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                                                                  EXHIBIT 10.1.2

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE
OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND
QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED.

                        APPLIED MOLECULAR EVOLUTION, INC.

                                 1992 STOCK PLAN

                             STOCK OPTION AGREEMENT

        Applied Molecular Evolutions, Inc., a Delaware corporation (the
"Company"), hereby grants an Option to the Optionee named below to purchase
shares of its common stock (par value $.001) ("Common Stock") of the Company.
The terms and conditions of the Option are set forth in this Stock Option
Agreement and in the Company's 1992 Stock Plan, as amended April 7, 2000 (the
"Plan"). Unless otherwise defined herein, capitalized terms used in the Stock
Option Agreement shall have the same meaning as in the Plan.

I.      GRANT INFORMATION

Date of Grant:                      __________, 20___

Name of Optionee:                   ____________________________________________

Optionee's Social Security Number:  ________-______-________

Type of Option:                     __ Incentive ("ISO")

                                    __ Nonstatutory ("NSO")

Number of Shares of Common Stock Covered by the Option: ____________

Exercise Price per Share:           $__________

Time of Exercise:                   The option may be Exercised at the time
                                    indicated below:

                                    [ ]   Anytime after date of grant ("Early
                                          Exercise")

                                    [ ]   At the time and to the extent rights
                                          under the option have vested

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                                    [ ]   Other ________________________________

Vesting Start Date:                 __________, 20__

Vesting Schedule:                   [Subject to attached Terms and Conditions,
                                    the Option shall vest as follows:
                                    Twenty-five percent (25%) of the shares of
                                    Common Stock subject to this Option will
                                    vest one (1) year from the Vesting Start
                                    Date (as shown on the first page of this
                                    Option). No portion of this Option will vest
                                    until the Optionee has complete one year of
                                    Service. Thereafter, the remaining
                                    seventy-five percent (75%) of the shares of
                                    Common Stock subject to this Option will
                                    vest monthly at a rate of 2.08333% of the
                                    total shares of Common Stock subject to this
                                    Option (rounded to the nearest whole number)
                                    such that 100% of the shares of Common Stock
                                    shall vest four years after the Vesting
                                    Start Date.]

        BY SIGNING BELOW, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED
        IN THIS STOCK OPTION AGREEMENT, INCLUDING THE ATTACHED TERMS AND
        CONDITIONS, NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT AND
        THE PLAN.

Optionee:
            --------------------------------------------------------------------
                                   (Signature)

Company:
            --------------------------------------------------------------------
                                   (Signature)

Title:
            --------------------------------------------------------------------

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II.     TERMS AND CONDITIONS

        1. VESTING. During your Service to the Company, your Option vests on the
dates specified in the Vesting Schedule in Section I of this Stock Option
Agreement. Vesting will cease if your Service terminates for any reason.
Notwithstanding the above, one hundred percent (100%) of the shares of Common
Stock covered by this option shall become vested upon a Change in Control.

        2. EXERCISE OF OPTION BEFORE VESTING ("EARLY EXERCISE"). To the extent
indicated in Section I of this Agreement, you may exercise your Option before it
is fully vested, and the vesting provisions set forth in the Vesting Schedule of
this Stock Option Agreement will apply to the Common Stock you acquire by
exercising your Option. IF YOU EXERCISE THIS OPTION BEFORE VESTING, YOU SHOULD
CONSIDER MAKING AN ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "83(b) ELECTION"), A FORM OF WHICH IS ATTACHED AS EXHIBIT
E. PLEASE SEE THE TAX SUMMARY ATTACHED AS EXHIBIT F. THE 83(b) ELECTION MUST BE
FILED WITHIN THIRTY (30) DAYS AFTER THE DATE YOU EXERCISE ALL OR ANY PORTION OF
YOUR OPTION IN WHICH YOU ARE NOT VESTED.

        3. SERVICE; LEAVES OF ABSENCE. Your Service shall cease when you cease
to be actively employed by, or a consultant or adviser to, the Company (or any
subsidiary) as determined in the sole discretion of the Board. For purposes of
your Option, your Service does not terminate when you go on a bona fide leave of
absence, that was approved by the Company in writing, if the terms of the leave
provide for continued service crediting, or when continued service crediting is
required by applicable law. However, for purposes of determining whether your
Option is entitled to ISO status, your Service will be treated as terminating
ninety (90) days after you went on leave, unless your right to return to active
work is guaranteed by law or by a contract. Your Service terminates in any event
when the approved leave ends, unless you immediately return to active work. The
Company determines which leaves count toward Service, and when your Service
terminates for all purposes under the Plan.

        4. TERM OF OPTION. Your Option expires on the day before the 10th
anniversary of the Date of Grant (fifth anniversary for a 10% owner), and will
expire earlier if your Service terminates as follows:

                (a) REGULAR TERMINATION. If your Service terminates for any
        reason except Cause, death or Total and Permanent Disability, then your
        Option will expire at the close of business at Company headquarters on
        the date three (3) months after your Service terminates. During that
        three-(3)-month period, you may exercise that portion of your Option
        that was vested on the date that your Service terminated.

                (b) CAUSE. If your Service terminates for Cause, your Option
        will expire immediately.

                For purposes of this Section 4(b), "Cause" means (i) continued
        failure to perform substantially your duties, which standard of duties
        shall be referenced to the standards set by the Company at the date of
        this Agreement (other than as a result of sickness, accident

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        or similar cause beyond your reasonable control) after receipt of a
        written warning and given thirty (30) days to improve, (ii) willful and
        material misconduct, which is demonstrably and materially injurious to
        the Company or any of its subsidiaries, including willful and material
        failure to perform your duties as an officer or employee of the Company
        or any of its subsidiaries or a material breach of this Agreement, (iii)
        conviction of or plea of nolo contendere to a felony; (iv) conviction of
        an act of fraud against, or the misappropriation of property belonging
        to the Company or any of its subsidiaries, or any employee, customer, or
        supplier of the Company or any of its subsidiaries.

                (c) DEATH. If you die while in Service, then your Option will
        expire at the close of business at Company headquarters on the date six
        (6) months after the date of death. During that six-(6)-month period,
        your estate or heirs may exercise that portion of your Option that was
        vested on the date of death.

                (d) TOTAL AND PERMANENT DISABILITY. If your Service terminates
        because of your Total and Permanent Disability, then your Option will
        expire at the close of business at Company headquarters on the date six
        (6) months after your Service terminates. During that six-(6)-month
        period, you may exercise that portion of your Option that was vested on
        the date of your Total and Permanent Disability.

        5. EXERCISE OF OPTION.

                (a) LEGAL RESTRICTIONS. By signing this Agreement, you agree not
        to exercise this Option or sell any Common Stock acquired upon exercise
        of this Option at a time when applicable laws, regulations or Company or
        underwriter trading policies prohibit exercise or sale. In particular,
        the Company shall have the right to designate one or more periods of
        time, each of which shall not exceed 180 days in length, during which
        this Option shall not be exercisable if the Company determines (in its
        sole discretion) that such limitation on exercise could in any way
        facilitate a lessening of any restriction on transfer pursuant to the
        Securities Act or any state securities laws with respect to any issuance
        of securities by the Company, facilitate the registration or
        qualification of any securities by the Company under the Securities Act
        or any state securities laws, or facilitate the perfection of any
        exemption from the registration or qualification requirements of the
        Securities Act or any applicable state securities laws for the issuance
        or transfer of any securities. Such limitation on exercise shall not
        alter the vesting schedule set forth in this Agreement other than to
        limit the periods during which this Option shall be exercisable.

                If the sale of Common Stock under the Plan is not registered
        under the Securities Act of 1933, as amended (the "Securities Act"), but
        an exemption is available which requires an investment or other
        representation, you shall represent and agree at the time of exercise
        that the Common Stock being acquired upon exercise of this Option are
        being acquired for investment, and not with a view to the sale or
        distribution thereof, and shall

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        make such other representations as are deemed necessary or appropriate
        by the Company and its counsel.

                (b) METHOD OF EXERCISE. To exercise your Option, you must
        execute the Notice of Exercise and Common Stock Purchase Agreement,
        attached hereto as Exhibit A. If you exercise your option prior to
        vesting, you must also execute the Joint Escrow Instructions and an
        Assignment Separate from Certificate, attached hereto as Exhibits B and
        C, respectively. You must submit the form(s), together with full
        payment, at the address given on the form(s). Your exercise will be
        effective when the Company receives it. If someone else wants to
        exercise your Option after your death, that person must prove to the
        Company's satisfaction that he or she is entitled to do so.

                (c) FORM OF PAYMENT. When you submit Exhibit A, you must include
        payment of the aggregate Exercise Price for the Common Stock you are
        purchasing. Payment may be made in one (or a combination) of the
        following forms.

                ~       Your personal check, a cashier's check or a money order.

                ~       Shares of Common Stock which you have owned for six
                        months and which are surrendered to the Company. The
                        value of such Common Stock, determined as of the
                        effective date of the Option exercise, will be applied
                        to the Exercise Price.

                ~       To the extent that a public market for Common Stock
                        exists as determined by the Company, by delivery (on a
                        form approved by the Company) of an irrevocable
                        direction to a securities broker to sell Common Stock
                        and to deliver all or part of the sale proceeds to the
                        Company in payment of the aggregate Exercise Price.

                ~       Any other form of legal consideration approved by the
                        Board.

                (d) WITHHOLDING TAXES. You will not be allowed to exercise your
        Option unless you make acceptable arrangements to pay any withholding or
        other taxes that may be due as a result of the Option exercise or the
        sale of Common Stock acquired upon exercise of your Option.

        6. RESALE RESTRICTIONS/MARKET STAND-OFF. In connection with any
underwritten public offering by the Company of its equity securities pursuant to
an effective registration statement filed under the Securities Act, including
the Company's initial public offering, you shall not, directly or indirectly,
engage in any transaction prohibited by the underwriter, nor shall you sell,
make any short sale of, contract to sell, transfer the economic risk of
ownership in, loan, hypothecate, pledge, grant any option for the purchase of,
or otherwise dispose or transfer for value or agree to engage in any of the
foregoing transactions with respect to any Common Stock without the prior
written consent of the Company or its underwriters, for such period of time
after the effective date of such registration statement as may be requested by
the Company or such underwriters. Such period of time shall not exceed one
hundred eighty (180) days and may

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be required by the underwriter as a market condition of the offering. By signing
this Agreement you agree to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent with
the foregoing or which are necessary to give further effect thereto. To enforce
the provisions of this paragraph, the Company may impose stop-transfer
instructions with respect to the Common Stock until the end of the applicable
stand-off period.

        7. RIGHT OF FIRST REFUSAL. If you propose to sell, pledge or otherwise
transfer to a third party any Common Stock acquired under this Stock Option
Agreement, or any interest in such Common Stock, the Company shall have the
"Right of First Refusal" with respect to all (and not less than all) of such
Common Stock. If you desire to transfer Common Stock acquired under this Stock
Option Agreement, you must give a written "Transfer Notice" to the Company
describing fully the proposed transfer, including the number of shares proposed
to be transferred, the proposed transfer price and the name and address of the
proposed transferee. The Transfer Notice shall be signed both by you and by the
proposed transferee and must constitute a binding commitment of both parties to
the transfer of the Common Stock. The Company shall have the right to purchase
all, and not less than all, of the Common Stock on the terms of the proposal
described in the Transfer Notice (subject, however, to any change in such terms
permitted in the next paragraph) by delivery of a notice of exercise of the
Right of First Refusal within thirty (30) days after the date when the Transfer
Notice was received by the Company.

        If the Company fails to exercise its Right of First Refusal before or
within thirty (30) days after the date when it received the Transfer Notice, you
may, not later than ninety (90) days following receipt of the Transfer Notice by
the Company, conclude a transfer of the Common Stock subject to the Transfer
Notice on the terms and conditions described in the Transfer Notice. Any
proposed transfer on terms and conditions different from those described in the
Transfer Notice, as well as any subsequent proposed transfer by you, shall again
be subject to the Right of First Refusal and shall require compliance with the
procedure described in the paragraph above. If the Company exercises its Right
of First Refusal, the parties shall consummate the sale of the Common Stock on
the terms set forth in the Transfer Notice within sixty (60) days after the date
when the Company received the Transfer Notice (or within such longer period as
may have been specified in the Transfer Notice); provided, however, that if the
Transfer Notice provided that payment for the Common Stock was to be made in a
form other than lawful money paid at the time of transfer, the Company shall
have the Option of paying for the Common Stock with lawful money equal to the
present value of the consideration described in the Transfer Notice.

        The Company's Right of First Refusal shall inure to the benefit of its
successors and assigns, shall be freely assignable in whole or in part and shall
be binding upon any transferee of the Common Stock.

        The Company's Right of First Refusal shall terminate if the Company's
common stock is listed on an established stock exchange or is quoted regularly
on the Nasdaq Stock Market.

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        8. TRANSFER OF OPTION. Prior to your death, only you may exercise your
Option. You cannot transfer or assign your Option. For instance, you may not
sell your Option or use it as security for a loan. If you attempt to do any of
these things, your Option will immediately become invalid. You may, however,
dispose of your Option in your will. Regardless of any marital property
settlement agreement, the Company is not obligated to honor a notice of exercise
from your spouse or former spouse, nor is the Company obligated to recognize
such individual's interest in your Option in any other way.

        9. NO RETENTION RIGHTS. Your Option does not give you the right to be
retained by the Company (or any subsidiaries) in any capacity. The Company
reserves the right to terminate your Service at any time and for any reason.

        10. STOCKHOLDER RIGHTS. You, or your estate or heirs, have no rights as
a stockholder of the Company until a certificate for your Common Stock has been
issued. No adjustments are made for dividends or other rights if the applicable
record date occurs before your stock certificate is issued, except as described
in the Plan.

        11. ADJUSTMENTS TO COMMON STOCK. In the event of a stock split, a stock
dividend or a similar change in the Company's Common Stock, the number of shares
covered by your Option and the exercise price per share may be adjusted pursuant
to the Plan. Your Option shall be subject to the terms of the agreement of
merger, liquidation or reorganization in the event the Company is subject to
such corporate activity.

        12. LEGENDS. All certificates representing the Common Stock issued upon
exercise of your Option shall, where applicable, have endorsed thereon the
following legends:

        "THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
        TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN
        COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND
        THE INITIAL HOLDER HEREOF. SUCH AGREEMENT PROVIDES FOR CERTAIN TRANSFER
        RESTRICTIONS, INCLUDING RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED
        TRANSFER OF THE SECURITIES AND RIGHTS OF REPURCHASE. THE SECRETARY OF
        THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT
        TO THE HOLDER HEREOF WITHOUT CHARGE."

        "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
        OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
        SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF
        REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL
        AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF
        COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION
        UNDER FEDERAL AND STATE SECURITIES LAWS ARE NOT REQUIRED."

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        13. APPLICABLE LAW. This Agreement will be interpreted and enforced
under the laws of the State of California (without regard to their choice of law
provisions).

        14. INCORPORATION OF PLAN BY REFERENCE. The text of the Plan is
incorporated in this Agreement by reference.

        This Agreement and the Plan constitute the entire understanding between
you and the Company regarding your Option. Any prior agreements, commitments or
negotiations concerning your Option are superseded.

        BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE
        TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN. YOU ALSO
        ACKNOWLEDGE THAT YOU HAVE READ SECTION 11, "PURCHASER'S INVESTMENT
        REPRESENTATIONS" OF EXHIBIT A AND THAT YOU CAN AND HEREBY DO MAKE THE
        SAME REPRESENTATIONS WITH RESPECT TO THE GRANT OF THIS OPTION.

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                                                                       EXHIBIT A
                                                           (to be attached to an
                                                               option agreement;
                                               allows exercise prior to vesting)

                        APPLIED MOLECULAR EVOLUTION, INC.

             NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT

        THIS AGREEMENT is dated as of ___________, ____, between Applied
Molecular Evolution, Inc. (the "Company"), and _________________ ("Purchaser").

                              W I T N E S S E T H:

        WHEREAS, the Company and Purchaser are parties to that certain Stock
Option Agreement dated as of ___________, ____ and amended on ________________,
2000, (the "Option Agreement") pursuant to which the Purchaser has the right to
purchase up to ______ shares of the Company's common stock (the "Option
Shares"); and

        WHEREAS, the Option is exercisable with respect to certain of the Option
Shares as of the date hereof; and

        WHEREAS, pursuant to the Option Agreement, Purchaser desires to purchase
shares of the Company as herein described, on the terms and conditions set forth
in this Agreement, the Option Agreement and the Applied Molecular Evolution,
Inc. 1992 Stock Plan (the "Plan"). Certain capitalized terms used in this
Agreement are defined in the Plan.

        NOW, THEREFORE, it is agreed between the parties as follows:

SECTION 1:     PURCHASE OF SHARES.

        (a) Pursuant to the terms of the Option Agreement, Purchaser hereby
agrees to purchase from the Company and the Company agrees to sell and issue to
Purchaser _________ shares of the Company's common stock (the "Common Stock")
for the Exercise Price per share specified in the Option Agreement payable by
personal check, cashier's check or money order, or, as permitted by the Option
Agreement, as follows: _______________________________. Payment shall be
delivered at the Closing, as such term is hereinafter defined.

        (b) The closing hereunder (the "Closing") shall occur at the offices of
the Company on __________, ____, or such other time and place as may be
designated by the Company (the "Closing Date").

SECTION 2:     REPURCHASE OPTION

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        All unvested shares of the Common Stock purchased by the Purchaser
pursuant to this Agreement (sometimes referred to as the "Repurchase Option
Stock") shall be subject to the following option (the "Repurchase Option"):

        (a) In the event the Purchaser terminates service with the Company
("Service") for any reason, with or without cause, the Company may exercise the
Repurchase Option.

        (b) Purchaser understands that the Common Stock is being sold in order
to induce Purchaser to become and/or remain associated with the Company and to
work diligently for the success of the Company and that the Repurchase Option
Stock will continue to vest in accordance with the schedule set forth in the
Option Agreement. Accordingly, the Company shall have the right at any time
within 90 days after the termination of Service to purchase from the Purchaser
all shares of Common Stock purchased hereunder which have not vested in
accordance with the terms of such vesting schedule in the Option Agreement. The
purchase price for such unvested shares of Repurchase Option Stock shall be the
Exercise Price per share (the "Option Price") paid by Purchaser for such shares
pursuant to the Option Agreement. The purchase price shall be paid by certified,
cashier's, or the Company's check or by cancellation of any indebtedness of
Purchaser to the Company. The Company's Repurchase right shall lapse with
respect to Common Stock in accordance with the vesting schedule in the Option
Agreement.

        (c) Nothing in this Agreement shall be construed as a right by Purchaser
to be retained by the Company, or a parent or subsidiary of Company in any
capacity. The Company reserves the right to terminate Purchaser's Service at any
time and for any reason.

SECTION 3:     EXERCISE OF REPURCHASE OPTION

        The Repurchase Option shall be exercised by written notice signed by an
officer of the Company and delivered or mailed as provided in Section 16 of this
Agreement and to the Escrow Agent as provided in Section 16 of the Joint Escrow
Instructions attached as Exhibit B to the Option Agreement.

SECTION 4:     WAIVER, ASSIGNMENT, EXPIRATION OF REPURCHASE OPTION

        If the Company waives or fails to exercise the Repurchase Option as to
all of the shares subject thereto, the Company may, in the discretion of its
Board of Directors, assign the Repurchase Option to any other holder or holders
of preferred or common stock of the Company in such proportions as such Board of
Directors may determine. In the event of such an assignment, the assignee shall
pay to the Company in cash an amount equal to the fair market value of the
Repurchase Option. The Company shall promptly, upon expiration of the 90-day
period referred to in Section 2 above, notify Purchaser of the number of shares
subject to the Repurchase Option assigned to such stockholder(s) and shall
notify both the Purchaser and the assignee(s) of the time, place and date for
settlement of such purchase, which must be made within 90 days from the date of
cessation of continuous Service. In the event that the Company and/or such
assignee(s) do not elect to exercise the Repurchase Option as to all or part of
the

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shares subject to it, the Repurchase Option shall expire as to all shares which
the Company and/or such assignee(s) have not elected to purchase.

SECTION 5:     ESCROW OF SHARES

        (a) As security for Purchaser's faithful performance of the terms of
this Agreement and to ensure the availability for delivery of Purchaser's shares
upon exercise of the Repurchase Option herein provided for, Purchaser agrees at
the Closing hereunder, to deliver to and deposit with the Escrow Agent named in
the Joint Escrow Instructions attached to the Option Agreement as Exhibit B, (i)
the certificate or certificates evidencing the Repurchase Option Stock; (ii) the
certificate or certificates evidencing the Option Stock subject to the terms of
the full-recourse promissory note, if applicable; and (iii) two Assignments
Separate from Certificate duly executed (with date and number of shares in
blank) in the form attached to the Option Agreement as Exhibit C. Such documents
are to be held by the Escrow Agent and delivered by the Escrow Agent pursuant to
the Joint Escrow Instructions, which instructions shall also be delivered to the
Escrow Agent at the Closing hereunder.

        (b) Within 30 days after the last day of each successive completed
calendar quarter after the Closing Date, if Purchaser so requests, the Escrow
Agent will deliver to Purchaser certificates representing so many shares of
Common Stock as are no longer subject to the Repurchase Option or, if
applicable, to the terms of the full-recourse promissory note (less such shares
as have been previously delivered). Ninety days after cessation of Purchaser's
Service with the Company the Company will direct the Escrow Agent to deliver to
Purchaser a certificate or certificates representing the number of shares not
repurchased by the Company or its assignees pursuant to exercise of the
Repurchase Option and not subject to the terms of the full-recourse promissory
note (less such shares as have been previously delivered).

SECTION 6:     ADJUSTMENT OF SHARES

        Subject to the provisions of the Certificate of Incorporation of the
Company, if, from time to time during the term of the Repurchase Option:

        (a) there is any stock dividend or liquidating dividend of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Company, or

        (b) there is any consolidation, merger or sale of all or substantially
all, of the assets of the Company,

then, in such event, any and all new, substituted or additional securities or
other property to which Purchaser is entitled by reason of Purchaser's ownership
of the shares shall be immediately subject to such Repurchase Option with the
same force and effect as the shares of Repurchase Option Stock from time to time
subject to the Repurchase Option. While the total Option Price shall remain the
same after each such event, the Option Price per share of Option Stock upon
exercise of the Repurchase Option shall be appropriately and equitably adjusted
as determined by the Board of Directors of the Company.

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SECTION 7:     THE COMPANY'S RIGHT OF FIRST REFUSAL.

        Before any shares of Common Stock registered in the name of Purchaser
and not subject to the Repurchase Option may be sold or transferred, such shares
shall first be offered to the Company as set forth in the Option Agreement.

SECTION 8:     PURCHASER'S RIGHTS AFTER EXERCISE OF REPURCHASE
               OPTION OR RIGHT OF FIRST REFUSAL.

        If the Company makes available, at the time and place and in the amount
and form provided in this Agreement, the consideration for the Common Stock to
be repurchased in accordance with the provisions of Sections 2 and 7 of this
Agreement, then from and after such time the person from whom such shares are to
be repurchased shall no longer have any rights as a holder of such shares (other
than the right to receive payment of such consideration in accordance with this
Agreement). Such shares shall be deemed to have been repurchased in accordance
with the applicable provisions hereof, whether or not the certificate(s)
therefor have been delivered as required by this Agreement.

SECTION 9:     TRANSFER BY PURCHASER TO CERTAIN TRUSTS.

        Purchaser shall have the right to transfer all or any portion of
Purchaser's interest in the shares issued under this Agreement which have been
delivered to Purchaser under the provisions of Section 5 of this Agreement, to a
trust established by Purchaser for the benefit of Purchaser, Purchaser's spouse
or Purchaser's children, without being subject to the provisions of Section 7
hereof, provided that the trustee on behalf of the trust shall agree in writing
to be bound by the terms and conditions of this Agreement. The transferee shall
execute a copy of Exhibit D attached to the Option Agreement and file the same
with the Secretary of the Company.

SECTION 10:    LEGEND OF SHARES.

        All certificates representing the Common Stock purchased under this
Agreement shall, where applicable, have endorsed thereon the legends set forth
in the Option Agreement and any other legends required by applicable securities
laws.

SECTION 11:    PURCHASER'S INVESTMENT REPRESENTATIONS.

        (a) This Agreement is made with Purchaser in reliance upon Purchaser's
representation to the Company, which by Purchaser's acceptance hereof Purchaser
confirms, that the Common Stock which Purchaser will receive will be acquired
with Purchaser's own funds for investment for an indefinite period for
Purchaser's own account, not as a nominee or agent, and not with a view to the
sale or distribution of any part thereof, and that Purchaser has no present
intention of selling, granting participation in, or otherwise distributing the
same, but subject, nevertheless, to any requirement of law that the disposition
of Purchaser's property shall at all times be within Purchaser's control. By
executing this Agreement, Purchaser further represents that Purchaser does not
have any contract, understanding or agreement with any

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person to sell, transfer, or grant participation, to such person or to any third
person, with respect to any of the Common Stock.

        (b) Purchaser understands that the Common Stock will not be registered
or qualified under federal or state securities laws on the ground that the sale
provided for in this Agreement is exempt from registration or qualification
under federal or state securities laws and that the Company's reliance on such
exemption is predicated on Purchaser's representations set forth herein.

        (c) Purchaser agrees that in no event will Purchaser make a disposition
of any of the Common Stock (including a disposition under Section 9 of this
Agreement), unless and until (i) Purchaser shall have notified the Company of
the proposed disposition and shall have furnished the Company with a statement
of the circumstances surrounding the proposed disposition and (ii) Purchaser
shall have furnished the Company with an opinion of counsel satisfactory to the
Company to the effect that (A) such disposition will not require registration or
qualification of such Common Stock under federal or state securities laws or (B)
appropriate action necessary for compliance with the federal or state securities
laws has been taken or (iii) the Company shall have waived, expressly and in
writing, its rights under clauses (i) and (ii) of this section.

        (d) With respect to a transaction occurring prior to such date as the
Plan and Common Stock thereunder are covered by a valid Form S-8 or similar
federal registration statement, this subsection shall apply unless the
transaction is covered by the exemption in California Corporations Code Section
25102(o) or a similar broad based exemption. In connection with the investment
representations made herein, Purchaser represents that Purchaser is able to fend
for himself or herself in the transactions contemplated by this Agreement, has
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of Purchaser's investment, has the ability to
bear the economic risks of Purchaser's investment and has been furnished with
and has had access to such information as would be made available in the form of
a registration statement together with such additional information as is
necessary to verify the accuracy of the information supplied and to have all
questions answered by the Company.

        (e) Purchaser understands that if the Company does not register with the
Securities and Exchange Commission pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or if a registration
statement covering the Common Stock (or a filing pursuant to the exemption from
registration under Regulation A of the Securities Act of 1933) under the
Securities Act of 1933 is not in effect when Purchaser desires to sell the
Common Stock, Purchaser may be required to hold the Common Stock for an
indeterminate period. Purchaser also acknowledges that Purchaser understands
that any sale of the Common Stock which might be made by Purchaser in reliance
upon Rule 144 under the Securities Act of 1933 may be made only in limited
amounts in accordance with the terms and conditions of that Rule.

SECTION 12:    ASSISTANCE TO PURCHASER UNDER RULE 144.

                                      A-5
<PAGE>   14

        The Company covenants and agrees that (a) at all times after it first
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, it will use its best efforts to comply with the current public
information requirements of Rule 144(c)(1) under the Securities Act of 1933, and
that if prior to becoming subject to such reporting requirements an
over-the-counter market develops for the Common Stock, it will make publicly
available the information required by Rule 144(c)(2); (b) it will furnish
Purchaser, upon request, with all information required for the preparation and
filing of Form 144; and (c) it will on a timely basis use its best efforts to
file all reports required to be filed and make all disclosures, including
disclosures of materially adverse information, required to permit Purchaser to
make the required representations in Form 144.

SECTION 13:    NO DUTY TO TRANSFER IN VIOLATION HEREUNDER.

        The Company shall not be required (a) to transfer on its books any
shares of Common Stock of the Company which shall have been sold or transferred
in violation of any of the provisions set forth in this Agreement or (b) to
treat as owner of such shares or to accord the right to vote as such owner or to
pay dividends to any transferee to whom such shares shall have been so
transferred.

SECTION 14:    RIGHTS OF PURCHASER.

        Except as otherwise provided herein, Purchaser shall, during the term of
this Agreement, exercise all rights and privileges of a stockholder of the
Company with respect to the Common Stock.

SECTION 15:    OTHER NECESSARY ACTIONS.

        The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.

SECTION 16:    NOTICE.

        Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon the earliest of personal delivery,
receipt or the third full day following deposit in the United States Post Office
with postage and fees prepaid, addressed to the other party hereto at the
address last known or at such other address as such party may designate by 10
days' advance written notice to the other party hereto.

SECTION 17:    SUCCESSORS AND ASSIGNS.

        This Agreement shall inure to the benefit of the successors and assigns
of the Company and, subject to the restrictions on transfer herein set forth, be
binding upon Purchaser and Purchaser's heirs, executors, administrators,
successors and assigns. The failure of the Company in any instance to exercise
the Repurchase Option or rights of first offer described herein shall not
constitute a waiver of any other Repurchase Option or right of first offer that
may subsequently arise under the provisions of this Agreement. No waiver of any
breach or condition

                                      A-6
<PAGE>   15

of this Agreement shall be deemed to be a waiver of any other or subsequent
breach or condition, whether of a like or different nature.

SECTION 18:    APPLICABLE LAW.

        This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California, as such laws are applied to contracts
entered into and performed in such state.

SECTION 19:    NO STATE QUALIFICATION.

        THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS
NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL,
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100,
25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO
THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.

SECTION 20:    NO ORAL MODIFICATION.

        No modification of this Agreement shall be valid unless made in writing
and signed by the parties hereto.

SECTION 21:    ENTIRE AGREEMENT.

        This Agreement and the Option Agreement constitute the entire complete
and final agreement between the parties hereto with regard to the subject matter
hereof.

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

APPLIED MOLECULAR EVOLUTION, INC.           PURCHASER

By:
   ------------------------------           ------------------------------------

                                      A-7
<PAGE>   16

                                    EXHIBIT B

                            JOINT ESCROW INSTRUCTIONS

                                ---------, -----

Secretary
Applied Molecular Evolution, Inc.

Dear Sir or Madam:

        As Escrow Agent for both Applied Molecular Evolution, Inc. (the
"Company"), and ___________________ ("Purchaser"), you are hereby authorized and
directed to hold the documents delivered to you pursuant to the terms of that
certain Common Stock Purchase Agreement (the "Agreement") of even date herewith,
to which a copy of these Joint Escrow Instructions is attached as Exhibit B to a
certain Stock Option dated ________ ("Option Agreement"), in accordance with the
following instructions:

        1. In the event the Company shall elect to exercise the Repurchase
Option set forth in the Agreement, the Company shall give to Purchaser and you a
written notice as provided in the Agreement. Purchaser and the Company hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice, including prompt delivery of stock certificates.

        2. At the closing, you are directed (a) to date the stock assignment
form or forms necessary for the transfer in question, (b) to fill in the number
of shares being transferred, and (c) to deliver same, together with the
certificate or certificates evidencing the shares to be transferred, to the
Company against the simultaneous delivery to you of the purchase price (by
certified, bank cashier's, or the Company's check) for the number of shares
being purchased pursuant to the exercise of the Repurchase Option.

        3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares to be held by you hereunder and any additions and
substitutions to said shares as defined in the Agreement. Purchaser does hereby
irrevocably constitute and appoint you as Purchaser's attorney-in-fact and agent
for the term of this escrow to execute with respect to such securities all
documents necessary or appropriate to make such securities negotiable and to
complete any transaction herein contemplated. Subject to the provisions of this
Section 3, Purchaser shall exercise all rights and privileges, including but not
limited to, the right to vote and to receive dividends (if any), of a
stockholder of the Company while the shares are held by you.

        4. In accordance with the terms of Section 5 of the Agreement, if
Purchaser exercised his or her Options using a full recourse promissory note,
then you may from time to time deliver to Purchaser a certificate or
certificates representing so many shares as are no longer subject to the terms
of such full recourse promissory note.

                                       B-1
<PAGE>   17

        5. In accordance with the terms of Section 5 of the Agreement, you may
from time to time deliver to Purchaser a certificate or certificates
representing so many shares as are no longer subject to the Repurchase Option.

        6. This escrow shall terminate upon the release of all shares held under
the terms and provisions hereof.

        7. If at the time of termination of this escrow you should have in your
possession any documents, securities or other property belonging to Purchaser,
you shall deliver all of same to Purchaser and shall be discharged from all
further obligations hereunder.

        8. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.

        9. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact of Purchaser while acting in good faith and
in the exercise of your own good judgment, and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.

        10. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree of any
court, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, notwithstanding any
such order, judgment or decree being subsequently reversed, modified, annulled,
set aside, vacated or found to have been entered without jurisdiction.

        11. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.

        12. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.

        13. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder and may rely upon the advice of such counsel.

        14. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be Secretary of the Company or if you shall resign by written
notice of each party. In the event of any such termination, the Company shall
appoint any officer of the Company as successor Escrow Agent.

                                      B-2
<PAGE>   18

        15. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.

        16. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such dispute shall have been settled either by mutual written agreement of
the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.

        17. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled.

        18. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.

        19. This instrument shall be governed by and construed in accordance
with the laws of the State of California.

        20. This instrument shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.

                                            Very truly yours,

                                            Applied Molecular Evolution, Inc.

                                            By:
                                               ---------------------------------

ESCROW AGENT:                               PURCHASER:

--------------------------                  ------------------------------------

                                      B-3
<PAGE>   19

                                    EXHIBIT C

                      ASSIGNMENT SEPARATE FROM CERTIFICATE

        FOR VALUE RECEIVED _________________________________ hereby sells,
assigns and transfers unto _________________________ ________________________
(________) shares of the Common Stock of Applied Molecular Evolution, Inc. (the
"Company"), standing in __________ name on the books of the Company represented
by Certificate No. ___________ herewith and hereby irrevocably constitutes and
appoints ________________ Attorney to transfer said stock on the books of the
Company with full power of substitution in the premises.

Dated:  ____________________, ____.

                                            ------------------------------------
                                                        Print Name

                                            ------------------------------------
                                                        (Signature)

                         Spousal Consent (if applicable)

___________________ (Purchaser's spouse) indicates by the execution of this
Assignment his or her consent to be bound by the terms herein as to his or her
interests, whether as community property or otherwise, if any, in the Shares.

                                            ------------------------------------
                                                         Signature

INSTRUCTIONS: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE.
THE PURPOSE OF THIS ASSIGNMENT IS TO ENABLE THE COMPANY TO EXERCISE ITS
"REPURCHASE OPTION" SET FORTH IN THE STOCK PURCHASE AGREEMENT WITHOUT REQUIRING
ADDITIONAL SIGNATURES ON THE PART OF PURCHASER

                                       C-1
<PAGE>   20

                                    EXHIBIT D

               ACKNOWLEDGMENT OF AND AGREEMENT TO BE BOUND BY THE
             NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT
                      OF APPLIED MOLECULAR EVOLUTION, INC.

        The undersigned, as transferee of shares of Applied Molecular Evolution,
Inc., hereby acknowledges that he or she has read and reviewed the terms of the
Notice of Exercise and Common Stock Purchase Agreement of Applied Molecular
Evolution, Inc. and hereby agrees to be bound by the terms and conditions
thereof, as if the undersigned had executed said Agreement as an original party
thereto.

Dated:  ____________________, ____.

                                            By:
                                               ---------------------------------

                                       D-1
<PAGE>   21

                                    EXHIBIT E

                         ELECTION UNDER SECTION 83(b) OF
                            THE INTERNAL REVENUE CODE

This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.

        (i)    The taxpayer who performed the services is:

               Name:
                    ----------------------------------------------

               Address:
                       -------------------------------------------

                       -------------------------------------------

               Social Security No.:
                                   -------------------------------

        (ii)   The property with respect to which the election is being made is
               _____________ shares of common stock of Applied Molecular
               Evolution, Inc., a Delaware corporation (the "Company").

        (iii)  The property was issued on _______________, 20____.

        (iv)   The taxable year in which the election is being made is the
               calendar year 20____.

        (v)    The property is subject to a repurchase right pursuant to which
               the issuer has the right to acquire the property at the original
               purchase price if for any reason taxpayer's service with the
               issuer is terminated. The issuer's repurchase right lapses in a
               series of annual and monthly installments over a ____ (__) year
               period ending on ___________.

        (vi)   The Fair Market Value of the property at the time of transfer
               (determined without regard to any restriction other than a
               restriction which by its terms will never lapse) is _________ per
               share.

        (vii)  The amount paid for such property is $_____________.

        (viii) A copy of this statement was furnished to the Company for whom
               taxpayer rendered the service underlying the transfer of
               property.

        (ix)   This statement is executed as of ___________________, 20_____.

----------------------------------          ------------------------------------
Spouse (if any)                             Taxpayer

THIS FORM MUST BE FILED WITH THE INTERNAL REVENUE SERVICE CENTER WITH WHICH
TAXPAYER FILES HIS/HER FEDERAL INCOME TAX RETURN. THE FILING MUST BE MADE WITHIN
THIRTY (30) DAYS AFTER THE DATE OF TRANSFER OF THE PROPERTY REFERENCED ABOVE.

                                       E-1
<PAGE>   22

                                    EXHIBIT F

                                   TAX SUMMARY
                               EXERCISE OF OPTIONS

The following tax discussion is a brief summary of current federal income tax
law regarding the exercise before vesting of stock options granted to you under
the Applied Molecular Evolution, Inc. 1992 Stock Plan, as amended (the "Plan").
The discussion is intended solely for general information. The federal income
tax laws and regulations are complex and change frequently, and each person's
situation is different. You are urged to consult your own tax adviser before
exercising stock options or disposing of any shares of stock acquired under the
Plan. The exercise of your options and sale of shares may have state, local, and
estate and gift tax consequences as well as the federal income tax aspects
outlined below.

EXERCISE OF INCENTIVE STOCK OPTIONS (ISOS)

        When you exercise your ISOs, you will not be subject to federal income
tax, and the Company will not be entitled to a tax deduction by reason of such
exercise. When you sell the shares, the difference between the sales proceeds
and the exercise price will be long-term capital gain (or loss) if you have held
the shares for more than one year and the sale occurs more than two years after
the grant date of the ISO. If you sell the shares before you have met these
holding requirements (a "disqualifying disposition"), you will recognize
ordinary income, and the Company will receive a corresponding deduction, equal
to the lesser of (i) the excess of the fair market value of the shares on the
exercise date over the exercise price, or (ii) the excess of the amount realized
on sale over the exercise price. You could have a disqualifying disposition if
you use shares acquired on exercise of an ISO to purchase new shares in a
"stock-for-stock" transfer before the holding periods are met.

        When you exercise your ISO, the spread between the exercise price and
the fair market value of the shares on date of exercise will be a tax preference
item for purposes of the alternative minimum tax. Alternative minimum tax is
payable when such tax exceeds a taxpayer's regular federal income tax. Whether
the alternate minimum tax is imposed will depend on your total tax situation. If
alternate minimum tax is paid, the portion of alternative minimum tax
attributable to certain items of tax preference (including the spread upon the
exercise of an ISO) may be credited against your regular tax liability in a
later year. In addition, the alternative minimum tax paid with respect to the
spread is added to your basis in the shares when computing the capital gain tax
preference item on sale for alternative minimum tax purposes (but not when
computing gain or loss on the shares for regular income tax purposes).

        If you sell shares acquired on the exercise of an ISO in the year of
exercise, which would be a disqualifying disposition, the spread will not be a
tax preference item. Instead, the spread will be subject to regular income tax
as compensation income.

                                      - 1 -
<PAGE>   23

        You may pay the exercise price in a "stock-for-stock" exchange using
Company stock that you have owned for at least six months ("old shares"). If the
Company stock was acquired on exercise of an ISO, then the ISO holding periods
must be met or you will have a "disqualifying disposition" of the old shares. If
you use the "stock-for-stock" method, the exercise is treated as two
transactions: (1) the exchange of old shares with a fair market value equal to
the exercise price for the same number of new shares ("exercise price shares")
and (2) the acquisition of additional shares (the "excess shares") equal in
value to the difference between the fair market value of the total shares
acquired on exercise of the ISO and the exercise price for all shares. Your
basis in the exercise price shares is the same as your basis in the old shares,
and the capital gains holding period is computed from the date you acquired the
old shares. Your basis in the excess shares is zero and the capital gains
holding period starts on that date. The fair market value of the excess shares
would be a tax preference item for purposes of the alternative minimum tax in
the year of exercise. The advantage of the stock-for-stock method of exercise is
that you defer tax on the appreciation of the old shares until you sell the
exercise price shares.

        Your Option Agreements have been amended to permit you to exercise your
ISOs before they vest. In that case, the shares acquired on exercise will be
subject to the same vesting schedule as the related options. The Company will
have the right to repurchase the shares at the exercise price if your service
with the Company terminates before the shares vest. The shares will be held in
escrow by an officer of the Company and released to you as they vest. The
capital gain and ISO holding periods begin from date of exercise, not date of
vesting. For purposes of the alternative minimum tax, the spread is measured on
the date of exercise if you make an "83(b) election", as described below, within
30 days of exercise. Otherwise, the spread will be measured on the date the
shares vest.

EXAMPLE: Assume you are granted an ISO with an exercise price of 10 cents per
share, which vests over four years. Assume that you exercise the ISO after
vesting when the stock has a fair market value of $10.10 per share. You will
have a preference item for alternate minimum tax purposes of $10.00 per share
and would have to hold the shares for another year to avoid a "disqualifying
disposition." If you exercise before vesting, the preference item would be the
"spread" on date of exercise. Your holding period for long-term capital gains
would begin on the date of exercise, but you would still have to hold the shares
for two years from the date the ISO was granted to avoid a "disqualifying
disposition". If you do not make an "83(b) election", the difference between the
exercise price and the fair market value of the shares on the date they vest
will be taxable as ordinary income in the year that the shares vest.

        If you exercise early, the shares you acquire on exercise will vest over
the same four-year period that the related options would have vested. If you
leave the service of the Company within that four years, the Company would have
the right to repurchase your unvested shares for the exercise price. You will
get no tax deduction on the repurchase of the unvested shares.

        The total value (determined at date of grant) of the shares covered by
your ISOs that first become exercisable in any single calendar year cannot
exceed $100,000. Your ISOs must be exercised within three months of termination
of employment (except in the case of death or

                                     - 2 -
<PAGE>   24

disability). ISOs that do not meet these special rules become nonstatutory
stock options (NSOs) and are treated the same as NSOs for tax purposes on
exercise, as described below.

EXERCISE OF NONQUALIFIED STOCK OPTIONS (NSOS)

        Upon the exercise of an NSO, the "spread" between the fair market value
of the shares on the date of exercise and the exercise price will be taxable to
you as compensation at ordinary income rates. The Company will be entitled to
deduct the same amount, provided it makes all required tax withholdings. You
must arrange with the Company for payment of all applicable federal, state and
local withholding tax obligations before you can receive your shares.

        Your tax basis in the shares you acquire on exercise of the NSO is the
fair market value of such shares on the date of exercise. When you sell the
shares, you will realize capital gain or loss (long-term or short-term,
depending on whether the shares were held for more than 12 months after
exercise) equal to the difference between your basis in the shares and the sale
proceeds.

        You may pay the exercise price in a "stock-for-stock" exchange using
Company stock that you have owned for at least six months ("old shares").
Special rules apply if the Company stock was acquired on exercise of an ISO.
Those rules are discussed above. If you use the "stock-for-stock" method, the
exercise is treated as two transactions: (1) the exchange of old shares with a
fair market value equal to the exercise price for the same number of new shares
("exercise price shares") and (2) the acquisition of additional shares (the
"excess shares") equal in value to the difference between the fair market value
of the total shares acquired on exercise of the NSO and the exercise price for
all shares. Your basis in the exercise price shares is the same as your basis in
the old shares, and the capital gains holding period is computed from the date
you acquired the old shares.

        You will be taxed at ordinary income rates on the fair market value of
the excess shares (minus any cash you pay for those shares). Your basis in the
excess shares is equal to their fair market value on the exercise date, and the
capital gains holding period starts on that date. The advantage of the
stock-for-stock method of exercise is that you defer tax on the appreciation of
the old shares until you sell the exercise price shares.

        If you exercise your NSOs immediately, and make a Section 83(b) election
within 30 days of exercise, the spread is measured on the date of exercise for
purposes of compensation income. Otherwise, the spread is measured on the date
that shares vest.

        EXAMPLE: Assume the same facts as in the example above, and assume that
the fair market value of the shares on date of early exercise is $5.10 per
share. If you exercise after vesting, you would have compensation income of
$10.00 per share and your basis in the shares would be $10.10 per share. If you
sell the shares after one year for $30.10 per share, you would have long-term
capital gain of $20.00 per share.

        If, on the other hand, you exercise the NSO before vesting and make a
Section 83(b) election within 30 days of exercise, your compensation income will
equal the spread on the date

                                     - 3 -
<PAGE>   25

of exercise ($5.00 per share) and your basis in the shares will be their fair
market value on the date of exercise ($5.10 per share). When you sell the shares
after one year for $30.10 per share, you will have long term capital gain of
$25.00 per share. If you do not make a Section 83(b) election in the year of
exercise, the value of the shares will be taxed as compensation income in the
year they vest.

        If you leave the Company before the shares vest, the Company will have
the right to repurchase the shares for their exercise price. If you made a
Section 83(b) election, and were taxed on the spread on the shares on the date
of exercise, you will get no deduction for that amount when if the shares are
repurchased.

SECTION 83(b) ELECTIONS

        An election under Internal Revenue Code Section 83(b) permits the
excess, if any, of (i) the fair market value of such shares at the time of
transfer (determined without regard to restrictions other than those which will
never lapse) over (ii) the amount (if any) paid for such shares (the "spread")
to be the measure of the preference item for purposes of alternative minimum tax
in the case of an ISO or as compensation income in the case of an NSO.

        The election must be made not later than 30 days after the date of
transfer of the shares to you. The election must be filed with the Internal
Revenue Service Center where you file your tax return. Each filing should be
made by certified mail with the sender's receipt postmarked at the time of
mailing to establish proof of filing.

        One copy of the election should be filed with the Company. Finally, one
copy of the election must be submitted with your federal income tax return for
the taxable year in which the shares are transferred. Certain states may also
require a copy of the election to be submitted with state tax returns. Employees
should seek local tax advice.

        TAX LAWS ARE COMPLEX AND CHANGE FREQUENTLY. YOU SHOULD CONSULT YOUR OWN
TAX ADVISOR ABOUT YOUR PARTICULAR SITUATION BEFORE EXERCISING AN OPTION OR
MAKING A SECTION 83(b) ELECTION.

                                     - 4 -<PAGE>   1

                                                                   EXHIBIT 10.14

CONFIDENTIAL TREATMENT REQUEST.
CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN REDACTED AND
HAVE BEEN SEPARATELY FILED WITH THE COMMISSION

                         NON-EXCLUSIVE LICENSE AGREEMENT

       THIS NON-EXCLUSIVE LICENSE AGREEMENT, dated as of September 9, 1998 (the
"Effective Date") is made by and between IXSYS, INC., a Delaware corporation
("Ixsys"), and BIOSITE DIAGNOSTICS INCORPORATED, a Delaware corporation
("Biosite").

       WHEREAS, Ixsys and Biosite have entered into that certain Research and
Development Agreement dated as of July 1, 1992 (the "R&D Agreement") pursuant to
which Ixsys granted to Biosite licenses to certain patent rights and related
know-how for the manufacture, use and sale of antibodies;

       WHEREAS, Ixsys and Biosite wish to terminate the R&D Agreement; and

       WHEREAS, Ixsys wishes to grant to Biosite, and Biosite wishes to obtain
from Ixsys, a non-exclusive license under certain patent rights and related
know-how held by Ixsys on the terms and subject to the conditions set forth
herein.

       NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the parties hereto hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

       1.1 "AFFILIATE" means any corporation or other entity which controls, is
controlled by, or is under common control with, a party. A corporation or other
entity shall be regarded as in control of another corporation or entity if it
owns or directly or indirectly controls 50% or more of the voting stock or other
ownership interest of the other corporation or entity, or if it possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the corporation or other entity.

       1.2 "BIOSITE FIELD" means all *** purposes and all *** purposes.

       1.3 "CONFIDENTIAL INFORMATION" means any confidential information of a
party, including information related to the Ixsys Technology, and any other
information relating to any compound, research project, work in process, future
development, scientific, engineering, manufacturing, marketing, business plan,
financial or personnel matter relating to such party, its present or future
products, sales, suppliers, customers, employees, investors or business, whether
in oral, written, graphic or electronic form. Confidential Information shall not
include any information which the receiving party can prove by competent
evidence:

*** Confidential Treatment has been requested with respect to certain portions
of this agreement.

                                      -1-
<PAGE>   2

       (a) is now, or hereafter becomes, through no act or failure to act on the
part of the receiving party, generally known or available;

       (b) is known by the receiving party at the time of receiving such
information, as evidenced by its records;

       (c) is hereafter furnished to the receiving party by a Third Party, as a
matter of right and without restriction on disclosure;

       (d) is independently developed by the receiving party without knowledge
of, and without the aid, application or use of, the disclosing party's
Confidential Information; or

       (e) is the subject of a written permission to disclose provided by the
disclosing party.

       1.4 "CONTROL" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement
or other arrangement with any Third Party.

       1.5 "IXSYS KNOW-HOW" means all Know-How, owned by or under the Control of
Ixsys as of the Effective Date, which is not covered by the Ixsys Patent Rights,
but which is necessary or useful for the commercial exploitation of the Ixsys
Patent Rights.

       1.6 "IXSYS PATENT RIGHTS" means all rights under the patents and patent
applications set forth on Exhibit A, owned by or under the Control of Ixsys as
of the Effective Date, including any and all patents issuing therefrom and any
and all substitutions, extensions (including supplemental protection
certificates), registrations, confirmations, continuations,
continuations-in-part, divisionals, re-examinations, renewals, reissues and
foreign counterparts of the aforementioned.

       1.7 "IXSYS TECHNOLOGY" means the Ixsys Patent Rights and the Ixsys
Know-How.

       1.8 "KAUFFMAN AGREEMENT" means that certain License Agreement between
Stuart A. Kauffman, M.D. and Ixsys dated as of November 3, 1994, a copy of which
is attached hereto as Exhibit B.

       1.9 "KNOW-HOW" means all know-how, knowledge, trade secrets, inventions,
data, materials, techniques, practices, processes, procedures, devices, methods,
formulas, protocols and proprietary information, whether or not patentable,
which are not generally publicly known, including, without limitation, all
chemical, biochemical, toxicological and scientific research information.

       1.10 "PRODUCT" means any product or service, the development,
manufacture, use or sale of which is covered by, uses or incorporates any Ixsys
Technology.

       1.11 "STRATAGENE AGREEMENT" means that certain Master Agreement between
Stratagene Cloning Systems, Inc., Stratacyte Corporation, William D. Huse and
Ixsys dated as of November 7, 1991, a copy of which is attached hereto as
Exhibit C.

                                      -2-
<PAGE>   3

       1.12 "TERM" shall have the meaning set forth in Section 5.1.

       1.13 "THIRD PARTY" means any entity other than Biosite or Ixsys or an
Affiliate of Biosite or Ixsys.

                                    ARTICLE 2
                       GRANT OF LICENSE; ROYALTY PAYMENT;
                          TERMINATION OF R&D AGREEMENT

       2.1 LICENSE GRANT. Subject to the terms and conditions of this Agreement
and during the Term, Ixsys hereby grants to Biosite a *** license under the
Ixsys Technology to develop, make, have made, use, offer for sale, sell and
import Products in the Biosite Field.

       2.2 THIRD PARTY SALE OR PRODUCTION. Notwithstanding anything to the
contrary in this Agreement, Biosite shall have the right, in connection with a
transaction or arrangement with a Third Party relating to any product or service
relating to the Biosite Field, to grant to such Third Party the right to
produce, use, provide and sell such product or service derived from hosts
provided by Biosite; provided, however, that any such Third Party shall have no
other right, title or license under the Ixsys Technology.

       2.3 SUBLICENSES. Biosite shall have the right to grant sublicenses to its
Affiliates only. Biosite shall notify any sublicensee hereunder of all rights
and obligations of Biosite under this Agreement which are sublicensed to such
sublicensee and shall notify Ixsys within 30 days of the grant of any sublicense
hereunder. Biosite shall remain primarily liable under this Agreement
irrespective of any sublicense granted hereunder.

       2.4 SUBLICENSE OBLIGATIONS. Biosite hereby agrees to be bound by the
terms and conditions expressly applicable to a sublicensee under the Kauffman
Agreement and the Stratagene Agreement.

       2.5 UP-FRONT ROYALTY PAYMENT. In full consideration for the license grant
in Section 2.1, Biosite shall pay to Ixsys *** upon the Effective Date.

       2.6 TERMINATION OF R&D AGREEMENT. Ixsys and Biosite hereby terminate the
R&D Agreement as of the Effective Date with the effect of termination specified
therein (subject to the rights and licenses granted herein); provided, however,
that the parties agree that there are no outstanding debts or obligations or
claims under the R&D Agreement, except for the surviving provisions expressly
referred to in the second and third sentences of Section 11.3 thereof. For
avoidance of doubt, Ixsys has, and will have, ***.

                                    ARTICLE 3
                                 CONFIDENTIALITY

       During the Term and for a period of five years thereafter, each party
will maintain all Confidential Information of the other party as confidential
and will not disclose any Confidential Information of the other party to any
Third Party or use any Confidential Information of the other party for any
purpose, except (a) as authorized by this Agreement, (b) as required by law,
rule, regulation or court order (provided that the disclosing party shall use
commercially reasonable

*** Confidential Treatment has been requested with respect to certain portions
of this agreement.

                                      -3-
<PAGE>   4

efforts to obtain confidential treatment of any such information required to be
disclosed), or (c) to its Affiliates, employees, agents, consultants and other
representatives to accomplish the purposes of this Agreement so long as such
persons are under an obligation of confidentiality no less stringent than as set
forth herein. Each party may use such Confidential Information only to the
extent required to accomplish the purposes of this Agreement. Each party will
use at least the same standard of care as it uses to protect its own
Confidential Information to ensure that its Affiliates, employees, agents,
consultants and other representatives do not disclose or make any unauthorized
use of Confidential Information of the other party. Each party will promptly
notify the other upon discovery of any unauthorized use or disclosure of the
Confidential Information of the other party.

                                    ARTICLE 4
                    REPRESENTATIONS, WARRANTIES AND COVENANTS

       4.1 CORPORATE POWER. Each party hereby represents and warrants that it is
duly organized and validly existing under the laws of the State of Delaware and
has full corporate power and authority to enter into this Agreement and to carry
out the provisions hereof.

       4.2 DUE AUTHORIZATION. Each party hereby represents and warrants that
such party is duly authorized to execute and deliver this Agreement and to
perform its obligations hereunder.

       4.3 BINDING AGREEMENT. Each party hereby represents and warrants that
this Agreement is a legal and valid obligation binding upon it and is
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by such party does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a party
or by which it may be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having authority over it.

       4.4 IXSYS PATENT RIGHTS. Ixsys hereby represents and warrants that (a)
all patents and patent applications set forth on Exhibit A are owned by or under
the Control of Ixsys as of the Effective Date, and (b) to the best of its
knowledge, the Ixsys Patent Rights include all patent rights owned by or under
the Control of Ixsys as of the Effective Date applicable to the Biosite Field as
of the Effective Date.

       4.5 SUBLICENSED PATENT RIGHTS. Ixsys represents and warrants that (a)
Ixsys shall be fully and solely responsible for all payment obligations under
the Kauffman Agreement and the Stratagene Agreement in connection with the
license granted to Biosite hereunder and for otherwise fully maintaining all
relevant licenses and arrangements with third parties such that all licenses and
sublicenses granted to Biosite hereunder remain fully in effect without any
payment by Biosite to Ixsys or anyone else, except as specified in Section 2.5,
(b) Ixsys has provided to Biosite copies of all written agreements related to
the Kauffman Agreement and the Stratagene Agreement (including, without
limitation, any amendments thereto and any agreements attached as exhibits
thereto), (c) the Kauffman Agreement and the Stratagene Agreement are in effect
and in good standing as of the Effective Date, (d) Ixsys shall notify Biosite
promptly in writing of the occurrence of any potential event of which Ixsys
becomes aware which may result in the termination of the Kauffman Agreement or
the Stratagene Agreement or which may limit any right granted to Biosite
hereunder, and (e) the Kauffman Agreement and the Stratagene

                                      -4-
<PAGE>   5

Agreement are the only agreements under which Ixsys has received a license to
any of the Ixsys Patent Rights or Ixsys Know How.

       4.6 KNOW-HOW LICENSED TO BIOSITE. Ixsys hereby represents and warrants
that any Know-How previously provided to Biosite under the R&D Agreement is
owned by or under the Control of Ixsys as of the Effective Date.

       4.7 DISCLAIMER OF WARRANTIES. 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.

       4.8 LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE ENTITLED TO RECOVER
FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES
IN CONNECTION WITH THE IXSYS TECHNOLOGY OR ANY LICENSE GRANTED HEREUNDER.

       4.9 INDEMNIFICATION. Biosite hereby agrees to save, defend, indemnify and
hold harmless Ixsys and its directors, officers, employees, agents, consultants
and other representatives from and against any and all losses, damages,
liabilities, expenses and costs, including reasonable legal expense and
attorneys' fees ("Losses"), to which Ixsys may become subject as a direct result
of any claim, demand, action or other proceeding by any Third Party to the
extent such Losses arise directly out of the practice by Biosite of the license
granted hereunder, except to the extent such Losses result from the negligence
or the willful misconduct of Ixsys. In the event Ixsys seeks indemnification
under this Section 4.9, and as a condition thereof, Ixsys shall inform Biosite
of a claim as soon as reasonably practicable after Ixsys receives notice of the
claim, shall permit Biosite to assume direction and control of the defense and
settlement of the claim (including the right to settle the claim solely for
monetary consideration), and shall cooperate as requested (at the expense of
Biosite) in the defense and settlement of the claim. The indemnification
provided under this Section 4.9 shall supersede any surviving indemnification
obligation of Biosite under the R&D Agreement.

       4.10 FAIR VALUE. Ixsys represents and warrants that its Board of
Directors, after full disclosure and review of all relevant facts and
circumstances, has determined that this Agreement provides Ixsys with fair value
at least equivalent to the value it is providing under this Agreement, and,
accordingly, has approved this transaction.

                                    ARTICLE 5
                                TERM; TERMINATION

       5.1 TERM. This Agreement shall begin as of the Effective Date and shall
end upon the expiration of the last to expire of the Ixsys Patent Rights (the
"Term").

       5.2 EFFECT OF EXPIRATION. Expiration of this Agreement shall not relieve
the parties of any obligation accruing prior to such expiration. The provisions
of Sections 4.4, 4.5, 4.6, 4.7, 4.8, 4.9 and 5.2 and Articles 1, 3, and 6 shall
survive the expiration of this Agreement.

                                      -5-
<PAGE>   6

                                    ARTICLE 6
                                  MISCELLANEOUS

       6.1 FORCE MAJEURE. Neither party shall be held liable or responsible to
the other party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of this Agreement
(except for non-payment) when such failure or delay is caused by or results from
causes beyond the reasonable control of the affected party, including, without
limitation, fire, floods, embargoes, war, acts of war (whether war be declared
or not), insurrections, riots, civil commotions, strikes, lockouts or other
labor disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other party.

       6.2 ASSIGNMENT. Except as expressly provided hereunder, neither this
Agreement nor any rights or obligations hereunder may be assigned or otherwise
transferred by either party without the prior written consent of the other party
(which consent shall not be unreasonably withheld); provided, however, that
either party may assign this Agreement and its rights and obligations hereunder
without the other party's consent (a) *** (b) to any Affiliate. Notwithstanding
the foregoing, any such assignment to an Affiliate shall not relieve the
assigning party of its responsibilities for performance of its obligations under
this Agreement. The rights and obligations of the parties under this Agreement
shall be binding upon and inure to the benefit of the successors and permitted
assigns of the parties. Any assignment not in accordance with this Agreement
shall be void.

       6.3 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

       6.4 NOTICES. All notices and other communications provided for hereunder
shall be in writing and shall be mailed by first-class, registered or certified
mail, postage paid, or delivered personally, by overnight delivery service or by
facsimile, computer mail or other electronic means, with confirmation of
receipt, addressed as follows:

       IF TO BIOSITE:       BIOSITE DIAGNOSTICS INCORPORATED
                            11030 Roselle Street, Suite D
                            San Diego, CA 92121
                            Attn: President
                            Fax No.  (619) 455-4815

       IF TO IXSYS:         IXSYS, INC.
                            3520 Dunhill Street
                            San Diego, CA 92121
                            Attn: President
                            Fax No.  (619) 597-4950

       Either party may by like notice specify or change an address to which
notices and communications shall thereafter be sent. Notices sent by facsimile,
computer mail or other electronic means shall be effective upon confirmation of
receipt, notices sent by mail or

*** Confidential Treatment has been requested with respect to certain portions
of this agreement.

                                      -6-
<PAGE>   7

overnight delivery service shall be effective upon receipt, and notices given
personally shall be effective when delivered.

       6.5 GOVERNING LAW; VENUE. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of California,
without regard to its choice of law provisions. Any action or proceeding arising
from or relating to this Agreement shall be brought in a federal court in the
Southern District of California or in a state court in San Diego County,
California, and each party irrevocably submits to the jurisdiction and venue of
any such court in any such action or proceeding.

       6.6 ATTORNEYS' AND EXPERTS' FEES. In any proceeding between the parties
arising from or related to the interpretation, construction or enforcement of
this Agreement, the prevailing party shall, in addition to recovering all costs
of suit, be entitled to an award of actual attorneys' fees and actual expert
witness' fees incurred, whether in an original action or on appeal.

       6.7 INJUNCTIVE RELIEF. Biosite agrees that Biosite's unauthorized use or
disclosure of any of Ixsys' Confidential Information received by Biosite will
cause irreparable injury to Ixsys for which pecuniary compensation would not
afford adequate relief and would be extremely difficult to ascertain. In
addition, notwithstanding any of the provisions of this Agreement, Ixsys shall
have the unequivocal right to obtain timely injunctive relief in the event
Biosite breaches its obligations under Article 2 of this Agreement.

       6.8 ENTIRE AGREEMENT; AMENDMENT. This Agreement sets forth all of the
covenants, promises, agreements, warranties, representations, conditions and
understandings between the parties hereto with respect to the subject matter of
this Agreement, and supersedes and terminates all prior agreements and
understanding between the parties with respect to the subject matter of this
Agreement. There are no covenants, promises, agreements, warranties,
representations conditions or understandings with respect to the subject matter
hereof, either oral or written, between the parties other than as set forth
herein. No subsequent alteration, amendment, change or addition to this
Agreement shall be binding upon the parties hereto unless reduced to writing and
signed by the respective authorized officers of the parties.

       6.9 HEADINGS. The captions contained in this Agreement are not a part of
this Agreement, but are merely guides or labels to assist in locating and
reading the several Articles hereof.

       6.10 INDEPENDENT CONTRACTORS. It is expressly agreed that Ixsys and
Biosite shall be independent contractors and that the relationship between the
two parties shall not constitute a partnership, joint venture or agency of any
kind. Neither party shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior written consent of the other party.

       6.11 WAIVER. Except as specifically provided for herein, the waiver from
time to time by either of the parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
the same rights or remedies or of any other of such party's rights or remedies
provided in this Agreement.

                                      -7-
<PAGE>   8

       6.12 COUNTERPARTS. This Agreement may be executed 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.

       IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.

IXSYS, INC.                                    BIOSITE DIAGNOSTICS INCORPORATED

<TABLE>
<S>                                              <C>
By:  /s/  Janine M. Taylor                     By:  /s/  Kim D. Blickenstaff
  --------------------------------------          --------------------------------------

Name:  Janine M. Taylor                        Name:  Kim D. Blickenstaff
    ------------------------------------            ------------------------------------

Title:  Chief Financial Officer                Title:  President
     -----------------------------------             -----------------------------------
</TABLE>

                         Non-Exclusive license Agreement

                                      -8-

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