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ARADIGM CORPORATION
 
CONSULTING AGREEMENT FOR INDEPENDENT CONTRACTORS
 
THIS CONSULTING AGREEMENT (the “Agreement”) is made and entered into by and
between ARADIGM CORPORATION, a California corporation (“Aradigm”), and NORMAN
HALLEEN an individual (“Consultant”), effective as of July 2, 2007.
 
RECITALS
 
WHEREAS, Consultant has unique skills and knowledge in Aradigm’s field of
endeavor and thus is well suited to advise Aradigm with respect to its financial
functions; and
 
WHEREAS, Aradigm desires that Consultant advise and consult with Aradigm and be
responsible for all functions and duties of the treasurer, and exercise such
powers and perform such duties as are usually vested in the office of chief
financial officer of a corporation, and Consultant agrees to provide such
assistance to Aradigm through a consulting relationship with Aradigm;
 
NOW THEREFORE, in consideration of the mutual obligations specified in this
Agreement, the parties agree to the following:
 
1.           CONSULTING SERVICES ENGAGEMENT.  Aradigm hereby retains Consultant,
and Consultant hereby accepts such retention, to perform consulting services for
Aradigm as set forth herein.
 
1.1   Scope. Consultant shall provide consulting services (“Services”) to
Aradigm generally in the specialized field of duties that are usually vested in
the office of chief financial officer of a corporation (the “Field”).  Aradigm
shall determine the specific nature and amount of the Services to be performed
within the Field during the term of this Agreement and as set forth herein.
 
The scope of the services will include:
 
(a)           Strategic Planning - actively participate in ongoing strategy
dialogues and assist in setting direction for the future of Aradigm. Participate
in the evaluation of new strategic business opportunities.
 
(b)           Working Capital Management - provide guidance on opportunities in
the marketplace.
 
(c)           Financial Reporting - define scope for detailed performance
reporting and provide the guidance to the chief executive officer and Financial
Controller, including analysis of key performance metrics to highlight operating
issues/challenges.
 
(d)           Operational Accounting - oversee the Finance and Accounting staff
with respect to month end close, general ledger accounting, inventory, accounts
receivable, accounts payable and fixed assets.
 
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(e)           Budgeting and Forecasting - oversee the annual budget process and
set up baseline expectations, variance analysis presentations and reviews.
 
(f)           Treasury/Banking - manage and act as the primary contact for the
banking relationship, ensure full compliance with the covenants of the loan
agreement and dialogue with broader investment community.  Oversight of
treasury/cash management.
 
(g)           Mergers and Acquisitions - lead all financial reporting and
due-diligence requirements associated with the Aradigm’s strategic initiatives.
 
(h)           Internal Controls and Accounting Processes - responsible for
evaluating existing processes and related internal controls, make
recommendations for improvement and ensure against any internal control
weaknesses.
 
(i)           Audit - act as primary interface with the Auditors and provide
management/oversight of corporate audit activity, including maintaining active
dialogue with auditors to ensure compliance with accounting standards.
 
(j)           Tax Compliance - oversee all financial/tax reporting to
appropriate federal, state, and local governments and ensure payment of all
taxes on a timely basis.  Provide guidance on development of broader tax
planning and structuring strategies for the future.
 
(k)           Exercise such powers and perform such duties as are usually vested
in the office of chief financial officer of a corporation, and exercise such
other powers and perform such other duties as may be prescribed by the Board of
Directors or the chief executive officer.
 
1.2   Performance and Time Commitment.  Consultant shall render the Services at
such times as may be mutually agreed upon by Consultant and Aradigm.  Consultant
shall perform the services at Aradigm’s principal place of business or at other
places upon mutual agreement of the parties.  Consultant also agrees to perform
a reasonable amount of informal consultation with Aradigm over the telephone or
otherwise.
 
1.3   Professional Standards.  The manner and means used by Consultant to
perform the Services desired by Aradigm are in the sole discretion and control
of Consultant.  Consultant’s Services, and the results thereof, will be
performed with and be the product of the highest degree of professional skill
and expertise.
 
1.4   Independent Contractor Status.  It is understood and agreed that
Consultant is an independent contractor, is not an agent or employee of Aradigm,
and is not authorized to act on behalf of Aradigm.  Consultant agrees not to
hold himself out as, or give any person any reason to believe that he is, an
employee, agent, joint venturer or partner of Aradigm, except as Consultant may
be required by law to act as an agent of Aradigm in relation to Services as
specified in Section 1.1, above.  Consultant will not be eligible for any
employee benefits, including, but not limited to, profit-sharing or retirement
benefits, nor will Aradigm make deductions from any amounts payable to
Consultant for taxes or insurance.  Consultant will, however, be eligible for
group health insurance.  Consultant will be solely responsible for all tax
payments and tax returns required to be filed with or made to any federal, state
or local tax authority with respect to Consultants performance of Services and
receipt of fees under this Agreement.  Aradigm will regularly report amounts
paid to Consultant by filing Form-1099 MISC with the Internal Revenue Service as
required by law.  Because Consultant is an independent contractor, Aradigm will
not withhold or make payments for Social Security; make unemployment insurance
or disability insurance contributions; or obtain workers compensation insurance
on Consultant’s behalf.  Consultant agrees to accept exclusive liability for
complying with all applicable state and federal laws governing self-employed
individuals, including obligations such as payment of taxes, social security,
disability and other contributions based on fees paid to Consultant under this
Agreement.  Consultant hereby agrees to indemnify and defend Aradigm against any
and all such taxes or contributions, including penalties and
interest.  Consultant retains the right to provide services for others during
the term of this Agreement and is not required to devote his services
exclusively for Aradigm.
 
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2.           COMPENSATION.  As compensation for Consultant’s services and the
discharge of all Consultant’s obligations hereunder, Aradigm shall pay
Consultant a consulting fee of $22,500 per month for Services requested by
Aradigm, payable on the 25th of the month after Consultant’s services are
discharged.  In addition, Aradigm will provide Consultant health care insurance
that includes medical, dental, and vision coverage for the term of this
Agreement. Total compensation for services and group health insurance not to
exceed $300,000 without further approval.
 
3.           EXPENSES.  Aradigm shall reimburse Consultant for expenses actually
incurred by Consultant in performing the Services so long as such expenses are
reasonable and necessary as determined by Aradigm.  Consultant shall maintain
adequate books and records relating to any expenses to be reimbursed and shall
submit requests for reimbursement in a timely manner and form acceptable to
Aradigm.
 
4.           NO SOLICITATION.  During the term of this Agreement and for three
(3) years after its termination, Consultant will not personally or through
others recruit, solicit or induce any employee of Aradigm to terminate his or
her employment with Aradigm.
 
5.           MAINTAINING CONFIDENTIAL INFORMATION.
 
5.1           Company Information.  During the term of this Agreement and in the
course of Consultant’s performance hereunder, Consultant may receive or
otherwise be exposed to confidential and/or proprietary information relating to
Aradigm’s technology know-how, trade secrets, data, inventions, developments,
plans business practices, and strategies.  Such confidential and/or proprietary
information of Aradigm (collectively referred to as “Information”) may include
but not be limited to: (i) confidential and/or proprietary information supplied
to Consultant with the legend “Aradigm Confidential” or equivalent; (ii)
Aradigm’s marketing and customer support strategies, financial information
(including sales, costs, profits and pricing methods), internal organization,
employee information, and customer lists; (iii) Aradigm’s technology, including,
but not limited to, discoveries, inventions, research and development efforts,
data, software, trade secrets, processes, samples, AERx® drug delivery
technology, AERx StripTM dosage forms and other related technology, formulas,
methods, product and know-how and show-how; (iv) all derivatives, improvements,
additions, modifications, and enhancements to any of the above, including any
such information or material created or developed by Consultant under this
Agreement; or (v) information of third parties as to which Aradigm has an
obligation of confidentiality.
 
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Consultant acknowledges the confidential and secret character of the Information
and agrees that the Information is the sole, exclusive and extremely valuable
property of Aradigm.  Accordingly, Consultant agrees not to reproduce any of the
Information without the applicable prior written consent of Aradigm, not to use
the Information except in the performance of this Agreement, and not to disclose
all or any part of the Information in any form to any third party, either during
or after the term of this Agreement.  Consultant agrees to protect all
Information of Aradigm with the same degree of care that it protects its own
Information (which, in any event, shall be not less than a reasonable degree of
care under the circumstances).  Upon notice of termination of this Agreement for
any reason, including expiration of term, or upon Aradigm’s request, Consultant
agrees to cease using and to immediately return to Aradigm all whole and partial
copies and derivatives of the Information, whether in Consultant’s possession or
under Consultant’s direct or indirect control.
 
5.2           Other Employer Information.  Consultant agrees that he will not,
during his engagement with Aradigm, improperly use or disclose any proprietary
information or trade secrets of his former or concurrent clients, employers or
companies, and that he will not bring onto the premises of Aradigm any
unpublished documents or any property belonging to his former or concurrent
clients, employers or companies unless consented to in writing by said employers
or companies. .
 
5.3           Third Party Information.  Consultant recognizes that Aradigm has
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on Aradigm’s part to maintain the
confidentiality of such information and, in some cases, to use it only for
certain limited purposes.  Consultant agrees that he owes Aradigm and such third
parties, both during the term of his engagement and thereafter, a duty to hold
all such confidential or proprietary informat­ion in the strictest confidence
and not to disclose it to any person, firm or corporation (except in a manner
that is consistent with Aradigm’s agreement with the third party) or use it for
the benefit of anyone other than Aradigm or such third party (consistent with
Aradigm’s agreement with the third party).
 
6.           INVENTIONS.
 
6.1           Disclosure of Work Product.  As used in this Agreement, the term
"Work Product" means any invention, whether or not patentable, and all related
know-how, designs, mask works, trademarks, formulae, processes, manufacturing
techniques, trade secrets, ideas, artwork, software or other copyrightable or
patentable works.  Consultant agrees to disclose promptly in writing to Aradigm,
or any person designated by Aradigm, all Work Product that is solely or jointly
conceived, made, reduced to practice, or learned by Consultant in the course of
any work performed for Aradigm ("Aradigm Work Product").  Consultant represents
that any Work Product relating to Aradigm's business or any project that
Consultant has made, conceived or reduced to practice at the time of signing
this Agreement ("Prior Work Product") has been disclosed in writing to Aradigm
and attached to this Agreement as Exhibit A.  If disclosure of any such Prior
Work Product would cause Consultant to violate any prior confidentiality
agreement, Consultant understands that it is not to list such Prior Work Product
in Exhibit A but it will disclose a cursory name for each such invention, a
listing of the party(ies) to whom it belongs, and the fact that full disclosure
as to such Prior Work Product has not been made for that reason.  A space is
provided in Exhibit A for such purpose.
 
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6.2           Ownership of Work Product.  Consultant shall specifically describe
and identify in Exhibit A all technology which (a) Consultant intends to use in
performing under this Agreement, (b) is either owned solely by Consultant or
licensed to Consultant with a right to sublicense and (c) is in existence in the
form of a writing or working prototype prior to the Effective Date ("Background
Technology").  Consultant agrees that any and all Inventions conceived, written,
created or first reduced to practice in the performance of work under this
Agreement shall be the sole and exclusive property of Aradigm.

6.3           Assignment of Aradigm Work Product.  Except for Consultant's
rights in the Background Technology, Consultant irrevocably assigns to Aradigm
or its designee, all right, title and interest worldwide in and to the Aradigm
Work Product and all applicable intellectual property rights related to the
Aradigm Work Product, including without limitation, copyrights, trademarks,
trade secrets, patents, moral rights, contract and licensing rights, whether or
not patentable or registerable under copyright or similar laws,  (the
"Proprietary Rights").  Except as set forth below, Consultant retains no rights
to use the Aradigm Work Product and agrees not to challenge the validity of
Aradigm's ownership in the Aradigm Work Product.  Consultant hereby grants to
Aradigm a non-exclusive, royalty-free, irrevocable and world-wide right, with
rights to sublicense through multiple tiers of sublicensees, to reproduce, make
derivative works of, publicly perform, and publicly display in any form or
medium, whether now known or later developed, distribute, make, use and sell
Background Technology and any Prior Work Product incorporated or used in the
Aradigm Work Product for the purpose of developing and marketing Aradigm
products.  Consultant further acknowledges that all original works of authorship
which are made by Consultant (solely or jointly with others) within the scope of
and during the period of this agreement and which are protectable by copyright
are “works made for hire” as that term is defined in the United States Copyright
Act (17 U.S.C., Section 101).

6.4           Waiver of Assignment of Other Rights.  If Consultant has any
rights to the Aradigm Work Product that cannot be assigned to Aradigm,
Consultant unconditionally and irrevocably waives the enforcement of such
rights, and all claims and causes of action of any kind against Aradigm with
respect to such rights, and agrees, at Aradigm's request and expense, to consent
to and join in any action to enforce such rights.  If Consultant has any right
to the Aradigm Work Product that cannot be assigned to Aradigm or waived by
Consultant, Consultant unconditionally and irrevocably grants to Aradigm during
the term of such rights, an exclusive, irrevocable, perpetual, worldwide, fully
paid and royalty-free license, with rights to sublicense through multiple levels
of sublicensees, to reproduce, create derivative works of, distribute, publicly
perform and publicly display by all means now known or later developed, such
rights.

6.5           Assistance.  Consultant agrees to cooperate with Aradigm or its
designee(s), both during and after the term of this Agreement, in the
procurement and maintenance of Aradigm's rights in Aradigm Work Product and to
execute, when requested, any other documents deemed necessary by Aradigm to
carry out the purpose of this Agreement.  Consultant agrees to execute upon
Aradigm's request a signed transfer of copyright to Aradigm in the form attached
to this Agreement as Exhibit B for all Aradigm Work Product subject to copyright
protection, including, without limitation, computer programs, notes, sketches,
drawings and reports.

6.6           Enforcement of Proprietary Rights.  Consultant will assist Aradigm
in every proper way to obtain, and from time to time enforce, United States and
foreign Proprietary Rights relating to Aradigm Work Product in any and all
countries.  To that end Consultant will execute, verify and deliver such
documents and perform such other acts (including appearances as a witness) as
Aradigm may reasonably request for use in applying for, obtaining, perfecting,
evidencing, sustaining and enforcing such Proprietary Rights and the assignment
thereof.  In addition, Consultant will execute, verify and deliver assignments
of such Proprietary Rights to Aradigm or its designee.  Consultant's obligation
to assist Aradigm with respect to Proprietary Rights relating to such Aradigm
Work Product in any and all countries shall continue beyond the termination of
this Agreement, but Aradigm shall compensate Consultant at a reasonable rate
after such termination for the time actually spent by Consultant at Aradigm's
request on such assistance.

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6.7           Execution of Documents.  In the event Aradigm is unable for any
reason, after reasonable effort, to secure Consultant's signature on any
document needed in connection with the actions specified in the preceding
sections 6.5 and 6.6, Consultant hereby irrevocably designates and appoints
Aradigm and its duly authorized officers and agents as its agent and attorney in
fact, which appointment is coupled with an interest, to act for and in its
behalf to execute, verify and file any such documents and to do all other
lawfully permitted acts to further the purposes of the preceding paragraph with
the same legal force and effect as if executed by Consultant.  Consultant hereby
waives and quitclaims to Aradigm any and all claims, of any nature whatsoever,
which Consultant now or may hereafter have for infringement of any Proprietary
Rights assigned hereunder to Aradigm.

6.8           Exception to Assignments.  Consultant understands that the
provisions of this Agreement requiring assignment of inventions and works of
authorship to the Aradigm do not apply to any invention which qualifies fully
under the provisions of the California Labor Code Section 2870 (attached hereto
as Exhibit C).  Consultant will advise the Aradigm promptly in writing of any
inventions or works of authorship which Consultant believes meet the criteria in
California Labor Code Section 2670 and not otherwise disclosed in Exhibit B.

6.9           Obligation to Keep Aradigm Informed.  During the term of this
Agreement, and for one (1) year after its termination for any reason, Consultant
will promptly disclose to Aradigm fully and in writing all patent applications
filed by him or on his behalf.
 
7.           TERMINATION.  Either Aradigm or the Consultant may terminate this
Agreement at any time by giving the other party ten (10) days’ written
notice.  In the event of such termination, Consultant shall cease work
immediately after giving or receiving such notice or termination, unless
otherwise agreed to by the parties. Unless earlier terminated as provided
herein, this Agreement shall expire on June 30, 2008.
 
7.1           Return of Aradigm Property.  Upon termination of this Agreement or
earlier as requested by Aradigm, Consultant shall deliver to Aradigm any and all
drawings, notes, memoranda, specifications, devices, formulas, Information,
Aradigm Work Product, together with al copies thereof, and any other material
containing or disclosing any Aradigm Work Product, Information or third party
information.
 
7.2  Notification to New Employer. Consultant hereby grants Aradigm the right to
notify Consultant’s future employers or clients of Consultant’s rights and
obligations under this Agreement; Aradigm, however, shall not have the right to
disclose any compensation or benefits received by Consultant pursuant to this
Agreement.
 
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8.           ARBITRATION AND EQUITABLE RELIEF.

8.1            Arbitration.  Aradigm and Consultant hereby acknowledge and agree
to resolve any and all differences and/or legal disputes between Aradigm and
Consultant through the process of final and binding arbitration.  Consultant
acknowledges that any reference in Section 8 to Aradigm will include affiliated
entities, fiduciaries, administrators, affiliates, and all successors and
assigns of any of them.
 
8.2           Claims Covered by this Agreement.  Aradigm and Consultant mutually
consent to the resolution by arbitration of all claims or controversies
(collectively, “claims”), whether or not arising out of Consultant’s retention
as an independent contractor (or the termination of that retention), that
Aradigm may have against Consultant or Consultant may have against Aradigm or
against its officers, directors, employees, attorneys, partners or agents in
their capacity as such or otherwise.  The claims covered by this Agreement
include, but are not limited to, claims for compensation due; claims for breach
of any contract or covenant (express or implied); applicable tort, statutory or
common law claims; claims for benefits (unless arising under a plan that
specifies that its claims procedure shall culminate in an arbitration procedure
different from this one); and claims for violation of any federal, state, or
other governmental law, statute, regulation, or ordinance (hereafter “Covered
Claims”) applicable to independent contractors.
 
8.3           Claims Not Covered by the Agreement.  Consultant understands that
nothing in this Agreement prevents Consultant from filing, cooperating with or
participating in any proceeding before the Securities and Exchange Commission,
the Department of Labor, California Division of Labor Standards Enforcement,
Equal Employment Opportunity Commission or the California Department of Fair
Employment and Housing, except that Consultant acknowledges and agrees that
Consultant shall not recover any monetary benefits in connection with such claim
or as a result of any proceeding before such state or federal agency as any and
all claims for benefits must be arbitrated under this Agreement.
 
8.4           Required Notice of All Covered Claims and Statute of
Limitations   The parties agree that the aggrieved party must give written
notice of any Covered Claim to the other party within the applicable statute of
limitations for the claims in question.  The written notice shall identify and
describe the nature of all claims asserted and the facts upon which such claims
are based.  The notice shall be sent to the other party by certified or
registered mail, return receipt requested.  Written notice of all claims
involving or relating to Aradigm, or its officers, directors, employees,
attorneys, partner or agents, shall be sent to Jeffery Grimes, General Counsel,
or his successor.  Consultant will be given written notice at the residence
address provided below.
 
8.5           Representation.  Any party may be represented by an attorney or
other representative selected by the party.

8.6           Discovery.  Each party will be entitled to discovery permitted
under the then current Employment Arbitration Rules & Procedures promulgated by
JAMS (“JAMS Rules”), which meet or exceed the right to discovery required by the
California Arbitration Act.  The JAMS Rules may be found on the Internet at
www.jamsadr.com.

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8.7           Designation of Witnesses.  At least 30 days before the
arbitration, the parties must exchange lists of witnesses, including any
expert(s), and copies of all exhibits intended to be used at the
arbitration.  Each party shall have the right to subpoena witnesses and
documents for the arbitration.

8.8           Arbitration Procedures
(a)           Location.  Aradigm and Consultant agree that, except as provided
in this Agreement, any arbitration shall be in accordance with the current JAMS
Rules before a retired judge at JAMS (the “Arbitrator”).  Aradigm and the
Consultant agree that the arbitration shall be held at a JAMS office in Hayward,
California, unless an otherwise mutually agreeable location is chosen.
 
(b)           Selection of Arbitrator.  The Arbitrator shall be selected as
follows.  JAMS shall give each party a list of eleven arbitrators drawn from its
panel of labor-management dispute arbitrators.  If the parties cannot agree on
an arbitrator from that list of eleven, then the parties shall strike
alternately from the list until only one name remains.  The last remaining name
shall be the Arbitrator.  The first party to strike shall be determined by
lot.  Notwithstanding the preceding, nothing prevents Aradigm and the Consultant
from voluntarily agreeing to an Arbitrator without this process.
 
(c)           Authority of Arbitrator.  The Arbitrator shall apply the
substantive law (and the law of remedies, if applicable) of the state of
California, or federal law, or both, as applicable to the claim(s)
asserted.  The Arbitrator, and not any federal, state, or local court or agency,
shall have the exclusive authority to resolve any dispute relating to the
interpretation, applicability, enforceability, or formation of this Agreement,
including, but not limited to, any claim that all or any part of this Agreement
is void or voidable.  In reaching their award, the arbitrators shall follow and
be bound by California law to the same extent and as if they were judges in a
California court of law, including the ability to receive and rule upon
demurrers, motions to dismiss and/or motions for summary judgment or
adjudication.

(d)           Written Opinion.   The Arbitrator shall issue a written statement
of decision, which shall be final and binding upon the parties.

(e)           Miscellaneous Procedures.   The Arbitrator shall have jurisdiction
to hear and rule on pre-hearing disputes and is authorized to hold pre-hearing
conferences by telephone or in person as the Arbitrator deems necessary.  The
Arbitrator shall have the authority to entertain a motion to dismiss and/or a
motion for summary judgment by any party and shall apply the standards governing
such motions under the California Code of Civil Procedure. Either party, at its
expense, may arrange for and pay the cost of a court reporter to provide a
stenographic record of the proceedings.  Either party, upon request at the close
of hearing, shall be given leave to file a post-hearing brief.  The time for
filing such a brief shall be set by the Arbitrator. Either party may bring an
action in any court of competent jurisdiction to compel arbitration under this
Agreement and to enforce an arbitration award.  Except as otherwise provided in
this Agreement, both Aradigm and Consultant agree that neither of them shall
initiate nor prosecute any lawsuit of any nature, in any way related to any
Covered Claim.

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(f)           Finality of Order.  The decision of the Arbitrator, after the
matter is submitted, shall be final and binding upon both the Aradigm and
Consultant.
 
(g)           Confidentiality.  The arbitration shall be conducted in private
and, to the extent permitted by applicable law, the evidence presented and the
results of the arbitration shall be confidential.  Nothing herein shall preclude
or limit the right of either party to make a report to an appropriate government
agency or commission.
 
(h)           Arbitration Fees and Costs.  Aradigm shall pay the fees and costs
of the Arbitrator.  Each party shall pay for its own costs and attorneys’ fees,
if any.  However, if any party prevails on a statutory claim that affords the
prevailing party attorneys’ fees and/or costs, the Arbitrator may award
reasonable fees and/or costs to the prevailing party.
 
ARADIGM AND CONSULTANT FURTHER UNDERSTAND THAT, BY THIS AGREEMENT, ARADIGM AND
CONSULTANT ARE WAIVING THEIR RIGHT TO HAVE CLAIMS AGAINST THE OTHER ADJUDICATED
BY A COURT OR JURY.

8.9   Equitable Remedies.  Consultant agrees that both Aradigm and Consultant
have the right to obtain provisional remedies, including injunctive relief, in
accordance with California Code of Civil Procedure section 1281.8.  Consultant
further agrees that it would be impossible or inadequate to measure and
calculate Aradigm's damages from any breach of the covenants set forth in
sections 4, 5, 6, and 7.1 herein.  Accordingly, Consultant agrees that if
Consultant breaches any of such sections, Aradigm will have available, in
addition to any other right or remedy available, the right to obtain an
injunction from the arbitrator (as provided by California Code of Civil
Procedure section 1281.8) restraining such breach or threatened breach and to
specific performance of any such provision of this Agreement.  Consultant
further agrees that no bond or other security shall be required in obtaining
such equitable relief and Consultant hereby consents to the issuance of such
injunction and to the ordering of specific performance.

8.10   Consideration.  Consultant understands that each party's promise to
resolve claims by arbitration in accordance with the provisions of this
Agreement, rather than through the courts, is consideration for the other
party's like promise.  Consultant further understands that Consultant is offered
this Agreement in consideration of Consultant’s promise to arbitrate claims.

9.   COMPLIANCE WITH APPLICABLE LAWS.  Consultant warrants that all material
supplied and work performed under this Agreement complies with or will comply
with all applicable United States and foreign laws and regulations.

10.   ASSIGNMENT; BENEFIT.  This Agreement is for the personal services of
Consultant and may not be assigned by him, nor shall it be assignable by
operation of law, without the prior written consent of Aradigm.  Aradigm may
assign this Agreement at any time.  The parties’ rights and obligations under
this Agreement will bind and inure to the benefit of their respective
successors, heirs, executors, and administrators and permitted assigns.

11.   INDEMNIFICATION.  Aradigm agrees to indemnify and hold harmless Consultant
against any liability, damages, loss or expense (including reasonable attorney
fees and expenses of litigation) arising out of the actions of Aradigm, its
employees or any third party acting on behalf or under authorization from
Aradigm in the performance of this Agreement or as a result of any products
developed or made as a result of information or   received from Consultant,
except for the negligent or intentionally wrongful acts of Consultant.

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12.           WARRANTIES.  Consultant agrees that it shall perform the services
in a professional and workmanlike manner in accordance with industry
standards.  In addition, Consultant hereby represents and warrants that the Work
Product shall not infringe any copyright, patent, trademark or other proprietary
right of any third party; provided, however, that Consultant shall not be
responsible for infringing Work Product to the extent that the infringement was
caused by Aradigm.
 
13.           LEGAL AND EQUITABLE REMEDIES.  Consultant hereby acknowledges and
agrees that in the event of any breach of this Agreement by Consultant,
including, without limitation, the actual or threatened disclosure of
Information or Service Product without the prior express written consent of
Aradigm, Aradigm will suffer an irreparable injury, such that no remedy at law
will afford it adequate protection against, or appropriate compensation for,
such injury. Accordingly, Consultant hereby agrees that Aradigm shall be
entitled to specific performance of Consultant’s obligations under this
Agreement, as well as such further relief as may be granted by a court of
competent jurisdiction.
 
14.   LIMITATION ON LIABILITY.  Except for breaches of obligations pertaining to
confidentiality, under no circumstances and under no theory of liability shall
either party or any officer, employee, owner, director, shareholder, successor
agent or assign be liable to the other for any indirect, special, incidental,
consequential or punitive damages of any nature whatsoever arising in connection
with the provision of Work Product or Services under this Agreement.
 
15.           GOVERNING LAW; SEVERABILITY.  This Agreement shall be governed by
and construed according to the laws of the State of California without regard to
its conflict of laws rules.  If any provision of this Agreement is found by a
court of competent jurisdiction to be unenforceable, that provision shall be
severed and the remainder of this Agreement shall continue in full force and
effect.
 
16.           COMPLETE UNDERSTANDING; MODIFICATION.  This Agreement, together
with its Exhibits, constitutes the final, exclusive and complete understanding
and agreement of Aradigm and Consultant with respect to the subject matter
hereof.  Any waiver, modification or amendment of any provision of this
Agreement shall be effective only if in writing and signed by an Aradigm
officer.
 
17.           SURVIVAL. The following provisions shall survive the expiration or
termination of this Agreement: Sections 1.4, 4, 5, 6, 7.1, 7.2, 8., , 9, 13, 14,
15, 16, 17 and 18.   
 
18.           NOTICES.  Any notices required or permitted hereunder shall be
given to the appropriate party at the address specified below or at such other
address as the party shall specify in writing.  Such notice shall be deemed
given upon personal delivery to the appropriate address or sent by certified or
registered mail, three days after the date of mailing.
 
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If to Aradigm:
If to the Consultant:

 
 
Igor Gonda
Norman Halleen

 
Aradigm Corporation
423 Broadway #244

 
3929 Point Eden Way
Milbrae, California

 
(510) 265-9000

 
Fax: (510) 265-0277

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
 
ARADIGM CORPORATION
 
CONSULTANT
         
By:
/s/ Igor Gonda
 
By:
/s/ Norman Halleen
         
Name:
Igor Gonda
     

Its (Title):
President and CEO

Chief Executive Officer

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EXHIBIT A
Other Employment/Consulting Relationships
 
[ _____________________ ]
 
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EXHIBIT B

PRIOR WORK PRODUCT DISCLOSURE

I.                      EXCEPT AS LISTED IN SECTION 2 BELOW, THE FOLLOWING IS A
COMPLETE LIST OF ALL PRIOR WORK PRODUCT THAT HAVE BEEN MADE OR CONCEIVED OR
FIRST REDUCED TO PRACTICE BY CONSULTANT ALONE OR JOINTLY WITH OTHERS PRIOR TO MY
ENGAGEMENT BY ARADIGM:

 
¨
No inventions or improvements.

 
¨
See below:

 

           

 
 
¨
Additional sheets attached.

II.                      DUE TO A PRIOR CONFIDENTIALITY AGREEMENT, CONSULTANT
CANNOT COMPLETE THE DISCLOSURE UNDER SECTION 1 ABOVE WITH RESPECT TO INVENTIONS
OR IMPROVEMENTS GENERALLY LISTED BELOW, THE PROPRIETARY RIGHTS AND DUTY OF
CONFIDENTIALITY WITH RESPECT TO WHICH CONTRACTOR OWES TO THE FOLLOWING
PARTY(IES):

   
Invention or Improvement
 
Party(ies)
 
Relationship
1.
           
2.
           
3.
           

 
¨
Additional sheets attached.

BACKGROUND TECHNOLOGY DISCLOSURE

The following is a list of all Background Technology that Consultant intends to
use in performing under this Agreement:

         

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EXHIBIT C

CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS;
ASSIGNMENT OF RIGHTS

"(a)   Any provision in an employment agreement which provides that an employee
shall assign, or offer to assign, any of his or her rights in an invention to
his or her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information except for those inventions
that either:

(1)  Relate at the time of conception or reduction to practice of the invention
to the employer's business, or actual or demonstrably anticipated research or
development of the employer.

(2)  Result from any work performed by the employee for the employer.

(b)   To the extent a provision in an employment agreement purports to require
an employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable."
 
 
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