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                                                                   EXHIBIT 10.41











                        COMBINATORIAL CHEMISTRY AGREEMENT


                                     BETWEEN


                           AXYS PHARMACEUTICALS, INC.


                                       AND


                             WARNER-LAMBERT COMPANY


                                  MAY 15, 1998






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                                TABLE OF CONTENTS


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<S>     <C>                                                                               <C>
1.      DEFINITIONS..........................................................................1

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

        1.2    "Axys Compound"...............................................................1

        1.3    "Axys Know-How"...............................................................1

        1.4    "Axys Patents"................................................................2

        1.5    "Axys Restricted Information".................................................2

        1.6    "Compound"....................................................................2

        1.7    "Compound Patent".............................................................2

        1.8    "Confidential Information"....................................................2

        1.9    "Controlled"..................................................................2

        1.10   "General Screening"...........................................................2

        1.11   "Information".................................................................2

        1.12   "Library".....................................................................3

        1.13   "Licensed Product"............................................................3

        1.14   "Protocol"....................................................................3

        1.15   "Scaffold"....................................................................3

        1.16   "Selected Protocol"...........................................................3

        1.17   "Software"....................................................................3

        1.18   "Technology Committee"........................................................3

        1.19   "Warner-Lambert Compound".....................................................3

2.      DEVELOPMENT AND TRANSFER OF LIBRARY..................................................3

        2.1    Library Synthesis.............................................................3

        2.2    Selection of Protocols........................................................3

        2.3    Delivery of Compounds.........................................................4

        2.4    Technology Committee..........................................................4

        2.5    Right to Use Compounds - Warner-Lambert.......................................5

        2.6    Right to Use Compounds - Axys.................................................5
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                                TABLE OF CONTENTS
                                   (CONTINUED)

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                                                                                          PAGE
<S>     <C>                                                                               <C>
        2.7    Limited Right to Select Compounds to Commercialize............................6

        2.8    Most Favored Nation Regarding Protocols.......................................6

        2.9    Software Modifications........................................................7

3.      TECHNOLOGY TRANSFER AND LICENSE......................................................7

        3.1    Transfer of Chemistry Technology..............................................7

        3.2    Technology and Library License Rights.........................................7

        3.3    Limited Commercial Licenses...................................................8

        3.4    License Limitations...........................................................8

4.      PAYMENTS.............................................................................8

        4.1    Compound Purchase Prices......................................................8

        4.2    Royalty on Compounds..........................................................9

5.      INTELLECTUAL PROPERTY MATTERS........................................................9

        5.1    Ownership.....................................................................9

        5.2    Limitation on Patent Applications............................................10

        5.3    Additional Licenses..........................................................10

        5.4    Enforcement of Patents.......................................................11

        5.5    Third Party Patent Rights....................................................11

6.      CONFIDENTIALITY.....................................................................11

        6.1    Confidentiality Obligations..................................................11

        6.2    Press Releases...............................................................12

        6.3    Publications.................................................................12

7.      INDEMNIFICATION.....................................................................12

        7.1    Indemnification by Warner-Lambert............................................13

        7.2    Indemnification by Axys......................................................13

8.      TERMINATION AND EXPIRATION..........................................................14

        8.1    Term and Termination.........................................................14

        8.2    Termination by Warner-Lambert for Failure to Deliver.........................14
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                                TABLE OF CONTENTS
                                   (CONTINUED)

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        8.3    Termination Upon Material Breach.............................................14

        8.4    Consequences of Termination..................................................14

        8.5    Accrued Rights; Surviving Obligations........................................14

        8.6    Rights in Bankruptcy.........................................................14

9.      MISCELLANEOUS PROVISIONS............................................................16

        9.1    Relationship of the Parties..................................................16

        9.2    Assignments..................................................................16

        9.3    Disclaimer of Warranties.....................................................16

        9.4    Representations and Warranties...............................................16

        9.5    Further Actions..............................................................18

        9.6    Force Majeure................................................................20

        9.7    No Trademark Rights..........................................................18

        9.8    Entire Agreement of the Parties; Amendments..................................18

        9.9    Captions.....................................................................18

        9.10   Applicable Law...............................................................18

        9.11   Disputes.....................................................................18

        9.12   Notices and Deliveries.......................................................19

        9.13   No Consequential Damages.....................................................19

        9.14   Waiver.......................................................................20

        9.15   Compliance with Law..........................................................20

        9.16   Severability.................................................................20

        9.17   Counterparts.................................................................20
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                        COMBINATORIAL CHEMISTRY AGREEMENT

        THIS COMBINATORIAL CHEMISTRY AGREEMENT (the "Agreement") is made and
entered into effective as of May 15, 1998 (the "Effective Date"), by and between
AXYS PHARMACEUTICALS, INC., a Delaware corporation having a place of business at
180 Kimball Way, South San Francisco, CA 94080 ("Axys"), and WARNER-LAMBERT
COMPANY, a Delaware corporation having a place of business at 2800 Plymouth
Road, Ann Arbor, Michigan 48105 ("Warner-Lambert"). Axys and Warner-Lambert may
be referred to herein as a "Party" or, collectively, as "Parties."

                                    RECITALS

        A.     Axys has developed and owns certain technology and intellectual
property rights relating to combinatorial chemistry and the synthesis of diverse
chemistry libraries using combinatorial techniques.

        B.     Warner-Lambert desires to obtain from Axys a co-exclusive library
of  ***  compounds to be synthesized pursuant to protocols developed by Axys and
a license to use the Axys combinatorial chemistry technology and intellectual
property rights for Warner-Lambert' own internal drug discovery and development
programs.

        C.     Axys is willing to grant such rights to Warner-Lambert and to
synthesize and deliver to Warner-Lambert such compound library pursuant to the
following terms and conditions.

        NOW, THEREFORE, the Parties agree as follows:

1.      DEFINITIONS

        1.1    "AFFILIATE" means, with respect to a Party, any individual or
entity that controls, is controlled by, or is under common control with, such
Party. For this definition, the term "control" shall refer to (a) the ownership,
directly or indirectly, of at least 50% of the voting securities or other
ownership interest of an entity, or (b) the possession, directly or indirectly,
of the power to direct the management or policies of an entity, whether through
the ownership of voting securities, by contract or otherwise.

        1.2    "AXYS COMPOUND" means a Compound that has been selected by Axys
for clinical development (either by Axys or its Affiliate or licensee) and
commercialization as provided in Section 2.7, but only for so long as such
Compound is itself the subject of ongoing, diligent clinical development efforts
or, if subject to a regulatory approval, is being commercially sold, in any form
or formulation, by Axys or its Affiliate or sublicensee.


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        1.3    "AXYS KNOW-HOW" means Information Controlled by Axys during the
Agreement that comprises (a) the Selected Protocols, or (b) the general
combinatorial chemistry techniques proprietary to Axys relating to use of such
Selected Protocols that is necessary to enable Warner-Lambert to replenish the
Compounds in the Library and to conduct accelerated medicinal chemistry based on
the Compounds, including without limitation computational methods and
instrumentation know-how.

        1.4    "AXYS PATENTS" means all patents and patent applications
Controlled by Axys during the Agreement that claim inventions which constitute
the Axys Know-How.

        1.5    "AXYS RESTRICTED INFORMATION" means all confidential Information
of Axys, other than Axys Know-How and Axys Patents, that is learned by the
employees of Warner-Lambert who work at Axys as permitted under Section 3.1 at
any time they are at an Axys facility.

        1.6    "COMPOUND" means any individual chemical compound within the
Library, a sample of which is provided and the structure of which is disclosed
to Warner-Lambert by Axys.

        1.7    "COMPOUND PATENT" means any patent application filed by or on
behalf of Warner-Lambert and/or Axys under Section 5.2(b) that claims an Axys
Compound or a Warner-Lambert Compound and all patents issuing from such
applications, and including any reissues, reexaminations, or extensions of such
patents.

        1.8    "CONFIDENTIAL INFORMATION" means the Information of a Party that
it considers proprietary and/or confidential, and that, if disclosed under this
Agreement in written, graphic or electronic form, is marked or otherwise
designated as "confidential" or "proprietary" or the equivalent and, if
disclosed orally, is characterized as "confidential" or "proprietary" by the
disclosing Party at the time of such disclosure. In addition, the Axys
Restricted Information shall be deemed to be the Confidential Information of
Axys.

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

        1.10   "GENERAL SCREENING" means use of the Library or any Compounds in
the Library in assays to screen for activity against targets in the pursuit of
the identification of lead compounds or structures in drug discovery and
development programs, where the party conducting such screening is permitted to
screen the Library or any Compounds against more than  ***  different targets
within a particular therapeutic area or disease or against more than a total of
  ***  different therapeutic areas or diseases, unless otherwise agree to in
writing by Axys and Warner-Lambert.


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        1.11   "INFORMATION" means information and data of any type and in any
tangible or intangible form, including without limitation inventions, practices,
methods, techniques, specifications, formulations, formulae, knowledge,
know-how, skill, experience, test data, analytical and quality control data,
stability data, results of studies and patent and other legal information or
descriptions.

        1.12   "LIBRARY" means the collection of approximately  ***  different
chemical compounds to be synthesized by Axys and provided to Warner-Lambert
under the terms of Article 2 of this Agreement.

        1.13   "LICENSED PRODUCT" means any product (including any formulation
thereof without regards to method of delivery or administration) that contains a
Warner-Lambert Compound.

        1.14   "PROTOCOL" means a detailed set of combinatorial chemistry
synthetic methods and standard operating procedures designed to be used for
synthesizing a set of related compounds using combinatorial chemistry
techniques.

        1.15   "SCAFFOLD" means the substructure common to a set of compounds
related by the use of a particular Protocol to synthesize such compounds.

        1.16   "SELECTED PROTOCOL" means a Protocol that has been selected by
the Technology Committee pursuant to Section 2.2, which Protocol shall contain
at a minimum the enabling information outlined in Exhibit A attached hereto.

        1.17   "SOFTWARE" means the proprietary software of Axys known as
IcePick(TM), in object and source code form, including improvements thereto made
during the Agreement.

        1.18   "TECHNOLOGY COMMITTEE" means the committee formed by the Parties
under Section 2.4 of the Agreement.

        1.19   "WARNER-LAMBERT COMPOUND" means a Compound that has been selected
by Warner-Lambert for clinical development and commercialization as provided in
Section 2.7, but only for so long as such Compound is itself the subject of
ongoing, diligent clinical development efforts or, if subject to a regulatory
approval, is being commercially sold, in any form or formulation, by
Warner-Lambert or its Affiliate or sublicensee.

2.      DEVELOPMENT AND TRANSFER OF LIBRARY

        2.1    LIBRARY SYNTHESIS. Commencing promptly after the Effective Date,
Axys will use commercially reasonable efforts to synthesize Compounds to be
provided to Warner-Lambert as part of the Library. Such Compounds shall be
synthesized using the Selected Protocols. The Library will contain Compounds
based on between  ***  different Selected Protocols. Axys will use commercially
reasonable efforts to come as close as possible to using


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***  different Selected Protocols. Axys will ensure that the Library will
contain no more than  ***  Compounds which are synthesized by using a
particular Selected Protocol represented in the Library (as such number may be
adjusted as provided in Section 2.8).

        2.2    SELECTION OF PROTOCOLS. During the term of the Agreement,
Warner-Lambert, through the Technology Committee, shall first choose and accept
as Selected Protocols at least  ***  Protocols out of a total of  ***  Protocols
proposed by Axys. Such selection shall be made based upon review by
Warner-Lambert of the basic Scaffolds that result from the proposed Protocols.
It is understood that  ***  Protocols exist at Axys as of the Effective Date.
Second, the Technology Committee shall have the responsibility for choosing the
additional Selected Protocols needed to complete the Library, as follows: The
Technology Committee shall diligently review and evaluate in good faith new
proposals and ideas or plans for Scaffolds to be used to create new Protocols
that either Party proposes to be selected for development into Selected
Protocols by Axys. The Technology Committee shall attempt to reach agreement on
whether to select or reject a proposed Scaffold as soon as possible. All such
proposals for Scaffolds that are selected by the Technology Committee shall then
be investigated by Axys to determine if Axys can develop and validate a Protocol
for creating a library of compounds around such Scaffold. If Axys is able to
create and validate a Protocol based on such selected Scaffold, such Protocol
shall be deemed a "Selected Protocol" under the Agreement. If the Technology
Committee cannot reach agreement to select a proposed Scaffold promptly after it
has been proposed, or if after such selection Axys is not able after reasonable
efforts to create and validate a Protocol based on such Scaffold, then such
Scaffolds (and its related Protocol, if any) shall be deemed rejected, and each
Party then will use diligent, good faith efforts to propose to the Technology
Committee different proposals for Scaffolds for review in order for Axys to
prepare and select the additional needed Selected Protocols. The Parties agree
to work cooperatively together to select the additional needed Scaffolds for
Selected Protocols in a timely fashion to allow Axys sufficient time to complete
delivery of the Library within the schedule set forth in Section 2.3.

        2.3    DELIVERY OF COMPOUNDS. Axys shall use commercially reasonable
efforts to deliver the Compounds in the Library to Warner-Lambert according to
the following schedule:  ***  Compounds to be delivered by the end of 1998, and
the remainder to be delivered by Axys quarterly thereafter at an annual rate of
approximately  ***  Compounds per year. If Axys is able to produce and deliver
the Compounds at a faster rate than contemplated above, then, if mutually agreed
with Warner-Lambert, Axys may deliver such Compounds as they become available
for delivery. The Compounds shall be delivered in 96 well plates with an 88 well
array format with approximately  ***  of each Compound present in the shipment,
or in such other reasonable format as is reasonably requested by Warner-Lambert,
provided that any additional cost to Axys required to prepare or ship such other
format shall be paid by Warner-Lambert. Each shipment shall be accompanied by a
confidential description of the identity and structure of each Compound in such
shipment. Accompanying each shipment will be the results of the analysis of each
Compound, performed by Axys according to the method of analysis set forth in
Exhibit B attached hereto.


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        2.4    TECHNOLOGY COMMITTEE. Within thirty (30) days of the Effective
Date, Axys and Warner-Lambert will form a committee consisting of two (2)
representatives of each Party (the "Technology Committee") and shall conduct the
first meeting of such committee. The Technology Committee shall meet on a
regular basis as agreed upon by the members of the Technology Committee (but no
more than once per quarter), (a) to discuss and implement the means for an
orderly and reasonable transfer of the Axys Know-How, (b) to discuss proposals
for Scaffolds proposed by either Party for selection and to select additional
Selected Protocols for use by Axys in completing the Library, (c) to assess and
approve the diversity of the Compounds to be made under each Selected Protocol
in order to maximize the chemical diversity in the Library, and (d) to discuss
and resolve any other non-business aspects of the relationship of the Parties
under the Agreement that require attention. The Technology Committee shall act
by unanimous consent, and may meet by telephone, videoconference or in
face-to-face meetings, as agreed upon by the members of the committee. A
Chairperson shall be appointed for each meeting of the Technology Committee by
the members of the committee and shall be responsible for issuing an agenda for
the meeting, conducting and chairing the meeting and preparing the minutes for
the meeting, and such other tasks as assigned by the committee. Each Party may
change its representatives on the Technology Committee as it deems appropriate,
and may send non-voting representatives to attend committee meetings as
observers.

        2.5    RIGHT TO USE COMPOUNDS - WARNER-LAMBERT. All intellectual
property rights existing as of the Effective Date and relating to the Library
and the Compounds, and any Information of Axys relating thereto, shall be and
remain the intellectual property of Axys. Subject to the terms of this
Agreement, Warner-Lambert and its Affiliates shall have the right to use the
Library and the Compounds therein solely in Warner-Lambert's and its Affiliates'
internal drug discovery, medicinal chemistry, development and commercialization
programs, and for use in research, development and commercialization programs
pursuant to collaborative research agreements with third parties, provided that,
such third party corporate partners are not permitted to use the Library or
Compounds for General Screening. Warner-Lambert shall be permitted to transfer
the Library or individual Compounds only (a) to Affiliates solely to use in such
Affiliate's internal drug discovery, development and commercialization programs,
or (b) to third party contractors or outside researchers who perform screening
in assays on behalf of Warner-Lambert or its Affiliates solely as part of
Warner-Lambert's or its Affiliates' internal or collaborative drug discovery,
development and commercialization programs as provided above in this Section and
provided that such third party contractors or outside researchers are subject to
written confidentiality agreements at least as restrictive as the provisions of
Article 6. Except as expressly permitted in the foregoing or as permitted in
Section 6.3, Warner-Lambert covenants that it and its Affiliates shall not
transfer or disclose the Library or Compounds to any third party for any
purpose. Warner-Lambert and its Affiliates may use the Information generated by
the uses of the Library or Compounds permitted above for any purpose subject to
and in compliance with the limitations in this Agreement.

        2.6    RIGHT TO USE COMPOUNDS - AXYS. Axys covenants that during the
term of the Agreement, it shall not (a) provide the Library or any significant
portion thereof to any third party pharmaceutical company for use in General
Screening, or (b) provide a library of compounds synthesized using-the Selected
Protocols (but not including any Compounds) to



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more than a total of  ***  third party pharmaceutical companies for use in
General Screening. Axys and its Affiliates shall retain full rights to use the
Library and the Compounds for all internal purposes, including without
limitation General Screening, combinatorial chemistry and medicinal chemistry,
and drug discovery, development and commercialization activities of Axys and its
Affiliates. For clarity, it is understood that Axys also retains the right to
use the Library and the Compounds in screening for activity in assays for
specific targets covered by research, development or commercialization programs
pursuant to collaborative research agreements with third parties, and to provide
the Library or Compounds, or a library of compounds made using the Selected
Protocols, to third party corporate partners of Axys or its Affiliates for use
by such partner in screening for activity in specific assays for targets covered
by the research, development or commercialization program between such corporate
partner and Axys (or its Affiliate, as applicable), provided that, such third
party corporate partner is not permitted to use the Library or Compounds for
General Screening. Axys covenants that during the term of the Agreement it shall
not provide the structures for the Compounds to any third party other than a
third party to whom Axys has provided Compounds as permitted above.

        2.7    LIMITED RIGHT TO SELECT COMPOUNDS TO COMMERCIALIZE. If
Warner-Lambert (or its Affiliate) determines that a particular Compound (but
excluding the Axys Compounds) has potential therapeutic or prophylactic utility
sufficient to select such Compound as a "Lead Candidate" for which
Warner-Lambert will initiate GLP toxicology studies and other significant
preclinical testing that is required to develop the data needed to submit an IND
for initiating human clinical trials on the Compound as a drug candidate, with
the intention of commercializing such Compound as a drug product, then
Warner-Lambert may give Axys notice to that effect, and such Compound shall,
unless such Compound is at the time of such notice an Axys Compound, thereafter
be deemed a "Warner-Lambert Compound" for so long as Warner-Lambert or its
Affiliate or sublicensee or assignee continues ongoing, diligent development
efforts on or, if subject to a regulatory approval, continues commercial sales
of such Compound. If such diligent efforts or such sales cease to continue with
respect to a particular Warner-Lambert Compound, then such Compound shall cease
to be a Warner-Lambert Compound and shall revert to being solely a Compound. If
Axys (or its Affiliate or licensee) determines that a particular Compound (but
excluding the Warner-Lambert Compounds) has potential therapeutic or
prophylactic utility sufficient to select such Compound for GLP toxicology
studies and other significant preclinical testing that is required to develop
the data needed to submit an IND for initiating into human clinical trials on
the Compound as a drug candidate, with the intention of commercializing such
Compound as a drug product, then Axys may give Warner-Lambert notice to that
effect, and such Compound shall, unless such Compound is at the time of such
notice a Warner-Lambert Compound, thereafter be deemed an "Axys Compound" for so
long as Axys or its Affiliate or licensee or assignee continues ongoing,
diligent development efforts on or, if subject to a regulatory approval,
continues commercial sales of such Compound. If such diligent efforts or such
sales cease to continue with respect to a particular Axys Compound, then such
Compound shall cease to be an Axys Compound and shall revert to being solely a
Compound.


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        2.8    MOST FAVORED NATION REGARDING PROTOCOLS. Axys covenants that if,
during the term of this Agreement, Axys agrees to provide to a third party,
pursuant to a combinatorial chemistry library agreement similar to this
Agreement, at least  ***  compounds based on Protocols, and such agreement
stipulates that the maximum number of such compounds per Protocol that Axys may
deliver to such third party is a number less than the maximum number of
Compounds per Selected Protocol that Axys is permitted to provide to
Warner-Lambert in the Library under Section 2. 1, then if requested by
Warner-Lambert, Axys will agree to reduce such maximum number of Compounds per
Selected Protocol (as set forth in Section 2.1) for the remaining term of the
Agreement to the same maximum number of compounds per Protocol as Axys committed
in such other agreement, provided that the total number of Compounds to be
purchased by Warner-Lambert shall remain approximately *** unless Axys and
Warner-Lambert otherwise agree in writing. This Section 2.8 shall terminate and
be of no further force or effect immediately upon completion of delivery of the
Library by Axys.

        2.9    SOFTWARE MODIFICATIONS. The Technology Committee shall, on a
reasonable and acceptable time frame, review and discuss the Software to
determine if there are mutually agreeable modifications to the Software that
would serve to enhance the functionality of the Software to both Parties. The
Parties may agree to conduct such modifications cooperatively, under terms to be
agreed upon at that time.

3.      TECHNOLOGY TRANSFER AND LICENSE

        3.1    TRANSFER OF CHEMISTRY TECHNOLOGY. Commencing promptly after the
Effective Date, Axys will commence the transfer to Warner-Lambert on an orderly
basis, of the Axys Know-How, copies of the issued Axys Patents, and the
Software. Such transfer will be managed and coordinated by the Technology
Committee, formed as provided in Section 3.4 below. The schedule for such
transfer will be reasonable, provided that Axys will complete transfer of the
Axys Know-How relating directly to a particular Selected Protocol within  ***
of the date of selection of such Selected Protocol under Section 2.2. In
addition, Warner-Lambert may provide, at its cost and expense, up to  ***
Warner-Lambert scientists to work at Axys during the period of technology
transfer to assist and direct the transfer to Warner-Lambert of the Axys
Know-How; provided that access or exposure to Axys Restricted Information by the
Warner-Lambert scientists shall be subject to the provisions of Article 6, and
that such number of scientists may not exceed an average of  ***  per month
during such transfer period. Any such Warner-Lambert scientists that work at
Axys under the terms of this Section 3.1 shall be restricted from access to any
Axys facilities or locations other than those necessary for completing the
transfer of Axys Know-How as provided above. Further, Axys shall use reasonable
efforts to limit and restrict such Warner-Lambert scientists from access or
exposure to any Axys confidential information that is not Axys Know-How. If Axys
makes improvements to the Software during the Agreement, such improved Software
shall be provided to Warner-Lambert promptly thereafter.

        3.2    TECHNOLOGY AND LIBRARY LICENSE RIGHTS.


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               (a)    Subject to the terms of this Agreement, Axys hereby grants
Warner-Lambert the non-exclusive, worldwide, fully paid-up, perpetual (subject
to termination under Article 12) license to use and practice the Axys Know-How
and Axys Patents solely for Warner-Lambert's permitted use of the Library and
Compounds under Section 2.3, and including the right of Warner-Lambert to
synthesize the Compounds for use as permitted in Section 2.3.

               (b)    Subject to the terms of this Agreement, Axys hereby grants
Warner-Lambert the non-exclusive, worldwide, fully paid-up, perpetual (subject
to termination under Article 12) license to use the Software solely in
conjunction with Warner-Lambert' or its Affiliates' permitted use of the Library
under Section 2.3, and to copy the Software to the extent necessary for
conducting the foregoing permitted use of such Software.

The foregoing license rights may be sublicensed to a third party without the
prior written consent of Axys in conjunction with and in compliance with
Warner-Lambert's permitted use of the Library and Compounds under Section 2.3
and only to the extent needed to accomplish such permitted purposes, and
Warner-Lambert and its Affiliates covenant that they will not transfer or
disclose any such Axys Know-How or Software to any third party except as part of
such permitted sublicenses and only subject to limitations consistent with the
above restrictions.

        3.3    LIMITED COMMERCIAL LICENSES.

               (a)    Subject to the terms of this Agreement, Axys hereby grants
Warner-Lambert the exclusive, worldwide, perpetual (subject to termination under
Article 12), royalty-bearing license, with the right to sublicense, under Axys'
interest in the Compound Patents solely for Warner-Lambert, its Affiliates and
sublicensees to make, have made, import, use, offer for sale and sell Licensed
Products.

               (b)    Subject to the terms of this Agreement, Warner-Lambert
hereby grants Axys the exclusive, worldwide, perpetual (subject to termination
under Article 12), royalty-free license, with the right to sublicense, under
Warner-Lambert' interest in the Compound Patents solely for Axys, its Affiliates
and licensees to make, have made, import, use, offer for sale and sell products
containing the Axys Compounds.

        3.4    LICENSE LIMITATIONS. Warner-Lambert understands and agrees that
its rights granted in Section 3.2 under the Axys Know-How, Axys Patents, and the
Software are non-exclusive, and that Axys retains all its rights to use all such
technology, Information and intellectual property rights for its own purposes
and to license or disclose such technology, Information and intellectual
property rights to third parties without restriction, subject only to the
restrictions, and to the licenses and other rights granted Warner-Lambert, under
this Agreement. Warner-Lambert covenants that it and its Affiliates shall not
use or practice the Axys Know-How, Axys Patents and Software for any use or
purpose except as expressly permitted in Section 3.2 and 3.3(a), that it will
not grant any sublicenses to any third party under such Information or
intellectual property rights except as expressly permitted under Section 3.2 or
3.3(a), and that it will not sell or otherwise commercialize any Compound unless
it has been selected as a Warner-Lambert Compound and is sold as a Licensed
Product, but excluding from the foregoing limitation any Compound that is
discovered or synthesized by Warner-Lambert or its Affiliates



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completely independent of any activity permitted under this Agreement and
without reliance on any Axys Know-How, Axys Patents or other Axys Confidential
Information disclosed to Warner-Lambert. Warner-Lambert acknowledges that the
source code for the Software contains the valuable trade secrets of Axys, and
Warner-Lambert covenants that it and its Affiliates shall not distribute the
Software to any third party except to the extent permitted by Axys in writing.

4.      PAYMENTS

        4.1    COMPOUND PURCHASE PRICES. Warner-Lambert shall pay Axys a
purchase price for each Compound delivered hereunder as provided below:

               (a)    Warner-Lambert shall pay Axys             ***
for each of the       ***         Compounds delivered to Warner-Lamber  by Axys
under the terms of Article 2;

               (b)    Warner-Lambert shall pay Axys          ***           for
each of the next       ***             Compounds delivered to Warner-Lambert by
Axys under the terms of Article 2; and

               (c)    Warner-Lambert shall pay Axys                ***
 for each of the remaining                ***            Compounds delivered to
Warner-Lambert by Axys.

Such payments shall be made within thirty (30) days of delivery of an invoice
from Axys regarding such delivered Compounds, which invoice shall be submitted
promptly upon delivery of the Compounds by Axys under the terms of Section 2.2.
Warner-Lambert shall be responsible for payment of any sales, transfer or other
tax accessible on the sale or transfer of the Compounds, Axys Know-How, Software
or Axys Patents under the terms of this Agreement, other than taxes based upon
net income of Axys.

        4.2    ROYALTY ON COMPOUNDS. Warner-Lambert shall pay Axys a royalty on
sales of Licensed Products equal to     ***    of the Net Sales of the Licensed
Products by Warner-Lambert, its Affiliates and sublicensees in countries where
the manufacture, use or sale of such Licensed Product (or the Warner-Lambert
Compound therein) is covered by a claim in an issued patent that claims the
composition of matter of the Compound that is an active ingredient in such
Licensed Product and for which Axys or an Axys employee or contractor is an
inventor, provided that the Compound in the Licensed Product was made using one
of the at least   ***   Selected Protocols proposed by Axys and selected by the
Technology Committee as provided in Section 2.2. As used herein, "Net Sales"
shall mean the gross amount received from non-affiliated customers for all
Licensed Products sold after deduction for the following items (i) trade,
quantity and cash discounts or rebates; (ii) credits, rebates, charge-back
rebates, reimbursements or similar payments granted or given to wholesalers and
other distributors, buying groups, health care insurance carriers, governmental
agencies and other institutions; (iii) credits or allowances for rejection or
return of such Licensed Product previously


*** Portions of this page have been omitted pursuant to a request for
    Confidential Treatment and filed separately with the Commission.



                                       9
<PAGE>   14

sold; (iv) any tax, tariff, duty or other governmental charge (other than an
income tax) levied on the sale, transportation or delivery of Licensed Product
and borne by the seller thereof; (v) payments or rebates paid in connection with
state or federal Medicare, Medicaid or similar programs; (vi) any charge for
freight or insurance; and (vii) bad debt expense.

5.      INTELLECTUAL PROPERTY MATTERS

        5.1    OWNERSHIP. All intellectual property rights in and to the
Library, Compounds, Selected Protocols, Axys Know-How, Axys Patents, and the
Software owned or Controlled by Axys as of the Effective Date shall remain
exclusively with Axys, subject only to the license rights granted to
Warner-Lambert under Sections 2.3 and 3.2. Axys shall own the entire right,
title and interest in and to any inventions and Information, and all
intellectual property rights therein, developed solely by employees or agents of
Axys in the course of this Agreement. Warner-Lambert shall own the entire right,
title and interest in and to any inventions and Information, and all
intellectual property rights therein, developed solely by employees or agents of
Warner-Lambert in the course of this Agreement. The Parties shall own jointly
the entire right, title and interest in and to any inventions and Information,
and all intellectual property rights therein, developed jointly by employees or
agents of Axys and employees or agents of Warner-Lambert in the course of this
Agreement. Notwithstanding the foregoing, Warner-Lambert hereby grants to Axys
the right, under any rights Warner-Lambert may have or obtain in the Selected
Protocols and the Scaffolds on which they are based, if any, to use the Selected
Protocols to make, use and sell compounds for all purposes, subject to the
limitations in Section 2.6. Further, it is understood that Warner-Lambert will
own the physical samples of the Compounds provided by Axys hereunder.

        5.2    LIMITATION ON PATENT APPLICATIONS.

               (a)    The Parties agree that each Party and its Affiliates shall
not file or prosecute any patent applications that specifically claim or
otherwise describe any Compound(s); provided that the foregoing shall not apply
with respect to any Compound(s) that is or are discovered or synthesized by
Warner-Lambert or its Affiliates completely independent of any activity
permitted under this Agreement and without reliance on any Axys Know-How, Axys
Patents or other Axys Confidential Information disclosed to Warner-Lambert. Axys
will not provide the Library to any third party without obtaining the third
party's promise, in writing, not to file or prosecute any patent applications
that specifically claim or otherwise describe any Compound(s) (except for
Compounds independently discovered or synthesized by such party), and to grant
Axys a license under any patent owned by such party that claim (either
specifically or generically) a Compound for Axys and its Affiliates and
sublicensees (including Warner-Lambert) to make, have made, import, use, offer
for sale and sell such Compound (other than patents claiming such independently
discovered Compounds).

               (b)    Notwithstanding subsection (a) above, a Party may file and
prosecute patent applications that specifically claim or otherwise describe a
Compound or Compounds, but only if (i) the Party has defined a preliminary
structural activity relationship around such Compound(s); (ii) the Party has
prepared and evaluated related compounds outside the Library in support of the
structural activity relationship; and (iii) the claims to or descriptions of the



                                       10
<PAGE>   15

Compound(s) are essential in order to meet best mode requirements or to protect
preferred embodiments or otherwise to support claims in such patent application.

        5.3    ADDITIONAL LICENSES. Axys hereby grants to Warner-Lambert a
non-exclusive, world-wide, perpetual (subject to termination under Article 12),
fully paid-up license under any issued patents owned by Axys or its Affiliate
that claim (either specifically or generically) a Compound solely for
Warner-Lambert and its Affiliates and permitted sublicensees to make, have made,
import, and use such Compound solely for the purposes permitted in Section 2.5.
Warner-Lambert hereby grants to Axys a non-exclusive, world-wide perpetual
(subject to termination under Article 12), fully paid-up license, with right to
sublicense, under issued patents owned by Warner-Lambert or its Affiliate that
claim (either specifically or generically) a Compound solely for Axys and its
Affiliates and sublicensees to make, have made, import, use, offer for sale and
sell such Compound as permitted in Section 2.6, but excluding from the foregoing
license any Warner-Lambert patent claiming a Compound that is discovered or
synthesized by Warner-Lambert or its Affiliates completely independent of any
activity permitted under this Agreement and without reliance on any Axys
Know-How, Axys Patents or other Axys Confidential Information disclosed to
Warner-Lambert.

        5.4    ENFORCEMENT OF PATENTS. If Warner-Lambert becomes aware of any
actions of a third party that it considers infringing upon any Axys Patent, it
shall notify Axys and provide all evidence of such infringement that is
reasonably available. Axys shall have the sole and exclusive right, at its own
expense, to attempt to terminate such infringement by commercially appropriate
steps, including suit. Warner-Lambert shall provide reasonable assistance to
Axys in enforcing the Axys Patents, at Axys's request and expense, including
providing access to relevant documents and other evidence and making its
employees available. Any amounts recovered by Axys, whether by settlement or
judgment, shall be retained by Axys.

        5.5    THIRD PARTY PATENT RIGHTS. If any warning letter or other notice
of infringement is received by a Party, or action, suit or proceeding is brought
against a Party alleging infringement of a patent right of any third party in
the manufacture, use or sale of a Compound or use of the Axys Know-How or Axys
Patents or Software as permitted herein, the Parties shall promptly discuss and
decide the best way to respond.

6.      CONFIDENTIALITY

        6.1    CONFIDENTIALITY OBLIGATIONS. Each Party agrees that, for the term
of this Agreement and for five (5) years thereafter, such Party shall keep, and
shall ensure that its officers, directors, employees and agents keep, completely
confidential and shall not publish or otherwise disclose and shall not use for
any purpose except as expressly permitted hereunder any Confidential Information
furnished to it by the other Party pursuant to this Agreement; except that the
foregoing obligations shall not apply to any Information to the extent that it
can be established by such receiving Party that such Information:

               (a)    was already known to the receiving Party or any of its
Affiliates, other than pursuant to an obligation of confidentiality owed to the
disclosing Party, at the time of disclosure;



                                       11
<PAGE>   16

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

               (c)    became 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

               (d)    was subsequently lawfully disclosed to the receiving Party
or its Affiliates by a Third Party other than in contravention of a
confidentiality obligation of such Third Party to the disclosing Party; or

               (e)    was developed or discovered by employees of the receiving
Party or its Affiliates who had no access to the Confidential Information of the
disclosing Party.

        Notwithstanding the foregoing, Warner-Lambert shall not use for any
purpose the Axys Restricted Information. Further, each Party may disclose the
other's Confidential Information only to the extent such disclosure is necessary
in prosecuting or defending litigation or complying with applicable governmental
laws or regulations, provided that if a Party is required to make any such
disclosure of the other Party's Confidential Information, it will, whenever
reasonably possible, give advance notice to the latter Party of such disclosure
requirement, will cooperate with the other Party in its efforts to secure
confidential treatment of such Information prior to its disclosure (whether
through protective orders or confidentiality agreements or otherwise), and will
use reasonable efforts to limit the extent of such disclosure and, if requested
by the other Party because of an inability of such other Party to seek
confidential treatment, to secure confidential treatment of such Information
prior to its disclosure (whether through protective orders or confidentiality
agreements or otherwise).

        6.2    PRESS RELEASES. Except as required by law or in accordance with
Section 6.3, neither Party shall have the right to make any public announcements
concerning this Agreement or the subject matter hereof without the prior written
consent of the other, which shall not be unreasonably withheld. Notwithstanding
the foregoing, the Parties agree that (a) each Party may make public disclosures
regarding Compounds in clinical development or commercialization; and (b) each
Party may desire or be required to issue press releases relating to the
Agreement or activities thereunder, and the Parties agree to consult with each
reasonably and in good faith with respect to the text of such press releases
(under this subsection (b)) prior to the issuance thereof, provided that a Party
may not unreasonably withhold consent to such releases. All such public
disclosures with respect to this Agreement must be accurate and comply with
applicable law and regulations. Except as set forth in Section 6.2(a) hereof, in
the event of a required or desired public announcement, such Party shall provide
the other Party with a reasonable opportunity and the right to approve the
content of such announcement prior to its being made, which approval shall not
be delayed or unreasonably withheld. Each Party agrees that any filings it makes
with the SEC describing the terms of this Agreement shall be consistent with the
prior press releases and other public disclosures of such terms.



                                       12
<PAGE>   17

        6.3    PUBLICATIONS. Notwithstanding the terms of Section 6.2, either
Party may publish Information that such Party discovered or developed in its
research, development or commercialization activities derived from use of the
Library or any Compound without the consent of or notice to the other Party,
provided, however, that no such publication may contain the structure of a
Compound or Information that reasonably may be interpreted to disclose the
structure of a Compound unless:

               (a)    the publishing Party has filed a patent application, in
compliance with the requirements of Section 5.1, that discloses or specifically
claims such Compound;

               (b)    such structure is in the public domain at the time of such
publication;

               (c)    such structure was independently discovered by employees
of the publishing Party who had no access to the Libraries, the Compounds or any
Confidential Information of the other Party; or

               (d)    the other Party has consented in writing to such
disclosure.

7.      INDEMNIFICATION

        7.1    INDEMNIFICATION BY WARNER-LAMBERT. Warner-Lambert shall
indemnify, defend and hold Axys and its agents, employees, officers and
directors (the "Axys Indemnitees") harmless from and against any and all
liability, damage, loss, cost or expense (including reasonable attorneys' fees)
arising out of Third Party claims or suits related to (a) Warner-Lambert's or
its Affiliate's negligence, willful misconduct or breach of this Agreement; or
(b) the manufacture, use or sale of Compounds or products containing Compounds
or any compound based upon or derived therefrom by Warner-Lambert and its
Affiliates, sublicensees, distributors and agents, except to the extent such
claims or suits result from the active negligence or willful misconduct of or
breach of the Agreement by any of the Axys Indemnitees or the manufacture, use
or sale to third parties of Compounds or products containing Compounds or any
compound based upon or derived therefrom by Axys and its Affiliates, other
licensees (i.e., excluding Warner-Lambert) distributors or agents. Upon the
assertion of any such claim or suit, the Axys Indemnitees shall promptly notify
Warner-Lambert thereof, and Warner-Lambert shall appoint counsel reasonably
acceptable to the Axys Indemnitees to represent the Axys Indemnitees with
respect to any claim or suit for which indemnification is sought, provided that
Warner-Lambert shall have sole control over the defense and settlement of such
claim or suit. As a condition to obtaining indemnification hereunder, the Axys
Indemnitees shall not settle or attempt to settle or defend or attempt to defend
any such claim or suit without the prior written consent of Warner-Lambert,
unless they shall have first waived their rights to indemnification hereunder;
provided that the foregoing shall in no way limit Axys' right to challenge or
defend against a claim (whether by Warner-Lambert or any third party) that the
claim or suit that is the subject of a claim for indemnification by Axys
hereunder results from the active negligence or willful misconduct of or breach
of the Agreement by any of the Axys Indemnitees.

        7.2    INDEMNIFICATION BY AXYS. Axys shall indemnify, defend and hold
Warner-Lambert and its agents, employees, officers and directors (the
"Warner-Lambert Indemnitees")



                                       13
<PAGE>   18

harmless from and against any and all liability, damage, loss, cost or expense
(including reasonable attorney's fees) arising out of Third Party claims or
suits related to (a) Axys's negligence, willful misconduct or breach of this
Agreement, except to the extent that such claims or suits result from (i) the
manufacture, use, or sale or Compound or products containing Compounds or any
compound based upon or derived therefrom by Warner-Lambert and its Affiliates,
sublicensees, distributors and agents, or (ii) the active negligence or willful
misconduct of or breach of this Agreement by any of the Warner-Lambert
Indemnitees; or (b) the manufacture, use or sale to third parties by Axys, its
Affiliates, third party licensees, distributors or agents of Compounds or
products containing Compounds or any compound based upon or derived therefrom
(but excluding from the foregoing exception any claims or suits that relate to
use or sale of the physical samples of Compounds provided to Warner-Lambert
hereunder); or (c) personal or property damage arising during the course of
manufacture of the Compounds by Axys. Upon the assertion of any such claim or
suit, the Warner-Lambert Indemnitees shall promptly notify Axys thereof, and
Axys shall appoint counsel reasonably acceptable to the Warner-Lambert
Indemnitees to represent the Warner-Lambert Indemnitees with respect to any
claim or suit for which indemnification is sought, provided that Axys shall have
sole control over the defense and settlement of such claim or suit. As a
condition to obtaining indemnification hereunder, the Warner-Lambert Indemnitees
shall not settle or attempt to settle or defend or attempt to defend any such
claim or suit without the prior written consent of Axys, unless they shall have
first waived their rights to indemnification hereunder; provided that the
foregoing shall in no way limit Warner-Lambert's right to challenge or defend
against a claim (whether by Axys or any third party) that the claim or suit that
is the subject of a claim for indemnification by Warner-Lambert hereunder
results from the active negligence or willful misconduct of or breach of the
Agreement by any of the Warner-Lambert Indemnitees.

8.      TERMINATION AND EXPIRATION

        8.1    TERM AND TERMINATION. This Agreement shall commence upon the
Effective Date and, unless earlier terminated as provided herein, shall expire
on the third anniversary of the Effective Date or, if later, upon the completion
of delivery of the Library. The license and other rights granted to
Warner-Lambert under Sections 2.5, 2.7, 3.2, 3.3(a), 3.4 and 5.3 shall survive
such expiration, subject to compliance by Warner-Lambert and its Affiliates with
all limitations on the practice of such license rights set forth in such
Sections. The license rights granted to Axys under Section 3.3(b) shall survive
such expiration.

        8.2    TERMINATION BY WARNER-LAMBERT FOR FAILURE TO DELIVER.
Warner-Lambert shall have the right, subject to the provisions of Section 9.11,
to terminate the Agreement upon sixty (60) days written notice if Axys has
materially failed to comply with the delivery schedule for delivering Compounds
under Section 2.3, provided that such termination shall not be effective if Axys
cures such failure prior to the end of such sixty (60) day period. The license
and other rights granted to Warner-Lambert under Sections 2.5, 2.7, 3.2, 3.3(a),
3.4 and 5.3 shall survive such termination with respect to the Compounds already
delivered and paid for by Warner-Lambert, subject to compliance by
Warner-Lambert and its Affiliates with all limitations on the practice of such
license rights set forth in such Sections. The license rights granted to Axys
under Section 3.3(b) shall survive such termination.



                                       14
<PAGE>   19

        8.3    TERMINATION UPON MATERIAL BREACH.

               (a)    Failure by a Party to comply with any of its material
obligations contained herein shall entitle the Party not in default to give to
the Party in default notice specifying the nature of the default, requiring it
to make good or otherwise cure such default, and stating its intention to
terminate if such default is not cured. If such default is not cured within
sixty (60) days after the date of such notice (or, if such default cannot be
cured within such sixty (60) day period, if the Party in default does not
commence and diligently continue actions to cure such default), the Party not in
default shall be entitled, without prejudice to any of its other rights
conferred on it by this Agreement, and in addition to any other remedies
available to it by law or in equity, to terminate this Agreement; provided,
however, that such right to terminate shall be stayed in the event that, during
such sixty (60) day period, the Party alleged to have been in default shall have
initiated dispute resolution proceedings in accordance with Section 9.11 with
respect to the alleged default, which stay shall last so long as the initiating
Party diligently and in good faith pursues the prompt resolution of such
proceedings, and provided further that if such default is by Warner-Lambert and
is limited to a default with respect to obligations as to particular Compounds,
then Axys may not terminate the entire Agreement but may terminate the
Agreement, and all the rights of Warner-Lambert, only with respect to such
Compounds.

               (b)    The right of a Party to terminate this Agreement, as
provided above, shall not be affected in any way by its waiver or failure to
take action with respect to any prior default. A Party may waive its right to
terminate this Agreement with respect to a particular default, provided that any
such waiver shall not constitute a waiver of, and such Party shall retain all
rights to pursue, any and all other remedies it may have at law or in equity of
such default by the other Party.

        8.4    CONSEQUENCES OF TERMINATION.

               (a)    Upon termination of this Agreement by Warner-Lambert
pursuant to Section 8.3 for the uncured material breach of Axys, then: (i) the
license and other rights granted under Sections 2.5, 3.2, 3.3(a) and 5.3 shall
survive termination subject to compliance with all limitations in such Sections
and in Section 3.4; (ii) Axys shall promptly return all Confidential Information
of Warner-Lambert in its possession; (iii) all obligations and rights of Axys to
provide additional Compounds shall terminate; (iv) Warner-Lambert shall retain
the right to use the Compounds already delivered and paid for as permitted under
the Agreement; and (v) Warner-Lambert may retain exclusive rights to up to ***
Warner-Lambert Compounds selected under Section 2.7, regardless of whether
Warner-Lambert or its Affiliate or sublicensee complies with the obligations of
diligence or continued sales under Section 2.7 to maintain such Compounds as
Warner-Lambert Compounds.

               (b)    Upon termination of this Agreement by Axys pursuant to
Section 8.3, in its entirety or only as to particular Compounds, as applicable,
for the uncured material breach of Warner-Lambert, then: (i) all licenses and
other rights granted by Axys to Warner-Lambert under the Agreement, or, if
applicable, under the Agreement as to the particular Compounds so



                                       15

*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission
<PAGE>   20

terminated, shall terminate; (ii) Warner-Lambert shall return all existing
samples of the Compounds that are subject to the termination and all rights to
use such Compounds shall terminate and revert to Axys; (iii) if the entire
Agreement is terminated, all obligations of Axys to provide additional Compounds
shall terminate, and (iv) the license rights granted to Axys by Warner-Lambert
in Section 5.3 shall survive termination any such termination.

        8.5    ACCRUED RIGHTS; SURVIVING OBLIGATIONS.

               (a)    Termination, relinquishment or expiration of this
Agreement for any reason shall be without prejudice to any rights which shall
have accrued to the benefit of a Party prior to such termination, or expiration.
Such termination, relinquishment or expiration shall not relieve a Party from
obligations which are expressly indicated to survive termination or expiration
of this Agreement.

               (b)    Without limiting the foregoing, Sections 5.1, 5.2 and 5.4
and Articles 1, 6, 7 and 8 of this Agreement shall survive the expiration or
termination of this Agreement.

        8.6    RIGHTS IN BANKRUPTCY. All rights and licenses granted under or
pursuant to this Agreement by Warner-Lambert or Axys are, and shall otherwise be
deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code,
licenses of right to "intellectual property" as defined under Section 101 of the
U.S. Bankruptcy Code. The Parties agree that the Parties, as licensees of such
rights under this Agreement, shall retain and may fully exercise all of their
rights and elections under the U.S. Bankruptcy Code. The Parties further agree
that, in the event of the commencement of a bankruptcy proceeding by or against
either Party under the U.S. Bankruptcy Code, the Party hereto which is not a
party to such proceeding shall be entitled to a complete duplicate of (or
complete access to, as appropriate) any such intellectual property and all
embodiments of such intellectual property, and same, if not already in their
possession, shall be promptly delivered to them (i) upon any such commencement
of a bankruptcy proceeding upon their written request therefor, unless the Party
subject to such proceeding elects to continue to perform all of its obligations
under this Agreement or (ii) if not delivered under (i) above, following the
rejection of this Agreement by or on behalf of the Party subject to such
proceeding upon written request therefor by an non-subject Party.

9.      MISCELLANEOUS PROVISIONS

        9.1    RELATIONSHIP OF THE PARTIES. Nothing in this Agreement is
intended or shall be deemed to constitute a partnership, agency or
employer-employee relationship between the Parties. Neither Party shall incur
any debts or make any commitments for the other.

        9.2    ASSIGNMENTS. Except as expressly provided herein, neither this
Agreement nor any interest hereunder shall be assignable, nor any other
obligation delegable, by a Party without the prior written consent of the other;
provided, however, that a Party may assign this Agreement to any Affiliate or to
any successor in interest by way of merger or sale of all or substantially all
of its assets in a manner such that the assignee shall be liable and responsible
for the performance and observance of all such Party's duties and obligations
hereunder, but provided that if such assignee is an Affiliate of the assigning
Party, such Party shall guarantee the



                                       16
<PAGE>   21

performance by such Affiliate of all its obligations under the Agreement. This
Agreement shall be binding upon the successors and permitted assigns of the
Parties; provided, however, that in-the event that Axys is acquired, the Axys
Know-How and the Axys Patents shall not include any information or intellectual
property rights owned by the acquiring company as of the date of such
acquisition, unless previously licensed to Axys. Any assignment not in
accordance with this Section 9.2 shall be void.

        9.3    DISCLAIMER OF WARRANTIES. THE PARTIES EXPRESSLY DISCLAIM ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT OF THIRD
PARTY RIGHTS, UNLESS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT.

        9.4    REPRESENTATIONS AND WARRANTIES.

               (a)    Each Party represents and warrants to the other Party
that, as of the date of this Agreement:

                      (i)    such Party is duly organized and validly existing
under the laws of the state of its incorporation and has full corporate power
and authority to enter into this Agreement and to carry out the provisions
hereof;

                      (ii)   such Party has taken all corporate action necessary
to authorize the execution and delivery of this Agreement and the performance of
its obligations under this Agreement; and

                      (iii)  this Agreement is a legal and valid obligation of
such Party, binding upon such Party and enforceable against such Party in
accordance with the terms of this Agreement, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of equitable
relief, including specific performance. All consents, approvals and
authorizations from all governmental authorities or other Third Parties required
to be obtained by such Party in connection with this Agreement have been
obtained.

                      (iv)   such Party has obtained written confidentiality
agreements from each of its employees and consultants who have access to the
Confidential Information of the other Party hereunder, whether in the form of
general confidentiality agreements from the employees obtained at the time of
commencement of such employees' employment by such Party or otherwise, which
agreements obligate such persons to maintain as confidential all confidential
information obtained by such Party in confidence from a third party.

               (b)    Axys represents and warrants to Warner-Lambert that as of
the date of this Agreement:



                                       17
<PAGE>   22

                      (i)    to Axys' knowledge, the Axys Patents, Axys Know-How
and the Software existing as of the Effective Date are subsisting and are not
invalid or unenforceable, in whole or in part;

                      (ii)   it has the full right, power and authority to enter
into this Agreement and to grant the licenses granted under Article 3 hereof;

                      (iii)  to Axys' knowledge, the Axys Patents, Axys Know-How
and the Software existing as of the Effective Date practiced as permitted herein
do not infringe on any intellectual property rights owned or controlled by any
Third Party;

                      (iv)   the execution, delivery and performance of this
Agreement by Axys does not constitute a material breach under, and is not
precluded by the terms of, any agreement to which Axys is a party or by which
Axys is bound; and

                      (v)    there are no claims, judgments or settlements
against or owed by Axys or pending or threatened claims or litigation relating
to the Axys Patents, Axys Know-How or the Software.

               (c)    Warner-Lambert represents and warrants to Axys that as of
the date of this Agreement:

                      (i)    it has the full right, power and authority to enter
into this Agreement and to grant the licenses granted under Article 3 hereof;

                      (ii)   the execution, delivery and performance of this
Agreement by Warner-Lambert does not constitute a material breach under, and is
not precluded by the terms of, any agreement to which Warner-Lambert is a party
or by which Warner-Lambert is bound.

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

        9.6    FORCE MAJEURE. The failure of a Party to perform any obligation
under this Agreement by reason of acts of God, acts of governments, riots, wars,
strikes, accidents or deficiencies in materials or transportation or other
causes of any nature (whether similar or dissimilar) beyond its control for the
duration thereof and for thirty (30) days thereafter shall not be deemed to be a
breach of this Agreement.

        9.7    NO TRADEMARK RIGHTS. No right, express or implied, is granted by
this Agreement to a Party to use in any manner the name or any other trade name
or trademark of a Party in connection with the performance of this Agreement.

        9.8    ENTIRE AGREEMENT OF THE PARTIES; AMENDMENTS. This Agreement
constitutes and contains the entire understanding and agreement of the Parties
respecting the subject matter hereof and cancels and supersedes any and all
prior negotiations, correspondence,



                                       18
<PAGE>   23

understandings and agreements between the Parties, whether oral or written,
regarding such subject matter. No waiver, modification or amendment of any
provision of this Agreement shall be valid or effective unless made in writing
and signed by a duly authorized officer of each Party.

        9.9    CAPTIONS. The captions to this Agreement are for convenience
only, and are to be of no force or effect in construing or interpreting any of
the provisions of this Agreement.

        9.10   APPLICABLE LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California, USA,
applicable to contracts entered into and to be performed wholly within the State
of California, excluding conflict of laws principles.

        9.11   DISPUTES. In the event of any controversy or claim arising out
of, relating to or in connection with any provision of this Agreement, or the
rights or obligations of the Parties hereunder, the Parties shall try to settle
their differences amicably between themselves by referring the disputed matter
to the Chief Executive Officer of Axys and the President of Warner-Lambert
Company's Pharmaceutical Research Division for discussion and resolution. Either
Party may initiate such informal dispute resolution by sending written notice of
the dispute to the other Party, and within twenty (20) days after such notice
such representatives of the Parties shall meet for attempted resolution by good
faith negotiations. If such personnel are unable to resolve such dispute within
thirty (30) days of their first meeting of such negotiations, either Party may
seek to have such dispute resolved in any federal or state court in the United
States having jurisdiction over the dispute and the Parties.

        9.12   NOTICES AND DELIVERIES. Any notice, request, delivery, approval
or consent required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been sufficiently given if delivered in
person, transmitted by telecopier (receipt verified) or by express courier
service (signature required) or five (5) days after it was sent by registered
letter, return receipt requested (or its equivalent), to the Party to which it
is directed at its address shown below or such other address as such party shall
have last given by notice to the other Parties.

        If to Warner-Lambert, addressed to:

               Warner-Lambert Company
               2800 Plymouth Road
               Ann Arbor, Michigan 48105
               Attn: Vice President and Chairman
                     Pharmaceutical Research Division
               Telecopier: (_____)

        With a copy to:

               Warner-Lambert Company
               201 Tabor Road
               Morris Plains, New Jersey 07950



                                       19
<PAGE>   24

               Attn: Vice President and General Counsel
               Telecopier: (_____)

        If to Axys, addressed to:

               Axys Pharmaceuticals, Inc.
               180 Kimball Way
               South San Francisco, CA USA 94080
               Telecopier: (415) 829-1067
               Attn: CEO

               with a copy to:

               Cooley Godward LLP
               5 Palo Alto Square, 4th Floor
               3000 El Camino Real
               Palo Alto, CA 94306-2155
               Attention: Barclay James Kamb, Esq.

        9.13   NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL EITHER PARTY OR ANY
OF ITS RESPECTIVE AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS
AFFILIATES FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER
IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE,
including, but not limited to, loss of profits or revenue, or claims of
customers of any of them or other Third Parties for such other damages.

        9.14   WAIVER. A waiver by either Party of any of the terms and
conditions of this Agreement in any instance shall not be deemed or construed to
be a waiver of such term or condition for the future, or of any subsequent
breach hereof. All rights, remedies, undertakings, obligations and agreements
contained in this Agreement shall be cumulative and none of them shall be in
limitation of any other remedy, right, undertaking, obligation or agreement of
either party.

        9.15   COMPLIANCE WITH LAW. Nothing in this Agreement shall be deemed to
permit a Party to export, reexport or otherwise transfer any Compound provided
under this Agreement without compliance with applicable laws.

        9.16   SEVERABILITY. When 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 prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.

        9.17   COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, any one of which need not contain the signature of
more than one Party but all such counterparts taken together shall constitute
one and the same agreement.



                                       20
<PAGE>   25

        IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written, each copy of which shall for all purposes be deemed to be
an original.


                          WARNER-LAMBERT COMPANY


                          By: /s/ Ronald M. Crasswell
                              --------------------------------------------------
                          Title: Prof. Ronald M. Crasswell Ph.D., Hon D.Sc. FRSE
                                 Vice President and Chairman
                                 Parke-Davis Pharmaceutical Research
                                 Warner-Lambert Company


                          AXYS PHARMACEUTICALS, INC.


                          By: /s/ illegible
                              --------------------------------------------------
                          Title: Chairman/CEO




                                       21
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                                    EXHIBIT A

                                PROTOCOL CRITERIA







                                       22
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                                                                               1















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<PAGE>   28

                                                                               2















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<PAGE>   29

                                                                               3















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<PAGE>   30

                                                                               4















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    Confidential Treatment and filed separately with the Commission.

<PAGE>   31

                                                                               5















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    Confidential Treatment and filed separately with the Commission.

<PAGE>   32

                                                                               6















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<PAGE>   33

                                                                               7















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<PAGE>   34

                                                                               8















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<PAGE>   35

                                                                               9















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    Confidential Treatment and filed separately with the Commission.

<PAGE>   36

                                                                              10















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<PAGE>   37


                                    EXHIBIT B

                               METHODS OF ANALYSIS







                                       23
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    Confidential Treatment and filed separately with the Commission.

<PAGE>   39
















                                      ***

















*** Portions of this page have been omitted pursuant to a request for
    Confidential Treatment and filed separately with the Commission.