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                                                                    EXHIBIT 10.7

                          SIGNAL PHARMACEUTICALS, INC.
                    NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

                             STOCK OPTION AGREEMENT
                           (NONSTATUTORY STOCK OPTION)


        Pursuant to your Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, Signal Pharmaceuticals, Inc. (the "Company") has granted
you an option under its Non-Employee Directors' Stock Option Plan (the "Plan")
to purchase the number of shares of the Company's Common Stock indicated in your
Grant Notice at the exercise price indicated in your Grant Notice. Defined terms
not explicitly defined in this Stock Option Agreement but defined in the Plan
shall have the same definitions as in the Plan.

        The details of your option are as follows:

        1.      VESTING. Subject to the limitations contained herein, your
option will vest as provided in your Grant Notice, provided that vesting will
cease upon the termination of your Continuous Service.

        2.      NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of
Common Stock subject to your option and your exercise price per share referenced
in your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.

        3.      EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in
your Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise"
of your option is permitted) and subject to the provisions of your option, you
may elect at any time that is both (i) during the period of your Continuous
Service and (ii) during the term of your option, to exercise all or part of your
option, including the nonvested portion of your option; provided, however, that:

               (a) a partial exercise of your option shall be deemed to cover
first vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;

               (b) any shares of Common Stock so purchased from installments
that have not vested as of the date of exercise shall be subject to the purchase
option in favor of the Company as described in the Company's form of Early
Exercise Stock Purchase Agreement; and

               (c) you shall enter into the Company's form of Early Exercise
Stock Purchase Agreement with a vesting schedule that will result in the same
vesting as if no early exercise had occurred.

        4.      METHOD OF PAYMENT. Payment of the exercise price is due in full
upon exercise of all or any part of your option. You may elect to make payment
of the exercise price in cash or by check or by one or more of the following:


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               (a) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
that, prior to the issuance of Common Stock, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to pay
the aggregate exercise price to the Company from the sales proceeds.

               (b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company's stock.

        5.      WHOLE SHARES. You may exercise your option only for whole shares
of Common Stock.

        6.      SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, you may not exercise your option unless the shares of
Common Stock issuable upon such exercise are then registered under the
Securities Act or, if such shares of Common Stock are not then so registered,
the Company has determined that such exercise and issuance would be exempt from
the registration requirements of the Securities Act. The exercise of your option
must also comply with other applicable laws and regulations governing your
option, and you may not exercise your option if the Company determines that such
exercise would not be in material compliance with such laws and regulations.

        7.      TERM. The term of your option commences on the Date of Grant and
expires upon the EARLIEST of the following:

               (a) three (3) months after the termination of your Continuous
Service for any reason other than your Disability or death, provided that if
during any part of such three- (3-) month period your option is not exercisable
solely because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of your Continuous Service;

               (b) six (6) months after the termination of your Continuous
Service due to your Disability;

               (c) six (6) months after your death if you die either during your
Continuous Service or within three (3) months after your Continuous Service
terminates; or


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               (d) the Expiration Date indicated in your Grant Notice.

        8.      EXERCISE.

               (e) You may exercise your option during its term by delivering a
Notice of Exercise (in a form designated by the Company) together with the
exercise price to the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together with such
additional documents as the Company may then require.

               (f) By exercising your option you agree that, as a condition to
any exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of the exercise of your
option.

        9.      TRANSFERABILITY. Your option is not transferable, except (i) by
will or by the laws of descent and distribution, and (ii) to such further extent
as permitted by the Rule as to Use of Form S-8 specified in the General
Instructions of the Form S-8 Registration Statement under the Securities Act.
Your option is exercisable during your life only by you or a transferee
satisfying the above-stated conditions. The right of a transferee to exercise
the transferred portion of your option after termination of your Continuous
Service shall terminate in accordance with your right to exercise your option as
specified in your option. In the event that your Continuous Service terminates
due to your death, your transferee will be treated as a person who acquired the
right to exercise your option by bequest or inheritance. In addition to the
foregoing, the Company may require, as a condition of the transfer of your
option to a trust or by gift, that your transferee enter into an option transfer
agreement provided by, or acceptable to, the Company. The terms of your option
shall be binding upon your transferees, executors, administrators, heirs,
successors, and assigns. Notwithstanding the foregoing, by delivering written
notice to the Company, in a form satisfactory to the Company, you may designate
a third party who, in the event of your death, shall thereafter be entitled to
exercise your option.

        10.     OPTION NOT A SERVICE CONTRACT. Your option is not an employment
or service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective stockholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.

        11.     NOTICES. Any notices provided for in your option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by mail by the Company to you, five (5) days
after deposit in the United States mail, postage prepaid, addressed to you at
the last address you provided to the Company.

        12.     GOVERNING PLAN DOCUMENT. Your option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your
option, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated


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and adopted pursuant to the Plan. In the event of any conflict between the
provisions of your option and those of the Plan, the provisions of the Plan
shall control.


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                          SIGNAL PHARMACEUTICALS, INC.
                            STOCK OPTION GRANT NOTICE
                                  INITIAL GRANT
                   (NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN)


Signal Pharmaceuticals, Inc. (the "Company"), pursuant to its Non-Employee
Directors' Stock Option Plan (the "Plan"), hereby grants to Optionholder an
option to purchase the number of shares of the Company's Common Stock set forth
below. This option is subject to all of the terms and conditions as set forth
herein and in the Stock Option Agreement, the Plan and the Notice of Exercise,
all of which are attached hereto and incorporated herein in their entirety.

Optionholder:                               _____________________________
Date of Grant:                              _____________________________
Vesting Commencement Date:                  Date of Grant
Number of Shares Subject to Option:         _____________________________
Exercise Price (Per Share):                 _____________________________
Total Exercise Price:                       _____________________________
Expiration Date:                            The day before the 10th anniversary
                                            of the Date of Grant

TYPE OF GRANT:     Nonstatutory Stock Option

EXERCISE SCHEDULE: Early Exercise Permitted

VESTING SCHEDULE:  1/16th of the shares vest one quarterly after the Vesting
                   Commencement Date over the next four years.

PAYMENT:           By one or a combination of the following items (described in
                   the Stock Option Agreement):

                          By cash or check

                          Pursuant to a Regulation T Program if the Shares are
                          publicly traded

                          By delivery of already-owned shares if the Shares are
                          publicly traded

ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionholder further acknowledges that as of the Date of
Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the
entire understanding between Optionholder and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted
and delivered to Optionholder under the Plan, and (ii) the following agreements
only:

        OTHER AGREEMENTS:
                                          --------------------------------------

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

SIGNAL PHARMACEUTICALS, INC.                    OPTIONHOLDER:


By:
   ----------------------------------           --------------------------------
                 Signature                                 Signature

Title:                                          Date:
      -------------------------------                ---------------------------

Date:
     --------------------------------

ATTACHMENTS: Stock Option Agreement, Non-Employee Directors' Stock Option Plan
             and Notice of Exercise


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                                  ATTACHMENT I

                             STOCK OPTION AGREEMENT


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                                  ATTACHMENT II

                    NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN


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                                 ATTACHMENT III

                               NOTICE OF EXERCISE


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                          SIGNAL PHARMACEUTICALS, INC.
                            STOCK OPTION GRANT NOTICE
                                  ANNUAL GRANT
                   (NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN)


Signal Pharmaceuticals, Inc. (the "Company"), pursuant to its Non-Employee
Directors' Stock Option Plan (the "Plan"), hereby grants to Optionholder an
option to purchase the number of shares of the Company's Common Stock set forth
below. This option is subject to all of the terms and conditions as set forth
herein and in the Stock Option Agreement, the Plan and the Notice of Exercise,
all of which are attached hereto and incorporated herein in their entirety.

Optionholder:                               _____________________________
Date of Grant:                              _____________________________
Vesting Commencement Date:                  Date of Grant
Number of Shares Subject to Option:         [5,000] [7,500]
Exercise Price (Per Share):                 _____________________________
Total Exercise Price:                       _____________________________
Expiration Date:                            The day before the 10th anniversary
                                            of the Date of Grant

TYPE OF GRANT:     Nonstatutory Stock Option

EXERCISE SCHEDULE: Early Exercise Permitted

VESTING SCHEDULE:  1/12th  of the shares vest monthly over one year after the
                   Vesting Commencement Date.

PAYMENT:           By one or a combination of the following items (described in
                   the Stock Option Agreement):

                          By cash or check

                          Pursuant to a Regulation T Program if the Shares are
                          publicly traded

                          By delivery of already-owned shares if the Shares are
                          publicly traded

ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionholder further acknowledges that as of the Date of
Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the
entire understanding between Optionholder and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted
and delivered to Optionholder under the Plan, and (ii) the following agreements
only:

        OTHER AGREEMENTS:
                                          --------------------------------------

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

SIGNAL PHARMACEUTICALS, INC.                    OPTIONHOLDER:


By:
   ----------------------------------           --------------------------------
                 Signature                                 Signature

Title:                                          Date:
      -------------------------------                ---------------------------

Date:
     --------------------------------

ATTACHMENTS: Stock Option Agreement, Non-Employee Directors' Stock Option Plan
             and Notice of Exercise


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                                  ATTACHMENT I

                             STOCK OPTION AGREEMENT


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                                  ATTACHMENT II

                    NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN


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                                 ATTACHMENT III

                               NOTICE OF EXERCISE