Document:

exv10w20

 

Exhibit 10.20

PROMISSORY NOTE AND

SECURITY AGREEMENT

			
	 	 	 
	$7,500,000.00
	 	July 3, 2006

     FOR VALUE RECEIVED, ARADIGM CORPORATION, a California corporation (with its successors, the
“Borrower”), promises to pay to the order of NOVO NORDISK A/S (the “Lender”) at its office at Novo
Allé 1, DK-2880 Bagsværd, Denmark, in lawful money of the United States of America in same day
funds, US$7,500,000 (the “Loan”; and this Promissory Note and Security Agreement, as amended from
time to time, the “Agreement”), in accordance with the payment schedule attached hereto. The Loan
shall mature on June 30, 2014. Interest shall accrue on the unpaid principal amount of the Loan
until maturity on the dates and at a rate per annum as hereinafter set forth. Interest hereunder
shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed
(including the first day but excluding the last day).

     1. Certain Definitions. As used herein, the following terms have the following meanings:

     “Applicable Law” means, with respect to any Person, any federal, state or local law
(statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule,
regulation, order, injunction, judgment, decree, ruling or other similar requirement
enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon
or applicable to such Person, as amended.

     “Collateral” has the meaning set forth in Section 6.

     “Governmental Authority” means any transnational, domestic or foreign federal, state
or local, governmental authority, department, court, agency or official, including any
political subdivision thereof.

     “License Agreement” means the Amended and Restated License Agreement dated as of
January 26, 2005 between Borrower and Lender, as amended from time to time.

 

 

     “Lien” means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest, encumbrance or other adverse claim of any kind in respect of
such property or asset.

     “Permitted Liens” means:

     (i) Liens imposed by law for taxes, fees, assessments or other governmental
charges or levies that are not yet due or are being contested in good faith by
appropriate proceedings;

     (ii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s,
landlord’s and other like Liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 30 days or
are being contested in good faith by appropriate proceedings;

     (iii) pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations;

     (iv) judgment liens in respect of judgments that do not constitute an Event
of Default under Section 8 hereof;

     (v) Liens arising solely by virtue of any statutory or common law provision
or granted to banks in the ordinary course of business relating to banker’s
Liens, rights of set-off or similar rights and remedies as to deposit accounts or
other funds maintained with a creditor depository institution;

     (vi) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of customs duties in connection with the importation of
goods;

     (vii) Liens consisting of cash collateral securing, and in an amount not to
exceed the undrawn amount of, any letter of credit;

     (viii) Liens solely on deposits, advances, contractual payments, including
implementation allowances or escrows made or paid by Borrower to or with
customers or clients in the ordinary course of business; and

     (ix) Liens that are expressly subordinate to the Transaction Lien, and for
which the documentation evidencing such express subordination has been approved
by Lender, such approval not to be unreasonably withheld.

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     “Person” means an individual, corporation, partnership, limited liability company,
association, trust or other entity or organization, including a Governmental Authority.

     “Transaction Lien” means the Lien on the Collateral granted by Borrower to Lender
under this Agreement.

     “UCC” means the Uniform Commercial Code as in effect from time to time in the State
of New York; provided that, if perfection or the effect of perfection or non-perfection or
the priority of the Transaction Lien on any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York, “UCC” means the
Uniform Commercial Code as in effect from time to time in such other jurisdiction for
purposes of the provisions hereof relating to such perfection, effect of perfection or
non-perfection or priority.

     2. Interest Rate; Additional Amounts. (a) The Loan shall bear interest at a rate per annum
equal to 5.0%, compounded annually; provided that, in the case of any overdue amounts of principal
or interest, Borrower shall pay interest, on demand by Lender, at a rate per annum equal to 9.5%.

     (b) Principal and interest shall be payable in three equal payments of $3,513,566.58, on each
of July 2, 2012, July 1, 2013 and June 30, 2014, aggregating $10,540,699.74, calculated as set
forth on Schedule A attached hereto.

     (c) Taxes. Borrower will pay all amounts due hereunder free and clear of and without
reduction for any taxes, levies, imposts, deductions, withholding or charges imposed or levied by
the United States, Denmark or any political subdivision or taxing authority thereof with respect
thereto (“Taxes”). Borrower will pay on behalf of Lender all such Taxes so imposed or levied and
any additional amounts as may be necessary so that the net payment of principal and interest
payable under this Agreement received by Lender after payment of all such Taxes shall be not less
than the full amount provided hereunder. Borrower will deliver to Lender originals or certified
copies of official receipts evidencing the payment of any Taxes within 45 days following the day on
which payment of such Taxes is due pursuant to Applicable Law.

     3. Prepayments. Borrower will have the right at any time to prepay the Loan in whole or in
part.

     4. General Provisions Regarding Payments. Borrower will pay all amounts due hereunder without
set-off or counterclaim, at the place for payment specified above in U.S. dollars available the
same day in the city in which such place for payment is located. Borrower hereby waives diligence,
presentment, demand, protest and notice of any kind whatsoever.

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     5. Representations and Warranties. Borrower represents and warrants to Lender that:

     (a) Borrower is a duly organized and existing corporation incorporated under the laws
of California and is duly authorized to borrow hereunder, and to enter into, deliver and
perform this Agreement, which constitutes a valid and binding obligation of Borrower,
enforceable in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy laws and by general equitable principles (whether enforcement is
sought by proceedings in equity or law);

     (b) none of the making of this Agreement, the borrowing hereunder, the grant of the
Transaction Lien hereunder or the performance by Borrower of its obligations hereunder
will violate any provision of law or any agreement, indenture, note or other instrument
binding upon Borrower or any of its subsidiaries or its certificate of incorporation or
by-laws or other constitutional documents or give cause for acceleration of any
indebtedness of Borrower or any of its subsidiaries;

     (c) no authority from or approval by any Governmental Authority is required in
connection with the making or validity of and the execution, delivery and performance of
this Agreement or borrowing hereunder;

     (d) Borrower has not performed any acts that would reasonably be expected to prevent
Lender from enforcing any of the provisions of this Agreement, or that would limit Lender
in any such enforcement. The Collateral is free and clear of any lien, security interest,
encumbrance or other adverse claim of any kind, and no financing statement, security
agreement or similar or equivalent document or instrument covering all or part of the
Collateral is on file or of record in any jurisdiction in which such filing or recording
would be effective to perfect or record a Lien on such Collateral;

     (e) the security interest in the Collateral owned by Borrower has been validly
created, will attach to such Collateral on the date hereof and when so attached will
secure all of Borrower’s obligations under this Agreement;

     (f) the balance sheet of Borrower as of March 31, 2006 and the related statements of
income and cash flows for the period then ended, as filed with the U.S. Securities and
Exchange Commission on May 15, 2006, are complete in all material respects and correct in
all material respects and fairly present the financial condition and results of operations
of Borrower as at such date and since such date there has been no material

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adverse change in the financial condition, business, results of operations or
prospects of Borrower from that reflected in said financial statements;

     (g) there are no actions, suits or proceedings pending against or, to the knowledge
of Borrower, threatened against or affecting, Borrower, in any court or before or by any
Governmental Authority, an adverse decision in which could materially and adversely affect
the financial condition, business or operations of Borrower or the ability of Borrower to
perform its obligations under this Agreement;

     (h) Within five (5) days of the date hereof, Borrower will furnish to Lender a file
search report from each UCC filing office listed on Schedule C attached hereto, showing
the filing made at such filing office to perfect the Transaction Lien on its Collateral;

     (i) When UCC financing statements describing the Collateral have been filed in the
offices specified on Schedule B attached hereto, the Transaction Lien will constitute a
perfected security interest in the Collateral owned by Borrower to the extent that a
security interest therein may be perfected by filing pursuant to the UCC, prior to all
liens and rights of others therein except Permitted Liens; and

     (j) Borrower is in compliance in all material respects with all Applicable Law,
except to the extent such noncompliance would not reasonably be expected to cause a
material adverse effect on the financial condition, business or operations of Borrower or
the ability of Borrower to perform its obligations under this Agreement.

     6. Grant of Security Interest. In order to secure the full and punctual payment and
performance of all principal, interest and other amounts payable, now or hereafter, under this
Agreement, Borrower grants to Lender a continuing security interest in any and all royalties
payable by Lender to Borrower under Sections 5.01 and 10.05 of the License Agreement, whether now
or hereafter payable, and all proceeds thereof (the “Collateral”).

     7. Covenants. So long as any amount is outstanding under this Agreement, Borrower agrees
that:

     (a) Borrower will, from time to time, at Borrower’s expense, execute, deliver, file
and record any statement, assignment, instrument, document, agreement or other paper and
take any other action (including any filing of financing or continuation statements under
the UCC) that from time to time may be necessary, or that Lender may reasonably request,
in order to (i) create, preserve, perfect, confirm or validate the Transaction Lien on the
Collateral; (ii) enable Lender to obtain the full

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benefits of this Agreement; or (iii) enable Lender to exercise and enforce any of its
rights, powers and remedies with respect to the Collateral.

     To the extent permitted by Applicable Law, Borrower authorizes Lender to execute and file such
financing statements or continuation statements without Borrower’s signature appearing thereon.
Borrower agrees that a carbon, photographic, photostatic or other reproduction of this Agreement or
of a financing statement is sufficient as a financing statement.

     (b) Borrower will not (i) change its name or corporate structure, (ii) change its
location (determined as provided in UCC Section 9-307) or (iii) become bound, as provided
in UCC Section 9-203(d) or otherwise, by a security agreement entered into by another
Person with respect to the Collateral, unless it shall have given Lender at least 10 days’
prior notice thereof.

     (c) Borrower will not sell, assign or otherwise dispose of, or grant any rights with
respect to, the Collateral, except for Permitted Liens.

     (d) Borrower will not consolidate or merge with or into any other person or entity,
except for any consolidation or merger in which Borrower’s shareholders immediately prior
to such consolidation or merger hold a majority of the outstanding shares and voting power
of the resulting entity immediately following such consolidation or merger, or sell, lease
or otherwise transfer, directly or indirectly, all or substantially all of the assets of
Borrower and its subsidiaries, taken as a whole, to any other person or entity; provided,
however, that Borrower shall not be prohibited from any such transaction which results in
the retention by Borrower of assets (including intellectual property and other general
intangibles) that it utilizes in its ongoing operating business and which Lender
reasonably agrees will provide sufficient value, taking into account Borrower’s remaining
liabilities, including contingent liabilities, to allow Borrower to perform its
obligations under this Agreement.

     (e) No part of the proceeds of the Loan hereunder will be used, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate of buying or
carrying any “margin stock” within the meaning of Regulation U or X.

     8. Events of Default. If any of the following events (“Events of Default”) shall occur and be
continuing:

     (a) Borrower shall fail to make payment when due of any principal of or interest on
the Loan;

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     (b) any representation or warranty made by Borrower in this Agreement shall prove to
have been incorrect in any material respect when made;

     (c) Borrower shall fail to observe or perform any covenant contained in this
Agreement and such failure shall continue unremedied for thirty (30) calendar days
following written notice thereof from Lender to Borrower;

     (d) Borrower shall become insolvent (however such insolvency may be evidenced) or
proceedings are instituted by or against Borrower under the United States Bankruptcy Code
or under any bankruptcy, reorganization or insolvency law or other law for the relief of
debtors; and, in the case of proceedings instituted against Borrower, such proceedings
continue undismissed or unstayed for a period of sixty (60) calendar days;

     (e) a judgment or order for the payment of money which in the aggregate at any one
time exceeds $2.5 million shall be entered or filed against Borrower by a court of
competent jurisdiction, and the same is not released, discharged, bonded against or stayed
pending appeal within thirty (30) days after the date it first arises; or

     (f) there shall be a default under any debt of Borrower or under any mortgage,
indenture or other instrument under which there may be issued or by which there may be
secured or evidenced any debt of Borrower, if the effect of such default results in the
payees of any such debt at any one time aggregating in excess of $2.5 million in principal
amount declaring such debt to become due and payable prior to its stated maturity, or
failure by Borrower to pay when due any debt of Borrower aggregating in excess of $2.5
million which default, declaration of acceleration of such debt, or failure to pay when
due such debt has not been irrevocably waived or otherwise remains uncured for fourteen
(14) calendar days;

     then, in the case of any of the Events of Default specified above, Lender may, by written
notice to Borrower, declare the Loan to be forthwith due and payable, together with accrued
interest, whereupon the same shall become forthwith due and payable, without demand, protest,
presentment, notice of dishonor or any other notice or demand whatsoever, all of which are hereby
waived by Borrower; provided that in the case of the Event of Default specified in clause (d)
above, without any notice to Borrower or any other act of Lender, the Loan shall become forthwith
due and payable, together with accrued interest, without demand, protest, presentment, notice of
dishonor or any other notice or demand whatsoever, all of which are hereby waived by Borrower.

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     9. Application of Proceeds. If an Event of Default shall have occurred and be continuing,
Lender may apply the proceeds of any sale or other disposition of all or any part of the
Collateral, in the following order of priorities:

     first, to pay the expenses of such sale or other disposition, including reasonable
compensation to agents of and counsel for Lender, and all expenses, liabilities and
advances incurred or made by Lender in connection with this Agreement;

     second, to pay the unpaid principal of the Loan ratably, until payment in full of the
principal of the Loan shall have been made;

     third, to pay ratably all interest (including any interest that accrues after
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of Borrower (or would accrue but for the operation of
applicable bankruptcy or insolvency laws), whether or not such interest is allowed or
allowable as a claim in any such proceeding) on the Loan payable under this Agreement,
until payment in full of all such interest and fees shall have been made; and

     finally, to pay to Borrower, or as a court of competent jurisdiction may direct, any
surplus then remaining from the proceeds of the Collateral owned by it.

     10. Expenses; Indemnity. Borrower shall pay (i) all reasonable out-of-pocket expenses of
Lender in connection with the enforcement of this Agreement, any waiver or consent hereunder or any
amendment hereof or any Event of Default or alleged Event of Default hereunder and (ii) if an Event
of Default occurs, all reasonable out-of-pocket expenses incurred by Lender, including (without
duplication) the reasonable fees and disbursements of outside counsel in connection with such Event
of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom. Without limitation of the foregoing, Borrower agrees to indemnify Lender, its
affiliates and the respective directors, officers, agents and employees of the foregoing (each an
“Indemnitee”) and hold each Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and reasonable expenses of any kind, including, without limitation, the reasonable
fees and disbursements of counsel and settlement costs, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of
this Agreement or any actual or proposed use of proceeds of the Loan made hereunder; provided that
no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee’s own gross
negligence or willful misconduct. Borrower shall also pay all reasonable attorneys’ fees and costs
and court costs incurred by Lender in enforcing the indemnification provided for in this Section.
Notwithstanding the foregoing, Borrower expressly agrees and

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acknowledges that the right of indemnification granted herein to Lender shall not be deemed to
be the exclusive remedy available to Lender for any of the matters described in this Section.

     11. Termination of Transaction Lien. The Transaction Lien granted by Borrower shall terminate
upon the payment in full of all obligations under this Agreement. Upon the termination of the
Transaction Lien, Lender will, at the expense of Borrower, execute and deliver to Borrower such
documents as Borrower shall reasonably request to evidence the termination of the Transaction Lien.

     12. Notices. All notices and other communications required or permitted hereunder shall be
effective upon receipt and shall be in writing and may be delivered in person, by telecopy,
electronic mail, overnight delivery service or by mail, in which event it may be mailed by
first-class, certified or registered, postage prepaid, addressed at its address set forth below, or
at such other address as a party shall have furnished in writing:

     If to Borrower:

Aradigm Corporation

3929 Point Eden Way

Hayward, California 94545

U.S.A.

Attention: Chief Financial Officer

Telephone: +1 510-265-9000

Telefax: +1 510-265-0277

     If to Lender:

Novo Nordisk A/S

Novo Allé 1

DK-2880 Bagsværd

Denmark

Attention: General Counsel

Telephone: +45 44 44 88 88

Telefax: +45 44 42 41 35

     13. Assignments. This Agreement shall be binding upon Borrower and its successors and assigns
and is for the benefit of Lender and its successors and assigns, except that Borrower may not
assign or otherwise transfer its rights or obligations under this Agreement.

     14. Miscellaneous. (a) Any waiver of any kind or character on the part of Lender in respect
of this Agreement must be in writing and shall be effective

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only to the extent specifically set forth in such writing and (b) any notice to be given under
this Agreement shall be in writing and shall be deemed to have been duly given when received by the
recipient. No delay on the part of Lender in exercising any of its powers or rights, and no
partial or single exercise, shall constitute a waiver thereof.

     15. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS
PROVISIONS. BORROWER HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK
CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT. BORROWER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH BORROWER MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURT AND ANY
CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF LENDER AND BORROWER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

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

	 	 	 	 	 
	 	ARADIGM CORPORATION

 	 
	 	By:  	/s/ Babatunde A. Otulana
 	 
	 	 	Name:  	Babatunde A. Otulana 	 
	 	 	Title:  	Senior Vice President, Development 	 
	 

	 	 	 	 	 
	 	NOVO NORDISK A/S

 	 
	 	By:  	/s/ Jasper Brandgaard
 	 
	 	 	Name:  	Jasper Brandgaard 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

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Schedule A

	 	 	 	 	 	 	 
	Notional
	 	 	7,500,000.00	 	 	USD
	Nom. interest rate
	 	 	5.00	%	 	p.a.
	Start date
	Monday, July 03, 2006	 	 	 
	To be paid back from
	Monday, July 02, 2012	 	 	 
	Payment tenor
	 	 	3	 	 	years
	Payment frequency
	Annually	 	 	 
	Amortization type
	Annuity	 	 	 
	Day convention
	 	 	360/360	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Principal	 	Total
	Date	 	Days	 	Principal	 	Interest	 	payment	 	payment
	Monday, July 03, 2006
	 	 	 	 	 	 	7,500,000.00	 	 	 	 	 	 	 	 	 	 	 	 	 
	Saturday, June 30, 2007
	 	 	357	 	 	 	7,871,875.00	 	 	 	371,875.00	 	 	 	 	 	 	 	 	 
	Monday, June 30, 2008
	 	 	360	 	 	 	8,265,468.75	 	 	 	393,593.75	 	 	 	 	 	 	 	 	 
	Tuesday, June 30, 2009
	 	 	360	 	 	 	8,678,742.19	 	 	 	413,273.44	 	 	 	 	 	 	 	 	 
	Wednesday, June 30, 2010
	 	 	360	 	 	 	9,112,679.30	 	 	 	433,937.11	 	 	 	 	 	 	 	 	 
	Thursday, June 30, 2011
	 	 	360	 	 	 	9,568,313.26	 	 	 	455,633.96	 	 	 	 	 	 	 	 	 
	Monday, July 02, 2012
	 	 	362	 	 	 	6,535,820.21	 	 	 	481,073.53	 	 	 	3,032,493.05	 	 	 	3,513,566.58	 
	Monday, July 01, 2013
	 	 	359	 	 	 	3,348,136.89	 	 	 	325,883.26	 	 	 	3,187,683.32	 	 	 	3,513,566.58	 
	Monday, June 30, 2014
	 	 	359	 	 	 	1,512.14	 	 	 	166,941.83	 	 	 	3,346,624.75	 	 	 	3,513,566.58	 
	 
	Total 2012-2014
	 	 	 	 	 	 	 	 	 	 	973,898.61	 	 	 	9,566,801.13	 	 	 	10,540,699.74	 
	Total 2006-2014
	 	 	 	 	 	 	 	 	 	 	3,042,211.87	 	 	 	9,566,801.13	 	 	 	10,540,699.74	 

 

 

Schedule B

List of all UCC filing offices in which a financing statement relating to the Collateral will be
filed. 

Secretary of State of the State of Californiaexv10w21

 

[ **** ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange Commission
pursuant to Rule 406 of the Securities Act of 1933, as amended.

Exhibit 10.21

ASSET PURCHASE AGREEMENT

BY AND BETWEEN

ARADIGM CORPORATION.

AND

SJ2 THERAPEUTICS, INC.

Dated as of August 25, 2006

 

Table of Contents

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	ARTICLE I     DEFINITIONS	 	 	1	 
	Section 1.01
	 	Certain Definitions	 	 	1	 
	Section 1.02
	 	Additional Definitions	 	 	5	 
	ARTICLE II     ASSIGNMENT, TRANSFER AND LICENSE	 	 	6	 
	Section 2.01
	 	Assignment of Assigned Assets to Purchaser	 	 	6	 
	Section 2.02
	 	Asset Transfer	 	 	6	 
	Section 2.03
	 	Coordination Leads	 	 	6	 
	Section 2.04
	 	Transitional Services	 	 	6	 
	Section 2.05
	 	Assumption of Liabilities	 	 	7	 
	Section 2.06
	 	Consideration	 	 	7	 
	Section 2.07
	 	Closing, Closing Place, Time and Date	 	 	9	 
	Section 2.08
	 	Nontransferable Assets	 	 	10	 
	Section 2.10
	 	Taking of Necessary Action; Further Action	 	 	11	 
	ARTICLE III     REPRESENTATIONS AND WARRANTIES OF ARADIGM	 	 	11	 
	Section 3.01
	 	Organization, Qualification, and Corporate Power	 	 	11	 
	Section 3.02
	 	Authorization	 	 	12	 
	Section 3.03
	 	Assets	 	 	12	 
	Section 3.04
	 	Transferred Books and Records	 	 	12	 
	Section 3.05
	 	Transferred Contracts	 	 	12	 
	Section 3.06
	 	Transferred Intellectual Property	 	 	13	 
	ARTICLE IV     REPRESENTATIONS AND WARRANTIES OF PURCHASER	 	 	14	 
	Section 4.01
	 	Organization, Qualification, and Corporate Power	 	 	14	 
	Section 4.02
	 	Authorization	 	 	15	 
	ARTICLE V     OTHER AGREEMENTS AND COVENANTS	 	 	15	 
	Section 5.01
	 	Additional Documents and Further Assurances	 	 	15	 
	Section 5.02
	 	Reasonable Cooperation of Purchaser	 	 	15	 
	Section 5.03
	 	Reasonable Efforts	 	 	15	 
	Section 5.04
	 	Indemnification	 	 	15	 

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	 	 	 	 	Page	 
	ARTICLE VI     MISCELLANEOUS	 	 	17	 
	Section 6.01
	 	Press Releases and Public Announcements	 	 	17	 
	Section 6.02
	 	No Third-Party Beneficiaries	 	 	17	 
	Section 6.03
	 	Force Majeure	 	 	17	 
	Section 6.04
	 	Limitation of Liability	 	 	17	 
	Section 6.05
	 	Entire Agreement and Modification	 	 	17	 
	Section 6.06
	 	Amendment	 	 	18	 
	Section 6.07
	 	Waivers	 	 	18	 
	Section 6.08
	 	Successors and Assigns	 	 	18	 
	Section 6.09
	 	Counterparts	 	 	18	 
	Section 6.10
	 	Interpretation	 	 	18	 
	Section 6.11
	 	Notices	 	 	19	 
	Section 6.12
	 	Governing Law	 	 	20	 
	Section 6.13
	 	Severability	 	 	20	 
	Section 6.14
	 	Construction	 	 	20	 
	Section 6.15
	 	Attorneys’ Fees	 	 	20	 
	Section 6.16
	 	Further Assurances	 	 	20	 

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EXHIBITS

	 	 	 
	EXHIBIT A

	 	Transferred Assets (including Transferred Technology)
	 
	 	 
	EXHIBIT B

	 	Transferred Books and Records
	 
	 	 
	EXHIBIT C

	 	Transferred Contracts
	 
	 	 
	EXHIBIT D

	 	Transferred Intellectual Property
	 
	 	 
	EXHIBIT E

	 	General Assignment and Bill of Sale
	 
	 	 
	EXHIBIT F

	 	Assumed Liabilities
	 
	 	 
	EXHIBIT G

	 	Transfer Plan
	 
	 	 
	EXHIBIT H

	 	Transitional Services Agreement
	 
	 	 
	EXHIBIT I

	 	Intraject Delivery System
	 
	 	 
	EXHIBIT J

	 	Nontransferable Assets

 

 

ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of August 25,
2006 by and between Aradigm Corporation, a California corporation (“Aradigm”), and SJ2
Therapeutics, Inc., a Delaware corporation (“Purchaser”). Aradigm and Purchaser are sometimes
referred to herein individually as a “Party” and collectively as the “Parties.”

RECITALS

     A. Aradigm desires to assign and transfer to Purchaser, and Purchaser desires to accept
assignment and transfer from Aradigm, on the terms and subject to the conditions set forth herein,
those certain assets of Aradigm related to the Intraject Delivery System.

     B. Furthermore, Aradigm and Purchaser desire to make certain representations, warranties,
covenants and other agreements in connection with the transactions contemplated hereby.

     NOW, THEREFORE, in consideration of the covenants and representations set forth herein, and
for other good and valuable consideration, the parties agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.01 Certain Definitions. As used in this Agreement, the following terms have
the following meanings (terms defined in the singular to have a correlative meaning when used in
the plural and vice versa). Certain other terms are defined in the text of this Agreement.

     (a) “Affiliate” means a corporation or any other entity that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common control with, the
designated Party, but only for so long as such control exists. As used in this definition only,
“control” shall mean ownership of shares of stock having at least 50% of the voting power entitled
to vote for the election of directors in the case of a corporation (or, in the case of an entity
that is not a corporation, in the election of the corresponding managing authority), or otherwise
having the power to directly or indirectly control the management of such entity.

     (b) “Assigned Assets” shall mean any and all of Aradigm’s right, title and interest in and to
the following:

          (i) any and all tangible assets owned or otherwise transferable by Aradigm as of the Closing
Date, in each case to the extent exclusively used or held for use in the Business, including those
assets listed on Exhibit A (collectively, “Transferred Assets”);

          (ii) the Books and Records listed on Exhibit B (collectively, “Transferred Books and
Records”);

1.

 

          (iii) all agreements listed on Exhibit C (collectively, “Transferred Contracts”);

          (iv) all Patents (including in each case all rights to Prosecute and Enforce the same) listed
on Exhibit D (collectively, “Transferred Patents”);

          (v) all Trademarks (including in each case all rights to Prosecute and Enforce the same)
listed on Exhibit D (collectively, “Transferred Trademarks”);

          (vi) any and all Technology owned or otherwise transferable by Aradigm as of the Closing Date,
other than the Transferred Patents and Transferred Trademarks, in each case to the extent
exclusively used or held for use in the Business, including that Technology listed on Exhibit
A (collectively, “Transferred Technology”); and

          (vii) any and all right to recover past, present and future damages for the breach,
infringement or misappropriation, as the case may be, of any of the foregoing.

     (c) “Books and Records” shall mean all papers and records (in any format including paper or
electronic) kept or maintained including any and all laboratory notebooks, invention disclosures,
purchasing and sales records, all data and communications relating to ongoing business development
activities, preclinical and clinical data, all Regulatory Documents, vendor lists, accounting and
financial records, product documentation, product specifications, marketing documents and the like,
in each case pertaining to the Business or the Assigned Assets.

     (d) “Business” shall mean the research, development, commercialization, manufacture,
marketing, distribution, sale, support and other use and commercial exploitation of the Intraject
Delivery System.

     (e) “Business Intellectual Property” shall mean any and all Technology and any and all
Intellectual Property Rights, including Registered Intellectual Property Rights, that is or are
owned (in whole or in part) by or exclusively licensed to Aradigm, as of the Closing Date, in each
case that are used in or necessary to the Business.

     (f) “Dollars” shall refer to United States currency unless expressly specified otherwise.

     (g) “Governmental Body” shall mean any: (i) nation, province, state, county, city, town,
village, district, or other jurisdiction of any nature; (ii) federal, provincial, state, local,
municipal, foreign, or other government; (iii) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or entity and any court or
other tribunal); (iv) multi-national organization or body; or (v) body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.

     (h) “Intraject Delivery System” shall mean Aradigm’s Intraject® needle-free injection delivery
system as more fully described in Exhibit I (the “Existing Delivery System”)

2.

 

or any modified, improved or derivative version thereof, in each case that includes one or
more material elements of the Existing Delivery System.

     (i) “Intellectual Property Rights” shall mean any or all of the following and all rights in,
arising out of, or associated therewith: (i) all United States and foreign patents and utility
models and applications therefor and all reissues, divisionals, re examinations, renewals,
extensions, provisionals, supplementary protection certificates, continuations and continuations
in-part thereof, and equivalent or similar registered rights anywhere in the world (“Patents”);
(ii) all trade secrets and other rights in know-how and confidential or proprietary information,
inventions and discoveries, including without limitation invention disclosures; (iii) all
copyrights, works of authorship, copyright registrations and applications therefor and all other
rights corresponding thereto throughout the world (“Copyrights”); (iv) all rights in Uniform
Resource Locators, World Wide Web addresses and domain names and applications and registrations
therefor (“Internet Property Rights”); (v) all trade names, logos, common law trademarks and
service marks, trademark and service mark registrations and applications therefor and all goodwill
associated therewith throughout the world (“Trademarks”); and (vi) any similar, corresponding or
equivalent rights to any of the foregoing anywhere in the world, including, without limitation,
moral rights.

     (j) “Licensee” shall mean a Person other than an Affiliate to whom Purchaser or its Affiliate
has granted the right, or to whom such a Person has sublicensed the right, to (i) make and sell any
Product or (ii) sell any Product, provided that distributors, wholesalers and resellers as to which
Purchaser does not receive compensation on resales of Products by such entity shall not be
considered Licensees.

     (k) “Lien” shall mean any mortgage, pledge, lien, charge, claim, security interest, adverse
claims of ownership or use, restrictions on transfer, defect of title or other encumbrance of any
sort, other than (i) mechanic’s, materialmen’s, and similar liens with respect to any amounts not
yet due and payable, and (ii) liens for taxes not yet due and payable.

     (l) “Net Sales” shall mean the amounts actually received by Purchaser, its Affiliates, or
Licensees, in consideration of their sales of Product to Third Party customers, less: (i) normal
and customary trade, cash and other discounts; (ii) credits or allowances for damaged goods,
returns, rejections or recalls of Product; (iii) sales taxes, value added taxes, withholding,
import/export taxes or other similar taxes (excluding taxes on the income of the selling entity)
actually paid; (iv) normal and customary charge back payments or rebates; and (v) packaging,
handling fees, prepaid freight, insurance and the like to the extent separately identified on the
invoice. Sales between or among Purchaser, its Affiliates or Licensees for resale shall be
excluded from the computation of Net Sales, but the subsequent re sale of such Products by
Purchaser, its Affiliates or Licensees to an end user shall be included within the computation of
Net Sales. Net Sales shall not include amounts in respect of Product sold or used for development
applications (including for clinical trials) or commercial samples (i.e., items provided for free
or at or below cost plus a nominal profit for promotional purposes).

     (m) “Nontransferable Asset” shall have the meaning ascribed to the term in Section 9.

3.

 

     (n) “Non-Sumatriptan Product” shall mean any Product comprising the Intraject Delivery System
combined with an applicable drug formulation, other than Sumatriptan.

     (o) “Person” shall mean any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, Governmental Body or other entity.

     (p) “Product” shall mean any pharmaceutical product comprising the Intraject Delivery System
combined with Sumatriptan or other applicable drug formulation.

     (q) “Prosecution and Enforcement” shall mean (i) the preparation, filing for, prosecution,
maintenance of registrations thereof and applications for any such registration (ii) the conduct of
interferences, re examinations, reissues, oppositions or requests for term extensions with respect
thereto and (iii) the conduct of any enforcement proceeding with respect thereto (whether
infringement, misuse, misappropriation or otherwise) or any declaratory judgment proceeding with
respect thereto; and “Prosecute and Enforce” shall have the correlative meaning.

     (r) “Pulmonary Field” shall mean the delivery of one or more aerosolized active pharmaceutical
ingredients directly into the bronchia or lungs.

     (s) “Registered Intellectual Property Rights” shall mean all United States, international and
foreign: (i) Patents, including applications therefor (each a “Registered Patent”); (ii) registered
Trademarks, applications to register Trademarks, including intent-to use applications, or other
registrations or applications related to Trademarks; (iii) Copyright registrations and applications
to register Copyrights; and (iv) any other Technology or Intellectual Property Rights that is the
subject of an application, certificate, filing, registration or other document issued by, filed
with, or recorded by, any state, government or other public or private legal authority at any time.

     (t) “Regulatory Documents” shall mean any and all regulatory submissions (whether completed or
in process) to any Governmental Body anywhere in the world submitted by or on behalf of Aradigm
relating to the Business (including any product developed in connection therewith), including all
annual reports, adverse event reports, and other adverse event submission tracking information, and
amendments and supplements to any of the foregoing. For purposes of clarity, “Regulatory
Documents” shall not include any filing or other submission made to the United States Securities
and Exchange Commission, the National Association of Securities Dealers, the Nasdaq Stock Exchange
or any similar entity.

     (u) “Representatives” shall mean, with respect to a Person, that Person’s officers, directors,
employees, accountants, counsel, investment bankers, financial advisors, agents and other
representatives.

     (v) “Royalty Revenue” shall mean running royalties actually received by Purchaser from a
Licensee for sales of Non-Sumatriptan Products by or under authority of such Licensee, plus any
license fees or milestone or other payments receive by Purchaser from a Licensee to the extent not
allocable to recovery of development or other costs incurred by Purchaser specific to

4.

 

the applicable Product. For clarity, Royalty Revenue shall exclude: (i) payments in
consideration of goods (including Products) or services at Purchaser’s fully-burdened cost therefor
(any amounts in excess of the fully-burdened cost shall be included in Royalty Revenue), (ii)
payments in consideration for equity at the fair market value therefor (any amounts in excess of
the fair market value shall be included in Royalty Revenue) and (iii) amounts received by Purchaser
in consideration for a sale of all, or substantially all, of the business or assets of Purchaser
(whether by way of merger, sale of stock, sale of assets or otherwise), if the successor to such
business or assets has assumed the obligations under Section 2.06(a) of this Agreement.

     (w) “Royalty Term” shall mean, for a given Product, the period commencing on the Closing Date
and continuing until the later of (i) the ten-year anniversary of the first commercial sale of such
Product in the United States, but no more than twenty years after the Closing Date and (ii) the
later of expiration or abandonment of the last Valid Claim of the Transferred Patents covering the
manufacture, use or sale of such Product.

     (x) “Sumatriptan Product” shall mean any Product comprising the Intraject Delivery System
combined with Sumatriptan.

     (y) “Technology” shall mean any or all of the following: (i) works of authorship including,
without limitation, computer programs, source code and executable code, whether embodied in
software, firmware or otherwise, documentation, designs, files, net lists, records, data and mask
works; (ii) inventions (whether or not patentable), improvements, and technology; (iii) proprietary
and confidential information, including technical data and customer and supplier lists, trade
secrets and know how; (iv) databases, data compilations and collections and technical data; (v)
logos, trade names, trade dress, trademarks, service marks; (vi) World Wide Web addresses, domain
names and sites; (vii) protocols, methods and processes; and (viii) all instantiations of the
foregoing in any form and embodied in any media.

     (z) “Territory” shall mean the entire world.

     (aa) “Third Party” shall mean any Person other than Purchaser or Aradigm, or their respective
Affiliates.

     (bb) “Transfer Plan” shall mean the plan for the transfer of the Assigned Assets attached
hereto as Exhibit G.

     (cc) “Valid Claim” shall mean (i) a claim of an issued and unexpired patent, which has not
been held unenforceable, unpatentable or invalid by a court or other governmental agency of
competent jurisdiction, and which has not been admitted to be invalid or unenforceable through
reissue, disclaimer or otherwise, or (ii) a claim in a pending patent application being prosecuted
in good faith that has not been abandoned or finally rejected and that has been pending for fewer
than five years after the earliest priority date to which it is entitled.

     Section 1.02 Additional Definitions. Each of the following definitions shall have the
meanings defined in the corresponding sections of this Agreement indicated below:

5.

 

	 	 	 	 	 	 	 
	 	 	Definition	 	Section	 	 
	 

	 	Agreement
	 	Preamble
	 	 
	 

	 	Aradigm Indemnities
	 	Section 6.04(b)	 	 
	 

	 	Assumed Liabilities
	 	Section 2.05(b)	 	 
	 

	 	Claim
	 	Section 6.04(a)	 	 
	 

	 	Closing Date
	 	Section 2.07	 	 
	 

	 	Coordination Lead
	 	Section 2.03	 	 
	 

	 	Excluded Liabilities
	 	Section 2.05(c)	 	 
	 

	 	Indemnitee
	 	Section 6.04(c)	 	 
	 

	 	Indemnitor
	 	Section 6.04(c)	 	 
	 

	 	Party
	 	Preamble	 	 
	 

	 	PTO
	 	Section 4.06(a)	 	 
	 

	 	Purchaser Indemnities
	 	Section 6.04(a)	 	 

ARTICLE II

ASSIGNMENT, TRANSFER AND LICENSE

     Section 2.01 Assignment of Assigned Assets to Purchaser. Upon the terms and subject
to the conditions set forth herein, Aradigm hereby assigns, conveys and transfers to Purchaser, at
the Closing, all of Aradigm’s right, title and interest in and to the Assigned Assets, subject to
the reservation on behalf of Aradigm of a perpetual, worldwide, royalty-free, non-exclusive
license, under the Transferred Patents and Transferred Technology solely for purposes of the
Pulmonary Field, which retained license shall include the right to grant sublicenses to Persons
solely within the scope of such retained license in connection with the grant to such Persons of
licenses under other Patents owned or controlled by Aradigm.

     Section 2.02 Asset Transfer. Subject to the terms and conditions set forth in this
Agreement, on the Closing Date, Aradigm shall transfer all Assigned Assets, in the shape, manner
and form of their existence as of the date such Assigned Assets are transferred to Purchaser, in
accordance with the Transfer Plan. Without limiting the specifics of the Transfer Plan, Aradigm
shall promptly transfer those assets (to the extent not previously transferred to the Transferee
hereunder) to Purchaser as required in the Transfer Plan and this Section 2.02. Unless otherwise
specified in the Transfer Plan, the mode of such transfer shall be determined by the Coordination
Leads with the goal of efficiency and cost-effectiveness. Without limiting the foregoing and in
connection with such transfers of assets pursuant to this Section 2.02, Aradigm shall make
available such personnel reasonably familiar with the Assigned Assets to consult with and assist
Purchaser in implementing such assets at mutually agreeable times.

     Section 2.03 Coordination Leads. In order to facilitate the transfer of assets
pursuant to Section 2.02, each Party shall appoint, from time to time, by written notice to the
other Party, one of its personnel as its coordination lead (each, a “Coordination Lead”). The
Coordination Leads shall be responsible for oversight and coordination of the transfer of assets in
accordance with Section 2.02 and the Transfer Plan. The Coordination Leads shall carry out their
responsibilities by any reasonable means or practices as the Parties may mutually agree.

6.

 

     Section 2.04 Transitional Services. Aradigm shall provide all reasonable transitional
services to Purchaser, including facilities, furnishings, access to systems, document control,
quality systems, IT support, accounting, payroll, administration and other such services as the
Parties may mutually agree, until December 31, 2006 or until such later date as mutually agreed to
by the Parties, as more fully described in Exhibit H, and Purchaser shall pay the fees
therefor set forth in Exhibit H in accordance with the schedule set forth therein.

     Section 2.05 Assumption of Liabilities.

     (a) Assumption. Upon the terms and subject to the conditions set forth herein, at the
Closing, Purchaser shall assume from Aradigm, and Aradigm shall irrevocably convey, transfer and
assign to Purchaser, all of the Assumed Liabilities (as defined in Section 2.05(b) hereof).
Purchaser shall not assume any liabilities of Aradigm pursuant hereto, other than the Assumed
Liabilities.

     (b) Definition of Assumed Liabilities. For all purposes of and under this Agreement,
the term “Assumed Liabilities” shall mean, refer to and include only those liabilities listed on
Exhibit F.

     (c) Definition of Excluded Liabilities. Except for the Assumed Liabilities, Purchaser
does not assume and is not assuming any debt, liability, duty or other obligation (of any kind) of
Aradigm, whether known or unknown, fixed or contingent, and regardless of when such liabilities or
obligations may arise or may have arisen or when asserted, including any liabilities, or
obligations related to the Assigned Assets which are outstanding or unpaid as of the Closing (the
“Excluded Liabilities”), and Aradigm shall remain responsible for the Excluded Liabilities.

     Section 2.06 Consideration. On the terms and subject to the conditions set forth in
this Agreement, in addition to the payments contemplated by Section 2.07(a), the consideration for
the Assigned Assets shall be the following:

     (a) Royalties.

          (i) In consideration for the assignment and transfer of the Assigned Assets, with respect to
Net Sales Purchaser shall pay to Aradigm, during the Royalty Term:

               (1) For each Non-Sumatriptan Product, [****] percent ([****]%) of Net Sales of such
Non-Sumatriptan Product, provided that in the event and to the extent such Non-Sumatriptan Product
is commercialized by a Licensee Purchaser may at its election pay to Aradigm either [****] percent
([****]%) of such Licensee’s Net Sales of such Non-Sumatriptan Product or [****] percent ([****]%)
of Purchaser’s Royalty Revenues from such Licensee in respect of such Non-Sumatriptan Product.
Purchaser shall make its election with respect to each such Non-Sumatriptan Product by written
notice to Aradigm of its election on or before the date its first payment would be due under
Section 2.06(a)(vi) in respect of such Non-Sumatriptan Product under either of the foregoing
alternatives.

               (2) For Sumatriptan Products, [ **** ] percent ([ **** ]%) of Net Sales of Sumatriptan Products.

[ **** ] = Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to
Rule 406 of the Securities Act of 1933, as amended.

7.

 

          (ii) Combination Products. In the event that a Product is sold in the form of a
combination product (a “Combination Product”) containing both (1) such Product and (2) another
product or service for which no royalty would be due hereunder if sold separately, the Net Sales
from such combination sales for purposes of calculating the amounts due under this Section 2.06(a)
shall be calculated by multiplying Net Sales of the Combination Product by a fraction that
reasonably reflects the fair value of the contribution of the Product in the Combination Product to
the total market value of such Combination Product, which fraction shall be established by the
Purchaser and Aradigm through good faith negotiations and mutual agreement, on a Combination
Product-by-Combination Product basis.

          (iii) Single Royalty. Only one royalty shall be paid with respect to each unit of
Product that is subject to royalties under this Section 2.06(a), without regard to the number of
transfers or otherwise. In no event shall more than one royalty be due under this Section 2.06(a)
with respect to any Product unit.

          (iv) Milestone Payment. Purchaser shall pay Aradigm $[****] within 30 days of the
first U.S. commercial sale of the Sumatriptan Product.

          (v) Records. During the term of this Agreement and for a period of three years
thereafter, Purchaser and its Affiliates shall keep, and shall cause its licensees and sublicensees
to keep, complete and accurate records of their Net Sales in sufficient detail to enable the
amounts payable under this Section 2.06(a) to be determined. Upon Aradigm’s written request, but
not more frequently than once per calendar year, Purchaser shall permit representatives or agents
of Aradigm, at Aradigm’s expense, to examine such records during Purchaser’s regular business hours
for the purpose of and to the extent necessary to verify any report required under this Agreement
with respect to Net Sales received not more than three years prior to the date of Aradigm’s
request. In the event that the amounts due to Aradigm are determined to have been underpaid,
Purchaser shall promptly pay to Aradigm any amount due and unpaid. In the event that it is
determined, as a result of such examination, that the amount underpaid with respect to a given
payment is in excess of 5% of the total amount of such payment, then Purchaser shall reimburse
Aradigm for all costs incurred by Aradigm in conducting such examination.

          (vi) Reports. Beginning with the first accrual of royalties or other payments due
hereunder, Purchaser shall provide to Aradigm a quarterly royalty report as follows: Within 60 days
after the end of each quarterly period, Purchaser shall deliver to Aradigm a true and accurate
report, giving such particulars of the business conducted by Purchaser, its Affiliates and
Licensees, during such quarterly period as are pertinent to account for payments due under this
Section 2.06(a). Such report shall include, as applicable, at least (A) the total of Net Sales
during such quarterly period; (B) the calculation of royalties; (C) the calculation of Royalty
Revenue for each applicable Non-Sumatriptan Product and (D) the total royalties and other payments
due Aradigm. Simultaneously with the delivery of each such report, Purchaser shall pay to Aradigm
the total amount, if any, due to Aradigm for the period of such report. If no payment is due,
Purchaser shall so report. Aradigm shall not provide to Third Parties any information contained in
reports provided to Aradigm under this Section 2.06(a)(v), or learned by Aradigm under Section
2.06(a)(iii) above.

[ **** ] = Certain confidential information contained in this document, marked by brackets, has
been omitted and filed separately with the Securities and Exchange Commission pursuant to
Rule 406 of the Securities Act of 1933, as amended.

8.

 

          (vii) Payments. All amounts payable hereunder by Purchaser shall be payable in
Dollars to Aradigm. If any currency conversion shall be required in connection with the payment of
royalties hereunder, such conversion shall be made by using the exchange rates reported in the Wall
Street Journal on the last business day of the quarter in respect of which such payment is made.

          (viii) Taxes. Any withholding or other tax that is required by law to be withheld on
behalf of Aradigm with respect to payments owed by Purchaser pursuant to this Agreement shall be
deducted by Purchaser from such payment prior to remittance. Purchaser shall promptly furnish
Aradigm evidence of any such taxes withheld.

          (ix) Without limiting Section 2.06(a)(v) above, Purchaser shall take reasonable measures to
keep Aradigm informed as to the progress of the development and commercialization of the Intraject
Delivery System and Products arising therefrom until such time as Purchaser has fulfilled its
royalty obligations to Aradigm pursuant to Section 2.06(a).

     Section 2.07 Closing, Closing Place, Time and Date. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall be held at the offices of Cooley Godward
llp, 3175 Hanover Street, Palo Alto, California, at 10:00 a.m. on the date of the
Agreement (the actual date on which the Closing shall occur being referred to herein as the
“Closing Date”).

     (a) Closing Deliveries.

          (i) At the Closing, Purchaser shall deliver, or cause to be delivered, to Aradigm the
following, dated as of the date of this Agreement and, where relevant, executed for and on behalf
of Purchaser by a duly authorized officer thereof:

               (1) any and all instruments, certificates and agreements as Aradigm may reasonably request in
order to effectively make Purchaser responsible for all Assumed Liabilities pursuant hereto to the
fullest extent permitted by applicable law;

               (2) Purchaser shall have provided Aradigm with evidence demonstrating that Purchaser has
obtained at least $15 million in equity financing;

               (3) Purchaser shall have paid to Aradigm, by wire transfer, $4,000,000 in cash;

               (4) Purchaser shall have reimbursed Aradigm for all documented expenses actually incurred by
Aradigm from July 1, 2006 through the Closing Date, that were pre-approved in writing by Purchaser,
up to $515,036;

               (5) Each of Steve Farr and John Turanin shall have provided Aradigm with a release of all
claims over or rights to any severance payments relating to their cessation of services to Aradigm,
in a form that is reasonably acceptable to Aradigm and including mutually agreed consideration for
such releases; and

               (6) the Transitional Services Agreement.

9.

 

          (ii) At the Closing, Aradigm shall deliver, or cause to be delivered, to Purchaser the
following, dated as of the date of this Agreement and executed for and on behalf of Aradigm by a
duly authorized officer thereof:

               (1) a general assignment and bill of sale with respect to the Assigned Assets in the form
attached hereto as Exhibit F;

               (2) one or more instruments of assignment and assumption, in customary form and substance
reasonably satisfactory to Purchaser and Aradigm and their respective counsel;

               (3) an instrument of assignment of the Transferred Patents, the Transferred Trademarks, and
any other Registered Intellectual Property Rights included in the Assigned Assets, in customary
form and substance reasonably satisfactory to Purchaser and Aradigm and their respective counsel;

               (4) any and all required third party consents including those consents necessary for the valid
assignment and transfer of the Transferred Contracts;

               (5) any and all other instruments, certificates and agreements as Purchaser may reasonably
request in order to effectively transfer to Purchaser all of the Assigned Assets pursuant hereto
and to the Transfer Plan to the fullest extent permitted by applicable law; and

               (6) the Transitional Services Agreement.

     (b) Closing. From and after the Closing, the Assigned Assets shall be held for the
account and benefit, and at the risk, of Purchaser.

     Section 2.08 Nontransferable Assets. To the extent that any Assigned Asset or Assumed
Liability to be sold, conveyed, assigned, transferred, delivered or assumed to or by Purchaser
pursuant hereto, or any claim, right or benefit arising thereunder or resulting therefrom, is not
capable of being sold, conveyed, assigned, transferred or delivered without the approval, consent
or waiver of the issuer thereof or the other Party thereto, or any third Person (including a
Governmental Body), or if such sale, conveyance, assignment, transfer or delivery or attempted
sale, conveyance, assignment, transfer or delivery would constitute a breach (or give rise to a
termination right) thereof or a violation of any law, decree, order, regulation or other
governmental edict (collectively, with respect to such Assigned Assets as set forth on Exhibit
J, the “Nontransferable Assets”), except as expressly otherwise provided herein, this Agreement
shall not constitute a sale, conveyance, assignment, transfer or delivery thereof, or an attempted
sale, conveyance, assignment, transfer or delivery thereof absent such approvals, consents or
waivers. If any such approval, consent or waiver shall not be obtained, or if an attempted
assignment of any such Assigned Asset or the assumption of any Assumed Liability by Purchaser would
be ineffective so that Purchaser would not in fact receive all the Nontransferable Assets or assume
all such Assumed Liabilities pursuant hereto, Aradigm and Purchaser shall cooperate in a mutually
agreeable arrangement under which Purchaser would obtain the benefits and assume the obligations of
such Assigned Assets and Assumed Liabilities,

10.

 

respectively, in accordance with this Agreement, including subcontracting, sub-licensing, or
sub-leasing to Purchaser, or under which Aradigm, at Purchaser’s expense, would enforce for the
benefit of Purchaser, with Purchaser assuming all of Aradigm’s obligations thereunder, any and all
rights of Aradigm against a Third Party thereto.

     Section 2.09 FTO Licenses.

     (a) To Purchaser. Aradigm hereby grants to Purchaser a non-exclusive, fully-paid,
world-wide, perpetual, irrevocable, transferable, sublicensable license to fully exercise any
Intellectual Property Rights that are (i) owned, controlled or employed by Aradigm at any time
prior to the Closing (or that arises thereafter to the extent covering Technology created, owned,
controlled or employed by Aradigm prior to the Closing), (ii) necessary or useful for the operation
of the Business and (iii) not included in the Assigned Assets that are actually assigned to
Purchaser.

     (b) To Aradigm. Purchaser hereby grants to Aradigm a non-exclusive, fully-paid,
world-wide, perpetual, irrevocable, transferable, sublicensable license to fully exercise any
Intellectual Property Rights that are (i) owned, controlled or employed by Purchaser as of the
Closing (or that arises thereafter to the extent covering Technology created, owned, controlled or
employed by Aradigm as of the Closing) and (ii) solely for use in the Pulmonary Field.

     Section 2.10 Taking of Necessary Action; Further Action. From time to time after the
Closing, at the request of either Party, the Parties hereto shall execute and deliver such other
instruments of sale, transfer, conveyance, assignment and confirmation and take such action as the
Parties may reasonably determine is necessary to transfer, convey and assign to Purchaser, and to
confirm Purchaser’s title to or interest in the Assigned Assets, to put Purchaser in actual
possession and operating control thereof and to assist Purchaser in exercising all rights with
respect thereto. Aradigm hereby constitutes and appoints Purchaser and its successors and assigns
as its true and lawful attorney in fact in connection with the transactions contemplated by this
Agreement, with full power of substitution, in the name and stead of Aradigm but on behalf of and
for the benefit of Purchaser and its successors and assigns, to demand and receive any and all of
the Assigned Assets and to give receipt and releases for and in respect of the same and any part
thereof, and from time to time to institute and prosecute, in the name of Aradigm or otherwise, for
the benefit of Purchaser or its successors and assigns, proceedings at law, in equity, or
otherwise, which Purchaser or its successors or assigns reasonably deem proper in order to collect
or reduce to possession or endorse any of the Assigned Assets and to do all acts and things in
relation to the Assigned Assets which Purchaser or its successors or assigns reasonably deem
desirable.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF ARADIGM

     Aradigm hereby represents and warrants to Purchaser as follows:

     Section 3.01 Organization, Qualification, and Corporate Power. Aradigm (a) is a
corporation duly organized, validly existing, and in good standing under the laws of the State of

11.

 

California, (b) has obtained all necessary corporate approvals to enter into and execute this
Agreement and (c) has the full right, power and authority to enter into this Agreement.

     Section 3.02 Authorization. Aradigm has full power and authority to execute and
deliver this Agreement, and to consummate the transactions contemplated hereunder and to perform
its obligations hereunder, and no other proceedings on the part of Aradigm are necessary to
authorize the execution, delivery and performance of this Agreement. This Agreement constitutes
the valid and legally binding obligations of Aradigm, enforceable against Aradigm in accordance
with its terms and conditions, except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and rules of law governing specific performance, injunctive relief or other
equitable remedies.

     Section 3.03 Assets.

     (a) The Assigned Assets include all assets of Aradigm and its Affiliates that are used or held
for use by Aradigm and its Affiliates primarily in the operation or conduct of the Business.

     (b) Following the consummation of the transactions contemplated by this Agreement and the
related agreements, and the execution of the instruments of transfer contemplated hereby and
thereby, Purchaser will own, with good, valid and marketable title, or lease, under valid and
subsisting leases, or otherwise acquire the interests of Aradigm in the Assigned Assets, free and
clear of any Liens, and without incurring any penalty or similar transfer fee.

     Section 3.04 Transferred Books and Records. The Transferred Books and Records listed
on Exhibit B are all of the Books and Records maintained by Aradigm that pertain to the
Business and the Assigned Assets.

     Section 3.05 Transferred Contracts. The Transferred Contracts listed on Exhibit
C are all of the contracts between Aradigm and any Third Party currently necessary for or
primarily related to, the operation of the Business, and true and complete copies of all such
Transferred Contracts have been delivered or made available to Purchaser or its representatives.
Each Transferred Contract is in full force and effect and, to Aradigm’s knowledge, Aradigm is not
subject to any default thereunder, nor, to Aradigm’s knowledge, is any party obligated to Aradigm
pursuant to any such Transferred Contract subject to any default thereunder. Aradigm has neither
breached, violated or defaulted under, nor received notice that Aradigm has breached, violated or
defaulted under, any of the terms or conditions of any Transferred Contract. Aradigm has obtained,
or will obtain prior to the Closing, all necessary consents, waivers and approvals of parties to
any Transferred Contract as are required thereunder in connection with the Closing, or for any such
Transferred Contract to be transferred to Purchaser, and to remain in full force and effect without
limitation, modification or alteration after the Closing. Following the Closing, Purchaser will be
permitted to exercise all of the rights Aradigm had under the Transferred Contracts without the
payment of any additional amounts or consideration other than ongoing fees, royalties or payments
which Aradigm would otherwise be required to pay pursuant to the terms of such Transferred
Contracts had the transactions contemplated by this Agreement not occurred.

12.

 

     Section 3.06 Transferred Intellectual Property.

     (a) The Exhibits listing the Transferred Patents and the Transferred Trademarks are, to
Aradigm’s knowledge, complete and accurate. With respect to Transferred Patents, those Transferred
Patents that are Registered Patents are currently in compliance with formal legal requirements
(including payment of filing, examination and maintenance fees and proofs of use), and are not
subject to any unpaid maintenance fees or taxes falling due within 90 days after the Closing Date.
There are no proceedings or actions known to Aradigm before any court, tribunal (including the
United States Patent and Trademark Office (the “PTO”) or equivalent authority anywhere in the
world) related to any such Registered Patent.

     (b) To Aradigm’s knowledge, each Registered Patent that is a Transferred Patent is properly
filed and is currently pending or issued, and all necessary registration, maintenance and renewal
fees in connection with such Registered Patent that is a Transferred Patent have been paid and all
necessary documents and certificates in connection with such Registered Patent have been filed with
the relevant patent authorities in the United States or foreign jurisdictions in which Aradigm has
elected to pursue such Registered Patent, as the case may be, for the purposes of maintaining such
Registered Patent. There are, to Aradigm’s knowledge, no actions that must be taken by Aradigm
within 90 days after the Closing Date, including the payment of any registration, maintenance or
renewal fees or the filing of any responses to PTO office actions, documents, applications or
certificates for the purposes of obtaining, maintaining, perfecting or preserving or renewing any
such Registered Patent. To the extent Aradigm has acquired from any Person any Technology or
Intellectual Property Right, in each case that are included in the Assigned Assets, Aradigm has
obtained a valid and enforceable assignment sufficient to irrevocably transfer all rights in such
Technology and Intellectual Property Rights (including the right to seek past and future damages
with respect thereto) to Aradigm. To the maximum extent provided for by, and in accordance with,
applicable laws and regulations, Aradigm has recorded each such assignment of a Registered
Intellectual Property Right assigned to Aradigm with the relevant Governmental Body, including the
PTO, the U.S. Copyright Office, or their respective equivalents in any relevant foreign
jurisdiction, as the case may be. Aradigm has not claimed a particular status, including “Small
Entity Status,” in the application for any Registered Patent that is a Transferred Patent, which
claim of status was not at the time made, or which has since become, inaccurate or false or that
will no longer be true and accurate as of the Closing Date.

     (c) Aradigm has no knowledge of any misrepresentation regarding, or failure to disclose, any
fact or circumstances in any application for any Registered Patent that is a Transferred Patent
that would materially and adversely affect the validity or enforceability of such Registered Patent
that is a Transferred Patent.

     (d) All Registered Intellectual Property Rights included in the Assigned Assets are free and
clear of any Liens. Immediately prior to the Closing, Aradigm is the exclusive owner or exclusive
licensee of all Business Intellectual Property.

     (e) Schedule 3.06(e) sets forth a list of all Regulatory Documents.

13.

 

     (f) All Assigned Assets will be fully transferable, alienable or licensable by Purchaser
without restriction and without payment of any kind to any Third Party, including royalty
obligations, other than those restrictions and payments Aradigm would be subject to as of the
Closing Date with respect to such Assigned Assets had the transactions contemplated by this
Agreement not occurred.

     (g) Each material item of Technology used in the conduct of the Business by Aradigm was (i)
written and created by then-current employees of Aradigm acting within the scope of their
employment or (ii) acquired or licensed by Aradigm from Third Parties who have validly and
irrevocably assigned such item to Aradigm, or granted Aradigm a license to use such item of a
sufficient scope to cover Aradigm’s use or prior use of thereof in the Business.

     (h) To Aradigm’s knowledge, the conduct of the Business by Aradigm as it was previously
conducted does not, infringe or misappropriate any Intellectual Property Right of any person, or
constitute unfair competition or trade practices under the laws of any jurisdiction, and Aradigm
has not received notice from any person claiming that such conduct by Aradigm infringes or
misappropriates any Intellectual Property Right of any person or constitutes unfair competition or
trade practices under the laws of any jurisdiction.

     (i) Each employee and consultant of Aradigm that provides services to Aradigm in connection
with the Business has entered into a valid and binding written agreement with Aradigm sufficient to
vest title in Aradigm of all Technology and Intellectual Property Rights included in the Assigned
Assets and created by such employee or consultant in the scope of his or her services or employment
for Aradigm.

     (j) Aradigm has not transferred ownership of, nor granted any exclusive license of or
exclusive right to use, or authorized the retention of any exclusive rights to use or joint
ownership of, any Technology or Intellectual Property Right that is or was used in connection with
the Business, to any other person.

     (k) To Aradigm’s knowledge, no person is infringing or misappropriating any Intellectual
Property Right included in the Assigned Assets.

     (l) No Business Intellectual Property is subject to any proceeding or outstanding decree,
order, judgment or settlement agreement or stipulation against Aradigm or, to Aradigm’s knowledge,
against any Third Parties from whom Aradigm acquired or licensed Business Intellectual Property
that restricts in any material way the use, transfer or licensing of such Business Intellectual
Property by Aradigm or is reasonably likely to affect the validity, use or enforceability of such
Business Intellectual Property.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

     Purchaser hereby represents and warrants to Aradigm as follows:

14.

 

     Section 4.01 Organization, Qualification, and Corporate Power. Purchaser (a) is a
corporation duly organized, validly existing, and in good standing under the laws of the State of
Delaware, (b) has obtained all necessary corporate approvals to enter into and execute this
Agreement and (c) has the full right, power and authority to enter into this Agreement.

     Section 4.02 Authorization. Purchaser has full power and authority to execute and
deliver this Agreement, and to consummate the transactions contemplated hereunder and to perform
its obligations hereunder, and no other proceedings on the part of Purchaser are necessary to
authorize the execution, delivery and performance of this Agreement. This Agreement constitutes
the valid and legally binding obligations of Purchaser, enforceable against Purchaser in accordance
with its terms and conditions, except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and rules of law governing specific performance, injunctive relief or other
equitable remedies.

ARTICLE V

OTHER AGREEMENTS AND COVENANTS

     Section 5.01 Additional Documents and Further Assurances. Each Party hereto, at the
request of another Party hereto, shall execute and deliver such other instruments and do and
perform such other acts and things as may be reasonably requested for effecting completely the
consummation of the transactions contemplated hereby.

     Section 5.02 Reasonable Cooperation of Purchaser. Purchaser shall cooperate, to the
extent reasonable, with Aradigm’s efforts to obtain any Third Party consents; provided, however,
that this Section 6.02 shall not obligate Purchaser to incur any additional expense or liability.

     Section 5.03 Reasonable Efforts. Each of the Parties will use their reasonable
efforts to take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement.

     Section 5.04 Indemnification.

     (a) Indemnification of Purchaser.

          (i) Aradigm shall indemnify and hold harmless each of Purchaser and its Affiliates, and the
directors, officers, and employees of Purchaser and of such Affiliates, and the successors and
assigns of any of the foregoing (collectively, the “Purchaser Indemnitees”), from and against any
and all liabilities, damages, settlements, claims, actions, suits, penalties, fines, costs and
expenses (including, without limitation, reasonable attorneys’ fees and other expenses of
settlement) (any of the foregoing, a “Claim”) incurred by any Purchaser Indemnitee, based upon a
Claim of a Third Party, to the extent resulting from the breach of any of Aradigm’s express
representations and warranties set forth in Article III of this Agreement. Aradigm’s obligations
to the Purchaser Indemnitees pursuant to this Section 5.04(a)(i) shall be limited, in the
aggregate, to amounts actually received by Aradigm by operation of Section 2.06(a)(i).
Notwithstanding the foregoing, Aradigm shall not have any obligation to the Purchaser

15.

 

Indemnitees in respect of any breach of representations and warranties as to which Purchaser
has actual knowledge (including for this purpose the actual knowledge of Steve Farr, John Turanin
or Jonathan Rigby) prior to the Closing.

     (b) Aradigm shall indemnify and hold harmless the Purchaser Indemnitees from and against all
Claims arising from the Excluded Liabilities.

     (c) Indemnification of Aradigm. Purchaser shall indemnify and hold harmless each of
Aradigm and its Affiliates, and the directors, officers, and employees of Aradigm and of such
Affiliates, and the successors and assigns of any of the foregoing (collectively, the “Aradigm
Indemnitees”), from and against any and all liabilities, damages, settlements, claims, actions,
suits, penalties, fines, costs and expenses (including, without limitation, reasonable attorneys’
fees and other expenses of settlement) incurred by any Aradigm Indemnitee, based upon (i) a Claim
of a Third Party, to the extent resulting from the breach of any of Purchaser’s express
representations and warranties set forth in Article IV of this Agreement, (ii) a Claim relating to
product liability concerning any of the Assigned Assets or (iii) a Claim relating to the Assumed
Liabilities.

     (d) Procedure. A Party that intends to claim indemnification under this Section 5.04
(the “Indemnitee”) shall promptly notify the other Party (the “Indemnitor”) in writing of any Claim
in respect of which the Indemnitee intends to require such indemnification, and the Indemnitor
shall have sole control of the defense and/or settlement thereof; provided that the Indemnitee
shall have the right to participate, at its own expense, with counsel of its own choosing in the
defense and/or settlement of such Claim. The indemnification obligations of the Parties in this
Section 5.04 shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the consent of the Indemnitor, which consent shall not be unreasonably withheld or
delayed. The failure to deliver written notice to the Indemnitor within a reasonable time after
the commencement of any such Claim, if prejudicial to Indemnitor’s ability to defend such action,
shall relieve such Indemnitor of any liability to the Indemnitee under this Section 5.04, but the
omission to so deliver written notice to the Indemnitor shall not relieve the Indemnitor of any
liability to any Indemnitee otherwise than under this Section 5.04. The Indemnitee under this
Section 5.04 and its directors, officers and employees shall cooperate fully with the Indemnitor
and its legal representatives and provide full information in the investigation of any Claim
covered by this indemnification.

     (e) Sole Remedy. The indemnification rights provided for in this Article V shall
constitute the sole and exclusive remedy and the sole basis and means of recourse among the Aradigm
Indemnities and the Purchaser Indemnities with respect to Claims arising out of or in connection
with any breach of or inaccuracy in any representation, warranty, covenant or agreement contained
in this Agreement.

     Section 5.05 Covenant Not to Compete. Aradigm and its Affiliates agree for a period
of four (4) years after the Closing Date (the “Initial Period”) not to (i) conduct, participate in
or sponsor, directly or indirectly, any activities directed toward the research, development of
technologies or products for the delivery of one or more active pharmaceutical ingredients via
needle free injection or the manufacture, marketing or distribution of such products (each, a
"Competing Activity”) or (ii) appoint, license or otherwise authorize any Third Party, whether

16.

 

pursuant to such license, appointment, or authorization or otherwise to perform any Competing
Activities; provided that during the Initial Period, Purchaser (itself or through one or more Third
Parties) is diligently pursuing the development (including preclinical development) or
commercialization of one or more Products. Thereafter during the Royalty Term, Aradigm and its
Affiliates agree not to develop or commercialize any product for needle free injection of any
active pharmaceutical ingredient for which Purchaser (itself or through one or more Third Parties)
is then actively developing or commercializing a Product incorporating such active pharmaceutical
ingredient (or any prodrug, metabolite, degradant, intermediate, salt form, hydrate, ester, isomer
thereof).

ARTICLE VI

MISCELLANEOUS

     Section 6.01 Press Releases and Public Announcements. No Party shall issue any press
release or make any public announcement relating to the subject matter of this Agreement prior to
the Closing without the prior written approval of the other Party; provided, however, that (a)
either Party may make any public disclosure it believes in good faith is required by applicable law
and (b) Aradigm may correspond with Third Parties in writings in form and substance reasonably
satisfactory to Purchaser with respect to obtaining consents from such Third Parties. In
furtherance of the foregoing sentence, the Parties agree and acknowledge that either party may
issue a press release regarding this Agreement and the transactions contemplated herein at a time
to be mutually agreed after the Closing Date, which press release shall not provide the financial
terms of the Agreement. The Parties will provide to each other a copy of such press release at
least five business days prior to its release and such press release shall be subject to written
approval of the receiving Party, which approval shall not be unreasonably withheld or delayed.

     Section 6.02 No Third-Party Beneficiaries. This Agreement shall not confer any rights
or remedies upon any Person other than the Parties, and their respective successors and permitted
assigns.

     Section 6.03 Force Majeure. Except with respect to the payment of money, in the event
either Party hereto is prevented from or delayed in the performance of any of its obligations
hereunder by reason of acts of God, terrorism, war, invasion, strikes, riots, earthquakes, storms,
fires, energy shortage, acts of government or governmental agencies, or any other cause whatsoever
beyond the reasonable control of the Party, the Party so prevented or delayed shall be excused from
the performance of any such obligation to the extent and during the period of such prevention or
delay.

     Section 6.04 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY OR ANY THIRD PARTY FOR ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING
LOST OR ANTICIPATED REVENUES OR PROFITS RELATING TO THE SAME), ARISING FROM ANY CLAIM RELATING TO
THIS AGREEMENT, WHETHER SUCH CLAIM IS BASED ON CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE,
EVEN IF AN AUTHORIZED REPRESENTATIVE OF SUCH PARTY IS ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF
SAME.

17.

 

     Section 6.05 Entire Agreement and Modification. This Agreement (including the
exhibits hereto) constitutes the entire agreement among the Parties with respect to the subject
matter hereof and supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the subject matter hereof.
This Agreement may not be amended except by a written agreement executed by all Parties.

     Section 6.06 Amendment. This Agreement may be amended by Purchaser and Aradigm or any
successor thereto by execution by each Party (or their successors) of an instrument in writing.

     Section 6.07 Waivers. The rights and remedies of the Parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any Party in exercising any
right, power or privilege under this Agreement or the documents referred to in this Agreement will
operate as a waiver of such right, power or privilege, and no single or partial exercise of such
right, power, or privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted
by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to
in this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation
of the claim or right unless in writing signed by the other Party, (b) no waiver that may be given
by a Party will be applicable except in the specific instance for which it is given and (c) no
notice to or demand on one Party will be deemed to be a waiver of any obligation of such Party or
of the right of the Party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this Agreement.

     Section 6.08 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Parties named herein and their respective successors and permitted assigns.
This Agreement shall not be assigned by either Party without the prior written consent of the other
Party, except that either Party may assign this Agreement, in whole or in part, to an Affiliate of
such Party or to the successor (including the surviving company in any consolidation,
reorganization or merger) or assignee of all or substantially all of its business pertaining
hereto. This Agreement will be binding upon any permitted assignee of either Party. No assignment
shall have the effect of relieving any Party to this Agreement of any of its obligations hereunder.

     Section 6.09 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together will constitute one and the same
instrument.

     Section 6.10 Interpretation. The captions and headings to this Agreement are for
convenience only, and are to be of no force or effect in construing or interpreting any of the
provisions of this Agreement. Unless specified to the contrary, references to Articles, Sections
or Exhibits mean the particular Articles, Sections and Exhibits to this Agreement and references to
this Agreement include all such subparts. Unless context otherwise clearly requires, whenever used
in this Agreement: (a) the words “include” or “including” shall be construed as incorporating,
also, “but not limited to” or “without limitation”; (b) the word “day” or “year” means a calendar
day or year unless otherwise specified; (c) the word “notice” means notice in writing (whether or
not specifically stated) and shall include notices, consents, approvals and

18.

 

other written communications contemplated under this Agreement; (d) the words “hereof,”
“herein,” “hereby” and derivative or similar words refer to this Agreement (including any and all
subparts); (e) the word “or” shall be construed as the inclusive meaning identified with the phrase
“and/or”; (f) provisions that require that a Party, the Parties or any committee hereunder “agree,”
“consent” or “approve” or the like shall require that such agreement, consent or approval be
specific and in writing, whether by written agreement, letter, approved minutes or otherwise; (g)
words of any gender include the other gender; (h) words using the singular or plural number also
include the plural or singular number, respectively; and (i) references to any specific Law or
article, section or other division thereof shall be deemed to include the then-current amendments
thereto or any replacement Law thereof.

     Section 6.11 Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to
be given upon receipt or, if earlier, (a) five days after deposit with the U.S. Postal Service or
other applicable postal service, if delivered by certified or registered first class mail, postage
prepaid, return receipt requested, (b) upon delivery, if delivered by hand, (c) one (1) business
day after the business day of deposit with Federal Express or similar overnight courier, freight
prepaid or (d) one business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by certified or registered first class mail, postage prepaid,
return receipt requested and shall be addressed to the intended recipient as set forth below:

	 	 	 	 	 
	 

	 	If to Purchaser:	 	 
	 
	 	 	 	 
	 

	 	Addressed to:
	 	SJ2 Therapeutics, Inc.
	 

	 	 	 	3929 Point Eden Way
	 

	 	 	 	Hayward, California 94545
	 

	 	 	 	Attention: President
	 

	 	 	 	Facsimile: (510) 265 0277
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Wilson, Sonsini, Goodrich & Rosati
	 

	 	 	 	650 Page Mill Rd
	 

	 	 	 	Palo Alto, California 94304-1050
	 

	 	 	 	Attn: J. Casey McGlynn, Esq.
	 

	 	 	 	Facsimile: (650) 493-6811
	 
	 	 	 	 
	 

	 	If to Aradigm:	 	 
	 
	 	 	 	 
	 

	 	Addressed to:
	 	Aradigm Corporation.
	 

	 	 	 	3929 Point Eden Way
	 

	 	 	 	Hayward, California 94545
	 

	 	 	 	Attention: Chief Financial Officer
	 

	 	 	 	Facsimile: (510) 265 0277
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Cooley Godward llp
	 

	 	 	 	3175 Hanover Street

	 

	 	 	 	Palo Alto, CA 94304-1130

19.

 

	 	 	 	 	 
	 

	 	 	 	Attn: James Kitch, Esq.

	 

	 	 	 	Facsimile: (650) 843-5027

     Any Party may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party ten days’ advance written
notice to the other Party pursuant to the provisions above.

     Section 6.12 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California without giving effect to any choice or
conflict of law provision or rule (whether of the State of California or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the State of
California.

     Section 6.13 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.

     Section 6.14 Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption
or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise.

     Section 6.15 Attorneys’ Fees. If any legal proceeding or other action relating to
this Agreement is brought or otherwise initiated, the prevailing Party shall be entitled to recover
reasonable attorney’s fees, costs and disbursements (in addition to any other relief to which the
prevailing Party may be entitled).

     Section 6.16 Further Assurances. The Parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other such other documents
and (c) to do such other acts and things, all as the other Party may reasonably request for the
purpose of carrying out the intent of this Agreement and the documents referred to in this
Agreement.

[The remainder of this page left intentionally blank; signature page follows]

20.

 

     IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on of the date first above
written.

	 	 	 	 	 
	 	 	ARADIGM CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Thomas C. Chesterman
	 

	 	Name:
	 	Thomas C. Chesterman

	 

	 	Title:
	 	Senior Vice President & CFO

	 
	 	 	 	 
	 	 	SJ2 THERAPEUTICS, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Stephen J. Farr
	 

	 	Name:
	 	Stephen J. Farr

	 

	 	Title:
	 	President

 

 

Schedule 3.06(e)

Regulatory Documents

[****]

[ **** ] = Certain confidential information contained in
this document, marked by brackets, has been omitted and filed separately with
the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

 

 

EXHIBIT A

Transferred Assets (including Transferred Technology)

[****]

[ **** ] = Certain confidential information contained in
this document, marked by brackets, has been omitted and filed separately with
the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

 

 

EXHIBIT B

Transferred Books and Records

[****]

[ **** ] = Certain confidential information contained in
this document, marked by brackets, has been omitted and filed separately with
the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

 

 

EXHIBIT C

Transferred Contracts

[****]

[ **** ] = Certain confidential information contained in
this document, marked by brackets, has been omitted and filed separately with
the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

 

 

EXHIBIT D

Transferred Intellectual Property

[****]

[ **** ] = Certain confidential information contained in
this document, marked by brackets, has been omitted and filed separately with
the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

 

 

EXHIBIT E

General Assignment and Bill of Sale

 

 

FORM OF BILL OF SALE AND ASSIGNMENT AGREEMENT

     This Bill of Sale and Assignment Agreement is made effective as of August 25, 2006, by and
between SJ2 Therapeutics, Inc., a Delaware corporation (“Purchaser”), and Aradigm Corporation, a
California corporation (“Aradigm”). All capitalized words and terms used in this Agreement and not
defined herein shall have the respective meanings ascribed to them in the Asset Purchase Agreement
dated August 25, 2006 between Aradigm and the Purchaser (the “Asset Purchase Agreement”).

BACKGROUND

     WHEREAS, Aradigm and Purchaser have entered into the Asset Purchase Agreement, under which
Aradigm has agreed to sell, convey, assign, transfer and deliver the Assigned Assets to Purchaser
or its assigns.

AGREEMENT

	1.	 	Sale. Aradigm does hereby sell, convey, assign, transfer and deliver to Purchaser,
and Purchaser does hereby purchase, acquire and accept from Aradigm, all of Aradigm’s right,
title and interest in and to the Assigned Assets, subject to the licensed reserved on behalf
of Aradigm pursuant to Section 2.01 of the Asset Purchase Agreement.

	2.	 	Representations. All representations, warranties, agreements and indemnities of
Aradigm with respect to the Assigned Assets set forth in the Asset Purchase Agreement will
continue in effect as provided therein and will not be deemed to be amended, modified,
terminated or superseded by or merged with this Bill of Sale and Assignment Agreement.

	3.	 	Miscellaneous Provisions.

3.1 Amendments; Waiver. The terms, provisions and conditions of this Bill of Sale
and Assignment Agreement may be amended only by agreement in writing of all parties. No
waiver of any provision nor consent to any exception to the terms of this Bill of Sale and
Assignment Agreement or any agreement contemplated hereby will be effective unless in
writing and signed by the party to be bound and then only to the specific purpose, extent
and instance so provided.

3.2 Further Assurances. Each party will execute and deliver, both before and after
the Closing Date, such further certificates, agreements and other documents and take such
other actions as the other party may reasonably request or as may be necessary or
appropriate to consummate or implement the Transactions, including to more effectively
transfer the Assigned Assets, or to evidence such events or matters.

3.3 Assignment. Neither this Bill of Sale and Assignment Agreement nor any rights
or obligations under it are assignable by one party without the prior written consent of the
other party.

2.

 

3.4 Descriptive Headings. The descriptive headings of the sections and subsections
of this Bill of Sale and Assignment Agreement are for convenience only and do not constitute
a part of this Bill of Sale and Assignment Agreement.

3.5 Counterparts. This Bill of Sale and Assignment Agreement and any amendment
hereto or any other agreement delivered pursuant hereto may be executed in one or more
counterparts and by different parties in separate counterparts. All counterparts will
constitute one and the same agreement and will become effective when one or more
counterparts have been signed by each party and delivered to the other party. A facsimile
signature page will be deemed an original.

3.6 Governing Laws. This Bill of Sale and Assignment Agreement and the legal
relations between the parties will be governed by and construed in accordance with the laws
of the State of California applicable to contracts made and performed in such State and
without regard to conflicts of law doctrines unless certain matters are preempted by federal
law.

3.7 Waiver. No failure on the part of any party to exercise or delay in exercising
any right hereunder will be deemed a waiver thereof, nor will any single or partial exercise
preclude any further or other exercise of such or any other right.

3.8 Representation By Counsel; Interpretation. The parties each acknowledge that
each has been represented by counsel in connection with this Bill of Sale and Assignment
Agreement and the transactions contemplated by the Asset Purchase Agreement. Accordingly,
any rule of law or any legal decision that would require interpretation of any claimed
ambiguities in this Bill of Sale and Assignment Agreement against the party that drafted it
has no application and is expressly waived. The provisions of this Agreement will be
interpreted in a reasonable manner to effect the intent of the parties hereto.

3.9 Severability. If any provision of this Bill of Sale and Assignment Agreement is
held to be unenforceable for any reason, it will be adjusted rather than voided, if
possible, to achieve the intent of the parties. All other provisions of this Bill of Sale
and Assignment Agreement will be deemed valid and enforceable to the extent possible.

[signature page to follow]

3.

 

     IN WITNESS WHEREOF, Aradigm and Purchaser have caused this Bill of Sale and Assignment
Agreement to be duly executed as of the day and year first above written.

	 	 	 	 	 	 	 
	PURCHASER:	 	ARADIGM:
	 
	 	 	 	 	 	 
	SJ2 THERAPEUTICS, INC.	 	ARADIGM CORPORATION
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Name:

	 	 	 	Name:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Title:

	 	 	 	Title:	 	 
	 

	 	 
	 	 	 	 

4.

 

EXHIBIT F

Assumed Liabilities

     1. All obligations under Assumed Contracts, other than obligations due and owing as of the
date of the Agreement to Third Parties that are parties to such Assumed Contracts.

     2. Liabilities (other than Excluded Liabilities) incurred in the use of the Assigned Assets
following the Closing Date.

     3. See attached list for additional items.

 

 

EXHIBIT G

Transfer Plan

[****]

[ **** ] = Certain confidential information contained in
this document, marked by brackets, has been omitted and filed separately with
the Securities and Exchange Commission pursuant to Rule 406 of the Securities
Act of 1933, as amended.

 

 

EXHIBIT H

Transitional Services Agreement

 

 

[Aradigm Letterhead]

August 25, 2006

SJ2 Therapeutics, Inc.

 

			
	Re:	 	Transition Services

Ladies and Gentlemen:

      SJ2 Therapeutics, Inc. (“SJ2”) and Aradigm Corporation (“Aradigm”) are entering into an Asset
Purchase Agreement (the “APA”) dated as of the date of this letter (the “Effective Date”), which,
among other things, provides for the sale to SJ2 of certain Aradigm assets related to the
development, manufacture, and commercialization of Aradigm’s Intraject Delivery System.

      1. Services. On the terms and subject to the conditions contained herein, Aradigm shall
provide, or shall cause third parties designated or hired by it (such designated third parties,
together with Aradigm, the “Service Providers”) to provide to SJ2 the following services
(collectively, the “Services”) for the time period through December 31, 2006 (“Expiration Date”):

	 	(a)	 	General information technology services and support (e.g., e-mail access, computer equipment
and software support, network access and support to SJ2’s server only, and other general
computer technologies support) within Aradigm’s current systems and procedures until SJ2
vacates Aradigm’s facilities or the Expiration date, which ever is earlier,
	 
	 	(b)	 	Telephone and fax services and support,
	 
	 	(c)	 	Aradigm will provide SJ2 with document control support for the activities documented in
Aradigm’s current document control processes, using Aradigm’s Document Control System (DCS)
database. Aradigm has assumed that SJ2 will purchase the DCS on or shortly after the
Effective Date. It is Aradigm’s intention to hire a temporary senior level Document Control
Specialist, on or shortly after the Effective Date, who will be fully funded by SJ2, to allow
Aradigm’s current document control personnel to provide document control support to SJ2
consistent with Aradigm’s current Document Control processes. If Aradigm is unable to hire a
temporary senior level Document Control Specialist, or should the temporary employee hired
leave Aradigm for any reason, Aradigm will not be able to provide the services described in
this section 1(c).
	 
	 	(d)	 	Human resources services and support for Aradigm consultants transferring to SJ2,
	 
	 	(e)	 	Payment for individual Aradigm consultants transferring to SJ2,
	 
	 	(f)	 	Technical consulting as available and approved in writing by both parties,
	 
	 	(g)	 	Office facilities, furnishings, and services (e.g., utilities, maintenance, mail, etc.), and

 

 

	 	(h)	 	Such other services as Aradigm and SJ2 may agree to as set forth in paragraph 4.

      2. Current Invoices. Exhibit A to this letter contains an invoice for transitional services
provided by Aradigm to SJ2 through the months of July and August 2006. The parties acknowledge
that a secondary invoice will be provided to SJ2 relating to transitional service provided at the
time of closing Aradigm’s August accounting records. As Aradigm’s August accounting records have
not been closed as of the Effective Date,

      3. Term of Agreement. Except for the services performed prior to the Effective Date as
referenced in paragraph 2, all services to be provided under this Agreement shall begin as of the
Effective Date and shall terminate on the Expiration Date. Aradigm and SJ2 will negotiate in good
faith if SJ2 needs to extend the term of this letter and/or any provision of any Service beyond the
Expiration Date (and the parties hereby acknowledge that the negotiation of any such extension may
involve a renegotiation of the charges with respect to any such Services). This letter may be
extended upon the mutual agreement of the parties hereto in writing, either in whole or with
respect to one or more of the Services; provided that, such extension shall only apply to the
specific Services for which this letter was extended. Services shall be provided up to and
including the applicable Expiration Date, subject to earlier termination as provided in this
letter.

      4. Additional Services. From time to time after the Effective Date, Aradigm and SJ2 may
identify and mutually agree upon additional services to be provided to SJ2 in accordance with the
terms of this letter (the “Additional Services”). At such times, the parties shall execute an
addendum to this Agreement setting forth a description of any Additional Service, the time period
during which such Additional Service will be provided, the charge for such Additional Service and
any other terms applicable. Aradigm and SJ2 acknowledge that charges for Additional Services will
include a profit margin consistent with industry standards for the provision of similar services.
Additional Services may include, but shall not be limited to, regulatory consulting for the
Intraject Sumatriptan NDA, clinical training of the CRO selected to conduct the Intraject
bioequivalence study, submission of the Intraject Sumatriptan IND on behalf of SJ2 and assistance
with R&D efforts.

      5. Provision of Services. Aradigm will use commercially reasonable efforts to ensure that
employees and Service Providers are available to perform its obligations hereunder. Aradigm shall
provide the Services in accordance with the policies, procedures and practices in effect as of
immediately prior to the Effective Date. Aradigm and SJ2 will use their commercially reasonable
efforts to promote a smooth and efficient transition of operations.

      6. No Warranties. ARADIGM WILL USE COMMERCIALLY REASONABLE EFFORTS TO CAUSE THE SERVICES TO
BE PERFORMED IN A PROFESSIONAL AND COMPETENT MANNER; HOWEVER, ARADIGM DOES NOT MAKE ANY WARRANTIES,
EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF
MERCHANTABILITY, BUSINESS CONTINUITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE
SERVICES, MATERIALS OR OTHER DELIVERABLES PROVIDED, OR CAUSED TO BE PROVIDED, BY IT UNDER THIS
LETTER.

      7. Transition to SJ2 Systems and Personnel. During the term of this letter, Aradigm will use
reasonable efforts to provide to SJ2, at SJ2’s expense, consultation, assistance and information as
reasonably requested by SJ2, and will otherwise perform the Services, so as to effect a smooth
transition from SJ2’s utilization of Aradigm’s systems and personnel to SJ2’s utilization of its
own systems and personnel in

 

 

connection with the development of the Intraject Delivery System prior to the termination or
expiration of this letter.

      8. Payments. SJ2 shall pay Aradigm on a monthly basis for documented actual charges for the
performance of the Services. Aradigm will invoice SJ2 for its representatives’ activities using an
hourly rate based on salary, benefits and overhead of the Aradigm representatives performing the
Services. Aradigm will not apply a profit to its representatives’ hourly rates through the
Expiration Date.

      9. Discontinuation of Services. If SJ2 chooses to discontinue any Service prior to the
Expiration Date, SJ2 shall give at least 30 days prior written notice, of its intent to terminate
this letter as to that particular Service, which termination as to that particular service shall be
effective on the last day of the month on which the 30 days prior written notice lapses. SJ2 will
pay Aradigm hereto the fees and costs of any terminated Service up until the effective date of
termination of such Service.

      10. Termination. Notwithstanding anything to the contrary contained in this letter, this
letter may be terminated, in whole or in part, at any time: (a) by the mutual consent of SJ2 and
Aradigm; or (b) by either SJ2 or Aradigm in the event of any material breach or default by the
other party of any of its obligations under this letter and the failure of such defaulting party to
cure, or to take substantial steps towards the curing of, such breach or default within 14 days
after receipt of written notice from the non-defaulting party requesting such breach or default to
be cured.

      11. No Implied Responsibilities or Obligations. NO PARTY HERETO ASSUMES ANY RESPONSIBILITY OR
OBLIGATIONS WHATSOEVER, OTHER THAN THE RESPONSIBILITIES AND OBLIGATIONS EXPRESSLY SET FORTH IN THIS
LETTER OR A SEPARATE WRITTEN AGREEMENT BETWEEN THE PARTIES. NOTWITHSTANDING ANYTHING CONTAINED IN
THIS LETTER TO THE CONTRARY, IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY FOR ANY LOST
PROFITS, LOSS OF DATA, LOSS OF USE, BUSINESS INTERRUPTION OR OTHER SPECIAL, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES.

      12. Independent Contractors. The relationship between SJ2 and Aradigm established under this
letter is that of independent contractors and no party shall be deemed an employee, agent, partner,
or joint venturer of or with the other. Each Service Provider will be solely responsible for any
employment-related taxes, insurance premiums or other employment benefits respecting its
personnel’s performance of any Services. SJ2 agrees to grant to any applicable Service Provider’s
personnel reasonable access to sites, systems and information as necessary for the Service Provider
to perform its obligations under this letter. The personnel of SJ2 and Aradigm shall agree to obey
any and all security regulations and other published policies of the other party relevant to the
provision or receipt of any Services.

      13. Confidentiality. Any information from time to time communicated or delivered by SJ2 or
Aradigm to the other party, including without limitation trade secrets, business methods, and cost,
supplier, manufacturing and customer information, shall be treated by SJ2 and Aradigm,
respectively, as confidential information of the other party, and shall not be disclosed or
revealed to any third party whatsoever or used in any manner except as expressly provided for in
this letter; provided, however that such confidential information shall not be subject to the
restrictions and prohibitions set forth in this paragraph 13 to the extent that such confidential
information: (a) is available to the public in public literature or otherwise, or after disclosure
by one party to the

 

 

other becomes public knowledge through no default of the party receiving such confidential
information; or (b) was known to the party (as demonstrated by the written records of such party)
receiving such confidential information with no obligation to maintain confidentiality prior to the
receipt of such confidential information by such party, whether received before or after the date
of this letter; or (c) is obtained by the party receiving such confidential information from a
third party not subject to a requirement of confidentiality with respect to such confidential
information. For the avoidance of doubt, information will not be considered to be available to the
public, in the public literature, or in the prior possession of the receiving party merely because
individual elements thereof are available to the public, in the public literature, or in the prior
possession of the receiving party, unless the combination of such elements is available to the
public, in the public literature, or in the prior possession of the receiving party. SJ2 and
Aradigm shall take all such precautions as it normally takes with its own confidential information
to prevent any improper disclosure of such confidential information to any third party;
provided that, such confidential information may be disclosed: (x) pursuant to any order of
a court or government entity having jurisdiction and power to order such information to be released
or made public; (y) within the limits required to obtain any authorization from any governmental or
regulatory agency; or (z) with the prior written consent of the other party, which shall not be
unreasonably withheld, as may otherwise be required in connection with the purposes of this letter.

      14. Access to Aradigm Computer Systems. If SJ2 is given access to any computer equipment,
computer, software, network, electronic files, or electronic data storage system owned or
controlled by Aradigm (“Aradigm Computer Systems”), then SJ2 shall limit access and use of such
Aradigm Computer Systems solely to receive Services under this letter and shall not access, attempt
to access or use any Aradigm Computer Systems, other than those specifically required to receive
the Services. All user identification numbers and passwords disclosed to SJ2 and any of Aradigm’s
confidential information obtained by SJ2 as a result of its access to and use of any such Aradigm
Computer Systems shall be deemed to be, and shall be treated as, Aradigm’s confidential information
under applicable provisions of this letter. SJ2 agrees to cooperate with Aradigm in the
investigation of any apparent unauthorized access by SJ2 or its representatives to any Aradigm
Computer Systems, or any apparent unauthorized release of Aradigm’s confidential information by the
employees, contractors or advisers of SJ2.

      15. Indemnification. SJ2 indemnifies Aradigm and its affiliates against, and agrees to hold
each of them harmless from, any and all damage, loss, liability and expense (including reasonable
expenses of investigation and reasonable attorneys’ fees and any incidental, indirect or
consequential damages, losses, liabilities or expenses) (“Damages”) incurred or suffered by Aradigm
or any of its affiliates (other than Damages incurred or suffered by Aradigm or any of its
affiliates arising from any claims made by employees of Aradigm) that arise from any third-party
claim for personal injury or damage to property based upon the performance of the Services by any
of Aradigm’s employees, except to the extent such third-party claim arises out of such employee’s
negligence, willful misconduct or breach of obligations under this letter. Aradigm indemnifies SJ2
and its affiliates against, and agrees to hold each of them harmless from, any and all Damages
incurred or suffered by SJ2 or any of its affiliates (other than Damages incurred or suffered by
SJ2 or any of its affiliates arising from any claims made by employees of SJ2) that arise from any
third-party claim for personal injury or damage to property based upon actions by any of SJ2’s
employees under the terms of this letter, except to the extent such third-party claim arises out of
such employee’s negligence, willful misconduct or breach of obligations under this letter.

      16. Existing Ownership Rights Unaffected. Neither SJ2 nor Aradigm will gain, by virtue of
this letter, any rights or ownership of copyrights, patents, know-how, trade secrets, trademarks or
any other intellectual property rights owned by the other party.

 

 

      17. Dispute Resolution. All disputes arising out of this letter shall be settled as far as
possible by negotiations between SJ2 and Aradigm. If SJ2 and Aradigm cannot agree on an amicable
settlement within 30 days from written submission of the matter by one party to the other, the
matter shall be shall be settled by binding arbitration in the County of Hayward in the State of
California in accordance with the Commercial Arbitration Rules then in effect of JAMS/Endispute.
Arbitration will be conducted by one arbitrator, mutually selected by SJ2 and Aradigm. If Aradigm
and SJ2 fail to mutually select an arbitrator within 15 days following the submission of the matter
to JAMS/Endispute, then arbitration will be conducted by three arbitrators: one selected by
Aradigm; one selected by SJ2; and the third selected by the first two arbitrators. If SJ2 or
Aradigm fails to select an arbitrator within ten days following the expiration of the initial 15
day period, then the other shall be entitled to select the second arbitrator. SJ2 and Aradigm
agree to use all reasonable efforts to cause the arbitration hearing to be conducted within 75 days
after the appointment of the mutually selected arbitrator or the last of the three arbitrators, as
the case may be, and to use all reasonable efforts to cause the decision of the arbitrators to be
furnished within 95 days after the appointment of the mutually selected arbitrator or the last of
the three arbitrators, as the case may be. SJ2 and Aradigm further agree that discovery shall be
completed at least 10 days prior to the date of the arbitration hearing. The final decision of the
arbitrators shall be furnished to SJ2 and Aradigm in writing and shall constitute a conclusive
determination of the issues in question, binding upon SJ2 and Aradigm and shall not be contested by
any of them. The non-prevailing party in any arbitration shall pay the reasonable expenses
(including attorneys’ fees) of the prevailing party and the fees and expenses associated with the
arbitration (including the arbitrators’ fees and expenses). For purposes of this paragraph 17, the
non-prevailing party shall be determined solely by the arbitrators.

      18. No Third Party Beneficiaries. This letter shall not confer any rights or remedies upon
any person or entity other than SJ2 or Aradigm and their respective successors and permitted
assigns.

      19. Counterparts and Facsimile Signature. This letter may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute one and the same
instrument. This letter may be executed by facsimile signature.

      20. Notices. All notices and other communications under this letter will be in writing and
deemed to have been duly given if given in accordance with Section 6.11 of the APA.

      21. Successors and Assigns. The provisions of this letter shall be binding upon and inure to
the benefit of SJ2 and Aradigm and their respective successors and assigns; provided, however, that
except as expressly provided in this letter, no party may assign, delegate or otherwise transfer
any of its rights or obligations under this letter without the consent of each other party.

 

 

      If you are in agreement with the terms of this letter, please execute this letter where
indicated below and return a copy of the signed letter to Aradigm.

	 	 	 	 	 
	 	 	Aradigm Corporation 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 

	 	 	 	 	 
	ACCEPTED AND AGREED TO:	 	 
	 
	 	 	 	 
	SJ2 Technologies, Inc.	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Name:
	 	 	 	 
	 
	 	 	 	 
	Title:
	 	 	 	 

 

 

EXHIBIT I

Intraject Delivery System

 

 

EXHIBIT J

Nontransferable Assets

      None.

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