EX-10.1






December 12, 2008



Babatunde A. Otulana, M.D.



Dear Tunde:



This letter sets forth the substance of the separation agreement (the “Agreement”) that Aradigm
Corporation (the “Company”) is offering to you to aid in your employment transition.




	 	1.	 	Separation. Your last day of work with the Company and your employment termination
date will be December 31, 2008 (the “Separation Date”).






	 	2.	 	Accrued Salary and Paid Time Off. On the Separation Date, the Company will pay all
accrued salary, and all accrued and unused vacation earned through the Separation Date,
subject to standard payroll deductions and withholdings. You are entitled to these payments
regardless of whether or not you sign this Agreement.






	 	3.	 	Severance Benefits. The Company will make severance payments to you in the amount of
$16,666.67 per month paid over one year following the Separation Date. These payments will
be made on the Company’s ordinary payroll dates, and will be subject to standard payroll
deductions and withholdings.






	 	4.	 	Health Insurance. To the extent provided by the federal COBRA law or, if applicable,
state insurance laws, and by the Company’s current group health insurance policies, you and
your dependents will be eligible to continue your group health insurance benefits. Later,
you may be able to convert to an individual policy through the provider of the Company’s
health insurance, if you wish. If you elected COBRA, the Company will pay COBRA premiums
on your behalf and on behalf of your dependents up to a maximum of twelve (12) months or
until you become eligible for group health insurance coverage through a new employer
(whichever comes first). You must promptly notify the Company in writing if you become
eligible for group health insurance coverage through a new employer during the twelve (12)
months following the Separation Date.






	 	5.	 	Other Compensation or Benefits. Except with respect to any fees earned by you pursuant
to that certain Consulting Agreement for Independent Contractors between you and the
Company dated effective January 1, 2009 and that certain International Scientific Advisory
Agreement between you and the Company dated effective January 1, 2009, you acknowledge
that, except as expressly provided in this Agreement, you will not receive any additional
compensation, severance or benefits after the Separation Date, with the sole exception of
any benefit the right to which has vested under the express terms of a Company benefit plan
document. Notwithstanding the foregoing any stock options and/or restricted stock awards
previously granted to you, including, without limitation, the continued vesting thereof,
will continue to be governed by the plan documents pursuant to which they were granted.






	 	6.	 	Expense Reimbursement. You agree that, within ten (10) days of the Separation Date,
you will submit your final documented expense reimbursement statement reflecting all
business expenses you incurred through the Separation Date, if any, for which you seek
reimbursement. The Company will reimburse you for these expenses pursuant to its regular
business practice.






	 	7.	 	Return of Company Property. You agree that, by the Separation Date, you shall return
to the Company all Company documents (and all copies thereof) and other Company property in
your possession or control, including, but not limited to: Company files, notes, memoranda,
correspondence, agreement, draft documents, notebooks, logs, drawings, records, plans,
proposals, reports, forecasts, financial information, sales and marketing information,
research and development information, personnel information, specifications,
computer-recorded information, tangible property and equipment, credit cards, entry cards,
identification badges, and keys; and any materials of any kind that contain or embody any
proprietary or confidential information of the Company (and all reproductions thereof in
whole or in part).






	 	8.	 	Proprietary Information Obligations. You acknowledge your continuing obligations under
your Proprietary Information and Inventions Agreement (a copy of which was provided to you
separately).






	 	9.	 	Nondisparagement. Both you and the Company’s officers agree not to disparage the other
party, and the other party’s officers, directors, employees, shareholders and agents, in
any manner likely to be harmful to them or their business, business reputation or personal
reputation; provided that both you and the Company will respond accurately and fully to any
question, inquiry or request for information when required by legal process.






	 	10.	 	Release. In exchange for the severance payments, and other consideration under this
Agreement to which you would not otherwise be entitled, you hereby generally and completely
release the Company and its directors, officers, employees, shareholders, partners, agents,
attorneys, predecessors, successors, parent or subsidiary entities, insurers, affiliates
and assigns from any and all claims, liabilities and obligations, both known and unknown,
that arise out of or are in any way related to events, acts, conduct, or omissions prior to
or on the date you sign this Agreement. This general release includes, but is not limited
to: (1) all claims arising out of or in any way related to your employment with the
Company or the termination of that employment; (2) all claims related to your compensation
or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense
reimbursements, severance pay, fringe benefits, stock, stock options or any other ownership
interests in the Company; (3) all claims for breach of contract, wrongful termination or
breach of the implied covenant of good faith and fair dealing; (4) all tort claims,
including claims for fraud, defamation, emotional distress and discharge in violation of
public policy; and (5) all federal, state, and local statutory claims, including claims
for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under
the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities
Act of 1990, or the California Fair Employment and Housing Act (as amended).






	 	11.	 	Release of ADEA Claims. You hereby acknowledge that you are knowingly and voluntarily
waiving and releasing any rights you may have under the ADEA, and that the consideration
given for the foregoing waiver is in addition to anything of value to which you were
already entitled. You have been advised by this writing, as required by the ADEA that:
(a) your waiver and release do not apply to any claims that may arise after your signing of
this Agreement; (b) you should consult with an attorney prior to executing this release;
(c) you have twenty-one (21) days within which to consider this release (although you may
choose to voluntarily execute this release earlier); (d) you have seven (7) days following
the execution of this release to revoke the Agreement; and (e) this Agreement will not be
effective until the eighth day after this Agreement has been signed both by you and by the
Company (“Effective Date”).






	 	 	 	12.




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Section 1542 Waiver. In granting the release herein, which includes claims which may be
unknown to you at present, you acknowledge that you have read and understand Section 1542 of
the California Civil Code: “A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of executing the release, which
if known by him must have materially affected his settlement with the debtor.” You hereby
expressly waive and relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to your release of any unknown or unsuspected
claims herein.




	 	13.	 	Miscellaneous. This Agreement, including Exhibit A, constitutes the complete, final
and exclusive embodiment of the entire agreement between you and the Company with regard to
this subject matter. It is entered into without reliance on any promise or representation,
written or oral, other than those expressly contained herein, and it supersedes any other
such promises or representations. This Agreement may not be modified or amended except in
a writing signed by both you and a duly authorized officer of the Company. This Agreement
will bind the heirs, personal representatives, successors and assigns of both you and the
Company, and insure to the benefit of both you and the Company, their heirs, successors and
assigns. The failure to enforce any breach of this Agreement shall not be deemed to be a
waiver of any other or subsequent breach. For purposes of construing this Agreement, any
ambiguities shall not be construed against either party as the drafter. If any provision
of this Agreement is determined to be invalid or unenforceable, in whole or in part, this
determination will not affect any other provision of this Agreement and the provision in
question will be modified by the court so as to be rendered enforceable in a manner
consistent with the intent of the parties insofar as possible. This Agreement will be
deemed to have been entered into and will be construed and enforced in accordance with the
laws of the State of California as applied to contacts made and to be performed entirely
within California. This agreement may be executed in counterparts which shall be deemed to
be part of one original, and facsimile signatures shall be equivalent to original
signatures.





If this Agreement is acceptable to you, please sign below and return the original to me.



I wish you good luck in your future endeavors.



Sincerely,



ARADIGM CORPORATION



By:      /s/ Igor Gonda     Date:      12/12/08

Igor Gonda

President and CEO




AGREED:



	 	 	 
	     /s/ Babatunde Otulana     

	 	Date:      12/12/08
	 

	 	 
	Babatunde A. Otulana, M.D.

	 	








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