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                                                                    Exhibit 10.4

                  FIRST COMMUNITY BANCORP STOCK INCENTIVE PLAN
                              ADOPTED: MAY 31, 2000

         1.       PURPOSE.

                  The purpose of the First Community Bancorp Stock Incentive
Plan (the "Plan") is to strengthen First Community Bancorp, a California
corporation (the "Corporation") and those corporations which are or hereafter
become subsidiary corporations by providing an additional means of attracting
and retaining competent managerial personnel and by providing to participating
directors, officers, and key employees added incentives for high levels of
performance and for unusual efforts to increase the earnings of the Corporation
and any Subsidiary as defined herein; to allow consultants, business associates
and others with business relationships with the Corporation, an opportunity to
participate in the ownership of the Corporation and thereby have an interest in
the success and increased value of the Corporation; and to allow optionees under
the Rancho Santa Fe National Bank 1992 Stock Option Plan and under the First
Community Bank of the Desert 1987 Incentive Stock Option Plan (collectively the
"Subsidiary Plans") to exchange their unexercised, unexpired stock options under
the Subsidiary Plans, for options granted under Section 7 of this Plan, adjusted
as required by the Merger Agreement, as defined herein, or by Section 7 hereof.
The Plan seeks to accomplish these purposes and achieve these results by
providing a means whereby such directors, officers, key employees, consultants,
business associates and others may purchase shares of Common Stock as defined
herein of the Corporation pursuant to Stock Options or Stock Awards as defined
herein granted in accordance with this Plan.

                  Stock Options granted pursuant to this Plan are intended to be
Incentive Stock Options as defined herein or Non-Qualified Stock Options as
defined herein, as shall be determined and designated by the Stock Option
Committee as defined herein upon the grant of each Stock Option hereunder. All
options granted under the Subsidiary Plans shall be exchanged for comparable
Incentive Stock Options or Non-Qualified Stock Options, according to their
original terms, subject to those adjustments thereto as are required by the
Merger Agreement, as defined herein, or by Section 7 hereof. The provisions of
the Plan as amended shall apply to all Options previously issued pursuant to the
Plan.

         2.       DEFINITIONS. For the purposes of this Plan, the following
terms shall have the following meanings:

                  (a)      "COMMON STOCK." This term shall mean shares of the
Corporation's no par value common stock, subject to adjustment pursuant to
Section 15 (Adjustment Upon Changes in Capitalization) hereunder.

                  (b)      "CORPORATION." This term shall mean First Community
Bancorp, a California corporation.

                  (c)      "ELIGIBLE PARTICIPANT."  This term shall mean:

                           (i)      all directors of the Corporation or any
Subsidiary;

                           (ii)     all full time officers (whether or not they
are also directors) of the Corporation or any Subsidiary;

                           (iii)    all full time key employees (as such persons
may be determined by the Stock Option Committee from time to time) of the
Corporation or any Subsidiary; and

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                           (iv)     consultants, business associates or others
with important business relationships with the Corporation.

                  (d)      "FAIR MARKET VALUE." This term shall mean, as of any
date, the fair market value of the Corporation's Common Stock determined as
follows:

                           (i)      If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation, the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair Market Value of a
share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales are reported) as quoted on such system or exchange (or
the exchange with the greatest volume of trading in the Common Stock) on the
last market trading day prior to the day of determination, as reported in the
Wall Street Journal or such other source as the Stock Option Committee deems
reliable;

                           (ii)     If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or is regularly quoted by
recognized securities dealers but selling prices are not reported, the Fair
Market Value of a share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in the Wall Street journal or such
other source as the Stock Option Committee deems reliable;

                           (iii)    In the absence of any established market for
the Common Stock, the Fair Market Value shall be determined in good faith by the
Stock Option Committee.

                  (e)      "GRANTEE." This term shall mean (i) any Optionee or
(ii) any Eligible Participant to whom a Stock Award has been granted pursuant to
this Plan, provided that at least part of the Stock Award is outstanding and
unvested.

                  (f)      "INCENTIVE STOCK OPTION." This term shall mean a
Stock Option which is an "Incentive Stock Option" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").

                  (g)      "MERGER AGREEMENT." This term shall mean the
Agreement and Plan of Merger dated October 22, 1999, as amended, by and among
the Corporation, and Rancho Santa Fe National Bank and First Community of the
Desert.

                  (h)      "NON-QUALIFIED STOCK OPTION." This term shall mean a
Stock Option which is not an Incentive Stock Option.

                  (i)      "OPTION SHARES." This term shall mean shares of
Common Stock which are covered by and subject to any outstanding unexercised
Stock Option granted pursuant to this Plan.

                  (j)      "OPTIONEE." This term shall mean any Eligible
Participant to whom a Stock Option has been granted pursuant to this Plan,
including those persons to whom an option is granted under Section 7 hereof in
exchange for options previously granted under either of the Subsidiary Plans,
provided that at least part of the Stock Option is outstanding and unexercised.

                  (k)      "PLAN." This term shall mean the First Community
Bancorp Stock Incentive Plan as embodied herein and as may be amended from time
to time in accordance with the terms hereof and applicable law.

                  (l)      "STOCK AWARD." This term shall mean a grant by the
Corporation of a specified number of shares of Common Stock upon terms and
conditions determined by the Stock Option Committee.

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                  (m)      "STOCK OPTION." This term shall mean the right to
purchase from the Corporation a specified number of shares of Common Stock under
the Plan at a price and upon terms and conditions determined by the Stock Option
Committee, and shall include options granted under Section 7 hereof in exchange
for options previously granted under either of the Subsidiary Plans, as modified
by the Merger Agreement.

                  (n)      "STOCK OPTION COMMITTEE." The Board of Directors of
the Corporation may select and designate a stock option committee consisting of
at least two and not more than five persons, at least two of whom are directors,
having full authority to act in the matters. Regardless of whether a Stock
Option Committee is selected, the Board of Directors may act as the Stock Option
Committee and any action taken by the Board of Directors as such shall be deemed
to be action taken by the Stock Option Committee. All references in the Plan to
the "Stock Option Committee" shall be deemed references to the Board of
Directors acting as a stock option committee and to a duly appointed Stock
Option Committee, if there be one. In the event of any conflict between any
action taken by the Board of Directors acting as a Stock Option Committee and
any action taken by a duly appointed Stock Option Committee, the action taken by
the Board of Directors shall be controlling and the action taken by the duly
appointed Stock Option Committee shall be disregarded.

                  (o)      "SUBSIDIARY." This term shall mean any subsidiary
corporation of the Corporation as such term is defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended.

                  (p)      "SUBSIDIARY PLANS." This term shall be defined as
provided in Section 1 of this Plan.

                  (q)      "TERMINATING EVENT." This term shall mean:

                           (i)      the consummation of a plan of dissolution or
liquidation of the Corporation;

                           (ii)     the individuals who, as of the effective
date of the reorganization contemplated by the Merger Agreement, are members of
the Board of Directors of the Corporation ("Incumbent Board"), cease for any
reason to constitute at least two-thirds of the members of the Board; provided,
however, that if the election, or nomination for election by the Corporation's
shareholders, of any new director was approved by a vote of at least two-thirds
of the Incumbent Board, such new director shall, for purposes of this Plan, be
considered as a member of the Incumbent Board; provided, further, however, that
no individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
"Person" (as the term person is used for purposes of Section 13(d) or 14(d) of
the Exchange Act) other than the Board of Directors (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest;

                           (iii)    the consummation of a plan of
reorganization, merger or consolidation involving the Corporation, except for a
reorganization, merger or consolidation where (A) the shareholders of the
Corporation immediately prior to such reorganization, merger or consolidation
own directly or indirectly at least 70% of the combined voting power of the
outstanding voting securities of the corporation resulting from such
reorganization, merger or consolidation (the "Surviving Corporation") in
substantially the same proportion as their ownership of voting securities of the
Corporation immediately prior to such reorganization, merger or consolidation,
and (B) the individuals who were members of the Incumbent Board immediately
prior to the execution of the agreement providing for such reorganization,
merger or consolidation constitute at least two-thirds of the members of the
board of directors of the Surviving Corporation, or a corporation beneficially
directly or indirectly owning a majority of the voting securities of the
Surviving Corporation;

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                           (iv)     the sale of all or substantially all the
assets of the Corporation to another Person; or

                           (v)      the acquisition of beneficial ownership of
stock representing more than fifty percent (50%) of the voting power of the
Corporation then outstanding by another Person.

                  (r)      "VESTING EVENT." This term shall mean the approval by
the shareholders of the Corporation of any matter, plan or transaction which
would constitute a Terminating Event, or if any Terminating Event occurs without
shareholder approval, the occurrence of such Terminating Event.

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         3.       ADMINISTRATION.

                  (a)      STOCK OPTION COMMITTEE. This Plan shall be
administered by the Stock Option Committee. The Board of Directors of the
Corporation shall have the right, in its sole and absolute discretion, to remove
or replace any person from or on the Stock Option Committee at any time for any
reason whatsoever.

                  (b)      ADMINISTRATION OF THE PLAN. Any action of the Stock
Option Committee with respect to the administration of the Plan shall be taken
pursuant to a majority vote, or pursuant to the unanimous written consent, of
its members. Any such action taken by the Stock Option Committee in the
administration of this Plan shall be valid and binding, so long as the same is
in conformity with the terms and conditions of this Plan. Subject to compliance
with each of the terms, conditions and restrictions set forth in this Plan,
including, but not limited to, those set forth in Section 6(a) hereof, the Stock
Option Committee shall have the exclusive right, in its sole and absolute
discretion, to establish the terms and conditions of any Stock Options or Stock
Awards granted under the Plan, including, without limitation, the power to:

                           (i)      establish the number of Stock Options or
Stock Awards, if any, to be granted hereunder, in the aggregate and with regard
to any individual Eligible Participant;

                           (ii)     determine the time or times when such Stock
Options or Stock Awards, or any parts thereof, may vest or be exercised;

                           (iii)    determine and designate which Stock Options
granted under the Plan shall be Incentive Stock Options and which shall be
Non-Qualified Stock Options;

                           (iv)     determine the Eligible Participants, if any,
to whom Stock Options or Stock Awards are granted, and determine the date as of
which a Grantee's status as an Eligible Participant shall have terminated and
provide written notice of such termination to such Grantee within 60 days after
such termination date;

                           (v)      determine the duration and purposes, if any,
of leaves of absence which may be permitted to holders of unexercised, unexpired
Stock Options without such constituting a termination of employment under the
Plan;

                           (vi)     prescribe and amend the terms, provisions
and form of any instrument or agreement setting forth the terms and conditions
of every Stock Option or Stock Award granted hereunder (such terms and
conditions to include, without limitation, the exercise price, the time or times
when Stock Options or Stock Awards may vest or be exercised (which may be based
on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Stock Option,
Stock Award or the Option Shares or Common Stock relating thereto); and

                           (vii)    make loans to or guarantee any obligations
of any Optionees, except directors, in connection with the exercise of Stock
Options as specified in Section 8(c) hereof, whenever the Stock Option Committee
determines that such loan or guarantee may reasonably be expected to benefit the
Corporation, subject to the provisions of Section 315(b) of the California
General Corporations Law of 1977, as amended and subject to Regulations G, U and
T promulgated by the Board of Governors of the Federal Reserve System pursuant
to Section 7 of the Securities Exchange Act of 1934, if the Option Shares are
listed on a stock exchange or are contained in the list of over-the-counter
margin securities published by the Federal Reserve Board.

                  (c)      DECISIONS AND DETERMINATIONS. Subject to the express
provisions of the Plan, the Stock Option Committee shall have the authority to
construe and interpret the Plan, to define the terms used therein, to prescribe,
amend, and rescind rules, regulations and policies relating to the

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administration of the Plan, and to make all other determinations necessary or
advisable for administration of the Plan. Determinations of the Stock Option
Committee on matters referred to in this Section 3 shall be final and conclusive
so long as the same are in conformity with the terms of this Plan.

         4.       SHARES SUBJECT TO THE PLAN.

                  Subject to adjustments as provided in Section 15 hereof, the
maximum number of shares of Common Stock which may be issued upon exercise of
Stock Options or pursuant to Stock Awards granted under this Plan shall be
780,000 shares in the aggregate (including the shares of Common Stock issuable
upon exercise of Stock Options previously granted under Subsidiary Plans). If
any Stock Option or Stock Award shall be canceled, surrendered, or expire for
any reason without having been exercised or received in full, the unpurchased
Common Stock represented thereby shall again be available for grants under this
Plan.

         5.       ELIGIBILITY.

                   Only Eligible Participants shall be eligible to receive
grants of Stock Options and Stock Awards under this Plan.

         6.       GRANTS OF STOCK OPTIONS.

                  (a)      GRANT. Subject to the express provisions and
limitations of the Plan, the Stock Option Committee, in its sole and absolute
discretion, may grant Stock Options to Eligible Participants exercisable, for a
number of Option Shares, at the price(s) and time(s), on the terms and
conditions and to such Eligible Participants as it deems advisable and specifies
in the respective grants. Subject to the limitations and restrictions set forth
in the Plan, an Eligible Participant who has been granted a Stock Option or
Stock Award may, if otherwise eligible, be granted additional Stock Options if
the Stock Option Committee shall so determine. The Stock Option Committee shall
designate in each grant of a Stock Option whether the Stock Option is an
Incentive Stock Option or a Non-Qualified Stock Option. No Eligible Participant
shall be granted in any fiscal year of the Corporation Stock Options to purchase
more than 100,000 Option Shares. If a Stock Option expires or terminates for any
reason without having been exercised in full, the unpurchased shares subject to
such expired or terminated option will continue to count against the maximum
number of shares for which Stock Options may be granted to an Eligible
Participant in any fiscal year of the Corporation or portion thereof. The
limitations set forth in the two preceding sentences are intended to satisfy the
requirements applicable to Stock Options such that they qualify as
"performance-based compensation" (within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended).

                  (b)      DATE OF GRANT AND RIGHTS OF OPTIONEE. The
determination of the Stock Option Committee to grant a Stock Option shall not in
any way constitute or be deemed to constitute an obligation of the Corporation,
or a right of the Eligible Participant who is the proposed subject of the grant,
and shall not constitute or be deemed to constitute the grant of a Stock Option
hereunder unless and until both the Corporation and the Eligible Participant
have executed and delivered the form of stock option agreement then required by
the Stock Option Committee as evidencing the grant of the Stock Option, together
with such other instruments as may be required by the Stock Option Committee
pursuant to this Plan; provided, however, that the Stock Option Committee may
fix the date of grant as any date on or after the date of its final
determination to grant the Stock Option (or if no such date is fixed, then the
date of grant shall be the date on which the determination was made by the Stock
Option Committee to grant the Stock Option), and such date shall be set forth in
the stock option agreement. The date of grant as so determined shall be deemed
the date of grant of the Stock Option for purposes of this Plan.

                  (c)      SHAREHOLDER-EMPLOYEES. Notwithstanding anything to
the contrary contained elsewhere herein, an Incentive Stock Option shall not be
granted hereunder to an Eligible

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Participant who owns, directly or indirectly, at the date of the grant of the
Incentive Stock Option, more than ten percent (10%) of the total combined voting
power of all classes of capital stock of the Corporation or a Subsidiary
corporation, unless the purchase price of the Option Shares subject to said
Incentive Stock Option is at least one hundred and ten percent (110%) of the
Fair Market Value of the Option Shares, determined as of the date said Stock
Option is granted.

                  (d)      MAXIMUM VALUE OF INCENTIVE STOCK OPTIONS. To the
extent that the aggregate Fair Market Value (determined at the time the Stock
Option is granted) of Option Shares which are designated as Incentive Stock
Options are exercisable for the first time by an Eligible Participant pursuant
to the terms of the Plan during any calendar year exceeds One Hundred Thousand
Dollars ($100,000), such excess Stock Options shall be treated as Non-Qualified
Stock Options.

                  (e)      NON-QUALIFIED STOCK OPTIONS. All Stock Options
granted by the Stock Option Committee which: (i) are designated at the time of
grant as Incentive Stock Options but do not so qualify under the provisions of
Section 422 of the Code or any regulations or rulings issued by the Internal
Revenue Service for any reason; (ii) are in excess of the Fair Market Value
limitation set forth in Section 6(d); or (iii) are designated at the time of
grant as Non-Qualified Stock Options, shall be deemed Non-Qualified Stock
Options under this Plan. Non-Qualified Stock Options granted or substituted
hereunder shall be so designated in the stock option agreement entered into
between the Corporation and the Optionee.

                  (f)      AWARD OF RESTORATION OPTIONS. In the event that any
Optionee delivers to the Corporation shares of Common Stock in payment of the
exercise price of any Option, the Stock Option Committee shall have the right to
provide for the grant of a "Restoration Option" to such Optionee. The grant of a
Restoration Option shall be subject to the satisfaction of such conditions and
criteria as the Stock Option Committee in its sole discretion shall establish
from time to time, including the requirement that the shares of Common Stock
tendered in payment of the exercise price have been held by the Optionee for a
period of more than six months. A Restoration Option shall entitle the holder
thereof to purchase a number of shares of Common Stock equal to the number of
shares delivered or withheld upon exercise of the original Option and, in the
discretion of the Stock Option Committee, the number of shares, if any delivered
or withheld by the Corporation to satisfy any withholding tax liability arising
in connection with the exercise of the original Option. A Restoration Option
shall have a per share exercise price of not less than 100% of the per share
Fair Market Value of the Common Stock on the date of grant of such Restoration
Option, a term not longer than the term of the original Option at the time of
exercise thereof, and such other terms and conditions as the Committee in its
sole discretion shall determine.

         7.       STOCK OPTION EXERCISE PRICE.

                  (a)      MINIMUM PRICE. The exercise price of any Stock
Options for Option Shares shall be determined by the Stock Option Committee, in
its sole and absolute discretion, upon the grant of a Stock Option. Except as
provided elsewhere herein, said exercise price shall not be less than one
hundred percent (100%) of the Fair Market Value of the Common Stock represented
by the Option Share on the date of grant of the related Stock Option.

                  (b)      EXCHANGED STOCK OPTIONS. Where the outstanding shares
of stock of another corporation are changed into or exchanged for shares of
Common Stock of the Corporation without monetary consideration to that other
corporation, then, subject to the approval of the Board or Directors of the
Corporation, Stock Options may be granted in exchange for unexercised, unexpired
stock options of the other corporation, including but not limited to
unexercised, unexpired stock options under the Subsidiary Plans, and the
exercise price of the Option Shares subject to each Stock Option so granted may
be fixed at a price less than one hundred percent (100%) of the Fair Market
Value of the Common Stock at the time such Stock Option is granted if said
exercise price has been computed to be not less than the exercise price set
forth in the stock option of the other corporation, with appropriate

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adjustment to reflect the exchange ratio of the shares of stock of the other
corporation into the shares of Common Stock of the Corporation.

         8.       EXERCISE OF STOCK OPTIONS.

                  (a)      EXERCISE. Except as otherwise provided elsewhere
herein, each Stock Option shall be exercisable in such increments, which need
not be equal, and upon such contingencies as the Stock Option Committee shall
determine at the time of grant of the Stock Option; provided, however, (i) that
if an Optionee shall not in any given period exercise any part of a Stock Option
which has become exercisable during that period, the Optionee's right to
exercise such part of the Stock Option shall continue until expiration of the
Stock Option or any part thereof as may be provided in the related stock option
agreement, and (ii) a minimum of twenty percent (20%) of the Stock Option shall
be exercisable in each year over a five year period from the date the Stock
Option is granted. No Stock Option or part thereof shall be exercisable except
with respect to whole shares of Common Stock, and fractional share interests
shall be disregarded except that they may be accumulated.

                  (b)      NOTICE AND PAYMENT. Stock Options granted hereunder
shall be exercised by written notice delivered to the Corporation specifying the
number of Option Shares with respect to which the Stock Option is being
exercised, together with concurrent payment in full of the exercise price as
hereinafter provided in Section 8(c) hereof. If the Stock Option is being
exercised by any person or persons other than the Optionee, said notice shall be
accompanied by proof, satisfactory to counsel for the Corporation, of the right
to such person or persons to exercise the Stock Option. The Corporation's
receipt of a notice of exercise without concurrent receipt of the full amount of
the exercise price shall not be deemed an exercise of a Stock Option by an
Optionee, and the Corporation shall have no obligation to an Optionee for any
Option Shares unless and until full payment of the exercise price is received by
the Corporation in accordance with Section 8(c) hereof, and all of the terms and
provisions of the Plan and the related stock option agreement have been complied
with.

                  (c)      PAYMENT OF EXERCISE PRICE. The exercise price of any
Stock Option for Option Shares purchased upon the proper exercise of a Stock
Option shall be paid in full at the time of each exercise of a Stock Option in
cash and/or, with the prior written approval of the Stock Option Committee, in
Common Stock of the Corporation owned of record on the books of the Corporation
by the Optionee for a period of at least six (6) months prior to such payment
and which, when added to the cash payment, if any, has an aggregate Fair Market
Value equal to the full amount of the exercise price of the Stock Option, or
part thereof, then being exercised and/or, with the prior written approval of
the Stock Option Committee, on a deferred basis evidenced by a promissory note,
containing such terms and subject to such security as the Stock Option Committee
shall determine to be fair and reasonable from time to time, for the total
option price for the number of Option Shares so purchased. No director,
consultant or business associate may purchase any Stock Option on a deferred
basis unless evidenced by a promissory note. Unless payment is on a deferred
basis, payment by an Optionee as provided herein shall be made in full
concurrently with the Optionee's notification to the Corporation of his
intention to exercise all or part of a Stock Option. If all or part of payment
is made in shares of Common Stock as heretofore provided, such payment shall be
deemed to have been made only upon receipt by the Corporation of all required
share certificates, and all stock powers and other required transfer documents
necessary to transfer the shares of Common Stock to the Corporation.

                  (d)      REORGANIZATION. Notwithstanding any provision in any
stock option agreement pertaining to the time of exercise of a Stock Option, or
part thereof, upon the occurrence of a Vesting Event, the Stock Option shall
become immediately exercisable as to all Option Shares (whether or not
previously vested).

                  (e)      MINIMUM EXERCISE. Not less than ten (10) Option
Shares may be purchased at any one time upon exercise of a Stock Option unless
the number of shares purchased is the total number which remains to be purchased
under the Stock Option.

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         9.       STOCK AWARDS.

                  (a)      GRANT. Subject to the express provisions and
limitations of the Plan, the Stock Option Committee, in its sole and absolute
discretion, may grant Stock Awards to Eligible Participants for a number of
shares of Common Stock on the terms and conditions and to such Eligible
Participants as it deems advisable and specifies in the respective grants.
Subject to the limitations and restrictions set forth in the Plan, an Eligible
Participant who has been granted a Stock Option or Stock Award may, if otherwise
eligible, be granted additional Stock Options or Stock Awards if the Stock
Option Committee shall so determine.

                  (b)      RESTRICTIONS. The Stock Option Committee, in its sole
and absolute discretion, may impose restrictions in connection with any Stock
Award, including without limitation, (i) imposing a restricted period during
which all or a portion of the Common Stock subject to the Stock Award may not be
sold, assigned, transferred, pledged or otherwise encumbered (the "Restricted
Period"), (ii) providing for a vesting schedule with respect to such Common
Stock such that if a Grantee ceases to be an Eligible Participant during the
Restricted Period, some or all of the shares of Common Stock subject to the
Stock Award shall be immediately forfeited and returned to the Corporation. The
Stock Option Committee may, at any time, reduce or terminate the Restricted
Period. Each certificate issued in respect of shares of Common Stock pursuant to
a Stock Award which is subject to restrictions shall be registered in the name
of the Grantee, shall be deposited by the Grantee with the Company together with
a stock power endorsed in blank and shall bear an appropriate legend summarizing
the restrictions imposed with respect to such shares of Common Stock.

                  (c)      REORGANIZATION. Notwithstanding any provision in any
agreement pertaining to a Stock Award, or part thereof, upon the occurrence of a
Vesting Event, all shares of Common Stock subject to the Stock Award shall
become immediately vested.

                  (d)      RIGHTS AS SHAREHOLDER. Subject to the terms of any
agreement governing a Stock Award, the Grantee of a Stock Award shall have all
the rights of a shareholder with respect to the Common Stock issued pursuant to
a Stock Award, including the right to vote such shares; provided, however, that
dividends or distributions paid with respect to any such shares which have not
vested shall be deposited with the Corporation and shall be subject to
forfeiture until the underlying shares have vested unless otherwise released by
the Stock Option Committee in its sole discretion. A Grantee shall not be
entitled to interest with respect to the dividends or distributions so
deposited.

         10.      COMPLIANCE WITH LAW.

                  No shares of Common Stock shall be issued by the Corporation
pursuant to a Stock Award or upon exercise of any Stock Option, and a Grantee
shall have no rights or claim to such shares, unless and until: (a) with respect
to a Stock Option, payment in full as provided in Section 8(c) hereof has been
received by the Corporation; (b) in the opinion of the counsel for the
Corporation, all applicable registration requirements of the Securities Act of
1933, all applicable listing requirements of securities exchanges or
associations on which the Corporation's Common Stock is then listed or traded,
and all other requirements of law and of regulatory bodies having jurisdiction
over such issuance and delivery, have been fully complied with; and (c) if
required by federal or state law or regulation, the Grantee shall have paid to
the Corporation the amount, if any, required to be withheld on the amount deemed
to be compensation to the Grantee as a result of the exercise of his or her
Stock Option or his or her Stock Award, or made other arrangements satisfactory
to the Corporation, in its sole discretion, to satisfy applicable income tax
withholding requirements.

         11.      NONASSIGNABILITY

                  Except to the extent otherwise provided in the applicable
Stock Option or Stock Award Agreement, no Stock Option, Stock Award or any other
right granted to any person under the Plan shall

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be assignable or transferable other than by will or by the laws of descent and
distribution, and all such Stock Options and Stock Awards and other rights shall
be exercisable during the life of the Grantee only by the Grantee or the
Grantee's legal representative. Notwithstanding the immediately preceding
sentence, the Committee may permit a Grantee to transfer any Stock Option which
is not an Incentive Stock Option to one or more of the Grantee's immediate
family members or to trusts established in whole or in part for the benefit of
the Grantee and/or one or more of such immediate family members. For purposes of
the Plan, the term "IMMEDIATE FAMILY" shall mean the Grantee's spouse and issue
(including adopted and step children).

         12.      CESSATION OF EMPLOYMENT.

                  Except as provided in Sections 13, 14 or 16 hereof, if, for
any reason, an Optionee's status as an Eligible Participant is terminated, the
Stock Options granted to such Optionee shall expire on the expiration dates
specified for said Stock Options at the time of their initial grant, or three
(3) months after written notice is provided to the Optionee that the Optionee's
status as an Eligible Participant is terminated, whichever is earlier. During
such period Stock Options shall be exercisable only as to those increments, if
any, which had become exercisable as of the date on which written notice is
provided to the Optionee that such Optionee's status as an Eligible Participant
terminated, and any Stock Options or increments which had not become exercisable
as of such date shall expire and terminate automatically on such date.

         13.      DEATH OF OPTIONEE.

                  If an Optionee loses his status as an Eligible Participant by
reason of death, or if an Optionee dies during the three-month period referred
to in Section 12 hereof, the Stock Options granted to such Optionee shall expire
on the expiration dates specified for said Stock Options at the time of their
initial grant, or one (1) year after the date of such death, whichever is
earlier. After such death but before such expiration, subject to the terms and
provisions of the Plan and the related stock option agreements, the person or
persons to whom such Optionee's rights under the Stock Options shall have passed
by will or by the applicable laws of descent and distribution, or the executor
or administrator of the Optionee's estate, shall have the right to exercise such
Stock Options to the extent that increments, if any, had become exercisable as
of the date on which the Optionee died.

         14.      DISABILITY OF OPTIONEE.

                  If an Optionee is disabled while employed by or while serving
as a director of the Corporation or a Subsidiary or during the three-month
period referred to in Section 12 hereof, the Stock Options granted to such
Optionee shall expire on the expiration dates specified for said Stock Options
at the time of their initial grant, or one (1) year after the date of such
disability, whichever is earlier. After such disability but before such
expiration, the Optionee or a guardian or conservator of the Optionee's estate,
as duly appointed by a court of competent jurisdiction, shall have the right to
exercise such Stock Options to the extent that increments, if any, had become
exercisable as of the date on which the Optionee became disabled or ceased to be
employed by the Corporation or a Subsidiary as a result of the disability. For
the purpose of this Section 14, an Optionee shall be deemed to have become
"disabled" if it shall appear to the Stock Option Committee, upon written
certification delivered to the Corporation by a qualified licensed physician,
that the Optionee has become permanently and totally unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death, or which has lasted
or can be expected to last for a continuous period of not less than twelve (12)
months.

         15.      ADJUSTMENT UPON CHANGES IN CAPITALIZATION.

                  If the outstanding shares of Common Stock of the Corporation
are increased, decreased, or changed into or exchanged for a different number or
kind of shares or securities of the Corporation,

                                       10
<PAGE>

through a reorganization, merger, recapitalization, reclassification, stock
split, stock dividend, stock consolidation, or otherwise, without consideration
to the Corporation, an appropriate and proportionate adjustment shall be made in
the number and kind of shares as to which Stock Options and Stock Awards may be
granted. A corresponding adjustment changing the number or kind of Option Shares
and Stock Awards and the exercise prices per share allocated to unexercised
Stock Options, or portions thereof, which shall have been granted prior to any
such change, shall likewise be made. Any such adjustment, however, in an
outstanding Stock Option shall be made without change in the total price
applicable to the unexercised portion of the Stock Option, but with a
corresponding adjustment in the price for each Option Share subject to the Stock
Option. Any adjustment under this Section shall be made by the Stock Option
Committee, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final and conclusive. No fractional shares of stock
shall be issued or made available under the Plan on account of any such
adjustment, and fractional share interests shall be disregarded and the
fractional share interest shall be rounded down to the nearest whole number.

         16.      TERMINATING EVENTS.

                  Not less than thirty (30) days prior to the occurrence of any
Terminating Event, the Stock Option Committee or the Board of Directors shall
notify each Grantee of the pendency of the Terminating Event. Upon the effective
date of the Terminating Event, the Plan shall automatically terminate and all
Stock Options theretofore granted shall terminate and all unvested Stock Awards
shall be cancelled and the underlying Common Stock forfeited and returned to the
Company, unless provision is made in connection with such transaction for the
continuance of the Plan and/or assumption of Stock Options and unvested Stock
Awards theretofore granted, or substitution for such Stock Options and unvested
Stock Awards with new stock options and awards covering stock of a successor
employer corporation, or a parent or subsidiary corporation thereof, solely at
the discretion of such successor corporation, or parent or subsidiary
corporation, with appropriate adjustments as to number and kind of shares and
prices, in which event the Plan, options and awards theretofore granted shall
continue in the manner and under the terms so provided. If the Plan and
unexercised Stock Options shall terminate pursuant to the foregoing sentence,
all persons shall have the right to exercise the Stock Options then outstanding
and not exercised (including those vested pursuant to Section 8(d) hereof) at
such time prior to the consummation of the transaction causing such termination
as the Corporation shall designate, unless the Board of Directors shall have
provided for the cancellation of such Stock Options in exchange for a cash
payment equal to the excess of the Fair Market Value of the Common Stock as of
the date of the Terminating Event over the exercise price of such Stock Options.

         17.      AMENDMENT AND TERMINATION.

                  The Board of Directors of the Corporation may at any time and
from time-to-time suspend, amend, or terminate the Plan and may, with the
consent of a Grantee, make such modifications of the terms and conditions of a
Stock Option or Stock Award as it shall deem advisable; provided that, except as
permitted under the provisions of Section 16 hereof, no amendment or
modification may be adopted without the Corporation having first obtained all
necessary regulatory approvals and approval of the holders of a majority of the
Corporation's shares of Common Stock present, or represented, and entitled to
vote at a duly held meeting of shareholders of the Corporation if the amendment
or modification would: (a) increase the number of Shares of Common Stock which
may be issued under the Plan; (b) change any provision of the Plan which would
affect the qualification as an Incentive Stock Option under the Plan; or (c)
make any other change for which shareholder approval is required pursuant to the
provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended.
No Stock Option or Stock Award may be granted during any suspension of the Plan
or after termination of the Plan. Amendment, suspension, or termination of the
Plan shall not (except as otherwise provided in Section

                                       11
<PAGE>

8(d) or Section 16 hereof), without the consent of the Grantee, alter or impair
any rights or obligations under any Stock Option or Stock Award theretofore
granted.

         18.      RIGHTS OF PARTICIPANTS.

                  Neither any Eligible Participant, any Grantee nor any other
person shall have any claim or right to be granted any Stock Option or Stock
Award under this Plan, and neither this Plan nor any action taken hereunder
shall be deemed or construed as giving any Eligible Participant, Grantee,
Optionee or any other person any right to be retained in the employ of the
Corporation or any subsidiary of the Corporation. Without limiting the
generality of the foregoing, there is no vesting of any right in the
classification of any person as an Eligible Participant, such classification
being used solely to define and limit those persons who are eligible for
consideration of the grant of Stock Options or Stock Awards under the Plan.

         19.      PRIVILEGES OF STOCK OWNERSHIP: SECURITIES LAW COMPLIANCE:
NOTICE OF SALE.

                  No Grantee shall be entitled to the privileges of stock
ownership as to any Common Stock not actually issued and delivered. No Option
Shares may be purchased upon the exercise of a Stock Option and no Common Stock
may be delivered pursuant to a Stock Award unless and until all then applicable
requirements of all regulatory agencies having jurisdiction and all applicable
requirements of securities exchanges upon which the stock of the Corporation is
listed (if any) shall have been fully complied with. The Corporation will
diligently endeavor to comply with all applicable securities laws before any
options are granted under the Plan and before any stock is issued pursuant to
options or Stock Awards. The Grantee shall, not more than five (5) days after
each sale or other disposition of shares of Common Stock acquired pursuant to
the exercise of Stock Options or pursuant to Stock Awards, give the Corporation
notice in writing of such sale or other disposition.

         20.      EFFECTIVE DATE OF THE PLAN.

                  The Plan was originally adopted by the Board of Directors of
the Corporation, and by the sole shareholder of the Corporation, as of May 31,
2000, and shall be effective as of that date.

         21.      TERMINATION.

                  Unless previously terminated as aforesaid, the Plan shall
terminate on May 30, 2010, which is ten (10) years from the date of adoption of
the Plan by the Board of Directors. No Stock Options or Stock Awards shall be
granted under the Plan thereafter, but such termination shall not affect any
Stock Option or Stock Award theretofore granted.

         22.      AGREEMENT.

                  Each Stock Option or Stock Award granted under the Plan shall
be evidenced by a written agreement executed by the Corporation and the Grantee,
and shall contain each of the provisions and agreements herein specifically
required to be contained therein, and such other terms and conditions as are
deemed desirable by the Stock Option Committee and are not inconsistent with the
Plan.

         23.      STOCK OPTION PERIOD.

                  Each Stock Option and all rights and obligations thereunder
shall expire on such date as the Stock Option Committee may determine, but not
later than ten (10) years from the date such Stock Option is granted, and shall
be subject to earlier termination as provided elsewhere in the Plan.

         24.      EXCULPATION AND INDEMNIFICATION OF STOCK OPTION COMMITTEE.

                                       12
<PAGE>

                  In addition to such other rights of indemnification which they
may have as officers or members of the board of directors of the Corporation or
as members of any committee thereof, the present and former members of the Stock
Option Committee shall be indemnified by the Corporation in accordance with the
Articles of Incorporation and the Bylaws of the Corporation, and Section 317 of
the California General Corporation Law. The Corporation has the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, agent or employee of the Corporation, including members of
the Stock Option Committee, whether or not the Corporation would have the power
to indemnify such person under the provisions of the Bylaws. The provisions of
this Section shall apply to the estate, executor and administrator of each
member of the Stock Option Committee.

         25.      AGREEMENT AND REPRESENTATIONS OF GRANTEE.

                  Unless the shares of Common Stock covered by this Plan have
been registered with the Securities and Exchange Commission pursuant to Section
5 of the Securities Act of 1933, each Grantee shall by and upon accepting a
Stock Option or Stock Award, represent and agree in writing, for himself or
herself and his or her transferees by will or the laws of descent and
distribution, that all shares of Common Stock acquired pursuant thereto will be
acquired for investment purposes and not for resale or distribution. Upon the
exercise of a Stock Option, or a part thereof, and upon issuance of a Stock
Award, Grantee shall, unless waived by the Corporation, furnish evidence
satisfactory to the Corporation, including written and signed representations,
to the effect that the Common Stock issued thereunder is being acquired for
investment purposes and not for resale or distribution. Furthermore, the
Corporation, at its sole discretion, to assure itself that any sale or
distribution by the Grantee complies with this Plan and any applicable federal
or state securities laws, may take all reasonable steps, including placing stop
transfer instructions with the corporation's transfer agent prohibiting
transfers in violation of the Plan and affixing the following legend (and/or
such other legend or legends as the Stock Option Committee shall require) on
certificates evidencing the shares: "IT IS UNLAWFUL TO CONSUMMATE A SALE OR
TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES." and "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE
ACT OR A DETERMINATION BY FIRST COMMUNITY BANCORP (OR ANY SUCCESSOR ENTITY) THAT
REGISTRATION IS NOT REQUIRED." At any time that Grantee contemplates the
disposition of any Common Stock acquired pursuant to this Plan (whether by sale,
exchange, gift or other form of transfer) he or she shall first notify the
Corporation of such proposed disposition and shall thereafter cooperate with the
Corporation in complying with all applicable requirements of law which, in the
opinion of counsel for the Corporation, must be satisfied prior to the making of
such disposition. Before consummating such disposition, the Corporation (or any
successor entity) shall determine that such disposition will not result in a
violation of any state or federal securities law or regulations. The Corporation
shall remove any legend affixed to certificates representing Common Stock
pursuant to this Section if and when all of the restrictions on the transfer of
the Common Stock, whether imposed by this Plan or federal or state law, have
terminated. A Grantee who thereafter sells or disposes of his shares of Common
Stock will be required to notify the Corporation of such sale or disposition
within five (5) days after the sale or disposition.

         26.      NOTICES.

                  All notices and demands of any kind which the Stock Option
Committee, any Grantee, or any other person may be required or desires to serve
under the terms of this Plan shall be in writing and shall be served by personal
service upon the respective person or by leaving a copy of such notice or demand
at the address of such person as may be reflected in the records of the
Corporation, or in the case of the Stock Option Committee, with the Secretary of
the Corporation, or by mailing a copy thereof

                                       13
<PAGE>

by certified or registered mail, postage prepaid, with return receipt requested.
In the case of service by mail, it shall be deemed complete at the expiration of
the third day after the day of mailing, except for notice of the exercise of any
Stock Option and payment of the Stock Option exercise price, both of which must
be actually received by the Corporation.

         27.      LIMITATION OF OBLIGATIONS OF THE CORPORATION.

                  Any obligation of the Corporation arising under or as a result
of this Plan or any Stock Option or Stock Award granted hereunder shall
constitute the general unsecured obligation of the Corporation, and not of the
Board of Directors of the Corporation, or any members thereof, the Stock Option
Committee, or any member thereof, any officer of the Corporation, or any other
person or any Subsidiary, and none of the foregoing, except the Corporation,
shall be liable for any debt, obligation, cost or expense hereunder.

         28.      LIMITATION OF RIGHTS.

                  The Stock Option Committee, in its sole and absolute
discretion, is entitled to determine who, if anyone, is an Eligible Participant
under this Plan, and which, if any, Eligible Participant shall receive any grant
of a Stock Option or Stock Award. No oral or written agreement by any person on
behalf of the Corporation relating to this Plan or any Stock Option or Stock
Award granted hereunder is authorized, and such agreement may not bind the
Corporation or the Stock Option Committee to grant any Stock Option or Stock
Award to any person.

         29.      SEVERABILITY.

                  If any provision of this Plan as applied to any person or to
any circumstances shall be adjudged by a court of competent jurisdiction to be
void, invalid, or unenforceable, the same shall in no way effect any other
provision hereof, the application of any such provision in any other
circumstances, or the validity of enforceability hereof.

         30.      CONSTRUCTION.

                  Where the context or construction requires, all words applied
in the plural shall be deemed to have been used in the singular and vice versa,
and the masculine gender shall include the feminine and the neuter.

         31.      HEADINGS.

                  The headings of the several paragraphs of this Plan are
inserted solely for convenience of reference and are not intended to form a part
of and are not intended to govern, limit or aid in the construction of any term
or provision hereof.

         32.      SUCCESSORS.

                  This Plan shall be binding upon the respective successors,
assigns, heirs, executors, administrators, guardians and personal
representatives of the Corporation and any Optionee.

         33.      GOVERNING LAW.

                                       14
<PAGE>

                  This Plan shall be governed by and construed in accordance
with the laws of the State of California.

         34.      CONFLICT.

                  In the event of any conflict between the terms and provisions
of this Plan, and any other document, agreement or instrument, including,
without limitation, any stock option agreement, the terms and provisions of this
Plan shall control.

END OF PLAN.

                                       15<PAGE>

                                  EXHIBIT 10.24

                         ASSIGNMENT AND OPTION AGREEMENT

                                 BY AND BETWEEN

                         INTERMUNE PHARMACEUTICALS, INC.

                                       AND

CONNETICS CORPORATION

                                  JUNE 23, 2000

   (SUPERSEDING AND REPLACING THE AMENDED AND RESTATED EXCLUSIVE SUBLICENSE
                         AGREEMENT OF APRIL 27, 1999)

<PAGE>

                         ASSIGNMENT AND OPTION AGREEMENT

         THIS ASSIGNMENT AND OPTION AGREEMENT (the "Agreement") is made
effective and entered into as of June 23, 2000 (the "Effective Date") by and
between CONNETICS CORPORATION, a Delaware corporation, with a principal place of
business at 3400 West Bayshore Road, Palo Alto, CA 94303 ("Connetics"), and
INTERMUNE PHARMACEUTICALS, INC., a Delaware corporation, with a principal place
of business at 1710 Gilbreth Road, Suite 301, Burlingame, CA 94010
("InterMune"). Connetics and InterMune may be referred to herein as a "Party" or
collectively as the "Parties."

                                    RECITALS

A.       WHEREAS, InterMune is a corporation formed for the purpose of research
and development of biopharmaceutical products for the treatment of infectious
and autoimmune diseases; and

B.       WHEREAS, Connetics has licensed the rights to certain immunology-based
products and to the technology relating thereto from Genentech, Inc.
("Genentech") pursuant to that certain License Agreement for Interferon Gamma by
and between Connetics and Genentech, dated May 5, 1998, as amended (the
"Genentech License"); and

C.       WHEREAS, InterMune and Connetics have entered into that certain Amended
and Restated Exclusive Sublicense Agreement, dated April 27, 1999 (the "Original
Agreement"), pursuant to which (a) Connetics granted an exclusive sublicense to
InterMune under the Genentech License to develop, make, have made, import, offer
for sale and sell therapeutic products containing or derived from such
immunology-based products and technology for use for certain specific
indications, and (b) InterMune granted to Connetics the exclusive option to
practice such sublicensed rights in the dermatology field; and

D.       WHEREAS, InterMune and Connetics now desire to supersede and replace
the Original Agreement as further set forth herein in order to assign to
InterMune Connetics' entire right, title and interest in, to and under the
Genentech License.

         NOW, THEREFORE, the Parties agree as follows:

1.       DEFINITIONS

              1.1 "Affiliate" means any company or entity controlled by,
                  controlling or under common control with a Party. As used in
                  this Section, "control" means (a) that an entity or company
                  owns, directly or indirectly, fifty percent (50%) or more of
                  the voting stock of another entity, or (b) that an entity,
                  person or group has the actual ability to control and direct
                  the management of the entity, whether by contract or
                  otherwise, but excluding, for all purposes of this Agreement,
                  Connetics, as to InterMune, and InterMune, as to Connetics.

              1.2 "Amendment No. 3" means that certain Amendment No. Three to
                  License Agreement entered into between Connetics and
                  Genentech, effective April 27, 1999. For clarity, the phrase
                  "as amended by Amendment No. 3" as used herein is intended
                  only for ease of reference and not as a limitation.

              1.3 "Best Efforts" means every necessary and prudent effort of a
                  Party applied in a prompt, commercially reasonable manner, to
                  the maximum extent reasonably allowed by such Party's
                  available financial resources, taking into account all of such
                  Party's business commitments for such financial resources.

              1.4 "BLA" means a Biologics License Application.

              1.5 "Connetics Know-How" means all Know-How in the areas of
                  quality assurance/ quality control (QA/QC), pharmaceutical
                  science, process development or regulatory affairs that (a) is
                  Controlled by Connetics during the term of this Agreement, and
                  (b) is necessary or useful to the discovery, development, use
                  or

<PAGE>

                  manufacture of Products, but excluding all Know-How that is
                  part of the Genentech License Rights.

              1.6 "Controlled" means with respect to any material, Know-How or
                  intellectual property right, that the Party owns or has a
                  license to such material, Know-How or intellectual property
                  right and has the ability to grant access, a license, or a
                  sublicense to such material, Know-How or intellectual property
                  right to the other Party as provided for herein without
                  violating an agreement with a Third Party as of the time the
                  Party would be first required hereunder to grant the other
                  Party such access, license or sublicense.

              1.7 "Dermatology Field" means the administration to humans of
                  therapeutic products for the treatment, prevention or
                  diagnosis of any dermatological disease or condition,
                  including, without limitation, atopic dermatitis,
                  keloids/hypertrophic scars, pustular psoriasis and
                  scleroderma, but excluding (a) any cancer disease or
                  condition, (b) any infectious disease or condition, and (c)
                  any indication outside of the IG Field.

              1.8 "Dermatology Sublicensee" means a Third Party to which
                  Connetics has granted a sublicense under the sublicense rights
                  to be granted by InterMune to Connetics following Connetics'
                  exercise of its option pursuant to Section 4.1.

              1.9 "FDA" means the U.S. Food and Drug Administration, or any
                  successor agency.

              1.10         "Gene Therapy" means the therapeutic or prophylactic
                  treatment of a human being with: (a) one or more
                  oligonucleotides or nucleotide sequences, in native form or
                  chemically modified, which are introduced into the body in
                  free form, bound to a carrier molecule, contained in any
                  molecular vesicle (e.g. a liposome), incorporated into or
                  attached to a vector of any type, contained in any cellular
                  construct and/or contained in any mechanical device or (b)
                  cells which have been manipulated EX VIVO using one or more
                  oligonucleotides or nucleotide sequences.

              1.11         "Gene Therapy Field" means the administration to
                  humans of Licensed Gene Product for Gene Therapy for the
                  treatment or prevention of any human disease or condition,
                  provided however, that "Gene Therapy Field" shall not include
                  any treatment or prevention of any type of cardiac or
                  cardiovascular disease or condition.

              1.12         "Genentech" means Genentech, Inc., a Delaware
                  corporation, with its principal office at 1 DNA Way, South San
                  Francisco, CA 94080.

              1.13         "Genentech License" means the License Agreement for
                  Interferon Gamma between Genentech and Connetics, dated May 4,
                  1998; as amended by: Amendment No. 1 to License Agreement,
                  effective December 28, 1998; Amendment No. 2 to License
                  Agreement, effective January 15, 1999; Amendment No. 3; and
                  that certain Consent to Assignment Agreement, dated as of the
                  date hereof.

              1.14         "Genentech License Rights" means all rights under
                  Patents, Know-How and trademarks granted to Connetics by
                  Genentech under the Genentech License, but only to the extent
                  the Genentech License permits the practice of such rights

<PAGE>

                  for the uses set forth in Article 3 herein. "Genentech License
                  Rights" shall not include any Third Party Product Rights.

              1.15         "Genentech Patents" means all the Patent rights which
                  are granted to Connetics under the Genentech License.

              1.16         "Genentech Supply Agreement" means the Supply
                  Agreement entered into between Genentech and Connetics dated
                  May 4, 1998.

              1.17         "IG Field" means the administration to humans of
                  Licensed Protein Product for the treatment or prevention of
                  any human disease or condition, provided however, that "IG
                  Field" shall not include: (a) the administration to humans of
                  Licensed Protein Product for the treatment or prevention of
                  any type of arthritis or cardiac or cardiovascular disease or
                  condition or (b) use of Licensed Protein Product for Gene
                  Therapy.

1.18
                  "Interferon Gamma" or "IG" means the polypeptide described as
                  "Interferon Gamma" in Section 1.20 of the Genentech License.

                  1.19 "InterMune Net Sales" means "Net Sales" of Licensed
                  Protein Products in the Territory for use in the IG Field by
                  InterMune and its sublicensees hereunder other than Connetics
                  and its Affiliates and Dermatology Sublicensees.

              1.20         "Know-How" means all information, data, know-how,
                  trade secrets, inventions, developments, results, techniques
                  and materials, whether or not patentable.

              1.21         "Licensed Product," "Licensed Gene Product" and
                  "Licensed Protein Product" shall each have the same meaning as
                  defined in Section 1.22 of the Genentech License.

              1.22         "Licensed Technology" means the Genentech License
                  Rights and the Connetics Know-How.

              1.23         "Net Sales" means "Net Sales" (as defined in Section
                  1.25 of the Genentech License) of Licensed Protein Products in
                  the Territory for use in the IG Field by InterMune and any of
                  its sublicensees hereunder (including without limitation
                  Connetics, its Affiliates and its Dermatology Sublicensees).

              1.24         "Original Agreement Effective Date" means April 27,
                  1999.

              1.25         "Patents" means any and all issued or pending patents
                  and patent applications, both foreign and domestic, and
                  including without limitation (a) all divisionals,
                  continuations and continuations-in-part of any such
                  applications, (b) any patents that issue from any of the
                  foregoing, and (c) all substitutions, extensions, reissues,
                  renewals, supplementary protection certificates and inventors'
                  certificates with respect to any of the foregoing issued
                  patents.

             1.26          "Territory" shall have the meaning set forth in
                  Section 1.28 of the Genentech License.

             1.27          "Third Party" means any party besides the Parties and
                  their respective Affiliates.

<PAGE>

             1.28          "Third Party Product Rights" shall have the meaning
                  set forth in Section 1.37 of the Genentech License.

             1.29          United States" means the United States and its
                  territories and possessions.

2.       ORIGINAL AGREEMENT SUPERSEDED

         The Parties agree that the Original Agreement is hereby replaced and
superseded in all respects by this Agreement as of the Effective Date, except as
expressly set forth in Section 3.3.

3.       ASSIGNMENT OF RIGHTS; LICENSE GRANT; RELATED COVENANTS

              3.1 Assignment of Rights. Connetics agrees to assign and hereby
                  does assign to InterMune Connetics' entire right, title and
                  interest in, to and under the Genentech License. Upon each
                  request by InterMune, without additional consideration,
                  Connetics agrees to promptly execute all documents and take
                  all such acts as InterMune deems necessary or desirable to
                  procure, maintain, perfect, and enforce the full benefits,
                  enjoyment, rights, title and interest in, to and under the
                  Genentech License assigned hereunder. In the event InterMune
                  is unable for any reason, after reasonable effort, to secure
                  Connetics' signature on any document needed in connection with
                  the actions specified herein, Connetics hereby irrevocably
                  designates and appoints InterMune and its duly authorized
                  officers and agents as its agent and attorney in fact, which
                  appointment is coupled with an interest, to act for and on its
                  behalf to execute, verify and file any such documents and to
                  do all other lawfully permitted acts to further the purposes
                  of this Section 3.1 with the same legal force and effect as if
                  executed by Connetics. Connetics agrees that as of the
                  Effective Date, InterMune shall be deemed a party to and sole
                  licensee under the Genentech License, and that Connetics shall
                  have no further rights nor obligations thereunder, except as
                  set forth in Section 4.1 of this Agreement and those
                  obligations that accrued prior to the Effective Date,
                  including without limitation, Connetics' remaining
                  obligations, if any, under Section 8.1 of the Genentech
                  License. Connetics hereby covenants that it shall take no
                  action inconsistent with InterMune's rights as party to and
                  licensee under the Genentech License.

              3.2 Connetics Know-How. Connetics hereby grants to InterMune a
                  non-exclusive license under the Connetics Know-How to develop,
                  use, make, have made, import, offer for sale and sell (a)
                  Licensed Products in the Territory, and (b) any products
                  covered by Third Party Product Rights to which Connetics or
                  InterMune acquires rights under the Genentech License in the
                  applicable territory.

              3.3 Genentech Supply Agreement. Pursuant to the Original
                  Agreement, Connetics assigned to InterMune Connetics' entire
                  right, title and interest to the Genentech Supply Agreement,
                  which assignment shall remain in full force and effect.
                  InterMune hereby covenants that it shall maintain the
                  Genentech Supply Agreement effective and in good standing. To
                  the extent Connetics exercises its option pursuant to Section
                  4.1 below, InterMune shall procure for and supply to Connetics
                  (and its Dermatology Sublicensees, if any) its requirements
                  for Bulk Product and Finished Product (as such terms are
                  defined in the Genentech Supply Agreement) for use in the
                  Dermatology Field from Genentech pursuant to the Genentech
                  Supply Agreement or from any Third Party manufacturer(s)
                  contracted by InterMune to manufacture Finished Product and
                  Bulk Product, provided that

<PAGE>

                  Connetics shall pay to InterMune InterMune's cost, without
                  markup, for procuring and supplying such Finished Product and
                  Bulk Product to Connetics.

              3.4 Transfer of Data and Materials. Promptly following the
                  Effective Date, Connetics and InterMune shall work
                  cooperatively together to transfer to InterMune all documents
                  or materials in Connetics' possession comprising or containing
                  the Licensed Technology, including without limitation,
                  biological and chemical materials, regulatory filings, and
                  data, and Connetics shall transfer any and all additions or
                  improvements to the Licensed Technology to InterMune as soon
                  as is reasonably practicable after the creation, development
                  or acquisition of such addition or improvements.

4.       OPTION TO DERMATOLOGY RIGHTS

              4.1 Option Grant. InterMune hereby grants to Connetics the
                  exclusive option to obtain the exclusive sublicense under the
                  Genentech License Rights to develop, use, make, have made,
                  import, offer for sale and sell Licensed Protein Products for
                  use solely in the Dermatology Field in the United States,
                  subject to Genentech's rights under the Genentech License.
                  Connetics may exercise such option at any time prior to the
                  fifth anniversary of the Original Agreement Effective Date by
                  providing InterMune written notice of its desire to exercise
                  such option. Upon InterMune's receipt of such notice,
                  InterMune shall be deemed to have granted to Connetics the
                  exclusive, royalty-free (with respect to InterMune only),
                  sublicense under the Genentech License Rights to use, make,
                  have made, import, offer for sale and sell Licensed Protein
                  Products in the Dermatology Field in the United States for the
                  term of this Agreement, subject to the terms of the Genentech
                  License and of this Agreement, and Connetics shall be subject
                  to all terms and conditions of the Genentech License relating
                  to its development and commercialization of Licensed Protein
                  Products in the Dermatology Field in the United States,
                  including without limitation those obligations described in
                  Sections 4.2 and 4.5 below. Such sublicense shall be further
                  sublicenseable by Connetics to the extent permitted by the
                  Genentech License. If not exercised by the fifth anniversary
                  of the Original Agreement Effective Date, the option granted
                  in this Section 4.1 shall expire.

              4.2 MILESTONE PAYMENTS.  If Connetics exercises its option under
                  Section 4.1 then:

                         (a)      In the event that Connetics or a Dermatology
                           Sublicensee achieves one of the milestones set forth
                           in Sections 8.2(a) or (b) of the Genentech License
                           with respect to a Licensed Protein Product, Connetics
                           or such Dermatology Sublicensee shall inform
                           InterMune thereof and provide such milestone payment
                           due under the Genentech License to InterMune.

                         (b)      In the event that milestone payments to
                           Genentech as set forth in Sections 8.2(c) and (d) of
                           the Genentech License are triggered by the sale of
                           Licensed Protein Products by both Connetics and
                           InterMune (and/or their sublicensees) in the
                           Territory, the Parties shall promptly meet and in
                           good faith determine a fair apportionment between the
                           Parties of the payment to be made to Genentech for
                           such milestone based upon the relative Net Sales of
                           each Party for such calendar year or other agreed
                           upon method of apportionment. Connetics shall then
                           submit to InterMune its portion of such milestone
                           payment in accordance with the terms of the Genentech
                           License.

<PAGE>

              4.3 ROYALTIES.  If Connetics exercises its option under Section
                  4.1 then:

                         (a)      Connetics shall pay royalties to InterMune
                           on all Net Sales of Licensed Protein Products by
                           Connetics, its Affiliates and its Dermatology
                           Sublicensees at the applicable royalty rate set forth
                           in Section 8.3 of the Genentech License (as may be
                           reduced pursuant to Section 8.4 of the Genentech
                           License).

                         (b)      Royalty payments shall be made to InterMune
                           quarterly within sixty (60) days following the end of
                           each calendar quarter for which royalties are due.
                           Each royalty payment shall be accompanied by a report
                           summarizing the total Net Sales by Connetics, its
                           Affiliates and its Dermatology Sublicensees during
                           the relevant three-month period, and the calculation
                           of royalties, if any, due thereon pursuant to
                           subsection (a) above.

                         (c)      Connetics, its Affiliates and its
                           Dermatology Sublicensees hereunder shall keep full,
                           true and accurate books of account containing all
                           particulars which may be necessary for the purpose of
                           showing Net Sales. Said books of account shall be
                           kept at the principal place of business of Connetics,
                           its Affiliates or its Dermatology Sublicensees, as
                           the case may be. Said books and the supporting data
                           shall be open at all reasonable times, for three (3)
                           years following the end of the calendar year to which
                           they pertain (and access shall not be denied
                           thereafter, if reasonably available), to the
                           inspection of an independent public accountant
                           retained by InterMune or Genentech and reasonably
                           acceptable to Connetics (or its Affiliate or
                           Dermatology Sublicensee) for the purpose of verifying
                           Net Sales under this Agreement; subject to the
                           provisions of subsection (e) below.

                         (d)      Connetics shall, within sixty (60) days
                           after the end of each calendar quarter beginning with
                           the quarter of the first commercial sale of a
                           Licensed Protein Product in the Dermatology Field in
                           the Territory by Connetics, its Affiliates or its
                           Dermatology Sublicensees, deliver to InterMune a true
                           and accurate report, setting forth such particulars
                           of the business conducted by Connetics, its
                           Affiliates and its Dermatology Sublicensees during
                           the preceding quarter as are pertinent to an
                           accounting for Net Sales and deductible expenses as
                           permitted under the Genentech License. Such reports
                           shall include at least the following: (i) the total
                           gross sales of Licensed Protein Products occurring
                           during that calendar quarter, (ii) the allowable
                           deductions therefrom, (iii) the total Net Sales of
                           Licensed Protein Products occurring during that
                           calendar quarter and (iv) the calculation of
                           royalties, if any, due thereon pursuant to subsection
                           (a) above.

                         (d)      At InterMune's or Genentech's request and
                           expense, Connetics shall permit a certified public
                           accountant selected by InterMune or Genentech and
                           reasonably acceptable to Connetics to examine, not
                           more than once in any four consecutive calendar
                           quarters during the term of this Agreement, but
                           including one (1) post-termination audit, Connetics'
                           books of account and records of all sales of Licensed
                           Protein Products by Connetics, its Affiliates and its
                           Dermatology Sublicensees for the sole purpose of
                           determining the correctness of the reports provided
                           by Connetics under subsection (a) above. If such
                           accountant reasonably

<PAGE>

                           determines that the royalties owed by Connetics to
                           InterMune under subsection (a) above have been, for
                           any calendar year in total, understated by Connetics,
                           Connetics shall immediately pay to InterMune all
                           understated royalties, together with interest on such
                           royalties from the date accrued at a rate of prime
                           plus 2% and shall pay the reasonable costs of the
                           examination if Connetics has understated such
                           royalties by more than 5%.

              4.4 OFF-LABEL SALES.  If Connetics exercises the option set forth
                  in Section 4.1 then:

                         (a)      Each Party agrees and shall require its
                           sublicensees, if any, to use commercially reasonable
                           efforts to formulate all Licensed Protein Products
                           developed by such Party or sublicensee thereof in a
                           manner to reduce, to the extent reasonably
                           practicable, the possibility that such Licensed
                           Protein Product can be used in the other Party's
                           field of use as provided hereunder. If a Party cannot
                           so formulate a particular Licensed Protein Product,
                           then such Party agrees to use its Best Efforts to
                           prevent sales of such Licensed Protein Product for
                           use in the other Party's field of use, including
                           without limitation instructing its sales forces, and
                           requiring all sublicensees to instruct their sales
                           forces, that such Licensed Protein Product is not to
                           be promoted, marketed or sold for use in the other
                           Party's field of use.

                         (b)      In the event that either Party determines
                           that a Licensed Protein Product sold by a Party or
                           its sublicensees hereunder is being used in a field
                           of use other than one for which such Party has the
                           right to sell such Licensed Protein Product
                           hereunder, the Party making such determination shall
                           immediately inform the other Party. The Parties shall
                           then promptly meet and diligently and in good faith
                           determine a fair and reasonable mechanism for
                           equitable allocation of the sales of such Licensed
                           Protein Product that are used outside the field of
                           use for which the selling Party had the right to
                           sell.

              4.5 PATENT COSTS. If Connetics exercises the option set forth in
                  Section 4.1, then Connetics agrees to reimburse InterMune all
                  costs paid by InterMune to Genentech under Section 5.2 of the
                  Genentech License which relate to any patent or patent
                  application the claims of which: (a) are specifically directed
                  to a Licensed Protein Product for use in the Dermatology Field
                  and (b) do not relate to a Licensed Protein Product for use in
                  any area of the IG Field other than the Dermatology Field.

              4.6 MILESTONE PAYMENTS. If Connetics exercises its option under
                  Section 4.1, then Connetics shall make the following cash
                  milestone payments to InterMune:

                         (a)      One million two hundred thousand dollars
                           ($1,200,000) within thirty (30) days following the
                           date on which the first NDA or BLA for a Licensed
                           Protein Product is filed with the FDA by Connetics,
                           its Affiliate or its Dermatology Sublicensee for an
                           indication in the Dermatology Field; and

                         (b)      Two million dollars ($2,000,000) within
                           thirty (30) days following the date Connetics, its
                           Affiliate or its Dermatology Sublicensee receives FDA
                           clearance for each new indication in the Dermatology
                           Field of a Licensed Protein Product for commercial
                           sale in the United States.

<PAGE>

              4.7 DERMATOLOGICAL INDICATIONS OUTSIDE OF THE DERMATOLOGY FIELD.

                         (a)      It is the intention of the Parties that
                           Connetics shall be InterMune's preferred marketing
                           partner for sales of Licensed Protein Product to
                           dermatologists in the United States during the term
                           of this Agreement. Therefore, during the term of this
                           Agreement, if either Party desires to sell Licensed
                           Protein Product to dermatologists in the United
                           States for use for indications that are outside of
                           the Dermatology Field but within the IG Field (an
                           "Outside Indication"), the provisions of this Section
                           4.7 shall apply.

                         (b)      In the event that either Party desires to
                           sell a Licensed Protein Product for an Outside
                           Indication to dermatologists in the United States
                           during the term of this Agreement, such Party shall
                           give the other Party written notice of such interest,
                           which notice shall specify the indication of
                           interest. If InterMune notifies Connetics that
                           InterMune itself desires to sell such Licensed
                           Protein Product for an Outside Indication directly to
                           dermatologists in the United States, then the
                           procedures of subsection (d) shall apply. Otherwise,
                           for ninety (90) days following receipt of such
                           notice, the Parties shall exclusively negotiate in
                           good faith for the reasonable commercial terms under
                           which Connetics shall exclusively sell such Licensed
                           Protein Product for such Outside Indication to
                           dermatologists in the United States. In the event
                           that, at the end of such ninety (90) day period, the
                           Parties have failed to enter into a written agreement
                           on such commercially reasonable terms, Connetics'
                           rights with respect to the sale of such Licensed
                           Protein Product for such Outside Indication shall
                           terminate and InterMune shall have no further
                           obligations to Connetics under this Section 4.7 with
                           respect to such Licensed Protein Product for such
                           Outside Indication except as set forth is subsections
                           (c) and (d) below.

                         (c)      If the Parties have failed to enter into an
                           agreement by the end of such ninety (90) day period,
                           as described in subsection (b) above, InterMune shall
                           then have the right during the following one hundred
                           eighty (180) day period to enter into an agreement
                           with a Third Party for the sale to dermatologists of
                           such Licensed Protein Product for such Outside
                           Indication on economic terms that, taken as a whole,
                           are substantially the same as, or more favorable to
                           InterMune than, those last offered in writing by
                           Connetics for such rights pursuant to subsection (b)
                           above. If at the end of such one hundred eighty (180)
                           day period InterMune has not entered into an
                           agreement with a Third Party to sell such Licensed
                           Protein Product for such Outside Indication to
                           dermatologists in the United States, then the
                           procedures set forth in subsection (b) above shall
                           again apply, provided that InterMune may proceed
                           alternatively under subsection (d) below.

                         (d)      If InterMune itself desires to sell such
                           Licensed Protein Product to dermatologists in the
                           United States for Outside Indications, then upon
                           written notice from InterMune, Connetics and
                           InterMune shall enter into good faith negotiations,
                           for a period of ninety (90) days from Connetics'
                           receipt of such notice, for the reasonable commercial
                           terms upon which InterMune shall grant to Connetics
                           the rights to co-promote such Licensed Protein
                           Product for such Outside Indication to dermatologists
                           in the United States. InterMune agrees that it shall
                           not unreasonably withhold its

<PAGE>

                           agreement to such commercially reasonable terms. In
                           the event that, at the end of such ninety (90) day
                           period, the Parties have failed to enter into a
                           written agreement for such co-promotion rights,
                           InterMune shall have no further obligations to
                           Connetics under this Section 4.7 with respect to such
                           Licensed Protein Product for such Outside Indication,
                           PROVIDED THAT InterMune may not enter into an
                           agreement with a Third Party for the rights to
                           co-promote Licensed Protein Product for such Outside
                           Indication to dermatologists in the United States on
                           economic terms that, taken as a whole, are less
                           favorable to InterMune than those last offered in
                           writing by Connetics for such rights. In the event
                           that InterMune does not enter into such a
                           co-promotion agreement with a Third Party and instead
                           solely promotes and sells such Licensed Protein
                           Product for such Outside Indication to dermatologists
                           in the United States itself, if at any time following
                           such sole promotion and sale InterMune determines in
                           its sole discretion that it desires to grant a
                           license to the rights to promote and sell, or to
                           co-promote, such Licensed Protein Product for such
                           Outside Indication to dermatologists in the United
                           States to a Third Party, then the procedures set
                           forth in subsection (b) above shall apply.

5.       CONSIDERATION

              5.1 ROYALTIES.

                         (a)      Beginning on January 1, 2002, InterMune
                           shall pay to Connetics a royalty of one-quarter of
                           one percent (0.25%) of InterMune Net Sales in the
                           United States. InterMune shall continue to pay such
                           royalties to Connetics until such time as the
                           cumulative InterMune Net Sales in United States,
                           beginning on January 1, 2000, are equal to one
                           billion dollars ($1,000,000,000). Thereafter,
                           InterMune shall pay to Connetics a royalty of
                           one-half of one percent (0.5%) of InterMune Net Sales
                           in the United States for the remainder of the term of
                           the Agreement.

                         (b)      All royalties due under this Section 5.1
                           shall be due and payable quarterly within thirty (30)
                           days following the last day of each quarter in which
                           royalties are incurred beginning with first calendar
                           quarter of 2002.

              5.2 MILESTONE PAYMENT. InterMune shall pay to Connetics a
                  milestone payment of one million five hundred thousand dollars
                  ($1,500,000), (the "Milestone Payment"), payable in a lump sum
                  or in installments based on the level of InterMune Net Sales,
                  as follows:

                         (a)      If annualized InterMune Net Sales in the
                           United States for 2001, based on InterMune Net Sales
                           in the United States for the third and fourth
                           calendar quarters of 2001, ("2001 Net Sales") are
                           equal to or greater than twenty million dollars
                           ($20,000,000), then on March 31, 2002, InterMune
                           shall, at its election, either (i) pay the full
                           Milestone Payment to Connetics, or (ii) pay to
                           Connetics three hundred seventy five thousand dollars
                           ($375,000) of the Milestone Payment and furnish to
                           Connetics a promissory note for the balance of the
                           Milestone Payment, which promissory note shall
                           provide for three (3) principal payments to Connetics
                           of three hundred seventy five thousand dollars
                           ($375,000) each due upon June 30, 2002, September 30,
                           2002 and December 31, 2002, respectively.

<PAGE>

                         (b)      If 2001 Net Sales are equal to or greater
                           than fifteen million dollars ($15,000,000) but less
                           than twenty million dollars ($20,000,000), then on
                           March 31, 2002, InterMune shall pay to Connetics
                           three hundred thousand dollars ($300,000) of the
                           Milestone Payment, and furnish to Connetics a
                           promissory note for the balance of the Milestone
                           Payment (the "Remaining Payment"), which promissory
                           note shall provide for full payment of the balance of
                           such note to Connetics on the earlier to occur of (i)
                           March 31, 2004, or (ii) the last day of the month
                           following the consecutive twelve (12) month period
                           that InterMune Net Sales in the United States are
                           equal to or greater than twenty million dollars
                           ($20,000,000), subject to subsection (d) below.

                         (c)      If 2001 Net Sales are less than fifteen
                           million dollars ($15,000,000), then on March 31,
                           2002, InterMune shall pay to Connetics a portion of
                           the Milestone Payment equal to three hundred thousand
                           dollars ($300,000) multiplied by a fraction, the
                           numerator of which is 2001 Net Sales and the
                           denominator of which is twenty million dollars
                           ($20,000,000). InterMune shall furnish to Connetics a
                           promissory note for the balance of the Milestone
                           Payment (the "Remaining Payment"), which promissory
                           note shall provide for full payment of the balance of
                           such note to Connetics on the earlier to occur of (i)
                           March 31, 2004, or (ii) the last day of the month
                           following the consecutive twelve (12) month period
                           that InterMune Net Sales in the United States are
                           equal to or greater than twenty million dollars
                           ($20,000,000), subject to subsection (d) below.

                         (d)      With respect to the promissory note for the
                           Remaining Payment described in subsection (b) or (c)
                           above, if InterMune is to pay the balance of such
                           note on March 31, 2004, and InterMune Net Sales in
                           the United States for the twelve (12) month period
                           preceding March 31, 2004 are equal to or greater than
                           ten million dollars ($10,000,000) but less than
                           twenty million dollars ($20,000,000), then:

                               (i)  InterMune may, at its election, pay fifty
                                    percent (50%) of the Remaining Payment
                                    either in cash or in Preferred Shares of
                                    InterMune stock at the fair market value of
                                    such shares, determined as the average
                                    closing price of such shares over the
                                    previous thirty (30) day period; and

                               (ii) With respect to the other fifty percent
                                    (50%) of the Remaining Payment, Connetics
                                    may, at its election, receive such fifty
                                    percent either in cash or in Preferred
                                    Shares of InterMune stock at the fair market
                                    value of such shares, determined as the
                                    average closing price of such shares over
                                    the previous thirty (30) day period,
                                    provided that Connetics shall notify
                                    InterMune of its election in writing at
                                    least thirty (30) days prior to the date
                                    that such payment is due.

                         (e)      With respect to the Remaining Payment
                           described in subsection (b) or (c) above, if
                           InterMune is to pay the balance of such note on March
                           31, 2004, and InterMune Net Sales in the United
                           States for the twelve (12) month period preceding
                           March 31, 2004 are less than ten million dollars
                           ($10,000,000), then InterMune may, at its election,
                           either:

                                       10
<PAGE>

                                        (1) Pay such Remaining Payment in cash
                                            or in Preferred Shares of InterMune
                                            stock at the fair market value of
                                            such shares, determined as the
                                            average closing price of such shares
                                            over the previous thirty (30) day
                                            period; or

                                        (2) Grant to Connetics the license to
                                            the Accounting and Revenue Rights to
                                            CGD Units (as defined below), on
                                            commercially reasonable terms to be
                                            agreed upon by the Parties, in which
                                            event InterMune shall thereafter
                                            have no further obligation to
                                            Connetics with respect to such
                                            Remaining Payment. Such license
                                            shall be fully paid-up solely with
                                            respect to InterMune but not with
                                            respect to Genentech or any other
                                            Third Party, and shall expire upon
                                            the date of expiration of the last
                                            to expire Genentech Patent covering
                                            the manufacture, use or sale of
                                            Licensed Products for the treatment
                                            of CGD in the United States and its
                                            territories and possessions. As used
                                            herein, "Accounting and Revenue
                                            Rights to CGD Units" means the right
                                            to book net revenues, expenses and
                                            net profits for the sales of
                                            Licensed Products for the treatment
                                            of chronic granulomatous disease by
                                            InterMune and its sublicensees in
                                            the United States.

                         (f)      All promissory notes referred to in this
                           Section 5.2 shall bear interest at the rate of the
                           prime rate plus two percentage points (2%).

              5.3 REPORTS; AUDIT RIGHTS. InterMune shall provide to Connetics a
                  copy of all reports submitted to Genentech by InterMune
                  pursuant to Section 8.8 of the Genentech License when
                  InterMune submits such report to Genentech. Following January
                  1, 2002, Connetics shall have the same audit rights as
                  Genentech pursuant to Section 8.8 of the Genentech License.

              5.4 THIRD PARTY ROYALTIES. Each Party shall be responsible for
                  paying all royalties due to Third Parties other than Genentech
                  under Section 8.4 of the Genentech License with respect to
                  such Party's and its sublicensees' activities hereunder.

6.       INTELLECTUAL PROPERTY

              6.1 Ownership of Inventions. Each Party shall remain the sole
                  owner of its respective technology and other intellectual
                  property that it owned as of the Effective Date. A Party shall
                  not have or acquire any rights in any inventions, Know-How or
                  intellectual property rights of the other Party, except as
                  specifically granted herein.

              6.2 Infringement of Third Party Patents. In the event that a Third
                  Party files an action against a Party alleging that such
                  Party's activities under this Agreement infringe such Third
                  Party's patent rights, such Party shall give written notice to
                  the other Party, and the Parties will consult and cooperate on
                  the best course of action. The Party that was sued shall have
                  the right to defend itself against such action, and the other
                  Party shall provide all reasonable assistance in such defense.

              6.3 Infringement of Licensed Patents. In the event that either
                  Party becomes aware that a Third Party is infringing any
                  rights in the Genentech Patents, such Party shall promptly
                  notify the other. InterMune shall have the right to enforce
                  the

                                       11
<PAGE>

                  Genentech Patents to the full extent permitted under the
                  Genentech License, and Connetics will reasonably cooperate
                  with InterMune in such enforcement actions and take all
                  reasonably necessary steps to facilitate InterMune's
                  enforcement of the Genentech Patents.

              6.4 Cooperation. Each Party agrees to cooperate with the other and
                  take all reasonable additional actions as may be reasonably
                  required to achieve the intent of this Article 6, including,
                  without limitation, the execution of all necessary and
                  appropriate instruments and documents.

7.       REPRESENTATIONS AND WARRANTIES

              7.1 Mutual Representations and Warranties. Each Party hereby
                  represents and warrants to the other Party as follows:

                         (a)      Such Party (i) is duly organized, validly
                           existing and in good standing under the laws of the
                           state in which it is organized; (ii) has the power
                           and authority and the legal right to own and operate
                           its property and assets, to lease the property and
                           assets it operates under lease, and to carry on its
                           business as it is now being conducted; and (iii) is
                           in compliance with all requirements of applicable
                           law, except to the extent that any noncompliance
                           would not materially adversely affect such Party's
                           ability to perform its obligations under the
                           Agreement.

                         (b)      Such Party (i) has the power and authority
                           and the legal right to enter into the Agreement and
                           to perform its obligations hereunder, and (ii) has
                           taken all necessary action on its part to authorize
                           the execution and delivery of the Agreement and the
                           performance of its obligations hereunder. The
                           Agreement has been duly executed and delivered on
                           behalf of such Party, and constitutes a legal, valid,
                           binding obligation, enforceable against such Party in
                           accordance with its terms.

                         (c)      All necessary consents, approvals and
                           authorizations of all governmental authorities and
                           other persons required to be obtained by such Party
                           in connection with the Agreement have been obtained.

                         (d)      The execution and delivery of the Agreement
                           and the performance of such Party's obligations
                           hereunder (i) do not conflict with or violate any
                           requirement of applicable laws or regulations or any
                           material contractual obligation of such Party, and
                           (ii) do not materially conflict with, or constitute a
                           material default or require any consent under any
                           material contractual obligation of such Party.

              7.2 Connetics Representations and Warranties.  Connetics hereby
                  represents and warrants that:

                         (a)      To Connetics' knowledge as of the Effective
                           Date, the Licensed Technology practiced as permitted
                           herein does not infringe on any intellectual property
                           rights owned by any Third Party.

                         (b)      Connetics possesses the necessary interest,
                           title and right to the Licensed Technology to grant
                           the licenses and to make the assignments to InterMune
                           hereunder.

                                       12
<PAGE>

8.       INDEMNIFICATION

              8.1 Indemnification by Connetics. Connetics agrees to indemnify,
                  hold harmless and defend InterMune and InterMune's directors,
                  officers, employees and agents, and the directors, officers,
                  employees and agents of any InterMune Affiliate from and
                  against any and all claims, suits, losses, damages, costs,
                  fees and expenses resulting from or arising out of any
                  negligent or wrongful act or omission by Connetics, its
                  Affiliates or its Dermatology Sublicensees, or any breach by
                  Connetics of its obligations under this Agreement or under the
                  Genentech License, except to the extent that such claims,
                  suits, losses, damages, costs, fees or expenses arises or
                  results from any negligent or wrongful act or omission of
                  InterMune or its Affiliates.

              8.2 Indemnification by InterMune. InterMune agrees to indemnify,
                  hold harmless and defend Connetics and its directors,
                  officers, employees and agents, and the directors, officers,
                  employees and agents of any Connetics Affiliates or its
                  Dermatology Sublicensees from and against any and all claims,
                  suits, losses, damages, costs, fees and expenses resulting
                  from or arising out of damage or injury caused by a negligent
                  or wrongful act or omission of InterMune, its Affiliates or
                  its Sublicensees, or any breach by InterMune of its
                  obligations under this Agreement or under the Genentech
                  License, except to the extent that such claims, suits, losses,
                  damages, costs, fees or expenses arises or results from any
                  negligent or wrongful act or omission of Connetics, its
                  Affiliates or its Dermatology Sublicensees.

              8.3 Indemnification Procedure. In all cases where one Party seeks
                  indemnification by the other under this Article 8, the Party
                  seeking indemnification shall promptly notify the indemnifying
                  Party of receipt of any claim or lawsuit covered by such
                  indemnification obligation and shall cooperate fully with the
                  indemnifying Party in connection with the investigation and
                  defense of such claim or lawsuit. The indemnifying Party shall
                  have the right to control the defense, with counsel of its
                  choice, provided that the non-indemnifying Party shall have
                  the right to be represented by advisory counsel at its own
                  expense. The indemnifying Party shall not settle or dispose of
                  the matter in any manner which could negatively and materially
                  affect the rights or liability of the non-indemnifying Party
                  without the non-indemnifying Party's prior written consent,
                  which shall not be unreasonably withheld.

9.       CONFIDENTIALITY

              9.1 Confidential Information Obligations. As used herein,
                  "Confidential Information" means all information that a Party
                  discloses to the other Party under this Agreement or had
                  disclosed to the other Party under the Original Agreement,
                  provided that Confidential Information shall not include such
                  information excluded under Section 9.2. Except to the extent
                  expressly authorized by this Agreement or otherwise agreed in
                  writing by the Parties, each Party agrees that, during the
                  term of this Agreement and for five (5) years after the
                  expiration or termination of this Agreement, it shall keep
                  confidential and shall not publish or otherwise disclose and
                  shall not use for any purpose other than as provided for in
                  this Agreement any Confidential Information furnished to it by
                  the other Party pursuant to this Agreement.

                                       13
<PAGE>

              9.2 Exceptions. The obligations set forth in Section 9.1 shall not
                  apply to any Information that the receiving Party can
                  demonstrate by competent evidence:

                         (a)      was already known to the receiving Party,
                           other than under an obligation of confidentiality, at
                           the time of disclosure by the other Party;

                         (b)      was generally available to the public or
                           otherwise part of the public domain at the time of
                           its disclosure to the receiving Party by the other
                           Party;

                         (c)      became generally available to the public or
                           otherwise part of the public domain after its
                           disclosure and other than through any act or omission
                           of the receiving Party in breach of this Agreement;

                         (d)      was disclosed to the receiving Party, other
                           than under an obligation of confidentiality to a
                           Third Party, by a Third Party who had no obligation
                           to the disclosing Party not to disclose such
                           information to others; or

                         (e)      is independently developed by the receiving
                           Party without using any of the other Party's
                           Confidential Information.

              9.3 Terms of the Agreement. The Parties agree that the terms of
                  this Agreement will be considered Confidential Information of
                  both Parties. Notwithstanding the foregoing, a Party shall
                  have the right to disclose the material financial terms of the
                  Agreement to any bona fide potential investor, investment
                  banker, acquiror, merger partner or other potential financial
                  partner, subject to such Party obtaining the agreement of such
                  party receiving such Confidential Information to keep such
                  information confidential.

              9.4 Permitted Disclosure. Notwithstanding the limitations in this
                  Article 9, each Party may disclose Confidential Information
                  belonging to the other Party (or otherwise subject to this
                  Article 9), to the extent such disclosure is reasonably
                  necessary in the following instances, but solely for the
                  limited purpose of such necessity:

                         (a)      filing or prosecuting Patents;

                         (b)      regulatory and tax filings;

                         (c)      prosecuting or defending litigation;

                         (d)      complying with applicable governmental laws
                           or regulations or valid court orders;

                         (e)      conducting preclinical or clinical trials of
                           Licensed Products; and

                         (f)      disclosure to Affiliates, licensees,
                           sublicensees, employees, consultants or agents who
                           agree to be bound by similar terms of confidentiality
                           and non-use at least equivalent in scope to those set
                           forth in this Article 9.

         Notwithstanding the foregoing, in the event a Party is required to make
a disclosure of the other Party's Confidential Information pursuant to Section
9.4, it will give reasonable advance notice to the other Party of such
disclosure and endeavor in good faith to secure confidential treatment of such
information. In any event, the Parties

                                       14
<PAGE>

agree to take all reasonable action to avoid disclosure of Confidential
Information hereunder. Further, the Parties agree to consult with one another
on the provisions of this Agreement to be redacted in any filings made by a
Party with the United States Securities and Exchange Commission or as
otherwise required by law.

10.      TERMINATION

              10.1         Term of Agreement. The term of this Agreement shall
                  expire, unless earlier terminated as provided by Section 10.2
                  below, upon expiration or termination of the Genentech
                  License.

              10.2         Termination for Material Breach. If either Party
                  shall default in a material manner with respect to any
                  material provision of this Agreement and the other Party shall
                  have given the defaulting Party written notice of such
                  default, the defaulting Party shall have thirty (30) days to
                  cure such default. If such default is not cured within such
                  thirty (30) day period, the non-defaulting Party shall have
                  the right, upon notice to the defaulting Party and without
                  prejudice to any other rights the non-defaulting Party may
                  have, to terminate this Agreement unless the defaulting Party
                  is in the process of attempting in good faith to remedy such
                  default, in which case, the thirty (30) day cure period shall
                  be extended by an additional thirty (30) days.

              10.3         Effect of Termination. Upon termination or expiration
                  of the Agreement, (a) all licenses granted by Connetics to
                  InterMune under Article 3 will terminate; (b) any and all
                  claims and payment obligations that accrued prior to the date
                  of such termination or expiration shall survive such
                  termination; and (c) each Party shall return all of the other
                  Party's Confidential Information.

              10.4         Surviving Rights. The obligations and rights of the
                  Parties under Sections 4.3(c), 5.3, 6.1, and Articles 8, 9, 10
                  and 11 shall survive any termination or expiration of the
                  Agreement.

              10.5         Accrued Rights and Surviving Obligations. The
                  termination or expiration of the Agreement for any reason
                  shall be without prejudice to any rights, which shall have
                  accrued to the benefit of either Party prior to such
                  termination or expiration, including any damages arising from
                  any breach hereunder. Such termination or expiration shall not
                  relieve either Party from obligations which are expressly
                  indicated to survive termination or expiration of the
                  Agreement.

              10.6         Bankruptcy Rights. In the event that this Agreement
                  is terminated or rejected by a Party or its receiver or
                  trustee under applicable bankruptcy laws due to such Party's
                  bankruptcy, then all rights and licenses granted under or
                  pursuant to this Agreement by such Party to the other Party
                  are, and shall otherwise be deemed to be, for purposes of
                  Section 365(n) of the Bankruptcy Code and any similar law or
                  regulation in any other country, licenses of rights to
                  "intellectual property" as defined under Section 101(52) of
                  the Bankruptcy Code. The Parties agree that all intellectual
                  property rights licensed hereunder, including without
                  limitation any patents or patent applications in any country
                  of a Party covered by the license grants under this Agreement,
                  are part of the "intellectual property" as defined under
                  Section 101(52) of the Bankruptcy Code subject to the
                  protections afforded the non-terminating Party under Section
                  365(n) of the Bankruptcy Code, and any similar law or
                  regulation in any other country.

                                       15
<PAGE>

11.      MISCELLANEOUS

              11.1         Waiver. No waiver by either Party hereto of any
                  breach or default of any of the covenants or agreements herein
                  set forth shall be deemed a waiver as to any subsequent or
                  similar breach or default.

              11.2         Assignment. This Agreement shall be binding upon and
                  inure to the benefit of the Parties hereto and their permitted
                  successors and assigns; provided, however, that neither Party
                  shall assign any of its rights and obligations hereunder
                  without the prior written consent of the other Party, except
                  as incident to the merger, consolidation, reorganization or
                  acquisition of stock or assets affecting substantially all of
                  the assets or actual voting control of the assigning Party.
                  Any assignment or attempted assignment by either Party in
                  violation of the terms of this Section 11.2 shall be null and
                  void and of no legal effect.

              11.3         Notices. Any notice or other communication required
                  or permitted to be given to either Party hereto shall be in
                  writing and shall be deemed to have been properly given and to
                  be effective on the date of delivery if delivered in person or
                  by facsimile or five (5) days after mailing by registered or
                  certified mail, postage paid, to the other Party at the
                  following address:

<TABLE>

<S>                                         <C>
         In the case of InterMune:          InterMune Pharmaceuticals, Inc.
                                            1710 Gilbreth Road,
                                            Suite 301
                                            Burlingame, CA 94010
                                            Fax: (650) 259-0774
                                            Attention:  General Counsel

         with a copy to:                    Cooley Godward LLP
                                            Five Palo Alto Square
                                            3000 El Camino Real
                                            Palo Alto, CA 94306
                                            Fax: (650) 849-7400
                                            Attention:  Barclay James Kamb, Esq.

         In the case of Connetics:          Connetics Corporation
                                            3400 West Bayshore Road
                                            Palo Alto, CA 94303
                                            Fax: (650) 843-2899
                                            Attention:  Chief Executive Officer

</TABLE>

Either Party may change its address for communications by a notice to the other
Party in accordance with this Section.

              11.4         Headings. The headings of the several sections are
                  inserted for convenience of reference only and are not
                  intended to be a part of or to affect the meaning or
                  interpretation of this Agreement.

              11.5         Amendment. No amendment or modification hereof shall
                  be valid or binding upon the Parties unless made in writing
                  and signed by both Parties.

              11.6         Governing Law. This Agreement shall be governed
                  exclusively by the laws of the State of California, U.S.A., as
                  such law applies to contracts entered

                                       16
<PAGE>

                  into between and to be performed by California residents
                  entirely in the State of California.

              11.7         DISPUTE RESOLUTION.

                         (a)        In the event of any controversy or claim
                           arising out of, relating to or in connection with any
                           provision of this Agreement, or the rights or
                           obligations of the Parties hereunder, the Parties
                           shall try to settle their differences amicably
                           between themselves by referring the disputed matter
                           to the President of InterMune and the Chief Executive
                           Officer of Connetics for discussion and resolution.
                           Either Party may initiate such informal dispute
                           resolution by sending written notice of the dispute
                           to the other Party, and within ten (10) days after
                           such notice such representatives of the Parties shall
                           meet for attempted resolution by good faith
                           negotiations. If such personnel are unable to resolve
                           such dispute within thirty (30) days of initiating
                           such negotiations, either Party may seek to have such
                           dispute resolved by binding arbitration under this
                           Section 11.7. The arbitration shall be held in Palo
                           Alto, California according to the Commercial
                           Arbitration Rules of the American Arbitration
                           Association (the "Rules"). The arbitration will be
                           conducted by a panel of three (3) arbitrators who are
                           knowledgeable in the subject matter that is at issue
                           in the dispute, are not affiliated directly or
                           indirectly with either Party, and are selected by
                           mutual agreement of the Parties. Failing such
                           agreement, the arbitrators shall be selected
                           appointed as provided in the Rules. During the
                           arbitration, the Parties shall have such discovery
                           rights as the arbitrators may allow, consistent with
                           the discovery permitted by the Federal Code of Civil
                           Procedure. In conducting the arbitration, the
                           arbitrators shall apply the rules of evidence
                           applicable in California, and shall be able to decree
                           any and all relief of an equitable nature, including
                           but not limited to such relief as a temporary
                           restraining order, a preliminary injunction, a
                           permanent injunction, or replevin of property, as
                           well as specific performance. The arbitrators shall
                           also be able to award direct and indirect damages,
                           but shall not award any other form of damage (e.g.,
                           punitive or exemplary damages). The reasonable fees
                           and expenses, of the arbitrators, along with the
                           reasonable legal fees and expenses of the prevailing
                           Party (including all expert witness fees and
                           expenses), the fees and expenses of a court reporter,
                           and any expenses for a hearing room, shall be paid as
                           follows: If the arbitrators rule in favor of one
                           Party on all disputed issues in the arbitration, the
                           losing Party shall pay one hundred percent (100%) of
                           such fees and expenses; if the arbitrators rule in
                           favor of one Party on some issues and the other Party
                           on other issues, the arbitrators shall issue with the
                           rulings a written determination as to how such fees
                           and expenses shall be allocated between the Parties.
                           The arbitrators shall allocate fees and expenses in a
                           way that bears a reasonable relationship to the
                           outcome of the arbitration, with the Party prevailing
                           on more issues, or on issues of greater value or
                           gravity, recovering a relatively larger share of its
                           legal fees and expenses. The decision of the
                           arbitrators shall be final and may be entered, sued
                           on or enforced by the Party in whose favor it runs in
                           any court of competent jurisdiction at the option of
                           such Party. Whether a claim, dispute or other matter
                           in question would be barred by the applicable statute
                           of limitations, which statute of limitations also
                           shall apply to any claim or disputes subject to
                           arbitration

                                       17
<PAGE>

                           under this Section, shall be determined by binding
                           arbitration pursuant to this Section.

                         (b)        Notwithstanding anything to the contrary in
                           this Agreement, either Party may seek immediate
                           injunctive or other interim relief without resort to
                           arbitration from any court of competent jurisdiction
                           with respect to any breach of Article 9 hereof, or as
                           necessary to enforce and prevent infringement of the
                           patent rights, copyright rights, trademarks, trade
                           secrets, or other intellectual property rights owned
                           or controlled by a Party or its Affiliates.

              11.8         Force Majeure. Any delays in performance by any Party
                  under this Agreement shall not be considered a breach of this
                  Agreement if and to the extent caused by occurrences beyond
                  the reasonable control of the Party affected, including but
                  not limited to acts of God, embargoes, governmental
                  restrictions, fire, flood, explosion, riots, wars, civil
                  disorder, rebellion or sabotage. The Party suffering such
                  occurrence shall immediately notify the other Party as soon as
                  practicable, and any time for performance hereunder shall be
                  extended by the actual time of delay caused by the occurrence.

              11.9         Independent Contractors. In making and performing
                  this Agreement, InterMune and Connetics act and shall act at
                  all times as independent contractors and nothing contained in
                  this Agreement shall be construed or implied to create an
                  agency, partnership or employer and employee relationship
                  between InterMune and Connetics. At no time shall one Party
                  make commitments or incur any charges or expenses for or in
                  the name of the other Party.

              11.10        Severability. If any part of this Agreement is
                  declared invalid by any legally governing authority having
                  jurisdiction over either Party, then such declaration shall
                  not affect the remainder of the Agreement and the Parties
                  shall revise the invalidated part in a manner that will render
                  such provision valid without impairing the Parties' original
                  interest.

              11.11        Cumulative Rights. The rights, powers and remedies
                  hereunder shall be in addition to, and not in limitation of,
                  all rights, powers and remedies provided at law or in equity,
                  or under any other agreement between the Parties. All of such
                  rights, powers and remedies shall be cumulative, and may be
                  exercised successively or cumulatively.

              11.12        Counterparts. This Agreement may be executed in two
                  or more counterparts, each of which shall be an original and
                  all of which shall constitute together the same document.

              11.13        Entire Agreement. This Agreement and any and all
                  Exhibits referred to herein, in conjunction with the other
                  "Intercompany Agreements" (as defined in that certain
                  Collaboration Agreement by and between the Parties dated April
                  27, 1999 excluding the "Amended and Restated Service
                  Agreement"), embodies the entire understanding of the Parties
                  with respect to the subject matter hereof and of the
                  "Intercompany Agreements," and supersedes and terminates all
                  previous communications, representations or understandings,
                  either oral or written, between the Parties relating to the
                  subject matter hereof and of the "Intercompany Agreements."
                  The Amended and Restated Service Agreement is hereby

                                       18
<PAGE>

                  terminated in its entirety, except for the provisions of the
                  sections set forth in Section 14 therein.

         IN WITNESS WHEREOF, both InterMune and Connetics have executed this
Agreement, as of the day and year first written above.

INTERMUNE PHARMACEUTICALS, INC.            CONNETICS CORPORATION

By:  /s/ W. SCOTT HARKONEN                 By: /s/ THOMAS G. WIGGANS
    ---------------------------------          ---------------------------------
Print Name: W. Scott Harkonen              Print Name: Thomas G. Wiggans
            -------------------------                  -------------------------
Title: Pres./CEO                           Title: Pres. & CEO
       ------------------------------             ------------------------------

                                       19

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