Exhibit 10.1
AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT
     This Amended and Restated Change of Control Agreement (the “Agreement”) is
made and entered into as of July 30, 2009, by and between Aradigm Corporation
(the “Company”), and Igor Gonda (the “Executive”).
     Whereas, the Company’s Board of Directors (the “Board”) has determined that
it would be in the best interests of the Company and its stockholders to provide
for certain severance benefits in the event the Executive’s employment is
terminated in connection with a Change of Control (as defined below) in order to
align further the interests of the Executive with those of the stockholders of
the Company;
     NOW, Therefore, in consideration of the Executive’s continued employment
with the Company, the Company and the Executive hereby agree as follows:
     1. Definitions. The following terms in this Agreement shall have the
meanings set forth below:
     1.1 “Change of Control” shall mean any one or more of the following events:
          (a) The consummation of a merger, consolidation or similar transaction
involving (directly or indirectly) the Company and, immediately after the
consummation of such merger, consolidation or similar transaction, the
shareholders of the Company immediately prior thereto do not own, directly or
indirectly, either (i) outstanding voting securities representing more than
sixty percent (60%) of the combined outstanding voting power of the surviving
entity in such merger, consolidation or similar transaction or (ii) more than
sixty percent (60%) of the combined outstanding voting power of the parent of
the surviving entity in such merger, consolidation or similar transaction, in
each case in substantially the same proportions as their ownership of the
outstanding voting securities of the Company immediately prior to such
transaction.
          (b) The consummation of a sale, lease, exclusive license or other
disposition of 90% or more of the consolidated assets of the Company and its
subsidiaries within a single 12 month period, other than a sale, lease, license
or other disposition of all or substantially all of the consolidated assets of
the Company and its subsidiaries to an entity, more than sixty percent (60%) of
the combined voting power of the voting securities of which are owned by the
shareholders of the Company in substantially the same proportions as their
ownership of the outstanding voting securities of the Company prior to such
sale, lease, license or other disposition. The Board shall have the sole
discretion to determine whether the event described in this Section 1.1 (b) has
occurred.
          (c) Individuals who, on the date this Agreement is approved by the
Board, are members of the Board (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the members of the Board; provided, however,
that if the appointment or election (or nomination for election) of any new
Board member was approved or recommended by a majority vote of the members of
the Incumbent Board then still in office, such new member shall, for purposes of
this Agreement, be considered a member of the Incumbent Board.

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The term Change of Control shall not include a sale of assets, merger or other
transaction effected exclusively for the purpose of changing the domicile of the
Company, or any transaction which does not constitute a “change in control
event” as defined in Treasury Regulation 
Section 1.409A-3(i)(5)(i).
     1.2 “Cause” shall mean any one or more of the following: (i) the
Executive’s commission of any felony or any crime involving fraud, dishonesty or
moral turpitude under the laws of the United States or any state thereof;
(ii) the Executive’s attempted commission of, or participation in, a fraud or
act of dishonesty against the Company; (iii) the Executive’s intentional,
material violation of any material contract or agreement between the Executive
and the Company or any statutory duty owed to the Company; (iv) the Executive’s
unauthorized use or disclosure of the Company’s confidential information or
trade secrets; or (v) the Executive’s gross misconduct. The determination that a
termination is for Cause shall be made by the Company in its sole discretion.
     1.3 “Constructive Termination” shall mean the resignation of the Executive
due to the occurrence of any of the following without the Executive’s consent:
          (a) a material reduction in the Executive’s duties, title, reporting
relationships, or responsibilities relative to the Executive’s duties, title,
reporting relationships, or responsibilities in effect immediately prior to the
effective date of the Change of Control; provided, however, that a change in the
Executive’s title or reporting relationships shall not in and of themselves (or
collectively) constitute a Constructive Termination; provided further, that this
determination will include an analysis of whether the Executive maintains at
least the same level, scope and type of duties, title, reporting relationships,
and responsibilities with respect to the management, strategy, operations and
business of the combined entity resulting from such Change of Control, taking
the Company, any successor, and their respective parent corporations,
subsidiaries and other affiliates, together as a whole;
          (b) a material reduction by the Company in the Executive’s annual base
salary or benefits as in effect on the effective date of the Change of Control
or as increased thereafter; provided, however, that Constructive Termination
shall not be deemed to have occurred in the event of a reduction in the
Executive’s annual base salary or benefits that is pursuant to a salary
reduction program or change in Company benefit programs that affects
substantially all of the executive officers or employees of the Company and that
does not adversely affect the Executive to a greater extent than other similarly
situated employees;
          (c) a relocation of the Executive’s primary business office to a
location more than fifty (50) miles from the location at which the Executive
performed the Executive’s duties as of the effective date of the Change of
Control, except for required travel by the Executive with respect to the
Company’s business to an extent substantially consistent with the Executive’s
business travel obligations prior to the effective date of the Change of
Control; or
          (d) a material breach by the Company of any material obligations under
this Agreement, or a failure of any successor to the Company to assume or
continue this Agreement.
     1.4 “Covered Termination” shall mean either that an Executive’s employment
(a) is terminated without Cause, or (b) terminates as a result of a Constructive
Termination, in each

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case, resulting in a “separation from service” with the Company within the
meaning of Treasury Regulation Section 1.409A-l(h) (without regard to any
permissible alternative definition of “termination of employment” thereunder).
2. Change of Control Severance Benefits.
     2.1 Severance Benefits. If within eighteen (18) months after the effective
date of a Change of Control, the Executive: (a) has a Covered Termination; and
(b) provides the Company with a signed general release of all claims in a form
acceptable to the Company (the “Release”) and allows the Release to become
effective within sixty (60) days following the date of the Covered Termination
(the “Release Deadline”), then the Executive shall be eligible for the following
severance benefits:
          (a) Severance Payment. The Executive shall receive a single lump sum
payment equal to 24 months of the base salary he received as of the date of the
Change of Control, or the date of the Covered Termination (whichever is
greater). This Severance Payment shall be subject to required deductions and tax
withholdings and shall be paid within ten (10) business days of the effective
date of the Release.
          (b) Bonus Payment. The Executive shall receive a single lump sum
payment equal to two times the following sum: The Executive’s target bonus for
the year in which the Covered Termination occurs multiplied by the average
annual percentage achievement of corporate goals over each fiscal year for the
three complete fiscal years preceding the date of the Covered Termination. This
Bonus Payment shall be subject to required deductions and tax withholdings and
shall be paid within ten (10) business days of the effective date of the
Release.
          (c) Health Insurance Payments. If, following the date of a Covered
Termination, the Executive timely elects continued group health insurance
coverage under the federal COBRA law or similar state laws, if applicable, the
Company will pay the Executive’s COBRA premium costs to continue such coverage
at the level in effect as of the date of the Covered Termination for a period of
24 months after the date of the Covered Termination (the “Termination Date”) or
until the Executive becomes eligible for group health insurance coverage through
a new employer (whichever comes first). The Executive must promptly notify the
Company in writing if the Executive becomes eligible for group health insurance
coverage through a new employer during the Severance Period.
          (d) Career Transition Assistance (Outplacement Services). The Company
will reimburse the Executive up to $20,000 for expenses actually incurred by the
Executive within six (6) months of the date of his Covered Termination for
reasonable and customary outplacement services for career transition assistance
expenses. Such payments shall qualify for the exemption provided by Treasury
Regulation Sections 1.409A-l(b)(9)(v)(A) and (C).
          (e) Accelerated Vesting. The Company will accelerate the vesting of
any stock options or restricted stock awards that remain unvested as of the date
of the termination of the Executive’s employment such that all such unvested
options or awards shall be deemed vested as of the date of such termination.
Except as modified herein, all such options and awards shall continue to be
governed by the applicable agreements and stock option plans.

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     2.2 Ineligibility for Severance Benefits. The Executive will not be
eligible for any benefits under this Agreement if the Company (or its successor)
terminates the Executive’s employment for Cause or if the Executive resigns for
any reason other than a Constructive Termination. Further, the Executive will
not be eligible for severance benefits under this Agreement in the event that
the Executive’s employment ends for any reason more than eighteen (18) months
after the effective date of a Change of Control, although the Executive may in
such instance be eligible for benefits under a separate Company severance plan,
including, without limitation, the Aradigm Corporation Executive Officer
Severance Benefit Plan. If the Release does not become effective by the Release
Deadline, Executive will not have any rights to any benefits under this
Agreement.
     2.3 Other Severance Benefits. Nothing in this Agreement shall affect the
right of the Executive to receive any severance benefits pursuant to any other
Company severance plan including, without limitation, the Aradigm Corporation
Executive Officer Severance Benefit Plan; provided, however, that if the
Executive actually receives benefits under this Agreement, he shall not be
entitled to receive any other severance benefits of any kind (except for the
accelerated vesting set forth in Section 2.1(e) above) pursuant to any other
severance benefit plan of the Company (including, without limitation, the
Aradigm Corporation Executive Officer Severance Benefit Plan). The Executive
acknowledges and agrees that any prior agreement between the Executive and the
Company providing for or relating to severance benefits in connection with a
Change of Control (as defined herein or therein), except for those contained in
the Executive’s stock option agreements with the Company, are hereby expressly
superseded and replaced in their entirety by this Agreement and shall have no
further force or effect
     2.4 Deferred Compensation.
          (a) All payments provided under this Agreement are intended to
constitute separate payments for purposes of Treasury
Regulation Section 1.409A-2(b)(2).
          (b) If Executive is a “specified employee” of the Company or any
affiliate thereof (or any successor entity thereto) within the meaning of
Section 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended (the
“Code”) on the date of a Covered Termination, then, except with respect to
amounts which may be paid sooner pursuant to an “involuntary separation from
service” as permitted by Treasury Regulation Section 1.409A-l(b)(9)(iii), any
cash severance payments pursuant to Sections 2.1(a) and 2.1(b) (the “Severance
Payments”) shall be delayed until the earlier of: (i) the date that is six
(6) months after the date of the Covered Termination, or (ii) the date of the
Executive’s death (such date, the “Delayed Payment Date”), and the Company (or
the successor entity thereto, as applicable) shall pay to the Executive a lump
sum amount equal to the sum of the Severance Payments that otherwise would have
been paid to the Executive on or before the Delayed Payment Date, without any
adjustment on account of such delay. Except to the extent that payments may be
delayed until the Delayed Payment Date, the Company will pay the Executive the
Severance Payments within eighty (80) days following the date of the Covered
Termination, provided that the Company shall have no obligation to pay any
Severance Payments prior to the date the Release becomes effective by its terms.
          (c) Provided that no Covered Termination following a Change of Control
has occurred on or prior to December 31, 2009, the following sentence shall
apply: notwithstanding

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anything in Section 2.4 to the contrary, payments shall be delayed pursuant to
Section 2.4(b) only to the extent such payments constitute deferred compensation
under Code Section 409A and such delay is necessary to prevent any adverse tax
consequences under Code Section 409A.
          (d) Any amounts paid pursuant to Section 2.1(c) are not intended to be
delayed pursuant to Section 409A(a)(2)(B)(i) of the Code and are intended to be
paid pursuant to the exception provided by Treasury
Regulation Section 1.409A-l(b)(9)(v)(B). Amounts paid pursuant to Section 2.1(d)
are intended to qualify for the exception provided under Treasury
Regulation Sections 1.409A-l(b)(9)(v)(A) and (C).
3. Parachute Payments.
     3.1 Reduction of Severance Benefits. Notwithstanding the above, if any
payment or benefit that the Executive would receive under this Agreement, when
combined with any other payment or benefit he receives that is contingent upon a
Change in Control (“Payment”) would (i) constitute a “parachute payment” within
the meaning of Section 280G of the Code, and (ii) but for this sentence, be
subject to the excise tax imposed by Section 4999 of the Code (“Excise Tax”),
then such Payment shall be either (x) the full amount of such Payment or
(y) such lesser amount as would result in no portion of the Payment being
subject to the Excise Tax (the “Reduced Amount”), whichever of the foregoing
amounts, taking into account the applicable federal, state and local employment
taxes, income taxes and the Excise Tax, results in the Executive’s receipt, on
an after-tax basis, of the greater economic benefit notwithstanding that all or
some portion of the Payment may be subject to the Excise Tax. If a reduction in
payments or benefits constituting “parachute payments” is necessary so that the
Payment equals the Reduced Amount, reduction shall occur in a manner necessary
to provide the Executive with the greatest economic benefit. If more than one
manner of reduction of payments or benefits necessary to arrive at the Reduced
Amount yields the greatest economic benefit, the payments and benefits shall be
reduced pro rata. The Executive shall be solely responsible for the payment of
all personal tax liability that is incurred as a result of the payments and
benefits received under this Agreement, and the Executive will not be reimbursed
by the Company for any such payments.
     3.2 Determination of Excise Tax Liability. The Company shall attempt to
cause its accountants to make all of the determinations required to be made
under Section 3.1, or, in the event the Company’s accountants will not perform
such service, the Company may select another professional services firm to
perform the calculations. The Company shall request that the accountants or firm
provide detailed supporting calculations both to the Company and the Executive
prior to the Change in Control if administratively feasible or subsequent to the
Change in Control if events occur that result in parachute payments to the
Executive at that time. For purposes of making the calculations required by
Section 3.1, the accountants or firm may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith determinations concerning the application of the Code. The Company and the
Executive shall furnish to the accountants or firm such information and
documents as the accountants or firm may reasonably request in order to make a
determination under this Section 3.1. The Company shall bear all costs the
accountants or firm may reasonably incur in connection with any calculations
contemplated by Section 3.1. Any such determination by the Company’s accountants
or other firm shall be binding upon the Company and the Executive, and the
Company shall have no liability to the Executive for the determinations of its
accountants or other firm.

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4. General Provisions.
     4.1 At Will Employment. Nothing in this Agreement alters the Executive’s
at-will employment status. Either the Executive or the Company may terminate the
Executive’s employment relationship at any time, with or without cause or
advance notice. In particular, nothing expressed or implied in this Agreement
will create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company or any subsidiary
prior to or following any Change of Control.
     4.2 Successors and Binding Agreement. This Agreement will be binding upon
and inure to the benefit of the Company and any successor to the Company,
including without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether or not
through a Change of Control (and such successor shall thereafter be deemed the
“Company” for the purposes of this Agreement). This Agreement will inure to the
benefit of and be enforceable by the Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees and
legatees.
     4.3 Amendments. No provision of the Agreement may be amended, modified or
waived unless such amendment, modification or waiver shall be agreed to in
writing and signed by the Executive and a duly authorized officer of the
Company.
     4.4 Severability. If any provision of the Agreement shall be determined to
be invalid or unenforceable by a court of competent jurisdiction, the remaining
provisions of the Agreement shall be unaffected thereby and shall remain in full
force and effect to the fullest extent permitted by law.
     4.5 Notices. Any notice or other communication required or permitted under
the Agreement shall be in writing and shall be deemed to have been duly given
when delivered by hand, electronic transmission (with a copy following by hand
or by overnight courier), by registered or certified mail, postage prepaid,
return receipt requested or by overnight courier addressed to the other party.
All notices shall be addressed as follows, or to such other address or addresses
as may be substituted by notice in writing:

     
To the Company:
  To the Executive:
Aradigm Corporation
  Igor Gonda
3929 Point Eden Way
  c/o Aradigm Corporation
Hayward, CA 94545
  3929 Point Eden Way
 
  Hayward, CA 94545

     4.6 Governing Law. The Agreement shall be construed, interpreted and
governed in accordance with the laws of the State of California, without
reference to rules relating to conflicts of law.
     4.7 Independent Counsel. The Executive acknowledges that this Agreement has
been prepared on behalf of the Company by counsel to the Company and that this
counsel does not represent, and is not acting on behalf of, the Executive. The
Executive has been provided with an opportunity to consult with the Executive’s
own counsel with respect to this Agreement.

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     4.8 Amendment and Restatement of Prior Agreement. This agreement replaces
any prior agreement between the Company and Executive with respect to the
subject matter hereof, and any prior agreement is terminated and of no further
force or effect.
     4.9 Counterparts. 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 will constitute one and the same agreement.

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     In Witness Whereof,the parties have executed this Amended and Restated
Change of Control Agreement as of the date first written above.

      Aradigm Corporation   Executive      

             
By:
  /s/ D. Jeffery Grimes   Signature:   /s/ Igor Gonda
 
           
Name:
  D. Jeffery Grimes   Print Name:   Igor Gonda
Title:
  VP, Legal Affairs, General Counsel & Secretary        

Signature Page to Amended and Restated Change of Control Agreement
(Igor Gonda)