<PAGE>   1
                                                                   EXHIBIT 10.28



                        COMMON STOCK PURCHASE AGREEMENT




                          DATED AS OF NOVEMBER 3, 2000




                                 BY AND BETWEEN



                              ARADIGM CORPORATION



                                      AND



                                ACQUA WELLINGTON
                       NORTH AMERICAN EQUITIES FUND, LTD.



<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
ARTICLE I         Definitions.................................................1

       Section 1.1 Definitions................................................1

ARTICLE II       Purchase and Sale of Common Stock............................3

       Section 2.1 Purchase and Sale of Stock.................................3
       Section 2.2 The Shares.................................................3
       Section 2.3 Purchase Price and Closing.................................3

ARTICLE III      Representations and Warranties...............................4

       Section 3.1 Representation and Warranties of the Company...............4
       Section 3.2 Representation and Warranties of the Purchaser............10

ARTICLE IV       Covenants...................................................12

       Section 4.1 Securities Compliance.....................................12
       Section 4.2 Registration and Listing..................................12
       Section 4.3 Registration Statement....................................12
       Section 4.4 Compliance with Nasdaq Rule...............................12
       Section 4.5 Keeping of Records and Books of Account...................12
       Section 4.6 Reporting Requirements....................................13
       Section 4.7 Non-public Information....................................13
       Section 4.8 Effective Registration Statement..........................13
       Section 4.9 No Stop Orders............................................13
       Section 4.10 Amendments to the Registration Statement.................14
       Section 4.11 Prospectus Delivery......................................14
       Section 4.12 Other Financing..........................................14
       Section 4.13 Notice...................................................15

ARTICLE V        Conditions to Closing, Draw Downs and Call Options..........15

       Section 5.1 Conditions Precedent to the Obligation of the
                     Company to Issue a Draw Down Notice or Grant
                     a Call Option and Sell the Shares.......................15
       Section 5.2 Conditions Precedent to the Obligation of the
                     Purchaser to Close......................................16
       Section 5.3 Conditions Precedent to the Obligation of the
                     Purchaser to Accept a Draw Down or Call
                     Option Grant and Purchase the Shares....................17

ARTICLE VI       Draw Down Terms; Call Option................................19
</TABLE>


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<TABLE>
<S>                                                                         <C>
       Section 6.1 Draw Down Terms...........................................19
       Section 6.2 Purchaser's Call Option...................................21

ARTICLE VII       Termination................................................22

       Section 7.1 Termination by Mutual Consent.............................22
       Section 7.2 Other Termination.........................................22
       Section 7.3 Effect of Termination.....................................22

ARTICLE VIII      Indemnification............................................22

       Section 8.1 General Indemnity.........................................22
       Section 8.2 Indemnification Procedures................................24

ARTICLE IX        Miscellaneous..............................................25

       Section 9.1 Fees and Expenses.........................................25
       Section 9.2 Specific Enforcement, Consent to Jurisdiction.............25
       Section 9.3 Entire Agreement; Amendment...............................25
       Section 9.4 Notices...................................................26
       Section 9.5 Waivers...................................................27
       Section 9.6 Headings..................................................27
       Section 9.7 Successors and Assigns....................................27
       Section 9.8 Governing Law.............................................27
       Section 9.9 Survival..................................................27
       Section 9.10 Counterparts.............................................27
       Section 9.11 Publicity................................................27
       Section 9.12 Severability.............................................28
       Section 9.13 Further Assurances.......................................28
</TABLE>




                                      -ii-
<PAGE>   4

                         COMMON STOCK PURCHASE AGREEMENT



        This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
November 3, 2000 by and between Aradigm Corporation, a California corporation
(the "Company"), and Acqua Wellington North American Equities Fund, Ltd., a
limited liability company organized under the laws of the Commonwealth of The
Bahamas (the "Purchaser").

        The parties hereto agree as follows:


                                    ARTICLE I

                                   Definitions

            SECTION 1.1 Definitions.

            (a) "Alternate Market" shall mean the Nasdaq Small Cap Market, the
American Stock Exchange, the New York Stock Exchange or the OTC Bulletin Board,
whichever is at the time the principal trading exchange or market for the Common
Stock.

            (b) "Call Option" shall have the meaning assigned to such term in
Section 6.2(a) hereof.

            (c) "Commission" shall mean the Securities and Exchange Commission.

            (d) "Commission Documents" shall have the meaning assigned to such
term in Section 3.1(f) hereof.

            (e) "Commission Filings" means the Company's Form 10-K for the
fiscal year ended December 31, 1999 as amended, Forms 10-Q for the periods ended
March 31, 2000, and June 30, 2000, Registration Statement on Form S-3, No's
333-31418 and 333-48384 and all other filings made by the Company after the date
hereof pursuant to the Securities Exchange Act of 1934.

            (f) "Common Stock" shall have the meaning assigned to such term in
Section 2.1 hereof.

            (g) "Draw Down" means the exercise by the Company of its right to
request the purchase of shares of Common Stock by the Purchaser.

            (h) "Draw Down Amount" means the actual amount of a Draw Down up to
$8,000,000 or such other amount mutually agreed upon by the Purchaser and the
Company.

            (i) "Draw Down Discount Percentage" means 94.5% if the Threshold
Price is equal to or greater than $15.00 but less than or equal to $17.00;
provided, however, that for every


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<PAGE>   5
$2.00 increase in the Threshold Price above $15.00 to a maximum of $35.00, the
draw down discount percentage shall be increased 0.5%, incrementally, up to a
maximum draw down discount percentage of 95%, and for every $2.00 decrease in
the Threshold Price from $15.00 to $9.00, the draw down discount percentage
shall be decreased 0.5%, incrementally, down to a minimum draw down discount
percentage of 93%.

            (j) "Draw Down Exercise Date" shall have the meaning assigned to
such term in Section 5.1 hereof.

            (k) "Draw Down Notice" shall have the meaning assigned to such term
in Section 6.1(i) hereof.

            (l) "Draw Down Pricing Period" shall mean a period of twenty (20)
consecutive Trading Days following a Draw Down Notice, or such other period
mutually agreed upon by the Purchaser and the Company.

            (m) "Effective Date" shall mean October 27, 2000.

            (n) "Investment Period" shall have the meaning assigned to such
term in Section 7.1 hereof.

            (o) "Material Adverse Effect" shall mean any effect on the business,
results of operations, prospects, assets or financial condition of the Company
that is material and adverse to the Company and its subsidiaries, taken as a
whole and/or any condition, circumstance, or situation that would prohibit the
Company from entering into and performing any of its obligations under this
Agreement in any material respect.

            (p) "Material Change in Ownership" shall mean that, as of any
particular measurement date, the officers and directors of the Company shall
beneficially own (including for such purposes any issued and outstanding
options) in the aggregate less than 2% of the outstanding Common Stock of the
Company, except that for purposes of making any such calculation, Common Stock
issued to the Purchaser pursuant to this Agreement shall not be included in such
calculation.

            (q) "Prospectus" as used in this Agreement means the prospectus in
the form included in the Registration Statement, as supplemented by any
prospectus supplement filed with the Commission pursuant to Rule 424(b).

            (r) "Registration Statement" shall mean the registration statement
on Form S-3, Commission File Number 333-48384 under the Securities Act, filed
with the Commission for the registration of the Shares, as such Registration
Statement may be amended from time to time.

            (s) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder.

            (t) "Settlement Date" shall have the meaning assigned to such term
in Section 6.1(d) hereof.


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<PAGE>   6

            (u) "Shares" shall mean the shares of Common Stock of the Company
that may be purchased hereunder.

            (v) "Threshold Price" is the lowest price at which the Company may
set in the Draw Down Notice to sell Shares during a Draw Down Pricing Period
(not taking into account the Draw Down Discount Percentage during such Draw Down
Pricing Period).

            (w) "Trading Day" shall mean a day on which the Common Stock is
traded on the Nasdaq National Market or an Alternate Market.

            (x) "VWAP" shall mean the daily volume weighted average price (based
on a Trading Day from 9:30 a.m. to 4:00 p.m., eastern time) of the Common Stock
of the Company on the NASDAQ National Market or an Alternate Market as reported
by Bloomberg Financial LP using the AQR function.



                                   ARTICLE II

                        PURCHASE AND SALE OF COMMON STOCK

            SECTION 2.1 Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company shall issue and sell to the Purchaser
and the Purchaser shall purchase from the Company up to $50,000,000 of the
Company's common stock, no par value per share (the "Common Stock"), based on
Draw Downs, subject to Section 6.1 hereof, of up to $8,000,000 per Draw Down and
up to an additional $8,000,000 of Common Stock based on Call Options of up to
the Draw Down Amount for the applicable Draw Down Pricing Period that the
Company may grant to the Purchaser in the Company's sole discretion.

            SECTION 2.2 The Shares. The Company has authorized and has reserved
and covenants to continue to reserve, subject to Section 4.4(b) hereof, free of
preemptive rights and other similar contractual rights of stockholders, a
sufficient number of its authorized but unissued shares of its Common Stock to
cover the Shares to be issued in connection with all Draw Downs and Call
Options.

            SECTION 2.3 Purchase Price and Closing. The Company agrees to issue
and sell to the Purchaser and, in consideration of and in express reliance upon
the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchaser, agrees to purchase that number of the Shares to be
issued in connection with each Draw Down and each Call Option exercised by the
Purchaser. The closing of the execution and delivery of this Agreement shall
take place at the offices of Parker Chapin LLP, The Chrysler Building, 405
Lexington Avenue, New York, NY 10174 (the "Closing") at 10:00 a.m., eastern
time, on (i) November 3, 2000, or (ii) such other time and place or on such date
as the Purchaser and the Company may agree upon (the "Closing Date"). Each party
shall deliver all documents, instruments and writings required to be delivered
by such party pursuant to this Agreement at or prior to the Closing.


                                      -3-
<PAGE>   7

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

            SECTION 3.1 Representations and Warranties of the Company. The
Company hereby makes the following representations and warranties to the
Purchaser:

            (a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of California and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now being
conducted. As of the date hereof, the Company does not have any subsidiaries (as
defined in Section 3.1(g)) except as set forth in the Registration Statement and
in the Company's most recent Form 10-K, including the accompanying financial
statements (as amended, the "Form 10-K"), or in the Company's most recent Form
10-Q (the "Form 10-Q"), or on Schedule 3.1(g) attached hereto. The Company and
each such subsidiary is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary
except for any jurisdiction in which the failure to be so qualified will not
have a Material Adverse Effect.

            (b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue and sell the Shares in accordance with the terms hereof. The execution,
delivery and performance of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action, and, except as contemplated by
Section 4.4, no further consent or authorization of the Company or its Board of
Directors or stockholders is required. This Agreement has been duly executed and
delivered by the Company. This Agreement constitutes, or shall constitute when
executed and delivered, a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.

            (c) Capitalization. The authorized capital stock of the Company and
the shares thereof issued and outstanding as of October 27, 2000 are set forth
on Schedule 3.1(c) attached hereto. All of the outstanding shares of the
Company's Common Stock have been duly and validly authorized, and are fully paid
and non-assessable. Except as set forth in the Commission Documents or this
Agreement including Schedule 3.1(c), as of the date hereof no shares of Common
Stock are entitled to preemptive rights or registration rights and there are no
outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in the Commission Documents or this Agreement including
Schedule 3.1(c), as of the date hereof there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for customary transfer restrictions contained


                                      -4-
<PAGE>   8

in agreements entered into by the Company in order to sell restricted securities
or as set forth in Schedule 3.1(c), as of the date hereof, the Company is not a
party to any agreement granting registration rights to any person with respect
to any of its equity or debt securities and the Company is not a party to, and
it has no knowledge of, any agreement restricting the voting or transfer of any
shares of the capital stock of the Company. The offer and sale of all capital
stock, convertible securities, rights, warrants, or options of the Company
issued prior to the Closing complied with all applicable federal and state
securities laws, and no stockholder has a right of rescission or damages with
respect thereto which would have a Material Adverse Effect. The Company has
furnished or made available to the Purchaser true and correct copies of the
Company's Articles of Incorporation as in effect on the date hereof (the
"Charter"), and the Company's Bylaws as in effect on the date hereof (the
"Bylaws").

            (d) Issuance of Shares. The Shares to be issued under this Agreement
have been duly authorized by all necessary corporate action and, when paid for
and issued in accordance with the terms hereof, the Shares shall be validly
issued and outstanding, fully paid and non-assessable, and the Purchaser shall
be entitled to all rights accorded to a holder of Common Stock.

            (e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated herein do not (i) violate any provision of the Company's Charter or
Bylaws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases (other than violations
pursuant to clauses (i) and (iv) (to the extent of federal securities law)), for
such conflicts, defaults, terminations, amendments, acceleration, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The Company is not required under federal, state or local law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, or
issue and sell the Shares in accordance with the terms hereof (other than any
filings which may be required to be made by the Company with the Commission, or
the Nasdaq National Market subsequent to the Closing, and, any registration
statement which may be filed pursuant hereto); provided that, for purpose of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Purchaser
herein.

            (f) Commission Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and since December 31,
1999, the Company has timely


                                      -5-
<PAGE>   9

filed all reports, schedules, forms, statements and other documents required to
be filed by it with the Commission pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the
Exchange Act (all of the foregoing including filings incorporated by reference
therein being referred to herein as the "Commission Documents"). The Company's
Commission Documents filed with the Commission since December 31, 1999 and prior
to the Closing Date are available on the Commission's "electronic data gathering
and retrieval" (EDGAR) service. The Company has not provided to the Purchaser
any information which, according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement. The
Form 10-K complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such documents, and as of the date it was filed with the
Commission, the Form 10-K did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the Commission Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the Commission or other applicable rules and regulations with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements and are subject to normal year-end audit
adjustments), and fairly present in all material respects the financial position
of the Company and its subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).

            (g) Subsidiaries. The Commission Documents or Schedule 3.1(g)
attached hereto set forth each subsidiary of the Company as of the date hereof,
showing the jurisdiction of its incorporation or organization and showing the
percentage of each person's ownership of the outstanding stock or other
interests of such subsidiary. For the purposes of this Agreement, "subsidiary"
shall mean any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other subsidiaries. Except as set forth in the Commission
Documents or the Commission Filings, none of such subsidiaries is a "significant
subsidiary" as defined in Regulation S-X.

            (h) No Material Adverse Effect. Since June 30, 2000, the Company has
not experienced or suffered any Material Adverse Effect, except continued losses
from operations.

            (i) No Undisclosed Liabilities. The Company has no liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of the Company or any subsidiary (including the
notes thereto) in conformity with GAAP not disclosed in the Commission
Documents, other than those incurred in the ordinary course of the


                                      -6-
<PAGE>   10

Company's or its subsidiaries respective businesses since June 30, 2000 and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect.

            (j) No Undisclosed Events or Circumstances. No event or circumstance
has occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed and which, individually or in the aggregate, do not or would not have
a Material Adverse Effect.

            (k) Indebtedness. The Commission Documents set forth as of June 30,
2000, all outstanding secured and unsecured Indebtedness of the Company, or for
which the Company or any subsidiary has commitments. For the purposes of this
Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed money or
amounts owed in excess of $100,000 (other than trade accounts payable incurred
in the ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $100,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
or any subsidiary is in default with respect to any Indebtedness.

            (l) Title to Assets. Each of the Company and its subsidiary has good
and marketable title to all of its owned real and personal property reflected in
the Commission Documents, free of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those indicated in the
Commission Documents or the Commission Filings or such that could not reasonably
be expected to cause a Material Adverse Effect. All material leases of the
Company and each of its subsidiaries are valid and subsisting and in full force
and effect in all material respects.

            (m) Actions Pending. There is no action, suit, claim, investigation
or proceeding pending or, to the knowledge of the Company, threatened against
the Company which questions the validity of this Agreement or the transactions
contemplated hereby or any action taken or to be taken pursuant hereto or
thereto. Except for those indicated in the Commission Documents or the
Commission Filings, there is no action, suit, claim, investigation or proceeding
pending or, to the knowledge of the Company, threatened, against or involving
the Company or any subsidiary, or any of their respective properties or assets
which, if adversely determined, is reasonably likely to result in a Material
Adverse Effect.

            (n) Compliance with Law. Except as set forth in the Commission
Documents or the Commission Filings, the business of the Company has been at all
times since May 22, 1996 and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as such that has not and will not cause a Material Adverse
Effect. Each of the Company and its subsidiary has all franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals necessary for the conduct of its business as now being conducted
unless the failure to possess such franchises, permits, licenses, consents and
other governmental or regulatory authorizations


                                      -7-
<PAGE>   11

and approvals, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

            (o) Certain Fees. No brokers, finders or financial advisory fees or
commissions will be payable by the Company with respect to the transactions
contemplated by this Agreement.

            (p) Disclosure. To the Company's knowledge, neither this Agreement
or the Schedules hereto nor any other documents, certificates or instruments
furnished to the Purchaser by or on behalf of the Company in connection with the
transactions contemplated by this Agreement contain any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.

            (q) Operation of Business. The Company or its subsidiary owns or has
a valid right to use all patents, trademarks, service marks, trade names,
copyrights, licenses and proprietary rights as set forth in the Commission
Documents or the Commission Filings and all rights with respect to the
foregoing, which are necessary for the conduct of its business as now conducted
without any known conflict with the rights of others, except to the extent set
forth in the Commission Documents or the Commission Filings, that a Material
Adverse Effect could not reasonably be expected to result from such conflict.

            (r) Environmental Compliance. Except as disclosed in the Commission
Filings, the Company has obtained all approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other person, that are required under any
Environmental Laws, except where the failure to do so would not have a Material
Adverse Effect. "Environmental Laws" shall mean all applicable laws relating to
the protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. To the best of the Company's knowledge, the Company has not
violated any Environmental Law.

            (s) Material Agreements. Except as set forth in the Commission
Documents, Commission Filings and this Agreement, including Schedule 3.1(s), the
Company is not a party to any written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement, a copy of which would be required
to be filed with the Commission as an exhibit to a registration statement on
Form S-3 or applicable form (collectively, "Material Agreements") if the Company
was registering securities under the Securities Act, which is not already filed
with the Commission. The Company has in all material respects performed all the
obligations required to be performed by it to date under the foregoing
agreements, has received no notice of default and, to the best of the Company's
knowledge is not in default under any Material


                                      -8-
<PAGE>   12

Agreement now in effect, the result of which could reasonably be expected to
cause a Material Adverse Effect.

            (t) Transactions with Affiliates. Except as set forth in the
Commission Documents or the Commission Filings, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions exceeding $100,000 between (a) the Company or,
to the knowledge of the Company, any of its customers (excluding agreements
related to the purchase or lease of the Company's products) or suppliers on the
one hand, and (b) on the other hand, any officer, employee, consultant or
director of the Company, or any person who would be covered by Item 404(a) of
Regulation S-K or any corporation or other entity controlled by such officer,
employee, consultant, director or person.

            (u) Securities Act of 1933. The Company has complied in all material
respects with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Shares hereunder.

               (i) Each Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Securities Act, complied when so filed
in all material respects with the provisions of the Securities Act. The
Commission has not issued any order preventing or suspending the use of any
Prospectus.

               (ii) The Company meets the requirements for the use of Form S-3
under the Securities Act. The Registration Statement in the form in which it
became effective and also in such form as it may be when any post-effective
amendment thereto became effective and the Prospectus and any supplement or
amendment thereto when filed with the Commission under Rule 424(b) under the
Securities Act, complied in all material respects with the provisions of the
Securities Act and did not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in the
light of the circumstances under which they were made) not misleading, except
that this representation and warranty does not apply to statements in or
omissions from the Registration Statement or the Prospectus made in reliance
upon and in conformity with information relating to the Purchaser furnished to
the Company in writing by or on behalf of the Purchaser expressly for use
therein.

               (iii) The Company has not distributed and, prior to the
completion of the sale of the Shares to the Purchaser, will not distribute any
offering material in connection with the offering and sale of the Shares other
than the Registration Statement, the Prospectus or other materials, if any,
permitted by the Securities Act.

            (v) Employees. As of the date hereof, the Company has no collective
bargaining arrangements or agreements covering any of its employees. Except as
set forth in the Commission Documents or on Schedule 3.1(v) attached hereto, as
of the date hereof the Company has no employment contract or any other similar
contract or restrictive covenant, relating to the right of any officer, employee
or consultant to be employed or engaged by the Company. Each of the Company and
its subsidiary requires its officers, technical employees and certain
consultants to enter into agreements regarding proprietary information and
assignment of


                                      -9-
<PAGE>   13

inventions, or other similar agreements containing restrictive covenants. Except
as set forth on Schedule 3.1(v) attached hereto, as of the date hereof, since
December 31, 1999, no officer, consultant or key employee of the Company whose
termination, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, has terminated or, to the knowledge
of the Company, has any present intention of terminating his or her employment
or engagement with the Company.

            (w) Use of Proceeds. The proceeds from the sale of the Shares will
be used by the Company and its subsidiary for the purposes set forth in the
Prospectus (as then amended or supplemented) under "Use of Proceeds."

            (x) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.

            (y) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan (as defined below) by the Company
which is or would have a Material Adverse Effect. The execution and delivery of
this Agreement and the issue and sale of the Shares will not involve any
transaction which is subject to the prohibitions of Section 406 of ERISA or in
connection with which a tax could be imposed pursuant to Section 4975 of the
Internal Revenue Code of 1986, as amended, provided that, if any of the
Purchaser, or any person or entity that owns a beneficial interest in any of the
Purchaser, is an "employee pension benefit plan" (within the meaning of Section
3(2) of ERISA) with respect to which the Company is a "party in interest"
(within the meaning of Section 3(14) of ERISA), the requirements of Sections
407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this Section
3.1(y), the term "Plan" shall mean an "employee pension benefit plan" (as
defined in Section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or by any trade
or business, whether or not incorporated, which, together with the Company, is
under common control, as described in Section 414(b) or (c) of the Code.

            (z) Acknowledgment Regarding Purchaser's Purchase of Shares. The
Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the
Shares.

            SECTION 3.2 Representations and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company:


                                      -10-
<PAGE>   14

            (a) Organization and Standing of the Purchaser. The Purchaser is a
limited liability company duly organized, validly existing and in good standing
under the laws of the Commonwealth of the Bahamas. The Purchaser's principal
place of business is as set forth in Section 9.4 hereof.

            (b) Authorization and Power. The Purchaser has the requisite
corporate power and authority to enter into and perform this Agreement and to
purchase the Shares in accordance with the terms hereof. The execution, delivery
and performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Purchaser, its
Board of Directors or stockholders is required. This Agreement constitutes, or
shall constitute when executed and delivered, a valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership, or similar laws relating to, or affecting generally the
enforcement of, creditor's rights and remedies or by other equitable principles
of general application.

            (c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a
violation of such Purchaser's charter documents or bylaws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of any material agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Purchaser is a party, (iii) create or impose or lien,
charge or encumbrance on any property of the Purchaser under any agreement or
any commitment to which the Purchaser is party or by which the Purchaser is on
or by which any of its respective properties or assets are bound or (iv) result
in a violation of any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to the Purchaser or its
properties, except for such conflicts, defaults and violations as would not,
individually or in the aggregate, prohibit or otherwise interfere with the
ability of the Purchaser to enter into and perform its obligations under this
Agreement in any material respect. The Purchaser is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or to purchase the Shares in accordance
with the terms hereof, provided that for purposes of the representation made in
this sentence, the Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.

            (d) Information. The Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares which
have been requested by the Purchaser. The Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. The
Purchaser has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Shares. Purchaser understands that it (and not the Company)
shall be responsible for its own tax liabilities that may arise as a result of
this investment or the transactions contemplated by this Agreement.


                                      -11-
<PAGE>   15

            (e) Selling Restriction. The Purchaser covenants that prior to and
during the Investment Period, neither the Purchaser nor any of its affiliates
nor any entity managed by the Purchaser will ever sell shares of Common Stock of
the Company other than what the Purchaser has accumulated to purchase under the
terms of this Agreement or in any accounts directly or indirectly managed by the
Purchaser or any affiliate of the Purchaser or any entity managed by the
Purchaser.


                                   ARTICLE IV

                                    COVENANTS

        The Company covenants with the Purchaser as follows, which covenants are
for the benefit of the Purchaser and its permitted assignees, that during the
term of this Agreement:

            SECTION 4.1 Securities Compliance. The Company shall notify the
Commission and the Nasdaq National Market or an Alternate Market, if applicable,
in accordance with their rules and regulations, of the transactions contemplated
by this Agreement, and shall take all other necessary action and proceedings as
may be required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Shares to the Purchaser or subsequent holders.

            SECTION 4.2 Registration and Listing. The Company will take all
action necessary to cause its Common Stock to continue to be registered under
Sections 12(b) or 12(g) of the Exchange Act, will comply in all respects with
its reporting and filing obligations under the Exchange Act, and will not take
any action or file any document (whether or not permitted by the Securities Act
or the rules promulgated thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under the
Exchange Act or Securities Act, except as permitted herein. The Company will
take all action necessary to continue the listing or trading of its Common Stock
and the listing of the Shares purchased by Purchaser hereunder on the Nasdaq
National Market or an Alternate Market and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the Nasdaq National Market or an Alternate Market.

            SECTION 4.3 Registration Statement. Before the Company shall issue a
Draw Down Notice, the Company shall have caused a sufficient number of shares of
Common Stock to be authorized and registered to cover the Shares to be issued in
connection with this Agreement.

            SECTION 4.4 Compliance with Nasdaq Rule. The Company will not be
obligated to issue and the Purchaser will not be obligated to purchase any
shares of the Company's Common Stock which would result in the issuance under
this Agreement of more than nineteen and nine-tenths percent (19.9%) of the
issued and outstanding shares of the Company's Common Stock.

            SECTION 4.5 Keeping of Records and Books of Account. The Company
shall keep adequate records and books of account, in which complete entries will
be made pursuant to a system of accounting established in accordance with GAAP
consistently applied, reflecting all


                                      -12-
<PAGE>   16

financial transactions of the Company and its subsidiaries, and in which, for
each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business as shall be required by GAAP consistently applied shall be made.

            SECTION 4.6 Reporting Requirements. Upon request, the Company shall
furnish or make available the following to the Purchaser so long as such
Purchaser shall be obligated hereunder to purchase Shares:

            (a) Quarterly Reports filed with the Commission on Form 10-Q as soon
as available, and in any event within forty-five (45) days after the end of each
of the first three fiscal quarters of the Company; and

            (b) Annual Reports filed with the Commission on Form 10-K as soon as
available, and in any event within ninety (90) days after the end of each fiscal
year of the Company.

            SECTION 4.7 Non-public Information. Neither the Company nor any of
its officers or agents shall disclose any material non-public information about
the Company to the Purchaser and neither the Purchaser nor any of its
affiliates, officers or agents will solicit any material non-public information
from the Company.

            SECTION 4.8 Effective Registration Statement. If it is necessary for
the Registration Statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, the Company will
endeavor to cause the Registration Statement or such post-effective amendment to
become effective as soon as reasonably practicable and will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in
writing, when it receives notice that the Registration Statement or such
post-effective amendment has become effective.

            SECTION 4.9 No Stop Orders. The Company will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in
writing: (i) of its receipt of notice of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prospectus or
for additional information; (ii) of its receipt of notice of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of the suspension of qualification of the Shares for offering or
sale in any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) of its becoming aware of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Securities Act or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Securities Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration


                                      -13-
<PAGE>   17

Statement, the Company will make all reasonable efforts to obtain the withdrawal
of such order at the earliest possible time.

            SECTION 4.10 Amendments to the Registration Statement. The Company
will not (i) file any amendment to the Registration Statement or make any
amendment or supplement to the Prospectus that relates to the Purchaser in any
way whatsoever of which the Purchaser shall not previously have been advised or
to which the Purchaser shall reasonably object after being so advised or (ii) so
long as, in the reasonable opinion of counsel for the Purchaser, a Prospectus is
required to be delivered in connection with sales by any Purchaser or dealer,
file any information, documents or reports pursuant to the Exchange Act without
delivering a copy of such information, documents or reports to the Purchaser,
promptly following such filing.

            SECTION 4.11 Prospectus Delivery. The Company shall file a
prospectus supplement to its Registration Statement by the first business day
immediately following the end of each Draw Down Pricing Period, and will deliver
to the Purchaser, without charge, in such quantities as reasonably requested by
the Purchaser, copies of each form of Prospectus and prospectus supplement on
each Settlement Date. The Company consents to the use of the Prospectus (and of
any amendment or supplement thereto) in accordance with the provisions of the
Securities Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares may be sold by the Purchaser, in connection with the offering
and sale of the Shares and for such period of time thereafter as the Prospectus
is required by the Securities Act to be delivered in connection with sales of
the Shares. If during such period of time any event shall occur that in the
judgment of the Company or in the reasonable opinion of counsel for the
Purchaser is required to be set forth in the Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Prospectus to
comply with the Securities Act or any other law, the Company will forthwith
prepare and, subject to the provisions of Section 4.10 above, file with the
Commission an appropriate supplement or amendment thereto, and will
expeditiously furnish to the Purchaser a reasonable number of copies thereof.

            SECTION 4.12 Other Financing. If the Company enters into any other
financing agreement, the primary purpose of which would be to obtain equity
financing for the Company (an "Other Financing"), during a Draw Down Pricing
Period, the Company shall promptly notify the Purchaser of such Other Financing
and the Purchaser shall have the options set forth in Section 6.1(k) hereof. If
the Company enters into the Other Financing between Draw Down Pricing Periods,
the Company shall promptly notify the Purchaser of such Other Financing and the
Purchaser shall have the option, which option shall be exercised no later than
five (5) Trading Days after receipt by the Purchaser of the notice of the Other
Financing, to purchase up to (i) the Draw Down Amount, assuming that the
Threshold Price is the price per share to be paid for the Common Stock in the
Other Financing, or (ii) an amount mutually agreed upon by the Purchaser and the
Company on the same, absolute terms and conditions contemplated in the Other
Financing. The Company shall have the right to close the Other Financing to the
extent not purchased by the Purchaser on the scheduled closing date with a third
party, provided that all of the terms and conditions of such closing are similar
in all material respects to those provided to the Purchaser. As used herein,
"Other Financing" shall not include the Company (i) entering into


                                      -14-
<PAGE>   18

a loan, credit or lease facility with a bank or financing institution (including
any equity component thereof), (ii) establishing an employee stock option plan
or agreement or financing the acquisition of other companies, equipment,
technologies or lines of business, (iii) issuing shares of Common Stock in
connection with the Company's current option plans (as the same may be amended
from time to time), stock purchase plans, rights plans, currently outstanding
warrants or options, or increasing the number of shares available under any such
plans (the primary purpose of which is not to raise equity), and (iv) issuing
shares of Common Stock and/or preferred stock in connection with the formation
and maintenance of strategic partnerships, alliances or joint ventures and the
acquisition of products, licenses or other assets (each a "Permitted
Transaction").

            SECTION 4.13 Notices. The Company shall promptly notify the
Purchaser that (i) a Material Adverse Effect or Material Change in Ownership has
occurred or (ii) the Company has entered into an Other Financing (as defined in
Section 4.12 hereof).


                                    ARTICLE V

               CONDITIONS TO CLOSING, DRAW DOWNS AND CALL OPTIONS

            SECTION 5.1 Conditions Precedent to the Obligation of the Company to
Issue a Draw Down Notice or Grant a Call Option and Sell the Shares. The
obligation hereunder of the Company to issue a Draw Down Notice or grant a Call
Option and sell the Shares to the Purchaser is subject to the satisfaction or
waiver, at or before each Draw Down or Call Option request (the "Draw Down
Exercise Date"), of each of the conditions set forth below. These conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion.

            (a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser in this Agreement shall be true
and correct in all material respects as of the date when made and as of each
Draw Down Exercise Date and each Settlement Date as though made at that time,
except for representations and warranties that are expressly made as of a
particular date.

            (b) Registration Statement. The Company shall have Shares registered
under the Registration Statement which are valued at an amount equal to or in
excess of the number of Shares issuable pursuant to such Draw Down Notice or
Call Option. The Registration Statement registering the offer and sale of the
Shares shall have been declared effective by the Commission and shall have been
amended or supplemented, as required, to disclose the sale of the Shares prior
to each Settlement Date, as applicable, and there shall be no stop order
suspending the effectiveness of the Registration Statement.

            (c) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchaser at or prior to each Settlement Date.


                                      -15-
<PAGE>   19

            (d) No Injunction. No statute, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.

            (e) No Suspension, Etc. Trading in the Company's Common Stock shall
not have been suspended by the Commission or the Nasdaq National Market or an
Alternate Market (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to such
Draw Down Exercise Date and applicable Settlement Date), and, at any time prior
to each Draw Down Exercise Date, trading in securities generally as reported on
the Nasdaq National Market or an Alternate Market shall not have been suspended
or limited, or minimum prices shall not have been established on securities
whose trades are reported by the Nasdaq National Market or an Alternate Market,
nor shall a banking moratorium have been declared either by the United States or
New York State authorities, nor shall there have occurred any material outbreak
or escalation of hostilities or other national or international calamity or
crisis of such magnitude in its effect on, or any material adverse change in any
financial market which, in each case, in the reasonable judgment of the Company,
makes it impracticable or inadvisable to issue the Shares.

            (f) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company, or any of the officers, directors or affiliates of the
Company seeking to restrain, prevent or change the transactions contemplated by
this Agreement, or seeking damages in connection with such transactions.

            SECTION 5.2 Conditions Precedent to the Obligation of the Purchaser
to Close. The obligation hereunder of the Purchaser to enter this Agreement is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser at any time in its sole discretion.

            (a) Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company shall be true and correct
in all material respects as of the date when made and as of the Closing Date, as
though made at that time, except for representations and warranties that speak
as of a particular date.

            (b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.

            (c) Effective Registration Statement. The Registration Statement
registering the offer and sale of the Shares shall have been declared effective
by the Commission and shall have been amended or supplemented, as required, to
disclose the sale of the Shares prior to each Settlement Date, as applicable,
and there shall be no stop order suspending the effectiveness of the
Registration Statement.


                                      -16-
<PAGE>   20

            (d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

            (e) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company, or any of the officers, directors or affiliates of the
Company seeking to restrain, prevent or change the transactions contemplated by
this Agreement, or seeking damages in connection with such transactions.

            (f) Opinion of Counsel, Etc. At the Closing, the Purchaser shall
have received an opinion of counsel to the Company, dated the date of Closing,
in a form reasonably acceptable to the Purchaser, a secretary's certificate,
dated the date of Closing, in the form of Exhibit A hereto, and such other
certificates and documents as the Purchaser or its counsel shall reasonably
require incident to the Closing.

            SECTION 5.3 Conditions Precedent to the Obligation of the Purchaser
to Accept a Draw Down or Call Option Grant and Purchase the Shares. The
obligation hereunder of the Purchaser to accept a Draw Down or Call Option grant
and to acquire and pay for the Shares on the Settlement Date is subject to the
satisfaction or waiver, at or before each Draw Down Exercise Date and each
Settlement Date, as applicable, of each of the conditions set forth below. The
conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in its sole discretion.

            (a) Accuracy of the Company's Representations and Warranties. Each
of the representations and warranties of the Company shall be true and correct
in all material respects as of the date when made and as of the Draw Down
Exercise Date and Settlement Date, as applicable, as though made at that time,
except for representations and warranties that speak as of a particular date.

            (b) Registration Statement. The Company shall have Shares registered
under the Registration Statement which are valued at an amount equal to or in
excess of the number of Shares issuable pursuant to such Draw Down Notice or
Call Option. The Registration Statement registering the offer and sale of the
Shares shall have been declared effective by the Commission and shall have been
amended or supplemented, as required, to disclose the sale of the Shares prior
to each Draw Down Exercise Date or each Settlement Date, as applicable, and
there shall be no stop order suspending the effectiveness of the Registration
Statement.

            (c) No Suspension, Etc. Trading in the Company's Common Stock shall
not have been suspended by the Commission or the Nasdaq National Market or an
Alternate Market (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to each
Draw Down Exercise Date), and, at any time prior to such Draw Down Exercise Date
or such Settlement Date, trading in securities generally as reported by the
Nasdaq National Market or an Alternate Market shall not have been suspended or
limited, or minimum prices shall not have been established on securities whose
trades are


                                      -17-
<PAGE>   21

reported by the Nasdaq National Market or an Alternate Market, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities, nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity or crisis
of such magnitude in its effect on, or any material adverse change in any
financial market which, in each case, in the reasonable judgment of the
Purchaser, makes it impracticable or inadvisable to purchase the Shares. The
Common Stock shall be listed on Nasdaq or an Alternate Market.

            (d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Draw Down Exercise Date and the
Settlement Date and shall have delivered the Compliance Certificate
substantially in the form attached hereto as Exhibit B.

            (e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.

            (f) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company, or any of the officers, directors or affiliates of the
Company seeking to restrain, prevent or change the transactions contemplated by
this Agreement, or seeking damages in connection with such transactions.

            (g) No Material Adverse Effect; No Material Change in Ownership. No
Material Adverse Effect or Material Change in Ownership shall have occurred.

            (h) Ten Percent Limitation. On each Settlement Date, the number of
Shares then to be purchased by the Purchaser shall not exceed the number of such
shares that, when aggregated with all other shares of Common Stock then owned by
the Purchaser beneficially, would result in the Purchaser owning more than 9.9%
of all of such Common Stock as would be outstanding on such Settlement Date, as
determined in accordance with Section 16 of the Exchange Act and the regulations
promulgated thereunder. For purposes of this Section 5.3(h), in the event that
the amount of Common Stock outstanding as determined in accordance with Section
16 of the Exchange Act and the regulations promulgated thereunder is greater on
a Settlement Date than on the date upon which the Draw Down Notice associated
with such Settlement Date is given, the amount of Common Stock outstanding on
such Settlement Date shall govern for purposes of determining whether the
Purchaser, when aggregating all purchases of Common Stock made pursuant to this
Agreement would own more than 9.9% of the Common Stock following such Settlement
Date.


                                      -18-
<PAGE>   22

                                   ARTICLE VI

                          DRAW DOWN TERMS; CALL OPTION

            SECTION 6.1 Draw Down Terms.  Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as follows:

            (a) The Company, may, in its sole discretion, issue a Draw Down
Notice with respect to a Draw Down during each Draw Down Pricing Period as
follows: (i) If the Threshold Price is set equal to or greater than $15.00 but
less than $17.00, the Draw Down Amount shall be up to $3,000,000; (ii) from
$15.00 to a maximum of $35.00, for every $2.00 increase in the Threshold Price,
the Draw Down Amount shall be increased by up to $500,000, incrementally, for a
maximum Draw Down Amount during each Draw Down Pricing Period of up to
$8,000,000; and (iii) from $15.00 to $9.00, for every $2.00 decrease in the
Threshold Price, the Draw Down Amount shall be decreased by up to $500,000,
incrementally, down to a minimum Draw Down Amount of $1,500,000; provided, that
the Company may, in its sole discretion, issue a Draw Down Notice with respect
to any Draw Down Amount at any Threshold Price or any Draw Down Discount
Percentage pursuant to terms mutually agreed upon by the Purchaser and the
Company, which Draw Down the Purchaser will be obligated to accept. Prior to
issuing any Draw Down Notice, the Company shall have Shares registered under the
Registration Statement which are valued at an amount equal to or in excess of
the Draw Down Amount.

            (b) The number of Shares to be issued in connection with each Draw
Down shall be equal to the sum of the quotients (for each Trading Day of the
Draw Down Pricing Period for which the VWAP equals or exceeds the Threshold
Price) of (x) 1/20th (or such other fraction based on the length of the Draw
Down Pricing Period) of the Draw Down Amount divided by (y) the applicable Draw
Down Discount Percentage multiplied by the VWAP of the Common Stock for such
Trading Day.

            (c) Only one Draw Down shall be allowed in each Draw Down Pricing
Period.

            (d) The number of Shares purchased by the Purchaser with respect to
each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled on the second business day following the end of each
Draw Down Pricing Period (the "Settlement Date").

            (e) There shall be a minimum of five (5) Trading Days between Draw
Downs, unless otherwise mutually agreed upon between the Purchaser and the
Company.

            (f) There shall be a maximum of eighteen (18) monthly Draw Downs
during the term of this Agreement.

            (g) Each Draw Down will expire on the end of the last Trading Day of
each Draw Down Pricing Period.


                                      -19-
<PAGE>   23

            (h) If the VWAP on a given Trading Day is less than the Threshold
Price, then the total amount of the Draw Down for the relevant Draw Down Pricing
Period will be reduced by 1/20th (or such other fraction based on the length of
the Draw Down Pricing Period). At no time shall the Threshold Price be set below
$9.00, unless mutually agreed upon by the Company and the Purchaser. If trading
in the Company's Common Stock is suspended for any reason for more than three
(3) hours in any Trading Day, at the Purchaser's option, the price of the Common
Stock shall be deemed to be below the Threshold Price for that Trading Day and
the Draw Down for the relevant Draw Down Pricing Period shall be reduced by
1/20th (or such other fraction based on the length of the Draw Down Pricing
Period). Notwithstanding anything in the foregoing to the contrary, for each
Trading Day during the Draw Down Pricing Period that the VWAP is less than the
Threshold Price or is deemed to be below the Threshold Price pursuant to the
immediately preceding sentence, the Purchaser may elect in its sole discretion
to purchase Shares at a price equal to the Threshold Price multiplied by the
Draw Down Discount Percentage at the end of such Draw Down Pricing Period. The
Purchaser will inform the Company via facsimile transmission no later than 8:00
p.m. (eastern time) on the last Trading Day of such Draw Down Pricing Period as
to the number of Shares, if any, the Purchaser chooses to purchase under such
circumstances set forth in this Section 6.1(h).

            (i) The Company must inform the Purchaser via facsimile transmission
as to the Draw Down Amount the Company wishes to exercise before commencement of
trading on the first Trading Day of the Draw Down Pricing Period (the "Draw Down
Notice"), substantially in the form attached hereto as Exhibit C. In addition to
the Draw Down Amount, the Company shall set the Threshold Price with each Draw
Down Notice and shall designate the first Trading Day of the Draw Down Pricing
Period. Notwithstanding anything in the foregoing to the contrary, if the
Company wishes the date of the Draw Down Notice to be the first day of the Draw
Down Pricing Period, the Draw Down Notice must be delivered to the Purchaser and
receipt of such Draw Down Notice confirmed by the Purchaser prior to the
commencement of trading on the date of such Draw Down Notice.

            (j) On each Settlement Date, the Company shall deliver the Shares
purchased by the Purchaser to the Purchaser or to The Depositary Trust Company
("DTC") on the Purchaser's behalf via the Deposit Withdrawal Agent Commission
system ("DWAC"), and upon receipt of the Shares, the Purchaser shall cause
payment therefor to be made to the account designated by the Company by wire
transfer of immediately available funds provided that the Shares are received no
later than 1:00 p.m., eastern time, or next day available funds if the Shares
are received thereafter.

            (k) If during any Draw Down Pricing Period the Company shall enter
into an Other Financing (other than shares of Common Stock issued under this
Agreement or pursuant to a Permitted Transaction), the Purchaser may in its sole
discretion (i) purchase the Draw Down Amount of shares of Common Stock and/or
exercise Call Options granted during such Draw Down Pricing Period on the terms
at which the Company issued shares of Common Stock in the Other Financing during
such Draw Down Pricing Period, net of any third party's discount and fees, (ii)
purchase the Draw Down Amount of shares of Common Stock and/or exercise Call
Options granted during such Draw Down Pricing Period at the applicable Draw Down
Discount Percentage times the VWAP for such Draw Down Pricing Period, or (iii)
elect not to purchase


                                      -20-
<PAGE>   24

any Shares during such Draw Down Pricing Period. The Purchaser shall notify the
Company of its election on the business day preceding the Settlement Date.

            (l) If on the Settlement Date, the Company fails to deliver the
Shares to be purchased by the Purchaser, and such failure continues for ten (10)
Trading Days, the Company shall pay, in cash or restricted shares of Common
Stock, at the option of the Purchaser, as liquidated damages and not as a
penalty to the Purchaser an amount equal to two percent (2%) of the Draw Down
Amount for the initial thirty (30) days and each additional thirty (30) day
period thereafter until such failure has been cured, which shall be pro rated
for such periods less than thirty (30) days (the "Periodic Amount"). Cash
payments to be made pursuant to this clause (1) shall be due and payable
immediately upon demand in immediately available cash funds. Certificates
evidencing the restricted shares of Common Stock shall be delivered immediately
upon demand. The parties agree that the Periodic Amount represents a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of damages that may be incurred by the Purchaser if the Company fails to
deliver the Shares on the Settlement Date. If the Purchaser elects to receive
shares of Common Stock instead of cash, the Purchaser shall have the right to
demand registration once within twelve (12) months of the date of issuance of
such shares of Common Stock and piggyback registration rights if the Company
files a separate registration statement.

            SECTION 6.2 Purchaser's Call Option.

            (a) During each Draw Down Pricing Period, the Company at its sole
discretion may grant to the Purchaser the right to exercise multiple call
options of up to the applicable Draw Down Amount (a "Call Option"). The amount
of the Call Option shall be set forth in the Draw Down Notice. For each Trading
Day during a Draw Down Pricing Period, the Purchaser may exercise a Call Option
by providing notice to the Company of the exercise of a Call Option (the "Call
Option Notice"), substantially in the form attached hereto as Exhibit D.

            (b) The number of shares of Common Stock to be issued in connection
with each Call Option shall equal the quotient of (i) the amount of the Call
Option exercised and (ii) the product of the applicable Draw Down Discount
Percentage and the greater of (A) the VWAP for the Common Stock on the day the
Purchaser issues its Call Option Notice and (B) the Threshold Price.

            (c) Each Call Option exercised shall be settled on the applicable
Settlement Date.

            (d) The Threshold Price designated by the Company in its Draw Down
Notice shall apply to each Call Option.

            (e) For each Call Option that the Purchaser exercises pursuant to
this Section 6.2, the Purchaser must issue via facsimile a Call Option Notice to
the Company no later than 8:00 p.m. (eastern time) on the day such Call Option
is exercised. If the Purchaser does not exercise a Call Option by 8:00 p.m.
(eastern time) on the last day of the applicable Draw Down Pricing Period, the
Purchaser's Call Options with respect to that Draw Down Pricing Period shall
terminate.


                                      -21-
<PAGE>   25

                                   ARTICLE VII

                                   TERMINATION

            SECTION 7.1 Termination by Mutual Consent. The term of this
Agreement shall be the earlier of (i) twenty (20) consecutive months from the
date of execution of this Agreement (the "Investment Period"), (ii) the date
that all of the shares of Common Stock registered under the Registration
Statement have been issued and sold and (iii) the date that the Purchaser has
purchased in the aggregate $50,000,000 pursuant to all Draw Downs issued and
Call Options granted and exercised. This Agreement may be terminated at any time
by mutual consent of the parties.

            SECTION 7.2 Other Termination. The Company shall inform the
Purchaser, and the Purchaser shall have the right to terminate this Agreement
within the subsequent thirty (30) days (the "Event Period"), if (x) the Company
enters into an Other Financing without the prior consent of the Purchaser, which
consent will not be unreasonably delayed, conditioned or withheld, which
provides for (i) the issuance of Common Stock or securities convertible,
exercisable or exchangeable into Common Stock at a discount to the then current
market price of the Common Stock, except for such issuance in a public
underwritten offering, (ii) a mechanism for the reset of the purchase price of
the Common Stock to below the then current market price of the Common Stock, or
(iii) the issuance of Common Stock with warrants, which have an exercise price
such that together with the price of the Common Stock would result in the
issuance of shares of Common Stock at a per share price below the then current
market price of the Common Stock, or (y) an event resulting in a Material
Adverse Effect or Material Change in Ownership has occurred. The Purchaser may
terminate this Agreement upon one (1) day's notice during the Event Period.

            SECTION 7.3 Effect of Termination. In the event of termination by
the Company or the Purchaser, written notice thereof shall forthwith be given to
the other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except as provided in Section 9.9
hereof. Nothing in this Section 7.3 shall be deemed to release the Company or
the Purchaser from any liability for any breach under this Agreement, or to
impair the rights of the Company and the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.


                                  ARTICLE VIII

                                 INDEMNIFICATION

            SECTION 8.1 General Indemnity.

            (a) Indemnification by the Company. The Company will indemnify and
hold harmless the Purchaser, each of its directors, fund managers and officers,
and each person, if any, who controls the Purchaser within the meaning of
Section 15 of the Securities Act or Section


                                      -22-
<PAGE>   26

20(a) of the Exchange Act from and against any losses, claims, damages,
liabilities and expenses (including reasonable costs of defense and
investigation and all reasonable attorneys' fees) to which the Purchaser, each
of its directors, fund managers and officers, and each person, if any, who
controls the Purchaser may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement relating to Common
Stock being sold to the Purchaser (including the any prospectus supplement filed
in connection with the transactions contemplated hereunder (the "Prospectus
Supplement") which are a part of it), or any amendment or supplement to it, or
(ii) the omission or alleged omission to state in that Registration Statement or
any document incorporated by reference in the Registration Statement, a material
fact required to be stated therein or necessary to make the statements therein
not misleading, provided that the Company shall not be liable under this Section
8.1(a) to the extent that a court of competent jurisdiction shall have
determined by a final judgment (with no appeals available) that such loss,
claim, damage, liability or action resulted directly from any such acts or
failures to act, undertaken or omitted to be taken by the Purchaser or such
person through its bad faith or willful misconduct; provided, however, that the
foregoing indemnity shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Purchaser expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto); and provided, further, that with respect to
the Prospectus, the foregoing indemnity shall not inure to the benefit of the
Purchaser or any such person from whom the person asserting any loss, claim,
damage, liability or expense purchased Common Stock, if copies of the Prospectus
were timely delivered to the Purchaser pursuant hereto and a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
the Purchaser or any such person to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Common Stock to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or expense.

        To the extent that the Company is liable for indemnity pursuant to the
foregoing, the Company will reimburse the Purchaser and each such controlling
person promptly upon demand for any legal or other costs or expenses reasonably
incurred by the Purchaser or any controlling person in investigating, defending
against, or preparing to defend against any such claim, action, suit or
proceeding.

            (b) Indemnification by the Purchaser. The Purchaser will indemnify
and hold harmless the Company, each of its directors and officers, and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against any losses,
claims, damages, liabilities and expenses (including reasonable costs of defense
and investigation and all attorneys' fees) to which the Company and each
director, officer and person, if any, who controls the Company may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities and expenses (or actions in respect thereof) arise out of
or are based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any Prospectus or


                                      -23-
<PAGE>   27

Prospectus Supplement or any amendment or supplement to it or (ii) the omission
or alleged omission to state in the Registration Statement or any Prospectus or
Prospectus Supplement or any amendment or supplement to it a material fact
required to be stated therein or necessary to make the statements therein not
misleading, to the extent, but only to the extent, the untrue statement, alleged
untrue statement, omission or alleged omission was made in reliance upon, and in
conformity with, written information furnished by or on behalf of the Purchaser
to the Company for inclusion in the Registration Statement, the Prospectus or
Prospectus Supplement or an amendment or supplement thereto, and the Purchaser
will reimburse the Company and each such director, officer or controlling person
promptly upon demand for any legal or other costs or expenses reasonably
incurred by the Company or the other person in investigating, defending against,
or preparing to defend against any such claim, action, suit or proceeding.

            SECTION 8.2 Indemnification Procedures. Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under paragraph (a) or (b) of Section 8.1, the
person will notify the indemnifying party in writing of the claim or
commencement of the action, suit or proceeding, but failure to notify the
indemnifying party will not relieve the indemnifying party from liability under
paragraph (a) or (b) of Section 8.1, except to the extent it has been materially
prejudiced by the failure to give notice. The indemnifying party will be
entitled to participate in the defense of any claim, action, suit or proceeding
as to which indemnification is being sought, and if the indemnifying party
acknowledges in writing the obligation to indemnify the party against whom the
claim or action is brought pursuant to the terms set forth in Section 8.1(a) or
8.1(b), the indemnifying party may (but will not be required to) assume the
defense against the claim, action, suit or proceeding with counsel satisfactory
to it. After an indemnifying party notifies an indemnified party that the
indemnifying party wishes to assume the defense of a claim, action, suit or
proceeding the indemnifying party will not be liable for any legal or other
expenses incurred by the indemnified party in connection with the defense
against the claim, action, suit or proceeding except that if, in the opinion of
counsel to the indemnifying party, one or more of the indemnified parties should
be separately represented in connection with a claim, action, suit or proceeding
the indemnifying party will pay the reasonable fees and expenses of one separate
counsel for the indemnified parties. Each indemnified party, as a condition to
receiving indemnification as provided in Paragraph (a) or (b) or Section 8.1,
will cooperate in all reasonable respects with the indemnifying party in the
defense of any action or claim as to which indemnification is sought. No
indemnifying party will be liable for any settlement of any action effected
without its prior written consent. No indemnifying party will, without the prior
written consent of the indemnified party, effect any settlement of a pending or
threatened action with respect to which an indemnified party is, or is informed
that it may be, made a party and for which it would be entitled to
indemnification, unless the settlement includes an unconditional release of the
indemnified party from all liability and claims which are the subject matter of
the pending or threatened action.

        If for any reason the indemnification provided for in this Agreement is
not available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability referred to in paragraph (a) or (b) of Section
8.1, each indemnifying party will, in lieu of indemnifying the indemnified
party, contribute to the amount paid or payable by the indemnified party as a
result of the loss or liability, (i) in the proportion which is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and by the indemnified party on the


                                      -24-
<PAGE>   28

other from the sale of stock which is the subject of the claim, action, suit or
proceeding which resulted in the loss or liability or (ii) if that allocation is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits of the sale of stock, but also the relative fault
of the indemnifying party and the indemnified party with respect to the
statements or omissions which are the subject of the claim, action, suit or
proceeding that resulted in the loss or liability, as well as any other relevant
equitable considerations.


                                   ARTICLE IX

                                  MISCELLANEOUS

            SECTION 9.1 Fees and Expenses. The Company shall pay all reasonable
fees and expenses related to the transactions contemplated by this Agreement
incurred by it; provided, that the Company shall pay, at the Closing, all
reasonable attorneys fees and expenses (exclusive of disbursements and
out-of-pocket expenses) incurred by the Purchaser of up to $50,000 in connection
with the preparation, negotiation, execution and delivery of this Agreement. In
addition, the Company shall pay all reasonable fees and expenses incurred by the
Purchaser in connection with any amendments, modifications or waivers of this
Agreement or incurred in connection with the enforcement of this Agreement,
including, without limitation, all reasonable attorneys' fees and expenses,
which amount shall not exceed $10,000 in the aggregate.

            SECTION 9.2 Specific Enforcement, Consent to Jurisdiction.

            (a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.

            (b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of New York for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.

            SECTION 9.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as


                                      -25-
<PAGE>   29

specifically set forth herein, neither the Company nor the Purchaser makes any
representations, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the party against whom enforcement of any such amendment or
waiver is sought.

            SECTION 9.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telecopy or facsimile with
written confirmation at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:


If to the Company:        Aradigm Corporation
                          3929 Point Eden Way
                          Hayward, California 94545
                          Tel. No.:  (510) 265-9000
                          Fax No.:  (510) 265-0277
                          Attention: Richard P. Thomson

With copies to:           Cooley Godward LLP
                          3175 Hanover Street
                          Palo Alto, California 94304-1130
                          Tel. No.:  (650) 843-5000
                          Fax No.:  (650) 849-7400
                          Attention: James C. Kitch


If to the Purchaser:      Acqua Wellington North American
                            Equities Fund, Ltd.
                          c/o Fortis Fund Services (Bahamas) Ltd.
                          Montague Sterling Centre
                          East Bay Street, P. O. Box SS-6238
                          Nassau, Bahamas
                          Tel. No:  (242) 394-2700
                          Fax No.:  (242) 394-9667
                          Attention:  Anthony L.M. Inder Rieden

With copies to:           Parker Chapin LLP
                          The Chrysler Building
                          405 Lexington Avenue
                          New York, NY  10174
                          Tel. No:  (212) 704-6000
                          Fax No:  (212) 704-6288


                                      -26-
<PAGE>   30

                          Attention:  Christopher S. Auguste

        Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the
other party hereto.

            SECTION 9.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.

            SECTION 9.6 Headings. The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.

            SECTION 9.7 Successors and Assigns. The Purchaser may not assign
this Agreement to any person without the prior consent of the Company, which
consent will not be unreasonably withheld. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. The
parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment. After Closing, the assignment by a party to this
Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement.

            SECTION 9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.

            SECTION 9.9 Survival. The representations and warranties of the
Company and the Purchaser contained in Article III and the covenants contained
in Article IV shall survive the execution and delivery hereof and the Closing
until the termination of this Agreement, and the agreements and covenants set
forth in Article VIII of this Agreement shall survive the execution and delivery
hereof and the Closing hereunder.

            SECTION 9.10 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.

            SECTION 9.11 Publicity. The Company shall not issue any press
release or otherwise make any public statement or announcement with respect to
this Agreement or the transactions contemplated hereby or the existence of this
Agreement without the prior written consent of the Purchaser. In the event the
Company is required by law or regulation to issue a


                                      -27-
<PAGE>   31

press release or otherwise make a public statement or announcement with respect
to this Agreement or the transaction contemplated hereby prior to or after the
Closing, the Company shall consult with the Purchaser on the form and substance
of such press release or other disclosure.

            SECTION 9.12 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.

            SECTION 9.13 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.

                                 [END OF PAGE]




                                      -28-
<PAGE>   32

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.


                                         ARADIGM CORPORATION



                                         By: /s/ Norman Halleen
                                            ------------------------------------
                                             Name: Norman Halleen
                                             Title: Chief Financial Officer


                                         ACQUA WELLINGTON NORTH AMERICAN
                                         EQUITIES FUND, LTD.



                                         By: /s/ Anthony L.M. Inder Rieden
                                            ------------------------------------
                                             Name: Anthony L.M. Inder Rieden
                                             Title: Director


<PAGE>   33

                                    EXHIBIT A
                     TO THE COMMON STOCK PURCHASE AGREEMENT

                              OFFICER'S CERTIFICATE

                                NOVEMBER 3, 2000

        The undersigned, Norman Halleen, Vice President, Finance and
Administration and Chief Financial Officer of Aradigm Corporation, a California
corporation (the "Company"), delivers this certificate in connection with the
issuance and sale of shares of common stock of the Company in an aggregate
amount of up to $50,000,000 to Acqua Wellington North American Equities Fund,
Ltd. (the "Purchaser") pursuant to the Common Stock Purchase Agreement, dated
November 3, 2000 (the "Agreement"), by and among the Company and the Purchaser,
and hereby certifies on the date hereof, that (capitalized terms used herein
without definition have the meanings assigned to them in the Agreement):

        1. Attached hereto as ANNEX A is a true, complete and correct copy of
the Amended and Restated Articles of Incorporation of the Company (together with
a copy of the Certificate of Determination of Series A Junior Participating
Preferred Stock of the Company) (the "Articles") as filed with the Secretary of
State of the State of California. The Articles have not been further amended or
restated, and no document with respect to any amendment to the Articles has been
filed in the office of the Secretary of State of the State of California since
November 1, 2000, the date shown on the face of the state certification relating
to the Articles, which is in full force and effect on the date hereof, and no
action has been taken by the Company in contemplation of any such amendment or
the dissolution, merger or consolidation of the Company.

        2. Attached hereto as ANNEX B is a true and complete copy of the Amended
and Restated Bylaws of the Company (the "Bylaws"), as amended and restated
through, and as in full force and effect on the date hereof, and no proposal for
any amendment, repeal or other modification to the Bylaws has been taken or is
currently pending before the Board of Directors or Stockholders of the Company.

        3. Attached hereto as ANNEX C is a true and correct copy of all written
actions and resolutions of the Board of Directors (including any committees
thereof) of the Company relating to the Agreement and the transactions
contemplated by the Agreement; said actions and resolutions have not been
amended, rescinded or modified since their adoption and remain in full force and
effect as of the date hereof; said actions and resolutions are the only
resolutions adopted by the Board of Directors of the Company, or any committee
thereof, pertaining to (A) the offering of the Common Stock to be sold by the
Company pursuant to the Agreement, (B) the execution and delivery of the
Agreement and (C) all other transactions in connection with the foregoing.

        4. Each person who, as an officer of the Company, or as attorney-in-fact
of an officer of the Company, signed (A) the Agreement, (B) the Registration
Statement and (C) any other document delivered prior hereto or on the date
hereof in connection with the transactions contemplated by the Agreement, was
duly elected, qualified and acting as such officer or duly appointed and acting
as such attorney-in-fact, and the signature of each such person appearing on any
such document is his genuine signature.


<PAGE>   34

        5. The Agreement as executed and delivered on behalf of the Company has
been approved by the Company.

        6. The actions, resolutions and other records of the Company relating to
all of the proceedings of the Stockholders of the Company, the Board of
Directors of the Company and any committees thereof made available to the
Purchasers and their counsel are the true, correct and complete copies thereof,
with respect to all proceedings of said Stockholders, Board of Directors and
committees thereof. Such records and other documents of the Company made
available to the Purchaser and their counsel were true and complete in all
respects. There have been no material changes, additions or alterations in said
records and other documents that have not been disclosed to the Purchasers.

        IN WITNESS WHEREOF, I have signed my name as of the date first above
written.

                                      By: /s/ Norman Halleen
                                          --------------------------------------
                                          Norman Halleen
                                          Vice President, Finance and
                                          Administration and Chief Financial
                                          Officer

        I, Richard P. Thompson, President and Chief Executive Officer of Aradigm
Corporation, do hereby certify that Norman Halleen is the duly elected,
qualified and acting Vice President, Finance and Administration and Chief
Financial Officer of the above mentioned company, and that the signature set
forth above is his true and genuine signature.

        IN WITNESS WHEREOF, I have hereunto signed my name as of the date first
above written.

                                       By: /s/ Richard P. Thompson
                                           -------------------------------------
                                           Richard P. Thompson
                                           President and Chief Executive Officer
<PAGE>   35

                                    EXHIBIT B
                     TO THE COMMON STOCK PURCHASE AGREEMENT

                             COMPLIANCE CERTIFICATE

            In connection with the issuance of shares of common stock of Aradigm
Corporation (the "Company") pursuant to the Draw Down Notice, dated ___________
delivered by the Company to Acqua Wellington North American Equities Fund, Ltd.
(the "Purchaser") pursuant to Article VI of the Common Stock Purchase Agreement
dated November __, 2000, by and between the Company and Acqua Wellington North
American Equities Fund, Ltd. (the "Agreement"), the undersigned hereby certifies
as follows:

        1. The undersigned is the duly elected Chief [Executive/Financial]
Officer of the Company.

        2. The representations and warranties of the Company set forth in
Section 3.1 of the Agreement are true and correct in all material respects as
though made on and as of the date hereof, except for representations and
warranties that speak as of a particular date.

        3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Draw Down Exercise
Date and the Settlement Date related to the Draw Down Notice and has complied in
all material respects with all obligations and conditions contained in Section
5.3 of the Agreement.

            Capitalized terms used but not otherwise defined herein shall have
the meanings assigned to them in the Agreement.

            The undersigned has executed this Certificate this _____ day of
_________, 2000.



                              By:_______________________________________

                              Name:_____________________________________

                              Title:____________________________________



<PAGE>   36

                                    EXHIBIT C
                     TO THE COMMON STOCK PURCHASE AGREEMENT

                            FORM OF DRAW DOWN NOTICE

        Reference is made to the Common Stock Purchase Agreement dated as of
November __, 2000 (the "Purchase Agreement") between Aradigm Corporation, a
California corporation (the "Company"), and Acqua Wellington North American
Equities Fund, Ltd. Capitalized terms used and not otherwise defined herein
shall have the meanings given such terms in the Purchase Agreement.

        In accordance with and pursuant to Section 6.1 of the Purchase
Agreement, the Company hereby issues this Draw Down Notice to exercise a Draw
Down request for the Draw Down Amount indicated below.

        Draw Down Amount:_________________________________

        Call Option Amount:_______________________________

        Draw Down Pricing Period start date:______________

        Draw Down Pricing Period end date:________________

        Settlement Date:__________________________________

        Threshold Price:__________________________________

        Minimum Threshold Price:__________________________

        Dollar Amount and/or Number of Shares
        of Common Stock Currently Unissued
        under the Registration Statement:_________________


Dated:_______________

                                    ________________________________

                                    By:________________________________________
                                       Name:
                                       Title:

                                    Address:
                                    Facsimile No.:
                                    Wire Instructions:__________________
                                    Contact Name:_______________________

Receipt Acknowledged:



<PAGE>   37

Acqua Wellington North American Equities Fund, Ltd.

By:____________________________
   Name:
   Title:





<PAGE>   38

                                    EXHIBIT D
                     TO THE COMMON STOCK PURCHASE AGREEMENT

                           FORM OF CALL OPTION NOTICE

To: ______________
Fax #:

        Reference is made to the Common Stock Purchase Agreement dated as of
November __, 2000 (the "Purchase Agreement") between Aradigm Corporation, a
California corporation (the "Company"), and Acqua Wellington North American
Equities Fund, Ltd. Capitalized terms used and not otherwise defined herein
shall have the meanings given such terms in the Purchase Agreement.

        In accordance with and pursuant to Section 6.2 of the Purchase
Agreement, the Purchaser hereby issues this Call Option Notice to exercise a
Call Option for the Call Option Amount indicated below.

        Call Option Amount Exercised:__________________________

        Number of Shares to be purchased:______________________

        VWAP on the date hereof:_______________________________

        Draw Down Discount Percentage:_________________________

        Settlement Date:_______________________________________

        Threshold Price:_______________________________________

        Minimum Threshold Price:_______________________________


Dated:_______________


                              Acqua Wellington North American Equities Fund,
                              Ltd.


                              By:_________________________________
                                 Name:
                                 Title: