<PAGE>   1
                                                                   EXHIBIT 10.27

                             COLLABORATIVE RESEARCH
                                       AND
                                LICENSE AGREEMENT

                                DECEMBER 13, 1996

                                     BETWEEN

                     THE DUPONT MERCK PHARMACEUTICAL COMPANY

                                       AND

                           GENELABS TECHNOLOGIES, INC.

<PAGE>   2

                  COLLABORATIVE RESEARCH AND LICENSE AGREEMENT

OVERVIEW AND INTENT...........................................................1

ARTICLE I           CERTAIN DEFINITIONS.......................................2

         "Affiliate"..........................................................2
         "Agency".............................................................2
         "Calendar Quarter"...................................................3
         "Calendar Year"......................................................3
         "Collaboration"......................................................3
         "Collaboration Lead Compound"........................................3
         "Collaboration Patent Rights"........................................3
         "Collaboration Target Gene"..........................................3
         "Collaboration Technology"...........................................3
         "Confidential Information"...........................................4
         "Discovered" or "Discovery"..........................................4
         "Effective Date".....................................................4
         "Field of Use".......................................................4
         "First Commercial Sale"..............................................4
         "FTE"................................................................5
         "FTE Rate"...........................................................5
         "Genelabs Lead Compounds"............................................5
         "Genelabs Lead Compound Program".....................................5
         "Genelabs Patent Rights".............................................5
         "Genelabs Screening Collaboration"...................................6
         "Genelabs Target Gene"...............................................6
         "Genelabs Technology"................................................6
         "Initial Research Term"..............................................6
         "Lead Compound"......................................................6
         "Licensed Products"..................................................6
         "Merlin Assay".......................................................6
         "Monomer"............................................................7
         "Monomer Database"...................................................7
         "Net Proceeds".......................................................7
         "Net Sales"..........................................................8
         "Patent Rights"......................................................8
         "Research Program"...................................................8
         "Research Plan"......................................................8
         "RSC"................................................................9
         "Sublicensee"........................................................9
         "Target Gene"........................................................9
         "Technology".........................................................9
         "Third Party Lead Compound Program"..................................9

ARTICLE II          RESEARCH COLLABORATION....................................9

<PAGE>   3

         2.1      Conduct of the Research Program.............................9
         2.2      Scope of Collaboration......................................10
         2.3      Term of Research Program....................................10
         2.4      Research Term Extension.....................................11
         2.5      Direction of Research Program...............................12
         2.6      Assistance..................................................13

ARTICLE III         TARGET GENES..............................................13
         3.1      Collaboration Target Genes..................................13
         3.2      Genelabs Lead Compound Programs.............................14
         3.3      Outlicensing by Genelabs....................................17
         3.4      Genelabs Screening Collaboration............................18

ARTICLE IV          GRANT OF RIGHTS...........................................19
         4.1      Monomer Database............................................19
         4.2      License to DuPont Merck.....................................19
         4.3      Collaboration Technology....................................21

ARTICLE V           PAYMENTS..................................................21
         5.1      Payments by DuPont Merck....................................21
                  (a)      Up-Front Payment...................................21
                  (b)      Milestones.........................................21
                  (c)      Royalties..........................................24
         5.2      Payments by Genelabs........................................24
                  (a)      Outlicensing Revenues if Lead Compound Discovered..24
                  (b)      Licensing Revenues If Lead Compound Not Discovered.26
                  (c)      Revenues from Genelabs Commercialization...........27
                  (d)      Revenues from Genelabs Screening Collaborations....28
         5.3      Accounting..................................................29
         5.4      Certain Conditions..........................................30
         5.5      Paid-up License.............................................31
         5.6      Sublicense Provision........................................31
         5.7      Confidentiality of Financial Information....................31
         5.8      Interest on Late Payments...................................32

ARTICLE VI          CONFIDENTIALITY AND PUBLICATION...........................32
         6.1      Restrictions on Disclosure..................................32
         6.2      Access to Information.......................................33
         6.3      Protection of Information...................................34
         6.4      Ownership of Information....................................34
         6.5      Return of Information.......................................34
         6.6      Injunctive Relief...........................................35
         6.7      Use of Confidential Information.............................35
         6.8      Scientific Publication......................................35

<PAGE>   4

ARTICLE VII         INVENTIONS, PATENTS.......................................36
         7.1      Collaboration Patent Rights.................................36
         7.2      Filing, Prosecution and Maintenance of Patents..............36
         7.3      Patent Term Restoration.....................................37
         7.4      Infringement................................................37

ARTICLE VIII        TERM AND TERMINATION......................................39
         8.1      Term and Expiration.........................................39
         8.2      Termination for Cause.......................................39
         8.3      Effect of Termination.......................................40
         8.4      Continuation of Agreement...................................40

ARTICLE IX          LIABILITY.................................................40
         9.1      Indemnification.............................................40
                  (a)      By DuPont Merck....................................40
                  (b)      By Genelabs........................................41
         9.2      Insurance...................................................42
         9.3      No Implied Warranties.......................................42

ARTICLE X           MISCELLANEOUS.............................................43
         10.1     Force Majeure...............................................43
         10.2     Assignment..................................................43
         10.3     Severability................................................44
         10.4     Notices.....................................................44
         10.5     Applicable Law/Jurisdiction.................................45
         10.6     Dispute Resolution..........................................46
         10.7     Entire Agreement............................................46
         10.8     Headings....................................................46
         10.9     Independent Contractors.....................................46
         10.10    Waiver......................................................47
         10.11    Counterparts................................................47
         10.12    Representations and Warranties..............................47
         10.13    Publicity...................................................48
         10.14    Use of Names................................................48

EXHIBIT A           GENELABS PATENT RIGHTS....................................49

EXHIBIT B           RESEARCH PLAN.............................................50

<PAGE>   5

                  COLLABORATIVE RESEARCH AND LICENSE AGREEMENT


         THIS AGREEMENT, dated as of December 13, 1996 (the "Effective Date"),
is between Genelabs Technologies, Inc., a corporation organized and existing
under the laws of California and having its principal office at 505 Penobscot
Drive, Redwood City, California 94063 ("Genelabs") and The DuPont Merck
Pharmaceutical Company, a general partnership organized and existing under the
laws of Delaware and having its principal office at DuPont Merck Plaza, Walnut
Run, 974 Centre Road, Wilmington, Delaware 19807 ("DuPont Merck").

                               OVERVIEW AND INTENT

         The parties intend to establish a research collaboration using certain
Genelabs technology directed towards the discovery of gene regulating
DNA-binding drugs for human therapeutic applications. Each party will contribute
compounds and chemistries which it currently has or develops during the course
of the research collaboration, and in the case of DuPont Merck for [ * ] years
after the collaboration, into a monomer database. Each party may use the monomer
data base independently for the discovery of lead compounds for pharmaceutical
products. The primary goals of the collaboration are to create the monomer
database, to use the monomer database to create lead compounds, and to create
small molecule gene regulating DNA-binding pharmaceuticals from such lead
compounds. Each party can develop and commercialize pharmaceutical products or
sublicense lead compounds to other parties. DuPont Merck will have certain
exclusive rights to pharmaceutical products resulting from the collaboration.

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       1
<PAGE>   6

         The parties agree as follows.

ARTICLE I CERTAIN DEFINITIONS

         The terms in this Agreement with initial letters capitalized, whether
used in the singular or plural, shall have the meaning designated below or, if
not designated below, the meaning as designated in places throughout this
Agreement.

         "Affiliate" means any corporation or other entity which controls, is
controlled by, or is under common control with a party to this Agreement. A
corporation or other entity shall be regarded as in control of another
corporation or entity if it owns or directly or indirectly controls more than
fifty percent (50%) of the voting stock or other ownership interest of the other
corporation or entity, or if it possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the corporation
or other entity or the power to elect or appoint more than fifty percent (50%)
of the members of the governing body of the corporation or other entity. For
purposes of this Agreement, [ * ].

         "Agency" means any governmental regulatory authority responsible for
granting health or pricing approvals, registrations, import permits, and other
approvals required before Licensed Product may be tested or marketed in any
country.

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       2
<PAGE>   7

         "Calendar Quarter" means the respective periods of three (3)
consecutive calendar months ending on March 31, June 30, September 30 and
December 31.

         "Calendar Year" means each successive period of twelve (12) months
commencing on January 1 and ending on December 31.

         "Collaboration" means the collaborative research program established by
this Agreement, also sometimes referred to herein as the "Research Program" or
"Research Collaboration".

         "Collaboration Lead Compound" means a Lead Compound Discovered as part
of the Collaboration.

         "Collaboration Patent Rights" means all patents and applications
worldwide on patentable inventions and discoveries included in the Collaboration
Technology, any divisions, continuations, or continuations-in-part of the patent
applications, all patents which issue on such applications, including all
reissues, reexaminations or extensions of the patents, any extended or restored
term, and any confirmation patent, registration patent, patent of addition, or
the like.

         "Collaboration Target Gene" has the meaning set forth in Section 3.1.

         "Collaboration Technology" means any information, and data concerning
[*], and all related intellectual

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       3
<PAGE>   8

property, including information, data, trade secrets, know-how, inventions,
discoveries and Collaboration Patent Rights, owned or licensable by one party to
the other, excluding clinical information and data, and excluding that portion
of such information, data, trade secrets, know-how, inventions, discoveries and
[ * ].

         "Confidential Information" means information and data which relates to
the Genelabs Technology or the Collaboration Technology, which is owned by one
party and is disclosed to the other party in connection with this Agreement, and
which is designated confidential by the disclosing party.

         "Discovered" or "Discovery", as applied to [ * ].

         "Effective Date" means January 1, 1997, the date of commencement of the
Research Program.

         "Field of Use" means [ * ].

         "First Commercial Sale" means, with respect to a Licensed Product, the
first sale for use or consumption by the public of such Licensed Product in a
country after all required approvals, including marketing and pricing approvals,
have been granted by such country.

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       4
<PAGE>   9

         "FTE" means one or more researchers employed by Genelabs or DuPont
Merck and assigned to work on the Research Collaboration with such time and
effort to constitute the equivalent of one scientist working on a full time
basis consistent with normal business and scientific practice (e.g. at least 40
hours per week of dedicated effort for at least 48 weeks per year).

         "FTE Rate" shall have the meaning set forth in Section 2.3.

         "Genelabs Lead Compounds" means Lead Compounds [ * ].

         "Genelabs Lead Compound Program" means a program which [ * ].

         "Genelabs Patent Rights" means all currently existing patents and
patent applications worldwide which relate to [ * ] and which are owned or
licensable by Genelabs, including those set forth in Exhibit A hereto, any
divisions, continuations, or continuations-in-part of the patent applications,
all patents which issue on such applications, including all reissues,
reexaminations or extensions of the patents, any extended or restored term, and
any confirmation patent, registration patent, patent of addition, or the like.

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       5
<PAGE>   10

         "Genelabs Screening Collaboration" means a collaboration in which
[ * ].

         "Genelabs Target Gene" means a Target Gene which is [ * ].

         "Genelabs Technology" means the Merlin assay and all related
intellectual property existing as of the Effective Date, including information,
data, trade secrets, know-how, inventions, discoveries and Genelabs Patent
Rights owned or licensable by Genelabs and directed toward [ * ].

         "Initial Research Term" shall have the meaning set forth in Section
2.3.

         "Lead Compound" means a molecule which demonstrates [ * ].

         "Licensed Products" means pharmaceutical products in the Field of Use
derived directly or indirectly from a Lead Compound and/or employing the
Technology.

         "Merlin Assay" means the assay described and claimed [ * ]

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       6
<PAGE>   11

         [ * ].

         "Monomer" means a [ * ].

         "Monomer Database" means a [ * ].

         "Net Proceeds" means the gross amount of revenues received by Genelabs
from outlicensing or sublicensing a Lead Compound to third parties, including
[ * ]. Net Proceeds shall include the financial value of any non-

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       7
<PAGE>   12

financial compensation paid or exchanged with Genelabs, to be determined by
valuation methods (and a payment schedule) to be agreed upon by the parties.

         "Net Sales" means the gross invoice price of Licensed Product to third
parties, including without limitation distributors, less (i) trade and quantity
discounts actually allowed; (ii) returns and allowances; (iii) rebates,
chargebacks and other amounts paid, credited or accrued, (iv) retroactive price
reductions; (v) sales commissions to distributors and independent agents, (vi)
the costs of devices for dispensing or administering the Licensed Product (for
which the customer is not charged) which accompany the Licensed Product as it is
sold, (vii) a fixed amount equal to [ * ] for sales outside the U.S., of the
amount invoiced to cover bad debts, custom duties, surcharges, sales or excise
taxes, cash discounts, transportation and insurance charges; and (viii) as
agreed by the parties, any other specifically identifiable amounts included in
gross sales that were or ultimately will be credited and that are substantially
similar to those listed above.

         "Patent Rights" means Genelab Patent Rights and Collaboration Patent
Rights.

         "Research Program" or "Research Collaboration" means the collaborative
research program established by this Agreement, also sometimes referred to
herein as the "Collaboration".

         "Research Plan" is the research plan for the Collaboration, as
described in Section 2.1, and as revised from time to time by the Research
Steering Committee.

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       8
<PAGE>   13

         "RSC" or "Research Steering Committee" has the meaning set forth in
Section 2.5.

         "Sublicensee" means a business entity which is sublicensed by DuPont
Merck or Genelabs under this Agreement.

         "Target Gene" means [ * ].

         "Technology" means Genelabs Technology and Collaboration Technology.

         "Third Party Lead Compound Program" means a [ * ].

                        ARTICLE II RESEARCH COLLABORATION

         2.1 Conduct of the Research Program. The parties shall engage in a
collaborative research program (the "Research Program" or "Research
Collaboration") directed towards the discovery of gene regulating DNA-binding
pharmaceutical products. The Research Program will be conducted in good
scientific manner, and in accordance with all applicable good laboratory
practices and legal requirements. The objectives, workplan, timeline and
assignment of the initial activities of the Research

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.

                                       9
<PAGE>   14

Program are set forth in the Research Plan annexed hereto as Exhibit B (the
"Research Plan"). Within four months of the Effective Date, the scientists
assigned to work on the Research Collaboration will have assessed [ * ], and
will at that time present a more detailed set of objectives and research plans
to the Research Steering Committee, which will issue a revised Research Plan.

         2.2 Scope of Collaboration. Notwithstanding anything else in this
Agreement, the parties recognize that in conducting the Research Program
compounds and components of compounds may be identified that could have
applications outside the Field of Use. [ * ].

         2.3 Term of Research Program. The initial term for the Research Program
shall commence on January 1, 1997 and continue through [ * ] (the "Initial
Research Term"), and may be extended, as provided below, for [ * ]. During each
year of the Initial Research Term, DuPont Merck shall fund a [ * ]. Payment to
Genelabs of such research funding shall be made

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       10
<PAGE>   15

in equal quarterly installments payable within 15 days of the beginning of each
Calendar Quarter commencing on the Effective Date. Payment shall be made by
immediately available funds. Such funding by DuPont Merck of FTE's at Genelabs
shall be contingent upon Genelabs providing and retaining the indicated number
of qualified FTE's and upon Genelabs making a good faith effort in accordance
with industry standards to achieve the goals of the Research Collaboration as
set forth in the Research Plan. Without limiting DuPont Merck's rights or
remedies, DuPont Merck shall have the right to reduce the level of funding
described above to reflect the failure by Genelabs to provide or retain the
required number of qualified FTE's or to make the required effort to achieve the
goals of the Research Collaboration. The names, curriculum vitae and percentage
of time devoted to the Research Program for each scientist comprising the
required number of FTE's will be provided to DuPont Merck within 30 days of the
Effective Date and not later than 60 days prior to the start of each subsequent
Calendar Year of the Research Collaboration. The mixture of skills and levels of
expertise of such scientists shall be appropriate to the objectives of the
Research Program. The selection of such scientists shall be subject to the
approval of DuPont Merck, such approval not to be unreasonably withheld.

         2.4 Research Term Extension. DuPont Merck shall provide Genelabs with
written notice no later than [ * ],

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       11
<PAGE>   16

[ * ]. Upon any extension of the Initial Research Term, the RSC shall revise the
Research Plan and assign responsibilities and determine manpower requirements of
the parties for such extended term.

         2.5 Direction of Research Program

             (a) The Research Program will be directed by a [ * ] member
Research Steering Committee ("RSC"), comprised of [ * ]. The first meeting of
the RSC will take place within thirty (30) days after January 1, 1997 for the
purpose of making any modifications to the Research Plan, including
modifications to the timeline or assignment of responsibilities to achieve the
objectives of the Research Program. Thereafter, the RSC will meet on a regular
basis, no less frequently than quarterly (via teleconference, video conference,
or face to face) to review the progress of the Research Program and make any
changes in the Research Plan necessary to achieve the objectives of the Research
Program. Additional meetings may be scheduled by mutual consent.

             (b) Genelabs and DuPont Merck will exchange written reports
quarterly outlining the progress of the Research Program for the prior quarter,
and, in particular, reporting on the progress of those aspects of the Research
Program for which the party is primarily or entirely

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       12
<PAGE>   17

responsible. Each party shall select a coordinator for the Research Program to
whom such communications and all reports shall be submitted and who shall
mutually determine the agenda for each of the meetings between the parties. The
authority and responsibility of the RSC shall be limited to scientific matters
relating to the Research Plan being undertaken during the Research
Collaboration; the RSC shall have no authority regarding any business matter,
for example, to amend this Agreement or in any way elaborate, change or expand
upon any of its terms. In the event of any impasse which cannot be resolved by
the RSC, [ * ] shall have tie-breaking authority.

         2.6 Assistance. If either party requests, the other party will provide
to it technical assistance within its area of expertise and supply any technical
information and know-how which the requesting party may require in connection
with the Research Program. Provision of such technical assistance shall include
but not be limited to visits by Genelabs and/or DuPont Merck personnel to each
other at the requesting party's expense, at times and for periods of time upon
which the parties shall reasonably agree.

                            ARTICLE III TARGET GENES

         3.1 Collaboration Target Genes. Within the initial four months of the
Research Collaboration, the RSC shall designate [ * ] (the "Collaboration Target
Genes"), and shall designate [ * ] Collaboration Target Genes as the initial
focus of the Research Collaboration. [ * ]

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       13
<PAGE>   18

         [ * ].

         3.2 Genelabs Lead Compound Programs.

             (a) Genelabs may initiate [ * ], a Genelabs Lead Compound Program;
provided, however, that in no event may [ * ]. Genelabs may initiate [ * ]
Genelabs Lead Compound Programs during any year of the Research Collaboration;
however, if in any year, Genelabs ceases work on a [ * ].

             (b) [ * ]

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       14
<PAGE>   19

                          [*].

             (c) Lead Compound Programs can be [ * ], subject to the following
provisions:

                  (i) [ * ]

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       15
<PAGE>   20

Programs [ * ] that Genelabs is able to establish during the term of the
Research Collaboration, provided that Genelabs may initiate [ * ] Third Party
Lead Compound Program which program is described in [ * ] during the [ * ] of
[ * ].

                  (ii) [ * ] resulting from [ * ] will be subject to the same
[ * ] to be made by Genelabs to DuPont Merck for [ * ].

                  (iii) If the [ * ], Genelabs will [ * ].

                  (iv) If the [ * ].

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       16
<PAGE>   21
                  [ * ].

                  (v) If the [ * ].

                  (vi) Following the term of the Research Collaboration, [ * ].

             (d) Genelabs will provide to DuPont Merck a quarterly progress
report on all Genelabs Lead Compound Programs.

         3.3 Outlicensing by Genelabs. Genelabs may develop and commercialize
Genelabs Lead Compounds or may choose at any time to out-license a Genelabs Lead
Compound to a third party according to the following procedure:

                  i) Genelabs shall [ * ];

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       17
<PAGE>   22

                  ii) [ * ];

                  iii) [ * ];

                  iv) [ * ].

Genelabs' obligations under this Section 3.3 shall terminate upon the [ * ]
anniversary of the termination of the Research Program.

         3.4 Genelabs Screening Collaboration. During the term of the Research
Collaboration, Genelabs may, at its sole discretion, enter into Genelabs
Screening Collaborations on a blinded basis with third parties. As part of
Genelabs Screening Collaborations, Genelabs shall [ * ]

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       18
<PAGE>   23

         [ * ].


                           ARTICLE IV GRANT OF RIGHTS

         4.1 Monomer Database. Following the execution of this Agreement, each
party will [ * ].

         4.2 License to DuPont Merck. Genelabs grants to DuPont Merck:

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       19
<PAGE>   24

                  (i) [ * ] license, with no right to sublicense, to use the
Technology and Patent Rights during the term of the Research Collaboration to
Discover Collaboration Lead Compounds directed against Collaboration Target
Genes, which shall [     *     ],

and

                  (ii) [ * ] license to the Technology and Patent Rights to
discover, make, use and sell Lead Compounds and Licensed Products directed
against Target Genes other than Collaboration Target Genes in the Field of Use,
with the right to grant sublicenses to, make, use and sell Lead Compounds and
Licensed Products directed against Target Genes other than Collaboration Target
Genes in the Field of Use, and

                  (iii) [ * ] license to the Technology and Patent Rights to
discover, make, use and sell Lead Compounds and Licensed Products directed
against Collaboration Target Genes in the Field of Use, with the right to grant
sublicenses to make, use and sell Lead Compounds and Licensed Products directed
against Collaboration Target Genes in the Field of Use. This license shall be
(i) [ * ]


[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       20
<PAGE>   25

         [ * ].

         For the purpose of clarity, it is understood that (a) [ * ].

         4.3 Collaboration Technology. Each party grants to the other a
non-exclusive worldwide license in the Field of Use to any Collaboration
Technology and Collaboration Patent Rights, except for the [ * ].


                               ARTICLE V PAYMENTS

         5.1 Payments by DuPont Merck. In consideration for the licenses
provided for in Section 4.2 hereof and the research to be conducted by Genelabs
pursuant to the Research Plan, DuPont Merck shall make the following payments to
Genelabs:

             (a) Up-Front Payment. Within 3 business days following the
execution of this Agreement, DuPont Merck shall pay to Genelabs [ * ].

             (b) Milestones. DuPont Merck shall also make the following payments
(which may be used for any purpose by Genelabs) to Genelabs within thirty (30)
days of the

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       21
<PAGE>   26

achievement of the following milestones related to commercial Licensed Products
which are derived directly or indirectly through utilization of the Genelabs
Technology or Collaboration Technology, regardless of whether the milestone is
achieved during or after termination of the Research Collaboration, and
regardless of whether the entity achieving the milestone is DuPont Merck itself
or one of its Sublicensees or Affiliates:

                  (i) [ * ];

                  (ii) [ * ];

                  (iii) [ * ];

                  (iv) [ * ];

                  (v) [ * ];

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       22
<PAGE>   27

                  (vi) [ * ];

                  (vii) [ * ].

         To clarify the foregoing, in no event is DuPont Merck required to pay
Genelabs more than one time for the accomplishment of the [ * ]. For example, if
[ * ].

         In the first instance that either Milestone (ii) above is achieved or
Milestone (i) above is achieved with respect to [ * ], and for each
subsequent instance occurring within 90 days of the first instance, DuPont Merck
will have a 90 day period from the date of the first such achievement to select
between the options of either [ * ]. If DuPont Merck elects the latter option
with respect to a given Collaboration Lead Compound,

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       23
<PAGE>   28

         DuPont Merck will have [ * ].

             (c) Royalties. [ * ]. Notwithstanding the foregoing, if no patent
is obtained for the Licensed Product, or if DuPont Merck is required to pay
royalties in order to obtain an unblocking license, with respect to the
manufacture, use or sale of such Licensed Product, then the royalty rate to be
paid to Genelabs by DuPont Merck shall be reduced by a total of one-third of the
royalty rate to be paid by DuPont Merck for the unblocking license; provided
that the maximum reduction of the royalty payable to Genelabs by DuPont Merck
shall be an amount equal to one-third of the amount of the royalty which would
have otherwise been payable by DuPont Merck to Genelabs, without taking into
consideration such reduction.

         5.2 Payments by Genelabs.

         (a) Outlicensing Revenues if [ * ]. In the event [ * ]

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       24
<PAGE>   29

[ * ], Genelabs will pay to DuPont Merck a fee equal to a percentage of the Net
Proceeds received by Genelabs from outlicensing or sublicensing any Genelabs
Lead Compounds. For a given Genelabs Lead Compound outlicensed or sublicensed by
Genelabs, the applicable percentage of Net Proceeds to be paid to DuPont Merck
will [ * ]. The following chart illustrates the applicable percentage which
DuPont Merck will be entitled to:

                                          Applicable Percentage of Net Proceeds
                     ----------------------------------------------------------

[
--------------------------------------------------------------------------------
* ]

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       25
<PAGE>   30

         [ * ]

         As an example of the foregoing, assume (i) [ * ].

         As another example, assume [ * ].

         For the purposes of determining the [ * ].

             (b) Licensing Revenues If [ * ]. If [ * ]

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       26
<PAGE>   31

             [ * ], Genelabs will pay to DuPont Merck a fee equal to a
percentage of the Net Proceeds received by Genelabs from outlicensing or
sublicensing such Genelabs Lead Compounds. For a given Genelabs Lead Compound
outlicensed or sublicensed by Genelabs, the applicable percentage of Net
Proceeds to be paid to DuPont Merck will [ * ]. Genelabs will have no obligation
to DuPont Merck with respect to [ * ]. The following chart illustrates the
applicable percentage which DuPont Merck will be entitled to:

                                          Applicable Percentage of Net Proceeds
                     -----------------------------------------------------------

[
--------------------------------------------------------------------------------
* ]

             (c) Revenues from Genelabs Commercialization. Genelabs will pay to
DuPont Merck [ * ] by Genelabs and its Affiliates of Licensed Products in the

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       27
<PAGE>   32

Field of Use derived from Genelabs Lead Compounds Discovered during the
Collaboration or for the applicable period of time thereafter determined
pursuant to Subsections (a) and (b), above. The amount of the royalty will be
determined [ * ]. Notwithstanding the foregoing, if no patent is obtained for
the Licensed Product, or if Genelabs is required to pay royalties in order to
obtain an unblocking license, with respect to the manufacture, use or sale of
such product then the royalty rate to be paid to DuPont Merck by Genelabs shall
be reduced by a total of one-third of the royalty rate to be paid by Genelabs
for the unblocking license; provided that the maximum reduction of the royalty
payable to DuPont Merck by Genelabs shall be an amount equal to one-third of the
amount of the royalty which would have otherwise been payable by Genelabs to
DuPont Merck, without taking into consideration such reduction.

             (d) Revenues from Genelabs Screening Collaborations. In no event
will any payments be owed by Genelabs to DuPont Merck for revenue derived from
Genelabs

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       28
<PAGE>   33
Screening Collaborations performed by Genelabs for third parties.

         5.3 Accounting

             (a) DuPont Merck and Genelabs shall deliver to each other within
sixty (60) days after the end of each Calendar Quarter a written accounting,
including quantities and monetary amounts of Net Sales and Net Proceeds subject
to fee or royalty payments and the amount of the fee or royalty payment due to
the other party for such Calendar Quarter.

             (b) When each party delivers its accounting to the other, the
reporting party shall also deliver all fee or royalty payments due to the other
party for the Calendar Quarter.

             (c) Each party shall keep accurate records in sufficient detail to
enable the amounts due to the other party to be determined. Upon the request of
either party, the other party shall permit an independent, certified public
accountant selected by the requesting party, except one to whom the disclosing
party has reasonable objections, to have access during ordinary business hours
to records necessary to determine the correctness of any quarterly report and
obtain information as to the amount payable to the requesting party for any such
period in case of the disclosing party's failure to report or make payment. Such
examination shall be at the requesting party's expense and shall not take place
more than once each year for each party. These rights with respect to any year
shall terminate three (3) years after the end of any such year. Information
supplied to the requesting party by such


                                       29

<PAGE>   34

independent certified public accountants shall not include any proprietary
information not required to be disclosed under other sections of this Agreement.

             (d) All payments to be made by either party under this Agreement
shall be made in United States dollars. In the case of sales outside the United
States, the rate of exchange to be used in computing the amount of currency
equivalent in United States dollars due to a party shall be the month-end
exchange rate applicable for the month in which the sales are recorded. Such
month-end exchange rate is the exchange rate utilized by the paying party in its
worldwide accounting system and reflects the average exchange rate for the
month.

             (e) All payments due hereunder from either party shall be paid in
immediate available funds.

         5.4 Certain Conditions. Payments for sale of Licensed Products by
either party shall be subject to the following conditions:

             (a) no fees or royalties shall be due upon the sale or other
transfer between DuPont Merck and its Affiliates or Genelabs and its Affiliates,
provided that royalties will be paid on sales by such Affiliates to independent
third parties;

             (b) no fees or royalties shall accrue on the disposition of
Licensed Product in reasonable quantities by DuPont Merck, Genelabs, or their
respective Affiliates or Sublicensees as bona fide samples or as donations to
non-profit institutions or government agencies for non-


                                       30
<PAGE>   35

commercial purposes or to support physician initiated research; and

             (c) notwithstanding the above fee and royalty rates, upon either
party's request, the parties will discuss in good faith a reduction of the
applicable fee or royalty rate in any given country in the event the level of
development, patent protection or general commercial environment affects the
commercial viability of the Licensed Products under such fee or royalty rate.

         5.5 Paid-up License. For each country, upon expiration of DuPont
Merck's obligation to pay royalties pursuant to Section 5.1, DuPont Merck shall
have a fully paid-up, non-exclusive license under the Genelabs Technology, to
make, have made, use and sell Licensed Product in that country. For each
country, upon expiration of a party's obligation to make payments hereunder, the
party shall have a fully paid-up, non-exclusive license under the Collaboration
Technology owned by the other party to make, have made, use and sell Licensed
Product in that country.

         5.6 Sublicense Provision. Each party shall include in each sublicense
granted by it pursuant to this Agreement a provision requiring the Sublicensee
to make reports to the other party, to keep and maintain records of sales made
pursuant to such sublicense and to grant access to such records by independent
accountant.

         5.7. Confidentiality of Financial Information. Each party shall treat
all financial information subject to review under Section 5.3(c) or under any
sublicense agreement in accordance with the confidentiality provisions


                                       31
<PAGE>   36

of this Agreement, and shall cause its accounting firm to enter into a
confidentiality agreement with the other party obligating it to retain all such
financial information in confidence pursuant to such confidentiality agreement.

         5.8 Interest on Late Payments. Each party will pay interest on any
overdue amounts at the rate of one-half percent (0.5%) per month calculated from
the date any payment was due and payable.


                   ARTICLE VI CONFIDENTIALITY AND PUBLICATION

         6.1 Restrictions on Disclosure. The parties will not disclose or use
Confidential Information disclosed by one party to the other under the terms of
this Agreement without the express, written consent of the disclosing party,
with the exception of the following:

          a. information which, at the time of disclosure, is available to the
             public;

          b. information which, after disclosure, becomes available to the
             public by publication or otherwise, other than by breach of this
             Agreement by the receiving party;

          c. information that the receiving party can establish by prior written
             record was already known to it or was in its possession or in the
             possession of an Affiliate at the time of disclosure and was not
             acquired, directly or indirectly, from the disclosing party;

          d. information that the receiving party obtains from a third party;
             provided however, that such information was not obtained by said
             third party, directly or indirectly, from the


                                       32
<PAGE>   37

             disclosing party under an obligation of confidentiality toward the
             disclosing party;

          e. information that the receiving party can establish by written
             evidence satisfactory to the disclosing party was independently
             developed by persons in its employ or otherwise who had no contact
             with and were not aware of the content of the Confidential
             Information; and

          f. information that the receiving party is compelled to disclose by a
             court or other tribunal of competent jurisdiction, provided
             however, that in such case the receiving party shall immediately
             give notice to the providing party so that the providing party may
             seek a protective order or other remedy from said court or tribunal
             and will cooperate with the disclosing party. In any event, the
             receiving party shall disclose only that portion of the
             Confidential Information that, in the opinion of its legal counsel,
             is legally required to be disclosed and will exercise reasonable
             efforts to ensure that any such information so disclosed will be
             accorded confidential treatment by said court or tribunal.

         6.2 Access to Information. The receiving party will not disclose any
such Confidential Information to any person other than to its directors,
officers or employees, or to directors, officers or employees of an Affiliate
and sublicencees, or to contractors under confidentiality obligations having
substantially the same terms expressed herein, and only then to the foregoing
individuals if they have a clear need to know such Confidential Information in


                                       33
<PAGE>   38

connection with the performance of their professional responsibilities.

         6.3 Protection of Information. The receiving party shall take all
reasonable steps, including, but not limited to, those steps taken to protect
its own information, data or other tangible or intangible property that it
regards as proprietary or confidential, to insure that the Confidential
Information is not disclosed or duplicated for the use of any third party, and
shall take all reasonable steps to prevent its officers and employees, or any
others having access to the Confidential Information, from disclosing or making
unauthorized use of any Confidential Information, or from committing any acts or
omissions that may result in a violation of this Agreement.

         6.4 Ownership of Information. Title to, and all rights emanating from
the ownership of, all Confidential Information disclosed under this Agreement
shall remain vested in the disclosing party. Nothing herein shall be construed
as granting any license or other right to use the Confidential Information other
than as specifically agreed upon by the parties.

         6.5 Return of Information. Upon expiration or termination of this
Agreement and upon the written request of the disclosing party, the receiving
party shall return promptly to the disclosing party all written materials and
documents, as well as any computer software or other media, made available or
supplied by the disclosing party to the receiving party that contains
Confidential Information, together with any copies thereof, except that the
receiving party may retain one copy of each such document or other media under
seal for archival purposes, subject to


                                       34
<PAGE>   39

protection and non-disclosure in accordance with the terms of this Agreement.

         6.6 Injunctive Relief. The receiving party acknowledges that the
disclosure of Confidential Information without the express written consent of
the disclosing party will cause irreparable harm to the disclosing party, and
that any breach or threatened breach of this Agreement by the receiving party
will entitle the disclosing party to injunctive relief, in addition to any other
legal remedies available to it, in any court of competent jurisdiction, and that
the receiving party will not claim as a defense that the disclosing party has an
adequate remedy at law.

         6.7 Use of Confidential Information. Confidential Information shall
only be used in connection with the parties' respective rights and obligations
under this Agreement.

         6.8 Scientific Publication Either party wishing to make a scientific
publication of the research emanating from the Research Program shall deliver to
the other party a copy of the proposed written publication or an outline of an
oral disclosure at least sixty (60) days prior to submission for publication or
presentation. The reviewing party shall have the right (i) to propose
modifications to the publication for patent reasons, trade secret reasons or
business reasons and (ii) to request removal of its Confidential Information
from such publication or presentation. If the reviewing party requests
modifications to the publication, the publishing party shall edit such
publication to prevent disclosure of trade secret or proprietary business
information prior to


                                       35
<PAGE>   40

submission of the publication or presentation. In event the parties agree to
publish the proposed submission, then the contributions of the parties to the
research shall be expressly noted in such publications or other public
disclosures by acknowledgment or co-authorship, whichever is appropriate.

                         ARTICLE VII INVENTIONS, PATENTS

         7.1 Collaboration Patent Rights. If either party makes an invention in
the course of the Research Program, that party shall own the invention and is
responsible for the preparation, filing, prosecution and maintenance of all
patent applications and patents covering such invention. If any joint invention
is made under the Research Program, then such invention shall be owned by both
parties, and Genelabs shall be responsible for the preparation, filing,
prosecution and maintenance of all patent applications and patents covering such
invention. Each party's Collaboration Patent Rights shall be subject to the
license grants described in Section 4.2.

         7.2 Filing, Prosecution and Maintenance of Patents. Each party shall
diligently take all commercially reasonable steps required to maintain the
Collaboration Patent Rights it owns in full force and effect and shall be
responsible for the day-to-day activities associated with filing, prosecuting
and maintaining such Collaboration Patent Rights. Each party will consult with
and cooperate with the other party to promptly file, prosecute and maintain such
party's Collaboration Patent Rights. Each party shall at all times during the
term of this Agreement keep the other party advised of the status of its patent
filings related to the Collaboration Patent Rights, and


                                       36
<PAGE>   41

upon request of the other party, shall provide copies of any papers relating to
the filing, prosecution or maintenance of such Collaboration Patent Rights,
subject to Article VI hereof. During the term of this Agreement the parties
shall cooperate in providing information to assist counsel with the patent
prosecution of such Collaboration Patent Rights.

         7.3 Patent Term Restoration. The parties hereto shall cooperate with
each other in obtaining patent term restoration or supplemental protection
certificates or their equivalents in any country in the Territory where
applicable to Patent Rights. In the event that elections with respect to
obtaining such patent term restoration, supplemental protection certificates or
their equivalents are to be made, the party owning such patent rights shall have
the right to make the election and the other party will abide by such election.

         7.4 Infringement.

             (a) Genelabs and DuPont Merck each shall immediately give notice to
the other of any potential or actual infringement by a third party of any Patent
Rights of which they become aware or of any certification of which they become
aware filed under the United States "Drug Price Competition and Patent Term
Restoration Act of 1984" claiming that Patent Rights are invalid or
unenforceable or that infringement will not arise from the manufacture, use or
sale of a product by a third party.

             (b) The owner of the Patent Rights will have the right to settle
with the infringer or to bring suit or other proceeding at its expense against
the infringer in


                                       37
<PAGE>   42

its own name or in the name of the other party where necessary, after
consultation with the other party; provided, however, that no settlement will be
entered into which increases the payment obligations of the other party without
the prior written consent of the other party. A party shall keep the other party
advised at all times of such suit or proceedings brought. A party may, in its
discretion and at its expense, join the other party as a party to the suit or
other proceeding, provided that the party bringing the action shall retain
control of the prosecution of such suit or proceedings in such event. Each party
will cooperate with the other party in any efforts to protect Patent Rights,
including joining as a party where necessary.

             (c) If the party owning the Patent Rights does not settle with the
infringer or bring suit or other proceeding against the infringer, the other
party may in its discretion, bring suit or other proceeding at its expense
against the infringer, provided however, that the other party shall first
consult with the party owning such Patent Rights as to whether such act(s) by a
third party reasonably constitute infringement and whether it is commercially
advisable to bring such suit or proceeding, as reasonably determined by the
owner of such patent rights. Such owning party shall be kept advised at all
times of all developments in such suit or proceedings brought by the other
party.

             (d) Each party will bear its own expenses with respect to any suit
or other proceeding against an infringer. Any recovery in connection with such
suit or proceeding will first be applied to reimburse each party for its
out-of-pocket expenses, including attorneys' fees.


                                       38
<PAGE>   43

The party controlling the suit will retain the balance of any recovery.

                        ARTICLE VIII TERM AND TERMINATION

         8.1 Term and Expiration. This Agreement shall be effective as of the
Effective Date and unless terminated earlier pursuant to Section 8.2 below, the
terms of this Agreement shall continue in effect on a country-by-country basis
until expiration date of the last obligation of a party to pay fees or royalties
to the other party for the sale of a Licensed Product in that country. Upon
expiration of this Agreement as to any country due to the expiration of the
obligation of a party to pay royalty to the other party for the sale of a
Licensed Product in that country, the licenses hereunder with respect to
Licensed Product shall become fully paid-up, perpetual licenses.

         8.2 Termination for Cause. This Agreement may be terminated by notice
by either party at any time during the term of this Agreement:

             (a) if it is shown by credible evidence that the other party is in
breach of its material obligations hereunder by causes and reasons within its
control and has not cured such breach within ninety (90) days after written
notice requesting cure of the breach; or

             (b) upon the filing or institution of bankruptcy, reorganization,
liquidation or receivership proceedings, or upon an assignment of a substantial
portion of the assets for the benefit of creditors by the other party; provided,
however, in the case of any involuntary bankruptcy proceeding such right to
terminate shall only become effective if the party consents to the involuntary


                                       39
<PAGE>   44

bankruptcy or such proceeding is not dismissed within ninety (90) days after the
filing thereof.

         8.3 Effect of Termination. Expiration or termination of the Agreement
shall not relieve the parties of any obligation accruing prior to such
expiration or termination. Any expiration or early termination of this Agreement
shall be without prejudice to the rights of either party against the other
accrued or accruing under this Agreement prior to termination, including the
obligation to pay milestones, royalties or fees for Licensed Product sold prior
to such termination.

         8.4 Continuation of Agreement. In the event of a breach described in
Section 8.2, as an alternative to terminating the Agreement, the non-breaching
party may in its discretion continue the Agreement, but reduce its payment
obligations to the breaching party [ * ]. All rights and obligations of the
breaching party continue, including licenses under Article IV hereof and payment
obligations to the non-breaching party.


                              ARTICLE IX LIABILITY

         9.1 Indemnification.

             (a) By DuPont Merck. DuPont Merck shall at all times during the
term of this Agreement and thereafter, indemnify, defend and hold harmless
Genelabs, its

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       40
<PAGE>   45

directors, officers, employees and Affiliates, from and against any and all
claim, loss, damage, liability, injury, cost or expense, including without
limitation expenses of litigation and reasonable attorneys' fees, in connection
with any claims made or suits brought against Genelabs by a third party relating
to this Agreement and (i) arising from the negligence, willful misconduct, or
material breach of this Agreement by DuPont Merck, its Affiliates,
subcontractors or agents or (ii) arising out of the death of or injury to any
person or persons or out of any damage to property and resulting from the
production, manufacture, sale, use, lease, consumption or advertisement of
Licensed Product by DuPont Merck, its Affiliates or Sublicensees; provided
however that DuPont Merck's obligation to provide indemnification hereunder
shall be limited to the extent by which any such claim, loss, damage, liability,
injury, cost or expense results from the negligence, willful misconduct, or
material breach of this Agreement by Genelabs.

             (b) By Genelabs. Genelabs shall at all times during the term of
this Agreement and thereafter, indemnify, defend and hold harmless DuPont Merck
and its owners and Affiliates, and their respective directors, officers, and
employees, from and against any and all claim, loss, damage, liability, injury,
cost or expense, including without limitation expenses of litigation and
reasonable attorneys' fees, in connection with any claims made or suits brought
against DuPont Merck by a third party relating to this Agreement and (i) arising
from the negligence, willful misconduct, or material breach of this Agreement by
Genelabs, its Affiliates, subcontractors or agents or (ii) arising out of the
death of or injury to any person or persons or out of any damage to property and
resulting from the production, manufacture, sale, use,


                                       41
<PAGE>   46

lease, consumption or advertisement of Licensed Product by Genelabs, its
Affiliates or Sublicensees; provided however that Genelabs' obligation to
provide indemnification hereunder shall be limited to the extent by which any
such claim, loss, damage, liability, injury, cost or expense results from the
negligence, willful misconduct, or material breach of this Agreement by DuPont
Merck.

         9.2  Insurance.

             (a) DuPont Merck represents and warrants that DuPont Merck is
self-insured, and shall provide liability protection to Genelabs in regard to
events covered by Section 9.1(a). DuPont Merck further represents and warrants
that it has sufficient financial resources enabling it to provide liability
protection, the nature and extent of which is commensurate with usual and
customary industry practices, as determined by DuPont Merck's good faith
assessment.

             (b) Genelabs represents and warrants that it possesses sufficient
insurance to meet its obligations hereunder, and shall provide liability
protection to DuPont Merck in regard to events covered by Section 9.1(b).
Genelabs further represents and warrants that it has sufficient financial
resources enabling it to provide liability protection, the nature and extent of
which is commensurate with usual and customary industry practices, as determined
by Genelabs' good faith assessment.

         9.3 No Implied Warranties. Except as otherwise expressly set forth in
this Agreement, DuPont Merck and Genelabs MAKE NO REPRESENTATIONS AND EXTENDS NO
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT


                                       42
<PAGE>   47

LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT OF THIRD PARTY RIGHTS, AND VALIDITY OF PATENT RIGHTS CLAIMS,
ISSUED OR PENDING.

                             ARTICLE X MISCELLANEOUS

         10.1 Force Majeure. Except with respect to any payment obligation,
neither party shall be held liable or responsible to the other party nor be
deemed to have defaulted under or breached the Agreement for failure or delay in
fulfilling or performing any term of the Agreement when such failure or delay is
caused by or results from causes beyond the reasonable control of the affected
party including, but not limited to, fire, floods, embargoes, war, acts of war
(whether war be declared or not), insurrections, riots, civil commotions,
strikes, lockouts or other labor disturbances, acts of God or acts, omissions or
delays in acting by any governmental authority or the other party.

         10.2 Assignment. This Agreement may not be assigned or otherwise
transferred by either party without the consent of the other party; provided,
however, that the parties may, without such consent, assign this Agreement and
its rights and obligations hereunder to its Affiliates or in connection with the
transfer or sale of all or substantially all of its business to which the
Agreement relates, or in the event of its merger or consolidation or similar
transaction. Any purported assignment in violation of the preceding sentences
shall be void. Any permitted assignee shall assume all obligations of its
assignor under this Agreement.


                                       43
<PAGE>   48

         10.3 Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby, unless the absence of the invalidated provision(s) adversely affect the
substantive rights of the parties. The parties shall in such an instance use
their best efforts to replace the invalid, illegal or unenforceable provision(s)
with valid, legal and enforceable provision(s) which, insofar as practical,
implement the purposes of this Agreement.

         10.4 Notices;. Any payment, notice or other communication pursuant to
this Agreement shall be sufficiently made or given on the date of mailing if
sent to such party by facsimile on such date, with paper copy being sent by
certified first class mail, postage prepaid, or by next day express delivery
service, addressed to it at its address below (or such address as it shall
designate by written notice given to the other party).

         In the case of DUPONT MERCK:

                  Attention:
                  President, DuPont Merck Research Laboratories
                  Research and Development Division
                  The DuPont Merck Pharmaceutical Company
                  974 Centre Road, DuPont Merck Plaza
                  Wilmington, Delaware 19807-2802
                  Phone (302) 695-7008)

                  with copy to:
                  General Counsel


                                       44
<PAGE>   49

                  Legal Division
                  The DuPont Merck Pharmaceutical Company
                  974 Centre Road, DuPont Merck Plaza
                  Wilmington, Delaware 19807-2802
                  Fax (302) 892-8536)

          In the case of Genelabs:

                   Attention: Chief Executive Officer
                   Genelabs Technologies, Inc.
                   505 Penobscot Drive
                   Redwood City, California 94603
                   Phone: (415) 369-9500
                   Fax: (415) 368-0709

                   with copy to:
                   General Counsel
                   Genelabs Technologies, Inc.
                   505 Penobscot Drive
                   Redwood City, CA  94603
                   Fax: (415) 368-0709



         10.5 Applicable Law/Jurisdiction. This Agreement is acknowledged to
have been made in and shall be construed, governed, interpreted and applied in
accordance with the laws of Delaware, without giving effect to its conflict of
laws provisions. Any litigation instituted by DuPont Merck shall be brought in a
state or federal court located in San Francisco, California, and any litigation
instituted by Genelabs shall be brought in a state or federal court located in
Wilmington, Delaware. Each party


                                       45
<PAGE>   50

hereby irrevocably consents to the personal and exclusive jurisdiction and
venue of such courts.

         10.6 Dispute Resolution. In the event that any controversy or claim
shall arise under, out of, in connection with, or relating to this Agreement or
the breach thereof, the party initiating such controversy or making such claim
shall provide to the other party a brief and concise statement of the initiating
party's claims, together with relevant facts supporting them. During a period of
sixty (60) days, or such longer period as may be mutually agreed upon in writing
by the parties, following the date of said notice, the parties shall make good
faith efforts to settle the dispute. Such efforts will include, but shall not be
limited to, full presentation of both parties' claims and responses, with or
without assistance of counsel, before the President of Genelabs and the
President of DuPont Merck, or an equivalent if such positions do not exist in
the respective companies.

         10.7 Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties as to the subject matter hereof. This Agreement
may be amended only by a written instrument duly executed by both parties
hereto.

         10.8 Headings. The captions to the Articles and Sections hereof are not
a part of the Agreement, but are merely guides or labels to assist in locating
and reading the Articles and Sections hereof.

         10.9 Independent Contractors. Genelabs and DuPont Merck are independent
contractors with respect to this Agreement. The relationship between the two
parties


                                       46
<PAGE>   51

created by this Agreement shall not constitute a partnership, joint venture or
agency. Neither Genelabs nor DuPont Merck shall have the authority to make any
statements, representations or commitments of any kind, or to take any action,
which shall be binding on the other.

         10.10 Waiver. The waiver by either party hereto of any right hereunder
or the failure to perform or of a breach by the other party shall not be deemed
a waiver of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.

         10.11 Counterparts. The Agreement may be executed with original or
facsimile signatures in two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.

         10.12 Representations and Warranties. Genelabs hereby represents and
warrants that: (1) it owns the Genelabs Patent Rights and Genelabs Technology
licensed hereunder; (2) no other person or organization presently has any
effective option or license to the Genelabs Patent Rights; (3) Genelabs is not
aware of any existing patent or published application of a third party which
would be infringed by use of the Genelabs Technology as part of the Research
Collaboration; and (4) Genelabs is not aware of any prior art or other reason to
believe that the Genelabs Patent Rights licensed hereunder are invalid or
unenforceable. Each party warrants and represents to the other that it has the
full right and authority to enter into this Agreement, and that it is not aware
of any


                                       47
<PAGE>   52

impediment which would inhibit its ability to perform the terms and conditions
imposed on it by such Agreement.

         10.13 Publicity. Neither party will issue any press release or other
public statement, whether oral or written, disclosing any information relating
to this Agreement that has not previously been approved without the prior
written consent of the other party, provided however, that neither party will be
prevented from complying with any duty of disclosure it may have pursuant to law
or governmental regulation.

         10.14 Use of Names. Neither party will, without prior written consent
of the other party, use the name or any trademark or tradename owned by the
other party, or owned by an Affiliate or parent corporation of the other party,
in any publication, publicity, advertising, or otherwise.

                                    GENELABS TECHNOLOGIES, INC.

                                    By:_______________________________
                                    Title:____________________________
                                    Date:_____________________________

                                    THE DUPONT MERCK PHARMACEUTICAL COMPANY

                                    By:_______________________________
                                    Title:____________________________
                                    Date:_____________________________


                                       48
<PAGE>   53

                                    EXHIBIT A

                             GENELABS PATENT RIGHTS

COUNTRY           PATENT/SERIAL NO.                  TITLE

[ * ]

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       49
<PAGE>   54

                                    EXHIBIT B

                                  RESEARCH PLAN


                   COLLABORATIVE DNA-BINDING DISCOVERY PROGRAM
                                     BETWEEN
                  DUPONT MERCK AND GENELABS TECHNOLOGIES, INC.

[ * ]

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       50
<PAGE>   55

                             Exhibit B (page 2 of 3)

[*]

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       51
<PAGE>   56

                             Exhibit B (page 3 of 3)

                                    TIMELINES

       [*]

[*]      Confidential treatment requested pursuant to a request for confidential
         treatment filed with the Securities and Exchange Commission. Omitted
         portions have been filed separately with the Commission.


                                       52