ex10_1.htm


    
      

    

    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.


    
      
        
        

        
        

      

      
        9

        
          

        

      

      
        
        

      

    


    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.

     

    
      
        
        

        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    
      	
               

            	
              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


    
      
        
        

        
        

      

      
        11

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A

    Other
      Employment/Consulting Relationships

     

    [
      _____________________ ]

     

    
      
        
        

        
        

      

      
        12

        
          

        

      

      
        
        

      

    


    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:

    


    
      	 
	 
	 
	 
	 


    


    
      
        
        

        
        

      

      
        13

        
          

        

      

      
        
        

      

    


    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."

     

     

    14