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                                                                    EXHIBIT 10.1

                              CONNETICS CORPORATION
                        1995 EMPLOYEE STOCK PURCHASE PLAN
                  (AS AMENDED AND RESTATED THROUGH MAY 7, 2004)
                 Adopted by the Board of Directors Feb. 17, 2000
                    Approved by the Stockholders May 11, 2000

1.    PURPOSE. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company. It is the intention of the Company to have the Plan qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of
1986, as amended. The provisions of the Plan shall, accordingly, be construed so
as to extend and limit participation in a manner consistent with the
requirements of that section of the Code.

2.    DEFINITIONS.

      (a)   "Board" means the Board of Directors of the Company.

      (b)   "Code" means the Internal Revenue Code of 1986, as amended.

      (c)   "Common Stock" means the Common Stock of the Company.

      (d)   "Company" means Connetics Corporation a Delaware corporation.

      (e)   "Compensation" means all regular straight time gross earnings,
excluding payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses, commissions and other compensation.

      (f)   "Continuous Status as an Employee" means the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company, provided that such leave is for a period of
not more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.

      (g)   "Contributions" means all amounts credited to the account of a
participant pursuant to the Plan.

      (h)   "Designated Subsidiaries" means the Subsidiaries which have been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.

      (i)   "Employee" means any person, including an Officer, who is
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.

      (j)   "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

      (k)   "Purchase Date" means the last day of each Purchase Period of the
Plan.

      (l)   "Offering" means the grant of rights to purchase Common Stock of the
Company under the Plan to eligible Employees.

      (m)   "Offering Date" means the first business day of each Offering Period
of the Plan. In the case of an individual who becomes an eligible Employee after
the first business day of an Offering Period but prior to the first business day
of the last calendar quarter of such Offering Period, the term "Offering Date"
means the first business day of the calendar quarter coinciding with or next
succeeding the day on which that individual becomes an eligible Employee.
Options granted after the first business day of an Offering Period will be
subject to the same terms as the options granted on the first business day of
such Offering Period except that they will have a different grant date (thus,
potentially, a different exercise price) and, because they expire at the same
time as the options granted on the first business day of such Offering Period, a
shorter term.

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      (n)   "Offering Period" means a period of twenty-four (24) months
commencing on December 1 and June 1 of each year, except as otherwise set forth
in SECTION 4(a), or such other period as the Board of Directors may determine
prior to the commencement of an Offering Period, but which period shall not
exceed twenty-four (24) months.

      (o)   "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated under the Exchange Act.

      (p)   "Option Price" means the price at which the shares are offered in a
given Offering Period, calculated as set forth in SECTION 7(b).

      (q)   "Plan" means this Employee Stock Purchase Plan.

      (r)   "Purchase Period" means a period of six (6) months within an
            Offering Period.

      (s)   "Subsidiary" means a corporation, domestic or foreign, of which not
less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.

3.    ELIGIBILITY.

      (a)   Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan subject to the requirements of SECTION 5(a) and the limitations imposed
by Section 423(b) of the Code.

      (b)   Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company, or (ii) if such option would permit
his or her rights to purchase stock under all employee stock purchase plans
(described in Section 423 of the Code) of the Company and its Subsidiaries to
accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of fair
market value of such stock (determined at the time such option is granted) for
each calendar year in which such option is outstanding at any time.

4.    OFFERING PERIODS AND PURCHASE PERIODS.

      (a)   Offering Periods. The Plan shall be implemented by a series of
Offering Periods of twenty-four (24) months duration, with new Offering Periods
commencing on or about June 1 and December 1 of each year (or at such other time
or times as may be determined by the Board of Directors). In particular, upon
adoption of this Plan as amended and restated, a new Offering Period shall
commence on June 1, 2003. The Plan shall continue until terminated in accordance
with SECTION 20 of this Plan. The Board of Directors of the Company shall have
the power to change the duration and/or the frequency of Offering Periods with
respect to future offerings without stockholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected. The terms and conditions of an Offering
Period shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offering Periods need not be identical, but
each Offering shall include (thorough incorporation of the provisions of this
Plan by reference into the document comprising the Offering or otherwise) the
Offering Period, and the substance of the provisions contained in SECTIONS 5
through 13, inclusive. An Employee may only participate in one Offering Period
at a time.

      (b)   Purchase Periods. Each Offering Period shall consist of consecutive
Purchase Periods of six (6) months duration. The last day of each Purchase
Period shall be the "Purchase Date" for such Purchase Period. A Purchase Period
commencing on June 1 shall end on the next November 30. A Purchase Period
commencing on December 1 shall end on the next May 31. In particular, upon
adoption of this Plan as amended and restated, a new Purchase Period shall
commence on June 1, 2003. The Board of Directors of the Company shall have the
power to change the duration and/or frequency of Purchase Periods with respect
to future purchases without stockholder

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approval if such change is announced at least fifteen (15) days prior to the
scheduled beginning of the first Purchase Period to be affected.

5.    PARTICIPATION.

      (a)   An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given offering. The
subscription agreement shall set forth the percentage of the participant's
Compensation (which shall be greater than or equal to zero percent (0%) but not
more than fifteen percent (15%)) to be paid as Contributions pursuant to the
Plan.

      (b)   Payroll deductions shall commence on the first payroll following the
Offering Date and shall end on the last payroll paid on or prior to the last
Purchase Period of the Offering Period to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in SECTION
10.

6.    METHOD OF PAYMENT OF CONTRIBUTIONS.

      (a)   The participant shall elect to have payroll deductions made on each
payday during the Offering Period in an amount greater than or equal to zero
percent (0%) but not more than fifteen percent (15%) of such participant's
Compensation on each such payday. All payroll deductions made by a participant
shall be credited to his or her account under the Plan. A participant may not
make any additional payments into such account.

      (b)   A participant may discontinue his or her participation in the Plan
as provided in SECTION 10, or, on one occasion only during a Purchase Period,
may increase or decrease the rate of his or her Contributions during the
Offering Period by completing and filing with the Company a change of status
notice. The change in rate shall be effective for the first full payroll period
commencing no fewer than ten (10) business days following the Company's receipt
of the change of status notice, unless this change is processed more quickly.

      (c)   Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and SECTION 3(b) of this Plan, a
participant's payroll deductions may be decreased to 0% at such time during any
Offering Period which is scheduled to end during the current calendar year that
the aggregate of all payroll deductions accumulated with respect to such
Offering Period and any other Offering Period ending within the same calendar
year equal $25,000. Payroll deductions shall re-commence at the rate provided in
such participant's subscription Agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in SECTION 10.

7.    GRANT OF OPTION.

      (a)   On the Offering Date of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to purchase on
each Purchase Date a number of shares of the Company's Common Stock determined
by dividing such Employee's Contributions accumulated prior to such Purchase
Date and retained in the participant's account as of the Purchase Date by the
Option Price; provided however, that the maximum number of shares an Employee
may purchase during each Offering Period shall be determined at the Offering
Date by dividing $50,000 by the fair market value of a share of the Company's
Common Stock on the Offering Date, and provided further that such purchase shall
be subject to the limitations set forth in SECTIONS 3(b) and 13. The fair market
value of a share of the Company's Common Stock shall be determined as provided
in SECTION 7(b).

      (b)   The option price per share of the shares offered in a given Offering
Period ("Option Price") shall be the lower of:

      (i)   eighty-five percent (85%) of the fair market value of a share of the
            Company's Common Stock on the Offering Date, or

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      (ii)  eighty-five percent (85%) of the fair market value of a share of the
            Company's Common Stock on the Purchase Date;

The fair market value of the Company's Common Stock on a given date shall be
determined by the Board in its discretion based on the closing price of the
Common Stock for such date (or, in the event that the Common Stock is not traded
on such date, on the immediately preceding trading date), as reported by the
National Association of Securities Dealers Automated Quotation (Nasdaq) National
Market or, if such price is not reported, the mean of the bid and asked prices
per share of the Common Stock as reported by Nasdaq or, in the event the Common
Stock is listed on a stock exchange, the fair market value per share shall be
the closing price on such exchange on such date (or, in the event that the
Common Stock is not traded on such date, on the immediately preceding trading
date), as reported in The Wall Street Journal.

      (c)   In connection with each Offering made under the Plan, the Board or
the Committee may specify a maximum number of shares that may be purchased by
any employee as well as a maximum aggregate number of shares that may be
purchased by all eligible employees pursuant to such Offering. In addition, in
connection with each Offering that contains more than one Purchase Date, the
Board or the Committee may specify a maximum aggregate number of shares which
may be purchased by all eligible employees on any give Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as is practicable and as it deems to be equitable.

8.    EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in SECTION 10, his or her option for the purchase of shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of shares, including fractional shares, subject to the option
will be purchased at the applicable option price with the accumulated
Contributions in his or her account. The shares purchased upon exercise of an
option hereunder shall be deemed to be transferred to the participant on the
Purchase Date. During his or her lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.

9.    DELIVERY. As promptly as practicable after each Purchase Date of each
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of
his or her option or the deposit of such number of shares with the broker
selected by the Company for administration of Plan stock purchases, as
determined by the Company. Any cash remaining to the credit of a participant's
account under the Plan after a purchase by him or her of shares at the
termination of each Offering Period, or which is insufficient to purchase a full
share of Common Stock of the Company, shall be carried over to the next Offering
Period if the Employee continues to participate in the Plan, or if the Employee
does not continue to participate, shall be returned to said participant.

10.   VOLUNTARY WITHDRAWAL; TERMINATION OF EMPLOYMENT.

      (a)   A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current period will be automatically terminated, and no further
Contributions for the purchase of shares will be made during the Offering
Period.

      (b)   Upon termination of the participant's Continuous Status as an
Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under SECTION 15, and his or her option will
be automatically terminated.

      (c)   If an Employee fails to remain in Continuous Status as an Employee
of the Company for at least twenty (20) hours per week during the Offering
Period in which the employee is a participant, he or she will be deemed to have
elected to withdraw from the Plan and the Contributions credited to his or her
account will be returned to him or her and his or her option terminated.

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      (d)   A participant's withdrawal from an offering will not have any effect
upon his or her eligibility to participate in a succeeding offering or in any
similar plan which the Company may adopt after the date of this Plan.

11.   AUTOMATIC WITHDRAWAL. If on the Purchase Date of any Purchase Period in an
Offering Period, the fair market value of the shares is lower than it was on the
Offering Date of such Offering Period (after taking into account any adjustment
during the Offering Period pursuant to SECTION 19(a)), all participants in such
Offering Period shall (a) acquire the shares reserved for the participant for
such Purchase Period, and (b) automatically be (i) withdrawn from the Offering
Period following the acquisition of shares, and (ii) enrolled in the Offering
Period that commences on the next business day.

12.   INTEREST.

      (a)   All payroll deductions credited to the account of a participant
under the Plan shall accrue interest. In the case of participants primarily
employed in Australia, such amounts credited to a participant's account shall be
deposited with a bank in Australia. In the case of participants primarily
employed in the United States, such amounts credited to a participant's account
shall be deposited with a bank in the United States. With respect to
participants employed in other jurisdictions, the Board shall determine the
location of the bank where amounts credited to a participant's account shall be
deposited.

      (b)   Any interest attributable to amounts credited to the account of a
participant under the Plan shall be paid to the account of the participant and
shall form part of that participant's Contributions.

      (c)   The Company shall be entitled to deduct from the interest earned on
amounts credited to the account of a participant any bank and government charges
referable to that participant's Contributions and an amount representing a
reasonable apportionment of the cost of administering the Plan, as determined by
the Board from time to time. In addition, the Company shall be entitled to
withhold from such interest an amount sufficient to satisfy any applicable
income and employment tax withholding obligations.

      (d)   The Company shall advise each participant of the amount of interest
(net of any bank, government and administration charges deducted) earned in
respect of amounts credited to the account of a participant for the relevant tax
period.

13.   STOCK SUBJECT TO THE PLAN.

      (a)   Subject to adjustment upon changes in capitalization of the Company
as provided in SECTION 19(a), the maximum aggregate number of Shares which may
be optioned and sold under the Plan shall be Eight Hundred Thousand (800,000)
shares, plus an annual increase to be added on each November 30, equal to the
lesser of:

      (i)   one half of one percent (0.5%) of the total number of shares of
            Common Stock outstanding on such anniversary date; or

      (ii)  a number of shares determined by the Board prior to the anniversary
            date, which number shall be less than (i) above.

The Shares may be authorized, but unissued, or reacquired Common Stock. If the
total number of shares which would otherwise be subject to options granted
pursuant to SECTION 7(a) on the Offering Date of an Offering Period exceeds the
number of shares then available under the Plan (after deduction of all shares
for which options have been exercised or are then outstanding), the Company
shall make a pro rata allocation of the shares remaining available for option
grant in as uniform a manner as shall be practicable and as it shall determine
to be equitable. In such event, the Company shall give written notice of such
reduction of the number of shares subject to the option to each Employee
affected thereby and shall similarly reduce the rate of Contributions, if
necessary.

      (b)   The participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.

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      (c)   Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.

14.   ADMINISTRATION. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to determine when and how rights to
purchase stock of the Company shall be granted and the provisions of each such
Offering Period (which need not be identical), to construe and interpret the
Plan and rights granted under it, and to establish, amend and revoke rules and
regulations for the administration of the Plan. The composition of the committee
shall be in accordance with the requirements to obtain or retain any available
exemption from the operation of Section 16(b) of the Exchange Act pursuant to
Rule 16b-3 under the Exchange Act.

15.   DESIGNATION OF BENEFICIARY.

      (a)   A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him or her of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Purchase Date of an Offering Period. If
a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.

      (b)   Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its discretion, may deliver such shares and/or cash to the spouse or to any
one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.

16.   TRANSFERABILITY. Neither Contributions credited to a participant's account
nor any rights with regard to the exercise of an option or to receive shares
under the Plan may be assigned, transferred, pledged or otherwise disposed of in
any way (other than by will, the laws of descent and distribution, or as
provided in SECTION 15) by the participant. Any such attempt at assignment,
transfer, pledge or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw funds in accordance with
SECTION 10.

17.   USE OF FUNDS. Contributions received by the Company under the Plan shall
constitute general funds of the Company.

18.   REPORTS. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given to participating Employees
promptly following the Purchase Date, which statements will set forth the
amounts of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.

19.   ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.

      (a)   Adjustment. Subject to any required action by the shareholders of
the Company, the number of shares of Common Stock covered by each option under
the Plan which has not yet been exercised and the number of shares of Common
Stock which have been authorized for issuance under the Plan but have not yet
been placed under option (collectively, the "Reserves"), as well as the price
per share of Common Stock covered by each option under the Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any

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class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.

      (b)   Corporate Transactions. In the event of the proposed dissolution or
liquidation of the Company, the Offering Period will terminate immediately prior
to the consummation of such proposed action, unless otherwise provided by the
Board. In the event of a proposed sale of all or substantially all of the assets
of the Company, or the merger of the Company with or into another corporation,
each option under the Plan shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, to shorten the
Offering Period then in progress by setting a new Purchase Date (the "New
Purchase Date"). If the Board shortens the Offering Period then in progress in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify each participant in writing, at least ten (10) days prior
to the New Purchase Date, that the Purchase Date for his or her option has been
changed to the New Purchase Date and that his or her option will be exercised
automatically on the New Purchase Date, unless prior to such date he or she has
withdrawn from the Offering Period as provided in SECTION 10. For purposes of
this paragraph, an option granted under the Plan shall be deemed to be assumed
if, following the sale of assets or merger, the option confers the right to
purchase, for each share of option stock subject to the option immediately prior
to the sale of assets or merger, the consideration (whether stock, cash or other
securities or property) received in the sale of assets or merger by holders of
Common Stock for each share of Common Stock held on the effective date of the
transaction (and if such holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
shares of Common Stock); provided, however, that if such consideration received
in the sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the participant, provide
for the consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair market
value to the per share consideration received by holders of Common Stock and the
sale of assets or merger.

      The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.

20.   AMENDMENT OR TERMINATION.

      (a)   The Board of Directors of the Company may at any time terminate or
amend the Plan. Except as provided in SECTION 19(b), no such termination may
affect options previously granted, nor may an amendment make any change in any
option theretofore granted which adversely affects the rights of any
participant. In addition, to the extent necessary to comply with Rule 16b-3
under the Exchange Act, or under Section 423 of the Code (or any successor rule
or provision or any applicable law or regulation), the Company shall obtain
shareholder approval in such a manner and to such a degree as so required.

      (b)   Without shareholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.

21.   NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.

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22.   CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated under those Acts, and the requirements of any stock exchange upon
which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an option, the Company may require the person
exercising such option to represent and warrant at the time of any such exercise
that the shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
applicable provisions of law.

23.   TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the shareholders of the Company. It shall continue in effect for a term of
twenty (20) years unless sooner terminated under SECTION 20.

24.   ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions of options
granted hereunder to, and the purchase of shares by, persons subject to Section
16 of the Exchange Act shall comply with the applicable provisions of Rule
16b-3. This Plan shall be deemed to contain, and such options shall contain, and
the shares issued upon exercise thereof shall be subject to, such additional
conditions and restrictions as may be required by Rule 16b-3 to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.

25.   PLAN APPROVAL. The Plan was initially approved by the Board and the
stockholders of the Company in the year 2000. In December 2002, the Board
approved an amendment and restatement of the Plan to provide (a) that a
participant may increase or decrease his or his percentage of payroll
withholding once during each Purchase Period, (b) that a participant may elect
to have payroll deductions made on each payday during an Offering Period in an
amount greater than or equal to zero percent (0%) but not more than fifteen
percent (15%) of the participant's Compensation and (c) for certain other
administrative changes, which amendments are not subject to stockholder
approval. The amendments described in the previous sentence shall be effective
for Offering Periods commencing on or after June 1, 2003. In May 2004, the Board
approved an amendment and restatement of the Plan to provide that all payroll
deductions credited to the account of a participant under the Plan shall accrue
interest subject to the provisions of Section 12 of the Plan, which amendment is
not subject to stockholder approval. The amendment described in the previous
sentence shall be effective for Offering Periods commencing on or after June 1,
2004.

                               * * * * * * * * * *

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                              CONNETICS CORPORATION
                        1995 EMPLOYEE STOCK PURCHASE PLAN
                    SUBSCRIPTION AGREEMENT FOR U.S. EMPLOYEES

1.    I, ________________________, hereby elect to participate in the CONNETICS
CORPORATION 1995 Employee Stock Purchase Plan (the "Plan") for the Offering
Period Offering Period ______________, 20___ to _______________, 20__, and
subscribe to purchase shares of the Company's Common Stock in accordance with
this Subscription Agreement and the Plan.

2.    I elect to have Contributions in the amount of ____% of my Compensation,
as those terms are defined in the Plan, applied to this purchase. I understand
that this amount must be greater than or equal to zero percent (0%) but not more
than fifteen percent (15%) of my Compensation during the Offering Period.
(PLEASE NOTE THAT NO FRACTIONAL PERCENTAGES ARE PERMITTED).

3.    I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.

4.    I understand that I may discontinue at any time prior to the Purchase Date
my participation in the Plan as provided in Section 10 of the Plan. I also
understand that I can decrease the rate of my Contributions on one occasion only
during any Purchase Period by completing and filing a change of status notice
with such decrease taking effect for the first full payroll period commencing no
fewer than ten (10) business days following the Company's receipt the change of
status notice, unless this change is processed more quickly. Further, I may
change the rate of deductions for future Offering Periods by filing a new
Subscription Agreement, and any such change will be effective as of the
beginning of the next Offering Period. In addition, I acknowledge that, unless I
discontinue my participation in the Plan as provided in Section 10 of the Plan,
my election will continue to be effective for each successive Offering Period.

5.    I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "CONNETICS CORPORATION 1995 Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.

6.    Shares purchased for me under the Plan should be issued in the name(s) of
(name of employee or employee and spouse only):

                       __________________________________

                       __________________________________

7.    In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:

NAME: _____________________________________         ____________________
(Please print) (First) (Middle) (Last)                   (Relationship)

__________________________________
             (Address)

__________________________________

                                      -1-
<PAGE>

8.    I understand that if I dispose of any shares received by me pursuant to
the Plan within two years after the Offering Date (the first day of the Offering
Period during which I purchased such shares) or within one year after the
Purchase Date, I will be treated for federal income tax purposes as having
received ordinary compensation income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares on the
Purchase Date over the price which I paid for the shares, regardless of whether
I disposed of the shares at a price less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.

      I hereby agree to notify the Company in writing within 30 days after the
date of any such disposition, and I will make adequate provision for federal,
state or other tax withholding obligations, if any, which arise upon the
disposition of the Common Stock. The Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.

9.    If I dispose of such shares at any time after expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal income
tax purposes as having received compensation income only to the extent of an
amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares under the option, or (2) 15% of the fair market value of the shares
on the Offering Date. The remainder of the gain or loss, if any, recognized on
such disposition will be treated as capital gain or loss.

      I understand that this tax summary is only a summary and is subject to
change. I further understand that I should consult a tax advisor concerning the
tax implications of the purchase and sale of stock under the Plan.

10.   I hereby agree to be bound by the terms of the Plan. The effectiveness of
this Subscription Agreement is dependent upon my eligibility to participate in
the Plan.

SIGNATURE: ____________________________________

SOCIAL SECURITY OR TAX I.D. #: _______________________

DATE: _______________________

SPOUSE'S SIGNATURE (necessary if beneficiary is not spouse):

____________________________________________________________
(Signature)

____________________________________
(Print name)

                                      -2-
<PAGE>

                              CONNETICS CORPORATION
                        1995 EMPLOYEE STOCK PURCHASE PLAN
                 SUBSCRIPTION AGREEMENT FOR AUSTRALIAN EMPLOYEES

1.    I, ________________________, hereby elect to participate in the CONNETICS
CORPORATION 1995 Employee Stock Purchase Plan (the "Plan") for the Offering
Period Offering Period ______________, 20___ to _______________, 20__, and
subscribe to purchase shares of the Company's Common Stock in accordance with
this Subscription Agreement and the Plan.

2.    I elect to have Contributions in the amount of ____% of my Compensation,
as those terms are defined in the Plan, applied to this purchase. I understand
that this amount must be greater than or equal to zero percent (0%) but not more
than fifteen percent (15%) of my Compensation during the Offering Period.
(PLEASE NOTE THAT NO FRACTIONAL PERCENTAGES ARE PERMITTED).

3.    I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.

4.    I understand that I may discontinue at any time prior to the Purchase Date
my participation in the Plan as provided in Section 10 of the Plan. I also
understand that I can decrease the rate of my Contributions on one occasion only
during any Purchase Period by completing and filing a change of status notice
with such decrease taking effect for the first full payroll period commencing no
fewer than ten (10) business days following the Company's receipt the change of
status notice, unless this change is processed more quickly. Further, I may
change the rate of deductions for future Offering Periods by filing a new
Subscription Agreement, and any such change will be effective as of the
beginning of the next Offering Period. In addition, I acknowledge that, unless I
discontinue my participation in the Plan as provided in Section 10 of the Plan,
my election will continue to be effective for each successive Offering Period.

5.    I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "CONNETICS CORPORATION 1995 Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.

6.    Shares purchased for me under the Plan should be issued in the name(s) of
(name of employee or employee and spouse only):

                     _____________________________________

                     _____________________________________

7.    In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:

NAME: _____________________________________         ____________________
(Please print) (First) (Middle) (Last)                   (Relationship)

__________________________________
             (Address)

__________________________________

                                      -1-
<PAGE>

      I understand that the tax summary in the Explanatory Booklet is only a
summary and is subject to change. I further understand that I should consult a
tax advisor concerning the tax implications of the purchase and sale of stock
under the Plan.

10.   I hereby agree to be bound by the terms of the Plan. The effectiveness of
this Subscription Agreement is dependent upon my eligibility to participate in
the Plan.

SIGNATURE: ____________________________________

SOCIAL SECURITY OR TAX I.D. #: _____________________________

DATE: _____________________________

SPOUSE'S SIGNATURE (necessary if beneficiary is not spouse):

____________________________________________________________
(Signature)

____________________________________________________________
(Print name)

                                      -2-
<PAGE>

                              CONNETICS CORPORATION
                        1995 EMPLOYEE STOCK PURCHASE PLAN
                             CHANGE OF STATUS NOTICE

  [ ] WITHDRAWAL FROM 1995 EMPLOYEE STOCK PURCHASE PLAN

I, __________________________, hereby elect to withdraw my participation in the
CONNETICS CORPORATION 1995 Employee Stock Purchase Plan (the "Plan") for the
Offering Period ______________, 20___ to _______________, 20__. This withdrawal
covers all Contributions credited to my account and is effective on the date
designated below.

I understand that all Contributions credited to my account will be paid to me
within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.

I further understand and agree that I shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.

If the undersigned is an Officer or Director of CONNETICS CORPORATION or other
person subject to Section 16 of the Securities Exchange Act of 1934, the
signature below indicates that, in addition to the foregoing, I understand that
under rules promulgated by the U.S. Securities and Exchange Commission I may not
re-enroll in the Plan for a period of six (6) months after withdrawal.

  [ ] CHANGE IN PAYROLL DEDUCTION

I, __________________________, hereby elect to change my rate of payroll
deduction under the Plan as follows. I elect to have Contributions in the amount
of ____% of my Compensation, as those terms are defined in the Plan, applied
toward the purchase of shares under the Plan. I understand that this amount must
be greater than or equal to zero percent (0%) but not more than fifteen percent
(15%) of my Compensation during the Offering Period. (PLEASE NOTE THAT NO
FRACTIONAL PERCENTAGES ARE PERMITTED).

An increase or a decrease in payroll deduction will be effective for the first
full payroll period commencing no fewer than ten (10) business days following
the Company's receipt of this notice, unless this change is processed more
quickly.

                                       2
<PAGE>

  [ ] CHANGE OF BENEFICIARY

This change of beneficiary shall terminate my previous beneficiary designation
under the Plan. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:

NAME: _____________________________________         ____________________
(Please print) (First) (Middle) (Last)                   (Relationship)

__________________________________
             (Address)

__________________________________

SIGNATURE: ____________________________________

SOCIAL SECURITY OR TAX I.D. #: _____________________________

DATE: _____________________________

SPOUSE'S SIGNATURE (necessary if beneficiary is not spouse):

____________________________________________________________
(Signature)

_______________________________________
(Print name)

                                       2<PAGE>
                                                                    Exhibit 10.2

                               SUBLEASE AGREEMENT

                                       I.
                                  DEFINED TERMS

Basic Rent:                Months                 Monthly Basic Rent

                           1-75                   $110,428.75 per month

Broker:             CRESA Partners (representing both Sublessor and Sublessee)

Building:           3160 Porter Drive, Palo Alto, California

Effective           Date: May 6, 2004

Expiration          Date: March 31, 2011

Landlord:           The Board of Trustees of the Leland Stanford Junior
                    University

Master              Lease: That certain Lease dated as of June 19, 1997 by and
                    between Landlord, as landlord, and Incyte Pharmaceuticals,
                    Inc., predecessor-in-interest to Sublessor, as tenant, as
                    amended by (i) Notice of Commencement Date dated October 28,
                    1998 (the "October 1998 Notice"), (ii) Notice of Base Rent
                    and Rentable Area dated November 24, 1998 (the "November
                    1998 Notice (#1)"), (iii) Notice of Rent Commencement Date
                    and Expiration Date dated November 24, 1998 (the "November
                    1998 Notice (#2)"), and (iv) First Amendment to Lease dated
                    as of May 6, 2004 (the "First Amendment").

Permitted           Uses: The uses permitted in Section 7.1 of the Master Lease.

Premises:           The entire Building consisting of approximately 96,025
                    rentable square feet, as more particularly described in the
                    Master Lease attached hereto as Exhibit A

Commencement Date:  The earlier of (i) January 1, 2005, or (ii) the date
                    Sublessee commences business operations in the Sublet Space

Letter of Credit:   $663,000.00, subject to reduction in accordance
                    with Section 6

Sublessee:          Connetics Corporation, a Delaware corporation

                                       1.
<PAGE>

Sublessee's Address:    Prior to Commencement Date:
                        Connetics Corporation
                        3290 West Bayshore Road
                        Palo Alto, CA  94303
                        Attn: Christopher T. Holman,
                              Director of Facilities and Production Planning

                        On and after Commencement Date:
                        Connetics Corporation
                        3160 Porter Drive
                        Palo Alto, CA  94304
                        Attn: Christopher T. Holman,
                              Director of Facilities and Production Planning
Sublessee's Share:      100%

Sublessor:              Incyte Corporation, a Delaware corporation

Sublessor's Address:    Incyte Corporation
                        Experimental Station
                        Route 141 and Henry Clay Road
                        Building 336
                        Wilmington, DE  19880
                        Attn:  General Counsel

                        with a copy to:

                        Incyte Corporation
                        Experimental Station
                        Route 141 and Henry Clay Road
                        Building 336
                        Wilmington, DE  19880
                        Attn: Chief Financial Officer

Sublet Space:           The entire Premises

Sublease Term:          Seventy five (75) months

Exhibits:               Exhibit A - Master Lease
                        Exhibit B - List of FF&E
                        Exhibit C - List of Exercise Equipment
                        Exhibit D - Closure Plan
                        Exhibit E - Responsible Party Letter

                                       2.

                                      II.

     THIS SUBLEASE AGREEMENT ("Sublease") is entered as of the Effective Date by
and between Sublessor and Sublessee. Sublessor and Sublessee are each sometimes
referred to in this Sublease as a "Party" and collectively as "Parties."

     THE PARTIES ENTER this Sublease on the basis of the following facts,
understandings and intentions:

     A.   Sublessor is presently the lessee of the Premises pursuant to the
Master Lease by and between Landlord and Sublessor. A copy of the Master Lease
with all exhibits and addenda thereto is attached hereto as Exhibit A.

     B.   Sublessor desires to sublease the Sublet Space to Sublessee and
Sublessee desires to sublease the Sublet Space from Sublessor on all of the
terms, covenants and conditions hereinafter set forth.

     C.   All of the terms and definitions in the Defined Terms section of this
Sublease are incorporated herein by this reference. Capitalized terms used in
this Sublease and not otherwise defined herein shall have the meanings given to
them in the Master Lease.

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and promises of
the Parties, the Parties hereto agree as follows:

     1.   SUBLEASE TERM.

          a.   COMMENCEMENT AND EXPIRATION OF SUBLEASE TERM. The Sublease Term
shall commence on the Commencement Date and end on the Expiration Date. If for
any reason Sublessor does not deliver possession of the Sublet Space to
Sublessee on or before January 1, 2005, then this Sublease shall not terminate.
Sublessor will have no liability for such failure to deliver the Sublet Space,
but the Basic Rent and Additional Rent due hereunder shall not commence until
the date possession of the Sublet Space is given to Sublessee. Sublessor shall
sublease to Sublessee, and Sublessee shall sublease from Sublessor the Sublet
Space for the Sublease Term upon all of the terms, covenants and conditions
herein contained.

          b.   EARLY ACCESS. During the period between July 1, 2004 and the
Commencement Date (the "Early Access Period"), Sublessee shall be permitted to
enter the Sublet Space for the sole purpose of performing improvements and
installing Sublessee's equipment, furniture and other personal property, at
Sublessee's sole cost and expense. Under no circumstances may Sublessee conduct
business in the Sublet Space during the Early Access Period. All the terms and
conditions of this Sublease (including without limitation, Sublessee's indemnity
and insurance obligations hereunder and Sublessee's obligation hereunder to
maintain, at its cost, the Building [other than the Building Structure, which
Landlord is obligated to maintain under the Master Lease], the Building Systems
and the parking areas within the Building Common Area in accordance with the
terms of the Master Lease) shall apply during the

                                       3.
<PAGE>

Early Access Period, except that Sublessee shall not be obligated to pay during
the Early Access Period (i) Basic Rent, (ii) Real Estate Taxes, (iii) insurance
maintained by Landlord pursuant to the Master Lease, (iv) utilities or (v) the
cost of maintaining the landscape areas within the Building Common Area. Without
limiting the generality of the foregoing, Sublessee shall be responsible for
repairing, at its cost, any damage to the Building or the Building Common Area
arising out of or resulting from Sublessee's performance of any Alterations (as
defined in the Master Lease) and/or installation of equipment, furniture or
other personal property during the Early Access Period. Sublessee's early access
shall also be conditioned upon Sublessee's not being in default hereunder and
the Parties having received the prior written consent of Landlord to this
Sublease. Any Alterations performed by Sublessee during the Early Access Period
shall be performed in accordance with the terms of this Sublease (including,
without limitation, the need to obtain the prior written consent of Sublessor
and Landlord thereto). Sublessee agrees to deliver its plans and specifications
for any Alterations to be performed by or on behalf of Sublessee during the
Early Access Period simultaneously to Landlord and to Sublessor. Sublessor's
consent to such Alterations shall not be unreasonably withheld and shall be
given or denied within three (3) business days after Sublessor's receipt of
Landlord's written consent to such Alterations. Without limiting the generality
of the foregoing, the Parties agree that it shall be reasonable for Sublessor to
withhold its consent to any Alterations (i) which have not been approved by
Landlord, or (ii) which have been approved by Landlord, but which Landlord has
notified Sublessor (and/or Sublessee), at the time of Landlord's approval of
such Alterations, will be required to be removed from the Sublet Space upon the
expiration or earlier termination of the Master Lease.

     2.   CONDITION OF SUBLET SPACE.

          a.   PHYSICAL CONDITION. Sublessor shall deliver the Sublet Space with
all Building Systems in good working order and with the Building in compliance
with the Americans with Disabilities Act of 1990 and applicable building codes,
as the same are in effect as of the commencement of the Early Access Period.
Prior to the commencement of the Early Access Period, Sublessor shall have
complied with the closure plan attached hereto as Exhibit D and incorporated
herein by this reference (the "Closure Plan"). For purposes of complying with
Section 2 of the Closure Plan (entitled "Lab Equipment"), Sublessor shall
decontaminate biosafety cabinets with potential viral contamination with
decontaminates acceptable to the City of Palo Alto Fire Department. Sublessee
acknowledges and agrees that in order for Sublessor to comply with the Closure
Plan, Sublessee shall be required to provide, and hereby agrees to provide by no
later than June 1, 2004, a responsible party letter to the City of Palo Alto
Fire Department, in the form of Exhibit E attached hereto and incorporated
herein by this reference. As of the Effective Date, Sublessee acknowledges that
Sublessee shall have conducted Sublessee's own investigation of the Sublet Space
and the physical condition thereof, including accessibility and location of
utilities, and improvements, which in Sublessee's judgment affect or influence
Sublessee's use of the Sublet Space and Sublessee's willingness to enter this
Sublease, and subject to the first and second sentences of this Section 2.a,
shall accept the Sublet Space in "AS IS" condition and repair. Sublessee
acknowledges that Sublessor has made no representations of any kind in
connection with improvements or physical conditions on, or bearing on, the use
of the Sublet Space. Sublessee shall rely solely on Sublessee's own inspection
and examination of such items and not on any representations of Sublessor,
express or implied. Without limiting the generality of the foregoing, Sublessee
acknowledges and agrees

<PAGE>

that Sublessor shall not provide any fiber access to the Sublet Space other than
any fiber access that may currently exist in the Sublet Space as of the
Effective Date. Subject to the first and second sentences of this Section 2.a,
Sublessee further recognizes and agrees that neither Sublessor nor Landlord
shall be required to perform any work of construction or alteration to the
Sublet Space to ready the same for Sublessee's occupancy.

          b.   FURTHER INSPECTION. Sublessee represents and warrants to
Sublessor that as of the Effective Date Sublessee shall examine and inspect all
matters with respect to taxes, income and expense data, insurance costs, bonds,
permissible uses, the Master Lease, zoning, covenants, conditions and
restrictions and all other matters which in Sublessee's judgment bear upon the
value and suitability of the Sublet Space for Sublessee's purposes. Sublessee
has and will rely solely on Sublessee's own inspection and examination of such
items and not on any representations of Sublessor, express or implied.

          c.   TRANSFER OF FF&E. Effective as of the commencement of the Early
Access Period, Sublessor transfers to Sublessee, in consideration of the sum of
One and 00/100 Dollars ($1.00), Sublessor's right, title and interest in and to
the furniture, trade fixtures and equipment located in the Sublet Space as of
the Effective Date and identified on Exhibit B attached hereto and incorporated
herein by this reference (collectively, the "FF&E"). SUBLESSEE HEREBY
ACKNOWLEDGES AND AGREES THAT THE FF&E IS USED AND CONVEYED AND ACCEPTED "AS-IS"
WITHOUT ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR NATURE, INCLUDING,
WITHOUT LIMITATION, AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
WHETHER EXPRESS OR IMPLIED, OR WHETHER WRITTEN OR ORAL, CONCERNING ANY AND ALL
DEFECTS OF A PHYSICAL NATURE, WHETHER IN MATERIAL OR WORKMANSHIP AND WHETHER OR
NOT SUCH DEFECT WOULD BE VISIBLE OR APPARENT UPON SUBLESSEE'S FULL INSPECTION
AND EXAMINATION OF THE FF&E. Sublessee, at its sole cost and expense, shall be
responsible for repairing, maintaining and insuring (in accordance with the
terms of the Master Lease) the FF&E. In addition, Sublessee, at its sole cost
and expense, shall be responsible for removing the FF&E from the Sublet Space,
in accordance with the terms of the Master Lease, upon the earlier of (i) the
termination of this Sublease; or (ii) the expiration or earlier termination of
the Master Lease, in the event (A) this Sublease becomes effective as a direct
lease between Landlord and Sublessee, and/or (B) the Master Lease, upon the
expiration of the Sublease Term, continues as a direct lease between Landlord
and Sublessee. In addition, Sublessee, at its sole cost and expense, shall be
responsible for any and all licensing, connection requirements and maintenance
fees and contracts associated with the FF&E.

          d.   OPTION TO PURCHASE EXERCISE EQUIPMENT. Sublessee shall have the
option to purchase, effective as of the commencement of the Early Access Period,
Sublessor's right, title and interest in and to the exercise equipment located
in the Sublet Space as of the Effective Date and identified on Exhibit C
attached hereto and incorporated herein by this reference (collectively, the
"Exercise Equipment"), for a cash purchase price in the amount of Twenty Six
Thousand and 00/100 Dollars ($26,000.00). If Sublessee elects to purchase the
Exercise Equipment pursuant to this Section 2.d, Sublessee shall deliver written
notice to Sublessor confirming such election no later than fourteen (14) days
after the Effective Date. In the event Sublessee purchases the Exercise
Equipment pursuant to this Section 2.d, SUBLESSEE

                                       5.
<PAGE>

ACKNOWLEDGES AND AGREES THAT THE EXERCISE EQUIPMENT HAS BEEN USED AND SHALL BE
CONVEYED AND ACCEPTED "AS-IS" WITHOUT ANY WARRANTIES OR REPRESENTATIONS OF ANY
KIND OR NATURE, INCLUDING, WITHOUT LIMITATION, AS TO MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE, WHETHER EXPRESS OR IMPLIED, OR WHETHER WRITTEN OR
ORAL, CONCERNING ANY AND ALL DEFECTS OF A PHYSICAL NATURE, WHETHER IN MATERIAL
OR WORKMANSHIP AND WHETHER OR NOT SUCH DEFECT WOULD BE VISIBLE OR APPARENT UPON
SUBLESSEE'S FULL INSPECTION AND EXAMINATION OF THE EXERCISE EQUIPMENT. In the
event Sublessee purchases the Exercise Equipment pursuant to this Section 2.d,
Sublessee, at its sole cost and expense, shall be responsible for repairing,
maintaining and insuring (in accordance with the terms of the Master Lease) the
Exercise Equipment. In addition, in the event Sublessee purchases the Exercise
Equipment pursuant to this Section 2.d, Sublessee, at its sole cost and expense,
shall be responsible for removing the Exercise Equipment from the Sublet Space,
in accordance with the terms of the Master Lease, upon the earlier of (i) the
termination of this Sublease; or (ii) the expiration or earlier termination of
the Master Lease, in the event (A) this Sublease becomes effective as a direct
lease between Landlord and Sublessee, and/or (B) the Master Lease, upon the
expiration of the Sublease Term, continues as a direct lease between Landlord
and Sublessee. In addition, in the event Sublessee purchases the Exercise
Equipment pursuant to this Section 2.d, Sublessee, at its sole cost and expense,
shall be responsible for any and all licensing, connection requirements and
maintenance fees and contracts associated with the Exercise Equipment.

     3.   SUBLEASE SUBJECT TO MASTER LEASE.

          a.   INCLUSIONS. It is expressly understood, acknowledged and agreed
by Sublessee that all of the other terms, conditions and covenants of this
Sublease shall be those stated in the Master Lease except as excluded in Section
3.b herein. Whenever the word "Premises" is used in the Master Lease, for
purposes of this Sublease, the word "Sublet Space" shall be substituted.
Sublessee shall be subject to, bound by and comply with all of said Articles and
Sections of the Master Lease with respect to the Sublet Space and shall satisfy
all applicable terms and conditions of the Master Lease for the benefit of both
Sublessor and Landlord, it being understood and agreed that, for purposes of
this Sublease, as between Sublessor and Sublessee, wherever in the Master Lease
the word "Tenant" appears, the word "Sublessee" shall be substituted, and
wherever the word "Landlord" appears, for the purposes of this Sublease, the
word "Sublessor" shall be substituted; wherever the words "Tenant's Share"
appears, for the purposes of this Sublease, the words "Sublessee's Share" shall
be substituted; and that upon the breach by Sublessee of any of said terms,
conditions or covenants of the Master Lease incorporated into this Sublease or
upon the failure of Sublessee to pay Rent or otherwise comply with any of the
provisions of this Sublease, Sublessor may, but shall not be obligated to,
exercise any and all rights and remedies granted to Landlord by the Master
Lease. In the event of any conflict between the terms of this Sublease and the
terms of the Master Lease, the terms of this Sublease shall control as between
Sublessor and Sublessee. It is further understood and agreed that Sublessor has
no duty or obligation to Sublessee under the aforesaid Articles and Sections of
the Master Lease other than to maintain the Master Lease in full force and
effect during the term of this Sublease; provided, however, that Sublessor shall
not be liable to Sublessee for any termination of the Master Lease prior to the
Expiration Date which is not caused solely by the

                                       6.
<PAGE>

fault or default of Sublessor. Whenever the provisions of the Master Lease
incorporated as provisions of this Sublease require the written consent of
Landlord, said provisions shall be construed to require the written consent of
both Landlord and Sublessor. Sublessee hereby acknowledges that it has read and
is familiar with all the terms of the Master Lease, and agrees that this
Sublease is subordinate and subject to the Master Lease and that any termination
of the Master Lease shall likewise terminate this Sublease unless Landlord and
Sublessee have entered into a recognition and attornment agreement whereby
Landlord has agreed to accept this Sublease as a direct lease between Landlord
and Sublessee.

          b.   MODIFICATION OF INCORPORATED PROVISIONS. For so long as this
Sublease continues in effect between Sublessor and Sublessee, the following
provisions of the Master Lease, which have been incorporated into this Sublease
pursuant to Section 3.a above, shall be modified as between Sublessor and
Sublessee as follows: (i) in Section 8.4, "Landlord" shall mean Landlord, and
not Sublessor; (ii) the last sentence of Section 9.3(a) is deleted and replaced
with the following: "Alterations shall be at least equal in quality to the
improvements in the Sublet Space as of the Effective Date"; (iii) as used in
Section 10.1, "Landlord" shall mean Landlord, and not Sublessor, and Sublessee
acknowledges and agrees that Sublessor shall not have any liability by reason of
any injury to Sublessee's business or interference with Sublessee's business
arising from the making of any repairs, alterations or improvements to any
portion of the Building or to fixtures, appurtenances and equipment therein by
Landlord pursuant to such Section 10.1; (iv) as used in Section 21.7, "Landlord"
shall mean Landlord, and not Sublessor; (v) Section 42.4 is modified to delete
the parenthetical "(and if against Landlord, shall)"; and (vi) Sublessee
acknowledges and agrees that by incorporating Section 42.8 into this Sublease,
Sublessee shall be obligated to pay all holdover rent payable by Sublessor to
Landlord under the Master Lease in the event of any holdover by Sublessee.

          c.   EXCLUSIONS. For so long as this Sublease continues in effect
between Sublessor and Sublessee, the following Sections and portions of the
Master Lease shall not be incorporated into this Sublease: Section 1; Section 2
(except for the following definitions, which are incorporated into this
Sublease: "Agents", "Alterations", "Applicable Laws", "Building Structure",
"Building Systems", "Building Common Area", "Environmental Laws", "Environmental
Activity", "Hazardous Material", "Interest Rate", "Landlord's Tax Statement",
"Real Estate Taxes", "Stanford Research Park", "Tax Year", "Tenant's Hazardous
Materials", "Tenant's Property", "Termination Date", and "3160/3170 Porter Drive
Site" (as defined in the First Amendment); Sections 4.1 through 4.3, inclusive;
Sections 5.1 through 5.3, inclusive; the phrase "during the first five years of
the Term" four (4) lines from the bottom of Section 6.1(c); Sections 8.1 and
8.2, inclusive; the phrase "After completion of the Tenant Improvement Work" at
the beginning of Section 9.1; the phrase "except as expressly provided in
attached Exhibit B with respect to the Base Building Work" in Section 13.1;
Section 16; Section 17; Section 18; Section 25; Section 30; Section 33; the last
sentence of Section 42.6; Exhibits B, C-1, C-2, D, and E, inclusive; the October
1998 Notice; the November 1998 Notice (#1); and the November 1998 Notice (#2).

          d.   TIME FOR NOTICE. For so long as this Sublease continues in effect
between Sublessor and Sublessee, the time limits provided for in the provisions
of the Master Lease for the giving of notice, making of demands, performance of
any act, condition or covenant, or the exercise of any right, remedy or option,
are amended for the purposes of this

                                       7.
<PAGE>

Sublease by lengthening or shortening the same in each instance by five (5)
days, as appropriate, so that notices may be given, demands made, or any act,
condition or covenant performed, or any right, remedy or option hereunder
exercised, by Sublessor or Sublessee, as the case may be, within the time limit
relating thereto contained in the Master Lease. If the Master Lease allows only
five (5) days or less for Sublessor to perform any act, or to undertake to
perform such act, or to correct any failure relating to the Premises or the
Lease, then Sublessee shall nevertheless be allowed three (3) days to perform
such act, undertake such act and/or correct such failure. Notwithstanding the
foregoing, in the event Landlord provides concurrent written notice to Sublessor
and Sublessee, which written notice copies both Parties, of any failure by
Sublessee to perform any act, or to undertake to perform such act, or to correct
any failure relating to the Premises or the Lease, then Sublessee shall be
entitled to the same time limit provided for in the provisions of the Master
Lease for Sublessor to perform such act, undertake to perform such act and/or
correct such failure.

     4.   PERFORMANCE BY SUBLESSOR; STATUS OF MASTER LEASE.

          a.   SUBLESSOR'S PERFORMANCE CONDITIONED ON LANDLORD'S PERFORMANCE.
Sublessee recognizes that Sublessor is not in a position to render any of the
services or to perform any of the obligations required of Landlord by the terms
of the Master Lease. Therefore, despite anything to the contrary in this
Sublease, Sublessee agrees that performance by Sublessor of its obligations
under this Sublease is conditioned on performance by Landlord of its
corresponding obligations under the Master Lease, and Sublessor will not be
liable to Sublessee for any default of Landlord under the Master Lease.
Sublessee will not have any claim against Sublessor based on Landlord's failure
or refusal to comply with any of the provisions of the Master Lease unless that
failure or refusal is a result of Sublessor's act or failure to act. Despite
Landlord's failure or refusal to comply with any of those provisions of the
Master Lease, this Sublease will remain in full force and effect and Sublessee
will pay the Basic Rent and additional rent and all other charges provided for
in this Sublease without any abatement, deduction or setoff, except and then
only to the extent Sublessor is entitled to and receives any abatement,
deduction or setoff under the express terms of the Master Lease. Except as
expressly provided in this Sublease, Sublessee agrees to be subject to, and
bound by, all of the covenants, agreements, terms, provisions, and conditions of
the Master Lease, as though Sublessee was the Tenant under the Master Lease.

          b.   OBTAINING LANDLORD'S CONSENT. Whenever the consent of Landlord is
required under the Master Lease, or whenever Landlord fails to perform its
obligations under the Master Lease, Sublessor agrees to use its reasonable, good
faith efforts to obtain, upon Sublessee's written request and at Sublessee's
sole cost and expense, such consent or performance on behalf of Sublessee.

     5.   RENT.

          a.   BASIC RENT. Sublessee shall pay to Sublessor the Basic Rent in
advance on the first day of each month of the Sublease Term, commencing on the
Commencement Date. In the event the first day of the Sublease Term shall not be
the first day of a calendar month or the last day of the Sublease Term is not
the last day of the calendar month, the Basic Rent shall be appropriately
prorated based on a thirty (30) day month. All installments

                                       8.
<PAGE>

of Basic Rent shall be delivered to Sublessor's Address, or at such other place
as may be designated in writing from time to time by Sublessor, in lawful money
of the United States and without deduction or offset for any cause whatsoever.

          b.   ADDITIONAL RENTAL. Commencing on the Commencement Date, Sublessee
shall be responsible for Sublessee's Share of all costs and expenses of every
kind and nature which may be imposed, at any time, on Sublessor pursuant to the
Master Lease (except for Basic Rent, as defined in the Master Lease) including,
but not limited to, Real Estate Taxes, insurance maintained by Landlord pursuant
to the Master Lease, all costs and expenses relating to Landlord's ownership and
operation of the Building and the Building Common Area, and other additional
rent (collectively, "Additional Rent"). As hereinafter used, "Rent" shall
include Basic Rent, all Additional Rent to be paid by Sublessee pursuant to this
Section 5.b, and all other amounts payable by Sublessee under this Sublease.

          c.   UTILITIES. Sublessee shall contract directly with all utilities
providers to receive invoices directly (in Sublessee's name) from such utilities
providers for utilities consumed in the Sublet Space.

     6.   LETTER OF CREDIT.

          a.   FORM OF LETTER OF CREDIT. Upon execution of this Sublease, and as
a condition precedent to the effectiveness of this Sublease, Sublessee shall
deliver to Sublessor an irrevocable stand-by letter of credit in the amount of
Six Hundred Sixty Three Thousand and 00/100 Dollars ($663,000.00) (the "Letter
of Credit") as credit enhancement for Sublessee's faithful performance of all
terms, covenants and conditions of this Sublease and not as a security deposit,
as more particularly described in this Section 6. The Letter of Credit shall be
in form and substance and issued by a bank that is reasonably satisfactory to
Sublessor. Sublessor hereby confirms that Silicon Valley Bank is acceptable as
the initial issuer of the Letter of Credit. The Letter of Credit shall: (i) name
Sublessor as beneficiary, (ii) be effective upon the commencement date of the
Early Access Period, (iii) allow Sublessor to make partial and multiple draws
thereunder up to the face amount for the purposes permitted under this Section
6, (iv) require the issuing bank to pay to Sublessor the amount of a draw upon
receipt by such bank of a sight draft signed by Sublessor and presented to the
issuing bank, accompanied by Sublessor's statement that said draw is being made
in accordance with the terms of this Section 6, and (v) provide that Sublessor
can freely transfer the Letter of Credit upon an assignment or other transfer of
its interest in this Sublease to the assignee or transferee without having to
obtain the consent of Sublessee or the issuing bank. Sublessee shall be
responsible for all fees associated with issuance of the Letter of Credit.
Sublessor shall be entitled to draw upon the Letter of Credit in accordance with
this Section 6, or at any time within thirty (30) days prior to the expiration
date of the Letter of Credit unless Sublessee shall have delivered to Sublessor
a replacement Letter of Credit meeting the requirements of this Section 6 and
with an expiration date not less than twelve (12) months after the date of
delivery. The Letter of Credit (or a replacement thereof satisfactory to
Sublessor) shall remain in effect until the earlier of (i) the Expiration Date
(i.e., March 31, 2011), or (ii) the date this Sublease becomes effective as a
direct lease between Landlord and Sublessee.

                                       9.
<PAGE>
          b.   DRAWS UNDER LETTER OF CREDIT. Sublessor shall have the right (but
shall not be obligated to) draw under the Letter of Credit to remedy any default
by Sublessee in the performance of its obligations under this Sublease, and/or
to compensate Sublessor for any losses, costs, liabilities or damages incurred
by Sublessor as a result of Sublessee's failure to perform its obligations under
this Sublease (collectively, "Losses"). In the event Sublessor draws under the
Letter of Credit pursuant to this subsection (b), Sublessor shall use or apply
the proceeds of such draw to remedy Sublessee's default and to compensate
Sublessor for Losses. If, despite the intent of the Parties that the Letter of
Credit not be considered a security deposit, a court of competent jurisdiction
determines that the Letter of Credit is in fact a security deposit, then
Sublessee hereby waives to the extent inconsistent with the foregoing any
restriction on the uses to which the proceeds of a draw under the Letter of
Credit may be applied as contained in Section 1950.7(c) of the California Civil
Code and/or any successor statute, if applicable. If Sublessor uses or applies
the proceeds of a draw under the Letter of Credit pursuant to this Section 6,
Sublessee shall, within ten (10) business days after demand therefor, deposit
cash or other collateral with the issuing bank and as required by the issuing
bank in an amount sufficient to restore the Letter of Credit to the amount
thereof in effect immediately prior to such draw, and Sublessee's failure to do
so shall, at Sublessor's option, be a non-curable default under this Sublease.
If Sublessee has performed all of its obligations under this Sublease, the
Letter of Credit, or so much thereof as has not theretofore been applied by
Sublessor in accordance with this Section 6 or reduced pursuant to the following
provisions of this Section 6, shall be returned, without payment of interest or
other increment for their use, to Sublessee upon the earlier of (i) the
Expiration Date (i.e., March 31, 2011), or (ii) the date this Sublease becomes
effective as a direct lease between Landlord and Sublessee. No trust
relationship is created herein between Sublessor and Sublessee with respect to
the Letter of Credit.

          c.   REDUCTION OF AMOUNT. Provided no default by Sublessee under this
Sublease has at any time occurred or is then occurring, the amount of the Letter
of Credit shall be (i) reduced to Three Hundred Thirty One Thousand Five Hundred
and 00/100 Dollars ($331,500.00) on the first day of the twenty-fifth (25th)
calendar month of the Sublease Term, and (ii) reduced to One Hundred Ten
Thousand Five Hundred and 00/100 Dollars ($110,500.00) on the first day of the
forty-ninth (49th) calendar month of the Sublease Term.

     7.   USE. The Sublet Space is to be used for the Permitted Uses, and for no
other purpose or business without the prior written consent of Sublessor and
Landlord. In no event shall the Sublet Space be used for a purpose or use
prohibited by the Master Lease.

     8.   INDEMNITY

          a.   SUBLESSEE INDEMNITY. In addition to, and without limitation of,
Sublessee's indemnity obligations under this Sublease incorporated by reference
from the Master Lease, Sublessee agrees to indemnify, protect, defend, with
attorneys approved by Sublessor in its reasonable discretion, and save and hold
harmless Sublessor and its trustees, directors, officers, agents and employees,
harmless from and against any and all losses, costs, liabilities, claims,
damages and expenses, including, without limitation, reasonable attorneys' fees
and costs, and reasonable investigation costs, that may at the time be asserted
against Sublessor by (a) Landlord for failure of Sublessee to perform any of the
covenants, agreements, terms, provisions, or conditions contained in the Master
Lease that Sublessee is obligated to perform
<PAGE>

under the provisions of this Sublease, (b) any person or entity as a result of
Sublessee's failure to surrender possession of the Sublet Space in accordance
with the terms of this Sublease, or (c) any person or entity (including without
limitation, Interval [as defined in Section 15(h) below] or its assignee(s)) as
a result of Sublessee's performance of, or failure to perform, Sublessee's
obligations under the Walkway Agreement (as defined in Section 15(h) below).

          b.   SUBLESSOR INDEMNITY. Sublessor agrees to indemnify, defend, and
hold Sublessee and Sublessee's officers, directors and employees harmless from
and against any investigation and remediation costs to the extent arising from
or arising out of the release, treatment, storage, use or disposal of Hazardous
Materials in the Building or the Building Common Area by Sublessor or
Sublessor's agents, employees, officers, directors, trustees, contractors or
subcontractors. Sublessor's indemnification obligations hereunder shall extend
only to actual, out-of-pocket remediation costs (including reasonable attorneys'
fees and investigation, oversight and response costs) but shall not include
consequential damages or incidental damages such as lost profits or any loss of
rental value of the Sublet Space suffered or allegedly suffered by Sublessee or
any of Sublessee's agents, employees, officers, directors, trustees,
contractors, subcontractors, subtenants, assignees, licensees or invitees or
anyone claiming under Sublessee.

          c.   SURVIVAL. The provisions of this Section 8 will survive the
expiration or earlier termination of this Sublease.

     9.   RIGHT TO CURE SUBLESSEE'S DEFAULTS. For so long as this Sublease
continues in effect between Sublessor and Sublessee, if Sublessee shall at any
time fail to make any payment or perform any other obligation of Sublessee under
this Sublease, then Sublessor shall have the right, but not the obligation,
after the lesser of (i) five (5) days' notice to Sublessee, or (ii) the time
within which Landlord may act on Sublessor's behalf under the Master Lease, or
(iii) without notice to Sublessee in the case of any emergency, and without
waiving or releasing Sublessee from any obligations of Sublessee under this
Sublease, to make such payment or perform such obligation of Sublessee in such
manner and to such extent as Sublessor shall reasonably deem necessary. In
exercising any such right, Sublessor shall have the right to pay any reasonable
incidental costs and expenses, employ attorneys and other professionals, and
incur and pay reasonable attorneys' fees and other costs reasonably required in
connection with such failure to perform, and Sublessee shall pay to Sublessor,
upon demand, all such reasonable costs, fees and/or expenses paid or incurred by
Sublessor, together with interest thereon at the Interest Rate set forth in the
Master Lease.

     10.  DAMAGE AND DESTRUCTION. For so long as this Sublease continues in
effect between Sublessor and Sublessee, the following provisions shall apply
with respect to any damage or destruction of the Sublet Space:

          a.   TERMINATION OF MASTER LEASE. In the event Sublessor is entitled
to terminate the Master Lease under Section 16 of the Master Lease, Sublessee
shall be entitled to terminate this Sublease by written notice to Sublessor no
later than five (5) days prior to the date Sublessor is required to notify
Landlord of such election by Sublessor. Notwithstanding the foregoing,
Sublessor's right to

                                       11.
<PAGE>

terminate the Master Lease pursuant to Section 16 of the Master Lease shall not
be conditioned in any way upon Sublessee also exercising Sublessee's right to
terminate this Sublease pursuant to this Section 10.a. If the Master Lease is
terminated by either Landlord or Sublessor pursuant to Section 16 of the Master
Lease, this Sublease shall automatically terminate as of the date of the
termination of the Master Lease, unless Landlord and Sublessee have theretofore
entered into a recognition and attornment agreement whereby Landlord has agreed
to accept this Sublease as a direct lease between Landlord and Sublessee.

          b.   CONTINUATION OF SUBLEASE. If the Master Lease is not terminated
following any damage or destruction as provided in Section 10.a above, subject
to any termination of this Sublease by Sublessee in accordance with Section 10.a
above, this Sublease shall remain in full force and effect and, upon Sublessee's
written request and at Sublessee's cost, Sublessor shall diligently enforce any
rights under the Master Lease to require Landlord to rebuild the Sublet Space.
Despite anything contained in the Master Lease to the contrary, as between
Sublessor and Sublessee only, in the event of damage to the Sublet Space
Sublessor will have no obligation to rebuild or restore any Alterations made by
or on behalf of Sublessee in the Sublet Space.

     11.  EMINENT DOMAIN. For so long as this Sublease continues in effect
between Sublessor and Sublessee, the following provisions shall apply with
respect to any condemnation of the Sublet Space:

          a.   TOTAL CONDEMNATION. If all of the Sublet Space is condemned by
eminent domain, inversely condemned or sold in lieu of condemnation, for any
public or a quasi-public use or purpose ("Condemned" or "Condemnation"), this
Sublease shall terminate as of the date of title vesting in such proceeding, and
Basic Rent shall be adjusted to the date of termination.

          b.   PARTIAL CONDEMNATION. In the event Sublessor is entitled to
terminate the Master Lease under Section 17 of the Master Lease, Sublessee shall
be entitled to terminate this Sublease by written notice to Sublessor no later
than five (5) days prior to the date Sublessor is required to notify Landlord of
such election by Sublessor. Notwithstanding the foregoing, Sublessor's right to
terminate the Master Lease pursuant to Section 17 of the Master Lease shall not
be conditioned in any way upon Sublessee also exercising Sublessee's right to
terminate this Sublease pursuant to this Section 11.b. If the Master Lease is
terminated by either Landlord or Sublessor pursuant to Section 17 of the Master
Lease, this Sublease shall automatically terminate as of the date of the
termination of the Master Lease, unless Landlord and Sublessee have theretofore
entered into a recognition and attornment agreement whereby Landlord has agreed
to accept this Sublease as a direct lease between Landlord and Sublessee. If the
Master Lease is not terminated following any such Condemnation, subject to any
termination of this Sublease by Sublessee in accordance with the first sentence
of this Section 11.b, this Sublease shall remain in full force and effect and,
upon Sublessee's written request and at Sublessee's cost, Sublessor shall
diligently enforce any rights under the Master Lease to require Landlord to
rebuild the Sublet Space. Despite anything contained in the Master Lease to the
contrary, as between Sublessor and Sublessee only, in the event of Condemnation
of the Sublet Space Sublessor will have no obligation to rebuild or restore any
Alterations made by or on behalf of Sublessee in the Sublet Space. Basic Rent
shall be equitably adjusted to take into account interference with Sublessee's
ability to conduct its operations on the Sublet Space as a result of the Sublet
Space being Condemned. Sublessee hereby waives the provisions of

                                      12.
<PAGE>

California Code of Civil Procedure Section 1265.130 permitting a court of law to
terminate this Sublease.

          c.   SUBLESSEE'S AWARD. Subject to the provisions of the Master Lease,
Sublessee shall have the right to recover from the condemning authority, but not
from Sublessor, such compensation as may be separately awarded to Sublessee in
connection with costs and removing Sublessee's merchandise, furniture, fixtures,
leasehold improvements and equipment to a new location.

     12.  ASSIGNMENT AND SUBLETTING. For so long as this Sublease continues in
effect between Sublessor and Sublessee, the following provisions shall apply
with respect to any assignment and/or subletting of the Sublet Space by
Sublessee:

          a.   CONSENT REQUIRED. Sublessee shall not directly or indirectly
(including, without limitation, by merger, consolidation, reorganization,
acquisition or other transfer of any interest in Sublessee or by transfer to any
parent, subsidiary or affiliate of Sublessee), voluntarily or by operation of
law, sell, assign, encumber, mortgage, pledge or otherwise transfer or
hypothecate all or any part of its interest in or rights with respect to this
Sublease or the Sublet Space (collectively, "Assignment"), or permit all or any
portion of the Sublet Space to be occupied by anyone other than itself or sublet
all or any portion of the Sublet Space (including, without limitation, any
sublease to, or occupancy by, any parent, subsidiary or affiliate of Sublessee)
(collectively, "Sublease"), without obtaining Sublessor's prior written consent
in each instance, which consent shall not be unreasonably withheld or delayed.
In determining whether or not to consent to a proposed Assignment or Sublease,
Sublessor may consider the following factors, among others, all of which are
deemed reasonable: (i) whether the proposed assignee or subtenant has sufficient
financial capability to perform its obligations under this Sublease; (ii)
whether the proposed use of the Sublet Space by the proposed assignee or
subtenant is consistent with the Permitted Uses set forth in the Defined Terms
section of this Sublease; and (iii) whether Landlord has consented in writing to
the proposed Assignment or Sublease (it being understood that a condition to
Sublessor's consent to any Assignment or Sublease is Landlord's written consent
to the same). Any Assignment or Sublease that is not in compliance with this
Section 12 shall be null and void and, at the option of Sublessor, shall
constitute a noncurable default by Sublessee under this Sublease, and Sublessor
shall be entitled to pursue any right or remedy available to Sublessor under
this Sublease or under the laws of the State of California. No Assignment or
Sublease shall release or relieve Sublessee of its obligations under this
Sublease. The acceptance of Rent by Sublessor from any other person shall not be
deemed to be a waiver by Sublessor of any provision of this Sublease or to be a
consent to any Assignment or Sublease. Consent to one (1) Assignment or Sublease
shall not be deemed to constitute consent to any subsequent attempted Assignment
or Sublease.

          b.   ASSIGNMENT DOCUMENTATION. With respect to any Assignment, any
assignee approved by Sublessor pursuant to this Section 12 shall, from and after
the effective date of the Assignment, assume all obligations of Sublessee under
this Sublease and shall be and remain liable jointly and severally with
Sublessee for the payment of Rent, and for the performance of all of the terms,
covenants, conditions and agreements herein contained on Sublessee's part to be
performed. No Assignment shall be binding on Sublessor unless Sublessee shall
deliver to Sublessor a counterpart of the Assignment and an instrument that

                                      13.
<PAGE>

contains a covenant of assumption by such assignee satisfactory in form and
substance to Sublessor, and consistent with the requirements of this Section
12.b. Any failure or refusal of such assignee to execute such instrument of
assumption shall constitute a default under this Sublease but shall not release
or discharge such assignee from its liability as set forth above.

          c.   TRANSFER CONSIDERATION. If Sublessor consents to an Assignment or
Sublease, as a condition thereto which the Parties hereby agree is reasonable,
Sublessee shall pay to Sublessor fifty percent (50%) of any rent, additional
rent or other consideration payable by the assignee or subtenant in connection
with the Assignment or Sublease in excess of the Basic Rent and Additional Rent
payable by Sublessee under this Sublease on a per rentable square foot basis if
less than all of the Sublet Space is transferred, in either case without any
deduction therefrom.

     13.  INSURANCE. All insurance policies required to be carried by Sublessee
pursuant to the Master Lease shall contain a provision whereby Sublessor and
Landlord are each named as additional insureds under such policies.

     14.  BROKERAGE COMMISSION. Sublessor shall pay a brokerage commission to
the Broker for Sublessee's subletting of the Sublet Space as provided for in a
separate agreement between Sublessor and the Broker. Sublessee warrants for the
benefit of Sublessor that its sole contact with Sublessor or the Sublet Space in
connection with this transaction has been directly with Sublessor and the
Broker. Sublessee further warrants for the benefit of Sublessor that no other
broker or finder can properly claim a right to a commission or a finder's fee
based upon contacts between the claimant and Sublessee with respect to the other
party or the Sublet Space. Sublessee shall indemnify, defend by counsel
acceptable to Sublessor and hold Sublessor harmless from and against any loss,
cost or expense, including, but not limited to, attorneys' fees and court costs,
resulting from any claim for a fee or commission by any broker or finder, other
than any claims by the Broker, in connection with the Sublet Space and this
Sublease.

     15.  MISCELLANEOUS.

          a.   ENTIRE AGREEMENT. This Sublease contains all of the covenants,
conditions and agreements between the Parties concerning the Sublet Space, and
shall supersede all prior correspondence, agreements and understandings
concerning the Sublet Space, both oral and written. No addition or modification
of any term or provision of this Sublease shall be effective unless set forth in
writing and signed by both Sublessor and Sublessee.

          b.   CAPTIONS. All captions and headings in this Sublease are for the
purposes of reference and convenience and shall not limit or expand the
provisions of this Sublease.

          c.   LANDLORD'S CONSENT. This Sublease is conditioned upon Landlord's
written approval of this Sublease within thirty (30) days after the Effective
Date. If Landlord refuses to consent to this Sublease, or if the thirty (30) day
consent period expires, this Sublease shall terminate and neither Party shall
have any continuing obligation to the other with respect to the Sublet Space;
provided Sublessor shall return the Letter of Credit, if previously delivered to
Sublessor, to Sublessee.

                                      14.
<PAGE>

          d.   AUTHORITY. Each person executing this Sublease on behalf of a
party hereto represents and warrants that he or she is authorized and empowered
to do so and to thereby bind the Party on whose behalf he or she is signing.

          e.   NOTICES. All notices, demands, consents and approvals which may
or are required to be given by either Party to the other hereunder shall be in
writing and either personally delivered, sent by commercial overnight courier,
or mailed, certified or registered, postage prepaid, and addressed to the Party
to be notified at the address for such Party as specified in the Defined Terms
section of this Sublease or to such other place as the Party to be notified may
from time to time designate by at least ten (10) days' notice to the notifying
Party. Notices shall be deemed served upon receipt or refusal to accept
delivery. Sublessee appoints as its agent to receive the service of all default
notices and notice of commencement of unlawful detainer proceedings the person
in charge of or apparently in charge of occupying the Sublet Space at the time,
and, if there is no such person, then such service may be made by attaching the
same on the main entrance of the Sublet Space.

          f.   PARKING AND SIGNAGE. Sublessee shall have all the rights of
"Tenant" under 7.2 of the Master Lease with regard to parking, subject to all of
the terms and conditions therein, provided all related costs shall be the sole
responsibility of Sublessee. In addition, subject to Landlord's prior written
consent in accordance with Section 34 of the Master Lease, Sublessee shall have
the right to install, at its sole cost and expense, a monument sign (i) above
the entrance to the Building, (ii) at the front of the Building, and (iii) at
the Porter Drive entrance leading to the Building. Sublessee, at its sole cost
and expense, shall: (A) maintain such signs in good working order during the
Sublease Term and (B) upon the earlier of (1) the termination of this Sublease,
or (2) the expiration or earlier termination of the Master Lease, in the event
(aa) this Sublease becomes effective as a direct lease between Landlord and
Sublessee and/or (bb) the Master Lease continues as a direct lease between
Landlord and Sublessee upon the expiration of the Sublease Term, remove such
signs and return the areas on which the signs are located to the condition in
which they existed prior to the installation of such signs.

          g.   APPROVAL OF CONTRACTORS FOR MAINTENANCE AND REPAIR OF BUILDING
SYSTEMS. Notwithstanding anything to the contrary set forth in this Sublease
and/or in the Master Lease, for so long as this Sublease continues in effect
between Sublessor and Sublessee, all contractors and subcontractors performing
any repairs and/or maintenance of the Building Systems on behalf of Sublessee
shall be subject to the prior written approval of Sublessor, which approval
shall not be unreasonably withheld or delayed. Sublessor hereby acknowledges its
approval of Therma Mechanical to perform repairs and/or maintenance of the
heating, ventilating, air-conditioning and plumbing Building Systems and of
Cupertino Electric to perform repairs and/or maintenance of the electrical
Building Systems.

          h.   WALKWAY AGREEMENT. Effective as of the commencement of the Early
Access Period, Sublessee agrees to perform and observe all of the obligations,
covenants, terms and conditions to be performed or observed by Sublessor under
the Walkway Agreement arising from and after the commencement of the Early
Access Period.

                                      15.
<PAGE>

     IN WITNESS WHEREOF, the Parties hereto have executed one (1) or more copies
of this Sublease, effective as of the Effective Date.

                                   "SUBLESSOR"

                                   INCYTE CORPORATION, a Delaware corporation

                                   By: /s/ David Hastings
                                       --------------------------------------
                                   Its: EVP, CFO
                                       --------------------------------------

                                   By:
                                       --------------------------------------
                                   Its:
                                       --------------------------------------

                                   "SUBLESSEE"

                                   CONNETICS CORPORATION, a Delaware corporation

                                   By: /s/ John L. Higgins
                                       --------------------------------------
                                   Its: CFO
                                       --------------------------------------

                                   By:
                                       --------------------------------------
                                   Its:
                                       --------------------------------------

                                      16.

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