<PAGE>   1
                                                                  EXHIBIT 10.121

                         EXECUTIVE EMPLOYMENT AGREEMENT


        This Executive Employment Agreement ("Agreement") is entered into as of
the 14th day of December, 1999 (the "Effective Date"), by and between William J.
Newell ("Executive") and Axys Pharmaceuticals, Inc. (the "Company").

        WHEREAS, the Company desires to continue to employ Executive to provide
personal services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for Executive's services; and

        WHEREAS, Executive wishes to continue to be employed by the Company and
provide personal services to the Company in return for certain compensation and
benefits;

        NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:


                                    ARTICLE I
                                   DEFINITIONS

        For purposes of the Agreement, the following terms are defined as
follows:

1.1         "BOARD" means the Board of Directors of the Company.

1.2         "CAUSE" means:

            (a) Executive's intentional action or intentional failure to act
that was performed in bad faith and to the material detriment of the business of
the Company;

            (b) Executive's intentional refusal or intentional failure to act in
accordance with any lawful and proper direction or order of the Board or the
appropriate individual to whom Executive reports;

            (c) Executive's willful and habitual neglect of Executive's duties
of employment;

            (d) Executive's violation of any noncompetition or noninterference
agreement that Executive has entered into with the Company; or

            (e) Executive's conviction of a felony crime involving moral
turpitude;

provided, however, that if any of the foregoing events under clauses (a), (b),
(c) or (d) above is capable of being cured, the Company shall provide written
notice to Executive describing the nature of such event and Executive shall
thereafter have ten (10) business days to cure such event.


                                       1.
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1.3         "CHANGE IN CONTROL" means the occurrence of any of the following
events:

            (a) a dissolution, liquidation or sale of all or substantially all
of the assets of the Company;

            (b) a merger or consolidation in which the Company is not the
surviving corporation;

            (c) a reverse merger in which the Company is the surviving
corporation but shares outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or

            (d) the acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors.

1.4         "COMPANY" means Axys Pharmaceuticals, Inc. or, following a Change in
Control, the surviving entity resulting from such transaction.

1.5         "COVERED TERMINATION" means (i) an Involuntary Termination Without
Cause that occurs at any time, without regard to a Change in Control, or (ii) a
voluntary termination for Good Reason that occurs on or after the effective date
of a Change in Control.

1.6         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

1.7         "GOOD REASON" means that any of the following are undertaken without
Executive's express written consent:

            (a) the assignment to Executive of any duties or responsibilities
that results in any diminution or adverse change of Executive's position,
status, circumstances of employment or scope of responsibilities;

            (b) a reduction by the Company in Executive's annual base salary as
in effect on the effective date of the Change in Control;

            (c) the taking of any action by the Company that would adversely
affect Executive's participation in, or reduce Executive's benefits under, the
Company's benefit plans (including equity benefits) as of the effective date of
the Change in Control, except to the extent the benefits of all other executives
of the Company are similarly reduced;

            (d) a relocation of Executive's principal office to a location more
than forty (40) miles from the location at which Executive was performing
Executive's duties as

                                       2.
<PAGE>   3

of the effective date of the Change in Control, except for required travel by
Executive on the Company's business;

            (e) any material breach by the Company of any provision of this
Agreement; or

            (f) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company.

1.8         "INVOLUNTARY TERMINATION WITHOUT CAUSE" means Executive's dismissal
or discharge other than for Cause. The termination of Executive's employment as
a result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.

                                   ARTICLE II
                            EMPLOYMENT BY THE COMPANY

2.1 POSITION AND DUTIES. Subject to terms set forth herein, the Company agrees
to continue to employ Executive in the position of Senior Vice President,
Corporate and Business Development and General Counsel and Executive hereby
accepts such continued employment. Executive shall serve in an executive
capacity and shall perform such duties as are customarily associated with the
position of Senior Vice President, Corporate and Business Development and
General Counsel and such other duties as are assigned to Executive by the
Company's Chief Executive Officer. Executive will report to the Chief Executive
Officer. During the term of Executive's employment with the Company, Executive
will devote Executive's best efforts and substantially all of Executive's
business time and attention (except for vacation periods as set forth herein and
reasonable periods of illness or other incapacities permitted by the Company's
general employment policies or as otherwise set forth in this Agreement) to the
business of the Company.

2.2 EMPLOYMENT AT WILL. Both the Company and Executive shall have the right to
terminate Executive's employment with the Company at any time, with or without
Cause, and without prior notice. If Executive's employment with the Company is
terminated, Executive will be eligible to receive severance benefits to the
extent provided in this Agreement.

2.3 EMPLOYMENT POLICIES. The employment relationship between the parties shall
also be governed by the general employment policies and practices of the
Company, including those relating to protection of confidential information and
assignment of inventions, except that when the terms of this Agreement differ
from or are in conflict with the Company's general employment policies or
practices, this Agreement shall control.


                                       3.
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                                   ARTICLE III
                                  COMPENSATION

3.1 BASE SALARY. Executive shall receive for services to be rendered hereunder
an annual base salary of $243,000.00, payable on the regular payroll dates of
the Company, subject to increase in the sole discretion of the Board of
Directors.

3.2 BONUS. Executive shall be eligible for a discretionary bonus, in an amount
to be determined solely by the Company, in its discretion.

3.3 STANDARD COMPANY BENEFITS. Executive shall be entitled to all rights and
benefits for which Executive is eligible under the terms and conditions of the
standard Company benefits and compensation practices that may be in effect from
time to time and are provided by the Company to its executive employees
generally.

3.4 COMPENSATORY STOCK AWARD. At the Board's meeting on the date hereof, the
Board granted Executive an option to acquire seventy-five thousand (75,000)
shares of the common stock of the Company (the "Option"). The Option has been
granted pursuant to the Company's 1997 Equity Incentive Plan. The Option is an
incentive stock option for purposes of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), to the extent permitted under the Code. The
exercise price per share of the Option will be equal to one hundred percent
(100%) of the fair market value of the Company's common stock, as determined
pursuant to the Company's 1997 Equity Incentive Plan, on the date of grant.
Subject to Executive's continued employment by the Company, the Option vests as
to one-forty-eighth (1/48) of the shares of common stock subject to the Option
each calendar month for forty-eight (48) months, counted from the Option's date
of grant. In all other respects, the Option is to be governed by the terms of
the Plan, including the option agreement and grant notice thereunder.


                                   ARTICLE IV
                    SEVERANCE AND CHANGE IN CONTROL BENEFITS

4.1 SEVERANCE BENEFITS. If Executive's employment terminates due to a Covered
Termination after the date of execution of this Agreement, Executive shall
receive any annual base salary and bonus compensation that has accrued but is
unpaid as of the date of such Covered Termination. Within thirty (30) days
following the date on which the Release described in Section 4.4 below becomes
effective in accordance with its terms, Executive shall also receive a lump sum
payment equal to one hundred percent (100%) of Executive's annual base salary as
in effect during the last regularly scheduled payroll period immediately
preceding the Covered Termination, all of the foregoing subject to applicable
tax withholding. In addition, following a Covered Termination, Executive and
Executive's covered dependents shall be eligible to continue their health care
benefit coverage as permitted by COBRA (Internal Revenue Code Section 4980B) at
the same cost to Executive as in effect immediately prior to the Covered
Termination for the one (l)-year period following the Covered Termination.
Executive shall be entitled to maintain

                                       4.
<PAGE>   5

coverage for Executive and Executive's eligible dependents at Executive's own
expense for the balance of the period that Executive is entitled to coverage
under COBRA.

4.2 ACCELERATION OF VESTING OF OUTSTANDING OPTIONS.

            (a) If Executive's employment with the Company terminates due to a
Covered Termination within thirteen (13) months following the effective date of
a Change in Control, then the Option to purchase the Company's common stock
granted to Executive pursuant to Section 3.3 above shall become immediately
fully vested and exercisable as of the date of such Covered Termination.

            (b) Notwithstanding (a) above, if Executive's employment terminates
in connection with a Change in Control that is a transaction that is accounted
for as a pooling of interests for financial accounting purposes, then no portion
of Executive's Option shall accelerate unless the Company receives reasonable
assurances from its independent public accountants (and from the acquiring
party's independent public accountants) that in their good faith judgment such
acceleration will not affect the pooling of interests accounting treatment of
such Change in Control transaction.

        4.3 PARACHUTE PAYMENTS. If any payment or benefit Executive would
receive in connection with a Change in Control from the Company or otherwise
("Payment") would (i) constitute a "parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and
(ii) but for this sentence, be subject to the excise tax imposed by Section 4999
of the Code (the "Excise Tax"), then such Payment shall be reduced to the
Reduced Amount. The "Reduced Amount" shall be either (x) the largest portion of
the Payment that would result in no portion of the Payment being subject to the
Excise Tax or (y) the largest portion, up to and including the total, of the
Payment, whichever amount, after taking into account all applicable federal,
state and local employment taxes, income taxes, and the Excise Tax (all computed
at the highest applicable marginal rate), results in Executive's receipt, on an
after-tax basis, of the greater amount of the Payment notwithstanding that all
or some portion of the Payment may be subject to the Excise Tax. If a reduction
in payments or benefits constituting "parachute payments" is necessary so that
the Payment equals the Reduced Amount, reduction shall occur in the following
order unless Executive elects in writing a different order (provided, however,
that such election shall be subject to Company approval if made on or after the
effective date of the Change in Control): reduction of cash payments;
cancellation of accelerated vesting of stock awards; reduction of employee
benefits. In the event that acceleration of vesting of stock award compensation
is to be reduced, such acceleration of vesting shall be cancelled in the reverse
order of the date of grant of Executive's stock awards unless Executive elects
in writing a different order for cancellation.

        The accounting firm engaged by the Company for general audit purposes as
of the day prior to the effective date of the Change in Control shall perform
the foregoing calculations. If the accounting firm so engaged by the Company is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required

                                       5.
<PAGE>   6

hereunder. The Company shall bear all expenses with respect to the
determinations by such accounting firm required to be made hereunder.

        The accounting firm engaged to make the determinations hereunder shall
provide its calculations, together with detailed supporting documentation, to
the Company and Executive within fifteen (15) calendar days after the date on
which Executive's right to a Payment is triggered (if requested at that time by
the Company or Executive) or such other time as requested by the Company or
Executive. If the accounting firm determines that no Excise Tax is payable with
respect to a Payment, either before or after the application of the Reduced
Amount, it shall furnish the Company and Executive with an opinion reasonably
acceptable to Executive that no Excise Tax will be imposed with respect to such
Payment. Any good faith determinations of the accounting firm made hereunder
shall be final, binding and conclusive upon the Company and Executive.

4.4 RELEASE. Upon the occurrence of a Covered Termination, and prior to the
receipt of any benefits under Section 4.1 (except pursuant to the first sentence
thereof) and Section 4.2 on account of the occurrence of such Covered
Termination, Executive shall execute a Release (the "Release") in the form
attached hereto as Exhibit A or Exhibit B, as appropriate. Such Release shall
specifically relate to all of Executive's rights and claims in existence at the
time of such execution and shall confirm Executive's obligations under the
Company's standard form of proprietary information agreement. It is understood
that Executive has a certain period to consider whether to execute such Release,
and Executive may revoke such Release within seven (7) business days after
execution. In the event Executive does not execute such Release within the
applicable period, or if Executive revokes such Release within the subsequent
seven (7) business day period, none of the aforesaid benefits shall be payable
under this Agreement and this Agreement shall be null and void.

4.5 MITIGATION. Executive shall not be required to mitigate damages or the
amount of any payment provided under this Agreement by seeking other employment
or otherwise, nor shall the amount of any payment provided for under this
Agreement be reduced by any compensation earned by Executive as a result of
employment by another employer or by any retirement benefits received by
Executive after the date of the Covered Termination, or otherwise.


                                    ARTICLE V
                       PROPRIETARY INFORMATION OBLIGATIONS

5.1 AGREEMENT. Executive agrees to execute and abide by the Proprietary
Information and Inventions Agreement attached hereto as Exhibit C.

5.2 REMEDIES. Executive's duties under the Proprietary Information and
Inventions Agreement shall survive termination of Executive's employment with
the Company and the termination of this Agreement. Executive acknowledges that a
remedy at law for any breach or threatened breach by Executive of the provisions
of the Proprietary Information and Inventions Agreement would be inadequate, and
Executive therefore agrees that the

                                       6.
<PAGE>   7

Company shall be entitled to injunctive relief in case of any such breach or
threatened breach.


                                   ARTICLE VI
                               OUTSIDE ACTIVITIES

6.1 Except with the prior written consent of the Board, Executive shall not
during the term of this Agreement undertake or engage in any other employment,
occupation or business enterprise, other than ones in which Executive is a
passive investor. Executive may engage in civic and not-for-profit activities so
long as such activities do not materially interfere with the performance of
Executive's duties hereunder.

6.2 During the term of Executive's employment by the Company, except on behalf
of the Company, Executive shall not directly or indirectly, whether as an
officer, director, stockholder, partner, proprietor, associate, representative,
consultant, or in any capacity whatsoever engage in, become financially
interested in, be employed by or have any business connection with any other
person, corporation, firm, partnership or other entity whatsoever which were
known by Executive to compete directly with the Company, throughout the world,
in any line of business engaged in (or planned to be engaged in) by the Company;
provided, however, that anything above to the contrary notwithstanding,
Executive may own, as a passive investor, securities of any competitor
corporation, so long as Executive's direct holdings in any one such corporation
shall not in the aggregate constitute more than 1% of the voting stock of such
corporation.


                                   ARTICLE VII
                                 NONINTERFERENCE

    While employed by the Company, and for one (1) year immediately following
the date on which Executive terminates employment or otherwise ceases providing
services to the Company, Executive agrees not to interfere with the business of
the Company by soliciting or attempting to solicit any employee of the Company
to terminate such employee's employment in order to become an employee,
consultant or independent contractor to or for any competitor of the Company.
Executive's duties under this Article 7 shall survive termination of Executive's
employment with the Company and the termination of this Agreement.


                                  ARTICLE VIII
                               GENERAL PROVISIONS

8.1 NOTICES. Any notices provided hereunder must be in writing and shall be
deemed effective upon the earlier of personal delivery (including personal
delivery by telex) or the third day after mailing by first class mail, to the
Company at its primary office location and to Executive at Executive's address
as listed on the Company payroll.

                                       7.
<PAGE>   8

8.2 SEVERABILITY. Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.

8.3 WAIVER. If either party should waive any breach of any provisions of this
Agreement, they shall not thereby be deemed to have waived any preceding or
succeeding breach of the same or any other provision of this Agreement.

8.4 COMPLETE AGREEMENT. This Agreement and its Exhibit A, Exhibit B and Exhibit
C constitute the entire agreement between Executive and the Company and are the
complete, final, and exclusive embodiment of their agreement with regard to this
subject matter; provided, however, that this Agreement shall not supersede the
letter agreement entered into between Executive and the Company on June 11,
1998, and in the event of any inconsistency between the terms of this Agreement
and those of said side letter agreement, the terms of the latter shall control.
They are entered into without reliance on any promise or representation other
than those expressly contained herein or therein, and they cannot be modified or
amended except in a writing signed by an officer of the Company.

8.5 COUNTERPARTS. This Agreement may be executed in separate counterparts, any
one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.

8.6 HEADINGS. The headings of the sections hereof are inserted for convenience
only and shall not be deemed to constitute a part hereof nor to affect the
meaning thereof.

8.7 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to the
benefit of and be enforceable by Executive and the Company, and their respective
successors, assigns, heirs, executors and administrators, except that Executive
may not assign any of Executive's duties hereunder and Executive may not assign
any of Executive's rights hereunder, without the written consent of the Company,
which shall not be withheld unreasonably.

8.8 ARBITRATION. Unless otherwise prohibited by law or specified below, all
disputes, claims and causes of action, in law or equity, arising from or
relating to this Agreement or its enforcement, performance, breach, or
interpretation shall be resolved solely and exclusively by final and binding
arbitration held in San Francisco County, California through Judicial
Arbitration & Mediation Services/Endispute ("JAMS") under the then existing JAMS
arbitration rules. However, nothing in this section is intended to prevent
either party from obtaining injunctive relief in court to prevent irreparable
harm pending the conclusion of any such arbitration. Each party in any such
arbitration shall be responsible for its own attorneys' fees, costs and
necessary disbursement; provided, however, that if one party refuses to
arbitrate and the other party seeks to compel arbitration by court order, if
such other party prevails, it shall be entitled to recover

                                       8.
<PAGE>   9

reasonable attorneys' fees, costs and necessary disbursements. Pursuant to
California Civil Code Section 1717, each party warrants that it was represented
by counsel in the negotiation and execution of this Agreement, including the
attorneys' fees provision herein.

8.9 ATTORNEYS' FEES. If either party hereto brings any action to enforce rights
hereunder, each party in any such action shall be responsible for its own
attorneys' fees and costs incurred in connection with such action.

8.10 CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California.

        IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.

                                             AXYS PHARMACEUTICALS, INC.



                                             By: /s/ John P. Walker
                                                --------------------------------
                                             Date: 12/14/99
                                                  ------------------------------

Accepted and agreed this
14th day of December, 1999


 /s/ William J. Newell
----------------------------
WILLIAM J. NEWELL

Exhibit A:  Release (Individual Termination)
Exhibit B:  Release (Group Termination)
Exhibit C:  Proprietary Information and Inventions Agreement



                                       9.
<PAGE>   10

                                    EXHIBIT A

                                     RELEASE
                            (INDIVIDUAL TERMINATION)


        Certain capitalized terms used in this Release are defined in the
Executive Employment Agreement (the "Agreement") which I have executed and of
which this Release is a part.

        I hereby confirm my obligations under the Company's proprietary
information and inventions agreement.

        I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.

        Except as otherwise set forth in this Release, in consideration of
benefits I will receive under the Agreement, I hereby release, acquit and
forever discharge the Company, its parents and subsidiaries, and their officers,
directors, agents, servants, employees, shareholders, successors, assigns and
affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys' fees, damages, indemnities and obligations
of every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me
based on my employment with the Company), arising out of or in any way related
to agreements, events, acts or conduct at any time prior to and including the
date I execute this Release, including, but not limited to: all such claims and
demands directly or indirectly arising out of or in any way connected with my
employment with the Company or the termination of that employment, including but
not limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; statutory law; common law; wrongful discharge;
discrimination; fraud; defamation; emotional distress; and breach of the implied
covenant of good faith and fair dealing; provided, however, that nothing in this
paragraph shall be construed in any way to release the Company from its
obligation to indemnify me pursuant to the Company's indemnification obligation
pursuant to agreement or applicable law.

        I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under ADEA. I also acknowledge that the consideration
given under the Agreement

                                       1.
<PAGE>   11

for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Release; (B) I have the right to consult with an attorney
prior to executing this Release; (C) I have twenty-one (21) days to consider
this Release (although I may choose to voluntarily execute this Release
earlier); (D) I have seven (7) days following the execution of this Release by
the parties to revoke the Release; and (E) this Release shall not be effective
until the date upon which the revocation period has expired, which shall be the
eighth (8th) day after this Release is executed by me.

                                           WILLIAM J. NEWELL



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



                                       2.
<PAGE>   12

                                    EXHIBIT B

                                     RELEASE
                               (GROUP TERMINATION)


        Certain capitalized terms used in this Release are defined in the
Executive Employment Agreement (the "Agreement") which I have executed and of
which this Release is a part.

        I hereby confirm my obligations under the Company's proprietary
information and inventions agreement.

        I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.

        Except as otherwise set forth in this Release, in consideration of
benefits I will receive under the Agreement, I hereby release, acquit and
forever discharge the Company, its parents and subsidiaries, and their officers,
directors, agents, servants, employees, shareholders, successors, assigns and
affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys' fees, damages, indemnities and obligations
of every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me
based on my employment with the Company), arising out of or in any way related
to agreements, events, acts or conduct at any time prior to and including the
date I execute this Release, including, but not limited to: all such claims and
demands directly or indirectly arising out of or in any way connected with my
employment with the Company or the termination of that employment, including but
not limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; statutory law; common law; wrongful discharge;
discrimination; fraud; defamation; emotional distress; and breach of the implied
covenant of good faith and fair dealing; provided, however, that nothing in this
paragraph shall be construed in any way to release the Company from its
obligation to indemnify me pursuant to the Company's indemnification obligation
pursuant to agreement or applicable law.

        I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under ADEA. I also acknowledge that the consideration
given under the Agreement

                                       1.
<PAGE>   13

for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Release; (B) I have the right to consult with an attorney
prior to executing this Release; (C) I have forty-five (45) days to consider
this Release (although I may choose to voluntarily execute this Release
earlier); (D) I have seven (7) days following the execution of this Release by
the parties to revoke the Release; (E) this Release shall not be effective until
the date upon which the revocation period has expired, which shall be the eighth
day (8th) after this Release is executed by me; and (F) I have received with
this Release a detailed list of the job titles and ages of all employees who
were terminated in this group termination and the ages of all employees of the
Company in the same job classification or organizational unit who were not
terminated.

                                           WILLIAM J. NEWELL



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



                                       2.

<PAGE>   14

                                    EXHIBIT C

                PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT


<PAGE>   15

                        ARRIS PHARMACEUTICAL CORPORATION

                    EMPLOYMENT, CONFIDENTIAL INFORMATION AND
                         INVENTION ASSIGNMENT AGREEMENT

        As a condition of my employment with ARRIS Pharmaceutical Corporation
("ARRIS"), and in consideration of my employment with ARRIS and my receipt of
the compensation now and hereafter paid to me by ARRIS, I agree to the
following:

        1. AT-WILL EMPLOYMENT. I understand and acknowledge that my employment
with ARRIS is for an unspecified duration and constitutes "at-will" employment.
I acknowledge that this employment relationship may be terminated at any time,
with or without cause, at the option of either ARRIS or myself, with or without
notice.

        2. CONFIDENTIAL INFORMATION.

            (a) ARRIS AND THIRD PARTY INFORMATION. I agree at all times during
the term of my employment and thereafter, to hold in strictest confidence, and
not to use, except for the benefit of ARRIS, or to disclose to any person, firm
or corporation without written authorization of an officer of ARRIS, any
Confidential Information of ARRIS. I understand that "Confidential Information"
means any ARRIS proprietary information, technical data, trade secrets or
know-how, including, but not limited to, research and product plans, products,
services, customer lists and customers (including, but not limited to, customers
of ARRIS on whom I called or with whom I became acquainted during the term of my
employment), markets, developments, inventions, processes, formulas, technology,
marketing, finances or other business information disclosed to me by ARRIS
either directly or indirectly in writing, orally or otherwise. I recognize that
ARRIS has received and in the future will receive from third parties their
confidential or proprietary information subject to a duty on ARRIS's part to
maintain the confidentiality of such information and to use it only for certain
limited purposes, and I understand that such information is also Confidential
Information. I further understand that Confidential Information does not include
any of the foregoing items that has become publicly known and made generally
available through no wrongful act of mine or of others who were under
confidentiality obligations as to the item or items involved.

            (b) FORMER EMPLOYER INFORMATION. I agree that I will not, during my
employment with ARRIS, improperly use or disclose any proprietary information or
trade secrets of any former or concurrent employer or other person or entity and
that I will not bring onto the premises of ARRIS any unpublished document or
proprietary information belonging to any such employer, person or entity unless
consented to in writing by such employer, person or entity.


                                       1.
<PAGE>   16

        3. INVENTIONS.

            (a) INVENTIONS RETAINED AND LICENSED. I have attached hereto, as
Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets that were made by me prior to my
employment with ARRIS (collectively referred to as "Prior Inventions"), that
belong to me, that relate to ARRIS's proposed business, products or research and
development, and that are not assigned to ARRIS hereunder; or, if no such list
is attached, I represent that there are no such Prior Inventions. If in the
course of my employment with ARRIS, I incorporate into a ARRIS product, process
or machine a Prior Invention owned by me or in which I have an interest, ARRIS
is hereby granted and will have a non-exclusive, royalty-free, irrevocable,
perpetual, worldwide license, with the right to grant sublicenses, to make, have
made, modify, use, and sell such Prior Invention as part of or in connection
with such product, process or machine.

            (b) ASSIGNMENT OF INVENTIONS. I agree that I will promptly make full
written disclosure to ARRIS, and will hold in trust for the sole right and
benefit of ARRIS, and hereby assign to ARRIS, or its designee, all my right,
title, and interest in and to any and all inventions, original works of
authorship, developments, concepts, improvements or trade secrets, whether or
not patentable or registrable under patent, copyright or similar laws, that I
may solely or jointly conceive or develop or reduce to practice, or cause to be
conceived or developed or reduced to practice, during the period of time I am in
the employ of ARRIS (collectively referred to as "Inventions"), except as
provided in Section 3(e) below. I further acknowledge that all original works of
authorship that are made by me (solely or jointly with others) within the scope
of and during the period of my employment with ARRIS and that are protectable by
copyright are works made for hire," as that term is defined in the United States
Copyright Act.

            (c) MAINTENANCE OF RECORDS. I agree to keep and maintain adequate
and current written records of all inventions made by me (solely or jointly with
others) during the term of my employment with ARRIS. The records will be in the
form of notes, sketches, drawings, and any other format that may be specified by
ARRIS. The records will be available to and remain the sole property of ARRIS at
all times.

            (d) PATENT AND COPYRIGHT REGISTRATIONS. I agree to assist ARRIS's,
or its designee, at ARRIS's expense, in every way to secure ARRIS' rights in the
Inventions and any copyrights, patents, mask work rights or other intellectual
property rights relating thereto in any and all countries, including disclosing
to ARRIS all pertinent information and data with respect thereto, and executing
all applications, specifications, oaths, assignments and all other instruments
that ARRIS shall deem necessary in order to apply for and obtain such rights and
in order to assign and convey to ARRIS, its successors, assigns and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers will
continue after the termination of this Agreement. If ARRIS is unable because of
my

                                       2
<PAGE>   17

mental of physical incapacity or for any other reason to secure my signature to
apply for or to pursue any application for any United States or foreign patents
or copyright registrations covering Inventions or original works of authorship
assigned to ARRIS as above, then I hereby irrevocably designate and appoint
ARRIS and its duly authorized officers and agents as my agent and attorney in
fact, to act for and in my behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent or copyright registrations thereon
with the same legal force and effect as if executed by me.

            (e) EXCEPTION TO ASSIGNMENTS. I understand that the provisions of
this Agreement requiring assignment of Inventions to ARRIS do not apply to any
invention that qualifies fully under the provisions of California Labor Code
Section 2870 (attached hereto as Exhibit B). I will advise ARRIS promptly in
writing of any inventions that I believe meet the criteria in California Labor
Code Section 2870 and that are not otherwise disclosed in Exhibit A.

        4. CONFLICTING EMPLOYMENT. I agree that, during the term of my
employment with ARRIS, I will not engage in any other employment, occupation,
consulting or other business activity directly related to the business in which
ARRIS is now involved or becomes involved during the term of my employment, nor
will I engage in any other activities that conflict with my obligations to
ARRIS.

        5. RETURNING ARRIS DOCUMENTS. I agree that, at the time of leaving the
employ of ARRIS, I will deliver to ARRIS (and will not keep in my possession,
recreate or deliver to anyone else) any and all documents or property, or
reproductions of any such documents or property, developed by me pursuant to my
employment with ARRIS or otherwise belonging to ARRIS, its successors or
assigns.


        6. SOLICITATION OF EMPLOYEES. I agree that for a period of twelve (12)
months immediately following the termination of my relationship with ARRIS for
any reason, whether with or without cause, I will not either directly or
indirectly solicit, induce, recruit or encourage any of ARRIS's employees to
leave their employment, or take away such employees, or attempt to solicit,
induce, recruit, encourage or take away employees of the ARRIS, either for
myself or for any other person or entity.

        7. REPRESENTATIONS. I agree to execute any proper oath or verify any
proper document requested by ARRIS to carry out the terms of this Agreement. I
represent that my performance of all the terms of this Agreement will not breach
any agreement to keep in confidence proprietary information acquired by me in
confidence or in trust prior to my employment by ARRIS. I have not entered into,
and I agree I will not enter into, any oral or written agreement in conflict
with the terms of this Agreement.


                                       3
<PAGE>   18

        8. ARBITRATION AND EQUITABLE RELIEF.

            (a) ARBITRATION. Except as provided in Section 8(b) below, I agree
that any dispute or controversy arising out of or relating to any
interpretation, construction, performance or breach of this Agreement, will be
settled by arbitration to be held in San Mateo County, California, in accordance
with the rules then in effect of the American Arbitration Association. The
arbitrator may grant injunctions or other relief in such dispute or controversy.
The decision of the arbitrator will be final, conclusive and binding on the
parties to the arbitration. Judgment may be entered on the arbitrator's decision
in any court having jurisdiction. ARRIS and I will each pay one-half of the
costs and expenses of such arbitration, and each of us will separately pay our
counsel fees and expenses.

            (b) EQUITABLE REMEDIES. I agree that it would be impossible or
inadequate to measure and calculate ARRIS's damages for any breach of the
covenants set forth in Sections 2,3, and 5 herein. Accordingly, I agree that if
I breach my obligations under any of such Sections, ARRIS will have, in addition
to any other right or remedy available, the right to obtain injunction from a
court of competent jurisdiction restraining such breach or threatened breach and
to specific performance of any such provision of this Agreement. I further agree
that no bond or other security will be required in obtaining such equitable
relief and I hereby consent to the issuance of such injunction and to the
ordering of specific performance. I hereby further consent to the personal
jurisdiction of the state and federal courts located in California for any
lawsuit filed there against me by ARRIS arising from or relating to this
Agreement.

        9. GENERAL PROVISIONS

            (a) GOVERNING LAW. This agreement will be governed by the laws of
the State of California without reference to conflicts of laws principles.

            (b) ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
and understanding between ARRIS and me relating to the subject matter hereof and
merges all prior discussions between us. No modification of or amendment to this
Agreement, or any waiver of any rights under this Agreement, will be effective
unless in writing signed by the party to be charged. Any subsequent change or
changes in my duties, salary or compensation will not affect the validity or
scope of this Agreement.


                                       4
<PAGE>   19

            (c) SEVERABILITY. If one or more of the provisions in this Agreement
are deemed void by law, then the remaining provisions will continue in full
force and effect.

            (d) SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for
the benefit of ARRIS, its successors, and its assigns.





     Date:     7/20/98                       Signature: /s/ William J. Newell
           ----------------------------                -------------------------
                                              William J. Newell
                                             -----------------------------------
                                             Name of Employee (typed or printed)



     ARRIS Pharmaceuticals, Inc.

     Name: /s/ Linda Ballenger
          -----------------------------------
     Print Name: Linda Ballenger
                -----------------------------
     Title: Comp. & Benefits Manager
           ----------------------------------


                                       5
<PAGE>   20


                                    EXHIBIT A
                            LIST OF PRIOR INVENTIONS
                        AND ORIGINAL WORKS OF AUTHORSHIP

                                                           IDENTIFYING # OR
Title __________________________________ Date _______________ Brief Description





 X  No inventions or improvements
---
_____ Additional sheets attached


Signature of Employee /s/ William J. Newell
                     -----------------------
Print Name of Employee William J. Newell
Date 7/20/98


Signature of Supervisor /s/ John P. Walker
                       ---------------------
Print Name of Supervisor John P. Walker

Date 7/20/98


                                       6
<PAGE>   21

                                    EXHIBIT B
                       CALIFORNIA LABOR CODE SECTION 2870
                   EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS

        " (a) ANY PROVISION IN AN EMPLOYMENT AGREEMENT WHICH PROVIDES THAT AN
EMPLOYEE SHALL ASSIGN, OR OFFER TO ASSIGN, ANY OF HIS OR HER RIGHTS IN AN
INVENTION TO HIS OR HER EMPLOYER SHALL NOT APPLY TO AN INVENTION THAT THE
EMPLOYEE DEVELOPED ENTIRELY ON HIS OR HER OWN TIME WITHOUT USING THE EMPLOYER'S
EQUIPMENT, SUPPLIES, FACILITIES, OR TRADE SECRET INFORMATION EXCEPT FOR THOSE
INVENTIONS THAT EITHER:


                (1) RELATE AT THE TIME OF CONCEPTION OR REDUCTION TO PRACTICE OF
            THE INVENTION TO THE EMPLOYER'S BUSINESS, OR ACTUAL OR DEMONSTRABLY
            ANTICIPATED RESEARCH OR DEVELOPMENT OF THE EMPLOYER.


                (2) RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE
            EMPLOYER.


                (3) TO THE EXTENT A PROVISION IN AN EMPLOYEE AGREEMENT PURPORTS
            TO REQUIRE AN EMPLOYEE TO ASSIGN AN INVENTION OTHERWISE EXCLUDED
            FROM BEING REQUIRED TO BE ASSIGNED UNDER SUBDIVISION (a), THE
            PROVISION IS AGAINST THE PUBLIC POLICY OF THIS STATE AND IS
            UNENFORCEABLE."

                                       7