<PAGE>

                                                                   EXHIBIT 10.44

CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. (S)(S)200.80(b)(4), 200.83 AND 240.24b-2



               DRUG DISCOVERY, DEVELOPMENT, AND LICENSE AGREEMENT

                                 by and between

                              DIVERSA CORPORATION

                                      and

                       INTRABIOTICS PHARMACEUTICALS, INC.
<PAGE>

<TABLE>
<S>                                                                                    <C>
1.   Definitions....................................................................    1

2.   R&D Program....................................................................    8

     2.1   R&D Program..............................................................    8

     2.2   Research and Development Activities......................................    8

     2.3   Limited Use of Materials Provided by Diversa.............................    9

     2.4   Records..................................................................    9

     2.5   Permitted Affiliates, its Sublicensees and Third Party Subcontractors....   10

3.   Committees; Selection Of Compounds And Compound Derivatives....................   10

     3.1   Organization.............................................................   10

     3.2   Responsibilities.........................................................   11

     3.3   Meetings of the RMC and Steering Committee...............................   13

     3.4   Requirements for Action..................................................   13

     3.5   Members..................................................................   13

     3.6   Visits to Facilities.....................................................   14

     3.7   Information Sharing......................................................   14

     3.8   Dispute Resolution.......................................................   14

     3.9   Expenses.................................................................   14

4.   Grant Of Rights And Reversion Of Rights........................................   14

     4.1   License..................................................................   14

     4.2   Rights to Sublicense.....................................................   15

     4.3   License Period...........................................................   16

     4.4   Reserved Sets............................................................   17

     4.5   IBP Diligence Obligations................................................   18

     4.6   Reversion of Rights to Diversa...........................................   19

     4.7   Manufacturing Rights.....................................................   20

     4.8   Extension of Research Period.............................................   21

     4.9   Compound Exclusivity; Non-Compete........................................   21

5.   Intellectual Property Rights...................................................   21

     5.1   Intellectual Property Ownership..........................................   21

     5.2   Filing, Prosecution and Maintenance of Patents...........................   22

     5.3   Cooperation of the Parties...............................................   23

     5.4   Potential Assignments To IBP.............................................   23
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                    <C>
     5.5   Infringement by Third Parties............................................   24

     5.6   Third Party Claims of Infringement.......................................   25

     5.7   Hold Harmless............................................................   25

6.   Payments, Reports, and Records.................................................   25

     6.1   Technology Access Fee Payments...........................................   25

     6.2   Research Funding.........................................................   25

     6.3   Milestone Payments; Diligence Payment....................................   26

     6.4   Royalties................................................................   28

     6.5   Reports and Payments.....................................................   28

     6.6   Payments by IBP to Diversa...............................................   29

     6.7   Records..................................................................   29

     6.8   Late Payments............................................................   30

7.   Confidential Information.......................................................   30

     7.1   Definition of Confidential Information...................................   30

     7.2   Obligations..............................................................   30

     7.3   Exceptions...............................................................   31

     7.4   Survival of Obligations..................................................   31

     7.5   Public Announcement......................................................   31

     7.6   Publication..............................................................   32

8.   Representations, Warranties, and Disclaimers...................................   32

     8.1   Organization; Good Standing..............................................   32

     8.2   Binding Obligation; Due Authorization; No Conflict.......................   32

     8.3   No Suit..................................................................   33

     8.4   Title to Intellectual Property Rights....................................   33

     8.5   No Violations of Third Party Intellectual Property Rights................   33

     8.6   No Unauthorized Use Necessary............................................   33

     8.7   Proper Assignment of Inventions..........................................   33

     8.8   Disclaimers..............................................................   33

     8.9   Limitation of Liability..................................................   34

9.   Indemnification................................................................   34

     9.1    Indemnification.........................................................   34

     9.2    Procedures..............................................................   35

10.  Term and Termination...........................................................   35
</TABLE>

                                      ii
<PAGE>

<TABLE>
<S>                                                                                    <C>
     10.1   Term....................................................................   35

     10.2   Mutual Consent..........................................................   35

     10.3   Default.................................................................   35

     10.4   Bankruptcy..............................................................   36

     10.5   Disposition of Confidential Information.................................   37

     10.6   Effect of Termination or Expiration.....................................   37

11.  Dispute Resolution.............................................................   37

     11.1   Informal Dispute Resolution.............................................   37

     11.2   Mediation...............................................................   37

     11.3   Court of Law............................................................   38

     11.4   Confidentiality.........................................................   38

12.  Miscellaneous..................................................................   38

     12.1   Relationship of Parties.................................................   38

     12.2   Governing Law...........................................................   38

     12.3   Binding Effect..........................................................   38

     12.4   Assignment..............................................................   38

     12.5   Notices.................................................................   38

     12.6   Exports.................................................................   39

     12.7   Amendment and Waiver....................................................   39

     12.8   Severability............................................................   39

     12.9   Third Parties...........................................................   39

     12.10  Entire Agreement........................................................   40

     12.11  Regulatory Filings......................................................   40

     12.12  Force Majeure...........................................................   40

     12.13  Withholding.............................................................   40

     12.14  No Trademark Rights.....................................................   40

     12.15  Counterparts............................................................   41

     12.16  Titles and Subtitles; Form of Pronouns; Construction and Definitions....   41
</TABLE>

                                      iii
<PAGE>

               DRUG DISCOVERY, DEVELOPMENT, AND LICENSE AGREEMENT

     This Drug Discovery, Development, and License Agreement, dated and
effective as of January 6, 2001 (the "Effective Date"), is by and between
Diversa Corporation, a Delaware corporation ("Diversa"), having its principal
place of business at 4955 Directors Place, San Diego, California 92121, and
IntraBiotics Pharmaceuticals, Inc., a Delaware corporation ("IBP"), having its
principal place of business at 2021 Stierlin Court, Mountain View, California
94043 (collectively, the "Parties").

                                    Recitals

     Whereas, Diversa has developed proprietary technologies for the rapid
discovery, development and optimization of Compounds (as such term is defined
below); and

     Whereas, IBP is developing novel antibacterial and antifungal drugs for the
prevention or treatment of serious infectious diseases; and

     Whereas, IBP and Diversa desire to collaborate to identify novel molecules
derived from Diversa Technology (as such term is defined below) that demonstrate
efficacy against assays that are designed to identify compounds having
antibacterial or antifungal properties; and

     Whereas, as part of such collaboration, IBP and Diversa desire to use
certain other of their respective technologies to improve the discovery process
for delivering optimized lead drug candidates prior to pre-clinical testing; and

     Whereas, the Parties desire to set forth herein the terms governing such
collaboration.

     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.  Definitions

     "Active Substructure" shall mean the [***] structure that is [***] of a
Compound or Compound Derivative and which has been identified or confirmed
against antibacterial or antifungal screens under the Work Plan.

     "Affiliate" shall mean any entity that directly or indirectly Owns, is
Owned by or is under common Ownership, with IBP, or Diversa, as the case may be,
where "Owns," "Owned" or "Ownership" means direct or indirect possession of more
than fifty percent (50%) of the outstanding voting securities of a corporation
or a comparable equity interest in any other type of entity or such lesser
amount as constitutes control in the relevant jurisdiction.

     "Agreement" shall mean this Drug Discovery, Development, and License
Agreement.

-----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       1
<PAGE>

     "Alternate" shall have the meaning set forth in Section 3.5.

     "Annual Net Sales" shall mean the Net Sales made within each calendar year.

     "Audited Party" shall have the meaning set forth in Section 6.7.

     "Auditing Party" shall have the meaning set forth in Section 6.7.

     "Committee Member" shall have the meaning set forth in Section 3.1.1.

     "Compound" shall mean a chemical compound that:  (1) is initially [***]
during the Research Period, (2) has a [***] the Parties to allow [***] to
determine whether such [***], and (3) is not an Excluded Compound [***] with
respect to such compound pursuant to [***].

     "Compound Derivative" shall mean any [***] of a particular Compound that
has all of the following properties:

          (1)  that [***] of such Compound; and

          (2)  the [***] of which has been [***] under the Work Plan as those
used to identify such Compound; and

          (3)  which was [***] such Compound or [***] of such Compound; and

          (4)  where the Active Substructure of such [***] with respect to such
Compound, if an Active Substructure has [***] with respect to such Compound; and

          (5)  that was identified by either Party or by both Parties together
during the Research Period and [***]; and

          (6)  the [***] of which has been [***] and [***] in accordance with
the terms of this Agreement; and

          (7)  which is not an Excluded Compound at the [***] hereunder.

     "Compound Patent(s)" shall have the meaning set forth in Section 5.2.2.

     "Compound Set" shall mean, with respect to [***] with respect to such
Compound.  A Compound Set shall not include [***].

     "Confidential Information" shall have the meaning set forth in Section 7.1.

     "CPI" shall mean the Consumer Price Index for Urban Consumers, as published
by the United States Department of Labor from time to time, or, if such
statistic is no longer published, any similar inflation factor as may be
mutually agreed to by the Parties in writing.

     "Defaulting Party" shall have the meaning set forth in Section 10.3.1.


-----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       2
<PAGE>

     "Disclosing Party" shall mean that Party disclosing Confidential
Information under Section 7.1.

     "Dispute" shall have the meaning set forth in Section 11.1.

     "Diversa Know-How" shall mean all know-how, trade secrets, inventions,
data, processes, procedures, devices, methods, formulas, media and all lines,
reagents, protocols and marketing and other information, including improvements
thereon, whether or not patentable, but which are necessary or useful for the
commercial exploitation of the Diversa Patent Rights, the conduct of the
research and development activities hereunder, the development, use, or
manufacture of compounds [***], the development, use, manufacture, offer for
sale, sale, or import of Products, in each case which are owned by or licensed
to Diversa, with the right to sublicense, as of the Effective Date or otherwise
during the Research Period (including the [***]).  Diversa Know-How shall not
include Diversa Patent Rights.

     "Diversa Patent Rights" shall mean all patent applications and issued and
subsisting patents, including, without limitation, all provisionals, converted
provisionals, continued prosecution applications, substitutions, divisionals,
continuations, continuations-in-part, reissues, reexaminations, extensions and
supplementary protection certificates thereof, including foreign counterparts of
the foregoing owned by or licensed to Diversa, with the right to sublicense, as
of the Effective Date or otherwise during the Research Period (including the
[***]), which are necessary or useful to conduct research and development
activities hereunder, to develop, use, or manufacture compounds within Compound
Sets, or to develop, use, manufacture, offer for sale, sale, or import Products.

     "Diversa Technology" shall mean the Diversa Know-How and the Diversa Patent
Rights.

     "EMEA" means the European Medicines Evaluation Agency, or any successor
agency thereto which coordinates the scientific review of human pharmaceutical
products under the centralized licensing procedure in the European Union.

     "Excluded Compound" shall mean any chemical compound with respect to which
Diversa has granted rights or an option to obtain rights to a Third Party prior
to the date upon which IBP notifies Diversa that IBP desires to obtain a license
or other right pursuant to this Agreement such that Diversa could not grant to
IBP a License under Section 4.1 to such compound without breaching its
obligations to such Third Party.

     "FDA" means the United States Food and Drug Administration, or any
successor agency thereto having the administrative authority to regulate the
marketing of human pharmaceutical products or biological therapeutic products,
delivery systems and devices in the United States.

     "Field" shall mean use in the treatment, prevention or diagnosis of a
fungal or bacterial infection in humans.


-----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       3
<PAGE>

     "FTE" shall mean the equivalent of one full year of work on a full time
basis by a scientist or other professional (whether an employee or independent
contractor of Diversa) possessing skills and experience necessary to carry out
the research activities by Diversa contemplated by this Agreement, determined in
accordance with the Diversa's normal policies and procedures.

     "IBP Know-How" shall mean all know-how, trade secrets, inventions, data,
processes, procedures, devices, methods, formulas, media and all lines,
reagents, protocols and marketing and other information, including improvements
thereon, whether or not patentable, but which are necessary or useful for the
commercial exploitation of the IBP Patent Rights, the conduct of the research
and development activities hereunder, the development, use, or manufacture of
compounds within Compound Sets, the development, use, manufacture, offer for
sale, sale, or import of Products, in each case which are owned by or licensed
to IBP, with the right to sublicense, as of the Effective Date or otherwise
during the Research Period (including the six-month period of Section 4.8).  IBP
Know-How shall not include IBP Patent Rights.

     "IBP Patent Rights" shall mean all patent applications and issued and
subsisting patents, including, without limitation, all provisionals, converted
provisionals, continued prosecution applications, substitutions, divisionals,
continuations, continuations-in-part, reissues, reexaminations, extensions and
supplementary protection certificates thereof, including foreign counterparts of
the foregoing owned by or licensed to IBP, with the right to sublicense, as of
the Effective Date or otherwise during the Research Period (including the six-
month period of Section 4.8), which are necessary or useful to conduct research
and development activities hereunder, or the development, use, or manufacture
compounds within Compound Sets, or to develop, use, manufacture, offer for sale,
sale, or import Products.

     "IBP Technology" shall mean the IBP Know-How and the IBP Patent Rights.

     "IND" shall mean an investigational new drug application (or equivalent
application outside of the United States).

     "IND-Enabling Toxicology Studies" shall mean toxicology studies as required
or suggested by the FDA (or equivalent agency outside of the United States) for
filing of an IND.

     "Indemnitee" shall have the meaning set forth in Section 9.2.

     "Indemnitor" shall have the meaning set forth in Section 9.2.

     "Independent Expert" shall have the meaning set forth in Section 4.6.1.

     "Industry Expert" shall have the meaning set forth in Section 3.2.4.

     "JAMS" shall have the meaning set forth in Section 11.2.

                                       4
<PAGE>

     "Lead Compound" shall mean a particular compound in a particular Compound
Set that is selected by IBP pursuant to the terms of this Agreement for
commencement of preclinical and clinical development activities.  Such
activities include, but are not limited to, [***].

     "License" shall have the meaning set forth in Section 4.1.

     "License Period" shall have the meaning set forth in Section 4.3.

     "Major Market" shall mean any one of the following countries:  the [***].

     "Mediation Rules" shall have the meaning set forth in Section 11.2.

     "MHW" the Ministry of Health and Welfare agency of Japan or any successor
agency thereto which coordinates the scientific review of human pharmaceutical
products under the licensing procedures in Japan.

     "Net Sales" shall mean, with respect to each given country, the gross
amount invoiced for sales of Products by or on behalf of a Party, its Affiliates
or Sublicensees to any Third Party (whether an end-user, a distributor or
otherwise), exclusive of inter-company transfers or sales to or from Affiliates
or Sublicensees, less the following deductions from such gross amounts only to
the extent reasonable and customary, and which are actually incurred and
included in gross amounts invoiced:

               (a)  credits or allowances actually granted for damaged products,
returns or rejections of product and retroactive price reductions;

               (b)  freight, postage, shipping, customs, duties and insurance
charges;

               (c)  sales, value added or similar taxes measured by the billing
amount, when included in billing;

               (d)  charge back payments and rebates granted to managed health
care organizations or to federal, state and local governments, their agencies,
and purchasers and reimbursers or to trade customers;

               (e)  commissions paid to Third Parties other than sales personnel
and sales representatives or sales agents by such Party, its Affiliates or
Sublicensees; and

               (f)  rebates (or equivalents thereof) granted to or charged by
national, state or local government authorities in countries other than the
United States and actually paid by such Party, its Affiliates or Sublicensees in
accordance with the applicable laws, regulations or rules of such countries.

     If a Product is sold in the form of a combination product, Net Sales for
such combination product shall be calculated by multiplying actual Net Sales of
such combination product by the fraction A/(A+B) where: A is the invoice price
of the Product contained in the combination


-----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       5
<PAGE>

product if sold separately by a Party, its Affiliate, or Sublicensee; and B is
the invoice price of any other active component or components in the combination
product if sold separately by such Party, its Affiliate, or Sublicensee. If the
Product is sold in the form of a combination product for which the Net Sales
cannot reasonably be calculated using such formula, then the Net Sales for
purposes of determining royalty payments shall be negotiated in good faith and
agreed upon in writing by the Parties based on the relative value contributed by
each component.

     "Non-Defaulting Party" shall have the meaning set forth in Section 10.3.1.

     "Notice of Default" shall have the meaning set forth in Section 10.3.1.

     "Notification" shall have the meaning set forth in Section 3.2.3.

     "Party" shall mean Diversa or IBP, as applicable.

     "Patent Rights" shall mean Diversa Patent Rights or IBP Patent Rights, as
applicable.

     "Performance Default" shall have the meaning set forth in Section 10.3.1.

     "Product" shall mean a commercial product containing, consisting of, based
on, or incorporating any compound in a Compound Set for use in the Field.

     "Program Inventions" shall mean all inventions, discoveries, developments
and improvements, whether or not patentable, conceived of by employees or
consultants of either Party, or jointly by employees and consultants of both
Parties, in the course of the activities conducted under the Work Plan during
the Research Period and if applicable, [***].

     "Progress Report" shall have the meaning set forth in Section 3.7.

     "Project Leader" shall have the meaning set forth in Section 3.1.3.

     "R&D Data" means all data, including, but not limited to, all in vitro and
in vivo data, structure elucidation data, the medicinal chemistry efforts, and
any other information obtained or developed in the course of performance of the
R&D Program.

     "R&D Program" shall mean the research and development program to be
conducted by Diversa and IBP pursuant to Section 2, as more fully described in
the Work Plan.  The R&D Program with respect to a given compound in a Compound
Set shall end upon the earliest of (i) the date that an investigational new drug
application (or equivalent application outside of the United States) is filed
for a Product containing such compound or (ii) the date that any License with
respect to such compound terminates.

     "Receiving Party" shall mean that Party receiving Confidential Information
under Section 7.1.


-----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       6
<PAGE>

     "Regulatory Approval" shall mean any approvals (including supplements,
amendments, pre- and post-approvals and price approvals), licenses,
registrations or authorizations of any national, supra-national (e.g., the
European Commission or the Council of the European Union), regional, state or
local regulatory agency, department, bureau, commission, council or other
governmental entity, necessary for the manufacture, distribution, use or sale of
Products in a regulatory jurisdiction.

     "Representation Default" shall have the meaning set forth in Section
10.3.1.

     "Research Period" shall mean the period beginning on the Effective Date and
ending upon the third anniversary of the Effective Date, unless extended by
mutual written agreement of the Parties in accordance with the terms of this
Agreement.

     "Reserved Set" shall have the meaning set forth in Section 4.4.

     "Reversion License" shall have the meaning set forth in Section 4.6.1.

     "Royalty Period" shall mean, with respect to each Product in any country,
every calendar quarter, or partial calendar quarter, commencing with the first
arms-length, commercial sale of such Product in such country and ending upon the
later to occur of (a) the date all Valid Claims included in patents covering
Program Inventions under the license of Section 4.1.1 covering a Product (or any
associated Lead Compound contained therein) in that country have expired, or (b)
the date all Valid Claims included in the Diversa Patent Rights covering a
Product (or any associated Lead Compound contained therein) in that country have
expired, or (c) twelve (12) years from the date of the first arms-length
commercial sale in that country of the applicable Product.

     "RMC" shall have the meaning set forth in Section 3.1.1.

     "Senior Executives" shall have the meaning set forth in Section 11.1.

     "Staffing Level" shall have the meaning set forth in Section 2.2.1.

     "Steering Committee" shall have the meaning set forth in Section 3.1.2.

     "Sublicensee" shall mean any Third Party licensed by IBP or its Affiliates
to make, use (except where the implied right to use accompanies the sale to the
Third Party of any Product by IBP or its Affiliates or Sublicensees), sell,
import, export, advertise, promote and otherwise commercialize any Product.

     "Territory" shall mean the world.

     "Third Party" shall mean any individual, partnership, joint venture,
corporation, trust, estate, unincorporated organization, government or any
department or agency thereof, or any other entity other than Diversa or IBP or
an Affiliate of Diversa or IBP.

     "Valid Claim" shall mean a claim included in (a) any issued patent, which,
with respect to any pending claim, has not been irrevocably abandoned or held to
be unpatentable by a court

                                       7
<PAGE>

or other authority of competent jurisdiction in a proceeding which is not
reversed, not appealable and not appealed, or, with respect to any issued claim,
has not been held invalid by a decision of a court or other authority of
competent jurisdiction which is not reversed, not appealable and not appealed or
(b) any patent application within the Patent Rights of either Party, so long as
such application is being prosecuted and the claim in question has not been
abandoned by the owner Party of the application (and provided that such patent
application has not been pending for more than seven (7) years in the country in
question).

     "Work Plan" shall mean the work plan that outlines the research and
development activities to be performed by Diversa and IBP hereunder, including
identification of deliverables from IBP and Diversa, which is set forth in a
letter agreement between the Parties of even date herewith.  In case of any
discrepancies between the terms of the Work Plan and the terms of this
Agreement, the terms of this Agreement shall prevail.

     The above definitions are intended to encompass the defined terms in both
the singular and plural tenses.

2.   R&D Program

     2.1  R&D Program.   The scope of the collaboration between IBP and Diversa
during the Research Period will be the areas of discovery, optimization, and
development of Compound Sets in the Field, as well as all other aspects of the
R&D Program, being defined in more detail in the Work Plan, which is hereby
incorporated by reference into this Agreement.  The Parties shall work together
to identify compounds having potential use in the Field, and intend that IBP may
obtain exclusive rights to such Compound Sets, subject to certain diligence and
payment obligations as provided in this Agreement.

     2.2  Research and Development Activities.

          2.2.1  Staffing Level.  In carrying out the R&D Program, Diversa shall
devote [***] FTEs per year during the Research Period (the "Staffing Level"),
and IBP shall pay Diversa for the services of such FTEs as set forth herein.
Diversa shall not be obligated to utilize more than [***] FTEs per year during
the Research Period in carrying out the R&D Program unless the Parties otherwise
mutually agree. If IBP chooses to exercise its option under [***], the Parties
shall mutually agree to the number of FTEs dedicated to the development of
Compound Derivatives during the specified [***]. The FTE rate applicable at the
time of IBP's exercise shall be the FTE rate for such mutually agreed FTEs.
Notwithstanding the foregoing or anything contained herein to the contrary, the
Staffing Level shall remain at [***] FTEs per year during the Research Period,
unless the Parties mutually agree in writing to a change in the Staffing Level.
Following the Research Period, if IBP requests that Diversa perform research
services hereunder with respect to a compound within a Compound Set subject to a
License (e.g., for supply of a Compound following the Research Period where such
Compound is a member of a formerly Reserved Set), Diversa hereby agrees to
discuss such request in good faith with IBP; provided, however, that Diversa
shall not be obligated to agree to perform such services, and IBP


-----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       8
<PAGE>

shall be required to pay Diversa for any such services performed by Diversa FTEs
at Diversa's then applicable FTE rate.

          2.2.2  Commercially Reasonable Efforts. Diversa and IBP shall use
commercially reasonable efforts to perform the tasks for which each Party is
responsible as set forth in the Work Plan, and to provide the facilities,
materials, and equipment necessary to perform the R&D Program under the Work
Plan.

          2.2.3  Allocation of Responsibility. While the Parties intend to work
collaboratively under the auspices of the RMC to specify the Party or Parties
with responsibility for performing the specific research and development
activities under the R&D Program, IBP shall be responsible for performing (or,
subject to the limitations herein, arranging for Third Party subcontractors to
perform) all research and development activities under the R&D Program that are
not specified to be performed by Diversa. IBP shall be responsible for funding
all research and development activities conducted hereunder, including those by
Diversa or by IBP and by permitted Third Parties, if any, designated to conduct
research and/or development activities in support of the R&D Program.

     2.3  Limited Use of Materials Provided by Diversa. IBP agrees that it will
use materials provided from Diversa's environmental libraries pursuant to the
Work Plan only for (i) screening such materials in connection with the R&D
Program against assays selected by the RMC and/or (ii) conducting a medicinal
chemistry program with respect to any particular Compound within such materials,
and IBP agrees that it will not use such materials for any other purpose. IBP
may not transfer such materials to any Affiliate, Sublicensee or Third Party
subcontractor unless: (i) IBP notifies Diversa, through the RMC, of such
transfer and (ii) IBP executes a agreement that governs the transfer of such
materials that provides ownership of all inventions made or discovered using
such materials to be allocated in a manner substantially consistent with the
provisions of Article 5, as well as an obligation of confidentiality
substantially similar to those set forth in Article 7, and a limitation on use
of such materials to the performance of work under this Agreement. IBP and
Diversa will separately inform the RMC in writing of the assays to be used in
its screening of such materials prior to commencing such screening. IBP will
provide Diversa with regular written reports identifying the extracts and assays
used in such screening and the results of such screening. Diversa will provide
IBP with regular written reports identifying the materials and assays used in
such screening and the results of such screening. IBP will employ a system to
track the identity and use of such materials and to ensure that such materials
are maintained separately from any other materials used by IBP (or any Affiliate
of IBP, its Sublicensee or Third Party subcontractor) and will provide Diversa
with a detailed description of such system prior to the delivery of any
materials by Diversa to IBP under the Work Plan.

     2.4  Records. During the Research Period and if applicable, the six-month
period of Section 4.8, and continuing for a period of [***] thereafter, and/or
as required by regulatory bodies, Diversa and IBP shall maintain records of the
R&D Program (or cause such records to be maintained), both in notebooks and
electronic forms that are generated for the R&D Program that are separate from
any Third Party information, in sufficient detail and good scientific


-----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       9
<PAGE>

manner as will properly reflect all work done in the R&D Program and results
achieved in the performance of the R&D Program. During the Research Period and
continuing for a period of [***] thereafter, each Party shall allow the other
Party to have reasonable access to all pertinent R&D Data generated by or on
behalf of such Party with respect to any Lead Compound and Product. This
retention of records may be extended if there is a legal proceeding pending
(i.e., court action, or United States interference or opposition in any country
involving Diversa's or IBP's intellectual property applicable to information
within such records) where those records are reasonably required and a written
request with the reason is provided to the other Party. Nothing herein shall
require, or be construed to require, that either Party disclose to the other
Party any of its Know-How, except to the extent necessary for the development
and/or commercialization of Lead Compounds and Products.

     2.5  Permitted Affiliates, its Sublicensees and Third Party Subcontractors.
The Parties contemplate that either Party may have certain of the work to be
performed by such Party in support of the R&D Program be performed by an
Affiliate of such Party, or its Sublicensees, or any Third Party subcontractor
hired for the sole purpose of performing such work, in accordance with the terms
set forth herein so long as any inventions or discoveries made or discovered by
an Affiliate of such Party, or its Sublicensees, or any Third Party
subcontractor during the course of performing such work shall be owned by the
appropriate Party as set forth in Article 5.  Such Affiliate, Sublicensee or
Third Party subcontractor may be involved in the following research and
development activities: developing and performing assays, manufacturing Compound
Derivatives and the Lead Compound, and running toxicology and stability studies.
Each Party shall remain primarily responsible for the work to be performed by
such Party, even if such work is performed by an Affiliate, Sublicensee, or
Third Party subcontractor in support of the R&D Program under this Agreement.
Either Party shall be permitted to involve Third Party subcontractors, its
Sublicensees and/or its Affiliates with specific aspects of the R&D Program.  In
all events, however, the Party delegating any aspects of the R&D Program to
Affiliates, Sublicensees or Third Party Subcontractor shall remain responsible
hereunder for the activities of such Affiliates, Sublicensees, or Third Party
subcontractors.

3.   Committees; Selection Of Compounds And Compound Derivatives

     3.1  Organization.

          3.1.1  Research Management Committee. IBP and Diversa shall establish
a research management committee (the "RMC") comprised of [***] persons (each, a
"Committee Member"), [***] of whom shall be appointed by IBP and [***] of whom
shall be appointed by Diversa. The RMC may invite other persons, including
representatives of the Parties, to participate in meetings of the RMC, as
appropriate, subject to appropriate obligations of confidentiality and non-use
and provided that such persons shall not have the right to vote as Committee
Members. The Parties may mutually agree to increase the number of Committee
Members on the RMC if they determine that such increase would allow individuals
with appropriate expertise to participate in the RMC, provided that after
implementation of any increase in the number of Committee Members, each Party
shall have an equal number of representatives on the RMC.


-----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       10
<PAGE>

          3.1.2  Steering Committee. In addition, IBP and Diversa shall
establish a steering committee (the "Steering Committee"), consisting of the
Chief Executive Officer of Diversa and the Chief Executive Officer of IBP, whose
role shall be to oversee the functioning of the RMC and to resolve disputes
within the RMC as described in Section 3.8.

          3.1.3  Project Leaders. Diversa and IBP shall each name one of its RMC
members to serve as a co-director of the R&D Program (each, a "Project Leader").
The Project Leaders shall oversee the implementation of the decisions and
conclusions of the RMC with respect to the execution of the Work Plan, and
address the day-to-day issues arising under the R&D Program.

     3.2  Responsibilities. The purpose of the RMC shall be to plan, coordinate,
and direct the research efforts related to the R&D Program and to ensure the
execution of the Work Plan. Responsibilities to effect this purpose include, but
are not limited to, the following:

          3.2.1  Proposing Amendments to Work Plan. Either Party's
representatives on the RMC shall be permitted to propose amendments to the Work
Plan. All such proposals to amend the Work Plan shall be in writing and
delivered to each Committee Member prior to the RMC's approval of such proposed
amendment(s). Any material amendment(s) to the Work Plan shall be approved in
writing by all Committee Members at a meeting of the RMC (or by written consent
of all Committee Members) and, following approval of such amendment(s) by the
RMC, shall be included in the minutes of such meeting. Specifically, any
proposed change to the Staffing Level shall first be unanimously approved by the
Committee Members and submitted to both Parties for written approval; however,
if the RMC cannot agree to such a change to the Staffing Level, such issue shall
be presented to the members of the Steering Committee as set forth in Section
3.8. Notwithstanding anything contained herein to the contrary, the Staffing
Level shall not be changed during the Research Period absent the written
approval of both Parties.

          3.2.2  Review of Reports. At least quarterly, or at such other more
frequent intervals as determined by the RMC, the RMC shall deliver to Diversa
and IBP reports disclosing a complete compilation of all R&D Data and revisions
to the Work Plan, as appropriate. The Parties will review such R&D Data to
determine progress made on the R&D Program. Reports prepared by the RMC and
delivered to each Party shall be subject to the confidentiality provisions
contained herein.

          3.2.3  Designation of Compound. If, as part of the research activities
hereunder in accordance with the Work Plan during the Research Period, either
Party invents or discovers a compound (i) that has not been derived from an
existing Compound or from knowledge of the structure of an existing Compound and
(ii) the structure of which has been elucidated as part of the Work Plan, as
soon as practicable following the elucidation of the chemical structure of such
compound sufficient to allow Diversa to determine whether such structure
corresponds to an Excluded Compound (but in no event later than [***] after such
event), such Party shall notify the RMC (as well as Diversa, if IBP is such
Party) in writing of such compound's structure to enable Diversa to determine
whether such compound is an Excluded Compound. Within [***]


-----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       11
<PAGE>

following Diversa's receipt of the structure information with respect to such
compound, Diversa shall notify the RMC as well as IBP in writing as to whether
or not such compound is an Excluded Compound (the "Notification"). If such
compound is an Excluded Compound, then such compound shall not be deemed to be a
Compound hereunder. If such compound is not an Excluded Compound, then such
compound shall be designated as a Compound hereunder and shall comprise the
first compound within the Compound Set associated with such Compound.

        3.2.4  Designation of Compound Derivatives.

               (a)  If, as part of the research activities hereunder in
accordance with the Work Plan, either Party invents or discovers a compound (i)
that has been derived from an existing Compound or from knowledge of the
structure of an existing Compound, either by [***], or by other means in the
course of performing research pursuant to the Work Plan, including without
limitation Compound Derivatives and (ii) the structure of which has been
elucidated as part of the Work Plan, as soon as practicable following the
elucidation of the chemical structure of such compound sufficient to allow
Diversa to determine whether such structure corresponds to an Excluded Compound
(but in no event later than [***] after such event), such Party shall notify the
RMC (as well as Diversa, if IBP is such Party) in writing of such compound's
structure to enable Diversa to determine whether such compound is an Excluded
Compound. Within [***] business days following Diversa's receipt of the
structure information with respect to such compound, Diversa shall notify the
RMC (as well as IBP) in writing as to whether such compound is an Excluded
Compound. If such compound is not an Excluded Compound and the RMC agrees that
such compound otherwise satisfies the definition of a "Compound Derivative" with
respect to the Compound from which such compound was originally derived, then
such compound shall be deemed to be a Compound Derivative of such Compound and
shall comprise an additional compound within the Compound Set associated with
such Compound. If the RMC cannot agree whether such compound satisfies the
definition of a "Compound Derivative," or more specifically, if the RMC cannot
determine the structure of the Active Substructure of the Compound that is
associated with the Compound Set, and therefore cannot determine whether a
compound is a Compound Derivative in such Compound Set within [***] days after
Diversa has notified the RMC that the compound is not an Excluded Compound, then
the Parties shall engage a mutually acceptable independent expert having a Ph.D.
or equivalent degree in organic chemistry, with at least ten (10) years of
experience in performing medicinal chemistry within the pharmaceutical industry,
to determine whether the compound should be deemed to be a Compound Derivative
of such Compound (an "Industry Expert"). The Parties shall select such Industry
Expert within [***] after the expiration of the foregoing [***] period. Within
[***] of its selection, the Industry Expert shall confer with the Parties for no
longer than [***] after he or she receives information from each Party
supporting its position on the structure of the Active Substructure or whether
the compound should be deemed a "Compound Derivative" and make his or her
determination. Each Party shall thereafter be bound by the decision of the
Industry Expert as to whether the compound is deemed a Compound Derivative. The
RMC shall maintain a document identifying the Compound Sets of this Agreement
and amend such document from time to time with the addition of any new Compound
Sets as identified during the Research Period (including, if applicable, any
Compound Derivatives identified during the [***] period of Section 4.8), with a
copy of such

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       12
<PAGE>

document, as amended from time to time being distributed to each Party within
[***] following the end of the Research Period or if applicable, the six-month
period of Section 4.8.

               (b)  However, if such compound is not an Excluded Compound and
the RMC or the Industry Expert (whichever is applicable) determines that the
compound does not otherwise satisfy the definition of a "Compound Derivative"
with respect to the Compound from which such compound was originally derived,
then such compound shall be deemed to be a new Compound with respect to which
IBP shall be entitled to exercise its rights under Section 3.2.3 and shall
comprise the first compound within a new Compound Set associated with such new
Compound.

        3.2.5  Compound Supply.  As soon as a Compound has been designated under
the procedures of Section 3.2.3 above, the RMC shall convene to decide the most
efficient route to produce sufficient quantities of such Compound, not to exceed
[***] of such Compound, to give IBP the opportunity to perform the minimum
studies required to determine IBP's interest in obtaining a License to a
Compound Set associated with such Compound. If the RMC determines that the most
efficient route to make such Compound is via [***], the RMC shall so notify IBP
in writing, and IBP shall be responsible for producing sufficient quantities of
the Compound as reasonably specified by the RMC. However, if the RMC determines
that the most efficient route to make such Compound is via [***], the RMC shall
so notify Diversa in writing, and Diversa shall be responsible for producing and
delivering to IBP sufficient quantities of the Compound via [***] as reasonably
specified by the RMC. IBP shall have a maximum of [***] from manufacture or
receipt (as applicable) of such applicable quantities of the Compound to carry
out such studies. If, within such [***] period, IBP determines that such
Compound is of interest to IBP, IBP shall promptly notify Diversa in writing as
to IBP's desire to obtain a License to such Compound Set associated with such
Compound. Subject to the terms and conditions of this Agreement, upon such
written notification, if such Compound is not an Excluded Compound at such time,
Diversa shall be deemed to grant a License to the Compound Set with respect to
such Compound and Products based thereon as provided in Section 4.1. If Diversa
is not so notified within such [***] period, however, IBP shall thereafter have
no right to License such Compound or the Compound Set with respect to such
Compound.

   3.3  Meetings of the RMC and Steering Committee.   The RMC shall meet in
person at least once every calendar quarter during the Research Period and
thereafter during the performance of the R&D Program, alternating the sites of
such in-person meetings between Diversa's facilities in San Diego, California
and IBP's facilities in Mountain View, California, or at such other times and
locations as the RMC determines. Draft minutes for each meeting of the RMC shall
be circulated within [***] following each meeting of the RMC. Such minutes shall
include a summary of the matters discussed, decisions made, conclusions, and
actions agreed upon by the RMC. The responsibility for preparing such meeting
minutes shall alternate between the Project Leaders of IBP and Diversa, and such
minutes will not be finalized until the Project Leader that did not prepare such
minutes reviews and confirms the accuracy of such minutes, which shall take
place within [***] of receipt of the minutes. The Steering Committee shall meet
at such times, with such frequency, and at such locations as its members may
agree from time to time.


----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       13
<PAGE>

     3.4  Requirements for Action.  At each RMC meeting, at least two Committee
Members appointed by each Party shall constitute a quorum of the RMC, and
decisions shall be made by unanimous vote. The Committee Members or Alternates
of IBP shall collectively have one (1) vote on the RMC, and the Committee
Members or Alternates of Diversa shall collectively have one (1) vote on the
RMC.

     3.5  Members.  The initial Committee Members of the RMC shall be as
follows:


          Diversa Representatives    IBP Representatives

          [***]                      [***]

     A Party may change one or more of its Committee Members, provided, however,
that such person is technically qualified for the position as reasonably
demonstrated by that Party.  All appointments and withdrawals of appointment
shall be made by written notice to the other Party.  Each Party may designate in
writing an alternate Committee Member ("Alternate") with at least three (3) days
prior notice to the other Party if the designated Committee Member cannot attend
a meeting, provided, however, that such Alternate is technically qualified for
the position as reasonably demonstrated by that Party.  Any action taken with
approval of an Alternate shall be as valid as if taken with the approval of the
designated Committee Member.

     3.6  Visits to Facilities.  Committee Members and their designated
representatives shall have reasonable opportunity to visit the facilities of
each Party (and such Party's Affiliates, its Sublicensees and permitted Third
Party subcontractors hereunder) where activities under this Agreement are in
progress, as reasonably required to execute the Work Plan, during normal
business hours on a mutually agreeable date. Each Party shall bear its own
expenses in connection with such site visits. Committee Members and their
designated representatives shall be obligated to keep any and all information
that such Committee Member or their designated representatives receives or
reviews during such visits confidential, whether or not such information relates
to the research and development activities overseen by the RMC under this
Agreement. Each Party shall exert reasonable efforts to limit access by any
permitted visitor to its facility to information that is unrelated to the
Parties' performance under this Agreement. Committee Members and their
designated representatives shall have the right at any time during the visit to
ask questions of and receive answers from personnel regarding their activities
and findings under this Agreement.

     3.7  Information Sharing.  Each Party shall provide to the RMC information
that is relevant and necessary to make decisions regarding the R&D Program and
demonstrate efforts in furthering the research and development activities under
the Work Plan in the form of a report (a "Progress Report") no fewer than [***]
prior to a scheduled RMC meeting.  Each Progress Report shall, at a minimum,
provide the status of any research, preclinical, and clinical development
activities for compounds within a Compound Set and summarize any outstanding
material issues associated with such development efforts and the likelihood of
and timetable for commercialization of a Product based on any such compounds.

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       14
<PAGE>

     3.8  Dispute Resolution.  If the RMC and Program Directors fail to reach
agreement upon any matter, the dispute will be referred to the Steering
Committee, which shall attempt to resolve such disputes informally. If such
disputes cannot be resolved informally by the Steering Committee, the dispute
will be resolved in accordance with the procedures set forth in Article 11.

     3.9  Expenses.  Diversa and IBP shall each bear all expenses of their
respective RMC and Steering Committee members related to their participation on
the RMC, attendance at RMC meetings, participation on the Steering Committee,
and attendance at Steering Committee meetings.

4.   Grant Of Rights And Reversion Of Rights

     4.1  License.

          4.1.1  Subject to the terms and conditions of this Agreement,
including, without limitation, [***], with respect to each Compound Set for
which IBP elects to take a license pursuant to Section 3.2.5, Diversa hereby
grants to IBP an exclusive, worldwide, milestone-bearing, royalty-bearing
license (the "License") under the Diversa Technology to the Compound Set to the
extent necessary or useful to develop, make, have made, use, sell, offer for
sale and import Products in the Territory and within the Field. This License
also includes the right to identify and develop new compounds that are Compound
Derivatives of members of such a Compound Set by medicinal chemistry; provided,
                                                                      --------
however, that the license to identify and develop new compounds that are
-------
Compound Derivatives of members of such a Compound Set [***]. Subject to Section
4.3, the duration of the License under this Section 4.1.1 shall be perpetual.

          4.1.2  Subject to the terms and conditions of this Agreement,
including, without limitation, [***], Diversa hereby grants to IBP a
nonexclusive, fully-paid, worldwide license to use a [***] and an exclusive,
fully-paid, worldwide license to [***], in each case, solely to manufacture or
have manufactured a Compound or Product in the Territory and within the Field,
provided [***] (i) direct the synthesis of a compound included within a Compound
Set or a Product and (ii) (A) were identified or otherwise known or available as
part of the R&D Program [***], or, (B) with respect to those Compound Sets opted
to be carried into the [***], were identified or otherwise known or available as
part of the R&D Program [***]; and provided further that such licenses shall not
include any rights to genetically modify any [***]. For clarity, the period of
identifying [***] for all compounds within a Compound Set that are not opted to
be carried into the [***] expires at the end of the Research Period; the period
for identifying [***] for all compounds within a Compound Set that is opted for
further development during the [***] expires at the end of such period. If a
License under Section 4.1.1 terminates, then the licenses under this Section
4.1.2 shall also terminate.

          4.1.3  Diversa hereby grants to IBP (i) a nonexclusive, fully-paid,
perpetual license to practice any and all Program Inventions that are not
covered by [***] (or applications related thereto, so long as such applications
are being prosecuted) made by IBP employees or consultants, either alone or
jointly with Diversa employees or consultants, and [***], and (ii) a

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       15
<PAGE>

nonexclusive, fully-paid, perpetual license to practice any and all Program
Inventions made by IBP employees or consultants either alone or jointly with
Diversa employees or consultants, for IBP to carry out its responsibilities in
accordance with this Agreement; provided however, that the license granted in
this Section 4.1.3 shall not include a license to practice any Diversa Patent
Rights. For the sake of clarity, [***].

     4.2  Rights to Sublicense.  Under each License, IBP shall have the right to
grant sublicenses, through multiple tiers of sublicenses, provided that any such
sublicense shall expressly provide for the Sublicensee to be bound by
obligations consistent with those provided in this Agreement.  If the
Sublicensee receives materials provided by Diversa under Section 2.3 or if the
Sublicensee performs work under the Work Plan as set forth in Sections 2.1 and
2.5, such sublicense shall provide for rights necessary for the Sublicensee to
conduct and complete such activities on behalf of IBP in a manner consistent
with the terms provided in this Agreement.  IBP shall provide Diversa with
prompt written notice of each sublicense agreement, as well as a copy of such
sublicense agreement, after it is granted, provided that IBP may redact from
such copy any terms not  necessary to confirm compliance with this Section 4.2.

     4.3  License Period.  The term of the License with respect to each Compound
Set, other than a Reserved Set, shall continue in force for the period (the
"License Period") ending on the earliest to occur of:

                 (a)  the date IBP notifies Diversa that IBP does not intend to
proceed with further development of [***] in accordance with the Work Plan, such
notice to be made promptly after IBP makes such determination; or

                 (b)  the date IBP notifies Diversa that IBP does not intend to
continue to commercialize Product(s) based upon [***], such notice to be made
promptly after IBP makes such determination; or

                 (c)  expiration of [***] following IBP's election to obtain a
License pursuant to Section 3.2.5 to such Compound Set if IBP has not previously
initiated [***] in the Compound Set, provided that such [***] time frame shall
be extended (1) if [***], based on available data, to conduct additional lead
optimization studies to select the [***], (2) if unexpected problems arise
during exploratory toxicology studies prior to [***] that necessitate the
replacement of the [***] with another compound in the Compound Set, (3) if [***]
has not [***] under the Work Plan during the [***] or (4) if situations arise
where [***] time frame shall be extended; or

                 (d)  expiration of [***] following IBP's election to obtain a
License pursuant to Section 3.2.5 to such Compound Set if IBP has not previously
filed an investigational new drug application with the FDA (or equivalent
application with an equivalent agency outside of the United States), or sought
approval from an Institutional Review Board for initiation of human testing with
respect to [***], provided that such thirty-six (36) month time frame shall be
extended if such event has not occurred for reasons outside of IBP's reasonable
control, for example, but not limited to, (1) if [***] during development, (2)
if [***], or (3) if [***]; or

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       16
<PAGE>

                 (e)  any date prior to Regulatory Approval of a Product based
upon a compound in such Compound Set upon which IBP, its Affiliate(s), and/or
Sublicensee(s) (as applicable) cease(s) to use commercially reasonable efforts
to develop a Product associated with any compound within such Compound Set; or

                 (f)  any date prior to commercialization of a Product
containing or based upon a compound within such Compound Set, (i) if [***], its
Affiliate(s), and/or Sublicensee(s) (as applicable) [***] with respect to such
Compound Set as set forth in the Work Plan or (ii) upon which [***], its
Affiliate(s), and/or Sublicensee(s) (as applicable) [***] such Product unless,
in the case of clause (ii), after such date [***] continues to spend at least
[***] basis to [***] of such a Product and [***] as set forth in the Work Plan
demonstrating that [***] is continuing, at this level of funding, to [***],[***]
with respect to a compound within such Compound Set and [***] with respect to a
compound within such Compound Set; or

                 (g)  the date that IBP notifies Diversa in writing that it
 waives its rights under the License as to the Compound Set; or

                 (h)  expiration of the applicable Royalty Period(s) with
respect to the Product(s) associated with such Compound Set; or

                 (i)  the date that a Party terminates the License for such
Compound Set pursuant to Section 10.3 due to a Default by the other Party.

     4.4  Reserved Sets.  During the Research Period, IBP shall have the right
to obtain a License with respect to as many Compound Sets as it identifies as
being of interest to it pursuant to Section 3.2.4, subject to the provisions of
Section 4.3 which provide for termination of the License Period for a given
Compound Set if IBP [***] of compounds within the associated Compound Set. The
Parties recognize that IBP [***] with respect to other Compound Sets.
Accordingly, IBP may elect to [***] such Compound Set, by notifying Diversa in
writing at the time [***]. For each compound within a Reserved Set, IBP may
continue to [***] at the following times following its election to take a
License for such Reserved Set:

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

IBP shall not be obligated to [***] with respect to a Reserved Set pursuant to
this Section 4.4 [***] at any time after IBP [***] with a [***] below, as
certified by IBP in a written notice to Diversa that IBP has [***].  After such
written notice is received by Diversa, such Compound Set shall no longer be
deemed to be a Reserved Set and the obligations under [***] with respect to such
Compound Set shall [***] as if the [***], provided that Diversa shall be
permitted to promptly request a reasonable amount of information from IBP to
[***], which information IBP shall use its commercially reasonably efforts to
supply to Diversa promptly on written request.  However, after such notice is
provided to Diversa, the [***] for such Compound Set shall [***] if any of the
events described therein occurs.  If IBP does not (a) [***] within [***] with
respect

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       17
<PAGE>

thereto and (b) [***], then [***] with respect to such Reserved Set [***]. IBP
shall not be entitled to re-designate a Compound Set as a Reserved Set (i) after
[***] thereto pursuant to the foregoing sentence or (ii) following [***] of such
Reserved Set as specified in this Section 4.4.

     4.5  IBP Diligence Obligations.  IBP shall have the sole and absolute
discretion to make all decisions relating to marketing and other
commercialization activities with respect to any Compound, compound within a
Compound Set or any Product, provided that IBP may delegate the conduct and
completion of such activities to its Affiliates, its Sublicensees, or any Third
Party subcontractors, subject to the terms of this Agreement. However,
notwithstanding the foregoing or anything to the contrary contained herein, each
License to a Compound Set that is not a Reserved Set is expressly subject to (i)
IBP's continuing to use commercially reasonable efforts consistent with
standards typically made by a [***] to proceed with the development of a Lead
Compound in accordance with the Work Plan and (ii) following commercialization
of a Product associated with such Lead Compound, IBP's continuing to use
commercially reasonable efforts consistent with standards typically made by a
[***] to market and sell the Product. In the event that IBP no longer wishes to
use such efforts, IBP shall promptly notify Diversa in writing of the same, and
the License with respect to such Compound Set shall immediately terminate in
accordance with the terms of this Agreement. In the event that Diversa believes
that IBP is no longer using such efforts with respect to a Compound Set, then
Diversa shall promptly notify IBP in writing of the same, and the Parties shall
discuss such failure during the following [***]. If Diversa, after such [***]
day period, believes that IBP has not remedied its failure to use such efforts,
Diversa shall so notify IBP in writing, and IBP may then exercise its rights
under Section 10.3 as a Defaulting Party thereunder to cure such default prior
to Diversa's terminating the License to such Compound Set. If, within the period
specified in such notice, IBP has not cured such default with respect to such
Compound Set, the License to such Compound Set shall immediately terminate.

     4.6  Reversion of Rights to Diversa.

          4.6.1  If the License Period with respect to the License to a Compound
Set expires pursuant to the terms of this Agreement, including, without
limitation, pursuant to the reasons set forth in Section 4.4 above, IBP shall
have [***] and, at Diversa's written request, shall transfer to Diversa or
destroy all Confidential Information relating to the Compound Set (regardless of
which Party generated such Confidential Information) within [***] after such
expiration; provided, however, that IBP may retain one copy of such Confidential
Information for the sole purposes of use in any litigation resulting from this
Agreement or the activities undertaken pursuant to this Agreement. Upon the
expiration of the License to a Compound Set, the Parties shall promptly initiate
and continue negotiations, in good faith, for [***] to establish the terms of an
[***] (the "Reversion License"). Specifically, the Parties shall negotiate the
[***] for such Reversion License based on, among other things, the [***] created
(in whole or in part) by [***], the [***] of compounds within such reverted
Compound Set or Product based on such Compound Set, and [***] such Compound Set
or Product based therein. If the Parties cannot agree to the terms of the
Reversion License within the [***] period, then the Parties shall engage a
mutually acceptable independent expert with experience in valuing pharmaceutical
compounds (the "Independent Expert") to determine such [***] for the Reversion
License, the

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       18
<PAGE>

costs of which shall be shared equally by the Parties. The Parties shall select
such Independent Expert within [***] after the expiration of the foregoing [***]
period. Within [***] of selection of such Independent Expert, each Party shall
provide the Independent Expert with a reasonable amount of information such
Party wishes the Independent Expert to consider as part of his or her decision.
The Independent Expert shall confer with the Parties for [***] after he or she
receives such information from each Party and make his or her determination at
the end of such [***] period. Each Party shall thereafter be bound by the
decision of the Independent Expert as to the amount that represents [***] to IBP
for such Reversion License, and such matter shall not be subject to the dispute
resolution procedure set forth in Article 11 hereof. [***] to be [***] hereunder
for such Reversion License shall be subject to the accrual of [***]; provided
however, that in no event shall [***] applicable. Such rate shall be determined
as soon as practicable following the determination of the [***] hereunder for
such Reversion License, and [***] shall begin to [***] after the date of such
determination.

          4.6.2  Notwithstanding anything contained herein to the contrary,
[***] with respect to any reverted Compound Set until and unless [***]
attributable to one or more compounds within such reverted Compound Set. With
respect to each reverted Compound Set, [***] associated with the compound(s)
within such reverted Compound Set that [***] receives, as well as [***], if any,
of Products [***] that incorporate such compound(s), until [***] set pursuant to
Section 4.6.1 above, together with all [***] thereon.

     4.7  Manufacturing Rights.

          4.7.1  As development progresses under the Work Plan for each compound
within a Compound Set or Product such that IBP requires larger quantities of
such compounds or Products manufactured in compliance with GMP, or other
manufacturing standards, IBP shall notify Diversa of its need for preclinical,
clinical or commercial supply, as applicable. If Diversa desires to be
considered as a potential manufacturer, Diversa shall provide IBP with the
requisite information to enable IBP to evaluate whether Diversa can manufacture
compounds within a Compound Set or Products, as applicable, in accordance with
regulatory requirements, IBP's own standards for manufacture and other standards
typically applicable in the pharmaceutical industry for the manufacture of
pharmaceuticals. Selection of the manufacturer will be at IBP's sole discretion.
However, provided (i) IBP desires that the compound or Product in question be
manufactured via a [***] route and (ii) Diversa possesses the ability to
manufacture such compound or Product via [***], at a comparable price and in
compliance with the relevant GMP, or other manufacturing and laboratory
standards reasonably required by IBP, and (iii) Diversa is able to meet all
other commercially reasonable requirements of IBP (e.g., regarding quality
control, total cost, and capacity requirements)) IBP shall negotiate [***] with
Diversa in good faith for [***] regarding the terms of a manufacturing agreement
regarding such compound or Product (as applicable) [***], unless [***].

          4.7.2  Subject to Sections 4.1.2 and 4.7.1 above, if IBP desires that
the compound or Product in question be manufactured via a [***] but (a) IBP
desires to manufacture such compound or Product internally or through a Third
Party manufacturer, (b) Diversa notifies IBP that it is not interested in
manufacturing such compound or Product (as applicable), (c)

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       19
<PAGE>

Diversa does not possess the ability to manufacture such compound or Product via
[***] and in compliance with the relevant GMP, or other manufacturing standards,
and other commercially reasonable standards required by IBP, or (d) Diversa is
not a reasonably competitive prospective manufacturer of such compound or
Product, then, subject to the Parties agreeing in good faith to reasonable
compensation for all reasonable technology transfer costs and other reasonable
Diversa costs as mutually agreed by the Parties. Subject to Section 4.1.2, IBP
may engage a Third Party manufacturer for such compound or Product and may [***]
to such Third Party solely to manufacture such compound or Product in accordance
with this Agreement and the terms of such license; provided, however, that such
                                                   -----------------
[***] to such Third Party manufacturer under a [***] with the provisions of this
Agreement. However, IBP shall [***] in good faith for [***] regarding the terms
of any manufacturing agreement of such compound or Product (as applicable) via
[***] prior to [***], unless Diversa notifies IBP in writing that it is not
interested in manufacturing such compound or Product (as applicable). Prior to
execution of any sublicense agreement with a Third Party manufacturer, IBP shall
provide Diversa with a copy of such sublicense agreement, provided that IBP may
redact from such copy any terms not necessary to confirm compliance with the
provisions of Section 4.2 and this Section 4.7.2. Within [***] of receipt of
such copy, Diversa shall have the right to approve such sublicense agreement,
such approval not to be unreasonably withheld. Diversa's failure to respond
within [***] of receipt of the copy of the sublicense agreement shall constitute
approval of the sublicense agreement.

     4.8  Extension of Research Period.  Notwithstanding the [***] period to
extend the Research Period set forth in Section 10.1, IBP shall have the option
to continue developing Compound Derivatives of the compounds within the Compound
Sets existing at the end of the originally scheduled Research Period for up to
[***] as an extension of the Research Period for such Compound Sets.
Specifically, at least thirty (30) days before the end of the initial [***]
Research Period, IBP shall identify to Diversa the Compound Sets for which IBP
wishes to continue developing Compound Derivatives, and the Parties can conduct
such work for up to [***] thereafter. During such extended Research Period, IBP
shall not have the right to designate Compounds as set forth in Section 3.2.3 or
Compound Derivatives as set forth in Section 3.2.4 that are not Compound
Derivatives within the Compound Sets identified by IBP. Any Compound Derivatives
made, discovered or invented during the extended Research Period shall be
subject to all applicable terms of this Agreement regarding Compound
Derivatives, including without limitation the provisions regarding the payment
to Diversa of milestones and royalties.

     4.9  Compound Exclusivity; Non-Compete.  With respect to each Compound Set
for which IBP has a License that has not terminated, Diversa shall not itself
develop or commercialize products based upon or containing any compounds within
such Compound Set, or grant to any Third Party a license under the Diversa
Technology or collaborate with any Third Party, to develop or commercialize
products based upon or containing compounds within such Compound Set. In
addition, for a period of [***] following the Effective Date, Diversa shall not
outlicense any Diversa Technology to a Third Party company (i) whose primary
business is the research, development and commercialization of novel drugs in
the Field and (ii) who owns,

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       20
<PAGE>

either directly or through one or more wholly-owned subsidiaries, patents
related to all of the following: [***]

5.   Intellectual Property Rights

     5.1  Intellectual Property Ownership.  All Program Inventions shall be
owned by Diversa, except that IBP shall own all Program Inventions that relate
solely to (a) [***] and (b) [***] and that are designated by the RMC as
proprietary [***]. Each Party shall notify promptly the other Party, in writing,
of any Program Invention. Such written notification shall provide the [***], to
the extent known, of any compounds made, discovered or invented, and all other
data relevant to determining the patentability and inventorship of such Program
Invention.

          5.1.1  Each Party shall continue to own all intellectual property
owned by such Party prior to the Effective Date.

          5.1.2  Each Party shall have the right to secure patent protection for
the Program Inventions owned by it, in accordance with this Section 5. Each
Party shall (and shall cause its applicable Affiliates to) make such assignments
and take such other actions as may be necessary or appropriate to effect the
ownership of intellectual property rights in accordance with this Section 5.1.

     5.2  Filing, Prosecution and Maintenance of Patents.

          5.2.1  Except as provided in this Section 5.2 or Section 5.5, each
Party shall have the sole right, at its own expense, to control the filing,
prosecution, maintenance, defense and enforcement of its own patents and patent
applications.

          5.2.2  Diversa shall confer with IBP regarding its plans to secure
patent protection for any Program Inventions owned by Diversa which cover the
composition, manufacture or use of Compounds, Compound Derivatives, Active
Substructures and/or Products ("Compound Patents"). The Parties shall seek to
agree on the patent strategy to be followed in securing such protection.

                 (a)  Diversa shall select outside counsel to prepare,
prosecute, and maintain each patent application and resulting patent within the
Compound Patents, and IBP shall reimburse Diversa for [***] incurred in
connection with such work. The Parties shall have equal access to such outside
counsel. The Parties shall seek to agree on the prosecution of patent
applications within the Compound Patents, but in the event of disagreement,
Diversa shall control the prosecution. If IBP is dissatisfied with the
prosecution of patent applications within the Compound Patents by the outside
counsel selected by Diversa, IBP shall so inform Diversa in writing, and such
patent applications shall be transferred to a different, mutually-acceptable
outside counsel. Diversa shall provide IBP a list identifying at least three (3)
alternative outside counsel, identify its first preferred choice within such
list and request approval of its first preferred choice from IBP. IBP's approval
shall not be unreasonably withheld. If IBP has a reasonable basis to disagree
with the selection of such outside counsel, the Parties shall

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       21
<PAGE>

negotiate, in good faith, the selection of an alternative outside counsel from
the remaining outside counsel identified in the list. The Parties shall confer
with respect to the list of countries outside the United States in which patent
applications within the Compound Patents will be filed and maintained, and with
prior notice, IBP may decline to pay any fees or expenses with respect to
individual countries. In such case, Diversa shall make the sole decision about
whether to pursue such patent applications in such countries, at its sole
expense.

                 (b)  Diversa shall furnish IBP with copies of draft patent
applications and correspondence relating thereto to and from governmental patent
agencies and other authorities which relate to Compound Patents. Diversa shall
permit IBP to offer its comments thereon before Diversa makes a submission to a
governmental patent agency or other authority which could materially affect the
scope or validity of the patent coverage with respect to such Compound Patent,
and IBP shall offer its comments promptly; provided IBP's failure to respond
within [***] of receipt of the draft patent application or correspondence
relating thereto shall be deemed approval of such patent application or
correspondence. Diversa shall seek to incorporate IBP's comments in its patent
prosecution activities, and to the extent that it declines to incorporate such
comments, shall explain to IBP its reasons for such decision. Diversa shall also
keep IBP informed of its patent prosecution for all Compound Patents that are
subject to the License of Section 4.1, and shall confer reasonably with IBP and
provide IBP with copies of any patent applications and correspondence related
thereto to and from governmental patent agencies or other authorities to the
extent reasonably requested by IBP to monitor the scope and nature of the rights
to which IBP holds a license under this Agreement.

                 (c)  If Diversa decides not to file any Compound Patent, or to
abandon any patent application, patent or other intellectual property right
covering such matter, either on a worldwide basis or in particular countries, it
shall provide IBP reasonable written notice of such intention, and shall permit
IBP, at the sole option and expense of IBP, to file, prosecute and maintain such
patent application, patent, or other intellectual property right in the name of
IBP. In such event, Diversa shall cooperate fully with IBP and shall provide to
IBP whatever assignments and other documents that may be needed in connection
therewith.

                 (d)  IBP may, at its election and from time to time, disclaim
any special rights under paragraph (a) above with respect to particular patent
application(s) included within Compound Patents, in which case Diversa shall
assume exclusive control over the prosecution of such application(s) at its sole
expense. In such case, IBP shall retain the rights set forth elsewhere in this
Section 5.2 with respect to patent prosecution covering other Program
Inventions.

     5.3  Cooperation of the Parties.  Each Party agrees (and will cause any of
its Affiliates) to cooperate fully in the preparation, filing, prosecution and
maintenance of any patent rights with respect to Program Inventions. Such
cooperation shall include but not be limited to:

                 (a)  executing all papers and instruments, or using reasonable
efforts to cause its employees or agents to execute such papers and instruments,
so as to effectuate the

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       22
<PAGE>

ownership of intellectual property rights set forth in Section 5.1 and to enable
the other Party to file and to prosecute patent applications and to maintain
patents in any country;

                 (b)  promptly informing the other Party of any matters coming
to such Party's attention that may affect the preparation, filing or prosecution
of any such patent applications or the maintenance of any such patents; and

                 (c)  undertaking no actions that are potentially deleterious to
the preparation, filing or prosecution of such patent applications or to the
maintenance of such patents.

     5.4  Potential Assignments To IBP.  Diversa recognizes that IBP has a
commercial interest in determining the patent protection for Compounds, Compound
Derivatives, Active Substructures and Products, and enforcing any patents which
cover the composition, manufacture or uses thereof. In the event IBP makes a
determination to commence human clinical trials of any particular Product or
Product(s), the Parties will discuss whether it is practical to assign to IBP
any of the patent applications or patents arising from Program Inventions that
are specific to the Product in question, or the Compound or Compound Derivative
contained therein, or related compounds within the same Active Substructure. In
the alternative, the Parties shall consider whether it is practical to create
and assign to IBP divisional patent properties which are specific to such
matters. Any such assignments shall occur only by mutual agreement of the
Parties in the future, but Diversa agrees to review opportunities for such
assignment in good faith, and without further consideration to be paid by IBP
(except that IBP would become responsible for any costs of assignment and the
future prosecution and maintenance of any patent applications and patents which
are assigned).

     5.5  Infringement by Third Parties.

          5.5.1  Notice.  Each Party shall promptly notify the other Party in
writing of any competitive products sold by Third Parties or other activities by
Third Parties of which they become aware that appear to infringe any patent or
patent application included within the Patent Rights of the other Party.

          5.5.2  IBP Actions.  IBP shall have the first right to bring and
control, by counsel of its own choice and at its own expense, any action or
proceeding with respect to infringement of any IBP Patent Rights, as well as any
Compound Patents subject to a License at the time of commencement of any such
action or proceeding or which issue during the pendency of any such action or
proceeding. If IBP requests Diversa to enforce or to authorize IBP to enforce
other Diversa Patent Rights that may be infringed by the activities of a Third
Party, then Diversa will consider in good faith bringing such action or
authorizing IBP to bring such action. Diversa shall have the right, using
counsel of its own choice and at its own expense, to participate in any such
action regarding the Diversa Patent Rights. Upon written notice to Diversa, IBP
may require Diversa to participate in such action as a necessary party, at IBP's
expense. If IBP fails to bring an action or proceeding with respect to any such
Diversa Patent Rights within (a) [***] following the notice of alleged
infringement or (b) [***] before the time

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       23
<PAGE>

limit, if any, set forth in the appropriate laws and regulations for the filing
of such actions, whichever comes first, Diversa shall have the right to bring
and control any such action, at its own expense and by counsel of its own
choice, and IBP shall have the right, using counsel of its own choice and at its
own expense, to be represented in any such action.

          5.5.3  Diversa Actions.  Diversa shall have the right to bring and
control, by counsel of its own choice, any action or proceeding with respect to
infringement of any Diversa Patent Rights which are not subject to a License at
the time of commencement of such action or proceeding.

          5.5.4  Cooperation; Awards. In the event a Party bring an infringement
action which relates to Program Inventions, the other Party shall (and shall
endeavor to cause its Affiliates, Sublicensees and Third Party subcontractors,
if appropriate, to) cooperate fully, including if required to bring such action,
the furnishing of a power of attorney. Neither Party shall have the right to
settle any patent infringement litigation under this Section 5.5 in a manner
that diminishes the rights of the other Party without the prior written consent
of the other Party. Except as otherwise agreed to by the Parties as part of a
cost sharing agreement, any recovery realized as a result of such litigation,
after reimbursement of any litigation costs of Diversa and IBP, shall be shared
between the Parties so that the Party bringing such action retains [***] of such
amount and the other Party retains [***] of such amount.

     5.6  Third Party Claims of Infringement.  Diversa and IBP shall promptly
notify the other in writing of any allegation by a Third Party that the exercise
of the rights granted to IBP under this Agreement or the activities of either
Party under this Agreement infringes or may infringe the intellectual property
rights of such Third Party. Each Party will use commercially reasonable efforts
(and will endeavor to cause its Affiliates to use commercially reasonable
efforts) to cooperate with the other Party to resolve or defend against any such
claims. Neither Party shall have the right to settle any patent infringement
litigation under this Section 5.6 in a manner that diminishes the rights of the
other Party without the prior written consent of such other Party.

     5.7  Hold Harmless.   During the term of this Agreement, (a) Diversa shall
hold IBP harmless from and against claims by Diversa of infringement of Diversa
Technology with respect to IBP's activities in accordance with this Agreement
except for claims covered by Section 9.2 and (b) IBP shall hold Diversa harmless
from and against claims by IBP of infringement of IBP Technology with respect to
Diversa's activities in accordance with this Agreement except for claims covered
by Section 9.1 solely for the purposes of carrying out the R&D Program as set
forth in the Work Plan. The provisions of this Section 5.7 are intended to
permit both Parties to have freedom to carry out their respective
responsibilities and perform their respective obligations under this Agreement
and the Work Plan without fear of being made a party to any legal action
concerning infringing any intellectual property of the other Party that is used
to carry out such responsibilities or perform such obligations. Notwithstanding
the foregoing, the provisions of this Section 5.7 shall not be construed to
grant to the other Party any license to use a Party's Technology to perform any
activities beyond the scope of the roles and

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       24
<PAGE>

responsibilities assigned to the Parties under this Agreement and the Work Plan
outside the scope of the licenses provided herein, or to limit a Party's
obligations under Article 9.

6.   Payments, Reports, and Records

     6.1  Technology Access Fee Payments.  In exchange for utilizing Diversa's
research and development services during the Research Period as part of the Work
Plan, IBP shall pay to Diversa a technology access fee of [***], payable as
follows:  [***] due on [***],[***] due on or before [***], and [***] due on or
before [***].  Such technology access fee payments set forth in this Section 6.1
shall be non-refundable and shall not be credited against any research funding,
milestones, or royalties, or any other amounts payable to Diversa under this
Agreement.

     6.2  Research Funding

          6.2.1  Subject to Section 6.2.2 below, within [***] following the end
of each calendar quarter, Diversa shall invoice IBP, [***], for the research and
development services provided by Diversa in the previous quarter, at the initial
rate per FTE of [***]. For the second year of the term of this Agreement and
through the end of the Research Period, such FTE rate shall be adjusted annually
beginning on January 1, 2002 by a percentage equal to the change in the CPI from
the month prior to the beginning of the annual period to the month prior to the
date of the adjustment; provided, however, that in no event shall such FTE rate
be reduced for a subsequent year. All amounts listed on each invoice delivered
to IBP pursuant to this Section 6.2.1 shall be paid to Diversa within [***]
after the end of such quarter, except to the extent that IBP disputes, in good
faith, the proper amount of such invoice and so notifies Diversa in writing
before the end of such thirty-day period (in which case IBP shall promptly pay
all undisputed amounts in accordance with this Section 6.2.1).

          6.2.2  Within [***] following the end of each calendar quarter for
which Diversa shall invoice IBP [***] under Section 6.2.1 above, IBP shall
provide Diversa with a written certification that IBP has, at the time of the
certification, at least an adequate amount in cash to meet the demands of its
operations for the next [***]. If IBP does not make such a certification,
Diversa shall be entitled to immediately invoice IBP for the estimated payments
associated with the research and development activities of the Diversa FTEs for
the then-current calendar quarter, and all amounts listed on each invoice
delivered to IBP pursuant to this Section 6.2.2 shall be paid to Diversa within
[***] after the end of such quarter, except to the extent that IBP disputes, in
good faith, the proper amount of such invoice and so notifies Diversa in writing
before the end of such thirty-day period (in which case IBP shall promptly pay
all undisputed amounts in accordance with this Section 6.2.2). In addition, in
such event, Diversa thereafter be entitled to invoice IBP in advance of each
succeeding calendar quarter for the research and development services estimated
in good faith by Diversa to be performed by Diversa FTEs in such quarter, which
amounts shall be paid to Diversa within [***] of receipt of such invoice. If IBP
subsequently provides Diversa with a written certification that the total of
IBP's cash and cash equivalents as of the end of a subsequent calendar quarter
exceeds IBP's projected cash burn rate for the subsequent [***], advance
invoicing and payment procedure set forth this Section 6.2.2 shall be suspended,
and the corresponding procedure set forth in Section 6.2.1 shall

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       25
<PAGE>

thereafter apply (subject to IBP's continuing obligation to supply the monthly
certifications as set forth herein).

     6.3  Milestone Payments; Diligence Payment.  With respect to each Compound
Set developed pursuant to this Agreement, IBP shall pay to Diversa the following
amounts within [***] after (a) achievement of each of the following milestones,
in the case of the payments specified in the following table, and (b) the
expiration of the [***] period, in the case of the payment specified in Section
6.3.1:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Milestone                                                                           Payment to Diversa
-----------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>
Notification by IBP to Diversa that [***]                                                         US $[***]
-----------------------------------------------------------------------------------------------------------
Commencement of [***]                                                                             US $[***]
-----------------------------------------------------------------------------------------------------------
Submission of an IND to the FDA (or equivalent application to an equivalent                       US $[***]
agency outside of the United States) or institutional review board [***]*
-----------------------------------------------------------------------------------------------------------
The first enrollment in any country of the first patient in a Phase II                             US$[***]
clinical trial study (or equivalent clinical program outside of the United
States) involving [***]
-----------------------------------------------------------------------------------------------------------
The first enrollment in any country of the first patient in a Phase III                            US$[***]
clinical trial study (or equivalent clinical program outside of the United
States) involving [***]
-----------------------------------------------------------------------------------------------------------
Receipt of Regulatory Approval by the FDA for a Product [***]                                      US$[***]
-----------------------------------------------------------------------------------------------------------
Receipt of Regulatory Approval by the EMEA or receipt of marketing approval                        US$[***]
in one of the Major Markets for a [***]
-----------------------------------------------------------------------------------------------------------
Receipt of Regulatory Approval by the MHW or receipt of marketing approval                         US$[***]
in Japan for a Product [***]
-----------------------------------------------------------------------------------------------------------
</TABLE>

*  Such milestone shall be reduced to [***] if such event occurs on or before
the date that is [***] after IBP obtains a License to the relevant Compound Set,
except as provided for in Section 4.3(d).

          6.3.1  The milestone and other payments set forth in this Section 6.3
shall be non-refundable and shall not be credited against any research funding,
other milestones, or royalties payable to Diversa under this Agreement. All of
the milestones and other amounts provided for in this Section 6.3 shall be
payable to Diversa once for each Lead Compound within a Compound Set; provided,
however, that, notwithstanding the foregoing, (i) the [***] milestone shall be
payable to Diversa [***] for each Compound Set to which IBP has notified Diversa
it is

----------------------
* CONFIDENTIAL TREATMENT REQUESTED

                                       26
<PAGE>

interested in obtaining a License, and (ii) with respect to any particular Lead
Compound, IBP shall not be required to pay Diversa development milestones (i.e.,
milestones other than ones attributable to the receipt of regulatory or
marketing approval) for which IBP has previously paid Diversa if (a) IBP has
replaced a Lead Compound that has achieved such milestones with a different Lead
Compound from the same Compound Set from which the first Lead Compound was
derived and (b) IBP has discontinued development of such replaced Lead Compound.
IBP shall promptly notify Diversa in writing of each occurrence of any of the
foregoing milestone events, but in no event less than [***] thereafter.


     6.4  Royalties.   In consideration of the Licenses granted to IBP by
Diversa hereunder, for all sales by IBP, its Affiliates and Sublicensees of
Products, IBP shall pay to Diversa incremental royalties on Annual Net Sales of
a Product pursuant to the corresponding percentages set forth under the column
heading "Applicable Maximum Royalty to Diversa" of the following table, subject
to offsets as provided below:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                                     Applicable Minimum Royalty to      Applicable Maximum Royalty to
           Portion of Annual Net Sales                          Diversa                            Diversa
-----------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                                <C>
US$0 to $250,000,000                                             5.0%                               5.0%
-----------------------------------------------------------------------------------------------------------------------
US$250,000,001 to $500,000,000                                   5.5%                               6.5%
-----------------------------------------------------------------------------------------------------------------------
US$500,000,001 to $750,000,000                                   7.0%                               8.0%
-----------------------------------------------------------------------------------------------------------------------
US$750,000,001 to $1,000,000,000                                 7.5%                               9.0%
-----------------------------------------------------------------------------------------------------------------------
Over US$1,000,000,000                                            8.0%                               10.0%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

     No royalty shall accrue under this Section 6.4 on sales among IBP, its
Affiliates and Sublicensees, unless IBP or such Affiliate or Sublicensee is the
end user of a Product.  Royalties shall be payable only once for any given unit
of Product sold.

     IBP shall not be permitted to engage the services of any Third Parties to
whom royalties on Products would be payable with an offset pursuant to this
Section 6.4, unless (i) such services represented proprietary, enabling
technologies of the type that IBP was not reasonably capable of providing itself
(e.g., such services would not include medicinal chemistry services), (ii) IBP
provided Diversa with prior written notice at least [***] in advance of entering
into any such arrangement with a Third Party, and (iii) such notice specified
the name(s) of the Third Party/Parties, the services to be rendered, and the
royalty compensation requested by such Third Party/Parties.  In the event IBP is
obligated to pay to Third Parties royalties with respect to sales of Products
for such enabling technologies, IBP may offset against the royalties due to
Diversa under this Section 6.4, on a country-by-country basis and Product-by-
Product basis, up to [***] of all royalties due to such Third Parties for such
technologies; provided, however, that in no

----------
* CONFIDENTIAL TREATMENT REQUESTED

                                       27
<PAGE>

event shall the incremental royalties due to Diversa hereunder on Annual Net
Sales of a Product be reduced as a result to less than the corresponding minimum
percentages set forth under the column heading "Applicable Minimum Royalty to
Diversa" of the table above.

     6.5  Reports and Payments.

          6.5.1  All royalty payments under this Agreement shall be made to
Diversa or its designee quarterly within [***] after the end of the calendar
quarter for which royalties are due from IBP; provided that, for royalties due
to Diversa with respect to Net Sales of Products by IBP's Sublicensees, such
payment shall be due within [***] after IBP receives such royalties from such
Third Party, but in no event later than [***] after the end of such calendar
quarter. IBP shall, at the time of payment of such royalties deliver to Diversa
a report containing the following information:

                 (a)  Estimated gross sales and returns of Products by IBP, its
Affiliates and Sublicensees during the applicable Royalty Period in each country
of sale;

                 (b)  Adjustments and calculation of Net Sales for the
applicable Royalty Period in each country of sale; and

                 (c)  Calculation of royalty.

          6.5.2  All amounts payable under this Section will first be calculated
in the currency of sale and then converted into United States dollars. The
buying rates involved for the currency of the United States into which the
currencies involved are being exchanged shall be the arithmetic averages of the
ones quoted by the Western Edition of The Wall Street Journal at the close of
business on the last business day of each calendar month of the applicable
Royalty Period. In the event that such publication no longer publishes such
rates, another financial publication mutually agreed on by the Parties shall be
substituted or one shall be chosen by an investment banker/analyst mutually
agreed on by the Parties.

          6.5.3  Diversa shall pay any and all taxes levied on account of
royalties and other payments it receives under this Agreement. If laws or
regulations require that taxes be withheld, IBP will deduct such taxes from the
amount due to Diversa, pay such taxes to the proper tax authority, and send
evidence of the obligation together with proof of payment to Diversa promptly
after making such payment.

     6.6  Payments by IBP to Diversa.   All payments due under this Agreement
shall be payable in United States dollars. IBP shall make all payments to
Diversa by bank wire transfer in immediately available funds as follows, or as
otherwise specified by Diversa in writing:

                         [***]

     6.7  Records.   IBP and its Affiliates shall maintain complete and accurate
records of Products made, used or sold by them or their Sublicensees under this
Agreement, and any amounts payable to Diversa in relation to Products, which
records shall contain sufficient

----------
* CONFIDENTIAL TREATMENT REQUESTED

                                       28
<PAGE>

information to Diversa to confirm the accuracy of any reports delivered to them
in accordance with Section 6.5. IBP and its Affiliates shall retain such records
relating to a given Royalty Period for at least [***] after the conclusion of
that Royalty Period. Diversa (acting as the "Auditing Party") shall have the
right, at its own expense, to cause an independent certified public accountant
reasonably acceptable to IBP, to inspect such records of IBP or its Affiliates
(the "Audited Party") during normal business hours for the sole purpose of
verifying any reports and payments delivered under this Agreement. Such
accountant shall not disclose to the Auditing Party any information other than
information relating to accuracy of reports and payments delivered under this
Agreement and shall provide the Audited Party with a copy of any report given to
the Auditing Party. The Parties shall reconcile any underpayment or overpayment
within [***] after the accountant delivers the results of the audit. The
Auditing Party shall bear the full cost of the audit unless the audit performed
under this Section reveals an underpayment in excess of [***] in any Royalty
Period, in which case the Audited Party shall bear the full cost of such audit.
Diversa may exercise its rights under this Section [***] and only with
reasonable prior notice to IBP. IBP shall require that its Affiliates and its
Sublicensees shall have to obligation to account and provide records to IBP for
all their sales of Products as annual Net Sales by IBP.

     6.8  Late Payments.   In the event that any payment, including royalty
payments, due hereunder is not made within [***] of the date due, the payment
shall accrue interest from that date due at the rate of [***] per month;
provided however, that in no event shall such rate exceed the maximum legal
annual interest rate. The payment of such interest shall not limit Diversa from
exercising any other rights it may have as a consequence of the lateness of any
payment as set forth in Section 10.3, provided such exercise shall follow the
procedures set forth in such section.

7.   Confidential Information

     7.1  Definition of Confidential Information.   "Confidential Information"
shall mean any technical or business information furnished by the Disclosing
Party to the Receiving Party in connection with this Agreement, whether orally
or in writing. Such Confidential Information shall include, without limitation,
the existence and terms of this Agreement, information disclosed by one Party to
the other Party relating to the structure of a Compound, any gene encoding such
Compound, the use and manufacture of the Compound, any Compound Derivatives, any
Lead Compound, and any other compound in the Compound Set, Diversa Technology,
IBP Technology, trade secrets, know-how, inventions, technical data or
specifications, testing methods, business or financial information, research and
development activities, product and marketing plans, and customer and supplier
information, including, but not limited to, such information that become known
to a Party during visits to the facilities of the other Party. Notwithstanding
the foregoing, IBP shall solely own all data resulting from the clinical
development of Products, and all such data shall be deemed Confidential
Information of IBP.

     7.2  Obligations.   The Receiving Party agrees that it shall:

----------
* CONFIDENTIAL TREATMENT REQUESTED

                                       29
<PAGE>

          7.2.1  Maintain all Confidential Information in strict confidence,
except that the Receiving Party may disclose or permit the disclosure of any
Confidential Information to its, and its Affiliates, directors, officers,
employees, consultants and advisors who are obligated to maintain the
confidential nature of such Confidential Information and who need to know such
Confidential Information for the purposes set forth in this Agreement;

          7.2.2  Use all Confidential Information solely for the purposes set
forth in, or as permitted by, this Agreement; and

          7.2.3  Allow its Affiliates, directors, officers, employees,
consultants and advisors to reproduce the Confidential Information only to the
extent necessary to effect the purposes set forth in this Agreement, with all
such reproductions being considered Confidential Information.

     Each Party shall be responsible for any breaches of this Section 7.2. by
any of its Affiliates, directors, officers, employees, consultants and advisors.

     7.3  Exceptions.   The obligations of the Receiving Party under Section
7.2. above shall not apply to any specific Confidential Information to the
extent that the Receiving Party can demonstrate by competent proof that such
Confidential Information:

          7.3.1  Was generally known to the public or otherwise part of the
public domain prior to the time of its disclosure under this Agreement;

          7.3.2  Entered the public domain after the time of its disclosure
under this Agreement through means other than an unauthorized disclosure
resulting from an act or omission by the Receiving Party or its Affiliates,
directors, officers, employees, consultants, advisors or agents;

          7.3.3  Was already known to the Receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the Disclosing
Party; or

          7.3.4  Is or was disclosed to the Receiving Party at any time, whether
prior to or after the time of its disclosure under this Agreement, by a Third
Party having no fiduciary relationship with the Disclosing Party and having no
obligation of confidentiality to the Disclosing Party with respect to such
Confidential Information; or

          7.3.5  Is required to be disclosed to comply with applicable laws or
regulations (such as disclosure to the United States Securities and Exchange
Commission, the United States Environmental Protection Agency, the FDA, or the
United States Patent and Trademark Office or to their foreign equivalents), or
to comply with a court or administrative order, provided that the Disclosing
Party receives prior written notice of such disclosure and that the Receiving
Party takes all reasonable and lawful actions to obtain confidential treatment
for such disclosure and, if possible, to minimize the extent of such disclosure.

                                       30
<PAGE>

     7.4  Survival of Obligations.   The obligations set forth in Sections 7.1,
7.2 and 7.3 shall remain in effect after termination or expiration of this
Agreement for a period of [***].

     7.5  Public Announcement.   Upon the execution of this Agreement, the
Parties shall issue a joint press release that is mutually acceptable to both
Parties. Except for the information disclosed in such press release, neither
Party shall use the name of the other Party or reveal the existence of or terms
of this Agreement in any publicity or advertising without the prior written
approval of the other Party, except that (i) either Party may use the text of a
written statement approved in advance by both Parties without further approval,
and (ii) either Party shall have the right to identify the other Party and to
disclose the terms of this Agreement as required by applicable securities laws
or other applicable law or regulation, provided that the receiving Party takes
reasonable and lawful actions to minimize the degree of such disclosure.

     7.6  Publication.

          7.6.1  In the event a Party desires to publish or verbally disclose
the results of any of the research and development work performed hereunder, the
Parties shall cooperate in appropriate publication of the such results, but
subject to the predominating interest to obtain patent protection for any
patentable subject matter. To this end, prior to any public disclosure of such
results, the Party proposing disclosure shall send the other Party a copy of the
information to be disclosed, and shall allow the other Party [***] from the date
of receipt in which to determine whether the information to be disclosed
contains subject matter for which patent protection should be sought prior to
disclosure, or otherwise contains Confidential Information of the reviewing
Party. The Party proposing disclosure shall be free to proceed with the
disclosure unless prior to the expiration of such [***] period the reviewing
Party notifies the Party proposing disclosure that the disclosure contains
subject matter for which patent protection should be sought or Confidential
Information of the reviewing Party, and the Party proposing publication shall
then delay public disclosure of the information for an additional period to be
mutually agreed not to exceed [***] from the time that such information was
available to the other Party to permit the preparation and filing of a patent
application on the subject matter to be disclosed or for the Parties to
determine a mutually acceptable modification to such publication to protect the
Confidential Information of the reviewing Party adequately. Notwithstanding the
foregoing, either Party may publish any Confidential Information owned by the
other Party without the express written permission of such other Party. The
Party proposing disclosure shall thereafter be free to publish or disclose the
information. The determination of authorship for any paper shall be in
accordance with accepted scientific practice.

          7.6.2  Notwithstanding Section 7.6.1, IBP shall have the right to
publish any data, results, or other information originating from any clinical
trials related to any compound within a Compound Set or Product after the
Research Period.

8.   Representations, Warranties, and Disclaimers

     8.1  Organization; Good Standing.   Each Party hereby represents to the
other Party on the Effective Date and thereafter throughout the Term that, to
the best of its knowledge, it (a)

----------
* CONFIDENTIAL TREATMENT REQUESTED

                                       31
<PAGE>

is a corporation duly organized, validly existing, (b) is in good standing under
the laws of the jurisdiction of its incorporation, (c) is qualified to do
business and in good standing in each jurisdiction in which the performance of
its obligations hereunder requires such qualification and (d) has all requisite
power and authority, corporate or otherwise, and the legal right to conduct its
business as now being conducted, to own, lease and operate its properties and to
execute, deliver and perform under this Agreement.

     8.2  Binding Obligation; Due Authorization; No Conflict.   Each Party
hereby represents to the other Party on the Effective Date and thereafter
throughout the Term that, to the best of its knowledge, this Agreement is a
legal and valid obligation binding upon its execution and enforceable in
accordance with its terms and conditions. The execution, delivery and
performance of this Agreement by such Party have been duly authorized by all
necessary corporate action, and the person executing this Agreement on behalf of
such Party has been duly authorized to do so by all requisite corporate actions
and do not and will not (a) require any consent or approval of its stockholders
or any Third Party or (b) conflict with, or constitute a material breach or
violation of, any agreement, instrument, understanding, oral or written, to
which it is a party or by which it may be bound, and any judgment of any court
or governmental body applicable to such a Party or (c) violate any law, decree,
order, rule or regulation of any court, governmental body or administrative or
other agency having authority over it.

     8.3  No Suit.   Each Party hereby represents to the other Party on the
Effective Date and thereafter throughout the Term, that it is aware of no
action, suit or inquiry or investigation contemplated or instituted by any Third
Party that questions or threatens the validity of this Agreement.

     8.4  Title to Intellectual Property Rights.   Each Party hereby represents
to the other Party that it has sufficient legal and beneficial title under its
intellectual property rights necessary for the purposes contemplated under this
Agreement and to grant the licenses contained in this Agreement.

     8.5  No Violations of Third Party Intellectual Property Rights.   Each
Party hereby represents to the other Party, it is not aware of any material
communications alleging that it has violated or, by conducting its obligations
or the Work Plan as currently proposed under this Agreement, it would violate
any of the intellectual property rights of any Third Party.

     8.6  No Unauthorized Use Necessary.   Each Party hereby represents to the
other Party, there is no material unauthorized use, infringement or
misappropriation of any of its Patent Rights, copyrights, trademarks, trade
secret rights and know-how rights necessary or useful to perform the R&D Program
as provided in the Work Plan.

     8.7  Proper Assignment of Inventions.   Each Party hereby represents to the
other Party that all of its employees, officers and consultants have executed
agreements requiring assignment to the Party of all inventions made during the
course of and as a result of their association with such Party and obligating
the individual to maintain as confidential the Confidential Information of such
Party.

                                       32
<PAGE>

     8.8  Disclaimers.   Each Party hereby acknowledges that the data and any
materials to be provided to such Party by the other Party under this Agreement
will be of an experimental nature, provided without warranties, and neither
Party shall accept any liability in connection with their use, storage and
disposal by the other Party.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER PARTY OF ANY
KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF NON-
INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR NON-
INFRINGEMENT.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH PARTY
ACKNOWLEDGES THAT THIS AGREEMENT PROVIDES FOR AN INNOVATIVE PROGRAM USING NEW
TECHNOLOGIES AND THAT NO WARRANTY IS MADE REGARDING THE SUCCESS OF ANY RESEARCH
DONE PURSUANT TO THIS AGREEMENT OR THE UTILITY OF ANY INFORMATION, MATERIALS OR
TECHNOLOGY PROVIDED HEREUNDER.  EACH PARTY EXPRESSLY DISCLAIMS ALL WARRANTIES AS
TO THE VALIDITY OR SCOPE OF PATENTS AND PATENT CLAIMS, ISSUED AND PENDING,
PROTECTING ITS TECHNOLOGY OR THAT ANY TECHNOLOGY WILL BE FREE FROM INFRINGEMENT
OF PATENTS OR PROPRIETARY RIGHTS OF THIRD PARTIES, OR THAT NO THIRD PARTIES ARE
IN ANY WAY INFRINGING PATENT RIGHTS.

     8.9  Limitation of Liability.   IN NO EVENT WILL EITHER PARTY, ITS
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR AFFILIATES BE LIABLE TO THE OTHER
PARTY FOR ANY INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES,
WHETHER BASED UPON A CLAIM OR ACTION OF CONTRACT, WARRANTY, NEGLIGENCE, STRICT
LIABILITY OR OTHER TORT, OR OTHERWISE, ARISING OUT OF THIS AGREEMENT.

9.   Indemnification

     9.1  Indemnification.

          9.1.1  IBP shall indemnify, defend, and hold harmless Diversa and its
Affiliates and their directors, officers, employees, and agents and their
respective successors, heirs and assigns, against any liability, damage, loss,
or expense incurred by or imposed upon such persons or any one of them in
connection with any claims, settlements, suits, actions, demands, or judgments
arising out of any theory of product liability (including, but not limited to,
actions in the form of tort, warranty, or strict liability) concerning any
Compound, Compound Set, Compound Derivative or Product (or any process or
service) that is made, used, marketed, or sold by IBP or its Affiliates or
Sublicensees pursuant to any right or license granted under this Agreement;
provided, however, that such indemnification right shall not apply to any
liability, damage, loss, or expense to the extent directly attributable to the
negligence, reckless misconduct, or intentional misconduct of a party seeking
indemnification under this Section 9.1.1. None of Diversa and its Affiliates and
their directors, officers, employees, and agents and their respective
successors, heirs and assigns shall be entitled to indemnification for the
settlement of any claim pursuant to this Agreement unless it obtains the prior
written consent of IBP to such settlement.

                                       33
<PAGE>

          9.1.2  Diversa shall indemnify, defend, and hold harmless IBP and its
Affiliates and their directors, officers, employees, and agents and their
respective successors, heirs and assigns, against any liability, damage, loss,
or expense incurred by or imposed upon such persons or any one of them in
connection with any claims, settlements, suits, actions, demands, or judgments
arising out of any theory of product liability (including, but not limited to,
actions in the form of tort, warranty, or strict liability) concerning any
Compound, Compound Set, Compound Derivative or Product (or any process or
service) that is made, used, marketed, or sold by Diversa or its Affiliates or
Sublicensees pursuant to any right or license granted under this Agreement;
provided, however, that such indemnification right shall not apply to any
liability, damage, loss, or expense to the extent directly attributable to the
negligence, reckless misconduct, or intentional misconduct of a party seeking
indemnification under this Section 9.1.2. None of Diversa and its Affiliates and
their directors, officers, employees, and agents and their respective
successors, heirs and assigns shall be entitled to indemnification for the
settlement of any claim pursuant to this Agreement unless it obtains the prior
written consent of IBP to such settlement.

     9.2  Procedures.   Any party (an "Indemnitee") that intends to claim
indemnification under Section 9.1 shall promptly notify either Diversa or IBP,
as applicable (the "Indemnitor"), of any claim in respect of which the intends
to claim such indemnification, and the Indemnitor shall assume the defense
thereof with counsel mutually satisfactory to the Parties; provided, however,
that an Indemnitee shall have the right to retain its own counsel, with the fees
and expenses of no more than the law firm representing all Indemnitees in the
proceeding or related proceeding, to be paid by the Indemnitor, if
representation of such Indemnitee by the counsel retained by the Indemnitor
would be inappropriate due to actual or potential differing interests between
such Indemnitee and any other Party represented by such counsel in such
proceedings. The indemnity agreement in Section 9.1 shall not apply to amounts
paid in settlement of any loss, claim, liability or action if such settlement is
effected without the consent of the Indemnitor. The failure to deliver notice to
the Indemnitor within a reasonable time after the commencement of any such
action, shall not relieve the Indemnitor of any liability to the Indemnitee
under Section 9.1, except to the extent the Indemnitor has been prejudiced by
such failure to give notice. Each Party and its Affiliates and their employees
and agents shall cooperate fully with the other Party and its legal
representatives in the investigation of any action, claim or liability covered
by this indemnification.

10.  Term and Termination

     10.1  Term.   The term of this Agreement will commence as of the Effective
Date of this Agreement and, unless sooner terminated as provided hereunder, will
expire on the later of (i) the last day of the Research Period (which is three
years from the Effective Date, unless extended by mutual agreement by the
Parties in accordance with this Agreement) or (ii) the expiration of the last
License granted hereunder with respect to a Compound Set; provided, however,
that by mutual written agreement of the Parties, the Research Period may be
extended for successive one-year periods on each anniversary of the Effective
Date, beginning with the


                                       34
<PAGE>

third anniversary of the Effective Date. Any extension of the Research Period
shall be exercised at least [***] before the term of the Research Period would
otherwise expire.

     10.2  Mutual Consent.   This Agreement may be terminated at any time by
mutual written agreement of the Parties.

     10.3  Default.

           10.3.1  Notice of Default.   In the event any material representation
or warranty made hereunder by either Party shall be untrue ("Representation
Default") or upon any breach or default of a material obligation of this
Agreement by a Party ("Performance Default"), the Party not in Default ("Non-
Defaulting Party") must first give the other Party ("Defaulting Party") written
notice thereof ("Notice of Default"), which notice must state the nature of the
untruthfulness, breach or default in reasonable detail and request the
Defaulting Party cure such Default within [***].

           10.3.2  Termination for Default.   Subject to Section 4.5, the Non-
Defaulting Party may, in addition to any other remedies which may be available
to such Non-Defaulting Party at law or equity, terminate this Agreement in the
event of (a) a Representation Default by the Defaulting Party or (b) a
Performance Default by the Defaulting Party; that has not been cured within
[***] after receipt of a Notice of Default; or, if such Performance Default
cannot be cured within such [***] period, and the Defaulting Party shall have
failed to commence substantial remedial actions within such [***] period and to
diligently pursue the same. Notwithstanding the foregoing, if a Representation
or Performance Default is not curable by its nature, the Non-Defaulting Party
may immediately terminate this Agreement with a Notice of Default to the
Defaulting Party.

           10.3.3  Breach of Payment Obligations.   Notwithstanding the
foregoing, in the event that IBP fails to make timely payment of any amounts due
under this Agreement within [***] after demand therefor, Diversa may terminate
this Agreement upon [***] prior written notice, unless IBP cures such breach by
paying all past-due amounts that are not the subject of a good-faith dispute
between the Parties within such [***] notice period, provided that IBP shall be
entitled to use such cure provision no more than once in any twelve (12) month
period.

     10.4  Bankruptcy.

           10.4.1  A Party may terminate this Agreement if, during the Term, the
other Party shall file in court or agency pursuant to any statute or regulation
of any state or country, a petition in bankruptcy or insolvency or for
reorganization or for an arrangement or for the appointment of a receiver or
trustee of the Party or of its assets, or if the other Party proposes a written
agreement of composition or extension of its debts, or if the other Party shall
be served with an involuntary petition in bankruptcy or seeking reorganization,
liquidation, dissolution, winding-up arrangement, composition or readjustment of
its debts or any other relief under any bankruptcy, insolvency, reorganization
or other similar act or law of any jurisdiction now or hereafter in effect, or
there shall have been issued a warrant of attachment, execution or similar

----------
* CONFIDENTIAL TREATMENT REQUESTED

                                       35
<PAGE>

process against it, filed in any insolvency proceeding, and such petition shall
not be dismissed within ninety (90) days after the filing thereof, or if the
other Party shall propose or be a Party to any dissolution or liquidation, or if
the other Party shall make an assignment for the benefit of creditors.

           10.4.2  All rights and licenses granted under or pursuant to this
Agreement are, and shall otherwise be deemed to be, for purposes of Section
365(n) of the U.S. Bankruptcy Code, licenses of rights to "intellectual
property" as defined under Section 101 of the U.S. Bankruptcy Code. The Parties
agree that each Party that is a licensee of such rights under this Agreement
shall retain and may fully exercise its 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,
within [***] of the commencement of such proceeding, delivered to them (i) upon
any such commencement of a bankruptcy proceeding upon their written request
therefore, unless the Party subject to such proceeding (or a trustee on behalf
of the subject Party) elects to continue to perform all of their obligations
under this Agreement or (ii) if not delivered under (i) above, upon the
rejection of this Agreement by or on behalf of the Party subject to such
proceeding upon written request therefore by the non-subject Party.

     10.5  Disposition of Confidential Information.   In the event of
termination or expiration of this Agreement, the Parties shall return or destroy
all forms of Confidential Information provided to them under this Agreement,
within [***] after such termination or expiration, provided, however, that each
Party may retain one copy of such Confidential Information for the sole purpose
of use in any litigation resulting from this Agreement or the activities
undertaken pursuant to this Agreement and further provided, that if Diversa is
the breaching Party, IBP may retain Compound Set, if any, pursuant to the
Licenses granted pursuant to Section 4.

     10.6  Effect of Termination or Expiration.   Termination or expiration of
this Agreement shall not relieve the Parties of any obligation accruing prior to
such termination or expiration and shall not terminate any License granted prior
to such termination or expiration. Except as otherwise provided herein, the
provisions of Sections 5.1.1, 5.6, 7.1, 7.2, 7.3, 7.4, 7.6, 8.8, 8.9, 10.5 and
Articles 1, 9, 11, and 12 shall survive the expiration or termination of this
Agreement, and the provisions of Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.7,
4.8, 4.9, 6.3, 6.4, 6.5, 6.6, 6.7, and 6.8 shall survive the termination of this
Agreement with respect to any License granted prior to such termination.
Termination of this Agreement pursuant to Section 10.3 shall not limit any other
rights and remedies of the terminating Party.

11.  Dispute Resolution

     11.1  Informal Dispute Resolution.   In the event that a controversy, claim
or dispute arises under this Agreement (each, a "Dispute") between the Parties,
either Party may, by written

----------
* CONFIDENTIAL TREATMENT REQUESTED

                                       36
<PAGE>

notice to the other Party, have such Dispute referred to the Chief Executive
Officer of Diversa and the Chief Executive Officer of IBP, or their successors
or counterparts (the "Senior Executives"), for resolution by good faith
negotiations at a mutually convenient location and time within [***] after such
notice is received. If the Parties are unable to reach agreement with respect to
a Dispute between the Parties pursuant to this Section 11.1, then such Dispute
shall be resolved as described in Section 11.2.

     11.2  Mediation.   If the Dispute is not resolved within [***] after
referral under Section 11.1, or such other time as mutually agreed upon in
writing by the Parties, the Parties shall submit the matter to non-binding
mediation to be administered by the Judicial Arbitration and Mediation Services,
Inc. (the "JAMS") under its rules governing mediation in effect at such time
(the "Mediation Rules"). The Party desiring such mediation shall initiate it in
accordance with the Mediation Rules of JAMS. Upon delivery of the mediation
request, the Parties shall endeavor in good faith to select a neutral mediator
who is acceptable to each Party. If the Parties have not selected a mutually
acceptable neutral mediator within five (5) business days after delivery of the
mediation request, they shall notify the JAMS and request JAMS to appoint a
mediator in accordance with the Mediation Rules. Unless otherwise agreed upon by
the Parties, all mediation sessions shall be held at the JAMS regional office
within California. The Parties shall endeavor in good faith to resolve the
Dispute through the mediation process contemplated by this Section and neither
Party shall be entitled unilaterally to terminate the mediation prior to [***]
after the appointment of a mediator. Upon any termination of such mediation
proceeding by either Party after such [***] period, the Parties may submit the
Dispute to the appropriate court of law pursuant to Section 11.3.

     11.3  Court of Law.   Any Dispute under this Agreement that is not settled
pursuant to Sections 11.1 or 11.2 shall be finally decided in the appropriate
court of law or equity. Except as otherwise expressly provided in this
Agreement, the costs of such legal action, including court fees, shall be borne
equally by the Parties and each Party shall bear its own costs and attorneys'
and witness' fees incurred in connection with the litigation.

     11.4  Confidentiality.   The Parties hereby mutually agree that the
existence, terms, content and decision of any Dispute resolution pursuant to
Section 11.1 or 11.2, as well as all information or documents relating thereto,
shall be maintained in confidence and not be given, shown, disclosed to or
discussed with any Third Party, except (a) by prior written agreement of both
Parties; (b) during any legal proceeding to protect or secure a Party's rights
under such Dispute resolution; (c) to counsel and accountants who shall agree to
maintain its confidentiality; (d) to the extent required by applicable reporting
requirements; and (e) upon compulsory legal process.

12.  Miscellaneous

     12.1  Relationship of Parties.   It is expressly agreed that Diversa and
IBP shall be independent contractors and that nothing in this Agreement is
intended or shall be deemed to constitute a partnership, agency,
distributorship, employer-employee or joint venture relationship

----------
* CONFIDENTIAL TREATMENT REQUESTED

                                       37
<PAGE>

between the Parties. No Party shall incur any debts or make any commitments for
the other, except to the extent, if at all, specifically provided herein.

     12.2  Governing Law.   This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to those
provisions governing conflicts of law.

     12.3  Binding Effect.   This Agreement and all rights and obligations
hereunder shall inure to the benefit of and be binding upon the Parties, their
Affiliates, and their respective lawful successors and assigns (including,
without limitation, any successor to a Party upon a Change of Control).

     12.4  Assignment.   Except as otherwise provided herein, neither this
Agreement nor any interest hereunder will be 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 any of its Affiliates or
to any successor by merger or sale of substantially all of its business to which
this Agreement relates (provided that, in the event of such merger or sale, no
intellectual property of any acquiring corporation that is not a Party on the
Effective Date shall be included in the technology licensed hereunder). This
Agreement will be binding upon the successors and permitted assigns of the
Parties. Any assignment which is not in accordance with this Section shall be
void.

     12.5  Notices.   All notices, requests, demands and other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be deemed to have been duly given upon the date of receipt if
delivered by hand, recognized international overnight courier or confirmed
facsimile transmission to the following addresses or facsimile numbers:

If to IBP:                                                If to Diversa:

[***]                                                     [***]

With a copy to:                                           with a copy to:

[***]                                                     [***]

     Either Party may change its designated address and facsimile number by
notice to the other Party in the manner provided in this Section.

     12.6  Exports.   The Parties acknowledge that the export of technical data,
materials or Products is subject to the exporting Party receiving any necessary
export licenses and that the Parties cannot be responsible for any delays
attributable to export controls which are beyond the reasonable control of
either Party.  Diversa and IBP agree not to export or re-export, directly or
indirectly, any information, technical data, the direct product of such data,
samples, Products or equipment received or generated under this Agreement in
violation of any applicable export

----------
* CONFIDENTIAL TREATMENT REQUESTED

                                       38
<PAGE>

control laws or governmental regulations. Diversa and IBP agree to obtain
similar covenants from their licensees, Sublicensees and contractors with
respect to the subject matter of this paragraph.

     12.7  Amendment and Waiver.   This Agreement may be amended, supplemented,
or otherwise modified only by means of a written instrument signed by both
Parties. Any waiver of any rights or failure to act in a specific instance shall
relate only to such instance and shall not be construed as an agreement to waive
any rights or fail to act in any other instance, whether or not similar.

     12.8  Severability.   In the event that any provision of this Agreement
shall, for any reason, be 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 the Agreement to
preserve (to the extent possible) their original intent.

     12.9  Third Parties.   Nothing in this Agreement, express or implied, is
intended to confer upon any Party, other than the Parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.

     12.10 Entire Agreement.   Subject to any applicable provisions of the
Confidential Disclosure Agreement between the Parties executed on July 17, 2000,
that do not contradict the terms of this Agreement, this Agreement and the
exhibits hereto constitute the entire agreement between the Parties with respect
to the subject matter hereof and supersede all prior and contemporaneous
agreements, representations, and understandings of the Parties.  No Party hereto
shall be liable or bound to the other in any manner by any warranties,
representations or covenants with respect to the subject matter hereof except as
specifically set forth herein.

     12.11 Regulatory Filings.   IBP shall have sole responsibility for making
all regulatory filings worldwide, including, without limitation, all filings
required by the Biodiversity Convention and other legislation related to the
ownership or use of biological resources, and obtaining the necessary approvals
to market Products. Diversa will cooperate to provide information required to
make and maintain such filings, as appropriate.

     12.12 Force Majeure.   Neither Party shall be held liable or responsible to
the other Party, nor be deemed to be in breach of this Agreement, for failure or
delay in fulfilling or performing any provisions of this Agreement (other than
payment obligations) when such failure or delay is caused by or results from any
cause whatsoever outside the reasonable control of the Party concerned
including, but not limited to, fire, explosion, breakdown of plant, damage to
plant material by pests or otherwise, strike, lock-out, labor disputes, casualty
or accident, lack or failure of transportation facilities, flood, lack or
failure of sources of supply or of labor, raw materials or energy, civil
commotion, embargo, any law, regulation, decision, demand or requirement of any
national or local government or authority.  The Party claiming relief shall,
without delay, notify the other Party by registered airmail or by telefax of the
interruption and cessation thereof and shall use its best efforts to remedy the
effects of such hindrance with all reasonable dispatch.  The onus of proving
that any such Force Majeure event exists shall rest upon the Party so asserting.
During the period that one Party is prevented from performing its obligations
under this Agreement due to a Force Majeure event, the other Party may, in its
sole

                                       39
<PAGE>

discretion, suspend any obligations that relate thereto. Upon cessation of such
Force Majeure event the Parties hereto shall use their best efforts to make up
for any suspended obligations. If such Force Majeure event is anticipated to
continue, or has existed for nine (9) consecutive months or more, this Agreement
may be forthwith terminated by either Party by registered airmail or by telefax.
In case of such termination the terminating Party will not be required to pay to
the other Party any indemnity whatsoever.

     12.13 Withholding.   To the extent any Party is required by law to withhold
or to make tax payments on behalf of or with respect to the other Party, the
first Party may withhold such amounts and make such tax payments as so required.
For purposes of this Agreement, any such payments or withholdings shall be
treated as a payment to Party on behalf of whom the withholding or payment was
made.

     12.14 No Trademark Rights.   Except as otherwise provided herein or agreed
to in advance in writing, no right, express or implied, is granted by this
Agreement to use in any manner the names "IntraBiotics" or "Diversa," or any
other trade name or trademark of a Party or the names of any employees thereof,
for any purpose other than for the Parties' own internal purposes.

     12.15 Counterparts.   This Agreement may be executed via facsimile and in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument, and shall become
effective when there exist copies hereof which, when taken together, bear the
authorized signatures of each of the Parties hereto. Only one such counterpart
signed by the Party against whom enforceability is sought needs to be produced
to evidence the existence of this Agreement.

     12.16 Titles and Subtitles; Form of Pronouns; Construction and Definitions.
The titles of the sections and paragraphs of this Agreement are for convenience
only and are not to be considered in construing this Agreement.  All pronouns
used in this Agreement shall be deemed to include masculine, feminine and neuter
forms, the singular number includes the plural and the plural number includes
the singular.  Unless the context otherwise requires, the term "including" shall
mean "including, without limitation."

     In Witness Whereof, the undersigned have duly executed and delivered this
Agreement as a sealed instrument effective as of the date first above written.


                              DIVERSA CORPORATION


                              By:/s/ Jay M. Short
                                 ----------------
                              Name:  Jay M. Short, Ph.D.
                              Title:  President and Chief Executive Officer


                              INTRABIOTICS PHARMACEUTICALS, INC


                              By:/s/ Kenneth J. Kelley
                                 ---------------------
                              Name:  Kenneth J. Kelley
                              Title:  Chairman and Chief Executive Officer

                                       40