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                                                                   EXHIBIT 10.39

                             PARADIGM GENETICS, INC.
                               108 Alexander Drive
                                 P. O. Box 14528
                             Research Triangle Park
                            North Carolina 27709-4528

                                                                    May 16, 2002

John A. Ryals, Ph.D.
3030 Brittany Place
Cary, North Carolina  27511

Dear John:

       The purpose of this letter agreement (the "Agreement") is to confirm the
terms of your separation of employment with Paradigm Genetics, Inc. ("Paradigm"
or the Company). As more fully set forth below, Paradigm desires to provide you
with severance pay and benefits in exchange for certain agreements by you. For
purposes of this Letter Agreement ("Agreement"), the terms "Paradigm" and the
"Company" are intended to and shall include Paradigm and any affiliates,
divisions and subsidiaries, and its and their respective officers, directors,
employees, agents and assigns.

       1.     Separation of Employment; Resignation as Director. You acknowledge
that your employment with Paradigm was terminated effective February 26, 2002
(the "Separation Date"). You hereby resign as a Director of Paradigm and each of
its subsidiaries, effective immediately.

       2.     Severance Pay and Benefits. In exchange for the mutual covenants
set forth in this letter agreement, Paradigm agrees to provide you with the
following severance pay and benefits (collectively the "Severance Pay"):

              (i)    continuation of your base salary (equivalent to a monthly
                     wage of twenty-seven thousand five hundred dollars
                     ($27,500.00)), less state and federal income and welfare
                     taxes and other mandatory deductions under applicable laws,
                     for nine (9) consecutive months, the first payment to be
                     made on or before May 16, 2002, and thereafter on the 16th
                     day of each month through January 16, 2003,

              (ii)   The Severance Pay referenced in item (i) above shall
                     continue until January 16, 2003 (the "Severance Period").
                     In the event that you do not become employed by a third
                     party or otherwise covered under alternative medical
                     insurance plans during the Severance Period, you will have
                     the right to continue your medical insurance pursuant to
                     the

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                     provisions of the Consolidated Omnibus Budget
                     Reconciliation Act of 1985 (COBRA); provided, however, the
                     benefit period under the COBRA shall be deemed to have
                     commenced on the Separation Date; and

              (iii)  You shall also be entitled to exercise the following stock
                     option grants to the extent described below:

                     (A)    The right to exercise in full an option to acquire
                            77,917 vested shares of Paradigm common stock at an
                            exercise price of $.60 per share in accordance with
                            the terms and conditions of such Stock Option
                            Agreement with a date of grant of December 14, 1999;

                     (B)    The right to exercise an option to acquire 29,644
                            vested shares of an option to acquire up to 52,700
                            shares of Paradigm common stock at an exercise price
                            of $3.94 per share in accordance with the terms and
                            conditions of such Stock Option Agreement with a
                            date of grant of March 16, 2001;

                     (C)    The right to exercise an option to acquire 59,517
                            vested shares of an option to acquire up to 105,808
                            shares of Paradigm common stock at an exercise price
                            of $3.94 per share in accordance with the terms and
                            conditions of such Stock Option Agreement with a
                            date of grant of March 16, 2001; and

                     (D)    The right to exercise an option to acquire 24,858
                            vested shares of an option to acquire up to 44,192
                            shares of Paradigm common stock at an exercise price
                            of $3.94 per share in accordance with the terms and
                            conditions of such Stock Option Agreement with a
                            date of grant of March 16, 2001.

       All unvested shares shall terminate immediately. All vested shares
referenced in paragraph (A) must be exercised on or before May 27, 2002. All
vested shares referenced in paragraphs (B) - (D) must be exercised on or before
May 31, 2003 and will be treated as non-qualified stock options. Except as set
forth herein, all other terms and conditions set forth in the option grant
letters referenced above shall govern each respective option.

       Paradigm agrees to pay to your counsel, Smith Moore LLP on or before May
16, 2002 the sum of Thirty-Eight Thousand Dollars ($38,000.00) for your legal
fees associated with the negotiation of this Agreement.

       You acknowledge and agree that, except for any rights and benefits under
the Stock Option Agreements referenced above, the Severance Pay and Benefits
provided herein are not otherwise due or owing to you under any Paradigm
employment agreement (oral or written) or Company policy or practice, nor is
this Severance Pay and Benefits intended to, and shall not,

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constitute a severance plan, and shall confer no benefit on anyone other than
the parties hereto. You further acknowledge that except for the specific
financial consideration set forth in this Agreement, you have been paid and
provided all wages, commissions, bonuses, vacation pay, holiday pay and any
other form of compensation or benefit that may be due to you now or which would
have become due in the future in connection with your employment with or
separation of employment from Paradigm.

       3.     Confidentiality/Non-Solicitation/Non-Disparagement; Limitation On
Resale of Paradigm Stock. You expressly acknowledge and agree to the following:

       (i)    that you have or will return to Paradigm all Paradigm documents
              (and any copies thereof) and property including, without
              limitation, financial documents, business plans, educational
              documents, provided, however, that you will be entitled to retain
              the board of directors materials delivered to you recently by the
              Company;

       (ii)   that the Founder Proprietary Information and Inventions Agreement
              in the form attached hereto as Exhibit "A" between you and
              Paradigm has and remains in full force and effect;

       (iii)  that for twenty-four (24) months immediately following the date of
              this Agreement, you shall not recruit or encourage employees of
              Paradigm to leave Paradigm to be hired by any company or business
              with which you are affiliated or allow any such company or
              business, to the extent it is in your control, to engage in any
              activity which, were it done by you, would violate any provision
              of this Section 3(ii) or (iii); provided, however, that the
              Company acknowledges and agrees that a company or business with
              which you are affiliated may employ or engage Paradigm employees
              that have left Paradigm, so long as the company or business did
              not recruit or encourage the Paradigm employee to leave (it being
              understood that discussions, whether occurring before or after the
              date of this Agreement, resulting from general employment
              advertisements or initiated by Paradigm employees, do not
              constitute recruitment or encouragement to leave).

       (vi)   that you will not make any statements that are professionally or
              personally disparaging about Paradigm (including but not limited
              to its current and past officers, directors, employees and legal
              counsel) including, but not limited to, any statements that
              disparage any person, product, service, finances, financial
              condition, capability or any other aspect of the business of
              Paradigm, and that you will not engage in any conduct which is
              intended to harm professionally or personally the reputation of
              Paradigm (including but not limited to its officers, directors,
              employees and legal counsel). Nothing in this provision shall
              prevent the parties from (i) complying with compulsory legal
              process or otherwise making disclosures in connection with
              litigation or administrative proceedings, (ii) making such
              disclosures as are necessary to obtain legal advice, (iii) making
              disclosures as are required by federal, state or local regulatory
              authorities, and (iv) making disclosures which by law are required
              or cannot be prohibited.

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       (vii)  that you and any individual, trust or other entity holding shares
              gifted by you after February 26, 2002 will not sell during any
              calendar week an amount of shares of Paradigm Common Stock in an
              aggregate amount greater than 25% of the average weekly trading
              volume of Paradigm Common Stock as reported by NASDAQ National
              Market during the immediately preceding calendar week and that you
              agree that any share certificates evidencing your ownership of
              Paradigm Common Stock, at Paradigm's request, shall be endorsed
              with a restrictive legend evidencing the limitations contained in
              this Agreement (and any brokerage firm holding unlegended
              certificates shall agree to acknowledge this restriction), such
              legend to read as follows: "The shares evidenced by this
              certificate are subject to the terms and conditions of an
              agreement between Dr. John Ryals and the Company dated as of May
              14, 2002, limiting the sale volume of common stock represented by
              this certificate." A copy of the operative provisions of Section
              3(vii) of such agreement is available upon written request to the
              Company. In addition, the Company agrees to assume all costs
              charged by the transfer agent to place such a legend on any stock
              certificates and to remove such a legend from any stock
              certificate, as well as the costs of Company counsel to provide
              written opinions or advice to the transfer agent or to any
              brokerage firm regarding this Agreement; and

       (viii) that a breach of this Section 3 shall constitute a material breach
              of this Agreement. You also acknowledge that the provisions of
              this Section 3 are reasonable and necessary to protect Paradigm's
              business interest, and further acknowledge and agree that your
              breach or threatened breach of the covenants set forth in this
              Section 3 would constitute a material breach of the Agreement,
              that Paradigm would suffer substantial irreparable harm and that
              Paradigm would not have an adequate remedy at law for such breach
              or threatened breach. Therefore, in recognition of these
              acknowledgments, you agree that in the event of a breach or
              threatened breach of any of these covenants, in addition to such
              other remedies as Paradigm may have at law, Paradigm, without
              posting any bond, shall be entitled to obtain equitable relief in
              the form of specific performance or temporary, preliminary or
              permanent injunctive relief, or any other equitable remedy which
              then may be available. The seeking of such injunction or order
              shall not affect Paradigm's right to seek and obtain damages or
              other equitable relief on account of any such actual or threatened
              breach.

       4.     Release of Claims. You and Paradigm each hereby agree and
acknowledge that by signing this Agreement and accepting the good and valuable
consideration provided for in this Agreement, each party is waiving its right to
assert any form of legal claim against the other party whatsoever for any
alleged action, inaction or circumstance existing or arising from the beginning
of time through the date of this Agreement. The waiver and release herein of
each party is intended to bar any form of legal claim, charge, complaint or any
other form of action (jointly referred to as "Claims") against the other party
seeking any form of relief including, without limitation, equitable relief
(whether declaratory, injunctive or otherwise), the recovery of any damages or
any other form of monetary recovery whatsoever (including, without limitation,

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back pay, front pay, compensatory damages, emotional distress damages, punitive
damages, attorneys fees and any other costs) against the other party, for any
alleged action, inaction or circumstance existing or arising through the date of
this Agreement. Notwithstanding the foregoing, the release by Paradigm shall not
include (i) a release for indemnification in the event of any claims against the
Company related to your actions while serving as a director or an officer or
employee of the Company by any third party (which shall exclude Paradigm, as
defined in this Agreement), and (ii) any claim under the Founder's
Confidentiality and Inventions Agreement attached as Exhibit "A".

       Without limiting the generality of the foregoing, you specifically waive
and release Paradigm (as defined above) from any claim arising from or related
to your employment relationship with Paradigm up through the date of this
Agreement including, without limitation; (i) claims under any North Carolina (or
any other state) or federal discrimination, fair employment practices or other
employment related statute, regulation or executive order (as they may have been
amended through the date you sign this Agreement); (ii) claims under any other
North Carolina (or any other state) or federal employment related statute,
regulation or executive order (as they may have been amended through the date
you sign this Agreement) relating to wages, hours or any other terms and
conditions of employment; (iii) claims under any North Carolina (or any other
state) or federal common law theory; (iv) any other claim arising under other
state or federal law.

       We acknowledge and agree that, but for providing this waiver and release,
neither party would be receiving the benefits being provided under the terms of
this Agreement.

       Notwithstanding the foregoing, this Section shall not release Paradigm
from (i) non-termination related workers' compensation claims and claims arising
under disability insurance policies; (ii) claims to vested account balances in
any 401(k) benefit plans; or (iii) any obligation expressly set forth in, or
rights to enforce, this Agreement. Further, nothing in this release shall
operate as a release or waiver by you of any rights to defense and/or
indemnification under any (i) indemnification agreement to which the Company
(including any subsidiary or parent) is a party; (ii) applicable law; (iii)
certificates of incorporation and/or bylaws of Paradigm (including any
subsidiary or parent); or (iv) Paradigm's Directors' and Officers' Liability
Policy, which Paradigm represents and agrees will continue to cover you for
claims related to your service as a director and officer of Paradigm, subject to
the terms of such policy.

       You explicitly acknowledge that because you are over forty (40) years of
age, you have specific rights under the Age Discrimination in Employment Act and
the Older Workers Benefits Protection Act ("OWBPA"), which prohibit
discrimination on the basis of age, and that the releases set forth in this
section are intended to release any right that you may have to file a claim
against Paradigm alleging discrimination on the basis of age.

       Consistent with the provisions of the OWBPA, Paradigm is providing you
with twenty-one (21) days (until June 5, 2002) in which to consider and accept
the terms of this Agreement by signing below and returning it to Mr. James
Bucci, Paradigm Genetics, Inc., either by facsimile

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transmission or by delivery to 108 Alexander Drive, P.O. Box 14528, Research
Triangle Park, North Carolina 27709-4528. Of course, you may choose to sign and
return this Agreement sooner than June 5, 2002 if you wish. In addition, you may
rescind your assent to this Agreement if, within seven (7) days after you sign
this Agreement, you deliver a notice of rescission to James Bucci. To be
effective, such rescission must be hand delivered within the seven (7) day
period to Mr. James Bucci, Paradigm Genetics, Inc., 108 Alexander Drive, P.O.
Box 14528, Research Triangle Park, North Carolina 27709-4528.

       It is Paradigm's desire and intent to make certain that you fully
understand the provisions and effects of this Agreement. To that end, you have
been encouraged and given the opportunity to consult with your legal counsel,
Smith Moore LLP, for the purpose of reviewing the terms of this Agreement.

       Before any announcement is made, the parties must agree on a statement to
be delivered to Paradigm employees announcing your resignation as a Director. It
is agreed and understood by the parties that the terms of this Agreement and the
events leading up to the settlement described herin are sensitive in nature and
that, other than disclosures regarding the terms of this Agreement that the
Company believes are necessary for federal securities law purposes or in
response to direct inquiries from an investor, neither will discuss or divulge
any information relating to any aspect of this settlement to any person
(including, any Company employee, consultant or representative (other than its
Directors and the Company's Chief Executive Officer)), firm, or corporation.


       5.     Entire Agreement/Choice of Law/Enforceability. This Agreement
shall be deemed to have been made in the State of North Carolina, shall take
effect as an instrument under seal within North Carolina, and shall be governed
by and construed in accordance with the laws of the State of North Carolina,
without giving effect to conflict of law principles. The provisions of this
Agreement are severable, and if for any reason any part hereof shall be found to
be unenforceable, the remaining provisions shall be enforced in full. No
variations or modification hereof shall be deemed valid unless reduced to
writing and signed by you and by an executive officer of Paradigm.

       By executing this Agreement, you are acknowledging that you have been
afforded sufficient time to understand the terms and effects of this Agreement
and to review this Agreement with your legal counsel and other advisors, that
your agreements and obligations hereunder are made voluntarily, knowingly and
without duress, and that neither Paradigm nor its agents or representatives have
made any representations inconsistent with the provisions of this Agreement.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

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       If the foregoing correctly sets forth our understanding, please sign,
date and return the enclosed copy of this Agreement.

                                             Very truly yours,

                                             PARADIGM GENETICS, INC.


                                         By: /s/ John Hamer
                                             ----------------------------------
                                             John Hamer, Ph.D., Acting President
Confirmed and Agreed:


      /s/ John A. Ryals
-------------------------------
John A. Ryals, Ph.D.

Dated: May 16, 2002