EXHIBIT 10.32

*** = Certain confidential information contained in this document, marked by
asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

RELEASE AGREEMENT

This Release Agreement (“Agreement”), dated and effective as of July 27, 2001
(the “Effective Date”), is by and between IntraBiotics Pharmaceuticals, Inc., a
Delaware corporation, (“IntraBiotics”), and Diversa Corporation, a Delaware
corporation (“Diversa,” and, together with IntraBiotics, the “Parties”). 
Defined terms used but not otherwise defined hereunder shall have the meanings
given them in that certain Drug Discovery, Development, and License Agreement,
dated as of January 6, 2001, between Diversa and IntraBiotics (“License
Agreement”).

RECITALS

             WHEREAS, Diversa and IntraBiotics entered into the License
Agreement as of January 6, 2001; and

             WHEREAS, Diversa and IntraBiotics entered into that certain binding
term sheet (the “Term Sheet”) dated as of June 27, 2001 relating to the
termination of the License Agreement and the mutual release of the obligations
of both IntraBiotics and Diversa under such License Agreement; and

             WHEREAS, the Term Sheet contemplated that the Parties would
subsequently execute and deliver a definitive termination agreement, containing
the terms and conditions set forth in the Term Sheet and other terms and
conditions consistent the Term Sheet, that would supersede the Term Sheet; and

             WHEREAS, the Parties desire to set forth herein the terms governing
such definitive termination agreement.

             NOW, THEREFORE, in consideration of the mutual covenants set forth
in this Agreement, the receipt and sufficiency of which the Parties hereby
acknowledge, the Parties hereby agree as follows:

             1.          Payments by IntraBiotics to Diversa.  On      ***    ,
IntraBiotics paid Diversa the non-refundable, non-creditable sum of
                           ***                  ***      .  On                 
***          , IntraBiotics shall pay Diversa the non-refundable, non-creditable
sum of                            ***                    via wire transfer in
immediately available funds in accordance with the following information:

Bank of America *** *** 450 B Street San Diego, CA 92101

             2.          Issuance of Warrants to Diversa.  On the date hereof,
IntraBiotics shall issue to Diversa warrants to purchase 700,000 shares of
common stock of IntraBiotics of (collectively, the “Warrants”) pursuant to the
form of Warrant attached as Exhibit A hereto.  The shares of IntraBiotics’s
common stock into which the Warrants are exercisable are subject to a
Registration Rights Agreement between IntraBiotics and Diversa in the form
attached as Exhibit B hereto.

             3.          Ownership of R&D Program Data & Materials.  Diversa
shall solely own all of the data and materials generated by the research
activities performed by employees and consultants of Diversa pursuant to the R&D
Program.

             4.          Assignment of IntraBiotics’s Assays to Diversa. 
Diversa shall solely own each and every primary, secondary, and tertiary assay
used or discussed in the Work Plan, which assays are described in Exhibit C
hereto (the “Assays”).  To that end, IntraBiotics hereby assigns to Diversa such
right, title in interest in and to the Assays as IntraBiotics may have.

             5.          Mutual Releases.

                           a.          Diversa Release.  In consideration of the
obligations, warranties and representations of Diversa contained hereunder and
contingent upon the timely performance by IntraBiotics of its obligations
hereunder, Diversa hereby releases, acquits, and forever discharges
IntraBiotics, its parents and subsidiaries, and their officers, directors,
agents, servants, employees, attorneys, shareholders, partners, successors,
assigns, affiliates, customers, and clients 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, arising out of or in any way related to agreements, acts or conduct
at any time prior to the date of this Term Sheet, including, but not limited to:
all such claims and demands directly or indirectly arising out of or in any way
connected with the License Agreement; and claims pursuant to any federal, state
or local law or cause of action including, but not limited to, tort law;
contract law; fraud; defamation; and breach of the implied covenant of good
faith and fair dealing.  In giving this release, which includes claims which may
be unknown to Diversa at present, Diversa hereby acknowledges that it has read
and understands Section 1542 of the Civil Code of the State of California 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.”

                           Diversa hereby expressly waives and relinquishes all
rights and benefits under Section 1542 of the Civil Code of the State of
California and any law or legal principle of similar effect in any jurisdiction
with respect to claims released hereby.

                           b.          IntraBiotics Release.  In consideration
of the obligations, warranties and representations of IntraBiotics contained
hereunder, IntraBiotics hereby releases, acquits, and forever discharges
Diversa, its parents and subsidiaries, and their officers, directors, agents,
servants, employees, attorneys, shareholders, partners, successors, assigns,
affiliates, customers, and clients 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, arising out of or in any way related to agreements, acts or conduct
at any time prior to the date of this Term Sheet, including, but not limited to:
all such claims and demands directly or indirectly arising out of or in any way
connected with the License Agreement; and claims pursuant to any federal, state
or local law or cause of action including, but not limited to, tort law;
contract law; fraud; defamation; and breach of the implied covenant of good
faith and fair dealing.  In giving this release, which includes claims which may
be unknown to IntraBiotics at present, IntraBiotics hereby acknowledges that it
has read and understands Section 1542 of the Civil Code of the State of
California 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.”

                           IntraBiotics  hereby expressly waives and
relinquishes all rights and benefits under Section 1542 of the Civil Code of the
State of California and any law or legal principle of similar effect in any
jurisdiction with respect to claims released hereby.

             6.          Termination; Survival of Obligations.  Except as set
forth herein, the License Agreement is terminated.  Only the confidentiality
provisions of Sections 7.1, 7.2, and 7.3 of the License Agreement (and any
applicable provisions of the Confidential Disclosure Agreement between Diversa
and IntraBiotics executed on July 17, 2000 that do not contradict the terms of
Sections 7.1, 7.2 or 7.3 of the License Agreement) shall survive for a period of
ten (10) years.

             7.          No Admission of Liability.  Diversa and IntraBiotics
hereby acknowledge that this is a compromise settlement of various matters, and
that the payments in consideration of this Agreement shall not be construed to
be an admission of any liability or obligation by either party to the other
party or to any other person whomsoever.

             8.          Publicity; Regulatory Filings.  Diversa and
IntraBiotics each acknowledge and agree that neither the Term Sheet or this
Agreement nor the terms contained therein or herein shall be considered ether
confidential or “Confidential Information” as such term is defined in the
License Agreement; provided, however, that information regarding the Assays
shall be considered Confidential Information under the terms of the License
Agreement and, notwithstanding the exception in Section 7.3.3 of the License
Agreement, IntraBiotics shall have the obligations of a Receiving Party with
respect to information regarding the Assays and Diversa shall be considered a
Disclosing Party with respect to information regarding the Assays as such terms
are defined in the License Agreement.  Accordingly, each of Diversa and
IntraBiotics shall be permitted to disclose the existence of the Term Sheet or
this Agreement and the terms thereof or hereof, except disclosures by
IntraBiotics with respect to the Assays, in such communications as such party
shall determine in its sole discretion, including, without limitation (i) in one
or more press releases and (ii) in one or more filings with the Securities and
Exchange Commission (or any other governmental agency, such as the Federal Trade
Commission, with which the License Agreement, Term Sheet, and/or Agreement is
required to be provided or filed by Diversa and/or IntraBiotics); provided,
however, that IntraBiotics shall not issue any press release regarding the Term
Sheet, this Agreement, or the termination of the License Agreement without the
express written consent of Diversa to the content of such press release.

             9.          General Terms.  This Agreement shall be governed by and
construed in accordance with the laws of the State of California without regard
to provisions governing conflicts of law.  This Agreement is not assignable in
part or in whole by any party without the prior written consent of the other
party; provided, however, that either party may assign this Agreement to its
affiliates or to a successor by merger or sale of all or substantially all of
its business to which this Agreement relates.  The terms of this Agreement shall
inure to the benefit of and be binding upon the parties and their respective
successors and assigns.  The terms and conditions of this Agreement constitute
the entire agreement between Diversa and IntraBiotics and supersede all previous
negotiations or agreements, either oral or written, between the parties with
respect to the subject matter of this Agreement, including, without limitation,
the Term Sheet and the License Agreement.  This Agreement shall not be amended,
supplemented or abrogated other than by a written instrument signed by the
authorized representative of each Party.  The failure of either Party to enforce
at any time any of the provisions of this Agreement, or any rights in respect of
it, or to exercise any election provided in it, shall in no way be considered to
be a waiver of such provisions, rights or elections, and shall in no way affect
the validity of this Agreement.  If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys’ fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.  In the event
that any provision of this Agreement is, for any reason, held to be invalid or
unenforceable in any respect, such invalidity or unenforceability shall not
affect any other provision hereof, and the parties shall negotiate in good faith
to modify this Agreement to preserve (to the extent possible) their original
intent.  Each party warrants that it has the authority to enter into this
Agreement on the basis of the terms and conditions herein and that it has not
made any other agreement inconsistent with its obligations under this
Agreement.  This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.

(signature page follows)

 

IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement effective as of the date first above written.

  DIVERSA CORPORATION       By: /s/  KARIN EASTHAM    

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      Name: Karin Eastham    

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      Title: Senior Vice President, Finance and
Chief Financial Officer    

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      INTRABIOTICS PHARMACEUTICALS, INC.       By: /s/  KENNETH J. KELLEY    

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      Name: Kenneth J. Kelley    

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      Title: President and Chief Executive Officer    

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Exhibit A

Warrant

Exhibit B

Registration Rights Agreement

Exhibit C

Assays Assigned to Diversa

 

***

***

***

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*** = Certain confidential information contained in this document, marked by
asterisks, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.

Document Number:  386048