AVGN Avigen (MM)

      Incentive Bonus. The Committee sets target incentive levels annually for each executive officer in consultation and discussion with our chief executive officer, other than for his own target incentive level. Ordinarily, the Committee considers industry data compiled by Radford and determines the appropriate level of target incentive bonus award for our chief executive officer and for our other executive officers as a percentage of their respective base salaries based on the Committee’s subjective determination as to the appropriate range to attract and retain our executive officers given the size of the company, assigning the actual percentage within this range based upon the level of each executive officer’s responsibility and experience. The Committee determines actual bonus payments based on subjective assessments of the performance of management and individual officers in achieving the company’s strategic objectives, applied to these target incentive levels. As a function of this process, the Committee met several times throughout the year with Dr. Chahine to review the status of the management team’s individual contributions. The 2008 strategic objectives against which corporate performance was intended to be measured are discussed below under “2008 Performance”.

      The Committee establishes the company’s strategic objectives in discussions with our chief executive officer at the beginning of the compensation period to ensure that its performance evaluations at the end of the compensation period reflect the strategic priorities of the company to create value for our stockholders. Ordinarily, our chief executive officer reviews the performance of the company and of each executive officer, other than his own, with the Committee at the end of the compensation period and makes recommendations to the Committee for its review and final determination.

      Equity Incentives. The Committee is responsible for making stock option grants under Avigen’s 2006 Equity Incentive Plan (the “ 2006 Plan ”), and believes that long-term stockholder value is best achieved through an ownership culture among all our employees, particularly our executives, through grants of stock-based awards.

      The Committee grants stock-based awards under the 2006 Plan with multi-year vesting periods designed as incentives to retain key employees to continue in the employ of Avigen. Through option grants, executives receive significant equity incentives to build long-term stockholder value. The exercise price of options granted under the 2006 Plan is 100% of fair market value of the underlying stock on the date of grant. Employees receive value from these grants only if Avigen’s common stock appreciates over the long-term. The size of option grants is determined based primarily on Avigen’s philosophy of significantly linking executive compensation with stockholder interests, the individual criteria set forth below, and the Committee’s use of industry sources in order to be knowledgeable of compensation practices for companies of a similar size and development stage in the biotechnology and pharmaceutical industries. Historically, the Committee does not target any specific level as compared to industry average in determining stock option grants.

      Change in Control Arrangements. The Board of Directors, upon the recommendation of the Committee, established a Management Transition Plan (“Transition Plan”) in 1998, which was amended in March 2005 and again in October 2008. The Transition Plan is intended to retain key employees and enable executive officers to represent stockholder interests during periods involving a possible change in control of Avigen, and to provide severance benefits in the event of termination of employment without cause. The Transition Plan is designed to protect the earned benefits of key employees, including executive officers, against adverse changes that may result from a change in control of Avigen or termination without cause. The level of payments provided under the agreement for executives reflects the Committee’s subjective view, based upon its experience, of comparable benefits offered to executives under change of control arrangements at other companies within the industry in a similar development stage. Each of our named executive officers are participants in the plan and will receive the following benefits if their employment is involuntarily terminated, or they resign as a result of a constructive termination, as defined under the Plan:

• 15 months base salary (21 months in the case of Dr. Chahine);
   
• extended option exercisability of two years;
   
• full accelerated vesting of outstanding stock options; and
   
• 15 months (18 months in the case of Dr. Chahine) health benefits payments, or until such earlier date as the executive officer secures subsequent employment that provides substantially similar health benefits.

      In October 2008, the Board amended the Transition Plan to comply with certain changes in federal tax regulations that were required to be made before December 31, 2008, and at the same time, the Committee reviewed benefit levels offered by other companies within the industry similar to Avigen. Based on this review, the Committee adjusted the benefits included in the Transition Plan by adding an additional three months of severance benefits for each executive officer and extending those benefits to circumstances in which an executive officer was terminated without cause. The amendments were adopted to make the Transition Plan comparable to benefits offered by companies similar to Avigen, as without this security, we were at risk of losing executive talent necessary to preserve the value of the company’s assets.

      In March 2009, Avigen’s Board announced its intention to develop a plan to maximize Avigen’s liquidation value. The Board determined that Avigen no longer needed to retain the services of a majority of its employees, including three executive officers, Dr. Chahine, Mr. Coffee and Ms. Thomson, and reduced Avigen’s headcount accordingly. As a result of these actions, Dr. Chahine, Mr. Coffee and Ms. Thomson were terminated without cause, triggering their respective benefits under the Transition Plan.

2008 Performance

      At the beginning of the year, the Committee determined to base its assessment of Avigen’s overall performance for the fiscal year ended December 31, 2008 on the following strategic objectives:

• Quality data from Phase II clinical development progress of AV650;
   
• Responsible management of finances;
   
• Clinical development progress of AV411;
   
• Development and progress toward clinical testing of AV513;
   
• Evaluation, identification and development of new product candidates for clinical testing, including proprietary analogs for AV411; and
   
• Execution of a strategic plan that efficiently manages financial and staffing resources to support the research and development needs of the company, including raising additional capital for clinical testing.

Historically, the Committee applies its discretion in determining a subjective evaluation of Avigen’s overall performance. For fiscal 2008, the Committee took into consideration the performance of management against all the 2008 strategic objectives, including the quality execution of the AV650 Phase II clinical trial, responsible management of finances, development progress of AV411, and the successful sale of Avigen’s early-stage AV513 program for $7 million, and authorized the accrual of $250,000 for bonus payments to executive officers. In April 2009, the Committee allocated the bonus pool to Avigen’s current and former executive officers.

      Bonus payments for the year ended December 31, 2008 were determined for each individual executive officer based on target bonus payments that represented a percent of base salary between 35% and 45%. Target bonus payments were subsequently weighted so that the bonus payments received were based on the assessments of the achievement of corporate performance objectives as well as the subjective determination by the Committee of the executive officers’ achievement of individual performance objectives.

2009 Compensation

      The Committee, with the support of management, has determined (given the current business environment) not to adjust base salaries for 2009, other than in connection with the promotion of Ms. Thomson to Vice President, General Counsel. Effective January 1, 2009. Ms. Thomson’s base salary was increased to $267,931. The Committee has not yet finalized or determined the relative weighting of strategic objectives to be used as the basis for its evaluation of management’s performance for fiscal 2009.

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S UMMARY C OMPENSATION T ABLE

      The following table shows for the fiscal years ended December 31, 2008, 2007 and 2006, compensation awarded to or paid to, or earned by, Avigen’s Chief Executive Officer, Chief Financial Officer and its three other most highly compensated executive officers at December 31, 2008 (the “ Named Executive Officers ”).

Summary Compensation Table

												Option				All Other
				Salary				Bonus				Awards				Compensation
Name and Principal Position		Year		($)		($)		($) (2)		($) (3)		Total ($)
Kenneth G. Chahine, President		2008		$	443,251			$	80,982	(1)		$	341,318			$	4,552			$	870,103
and Chief Executive Officer (4)		2007			426,613				158,380				333,763				4,299				923,055
		2006			407,239				95,000				271,027				4,199				777,465
Andrew A. Sauter, Chief		2008			267,931				42,725	(1)			208,961				3,378				522,995
Financial Officer (5)		2007			238,625				68,903				166,461				3,558				477,547
		2006			229,017				28,000				98,733				3,458				359,208
Michael D. Coffee, Chief		2008			313,903				50,978	(1)			281,150				4,712				650,743
Business Officer (4)		2007			302,120				90,636				237,876				4,711				635,343
		2006			288,400				69,000				152,547				4,711				514,658
Kirk W. Johnson, Ph.D., Vice		2008			278,528				39,579	(1)			249,062				4,451				571,620
President Research and		2007			248,824				74,025				282,000				4,091				608,940
Development (6)		2006			237,524				46,000				192,092				4,091				479,707
M. Christina Thompson, J.D.,		2008			221,524				35,736	(1)			242,283				3,366				502,909
Vice President, General		2007			239,861				65,062				234,067				3,466				542,456
Counsel and Secretary (4)		2006			239,444				46,000				162,436				3,466				451,346

(1) In 2008, the Compensation Committee authorized the accrual of $250,000 for bonus payouts to executive officers for 2008. In April 2009, the Compensation Committee authorized bonus payments from that pool for the year ended December 31, 2008.

(2) The amounts shown in this column represent the dollar amounts recognized for financial statement reporting purposes for each fiscal year ended December 31, in accordance with FAS 123(R), excluding an estimate of forfeitures related to service-based vesting conditions, and thus include amounts from awards granted in and prior to 2008. Assumptions used in the calculation of these amounts are described in the notes to Avigen’s audited financial statements for the fiscal year ended December 31, 2008, which will be included in Avigen’s Annual Report on Form 10-K expected to be filed with the SEC on March 16, 2009. All grants were made subject to individual award agreements, the form of which was previously filed with the SEC.

(3) Except as otherwise indicated, represents insurance premiums paid by Avigen with respect to supplemental long-term care insurance for the benefit of the Named Executive Officer and up to $2,500 of matching contributions to Avigen’s 401(k) savings plan.

(4) Avigen terminated the employment of each of Dr. Chahine, Mr. Coffee and Ms. Thomson on March 26, 2009 without cause.

(5) On March 26, 2009, Avigen appointed Mr. Sauter as President and Chief Executive Officer, in addition to his remaining Chief Financial Officer.

(6) On March 26, 2009, Avigen appointed Dr. Johnson to be Secretary, in addition to his other functions.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

      The information required by this Item with respect to security ownership of certain beneficial owners and management is set forth in the Proxy Statement under the caption, “Security Ownership of Certain Beneficial Owners and Management.” Such information is incorporated herein by reference.

      In November 2008, Biotechnology Fund, L.P. and certain of its affiliates (collectively, “BVF”), purchased approximately 29% of our outstanding shares of common stock. In January 2009, BVF gave notice to Avigen that it was calling a special meeting of our stockholders for the purpose of removing our entire Board of Directors, without cause, and replacing it with four nominees selected by BVF. Also in January 2009, BVF launched a tender offer to acquire the remaining outstanding shares of our common stock for $1.00 per share, contingent on BVF being successful in removing our entire Board of Directors, without cause, and replacing it with their four nominees, and the redemption of the preferred stock purchase rights under our shareholder rights agreement. On March 27, 2009, we held a special meeting of our stockholders where BVF failed to garner enough votes to remove our entire Board of Directors. As a result, BVF’s nominees were not elected and BVF withdrew its tender offer.

EQUITY COMPENSATION PLAN INFORMATION

      The following table provides certain information with respect to all of Avigen’s equity compensation plans in effect as of December 31, 2008:

			Number of securities
			remaining available
	Number of securities	Weighted-average	for future issuance
	to be issued upon	exercise price of	under equity
	exercise of	outstanding	compensation plans
	outstanding options,	options,	(excluding securities
	warrants and rights	warrants and	reflected in column
	(1)	rights	(a))(2)
Plan Category	(a)	(b)	(c)
Equity compensation plans
approved by security holders	3,165,283	$	5.80	2,167,247
Equity compensation plans not approved
by security holders	977,041	$	8.68	0
Total	4,142,324	$	6.48	2,167,247

(1) Our 2000 Equity Incentive Plan (the “ 2000 Plan ”) was adopted in 2000 without stockholder approval. The 2000 Plan was amended and restated as our 2006 Equity Incentive Plan (the “ 2006 Plan ”), which amendment and restatement was approved by our stockholders on May 31, 2006. The number of shares subject to options outstanding under plans not approved by our stockholders reflects options granted pursuant to the 2000 Plan prior to May 31, 2006, which number of shares is not reflected as outstanding under compensation plans approved by our stockholders.

(2) Reflects shares available for grant under our 2006 Plan.

      2000 Equity Incentive Plan

      Prior to the amendment and restatement of Avigen’s 2000 Equity Incentive Plan (the “ 2000 Plan ”) as the 2006 Equity Incentive Plan, the 2000 Plan provided for the grant of nonqualified stock options, stock bonuses and restricted stock purchase awards (collectively, “stock awards”). An aggregate of 5,000,000 shares of common stock had been reserved for issuance under the 2000 Plan. Stock awards could be granted under the 2000 Plan to employees (including officers), directors and consultants of Avigen and its affiliates; provided, however, that the aggregate number of shares issued pursuant to stock awards granted to officers and directors under the 2000 Plan could not exceed 40% of the number of shares reserved for issuance under the 2000 Plan, except that stock awards granted to officers prior to their employment by Avigen as an inducement to entering into employment contracts with Avigen were not included in the 40% limitation. The exercise price of options and restricted stock purchase awards could not be less than 85% of the fair market value of the stock on the date of grant. Stock bonuses could be awarded in consideration for past services actually rendered to Avigen or its affiliates.

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      Vesting. Stock awards granted under the 2000 Plan may become exercisable (in the case of options) or released from a repurchase option in favor of Avigen (in the case of stock bonuses and restricted stock purchase awards) in cumulative increments (“vest”) as determined by the Board. The Board has the power to accelerate the time during which stock awards may vest or be exercised. In addition, options granted under the 2000 Plan may permit exercise prior to vesting, but in such event the participant may be required to enter into an early exercise stock purchase agreement that allows Avigen to repurchase unvested shares, generally at their exercise price, should the participant’s service terminate before vesting.

      Term . The term of options granted under the 2000 Plan was determined by the Board in its discretion. Options under the 2000 Plan generally terminate three months after termination of the participant’s service, subject to extension in certain circumstances.

      Effect of Certain Corporate Events. The 2000 Plan provides that, in the event of a dissolution, liquidation or sale of substantially all of the assets of Avigen, specified type of merger, or other corporate reorganization (a “change in control”), any surviving corporation must either assume any stock awards outstanding under the 2000 Plan or substitute similar stock awards for those outstanding under the 2000 Plan, or else the outstanding stock awards will continue in full force and effect. In the event that any surviving corporation declines to assume or continue the stock awards outstanding under the 2000 Plan, or to substitute similar stock awards, then, with respect to stock awards held by persons then performing services as employees, directors, or consultants of Avigen, the vesting and the time during which these stock awards may be exercised will be accelerated in full.

Item 13. Certain Relationships and Related Transactions, and Director Independence

      The information required by this Item is set forth in the Proxy Statement under the headings “Information Regarding the Board of Directors and Corporate Governance – Independence of the Board of Directors” and “Related Person Transactions Policy and Procedures.” Such information is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

      The following table is a summary of the fees billed to Avigen by Odenberg, Ullakko, Muranishi & Co. LLP (“OUM”) for the fiscal years ended December 31, 2008 and 2007 for professional services rendered as Avigen’s registered public accountant.

		Fiscal Year Ended
		December 31,
		2008		2007
Audit Fees		$	270,885		$	326,585
Audit-Related Fees			—			—
Tax Fees			12,000			12,000
All Other Fees			—			—
Total Fees		$	282,885		$	338,585

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      Audit Fees. Consists of fees for professional services rendered for the audit of Avigen’s annual financial statements and services that are normally provided by OUM in connection with regulatory filings or engagements.

      Audit-Related Fees. During the fiscal years ended December 31, 2008 and 2007, no audit-related services were performed by OUM.

      Tax Fees. Consists of fees for professional services for tax compliance, tax advice and tax planning by OUM for the tax years ended December 31, 2008 and 2007.

      All Other Fees. During the fiscal years ended December 31, 2008 and 2007, there were no other fees for services rendered by OUM.

      All fees described above were approved by the Audit Committee.

Pre-Approval Policies and Procedures

      Avigen’s Audit Committee pre-approves all audit and permissible non-audit services provided by Avigen’s independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Prior to engaging Avigen’s independent registered public accounting firm to render an audit or permissible non-audit service, the Audit Committee specifically approves the engagement of Avigen’s independent registered public accounting firm to render that service. Accordingly, Avigen does not engage its independent registered public accounting firm to render audit or permissible non-audit services pursuant to pre-approval policies or procedures or otherwise, unless the engagement to provide such services has been approved by the Audit Committee in advance. As such, 100% of the services described in the categories above for which OUM was engaged were approved by the Audit Committee in advance of the rendering of those services. The Audit Committee has determined that the rendering of the services other than audit services by OUM is compatible with maintaining the registered public accounting firm’s independence, respectively.

      Consistent with Section 10A(i)(2) of the Securities Exchange Act of 1934, as added by Section 202 of the Sarbanes-Oxley Act of 2002, we are responsible for listing the non-audit services approved by our Audit Committee to be performed by OUM, our external auditor. Non-audit services are defined as services other than those provided in connection with an audit or a review of our financial statements. Our Audit Committee has approved our recurring engagements of non-audit services of OUM for the preparation of tax returns and tax advice in preparing for and in connection with such filings.

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SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	AVIGEN, INC.
	By:		/s/ Andrew A. Sauter
			Andrew A. Sauter
			Chief Executive Officer, President and Chief Financial Officer
			(Principal Executive Officer and Principal Financial Officer)

Dated: April 29, 2009

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Exhibit Index

To Amendment No. 1 to Annual Report on Form 10-K/A

Exhibit		Description of document
31.1		Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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