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                                                                    EXHIBIT 4.03

                                                            Symantec Corporation
                                                           1999 Acquisition Plan
                                                        As adopted July 15, 1999

                              SYMANTEC CORPORATION

                              1999 ACQUISITION PLAN

                            As Adopted July 15, 1999

             1.     PURPOSE. The purpose of this Plan is to provide incentives
to attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent,
Subsidiaries and Affiliates, by offering them an opportunity to participate in
the Company's future performance through awards of Options. Capitalized terms
not defined in the text are defined in Section 21.

             2.      SHARES SUBJECT TO THE PLAN.

                     2.1 Number of Shares Available. Subject to Sections 2.2 and
16, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 500,000 Shares plus any Shares that are made
available for grant and issuance under this Plan pursuant to the following
sentence. Subject to Sections 2.2 and 16, Shares that are subject to issuance
upon exercise of an Option but cease to be subject to such Option for any reason
other than exercise of such Option will again be available for grant and
issuance in connection with future Options under this Plan. At all times the
Company shall reserve and keep available a sufficient number of Shares as shall
be required to satisfy the requirements of all outstanding Options granted under
this Plan.

                     2.2 Adjustment of Shares. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then the number of Shares reserved for issuance under this Plan and the Exercise
Prices of and number of Shares subject to outstanding Options will be
proportionately adjusted, subject to any required action by the Board or the
stockholders of the Company and compliance with applicable securities laws;
provided, however, that fractions of a Share will not be issued but will either
be replaced by a cash payment equal to the Fair Market Value of such fraction of
a Share or will be rounded up to the nearest whole Share, as determined by the
Committee.

             3.      ELIGIBILITY. All Options issued under the Plan shall be
nonqualified stock options. Options may be granted to employees, officers,
consultants, independent contractors and advisors of the Company or any Parent,
Subsidiary or Affiliate of the Company; provided that Options awarded to
officers of the Company or any Parent, Subsidiary or Affiliate of the Company
may not exceed 30% of all Options that are available for grant under the Plan
and provided further that such consultants, independent contractors and advisors
render bona fide services not in connection with the offer and sale of
securities in a capital-raising transaction.

             4.      ADMINISTRATION.

                     4.1 Committee Authority. This Plan will be administered by
the Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:

             (a)     construe and interpret this Plan, any Stock Option
                     Agreement and any other agreement or document executed
                     pursuant to this Plan;

             (b)     prescribe, amend and rescind rules and regulations relating
                     to this Plan;

             (c)     select persons to receive Options;

             (d)     determine the form and terms of Options;

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             (e)     determine the number of Shares or other consideration
                     subject to Options;

             (f)     determine whether Options will be granted singly, in
                     combination with, in tandem with, in replacement of, or as
                     alternatives to, other Options under this Plan or any other
                     incentive or compensation plan of the Company or any
                     Parent, Subsidiary or Affiliate of the Company;

             (g)     grant waivers of Plan or Option conditions;

             (h)     determine the vesting, exercisability and payment of
                     Options;

             (i)     correct any defect, supply any omission or reconcile any
                     inconsistency in this Plan, any Option or any Stock Option
                     Agreement;

             (j)     determine whether an Option has been earned;

             (k)     amend any option agreements executed in connection with
                     this Plan; and

             (l)     make all other determinations necessary or advisable for
                     the administration of this Plan.

                     4.2 Committee Discretion. Any determination made by the
Committee with respect to any Option will be made in its sole discretion at the
time of grant of the Option or, unless in contravention of any express term of
this Plan or Option, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Option under
this Plan. The Committee may delegate to one or more officers of the Company the
authority to grant Options under this Plan.

             5.     OPTIONS. The Committee may grant Options to eligible
persons and will determine the number of Shares subject to the Option, the
Exercise Price of the Option, the period during which the Option may be
exercised, and all other terms and conditions of the Option, subject to the
following:

                     5.1 Form of Option Grant. Each Option granted under this
Plan will be evidenced by a Stock Option Agreement, which will be in such form
and contain such provisions (which need not be the same for each Participant) as
the Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.

                     5.2 Date of Grant. The date of grant of an Option will be
the date on which the Committee makes the determination to grant such Option,
unless otherwise specified by the Committee. The Stock Option Agreement and a
copy of this Plan will be delivered to the Participant within a reasonable time
after the granting of the Option.

                     5.3 Exercise Period. Options will be exercisable within the
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement governing such Option; provided, however, that no Option will
be exercisable after the expiration of ten (10) years from the date the Option
is granted. The Committee also may provide for the exercise of Options to become
exercisable at one time or from time to time, periodically or otherwise, in such
number of Shares or percentage of Shares as the Committee determines.

                     5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less than
100% of the Fair Market Value of the Shares on the date of grant. Payment for
the Shares purchased may be made in accordance with Section 6 of this Plan.

                     5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"EXERCISE AGREEMENT") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions

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imposed on the Shares purchased under such Exercise Agreement, if any, and such
representations and agreements regarding Participant's investment intent and
access to information and other matters, if any, as may be required or desirable
by the Company to comply with applicable securities laws, together with payment
in full of the Exercise Price for the number of Shares being purchased.

                     5.6 Termination. Notwithstanding the exercise periods set
forth in the Stock Option Agreement, exercise of an Option will always be
subject to the following:

             (a)     If the Participant is Terminated for any reason except
                     death or Disability, then the Participant may exercise such
                     Participant's Options only to the extent that such Options
                     would have been exercisable upon the Termination Date no
                     later than three (3) months after the Termination Date (or
                     such shorter or longer time period not exceeding five (5)
                     years as may be determined by the Committee), but in any
                     event, no later than the expiration date of the Options.

             (b)     If the Participant is Terminated because of Participant's
                     death or Disability (or the Participant dies within three
                     (3) months after a Termination other than because of
                     Participant's death or disability), then Participant's
                     Options may be exercised only to the extent that such
                     Options would have been exercisable by Participant on the
                     Termination Date and must be exercised by Participant (or
                     Participant's legal representative or authorized assignee)
                     no later than twelve (12) months after the Termination Date
                     (or such shorter or longer time period not exceeding five
                     (5) years as may be determined by the Committee), but in
                     any event no later than the expiration date of the Options.

                     5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.

                     5.8 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. The Committee may reduce the Exercise Price
of outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.

             6.      PAYMENT FOR SHARE PURCHASES.

                     6.1 Payment. Payment for Shares purchased pursuant to this
Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:

             (a)     by cancellation of indebtedness of the Company to the
                     Participant;

             (b)     by surrender of shares that either: (1) have been owned by
                     Participant for more than six (6) months and have been paid
                     for within the meaning of SEC Rule 144 (and, if such shares
                     were purchased from the Company by use of a promissory
                     note, such note has been fully paid with respect to such
                     shares); or (2) were obtained by Participant in the public
                     market;

             (c)     by tender of a full recourse promissory note having such
                     terms as may be approved by the Committee and bearing
                     interest at a rate sufficient to avoid imputation of income
                     under Sections 483 and 1274 of the Code; provided, however,
                     that Participants who are not employees of the Company will
                     not be entitled to purchase Shares with a promissory note

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                     unless the note is adequately secured by collateral other
                     than the Shares; provided, further, that the portion of the
                     Exercise Price equal to the par value of the Shares, if
                     any, must be paid in cash;

             (d)     by waiver of compensation due or accrued to the Participant
                     for services rendered; provided, further, that the portion
                     of the Exercise Price equal to the par value of the Shares,
                     if any, must be paid in cash;

             (e)     provided that a public market for the Company's stock
                     exists:

                     (1)    through a "same day sale" commitment from the
                            Participant and a broker-dealer that is a member of
                            the National Association of Securities Dealers (an
                            "NASD DEALER") whereby the Participant irrevocably
                            elects to exercise the Option and to sell a portion
                            of the Shares so purchased to pay for the Exercise
                            Price, and whereby the NASD Dealer irrevocably
                            commits upon receipt of such Shares to forward the
                            Exercise Price directly to the Company; or

                     (2)    through a "margin" commitment from the Participant
                            and a NASD Dealer whereby the Participant
                            irrevocably elects to exercise the Option and to
                            pledge the Shares so purchased to the NASD Dealer in
                            a margin account as security for a loan from the
                            NASD Dealer in the amount of the Exercise Price, and
                            whereby the NASD Dealer irrevocably commits upon
                            receipt of such Shares to forward the Exercise Price
                            directly to the Company; or

             (f)     by any combination of the foregoing.

                     6.2 Loan Guarantees. The Committee may help the Participant
pay for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant, provided the Company has full
recourse to the Participant relative to the guarantee.

             7.      WITHHOLDING TAXES.

                     7.1 Withholding Generally. Whenever Shares are to be issued
in satisfaction of Options granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Options are to be made in cash, such payment will be net of
an amount sufficient to satisfy federal, state, and local withholding tax
requirements.

                     7.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Option that is subject to tax withholding and the Participant is obligated
to pay the Company the amount required to be withheld, the Committee may allow
the Participant to satisfy the minimum withholding tax obligation by electing to
have the Company withhold from the Shares to be issued that number of Shares
having a Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be
determined. All elections by a Participant to have Shares withheld for this
purpose will be made in writing in a form acceptable to the Committee.

             8.      PRIVILEGES OF STOCK OWNERSHIP.

                     8.1 Voting and Dividends. No Participant will have
any of the rights of a stockholder with respect to any Shares until the Shares
are issued to the Participant. After Shares are issued to the Participant, the
Participant will be a stockholder and have all the rights of a stockholder with
respect to such Shares, including the right to vote and receive all dividends or
other distributions made or paid with respect to such Shares;

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provided, that the Participant will have no right to retain such stock dividends
or stock distributions with respect to Shares that are repurchased at the
Participant's original Exercise Price pursuant to Section 10.

                     8.2 Financial Statements. The Company will provide
financial statements to each Participant prior to such Participant's purchase of
Shares under this Plan, and to each Participant annually during the period such
Participant has Options outstanding; provided, however, the Company will not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.

             9. TRANSFERABILITY. Options granted under this Plan, and any
interest therein, will not be transferable or assignable by Participant, and may
not be made subject to execution, attachment or similar process, otherwise than
by will or by the laws of descent and distribution or as determined by the
Committee, in its sole discretion, within the limits permitted under the Form
S-8 Registration Statement relating to Shares thereto and set forth in the Stock
Option Agreement.

             10. RESTRICTIONS ON SHARES. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Stock Option
Agreement a right to repurchase a portion of or all unvested Shares previously
received upon exercise of an Option and held by a Participant following such
Participant's Termination at any time within ninety (90) days after the later of
Participant's Termination Date and the date Participant purchases Shares under
this Plan, for cash and/or cancellation of purchase money indebtedness, at the
Participant's Exercise Price.

             11. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.

             12. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.

             13. EXCHANGE AND BUYOUT OF OPTIONS. The Committee may, at any time
or from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Options in exchange for the surrender and
cancellation of any or all outstanding Options. The Committee may at any time
buy from a Participant an Option previously granted with payment in cash, Shares
or other consideration, based on such terms and conditions as the Committee and
the Participant may agree.

             14. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Option will
not be effective unless such Option is in compliance with all applicable federal
and state securities laws, rules and regulations of any governmental body, and
the requirements of any stock exchange or automated quotation system upon which
the Shares may then be listed or quoted, as they are in effect on the date of
grant of the Option and also

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on the date of exercise or other issuance. Notwithstanding any other provision
in this Plan, the Company will have no obligation to issue or deliver
certificates for Shares under this Plan prior to: (a) obtaining any approvals
from governmental agencies that the Company determines are necessary or
advisable; and/or (b) completion of any registration or other qualification of
such Shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company will be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.

             15. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option
granted under this Plan will confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent, Subsidiary or Affiliate of the Company or limit
in any way the right of the Company or any Parent, Subsidiary or Affiliate of
the Company to terminate Participant's employment or other relationship at any
time, with or without cause.

             16. CORPORATE TRANSACTIONS.

                     16.1 Assumption or Replacement of Options by Successor. In
the event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Options granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company (other than any stockholder
which merges (or which owns or controls another corporation which merges) with
the Company in such merger) cease to own their shares or other equity interests
in the Company, (d) the sale of substantially all of the assets of the Company,
or (e) any other transaction which qualifies as a "corporate transaction" under
Section 424(a) of the Code wherein the stockholders of the Company give up all
of their equity interest in the Company (except for the acquisition, sale or
transfer of all or substantially all of the outstanding shares of the Company
from or by the stockholders of the Company), any or all outstanding Options may
be assumed, converted or replaced by the successor corporation (if any), which
assumption, conversion or replacement will be binding on all Participants. In
the alternative, the successor corporation may substitute equivalent Options or
provide substantially similar consideration to Participants as was provided to
stockholders (after taking into account the existing provisions of the Options).
The successor corporation may also issue, in place of outstanding Shares of the
Company held by the Participant, substantially similar shares or other property
subject to repurchase restrictions no less favorable to the Participant. In the
event such successor corporation (if any) refuses to assume or substitute
Options, as provided above, pursuant to a transaction described in this
Subsection 16.1, such Options will expire on such transaction at such time and
on such conditions as the Board will determine.

                     16.2 Other Treatment of Options. Subject to any greater
rights granted to Participants under the foregoing provisions of this Section
16, in the event of the occurrence of any transaction described in Section 16.1,
any outstanding Options will be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation, sale of assets or
other "corporate transaction."

                     16.3 Assumption of Options by the Company. The Company,
from time to time, also may substitute or assume outstanding options granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either; (a) granting an Option under this Plan in substitution
of such other company's option; or (b) assuming such option as if it had been
granted under this Plan if the terms of such assumed option could be applied to
an Option granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed option would have been
eligible to be granted an Option under this Plan if the other company had
applied the rules of this Plan to such grant. In the event the Company assumes
an option granted by another company, the terms and conditions of such option
will remain unchanged (except that the exercise price and the number and nature
of Shares issuable upon exercise of any such option will

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be adjusted appropriately pursuant to Section 424(a) of the Code). In the event
the Company elects to grant a new Option rather than assuming an existing
option, such new Option may be granted with a similarly adjusted Exercise Price.

             17. ADOPTION AND EFFECTIVE DATE. This Plan will become effective
on the date that it is adopted by the Board (the "EFFECTIVE DATE").

             18. TERM OF PLAN. Unless earlier terminated as provided herein,
this Plan will terminate ten (10) years from the Effective Date.

             19. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Stock Option Agreement or instrument to be executed
pursuant to this Plan; provided, however, that no amendments may be made to
outstanding Options without the consent of the Participant.

             20. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan
by the Board nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.

             21. DEFINITIONS. As used in this Plan, the following terms will
have the following meanings:

                     "AFFILIATE" means any corporation that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, another corporation, where "control" (including
the terms "controlled by" and "under common control with") means the possession,
direct or indirect, of the power to cause the direction of the management and
policies of the corporation, whether through the ownership of voting securities,
by contract or otherwise.

                     "BOARD" means the Board of Directors of the Company.

                     "CODE" means the Internal Revenue Code of 1986, as amended.

                     "COMMITTEE" means the committee appointed by the Board to
administer this Plan, or if no such committee is appointed, the Board.

                     "COMPANY" means Symantec Corporation, a corporation
organized under the laws of the State of Delaware, or any successor corporation.

                     "DISABILITY" means a disability, whether temporary or
permanent, partial or total, within the meaning of Section 22(e)(3) of the Code,
as determined by the Committee.

                     "EXERCISE PRICE" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.

                     "FAIR MARKET VALUE" means, as of any date, the value of a
share of the Company's Common Stock determined as follows:

             (a)     if such Common Stock is then quoted on the Nasdaq National
                     Market, its closing price on the Nasdaq National Market on
                     the last trading day prior to the date of determination as
                     reported in The Wall Street Journal;

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             (b)     if such Common Stock is publicly traded and is then listed
                     on a national securities exchange, its closing price on the
                     last trading day prior to the date of determination on the
                     principal national securities exchange on which the Common
                     Stock is listed or admitted to trading as reported in The
                     Wall Street Journal;

             (c)     if such Common Stock is publicly traded but is not quoted
                     on the Nasdaq National Market nor listed or admitted to
                     trading on a national securities exchange, the average of
                     the closing bid and asked prices on the last trading day
                     prior to the date of determination as reported in The Wall
                     Street Journal; or

             (d)     if none of the foregoing is applicable, by the Committee in
                     good faith.

                     "OPTION" means an award of a nonqualified stock option to
purchase Shares pursuant to Section 5.

                     "PARENT" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if at the time of the
granting of an Option under this Plan, each of such corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.

                     "PARTICIPANT" means a person who receives an Option under
this Plan.

                     "PLAN" means this Symantec Corporation 1999 Acquisition
Plan, as amended from time to time.

                     "SEC" means the Securities and Exchange Commission.

                     "SHARES" means shares of the Company's Common Stock
reserved for issuance under this Plan, as adjusted pursuant to Sections 2 and
16, and any successor security.

                     "STOCK OPTION AGREEMENT" means, with respect to each
Option, the signed written agreement between the Company and the Participant
setting forth the terms and conditions of the Option.

                     "SUBSIDIARY" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if, at the time
of granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

                     "TERMINATION" or "TERMINATED" means, for purposes of this
Plan with respect to a Participant, that the Participant has for any reason
ceased to provide services as an employee, officer, consultant, independent
contractor or advisor to the Company or a Parent, Subsidiary or Affiliate of the
Company, except in the case of sick leave, military leave, or any other leave of
absence approved by the Committee, provided that such leave is for a period of
not more than ninety (90) days, or reinstatement upon the expiration of such
leave is guaranteed by contract or statute. The Committee will have sole
discretion to determine whether a Participant has ceased to provide services and
the effective date on which the Participant ceased to provide services (the
"TERMINATION DATE").

                                       8<PAGE>   1
                                                                   Exhibit 10.75

                                    AGREEMENT

THIS AGREEMENT is entered into as of the 9th day of December, 1999, by and
between Connetics Corporation ("Connetics") and Soltec Research Pty Ltd., A.C.N.
006 363 891 ("Soltec"). Connetics and Soltec are sometimes referred to in this
Agreement individually as a "Party" and collectively as the "Parties."

                               B A C K G R O U N D

A.      Soltec and Connetics are parties to an Exclusive Option Letter Agreement
        dated March 25, 1996 as amended on June 14, 1996 and January 6, 1998,
        between Connetics (under its former name, Connective Therapeutics, Inc.)
        and Soltec with respect to Soltec's "Pharmaceutical Mousse Delivery
        System Technology."

B.      Soltec and Connetics entered into a Letter of Understanding, dated
        September 10, 1999, which outlined the foundation for this Agreement,
        and which contemplates the termination of the Option Agreement.

NOW, THEREFORE, for the consideration set forth, the Parties agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

ADVERSE EXPERIENCE. "Adverse Experience" shall have the meaning set forth in
SECTION 12.1.

AFFILIATE. "Affiliate" means in respect of either Party any corporation or
business entity controlled by, controlling, or under common control with Soltec
or Connetics, respectively. For this purpose "control" means the direct or
indirect beneficial ownership of at least fifty percent (50%) of the voting
stock of, or at least fifty percent (50%) interest in the income of, such
corporation or other business entity, or such other relationship as, in fact,
constitutes actual control.

CLINICAL TRIAL. A Clinical Trial means a clinical investigation for a given
Product, and a Clinical Trial is commenced on the date the first human patient
is dosed.

CLOSING DATE. "Closing Date" means a date at which the initial payment for this
Agreement is to be exchanged, which shall be no less than five (5) business days
after the date this Agreement is signed unless the Parties agree in writing to a
different date.

COGS. "COGS" means Connetics' cost of producing the Product, computed in
accordance with GAAP applied on a consistent basis. Such costs shall include the
reasonable, out of pocket cost (whether incurred directly by such Party or
invoiced by any Third Party) of all raw materials,

[*****] CONFIDENTIAL TREATMENT REQUESTED
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labor and overhead for manufacturing, formulation, storage, filling, finishing,
labeling, packaging, quality assurance and quality control, shipping and
distribution costs from the manufacturer, and technical support incurred
directly and exclusively for, or proportionately allocated to, the production of
the Product, any value added taxes or transportation charges, and any royalties
paid pursuant to licenses in connection with the manufacturing process or
materials used.

CONNETICS STOCK. "Connetics Stock" means the common stock of Connetics traded on
the NASDAQ National Market System under the symbol "CNCT."

EARNEST MONEY. "Earnest Money" means the amount deposited in escrow by Connetics
in connection with the Letter of Understanding.

EXCLUDED TECHNOLOGY. "Excluded Technology" means any and each of (a) Previously
Licensed Technology, and/or (b) the formulations described in greater detail on
EXHIBIT A to this Agreement.

EFFECTIVE DATE. "Effective Date" means the first date written at the beginning
of this Agreement.

FDA. "FDA" means the United States Food and Drug Administration.

FIELD. "Field" means the per topical treatment or prevention of diseases or
disorders of the skin (whether the effect of such treatment or prevention is
mediated locally or systemically), or the per topical moisturization or
protection of the skin.

FORCE MAJEURE. "Force Majeure" means, inter alia, government regulation, fire,
strike, inevitable accident, national emergency, earthquake, or any other cause
outside the reasonable control of the Party having a duty to perform.

FUTURE TECHNOLOGY. "Future Technology" means any platform technology within the
Field not available from Soltec as of the Effective Date, which Soltec develops
during the term of the Research Period.

LAUNCH. "Launch" means the first arms' length sale of a Product to a third party
forming part of a continuous program or campaign designed to market the Product
in the Territory during the Term of this Agreement.

LETTER OF UNDERSTANDING. "Letter of Understanding" means the Letter of
Understanding between the Parties dated September 10, 1999.

LICENSED IP. "Licensed IP" means the Patents and the Trademark.

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                                                                          PAGE 2
<PAGE>   3

LIQUIPATCH ANTIFUNGALS. "Liquipatch Antifungals" means a formulation
incorporating Soltec's Liquipatch(TM) technology as disclosed in [*****] and any
antifungal active agent.

LIQUIPATCH NSAIDs. "Liquipatch NSAIDs" means a formulation incorporating
Soltec's Liquipatch(TM) technology as disclosed in [*****] and any NSAID agent
for the purposes of effecting analgesia or reduction of inflammation.

LOSSES.  "Losses" shall have the meaning set forth in SECTION 11.2.

MEDEVA PATENTS. "Medeva Patents" means PCT application [*****] (filed [*****]
and claiming priority from U.K. application [*****] filed [*****]), U.S.
application numbers [*****] (filed *[*****]) and [*****] (filed [*****]), Mexico
application [*****], Canada application [*****] and any patents issuing
therefrom in the Territory, together with any extensions, reissues,
reexaminations, substitutions, renewals, divisions, continuations, or
continuations-in-part of those applications.

MEDEVA/SOLTEC AGREEMENT. "Medeva/Soltec Agreement" means the agreement between
Soltec and Medeva PLC dated 26 April 1994 as amended on 19 June 1996 relating to
patent application [*****].

MINIMUM ROYALTY.  "Minimum Royalty" means the following:

<TABLE>
<CAPTION>
                  Calendar Year                             Amount
<S>                                                         <C>
        2000                                                [*****]
        2001                                                [*****]
        2002                                                [*****]
        2003                                                [*****]
        2004                                                [*****]
        2005                                                [*****]
        2006 and each subsequent year until                 [*****]
            expiration of the Term pursuant
            to SECTION 14.5
</TABLE>

NET SALES. "Net Sales" means the proceeds actually received by Connetics, its
Affiliates and sublicensees from the sale of Products to purchasers who are not
Affiliates, less:

        (a)    trade, quantity and cash discounts actually allowed and taken;

        (b)    credits actually allowed on account of the rejection or return or
               billing error relating to any Product previously billed and paid;

        (c)    freight, other transportation and insurance costs incurred in the
               sale of Product;

        (d)    taxes imposed on account of such sale (including, without
               limitation, sales, value-added and distribution taxes); and

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                                                                          PAGE 3
<PAGE>   4

        (e) rebates and adjustments, including charge backs.

OPTION AGREEMENT. "Option Agreement" means the Exclusive Option Agreement
between the Parties, as amended, referred to in Recital A of this Agreement.

OTC PRODUCT. "OTC Product" means any Product which is permitted to be sold over
the counter in the Territory, without prescription.

PATENTS. "Patents" means all patents, and patent applications and any patents
issuing therefrom, together with any extensions, reissues, reexaminations,
substitutions, renewals, divisions, continuations, continuations-in-part and
counterparts thereof or therefor, licensed to or owned by Soltec as of the
Effective Date or during the term of this Agreement, that directly claim or
relate to the manufacture, use or sale of the Technology or the Products,
including without limitation those patents listed on EXHIBIT B to this Agreement
and corresponding national applications filed in the Territory, and including
the Medeva Patents (to the extent that Soltec is permitted to sublicense its
rights to the Medeva Patents).

PREVIOUSLY LICENSED TECHNOLOGY. "Previously Licensed Technology" refers to the
following hydroethanolic aerosol foam formulations, which are excluded by virtue
of existing agreements between Connetics and Soltec:

<TABLE>
<CAPTION>
        FORMULATION INCORPORATING:                    RELEVANT AGREEMENT
        --------------------------                    ------------------
<S>                                     <C>
    betamethasone valerate              License Agreement between Soltec Research Pty
                                        Limited and Connective Therapeutics, Inc.
                                        dated June 14, 1996
    clobetasol                          propionate License Agreement between
                                        Soltec Research Pty Ltd and Connetics
                                        Corporation, dated January 1, 1998, as
                                        amended effective May 28, 1999
    ketoconazole                        License Agreement between Soltec Research Pty
                                        Limited and Connetics Corporation, effective
                                        as of July 14, 1999
</TABLE>

PRODUCT. "Product" means any pharmaceutical product based on or incorporating
the licensed Technology. "Product" does not include any Excluded Technologies.

PRODUCT INFORMATION. "Product Information" means all information in the
possession or under the control of Soltec relating to the specifications of the
Technology, the Products, or the Future Technology, and information relating to
the manufacture (including method, conditions, and process equipment), testing
(including quality control standards, assay methods and stability studies),
storage and use of the Products as of the Effective Date or during the Term of
this Agreement.

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                          PAGE 4
<PAGE>   5

PROPRIETARY INFORMATION. "Proprietary Information" means any information of
value, not generally known to the public, including (but not limited to):

        (a)    the Product Information; the development status of the
               Technology, the Products or the Future Technology; Product
               indications and modes of administration; technical information,
               such as clinical, biological, pharmaceutical and characterizing
               data; and know-how; and

        (b)    business information, such as reports, records, customer lists,
               supplier lists, marketing and sales plans; financial information;
               costs; and pricing information.

QUARTER. "Quarter" means calendar quarter, except when used to refer to the
first or last year this Agreement is in effect. The first "Quarter" shall be
deemed to mean the period from the Effective Date until December 31, 1999. The
last "Quarter" shall be deemed to mean the period from the last to occur of the
dates January 1, April 1, July 1 or October 1 and ending on the date of
termination.

REGULATORY APPROVAL. "Regulatory Approval" means all approvals, including
pricing approvals for reimbursement purposes, from the appropriate Regulatory
Authorities (a) in the United States or (b) in each country in the Territory
that are required to promote and market the Product in the relevant country.

REGULATORY AUTHORITY. "Regulatory Authority" means the FDA or any equivalent or
additional governmental or regulatory agencies in the Territory.

RESEARCH PERIOD. "Research Period" means the period during which Connetics
continues to pay Research Support to Soltec pursuant to SECTION 6.1, including
any extensions of time.

RESEARCH SUPPORT. "Research Support" means the fee paid to Soltec pursuant to
SECTION 6.1, and any additional such fees for any extensions of time.

ROYALTY TERM. "Royalty Term" means, with respect to each Product, the longer of
(A) the life of any Patent in respect of that Product, or (B) a minimum of eight
(8) years from the Launch of that Product, regardless of the date of termination
of this Agreement.

SPECIFICATIONS. "Specifications" means the specifications listed on EXHIBIT C
with respect to each specified Product, as it may be amended by the Parties from
time to time. With respect to Products not yet formulated, "Specifications"
means the specifications agreed to by Soltec and Connetics.

TECHNOLOGY. "Technology" means the formulation technologies described briefly as
Aerosol Foam Technologies, Liquipatch(TM), Non-Aqueous Shampoos, Minoxidil
Formulation Technology, Sunscreen 2000, and Ketoconazole Shampoo, which shall
have the meanings as set forth in greater detail in EXHIBIT C.

TERM. The "Term" of this Agreement shall have the meaning set forth in SECTION
14.5.

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                          PAGE 5
<PAGE>   6
TERRITORY. "Territory" means the United States of America, its territories and
possessions; Canada; and Mexico.

THIRD PARTY(ies). "Third Party(ies)" means any person or entity other than
Soltec, Connetics, or an Affiliate of Soltec or Connetics.

VALID CLAIM. "Valid Claim" means a claim of an issued, unexpired Patent in the
Territory that has not been abandoned for any reason, which, but for the license
to Connetics under this Agreement would be infringed by Connetics' manufacture,
use or sale of a Product, which claim (a) has not been invalid or unenforceable
by a decision of a court of competent jurisdiction, nonappealable or unappealed
within the time allowed for appeal, and (b) has not been admitted to be invalid
through reissue, reexamination or disclaimer. With respect to countries in which
patents cannot be "abandoned" or which do not recognize the concept of
"abandonment," the term "Valid Claim" shall mean a claim of any issued,
unexpired Patent in that country.

                                    ARTICLE 2
                              LICENSE TO CONNETICS

SECTION 2.1 LICENSE TO TECHNOLOGY. Subject to the terms and conditions of this
Agreement, during the Term, Soltec hereby exclusively licenses the Technology to
Connetics in the Territory for use in the Field free and clear from all liens,
interests, or equities, charges and encumbrances, except as contemplated by the
definition of Excluded Technology. Notwithstanding the foregoing, the license
granted under this SECTION 2.1 with respect to [*****].

SECTION 2.2 LICENSE TO PRODUCT INFORMATION. Subject to the terms and conditions
of this Agreement, and to the extent required to enable Connetics to develop,
manufacture, use and/or sell Products directly or indirectly, during the Term,
Soltec hereby exclusively licenses the Product Information to Connetics in the
Territory for use in the Field, free and clear from all liens, interests, or
equities, charges and encumbrances. Notwithstanding the foregoing, the license
granted under this SECTION 2.2 with respect to [*****].

SECTION 2.3 LICENSE TO PATENTS. Subject to the terms and conditions of this
Agreement, during the Term, and to the extent required to enable Connetics to
develop, manufacture, use and/or sell Products directly or indirectly, Soltec
hereby grants to Connetics for use in the Field an exclusive license under the
Patents in the Territory with the right to sublicense, and a non-exclusive
license under the Patents to have the Product manufactured outside the
Territory. Notwithstanding the foregoing, (a) the license granted under this
SECTION 2.3 with respect to [*****],

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                          PAGE 6
<PAGE>   7

and (b) Soltec shall use commercially reasonable efforts to obtain the necessary
consents to sublicense to Connetics the Medeva Patents in the Territory in the
Field.

SECTION 2.4 LICENSE TO TRADEMARKS. Subject to the terms and conditions of this
Agreement, during the Term and unless earlier terminated pursuant to SECTION
14.6, Soltec grants to Connetics an exclusive, royalty-free license to use the
tradenames LIQUIPATCH(TM) and Sunscreen 2000 for the advertising, promotion,
marketing, distribution and sale of Product in the Territory. If Connetics
chooses to use the trademark, Connetics shall display the marks in a style or
size of print distinguishing the mark from any accompanying wording or text.
Where feasible, Connetics shall display the appropriate trademark symbol to the
right of and slightly above or below the last letter of the word. Except as
expressly permitted in this Agreement, no right or license is granted to
Connetics to use Soltec's name or any trademarks or tradenames of Soltec in
advertising, publicity or other promotional activities without the express
written approval of Soltec.

SECTION 2.5 RIGHT TO SUBLICENSE. Connetics shall have the absolute right, within
the Territory, to sublicense any of the rights licensed to Connetics under this
Agreement, provided that Connetics complies with the requirements for such a
sublicense set forth in SECTIONS 3.5 and 14.11. Any sublicense pursuant to this
SECTION 2.5 shall be consistent with the terms of this Agreement, and may not
extend beyond the expiration or termination of this Agreement.

SECTION 2.6 REVERSION OF EXCLUDED TECHNOLOGY. If at any time during the Term of
this Agreement any of the Excluded Technology rights (other than [*****]) revert
to Soltec from the parties that currently hold such rights, the Excluded
Technology so returned to Soltec shall be deemed to be added to the definition
of Technology under this Agreement, and shall automatically be treated as though
licensed to Connetics for use in the Field as of the Effective Date, for no
additional consideration from Connetics. Soltec shall notify Connetics in
writing within thirty (30) calendar days after any Excluded Technology is
returned to Soltec. Any such Excluded Technology returned to Soltec and deemed
licensed to Connetics pursuant to this provision shall be confirmed in writing
between the Parties by an amendment to this Agreement and shall be subject to
the milestone, royalty, and sublicense payments described in SECTIONS 3.2, 3.4
and 3.5. The Parties shall negotiate in good faith the price to include
Liquipatch Antifungals in the definition of "Technology," should that technology
revert to Soltec.

SECTION 2.7 LICENSE TO SOLTEC. Subject to the terms and conditions of this
Agreement, during the Term, Connetics hereby licenses to Soltec, for use in
Australia and New Zealand by Soltec and its Affiliates, all clinical and
regulatory data generated by Connetics in connection with the Technology or the
Products.

SECTION 2.8    SALES.

               2.8.1 BY CONNETICS. Connetics agrees that neither it nor its
        Affiliates will supply, promote, distribute or sell Products outside the
        Territory nor for use outside the Field, nor permit any other person to
        sell Products outside the Territory, during the Term of this Agreement.
        Connetics further agrees not to sell Products to any person whom

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                                                                          PAGE 7
<PAGE>   8

        Connetics knows or has reason to believe will resell the Product(s)
        outside the Territory. For purposes of this provision, a written
        notification from Soltec to Connetics given in good faith to the effect
        that Soltec knows or reasonably believes that a person will so resell
        the Product(s) shall be deemed to give Connetics a reason to believe of
        such resale or proposed resale. Furthermore, Connetics and its
        Affiliates will not commercialize an equivalent technology for a
        commercially competitive product in the Territory without Soltec's
        consent. Soltec's refusal to consent shall have no impact on Connetics'
        rights to commercialize the new technology; however, the licenses
        granted to Connetics pursuant to this Agreement with respect to the
        Product(s) and Technology(ies) affected by Connetics' decision shall
        revert to Soltec.

               2.8.2 BY SOLTEC. Soltec agrees that neither it nor its Affiliates
        will supply, promote, distribute or sell Products within the Territory,
        nor permit any other person to sell Products within the Territory,
        during the Term of this Agreement. Soltec further agrees not to sell
        Products to any person whom Soltec knows or has reason to believe will
        resell the Product(s) inside the Territory. For purposes of this
        provision, a written notification from Connetics to Soltec given in good
        faith to the effect that Connetics knows or reasonably believes that a
        person will so resell the Product(s) shall be deemed to give Soltec a
        reason to believe of such resale or proposed resale. Nothing in the
        language of this SECTION 2.8.2 shall have any impact on the [*****].

                                    ARTICLE 3
                                  PAYMENT TERMS

SECTION 3.1 INITIAL PAYMENT. Connetics shall pay Soltec a license fee in the
amount of One Million U.S. Dollars (US$1,000,000), payable as follows: (a)
US$500,000 cash, payable on the Closing Date, and (b) US$500,000 value of
Connetics Stock, issued as set forth in SECTION 3.3. The cash payment shall be
reduced by the amount, if any, of the Earnest Money payment previously received
by Soltec. The amount of Twenty-Two Thousand Five Hundred U.S. Dollars
(US$22,500) previously paid by Connetics to Soltec to exercise the option on
hydrocortisone hydroethanolic foam shall not be applied against any payments
under this Agreement, and shall be treated as a non-refundable payment by
Connetics.

SECTION 3.2 MILESTONE PAYMENTS. For each Product, Connetics will pay Soltec
milestone success payments in the amounts stated below (adjusted upwards at a
[*****] per year on each anniversary of the Closing Date):

        (a)    US$[*****]due the first time [*****];

        (b)    US$[*****] at the time of [*****];

        (c)    US$[*****] at the time of [*****].

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                          PAGE 8
<PAGE>   9

SECTION 3.3 EQUITY PAYMENT. Connetics shall issue to Soltec Eighty Thousand One
Hundred Fifty-Four (80,154) shares of Connetics' Stock, pursuant to the terms
set forth in the Stock Issuance Agreement attached to this Agreement as EXHIBIT
D and entered into simultaneously with this Agreement. Connetics shall issue the
shares on the date that Connetics files with the U.S. Securities and Exchange
Commission a Registration Statement on Form S-3, but in any event no later than
January 26, 2000. If the shares to be issued to Soltec pursuant to this SECTION
3.3 have not been registered or are not otherwise freely tradeable without
restriction by Soltec on or by June 30, 2000, then Soltec shall have a one-time
right to demand payment in cash in lieu of stock, on the terms and conditions
set forth in the Stock Issuance Agreement.

SECTION 3.4 ROYALTIES. Connetics shall pay Soltec a royalty on Net Sales of
Product as follows:

        (a)    [*****] percent ([*****]%) of Net Sales by Connetics, an
               Affiliate, or sublicensee, in a country in the Territory where
               such Product is covered by a Valid Claim of a Patent;

        (b)    [*****]percent ([*****]%) of Net Sales by Connetics, an
               Affiliate, or sublicensee, in a country in the Territory where
               such Product is not covered by a Valid Claim of a Patent.

Notwithstanding the foregoing, (i) for each year in which a Minimum Royalty is
due, Connetics shall pay the Minimum Royalty sixty (60) days after the end of
that year (unless royalties on Net Sales exceed the Minimum Royalty in that
year), (ii) Connetics shall pay royalties on a Product pursuant to this Section
for the full Royalty Term, and, in addition, (iii) with respect to any Product
for which Soltec is required to pay a royalty to Medeva pursuant to the
Medeva/Soltec Agreement, Connetics agrees to reimburse Soltec for [*****]
percent ([*****]%) of the amount due to Medeva (up to, but not to exceed, an
additional [*****]percent ([*****]%) on Connetics' Net Sales).

SECTION 3.5 SUBLICENSE FEES. In addition to the royalties owed pursuant to
SECTION 3.4, Connetics shall pay Soltec a fee as described in this Section if
Connetics sublicenses any Product or Technology to a Third Party, as follows:

        (a)    [*****] percent ([*****]%) of any [*****] that Connetics receives
               in whatever form, including cash or equity, from a sublicensee in
               connection with a sublicense entered into [*****];

        (b)    [*****] percent ([*****]%) of any [*****] that Connetics receives
               in whatever form, including cash or equity, from a sublicensee in
               connection with a sublicense entered into [*****];

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                          PAGE 9
<PAGE>   10

        (c)    [*****] percent ([*****]%) of any [*****] that Connetics receives
               in whatever form, including cash or equity, from a sublicensee in
               connection with a sublicense entered into [*****].

For purposes of this Section, [*****] paid to Connetics [*****].

SECTION 3.6. PAYMENT TERMS. All royalties payable on Net Sales pursuant to this
Agreement shall be paid within two (2) months after the close of the Quarter
during which the Net Sales were actually made. Each royalty payment shall be
accompanied by a statement that sets forth Net Sales (including details of all
amounts deducted from the proceeds invoiced for the purpose of calculating Net
Sales) during the Quarter in question and the royalty payment due thereon.
[*****] Each such payment shall be accompanied by a statement that sets forth
the basis for the calculation of the fee paid to Soltec, in sufficient detail to
permit Soltec to understand how the payment was determined.

SECTION 3.7 CURRENCY OF PAYMENTS. All amounts payable to Soltec by Connetics
pursuant to this Agreement shall be made in U.S. Dollars and by wire transfer to
the bank account(s) specified by Soltec from time to time. Connetics shall apply
a conversion rate from all other currencies to U.S. Dollars for amounts payable
under this Agreement equal to [*****]. The conversion rates to be used in this
Agreement shall be [*****] or such other reference as the Parties may agree
upon.

SECTION 3.8. TAXES. If any taxes, withholding or otherwise, are levied by any
taxing authority in connection with the accrual or payment of royalties under
this Agreement and are required to be paid by Connetics in connection with such
accrual or payment, then Connetics shall pay such taxes to the local taxing
authorities on behalf of Soltec and remit to Soltec in full satisfaction of its
royalty obligations under this Agreement the net amount due after reduction by
the amount of such taxes, together with evidence of payment of such taxes.

SECTION 3.9. INTERCOMPANY TRANSFERS. No royalty payment shall be made with
respect to any non-commercial sale or transfer of a product between and among
Connetics, its Affiliates, and/or its sublicensees where such sale or transfer
is made in the course of a subsequent royalty-

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                         PAGE 10
<PAGE>   11

generating transaction under this Agreement. No multiple royalties shall be
payable on account of the sale of any Product, regardless of whether or not more
than one patent, or patent and other intellectual property rights, exist(s)
covering such Product in any country. No royalty shall be payable with respect
to reasonable quantities of samples provided free of charge to physicians and
reasonable quantities of free "trade goods" including indigent patient programs.

SECTION 3.10 AUDIT. Connetics shall keep records of all items in a manner and in
sufficient detail to accurately and fully determine Net Sales, COGS, and
sublicense fees in accordance with this Agreement and in accordance with U.S.
generally accepted accounting principles and to regularly maintain such records
in sufficient detail to permit calculation of Net Sales, COGS, and payments due
pursuant to sublicenses under this Agreement. Such records shall be retained for
five (5) years after the end of the relevant Quarter. Soltec shall have the
right to nominate an independent firm of certified public accountants reasonably
acceptable to Connetics to verify records of Connetics pertaining to, the
calculation of any royalties payable under this Agreement with respect to the
preceding calendar year, and Connetics shall maintain records for at least five
(5) years after each year to which the records apply. Such verification shall
not occur more than once each calendar year during the term of this Agreement
and shall be conducted during normal business hours. Soltec shall be responsible
for the fees and expenses of the accountants performing such verification. The
accountants appointed under this Agreement shall not be authorized to disclose
to Soltec any information other than the accuracy or inaccuracy of the item(s)
to be verified. If the audit reveals that Connetics has over-reported for the
period of the audit, Connetics shall be entitled to take a credit for the amount
overpaid against future payments. If the audit reveals that Connetics has
under-reported for the period of the audit, Connetics shall immediately remit to
Soltec any balance owing, together with interest at [*****] percent ([*****]%)
over the then-current U.S. prime rate, accruing from the date the original
payment was due. In addition, if the audit reveals that Connetics under-reported
by more than [*****] percent ([*****]%), Connetics shall be responsible for
paying the accountants' fees in connection with the audit. Except in the event
that the audit reveals fraud or a failure during the course of the audit to
disclose full or correct records, Soltec shall have no right under this Section
to audit records for periods that have already been audited under this
provision.

                                    ARTICLE 4
                               PRODUCT DEVELOPMENT

SECTION 4.1 PRODUCT DEVELOPMENT GENERALLY. Connetics shall have responsibility
for all product development, which includes nominating the Products to be
developed, and conducting or sponsoring all work necessary to secure applicable
product licenses and other marketing authorizations required in the Territory.
Subject to timely performance of Soltec's obligations pursuant to SECTION 4.3,
Connetics shall complete product development as to each Product or Technology in
sufficient time to enable Connetics to comply with its specific obligations
under SECTIONS 4.2.1 through 4.2.6. All product licenses and marketing
authorizations for a Product in the Territory shall be and remain the property
of Connetics, subject to the provisions of ARTICLE 5. Connetics shall assume
responsibility for compliance with governmental regulations in the Territory,
including without limitation adverse event reporting requirements.

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                         PAGE 11
<PAGE>   12

SECTION 4.2 SPECIFIC DILIGENCE REQUIREMENTS OF CONNETICS. Connetics shall have
the specific obligations with respect to the Technology set forth in this
Section. For purposes of this Section, the term "diligently pursue" shall mean
commencing and conducting such pre-clinical and clinical testing and such other
actions as are customary in the development and commercialization of
pharmaceuticals and as may be required to obtain necessary regulatory approvals
in a timely manner consistent with standards generally accepted in the
pharmaceutical industry. [*****] Connetics' specific obligations are as follows:

               4.2.1 AEROSOL FOAM TECHNOLOGY. Connetics shall diligently pursue
        development of a minimum of [*****] new Products based on the Aerosol
        Foam Technology at the rate of [*****] commencing on the Effective Date.

               4.2.2 LIQUIPATCH. Connetics shall diligently pursue development
        of [*****] Liquipatch Products during the first [*****] after the
        Effective Date of this Agreement.

               4.2.3 SUNSCREEN 2000. Connetics shall Launch Sunscreen 2000 in
        the United States no later than [*****].

               4.2.4 NON-AQUEOUS SHAMPOO AND KETOCONAZOLE SHAMPOO. Connetics
        shall Launch [*****] Products comprising either Non-Aqueous Shampoo or
        Ketoconazole Shampoo, during the first [*****] after the Effective Date
        of this Agreement.

               4.2.5 MINOXIDIL FORMULATION TECHNOLOGY. Within [*****] after the
        Effective Date, Connetics shall diligently pursue development of a
        Minoxidil Formulation Technology, which may include a foam formulation
        pursuant to SECTION 4.2.1.

               4.2.6 HYDROCORTISONE HYDROALCOHOLIC FOAM. Connetics shall
        diligently pursue development of a hydroalcoholic aerosol foam product
        containing hydrocortisone within [*****] years after the Effective Date
        of this Agreement.

SECTION 4.3 SOLTEC'S RESPONSIBILITIES. Soltec shall generate prototype Products.
For purposes of this SECTION 4.3, Soltec's obligation shall be satisfied with
respect to a Product when Soltec delivers to Connetics a prototype (up to
[*****]), and an information package that contains at a minimum the following:

[*****]

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                         PAGE 12
<PAGE>   13

Soltec agrees to use its best efforts to select ingredients (other than the
active therapeutic agent) which are acceptable for pharmaceutical use in the
United States, in developing prototype Products. Any activities that Soltec
undertakes at Connetics' request after meeting these obligations will be treated
as additional research pursuant to ARTICLE 6. To the extent that Soltec's
failure to perform pursuant to this SECTION 4.3 directly impacts Connetics'
ability to achieve the milestones set forth in SECTION 4.2, Connetics' time
requirements shall be extended for the additional number of days directly
attributable to Soltec's failure to perform.

                                    ARTICLE 5
                            ACCESS TO CONNETICS DATA

SECTION 5.1 ACCESS BY SOLTEC. Connetics agrees that, upon written request by
Soltec and pursuant to the license set forth in SECTION 2.7, Connetics will
provide to Soltec or an Affiliate of Soltec [*****] any information developed by
Connetics in connection with the Technology and/or the Products that Soltec may
require in order to apply for approval to commercialize the Technology and/or
Products in Australia and New Zealand. Soltec shall have no right to furnish
such Connetics information to any Third Party, except in compliance with the
restrictions and requirements of SECTION 5.2.

SECTION 5.2 ACCESS BY THIRD PARTIES. Connetics agrees to grant to Soltec and any
Third Party licensee (or potential licensee) of Soltec outside of the Territory
and outside Australia and New Zealand, access to Connetics' data related to the
Technology or Products, or the clinical studies developed by or for Connetics
under the following circumstances:

        (a)    Soltec or the Third Party may only review the material at
               Connetics' offices, after signing an appropriate confidentiality
               agreement with Connetics; and

        (b)    if Soltec or the Third Party determines that it wants copies of
               the material provided by Connetics, then Connetics will establish
               a price to share the data based on Connetics' cost of developing
               the data, giving consideration to other relevant factors such as
               size and value of market

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        (c)    upon reaching agreement with Connetics as indicated in paragraph
               (b), Soltec or the Third Party, as the case may be, shall be
               entitled to use the relevant material in any way it deems
               appropriate to advance and exploit the Technology or Products
               outside of the Territory.

                                    ARTICLE 6
                                RESEARCH SUPPORT

SECTION 6.1 RESEARCH SUPPORT. Connetics will pay Soltec [*****] per year for the
first [*****] of this Agreement ("RESEARCH SUPPORT"). The first Research Support
payment shall be due when Soltec notifies Connetics that Soltec has hired an
additional employee for Soltec's dermatology team. Subsequent payments shall be
made on the first and second anniversaries of the Effective Date. The Parties
may extend the period of Research Support upon mutual written agreement.

SECTION 6.2 SOLTEC'S RESEARCH OBLIGATIONS. The Parties acknowledge that the
timing of invention cannot easily be dictated. Nevertheless, in the spirit of an
ongoing relationship and in return for the Research Support, Soltec agrees that
it shall continue to conduct research to develop new platform technologies and
products in the Field, and to present those opportunities to Connetics on a
regular basis, during the term of the Research Support.

SECTION 6.3 RESEARCH ASSISTANCE. If Connetics requests research activities from
Soltec beyond those contemplated by SECTION 4.3, Connetics will pay Soltec at an
hourly rate of [*****] per person for such research activities; provided,
however, that the initial payment of [*****] paid pursuant to SECTION 6.1 will
be credited against such fees for service.

SECTION 6.4 CONNETICS LIAISON. In addition to the additional employee to be
hired in connection with SECTION 6.1, Soltec shall designate a Soltec employee
(which may be, but is not required to be, the same individual) to coordinate
Connetics' projects within Soltec.

SECTION 6.5 RIGHT OF REFUSAL. Connetics shall have a right of refusal to any
Future Technology developed during the Research Period, on the terms set forth
in this Section.

               6.5.1 If Soltec develops any Future Technology during the
        Research Period, and determines to develop and commercialize that Future
        Technology, or to license the Future Technology to a Third Party in the
        Territory in the Field, then Soltec will first offer to Connetics by
        written notice the right to carry out the development, manufacture, use,
        distribution, marketing or sale of such Future Technology in the
        Territory in the Field.

               6.5.2 Connetics shall have [*****] following receipt of such
        written notice within which to notify Soltec whether or not Connetics
        wishes to exercise its right of refusal to such Future Technology that
        is the subject of Soltec's offer.

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               6.5.3 If Connetics notifies Soltec that it wishes to exercise its
        right of refusal to such Future Technology, then with respect to any
        Product or Technology [*****], the provisions of SECTION 6.6 shall
        apply.

               6.5.4 If the offer relates to [*****], and Connetics notifies
        Soltec that it wishes to exercise its right of refusal, Soltec and
        Connetics will negotiate in good faith the terms of an appropriate
        agreement during a further period of [*****].

               6.5.5 If as a consequence of such good faith negotiations the
        Parties come to an agreement they will promptly enter into and exchange
        any amendments to this Agreement that they deem necessary to carry out
        the effect of the decision.

               6.5.6 If the Parties are unable to agree to terms despite good
        faith negotiations with respect to [*****], Soltec shall be free to
        negotiate agreements for such rights with Third Parties; provided,
        however, that Soltec will not enter into any agreement with Third
        Parties on terms which, if they were offered to Connetics, would be more
        favorable to Connetics than the terms offered in the course of the
        aforementioned good faith negotiations.

               6.5.7 If in response to the written offer Connetics indicates it
        does not wish to exercise its right of refusal, or if Connetics fails to
        respond to Soltec's offer within the [*****] time period, then Soltec
        will be free to negotiate for the grant of such rights to Third Parties
        on such terms as it may wish.

SECTION 6.6 FUTURE TECHNOLOGY. If Connetics exercises its right of refusal as to
a particular Future Technology pursuant to SECTION 6.5, Connetics shall pay
Soltec [*****] and the Parties shall negotiate in good faith to set diligence
milestones for such Future Technology. This Agreement shall be amended to
include such Future Technology in the definition of "Product" and "Technology"
pursuant to this Agreement, and all remaining provisions of this Agreement
relating to Connetics' obligations with respect to the Products and the
Technology shall be deemed to apply to such Future Technology.

SECTION 6.7 IMPROVEMENTS. To the extent that it is not prevented from doing so
due to legal obligations of confidentiality, Soltec shall keep Connetics
informed from time to time of any applications of the Technology or the Products
outside of the Field but shall be under no obligations to offer any such
applications to Connetics.

                                    ARTICLE 7
                                     PATENTS

SECTION 7.1 NO OTHER PATENTS. Soltec confirms that the Patents represent the
only patent protection it or its Affiliates have applied for in relation to the
Technology or the Products

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(excluding patent protection for the Excluded Technology).

SECTION 7.2 TITLE TO PATENTS. Soltec or its Affiliates shall retain title to the
Patents and to any patent rights and know-how related to the Products, the
Technology, or the Future Technology developed solely by Soltec in the future.
Connetics shall be granted an exclusive license in the Field in the Territory to
any improvements made by Soltec to the Products or the Technology. Connetics
shall retain title to any patent rights and know-how related to the Products or
the Technology developed solely by Connetics in the future. Connetics and Soltec
shall jointly own any patent rights and know-how related to the Products or the
Technology developed jointly by Soltec and Connetics in the future, in relative
proportions to be agreed upon at the time any patent application is filed (or
prior to any commercialization, in the case of know-how).

SECTION 7.3 PATENT PROSECUTION AND MAINTENANCE. Soltec shall prosecute and
maintain the Patents and shall not take any steps to abandon, or allow to lapse,
nor fail to take any steps which are required to avoid the abandonment or
lapsing of any Patent (nor cause or permit any other person to do so) unless, in
each case, the Parties otherwise specifically agree in writing. Soltec shall
keep Connetics promptly informed of the status of prosecution of the Patents,
including providing copies of all material correspondence with the Patent Office
in each country of the Territory. Connetics shall have the right to comment upon
and make suggestions for such prosecution and Soltec agrees to give such
comments and suggestions due consideration, but the decision whether to
implement Connetics' comments and suggestions shall rest solely with Soltec.
Connetics shall reimburse Soltec for the portion of Patent filing, prosecution,
grant and maintenance fees (including attorneys' fees) allocable to the
Territory, within thirty (30) days after receipt of an invoice from Soltec
containing sufficient detail to support the obligation for payment.

SECTION 7.4 ASSISTANCE FROM CONNETICS. Connetics shall assist Soltec in
prosecuting the Patents as contemplated by SECTION 7.3. If Soltec decides to
discontinue prosecution or maintenance of any or all of the Patents, at its
option Connetics may elect to continue such prosecution and maintenance at its
own expense, upon which election title to such Patent(s) shall be assigned to
Connetics.

SECTION 7.5    INFRINGEMENT ACTIONS.

               7.5.1 ACTION. If either Party learns that a Third Party is
        infringing the Patents, it shall promptly notify the other in writing.
        The Parties shall use reasonable efforts in cooperation with each other
        to stop such patent infringement without litigation. If such efforts are
        unsuccessful, Soltec may take steps to remove the infringement of the
        Patents, including, without limitation, initiating suit. If Soltec
        decides not to take such steps to remove the infringement within three
        (3) months of discovering or being notified of the infringement,
        Connetics may, but shall not be required to, take steps to remove the
        infringement.

               7.5.2 EXPENSES; CONTROL. Any legal action taken under this
        section will be at the expense of the Party by whom suit is filed and
        will be controlled by the Party bringing suit. The Party not bringing
        suit may choose to be represented in any such

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<PAGE>   17

        action by counsel of its own choice at its own expense. The Party
        bringing suit shall be reimbursed for its costs associated with bringing
        suit with the proceeds of any damages or costs recovered. Any moneys
        remaining shall be split between the parties on an equitable basis
        proportional to their respective damage from the infringement. If both
        Parties bring suit, equitable apportionment of the costs and damages to
        be recovered shall be agreed upon before the filing of the suit.

SECTION 7.6 INFRINGEMENT OF THIRD PARTY PATENT. If a notice of infringement is
received by, or a suit is initiated against, either Soltec or Connetics with
respect to the Technology or a Product as made, used or sold in the Territory,
the Parties will in good faith discuss the best way to respond.

SECTION 7.7 NO CHALLENGE TO PATENT RIGHTS. Connetics agrees that it will not,
during the Term of this Agreement, challenge the validity or the enforceability
of any of the Licensed IP in the Territory.

                                    ARTICLE 8
                            REPRESENTATIONS OF SOLTEC

Soltec represents and warrants to Connetics as follows:

SECTION 8.1 ORGANIZATION; STANDING. Soltec is duly organized, validly existing
and in good standing and has the corporate power and authority to execute and
deliver this Agreement and the other agreements contemplated by this Agreement.

SECTION 8.2 NO CONFLICTS. The execution, delivery and performance of this
Agreement have been validly authorized by Soltec; neither the execution and
delivery of, or the performance of its obligations under this Agreement (a)
conflicts with, or contravenes or constitutes any default under, any agreement,
instrument or understanding, oral or written, to which it is a party, including
without limitation its certificate of incorporation or bylaws, or (b) violates
applicable laws, rules or regulations, or any judgment, injunction, order or
decree of any governmental authority having jurisdiction over it.

SECTION 8.3 RIGHTS TO LICENSED IP. As of the Effective Date, Soltec owns,
controls, or otherwise has the right to use, all Product Information and Patents
required or necessary to develop, manufacture and sell Products (in bulk or
finished form); and further Soltec has the right to grant to Connetics the
rights and licenses under the Licensed IP in this Agreement, including without
limitation the Medeva Patents (subject to Medeva's consent pursuant to the
Medeva/Soltec Agreement).

SECTION 8.4 NO LAWSUITS, ETC. To the best of Soltec's knowledge, as of the
Effective Date and during the immediately preceding five (5) year period, there
have not been any claims, lawsuits, arbitrations, legal or administrative or
regulatory proceedings, charges, complaints or investigations by any government
authority or other Third Party (except for litigation between

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<PAGE>   18

Soltec and Monash University instituted in the Supreme Court of Victoria in May
1998 and finally settled between the parties in 1999) threatened, commenced or
pending against Soltec or its licensors relating to, and Soltec has not received
any notice of infringement with respect to, the Product Information, Patents, or
the Technology, including Soltec's right to manufacture, use or sell Products.

SECTION 8.5 THIRD PARTY RIGHTS. The exercise by Connetics of the rights and
licenses granted to Connetics by Soltec under this Agreement will not violate
any agreement between Soltec and any Third Party nor, to the best of Soltec's
knowledge, infringe any rights owned by any Third Party. Except as disclosed to
Connetics in a separate letter (if any), as of the Effective Date, Soltec is not
aware of any Third Parties that own or control any patents or Product
Information required for the production, manufacture or commercialization of the
Technology.

SECTION 8.6 NO ENCUMBRANCES. As of the Effective Date, Soltec controls or
otherwise is entitled to use throughout the Territory all rights in, to and
under the Patents and Product Information, free and clear of any lien, claim,
charge, encumbrance or right of any Third Party (except as relates to the
Excluded Technology).

SECTION 8.7 NO OTHER AGREEMENTS. No other agreement or understanding, verbal or
written, exists to which Soltec is legally bound regarding the Licensed IP in
the Territory in the Field, except for [*****], all as previously disclosed to
Connetics.

SECTION 8.8 INFORMATION. All information relating to the Technology and the
Products delivered to Connetics by Soltec, its officers, directors,
representatives or agents, was when delivered and is as of the date of this
Agreement in all material respects accurate and correct to the best of Soltec's
knowledge, and Soltec is not aware of any information which would be required to
be disclosed to make any such information not misleading.

SECTION 8.9 INVESTMENT REPRESENTATIONS. Soltec meets the investment
representations set forth in the Stock Issuance Agreement.

                                    ARTICLE 9
                   REPRESENTATIONS AND WARRANTIES OF CONNETICS

SECTION 9.1 ORGANIZATION; STANDING. Connetics is duly organized, validly
existing and in good standing and has the corporate power and authority to
execute and deliver this Agreement and the other agreements contemplated by this
Agreement.

SECTION 9.2 NO CONFLICTS. The execution, delivery and performance of this
Agreement have been validly authorized by Connetics; neither the execution and
delivery of, or the performance of its obligations under this Agreement (a)
conflicts with, or contravenes or constitutes any default under, any agreement,
instrument or understanding, oral or written, to which it is a party, including
without limitation its certificate of incorporation or bylaws, or (b) violates
applicable

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laws, rules or regulations, or any judgment, injunction, order or decree of any
governmental authority having jurisdiction over it.

                                   ARTICLE 10
                               SUPPLY OF MATERIAL

SECTION 10.1   CLINICAL SUPPLIES.

               10.1.1 RIGHT TO PURCHASE. Commencing from the Effective Date
        until Soltec receives Regulatory Approval to market a Product outside of
        the Territory, Soltec and its Affiliates shall have the right (subject
        to the terms of this Agreement) to purchase Soltec's required quantities
        of that Product for use in Clinical Trials in Australia and New Zealand.

               10.1.2 PAYMENT AND INVOICING. Soltec's purchase price shall be
        [*****]. Connetics shall invoice Soltec for Product ordered by Soltec.
        Each invoice shall be accompanied by a schedule illustrating the
        calculation of [*****]. Payment of the invoice shall be due on the later
        of thirty (30) days after the date of the invoice or thirty (30) days
        after Connetics delivers the product to the common carrier for Soltec.

               10.1.3 NO TRANSFER. Neither Soltec nor its Affiliates shall
        transfer any such supply of Product to any Third Party at any time
        except to the extent transfer is required for clinical development,
        regulatory filings or Regulatory Approval related to the Product in
        Australia and New Zealand.

               10.1.4. CHANGES IN MANUFACTURING. If Connetics decides that
        change or modification of the production procedure is necessary during
        the Term for any reason, Connetics shall promptly notify Soltec in
        writing of the need for such change or modification.

SECTION 10.2 COMMERCIAL SUPPLIES. With respect to any Product for which Soltec
has received Regulatory Approval to market in Australia and New Zealand,
Connetics agrees to use commercially reasonable efforts to manufacture for and
supply to Soltec or its Affiliates all of Soltec's or the Affiliate's
requirements for Product for sale in Australia and New Zealand. The price to
Soltec for commercial supply of Product for sale in Australia and New Zealand
shall be [*****]. The other material terms of the supply arrangement shall be
set forth in a separate supply agreement with respect to the approved Product,
such supply agreement to be entered into by the Parties as soon as practicable,
but in no event later than the date of first sale of Product in Australia or New
Zealand. It is envisioned that each approved Product may require a separate
supply agreement.

SECTION 10.3 SUPPLY TO THIRD PARTIES. Connetics shall have no obligation to sell
Product to Third Parties on any terms. Nevertheless, Connetics agrees that, at
Soltec's request, Connetics

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will enter into good faith negotiations to supply clinical or commercial
supplies of Product to a licensee of Soltec outside of the Territory and/or
outside of the Field.

                                   ARTICLE 11
              DISCLAIMER OF WARRANTIES; INDEMNIFICATION; INSURANCE

SECTION 11.1 DISCLAIMER OF WARRANTIES. Except as otherwise expressly provided in
this agreement or by applicable law, neither party makes any warranty with
respect to any technology, goods, services, rights, or other subject matter of
this agreement and hereby disclaims all warranties, conditions or
representations of any kind, express or implied, including, but not limited to,
implied warranties of performance, merchantability, satisfactory quality,
fitness for a particular purpose or non-infringement of third party intellectual
property rights.

SECTION 11.2. INDEMNIFICATION BY CONNETICS. Connetics hereby undertakes to
indemnify Soltec from and against all suits, losses, actions, demands,
investigations, claims, damages, liabilities, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) (collectively,
"LOSSES") brought by Third Parties arising from or occurring as a result of (a)
any breach (or alleged breach) by Connetics of its representations, warranties,
or obligations under this Agreement; (b) the manufacture or the storage of
Product after Soltec delivers the prototype and information package in
conformance with SECTION 4.3, except to the extent caused by the negligence or
willful misconduct of Soltec or its officers, agents, employees, Affiliates,
sublicensees or customers; or (c) the negligence or willful misconduct of
Connetics or its officers, agents, employees or Affiliates.

SECTION 11.3 INDEMNIFICATION BY SOLTEC. Soltec hereby undertakes to indemnify
Connetics from and against all Losses brought by Third Parties arising from or
occurring as a result of (a) any breach (or alleged breach) by Soltec of its
representations, warranties, or obligations under this Agreement; or (b) the use
or consumption of Products or Technology in Australia or New Zealand stemming
from sales of such Products or Technology by Soltec, save to the extent the
losses arise from or occur as a result of any activity by Connetics.

SECTION 11.4 INSURANCE REQUIREMENTS. At all times during the term of this
Agreement, each Party shall obtain and maintain liability insurance at its sole
cost and expense, as follows:

               11.4.1.  SOLTEC.  Soltec shall provide:

                      (a)    Commercial General Liability, including coverage
                             for products and completed operations (including
                             coverage for advertising and personal injury). The
                             policy shall have a per claim limit of not less
                             than [*****] and an aggregate limit of not less
                             than [*****], shall be maintained for a period of
                             at least [*****] years after the expiration or
                             termination of this Agreement, and shall provide
                             coverage for all loss (excluding consequential
                             damages and loss of profits), liability,

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                             damage, fee, cost (including legal cost of a
                             solicitor), expense, suit, claim, demand, judgment
                             and prosecution directly or indirectly arising from
                             or incidental to or resulting from the insured
                             event.

                      (b)    Policy Conditions: All policies under (a) above
                             shall:

                             (i)    be written by insurance companies with an
                                    A.M. Best's rating of A:VIII or higher (or
                                    if Soltec or its sublicensees policies are
                                    not subject to the Best rating, then by
                                    carriers who are acceptable to Connetics);
                                    and

                             (ii)   note Connetics as a third party for its
                                    rights and interest.

        Soltec shall provide Connetics a certificate of insurance which shall
        reflect the above coverages and provisions.

               11.4.2.  CONNETICS.  Connetics shall provide:

                      (a)    Commercial General Liability, including coverage
                             for products and completed operations and
                             contractual liability (including coverage for
                             advertising and personal injury). The policy shall
                             have a per claim limit of not less than [*****] and
                             an aggregate limit of not less than [*****], shall
                             be maintained for a period of at least [*****]
                             years after the expiration or termination of this
                             Agreement, and shall provide coverage for all loss
                             (excluding consequential damages and loss of
                             profits), liability, damage, fee, cost (including
                             legal cost of a solicitor), expense, suit, claim,
                             demand, judgment and prosecution directly or
                             indirectly arising from or incidental to or
                             resulting from the insured event.

                      (b)    Policy Conditions: All policies under (a) above
                             shall:

                             (i)    be written by insurance companies with an
                                    A.M. Best's rating of A:VIII or higher (or
                                    if Connetics or its sublicensees policies
                                    are not subject to the Best rating, then by
                                    carriers who are acceptable to Soltec); and

                             (ii)   add Soltec as an additional insured.

        Connetics shall provide Soltec a certificate of insurance which shall
        reflect the above coverages and provisions.

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                                   ARTICLE 12
                               REGULATORY MATTERS

SECTION 12.1 ADVERSE EXPERIENCE REPORTING. Each Party shall notify, and shall
cause its Affiliates and sublicensees to notify, the other Party promptly upon
receipt of:

        (a)    any information concerning any potentially serious or unexpected
               side effect, injury, toxicity or sensitivity reaction or any
               unexpected incidence or other adverse experience (an "ADVERSE
               EXPERIENCE") and the severity thereof associated with the
               clinical uses, studies, investigations, tests and marketing of
               the Products, whether or not determined to be attributable to the
               same;

        (b)    any information regarding any pending or threatened action which
               may affect the safety or efficacy claims of the Products or the
               continued marketing of the Products in any nation or
               jurisdiction; and

        (c)    any material communications with or notice from a Regulatory
               Authority indicating that it intends to visit or inspect a
               Party's facilities, or the facilities of an Affiliate or
               sublicensee of such Party, for a purpose relevant to the
               development, manufacture of marketing of the Products.

Without limiting the foregoing, Soltec shall use commercially reasonable efforts
to require each Affiliate and sublicensee to notify Connetics' responsible drug
safety department by telephone and facsimile within twenty-four (24) hours after
Soltec first becomes aware of any Adverse Experience that gives cause for
concern or is unexpected or that is fatal, life-threatening (as it occurred),
permanently disabling, requires (or prolongs) inpatient hospitalization,
represents a significant hazard, or is a cancer or a congenital anomaly or
represents an overdose, or any other circumstance that might necessitate a
recall, expedited notification of any Regulatory Authorities or a significant
change in the label of the Product, including without limitation, any deviation
from the specified environmental conditions for shipping or storage of the
Product. Each Party shall make such reports as are necessary to comply with laws
and regulations applicable to it, at its sole expense. Further, in the event a
Party (or its Affiliates or sublicensees) receives a communication or directive
from a Regulatory Authority commencing or threatening seizure of (or other
removal from the market of) a Product, such Party shall transmit such
information to the other Party within twenty-four (24) hours of receipt.

SECTION 12.2 NOTIFICATION AND RECALL. If any Regulatory Authority issues or
requests a recall or takes similar action in connection with a Product, or if
either Party determines that an event, incident or circumstance has occurred
which may result in the need for a recall or market withdrawal, the Party
notified of or wishing to call such recall or similar action shall, within
twenty-four (24) hours, advise the other Party of notification or its
determination by telephone or facsimile, after which the Parties shall promptly
discuss and work together to effect an appropriate course of action; provided,
however, that either Party may initiate a recall or market

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withdrawal thereafter if it deems such action necessary or appropriate. As
between the Parties, Soltec shall be responsible for notification to the
applicable Regulatory Authority with respect to countries other than those in
the Territory and compliance with applicable laws outside the Territory in
conducting such recall. Connetics shall be responsible for notification to the
applicable Regulatory Authority with respect to countries in the Territory and
compliance with applicable laws in the Territory in conducting such recall.

                                   ARTICLE 13
                                   GOVERNANCE

SECTION 13.1 COMMITTEES. The Parties shall establish the committees described
below for the purpose of performing the obligations and governing the
relationship between the Parties pursuant to this Agreement. Each Party will
provide to the relevant committees such data and documentation developed by each
Party necessary to enable the committees to perform the duties described in this
ARTICLE 13. The confidentiality requirements set forth in this Agreement shall
be deemed to apply to all correspondence, minutes, and discussions in connection
with committee meetings. The Committee members shall be duly authorized and
empowered to make decisions pertaining to the performance of this Agreement on
behalf of their respective appointing Parties.

SECTION 13.2 PRODUCT DEVELOPMENT COMMITTEE. The Parties shall establish a
Product Development Committee which shall (a) develop, approve and amend the
development plan with respect to Connetics' duties in the Territory, and (b)
provide overall direction, monitor progress, manage information exchange between
the Parties, decide key strategies and solve problems with respect to the
development of the Technology and of the Products in the Territory. At the first
meeting of the Product Development Committee, the members shall establish a
regular meeting time (which shall be, at a minimum, quarterly) and structure.
Each Party shall appoint a key individual, who shall be responsible for
coordinating timing and agenda of meetings, and for ensuring that the Party is
represented by the appropriate persons at each meeting (based on the proposed
agenda for that meeting).

SECTION 13.3 BUSINESS DEVELOPMENT COMMITTEE. The Parties shall establish a
Business Development Committee which shall be responsible for deciding key
strategies and solving problems with respect to commercialization and promotion
of the Technology and/or the Products outside of the Territory. At the first
meeting of the Business Development Committee, the members shall establish a
regular meeting time and structure. The Business Development Committee shall be
composed of two (2) members, who shall have joint responsibility to coordinate
the timing, notice, and agendas for Business Development Committee meetings.
Connetics agrees to promptly inform Soltec of any inquiries Connetics receives
for acquisition to the Technology or the Products outside of the Territory.

SECTION 13.4 DECISION MAKING. Meetings of the committees may be held in person
at mutually agreed times and locations, or may be held by telephone or video
conference. In general, each of the committees shall strive to make decisions by
consensus. If consensus cannot be reached on

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matters assigned to the Product Development Committee or the Business
Development Committee, then (a) with respect to matters within in the Territory,
Connetics shall have the right to resolve deadlocks, and (b) with respect to
matters outside of the Territory, Soltec shall have the right to resolve
deadlocks. Nothing in this SECTION 13.4 shall be construed to require Connetics
to share regulatory and clinical data with any Third Party, except as otherwise
set forth in this Agreement.

                                   ARTICLE 14
                                 GENERAL MATTERS

SECTION 14.1 CONFIDENTIALITY. In order to facilitate this Agreement it will be
necessary for the parties to exchange certain Proprietary Information, each
recipient of which agrees to retain such Proprietary Information in strict
confidence and not to disclose or transfer to any party or use other than as
authorized by the terms of this Agreement or otherwise in writing by the
discloser. In particular, Connetics agrees that EXHIBIT A and all of the
information contained in it is to be treated in strict confidence and not
disclosed or transferred. It is not able to be used by Connetics for any purpose
whatsoever other than to define the Excluded Technology. The parties hereby
acknowledge that such Proprietary Information can constitute "inside
information" for securities purposes and the responsibility to refrain from any
unauthorized disclosure, trading or other such use. These obligations of
confidentiality and non-use shall not apply to Proprietary Information: (a) that
was previously known to the recipient as evidenced by recipient's written
records, (b) that is lawfully obtained by recipient from a source independent of
the discloser, or (c) that is now or becomes public knowledge other than by
breach of this Agreement. These obligations of confidentiality and non-use shall
survive the expiration or termination of this Agreement.

SECTION 14.2 COMPLIANCE WITH LAWS. In performing this Agreement, each Party
shall comply with all applicable laws and government regulations at all times,
including but not limited to any applicable laws and regulations in the
Territory with respect to the export or re-export or release of technology and
technical data.

SECTION 14.3 GOVERNING LAW; VENUE. This Agreement shall be governed, controlled,
interpreted and defined by and under the laws of the State of New York and the
United States without regard to that body of law known as conflicts of law;
provided that issues relating to the validity and enforceability of patents
shall be governed by the laws of the jurisdiction by which such patent was
granted. The Parties specifically disclaim application to this Agreement of the
Convention on Contracts for the International Sale of Goods.

SECTION 14.4 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement, or the breach or termination of this Agreement,
shall be dealt with in the following manner:

               14.4.1 The dispute, controversy or claim shall first be referred
        to the chief executive officer of each of Soltec and Connetics for
        resolution at a place to be agreed

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                                                                         PAGE 24
<PAGE>   25

        between such chief executive officers and, failing agreement, at the
        head office of the Soltec (if Connetics requests the referral) or
        Connetics (if Soltec requests the referral).

               14.4.2 If the dispute, controversy or claim is not settled or
        agreed between such chief executive officers within a period of one (1)
        month, then it shall be settled by arbitration in accordance with the
        UNCITRAL Rules then in effect. At the written request of either party,
        Soltec and Connetics may each nominate one or more appropriately
        qualified experts, but both parties must agree to the expert to be
        appointed. If the Parties are unable to agree on an expert or experts,
        the arbitration will be conducted by a panel of three (3) arbitrators
        who are knowledgeable in the subject matter that is at issue in the
        dispute, are not affiliated directly or indirectly with either Party,
        one of whom is selected by Soltec, one of whom is selected by Connetics,
        and one of whom is selected by the mutual agreement of the other two
        arbitrators. During the arbitration, the Parties shall have such
        discovery rights as the arbitrators may allow, consistent with the
        discovery permitted by the Federal Code of Civil Procedure. The place of
        arbitration shall be New York, New York. The arbitrators shall apply the
        law of the State of New York (regardless of that jurisdiction's or any
        other jurisdiction's choice of law principles).

               14.4.3 In any arbitration pursuant to this section, the
        arbitrators shall be able to decree any and all relief of an equitable
        nature, including but not limited to such relief as a temporary
        restraining order, a preliminary or permanent injunction, as well as
        specific performance. The arbitrators shall also be able to award direct
        and indirect damages, but shall not award any other form of damage
        (e.g., punitive or exemplary damages). The reasonable fees and expenses
        of the arbitrators, the fees and expenses of a court reporter, and any
        expenses for a hearing room, shall be borne equally by the Parties. The
        decision of the arbitrators shall be final and will be handed down
        within a period of sixty days of being appointed. The Party in whose
        favor the decision runs may enter, sued on or enforced the decision in
        any court of competent jurisdiction at the option of such Party.

SECTION 14.5 TERM. The term of this Agreement and license shall commence on the
Effective Date and continue in full force and effect with respect to each
Product and Technology until the later of (a) the expiration of the last to
expire Patent having a Valid Claim in the Territory; or (b) twelve (12) years
after the Effective Date.

SECTION 14.6   TERMINATION.

        14.6.1 TERMINATION FOR BREACH.

               (a)    Failure of Connetics to Meet Diligence Milestones. If
                      Connetics fails to meet any of its diligence milestones
                      set forth in ARTICLE 4 for any reason other than fault of
                      Soltec or Force Majeure, and if Connetics does not cure or
                      does not present a plan to cure which is acceptable to
                      Soltec within [*****] days after written notice from
                      Soltec, Soltec shall have the right upon further written
                      notice to terminate Connetics' exclusive license in the
                      Territory with respect to the Product or Technology at
                      issue as follows:

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                                                                         PAGE 25
<PAGE>   26

<TABLE>
<CAPTION>
       Termination Under Section    Reason for Termination       Effect
       -------------------------    ----------------------       ------
<S>                                 <C>                          <C>
       4.2.1                        [*****]                      [*****]
       Aerosol Foam Technology
       4.2.1                        [*****]                      [*****]
       Aerosol Foam Technology
       4.2.2                        [*****]                      [*****]
       Liquipatch
       4.2.2                        [*****]                      [*****]
       Liquipatch
       4.2.3                        [*****]                      [*****]
       Sunscreen 2000
       4.2.4                        [*****]                      [*****]
       Non-Aqueous Shampoo and
       Ketoconazole Shampoo

       4.2.4                        [*****]                      [*****]
       Non-Aqueous Shampoo and
       Ketoconazole Shampoo
       4.2.5                        [*****]                      [*****]
       Minoxidil Formulation
       Technology

       4.2.6                        [*****]                      [*****]
       Hydrocortisone
       Hydroalcoholic Foam
</TABLE>

               (b)    Other Breach by Connetics. Upon breach by Connetics of any
                      of its obligations contained in this Agreement other than
                      the diligence milestones set forth in ARTICLE 4
                      ("CONNETICS BREACH"), Soltec shall be entitled to give
                      Connetics notice specifying the nature of the Connetics
                      Breach and stating its intent to terminate this Agreement
                      if the Connetics Breach is not cured. This Agreement shall
                      terminate [*****] after Connetics receives such notice (i)
                      if Connetics does not cure the Connetics Breach, or (ii)
                      if a plan, reasonably acceptable to Soltec, is not

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                         PAGE 26
<PAGE>   27

                      implemented to cure as soon as practicable after notice of
                      the Connetics Breach.

               (c)    Breach by Soltec. Upon breach by Soltec of any of its
                      obligations contained in this Agreement ("SOLTEC BREACH"),
                      Connetics shall be entitled to give Soltec notice
                      specifying the nature of the Soltec Breach and stating its
                      intent to terminate this Agreement if the Soltec Breach is
                      not cured. This Agreement shall terminate [*****] after
                      Soltec receives such notice (i) if Soltec does not cure
                      the Soltec Breach, or (ii) if a plan, reasonably
                      acceptable to Connetics, is not implemented to cure as
                      soon as practicable after notice of the Soltec Breach.

               14.6.2 TERMINATION FOR INSOLVENCY. Either Party may terminate
        this Agreement immediately upon delivery of written notice to the other
        Party (a) upon the institution by or against the other Party of
        insolvency, receivership or bankruptcy proceedings or any other
        proceedings for the settlement of the other Party's debts, provided,
        however with respect to involuntary proceedings, that such proceedings
        are not dismissed within [*****]; (b) upon the other Party's making an
        assignment for the benefit of creditors; or (c) upon the other Party's
        dissolution or ceasing to do business.

               14.6.3 TERMINATION FOR FORCE MAJEURE. If performance of a Party's
        obligations is delayed for a continuous period of not less than [*****]
        due to a force majeure event described in SECTION 14.7, the other Party
        shall have the right to terminate this Agreement upon written notice to
        the non-performing Party; provided, however, that no Party shall have
        the right to terminate this Agreement pursuant to this SECTION 14.6.3 if
        the terminating Party could have reasonably prevented the non-performing
        Party's failure to perform.

               14.6.4   TERMINATION BY CONNETICS.

               (a)    Connetics shall have no rights except for Soltec Breach or
                      Force Majeure to terminate this Agreement prior to the
                      [*****] anniversary of the Effective Date.

               (b)    Connetics shall have a limited right to terminate this
                      Agreement, as follows:

                      (i)    Beginning on the third anniversary of the Effective
                             Date, Connetics shall have a [*****] period in
                             which to terminate this Agreement. Such termination
                             shall be effective immediately upon delivery of
                             written notice to Soltec, with respect to any
                             Products and/or Technologies that Connetics
                             specifies in the written notice to Soltec.

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                                                                         PAGE 27
<PAGE>   28

                      (ii)   If Connetics does not elect to terminate this
                             Agreement pursuant to (i) above, then beginning on
                             the [*****] anniversary of the Effective Date,
                             Connetics shall have one other opportunity to
                             terminate, by giving Soltec written notice of
                             termination within [*****] after the [*****]
                             anniversary of the Effective Date. Such termination
                             shall be effective immediately upon delivery of
                             written notice to Soltec, with respect to any
                             Products and/or Technologies that Connetics
                             specifies in the written notice to Soltec.

               (c)    If Connetics exercises its right to terminate pursuant to
                      this SECTION 14.6.4, then (i) the Agreement shall continue
                      in full force and effect with respect to any Products or
                      Technologies that Connetics does not specify in the
                      written notice, (ii) in the absence of any agreement
                      between the Parties to the contrary, the Minimum Royalty
                      and Royalty obligations shall remain unchanged, (iii) all
                      rights to the Products and Technologies specified by
                      Connetics shall revert to Soltec and Connetics shall no
                      longer have any rights to develop, manufacture, use,
                      distribute, market or sell such Products and/or
                      Technologies, and (iv) Connetics' ongoing diligence
                      obligations shall be as set forth in SECTION 14.6.5(d).

               14.6.5 EFFECT OF TERMINATION. Upon the expiration or earlier
        termination of this Agreement, the rights licensed under this Agreement
        shall be treated as follows:

               (a)    Upon termination for a Connetics Breach or a Soltec
                      Breach, or if such a breach is likely to occur, the other
                      Party shall be entitled to seek equitable relief,
                      including specific performance or an injunction, in
                      addition to any other rights or remedies, including money
                      damages, provided by law, without posting a bond. In
                      addition, upon termination for a Connetics Breach, all
                      rights to the Products and the Technology in the Territory
                      shall revert to Soltec, and all rights of Connetics to
                      develop, manufacture, use, distribute, market and sell
                      such Products and Technology in the Territory and the
                      obligation to pay royalties (including Minimum Royalties)
                      shall thereupon cease. Thereafter Connetics shall have no
                      right to use the trademark(s) relating to such Products
                      and Technology.

               (b)    Unless previously terminated pursuant to this SECTION
                      14.6, upon the expiration of the Term, Connetics shall
                      have a fully paid-up (subject to the Royalty Term and to
                      the Minimum Royalty payable pursuant to SECTION 3.4),
                      perpetual, irrevocable, royalty-free, transferable,
                      non-exclusive right and license to make, have made, use,
                      offer to sell, and sell Products in the Territory, and to
                      use the trademark(s) licensed pursuant to this Agreement
                      on Products on the market in the Territory at the time of
                      such expiration.

               (c)    Upon termination by Soltec for Connetics' failure to meet
                      diligence milestones with respect to a given Product or
                      Technology pursuant to

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                         PAGE 28
<PAGE>   29

                      SECTION 14.6.1(a), (i) all rights licensed under this
                      Agreement to the affected Product or Technology, as the
                      case may be, in the Territory shall revert to Soltec, (ii)
                      all rights of Connetics to develop, manufacture, use,
                      distribute, market and sell such Product in the Territory
                      and the obligation to pay royalties in relation to such
                      Product shall thereupon cease, and (iii) thereafter
                      Connetics shall have no right to use the trademark(s)
                      relating to such Product. In addition, Soltec shall
                      automatically be entitled to the information developed by
                      Connetics in relation to such Product, such rights to
                      apply solely to use by Soltec or an Affiliate of Soltec
                      (without the right to sublicense) outside of the
                      Territory, throughout the world (and not limited to
                      Australia and New Zealand). No Third Party shall be
                      entitled to such information developed by Connetics except
                      on the terms set forth in SECTION 5.2. Nothing in this
                      paragraph (c) is intended to relieve Connetics' obligation
                      to remit royalties to Soltec for Product sold prior to
                      termination of this Agreement, even though Connetics is
                      not paid for such Products until after the date of
                      termination.

               (d)    Upon termination by Connetics pursuant to SECTION 14.6.4,
                      Connetics shall have no further diligence obligations with
                      respect to Products that it specifies in the written
                      notice to Soltec. For any other Product or Technology,
                      Connetics shall have the same diligence, royalty and other
                      obligations set forth elsewhere in this Agreement. In
                      addition, Soltec shall automatically be entitled to the
                      information developed by Connetics in relation to such
                      Product, such rights to apply solely to use by Soltec or
                      an Affiliate of Soltec (without the right to sublicense)
                      outside of the Territory, throughout the world (and not
                      limited to Australia and New Zealand). No Third Party
                      shall be entitled to such information developed by
                      Connetics except on the terms set forth in SECTION 5.2.

        Except as expressly provided in this Agreement, termination of this
        Agreement pursuant to the terms and conditions set forth in this
        Agreement shall not relieve the parties of any right or obligation,
        including but not limited to any payment obligations, accruing prior to
        or upon such expiration or termination. Upon expiration or termination
        of this Agreement for any reason, each party shall immediately return to
        the other party or destroy any Proprietary Information disclosed by the
        other party, except that each party may retain one copy of such
        Proprietary Information marked and used for legal archival purposes
        only.

SECTION 14.7 FORCE MAJEURE. Neither Party shall be considered in default of
performance of its obligations under this Agreement, except any obligation under
this Agreement to make payments when due, to the extent that performance of such
obligations is delayed by contingencies or causes beyond the reasonable control
and not caused by the negligence or willful misconduct of such Party, including
but not limited to strike, fire, flood, earthquake, windstorm, governmental acts
or orders or restrictions, or force majeure, to the extent that the failure to
perform is beyond the reasonable control of the nonperforming Party.

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                         PAGE 29
<PAGE>   30

SECTION 14.8 PUBLICITY. Subject to the requirements of law and/or The Australian
Stock Exchange Limited or the Nasdaq National Market System, any announcements
or publicity (whether verbal or written, including, but not limited to
shareholder reports, prospectuses, communications with stock market analysts,
press releases or other communications with the media) to be made or given in
respect of this Agreement by either party shall be subject to the prior approval
in writing of the other party (such approval not to be unreasonably withheld or
delayed) where such announcement or publicity refers to such other party, the
Product or the Technology. The parties agree that once approval for disclosure
of information has been obtained in accordance with the provisions of this
SECTION 14.8, the party that requested such approval shall be entitled to use
such information without any obligation to seek further approval.

SECTION 14.9 NOTICES. Any notice required or permitted by the terms of this
Agreement shall be given by international overnight courier or registered mail,
prepaid and properly addressed, or delivered by hand, as follows:

        If to Soltec, to:
           Managing Director
           Soltec Research Pty Ltd.
           8 Macro Court
           Rowville
           Victoria 3178
           Australia
           Facsimile:  (+61) 3 9763 0354

        With a copy to:
           Company Secretary
           F. H. Faulding and Co., Limited
           115 Sherriff Street
           Underdale, South Australia 5032
           Facsimile:  (08) 8234 8230

        If to Connetics, to:
           Chief Executive Officer
           Connetics Corporation
           3400 West Bayshore Road
           Palo Alto, California  94303
           Facsimile:  650-843-2899

Either Party may designate a different address by giving notice pursuant to this
Section to the other Party. Any such notice shall be deemed to have been given
when received. All notices to Connetics shall be sent to the attention of its
President.

SECTION 14.10 PARTIAL INVALIDITY. If any provision of this Agreement is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction: (a) such provision will be

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                         PAGE 30
<PAGE>   31

deemed amended to conform to applicable laws of such jurisdiction so as to be
valid and enforceable, or, if it cannot be so amended without materially
altering the intention of the parties, it will be stricken; (b) the validity,
legality and enforceability of such provision will not in any way be affected or
impaired thereby in any other jurisdiction; and (c) the remainder of this
Agreement will remain in full force and effect.

SECTION 14.11 NONASSIGNABILITY AND BINDING EFFECT.

               14.11.1 Each Party agrees that its rights and obligations under
        this Agreement may not be transferred or assigned directly or
        indirectly, except as follows: (a) either Party may transfer or assign
        this Agreement to an Affiliate of such Party which agrees in writing to
        undertake the obligations under this Agreement provided the assigning
        Party remains primarily liable, (b) either Party may transfer or assign
        this Agreement in connection with the sale of all or substantially all
        of the assigning Party's related business, and (c) either Party may
        transfer or assign this Agreement to a non-Affiliate Third Party with
        the prior written consent of the other Party, which consent shall not be
        unreasonably withheld.

               14.11.2 In the case of an assignment by Connetics, Connetics
        agrees that Soltec may seek to enforce Connetics' remedies against the
        assignee directly against such assignee without first exhausting its
        remedies against Connetics if the assignee breaches its agreement so as
        to cause Connetics to become liable to Soltec for damages due to
        Connetics' breach in accordance with the terms of this Agreement. As to
        each such assignee, Connetics shall use commercially reasonable efforts
        to cause each assignee to execute and deliver to Soltec prior to the
        date of the assignment a letter acknowledging Soltec's right to enforce
        Connetics' remedies directly against the assignee. Notwithstanding the
        preceding sentence, if Soltec shall seek to exercise such remedies,
        Connetics shall remain primarily liable and obligated to Soltec under
        all provisions of this Agreement.

               14.11.3 Subject to the foregoing, this Agreement shall be binding
        upon and inure to, the benefit of the Parties, their successors and
        assigns. Any attempted assignment contrary to the provisions of this
        SECTION 14.11 shall be deemed ineffective, and either Party shall have
        the right to terminate this Agreement, with the effect described in
        SECTION 14.6 with respect to a Connetics Breach or a Soltec Breach, as
        applicable.

SECTION 14.12 NON-WAIVER. No failure or delay on the part of a party in
exercising any right under this Agreement will operate as a waiver of, or
impair, any such right, unless a waiver is made in writing signed by the waiving
party. No single or partial exercise of any such right will preclude any other
or further exercise thereof or the exercise of any other right. No waiver of any
such right will be deemed a waiver of any other right under this Agreement.

SECTION 14.13 SURVIVAL. The agreements set forth in SECTIONS 3.4 (Royalties),
3.5 (Sublicense Fees, with respect to transactions entered into prior to
termination), 3.7 (Currency of Payments), 3.10 (Audit), 11.2 (Indemnification by
Connetics), 11.3 (Indemnification by Soltec), 11.4 (Insurance Requirements),
14.1 (Confidentiality), 14.4 (Arbitration), and 14.6.5 (Effect of

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                         PAGE 31
<PAGE>   32

Termination) and ARTICLE 12 (Regulatory Matters) shall survive any termination
or expiration of this Agreement and remain in full force and effect regardless
of the cause of termination. All other rights and obligations of the Parties
shall cease upon expiration or termination of this Agreement.

SECTION 14.14 HEADINGS. Section headings contained in this Agreement are
included for convenience only and form no part of the agreement between the
parties.

SECTION 14.15 ENTIRE AGREEMENT. This Agreement, together with its exhibits which
are incorporated in this Agreement by reference, sets forth the entire agreement
of the parties with respect to the subject matter set forth. Specifically, this
Agreement supercedes in their entirety the Option Agreement and the Letter of
Understanding, both of which shall have no further force or effect as of the
Effective Date. This Agreement is not intended to, and shall not be deemed to,
have any effect on the existing agreements between the Parties with respect to
the Excluded Technology. This Agreement may not be modified except by a writing
signed by the Parties' authorized representatives.

SECTION 14.16 INDEPENDENT CONTRACTORS. The Parties to this Agreement are
independent contractors. This Agreement does not establish a relationship of
agency, partnership, joint venture, employment or franchise between the Parties
and neither Party shall have any authority to bind the other Party or incur any
obligation on the other Party's behalf.

SECTION 14.17 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

IN WITNESS WHEREOF, the parties to this Agreement have entered into this
Agreement as of the Effective Date.

"CONNETICS"                                  "SOLTEC"

Connetics Corporation                        Soltec Research Pty Ltd.

By:     /s/ Thomas G. Wiggans                By:     /s/ Ross A. MacDonald
   --------------------------------             --------------------------------
    Thomas G. Wiggans                            Ross A. MacDonald, Ph.D.
    President and Chief Executive                Managing Director
    Officer

[*****] CONFIDENTIAL TREATMENT REQUESTED
                                                                         PAGE 32
<PAGE>   33

                            C O N F I D E N T I A L

                          EXHIBIT A EXCLUDED TECHNOLOGY

                                     [*****]

<PAGE>   34

                                EXHIBIT B PATENTS

PATENT NUMBER (REFERENCE)                             NAME OF PATENT/APPLICATION
-------------------------                             --------------------------

                                     [*****]

<PAGE>   35

                             C O N F I D E N T I A L

                            EXHIBIT C SPECIFICATIONS

CONFIDENTIAL
                                     [*****]

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