2**ARTICLE 1**- **DEFINITIONS**In the present Agreement the following definitions shall prevail:     1.1 “Affiliates” of a party hereto shall mean an entity which controls, iscontrolled by or is under common control with such party (by majority ownership or otherwise). Forthe purposes hereof “control” shall mean the power to direct or cause the direction of themanagement and the policies of an entity, whether through the ownership of a majority of theoutstanding voting securities or by contract or otherwise.     1.2 “ARADIGM” shall mean ARADIGM CORPORATION of 26219 Eden Landing Road, Hayward,California 94545, and any of its Affiliates.     1.3 “ARADIGM Know-How” shall mean all knowledge, information and expertisepossessed by ARADIGM prior to or at any time during the term of this Agreement related to thedevelopment and production of the Device, Packaged Products, Formulated Compounds and ProgrammeCompounds, whether or not covered by ARADIGM Patent Rights or any other industrial or intellectualproperty right of ARADIGM, including but not limited to technical data, experimental results,specifications, techniques, methods, processes and written materials.     1.4 “ARADIGM Patent Rights” shall mean any and all of ARADIGM’s patents andpatent applications related to the Device, Packaged Products, Formulated Compounds and ProgrammeCompounds, including those that relate to the development, production and use of same, possessed byARADIGM at any time during the term of this Agreement. A current and complete list of such rights,entitled “ARADIGM Patents” and certified by an officer of ARADIGM, has been delivered to NOVONORDISK. ARADIGM Patent Rights shall also include all continuations, continuations-in-part,divisionals or re-issues of such patents and patent applications and any patents issuing thereon orextensions thereof or any foreign counterparts thereof. Extensions of patents shall include: a)extensions under the U.S. Patent Term Restoration Act, b) extensions of patents under the JapanesePatent Law, c) Supplementary Protection Certificates for members of the European Patent Conventionand other countries in the European Economic Area and d) similar extensions under any applicablelaw in the Territory.     1.5 “Development Costs” shall mean the fully burdened costs of conductingdevelopment activities (including the supply by ARADIGM of clinical trial quantities of Devices andPackaged Products) pursuant to the Development Programme, including the costs of labor (includingall allocable benefits), materials, outside consultants and research and development and corporateand overhead amounts reasonably allocable to such development activities [ * ]. **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

3     1.6 “Development Programme” shall mean the pharmaceutical development of thePackaged Products (including Formulated Compounds and the disposable unit dose packaging) and theDevice, including the pre-clinical and clinical development programmes required for registrationand approval of the Device and the Packaged Products in the Territory as provided for in thisAgreement. The Development Programme shall initially consist of a development plan addressing thedevelopment of the Device and a Packaged Product containing the Initial Compound, but may beenlarged to include the development of Packaged Products containing one or more Other Compounds inaccordance with Article 2.1.     1.7 “Device” shall mean any pulmonary delivery device, together with anyaccessories, used to administer any Formulated Compounds contained in a disposable unit dosepackage, developed in the course of the Development Programme based on the device technologydescribed in the ARADIGM Patent Rights or utilizing ARADIGM Know-How.     1.8 “Diligent Efforts” shall mean no less than the efforts that the applicableparty applies to development, manufacture or commercialization of its own compounds or productswith similar regulatory requirements and market potential.     1.9 “Field” shall mean pulmonary administration of insulin, insulin analogs andany other compounds whose principal therapeutic effect is to control blood glucose levels inhumans, including but not limited to glucagon-like peptide (“GLP”), GLP-1 and analogs of GLP.     1.10 “First Marketing” shall mean making available for sale the Device and a PackagedProduct in commercial quantities in any country in the Territory.     1.11 “Formulated Compound” shall mean any formulation of any Programme Compounddeveloped in the course of the Development Programme for use in a Packaged Product.     1.12 “Fully Burdened Costs” shall mean the cost of raw materials (excluding unlessotherwise stated the Programme Compound), components, labour (production), quality control (labour,material and external analysis), third party royalties, freight, import duties, taxes andreasonably allocated facilities, depreciation of equipment and manufacturing overheads relating tothe production of the specified item.     1.13 “Gross Profit” shall mean NOVO NORDISK’s Net Sales of Packaged Products andDevices in the Territory minus the Fully Burdened Costs of all Packaged Products and Devices(including finished goods, components and raw materials such as Initial Compound that becomeobsolete or outdated, whether due to inaccurate forecasting or any other reason) supplied to NOVONORDISK or produced by NOVO NORDISK as contemplated by Article 4.7 [ * ] and Article 4.9(a)(secondary packaging), including for this purpose the Fully Burdened Costs of the applicableProgramme Compound, other than product that is so produced or provided as samples (Article 4.9(f)). **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

4     1.14 “Initial Compound” shall mean recombinant human insulin.     1.15 “Minimum Product Profile” shall mean any and all of the essential minimumproduct specifications and other criteria for the Device and the Packaged Products, set forth in aseparate document entitled “Minimum Product Profile” signed by the parties, which the parties haveagreed must be met in the course of the Development Programme to provide justification forcommercial launch and which may provide the basis for termination of this Agreement as set forth inArticle 9.2.     1.16 “Net Sales” shall mean the invoiced gross revenue from sales of product made byNOVO NORDISK and/or its sublicensees when invoiced to any third party in an arm’s lengthtransaction less: a) Trade, cash and/or quantity discounts or rebates, if any; b) Credits orallowances given for rejection or return of such products previously sold; c) Any tax orgovernmental charge other than income tax levied on the sale thereof or customs duties associatedtherewith; d) Freight, insurance and other similar expenses billed separately to the customer.Upon a request by NOVO NORDISK supported by suitable documentation reflecting actual operatingexperience, the parties will agree on a fixed percentage of Net Sales to represent item (d).     1.17 “NOVO NORDISK Know-How” shall mean knowledge, information and expertisepossessed by NOVO NORDISK prior to or at any time during the term of this Agreement that relates toany Programme Compound or any Formulated Compound or that NOVO NORDISK otherwise contributes to theDevelopment Programme, whether or not covered by NOVO NORDISK Patent Rights or other industrial orintellectual property right of NOVO NORDISK, including but not limited to technical data,experimental results, specifications, techniques, methods, processes and written materials.     1.18 “NOVO NORDISK” shall mean NOVO NORDISK A/S, Novo Allé, DK-2880 Bagsvaerd,Denmark, and any of its Affiliates.     1.19 “NOVO NORDISK Patent Rights” shall mean any and all of NOVO NORDISK’s patentsand patent applications related to any Programme Compound or any Formulated Compound, includingthose that relate to the production, development and use of same, possessed by NOVO NORDISK at anytime during the term of this Agreement. NOVO NORDISK Patent Rights shall also include allcontinuations, continuations-in-part, divisionals or re-issues of such patents and patentapplications and any patents issuing thereon or extensions thereof or any foreign counterpartsthereof. Extensions of patents shall include: a) extensions under the U.S. Patent Term RestorationAct, b) extensions under the Japanese Patent Law, c) Supplementary Protection Certificates formembers of the European Patent Convention and other countries in the European Economic Area and d)similar extensions under any applicable law in the Territory.     1.20 “Other Compounds” shall mean compounds in the Field other than the InitialCompound. **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

5     1.21 “Packaged Products” shall mean the disposable unit dose packages developed inthe course of the Development Programme containing Formulated Compounds, packaged for use with theDevice for pulmonary delivery of such Formulated Compounds.     1.22 “Programme Compounds” shall mean the Initial Compound and any Other Compoundsthat are added to the Development Programme in accordance with Article 2.1.     1.23 “Regulatory Approval” shall mean the granting of a commercial marketingauthorization for the Packaged Product for delivery of a Formulated Compound using the Device andfor the Device.     1.24 “Regulatory Submission” shall mean the filing of an application for a commercialmarketing authorization for a Packaged Product for delivery of a Formulated Compound using theDevice and for the Device.     1.25 “Territory” shall include any and all countries of the world.**ARTICLE 2**- **DEVELOPMENT ACTIVITIES AND RESPONSIBILITIES**     2.1 NOVO NORDISK and ARADIGM shall jointly conduct the Development Programme,which shall initially consist of Diligent Efforts by the parties to carry out a development planaddressing development of the Device and a Packaged Product containing the Initial Compound foradministration using the Device. The preliminary details of such development plan have been agreedupon by the parties and are set forth in a separate document entitled “Milestone Plan.” Thedetails of this development plan shall be discussed and agreed on in good faith between the partiesand embodied in a document signed by both parties, which shall thereafter be subject to furthermodification from time to time as approved by the Steering Committee. The product description forthe Packaged Product and the Device, including the Minimum Product Profile as well as desiredtarget profiles, shall be agreed by NOVO NORDISK and ARADIGM and shall be included in the documentdefining the Development Programme. It is understood between the parties that the specificationsfor the Packaged Product and the Device may require some changes during the course of the programmeand that such changes will be made when and as approved by the Steering Committee. NOVO NORDISKshall specify within [ * ] after the initiation of a Phase III trial of the initial PackagedProduct one or more Other Compounds for study by the Steering Committee as candidates for thesecond Packaged Product to be added to the Development Programme and may from time to timethereafter propose additional Other Compounds for the Development Programme. Upon agreement by theparties on a development plan to incorporate the preliminary details for the development of suchOther Compounds and determination by the Steering Committee that such development is feasible andshould be undertaken, such Other Compounds will be added to the Development Programme. Each timean Other Compound is added to the Development Programme in this manner, the parties will agree ingood faith on the financial terms not otherwise specified herein for such development andcommercialization, which will provide for a reasonable sharing of the **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

6potential value of thePackaged Product containing such compound, as well as on such other modifications of the otherterms hereof as may be reasonable under the circumstances.     2.2 A Steering Committee will be established, consisting of an equal number ofpeople (at least three) from each party, whose responsibility will be to ensure the DevelopmentProgramme is carried out to the satisfaction of both parties. The Steering Committee, [ * ] shallhave responsibility for approval of and release of funds, approving budgets, approving any changesto the Development Programme, for approving reimbursement of costs for pharmaceutical developmentas described in Article 2.5, as well as plans for production capacity and budgets for capitalexpenditures associated therewith, and for the review and approval of product specifications ascontemplated by Article 4.9(d). The Steering Committee will meet each quarter, during the firstyear of this Agreement, and then as mutually agreed between the parties. In the event the SteeringCommittee is unable to resolve any matter to the satisfaction of the Steering Committee, the matterwill be referred to the senior managements of the two parties for resolution. While in general theparties intend to act by mutual agreement, with respect to issues concerning the design andimplementation of clinical trials and approval of specifications as provided in Article 4.9(d), thesenior management of NOVO NORDISK shall have the right to make the final decision.     2.3 ARADIGM agrees that it will use Diligent Efforts to develop, manufacture andsupply, to the deadlines included in the Development Programme agreed between the parties, thePackaged Product and the Device consistent with Good Manufacturing Practice and any other relevantpractices as required to obtain Regulatory Approval for the Device and the Packaged Product in allmajor markets in the Territory. ARADIGM shall use Diligent Efforts to obtain all the requiredRegulatory Approvals in the Territory required for NOVO NORDISK commercialization of the Devicewith the Packaged Products. However, in such cases where the Device Regulatory Submission is anintegrated part of the Regulatory Submission, then ARADIGM shall only timely submit to NOVO NORDISKall the sections of the Regulatory Submission which are required for obtaining Regulatory Approvalof the Device with the Packaged Products. For countries other than the United States, NOVO NORDISKshall provide reasonable non-monetary assistance in structuring such Device Regulatory Submission,provided NOVO NORDISK has the necessary experience to provide such assistance. The personnel ofNOVO NORDISK having relevant expertise in technical areas affecting ARADIGM’s activities directedto product development, production process development and manufacturing scale-up and costreduction, including those pertaining to the Device as well as the Packaged Product, shallparticipate or advise in the Development Programme in such manner as is approved by the SteeringCommittee.     2.4 The Development Costs necessary for activities after the Effective Daterequired to develop the Packaged Product and the Device as specified in the Development Programmereferred to in Article 2.1 shall be allocated and paid as described below: **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

7   Pre-clinical, clinical and regulatory Development [ * ] Programme Compound and Formulated Compound [ * ] Packaged Product development work specific to Development Programme [ * ] Packaged Product supply for clinical development [ * ] Device development and Device regulatory work specific toDevelopment Programme [ * ] Device supply for clinical development (subject to Article 4.6) [ * ] Production validation and process qualification specific toDevelopment Programme [ * ] All other production process development [ * ] All other Device and Packaged Product Development [ * ]In addition to the foregoing, and in consideration of ARADIGM’s past and future developmentactivities, NOVO NORDISK agrees to make the following milestone payments to ARADIGM at firstoccurrence of each of the following events: (a) Twenty (20) days after the Effective Date: USD two million (USD2,000,000).  (b) Upon initiation of the Phase IIb clinical study (first patient,first dose) (see development plan): [ * ]  (c) Upon initiation of the Phase III clinical study (first patient,first dose) (see development plan): [ * ]  (d) At NOVO NORDISK’s first Regulatory Submission in the UnitedStates, the EEC or Japan: [ * ]  (e) Upon first Regulatory Approval in the United States: [ * ]  (f) Upon first Regulatory Approval in the EEC: [ * ]  (g) Upon first Regulatory Approval in Japan: [ * ] **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

8Notwithstanding any other provision of this Agreement, and for the avoidance of doubt, each of theamounts referred to in [ * ] shall be payable only once with respect to the development of theinitial Packaged Product and shall be non-refundable. Consequently, maximum total milestonepayments to be paid by NOVO NORDISK to ARADIGM under this Agreement in respect of such milestonesshall amount to [ * ] (h) Upon initiation (first patient, first dose) of a Phase IIbclinical trial of a Packaged Product containing the second Programme Compound: [* ]  (i) Upon initiation (first patient, first dose) of a pivotal PhaseIII clinical trial of such second Packaged Product: [ * ]  (j) When cumulative Net Sales of Devices and Packaged Productsreach [ * ]  (k) When cumulative Net Sales of Devices and Packaged Products reach[ * ]  (l) When cumulative Net Sales of Devices and Packaged Productsreach [ * ]For the avoidance of doubt, each of the amounts referred to in [(h)-(l) of this Article 2.4] shallbe payable only once. Moreover, no further payments in respect of such milestones will become dueonce NOVO NORDISK has paid ARADIGM a total of [ * ]. Consequently, maximum total milestonepayments to be paid by NOVO NORDISK to ARADIGM under this Agreement in respect of such milestonesshall amount to [ * ].Thus, the total milestone payments in respect of the Packaged Product containing the secondProgramme Compound will be [ * ], plus milestone amounts in respect of regulatory submission andapprovals thereof to be agreed upon at the time it is added to the Development Programme. Uponrequest by NOVO NORDISK to develop a third Programme Compound in the Development Programme pursuantto Article 2.1, the parties will agree in good faith on the milestone payments to apply to theclinical development of Packaged Products containing such Other Compound.Furthermore, NOVO NORDISK shall invest up to a total of USD ten million (USD 10,000,000) equity inARADIGM at times and under terms as specified in a separate agreement between the parties.     2.5 Development Costs of ARADIGM to be borne by NOVO NORDISK will be paidquarterly [ * ] by NOVO NORDISK based on budgeted expenses approved by the Steering Committee,subject to a reconciliation to actual costs incurred at the end of each year (based on apresentation to the Steering Committee no later than sixty (60) days after the end of such year)approved by the Steering Committee (such approval not to be unreasonably withheld or delayed) ormore frequently if requested by either party. NOVO NORDISK shall pay or ARADIGM shall refund, asapplicable, any difference between amounts advanced and actual costs incurred within thirty (30)days after such reconciliation is approved. Any anticipated material deviations from establishedbudgets will be reported as promptly as practicable to the Steering Committee. **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

9     2.6 NOVO NORDISK and ARADIGM shall use their Diligent Efforts to obtain allnecessary regulatory approvals for pre-clinical and clinical development work. All regulatorysubmissions required for clinical development work in the USA to be filed initially by ARADIGM thatare needed by NOVO NORDISK to continue development will be transferred to NOVO NORDISK as soon aspracticable but in any event prior to the commencement of Phase III trials, and NOVO NORDISK willthereafter be the holder thereof and will have responsibility for all further regulatory filingsworldwide unless otherwise approved by the Steering Committee.     2.7 NOVO NORDISK agrees that it will use its Diligent Efforts to clinicallydevelop and register, to the deadlines included in the Development Programme agreed between theParties, and market the Packaged Products for administration using the Device in the Territory. [* ]     2.8 All supplies of Programme Compounds (including certificates of analysis andsafety handling data) required for the Development Programme, shall be supplied by NOVO NORDISK toARADIGM, [ * ] and in a timely manner, so as not to adversely affect the expected duration of theDevelopment Programme.     2.9 All supplies of Packaged Product and the Device plus safety and handlinginformation and training required for the Development Programme, shall be supplied by ARADIGM toNOVO NORDISK, [ * ] and in a timely manner, so as not to adversely affect the expected duration ofthe Development Programme.     2.10 NOVO NORDISK shall furnish ARADIGM with such data and information as ARADIGMshall reasonably require regarding each Programme Compound to enable ARADIGM to carry out the workunder the Development Programme.     2.11 ARADIGM shall furnish NOVO NORDISK with such data and information as NOVONORDISK shall reasonably require regarding the Packaged Products, the Devices and componentsthereof, as well as the manufacturing processes therefor, to enable NOVO NORDISK to carry out thework under the Development Programme.     2.12 ARADIGM shall only use Programme Compounds supplied by NOVO NORDISK and the NOVONORDISK Know-How as provided for in this Agreement. NOVO NORDISK shall only use the ARADIGMKnow-How as provided for in this Agreement. Upon termination of this Agreement, ARADIGM undertakesto return, upon NOVO NORDISK’s written request, all written documentation embodying NOVO NORDISKKnow-How and any and all remaining Programme Compound to NOVO NORDISK, except and to the extentretention thereof is reasonably necessary during any post termination period in which NOVO NORDISKcontinues to supply insulin to ARADIGM. Upon termination of this Agreement, NOVO NORDISKundertakes to return, upon Aradigm’s written request, all written documentation embodying ARADIGMKnow-How to ARADIGM. **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

10     2.13 ARADIGM hereby acknowledges that NOVO NORDISK may be simultaneously conductingexploratory research and development on alternative pulmonary delivery technologies that may beapplicable in the Field and that NOVO NORDISK is free to develop and commercialise such technologyoutside the Field. NOVO NORDISK may also supply insulin to third parties free of charge for use insuch third party’s clinical studies using such third party’s pulmonary delivery technology inexchange for rights in such technology in the Field. However, NOVO NORDISK [ * ] and [ * ]provided that NOVO NORDISK has given written notice (the “Alternative Technology Notice”) toARADIGM of its intention to commence such commercialization at least one year prior to suchcommencement. Notwithstanding the foregoing, in the event NOVO NORDISK proposes to add an OtherCompound to the Development Programme pursuant to Article 2.1, and ARADIGM is unwilling or unableto do so, NOVO NORDISK may thereafter develop and commercialize such Other Compound with analternative pulmonary delivery technology without being in breach of this Agreement and such OtherCompound, together with equivalent compounds, will thereafter be excluded from the Field.     2.14 During the term of this Agreement, in the event NOVO NORDISK becomes aware of [* ] it agrees subject to the rights and demands of the potential licensor, to inform ARADIGM ofsuch opportunity and, [ * ] then the parties will jointly consider in good faith terms under whichARADIGM would license such rights for application within pulmonary delivery, further develop theapplicable technology and make it available to a collaboration between the two parties.     2.15 For so long as the license to NOVO NORDISK under Article 3 is exclusive, andsubject to Article 2.13 above, ARADIGM shall not be entitled to enter into any other agreement withany third party within the Field, and shall not conduct any work programme with Initial Compound orany Other Compound from any third party supplier without the written consent of NOVO NORDISK.     2.16 NOVO NORDISK agrees that, in the event it cannot produce sufficient quantitiesof the Initial Compound to satisfy all customer demand on its capacity, [ * ] form.**ARTICLE3 – GRANT OF LICENSE; OPTION**     3.1 ARADIGM hereby grants NOVO NORDISK a world-wide sole and exclusive licenseunder the ARADIGM Patent Rights and ARADIGM Know-How a) to use, market, distribute, sell, offer forsale, import and export the Packaged Products and the Device in and from the Territory for usewithin the Field, with the right to sublicense, and b) to otherwise exercise and perform its rightsand obligations under this Agreement.     3.2 ARADIGM hereby grants NOVO NORDISK the right to sublicense its customers toa) use the Packaged Products and the Device, and b) sell, offer to sell, import or export thePackaged Products and the Device, so long as said items were bought from NOVO NORDISK. **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

11     3.3 Notwithstanding the foregoing and except as set forth herein, effective oneyear after NOVO NORDISK gives ARADIGM the Alternative Technology Notice pursuant to Article 2.13,the licences granted to NOVO NORDISK under Article 3.1 and 3.2 will become nonexclusive, andARADIGM shall be entitled from and after receipt of the Alternative Technology Notice to engagemarketing partners and other distributors and otherwise prepare itself to commence commercialmarketing of Devices and Packaged Products on the effective date of such conversion. If at thetime of delivery of the Alternative Technology Notice, NOVO NORDISK is engaged in clinicaldevelopment of one or more Packaged Products containing one or more Other Compounds, or intends topromptly commence clinical development of one or more such Packaged Products, it may at its optionelect to [ * ] with respect to such Other Compounds by specifying such Other Compounds in theAlternative Technology Notice. In this case, (a) the parties will proceed promptly under Article2.1 to add any of such specified Other Compounds to the Development Programme (if they are notalready in development), (b) the parties will thereafter meet their respective obligations todiligently develop and commercialize such specified Other Compounds and (c) the terms andconditions of this Agreement, including but not limited to Articles 2.13 (with NOVO NORDISK’sobligation not to conduct or fund clinical studies to apply until the first Regulatory Approval ofa specified Other Compound), 2.15 and 3.1, shall remain in full force and effect but only withrespect to Packaged Products containing such specified Other Compounds until NOVO NORDISK providesa supplemental Alternative Technology Notice at least one year in advance of its commencement ofcommercialization of any of such specified Other Compounds using an [ * ], provided that suchsupplemental notice may not be given prior to the end of the fifth year after First Marketing of aPackaged Product containing a specified Other Compound. ARADIGM shall be granted access to, and begiven sufficient rights under, relevant [ * ], NOVO NORDISK Patents and NOVO NORDISK Know-How tothe extent reasonably necessary to enable it to commercialise Devices and Packaged Productsdirectly or through marketing partners. The foregoing notwithstanding, it is expressly understoodthat neither ARADIGM nor any marketing partner of ARADIGM shall be granted access to [ * ]Moreover, NOVO NORDISK will continue to supply the Initial Compound in bulk to ARADIGM for use inPackaged Products to be marketed by ARADIGM during the term of this Agreement at the pricespecified in Article 9.5.     3.4 In consideration of NOVO NORDISK undertaking the development and marketingactivities hereunder, ARADIGM hereby grants to NOVO NORDISK an exclusive option to enter into adevelopment and license agreement addressing the development of a product for pulmonary delivery of[ * ] using the Device or a modified version of the Device. During the term of this option,ARADIGM agrees to conduct feasibility studies on compounds covered by this option, if requested todo so by NOVO NORDISK, [ * ]. Upon exercise of this option, the parties will negotiate in goodfaith an agreement for the development and commercialisation of such products. The parties willnegotiate financial terms for such agreement which take into consideration product economics andmarket conditions in the applicable field, which may be different from those in the Field. Thisoption will expire [ * ]. During the term of this option, ARADIGM will not enter into anyagreement **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

12with any third party concerning the development of any such product without the writtenconsent of NOVO NORDISK.**ARTICLE 4**– **MANUFACTURING AND SUPPLY**     4.1 The parties hereto shall as soon as reasonably practicable after theEffective Date enter into a supply agreement (“the Supply Agreement”) for the purpose of settingforth terms and conditions for ARADIGM’s supply of the Packaged Product and the Device to NOVONORDISK. The Supply Agreement shall include provisions for arrangements according to which NOVONORDISK can maintain a) sufficient supplies of the Packaged Product and the Device in the event ofARADIGM becoming unable to perform by reason of insolvency or bankruptcy and b) sufficient supplysecurity at all other times based on the maintenance of inventories, redundant production capacityand contingency planning.     4.2 ARADIGM shall, at its sole cost, establish and maintain in operation at leastone (1) fully validated site of manufacture, to all relevant regulatory requirements within theTerritory, to supply the Packaged Products and the Device to NOVO NORDISK in accordance with theSupply Agreement. NOVO NORDISK shall have a right to inspect the site of manufacture. NOVO NORDISKshall supply ARADIGM with any information specifically related to each Programme Compound that maybe required from ARADIGM by the relevant regulatory authorities and required by ARADIGM toestablish said manufacturing site.     4.3 ARADIGM shall supply all clinical trial quantities and all commercialquantities of the Packaged Products and the Device to NOVO NORDISK in a timely fashion inaccordance with the Supply Agreement.     4.4 For the quantities referred to in Article 4.3 above, NOVO NORDISK shall [ * ]supply sufficient amounts of each Programme Compound in solid bulk form for filling and packagingof the Packaged Products by ARADIGM in a timely fashion.     4.5 ARADIGM shall supply the clinical trial quantities of the Packaged Productsreferred to in Article 4.3 above at its Development Cost. As payment for the commercial quantitiesof the Packaged Product referred to in Article 4.3 above, NOVONORDISK shall [ * ] For clinical trial supplies of the Packaged Products, the Development Costs will beestimated by the parties and paid quarterly in advance by NOVO NORDISK based on the forecastednumber of units to be produced for the Development Programme in such quarter, subject toreconciliation to actual costs and the actual number of units produced at the end of each year.For commercial supplies of the Packaged Products, [ * ] will be estimated annually by the partiesto establish an interim transfer price, subject to reconciliation at the end of each year. Paymentof the interim transfer price will be made net 30 days from date of shipment by ARADIGM.     4.6 As payment for the clinical trial quantities of the Device referred to inArticle 4.3 above, NOVO NORDISK shall [ * ]. The parties will cooperate to minimize the number **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

13ofsuch units required, consistent with meeting the objectives of the Development Programme, and willprovide for re-use of Devices to the extent practicable. As payment for the commercial quantitiesof the Device referred to in Article 4.3 above, NOVO NORDISK shall [ * ]. For clinical trialsupplies of the Device, [ * ] will be estimated by the parties and NOVO NORDISK’s share thereofwill be paid quarterly in advance by NOVO NORDISK based on the forecasted number of units to beproduced for the Development Programme in such quarter, subject to reconciliation to actual costsand the actual number of units produced at the end of each year. For commercial supplies of theDevice, [ * ] will be estimated annually by the parties to establish an interim transfer price,subject to reconciliation at the end of each year. [ * ] The parties will reset this component ofthe interim transfer price at the end of each year based on anticipated commercial pricing for thecoming year. Payment of the interim transfer price will be made net thirty (30) days from date ofshipment by ARADIGM.     4.7 NOVO NORDISK may following consultation with ARADIGM, at its sole cost andfor the purpose of ensuring sufficient security of supply, choose to establish and operate a secondcommercial production facility for the Packaged Product or the Device, at a site owned either byNOVO NORDISK or by ARADIGM, at the election of ARADIGM. The location of the second site ofmanufacture shall be negotiated in good faith between the parties hereto, but NOVO NORDISK mayrequire that it be located at least fifty (50) miles from the first production facility. ARADIGMwill provide NOVO NORDISK with any non-monetary assistance required to design and construct asecond site. All costs directly related to such transfer of manufacture will be borne by NOVONORDISK. In the event ARADIGM elects to own such facility, it will do so through an Affiliateestablished for the sole purpose of owning and operating such facility, and NOVO NORDISK will notbear any such transfer costs or the cost of that portion of such facility that will be used byARADIGM to meet the needs of its other customers. In the event NOVO NORDISK is the owner of suchfacility, its license under Article 3.1 above shall be enlarged to include the right to makeDevices and/or Packaged Products, as applicable, at such facility, and ARADIGM shall continue toshare in the Gross Profit as contemplated by Article 5. Regardless of which party owns suchfacility, [ * ] of product produced, [ * ] will be included in the calculation of Gross Profit.     4.8 ARADIGM agrees to keep NOVO NORDISK informed as to its financial conditionduring the term of this Agreement. If at any time the financial resources of ARADIGM are notreasonably sufficient to enable it to continue to meet its obligations hereunder for at least thenext six (6) months, the parties will meet to review and consider steps that might be taken toensure that ARADIGM will be able to perform. Such steps could include, but are not limited to, thetermination of ARADIGM activities that it is not contractually obligated to perform in order toconserve resources. If steps implemented by ARADIGM are not sufficient to correct the situationwithin a sixty (60) day period and ARADIGM cannot demonstrate to the reasonable satisfaction ofNOVO NORDISK that it will be able to complete any needed financing within the next thirty (30)days, (a) then NOVO NORDISK shall have the right but not the obligation to provide such financingon terms and conditions, including security, that are reasonable under the circumstances and (b) ifthis situation arises after Regulatory Approval, NOVO NORDISK may also exercise its **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

14right to have asecond commercial facility established pursuant to Article 4.7 and in this case ARADIGM shall nothave the right to elect to own such facility.     4.9 The Supply Agreement will, in addition to the foregoing, contain terms andconditions consistent with the following principles: (a) Devices and Packaged Products will be supplied by ARADIGM infinal packaging or, if it is more efficient, in primary packaging with secondarypackaging to be done by NOVO NORDISK (and [ * ] of any such secondary packagingwill be included in the calculation of Gross Profit).  (b) NOVO NORDISK, as part of its sales and marketing responsibility,will provide [ * ], but ARADIGM will provide [ * ] (the costs of which will beincluded in product transfer pricing) as reasonably requested by NOVO NORDISK.  (c) If for any reason a product recall is required, the decision toimplement the recall will be made by NOVO NORDISK and ARADIGM will providesupport as reasonably requested. The cost of such recall, including the cost ofreplacement product, shall be borne [ * ]; provided, however, that if uponanalysis of actually defective recalled product the fault or relative fault canbe determined or allocated, then the cost of product to replace such defectiveproduct shall be borne based on such determination or allocation. [ * ]    [ * ]    [ * ]    [ * ]    [ * ]    [ * ]    [ * ]    [ * ]    [ * ]    [ * ]  (d) The specifications for the Device and Packaged Products andproduction processes affecting safety or efficacy will be subject to the reviewand approval of NOVO NORDISK. NOVO NORDISK will accordingly be **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

15   responsible forall product liability other than product liability attributable to the negligenceof ARADIGM or any failure by ARADIGM to manufacture the product in accordancewith applicable standards and practices. Product liabilities that are incurredwill be allocated between the parties based on the fault or relative fault of theparties. If negligence or fault cannot be so determined or allocated, then suchliability shall be borne [ * ].  (e) In view of the need to ensure customer satisfaction, NOVONORDISK’s customer service operation is expected to accept returns and providereplacements of products in response to customer complaints often withoutreference to whether or not such product was defective. Replacement product willbe pulled from regular inventories [ * ].  (f) NOVO NORDISK will also have the right to order samples ofproduct containing active compound or placebo (i.e., product that is ordered,labeled and distributed as sample product), which ARADIGM will supply at [ * ]and such cost will not be included in the calculation of Gross Profit.  (g) ARADIGM will carry insurance against such risks and in suchamounts as is reasonable under the circumstances, including insurance of bulkcompound supplied by NOVO NORDISK against loss and other casualties that can bereasonably insured against. Since the efficiency with which bulk compound ispackaged into Packaged Product is an important cost factor, ARADIGM and NOVONORDISK will jointly develop and review all aspects of the production processthat affect efficiency. If, notwithstanding these efforts, productionefficiencies are predicted to be below objectives established by the SteeringCommittee [ * ], the parties will meet to consider corrective action, and anyimprovements that are reasonable in light of anticipated capital expenditures andthe impact on profitability will be implemented by ARADIGM.  (h) In the event that this Agreement is terminated by NOVO NORDISKpursuant to Article 9.7 or by ARADIGM other than for a breach by NOVO NORDISK andif in such case NOVO NORDISK elects to continue the commercialization of PackagedProducts and Devices, then NOVO NORDISK shall have a right to set-up at its solecost production facilities for Packaged Products and Devices and ARADIGM shall insuch case provide NOVO NORDISK with access to all necessary or usefuldocumentation for its existing facilities and reasonable non-monetary assistancerequired by NOVO NORDISK for setting up such production facilities. Furthermore,in such case NOVO NORDISK shall be granted a license to all necessary rightsunder ARADIGM Patents and ARADIGM Know-How required for production of PackagedProducts and Devices in its facilities. In such case ARADIGM shall continue tobe entitled to **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 

16   receive on an ongoing basis its [ * ] as specified in Article 5.2,but reduced by the [ * ] associated with the transfer prices, as specified inArticles 4.5 and 4.6, which shall be retained by NOVO NORDISK as compensation forbeing required to undertake the manufacturing function.     4.10 In light of the length of time necessary to establish production capacity, theSteering Committee will address long range capacity planning as a part of the DevelopmentProgramme. Within [ * ] of the Effective Date, NOVO NORDISK will present to the Steering Committeea non-binding, long-term forecast [ * ] of projected Device and Packaged Product unit sales on aworldwide basis. Such forecast will be updated from time to time as part of NOVO NORDISK’sstandard strategic planning process and such updates and any interim forecast changes will beprovided to the Steering Committee to ensure that significant decisions with respect to capacityplans are made on the basis of the most recent market forecasts. Subject to the review andapproval of the Steering Committee, ARADIGM and NOVO NORDISK will develop plans and associated timelines for establishing needed production capacity for [ * ] for at least [ * ] after FirstMarketing. Each party will keep the other fully informed as to the status of implementation ofthose aspects of such plans for which such party is responsible. The Steering Committee will alsoassess the flexibility of the planned production capacity to respond to changes in market demandand will supervise the establishment of forecasting and order lead time procedures that willoptimize overall supply chain efficiency. It is the goal of the parties that the ARADIGM willproduce and ship product to NOVO NORDISK substantially as follows: (a) Once each quarter, NOVO NORDISK shall provide a [ * ] rollingforecast to ARADIGM projecting unit volumes for Packaged Product and Devices on aworldwide basis. The forecast for the first quarter will be binding and may notbe changed from the previous forecast. The second quarter forecast may bechanged by plus or minus [ * ] from the previous forecast. The third quarterforecast may be changed by plus or minus [ * ] from the previous forecast. Thefourth quarter may be changed by plus or minus[ * ] from the previous forecast. The fifth and sixth quarters may be changedwithout limit subject to the limits of production capacity. The first six quarterrolling order forecast will be provided to ARADIGM no later than [ * ] months priorto First Marketing. The Steering Committee will review and establish actualforecast and order procedures, which will be incorporated in the Supply Agreement.  (b) NOVO NORDISK and ARADIGM shall use diligent efforts to keep eachother informed concerning changes in demand or capability to meet demand andshall use diligent efforts to meet requests for changes in the forecast that donot comply with the foregoing.  (c) The Steering Committee will have the responsibility to reviewand approve ARADIGM’s inventory policies including the amounts carried at eachlevel of production. All orders will be shipped on completion and the **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**

 
17   maintenance of finished goods inventory will be the responsibility of NOVONORDISK. Upon ARADIGM’s request, NOVO NORDISK will provide an update of currentinventory levels held in finished goods at all NOVO NORDISK or Affiliatelocations. Likewise, ARADIGM will upon NOVO NORDISK’s request provide an updateof current inventory levels of raw materials for Devices and Packaged Product,including inventory levels of Initial Compound.  (d) NOVO NORDISK shall use diligent efforts to maintain sufficientproduction capacity for Initial Compound and shall keep ARADIGM informed of itsplans for increasing capacity as necessary to meet the requirements of ARADIGMfor the production of Packaged Product.  (e) The parties will on a regular basis review long term marketforecasts generated by NOVO NORDISK in its normal internal planning cycle for thepurpose of anticipating the need for expanded production capacity in sufficienttime to develop and implement plans for such expansions.     4.11 If the volume of Packaged Products containing Initial Compound supplied to NOVONORDISK exceeds [ * ] NOVO NORDISK shall have the right, after consultation with ARADIGM, toestablish at its sole cost an additional site for manufacturing such Packaged Products at anexisting NOVO NORDISK site where insulin is already being processed. In such case, ARADIGM mayrequire that the key production equipment installed at this site will be [ * ] and that theproduction steps involving laser drilling will be maintained and performed by ARADIGM at anexisting or new ARADIGM facility. In such case, ARADIGM will supply [ * ] to NOVO NORDISK on theterms specified in Article 4.5 and in other respects in a manner that is equivalent to how itprovides such [ * ] to its own Packaged Product production facility, with allocations in the eventof a shortage to be made on a pro rata basis. NOVO NORDISK’s license under Article 3.1 above shallbe enlarged to include the right to make such Packaged Products at such facility, and ARADIGM willprovide NOVO NORDISK reasonable non-monetary assistance in establishing such production facility.All costs directly related to such assistance will be borne by NOVO NORDISK. NOVO NORDISK shallhave the right to [ * ], provided that ARADIGM shall have the right to implement such improvementsin its own facilities and to otherwise use such improvements outside the Field as well as in itsown production of Packaged Products. NOVO NORDISK acknowledges and agrees that this facility willbe used to meet demand for Packaged Products in excess of the threshold volumes required to triggerNOVO NORDISK’s right to establish such facility and that priority will be given to maintaining theproduction levels of ARADIGM at or above such threshold volumes in order to ensure that ARADIGM’sproduction capacity is used efficiently. ARADIGM shall continue to share in the Gross Profitassociated with Packaged Products produced in this facility as specified by Article 5 (with the [ *] of product produced at such facility to be included in the calculation of Gross Profit). In theevent the parties determine that additional capacity beyond that which has been established byARADIGM and by NOVO NORDISK hereunder, such additional capacity will be planned and added on suchbasis as the parties agree upon. **[*]**=**Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately withthe Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.**
 

 
18**ARTICLE5 –  LICENSE PAYMENTS AND PROFIT SHARING**     5.1 In consideration of the licence and marketing rights granted by ARADIGM inaccordance with Article 3 above, NOVO NORDISK shall pay to ARADIGM the sum of USD two million (USD2,000,000) within twenty (20) days after the Effective Date. Such payment is non-refundable andwill be in addition to, and may not be applied toward or otherwise credited against, any otherpayment required hereunder, including but not limited to the payments provided for in Article 2.4.     5.2 In addition to the payments referred to in Article 5.1 above, each yearduring the term of this Agreement NOVO NORDISK shall pay to ARADIGM [ * ] on Net Sales of thePackaged Products and the Devices during such year; provided, however, that a different percentagemay be applicable to Packaged Products containing Other Compounds as agreed by the parties pursuantto Article 2.1. Interim payments shall be made to ARADIGM during such year in the form of apercentage of Net Sales of Packaged Products and Devices intended to approximate ARADIGM’s interestin the Gross Profit. The applicable interim payment percentage shall be established by agreementof the parties at the beginning of each calendar year to govern payments during such year and areconciliation account established and settled at the end of the year to achieve the Gross Profitspecified above. The interim payments above and the transfer price profit components referred toin Articles 4.5 and 4.6 shall be credited against ARADIGM’s share in the Gross Profit.     5.3 If the parties agree that it is necessary to enter into a Licence Agreementwith a third party to secure intellectual property rights in any country in the Territory for thePackaged Products or the Device, [ * ]. Notwithstanding the foregoing, NOVO NORDISK shall bear allsuch costs that may be payable in respect of any Programme Compound to secure freedom of operationfor that compound.     5.4 NOVO NORDISK shall keep complete and correct records of the Net Sales of thePackaged Products and the Device and other financial information necessary to determine the GrossProfit and shall report such information as is pertinent along with each payment to ARADIGM.ARADIGM will maintain similar records with respect to its pertinent costs hereunder.     5.5 Interim payments under Article 5.2 of this Agreement shall be due and payablewithin forty-five (45) days after January 1, April 1, July 1 and October 1 of each calendar year.To achieve a year-end reconciliation, ARADIGM will provide NOVO NORDISK with[ * ] NOVO NORDISK within thirty (30) days after receipt of ARADIGM’s report or, if later,within seventy-five (75) days after the end of the year. NOVO NORDISK shall pay or ARADIGM shallrefund, as applicable, any difference between interim payments made and actual results withinthirty (30) days after delivery of such reconciliation report, subject to the audit rights of theparties.     5.6 Payments under this Agreement in respect of Net Sales made in currenciesother than USD shall be calculated on the average daily exchange rate for the applicable year **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**
 

 
19to date period (i.e., from January 1 of each year to the last business day of the quarter in question)for exchanging the local currency into USD at the rate for buying USD quoted by Den Danske Bank,and its successor(s) in Copenhagen, Denmark.     5.7 Not more than once in a calendar year, at ARADIGM’s request, NOVO NORDISKagrees to provide to ARADIGM, at ARADIGM’s expense, a statement from an independent auditorselected by ARADIGM and reasonably acceptable to NOVO NORDISK, attesting to the correctness of NOVONORDISK’s payments. In the event such auditor determines that additional amounts are due toARADIGM, such amounts shall be promptly paid by NOVO NORDISK, together with the reasonable costs ofconducting the audit, it being understood that ARADIGM will otherwise bear such audit costs. NOVONORDISK shall likewise have the right to require an auditor’s statement as to the accuracy of thepertinent costs of ARADIGM. In the event such auditor determines that additional amounts are dueto NOVO NORDISK, such amounts shall be promptly paid by ARADIGM, together with the reasonable costsof conducting the audit, it being understood that NOVO NORDISK will otherwise bear such auditcosts. Notwithstanding the foregoing, relevant NOVO NORDISK personnel shall once a year have aright to review with relevant ARADIGM personnel cost and investment accounts related to activitiesunder this Agreement.     5.8 NOVO NORDISK agrees to use Diligent Efforts to achieve commercial success forthe Packaged Products and the Device in each country in the Territory in which Regulatory Approvalhas been obtained, except for such countries in which it would not be desirable to market suchproducts in light of the overall commercialisation strategy therefor. Prior to the initiation ofPhase III clinical studies, reasonably documented sales forecasts for such products for each of theUnited States, the EEC and Japan [ * ]following commercial launch will be established. Theinitial [ * ] will be reviewed and approved by the Steering Committee, provided that if theSteering Committee is unable to agree on such forecast, the senior managements of the two partieswill meet in an effort to reach agreement. If agreement cannot be reached, NOVO NORDISK willdecide the matter. The initial sales forecasts for the EEC and Japan will be established by NOVONORDISK after review and comment by the Steering Committee. Prior to First Marketing, NOVO NORDISKwill update the [ * ] and review and discuss with the Steering Committee the marketing plan bywhich it intends to meet its marketing diligence obligation hereunder in respect of product launchand during the first year after launch. At the end of the first and second years following FirstMarketing, updated reasonably documented forecasts for the [ * ] will be similarly established andmarketing plans will likewise be reviewed and discussed. If NOVO NORDISK subsequently revises suchforecasts to less than [ * ] of initially forecasted levels for any year or if actual results inany year are less than [ * ] of the [ * ] for such year, NOVO NORDISK will develop and review withARADIGM strategies to be implemented to ensure that the expected market potential will be realised.The parties will also discuss the establishment of [ * ] and will likewise in good faith discussany failure or anticipated failure to achieve such minimum pricing. If, notwithstanding suchefforts, sales forecasts or actual sales continue to be materially short of expectations or ifpricing continues to be below targeted minimums for more than a year, NOVO NORDISK agrees that uponrequest by ARADIGM it will in good faith negotiate such modifications to this Agreement or theSupply **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**
 

 
20Agreement as may be reasonably necessary to enable [ * ] in light of the scale of theforecasted or actual commercial results. Alternatively, NOVO NORDISK may at its election aftersuch a renegotiation request by ARADIGM elect to terminate this Agreement and the Supply Agreement.At the end of each of the [ * ] commencing with the third year following First Marketing, NOVONORDISK will review and discuss its latest reasonably documented [ * ] forecasts and marketingplans with ARADIGM.     ARADIGM agrees to use Diligent Efforts to realize its pre-Phase III cost estimate contemplatedby the Minimum Product Profile that is the basis for a decision to proceed with Phase III trials.If, notwithstanding such efforts, Aradigm’s actual Fully Burdened Cost of producing PackagedProducts (excluding for these purposes the cost of the Initial Compound) and Devices are materiallyhigher than estimated (for reasons other than lower than expected volume or externalities such asexchange rates or inflation) and as a result gross margins contemplated by the Minimum ProductProfile are not achieved, ARADIGM will develop and review with NOVO NORDISK strategies to beimplemented to reduce costs to targeted levels. If, notwithstanding such efforts, ARADIGM costscontinue to be materially higher than targeted levels for more than a year, then ARADIGM agreesthat upon request by NOVO NORDISK it will in good faith negotiate such modifications to thisAgreement or the Supply Agreement as may be reasonably necessary to enable NOVO NORDISK to realisea reasonable profit on its sales of Packaged Products and Devices. In no event will NOVO NORDISKbe under any obligation to agree to pay ARADIGM Fully Burdened Cost amounts for Packaged Productsand Devices that do not enable a Gross Profit Margin of at least 70%. Alternatively, ARADIGM mayat its election after such a renegotiation request by NOVO NORDISK elect to terminate thisAgreement and the Supply Agreement. Notwithstanding the foregoing, if in either of the abovesituations a party requests a renegotiation of the terms of the Agreement or the Supply Agreement,it is expressly understood that neither party will be required to agree to any terms that do notenable it to realise a reasonable profit on its activities under this Agreement and the SupplyAgreement, it being further understood that the parties anticipate a termination of this Agreementand the Supply Agreement if it is not possible for both parties to realise a reasonable profit.     5.9 Under no circumstances shall NOVO NORDISK be required to pay any amount inexcess of or in addition to the payments agreed under this Agreement. If any payment made by NOVONORDISK under this Agreement is subject to withholding tax, such withholding tax shall be borne byARADIGM and shall be deducted from the payments made by NOVO NORDISK. Upon ARADIGM’s writtenrequest, NOVO NORDISK shall support ARADIGM in its efforts of minimizing any such withholdingtaxes, and reasonably provide ARADIGM with relevant information about documentation needed toreduce the withholding tax to a legal minimum or to secure applicable credits in respect thereof.**ARTICLE 6**– **INTELLECTUAL PROPERTY**     6.1 ARADIGM shall remain the sole owner of all ARADIGM Patent Rights and ARADIGMKnow-How obtained by ARADIGM individually prior to entering into this Agreement and shall use bestefforts to maintain and defend their position. Furthermore, **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**
 

 
21ARADIGM warrants that it is not awareof any third party patent rights that would limit in any material respect the parties’ freedom ofoperation with respect to practicing the ARADIGM Patent Rights.     6.2 NOVO NORDISK shall remain the sole owner of all NOVO NORDISK Patent Rightsand NOVO NORDISK Know-How obtained by NOVO NORDISK prior to entering into this Agreement.     6.3 (a) ARADIGM shall retain ownership of any and all results, improvements orinventions (“ARADIGM Programme Inventions”) whether patentable or not made jointly by the partiesor individually by one of the parties as a part of the Development Programme during the term ofthis Agreement and which relate solely to [ * ]. ARADIGM shall be responsible for filing,maintaining and defending any patents filed based on ARADIGM Programme Inventions and will timelyinform NOVO NORDISK of its intentions, activities and filings in this respect. ARADIGM will grantNOVO NORDISK a royalty free license, with the right to sublicense, under the ARADIGM ProgrammeInventions. Such license will be perpetual but will be limited to applications outside the fieldof pulmonary drug delivery. (b) Should ARADIGM decide not to patent an ARADIGM Programme Inventionin any country, NOVO NORDISK shall have the right to do so. In such case, NOVO NORDISK shall be theowner of any patent or patent application based on such ARADIGM Programme Invention and will grantARADIGM a royalty free licence thereunder, with the right to sublicence. Such licence will be forthe life of the patent but will be limited to applications outside the Field for so long as NOVONORDISK’s rights under Article 3 remain exclusive (and thereafter for so long as NOVO NORDISKretains exclusivity under Article 3.3 with respect to specified Packaged Products, to applicationsother than those for which there is continuing exclusivity under Article 3.3). Should ARADIGMdecide to abandon any such patent or patent application, in any country, NOVO NORDISK shall havethe option to take over such patent or patent application. In such case, NOVO NORDISK shall be theowner thereof and will grant ARADIGM a royalty free licence thereunder, with the right tosublicence. Such licence will be for the life of the patent but will be limited to applicationsoutside the Field for so long as NOVO NORDISK’s rights under Article 3 remain exclusive (andthereafter for so long as NOVO NORDISK retains exclusivity under Article 3.3 with respect tospecified Packaged Products, to applications other than those for which there is continuingexclusivity under Article 3.3). (c) Furthermore, NOVO NORDISK shall be entitled to enter anylitigation in the defence and enforcement of any such patents by any infringer thereof in the Fieldand the parties shall agree in good faith regarding any such defence and enforcement, as well ashow to pay for any costs incurred and how to share any rewards.     6.4 (a) NOVO NORDISK shall retain ownership of any and all results, improvementsor inventions whether patentable or not made jointly by the parties or individually by one of theparties as a part of the Development Programme during the term of this Agreement and which relatesolely to [ * ]. Inventions relating to the Formulated Compound owned by NOVO NORDISK are referredto as “NOVO Formulation Inventions.” NOVO NORDISK shall be responsible for filing, maintaining anddefending any patents filed **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**
 

 
22based on NOVO Formulation Inventions and will timely inform ARADIGM ofits intentions, activities and filings in this respect. NOVO NORDISK will grant ARADIGM a royaltyfree licence, with the right to sublicence, under the NOVO Formulation Inventions. Such licencewill be perpetual but will be limited to applications outside the Field. (b) Should NOVO NORDISKdecide not to patent a NOVO Formulation Invention in any country, ARADIGM shall have the right todo so. In such case, ARADIGM shall be the owner of any patent or patent application based on suchNOVO Formulation Invention and will grant NOVO NORDISK a royalty free licence thereunder, with theright to sublicence, for the life of the patent. Should NOVO NORDISK decide to abandon any suchpatent or patent application, in any country, ARADIGM shall have the option to take over suchpatent or patent application. In such case, ARADIGM shall be the owner of such patent or patentapplication and will grant NOVO NORDISK a royalty free licence thereunder, with the right tosublicence, for the life of the patent. (c) Furthermore, ARADIGM shall be entitled to enter anylitigation in the defence and enforcement of any such patents by any infringer thereof outside theField and the parties shall agree in good faith regarding any such defence and enforcement, as wellas how to pay for any costs incurred and how to share any reward.     6.5 The foregoing is not intended to limit in any respect the rights of ARADIGMunder Articles 3.3, 9.3 and 9.5 to develop and commercialise Devices and Packaged Products underthe circumstances specified therein. NOVO NORDISK will grant ARADIGM a perpetual royalty freelicence, with the right to sublicence, [ * ] utilized in the Development Programme needed byARADIGM in order only to conduct and continue the development, production and commercialisationactivities contemplated by Article 3.3, 9.3 and 9.5 of this Agreement.**ARTICLE 7**– **SECRECY**     7.1 Any information from time to time communicated or delivered by one of theparties to the other, including, without limitation, trade secrets, business methods, and cost,supplier, manufacturing and customer information, and information regarding such party’s PatentRights and Know-How, shall be treated by NOVO NORDISK and ARADIGM, respectively, as confidentialinformation, and shall not be disclosed or revealed to any third party whatsoever or used in anymanner except as expressly provided for herein; provided, however, that such confidentialinformation shall not be subject to the restrictions and prohibitions set forth in this Article 7to the extent that such confidential information: **•** is available to the public in public literature or otherwise,or after disclosure by one party to the other becomes public knowledge through nodefault of the party receiving such confidential information; or  **•** was known to the party (as demonstrated by the writtenrecords of such party) receiving such confidential information with no obligation tomaintain confidentiality prior to the receipt of such confidential information by suchparty, whether received before or after the date of this Agreement; or **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**
 

 
23 **•** is obtained by the party receiving such confidentialinformation from a third party not subject to a requirement of confidentiality withrespect to such confidential information; or  **•** is required to be disclosed pursuant to (i) any order of acourt having jurisdiction and power to order such information to be released or madepublic; or (ii) any lawful action of a governmental or regulatory agency.     7.2 Each party shall take all such precautions as it normally takes with its ownconfidential information to prevent any improper disclosure of such confidential information to anythird party; provided, however, that such confidential information may be disclosed within thelimits required to obtain any authorization from any governmental or regulatory agency or, with theprior written consent of the other party, which shall not be unreasonably withheld, or as mayotherwise be required in connection with the purposes of this Agreement.     7.3 Each party agrees that it will not use, directly or indirectly, any Know-Howor otherwise confidential information received from the other party pursuant to this Agreementother than as expressly provided herein.     7.4 NOVO NORDISK and ARADIGM will not publicise the existence of this Agreementin any way without the prior written consent of the other subject to the disclosure requirements ofapplicable law and regulations. However, it has been agreed between the parties that the partieswill issue a joint press release, following signature of the Agreement, including information onthe total potential value of the collaboration and stating that the collaboration involves thedevelopment of formulations for pulmonary administration within the Field as well as an option toexpand the collaboration into two additional fields.     7.5 As a part of its marketing obligations hereunder, NOVO NORDISK shall besolely responsible for all publication planning, it being understood that NOVO NORDISK willendeavor to present to the Steering Committee its overall publication planning strategy in goodtime prior to implementation and will in such event in good faith consider any reasonablesuggestion made by ARADIGM for amendments to such strategy, it being at all times understood thatNOVO NORDISK shall not be entitled to publish any information covered by Article 7.1 without theprior written consent of ARADIGM. For other publications not covered by NOVO NORDISK’s publicationplanning hereunder, the parties agree not to publish in any technical or scientific article orotherwise any of the results of the Development Programme without the review and approval of bothparties such approval not to be unreasonably withheld.     7.6 The confidentiality conditions shall remain in force for seven years from theday of termination of this Agreement.**ARTICLE 8**– **NOTICE** **[ * ]** **= Certain confidential information contained in this document, marked by brackets, hasbeen omitted and filed separately with the Securities and Exchange Commission pursuant to Rule24b-2 of the Securities Exchange Act of 1934, as amended.**
 

 
24     8.1 Any notice to be given under this Agreement shall be sent in writing inEnglish by registered airmail or telecopied to:          ARADIGM CORPORATION