Current assets

EXHIBIT 10.29

[ * ] = Certain confidential information contained 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.

DEVELOPMENT AND LICENSE AGREEMENT

This Agreement is made this 2nd day of June, 1998 (“the Effective Date”) by and between

		ARADIGM CORPORATION
		26219 Eden Landing Road
		Hayward, California 94545
		(hereinafter referred to as ARADIGM)
and		NOVO NORDISK A/S
		Novo Alle
		DK-2880 Bagsvaerd
		Denmark
		(hereinafter referred to as NOVO NORDISK)

WHEREAS		ARADIGM is the owner of, and is beneficially entitled to, a number of patents and patent applications and Know-How related to the production and delivery of drugs, including proteins/peptides, via the pulmonary route using a breath controlled delivery device;
WHEREAS		NOVO NORDISK is the owner of, and is beneficially entitled to, a number of patents and patent applications and Know-How relating to the development and production of recombinant human insulin, as well as insulin analogues and other compounds useful in the control of blood glucose levels in humans;
WHEREAS		NOVO NORDISK and ARADIGM wish to enter into a Development and License Agreement to develop a system for pulmonary delivery of insulin (and potentially other compounds) and ARADIGM is willing to use its Patent Rights and Know-How in such a development programme;
WHEREAS		NOVO NORDISK and ARADIGM, in addition to the above mentioned development work, wish to enter into a licensing arrangement under which ARADIGM will grant to NOVO NORDISK an exclusive, world-wide license under ARADIGM’s Patent Rights and ARADIGM’s Know-How, to use, market, distribute, sell and sublicense products resulting from such development programme in the Field;

NOW, THEREFORE, it is hereby agreed as follows:

 

 

 

 

 

 

 

 

 

     3.3 Notwithstanding the foregoing and except as set forth herein, effective one year after NOVO NORDISK gives ARADIGM the Alternative Technology Notice pursuant to Article 2.13, the licences granted to NOVO NORDISK under Article 3.1 and 3.2 will become nonexclusive, and ARADIGM shall be entitled from and after receipt of the Alternative Technology Notice to engage marketing partners and other distributors and otherwise prepare itself to commence commercial marketing of Devices and Packaged Products on the effective date of such conversion. If at the time of delivery of the Alternative Technology Notice, NOVO NORDISK is engaged in clinical development of one or more Packaged Products containing one or more Other Compounds, or intends to promptly commence clinical development of one or more such Packaged Products, it may at its option elect to [ * ] with respect to such Other Compounds by specifying such Other Compounds in the Alternative Technology Notice. In this case, (a) the parties will proceed promptly under Article 2.1 to add any of such specified Other Compounds to the Development Programme (if they are not already in development), (b) the parties will thereafter meet their respective obligations to diligently develop and commercialize such specified Other Compounds and (c) the terms and conditions of this Agreement, including but not limited to Articles 2.13 (with NOVO NORDISK’s obligation not to conduct or fund clinical studies to apply until the first Regulatory Approval of a specified Other Compound), 2.15 and 3.1, shall remain in full force and effect but only with respect to Packaged Products containing such specified Other Compounds until NOVO NORDISK provides a supplemental Alternative Technology Notice at least one year in advance of its commencement of commercialization of any of such specified Other Compounds using an [ * ], provided that such supplemental notice may not be given prior to the end of the fifth year after First Marketing of a Packaged Product containing a specified Other Compound. ARADIGM shall be granted access to, and be given sufficient rights under, relevant [ * ], NOVO NORDISK Patents and NOVO NORDISK Know-How to the extent reasonably necessary to enable it to commercialise Devices and Packaged Products directly or through marketing partners. The foregoing notwithstanding, it is expressly understood that neither ARADIGM nor any marketing partner of ARADIGM shall be granted access to [ * ] Moreover, NOVO NORDISK will continue to supply the Initial Compound in bulk to ARADIGM for use in Packaged Products to be marketed by ARADIGM during the term of this Agreement at the price specified in Article 9.5.

     3.4 In consideration of NOVO NORDISK undertaking the development and marketing activities hereunder, ARADIGM hereby grants to NOVO NORDISK an exclusive option to enter into a development and license agreement addressing the development of a product for pulmonary delivery of [ * ] using the Device or a modified version of the Device. During the term of this option, ARADIGM agrees to conduct feasibility studies on compounds covered by this option, if requested to do so by NOVO NORDISK, [ * ]. Upon exercise of this option, the parties will negotiate in good faith an agreement for the development and commercialisation of such products. The parties will negotiate financial terms for such agreement which take into consideration product economics and market conditions in the applicable field, which may be different from those in the Field. This option will expire [ * ]. During the term of this option, ARADIGM will not enter into any agreement

 

 

 

 

 

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			maintenance of finished goods inventory will be the responsibility of NOVO NORDISK. Upon ARADIGM’s request, NOVO NORDISK will provide an update of current inventory levels held in finished goods at all NOVO NORDISK or Affiliate locations. Likewise, ARADIGM will upon NOVO NORDISK’s request provide an update of current inventory levels of raw materials for Devices and Packaged Product, including inventory levels of Initial Compound.
	(d)		NOVO NORDISK shall use diligent efforts to maintain sufficient production capacity for Initial Compound and shall keep ARADIGM informed of its plans for increasing capacity as necessary to meet the requirements of ARADIGM for the production of Packaged Product.
	(e)		The parties will on a regular basis review long term market forecasts generated by NOVO NORDISK in its normal internal planning cycle for the purpose of anticipating the need for expanded production capacity in sufficient time to develop and implement plans for such expansions.

     4.11 If the volume of Packaged Products containing Initial Compound supplied to NOVO NORDISK exceeds [ * ] NOVO NORDISK shall have the right, after consultation with ARADIGM, to establish at its sole cost an additional site for manufacturing such Packaged Products at an existing NOVO NORDISK site where insulin is already being processed. In such case, ARADIGM may require that the key production equipment installed at this site will be [ * ] and that the production steps involving laser drilling will be maintained and performed by ARADIGM at an existing or new ARADIGM facility. In such case, ARADIGM will supply [ * ] to NOVO NORDISK on the terms specified in Article 4.5 and in other respects in a manner that is equivalent to how it provides such [ * ] to its own Packaged Product production facility, with allocations in the event of a shortage to be made on a pro rata basis. NOVO NORDISK’s license under Article 3.1 above shall be enlarged to include the right to make such Packaged Products at such facility, and ARADIGM will provide NOVO NORDISK reasonable non-monetary assistance in establishing such production facility. All costs directly related to such assistance will be borne by NOVO NORDISK. NOVO NORDISK shall have the right to [ * ], provided that ARADIGM shall have the right to implement such improvements in its own facilities and to otherwise use such improvements outside the Field as well as in its own production of Packaged Products. NOVO NORDISK acknowledges and agrees that this facility will be used to meet demand for Packaged Products in excess of the threshold volumes required to trigger NOVO NORDISK’s right to establish such facility and that priority will be given to maintaining the production levels of ARADIGM at or above such threshold volumes in order to ensure that ARADIGM’s production capacity is used efficiently. ARADIGM shall continue to share in the Gross Profit associated with Packaged Products produced in this facility as specified by Article 5 (with the [ * ] of product produced at such facility to be included in the calculation of Gross Profit). In the event the parties determine that additional capacity beyond that which has been established by ARADIGM and by NOVO NORDISK hereunder, such additional capacity will be planned and added on such basis as the parties agree upon.

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ARTICLE 5 – LICENSE PAYMENTS AND PROFIT SHARING

     5.1 In consideration of the licence and marketing rights granted by ARADIGM in accordance with Article 3 above, NOVO NORDISK shall pay to ARADIGM the sum of USD two million (USD 2,000,000) within twenty (20) days after the Effective Date. Such payment is non-refundable and will be in addition to, and may not be applied toward or otherwise credited against, any other payment required hereunder, including but not limited to the payments provided for in Article 2.4.

     5.2 In addition to the payments referred to in Article 5.1 above, each year during the term of this Agreement NOVO NORDISK shall pay to ARADIGM [ * ] on Net Sales of the Packaged Products and the Devices during such year; provided, however, that a different percentage may be applicable to Packaged Products containing Other Compounds as agreed by the parties pursuant to Article 2.1. Interim payments shall be made to ARADIGM during such year in the form of a percentage of Net Sales of Packaged Products and Devices intended to approximate ARADIGM’s interest in the Gross Profit. The applicable interim payment percentage shall be established by agreement of the parties at the beginning of each calendar year to govern payments during such year and a reconciliation account established and settled at the end of the year to achieve the Gross Profit specified above. The interim payments above and the transfer price profit components referred to in Articles 4.5 and 4.6 shall be credited against ARADIGM’s share in the Gross Profit.

     5.3 If the parties agree that it is necessary to enter into a Licence Agreement with a third party to secure intellectual property rights in any country in the Territory for the Packaged Products or the Device, [ * ]. Notwithstanding the foregoing, NOVO NORDISK shall bear all such costs that may be payable in respect of any Programme Compound to secure freedom of operation for that compound.

     5.4 NOVO NORDISK shall keep complete and correct records of the Net Sales of the Packaged Products and the Device and other financial information necessary to determine the Gross Profit and shall report such information as is pertinent along with each payment to ARADIGM. ARADIGM will maintain similar records with respect to its pertinent costs hereunder.

     5.5 Interim payments under Article 5.2 of this Agreement shall be due and payable within forty-five (45) days after January 1, April 1, July 1 and October 1 of each calendar year. To achieve a year-end reconciliation, ARADIGM will provide NOVO NORDISK with [ * ] NOVO NORDISK within thirty (30) days after receipt of ARADIGM’s report or, if later, within seventy-five (75) days after the end of the year. NOVO NORDISK shall pay or ARADIGM shall refund, as applicable, any difference between interim payments made and actual results within thirty (30) days after delivery of such reconciliation report, subject to the audit rights of the parties.

     5.6 Payments under this Agreement in respect of Net Sales made in currencies other than USD shall be calculated on the average daily exchange rate for the applicable year

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to date period (i.e., from January 1 of each year to the last business day of the quarter in question) for exchanging the local currency into USD at the rate for buying USD quoted by Den Danske Bank, and its successor(s) in Copenhagen, Denmark.

     5.7 Not more than once in a calendar year, at ARADIGM’s request, NOVO NORDISK agrees to provide to ARADIGM, at ARADIGM’s expense, a statement from an independent auditor selected by ARADIGM and reasonably acceptable to NOVO NORDISK, attesting to the correctness of NOVO NORDISK’s payments. In the event such auditor determines that additional amounts are due to ARADIGM, such amounts shall be promptly paid by NOVO NORDISK, together with the reasonable costs of conducting the audit, it being understood that ARADIGM will otherwise bear such audit costs. NOVO NORDISK shall likewise have the right to require an auditor’s statement as to the accuracy of the pertinent costs of ARADIGM. In the event such auditor determines that additional amounts are due to NOVO NORDISK, such amounts shall be promptly paid by ARADIGM, together with the reasonable costs of conducting the audit, it being understood that NOVO NORDISK will otherwise bear such audit costs. Notwithstanding the foregoing, relevant NOVO NORDISK personnel shall once a year have a right to review with relevant ARADIGM personnel cost and investment accounts related to activities under this Agreement.

     5.8 NOVO NORDISK agrees to use Diligent Efforts to achieve commercial success for the Packaged Products and the Device in each country in the Territory in which Regulatory Approval has been obtained, except for such countries in which it would not be desirable to market such products in light of the overall commercialisation strategy therefor. Prior to the initiation of Phase III clinical studies, reasonably documented sales forecasts for such products for each of the United States, the EEC and Japan [ * ]following commercial launch will be established. The initial [ * ] will be reviewed and approved by the Steering Committee, provided that if the Steering Committee is unable to agree on such forecast, the senior managements of the two parties will meet in an effort to reach agreement. If agreement cannot be reached, NOVO NORDISK will decide the matter. The initial sales forecasts for the EEC and Japan will be established by NOVO NORDISK after review and comment by the Steering Committee. Prior to First Marketing, NOVO NORDISK will update the [ * ] and review and discuss with the Steering Committee the marketing plan by which it intends to meet its marketing diligence obligation hereunder in respect of product launch and during the first year after launch. At the end of the first and second years following First Marketing, updated reasonably documented forecasts for the [ * ] will be similarly established and marketing plans will likewise be reviewed and discussed. If NOVO NORDISK subsequently revises such forecasts to less than [ * ] of initially forecasted levels for any year or if actual results in any year are less than [ * ] of the [ * ] for such year, NOVO NORDISK will develop and review with ARADIGM strategies to be implemented to ensure that the expected market potential will be realised. The parties will also discuss the establishment of [ * ] and will likewise in good faith discuss any failure or anticipated failure to achieve such minimum pricing. If, notwithstanding such efforts, sales forecasts or actual sales continue to be materially short of expectations or if pricing continues to be below targeted minimums for more than a year, NOVO NORDISK agrees that upon request by ARADIGM it will in good faith negotiate such modifications to this Agreement or the Supply

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Agreement as may be reasonably necessary to enable [ * ] in light of the scale of the forecasted or actual commercial results. Alternatively, NOVO NORDISK may at its election after such a renegotiation request by ARADIGM elect to terminate this Agreement and the Supply Agreement. At the end of each of the [ * ] commencing with the third year following First Marketing, NOVO NORDISK will review and discuss its latest reasonably documented [ * ] forecasts and marketing plans with ARADIGM.

     ARADIGM agrees to use Diligent Efforts to realize its pre-Phase III cost estimate contemplated by the Minimum Product Profile that is the basis for a decision to proceed with Phase III trials. If, notwithstanding such efforts, Aradigm’s actual Fully Burdened Cost of producing Packaged Products (excluding for these purposes the cost of the Initial Compound) and Devices are materially higher than estimated (for reasons other than lower than expected volume or externalities such as exchange rates or inflation) and as a result gross margins contemplated by the Minimum Product Profile are not achieved, ARADIGM will develop and review with NOVO NORDISK strategies to be implemented to reduce costs to targeted levels. If, notwithstanding such efforts, ARADIGM costs continue to be materially higher than targeted levels for more than a year, then ARADIGM agrees that upon request by NOVO NORDISK it will in good faith negotiate such modifications to this Agreement or the Supply Agreement as may be reasonably necessary to enable NOVO NORDISK to realise a reasonable profit on its sales of Packaged Products and Devices. In no event will NOVO NORDISK be under any obligation to agree to pay ARADIGM Fully Burdened Cost amounts for Packaged Products and Devices that do not enable a Gross Profit Margin of at least 70%. Alternatively, ARADIGM may at its election after such a renegotiation request by NOVO NORDISK elect to terminate this Agreement and the Supply Agreement. Notwithstanding the foregoing, if in either of the above situations a party requests a renegotiation of the terms of the Agreement or the Supply Agreement, it is expressly understood that neither party will be required to agree to any terms that do not enable it to realise a reasonable profit on its activities under this Agreement and the Supply Agreement, it being further understood that the parties anticipate a termination of this Agreement and the Supply Agreement if it is not possible for both parties to realise a reasonable profit.

     5.9 Under no circumstances shall NOVO NORDISK be required to pay any amount in excess of or in addition to the payments agreed under this Agreement. If any payment made by NOVO NORDISK under this Agreement is subject to withholding tax, such withholding tax shall be borne by ARADIGM and shall be deducted from the payments made by NOVO NORDISK. Upon ARADIGM’s written request, NOVO NORDISK shall support ARADIGM in its efforts of minimizing any such withholding taxes, and reasonably provide ARADIGM with relevant information about documentation needed to reduce the withholding tax to a legal minimum or to secure applicable credits in respect thereof.

ARTICLE 6 – INTELLECTUAL PROPERTY

     6.1 ARADIGM shall remain the sole owner of all ARADIGM Patent Rights and ARADIGM Know-How obtained by ARADIGM individually prior to entering into this Agreement and shall use best efforts to maintain and defend their position. Furthermore,

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ARADIGM warrants that it is not aware of any third party patent rights that would limit in any material respect the parties’ freedom of operation with respect to practicing the ARADIGM Patent Rights.

     6.2 NOVO NORDISK shall remain the sole owner of all NOVO NORDISK Patent Rights and NOVO NORDISK Know-How obtained by NOVO NORDISK prior to entering into this Agreement.

     6.3 (a) ARADIGM shall retain ownership of any and all results, improvements or inventions (“ARADIGM Programme Inventions”) whether patentable or not made jointly by the parties or individually by one of the parties as a part of the Development Programme during the term of this Agreement and which relate solely to [ * ]. ARADIGM shall be responsible for filing, maintaining and defending any patents filed based on ARADIGM Programme Inventions and will timely inform NOVO NORDISK of its intentions, activities and filings in this respect. ARADIGM will grant NOVO NORDISK a royalty free license, with the right to sublicense, under the ARADIGM Programme Inventions. Such license will be perpetual but will be limited to applications outside the field of pulmonary drug delivery. (b) Should ARADIGM decide not to patent an ARADIGM Programme Invention in any country, NOVO NORDISK shall have the right to do so. In such case, NOVO NORDISK shall be the owner of any patent or patent application based on such ARADIGM Programme Invention and will grant ARADIGM a royalty free licence thereunder, with the right to sublicence. Such licence will be for the life of the patent but will be limited to applications outside the Field for so long as NOVO NORDISK’s rights under Article 3 remain exclusive (and thereafter for so long as NOVO NORDISK retains exclusivity under Article 3.3 with respect to specified Packaged Products, to applications other than those for which there is continuing exclusivity under Article 3.3). Should ARADIGM decide to abandon any such patent or patent application, in any country, NOVO NORDISK shall have the option to take over such patent or patent application. In such case, NOVO NORDISK shall be the owner thereof and will grant ARADIGM a royalty free licence thereunder, with the right to sublicence. Such licence will be for the life of the patent but will be limited to applications outside the Field for so long as NOVO NORDISK’s rights under Article 3 remain exclusive (and thereafter for so long as NOVO NORDISK retains exclusivity under Article 3.3 with respect to specified Packaged Products, to applications other than those for which there is continuing exclusivity under Article 3.3). (c) Furthermore, NOVO NORDISK shall be entitled to enter any litigation in the defence and enforcement of any such patents by any infringer thereof in the Field and the parties shall agree in good faith regarding any such defence and enforcement, as well as how to pay for any costs incurred and how to share any rewards.

     6.4 (a) NOVO NORDISK shall retain ownership of any and all results, improvements or inventions whether patentable or not made jointly by the parties or individually by one of the parties as a part of the Development Programme during the term of this Agreement and which relate solely to [ * ]. Inventions relating to the Formulated Compound owned by NOVO NORDISK are referred to as “NOVO Formulation Inventions.” NOVO NORDISK shall be responsible for filing, maintaining and defending any patents filed

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based on NOVO Formulation Inventions and will timely inform ARADIGM of its intentions, activities and filings in this respect. NOVO NORDISK will grant ARADIGM a royalty free licence, with the right to sublicence, under the NOVO Formulation Inventions. Such licence will be perpetual but will be limited to applications outside the Field. (b) Should NOVO NORDISK decide not to patent a NOVO Formulation Invention in any country, ARADIGM shall have the right to do so. In such case, ARADIGM shall be the owner of any patent or patent application based on such NOVO Formulation Invention and will grant NOVO NORDISK a royalty free licence thereunder, with the right to sublicence, for the life of the patent. Should NOVO NORDISK decide to abandon any such patent or patent application, in any country, ARADIGM shall have the option to take over such patent or patent application. In such case, ARADIGM shall be the owner of such patent or patent application and will grant NOVO NORDISK a royalty free licence thereunder, with the right to sublicence, for the life of the patent. (c) Furthermore, ARADIGM shall be entitled to enter any litigation in the defence and enforcement of any such patents by any infringer thereof outside the Field and the parties shall agree in good faith regarding any such defence and enforcement, as well as how to pay for any costs incurred and how to share any reward.

     6.5 The foregoing is not intended to limit in any respect the rights of ARADIGM under Articles 3.3, 9.3 and 9.5 to develop and commercialise Devices and Packaged Products under the circumstances specified therein. NOVO NORDISK will grant ARADIGM a perpetual royalty free licence, with the right to sublicence, [ * ] utilized in the Development Programme needed by ARADIGM in order only to conduct and continue the development, production and commercialisation activities contemplated by Article 3.3, 9.3 and 9.5 of this Agreement.

ARTICLE 7 – SECRECY

     7.1 Any information from time to time communicated or delivered by one of the parties to the other, including, without limitation, trade secrets, business methods, and cost, supplier, manufacturing and customer information, and information regarding such party’s Patent Rights and Know-How, shall be treated by NOVO NORDISK and ARADIGM, respectively, as confidential information, and shall not be disclosed or revealed to any third party whatsoever or used in any manner except as expressly provided for herein; provided, however, that such confidential information shall not be subject to the restrictions and prohibitions set forth in this Article 7 to the extent that such confidential information:

	•		is available to the public in public literature or otherwise, or after disclosure by one party to the other becomes public knowledge through no default of the party receiving such confidential information; or
	•		was known to the party (as demonstrated by the written records of such party) receiving such confidential information with no obligation to maintain confidentiality prior to the receipt of such confidential information by such party, whether received before or after the date of this Agreement; or

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	•		is obtained by the party receiving such confidential information from a third party not subject to a requirement of confidentiality with respect to such confidential information; or
	•		is required to be disclosed pursuant to (i) any order of a court having jurisdiction and power to order such information to be released or made public; or (ii) any lawful action of a governmental or regulatory agency.

     7.2 Each party shall take all such precautions as it normally takes with its own confidential information to prevent any improper disclosure of such confidential information to any third party; provided, however, that such confidential information may be disclosed within the limits required to obtain any authorization from any governmental or regulatory agency or, with the prior written consent of the other party, which shall not be unreasonably withheld, or as may otherwise be required in connection with the purposes of this Agreement.

     7.3 Each party agrees that it will not use, directly or indirectly, any Know-How or otherwise confidential information received from the other party pursuant to this Agreement other than as expressly provided herein.

     7.4 NOVO NORDISK and ARADIGM will not publicise the existence of this Agreement in any way without the prior written consent of the other subject to the disclosure requirements of applicable law and regulations. However, it has been agreed between the parties that the parties will issue a joint press release, following signature of the Agreement, including information on the total potential value of the collaboration and stating that the collaboration involves the development of formulations for pulmonary administration within the Field as well as an option to expand the collaboration into two additional fields.

     7.5 As a part of its marketing obligations hereunder, NOVO NORDISK shall be solely responsible for all publication planning, it being understood that NOVO NORDISK will endeavor to present to the Steering Committee its overall publication planning strategy 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 any information covered by Article 7.1 without the prior written consent of ARADIGM. For other publications not covered by NOVO NORDISK’s publication planning hereunder, the parties agree not to publish in any technical or scientific article or otherwise any of the results of the Development Programme without the review and approval of both parties such approval not to be unreasonably withheld.

     7.6 The confidentiality conditions shall remain in force for seven years from the day of termination of this Agreement.

ARTICLE 8 – NOTICE

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     8.1 Any notice to be given under this Agreement shall be sent in writing in English by registered airmail or telecopied to:

          ARADIGM CORPORATION
          26219 Eden Landing Road
          Hayward, California 94545
          Attention: Chief Financial Officer
          Telephone: 01 ###-###-####
          Telefax: 01 ###-###-####

          NOVO NORDISK A/S
          Novo Alle
          DK-2880 Bagsvaerd
          Denmark
          Attention: General Counsel
          Telephone: 45 44 44 88 88
          Telefax: 45 44 42 18 30

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

     8.2 Any notice sent by mail shall be deemed to have been delivered within seven (7) working days after despatch and any notice sent by telex or telecopy shall be deemed to have been delivered within twenty-four (24) hours of the time of the despatch. Notice of change of address shall be effective upon receipt.

ARTICLE 9 – TERM AND TERMINATION

     9.1 This Agreement shall commence on the Effective Date and, unless terminated in accordance with other Articles included in this Agreement, shall continue to be in full force and legal effect for a period of [ * ] from First Marketing and shall continue in effect thereafter until terminated by either party by written notice of termination given at least [ * ] ahead of the effective date thereof.

     9.2 Prior to the Initial Regulatory Approval, NOVO NORDISK shall have the right to terminate this Agreement, by giving ARADIGM ninety (90) days prior written notice, for technical or scientific reasons and at agreed time points in the event that [ * ], which termination notice may be given only (a) if the Steering Committee has met to review the relevant problems and determined that they cannot reasonably be solved, or (b) if within sixty (60) days after the Steering Committee’s initial meeting to review the relevant problems, such problems have not been solved or the Steering Committee has not approved development actions reasonably likely to result in a solution or (c) if such approved development actions fail to solve such problems to the satisfaction of the Steering Committee. NOVO NORDISK

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shall reimburse ARADIGM any reasonable costs and expenses incurred by ARADIGM during the ninety (90) day notice period referred to above. ARADIGM will use their best efforts to minimise such costs.

     9.3 Should NOVO NORDISK terminate this Agreement, as allowed for in Article 9.2, or should ARADIGM terminate this Agreement due to a breach by NOVO NORDISK, before Regulatory Approval in the Territory, ARADIGM shall be entitled to use the data generated under the Agreement to work with a third party and shall have full access to the relevant sections of [ * ]. In such case, if in ARADIGM’s reasonable judgement further efforts could result in a commercially viable product, NOVO NORDISK shall also continue bulk supply of the Initial Compound to ARADIGM at Fully Burdened Cost for the duration of any continued development by ARADIGM. The foregoing notwithstanding, it is expressly understood that neither ARADIGM nor any marketing partner of ARADIGM shall have access to any [ * ].

     9.4 Either party shall be entitled to terminate this Agreement upon thirty (30) days’ written notice in the event that the other party shall commit a material breach of any of the terms and conditions of this Agreement and shall fail to remedy such breach within sixty (60) days of notice of such breach.

     9.5 Should ARADIGM terminate this Agreement due to a breach by NOVO NORDISK following Regulatory Approval in the Territory, ARADIGM will be entitled to gain ownership of the marketing authorisations in the Territory. In such case, the Marketing Authorisations, held by NOVO NORDISK, shall be transferred to ARADIGM at NOVO NORDISK’s cost of transfer; and NOVO NORDISK will agree to supply bulk Initial Compound to ARADIGM at [ * ]. The foregoing notwithstanding, it is expressly understood that neither ARADIGM nor any marketing partner of ARADIGM shall have access to any NOVO NORDISK bulk insulin Regulatory Approval or any [ * ].

     9.6 During the six calendar months following the Effective date, NOVO NORDISK shall have a right to terminate the Agreement, with thirty days (30) written notice, in the event of [ * ].

     9.7 Either party in addition to any other remedies available to it in law may terminate this Agreement forthwith by written notice to the other party in the event the other party shall

	(a)		become insolvent or bankrupt;
	(b)		make an assignment for the benefit of its creditors;
	(c)		appoint a trustee or receiver for itself for all or a substantial part of its property, seek reorganisation, liquidation, dissolution, a winding arrangement, composition or readjustment of its debts;

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	(d)		have its controlling interests acquired by a third party manufacturer of an approved insulin product at any time.
	(e)		have its controlling interest acquired by any pharmaceutical company reasonably deemed to be a competitor by NOVO NORDISK or ARADIGM, as applicable, unless such company promptly and expressly assumes and agrees to be directly bound by the terms of this Agreement in writing.

     9.8 Termination or expiration of this Agreement shall not affect the continuing validity and enforceability of Articles 6 and 7 of this Agreement. All confidential information provided under the Agreement shall be returned to the respective parties within 90 days of the termination date, except as otherwise contemplated by this Agreement.

ARTICLE 10 – DISPUTE RESOLUTION AND APPLICABLE LAW

     10.1 Both parties will use their best endeavours to settle all matters in dispute amicably. Any matter in dispute that cannot be resolved by the Steering Committee will be referred to the senior management of the two parties, who shall meet in an effort to settle such dispute before further proceedings. All disputes and differences of any kind related to this Agreement, which cannot be so solved amicably by the parties, shall be referred to, and finally settled by, arbitration in New York, New York in accordance with the Arbitration Rules of the American Arbitration Association. The number of arbitrators shall be three (3). The award of the arbitrators shall be final and binding on both parties. The parties bind themselves to carry out the award of the arbitrators.

     10.2 This Agreement shall be construed under and interpreted pursuant to the Laws of New York.

Hayward, 1998—		Bagsvaerd, 1998—
ARADIGM CORPORATION		NOVO NORDISK A/S
/s/ Richard P. Thompson		/s/ Lares Rebien Sørensen
By: Richard P. Thompson		By: Lars Rebien Sørensen
President & CEO		Executive Corporate Vice President Health Care