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                                                                    EXHIBIT 10.7


                               LICENSE AGREEMENT

THIS AGREEMENT is made as of January 11, 2000 between:

1.   SANGAMO BIOSCIENCES, INC. incorporated in Delaware, United States of
     America, having an office at Point Richmond Tech Center, 501 Canal Blvd.
     Suite A100, Richmond, California 94840 (SANGAMO); and

2.   BAXTER HEALTHCARE CORPORATION incorporated in Delaware, United States of
     America, having an office at 17221 Red Hill Avenue, Irvine, California,
     92614-5686 (BAXTER).

                                    RECITALS

A.   SANGAMO is the owner or licensee of the Technology and Patent Rights (as
     defined in Clause 1.1. herein).

B.   BAXTER wishes to received an exclusive license to use and exploit the
     Technology and Patent Rights to develop and commercialize zinc finger DNA
     binding protein and gene therapy products for activation of all vascular
     endothelial growth factors ("VEGF") and VEGF receptors for the treatment of
     ischemic cardiovascular and vascular disease in humans, and SANGAMO is
     willing to grant BAXTER such a license on the terms and conditions
     contained in this Agreement.

C.   SANGAMO wishes to undertake research relating to the further development of
     its proprietary zinc finger binding protein and gene therapy technology and
     BAXTER wishes to fund such research to facilitate SANGAMO's ability to
     license such technology to BAXTER under the License Agreement. Therefore,
     BAXTER and SANGAMO have entered into a Research Funding Agreement,
     contemporaneously herewith.

     IT IS AGREED as follows.

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1.   DEFINITIONS

     The following definitions apply unless the context requires otherwise.

1.1  AFFILIATE with respect to an entity, means a person or entity which owns,
     is owned by or is under common ownership with the first-named entity. For
     the purposes of this definition, the term "owns" as used with respect to
     any person or entity means ownership (directly or indirectly) of at least
     fifty percent (50%) of the outstanding voting securities of a corporation
     or a comparable equity interest in another form of entity.

1.2  AGREEMENT means this License Agreement.

1.3  BAXTER INVENTIONS shall mean those Inventions independently conceived
     and/or reduced to practice, or written (as determined by United States
     patent or copyright law) solely by BAXTER or by an employee, consultant,
     agent or representative of BAXTER or by some other person obligated to
     assign their rights to such Invention to BAXTER or otherwise owned by
     BAXTER.

1.4  CONVERTIBLE DEBENTURES means a debenture issued by SANGAMO, substantially
     in the form of Schedule 3 hereto, accruing interest at the Prime Rate as
     published in the United States Western Edition of The Wall Street Journal
     under the heading "Money Rates" on the date of issuance, maturing on the
     fifth anniversary of the date of issuance, and convertible in accordance
     with its terms into capital stock of SANGAMO.

1.5  CROSS LICENSED PRODUCT shall mean product or device for which BAXTER or its
     Affiliate receives a (sub)license or other rights to commercialize in
     connection with the grant of a sublicense or other rights to commercialize
     a Licensed Product.

1.6  DEVELOPMENT COSTS shall mean, with respect to a Licensed Product, the sum
     of (a) the aggregate cash consideration actually paid by BAXTER to Third
     Parties to acquire licenses under pending patent applications or issued
     patents necessary in order to manufacture, having manufactured, import,
     use, sell and offer for sale such Licensed Product, plus (b) the aggregate
     out-of-pocket amounts (if any) actually paid by BAXTER to Third Parties to
     research and develop such Licensed Product for commercial sale, or to


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     acquire or develop the facilities, equipment, materials and processes
     needed for GMP manufacture of such Licensed Product. Whether or not a
     pending patent application, issued patent, facility, equipment, materials
     or process is needed for purposes of this Clause 1.5 shall be determined by
     the Steering Committee: provided, however, if the Steering Committee cannot
     reach agreement, the disagreement shall be resolved pursuant to Clause 12.

1.7  EFFECTIVE DATE means the date set forth on page 1, line 1 of this
     Agreement.

1.8  ELA means Establishment License Approval to manufacture any Licensed
     Product by USFDA, or its foreign equivalent in a Major Country.

1.9  FIELD means the use of zinc finger DNA binding proteins and nucleic acids
     that encode zinc finger DNA binding proteins for the activation of VEGF and
     VEGF receptors for the treatment and prevention of ischemic cardiovascular
     and vascular disease in humans.

1.10 FIELD OF RESEARCH shall mean the development of zinc finger DNA binding
     proteins and nucleic acids that encode zinc finger DNA binding proteins for
     the activation of VEGF and VEGF receptors for the treatment and prevention
     of ischemic cardiovascular and vascular disease in humans.

1.11 FIRST COMMERCIAL SALE means the initial arms length transfer in a Major
     Country by BAXTER or BAXTER'S sub-licensee of a Licensed Product to a
     purchaser that is not an Affiliate after the date of receiving the
     applicable regulatory approval to market the Licensed Product in such Major
     Country, in exchange for cash or some equivalent to which value can be
     assigned for the purpose of determining Net Sales.

1.12 GROSS PROFITS means the Net Sales of Licensed Products, less the sum of (a)
     the actual cost of raw materials and (b) the other production costs
     (allocated in accordance with generally accepted accounting principles
     consistently applied to all products produced by the producer) incurred in
     bringing the Licensed Products to the point of sale.

1.13 IND means Investigational New Drug application in the United States or its
     foreign equivalent in a Major Country, and a reference to the submission
     thereof is a reference to

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           the submission of such application with the USFDA or the equivalent
           submission with the applicable foreign regulatory authority of a
           Major Country.

     1.14  INVENTION(S) as used herein shall include, without restriction or
           limitation, any and all devices, products, compositions or matter,
           chemical formulations, computer software, or processes (including
           without limitation processes for making or using devices or
           compositions of matter), whether patentable or unpatentable, and any
           and all written materials or other works which may be subject to
           copyright, which are reduced to practice, conceived or written during
           the term of the Research Funding Agreement and for ninety (90) days
           after it expires, and result from the performance of the Sponsored
           Research.

     1.15  INVENTION PATENTS as used herein shall include any patent or patent
           application covering an Invention in any country (including any
           additions, divisions, continuations, continuations-in-part, reissues,
           re-examinations, inventors' certificates, registrations or extensions
           of the said patents or patent applications and any supplementary
           protection certificates issued in connection with any of the said
           patents or patent applications).

     1.16  JOINT INVENTIONS shall mean those Inventions jointly conceived and/or
           reduced to practice, or written (as determined by United States
           patent or copyright law) by, on the one hand, either an employee,
           consultant, agent, or representative of SANGAMO or some other person
           obligated to assign their rights to such invention to SANGAMO, and,
           on the other hand, BAXTER or an employee, consultant, agent, or
           representative of BAXTER or by some other person obligated to assign
           their rights to such Invention to BAXTER, or otherwise jointly owned
           by SANGAMO and BAXTER.

     1.17  JOINTLY INVENTED LICENSED PRODUCT shall mean a pharmaceutical product
           (in final dosage, packaged and labeled form) comprising a ZFP, the
           manufacture, use, offer for sale, sale or import of which falls
           within the scope of one or more claims of a pending patent
           application or issued and unexpired patent within the Inventions
           Patents covering Joint Inventions which has not been permanently
           revoked, held unenforceable or invalid by a decision of a court or
           other governmental agency of competent jurisdiction, unappealable or
           unappealed within the time allowed for appeal, and which has not been



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           admitted to be invalid or unenforceable through reissue or disclaimer
           or otherwise, provided that such product is not otherwise a Licensed
           Product.

     1.18  JOINTLY INVENTED LICENSE COMBINATION PRODUCT shall mean any
           pharmaceutical product (in final dosage, packaged and labeled form)
           that consists of a Jointly Invented Licensed Product and parts of
           other products such as, for example, biological or mechanical drug
           delivery systems or vehicles, including but not limited to devices or
           biological systems for enhancing the performance of the Jointly
           Invented Licensed Product, the local delivery of the Jointly Invented
           Licensed Product, or the sustained expression of the Jointly Invented
           Licensed Product.

     1.19  LICENSE FEE means any amount payable by BAXTER to SANGAMO pursuant to
           this Agreement.

     1.20  LICENSED PRODUCT means any of a Jointly Invented Licensed ZFP
           Product, Jointly Invented Licensed ZFP Combination Product, Licensed
           ZFP Product or Licensed ZFP Combination Product. For clarification
           purposes, a Subsequent Licensed Product shall be a Licensed Product.

     1.21  LICENSED ZFP PRODUCT means any pharmaceutical product (in final
           dosage, packaged and labeled form) comprising a ZFP, the manufacture,
           use, offer for sale, sale or import of which falls within the scope
           of one or more claims of a pending patent application or issued and
           unexpired patent within the Patent Rights, which has not been
           permanently revoked, held unenforceable or invalid by a decision of a
           court or other governmental agency of competent jurisdiction,
           unappealable or unappealed within the time allowed for appeal, and
           which has not been admitted to be invalid or unenforceable through
           reissue or disclaimer or otherwise.

     1.22  LICENSED ZFP COMBINATION PRODUCT means any pharmaceutical product (in
           final dosage, packaged and labeled form) that consists of the
           Licensed ZFP Product and parts of other products such as, for
           example, biological or mechanical drug delivery systems or vehicles,
           including but not limited to devices or biological systems for
           enhancing the

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           performance of the Licensed ZFP Product, the local delivery of the
           Licensed ZFP Product, or the sustained expression of the Licensed ZFP
           Product.

     1.23  MAJOR COUNTRY means either the United States of American or any three
           countries of the European Union.

     1.24  MARKETING APPROVAL means the granting of marketing approval for any
           Licensed Product by the USFDA or the applicable foreign regulatory
           authority in a Major Country.

     1.25  NET SALES means gross invoiced sales price from sales of any Licensed
           Product by BAXTER, its Affiliate or sub-licensee of BAXTER to a
           purchaser that is not an Affiliate (other than to an Affiliate that
           is an end user), less reasonable and customary deductions for (a)
           transportation charges, including insurance relating thereto; (b)
           sales and excise taxes or customs duties paid by the party selling or
           distributing such Licensed Product or any other governmental charges
           imposed upon the sale or distribution of such Licensed Product; and
           (c) returns, or allowances in lieu of returns, quantity discounts,
           cash discounts or chargebacks actually granted, allowed or incurred
           in the ordinary course of business in connection with the sale or
           distribution of such Licensed Product. Notwithstanding the foregoing,
           if BAXTER does not receive in the ordinary course of business, from
           an Affiliate to whom BAXTER sells or otherwise transfers a Licensed
           Product for resale in any country, the foregoing itemized gross sales
           and deductions data regarding a Licensed Product, then "Net Sales"
           shall mean, with respect to such Affiliate and such Licensed Product
           (on a per unit basis) sold in such country, the average per unit
           sales price, less the above types of deductions (the "average net
           sales price"), by such Affiliate of such Licensed Product in such
           country (if reported) or otherwise in the geographic region in which
           such country is located; provided, however, that the average net
           sales price shall be calculated in accordance with generally accepted
           accounting principles consistently applied in the United States,
           shall be the same as the average net sales price by such Affiliate in
           such country or region (as applicable) used for purposes of preparing
           BAXTER's consolidated financial statements, and shall not materially
           differ from the calculation of Net Sales by BAXTER itemized above.

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1.26 NET SUBLICENSE REVENUES shall mean, with respect to a Licensed Product, the
     Sublicense Revenues for such Licensed Product, less the sum of (a) fifty
     percent (50%) of the aggregate milestone payments actually paid to SANGAMO
     pursuant to Clauses 4.2.1(b) and 4.2.1(c) for such Licensed Product, (b)
     two hundred percent (200%) of the aggregate royalties actually paid to
     SANGAMO pursuant to Clause 4.3.1 for such Licensed Product, and (c) fifty
     percent (50%) of the Development Costs for such Licensed Product.

1.27 PATENT RIGHTS means (i) the SANGAMO Patent Applications, (ii) any patent or
     patent application owned by or licensed to SANGAMO which discloses or
     claims a ZFP or methods of producing or using ZFP in the Field, and (iii)
     any patent subsequently issued on any or all of (i) or (ii) in any country
     (including any additions, divisions, continuations, continuations-in-part,
     reissues, re-examinations, inventors' certificates, registrations or
     extensions of the said patents or patent applications and any supplementary
     protection certificates issued in connection with any of the said patents
     or patent applications), in each case that are owned by SANGAMO or licensed
     to SANGAMO with the right to grant sublicenses during the term of this
     Agreement.

1.28 PHASE 1 CLINICAL TRIALS has the same meaning as the term has in the United
     States Code of Federal Regulations or its foreign equivalent in a Major
     Country.

1.29 PHASE 2 CLINICAL TRIALS has the same meaning as that term in the United
     States Code of Federal Regulations or its foreign equivalent in a Major
     Country.

1.30 PHASE 3 CLINICAL TRIALS has the same meaning as that term has in the United
     States Code of Federal Regulations or its foreign equivalent in a Major
     Country.

1.31 RESEARCH FUNDING AGREEMENT shall mean the Research Funding Agreement
     entered into between BAXTER and SANGAMO contemporaneously herewith (as
     amended or restated from time to time).

1.32 SANGAMO INVENTIONS shall mean those Inventions independently conceived
     and/or reduced to practice, or written (as determined by United States
     patent or copyright law) solely by SANGAMO or by an employee, consultant,
     agent or representative of


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     SANGAMO or by some other person obligated to assign their rights so such
     Inventions to SANGAMO or otherwise owned by SANGAMO.

1.33 SANGAMO PATENT APPLICATIONS means any patents and patent applications
     described in Schedule 1.

1.34 SPONSORED RESEARCH shall mean those research activities to be performed
     within the Field Of Research, and in accordance with a Research Plan
     specifically set forth in Exhibit A to the Research Funding Agreement.

1.35 STEERING COMMITTEE means the Committee appointed pursuant to clause 7.2.1.

1.36 SUBLICENSE REVENUES shall mean, with respect to a Licensed Product, the
     aggregate cash consideration, plus the fair market value of the aggregate
     cash equivalents and securities, owing to BAXTER and its Affiliates in
     connection with the grant of such sublicense or other rights to
     commercialize such Licensed Product. If the parties fail to reach mutually
     acceptable agreement on the fair market value of any such cash equivalents
     or securities, the disagreement shall be resolved in accordance with Clause
     12.

1.37 SUBSEQUENT LICENSED PRODUCT shall mean a Licensed Product that comprises a
     ZFP intended for use in the treatment or prevention of a clinical
     indication in the Field, other than coronary or peripheral vascular
     disease, and that is different than any Licensed Product which previously
     reached the point of First Commercial Sale.

1.38 TECHNOLOGY means any and all technical data, information, materials,
     know-how and trade secrets (including but not limited to, the biological
     materials and other materials used by SANGAMO for purifying or producing
     ZFPs), regarding ZFPs or methods of purifying, producing, or using ZFPs in
     the Field, which is owned by SANGAMO or licensed to SANGAMO with the right
     to grant sublicenses during the term of this Agreement.


1.39 TERRITORY means the entire world.

1.40 THIRD PARTY means any party other than SANGAMO or BAXTER.


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1.41   USFDA means the Food and Drug Administration of the United States of
       America.

1.42   ZFP means any zinc finger DNA binding protein, or any nucleic acid that
       encodes for a zinc finger DNA binding protein, that is developed,
       licensed or acquired by SANGAMO for use in the Field pursuant to the
       Research Funding Agreement or this Agreement.


2.     REPRESENTATIONS AND WARRANTIES

2.1    PATENT MATTERS

       (a)   As of the Effective Date:

             (i)    SANGAMO warrants and represents that, except as SANGAMO
                    otherwise has advised BAXTER in writing prior to the
                    Effective Date, it has not received written notice from any
                    Third Party that any composition, process or use claimed by
                    the Patent Rights infringes an issued patent of such Third
                    Party;

             (ii)   SANGAMO warrants and represents that (A) it has conducted
                    searches of public databases for issued patents and
                    published Third Party patent applications that contain the
                    words "zinc finger" or "nucleic acid binding proteins" in
                    the title or abstract, and (B) that it has disclosed to
                    BAXTER all issued patents and published Third Party patent
                    applications that have been disclosed to SANGAMO in the
                    results of such searches.

             (iii)  SANGAMO warrants and represents that it has no actual
                    knowledge (without any duty of inquiry) of any current
                    action conducted by a Third Party which is or would
                    constitute an infringement of the Patent Rights in the
                    Field;

             (iv)   BAXTER has had the opportunity to review such materials and
                    to ask such questions of SANGAMO and its advisors, as BAXTER
                    deems necessary or appropriate, regarding the Patent Rights.
                    SANGAMO warrants and represents that such materials provided
                    to BAXTER and responses to such inquiries did not contain
                    any untrue statement of a


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                    material fact or omit to state any material fact necessary
                    in order to make the statements made therein, in light of
                    the circumstances under which they were made, not
                    misleading; and

             (v)    SANGAMO warrants and represents that it has reviewed its
                    intellectual property portfolio and believes that there
                    are no other patents or patent applications owned by
                    SANGAMO or licensed to SANGAMO with the right to grant
                    sublicenses which would be infringed in the practice of the
                    Patent Rights in the Field in the Territory. Should it
                    later eventuate that any patent or patent application, that
                    as of the Effective Date is owned by SANGAMO or licensed to
                    SANGAMO with the right to grant sublicenses, would be
                    infringed in the practice of the Patent Rights in the Field
                    in the Territory, then that patent or patent application
                    shall be deemed to be licensed to BAXTER as part of the
                    Patent Rights under this Agreement but only to the extent
                    necessary for BAXTER to exercise the license rights granted
                    to it under this Agreement.

2.2    OTHER SANGAMO REPRESENTATIONS AND WARRANTS

       (a)   SANGAMO warrants and represents regarding the Patent Rights and
             Technology, that it owns or has a license to the Patent Rights and
             Technology, that it has the legal power to extend the rights
             granted to BAXTER under this Agreement, that this Agreement
             constitutes a binding agreement enforceable against SANGAMO in
             accordance with its terms, and that it has not made any
             commitments to others regarding ZFP in respect of the Patent
             Rights and/or Technology in the Field that would conflict with
             such rights.

       (b)   SANGAMO warrants and represents that it has disclosed to BAXTER all
             technical data and other information owned or known by SANGAMO as
             of the Effective Date regarding the safety and efficacy of zinc
             finger DNA binding proteins in the Field.




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2.3    BAXTER REPRESENTATIONS AND WARRANTIES

       BAXTER warrants and represents that it has the legal power to enter into
       this Agreement, that this Agreement constitutes a binding agreement
       enforceable against BAXTER in accordance with its terms, and that is has
       not made any commitments to others that would conflict with its
       obligations under this Agreement.

3.     LICENSE AND OPTION

3.1    GRANT OF LICENSE AND OPTION

       (a)   The parties hereby acknowledge that, pursuant to the Research
             Funding Agreement, BAXTER has assigned to SANGAMO any and all of
             its rights to BAXTER Inventions and to Joint Inventions, including
             all rights under the patent, copyright and other intellectual
             property laws of the United States or any other country.

       (b)   SANGAMO hereby grants to BAXTER      *       license including the
             right to sub-license pursuant to Clause 3.2 under the Patent
             Rights, the Technology, and under Invention Patents and Inventions
             (other than Inventions Patents to the extent they claim BAXTER
             Inventions, and other than BAXTER Inventions) to      *
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             Products for use in the Field throughout the Territory for the
             term of this Agreement.      *
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       (c)   SANGAMO hereby grants to BAXTER      *
                  *       license, including the exclusive right to
             sub-license, under the Invention Patents to the extent they claim
             BAXTER Inventions and under BAXTER Inventions for all purposes
             throughout the Territory; provided, however, that SANGAMO reserves
             the right thereunder to conduct its obligations and exercise its
             rights under this Agreement.


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  the Commission. Confidential treatment has been requested with respect to the
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     (d)  SANGAMO hereby grants to BAXTER      *      *     *
               *   *   license, including the right to sub-license, under the
          Invention Patents to the extent they claim Joint Inventions and under
          Joint Inventions for all purposes throughout the Territory for the
          term of this Agreement, other than to      *     *      *
               *                               Licensed Products for use in the
          Field throughout the Territory for the term of this Agreement.

     (e)  SANGAMO hereby grants to BAXTER the exclusive option, exercisable for
          a period of      *     *    *    after the Effective Date, to purchase
          a Convertible Debenture having a face amount of     *     *     *
               *        *       *       *       pursuant to a Convertible
          Debenture Purchase Agreement substantially in the form of the similar
          agreement between the parties entered into concurrently herewith. Such
          option is exercisable by BAXTER giving express written notice to
          SANGAMO of its desire to exercise such option, and paying to SANGAMO
          the sum of      *      *      *      *      *        *       *
          prior to the expiration of such option. If BAXTER timely exercises
          such option and purchases such Convertible Debenture, SANGAMO shall
          grant to BAXTER a right of first refusal, for a period of      *
          years after the date of the issuance of such Convertible Debenture, to
          obtain      *       license      *
               *     *     *       *        *        *        *       *     *
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     (f)  BAXTER shall not use the Patent Rights, Technology, Invention Patents
          or Inventions for any purpose for which it is not expressly licensed
          hereunder.

     (g)  Except as otherwise expressly set forth in this Agreement, neither
          party grants to the other party any license, immunity or other right
          under the such party's patent rights, other intellectual property
          rights or technology, whether by implication or otherwise, for any
          purpose.


* Certain information on this page has been omitted and filed separately with
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     (h)  If BAXTER becomes aware of any pending patent applications or issued
          patents of a Third Party that claim ZFPs or their use in the Field,
          BAXTER promptly shall advise SANGAMO thereof. As between BAXTER and
          SANGAMO, SANGAMO shall have the first right, but not the obligation
          (at its option in its sole discretion), to obtain a license from such
          Third Party under such pending patent applications and issued
          patents, and shall use its commercially reasonable efforts to obtain
          a license (with the right to grant a sublicense to BAXTER) for use in
          the Field, in each case on terms and conditions acceptable to
          SANGAMO. If SANGAMO obtains such a license (with the right to grant a
          sublicense to BAXTER) for use in the Field, then such pending patent
          applications and issued patents shall be subject to this Agreement.
          If SANGAMO elects not to seek, or fails to obtain, such a license
          (with the right to grant a sublicense to BAXTER) for use in the
          Field, then BAXTER shall have the right, but not the obligation (at
          its option in its sole discretion), to obtain a license from such
          Third Party under such pending patent applications and issued patents
          on terms and conditions acceptable to BAXTER.

3.2  CERTAIN RESTRICTIONS ON SUB-LICENSES

     BAXTER's right to sublicense the rights granted under Clauses 3.1 to a
     Third Party shall be subject to the following:

     (a)  BAXTER shall inform SANGAMO of any sublicense under Clauses 3.1 and
          shall provide SANGAMO, after the grant of such sublicense, a copy of
          such sublicense subject to the confidentiality provisions of this
          Agreement; and

     (b)  Any sublicense granted under Clauses 3.1 shall be subject to the
          terms and conditions of this Agreement and shall have terms and
          conditions which are consistent with the terms and conditions of this
          Agreement.

3.3  DESIGN OF ZFPS AFTER THE SPONSORED RESEARCH

     (a)  At any time during the term of this Agreement after the termination
          of the Research Funding Agreement, upon the reasonable request of
          BAXTER,

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     SANGAMO shall design, assemble and characterize (or cause to be designed,
     assembled or characterized) one or more zinc finger DNA binding proteins
     for the activation of VEGF or VEGF receptors for the treatment or
     prevention of ischemic cardiovascular and vascular disease in humans, in
     addition to those developed under the Sponsored Research, and shall deliver
     to BAXTER such zinc finger DNA binding protein and/or the nucleic acid that
     encodes therefor. On or after delivery of such zinc finger DNA binding
     protein and/or the nucleic acid, SANGAMO shall invoice BAXTER an amount not
     to exceed     *     *     *     *     *     *    of the fully-burdened cost
     to SANGAMO therefor, and BAXTER shall pay such invoice promptly following
     receipt of such invoice.

     *     *     *     *     *     *     *     *     *     *     *     *     *
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  the Commission. Confidential treatment has been requested with respect to the
  omitted portions.
<PAGE>   15
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *

3.4    TRANSFER OF CERTAIN MATERIALS

       Upon request, SANGAMO shall deliver to BAXTER the materials (including
       but not limited to biological materials such as cell lines, master cell
       banks, transformed vectors and antibodies) and information that (a) are
       owned by SANGAMO or licensed to SANGAMO with the right to grant
       sublicenses, and (b) are needed for GMP production and/or purification of
       ZFP, or improve the yield of production, increase the purity or decrease
       the cost of production of ZFP (based on SANGAMO's then current state of
       the art). Such materials and information shall be included within the
       definition of Technology and shall be subject to the licenses granted by
       SANGAMO to BAXTER hereunder.

4.     PAYMENTS BY BAXTER

4.1    METHOD OF PAYMENT

       All payments due by BAXTER to SANGAMO pursuant to this Agreement shall be
       payable in the currency of the United States of America and shall be paid
       by wire transfer into such accounts as SANGAMO may direct.

4.2    CONVERTIBLE DEBENTURE AND MILESTONE PAYMENTS

       4.2.1 In consideration for the rights acquired under this Agreement:


                                      -15-

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<PAGE>   16
      (a)   On or before January 21, 2000, BAXTER shall pay to SANGAMO the sum
            of Five Million Dollars ($5,000,000) in consideration for the
            purchase of a Convertible Debenture having a face amount of Five
            Million Dollars ($5,000,000).

      (b)   Within thirty (30) days of the first achievement of each of the
            following events or the respective date described, BAXTER shall pay
            SANGAMO the following milestone payments:

     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *
     *     *     *     *     *     *     *     *     *     *     *     *     *


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<PAGE>   17
                      *     *     *     *     *    *     *     *     *     *
                      *     *     *     *     *    *     *     *     *     *
                      *     *     *     *     *    *     *     *     *     *

      (c)   With respect to each Subsequent Licensed Product, within thirty
            (30) days of achievement of each of the following events or the
            respective date described, BAXTER shall pay to SANGAMO the
            following milestone payments:

            *    *    *     *     *     *     *    *     *     *     *     *
                 *    *     *     *     *     *    *     *     *     *     *

            *    *    *     *     *     *     *    *     *     *     *     *
                 *    *     *     *     *     *    *     *     *     *     *
                 *    *     *     *     *     *    *     *     *     *     *

      4.2.2 For purposes of this Agreement,      *     *     *     *     *
            *    *    *     *     *     *     *    *     *     *     *     *
            *    *    *     *     *     *     *    *     *     *     *     *
            *    *    *     *     *     *     *    *     *     *     *     *
            *    *    *     *     *     *     *    *     *     *     *     *
            *    *    *     *     *     *     *    *     *     *     *     *

      4.2.3 In the event that BAXTER must license from a Third Party one or
            more pending patent applications or issued patents in order to
            *     *    *     *     *     *     *    *     *     *     *     *
            *    a Licensed Product in any country for use in the Field, BAXTER
            shall have the right to credit all up-front license payments and
            milestone payments actually paid to such Third Party against up to
            *     *     *     *  of each milestone payment owing to SANGAMO
            under Clause 4.2.1(b)(iv), (v) and (vi) and Clause 4.2.1(c) with
            respect to such Licensed Product. If the parties disagree whether
            or not a pending patent application or issued patent is consistent
            with the requirement set forth in this Clause 4.2.3, the
            disagreement shall be resolved pursuant to Clause 12.

      4.2.4 The calendar dates described in Clauses 4.2.1(b)(i), (ii), (iii)
            and (iv) will be subject to review, and revision if appropriate, by
            the Steering Committee as follows. The Steering Committee shall
            determine the appropriateness of such



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                                      -17-
<PAGE>   18
       calendar dates for the achievement of the applicable milestone events in
       light of the technical and commercial feasibility of the particular ZFP
       molecule being pursued at the time, and if appropriate, shall adjust such
       calendar dates as agreed by the Steering Committee.

4.3 LICENSE FEE - ROYALTY

4.3.1  In addition to the payments set out in Clause 4.2, and subject to Clause
       4.4, BAXTER shall pay to SANGAMO the following royalties based on Net
       Sales:

(a)    A royalty equal to    *     *     *  of Net Sales of Licensed ZFP
       Product, and a royalty equal to    *     *     *   of Net Sales of
       Licensed ZFP Combination Product.

(b)    A royalty equal to     *     *     * of Net Sales of Jointly Invented
       Licensed Product and a royalty equal    *     *     *     of Net Sales of
       Jointly Invented Licensed Combination Product.

(c)    In addition to the royalties set out in Clauses 4.2.1(a) and (b), for a
       period of five (5) years after the First Commercial Sale of each
       Subsequent Licensed Product, an additional royalty equal    *     *     *
       *    of Net Sales of such Subsequent Licensed Product.

4.3.2  In addition to the payments set out in Clauses 4.2 and 4.3.1, if BAXTER
       grants to a Third Party a sublicense or other rights to commercialize a
       Licensed Product prior to the first administration of such Licensed
       Product to the first enrolled and evaluable patient in the first Phase 3
       Clinical Trial for such Licensed Product, BAXTER shall pay to SANGAMO the
       following royalties:

(a)    A royalty equal to     *     *     *   of Net Sublicense Revenues of such
       Licensed Product.

(b)    A royalty equal to    *     *     *  of Net Sales of any Cross Licensed
       Product for which BAXTER or its Affiliate receives any (sub)license or
       other rights to commercialize in connection with the grant of such
       sublicense or other rights to



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                                      -18-
<PAGE>   19
       commercialize such Licensed Product. Baxter shall calculate, report and
       pay the royalties for such Cross Licensed Product hereunder in the same
       manner as if such Cross Licensed Product were a Licensed Product
       hereunder.

4.3.3  The payments due by BAXTER to SANGAMO pursuant to Clauses 4.3.1 and 4.3.2
       shall be made to SANGAMO within sixty (60) days of the end of each
       calendar quarter, and each such payment shall be accompanied by a
       reasonably detailed written report containing the calculation of the
       payment due to SANGAMO for said calendar quarter. With respect to sales
       of Licensed Products invoiced in United States dollars, the Net Sales,
       Net Sublicense Revenues and royalties payable shall be expressed in
       United States dollars. With respect to sales of Licensed Products
       invoiced in a currency other than United States dollars, the Net Sales,
       Net Sublicense Revenues and royalties payable shall be expressed in the
       domestic currency of the party making the sale together with the United
       States dollar equivalent of the royalty payable, calculated using the
       average closing buying rate for such currency quoted in the United States
       Western Edition of The Wall Street Journal under the heading "Currency
       Trading -- Exchange Rates" on last day of each month during said calendar
       quarter.

4.4 ROYALTY ADJUSTMENTS

(a)    In the event that BAXTER must license from a Third Party one or more
       pending patent applications or issued patents that claim a ZFP or the
       method of making or using a ZFP in any country in the Field, BAXTER shall
       have the right to credit one hundred percent (100%) of such Third Party
       royalty payments based upon sales of such Licensed Product in such
       country against the royalties owing to SANGAMO under Clause 4.3.1(a)
       above with respect to sales of such Licensed Product in such country;
       provided, however, that BAXTER shall not reduce, pursuant to Clauses
       4.4(a) and (b), the amount of the royalties paid to SANGAMO under Clause
       4.3.1(a) above, with respect to sales of such Licensed Product in such
       country, to less than    *    *    *   of Net Sales of such Licensed
       Product in such country.



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                                      -19-
<PAGE>   20
        (b)     In the event that BAXTER must license from a Third Party one or
                more pending patent applications or issued patents (other than
                those described in Clause 4.4(a)) in order to    *     *     *
                *     *     *     *     *     *     *     *     *  a Licensed
                Product in any country for use in the Field. BAXTER shall have
                the right to credit fifty percent (50%) of such Third Party
                royalty payments based upon sales of such Licensed Product in
                such country against the royalties owing to SANGAMO under Clause
                4.3.1(a) above with respect to sales of such Licensed Product in
                such country; provided, however, that BAXTER shall not reduce,
                pursuant to Clauses 4.4(a) and (b), the amount of the royalties
                paid to SANGAMO under Clause 4.3.1(a) above, with respect to
                sales of such Licensed Product in such country, to less than   *
                *      *     of Net Sales of such Licensed Product in such
                country.

        (c)     BAXTER shall allow representatives of SANGAMO to examine any
                licenses that BAXTER asserts justify the adjustment of royalties
                to verify that any adjustments made pursuant to this Clause 4.4
                are consistent with the requirement set forth in this Clause
                4.4. SANGAMO's representatives shall not copy the license or
                licenses and must keep confidential all information, including
                royalty rates, pertaining to the license or licenses. If the
                parties disagree whether or not a pending patent application or
                issued patent is consistent with the requirement set forth in
                this Clause 4.4, the disagreement shall be resolved pursuant to
                Clause 12.

        (d)     If the    *     *     *     *     *     *     *    *    of any
                Licensed Product does not fall within the scope of one or more
                claims of an issued and unexpired patent within the Patent
                Rights or Inventions Patents (other than Inventions Patents to
                the extent they claim only BAXTER Inventions), then the
                royalties owing under Clause 4.3.1 shall be reduced by one-half
                and shall be payable only for a period of five (5) years after
                the First Commercial Sale of such Licensed Product; provided,
                however, at such later time as the     *     *     *    *    *
                *    *     *     *   of any Licensed Product falls within the
                scope of one or more claims of an issued and unexpired patent
                within the Patent Rights or Inventions Patents that was pending
                on the date of the First Commercial Sale thereof (other


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                                     - 20 -




<PAGE>   21
        than Inventions Patents to the extent they claim only BAXTER
        Inventions), then the royalties owing under Clause 4.3.1 shall resume in
        full.

4.5     Records

        (a)     BAXTER shall keep, and shall cause any person to whom it has
                granted a sublicense pursuant to Clause 3.2 to keep, for a
                minimum of five (5) years, complete records of all matters which
                are relevant for determining the License Fees which are to be
                paid to SANGAMO pursuant to this Agreement.

        (b)     Upon the written request of SANGAMO and not more than once in
                each calendar year, BAXTER shall permit an independent certified
                public accounting firm of nationally recognized standing,
                selected by SANGAMO and reasonably acceptable to BAXTER, at
                SANGAMO's expense, to have access during normal business hours
                to such of the records of BAXTER as may be reasonably necessary
                to verify the accuracy of the royalty reports hereunder for any
                year ending nor more than thirty-six (36) months prior to the
                date of such request. The accounting firm shall disclose to
                SANGAMO only whether the records are correct or not and the
                specific details concerning any discrepancies. No other
                information shall be shared. If such accounting firm concludes
                that additional royalties were owed during such period, BAXTER
                shall pay the additional royalties within thirty (30) days of
                the date SANGAMO delivers to BAXTER such accounting firm's
                written report so concluding. The fees charged by such
                accounting firm shall be paid by SANGAMO; provided, however, if
                the audit discloses that the royalties payable by BAXTER for the
                audited period are more than one hundred five percent (105%) of
                the royalties actually paid for such period, then BAXTER shall
                pay the reasonable fees and expenses charged by such accounting
                firm.

5.      OBLIGATIONS OF SANGAMO AND BAXTER

5.1     SANGAMO OBLIGATIONS

        SANGAMO undertakes the following obligations as part of entering this
        Agreement:

                                     - 21 -
<PAGE>   22
      (a)   To enter into a Research Funding Agreement with BAXTER, which will
            be executed contemporaneously with this Agreement and undertake the
            activities described therein in a timely manner;

      (b)   To deliver to BAXTER the ZFP product, molecule design, and package
            design (as described in Schedule 2) and complete pre-clinical
            testing to demonstrate the performance and activity of ZFP (as
            described in Schedule 2), and to use its commercially reasonable
            efforts to do so on or before April 1, 2001;

      (c)   To disclose to BAXTER all technical data and other information owned
            or known by SANGAMO, that was not previously disclosed to BAXTER,
            regarding the safety and efficacy of the ZFPs in the Field.

      (d)   To assist BAXTER in assessing as to competency and price, and
            recommend to the Steering Committee, the preferred manufacturer of
            GMP grade ZFP for clinical trial and commercial purposes;

      (e)   To develop and deliver to BAXTER processes for preclinical
            production of ZFPs and procedures for the testing of ZFPs comprising
            Licensed Products as are reasonably necessary for the clinical
            development, the regulatory approval to manufacture and sell and the
            commercial sale of Licensed Products hereunder.

      (f)   If requested by BAXTER, (i) to transfer to a manufacturer, who is
            acceptable to the Steering Committee, has the expertise to produce
            GMP grade material and has been granted a manufacturing sublicense
            from BAXTER hereunder, such Technology as reasonably necessary for
            the manufacture of GMP grade ZFP for clinical trial and commercial
            purposes, and (ii) to provide such reasonable technical assistance
            to such manufacturer regarding the use of such Technology to permit
            such manufacturer to develop appropriate processes for the
            manufacture of GMP grade ZFP for clinical trial and commercial
            purposes;

      (g)   To produce and supply to BAXTER ZFPs of appropriate quality and in
            reasonably requested quantities sufficient to support BAXTER's
            preclinical testing activities required by the appropriate
            regulatory authorities; and


                                      -22-
<PAGE>   23
     (h)  If requested by BAXTER, to reasonably assist BAXTER in the
          preparation, filing and prosecution of all filings and submissions to
          obtain Marketing Approval and ELA for Licensed Products.

5.2  BAXTER OBLIGATIONS

     BAXTER undertakes the following obligations as part of entering this
     Agreement:

     (a)  To enter into a Research Funding Agreement with SANGAMO, which will
          be executed contemporaneously with this Agreement and to undertake
          the activities described therein in a timely manner;

     (b)  To consult and collaborate with SANGAMO to determine the clinical and
          regulatory requirements and strategy;


     (c)  To consult and collaborate with SANGAMO on the production and
          manufacture of ZFP;

     (d)  To undertake, at its sole cost, the performance of all animal
          pre-clinical testing, clinical development, regulatory activities and
          manufacture as are required for the commercialization of Licensed
          Products in the Territory for use in the Field in accordance with the
          provisions of Clause 7.1; and

     (e)  To be primarily responsible, with the reasonable assistance of
          SANGAMO, for the preparation, filing and prosecution of all filings
          and submissions to obtain Marketing Approval and ELA for Licensed
          Products.

6.   INTELLECTUAL PROPERTY

6.1  INFRINGEMENT BY THIRD PARTIES

     (a)  A party shall promptly notify the other party in writing of any
          alleged or threatened substantial and continuing infringement within
          the Field of any patent included within the Patent Rights or
          Invention Patents of which such party becomes aware.

                                      -23-

<PAGE>   24
     (b)  BAXTER shall have the right to bring and control any action or
          proceeding with respect to such alleged or threatened infringement of
          patents covering BAXTER Inventions or Joint Inventions within the
          Field, where such infringement does not also constitute
          infringement of the Patent Rights (BAXTER PROCEEDING) at its own
          expense and represented by legal advisers of its own choice.

          (i)  In the event BAXTER brings a BAXTER Proceeding or in the event
               an action is brought by a Third Party for a declaratory judgment
               that any of the patents covering BAXTER Inventions or Joint
               Inventions are not infringed or invalid (BAXTER ACTION), SANGAMO
               shall co-operate reasonably with BAXTER including, if required,
               undertaking any action or agreeing to be joined as a party to
               such BAXTER Proceeding or BAXTER Action, the reasonable costs of
               which shall be at BAXTER's expense;

               (A)  SANGAMO shall retain the right to be represented by legal
                    advisers of its own choice at its expense.

               (B)  BAXTER shall keep SANGAMO fully informed of the status of
                    such BAXTER Proceeding or BAXTER Action on a regular basis
                    or, as reasonably requested by SANGAMO, from time to time.

               (C)  In the event BAXTER brings a BAXTER Proceeding pursuant to
                    Clause 6.1(b), BAXTER shall be entitled to retain      *
                    *     *     *     of the balance of any recovery, after
                    reimbursement of reasonable attorneys' fees and costs
                    incurred by BAXTER (or for which BAXTER is required to
                    reimburse SANGAMO) in such BAXTER Proceeding, realized as a
                    result of such BAXTER Proceeding, and shall remit to
                    SANGAMO the other     *     *     *     *     .

          (ii) In the event SANGAMO notifies BAXTER in writing of any
               infringement of patents covering Joint Inventions within the
               Field referred to in

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                                      -24-
<PAGE>   25
                  Clause 6.1(b) and BAXTER fails to commence a BAXTER
                  Proceeding within a reasonable time of being so notified by
                  SANGAMO, provided that such time shall not, in any event,
                  exceed one hundred and eighty (180) days, SANGAMO may
                  commence a proceeding at its own expense and may be
                  represented by legal advisers of its own choice. In the event
                  SANGAMO brings such a proceeding, BAXTER shall provide all
                  reasonable assistance to SANGAMO, at SANGAMO's expense, in
                  relation to such proceeding and the terms set out in Clause
                  6.1(b) shall apply as if BAXTER were SANGAMO and SANGAMO were
                  BAXTER.

          (iii)   In the event SANGAMO brings a proceeding pursuant to Clause
                  6.1(b)(ii), SANGAMO shall be entitled to retain      *     *
                  *     *     *     of the balance of any recovery, after
                  reimbursement of reasonable attorneys' fees and costs
                  incurred by SANGAMO (or for which SANGAMO is required to
                  reimburse BAXTER) in such proceeding, realized as a result of
                  such proceeding, and shall remit to BAXTER the other     *
                  *     *     *    .

     (c)  SANGAMO shall have the right to bring and control any action or
          proceeding with respect to such alleged or threatened infringement of
          Patent Rights or patents covering SANGAMO Inventions within the Field
          (SANGAMO PROCEEDING) at its own expense and represented by legal
          advisers of its own choice.

          (i)     In the event SANGAMO brings a SANGAMO Proceeding or in the
                  event an action is brought by a Third Party for a declaratory
                  judgment that any of the Patent Rights or patents covering
                  SANGAMO Inventions are not infringed or invalid (SANGAMO
                  ACTION), BAXTER shall co-operate reasonably with SANGAMO
                  including, if required, undertaking any action or agreeing to
                  be joined as a party to such SANGAMO Proceeding or SANGAMO
                  Action, the reasonable costs of which shall be at SANGAMO's
                  expense;

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                                      -25-
<PAGE>   26
                  (A)  BAXTER shall retain the right to be represented by legal
                       advisers of its own choice at its own expense.

                  (B)  SANGAMO shall keep BAXTER fully informed of the status
                       of such SANGAMO Proceeding or SANGAMO Action on a
                       regular basis or, as reasonably requested by BAXTER,
                       from time to time.

                  (C)  In the event SANGAMO brings a SANGAMO Proceeding
                       pursuant to Clause 6.1(c), SANGAMO shall be entitled to
                       retain      *     *     *     *    of the balance of any
                       recovery, after reimbursement of reasonable attorneys'
                       fees and costs incurred by SANGAMO (or for which SANGAMO
                       is required to reimburse BAXTER) in such SANGAMO
                       Proceeding, realized as a result of such SANGAMO
                       Proceeding, and shall remit to BAXTER the other      *
                       *     *     *     *.


          (ii)    In the event BAXTER notifies SANGAMO in writing of any
                  infringement referred to in Clause 6.1(c) and SANGAMO fails to
                  commence a SANGAMO Proceeding within a reasonable time of
                  being so notified by BAXTER, provided that such time shall
                  not, in any event, exceed one hundred and eighty (180) days,
                  BAXTER may commence a proceeding at its own expense and may
                  be represented by legal advisers of its own choice. In the
                  event BAXTER brings such a proceeding, SANGAMO shall provide
                  all reasonable assistance to BAXTER, at BAXTER's expense, in
                  relation to such proceeding and the terms set out in Clause
                  6.1(c) shall apply as if SANGAMO were BAXTER and BAXTER were
                  SANGAMO.

          (iii)   In the event BAXTER brings a proceeding pursuant to Clause
                  6.1(c)(ii), BAXTER shall be entitled to retain      *     *
                       *      of the balance of any recovery, after
                  reimbursement of reasonable attorneys' fees and costs
                  incurred by BAXTER (or for which BAXTER is required to
                  reimburse SANGAMO) in such proceeding, realized as a result
                  of such

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                                      -26-

<PAGE>   27
                    proceeding, and shall remit to SANGAMO the other     *     *
                         *     * .

6.2  INFRINGEMENT OF THIRD PARTY RIGHTS

     6.2.1     Each party shall promptly notify the other parties in writing in
               the event that any allegation of infringement of any Third Party
               patent is raised by reason of the exercise by BAXTER or any of
               its sublicensees of any rights pursuant to Clause 3.1 or 3.2
               (ALLEGED THIRD PARTY PATENT RIGHTS). In the event that such an
               action is brought by a Third Party against BAXTER or any of its
               sublicensees of any rights pursuant to Clause 3.1 or 3.2, BAXTER,
               or any sub-licensee of BAXTER, as may be determined by BAXTER,
               shall have the right to control any defense of any such action,
               at its own expense, and to be represented by legal advisers of
               its own choice, and SANGAMO shall have the right, at its own
               expense, to be represented in any such action by legal advisers
               of its own choice. In the event of any infringement or alleged
               infringement of any Alleged Third Party Patent Rights, SANGAMO
               shall co-operate in good faith with BAXTER or any sublicensee of
               BAXTER (as the case may be) on a reasonable basis to negotiate
               and settle any dispute with a Third Party in relation to such
               infringement or alleged infringement of any Alleged Third Party
               Patent Rights, and to otherwise resolve any such infringement or
               alleged infringement and secure BAXTER's continued rights to the
               Alleged Third Party Patent Rights, if necessary or desirable.

     6.2.2     In the event that such an action is brought by a Third Party
               against BAXTER alleging the infringement by BAXTER, its Affiliate
               or sublicensee of any Third Party patent by reason of the
                    *     *     *     *     *     *     *     * of a Licensed
               Product in any country for use in the Field, BAXTER shall be
               entitled to retain up to      *     *     *   of the license fees
               to be paid to SANGAMO pursuant to Clauses 4.2.1(b)(iv), (v) and
               (vi) and Clause 4.2.1(c) with respect to such Licensed Product,
               and up to     *     *     *  of the royalties to be paid to
               SANGAMO pursuant to Clause 4.3.1(a) with respect to


* Certain information on this page has been omitted and filed separately with
  the Commission. Confidential treatment has been requested with respect to the
  omitted portions.


                                      -27-

<PAGE>   28
          such Licensed Product, and to use such monies to pay for, or defray,
          the costs of defending such action for alleged infringement of such
          Third Party patents and to pay damages, reasonable attorneys' fees, or
          other costs resulting from such litigation until BAXTER has recovered
          all of its costs. During the pendency of such action for alleged
          infringement of such Third Party patents, BAXTER shall submit
          quarterly written reports showing royalties accruing to SANGAMO and
          the expenses of defending itself against such claims of alleged
          infringement. Upon termination of all proceedings or actions
          involving such defense, BAXTER shall remit the unused balance, if
          any, of the license fees and royalties accrued but not yet paid to
          SANGAMO. Notwithstanding anything to the contrary in this Agreement,
          (a) BAXTER shall not be entitled to reduce the amount of any license
          fee owing to SANGAMO under Clauses 4.2.1(b)(iv), (v) and (vi) or
          Clause 4.2.1(c) with respect to such Licensed Product by more than
               *     *     *   in the aggregate under this Clause 6.2.2 and
          Clause 4.2.3, and (b) BAXTER shall not be entitled to reduce the
          amount of any royalties owing to SANGAMO under Clause 4.3.1(a) with
          respect to such Licensed Product to less than     *     *     * of Net
          Sales of such Licensed Product after giving effect to this Clause
          6.2.2 and Clause 4.4.

6.3  PROSECUTION AND MAINTENANCE OF PATENT RIGHTS AND INVENTION PATENTS

     (a)  Except as further provided herein, SANGAMO shall be responsible, at
          its sole cost, for filing and prosecuting to issuance patent
          applications, for filing and prosecuting all patent re-issues and
          re-examinations, for applying for and obtaining any patent term
          extensions, and for paying all maintenance fees on all patents,
          relating to the Patent Rights and the Inventions Patents (other than
          Inventions Patents that claim BAXTER Inventions). SANGAMO shall
          promptly make available to BAXTER copies of all relevant
          patent-related documents, including all documents received from or
          filed with a national or international patent office, and shall
          consult with BAXTER regarding the preparation and prosecution of
          applications. BAXTER shall have the right to comment upon preparation
          and prosecution strategies and to request desired claims. SANGAMO

* Certain information on this page has been omitted and filed separately with
  the Commission. Confidential treatment has been requested with respect to the
  omitted portions.


                                      -28-

<PAGE>   29
            shall consider in good faith all reasonable suggestions of BAXTER.
            SANGAMO shall provide BAXTER a written update of the status of the
            Patent Rights and such Inventions Patents, in the same form as the
            Schedules hereto on at least an annual basis. If SANGAMO chooses not
            to file, prosecute or maintain any patent applications within the
            Patent Rights or Inventions Patents, then SANGAMO shall notify
            BAXTER prior to taking any action which would jeopardize such patent
            rights. BAXTER will then have the right (i) to file, prosecute or
            maintain any patent applications within the Inventions Patents that
            claim solely Joint Inventions at its own expense, and (ii) to pay
            SANGAMO's reasonable expenses for SANGAMO's continued filing,
            prosecution or maintenance of such Patent Rights or other Inventions
            Patents (if SANGAMO determines in good faith that such continued
            filing, prosecution or maintenance is strategically desirable for
            the Licensed Products and is consistent with its patent prosecution
            practices).

      (b)   BAXTER shall be responsible, at its sole cost, for filing and
            prosecuting to issuance patent applications, for filing and
            prosecuting all patent re-issues and re-examinations, for applying
            for and obtaining any patent term extensions, and for paying all
            maintenance fees on all patents, relating to the Inventions Patents
            that claim BAXTER Inventions.

7.    OBLIGATIONS OF THE PARTIES

7.1   DILIGENCE OBLIGATIONS

      (a)   SANGAMO shall use commercially reasonable efforts consistent with
            international practice in the biotechnology industry, SANGAMO's
            sound business judgment, and research, regulatory and market
            conditions, to perform its obligations under this Agreement,
            including, but not limited to, its obligations under Clause 5.1.

      (b)   BAXTER and/or its sub-licensees shall use commercially reasonable
            efforts consistent with international practice in the human-use
            pharmaceutical industry, BAXTER's sound business judgment, and
            clinical, regulatory and market


                                      -29-
<PAGE>   30

                conditions, to develop and commercialize Licensed Products in
                the Territory for use in the Field.

        (c)     Notwithstanding the foregoing, BAXTER shall be deemed to have
                satisfied its diligence obligations under this Clause 7.1 upon
                timely payment of the license fees under Clauses 4.2.1(b) and
                (c).

7.2     STEERING COMMITTEE

        7.2.1   SANGAMO and BAXTER will appoint a Steering Committee comprising
                up to three (3) named representatives from each party and up to
                four (4) ex-officio members from each party as required to meet
                at least four (4) times per year or with less frequency if
                mutually agreed by the Steering Committee at mutually agreed
                locations. SANGAMO and BAXTER shall have the right to approve
                the other Party's nominated Steering Committee members, which
                approval shall not be unreasonably withheld, with the sole
                objective of avoiding the appearance of conflict among
                nominated representatives. Where matters of conflict of interest
                arise subsequent to a member joining the Steering Committee, the
                Steering Committee shall have the right to remove such member
                and the Party who such member represents will nominate a
                replacement.

        7.2.2   The Steering Committee shall design, manage, review and direct
                the status and operation of the scientific and technical
                activities and obligations to be performed under this Agreement
                and the Research Funding Agreement, including, but not limited
                to, (i) the selection of the appropriate ZFP molecule to be
                pursued for pre-clinical testing, and (ii) reviewing and
                approving entry into each phase of clinical development. The
                Steering Committee may be further called upon to assist in
                establishing or revising the workplans associated with and/or
                the requirements for the preclinical testing needed for the IND
                submission or the manufacturing process development to be
                performed under this Agreement and the Research Funding
                Agreement. The Steering Committee shall also provide a forum for
                the parties to disclose any additional research data relating to
                improvements,


                                     - 30 -
<PAGE>   31

                modifications, enhancements or variations to the ZFP arising
                under this Agreement or the Research Funding Agreement.

        7.2.3   Decisions, recommendations, or approval of the Steering
                Committee shall require an affirmative vote of two-thirds of the
                seated members (i.e., four of six). Meetings or convenings of
                the Steering Committee shall require the participation or
                attendance of at least five (5) members of the Steering
                Committee.

        7.2.4   Each party will be responsible for the costs of their
                representative's attendance, unless otherwise agreed. The
                Steering Committee shall appoint a secretary who shall keep
                written records of its meetings.

        7.2.5   At any time after the date of First Commercial Sale of a
                Licensed Product, the Steering Committee may disband by mutual
                agreement.

7.3     APPOINTMENT OF PROJECT MANAGER

        In addition to the appointment of the Steering Committee above, SANGAMO
        and BAXTER shall each appoint a designated project manager who will be
        responsible for keeping the other party informed of activities under
        this Agreement.

8.      CONFIDENTIALITY

8.1     OBLIGATIONS

        This Clause 8 applies, except as otherwise provided in this Clause 8,
        during the term of this Agreement, and thereafter for a period of five
        (5) years. Both SANGAMO and BAXTER shall maintain in confidence, not
        disclose to any Third Party and use only for the purposes of this
        Agreement information and data which is not generally known and which
        (a) results from the use or development of the Technology and Inventions
        pursuant to this Agreement or the Research Funding Agreement, or (b) is
        supplied by SANGAMO or BAXTER after April 13, 1999 in connection with
        this Agreement or the Research Funding Agreement (or discussions leading
        up to them) and is marked, identified or otherwise acknowledged to be
        confidential (INFORMATION).

                                     - 31 -


<PAGE>   32


8.2    PERMITTED DISCLOSURES

       To the extent it is reasonably necessary to fulfill their obligations or
       exercise their rights pursuant to this Agreement, BAXTER and SANGAMO may
       disclose Information they are otherwise obligated pursuant to this Clause
       8 not to disclose, to its Affiliates, its bona fide proposed sublicensees
       and its permitted sublicensees, and shall limit disclosure of such
       Information to its and their respective officers, directors, employees
       and consultants on a need-to-know basis, in each case provided that such
       persons and entities agree to keep the Information confidential for the
       same time periods and to the same extent as the disclosing party is
       required to keep the Information confidential. BAXTER and SANGAMO may
       also disclose such information to government or other regulatory
       authorities to the extent that such disclosure is required to be
       disclosed to obtain a patent or authorization to conduct a clinical
       trial or to commercially market any product arising out of the Technology
       or is otherwise required by applicable law, regulation or court order, in
       each case provided that the disclosing party shall provide written notice
       to the other party and sufficient opportunity to object to such
       disclosure or to request confidential treatment thereof. The obligation
       not to disclose Information shall not apply to any part of such
       Information that:

       (a)  is or becomes patented, published or otherwise part of the public
            domain other than by acts of the person obligated not to disclose
            such Information in contravention of this Agreement;

       (b)  is disclosed to the receiving party by a Third Party, provided such
            Information was not obtained from such Third Party directly or
            indirectly from SANGAMO or BAXTER (as the case may be);

       (c)  prior to disclosure pursuant to this Agreement, was already in the
            possession of the receiving party, provided such Information was not
            obtained directly or indirectly from SANGAMO or BAXTER (as the case
            may be);



                                      -32-
<PAGE>   33



       (d)  is developed independently of the Information obtained from SANGAMO
            or BAXTER (as the case may be), by persons without access to or use
            of the Information, as demonstrated by written evidence; or

       (e)  is disclosed by either SANGAMO or BAXTER with the prior written
            consent of the other.

8.3    TERMS OF THIS AGREEMENT

       SANGAMO and BAXTER agree to not disclose the existence of or the
       financial terms or conditions of this Agreement or the Research Funding
       Agreement to any Third Party without the prior written consent of the
       other, except as required by applicable law or regulatory authority.

8.4    PUBLIC ANNOUNCEMENTS

       Notwithstanding the provisions of Clause 8, neither BAXTER nor SANGAMO
       shall release any media release or other oral or written announcement for
       dissemination to the media concerning or arising from this Agreement or
       the Research Funding Agreement without the written consent of the other
       party.

8.5    SURVIVAL OF OBLIGATIONS

       This Clause 8 survives the termination of this Agreement.

9.     LIMITATION OF LIABILITY AND INDEMNITY

9.1    BAXTER agrees to indemnify, hold harmless and defend SANGAMO, its
       directors, trustees, officers, employees and agents, and the inventors of
       the patent and patent applications included in the Patent Rights or in
       SANGAMO Inventions or Joint Inventions against any and all losses,
       liabilities, damages and expenses (including reasonable attorneys' fees
       and costs) incurred as a result of any Third Party claims, suits,
       demands, causes of action or other proceedings to the extent arising out
       of BAXTER's and its sublicensees' use of the Patent Rights, Technology,
       Inventions Patents or Inventions or the manufacture, use, offer for sale
       or sale of Licensed Products (without



                                      -33-
<PAGE>   34
      regard to culpable conduct), except to the extent arising from the
      negligence or willful misconduct of SANGAMO, or its directors, officers,
      employees, and agents, or the failure of SANGAMO (as the case may be) to
      disclose relevant information pursuant to Section 2.1, 2.2 or 5.1(c) of
      this Agreement.

9.2   SANGAMO agrees to indemnify, hold harmless and defend BAXTER, its
      directors, trustees, officers, employees and agents, against any and all
      losses, liabilities, damages and expenses (including reasonable
      attorneys' fees and costs) incurred as a result of any Third Party
      claims, suits, demands, causes of action or other proceedings to the
      extent arising out of the negligence or willful misconduct of SANGAMO, or
      its directors, officers, employees and agents, or the failure of SANGAMO
      to disclose relevant information pursuant to Section 2.1, 2.2 or 5.1(c)
      of this Agreement.

9.3   This Clause 9 survives the termination of this Agreement.

10.   INSURANCE

      (a)   BAXTER shall maintain insurance, including product liability
      insurance, with respect to the use and exploitation of the Patent Rights,
      Technology, Inventions Patents and Inventions, and the research,
      development, production, distribution and use of Licensed Products in
      such amount as is customarily maintained in accordance with good practice
      for the pharmaceutical industry. BAXTER shall maintain such insurance for
      so long as it continues to use and exploit any of the Patent Rights,
      Technology, Inventions Patents or Inventions, or to conduct the research,
      development, production, distribution or use of Licensed Products, and
      thereafter for so long as BAXTER maintains insurance for itself covering
      supply of Licensed Products. The liability insurance requirement of this
      Section may be satisfied through self-insurance with reserves consistent
      with industry practices.

      (b)   BAXTER shall, upon the request of SANGAMO:

            (i)   produce evidence of the currency of such insurance; and

            (ii)  note the interest of SANGAMO on the policy in respect of such
                  insurance.



                                      -34-
<PAGE>   35
11.   TERM AND TERMINATION

11.1  TERM

      Unless terminated earlier pursuant to Clause 11.2, this Agreement shall
      continue in force in each country of the Territory until the date of
      expiration of the last to expire of any patent within the Patent Rights
      or the Invention Patents in such country, at which time BAXTER will have
      a fully paid up license, including the right to sublicense, to the ZFPs,
      Inventions and the Technology as provided herein.

11.2  EARLY TERMINATION

      (a)   In addition to any rights it may have hereunder, a party may
            terminate this Agreement upon (30) days prior written notice
            following the occurrence of any of the following:

            (1)   the bankruptcy, insolvency, dissolution or winding up of the
                  other party (other than dissolution or winding up for the
                  purposes of a solvent reconstruction or amalgamation);

            (2)   the failure of the other party to cure the breach of any
                  provision of this Agreement for the payment of funds within
                  thirty (30) days after written notice thereof by the
                  non-breaching party; or

            (3)   the failure of the other party to cure the breach of any
                  material provision of this Agreement, except nonpayment of
                  funds, within sixty (60) days after written notice thereof by
                  the non-breaching party.

      (b)   BAXTER has the right to terminate this Agreement at any time by
            giving ninety (90) days prior written notice without cause.

      (c)   Upon early termination of this Agreement for any of the reasons set
            forth in this Clause 11.2(a) and (b), BAXTER shall have no
            obligation to make any license fee payments that come due after the
            effective date of termination.



                                      -35-
<PAGE>   36
11.3  SURVIVAL

      (a)   Expiration or termination of this Agreement shall not relieve the
            parties of any obligation accruing prior to such expiration or
            termination.

      (b)   The provisions of Clause 3.1(d) shall survive the expiration or
            termination of this Agreement.

      (c)   Upon expiration or termination of this Agreement, SANGAMO shall
            assign to BAXTER all right, title and interest in the BAXTER
            Inventions and all patent rights and other intellectual property
            rights therein.

12.   RESOLUTION OF DISPUTES

12.1  DISPUTES COMMITTEE

      Disputes arising between the Parties to this Agreement shall be referred
      to a disputes committee which shall consist of the respective chief
      executive of SANGAMO and the highest official of the CardioVascular Group
      of BAXTER or their delegates (DISPUTES COMMITTEE). The Disputes Committee
      shall confer together in an endeavor to settle the dispute on some fair
      and equitable commercial basis with regard to the basic legal rights of
      SANGAMO and BAXTER. Any discussions or proceedings of the Disputes
      Committee shall be on a without prejudice basis.

12.2  USE OF EXPERT

      Subject to agreement of all members of the Disputes Committee, the
      Disputes Committee may, at its option, refer any dispute or difference to
      an independent Third Party, who shall act as an expert and not as an
      arbitrator in settling the same, on terms that the decision of such
      independent Third Party shall be binding on SANGAMO and BAXTER.

12.3  OTHER RIGHTS AND REMEDIES

      If the parties are unable to resolve a dispute under this Clause 12 within
      thirty (30) days after written notice from one party to the other of such
      dispute, either party shall have the


                                      -36-
<PAGE>   37
      right to pursue all rights and remedies to which it is entitled at law, in
      equity or otherwise. Nothing in this Agreement shall preclude either party
      from seeking appropriate injunctive relief in any court of competent
      jurisdiction, whether or not the applicable dispute has been submitted to
      resolution under this Clause 12.

13.   NOTICES

      Any notice, demand, consent or other communication (NOTICE) given or made
      under this Agreement:

      (a)   must be in writing and signed by a person duly authorized by the
            sender;

      (b)   must either be delivered to the intended recipient as follows:

            (i)   to SANGAMO
                  BIOSCIENCES, INC.:      Point Richmond Tech Center
                                          501 Canal Blvd., Suite A100
                                          Richmond, California 94840
                                          Attention: President
                                          Fax No: (510) 236-8951

            (ii)  to Baxter Healthcare
                  Corporation:            17221 Red Hill Avenue
                                          Irvine, California, 92614-5686
                                          Attention: Group Vice President,
                                          CardioVascular Group
                                          Fax No: (949) 250-6850

      (c)   will be effective upon receipt by the intended recipient.

14.   ENTIRE AGREEMENT

      This Agreement and the Research Funding Agreement contain the entire
      agreement between the parties with respect to its subject matter and
      supersede all prior agreements and understandings between the parties in
      connection with them.

15.   AMENDMENT

      No amendment or variation of this Agreement is valid or binding on a party
      unless made in writing executed by all parties.


                                      -37-
<PAGE>   38
16.  ASSIGNMENT

16.1 NO ASSIGNMENT WITHOUT CONSENT

     Except as provided in clause 16.2, neither BAXTER nor SANGAMO may assign
or otherwise transfer this Agreement or any of its rights or obligations herein
without the prior written consent of the other party, which consent shall not
be unreasonably withheld.

16.2 PERMITTED ASSIGNMENTS

     (a)  Either party may assign this Agreement together with the Research
          Funding Agreement, the Convertible Debenture Purchase Agreement and
          the Convertible Debenture, without the prior written consent of the
          other party in connection with the sale or transfer of all or
          substantially all of its stock or assets to which this Agreement
          relates, by merger, divestiture, spin-off or similar transaction,
          provided that such assignee undertakes in writing to be bound by all
          the terms and conditions in this Agreement and the other party is
          notified within thirty (30) days of such assignment taking place; and

     (b)  SANGAMO or BAXTER may assign this Agreement together with the
          Research Funding Agreement, the Convertible Debenture Purchase
          Agreement and the Convertible Debenture, to an Affiliate provided that
          such Affiliate undertakes to be bound by the terms and conditions of
          this Agreement.

17.  NO WAIVER

     No failure to exercise nor any delay in exercising any right, power or
     remedy by a party operates as a continuing waiver. A single or partial
     exercise of any right, power or remedy does not preclude any other or
     further exercise of that or any other right, power or remedy. A waiver is
     not valid or binding on the party granting that waiver unless made in
     writing.


                                      -38-


<PAGE>   39
18.  FURTHER ASSURANCES

     Each party agrees to do all things and execute all deeds, instruments,
transfers or other documents as may be necessary or desirable to give full
effect to the provisions of this Agreement and the transactions contemplated by
it.

19.  RELATIONSHIP OF THE PARTIES

     This Agreement does not constitute an employer/employee relationship,
partnership of any kind, an association or trust between the parties, each
party being individually responsible only for its obligations as set out in
this Agreement and in addition the parties agree that their relationship is one
of independent contractors. BAXTER is not authorized or empowered to act as
agent on behalf of SANGAMO and BAXTER shall not on behalf of SANGAMO enter into
any contract, warranty or representation as to any matter. SANGAMO shall not be
bound by the acts or conduct of BAXTER. SANGAMO is not authorized or empowered
to act as agent on behalf of BAXTER and SANGAMO shall not enter any contract,
warranty or representations as to any matter on behalf of BAXTER. BAXTER shall
not be bound by the acts or conduct of SANGAMO.

20.  GOVERNING LAW AND JURISDICTION

     This Agreement is governed by the laws of the State of California, USA.

21.  COUNTERPARTS

     This Agreement may be executed in any number of counterparts. All
counterparts together will be taken to constitute one instrument.

22.  INSOLVENCY

     (a)  All rights and licenses granted under or pursuant to this Agreement
by SANGAMO to BAXTER are, for all purposes of Section 365(n) of Title 11 of the
United Sates Code (together with its foreign equivalents, the "Insolvency
Statute"), licenses of rights to "intellectual property" as defined in the
Insolvency Statute. If an Insolvency Statute case is commenced by or against
SANGAMO,



                                      -39-

<PAGE>   40
     and this Agreement is rejected by SANGAMO (in any capacity, including
     debtor-in-possession, its successors, assigns, or an Insolvency Statute
     trustee), then notwithstanding such rejection BAXTER shall retain all of
     its rights, benefits, licenses, protections and privileges under this
     Agreement and shall be entitled to all of the rights, benefits and
     protections of a licensee under the Insolvency Statute. BAXTER will have
     the right and ability to cure any and all defaults by SANGAMO under this
     Agreement and to take any other actions to oppose a rejection pursuant to
     the Insolvency Statute of this Agreement, and to contract directly with
     third parties, if any, involved in contracted arrangements with SANGAMO
     with respect to performance of this Agreement. SANGAMO shall, upon written
     request of BAXTER, provide BAXTER with complete access to all Patent
     Rights, Technology, Inventions Patents and Inventions solely to the extent
     necessary for BAXTER to perform SANGAMO's obligations under this Agreement;
     provided, however, that such rights of access shall only be exercisable if
     SANGAMO fails to perform its obligations under this Agreement substantially
     as contemplated herein. All rights, powers and remedies of BAXTER provided
     herein are in addition to and not in substitution for any and all other
     rights, powers and remedies now or hereafter existing at law or in equity
     (including, without limitation, the Insolvency Statute) in the event of the
     commencement of an Insolvency Statute case by or against SANGAMO, and
     BAXTER shall be entitled to exercise all other such rights and powers and
     resort to all other such remedies as may now or hereafter exist at law or
     in equity in such event.

(b)  In the event of a rejection in bankruptcy of this Agreement by SANGAMO
     pursuant to the Insolvency Statute, then, in place of SANGAMO, Baxter shall
     itself have the right to design, assemble and characterize (or cause to be
     designed, assembled or characterized) one or more zinc finger DNA binding
     proteins for the activation of VEGF or VEGF receptors for the treatment or
     prevention of ischemic cardiovascular and vascular disease in humans, in
     addition to those developed under the Sponsored Research, and any zinc
     finger DNA binding protein and/or the nucleic acid that encodes therefor;
     provided, however, that the

                                      -40-
<PAGE>   41
          subsequent making, using, offering for sale, selling or importing of
          such zinc finger DNA binding proteins shall be limited to the scope of
          the licenses granted hereunder. If this Agreement is rejected by
          SANGAMO in bankruptcy then, upon the written request of BAXTER, and as
          required by the Insolvency Statute, SANGAMO shall promptly deliver to
          BAXTER any intellectual property and/or know-how or any other
          information which is in the control of SANGAMO and which BAXTER
          reasonably needs or requires to allow BAXTER itself to design,
          assemble and characterize (or cause to be designed, assembled or
          characterized) zinc finger DNA binding proteins and/or the nucleic
          acid that encodes therefor; provided, however, that the subsequent
          making, using, offering for sale, selling or importing of such zinc
          finger DNA binding proteins shall be limited to the scope of the
          licenses granted hereunder. BAXTER shall be relieved from any payment
          obligation to SANGAMO under Paragraph 3.3 above for zinc finger DNA
          binding proteins which BAXTER designs, assembles or characterizes (or
          causes to be designed, assembled or characterized) after the rejection
          of this Agreement by SANGAMO.

23.  FORCE MAJEURE

     In the event of any delay in performance by either party of any of its
     obligations or liabilities pursuant to this Agreement to the extent due to
     any cause arising from or attributable to acts, events, non-happenings,
     omissions, accidents or acts of God beyond the reasonable control of the
     party to perform (including but not limited to strikes, lock-outs, shortage
     of labor, civil commotion, riot, war, threat of or preparation for war,
     breaking off of diplomatic relations, fire, explosion, sabotage, storm,
     flood, earthquake, fog, subsidence, pestilence, epidemics, computer system
     or machinery breakdown, failure of plant, collapse of structures, voluntary
     or mandatory compliance with any direction, request or order of any person
     having or appearing to have authority whether for defense or other
     governmental or national purposes, or any requisition for materials or
     services apparently or stated to be used for the purposes of defense,
     inability to obtain suitable raw material, equipment, fuel, power,
     components or transportation), the party so delayed or prevented will be
     under no liability for loss or injury suffered by the other party and any

                                      -41-
<PAGE>   42
   such delay or failure to perform will not constitute a breach of this
   agreement to the extent due to such cause, provided that the party so delayed
   uses commercially reasonable efforts to remedy the effect of such cause.

   EXECUTED as an agreement.

SIGNED by /s/ EDWARD LANPHIER          )
                                       )
a duly authorized officer of SANGAMO   )
BIOSCIENCES, INC. in the presence of:  )



Witness     /s/ PETER BLUFORD            PRESIDENT & CEO
            ---------------------------  --------------------------------------
                                         Duly Authorized Officer


Print Name  Peter Bluford                Edward Lanphier
            ---------------------------  --------------------------------------
            VP, Corporate Development    Print Name


SIGNED by                              )
                                       )
a duly authorized officer of BAXTER    )
HEALTHCARE CORPORATION in the presence )
of:

Witness     /s/ ANN M. SMALL             /s/ J. H. KEHL, JR.
            ---------------------------  --------------------------------------
                                         Duly Authorized Officer


Print Name  Ann M. Small                 J. H. Kehl, Jr.
            ---------------------------  --------------------------------------
                                         Print Name
                                         VP, Business Development
                                         CardioVascular Group


                                      -42-