<PAGE>   1

                                                                    EXHIBIT 10.6

                                  AVIGEN, INC.

                 1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

                             ADOPTED MARCH 29, 1996

                     APPROVED BY STOCKHOLDERS APRIL 30, 1996
             AMENDED BY THE BOARD OF DIRECTORS ON SEPTEMBER 24, 1999
                   APPROVED BY STOCKHOLDERS NOVEMBER 12, 1999


1.      PURPOSE.

        (a) The purpose of the Avigen, Inc. 1996 Non-Employee Directors' Stock
Option Plan (the "Plan") is to provide a means by which each director of Avigen,
Inc. a Delaware corporation (the "Company") who is not otherwise an employee of
the Company or of any Affiliate of the Company (each such person being hereafter
referred to as a "Non-Employee Director") will be given an opportunity to
purchase stock of the Company.

        (b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").

        (c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.

2.      ADMINISTRATION.

        (a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).


<PAGE>   2


        (b) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.

3.      SHARES SUBJECT TO THE PLAN.

        (a) Subject to the provisions of paragraph 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate two hundred thousand (200,000)
(after giving effect to the 4.43-for-1 reverse split of the Company's Common
Stock) shares of the Company's Common Stock. If any option granted under the
Plan shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such option shall again become
available for the Plan.

        (b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

4.      ELIGIBILITY.

        Options shall be granted only to Non-Employee Directors of the Company.

5.      NON-DISCRETIONARY GRANTS.

        (a) Each person who is, after the Effective Date, elected for the first
time to be a Non-Employee Director automatically shall, upon the date of initial
election to be a Non-Employee Director by the Board or stockholders of the
Company, be granted an option to purchase fifteen


                                       2
<PAGE>   3


thousand (15,000) (after giving effect to the 4.43-for-1 reverse split of the
Company's Common Stock) shares of Common Stock of the Company on the terms and
conditions set forth herein.

        (b) At each annual meeting of the Company's stockholders after the
Effective Date (i) each person who is then a Non-Employee Director and
continuously has been a Non-Employee Director since the preceding annual meeting
of the Company's stockholders automatically shall be granted an option to
purchase seven thousand five hundred (7,500) (after giving effect to the
4.43-for-1 reverse split of the Company's Common Stock) shares of Common Stock
of the Company on the terms and conditions set forth herein, and (ii) each other
person who is then a Non-Employee Director automatically shall be granted an
option to purchase, on the terms and conditions set forth herein, the number of
shares of Common Stock of the Company (rounded up to the nearest whole share)
determined by multiplying the seven thousand five hundred (7,500) shares by a
fraction, the numerator of which is the number of days the person continuously
has been a Non-Employee Director as of the date of such grant and the
denominator of which is 365.

6.      OPTION PROVISIONS.

        Each option shall be subject to the following terms and conditions:

        (a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") ten (10) years from the date of grant. If the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate terminates for any reason or for no reason, the option shall terminate
on the earlier of the Expiration Date or the date twelve (12) months following
the date of termination of all such service; provided, however, that if such
termination of service is due to the optionee's death, the option shall
terminate on the earlier of the Expiration Date or eighteen (18) months
following the date of the optionee's death. In any and all circumstances, an
option


                                       3
<PAGE>   4


may be exercised following termination of the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate only as to that number of shares as to which it was exercisable on the
date of termination of such service under the provisions of subparagraph 6(e).

        (b) The exercise price of each option shall be one hundred percent
(100%) of the fair market value of the stock subject to such option on the date
such option is granted.

        (c) Payment of the exercise price of each option is due in full in cash
upon any exercise when the number of shares being purchased upon such exercise
is fewer than 1,000 shares. However, when the number of shares being purchased
upon an exercise is 1,000 or more shares, the optionee may elect to make payment
of the exercise price under one of the following alternatives:

                (i) Payment of the exercise price per share in cash or by check
at the time of exercise; or

                (ii) Provided that at the time of the exercise the Company's
Common Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of Common Stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which Common Stock shall be valued at its fair market
value on the date preceding the date of exercise; or

                (iii) Payment by a combination of the methods of payment
specified in subparagraph 6(c)(i) and 6(c)(ii) above.

        Notwithstanding the foregoing, this option may be exercised pursuant to
a program developed under Regulation T as promulgated by the Federal Reserve
Board which results in the


                                       4
<PAGE>   5


receipt of cash (or check) by the Company prior to the issuance of shares of the
Company's Common Stock.

        (d) An option shall not be transferable except by will or by the laws of
descent and distribution, or pursuant to a qualified domestic relations order
satisfying the requirements of Rule 16b-3 under the Securities Exchange Act of
1934 ("Rule 16b-3") and shall be exercisable during the lifetime of the person
to whom the option is granted only by such person (or by his guardian or legal
representative) or transferee pursuant to such an order. Notwithstanding the
foregoing, the optionee may, by delivering written notice to the Company in a
form satisfactory to the Company, designate a third party who, in the event of
the death of the optionee, shall thereafter be entitled to exercise the option.

        (e) The option shall become exercisable in installments over a period of
three (3) years from the date of grant commencing on the date one (1) year after
the date of grant of the option, with thirty-three percent (33%) becoming
exercisable one (1) year after the date of the grant, thirty-four percent (34%)
becoming exercisable two (2) years after the date of grant and the remaining
thirty-three percent (33%) becoming exercisable three (3) years after the date
of grant; provided that the optionee has, during the entire period prior to such
vesting date, continuously served as a Non-Employee Director or employee of or
consultant to the Company or any Affiliate of the Company, whereupon such option
shall become fully exercisable in accordance with its terms with respect to that
portion of the shares represented by that installment.

        (f) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 6(d), as a condition of exercising any
such option: (i) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in


                                       5
<PAGE>   6


financial and business matters; and (ii) to give written assurances satisfactory
to the Company stating that such person is acquiring the stock subject to the
option for such person's own account and not with any present intention of
selling or otherwise distributing the stock. These requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise of the option has been registered under
a then-currently-effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), or (ii), as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then-applicable
securities laws.

        (g) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.

        (h) The Company (or a representative of the underwriters) may, in
connection with the first underwritten registration of the offering of any
securities of the Company under the Securities Act, require that any optionee
not sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters.

7.      COVENANTS OF THE COMPANY.

        (a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.



                                       6
<PAGE>   7


        (b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.

8.      USE OF PROCEEDS FROM STOCK.

        Proceeds from the sale of stock pursuant to options granted under the
Plan shall constitute general funds of the Company.

9.      MISCELLANEOUS.

        (a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.

        (b) Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the stockholders of the
Company provided for in the Bylaws of the Company and such other information
regarding the Company as the holder of such option may reasonably request.


                                       7
<PAGE>   8


        (c) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any
Non-Employee Director.

        (d) No Non-Employee Director, individually or as a member of a group,
and no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of Common Stock, if any, as shall have been
reserved for him pursuant to an option granted to him.

        (e) In connection with each option made pursuant to the Plan, it shall
be a condition precedent to the Company's obligation to issue or transfer shares
to a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.

        (f) As used in this Plan, "fair market value" means, as of any date, the
value of the Common Stock of the Company determined as follows:

                (i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market of The Nasdaq Stock Market , the Fair Market Value of a share of Common
Stock shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such system or exchange (or the exchange with
the greatest volume of trading in Common Stock) on the last market trading day
prior to the day of determination, as reported in the Wall Street Journal or
such other source as the Board deems reliable;



                                       8
<PAGE>   9


                (ii) If the Common Stock is quoted on The Nasdaq Stock Market
(but not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of Common Stock shall be the mean between the bid and asked prices for
the Common Stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;

                (iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the Board.

        Notwithstanding the foregoing, the Fair Market Value of the Common Stock
for an option granted on the Effective Date shall be the price per share at
which shares of Common Stock are first sold to the public in the Company's
initial public offering.

10.     ADJUSTMENTS UPON CHANGES IN STOCK.

        (a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Plan and outstanding options will be appropriately adjusted in the class(es) and
maximum number of shares subject to the Plan and the class(es) and number of
shares and price per share of stock subject to outstanding options.

        (b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
Common Stock outstanding immediately preceding the merger are


                                       9
<PAGE>   10


converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (4) any other capital reorganization
(including a sale of stock of the Company to a single purchaser or single group
of affiliated purchasers) after which less than fifty percent (50%) of the
outstanding voting shares of the new or continuing corporation are owned by
stockholders of the Company immediately before such transaction, the time during
which options outstanding under the Plan may be exercised shall be accelerated
to permit the optionee to exercise all such options in full prior to such event,
and the options shall terminate if not exercised prior to such event.

11.     AMENDMENT OF THE PLAN.

        (a) The Board at any time, and from time to time, may amend the Plan,
provided, however, that the Board shall not amend the Plan more than once every
six (6) months, with respect to the provisions of the Plan which relate to the
amount, price and timing of grants, other than to comport with changes in the
Code, or applicable regulations or rulings thereunder. Except as provided in
paragraph 10 relating to adjustments upon changes in stock, no amendment shall
be effective unless approved by the stockholders of the Company within twelve
(12) months before or after the adoption of the amendment, where the amendment
will modify the Plan in any way if such modification requires stockholder
approval in order for the Plan to comply with the requirements of Rule 16b-3.

        (b) Rights and obligations under any option granted before any amendment
of the Plan shall not be impaired by such amendment unless (i) the Company
requests the consent of the person to whom the option was granted and (ii) such
person consents in writing.

12.     TERMINATION OR SUSPENSION OF THE PLAN.


                                       10
<PAGE>   11


        (a) The Board may suspend or terminate the Plan at any time. No options
may be granted under the Plan while the Plan is suspended or after it is
terminated.

        (b) Rights and obligations under any option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.

        (c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.

13.     EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.

        (a) The Plan shall become effective on the same day that the Company's
initial public offering of shares of Common Stock becomes effective (the
"Effective Date"), subject to the condition that the Plan is approved by the
stockholders of the Company.

        (b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.



                                       11