Document:

<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 One Million Dollars ($1,000,000) (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.<PAGE>   1
                                           *** Text Omitted and Filed Separately
                                               Confidential Treatment Requested
                                               Under 17 C.F.R. Sections 200.80,
                                               200.83 and 230.406

                                                                   Exhibit 10.45

                JOINT DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

                                 BY AND BETWEEN

                             NIPPON KAYAKU CO., LTD.

                                       AND

                          SIGNAL PHARMACEUTICALS, INC.

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>            <C>                                                                        <C>
1.      DEFINITIONS..........................................................................1

        1.1    "Affiliate"...................................................................1

        1.2    "Allowable Costs and Expenses"................................................2

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

        1.4    "CNS Field"...................................................................2

        1.5    "Collaboration"...............................................................2

        1.6    "Collaboration Know-How"......................................................2

        1.7    "Collaboration Patents".......................................................2

        1.8    "Compound(s)".................................................................3

        1.9    "Commercialization Management Committee"......................................3

        1.10   "Commercialization Plan"......................................................3

        1.11   "Commercializing Party".......................................................3

        1.12   "Confidential Information"....................................................3

        1.13   "Control".....................................................................3

        1.14   "Development".................................................................3

        1.15   "Development Candidate".......................................................3

        1.16   "FDA".........................................................................3

        1.17   "Field".......................................................................3

        1.18   "Initial Joint Development Project"...........................................3

        1.19   "Joint Project"...............................................................3

        1.20   "Joint Project Head"..........................................................3

        1.21   "Know-How"....................................................................4

        1.22   "Net Sales of Other Products".................................................4

        1.23   "Net Sales of Products".......................................................4

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

        1.25   "Nippon Kayaku Patents".......................................................4

        1.26   [***].........................................................................5

        1.27   "NSP6783".....................................................................5

        1.28   "Other Product"...............................................................5

        1.29   "Patent"......................................................................5
</TABLE>

                                       i.

                      *** Confidential Treatment Requested
<PAGE>   3

                                TABLE OF CONTENTS
                                   (CONTINUED)
<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>            <C>                                                                        <C>
        1.30   "Patent Costs"................................................................5

        1.31   "PNS Field"...................................................................5

        1.32   "Product".....................................................................5

        1.33   "Profit or Loss"..............................................................5

        1.34   "Regulatory Approval".........................................................5

        1.35   "Research"....................................................................6

        1.36   "Research and Development Management Committee"...............................6

        1.37   "Research and Development Plan"...............................................6

        1.38   "Research Lead"...............................................................6

        1.39   "Research Lead Notice"........................................................6

        1.40   "Rest of the World"...........................................................6

        1.41   "Roche Agreement".............................................................6

        1.42   "Signal Know-How".............................................................6

        1.43   "Signal Patents"..............................................................6

        1.44   "Term"........................................................................7

        1.45   "Third Party".................................................................7

        1.46   "Valid Claim".................................................................7

2.      RESEARCH AND DEVELOPMENT PHASE OF COLLABORATION......................................7

        2.1    Research and Development Management Committee.................................7

        2.2    Responsibilities of the RDMC..................................................7

        2.3    Determination of Additional Research Leads....................................9

        2.4    Know-How, Reports and Delivery of Compounds...................................9

        2.5    Management and Staffing of the Initial Joint Development Project.............10

        2.6    Operational Authority and Responsibility of Joint Project Head Under
               the Initial Joint Development Project........................................10

        2.7    Management and Staffing for Other Joint Projects.............................10

        2.8    Contributions................................................................11

        2.9    Expenses.....................................................................12

        2.10   Visiting Personnel...........................................................12

3.      COMMERCIALIZATION PHASE OF COLLABORATION............................................12

</TABLE>

                                       ii.
<PAGE>   4

                                TABLE OF CONTENTS
                                   (CONTINUED)
<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>            <C>                                                                        <C>
        3.1    Commercialization Management Committee.......................................12

        3.2    Responsibilities of the CMC..................................................12

        3.3    Contributions................................................................14

        3.4    Commercialization Expenses...................................................14

        3.5    Regulatory Filings...........................................................14

        3.6    Product Marketing Plans......................................................14

        3.7    Product Brand Names..........................................................14

        3.8    Contracting for Services.....................................................14

        3.9    Supply of Bulk Drug Substance and Drug Product...............................15

4.      SHARING OF PROFITS OR LOSSES; OTHER PAYMENTS........................................15

        4.1    Sharing of Profits or Losses, Allowable Costs and Expenses and Costs of
               Goods Sold...................................................................15

        4.2    Nippon Kayaku Royalties on Sales of Products in Japan........................16

        4.3    Royalties on Sales of Products Outside the Field.............................16

        4.4    Royalties on Sales of Other Products in the Field............................16

        4.5    Royalties on Sales of Other Products Outside the Field.......................16

        4.6    Reduction of Participation...................................................17

        4.7    Revenues on Joint License to the Third Party.................................17

5.      ROYALTY OBLIGATIONS.................................................................17

        5.1    Royalties for Sales of Products or Other Products............................17

        5.2    Foreign Exchange.............................................................17

        5.3    Blocked Currency.............................................................17

        5.4    Taxes........................................................................17

        5.5    Payment and Reporting........................................................17

        5.6    Duration.....................................................................18

        5.7    Accounting...................................................................18

        5.8    Sales by Licensees and Sublicensees..........................................18

6.      LICENSE GRANTS......................................................................19

        6.1    Licenses During Collaboration................................................19

        6.2    Commercialization Licenses for Other Products and Outside the Field..........21

</TABLE>

                                      iii.
<PAGE>   5

                                TABLE OF CONTENTS
                                   (CONTINUED)
<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>            <C>                                                                        <C>
        6.3    Licenses and Sublicenses.....................................................22

        6.4    Duration of Licenses.........................................................22

7.      CONFIDENTIALITY; PUBLICATIONS.......................................................22

        7.1    Confidentiality; Exceptions..................................................22

        7.2    Authorized Disclosure........................................................23

        7.3    Publications.................................................................23

        7.4    Public Disclosure............................................................23

8.      OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS................................24

        8.1    Ownership of Collaboration Patents; Nippon Kayaku Patents; Signal
               Patents......................................................................24

        8.2    Patent Filings...............................................................24

        8.3    Enforcement Rights...........................................................25

9.      REPRESENTATIONS AND WARRANTIES; EXCLUSIVITY.........................................26

        9.1    Representations and Warranties...............................................26

        9.2    Limitation on Warranties.....................................................27

        9.3    Negative Covenants...........................................................27

10.     TERM AND TERMINATION................................................................27

        10.1   Term.........................................................................27

        10.2   Termination For Breach.......................................................28

        10.3   Termination For Bankruptcy...................................................28

        10.4   Surviving Rights.............................................................28

        10.5   Accrued Rights; Surviving Obligations........................................28

        10.6   Termination Not Sole Remedy..................................................28

11.     INDEMNIFICATION; INSURANCE..........................................................29

        11.1   Research and Development Indemnification.....................................29

        11.2   Indemnification Procedures...................................................29

        11.3   Insurance....................................................................29

12.     DISPUTE RESOLUTION..................................................................29

        12.1   Disputes.....................................................................29

        12.2   Dispute Resolution Procedures................................................30

</TABLE>

                                       iv.
<PAGE>   6

                                TABLE OF CONTENTS
                                   (CONTINUED)
<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>            <C>                                                                        <C>
13.     MISCELLANEOUS.......................................................................30

        13.1   Assignment...................................................................30

        13.2   Consents Not Unreasonably Withheld...........................................31

        13.3   Force Majeure................................................................31

        13.4   Further Actions..............................................................31

        13.5   No Trademark Rights..........................................................31

        13.6   Notices......................................................................31

        13.7   Waiver.......................................................................32

        13.8   Severability.................................................................32

        13.9   Ambiguities..................................................................32

        13.10  Counterparts.................................................................32

        13.11  Entire Agreement.............................................................33

        13.12  Governing Law................................................................33

        13.13  Headings.....................................................................33

</TABLE>

                                       v.
<PAGE>   7

                JOINT DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

      THIS JOINT DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (the "Agreement")
is made effective as of February 9, 2000 (the "Effective Date") by and between
NIPPON KAYAKU CO., LTD., a Japanese corporation ("Nippon Kayaku"), having its
principal place of business at Tokyo Fujimi Building, 11-2, Fujimi 1-chome,
Chiyoda-ku, Tokyo 102-8172, Japan, and SIGNAL PHARMACEUTICALS, INC., a
California corporation ("Signal"), having its principal place of business at
5555 Oberlin Drive, San Diego, California 92121, U.S.A. (each, a "Party" and,
collectively, the "Parties").

                                    RECITALS

      WHEREAS, Nippon Kayaku and Signal are parties to that certain
Collaboration Agreement dated February 9, 1998 (the "Collaboration Agreement");

      WHEREAS, pursuant to Section 3.1 of the Collaboration Agreement, the
Parties desire to establish a collaborative relationship to develop and
commercialize novel drug products based on or derived from compounds identified
under the Collaboration Agreement for the treatment and prevention of diseases
and disorders of the peripheral nervous system and central nervous system on the
terms and subject to the conditions set forth herein; and

      WHEREAS, this Agreement is intended to supersede and replace the
Collaboration Agreement in its entirety.

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

1.    DEFINITIONS

      For the purposes of this Agreement, the following terms, whether used in
their singular or plural form, shall have the respective meanings set forth
below.

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

                                       1.
<PAGE>   8

      1.2   "ALLOWABLE COSTS AND EXPENSES" shall have the meaning provided in
Exhibit B hereto.

      1.3   "CNS" shall mean the central nervous system.

      1.4   "CNS FIELD" shall mean the treatment or prevention of CNS diseases
or disorders.

      1.5   "COLLABORATION" shall mean the activities, rights and obligations of
Nippon Kayaku and Signal encompassed in their relationship in accordance with
the Collaboration Agreement during the term thereof (and the rights and
obligations that survive such term) and this Agreement during the Term hereof
(and the rights and obligations that survive such Term).

      1.6   "COLLABORATION KNOW-HOW" shall mean Know-How: (i) relating to
Compounds (including, without limitation, their structure, function and
formulation); (ii) relating to results and data from animal studies conducted as
part of the Research or Development under the Collaboration Agreement or this
Agreement in accordance with the Research and Development Plan; (iii) otherwise
arising from or in connection with the conduct of the Research or Development
under the Collaboration Agreement or this Agreement in accordance with the
Research and Development Plan and jointly owned by or within the common Control
of the Parties, their respective Affiliates, licensees and sublicensees or
purchasers and assignees of their rights or obligations hereunder; (iv) relating
to results and data from preclinical and clinical studies conducted under this
Agreement in accordance with the Research and Development Plan; (v) relating to
commercialization, marketing, sales, finance, manufacturing, business or other
activities, data or plans with respect to Development Candidates or Products
under this Agreement; or (vi) otherwise arising from or in connection with the
conduct of activities under this Agreement and jointly owned by or within the
common Control of the Parties, their respective Affiliates, licensees and
sublicensees or purchasers and assignees of their rights or obligations
hereunder, but excluding Collaboration Patents.

      1.7   "COLLABORATION PATENTS" shall mean all Patents that claim or cover
inventions: (i) made jointly (as determined in accordance with the rules of
inventorship under United States patent law) by officers, employees, consultants
or agents of Signal, one of its Affiliates, licensees and sublicensees or
purchasers and assignees of its rights or obligations hereunder , on the one
hand, and officers, employees, consultants or agents of Nippon Kayaku or one of
its Affiliates, licensees and sublicensees or purchasers and assignees of its
rights or obligations hereunder, on the other hand, in connection with
activities conducted pursuant to the Collaboration Agreement or this Agreement;
(ii) which come under the common Control of Signal or one of its Affiliates,
licensees and sublicensees or purchasers and assignees of its rights or
obligations hereunder, on the one hand, and Nippon Kayaku or one of its
Affiliates, licensees and sublicensees or purchasers and assignees of its rights
or obligations hereunder, on the other hand, prior to the end of the Term; or
(iii) based on or derived from a Compound and conceived or reduced to practice
during the Research Term under the Collaboration Agreement (as defined therein)
or during the Term of this Agreement by officers, employees, consultants, agents
of one or more of the Parties, their Affiliates, licensees and sublicensees or
purchasers and assignees of their rights or obligations hereunder. A list of the
Collaboration Patents as of the Effective Date is set forth on Schedule III.

                                       2.
<PAGE>   9

      1.8   "COMPOUND(s)" shall mean: (a) NSP6783; (b) [***]; (c) any
small-molecule compound based on or derived from NSP6783 or [***]; (d) any
compound series based on or derived from, or any analog or modification of,
NSP6783 or [***]; or (e) any compound or series of compounds which is either
synthesized through medicinal chemistry and combinatorial chemistry techniques
or identified through searching the database of Signal's or Nippon Kayaku's
compound library as described in Section 2.4(c) of the Collaboration Agreement
or Section 2.4(c) of this Agreement, that, in each case, is identified, or is
acquired or licensed, by one or both of the Parties pursuant to the
Collaboration Agreement or this Agreement.

      1.9   "COMMERCIALIZATION MANAGEMENT COMMITTEE" or "CMC" shall mean the
committee established pursuant to Section 3.2 hereof.

      1.10  "COMMERCIALIZATION PLAN" shall have the meaning provided in Section
3.1 hereof.

      1.11  "COMMERCIALIZING PARTY" shall have the meaning provided in Section
5.1.

      1.12  "CONFIDENTIAL INFORMATION" shall have the meaning provided in
Section 7.1.

      1.13  "CONTROL" shall mean possession of the ability, whether by ownership
or license, to grant a license or sublicense as provided for herein without
violating the terms of any agreement or other arrangements with any Third Party.

      1.14  "DEVELOPMENT" shall mean all work performed by the Parties or on
their behalf pursuant to this Agreement directed towards or in connection with
the identification, development or Regulatory Approval of Development Candidates
or Products.

      1.15  "DEVELOPMENT CANDIDATE" shall mean a Research Lead that the RDMC has
determined to be suitable for preclinical and clinical development hereunder.

      1.16  "FDA" shall mean the United States Food and Drug Administration.

      1.17  "FIELD" shall mean the PNS Field and the CNS Field.

      1.18  "INITIAL JOINT DEVELOPMENT PROJECT" shall mean the Joint Project
regarding the development of Development Candidates and Products containing or
comprising NSP6783 for the prevention or treatment of chemotherapy-induced
neuropathies.

      1.19  "JOINT PROJECT" shall mean any research and development project in
the Field that is approved by the RDMC as part of a Research and Development
Plan.

      1.20  "JOINT PROJECT HEAD" shall mean:

            (a)   in the case of the Initial Joint Development Project, an
employee of Nippon Kayaku or its Affiliates who shall be experienced in clinical
and regulatory matters pertaining to the development of drug products and who is
designated by Nippon Kayaku as the head of the Initial Joint Development
Project; and

                                       3.

                      *** Confidential Treatment Requested
<PAGE>   10

            (b)   in the case of any other Joint Project, an employee of a Party
or its Affiliates who shall be experienced in clinical and regulatory matters
pertaining to the development of drug products and reasonably acceptable to the
other Party and who is designated by the RDMC as the head of such Joint Project.

      1.21  "KNOW-HOW" shall mean techniques, data, materials and chemicals
materially relating to the Field, including, without limitation, inventions,
practices, methods, knowledge, know-how, skill, experience, test data including
pharmacological, toxicological and clinical test data, regulatory filings and
submissions, analytical and quality control data, patent and legal data or
descriptions, and manufacturing, marketing, sales or finance data.

      1.22  "NET SALES OF OTHER PRODUCTS" shall mean the gross amounts invoiced
for sales of Other Products by Signal or Nippon Kayaku, as the case may be, and
its Affiliates, licensees and sublicensees or purchasers and assignees of its
rights or obligations hereunder to Third Parties pursuant to one or more of the
licenses and sublicenses granted under Article 6 and one or more of the rights
obtained under Section 13.1 less (a) discounts actually granted, (b) credits or
allowances actually granted upon claims, damaged goods, rejections or returns of
any such Other Product, including recalls, (c) freight, postage, shipping and
insurance charges actually allowed or paid for delivery of any such Other
Product, to the extent billed and (d) taxes, duties or other governmental
charges (other than income taxes) levied on, absorbed or otherwise imposed on
sales of any such Other Products. Sales of Other Products for use in clinical
trials prior to receipt of Regulatory Approval for such Other Products shall not
be included in Net Sales of Other Products.

      1.23  "NET SALES OF PRODUCTS" shall mean the gross amounts invoiced for
sales of Products by Signal or Nippon Kayaku, as the case may be, and its
Affiliates, licensees and sublicensees or purchasers and assignees of its rights
or obligations hereunder to Third Parties pursuant to one or more of the
licenses and sublicenses granted under Article 6 and one or more of the rights
obtained under Section 13.1 less (a) discounts actually granted, (b) credits or
allowances actually granted upon claims, damaged goods, rejections or returns of
any such Product, including recalls, (c) freight, postage, shipping and
insurance charges actually allowed or paid for delivery of any such Product, to
the extent billed and (d) taxes, duties or other governmental charges (other
than income taxes) levied on, absorbed or otherwise imposed on sales of any such
Products. Sales of Products for use in clinical trials prior to receipt of
Regulatory Approval for such Products shall not be included in Net Sales of
Products.

      1.24  "NIPPON KAYAKU KNOW-HOW" shall mean Know-How that is (i) owned or
within the Control of Nippon Kayaku, its Affiliate, licensee and sublicensee or
purchaser and assignee of its rights or obligations hereunder of Nippon Kayaku
prior to the end of the Term and (ii) necessary or useful for the research,
development, manufacture, use, sale or import of products pursuant to one or
more of the licenses and sublicenses granted under Article 6 and one or more of
the rights obtained under Section 13.1, but excluding Nippon Kayaku Patents,
Collaboration Know-How, Collaboration Patents, Signal Know-How and Signal
Patents.

      1.25  "NIPPON KAYAKU PATENTS" shall mean all Patents owned or Controlled
by Nippon Kayaku, its Affiliate, licensee and sublicensee or purchaser and
assignee of its rights or obligations hereunder of Nippon Kayaku (excluding
Collaboration Patents and Signal Patents)

                                       4.
<PAGE>   11

necessary or useful for the research, development, manufacture, use, sale or
import of products pursuant to one or more of the licenses and sublicenses
granted under Article 6 and one or more of the rights obtained under Section
13.1, where such Patents cover (i) inventions made prior to the Effective Date
of this Agreement, (ii) inventions made solely by officers, employees,
consultants or agents of Nippon Kayaku, its Affiliate, licensee and sublicensee
or purchaser and assignee of its rights or obligations hereunder of Nippon
Kayaku after the Effective Date and prior to the end of the Term (but
specifically excluding Collaboration Patents covered by Section 1.7(iii) and
Signal Patents), or (iii) inventions which come under the Control of Nippon
Kayaku, its Affiliates, licensees and sublicensees or purchasers and assignees
of its rights or obligations hereunder after the Effective Date and prior to the
end of the Term; a list of the Nippon Kayaku Patents as of the Effective Date is
set forth on Schedule I.

      1.26  "[***]" shall mean the compound Controlled by Nippon Kayaku known
as [***] and described on Exhibit A to the Collaboration Agreement.

      1.27  "NSP6783" shall mean the compound known as NSP6783, which was
identified pursuant to the Collaboration Agreement and described on Exhibit A
hereto.

      1.28  "OTHER PRODUCT" shall mean any pharmaceutical product based on or
derived from a Compound other than a Research Lead, Development Candidate or
Product.

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

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

      1.31  "PNS FIELD" shall mean the treatment or prevention of diabetic
neuropathy, chemotherapy-induced neuropathy or other diseases or disorders of
the peripheral nervous system in humans but specifically excluding therapeutic
and diagnostic products directed at pain, lower urinary tract dysfunction and
peripheral vascular disease; provided, however, that to the extent, if any, that
the rights of Roche Bioscience, a Division of Syntex (U.S.A.) Inc. in the PNS
Field under the Roche Agreement terminate, the foregoing exclusion shall no
longer be effective.

      1.32  "PRODUCT" shall mean any pharmaceutical product based on or derived
from any Research Lead that (a) has been designated a Development Candidate, (b)
has received Regulatory Approval, and (c) is covered by one or more of Signal
Patents, Signal Know-How, Nippon Kayaku Patents, Nippon Kayaku Know-How,
Collaboration Patents or Collaboration Know-How.

      1.33  "PROFIT OR LOSS" shall have the meaning provided in Exhibit B
hereto.

      1.34  "REGULATORY APPROVAL" shall mean any approval (including price and
reimbursement approvals), licenses, registrations or authorizations of any
supra-national, federal, state or local regulatory agency, department, bureau or
other government entity, necessary for the

                                       5.

                      *** Confidential Treatment Requested
<PAGE>   12

manufacture, use, storage, import, transport or sale of a pharmaceutical product
in a regulatory jurisdiction.

      1.35  "RESEARCH" shall mean all work in the Field performed by the Parties
or on their behalf pursuant to the Collaboration Agreement or this Agreement
directed towards or in connection with the discovery, identification and
investigation of Research Leads.

      1.36  "RESEARCH AND DEVELOPMENT MANAGEMENT COMMITTEE" or "RDMC" shall mean
the committee established pursuant to Section 2.2 hereof.

      1.37  "RESEARCH AND DEVELOPMENT PLAN" shall have the meaning provided in
Section 2.1 hereof.

      1.38  "RESEARCH LEAD" shall mean a Compound identified by either Party
(separately or jointly) pursuant to the Collaboration Agreement or this
Agreement showing a certain potentiality (potency, selectivity and other
parameters determined by the RMDC) determined by the RDMC.

      1.39  "RESEARCH LEAD NOTICE" shall have the meaning provided in Section
2.3.

      1.40  "REST OF THE WORLD" shall mean the entire world excluding Japan.

      1.41  "ROCHE AGREEMENT" shall mean the Research Collaboration Agreement
dated August 26, 1996 between Signal and Roche Bioscience, a Division of Syntex
(U.S.A.) Inc., a Delaware corporation.

      1.42  "SIGNAL KNOW-HOW" shall mean Know-How that is (i) owned or within
the Control of Signal, its Affiliate, licensee and sublicensee or purchaser and
assignee of its rights or obligations hereunder prior to the end of the Term and
(ii) necessary or useful for the research, development, manufacture, use, sale
or import of products pursuant to one or more of the licenses and sublicenses
granted under Article 6 and one or more of the rights obtained under Section
13.1, but excluding Signal Patents, Nippon Kayaku Patents, Nippon Kayaku
Know-How, Collaboration Patents and Collaboration Know-How.

      1.43  "SIGNAL PATENTS" shall mean all Patents owned or Controlled by
Signal, its Affiliate, licensee and sublicensee or purchaser and assignee of its
rights or obligations hereunder (excluding Collaboration Patents and Nippon
Kayaku Patents) necessary or useful for the research, development, manufacture,
use, sale or import of products pursuant to one or more of the licenses and
sublicenses granted under Article 6 and one or more of the rights obtained under
Section 13.1 where such Patents cover (i) inventions made prior to the Effective
Date of this Agreement, (ii) inventions made solely by officers, employees,
consultants or agents of Signal, its Affiliate, licensee and sublicensee or
purchaser and assignee of its rights or obligations hereunder after the
Effective Date and prior to the end of the Term (but specifically excluding
Collaboration Patents covered by Section 1.7(iii) and Nippon Kayaku Patents), or
(iii) inventions which come under the Control of Signal, its Affiliate, licensee
and sublicensee or purchaser and assignee of its rights or obligations hereunder
after the Effective Date and prior to the end of the Term; a list of the Signal
Patents as of the Effective Date is set forth on Schedule II.

                                       6.
<PAGE>   13

      1.44  "TERM" shall have the meaning provided in Section 10.1.

      1.45  "THIRD PARTY" shall mean any entity or individual other than Signal,
Nippon Kayaku and Affiliates of either.

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

2.    RESEARCH AND DEVELOPMENT PHASE OF COLLABORATION.

      2.1   RESEARCH AND DEVELOPMENT MANAGEMENT COMMITTEE. The purpose of the
Collaboration is (a) to discover, and conduct further Research of, Research
Leads identified under the Collaboration Agreement or this Agreement, and (b) to
identify Research Leads suitable for designation as Development Candidates and
for development into Products for commercialization in the Field. The Parties
agree that, with respect to each Research Lead or Development Candidate, all
Research and Development activities shall be conducted as specified in a written
long-term research and development plan and an annual research and development
plan and budget to be coordinated and approved by the Research and Development
Management Committee, as such research and development plans and budgets may be
amended from time to time in writing by the RDMC (collectively, a "Research and
Development Plan"), with each Party to use commercially reasonable and diligent
efforts (as defined below) to perform its responsibilities under each such
Research and Development Plan.

      2.2   RESPONSIBILITIES OF THE RDMC. The Parties shall establish a Research
and Development Management Committee ("RDMC") promptly after the date of the
execution of this Agreement. The RDMC shall be comprised of three (3)
representatives of each Party or such greater number of representatives as the
Parties may mutually agree, with at least one of each Party's representatives
having Development responsibility and one of each Party's representatives having
business management responsibility for such Party. The initial members of the
RDMC are set forth on Schedule IV. Either Party may appoint substitute or
replacement members of the RDMC to serve as their representatives as long as any
such substitutes or replacements are persons of comparable standing and
authority within the Parties' organizations. Decisions by the RDMC shall be made
by unanimous vote. The RDMC shall continue in existence for so long as Research
is ongoing or at least one Research Lead or Development Candidate is in ongoing
Research or Development hereunder. The RDMC shall have the responsibility and
authority, except for Japan, to:

            (a)   Determine the overall strategy and policies for Research
regarding the identification of additional Research Leads and Development of
Development Candidates and Products;

            (b)   Plan, monitor and prioritize Research activities, including
approving, reviewing and modifying the Research and Development Plan and
determining whether a Compound is a Research Lead, and Development activities,
including approving, reviewing and

                                       7.
<PAGE>   14

modifying the long-range, annual and periodic (e.g., quarterly and monthly)
Research and Development Plans;

            (c)   Determine whether a Research Lead meets criteria established
by the RDMC for initiating, continuing or discontinuing development of a
Development Candidate;

            (d)   Determine the principal indications and clinical and
geographical markets for which Development Candidates shall be developed;

            (e)   Evaluate the results and discuss information relating to
Research, Development and commercialization activities hereunder;

            (f)   Review scientific and business publications and presentations
of the Parties regarding Research, Development and commercialization activities
hereunder;

            (g)   Determine the suitability of Third Party contract services for
carrying out Research, Development and commercialization activities hereunder,
including preclinical and clinical studies and Product marketing, sales,
distribution and manufacturing;

            (h)   Assign responsibility for the conduct of clinical studies and
pursuit of Regulatory Approvals and the filing of drug approval applications for
Products;

            (i)   Determine the number of Nippon Kayaku and Signal employees
(other than the Joint Project Head of the Initial Joint Development Project) and
external consultants to be assigned to the Collaboration and otherwise allocate
resources among Joint Projects;

            (j)   Review and approve a Research and Development Plan for each
Research Lead, Development Candidate and Product through, and following,
Regulatory Approval;

            (k)   Determine the suitability of a certain Third Party to be the
licensee and sublicensee which shall obtain jointly from Nippon Kayaku and
Signal the right to share the Profit or Loss by contributing development of
Research Lead, Development Candidate or Product. The RDMC shall also review (but
shall not have the authority to approve or prohibit) either Party's license or
sublicense to a Third Party;

            (l)   Determine the definition of the Project set forth in Section
4.6;

            (m)   Evaluate and select Compounds for license or acquisition as
part of the Collaboration; and

            (n)   Determine whether providing clinicians or clinical
investigators with samples of Research Leads or Development Candidates prior to
Regulatory Approval is permissible.

      Either Party may refer any dispute to the appropriate officers of the
Parties for consideration and resolution pursuant to Article 12. The RDMC shall
meet at least once per calendar quarter, with two (2) of such meetings per
calendar year being conducted in each of San

                                       8.
<PAGE>   15

Diego, California and Tokyo, Japan, or at such other times and places agreed to
by the Parties, until the end of the Term.

      2.3   DETERMINATION OF ADDITIONAL RESEARCH LEADS. Upon the identification
by one or both of the Parties pursuant to this Agreement of a Research Lead,
such Party or Parties shall promptly provide notice thereof (the "Research Lead
Notice"), which notice shall include all relevant data regarding such Research
Lead, to the RDMC and, if applicable, the other Party.

      2.4   KNOW-HOW, REPORTS AND DELIVERY OF COMPOUNDS.

            (a)   Each Party shall disclose to the other Party all Collaboration
Know-How learned, acquired or discovered by such Party, or its Affiliates,
licensors (where permitted), licensees or sublicensees, at any time on or before
the end of the Term, as promptly as is reasonably practicable after such
Collaboration Know-How is learned, acquired or discovered. At the time of
effectiveness of any license granted hereunder, Signal and/or Nippon Kayaku, as
appropriate under the license granted, (i) shall make available and disclose to
the other Party such Signal Know-How or Nippon Kayaku Know-How, as the case may
be, known by such Party as of such date, and (ii) shall also disclose any Signal
Know-How or Nippon Kayaku Know-How, as the case may be, learned, acquired or
discovered by such Party or its Affiliates, licensees or sublicensees at any
time thereafter for so long as such license continues in full force and effect,
as promptly as is reasonably practicable after such Signal Know-How or Nippon
Kayaku Know-How is learned, acquired or discovered. The Parties shall exchange
written reports (with copies to the RDMC) presenting a meaningful summary of
research, development and commercialization activities performed under this
Agreement, at a frequency to be determined from time to time by the RDMC (but in
any event at least monthly). Each Party shall provide the other with raw data,
including QSAR, for work carried out in the course of such activities, if
reasonably requested by the other Party. Know-How and other information
regarding the Collaboration disclosed by one Party to the other Party pursuant
hereto may be used only in accordance with the rights granted under this
Agreement.

            (b)   All Compounds synthesized in the course of any Research
hereunder shall first be used for purposes of the Collaboration. When the RDMC
determines that Compounds are not suitable for pursuit under the Collaboration,
then, to the extent Signal is not contractually prohibited under the terms of
its collaboration agreements in existence as of the Effective Date, such
Compound shall be freely available for testing by each of the Parties in their
other research and development programs and use outside the Field by each of the
Parties in accordance with the terms of this Agreement. Upon termination of the
rights of Roche Bioscience in the PNS Field provided in Section 1.31, Signal
shall provide notice thereof to Nippon Kayaku.

            (c)   It is understood, and the Parties hereby acknowledge and
agree, that as either Party's chemists develop structure-activity relationships
from the active analogues of NSP6783 and/or [***] in the course of the
Collaboration, that Party shall, using its database management program, conduct
sub-structure searches of such Party's compound library for compounds to screen
in the Collaboration, which may include compounds made or acquired in such
Party's existing or future programs (where permitted). Any of these compounds
that are not active in such programs' assays shall be evaluated in the
Collaboration, regardless of whether such compounds were made or acquired as
part of such programs.

                                       9.

                      *** Confidential Treatment Requested
<PAGE>   16

            (d)   All Research Leads and analogs thereof synthesized by one
Party in the course of the Collaboration shall be made available, together with
their chemical structures, to the other Party promptly upon request.

      2.5   MANAGEMENT AND STAFFING OF THE INITIAL JOINT DEVELOPMENT PROJECT.
One employee of Nippon Kayaku or its Affiliates, who shall be experienced in
clinical and regulatory matters pertaining to the development of drug products
and who shall be reasonably acceptable to Signal, shall be designated the Joint
Project Head of the Initial Joint Development Project. All other employees of
either Party or its Affiliates assigned to the Initial Joint Development Project
shall be determined by the RDMC. Any Nippon Kayaku or its Affiliates'
employee(s) responsible for carrying out clinical development and regulatory
affairs activities in the United States under the Initial Joint Development
Project shall be assigned by the RDMC and based in offices of Nippon Kayaku, its
Affiliates or Signal located in the United States. Such Nippon Kayaku or its
Affiliates' employee(s) shall be under the primary direction of Nippon Kayaku
management and adjusted from time to time as the requirements of the Initial
Joint Development Project demand and the RDMC determines. Participation of
clinical and regulatory employees of Signal in the Initial Joint Development
Project shall be determined in advance as part of the Research and Development
Plan and adjusted from time to time as the requirements of the Initial Joint
Development Project demand and the RDMC determines. Such Signal employee(s)
shall report to and be under the primary direction of Signal management but
shall also take direction (consistent with the Research and Development Plan and
the terms of this Agreement) from the Joint Project Head for the Initial Joint
Development Project on matters regarding Product development activities.

      2.6   OPERATIONAL AUTHORITY AND RESPONSIBILITY OF JOINT PROJECT HEAD UNDER
THE INITIAL JOINT DEVELOPMENT PROJECT. With regard to clinical development
activities under the Initial Joint Development Project, the Joint Project Head
shall have primary authority and responsibility for: (a) coordinating day-to-day
activities under the Initial Joint Development Project; (b) concluding and
managing contractual agreements with Third Parties (e.g., CRO's and
consultants); (c) managing the receipt and payment of funds for Collaboration
activities; (d) managing the collection, analysis and reporting of Initial Joint
Development Project data and information; and (e) recommending to the RDMC any
changes in staffing of the Initial Joint Development Project. Such Joint Project
Head shall carry out his or her duties: (i) either directly or by assigning
other Nippon Kayaku, Signal or their Affiliates' employees to carry out such
activities; (ii) in a manner consistent with the Research and Development Plan
regarding the Initial Joint Development Project; and (iii) according to policies
approved by the RDMC. It is further agreed that such Joint Project Head shall
maintain regular communications with and, to the extent such guidance is
consistent with achieving the Initial Joint Development Project's goals, take
guidance from the heads of clinical development and regulatory affairs of both
Nippon Kayaku and Signal, including regular briefings on recent developments and
future plans under the Initial Joint Development Project.

      2.7   MANAGEMENT AND STAFFING FOR OTHER JOINT PROJECTS. For any Joint
Projects other than the Initial Joint Development Project, the RDMC shall
determine the appropriate Joint Project Head and make other personnel
assignments to such Joint Project. Other provisions in Sections 2.5 and 2.6
shall be applied to Other Joint Projects.

                                      10.
<PAGE>   17

      2.8   CONTRIBUTIONS.

            (a)   BY SIGNAL. Once the RDMC has designated a Compound as a
Research Lead, the RDMC shall determine which Signal personnel shall be assigned
to the applicable Joint Project. Signal agrees to exert commercially reasonable
and diligent efforts to perform its obligations under each Research and
Development Plan. In the performance of such work, Signal shall maintain and
utilize scientific and other staff (including consultants), laboratories,
offices and other facilities consistent with such undertaking. All employees and
consultants of Signal who are assigned to the Collaboration shall be required to
sign a proprietary information and confidentiality agreement assigning to Signal
all rights to any inventions pertaining to the Collaboration.

            (b)   BY NIPPON KAYAKU. With respect to the Initial Joint
Development Project, Nippon Kayaku shall be responsible for: (a) designating the
Joint Project Head; and (b) diligently managing and conducting, or contracting
for the conduct of, Research, Development and commercialization activities with
respect to NSP6783 in Japan. Once the RDMC has designated any other Compound as
a Research Lead or Development Candidate, the RDMC shall determine which Nippon
Kayaku or its Affiliates' personnel shall be assigned to the applicable Joint
Project. Nippon Kayaku agrees to exert commercially reasonable and diligent
efforts to perform its obligations under each Research and Development Plan. In
the performance of such work, Nippon Kayaku shall maintain and utilize
scientific and other staff (including consultants), laboratories, offices and
other facilities consistent with such undertaking. All employees and consultants
of Nippon Kayaku or its Affiliates who are assigned to the Collaboration shall
be required to sign a proprietary information and confidentiality agreement
assigning to Nippon Kayaku all rights to any inventions pertaining to the
Collaboration. Nippon Kayaku shall provide written reports on the plan and
progress of development of a Research Lead or Development Candidate in Japan to
the RDMC on a quarterly basis until the filing of drug approval application for
a Product. Nippon Kayaku shall, at Signal's request, provide Signal of all
clinical data obtained during the clinical trial conducted by Nippon Kayaku or
on its behalf in Japan in the Field. Such clinical data may be used in
Development by Signal, its Affiliates, licensees and sublicensees or purchasers
and assignees of its rights or obligations hereunder.

            (c)   BY NIPPON KAYAKU AND SIGNAL, JOINTLY, OR BY A THIRD PARTY.
With respect to Research Leads, Development Candidates and Products in the PNS
Field, both Nippon Kayaku and Signal shall jointly carry out, or contract with
Third Parties for the conduct of, Research, Development and commercialization
activities in the Rest of the World. With respect to Research Leads, Development
Candidates and Products in the CNS Field, both Parties shall have the option,
upon mutual consent, to contract with a Third Party expert in the CNS Field to
provide funding and assume certain responsibilities for Research, Development
and commercialization in the Rest of the World.

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

                                      11.
<PAGE>   18

events with respect to the Research and Development Plans, the Parties agree to
discuss such changed circumstances and appropriate mechanisms to address them.

      2.9   EXPENSES. All costs and expenses incurred for research and
development of Research Leads, Development Candidates and Products shall be
shared equally by the Parties in accordance with Exhibit B hereto, provided that
such costs and expenses are in accordance with the applicable Research and
Development Plan, excluding costs and expenses incurred by or on behalf of
Nippon Kayaku in connection with the development and commercialization of
Products in Japan, which costs and expenses shall be borne solely by Nippon
Kayaku. In determining Allowable Costs and Expenses and Costs of Goods Sold, any
Party providing project-specific support-activities (e.g., laboratory research,
animal pharmacology and toxicology, manufacturing, QA/QC, clinical development,
regulatory affairs or clinical data management) may calculate the fully-burdened
cost and expense of providing such support activity, including both
project-specific variable costs and expenses and Allocable Overhead (as such
term is defined in Exhibit B hereto), using standard activity-based project
costing methods and otherwise in accordance with Exhibit B hereto.

2.10  VISITING PERSONNEL. Nippon Kayaku may, at its option, send up to [***]
visiting personnel of Nippon Kayaku and its Affiliates with clinical development
or regulatory affairs expertise to Signal's facilities in San Diego for a
duration determined by the RDMC. [***] Nippon Kayaku shall be responsible for
such scientists' living expenses, and Signal shall provide office and/or
laboratory space and supervision. Such personnel shall sign Signal's standard
form of Confidential Disclosure Agreement. Signal shall give Nippon Kayaku's or
its Affiliates' personnel full and correct instructions necessary to avoid any
loss, damage, death or injury, and Nippon Kayaku shall cause such personnel to
obey such instructions.

3.    COMMERCIALIZATION PHASE OF COLLABORATION.

      3.1   COMMERCIALIZATION MANAGEMENT COMMITTEE. The Parties agree that, with
respect to each Product, all commercialization activities (excluding Nippon
Kayaku's commercialization activities with respect to Products in Japan) shall
be conducted as specified in a written long-term commercialization plan and an
annual commercialization plan and budget to be coordinated and approved by the
Commercialization Management Committee, as such commercialization plans and
budgets may be amended from time to time in writing by the CMC (collectively, a
"Commercialization Plan"), with each Party to use commercially reasonable and
diligent efforts (as defined above) to perform its responsibilities under each
such Commercialization Plan.

      3.2   RESPONSIBILITIES OF THE CMC. The Parties shall establish a
Commercialization Management Committee ("CMC") promptly after a Development
Candidate is entered into the first Phase III clinical trial. The CMC shall be
comprised of three (3) representatives of each Party or such greater number of
representatives as the Parties may mutually agree, with at least one of each
Party's representatives having sales and marketing responsibility and one of
each Party's representatives having senior business management responsibility
for such Party. The initial members of the CMC shall be determined at the time
the CMC is established. Either Party

                                      12.

                      *** Confidential Treatment Requested
<PAGE>   19

may appoint substitute or replacement members of the CMC to serve as their
representatives as long as any such substitutes or replacements are persons of
comparable standing and authority within the Parties' organizations. Decisions
by the CMC shall be made by unanimous vote. The CMC shall continue in existence
for so long as at least one Development Candidate or Product is in ongoing
development or commercialization hereunder. With respect to commercialization of
Products in the Rest of the World, the CMC shall have the responsibility and
authority to:

            (a)   Oversee the commercialization of Products, including
commercialization planning, Product manufacturing and inventory planning, annual
budgeting, marketing, sales, distribution and post-Regulatory Approval clinical
development of Products;

            (b)   Monitor, review and comment on costs incurred by the Parties
in the manufacture, marketing, sale, distribution and post-Regulatory Approval
clinical development of Products;

            (c)   Review and comment on the Commercialization Plans;

            (d)   Receive and provide to the Parties all sales, pricing, and
financial reports pertaining to Commercialization of Products;

            (e)   Recommend to the RDMC the principal indications and delivery
routes for all Products;

            (f)   Determine the party (Nippon Kayaku, Signal, their Affiliates
or Third Party, solely or jointly) which shall be responsible for preparing and
submitting regulatory filings in all countries worldwide, except for Japan where
Nippon Kayaku shall have primary responsibility for all regulatory filings;

            (g)   Make pricing decisions with respect to Products;

            (h)   Facilitate the flow of information with respect to the
commercialization of Products; and

            (i)   Determine on a country-by-country basis the party (Nippon
Kayaku, Signal, their Affiliates or Third Party, solely or jointly) which shall
conduct development and commercialization of a Development Candidate and
Product.

      Either Party may refer any dispute to the appropriate officers of the
Parties for consideration and resolution pursuant to Article 12. The CMC shall
meet at least once per calendar quarter, with two (2) of such meetings per
calendar year being conducted in each of San Diego, California and Tokyo, Japan,
or at such other times and places agreed to by the Parties, until the end of the
Term.

                                      13.
<PAGE>   20

      3.3   CONTRIBUTIONS. Each Party's respective rights and responsibilities
for manufacturing, sales and marketing activities shall be determined by the CMC
at such time as sufficient clinical trial and market information regarding a
Product is available (which time shall be determined by the RDMC).

            (a)   BY SIGNAL. Signal agrees to exert commercially reasonable and
diligent efforts to perform its obligations under the Commercialization Plan. In
the performance of such work, Signal shall maintain and utilize such staff
(including consultants), offices and other facilities consistent with such
undertaking.

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

      3.4   COMMERCIALIZATION EXPENSES. All costs and expenses incurred for
commercialization of Products shall be shared equally by the Parties except for
Japan in accordance with Exhibit B hereto, provided that such costs and expenses
are in accordance with the applicable Commercialization Plan.

      3.5   REGULATORY FILINGS. Neither Party shall take any action that will or
could reasonably be expected to unnecessarily impair the other Party's efforts
to achieve Regulatory Approvals for which the Party is responsible. Nippon
Kayaku and Signal shall, together with any licensee or sublicensee, if any,
develop a worldwide development plan to coordinate clinical studies and
regulatory filings in all countries for which marketing approval is to be sought
with the goal of expediting the approval and marketing of each Product on a
worldwide basis.

      3.6   PRODUCT MARKETING PLANS. Subject to and as part of preparing
Research and Development Plans and Commercialization Plans approved by the RDMC
or CMC, respectively, Nippon Kayaku and Signal shall conduct, or contract with
Third Parties to conduct, market analysis and develop marketing plans with the
goal of maximizing each Product's Net Sales potential and competitive advantage
worldwide through a combination of Product design, development, pricing,
packaging, promotion and distribution strategies, which strategies shall be
coordinated between and among all countries for which development approval and
Regulatory Approval are to be sought.

      3.7   PRODUCT BRAND NAMES. Subject to Research and Development Plans and
Commercialization Plans approved by the RDMC or CMC, respectively, and to the
extent such strategy is beneficial in a given territory, Nippon Kayaku and
Signal shall endeavor to establish a common brand name under which each Product
would be marketed worldwide in order to maximize brand equity and the
corresponding return on development and marketing expenditures.

      3.8   CONTRACTING FOR SERVICES. Either Party may contract with the other
Party for various development and commercialization services, including
preclinical and clinical development, regulatory affairs, manufacturing,
marketing, sales and distribution services. Any such contracting shall be
mutually determined by both Parties on a Product-by-Product basis.

                                      14.
<PAGE>   21

Either Party may provide any such services at its fully-burdened cost plus a
commercially reasonable mark-up.

3.9   SUPPLY OF BULK DRUG SUBSTANCE AND DRUG PRODUCT. With respect to Products
developed for indications in the PNS Field, the Parties hereby agree that Nippon
Kayaku shall have the exclusive right to manufacture and supply bulk drug
substance and finished drug product on a worldwide basis. For purposes of
determining the transfer price of bulk drug substance and finished drug product
supplied by Nippon Kayaku hereunder, such transfer price shall [***]. Nippon
Kayaku's unit transfer price for commercial bulk drug substance and finished
drug product shall be no more than [***]. Signal further agrees to grant Nippon
Kayaku exclusive manufacturing rights for Products developed for indications in
the CNS Field, provided the granting of such rights to Nippon Kayaku does not
limit the Parties' ability to obtain collaboration partners for indications in
the CNS Field in the Rest of the World.

4.    SHARING OF PROFITS OR LOSSES; OTHER PAYMENTS

      4.1   SHARING OF PROFITS OR LOSSES, ALLOWABLE COSTS AND EXPENSES AND COSTS
OF GOODS SOLD. Subject to the terms and conditions of this Agreement, Nippon
Kayaku and Signal shall participate actively and equally in the Research,
Development and commercialization of Research Leads, Development Candidates and
Products, and, except as otherwise specifically provided in this Agreement,
Nippon Kayaku and Signal shall share equally (50%/50%) the Profits and Losses,
Allowable Costs and Expenses and Costs of Goods Sold (as such terms are defined
in Exhibit B hereto) for Research Leads, Development Candidates and Products
developed and commercialized under this Agreement (excluding Research Leads,
Development Candidates and Products developed and commercialized by Nippon
Kayaku pursuant to the license granted under Sections 6.1(b)(i) and 6.1(c)(i))
in accordance with the provisions of Exhibit B hereto. For the avoidance of
doubt, the Parties represent that, if a Party licenses, sublicenses, sells or
assigns its rights under this Agreement to its Affiliates or Third Parties, such
Party, its licensees and sublicensees or purchasers and assignees of its rights
or obligations hereunder (the Affiliates and the Third Parties) in the aggregate
shall take only fifty percent (50%) of Profits and Losses, Allowable Costs and
Expenses and Costs of Goods Sold, and the other fifty percent (50%) of Profits
and Losses, Allowable Costs and Expenses and Costs of Goods Sold shall in the
aggregate be taken by the other Party, its Affiliates, licensees, sublicensees,
purchasers and assignees. The Parties agree that if either Party fails to pay
its respective share of development and commercialization costs and expenses in
accordance with this Agreement (including, without limitation, Exhibit B
hereto), then following due notice by the other Party, which shall be given to
the non-paying Party and a copy of which shall be given to all of the RDMC
members, and provided the non-paying Party has not cured the non-payment within
the non-paying Party's fourteen (14) working days of such notice, then, upon the
expiration of such fourteen (14) working day period, the non-paying Party shall
be deemed to be a non-participating Party, shall forfeit its rights under the
preceding sentence and shall be subject to the provisions of Section 4.6.

                                      15.

                      *** Confidential Treatment Requested
<PAGE>   22

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

      4.3   ROYALTIES ON SALES OF PRODUCTS OUTSIDE THE FIELD.

            (a)   In consideration of the license granted to Signal under
Section 6.2(a)(i), Signal shall pay to Nippon Kayaku (i) a royalty of [***]
percent ([***]%) of Net Sales of Products by Signal, its Affiliates or
sublicensees outside the Field plus (ii) any royalties payable by Nippon Kayaku
to a Third Party, not to exceed [***] percent ([***]%) of Net Sales of Products
by Signal, its Affiliates or sublicensees outside the Field.

            (b)   In consideration of the license granted to Nippon Kayaku under
Section 6.2(a)(ii), Nippon Kayaku shall pay to Signal (i) a royalty of [***]
percent ([***]%) of Net Sales of Products by Nippon Kayaku, its Affiliates or
sublicensees outside the Field plus (ii) any royalties payable by Signal to a
Third Party, not to exceed [***] percent ([***]%) of Net Sales of Products by
Nippon Kayaku, its Affiliates or sublicensees outside the Field.

      4.4   ROYALTIES ON SALES OF OTHER PRODUCTS IN THE FIELD.

            (a)   In consideration of the license granted to Signal under
Section 6.2(b)(i), Signal shall pay to Nippon Kayaku (i) a royalty of [***]
percent ([***]%) of Net Sales of Other Products by Signal, its Affiliates or
sublicensees in the Field plus (ii) any royalties payable by Nippon Kayaku to a
Third Party, not to exceed [***] percent ([***]%) of Net Sales of Other Products
by Signal, its Affiliates or sublicensees in the Field.

            (b)   In consideration of the license granted to Nippon Kayaku under
Section 6.2(b)(ii), Nippon Kayaku shall pay to Signal (i) a royalty of [***]
percent ([***]%) of Net Sales of Other Products by Nippon Kayaku, its Affiliates
or sublicensees in the Field plus (ii) any royalties payable by Signal to a
Third Party, not to exceed [***] percent ([***]%) of Net Sales of Other Products
by Nippon Kayaku, its Affiliates or sublicensees in the Field.

      4.5   ROYALTIES ON SALES OF OTHER PRODUCTS OUTSIDE THE FIELD.

            (a)   In consideration of the license granted to Signal under
Section 6.2(c)(i), Signal shall pay to Nippon Kayaku (i) a royalty of [***]
percent ([***]%) of Net Sales of Other Products by Signal, its Affiliates or
sublicensees outside the Field plus (ii) any royalties payable by Nippon Kayaku
to a Third Party, not to exceed [***] percent ([***]%) of Net Sales of Other
Products by Signal, its Affiliates or sublicensees outside the Field.

            (b)   In consideration of the license granted to Nippon Kayaku under
Section 6.2(c)(ii), Nippon Kayaku shall pay to Signal (i) a royalty of [***]
percent ([***]%) of Net Sales of Other Products by Nippon Kayaku, its Affiliates
or sublicensees outside the Field plus (ii) any royalties payable by Signal to a
Third Party, not to exceed [***] percent ([***]%) of Net Sales of Other Products
by Nippon Kayaku, its Affiliates or sublicensees outside the Field.

                                      16.

                      *** Confidential Treatment Requested
<PAGE>   23

      4.6   REDUCTION OF PARTICIPATION. If at any time Nippon Kayaku or Signal,
including Nippon Kayaku's or Signal's licensees and sublicensees, willfully
reduces its participation in and contribution (i.e., 50% of Research,
Development and commercialization costs) to a Project or to regional development
and commercialization activity in a certain country or territory in the Rest of
the World (in each case, a "Participation Reduction"), the Party reducing its
participation and contribution (the "Non-Participating Party") shall be deemed
to have dropped out of the Project or such regional development and
commercialization activity, and the continuing Party (the "Commercializing
Party") shall pay to the Non-Participating Party a royalty of [***] percent
([***]%) of Net Sales of the applicable Product in the Rest of the World in the
case of Participation Reduction to the Project, and a royalty of [***] percent
([***]%) of Net Sales of the applicable Product in such country or territory in
the case of Participation Reduction to the regional development and
commercialization activity, by such Commercializing Party or its Affiliates,
licensees or sublicensees.

      4.7   REVENUES ON JOINT LICENSE TO THE THIRD PARTY. If Nippon Kayaku and
Signal jointly grant a license to develop and commercialize Research Lead,
Development Candidate or Product to the Third Party, Nippon Kayaku and Signal
shall share equally (50%/50%) all revenues arising out of such license.

5.    ROYALTY OBLIGATIONS

      5.1   ROYALTIES FOR SALES OF PRODUCTS OR OTHER PRODUCTS. Any royalty
obligations of a Party bearing royalty obligations hereunder (the
"Commercializing Party") shall be subject to the provisions of this Article 5.

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

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

      5.4   TAXES. The Receiving Party shall pay any and all taxes levied on
account of such payments it receives under this Agreement. If laws or
regulations require that taxes be withheld, the Commercializing Party shall (i)
deduct those taxes from the remittable payment, (ii) timely pay the taxes to the
proper taxing authority, and (iii) send proof of payment to the Receiving Party
and certify its receipt by the tax authorities within sixty (60) days following
that payment.

      5.5   PAYMENT AND REPORTING. Royalty payments under this Agreement shall
be made to the Receiving Party or its designee quarterly within forty-five (45)
days following the end of each calendar quarter for which royalties are due from
the Commercializing Party. Each royalty

                                      17.

                      *** Confidential Treatment Requested
<PAGE>   24

payment shall be accompanied by a report summarizing in suitable detail (as
determined by the CMC) the Net Sales of Products or Net Sales of Other Products
during the relevant three-month period. In addition, the Commercializing Party
shall provide a unit sales report to the Receiving Party monthly within thirty
(30) days following the end of each month.

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

      5.7   ACCOUNTING. The Commercializing Party shall maintain complete and
accurate records, consistent with its general internal recordkeeping policies,
which are relevant to revenues, costs, expenses and payments under this
Agreement and shall make its internal sales ledgers for sales of Products or
Other Products upon which royalties are payable available during reasonable
business hours for a period of five (5) years from creation of individual
records for examination of any one calendar quarter's or year's records at the
other Party's expense and not more often than twice a year by a certified public
accountant selected by the other Party and reasonably acceptable to the
Commercializing Party, audited for the sole purpose of verifying for the
inspecting Party the correctness of calculations of such revenues, costs,
expenses or payments made under this Agreement. If any such audit fails to
identify underpayments in excess of the lesser of five percent (5%) of the
amounts that should have been paid or $100,000 ("Material Underpayments") by the
Commercializing Party for any calendar year audited, the Commercializing Party
shall reimburse the Party requesting the audit for such discrepancy if the
underpayment is identified by such audit and the out-of-pocket expenses of both
Parties in such audit shall be borne by the Party requesting the audit. If any
Material Underpayments are identified by any such audit for any calendar year
audited, the Commercializing Party shall reimburse the Party requesting the
audit for such discrepancies and shall bear the out-of-pocket expenses of both
Parties in such audit. Any records or accounting information received from the
other Party shall be Confidential Information for purposes of Article 7.

      5.8   SALES BY LICENSEES AND SUBLICENSEES. In the event the
Commercializing Party grants licenses or sublicenses to Third Parties to make,
use and/or sell a Product or Other Product with respect to which a royalty
payment is due hereunder, such licenses or sublicenses shall include an
obligation for the licensee or sublicensee to account for and report its Net
Sales of such Products or Net Sales of such Other Products on the same basis as
if such sales were Net Sales of such Products or Net Sales of such Other
Products by the Party granting the license or sublicense, and such Party shall
account for, report and pay appropriate royalties to the Party receiving
royalties under this Agreement as if the Net Sales of such Products or Net Sales
of such Other Products of the licensee or sublicensee were Net Sales of such
Products or Net Sales of such Other Products of the Party granting the license
or sublicense (regardless of whether such Party has actually received payment
from the party to whom it granted such license or sublicense), subject to the
provisions of Section 5.3 above regarding blocked currency payments.

                                      18.
<PAGE>   25

6.    LICENSE GRANTS

      6.1   LICENSES DURING COLLABORATION.

            (a)   RESEARCH AND DEVELOPMENT LICENSES.

                  (i)   Signal grants to Nippon Kayaku an exclusive, except as
to Signal, royalty-free, worldwide license, with the right to grant sublicenses,
under Signal Patents, Signal Know-How, Collaboration Patents and Collaboration
Know-How, to make and use methods and materials solely:

                        (1)   to carry out the Research in accordance with the
Research and Development Plan for the discovery, identification and
investigation of Research Leads in the Field until the earlier of such time as
all of the Parties' respective obligations under the Research and Development
Plan have been performed in full or the termination of this Agreement in
accordance with its terms; and

                        (2)   to conduct Development activities in accordance
with the Research and Development Plan(s) with respect to Research Leads,
Development Candidates and Products in the Field until the earlier of such time
as all of the Parties' respective obligations under the Research and Development
Plan(s) have been performed in full or the termination of this Agreement in
accordance with its terms.

      Signal grants to Nippon Kayaku an exclusive, even as to Signal,
royalty-free license, with the right to grant sublicenses, under Signal Patents,
Signal Know-How, Collaboration Patents and Collaboration Know-How, to carry out
research and development including, but not be limited to, pursuit of Regulatory
Approvals and the filing of drug approval applications for Products in the Field
in Japan.

                  (ii)  Nippon Kayaku grants to Signal an exclusive, except as
to Nippon Kayaku, royalty-free, worldwide license, with the right to grant
sublicenses, under Nippon Kayaku Patents, Nippon Kayaku Know-How, Collaboration
Patents and Collaboration Know-How to make and use methods and materials solely:

                        (1)   to carry out the Research in accordance with the
Research and Development Plan for the discovery, identification and
investigation of Research Leads in the Field until the earlier of such time as
all of the Parties' respective obligations under the Research and Development
Plan have been performed in full or the termination of this Agreement in
accordance with its terms; and

                        (2)   to conduct Development activities in accordance
with the Research and Development Plan(s) with respect to Research Leads,
Development Candidates and Products in the Field until the earlier of such time
as all of the Parties' respective obligations under the Research and Development
Plan(s) have been performed in full or the termination of this Agreement in
accordance with its terms.

                                      19.
<PAGE>   26

            (b)   COMMERCIALIZATION LICENSES IN THE PNS FIELD.

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

                  (ii)  Subject to subparagraph (iii) below, Signal shall and
hereby does grant to Nippon Kayaku such licenses, with the right to grant
sublicenses, under Signal Patents, Signal Know-How, Collaboration Patents and
Collaboration Know-How, and Nippon Kayaku shall and does hereby grant to Signal
such licenses, with the right to grant sublicenses, under the Nippon Kayaku
Patents, Nippon Kayaku Know-How, Collaboration Patents and Collaboration
Know-How, as, in each case, are necessary or useful to make, have made, use,
sell and import Products in the PNS Field in the Rest of the World in accordance
with the terms of this Agreement.

                  (iii) In the event of a Participation Reduction pursuant to
Section 4.6, the Non-Participating Party shall and hereby does grant to the
Commercializing Party an exclusive (even as to the Non-Participating Party)
license, with the right to grant sublicenses, under Non-Participating Party
Patents, Non-Participating Party Know-How, Collaboration Patents and
Collaboration Know-How to research, develop, make, have made, use, sell and
import the applicable Products for the applicable indication in the PNS Field in
the Rest of the World in the case of Participation Reduction to the Project, and
in the countries or territory in the case of Participation Reduction to the
regional development and commercialization activity.

            (c)   COMMERCIALIZATION LICENSES IN THE CNS FIELD.

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

                  (ii)  Subject to subparagraph (iii) below, Signal shall and
hereby does grant to Nippon Kayaku, such licenses, with the right to grant
sublicenses, under Signal Patents, Signal Know-How, Collaboration Patents and
Collaboration Know-How, and Nippon Kayaku shall and hereby does grant to Signal
such licenses, with the right to grant sublicenses, under the Nippon Kayaku
Patents, Nippon Kayaku Know-How, Collaboration Patents and Collaboration
Know-How, as, in each case, are necessary or useful to make, have made, use,
sell and import Products in the CNS Field in the Rest of the World in accordance
with the terms of this Agreement.

                  (iii) In the event of a Participation Reduction pursuant to
Section 4.6, the Non-Participating Party shall and hereby does grant to the
Commercializing Party an exclusive (even as to the Non-Participating Party),
license, with the right to grant sublicenses, under Non-Participating Party
Patents, Non-Participating Party Know-How, Collaboration Patents and
Collaboration Know-How to research, develop, make, have made, use, sell and
import the applicable Products for the applicable indication in the CNS Field in
the Rest of the

                                      20.
<PAGE>   27

World in the case of Participation Reduction to the Project, and in the
countries or territory in the case of Participation Reduction to the regional
development and commercialization activity.

      The licenses granted pursuant to subsections (b)(ii) and (c)(ii) above
shall be subject to the obligation of the Parties to share Profits and Losses,
Allowable Costs and Expenses and Costs of Goods Sold in accordance with Section
4.1 above and Exhibit B hereto and shall not be royalty-bearing.

            (d)   LICENSE TO THE THIRD PARTY. If neither Party wishes to conduct
or continue Development or commercialization of Research Lead, Development
Candidate or Product and a Third Party wishes to conduct such Development or
commercialization, Nippon Kayaku and Signal shall mutually agree whether to
grant a license to such Third Party, and if the Parties determine to grant such
a license, the Parties shall jointly grant such license.

      6.2   COMMERCIALIZATION LICENSES FOR OTHER PRODUCTS AND OUTSIDE THE FIELD.

            (a)   PRODUCTS OUTSIDE THE FIELD.

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

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

            (b)   OTHER PRODUCTS IN THE FIELD.

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

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

            (c)   OTHER PRODUCTS OUTSIDE THE FIELD.

                  (i)   Nippon Kayaku shall and hereby does grant to Signal a
co-exclusive (with Nippon Kayaku), worldwide, royalty-bearing license, with the
right to grant

                                      21.
<PAGE>   28

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

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

      6.3   LICENSES AND SUBLICENSES. Each Party shall notify any permitted
licensee and sublicensee hereunder of all rights and obligations of such Party
under this Agreement licensed to such licensee and sublicensee and shall have
such licensee and sublicensee bear the same obligations as such Party bears
under this Agreement as long as not inapplicable; provided, however, that if
both Parties propose to grant licenses or sublicenses of their rights and
obligations under this Agreement to the same licensee or sublicensee, then the
Parties shall grant such license or sublicense jointly in accordance with the
provisions of Section 4.7. Upon termination of this Agreement for breach
pursuant to Section 10.2, any existing licenses or sublicenses granted by the
defaulting or terminating Party shall continue in full force and effect
following such termination, in accordance with their respective terms and
conditions, as licenses or sublicenses of the non-defaulting Party.

      6.4   DURATION OF LICENSES. Subject to the provisions of any particular
license granted under this Article 6 and unless earlier terminated pursuant to
Article 10, all licenses granted under this Article 6 shall continue in force on
a country-by-country basis from the Effective Date so long as the Collaboration
or the commercial sale of a Product or Other Product is continuing.

7.    CONFIDENTIALITY; PUBLICATIONS

      7.1   CONFIDENTIALITY; EXCEPTIONS.

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

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

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

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

                                      22.
<PAGE>   29

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

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

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

      7.3   PUBLICATIONS. Either Party may publish or present the results of the
Research and Development hereunder subject to the prior review by the other
Party for patentability and protection of Confidential Information. Each party
(the "submitting Party") shall provide to the other the opportunity to review
any proposed abstract, manuscript or presentation which covers the results of
the Research and Development hereunder by delivering a copy thereof to the other
Party (the "reviewing Party") no less than thirty (30) days before its intended
submission for publication or presentation. The reviewing Party shall have
twenty (20) days from its receipt of any such abstract, manuscript or
presentation in which to notify the submitting Party in writing of any specific
concern, based upon either the need to seek patent protection or concern
regarding competitive disadvantage arising from the proposal. In the absence of
such a notice within such twenty (20) day period, the publication or
presentation of such abstract, manuscript or presentation shall be deemed
approved by the reviewing Party. In the event of concern, the submitting Party
agrees not to submit such publication or to make such presentation that contains
such Confidential Information until the reviewing Party is given a reasonable
period of time (not to exceed forty-five (45) days from the date the reviewing
Party notifies the submitting Party in writing of the concern) to seek patent
protection for any material in such publication or presentation which it
believes is patentable, or up to fifteen (15) days to resolve any other issues.
Each Party also agrees to delete from any such proposed publication or
presentation any Confidential Information of the other Party upon its reasonable
request based upon the commercial value of the secrecy of such Confidential
Information.

      7.4   PUBLIC DISCLOSURE. The Parties shall agree to the public
announcement of the execution of this Agreement excluding provisions relating to
detailed financial provisions; provided, however, that the Parties shall
negotiate the contents of the public announcement with each other and decide on
them prior to the public announcement. Thereafter, the Parties shall consult and
agree with each other prior to the issuances of any press releases that discuss
aspects of the Collaboration; provided, however, that each Party shall be
entitled to make public disclosures required by law, including compliance with
securities laws.

                                      23.
<PAGE>   30

8.    OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS

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

      8.2   PATENT FILINGS.

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

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

            (c)   COLLABORATION PATENTS. The responsibility for the preparation,
filing, prosecution and maintenance of Collaboration Patents shall be
administered by the RDMC, or, if the RDMC is no longer in existence, the CMC (or
a subcommittee of the RDMC or CMC, as applicable, for which the RDMC or CMC
shall be responsible). The Parties intend that:

                  (i)   Either Party may refer any dispute regarding the
preparation, filing, prosecution or maintenance of Collaboration Patents to the
appropriate officers of the Parties for consideration and resolution pursuant to
Article 12;

                  (ii)  Unless otherwise determined by the RDMC or CMC, as
applicable, the supervision and direction of patenting of all inventions covered
by the Collaboration Patents, and filing and prosecution of all patent
applications covering Collaboration Patents, shall be the responsibility of
Signal in the United States, shall be the

                                      24.
<PAGE>   31

responsibility of Nippon Kayaku in Japan and shall be the responsibility of a
Party determined by the RDMC or CMC in other countries; and

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

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

            (e)   RESTRICTIONS ON TRANSFER. No Collaboration Patents shall be
assigned, transferred or licensed by a Party to any Third Party without the
prior written consent of the other Party; provided, however, that a Party may,
without the consent of the other Party, grant sublicenses under Section 6.1 or
Section 6.2.

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

      8.3   ENFORCEMENT RIGHTS.

            (a)   DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS. If a Third Party
asserts that a Patent or other right owned by it is infringed by the
manufacture, use or sale of any pharmaceutical product subject to any of the
licenses granted under Article 6 during the term of this Agreement, the Party
designated by the RDMC (or, if the RDMC is no longer in existence, the CMC)
shall control the defense of such claim at its initial cost and expense;
provided, however, that in the event that such matter includes claims with
respect to the Collaboration Patents or Collaboration Know-How or with respect
to a Product being commercialized jointly by the Parties, the RDMC (or, if the
RDMC is no longer in existence, the CMC) shall determine how to respond to such
claim, and shall designate the Party responsible for controlling the defense of
such claim, with the initial cost and expense of such defense to be shared
equally by the Parties. No settlement shall be entered into without the prior
written consent of both Parties if such settlement would adversely affect either
Party's interests, which consent shall not be unreasonably withheld.

            (b)   INFRINGEMENT BY THIRD PARTIES. If any Signal Patent, Nippon
Kayaku Patent or Collaboration Patent is infringed by a Third Party in any
country in connection with the manufacture, use and sale of any pharmaceutical
product subject to any of the licenses granted under Article 6 in such country
during the Term of this Agreement, the Party to this Agreement (including, for
purposes of this Section 8.3(b), such Party's licensees and sublicensees, and
purchasers or assignees of its rights or obligations hereunder) first having
knowledge of such

                                      25.
<PAGE>   32

infringement shall promptly notify the other in writing. The notice shall set
forth the facts of that infringement in reasonable detail. In the event a
Collaboration Patent, Nippon Kayaku Patent or Signal Patent is infringed by a
Third Party, the RDMC (or, if the RDMC is no longer in existence, the CMC) shall
designate the Party responsible for controlling any action or proceeding with
respect to such infringement, and, to the extent that the other Party Controls
or has any right, title or interest in such Patent, such other Party shall have
the right, at its own expense, to be represented in any action involving any
such Patent by counsel of its own choice. If the Party designated by the RDMC or
CMC fails to bring an action or proceeding within a period of sixty (60) days
after having knowledge of infringement of such Patent, then, to the extent that
the other Party Controls or has any right, title or interest in such Patent,
such other Party shall have the right to bring and control any such action by
counsel of its own choice, and the first Party shall have the right to be
represented in any such action by counsel of its own choice at its own expense.
If one Party brings any such action or proceeding, the other Party agrees to be
joined as a Party plaintiff if necessary to prosecute the action and to give the
first Party reasonable assistance and authority to file and prosecute the suit.

            (c)   MONETARY AWARDS. Any damages or other monetary awards
recovered shall be allocated first, to the costs and expenses of the Party or
Parties bringing suit, and then to the costs and expenses, if any, of the other
Party. Any amounts remaining shall be allocated as follows: (i) in accordance
with the allocation of Profits and Losses of the Parties if there has been no
Participation Reduction, or (ii) to the Party bringing the suit, which amounts
shall be treated as Net Sales of Products or Net Sales of Other Products subject
to the applicable royalty obligations set forth in this Agreement. A settlement
or consent judgment or other voluntary final disposition of a suit under Section
8.3(b) may not be entered into without the prior written consent of the Party
not bringing the suit, which consent shall not be unreasonably withheld.

            (d)   INFRINGEMENT OF COLLABORATION PATENTS OUTSIDE THE FIELD. With
respect to infringement of the Collaboration Patents outside the Field, the
Parties shall consult with each other regarding the institution, prosecution and
control of any action or proceeding with respect to the infringement of any of
the Collaboration Patents. In the absence of agreement, each Party may proceed
in such manner as the law permits. Each Party shall bear its own expenses, and
any damages or other monetary awards recovered shall be allocated first, to the
costs and expenses of the Party or Parties bringing suit, and then to the costs
and expenses, if any, of the other Party. Any amounts remaining shall be shared
equally by the Parties.

9.    REPRESENTATIONS AND WARRANTIES; EXCLUSIVITY

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

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

                                      26.
<PAGE>   33

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

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

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

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

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

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

10.   TERM AND TERMINATION

      10.1  TERM. The term of this Agreement (the "Term") shall commence as of
the Effective Date and, unless sooner terminated as provided herein, shall
continue in effect until the later of (a) the expiration or invalidation of the
last Valid Claim of a Nippon Kayaku Patent, Signal Patent or Collaboration
Patent in effect in any country, (b) ten (10) years from the first commercial
sale of a Product in the last country for which Regulatory Approval of a Product
is sought pursuant to the Research and Development Plan(s) and Commercialization
Plan(s) and

                                      27.
<PAGE>   34

obtained or (c) conclusion or termination of any and all Research and
Development under this Agreement.

      10.2  TERMINATION FOR BREACH.

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

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

      10.3  TERMINATION FOR BANKRUPTCY. Either Party shall have the right to
terminate this Agreement forthwith by written notice to the other Party (i) if
the other Party is declared insolvent or bankrupt by a court of competent
jurisdiction or (ii) if a voluntary or involuntary petition in bankruptcy is
filed in any court of competent jurisdiction against the other Party and is not
dismissed or otherwise invalidated by the court within sixty (60) days.

      10.4  SURVIVING RIGHTS. The obligations and rights of the Parties under
Sections 6.2 (except as otherwise provided in Section 10.2), 6.3, 6.4, 8.1,
8.2(c), 8.2(d), 8.2(e), 10.2, 10.4, 10.5, 10.6, 11.1 and 11.2 and Articles 4, 5,
7, 12 and 13 shall survive termination or expiration of this Agreement.

      10.5  ACCRUED RIGHTS; SURVIVING OBLIGATIONS. Termination or expiration of
this Agreement for any reason shall be without prejudice to any rights which
shall have accrued to the benefit of either Party, its licensees and
sublicensees or purchasers and assignees of its rights or obligations hereunder
prior to such termination or expiration, including, without limitation, any
payment obligations of the Parties and any and all damages arising from any
breach hereunder. Such termination or expiration shall not relieve either Party
from obligations which are expressly indicated to survive termination or
expiration of this Agreement.

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

                                      28.
<PAGE>   35

11.   INDEMNIFICATION; INSURANCE

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

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

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

      Each Party shall require indemnification, consistent with this Article 11,
from its Third Party contractors, licensees and sublicensees, and purchasers and
assignees of its rights or obligations hereunder.

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

      11.3  INSURANCE. Each Party shall maintain suitable amounts of insurance
coverage for clinical trial and commercial product liability proportionate to
the risks and exposures and standard for the industry and the respective
territories in which Products are developed and commercialized. The Parties
shall work with one another to coordinate such appropriate insurance coverage
for the activities contemplated by the Parties under this Agreement.

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 or its licensees' or
sublicensees' rights and/or

                                      29.
<PAGE>   36

obligations hereunder or which relate to rights and/or obligations sold or
assigned to purchaser or assignee from the Party hereunder. It is the objective
of the Parties to establish procedures to facilitate the resolution of such
disputes in an expedient manner by mutual cooperation and without resort to
litigation. To accomplish this objective, the Parties agree to follow the
procedures set forth in this Article 12 if and when such a dispute arises
between the Parties.

      12.2  DISPUTE RESOLUTION PROCEDURES.

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

      For Nippon Kayaku:   Head, Research & Development Division
                           Pharmaceuticals Group

      For Signal:          Chief Executive Officer

      Any such dispute arising out of or relating to this Agreement which is not
satisfactorily resolved between the Parties or the designated officers of the
Parties pursuant to the foregoing shall be resolved by final and binding
arbitration conducted in Honolulu, Hawaii, USA under the current Licensing
Agreement Arbitration Rules of the American Arbitration Association ("AAA");
provided, however, that depositions shall be permitted as follows: each Party
may take no more than seven (7) depositions with a maximum of six (6) hours of
examination time per deposition, and each such deposition shall take place in
Honolulu, Hawaii, USA, unless otherwise agreed by the Parties. The arbitration
shall be conducted by three (3) arbitrators who are knowledgeable in the subject
matter which is at issue in the dispute and who are selected by mutual agreement
of the Parties or, failing such agreement, shall be selected according to the
AAA rules. In conducting the arbitration, the arbitrators shall be able to
decree any and all relief of an equitable nature, including but not limited to
such relief as a temporary restraining order, a preliminary injunction, a
permanent injunction or replevin of property. The arbitrators shall also be able
to award actual, general or consequential damages, but shall not award any other
form of damages (i.e., punitive damages). The Parties shall share equally the
arbitrators' fees and expenses pending the resolution of the arbitration unless
the arbitrators, pursuant to their right but not their obligations, require the
nonprevailing Party to bear all or any portion of the costs of the prevailing
Party. The decision of the arbitrators shall be final and may be sued on or
enforced by the Party in whose favor it runs in any court of competent
jurisdiction at the option of such Party.

13.   MISCELLANEOUS

      13.1  ASSIGNMENT.

            (a)   GENERALLY. Except as otherwise set forth in subparagraph (b)
below, either Party may sell, assign or sublicense all or a portion of its
rights or obligations under this Agreement in any country to one or more of its
Affiliates and/or Third Parties (including, without limitation, in connection
with the sale of all or substantially all of a Party's assets or a

                                      30.
<PAGE>   37

merger or other change of management or ownership control of either Party);
provided, however, that the selling, assigning or sublicensing Party (the
"Selling Party"), together with the purchasers, assignees and sublicensees of
such Party's rights or obligations hereunder, shall continue to be bound by the
terms of this Agreement as long as not inapplicable. In the event of the sale of
all or substantially all of a Party's assets, a merger or other change of
management or ownership control, the other Party shall not have a right of first
refusal to acquire the rights of the Selling Party hereunder. Each Party agrees
to provide the other Party with prior written notice of any intended sale,
assignment or sublicense of such Party's rights hereunder and shall permit the
other Party to make a proposal to acquire such rights, which offer the Selling
Party may elect to accept or reject in its sole discretion.

            (b)   RESTRICTION. Neither Party shall sell, assign, license or
sublicense all or a portion of its rights hereunder to any Affiliate or Third
Party that is selling or developing any pharmaceutical product directly
competitive with, and a direct substitute product for, Products being developed
or commercialized hereunder and to any affiliate of such Third Party.

            (c)   SUCCESSORS AND ASSIGNS. This Agreement (including, without
limitation, the provisions of Section 13.1(b)) shall be binding upon and inure
to the benefit of the successors, permitted assigns, licensees and sublicensees
of each of the Parties. Any assignment not in accordance with this Agreement
shall be void.

      13.2  CONSENTS NOT UNREASONABLY WITHHELD. Whenever provision is made in
this Agreement for either Party to secure the consent or approval of the other,
that consent or approval shall not unreasonably be withheld, and whenever in
this Agreement provision is made for one Party to object to or disapprove a
matter, such objection or disapproval shall not unreasonably be exercised.

      13.3  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
that the Party claiming force majeure has exerted all reasonable efforts to
avoid or remedy such force majeure; provided, however, that in no event shall a
Party be required to settle any labor dispute or disturbance.

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

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

      13.6  NOTICES. All notices hereunder shall be in writing, and shall be
given by hand with written acknowledgement of receipt by the receiving Party,
mailed by registered or certified mail (return receipt requested), postage
prepaid, or sent by express courier service, to the Parties

                                      31.
<PAGE>   38

at the addresses set forth below (or at such other address for a Party as shall
be specified by like notice; provided, that notices of a change of address shall
be effective only upon receipt thereof). Notices given by hand shall be
effective when delivered and notices sent by mail or express courier service
shall be effective five (5) days after they are sent.

      If to Signal, to:            Signal Pharmaceuticals, Inc.
                                   5555 Oberlin Drive
                                   San Diego, CA 92121
                                   Attention:  Alan J. Lewis, Ph.D.
                                               President and Chief Executive
                                               Officer
                                   Telephone:  (858) 558-7500
                                   Telecopy:   (858) 558-7513

      If to Nippon Kayaku, to:     Nippon Kayaku Co., Ltd.
                                   31-12, Shimo 3-chome
                                   Kita-ku, Tokyo 115-8588
                                   Japan
                                   Attention:  Mr. Katsuhiro Aikawa
                                               Director, General Manager
                                               Research and Development Division
                                               Pharmaceuticals Group
                                   Telephone:  03-3598-5200
                                   Telecopy:   03-3598-5421

      13.7  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.

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

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

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

                                      32.
<PAGE>   39

      13.11 ENTIRE AGREEMENT. This Agreement sets forth all the covenants,
promises, agreements, warranties, representations, conditions and understandings
between the Parties and supersedes and terminates all prior agreements and
understanding between the Parties with respect to the subject matter of this
Agreement, including, without limitation, the Collaboration Agreement, the
Secrecy Agreement dated September 20, 1996 and the Material Transfer Agreement
dated May 19, 1997. 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 unless reduced to writing and signed by the respective
authorized officers of the Parties.

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

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

                                      33.
<PAGE>   40

      IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date set forth below.

SIGNAL PHARMACEUTICALS, INC.              NIPPON KAYAKU CO., LTD.

By: /s/ Alan J. Lewis                     By: /s/ Haruo Inose
   ----------------------------------        ----------------------------------

Name: ALAN J. LEWIS, PH.D.                Name: HARUO INOSE
     --------------------------------          --------------------------------

Title: President and Chief Executive      Title: Managing Director
       Officer                                   Head of Pharmaceuticals Group
      -------------------------------           -------------------------------

Date: February ___,2000                   Date: February ___,2000
     --------------------------------          --------------------------------

EXHIBITS

A     NSP6783 and/or its Salt
B     Sharing of Profits and Losses

SCHEDULES

I     Nippon Kayaku Patents
II    Signal Patents
III   Collaboration Patents
IV    Initial RDMC Members

                                      34.
<PAGE>   41

                                    EXHIBIT A

                             NSP6783 AND/OR ITS SALT

                                     [***]

                                       1.

                      *** Confidential Treatment Requested
<PAGE>   42

                                    EXHIBIT B

                          SHARING OF PROFITS OR LOSSES
           UNDER THE JOINT DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

      THIS EXHIBIT B to the Joint Development and Commercialization Agreement
(the "Agreement") effective as of February 9, 2000, between NIPPON KAYAKU CO.,
LTD. ("Nippon Kayaku"), and SIGNAL PHARMACEUTICALS, INC. ("Signal"), addresses
the accounting policies and procedures to be followed in determining Profits or
Losses. Terms not defined in this Exhibit shall have the meanings set forth in
the Agreement.

      FOR PURPOSES OF THIS EXHIBIT ONLY, the accounting for research,
development and sale of each Research Lead, Development Candidate or Product,
together with certain related costs and expenses, and the receipt of any
applicable royalties and non-royalty payments for such Research Lead,
Development Candidate or Product, shall be referred to as the Joint Venture. The
Joint Venture is not intended to be and is not a legal entity and has been
defined for identification purposes only.

1.    CALCULATION OF PROFIT OR LOSS

      The Profit or Loss for each Research Lead, Development Candidate or
Product shall be determined on a product-by-product basis and shall be equal to:
(i) Revenues plus Net Sales of Products (as defined in the Agreement) in the
Territory, less (ii) Allowable Costs and Expenses and Costs of Goods Sold (each
as defined below), plus or minus (iii) Net Interest Income of a Party in
connection with the development, manufacturing, marketing or selling of such
Research Lead, Development Candidate or Product, plus or minus (iv) Other
Non-Operating and Extraordinary Gains (Losses) incurred by or on behalf of a
Party in connection with the development, manufacturing, marketing or selling of
Research Leads, Development Candidates or Products, all as more fully described
below. Each Party shall calculate and maintain detailed records of its Allowable
Costs and Expenses and Costs of Goods Sold and shall report to the RDMC or CMC,
as appropriate, and to the other Party such Allowable Costs and Expenses and
Costs of Goods Sold on a monthly basis (or at such other intervals as the RDMC
or CMC shall direct) by the end of the month following the end of the applicable
month. All calculations hereunder shall be made using, and all defined and
undefined terms shall be construed in accordance with, U.S. generally accepted
accounting principles, consistently applied, and consistent with generally
accepted methods for activity-based project costing for similar products in
similar industries. Without limiting the foregoing, no cost item subject to
sharing by the Parties hereunder shall be included more than once in calculating
Profit or Loss. The Parties anticipate that neither Party shall incur expenses
which are included in the Profit or Loss calculation unless the RDMC or CMC, as
applicable, has agreed that such Party shall incur such expenses.

2.    REPORTING AND PAYMENT

      The fiscal year of the Joint Venture shall be a twelve (12) month period
ending on December 31 or such portion thereof as shall be applicable. The Joint
Venture's first, second,

                                       1.
<PAGE>   43

third and fourth quarters shall end on March 31, June 30, September 30 and
December 31, respectively.

      Reporting by the RDMC or CMC, as applicable, for the Joint Venture
revenues and expenses shall be performed as follows:

<TABLE>

      REPORTING EVENT              FREQUENCY         TIMING OF SUBMISSION
      ---------------              ---------         --------------------
<S>                                <C>             <C>
Preliminary                        Monthly         30-45 days following the
                                                   end of each month

Actuals (with adjustments for      Quarterly       30-45 days following the
all prior months of quarter)                       end of each quarter
</TABLE>

      The RDMC or CMC, as applicable, shall be responsible for the preparation
of reports, calculation of the Profit or Loss to be shared and determination of
the cash settlement between the Parties. The RDMC or CMC, as applicable, shall
provide to the Parties, by the submission dates shown above, a statement showing
the Joint Venture's results for the preceding calendar month or quarter, as
applicable, and year to date in the format set forth in Schedule B-1 hereto,
comparing monthly or quarterly results and year to date results to revenue
forecasts and expense budgets, calculating the Profit or Loss as provided in
paragraph 1 above and Schedule B-1 hereto, and determining the cash settlement
required. To the extent any quarter-end adjustments to the Joint Venture are
determined in good faith by the RDMC or CMC, as applicable, to be appropriate,
an appropriate adjustment to Profit or Loss for the applicable quarter shall be
made and an appropriate payment shall be made by the applicable Party within
thirty (30) days following receipt of the invoice issued by other Party based on
the RDMC's or CMC's report describing such adjustment. Any such adjustment
payment shall be without interest if such amount is less than the lesser of (a)
[***] percent ([***]%) of Profits or Losses for such quarter or (b) [***], and
shall bear interest from the due date for the invoice at the prime rate, as
published in The Wall Street Journal (Eastern U.S. Edition) on the last business
day preceding such date if such amount is greater than or equal to the lesser of
(x) [***] percent ([***]%) of Profits or Losses for such quarter or (y) [***].

3.    DEFINITIONS. As a supplement to the definitions provided in Article 1 of
the Agreement, the following accounting terms shall be further specified as
follows. As used herein, the term "operating unit" shall mean the standard
operating unit in which a profit and loss statement is prepared for management
accounting purposes in the Party's normal accounting procedures, consistently
applied within and across its operating units.

      "TERRITORY" shall mean the Rest of the World.

      "ALLOCABLE OVERHEAD" shall mean (for any particular cost item) a Party's
internal allocation, based on direct project headcount or other generally
accepted activity-based accounting methods, of indirect overhead costs incurred
by a Party or any of its operating units to support and carry out the activities
of the specific business function, such as development, manufacturing, and sales
and marketing, with respect to a Research Lead, Development Candidate or Product
for the Territory, which indirect costs may include but are not limited to:
indirect labor costs; occupancy costs; repair and maintenance costs; office
supplies and service

                                       2.

                      *** Confidential Treatment Requested
<PAGE>   44

costs; equipment costs; insurance costs; and outside professional and other
service costs. Such overhead shall exclude any indirect costs associated with
large start-up expenses or any excess or unused capacity not directly related to
a Research Lead, Development Candidate or Product for the Territory.
Furthermore, overhead costs of a Party or operating units that are not engaged
in the development, manufacturing, marketing or selling of a Research Lead,
Development Candidate or Product in the Territory shall not be recoverable as
Allocable Overhead or otherwise, except as provided herein.

      "ALLOWABLE COSTS AND EXPENSES" shall mean those costs and expenses
incurred by the Parties or for their account that are specifically attributable
or related to the research (to the extent consistent with the terms of the
Agreement), development, manufacturing, marketing or selling of a Research Lead,
Development Candidate or Product in the Territory, and consisting of: (i)
Research and Development Expenses, (ii) Sales and Marketing Expenses and (iii)
General and Administrative Expenses.

      "COST OF GOODS SOLD" shall mean the manufactured cost of a Product shipped
in final therapeutic form, calculated on a fully burdened basis (i.e., including
Allocable Overhead specifically attributable thereto). The "cost of a Product
shipped in final therapeutic form" shall mean the cost of Product shipped in
bulk form plus the cost of final manufacturing. The "cost of a Product shipped
in bulk form" shall mean the standard unit cost of Product in bulk form
calculated in accordance with the customary cost accounting methods,
consistently applied, of the Party performing the work. Standard unit cost
generally consists of direct material, direct labor and Allocable Overhead
specifically attributable to the Product at standard. The cost of final
manufacturing shall be calculated in accordance with customary cost accounting
methods, consistently applied, of the Party performing the work. Final
manufacturing costs generally consist of direct material, direct labor and
Allocable Overhead directly attributable to the Product at standard.

      Direct material costs shall include, but not be limited to, the costs
incurred in purchasing raw materials and finished goods, including (without
limitation) freight, sales and excise taxes imposed thereon and customs duty and
charges levied by government authorities, and all costs of packaging components.

      Direct labor shall include, but not be limited to, the cost of employees
engaged in direct manufacturing activities who are directly employed in Product
manufacturing and packaging for the Territory.

      Allocable Overhead included in Cost of Goods Sold shall include, but not
be limited to, other indirect costs associated with the operating unit(s)
manufacturing a Product for the Territory. Such Allocable Overhead shall
include, but not be limited to, expenses associated with: warehousing of a
Product in the Territory; quality assurance, manufacturing and engineering
associated with the operating unit(s) manufacturing a Product for the Territory;
and depreciation, repairs and maintenance, insurance and property taxes
associated with the plant(s) manufacturing Products for the Territory. Allocable
Overhead shall not include costs associated with capacity not incorporated into
standard unit costs. Standard unit costs shall exclude costs associated with
excess or unused capacity not directly related to Products for the Territory.

                                       3.
<PAGE>   45

      Costs of Goods Sold shall also include, but not be limited to, (i)
manufacturing variances and other attributable costs not in standard (but
excluding capacity not incorporated into standard manufacturing unit costs) such
as, but not limited to, material price variances, labor hour variances, material
usage variances, excess and obsolescence, inventory reserves and batches that do
not conform to specification, and (ii) actual Third Party royalty expenses.

      Third Party royalty expenses shall include, but not be limited to,
royalties or other compensation payable to a Third Party possessing or having a
license under patents and/or other technology rights relating to the
manufacture, sale, use, offer for sale or import of a Product for the Territory.

      "RESEARCH AND DEVELOPMENT EXPENSES" shall mean the expenses incurred by a
Party or for its account that are attributable to the Research or Development of
a Research Lead, Development Candidate or Product for the Territory, calculated
on a fully burdened basis (i.e., including Allocable Overhead specifically
attributable thereto). Without limiting the generality of the foregoing,
"Research and Development Expenses" shall mean amounts paid by a Party to Third
Parties involved in the Research or Development of a Research Lead, Development
Candidate or Product for the Territory, and all internal costs (calculated on a
full-time equivalent basis) incurred by a Party in connection with the Research
or Development of a Research Lead, Development Candidate or Product for the
Territory. Research and Development Expenses shall include, but are not limited
to, the following costs incurred for the Research or Development of a Research
Lead, Development Candidate or Product for the Territory: the costs of modifying
and optimizing a prospective Research Lead, Development Candidate or Product,
including its chemical structure and formulation, to achieve product development
goals regarding efficacy, safety, dosing and route of administration; the cost
of studies on the toxicological, pharmacokinetic, metabolic or clinical aspects
of a prospective Product conducted internally or by individual investigators or
consultants necessary or desirable for the purpose of obtaining and/or
maintaining Regulatory Approval of a Product in a country of the Territory;
costs (and related fees) for preparing, submitting, reviewing or developing data
or information for the purpose of submission to a governmental authority to
obtain and/or maintain Regulatory Approval of a Product in a country of the
Territory; and manufacturing process development and scale-up for a Product in
bulk and finished form for the Territory for purposes of conducting preclinical
and clinical studies necessary to obtain and/or maintain Regulatory Approval of
Products in a country of the Territory. In addition, Research and Development
Expenses shall include, but are not limited to, the following development costs
incurred by the Parties in support of or for extension of the applicable Product
in the Territory after the First Commercial Sale: Phase IV clinical trials;
ongoing product development (e.g., new formulations and routes of
administration); ongoing product support; ongoing medical affairs; and fees and
expenses of outside consultants and counsel in respect of regulatory affairs.

      "SALES AND MARKETING EXPENSES" shall mean the costs which are incurred by
a Party or for its account attributable to the distribution, sale, promotion and
marketing of a Product in the Territory, calculated on a fully burdened basis
(i.e., including Allocable Overhead specifically attributable thereto). Sales
and Marketing Expenses shall mean the sum of Selling Expenses, Marketing
Management, Market and Consumer Research, Advertising, Trade Promotion, Consumer
Promotion, Education Expenses and Freight and Transportation-Out, each of which
is specified below. The costs of activities which promote a Party's business as
a whole without

                                       4.
<PAGE>   46

being product specific (such as corporate image advertising) are specifically
excluded from Sales and Marketing Expenses. To the extent multiple products are
involved and some of such products are not Products, then such allowances shall
be allocated on a pro rata basis based upon net sales of each respective product
by such operating unit during the most recent quarter.

      "ADVERTISING" shall include, but not be limited to, all media costs
associated with Product advertising in the Territory as follows: production
expense/artwork including set up; design and art work for an advertisement; the
cost of securing print space, air time, etc. in newspapers, magazines, trade
journals, television, radio, billboards, etc.

      "CONSUMER PROMOTION" shall include, but not be limited to, the expenses
associated with programs to promote a Product in the Territory directly to the
prescriber or end user. This category shall include, but not be limited to,
expenses associated with promoting products directly to the professional
community such as professional samples, professional literature, promotional
material costs, patient aids and detailing aids. To the extent multiple products
are involved and some of such products are not the applicable Product, then such
allowances shall be allocated on a pro rata basis based upon net sales of each
respective product by such operating unit during the most recent quarter.

      "EDUCATION EXPENSES" shall include, but not be limited to, expenses
associated with professional education with respect to a Product in the
Territory through any means not covered above, including, but not be limited to,
articles appearing in journals, newspapers, magazines or other media; seminars,
scientific exhibits, and conventions; and symposia, advisory boards and opinion
leader development activities.

      "FREIGHT AND TRANSPORTATION-OUT" shall include (to the extent not already
recovered in the calculation of Net Sales), but not be limited to, the portion
of distribution costs relating to moving Product goods in the Territory from a
warehouse to the customer as follows: outbound transportation costs; costs of
moving goods from a manufacturing point to a warehouse at another location from
which it is ultimately to be distributed to a customer; the costs of the traffic
department where there is a separate department that has responsibility for
administration of freight costs.

      "MARKET AND CONSUMER RESEARCH" shall include, but not be limited to,
compensation and departmental expenses for market and consumer research
personnel and payments to Third Parties related to conducting and monitoring
professional and consumer appraisals of existing, new or proposed Products in
the Territory, such as market share services (e.g., IMS data), special research
testing and focus groups.

      "MARKETING MANAGEMENT" shall include, but not be limited to, product
management and sales promotion management compensation and departmental
expenses. This shall include, but not be limited to, costs associated with
developing overall sales and marketing strategies (e.g., product line or
customer segment), as well as planning and programs for Products in the
Territory. In addition, payments to Third Parties in connection with trademark
selection, filing, prosecution and enforcement in the Territory shall be
included in this category.

                                       5.
<PAGE>   47

      "SELLING EXPENSES" shall include, but not be limited to, the following
costs directly associated with the efforts of field sales representatives with
respect to Products in the Territory: field sales force; field sales offices;
home offices; staffs directly involved in the management of and the performance
of the selling functions; and payments to Third Parties under contract sales and
marketing agreements. The costs of detailing sales calls shall be allocated on a
weighted average basis based on the proportionate time and effort given to the
detailing of Products versus drug products other than a Product at an accounting
charge rate consistently applied within and across a Party's or a Third Party's
operating units and which is no less favorable than the internal charge rate
used by such Party or such Third Party for its own internal cost accounting
purposes for drug products other than the Product (excluding internal profit
margins and markups).

      "TRADE PROMOTION" shall include, but not be limited to, the allowances
given to retailers, brokers, distributors, hospital buying groups, etc. for
purchasing, promoting, and distribution of Products in the Territory. This shall
include, but not be limited to, purchasing, advertising, new distribution, and
display allowances as well as free goods, wholesale allowances and reasonable
field sales samples.

      "GENERAL AND ADMINISTRATIVE EXPENSES" shall mean a Party's customary
allocation, based on direct project headcount or other generally accepted
activity-based accounting methods, of the costs of the following corporate
general and administrative functions of such Party or any of its operating units
incurred to support or facilitate the development, manufacturing, marketing or
selling of Research Leads, Development Candidates or Products in the Territory:
finance and accounting; purchasing and receiving; management information
systems; facilities; human resources; executive management; and legal, patent
and trademark. Such costs include, but not be limited to, the costs of employees
performing such functions, the direct costs of supporting such individuals in
the performance of their jobs (e.g., travel, floor space, computers and other
supplies and telephones) and the actual cost of outside services (e.g.,
consulting and audit services). General and administrative expenses of a Party
or operating unit that are incurred in the Research, Development, manufacturing,
marketing or selling of a Research Lead, Development Candidate or Product in
Japan shall be excluded from General and Administrative Expenses. In view of the
manner in which General and Administrative Expenses are calculated,
administration expenses shall be excluded from the definition of each of the
other cost items that make up Allowable Costs and Expenses and Costs of Goods
Sold.

      Notwithstanding any other provision of this Agreement, commencing as of
the first (1st ) anniversary of the First Commercial Sale of a Product, total
General and Administrative Expenses shall not exceed [***] percent ([***]%) of
Net Sales of such Product in the Territory in any quarter, except as otherwise
agreed in writing by the CMC.

      "NET INTEREST INCOME" shall mean interest income less interest expense and
adjusted for realized gains and losses from the sale of investments.

      "NET SALES OF PRODUCTS" shall have the meaning provided in Section 1.23 of
the Agreement.

                                       6.

                      *** Confidential Treatment Requested
<PAGE>   48

      "OTHER NON-OPERATING AND EXTRAORDINARY GAINS (LOSSES)" shall mean gains or
losses incurred either from secondary or auxiliary activities of the Joint
Venture, outside the ordinary and primary course of business, or unusual and
infrequent gains and losses of material amounts.

      "PROFIT OR LOSS" shall have the meaning ascribed to it in paragraph 1
above.

      "REVENUES" shall mean the amounts received from the Third Party pursuant
to Section 4.7 of the Agreement.

4.    FOREIGN EXCHANGE

      The functional currency for accounting for Profit or Loss shall be U.S.
Dollars.

      The statement of Profit or Loss shall be translated into U.S. Dollars
using, for each currency, the selling rate of exchange for the currency of the
country from which the royalties are payable as published by The Wall Street
Journal, Eastern U.S. Edition, for the last business day of the quarterly period
for which a payment due.

5.    REPORTING OF ALLOWABLE COSTS AND EXPENSES AND COSTS OF GOODS SOLD

      To the extent that, consistent with the applicable Research and
Development Plan or Commercialization Plan, a Party or a Third Party with whom
such Party has contracted incurs Allowable Costs and Expenses and Costs of Goods
Sold, such Party shall promptly provide the RDMC or CMC, as applicable, with a
reasonably detailed written invoice for such Allowable Costs and Expenses and
Costs of Goods Sold, and such Allowable Costs and Expenses and Costs of Goods
Sold shall be accounted for in the fiscal quarter in which such invoice is
received by the RDMC or CMC, as applicable.

6.    AUDITS

      Each Party shall have the right to request that a mutually agreed
independent public accounting firm performs an audit of the RDMC's or CMC's, as
applicable, books of accounts for the sole purpose of verifying compliance with
this Exhibit B. Such audits shall be conducted at the expense of the Party
requesting the audit; provided, however, that if the audit results in an amount
payable to the auditing Party that exceeds the lesser of (i) [***] percent
([***]%) of Losses or Profits or (ii) [***] in any quarter, the reasonable cost
of the audit shall be borne by the other Party. Any disputes with regard to the
foregoing shall be resolved in accordance with Article 12 of the Agreement.
Audit results shall be shared with both Parties. Audits are limited to the same
time periods as provided in Section 5.7 of the Agreement.

      Each Party shall also have the right to request that an independent public
accounting firm of national standing reasonably acceptable to the other Party
performs an audit of the other Party's books of accounts for the sole purpose of
verifying invoices for the audited Party's Allowable Costs and Expenses and
Costs of Goods Sold submitted to the RDMC or CMC hereunder. Such audits shall be
conducted at the expense of the auditing Party; provided, however, that if the
audit results in an amount payable to the auditing Party that exceeds [***]
percent ([***]%) of the audited Party's Allowable Costs and Expenses and Costs
of Goods Sold in any period, the reasonable cost of the audit shall be borne by
the audited Party. Audit results

                                       7.

                      *** Confidential Treatment Requested
<PAGE>   49

shall be shared with both Parties. Audits are limited to the same time periods
as provided in Section 5.7 of the Agreement.

7.    PAYMENT OF EXPENSES AND COSTS BY THE PARTIES

      There shall be no pooling or deposit of funds significantly prior to
incurring Allowable Costs and Expenses and Costs of Goods Sold hereunder.
Instead, Nippon Kayaku and Signal shall promptly pay their respective share of
fixed Allowable Costs and Expenses and Costs of Goods Sold (e.g., project labor
and Allocable Overhead) on a monthly basis, payable in advance. Each of Nippon
Kayaku and Signal shall pay in advance fifty percent (50%) of all deposits
required by suppliers prior to the start of services under Third Party
contracts. Nippon Kayaku and Signal shall pay their respective share of variable
Allowable Costs and Expenses and Costs of Goods Sold (e.g., costs and expenses
of preclinical and clinical studies and drug materials) within thirty (30) days
of receipt of the invoice accompanying the applicable monthly or quarterly
financial statement of the Joint Venture.

8.    SHARING OF PROFITS AND LOSSES

      As provided in the Agreement, the Parties share equally (50%/50%) the
Profit or Loss for each quarterly period, subject to the provisions of Section
4.6 of the Agreement.

9.    START OF OPERATIONS

      Operation of the Joint Venture shall be deemed to have commenced on the
Effective Date of the Agreement.

10.   EXPENSES PERTAINING TO SALES OF A PRODUCT IN THE TERRITORY AND OUTSIDE THE
      TERRITORY

      (a)   In the event an expense is of benefit or utility to the Research,
Development or commercialization of a Research Lead, Development Candidate or
Product in the Territory, then 100% of such expense shall be charged to the
Joint Venture.

      (b)   In the event an expense is of sole benefit or utility to the
Research, Development or commercialization of a Research Lead, Development
Candidate or Product in Japan, then 100% of such expense shall be borne by
Nippon Kayaku and shall not be charged to the Joint Venture.

      11.   CAPITAL INVESTMENTS

      Notwithstanding anything to the contrary in the Agreement or herein, any
capital investment required to be made (consistent with the applicable Research
and Development Plan or Commercialization Plan) in connection with a Research
Lead, Development Candidate or Product (such as a capital investment in a
manufacturing facility) are to be borne by the Party making such capital
investment initially and recouped through an appropriate depreciation charge to
the Joint Venture.

                                       8.
<PAGE>   50

                                  SCHEDULE B-1

                   PROFIT AND LOSS FINANCIAL STATEMENT FORMAT

<TABLE>
                                                  Nippon
                                                  Kayaku     Signal     Total
                                                  ------     ------     -----
<S>                                               <C>        <C>        <C>
REVENUES
--------
Revenues:
    Royalty Payments
    Non-Royalty Payments
Total Revenues

Gross Product Sales
Less:
    Trade, Cash & Quantity Credits/Discounts
    Allowance for Returns/Rejections
    Handling Fees/Restocking Expenses
    Freight & Transportation-In
    Taxes & Duties
    Governmental Chargebacks/Rebates
Total Net  Sales of Product

Total Revenues

Cost of Goods Sold:
    Standard Direct Material Cost
    Standard Direct Labor Costs
    Manufacturing Variances
    Third Party Royalty Expenses
    Allocable Overhead
Total Cost of Goods Sold

Gross Profit

ALLOWABLE COSTS AND EXPENSES
----------------------------
Research and Development Expenses:
    Product Development
    Pre-Clinical Pharmacology & Toxicology
    Clinical Trials
    Regulatory Affairs
    Other Contract R&D
    Allocable Overhead
Total Research and Development Expenses

Sales and Marketing Expenses:
    Selling Expenses
    Marketing Management
    Market & Consumer Research
    Advertising
    Trade Promotion
    Consumer Promotion
    Education
    Freight & Transportation-Out
    Allocable Overhead
Total Sales and Marketing Expenses
</TABLE>

                                       1.
<PAGE>   51

<TABLE>
                                                  Nippon
                                                  Kayaku     Signal     Total
                                                  ------     ------     -----
<S>                                               <C>        <C>        <C>
General and Administrative Expenses:
    Finance & Accounting
    Purchasing & Receiving
    Management Information Systems
    Facilities
    Human Resources
    Executive Management
    Legal & Patent
Total General and Administrative Expenses

Operating Profit (Loss)

Interest Income (Expense)-Net

Other Non-Operating and Extraordinary Gains
    (Losses) Net (with attendant schedule)

Profit (Loss)

Adjustments for Non-Cash Items
    (with attendant schedule)

Adjustments per paragraph 10(a)

Balancing Receipt (Payment) per paragraph 7
</TABLE>

                                       2.
<PAGE>   52

                                   SCHEDULE I

                              NIPPON KAYAKU PATENTS

      Nippon Kayaku Patents on NK5805 or its derivatives

<TABLE>
<CAPTION>
<S>                   <C>                   <C>                <C>                     <C>
   Country            Appln. No.            Filing Date        Patent No.

   [***]              [***]                 [***]              [***]                 [***]

</TABLE>

                                       1.

                      *** Confidential Treatment Requested
<PAGE>   53

<TABLE>
<CAPTION>
<S>                   <C>                   <C>                <C>                     <C>
  [***]               [***]                 [***]              [***]                   [***]
</TABLE>

                                       2.

                      *** Confidential Treatment Requested
<PAGE>   54

<TABLE>
<CAPTION>
<S>                   <C>                   <C>                <C>                     <C>
  [***]               [***]                 [***]              [***]                   [***]
</TABLE>

[***]

                                       3.

                      *** Confidential Treatment Requested
<PAGE>   55

                                   SCHEDULE II

                                 SIGNAL PATENTS

                                     [***]

                                       1.

                      *** Confidential Treatment Requested
<PAGE>   56

                                     [***]

                                       2.

                      *** Confidential Treatment Requested
<PAGE>   57

                                  SCHEDULE III

                              COLLABORATION PATENTS

                                     [***]

                                       1.

                      *** Confidential Treatment Requested
<PAGE>   58

                                   SCHEDULE IV

                              INITIAL RDMC MEMBERS

Initial Signal Representatives:

      David Anderson, Ph.D.
      Anthony Manning, Ph.D.
      Shripad Bhagwat, Ph.D.

Initial Nippon Kayaku Representatives:

      Kunio Nishii, Ph.D.
      Yuh-ichiro Ichikawa, Ph.D.
      Takaaki Okuma, Ph.D.

                                       1.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00004-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00004-of-00352.parquet"}]]