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          **(b)**If Executive’s Service is terminated pursuant to a Covered Termination (as defined in theSeverance Plan) and provided that Executive complies with the terms and conditions set forth in theSeverance Plan, the shares subject to the Award which would have become vested had Executivecontinued to provide Service for the 12-month period following such Covered Termination shallbecome immediately vested as of the Release Effective Date (as defined in the Severance Plan).          **(c)**Upon a Change in Control, all unvested shares of the Award held by Executive immediatelyprior to the Change in Control (the “***Unvested Restricted Stock***”) shall become fully vested;provided, however, that if the Company’s Reacquisition Rights (as defined in Section 6 below) withrespect to the Unvested Restricted Stock are assigned to the successor corporation (or parentthereof) or are otherwise to continue in full force and effect pursuant to the terms of the Changein Control, then 50% of the Unvested Restricted Stock attributable to each future vesting dateshall vest immediately prior to the effective date of such Change in Control and the remaining 50%of the Unvested Restricted Stock attributable to each such future vesting date shall continue tovest pursuant to the schedule describe in (a) above; and provided further, however, that if theExecutive’s Service is terminated by reason of an Involuntary Termination (as defined in the Plan)within three months before or within 13 months following a Change in Control, then all unvestedshares of Restricted Stock held by the Executive (whether such shares are purported to be assumedby the successor corporation or not) shall immediately vest.     **3. ****Securities Law Compliance****.**Executive may not be issued any shares under the Awardunless the shares are either (i) then registered under the means the Securities Act of 1933, asamended (the “***Securities Act***”) or (ii) the Company has determined that such issuance would beexempt from the registration requirements of the Securities Act. The Award must also comply withother applicable laws and regulations governing the Award, and Executive will not receive suchshares if the Company determines that such receipt would not be in material compliance with suchlaws and regulations.     **4. ****Transferability.** The Award is not transferable except by will or by the laws ofdescent and distribution and shall be exercisable during Executives lifetime only by the Executive.     **5. ****Right of First Refusal****.**Shares that are received under the Award are subject toany right of first refusal that may be described in the Company’s bylaws in effect at such time theCompany elects to exercise its right.     **6. ****Right of Reacquisition****.**The Company shall have a reacquisition right (a“***Reacquisition Right***”) as to the shares Executive received pursuant to the Award that have not asyet vested in accordance with the vesting schedule set forth in Section 2 above (“***Unvested Shares***”)on the following terms and conditions:          **(a)**Subject to any potential future vesting upon a subsequent Change in Control within threemonths following Executive’s Involuntary Termination as provided inSection 2(c) above, the Company, shall simultaneously with termination of Executive’s Service(or upon such later date if no such potential future vesting occurs), automatically reacquire forno consideration all of the Unvested Shares, unless the Company agrees to waive its Reacquisition
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Right as to some or all of the Unvested Shares. Any such waiver shall be exercised by the Companyby written notice to Executive or Executive’s representative (with a copy to the Escrow Holder asdefined below) within 90 days after the termination of Executive’s Service, and the Escrow Holdermay then release to Executive the number of Unvested Shares not being reacquired by the Company.If the Company does not waive its Reacquisition Right as to all of the Unvested Shares, then uponsuch termination of Executive’s Service, the Escrow Holder shall transfer to the Company the numberof shares the Company is reacquiring.          **(b)**The Company shall not exercise its Reacquisition Right until at least six months (or suchlonger or shorter period of time necessary to avoid classification of the Award as a liability forfinancial accounting purposes) have elapsed following delivery of shares of Common Stock subject tothe Award, unless otherwise specifically provided by the Board. If the Company does exercise itsReacquisition Right as to any of the shares subject to the Award, then upon such termination ofExecutive’s Service, the Escrow Holder shall transfer to the Company the number of shares theCompany is repurchasing.          **(c)**The shares issued under the Award shall be held in escrow pursuant to the terms of theJoint Escrow Instructions attached hereto as **Exhibit A**. Executive agrees to execute twoAssignment Separate From Certificate forms (with date and number of shares blank) substantially inthe form attached hereto as **Exhibit B** and deliver the same, along with the certificate orcertificates evidencing the shares, for use by the escrow agent pursuant to the terms of the JointEscrow Instructions.          **(d)**Subject to the provisions of the Award, Executive shall, during the term of the Award,exercise all rights and privileges of a stockholder of the Company with respect to the sharesdeposited in escrow. Executive shall be deemed to be the holder of the shares for purposes ofreceiving any dividends which may be paid with respect to such shares (which shall be subject tothe same vesting and forfeiture restrictions as apply to the shares to which they relate) and forpurposes of exercising any voting rights relating to such shares, even if some or all of suchshares have not yet vested and been released from the Company’s Reacquisition Right.          **(e)**If, from time to time, there is any stock dividend, stock split, recapitalization,combination of shares, exchange of shares or other change affecting the outstanding stock of theCompany as set forth in the Plan, the stock of which is subject to the provisions of the Award,then in such event any and all new, substituted or additional securities to which Executive isentitled by reason of Executive’s ownership of the shares acquired under the Award shall beimmediately subject to the Reacquisition Right with the same force and effect as the shares subjectto this Reacquisition Right immediately before such event.          **(f)**In the event of a Change in Control, the Reacquisition Right may be assigned by theCompany to the successor of the Company (or such successor’s parent company), if any, in connectionwith such transaction. To the extent the Reacquisition Right remains in effect following suchtransaction, it shall apply to the new capital stock, cash or other property received in exchangefor the Common Stock in consummation of the transaction, butonly to the extent the Common Stock was at the time covered by such right. If anyReacquisition Right is not assumed or substituted in connection with such transaction, theReacquisition Right shall lapse prior to the effective time of the Change in Control.
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          **(g)**In addition to any other limitation on transfer created by applicable securities laws,Executive shall not sell, assign, hypothecate, donate, encumber, or otherwise dispose of anyinterest in the Common Stock while such shares of Common Stock are subject to the ReacquisitionRight or continue to be held in the Joint Escrow; provided, however, that an interest in suchshares may be transferred pursuant to a qualified domestic relations order as defined in the Codeor Title I of the Employee Retirement Income Security Act. After any Common Stock has beenreleased from the Joint Escrow, Executive shall not sell, assign, hypothecate, donate, encumber, orotherwise dispose of any interest in the Common Stock except in compliance with the provisionsherein and applicable securities laws.     **7. ****Restrictive Legends.** The shares issued under the Award shall be endorsed withappropriate legends determined by the Company.     **8. ****Award not a Service Contract****.**The Award is not an employment or service contract,and nothing in the Award shall be deemed to create in any way whatsoever any obligation onExecutive’s part to continue in the employ of the Company or any corporate successor to all orsubstantially all of the assets or voting stock of the Company which has by appropriate actionassumed the Plan (or any Parent or Subsidiary employing or retaining Executive), or on the part ofthe Company or such successor, Parent or Subsidiary to continue Executive’s employment. Inaddition, nothing in the Award shall obligate the Company or any successor, Parent or Subsidiary,their respective stockholders, boards of directors, officers or employees to continue anyrelationship that Executive might have as a director or consultant for the Company or anysuccessor, Parent or Subsidiary.     **9. ****Withholding Obligations.**At the time the Award is granted, or at any timethereafter as requested by the Company, Executive hereby authorizes withholding from any amountspayable to Executive, or otherwise agrees to make adequate provision in cash for, any sums requiredto satisfy the federal, state, local and foreign tax withholding obligations of the Company or anysuccessor, Parent or Subsidiary, if any, which arise in connection with the Award. In the Company’ssole discretion, the Company may elect, and Executive hereby authorizes the Company, to withholdvested shares in such amounts as the Company determines are necessary to satisfy Executive’sobligation pursuant to the preceding sentence. Unless the tax withholding obligations of theCompany and/or any successor, Parent or Subsidiary are satisfied, the Company shall have noobligation to deliver to Executive any Common Stock.     **10. ****Tax Consequences.** The acquisition and vesting of the shares may have adversetax consequences to Executive that may avoided or mitigated by filing an election under Section83(b) of the Code. Such election must be filed within 30 days after the date of the Award.EXECUTIVE ACKNOWLEDGES THAT IT IS EXECUTIVE’S OWN RESPONSIBILITY, AND NOT THE COMPANY’S, TO FILE ATIMELY ELECTION UNDER CODE SECTION 83(B), EVEN IF EXECUTIVE REQUESTS THE COMPANY TO MAKE THE FILINGON EXECUTIVE’S BEHALF.     **11. ****Notices****.**Any notices provided for in the Award or the Plan shall be given inwriting and shall be deemed effectively given upon receipt or, in the case of notices delivered bythe Company to Executive, five days after deposit in the United States mail, postage prepaid,addressed to Executive at the last address Executive provided to the Company.
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     **12. **If any payment or benefit Executive would receive pursuant to a Change in Control from theCompany or otherwise (“***Payment***”) would (i) constitute a “parachute payment” within the meaning ofSection 280G of the Internal Revenue Code of 1986, as amended including any applicable regulationsand guidance thereunder (the “***Code***”), and (ii) but for this sentence, be subject to the excise taximposed by Section 4999 of the Code (the “***Excise Tax***”), then such Payment shall be equal to theReduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment thatwould result in no portion of the Payment being subject to the Excise Tax or (y) the largestportion, up to and including the total, of the Payment, whichever amount, after taking into accountall applicable federal, state and local employment taxes, income taxes, and the Excise Tax (allcomputed at the highest applicable marginal rate), results in Executive’s receipt, on an after-taxbasis, of the greater amount of the Payment notwithstanding that all or some portion of the Paymentmay be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachutepayments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in thefollowing order: reduction of cash payments; cancellation of accelerated vesting of stock awards;reduction of employee benefits. In the event that acceleration of vesting of stock awardcompensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse orderof the date of grant of Executive’s stock awards (*i.e.*, earliest granted stock award cancelledlast).     The accounting firm engaged by the Company for general audit purposes as of the day prior tothe effective date of the Change in Control shall perform the foregoing calculations. If theaccounting firm so engaged by the Company is serving as accountant or auditor for the individual,entity or group effecting the Change in Control, the Company shall appoint a nationally recognizedaccounting firm to make the determinations required hereunder. The Company shall bear all expenseswith respect to the determinations by such accounting firm required to be made hereunder.     The accounting firm engaged to make the determinations hereunder shall provide itscalculations, together with detailed supporting documentation, to Executive and the Company within15 calendar days after the date on which Executive’s right to a Payment is triggered (if requestedat that time by Executive or the Company) or such other time as requested by Executive or theCompany. If the accounting firm determines that no Excise Tax is payable with respect to aPayment, either before or after the application of the Reduced Amount, it shall furnish Executiveand the Company with an opinion reasonably acceptable to Executive that no Excise Tax will beimposed with respect to such Payment. Any good faith determinations of the accounting firm madehereunder shall be final, binding and conclusive upon Executive and the Company.     **13. ****Miscellaneous****.**          **(a)**The rights and obligations of the Company under the Award shall be transferable to any oneor more persons or entities, and all covenants and agreements hereundershall inure to the benefit of, and be enforceable by the Company’s successors and assigns.Executive’s rights and obligations under the Award may only be assigned with the prior writtenconsent of the Board in its sole discretion.
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          **(b)**Executive agrees upon request to execute any further documents or instruments necessary ordesirable in the sole determination of the Company to carry out the purposes or intent of theAward.          **(c)**Executive acknowledges and agrees that Executive has reviewed the Award in its entirety,has had an opportunity to obtain the advice of counsel prior to executing and accepting the Awardand fully understand all provisions of the Award.     **14. ****Governing Plan Documents****.**The Award is subject to all the provisions of the Planand, where specifically indicated, the Severance Plan, the provisions of which are hereby made apart of the Award, and is further subject to all interpretations, amendments, rules and regulationswhich may from time to time be promulgated and adopted pursuant to the Plan and the Severance Plan,as applicable. In the event of any conflict between the provisions of the Award and those of thePlan or the Severance Plan, the provisions of the Plan or the Severance Plan, as applicable, shallcontrol.     **15. ****Application of Section 409A**. This Award is intended to be exempt from theapplication of Section 409A of the Code (***“Section 409A”***) pursuant to Treasury Regulation1.409A-1(b)(6). Notwithstanding the foregoing, if it is determined that the Award fails to satisfythe requirements of Treasury Regulation 1.409A-1(b)(6) or the short-term deferral rule and isotherwise deferred compensation subject to Section 409A, and if Executive is a “Specified Employee”(within the meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of Executive’sseparation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), then thevesting and/or issuance of any shares that would otherwise be made upon the date of Executive’sseparation from service or within the first six months thereafter will not be made on theoriginally scheduled date(s) and will instead occur in a lump sum on the date that is six monthsand one day after the date of the separation from service, with the balance of the shares becomingvested or issued thereafter in accordance with the original vesting and issuance schedule set forthabove, but if and only if such delay is necessary to avoid the imposition of taxation on Executivein respect of the shares under Section 409A. Each installment of shares that vests is intended toconstitute a “separate payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2).[The remainder of this page is left intentionally blank]
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     **IN WITNESS WHEREOF,**the parties hereto have executed this Agreement on the day and year firstabove written.      **Ardea Biosciences, Inc.**