Document:

<PAGE>   1
                                                                   EXHIBIT 10.51

                               [SIGNAL LETTERHEAD]

May 18, 1998

Dear Doug:

Signal Pharmaceuticals, Inc. ("Signal" or the "Company") is pleased to formally
offer you the position of Vice President Corporate Development. The effective
date of your employment will be Monday, June 8 (your "Start Date"), although it
is understood that you shall have the option of working from your home in
Pennsylvania until Monday, June 29.

The terms of this offer of employment are as follows:

Position:                       Vice President, Corporate Development

Reporting to:                   Mr. Carl F. Bobkoski, Executive Vice President

Base Salary:                    $7,292 semi-monthly (175,000 per year), less all
                                required withholding for taxes, social security
                                and other deductions, to be increased annually
                                in accordance with the standard practice of the
                                Company.

House Purchase Loan:            The Company will provide you with a $60,000
                                interest free, subordinated, secured loan to be
                                used for the purchase of a new principal
                                residence, to be funded upon closing on a house
                                in San Diego County, secured by your Signal
                                common stock. 1/3 of the loan will be forgiven
                                upon the second anniversary of your Start Date
                                at the Company, 1/3 upon the third such
                                anniversary, and 1/3 upon the fourth such
                                anniversary. Should your employment be
                                terminated, for any reason, prior to the fourth
                                anniversary of your Start Date, you will have
                                one year from such date of termination to repay
                                the remaining balance to the Company, including
                                interest accrued on such at a rate of 8% per
                                year.

Performance Bonus:              You will receive a performance bonus of
                                up to 20% of your annual salary based upon
                                performance against measurable, mutually agreed
                                upon goals set according to the Company's
                                standard practice. Individual goals will be
                                assigned specific percent weighting.

Relocation:                     Reimbursed moving expenses will include
                                reasonable and customary closing costs for the
                                sale of your house, including realtors' fees,
                                reasonable and customary costs for the purchase
                                of a new home, including origination fees or
                                points, reasonable legal fees, surveys and
                                inspections, and the cost of recording the deed

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                                or mortgage; payment for movement of household
                                goods (and two cars), including packing,
                                unpacking, insurance, and up to three months of
                                storage, if necessary, and subsequent movement
                                to a final destination; economy air fares for
                                you and your immediate family from Yardley,
                                Pennsylvania, and two "house hunting" visits for
                                you and your immediate family; and up to four
                                months' payment of temporary accommodations and
                                car rental not to exceed $3,000 per month. In
                                addition, Signal will reimburse you for up to
                                four trips home to Yardley, Pennsylvania from
                                San Diego or until such time as your family has
                                relocated to the San Diego Area. All expenses
                                will be documented and paid either directly to
                                the vendor or reimbursed to you by normal means.
                                The Company will follow federal, state and local
                                tax regulations with regards to reporting
                                reimbursements associated with the move and will
                                "gross up" the compensation element of directly
                                paid or reimbursed relocation expenses. The
                                Company will pay all applicable taxes related to
                                the compensation element of these relocation
                                reimbursables (which will include the payment of
                                such taxes themselves). Notwithstanding the
                                above, Signal will reimburse a maximum of
                                $60,000 for such moving expenses.

Stock Option Grants:            The Company will grant you an option 1) to
                                purchase 225,000 shares of the Company's Common
                                Stock. The exercise price of the option will be
                                $0.50 per share.

                                One fourth (25%) of the shares will vest on the
                                first day of your thirteenth month of
                                employment. The remaining shares will vest in
                                equal installments over a three year period
                                until all shares are vested. In the event of a
                                change in control of the Company, all
                                outstanding unvested options will become
                                immediately vested.

Benefits:                       You will receive the Company's standard family
                                medical and dental benefits and other benefits
                                enjoyed by officers of the Company, as such may
                                be in effect from time to time, including
                                vacation, 401k, etc.

At-will employment:             (a) Your employment with the Company is for an
                                indefinite term. In other words, the employment
                                relationship is "at will," and either you or
                                Signal has the right to terminate that
                                employment relationship at any time. Signal
                                requires a baseline blood draw from all new
                                employees. This will be done on your first day
                                of employment at Signal (or as soon as
                                practicable thereafter). These vials will be
                                stored offsite to protect your privacy. No
                                testing will be done to the sample unless
                                required by legal proceedings.

                                You will be asked to sign an Employee's
                                Proprietary Information

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                                and Inventions Agreement. In addition, you will
                                be expected to abide by the Company rules and
                                regulations as described in the Company
                                handbook.

                                The employment terms in this letter supersede
                                any other agreements or promises made to you. As
                                required by law, this offer is subject to
                                satisfactory proof of your right to work in the
                                United States.

                                (b) If your employment with the Company
                                terminates as a result of mutual agreement or
                                the Company terminates your employment for any
                                reason, you will receive a severance payment and
                                Benefits from the Company in an amount equal to
                                six (6) months of your then annual salary.

We have greatly enjoyed our meetings with you and look forward to your joining
the Signal team. We feel that your experience and enthusiasm can make a
substantial contribution to the success of Signal.

Sincerely,

/s/ Bradley B. Gordon
-----------------------------------------
Bradley B. Gordon
Vice President Finance, CFO

AGREED TO AND ACCEPTED BY:

/s/ Douglas E. Richards                        5/18/98
-----------------------------------------      --------
Douglas E. Richards                            Date

                                       3<PAGE>   1
                                                                   EXHIBIT 10.52

                             SECURED PROMISSORY NOTE

$60,000.00                                                       August __, 1998
                                                           San Diego, California

        FOR VALUE RECEIVED, DOUGLAS E. RICHARDS ("BORROWER"), hereby
unconditionally promises to pay to the order of SIGNAL PHARMACEUTICALS, INC., a
California corporation ("LENDER"), at 5555 Oberlin Drive, San Diego, California
92121, or at such other place as the holder hereof may designate in writing, in
lawful money of the United States of America and in immediately available funds,
the principal amount of Sixty Thousand Dollars ($60,000.00) together with
interest accrued on the unpaid principal (the "LOAN") and subject to the
Forgiveness Provisions described in Section 3 herein.

        This Promissory Note is the Note referred to in and is executed and
delivered in connection with that certain Stock Pledge Agreement dated as of
even date herewith and executed by Borrower in favor of Lender (as the same may
from time to time be amended, modified or supplemented or restated, the "PLEDGE
AGREEMENT") attached hereto as Exhibit A. Additional rights of Lender are set
forth in the Pledge Agreement. All capitalized terms used herein and not
otherwise defined herein shall have the respective meanings given to them in the
Pledge Agreement.

        1.      PRINCIPAL REPAYMENT. Subject to Section 3 herein, the
outstanding principal amount of the Loan shall be due and payable one (1) year
from the date of the termination of the Borrower's employment with the Lender
(the "TERMINATION DATE") occurring for any reason whatsoever.

        2.      INTEREST RATE.

               (a) From the date hereof through the Termination Date, this Note
shall be a non-interest bearing note and, as such, will be subject to the
provisions of Section 7872 of the Internal Revenue Code of 1986, as amended, and
the Treasury Regulations thereunder. Accordingly, Borrower shall take into
income imputed interest on the Loan at a rate equal to the applicable federal
rate, and the Lender shall be obligated to (i) report such imputed interest
income, and (ii) withhold appropriate taxes from Borrower's salary payments with
respect to such imputed interest. Notwithstanding the foregoing, Lender hereby
acknowledges and agrees to pay Borrower an amount equal to any federal and state
income taxes ("TAXES") incurred from the recognition of such imputed interest
income to Borrower (including any Taxes attributable to the receipt of such
payments by Borrower) (collectively, the "TAX GROSS-UP PAYMENTS") as further
described in a letter agreement executed as of even date herewith and attached
hereto as Exhibit B.

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               (b) From and after the Termination Date, Borrower further
promises to pay interest on the outstanding principal amount of the Loan from
the Termination Date until payment in full, which interest shall be payable at
the rate of 8.0% per annum or the maximum rate permissible by law (which under
the laws of the State of California shall be deemed to be the laws relating to
permissible rates of interest on commercial loans), whichever is less. Interest
shall be due and payable at the same time that the principal amount of this Note
becomes due and payable and shall be compounded annually and calculated on the
basis of a 360-day year for the actual number of days elapsed.

        3.      FORGIVENESS PROVISIONS. The principal amount of the Loan shall
be forgiven by the holder hereof in three increments, provided that the Borrower
remains in continuous employment by the Lender as of each applicable date listed
below: (i) a principal amount of Twenty Thousand Dollars ($20,000.00) shall be
forgiven on June 8, 2000, such that the remaining principal balance of the loan
shall be Forty Thousand Dollars ($40,000.00); (ii) a principal amount of Twenty
Thousand Dollars ($20,000.00) shall be forgiven on June 8, 2001, such that the
remaining principal balance of the loan shall be Twenty Thousand Dollars
($20,000.00); and (iii) a principal amount of Twenty Thousand Dollars
($20,000.00) shall be forgiven on June 8, 2002, such that the remaining
principal balance of the loan shall be Zero Dollars ($0.00).

        4.      APPLICATION OF PAYMENTS. Payment on this Note shall be applied
first to accrued interest, and thereafter to the outstanding principal balance
hereof.

        5.      SECURED NOTE. The full amount of this Note is secured by the
Collateral identified and described as security therefor in the Pledge Agreement
executed by and delivered by Borrower. Borrower shall not, directly or
indirectly, create, permit or suffer to exist, and shall defend the Collateral
against and take such other action as is necessary to remove, any Lien on or in
the Collateral, or in any portion thereof, except as permitted pursuant to the
Pledge Agreement.

        6.      DEFAULT. Each of the following events shall be an "EVENT OF
DEFAULT" hereunder:

               (a) Borrower fails to pay timely any of the principal amount due
under this Note on the date the same becomes due and payable or any accrued
interest or other amounts due under this Note on the date the same becomes due
and payable;

               (b) An Event of Default under the Stock Pledge Agreement;

               (c) Borrower files any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law or any other law for
the relief of, or relating to, debtors, now or hereafter in effect, or makes any
assignment for the benefit of creditors or takes any corporate action in
furtherance of any of the foregoing; or

               (d) An involuntary petition is filed against Borrower (unless
such petition is dismissed or discharged within sixty (60) days) under any
bankruptcy statute now or hereafter in effect, or a custodian, receiver,
trustee, assignee for the benefit of creditors (or other similar official) is
appointed to take possession, custody or control of any property of Borrower.

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Upon the occurrence of an Event of Default hereunder, all unpaid principal,
accrued interest and other amounts owing hereunder shall, at the option of
Lender, and, in the case of an Event of Default pursuant to (c) or (d) above,
automatically, be immediately due, payable and collectible by Lender pursuant to
applicable law.

        7.      WAIVER. Borrower waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Note, and shall pay
all costs of collection when incurred, including, without limitation, reasonable
attorneys' fees, costs and other expenses.

        The right to plead any and all statutes of limitations as a defense to
any demands hereunder is hereby waived to the full extent permitted by law.

        8.      GOVERNING LAW. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.

        9.      PREPAYMENT. Borrower may prepay the unpaid principal in whole or
in part, ithout penalty, at any time, upon the payment of all unpaid interest
accrued to the date of such prepayment.

        10.     NON-TRANSFERABLE. The right of Borrower to request and receive
the Loan hereunder, as well as the other benefits under this Note, shall not be
assignable or otherwise transferable by Borrower.

        11.     SUCCESSORS AND ASSIGNS. The provisions of this Note shall be
binding on any successor to Borrower and shall inure to the benefit of any
holder hereof.

                                          /s/ Douglas E. Richards
                                          --------------------------------------
                                          DOUGLAS E. RICHARDS

ACKNOWLEDGED AND AGREED TO:

SIGNAL PHARMACEUTICALS, INC.

/s/ Bradley B. Gordon
---------------------------------------
BRADLEY B. GORDON
Vice President Finance, Chief Financial
Officer and Corporate Secretary

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EXHIBIT A - STOCK PLEDGE AGREEMENT
EXHIBIT B - SIDE LETTER AGREEMENT

                                       4
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                                    EXHIBIT A

                             STOCK PLEDGE AGREEMENT

                             STOCK PLEDGE AGREEMENT

        THIS STOCK PLEDGE AGREEMENT ("PLEDGE AGREEMENT") is made as of August
__, 1998, by DOUGLAS E. RICHARDS, an individual residing at
___________________________ ("PLEDGOR"), in favor of SIGNAL PHARMACEUTICALS,
INC., a California corporation with its principal place of business at 5555
Oberlin Drive, San Diego, California 92121 ("PLEDGEE").

        WHEREAS, Pledgor (also referred to herein as the "BORROWER") has
concurrently herewith executed that certain Promissory Note (the "NOTE") in
favor of Pledgee, which is secured by this Pledge Agreement; and

        WHEREAS, Pledgee is willing to accept the Note from Pledgor, but only
upon the condition, among others, that Pledgor shall have executed and delivered
to Pledgee this Pledge Agreement and the Pledged Collateral (as defined below):

        NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, Pledgor hereby agrees as
follows:

        1. As security for the full, prompt and complete payment and performance
when due (whether by stated maturity, by acceleration or otherwise) of all
indebtedness of Pledgor to Pledgee created under the Note (all such indebtedness
being the "LIABILITIES"), together with, without limitation, the prompt payment
of all expenses, including, without limitation, reasonable attorneys' fees and
legal expenses, incidental to the collection of the Liabilities and the
enforcement or protection of Pledgee's lien in and to the collateral pledged
hereunder, Pledgor hereby pledges to Pledgee, and grants to Pledgee, a first
priority security interest in all of the following (collectively, the "PLEDGED
COLLATERAL"):

               (a) all Common Stock in the Pledgee now or hereafter held by the
Pledgor, including, without limitation, (i) any such shares issued upon any
exercise of outstanding options to purchase shares of Common Stock of the
Pledgee, and (ii) any and all shares of Common Stock issued to Pledgor upon
exercise of any option to purchase shares of Common Stock of the Company granted
after the date of the Note (collectively, the "PLEDGED SHARES"), and all
dividends, cash, instruments, and other property or proceeds from time to time
received, receivable, or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;

               (b) all voting trust certificates held by Pledgor evidencing the
right to vote any Pledged Shares subject to any voting trust; and

               (c) all additional shares and voting trust certificates from time
to time acquired by Pledgor in any manner (which additional shares shall be
deemed to be part of the

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Pledged Shares), and the certificates representing such additional shares, and
all dividends, cash, instruments, and other property or proceeds from time to
time received, receivable, or otherwise distributed in respect of or in exchange
for any or all of such shares.

        The term "indebtedness" is used herein in its most comprehensive sense
and includes any and all advances, debts, obligations and Liabilities
heretofore, now or hereafter made, incurred or created, whether voluntary or
involuntary and whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether recovery upon such
indebtedness may be or hereafter becomes unenforceable.

        2. At any time, without notice, and at the expense of Pledgor, Pledgee
in its name or in the name of its nominee or of Pledgor may, but shall not be
obligated to: (i) collect by legal proceedings or otherwise all dividends,
interest, principal payments and other sums now or hereafter payable upon or on
account of said Pledged Collateral; (ii) enter into any extension,
reorganization, deposit, merger or consolidation agreement, or any agreement in
any way relating to or affecting the Pledged Collateral, and in connection
therewith may deposit or surrender control of such Pledged Collateral
thereunder, accept other property in exchange for such Pledged Collateral and do
and perform such acts and things as it may deem proper, and any money or
property received in exchange for such Pledged Collateral shall be applied to
the indebtedness or thereafter held by it pursuant to the provisions hereof;
(iii) insure, process and preserve the Pledged Collateral; (iv) cause the
Pledged Collateral to be transferred to its name or to the name of its nominee;
or (v) exercise as to such Pledged Collateral all the rights, powers and
remedies of an owner, except that so long as no default exists under the Note or
hereunder Pledgor shall retain all voting rights as to the Pledged Shares.

        3. Pledgor agrees to pay prior to delinquency all taxes, charges, liens
and assessments against the Pledged Collateral, and upon the failure of Pledgor
to do so, Pledgee at its option may pay any of them and shall be the sole judge
of the legality or validity thereof and the amount necessary to discharge the
same.

        4. At the option of Pledgee and without necessity of demand or notice,
all or any part of the indebtedness of Pledgor shall immediately become due and
payable irrespective of any agreed maturity, upon the happening of any of the
following events, each of which will constitute an "EVENT OF DEFAULT": (i)
failure to keep or perform any of the terms or provisions of this Pledge
Agreement; (ii) the levy of any attachment, execution or other process against
the Pledged Collateral; or (iii) an Event of Default under the Note.

        5. Upon an Event of Default, Pledgee may then, or at any time
thereafter, at its election, apply, set off, collect or sell in one or more
sales, or take such steps as may be necessary to liquidate and reduce to cash in
the hands of Pledgee in whole or in part, with or without any previous demands
or demand of performance or notice or advertisement, the whole or any part of
the Pledged Collateral in such order as Pledgee may elect, and any such sale may
be made either at public or private sale at its place of business or elsewhere,
or at any broker's board or securities exchange, either for cash or upon credit
or for future delivery; provided, however, that if such disposition is at
private sale, then the purchase price of the Pledged Collateral shall be equal
to the public market price then in effect, or, if at the time of sale no public
market for the Pledged Collateral exists, then, in recognition of the fact that
the sale of the

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Pledged Collateral would have to be registered under the Securities Act of 1933
and that the expenses of such registration are commercially unreasonable for the
type and amount of collateral pledged hereunder, Pledgee and Pledgor hereby
agree that such private sale shall be at a purchase price mutually agreed to by
Pledgee and Pledgor or, if the parties cannot agree upon a purchase price, then
at a purchase price established by a majority of three independent appraisers
knowledgeable of the value of such collateral, one named by Pledgor within 10
days after written request by the Pledgee to do so, one named by Pledgee within
such 10 day period, and the third named by the two appraisers so selected, with
the appraisal to be rendered by such body within 30 days of the appointment of
the third appraiser. The cost of such appraisal, including all appraiser's fees,
shall be paid by the Pledgor. Pledgee may be the purchaser of any or all Pledged
Collateral so sold and hold the same thereafter in its own right free from any
claim of Pledgor or right of redemption. Demands of performance, notices of
sale, advertisements and presence of property at sale are hereby waived, and
Pledgee is hereby authorized to sell hereunder any evidence of debt pledged to
it. Any sale hereunder may be conducted by any officer or agent of Pledgee.

        6. The proceeds of the sale of any of the Pledged Collateral and all
sums received or collected by Pledgee from or on account of such Pledged
Collateral shall be applied by Pledgee to the payment of expenses incurred or
paid by Pledgee in connection with any sale, transfer or delivery of the Pledged
Collateral, to the payment of any other costs, charges, attorneys' fees or
expenses mentioned herein, and to the payment of the indebtedness or any part
hereof, all in such order and manner as Pledgee in its discretion may determine.
Pledgee shall then pay any balance to Pledgor.

        7. Upon the transfer of all or any part of the indebtedness Pledgee may
transfer all or any part of the Pledged Collateral and shall be fully discharged
thereafter from all liability and responsibility with respect to such Pledged
Collateral so transferred, and the transferee shall be vested with all the
rights and powers of Pledgee hereunder with respect to such Pledged Collateral
so transferred; but with respect to any Pledged Collateral not so transferred
Pledgee shall retain all rights and powers hereby given.

        8. Until all indebtedness shall have been paid in full the power of sale
and all other rights, powers and remedies granted to Pledgee hereunder shall
continue to exist and may be exercised by Pledgee at any time and from time to
time irrespective of the fact that the indebtedness or any part thereof may have
become barred by any statute of limitations, or that the personal liability of
Pledgor may have ceased.

        9. The rights, powers and remedies given to Pledgee by this Pledge
Agreement shall be in addition to all rights, powers and remedies given to
Pledgee by virtue of any statute or rule of law. Any forbearance or failure or
delay by Pledgee in exercising any right, power or remedy hereunder shall not be
deemed to be a waiver of such right, power or remedy, and any single or partial
exercise of any right, power or remedy hereunder shall not preclude the further
exercise thereof; and every right, power and remedy of Pledgee shall continue in
full force and effect until such right, power or remedy is specifically waived
by an instrument in writing executed by Pledgee.

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<PAGE>   8

        10. If any provision of this Pledge Agreement is held to be
unenforceable for any reason, it shall be adjusted, if possible, rather than
voided in order to achieve the intent of the parties to the extent possible. In
any event, all other provisions of this Pledge Agreement shall be deemed valid
and enforceable to the full extent possible.

        11. This Pledge Agreement shall be governed by, and construed in
accordance with, the laws of the State of California as applied to contracts
made and performed entirely within the State of California by residents of such
State.

Dated: August __, 1998

PLEDGOR:

/s/ Douglas E. Richards
--------------------------------------
DOUGLAS E. RICHARDS

                                         ACKNOWLEDGED AND AGREED TO:

                                         SIGNAL PHARMACEUTICALS, INC.

                                         /s/ Bradley B. Gordon
                                         ---------------------------------------
                                         BRADLEY B. GORDON
                                         Vice President Finance, Chief Financial
                                         Officer and Corporate Secretary

                                       4
<PAGE>   9

                                    EXHIBIT 1
                                       TO
                             STOCK PLEDGE AGREEMENT

                      ASSIGNMENT SEPARATE FROM CERTIFICATE

        DOUGLAS E. RICHARDS, hereby sells, assigns and transfers unto
_____________________ a total of ___________________ (_______) shares of the
Common Stock of SIGNAL PHARMACEUTICALS, INC., standing in the undersigned's name
on the books of said corporation represented by Certificate Nos. ___________
herewith and does hereby irrevocably constitute and appoint
______________________________ to transfer the said stock on the books of said
corporation with full power of substitution in the premises.

        This Assignment Separate From Certificate may only be used in accordance
with that certain Stock Pledge Agreement, dated as of ___________, 1998, between
Douglas E. Richards and Signal Pharmaceuticals, Inc.

Dated:
      ---------------

                                          --------------------------------------
                                          DOUGLAS E. RICHARDS

<PAGE>   10

                                    EXHIBIT B

                              SIDE LETTER AGREEMENT

                               [SIGNAL LETTERHEAD]

August __, 1998

Dear Doug:

This letter serves to clarify the terms of an agreement by Signal
Pharmaceuticals, Inc. (the "Company") to pay you, Douglas E. Richards (the
"Borrower"), any federal and state income taxes incurred by Borrower with
respect to a Secured Promissory Note of even date herewith (the "Note") pursuant
to Section 2(a) therein (the "Tax Gross-Up Payments").

In general, the Tax Gross-Up Payments by the Company are intended to equal: (i)
the federal and state income taxes incurred by Borrower pursuant to the
recognition of imputed interest income from the Note, and (ii) a "gross-up" for
any taxes attributable to such payments.

Since the meaning of the phrase "tax gross-up" may be subject to various
interpretations and in the interest of memorializing the intent of the parties,
the Company and the Borrower hereby agree that the Tax Gross-Up Payments be
described as follows:

        1. GENERAL. Subject to the limitations discussed below and in any other
documents contemplated in the Note, upon the determination of actual income tax
payments incurred by Borrower in connection with the imputed interest attributed
to Borrower under the Note, Borrower will receive payment(s) to cover any
federal and California state income tax liability resulting from such imputed
interest. In other words, not only will Borrower receive a payment equal to the
federal and California state income taxes attributable to income from such
imputed interest, but Borrower will also receive monies to cover any such
federal and California income taxes attributable to such payment(s).

        2. COVERED TAXES. The Tax Gross-Up Payments will cover only federal and
California state income tax liabilities. The Tax Gross-Up Payments will not
cover any other federal, state, local or foreign taxes, including but not
limited to any payroll taxes, social security taxes, Federal Insurance
Contributions Act taxes, Federal Unemployment Tax Act taxes or California
disability taxes. In addition, the Tax Gross-Up Payments will not cover any
federal or California income tax liability for interest, penalties or other
charges attributable to a failure to file or otherwise comply with any tax laws.

        3. TAX RATE. For purposes of calculating federal and California state
income tax liability, the Company will use the then-applicable maximum stated
tax rate (currently 39.6%

<PAGE>   11

federal and 9.3% California) and will assume that the California state tax
liability is fully deductible for purposes of calculating federal income tax
liability.

Please confirm your acceptance of the terms described herein by completing the
endorsement set forth below on this letter, whereupon this shall be and become a
binding mutual agreement between us in accordance with its terms.

                                         Very truly yours,

                                         SIGNAL PHARMACEUTICALS, INC.

                                         By: /s/ Bradley B. Gordon
                                            ------------------------------------
                                                 Authorized Signatory

Agreed and Accepted to
as of August __, 1998

DOUGLAS E. RICHARDS

/s/ Douglas E. Richards
--------------------------------------

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