S-8

As filed with the Securities and Exchange Commission on January 21, 2003 Registration
No. 333-

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-8

REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933

CONNETICS CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware
(State of incorporation) 94-3173928
(I.R.S. Employer Identification No.)

3290 West Bayshore Road
Palo Alto, CA 94303
(Address of principal executive offices)

Stock Plan (2000)
1995 Employee Stock Purchase Plan
(Full Title of the Plan)

Thomas G. Wiggans
President and Chief Executive Officer
CONNETICS CORPORATION
3290 West Bayshore Road
Palo Alto, CA 94303
(650) 843-2800
(Name, address and telephone number, including area code, of agent for service)

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CALCULATION OF REGISTRATION FEE

		Proposed Maximum			Proposed Maximum			Amount of
Title of Securities to be	Amount to be	Offering Price per			Aggregate Offering			Registration
Registered (1)	Registered (2)	Share (3)			Price (4)			Fee
Common Stock, $0.001 par value, to be issued under:
Stock Plan (2000)
Issuable Upon Exercise of Outstanding Options	676,000 shares	$	12.45	(4)	$	8,416,200.00	(4)	$	774.29	(4)
Reserved for Future Grants	261,016 shares	$	13.99	(5)	$	3,651,613.84	(5)	$	335.95	(5)
1995 Employee Stock Purchase Plan	155,722 shares	$	13.99	(5)	$	2,178,550.78	(5)	$	200.43	(5)
TOTAL	1,092,738 shares				$	14,246,364.62		$	1,310.67

(1)  Each share of common stock being registered pursuant to this Registration Statement includes a right to purchase one one-thousandth of a share of Series B Participating Preferred Stock pursuant to an Amended and Restated Rights Agreement between the Registrant and EquiServe Trust Company, N.A., as Rights Agent.

(2)  This Registration Statement shall also cover any additional shares of common stock which become issuable under any of the referenced plans being registered pursuant to this Registration Statement by reason of any stock dividend, stock split, recapitalization or any other similar transaction effected without the Registrant’s receipt of consideration, which results in an increase in the number of the Registrant’s outstanding shares of common stock.

(3)  Estimated solely for the purpose of determining the registration fee.

(4)  Computed in accordance with Rule 457(h) under the Securities Act of 1933, based on the per share exercise price of outstanding options granted under the Stock Plan (2000).

(5)  Computed in accordance with Rule 457(h) and Rule 457 (c) of the Securities Act of 1933. Based on the average of the high and low prices of the Registrant’s common stock as reported on The Nasdaq National Market on January 16, 2003.

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TABLE OF CONTENTS

PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
	Item 3. Incorporation of Documents by Reference.
	Item 7. Exemption from Registration Claimed.
	Item 8. Exhibits. See Index to Exhibits (page 8).
	Item 9. Undertakings.
SIGNATURES
INDEX TO EXHIBITS
EXHIBIT 5.1
EXHIBIT 23.2
EXHIBIT 99.1

PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference.

          The following documents and information filed with the Securities and Exchange Commission (the “SEC”) by Connetics Corporation (Commission File No. 0-27406) are hereby incorporated by reference into this Registration Statement:

a)	Connetics’ Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 29, 2002, Amendment No. 1 on Form 10-K/A to our Annual Report on Form 10-K for the year ended December 31, 2001, filed with the SEC on March 29, 2002, and Amendment No. 2 on Form 10-K/A to our Annual Report on Form 10-K/A for the year ended December 31, 2001, filed with the SEC on July 12, 2002.
b)	Connetics’ Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002, June 30, 2002 and September 30, 2002, filed with the SEC on May 14, 2002, August 14, 2002 and November 13, 2002, respectively.
c)	Connetics’ Current Reports on Form 8-K, or Form 8-K/A filed with the SEC on January 2, 2002, March 6, 2002, March 19, 2002, May 24, 2002, July 12, 2002, September 16, 2002, October 28, 2002, November 20, 2002, December 2, 2002 and December 23, 2002.
d)	The description of Connetics’ common stock contained in the Registration Statement on Form 8-A dated December 8, 1995, including any amendments or reports filed with the SEC for the purpose of updating such description.
e)	The description of Connetics’ Preferred Share Purchase Rights contained in the Registration Statement on Form 8-A dated May 20, 1997, as amended by Amendment No. 1 thereto on Form 8-A/A dated November 27, 2001, including any amendments or reports filed with the SEC for the purpose of updating such description.

     All reports and other documents filed by Connetics pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, after the date of this Registration Statement and prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference into this Registration Statement and to be part of this Registration Statement from the date such documents are filed. Any statement contained in a document incorporated or deemed to be incorporated by reference in this Registration Statement shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained in this Registration Statement (or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein) modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed to constitute a part of this Registration Statement, except as so modified or superseded.

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Item 4. Description of Securities.

     Not applicable.

Item 5. Interests of Named Experts and Counsel.

     Not applicable.

Item 6. Indemnification of Officers and Directors.

     Section 145(a) of the Delaware General Corporation Law, or DGCL, provides, in general, that a corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, other than an action by or in the right of the corporation, by reason of the fact that the person is or was a director or officer of the corporation, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding, if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and if, with respect to any criminal action or proceeding, the person had no reasonable cause to believe the person’s conduct was unlawful.

     Section 145(b) of the DGCL provides, in general, that a corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director or officer of the corporation, against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to be indemnified for such expenses which the court shall deem proper.

     Connetics has implemented such indemnification provisions in its Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, which provide that officers and directors shall be entitled to be indemnified by Connetics to the fullest extent permitted by law. In addition, Connetics has entered into Indemnification Agreements with its officers and directors.

     Section 145(g) of the DGCL provides, in general, that a corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation against any liability asserted against the person or incurred by the person in any such capacity, or arising out of the person’s status as such, whether or not the corporation would have the power to indemnify the person against such liability under Section 145. Pursuant to Section 145(g) of the DGCL, Connetics maintains insurance on behalf of the directors and officers serving at the request of Connetics.

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          The foregoing summaries are not intended to be complete and are necessarily subject to the complete text of the DGCL, Connetics’ Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, and the arrangements referred to above, and are qualified in their entirety by reference thereto.

Item 7. Exemption from Registration Claimed. Not applicable.

Item 8. Exhibits. See Index to Exhibits (page 8).

Item 9. Undertakings.

(a)  The undersigned Registrant hereby undertakes:

     (1)  To file, during any period in which offers or sales are being made, a post effective amendment to this registration statement to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

     (2)  That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

     (3)  To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(b)  The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c)  Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Palo Alto, State of California, on January 17, 2003.

Connetics Corporation a Delaware corporation
By:	/s/ John L. Higgins
John L. Higgins Executive Vice President, Finance and Corporate Development and Chief Financial Officer

POWER OF ATTORNEY

     KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Katrina J. Church and John L. Higgins, jointly and severally, his attorneys-in-fact and agents, each with the power of substitution and resubstitution, for him and in his name, place or stead, in any and all capacities, to sign any amendments to this Registration Statement on Form S-8, and to file such amendments, together with exhibits and other documents in connection therewith, with the Securities and Exchange Commission, granting to each attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully as he or she might or could do in person, and ratifying and confirming all that the attorney-in-facts and agents, or his substitute or substitutes, may do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
/s/ Thomas G. Wiggans Thomas G. Wiggans	Principal Executive Officer: President, Chief Executive Officer, and Director	January 17, 2003
/s/ John L. Higgins John L. Higgins	Principal Financial and Accounting Officer: Executive Vice President, Finance and Corporate Development and Chief Financial Officer	January 17, 2003

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/s/ G. Kirk Raab G. Kirk Raab	Chairman of the Board and Director	January 17, 2003
/s/ Alexander E. Barkas Alexander E. Barkas	Director	January 17, 2003
/s/ Eugene A. Bauer Eugene A. Bauer	Director	January 17, 2003
/s/ R. Andrew Eckert R. Andrew Eckert	Director	January 17, 2003
/s/ John C. Kane John C. Kane	Director	January 17, 2003
/s/ Thomas D. Kiley Thomas D. Kiley	Director	January 17, 2003
/s/ Glenn A. Oclassen Glenn A. Oclassen	Director	January 17, 2003
/s/ Leon E. Panetta Leon E. Panetta	Director	January 17, 2003

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INDEX TO EXHIBITS

Exhibit
Number
5.1	Opinion of Morrison & Foerster LLP
23.1	Consent of Morrison & Foerster LLP (included in Exhibit 5.1)
23.2	Consent of Ernst & Young LLP, Independent Auditors
24.1	Power of Attorney (see page 6)
99.1	1995 Employee Stock Purchase Plan as amended and restated through December 12, 2002.

8 EX-5.1 3 f87008exv5w1.txt EXHIBIT 5.1 Exhibit 5.1 Morrison & Foerster LLP 5200 Republic Plaza 370 Seventeenth Street Denver, Colorado 80202 January 17, 2003 CONNETICS CORPORATION 3290 West Bayshore Road Palo Alto, California 94303 RE: Registration Statement on Form S-8 Ladies and Gentlemen: We have acted as counsel to Connetics Corporation, a Delaware corporation (the "Company"), in connection with the Registration Statement on Form S-8, being filed by the Company with the Securities and Exchange Commission relating to the registration under the Securities Act of 1933 of a total of 1,092,738 shares (the "Shares") of the Company's Common Stock, $.001 par value, which will be issuable from time to time under the Company's Stock Plan (2000) and 1995 Employee Stock Purchase Plan (as amended and restated through December 12, 2002) (collectively referred to herein as the "Plans"). In connection therewith, we have reviewed such Registration Statement, the Company's filings with the Securities and Exchange Commission, certain of the Company's corporate records, documents, instruments and certificates of public officials taken in connection with the adoption of the Plans and the authorization of the issuance of the Shares and such other factual and legal matters as we have deemed necessary for purposes of rendering the opinion set forth herein. We have assumed the genuineness of the signatures on and the authenticity of all documents submitted to us as originals and the conformity with originals of all items submitted to us as copies. We also have relied upon a certificate of an officer of the Company as to certain factual matters. We have relied on the Company's records and have assumed the accuracy and completeness thereof. Based upon and subject to the foregoing, we are of the opinion that the Shares, when issued and sold in accordance with the terms of the respective Plans and pursuant to the agreements that accompany each grant under the Plans, will be validly issued, fully paid and nonassessable. We express no opinion as to matters governed by laws of any jurisdiction other than the laws of the State of Delaware and the federal laws of the United States of America, as in effect on the date hereof. We hereby consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement referred to above. Very truly yours, /s/ Morrison & Foerster LLP Morrison & Foerster LLP EX-23.2 4 f87008exv23w2.txt EXHIBIT 23.2 Exhibit 23.2 CONSENT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS We consent to the incorporation by reference in this Registration Statement (Form S-8) of Connetics Corporation, pertaining to the Stock Plan (2000) and 1995 Employee Stock Purchase Plan, of our report dated January 28, 2002 (except for the Note titled Subsequent Event, as to which the date is March 26, 2002), with respect to the consolidated financial statements and schedule of Connetics Corporation included in its Annual Report (Form 10-K/A) for the year ended December 31, 2001 filed with the Securities and Exchange Commission. /s/ ERNST and YOUNG LLP Palo Alto, California January 15, 2003 EX-99.1 5 f87008exv99w1.txt EXHIBIT 99.1 Exhibit 99.1 CONNETICS CORPORATION 1995 EMPLOYEE STOCK PURCHASE PLAN (AS AMENDED AND RESTATED THROUGH DECEMBER 12, 2002) Adopted by the Board of Directors Feb. 17, 2000 Approved by the Stockholders May 11, 2000 The following constitute the provisions of the 1995 Employee Stock Purchase Plan of Connetics Corporation, as amended and restated. The amended and restated 1995 Employee Stock Purchase Plan shall be effective for Offering Periods commencing on or after June 1, 2003. 1. PURPOSE. The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of the Plan shall, accordingly, be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code. 2. DEFINITIONS. (a) "Board" means the Board of Directors of the Company. (b) "Code" means the Internal Revenue Code of 1986, as amended. (c) "Common Stock" means the Common Stock of the Company. (d) "Company" means Connetics Corporation a Delaware corporation. (e) "Compensation" means all regular straight time gross earnings, excluding payments for overtime, shift premium, incentive compensation, incentive payments, bonuses, commissions and other compensation. (f) "Continuous Status as an Employee" means the absence of any interruption or termination of service as an Employee. Continuous Status as an Employee shall not be considered interrupted in the case of a leave of absence agreed to in writing by the Company, provided that such leave is for a period of not more than 90 days or reemployment upon the expiration of such leave is guaranteed by contract or statute. (g) "Contributions" means all amounts credited to the account of a participant pursuant to the Plan. (h) "Designated Subsidiaries" means the Subsidiaries which have been designated by the Board from time to time in its sole discretion as eligible to participate in the Plan. (i) "Employee" means any person, including an Officer, who is customarily employed for at least twenty (20) hours per week and more than five (5) months in a calendar year by the Company or one of its Designated Subsidiaries. (j) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (k) "Purchase Date" means the last day of each Purchase Period of the Plan. (l) "Offering" means the grant of rights to purchase Common Stock of the Company under the Plan to eligible Employees. (m) "Offering Date" means the first business day of each Offering Period of the Plan. In the case of an individual who becomes an eligible Employee after the first business day of an Offering Period but prior to the first business day of the last calendar quarter of such Offering Period, the term "Offering Date" means the first business day of the calendar quarter coinciding with or next succeeding the day on which that individual becomes an eligible 1 Employee. Options granted after the first business day of an Offering Period will be subject to the same terms as the options granted on the first business day of such Offering Period except that they will have a different grant date (thus, potentially, a different exercise price) and, because they expire at the same time as the options granted on the first business day of such Offering Period, a shorter term. (n) "Offering Period" means a period of twenty-four (24) months commencing on December 1 and June 1 of each year, except as otherwise set forth in SECTION 4(A), or such other period as the Board of Directors may determine prior to the commencement of an Offering Period, but which period shall not exceed twenty-four (24) months. (o) "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated under the Exchange Act. (p) "Option Price" means the price at which the shares are offered in a given Offering Period, calculated as set forth in SECTION 7(B). (q) "Plan" means this Employee Stock Purchase Plan. (r) "Purchase Period" means a period of six (6) months within an Offering Period. (s) "Subsidiary" means a corporation, domestic or foreign, of which not less than 50% of the voting shares are held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary. 3. ELIGIBILITY. (a) Any person who is an Employee as of the Offering Date of a given Offering Period shall be eligible to participate in such Offering Period under the Plan subject to the requirements of SECTION 5(A) and the limitations imposed by Section 423(b) of the Code. (b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) if, immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any subsidiary of the Company, or (ii) if such option would permit his or her rights to purchase stock under all employee stock purchase plans (described in Section 423 of the Code) of the Company and its Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of fair market value of such stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time. 4. OFFERING PERIODS AND PURCHASE PERIODS. (a) Offering Periods. The Plan shall be implemented by a series of Offering Periods of twenty-four (24) months duration, with new Offering Periods commencing on or about June 1 and December 1 of each year (or at such other time or times as may be determined by the Board of Directors). In particular, upon adoption of this Plan as amended and restated, a new Offering Period shall commence on June 1, 2003. The Plan shall continue until terminated in accordance with SECTION 20 of this Plan. The Board of Directors of the Company shall have the power to change the duration and/or the frequency of Offering Periods with respect to future offerings without stockholder approval if such change is announced at least fifteen (15) days prior to the scheduled beginning of the first Offering Period to be affected. The terms and conditions of an Offering Period shall be incorporated by reference into the Plan and treated as part of the Plan. The provisions of separate Offering Periods need not be identical, but each Offering shall include (thorough incorporation of the provisions of this Plan by reference into the document comprising the Offering or otherwise) the Offering Period, and the substance of the provisions contained in SECTIONS 5 through 13, inclusive. An Employee may only participate in one Offering Period at a time. 2 (b) Purchase Periods. Each Offering Period shall consist of consecutive Purchase Periods of six (6) months duration. The last day of each Purchase Period shall be the "Purchase Date" for such Purchase Period. A Purchase Period commencing on June 1 shall end on the next November 30. A Purchase Period commencing on December 1 shall end on the next May 31. In particular, upon adoption of this Plan as amended and restated, a new Purchase Period shall commence on June 1, 2003. The Board of Directors of the Company shall have the power to change the duration and/or frequency of Purchase Periods with respect to future purchases without stockholder approval if such change is announced at least fifteen (15) days prior to the scheduled beginning of the first Purchase Period to be affected. 5. PARTICIPATION. (a) An eligible Employee may become a participant in the Plan by completing a subscription agreement on the form provided by the Company and filing it with the Company's payroll office prior to the applicable Offering Date, unless a later time for filing the subscription agreement is set by the Board for all eligible Employees with respect to a given offering. The subscription agreement shall set forth the percentage of the participant's Compensation (which shall be greater than or equal to zero percent (0%) but not more than fifteen percent (15%)) to be paid as Contributions pursuant to the Plan. (b) Payroll deductions shall commence on the first payroll following the Offering Date and shall end on the last payroll paid on or prior to the last Purchase Period of the Offering Period to which the subscription agreement is applicable, unless sooner terminated by the participant as provided in SECTION 10. 6. METHOD OF PAYMENT OF CONTRIBUTIONS. (a) The participant shall elect to have payroll deductions made on each payday during the Offering Period in an amount greater than or equal to zero percent (0%) but not more than fifteen percent (15%) of such participant's Compensation on each such payday. All payroll deductions made by a participant shall be credited to his or her account under the Plan. A participant may not make any additional payments into such account. (b) A participant may discontinue his or her participation in the Plan as provided in SECTION 10, or, on one occasion only during a Purchase Period, may increase or decrease the rate of his or her Contributions during the Offering Period by completing and filing with the Company a change of status notice. The change in rate shall be effective for the first full payroll period commencing no fewer than ten (10) business days following the Company's receipt of the change of status notice, unless this change is processed more quickly. (c) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and SECTION 3(b) of this Plan, a participant's payroll deductions may be decreased to 0% at such time during any Offering Period which is scheduled to end during the current calendar year that the aggregate of all payroll deductions accumulated with respect to such Offering Period and any other Offering Period ending within the same calendar year equal $25,000. Payroll deductions shall re-commence at the rate provided in such participant's subscription Agreement at the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless terminated by the participant as provided in SECTION 10. 7. GRANT OF OPTION. (a) On the Offering Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on each Purchase Date a number of shares of the Company's Common Stock determined by dividing such Employee's Contributions accumulated prior to such Purchase Date and retained in the participant's account as of the Purchase Date by the Option Price; provided however, that the maximum number of shares an Employee may purchase during each Offering Period shall be determined at the Offering Date by dividing $50,000 by the fair market value of a share of the Company's Common Stock on the Offering Date, and provided further that such purchase shall be subject to the limitations set forth in SECTIONS 3(b) and 12. The fair market value of a share of the Company's Common Stock shall be determined as provided in SECTION 7(b). 3 (b) The option price per share of the shares offered in a given Offering Period ("Option Price") shall be the lower of: (i) eighty-five percent (85%) of the fair market value of a share of the Company's Common Stock on the Offering Date, or (ii) eighty-five percent (85%) of the fair market value of a share of the Company's Common Stock on the Purchase Date; The fair market value of the Company's Common Stock on a given date shall be determined by the Board in its discretion based on the closing price of the Common Stock for such date (or, in the event that the Common Stock is not traded on such date, on the immediately preceding trading date), as reported by the National Association of Securities Dealers Automated Quotation (Nasdaq) National Market or, if such price is not reported, the mean of the bid and asked prices per share of the Common Stock as reported by Nasdaq or, in the event the Common Stock is listed on a stock exchange, the fair market value per share shall be the closing price on such exchange on such date (or, in the event that the Common Stock is not traded on such date, on the immediately preceding trading date), as reported in The Wall Street Journal. (c) In connection with each Offering made under the Plan, the Board or the Committee may specify a maximum number of shares that may be purchased by any employee as well as a maximum aggregate number of shares that may be purchased by all eligible employees pursuant to such Offering. In addition, in connection with each Offering that contains more than one Purchase Date, the Board or the Committee may specify a maximum aggregate number of shares which may be purchased by all eligible employees on any give Purchase Date under the Offering. If the aggregate purchase of shares upon exercise of rights granted under the Offering would exceed any such maximum aggregate number, the Board or the Committee shall make a pro rata allocation of the shares available in as nearly a uniform manner as is practicable and as it deems to be equitable. 8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as provided in SECTION 10, his or her option for the purchase of shares will be exercised automatically on each Purchase Date of an Offering Period, and the maximum number of shares, including fractional shares, subject to the option will be purchased at the applicable option price with the accumulated Contributions in his or her account. The shares purchased upon exercise of an option hereunder shall be deemed to be transferred to the participant on the Purchase Date. During his or her lifetime, a participant's option to purchase shares hereunder is exercisable only by him or her. 9. DELIVERY. As promptly as practicable after each Purchase Date of each Offering Period, the Company shall arrange the delivery to each participant, as appropriate, of a certificate representing the shares purchased upon exercise of his or her option or the deposit of such number of shares with the broker selected by the Company for administration of Plan stock purchases, as determined by the Company. Any cash remaining to the credit of a participant's account under the Plan after a purchase by him or her of shares at the termination of each Offering Period, or which is insufficient to purchase a full share of Common Stock of the Company, shall be carried over to the next Offering Period if the Employee continues to participate in the Plan, or if the Employee does not continue to participate, shall be returned to said participant. 10. VOLUNTARY WITHDRAWAL; TERMINATION OF EMPLOYMENT. (a) A participant may withdraw all but not less than all the Contributions credited to his or her account under the Plan at any time prior to each Purchase Date by giving written notice to the Company. All of the participant's Contributions credited to his or her account will be paid to him or her promptly after receipt of his or her notice of withdrawal and his or her option for the current period will be automatically terminated, and no further Contributions for the purchase of shares will be made during the Offering Period. (b) Upon termination of the participant's Continuous Status as an Employee prior to the Purchase Date of an Offering Period for any reason, including retirement or death, the Contributions credited to his or her account will be returned to him or her or, in the case of his or her death, to the person or persons entitled thereto under SECTION 14, and his or her option will be automatically terminated. 4 (c) If an Employee fails to remain in Continuous Status as an Employee of the Company for at least twenty (20) hours per week during the Offering Period in which the employee is a participant, he or she will be deemed to have elected to withdraw from the Plan and the Contributions credited to his or her account will be returned to him or her and his or her option terminated. (d) A participant's withdrawal from an offering will not have any effect upon his or her eligibility to participate in a succeeding offering or in any similar plan which the Company may adopt after the date of this Plan. 11. AUTOMATIC WITHDRAWAL. If on the Purchase Date of any Purchase Period in an Offering Period, the fair market value of the shares is lower than it was on the Offering Date of such Offering Period (after taking into account any adjustment during the Offering Period pursuant to SECTION 19(a)), all participants in such Offering Period shall (a) acquire the shares reserved for the participant for such Purchase Period, and (b) automatically be (i) withdrawn from the Offering Period following the acquisition of shares, and (ii) enrolled in the Offering Period that commences on the next business day. 12. INTEREST. No interest shall accrue on the Contributions of a participant in the Plan. 13. STOCK SUBJECT TO THE PLAN. (a) Subject to adjustment upon changes in capitalization of the Company as provided in SECTION 18, the maximum aggregate number of Shares which may be optioned and sold under the Plan shall be Eight Hundred Thousand (800,000) shares, plus an annual increase to be added on each November 30, equal to the lesser of: (i) one half of one percent (0.5%) of the total number of shares of Common Stock outstanding on such anniversary date; or (ii) a number of shares determined by the Board prior to the anniversary date, which number shall be less than (i) above. The Shares may be authorized, but unissued, or reacquired Common Stock. If the total number of shares which would otherwise be subject to options granted pursuant to SECTION 7(a) on the Offering Date of an Offering Period exceeds the number of shares then available under the Plan (after deduction of all shares for which options have been exercised or are then outstanding), the Company shall make a pro rata allocation of the shares remaining available for option grant in as uniform a manner as shall be practicable and as it shall determine to be equitable. In such event, the Company shall give written notice of such reduction of the number of shares subject to the option to each Employee affected thereby and shall similarly reduce the rate of Contributions, if necessary. (b) The participant will have no interest or voting right in shares covered by his or her option until such option has been exercised. (c) Shares to be delivered to a participant under the Plan will be registered in the name of the participant or in the name of the participant and his or her spouse. 14. ADMINISTRATION. The Board, or a committee named by the Board, shall supervise and administer the Plan and shall have full power to adopt, amend and rescind any rules deemed desirable and appropriate for the administration of the Plan and not inconsistent with the Plan, to determine when and how rights to purchase stock of the Company shall be granted and the provisions of each such Offering Period (which need not be identical), to construe and interpret the Plan and rights granted under it, and to establish, amend and revoke rules and regulations for the administration of the Plan. The composition of the committee shall be in accordance with the requirements to obtain or retain any available exemption from the operation of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 under the Exchange Act. 5 15. DESIGNATION OF BENEFICIARY. (a) A participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant's account under the Plan in the event of such participant's death subsequent to the end of a Purchase Period but prior to delivery to him or her of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant's account under the Plan in the event of such participant's death prior to the Purchase Date of an Offering Period. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective. (b) Such designation of beneficiary may be changed by the participant (and his or her spouse, if any) at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. 16. TRANSFERABILITY. Neither Contributions credited to a participant's account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in SECTION 14) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds in accordance with SECTION 10. 17. USE OF FUNDS. Contributions received by the Company under the Plan shall constitute general funds of the Company. 18. REPORTS. Individual accounts will be maintained for each participant in the Plan. Statements of account will be given to participating Employees promptly following the Purchase Date, which statements will set forth the amounts of Contributions, the per share purchase price, the number of shares purchased and the remaining cash balance, if any. 19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS. (a) Adjustment. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but have not yet been placed under option (collectively, the "Reserves"), as well as the price per share of Common Stock covered by each option under the Plan which has not yet been exercised, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration". Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option. (b) Corporate Transactions. In the event of the proposed dissolution or liquidation of the Company, the Offering Period will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each option under the Plan shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless the Board determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, to shorten the Offering Period then in progress by setting a new Purchase Date (the "New Purchase Date"). If the Board shortens the Offering Period then in progress in lieu of assumption or substitution in the event of a merger or sale of assets, the Board shall notify each participant in writing, at least ten (10) days prior to the New 6 Purchase Date, that the Purchase Date for his or her option has been changed to the New Purchase Date and that his or her option will be exercised automatically on the New Purchase Date, unless prior to such date he or she has withdrawn from the Offering Period as provided in SECTION 10. For purposes of this paragraph, an option granted under the Plan shall be deemed to be assumed if, following the sale of assets or merger, the option confers the right to purchase, for each share of option stock subject to the option immediately prior to the sale of assets or merger, the consideration (whether stock, cash or other securities or property) received in the sale of assets or merger by holders of Common Stock for each share of Common Stock held on the effective date of the transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if such consideration received in the sale of assets or merger was not solely common stock of the successor corporation or its parent (as defined in Section 424(e) of the Code), the Board may, with the consent of the successor corporation and the participant, provide for the consideration to be received upon exercise of the option to be solely common stock of the successor corporation or its parent equal in fair market value to the per share consideration received by holders of Common Stock and the sale of assets or merger. The Board may, if it so determines in the exercise of its sole discretion, also make provision for adjusting the Reserves, as well as the price per share of Common Stock covered by each outstanding option, in the event that the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of shares of its outstanding Common Stock, and in the event of the Company being consolidated with or merged into any other corporation. 20. AMENDMENT OR TERMINATION. (a) The Board of Directors of the Company may at any time terminate or amend the Plan. Except as provided in SECTION 19, no such termination may affect options previously granted, nor may an amendment make any change in any option theretofore granted which adversely affects the rights of any participant. In addition, to the extent necessary to comply with Rule 16b-3 under the Exchange Act, or under Section 423 of the Code (or any successor rule or provision or any applicable law or regulation), the Company shall obtain shareholder approval in such a manner and to such a degree as so required. (b) Without shareholder consent and without regard to whether any participant rights may be considered to have been adversely affected, the Board (or its committee) shall be entitled to change the Offering Periods and Purchase Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company's processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant's Compensation, and establish such other limitations or procedures as the Board (or its committee) determines in its sole discretion advisable which are consistent with the Plan. 21. NOTICES. All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated under those Acts, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law. 7 23. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon the earlier to occur of its adoption by the Board of Directors or its approval by the shareholders of the Company. It shall continue in effect for a term of twenty (20) years unless sooner terminated under SECTION 20. 24. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions of options granted hereunder to, and the purchase of shares by, persons subject to Section 16 of the Exchange Act shall comply with the applicable provisions of Rule 16b-3. This Plan shall be deemed to contain, and such options shall contain, and the shares issued upon exercise thereof shall be subject to, such additional conditions and restrictions as may be required by Rule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. * * * * * * * * * * 8 CONNETICS CORPORATION 1995 EMPLOYEE STOCK PURCHASE PLAN SUBSCRIPTION AGREEMENT 1. I, ________________________, hereby elect to participate in the CONNETICS CORPORATION 1995 Employee Stock Purchase Plan (the "Plan") for the Offering Period Offering Period ______________, 20___ to _______________, 20__, and subscribe to purchase shares of the Company's Common Stock in accordance with this Subscription Agreement and the Plan. 2. I elect to have Contributions in the amount of ____% of my Compensation, as those terms are defined in the Plan, applied to this purchase. I understand that this amount must be greater than or equal to zero percent (0%) but not more than fifteen percent (15%) of my Compensation during the Offering Period. (PLEASE NOTE THAT NO FRACTIONAL PERCENTAGES ARE PERMITTED). 3. I hereby authorize payroll deductions from each paycheck during the Offering Period at the rate stated in Item 2 of this Subscription Agreement. I understand that all payroll deductions made by me shall be credited to my account under the Plan and that I may not make any additional payments into such account. I understand that all payments made by me shall be accumulated for the purchase of shares of Common Stock at the applicable purchase price determined in accordance with the Plan. I further understand that, except as otherwise set forth in the Plan, shares will be purchased for me automatically on the Purchase Date of each Offering Period unless I otherwise withdraw from the Plan by giving written notice to the Company for such purpose. 4. I understand that I may discontinue at any time prior to the Purchase Date my participation in the Plan as provided in Section 10 of the Plan. I also understand that I can decrease the rate of my Contributions on one occasion only during any Purchase Period by completing and filing a change of status notice with such decrease taking effect for the first full payroll period commencing no fewer than ten (10) business days following the Company's receipt the change of status notice, unless this change is processed more quickly. Further, I may change the rate of deductions for future Offering Periods by filing a new Subscription Agreement, and any such change will be effective as of the beginning of the next Offering Period. In addition, I acknowledge that, unless I discontinue my participation in the Plan as provided in Section 10 of the Plan, my election will continue to be effective for each successive Offering Period. 5. I have received a copy of the Company's most recent description of the Plan and a copy of the complete "CONNETICS CORPORATION 1995 Employee Stock Purchase Plan." I understand that my participation in the Plan is in all respects subject to the terms of the Plan. 6. Shares purchased for me under the Plan should be issued in the name(s) of (name of employee or employee and spouse only): ------------------------------------ ------------------------------------ 7. In the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and shares due to me under the Plan: NAME: ________________________________________________ __________________ (Please print) (First) (Middle) (Last) (Relationship) - ------------------------------------- (Address) - ------------------------------------- -1- 8. I understand that if I dispose of any shares received by me pursuant to the Plan within two years after the Offering Date (the first day of the Offering Period during which I purchased such shares) or within one year after the Purchase Date, I will be treated for federal income tax purposes as having received ordinary compensation income at the time of such disposition in an amount equal to the excess of the fair market value of the shares on the Purchase Date over the price which I paid for the shares, regardless of whether I disposed of the shares at a price less than their fair market value at the Purchase Date. The remainder of the gain or loss, if any, recognized on such disposition will be treated as capital gain or loss. I hereby agree to notify the Company in writing within 30 days after the date of any such disposition, and I will make adequate provision for federal, state or other tax withholding obligations, if any, which arise upon the disposition of the Common Stock. The Company may, but will not be obligated to, withhold from my compensation the amount necessary to meet any applicable withholding obligation including any withholding necessary to make available to the Company any tax deductions or benefits attributable to the sale or early disposition of Common Stock by me. 9. If I dispose of such shares at any time after expiration of the 2-year and 1-year holding periods, I understand that I will be treated for federal income tax purposes as having received compensation income only to the extent of an amount equal to the lesser of (1) the excess of the fair market value of the shares at the time of such disposition over the purchase price which I paid for the shares under the option, or (2) 15% of the fair market value of the shares on the Offering Date. The remainder of the gain or loss, if any, recognized on such disposition will be treated as capital gain or loss. I understand that this tax summary is only a summary and is subject to change. I further understand that I should consult a tax advisor concerning the tax implications of the purchase and sale of stock under the Plan. 10. I hereby agree to be bound by the terms of the Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Plan. SIGNATURE: ----------------------------------------- SOCIAL SECURITY #: ------------------------ DATE: ----------------------------- SPOUSE'S SIGNATURE (necessary if beneficiary is not spouse): - --------------------------------------------------------- (Signature) - ----------------------------------------- (Print name) -2- CONNETICS CORPORATION 1995 EMPLOYEE STOCK PURCHASE PLAN CHANGE OF STATUS NOTICE ================================================================================ [ ] WITHDRAWAL FROM 1995 EMPLOYEE STOCK PURCHASE PLAN I, __________________________, hereby elect to withdraw my participation in the CONNETICS CORPORATION 1995 Employee Stock Purchase Plan (the "Plan") for the Offering Period ______________, 20___ to _______________, 20__. This withdrawal covers all Contributions credited to my account and is effective on the date designated below. I understand that all Contributions credited to my account will be paid to me within ten (10) business days of receipt by the Company of this Notice of Withdrawal and that my option for the current period will automatically terminate, and that no further Contributions for the purchase of shares can be made by me during the Offering Period. I further understand and agree that I shall be eligible to participate in succeeding Offering Periods only by delivering to the Company a new Subscription Agreement. If the undersigned is an Officer or Director of CONNETICS CORPORATION or other person subject to Section 16 of the Securities Exchange Act of 1934, the signature below indicates that, in addition to the foregoing, I understand that under rules promulgated by the U.S. Securities and Exchange Commission I may not re-enroll in the Plan for a period of six (6) months after withdrawal. ================================================================================ [ ] CHANGE IN PAYROLL DEDUCTION I, __________________________, hereby elect to change my rate of payroll deduction under the Plan as follows. I elect to have Contributions in the amount of ____% of my Compensation, as those terms are defined in the Plan, applied toward the purchase of shares under the Plan. I understand that this amount must be greater than or equal to zero percent (0%) but not more than fifteen percent (15%) of my Compensation during the Offering Period. (PLEASE NOTE THAT NO FRACTIONAL PERCENTAGES ARE PERMITTED). An increase or a decrease in payroll deduction will be effective for the first full payroll period commencing no fewer than ten (10) business days following the Company's receipt of this notice, unless this change is processed more quickly. ================================================================================ 2 ================================================================================ [ ] CHANGE OF BENEFICIARY This change of beneficiary shall terminate my previous beneficiary designation under the Plan. In the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and shares due to me under the Plan: NAME: _________________________________________________ __________________ (Please print) (First) (Middle) (Last) (Relationship) - ------------------------------------- (Address) - ------------------------------------- ================================================================================ SIGNATURE: ----------------------------------------- SOCIAL SECURITY #: ------------------------ DATE: ----------------------------- SPOUSE'S SIGNATURE (necessary if beneficiary is not spouse): - ------------------------------------------------------------- (Signature) - -------------------------------------------- (Print name) 2 -----END PRIVACY-ENHANCED MESSAGE-----

EX-5.1

                                                                     Exhibit 5.1

                             Morrison & Foerster LLP
                               5200 Republic Plaza
                             370 Seventeenth Street
                             Denver, Colorado 80202

                                January 17, 2003

CONNETICS CORPORATION
3290 West Bayshore Road
Palo Alto, California  94303

         RE:      Registration Statement on Form S-8

Ladies and Gentlemen:

         We have acted as counsel to Connetics Corporation, a Delaware
corporation (the "Company"), in connection with the Registration Statement on
Form S-8, being filed by the Company with the Securities and Exchange Commission
relating to the registration under the Securities Act of 1933 of a total of
1,092,738 shares (the "Shares") of the Company's Common Stock, $.001 par value,
which will be issuable from time to time under the Company's Stock Plan (2000)
and 1995 Employee Stock Purchase Plan (as amended and restated through December
12, 2002) (collectively referred to herein as the "Plans").

         In connection therewith, we have reviewed such Registration Statement,
the Company's filings with the Securities and Exchange Commission, certain of
the Company's corporate records, documents, instruments and certificates of
public officials taken in connection with the adoption of the Plans and the
authorization of the issuance of the Shares and such other factual and legal
matters as we have deemed necessary for purposes of rendering the opinion set
forth herein.

         We have assumed the genuineness of the signatures on and the
authenticity of all documents submitted to us as originals and the conformity
with originals of all items submitted to us as copies. We also have relied upon
a certificate of an officer of the Company as to certain factual matters. We
have relied on the Company's records and have assumed the accuracy and
completeness thereof.

         Based upon and subject to the foregoing, we are of the opinion that the
Shares, when issued and sold in accordance with the terms of the respective
Plans and pursuant to the agreements that accompany each grant under the Plans,
will be validly issued, fully paid and nonassessable.




         We express no opinion as to matters governed by laws of any
jurisdiction other than the laws of the State of Delaware and the federal laws
of the United States of America, as in effect on the date hereof.

         We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement referred to
above.

                                           Very truly yours,

                                           /s/ Morrison & Foerster LLP

                                           Morrison & Foerster LLP

EX-23.2

                                                                    Exhibit 23.2

                CONSENT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS

         We consent to the incorporation by reference in this Registration
Statement (Form S-8) of Connetics Corporation, pertaining to the Stock Plan
(2000) and 1995 Employee Stock Purchase Plan, of our report dated January 28,
2002 (except for the Note titled Subsequent Event, as to which the date is March
26, 2002), with respect to the consolidated financial statements and schedule of
Connetics Corporation included in its Annual Report (Form 10-K/A) for the year
ended December 31, 2001 filed with the Securities and Exchange Commission.

                                           /s/ ERNST and YOUNG LLP


Palo Alto, California
January 15, 2003

EX-99.1

                                                                    Exhibit 99.1

                              CONNETICS CORPORATION
                        1995 EMPLOYEE STOCK PURCHASE PLAN
               (AS AMENDED AND RESTATED THROUGH DECEMBER 12, 2002)
                 Adopted by the Board of Directors Feb. 17, 2000
                    Approved by the Stockholders May 11, 2000

The following constitute the provisions of the 1995 Employee Stock Purchase Plan
of Connetics Corporation, as amended and restated. The amended and restated 1995
Employee Stock Purchase Plan shall be effective for Offering Periods commencing
on or after June 1, 2003.

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

2. DEFINITIONS.

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

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

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

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

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

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

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

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

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

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

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

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

      (m) "Offering Date" means the first business day of each Offering Period
of the Plan. In the case of an individual who becomes an eligible Employee after
the first business day of an Offering Period but prior to the first business day
of the last calendar quarter of such Offering Period, the term "Offering Date"
means the first business day of the calendar quarter coinciding with or next
succeeding the day on which that individual becomes an eligible


                                        1

Employee. Options granted after the first business day of an Offering Period
will be subject to the same terms as the options granted on the first business
day of such Offering Period except that they will have a different grant date
(thus, potentially, a different exercise price) and, because they expire at the
same time as the options granted on the first business day of such Offering
Period, a shorter term.

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

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

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

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

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

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

3. ELIGIBILITY.

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

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

4. OFFERING PERIODS AND PURCHASE PERIODS.

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


                                        2

      (b) Purchase Periods. Each Offering Period shall consist of consecutive
Purchase Periods of six (6) months duration. The last day of each Purchase
Period shall be the "Purchase Date" for such Purchase Period. A Purchase Period
commencing on June 1 shall end on the next November 30. A Purchase Period
commencing on December 1 shall end on the next May 31. In particular, upon
adoption of this Plan as amended and restated, a new Purchase Period shall
commence on June 1, 2003. The Board of Directors of the Company shall have the
power to change the duration and/or frequency of Purchase Periods with respect
to future purchases without stockholder approval if such change is announced at
least fifteen (15) days prior to the scheduled beginning of the first Purchase
Period to be affected.

5. PARTICIPATION.

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

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

6. METHOD OF PAYMENT OF CONTRIBUTIONS.

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

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

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

7. GRANT OF OPTION.

      (a) On the Offering Date of each Offering Period, each eligible Employee
participating in such Offering Period shall be granted an option to purchase on
each Purchase Date a number of shares of the Company's Common Stock determined
by dividing such Employee's Contributions accumulated prior to such Purchase
Date and retained in the participant's account as of the Purchase Date by the
Option Price; provided however, that the maximum number of shares an Employee
may purchase during each Offering Period shall be determined at the Offering
Date by dividing $50,000 by the fair market value of a share of the Company's
Common Stock on the Offering Date, and provided further that such purchase shall
be subject to the limitations set forth in SECTIONS 3(b) and 12. The fair market
value of a share of the Company's Common Stock shall be determined as provided
in SECTION 7(b).


                                        3

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

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

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

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

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

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

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

10. VOLUNTARY WITHDRAWAL; TERMINATION OF EMPLOYMENT.

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

      (b) Upon termination of the participant's Continuous Status as an Employee
prior to the Purchase Date of an Offering Period for any reason, including
retirement or death, the Contributions credited to his or her account will be
returned to him or her or, in the case of his or her death, to the person or
persons entitled thereto under SECTION 14, and his or her option will be
automatically terminated.


                                        4

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

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

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

12. INTEREST. No interest shall accrue on the Contributions of a participant in
the Plan.

13. STOCK SUBJECT TO THE PLAN.

      (a) Subject to adjustment upon changes in capitalization of the Company as
provided in SECTION 18, the maximum aggregate number of Shares which may be
optioned and sold under the Plan shall be Eight Hundred Thousand (800,000)
shares, plus an annual increase to be added on each November 30, equal to the
lesser of:

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

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

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

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

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

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


                                        5

15. DESIGNATION OF BENEFICIARY.

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

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

16. TRANSFERABILITY. Neither Contributions credited to a participant's account
nor any rights with regard to the exercise of an option or to receive shares
under the Plan may be assigned, transferred, pledged or otherwise disposed of in
any way (other than by will, the laws of descent and distribution, or as
provided in SECTION 14) by the participant. Any such attempt at assignment,
transfer, pledge or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw funds in accordance with
SECTION 10.

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

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

19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.

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

      (b) Corporate Transactions. In the event of the proposed dissolution or
liquidation of the Company, the Offering Period will terminate immediately prior
to the consummation of such proposed action, unless otherwise provided by the
Board. In the event of a proposed sale of all or substantially all of the assets
of the Company, or the merger of the Company with or into another corporation,
each option under the Plan shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, to shorten the
Offering Period then in progress by setting a new Purchase Date (the "New
Purchase Date"). If the Board shortens the Offering Period then in progress in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify each participant in writing, at least ten (10) days prior
to the New


                                        6

Purchase Date, that the Purchase Date for his or her option has been changed to
the New Purchase Date and that his or her option will be exercised automatically
on the New Purchase Date, unless prior to such date he or she has withdrawn from
the Offering Period as provided in SECTION 10. For purposes of this paragraph,
an option granted under the Plan shall be deemed to be assumed if, following the
sale of assets or merger, the option confers the right to purchase, for each
share of option stock subject to the option immediately prior to the sale of
assets or merger, the consideration (whether stock, cash or other securities or
property) received in the sale of assets or merger by holders of Common Stock
for each share of Common Stock held on the effective date of the transaction
(and if such holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Common Stock); provided, however, that if such consideration received in the
sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the participant, provide
for the consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair market
value to the per share consideration received by holders of Common Stock and the
sale of assets or merger.

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

20. AMENDMENT OR TERMINATION.

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

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

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

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


                                        7

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

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

                               * * * * * * * * * *


                                        8

                              CONNETICS CORPORATION
                        1995 EMPLOYEE STOCK PURCHASE PLAN
                             SUBSCRIPTION AGREEMENT

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

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

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

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

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

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

                      ------------------------------------

                      ------------------------------------

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

NAME:  ________________________________________________       __________________
(Please print)    (First)       (Middle)        (Last)          (Relationship)


- -------------------------------------
            (Address)

- -------------------------------------


                                      -1-

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

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

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

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

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



SIGNATURE:
            -----------------------------------------

SOCIAL SECURITY #:
                    ------------------------

DATE:
       -----------------------------

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


- ---------------------------------------------------------
(Signature)


- -----------------------------------------
(Print name)



                                      -2-

                              CONNETICS CORPORATION
                        1995 EMPLOYEE STOCK PURCHASE PLAN
                             CHANGE OF STATUS NOTICE

================================================================================
      [ ] WITHDRAWAL FROM 1995 EMPLOYEE STOCK PURCHASE PLAN

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

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

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

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

================================================================================
      [ ] CHANGE IN PAYROLL DEDUCTION

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

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

================================================================================


                                       2

================================================================================
      [ ] CHANGE OF BENEFICIARY

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

NAME:  _________________________________________________      __________________
(Please print)    (First)       (Middle)        (Last)          (Relationship)


- -------------------------------------
           (Address)

- -------------------------------------

================================================================================



SIGNATURE:
            -----------------------------------------

SOCIAL SECURITY #:
                    ------------------------

DATE:
       -----------------------------

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


- -------------------------------------------------------------
(Signature)


- --------------------------------------------
(Print name)


                                       2