordisk shall not disagree, based primarily on any contractual obligations Novo Nordisk may have to a third party, with Aradigm’s belief that action is deemed necessary to prevent infringement of such Patent Rights by a third party practicing within the Field.

      (c) If the infringement in the Field involves sales of a Directly Infringing Product (as defined below), and Novo Nordisk believes that action is necessary, but Aradigm does not agree in the discussions above that action is necessary within sixty (60) days of commencing such discussions, then Novo Nordisk shall thereafter have the right to initiate and conduct, at its expense, an action against the third party based on the Directly Infringing Product, subject to all other applicable provisions of this Section 7.02. For purposes of this Section 7.02, a “Directly Infringing Product” shall mean either (x) a disposable unit dose package intended and capable for use to deliver a medicament within the Field in a device that is a copy of, or substantially the same as, a Device used or tested by Novo Nordisk in clinical trials under this Agreement, or (y) a pulmonary delivery device intended for and capable of using disposable unit dose package that is a copy of, or substantially the same as, that utilized in a Packaged Product used or tested by Novo Nordisk in clinical trials under this Agreement. As used herein and in Section 10.05(b)(ii) and Section 10.05(c)(i), the term “substantially the same as” with respect to a device means that the two devices being compared have the same general principles of function, such as: (A) active breath control; (B) delivery of an aerosol of fine particles; and (C) an aerosol created from a liquid formulation of drug. As used herein and in Section 10.05(b)(ii) and Section 10.05(c)(i), the term “substantially the same as” with respect to a disposable unit dose package means that the two disposable unit dose packages being compared have the same general principles of function, such as: (X) liquid drug formulation; and (Y) an aerosol of fine particles created through an aerosol nozzle integrated with a flexible porous membrane.

      (d) In a suit initiated or conducted by Novo Nordisk pursuant to Section 7.02(a)-(c), in the initiation, conduct and settlement of the suit Novo Nordisk shall consider in good faith the interests of Aradigm, both inside and outside the Field. Novo Nordisk shall keep Aradigm reasonably informed of the progress of the suit, action, or proceeding, and shall provide Aradigm in a manner reasonably designed to preserve attorney-client privilege with copies of all substantive communications relating to the suit, action, or proceeding, subject to confidentiality obligations to third parties. To the extent that Aradigm believes that a particular strategy for conduct and/or settlement of the suit proposed by Novo Nordisk would have a material adverse impact on Aradigm’s activities outside the Field and/or Aradigm’s interests outside the Development Program, the Parties agree to meet and discuss in good faith an alternative strategy to address Aradigm’s concerns, and Novo Nordisk shall not proceed with any strategy without Aradigm’s approval, which shall not

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      (e) In a suit initiated or conducted by Aradigm pursuant to Section 7.02(b), in the initiation, conduct and settlement of the suit Aradigm shall consider in good faith the interests of Novo Nordisk inside the Field. Aradigm shall keep Novo Nordisk reasonably informed of the progress of the suit, action, or proceeding, and shall provide Novo Nordisk in a manner reasonably designed to preserve attorney-client privilege with copies of all substantive communications relating to the suit, action, or proceeding, subject to confidentiality obligations to third parties. To the extent that Novo Nordisk believes that a particular strategy for conduct and/or settlement of the suit proposed by Aradigm would have a material adverse impact on Novo Nordisk’s interests in the Field, the Parties agree to meet and discuss in good faith an alternative strategy to address Novo Nordisk’s concerns, and Aradigm shall not proceed with any strategy without Novo Nordisk’s approval, which shall not be unreasonably withheld or delayed. Novo Nordisk shall fully cooperate with and supply all assistance reasonably requested by Aradigm in such action.

      (f) In any suit initiated or conducted by Novo Nordisk pursuant to Section 7.02(a)-(c), all internal and external costs and expenses of every kind and character incurred by Novo Nordisk, including attorney’s fees, involved in the prosecution of the suit, shall be the responsibility of Novo Nordisk. In any suit initiated or conducted by Aradigm pursuant to Section 7.02(b), all internal and external costs and expenses of every kind and character incurred by Aradigm, including attorney’s fees, involved in the prosecution of the suit, shall be the responsibility of Aradigm.

      (g) Any damages or other monetary or non-monetary awards recovered in such a suit initiated or conducted by Novo Nordisk pursuant to Section 7.02(a)-(c) shall be allocated to the Parties in the following manner: First, Novo Nordisk and Aradigm shall be reimbursed for their respective internal and external expenses (including reasonable attorneys’ fees and costs) incurred in the suit (to the extent not previously reimbursed in accordance with Section 6.05(b)); and, second, the remaining balance from such recovery shall be shared by Novo Nordisk and Aradigm according to the following formula: [2:1] Novo Nordisk:Aradigm. If the recovery is less than both Parties’ costs, the recovery shall be allocated on a pro rata basis based on each Party’s internal and external expenses. The determination of the value of non-monetary benefits or awards shall be through mutual agreement between the parties. If an agreement cannot be reached between the Parties, then the fair value of such non-monetary benefits or awards shall be established by arbitration conducted as provided for in Section 10.01.

      (h) Notwithstanding the above provisions, with respect to Novo Nordisk Patent Rights and patents included in the Novo Nordisk New IPR, Novo Nordisk shall bear the sole responsibility for initiating and conducting any suits to defend such rights; shall bear all costs of such suits; shall have the right to settle any such suit without consulting with Aradigm; and shall retain the full recovery from such suit. Novo Nordisk will keep Aradigm reasonably informed of the status of any such threatened, pending, or actual suit or proceeding regarding the Novo Nordisk Patent Rights involving activity in the Field.

      (i) Notwithstanding anything else contained herein, with respect to any practice or activity outside the Field, Aradigm (or its licensees, as applicable) shall have the sole right and responsibility for initiating and conducting any suits to defend or enforce the Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights and patents included in the Aradigm New IPR against practice outside the Field and shall bear all costs of such suits. To the extent that such a suit or proceeding could have a material impact on Novo Nordisk’s interests in the Field, Aradigm shall keep Novo Nordisk reasonably informed of the status of any such suit or proceeding regarding Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery rights and patents included in the Aradigm New IPR outside the Field and shall offer Novo Nordisk an opportunity to comment on Aradigm’s strategy in conducting, and/or settling such suit, to the extent not prevented by confidentiality or other contractual obligations to third parties. Subject to the preceding provision, Aradigm shall have the right to settle any such suit without consulting with Novo Nordisk and shall retain the full recovery from such suit.

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      (j) For any of the disclosure or notification obligations of the Parties hereunder, it is understood that all information disclosed under such obligations is covered by the confidentiality provisions set forth in Article 8, and further that neither Party shall be required, by such obligations, to disclose privileged information (e.g., information protected by work product and/or attorney client privilege) or information in respect of which such Party is subject to confidentiality or other contractual obligations to third parties. However, each Party agrees to use reasonable efforts to disclose the substance of any such information in a manner that does not destroy the privilege, and the Parties shall use good faith efforts to work together to establish a procedure or relationship that enables the disclosure of such privileged information without destroying the privilege.

      SECTION 7.03.     Interferences. With respect to Aradigm Patent Rights and Aradigm New IPR that are licensed to Novo Nordisk under Article 3, in the event that any of such Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights or Aradigm New IPR are subject to an interference action in the United States Patent and Trademark Office, Aradigm shall provide Novo Nordisk with copies of all communications relating to the interference action and shall keep Novo Nordisk reasonably informed of the progress of the interference action. Furthermore, Aradigm shall not enter into any settlement agreement or take other dispositive action in the interference without giving good faith consideration to Novo Nordisk’s interests and concerns, and if such action would have a material adverse impact on Novo Nordisk’s activities in the Field, without obtaining the prior consent of Novo Nordisk (which consent shall not be unreasonably withheld or delayed).

      SECTION 7.04.     Defense and Settlement of Third Party Patent Claims. (a) If conduct of the Development Program or the manufacture, use, marketing, or sale of a Device or Packaged Product results in a claim, suit, action, or proceeding by a third party against a Party for patent infringement of such third party’s patent rights (a “Field Infringement”), the Party first having notice of such claim of Field Infringement shall notify the other Party in writing within fifteen (15) days. The notice shall set forth the facts of the claim (to the extent known by the Party having notice) in reasonable detail.

      (b) If during the term of this Agreement, a third party makes or attempts to enforce a claim, files suit, or initiates a proceeding or any action that has the potential to affect enforceability, validity, or exclusivity of any Patent Rights that would materially affect rights within the Field, then the Party having notice shall notify the other Party in writing within fifteen (15) days. If prior to the Effective Date, a third party made or attempted to enforce a claim, filed suit, or initiated a proceeding or any action that has the potential to affect enforceability, validity, or exclusivity of any Patent Rights that would materially affect rights within the Field, then the Party having notice shall notify the other Party in writing within fifteen (15) days of the Effective Date to the extent that such Party had the obligation under the Development and License Agreement or the Patent Cooperation Agreement to notify the other Party. Any notice to be provided pursuant to this Section 7.04(b) shall set forth the facts (to the extent known by the Party having notice) in reasonable detail.

      (c) Within fifteen (15) days of notification under Section 7.04(a) or Section 7.04(b), if applicable and upon agreement of the Parties, a senior officer of each Party shall meet to discuss in good faith and agree upon a strategy for responding to such third party suit, action, or proceeding, which strategy shall accommodate both Parties’ commercial interests and investment in the Development Program. To the extent that the Parties cannot agree to such a strategy for conduct and/or settlement of the proceeding or suit, then the Party that is the subject of such proceeding or suit may conduct or settle such suit in its sole discretion, unless the other Party agrees in writing to assume the defense of such action and bear the cost of such defense and settlement or any final judgment at its own expense; provided that, the Party assuming the defense of such proceeding or suit shall bear only the excess of the cost of any final settlement or judgment over the cost to which the Party that is the subject of the proceeding or suit was to have paid in any proposed final settlement that such Party had agreed to pay prior to the assumption of the defense by the other Party.

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ARTICLE 8

SECRECY

      SECTION 8.01.     Confidentiality. (a) Each Party agrees that it shall use, and that it shall cause any Person to whom Confidential Information is disclosed pursuant to clause (b)(i) below to use, the Confidential Information only in connection with the Transaction Agreements, and the exercise of its rights hereunder and not for any other purpose.

      (b) Each Party further acknowledges and agrees that it shall not disclose any Confidential Information to any Person, except that Confidential Information may be disclosed:

      (c) Nothing contained herein shall prevent the use (subject, to the extent possible, to a protective order) of Confidential Information in connection with the assertion or defense of any claim by or against any Party.

      (d) For purposes of this Section 8.01, “Confidential Information” means any information concerning this Agreement or the Parties’ respective rights and obligations hereunder, including trade secrets, business methods, cost, manufacturing and customer information and information relating to the Patent Rights and the Know-How in the possession of or furnished to a Party by the other Party; provided that, the term “Confidential Information” does not include information to the extent that it (i) is or becomes generally available to the public other than as a result of a disclosure by a Party or its partners, directors, officers, employees, agents, counsel, investment advisers or representatives (all such persons being collectively referred to as “Representatives”) in violation of this Agreement or any of the Transaction Agreements, (ii) is or was available to such Party on a non-confidential basis (as demonstrated by the written records of such Party) prior to its disclosure to such Party by the other Party or (iii) was or becomes available to such Party on a non-confidential basis from a source other than the other Party, which source is or was (at the time of receipt of the relevant information) not, to the best of such Party’s knowledge, bound by a confidentiality agreement with (or other confidentiality obligation to) the other Party or another Person.

      SECTION 8.02.     Publication Planning. Novo Nordisk shall be solely responsible for all publication planning, it being understood that Novo Nordisk will endeavor to present to the Review Committee its overall publication planning strategy relating to the Development Program in good time prior to implementation and will in such event in good faith consider any reasonable suggestion made by Aradigm for amendments to such strategy, it being at all times understood that Novo Nordisk shall not be entitled to publish or present any information covered by Section 8.01 without the prior written consent of Aradigm. For other publications or public presentations not covered by Novo Nordisk’s publication planning hereunder, Novo Nordisk shall be solely responsible for any publication in any technical or scientific article or other presentation of any of the results of the Development Program; provided that, Novo Nordisk shall not publish or publicly present any conclusions regarding the safety and efficacy of the Device and Packaged Product and/or pulmonary delivery of drugs without first: (a) providing Aradigm a draft of such publication or public presentation; and

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      SECTION 8.03.     Term Of Confidentiality Provisions. This Article 8 shall remain in force for ten (10) years from the date of termination of this Agreement.

ARTICLE 9

NOTICE

      SECTION 9.01.     Notice. Any notice to be given under this Agreement shall be sent in writing in English by registered airmail or telecopied,

or to such other addresses and telecopier numbers as may from time to time be notified by either Party to the other hereunder.

      SECTION 9.02.     Deemed Receipt of Notice. Any notice sent by registered airmail shall be deemed to have been delivered within seven (7) working days after dispatch and any notice sent by telex or telefax shall be deemed to have been delivered within twenty-four (24) hours after dispatch. Notice of change of address shall be effective upon receipt.

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ARTICLE 10

TERM AND TERMINATION

      SECTION 10.01.     Term. This Agreement shall commence on the Effective Date and shall continue in full force and legal effect thereafter until terminated in accordance with this Article 10.

      SECTION 10.02.     Termination by Novo Nordisk. (a) Novo Nordisk shall have the right to terminate this Agreement at its sole discretion upon one hundred and twenty (120) days’ prior written notice to Aradigm.

      (b) Novo Nordisk shall also have the right to terminate this Agreement upon thirty (30) days’ prior written notice to Aradigm in the event that Aradigm shall have committed a material breach of this Agreement or any of the other Transaction Agreements and shall have failed to remedy such breach within sixty (60) days of written notice of such breach.

      SECTION 10.03.     Termination by Aradigm. (a) Aradigm shall have the right to terminate this Agreement upon thirty (30) days’ prior written notice to Novo Nordisk in the event that Novo Nordisk shall have committed a material breach of this Agreement and shall have failed to remedy such breach within sixty (60) days of written notice of such breach; provided that, notwithstanding the foregoing, Novo Nordisk shall have one hundred twenty (120) days following written notice by Aradigm to remedy any breach of the obligations set forth in Section 2.05(a)-(d).

      SECTION 10.04.     Termination By Either Party. Either Party, in addition to any other remedies available to it in law, may terminate this Agreement upon written notice to the other Party in the event such other Party shall

      SECTION 10.05.     Rights And Obligations Of The Parties After Termination. (a) In the event that either Party terminates this Agreement, both Parties shall retain perpetual, world-wide, non-exclusive, royalty-free, licenses, to Aradigm New IPR and Novo Nordisk New IPR Made Jointly by Aradigm and Novo Nordisk, to the extent not already owned by such Party, to develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export any product within and outside the Field; provided that, in the event of termination by Novo Nordisk in accordance with the provisions set forth in Section 10.02(b) or Section 10.04, and in the event that Novo Nordisk elects to continue the Development Program pursuant to Section 10.05(b)(i), the license retained by Novo Nordisk hereunder shall be exclusive within the Field and non-exclusive outside the Field.

      (b) In the event that Novo Nordisk terminates this Agreement in accordance with the provisions set forth in Section 10.02(b) or Section 10.04, the Parties hereto shall have the following additional rights and obligations:

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      (c) In the event that Novo Nordisk terminates this Agreement in accordance with any provision contained herein other than as set forth in Section 10.02(b) or Section 10.04, the Parties hereto shall have the following additional rights and obligations:

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      (d) In the event that Aradigm terminates this Agreement in accordance with the provisions set forth in Section 10.03 or Section 10.04, Aradigm shall be, and hereby is, granted a perpetual, world-wide, non-exclusive license, with the right to sublicense, under the Novo Nordisk Know-How and know-how included within Novo Nordisk New IPR and certain claims under the Novo Nordisk Patent Rights and the patents included within Novo Nordisk New IPR, which are necessary to develop, manufacture, use, market, distribute, sell, offer for sale, import and/or export: (1) the Insulin Compound Packaged Product containing the Insulin Compound formulation as it exists on the date of termination and the Device and/or later generation pulmonary products in the Field derived from such Insulin Compound Packaged Product containing the Insulin Compound formulation as it exists on the date of termination and the Device; and (2) any product outside the Field. Such royalty shall be royalty-free in the Field and royalty-bearing (as determined in accordance with the provisions set forth in Section 5.03(a)) outside the Field. Novo Nordisk shall in good faith specify in writing to Aradigm promptly following termination the patent claims that describe such Insulin Compound formulation to enable Aradigm to practice its rights under the foregoing license, as further described below; provided that, if Aradigm notifies Novo Nordisk in writing of any additional claims that Aradigm believes are necessary to practice such license, then the Parties shall meet and discuss in good faith whether to specify such additional claims. For the avoidance of doubt, Aradigm’s license with respect to the Insulin Compound Packaged Product under the Novo Nordisk Know-How and the know-how included within the Novo Nordisk New IPR and the specific claims under the Novo Nordisk Patent Rights and the patents included in the Novo Nordisk New IPR permit Aradigm to make only (a) the exact formulation of the Insulin Compound as it exists at the time of termination; (b) a formulation of such Insulin Compound with a lower (but not higher) concentration of insulin, in each case falling within the concentration ranges in the specified claims; (c) subject to (b) above, a formulation of such Insulin Compound that increases or decreases the range of excipients or other non-Insulin Compound components included within such existing formulation, provided such excipients or other non-Insulin Compound components remain within a range of two (2) times the quality specification for such component; and/or (d) a formulation of such Insulin Compound to which excipients or other components may be added or deleted provided such additional excipients or other compounds do not infringe any intellectual property rights of Novo Nordisk or any of its Affiliates, other than such intellectual property rights licensed to Aradigm under this Section 10.05(d). Additionally, Aradigm shall retain its license under Section 3.04(b), which license shall be expanded to include the ability to develop, manufacture, use, market, distribute, sell, offer for sale, have made, import and/or export any product inside the Field. In the event that Aradigm terminates this Agreement prior to the first Regulatory Submission of the Insulin Compound Packaged Product and the Device, Novo Nordisk shall supply insulin to Aradigm in accordance with the provisions set forth in Section 10.05(f).

      (e) In the event that either Party terminates this Agreement in accordance with the provisions set forth herein, other than in accordance with the provisions set forth in Section 10.02(b) or Section 10.04 as and to the extent requested in writing by Aradigm, Novo Nordisk will cooperate with Aradigm to transfer the technology and any related development or production equipment (as specified by Aradigm) back to Aradigm, and Aradigm will pay Novo Nordisk: (i) for its transfer activities (on terms and conditions substantially similar to those set forth in the Transition Services Agreement and the Restructuring Agreement); and (ii) the replacement value for any custom-made equipment and the fair market value for

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      (f) In the event that either Party terminates this Agreement in accordance with the provisions set forth herein, other than in accordance with the provisions set forth in Section 10.02(b) or Section 10.04 and if, and only if, such termination occurs prior to First Marketing of the Insulin Compound Packaged Product and the Device, Novo Nordisk shall [****].

      (g) In the event that either Party terminates this Agreement in accordance with the provisions set forth herein, Aradigm agrees that it will not use, directly or indirectly, any Novo Nordisk Know-How or other confidential information received from Novo Nordisk pursuant to this Agreement, and Novo Nordisk agrees that it will not use, directly or indirectly, any Aradigm Know-How or other confidential information received from Aradigm pursuant to this Agreement, in either case other than as expressly provided herein.

      (h) In the event that Novo Nordisk terminates this Agreement for any reason, Novo Nordisk may elect to have granted to it a (1) non-exclusive, royalty-bearing (as described below) license to Aradigm’s [****], claims [****] or (2) a semi-exclusive, royalty-bearing (as described below) license to Aradigm’s [****], claims [****], in respect of which patent Aradigm may only further license such patent to [****], in each case by notifying Aradigm in writing within one (1) month of the delivery of the termination notice and, in the case of (2) above, [****]. Novo Nordisk will pay a royalty of [****] (by any member of the Novo Nordisk Affiliate Group) of products covered by one (1) or more of the licensed claims from Aradigm's [****]; provided that, in the event that Aradigm licenses the [****] patent to [****], Novo Nordisk will pay Aradigm the [****]. [****].

      (i) Upon termination of this Agreement, Aradigm undertakes to return, upon Novo Nordisk’s written request, all written documentation embodying Novo Nordisk Know-How and any and all remaining Program Compound to Novo Nordisk, except and to the extent retention thereof is reasonably necessary during any post termination period in which Novo Nordisk continues to supply insulin to Aradigm. In the event that Aradigm terminates this Agreement in accordance with the provisions set forth in Section 10.03, Novo Nordisk shall return, upon Aradigm’s written request, all written documentation embodying Aradigm Know- How to Aradigm.

      SECTION 10.06.     Additional Effects of Termination or Expiration. Termination or expiration of this Agreement shall not affect the continuing validity and enforceability of Sections 5.02, 5.03, 5.04, 5.05, 5.06, 5.07, 6.01, 6.02, 6.06, Articles 7, 8, 9, 10, 11 and 12 and the applicable definitions in Article 1 of this Agreement. All confidential information provided under the Agreement shall be returned to the respective Parties within ninety (90) days of the termination date, except as otherwise contemplated by this Agreement and except as to confidential information required by the Parties to exercise their respective rights under this Agreement.

ARTICLE 11

DISPUTE RESOLUTION AND GOVERNING LAW

      SECTION 11.01.     Dispute Resolution. (a) All disputes arising out of this Agreement shall be settled as far as possible by negotiations between the Parties. If the Parties cannot agree on an amicable settlement within thirty (30) days from written submission of the matter by one Party to the other Party, the matter shall be submitted for decision and final resolution to arbitration to the exclusion of any courts of law, under the Arbitration Rules of the American Arbitration Association.

      (b) The arbitration tribunal shall be composed of three disinterested arbitrators, appointed pursuant to the following procedure: the Party invoking arbitration shall notify the other Party stating the substance of its claim and the name and address of the arbitrator it has chosen, who may be a citizen of any country. Within thirty (30) days of receipt of such notification, the other Party shall notify the first party of its answer to the

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      (c) The arbitrators shall choose a third arbitrator, who shall serve as president of the tribunal thus composed. If the arbitrators fail to agree upon the choice of a third arbitrator within thirty (30) days from the appointment of the second arbitrator, the third arbitrator will be appointed in accordance with the Arbitration Rules of the American Arbitration Association upon the request of the arbitrators or either of the Parties.

      (d) The arbitrators shall decide the dispute by majority decision and in accordance with the laws of the State of New York. The decision shall be rendered in writing, shall state the reasons on which it is based, and shall bear the signatures of at least two arbitrators. It shall also identify the members of the arbitration tribunal, and the time and place of the award granted. Finally, it shall determine the expenses of the arbitration and the Party who shall be charged therewith or the allocation of the expenses between the Parties at the discretion of the tribunal.

      (e) The arbitration decision shall be rendered as soon as possible, not later, however, if possible, than six months after the constitution of the arbitration tribunal. The arbitration decision shall be final and binding upon both Parties and the Parties agree that any award granted pursuant to such decision may be entered forthwith in any court of competent jurisdiction. This arbitration clause and any award granted pursuant to an arbitration decision thereunder shall be enforceable against the Parties in accordance with the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as amended.

      (f) The seat of arbitration shall be New York City, unless the Parties otherwise agree in writing. The official arbitration language shall be English.

      SECTION 11.02.     Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of New York.

ARTICLE 12

MISCELLANEOUS

      SECTION 12.01.     Bankruptcy Code Considerations. (a) The Parties agree that this Agreement is an “executory contract” (involving continuing executory obligations of Aradigm to provide licenses of the Aradigm Patent Rights, the Aradigm Selected Pulmonary Delivery Patent Rights, the Aradigm New IPR and the Aradigm Know-How, Novo Nordisk to provide licenses of the Novo Nordisk Patent Rights, Novo Nordisk New IPR and the Novo Nordisk Know-How, and continuing executory obligations to pay royalties hereunder), under which Aradigm and Novo Nordisk, as the case may be, is a “licensor of a right to intellectual property,” and that this Agreement is governed under 11 U.S.C. § 365(n) of the United States Bankruptcy Code (“Bankruptcy Code”).

      (b) The Parties further agree that the Aradigm Patent Rights, the Aradigm Selected Pulmonary Delivery Patent Rights, the Aradigm New IPR and the Aradigm Know-How, the Novo Nordisk Patent Rights, Novo Nordisk New IPR and the Novo Nordisk Know-How collectively constitute the “intellectual property” (as such term is defined in section 11 U.S.C. § 101(35A) of the Bankruptcy Code) being licensed hereunder. If a Party as debtor in possession or a trustee of bankruptcy for a Party in a case under the Bankruptcy Code, rejects this Agreement, the other Party may elect to retain its rights under this Agreement as provided for in 11 U.S.C. § 365(n). In addition, if a Party as debtor in possession or a trustee of bankruptcy for a Party in a case under the Bankruptcy Code chooses to assign this Agreement to any Person as may be permitted under the Bankruptcy Code, such Party or such trustee shall only assign this Agreement to an assignee that, in conformity with section 11 U.S.C. § 365(f) of the Bankruptcy Code, affirmatively agrees to assume all of such Party’s obligations under this Agreement, and that provides adequate assurance of future performance.

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      SECTION 12.02.     Binding Agreement. This Agreement shall not be binding upon the Parties until it has been signed herein below by or on behalf of each Party, in which event it shall be effective as of the Effective Date.

      SECTION 12.03.     Severability. If any provision in any Article of this Agreement is found by competent authority to be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of such other Article in every other respect and the remainder of this Agreement shall continue in effect so long as the Agreement still expresses the intent of the Parties. However, if the intent of the Parties cannot be preserved, this Agreement shall be either renegotiated or terminated.

      SECTION 12.04.     Amendments and Waivers. (a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each Party to this Agreement, or in the case of a waiver, by the Party against whom the waiver is to be effective.

      (b) No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

      SECTION 12.05.     Expenses. Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the Party incurring such cost or expense.

      SECTION 12.06.     Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns; provided that, no Party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other Party hereto, except pursuant to the provisions of Articles 3 and 10.

      SECTION 12.07.     Counterparts; Third Party Beneficiaries. 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. This Agreement shall become effective when each Party hereto shall have received a counterpart hereof signed by the other Party hereto. No provision of this Agreement is intended to confer upon any person other than the Parties hereto any rights or remedies hereunder.

      SECTION 12.08.     Entire Agreement. This Agreement and the other Transaction Agreements constitute the entire agreement between the Parties with respect to the subject matter of this Agreement and supersede all prior agreements and understandings, both oral and written, between the Parties with respect to the subject matter of this Agreement.

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EXHIBIT B

[ASSET PURCHASE AGREEMENT]

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ASSET PURCHASE AGREEMENT

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TABLE OF CONTENTS

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ASSET PURCHASE AGREEMENT

      AGREEMENT dated as of                     , 2004 between Aradigm Corporation, a corporation duly organized and existing under the law of the State of California (“Aradigm”) and Novo Nordisk Delivery Technologies, Inc., a corporation duly organized and existing under the law of the State of Delaware (“NOVO Nordisk Delivery Technologies, Inc.”).

W I T N E S S E T H:

      WHEREAS, Aradigm, Novo Nordisk Delivery Technologies, Inc. and Novo Nordisk A/S, a company duly organized and existing under the law of Denmark (“Novo Nordisk”) entered into a Restructuring Agreement dated as of September 28,2004 (the “Restructuring Agreement”) pursuant to which they agreed to restructure the existing arrangements between Aradigm and Novo Nordisk regarding, among other things, the development and commercialization of the Development Program; and

      WHEREAS, it is a precondition to performance on the part of Aradigm, Novo Nordisk Delivery Technologies, Inc. and Novo Nordisk of their respective obligations under the Restructuring Agreement that Aradigm and Novo Nordisk Delivery Technologies, Inc. enter into this Agreement pursuant to which Aradigm will transfer certain assets upon the terms and subject to the conditions hereinafter set forth.

      NOW, THEREFORE, in consideration of the premises set forth above and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

      SECTION 1.01.     Definitions.

      (a) The following terms, as used herein, shall have the following meanings:

      “Affiliate” shall have the meaning set forth in the Restructuring Agreement.

      “Amended and Restated License Agreement” shall have the meaning set forth in the Restructuring Agreement.

      “Assignment Agreements” shall have the meaning set forth in the Restructuring Agreement.

      “Business Day” shall mean a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York or Copenhagen, Denmark are authorized or required by law to close.

      “Closing” shall have the meaning set forth in the Restructuring Agreement.

      “Development Program” shall have the meaning set forth in the Restructuring Agreement.

      “Device” shall have the meaning set forth in the Amended and Restated License Agreement.

      “Device Manufacturing Facility” shall have the meaning set forth in the Sublease Agreement.

      “Environmental Liabilities” shall have the meaning set forth in the Restructuring Agreement.

      “Estimated Purchase Price” shall have the meaning set forth in the Restructuring Agreement.

      “Facilities” shall mean the facilities referred to by the parties hereto as (i) “Building 1” (but only with respect to the Device Manufacturing Facility), to be subleased by Novo Nordisk Delivery Technologies, Inc. from Aradigm pursuant to the Sublease Agreement, and “Building 2” and “Building 3”, the leases in respect thereof to be assigned to Novo Nordisk Delivery Technologies, Inc. by Aradigm pursuant to the Assignment Agreements.

      “Insulin Compound Packaged Product” shall have the meaning set forth in the Amended and Restated License Agreement.

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      “Governmental Authority” shall have the meaning set forth in the Restructuring Agreement.

      “Lien” shall have the meaning set forth in the Restructuring Agreement.

      “London Interbank Offered Rate” shall mean the rate for three-month deposits in United States dollars that appears on the display designated as page “3750” on Moneyline Telerate, Inc. (or such other page as may replace the 3750 page on that service or such other service or services as may be nominated by the British Bankers’ Association for the purposes of displaying London interbank offered rates for U.S. dollar deposits) as of 11:00 a.m., London time, on the date on which the 10-day period referred to in Section 5.03(c) shall have expired without payment.

      “Permits” shall have the meaning set forth in the Restructuring Agreement.

      “Permitted Lien” shall have the meaning set forth in the Restructuring Agreement.

      “Person” shall mean an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

      “Sublease Agreement” shall have the meaning set forth in the Restructuring Agreement.

      “Transaction Agreements” shall have the meaning set forth in the Restructuring Agreement.

      (b) Each of the following terms is defined in the Section set forth opposite such term:

      SECTION 1.02.     Other Definitional and Interpretative Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections,

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ARTICLE 2

PURCHASE AND SALE

      SECTION 2.01.     Purchase and Sale. Upon the terms and conditions of this Agreement, Novo Nordisk Delivery Technologies, Inc. agrees to purchase from Aradigm and Aradigm agrees to sell, convey, transfer, assign and deliver, or cause to be sold, conveyed, transferred, assigned and delivered, to Novo Nordisk Delivery Technologies, Inc. on the date hereof, free and clear of all Liens, other than Permitted Liens, all of Aradigm’s right, title and interest in, to and under the assets, identified on Annex 1 of Exhibit A hereto (the “Purchased Assets”).

EXCEPT AS SET FORTH IN THE RESTRUCTURING AGREEMENT: (i) THE PURCHASED ASSETS ARE BEING TRANSFERRED TO NOVO NORDISK DELIVERY TECHNOLOGIES, INC. “AS IS,” AND “WHERE IS”, AND (ii) ARADIGM MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED WITH RESPECT TO THE DESIGN, OPERABILITY OR CONDITION OF THE PURCHASED ASSETS OR ANY PART THEREOF; AS TO THE MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE; OR WITH RESPECT TO INFRINGEMENT OF THIRD PARTY RIGHTS.

      SECTION 2.02.     Excluded Assets. Novo Nordisk Delivery Technologies, Inc. expressly understands and agrees that all other assets of Aradigm (the “Excluded Assets”) shall be excluded from the Purchased Assets.

      SECTION 2.03.     Assumed Liabilities. Upon the terms and subject to the conditions of this Agreement, Novo Nordisk Delivery Technologies, Inc. agrees, effective on the date hereof, to assume only the liabilities and obligations of Aradigm arising under the Contracts (other than liabilities or obligations attributable to any failure by Aradigm to comply with the terms thereof prior to the date hereof) (the “Assumed Liabilities”).

      SECTION 2.04.     Excluded Liabilities. Notwithstanding any provision in this Agreement or any other writing to the contrary, Novo Nordisk Delivery Technologies, Inc. is assuming only the Assumed Liabilities and is not assuming any other liability or obligation of Aradigm (or any predecessor of Aradigm or any prior owner of all or part of its businesses and assets) of whatever nature, whether presently in existence or arising hereafter. All such other liabilities and obligations shall be retained by, and remain obligations and liabilities of, Aradigm (all such liabilities and obligations not being assumed being herein referred to as the “Excluded Liabilities”). Notwithstanding any provision in this Agreement or any other writing to the contrary, Excluded Liabilities shall include without limitation:

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      SECTION 2.05.     Assignment of Contracts and Rights. Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Purchased Asset or any claim or right or any benefit arising thereunder or resulting therefrom if such assignment, without the consent of a third party thereto, would constitute a breach or other contravention of such Purchased Asset or in any way adversely affect the rights of Novo Nordisk Delivery Technologies, Inc. or Aradigm thereunder.

      SECTION 2.06.     Purchase Price; Allocation of Purchase Price. The purchase price for the Purchased Assets (the “Purchase Price”) shall be the Estimated Purchase Price, as set forth in Annex 1 of Exhibit A and as adjusted in accordance with Section 2.01(b) of the Restructuring Agreement. The Purchase Price shall be paid by Novo Nordisk Delivery Technologies, Inc. to Aradigm on the date hereof.

      (a) As soon as practicable after the Closing, Novo Nordisk Delivery Technologies, Inc. shall deliver to Aradigm a statement (the “Allocation Statement”), allocating the Purchase Price (plus Assumed Liabilities, to the extent properly taken into account under Section 1060 of the Code) among the Purchased Assets in accordance with Section 1060 of the Code. If within 30 days after the delivery of the Allocation Statement Aradigm notifies Novo Nordisk Delivery Technologies, Inc. in writing that Aradigm objects to the allocation set forth in the Allocation Statement, Novo Nordisk Delivery Technologies, Inc. and Aradigm shall use commercially reasonable efforts to resolve such dispute within twenty (20) days. In the event that Novo Nordisk Delivery Technologies, Inc. and Aradigm are unable to resolve such dispute within twenty (20) days, Novo Nordisk Delivery Technologies, Inc. and Aradigm shall jointly retain a nationally recognized accounting firm (the “Accounting Referee”) to resolve the disputed items. Upon resolution of the disputed items, the allocation reflected on the Allocation Statement shall be adjusted to reflect such resolution. The costs, fees and expenses of the Accounting Referee shall be borne equally by Novo Nordisk Delivery Technologies, Inc. and Aradigm.

      (b) Each of Aradigm and Novo Nordisk Delivery Technologies, Inc. agrees to (i) be bound by the Allocation Statement and (ii) act in accordance with the Allocation Statement in the preparation, filing and audit of any Tax return (including filing Form 8594 with its federal income Tax return for the taxable year that includes the date of the Closing).

      (c) Not later than thirty (30) days prior to the filing of their respective Forms 8594 relating to the transactions contemplated by this Agreement, each party hereto shall deliver to the other party a copy of its Form 8594.

      SECTION 2.07.     Closing. The Closing shall take place as contemplated in Section 2.02 of the Restructuring Agreement.

ARTICLE 3

COVENANTS OF ARADIGM

      Aradigm agrees that:

      SECTION 3.01.     Access To Information; Confidentiality.

      (a) From the date hereof until December 31,2005, Aradigm will (i) give Novo Nordisk Delivery Technologies, Inc., its counsel, financial advisors, auditors and other authorized representatives full access to

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      (b) Aradigm will afford promptly to Novo Nordisk Delivery Technologies, Inc. and its agents reasonable access to its books of account, financial and other records (including accountant’s work papers), information, employees and auditors to the extent necessary or useful for Novo Nordisk Delivery Technologies, Inc. in connection with any audit, investigation, dispute or litigation or any other reasonable business purpose relating to the Development Program; provided that, any such access by Novo Nordisk Delivery Technologies, Inc. shall not unreasonably interfere with the conduct of the business of Aradigm.

ARTICLE 4

COVENANTS OF NOVO NORDISK DELIVERY TECHNOLOGIES, INC. AND ARADIGM

      Novo Nordisk Delivery Technologies, Inc. and Aradigm agree that:

      SECTION 4.01.     Trademarks; Tradenames. Except as set forth in the other subsections of this Section 4.01, Novo Nordisk Delivery Technologies, Inc. and its Affiliates shall not use any of the marks or names set forth on Schedule 4.01 (collectively or individually as the context requires, the “Aradigm Trademarks and Tradenames”).

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ARTICLE 5

TAX MATTERS

      SECTION 5.01.     Tax Definitions. The following terms, as used herein, have the following meanings:

      “Code” means the Internal Revenue Code of 1986, as amended.

      “Pre-Closing Tax Period” means (i) any Tax period ending on or before the date hereof and (ii) with respect to a Tax period that commences before but ends after the date hereof, the portion of such period up to and including the date hereof.

      “Tax” means (i) any tax, governmental fee or other like assessment or charge of any kind whatsoever (including withholding on amounts paid to or by any Person), together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Authority (a “Taxing Authority”) responsible for the imposition of any such tax (domestic or foreign), or (ii) liability for the payment of any amounts of the type described in (i) as a result of being party to any agreement or any express or implied obligation to indemnify any other Person.

      SECTION 5.02.     Tax Matters. Aradigm hereby represents and warrants to Novo Nordisk Delivery Technologies, Inc. that:

      SECTION 5.03.     Tax Cooperation; Allocation of Taxes.

      (a) Novo Nordisk Delivery Technologies, Inc. and Aradigm agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Development Program and the Purchased Assets (including access to books and records) as is reasonably necessary for the filing of all Tax returns, the making of any election relating to Taxes, the preparation for any audit by any taxing authority, and the prosecution or defense of any claim, suit or proceeding relating to any Tax. Novo Nordisk Delivery Technologies, Inc. and Aradigm shall retain all books and records with respect to Taxes pertaining to the Assets for a period of at least six years following the date hereof. On or after the end of such period, each party hereto shall provide the other with at least 10 days prior written notice before destroying any such books and records, during which period the party receiving such notice can elect to take possession, at its own expense, of such books and records. Aradigm and Novo Nordisk Delivery Technologies, Inc. shall cooperate with each other in the conduct of any audit or other proceeding relating to Taxes involving the Purchased Assets or the Development Program.

      (b) All real property taxes, personal property taxes and similar ad valorem obligations levied with respect to the Purchased Assets for a taxable period which includes (but does not end on) the date hereof (collectively, the “Apportioned Obligations”) shall be apportioned between Aradigm and Novo Nordisk Delivery Technologies, Inc. based on the number of days of such taxable period included in the Pre-Closing Tax Period and the number of days of such taxable period after the date hereof (such portion of such taxable period, the “Post-Closing Tax Period”). Aradigm shall be liable for the proportionate amount of such taxes that is attributable to the Pre-Closing Tax Period, and Novo Nordisk Delivery Technologies, Inc. shall be liable for the proportionate amount of such taxes that is attributable to the Post-Closing Tax Period.

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      (c) All excise, sales, use, value added, registration stamp, recording, documentary, conveyancing, franchise, property, transfer, gains and similar Taxes, levies, charges and fees (collectively, “Transfer Taxes”) incurred in connection with the transactions contemplated by this Agreement shall be borne by Aradigm and Novo Nordisk Delivery Technologies, Inc. as follows: Each Party shall bear fifty percent (50.0%) of the Transfer Taxes, calculated on an after-tax basis, taking into account any deductions or other benefits received on the tax returns of the parties hereto and their respective Affiliates. Novo Nordisk Delivery Technologies, Inc. and Aradigm shall cooperate in providing each other with any appropriate resale exemption certifications and other similar documentation.

      (d) Apportioned Obligations and Taxes described in Section 5.03(c) shall be timely paid, and all applicable filings, reports and returns shall be filed, as provided by applicable law. The paying party shall be entitled to reimbursement from the non-paying party in accordance with Sections 5.03(b) or 5.03(c), as the case may be. Upon payment of any such Apportioned Obligation or Tax, the paying party shall present a statement to the non-paying party setting forth the amount of reimbursement to which the paying party is entitled under Section 5.03(b) or (c), as the case may be, together with such supporting evidence as is reasonably necessary to calculate the amount to be reimbursed. The non-paying party shall make such reimbursement promptly but in no event later than 10 days after the presentation of such statement. Any payment not made within such time shall bear interest at the London Interbank Offered Rate plus 5.00% per annum until paid.

ARTICLE 6

SURVIVAL; INDEMNIFICATION

      SECTION 6.01.     Survival. The representations and warranties of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing indefinitely or until the latest date permitted by law. The covenants and agreements of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing indefinitely or for the shorter period explicitly specified therein, except that for such covenants and agreements that survive for such shorter period, breaches thereof shall survive indefinitely or until the latest date permitted by law. Notwithstanding the preceding sentence, any breach of covenant, agreement, representation or warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to the preceding sentence, if notice of the inaccuracy thereof giving rise to such right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time.

      SECTION 6.02.     Indemnification.

      (a) Effective at and after the Closing, Aradigm hereby indemnifies Novo Nordisk Delivery Technologies, Inc. and its Affiliates against and agrees to hold each of them harmless from any and all damage, loss, liability and expense (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses in connection with any action, suit or proceeding whether involving a third-party claim or a claim solely between the parties hereto and any incidental, indirect or consequential damages, losses, liabilities or expenses) (“Damages”) incurred or suffered by Novo Nordisk Delivery Technologies, Inc. or any of its Affiliates arising out of:

      (b) Effective at and after the Closing, Novo Nordisk Delivery Technologies, Inc. hereby indemnifies Aradigm and its Affiliates against and agrees to hold each of them harmless from any and all Damages incurred or suffered by Aradigm or any of its Affiliates arising out of any Warranty Breach or breach of

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      SECTION 6.03.     Procedures. The party seeking indemnification under Section 6.02 (the “Indemnified Party”) agrees to give prompt notice to the party against whom indemnity is sought (the “Indemnifying Party”) of the assertion of any claim, or the commencement of any suit, action or proceeding in respect of which indemnity may be sought under Section 6.02, which notice shall include a brief description of the specific facts relating to such claim, suit, action or proceeding. The Indemnifying Party may at the request of the Indemnified Party participate in and control the defense of any such suit, action or proceeding at its own expense. The Indemnifying Party shall not be liable under Section 6.02 for any settlement effected without its consent of any claim, litigation or proceeding in respect of which indemnity may be sought hereunder.

ARTICLE 7

MISCELLANEOUS

      SECTION 7.01.     Notices. Any notice to be given under this Agreement shall be sent in writing in English by registered airmail or telecopied,

or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. Any notice sent by registered airmail shall be deemed to have been delivered within seven (7) working days after dispatch and any notice sent by telex or telefax shall be deemed to have been delivered within twenty-four (24) hours after dispatch. Notice of change of address shall be effective upon receipt.

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      SECTION 7.02.     Amendments and Waivers.

      (a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party hereto, or in the case of a waiver, by the party against whom the waiver is to be effective.

      (b) No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

      SECTION 7.03.     Expenses. Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.

      SECTION 7.04.     Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that, no party hereto may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto; except that Novo Nordisk Delivery Technologies, Inc. may transfer or assign, in whole or from time to time in part, to one or more of its Affiliates, the right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Novo Nordisk Delivery Technologies, Inc. of its obligations hereunder.

      SECTION 7.05.     Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of New York.

      SECTION 7.06.     Dispute Resolution.

      (a) All disputes arising out of this Agreement shall be settled as far as possible by negotiations between the parties hereto. If the parties hereto cannot agree on an amicable settlement within thirty (30) days from written submission of the matter by one Party to the other Party, the matter shall be submitted for decision and final resolution to arbitration to the exclusion of any courts of law, under the Arbitration Rules of the American Arbitration Association.

      (b) The arbitration tribunal shall be composed of three disinterested arbitrators, appointed pursuant to the following procedure: the Party invoking arbitration shall notify the other Party stating the substance of its claim and the name and address of the arbitrator it has chosen, who may be a citizen of any country. Within thirty (30) days of receipt of such notification, the other Party shall notify the first party of its answer to the claim made, any counterclaim that it wishes to assert in the arbitration, and the name and address of its arbitrator, who may be a citizen of any country. If this is not done within the thirty (30) day period, appointment of the second arbitrator shall be made in accordance with the Arbitration Rules of the American Arbitration Association upon request of the initiating Party.

      (c) The arbitrators shall chose a third arbitrator, who shall serve as president of the tribunal thus composed. If the arbitrators fail to agree upon the choice of a third arbitrator within thirty (30) days from the appointment of the second arbitrator, the third arbitrator will be appointed in accordance with the Arbitration Rules of the American Arbitration Association upon the request of the arbitrators or either of the parties hereto.

      (d) The arbitrators shall decide the dispute by majority decision and in accordance with the laws of the State of New York. The decision shall be rendered in writing, shall state the reasons on which it is based, and shall bear the signatures of at least two arbitrators. It shall also identify the members of the arbitration tribunal, and the time and place of the award granted. Finally, it shall determine the expenses of the arbitration and the Party who shall be charged therewith or the allocation of the expenses between the parties hereto at the discretion of the tribunal.

      (e) The arbitration decision shall be rendered as soon as possible, not later, however, if possible, than six (6) months after the constitution of the arbitration tribunal. The arbitration decision shall be final and binding upon both parties hereto and the parties hereto agree that any award granted pursuant to such decision may be

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      (f) The seat of arbitration shall be New York City, unless the parties hereto otherwise agree in writing. The official arbitration language shall be English.

      SECTION 7.07.     Counterparts; Effectiveness; Third Party Beneficiaries. 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. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto. Until and unless each party hereto has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party hereto shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.

      SECTION 7.08.     Entire Agreement. This Agreement and the other Transaction Agreements constitute the entire agreement between the parties hereto with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties hereto with respect to the subject matter of this Agreement.

      SECTION 7.09.     Bulk Sales Laws. Novo Nordisk Delivery Technologies, Inc. and Aradigm each hereby waive compliance by Aradigm with the provisions of the “bulk sales,” “bulk transfer” or similar laws of any state. Aradigm agrees to indemnify and hold Novo Nordisk Delivery Technologies, Inc. harmless against any and all claims, losses, damages, liabilities, costs and expenses incurred by Novo Nordisk Delivery Technologies, Inc. or any of its Affiliates as a result of any failure to comply with any such “bulk sales,” “bulk transfer” or similar laws.

      SECTION 7.10.     Severability. If any provision in any Article of this Agreement is found by competent authority to be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of such other Article in every other respect and the remainder of this Agreement shall continue in effect so long as the Agreement still expresses the intent of the parties hereto. However, if the intent of the parties hereto cannot be preserved, this Agreement shall be either renegotiated or terminated.

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      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

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EXHIBIT A

ASSIGNMENT AND ASSUMPTION AGREEMENT

      ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of                     , 2004, between Aradigm Corporation, a corporation duly organized and existing under the laws of the State of California (“Aradigm”)and Novo Nordisk Delivery Technologies, Inc., a corporation duly organized and existing under the laws of the State of Delaware (“Novo Nordisk Delivery Technologies, Inc.”).

W I T N E S S E T H :

      WHEREAS, Aradigm and Novo Nordisk Delivery Technologies, Inc. have concurrently herewith consummated the purchase by Novo Nordisk Delivery Technologies, Inc. of the Purchased Assets pursuant to the terms and conditions of the Asset Purchase Agreement dated                     , 2004 between Aradigm and Novo Nordisk Delivery Technologies, Inc. (the “Asset Purchase Agreement”; terms defined in the Asset Purchase Agreement and not otherwise defined herein being used herein as therein defined); and

      WHEREAS, pursuant to the Asset Purchase Agreement, Novo Nordisk Delivery Technologies, Inc. has agreed to assume certain liabilities and obligations of Aradigm with respect to the Purchased Assets and the Development Program.

      NOW, THEREFORE, in consideration of the sale of the Purchased Assets and in accordance with the terms of the Asset Purchase Agreement, Aradigm and Novo Nordisk Delivery Technologies, Inc. agree as follows:

      1. (a) Aradigm does hereby sell, transfer, assign and deliver to Novo Nordisk Delivery Technologies, Inc. all of the right, title and interest of Aradigm in, to and under the Purchased Assets; provided that, no sale, transfer, assignment or delivery shall be made of any or any material portion of any of the Contracts or Permits if an attempted sale, assignment, transfer or delivery, without the consent of a third party, would constitute a breach or other contravention thereof or in any way adversely affect the rights of Aradigm or Novo Nordisk Delivery Technologies, Inc. thereunder.

      (b) Novo Nordisk Delivery Technologies, Inc. does hereby accept all the right, title and interest of Aradigm in, to and under all of the Purchased Assets (except as aforesaid) and Novo Nordisk Delivery Technologies, Inc. assumes and agrees to pay, perform and discharge promptly and fully when due all of the Assumed Liabilities and to perform all of the obligations of Aradigm to be performed under the Contracts except to the extent liabilities thereunder constitute Excluded Liabilities.

      2. This Agreement shall be governed by and construed in accordance with the law of the State of New York.

      3. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

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