Document:

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                                     ***Text Omitted and Filed Separately
                                        Confidential Treatment Requested
                                        Under 17 C.F.R. Sections 200.80, 200.83
                                        and 230.406

                                                                   EXHIBIT 10.43

================================================================================

                  COLLABORATIVE RESEARCH AND LICENSE AGREEMENT

                                     between

                           SIGNAL PHARMACEUTICAL, INC.

                                       and

                     THE DUPONT MERCK PHARMACEUTICAL COMPANY

================================================================================

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                  COLLABORATIVE RESEARCH AND LICENSE AGREEMENT

        THIS COLLABORATIVE RESEARCH AND LICENSE AGREEMENT (the "Agreement") is
made as of ___________, 1997 (the "Effective Date") by and between SIGNAL
PHARMACEUTICALS, INC., a Delaware corporation with its principal office at 5555
Oberlin Drive, San Diego, California 92121 ("SIGNAL") and THE DUPONT MERCK
PHARMACEUTICAL COMPANY, a general partnership organized and existing under the
laws of the State of Delaware and having its principal offices at 974 Centre
Road, Wilmington, Delaware 19807 ("DPM").

                                    RECITALS

        WHEREAS, SIGNAL is a biotechnology company engaged in identifying new
classes of small molecule drugs that regulate genes and the production of
disease-causing proteins;

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

        WHEREAS, SIGNAL and DPM wish to establish a collaborative relationship
to develop and commercialize novel products for the treatment and prevention of
human immunodeficiency virus ("HIV") and hepatitis C virus ("HCV");

        WHEREAS, DPM desires to obtain, and SIGNAL is willing to grant, an
option to expand the collaborative relationship to include the development and
commercialization of novel products for the treatment and prevention of [***];

        WHEREAS, it is recognized and acknowledged by SIGNAL that DPM has
carried out and will continue to carry out programs to discover, develop and
commercialize products for the treatment and prevention of HIV and HCV which are
outside of this collaboration; and

        WHEREAS, SIGNAL and DPM 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.

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                                    ARTICLE 1
                                   DEFINITIONS

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

        1.1     "Affiliate" means an individual, trust, business trust, joint
venture, partnership, corporation, association or any other entity which owns,
is owned by or is under common ownership with a party. For the purposes of this
definition, the term "owns" (including, with correlative meanings, the terms
"owned by" and "under common ownership with") as used with respect to any party,
shall mean the possession (directly or indirectly) of more than 50% of the
outstanding voting securities of a corporation or comparable equity interest in
any other type of entity.

        1.2     "Annual Research Plan" means the plan for conducting the
research activities under the Collaboration as described in Article 3 hereof.

        1.3     "Assay" means one or more of the following assays which are
described in Appendix 1 attached hereto, which have been developed or are to be
developed in HTS format under this Agreement in accordance with the Research
Plan: [***]

        1.4     "Assay Technology" means SIGNAL Technology necessary or useful
for performing the Assays.

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

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

        1.7     "Collaboration" means the activities of SIGNAL and DPM carried
out in performance of the Research Project under this Agreement.

        1.8     "Collaboration Know-How" means Know-How (i) arising from or in
connection with the conduct of the Collaboration under this Agreement in
accordance with the Research Plan and (ii) which is jointly developed by or
under the common Control of SIGNAL or one of its Affiliates, on the

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one hand, and DPM or one of its Affiliates, on the other hand.

        1.9     "Collaboration Patent Rights" means all Patent Rights that claim
or cover inventions (i) conceived of and reduced to practice jointly (as
determined in accordance with the rules of inventorship under United States
patent law) by employees or others acting on behalf of SIGNAL or one of its
Affiliates, on the one hand, and employees or others acting on behalf of DPM or
one of its Affiliates, on the other hand, in connection with activities
conducted pursuant to the Research Plan or (ii) which come under the common
Control of SIGNAL or one of its Affiliates, on the one hand, and DPM or one of
its Affiliates, on the other hand, during the Research Term and any Extended
Research Term and are necessary or appropriate for the full commercial
exploitation of the Field.

        1.10    "Collaboration Technology" means Collaboration Know-How and
Collaboration Patent Rights.

        1.11    "Combination Product" means a Product containing a Compound
which includes one or more additional active ingredients other than a Compound.

        1.12    "Compound" means any compound or any analog or derivative
thereof identified or selected for development by DPM or SIGNAL based upon use
of the Assays during, or otherwise in the course of and as a result of the
Collaboration during the Research Term and any Extended Research Term or by DPM
during the period of up to [***] thereafter and subject to Section 4.1.
It is to be understood that this definition of Compound excludes molecules or
compounds that are acquired or discovered by DPM other than by the use of Assays
(or target scopes) of this Agreement, but are subjected to an Assay for further
knowledge or characterization as a standard. A derivative Compound is a molecule
derived from and related to a screened compound identified or synthesized during
the Research Term and any Extended Research Term in the course of and as a
result of the Collaboration.

        1.13    "Confidential Information" means all information and materials
received by either party from the other party pursuant to this Agreement and all
information and materials developed in the course of the Collaboration,
including, without limitation, Know-How of each party and Collaboration
Know-How.

        1.14    "Control" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement
with or other arrangement with any Third Party.

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        1.15    "Distributor" shall mean a Third Party distributor engaged by
DPM to market and distribute Product in any Distributor Market.

        1.16    "Distributor Markets" means the markets in which DPM does not
have a field selling organization for direct sales and marketing, where DPM
markets Products through distributors. For purposes of this definition,
"Distributor Markets" shall not include [***]

        1.17    "Effective Date" means the date appearing in the first paragraph
of the Agreement.

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

        1.19    "Field" means the use of the Assays for the discovery,
identification and development of Compounds and Products for the treatment or
prevention of HIV and HCV and the use, manufacture, distribution, marketing and
sale of Compounds and Products for the treatment or prevention of HIV and HCV.
If DPM exercises the option set forth in Section 4.3, the definition of the
Field shall be expanded to include the discovery, identification and development
of Compounds and Products for the treatment or prevention of [***] and the use,
manufacture, distribution, marketing and sale of Compounds and Products for the
treatment or prevention of [***].

        1.20    "First Commercial Sale" of a Product means the first sale for
use or consumption of such Product in a country after required marketing and
pricing approval has been granted by the governing health regulatory authority
of such country. Sale to an Affiliate shall not constitute a First Commercial
Sale unless the Affiliate is the end user of the Product.

        1.21    "FTE" means a full time equivalent researcher employed by SIGNAL
or DPM and assigned to work on the Research Project with such time and effort to
constitute one researcher working on the Research Project on a full time basis
consistent with normal business and scientific practice (at least 40 hours per
week of dedicated effort; on an annual basis, at least 40 hours per week of
dedicated effort for at least 48 weeks (excluding official SIGNAL holidays) per
year).

        1.22    "HCV Constructs" mean collectively or individually
polynucleotide constructs, which are owned or Controlled by SIGNAL, and which
SIGNAL may now possess or acquire during the Research Term and any Extended
Research Term, containing HCV polynucleotide sequences, including but not
limited to those polynucleotide constructs listed in

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Appendix 2 hereto.

        1.23    "Hit" means any compound that demonstrates reproducible
significant activity in an Assay. The level of activity required to be
designated a Hit will be set by the RMC.

        1.24    "HTS" means high throughput screening.

        1.25    "IND" means an Investigational New Drug Application filed with
the FDA to commence human clinical testing of a Product, or the equivalent in
any other country or jurisdiction.

        1.26    "Know-How" means technical information and materials, including
without limitation, technology, data, cell lines, constructs, chemicals,
inventions (patentable or otherwise), practices, methods, knowledge, skill, and
experience relating to Compounds, Hits, Lead Compounds, Assays, and Products.

        1.27    "Lead Compound" means any Hit or any analog or derivative of a
Hit showing potential therapeutic activity in cellular or animal models in
follow-up testing after testing in an Assay and which is selected for
pre-clinical safety assessment testing. Lead Compounds will be selected by the
RMC as set forth in Section 2.1.

        1.28    "NDA" means a New Drug Application filed in the FDA to obtain
marketing approval for a Product, or the equivalent in any other country or
jurisdiction.

        1.29    "Net Sales" means the gross amounts invoiced for sales of
Compound or Product by DPM and its Affiliates to non-Affiliated Third Parties,
including but not limited to Distributors and Sublicensees, in bona fide,
arms-length transactions, less (to the extent actually incurred or reasonably
estimated and accrued in accordance with GAAP and to the extent not already
deducted in the amount invoiced): (a) trade and quantity discounts, (b) credits
or allowances upon claims, damaged goods, rejections or returns, including
recalls, (c) freight, postage, shipping and insurance charges for delivery of
Product, (d) custom duties, surcharges, sales or excise taxes and other
governmental charges (other than income taxes) incurred directly related to the
sale, (e) rebates, chargebacks and other amounts paid, credited or accrued, (f)
retroactive price reductions, (g) bad debt expense, and (h) amounts incurred
resulting from governmental mandated rebate programs.

        Sales of Products for use in clinical trials (including expanded access

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programs) prior to receipt of regulatory approval to market such Product shall
not be included in Net Sales.

        With respect to the sales of Combination Product, Net Sales shall be
calculated on the basis of the invoice price of a Product containing the same
weight of Compound sold without other active ingredients. In the event such
Compound is not sold without other active ingredients, Net Sales shall be
calculated by multiplying the amounts received by DPM or its Affiliates
attributable to Combination Products by the Combination Allocation Portion (as
defined below) attributable to such Combination Product. The "Combination
Allocation Portion," as used herein, shall mean that portion of any amounts
received by DPM or its Affiliates from the sale of any Combination Product that
results from multiplying the total amount received by DPM or its Affiliates from
such sale by a fraction, the numerator of which is the fair market value of the
Compound included in the Combination Product and the denominator of which is the
fair market value of such Compound and the fair market value of the products or
parts of such Combination Product which are not Compounds. Fair market value
shall be determined in good faith by DPM and SIGNAL either together or with a
mutually agreeable third party in the event that no market price is available.
In the event that the parties shall disagree regarding the fair market value
denomination, the parties shall resolve such dispute in accordance with Article
12 hereof.

        1.30    "Pass-Through Net Sales" means the gross amounts invoiced for
sales of Product by Distributors and Sublicensees to non-Affiliated Third
Parties, in bona fide, arms-length transactions, less deductions listed in the
[***] or other SIGNAL License Agreement. SIGNAL shall include in each SIGNAL
License Agreement entered into after the Effective Date a definition of Net
Sales and/or Pass-Through Net Sales that is consistent with the definition of
Net Sales in Section 1.29 above or as provided in the SIGNAL License Agreement
with [***] The purpose for such consistency being to prevent any obligation to
keep a multiplicity of books and records.

        1.31    "Patent Rights" means all rights under (a) patents (including
the inventor's certificates) that include one or more Valid Claims, including
without limitation any substitution, extension (including supplemental
protection certificate), registration, confirmation, reissue, continuation,
divisional, continuation-in-part, re-examination, renewal or the like, and (b)
pending applications for patents, including, without limitation, any
continuation, division or continuation-in-part thereof, and any provisional

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applications, which applications are listed and will be listed during the Term
of this Agreement in attached Schedule A and which are considered to be either
Collaboration Patent Rights or Signal Patent Rights.

        1.32    "Phase IIb" means such studies in humans of the safety, dose
ranging and efficacy of a Product designed to generate sufficient data to make a
decision about whether to commence a Pivotal Trial, as more specifically defined
by the rules and regulations of the FDA and corresponding rules and regulations
in other countries or jurisdictions.

        1.33    "Pivotal Trial" means a controlled study in humans on sufficient
numbers of patients designed to establish the efficacy and safety of a Product
which is prospectively designed to demonstrate statistically whether the Product
is safe and effective for use in a particular indication in a manner sufficient
to obtain full Regulatory Approval to market that Product.

        1.34    "Product" means any marketed product (a) containing a
formulation or dosage of a Compound; or (b) the manufacture, use or sale of
which is covered by one or more of SIGNAL Patent Rights, Collaboration Know-How
or Collaboration Patent Rights.

        1.35    "Regulatory Approval" means any approvals (including pricing and
reimbursement approvals), licenses, registrations or authorizations of any
national, supra-national, regional, state or local regulatory agency, department
or other governmental entity necessary for the manufacture, distribution, use
and sale of a Product in a regulatory jurisdiction. "Regulatory Approval" in the
U.S. means NDA approval.

        1.36    "Research Project" means the research activities under the
Collaboration carried out in accordance with the Research Plan as described in
Article 3 hereof.

        1.37    "Research Term" means the period beginning on the Effective Date
and ending on the third anniversary of the Effective Date; provided, however,
that the Research Term may be extended for up to three (3) additional one-year
periods ("Extended Research Term") at DPM's option upon written notice to SIGNAL
given no less than ninety (90) days prior to the expiration of the Research Term
or any extension thereof, as the case may be.

        1.38    "Research Year" means each twelve month period during the
Research Term and any Extended Research Term, with the first Research Year
beginning on the Effective Date.

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        1.39    "RMC" means the Research Management Committee established
pursuant to Section 2.1 hereof.

        1.40    "Royalty Term" means, in the case of any Product, in any
country, the period of time commencing on the First Commercial Sale and ending
upon the later of (a) 10 years from the date of First Commercial Sale in such
country, or (b) the expiration of the last to expire of the SIGNAL Patent Rights
and the Collaboration Patent Rights containing a Valid Claim covering such
Product in such country.

        1.41    "Signal Compound" means a compound contained in the Signal
Compound Library.

        1.42    "Signal Compound Library" means all compounds owned or
Controlled by SIGNAL which are available for screening in the Assays in
accordance with the terms and conditions of this Agreement, including but not
limited to the compounds and compound libraries identified in Appendix 3 hereto
(but excluding, for purposes of HIV and the [***] drug target, any compounds
licensed by SIGNAL from [***]).

        1.43    "SIGNAL Know-How" means all Know-How, which are owned or
Controlled by SIGNAL, which SIGNAL may now possess or acquire during the
Research Term and any Extended Research Term, which are necessary or useful for
DPM to utilize the Assays or in the discovery, development, manufacture,
marketing, use or sale of Compounds or Products.

        1.44    "Signal License Agreements" shall mean any license agreement
which SIGNAL has entered into as of the Effective Date pursuant to which SIGNAL
Controls Assay Technology, any part of the Signal Compound Library or any Signal
Compound or any such subsequent license agreement which SIGNAL has entered into
which is approved as a Signal License Agreement by the RMC after review and
approval by the Finance Division of DPM with respect to the definition of Net
Sales and for any payments which may be assumed by DPM for milestone and royalty
payments. These are listed in Appendix 5 and any subsequent such Agreements, if
any, will be added during the Research Term and any Extended Research Term.

        1.45    "SIGNAL Patent Rights" means the Patent Rights owned or
Controlled by SIGNAL, either solely or jointly with another party, which SIGNAL
may now possess or acquire in the future, which (i) are necessary or useful for
DPM to utilize the Assays or in the discovery, development, manufacture,
marketing, use or sale of Compounds or Products or (ii) which contains a claim
which would be infringed by a third party's

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manufacture, use, import or sale of any Compound or Product. These are listed in
Appendix 6 and will be added during the Research Term and any Extended Research
Term.

        1.46    "SIGNAL Technology" means the SIGNAL Patent Rights and the
SIGNAL Know-How.

        1.47    "Sublicense Territory" means all countries in which a license
has been granted to a Sublicensee, but shall specifically exclude the [***]
except with the prior approval of SIGNAL.

        1.48    "Sublicensee" means a Third Party to whom DPM has granted a
license or sublicense to develop, make, have made, use, offer for sale, sell and
import Products in the Field.

        1.49    "Sublicensing Revenue" means the amount actually paid to DPM by
a Sublicensee arising from the license or sublicense of the right to develop,
make, have made, use, offer for sale, sell and import Products in the Field.
Sublicensing Revenue shall include license fees, royalties, and any other
payments with respect to the SIGNAL Technology or the Collaboration Technology
but shall not include any payments tied to the provision of goods and services
by DPM to such Sublicensee to compensate DPM for the provision of such goods and
services.

        1.50    "Term" means the period commencing on the Effective Date and
ending on the Termination Date.

        1.51    "Termination Date" means the last date on which DPM is obligated
to make any payments to SIGNAL pursuant to Section 5.

        1.52    "Third Party" means any entity other than SIGNAL or DPM or an
Affiliate of SIGNAL or DPM.

        1.53    "Valid Claim" means a claim of an issued patent or pending
patent application which claim has not lapsed, been canceled or become abandoned
and has not been declared invalid by an unreversed and unappealable decision or
judgment of a court or other appropriate body of competent jurisdiction, and
which has not been admitted to be invalid or unenforceable through reissue or
disclaimer.

        1.54    "Viral Target" means the viral target of an Assay, HIV, HCV
[***] as the case may be, as specified in Appendix 1 hereto.

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                                    ARTICLE 2
                          RESEARCH MANAGEMENT COMMITTEE

        2.1     Research Management Committee. The Collaboration will be managed
by the RMC, which will be comprised of three representatives appointed by SIGNAL
and three representatives appointed by DPM. The RMC shall be co-chaired jointly
by a representative of each party. Either party may appoint substitute or
replacement members of the RMC to serve as their representatives upon notice to
the other party. The initial members of the RMC shall be appointed by the
parties within thirty (30) days following the Effective Date. The RMC shall
oversee the principal research aspects of the Collaboration; and DPM shall be
solely responsible for development, manufacturing and marketing activities. The
RMC shall have the responsibility and authority to (a) set and modify research
goals including recommendations to pursue different assays, (b) assign tasks and
responsibilities under the Research Plan to the parties, (c) set criteria for
identification of Lead Compounds and Hits, (d) recommend Hits to be developed as
Lead Compounds and/or to be chemically modified for development as Lead
Compounds, (e) monitor the progress of the Collaboration and (f) review and
modify the Research Plan, as it shall deem appropriate to achieve the parties'
objectives under this Agreement.

        2.2     Meetings. The RMC shall meet in-person or by teleconference on a
Calendar Quarter basis or more frequently as may be agreed upon, to review the
progress of the parties in performing the Research Project, with each party to
bear all travel and related costs for its representatives.

        2.3     Decision-Making Process. Each member of the RMC shall have one
vote, and decisions by the RMC shall be made by a majority vote. Any
disagreement among members of the RMC will be resolved within the RMC based on
the efficient achievement of the objectives of this Agreement. Any disagreement
which cannot be resolved by a majority vote of the RMC shall be referred to the
appropriate officers of SIGNAL and DPM for resolution under Article 12. It is
the intent of the parties to resolve issues through the RMC whenever possible
and to refer issues to the officers of SIGNAL and DPM only when resolution
through the RMC cannot be achieved.

                                    ARTICLE 3
                            CONDUCT OF COLLABORATION

        3.1     Exclusivity. All Compounds discovered or licensed by either DPM
or Signal shall be developed and commercialized for use in the Field pursuant to
and subject to the provisions of this Agreement. During the

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Research Term and any Extended Research Term, and for a period of two (2) years
following the Research Term or any Extended Research Term, DPM and its
Affiliates, shall not work independently of SIGNAL, either alone or with any
Third Party, and shall not enter into any negotiations or agreements with any
Third Party, with respect to the use of the Assays. During the Research Term and
any Extended Research Term and for a period of two (2) years following the
Research Term or any Extended Research Term, SIGNAL and its Affiliates, shall
not work independently of DPM, either alone or with any Third Party, and shall
not enter into any negotiations or agreements with any Third Party, with respect
to the Field. This Section 3.1 shall not in any way limit or modify the licenses
granted to DPM by SIGNAL under this Agreement.

        3.2     Objectives of Collaboration. The objective of the Collaboration
is to identify Hits and Lead Compounds that are suitable for development by DPM
as Products for commercialization in the Field. DPM shall be responsible for the
development of Products, including all preclinical and clinical testing,
obtaining Regulatory Approval for Products, manufacturing of Compounds and
Products, and the commercialization of Products in the Field. The parties agree
that the Collaboration shall be conducted in accordance with the initial
research plan attached hereto as Appendix 2, its modifications, and each Annual
Research Plan. The parties expect that: (i) initially, SIGNAL will be primarily
responsible for screening the compound libraries of each party using Assays
developed or to be developed primarily by SIGNAL, which responsibility may
thereafter be shifted in whole or in part to DPM in the RMC's discretion; (ii)
SIGNAL will initially have primary responsibility for follow-up and confirmation
of any Hits in HCV Assays; (iii) DPM will have primary responsibility for
follow-up and confirmation of any Hits in HIV Assays; (iv) the parties will
share responsibility for assessment of antiviral activity of Hits; and (v) DPM
will have primary responsibility for in vivo testing of Compounds and any
follow-up medicinal chemistry.

        3.3     Annual Research Plan. The Research Project will be conducted
under an Annual Research Plan which describes the work to be pursued by SIGNAL
and DPM during the Research Year. The first Annual Research Plan shall be
prepared by the RMC within forty-five (45) days after the Effective Date.
Subsequent Annual Research Plans shall be prepared by the RMC, not later than
sixty (60) days prior to the start of each Research Year. The Annual Research
Plan shall outline the work on the Research Project proposed to be carried out
during the subsequent Research Year and the number of FTEs to be assigned to
such work.

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        3.4     Research Efforts. Each party shall use good faith commercially
reasonable and diligent efforts (as defined below) to perform its
responsibilities under the Annual Research Plan. In particular, DPM will provide
funding to SIGNAL pursuant to Section 5.3 in each Research Year during the
Research Term and any Extended Research Term to support [***] qualified FTEs
at SIGNAL specified in the Annual Research Plan, unless modified by the RMC
during the Research Term and any Extended Research Term which funding by DPM
shall be contingent upon SIGNAL providing and retaining such qualified FTEs. In
addition, DPM will commit the number(s) of appropriately qualified FTEs to the
performance of DPM's responsibilities as specified in the Annual Research Plan.
Any modification in such FTE commitments by the parties shall be made by the RMC
in accordance with Article 2. As used herein, the term "commercially reasonable
and diligent efforts" will mean, unless the parties agree in writing otherwise,
those efforts consistent with the exercise of prudent scientific and business
judgment in accordance with industry standards, as applied to other products of
similar scientific and commercial potential.

                The Research Project will be conducted in good scientific
manner, and in compliance with all applicable good laboratory practices, and
applicable legal requirements, to attempt to achieve efficiently and
expeditiously the objectives of the Collaboration. Throughout the Research Term
and any Extended Research Term, SIGNAL shall assign a balanced number of FTE
Ph.D. or equivalent scientists and other technical support personnel as
specified in the Annual Research Plan to perform the work set forth in each
Annual Research Plan. The name, curriculum vitae, and percentage of time devoted
to working on the Research Project for each scientist comprising [***] potential
FTE scientists shall be provided to DPM within sixty (60) days of the Effective
Date and not later than sixty (60) days prior to the start of each subsequent
Research Year. The mixture of skills and levels of such FTEs shall be
appropriate to the scientific objectives of the Research Project. The scientists
comprising such [***] FTEs and their percentage of time devoted to working on
the Research Project shall be identified in each Annual Research Plan. The
selection of such scientists shall be communicated to DPM at the same time
offers of employment are made.

        3.5     Availability of Resources. Each party will maintain
laboratories, offices and all other facilities at its own expense and risk
necessary to carry out its responsibilities under the Collaboration pursuant to
the Annual Research Plan. In particular, within ninety (90) days following the
Effective Date, SIGNAL will have established, and will thereafter during the
Research Term and any Extended Research Term

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maintain, a non-shared BSL-2 laboratory space for conducting antiviral work.
Each party agrees to make its employees and non-employee consultants reasonably
available at their respective places of employment to consult with the other
party on issues arising during the Collaboration and in connection with any
request from any regulatory agency, including, without limitation, regulatory,
scientific, technical and clinical testing issues.

        3.6     Transfer of Technical Information, Know-How and Materials. As
the Assays are established and as improvements to the Assays are made, SIGNAL
shall provide DPM with all technical information, Know-How and materials
necessary to enable DPM to utilize such Assays.

        Within thirty (30) days following the Effective Date, SIGNAL shall
provide DPM with access to all HCV Constructs owned or Controlled by SIGNAL as
of the Effective Date, including those listed in Appendix 2 hereof.

        3.7     Screening of Signal Compounds in the Assays. As the Assays are
developed and validated, SIGNAL shall promptly proceed to diligently screen in
the Assays such Signal Compounds which exist prior to the Effective Date or are
synthesized or acquired by SIGNAL during the Research Term and any Extended
Research Term as determined by the RMC. The results of such testing and the
structure of any Hits shall be promptly disclosed to DPM as such results are
obtained. Likewise, DPM shall promptly disclose to SIGNAL the results of its
biologic screening activities during the Research Term and any Extended Research
Term.

        3.8     Disclosure; Reports. SIGNAL will make available and disclose to
DPM promptly after the Effective Date all Signal Know-How known as of the
Effective Date. Each party will make available and disclose to the other party
all SIGNAL Know-How or Collaboration Know-How, as applicable, learned, acquired
or discovered by such party at any time on or before the end of the Research
Term and any Extended Research Term, as promptly as is reasonably practicable
after such Know-How is learned. In addition, each party shall inform the other
promptly upon identifying any Hits in its performance of screening activities
pursuant to the Research Plan and shall provide such additional information with
respect thereto as the other party or the RMC shall reasonably request. The
parties will exchange at a minimum quarterly written reports (with copies to the
RMC) presenting a meaningful summary of the work performed on the Research
Project. In addition, on reasonable request by a party, the other party will
make presentations of its activities under this Agreement to inform such party
of the details of the work done under this Agreement. Know-How and other
information regarding the Research Project disclosed by one party to the

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other party pursuant hereto may be used only in accordance with the rights
granted under this Agreement.

        Within thirty (30) days following the end of each Calendar Quarter,
SIGNAL and DPM shall each provide to the RMC a written report summarizing in
reasonable detail the work performed by it under the Research Project during the
preceding Calendar Quarter. Subsequent to the termination or expiration of the
Research Term and any Extended Research Term, DPM shall provide SIGNAL with
quarterly reports concerning the status of its development activities concerning
the commercialization of Products, including but not limited to the results of
preclinical and clinical studies.

        3.9     Records. SIGNAL and DPM shall each maintain records in
sufficient detail and in good scientific manner appropriate for patent purposes
and as will properly reflect all work done and results achieved in the
performance of the Research Project (including all data in the form required to
be maintained under any applicable governmental regulations). Such records shall
include books, records, reports, research notes, charts, graphs, comments,
computations, analyses, recordings, photographs, computer programs and
documentation thereof, computer information storage means, samples of materials
and other graphic or written data generated in connection with the Research
Project. SIGNAL and DPM shall each provide the other the right to inspect such
records, and shall provide copies of all requested records, to the extent
reasonably required for the performance of the requesting party's obligations
under this Agreement; provided, however, that each party shall maintain such
records and the information of the other contained therein in confidence in
accordance with Article 8 below and shall not use such records or information
except to the extent otherwise permitted by this Agreement.

        3.10    DPM Compounds. To further the objectives of the Collaboration,
DPM shall transfer to SIGNAL certain DPM compounds for testing by SIGNAL in the
Assays in accordance with the applicable Annual Research Plan. Such compounds
provided or otherwise disclosed by DPM to SIGNAL under this Agreement are
referred to herein as "DPM Compounds". Such DPM Compounds and all information
relating to such DPM Compounds and information and materials derived from the
use of such DPM Compounds will be used by SIGNAL solely for the testing of the
DPM Compounds in the Assays as specified in the Annual Research Plan and shall
be used for no other purpose. SIGNAL will promptly provide to DPM all data from
such testing of DPM Compounds as such data is developed. Upon expiration or
termination of the Research Project, SIGNAL shall, upon the request of

<PAGE>   16
                                      -16-

DPM, return or destroy all compounds and other materials provided to SIGNAL by
DPM in the performance of the Research Project. DPM shall at all times own all
rights to the DPM Compounds it provides or discloses to SIGNAL hereunder,
including without limitation, all rights with respect to the manufacture, use or
sale of such DPM Compounds. Accordingly, SIGNAL agrees to: (i) disclose to DPM
any inventions it conceives or makes covering the manufacture, use, or sale of
DPM Compounds; (ii) assign to DPM all patent rights of SIGNAL covering the
manufacture, use, or sale of DPM Compounds; (iii) execute any necessary papers
and otherwise reasonably cooperate with DPM in securing such patent rights.
Anything to the contrary not withstanding, any such patent rights conveyed by
SIGNAL to DPM under this Section 3.10 shall be included in Collaboration Patent
Rights as set forth in (ii) of Section 1.9.

        3.11    Subcontracts. Notwithstanding Section 3.1, subject to the
provisions of Article 8 and subject to the prior written approval of the RMC,
SIGNAL and DPM may subcontract portions of the Research Project to be performed
by them in the normal course of their business to a Third Party upon prior
written notice to the other; provided, however, that such Third Party has
entered into an appropriate confidentiality agreement with SIGNAL and/or DPM
obligating such Third Party to be bound by the obligations contained in this
Agreement.

                                    ARTICLE 4
                                GRANT OF LICENSES

        4.1     License Under Assay Technology. Subject to the terms and
conditions of this Agreement and during the Research Term and Extended Research
Term, and for a period of two (2) years following the Research Term and any
Extended Research Term, Signal grants to DPM a worldwide, exclusive (except as
to SIGNAL, as described below) license under the Assay Technology to conduct
screening of compounds in the Assays in the Field, including the right to grant
sublicenses solely to its Affiliates for such purposes. Notwithstanding the
preceding sentence, SIGNAL retains the right under the Assay Technology solely
to perform its obligations under this Agreement, including but not limited to
conducting screening of DPM Compounds and Signal Compound Libraries as
contemplated by and in accordance with the Research Plan, including the right to
grant sublicenses solely to its Affiliates for such purposes.

        Subject to the terms and conditions of this Agreement, during the [***]
period after the Research Term and any Extended Research Term ("Post Research
Term"), SIGNAL shall have the right to conduct screening of Signal Compound
Libraries in the Assays. Any compound

<PAGE>   17
                                      -17-

identified by DPM or by SIGNAL with the acceptance of DPM based upon use of the
Assays during such Post Research Term shall be a Compound subject to all of the
terms and conditions of this Agreement. Any such Compound identified by SIGNAL
or DPM during such Post Research Term shall be disclosed to the other party at
the time such Compound is identified.

        For up to a [***] period after the Post Research Term referred to in the
preceding paragraph DPM will continue to pay for Compounds first identified,
continued or selected for development by DPM based upon use of the Assays during
or otherwise in the course of and as a result of the Collaboration as long as
the Assays are not in the public domain to be used by independent Third Parties.
During this additional extended period, the milestone and royalty payments set
forth in Sections 5.4.3, 5.4.4, 5.4.5 and 5.5 shall be equal to the amounts set
forth therein multiplied by:

        [***] if such Compound is identified within the [***] after expiration
        of the Post Research Term;

        [***] if such Compound is identified between [***] after the expiration
        of the Post Research Term.

        After expiration of the Post Research Term, DPM has a non-exclusive,
fully paid-up license under the Assay Technology.

        4.2     License Under Signal Technology and Collaboration Technology.
Subject to the terms and conditions of this Agreement, particularly Section 5.8,
SIGNAL hereby grants to DPM a worldwide, exclusive, royalty-bearing license
during the Royalty Term, with right to sublicense, under the SIGNAL Technology
and the Collaboration Technology to develop, make, have made, use, offer for
sale, sell, and import Compounds and Products in the Field, including the right
to grant sublicenses to Affiliates and Sublicensees.

        DPM shall diligently pursue development of Products. If DPM ceases to
pursue diligently development and commercialization of at least one Product
during or subsequent to the Research Term, SIGNAL shall have the right to
terminate the license granted to DPM hereunder on a Product by Product basis in
the event SIGNAL disagrees with DPM on the reasons for ceasing development of
such Product. Upon termination of such license for any such terminated Product,
SIGNAL shall receive an exclusive license, with the right to grant sublicenses,
to all Collaboration Technology for such terminated Product and to

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<PAGE>   18
                                      -18-

make, have made, use, offer for sale, sell or import all Lead Compounds selected
from DPM's compound library relating thereto in the Field on terms and
conditions to be negotiated. In addition, if a compound is selected as a Lead
Compound from the SIGNAL Compound Library and DPM ceases to pursue diligently
development and commercialization of such compound, all rights to such Lead
Compound shall revert to SIGNAL.

        4.3     [***] Option. During the period of eight (8) months following
the Effective Date [***], DPM shall have the option, upon commitment by DPM to
fund [***] additional SIGNAL FTEs for the duration of the Research Term and any
Extended Research Term, to expand the Collaboration, the definition of the Field
to include [***], and the definition of Assays to the [***] as set forth in
Appendix 1 hereto. In the event that DPM has not exercised such option by
providing notice to SIGNAL of its desire to exercise such option prior to the
expiration of the [***], then SIGNAL shall thereafter be free to license such
assays to a Third Party. If DPM exercises such option, DPM shall be responsible
for all milestone, royalty and other payments due under any SIGNAL License
Agreement with respect to any [***]

        4.4     Sublicenses. DPM shall notify any permitted Sublicensee
hereunder of all rights and obligations of such party under this Agreement
licensed to such Sublicensee and require such Sublicensee to be bound by all of
the terms and conditions of this Agreement. Upon termination of this Agreement
by DPM pursuant to Section 10.2, no existing sublicenses shall be affected by
such termination as long as such sublicense is in compliance with all of the
terms and conditions of this Agreement, and all such sublicenses shall remain in
effect according to their terms shall be either (a) assigned to SIGNAL, if
acceptable to SIGNAL, or (b) continue as Sublicensees of DPM following such
termination.

        4.5     No Other License. No right or license under any patent or patent
application is granted by DPM or SIGNAL under this Agreement, except as
specifically and expressly set forth herein.

        4.6     Limitation on Right to Sublicense. DPM agrees not to sublicense
rights granted hereunder to either Merck & Company or E.I. duPont deNemours &
Company ("Parents," which term shall include any entity in which either Parent
has a controlling interest as defined below) without the written consent of
SIGNAL, such consent not to be unreasonably withheld. In the event DPM decides
to

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<PAGE>   19
                                      -19-

sublicense rights granted hereunder to a Parent, then DPM agrees it will do so
only under terms and conditions substantially the same as those it receives
through arms length negotiation with an independent third party. DPM agrees not
to sublicense rights granted hereunder to non-Affiliates in which DPM has a
controlling interest without the written consent of SIGNAL, such consent not to
be unreasonably withheld. For the purposes of this Section 4.6, an entity shall
be regarded as in DPM's control or a Parent's control if DPM or such Parent owns
or directly or indirectly controls more than twenty percent (20%) of the voting
stock or other ownership interest of the entity, or has the power to elect or
appoint more than twenty percent (20%) of the members of the governing body of
the entity. There shall be no other limitation on DPM's right to sublicense
except as expressed in this Section 4.6. DPM may sublicense its Affiliates
without SIGNAL's consent.

                                    ARTICLE 5
                               PAYMENT OBLIGATIONS

        5.1     License Fee. In partial consideration of the grant of the
licenses set forth in Article 4 above, DPM agrees to pay to SIGNAL within ten
(10) days of the Effective Date a one-time, non-refundable fee of $1.0 million.
In addition, DPM shall pay SIGNAL the amount of [***] within ten (10) days of
its receipt of the HCV Constructs as set forth under Section 3.6 hereof.

        5.2     Equity Investment. In the event that, at any time during the
Research Term, SIGNAL completes an initial public offering of its Common Stock
("IPO"), DPM shall, as part of the IPO, purchase $2.0 million of shares of
Common Stock of SIGNAL in a private placement completed simultaneously with the
IPO and subject to Rule 144 of the Securities Act at a price per share equal to
the share price to the public in the IPO. Such equity investment shall be made
pursuant to a Stock Purchase Agreement substantially in the form attached hereto
as Appendix 7 (the "Stock Purchase Agreement").

        5.3     Research Funding. DPM agrees to fund the Research Project at
SIGNAL, during the Research Term and any Extended Research Term on a fully
allocated FTE basis in an amount equal to [***] per FTE per year in accordance
with the FTE requirements set forth in the Annual Research Plan. Such amount
shall be payable in advance in four quarterly installments during each Calendar
Year on or before the end of the Calendar Quarter. Any payment for a portion of
a quarterly period shall

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<PAGE>   20
                                      -20-

be made on a pro rata basis. The first such payment shall be made within ten
(10) days the Effective Date. Such annual funding shall be reevaluated annually
and adjusted in proportion to the percentage increase in the Consumer Price
Index. Except as provided in this Section 5.3, or as may be agreed from time to
time by the parties in writing, each of SIGNAL and DPM will bear all of its own
expenses incurred in connection with the Collaboration. Research funding by DPM
shall be contingent upon SIGNAL providing and retaining the number of qualified
FTEs set forth in Section 3.3 and 3.4 (or adjusted for any shortfall on a
prorata basis), the applicable Annual Research Plan and SIGNAL using good faith
commercially reasonable and diligent efforts to achieve the goals of the Annual
Research Plan.

        5.4     Milestone Payments. Within thirty (30) days after achievement of
each of the milestone events set forth below, subject to the terms and
conditions of this Agreement, DPM shall pay to SIGNAL the indicated
nonrefundable milestone payment, in cash or as an equity investment, as the case
may be, set forth below.

                5.4.1   [***]

                5.4.2   [***]

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<PAGE>   21
                                      -21-

                5.4.3   Milestone Payments for HIV.

                (a)     For a Compound in each Viral Target developed for the
treatment or prevention of HIV, DPM shall pay to SIGNAL:

                [***]

                For such Compounds developed for the prevention or treatment of
HIV infection, the milestone payments above shall be paid only [***]

                (b)     For each subsequent new Compound for which Regulatory
Approval is obtained for the prevention or treatment of HIV infection, DPM will
pay milestone payments not to exceed [***] as follows:

                        (i)     [***]

                        (ii)    [***]

        5.4.4   Milestone Payments for HCV.

                (a)     For a Compound in each Viral Target developed for the
treatment or prevention of HCV, DPM shall pay to SIGNAL:

                        (i)     [***]

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<PAGE>   22
                                      -22-

                        (ii)    [***]

                        (iii)   [***]

                        (iv)    [***]

                For such Compounds developed for the prevention or treatment of
HCV infection, the milestone payments above shall be paid only once upon the
first occurrence of such milestone event.

                (b)     For each subsequent new Compound for which Regulatory
Approval is obtained for the prevention or treatment of HCV infection, DPM will
pay milestone payments not to exceed [***] as follows:

                        (i)     [***]

                        (ii)    [***]

                5.4.5   Milestone Payments for [***]. In the event that DPM
exercises its option with respect to [***] and the [***] are included in the
definition of Assays hereunder, DPM shall pay the following milestone payments.

                (a)     For a Compound in each Viral Target developed for the
treatment or prevention of [***], DPM shall pay to SIGNAL:

                        (i)     [***]

                        (ii)    [***]

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<PAGE>   23
                                      -23-

                        (iii)   [***]

                        (iv)    [***]

                For such Compounds developed for the prevention or treatment of
[***], the milestone payments above shall be paid only once upon the first
occurrence of such milestone event.

                (b)     For each subsequent new Compound for which Regulatory
Approval is obtained for the prevention or treatment of [***], DPM will pay
milestone payments not to exceed [***] as follows:

                        [***]

        5.5     Royalty Payments. Subject to the terms and conditions of this
Agreement, particularly Section 5.5.4, DPM shall pay to SIGNAL a royalty on Net
Sales of Product as set forth below.

                5.5.1   Royalty on Products for HIV.

                (a)     DPM shall pay to SIGNAL the following royalty on Net
Sales of Products for the treatment or prevention of HIV as follows:

                        (i)     [***] of the aggregate annual Net Sales of such
Product for aggregate annual Net Sales of such Product less than [***];

                        (ii)    [***] of the aggregate annual Net Sales of such
Product for aggregate annual Net Sales of such Product between [***] and [***]

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<PAGE>   24
                                      -24-

                        (iii)   [***] of the aggregate annual Net Sales of such
Product for aggregate annual Net Sales of such Product between [***] and [***];
and

                        (iv)    [***] of the aggregate annual Net Sales of such
Product for aggregate annual Net Sales of such Product which exceed [***].

                5.5.2   Royalty on Products for HCV.

                (a)     DPM shall pay to SIGNAL the following royalty on Net
Sales of Products for the treatment or prevention of HCV as follows:

                        (i)     [***] of the aggregate annual Net Sales of such
Product for aggregate annual Net Sales of such Product less than [***];

                        (ii)    [***] of the aggregate annual Net Sales of such
Product for aggregate annual Net Sales of such Product between [***] and [***];

                        (iii)   [***] of the aggregate annual Net Sales of such
Product for aggregate annual Net Sales of such Product between [***] and [***];
and

                        (iv)    [***] of the aggregate annual Net Sales of such
Product for aggregate annual Net Sales of such Product which exceed [***].

                5.5.3   Royalty on Products for [***].

                (a)     In the event that DPM exercises its option with respect
to [***] and the [***] Assays are included in the definition of Assays
hereunder, DPM shall pay to SIGNAL the following royalty on Net Sales of
Products for the treatment or prevention of [***] as follows:

                        (i)     [***] of the aggregate annual Net Sales of such
Product for aggregate annual Net Sales of such Product less than [***];

                        (ii)    [***] of the aggregate annual Net Sales of such

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<PAGE>   25
                                      -25-

Product for aggregate annual Net Sales of such Product between [***] and [***];

                        (iii)   [***] of the aggregate annual Net Sales of such
Product for aggregate annual Net Sales of such Product between [***] and
[***]; and

                        (iv)    [***] of the aggregate annual Net Sales of such
Product for aggregate annual Net Sales of such Product which exceed [***].

                5.5.4   With respect to each Product such royalty payments shall
be payable on a country-by-country basis during the Royalty Term for such
Product in such country.

                5.5.5   The royalties payable hereunder shall be subject to the
following conditions:

        (i)     subject to 5.5.6 and 5.5.7, only one royalty shall be due with
        respect to the same unit of Product;

        (ii)    that no royalties shall be due upon the sale or other transfer
        among DPM and its Affiliates, but in such cases the royalty shall be due
        and calculated upon DPM's or its Affiliate's Net Sales of Product to the
        first independent third party;

        (iii)   no royalties shall accrue on the disposition of Product in
        reasonable quantities by DPM or its Affiliates as bona fide samples or
        as donations to non-profit institutions or government agencies for
        non-commercial purposes;

        (iv)    if a compulsory license is granted with respect to Product in
        any country with a royalty rate lower than the royalty rate provided
        above, then the royalty rate to be paid by DPM shall be [***]; and

        (v)     notwithstanding the above royalty rates, upon DPM's request, the
        parties agree to discuss in good faith a reduction (without any
        obligation to agree to such a reduction) of such royalty rate in any

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<PAGE>   26
                                      -26-

        given country in the event the level of development, patent protection
        or general commercial environment affects the commercial viability of
        the Product under such royalty rate.

                5.5.6   Sales by Distributors in Distributor Markets. In the
case of sales of Product by any Distributor in any Distributor Market, to the
extent that SIGNAL is obligated under any Signal License Agreement to pay
royalty payments on such sales of Product by Distributors in Distributor
Markets, then, in addition to any royalty amounts payable to SIGNAL under
Section 5.5.1, 5.5.2 or 5.5.3, DPM shall pay to SIGNAL an amount equal to the
amount SIGNAL is obligated to pay and actually pays to its licensors with
respect to such Distributor sales under such Signal License Agreement, provided
however, that such amount payable by DPM to SIGNAL under this Section 5.5.6
shall in no event exceed [***] of the applicable annual Pass-Through Net Sales
of Product by such Distributor. In no event, however, shall the total royalties
paid to SIGNAL under this Section 5.5.6 be higher than what they would have been
if calculated on sales to the ultimate third party as set forth in Sections
5.5.1, 5.5.2, and 5.5.3 as if DPM marketed the Product to the ultimate third
party itself rather than through a Distributor. See Appendix 4 for example
calculations.

                5.5.7   Sales by Sublicensees.

                (a)     In the event that DPM licenses or sublicenses the right
to sell Product to a Sublicensee and DPM does not supply and sell Compound or
Product to such Sublicensee, then DPM shall pay to SIGNAL [***] of all
Sublicensing Revenue that DPM receives from such Sublicensee.

                (b)     In the event that DPM licenses or sublicenses the right
to sell Product to a Sublicensee and DPM supplies and sells Compound or Product
to such Sublicensee, then the term "Net Sales" in Section 5.5.1, 5.5.2 and 5.5.3
with respect to such Compound or Product sold by DPM to such Sublicensee shall
include any payments received by DPM from such Sublicensee based on sales of
Product by such Sublicensee.

                (c)     To the extent that SIGNAL is obligated under any Signal
License Agreement to pay royalty payments on sales of Product by any
Sublicensee, then, in addition to any royalty amounts payable to SIGNAL under
Section 5.5.1, 5.5.2, 5.5.3, 5.5.7(a) or 5.5.7(b), DPM shall pay to SIGNAL an
amount equal to the amount SIGNAL is obligated to pay and actually pays to its
licensors with respect to such Sublicensee

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<PAGE>   27
                                      -27-

sales under such Signal License Agreement, provided however, that such amount
payable by DPM to SIGNAL under this Section 5.5.7 shall in no event exceed [***]
based on sales of Product by such Sublicensee. In no event, however, shall the
total royalties paid to SIGNAL under this Section 5.5.7 be higher than what they
would have been if calculated on sales to the ultimate third party as set forth
in Sections 5.5.1, 5.5.2, and 5.5.3 as if DPM marketed the Product to the
ultimate third party itself rather than through a Sublicensee. See Appendix 4
for example calculations.

        5.6     Signal License Agreements. Unless otherwise specified in this
Agreement SIGNAL shall be responsible for all payment obligations, costs and
expenses with respect to the Signal License Agreements, including but not
limited to, any upfront payments, license maintenance fees, milestone payments,
royalty payments and legal fees and disbursements.

        5.7     Third Party Patents. If DPM in its reasonable judgment and after
consultation with SIGNAL is required to obtain a license from a non-Affiliated
third party under a valid claim of a dominating patent in order to import,
manufacture, use or sell a Product or Compound, and to pay a royalty under such
license, and the infringement of such patent cannot reasonably be avoided by
DPM, the reasonableness of which shall be determined mutually by DPM and SIGNAL,
DPM's obligation to pay royalties under Section 5.5 shall be reduced by [***]
the amount of the royalty actually paid to such third party, provided, however,
that the royalties payable under Section 5.5 shall not be reduced in any event
below [***] of the amounts paid according to Section 5.5. In addition, if DPM is
required to pay up-front payments and/or milestone payments in consideration for
such license, then the milestone payments under Section 5.4 shall be reduced by
[***] the amount of the up-front payments and milestone payments paid to such
third party, provided, however, that the amount of such up-front payments and
milestone payments paid to such third party shall not be reduced in any event
below [***] of the amounts set forth in Section 5.4.

        5.8     Paid-up License. For each country, upon expiration of DPM's
obligation to pay royalties hereunder with respect to a Product, DPM shall have
a fully paid-up, non-exclusive license under any Signal Know-How or Signal
Patent Rights, to make, have made, use, sell, offer for sale and import the
applicable Product in that country.

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<PAGE>   28
                                      -28-

                                    ARTICLE 6
                            PAYMENTS; RECORDS; AUDITS

        6.1     Payment; Reports. Royalty payments and reports for the sale of
Products shall be calculated and reported for each Calendar Quarter. All royalty
payments due to SIGNAL under this Agreement shall be paid within sixty (60) days
of the end of each Calendar Quarter, unless otherwise specifically provided
herein. Each payment of royalties shall be accompanied by a report of Net Sales
of Products in sufficient detail to permit confirmation of the accuracy of the
royalty payment made, including, without limitation, the number of Products
sold, the gross sales and Net Sales of Products, the royalties, in U.S. dollars,
payable, the method used to calculate the royalty and the exchange rates used.

        6.2     Exchange Rate; Manner and Place of Payment. All payments
hereunder shall be payable in U.S. dollars. With respect to each quarter, for
countries other than the United States, whenever conversion of payments from any
foreign currency shall be required, such conversion shall be made at the rate of
exchange reported in The Wall Street Journal on the last business day of the
applicable reporting period. All payments owed under this Agreement shall be
made by wire transfer, unless otherwise specified by SIGNAL.

        6.3     Late Payments. In the event that any payment, including royalty,
milestone and research payments, due hereunder is not made when due, the payment
shall accrue interest from the date due at the rate of 1.5% per month; provided,
however, that in no event shall such rate exceed the maximum legal annual
interest rate. The payment of such interest shall not limit SIGNAL from
exercising any other rights it may have as a consequence of the lateness of any
payment.

        6.4     Records and Audits. During the Term and for a period of two (2)
years thereafter, DPM shall be obligated to keep complete and accurate records
pertaining to the development and sale or other disposition of Products in
sufficient detail to permit SIGNAL to confirm the accuracy of all payments due
hereunder. SIGNAL shall have the right to cause an independent, certified public
accountant of nationally recognized standing reasonably acceptable to DPM to
audit such records to confirm Net Sales and royalty and other payments for the
preceding year. Such audits may be exercised during normal business hours once a
year upon at least thirty (30) working days' prior written notice to DPM. SIGNAL
shall bear the full cost of such audit unless such audit correctly discloses a
variance of more than 10% from the amount of the Net Sales or royalties or other
payments

<PAGE>   29
                                      -29-

due under this Agreement. In such case, DPM shall bear the full cost of such
audit. DPM's obligation to retain such records shall expire two (2) years after
a payment has been made. DPM shall include in each sublicense granted by it
pursuant to this Agreement and in each distribution agreement with a Distributor
in a Distributor Market, a provision requiring the Sublicensee and the
Distributor to make reports to DPM, to keep and maintain books and records of
sales made pursuant to such sublicense and distribution agreement, and to grant
access to such books and records by DPM's independent accountant to the same
extent and under the same obligations as required by DPM under this Agreement.

        SIGNAL shall treat all financial information subject to review under
this Section in accordance with the confidentiality provisions of this
Agreement, and shall cause its accounting firm to enter into an acceptable
confidentiality agreement with DPM obligating it to retain all such financial
information in confidence pursuant to such confidentiality agreement.

        6.5     Taxes. All turnover and other taxes levied on account of the
royalties and other payments accruing to SIGNAL under this Agreement shall be
paid by SIGNAL for its own account, including taxes levied thereon as income to
SIGNAL. If provision is made in law or regulation for withholding, such tax
shall be deducted from the royalty or other payment made by DPM to the proper
taxing authority and a receipt of payment of the tax secured and promptly
delivered to SIGNAL. Each party agrees to assist the other party in claiming
exemption from such deductions or withholdings under any double taxation or
similar agreement or treaty from time to time in force.

        6.6     Prohibited Payments. Notwithstanding any other provision of this
Agreement, if DPM is prevented from paying any such royalty by virtue of the
statutes, laws, codes or governmental regulations of the country from which the
payment is to be made, then such royalty may be paid by depositing funds in the
currency in which accrued to SIGNAL's account in a bank acceptable to Signal in
the country whose currency is involved.

                                    ARTICLE 7
                         PATENT RIGHTS AND INFRINGEMENT

        7.1     Ownership of Patent Rights. SIGNAL shall own all inventions
invented solely by employees or agents of SIGNAL or its Affiliates in connection
with the Collaboration and all Patent Rights claiming such inventions. DPM shall
own all inventions invented solely by employees or agents of DPM or its
Affiliates in connection with the Collaboration and all
<PAGE>   30
                                      -30-

Patent Rights claiming such inventions. All inventions invented jointly by
employees or agents of SIGNAL and DPM or their respective Affiliates in
connection with the Collaboration, and all Patent Rights claiming such
inventions shall be owned jointly by DPM and SIGNAL as Collaboration Patents
Rights. Inventorship shall be determined under U.S. patent law.

        7.2     Prosecution and Maintenance of Patent Rights.

                (a)     It is the intention of the parties to secure broad
patent protection for discoveries and inventions made in connection with the
Collaboration. SIGNAL shall be responsible for the filing, prosecution and
maintenance of all SIGNAL Patent Rights and all patent applications and patents
covering any inventions owned solely by SIGNAL under Section 7.1. DPM shall be
responsible for the filing, prosecution and maintenance of all patent
applications and patents covering any inventions owned solely by DPM under
Section 7.1. Each party shall consider in good faith the requests and
suggestions of the other party with respect to strategies for filing and
prosecuting such patent applications. The inventing party shall keep the other
party informed of progress with regard to the filing, prosecution, maintenance,
enforcement and defense of patents applications and patents subject to this
Section 7.2(a).

                (b)     In the case of Collaboration Patent Rights, the parties
shall agree on the allocation of responsibility for the preparation, filing,
prosecution, and maintenance of any such Collaboration Patent Rights. The party
controlling a Collaboration Patent Right shall consult with the other party as
to the preparation, filing, prosecution, and maintenance of such Collaboration
Patent Right reasonably prior to any deadline or action with the U.S. Patent &
Trademark Office or any foreign patent office, and shall furnish to the other
party copies of all relevant documents reasonably in advance of such
consultation. In the event that the party controlling a Collaboration Patent
Right desires to abandon such Collaboration Patent Right, or if the party
assuming control of a Collaboration Patent Right later declines responsibility
for such Collaboration Patent Right, the controlling party shall provide
reasonable prior written notice to the other party of such intention to abandon
or decline responsibility, and such other party shall have the right, at its
expense, to prepare, file, prosecute, and maintain any Collaboration Patent
Rights. The costs for the preparation, filing, prosecution and maintenance of
Collaboration Patent Rights shall be shared on a 50/50 basis; however, neither
party shall be subject to any internal costs for work done in-house by the other
party.

                (c)     Each party will promptly disclose to the other party
such inventions arising from or made in the performance of the Research Project
and any patent or patent applications claiming such inventions, to the extent
that such inventions are necessary or useful to the Research Project or the
rights licensed hereunder.

<PAGE>   31
                                      -31-

                (d)     In no event will the Signal Patent Rights be abandoned
without DPM first being given an opportunity to maintain such Signal Patent
Rights. In the event that SIGNAL decides not to continue the prosecution or
maintenance of a patent application or patent within the Signal Patent Rights in
a country, SIGNAL shall provide DPM with prior written notice of this decision
and cooperate with DPM so as to provide DPM reasonable opportunity to assume
full responsibility for the continued prosecution or maintenance of such patent
application or patent. In such event that SIGNAL desires to discontinue
maintenance or prosecution of the Signal Patent Rights, SIGNAL agree to then
assign such SIGNAL Patent Rights to DPM at no cost.

        7.3     Cooperation of the Parties. Each party agrees to cooperate fully
in the preparation, filing, and prosecution of any Collaboration Patent Rights
under this Agreement. Such cooperation includes, but is not limited to:

                (a)     executing all papers and instruments, or requiring its
employees or agents, to execute such papers and instruments, so as to effectuate
the ownership of Patent Rights set forth in Section 7.1 above and to enable the
other party to apply for and to prosecute patent applications in any country;
and

                (b)     promptly informing the other party of any matters coming
to such party's attention that may affect the preparation, filing, or
prosecution of any such patent applications.

        7.4     Infringement by Third Parties.

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

                (b)     DPM as exclusive licensee with respect to the Signal
Patent Rights will have the right in the Field to bring suit or other proceeding
at its expense against the infringer in its own name or in the name of SIGNAL
where necessary, after consultation with SIGNAL. SIGNAL shall be kept advised

<PAGE>   32
                                      -32-

at all times of such suit or proceedings brought by DPM. SIGNAL may, in its
discretion and at its expense, join DPM as party to the suit or other
proceeding, provided that DPM shall retain control of the prosecution of such
suit or proceedings in such event. DPM has the right to approve of any outside
counsel selected by SIGNAL. SIGNAL agrees to cooperate with DPM in its efforts
to protect Signal Patent Rights, including joining as a party where necessary.

                (c)     If DPM does not bring suit or other proceeding against
the infringer, SIGNAL may in its discretion, bring suit or other proceeding at
its expense against the infringer, provided however, that SIGNAL shall first
consult with DPM as to whether such act(s) by a third party reasonably
constitute infringement and whether it is commercially advisable to bring such
suit or proceeding, as reasonably determined by DPM. DPM shall be kept advised
at all times of such suit or proceedings brought by SIGNAL. DPM may, in its
discretion and at its expense, join SIGNAL as party to the suit or other
proceeding, provided that SIGNAL shall retain control of the prosecution of such
suit or proceedings in such event. SIGNAL has the right to approve of any
outside counsel selected by DPM. DPM agrees to cooperate with SIGNAL in its
efforts to protect SIGNAL Patent Rights, including joining as a party where
necessary.

                (d)     Neither party shall have the right to settle any patent
infringement litigation under this Section 7.4 in a manner that diminishes the
rights or interests of the other party without the consent of the other party.

                (e)     Each party will bear its own expenses with respect to
any suit or other proceeding against an infringer. Any recovery in connection
with such suit or proceeding will first be applied to reimburse SIGNAL and DPM
for their out-of-pocket expenses, including attorney's fees. The party
controlling the suit will retain the balance of any recovery. However, if
damages are awarded to DPM based on lost sales or profit then DPM shall pay to
SIGNAL royalties that it would have paid had DPM made the sales.

        7.5     Infringement of Third Party Rights. DPM and SIGNAL shall
promptly notify the other in writing of any allegation by a Third Party that the
activity of either of the parties in the Field infringes or may infringe the
intellectual property rights of such Third Party. DPM shall have the first right
to control any defense of such claim at its own expense and by counsel of its
own choice, and SIGNAL shall have the right, at its own expense, to be
represented in any such action by counsel of its own choice. If DPM fails to
proceed in a timely fashion with regard to such defense, SIGNAL shall have the
right to control any such defense of such claim at its

<PAGE>   33
                                      -33-

own expense and by counsel of its own choice, and DPM shall have the right, at
its own expense, to be represented in any such action by counsel of its own
choice. Neither party shall have the right to settle any patent infringement
litigation under this Section 7.5 in a manner that diminishes the rights or
interests of the other party without the consent of such other party.

        7.6     Patent Term Extension. SIGNAL shall cooperate with DPM in
obtaining patent term restoration or supplemental protection certificates or
their equivalents in any country with respect to the Signal Patent Rights. In
the event that elections with respect to obtaining such patent term restoration,
supplemental protection certificates or their equivalents are to be made, DPM
shall have the right to make the election and SIGNAL agrees to abide by such
election.

                                    ARTICLE 8
                                 CONFIDENTIALITY

        8.1     Nondisclosure. The Confidential Disclosure Agreement between the
parties dated November 11, 1996, is hereby incorporated into this Agreement;
and, the obligations therein will be further subject to the terms and conditions
of this Agreement. During the Research Term and any Extended Research Term and
for a period of five (5) years thereafter, each party will maintain all
Confidential Information in trust and confidence and will not disclose any
Confidential Information to any Third Party or use any Confidential Information
for any purpose except (a) as expressly authorized by this Agreement, (b) as
required by law or court order, or (c) to its Affiliates. Each party may use
such Confidential Information only to the extent required to accomplish the
purposes of this Agreement. Each party will use at least the same standard of
care as it uses to protect proprietary or confidential information of its own to
ensure that its Affiliates, employees, agents, consultants and other
representatives do not disclose or make any unauthorized use of the Confidential
Information. Each party will promptly notify the other upon discovery of any
unauthorized use or disclosure of the Confidential Information.

        8.2     Exceptions. Confidential Information shall not include any
information which the receiving party can prove by competent evidence:

                (a)     is now, or hereafter becomes, through no act or failure
to act on the part of the receiving party, generally known or available;

                (b)     is known by the receiving party at the time of receiving

<PAGE>   34
                                      -34-

such information, as evidenced by its records;

                (c)     is hereafter furnished to the receiving party by a Third
Party, as a matter of right and without restriction on disclosure;

                (d)     is independently developed by the receiving party
without the aid, application or use of Confidential Information; or

                (e)     is the subject of a written permission to disclose
provided by the disclosing party.

        8.3     Publications. Each party to this Agreement recognizes that the
publication of papers regarding results of Collaboration hereunder, including
oral presentations and abstracts, may be beneficial to both parties provided
such publications are subject to reasonable controls to protect Confidential
Information. In particular, it is the intent of the parties to maintain the
confidentiality of any Confidential Information included in any foreign patent
application until such foreign patent application has been published.
Accordingly, each party shall have the right to review and approve any paper
proposed for publication by the other party, including oral presentations and
abstracts, which utilizes data generated from the Collaboration and/or includes
Confidential Information of the other party. Before any such paper is submitted
for publication, the party proposing publication shall deliver a complete copy
to the other party at least sixty (60) days prior to submitting the paper to a
publisher. The receiving party shall review any such paper and give its comments
to the publishing party within twenty (20) days of the delivery of such paper to
the receiving party. The publishing party shall comply with the other party's
request to delete references to such other party's Confidential Information in
any such paper and agrees to withhold publication of same for an additional
ninety (90) days in order to permit the parties to obtain patent protection, if
either of the parties deem it necessary, in accordance with the terms of this
Agreement. With respect to oral presentation materials and abstracts, the
parties shall make reasonable efforts to expedite review of such materials and
abstracts, and shall return such items as soon as practicable to the publishing
party with appropriate comments, if any, but in no event later than thirty (30)
days from the date of delivery to the receiving party.

<PAGE>   35
                                      -35-

                                    ARTICLE 9
                    REPRESENTATIONS, WARRANTIES AND COVENANTS

        9.1     Representations and Warranties.

                (a)     Each party hereby represents and warrants that it is
duly organized and validly existing under the laws of the state of its
incorporation and that it has the corporate power and authority to enter into
this Agreement and to carry out the provisions hereof.

                (b)     Each party hereby represents and warrants that it is
duly authorized to execute and deliver this Agreement and to perform its
obligations hereunder.

                (c)     Each party hereby represents and warrants (i) that this
Agreement is a legal and valid obligation binding upon it and is enforceable in
accordance with its terms, (ii) that the execution, delivery and performance of
this Agreement by such party does not conflict with any agreement, instrument or
understanding, oral or written, to which it is a party or by which it may be
bound, nor violate any law or regulation of any court, governmental body or
administrative or other agency having authority over it, (iii) and that it is
not aware of any impediment which would inhibit its ability to perform the terms
and conditions imposed on it by this Agreement.

                (d)     Each party warrants that it has enforceable written
agreements with all of its employees who receive Confidential Information under
this Agreement assigning to such party ownership of all intellectual property
rights created in the course of their employment.

                (e)     SIGNAL warrants that the only license agreements it has
as of the Effective Date within the scope of this Agreement are with [***] by
which SIGNAL acquired rights to [***] library of compounds, and [***] HCV
Constructs.

                (f)     SIGNAL warrants that there is no infringement of [***]
U.S. Patents granted prior to the Effective Date which relate to HCV protease.

                (g)     SIGNAL warrants that it owns or possesses adequate
licenses or other rights to use all SIGNAL Technology necessary to the conduct
of the Collaboration. As of the Effective Date, no claim is pending or, to the
best of SIGNAL's knowledge, threatened, to the effect that any SIGNAL Patent
Rights owned or licensed by SIGNAL, or which SIGNAL otherwise has the right to
use, is invalid or unenforceable by SIGNAL,

                      ***Confidential Treatment Requested
<PAGE>   36
                                      -36-

and, to the best of SIGNAL's knowledge, there is no basis for any such claim
(whether or not pending or threatened). To the best of SIGNAL's knowledge, all
SIGNAL Know-How developed by and belonging to SIGNAL for which patent protection
has not been sought has been kept confidential. SIGNAL has not granted or
assigned to any Third Party any right to manufacture, have manufactured,
assemble or sell any Compound or Product.

        9.2     Disclaimer of Warranties. Neither party guarantees the safety or
usefulness of any Product. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER PARTY OF ANY
NATURE, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

        9.3     Indemnification.

                9.3.1   Indemnification by SIGNAL. SIGNAL shall defend,
indemnify, and hold harmless DPM and its directors, officers, agents, parent
companies, affiliates, and employees, from and against any and all claim, loss,
damage, liability, injury (including death), cost or expense, including without
limitation expenses of litigation and reasonable attorneys' fees, in connection
with any claims made or suits brought against DPM relating to this Agreement
which are alleged to arise from the negligence, willful misconduct, or material
breach of this Agreement by SIGNAL, its Affiliates, subcontractors or agents;
provided however that SIGNAL shall not be obligated to provide indemnification
hereunder to the extent that any such claim, loss, damage, liability, injury,
cost or expense results from the negligence, willful misconduct, or material
breach of this Agreement by DPM.

                9.3.2   Indemnification by DPM. DPM shall at all times during
the term of this Agreement and thereafter, indemnify, defend and hold SIGNAL,
its directors, agents, officers, employees and affiliates, from and against any
and all claim, loss, damage, liability, injury (including death), cost or
expense, including without limitation expenses of litigation and reasonable
attorneys' fees, in connection with any claims made or suits brought against
SIGNAL relating to this Agreement and alleged to arise: (i) from the negligence,
willful misconduct, or material breach of this Agreement by DPM, its Affiliates,
subcontractors or agents or (ii) out of the death of or injury to any person or
persons or out of any damage to property and resulting from the production,
manufacture, sale, use, lease,

<PAGE>   37
                                      -37-

consumption or advertisement of Product; provided however that DPM shall not be
obligated to provide indemnification hereunder to the extent that any such
claim, loss, damage, liability, injury, cost or expense results from the
negligence, willful misconduct, or material breach of this Agreement by SIGNAL.

                9.3.3   Procedure. Should a party or any of its officers,
agents, parent companies, affiliates, or employees (the "Indemnitee") intend to
claim indemnification under this Article, such Indemnitee shall promptly notify
the other party (the "Indemnitor") in writing of any alleged loss, claim,
damage, liability or action in respect of which the Indemnitee intends to claim
such indemnification, and the Indemnitor shall be entitled to assume the defense
thereof with counsel selected by the Indemnitor and approved by the Indemnitee,
such approval not to be unreasonably withheld; provided, however, that if
representation of Indemnitee by such counsel first selected by the Indemnitor
would be inappropriate due to a conflict of interest between such Indemnitee and
any other party represented by such counsel, then Indemnitor shall select other
counsel for the defense of Indemnitee, with the fees and expenses to be paid by
the Indemnitor, such other counsel to be approved by Indemnitee and such
approval not to be unreasonably withheld. The indemnity agreement in this
Article shall not apply to amounts paid in settlement of any loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Indemnitor, which consent shall not be withheld unreasonably. The failure
to deliver notice to the Indemnitor within a reasonable time after the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such Indemnitor of any liability to the Indemnitee under
this Article, but the omission so to deliver notice to the Indemnitor will not
relieve it of any liability that it may have to any Indemnitee otherwise than
under this Article. The Indemnities under this Article, its employees and
agents, shall cooperate fully with the Indemnitor and its legal representatives
in the investigation of any action, claim or liability covered by this
indemnification.

                                   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 expire as of the end of
the Royalty Term.

        10.2    Termination for Cause. Either party may terminate this Agreement
upon sixty (60) days' written notice upon the occurrence of any

<PAGE>   38
                                      -38-

of the following:

                (a)     Upon or after the bankruptcy, insolvency, dissolution or
winding up of the other party (other than dissolution or winding up for the
purposes of reconstruction or amalgamation); or

                (b)     Upon or after the breach of any material provision of
this Agreement by the other party by causes and reasons within its control, as
shown by credible evidence, if the breaching party has not commenced to cure
such breach within sixty (60) days after notice thereof by the other party.

        10.3    Effect of Expiration or Termination.

                (a)     Expiration or termination of this Agreement shall not
relieve the parties of any obligation accruing prior to such expiration or
termination. Without limiting the foregoing, except as set forth in this
Agreement, the obligations and rights of the parties under Articles 5 and 8,
Sections 6.4, 9.2, 9.3 and 10.3 and Articles 12 and 13 shall survive termination
or expiration of this Agreement.

                (b)     Following the expiration of the Research Term and any
Extended Research Term, (i) the parties will continue to collaborate on the same
terms and conditions for Compounds and Products in development as of the last
day of the Research Term and any Extended Research Term, (ii) the RMC will
continue to manage the Research Project until the date on which the last
Compound and Product in development as of the last day of the Research Term and
any Extended Research Term commences a Phase I clinical trial, and (iii) without
limitation, the rights and obligations of the parties with respect to such
Products under Sections 4.1, 4.2, 4.4, 5.4, 5.5 and 5.6 and Articles 6 and 7
shall survive through the end of the Royalty Term.

                (c)     Without limiting any remedies otherwise available to
DPM, if DPM terminates this Agreement for cause pursuant to Section 10.2, (a)
all licenses set forth in Article 4 shall continue for so long as DPM is not in
breach of its obligations to pay to SIGNAL all milestone payments and royalty
payments in accordance with this Agreement and complies with the provisions of
Article 6 of this Agreement, and (b) SIGNAL shall return to DPM any Confidential
Information of DPM.

                (d)     Without limiting any remedies otherwise available to
SIGNAL, if SIGNAL terminates this Agreement for cause pursuant to

<PAGE>   39
                                      -39-

Section 10.2, (a) all licenses granted by SIGNAL to DPM hereunder shall
terminate and revert to SIGNAL, and (b) DPM shall return to SIGNAL any
Confidential Information of SIGNAL.

        10.4.   Failure to Pursue. If DPM is not diligently pursuing the
development of at least one Product using good faith commercially reasonable
efforts in accordance with industry standards and consistent with the usual
practice followed by DPM in pursuing the development of its other similar
pharmaceutical products, then SIGNAL shall have the right to terminate the
license right granted to DPM pursuant to Article 4 only with respect to such
Product which SIGNAL asserts is not being diligently pursued by DPM. SIGNAL
shall not have the right to terminate under this Section 10.4 with respect to
such Product unless (a) DPM is given ninety (90) days prior written notice by
SIGNAL of SIGNAL's intent to terminate with respect to such Product, stating the
reasons and justification for such termination and recommending steps which DPM
should take in such development, and (b) DPM has not taken good faith
commercially reasonable steps during such ninety (90) day period to diligently
pursue development of such Product. Notwithstanding the foregoing, SIGNAL shall
in no event have the right to terminate such license for such Product if the
development of such Product is not being pursued on the basis that a competitive
product is being diligently developed by DPM pursuant to this Agreement, or that
such Product is deemed by DPM unlikely to yield satisfactory results in clinical
trials or regulatory submissions, or that such Product is believed by DPM to be
commercially unattractive. In the event SIGNAL disagrees with the reasons why
DPM is not pursuing such Product, SIGNAL can so notify DPM and the further
development and commercialization of such Product may be undertaken by SIGNAL at
its risk and expense, and subject to SIGNAL negotiating a license with DPM under
Collaboration Technology for such Product as set forth in Section 4.2, second
paragraph.

        10.5.   Failure to Retain Qualified Scientists. DPM may terminate this
Agreement upon ninety (90) days prior written notice in the event that SIGNAL is
unable to retain sufficient qualified researchers to provide commercially
reasonable support for the Research Project.

                                   ARTICLE 11
                                    PUBLICITY

        11.1    Publicity Review. DPM and SIGNAL will jointly discuss and agree,
based on the principles of Section 11.2, on any statement to the

<PAGE>   40
                                      -40-

public regarding the execution and the subject matter of this Agreement or any
other aspect of this Agreement, except with respect to disclosures required by
law or regulation. Promptly following the Effective Date, the parties shall
issue a joint press release, which press release shall not refer to any
contingent payments in aggregate. Neither party shall use the name of the other
party in any public statement, prospectus, annual report, or press release
without the prior written approval of the other party, which approval shall not
be unreasonably withheld or delayed, provided, however, that both parties shall
endeavor in good faith to give the other party a minimum of five business days
to review such press release, prospectus, annual report, or other public
statement; and provided, further, that either party may use the name of the
other party in any public statement, prospectus, annual report, or press release
without the prior written approval of the other party, if such party is advised
by counsel that such disclosure is required to comply with applicable law.
However, any such use of the name of the other party shall be submitted to that
party in advance of such use in order to make any reasonable, good faith
modifications.

        11.2    Standards. In the discussion and agreement referred to in
Section 11.1, the principles observed by DPM and SIGNAL will be accuracy, the
requirements for confidentiality under Article 8, the advantage a competitor of
DPM or SIGNAL may gain from any public or Third Party statements under Section
11.1, the requirements of disclosure under any securities laws or regulations of
the United States, including those associated with public offerings, and the
standards and customs in the pharmaceutical industry for such disclosures by
companies comparable to DPM and SIGNAL.

                                   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.

        Any disputes arising between the parties relating to, arising out of or
in any way connected with the Agreement or any term or condition hereof, or the
performance by either party of its obligations hereunder (including any disputes
between the representatives of SIGNAL and DPM on the RMC), whether before or
after termination of the Agreement, ("Disputes") will be resolved as set forth
in this Section. Any Dispute between

<PAGE>   41
                                      -41-

representatives of SIGNAL and DPM shall be resolved by the RMC. Failing
resolution of such Dispute by the RMC, or in the event of a Dispute between
representatives of SIGNAL and DPM on the RMC, the Dispute will be presented to
the chief executive officers of DPM and SIGNAL, who shall attempt in good faith
to promptly resolve such Dispute. If such chief executive officers are unable to
resolve such Dispute, any litigation instituted by DPM shall, unless otherwise
agreed to in writing by SIGNAL, be filed in a California federal or state court
and any litigation instituted by SIGNAL shall, unless otherwise agreed to in
writing by DPM, be filed in a Delaware federal or state court.

                                   ARTICLE 13
                                  MISCELLANEOUS

        13.1    Activities Outside of Collaboration. Except as otherwise
specifically provided herein, all activities of the parties outside of the
Collaboration are outside of the scope of this Agreement and nothing herein is
intended to limit SIGNAL or its Affiliates from using the SIGNAL Technology for
other purposes.

        13.2    Assignment.

                (a)     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)     This Agreement may not be assigned or otherwise
transferred by either party, except to Affiliates, without the consent of the
other party; provided, however, that DPM or SIGNAL may, without such consent,
assign this Agreement and its rights and obligations hereunder to its Affiliates
and parent corporations, or in connection with the transfer or sale of all or
substantially all of its business, or in the event of its merger or
consolidation or change in control or similar transaction; and provide further,
that in the event of such a transaction, no intellectual property rights of the
acquiring corporation shall be included in the technology licensed hereunder
except with the approval of the acquiring corporation.

                (c)     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.

<PAGE>   42
                                      -42-

        13.3    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,
however, that the party claiming force majeure has exerted all reasonable
efforts to avoid or remedy such force majeure.

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

        In the case of DPM:
                President, DuPont Merck Research Laboratories
                The DuPont Merck Pharmaceutical Company
                Experimental Station, Bldg. 400
                Wilmington, Delaware 19880-0400
                (fax number: 302-992-3040)

           with copy to:
                Associate General Counsel
                Legal Department
                The DuPont Merck Pharmaceutical Company
                974 Centre Road, DuPont Merck Plaza, WR722
                Wilmington, Delaware 19807-2802
                (fax number: 302-892-8536)

           In the case of SIGNAL:

                Chief Executive Officer
                Signal Pharmaceuticals Inc.
                5555 Oberlin Drive
                San Diego, CA 92121

<PAGE>   43
                                      -43-

                (fax number: 619-558-7513)

           with a copy to:

                Frederick T. Muto, Esquire
                Cooley Godward LLP
                4365 Executive Drive
                San Diego, CA  92121
                (fax number:  619-453-3555)

        13.5    Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without reference to any
rules of conflict of laws, except that all questions concerning the construction
or effect of patent rights will be construed in accordance with the laws of the
country granting those rights.

        13.6    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.

        13.7    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 (a) 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 (b) 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 of this Agreement are to be effectuated.

        13.8    Independent Contractors. It is expressly agreed that SIGNAL and
DPM shall be independent contractors and that the relationship between the two
parties shall not constitute a partnership or agency of any kind. Neither SIGNAL
nor DPM shall have the authority to make any statements, representations or
commitments of any kind, or to take any action, which shall be binding on the
other, without the prior written

<PAGE>   44
                                      -44-

authorization of the party to do so.

        13.9    Entire Agreement. This Agreement sets forth all of the
covenants, promises, agreements, warranties, representations, conditions and
understandings between the parties hereto with respect to the subject matter
hereof and supersedes and terminates all prior agreements and understanding
between the parties, except all obligations of the parties under the
Confidential Disclosure Agreement referenced in Section 8.1 survive and are
subject to further terms and conditions of this 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.

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

        13.11   EEOC Compliance. SIGNAL agrees to comply with the following
Equal Employment Opportunity Compliance statement:

                (a)     SIGNAL will not discriminate against any individual
performing of behalf of SIGNAL under this Agreement because of race, religion,
sex, age within statutory limits, disability, national origin, or veteran
status. SIGNAL agrees to post in conspicuous places notices setting forth the
provisions of this non-discrimination clause.

                (b)     SIGNAL will, in all solicitation or advertisements for
candidates or applicants for employment with SIGNAL and involving the
performance of this Agreement, state that all qualified applicants will receive
consideration for employment without regard to race, religion, sex, age within
statutory limits, national origin, disability or veteran status.

                (c)     In the event of SIGNAL non-compliance with these
non-discrimination clauses or with any laws, rules, regulations, or orders, this
Agreement may be canceled, terminated, or suspended at the discretion of DPM in
accordance with Section 10.2.

SIGNAL warrants that it has complied with all applicable laws, rules, orders and
regulations covering services specified herein, including but not limited to
Executive Order 11246 (and the rules and regulations promulgated thereunder),
the Rehabilitation Act of 1973 and the Vietnam Era Veterans Readjustment Act of
1974.

<PAGE>   45
                                      -45-

        13.12   Use of Trade Names. Subject to Section 11.1, neither party will,
without prior written consent of the other party, use any trademark or trade
name owned by the other party, or owned by an Affiliate or Parent corporation of
the other party, in any publication, publicity, advertising, or otherwise.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their duly authorized officers as of the date first above
written.

THE DUPONT MERCK PHARMACEUTICAL        SIGNAL PHARMACEUTICALS, INC.
COMPANY

By:  [SIG]                             By:  /s/ ALAN LEWIS
   ---------------------------------      -----------------------------------

Name: President & CEO                  Name:  Alan Lewis
     -------------------------------        ---------------------------------

Title:  December 26, 1997              Title:  PRES/CEO
      ------------------------------         --------------------------------

<PAGE>   46
                                      -46-

                                   Appendix 1

[***]

                      ***Confidential Treatment Requested
<PAGE>   47

                                   Appendix 2

                             List of HCV Constructs

[***]

                      ***Confidential Treatment Requested
<PAGE>   48
                                      -49-

                                   Appendix 3

                            Signal Compound Libraries

[***]

                      ***Confidential Treatment Requested
<PAGE>   49
                                      -50-

                                   Appendix 4

                                    Example 1

[***]

                      ***Confidential Treatment Requested
<PAGE>   50
                                      -51-

                                   Appendix 5

                            Signal License Agreement

[***]

                      ***Confidential Treatment Requested
<PAGE>   51
                                      -52-

                                   Appendix 6

                              Signal Patent Rights

        None as of the Effective Date.

<PAGE>   52
                                      -53-

                                   Schedule A

                         Collaboration Patent Rights or
                              Signal Patent Rights

        None as of the Effective Date<PAGE>   1
                                           *** Text Omitted and Filed Separately
                                               Confidential Treatment Requested
                                               Under 17 C.F.R. Sections 200.80,
                                               200.83 and 230.406.

                                                                   EXHIBIT 10.44

                            STOCK PURCHASE AGREEMENT

                                     BETWEEN

                          SIGNAL PHARMACEUTICALS, INC.

                                       AND

                     THE DUPONT MERCK PHARMACEUTICAL COMPANY

<PAGE>   2
                          SIGNAL PHARMACEUTICALS, INC.

                            STOCK PURCHASE AGREEMENT

            THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
December __, 1997 by and between SIGNAL PHARMACEUTICALS, INC., a California
corporation with its principal office at 5555 Oberlin Drive, San Diego, CA 92121
("SIGNAL") and THE DUPONT MERCK PHARMACEUTICAL COMPANY, a Delaware general
partnership with its principal office at DuPont Merck Plaza, Centre Road -
Walnut Run, Wilmington, DE 19805 ("DPM").

                                    RECITALS

            WHEREAS, SIGNAL and DPM have entered into that certain Collaborative
Research and License Agreement of even date herewith (the "Collaboration
Agreement"); and

            WHEREAS, in connection with, and as a condition of DPM entering
into, the Collaboration Agreement, SIGNAL desires to sell to DPM, and DPM
desires to purchase from SIGNAL, shares of SIGNAL's capital stock, on the terms
and subject to the conditions set forth in this Agreement.

            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.          PURCHASE AND SALE OF SHARES.

            1.1 PURCHASE AND SALE OF MILESTONE SHARES. Subject to the terms and
conditions hereof, upon SIGNAL's achievement of the milestone set forth in
Section 5.4.2 of the Collaboration Agreement (the "Milestone Closing Event"),
DPM shall purchase from SIGNAL, and SIGNAL shall issue and sell to DPM, shares
of SIGNAL's Preferred Stock (unless an IPO, as described below, has been
completed, in which case such stock shall be Common Stock) having an aggregate
value of [***] (the "Milestone Shares") at a purchase price (the "Milestone
Share Price") which is equal to [***]; provided, however, that if such Milestone
Closing Event occurs more than six (6) months following an equity purchase as
described in (i) and (ii), then DPM will purchase the Milestone Shares at a

                                       1.

                      ***Confidential Treatment Requested
<PAGE>   3
[***] and provided further, that in the event that SIGNAL has completed an
initial public offering of its Common Stock (the "IPO") as of the Milestone
Closing Event, the Milestone Shares shall be purchased at a Milestone Share
Price equal to the average closing price per share for Common Stock of SIGNAL on
the Nasdaq National Market (or any other national securities exchange on which
the Common Stock of SIGNAL is then traded) for the thirty (30) trading days
immediately preceding the Milestone Closing Date (as defined below). The rights,
preferences and privileges of any SIGNAL Preferred Stock that may be issued to
DPM under this Section 1.1 would be substantially the same as SIGNAL's Series D
Preferred Stock, except that the applicable provisions regarding dividends,
liquidation preference and conversion would reflect the original issue price of
the shares issued to DPM.

            1.2 PURCHASE AND SALE OF IPO SHARES. Subject to the terms and
conditions hereof, in the event that, at any time during the Research Term (as
such term is defined in the Collaboration Agreement), SIGNAL completes its IPO
in which SIGNAL realizes aggregate net proceeds in excess of $15 million, DPM
shall purchase from SIGNAL, and SIGNAL shall issue and sell to DPM, shares of
SIGNAL's Common Stock having an aggregate value of Two Million Dollars
($2,000,000) (the "IPO Shares") to be issued and sold in a private placement to
close simultaneously with the completion of the IPO at the price per share to
the public in the IPO.

2.          CLOSING DATE; DELIVERY.

            2.1 MILESTONE CLOSING. Subject to the terms of Section 5, the
closing of the sale and purchase of the Milestone Shares under this Agreement
(the "Milestone Closing") shall be held on the date specified by the parties
within thirty (30) days after the Milestone Closing Event (the "Milestone
Closing Date") at the offices of Cooley Godward LLP ("Cooley Godward"), 4365
Executive Drive, Suite 1100, San Diego, California, or at such time and place as
SIGNAL and DPM may agree.

            2.2 IPO CLOSING. Subject to the terms of Section 5, the closing of
the sale and purchase of the IPO Shares under this Agreement (the "IPO Closing")
shall be held at the time and date of the completion of the IPO (the "IPO
Closing Date") at the offices of Cooley Godward, 4365 Executive Drive, Suite
1100, San Diego, California, or at such time and place as SIGNAL and DPM may
agree.

            2.3 DELIVERY. At the IPO Closing and, if applicable, the Milestone
Closing, subject to the terms and conditions hereof, SIGNAL shall deliver to DPM
a stock certificate, registered in the name of DPM, representing, respectively,
the IPO Shares and the Milestone Shares, dated as of the IPO Closing Date and
the Milestone Closing Date, respectively, against payment of the purchase price
therefor by wire transfer, unless other means of payment shall have been agreed
upon by SIGNAL and DPM.

                                       2.

                      ***Confidential Treatment Requested
<PAGE>   4
3.          REPRESENTATIONS AND WARRANTIES OF SIGNAL.

            Subject to and except as disclosed by SIGNAL in the Schedule of
Exceptions attached hereto as Exhibit A, SIGNAL hereby represents and warrants
to DPM as follows:

            3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. SIGNAL is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to carry on its business as now conducted and as proposed to be conducted.
SIGNAL is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its business or properties.

            3.2 AUTHORIZATION. All corporate action on the part of SIGNAL, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement has been taken. SIGNAL has the requisite
corporate power to enter into this Agreement and carry out and perform its
obligations under the terms of this Agreement. At the IPO Closing and the
Milestone Closing, SIGNAL will have the requisite corporate power to sell the
IPO Shares and the Milestone Shares, respectively, to be sold at each such
Closing.

            3.3 DUE EXECUTION. This Agreement has been duly authorized, executed
and delivered by SIGNAL and, upon due execution and delivery by DPM, this
Agreement will be a valid and binding agreement of SIGNAL, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by equitable principles.

            3.4 NO CONFLICT WITH OTHER INSTRUMENTS. The execution, delivery and
performance of this Agreement will not result in any violation of, be in
conflict with, or constitute a default under, with or without the passage of
time or the giving of notice: (a) any provision of SIGNAL's Articles of
Incorporation, as amended, or Bylaws; (b) any provision of any judgment, decree
or order to which SIGNAL is a party or by which it is bound; (c) any material
contract or agreement to which SIGNAL is a party or by which it is bound; or (d)
any statute, rule or governmental regulation applicable to SIGNAL.

            3.5 ARTICLES OF INCORPORATION; BYLAWS. SIGNAL has delivered to DPM
true, correct and complete copies of the Articles of Incorporation and Bylaws of
SIGNAL, as in effect on the date hereof.

            3.6 CAPITALIZATION.

                      (a) The authorized capital stock of SIGNAL consists, or
will consist prior to the Milestone Closing, of:

                                       3.

<PAGE>   5
                           (i) 24,453,931 shares of Preferred Stock (the
"Preferred Stock"), of which 2,626,892 shares have been designated Series A
Preferred Stock, all of which are issued and outstanding, of which 2,875,000
shares have been designated Series B Preferred Stock, all of which are issued
and outstanding, of which 8,791,433 shares have been designated Series C
Preferred Stock, of which 8,791,432 are issued and outstanding, of which 250,000
shares have been designated Series C-1 Preferred Stock, all of which are subject
to issued and outstanding warrants, of which 732,601 shares have been designated
Series D Preferred Stock, all of which are issued and outstanding, of which
6,455,493 shares have been designated Series E Preferred Stock, all of which are
issued and outstanding, and of which 2,722,513 shares have been designated
Series F Preferred Stock, all of which are issued and outstanding. The rights,
privileges and preferences of the Series A, Series B, Series C, Series C-1,
Series D, Series E and Series F Preferred Stock will be as stated in the
Company's Amended and Restated Articles of Incorporation.

                           (ii) 35,000,000 shares of common stock ("Common
Stock"), of which 2,481,014 shares are issued and outstanding.

                           (iii) Except for (A) the conversion privileges of the
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock, the Series C-1 Preferred Stock, the Series D Preferred Stock, the Series
E Preferred Stock and the Series F Preferred Stock, (B) 2,500,000 shares of
Common Stock reserved for issuance pursuant to the Company's 1993 Stock Option
Plan, of which 1,428,225 shares are subject to outstanding options and of which
1,015,014 shares are issued and outstanding, (C) 550,000 shares of Common Stock
reserved for issuance pursuant to the Company's 1993 Founders' Stock Option
Plan, 159,000 of which are subject to outstanding options and of which 373,000
shares are issued and outstanding, and (D) 1,000,000 shares of Common Stock
reserved for issuance pursuant to the Company's 1997 Stock Option Plan, of which
774,870 shares are subject to outstanding options and 2,500 of which are issued
and outstanding, there are not outstanding any options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock. The Company is
not a party or subject to any agreement or understanding, and, to the Company's
knowledge, there is no agreement or understanding between any persons and/or
entities, which affects or relates to the voting or giving of written consents
with respect to any security or by a director of the Company.

                      (b) In the event of an IPO, SIGNAL will update the
capitalization information set forth in subsection (a) above.

            3.7 VALID ISSUANCE OF SHARES. The IPO Shares, and the Milestone
Shares, when issued, sold and delivered in accordance with the terms hereof for
the consideration set forth herein, will be duly authorized, validly issued,
fully paid and nonassessable and,

                                       4.

<PAGE>   6
based in part upon the representations of DPM in this Agreement, will be issued
in compliance with all applicable federal and state securities laws.

            3.8 ABSENCE OF LITIGATION. There is no action, suit, proceeding nor,
to the best of its knowledge, any investigation pending or currently threatened
against SIGNAL that questions the validity of this Agreement or the
Collaboration Agreement.

            3.9 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of SIGNAL is required in connection with the consummation of the
transactions contemplated by this Agreement, except for notices required or
permitted to be filed with certain state and federal securities commissions
after the IPO Closing and the Milestone Closing, which notices will be filed on
a timely basis.

            3.10 FINANCIAL INFORMATION. SIGNAL has provided to DPM audited
financial statements (balance sheet and statement of operations) of SIGNAL as of
and for the year ended December 31, 1996, and unaudited financial statements as
of and for the nine-month period ended September 30, 1997 ("Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied and fairly
represent the financial position and operational results of SIGNAL as of the
dates thereof.

4.          REPRESENTATIONS AND WARRANTIES OF DPM.

            DPM hereby represents and warrants to SIGNAL as follows:

            4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. DPM is a general
partnership duly formed and validly existing under the laws of the State of
Delaware and has all requisite partnership power and authority to carry on its
business as now conducted and as proposed to be conducted. DPM is duly qualified
to transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business or
properties.

            4.2 AUTHORIZATION. DPM has the requisite partnership power to enter
into this Agreement, to carry out and perform its obligations under the terms of
this Agreement and, at the IPO Closing and the Milestone Closing, will have the
requisite partnership power to purchase the IPO Shares and the Milestone Shares,
respectively, to be purchased at each such Closing.

            4.3 DUE EXECUTION. This Agreement has been duly authorized, executed
and delivered by DPM, and, upon due execution and delivery by SIGNAL, this
Agreement will be a valid and binding agreement of DPM, enforceable in
accordance with its terms,

                                       5.

<PAGE>   7
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by equitable principles.

            4.4 INVESTMENT REPRESENTATIONS.

                      (a) DPM is acquiring the IPO Shares and the Milestone
Shares for its own account, not as nominee or agent, for investment and not with
a view to, or for resale in connection with, any distribution or public offering
thereof within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). By executing this Agreement, DPM further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to any of the IPO Shares or the Milestone Shares.

                      (b) DPM understands that (x) the IPO Shares and the
Milestone Shares have not been registered under the Securities Act by reason of
a specific exemption therefrom, that such securities must be held by it
indefinitely and that DPM must, therefore, bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration; (y) each
certificate representing the IPO Shares and the Milestone Shares will be
endorsed with the following legends:

                           (i) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

                           (ii) Any legend required to be placed thereon under
applicable state securities laws;

and (z) SIGNAL will instruct any transfer agent not to register the transfer of
either the IPO Shares (or any portion thereof) or the Milestone Shares (or any
portion thereof) unless the conditions specified in the foregoing legends are
satisfied, until such time as a transfer is made, pursuant to the terms of this
Agreement, and in compliance with Rule 144 or pursuant to a registration
statement or, if the opinion of counsel referred to above is to the further
effect that such legend is not required in order to establish compliance with
any provisions of the Securities Act or this Agreement.

                      (c) DPM has been furnished with all information it
considers necessary or appropriate for deciding whether to purchase the IPO
Shares and the Milestone Shares. DPM has been afforded the opportunity to ask
questions and receive answers from

                                       6.

<PAGE>   8
SIGNAL regarding the terms and conditions of the offering of the IPO Shares and
the Milestone Shares.

                      (d) DPM is an investor in securities of companies in the
development stage and acknowledges that it can bear the economic risk of its
investment and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the IPO Shares and the Milestone Shares.

                      (e) DPM is an "accredited investor" as such term is
defined in Rule 501 of the General Rules and Regulations prescribed by the
Securities and Exchange Commission pursuant to the Securities Act, and DPM was
not formed for the specific purpose of acquiring the IPO Shares or the Milestone
Shares.

5.          CONDITIONS TO CLOSING.

            5.1 CONDITIONS TO OBLIGATIONS OF DPM AT CLOSING. DPM's obligation to
purchase the IPO Shares at the IPO Closing and the Milestone Shares at the
Milestone Closing is subject to the fulfillment to DPM's satisfaction, on or
prior to the IPO Closing or the Milestone Closing, as applicable, of all of the
following conditions, any of which may be waived by DPM:

                      (a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by SIGNAL in Section 3
hereof, as modified by the Schedule of Exceptions, shall be true and correct in
all material respects on the dates of the IPO Closing or the Milestone Closing,
as applicable, with the same force and effect as if they had been made on and as
of said dates; provided, however, that the Schedule of Exceptions and the
representations and warranties shall be modified as required to reflect changes
occurring between the date hereof and the date of the IPO Closing or Milestone
Closing, as applicable; provided, further, that, in the event that any
modification to the Schedule of Exceptions or the representations and warranties
(excluding the representations and warranties set forth in Sections 3.6, 3.8 and
3.10) necessary to make such representations and warranties true and correct in
all material respects on the date of the IPO Closing and the Milestone Closing
shall be indicative of a materials adverse change in the business, financial
condition, operations, property or affairs of SIGNAL, the condition to closing
set forth in this Section 5.1(a) shall be deemed to be unsatisfied and DPM shall
have no obligation to purchase the IPO Shares or the Milestone Shares, as the
case may be. SIGNAL shall have performed and complied with all obligations and
conditions herein required to be performed or complied with by it on or prior to
the IPO Closing or the Milestone Closing, as applicable. A certificate duly
executed by an officer of SIGNAL, to the effect of the foregoing, shall be
delivered to DPM on the IPO Closing or the Milestone Closing, as applicable.

                                       7.

<PAGE>   9
                      (b) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings of SIGNAL in connection with the transactions contemplated at the
IPO Closing or Milestone Closing, as applicable, and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to DPM, and DPM shall have received all such counterpart
originals or certified or other copies of such documents as it may reasonably
request.

                      (c) OPINION OF SIGNAL'S COUNSEL. DPM shall have received
an opinion dated as of the IPO Closing Date or the Milestone Closing Date, as
applicable from Cooley Godward LLP, counsel to SIGNAL, in the form attached
hereto as Exhibit B.

            5.2 CONDITIONS TO OBLIGATIONS OF SIGNAL. SIGNAL's obligation to
issue and sell the IPO Shares at the IPO Closing and, if applicable, the
Milestone Shares at the Milestone Closing is subject to the fulfillment to
SIGNAL's satisfaction, on or prior to the IPO Closing or the Milestone Closing,
as applicable, of the following conditions, any of which may be waived by
SIGNAL:

                      (a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by DPM in Section 4 hereof
shall be true and correct in all material respects on the dates of the IPO
Closing and the Milestone Closing, as applicable, with the same force and effect
as if they had been made on and as of said dates; provided, however, that the
representations and warranties shall be modified as required to reflect changes
occurring between the date hereof and the date of the IPO Closing or Milestone
Closing, as applicable; provided, further, that, in the event that any
modification to the representations and warranties necessary to make the
representations and warranties true and correct in all material respects on the
dates of the IPO Closing and the Milestone Closing shall be indicative of a
material adverse change in the ability of DPM to consummate the transactions
contemplated hereby, the condition to closing set forth in this Section 5.2(a)
shall be deemed to be unsatisfied and SIGNAL shall have no obligation to issue
and sell the IPO Shares or the Milestone Shares, as the case may be. DPM shall
have performed and complied with all obligations and conditions herein required
to be performed or complied with by it on or prior to the IPO Closing or the
Milestone Closing, as applicable. A certificate duly executed by an officer of
DPM, to the effect of the foregoing, shall be delivered to SIGNAL on the IPO
Closing or the Milestone Closing, as applicable.

                      (b) PROCEEDINGS AND DOCUMENTS. All partnership and other
proceedings of DPM in connection with the transactions contemplated at the IPO
Closing or Milestone Closing, as applicable, and all documents and instruments
incident to such transactions shall be reasonably satisfactory in substance and
form to SIGNAL, and

                                       8.

<PAGE>   10
SIGNAL shall have received all such counterpart originals or certified or other
copies of such documents as it may reasonably request.

                      (c) PAYMENT OF PURCHASE PRICE. DPM shall have tendered
delivery of the purchase price for the IPO Shares specified in Section 1.2 at
the IPO Closing or the purchase price for the Milestone Shares specified in
Section 1.1 at the Milestone Closing by wire transfer to account number
4734-943186 at Wells Fargo Bank, 401 B Street, Suite 2201, San Diego, California
92101 (ABA# 121000248) or such other account as SIGNAL shall indicate by written
notice to DPM.

6.          ADDITIONAL AGREEMENTS.

            6.1 STANDSTILL PROVISION. From and after the date of the first to
occur of the IPO Closing or the Milestone Closing, DPM shall not, and shall
cause its affiliates not to, in any manner, singly or as part of a partnership,
limited partnership, syndicate or other "Group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Securities
Exchange Act")), directly or indirectly, acquire, or offer or agree to acquire,
record ownership or beneficial ownership of any shares of capital stock of
SIGNAL, any securities convertible into or exchangeable for capital stock or any
other right to acquire capital stock from SIGNAL or any other person, without
the prior written consent of SIGNAL; provided, however, that this clause shall
not apply to (i) the IPO Shares and the Milestone Shares, (ii) any securities
issued with respect to the IPO Shares and the Milestone Shares pursuant to a
stock split, stock dividend, recapitalization or reclassification and (iii) any
securities obtained or purchased by DPM pursuant to rights set forth in this
Agreement. This Section 6.1 shall terminate as to the IPO Shares and the
Milestone Shares ten (10) years from the IPO Closing Date and the Milestone
Closing Date, respectively.

            6.2 MARKET STAND-OFF PROVISION. DPM agrees that, during the period
of duration specified by SIGNAL and an underwriter of Common Stock or other
securities of SIGNAL following the effective date of a registration statement of
SIGNAL filed under the Securities Act (which period shall not exceed 180 days),
DPM shall not, to the extent requested by SIGNAL, directly or indirectly sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of any securities of SIGNAL
held by it at any time during such period. In order to enforce the provisions of
this Section 6.2, SIGNAL may impose stop-transfer instructions with respect to
the securities held by DPM that are subject to the foregoing restriction until
the end of such period.

                                       9.
<PAGE>   11
7.          REGISTRATION RIGHTS.

            7.1 CERTAIN DEFINITIONS. When used in this Section 7 of this
Agreement, the following terms shall have the following respective meanings:

            "COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.

            "FORM S-3" shall mean Form S-3 under the Securities Act as in effect
on the date of this Agreement, or any substantially similar, equivalent or
successor form under the Securities Act.

            "HOLDER" shall mean DPM or any transferee of registration rights
under Section 7.9 hereof who then holds any outstanding Registrable Securities.

            The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.

            "REGISTRABLE SECURITIES" means: (i) the Milestone Shares, if such
shares are Common Stock of SIGNAL (or, if the Milestone Shares are shares of
Preferred Stock of SIGNAL, the shares of SIGNAL Common Stock issued or issuable
upon conversion of the Milestone Shares); (ii) the IPO Shares; and (iii) shares
of SIGNAL Common Stock issued in respect of the shares of Common Stock referred
to under the foregoing clauses (i) and (ii) by reason of any stock split, stock
dividend, recapitalization or similar event which have not been sold to the
public.

            "REGISTRATION EXPENSES" shall mean all expenses incurred by SIGNAL
in complying with Sections 7.2 and 7.3 hereof, including, without limitation,
all registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel, blue sky fees and expenses, and the expense
of any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of SIGNAL which shall be paid in
any event by SIGNAL).

            "SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the applicable sale.

            7.2 COMPANY REGISTRATION.

                      (a) If, at any time or from time to time, SIGNAL shall
determine to register any of its securities, either for its own account or the
account of a security holder or holders exercising their respective demand
registration rights, other than a registration relating solely to employee
benefit plans on Form S-8 or similar forms which may be

                                       10.
<PAGE>   12
promulgated in the future or a registration on Form S-4 or similar forms which
may be promulgated in the future relating solely to a Commission Rule 145 or
similar transaction, SIGNAL will (i) promptly give to each Holder written notice
thereof and (ii) include in such registration (and any related qualification
under Blue Sky laws or other compliance), and in any underwriting involved
therein, all Registrable Securities of such Holders as specified in a written
request or requests made within 15 days after receipt of such written notice
from SIGNAL.

                      (b) If the registration of which SIGNAL gives notice is
for a registered public offering involving an underwriting, SIGNAL shall so
indicate in the notice given pursuant to Section 7.2(a). In such event the right
of any Holder to registration pursuant to this Section 7.2 shall be conditioned
upon such Holder's agreeing to participate in such underwriting and in the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with SIGNAL and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by SIGNAL or by other holders exercising any
demand registration rights. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
SIGNAL and the underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. Notwithstanding any
other provision of this Section 7.2, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may exclude some or all of the shares of
Registrable Securities from such registration and underwriting; provided,
however, that there shall first be excluded shares proposed to be included by
holders not possessing legal rights to include the same pursuant to this Section
7.2 or any similar provision.

            7.3 FORM S-3 REGISTRATION RIGHTS. After the IPO, SIGNAL shall use
its best efforts to qualify for registration on Form S-3, and to that end SIGNAL
shall use its best efforts to comply with the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE Act"), within twelve
(12) months following the effective date of the IPO. After SIGNAL has qualified
for the use of Form S-3, and subject to the provisions of Section 7.10, each
Holder shall have the right to request registrations on Form S-3 (such requests
shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended method of disposition of such
shares by each such Holder), subject only to the following limitations:

                      (a) SIGNAL shall not be obligated to cause a registration
on Form S-3 to become effective prior to one hundred eighty (180) days following
the effective date of a SIGNAL-initiated registration (other than a registration
effected solely to qualify an employee benefit plan or to effect a business
combination pursuant to Rule 145);

                                       11.
<PAGE>   13
                      (b) SIGNAL shall not be required to effect a registration
pursuant to this Section 7.3 unless the Holder or Holders requesting such a
registration propose to dispose of shares of Registrable Securities having an
aggregate disposition price (before deduction of underwriting discounts and
expenses of sale) of at least $1,000,000;

                      (c) SIGNAL shall not be required to effect a registration
pursuant to this Section 7.3 if SIGNAL shall furnish to the requesting Holders a
certificate signed by the President of SIGNAL stating that in the good faith
judgment of the Board of Directors of SIGNAL it would be seriously detrimental
to SIGNAL or its stockholders for the registration statement to be filed at the
date filing would be required, in which case SIGNAL shall have an additional
period of not more than one hundred twenty (120) days within which to file such
registration statement; provided, however, that SIGNAL shall not use this right
more than once in any twelve (12) month period; and

                      (d) SIGNAL shall not be required to effect a registration
pursuant to this Section 7.3 more often than once in any twelve (12) month
period.

            SIGNAL shall give notice to all Holders of the receipt of a request
for registration pursuant to this Section 7.3 and shall use its best efforts to
cause all Registrable Securities that such Holders have requested, within 15
days after receipt of such written notice, be registered in accordance with this
Section 7.3 to be registered under the Securities Act. Subject to the foregoing,
SIGNAL will use its best efforts to effect promptly any registration pursuant to
this Section 7.3.

            7.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 7.2 and 7.3 (exclusive of Selling Expenses but inclusive of the
reasonable fees and expenses of any special counsel to the selling Holders)
shall be borne by SIGNAL. All Selling Expenses incurred in connection with any
registrations hereunder shall be borne by the holders of the securities
registered pro rata on the basis of the number of shares registered.

            7.5 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by SIGNAL pursuant to this Section 7,
SIGNAL will keep each Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof. At
its expense SIGNAL will:

                      (a) Keep such registration, qualification or compliance
effective for a period of one hundred twenty (120) days or until the Holder or
Holders have completed the distribution described in the registration statement
relating thereto, whichever first occurs;

                                       12.
<PAGE>   14
                      (b) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;

                      (c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them;

                      (d) Use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that SIGNAL shall not be required in connection therewith or
as a condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;

                      (e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement; and

                      (f) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.

            7.6 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Section 7.2 or 7.3:

                      (a) To the extent permitted by law, SIGNAL will indemnify
each Holder, each of its officers, directors and partners, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification or compliance has been
effected pursuant to this Section 7, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in

                                       13.
<PAGE>   15
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by SIGNAL of any rule or
regulation promulgated under the Securities Act applicable to SIGNAL and
relating to action or inaction required of SIGNAL in connection with any such
registration, qualification or compliance, and will reimburse each such Holder,
each of its officers and directors and partners, and each person controlling
such Holder, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action; provided, however, that the indemnity agreement set
forth in this Section 7.6(a) shall not apply to amounts paid in settlement of
any such claim, loss damage, liability or action if such settlement is effected
without the consent of SIGNAL, which consent shall not be unreasonably withheld;
provided further, that SIGNAL will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to SIGNAL by an instrument duly executed by such Holder or underwriter
and stated to be specifically for use therein.

                      (b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify SIGNAL, each of its directors and officers, each underwriter, if any,
of SIGNAL's securities covered by such a registration statement, each person who
controls SIGNAL or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and partners and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
and liabilities (or actions in respect thereof) including any of the foregoing
incurred in settlement of any litigation commenced or threatened, arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading, or any violation by SIGNAL of any rule or
regulation promulgated under the Securities Act applicable to SIGNAL in
connection with any such registration, qualification, or compliance, and will
reimburse

                                       14.

<PAGE>   16
SIGNAL, such Holders, such directors, officers, partners, persons, underwriters
or control persons for any legal or any other expenses reasonably incurred in
connection with investigation, preparing or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to SIGNAL by an instrument duly
executed by such Holder and stated to be specifically for use therein; provided,
however, that the indemnity agreement set forth in this Section 7.6(b) shall not
apply to amounts paid in settlement of any such claim, loss, damage, liability
or action if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld; provided further, that the
obligations of such Holders hereunder shall be limited to an amount equal to the
proceeds to each such Holder of Registrable Securities sold as contemplated
herein.

                      (c) Each party entitled to indemnification under this
Section 7.6 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at its own expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 7.6 unless such failure
resulted in actual detriment to the Indemnifying Party. No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party a release from all liability
in respect of such claim or litigation.

                      (d) If the indemnification provided for in this Section
7.6 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by

                                       15.
<PAGE>   17
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.

                      (e) The obligations of SIGNAL and Holders under this
Section 7.6 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 7 and otherwise.

            7.7 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to SIGNAL such information
as SIGNAL may request in writing regarding such Holder or Holders and the
distribution proposed by such Holder or Holders and as shall be required in
connection with any registration, qualification or compliance referred to in
this Section 7.

            7.8 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of SIGNAL, SIGNAL
agrees to:

                      (a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date of the first registration under the Securities
Act filed by SIGNAL for an offering of its securities to the general public;

                      (b) File with the Commission in a timely manner all
reports and other documents required of SIGNAL under the Securities Exchange Act
at any time after it has become subject to such reporting requirements; and

                      (c) So long as a Holder owns any Registrable Securities,
to furnish to such Holder forthwith upon request a written statement by SIGNAL
as to its compliance with the reporting requirements of said Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by SIGNAL for an offering of its securities to the general public) and of
the Securities Act and the Securities Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent annual
or quarterly report of SIGNAL, and such other reports and documents of SIGNAL as
a Purchaser may reasonably request in availing itself of any rule or regulation
of the Commission allowing a Purchaser to sell any such securities without
registration.

            7.9 TRANSFER OF REGISTRATION RIGHTS. The rights to cause SIGNAL to
register securities granted under Sections 7.2 and 7.3 may be assigned or
otherwise conveyed to a

                                       16.
<PAGE>   18
transferee or assignee of Registrable Securities, who shall be considered a
"HOLDER" for purposes of this Section 7, provided that (a) SIGNAL is given
written notice by such Holder at the time of or within a reasonable time (but
not more than thirty (30) days) after said transfer, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned and (b) the
transferee acquires at least 50,000 Shares in a private transaction.

            7.10 TERMINATION OF REGISTRATION RIGHTS. The registration rights
granted pursuant to this Section 7 shall terminate (i) upon the third
anniversary of the effective date of the IPO or (ii) as to any particular
Holder, at such time after the IPO as all Registrable Securities held by such
Holder can be sold without compliance with the registration requirements of the
Securities Act pursuant to Rule 144 (including Rule 144(k)) promulgated
thereunder.

8.          MISCELLANEOUS.

            8.1 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.

            8.2 NOTICES. Any notices or communications provided for in this
Agreement to be made by either of the parties to the other shall be in writing,
in English, and shall be made by prepaid air mail with return receipt addressed
to the other at its address set forth above. Any such notice or communication
may also be given by hand, or facsimile to the appropriate designation. Either
party may by like notice specify an address to which notices and communications
shall thereafter be sent. Notices sent by mail, facsimile or cable shall be
effective upon receipt and notices given by hand shall be effective when
delivered.

            8.3 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of California, as such laws are applied to contracts entered into and
to be performed within such state.

            8.4 DISPUTE RESOLUTION. Disputes arising under this Agreement shall
be resolved in accordance with Article 12 of the Collaboration Agreement.

            8.5 ENTIRE AGREEMENT. This Agreement and the Collaboration Agreement
between the parties of even date herewith set forth all of the covenants,
promises, agreements, warranties, representations, conditions and understandings
between the parties hereto and supersede and terminate all prior agreements and
understanding between the parties. There are no covenants, promises, agreements,
warranties, representations conditions or understandings, either oral or
written, between the parties

                                       17.
<PAGE>   19
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.

            8.6 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 (a) 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 (b) 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 of this Agreement are to be effectuated.

            8.7 ASSIGNMENT.

                      (a) 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) 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 another party
and no consent for a merger or similar reorganization shall be required
hereunder.

                      (c) 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.

            8.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

            8.9 BROKERS OR FINDERS. Each party represents that it neither is nor
will be obligated for any broker's or finder's fees or commissions in connection
with this transaction. SIGNAL agrees to indemnify, defend and hold harmless DPM
from and against any and all claims, actions, damages, costs and expenses
arising from any claim of entitlement to any such fee or similar payment from
SIGNAL in connection with this

                                       18.
<PAGE>   20
transaction. DPM agrees to indemnify, defend and hold harmless SIGNAL from and
against any and all claims, actions, damages, costs and expenses arising from
any claim of entitlement to any such fee or similar payment from DPM in
connection with this transaction.

                                       19.
<PAGE>   21
            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.

THE DUPONT MERCK PHARMACEUTICAL COMPANY

By:  [SIG]
   -------------------------------

Title:  President & CEO
      ----------------------------

SIGNAL PHARMACEUTICALS, INC.

By:  [SIG]
   -------------------------------

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

                                       20.

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