Document:

<PAGE>
                                                                    EXHIBIT 10.3

                  1999 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
                                       OF
                                  MAXYGEN, INC.

                          (amended as of June 29, 2001)

1.   PURPOSES OF THE PLAN
     --------------------

     The purposes of the 1999 Nonemployee Directors Stock Option Plan of
Maxygen, Inc., a Delaware corporation, are: (a) to encourage Nonemployee
Directors to accept or continue their association with the Company; and (b) to
increase the interest of Nonemployee Directors in the Company's operations and
increased profits through participation in the growth in value of the Common
Stock of the Company.

2.   DEFINITIONS
     -----------

     As used herein, the following definitions shall apply:

     (a) "Administrator" shall mean the entity, either the Board or a committee
          -------------
appointed by the Board, responsible for administering this Plan, as provided in
Section 5.

     (b) "Affiliate" shall mean a parent or subsidiary corporation as defined in
          ---------
the applicable provisions of the Code.

     (c) "Annual Option" shall have the meaning set forth in Section 6(b).
          -------------

     (d) "Board" shall mean the Board of Directors of the Company, as
          -----
constituted from time to time.

     (e) "Change of Control" shall mean: (i) a dissolution or liquidation of the
          -----------------
Company; (ii) a sale of all or substantially all the assets of the Company;
(iii) a merger or consolidation in which the Company is not the surviving
corporation and in which beneficial ownership of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors has changed; (iv) a reverse merger in which
the Company is the surviving corporation but the shares of the common stock of
the Company outstanding immediately before the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, and in which beneficial ownership of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors has changed; (v) an acquisition by any
person, entity or group within the meaning of Section 13(d) or 14(d) of the
Exchange Act, or any comparable successor provisions (excluding any employee
benefit plan, or related trust, sponsored or maintained by the Company or
subsidiary of the Company or other entity controlled by the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled

<PAGE>

to vote in the election of directors; or, (vi) in the event that the individuals
who are members of the Incumbent Board cease for any reason to constitute at
least fifty percent (50%) of the Board.

     (f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
          ----

     (g) "Common Stock" shall mean the Common Stock of the Company.
          ------------

     (h) "Company" shall mean Maxygen, Inc., a Delaware corporation.
          -------

     (i) "Director Fee" shall mean the cash amount, if any, a Nonemployee
          ------------
Director shall be entitled to receive for serving as a director of the Company
in any fiscal year.

     (j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
          ------------
amended.

     (k) "Fair Market Value" shall mean, as of the date in question, the last
          -----------------
transaction price quoted by the NASDAQ National Market System on the date of
grant; provided, however, that if the Common Stock is not traded on such market
system or the foregoing shall otherwise be inappropriate, then the Fair Market
Value shall be determined by the Administrator in good faith at its sole
discretion and on such basis as it shall deem appropriate. Such determination
shall be conclusive and binding on all persons.

     (l) "Incumbent Board" shall mean the individuals who, as of June 28, 2001,
          ---------------
are members of the Board. If the election, or nomination for election by the
Company's stockholders, of any new director is approved by a vote of at least
fifty percent (50%) of the Incumbent Board, such new director shall be
considered as a member of the Incumbent Board.

     (m) "Initial Option" shall have the meaning set forth in Section 6(a).
          --------------

     (n) "Nonemployee Director" shall mean any person who is a member of the
          --------------------
Board but is not an employee of the Company or any Parent or Subsidiary of the

                                        2

<PAGE>

Company and has not been an employee of the Company or any Parent or Subsidiary
of the Company at any time during the preceding 12 months.

     (o) "Option" shall mean a stock option granted pursuant to this Plan.
          ------

     (p) "Option Agreement" shall mean the written agreement described in
          ----------------
Section 6(c) evidencing the grant of an Option to a Nonemployee Director and
containing the terms, conditions and restrictions pertaining to such Option.
"Written agreement" shall include electronic acceptance of an electronic form of
agreement.

     (q) "Option Shares" shall mean the Shares subject to an Option granted
          -------------
under this Plan.

     (r) "Optionee" shall mean a Nonemployee Director who holds an Option.
          --------

     (s) "Parent" shall mean a "parent corporation," whether now or hereafter
          ------
existing, as defined in Section 424(e) of the Code.

     (t) "Plan" shall mean this 1999 Nonemployee Directors Stock Option Plan of
          ----
Maxygen, Inc., as it may be amended from time to time.

     (u) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
          ----------
Exchange Commission, or any successor rule thereto.

     (v) "Section" unless the context clearly indicates otherwise, shall refer
          -------
to a Section of this Plan.

     (w) "Share" shall mean a share of Common Stock, as adjusted in accordance
          -----
with Section 7(a).

     (x) "Subsidiary" shall mean a "subsidiary corporation" of the Company,
          ----------
whether now or hereafter existing, within the meaning of Section 424(f) of the
Code, but only for so long as it is a "subsidiary corporation".

3.   ELIGIBLE PERSONS
     ----------------

     Every person who at the date of grant of an Option is a Nonemployee
Director is eligible to receive Options under this Plan.

                                        3

<PAGE>

4.   STOCK SUBJECT TO THIS PLAN
     --------------------------

     Subject to Section 7(a) of this Plan, the maximum aggregate number of
Shares which may be issued on exercise of Options granted pursuant to this Plan
is 300,000 Shares. The Shares covered by the portion of any grant under the Plan
that expires unexercised shall become available again for grants under the Plan.

5.   ADMINISTRATION
     --------------

     (a) This Plan shall be administered by the Board, or by a committee (the
"Committee") of at least two Board members to which administration of the Plan
is delegated (in either case, the "Administrator"), in accordance with the
requirements of Rule 16b-3.

     (b) Subject to the other provisions of this Plan, the Administrator shall
have the authority, in its sole discretion: (i) to determine the Fair Market
Value of the Shares subject to Option; (ii) to interpret this Plan; (iii) to
prescribe, amend and rescind rules and regulations relating to this Plan; (iv)
to defer (with the consent of the Optionee) or accelerate the exercise date of
any Option; (v) to authorize any person to execute on behalf of the Company any
instrument evidencing the grant of an Option; and (vi) to make all other
determinations deemed necessary or advisable for the administration of this
Plan. The Administrator may delegate nondiscretionary administrative duties to
such employees of the Company as it deems proper.

     (c) All questions of interpretation, implementation and application of this
Plan shall be determined by the Administrator. Such determination shall be final
and binding on all persons.

6.   GRANT OF OPTIONS
     ----------------

     (a) Grant for Initial Election or Appointment to Board. Subject to the
         --------------------------------------------------
terms and conditions of this Plan, if any person who is not an officer or
employee of the Company is first elected or appointed as a member of the Board
and is otherwise considered a "Nonemployee Director" as defined herein, then the
Company shall grant to such Nonemployee Director on such day an Option to
purchase 20,000 Shares ("Initial Option") at an exercise price equal to the Fair
Market Value of such Shares on the date of such Initial Option grant, subject to
the limitation of Section 7(i).

     (b) Grant for Re-election to Board. Subject to the terms and conditions of
         ------------------------------
this Plan, on the date of the first meeting of the Board immediately following
each annual meeting of stockholders of the Company (even if held on the same day
as the meeting of stockholders) the Company shall grant to each Nonemployee
Director then in

                                        4

<PAGE>

office for longer than six months, an Option to purchase 5,000 shares (the
"Annual Option") at an exercise price equal to the Fair Market Value of such
Shares.

     (c) No Option shall be granted under this Plan after ten years from the
date of adoption of this Plan by the Board. Each Option shall be evidenced by a
written Option Agreement, in form and substance satisfactory to the Company,
executed by the Company and the Optionee. Failure by the Company, the
Nonemployee Director, or both to execute an Option Agreement shall not
invalidate the granting of an Option; however, the Option may not be exercised
until the Option Agreement has been executed by both parties. For the purposes
of this Section 6(c), execution of an Option Agreement shall include electronic
acceptance of an electronic version of the Option Agreement.

7.   TERMS AND CONDITIONS OF OPTIONS
     -------------------------------

     Each Option granted under this Plan shall be subject to the terms and
conditions set forth in this Section 7.

     (a) Changes in Capital Structure. Subject to subsection 7(b), if the Common
         ----------------------------
Stock is changed by reason of a stock split, reverse stock split, stock
dividend, or recapitalization, or converted into or exchanged for other
securities as a result of a merger, consolidation, or reorganization,
appropriate adjustments shall be made in: (i) the number and class of shares of
Common Stock subject to this Plan and each Option outstanding under this Plan;
and (ii) the exercise price of each outstanding Option; provided, however, that
the Company shall not be required to issue fractional shares as a result of any
such adjustment. Each such adjustment shall be subject to approval by the
Administrator in its sole discretion.

     (b) Time of Option Exercise. Subject to the other provisions of this Plan,
         -----------------------
each Option shall be for a term of ten years. Each Option shall be exercisable
in full on the date of grant. At the discretion of the Administrator, the
Company shall have a right of repurchase of Option Shares. The Administrator
shall have the discretion to specify the times at which such right of repurchase
shall lapse; provided, however, that the right of repurchase must lapse at the
rate of at least 20% per year over five years from the date the option was
granted.

     (c) Limitation on Other Grants. The Administrator shall have no discretion
         --------------------------
to grant Options under this Plan other than as set forth in Sections 6(a) and
6(b).

     (d) Nonassignability of Option Rights. No Option shall be assignable or
         ---------------------------------
otherwise transferable by the Optionee, except by will or the laws of descent
and

                                       5

<PAGE>

distribution. During the life of an Optionee, an Option shall be exercisable
only by the Optionee.

     (e) Payment. Except as provided below, payment in full, in cash, shall be
         -------
made for all Option Shares purchased at the time written notice of exercise of
an Option is given to the Company, and proceeds of any payment shall constitute
general funds of the Company. Payment may also be made pursuant to a cashless
exercise/sale procedure. At the time an Option is granted or exercised, the
Administrator, in its absolute discretion, may authorize any one or more of the
following additional methods of payment: (i) acceptance of the Optionee's full
recourse promissory note for all or part of the Option price, less any par value
per share, which must be paid in cash, payable on such terms and bearing such
interest rate as determined by the Administrator (but in no event less than the
minimum interest rate required for the Company to avoid incurring a financial
accounting charge with respect to the Option and in no event more than the
maximum interest rate allowed under applicable usury laws), which promissory
note may be either secured or unsecured in such manner as the Administrator
shall approve (including, without limitation, by a security interest in the
Shares); (ii) delivery by the Optionee of Common Stock already owned by the
Optionee for all or part of the Option price, provided the Fair Market Value of
such Common Stock is equal on the date of exercise to the Option price, or such
portion thereof as the Optionee is authorized to pay by delivery of such stock;
provided, however, that if an Optionee has exercised any portion of any Option
granted by the Company by delivery of Common Stock, the Optionee may not, within
six months following such exercise, exercise any Option granted under this Plan
by delivery of Common Stock; and (iii) any other consideration and method of
payment to the extent permitted under the Delaware General Corporation Law.

     (f) Termination as Director. Unless determined otherwise by the
         -----------------------
Administrator in its absolute discretion, to the extent not already expired or
exercised, an Option shall terminate at the earlier of: (i) the expiration of
the term of the Option; or (ii) three months after the last day served by the
Optionee as a director of the Company; provided, that an Option shall be
exercisable after the date of termination of service as a director only to the
extent exercisable on the date of termination; and provided further, that if
termination of service as a director is due to the Optionee's death or
"disability" (as determined in accordance with Section 22(e)(3) of the Code),
the Optionee, or the Optionee's personal representative (or any other person who
acquires the Option from the Optionee by will or the applicable laws of descent
and distribution), may at any time within 12 months after the termination of
service as a director (or such lesser period as is specified in the Option
Agreement but in no event after the expiration of the term of the

                                        6

<PAGE>

Option), exercise the rights to the extent they were exercisable on the date of
the termination.

     (g) Withholding and Employment Taxes. At the time of exercise of an Option
         --------------------------------
(or at such later time(s) as the Administrator may prescribe), the Optionee
shall remit to the Company in cash all applicable federal and state withholding
and employment taxes. If authorized by the Administrator in its sole discretion,
an Optionee shall be permitted to elect, by means of a form of election to be
prescribed by the Administrator, to have shares of Common Stock that are
acquired upon exercise of the Option withheld by the Company (but in such event,
only up to the minimum required withholding amount and in no event any more) or
to tender to the Company other shares of Common Stock or other securities of the
Company owned by the Optionee on the date of determination of the amount of tax
to be withheld as a result of the exercise of such Option (the "Tax Date") to
pay the amount of withholding taxes due. Any securities so withheld or tendered
shall be valued by the Company as of the Tax Date.

     (h) Option Term. Each Option shall expire ten years after the date of
         -----------
grant.

     (i) Exercise Price. The exercise price of any Option granted to any person
         --------------
who owns, directly or by attribution under the Code currently Section 424(d),
stock possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or of any Affiliate (a "Ten Percent
Stockholder") shall in no event be less than 110% of the fair market value
(determined in accordance with 2(i)) of the stock covered by the Option at the
time the Option is granted.

8.   MANNER OF EXERCISE
     ------------------

     (a) An Optionee wishing to exercise an Option shall give written notice to
the Company at its principal executive office, to the attention of the officer
of the Company designated by the Administrator, accompanied by payment of the
exercise price as provided in Section 7(e) and, if required, by payment of any
federal or state withholding or employment taxes required to be withheld due to
exercise of the Option. The date the Company receives written notice of an
exercise accompanied by payment of the exercise price and any required federal
or state withholding or employment taxes will be considered as the date such
Option was exercised. Unless otherwise provided by the Administrator, Options
may be exercised only twice in any calendar year.

     (b) Promptly after the date an Option is exercised, the Company shall,
without stock issue or transfer taxes to the Optionee or other person entitled
to exercise the Option, deliver to the Optionee or such other person a
certificate or certificates for the

                                       7

<PAGE>

requisite number of shares of Common Stock or, in lieu of a certificate,
electronic or paper notification of share ownership in a brokerage account. An
Optionee or transferee of an Optionee shall not have any privileges as a
stockholder with respect to any Common Stock covered by the Option until the
date of issuance of a stock certificate or notification or ownership in a
brokerage account.

9.   NO RIGHT TO DIRECTORSHIP
     ------------------------

     Neither this Plan nor any Option shall confer upon any Optionee any right
with respect to continuation of the Optionee's membership on the Board or shall
interfere in any way with provisions in the Company's Certificate of
Incorporation, as amended, and Bylaws, as amended, relating to the election,
appointment, terms of office, and removal of members of the Board.

10.   FINANCIAL INFORMATION
      ---------------------

     The Company shall provide to each Optionee during the period the Optionee
holds an outstanding Option a copy of the financial statements of the Company as
prepared either by the Company or independent certified public accountants of
the Company. Such financial statements shall be delivered as soon as practicable
following the end of the Company's fiscal year during the period Options are
outstanding.

11.   LEGAL REQUIREMENTS
      ------------------

     The Company shall not be obligated to offer or sell any Shares upon
exercise of any Option unless the Shares are at that time effectively registered
or exempt from registration under the federal securities laws and the offer and
sale of the Shares are otherwise in compliance with all applicable securities
laws and the regulations of any stock exchange on which the Company's securities
may then be listed. The Company shall have no obligation to register the Shares
covered by this Plan under the federal securities laws or take any other steps
as may be necessary to enable the Shares covered by this Plan to be offered and
sold under federal or other securities laws. Upon exercising all or any portion
of an Option, an Optionee may be required to furnish representations or
undertakings deemed appropriate by the Company to enable the offer and sale of
the Shares or subsequent transfers of any interest in the Shares to comply with
applicable securities laws. Certificates evidencing Shares acquired upon
exercise of Options shall bear any legend required by, or useful for purposes of
compliance with, applicable securities laws, this Plan or the Option Agreements.

                                       8

<PAGE>

12.  ACCELERATION UPON CHANGE OF CONTROL
     -----------------------------------

     In the event of a Change of Control of the Company, all unvested Option
Shares shall immediately and automatically vest in full and any Company right to
repurchase Option Shares under Section 7(b) shall immediately and automatically
lapse in full.

13.  AMENDMENTS TO PLAN
     ------------------

     The Board may amend this Plan at any time. Without the consent of an
optionee, no amendment may adversely affect outstanding Options. No amendment
shall require stockholder approval unless:

     (a) stockholder approval is required to meet the exemptions provided by
Rule 16b-3, or any successor rule thereto or under applicable state statutes; or

     (b) the Board otherwise concludes that stockholder approval is advisable.

14.  STOCKHOLDER APPROVAL; TERM
     --------------------------

     This Plan shall become effective upon adoption by the Board of Directors;
provided, however, that no Option shall be exercisable unless and until written
consent of holders of a majority of the outstanding shares of capital stock of
the Company, or approval by holders of a majority of shares of capital stock of
the Company present, or represented, and entitled to vote at a validly called
stockholders' meeting (or such greater number as may be required by law or
applicable governmental regulations or orders) is obtained within 12 months
after adoption by the Board. This Plan shall terminate ten years after adoption
by the Board unless terminated earlier by the Board. The Board may terminate
this Plan at any time without stockholder approval. No Options shall be granted
after termination of this Plan, but termination shall not affect rights and
obligations under then-outstanding Options.

     Adopted by the Board of Directors:  September 29, 1999

     Approved by the Stockholders:  December 14, 1999

     Amended by the Board of Directors:  March 1, 2001

     Amended by the Board of Directors:  June 29, 2001

                                        9

<PAGE>

                                  MAXYGEN, INC.
                  1999 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
                             STOCK OPTION AGREEMENT

         This document (the "Agreement") sets forth the terms of a Stock Option
(the "Option") granted by Maxygen, Inc., a Delaware corporation (the "Company"),
pursuant to a Certificate of Stock Option Grant (the "Certificate") displayed at
the website of AST StockPlan, Inc. The Certificate, which specifies the person
to whom the Option is granted ("Optionee") and other specific details of the
grant, and the electronic acceptance of the Certificate at the website of AST
StockPlan, Inc., are incorporated herein by reference.

         THE PARTIES AGREE AS FOLLOWS:

     1. Grant of Option; Vesting Base Date.
        ----------------------------------

        1.1. Grant. The Company hereby grants to Optionee an opportunity to
             -----
     purchase shares of its Common Stock in accordance with the Company's 1999
     Non-Employee Directors Stock Option Plan (the "Plan"), as hereinafter
     provided.

        1.2. Vesting Base Date. The parties hereby establish the date set
             -----------------
     forth in the Certificate as the Vesting Base Date (as defined below).

        1.3. Type of Option. The Option shall be a "nonstatutory option."
             --------------

        1.4. Number of Option Shares. The number of shares of Company Common
             -----------------------
     Stock underlying the Option (the "Option Shares") is as set forth in the
     Certificate.

     2. Exercise Price. The exercise price for purchase of each share of Common
        --------------
Stock covered by this Option shall be the price set forth in the Certificate.

     3. Term. Unless otherwise specified in the Certificate or this Agreement,
        ----
this Option shall expire as provided in Section 7(b) of the Plan.

     4. Corporate Transactions. In the event of the proposed dissolution or
        ----------------------
liquidation of the Company, the Administrator (as defined in the Plan) shall
notify Optionee at least 15 days before consummation of the proposed action. To
the extent not previously exercised, the Option will terminate immediately
before the consummation of the proposed action. In the event of a merger or
consolidation of the Company with or into another entity in which the Company is
not a surviving entity or in which the stockholders of the Company just before
that transaction do not, by virtue of those holdings, own securities
representing at least 50 percent of the ordinary voting power of the Company
immediately after that transaction, or in the event of a sale of all or
substantially all the assets of the Company in which the stockholders of the
Company receive securities of the acquiring entity or an affiliate thereof: (a)
if the successor entity so chooses, it shall assume the Option or issue
equivalent options when the transaction is consummated or (b) if the successor
entity chooses not to do that, then the Option shall be fully vested and
exercisable for a period of 15 days after the date notice is given under this
Section 4 and shall terminate upon expiration of that 15-day period.

                                       1

<PAGE>

     5. Adjustment of Options. The Company shall adjust the number and kind of
        ---------------------
shares and the exercise price thereof in certain circumstances in accordance
with the provisions of Section 7(a) of the Plan and Section 4 hereof.

     6. Exercise of Options.
        -------------------

        6.1 Vesting; Time of Exercise. This Option shall be exercisable in
            -------------------------
     full on the date of grant but shall be subject to a right of repurchase in
     favor of the Company, at the exercise price per share, as to any unvested
     Option Shares. This Option shall vest according to the schedule set forth
     in the Certificate. Such schedule shall commence as of the date set forth
     in the Certificate (the "Vesting Base Date"). Notwithstanding the
     foregoing, the vesting schedule and right of repurchase set forth in this
     Section 6.1 are subject to the acceleration provisions in Section 12 of the
     Plan.

        6.2 Termination as Director. Unless determined otherwise by the
            -----------------------
     Administrator in its absolute discretion, to the extent not already
     expired, the Option shall terminate at the earlier of: (i) the expiration
     of the term of the Option; or (ii) three months after the last day served
     by Optionee as a director of the Company (the "Date of Termination");
     provided, that the Option shall stop vesting on the Date of Termination and
     exercises thereafter shall be only for vested Option Shares; and provided
     further, that if termination of service as a director is due to the
     Optionee's death or "disability" (as determined in accordance with Section
     22(e)(3) of the Internal Revenue Code), Optionee, or Optionee's personal
     representative (or any other person who acquires the Option from Optionee
     by will or the applicable laws of descent and distribution), may at any
     time within 12 months after the Date of Termination (but in no event after
     the expiration of the term of the Option), exercise the Option to the
     extent Option Shares were vested on the Date of Termination. The Company
     shall have three months after the Date of Termination to give notice of its
     intent to repurchase Option Shares that were unvested on the Date of
     Termination. The repurchase shall take place as soon as practicable after
     the date of such notice.

        6.3 Manner of Exercise. Optionee may exercise this Option, or any
            ------------------
     portion of this Option, by giving written notice to the Company at its
     principal executive office, to the attention of the officer of the Company
     designated by the Plan Administrator, accompanied by payment of the
     exercise price and payment of any applicable withholding or employment
     taxes. The date the Company receives written notice of an exercise
     hereunder accompanied by payment will be considered as the date this Option
     was exercised.

        6.4 Payment. Except as otherwise provided in the Certificate, payment
            -------
     of the exercise price per share is due in full upon exercise of all or any
     part of the Option. Optionee may elect, to the extent permitted by
     applicable statutes and regulations, to make payment of the exercise price
     under one of the following alternatives: (i) payment of the exercise price
     per share in cash (including check) at the time of exercise, (ii) payment
     pursuant to a program developed under Regulation T as promulgated by the
     Federal Reserve Board that, prior to the issuance of the Option Shares,
     results in either the receipt of cash (or check) by the Company or the
     receipt of irrevocable instructions to pay the aggregate exercise price to
     the Company from the sales proceeds, (iii) provided that at the time of
     exercise the Company's Common Stock is publicly traded and quoted regularly
     in the Wall Street Journal, payment by delivery of already-owned

                                       2

<PAGE>

shares of Common Stock, held for the period required to avoid a charge to the
Company's reported earnings, and owned free and clear of any liens, claims,
encumbrances or security interests, which Common Stock shall be valued at its
fair market value on the date of exercise, or (iv) payment by a combination of
the methods of payment permitted by subparagraphs 6.4(i) through 6.4(iii) above.
The proceeds of any payment shall constitute general funds of the Company.

        6.5 Delivery of Certificate/Notice of Share Ownership. Promptly after
            -------------------------------------------------
receipt of written notice of exercise of the Option, the Company shall instruct
its transfer agent to deliver to Optionee a certificate or certificates for the
requisite number of Option Shares or, in lieu thereof, paper or electronic
notification of share ownership in Optionee's brokerage account. The Optionee
shall not have any privileges as a stockholder of the Company with respect to
any Option Shares covered by the Option until the date of issuance of the stock
certificate or notice of share ownership for those Option Shares.

     7. Nonassignability of Option. This Option is not, and unvested Option
        --------------------------
Shares are not, assignable or transferable by Optionee except by will or by the
laws of descent and distribution. During the life of Optionee, the Option is
exercisable only by Optionee. Any attempt to assign, pledge, transfer,
hypothecate or otherwise dispose of this Option or unvested Option Shares in a
manner not herein permitted, and any levy of execution, attachment, or similar
process on this Option or on unvested Option Shares, shall be null and void.

     8. Restriction on Issuance of Shares.
        ---------------------------------

        8.1 Legality of Issuance. The Company shall not be obligated to sell
            --------------------
or issue any Option Shares pursuant to this Agreement if such sale or issuance,
in the opinion of the Company or its counsel, might constitute a violation by
the Company of any provision of law, including without limitation the provisions
of the Securities Act of 1933, as amended (the "Securities Act").

        8.2 Compliance with Law. The Company shall not be obligated to take
            -------------------
any affirmative action in order to cause the grant or exercise of this Option or
the issuance or sale of any Option Shares pursuant thereto to comply with any
law.

     9. Restriction on Transfer. Regardless of whether the sale of the Option
        -----------------------
Shares has been registered under the Securities Act or has been registered or
qualified under the securities laws of any state, the Company may impose
restrictions upon the sale, pledge or other transfer of Option Shares (including
the placement of appropriate legends on stock certificates) if, in the judgment
of the Company and the Company's counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state or any other law.

     10. Stock Certificate. Stock certificates evidencing Option Shares may bear
         -----------------
such restrictive legends as the Company and the Company's counsel deem necessary
or advisable under applicable law or pursuant to this Agreement.

                                       3

<PAGE>

     11. Assignment; Binding Effect. Subject to the limitations on assignment
         --------------------------
set forth in this Agreement, this Agreement shall be binding upon and inure to
the benefit of the executors, administrators, heirs, legal representatives, and
successors of the parties hereto.

     12. Damages. Optionee shall be liable to the Company for all costs and
         -------
damages, including incidental and consequential damages, resulting from a
disposition of Option Shares that is not in conformity with the provisions of
this Agreement.

     13. Governing Law. This Agreement shall be governed by, and construed in
         -------------
accordance with, the laws of the State of California excluding those laws that
direct the application of the laws of another jurisdiction.

     14. Notices. All notices and other communications under this Agreement
         -------
shall be in writing or posted electronically on the AST Stockplan website.
Unless and until Optionee is notified in writing to the contrary, all notices,
communications, and documents directed to the Company and related to the
Agreement shall be delivered to:

                  Maxygen, Inc.
                  515 Galveston Drive
                  Redwood City, CA  94063
                  Attention:  General Counsel

Unless and until the Company is notified in writing to the contrary, all
notices, communications, and documents directed to Optionee and related to this
Agreement shall be mailed to Optionee's last known address as shown on the
Company's books or posted electronically on the AST Stockplan website. Notices
and communications shall be delivered by hand, mailed by first class mail,
postage prepaid, sent by reputable overnight courier or posted electronically on
the AST Stockplan website. All mailings and deliveries related to this Agreement
shall be deemed received when actually received, if by hand delivery, two
business days after mailing, if by mail, the next business day after being sent
by reputable overnight courier, or 30 days after the date of posting for notices
posted electronically on the AST Stockplan website.

         IN WITNESS WHEREOF, the parties have entered into this Stock Option
Agreement as of the grant date set forth in the Certificate.

                                  MAXYGEN, INC.

         Optionee accepts and agrees to be bound by all the terms and conditions
of this Agreement and the Plan.

                                       4<PAGE>
                                                                    EXHIBIT 10.4

                                 PROMISSORY NOTE

$96,822                                                Redwood City, California
                                                                    May 7, 2001

         FOR VALUE RECEIVED, John Curd (the "Promisor") hereby unconditionally
promises to pay to the order of Maxygen, Inc. ("Maxygen") at 515 Galveston
Drive, Redwood City, California 94063, or at such other place, or to such other
party as Maxygen may from time to time designate in writing, the principal sum
of Ninety-Six Thousand Eight Hundred Twenty-Two Dollars and Zero Cents
($96,822), together with interest thereon from the date of this Note until and
including the date this Note is paid in full at the rate of the lesser of (i)
5.75% per annum and (ii) the maximum rate permissible by law (which under the
laws of the State of California shall be deemed to be the laws relating to the
permissible rates of interest on commercial loans), in either case compounded
annually.

         The principal sum consists of a loan made by Maxygen to the Promisor on
May 7, 2001.

         Interest shall be due and payable on June 30 and December 31 of each
year. Unpaid principal, together with all accrued and unpaid interest, shall be
due and payable in full on May 7, 2003. In the event the Promisor's employment
with Maxygen terminates for any reason before the unpaid principal balance of
this Note, and all unpaid interest, is paid in full, the remaining unpaid
principal balance of this Note, and all unpaid interest, shall be due and
payable on the Promisor's last date of employment (the "Employment Termination
Date"). Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed. This Note may be prepaid, in whole or in part, at
any time without premium or penalty.

         In the event that any portion of the principal amount hereof, or
interest due hereon, is not paid upon the Employment Termination Date, the
Promisor hereby authorizes and directs Maxygen to deduct all amounts due under
this Note from the Promisor's final paycheck. The Promisor agrees to execute any
reaffirmation agreement requested by Maxygen at the time of termination,
reaffirming the Promisor's authorization to deduct these sums from the final
paycheck. If the Promisor's final paycheck is insufficient to offset deduction
of the principal and interest owed under this Note, the Promisor agrees to pay
immediately, all of the outstanding principal and interest under this Note. The
Promisor also agrees to pay, upon demand, any costs and expenses of Maxygen
incurred in connection with or arising out of the collection or enforcement of
this Note, including without limitation, attorneys' fees and court costs
(inclusive of attorneys' fees and costs on appeal or in connection with any
bankruptcy proceeding relating to the Promisor).

         In the event that the Promisor fails to make payment on any date for
payment of principal and interest specified above, the Promisor shall be deemed
to be in default hereunder. In the event of default, Maxygen may, at its sole
discretion, five days after giving notice of default to the Promisor, accelerate
the maturity of all amounts due under this Note by giving notice of such

<PAGE>

acceleration; provided, however, that such acceleration shall not occur if the
Promisor makes the required payment within five days after notice of default is
given.

         This Note is secured by a Security Agreement of even date herewith.

         If any payment of principal or interest on this note becomes due on a
Saturday, Sunday, or a public holiday under the laws of the State of California,
such payment shall be made on the next succeeding business day and such
extension of time shall be included in computing interest in connection with
such payment.

         Upon payment in full of all principal and interest payable hereunder,
this Note shall be surrendered to the Promisor for cancellation.

         The Promisor and any endorsers or guarantors hereof and all others who
may become liable for all or part of this obligation, severally waive
presentment for payment, demand and protest and notice of protest, and of
dishonor and non-payment of this Note, and expressly consent to any extension of
the time of payment hereof or of any sums due hereunder, to the release of any
party liable for this obligation, and any such extension or release may be made
without notice to any of such parties and without in any way affecting or
discharging this liability.

         Time is expressly made of the essence with respect to every provision
of this Note. All payments due under this Note shall be made in the legal
currency of the United States in immediately available funds. Payments received
under this Note shall be applied first to payment of accrued and unpaid
interest, then to payment of Maxygen's costs and the balance to payment of
principal. This Note is being delivered in and shall be governed by, and
construed, enforced and interpreted in accordance with, the laws of the State of
California, excluding conflict of laws principles that would cause the
application of laws of any other jurisdiction. An action or proceeding for
collection or enforcement of this Note may be brought by Maxygen (or its
assignee) in any state or federal court in the State of California having proper
jurisdiction.

          The Promisor freely and voluntarily accepts the terms and conditions
set forth above and acknowledges receiving a completed copy of this Promissory
Note.

         This Promissory Note is executed at the location and as of the date
first set forth above.

                                                  The Promisor

                                                  /s/ John Curd
                                                  ---------------------------
                                                  John Curd
                                                  128 Reservoir
                                                  Hillsborough, CA 94010

                                       2

<PAGE>

                                  Payments Made
                                  -------------

     Date            Principal Amount        Interest        Received By
     ----            ----------------        --------        -----------

                                       3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00028-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00028-of-00352.parquet"}]]