Document:

exv4w3

Exhibit 4.3

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE
PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN
THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES,
SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

WARRANT TO PURCHASE STOCK

	 	 	 
	Company:

	 	ARDEA BIOSCIENCES, INC., a Delaware corporation
	Number of Shares:

	 	[Oxford: $300,000/Warrant Price]
	 

	 	[Silicon Valley Bank: $180,000/Warrant Price]
	Class of Stock:

	 	Common
	Warrant Price:

	 	lower of (i) the average closing price of the Company’s common stock for the ten
(10) trading days ending on the date immediately prior to Issue Date; or (ii) the closing price of
the Company’s common stock on the date immediately prior to Issue Date
	Issue Date:

	 	November ___, 2008
	Expiration Date:

	 	The 7th anniversary after the Issue Date, unless terminated earlier in accordance with the provisions contained herein
	Credit Facility:

	 	This Warrant is issued in connection with the Loan and Security
Agreement between Company and Silicon Valley Bank and Oxford
Finance Corporation dated as of November ___, 2008, as amended from time to time (the “Loan Agreement”).

     THIS WARRANT CERTIFIES THAT, for good and valuable consideration, including without limitation
the mutual promises contained in the Loan Agreement [SILICON VALLEY BANK][OXFORD FINANCE
CORPORATION] ([Silicon Valley Bank,] together with any successor or permitted assignee or
transferee of this Warrant, “Holder”) is entitled to purchase the number of fully paid and
nonassessable shares of the class of securities (the “Shares”) of the Company at the Warrant Price,
all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the
provisions and upon the terms and conditions set forth in this Warrant.

ARTICLE 1. EXERCISE.

          1.1 Method of Exercise. Holder may exercise this Warrant by delivering the original
of this Warrant together with a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion
right set forth in Article 1.2, Holder shall also deliver to the Company a check, wire transfer (to
an account designated by the Company), or other form of payment acceptable to the Company for the
aggregate Warrant Price for the Shares being purchased.

          1.2 Conversion Right. In lieu of exercising this Warrant as specified in Article 1.1,
Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares
determined by dividing (a) the aggregate fair market value of the Shares or other securities
otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price
of such Shares by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant to Article 1.3.

 

 

          1.3 Fair Market Value. The fair market value of each Share shall be the closing price
of a Share reported for the business day immediately before Holder delivers this Warrant together
with its Notice of Exercise to the Company.

          1.4 Delivery of Certificate and New Warrant. Promptly after Holder exercises or
converts this Warrant and, if applicable, the Company receives payment of the aggregate Warrant
Price, the Company shall deliver to Holder certificates for the Shares acquired and, if this
Warrant has not been fully exercised or converted and has not expired, a new Warrant representing
the Shares not so acquired.

          1.5 Replacement of Warrants. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss,
theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and
amount to the Company or, in the case of mutilation on surrender and cancellation of this Warrant,
the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

          1.6 Treatment of Warrant Upon Acquisition of Company.

               1.6.1 “Acquisition”. For the purpose of this Warrant, “Acquisition” means any sale,
license, or other disposition of all or substantially all of the assets of the Company, or any
reorganization, consolidation, or merger of the Company where the holders of the Company’s
securities before the transaction beneficially own less than 50% of the outstanding voting
securities of the surviving entity after the transaction.

               1.6.2 Treatment of Warrant at Acquisition.

A) Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that
is not an asset sale and in which the sole consideration is cash, either (a) Holder shall exercise
its conversion or purchase right under this Warrant and such exercise will be deemed effective
immediately prior to the consummation of such Acquisition or (b) if Holder elects not to exercise
the Warrant, this Warrant will expire upon the consummation of such Acquisition. The Company shall
provide the Holder with written notice of its request relating to the foregoing (together with such
reasonable information as the Holder may request in connection with such contemplated Acquisition
giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior
to the closing of the proposed Acquisition.

B) Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that
is an “arms length” sale of all or substantially all of the Company’s assets (and only its assets)
to a third party that is not an Affiliate (as defined below) of the Company (a “True Asset Sale”),
either (a) Holder shall exercise its conversion or purchase right under this Warrant and such
exercise will be deemed effective immediately prior to the consummation of such Acquisition or (b)
if Holder elects not to exercise the Warrant, this Warrant will continue until the Expiration Date
if the Company continues as a going concern following the closing of any such True Asset Sale. The
Company shall provide the Holder with written notice of its request relating to the foregoing
(together with such reasonable information as the Holder may request in connection with such
contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less
than ten (10) days prior to the closing of the proposed Acquisition.

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C) Upon the written request of the Company, Holder agrees that, in the event of a stock for stock
(or stock and cash) Acquisition of the Company by a publicly traded acquirer if, on the record date
for the Acquisition, the fair market value of the Shares (or other securities issuable upon
exercise of this Warrant) is equal to or greater than three (3) times the Warrant Price, the
Company may require the Warrant to be deemed converted pursuant to Article 1.2 hereof and the
Holder shall participate in the Acquisition as a holder of the Shares (or other securities issuable
upon exercise of the Warrant) on the same terms as other holders of the same class of securities of
the Company.

D) Upon the closing of any Acquisition other than those particularly described in subsections (A),
(B) and (C) above, the successor entity shall assume the obligations of this Warrant, and this
Warrant shall be exercisable for the same securities, cash, and property as would be payable for
the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were
outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price
and/or number of Shares shall be adjusted accordingly.

As used herein “Affiliate” shall mean any person or entity that owns or controls directly
or indirectly ten (10) percent or more of the stock of Company, any person or entity that controls
or is controlled by or is under common control with such persons or entities, and each of such
person’s or entity’s officers, directors, joint venturers or partners, as applicable.

ARTICLE 2. ADJUSTMENTS TO THE SHARES.

          2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on the
shares of its common stock payable in common stock, or other securities, then upon exercise of this
Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number
and kind of securities to which Holder would have been entitled had Holder owned the Shares of
record as of the date the dividend occurred. If the Company subdivides the shares of its common
stock by reclassification or otherwise into a greater number of shares or takes any other action
that causes the outstanding shares of its common stock to become converted into a greater number of
shares of common stock, the number of Shares shall be proportionately increased and the Warrant
Price shall be proportionately decreased. If the outstanding shares of the Company’s common stock
are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the
Warrant Price shall be proportionately increased and the number of Shares shall be proportionately
decreased.

          2.2 Reclassification, Exchange, Combinations or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall
be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that Holder would have received for the Shares if this Warrant had been
exercised or converted immediately before such reclassification, exchange, substitution, or other
event. The Company or its successor shall promptly issue to Holder an amendment to this Warrant
setting forth the number and kind of such new securities or other property issuable upon exercise
or conversion of this Warrant as a result of such reclassification, exchange, substitution or other
event that results in a change of the number and/or class of securities issuable upon exercise or
conversion of this Warrant and the amended Warrant Price. The amendment to this Warrant shall
provide for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon
exercise of the new Warrant. The provisions of this Article 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.

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          2.3 Intentionally Omitted.

          2.4 No Impairment. The Company shall not, by amendment of its Certificate of
Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution,
issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed under this Warrant by the Company,
but shall at all times in good faith assist in carrying out of all the provisions of this Article 2
and in taking all such action as may be necessary or appropriate to protect Holder’s rights under
this Article against impairment.

          2.5 Fractional Shares. No fractional Shares shall be issuable upon exercise or
conversion of this Warrant and the number of Shares to be issued shall be rounded down to the
nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the
Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount
computed by multiplying the fractional interest by the fair market value of a full Share computed
as set forth in Article 1.3 above.

          2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant Price, the
Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute
such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company shall, upon written
request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date
thereof and the series of adjustments leading to such Warrant Price.

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.

          3.1 Representations and Warranties. The Company represents and warrants and covenants
to the Holder as follows: all Shares which may be issued upon the exercise of the purchase right
represented by this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid
and nonassessable, and free of any liens and encumbrances except for restrictions on transfer
provided for herein or under applicable federal and state securities laws.

          3.2 Notice of Certain Events. If the Company proposes at any time (a) to declare any
dividend or distribution upon any of its stock, whether in cash, property, stock, or other
securities and whether or not a regular cash dividend; (b) to offer for sale to stockholders
generally any shares of the Company’s capital stock (or other securities convertible into such
capital stock), other than (i) pursuant to the Company’s stock option or other compensatory plans,
(ii) in connection with commercial credit arrangements or equipment financings, or (iii) in
connection with strategic transactions for purposes other than capital raising; (c) to effect any
reclassification or recapitalization of any of its stock; (d) to merge or consolidate with or into
any other corporation, or sell, lease, license, or convey all or substantially all of its assets,
or to liquidate, dissolve or wind up, then, in connection with each such event, the Company shall
give Holder: (1) at least 10 days prior written notice of the date on which a record will be taken
for such dividend, distribution, or subscription rights (and specifying the date on which the
holders of common stock will be entitled thereto) or for determining rights to vote, if any, in
respect of the matters referred to in (a) and (b) above; and (2) in the case of the matters
referred to in (c) and (d) above at least 10 days prior written notice of the date when the same
will take place (and specifying the date on which the holders of common stock will be entitled to
exchange their

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common stock for securities or other property deliverable upon the occurrence of such event).
Company will also provide information requested by Holder reasonably necessary to enable the Holder
to comply with the Holder’s accounting or reporting requirements.

          3.3 No Shareholder Rights. Except as provided in this Warrant, the Holder will not
have any rights as a shareholder of the Company until the exercise of this Warrant.

ARTICLE 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER. The Holder represents and warrants
to the Company as follows:

          4.1 Purchase for Own Account. This Warrant and the securities to be acquired upon
exercise of this Warrant by the Holder will be acquired for investment for the Holder’s account,
not as a nominee or agent, and not with a view to the public resale or distribution within the
meaning of the Act. Holder also represents that the Holder has not been formed for the specific
purpose of acquiring this Warrant or the Shares.

          4.2 Disclosure of Information. The Holder has received or has had full access to all
the information it considers necessary or appropriate to make an informed investment decision with
respect to the acquisition of this Warrant and its underlying securities. The Holder further has
had an opportunity to ask questions and receive answers from the Company regarding the terms and
conditions of the offering of this Warrant and its underlying securities and to obtain additional
information (to the extent the Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify any information furnished to the Holder or to
which the Holder has access.

          4.3 Investment Experience. The Holder understands that the purchase of this Warrant
and its underlying securities involves substantial risk. The Holder has experience as an investor
in securities of companies in the development stage and acknowledges that the Holder can bear the
economic risk of such Holder’s investment in this Warrant and its underlying securities and has
such knowledge and experience in financial or business matters that the Holder is capable of
evaluating the merits and risks of its investment in this Warrant and its underlying securities
and/or has a preexisting personal or business relationship with the Company and certain of its
officers, directors or controlling persons of a nature and duration that enables the Holder to be
aware of the character, business acumen and financial circumstances of such persons.

          4.4 Accredited Investor Status. The Holder is an “accredited investor” within the
meaning of Regulation D promulgated under the Act.

          4.5 The Act. The Holder understands that this Warrant and the Shares issuable upon
exercise or conversion hereof have not been registered under the Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the
Holder’s investment intent as expressed herein. The Holder understands that this Warrant and the
Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently
registered under the Act and qualified under applicable state securities laws, or unless exemption
from such registration and qualification are otherwise available.

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ARTICLE 5. MISCELLANEOUS.

          5.1 Term. This Warrant is exercisable in whole or in part at any time and from time
to time on or before the Expiration Date.

          5.2 Legends. This Warrant and the Shares shall be imprinted with a legend in
substantially the following form:

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE
AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

          5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable
upon exercise of this Warrant may not be transferred or assigned in whole or in part without
compliance with applicable federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation letters and legal
opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The
Company shall not require [Silicon Valley Bank (“Bank”)][Holder] to provide an opinion of counsel
if the transfer is to [Bank’s parent company, SVB Financial Group (formerly Silicon Valley
Bancshares), or any other affiliate of Bank][any affiliate of Holder]. Additionally, the Company
shall also not require an opinion of counsel if there is no material question as to the
availability of Rule 144, including, without limitation, current information as referenced in Rule
144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the
selling broker represents that it has complied with Rule 144(f), and the Company is provided with a
copy of Holder’s notice of proposed sale.

          5.4 Transfer Procedure. After receipt by Holder of the executed Warrant, [Bank will
transfer all of this Warrant to Holder’s parent company, SVB Financial Group][Holder may transfer
this Warrant to any affiliate of Holder], by execution of an Assignment substantially in the form
of Appendix 2. Subject to the provisions of Article 5.3 and upon providing Company with written
notice, [SVB Financial Group and any subsequent Holder][any subsequent Holder] may transfer all or
part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable
directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided,
however, in connection with any such transfer, [SVB Financial Group or any subsequent Holder][any
subsequent Holder] will give the Company notice of the portion of the Warrant being transferred
with the name, address and taxpayer identification number of the transferee and Holder will
surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if
applicable).

          5.5 Notices. All notices and other communications from the Company to the Holder, or
vice versa, shall be deemed delivered and effective when given personally or mailed by first-class
registered or certified mail, postage prepaid, at such address as may have been furnished to the
Company or the Holder, as the case may (or on the first business day after transmission by
facsimile) be, in writing by the Company or such Holder from time to time.

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Effective upon receipt of the fully executed Warrant and the initial transfer described in
Article 5.4 above, all notices to the Holder shall be addressed as follows until the Company
receives notice of a change of address in connection with a transfer or otherwise:

[SVB Financial Group

Attn: Treasury Department

3003 Tasman Drive, HA 200

Santa Clara, CA 95054

Telephone: 408-654-7400

Facsimile: 408-496-2405]

[Oxford Finance Corporation

133 N. Fairfax Street

Alexandria, VA 22314

Attn: Tim A. Lex, Chief Operating Officer

Telephone: (703) 519-4900

Facsimile: (703) 519-5225]

Notice to the Company shall be addressed as follows until the Holder receives notice of a change in
address:

ARDEA BIOSCIENCES, INC.

4939 Directors Place

San Diego, CA 92121

Attn: Chief Financial Officer

Tel.: (858) 652-6500

Fax: (858) 625-0760

          5.6 Waiver. This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought.

          5.7 Attorneys’ Fees. In the event of any dispute between the parties concerning the
terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to
collect from the other party all costs incurred in such dispute, including reasonable attorneys’
fees.

          5.8 Automatic Conversion upon Expiration. In the event that, upon the Expiration
Date, the fair market value of one Share as determined in accordance with Article 1.3 above is
greater than the Warrant Price in effect on such date, then this Warrant shall automatically be
deemed on and as of such date to be converted pursuant to Article 1.2 above as to all Shares (or
such other securities) for which it shall not previously have been exercised or converted, and the
Company shall promptly deliver a certificate representing the Shares (or such other securities)
issued upon such conversion to the Holder.

          5.9 Counterparts. This Warrant may be executed in counterparts, all of which together
shall constitute one and the same agreement.

          5.10 Governing Law. This Warrant shall be governed by and construed in accordance
with the laws of the State of California, without giving effect to its principles regarding
conflicts of law.

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[Balance of Page Intentionally Left Blank]

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	“COMPANY”
	 
	 	 
	ARDEA BIOSCIENCES, INC.
	 
	 	 
	By:
	 	 
	 

	 	 
	 
	 	 
	Name:
	 	 
	 

	 	 
	 

	 	(Print)
	Title:

	 	President and Chief Executive Officer
	 
	 	 
	 
	 	 
	 
	 	 
	“HOLDER”
	 
	 	 
	[SILICON VALLEY BANK][OXFORD FINANCE CORPORATION]
	 
	 	 
	By:
	 	 
	 

	 	 
	 
	 	 
	Name:
	 	 
	 

	 	 
	 

	 	(Print)
	 
	 	 
	Title:
	 	 
	 

	 	 

 

 

APPENDIX 1

NOTICE OF EXERCISE

          1. Holder
elects to purchase                                         
shares of the Common Stock of ARDEA BIOSCIENCES, INC.
pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the
shares in full.

          [or]

          1. Holder elects to convert the attached Warrant into Shares/cash [strike one] in the manner
specified in the Warrant. This conversion is exercised for                                          of the Shares
covered by the Warrant.

          [Strike paragraph that does not apply.]

          2. Please issue a certificate or certificates representing the shares in the name specified
below:

	 
	 

	     Holders Name

	 

	 

	 

	 

	 

	     (Address)

          3. By its execution below and for the benefit of the Company, Holder hereby restates each of
the representations and warranties in Article 4 of the Warrant as the date hereof.

	 	 	 
	HOLDER:
	 
	 	 
	 
	 
	 	 
	By:
	 	 
	 

	 	 
	 
	 	 
	Name:
	 	 
	 

	 	 
	 
	 	 
	Title:
	 	 
	 

	 	 
	 
	 	 
	(Date):
	 	 
	 

	 	 

 

 

APPENDIX 2

ASSIGNMENT

For value received, [Silicon Valley Bank][Oxford Finance Corporation] hereby sells, assigns
and transfers unto

	 	 	 
	[Name:

	 	SVB Financial Group
	Address:

	 	3003 Tasman Drive (HA-200)
	 

	 	Santa Clara, CA 95054
	 
	 	 
	Tax ID:

	 	91-1962278]
	 
	 	 
	[Name:
	 	 
	Address:
	 	 
	 
	 	 
	Tax ID:

	 	]

that certain Warrant to Purchase Stock issued by ARDEA BIOSCIENCES, INC. (the “Company”), on
November ___, 2008 (the “Warrant”) together with all rights, title and interest therein.

	 	 	 
	[SILICON VALLEY BANK][OXFORD FINANCE CORPORATION]
	 
	 	 
	By:
	 	 
	 

	 	 
	Name:
	 	 
	 

	 	 
	Title:
	 	 
	 

	 	 

	 	 	 
	Date:
	 	 
	 

	 	 

By its execution below, and for the benefit of the Company, [SVB Financial Group][                                        ] makes each of
the representations and warranties set forth in Article 4 of the Warrant and agrees to all other
provisions of the Warrant as of the date hereof.

	 	 	 
	[SVB FINANCIAL GROUP][                                        ]
	 
	 	 
	By:
	 	 
	 

	 	 
	Name:
	 	 
	 

	 	 
	Title:exv10w2

Exhibit 10.2

ARDEA BIOSCIENCES, INC.

SENIOR EXECUTIVE SEVERANCE BENEFIT PLAN

Amended and Restated Effective November 7, 2008

Section 1. Introduction.

     This Ardea Biosciences, Inc. Senior Executive Severance Benefit Plan was established effective
July 1, 2001 and most recently amended and restated November 7, 2008 (the “Plan”). The purpose of
the Plan is to provide for the payment of severance benefits to certain eligible employees of Ardea
Biosciences, Inc. (the “Company”) whose employment with the Company is terminated pursuant to a
Covered Termination (as defined below). This Plan shall supersede any other severance benefit
plan, policy or practice previously maintained by the Company with respect to Eligible Employees
covered under this Plan, except to the extent Eligible Employees are parties to written agreements
with the Company that expressly contemplate otherwise. This Plan document also is the Summary Plan
Description for the Plan.

Section 2. Definitions.

     For purposes of the Plan, the following terms are defined as follows:

     (a) “Base Salary” means the Eligible Employee’s annual base pay (excluding incentive pay,
premium pay, commissions, overtime, bonuses and other forms of variable compensation), at the rate
in effect during the last regularly scheduled payroll period immediately preceding the date of the
Eligible Employee’s Covered Termination, and prior to any reduction in base pay that would permit
such Eligible Employee to voluntarily terminate employment in a Constructive Termination pursuant
to Section 2(d)(i).

     (b) “Board” means the Board of Directors of the Company.

     (c) “Company” means Ardea Biosciences, Inc.

     (d) “Constructive Termination” means, with respect to an Eligible Employee, that such Eligible
Employee voluntarily terminates his or her employment with the Company (A) after (1) any of the
following are undertaken without Cause and without such Eligible Employee’s express written
consent; (2) the Eligible Employee notifies the Company in writing, within ninety (90) days after
the occurrence of one of the following events, which notice specifies the condition giving rise to
a Constructive Termination and that the Eligible Employee intends to terminate his employment no
earlier than thirty (30) days after the Company’s receipt of such notice; and (3) the Company does
not cure such condition within thirty (30) days following its receipt of such notice (the “Cure
Period”) or states unequivocally in writing that it does not intend to attempt to cure such
condition, and (B) such voluntary termination occurs within ninety (90) days following the end of
the Cure Period:

1.

 

          (i) a material reduction by the Company in the Eligible Employee’s Base Salary; provided,
however, that (A) a reduction of Base Salary of five percent (5%) or less
shall in no event be considered a material reduction for purposes of this Plan, and (B) a
reduction by the Company of the Eligible Employee’s Base Salary by up to ten percent (10%) shall
not constitute a material reduction for purposes of this Plan if it is made in connection with an
across-the-board reduction by the Company of all Eligible Employees’ annual base salaries by a
percentage at least equal to the percentage by which the Eligible Employee’s Base Salary is
reduced;

          (ii) a relocation of the Eligible Employee’s business office to a location more than fifty
(50) miles from the location at which the Eligible Employee performs his or her duties, except for
required travel by the Eligible Employee on the Company’s business to an extent substantially
consistent with the Eligible Employee’s business travel obligations; provided, however, that no
relocation of the Eligible Employee’s business office shall constitute a Constructive Termination
for purposes of this Plan if the Eligible Employee provides services to the Company from a remote
location (e.g., through telecommuting) at the time of the relocation; or

          (iii) a material breach by the Company of any provision of this Plan or any other Agreement
between the Eligible Employee and the Company concerning the terms and conditions of his or her
employment.

     (e) “Continuation Period” means a period of twelve (12) months following the Eligible
Employee’s Covered Termination.

     (f) “Covered Termination” means an Involuntary Termination Without Cause or a Constructive
Termination, notice of either of which is given on or after the Effective Date.

     (g) “Effective Date” means July 1, 2001, the effective date of the Plan.

     (h) “Eligible Employee” means any full-time, regular hire employee of the Company, other than
the Company’s Chief Executive Officer, who is a Senior Vice President or who holds a higher such
office with the Company and any person designated by the Board or its Compensation Committee from
time to time, and whose employment with the Company terminates due to a Covered Termination.

     (i) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     (j) “Involuntary Termination Without Cause” means the Eligible Employee’s dismissal or
discharge for reasons other than Cause. For this purpose, “Cause” means that, in the reasonable
determination of the Company, the Eligible Employee has

          (i) been convicted of or pleaded guilty or no contest to any felony or any crime involving
dishonesty that is likely to inflict or has inflicted demonstrable and material injury on the
business of the Company;

          (ii) willfully participated in any fraud against the Company;

2.

 

          (iii) willfully and materially breached a Company policy;

          (iv) intentionally damaged any property of the Company thereby causing demonstrable and
material injury to the business of the Company;

          (v) willfully and materially breached the Eligible Employee’s Proprietary Information and
Inventions Agreement with the Company; or

          (vi) engaged in conduct that, in the reasonable determination of the Company’s Board of
Directors, demonstrates gross unfitness to serve.

     Notwithstanding the foregoing, Cause shall not exist based on conduct described in clause
(iii) or (vi) above unless the conduct described in such clause has not been cured within fifteen
(15) days following the Eligible Employee’s receipt of written notice from the Company specifying
the particulars of the conduct constituting Cause.

     (k) “Target Performance Bonus” means either: (i) the target performance bonus then in effect
for the Eligible Employee for the year in which the Covered Termination occurs, (ii) if, on or
prior to the date of the Covered Termination, the Company shall not have approved a target
performance bonus applicable to such Eligible Employee for the year in which such Covered
Termination occurs, but a target performance bonus applicable to such Eligible Employee exists for
the year immediately preceding the year in which such Covered Termination occurs, the target
performance bonus amount in effect for the Eligible Employee for such immediately preceding year,
or (iii) if there is no target performance bonus in effect for the Eligible Employee for either the
year in which such Covered Termination occurs or the immediately preceding year, the largest
maximum target performance bonus payable to any other Company officer with an employment title
equivalent to or below the employment title of such Eligible Employee for the year that includes
such Covered Termination.

Section 3. Eligibility For Benefits.

     (a) General Rules. Subject to the requirements set forth in this Section, the Company shall
provide the severance benefits described in Section 4 of the Plan to Eligible Employees.

          (i) In order to be eligible to receive benefits under the Plan, an Eligible Employee whose
employment is terminated pursuant to a Covered Termination that is an Involuntary Termination
Without Cause must continue to provide services to the Company, at the Company’s request, through
such date as determined by the Company; provided, however, that such date shall not be more than
ninety (90) days from the date the Eligible Employee is notified by the Company, in writing, of his
or her Involuntary Termination Without Cause.

          (ii) In order to be eligible to receive benefits under the Plan, an Eligible Employee also
must execute a general waiver and release (the “Release”) in substantially the form attached hereto
as Exhibit A, Exhibit B or Exhibit C, as appropriate, within the applicable time period set forth
therein, but in no event later than forty-five (45) days following termination of the Eligible
Employee’s employment, and permitting such Release and Waiver to become fully effective in
accordance with its terms, (the date Executive’s Release

3.

 

becomes fully effective, the “Release Effective Date”), and such Release must become effective
in accordance with its terms. The Company, in its sole discretion, may modify the form of the
required Release to comply with applicable state law and shall determine the form of the required
Release.

     (b) Exceptions to Benefit Entitlement. An employee who otherwise is an Eligible Employee
shall not receive benefits under the Plan in any of the following circumstances, as determined by
the Company in its sole discretion:

          (i) The employee has executed an individually negotiated employment contract or agreement with
the Company relating to severance benefits that is in effect on his or her termination date, in
which case such employee’s severance benefit, if any, shall be governed by the terms of such
individually negotiated employment contract or agreement and shall be governed by this Plan only to
the extent that the reduction pursuant to Section 5(a) below does not entirely eliminate benefits
under this Plan.

          (ii) The Company involuntarily terminates the employee’s employment with the Company, and such
termination does not constitute an Involuntary Termination Without Cause.

          (iii) The employee voluntarily terminates employment with the Company, and such termination
does not constitute a Constructive Termination. Voluntary terminations include, but are not
limited to, resignation, retirement or failure to return from a leave of absence on the scheduled
date.

          (iv) The employee voluntarily terminates employment with the Company in order to accept
employment with another entity that is wholly or partly owned (directly or indirectly) by the
Company or an affiliate of the Company.

          (v) The employee is offered employment, with the same title and reporting responsibilities and
no diminution in duties and responsibilities, with the Company, an affiliate of the Company, or a
successor to the Company.

          (vi) The employee is rehired by the Company or an affiliate of the Company prior to the date
benefits under the Plan are scheduled to commence.

Section 4. Amount of Benefit.

     (a) Severance. Each Eligible Employee shall receive the following benefits:

          (i) Base Salary for the Continuation Period;

          (ii) Target Performance Bonus for the period in which the Eligible Employee’s termination
occurs, prorated to the date of termination; and

          (iii) Accelerated vesting of shares subject to all stock awards, for the number of shares
which would have vested accordingly had the Eligible Employee continued employment with the Company
for the Continuation Period.

4.

 

     Salary continuation shall be paid in regular installments on the normal payroll dates of the
Company commencing on the Release Effective Date (except as provided in Section 5(g) below) and
shall be subject to all required tax withholding. Target Performance Bonus payments shall be paid
within ten (10) days after the Release Effective Date.

     (b) Severance in connection with a Change in Control. An Eligible Employee whose employment
with the Company terminates due to a Covered Termination within three (3) months before or within
twelve (12) months following a Change in Control, (as defined in the Appendix, Section C, of the
Company’s 2004 Stock Equity Incentive Plan), shall receive the following benefits, and not the
benefits described in Section 4(a) above:

          (i) A payment equal to twelve (12) months of Base Salary; and

          (ii) A payment equal to the greater of (1) the Target Performance Bonus for the year in which
the Eligible Employee’s termination occurs or (2) the Target Performance Bonus earned for the year
preceding the year in which the Eligible Employee’s termination occurs.

     Payments of Base Salary and Target Performance Bonus amounts shall be paid within ten (10)
days after the Release Effective Date (except as provided in Section 5(g) below) and shall be
subject to all required tax withholding.

     (c) Continued Insurance Benefits. Provided that the Eligible Employee elects continued
coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), upon a
severance described in Sections 4(a) and 4(b) above, the Company shall pay the portion of premiums
(the “COBRA Premiums”) of each Eligible Employee’s group medical, dental and vision coverage,
including coverage for the Eligible Employee’s eligible dependents, that the Company paid prior to
the Covered Termination for the Continuation Period described in Section 4(a) or, if shorter, for
the duration of the COBRA continuation period. Such premium payments shall continue for the
duration of the Continuation Period; provided, however, that no such premium payments shall be made
following the effective date of the Eligible Employee’s coverage by a medical, dental or vision
insurance plan of a subsequent employer, or cancellation of coverage due to non-payment by the
Eligible Employee of his or her portion of the applicable premiums. Each Eligible Employee shall
be required to notify the Company immediately if the Eligible Employee becomes covered by a
medical, dental or vision insurance plan of a subsequent employer.

     No provision of this Plan will affect the continuation coverage rules under COBRA, except that
the Company’s payment of any COBRA Premiums during the Continuation Period will be credited as
payment by the Eligible Employee for purposes of the Eligible Employee’s payments required under
COBRA. Therefore, the period during which an Eligible Employee may elect to continue the Company’s
group medical coverage at his or her own expense under COBRA, the length of time during which COBRA
coverage will be made available to the Eligible Employee, and all other rights and obligations of
the Eligible Employee under COBRA (except the obligation to pay such portion of the insurance
premiums that the Company pays during the Continuation Period) will be applied in the same manner
that such rules would apply in the absence of this Plan. At the conclusion of the Continuation
Period, the

5.

 

Eligible Employee shall be responsible for the entire payment of premiums required under COBRA
for the duration of the COBRA continuation period. For purposes of this Section 4(b), such portion
of the applicable premiums that will be paid by the Company during the Continuation Period shall
not include any amounts payable by the Eligible Employee under a Section 125 health care
reimbursement plan, which amounts, if any, are the sole responsibility of the Eligible Employee.

Section 5. Limitations on Benefits.

     (a) Certain Reductions and Offsets. Notwithstanding any other provision of the Plan to the
contrary, any benefits payable to an Eligible Employee under this Plan shall be reduced by any
severance benefits payable by the Company to such individual under any other policy, plan, program
or arrangement, including, without limitation, a contract between the Eligible Employee and any
entity, covering such individual, unless such contract expressly contemplates that the Eligible
Employee is also eligible to participate in the Plan. Furthermore, to the extent that any federal,
state or local laws, including, without limitation, so-called “plant closing” laws, require the
Company to give advance notice or make a payment of any kind to an Eligible Employee because of
that Eligible Employee’s involuntary termination due to a layoff, reduction in force, plant or
facility closing, sale of business, change of control, or any other similar event or reason, the
benefits payable under this Plan shall either be reduced or eliminated but not below one (1) week
of Base Salary. The benefits provided under this Plan are intended to satisfy any and all
statutory obligations that may arise out of an Eligible Employee’s involuntary termination of
employment for the foregoing reasons, and the Plan Administrator shall so construe and implement
the terms of the Plan.

     (b) Mitigation. Except as otherwise specifically provided herein, Eligible Employees shall
not be required to mitigate damages or the amount of any payment provided under this Plan by
seeking other employment or otherwise, nor shall the amount of any payment provided for under this
Plan be reduced by any retirement benefits received by such Eligible Employee after the Covered
Termination.

     (c) Termination of Benefits. Benefits under this Plan shall terminate immediately if the
Eligible Employee, at any time, violates any proprietary information or confidentiality obligation
to the Company.

     (d) Non-Duplication of Benefits. No Eligible Employee is eligible to receive benefits under
this Plan more than one time.

     (e) Indebtedness of Eligible Employees. To the extent permitted by law, if a terminating
employee is indebted to the Company or an affiliate of the Company at his or her termination date,
the Company reserves the right to offset any severance payments under the Plan by the amount of
such indebtedness. Additionally, if a Covered Employee is subject to withholding for taxes related
to any non-Plan benefits, the Company may offset any salary severance payment or other payments
under the Plan by the amount of such withholding taxes.

6.

 

     (f) Parachute Payments. If any payment or benefit the Eligible Employee would receive in
connection with a change in ownership or effective control of the Company
from the Company or otherwise (“Payment”) would (i) constitute a “parachute payment” within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii)
but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the
“Excise Tax”), then such Payment shall be equal to the Reduced Amount. The “Reduced Amount” shall
be either (x) the largest portion of the Payment that would result in no portion of the Payment
being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the
Payment, whichever amount, after taking into account all applicable federal, state and local
employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal
rate), results in the Eligible Employee’s receipt, on an after-tax basis, of the greater amount of
the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise
Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that
the Payment equals the Reduced Amount, reduction shall occur in the following 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 award compensation is to be reduced, such
acceleration of vesting shall be cancelled in the reverse order of the date of grant of the
Eligible Employee’s stock awards.

     The accounting firm engaged by the Company for general audit purposes as of the day prior to
the effective date of the change in ownership or effective control of the Company shall perform the
foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant
or auditor for the individual, entity or group effecting the change in ownership or effective
control of the Company, the Company shall appoint a nationally recognized accounting firm to make
the determinations required hereunder. The Company shall bear all expenses with respect to the
determinations by such accounting firm required to be made hereunder.

     The accounting firm engaged to make the determinations hereunder shall provide its
calculations, together with detailed supporting documentation, to the Company and the Eligible
Employee within fifteen (15) calendar days after the date on which the Eligible Employee’s right to
a Payment is triggered (if requested at that time by the Company or the Eligible Employee) or such
other time as requested by the Company or the Eligible Employee. If the accounting firm determines
that no Excise Tax is payable with respect to a Payment, either before or after the application of
the Reduced Amount, it shall furnish the Company and the Eligible Employee with an opinion
reasonably acceptable to Executive that no Excise Tax will be imposed with respect to such Payment.
Any good faith determinations of the accounting firm made hereunder shall be final, binding and
conclusive upon the Company and the Eligible Employee.

     (g) Application of Internal Revenue Code Section 409A. Notwithstanding anything to the
contrary set forth herein, any payments and benefits provided under this Agreement (the “Severance
Benefits”) that constitute “deferred compensation” within the meaning of Section 409A of the Code
and the regulations and other guidance thereunder and any state law of similar effect (collectively
“Section 409A”) shall not commence in connection with Executive’s termination of employment unless
and until Executive has also incurred a “separation from service” (as such term is defined in
Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless the Company reasonably
determines that such amounts
may be provided to Executive without causing Executive to incur the additional 20% tax under
Section 409A.

7.

 

     It is intended that each installment of the Severance Benefits payments provided for in this
Agreement is a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i).
For the avoidance of doubt, it is intended that payments of the Severance Benefits set forth in
this Agreement satisfy, to the greatest extent possible, the exemptions from the application of
Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and
1.409A-1(b)(9). However, if the Company (or, if applicable, the successor entity thereto)
determines that the Severance Benefits constitute “deferred compensation” under Section 409A and
Executive is, on the termination of Executive’s service, a “specified employee” of the Company or
any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code,
then, solely to the extent necessary to avoid the incurrence of the adverse personal tax
consequences under Section 409A, the timing of the Severance Benefit payments shall be delayed
until the earlier to occur of: (i) the date that is six months and one day after Executive’s
Separation From Service or (ii) the date of Executive’s death (such applicable date, the “Specified
Employee Initial Payment Date”), and the Company (or the successor entity thereto, as applicable)
shall (A) pay to Executive a lump sum amount equal to the sum of the Severance Benefit payments
that Executive would otherwise have received through the Specified Employee Initial Payment Date if
the commencement of the payment of the Severance Benefits had not been so delayed pursuant to this
Section and (B) commence paying the balance of the Severance Benefits in accordance with the
applicable payment schedules set forth in this Agreement.

     Except to the extent that payments may be delayed until the Specified Employee Initial Payment
Date pursuant to the preceding paragraph, on the first regular payroll pay day following the
effective date of the Release, the Company will pay Executive the Severance Benefits Executive
would otherwise have received under the Agreement on or prior to such date but for the delay in
payment related to the effectiveness of the Release, with the balance of the Severance Benefits
being paid as originally scheduled. All amounts payable under the Agreement will be subject to
standard payroll taxes and deductions.

Section 6. Company Property.

     Notwithstanding anything to the contrary set forth herein, a Covered Employee will not be
entitled to any benefit under the Plan unless and until the Covered Employee promptly returns all
Company Property, except to the extent such obligation is waived in writing by the Company. For
this purpose, “Company Property” means all Company documents (and all copies thereof) and other
Company property which the Covered Employee had in his or her possession at any time, including,
but not limited to, Company files, notes, drawings records, plans, forecasts, reports, studies,
analyses, proposals, agreements, financial information, research and development information, sales
and marketing information, operational and personnel information, specifications, code, software,
databases, computer-recorded information, tangible property and equipment (including, but not
limited to, leased vehicles, computers, facsimile machines, mobile telephones, servers), credit
cards, entry cards, identification badges and keys; and any materials of any kind which contain or
embody any proprietary or confidential information of the Company (and all reproductions thereof in
whole or in part). As a condition
to receiving benefits under the Plan, Covered Employees must not make or retain copies,
reproductions or summaries of any such Company property.

8.

 

Section 7. Right To Interpret Plan; Amendment and Termination. 

     (a) Exclusive Discretion. The Plan Administrator shall have the exclusive discretion and
authority to establish rules, forms, and procedures for the administration of the Plan and to
construe and interpret the Plan and to decide any and all questions of fact, interpretation,
definition, computation or administration arising in connection with the operation of the Plan,
including, but not limited to, the eligibility to participate in the Plan and amount of benefits
paid under the Plan. The rules, interpretations, computations and other actions of the Plan
Administrator shall be binding and conclusive on all persons.

     (b) Amendment or Termination. The Company reserves the right to amend or terminate this Plan
or the benefits provided hereunder at any time; provided, however, that no such amendment or
termination shall affect the right to any unpaid benefit of any Eligible Employee whose termination
date has occurred prior to amendment or termination of the Plan. Any action amending or
terminating the Plan shall be in writing and executed by the chairman of the Compensation Committee
of the Board of Directors of the Company.

     (c) Successors and Assigns. The Company shall obtain the assumption of this Plan by any
successor or assign of the Company, which successor or assign shall agree to assume the obligations
and perform all of the terms and conditions of this Plan.

Section 8. Termination of Certain Employee Benefits.

     All non-health benefits (such as life insurance, disability and 401(k) plan coverage) shall
terminate as of the employee’s termination date (except to the extent that a conversion privilege
may be available thereunder).

Section 9. No Implied Employment Contract.

     The Plan shall not be deemed (i) to give any employee or other person any right to be retained
in the employ of the Company or (ii) to interfere with the right of the Company to discharge any
employee or other person at any time and for any reason, which right is hereby reserved.

Section 10. Legal Construction.

     This Plan is intended to be governed by and shall be construed in accordance with ERISA and,
to the extent not preempted by ERISA, the laws of the State of California.

Section 11. Claims, Inquiries And Appeals.

     (a) Applications for Benefits and Inquiries. Any application for benefits, inquiries about
the Plan or inquiries about present or future rights under the Plan must be submitted to the Plan
Administrator in writing by an applicant (or his or her authorized representative). The Plan
Administrator is:

Ardea Biosciences, Inc.

4939 Directors Place

San Diego, CA 92121

9.

 

     (b) Denial of Claims. In the event that any application for benefits is denied in whole or in
part, the Plan Administrator must provide the applicant with written or electronic notice of the
denial of the application, and of the applicant’s right to review the denial. Any electronic
notice will comply with the regulations of the U.S. Department of Labor. The written notice of
denial will be set forth in a manner designed to be understood by the employee and will include the
following:

          (i) the specific reason or reasons for the denial;

          (ii) references to the specific Plan provisions upon which the denial is based;

          (iii) a description of any additional information or material that the Plan Administrator
needs to complete the review and an explanation of why such information or material is necessary;
and

          (iv) an explanation of the Plan’s review procedures and the time limits applicable to such
procedures, including a statement of the applicant’s right to bring a civil action under section
502(a) of ERISA following a denial on review of the claim, as described in Section 11(d) below.

     This written notice will be given to the applicant within ninety (90) days after the Plan
Administrator receives the application, unless special circumstances require an extension of time,
in which case, the Plan Administrator has up to an additional ninety (90) days for processing the
application. If an extension of time for processing is required, written notice of the extension
will be furnished to the applicant before the end of the initial ninety (90) day period.

     This notice of extension will describe the special circumstances necessitating the additional
time and the date by which the Plan Administrator is to render its decision on the application. If
written notice of denial of the application for benefits is not furnished within the specified
time, the application shall be deemed to be denied. The applicant will then be permitted to appeal
the denial in accordance with the Review Procedure described below.

     (c) Request for a Review. Any person (or that person’s authorized representative) for whom an
application for benefits is denied (or deemed denied), in whole or in part, may appeal the denial
by submitting a request for a review to the Plan Administrator within sixty (60) days after the
application is denied (or deemed denied). A request for a review shall be in writing and shall be
addressed to:

Ardea Biosciences, Inc.

4939 Directors Place

San Diego, CA 92121

10.

 

     A request for review must set forth all of the grounds on which it is based, all facts in
support of the request and any other matters that the applicant feels are pertinent. The applicant
(or his or her representative) shall have the opportunity to submit (or the Plan Administrator may
require the applicant to submit) written comments, documents, records, and other information
relating to his or her claim. The applicant (or his or her representative) shall be provided, upon
request and free of charge, reasonable access to, and copies of, all documents, records and other
information relevant to his or her claim. The review shall take into account all comments,
documents, records and other information submitted by the applicant (or his or her representative)
relating to the claim, without regard to whether such information was submitted or considered in
the initial benefit determination.

     (d) Decision on Review. The Plan Administrator will act on each request for review within
sixty (60) days after receipt of the request, unless special circumstances require an extension of
time (not to exceed an additional sixty (60) days), for processing the request for a review. If an
extension for review is required, written notice of the extension will be furnished to the
applicant within the initial sixty (60) day period. This notice of extension will describe the
special circumstances necessitating the additional time and the date by which the Plan
Administrator is to render its decision on the review. The Plan Administrator will give prompt,
written or electronic notice of its decision to the applicant. Any electronic notice will comply
with the regulations of the U.S. Department of Labor. In the event that the Plan Administrator
confirms the denial of the application for benefits in whole or in part, the notice will set forth,
in a manner calculated to be understood by the applicant, the following:

          (i) the specific reason or reasons for the denial;

          (ii) references to the specific Plan provisions upon which the denial is based;

          (iii) a statement that the applicant is entitled to receive, upon request and free of charge,
reasonable access to, and copies of, all documents, records and other information relevant to his
or her claim; and

          (iv) a statement of the applicant’s right to bring a civil action under section 502(a) of
ERISA.

     If written notice of the Plan Administrator’s decision is not given to the applicant within
the time prescribed in this Subsection (d), the application will be deemed denied on review.

     (e) Rules and Procedures. The Plan Administrator will establish rules and procedures,
consistent with the Plan and with ERISA, as necessary and appropriate in carrying out its
responsibilities in reviewing benefit claims. The Plan Administrator may require an applicant who
wishes to submit additional information in connection with an appeal from the denial (or deemed
denial) of benefits to do so at the applicant’s own expense.

     (f) Exhaustion of Remedies. No legal action for benefits under the Plan may be brought until
the claimant (i) has submitted a written application for benefits in accordance with the procedures
described by Section 11(a) above, (ii) has been notified by the Plan

11.

 

Administrator that the application is denied (or the application is deemed denied due to the
Plan Administrator’s failure to act on it within the established time period), (iii) has filed a
written request for a review of the application in accordance with the appeal procedure described
in Section 11(c) above, and (iv) has been notified in writing that the Plan Administrator has
denied the appeal (or the appeal is deemed to be denied due to the Plan Administrator’s failure to
take any action on the claim within the time prescribed by Section 11(d) above).

Section 12. Basis Of Payments To And From Plan.

     All benefits under the Plan shall be paid by the Company. The Plan shall be unfunded, and
benefits hereunder shall be paid only from the general assets of the Company. A Covered Employee’s
right to receive payments under the Plan is no greater than that of the Company’s unsecured general
creditors. Therefore, if the Company were to become insolvent, the Covered Employee might not
receive benefits under the Plan.

Section 13. Non-Alienation Of Benefits

     No Plan benefit may be anticipated, alienated, sold, transferred, assigned, pledged,
encumbered or charged, and any attempt to do so will be void.

Section 14. Other Plan Information.

     (a) Employer and Plan Identification Numbers. The Employer Identification Number assigned to
the Company (which is the “Plan Sponsor” as that term is used in ERISA) by the Internal Revenue
Service is 94-3200380. The Plan Number assigned to the Plan by the Plan Sponsor pursuant to the
instructions of the Internal Revenue Service is 513.

     (b) Ending Date for Plan’s Fiscal Year. The date of the end of the fiscal year for the
purpose of maintaining the Plan’s records is December 31.

     (c) Agent for the Service of Legal Process. The agent for the service of legal process with
respect to the Plan is Ardea Biosciences, Inc., 4939 Directors Place, San Diego, CA 92121.

     (d) Plan Sponsor and Administrator. The “Plan Sponsor” and the “Plan Administrator” of the
Plan is Ardea Biosciences, Inc., 4939 Directors Place, San Diego, CA 92121. The Plan Sponsor’s and
Plan Administrator’s telephone number is (858) 652-6500. The Plan Administrator is the named
fiduciary charged with the responsibility for administering the Plan.

Section 15. Statement Of ERISA Rights.

     Participants in this Plan (which is a welfare benefit plan sponsored by Ardea Biosciences,
Inc.) are entitled to certain rights and protections under ERISA. If you are an Eligible Employee,
you are considered a participant in the Plan and, under ERISA, you are entitled to:

12.

 

     (a) Examine, without charge, at the Plan Administrator’s office and at other specified
locations, such as work sites, all Plan documents and copies of all documents filed by the Plan
with the U.S. Department of Labor, such as detailed annual reports;

     (b) Obtain copies of all Plan documents and Plan information upon written request to the Plan
Administrator. The Administrator may make a reasonable charge for the copies; and

     (c) Receive a summary of the Plan’s annual financial report, in the case of a plan that is
required to file an annual financial report with the Department of Labor. (Generally, all pension
plans and welfare plans with one hundred (100) or more participants must file these annual
reports.)

     In addition to creating rights for Plan participants, ERISA imposes duties upon the people
responsible for the operation of the employee benefit plan. The people who operate the Plan,
called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and
other Plan participants and beneficiaries.

     No one, including your employer or any other person, may fire you or otherwise discriminate
against you in any way to prevent you from obtaining a Plan benefit or exercising your rights under
ERISA. If your claim for a Plan benefit is denied in whole or in part, you must receive a written
explanation of the reason for the denial. You have the right to have the Plan review and
reconsider your claim.

     Under ERISA, there are steps you can take to enforce the above rights. For instance, if you
request materials from the Plan and do not receive them within thirty (30) days, you may file suit
in a federal court. In such a case, the court may require the Plan Administrator to provide the
materials and pay you up to $110 a day until you receive the materials, unless the materials were
not sent because of reasons beyond the control of the Plan Administrator. If you have a claim for
benefits that is denied or ignored, in whole or in part, you may file suit in a state or federal
court. If it should happen that the Plan fiduciaries misuse the Plan’s money, or if you are
discriminated against for asserting your rights, you may seek assistance from the U.S. Department
of Labor, or you may file suit in a federal court. The court will decide who should pay court
costs and legal fees. If you are successful, the court may order the person you have sued to pay
these costs and fees. If you lose, the court may order you to pay these costs and fees, for
example, if it finds your claim is frivolous.

     If you have any questions about the Plan, you should contact the Plan Administrator. If you
have any questions about this statement or about your rights under ERISA, or if you need assistance
in obtaining documents from the Plan Administrator, you should contact the nearest office of the
Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone
directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security
Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.
You may also obtain certain publications about your rights and responsibilities under ERISA by
calling the publications hotline of the Employee Benefits Security Administration or accessing its
website at http://www.dol.gov/ebsa/.

13.

 

Section 16. Execution.

     To record the adoption of the Plan, as amended and restated effective as of November 7, 2008,
Ardea Biosciences, Inc. has caused its duly authorized officer to execute the same this 7th day of
November, 2008.

	 	 	 
	Ardea Biosciences, Inc.
	 
	 	 
	 
	 	 
	By:

	 	/s/ Barry D. Quart, Pharm.D.
	 

	 	 
	 
	 	 
	Title:

	 	Chief Executive Officer
	 

	 	 

14.

 

Exhibit A

RELEASE

(Individual Termination, Eligible Employee age 40 or older)

     I understand and agree completely to the terms set forth in the Ardea Biosciences, Inc. Senior
Executive Severance Benefit Plan (the “Plan”). Certain capitalized terms used in this release are
defined in the Plan.

     I hereby confirm my obligations under the Company’s proprietary information and inventions
agreement.

     I acknowledge that I have read and understand Section 1542 of the California Civil Code which
reads as follows: “A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor.” I hereby expressly waive and relinquish all
rights and benefits under that section and any law of any jurisdiction of similar effect with
respect to my release of any claims I may have against the Company.

     In exchange for the benefits I am receiving under the Plan to which I am otherwise not
entitled, I hereby generally and completely release the Company and its directors, officers,
employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and
subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and
obligations, both known and unknown, that arise out of or are in any way related to events, acts,
conduct, or omissions occurring prior to my signing this Agreement. This general Release includes,
but is not limited to: (1) all claims arising out of or in any way related to my employment with
the Company or the termination of that employment; (2) all claims related to my compensation or
benefits from the Company, including salary, bonuses, commissions, vacation pay, expense
reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership
interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach
of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for
fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all
federal, state, and local statutory claims, including claims for discrimination, harassment,
retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964
(as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination
in Employment Act of 1967 (as amended) (“ADEA”), and the California Fair Employment and Housing Act
(as amended).

     I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have
under ADEA. I also acknowledge that the consideration given under the Plan for the waiver and
release in the preceding paragraph hereof is in addition to anything of value to which I was
already entitled. I further acknowledge that I have been advised by this writing, as required by
the ADEA, that: (A) my waiver and release do not apply to any rights or claims that may arise on
or after the date I execute this Release; (B) I should consult with an attorney prior to executing
this Release; (C) I have twenty-one (21) days to consider this Release (although I may choose to
voluntarily execute this Release earlier); (D) I have seven (7) days following my

1.

 

execution of this Release to revoke the Release; and (E) this Release shall not be effective
until the date upon which the revocation period has expired unexercised, which shall be the eighth
(8th) day after I execute this Release.

	 	 	 
	Employee
	 
	 	 
	 
	 	 
	Name:
	 	 
	 

	 	 
	 
	 	 
	Date:
	 	 
	 

	 	 

2.

 

Exhibit B

RELEASE

(Individual and Group Termination, Eligible Employee under age 40)

     I understand and agree completely to the terms set forth in the Ardea Biosciences, Inc. Senior
Executive Severance Benefit Plan (the “Plan”). Certain capitalized terms used in this Release are
defined in the Plan.

     I hereby confirm my obligations under the Company’s proprietary information and inventions
agreement.

     I acknowledge that I have read and understand Section 1542 of the California Civil Code which
reads as follows: “A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor.” I hereby expressly waive and relinquish all
rights and benefits under that section and any law of any jurisdiction of similar effect with
respect to my release of any claims I may have against the Company.

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

     I understand that I have seven (7) days to consider this Release (although I may voluntarily
execute the Release earlier).

	 	 	 
	Employee
	 
	 	 
	 
	 	 
	Name:
	 	 
	 

	 	 
	 
	 	 
	Date:
	 	 
	 

	 	 

1.

 

Exhibit C

RELEASE

(Group Termination, Eligible Employee age 40 or older)

     I understand and agree completely to the terms set forth in the Ardea Biosciences, Inc. Senior
Executive Severance Benefit Plan (the “Plan”). Certain capitalized terms used in this Release are
defined in the Plan.

     I hereby confirm my obligations under the Company’s proprietary information and inventions
agreement.

     I acknowledge that I have read and understand Section 1542 of the California Civil Code which
reads as follows: “A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor.” I hereby expressly waive and relinquish all
rights and benefits under that section and any law of any jurisdiction of similar effect with
respect to my release of any claims I may have against the Company.

     In exchange for the benefits I am receiving under the Plan to which I am otherwise not
entitled, In exchange for the benefits I am receiving under the Plan to which I am otherwise not
entitled, I hereby generally and completely release the Company and its directors, officers,
employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and
subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and
obligations, both known and unknown, that arise out of or are in any way related to events, acts,
conduct, or omissions occurring prior to my signing this Agreement. This general release includes,
but is not limited to: (1) all claims arising out of or in any way related to my employment with
the Company or the termination of that employment; (2) all claims related to my compensation or
benefits from the Company, including salary, bonuses, commissions, vacation pay, expense
reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership
interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach
of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for
fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all
federal, state, and local statutory claims, including claims for discrimination, harassment,
retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964
(as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination
in Employment Act of 1967 (as amended) (“ADEA”), and the California Fair Employment and Housing Act
(as amended).

     I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have
under ADEA. I also acknowledge that the consideration given under the Plan for the waiver and
release in the preceding paragraph hereof is in addition to anything of value to which I was
already entitled. I further acknowledge that I have been advised by this writing, as required by
the ADEA, that: (A) my waiver and release do not apply to any rights or claims that may arise on
or after the date I execute this Release; (B) I should consult with an attorney prior to executing
this Release; (C) I have forty-five (45) days to consider this Release (although I may

1.

 

choose to voluntarily execute this Release earlier); (D) I have seven (7) days following my
execution of this Release to revoke the Release; (E) this Release shall not be effective until the
date upon which the revocation period has expired unexercised, which shall be the eighth day (8th)
after I execute this Release; and (F) I have received with this Release a detailed list of the job
titles and ages of all employees who are eligible for severance benefits under the Plan in this
group termination and the ages of all employees of the Company in the same job classification or
organizational unit who are not eligible for severance benefits under the Plan.

	 	 	 
	Employee
	 
	 	 
	 
	 	 
	Name:
	 	 
	 

	 	 
	 
	 	 
	Date:
	 	 
	 

	 	 

2.

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