Document:

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                                               Under 17 C.F.R. Sections 200.80,
                                               200.83 and 230.406.

                                                                   EXHIBIT 10.45

                             COLLABORATION AGREEMENT

                                     BETWEEN

                          SIGNAL PHARMACEUTICALS, INC.,

                            A CALIFORNIA CORPORATION

                                       AND

                            NIPPON KAYAKU CO., LTD.,

                             A JAPANESE CORPORATION

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                                TABLE OF CONTENTS

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<S>             <C>                                                                       <C>
ARTICLE 1           DEFINITIONS..............................................................2

        1.1    "Affiliate"...................................................................2

        1.2    "CNS".........................................................................2

        1.3    "CNS Field"...................................................................2

        1.4    "Collaboration"...............................................................2

        1.5    "Collaboration Know-How"......................................................2

        1.6    "Collaboration Patents".......................................................2

        1.7    "Commercializing Party".......................................................3

        1.8    "Compound"....................................................................3

        1.9    "Control".....................................................................3

        1.10   "Effective Date"..............................................................3

        1.11   "FDA".........................................................................3

        1.12   "Field".......................................................................3

        1.13   "FTE".........................................................................3

        1.14   "Joint Commercialization Agreement"...........................................3

        1.15   "Joint Commercialization Alternative".........................................3

        1.16   "Know-How"....................................................................3

        1.17   "Net Sales of Other Products".................................................3

        1.18   "Net Sales of Products".......................................................4

        1.19   "Nippon Kayaku Know-How"......................................................4

        1.20   "Nippon Kayaku Patents".......................................................4

        1.21   [***]    .....................................................................4

        1.22   "Other Product"...............................................................4

        1.23   "Patent"......................................................................4

        1.24   "Patent Committee"............................................................4

        1.25   "Patent Costs"................................................................5

        1.26   "PNS Field"...................................................................5

        1.27   "Product".....................................................................5

        1.28   "Research"....................................................................5

        1.29   "Research Lead"...............................................................5
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                                TABLE OF CONTENTS
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        1.30   "Research Management Committee"...............................................5

        1.31   "Research Plan"...............................................................5

        1.32   "Research Term"...............................................................5

        1.33   "Rest of the World"...........................................................5

        1.34   "Royalty Alternative".........................................................5

        1.35   "Signal Know-How".............................................................5

        1.36   "Signal Patents"..............................................................6

        1.37   "Third Party".................................................................6

        1.38   "Valid Claim".................................................................6

ARTICLE 2           RESEARCH PHASE OF COLLABORATION..........................................6

        2.1    Research......................................................................6

        2.2    Responsibilities of the RMC...................................................6

        2.3    Determination of Research Lead................................................7

        2.4    Know-How, Reports and Delivery of Compounds...................................7

        2.5    Animal Models.................................................................8

        2.6    Research Contributions........................................................9

        2.7    Research Expenses.............................................................9

        2.8    Visiting Scientists...........................................................9

ARTICLE 3         DEVELOPMENT AND COMMERCIALIZATION PHASE OF COLLABORATION..................10

        3.1    Co-Development and Commercialization of the Products in the Field............10

        3.2    Royalty Alternative in the Field.............................................11

ARTICLE 4         PAYMENTS..................................................................12

        4.1    Funding for Research.........................................................12

        4.2    Nippon Kayaku Royalties on Sales of Products in the PNS Field in Japan.......12

        4.3    Royalties on Sales of Products Outside the Field.............................12

        4.4    Royalties on Sales of Other Products in the Field............................12

        4.5    Royalties on Sales of Other Products Outside the Field.......................13

        4.6    Royalties Under Royalty Alternative..........................................13

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                                TABLE OF CONTENTS
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ARTICLE 5           ROYALTY OBLIGATIONS.....................................................13

        5.1    Royalties For Sales of Products or Other Products............................13

        5.2    Foreign Exchange.............................................................13

        5.3    Blocked Currency.............................................................13

        5.4    Taxes........................................................................13

        5.5    Payment......................................................................14

        5.6    Duration.....................................................................14

        5.7    Accounting...................................................................14

        5.8    Sales by Sublicensees........................................................14

ARTICLE 6           LICENSE GRANTS..........................................................15

        6.1    Licenses During Collaboration................................................15

        6.2    Commercialization Licenses...................................................17

        6.3    Sublicenses..................................................................18

ARTICLE 7           CONFIDENTIALITY; PUBLICATIONS...........................................18

        7.1    Confidentiality; Exceptions..................................................18

        7.2    Authorized Disclosure........................................................19

        7.3    Publications.................................................................19

        7.4    Public Disclosure............................................................19

ARTICLE 8         OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS......................20

        8.1    Ownership of Collaboration Patents; Nippon Kayaku Patents; Signal
               Patents......................................................................20

        8.2    Patent Filings...............................................................20

        8.3    Enforcement Rights...........................................................21

ARTICLE 9           REPRESENTATIONS AND WARRANTIES; EXCLUSIVITY.............................23

        9.1    Representations and Warranties...............................................23

        9.2    Limitation on Warranties.....................................................24

        9.3    Negative Covenants...........................................................24

ARTICLE 10          TERM AND TERMINATION....................................................25

        10.1   Term.........................................................................25

        10.2   Termination For Breach.......................................................25
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        10.3   Termination For Bankruptcy...................................................25

        10.4   Surviving Rights.............................................................25

        10.5   Accrued Rights, Surviving....................................................25

        10.6   Termination Not Sole Remedy..................................................26

ARTICLE 11          INDEMNIFICATION; INSURANCE..............................................26

        11.1   Research and Development Indemnification.....................................26

        11.2   Indemnification Procedures...................................................26

        11.3   Insurance....................................................................27

ARTICLE 12          DISPUTE RESOLUTION......................................................27

        12.1   Disputes.....................................................................27

        12.2   Dispute Resolution Procedures................................................27

ARTICLE 13          MISCELLANEOUS...........................................................28

        13.1   Assignment...................................................................28

        13.2   Research and Development Entities............................................28

        13.3   Consents Not Unreasonably Withheld...........................................28

        13.4   Force Majeure................................................................29

        13.5   Further Actions..............................................................29

        13.6   No Trademark Rights..........................................................29

        13.7   Notices......................................................................29

        13.8   Waiver.......................................................................30

        13.9   Severability.................................................................30

        13.10  Ambiguities..................................................................30

        13.11  Counterparts.................................................................30

        13.12  Entire Agreement.............................................................30

        13.13  Governing Law................................................................31

        13.14  Headings.....................................................................31

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                                       iv.

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                             COLLABORATION AGREEMENT

        THIS COLLABORATION AGREEMENT (the "Agreement") is made effective as of
February 9, 1998 by and between SIGNAL PHARMACEUTICALS, INC., a California
corporation having its principal place of business at 5555 Oberlin Drive, San
Diego, California 92121 ("Signal"), and NIPPON KAYAKU CO., LTD., a Japanese
corporation having its principal place of business at Tokyo Fujimi Building,
11-2, Fujimi 1-chome, Chiyoda-ku, Tokyo 102, Japan ("Nippon Kayaku"). Signal and
Nippon Kayaku may be referred to herein as a "Party" or, collectively, as
"Parties."

                                    RECITALS

        WHEREAS, Signal has developed and licensed certain technology and
intellectual property in the area of drug discovery and lead optimization and is
experienced in the research and development of small-molecule drugs;

        WHEREAS, Nippon Kayaku is a pharmaceutical company dedicated to the
research, development and commercialization of pharmaceutical products;

        WHEREAS, Nippon Kayaku has identified the compound [***] (as described
in Exhibit A hereto) and the derivatives thereof;

        WHEREAS, Signal and Nippon Kayaku concluded a secrecy agreement dated
September 20, 1996 (the "Secrecy Agreement") and a material transfer agreement
dated May 19, 1997 (the "Material Transfer Agreement"), under which Signal has
conducted the evaluation of certain information and a sample of the compound
[***] received from Nippon Kayaku, and Signal has notified Nippon Kayaku of its
desire to conduct a pilot experiment to examine the effects of the compound
[***] and to conclude a further agreement relating to a right to research and
develop the compound [***] and the derivatives thereof jointly with Nippon
Kayaku;

        WHEREAS, Nippon Kayaku has exclusive rights to the compound [***];

        WHEREAS, Signal and Nippon Kayaku wish to establish a collaborative
relationship to develop and commercialize novel products based on or derived
from [***] for the treatment and prevention of diseases and disorders of the
central nervous system and peripheral nervous system; and

        WHEREAS, Signal and Nippon Kayaku wish to enter into this Agreement to
establish the collaboration on the terms and subject to the conditions set forth
herein.

        NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the Parties hereto, intending
to be legally bound, do hereby agree as follows:

                                       1.

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                                    ARTICLE 1

                                   DEFINITIONS

        The following terms shall have the following meanings as used in the
Agreement:

        1.1 "AFFILIATE" means an individual, trust, business trust, joint
venture, partnership, corporation, association or any other entity which
(directly or indirectly) is controlled by, controls or is under common control
with a Party. For the purposes of this definition, the term "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with") as used with respect to any Party, shall mean the
possession (directly or indirectly) of at least fifty percent (50%) of the
outstanding voting securities of a corporation or comparable equity interest in
any other type of entity, or, where the laws of the jurisdiction in which such
entity operates prohibit ownership by a Party of fifty percent (50%), such
ownership shall be at the maximum level of ownership allowed by such laws.

        1.2 "CNS" means central nervous system.

        1.3 "CNS FIELD" means the treatment or prevention of CNS diseases or
disorders in humans.

        1.4 "COLLABORATION" means the activities, rights and obligations of
Signal and Nippon Kayaku encompassed in their relationship in accordance with
the Research Plan during the Research Term and, in any further relationship
between the Parties pursuant to the Joint Commercialization Agreement, during
the life of such further relationship.

        1.5 "COLLABORATION KNOW-HOW" means Know-How (i) relating to Compounds;
(ii) relating to results and data from animal studies conducted as part of the
Research under this Agreement in accordance with the Research Plan; or (iii)
otherwise arising from or in connection with the conduct of the Research under
this Agreement in accordance with the Research Plan and jointly owned by or
within the common Control of the Parties or their respective Affiliates, but
excluding Collaboration Patents.

        1.6 "COLLABORATION PATENTS" means all Patents that claim or cover
inventions (i) made jointly (as determined in accordance with the rules of
inventorship under United States patent law) by officers, employees, consultants
or agents of Signal or one of its Affiliates, on the one hand, and officers,
employees, consultants or agents of Nippon Kayaku or one of its Affiliates, on
the other hand, in connection with activities conducted pursuant to the Research
Plan, (ii) which come under the common Control of Signal or one of its
Affiliates, on the one hand, and Nippon Kayaku or one of its Affiliates, on the
other hand, prior to the end of the Research Term or (iii) based on or derived
from a Compound and conceived or reduced to practice during the Research Term by
officers, employees, consultants or agents of one or both of the Parties.

                                       2.
<PAGE>   8

        1.7 "COMMERCIALIZING PARTY" shall have the meaning assigned to it in
Section 5.1.

        1.8 "COMPOUND" shall mean a small-molecule compound based on or derived
from [***], which is either synthesized through medicinal chemistry and
combinatorial chemistry techniques or identified through searching the database
of Signal's compound library as described in Section 2.4(c), that, in each case,
is identified in the course of the Research by one or both of the Parties.

        1.9 "CONTROL" means, with respect to an item of information or
intellectual property right, possession of the ability to grant a license or
sublicense as provided for herein under such item or right without violating the
terms of any agreement or other arrangement with any Third Party.

        1.10 "EFFECTIVE DATE" means the date first written above in this
Agreement.

        1.11 "FDA" means the United States Food and Drug Administration.

        1.12 "FIELD" means the CNS Field and the PNS Field.

        1.13 "FTE" means full-time equivalent scientific personnel.

        1.14 "JOINT COMMERCIALIZATION AGREEMENT" shall have the meaning assigned
to it in Section 3.1(a).

        1.15 "JOINT COMMERCIALIZATION ALTERNATIVE" shall have the meaning
assigned to it in Section 3.1(a).

        1.16 "KNOW-HOW" means techniques, data, materials and chemicals
materially relating to the Field, including, without limitation, inventions,
practices, methods, knowledge, know-how, skill, experience, test data including
pharmacological, toxicological and clinical test data, analytical and quality
control data, patent and legal data or descriptions.

        1.17 "NET SALES OF OTHER PRODUCTS" means the gross amounts invoiced for
sales of Other Products by Signal or Nippon Kayaku, as the case may be, and its
Affiliates and sublicensees to Third Parties pursuant to one or more of the
licenses granted under Article 6 less (a) discounts actually granted, (b)
credits or allowances actually granted upon claims, damaged goods, rejections or
returns of any such Other Product, including recalls, (c) freight, postage,
shipping and insurance charges actually allowed or paid for delivery of any such
Other Product, to the extent billed and (d) taxes, duties or other governmental
charges (other than income taxes) levied on, absorbed or otherwise imposed on
sales of any such Other Products. Sales of Other Products for use in clinical
trials prior to receipt of regulatory approval for such Other Products shall not
be included in Net Sales of Other Products.

                                       3.

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        1.18 "NET SALES OF PRODUCTS" means the gross amounts invoiced for sales
of Products by Signal or Nippon Kayaku, as the case may be, and its Affiliates
and sublicensees to Third Parties pursuant to one or more of the licenses
granted under Article 6 less (a) discounts actually granted, (b) credits or
allowances actually granted upon claims, damaged goods, rejections or returns of
any such Product, including recalls, (c) freight, postage, shipping and
insurance charges actually allowed or paid for delivery of any such Product, to
the extent billed and (d) taxes, duties or other governmental charges (other
than income taxes) levied on, absorbed or otherwise imposed on sales of any such
Products. Sales of Products for use in clinical trials prior to receipt of
regulatory approval for such Products shall not be included in Net Sales of
Products.

        1.19 "NIPPON KAYAKU KNOW-HOW" means Know-How that is (i) owned or within
the Control of Nippon Kayaku or an Affiliate of Nippon Kayaku prior to the end
of the Research Term and (ii) necessary or useful for the manufacture, use, sale
or import of products pursuant to one or more of the licenses granted under
Article 6, but excluding Nippon Kayaku Patents and Collaboration Know-How.

        1.20 "NIPPON KAYAKU PATENTS" means all Patents owned or Controlled by
Nippon Kayaku or an Affiliate of Nippon Kayaku (excluding Collaboration Patents)
necessary or useful for the manufacture, use, sale or import of products
pursuant to one or more of the licenses granted under Article 6, including,
without limitation, any such Patents related to [***], where such Patents cover
(i) inventions made prior to the Effective Date of this Agreement, (ii)
inventions made solely by employees or agents of Nippon Kayaku or an Affiliate
of Nippon Kayaku after the Effective Date and prior to the end of the Research
Term (but specifically excluding Collaboration Patents covered by Section
1.6(iii)), or (iii) inventions which come under the Control of Nippon Kayaku or
its Affiliates after the Effective Date and prior to the end of the Research
Term; a list of the Nippon Kayaku Patents as of the Effective Date is set forth
on Schedule I.

        1.21 "[***]" means the compound Controlled by Nippon Kayaku known as
[***] and described on Exhibit A hereto.

        1.22 "OTHER PRODUCT" shall mean any pharmaceutical product based on or
derived from a Compound other than a Research Lead.

        1.23 "PATENT" means (i) foreign and domestic Letters Patent including
one or more Valid Claims, including any extension (including Supplemental
Protection Certificate), registration, confirmation, reissue, continuation,
divisional, continuation-in-part, reexamination or renewal thereof, and (ii)
pending applications for any of the foregoing.

        1.24 "PATENT COMMITTEE" means the committee established pursuant to
Section 8.2(c) herein.

                                       4.

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        1.25 "PATENT COSTS" means the out-of-pocket fees and expenses paid to
outside legal counsel and other Third Parties and filing, prosecution and
maintenance expenses incurred in connection with the establishment and
maintenance of rights under Patents.

        1.26 "PNS FIELD" means the treatment or prevention of diabetic
neuropathy, chemotherapy-induced neuropathy or other neuropathies in humans but
specifically excluding therapeutic and diagnostic products directed at pain,
lower urinary tract dysfunction and peripheral vascular disease.

        1.27 "PRODUCT" shall mean any pharmaceutical product based on or derived
from any Research Lead that is covered by one or more of Signal Patents, Signal
Know-How, Nippon Kayaku Patents, Nippon Kayaku Know-How, Collaboration Patents
or Collaboration Know-How.

        1.28 "RESEARCH" means all work performed by the Parties or on their
behalf pursuant to the Research Plan directed towards or in connection with the
discovery, identification and investigation of Research Leads during the
Research Term.

        1.29 "RESEARCH LEAD" means a Compound identified by either Party
(separately or jointly) pursuant to Research performed during the Research Term
showing at least [***] more potency than [***], as decided by the RMC. [***]
greater potency will be determined as follows: [***]

        1.30 "RESEARCH MANAGEMENT COMMITTEE" or "RMC" means the committee
established pursuant to Section 2.2 herein.

        1.31 "RESEARCH PLAN" means the plan for conducting the Research as
described in Section 2.1 hereof and attached as Exhibit B hereto, as such plan
may be modified or amended by the RMC from time to time in writing.

        1.32 "RESEARCH TERM" means the period commencing on the Effective Date
and ending on the second anniversary of the Effective Date, unless terminated
earlier pursuant to Sections 10.2 or 10.3.

        1.33 "REST OF THE WORLD" means the entire world excluding Japan.

        1.34 "ROYALTY ALTERNATIVE" shall have the meaning assigned to it in
Section 3.2.

        1.35 "SIGNAL KNOW-HOW" means Know-How that is (i) owned or within the
Control of Signal or an Affiliate of Signal prior to the end of the Research
Term and (ii) necessary or useful for the manufacture, use, sale or import of
products pursuant to

                                       5.

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one or more of the licenses granted under Article 6, but excluding Signal
Patents and Collaboration Know-How.

        1.36 "SIGNAL PATENTS" means all Patents owned or Controlled by Signal or
an Affiliate of Signal (excluding Collaboration Patents) necessary or useful for
the manufacture, use, sale or import of products pursuant to one or more of the
licenses granted under Article 6 where such Patents cover (i) inventions made
prior to the Effective Date of this Agreement, (ii) inventions made solely by
employees or agents of Signal or an Affiliate of Signal after the Effective Date
and prior to the end of the Research Term (but specifically excluding
Collaboration Patents covered by Section 1.6(iii)), or (iii) inventions which
come under the Control of Signal or an Affiliate of Signal after the Effective
Date and prior to the end of the Research Term; a list of the Signal Patents as
of the Effective Date is set forth on Schedule II.

        1.37 "THIRD PARTY" means any entity or individual other than Signal,
Nippon Kayaku and Affiliates of either.

        1.38 "VALID CLAIM" means a claim of an issued patent which claim has not
lapsed, been canceled or become abandoned and has not been declared invalid by a
court or other appropriate body of competent jurisdiction, and which has not
been admitted to be invalid or unenforceable through reissue or disclaimer.

                                    ARTICLE 2

                         RESEARCH PHASE OF COLLABORATION

        2.1 RESEARCH. The purpose of the Research is to identify Research Leads
that are suitable for development into Products for commercialization in the
Field. The Parties agree that the Research shall be conducted as specified in
the Research Plan attached hereto as Exhibit B, as such Research Plan may be
amended from time to time in writing by the RMC, with each Party to use
commercially reasonable and diligent efforts (as defined below) to perform its
responsibilities under the Research Plan.

        2.2 RESPONSIBILITIES OF THE RMC. The Parties shall establish a Research
Management Committee ("RMC") promptly after the date of the execution of this
Agreement. The RMC shall be comprised of three (3) representatives of each
Party. The initial members of the RMC are set forth on Schedule III. Either
Party may appoint substitute or replacement members of the RMC to serve as their
representatives as long as any such substitutes or replacements are persons of
comparable standing and authority within the Parties' organizations. Decisions
by the RMC shall be made by unanimous vote. The RMC shall have the
responsibility and authority to:

               (a)    plan and monitor the Research;

                                       6.
<PAGE>   12

               (b)    review and modify the Research Plan;

               (c)    evaluate the results of the Research;

               (d)    discuss information relating to the Research;

               (e) review scientific publications of the Parties concerning the
Research;

               (f)    determine whether a Compound is a Research Lead;

               (g) determine whether a Compound is not suitable for pursuit
under the Collaboration; and

               (h) review and approve a protocol of Research furnished by either
Party with respect to animal models in the Field.

Either Party may refer any dispute to the appropriate officers of the Parties
for consideration and resolution pursuant to Article 12. The RMC shall meet at
least once per calendar quarter, with two of such meetings per calendar year
being conducted in each of San Diego, California and Tokyo, Japan, or at such
other times and places agreed to by the Parties, until the end of the Research
Term.

        2.3 DETERMINATION OF RESEARCH LEAD. Upon the identification by one or
both of the Parties in the course of the Research of a Research Lead, such Party
or Parties shall promptly provide notice thereof (the "Research Lead Notice"),
which notice shall include all relevant data regarding such Research Lead, to
the RMC and, if applicable, the other Party. The identification of a Research
Lead shall give rise to the Parties' rights set forth in Article 3 with respect
to such Research Lead. In the event that no Research Lead has been identified on
or before the end of the Research Term, the Collaboration shall terminate.

        2.4    KNOW-HOW, REPORTS AND DELIVERY OF COMPOUNDS.

               (a) Each Party shall disclose to the other Party all
Collaboration Know-How learned, acquired or discovered by such Party at any time
on or before the end of the Research Term, as promptly as is reasonably
practicable after such Collaboration Know-How is learned. At the time of
effectiveness of any license granted hereunder, Signal and/or Nippon Kayaku, as
appropriate under the license granted, (i) shall make available and disclose to
the other Party such Signal Know-How or Nippon Kayaku Know-How, as the case may
be, known by such Party as of such date, and (ii) shall also disclose any Signal
Know-How or Nippon Kayaku Know-How, as the case may be, learned, acquired or
discovered by such Party at any time thereafter for so long as such license
continues in full force and effect, as promptly as is reasonably practicable
after such Signal Know-How or Nippon Kayaku Know-How is learned. The Parties
shall exchange at a minimum quarterly written reports (with copies to the RMC)
presenting a meaningful summary of

                                       7.
<PAGE>   13

Research done under this Agreement. Each Party shall provide the other with raw
data, including QSAR, for work carried out in the course of the Research, if
reasonably requested by the other Party. Know-How and other information
regarding the Research disclosed by one Party to the other Party pursuant hereto
may be used only in accordance with the rights granted under this Agreement.

               (b) All Compounds synthesized in the course of the Research shall
first be used for purposes of the Collaboration. When the RMC determines that
Compounds are not suitable for pursuit under the Collaboration, then in order to
avoid any conflict with its other corporate partners, Signal shall, within
thirty (30) days following such determination, test such Compounds in assays
under certain other Signal programs; a list of such Signal programs as of the
Effective Date is set forth on Schedule IV. In the event that a Compound shows
activity in any such assay, Signal shall not be obligated to disclose or provide
such Compound to Nippon Kayaku, and no license granted to Nippon Kayaku
hereunder with respect to such Compound shall be effective, unless and until
such time as Signal is not contractually prohibited from disclosing, providing
or licensing such Compound to Nippon Kayaku. In the event that a Compound shows
no activity in any such assay or if development of such Compound is discontinued
under any such other Signal program, such Compound shall be freely available for
use outside the Field by each of the Parties in accordance with the terms of
this Agreement.

               (c) It is understood, and the Parties hereby acknowledge and
agree, that as Signal chemists develop structure-activity relationships from the
active analogues of [***] in the course of the Collaboration, Signal shall,
using its database management program, conduct sub-structure searches of the
Signal compound library for compounds to screen in the Collaboration, which may
include compounds made or acquired with financial support from Signal's existing
collaborative partners, as set forth on Schedule IV hereto. Any of these
compounds that are not active in such existing partners' assays shall be
evaluated in the Collaboration, regardless of whether such compounds were made
or acquired as part of such existing partners' programs.

               (d) The mechanism by which Signal will deliver samples and
supplies of Compounds to Nippon Kayaku is described in Exhibit C hereto. Signal
will provide Nippon Kayaku with the experimental details to reproduce any and
all parts of the libraries provided under this Agreement.

        2.5 ANIMAL MODELS. Studies in the Research with respect to animal models
in the Field shall be done in the U.S. and in Japan with the RMC's approval.
Signal shall be responsible for the conduct of any such studies done in the
U.S., and Nippon Kayaku shall be responsible for the conduct of any such studies
done in Japan. Costs of animal model studies conducted in the U.S. and in Japan
shall be shared equally by the Parties; provided, however, that, at Nippon
Kayaku's option and expense, Nippon Kayaku may conduct any such animal model
studies Signal does not agree to do.

                                       8.

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<PAGE>   14

        2.6    RESEARCH CONTRIBUTIONS.

               (a) BY SIGNAL. Signal agrees to exert commercially reasonable and
diligent efforts to perform its obligations under the Research Plan. In the
performance of such work, Signal shall maintain and utilize scientific and other
staff (including consultants), laboratories, offices and other facilities
consistent with such undertaking. Nippon Kayaku understands that Signal has
engaged certain scientific collaborators and consultants to perform research
services relating to the Field, and that the efforts of such collaborators and
consultants relating to the Field shall be included within the Research to the
extent contemplated by the Research Plan. Subject to Nippon Kayaku's fulfillment
of its obligation to provide research funding as set forth in Section 4.1,
Signal agrees to commit an average of at least [***] FTEs to the Research
during the Research Term. Notwithstanding the foregoing, the Parties hereby
acknowledge that during the initial calendar quarter of the Research Term,
Signal may commit [***] FTEs to the Research.

               (b) BY NIPPON KAYAKU. Nippon Kayaku agrees to exert commercially
reasonable and diligent efforts to perform its obligations under the Research
Plan. In the performance of such work, Nippon Kayaku shall maintain and utilize
scientific and other staff (including consultants), laboratories, offices and
other facilities consistent with such undertaking.

               (c) COMMERCIALLY REASONABLE AND DILIGENT EFFORTS. As used herein,
the term "commercially reasonable and diligent efforts" will mean, unless the
Parties agree otherwise in writing, those efforts consistent with the exercise
of prudent scientific and business judgment, as applied to research activities
conducted with regard to other products of similar potential and market size. In
the event of any unanticipated and severe changes in regulatory affairs or
technical developments or in the event of extreme conditions or similar
unforeseen events with respect to the Research, the Parties agree to discuss
such changed circumstances and appropriate mechanisms to address them.

        2.7 RESEARCH EXPENSES. All expenses of the Research shall be borne by
the Party incurring such expenses without contribution from or offset by the
other Party, unless otherwise agreed in writing by the Parties or expressly
provided herein.

        2.8 VISITING SCIENTISTS. Nippon Kayaku may, at its option, send up to
[***] visiting scientists [***], each of whom must be
acceptable to Signal) to Signal's facilities in San Diego. Nippon Kayaku shall
be responsible for such scientists' salaries and living and other expenses, and
Signal shall provide laboratory space and supervision. Such scientists shall
sign Signal's standard form of Confidential Disclosure Agreement and shall work
exclusively on projects relating to the Research while at Signal's facilities.

                                       9.

                      ***Confidential Treatment Requested
<PAGE>   15

        Signal shall give Nippon Kayaku's scientists full and correct
instructions necessary to avoid any loss, damage, death or injury, and Nippon
Kayaku shall cause such scientists to obey such instructions.

                                    ARTICLE 3

            DEVELOPMENT AND COMMERCIALIZATION PHASE OF COLLABORATION

        3.1 CO-DEVELOPMENT AND COMMERCIALIZATION OF THE PRODUCTS IN THE FIELD.

               (a) STRUCTURE. Within thirty (30) days following the date of any
Research Lead Notice pursuant to which the RMC has determined that a Compound
identified in the course of the Research is a Research Lead (the "Election
Period"), the Parties will meet to discuss whether to pursue the development of
such Research Lead jointly by entering into a joint venture arrangement through
the creation of a separate entity or otherwise sharing the expenses and profits
of the development and commercialization of Products based on such Research Lead
worldwide in the CNS Field and in the Rest of the World in the PNS Field (the
"Joint Commercialization Alternative"). If, during the Election Period, the
Parties agree to pursue the Joint Commercialization Alternative, the Parties
will negotiate in good faith the formal structure of such development and
commercialization arrangement pursuant to separate agreement or arrangement (a
"Joint Commercialization Agreement"), which shall include the principles set
forth in this Section 3.1 and in Exhibit D, within six (6) months following
delivery of the Research Lead Notice. A new six (6) month period will commence
upon the subsequent delivery of a Research Lead Notice with respect to a
different Research Lead or the substitution by the RMC or the Parties of one
Research Lead for another. Any such Joint Commercialization Agreement shall
specify the Parties' relative rights and responsibilities with respect to
continued pre-clinical development, clinical development, and marketing and
promotion rights, and shall include all appropriate licenses pursuant to Article
6 hereof.

               (b) PROFITS, LOSSES AND OPERATING EXPENSES. The Joint
Commercialization Agreement shall reflect equal sharing by the Parties of
Profits and Losses and Operating Expenses for Products based on the applicable
Research Lead (except for Products developed and commercialized by Nippon Kayaku
pursuant to the license granted under Section 6.1(b)(i)); provided, however,
that in the event the Parties agree with respect to a particular country to some
other cost-sharing arrangement, Profits and Losses and Operating Expenses in
such country will be shared according to costs incurred.

Royalties and license fees payable by either Party (or any joint venture entity
formed by the Parties hereunder or under the Joint Commercialization Agreement
by the Parties) to Third Parties with respect to such Products shall be treated
as an expense. Under any

                                      10.
<PAGE>   16

such Joint Commercialization Agreement, the terms "Profits," "Losses" and
"Operating Expenses" would have the meanings given them in Exhibit D.

               (c) CONTRACTING FOR SERVICES. Any such Joint Commercialization
Agreement would further contemplate contracting with each Party and/or their
Affiliates, or contracting with Third Parties, for services such as pre-clinical
and clinical development, clinical trials, regulatory affairs, manufacturing,
marketing, promotion, training, distribution and sales of Products. Any such
contracting shall be determined by the Parties on a Product-by-Product basis.
Each Party and its Affiliates shall provide any such service at cost plus a
commercially reasonable mark-up determined with reference to prevailing
standards in the industry for similar services.

               (d) SUPPLY OF BULK DRUG SUBSTANCE AND DRUG PRODUCT. The Joint
Commercialization Agreement between the Parties shall, at Nippon Kayaku's
option, provide for Nippon Kayaku to supply bulk drug substance on a worldwide
basis for a percentage of Net Sales of Products on commercially reasonable terms
to be negotiated in good faith by the Parties. In anticipation of this supply
arrangement, Nippon Kayaku will provide compounds and formulations of Research
Leads for all pre-clinical and clinical studies (including toxicology studies)
at a price and on such other commercially reasonable terms to be negotiated in
good faith by the Parties, and Nippon Kayaku will ensure that its facilities
meet all GMP and GLP standards, maintain DMFs and comply with all regulatory
requirements necessary to obtain regulatory and marketing approvals. In the
event that Nippon Kayaku does not provide such bulk drug substance and such drug
product for all pre-clinical and clinical studies (including toxicology
studies), then the foregoing option to supply bulk drug substance on a worldwide
basis for a percentage of Net Sales of Products shall lapse and be of no further
force or effect.

               (e) ADDITIONAL TERMS. The Joint Commercialization Agreement would
also provide for: (i) common Product brand names; (ii) common regulatory filings
and indications; (iii) common Product positioning and marketing plans; and (iv)
with respect to the development and commercialization of Products in the CNS
Field, an option to seek Third Party support for funding and/or expertise;
provided, however, that, notwithstanding any such Third Party support, Nippon
Kayaku shall have the right to develop and commercialize Products jointly with
any entity formed by the Parties hereunder or under the Joint Commercialization
Agreement in the CNS Field in Japan.

        3.2 ROYALTY ALTERNATIVE IN THE FIELD. In the event that, during the
Election Period, one Party (the "non-participating Party") elects not to
participate in the development and commercialization of Products, then the other
Party, if it elects to proceed with development and commercialization of
Products in the Field (the "Royalty Alternative"), shall be solely responsible
for the costs of development and commercialization and shall pay to the
non-participating Party a royalty of [***] of Net Sales of
Products by such Commercializing Party (as defined below) or its Affiliates or
sublicensees. In addition, in the event that the Parties have entered into a

                                      11.

                      ***Confidential Treatment Requested
<PAGE>   17

Joint Commercialization Agreement, either Party may thereafter at any time elect
by written notice to the other Party to convert to the Royalty Alternative in a
particular country and receive the royalty described in the preceding sentence
with respect to Net Sales of Products in such country.

                                    ARTICLE 4

                                    PAYMENTS

        4.1 FUNDING FOR RESEARCH. Nippon Kayaku agrees to fund the Research at
Signal over a two (2) year period in the aggregate amount of [***] for
(a) the costs and expenses for Signal's committing an average of at least
[***] to the Research, (b) any supervision provided by Signal relating to the
Research to the visiting scientists of Nippon Kayaku and (c) the use of Signal's
facilities by such visiting scientists of Nippon Kayaku for the purposes of
Research. Such amount shall be payable in advance in two (2) installments of
[***] within one (1) week following each of the Effective Date and the
first anniversary of the Effective Date.

        4.2 NIPPON KAYAKU ROYALTIES ON SALES OF PRODUCTS IN THE PNS FIELD IN
JAPAN. In consideration of the license granted to Nippon Kayaku pursuant to
Section 6.1(b)(i), Nippon Kayaku shall pay to Signal a royalty of [***] of Net
Sales of Products by Nippon Kayaku, its Affiliates or sublicensees of Products
in the PNS Field in Japan.

        4.3    ROYALTIES ON SALES OF PRODUCTS OUTSIDE THE FIELD.

               (a) In consideration of the license granted to Signal under
Section 6.2.1(a), Signal shall pay to Nippon Kayaku a royalty of [***]
of Net Sales of Products by Signal, its Affiliates or sublicensees outside
the Field plus any pass-through royalties.

               (b) In consideration of the license granted to Nippon Kayaku
under Section 6.2.1(b), Nippon Kayaku shall pay to Signal, a royalty of
[***] of Net Sales of Products by Nippon Kayaku, its Affiliates or
sublicensees outside the Field plus any pass through royalties.

        4.4    ROYALTIES ON SALES OF OTHER PRODUCTS IN THE FIELD

               (a) In consideration of the license granted to Signal under
Section 6.2.2(a), Signal shall pay to Nippon Kayaku a royalty of [***]
of Net Sales of Other Products by Signal, its Affiliates or sublicensees in
the Field plus any pass-through royalties.

               (b) In consideration of the license granted to Nippon Kayaku
under Section 6.2.2(b), Nippon Kayaku shall pay to Signal, a royalty of [***]
of Net

                                      12.

                      ***Confidential Treatment Requested
<PAGE>   18

Sales of Other Products by Nippon Kayaku, its Affiliates or sublicensees in the
Field plus any pass through royalties.

        4.5    ROYALTIES ON SALES OF OTHER PRODUCTS OUTSIDE THE FIELD.

               (a) In consideration of the license granted to Signal under
Section 6.2.3(a), Signal shall pay to Nippon Kayaku a royalty of [***]
of Net Sales of Other Products by Signal, its Affiliates or sublicensees
outside the Field plus any pass-through royalties.

               (b) In consideration of the license granted to Nippon Kayaku
under Section 6.2.3(b), Nippon Kayaku shall pay to Signal, a royalty of
[***] of Net Sales of Other Products by Nippon Kayaku, its Affiliates or
sublicensees outside the Field plus any pass through royalties.

        4.6 ROYALTIES UNDER ROYALTY ALTERNATIVE. In the event of election of the
Royalty Alternative by a Party pursuant to Section 3.2, the Commercializing
Party shall pay to the non-participating Party the royalty specified in Section
3.2.

                                    ARTICLE 5

                               ROYALTY OBLIGATIONS

        5.1 ROYALTIES FOR SALES OF PRODUCTS OR OTHER PRODUCTS. Any royalty
obligations of a Party (the "Commercializing Party") shall be subject to the
provisions of this Article 4.

        5.2 FOREIGN EXCHANGE. All amounts payable hereunder shall be paid in
U.S. dollars. The remittance of royalties payable on Net Sales of Products or
Net Sales of Other Products will be payable in U.S. dollars to the Party
entitled to receive the royalty hereunder (the "Receiving Party") at a bank and
to an account designated by the Receiving Party using the selling rate of
exchange for the currency of the country from which the royalties are payable as
published by the Wall Street Journal, New York, NY, USA, for the last business
day of the quarterly period for which the royalties are due.

        5.3 BLOCKED CURRENCY. In each country where the local currency is
blocked and cannot be removed from the country, at the election of the
Commercializing Party, royalties accrued in that country shall be paid to the
Receiving Party in the country in local currency by deposit in a local bank
designated by the Receiving Party.

        5.4 TAXES. The Receiving Party shall pay any and all taxes levied on
account of such payments it receives under this Agreement. If laws or
regulations require that taxes be withheld, the Commercializing Party will (i)
deduct those taxes from the remittable payment, (ii) timely pay the taxes to the
proper taxing authority, and (iii) send

                                      13.

                      ***Confidential Treatment Requested
<PAGE>   19

proof of payment to the Receiving Party and certify its receipt by the tax
authorities within sixty (60) days following that payment.

        5.5 PAYMENT. Royalty payments under this Agreement shall be made to the
Receiving Party or its designee quarterly within sixty (60) days following the
end of each calendar quarter for which royalties are due from the
Commercializing Party. Each royalty payment shall be accompanied by a report
summarizing the Net Sales of Products or Net Sales of Other Products during the
relevant three-month period.

        5.6 DURATION. The Commercializing Party shall pay royalties hereunder,
on a country by country basis, until the later of: (i) the last to expire Signal
Patent or Collaboration Patent (if Nippon Kayaku is the Commercializing Party)
or Nippon Kayaku Patent or Collaboration Patent (if Signal is the
Commercializing Party), a Valid Claim of which covers the manufacture, use or
sale of such Product or Other Product in such country, or (ii) the date ten (10)
years after the date of first commercial sale of such Product or Other Product
in such country by the Party, its Affiliates, or sublicensees; provided,
however, that all royalty obligations of the Parties shall cease thirty (30)
years after the Effective Date.

        5.7 ACCOUNTING. The Commercializing Party shall maintain complete and
accurate records, consistent with its general internal recordkeeping policies,
which are relevant to costs, expenses and payments under this Agreement and
shall make its internal sales ledgers for sales of Products or Other Products
upon which royalties are payable available during reasonable business hours for
a period of five (5) years from creation of individual records for examination
of any one calendar year's records at the other Party's expense and not more
often than once every two (2) years by a certified public accountant selected by
the other Party and reasonably acceptable to the Commercializing Party, audited
for the sole purpose of verifying for the inspecting Party the correctness of
calculations of such costs, expenses or payments made under this Agreement. If
any such audit fails to identify material underpayments (in excess of five
percent (5%) of the amounts that should have been paid) by the Commercializing
Party for any calendar year audited, the out-of-pocket expenses of both Parties
in such audit shall be borne by the Party requesting the audit. If any such
material discrepancies are identified by any such audit for any calendar year
audited, the Commercializing Party shall reimburse the Party requesting the
audit for such discrepancies and shall bear the out-of-pocket expenses of both
Parties in such audit. Any records or accounting information received from the
other Party shall be Confidential Information for purposes of Article 7.

        5.8 SALES BY SUBLICENSEES. In the event the Commercializing Party grants
licenses or sublicenses to Third Parties to make, use and sell a Product or
Other Product with respect to which a royalty payment is due hereunder, and the
Commercializing Party is not otherwise supplying any Product or Other Product to
such licensee or sublicensee, such licenses or sublicenses shall include an
obligation for the licensee or sublicensee to

                                      14.
<PAGE>   20

account for and report its Net Sales of such Products or Net Sales of such Other
Products on the same basis as if such sales were Net Sales of such Products or
Net Sales of such Other Products by the Party granting the license or
sublicense, and such Party shall account for, report and pay appropriate
royalties to the Party receiving royalties under this Agreement as if the Net
Sales of such Products or Net Sales of such Other Products of the sublicensee
were Net Sales of such Products or Net Sales of such Other Products of the Party
granting the license or sublicense (regardless of whether such Party has
actually received payment from the party to whom it granted such license or
sublicense), subject to the provisions of Section 5.3 above regarding blocked
currency payments.

                                    ARTICLE 6

                                 LICENSE GRANTS

        6.1    LICENSES DURING COLLABORATION.

               (a)    RESEARCH TERM LICENSES.

                      (i) Signal grants to Nippon Kayaku an exclusive, except as
to Signal, royalty-free, worldwide license to make and use methods and materials
solely to carry out the Research for the discovery, identification and
investigation of Compounds in the Field, with the right to grant sublicenses to
Affiliates only (except as agreed by the Parties in writing), under Signal
Patents, Signal Know-How, Collaboration Patents and Collaboration Know-How,
during the Research Term.

                      (ii) Nippon Kayaku grants to Signal an exclusive, except
as to Nippon Kayaku, royalty-free, worldwide license to make and use methods and
materials solely to carry out the Research for the discovery, identification and
investigation of Compounds in the Field, with the right to grant sublicenses to
Affiliates only (except as agreed by the Parties in writing), under Nippon
Kayaku Patents, Nippon Kayaku Know-How, Collaboration Patents and Collaboration
Know-How, during the Research Term.

               (b) LICENSES IN THE PNS FIELD.

                      (i) Signal shall and hereby does grant to Nippon Kayaku an
exclusive (even as to Signal), royalty-bearing license, with the right to grant
sublicenses, under Signal Patents, Signal Know-How, Collaboration Patents and
Collaboration Know-How to make, have made, use and sell Products in the PNS
Field solely in Japan.

                      (ii) In the event of the election of the Joint
Commercialization Alternative, effective upon execution or consummation by the
Parties of a definitive Joint Commercialization Agreement, Signal shall and
hereby does grant to Nippon Kayaku or to the joint venture (in the event that a
separate joint venture entity is formed), such licenses under Signal Patents,
Signal Know-How, Collaboration Patents and

                                      15.
<PAGE>   21

Collaboration Know-How, and Nippon Kayaku shall and does hereby grant to Signal
or to the joint venture (in the event that a separate joint venture entity is
formed) such licenses under the Nippon Kayaku Patents, Nippon Kayaku Know-How,
Collaboration Patents and Collaboration Know-How, as are necessary or useful to
make, have made, use, sell and import Products in the PNS Field in the Rest of
the World in the manner agreed to by the Parties under the Joint
Commercialization Agreement.

                      (iii) In the event of election of the Royalty Alternative,
the non-participating Party shall and hereby does grant to the Commercializing
Party an exclusive (even as to the non-participating Party) license, with the
right to grant sublicenses, under non-participating Party Patents,
non-participating Party Know-How, Collaboration Patents and Collaboration
Know-How to make, have made, use, sell and import Products in the PNS Field in
those countries in the Rest of the World as to which the Royalty Alternative
applies.

               (c) LICENSES IN THE CNS FIELD.

                      (i) In the event of the election of the Joint
Commercialization Alternative, effective upon execution or consummation by the
Parties of a definitive Joint Commercialization Agreement, Signal shall and
hereby does grant to Nippon Kayaku or to the joint venture (in the event that a
separate joint venture entity is formed), such licenses under Signal Patents,
Signal Know-How, Collaboration Patents and Collaboration Know-How, and Nippon
Kayaku shall and does hereby grant to Signal or to the joint venture (in the
event that a separate joint venture entity is formed) such licenses under the
Nippon Kayaku Patents, Nippon Kayaku Know-How, Collaboration Patents and
Collaboration Know-How, as are necessary or useful to make, have made, use, sell
and import Products in the CNS Field in the manner agreed to by the Parties
under the Joint Commercialization Agreement.

                      (ii) In the event of election of the Royalty Alternative,
the non-participating Party shall and hereby does grant to the Commercializing
Party an-exclusive (even as to the non-participating Party) license, with the
right to grant sublicenses, under non-participating Party Patents,
non-participating Party Know-How, Collaboration Patents and Collaboration
Know-How to make, have made, use, sell and import Products in the CNS Field in
those countries as to which the Royalty Alternative applies.

The licenses granted pursuant to subsections (b)(ii) and (c)(i) above shall be
subject to the obligation of the Parties to share Profits and Losses and
Operating Expenses in accordance with Section 3.1 above and shall not be
royalty-bearing.

                                      16.
<PAGE>   22

        6.2    COMMERCIALIZATION LICENSES.

               6.2.1  PRODUCTS OUTSIDE THE FIELD.

               (a) Nippon Kayaku shall and hereby does grant to Signal a
co-exclusive (with Nippon Kayaku), worldwide, royalty-bearing license, with the
right to grant sublicenses, under Nippon Kayaku Patents, Nippon Kayaku Know-How,
Collaboration Patents and Collaboration Know-How to make, have made, use and
sell Products outside the Field, subject to the Parties' rights and obligations
under Section 4.3; and

               (b) Signal shall and hereby does grant to Nippon Kayaku a
co-exclusive (with Signal), worldwide, royalty-bearing license, with the right
to grant sublicenses, under Signal Patents, Signal Know-How, Collaboration
Patents and Collaboration Know-How to make, have made, use and sell Products
outside the Field, subject to the Parties' rights and obligations under Section
4.3.

Promptly following the effectiveness of such license grants, each Party shall
deliver to the other Party copies of all confidential information and materials
relating to the applicable Patents and Know-How to enable such other Party to
fully utilize the license rights granted hereunder.

               6.2.2  OTHER PRODUCTS IN THE FIELD.

        Effective upon expiration of the Research Term:

               (a) Nippon Kayaku shall and hereby does grant to Signal a
co-exclusive (with Nippon Kayaku), worldwide, royalty-bearing license, with the
right to grant sublicenses, under Nippon Kayaku Patents, Nippon Kayaku Know-How,
Collaboration Patents and Collaboration Know-How to make, have made, use and
sell Other Products in the Field, subject to the Parties' rights and obligations
under Section 4.4; and

               (b) Signal shall and hereby does grant to Nippon Kayaku a
co-exclusive (with Signal), worldwide, royalty-bearing license, with the right
to grant sublicenses, under Signal Patents, Signal Know-How, Collaboration
Patents and Collaboration Know-How to make, have made, use and sell Other
Products in the Field, subject to the Parties' rights and obligations under
Section 4.4.

               6.2.3  OTHER PRODUCTS OUTSIDE THE FIELD.

        Effective upon expiration of the Research Term:

               (a) Nippon Kayaku shall and hereby does grant to Signal a
co-exclusive (with Nippon Kayaku), worldwide, royalty-bearing license, with the
right to grant sublicenses, under Nippon Kayaku Patents, Nippon Kayaku Know-How,
Collaboration

                                      17.
<PAGE>   23

Patents and Collaboration Know-How to make, have made, use and sell Other
Products outside the Field, subject to the Parties' rights and obligations under
Section 4.5; and

               (b) Signal shall and hereby does grant to Nippon Kayaku a
co-exclusive (with Signal), worldwide, royalty-bearing license, with the right
to grant sublicenses, under Signal Patents, Signal Know-How, Collaboration
Patents and Collaboration Know-How to make, have made, use and sell Other
Products outside the Field, subject to the Parties' rights and obligations under
Section 4.5.

        6.3 SUBLICENSES. Each Party shall notify any permitted sublicensee
hereunder of all rights and obligations of such Party under this Agreement
licensed to such sublicensee. Upon termination of this Agreement for breach
pursuant to Section 10.2, no existing sublicenses granted by the defaulting or
terminating Party shall be affected by such termination, and all such
sublicenses shall remain in effect according to their terms as sublicenses of
the non-defaulting Party.

                                    ARTICLE 7

                          CONFIDENTIALITY; PUBLICATIONS

        7.1    CONFIDENTIALITY; EXCEPTIONS.

               (a) NONDISCLOSURE. Except to the extent expressly authorized by
this Agreement or otherwise agreed in writing, the Parties agree that, during
the term of this Agreement and a ten (10) year period thereafter, the receiving
Party shall keep confidential and shall not publish or otherwise disclose or use
for any purpose, other than as provided for in this Agreement, any Know-How,
information included in any pending application included in the applicable
Patents or other materials furnished to it by the other Party pursuant to this
Agreement or developed or acquired in connection with the Collaboration
(collectively, "Confidential Information").

               (b) EXCEPTIONS. The restrictions under this Section 7.1 shall not
apply to the extent that it can be established by the receiving Party that such
Confidential Information:

                      (i) was already known to the receiving Party, other than
under an obligation of confidentiality, at the time of disclosure by the other
Party;

                      (ii) was generally available to the public or otherwise
part of the public domain at the time of its disclosure to the receiving Party;

                      (iii) becomes generally available to the public or
otherwise part of the public domain after its disclosure and other than through
any act or omission of the receiving Party in breach of this Agreement; or

                                      18.
<PAGE>   24

                      (iv) is lawfully received by the receiving Party from a
Third Party who does not acquire it, directly or indirectly, from the other
Party under an obligation of confidence after its disclosure.

        7.2 AUTHORIZED DISCLOSURE. Each Party may disclose Confidential
Information hereunder to the extent such disclosure is reasonably necessary in
filing or prosecuting patent applications, prosecuting or defending litigation,
complying with applicable governmental regulations or conducting pre-clinical or
clinical trials, provided that a Party making any such disclosure will give
prompt notice to the other Party of such disclosure requirement and, except to
the extent inappropriate in the case of patent applications, will use its
reasonable efforts to secure confidential treatment of such Confidential
Information required to be disclosed and to minimize the extent of such
disclosure. Each Party also may disclose to its collaborators for the
Collaboration, under confidentiality obligations, Confidential Information
developed by such Party during the course of this Collaboration.

        7.3 PUBLICATIONS. Either Party may publish or present the results of the
Research subject to the prior review by the other Party for patentability and
protection of Confidential Information. Each party (the "submitting Party")
shall provide to the other the opportunity to review any proposed abstract,
manuscript or presentation which covers the results of the Research by
delivering a copy thereof to the other Party (the "reviewing Party") no less
than forty-five (45) days before its intended submission for publication or
presentation. The reviewing Party shall have thirty (30) days from its receipt
of any such abstract, manuscript or presentation in which to notify the
submitting Party in writing of any specific concern, based upon either the need
to seek patent protection or concern regarding competitive disadvantage arising
from the proposal. In the absence of such a notice within such thirty (30) day
period, the publication or presentation of such abstract, manuscript or
presentation shall be deemed approved by the reviewing Party. In the event of
concern, the submitting Party agrees not to submit such publication or to make
such presentation that contains such Confidential Information until the
reviewing Party is given a reasonable period of time (not to exceed forty-five
(45) days) to seek patent protection for any material in such publication or
presentation which it believes is patentable or to resolve any other issues.
Each Party also agrees to delete from any such proposed publication any
Confidential Information of the other Party upon its reasonable request based
upon the commercial value of the secrecy of such Confidential Information.

        7.4 PUBLIC DISCLOSURE. The Parties shall agree to the public
announcement of the execution of this Agreement excluding provisions relating to
economical conditions; provided, however, that the Parties shall negotiate the
contents of the public announcement with each other and decide on them prior to
the public announcement. Thereafter, the Parties shall consult and agree with
each other prior to the issuances of any press releases that discuss aspects of
the Collaboration; provided, however, that each

                                      19.
<PAGE>   25

Party shall be entitled to make public disclosures required by law, including
compliance with securities laws.

                                    ARTICLE 8

              OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS

        8.1 OWNERSHIP OF COLLABORATION PATENTS; NIPPON KAYAKU PATENTS; SIGNAL
PATENTS. Nippon Kayaku and Signal shall be joint owners of all Collaboration
Patents with all ownership rights under such Collaboration Patents as fully
entitled by law, subject only to the licenses expressly granted herein. The
Parties agree to take all such actions, including execution of all documents,
necessary or appropriate so that the Collaboration Patents shall be owned
jointly by Nippon Kayaku and Signal. Nippon Kayaku shall retain all right, title
and interest in and to any Nippon Kayaku Patents, subject only to the licenses
expressly granted herein. Signal shall retain all right, title and interest in
and to any Signal Patents, subject only to the licenses expressly granted
herein. Each Party acknowledges and agrees, subject to the first sentence of
this Section 8.1, that any and all discoveries, know-how, inventions, methods
and ideas and the like made or discovered solely by its officers, employees,
consultants or agents shall be owned solely by it and that any and all
discoveries, know-how, inventions, methods, ideas and the like made jointly by
officers, employees, consultants or agents of each will be jointly owned, as
determined in accordance with the rules of inventorship under United States
patent law.

        8.2    PATENT FILINGS.

               (a) NIPPON KAYAKU PATENTS. Nippon Kayaku shall supervise and
direct patenting of all inventions covered by any Nippon Kayaku Patents, and
shall file and prosecute all patent applications covering any Nippon Kayaku
Patents. All Patent Costs and Nippon Kayaku's internal costs and expenses of
filing, prosecuting and maintaining the Nippon Kayaku Patents shall be borne by
Nippon Kayaku. Nippon Kayaku shall maintain all Patents that issue on such
applications.

               (b) SIGNAL PATENTS. Signal shall supervise and direct patenting
of all inventions covered by any Signal Patents, and shall file and prosecute
all patent applications covering any Signal Patents. All Patent Costs and
Signal's internal costs and expenses of filing, prosecuting and maintaining the
Signal Patents shall be borne by Signal. Signal shall maintain all Patents that
issue on such applications.

               (c) COLLABORATION PATENTS. The responsibility for the
preparation, filing, prosecution and maintenance of Collaboration Patents will
be administered through a Patent Committee comprised of two (2) members: one (1)
appointed by Signal and one (1) appointed by Nippon Kayaku. The Parties intend
that:

                                      20.
<PAGE>   26

                      (i) The Patent Committee shall meet together at such site
and timing or conduct discussion by means of telephone calls, by letter, by
telefax or by E-mail at such site and means, as may be agreed by the Parties.
Each Party shall pay its own costs in attending Patent Committee meetings. The
Patent Committee shall provide reports to the RMC on a semi-annual basis of the
status of the Collaboration Patents. Either Party may refer any dispute to the
appropriate officers of the Parties for consideration and resolution pursuant to
Article 12;

                      (ii) Unless otherwise determined by the Patent Committee,
the supervision and direction of patenting of all inventions covered by the
Collaboration Patents, and filing and prosecution of all patent applications
covering Collaboration Patents, shall be the responsibility of Signal in the
United States and shall be the responsibility of Nippon Kayaku in Japan; and

                      (iii) The Parties shall share equally the Patent Costs of
preparing, filing, prosecuting and maintaining the Collaboration Patents and
shall each bear their own internal costs and expenses of filing, prosecuting and
maintaining the Collaboration Patents.

               (d) COOPERATION. Each Party agrees to cooperate with the Party
responsible for the filing, prosecution and maintenance of Patents. Such
cooperation will include the execution of all documents necessary or appropriate
for such responsible Party to fulfill its obligations hereunder.

               (e) RESTRICTIONS ON TRANSFER. No Collaboration Patents shall be
assigned, transferred or licensed by a Party to any Third Party without the
prior written consent of the other Party; provided, however, that a Party may,
without the consent of the other Party, grant sublicenses under Section 6.2.2 or
6.2.3.

               (f) ELECTION NOT TO PURSUE. If a Party decides, at any time, not
to file or maintain any Patent as provided hereunder, it shall give the other
Party notice to this effect and upon such notice such other Party shall have the
right, but not the obligation, to file and maintain such Patent, in its own name
and at its own expense, and, if it so elects to file and maintain, then the
Party deciding not to so file or maintain shall assign to such other Party the
rights in such Patent.

        8.3    ENFORCEMENT RIGHTS.

               (a) DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. If a Third
Party asserts that a Patent or other right owned by it is infringed by the
manufacture, use or sale of any pharmaceutical product subject to any of the
licenses granted under Article 6 during the term of this Agreement, the Party
commercializing such product shall control the defense of such claim at its
initial cost and expense; provided, however, that in the event that such matter
includes claims with respect to the Collaboration Patents or

                                      21.
<PAGE>   27

Collaboration Know-How, the RMC (or, if after the Research Term, the Parties
mutually) shall determine how to respond to such claim, and shall control the
defense of such claim, with the initial cost and expense of such defense to be
shared equally by the Parties. No settlement shall be entered into without the
prior written consent of the Party commercializing any such product if such
settlement would adversely affect its interests, which consent shall not be
unreasonably withheld.

               (b) INFRINGEMENT BY THIRD PARTIES WITH RESPECT TO PRODUCTS DURING
RESEARCH TERM. If any Signal Patent, Nippon Kayaku Patent or Collaboration
Patent is infringed by a Third Party in any country in connection with the
manufacture, use and sale of any pharmaceutical product subject to any of the
licenses granted under Article 6 in such country during the Research Term, the
Party to this Agreement first having knowledge of such infringement shall
promptly notify the other in writing. The notice shall set forth the facts of
that infringement in reasonable detail. In the event a Collaboration Patent is
infringed by a Third Party, the RMC shall control any action or proceeding with
respect to such infringement, at its expense by counsel of its choice, and the
Parties shall share equally in the costs thereof. In the case of Signal Patents
or Nippon Kayaku Patents, the Party owning or Controlling such Patent shall have
the primary right, but not the obligation, to institute, prosecute, and control
any action or proceeding with respect to such infringement, by counsel of its
own choice, and the other Party shall have the right, at its own expense, to be
represented in any action involving any such Patent by counsel of its own
choice. If the Party owning or Controlling such Patent fails to bring an action
or proceeding within a period of sixty (60) days after having knowledge of
infringement of such Patent and such infringement would have a commercially
significant adverse effect on such products, the other Party shall have the
right to bring and control any such action by counsel of its own choice, and the
first Party shall have the right to be represented in any such action by counsel
of its own choice at its own expense. If one Party brings any such action or
proceeding, the other Party agrees to be joined as a Party plaintiff if
necessary to prosecute the action and to give the first Party reasonable
assistance and authority to file and prosecute the suit.

               (c) INFRINGEMENT BY THIRD PARTIES WITH RESPECT TO PRODUCTS AFTER
RESEARCH TERM. If any Signal Patent, Nippon Kayaku Patent or Collaboration
Patent is infringed by a Third Party in any country in connection with the
manufacture, use or sale of any pharmaceutical product subject to this Agreement
in such country following the Research Term and prior to any termination of the
Collaboration, the Party to this Agreement first having knowledge of such
infringement shall promptly notify the other in writing. The notice shall set
forth the facts of that infringement in reasonable detail. In the event that the
Parties have entered into a Joint Commercialization Agreement, infringement
matters shall be handled in the manner specified in such Agreement. Otherwise,
the Commercializing Party shall have the primary right, but not the obligation,
to institute, prosecute, and control any action or proceeding with respect to
such infringement of any Signal Patent, Nippon Kayaku Patent or Collaboration
Patent,

                                      22.
<PAGE>   28

by counsel of its own choice, and the other Party shall have the right, at its
own expense, to be represented in any action involving any of its Patents or any
Collaboration Patent by counsel of its own choice. If the Commercializing Party
fails to bring an action or proceeding within a period of sixty (60) days after
having knowledge of infringement of such Patent and such infringement would have
a commercially significant adverse effect on such products, the other Party
shall have the right to bring and control any such action by counsel of its own
choice, and the Commercializing Party shall have the right to be represented in
any such action by counsel of its own choice at its own expense. If one Party
brings any such action or proceeding, the other Party agrees to be joined as a
party plaintiff if necessary to prosecute the action and to give the first Party
reasonable assistance and authority to file and prosecute the suit.

               (d) MONETARY AWARDS. Any damages or other monetary awards
recovered shall be allocated first, to the costs and expenses of the Party
bringing suit, and the costs and expenses, if any, of the other Party. Any
amounts remaining shall be allocated as follows: (i) in accordance with the
allocation of Profits and Losses if the Parties have entered into a Joint
Commercialization Agreement, or (ii) to the Party bringing the suit, which
amounts shall be treated as Net Sales of Products or Net Sales of Other Products
subject to the applicable royalty obligations set forth in this Agreement. A
settlement or consent judgment or other voluntary final disposition of a suit
under Sections 8.4(b) or (c) may not be entered into without the prior written
consent of the Party not bringing the suit.

               (e) INFRINGEMENT OF COLLABORATION PATENTS OUTSIDE THE FIELD. With
respect to infringement of the Collaboration Patents outside the Field, the
Parties shall consult with each other regarding the institution, prosecution and
control of any action or proceeding with respect to the infringement of any of
the Collaboration Patents. In the absence of agreement, each Party may proceed
in such manner as the law permits. Each Party shall bear its own expenses, with
any recovery allocated pro rata according to costs and any excess shared equally
by the Parties.

                                    ARTICLE 9

                   REPRESENTATIONS AND WARRANTIES; EXCLUSIVITY

        9.1 REPRESENTATIONS AND WARRANTIES. Each of the Parties hereby
represents and warrants and covenants as follows:

               (a) BINDING OBLIGATION. This Agreement is legally and validly
binding upon each Party and enforceable in accordance with its terms. The
execution, delivery and performance of the Agreement by each Party does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a party or by which it is bound, nor violate any law or regulation
of any court, governmental body or administrative or other agency having
jurisdiction over it.

                                      23.
<PAGE>   29

               (b) NO CONFLICTING GRANTS. Except as set forth in Section 2.4(b)
and Schedule IV hereto, each Party has not granted, and during the term of the
Agreement will not grant, any right to any Third Party relating to its
respective technology including Know-How and Patents in the Field which would
conflict with the rights granted to the other Party hereunder.

               (c) VALID LICENSE. Each Party owns or Controls under valid
licenses with right of sublicense all of the rights, title and interest in and
to its Know-How. Each Party warrants that to the best of its knowledge, except
as otherwise disclosed, no license, sublicense or any of its Patents for which
the other Party is granted rights hereunder is invalid as of the Effective Date
and each Party will inform the other Party immediately if it makes any
determination to the contrary.

               (d) NO THIRD PARTY LICENSES NEEDED. Neither Party is currently
aware of any license from any Third Party (other than any license such Party has
previously obtained) necessary to enable the Parties to conduct the Research
contemplated by the Research Plan or commercialize the pharmaceutical products
contemplated by this Agreement.

        9.2 LIMITATION ON WARRANTIES. Nothing herein shall be construed as a
representation or warranty by either Party to the other that any Patent or
Know-How or other intellectual property right owned or Controlled by such Party
is valid, enforceable, or not infringed by any Third Party, or that the practice
of such rights does not infringe any property right of any Third Party. Neither
Party makes any warranties, express or implied, concerning the success of the
Research, or the commercial utility of Research Leads or any pharmaceutical
products developed or commercialized hereunder.

EXCEPT AS EXPRESSLY MADE HEREIN, EACH PARTY DISCLAIMS ANY WARRANTY, EXPRESS OR
IMPLIED, INCLUDING ANY WARRANTY OF NONINFRINGEMENT, MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE, OF ANY PRODUCT, OR ANY REPRESENTATION OR WARRANTY THAT
A PRODUCT ENCOMPASSED BY THE RIGHTS LICENSED HEREUNDER WILL NOT INFRINGE ANY
THIRD PARTY'S INTELLECTUAL PROPERTY RIGHTS.

        9.3 NEGATIVE COVENANTS. Each Party hereby covenants to the other that
such Party shall not use or practice the other Party's Patents or Know-How in
any field or in any manner except as specifically licensed under this Agreement.

                                      24.
<PAGE>   30

                                   ARTICLE 10

                              TERM AND TERMINATION

        10.1 TERM. This Agreement shall commence as of the Effective Date and,
unless sooner terminated as provided herein, shall continue in effect until the
later of (i) the conclusion of the Collaboration between the Parties or (ii) the
date on which all royalty obligations of the Parties cease pursuant to Section
5.6.

        10.2   TERMINATION FOR BREACH.

               (a) BREACH BY SIGNAL. If Signal materially breaches this
Agreement at any time, and has not cured such breach within ninety (90) days
after written notice thereof from Nippon Kayaku, then Nippon Kayaku shall have
the right to terminate this Agreement effective upon written notice thereof,
whereupon (i) all licenses granted by Nippon Kayaku to Signal hereunder shall
terminate and revert to Nippon Kayaku, (ii) all licenses granted to Nippon
Kayaku shall remain in full force and effect so long as Nippon Kayaku is not in
breach of its obligations to Signal under this Agreement and (iii) Signal shall
return to Nippon Kayaku all Confidential Information of Nippon Kayaku.

               (b) BREACH BY NIPPON KAYAKU. If Nippon Kayaku materially breaches
this Agreement, at any time, and has not cured such breach within ninety (90)
days after written notice thereof from Signal, then Signal shall have the right
to terminate this Agreement effective upon written notice thereof, whereupon (i)
all licenses granted by Signal to Nippon Kayaku hereunder shall terminate and
revert to Signal, (ii) all licenses granted to Signal shall remain in full force
and effect so long as Signal is not in breach of its obligations to Nippon
Kayaku under this Agreement and (iii) Nippon Kayaku shall return to Signal all
Confidential Information of Signal.

        10.3 TERMINATION FOR BANKRUPTCY. Either Party hereto shall have the
right to terminate this Agreement forthwith by written notice to the other Party
(i) if the other Party is declared insolvent or bankrupt by a court of competent
jurisdiction, (ii) if a voluntary or involuntary petition in bankruptcy is filed
in any court of competent jurisdiction against the other Party, or (iii) if the
other Party shall make or execute an assignment for the benefit of creditors.

        10.4 SURVIVING RIGHTS. In addition to the rights described in Section
10.2, the obligations and rights of the Parties under Sections 6.3, 8.1, 8.2(c),
8.2(d), 10.4, 10.5, 10.6, 11.1 and 11.2 and Articles 5, 7, 12 and 13 shall
survive termination or expiration of this Agreement.

        10.5 ACCRUED RIGHTS, SURVIVING. Termination or expiration of the
Agreement for any reason shall be without prejudice to any rights which shall
have accrued to the benefit of either Party prior to such termination or
expiration, including, without

                                      25.
<PAGE>   31

limitation, any payment obligations of the Parties and any and all damages
arising from any breach hereunder. Such termination or expiration shall not
relieve either Party from obligations which are expressly indicated to survive
termination or expiration of the Agreement.

        10.6 TERMINATION NOT SOLE REMEDY. Termination is not the sole remedy
under this Agreement and, whether or not termination is effected, all other
remedies will remain available except as agreed to otherwise herein.

                                   ARTICLE 11

                           INDEMNIFICATION; INSURANCE

        11.1 RESEARCH AND DEVELOPMENT INDEMNIFICATION. Each Party (the
"Indemnifying Party") shall indemnify, defend and hold the other Party (the
"Indemnified Party") harmless from and against any and all suits, judgments,
damages, claims, actions, demands, liabilities, expenses and/or losses,
including reasonable legal expenses and attorneys' fees ("Losses"):

               (a) arising out of (i) any injuries to person and/or damage to
property resulting from negligent acts of the Indemnifying Party performed in
carrying out the Research hereunder, including failure by the Indemnifying Party
to provide the Indemnified Party with any Know-How of the Indemnifying Party
which, if timely received, would have avoided injury, death or damage, provided
such failure to provide such Know-How is due to negligence on the part of the
Indemnifying Party, or (ii) personal injury to the Indemnified Party's employees
or agents or damage to the Indemnified Party's property resulting from acts
performed by, under the direction of, or at the request of the Indemnifying
Party (other than acts otherwise required to be performed by the Indemnified
Party by this Agreement) in carrying out activities contemplated by this
Agreement; or

               (b) with respect to pharmaceutical products covered by this
Agreement (determined on a country-by-country basis), resulting directly from
the manufacture, use, handling, storage, sale or other disposition of chemical
agents or such products by the Indemnifying Party, its Affiliates, agents or
sublicensees, except to the extent such Losses result directly from the
negligence of the Indemnified Party, its Affiliates, agents or sublicensees.

        11.2 INDEMNIFICATION PROCEDURES. In the event that Indemnified Party is
seeking indemnification under Section 11.1, it shall inform the Indemnifying
Party of a claim as soon as reasonably practicable after it receives notice of
the claim, shall permit the Indemnifying Party to assume direction and control
of the defense of the claim (including the right to settle the claim solely for
monetary consideration), and shall

                                      26.
<PAGE>   32

cooperate as requested (at the expense of the Indemnifying Party) in the defense
of the claim.

        11.3 INSURANCE. The Parties will work with one another to coordinate
appropriate insurance coverage for the activities contemplated by the Parties
under this Agreement.

                                   ARTICLE 12

                               DISPUTE RESOLUTION

        12.1 DISPUTES. The Parties recognize that disputes as to certain matters
may from time to time arise which relate to either Party's rights and/or
obligations hereunder. It is the objective of the Parties to establish
procedures to facilitate the resolution of such disputes in an expedient manner
by mutual cooperation and without resort to litigation. To accomplish this
objective, the Parties agree to follow the procedures set forth in this Article
12 if and when such a dispute arises between the Parties.

        12.2   DISPUTE RESOLUTION PROCEDURES.

               (a) If the Parties or the RMC cannot resolve the dispute within
twenty (20) days of formal request by either Party to the other, any Party may,
by written notice to the other (the "Dispute Notice"), have such dispute
referred to their respective officers designated below or their successors, for
attempted resolution by good faith negotiations within thirty (30) days after
such notice is received. Said designated officers are as follows:

<TABLE>
<S>                                <C>
          For Nippon Kayaku:       Head, Research & Development Division
                                   Pharmaceuticals Group

          For Signal:              Chief Executive Officer
</TABLE>

               (b) Any such dispute arising out of or relating to this Agreement
which is not resolved between the Parties or the designated officers of the
Parties pursuant to the foregoing shall be resolved by final and binding
arbitration conducted in Honolulu, Hawaii, USA under the current Licensing
Agreement Arbitration Rules of the American Arbitration Association ("AAA");
provided, however, that depositions shall be permitted as follows: each Party
may take no more than seven (7) depositions with a maximum of six (6) hours of
examination time per deposition, and each such deposition shall take place in
Honolulu, Hawaii, USA, unless otherwise agreed by the Parties. The arbitration
shall be conducted by three (3) arbitrators who are knowledgeable in the subject
matter which is at issue in the dispute and who are selected by mutual agreement
of the Parties or, failing such agreement, shall be selected according to the
AAA rules. In conducting the arbitration, the arbitrators shall be able to
decree any and all relief of an equitable

                                      27.
<PAGE>   33

nature, including but not limited to such relief as a temporary restraining
order, a preliminary injunction, a permanent injunction or replevin of property.
The arbitrators shall also be able to award actual, general or consequential
damages, but shall not award any other form of damages (i.e., punitive damages).
The Parties shall share equally the arbitrators' fees and expenses pending the
resolution of the arbitration unless the arbitrators, pursuant to their right
but not their obligations, require the nonprevailing Party to bear all or any
portion of the costs of the prevailing Party. The decision of the arbitrators
shall be final and may be sued on or enforced by the Party in whose favor it
runs in any court of competent jurisdiction at the option of such Party.

                                   ARTICLE 13

                                  MISCELLANEOUS

        13.1 ASSIGNMENT.

               (a) TO AFFILIATES. Notwithstanding any provision of this
Agreement to the contrary, either Party may assign any of its rights or
obligations under this Agreement in any country to any Affiliates; provided,
however, that such assignment shall not relieve the assigning Party of its
responsibilities for performance of its obligations under this Agreement.

               (b) ON SALE OF COMPANY. Either Party may also assign its rights
or obligations under this Agreement in connection with the sale of all or
substantially all of its assets, or otherwise with the prior written consent of
the other Party. This Agreement shall survive any merger of either Party with or
into a Third Party and no consent for a merger or similar reorganization shall
be required hereunder; provided, that in the event of such merger or in the
event of a sale of all assets, no intellectual property rights of the acquiring
corporation shall be included in the technology licensed hereunder.

               (c) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and permitted assigns of the Parties.
Any assignment not in accordance with this Agreement shall be void.

        13.2 RESEARCH AND DEVELOPMENT ENTITIES. Either Party may assign its
rights and obligations under this Agreement to an entity or entities (e.g.,
partnership or corporation) that are specifically formed for financial purposes
that would not jeopardize the collaboration hereunder and that finance research
and development performed by such Party, which entity able to carry out such
Party's obligations hereunder; provided, however, that such assignment shall not
relieve the assigning Party of responsibility for performance of its obligations
under this Agreement.

        13.3 CONSENTS NOT UNREASONABLY WITHHELD. Whenever provision is made in
this Agreement for either Party to secure the consent or approval of the other,
that

                                      28.
<PAGE>   34

consent or approval shall not unreasonably be withheld, and whenever in this
Agreement provision is made for one Party to object to or disapprove a matter,
such objection or disapproval shall not unreasonably be exercised.

        13.4 FORCE MAJEURE. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other similar cause beyond the control of the defaulting Party, provided
that the Party claiming force majeure has exerted all reasonable efforts to
avoid or remedy such force majeure; provided, however, that in no event shall a
Party be required to settle any labor dispute or disturbance.

        13.5 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or useful in order to carry out the purposes and intent of this
Agreement.

        13.6 NO TRADEMARK RIGHTS. Except as otherwise provided herein, no right,
express or implied, is granted by the Agreement to use in any manner the name
"Signal" or "Nippon Kayaku" or any other trade name or trademark of the other
Party or its Affiliates in connection with the performance of the Agreement.

        13.7 NOTICES. All notices hereunder shall be in writing and shall be
deemed given if delivered personally, mailed by registered or certified mail
(return receipt requested), postage prepaid, or sent by express courier service,
to the Parties at the following addresses (or at such other address for a Party
as shall be specified by like notice; provided, that notices of a change of
address shall be effective only upon receipt thereof):

               If to Signal, to:            Signal Pharmaceuticals, Inc.
                                            5555 Oberlin Drive
                                            San Diego, CA  92121
                                            Attention:    Alan J. Lewis, Ph.D.
                                                         Chief Executive Officer
                                            Telephone:    (619) 558-7500
                                            Telecopy:     (619) 558-7513

                                      29.
<PAGE>   35

               If to Nippon Kayaku, to:     Nippon Kayaku Co., Ltd.
                                            Tokyo Fujimi Building
                                            11-2, Fujimi 1-chome
                                            Chiyoda-ku, Tokyo 102
                                            Japan
                                            Attention:    Mr. Motonobu Yazaki
                                                          Managing Director
                                            Telephone: 03-3237-5011
                                            Telecopy: 03-3237-5081

        13.8 WAIVER. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such Party's rights or remedies provided in this
Agreement.

        13.9 SEVERABILITY. If any term, covenant or condition of this Agreement
or the application thereof to any Party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then (i) the remainder of this Agreement,
or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (ii) the Parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the Parties that the basic purposes and economic terms of this Agreement are to
be effectuated.

        13.10 AMBIGUITIES. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authored the ambiguous provision.

        13.11 COUNTERPARTS. This Agreement may be executed in two (2)
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.

        13.12 ENTIRE AGREEMENT. This Agreement sets forth all the covenants,
promises, agreements, warranties, representations, conditions and understandings
between the Parties hereto and supersedes and terminates all prior agreements
and understanding between the Parties, except the Secrecy Agreement and the
Material Transfer Agreement. There are no covenants, promises, agreements,
warranties, representations conditions or understandings, either oral or
written, between the Parties other than as set forth herein and therein. No
subsequent alteration, amendment, change or addition to this Agreement shall be
binding upon the Parties hereto unless reduced to writing and signed by the
respective authorized officers of the Parties.

                                      30.
<PAGE>   36

        13.13 GOVERNING LAW. Resolution of all disputes arising out of or
related to this Agreement or the performance, enforcement, breach or termination
of this Agreement and any remedies relating thereto, shall be governed by and
construed under the substantive laws of the State of California and the federal
law of the United States of America, without regard to conflicts of law rules.

        13.14 HEADINGS. The Article headings and Section headings are placed
herein merely as a matter of convenience and are not to be constructed as a part
of this Agreement.

                                      31.
<PAGE>   37

        IN WITNESS WHEREOF, the Parties have executed this Agreement in
duplicate originals by their proper officers as of the date and year first above
written.

                                       NIPPON KAYAKU CO., LTD.

                                       By: /s/ MOTONOBU YAZAKI
                                          --------------------------------------

                                       Name: Motonobu Yazaki
                                            ------------------------------------

                                       Title: Managing Director
                                             -----------------------------------

                                       SIGNAL PHARMACEUTICALS, INC.

                                       By: /s/ ALAN LEWIS
                                          --------------------------------------

                                       Name: Alan Lewis
                                            ------------------------------------

                                       Title: Pres/CEO
                                             -----------------------------------

                                      32.
<PAGE>   38

                                    EXHIBIT A

                                     [***]

                                      33.

                      ***Confidential Treatment Requested
<PAGE>   39

                                    EXHIBIT B

                                  RESEARCH PLAN

                                     [***]

                                      34.

                      ***Confidential Treatment Requested
<PAGE>   40
                                    EXHIBIT C

[***]

                                       35.

                      ***Confidential Treatment Requested
<PAGE>   41
                                    EXHIBIT D

                     PROFITS, LOSSES AND OPERATING EXPENSES

        For purposes of the Joint Commercialization Agreement, the terms set
forth below shall have the following meaning (all references to "overhead" in
this Exhibit D shall be determined in accordance with generally accepted
accounting principles):

        1. "ADVERTISING AND EDUCATION EXPENSE" means costs, including direct
overhead directly attributable to the Collaboration but excluding other
overhead, incurred by a Party or for its account which are specifically
identifiable to the advertising and marketing of Products, and related
professional education, of a Product and consistent with a marketing plan and
budget mutually acceptable to the Parties; provided, however, that such term
shall exclude Selling and Promotion Expenses.

        2. "CLINICAL DEVELOPMENT COSTS" means costs, including direct overhead
directly attributable to the Collaboration but excluding other overhead,
incurred by a Party or for its account, specifically identifiable to the
development of a Product, which is aimed at achieving regulatory approval to
market such Product or an expanded or significantly modified label for a Product
as to which regulatory approval to market such Product has been previously
obtained, including Cost of Goods for Product for use in clinical trials and
costs incurred with regulatory submissions, wages and benefits to the extent
employees work on clinical trials or regulatory submissions (calculated on a
full-time equivalent basis) and investigator grants and laboratory materials.

        3. "COST OF GOODS" means the cost of Products shipped in either bulk or
final therapeutic form, as the Parties may then agree. As used herein, the cost
of Products means (i) in the case of products and services acquired from Third
Parties, payments made to such Third Parties, and (ii) in the case of
manufacturing services performed by the Parties, including manufacturing
services in support of Third Party manufacturing, the actual unit costs of
manufacture in bulk form or final manufacturing, as the case may be, plus the
variances and other costs specifically provided for herein. Actual unit costs
shall consist of direct material and direct labor costs plus manufacturing
overhead directly attributable to the Products at standard, all calculated in
accordance with reasonable cost accounting methods, consistently applied, of the
Party performing the work.

        Direct material costs shall include the costs incurred in purchasing
materials, including sales and excise taxes imposed thereon and customs duty and
charges levied by government authorities, and all costs of packaging components.

        Direct labor shall include the cost of employees engaged in direct
manufacturing activities and direct or indirect quality control and quality
assurance activities who are directly employed in Product manufacturing and
packaging.

                                       36.

<PAGE>   42
        Overhead attributable to the Products shall include a reasonable
allocation of indirect labor (not previously included in direct labor), a
reasonable allocation of administrative costs, and a reasonable allocation of
facilities costs. Such allocations shall be in accordance with reasonable cost
accounting methods, consistently applied, of the Party performing the work.

        4. "DISTRIBUTION COSTS" means the costs, including direct overhead
directly attributable to the Collaboration but excluding other overhead,
incurred by a Party or for its account, specifically identifiable to the
distribution of a Product to a Third Party including (i) handling and
transportation to fulfill orders (excluding such costs, if any, treated as a
deduction in the definition of Net Sales), (ii) customer services including
order entry, billing and adjustments, inquiry and credit and collection, and
(iii) direct cost of facilities utilized for the storage and distribution of
Products.

        5. "LOSSES" means Net Sales of Products less Operating Expenses, if such
amount is less than zero (0).

        6. "OPERATING EXPENSES" means (i) Clinical Development Costs, (ii) Cost
of Goods, (iii) Distribution Costs, (iv) Selling and Promotion Expenses, (v)
Advertising and Education Expenses, (vi) royalties payable to a Third Party for
the manufacture, use or sale of Products, (vii) the direct costs of ongoing
medical studies to support such Product, excluding overhead, (viii) direct
expenses associated with market withdrawals, field adjustments or recalls, (ix)
capital expenditures specifically identifiable to the development and
commercialization of Products (and not otherwise included herein), and (x)
direct expenses relating to selling by non-Affiliates, training, adverse event
reporting, patents and trademarks.

        7. "PROFITS" means Net Sales of Products less Operating Expenses, if
such amount is greater than or equal to zero (0).

        8. "SELLING AND PROMOTION EXPENSES" means costs incurred to operate and
maintain the sales force which promotes Products, sales bulletins and other
communications, sales meetings, specialty sales forces, consultants, call
reporting and other monitoring/tracking costs, district and regional sales
management, home office personnel who support the sales force, and other
ancillary services.

                                       37.

<PAGE>   43
                                   SCHEDULE I

                                     [***]

                      ***Confidential Treatment Requested
<PAGE>   44
                                   SCHEDULE II

                                     [***]

                      ***Confidential Treatment Requested

<PAGE>   45
                                  SCHEDULE III

                INITIAL MEMBERS OF RESEARCH MANAGEMENT COMMITTEE

Initial Signal Representatives:

        [***]

Initial Nippon Kayaku Representatives:

        [***]

                                      42.

                      ***Confidential Treatment Requested
<PAGE>   46
                                   SCHEDULE IV

                             CERTAIN SIGNAL PROGRAMS

        1.     Molecular Targets

               [***]

        2.     Cell Based Targets

               [***]

        3.     Viral Targets

               [***]

                                      43.

                      ***Confidential Treatment Requested<PAGE>   1
                                                                   Exhibit 10.46

                                 PROMISSORY NOTE

$62,000.00                                                 San Diego, California
                                                                     May 8, 1998

        FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of SIGNAL PHARMACEUTICALS, INC., a California corporation (the
"Company"), 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 sum
of Sixty-Two Thousand Dollars ($62,000.00) together with interest accrued from
the date hereof on the unpaid principal at the rate of 5.69% 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, as follows:

                PRINCIPAL REPAYMENT. The outstanding principal amount hereunder
        shall be due and payable in full on May 8, 2003.

                INTEREST PAYMENTS. Interest shall be payable annually in arrears
        and shall be calculated on the basis of a 360-day year for the actual
        number of days elapsed;

provided, however, that in the event that the undersigned's employment by or
association with the Company is terminated for any reason prior to payment in
full of this Note, this Note shall be accelerated and all remaining unpaid
principal and interest shall become due and payable ninety (90) days after such
termination.

        If the undersigned fails to pay any of the principal and accrued
interest when due, the Company, at its sole option, shall have the right to
accelerate this Note, in which event the entire principal balance and all
accrued interest shall become immediately due and payable, and immediately
collectible by the Company pursuant to applicable law.

        This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.

        The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company (the "Pledged Shares"), and is subject to all of the terms
and provisions of the Stock Purchase Agreement and the Stock Pledge Agreement,
each of even date herewith between the undersigned and the Company.

        If the undersigned sells or transfers any of the Pledged Shares (whether
or not such sale or transfer is for consideration or for no consideration), this
Note shall be accelerated and all remaining unpaid principal and interest shall
become immediately due and payable after such sale or transfer.

                                       1.

<PAGE>   2
        The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.

        The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or demands
in connection with the delivery, acceptance, performance, default or endorsement
of this Note.

        The holder hereof shall be entitled to recover, and the undersigned
agrees to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.

        This Note shall be governed by, and construed, enforced and interpreted
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.

                                     Signed    /s/ ALAN J. LEWIS, PH.D.
                                            ------------------------------------
                                                  ALAN J. LEWIS, PH.D.

EXHIBIT A - Stock Pledge Agreement

                                       2.

<PAGE>   3
                                    EXHIBIT A

                             STOCK PLEDGE AGREEMENT

        THIS STOCK PLEDGE AGREEMENT ("Pledge Agreement") is made by ALAN J.
LEWIS PH.D., an individual residing at 6510 Monte Fuego, Rancho Santa Fe,
California 92067 ("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 has concurrently herewith executed that certain
Promissory Note (the "Note") in favor of Pledgee in the amount of Sixty-Two
Thousand Dollars ($62,000.00) in payment of the purchase price of Four Hundred
Twenty-Five Thousand (425,000) shares of the Common Stock of Pledgee; 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 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) Four Hundred Twenty-Five Thousand (425,000) shares of Common
Stock of Pledgee represented by Certificate No.(s) ____________ (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 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.

                                       1.
<PAGE>   4

        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
(except cash dividends other than liquidating 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 wise 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: (i) failure to keep or perform any of the terms or provisions
of this Pledge Agreement; (ii) failure to pay any installment of principal or
interest on the Note when due; (iii) the levy of any attachment, execution or
other process against the Pledged Collateral; or (iv) the insolvency, commission
of an act of bankruptcy, general assignment for the benefit of creditors, filing
of any petition in bankruptcy or for relief under the provisions of Title 11 of
the United States Code of, by, or against Pledgor.

        5. In the event of the nonpayment of any indebtedness when due, whether
by acceleration or otherwise, or upon the happening of any of the events
specified in the last preceding paragraph, 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

                                       2.

<PAGE>   5
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 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 charged against the
proceeds of sale as an expense of such sale. 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. Pledgee agrees that so long as no default exists under the Note or
hereunder, the Pledged Shares shall, upon the request of Pledgor, be released
from pledge as the indebtedness is paid. Such releases shall be at the rate of
one share for each fourteen cents ($0.14) of principal amount of indebtedness
paid. Release from pledge, however, shall not result in release from the

                                       3.

<PAGE>   6
provisions of those certain Joint Escrow Instructions, if any, of even date
herewith among the parties to this Pledge Agreement and the Escrow Agent named
therein.

        10. Pledgee may at any time deliver the Pledged Collateral or any part
thereof to Pledgor and the receipt of Pledgor shall be a complete and full
acquittance for the Pledged Collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.

        11. 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.

        12. 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.

        13. 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: May 8, 1998

PLEDGOR

 /s/ ALAN J. LEWIS, Ph.D.
-------------------------------
ALAN J. LEWIS, Ph.D.

                                       4.

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