Document:

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                                                                   EXHIBIT 10.18

Redacted portions have been replaced with [**]. The redacted material is subject
to a request for confidential treatment and has been filed separately with the
Securities and Exchange Commission.

                  LICENSE AND RESEARCH COLLABORATION AGREEMENT

                                     BETWEEN

                           GENELABS TECHNOLOGIES, INC.

                                       AND

                              GILEAD SCIENCES, INC.

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                  LICENSE AND RESEARCH COLLABORATION AGREEMENT

         This Agreement (the "AGREEMENT"), entered into on September 29, 2004
with an effective date (the "EFFECTIVE DATE") of October 1, 2004, is made
between Genelabs Technologies, Inc., a California corporation having its
principal place of business at 505 Penobscot Drive, Redwood City, CA 94063
("Genelabs"), and Gilead Sciences, Inc., a Delaware corporation having its
principal place of business at 333 Lakeside Drive, Foster City, CA 94404
("Gilead").

                                  1. RECITALS:

         WHEREAS, Genelabs has a research program for the discovery and
optimization of nucleoside inhibitors of the NS5b polymerase in hepatitis C
virus;

         WHEREAS, Gilead and Genelabs desire to enter into a research
collaboration to discover and develop Collaboration Compounds (as hereinafter
defined) upon the terms and conditions set forth herein;

         WHEREAS, Gilead desires to obtain the right to develop and
commercialize Products in the Field (as hereinafter defined) arising from the
collaboration and Genelabs desires to grant such rights, in each case upon the
terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the Parties hereby agree as follows:

1.       DEFINITIONS

         Unless specifically set forth to the contrary herein, the following
terms, whether used in the singular or plural, shall have the respective
meanings set forth below. References to "Articles", "Sections" and "subsections"
in this Agreement shall be to Articles, Sections and subsections respectively,
of this Agreement unless otherwise specifically provided:

         "AFFILIATE" shall mean any corporation or other entity which has
Corporate Control of, is under Corporate Control by, or is under common
Corporate Control with a Party to this Agreement. An entity shall be an
Affiliate of a Party for only so long as such Corporate Control exists. As used
in this Agreement, unless otherwise specified, "Gilead" shall include its
Affiliates and "Genelabs" shall include only those of its Affiliates that are
not Excluded Affiliates.

         "CALENDAR QUARTER" shall mean the respective periods of three (3)
consecutive calendar months ending on March 31, June 30, September 30 and
December 31.

         "CALENDAR YEAR" shall mean each successive period of twelve (12) months
commencing on January 1 and ending on December 31.

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         "CHANGE OF CONTROL" means with respect to a Party the occurrence of any
of the following: (a) any consolidation or merger of a Party with or into any
Third Party, or any other corporate reorganization involving a Third Party, in
which those persons or entities that are stockholders of such Party immediately
prior to such consolidation, merger or reorganization own less than fifty
percent (50%) of the surviving entity's voting power immediately after such
consolidation, merger or reorganization; (b) a change in the legal or beneficial
ownership of fifty percent (50%) or more of the voting securities of any Party
(whether in a single transaction or series of related transactions) where,
immediately after giving effect to such change, the legal or beneficial owner of
more than fifty percent (50%) of the voting securities of such Party is a Third
Party; or (c) the sale, transfer, lease, license or other disposition to a Third
Party of all or substantially all of a Party's assets in one or a series of
related transactions. As used in this definition, "Party" shall exclude
Affiliates under Corporate Control by or under common Corporate Control with
such Party.

         "COLLABORATION COMPOUND" shall mean a Nucleoside that satisfies the
chemical and technical requirements set forth on Exhibit 1.A, and its Related
Compounds and which:

         (a) is or was synthesized by or for Genelabs on or before the Effective
Date or during the Research Program Term; or

         (b) is [**] synthesized by or for Gilead after the Effective Date;

provided, however, that Collaboration Compound shall not include any Excluded
Compound or any Gilead Compound. For purposes of Section 3.2 ("Selection of
Collaboration Compounds for Development") only, a Nucleoside and its Related
Compounds shall together be deemed a single Collaboration Compound.

         "COLLABORATION COMPOUND PRODUCTS" shall mean any preparations in final
form, bulk form or other form containing as an active pharmaceutical ingredient
one or more Selected Compounds for sale by prescription, over-the-counter or any
other method, including without limitation any Combination Product.

         "COLLABORATION KNOW-HOW" shall mean Know-How owned or Controlled by
Genelabs as of the Effective Date, or made solely by Genelabs employees or
contractors, or jointly by the Parties, during the Research Program Term, and
that, in each case, is [**]; but excluding, in each case, Collaboration Patents.

         "COLLABORATION PATENTS" shall mean Patents claiming any Invention

                  (a)      owned or Controlled by Genelabs as of the Effective
                           Date; or

                  (b)      made solely by Genelabs employees or contractors, or
                           jointly by the Parties, during the Research Program
                           Term,

that, in each case, is [**]. "Collaboration Patents" include the patent
applications listed on Exhibit 1.B.

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         "COLLABORATION TECHNOLOGY" shall mean the Collaboration Know-How and
Collaboration Patents.

         "COMBINATION PRODUCT" shall mean a Product which includes one or more
pharmaceutically active ingredients other than a Collaboration Compound in
combination with at least one pharmaceutically active ingredient of a
Collaboration Compound. All references to Product in this Agreement shall be
deemed to include Combination Product.

         "COMMERCIALLY DILIGENT EFFORTS" shall mean those efforts to
commercialize Collaboration Compound Products that are consistent with the usual
practice followed by [**] in pursuing the clinical development, regulatory
approval, commercialization and marketing of its own pharmaceutical products
with a comparable potential market, risk, and revenues.

         "CONFIDENTIAL INFORMATION" shall have the meaning given such term in
Section 4.1 ("Nondisclosure Obligations").

         "CONTROLLED" means, with respect to an item of Information or
intellectual property right, that a Party owns or has a license to such item or
right and has the ability to disclose to the other Party and grant a license or
sublicense under such item or right as provided for in this Agreement without
violating the terms of any agreement with or other obligation to any Third
Party.

         "CORPORATE CONTROL" shall have the following meaning: A corporation or
other entity shall be regarded as having Corporate Control of another
corporation or entity if it owns or directly or indirectly controls more than
fifty percent (50%) (or, if less, the maximum ownership interest permitted by
law of a particular jurisdiction) 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
fifty percent (50%) or more of the members of the governing body of the
corporation or other entity.

         "EXCLUDED AFFILIATE" shall mean a Third Party over which Genelabs had
no Corporate Control at the Effective Date which becomes an Affiliate of
Genelabs after the Effective Date.

         "EXCLUDED COMPOUNDS" shall mean:

         (a) compounds: (i) that are developed by Gilead independently or
jointly with a Third Party; and/or (ii) to which Gilead obtains commercial
rights from a Third Party (by license, acquisition, assignment, joint
development or otherwise), and, in either case: [**] such compound proposed as
an Excluded Compound shall be determined in accordance with US patent law.

         (b) those compounds identified by Gilead on Exhibit 1.C hereto (which
exhibit Gilead may, at its option, update during the term of this Agreement with
other compounds which satisfy all of the criteria in "(a)" above).

         "FDA" shall mean the United States Food and Drug Administration, or a
successor federal agency thereto.

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         "FTE RATE" shall mean the amount Gilead will pay Genelabs over a
consecutive twelve (12) month period during the Research Program Term to support
one (1) Genelabs FTE in the Research Program. The FTE Rate will be U.S. [**]
Dollars (USD $[**]) per FTE per year through the third calendar quarter of 2006.
The FTE Rate for the ensuing one-year period shall be U.S. [**] Dollars (USD
$[**]) per FTE per year and shall increase annually thereafter by [**]. The FTE
Rate shall include all personnel (including normal vacations, sick days and
holidays and employee benefits), equipment, reagents and all other expenses
including support staff and overhead for or associated with an FTE, provided
that payment by Gilead of the FTE Rate shall not be deemed to give Gilead any
ownership interest in any equipment, reagents or other property purchased by
Genelabs using such research funding.

         "FAIR MARKET VALUE" means the cash consideration that a willing seller
would realize from an unaffiliated, unrelated and willing buyer in an arms'
length sale of the same item sold in the same quantity and at the same time and
place.

         "FIELD" shall mean all human and animal therapeutic, diagnostic, and
prophylactic uses, including, without limitation, the treatment, prevention and
prophylaxis of hepatitis C viral infections.

         "FIRST COMMERCIAL SALE" shall mean, with respect to any Product, the
first sale for end use or consumption of such Product in a country after all
required Regulatory Approvals with respect to such Product have been granted by
the Regulatory Authority of such country. For purposes of clarification, the
first sale for end use or consumption of a Product in a country after
conditional approval has been granted will constitute a First Commercial Sale
for purposes of this Agreement.

         "FULL TIME EQUIVALENT" or "FTE" shall mean the equivalent of a
full-time scientist's work time over a twelve-month period for scientific work
on or directly related to the Research Program. For purposes of the definition
of "FTE", such work time includes, without limitation, experimental laboratory
work, recording and writing up results, reviewing literature and references,
participating in scientific discussions, continuing education, seminars and
symposia, managing and directing scientific staff, and carrying out management
duties directly related to the Research Program, as well as normal vacations,
sick days and holidays.

         "GENELABS KNOW-HOW" shall mean Know-How owned or Controlled by
Genelabs, directed to [**], but excluding Collaboration Know-How.

         "GENELABS PATENTS" shall mean Patents owned or Controlled by Genelabs,
claiming any Genelabs Know-How, but excluding Collaboration Patents.

         "GENELABS TECHNOLOGY" shall mean the Genelabs Know-How and Genelabs
Patents.

         "GILEAD-ASSUMED PATENT COSTS" shall have the meaning given such term in
Section 7.3.4 ("Patent Fees").

         "GILEAD COMPOUNDS" shall mean compounds (i) that are developed by
Gilead or jointly with a Third Party and/or (ii) to which Gilead obtains
commercial rights from a Third

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Party (by license, acquisition, assignment, joint development or otherwise),
and, in either case: [**].

         "GILEAD COMPOUND PRODUCT" shall mean any preparation in final form,
bulk form or other form containing as an active pharmaceutical ingredient one or
more Gilead Compounds for sale by prescription, over-the-counter or any other
method, including without limitation any Combination Product.

         "GILEAD KNOW-HOW" shall mean Know-How owned or Controlled by Gilead and
useful in the conduct of the Research Program, excluding Collaboration Know-How.

         "GILEAD PATENTS" shall mean Patents owned or Controlled by Gilead
claiming Inventions the practice of which would be useful in the conduct of the
Research Program, but excluding Collaboration Patents

         "GILEAD TECHNOLOGY" shall mean the Gilead Know-How and Gilead Patents.

         "GOOD LABORATORY PRACTICES" or "GLP" shall mean Good Laboratory
Practices regulations as promulgated by the United States Food and Drug
Administration and any successor governmental authority having substantially the
same function, as such regulations may be amended from time to time, and any
comparable foreign standards as applicable.

         "HCV" shall mean all subtypes of hepatitis C virus.

         "HCV FIELD" shall mean the treatment of chronic hepatitis C viral
infections in humans.

         "IND" shall mean an Investigational New Drug application, Clinical
Study Application, Clinical Trial Exemption, or similar application or
submission for approval to conduct human clinical investigations filed with or
submitted to a Regulatory Authority in conformance with the requirements of such
Regulatory Authority.

         "INFORMATION" shall mean any and all information, data, results,
inventions, trade secrets, techniques, material, or compositions of matter of
any type or kind, including without limitation all Know-How and all other
scientific, pre-clinical, clinical, regulatory, manufacturing, marketing,
personnel, financial, legal and commercial information or data, whether
communicated in writing or orally or by any other method, which is disclosed by
one Party to the other Party in connection with this Agreement, provided that
the foregoing is related to the scope of this Agreement.

          "INVENTION" means any process, method, use, composition of matter,
article of manufacture, discovery or finding, whether or not patentable.

         "JRC" shall mean the joint research committee established to facilitate
the Research Program as more fully described in Section 2.4 ("Joint Research
Committee").

         "KNOW-HOW" shall mean all tangible and intangible (a) techniques,
technology, practices, trade secrets, inventions (whether patentable or not),
methods, knowledge, know-

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how, skill, experience, test data and results (including pharmacological,
toxicological and clinical test data and results), analytical and quality
control data, results or descriptions, software and algorithms and (b)
compounds, compositions of matter, cells, cell lines, assays, animal models and
physical, biological or chemical material.

         "MAJOR MARKET" shall mean each of the United States of America,
European Market and Japan. For purposes of this definition and Section 5.3,
"European Market" shall mean only the United Kingdom, France, Germany, Italy and
Spain.

         "NDA" shall mean a New Drug Application, Biologics License Application,
Worldwide Marketing Application, Regulatory Approval application or similar
application or submission for Regulatory Approval of a Product filed with a
Regulatory Authority to obtain marketing approval for a biological or
pharmaceutical product in that country or in that group of countries.

         "NET SALES" shall mean, with respect to a given period of time, the
total amount invoiced by Gilead or its Related Gilead Parties for sales of
Products to a Third Party (whether an end-user, wholesaler or otherwise) in the
Territory, less the following deductions with respect to such sale, to the
extent applicable to the Product and to the extent not already included in the
amounts invoiced and thereafter actually allowed and taken: (a) trade, cash and
quantity credits, discounts, credits, refunds or wholesaler fees for inventory
management or similar purposes [**]; (b) allowances or credits for returns or
rejected Product and allowance for bad debt expense; (c) prepaid freight and
insurance; (d) sales taxes and other governmental charges (including value added
and similar taxes, but solely to the extent not otherwise creditable or
reimbursed and excluding any income tax) actually paid in connection with the
sale; and (e) customary rebates (including, for this purpose, discounts provided
by means of chargebacks or rebates) actually granted to managed health care
organizations, federal, state, or local governments (or their agencies)
(including without limitation Medicaid rebates), all to the extent in accordance
with U.S. generally accepted accounting principles ("GAAP") consistently applied
across all of its products. If any credit, rebate, refund or other deduction is
described in more than one category above, it shall be deducted only once from
Net Sales.

         Where Product is sold in the form of a Combination Product, Net Selling
Price for such Combination Product for purposes of determining royalties payable
under this Agreement will be calculated by multiplying the actual Net Selling
Price of such Combination Product by the fraction A/(A+B) where A is the Net
Selling Price for the stock keeping unit most comparable in formulation and
dosing to that used for the Combination Product of the Product containing that
Collaboration Compound as the sole active ingredient, if sold separately, in
such country during the relevant fiscal quarter, and B is the Net Selling Price
for the stock keeping unit, most comparable in formulation and dosing to that
used for the Combination Product, of any other active ingredient, if sold
separately, in such country during the relevant fiscal quarter.

         For clarity, if there are three or more active ingredients (including
the Collaboration Compound), additional B terms calculated in the same manner,
shall be included in the denominator so that such fraction shall be A/(A+B1+
B2+...). If, on a country-by-country

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basis, one or more of the other active ingredients in the Combination Product
are not sold separately in said country, Net Selling Price for the purpose of
determining royalties payable under this Agreement for the Combination Product
shall be calculated by multiplying the actual Net Selling Price of such
Combination Product by the fraction A/C where A is the Net Selling Price for the
stock keeping unit most comparable in formulation and dosing to that used for
the Combination Product of the Product containing the relevant Collaboration
Compound as the sole active ingredient, if sold separately, in such country
during the relevant fiscal quarter and C is the Net Selling Price for the
Combination Product in such country during the relevant fiscal quarter. If, on a
country-by-country basis, the Product containing a Collaboration Compound as the
sole active ingredient is not sold separately in said country during the
relevant fiscal quarter but one or more of the other active ingredients in the
Combination Product are sold separately in said country during the relevant
fiscal quarter, the Net Selling Price for the Combination Product shall be
calculated by multiplying the actual Net Selling Price of such Combination
Product by the fraction (1-(D/C)) where D is the Net Selling Price for the stock
keeping unit most comparable in formulation and dosing to that used for the
Combination Product of the product containing the other active ingredient as the
sole active ingredient and C is the Net Selling Price for the Combination
Product in such country during the relevant fiscal quarter. If, on a
country-by-country basis, the Product containing a Collaboration Compound as the
sole active ingredient is not sold separately and one or more of the other
active ingredients in the Combination Product are not sold separately in such
country during the relevant fiscal quarter Net Selling Price for the purposes of
determining royalties of the Combination Product shall be deemed to be the Net
Selling Price of such Combination Product multiplied by a fraction, the
numerator of which is the number of Collaboration Compounds in such Combination
Product and the denominator of which is the number of all active ingredients in
such Combination Product.

         Whenever Net Selling Price is calculated for Combination Products, it
shall be multiplied by the number of units sold to determine Net Sales. The Net
Sales so calculated shall never be less than zero.

         For clarification, sale of a Product by Gilead or its Related Gilead
Parties to Gilead or Related Gilead Parties for resale by such entity to an
unaffiliated Third Party shall not be deemed a sale for purposes of "Net Sales"
hereunder, but the sale of such Product by such entity to an unaffiliated Third
Party (whether an end-user, wholesaler, distributor, or otherwise) shall be
deemed to be a sale by Gilead of a Product to a Third Party for purposes of
calculating Net Sales hereunder and royalties owed by Gilead under Section 5.5
("Royalties"). Further, transfers or dispositions of Products in commercially
reasonable quantities (consistent with Gilead's usual practice as applied to
other compounds and products of a similar nature) and without receipt of
compensation for charitable or promotional purposes or for preclinical or
clinical development, manufacturing scale-up or regulatory purposes prior to
receiving Regulatory Approval, or if sold on a not-for-profit basis in countries
outside of the Major Markets (provided, however, that if Gilead has other
therapies for the treatment of HCV, that such other therapies are also made
available on a not-for-profit basis in such other countries) in a program where
sales of Gilead's other HCV therapeutic products also are made available on a
not-for-profit basis, shall not be deemed "sales" for purposes of "Net Sales"
hereunder. For purposes of this definition, "Product" includes Collaboration
Compounds.

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         "NET SELLING PRICE" shall mean the Net Sales of product divided by the
number of units of product sold.

         "NUCLEOSIDE" shall mean a compound which [**]. By way of example and
not limitation, [**]. "Nucleoside" shall also include compounds wherein the
[**].

         "PARTY" shall mean Gilead or Genelabs. Unless otherwise specified,
"Party" with respect to Gilead shall include its Affiliates and with respect to
Genelabs shall include only those of its Affiliates that are not Excluded
Affiliates.

         "PATENT COSTS" shall mean all reasonable and actual out-of-pocket costs
incurred by Gilead and Genelabs associated with filing, prosecuting, issuing and
maintaining Patents including interference, opposition, reexamination and
reissue actions within the Collaboration Technology; provided that a Party shall
have a right to review and comment on any such costs (including statements
issued by Collaboration Patent Counsel) billed to the other Party that exceed
$[**] USD for any calendar month prior to payment by the other Party.

         "PATENTS" shall mean (a) all patents, certificates of invention,
applications for certificates of invention, and patent applications, including
without limitation patent applications under the Patent Cooperation Treaty and
the European Patent Convention, and abandoned patent applications throughout the
world, together with (b) any renewal, divisional, continuation (in whole or in
part), or continued prosecution applications of any of such patents,
certificates of invention and patent applications, and any all patents or
certificates of invention issuing thereon, and any and all reissues,
reexaminations, extensions, divisions, renewals, substitutions, confirmations,
supplemental protection certificates, registrations, revalidations, revisions,
and additions of or to any of the foregoing, and any foreign counterparts of any
of the foregoing and any other patents and patent applications claiming priority
back to any of the foregoing.

         "PHASE I CLINICAL TRIAL" shall mean a human clinical trial in any
country to initially evaluate the safety and/or pharmacological or antigenic
effect of a product in humans or that would otherwise satisfy the requirements
of 21 CFR 312.21(a) or the equivalent laws, rules or regulations in the European
Union or Japan.

         "PHASE II CLINICAL TRIAL" shall mean a human clinical trial in any
country to initially evaluate the effectiveness of a product (whether as a
primary or secondary endpoint) for a particular indication or indications in
humans with the disease or indication under study or that would otherwise
satisfy the requirements of 21 CFR 312.21(b) or the equivalent laws, rules or
regulations in the European Union or Japan.

         "PHASE III CLINICAL TRIAL" shall mean a pivotal human clinical trial in
any country the results of which could be used to establish safety and efficacy
of a product to support Regulatory Approval and as a basis for a NDA or that
would otherwise satisfy the requirements of 21 CFR 312.21(c) or the equivalent
laws, rules or regulations in the European Union or Japan.

         "PRE-CLINICAL DEVELOPMENT" shall mean initiation of dosing of a
Collaboration Compound in a GLP in vivo toxicology study.

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         "[**].

         "PREVIOUSLY KNOWN INFORMATION" shall mean Information: (A) that at the
time it was received from Genelabs by Gilead or its Third Party collaborator (i)
was previously known by Gilead or its collaborator as documented by Gilead's or
its Third Party collaborator's business records, (ii) had been disclosed to
Gilead or its Third Party collaborator on a non-confidential basis by a Third
Party who was lawfully entitled to do so, or (iii) had been independently
discovered or developed by Gilead or its collaborator without the use of
Know-How provided by Genelabs, as documented by Gilead's or its collaborator's
business records; or (B) that at the time of [**], was in the public domain
other than as a result of any breach of this Agreement by Gilead.

         "PRODUCT(S)" shall mean Collaboration Compound Products and Gilead
Compound Products.

         "[**]" shall have the meaning described in Exhibit 1.D.

         "REGULATORY APPROVAL" means all approvals necessary to market and sell
a Product in a particular country or jurisdiction, including approval of pricing
and reimbursement in countries where such approvals are required before
commercial sale.

         "REGULATORY AUTHORITY" shall mean any applicable government regulatory
authority necessary to obtain approval to manufacture, market and sell a Product
in the Territory, including, in the United States, the FDA and any successor
governmental authority having substantially the same function.

         "RELATED COMPOUNDS" shall have the meaning described in Exhibit 1.E.

         "RELATED GILEAD PARTY" shall mean Gilead's sublicensees (which term
does not include distributors) permitted under this Agreement. Notwithstanding
the foregoing, in no event shall Genelabs be considered a Related Gilead Party.

         "RESEARCH PLAN" means the plan attached hereto as Exhibit 1.F that sets
out the research work to be performed by Genelabs and Gilead in conducting the
Research Program, as such plan may be amended or modified by the Parties as
contemplated under this Agreement.

         "RESEARCH PROGRAM" shall mean the research activities undertaken by
either or both of the Parties hereto as set forth in Article 2 ("Research
Program") and the Research Plan.

         "RESEARCH PROGRAM TERM" shall mean the duration of the Research
Program, as it may be extended in Section 2.7 ("Research Program Term").

         "REVERSION COMPOUNDS" shall have the meaning set forth in Section 3.2
("Selection of Collaboration Compounds for Development").

         "SELECTED COMPOUNDS" shall have the meaning set forth in Section 3.2
("Selection of Collaboration Compounds for Development").

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         "SELECTION NOTICE" shall have the meaning set forth in Section 3.2
("Selection of Collaboration Compounds for Development").

         "TERRITORY" shall mean all of the countries in the world, and their
territories and possessions.

         "THIRD PARTY" shall mean an entity other than Gilead and its Related
Gilead Parties, and Genelabs.

         "VALID PATENT CLAIM" shall mean a claim of an issued and unexpired
Patent included within the Collaboration Technology or the Genelabs Technology,
which has not been revoked or held unenforceable or invalid by a decision of a
court or other governmental agency of competent jurisdiction, and which is not
appealable or has not been appealed within the time allowed for appeal, and
which has not been disclaimed, denied or admitted to be invalid or unenforceable
through reissue, re-examination or disclaimer or otherwise.

2.       RESEARCH PROGRAM

         2.1 GENERAL.

         2.1.1 IDENTIFICATION AND CONTRIBUTION OF COLLABORATION COMPOUNDS.
Collaboration Compounds will become available for research and development in
the Research Program as follows:

         (a) Genelabs has disclosed, in Exhibit 2.1.1 hereto, all Collaboration
Compounds which Genelabs has determined satisfy the criteria in Exhibit 1.A
("Criteria for Collaboration Compounds").

         (b) Each disclosure by Genelabs of Collaboration Compounds shall
include sufficient information as is available to Genelabs for Gilead to
determine whether to take such Collaboration Compounds into Pre-Clinical
Development and to further develop the Collaboration Compounds into
Collaboration Compound Products. Genelabs also shall provide to Gilead
reasonable research quantities of any Collaboration Compound upon Gilead's
request.

         (c) During the Research Program Term, Genelabs shall disclose
additional Collaboration Compounds promptly after they are identified by
Genelabs or by the parties pursuant to the Research Program by delivering to
Gilead an amended and updated Exhibit 2.1.1. Within thirty (30) days after the
Effective Date, and again within thirty (30) days after receipt of such updated
Exhibit 2.1.1, pursuant to this Section 2.1.1, Gilead shall respond to the JRC
whether it has determined that a compound so disclosed is a Collaboration
Compound. In the event that, within such thirty (30) day period, Gilead does not
so respond to the JRC that it has determined that a compound so disclosed is a
Collaboration Compound, such disclosed Collaboration Compound shall be deemed to
be a Collaboration Compound for all purposes under this Agreement. If Gilead in
its response determines that a compound is not a Collaboration Compound,
Genelabs may within ten (10) days of Gilead's response, notify Gilead in writing
that it disagrees with Gilead's determination and may request supporting
evidence that verifies Gilead's determination. If Genelabs fails to notify
Gilead

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within the ten (10) day period that it disagrees with Gilead's determination,
then the compound shall be deemed to not be a Collaboration Compound. If within
ten (10) days of receipt of any supporting evidence from Gilead, Genelabs still
disagrees with Gilead's determination, Genelabs shall notify Gilead in writing
of its disagreement and shall initiate a good faith meeting between the Parties.
In the event that the Parties cannot, after good faith efforts, reach agreement
on the issue, such issue shall be referred to the Executive Vice President of
Research and Development for Gilead and the Vice President, Research for
Genelabs. Such officers of the Parties shall meet promptly thereafter and shall
negotiate in good faith to resolve such issue. If they cannot resolve such issue
within thirty (30) days of commencing such negotiations, the matter shall be
referred to arbitration under Section 11.6. This procedure also shall be used if
Genelabs notifies Gilead in writing that Genelabs believes a compound [**].

         (d) A final disclosure of any remaining Collaboration Compounds not
previously disclosed by Genelabs shall be made by Genelabs within thirty (30)
days after the conclusion of the Research Program Term.

         2.1.2    RESEARCH PLAN.

         (a) Genelabs and Gilead shall engage in the Research Program, upon the
terms and conditions set forth in this Agreement. The activities to be
undertaken in the course of the Research Program are set forth in the Research
Plan.

         (b) The Research Plan specifies the tasks to be conducted by the
Parties and research milestones of the Research Program, and allocates Research
Program responsibilities and resources between the Parties in a manner
consistent with this Agreement. In the event of any conflict between the
Research Plan and this Agreement, this Agreement shall prevail.

         (c) The Research Plan may be amended from time to time by the Parties,
using the procedure specified in this Section 2.1.2(c). The JRC first shall
consider and recommend any suggested amendments in writing, and shall recommend
them for adoption by the Parties. Such amendments, if agreed to by the Parties,
shall be effective when approved in writing and signed by the Executive Vice
President of Research and Development for Gilead and the Vice President,
Research for Genelabs.

         2.1.3 RESPONSIBILITIES OF THE PARTIES. Unless otherwise agreed by the
Parties, Genelabs shall be responsible for [**].

         2.2 CONDUCT OF RESEARCH.

         Subject to the terms and conditions of this Agreement, each Party shall
be responsible for managing and controlling their personnel and their respective
tasks assigned under the Research Plan. Each Party shall conduct the Research
Program in good scientific manner, and in compliance in all material respects
with all requirements of applicable laws, rules and regulations to attempt to
achieve their objectives efficiently and expeditiously. Each Party shall proceed
diligently and in a timely manner with the work set out in the Research Program
and shall allocate sufficient time, effort, equipment and facilities to the
Research Program and use personnel with sufficient skills and experience as are
required to accomplish the Research

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** CONFIDENTIAL TREATMENT REQUESTED

Program in accordance with the terms of this Agreement and the Research Plan. In
no event shall Genelabs be obligated to devote to the Research Program more than
the number of FTEs being funded by Gilead under this Agreement. The Parties
acknowledge and understand that neither Party guarantees the success of the
Research Program undertaken hereunder.

         Genelabs shall be entitled to utilize the service of Third Parties to
perform Research Program activities only upon the prior written consent of
Gilead (not to be unreasonably withheld) or as specifically set forth in the
Research Plan, provided that Genelabs shall obtain the written agreement of each
such Third Party, prior to the time such Third Party initiates work, to (a)
assign ownership of Inventions made in the course of Research Program activities
to Genelabs and (b) maintain confidentiality of any Research Program activities
or information, and any Confidential Information in accordance with Section 4.1.

         2.3 GENELABS' FTES.

         2.3.1 During the first three (3) years of the Research Program Term,
and the first year of any extension thereafter, Genelabs shall dedicate [**]
FTEs to the Research Program per twelve (12) month period to work directly on
the Research Program, or such greater number of FTEs as agreed in writing by the
Parties. Thereafter Genelabs shall dedicate such number of FTEs to the Research
Program per twelve (12) month period as agreed in writing by the Parties. All
such FTEs shall be funded by Gilead in accordance with Section 5.2.

         2.3.2 Genelabs shall ensure that each FTE that works on the Research
Program is qualified by appropriate experience and qualifications to perform the
Research Program work assigned to such FTE in a capable and professional manner.

         2.4 JOINT RESEARCH COMMITTEE.

         The Parties shall establish a committee to function during the Research
Program Term to facilitate the Research Program as follows:

         2.4.1 COMPOSITION OF THE JOINT RESEARCH COMMITTEE. Promptly after the
Effective Date, the Parties shall establish a joint research committee (the
"JRC") composed of three (3) named representatives of Gilead and three (3) named
representatives of Genelabs. Each Party shall appoint its respective
representatives to the JRC from time to time, and may substitute one or more of
its representatives, in its sole discretion, effective upon notice to the other
Party of such change. These representatives shall have appropriate technical
credentials, experience and knowledge, and ongoing familiarity with the Research
Program. Additional representatives or consultants may from time to time, by
mutual consent of the Parties, be invited to attend JRC meetings, subject to
such representative's and consultant's written agreement to comply with the
confidentiality and non-use obligations equivalent to those set forth in Article
4, and provided that such additional representatives shall have no vote. Each
Party shall bear its own expenses related to the attendance of such meetings by
its representatives. The JRC shall be chaired by a representative of Gilead. The
JRC's decision-making authority shall be limited to scientific and technical
matters related to the conduct of the Research Program. Decisions of the JRC
shall be made by unanimous vote, with each Party's representatives on the JRC
collectively having one (1) vote.

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** CONFIDENTIAL TREATMENT REQUESTED

         In the event that the JRC cannot or does not, after good faith efforts,
reach agreement on an issue, such issue shall be referred to the Executive Vice
President of Research and Development for Gilead and the Vice President,
Research for Genelabs. Such officers of the Parties shall meet promptly
thereafter and shall negotiate in good faith to resolve such issue. If they
cannot resolve such issue within thirty (30) days of commencing such
negotiations, then the resolution and/or course of conduct shall be determined
by Gilead. In no event shall the JRC have the right:

         (a) to modify or amend the terms and conditions of this Agreement;

         (b) to make any decisions or determinations with respect to the
preparation, filing, prosecution, maintenance, enforcement or defense of Patents
(which decisions shall be made in accordance with Article 7);

         (c) to determine which personnel of a Party perform Research Program
activities or act as such Party's representatives on the JRC;

         (d) to modify or amend the Research Plan in any manner that would
require Genelabs to devote a number of FTEs to the Research Program other than
that specified in, or agreed upon in accordance with, Section 2.3 or to incur
expenses not contemplated by this Agreement;

         (e) to review, direct or control the commercialization or marketing of
any Product;

         (f) to determine any such issue in a manner that would conflict with
the express terms and conditions of this Agreement.

         2.4.2 MEETINGS. The JRC shall meet in accordance with a schedule
established by mutual written agreement of the Parties, but no less frequently
than once per Calendar Quarter, with the location for such meetings alternating
between Genelabs' and Gileads' San Francisco Bay Area, California facilities (or
such other locations as is mutually agreed by the Parties). In addition, either
Party may call for non-scheduled meetings of the JRC for good cause, which shall
occur at mutually agreeable times. Alternatively, the JRC upon mutual agreement
may meet by means of teleconference, videoconference or other similar
communications equipment. The JRC shall confer regarding the status of the
Research Program, review relevant data, consider and advise on any technical
issues that arise, set research priorities, and review and advise on any
budgetary and economic matters relating to the Research Program which is
referred to the JRC. No JRC meeting may be conducted unless at least two (2)
representatives of each Party are participating. After the end of the Research
Program Term, the JRC may choose to reduce the frequency of their meetings or
disband, as appropriate based on the reduced need for oversight of the
collaboration.

         2.4.3 MINUTES. The JRC chair, or his/her designee, shall have
responsibility for preparing definitive minutes of each JRC meeting, a draft of
which shall be circulated for comment to all members of the JRC within ten (10)
business days after the relevant meeting. Such minutes shall provide a
description, in reasonable detail, of the Research Program progress to date, and
of the discussions at the meeting, a list of any actions or determination
approved by the JRC and any disagreements not resolved by the JRC. The Project
Leaders for

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** CONFIDENTIAL TREATMENT REQUESTED

the Parties shall discuss any comments on such minutes and finalize the minutes
by no later than thirty (30) business days after the meeting. Minutes will be
approved at the next JRC meeting.

         2.4.4 PROJECT LEADERS. Gilead and Genelabs each shall appoint a person
(a "PROJECT LEADER") (who need not be a member of the JRC) to coordinate its
part of the Research Program. The Project Leaders shall be the primary contact
between the Parties with respect to the Research Program. Each Party shall
notify the other Party as soon as practicable upon changing this appointment.

         2.5 EXCHANGE OF INFORMATION. Upon execution of this Agreement, and from
time to time as necessary during the Research Program Term, Genelabs shall
disclose to Gilead in English all Collaboration Know-How not previously
disclosed and such Genelabs Know-How as is reasonably necessary, in Genelabs'
reasonable judgment, for the performance by Gilead of its responsibilities under
the Research Program or the manufacture, use or sale of Collaboration Compounds
and Products in the HCV Field. From time to time as necessary during the
Research Program Term, Gilead shall disclose to Genelabs all of its
Collaboration Know-How not previously disclosed, as is reasonably necessary, in
Gilead's reasonable judgment, for the performance by Genelabs of its
responsibilities under the Research Program.

         2.6 RECORDS AND REPORTS.

         2.6.1 RECORDS. Genelabs and Gilead shall each maintain records, in
sufficient detail and in good scientific manner appropriate for patent and
regulatory purposes, in laboratory notebooks (or equivalent), which shall fully
and properly reflect all work done and results achieved in the performance of
the Research Program by such Party.

         2.6.2 COPIES AND INSPECTION OF RECORDS. No more frequently than once
each Calendar Year during the Research Program Term and for six (6) months
thereafter, each Party shall have the right, during normal business hours and
upon reasonable notice, to inspect and copy all records of the other Party
referred to in Section 2.6.1; provided, however, that neither Party shall have
the right to review or copy records to the extent that such records contain
information that does not relate [**], and either Party, in lieu of providing
such access to its records, may elect to provide copies of the relevant records
to the other Party. The receiving Party shall maintain such records and the
information disclosed therein in confidence in accordance with Section 4.1
("Nondisclosure Obligation").

         2.6.3 DOCUMENTATION OF INVENTIONS. To protect Patents under U.S. law in
any Inventions within the Research Program, each Party agrees to maintain a
policy which requires its employees to record and maintain all data and
information developed during the Research Program in such a manner as to enable
the Parties to use such records to establish the earliest date of invention
and/or diligence to reduction to practice, and to assign ownership of all
inventions to the Party. At a minimum, the policy shall require such individuals
to record all inventions generated by them in standard laboratory notebooks (or
equivalent) that are dated and corroborated by non-inventors on a regular,
contemporaneous basis.

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** CONFIDENTIAL TREATMENT REQUESTED

         2.6.4 RESEARCH REPORTS. Each Party shall provide such progress reports
as determined by the JRC. Within thirty (30) days after the termination of the
Research Term, each Party shall deliver to the other a final report.

         2.7 RESEARCH PROGRAM TERM.

         Except as otherwise provided herein, the Research Program Term shall
commence on October 1, 2004 and continue for a period of three (3) years
thereafter. Gilead may, in its sole discretion, extend the Research Program Term
for up to an additional one (1) year, by providing Genelabs with written notice
of such election at least [**] prior to the expiration of the Research Program
Term. In the event of such election by Gilead, the Parties shall in good faith
agree upon any necessary amendments to the Research Plan, as applicable,
including, without limitation, the number of Genelabs FTEs to be committed and
funded by Gilead for such extended term; provided that for the first year
extension, the minimum number of FTEs shall not be less than [**] unless
Genelabs otherwise agrees. Thereafter, the Parties may extend the Research
Program Term by mutual written agreement of the authorized representative of the
Parties, at an FTE Rate which in any event shall be no less than [**] of the
then most recent FTE Rate. In such case, the Parties shall amend the Research
Plan as applicable. References in this Agreement to "Research Program Term"
shall be deemed to include the Research Program Term as extended pursuant to
this Section 2.7.

         2.8 COMPLIANCE.

         Each Party shall conduct the Research Program in accordance with all
applicable laws, rules and regulations, including, for those activities which
are required to be conducted thereunder, all current governmental regulatory
requirements concerning Good Laboratory Practices. In addition, if animals are
used in research hereunder, each Party will comply with the Animal Welfare Act
or any other applicable local, state, national and international laws or
regulations relating to the care and use of laboratory animals. Each Party shall
notify the other Party in writing of any deviations from applicable regulatory
or legal requirements. Each Party hereby certifies that, to its knowledge, it
has not and will not employ or otherwise use in any capacity the services of any
person debarred under Section 21 U.S.C. 335a in performing any services
hereunder.

         2.9 LIABILITY.

         In connection with the conduct of the Research Program, each Party
shall be responsible for, and hereby assumes, any and all risks of personal
injury or property damage attributable to the negligent acts or omissions of
that Party or its Affiliates, and their respective directors, officers,
employees and agents.

         2.10 MATERIALS.

         (a) In order to facilitate the Research Program, each Party shall
provide the other Party with sufficient quantities of Collaboration Compounds
and other biological or chemical materials as set forth in the Research Plan
("MATERIALS"). The Research Plan shall specify sufficient quantities of
Materials as required by the Research Program. Genelabs shall be responsible for
producing research quantities of such materials and Gilead shall be

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** CONFIDENTIAL TREATMENT REQUESTED

responsible for producing quantities of Collaboration Compounds for Pre-Clinical
Development, clinical development and commercialization. Except as otherwise
provided under this Agreement, all such Materials delivered to the other Party
shall remain the sole property of the supplying Party, shall be used only in
furtherance of the Research and solely under the control of the other Party (or
its Affiliates) except as provided below. Each Party shall use the Materials
supplied by the other Party solely for the purposes of carrying out its
respective activities under the Research Program in accordance with the terms of
this Agreement and, in the case of Gilead, of developing and commercializing
Collaboration Compounds and Products in accordance with this Agreement. Neither
Party shall transfer, deliver or disclose any such Materials of the other Party,
or any derivative, modification or component thereof, to any Third Party without
the prior written approval of the providing Party, except that: (a) Genelabs may
transfer Materials provided by Gilead to Genelabs' subcontractors of its
Research Program activities as permitted in accordance with Section 2.2 for the
sole purpose of performing such Research Program activities; and (b) Gilead may
transfer Materials, except Collaboration Compounds, provided by Genelabs (i) to
Gilead's permitted subcontractors of Research Program activities for the sole
purpose of performing such Research Program activities, or (ii) to academic
institutions, subject to appropriate restrictions on use. It is understood that
Gilead may transfer Collaboration Compounds to Third Parties without Genelabs'
consent for Pre-Clinical Development, clinical development and
commercialization, subject to appropriate restrictions on use. The Materials
supplied under this Section 2.10 are supplied "as is" and must be used with
prudence and appropriate caution, since not all of their characteristics may be
known. The Materials are not to be used in humans, except as contemplated by
this Agreement and permitted by applicable law.

         (b) Upon expiration or termination of the Research Program, (x)
Genelabs shall, at Gilead's option, deliver to Gilead or destroy (in accordance
with instructions from Gilead) any unused Materials supplied by Gilead, and any
derivatives, modifications or components thereof, and (y) Gilead shall, at
Genelabs' option, deliver to Genelabs or destroy any unused Materials supplied
by Genelabs, and any derivatives, modifications or components thereof; provided
that Gilead may retain the quantities of those Collaboration Compounds selected
by Gilead under Section 3.2 ("Selection of Collaboration Compounds for
Development") as are necessary for development and commercialization. Gilead
also may retain Collaboration Compounds and Products in the quantities and for
the times required by Regulatory Authorities.

         2.11 SCOPE OF THIS AGREEMENT.

         The Parties currently intend that all Patents filed by the Parties
pursuant to this Agreement shall be covered by the Cooperative Research and
Technology Enhancement (CREATE) Act of 2004, as currently drafted, if and when
such Act is promulgated. If the CREATE Act is amended after the Effective Date,
then the Parties shall meet and discuss the impact of such amendments on this
Agreement and the activities hereunder.

3.       LICENSE; EXCHANGE OF INFORMATION; DEVELOPMENT AND COMMERCIALIZATION

         3.1 LICENSE GRANT.

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** CONFIDENTIAL TREATMENT REQUESTED

         (a) GENELABS LICENSE TO GILEAD UNDER COLLABORATION TECHNOLOGY. Subject
to the terms and conditions of this Agreement, Genelabs hereby grants to Gilead
an exclusive (even as to Genelabs) royalty-bearing (as set forth in Section 5.5
("Royalties")) license, with the right to sublicense, under Genelabs' interest
in (i) Collaboration Patents, and (ii) Collaboration Know-How, in each case
solely to develop, make, have made, use, sell, have sold, offer for sale and
import Products in the Field in the Territory; provided, however, that Genelabs
retains such rights under Collaboration Technology as are necessary to perform
its obligations under the Research Program.

         (b) GILEAD NON-EXCLUSIVE LICENSE TO GENELABS UNDER GILEAD TECHNOLOGY.
Subject to the terms and conditions of this Agreement, Gilead hereby grants to
Genelabs a non-exclusive, royalty-free license, without the right to sublicense,
under Gilead Technology to perform Genelabs' obligations under the Research
Program during the Research Program Term and consistent with the Research Plan.

         (c) NON-EXCLUSIVE CROSS-LICENSES. Subject to the terms and conditions
of this Agreement, each Party hereby grants to the other Party a non-exclusive,
royalty-free license, without the right to sub-license:

                  (i) [**]; and

                  (ii) under such Party's interest in Collaboration Know-How,
         solely to conduct research in the HCV Field in the Territory.

         (d) LICENSE LIMITATIONS. Each Party covenants to the other Party that
it shall not practice, exercise or use any intellectual property rights licensed
to it by the other Party under this Agreement, except as permitted by the
express terms of the licenses granted in this Agreement.

         3.2 SELECTION OF COLLABORATION COMPOUNDS FOR DEVELOPMENT.

         (a) During the Research Program Term and the Evaluation Period, Gilead
may select in its discretion an unlimited number of Collaboration Compounds as
candidates for Pre-Clinical Development. Genelabs shall supply Gilead with all
available information on, and with research quantities of physical samples of,
those Collaboration Compounds so selected.

         (b) The JRC may recommend to Gilead that particular Collaboration
Compounds be selected for Pre-Clinical Development, and Gilead shall consider
such recommendations in good faith.

         (c) Gilead shall have [**] after the termination or expiration of the
Research Program Term (such [**] period being the "Evaluation Period") to
evaluate any and all Collaboration Compounds, including those that Gilead has
previously selected for Pre-Clinical Development. On or before the expiration of
the Evaluation Period, Gilead shall deliver to Genelabs one or more written
notices (each a "Selection Notice") (which may be sent before the end of the
Research Program term) each listing one or more Collaboration Compounds which
Gilead has determined in good faith it will continue to develop and potentially
commercialize (each, a "Selected Compound"); provided that Gilead cannot select
more than

                                      -18-

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** CONFIDENTIAL TREATMENT REQUESTED

a total of [**] Collaboration Compounds. Each selection of a Selected Compound
as set forth in such Selection Notice shall be irrevocable. First Regulatory
Approval of a Collaboration Compound by Gilead or a Related Gilead Party shall
be deemed a selection by Gilead of such Collaboration Compound as a Selected
Compound.

         (d) Upon expiration of the Evaluation Period or selection by Gilead of
a total of [**] Collaboration Compounds, whichever is sooner, Gilead thereafter
shall have no rights or license of any kind under this Agreement to any
Collaboration Compounds (the "Reversion Compounds") which are not timely
designated as Selected Compounds in the manner provided above.

         (e) From time to time in Gilead's sole discretion, Gilead may waive its
rights to select any particular Collaboration Compound(s) as a "Selected
Compound" by providing written notice thereof to Genelabs. Upon delivery of such
notice, such Collaboration Compound shall be deemed a Reversion Compound and
Gilead thereafter shall have no rights or license of any kind under this
Agreement to such designated Collaboration Compound.

         (f) During the Research Program Term and until the first to occur of
(i) the expiration of the Evaluation Period, or (ii) the selection by Gilead of
[**] Selected Compounds, Genelabs shall not itself or through its Affiliates,
Excluded Affiliates, or any Third Party commence Pre-Clinical Development or
clinical development or commercialization of any Collaboration Compound which is
not a Reversion Compound, except as provided in the Research Plan or as
otherwise agreed in writing by Gilead.

         3.3 DEVELOPMENT AND COMMERCIALIZATION; DILIGENCE.

         (a) As between Gilead and Genelabs, Gilead and its Related Gilead
Parties shall be solely responsible for Pre-Clinical Development, clinical
development, manufacturing (except as otherwise set forth in the Research Plan),
Regulatory Approval, marketing and commercialization of Products licensed to
Gilead hereunder. Gilead shall, itself and/or through Related Gilead Parties, at
its own expense, use Commercially Diligent Efforts to commercialize
Collaboration Compound Products in the HCV Field in [**]. In the event that
Gilead selects more than one Selected Compound, Gilead shall use "Commercially
Diligent Efforts" to determine the appropriate number of Selected Compounds
[**].

         (b) In the event that Gilead, except as otherwise excused in accordance
with Section 3.5 irrevocably elects in writing by specific reference to this
Section 3.3(b) not to use Commercially Diligent Efforts for any Collaboration
Compound Products licensed to Gilead hereunder in the HCV Field in [**] in
accordance with Section 3.3(a), then Gilead shall provide Genelabs with prompt
written notice thereof, and all rights granted by Genelabs to Gilead under this
Agreement to such Collaboration Compound Product in such [**] shall revert back
to Genelabs.

         (c) If Genelabs in good faith believes that Gilead is not using
Commercially Diligent Efforts in accordance with Section 3.3(a) in [**] that is
not otherwise excused in accordance with Section 3.5, Genelabs may provide
Gilead with written notice thereof, specifying in reasonable details its reasons
for its conclusions, in which event Gilead will have sixty

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** CONFIDENTIAL TREATMENT REQUESTED

(60) days from the date of such notice in which to respond to Genelabs that
Gilead is meeting such diligence obligation. If Genelabs believes that such
response does not change its view, or if Gilead does not timely respond, then
Genelabs may initiate the dispute resolution process set forth in Section 11.6
to seek termination of Gilead's rights to such Collaboration Compound Product in
[**].

         3.4 NEGATIVE COVENANTS; NO IMPLIED LICENSES.

         3.4.1 Except as otherwise expressly provided, Gilead shall not have any
right or license under any Genelabs Technology, and Gilead shall not use or
practice any Invention within the Genelabs Patents for the purpose of performing
research, development, manufacturing or commercialization activities with
respect to any composition of matter that is not a Collaboration Compound or a
Product.

         3.4.2 Except as otherwise expressly provided, Genelabs shall not have
any right or license under any Gilead Technology, and Genelabs shall not use or
practice any Invention within the Gilead Patents for the purpose of performing
research, development, manufacturing or commercialization activities with
respect to any composition of matter that is not a Collaboration Compound or a
Product.

         3.4.3 No right or license under any Patents or Information of either
Party is granted or shall be granted by implication or estoppel. All such rights
or licenses are or shall be granted only as expressly provided in the terms of
this Agreement.

         3.5 EXCUSED PERFORMANCE.

         In addition to the provisions of Section 11.1 ("Force Majeure"), the
obligations of Gilead with respect to any Collaboration Compound Product in the
HCV Field under Section 3.3 are expressly conditioned upon the continuing
absence of any material adverse condition or event relating to the safety or
efficacy of the Collaboration Compound Product, and such obligations also shall
be delayed or suspended so long as any such condition or event exists and, to
the extent required by Section 3.3, Gilead is diligently seeking to overcome
such adverse condition or event.

         3.6 REPORTS ON GILEAD EFFORTS.

         Gilead will keep Genelabs informed on a timely basis about Gilead's
development and commercialization efforts with respect to Collaboration
Compounds and Collaboration Compound Products. Without limiting the generality
of the foregoing, no less frequently than [**], Gilead shall provide Genelabs
with a written report specifying the occurrence of any of the following:

         (a) the grant of any sublicense of Gilead's rights hereunder (including
the identity of the sublicensee and the scope of the sublicense) and the
termination of any such sublicense;

         (b) identification or synthesis of any Collaboration Compound or
Collaboration Compound Product by or on behalf of Gilead or any of its Related
Gilead Parties pursuant to the Research Program.

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** CONFIDENTIAL TREATMENT REQUESTED

         (c) the occurrence of any regulatory filing with respect to any
Collaboration Compound or Collaboration Compound Product in any jurisdiction
(including, without limitation, any IND or NDA);

         (d) commencement of Phase I Clinical Trials, Phase II Clinical Trials
and Phase III Clinical Trials with respect to any Collaboration Compound or
Collaboration Compound Product in any jurisdiction, including the clinical
protocol for each such Clinical Trial;

         (e) the obtainment of Regulatory Approvals with respect to
Collaboration Compounds and Collaboration Compound Products in each
jurisdiction; and

         (f) with respect to Gilead Compounds, Gilead will keep Genelabs [**].

         3.7 CONFERENCES WITH GILEAD DEVELOPMENT TEAM.

         Upon commencement of Pre-Clinical Development of each Collaboration
Compound Gilead will make available for informal videoconference or in-person
conferences at Genelabs' request (but not more often once each Calendar Quarter)
the following members of Gilead's internal development team for such compound:
project manager, head regulatory person and, upon filing the IND, medical
director. Any in-person conferences shall be at locations mutually agreed by the
Parties. At such conferences, Gilead's representatives shall update Genelabs on
the progress of Pre-Clinical and clinical development and provide answers to
reasonable questions posed by Genelabs' representatives. Such information shall
be deemed Confidential Information covered by Article 4. Additionally, if and
when mutually agreed by the Parties, one or more Genelabs' employees may serve
on Gilead's development team for a Collaboration Compound Product.

         3.8 NEGOTIATION FOR EXCLUSIVE LICENSES.

         At any time and from time to time during and after the Research Program
Term, but before any expiration or termination of this Agreement, each Party may
request to the other party in writing, on a compound-by-compound basis for
Collaboration Compounds, to negotiate an exclusive license from the other Party
under such Party's interest in the Collaboration Technology , to make, have
made, use, sell, offer to sell, and import such Reversion Compound in the
Territory; provided that Gilead has not selected such compound as a Selected
Compound under Section 3.2 ("Selection of Collaboration Compounds for
Development"). To the extent not previously licensed by the other Party, the
Parties agree to negotiate with respect to the terms and conditions of such
license(s) in good faith, taking into consideration the terms and conditions of
this Agreement to the extent applicable. Nothing in this Section 3.8 shall be
deemed to (a) limit Genelabs' right to commercialize Reversion Compounds or
license rights to Reversion Compounds to Third Parties; or (b) obligate Gilead
to relinquish its right to evaluate and select any Collaboration Compound before
the expiration of the Evaluation Period; or (c) obligate either Party to enter
into any such license; or (d) obligate the Parties to negotiate for any period
longer than [**]; provided that in any such case neither Party may practice,
exercise or use any rights licensed to it by the other Party under this
Agreement, except as permitted by the express terms contained in this

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** CONFIDENTIAL TREATMENT REQUESTED

Agreement; and provided further, that nothing in Section 3.2 or this Section
3.8, by implication or otherwise, shall grant any right in the other Party's
intellectual property.

4.       CONFIDENTIALITY AND PUBLICATION

         4.1 NONDISCLOSURE OBLIGATION.

         (a) All Information disclosed by one Party to the other Party hereunder
("CONFIDENTIAL INFORMATION") shall be maintained in confidence by the receiving
Party and shall not be disclosed to any non-Party or used for any purpose except
to exercise its rights and perform its obligations under this Agreement without
the prior written consent of the disclosing Party, except to the extent that the
receiving Party can demonstrate by competent written evidence that such
Information:

                  (i) is known by receiving Party at the time of its receipt,
         and not through a prior disclosure by the disclosing Party, as
         documented by the receiving Party's business records;

                  (ii) is in the public domain other than as a result of any
         breach of this Agreement by the receiving Party;

                  (iii) is subsequently disclosed to the receiving Party on a
         non-confidential basis by a Third Party who may lawfully do so; or

                  (iv) is independently discovered or developed by the receiving
         Party without the use of Confidential Information provided by the
         Disclosing Party, as documented by receiving Party's business records.

         (b) Any non-obvious features or combination of features or disclosures
(as determined in accordance with U.S. patent law) shall not be deemed to fall
within the foregoing exclusions merely because individual features are published
or available to the general public or in the rightful possession of the
receiving Party unless the combination itself and principle of operation are
published or available to the general public or in the rightful possession of
the receiving Party.

         (c) Within thirty (30) days after any expiration or termination of this
Agreement, each party shall destroy (and certify to the other Party such
destruction) or return all Confidential Information provided by the other Party
except as otherwise set forth in this Agreement, and except that each Party may
retain a single copy of the Confidential Information in its confidential legal
files for the sole purpose of ascertaining its ongoing rights and
responsibilities regarding the Confidential Information.

         4.2 PERMITTED DISCLOSURES.

         Each Party may disclose Confidential Information provided by the other
Party to the extent such disclosure is reasonably necessary in the following
instances:

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** CONFIDENTIAL TREATMENT REQUESTED

         (a) disclosure to governmental or other regulatory agencies in order to
obtain patents on Collaboration Technology, Gilead Technology and/or Genelabs
Technology or to gain or maintain approval to conduct clinical trials or to
market Product (in each case to the extent permitted by this Agreement), but
such disclosure may be only to the extent reasonably necessary to obtain patents
or authorizations;

         (b) complying with applicable court orders or governmental regulations;

         (c) disclosure by Gilead to Related Gilead Parties for the sole purpose
of conducting development and/or commercialization of Collaboration Compounds
and Products in accordance with the terms and conditions of this Agreement on
the condition that such Related Gilead Parties agree to be bound by
confidentiality and non-use obligations at least equivalent in scope to those
contained in this Agreement; provided the term of confidentiality for such
Related Gilead Parties shall be no less than five (5) years; or

         (d) disclosure to consultants, agents or other Third Parties solely to
the extent required to accomplish the purposes of this Agreement or in
connection with due diligence or similar investigations by such Third Parties,
and disclosure to potential Third Party investors in confidential financing
documents, in each case on the condition that such Third Parties agree to be
bound by confidentiality and non-use obligations at least equivalent in scope to
those contained in this Agreement or for the purposes of such financing;
provided the term of confidentiality for such Third Parties shall be no less
than five (5) years.

         Each Party shall obtain written agreements from each of its employees
and consultants who perform work on the Research Program, which agreements shall
obligate such persons to similar obligations of confidentiality and to assign to
such Party all inventions made by such persons during the course of performing
the Research Program.

         If a Party is required by judicial or administrative process to
disclose Information that is subject to the non-disclosure provisions of Section
4.1, such Party shall promptly inform the other Party of the disclosure that is
being sought in order to provide the other Party an opportunity to challenge or
limit the disclosure obligations. Information that is disclosed by judicial or
administrative process shall remain otherwise subject to the confidentiality and
non-use provisions of this Article 4, and the Party disclosing Information
pursuant to law or court order shall take all reasonable steps necessary,
including without limitation obtaining an order of confidentiality, to ensure
the continued confidential treatment of such Information. Genelabs shall consult
with Gilead on the provisions of this Agreement and the Research Plan, together
with schedules or other attachments attached thereto, to be redacted in any
filings made by the Genelabs with the Securities and Exchange Commission or as
otherwise required by law.

         4.3 PUBLICATION.

         Gilead and Genelabs each acknowledge the other Party's interest in
publishing the results of its research and development efforts with respect to
Collaboration Compounds and Products in order to obtain recognition within the
scientific community and to advance the state of scientific knowledge. Each
Party also recognizes the mutual interest in obtaining valid

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patent protection and in protecting business interests and trade secret
information and, in particular, it is the intent of the Parties to maintain the
confidentiality of Confidential Information included in any patent application
until such time as such patent application has been published. Consequently,
except for disclosures permitted pursuant to Section 4.1 or 4.2, either Party,
its employees or consultants wishing to make a written publication or oral
presentation related to a Selected Compound shall deliver to the other Party a
copy of the proposed written publication or an outline of an oral disclosure at
least thirty (30) days prior to submission for publication or presentation. The
reviewing Party shall have the right (a) to propose modifications to the
publication or presentation for patent reasons, trade secret reasons or business
reasons or (b) to request a reasonable delay in publication or presentation in
order to protect patentable information. If the reviewing Party requests a
delay, the publishing Party shall delay submission or presentation for a period
of ninety (90) days from the date of such request to enable patent applications
protecting each Party's rights in such information to be filed in accordance
with Article 7. Upon expiration of such ninety (90) days, the publishing Party
shall be free to proceed with the publication or presentation. If the reviewing
Party requests modifications to the publication or presentation, the publishing
Party shall edit such publication to prevent disclosure of trade secret or
proprietary business information of the other Party prior to submission of the
publication or presentation. Notwithstanding anything to the contrary in the
foregoing, following the filing of any patent application within the
Collaboration Technology, in the eighteen (18) month period prior to the
publication of such a patent application, neither Party shall make any written
or oral disclosure regarding any invention claimed in such patent application
without the prior written consent of the other Party.

         4.4 PUBLICITY/USE OF NAMES.

         Each Party agrees to use reasonable efforts in press releases, web
pages, or other public documents issued by a Party which mention a Collaboration
Compound or Product to generally credit the other Party as licensor or licensee,
as applicable. Either Party shall be free to disclose, without the other Party's
prior written consent, the existence of this Agreement, the identity of the
other Party and those terms of the Agreement which have already been publicly
disclosed in accordance herewith. Except as set forth in the preceding sentence
or as expressly permitted by this Agreement, neither Party shall use the name,
trademark, trade name or logo of the other Party or its employees in any
publicity, news release or disclosure relating to this Agreement or its subject
matter, without the prior express written permission of the other Party. A press
release announcing the execution of this Agreement is attached to this Agreement
as Exhibit 4.4 The Parties acknowledge that each Party may desire or be required
to issue subsequent press releases relating to the Agreement or activities
thereunder. The Parties agree to consult with each other reasonably and in good
faith with respect to the text and timing of such press releases prior to the
issuance thereof. Notwithstanding the foregoing, either Party may issue such
press releases or otherwise make such public statements or disclosures (such as
in annual reports to stockholders or filings with the Securities and Exchange
Commission) as it determines, based on advice of counsel, are reasonably
necessary to comply with laws or regulations or for appropriate market
disclosure; provided, however, that such Party shall first have provided the
other Party with not less than 48 hours to review and comment on any such press
releases, statements or disclosures, except

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** CONFIDENTIAL TREATMENT REQUESTED

to the extent that doing so is not feasible within the timeframe required for
compliance with such laws, regulations or market disclosure requirements.

5.       PAYMENTS; ROYALTIES AND REPORTS

         5.1 UPFRONT FEE. Gilead shall make a one-time, non-refundable,
non-creditable payment to Genelabs of Eight Million U.S. Dollars ($8,000,000
USD) within five (5) business days of the Effective Date.

         5.2 FTE FUNDING. In consideration for Genelabs' performance of its
obligations under the Research Program, upon the terms and conditions contained
herein, Gilead shall fund each FTE provided by Genelabs pursuant to Section 2.3
("Genelabs' FTEs") at the FTE Rate. Gilead will pay Genelabs the FTE Rate in
four equal Calendar Quarter installments, each installment equal to one-quarter
of the FTE Rate multiplied by the number of FTEs for the Calendar Quarter.
Genelabs will provide an invoice for each quarterly installment at least thirty
(30) days prior to such Calendar Quarter, and payment by Gilead to Genelabs will
be made by the thirtieth (30th) day after receipt of such invoice or upon
commencement of such Calendar Quarter, whichever is later; provided that the FTE
payment for (a) the first Calendar Quarter will be due within five (5) business
days of the Effective Date and (b) the final Calendar Quarter during the
Research Program Term shall be pro rated to the date of expiration or
termination of the Research Program Term. If for any Calendar Quarter during the
Research Program Term, the number of Genelabs FTEs dedicated to the Research
Program falls below the number provided for in the Research Plan, Genelabs will
promptly notify Gilead of such discrepancy, and, without limiting any other
rights Gilead may have under this Agreement, [**]. In the event that the
Research Program Term is terminated by Gilead under Sections 9.2 ("Termination
by Gilead") or 9.3 ("Termination for Cause"), Gilead shall be entitled to a
prorated refund of any prepaid FTE funding to the extent it covers any period
after the effective date of such termination; Genelabs shall pay such refund
within thirty (30) days after such termination.

         5.3 MILESTONE PAYMENTS. Gilead shall pay to Genelabs the following
non-refundable, non-creditable milestone payments (whether such milestone is
achieved by Gilead or a Related Gilead Party):

    Milestone 1 $[**].

    Milestone 2 $[**].

    Milestone 3 $[**].

    Milestone 4 $[**].

    Milestone 5 $[**].

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** CONFIDENTIAL TREATMENT REQUESTED

     Milestone 6 $[**].

         5.4 PAYMENT OF MILESTONE PAYMENTS.

         (a) Each of the milestone payments described above in Section 5.3 shall
be payable for each Collaboration Compound, Selected Compound or Collaboration
Compound Product to reach such milestone. For each Collaboration Compound or
Collaboration Compound Product, each milestone payment shall be payable once
only upon the initial achievement of such milestone and no amounts shall be due
hereunder for subsequent or repeated achievement of such milestone by the "same"
Collaboration Compound, Selected Compound or Collaboration Compound Product. A
Collaboration Compound/Collaboration Compound Product will be deemed the "same"
as a previous Collaboration Compound/Collaboration Compound Product if [**].

         (b) Gilead shall notify Genelabs in writing within thirty (30) days
upon the achievement of each milestone for each Collaboration Compound or
Collaboration Compound Product, and shall make the appropriate milestone payment
within thirty (30) days of the achievement of such milestone. If, for any
reason, a Collaboration Compound, Selected Compound or Collaboration Compound
Product reaches a particular milestone specified above without having achieved
one or more preceding milestones above, then, upon the achievement of such
milestone, both the milestone payment applicable to such milestone and the
milestone payment(s) applicable to such preceding unachieved milestone(s) shall
be due and payable within thirty (30) days of the achievement of the later
milestone.

         5.5 ROYALTIES. (a) Subject to the terms and conditions of this
Agreement, Gilead shall pay to Genelabs a royalty on Net Sales of Products in
the Territory by Gilead and its Related Gilead Parties in an amount equal to
[**] percent ([**]%) of Net Sales on a country-by-country basis. Royalty payment
obligations on each Product shall be effective as of the date of First
Commercial Sale of such Product in a country and shall continue until the later
of: (i) expiration of the last Valid Patent Claim covering the manufacture, use,
import or sale of the Product sold in such country; or (ii) expiration of [**]
after the First Commercial Sale of such Product in such country.

         (b) If Gilead desires to sublicense a Product for sale in [**]. This
Agreement does not obligate Gilead to enter into any commercially unreasonable
sublicense.

         (c) The royalty payments required to be paid pursuant to this Section
5.5 shall be subject to an [**] paid by Gilead to Genelabs.

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         5.6 REPORTS; PAYMENT OF ROYALTY.

         During the term of this Agreement following the First Commercial Sale
of a Product, Gilead shall furnish to Genelabs a quarterly written report for
the Calendar Quarter showing the Net Sales of all Products subject to royalty
payments sold by Gilead and its Related Gilead Parties in the Territory and
separately for each Product sold during the reporting period and the royalties
payable under this Agreement in sufficient detail to permit confirmation of the
accuracy of the royalty payment made, including, without limitation and on a
country-by-country basis, the number of Products sold, the gross sales and Net
Sales of Products in local currency and as converted to U.S. dollars, the
royalties (in U.S. dollars) payable, an itemized list showing any and all
deductions, and the method used to calculate the royalty. Quarterly reports
shall be due on the thirtieth (30th) day following the close of each Calendar
Quarter. Royalties shown to have accrued by each royalty report shall be due and
payable on the date such royalty report is due. Gilead shall keep complete and
accurate records in sufficient detail to enable the royalties payable hereunder
to be determined.

         5.7 AUDITS.

         (a) Gilead shall maintain, and shall cause its Affiliates to maintain,
complete and accurate books and records in connection with the sale of Products
hereunder, as necessary to allow the accurate calculation of the royalties due
to Genelabs hereunder. Upon Genelab's written notice to Gilead with reasonable
advance notice and not more than once in each Calendar Year, Gilead shall permit
external accountants selected by Genelabs and reasonably acceptable to Gilead,
at Genelabs' expense (except as set forth in Section 5.7(b) below), to have
access during normal business hours to such of the records of Gilead and its
Affiliates as may be reasonably necessary to verify the accuracy of the royalty
reports hereunder for any Calendar Year ending not more than [**] prior to the
date of such request. The accountants shall disclose to Genelabs only whether
the royalty reports are correct or incorrect and the specific details concerning
any discrepancies. No other information shall be provided to Genelabs.

         (b) If such accountants identify a discrepancy made during such period,
the appropriate Party shall pay the other Party the amount of the discrepancy
within thirty (30) days of the date Genelabs delivers to Gilead such
accountants's written report, or as otherwise agreed upon by the Parties, plus
interest calculated in accordance with Section 5.10. The fees charged by such
accountants shall be paid by Genelabs; provided, that if the audit uncovers an
underpayment of royalties by Gilead in an amount that exceeds [**] percent
([**]%) of the total royalties owed, then the reasonable fees of such
accountants shall be paid by Gilead.

         (c) Gilead shall include in each sublicense granted by it pursuant to
this Agreement a provision requiring the sublicensee to make reports to Gilead,
to keep and maintain records of sales made pursuant to such sublicense. If
Genelabs performs a royalty audit pursuant to subsection 5.7(a), Gilead shall
provide to Genelabs' accountants sufficient information from Gilead's
sublicensees for Genelabs' accountants to verify the Net Sales of such
sublicensees.

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** CONFIDENTIAL TREATMENT REQUESTED

         (d) Genelabs shall treat all financial information subject to review
under this Section 5.7 or under any sublicense agreement in accordance with the
confidentiality and non-use provisions of this Agreement, and shall cause the
accountants selected by it to enter into an acceptable confidentiality agreement
with Gilead obligating such accountants to retain all such information in
confidence pursuant to such confidentiality agreement.

         5.8 PAYMENTS AND EXCHANGE RATE.

         Unless otherwise specified in writing by Genelabs, all payments to be
made by Gilead to Genelabs under this Agreement shall be made in United States
dollars and shall be paid by bank wire transfer in immediately available funds
from a bank account in the United States selected by Gilead to a bank account in
the United States designated in writing by Genelabs from time to time. With
respect to sales outside the United States, royalty amounts owed shall first be
calculated in the currency of sale, and then such amounts shall be converted
into U.S. Dollars based on applicable currency exchange rates (as provided in
the following sentence), and such Dollar amount of the royalties shall be paid
to Genelabs. The conversion of non-U.S. dollar sales into U.S. dollar sales
shall be calculated in accordance with Gilead's then current foreign exchange
conversion methodology for external financial reporting to the US Securities and
Exchange Commission.

         5.9 INCOME TAX WITHHOLDING.

         If laws, rules or regulations require withholding of income taxes, VAT,
royalty withholding taxes, or other taxes imposed upon payments to Genelabs set
forth in this Article 5, Gilead shall make such withholding payments as required
and subtract such withholding payments from the payments set forth in this
Article 5. Gilead shall submit appropriate proof of payment of the withholding
taxes to Genelabs within a reasonable period of time (but in no event later than
sixty (60) days) following such payment. Each Party shall provide reasonable
assistance to the other Party in minimizing or claiming exemptions from, refunds
of, or credits for, any such applicable withholding taxes, upon the other
Party's written request.

         5.10 INTEREST.

         Any payment not made when due, including payments in dispute, shall
bear interest, to the extent permitted by applicable law, at the annual prime
rate of interest published from time to time by the Wall Street Journal, Eastern
U.S. Edition, plus two percentage points, compounded daily.

         5.11 NON-MONETARY CONSIDERATION FOR SALES

         If Gilead or its Related Gilead Parties accept any non-monetary
consideration for the sale of a Product other than as would be reflected in Net
Sales, the Fair Market Value of such non-monetary consideration shall be
reported as Net Sales; provided that if Product is provided in exchange for data
on the Product or its use (e.g., clinical trials), no monetary value shall be
applied to such data for Net Sales purposes.

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6.       REPRESENTATIONS AND WARRANTIES

         6.1 REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES.

         Each Party represents and warrants to the other Party that, as of the
date of this Agreement:

         (a) such Party is duly organized and validly existing under the laws of
the state of its incorporation and has full corporate power and authority to
enter into this Agreement and to carry out the provisions hereof;

         (b) such Party has taken all corporate action necessary to authorize
the execution and delivery of this Agreement and the performance its obligations
under this Agreement;

         (c) this Agreement is a legal and valid obligation of such Party,
binding upon such Party and enforceable against such Party in accordance with
the terms of this Agreement, except as enforcement may be limited by applicable
bankruptcy or other debtor's rights laws and regulations. The execution,
delivery and performance of this Agreement by such Party does not violate any
agreement or instrument to which such Party is a party or by which such Party is
bound, and does not violate any law or regulation of any court, governmental
body or administrative or other agency having authority over such Party. All
consents, approvals and authorizations from all governmental authorities or
other Third Parties required to be obtained by such Party in connection with
this Agreement have been obtained;

         (d) it has the full and exclusive right, power and authority to enter
into this Agreement, to perform the Research Program and to grant the licenses
granted under Article 3 hereof; and

         (e) All individuals who will perform any activities on behalf of either
Party in connection with the Research Program have assigned to such Party or its
Affiliates the whole of their rights in any intellectual property conceived or
reduced to practice by them as a result of the Research, and no Third Party will
have any rights to any such intellectual property.

         6.2 GENELABS REPRESENTATIONS AND WARRANTIES.

         Genelabs represents and warrants to Gilead that as of the Effective
Date, and during the Research Program Term:

         (a) except as otherwise disclosed to Gilead in writing, it has not
previously assigned, transferred, conveyed, licensed or otherwise granted, and
will not assign, transfer, convey, license or otherwise grant a Third Party any
right, title and interest in its rights in the Patents listed in Exhibit 1.B
which are in any way inconsistent with the exclusive rights of Gilead under this
Agreement; and

         (b) except as otherwise disclosed to Gilead in writing, it has not
received a written notice or unwritten threatening communication from any Third
Party alleging that the practice of the Genelabs Technology or the making, use
or sale of any Collaboration Compound

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** CONFIDENTIAL TREATMENT REQUESTED

infringes or may infringe any intellectual property rights owned or possessed by
such Third Party.

         6.3 GILEAD REPRESENTATION AND WARRANTY.

         Gilead represents and warrants to Genelabs that as of the Effective
Date it has not received written notice from any Third Party alleging that the
practice of the Gilead Technology as contemplated by this Agreement infringes or
may infringe any intellectual property rights owned or possessed by such Third
Party.

         6.4 DISCLAIMER.

         Except as expressly set forth herein, THE TECHNOLOGY, MATERIALS AND
INTELLECTUAL PROPERTY RIGHTS PROVIDED BY EACH PARTY HEREUNDER ARE PROVIDED "AS
IS" AND EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR ARISING FROM A COURSE OF
DEALING, USAGE OR TRADE PRACTICES. Without limiting the generality of the
foregoing, each Party expressly does not warrant (a) the success of any study or
test commenced under the Research Program or (b) the safety or usefulness for
any purpose of the intellectual property or technology it provides hereunder.

7.       INTELLECTUAL PROPERTY.

         7.1 OWNERSHIP; DISCLOSURE.

         7.1.1 DISCLOSURE. Each Party shall promptly disclose to the other
Inventions within the Collaboration Technology made in connection with this
Agreement.

         7.1.2 COLLABORATION TECHNOLOGY. Inventorship of Collaboration
Technology, as between the Parties, shall be determined in accordance with
United States law. The Parties agree that each Party shall, subject to the
exclusive license grants in this Agreement, have the right to research, develop,
commercialize and/or otherwise exploit Collaboration Technology that is jointly
owned by the Parties, for any purpose without the consent of, or accounting to,
the other Party.

         7.1.3 GILEAD TECHNOLOGY. All right, title, and interest in and to
Gilead Technology shall, as between the Parties, be solely owned by Gilead.

         7.1.4 GENELABS TECHNOLOGY. All right, title, and interest in and to
Genelabs Technology shall, as between the Parties, be solely owned by Genelabs.

         7.1.5 COOPERATION. Each Party shall promptly execute all papers and
instruments, and/or require its employees or contractors to execute such papers
and instruments, as applicable, so as to effectuate the ownership of
Collaboration Technology, Gilead Technology

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and Genelabs Technology set forth in this Section 7.1 and to enable the other
Party to apply for and to prosecute Patents as contemplated by Section 7.3.

         7.2 PATENT COMMITTEE.

         The Parties shall establish a committee to function, until the Parties
agree to disband such committee, to facilitate the filing, prosecution,
enforcement, and defense of Patents as follows:

         7.2.1 COMPOSITION.

         (a) Promptly after the Effective Date, the Parties shall establish a
joint patent committee (the "PATENT COMMITTEE") composed of three (3) named
representatives of Gilead and three (3) named representatives of Genelabs. Each
Party shall appoint its respective representatives to the Patent Committee from
time to time, and may substitute one or more of its representatives, in its sole
discretion, effective upon notice to the other Party of such change.

         (b) The Patent Committee shall be chaired by a representative of
Genelabs.

         (c) The Patent Committee representatives shall have appropriate
technical or legal credentials, experience and knowledge, and ongoing
familiarity with the Research Program and related Patents. Members of the
Committee may delegate from time-to-time certain matters arising within the
Patent Committee as they from time-to-time deem appropriate.

         (d) Additional representatives or consultants may from time to time, by
mutual consent of the Parties, be invited to attend Patent Committee meetings,
subject to such representative's and consultant's written agreement to comply
with the confidentiality and non-use obligations equivalent to those set forth
in Article 4, and provided that such additional representatives shall have no
vote. Collaboration Patent Counsel shall normally attend any such meetings
unless the Parties mutually agree to exclude such Counsel. The Parties shall
take reasonable efforts to preserve the lawyer-client privilege and work product
privilege applicable to the communications and work of Collaboration Patent
Counsel and other legal counsel, including, if necessary, entering into a
shared-interest agreement.

         7.2.2 GOVERNANCE.

         (a) Decisions of the Patent Committee shall be made by unanimous vote,
with each Party's representatives on the Patent Committee collectively having
one (1) vote.

         (b) In the event that the Patent Committee cannot or does not, after
good faith efforts, reach agreement on an issue, such issue shall be referred to
the an officer for each Party designated by such Party, neither of whom shall be
a member of the Patent Committee. Such officers of the Parties shall meet
promptly thereafter and shall negotiate in good faith to resolve such issue. If
they cannot resolve such issue within thirty (30) days of commencing such
negotiations, then the resolution and/or course of conduct shall be determined
by Genelabs; provided, however, that Gilead, and not Genelabs, shall determine
all patent

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matters affecting Selected Compounds for which Gilead is the Responsible Party
under Section 7.3.

         (c) The Patent Committee may establish and revise from time to time
rules for operation, in such form and detail as the Patent Committee considers
appropriate.

         7.2.3 AUTHORITY AND JURISDICTION.

         (a) The Patent Committee's decision-making authority shall be limited
to matters related to Patents. Notwithstanding anything in this Article 7, The
Patent Committee shall have no review or authority over Collaboration Patents
solely owned by Genelabs to the extent they claim Reversion Compounds, and such
patents shall not be subject to this Article 7.

         (b) The Patent Committee shall confer regarding the status of
Collaboration Patents, review data and information, consider and advise on any
technical issues that arise, set patent filing priorities, and review and advise
on any budgetary and economic matters relating to the Collaboration Patents
affecting the Research Program which is referred to the Patent Committee. The
Patent Committee shall establish the strategy for prosecuting Collaboration
Patents, which strategy shall be followed by the Responsible Party and its
counsel.

         (c) In no event shall the Patent Committee have the right:

                  (i) to determine any matter not involving Collaboration
         Patents covering Collaboration Compounds;

                  (ii) to modify or amend the terms and conditions of this
         Agreement;

                  (iii) to make any decisions or determinations with respect to
         the Research Plan or the Research Program except to make
         recommendations due to issues involving Collaboration Patents;

                  (iv) to determine which personnel of a Party perform
         activities relating to matters affecting Collaboration Patents, or act
         as such Party's representatives on the Patent Committee;

                  (v) to review, direct or control the commercialization or
         marketing of any Product;

                  (vi) to determine any such issue in a manner that would
         conflict with the express terms and conditions of this Agreement.

         7.2.4 MEETINGS.

         (a) The Patent Committee shall meet in accordance with a schedule
established by mutual written agreement of the Parties, but no less frequently
than once per Calendar Quarter, with the location for such meetings alternating
between Genelabs' and Gileads' San

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Francisco Bay Area, California facilities (or such other locations as is
mutually agreed by the Parties).

         (b) Either Party may call for non-scheduled meetings of the Patent
Committee for good cause, which shall occur at mutually agreeable times.
Alternatively, the Patent Committee upon mutual agreement may meet by means of
teleconference, videoconference or other similar communications equipment.

         (c) After the end of the Research Program Term, the Patent Committee
may choose to reduce the frequency of their meetings or disband, as appropriate
based on the reduced need for oversight of Collaboration Patents.

         (d) No Patent Committee meeting may be conducted unless at least two
(2) representatives of each Party are participating.

         (e) Each Party shall bear its own expenses related to the attendance of
such meetings by its representatives, subject to reimbursement of Patent Costs
under Section 7.3.4.

         7.3 PATENT PROSECUTION.

         7.3.1 GILEAD PATENTS. Gilead shall have the sole right, but not the
obligation, to control the preparation, filing, prosecution and maintenance of
Gilead Patents using patent counsel of Gilead's choice, at Gilead's expense.

         7.3.2 GENELABS PATENTS. Genelabs shall have the sole right, but not the
obligation, to control the preparation, filing, prosecution and maintenance of
Genelabs Patents using patent counsel of Genelabs' choice, at Genelabs' expense.

         7.3.3 COLLABORATION PATENTS. During the term of this Agreement, all
preparation, filing, prosecution and maintenance of Collaboration Patents shall
be governed by this Section 7.3.3.

         (a) RESPONSIBLE PARTY. One Party (the "Responsible Party") will be
primarily responsible for the preparation, filing, prosecution and maintenance
of each Collaboration Patent. Genelabs shall be the Responsible Party for
Collaboration Patents; provided that Gilead, upon written notice to Genelabs,
may become the Responsible Party for Collaboration Patents claiming a Selected
Compound after Gilead has paid Milestone 3 (which Milestone is defined in
Section 5.3 ("Milestone Payments")) with respect to such Selected Compound;
provided that Gilead shall not narrow any claims in such Patents without
Genelabs' prior written consent.

                  (i) The Responsible Party shall consult with the other Party
         as to the preparation, filing, prosecution and maintenance of each
         Collaboration Patent reasonably in advance of any deadline or action
         with the U.S. Patent & Trademark Office or any foreign patent office,
         and shall furnish to the other Party copies of all relevant documents
         reasonably in advance of such consultation to permit such Party to
         comment on such action.

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                  (ii) The Patent Committee shall agree which jurisdictions to
         make Collaboration Patent filings in, and the Responsible Party shall
         not cease prosecution or maintenance of any such Collaboration Patent
         without prior written notice to the Patent Committee. Gilead, if it is
         the Responsible Party for Collaboration Patent on a Selected Compound,
         shall solely determine in which jurisdictions to make filings for such
         Patents, provided that filings shall be made in the Major Markets.

         (b) DILIGENCE. The Responsible Party shall use commercially diligent
efforts to pursue claims in the Collaboration Patents. In the United States the
Responsible Party shall use commercially diligent efforts to pursue claims for a
Collaboration Patent that would cover a Collaboration Compound Product that
would allow the Patent to be listed in the Orange Book under 21 U.S.C. 355(b),
(c)(2). In [**] the Responsible Party shall use commercially diligent efforts to
pursue claims in such Collaboration Patents so that such claims would issue in a
timely manner, [**]. Such diligent efforts also shall be consistent with the
usual practice followed by [**].

         (c) PATENT COUNSEL. The Responsible Party may also select outside
patent counsel to represent the Responsible Party, should the Responsible Party
elect to use outside patent counsel (or determine that such Counsel shall
represent both Parties) (the "COLLABORATION PATENT COUNSEL"). Gilead shall have
the right at any time during the term of this Agreement to object to the
retention of any outside Collaboration Patent Counsel that Gilead reasonably
believes would be prejudicial to its intellectual property interests (including,
without limitation, conflicts of interest, such as if Collaboration Patent
Counsel prosecutes patents for products similar to the Collaboration
Collaboration Compound Products for Third Parties) which objection shall be
considered by the Patent Committee meeting without the Collaboration Patent
Counsel in attendance. Collaboration Patent Counsel shall prepare, file,
prosecute, and maintain Collaboration Patents. Collaboration Patent Counsel
shall have final responsibility for determining, with respect to Collaboration
Patents: (i) whether, consistent with U.S. laws regarding inventorship, to
correct or supplement the inventors listed on the invention disclosure form in
view of the activities conducted under the Research Program, and (ii) whether,
consistent with applicable U.S. law regarding inventorship, the respective
invention was made solely or jointly by Gilead and/or Genelabs consistent with
US patent law. As used herein, "prosecution" shall include interferences,
reexaminations, reissues, oppositions, and the like.

         (d) INTERFERENCE, OPPOSITION, REEXAMINATION AND REISSUE. To the extent
permitted by 7.2.3(c)(i), Gilead and Genelabs each shall inform the Patent
Committee of any request for, or filing or declaration of, any interference,
opposition, or reexamination relating to Collaboration Patents within thirty
(30) days of learning of such event. The Responsible Party shall be the lead
party in any such interference, opposition, or reexamination. The non-lead Party
shall have the right to review and consult with the lead Party regarding any
submission to be made in connection with such proceeding. The Responsible Party
shall give the other Party timely notice of any proposed settlement of an
interference relating to a Collaboration Patent and shall not enter into such
settlement without the other Party's prior written consent (such consent not to
be unreasonably withheld). In connection with any interference, opposition,
reissue or reexamination proceeding relating to the Collaboration Patents,
Gilead and Genelabs will cooperate fully and will provide each other with any
information or

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** CONFIDENTIAL TREATMENT REQUESTED

assistance that either reasonably requests. Each Party shall keep the other
informed of developments in any such action or proceeding.

         (e)      OPTION TO PROSECUTE AND MAINTAIN PATENTS.

                  (i) Should the Patent Committee decide for any reason not to
         file applications for, or to cease prosecution and/or maintenance of,
         or not to continue to pay the expenses of prosecution and/or
         maintenance of, any Collaboration Patents on a country-by-country
         basis, then Gilead, at its sole discretion and expense, may elect to
         file or to continue prosecution or maintenance of any or all such
         Collaboration Patents:

                  (ii) Should a Party (the "Concerned Party") in good faith
         believe that the Responsible Party is not meeting its obligations in
         accordance with Section 7.3.3(b), the Concerned Party may provide the
         Responsible Party with written notice thereof, in which event the
         Responsible Party will have sixty (60) days from the date of such
         notice in which to reasonably demonstrate to the Concerned Party that
         the Responsible Party is meeting such diligence obligations. If the
         Concerned Party determines that such notice does not justify the delay,
         or such notice is not timely delivered, then the Concerned Party may
         notify the Responsible Party that the Concerned Party has determined
         that it wishes to become the Responsible Party for such Patent. The
         Responsible Party shall have thirty (30) days after receipt of such
         notice to initiate the dispute resolution process set forth in Section
         11.6, and assumption by the Concerned Party of the position as
         Responsible Party with respect to such Patent shall not occur until
         either expiration of such thirty (30) day period without the
         Responsible Party commencing the dispute resolution process, or the
         dispute resolution process has completed and determined that the
         Concerned Party has the right to become the Responsible Party with
         respect to such Patent.

                  (iii) In the event that the Concerned Party takes over any
         Collaboration Patent as described in Section 7.3.3(e)(i) or (ii), the
         Responsible Party shall execute such documents and perform such acts as
         may be reasonably necessary to allow the Concerned Party to continue
         prosecution and/or maintenance of such Patent in a timely manner. Such
         Patent shall continue to be considered part of Collaboration Technology
         and the claims of any such Patent shall be subject to the license
         provisions of Article 3 and payment obligations of Article 5.

         7.3.4 PATENT FEES.

         (a) All Patent Costs associated with the Genelabs Technology shall be
borne by Genelabs.

         (b) All Patent Costs associated with the Gilead Technology shall be
borne by Gilead.

         (c) All Patent Costs associated with the Collaboration Technology shall
be borne equally by both Parties in each country in the Shared Cost Countries
listed in Exhibit 7.3.4. For other countries in the Territory, Gilead shall pay
all Patent Costs associated with the Collaboration Technology ("Gilead-Assumed
Patent Costs"). Additionally, Gilead shall pay all worldwide Patent Costs for a
Collaboration Patent incurred after Gilead becomes the

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** CONFIDENTIAL TREATMENT REQUESTED

Responsible Party therefor under Section 7.3.3. Gilead upon written notice to
Genelabs may elect not to fund Patent Costs with respect to a Patent in any
jurisdiction, in which event such Patent shall no longer be deemed to be
included in Collaboration Technology and Gilead shall have no license thereto
under this Agreement. Gilead shall have no obligation to pay for Patent Costs
for Patents on Reversion Compounds, incurred after the particular Collaboration
Compound become a Reversion Compound.

         (d) A Party seeking reimbursement of Patent Costs shall invoice the
other Party on a quarterly basis in arrears, and shall provide copies of
receipts and counsel bills supporting such invoice. The other Party shall pay
its share of such Patent Costs within thirty (30) days.

         (e) [**].

         7.3.5 COOPERATION. Each Party will promptly provide to the other Party
information reasonably requested by the other Party that is necessary for the
prosecution activities pursuant to Section 7.3.3 above.

         7.4 ENFORCEMENT AND DEFENSE.

         7.4.1 If either Party learns of any infringement of Collaboration
Patents, or any misappropriation or misuse of Know-How, of which the other Party
is a sole owner, co-owner or licensee, such Party shall promptly notify the
other Party of such infringement, misappropriation or misuse. Gilead shall have
the sole right, but not the obligation, to initiate and prosecute any legal
action to enforce its rights in and to any Gilead Technology at its own expense
and in the name of Gilead, and to control the defense of any declaratory
judgment action relating to Gilead Technology. Genelabs shall have the sole
right, but not the obligation, to initiate and prosecute any legal action to
enforce its rights in and to any Genelabs Technology at its own expense and in
the name of Genelabs, and to control the defense of any declaratory judgment
action relating to Genelabs Technology.

         7.4.2 If the Patent Committee determines that such infringement,
misappropriation or misuse involves Collaboration Patent claims, or involves
Collaboration Know-How or claims of Collaboration Patents that do not cover a
Selected Compound ("GENELABS CLAIMS"), Genelabs shall have the right, but not
the obligation, to initiate and prosecute such legal action at its own expense
and, if necessary, to name Gilead as a co-party, or to control the defense of
any declaratory judgment action relating thereto, and Genelabs shall pay all
attorneys fees and costs associated with such action. In any other infringement,
misappropriation, or misuse of Collaboration Patents or Collaboration Know-How,
as applicable, that does not involve Genelabs Claims, Gilead shall have the
first right to initiate and prosecute such legal defense or action at its own
expense and, if necessary, to name Genelabs as a co-party, or to control any
declaratory judgment action relating thereto, and Gilead shall pay all attorneys
fees and costs associated with such action. If, within ninety (90) days
following a request by Genelabs to Gilead to initiate and prosecute such legal
action or ten (10) days before the time limit, if any, set forth in the
appropriate laws and regulations for the filing of such actions, whichever comes
first, Gilead fails to take such action, or if Gilead informs Genelabs that it
elects not to exercise such first right, Genelabs (or its

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** CONFIDENTIAL TREATMENT REQUESTED

designee) thereafter shall have the right either to initiate and prosecute such
action or to control the defense of such declaratory judgment and Genelabs shall
pay all attorneys fees and costs associated with such action.

         7.4.3 For any action to terminate any infringement of Collaboration
Patents, or any misappropriation or misuse of Collaboration Know-How, if either
Party is unable to initiate or prosecute such action solely in its own name, the
other Party shall join such action voluntarily and shall execute all documents
necessary to initiate litigation to prosecute and maintain such action. In
connection with any such action, Gilead and Genelabs shall cooperate fully and
will provide each other with any information or assistance that either
reasonably requests. Each Party shall keep the other informed of developments in
any such action or proceeding, including, to the extent permissible by law, the
consultation and approval of any offer related thereto.

         7.4.4 Any recovery obtained by either or both Gilead and Genelabs in
connection with or as a result of any action contemplated by Section 7.4.2,
whether by settlement or otherwise, shall be shared in order as follows:

         (a) The Party which initiated and prosecuted the action shall recoup
all of its costs and expenses incurred in connection with the action, plus [**];

         (b) The other Party shall then, to the extent possible, recover its
costs and expenses incurred in connection with the action, plus [**];

         (c) Any remaining amounts after such reimbursement of the Parties costs
and expenses shall be awarded to the Party which initiated and prosecuted the
action. Such award obtained by Gilead or its Related Gilead Parties in excess of
such Party's costs, expenses and [**], shall be considered Net Sales in the
Calendar Quarter it is received for purposes of calculating royalties payable by
Gilead in accordance with Article 5 if the recovery is for infringement by a
product that is competitive to a Collaboration Compound Product, otherwise the
remaining amount shall be allocated between the Parties [**].

         7.4.5 Each Party shall inform the other Party of any certification
regarding any Collaboration Patents pertaining to Collaboration Compound
Products licensed to Gilead it has received pursuant to either 21 U.S.C.
Sections 355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or its successor provisions, or
Canada's Patented Medicines (Notice of Compliance) Regulations Article 5, or any
similar provisions in a country other than the United States and Canada, and
shall provide the other Party with a copy of such certification within five (5)
days of receipt by such Party. Genelabs' and Gilead's rights with respect to the
initiation and prosecution of any legal action as a result of such certification
or any recovery obtained as a result of such legal action shall be as defined in
Sections 7.4.2 through 7.4.4.

         7.4.6 Each Party shall give the other Party timely written notice of
the proposed settlement of any action under Section 7.3.2, and neither Party
shall consent to the entry of any judgment or settle or otherwise compromise any
such action or suit in a way that adversely affects the other Party's
intellectual property rights or its rights or interests with

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** CONFIDENTIAL TREATMENT REQUESTED

respect to Collaboration Compounds, Reversion Compounds or Collaboration
Compound Products without such other Party's prior written consent (not to be
unreasonably withheld).

         7.5 PATENT TERM RESTORATION. The Parties shall cooperate in obtaining
patent term restoration or supplemental protection certificates or their
equivalents in any country in the Territory where applicable to Collaboration
Patents. If elections with respect to obtaining such patent term restoration are
to be made for Patents pertaining to Products licensed to Gilead, Gilead shall
have the right to make the election to seek patent term restoration or
supplemental protection and Genelabs shall abide by such election and fully
cooperate in assisting Genelabs to obtain such patent benefits.

8.       LIMITATION OF LIABILITY

         EXCEPT FOR PAYMENTS UNDER ARTICLE 5 OR LIABILITY FOR BREACH OF ARTICLE
4, IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS RESPECTIVE AFFILIATES OR
EXCLUDED AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES OR
EXCLUDED AFFILIATES FOR SPECIAL, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR
OTHERWISE, including, but not limited to, loss of profits or revenue, or claims
of customers of any of them or other Third Parties for such or other damages,
provided that the foregoing limitation shall not apply to either Party's
indemnification obligations under Article 10.

9.       TERM AND TERMINATION

         9.1 TERM AND EXPIRATION.

         This Agreement shall be effective as of the Effective Date and unless
terminated earlier pursuant to Section 9.2 or 9.3, this Agreement shall continue
in effect until expiration of all royalty obligations hereunder. Upon expiration
of all royalty obligations under this Agreement, all licenses granted to Gilead
pursuant to Section 3.1 as were in effect immediately prior to such expiration
shall become fully paid-up, perpetual licenses.

         9.2 TERMINATION BY GILEAD.

         Notwithstanding anything contained in this Agreement to the contrary,
Gilead shall have the right to terminate this Agreement at any time in its sole
discretion and for any reason after the end of the Research Program Term by
giving ninety (90) days' advance written notice to Genelabs. Not later than
thirty (30) days after the date of such termination, each Party shall return or
cause to be returned to the other Party all Information in tangible form
received from the other Party and all copies thereof, except that each Party may
retain one copy in its confidential files for records purposes, provided that
the Parties may retain and use Information to the extent necessary to exercise
their rights set forth below in this Section.

         In the event of termination under this Section 9.2:

         (a) each Party shall pay all amounts then due and owing to the other
Party as of the termination date;

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** CONFIDENTIAL TREATMENT REQUESTED

         (b) the licenses granted under Section 3.1(a) and (b) shall immediately
terminate;

         (c) Gilead shall provide Genelabs with a copy of all Pre-Clinical and
clinical data and all regulatory documentation pertaining to Collaboration
Compounds and Collaboration Compound Products, shall assign any filings for
Regulatory Approval for Collaboration Compounds and Collaboration Compound
Products to Genelabs or its designee, and shall permit and reasonably assist
Genelabs or its designee to utilize such data, documents and regulatory filings
to obtain Regulatory Approval for such Collaboration Compounds and Collaboration
Compound Products;

         (d) Gilead shall return any amounts of Collaboration Compounds and
Collaboration Compound Products provided to it by Genelabs (except such samples
as it is legally required to retain) and shall sell such amounts of additional
Collaboration Compounds and Collaboration Compound Products in its possession as
Genelabs may request at Gilead's out-of-pocket cost therefor;

         (e) except as set forth in this Section 9.2 and in Section 9.4, and for
the licenses granted in Section 3.1(c), the rights and obligations of the
Parties hereunder shall terminate as of the date of such termination.

         9.3 TERMINATION FOR CAUSE.

         9.3.1 CAUSE FOR TERMINATION. This Agreement may be terminated at any
time during the term of this Agreement:

         (a) upon written notice by a Party if the other Party is in material
breach of its obligations hereunder by causes and reasons within its control and
has not cured such breach within sixty (60) days after notice requesting cure of
the breach; provided, however, in the event of a good faith dispute with respect
to the existence of a material breach or cure thereof, the sixty (60) day cure
period shall be tolled until such time as the dispute is resolved pursuant to
Section 11.6 ("Dispute Resolution"); or

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

         9.3.2 EFFECT OF TERMINATION FOR CAUSE.

         (a) TERMINATION BY GILEAD. If Gilead terminates this Agreement under
Section 9.3.1(a) or 9.3.1(b):

                  (i) each Party shall pay all amounts then due and owing as of
         the termination date;

                  (ii) the license granted under Section 3.1(b) shall
         immediately terminate;

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** CONFIDENTIAL TREATMENT REQUESTED

                  (iii) the licenses granted under Section 3.1(a) shall survive
         with respect to any Selected Compounds selected by Gilead in accordance
         with Section 3.2 ("Selection of Collaboration Compounds for
         Development"); provided that, if Gilead has not yet selected [**]
         Collaboration Compounds thereunder, it may select additional
         Collaboration Compounds to bring the total of Selected Compounds to
         [**] by written notice to Genelabs within thirty (30) days after such
         termination specifying the Collaboration Compounds so selected;
         provided further that Gilead agrees in such written notice to remain
         bound by the Sections set forth in Section 9.4(c);

                  (iv) Gilead's right to make a claim against Genelabs for such
         damages shall not be affected, subject to Section 11.6 ("Dispute
         Resolution") hereof; and

                  (v) except as set forth in this Section 9.3.2(a) and in
         Section 9.4, the rights and obligations of the Parties hereunder shall
         terminate as of the date of such termination.

         (b) TERMINATION BY GENELABS. If Genelabs terminates this Agreement
under Section 9.3.1(a) or 9.3.1(b), the provisions of Section 9.2(a) through (e)
shall apply. In addition, all funding for all FTEs for the entire Research
Program Term (including any portion thereof remaining after the date of
termination) shall be immediately due and payable and Gilead shall immediately
pay to Genelabs all amounts for such FTE funding to the extent not previously
paid. Genelabs' right to make a claim against Gilead for such damages shall not
be affected, subject to Section 11.6 ("Dispute Resolution") hereof.

         9.4 EFFECT OF EXPIRATION OR TERMINATION; SURVIVAL.

         (a) Expiration or termination of this Agreement shall not relieve the
Parties of any obligation accruing prior to such expiration or termination. Any
expiration or 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 expiration or termination, including without limitation the
obligation to pay royalties for Product(s) or Collaboration Compound sold prior
to such expiration termination.

         (b) The provisions of Article 4 ("Confidentiality and Publication")
shall survive the expiration or termination of this Agreement and shall continue
in effect for ten (10) years. In addition, the provisions of the following
Articles and Sections shall survive expiration or termination of this Agreement.

         Article 1 (Definitions)

         Section 2.10(b) (relating to return of Materials)

         Section 3.4 (Negative Covenants; No Implied Licenses)

         Section 3.6 (Reports on Gilead Efforts) (for so long as Gilead conducts
         Pre-Clinical Development, clinical development or commercialization of
         Collaboration Compounds or Product)

         Section 3.8 (Negotiation for Exclusive Licenses)

         Section 5.6 (Reports; Payment of Royalty) (for four (4) Calendar
         Quarters after royalty-bearing sales have permanently ceased)

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** CONFIDENTIAL TREATMENT REQUESTED

         Section 5.7 (Audits) (until expiration of three (3) Calendar Years
         after royalty-bearing sales have permanently ceased)

         Section 5.8 (Payments and Exchange Rate)

         Section 5.9 (Income Tax Withholding)

         Section 5.10 (Interest)

         Section 6.4 (Disclaimer)

         Article 7 (Intellectual Property)

         Article 8 (Limitation of Liability)

         Article 9 (Term and Termination)

         Article 10 (Indemnification)

         Article 11 (Miscellaneous)

         (c) In addition, the provisions of the following additional Sections
shall also survive termination of this Agreement by Gilead solely to the extent
set forth in Section 9.3.2(a):

         Section 3.1(a) (Genelabs License to Gilead under Collaboration
         Technology)

         Section 3.3 (Development and Commercialization; Diligence)

         Section 3.5 (Excused Performance)

         Section 5.3 (Milestone Payments)

         Section 5.4 (Payment of Milestone Payments)

         Section 5.5 (Royalties)

         9.5 RIGHTS IN BANKRUPTCY.

         All rights and licenses granted under or pursuant to this Agreement
are, and will otherwise be deemed to be, for purposes of Section 365(n) of the
U.S. Bankruptcy Code (the "CODE"), licenses of rights to "intellectual property"
as defined under Section 101 of the Code. The Parties agree that Gilead, as
licensee of such rights under this Agreement, will retain and may fully exercise
all of its rights and elections under the Code. The Parties further agree that,
in the event of the commencement of a bankruptcy proceeding by or against
Genelabs under the Code, Gilead will be entitled to a complete duplicate of (or
complete access to, as appropriate) any such intellectual property and all
embodiments of such intellectual property, and the same, if not already in its
possession, will be promptly delivered to it (i) upon any such commencement of a
bankruptcy proceeding upon its written request therefor, unless Genelabs elects
to continue to perform all of its obligations under this Agreement, or (ii) if
not delivered under (i) above, following the rejection of this Agreement by or
on behalf of Genelabs upon written request therefor by Gilead.

         The foregoing provisions of this Section 9.5 are subject to any rights
a Party may have arising under the Code or other applicable law.

10.      INDEMNIFICATION

         10.1 INDEMNIFICATION BY GILEAD.

         Gilead hereby agrees to indemnify, defend and hold Genelabs and its
Affiliates and Excluded Affiliates, and their respective directors, officers,
employees and agents (each, a

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** CONFIDENTIAL TREATMENT REQUESTED

"GENELABS INDEMNITEE") harmless from and against any and all claims, suits,
actions, demands, liabilities, investigations, proceedings, expenses and/or
loss, including reasonable legal expense and attorneys' fees (collectively,
"LOSSES"), to which any Genelabs Indemnitee may become subject as a result of
any claim, demand, action or other proceeding by any person or entity other than
a Party or its Affiliates to the extent such Losses arise directly or indirectly
out of: (i) the manufacture, use, promotion, distribution, handling, storage,
sale or other disposition of any Product by Gilead or any of its Related Gilead
Parties, (ii) any defect or alleged defect in a Product or its packaging,
labeling or promotional materials, (iii) the breach by Gilead of any warranty,
representation, covenant or agreement made by Gilead in this Agreement, or (iv)
the negligence or willful or criminal misconduct of Gilead or its Related Gilead
Parties; except, in each case, to the extent such Losses result from the
negligence or willful misconduct of any Genelabs Indemnitee or the breach by
Genelabs of any warranty, representation, covenant or agreement made by Genelabs
in this Agreement.

         10.2 INDEMNIFICATION BY GENELABS.

         Genelabs hereby agrees to indemnify, defend and hold Gilead and its
Affiliates and their respective directors, officers, employees and agents (each,
a "GILEAD INDEMNITEE") harmless from and against any and all Losses to which any
Gilead Indemnitee may become subject as a result of any claim, demand, action or
other proceeding by any person or entity other than a Party or its Affiliates to
the extent such Losses arise directly or indirectly out of: (i) the breach by
Genelabs of any warranty, representation, covenant or agreement made by Genelabs
in this Agreement, or (ii) the negligence or willful or criminal misconduct of
Genelabs or its Excluded Affiliates; except, in each case, to the extent such
Losses result from the negligence or willful misconduct of any Gilead Indemnitee
or the breach by Gilead of any warranty, representation, covenant or agreement
made by Gilead in this Agreement.

         10.3 CONTROL OF DEFENSE.

         Any entity entitled to indemnification under this Article 10 shall give
notice to the indemnifying Party of any Losses that may be subject to
indemnification, promptly after learning of such Losses, and the indemnifying
Party shall assume the defense of such Losses with counsel reasonably
satisfactory to the indemnified Party. If such defense is assumed by the
indemnifying Party with counsel so selected, the indemnifying Party will not be
subject to any liability for any settlement of such Losses made by the
indemnified Party without its consent (but such consent will not be unreasonably
withheld or delayed), and will not be obligated to pay the fees and expenses of
any separate counsel retained by the indemnified Party with respect to such
Losses. The indemnified Party shall provide the indemnifying Party with all
information in its possession (except to the extent the provision of such
information would waive privileges pertaining to attorney-client communications
or attorney work product) and all assistance reasonably necessary to enable the
indemnifying Party to carry on the defense of any such Losses. The indemnified
Party shall cooperate with the indemnifying Party in the defense of such claim
or suit. In no event, however, may the indemnifying Party compromise or settle
any claim or suit in a manner which admits fault or negligence on the part of
the indemnified Party without the prior written consent of the indemnified
Party.

         10.4 INSURANCE.

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** CONFIDENTIAL TREATMENT REQUESTED

         Gilead, at its own expense, shall maintain product liability insurance
(or self-insure) in an amount consistent with industry standards during the term
of this Agreement.

11.      MISCELLANEOUS

         11.1 FORCE MAJEURE.

         Neither Party shall be held liable to the other Party nor be deemed to
have defaulted under or breached this Agreement for failure or delay in
performing any obligation under this 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, embargoes, war, acts of war (whether war be
declared or not), insurrections, riots, civil commotions, strikes, lockouts or
other labor disturbances, fire, floods, or other acts of God, or acts, omissions
or delays in acting by any governmental authority or the other Party. The
affected Party shall notify the other Party of such force majeure circumstances
as soon as reasonably practical, and shall promptly undertake all reasonable
efforts necessary to cure such force majeure circumstances. Such excuse from
liability shall be effective only to the extent and duration of the event(s)
causing the failure or delay in performance.

         11.2 ASSIGNMENT AND CHANGE OF CONTROL.

         11.2.1 Except as provided in this Section 11.2, this Agreement may not
be assigned or otherwise transferred, nor may any right or obligation hereunder
be assigned or transferred, by either Party without the written consent of the
other Party. For purposes of this Section 11.2, "Gilead" and "Genelabs" shall
exclude their respective Affiliates.

         11.2.2 Either Party may, without consent of the other Party, assign
this Agreement and its rights and obligations hereunder in whole or in part to
an Affiliate or by Gilead in connection with a Change of Control of Gilead,
provided that the assigning Party shall remain liable under this Agreement.

         11.2.3 GENELABS CHANGE OF CONTROL. Genelabs may, without Gilead's
consent, assign this Agreement and its rights and obligations hereunder in
connection with a Change of Control. Upon a Change of Control of Genelabs,
Genelabs shall provide written notice to Gilead and Gilead [**]:

         (a) [**]

         (b) [**]

[**].

         11.2.4 In the event that a Party assigns this Agreement and its rights
and obligations hereunder in connection with a Change of Control (whether this
Agreement is actually assigned or is assumed by the acquiring party by operation
of law (e.g., in the context of a reverse triangular merger)), intellectual
property rights of the acquiring party to such transaction (if other than one of
the Parties to this Agreement) shall not be included in the technology licensed
hereunder.

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** CONFIDENTIAL TREATMENT REQUESTED

         Any attempted assignment not in accordance with this Section 11.2 shall
be void. Any permitted assignee shall assume all assigned obligations of its
assignor under this Agreement.

         11.3 SEVERABILITY.

         If any one or more of the provisions contained in this Agreement is
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 affects 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.

         11.4 NOTICES.

         All notices which are required or permitted hereunder shall be in
writing and sufficient if delivered personally, sent by facsimile (and promptly
confirmed by personal delivery, registered or certified mail or overnight
courier), sent by nationally-recognized overnight courier or sent by registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:

       If to Genelabs,

                   to: Genelabs Technologies, Inc.
                       505 Penobscot Drive
                       Redwood City, CA 94063
                       Attention: Chief Executive Officer
                       Facsimile No.: (650) 368-0709

                  and: Genelabs Technologies, Inc.
                       505 Penobscot Drive
                       Redwood City, CA 94063
                       Attention: General Counsel
                       Facsimile No.: (650) 368-8748

if to Gilead,
                  to:  Gilead Sciences, Inc.
                       333 Lakeside Drive
                       Foster City, CA 94404
                       Attention: Chief Executive Officer
                       Facsimile No.: (650) 522-5488

                   and

                       Gilead Sciences, Inc.
                       333 Lakeside Drive

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** CONFIDENTIAL TREATMENT REQUESTED

                       Foster City, CA 94404
                       Attention: General Counsel
                       Facsimile: (650) 522-5537

or to such other address as the Party to whom notice is to be given may have
furnished to the other Party in writing in accordance herewith. Any such notice
shall be deemed to have been given: (a) when delivered if personally delivered
or sent by facsimile on a business day; (b) on the business day after dispatch
if sent by nationally-recognized overnight courier; and/or (c) on the fifth
business day following the date of mailing if sent by mail.

         11.5 APPLICABLE LAW.

         This Agreement shall be governed by and construed in accordance with
the laws of the State of California and the patent laws of the United States
without reference to the California rules of conflict of laws. The United
Nations Convention on Contracts for the International Sale of Goods shall not
apply.

         11.6 DISPUTE RESOLUTION.

         11.6.1 The Parties shall negotiate in good faith and use reasonable
efforts to settle any dispute, controversy or claim arising from or related to
this Agreement or the breach thereof. If the Parties cannot resolve the dispute,
controversy or claim within forty-five (45) days of a written request by either
Party to the other Party, the Parties agree to hold a meeting, attended by the
Chief Executive Officer of Genelabs and the Chief Executive Officer of Gilead,
to attempt to negotiate in good faith a resolution of the dispute prior to
pursuing other available remedies. If, within sixty (60) days after such written
request, the Parties have not succeeded in negotiating a resolution of the
dispute, and a Party wishes to pursue the matter, each such dispute, controversy
or claim that is not an "Excluded Claim" shall be resolved by binding
arbitration in accordance with the Commercial Arbitration Rules and
Supplementary Procedures for Large Complex Disputes ("RULES") of the American
Arbitration Association ("AAA") as then in effect, and judgment on the
arbitration award may be entered in any court having jurisdiction thereof. The
decision rendered in any such arbitration will be final and not appealable.

         11.6.2 The arbitration shall be conducted by a single neutral
arbitrator experienced in the pharmaceutical business, who shall not be a
current or former employee or director, or a then-current stockholder of record,
of either Party, their respective Affiliates or any Related Gilead Parties. The
Parties shall attempt to agree on the arbitrator but, absent agreement within
fourteen (14) days, either Party may apply to the AAA for selection of the
arbitrator in accordance with the Rules. The place of arbitration shall be San
Francisco, California, and all proceedings and communications shall be in
English.

         11.6.3 No later than thirty (30) days after selection of the
arbitrator, the Parties and their representatives shall hold a preliminary
meeting with the arbitrator, to mutually agree upon and thereafter follow
procedures seeking to assure that the arbitration will be concluded within six
(6) months from such meeting. Failing any such mutual agreement, the arbitrator
will design and the Parties shall follow procedures to such effect.

                                      -45-

<PAGE>

** CONFIDENTIAL TREATMENT REQUESTED

         11.6.4 The arbitrator will, in rendering his/her reasoned decision,
apply the substantive law of the state of California, U.S.A., without giving
effect to its principles of conflicts of law.

         11.6.5 The arbitrator shall have no authority to award punitive or any
other non-compensatory damages, except as may be expressly provided in Article 8
("Limitation of Liability"), nor may the arbitrator have any authority to order
a remedy which may not be lawfully ordered by a California Superior Court judge.
Each Party shall bear its own costs and expenses and attorneys' fees and an
equal share of the arbitrators' and any administrative fees of arbitration;
provided that if the arbitrator finds that a Party acted in bad faith, such
Party shall reimburse the other Party for its reasonable expenses and attorneys
fees.

         11.6.6 Except to the extent necessary to confirm or enforce an award or
as may be required by law, neither a Party nor an arbitrator may disclose the
existence, content, or results of an arbitration without the prior written
consent of both Parties. In no event shall an arbitration be initiated after the
date when commencement of a legal or equitable proceeding based on the dispute,
controversy or claim would be barred by the applicable California statute of
limitations.

         11.6.7 The Parties agree that, if a dispute over whether a Party has
the right to terminate this Agreement proceeds to arbitration, neither Party may
terminate this Agreement until final resolution of the dispute through such
arbitration. The Parties further agree that the disputed portion of any payments
to be made pursuant to this Agreement pending resolution of the dispute shall be
paid into an escrow account pending resolution by the arbitrator and to the
extent paid directly to a Party shall be refunded if an arbitrator or court
determines that such payments are not due.

         11.6.8 As used in this Section, the term "EXCLUDED CLAIM" shall mean a
dispute, controversy or claim that concerns: (a) the validity or infringement of
a patent, trademark or copyright; or (b) any antitrust, anti-monopoly or
competition law or regulation, whether or not statutory.

         11.7 ENTIRE AGREEMENT; AMENDMENTS.

         This Agreement, together with the exhibits hereto, contains the entire
understanding of the Parties with respect to the subject matter hereof and
supercedes and cancels all previous express or implied agreements and
understandings, negotiations, writings and commitments, either oral or written,
with respect to the subject matter hereof. This Agreement may be amended, or any
term hereof modified, only by a written instrument duly executed by authorized
representatives of both Parties hereto.

         Notwithstanding anything to the contrary in the foregoing, any prior
confidentiality agreements between the Parties shall remain in full force and
effect with respect to the subject matter thereof and information disclosed
thereunder. For clarification, the Material Transfer Agreement between the
Parties dated September 10, 2004 shall be superseded by this Agreement and any
materials provided thereunder shall be deemed to be covered by the terms of this
Agreement.

                                      -46-

<PAGE>

** CONFIDENTIAL TREATMENT REQUESTED

         11.8 HEADINGS.

         The captions to the several Articles and Sections hereof are not a part
of this Agreement, but are merely for convenience to assist in locating and
reading the several Articles and Sections hereof.

         11.9 INDEPENDENT CONTRACTORS.

         It is expressly agreed that Genelabs and Gilead shall be independent
contractors and that the relationship between the two Parties shall not
constitute a partnership, joint venture or agency. Neither Genelabs nor Gilead
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 Party,
without the prior written consent of the other Party.

         11.10 WAIVER.

         The waiver by either Party hereto of any right hereunder, or the
failure of the other Party to perform, or 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 such other Party whether of a similar nature or otherwise, subject to
Section 11.6.

         11.11 CUMULATIVE REMEDIES.

         No remedy referred to in this Agreement is intended to be exclusive,
but each shall be cumulative and in addition to any other remedy referred to in
this Agreement or otherwise available under law.

         11.12 WAIVER OF RULE OF CONSTRUCTION.

         Each Party has had the opportunity to consult with counsel in
connection with the review, drafting and negotiation of this Agreement.
Accordingly, the rule of construction that any ambiguity in this Agreement shall
be construed against the drafting Party shall not apply.

         11.13 NO TRADEMARK RIGHTS.

         No right, express or implied, is granted by this Agreement to a Party
to use in any manner the name or any other trade name or trademark of a Party in
connection with the performance of this Agreement.

         11.14 NON-SOLICITATION.

         During the Research Program Term, and for a period of one (1) year
thereafter, neither Party shall solicit, induce, encourage or attempt to induce
or encourage any employee of the other Party to terminate his or her employment
with such other Party or to breach any other obligation to such other Party. The
preceding sentence shall not be deemed to apply to general advertisements of
employment not specifically directed to employees of a Party.

         11.15 COMPLIANCE WITH LAW.

                                      -47-

<PAGE>

** CONFIDENTIAL TREATMENT REQUESTED

         Nothing in this Agreement shall be deemed to permit a Party to export,
re-export or otherwise transfer any Product sold under this Agreement without
compliance with applicable laws.

         11.16 COUNTERPARTS.

         This Agreement may be executed 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.

         IN WITNESS WHEREOF, the Parties have executed this Agreement on the
date first set forth above.

GILEAD SCIENCES, INC.                            GENELABS TECHNOLOGIES, INC.

BY:                                              BY:

NAME: John C. Martin                             NAME: James A.D. Smith

TITLE: President and Chief Executive Officer     TITLE: President and Chief
                                                        Executive Officer

                                      -48-<PAGE>

                                                                    EXHIBIT 10.1

                               BLUE29 CORPORATION

                            2003 STOCK INCENTIVE PLAN

      1. Purposes of the Plan. The purposes of this Plan are to attract and
retain the best available personnel, to provide additional incentives to
Employees, Directors and Consultants and to promote the success of the Company's
business.

      2. Definitions. As used herein, the following definitions shall apply:

            (a) "Administrator" means the Board or any of the Committees
appointed to administer the Plan.

            (b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

            (c) "Applicable Laws" means the legal requirements relating to the
administration of stock incentive plans, if any, under applicable provisions of
federal and state securities laws, the corporate laws of California and, to the
extent other than California, the corporate law of the state of the Company's
incorporation, the Code, the rules of any applicable stock exchange or national
market system, and the rules of any foreign jurisdiction applicable to Awards
granted to residents therein.

            (d) "Assumed" means that (i) pursuant to a Corporate Transaction
defined in Section 2(q)(i), 2(q)(ii) or 2(q)(iii), the contractual obligations
represented by the Award are expressly assumed (and not simply by operation of
law) by the successor entity or its Parent in connection with the Corporate
Transaction with appropriate adjustments to the number and type of securities of
the successor entity or its Parent subject to the Award and the exercise or
purchase price thereof which preserves the compensation element of the Award
existing at the time of the Corporate Transaction as determined in accordance
with the instruments evidencing the agreement to assume the Award or (ii)
pursuant to a Corporate Transaction defined in Section 2(q)(iv) or 2(q)(v), the
Award is expressly affirmed by the Company.

            (e) "Award" means the grant of an Option, Restricted Stock, or other
right or benefit under the Plan.

            (f) "Award Agreement" means the written agreement evidencing the
grant of an Award executed by the Company and the Grantee, including any
amendments thereto.

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

            (h) "Cause" means, with respect to the termination by the Company or
a Related Entity of the Grantee's Continuous Service, that such termination is
for "Cause" as such term is expressly defined in a then-effective written
agreement between the Grantee and the Company or such Related Entity, or in the
absence of such then-effective written agreement and definition, is based on, in
the determination of the Administrator, the Grantee's: (i) performance of any
act or failure to perform any act in bad faith and to the detriment of the
Company or a Related Entity;

                                       1
<PAGE>

(ii) material breach of any agreement with the Company or a Related Entity; or
(iii) commission of a crime involving dishonesty, breach of trust, or physical
or emotional harm to any person.

            (i) "Change in Control" means a change in ownership or control of
the Company after the Registration Date effected through either of the following
transactions:

                  (i) the direct or indirect acquisition by any person or
related group of persons (other than an acquisition from or by the Company or by
a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer made directly to the Company's shareholders which a
majority of the Continuing Directors who are not Affiliates or Associates of the
offeror do not recommend such shareholders accept, or

                  (ii) a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who are
Continuing Directors.

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

            (k) "Committee" means any committee composed of Directors of the
Board appointed by the Board to administer the Plan.

            (l) "Common Stock" means the voting common stock of the Company.

            (m) "Company" means Blue29 Corporation, a California corporation.

            (n) "Consultant" means any person (other than an Employee or a
Director, solely with respect to rendering services in such person's capacity as
a Director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.

            (o) "Continuing Directors" means members of the Board who either (i)
have been Board members continuously for a period of at least thirty-six (36)
months, or (ii) have been Board members for less than thirty-six (36) months and
were elected or nominated for election as Board members by at least a majority
of the Board members described in clause (i) who were still in office at the
time such election or nomination was approved by the Board.

            (p) "Continuous Service" means that the provision of services to the
Company or a Related Entity in any capacity of Employee, Director or Consultant,
is not interrupted or terminated. In jurisdictions requiring notice in advance
of an effective termination as an Employee, Director or Consultant, Continuous
Service shall be deemed terminated upon the actual cessation of providing
services to the Company or a Related Entity notwithstanding any required notice
period that must be fulfilled before a termination as an Employee, Director or
Consultant can be effective under Applicable Laws. Continuous Service shall not
be considered

                                       2
<PAGE>

interrupted in the case of (i) any approved leave of absence, (ii) transfers
among the Company, any Related Entity, or any successor, in any capacity of
Employee, Director or Consultant, or (iii) any change in status as long as the
individual remains in the service of the Company or a Related Entity in any
capacity of Employee, Director or Consultant (except as otherwise provided in
the Award Agreement). An approved leave of absence shall include sick leave,
military leave, or any other authorized personal leave. For purposes of each
Incentive Stock Option granted under the Plan, if such leave exceeds ninety (90)
days, and reemployment upon expiration of such leave is not guaranteed by
statute or contract, then the Incentive Stock Option shall be treated as a
Non-Qualified Stock Option on the day three (3) months and one (1) day following
the expiration of such ninety (90) day period.

            (q) "Corporate Transaction" means any of the following transactions:

                  (i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;

                  (ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company;

                  (iii) the complete liquidation or dissolution of the Company;

                  (iv) any reverse merger or series of related transactions
culminating in a reverse merger (including, but not limited to, a tender offer
followed by a reverse merger) in which the Company is the surviving entity but
in which securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities are transferred to
a person or persons different from those who held such securities immediately
prior to such merger or the initial transaction culminating in such merger but
excluding any such transaction or series of related transactions that the
Administrator determines shall not be a Corporate Transaction; or

                  (v) acquisition in a single or series of related transactions
by any person or related group of persons (other than the Company or by a
Company-sponsored employee benefit plan) of beneficial ownership (within the
meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding securities but excluding any such transaction or series of related
transactions that the Administrator determines shall not be a Corporate
Transaction.

            (r) "Covered Employee" means an Employee who is a "covered employee"
under Section 162(m)(3) of the Code.

            (s) "Director" means a member of the Board or the board of directors
of any Related Entity.

            (t) "Disability" means as defined under the long-term disability
policy of the Company or the Related Entity to which the Grantee provides
services regardless of whether the Grantee is covered by such policy. If the
Company or the Related Entity to which the Grantee

                                       3
<PAGE>

provides service does not have a long-term disability plan in place,
"Disability" means that a Grantee is unable to carry out the responsibilities
and functions of the position held by the Grantee by reason of any medically
determinable physical or mental impairment for a period of not less than ninety
(90) consecutive days. A Grantee will not be considered to have incurred a
Disability unless he or she furnishes proof of such impairment sufficient to
satisfy the Administrator in its discretion.

            (u) "Employee" means any person, including an Officer or Director,
who is in the employ of the Company or any Related Entity, subject to the
control and direction of the Company or any Related Entity as to both the work
to be performed and the manner and method of performance. The payment of a
director's fee by the Company or a Related Entity shall not be sufficient to
constitute "employment" by the Company.

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

            (w) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:

                  (i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation The Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system on
the date of determination (or, if no closing sales price or closing bid was
reported on that date, as applicable, on the last trading date such closing
sales price or closing bid was reported), as reported in The Wall Street Journal
or such other source as the Administrator deems reliable;

                  (ii) If the Common Stock is regularly quoted on an automated
quotation system (including the OTC Bulletin Board) or by a recognized
securities dealer, but selling prices are not reported, the Fair Market Value of
a share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the date of determination (or, if no such prices
were reported on that date, on the last date such prices were reported), as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable; or

                  (iii) In the absence of an established market for the Common
Stock of the type described in (i) and (ii), above, the Fair Market Value
thereof shall be determined by the Administrator in good faith and in a manner
consistent with Section 260.140.50 of Title 10 of the California Code of
Regulations which requires that consideration be given to (A) the price at which
securities of reasonably comparable corporations (if any) in the same industry
are being traded, or (B) if there are no securities of reasonably comparable
corporations in the same industry being traded, the earnings history, book value
and prospects of the issuer in light of market conditions generally.

            (x) "Good Reason" means the occurrence after a Corporate Transaction
or Change in Control of any of the following events or conditions unless
consented to by the Grantee (and the Grantee shall be deemed to have consented
to any such event or condition

                                       4
<PAGE>

unless the Grantee provides written notice of the Grantee's non-acquiescence
within 30 days of the effective time of such event or condition):

                  (i) a change in the Grantee's responsibilities or duties which
represents a material and substantial diminution in the Grantee's
responsibilities or duties as in effect immediately preceding the consummation
of a Corporate Transaction or Change in Control;

                  (ii) a reduction in the Grantee's base salary to a level below
that in effect at any time within six (6) months preceding the consummation of a
Corporate Transaction or Change in Control or at any time thereafter; or

                  (iii) requiring the Grantee to be based at any place outside a
50-mile radius from the Grantee's job location or residence prior to the
Corporate Transaction or Change in Control except for reasonably required travel
on business which is not materially greater than such travel requirements prior
to the Corporate Transaction or Change in Control.

            (y) "Grantee" means an Employee, Director or Consultant who receives
an Award under the Plan.

            (z) "Immediate Family" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Grantee's household (other than a tenant or employee), a trust in which these
persons (or the Grantee) have more than fifty percent (50%) of the beneficial
interest, a foundation in which these persons (or the Grantee) control the
management of assets, and any other entity in which these persons (or the
Grantee) own more than fifty percent (50%) of the voting interests.

            (aa) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.

            (bb) "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

            (cc) "Officer" means a person who is an officer of the Company or a
Related Entity within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.

            (dd) "Option" means an option to purchase Shares pursuant to an
Award Agreement granted under the Plan.

            (ee) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.

            (ff) "Performance-Based Compensation" means compensation qualifying
as "performance-based compensation" under Section 162(m) of the Code.

                                       5
<PAGE>

            (gg) "Plan" means this 2003 Stock Incentive Plan.

            (hh) "Post-Termination Exercise Period" means the period specified
in the Award Agreement of not less than ninety (90) days commencing on the date
of termination (other than termination by the Company or any Related Entity for
Cause) of the Grantee's Continuous Service, or such longer period as may be
applicable upon death or Disability.

            (ii) "Registration Date" means the first to occur of (i) the closing
of the first sale to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, of (A) the Common Stock or (B) the
same class of securities of a successor corporation (or its Parent) issued
pursuant to a Corporate Transaction in exchange for or in substitution of the
Common Stock; and (ii) in the event of a Corporate Transaction, the date of the
consummation of the Corporate Transaction if the same class of securities of the
successor corporation (or its Parent) issuable in such Corporate Transaction
shall have been sold to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, on or prior to the date of
consummation of such Corporate Transaction.

            (jj) "Related Entity" means any Parent or Subsidiary of the Company
and any business, corporation, partnership, limited liability company or other
entity in which the Company or a Parent or a Subsidiary of the Company holds a
substantial ownership interest, directly or indirectly.

            (kk) "Replaced" means that (i) pursuant to a Corporate Transaction
defined in Section 2(q)(i), 2(q)(ii) or 2(q)(iii), the Award is replaced with a
comparable stock award or a cash incentive program of the successor entity or
Parent thereof which preserves the compensation element of such Award existing
at the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same (or a more favorable) vesting schedule applicable to
such Award or (ii) pursuant to a Corporate Transaction defined in Section
2(q)(iv) or 2(q)(v), the Award is replaced with a comparable stock award or a
cash incentive program of the Company or Parent thereof which preserves the
compensation element of such Award existing at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same (or a
more favorable) vesting schedule applicable to such Award. The determination of
Award comparability shall be made by the Administrator and its determination
shall be final, binding and conclusive.

            (ll) "Restricted Stock" means Shares issued under the Plan to the
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.

            (mm) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act or any successor thereto.

            (nn) "Share" means a share of the Common Stock.

                                       6
<PAGE>

            (oo) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.

      3. Stock Subject to the Plan.

            (a) Subject to the provisions of Section 10 below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards (including
Incentive Stock Options) is 6,100,000 Shares. The Shares may be authorized,
but unissued, or reacquired Common Stock.

            (b) Any Shares covered by an Award (or portion of an Award) which is
forfeited, canceled or expires (whether voluntarily or involuntarily) shall be
deemed not to have been issued for purposes of determining the maximum aggregate
number of Shares which may be issued under the Plan. Shares that actually have
been issued under the Plan pursuant to an Award shall not be returned to the
Plan and shall not become available for future issuance under the Plan, except
that if unvested Shares are forfeited or repurchased by the Company, such Shares
shall become available for future grant under the Plan.

      4. Administration of the Plan.

            (a) Plan Administrator.

                  (i) Administration with Respect to Directors and Officers.
Prior to the Registration Date, with respect to grants of Awards to Directors or
Employees who are also Officers or Directors of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the Applicable
Laws. On or after the Registration Date, with respect to grants of Awards to
Directors or Employees who are also Officers or Directors of the Company, the
Plan shall be administered by (A) the Board or (B) a Committee designated by the
Board, which Committee shall be constituted in such a manner as to satisfy the
Applicable Laws and to permit such grants and related transactions under the
Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule
16b-3. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board.

                  (ii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Awards to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws. Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board.

                  (iii) Administration With Respect to Covered Employees.
Notwithstanding the foregoing, as of and after the date that the exemption for
the Plan under Section 162(m) of the Code expires, as set forth in Section 20
below, grants of Awards to any Covered Employee intended to qualify as
Performance-Based Compensation shall be made only by a Committee (or
subcommittee of a Committee) which is comprised solely of two or more Directors
eligible to serve on a committee making Awards qualifying as Performance-Based
Compensation. In the case of such Awards granted to Covered Employees,
references to the

                                       7
<PAGE>

"Administrator" or to a "Committee" shall be deemed to be references to such
Committee or subcommittee.

                  (iv) Officer Authorization to Grant Awards. The Board may
authorize one or more Officers to grant Awards subject to such limitations as
the Board determines from time to time.

            (b) Multiple Administrative Bodies. The Plan may be administered by
different bodies with respect to Directors, Officers, Consultants, and Employees
who are neither Directors nor Officers.

            (c) Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:

                  (i) to select the Employees, Directors and Consultants to whom
Awards may be granted from time to time hereunder;

                  (ii) to determine whether and to what extent Awards are
granted hereunder;

                  (iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;

                  (iv) to approve forms of Award Agreements for use under the
Plan;

                  (v) to determine the terms and conditions of any Award granted
hereunder;

                  (vi) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees favorable treatment under such rules or laws; provided,
however, that no Award shall be granted under any such additional terms,
conditions, rules or procedures with terms or conditions which are inconsistent
with the provisions of the Plan;

                  (vii) to amend the terms of any outstanding Award granted
under the Plan, provided that any amendment that would adversely affect the
Grantee's rights under an outstanding Award shall not be made without the
Grantee's written consent;

                  (viii) to construe and interpret the terms of the Plan and
Awards, including without limitation, any notice of award or Award Agreement,
granted pursuant to the Plan; and

                  (ix) to take such other action, not inconsistent with the
terms of the Plan, as the Administrator deems appropriate.

      5. Eligibility. Awards other than Incentive Stock Options may be granted
to Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the

                                       8
<PAGE>

Company or a Parent or a Subsidiary of the Company. An Employee, Director or
Consultant who has been granted an Award may, if otherwise eligible, be granted
additional Awards. Awards may be granted to such Employees, Directors or
Consultants who are residing in foreign jurisdictions as the Administrator may
determine from time to time.

      6. Terms and Conditions of Awards.

            (a) Designation of Award. Each Award shall be designated in the
Award Agreement. In the case of an Option, the Option shall be designated as
either an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of Shares subject to Options designated as Incentive Stock Options which
become exercisable for the first time by a Grantee during any calendar year
(under all plans of the Company or any Parent or Subsidiary of the Company)
exceeds $100,000, such excess Options, to the extent of the Shares covered
thereby in excess of the foregoing limitation, shall be treated as Non-Qualified
Stock Options. For this purpose, Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the grant date of the relevant Option.

            (b) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total shareholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.

            (c) Acquisitions and Other Transactions. The Administrator may issue
Awards under the Plan in settlement, assumption or substitution for, outstanding
awards or obligations to grant future awards in connection with the Company or a
Related Entity acquiring another entity, an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction.

            (d) Deferral of Award Payment. The Administrator may establish one
or more programs under the Plan to permit selected Grantees the opportunity to
elect to defer receipt of consideration upon exercise of an Award, satisfaction
of performance criteria, or other event that absent the election would entitle
the Grantee to payment or receipt of Shares or other consideration under an
Award (but only to the extent that such deferral programs would not result in an
accounting compensation charge unless otherwise determined by the
Administrator). The Administrator may establish the election procedures, the
timing of such elections, the mechanisms for payments of, and accrual of
interest or other earnings, if any, on amounts, Shares or other consideration so
deferred, and such other terms, conditions, rules and procedures that the
Administrator deems advisable for the administration of any such deferral
program.

                                       9
<PAGE>

            (e) Separate Programs. The Administrator may establish one or more
separate programs under the Plan for the purpose of issuing particular forms of
Awards to one or more classes of Grantees on such terms and conditions as
determined by the Administrator from time to time.

            (f) Individual Option Limit. Following the date that the exemption
from application of Section 162(m) of the Code described in Section 20 (or any
exemption having similar effect) ceases to apply to Awards, the maximum number
of Shares with respect to which Options may be granted to any Grantee in any
fiscal year of the Company shall be three million (3,000,000) Shares. In
connection with a Grantee's commencement of Continuous Service, a Grantee may be
granted Options for up to an additional one million (1,000,000) Shares which
shall not count against the limit set forth in the previous sentence. The
foregoing limitations shall be adjusted proportionately in connection with any
change in the Company's capitalization pursuant to Section 10, below. To the
extent required by Section 162(m) of the Code or the regulations thereunder, in
applying the foregoing limitations with respect to a Grantee, if any Option is
canceled, the canceled Option shall continue to count against the maximum number
of Shares with respect to which Options may be granted to the Grantee. For this
purpose, the repricing of an Option shall be treated as the cancellation of the
existing Option and the grant of a new Option.

            (g) Early Exercise. The Award Agreement may, but need not, include a
provision whereby the Grantee may elect at any time while an Employee, Director
or Consultant to exercise any part or all of the Award prior to full vesting of
the Award. Any unvested Shares received pursuant to such exercise may be subject
to a repurchase right in favor of the Company or a Related Entity or to any
other restriction the Administrator determines to be appropriate.

            (h) Term of Award. The term of each Award shall be the term stated
in the Award Agreement, provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof. However, in the case of an
Incentive Stock Option granted to a Grantee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary of the
Company, the term of the Incentive Stock Option shall be five (5) years from the
date of grant thereof or such shorter term as may be provided in the Award
Agreement.

            (i) Transferability of Awards. Non-Qualified Stock Options shall be
transferable (i) by will or by the laws of descent and distribution, or (ii) to
the extent and in the manner authorized by the Administrator by gift to members
of the Grantee's Immediate Family. Incentive Stock Options and other Awards may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Grantee, only by the Grantee.
Notwithstanding the foregoing, the Grantee may designate a member of the
Grantee's Immediate Family as a beneficiary of the Grantee's Incentive Stock
Option or Non-Qualified Stock Option in the event of the Grantee's death on a
beneficiary designation form provided by the Administrator.

                                       10
<PAGE>

            (j) Time of Granting Awards. The date of grant of an Award shall for
all purposes be the date on which the Administrator makes the determination to
grant such Award, or such other date as is determined by the Administrator.

      7. Award Exercise or Purchase Price, Consideration and Taxes.

            (a) Exercise or Purchase Price. The exercise or purchase price, if
any, for an Award shall be as follows:

                  (i) In the case of an Incentive Stock Option:

                        (A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary of the Company, the per Share exercise price shall be not less
than one hundred ten percent (110%) of the Fair Market Value per Share on the
date of grant; or

                        (B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be not
less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.

                  (ii) In the case of a Non-Qualified Stock Option:

                        (A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary of the
Company, the per Share exercise price shall be not less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant; or

                        (B) granted to any person other than a person described
in the preceding paragraph, the per Share exercise price shall be not less than
eighty-five percent (85%) of the Fair Market Value per Share on the date of
grant.

                  (iii) In the case of Awards intended to qualify as
Performance-Based Compensation, the exercise or purchase price, if any, shall be
not less than one hundred percent (100%) of the Fair Market Value per Share on
the date of grant.

                  (iv) In the case of the sale of Shares:

                        (A) granted to a person who, at the time of the grant of
such Award, or at the time the purchase is consummated, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary of the Company, the per Share purchase price
shall be not less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant; or

                        (B) granted to any person other than a person described
in the preceding paragraph, the per Share purchase price shall be not less than
eighty-five percent (85%) of the Fair Market Value per Share on the date of
grant.

                                       11
<PAGE>

                  (v) In the case of other Awards, such price as is determined
by the Administrator.

                  (vi) Notwithstanding the foregoing provisions of this Section
7(a), in the case of an Award issued pursuant to Section 6(c), above, the
exercise or purchase price for the Award shall be determined in accordance with
the provisions of the relevant instrument evidencing the agreement to issue such
Award.

            (b) Consideration. Subject to Applicable Laws, the consideration to
be paid for the Shares to be issued upon exercise or purchase of an Award
including the method of payment, shall be determined by the Administrator (and,
in the case of an Incentive Stock Option, shall be determined at the time of
grant). In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for Shares
issued under the Plan the following.

                  (i) cash;

                  (ii) check;

                  (iii) delivery of Grantee's promissory note with such
recourse, interest, security, and redemption provisions as the Administrator
determines as appropriate (but only to the extent that the acceptance or terms
of the promissory note would not violate an Applicable Law and would not result
in an accounting compensation charge with respect to the use of such promissory
note to pay the exercise price unless otherwise determined by the
Administrator);

                  (iv) if the exercise or purchase occurs on or after the
Registration Date, surrender of Shares or delivery of a properly executed form
of attestation of ownership of Shares as the Administrator may require which
have a Fair Market Value on the date of surrender or attestation equal to the
aggregate exercise price of the Shares as to which said Award shall be exercised
(but only to the extent that such exercise of the Award would not result in an
accounting compensation charge with respect to the Shares used to pay the
exercise price unless otherwise determined by the Administrator; generally an
accounting charge will result if the Shares used to pay the exercise price were
acquired less than six months before the exercise);

                  (v) with respect to Options, if the exercise occurs on or
after the Registration Date, payment through a broker-dealer sale and remittance
procedure pursuant to which the Grantee (A) shall provide written instructions
to a Company designated brokerage firm to effect the immediate sale of some or
all of the purchased Shares and remit to the Company sufficient funds to cover
the aggregate exercise price payable for the purchased Shares and (B) shall
provide written directives to the Company to deliver the certificates for the
purchased Shares directly to such brokerage firm in order to complete the sale
transaction; or

                  (vi) any combination of the foregoing methods of payment.

            (c) Taxes. No Shares shall be delivered under the Plan to any
Grantee or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of

                                       12
<PAGE>

Shares or the disqualifying disposition of Shares received on exercise of an
Incentive Stock Option. Upon exercise of an Award the Company shall withhold or
collect from Grantee an amount sufficient to satisfy such tax obligations.

      8. Exercise of Award.

            (a) Procedure for Exercise; Rights as a Shareholder.

                  (i) Any Award granted hereunder shall be exercisable at such
times and under such conditions as determined by the Administrator under the
terms of the Plan and specified in the Award Agreement but in the case of an
Option, in no case at a rate of less than twenty percent (20%) per year over
five (5) years from the date the Option is granted, subject to reasonable
conditions such as continued employment. Notwithstanding the foregoing, in the
case of an Option granted to an Officer, Director or Consultant, the Award
Agreement may provide that the Option may become exercisable, subject to
reasonable conditions such as such Officer's, Director's or Consultant's
Continuous Service, at any time or during any period established in the Award
Agreement.

                  (ii) An Award shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Award by the person entitled to exercise the Award and full payment
for the Shares with respect to which the Award is exercised has been made,
including, to the extent selected, use of the broker-dealer sale and remittance
procedure to pay the purchase price as provided in Section 7(b)(v). Until the
issuance (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to Shares subject to an Award,
notwithstanding the exercise of an Option or other Award. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in the Award Agreement
or Section 10 below.

            (b) Exercise of Award Following Termination of Continuous Service.
In the event of termination of a Grantee's Continuous Service for any reason
other than Disability or death (but not in the event of a Grantee's change of
status from Employee to Consultant or from Consultant to Employee), such Grantee
may, but only during the Post-Termination Exercise Period (but in no event later
than the expiration date of the term of such Award as set forth in the Award
Agreement), exercise the portion of the Grantee's Award that was vested at the
date of such termination or such other portion of the Grantee's Award as may be
determined by the Administrator. The Grantee's Award Agreement may provide that
upon the termination of the Grantee's Continuous Service for Cause, the
Grantee's right to exercise the Award shall terminate concurrently with the
termination of Grantee's Continuous Service. In the event of a Grantee's change
of status from Employee to Consultant, an Employee's Incentive Stock Option
shall convert automatically to a Non-Qualified Stock Option on the day three (3)
months and one day following such change of status. To the extent that the
Grantee's Award was unvested at the date of termination, or if the Grantee does
not exercise the vested portion of the Grantee's Award within the
Post-Termination Exercise Period, the Award shall terminate.

                                       13
<PAGE>

            (c) Disability of Grantee. In the event of termination of a
Grantee's Continuous Service as a result of his or her Disability, such Grantee
may, but only within twelve (12) months from the date of such termination (but
in no event later than the expiration date of the term of such Award as set
forth in the Award Agreement), exercise the portion of the Grantee's Award that
was vested at the date of such termination; provided, however, that if such
Disability is not a "disability" as such term is defined in Section 22(e)(3) of
the Code, in the case of an Incentive Stock Option such Incentive Stock Option
shall automatically convert to a Non-Qualified Stock Option on the day three (3)
months and one day following such termination. To the extent that the Grantee's
Award was unvested at the date of termination, or if Grantee does not exercise
the vested portion of the Grantee's Award within the time specified herein, the
Award shall terminate.

            (d) Death of Grantee. In the event of a termination of the Grantee's
Continuous Service as a result of his or her death, or in the event of the death
of the Grantee during the Post-Termination Exercise Period or during the twelve
(12) month period following the Grantee's termination of Continuous Service as a
result of his or her Disability, the Grantee's estate or a person who acquired
the right to exercise the Award by bequest or inheritance may exercise the
portion of the Grantee's Award that was vested as of the date of termination,
within twelve (12) months from the date of death (but in no event later than the
expiration of the term of such Award as set forth in the Award Agreement). To
the extent that, at the time of death, the Grantee's Award was unvested, or if
the Grantee's estate or a person who acquired the right to exercise the Award by
bequest or inheritance does not exercise the vested portion of the Grantee's
Award within the time specified herein, the Award shall terminate.

      9. Conditions Upon Issuance of Shares.

            (a) Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

            (b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award 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
Applicable Laws.

      10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, the maximum number of Shares with respect to which Options
may be granted to any Grantee in any fiscal year of the Company, as well as any
other terms that the Administrator determines require adjustment shall be
proportionately adjusted for (i) any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Shares, or similar transaction affecting
the Shares, (ii) any other increase or decrease in the number of issued Shares
effected

                                       14
<PAGE>

without receipt of consideration by the Company, or (iii) as the Administrator
may determine in its discretion, any other transaction with respect to Common
Stock including a corporate merger, consolidation, acquisition of property or
stock, separation (including a spin-off or other distribution of stock or
property), reorganization, liquidation (whether partial or complete) or any
similar transaction; 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 Administrator
and its determination shall be final, binding and conclusive. Except as the
Administrator determines, no issuance 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 hereof shall be made with respect to, the
number or price of Shares subject to an Award.

      11. Corporate Transactions and Changes in Control.

            (a) Termination of Award to Extent Not Assumed in Corporate
Transaction. Effective upon the consummation of a Corporate Transaction, all
outstanding Awards under the Plan shall terminate. However, all such Awards
shall not terminate to the extent they are Assumed in connection with the
Corporate Transaction.

            (b) Acceleration of Award Upon Corporate Transaction or Change in
Control.

                  (i) Corporate Transaction. Except as provided otherwise in an
individual Award Agreement, in the event of a Corporate Transaction and:

                        (A) for the portion of each Award that is Assumed or
Replaced, then such Award (if Assumed), the replacement Award (if Replaced), or
the cash incentive program (if Replaced) automatically shall become fully
vested, exercisable and payable and be released from any repurchase or
forfeiture rights (other than repurchase rights exercisable at Fair Market
Value) for all of the Shares at the time represented by such Assumed or Replaced
portion of the Award, immediately upon termination of the Grantee's Continuous
Service if such Continuous Service is terminated by the successor company or the
Company without Cause or voluntarily by the Grantee with Good Reason within
twelve (12) months of the Corporate Transaction; and

                        (B) for the portion of each Award that is neither
Assumed nor Replaced, such portion of the Award shall automatically become fully
vested and exercisable and be released from any repurchase or forfeiture rights
(other than repurchase rights exercisable at Fair Market Value) for all of the
Shares at the time represented by such portion of the Award, immediately prior
to the specified effective date of such Corporate Transaction.

                  (ii) Change in Control. Except as provided otherwise in an
individual Award Agreement, following a Change in Control (other than a Change
in Control which also is a Corporate Transaction) and upon the termination of
the Continuous Service of a Grantee if such Continuous Service is terminated by
the Company or Related Entity without Cause or voluntarily by the Grantee with
Good Reason within twelve (12) months of a Change in Control, each Award of such
Grantee which is at the time outstanding under the Plan automatically shall
become fully vested and exercisable and be released from any repurchase or
forfeiture rights

                                       15
<PAGE>

(other than repurchase rights exercisable at Fair Market Value), immediately
upon the termination of such Continuous Service.

                  (c) Effect of Acceleration on Incentive Stock Options. Any
Incentive Stock Option accelerated under this Section 11 in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Stock Option under the Code only to the extent the $100,000 dollar
limitation of Section 422(d) of the Code is not exceeded. To the extent such
dollar limitation is exceeded, a proportional fraction of each share subject to
such Option will be allocated as part Incentive Stock Option and part
Non-Qualified Stock Option.

      12. Repurchase Rights. If the provisions of an Award Agreement grant to
the Company the right to repurchase Shares upon termination of the Grantee's
Continuous Service, the Award Agreement shall (or may, with respect to Awards
granted or issued to Officers, Directors or Consultants) provide that:

                  (a) the right to repurchase must be exercised, if at all,
within ninety (90) days of the termination of the Grantee's Continuous Service
(or in the case of Shares issued upon exercise of Awards after the date of
termination of the Grantee's Continuous Service, within ninety (90) days after
the date of the Award exercise);

                  (b) the consideration payable for the Shares upon exercise of
such repurchase right shall be made in cash or by cancellation of purchase money
indebtedness within the ninety (90) day periods specified in Section 12(a);

                  (c) the amount of such consideration shall (i) be equal to the
original purchase price paid by Grantee for each such Share; provided, that the
right to repurchase such Shares at the original purchase price shall lapse at
the rate of at least twenty percent (20%) of the Shares subject to the Award per
year over five (5) years from the date the Award is granted (without respect to
the date the Award was exercised or became exercisable), and (ii) with respect
to Shares, other than Shares subject to repurchase at the original purchase
price pursuant to clause (i) above, not less than the Fair Market Value of the
Shares to be repurchased on the date of termination of Grantee's Continuous
Service; and

                  (d) the right to repurchase Shares, other than the right to
repurchase Shares at the original purchase price pursuant to clause (i) of
Section 12(c), shall terminate on the Registration Date.

      13. Effective Date and Term of Plan. The Plan shall become effective upon
the earlier to occur of its adoption by the Board or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 18 below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.

      14. Amendment, Suspension or Termination of the Plan.

                  (a) The Board may at any time amend, suspend or terminate the
Plan. To the extent necessary to comply with Applicable Laws, the Company shall
obtain shareholder approval of any Plan amendment in such a manner and to such a
degree as required.

                                       16
<PAGE>

                  (b) No Award may be granted during any suspension of the Plan
or after termination of the Plan.

                  (c) No suspension or termination of the Plan (including
termination of the Plan under Section 13, above) shall adversely affect any
rights under Awards already granted to a Grantee.

      15. Reservation of Shares.

                  (a) The Company, during the term of the Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.

                  (b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.

      16. No Effect on Terms of Employment/Consulting Relationship. The Plan
shall not confer upon any Grantee any right with respect to the Grantee's
Continuous Service, nor shall it interfere in any way with his or her right or
the right of the Company or a Related Entity to terminate the Grantee's
Continuous Service at any time, with or without Cause, and with or without
notice. The ability of the Company or any Related Entity to terminate the
employment of a Grantee who is employed at will is in no way affected by its
determination that the Grantee's Continuous Service has been terminated for
Cause for the purposes of this Plan.

      17. No Effect on Retirement and Other Benefit Plans. Except as
specifically provided in a retirement or other benefit plan of the Company or a
Related Entity, Awards shall not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Company or
a Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of compensation. The Plan
is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement
Income Security Act of 1974, as amended.

      18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under Applicable Laws. Any Award exercised
before shareholder approval is obtained shall be rescinded if shareholder
approval is not obtained within the time prescribed, and Shares issued on the
exercise of any such Award shall not be counted in determining whether
shareholder approval is obtained.

      19. Information to Grantees. The Company shall provide to each Grantee,
during the period for which such Grantee has one or more Awards outstanding,
copies of financial statements at least annually.

      20. Effect of Section 162(m) of the Code. Section 162(m) of the Code does
not apply to the Plan prior to the Registration Date or such earlier time that
the Company first becomes

                                       17
<PAGE>

subject to the reporting obligations of Section 12 of the Exchange Act.
Following the Registration Date or such earlier time that the Company first
becomes subject to the reporting obligations of Section 12 of the Exchange Act,
the Plan, and all Awards (except Awards of Restricted Stock that vest over time)
issued thereunder, are intended to be exempt from the application of Section
162(m) of the Code, which restricts under certain circumstances the Federal
income tax deduction for compensation paid by a public company to named
executives in excess of $1 million per year. The exemption is based on Treasury
Regulation Section 1.162-27(f), in the form existing on the effective date of
the Plan, with the understanding that such regulation generally exempts from the
application of Section 162(m) of the Code compensation paid pursuant to a plan
that existed before a company becomes publicly held. Under such Treasury
Regulation, this exemption is available to the Plan for the duration of the
period that lasts until the earliest of (i) the expiration of the Plan, (ii) the
material modification of the Plan, (iii) the exhaustion of the maximum number of
shares of Common Stock available for Awards under the Plan, as set forth in
Section 3(a), (iv) the first meeting of shareholders at which directors are to
be elected that occurs after the close of the third calendar year following the
calendar year in which the Company first becomes subject to the reporting
obligations of Section 12 of the Exchange Act, or (v) such other date required
by Section 162(m) of the Code and the rules and regulations promulgated
thereunder. To the extent that the Administrator determines as of the date of
grant of an Award that (i) the Award is intended to qualify as Performance-Based
Compensation and (ii) the exemption described above is no longer available with
respect to such Award, such Award shall not be effective until any shareholder
approval required under Section 162(m) of the Code has been obtained.

                                       18

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