Document:

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EXHIBIT 10.1                                        *TEXT OMITTED AND FILED
                                                    SEPARATELY UNDER 17 C.F.R.
                                                    SECTIONS 200.80(b)(4) 200.83
                                                    AND 240.24b-2

                               SANMINA CORPORATION

                                  AGREEMENT FOR

                        ELECTRONIC MANUFACTURING SERVICES

        This Agreement between METRICOM, INC., hereinafter referred to as
"Customer," and SANMINA CORPORATION, hereinafter referred to as "Sanmina" is
entered into on July 2nd, 1999. Sanmina shall perform manufacturing services
for the Customer under the terms and conditions set forth herein.

I.      TERM. This Agreement shall be in effect for twenty-four (24) months from
        the date of this Agreement. Unless the parties agree to extend such
        initial term of the Agreement, for any period, prior to the termination
        of such initial term, the Agreement shall terminate.

II.     SCOPE OF WORK PERFORMED. Customer wishes Sanmina to manufacture a range
        of Electronics products or Assemblies on behalf of Customer at the
        prices identified in Exhibit A. Sanmina and the Customer shall mutually
        agree upon a delivery schedule for the Products.

        A. Customer shall be liable for Material that Sanmina procures or
otherwise contracts for in order to manufacture the products per the customer
Bill-of-Materials (BOM) that Customer wishes to buy from Sanmina on a turnkey
basis.

        B. This liability shall be determined by defining the process that
incurs this liability and describing the situations or circumstances under which
Customer is liable for Material that Sanmina has procured.

        C. Sanmina shall purchase components for the Products in accordance with
a vendor list approved by Sanmina and the Customer ("AVL"). In the event Sanmina
cannot purchase a component from an approved vendor for any reason, including
unavailability or commercial infeasibility of the purchase of such components,
Sanmina may purchase such components from an alternate vendor with the prior
written consent of the Customer.

III.    GENERAL PLANNING AND PROCUREMENT PROCESS

        A. On the date this Agreement is executed and the first business day of
each calendar month thereafter, the Customer shall provide Sanmina with firm,
monthly, rolling purchase orders covering a minimum period of three (3) months
("Purchase Order").

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        B. On the same dates, the Customer shall provide Sanmina with additional
monthly, rolling nine (9) month forecast ("Forecast") covering nine (9) months
immediately following the Purchase Order period. Forecast does not incur any
liability for either Sanmina or Customer except that of any long lead-time parts
for which the forecast would cause procurement activity, and, even in such a
situation such liability for Customer would be limited per section IV and it
sub-sections. Within 30-days of this agreement or at the earliest possible date
thereafter, Sanmina will provide a summary of all components used on the BOM
showing each parts NCNR status, lead-time, standard cost, minimum buy quantity,
ABC code.

        C. Sanmina will take the Purchase Orders and Forecast referred to in
III(A) and III(B) above and generate a Master Production Schedule (MPS) for a
twelve-month period using the process described in Section III(D) below.

        D. This MPS will define the master plan on which Sanmina will base its
procurement, internal capacity projections and commitments.

                1. Sanmina will use the Purchase Orders referred to in A to
generate the first three months of the MPS.

                2. Sanmina will use the Forecast referred to in B to generate
the second nine months of the MPS.

                3. The MPS created as described above does not incur any
liability for either Sanmina (except to fulfill the binding Purchase Orders) or
Customer except that of any long lead-time parts for which the forecast would
cause procurement activity, and, even in such a situation such liability for
Customer would be limited per section IV and it sub-sections. In the event
Sanmina needs to procure NCNR material, utilizing Customer forecast, beyond the
3 months firm PO, written agreement must be attained from the Customer.

        E. Sanmina will process the MPS through industry-standard MRP software
that will convert the MPS reflecting Customer's Purchase Orders and Forecasts
into requirements for components that are required to make these products. In
doing so, Sanmina will off-set the requirements for receipt of components or
materials by allowing for the time required to build the products per the
following times:

                1. In-Circuit Test/Functional Test - 5 Working Days

                2. Assembly - 7 Working Days

                3. Kitting - 2 Working Days

                4. Material Handling - 2 Working Days

        F. Per this agreement Sanmina will plan and schedule material to be at
Sanmina eleven working days before the products are due to ship to Customer
where no Test is required, and sixteen working days before the products are due
to ship to Customer where Test is required.

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        G. Sanmina will also release (launch) orders to suppliers of materials
sometime prior to the anticipated date that the material is needed (per section
III(E) above). When these orders are launched will depend on the Vendor
Lead-Time that Sanmina will determine from time to time and maintain as a
parameter of Sanmina's manufacturing or materials planning systems.

        H. Sanmina, through its MRP System will also issue an instruction (MRP
Signal) to its procurement group to buy a part approximately seven days before
the order is due to be placed per section F above.

        I. When Sanmina places an order with its suppliers per the sections
above, Sanmina will order parts in various quantities (defined in
periods-worth-of-supply) that are defined by the part's ABC Classification. This
classification as well as the expected distribution or characteristics of
various classes of parts, and, the periods-worth-of-supply (Periods-of-Supply)
that will be bought for each class of part is shown on Table 1.

        Table 1. ABC Classifications, Descriptions and Periods-of-Supply

<TABLE>
<CAPTION>
                                                                         PERIODS WORTH OF
                                                 EXPECTED PERCENTAGE       SUPPLY TO BE
                         EXPECTED PERCENTAGE      OF TOTAL VALUE (OF     BOUGHT WITH EACH
      PART CLASS            OF TOTAL PARTS       GROSS REQUIREMENTS)           ORDER
      ----------            --------------       -------------------           -----
<S>                      <C>                     <C>                     <C>
           A                      3%                     80%                  2 Weeks

           B                     17%                     17%                  8 Weeks

           C                     80%                      3%                 6 Months
</TABLE>

        J. In addition to ordering parts for various periods-of-supply, Sanmina
will order parts according to various minimum-buy quantities, tape and reel
quantities, and, multiples of packaging quantities.

        K. The components Sanmina purchases or orders to fulfill the Purchase
Order and the Forecast on behalf of the Customer to manufacture the Products,
and any associated expenses related to purchasing, ordering, manufacturing
(labor and overhead), shipping, storing and eliminating such components and
agreed upon mark-up shall constitute a part of the Customer's Total Liability
("Total Liability").

IV.     LIABILITIES FOR MATERIALS

        A. Customer's liability for material that Sanmina has procured is
limited to the following:

                1. Parts that Sanmina, having ordered per the guidelines above,
cannot cancel prior to their receipt. This includes parts that may not be
cancelable by virtue of having

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insufficient time between the MRP signal to cancel and the expected or real
receipt date at Sanmina. Sanmina is to advise customer of non-cancelable items
prior to order placement by providing the information referred to in section III
(D.3).

                2. Parts that Sanmina, having ordered per the guidelines above,
cannot return to the suppliers that the parts came from, where the value of the
parts exceed $500 in total, and where Sanmina has made reasonable efforts to
return the parts (for no more than four weeks) or use for another requirement
within Sanmina. Sanmina is to advise Customer the list of non-returnable items
prior to order placement. Customer recognizes that some parts may have been
returnable when procured from a supplier by Sanmina, but nevertheless may
subsequently become non-returnable by virtue of some processing that Sanmina may
cause to have done to the parts in preparation for the use of those parts in
manufacturing.

                3. Parts that are worth less than $500 in total and where
Sanmina is not required to attempt return.

        B. Where Sanmina is able to return parts with a re-stocking or other
fees, those fees shall also become part of Customer's Total Liability.

        C. If necessary and with the Customer's written consent, Sanmina shall
purchase any necessary tools to fulfill the Purchase Order and Forecast. Such
tools shall be deemed a part of the Customer's Total Liability. All such tooling
purchased by Sanmina shall remain the Customer's property, shall be subject to a
security interest perfected on behalf of Customer, and Sanmina shall return such
tooling (normal wear and tear excepted) to the Customer upon request, the
completion of the relevant order or the termination of the Agreement.

        D. Customer's liability for the material defined in the previous
sections will be at the quoted cost agreed between Sanmina and Customer plus an
agreed margin of 5% (five percent) plus a materials burden of 5%.

V.      RESCHEDULES. The Customer may reschedule delivery dates of Products
        subject to the following matrix:

<TABLE>
<CAPTION>
               NOTICE PRIOR TO                          PERCENT OF ORIGINAL
                  ORIGINAL                             QUANTITY THAT CAN BE
                DELIVERY DATE                               RESCHEDULED
                -------------                               -----------
<S>                                                    <C>
                0 to 30 days                                    0%
                31 to 60 days                                   15%
                61 to 90 days                                   30%
               Beyond 90 Days                                  100%
</TABLE>

        A. As an example, if the Customer notifies Sanmina in writing between 31
and 60 days prior to the scheduled delivery date of the Products, the Customer
may reschedule a maximum of 15% of the total amount of the Products to be
delivered on such date.

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        B. For a decrease in quantity of Products to be delivered on a specific
delivery date, Sanmina and the Customer shall mutually agree upon a date to
deliver the undelivered Products within 45 days from the original delivery date.

        C. For an increase in quantity of Products to be delivered on a specific
delivery date, Sanmina, on a best effort basis, will attempt to accommodate such
increase.

        D. Any change in the delivery dates of any Product for a period
exceeding 45 days in the aggregate shall be deemed a cancellation by the
Customer with respect to such Products. If the Customer's schedule change
results in additional expenses to Sanmina to store such Products or to acquire
additional components, such additional expenses shall be deemed Part of the
Customer's Total Liability.

VI.     REVISIONS. In the event the Customer requests an engineering change to a
        product, Sanmina shall notify the Customer in writing of any impact on
        the cost and/or scheduled delivery of such Products within five (5)
        business days of the receipt of Customer's request. Unless the Customer
        consents to the amended notification from Sanmina, the requested
        engineering change shall be deemed canceled. Any increases in the cost
        of the Products resulting from such Engineering Change Order ("ECO")
        shall be deemed a part of the Customer's Total Liability as defined
        above. Similarly, any parts made obsolete or excess as a result of such
        an ECO shall be deemed part of the Customer's Total Liability. Sanmina
        will make reasonable effort to return or use in another application
        obsolete ECO related material where each part exceed $500 value in
        total. Such efforts are limited to 4 weeks duration.

VII.    CANCELLATIONS. The Customer may cancel any order by notifying Sanmina in
        writing at least 90 days prior to the delivery date of such order.
        Within 30 days of such cancellation, Sanmina shall provide the Customer
        with the amount of the Total Liability related to such canceled order.
        The Customer shall pay such cancellation amount to Sanmina on a net
        30-day basis. After receipt of such cancellation amount, Sanmina shall
        deliver to the Customer, at the Customer's expense, any components
        purchased but unused as a result of such cancellation or scrap such
        components, at the discretion of the Customer.

VIII.   PRICING. The prices for the Products are shown in Exhibit A and shall
        remain fixed for the term of this Agreement with the following
        exceptions:

        A. ECO - Engineering Change Order (referred to in section VI)

        B. Material variations on the market prices of components. The costed
BOM will be reviewed every quarter with the intent of cost reduction.

IX.     COST REDUCTION. Sanmina will make every reasonable effort to improve
        component pricing as well as improvements to test and assembly processes
        so as to decrease final pricing. Sanmina and CUSTOMER will meet every to
        manage a joint and ongoing cost reduction program as outlined in the
        Cost Reduction Plan, Exhibit B.

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X.      DELIVERY.

        A. Delivery of all items under this Agreement shall be in compliance
with a Customer order fulfillment process which will be mutually developed and
agreed to by Sanmina and Customer.

        B. Sanmina shall deliver the Products on the agreed upon delivery dates.
Time is of the essence in delivery.

        C. Unless otherwise specified by the Customer, Sanmina shall transport
the Products by the method Sanmina deems most advantageous, to the address
specified in writing by CUSTOMER. All reasonable freight, insurance and other
shipping expenses from the delivery point shall be borne Customer.
Specifications for special packaging will be provided by Customer. Expense for
special packaging will be borne by Customer.

XI.     TRAINING. Customer will perform initial training of Sanmina personnel.
        Upon satisfactory completion, Sanmina will assume responsibility for
        ongoing training.

XII.    TEST EQUIPMENT.

        A. Customer will provide Sanmina with one set of test equipment, which
shall remain the property of Customer. Additional sets of equipment as needed
will be provided by Sanmina. Customer will be responsible for cost of the
additional equipment. Customer must approve additional equipment costs and
purchase of equipment in writing prior to Sanmina supplying this equipment.

        B. Sanmina will assume responsibility for calibration and repair of
equipment at the customers expense. Upon completion of 100K radios, calibration
cost will be shared at 50/50 between Sanmina and Customer.

XIII.   PAYMENT AND INVOICING.

        A. Payment terms will be net 30 days from invoice date. Sanmina will
provide the Customer with a credit limit set at (to be determined). In the event
that the Customer exceeds this credit limit or has outstanding invoices for more
than 60 days, Sanmina may stop shipments of Products to Customer until the
Customer makes sufficient payment to bring its account consistent with terms
outlined above. Sanmina may reduce the credit limit with written notice to the
Customer.

XIV.    WARRANTY.

        A. Sanmina warrants that the Products shall be free from any defects in
materials and workmanship for a period of one year from the date of delivery.
Warranty on third-party components is limited to the warranty provided by the
component manufacturer. Sanmina shall pass on any unexpired warranty for such
Vendor Components provided by third-party vendors or passed on by such
third-party vendors from the original manufacturers until the expiration of such
warranties or up to a maximum of one (1) year from date of manufacture of the
Product by

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Sanmina, whichever is shorter. As the Customer's sole remedy under the warranty,
Sanmina will, at no charge, rework, repair and retest or replace any such
Products returned to Sanmina and found to contain defects. Warranty coverage
does not include failures due to the Customer design errors, the supply or
selection of improper or defective parts or materials used by the Customer,
damages caused by the Customer's misuse, unauthorized repair or negligence.
Sanmina does not assume any liability for expendable items such as lamps and
fuses. Sanmina reserves the right to inspect the Products and verify that they
are defective or non-conforming. Sanmina's total liability shall be limited to
the value of the Product supplied under this Agreement.

        B. The performance of any repair or replacement by Sanmina does not
extend the warranty period for any Products beyond the period applicable to the
Products originally delivered.

        C. EXCEPT FOR THE ABOVE EXPRESS WARRANTIES, SANMINA MAKES AND THE
CUSTOMER RECEIVES NO WARRANTIES OR CONDITIONS ON THE PRODUCTS, EXPRESS, IMPLIED,
STATUTORY, OR OTHERWISE, AND SANMINA SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

XV.     GENERAL INDEMNITY.

        A. The Customer shall indemnify Sanmina against, and hold it harmless
from any loss, cost, liability or expense (including court costs and the
reasonable fees of attorneys and other professionals) to the extent that such
loss, cost, liability or expense arises out of, or in connection with, in whole
or in part, (A) infringements of any patent, trademark, copyright or other
intellectual property of the Customer or (B) any negligence or willful
misconduct by the Customer, its employees or agents and subcontractors,
including but not limited to any such act or omission that contributes to: (i)
any bodily injury, sickness, disease, or death; (ii) any injury or destruction
to tangible or intangible property of the injured party or any loss of use
resulting therefrom; or (iii) any violation of any statute, ordinance or
regulation; provided that Sanmina shall give Customer prompt written notice of
such claim, sole control over the defense or settlement of such claim, and
reasonable assistance in such defense or settlement at Customer's request and
expense.

        B. Sanmina shall indemnify Customer against, and hold it harmless from
any loss, cost, liability or expense (including without limitation court costs
and the reasonable fees of attorneys and other professionals) to the extent that
such loss, cost, liability or expense arises out of, or in connection with, in
whole or in part, any negligence or willful misconduct by Sanmina, its employees
or agents and subcontractors, including but not limited to any such act or
omission that contributes to: (i) any bodily injury, sickness, disease, or
death; (ii) any injury or destruction to tangible or intangible property of the
injured party or any loss of use resulting therefrom; or (iii) any violation of
any statute, ordinance or regulation; provided that Customer shall give Sanmina
prompt written notice of such claim, sole control over the defense or settlement
of such claim, and reasonable assistance in such defense or settlement at
Sanmina's request and expense.

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XVI.    QUALITY, INSPECTION AND REPORTING.

        A. The Customer will have the right at all reasonable times, to visit
Sanmina's plant to inspect the work performed on the Products. Inspection of the
work shall not relieve Sanmina of any of its obligations under the Agreement or
purchase orders. Sanmina shall provide Customer with all mutually agreed upon
quality reports at agreed upon intervals. Sanmina reserves the right to restrict
the Customer's access to the plant or any area within it as necessary to protect
confidential information of Sanmina or its other customers.

        B. Customer and Sanmina will implement a joint quality improvement
program that will develop and implement a continuous quality improvement.

XVII.   CONFIDENTIALITY.

        A. All Confidential Information shall be treated as confidential and not
disclosed or transferred by the recipient to third parties, other than the
recipient's agents and employees who need to know such information to serve the
recipient and who are obligated to treat such information as confidential. All
Confidential Information shall remain the sole property of the disclosing party,
and the receiving party shall have no interest in or rights with respect thereto
except as expressly set forth in this Agreement. Each party agrees to maintain
all such Confidential Information in confidence to the same extent that it
protects its own similar Confidential Information, which in no event will be
less than reasonable care. "Confidential Information" is defined as information
in written, graphic, or electronic form identified by a party as its
confidential or proprietary information, or if initially disclosed in any other
form, identified at the time of disclosure as confidential or proprietary and
subsequently reduced to writing within thirty (30) days. Without limiting the
foregoing, the terms and conditions of this Agreement are the Confidential
Information of both parties.

        B. EXCEPTIONS. The foregoing restriction on disclosure shall not apply
with respect to any information which (a) becomes generally known or publicly
available through no act or failure to act on the part of the receiving party;
(b) is furnished to others by the disclosing party without restriction on
disclosure; (c) is known by the receiving party at the time of receiving such
information as evidenced by its records; (d) is hereafter furnished to the
receiving party by a third party, as a matter of right and without restriction
on disclosure; or (e) was developed independently of this Agreement without
obligation of confidentiality.

XVIII.  LICENSE GRANT; OWNERSHIP

        A. LICENSE GRANT.

                1. TECHNOLOGY LICENSE. Subject to the terms and conditions of
this Agreement, Customer hereby grants to Sanmina during the term of this
Agreement a nonexclusive, non-transferable, worldwide, royalty-free license,
without right to sublicense, to make the Products in accordance with the
specifications and to sell such Products to Customer.

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                2. SOFTWARE LICENSE. Subject to the terms and conditions of this
Agreement, Customer grants to Sanmina during the term of this Agreement a
nonexclusive, non-transferable, worldwide, royalty-free license, without right
to sublicense, to reproduce and use any software that Customer provides Sanmina
for incorporation in the Products (the "Software") in object code form only.
Sanmina shall not reverse compile, reverse engineer or otherwise disassemble the
Software. No rights to prepare derivative works or to display the Software are
granted hereunder.

                3. SOURCE CODE. Subject to the terms and conditions of this
Agreement, Customer may disclose to Sanmina the source code for the Software for
purposes of enabling Sanmina to port the Software as set forth in Exhibit A.
Such disclosure shall take place only at Customer's facilities. The source code
shall be retained at Customer's facilities and shall not be removed therefrom by
Sanmina, and any disclosure of source code, and all notes made by Sanmina
pertaining thereto shall be treated as Customer's Confidential Information
pursuant to the terms of this Agreement. Customer shall provide Sanmina with
access to materials and equipment located at Customer's facilities and the
support reasonably needed in connection with the porting effort. Except as
needed to port the Customer Software as set forth in Exhibit A, no copyright
rights to reproduce, prepare derivative works, perform, display or distribute
the Software in source code format are granted to Sanmina hereunder.

        B. OWNERSHIP. Sanmina acknowledges and agrees that Customer is and shall
remain the sole owner of any materials, tooling, designs, schematics, Software,
specifications or other information (including without limitation Confidential
Information) that Customer provides Sanmina pursuant to this Agreement
(collectively, the "Customer Technology"). Any improvements to the Technology
(the "Improvements") created during this Agreement by either party shall be
owned by Customer. Sanmina acknowledges and agrees that it has no rights in or
to the Technology, and any Improvements other than the license rights
specifically granted herein.

XIX.    TERMINATION.

        A. Either party may, without penalty, terminate this Agreement upon 180
days written notice to the other party in either one of the following events:

                The other party materially breaches this Agreement and such
                breach remains uncured for thirty (30) days following written
                notice of breach the non breaching party;

                The other party becomes involved in any voluntary or involuntary
                bankruptcy or other insolvency petition or proceeding for the
                benefit of its creditors, and such petition, assignment or
                proceeding is not dismissed within sixty (60) days after it was
                filed.

        B. Upon termination, Sanmina shall provide the Customer with an invoice
of the Customer's Total Liabilities. In addition, if the Customer is the
breaching party, the Customer shall be liable for all work-in-progress and any
outstanding charges. Upon termination,

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Customer shall pay all invoiced charges in net thirty (30) days. In addition,
Sections XIV, XV, XVII, XVIII.B, XIX.B, XX and XXI shall survive any termination
or expiration of this Agreement.

XX.     LIMITATION OF LIABILITY. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY
        SPECIAL, INDIRECT, CONSEQUENTIAL, OR INCIDENTAL DAMAGES, HOWEVER CAUSED
        AND ON ANY THEORY OF LIABILITY, ARISING IN ANY WAY OUT OF THIS
        AGREEMENT. THIS LIMITATION WILL APPLY EVEN IF SUCH PARTY HAS BEEN
        ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING ANY
        FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN.

XXI.    MISCELLANEOUS

        A. GOVERNING LAW. This Agreement will be governed by and interpreted
under the laws of the State of California, without reference to conflict of laws
principles.

        B. JURISDICTION. For any dispute arising out of this Agreement, the
parties consent to personal and exclusive jurisdiction of and venue in the state
and federal courts within Santa Clara County, California.

        C. ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets forth
the entire agreement and understanding of the parties relating to the subject
matter herein and therein and merge all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, will be effective unless in writing signed by the party to
be charged. The failure by either party to enforce any rights thereunder will
not be construed as a waiver of any rights of such party.

        D. ASSIGNMENT. Sanmina shall not assign this Agreement nor any of its
rights or obligations hereunder without the prior written consent of Customer.
The rights and liabilities of the parties hereto will bind and incur to the
benefit of their successors, executors or administrators.

        E. NOTICES. Any required notices thereunder will be given in writing at
the address of each party set forth above, or to such other address as either
party may substitute by written notice to the other in the manner contemplated
herein, and will be deemed served when delivered by facsimile or mail or when
tendered in person.

        F. FORCE MAJEURE. Neither party will be liable to the other for any
default thereunder if such default is caused by an event beyond such party's
control, including without limitation acts or failures to act of the other
party, component shortages, unavailability of transportation, floods, fires,
governmental requirements and acts of God (a "Force Majeure Event"). In the
event of threatened or actual non-performance as a result of any of the above
causes, the non-performing party will exercise commercially reasonable efforts
to avoid and cure such non-performance. Should a Force Majeure Event prevent a
party's performance thereunder

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for a period in excess of ninety (90) days, then the other party may elect to
terminate this Agreement by written notice thereof.

        G. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original and all of which together
will constitute one instrument.

SANMINA CORPORATION                         METRICOM, INC.

Signed: /s/ Rick LaPonzina                  Signed: /s/ Robert Mott
       -------------------------------             -----------------------------

Name:   Rick LaPonzina                      Name:  Robert Mott
       -------------------------------             -----------------------------

Title:  VP of Sales and Administration      Title: Senior VP of Eng. And Mfg.
       -------------------------------             -----------------------------

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                                    EXHIBIT A

PRICE LIST

Poletop            [***]

Eradio             [***]

WCS                [***]

Installation Kit   [***]

                   Note: Price is subject to change due to material and process.

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

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                                    EXHIBIT B

                               COST REDUCTION PLAN

DEDICATED COST REDUCTION TEAM

Sanmina will organize a team whose focus will be to reduce cost. This team will
consist of Front-End Engineers, Purchasing Agents, Manufacturing Engineers and
RF Engineers. We will work aggressively with Metricom to reduce cost yet
maintain quality, delivery and flexibility.

DESIGN FOR MANUFACTURABILITY (FRONT-END COST SAVINGS)

For future reference, DFM is a large part of Sanmina's Value Added Services.
Sanmina's PWB NPI Group can provide Metricom feedback on stack-up material
selection, DFM parameters and enhancements, electrical performance simulation,
panelizations and cost-abatement recommendations.

The resources offered can also provide Metricom Design Engineers the front-end
suggestions for testability, manufacturability and componentary. This exercise
will allow a smooth new product introduction, prototype and into production.

MATERIAL COST SAVINGS

Sanmina Purchasing Department will work with suppliers to negotiate aggressive
contracts, which will allow on going material cost reductions. Such contracts
will include shorter leadtimes, which will in turn allow much more flexibility
to Metricom yet at reduced cost. Sanmina's goal is to reduce material cost by
10-13% annually. Sanmina and Metricom will review material cost on a quarterly
basis at which time new cost will be implemented.

FURTHER MATERIAL COST SAVINGS

Sanmina will review material mark up as soon as Metricom meets or exceeds 15k/M
rate at which time new pricing will be implemented.

PROCESS IMPROVEMENTS (LABOR COST SAVINGS)

Sanmina Engineers will work with Metricom to expedite the "learning curve".
Furthermore, Sanmina Engineers will work towards developing a manufacturing
process flow, which will improve cost effectivity. Upon completion of the first
22k pieces, Sanmina Engineers will provide feedback on manufacturing process
improvements. Both Metricom and Sanmina will review the process flow on a
quarterly basis thereafter, at which time new cost will be implemented.

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FURTHER LABOR COST SAVINGS

Sanmina will review labor rate once Metricom meets or exceeds 8k/M rate,
equivalent to 96k/Y, at which time reduced rate will be implemented.

ICT IMPLEMENTATION (TEST COST SAVINGS)

Sanmina will dedicate a team of Test Engineers to develop ICT Programs and
Fixtures. Complex products such as Metricom's, benefit from ICT as it will
improve functional test yield.

RF TEST YIELD IMPROVEMENTS AND TIME REDUCTION (TEST COST SAVINGS)

Sanmina RF Engineers will work closely with Metricom Engineers to improve yields
and reduce test time. Sanmina will organize a RF team of Engineers who will
focus on improvements in both board level test yields and time, system level
test yields and time. The improvement in yields and reduction in test time will
allow this program to run more cost effectively. During the quarterly cost
review such cost savings will be realized and implemented.

FURTHER TEST COST SAVINGS

During the initial production of the program Sanmina will dedicate RF Engineers
to work with Metricom. Such RF Engineers have the expertise and experience to
reach the goals set by Metricom Test Engineers. During this process, Sanmina
Test Technicians will be trained to perform test and debug. Once Sanmina has
reached a satisfactory yield, Test Technicians will perform test on a full time
basis. At this time, Sanmina will review the test rate and reduced rate will be
implemented.

LONGTERM COST SAVINGS

Sanmina offers low cost manufacturing alternatives where mature products can be
transferred. This transfer will be completely invisible to Metricom. Sanmina
will ramp up at the low cost facility and phase out at the current facility.

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                          SUPPLEMENTAL AGREEMENT NO. 1

                                     OF THE

                 AGREEMENT FOR ELECTRONIC MANUFACTURING SERVICES

                                     BETWEEN

                               SANMINA CORPORATION

                                       AND

                               METRICOM DC, L.L.C

        THIS SUPPLEMENTAL AGREEMENT for the purchase and consignment of Radio
Kits, effective on the date last signed by both parties is between METRICOM DC,
L.L.C., (hereinafter referred to as "Customer"), METRICOM, INC. (HEREINAFTER
REFERRED TO AS "METRICOM, INC."), and SANMINA CORPORATION, (hereinafter referred
to as "Sanmina"). There is currently in full force and effect between Metricom,
Inc. and Sanmina an Agreement for Electronic Manufacturing Services, dated July
2, 1999 (hereinafter referred to as the "Agreement"). Customer, hereby, agrees
to the terms and conditions of the Agreement, and the parties to the Agreement,
intending to be legally bound, mutually agree that it is hereby supplemented as
follows:

I.      PREAMBLE

WHEREAS, Customer will purchase [***] Radio Kits, as defined herein, from
Sanmina for [***]

WHEREAS, Customer will consign the Radio Kits purchased to Sanmina for use in
the manufacture of Customer's Radios.

WHEREAS, Sanmina will invoice Customer for the finished Radios upon delivery,
and Customer will pay Sanmina the invoiced amount for delivered Radios minus
Customer's credit of [***]/Radio Kit for Consigned Goods.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound, the parties
agree as follows (and as hereinabove set forth):

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

                                       1
<PAGE>   16

II.     DEFINITIONS

        A.      Approved Components: electronic components listed in the Bill of
                Materials for Customer's Radios, current as of the date of this
                Supplemental Agreement, No. 1.

        B.      Radio Kit: One "Complete Radio Kit" is comprised of all the
                Approved Components necessary to manufacture one Customer Radio.
                A "Partial" Radio Kit is one that is missing some amount of
                necessary Approved Components to make it a Complete Radio Kit.

        C.      Radio: electronic devices manufactured by Sanmina to Customer's
                specifications.

        D.      Consigned Goods: Complete and Partial Radio Kits owned by
                Customer, located at Sanmina, and used exclusively for the
                manufacture of Customer's Radios.

III.    TERM OF SUPPLEMENTAL AGREEMENT NO. 1

        This Supplemental Agreement No. 1 will be in effect until one of the
following occurs: (1) Sanmina completely exhausts the supply of Consigned Goods
by delivering an equal amount of finished Radios to Customer, under the terms
and conditions of the Agreement and this Supplemental Agreement No. 1; or (2)
either party terminates the Agreement or this Supplemental Agreement No. 1.

IV.     TERMINATION OF MODIFICATION

A. This Supplemental Agreement No. 1 may be terminated: i) by any party under
the provisions set forth in Section XIX "Termination" of the Agreement, or ii)
by Customer if Sanmina fails to deliver [***] finished radios to Customer, based
on current design, within six (6) months from the execution of this Supplemental
Agreement No. 1. Delivery based on material availability of supply chain
specified by Customer

B. In the event of termination of this Supplemental Agreement No. 1 and/or the
Agreement for any reason, Sanmina will surrender to Customer all Radio Kits
purchased by Customer and consigned to Sanmina, less the amount of Consigned
Goods already manufactured into finished Radios and delivered and accepted by
Customer. Should there be a shortage of components and Sanmina can only return
"Partial" Radio Kits, the parties will mutually agree on how Customer will be
compensated for the shortfall in components. If the parties are unable to
mutually agree upon how Customer is to be compensated for the shortfall in
components, Customer may accept some combination of Approved Components equal in
value to the shortfall, or pursue any other remedies it has under the law.

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

                                       2
<PAGE>   17

C. In the event of termination as provided in Section IV. B., Sanmina, at
Customer's option, will return all Consigned Goods by: (1) making them available
for pick-up by Customer; or (2) at Sanmina's expense, package and transport the
remaining Consigned Goods by common carrier to location(s) designated by
Customer within the continental United States. Consigned Goods that are to be
transported will be packaged and labeled in accordance with Customer's specific
shipping instructions.

V.      PURCHASE TERMS AND OBLIGATIONS

                On a date to be agreed upon by the parties, but no later than
March 27, 2000, the parties will do the following:

(1) Sanmina will prepare a report for Customer estimating the number of Radio
Kits in its inventory and their respective percentage of completion. The cost of
the Radio Kits to Customer will be [***].

(2) Sanmina will provide documentation which evidences its good title to the
Radio Kits and/or the components comprising the Radio Kits;

(3) Following receipt of the information set forth in section (1) and (2),
Customer will make payment to Sanmina in the amount of [***], and take title to
[***] of Radio Kits;

(4) Once title to the Radio Kits has passed to Customer, Customer will consign
the Radio Kits ("Consigned Good") to Sanmina for use in the manufacture of
Customer's Radios;

(5) Customer will be invoiced for the finished Radios upon delivery at the
selling price for the Radios set forth in APPLICABLE ORDER(s) TO THE AGREEMENT.

(6) Customer will pay Sanmina the invoiced amount for delivered Radios minus
Customer's credit of [***]/Radio Kit for Consigned Goods, subject to the
standard payment provisions set forth in THE AGREEMENT.

VI.     TITLE OF GOODS AND CONSIGNMENT

        Title to the Radio Kits will pass from Sanmina to Customer, upon receipt
of payment by Sanmina from Customer. Upon passage of title, Customer will
consign the Radio Kits to Sanmina ("Consigned Goods").

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

                                       3
<PAGE>   18

VII.    WARRANTY OF TITLE

        Sanmina warrants that it holds title to the Approved Components
comprising the Radio Kits free and clear of any encumbrances, attachments,
and/or liens. Prior to Customer's purchase of the Radio Kits, Sanmina will
provide Customer documentation evidencing its clear title to the Radio Kits.

        Sanmina shall indemnify and hold harmless Customer and its affiliates,
and the directors, shareholders, agents and employees of each of them
("Indemnitees"), from and against any fine, penalty, loss, cost, damage, injury,
claim, expense or liability (individually and collectively "Liabilities") as a
result of encumbrances, attachments, and/or liens against the Inventory
purchased by Customer, whether known or unknown.

        Upon request of Customer, Sanmina shall, at no cost or expense to any
Indemnitee, defend and/or settle any claim, proceeding, appellate proceeding, or
suit against Indemnitees for Liabilities, whether or not litigation is actually
commenced, or the allegations are groundless or contain language that creates
the potential for Liabilities, and pay any costs, attorney fees, and any
judgment and/or settlement that may be incurred by any Indemnitee, under this
section or the enforcement of its rights under this section.

VII.    RISK OF LOSS

        Sanmina shall bear the risk of loss and indemnify Customer for any loss
or damage to, and/or destruction of any Consigned Goods held by SANMINA UNTIL
THOSE GOODS HAVE BEEN DELIVERED TO AND ACCEPTED BY CUSTOMER.

        Sanmina shall notify Customer promptly of any loss or damage to, and/or
destruction of Consigned goods held by Sanmina, and shall make every reasonable
effort to repair Consigned Goods that are damaged, and/or replace Consigned
Goods that have been destroyed to avoid delay in the manufacture of Customer's
Radios.

        Sanmina shall make reasonable efforts to safeguard the Consigned Goods
from loss, damage, and destruction while in Sanmina's control, custody, or
possession. The Consigned Goods shall remain segregated from other inventory
held by Sanmina.

IX.     INSURANCE

        Without limiting in any way Sanmina's indemnification obligations
hereunder, Sanmina shall maintain at its expense commercial general liability
(CGL) insurance with coverage limits of not less than [***] combined single
limit per occurrence. Such insurance shall provide protection against any claims
and/or liabilities including, but not limited to, claims for property

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

                                       4
<PAGE>   19

damage, which may arise or result from this Supplemental Agreement No. 1. Such
insurance shall include contractual liability coverage as well as Product and
Completed Operations Liability Insurance for all obligations assumed hereunder.
Sanmina agrees the insurance shall be issued by companies who hold a current
rating of not less then "A" according to Best's Key Rating Guide, shall name
Customer as additional an insured in matters covered by this Supplemental
Agreement No. 1, shall provide that said insurance is primary coverage with
respect to this insured. Sanmina agrees to maintain any additional insurance
requirements specified hereunder and to notify Customer thirty (30) days in
advance of any change or lapse in any of the coverages specified herein or
therein.

X.      WARRANTY

        Nothing in this Supplemental Agreement No. 1 will modify the rights and
obligations of the parties as provided in Section XIV "Warranty" of the
Agreement.

XI.     INVENTORY COSTS

        Sanmina is solely responsible for any and all costs incurred in
connection with the storage, warehousing, and inventory of the Consigned Goods.

XII.    ENTIRE AGREEMENT

        THIS SUPPLEMENTAL AGREEMENT NO. 1, INCLUDING ALL SUBORDINATE DOCUMENTS
ATTACHED TO OR REFERENCED IN THIS SUPPLEMENTAL AGREEMENT ARE MADE A PART HEREOF
BY REFERENCE AND SHALL CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH
RESPECT TO THE SUBJECT MATTER. THIS AGREEMENT SUPERSEDES ALL PRIOR ORAL AND
WRITTEN COMMUNICATIONS, AGREEMENTS AND UNDERSTANDINGS OF THE PARTIES WITH
RESPECT TO THE SUBJECT OF THIS AGREEMENT.

XIII.   AMENDMENTS, MODIFICATIONS AND WAIVERS

        NO PROVISIONS OF THIS SUPPLEMENTAL AGREEMENT, NO. 1 SHALL BE DEEMED
WAIVED, AMENDED OR MODIFIED BY ANY PARTY HERETO, UNLESS SUCH WAIVER, AMENDMENT
OR MODIFICATION IS IN WRITING AND SIGNED BY A DULY AUTHORIZED REPRESENTATIVE OF
EACH OF THE PARTIES HERETO.

XIV. EXCEPT AS MODIFIED BY THIS SUPPLEMENTAL AGREEMENT ALL OF THE TERMS AND
CONDITIONS OF THE AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT AND ARE
INCORPORATED BY REFERENCE HEREIN, AND SHALL HAVE THE FULL FORCE AND EFFECT AS IF
THEY WERE PROVIDED HEREIN.

                            (Signature Page Follows)

                                       5
<PAGE>   20

IN WITNESS THEREOF, the parties have caused this Supplemental Agreement No. 1 to
be executed by their duly authorized representatives.

                                       6
<PAGE>   21

METRICOM, INC.

By:         /s/ Timothy A. Dreisbach
            ---------------------------------

            Timothy A. Dreisbach
            ---------------------------------
            (Print Name)

Title:      Chairman and CEO
            ---------------------------------

Date Signed:        March 24, 2000
                    -------------------------

METRICOM DC, L.L.C.

By:         /s/ Timothy A. Dreisbach
            ---------------------------------

            Timothy A. Dreisbach
            ---------------------------------
            (Print Name)

Title:      Chairman and CEO
            ---------------------------------

Date Signed:        March 24, 2000
                    -------------------------

                                       7
<PAGE>   22

SANMINA CORPORATION

By:         /s/ Steven J. Deblock
            ---------------------------------

            Steven J. Deblock
            ---------------------------------
            (Print Name)

Title:      VP Operations
            ---------------------------------

Date Signed:        3/22/00
                    -------------------------

                                       8<PAGE>   1

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                                                   EXHIBIT 10.40

                                LICENSE AGREEMENT

        This License Agreement ("Agreement") is made this 3rd day of March 2000
("EFFECTIVE DATE") by and between BTG INTERNATIONAL LTD., a British corporation
("BTG"), having a principal place of business at 10 Fleet Place, Limeburner
Lane, London EC4M 7SB, ENGLAND and AVIGEN, INC., a Delaware corporation
("AVIGEN"), having a principal place of business at 1201 Harbor Bay Parkway,
#1000, Alameda, California 94502, U.S.A. (both BTG and AVIGEN being together
referred to as the "Parties").

PRELIMINARY STATEMENT

        BTG has rights to certain patents relating to the Factor IX gene and
wishes to effect commercialization of human gene therapy products that
incorporate the Factor IX gene and that result in Factor IX protein expression
in vivo.

        AVIGEN desires to acquire commercialization rights to the Factor IX gene
patents in order to commercialize and market products for human gene therapy
that incorporate the Factor IX gene and that result in Factor IX protein
expression in vivo.

        NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, BTG and AVIGEN
agree as follows:

1. DEFINITIONS

In this Agreement, the following terms, including their correlative plural or
singular forms, shall have the following meanings:

1.01 "AFFILIATE(S)" shall mean any entity, directly or indirectly, controlling,
controlled by, or under common control with AVIGEN. The term "control"
(including as correlative meanings, the terms "controlling", "controlled by" and
"under common control with") shall mean direct or indirect ownership of at least
fifty percent (50%) of the stock or shares entitled to vote for the election of
directors of any entity, or the possession, direct or indirect, of the power to
cause the direction of the management and policies of an entity, whether through
the ownership of voting securities, by contract or otherwise.

1.02 "AGREEMENT" shall mean this Agreement, including all attachments hereto.

1.03 "BANKRUPTCY EVENT" shall mean any of the following:

        (a) AVIGEN becomes insolvent, or generally fails to pay, or is generally
unable to pay, or admits in writing its inability to pay, its debts as they
become due or applies for, consents to, or acquiesces in, the appointment of a
trustee, receiver of other custodian for AVIGEN or a substantial part of its
property, or makes a general assignment for the benefit of creditors;

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       1
<PAGE>   2

        (b) AVIGEN commences any bankruptcy, reorganization, debt arrangement,
or other case or proceeding under any state or federal bankruptcy or insolvency
law, or any dissolution or liquidation proceeding;

        (c) Any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any state or federal bankruptcy or insolvency law, or any
dissolution or liquidation proceeding is involuntarily commenced against or in
respect of AVIGEN, and such involuntary case or proceeding shall remain
undismissed and unstayed for a period of sixty (60) days, or an order for relief
is entered in any such case or proceeding; or

        (d) A trustee, receiver, or other custodian is appointed for AVIGEN, or
a substantial part of AVIGEN'S property.

1.04 "COMPLETION" shall mean, with respect to a clinical trial carried out for
the purpose of securing marketing approval from a governmental regulatory
agency, the administration of a last dose of a Licensed Product to the last
enrolled subject of a clinical trial.

1.05 "DISTRIBUTOR" shall mean any entity with whom AVIGEN, its Affiliates or
Sublicensees establish a business arrangement for the commercial marketing of
the (i) Licensed Product or (ii) Licensed Product and Services.

1.06 "EFFECTIVE DATE" shall have the meaning set forth in the Preamble.

1.07 "FAIR MARKET VALUE" means the cash consideration that AVIGEN, or its
Affiliate, or its Sublicensee or Distributor would realize from an unaffiliated,
unrelated buyer in an arm's length sale of an identical item sold in the same
quantity and at the same time and place of the transaction.

1.08 "FIRST COMMERCIAL SALE" shall mean the first sale of a Licensed Product in
any country within the Licensed Territory by AVIGEN, its Affiliates,
Sublicensees, or Distributors following approval of its commercial marketing by
the appropriate governmental agency for the country in which the sale is to be
made, and when governmental approval is not required, the first sale in that
country.

1.09 "INDEX" shall mean the United States City Average All Urban Consumer Price
Index (all items) published by the United States Department of Commerce or, in
the event no longer published by the United States Department of Commerce or its
successor agency, such other equivalent index of inflation at the consumer level
as may then be published and generally recognized by the financial services
industry as a measure of inflation at the consumer level.

1.10 "INITIATION" shall mean, with respect to a clinical trial carried out for
the purpose of securing marketing approval from a governmental regulatory
agency, the administration of a first dose of a Licensed Product to the first
enrolled subject of a clinical trial.

1.11 "LICENSED PATENTS" shall mean the U.S. and foreign patents and patent
application(s) listed in Schedule A, all divisions and continuations of the
listed application, all patents issuing from such application, divisions, and
continuations, and any reissues, reexaminations, or extensions, including
Supplementary Protection Certificates, of all such patents.

1.12 "LICENSED PRODUCTS" shall mean viral vector products, including without
limitation adenovirus (AV) and adeno-associated virus (AAV) viral vector
products, for in vivo human gene therapy use whose manufacture, use, sale, offer
for sale, importation or other transfer or disposal would infringe one or more
claims of the Licensed Patents. Specifically excluded from the Licensed Products

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       2
<PAGE>   3

are utilization of non-viral vector products, any ex vivo approach based on the
administration of living cells, Factor IX protein produced by or from transgenic
animals, and any license rights to make, use, offer for sale, sell, or import
Factor IX protein.

1.13 "LICENSED TERRITORY" means all countries of the world where any of the
Licensed Patents are pending, issued or otherwise granted.

1.14(a) "NET SALES PRICE" or "NET SALES" shall mean the gross billing price of
any Licensed Product or Licensed Product and Services, as applicable, received
by AVIGEN, its Affiliates, Sublicensees or Distributors for the sale or
distribution of any Licensed Product in the Licensed Territory, less the
following amounts actually paid out by AVIGEN, its Affiliates or Sublicensees or
Distributors or credited against the amounts received by them from the sale or
distribution of Licensed Product to the extent that such amounts are reflected
in the price charged and do not exceed reasonable and customary amounts in the
country in which the sale or distribution occurs:

          (i)   discounts allowed;

          (ii)  returns;

          (iii) transportation and transportation insurance charges or
allowances;

          (iv)  custom charges and duties; and

          (v)   sales, transfer and other excise taxes or other similar
sales-related governmental charges but no franchise or income tax of any kind
whatsoever.

       (b) Transfer of a Licensed Product to an Affiliate, Sublicensee or
Distributor for sale by the Affiliate, Sublicensee or Distributor shall not be
considered a sale; in the case of such a transfer the NET SALES PRICE shall be
based on the gross billing price of the Licensed Product by the Affiliate or
Sublicensee or Distributor as invoiced to its ultimate arms-length customer. In
the event that a transfer of a Licensed Product from AVIGEN to any of its
Affiliates, Sublicensees or Distributors can be characterized as a sale or, in
other similar situations where the sale is made in other than an arm's-length
transaction, the value of the NET SALES attributed to such transactions shall be
based on the Fair Market Value of the Licensed Products or Licensed Products and
Services.

       (c) In addition to a bona fide sale to a bona fide customer (not to be
construed as including AVIGEN or its Affiliate or Sublicensee or Distributor),
every commercial use or disposition of any Licensed Product shall be considered
a sale of such Licensed Product at the Net Sales Price then payable in an arm's
length transaction, except for the following uses or dispositions:

                (i) in assuring product testing or control; or

                (ii) for reasonable, limited promotional distribution to
physicians; or

                (iii) for distribution to researchers for the sole purpose of
industry research by or on behalf of AVIGEN or any of its Affiliates,
Sublicensees or Distributors; or

                (iv) in obtaining regulatory approvals; or

                (v) required to be provided to a regulatory agency or a court of
law.

        1.15 "SERVICE" shall mean any process, procedure or treatment that is
used, sold, disposed of, transferred or otherwise rendered by AVIGEN, its
Affiliates, its Sublicensees or Distributors, in such a way that a license would
be required under the Licensed Patents for such use or sale or offer for sale or
importation or other disposal or transfer of such process, procedure or
treatment, in the absence of a license to the Licensed Products under this
Agreement.

        1.16 "SUBLICENSEE" means any entity to whom AVIGEN grants a sublicense
pursuant to Section 3.01 of this Agreement.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       3
<PAGE>   4

2. GRANT OF RIGHTS

2.01 License Grant: BTG hereby grants and AVIGEN accepts, subject to the terms
and conditions of this Agreement, a non-exclusive license to make, use, sell,
offer for sale or import Licensed Products under the Licensed Patents, with a
right to grant sublicenses only as provided in Article 3.

2.02 Nonassertion of Related BTG Patent Rights: BTG agrees that with respect to
any patents or pending patent applications that are not Licensed Patents and
that relate to the Factor IX gene or protein, which on the Effective Date BTG
owns or under which it has the right to grant licenses of the scope of the
licensed granted in this Agreement, BTG will not assert against AVIGEN, its
Affiliates, Sublicensees or Distributors any claims for infringement based on
the manufacture, use, sale, offer for sale or importation of any Licensed
Product for which a royalty has been paid in accordance with the provisions of
Article 5.

2.03 Pre-existing License Agreements: The license grant is subject to the
following pre-existing rights granted to third parties:

(i) a non-exclusive license to Pharmaceutical Proteins Ltd., in all fields of
application, with no right to sublicense without BTG's consent;

(ii) non-exclusive licenses with Genetic Therapy Inc., now assigned to Genetics
Institute, Inc., in the fields of human gene therapy utilizing retro viral
vector constructs only and human gene therapy utilizing viral vector constructs
other than retro viral vector constructs, now without rights to sublicense;

(iii) a non-exclusive license to Transkaryotic Therapies Inc. in the field of
human gene therapy excluding any product, process or treatment based on virally
induced cell transformation; and

(iv) a license to Genetics Institute, Inc. in the field of human recombinant
Factor IX protein produced from cell culture.

2.04 Termination of License: The non-exclusive license granted herein shall
terminate upon termination of this Agreement in accordance with Article 13.

3. SUBLICENSING

3.01 Sublicense Right: AVIGEN may grant sublicenses under its rights in Section
2.01, provided that such sublicenses shall be at least as favorable to BTG as
the present Agreement and provided that each Sublicensee is bound under a
written agreement with terms and conditions consistent with and no less
restrictive than those applicable to AVIGEN under this Agreement.

3.02 Binding Effect: AVIGEN agrees that any sublicenses granted by it shall
provide that the obligations to BTG under this Agreement shall be binding,
commensurate with the scope of the sublicense, upon the Sublicensee. AVIGEN
further agrees to attach copies of this Agreement to all sublicense Agreements.
AVIGEN shall be responsible for the operations of any Sublicensee relevant to
this Agreement as if such operations were carried out by AVIGEN itself,
including, without limitation, the payment of royalties or other payments
hereunder.

3.03 Termination Provision: Any sublicenses granted by AVIGEN under Section 3.01
shall provide for the termination of the sublicense, or the conversion to a
license directly between such Sublicensees and BTG, at the option of BTG upon
termination of this Agreement under Article 13.

3.04 Copy of Sublicense Agreements: AVIGEN agrees to forward to BTG a copy of
each fully executed sublicense agreement under Section 3.01 within thirty (30)
days of the execution of such

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       4
<PAGE>   5

agreement provided that AVIGEN may redact from such copy any information that is
not relevant to this Agreement. To the extent permitted by law, BTG agrees to
maintain each such Sublicense Agreement in confidence in accordance with Article
16.

3.05 Bankruptcy Provision: If AVIGEN becomes subject to a Bankruptcy Event, all
payments then or thereafter due and owing to AVIGEN from its Sublicensee shall,
upon notice from BTG to any Sublicensee, become payable directly to BTG for the
account of AVIGEN, provided, however, that BTG shall remit to AVIGEN the amount
by which such payments exceed the amount owed by AVIGEN to BTG.

4. LICENSE FEES AND MILESTONES

4.01 License Grant Fee: Within fifteen (15) days after the Effective Date,
AVIGEN shall pay to BTG a non-refundable, non-creditable license grant fee of
[ * ].

4.02 Stock Warrant: As additional consideration for the license grant in Section
4.01, AVIGEN shall grant to BTG (on behalf of BTG and its Licensor) at the
Effective Date a warrant for [ * ] shares of AVIGEN common stock, $0.001 par
value, with an exercise price of the closing price for such stock on the
business day immediately prior to the Effective Date. Such warrant shall be
exercisable at any time on or after the first anniversary of the Effective Date
and shall have an expiration date on the fifth anniversary of the Effective
Date.

4.03 License Milestones: AVIGEN shall pay to BTG the following non-refundable,
non-creditable development milestone license fees, adjusted for inflation in
accordance with Section 4.04 and payable within thirty (30) days of the
milestone event date, in respect of a Licensed Product:

        (a) [ * ] upon first Initiation (or at the Effective Date, if initiated
prior to the Effective Date) of a Phase I clinical trial for a Licensed Product
or upon approval from the U.S. Food and Drug Administration to forego such Phase
I studies;

        (b) [ * ] upon first Completion (or at the Effective Date, if completed
prior to the Effective Date) of a Phase I clinical trial for a Licensed Product
or upon approval from the U.S. Food and Drug Administration to forego such Phase
I studies or by March 15, 2001, whichever occurs first;

        (c) [ * ] upon first Initiation of a Phase II clinical trial for a
Licensed Product or upon approval from the U.S. Food and Drug Administration to
forego such Phase II studies;

        (d) [ * ] upon first Completion of a Phase II clinical trial for a
Licensed Product or upon approval from the U.S. Food and Drug Administration to
forego such Phase II studies;

        (e) [ * ] upon first Initiation of a Phase III clinical trial for a
Licensed Product or upon approval from the U.S. Food and Drug Administration to
forego such Phase III studies;

        (f) [ * ] upon first Completion of a Phase III clinical trial for a
Licensed Product or upon approval from the U.S. Food and Drug Administration to
forego such Phase III studies;

        (g) [ * ] upon first submission of a biological product license
application for a Licensed Product to the U.S. Food and Drug Administration or
to its equivalent governmental agency having jurisdiction over the approval for
commercial use of a Licensed Product outside of the United States, whichever
occurs first;

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       5

<PAGE>   6

        (h) [ * ] upon receipt of a first marketing approval for a Licensed
Product from the U.S. Food and Drug Administration or from its equivalent
governmental agency having jurisdiction over the approval for commercial use of
a Licensed Product outside of the United States, whichever occurs first.

4.04 Annual Maintenance Fee: In the event a First Commercial Sale of a Licensed
Product has not occurred by March 15, 2005, AVIGEN shall within ten (10) days of
such date pay to BTG an annual license maintenance fee payment of [ * ].
Thereafter in subsequent years AVIGEN shall also pay to BTG an annual license
maintenance fee payment of [ * ] within ten (10) days of each anniversary of
March 15, 2005 for which there has been no First Commercial Sale in the prior
twelve month period. If in any calendar year beginning with 2005, AVIGEN is
required to make any milestone payment to BTG in accordance with Section 4.03,
then the annual license maintenance fee due and paid in that calendar year shall
be credited against the amount due as the milestone payment.

4.05 Inflation Indexing: All payments made under this Article 4 shall be
adjusted for inflation in accordance with the following formula: Payments shall
be increased, with effect from the Effective Date, by an amount equal to the
product of (i) the amount payable, and (ii) the percentile increase, expressed
as a decimal fraction, in the last Index published on or before the Effective
Date and the last Index published on or before the date on which the relevant
payment becomes due and owing to BTG. In the event of a decrease in the Index,
the sums payable to BTG shall not be adjusted and shall be paid in full without
reference to the Index.

4.06 Regulatory Notices: Within ten (10) days after receipt, AVIGEN shall
forward to BTG copies of regulatory correspondence relevant to the (i)
Initiation and Completion event milestones and (ii) the biological product
licensing application submission and approval milestones specified in this
Article 4 and, further, copies of correspondence from a regulatory agency that
grants approval for marketing or other commercial use of a Licensed Product in
any country in the Licensed Territory. If such correspondence is not timely
received by AVIGEN but AVIGEN learns otherwise of the anticipated receipt of
such correspondence, then AVIGEN shall promptly advise BTG in writing of such
anticipated receipt. Such correspondence shall be subject to the confidentiality
and limited use obligations of Article 16.

5. ROYALTIES and ANNUAL MINIMUM ROYALTIES

5.01 Royalty: AVIGEN shall pay to BTG a running royalty of [ * ] of Net Sales of
Licensed Products and, if Services are provided, of Licensed Products and
Services by AVIGEN, its Affiliates and its Sublicensees or Distributors.

5.02 Annual Minimum Royalties: AVIGEN shall pay BTG an annual minimum royalty
payment for each calendar year in which royalties are due under this Agreement,
payable in advance in equal quarterly installments on the first day of each
quarter, i.e., January 1, April 1, July 1 and October 1 of each calendar year,
beginning with the calendar year of the First Commercial Sale as follows:

        (a) [ * ] in the calendar year (hereinafter the First Calendar Year) for
which there is a First Commercial Sale. Payment of the quarterly installment due
in the quarter during which the First Commercial Sale occurs shall be paid
within thirty (30) days of the date of First Commercial Sale. Payments for
subsequent quarters, if any, shall be made on the first day of each subsequent
quarter in the first calendar year. In the event the First Commercial Sale
occurs in other than the first quarter of the first calendar year, AVIGEN is not
obligated to make payment of quarterly installments for quarters prior to the
quarter during which the First Commercial Sale occurred.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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<PAGE>   7

        (b) [ * ] in the calendar year (hereinafter the Second Calendar Year) of
the first anniversary of the First Commercial Sale.

        (c) [ * ] in the calendar years (hereinafter the Third Calendar Year,
Fourth Calendar Year and subsequent calendar years) of the second, third and
subsequent anniversaries of the First Commercial Sale.

The annual minimum royalty paid for a given calendar year shall be credited
against running royalties payable to BTG during that calendar year. There will
be no carryover credit allowed in subsequent calendar years for any unused
portion of annual minimum royalty paid in a previous calendar year that was not
used to offset running royalties payable in that same previous calendar year.

5.03 Inflation Indexing: All annual minimum royalty payments made under this
Article 5 shall be adjusted for inflation in accordance with the following
formula: Payments shall be increased, with effect from the Effective Date, by an
amount equal to the product of (i) the amount payable, and (ii) the percentile
increase, expressed as a decimal fraction, in the last Index published on or
before the Effective Date and the last Index published on or before the date on
which the relevant payment becomes due and owing to BTG. In the event of a
decrease in the Index, the sums payable to BTG shall not be adjusted and shall
be paid in full without reference to the Index.

5.04 Deferred Royalty Payments I: AVIGEN may, at its option, defer payment of
[ * ] of earned royalties due to BTG that exceed the annual minimum royalty
payment for the First Calendar Year and Second Calendar Year and such deferment
shall be no more than [ * ] after the payment was due to be paid to BTG. Such
deferred payment will be subject to adjustment for inflation, the inflation
adjustment being calculated using the formula defined in Section 6.03 but being
effective from date the deferred royalty payment first became due. The
applicable annual minimum royalties specified for the First and Second Calendar
Years in Section 5.02 are unaffected by the deferred royalty payments allowable
under this Section 5.04. Furthermore, the annual minimum royalty for the
calendar year in which payment of the deferred royalty amount is actually made
to BTG shall not be used as a credit for such deferred royalties. Such deferred
royalty amounts shall likewise not be taken into account, as a credit or
otherwise, in the calculation of running royalties that are earned and due to be
paid to BTG in any year subsequent to the year in which the deferred royalty
amount was generated.

5.05 Deferred Royalty Payments II: AVIGEN may, at its option, defer payment of a
second [ * ] of earned royalties due to BTG for the First Calendar Year, Second
Calendar Year, Third Calendar Year and Fourth Calendar Year and such deferment
shall be no more than [ * ] after the payment was due to be paid to BTG. Such
deferred payment will be subject to adjustment for inflation, the inflation
adjustment being calculated using the formula defined in Section 6.03 but being
effective from date the deferred royalty payment first became due. The
applicable annual minimum royalties specified for the First through Fourth
Calendar Years in Section 5.02 are unaffected by the deferred royalty payments
allowable under this Section 5.05. Furthermore, the annual minimum royalty for
the calendar year in which payment of the deferred royalty amount is actually
made to BTG shall not be used as a credit for such deferred royalties. Such
deferred royalty amounts shall likewise not be taken into account, as a credit
or otherwise, in the calculation of running royalties that are earned and due to
be paid to BTG in any year subsequent to the year in which the deferred royalty
amount was generated.

5.06 Claims in Licensed Patents: A claim of a patent licensed under this
Agreement shall cease to fall within the Licensed Patents for the purpose of
computing the running royalty payments in any given country on the earliest of
the dates that (i) the patent expires or irrevocably lapses, without the patent
having been extended or restored or being the basis for supplemental protection
directed to the

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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<PAGE>   8

Licensed Product, or (ii) the claim has been held to be invalid or unenforceable
by an unappealed or unappealable decision of a court of competent jurisdiction.

5.07 No Multiple Royalties: No multiple royalties shall be payable because any
Licensed Products or Licensed Products and Services are covered by more than one
of the Licensed Patents.

5.08 No Non-monetary Consideration: Without the prior written consent of BTG,
AVIGEN (including its Affiliates and Sublicensees and Distributors) shall not
solicit or accept any consideration for the sale of Licensed Products or
Licensed Products and Services other than as will be accurately reflected in Net
Sales.

6. ROYALTY REPORTS AND PAYMENTS

6.01 Royalty Reports: With each royalty payment, AVIGEN shall deliver to BTG a
full and accurate accounting in a statement duly certified to be correct by a
senior officer of AVIGEN having primary responsibility for Licensee's financial
and accounting matters, which statement shall include at least the following
information:

        (a) Quantity of Licensed Product sold, transferred for consideration, or
otherwise commercially disposed of in each country of the Licensed Territory by
AVIGEN, its Affiliates, Sublicensees and Distributors and the quantity of
Licensed Product manufactured;

        (b) Total receipts for Licensed Product in each country of the Licensed
Territory;

        (c) Quantities of each Licensed Product used by AVIGEN and its
Affiliates or Sublicensees or Distributors unless such Licensed Product is used
for the purposes excluded by Section 1.14(c);

        (d) Reductions from gross sales as permitted in Section 1.14(a);

        (e) Calculations showing the determination of royalty amounts due and
being paid; and

        (f) Deferred royalty payments being deferred and/or paid under the
provisions of Sections 5.04-5.05, with calculations showing how such amounts
were computed.

6.02 Royalty Payments Other Than Annual Minimum Royalty Payments: In each year
the amount of royalty and other payments due shall be calculated semiannually as
of June 30 and December 31 and shall be paid semiannually within the sixty (60)
days next following such date. Every such payment shall be supported by the
accounting statement prescribed in Section 6.01 and shall be made in United
States currency by wire transfer as specified in Section 6.03.

6.03 Payments: All payments shall be made in United States dollars by means of
electronic transfer to the bank nominated by BTG from time to time. Whenever
conversion from any foreign currency shall be required for the purpose of
calculating royalty, such conversion shall be at the rate of exchange published
in the Wall Street Journal (or, if the Wall Street Journal is not then
published, such other periodical of general circulation in the United States of
America as the parties may agree) on the date immediately preceding the
applicable payment date.

6.04 No Deductions: When making any payment required pursuant to the terms of
this Agreement, AVIGEN shall make such payments without deduction, other than
such amount as AVIGEN is required to deduct or withhold by law or as specified
in Section 1.14(a). In regard to any deduction required by law,

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       8
<PAGE>   9

AVIGEN shall use all reasonable endeavors to assist BTG to claim recovery or
exemption under any double taxation or similar agreement, and AVIGEN shall
provide BTG with evidence of payment of all sums pursuant hereto. For the
avoidance of doubt, AVIGEN is not responsible for BTG corporate income tax
associated with payments made to BTG pursuant to this Agreement.

6.05 Foreign Taxes: Any tax required to be withheld by AVIGEN under the laws of
any foreign country for the account of BTG, shall be promptly paid by AVIGEN for
and on behalf of BTG to the appropriate governmental authority, and AVIGEN shall
use its best efforts to furnish BTG with proof of payment of such tax. Any such
tax actually paid on BTG's behalf shall be deducted from royalty payments due
BTG.

6.06 Currency Conversion or Transfer Limitations: If the transfer of or the
conversion into United States dollars of any payment required under this
Agreement in any such instance is not lawful or possible, the payment of such
part of the royalties as is necessary shall be made by the deposit thereof, in
the currency of the country where the sale was made on which the royalty was
based, to the credit and account of BTG or its nominee in any commercial bank or
trust company located in that country, prompt notice of which shall be given to
BTG.

6.07 Late Payments: The royalty payments and any other payments due under the
Agreement shall, if overdue, bear interest until payment, accruing from day to
day and compounded annually on 31 December, at a rate per annum equal to four
percent (4%) above the Prime Rate published in the Wall Street Journal (or, if
the Wall Street Journal is not then published, such other financial periodical
of general circulation in the United States of America as the parties may
reasonably agree), but not to exceed the maximum rate permitted by law,
effective from the day such payment becomes due and owing to BTG until payment
of such amount is in fact made to BTG. The payments of such interest shall not
preclude BTG from exercising any other rights it may have as a consequence of
the lateness of any royalty payment.

6.08 Confidentiality: All reports required by this Article 6 shall be subject to
the confidentiality and limited use obligations of Article 16.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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<PAGE>   10

7. RECORD KEEPING

7.01 Financial Records: AVIGEN agrees to keep accurate and correct records of
Licensed Products made, used, sold or otherwise transferred or disposed of under
this Agreement appropriate to determine the amount of royalties and the
timeliness of other payments due BTG. Such records shall be retained for at
least five (5) years following a given reporting period.

7.02 Report Verification: AVIGEN shall, upon reasonable notice and during normal
business hours, permit an authorized representative appointed by BTG, or any
authorized independent certified public accountant agreed by the parties and
whose services are paid for jointly by BTG and by AVIGEN, access to the premises
of AVIGEN and to the accounts, records and relevant documentation of AVIGEN, and
shall provide such information and explanations as the representative shall
reasonably require, all in order to verify the statements provided by AVIGEN
pursuant to Article 6 of this Agreement and to satisfy BTG that there has been
compliance with the royalty and other payment obligations undertaken by AVIGEN
pursuant to this Agreement. BTG shall be entitled, in each calendar year, to
have a representative conduct one verification (which may involve multiple
visits). The access to and inspection of AVIGEN's books shall be limited to that
which is reasonably required to verify the royalty and other payments required
to be paid pursuant to this Agreement; the BTG representative shall be permitted
to take copies and extracts of relevant documents. Any and all AVIGEN
information and documents shall be subject to the confidentiality and limited
use provisions of Article 16. BTG's right of verification hereof shall terminate
two years after termination of this Agreement, for whatever reason.

7.03 Deficiencies in Payments: If a verification or other audit discloses an
underpayment or underreporting or late payment to BTG of any royalties or other
payments due to BTG, AVIGEN shall pay the unreported or underpaid royalties
and/or any late charges as required by Section 6.07 of this Agreement, within
thirty (30) days of being notified of the same. If the verification discloses an
underpayment to BTG of more than five percent (5%) of the amount properly due in
any calendar year pursuant to this Agreement, AVIGEN shall promptly reimburse
BTG's cost of undertaking the verification provided for in this Article 7.

7.04 Disputed Underpayments: If there is a disagreement between BTG and AVIGEN
as to the amount of an underpayment which cannot be resolved in accordance with
Section 16.08, then the Parties shall agree upon the hiring of an independent
certified public accountant, at a cost to be shared equally by the Parties, to
review the verification or audit and provide a final determination of the amount
of underpayment in dispute.

7.05 Third Party Audits: In the event AVIGEN is required to carry out an
independent audit of its sales of Licensed Products on behalf of a third party
patent licensor, AVIGEN agrees to supply BTG with a copy of the report prepared
on the basis of such an audit. Such audit reports shall be subject to the
confidentiality and limited use provisions of Article 16, and AVIGEN may redact
any information not relevant to sales of Licensed Products that may be contained
in such reports.

8. PROGRESS REPORTS

8.01 Business Plan: Within ninety (90) days after the Effective Date, the
Licensee shall provide BTG with a business plan for the Licensed Territory-wide
development and marketing of Licensed Products. Such business plan should
include discussion of the regulatory approval process and estimated timelines
for Licensed Products, manufacturing plans, and commercialization plans for
marketing the Licensed Products in the United States and other countries within
the Licensed Territory.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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<PAGE>   11

8.02 Progress Reports: AVIGEN shall provide BTG with twice yearly written
progress reports on the Licensed Products, within sixty (60) days after June 30
and December 31 of each calendar year. for the immediately prior six month
period. These progress reports shall include, but not be limited to: status of
applications for regulatory approvals and of its efforts to obtain regulatory
approvals for the Licensed Product, progress on research and development,
manufacturing plans and progress, sublicensing activities and marketing efforts,
as well as plans for the present calendar year. In addition, the progress
reports should inform BTG of the sales (and of other commercially relevant
transfers or disposals of Licensed Product) during the preceding six month
period and provide a good faith estimate of anticipated annual sales projections
for the present calendar year, on a country-by-country basis. At BTG's request,
the reports shall be discussed with BTG in annual meetings to be held at a
mutually agreed time and place.

8.03 First Commercial Sale: AVIGEN shall promptly, no more than thirty (30) days
after each occurrence, advise BTG in writing of the date of a First Commercial
Sale of a Licensed Product in each country within the Licensed Territory.

8.04 Confidentiality: All plans and reports required by this Article 8 shall be
subject to the confidentiality and limited use obligations of Article 16.

9. PERFORMANCE

9.01 AVIGEN Best Efforts: AVIGEN shall use commercially reasonable endeavors to
develop Licensed Products for commercialization and shall seek to achieve in a
timely manner the development milestones set forth in Article 4. AVIGEN shall
obtain all licenses, registrations and other approvals necessary to enable, as
soon as commercially practicable, the marketing and use of Licensed Products in
the United States and in other countries within the Licensed Territory. AVIGEN
shall use all reasonable commercial efforts to achieve a First Commercial Sale
in the United States before March 15, 2005 and to meet the market demand in the
United States for Licensed Products.

9.02 AVIGEN Commercialization Responsibilities: AVIGEN shall be solely
responsible for compliance with, and shall comply with, all governing laws and
regulations relating to clinical evaluation, use, commercial manufacture, sale
export and import of Licensed Product and for all costs and expenses related to
the foregoing.

10. PATENTS: MARKING, EXTENSIONS, INFRINGEMENT AND ENFORCEMENT

10.01 Patent Marking: AVIGEN agrees to mark the Licensed Products or their
packaging made, used, sold, imported or otherwise disposed of or transferred in
the United States with the applicable U.S. patent. All Licensed Products
manufactured in, shipped to, used or sold in other countries shall be marked in
such a manner as to preserve BTG patent rights in such countries. The Licensee
shall provide all reasonable means for allowing BTG, from time to time, to
verify that packaging for Licensed Product is being properly marked.

10.02 Patent Term Extension: AVIGEN shall cooperate fully with BTG in pursuing
and securing available extensions or restoration of patent term for the Licensed
Patents or other protection under regulations, directives and laws governing the
development of and protection of rights relating to drug products, including
Supplementary Protection Certificates. Any patent extension or restoration of
patent term or other supplemental product protection which is secured by BTG
shall be deemed the term of the applicable patent within the Licensed Patents.
This Agreement and the obligations respecting the

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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<PAGE>   12

Licensed Patents shall survive until the expiration of such term(s), and AVIGEN
shall pay royalties and all other required payments applicable to Licensed
Patents until the expiration of such term(s).

10.03 AVIGEN Patent Term Option: The Parties recognize, at the Effective Date,
that commercial considerations may make it more advantageous for AVIGEN to seek
patent term extension or supplemental product protection via a Supplementary
Protection Certificate for a patent owned by or licensed to AVIGEN, that is not
a Licensed Patent. BTG agrees to give AVIGEN the option to elect, by written
notice to BTG within thirty (30) days after a biological product license
application (or its equivalent) is filed in any country within the Licensed
Territory, to seek patent term extension or supplementary product protection for
a patent other than a Licensed Patent.

10.04 Exercise of AVIGEN Patent Term Option: In consideration for BTG granting
to AVIGEN the option in Section 10.03 and for BTG's forgoing its right to
require patent term extension or supplementary product protection for a Licensed
Patent under Section 10.02, AVIGEN agrees to pay to BTG payments that are equal
to the annual royalty minimums and running royalties specified in Article 5
during the period for which the Licensed Patents would have otherwise been
extended or made the basis of Supplementary Protection Certificate(s). Such
payments shall be made by AVIGEN to BTG in the same manner and at times as would
have been applicable to the annual minimum payments and running royalties due
for the Licensed Patents had the latter been extended or made the basis of
Supplementary Protection Certificate(s).

10.05 Third Party Patent Term Extension: In the event BTG elects to have a third
party licensee of BTG under the Licensed Patents obtain extension of the
Licensed Patent in the United States, where such third party's licensed product
is first marketed prior to the First Commercial Sale of a Licensed Product under
this Agreement, then such extension of the Licensed Patent shall release AVIGEN
from its obligations under Section 10.02 to extend the U.S. patent that is a
Licensed Patent and from its obligation under Section 10.04, with respect to the
U.S. patent. In a similar manner, if BTG elects to have a third party licensee
seek supplementary patent protection via a Supplementary Protection Certificate
under a Licensed Patent for the third party's licensed product, then such
supplementary patent protection applicable to the Licensed Patent shall release
AVIGEN from its obligations under Section 10.02 to extend the same patent that
is a Licensed Patent and from its obligation under Section 10.04, with respect
to such patent.

10.06 Notice of Infringement: BTG and AVIGEN agree to notify each other promptly
of each infringement or possible infringement of the Licensed Patents by any
third party in the field of viral vector products for in vivo human gene therapy
of which either Party becomes aware. AVIGEN shall provide BTG with any evidence
of such possible infringement in AVIGEN's possession or readily available to
AVIGEN, its Affiliates or Sublicensees or Distributors.

10.07 BTG Response to Infringement: BTG will take appropriate steps, in BTG's
sole judgment, to protect its Licensed Patents from infringement in the field of
viral vector products for in vivo human gene therapy and to bring suit in its
own name when, in its sole judgment, such action may be reasonably necessary,
proper and justified. BTG shall have the sole and exclusive right to determine
all matters relating to the infringement, enforcement, validity and defense of
the Licensed Patents. BTG shall be under no obligation to prosecute any claim of
infringement in respect of the Licensed Patents or, furthermore, to defend any
claim of infringement asserted against AVIGEN, its Affiliates or Sublicensees or
Distributors in respect of intellectual property rights held by any third party.
AVIGEN shall inform BTG without delay if any legal proceeding is initiated
against AVIGEN, or its Affiliates or Sublicensees or Distributors and such
proceeding challenges or otherwise may adversely affect the validity and
enforceability of the Licensed Patents.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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<PAGE>   13

10.08 AVIGEN Infringement Relief: In the event AVIGEN shall bring to the
attention of BTG any evidence of unlicensed infringement of the Licensed Patents
by a third party in the field of viral vector products for in vivo human gene
therapy in a country within the Licensed Territory and BTG does not, within six
months from receipt of such evidence, (i) secure cessation of the infringement
in that country or (ii) enter suit against the infringing third party, then
AVIGEN may withhold payment of royalties due to BTG for the country where the
infringement is occurring; such royalty withholding may start from the end of
the six month period and continue until the unlicensed infringement is ceased.
After the date of cessation of the unlicensed infringement, AVIGEN shall
immediately resume payment of royalties accruing to and due BTG under this
Agreement from that date forward.

10.09 BTG Third Party Licenses: BTG shall act with diligence in its relations
with its third party licensees under the Licensed Patents and take appropriate
steps, as may be necessary in BTG's sole judgment, to monitor the contractual
provisions applicable to such third party licenses.

11. NEGATION OF REPRESENTATIONS AND WARRANTIES; LIMITATION OF LIABILITY;
    INDEMNIFICATION

11.01 BTG represents and warrants that it has all necessary authority and power
to enter into this Agreement and to grant the license rights under the Licensed
Patents. Other than that, no representation, condition or warranty whatsoever is
made or given by or on behalf of BTG. BTG HEREBY EXPRESSLY EXCLUDES ANY AND ALL
IMPLIED REPRESENTATIONS, CONDITIONS AND WARRANTIES, INCLUDING, WITHOUT
LIMITATION, THE FOLLOWING:

11.02 BTG DOES NOT REPRESENT OR WARRANT THE VALIDITY OF THE LICENSED PATENT
RIGHTS AND MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH REGARD TO THE
SCOPE OF THE LICENSED PATENTS, OR THAT THE LICENSED PATENTS MAY BE EXPLOITED
WITHOUT INFRINGING OTHER PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES AND HEREBY DISCLAIMS THE SAME.

11.03 BTG MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR ANY IMPLIED WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY OF THE LICENSED PATENTS or
LICENSED PRODUCTS AND HEREBY DISCLAIMS THE SAME.

11.04 BTG does not represent or warrant that it has any obligation to commence
or prosecute legal actions against third parties infringing the Licensed
Patents.

11.05 BTG SHALL BE UNDER NO LIABILITY WHATSOEVER TO AVIGEN, WHETHER IN
NEGLIGENCE OR OTHERWISE, FOR ANY EXPENSE, LOSS, DAMAGE OR INJURY OF ANY KIND,
INCLUDING LOSS OF PROFIT OR CONSEQUENTIAL DAMAGE, SUSTAINED BY AVIGEN OR ANY
THIRD PARTY AND ARISING OR INCURRED IN CONNECTION WITH THE MANUFACTURE, USE,
SALE, OFFER FOR SALE, IMPORTATION OR OTHER TRANSFER OR DISPOSAL OF LICENSED
PRODUCT.

11.06 AVIGEN shall defend, indemnify and hold BTG and its officers, employees,
agents and consultants, Licensors of the Licensed Patents, and its affiliated
companies BTG plc and BTG International Inc. (collectively, the "Indemnitees")
harmless from and against any and all claims, suits, losses, demands, actions,
liabilities, damages, costs and expenses (collectively, the "Liabilities")
incurred by any one or more of the Indemnitees, resulting from or arising in any
way from AVIGEN's

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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breach of this Agreement or any acts or omissions of AVIGEN in connection with
this Agreement, including without limitation any Liabilities arising from the
defense of any action, including attorneys' fees and expenses, in connection
with the manufacture, use, sale, offer for sale, importation, export or other
disposal or transfer of Licensed Product by or on behalf of AVIGEN, its
Affiliates or Sublicensees or Distributors, and the scope of such obligation to
defend, indemnify and hold harmless includes, without limitation, (i) any
damage, loss or liability with respect to death or injury to any person or
damage to property arising from or out of the possession, use or operation of
the Licensed Patents or any Licensed Product, and (ii) any fines or other
penalties of any nature imposed by any governmental body of competent
jurisdiction and arising from or related in any way to the manufacture, use,
sale, offer for sale, importation, export or other disposal or transfer of
Licensed Products.

11.07 Any Indemnitee which intends to claim indemnification under this Article
11 shall promptly notify AVIGEN in writing of any claim or other matter in
respect of which the Indemnitee intend to claim such indemnification; provided,
however, the failure to provide such notice within a reasonable period of time
shall not relieve AVIGEN of any of its obligations hereunder except to the
extent AVIGEN is prejudiced by such failure. The Indemnitee shall permit AVIGEN,
at its discretion, to settle any such action, claim or other matter. The
Indemnitee agrees to the complete control of such defense or settlement by
AVIGEN; provided however, such settlement does not adversely affect the
Indemnitee's rights hereunder or impose any obligations on the Indemnitee in
addition to those set forth herein in order for it to exercise such rights. No
such action, claim or other matter shall be settled without the prior written
consent of AVIGEN, and AVIGEN shall not be responsible for any attorneys' fees
or other costs incurred other than as provided herein. The Indemnitee shall have
the right, but not the obligation, to be represented by counsel of its own
selection and at its own expense.

12. INSURANCE

12.01 AVIGEN covenants that it shall promptly take out and maintain in force,
during the entire term of this Agreement and for a reasonable period thereafter,
and shall obligate its Sublicensees, commensurate with their sublicense rights,
to take out and maintain in force, during the entire term of the applicable
sub-license, commercial general liability insurance covering the manufacture,
use, sale, offer for sale, importation, transfer or other disposal of Licensed
Product, in coverage amounts reasonably acceptable to BTG and customarily
available to companies in the same or similar line of business as AVIGEN and in
coverage amounts and terms no less favorable to BTG than to other patent
licensors from whom AVIGEN has acquired patent rights with similar insurance
obligations. Such commercial general liability insurance shall include product
liability coverage for AVIGEN'S indemnification obligations under this
Agreement.

12.02 AVIGEN shall make available to BTG copies of such commercial general
liability insurance policy or policies promptly upon BTG's request. AVIGEN
covenants that AVIGEN shall also ensure that BTG is named as an insured party
under such insurance policy or policies and that BTG's rights are not subrogated
to those of the insurer or insurers, and that such policy or policies shall not
be canceled or amended so as to affect coverage of BTG's risks without the prior
written notice to BTG. AVIGEN shall provide BTG with written notice prior to the
cancellation, non-renewal or material change in such insurance; if AVIGEN does
not obtain replacement insurance providing comparable coverage in a timely
manner, BTG shall have the right to terminate this Agreement upon reasonable
notice to AVIGEN.

12.03 Any Sublicensee shall maintain insurance in favor of BTG under similar
terms as set forth above, commensurate with its sublicense rights.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

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<PAGE>   15

13. TERM AND TERMINATION

13.01 Term: This Agreement is effective upon the EFFECTIVE DATE, when signed by
the parties, and shall extend to the expiration of the last to expire of the
Licensed Patents unless sooner terminated as provided in this Article 13 or
unless extended by AVIGEN's election to exercise its rights relating to patent
term extension under Article 10.

13.02 AVIGEN Termination: AVIGEN may, at any time, terminate this Agreement, by
giving not less than three (3) months' prior written notice to that effect and
upon payment to BTG of an amount equal to the accrued royalties, if any, and any
other amounts required to have been paid by AVIGEN to BTG on or before the
effective date of such termination.

13.03 BTG Termination: BTG may, in its sole discretion, terminate this Agreement
by fifteen (15) days' advance written notice to AVIGEN, upon the happening of
any of the following events:

        (i)     if any royalties or other sums payable to BTG pursuant to this
                Agreement remain unpaid for sixty (60) days after BTG's written
                demand that AVIGEN pay such amounts to BTG; or

        (ii)    if AVIGEN becomes subject to a Bankruptcy Event; or

        (iii)   if control of AVIGEN shall be acquired by any entity, or entity
                or person(s) not having control of AVIGEN at the Effective Date
                and such change in control materially adversely affects the
                development and marketing of Licensed Product as contemplated
                under this Agreement or materially adversely affects BTG's
                rights or legal interests under this Agreement or the economic
                benefits to BTG under this Agreement. For the purposes hereof,
                "control" shall mean the power to direct or cause the direction
                of the management and policies of an entity, whether through the
                ownership of voting securities, by contract or otherwise; or

        (iv)    if there is no First Commercial Sale by AVIGEN, its Affiliates
                or its Sublicensees or Distributors before March 15, 2005 and
                AVIGEN fails to make timely payment of the annual license
                maintenance fee specified in Section 4.04; or

        (v)     if AVIGEN ceases to sell Licensed Product (except for a
                temporary sales moratorium having a reasonable technical or
                scientific basis) in the Licensed Territory for a continuous
                period of twelve (12) months after the Licensed Product is first
                made commercially available; or

        (vi)    if AVIGEN is in breach or default of any other material term of
                this Agreement and such breach or default remains unremedied
                after sixty (60) days has elapsed from the date of written
                notice to AVIGEN specifying the breach and demanding remedy
                thereof, or if such breach or default is not capable of remedy
                within such sixty (60) day period, then if AVIGEN has not
                commenced good faith substantial efforts to cure such breach or
                default during the sixty (60) day period.

13.04 Notice of Bankruptcy Event: In the event that AVIGEN becomes subject to a
Bankruptcy Event, AVIGEN shall immediately notify BTG in writing.

13.05 Termination Report and Payments Due: Within ninety (90) days of
termination of this Agreement under this Article 13 or expiration under Section
13.01, a final royalty report in accordance with Section 6.01 shall be submitted
to BTG by AVIGEN. Any royalty and other payments, including outstanding deferred
royalty payments, due to BTG shall become immediately due and payable upon

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       15
<PAGE>   16

termination or expiration. If terminated under this Article 13, BTG may elect,
at its sole discretion, to convert Sublicensee sublicenses to direct licenses
with the Sublicensees pursuant to Section 3.03.

14. MOST FAVORED PARTY

14.01 Offer of Favorable Terms: If, after the Effective Date and during the term
of this Agreement, BTG enters into an agreement granting a license under the
Licensed Patents to products for in vivo human gene therapy to a third party and
such license (i) contains royalty rates, annual minimum royalty payments, cash
signing fees (not including stock warrants or equity rights) or milestone
payments, or BTG in fact collects such payments, which, calculated on an
equivalent basis in respect to the Licensed Patents, are lower than those
provided in Article 4 (except Section 4.02) and Article 5 of this Agreement or
(ii) contains or BTG in fact collects royalties under patent term extension
provisions that are more favorable to the third party licensee than those
provided in Article 10 of this Agreement, then BTG will promptly provide notice
to AVIGEN of such third party license and offer to AVIGEN the lower royalty
rates, annual minimum royalty payments, signing fees, milestone payments or more
favorable patent term extension provisions of the third party license, effective
as of the date (or dates) from which they became effective in respect to the
third party license.

14.02 Acceptance of Favorable Terms: AVIGEN's opportunity to avail itself of
such more favorable license terms shall only be effective, however, if AVIGEN
advises BTG in writing, within sixty (60) days of the notice to AVIGEN, that it
accepts such terms of the third party license which are more favorable to AVIGEN
than corresponding terms of this Agreement and which are brought to the
attention of AVIGEN in the notice. AVIGEN shall be entitled to have the royalty
rate or other more favorable financial terms of the Noticed Third Party License
substituted in this Agreement, in respect of events occurring from the date (or
dates) from which they became effective in respect to the third party license.

15. ASSIGNMENTS; MERGERS

15.01 Assignability: This Agreement shall not be assigned by AVIGEN except a)
with the prior written consent of BTG; or b) as part of a sale or transfer of
substantially the entire business of AVIGEN provided that such assignee or
transferee has agreed in writing to be bound by the terms and provisions of this
Agreement and is so bound by operation of law and provided, further, that BTG
does not elect to terminate this Agreement in accordance with Section
13.03(iii). AVIGEN shall notify BTG in writing of any proposed assignment by
AVIGEN of this Agreement pursuant to this Section 15.01(b) at least thirty days
in advance of such proposed assignment. This Agreement shall be binding upon and
inure to the benefit of the successors, permitted assignees and personal
representatives of the Parties.

15.02 Stock Warrant for Merger or Acquisition: In the event AVIGEN is to be
merged with or acquired by a third party, then prior to such merger or
acquisition, [ * ], having an exercise price of the closing price for such stock
on the business day immediately prior to the Effective Date. Such warrant shall
be exercisable by BTG at any time after grant of the warrant and shall have an
expiration date on the fifth anniversary of the grant date. A copy of the form
Warrant Agreement is attached as an Exhibit to this Agreement.

16. CONFIDENTIALITY

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       16
<PAGE>   17

16.01 Confidential Information: The Parties anticipate that it will be
necessary, in connection with their obligations under this Agreement, for BTG
and AVIGEN to disclose to each other confidential, proprietary business and
technical information ("Confidential Information") relating to their respective
businesses and technologies. The Confidential Information shall include
information marked "Confidential" or the like disclosed in writing or in other
tangible form, including samples of materials. If disclosed orally, the
Confidential Information shall be summarized in written form within thirty (30)
days by the disclosing Party and a copy marked "Confidential" provided to the
recipient. Past disclosures made under or covered by the Secrecy Agreements
dated July 17, 1997 and December 7, 1999 between AVIGEN and BTG are understood
to be covered by this Article 16 of this Agreement.

16.02 Confidentiality and Limited Use: With respect to all Confidential
Information, both BTG and AVIGEN agree as follows, it being understood that
"recipient" indicates the Party receiving the confidential, proprietary
information from the other "disclosing" Party. During the term of this Agreement
and for a period of five (5) years from the date of expiration or termination of
this Agreement, the recipient shall protect and hold in confidence the
Confidential Information of the disclosing Party, not disclose or use such
Confidential Information except in accordance with this Agreement or except with
the prior written consent of the disclosing Party, and protect the Confidential
Information with at least the same degree of care that it affords its own
Confidential Information.

16.03 Exceptions: The obligations of Confidentiality and limited use shall not
apply to any of the Confidential Information which

        (i) at the time of disclosure is in the public domain by publication or
other documented means or later becomes part of the public domain, through no
act or fault of the recipient in violation of this Agreement; or

        (ii) is already known to recipient before receipt from the disclosing
Party, as demonstrated by recipient's pre-existing written records; or

        (iii) is received by recipient from a third party having a lawful right
to disclose the same and not in breach of an obligation to the disclosing Party
by virtue of such disclosure; or

        (iv) is developed independently by the receiving Party by individuals
having no access to the Confidential Information; or

        (v) is required to be disclosed to a third party pursuant to any
applicable law or the order of any court or tribunal of competent jurisdiction,
so long as reasonable prior written notice is given to the disclosing Party in
advance of such disclosure so as to enable the disclosing Party to take
reasonable steps to protect the confidentiality of the Confidential Information.

16.04 Return of Confidential Information: Upon termination of this Agreement and
upon request of the disclosing Party, originals and copies of Confidential
Information in written or other tangible form, including material samples, will
be returned to the disclosing Party by recipient or destroyed by recipient. One
copy of each document may be retained in the custody of recipient's legal
counsel solely to provide a record of what disclosures were made.

16.05 Confidential Status of Agreement: The milestone amounts and royalty terms
of this Agreement shall be deemed to be Confidential Information subject to the
provisions of this Article 16. Both Parties agree, furthermore, that neither
Party will make public disclosures concerning other specific terms of this
Agreement without giving reasonable prior notice to the other.

16. GENERAL PROVISIONS

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       17
<PAGE>   18

16.01 Notices: Any payment, notice, consent or other communication required or
permitted by this Agreement shall be in writing and shall be deemed given on the
date sent to the receiving Party by hand delivery (personally delivered),
facsimile (receipt verified), overnight courier (receipt verified) or certified
or registered mail, postage prepaid, addressed as follows:

        (i)     in the case of BTG: Geoffrey C. Porges, Chief Operating Officer;
                with a copy to: Senior Vice President, Finance; and

        (ii)    in the case of AVIGEN: Kenneth G. Chahine, Vice President of
                Business Development and Chief Patent Counsel;

at the appropriate address for the Party set forth at above, or at such other
address as such Party may specify from time to time in writing.

16.02 Entire Understanding: This Agreement constitutes the entire understanding
between the Parties relating to the subject matter hereof, and all prior
negotiations, representations, communications, agreements, and understandings
are merged into, extinguished by, and completely expressed by this Agreement.

16.03 Severable Provisions: The provisions of this Agreement are severable, and
in the event that any provision of this Agreement shall be determined to be
invalid or unenforceable under any controlling body of law such determination
shall not in any way affect the validity or enforceability of the remaining
provisions of this Agreement. However, if this results in a material alteration
to the terms and conditions of this Agreement, the Parties will negotiate in
good faith an amendment to the terms and conditions thereof to restore to each
Party the benefits of its bargain to the extent reasonably possible under the
circumstances.

16.04 Amendments: No provision of this Agreement may be amended, waived, or
otherwise modified except by an instrument in writing duly executed by
authorized representatives of the Parties to be bound by such amendment, waiver
or modification. If either Party desires a modification to this Agreement, the
Parties shall, upon reasonable notice of the proposed modification by the Party
desiring the change, confer in good faith to determine the desirability of such
modification. No modification will be effective until a written amendment is
signed by the signatories to this Agreement or their authorized representatives.

16.05 Non-Waiver: Neither Party may waive or release any of its rights or
interests in this Agreement except in writing. The failure of a Party to assert
a right hereunder or to insist upon compliance with any term or condition of
this Agreement shall not constitute a waiver of that right by such Party or
excuse a similar subsequent failure to perform any such term or condition by the
other Party. The waiver by either Party of any breach, by the other Party, of
any of the terms of this Agreement shall not be deemed to be a waiver of any
other breach of the Agreement.

16.06 Cumulative Rights: The rights and remedies provided in this Agreement are
cumulative and not exclusive of any rights or remedies provided by law or in
equity.

16.07 No BTG Endorsement: By entering into this Agreement, BTG does not directly
or indirectly endorse any product or service provided, or to be provided, by
AVIGEN whether directly or indirectly related to this Agreement. AVIGEN shall
not state or imply that this Agreement is an endorsement by BTG or its employees
in any advertising, promotional, or sales literature without the prior written
consent of BTG. AVIGEN shall not otherwise use the name of BTG or its employees
in any advertising, promotional, sales literature or other publicity without the
prior written consent of BTG.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       18
<PAGE>   19

16.08 Good Faith Negotiation: The Parties agree to attempt to settle any and all
claims, disputes or contentions arising under, out of, or in connection with
this Agreement, by good faith negotiations between the Parties.

16.09 Independent Contractors: For the purposes of this Agreement, each Party
shall be, and shall be deemed to be, an independent contractor and not an agent,
partner, joint venturer, or employee of the other Party.

16.10 Force Majeure: Neither Party shall be responsible in any way to the other
Party for failure to perform any of its obligations under this Agreement when
such failure is due to any war, fire, flood, labor trouble, strike, natural
calamity, accident, riot, act of governmental authority, inability or economic
impracticality to comply with requirements imposed by environmental regulations
or orders, Acts of God, or other similar contingencies beyond the reasonable
control of either Party. The Party so affected shall nevertheless use its best
efforts to avoid or remove such cause of non-performance and shall continue
performance hereunder, with the utmost dispatch whenever such causes are
removed.

16.11 Law and Jurisdiction: The construction, validity, performance, and effect
of this Agreement shall be governed by the Laws of the United States of America
and the State of Delaware without regard to any choice or conflict of laws rule
or principles that would result in the application of the domestic substantive
law of any other jurisdiction other than (i) United States federal law, to the
extent applicable and (ii) in regard to any question affecting the construction
or effect of any patent, the law of the jurisdiction under which such patent is
granted. AVIGEN agrees to submit to the non-exclusive jurisdiction of the
Delaware courts or the United States District Courts for the Eastern District of
Pennsylvania.

16.12 Headings: The headings of Articles and Sections of this Agreement are for
convenience only and shall not in any way affect the interpretation of the
Agreement.

16.13 Schedule: The appended Schedule forms an integral part of this Agreement.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       19
<PAGE>   20

IN WITNESS WHEREOF the Parties have caused this Agreement to be executed by
their duly authorized officers.

BTG INTERNATIONAL LTD.

/s/ Geoffrey C. Porges                      March 3, 2000
---------------------------------           ---------------------------------
Geoffrey C. Porges,  M.B.B.S.               Date:
Chief Operating Officer

/s/ [illegible]                             3/3/2000
---------------------------------           ---------------------------------
Name:                                       Date:
Title:

AVIGEN INC.

/s/ John J. Monahan                         March 3, 2000
---------------------------------           ---------------------------------
John J. Monahan,  Ph.D.                     Date:
President & Chief Executive Officer

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       20
<PAGE>   21

                          SCHEDULE A - LICENSED PATENTS

<TABLE>
<CAPTION>
                          APPLN            APPLN              PATENT           GRANT           EXPIRY
TERRITORY                 NUMBER           DATE               NUMBER           DATE            DATE*
<S>                       <C>              <C>                <C>              <C>             <C>
AUSTRALIA                 83/17521         02-AUG-83          560686           27-JUL-87       02-AUG-03
AUSTRIA                   E48015           03-AUG-83          EP0107278        15-NOV-89       02-AUG-03
BELGIUM                   83304487.8       03-AUG-83          EP0107278        15-NOV-89       02-AUG-03
CANADA                    433806           03-AUG-83          1214125          18-NOV-86       17-NOV-03
EPC**                     88116366.1       04-OCT-88***       [PENDING]
FRANCE                    83304487.8       03-AUG-83          EP0107278        15-NOV-89       02-AUG-03
GERMANY                   P3380848         03-AUG-83          EP0107278        15-NOV-89       02-AUG-03
ITALY                     89/69173         03-AUG-83          EP0107278        15-NOV-89       02-AUG-03
JAPAN                     83/502561        04-APR-84***       2625412          11-APR-97       03-AUG-03
JAPAN                     96/281135        23-OCT-96***       2764034          27-MAR-98       03-AUG-03
LUXEMBOURG                83304487.8       03-AUG-83          EP0107278        15-NOV-89       02-AUG-03
NETHERLANDS               83304487.8       03-AUG-83          EP0107278        15-NOV-89       02-AUG-03
SWEDEN                    83304487.8       03-AUG-83          EP0107278        15-NOV-89       02-AUG-03
SWITZERLAND               83304487.8       03-AUG-83          EP0107278        15-NOV-89       02-AUG-03
UNITED KINGDOM            8320975.9        03-AUG-83          2125409          13-NOV-85       03-AUG-03
USA                       07/355900        19-MAY-89****      4994371          19-FEB-91       19-FEB-08
</TABLE>

         *Without patent term extension or Supplementary Protection
                          Certificate (SPC) protection.

         **Designates United Kingdom, Austria, Belgium, France, Germany,
             Italy, Luxembourg, Netherlands, Sweden and Switzerland.

         ***Actual date but deemed to have the date of 03-AUG-83 in the
                    European Patent Convention and in Japan.

         ****Actual date but deemed to have the date of 28-OCT-82.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

                                       21

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