Exhibit 10.26

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

LICENSE AGREEMENT

dated as of

January 26, 2005

between

ARADIGM CORPORATION

and

NOVO NORDISK A/S

 

 

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TABLE OF CONTENTS

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 ARTICLE 1 DEFINITIONS
 SECTION 1.01.
   Definitions     1  
 SECTION 1.02.
   Other Defined Terms     6  
 SECTION 1.03.
   Other Definitional and Interpretative Provisions     6      ARTICLE 2 RIGHTS
AND OBLIGATIONS OF THE PARTIES
 SECTION 2.01.
   Development Program     6  
 SECTION 2.02.
   Review Committee     7  
 SECTION 2.03.
   Obligations Of The Parties In Respect Of The Review Committee     7  
 SECTION 2.04.
   Responsibilities Of The Review Committee     8  
 SECTION 2.05.
   Diligent Efforts     8  
 SECTION 2.06.
   Use Restrictions     8  
 SECTION 2.07.
   Alternative Technology     8  
 SECTION 2.08.
   Noncompetition     10  
 SECTION 2.09.
   Product Liability     10      ARTICLE 3 GRANT OF LICENSE
 SECTION 3.01.
   License     11  
 SECTION 3.02.
   Additional License Under Aradigm Selected Pulmonary Delivery Patent Rights  
  11  
 SECTION 3.03.
   Sublicense     11  
 SECTION 3.04.
   Additional Licenses     11  
 SECTION 3.05.
   Publicly Available Information     12      ARTICLE 4 SUPPLY
 SECTION 4.01.
   Novo Nordisk Supply Obligations     12      ARTICLE 5 ROYALTY PAYMENTS
 SECTION 5.01.
   Royalty Payments     12  
 SECTION 5.02.
   Royalty Payments Schedule     13  
 SECTION 5.03.
   Additional Royalty Provisions     13  
 SECTION 5.04.
   Record Keeping     14  
 SECTION 5.05.
   Audit Right     14  
 SECTION 5.06.
   Withholding Taxes     14  
 SECTION 5.07.
   Currency     14  

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  ARTICLE 6 INTELLECTUAL PROPERTY
SECTION 6.01.
  Aradigm Intellectual Property Rights     15  
SECTION 6.02.
  Novo Nordisk Intellectual Property Rights     15  
SECTION 6.03.
  Notice by Aradigm     16  
SECTION 6.04.
  Notice by Novo Nordisk     16  
SECTION 6.05.
  Pursuit of Patents     17  
SECTION 6.06.
  License Option In Lieu Of Ownership     18     ARTICLE 7 PATENT COOPERATION
SECTION 7.01.
  Enforcement of Patent Rights     18  
SECTION 7.02.
  Initiation of Action Relating to Patents     18  
SECTION 7.03.
  Interferences     21  
SECTION 7.04.
  Defense and Settlement of Third Party Patent Claims     21     ARTICLE 8
SECRECY
SECTION 8.01.
  Confidentiality     22  
SECTION 8.02.
  Publication Planning     22  
SECTION 8.03.
  Term Of Confidentiality Provisions     23     ARTICLE 9 NOTICE
SECTION 9.01.
  Notice     23  
SECTION 9.02.
  Deemed Receipt of Notice     23     ARTICLE 10 TERM AND TERMINATION
SECTION 10.01.
  Term     24  
SECTION 10.02.
  Termination by Novo Nordisk     24  
SECTION 10.03.
  Termination by Aradigm     24  
SECTION 10.04.
  Termination By Either Party     24  
SECTION 10.05.
  Rights And Obligations of The Parties After Termination     24  
SECTION 10.06.
  Additional Effects of Termination or Expiration     28     ARTICLE 11 DISPUTE
RESOLUTION AND GOVERNING LAW
SECTION 11.01.
  Dispute Resolution     28  
SECTION 11.02.
  Governing Law     29  

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   ARTICLE 12 MISCELLANEOUS
 SECTION 12.01.
   Bankruptcy Code Considerations     29  
 SECTION 12.02.
   Binding Agreement     30  
 SECTION 12.03.
   Severability     30  
 SECTION 12.04.
   Amendments and Waivers     30  
 SECTION 12.05.
   Expenses     30  
 SECTION 12.06.
   Successors and Assigns     30  
 SECTION 12.07.
   Counterparts; Third Party Beneficiaries     30  
 SECTION 12.08.
   Entire Agreement     30   Appendix A Aradigm Selected Pulmonary Delivery
Patent Rights        

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AMENDED AND RESTATED LICENSE AGREEMENT

      This AMENDED AND RESTATED LICENSE AGREEMENT (the “Agreement”) is entered
into as of January 26, 2005 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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**** 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.

3

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and (d) Freight, insurance and other similar expenses billed separately to the
customer. Upon a request by Aradigm or Novo Nordisk, as the case may be,
supported by suitable documentation reflecting actual operating experience, the
Parties will agree on a fixed percentage of Net Sales of the applicable product
to represent item (d).

      “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:

      Term Section

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Agreement
  Recitals
Aradigm
  Recitals
Bankruptcy Code
  12.01(a)
Confidential Information
  8.01(d)
Development and License Agreement
  Recitals
Directly Infringing Product
  7.02(c)
Field Claim
  7.02(b)
Field Infringement
  7.04(a)
Independent Auditor
  5.05(a)
Non-Insulin Compound
  2.07(b)
Novo Nordisk
  Recitals
Novo Nordisk Delivery Technologies, Inc. 
  Recitals
Representatives
  8.01(d)
Restructuring Agreement
  Recitals
Review Committee
  2.02
Royalty Paying Party
  5.02
Royalty Receiving Party
  5.02
substantially the same as
  7.02(c)

      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

        (a) consist of up to three (3) representatives of each Party, as
notified by such Party to the other Party from time to time in writing. Other
non-voting representatives of a Party may attend each meeting upon the approval
of the Review Committee;           (b) be chaired by a representative of Novo
Nordisk from the Effective Date until December 31, 2005; provided that, after
such date a representative from Aradigm will chair the Review Committee from
January 1, 2006 until December 31, 2006, and thereafter the Parties will
alternate chairing the Review Committee on a calendar year basis;          
(c) meet periodically (at least once every six (6) months). Meetings shall be
convened by the chairperson with at least thirty (30) calendar days prior
written notice and such notice shall include an agenda. Either Party may request
the chairperson to call a meeting, but in no event shall any Party request the
chairperson to call more than four (4) meetings per calendar year; and          
(d) have minutes drafted of each meeting by the chairperson and signed by one
representative of each Party.

      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:

        (a) ensuring optimal cooperation between the Parties;          
(b) conducting semi-annual technology reviews within the field of pulmonary
administration of drugs;           (c) identifying and recommending, subject to
the Parties’ agreement, consulting and other assignments to be performed by
Aradigm under the Development Program or as contemplated by Section 2.03(b) at
Novo Nordisk’s expense;           (d) reviewing the status, process and strategy
for prosecution and maintenance of patents in accordance with Article 6 and
addressing any issues or developments arising therefrom;          
(e) overseeing ongoing implementation of the technology transfer process
contemplated in the Restructuring Agreement;           (f) reviewing any Status
Report on the Development Program presented by Novo Nordisk; and          
(g) discussing any other matters as mutually agreed between the Parties.

      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:

        (a) Novo Nordisk must use Diligent Efforts to clinically develop and
register the Insulin Compound Packaged Product and the Device until it has
obtained Broad Regulatory Approval of such Insulin Compound Packaged Product and
the Device in the United States and the European Union;           (b) Novo
Nordisk must fund the Development Program for the Insulin Compound Packaged
Product and the Device with [****] until a Regulatory Submission for Broad
Regulatory Approval of such Insulin Compound Packaged Product and the Device has
been made in the United States and the European Union;           (c) until
receipt of Broad Regulatory Approval by Novo Nordisk in the United States and
the European Union, Novo Nordisk must expend [****] and           (d) within the
three-year period following Novo Nordisk’s receipt of Broad Regulatory Approval
in the United States in respect of the Insulin Compound Packaged Product and the
Device, a member of the Novo Nordisk Affiliate Group or any permitted
sublicensees thereof must accomplish First Marketing of the Insulin Compound
Packaged Product and the Device in the United States.

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.

--------------------------------------------------------------------------------

**** 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.

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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.

        (i) In the event that Aradigm delivers written notice to Novo Nordisk
that Aradigm will not market or fails to deliver any notice regarding its intent
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, notwithstanding
Section 2.07(d), then the license granted to Novo Nordisk pursuant to
Section 3.01 and Section 3.02 shall remain exclusive with respect thereto, and:
(A) until the sixth (6th) anniversary of the earlier of (I) First Marketing of a
Packaged Product and the Device and (II) First Marketing of any product based on
an Alternative

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  Technology that has been described in the applicable Alternative Technology
Notice, Aradigm shall be entitled to a royalty (in accordance with Section 5.01)
on the Net Sales by any member of the Novo Nordisk Affiliate Group, or any
permitted sublicensees thereof, of the product described in the applicable
Alternative Technology Notice (whether or not such product is covered by any
Aradigm Selected Pulmonary Delivery Patent Rights); and (B) following the sixth
(6th) anniversary of the earlier of (I) and (II) above, Aradigm shall be
entitled to a royalty (in accordance with Section 5.01) on the Net Sales by any
member of the Novo Nordisk Affiliate Group, or any permitted sublicensees
thereof, of (1) any Packaged Product and the Device and (2) any product based on
an Alternative Technology that has been described in the applicable Alternative
Technology Notice to the extent that, and for so long as, such product is
covered by any of the Aradigm Selected Pulmonary Delivery Patent Rights.    
      (ii) In the event that Aradigm delivers written notice to Novo Nordisk
that Aradigm will market, either alone or in collaboration with one
(1) marketing partner, any insulin or insulin analog class similar to the
insulin or insulin analog class specified in the applicable Alternative
Technology Notice, then Aradigm shall be entitled to a royalty only on Net Sales
of any Packaged Product and the Device in accordance with Section 5.01 and shall
not be entitled to a royalty on any product based on an Alternative Technology
that has been described in such Alternative Technology Notice.

      (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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receives from the sublicensee thereof a royalty or other compensation and
(ii) without such sublicense, the applicable product would otherwise infringe
the patents included within Novo Nordisk New IPR.

      (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:

        (i) in the event that the First Marketed Product and Device is the
Insulin Compound Packaged Product and the Device, (A) four and one-quarter
percent (4.25%) of Net Sales thereof (if any) by any member of the Novo Nordisk
Affiliate Group or any permitted sublicensees thereof during any year during the
Stage 1 Commercialization Period up to and including the applicable Baseline for
such year plus four and fifty-five hundredths percent (4.55%) of Net Sales
thereof (if any) by any member of the Novo Nordisk Affiliate Group or any
permitted sublicensees thereof in excess of the applicable Baseline for such
year; (B) five percent (5.00%) of Net Sales thereof (if any) by any member of
the Novo Nordisk Affiliate Group or any permitted sublicensees thereof during
the Stage 2 Commercialization Period up to and including the applicable Baseline
for such period plus five and three-tenths percent (5.30%) of Net Sales thereof
(if any) by any member of the Novo Nordisk Affiliate Group or any permitted
sublicensees thereof in excess of the applicable Baseline for such period; and
(C) six percent (6.00%) of Net Sales thereof (if any) by any member of the Novo
Nordisk Affiliate Group or any permitted sublicensees thereof during any year
during the Stage 3 Commercialization Period up to and including the applicable
Baseline in such year plus six and three-tenths percent (6.30%) of Net Sales
thereof (if any) by any member of the Novo Nordisk Affiliate Group or any
permitted sublicensees thereof in excess of the applicable Baseline for such
year; or           (ii) in the event that the First Marketed Product and Device
is any Packaged Product (relating to Program Compounds other than the Insulin
Compound) and the Device or any product using an Alternative Technology to
deliver a specific insulin or insulin analog class (in such case, only to the
extent

12

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  that royalties are payable under Section 2.07(e)(i)), (A) four and four-tenths
percent (4.40%) of Net Sales thereof (if any) by any member of the Novo Nordisk
Affiliate Group or any permitted sublicensees thereof during the Stage 1
Commercialization Period; (B) five and fifteen-hundredths percent (5.15%) of Net
Sales thereof (if any) by any member of the Novo Nordisk Affiliate Group or any
permitted sublicensees thereof during the Stage 2 Commercialization Period; and
(C) six and fifteen-hundredths percent (6.15%) of Net Sales thereof (if any) by
any member of the Novo Nordisk Affiliate Group or any permitted sublicensees
thereof during the Stage 3 Commercialization Period.

      (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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and (ii) Novo Nordisk is in compliance with all of its material obligations
under this Agreement at the time of such material reduction in gross margins,
then Novo Nordisk may request a reduction in the applicable royalty rates
hereunder for the specific geographic area (whether the United States, any
member state of the European Union and/or Japan). Within sixty (60) days of such
request, the Parties will meet to review Novo Nordisk’s financial and marketing
information pertinent to such request and to negotiate and agree on a reduction
in the royalty rates hereunder that is proportionate to the reduction in gross
margins experienced by Novo Nordisk or that otherwise fairly reflects the
diminished value of the applicable products to Novo Nordisk.

      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.

--------------------------------------------------------------------------------

**** 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.

15

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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

16

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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 such
patent application, Aradigm shall grant Novo Nordisk a world-wide,
non-exclusive, 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. Novo Nordisk shall use
its Diligent Efforts to cause its employees and contractors to assist in
prosecuting any patent applications requested by Aradigm in accordance with this
Section 6.04(c).

      (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

--------------------------------------------------------------------------------

**** 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.

17

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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 6.06.     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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Aradigm for its expenses relating to its joining and participation thereto. If
Aradigm is required to be joined as a party in any such action by a third party
practicing within the Field challenging the enforceability or validity or
asserting the non-infringement of Aradigm Patent Rights, Aradigm Selected
Pulmonary Delivery Patent Rights or Aradigm New IPR, then upon the request of
Novo Nordisk, Aradigm shall waive any objection to such joinder on the grounds
of personal jurisdiction, venue or forum non conveniens.

      (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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be unreasonably withheld or delayed. Aradigm shall fully cooperate with and
supply all assistance reasonably requested by Novo Nordisk in an action
conducted by Novo Nordisk under Section 7.02(a)-(c) above, and Novo Nordisk
shall reimburse Aradigm for its costs and expenses relating thereto.

      (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:

        (i) to such Party’s Representatives (as defined below) in the normal
course of the performance of their duties or to any financial institution
providing credit to such Party,           (ii) to the extent required by
applicable law, rule or regulation (including complying with any oral or written
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process to which a Party is subject;
provided that, such Party shall give the other Party prompt notice of such
request(s), to the extent practicable, so that such other Party may seek an
appropriate protective order or similar relief (and the Party shall cooperate
with such efforts by such other Party, and shall in any event make only the
minimum disclosure required by such law, rule or regulation)),          
(iii) to any governmental or regulatory authority or agency in order to obtain
from such authority or agency any authorization required or contemplated by this
Agreement or any of the other Transaction Agreements as long as such authority
or agency is advised of the confidential nature of such information, or    
      (iv) as mutually agreed between the Parties.

      (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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(b) obtaining the prior written consent of Aradigm for the release of such
publication or public presentation, such consent not to be unreasonably withheld
or delayed. For purposes of this Section 8.02, Aradigm shall be deemed to have
consented to the release of such draft publication or public presentation if it
shall not have provided comments to such draft publication or public
presentation to Novo Nordisk in writing within ten (10) days of its receipt
thereof.

      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,

  if to Aradigm, to:     Aradigm Corporation   3929 Point Eden Way   Hayward,
California 94545   Attention: Chief Financial Officer   Telephone: +1
510-265-9000   Telefax: +1 510-265-0277     with a copy to:     Cooley Godward
LLP   Five Palo Alto Square   3000 El Camino Real   Palo Alto, California 94306
  Attention: James C. Kitch   Telephone: +1 650-843-5027   Telefax: +1
650-849-7400     if to Novo Nordisk, to:     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     and     Attention: Vice President, Business
Development   Telephone: + 45 44 42 39 00   Telefax: + 45 44 42 16 98

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

        (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 reorganization,
liquidation, dissolution, a winding arrangement, composition or readjustment of
its debts;           (d) have its controlling interests acquired by a third
party manufacturer of an approved insulin product or an insulin product under
clinical development at any time unless such manufacturer promptly and expressly
assumes and agrees in writing to be directly bound by the terms of this
Agreement; or           (e) have its controlling interest acquired by any
company reasonably deemed to be a competitor by Novo Nordisk or Aradigm, as
applicable, unless such company promptly and expressly assumes and agrees in
writing to be directly bound by the terms of this Agreement.

      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:

        (i) in the event that Novo Nordisk, in its notice of termination,
informs Aradigm of Novo Nordisk’s intent to continue the Development Program:
(1) Novo Nordisk shall retain its licenses under Section 3.01 and Section 3.02
and pay royalties with respect thereto under Section 5.01 until the later of
(A) the date that is ten (10) years from First Marketing of any Packaged Product
and the Device and

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  (B) the expiration date of the last patent required to cover the Packaged
Product and the Device and the development, manufacturing, use, marketing,
distribution, sale, offer for sale, importation and/or exportation thereof in
and from the Territory, and (2) all rights and obligations of the Parties under
Sections 2.02, 2.03, 2.04, 2.08, 4.01, 6.03 and 6.04 will terminate. For the
avoidance of doubt, the remaining provisions of this Agreement will survive,
including Novo Nordisk’s license rights and payment obligations (as set forth in
(1) above) and Novo Nordisk’s obligation to expend Diligent Efforts to
clinically develop and register the Insulin Compound Packaged Product and the
Device for Broad Regulatory Approval in the United States and the European
Union.           (ii) in the event that Novo Nordisk fails to provide Aradigm
with written notice of its intent to continue the Development Program pursuant
to Section 10.05(b)(i), the licenses granted to Novo Nordisk under Section 3.01
and Section 3.02, and to its permitted sublicensees thereunder, shall
immediately terminate, and Novo Nordisk shall be, and hereby is, granted a
perpetual, world-wide, non-exclusive, royalty-bearing, license, with the right
to sublicense its customers and Joint Marketing Partners in accordance with
Section 3.03, under the Aradigm Patent Rights, Aradigm Selected Pulmonary
Delivery Patent Rights, Aradigm Know-How and Aradigm New IPR to develop,
manufacture, use, market, distribute, sell, offer for sale, have made, import
and/or export pulmonary products (other than Packaged Products, Devices or
products that are substantially the same as such Packaged Products or Devices)
in the Field. The royalty shall be payable on Net Sales within the Field (by any
member of the Novo Nordisk Affiliate Group or any permitted sublicensee
thereof), if any, of pulmonary products that use, or are covered by, any Aradigm
Know-How or any know-how included in the Aradigm New IPR, or that are covered by
any Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights or
any patents included in the Aradigm New IPR. Such royalty shall be payable until
the later of (A) the date that is ten (10) years from First Marketing of such
pulmonary product; and (B) the expiration date of the last patent required to
cover such pulmonary product and the development, manufacturing, use, marketing,
distribution, sale, offer for sale, importation and/or exportation thereof in
and from the Territory. The rate for such royalty shall be determined in
accordance with the provisions set forth in Section 5.03(a) in respect of those
patents and know-how licensed to Novo Nordisk by Aradigm under this
Section 10.05(b)(ii), but in no event shall such royalty exceed: (X) in the case
of any pulmonary products using an Alternative Technology to deliver a specific
insulin or insulin analog class, (1) for a First Marketed Product and Device,
four and one quarter percent (4.25%) of Net Sales thereof during the applicable
Stage 1 Commercialization Period, five percent (5.00%) of Net Sales thereof
during the applicable Stage 2 Commercialization Period, and six percent (6.00%)
of Net Sales thereof during the applicable Stage 3 Commercialization Period or
(2) for any Later Marketed Product and Device, five and one-quarter percent
(5.25%) of Net Sales thereof during the applicable Stage 1 Commercialization
Period and six percent (6.00%) of Net Sales thereof during the applicable
Stage 2 Commercialization Period and the applicable Stage 3 Commercialization
Period; and (Y) for any other pulmonary products, five and one-quarter percent
(5.25%) of Net Sales thereof during the applicable Stage 1 Commercialization
Period and six percent (6.00%) of Net Sales thereof during the applicable
Stage 2 Commercialization Period and the applicable Stage 3 Commercialization
Period.

      (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:

        (i) The licenses granted to Novo Nordisk under Section 3.01 and
Section 3.02, and to its permitted sublicensees thereunder, shall immediately
terminate, and Novo Nordisk shall be, and hereby is, granted a perpetual,
world-wide, non-exclusive, royalty-bearing license, with the right to sublicense
its customers and Joint Marketing Partners in accordance with Section 3.03,
under the Aradigm Patent Rights, Aradigm Selected Pulmonary Delivery Patent
Rights, Aradigm Know-How and Aradigm New IPR to develop, manufacture, use,
market, distribute, sell, offer for sale, have made, import and/or export
pulmonary products (other than Packaged Products, Devices or products that are
substantially the same as such Packaged Products or Devices) in the Field. The
royalty shall be payable on Net Sales within the Field (by any member of the
Novo Nordisk Affiliate Group or any permitted sublicensee thereof), if any,

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  of pulmonary products that use, or are covered by, any Aradigm Know-How or any
know-how included in the Aradigm New IPR, or that are covered by any Aradigm
Patent Rights, Aradigm Selected Pulmonary Delivery Patent Rights or any patents
included in the Aradigm New IPR. Such royalty shall be payable until the later
of (A) the date that is ten (10) years from First Marketing of such pulmonary
product; and (B) the expiration date of the last patent required to cover such
pulmonary product and the development, manufacturing, use, marketing,
distribution, sale, offer for sale, importation and/or exportation thereof in
and from the Territory. The rate for such royalty shall be determined in
accordance with the provisions set forth in Section 5.03(a) in respect of those
patents and know-how licensed to Novo Nordisk by Aradigm under this
Section 10.05(c)(i), but in no event shall such royalty exceed: (X) in the case
of any pulmonary products using an Alternative Technology to deliver a specific
insulin or insulin analog class, (1) for a First Marketed Product and Device,
four and one quarter percent (4.25%) of Net Sales thereof during the applicable
Stage 1 Commercialization Period, five percent (5.00%) of Net Sales thereof
during the applicable Stage 2 Commercialization Period, and six percent (6.00%)
of Net Sales thereof during the applicable Stage 3 Commercialization Period; or
(2) for any Later Marketed Product and Device, five and one-quarter percent
(5.25%) of Net Sales thereof during the applicable Stage 1 Commercialization
Period and six percent (6.00%) of Net Sales during the applicable Stage 2
Commercialization Period and the applicable Stage 3 Commercialization Period;
and (Y) for any other pulmonary products, five and one-quarter percent (5.25%)
of Net Sales thereof during the applicable Stage 1 Commercialization Period and
six percent (6.00%) of Net Sales thereof during the applicable Stage 2
Commercialization Period and the applicable Stage 3 Commercialization Period;  
        (ii) Aradigm shall be, and hereby is, granted a perpetual, world-wide,
non-exclusive, royalty-bearing (as described below in this Section 10.05(c)(ii))
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 pulmonary drug delivery product 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 TPR 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(c)(ii). Within the Field, such license shall be royalty-free prior to
First Marketing of any Packaged Product and/or Device by Aradigm or its
sublicensees; after such First Marketing, such license shall bear a royalty of
(A) two and seven-tenths percent (2.70%) of Net Sales (by Aradigm, any of its
Affiliates or permitted sublicensees) of Device and Packaged Products falling
within (a)-(d) above for the first four (4) years following First Marketing and
thereafter four percent (4.00%) of such Net Sales of the

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  Packaged Product and the Device; and (B) four percent (4.00%) of Net Sales (by
Aradigm, any of its Affiliates or sublicensees) of later generation pulmonary
products derived from such Device and/or Packaged Products. Outside the Field,
such royalty shall bear a royalty determined in accordance with the provisions
set forth in Section 5.03(a). 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; and           (iii) Novo
Nordisk shall supply insulin to Aradigm in accordance with the provisions set
forth in Section 10.05(f) until the date of the first Regulatory Submission if,
and only if, Novo Nordisk shall have terminated this Agreement prior to First
Marketing of the Insulin Compound Packaged Product and the Device.

      (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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any equipment that is not custom-made to Novo Nordisk for any such equipment;
provided that, Novo Nordisk shall be entitled to payment of fair market value
for any custom-made equipment in respect of which Novo Nordisk does not provide
Aradigm with reasonably satisfactory evidence of its intention to replace such
equipment. Additionally, Aradigm shall be entitled to use the data generated
under the Development Program to work with a third party and shall have
reasonable access to the relevant sections of applicable regulatory filings by
any member of the Novo Nordisk Affiliate Group; provided that, it is expressly
understood that neither Aradigm nor any marketing partner of Aradigm shall have
access to any Regulatory Approval in respect of Novo Nordisk bulk insulin or
Novo Nordisk Know-How, production process details or other information relating
to the production of bulk insulin by Novo Nordisk or any of its Affiliates.

      (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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**** 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.

28

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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 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 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.

29

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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.

[SIGNATURE PAGE FOLLOWS]

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  ARADIGM CORPORATION     By: /s/ Thomas C. Chesterman  

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  Name: Thomas C. Chesterman   Title: Sr. Vice President and Chief Financial
Officer     NOVO NORDISK A/S     By: /s/ Per Valstorp  

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  Name: Per Valstorp   Title: Senior Vice President, Product Supply

 

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Appendix A
Aradigm Selected Pulmonary Delivery Patent Rights
 
 
 
[****]

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****   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.