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                              EMPLOYMENT AGREEMENT


        THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this 8th day of September, 1999, by and between EPOCH PHARMACEUTICALS, INC., a
Delaware corporation (the "Employer"), and William Gerber, an individual (the
"Employee").


                                   WITNESSETH:

        WHEREAS Employer desires to employ Employee in the capacity hereinafter
stated, and the Employee desires to enter into the employ of the Employer in
that capacity for the period and pursuant to the terms and conditions set forth
herein.

        NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the Employer and the Employee,
intending to be legally bound, hereby agree as follows:

        1. EMPLOYMENT/POSITION AND DUTIES. Effective upon the date of this
Agreement (a) Employer shall employ Employee as the Chief Executive Officer of
Employer and Employee shall accept such employment and (b) Employee shall be
appointed to the Board of Directors of Employer and Employee shall accept such
appointment. During the term of this Agreement, Employee agrees to devote
substantially all of Employee's skills and efforts to the performance of, and to
perform diligently and on a timely basis, such duties as shall be assigned to
Employee from time to time by the Employer's Board of Directors.

        2. TERM. The term of the Employee's employment hereunder shall be
eighteen (18) months commencing on the date hereof and expiring on the first day
following such eighteen (18) month period beginning on the date hereof (the
"Expiration Date"), unless sooner terminated as hereinafter specified in Section
4.

        3. COMPENSATION.

           3.1 Base Salary. As compensation for all services to be rendered by
the Employee during the first year of employment under this Agreement, the
Employee shall accrue a base salary of Two Hundred Fifty Thousand Dollars
($250,000) per year (the "Base Salary"), which shall be payable by Employer to
Employee as follows: (a) Seventy-Two percent (72%) of the Base Salary shall be
paid on a regular basis in accordance with Employer's normal payroll procedures
and policies, and (b) the remaining Twenty-Eight percent (28%) of the Base
Salary shall be paid on the earlier to occur of (i) the first anniversary of the
date hereof or (ii) the closing of additional financing or licensing
transactions generating net proceeds or up-front licensing fees to the Company
of at least Two Million Dollars ($2,000,000). As compensation for all serviced
to be rendered by the Employee following the first year of employment under this
Agreement, the Employer shall pay to Employee such Base Salary in accordance
with Employer's normal payroll procedures and policies.

           3.2 Bonus Compensation. During the Term of this Agreement Employee
shall be eligible to receive annual incentive compensation of up to forty
percent (40%) of Employee's Base Salary upon the achievement of certain
performance goals set by the Board of Directors and participate in any other
incentive compensation or bonus program adopted for management employees of the
Employer. The terms on which Employee shall be eligible to participate in any
such incentive compensation or bonus program shall be comparable to the terms
that shall apply to



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other management employees of the Employer or its subsidiaries that are employed
in positions that are comparable to the position in which Employee is employed
by the Employer. Employee understands that adoption of any management incentive
compensation or bonus program by the Employer requires the prior approval of the
Board of Directors of the Employer. Employee's participation in any such program
that is approved by the Board of Directors of the Employer shall be subject to
the provisions, rules and regulations of any such program.

               3.3 Stock Option. Concurrent herewith, Employer shall grant
Employee a stock option to purchase One Hundred Thousand (100,000) shares of
Employer's Common Stock pursuant to the terms and conditions of that certain
Stock Option Agreement of even date herewith, at the exercise price set forth in
such Stock Option Agreement, which shall vest at 8,33333 shares on the 8th day
of each month commencing on October 8, 1999 for twelve months.

               3.4 Participation in Benefit Plans. The Employee shall be
entitled to participate in all employee benefit plans or programs (including
vacation time, sick leave and holidays) generally available to all employees of
the Employer, to the extent that Employee's position, title, tenure, salary,
age, health and other qualifications make Employee eligible to participate
therein. The Employee's participation in any such plan or program shall be
subject to the provisions, rules and regulations thereof that are generally
applicable to all participants therein.

               3.5 Expenses. In accordance with the Employer's policies
established from time to time, the Employer will pay or reimburse the Employee
for all reasonable and necessary out-of-pocket expenses incurred by Employee in
the performance of Employee's duties under this Agreement, subject to the
presentment of appropriate documentation confirming the amount and nature and
the business purposes of such expenses.

        4. TERMINATION AND COMPENSATION UPON THE TERMINATION OF THE EMPLOYEE'S
EMPLOYMENT BY THE EMPLOYER. In the event of a termination of Employee's
employment with the Employer in accordance with the provisions hereof, this
Agreement shall also terminate concurrently therewith.

           4.1 Termination Without Cause. The Employer may terminate Employee's
employment at any time during the Term of this Agreement without Cause (as
hereinafter defined), for any reason or no reason, including Employee's death or
total disability (as hereinafter defined). A termination without Cause shall be
effective upon thirty (30) days prior written notice to Employee, except that
such termination shall be effective immediately and without the necessity of any
notice in the case of Employee's death and on delivery of written notice of
termination to Employee in the case of Employee's total disability (as
hereinafter defined) (the "Employment Termination Date"). In the event of any
such termination, the Employer's sole obligation and liability to Employee shall
be as follows:

               (a) To pay to Employee (or in the case of death, to his estate)
the portion of his Base Salary and vacation and sick time that, as of the
Termination Date, had accrued for services rendered up to, but was unpaid as of,
such Employment Termination Date;

               (b) In the event of a termination without Cause for reasons other
than death or disability, severance compensation in an amount equal to the
portion of Base Salary that



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would have been payable to Employee during the then remaining term of the
Agreement (the "Post-Termination Severance Compensation"), which shall be
payable in the manner and times provided below; and

               (c) The amount of any bonus or incentive compensation that had
become Vested (as hereinafter defined) prior to the Employment Termination Date
if (A) a bonus had been awarded to Employee prior to the Employment Termination
Date (a "Bonus Award"), under any management incentive or bonus program
described in Paragraph 3.2 above in which Employee was a participant at or prior
to the Employment Termination Date, and (B) any conditions precedent (such as
those described below) to Employee's right to receive the payment of such Bonus
Award had been satisfied or had been waived, in writing, by the Employer prior
to such Employment Termination Date, then, the unpaid portion of such Bonus
Award that had become payable prior to the Employment Termination Date as a
result of the satisfaction or waiver of any such conditions precedent shall be
deemed to have become vested ("Vested") and shall be paid to Employee (or
Employee's estate, in the case of Employee's death) in the manner and times
provided below. By way of example, conditions precedent to the payment of a
Bonus Award may include, but shall not be limited to, any requirement that
Employee shall have remained in the Employer's employ continuously to a specific
date, or that specified operating results shall have been achieved, or specified
performance goals shall have been satisfied by the Employer, or the Employee (as
the case may be).

               All payments required to be made by the Employer to the Employee
pursuant to this Subsection 4.1, including, without limitation, any Severance
Compensation and any incentive or bonus compensation, shall be paid on a regular
basis in accordance with the Employer's normal payroll procedures and policies
at such times and in such installments in which such compensation would
otherwise have been paid to Employee had there been no such termination of
employment. For purposes of this Subsection 4.1, the term "totally disabled" or
"total disability" shall mean an inability of Employee, due to a physical or
mental illness, injury or impairment, to perform the essential functions of her
position even with reasonable accommodation as required by law, for a period of
120 consecutive days, or for non-consecutive periods aggregating more than 180
days in any period of 12 consecutive months, as determined by a medical
physician mutually selected by the Employee (or his guardian) and the Employer;
provided, however, that if the two parties cannot agree on a physician, then
each party shall select a physician and the two physicians shall select a third
physician who will make the determination.

           4.2 Termination for Cause. The Employer may terminate Employee's
employment at any time for "Cause" (as hereinafter defined), effective
immediately upon written notice to Employee. As used herein, the term "Cause"
shall mean Employee's:

               (a) commission of a material breach of this Agreement or of
Employee's duty of loyalty to the Employer, including, but not limited to, a
breach of any of Employee's obligations under any of Sections 5, 6, 7 or 8
hereof;

               (b) commission of an act that, under applicable law or government
regulations, could be held to constitute the commission of a felony, or a
misdemeanor involving moral turpitude, or could subject the Employer to civil or
criminal penalties or fines;

               (c) commission of an act that, in the sole judgment of the Board
of Directors of the Employer could adversely affect, or has adversely affected,
the reputation of the



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Employer, or the relationship of the Employer with any federal, state or local
government agency or any client of the Employer, the loss of which could
reasonably be expected to materially affect the Employer or its business;

               (d) refusal or failure to perform any of Employee's material
duties to the reasonable satisfaction of the Board of Directors of the Employer.

               Notwithstanding the foregoing, Employee shall not be deemed to
have been terminated for cause without (i) reasonable notice to Employee setting
forth the reason for the Company's intention to terminate for cause, (ii)
reasonable opportunity for Employee to cure, and (iii) an opportunity for
Employee, together with his counsel, if any, to be heard before the Board.

        If Employee's employment is terminated for Cause, the Employee shall not
be entitled to any compensation, nor shall the Employer have any obligation to
pay any sum or have any liability to Employee, whether as compensation for
Employee's services or as a result of such termination of employment, other than
the unpaid portion of Employee's Base Salary and vacation and sick time that
have accrued for services rendered by Employee to the Employer through the
effective date of such termination for Cause. All payments required to be made
by the Employer to the Employee pursuant to this Subsection 4.2 shall be paid in
such installments in which such compensation would otherwise have been paid to
Employee had there been no such termination of employment and in accordance with
the Employer's normal payroll procedures and policies.

           4.3 Termination by Employee for Employer Breach. In the event of a
breach by the Employer of any of its material obligations to Employee under this
Agreement, then Employee shall be entitled (i) to give a written default notice
to the Employer identifying, in reasonable detail, the nature of such breach and
stating that Employee intends to terminate this Agreement and Employee's
employment with the Employer if such breach is not cured within the succeeding
thirty (30) days (the "Cure Period") and (ii) if the Employer fails to cure such
breach in all material respects within the Cure Period, to terminate Employee's
employment with the Employer by a written termination notice delivered to the
Employer no later than the 15th day after the end of such Cure Period. In the
event of any such breach by the Employer and the termination by Employee of
Employee's employment pursuant to this Subsection 4.3, the Employer's sole
liability and obligation to Employee shall be to pay to Employee the same
compensation, on the same payment schedule, that applies to a termination of
Employee's employment without Cause, as provided in Subsection 4.1 hereof. If
Employee fails to exercise Employee's right of termination hereunder within the
15 day period specified above, then, notwithstanding anything to the contrary
contained herein, the Employer's breach and its failure to cure such breach
shall be deemed to have been waived by Employee, Employee's employment shall
continue hereunder and Employee shall not be entitled to terminate this
Agreement or Employee's employment or to receive any amounts or other payments
from the Employer by reason of such breach and failure to cure on the part of
the Employer.

        5. VENTURES AND ACQUISITIONS. If, during the term of this Agreement,
Employee is engaged in or associated with the planning or implementing of any
project, program or venture involving the Employer and a third party or parties
(a "Venture"), or any discussions, analyses or negotiations with respect to an
investment in, merger, acquisition or purchase, directly or indirectly, of the
stock, assets or business of any entity (an "Acquisition"), all rights in the
Venture and the Acquisition and any opportunity to make any investment in the
entity to be so acquired (the "Target") shall belong to the Employer and shall
constitute a corporate opportunity belonging exclusively to the Employer. Except
as approved by the Employer's Board of Directors, the



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Employee shall not be entitled to any interest in any such Venture or to invest
or solicit any third party to invest in the Target or consummate the
Acquisition, or to receive any commission, finder's fee or other compensation in
connection therewith other than the salary to be paid to Employee as provided in
this Agreement.

        6. CONFIDENTIAL INFORMATION. At all times during and after the Term of
this Agreement, Employee will hold in strict confidence and, without the express
prior written authorization of the Employer's Board of Directors, Employee shall
not disclose to any person or entity, any financial or marketing data of the
Employer (including, without limitation, financial statements of the Employer),
or any technique, process, formula, developmental or experimental work, work in
progress, business methods, business or marketing plans or trade secrets of or
used in the business of the Employer, or any other proprietary or confidential
information relating to the Employer or the services, business affairs of the
Employer, including, without limitation, any information relating to inquiries
made by the Employer or negotiations with respect to any Venture or Acquisition,
as such terms are defined in Section 5 above (collectively, the "Confidential
Information"). Employee agrees that Employee will not make use of any of the
Confidential Information during the Term of this Agreement other than for the
exclusive benefit of the Employer and that Employee shall not make any use
whatsoever of the Confidential Information at any time after termination of
Employee's employment with the Employer. Upon termination of such employment,
Employee shall deliver to the Employer (i) all documents, records, notebooks,
work papers and all similar repositories containing any Confidential Information
or any other information concerning the Employer, whether prepared by Employee,
the Employer or anyone else and (ii) all tangible personal property belonging to
the Employer that is in Employee's possession. The foregoing restrictions shall
not apply to (a) information which is or becomes, other than as a result of a
breach of this Agreement, generally available to the public, (b) information
related to the terms of Employee's compensation or benefits as an employee of
the Employer, or (c) the disclosure of information required pursuant to a
subpoena or other legal process; provided that the Employee shall notify the
Employer, in writing, of the receipt of any such subpoena or other legal process
requiring such disclosure immediately after receipt thereof and the Employee
shall assist the Employer in any efforts it may undertake to quash such subpoena
or other legal process or obtain an appropriate protective order prior to any
such disclosure by the Employee.

        7. COVENANTS AGAINST ACTIONS DAMAGING THE EMPLOYER. The Employee agrees
that Employee will not, during Employee's employment by the Employer hereunder,
and for a period of two (2) years following the termination of such employment
(whether by the Employer or by Employee and regardless of the reason for such
termination), (i) make any claim that the Employee has any right, interest or
title, of any kind or nature whatsoever, in or to any proprietary products,
services methods, practices, processes, discoveries, ideas, improvements,
devices, creations, business or marketing plans or systems, or, subject to
applicable labor laws, inventions relating to the business of the Employer, or
(ii) for Employee or on behalf of or in conjunction with any third party, hire
any employee of the Employer or induce or entice any employee of the Employer to
leave his or her employment with the Employer.

        8. NON-COMPETITION. Employee agrees that, during the term of Employee's
employment with the Employer, Employee will not engage or participate, in any
capacity (whether as an owner, shareholder, partner, lender, director, officer,
employee or independent contractor or consultant or advisor) in, or provide any
services (financial, advisory or other) to, any Person or business (including
any sole proprietorship, partnership, limited liability company, corporation,
unincorporated association or other entity) that is the same as, substantially
similar to, or competition



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with the Employer or is involved in any business activity in which the Employer
now is, or during the past 12 months was engaged, or in which the Employer has
been planning, and had begun material preparations, to engage in hereafter.
Nothing herein shall prevent Employee from holding, for investment purposes
only, no more than five (5) percent of any class of equity securities of a
company engaged in activities that are the same as, substantially similar to, or
competitive with the Employer if such class of equity securities is traded on a
national securities exchange or on the Nasdaq National Market. However, Employee
may continue to serve on the Board of Directors of Sangamo Biosciences.

        9. OTHER EMPLOYEE AGREEMENTS. Employee agrees to execute and deliver all
other agreements customarily entered into by the Company with its executive
level employees, including, without limitation, proprietary rights and invention
assignments.

        10. ASSIGNMENT. This Agreement shall not be assignable, in whole or in
part, by either party without the written consent of the other party, except
that the Employer may, without the consent of the Employee, assign its rights
and delegate its obligations under this Agreement to an Affiliate; or to any
unaffiliated corporation, firm or other business entity (i) with or into which
the Employer may merge or consolidate, or (ii) to which the Employer may sell or
transfer all or substantially all of its assets. After any such assignment by
the Employer, the Employer shall be discharged from all further liability
hereunder and such assignee shall thereafter be deemed to be the Employer for
the purposes of all provisions of this Agreement including this Section 9.

        11. SURVIVAL; REMEDIES.

           11.1 Survival. Any payment obligations of the Employer to Employee
that arise under Section 4 by reason of a termination of Employee's employment
in accordance with Section 4 hereof shall survive any such termination until
such obligations have been satisfied and Sections 5, 6, 7, and 8 of this
Agreement shall survive the expiration of the Term of this Agreement and any
termination of Employee's employment with the Employer.

           11.2 Remedies. Employee acknowledges and agrees that Employee's
covenants and the restrictions on Employee contained in the foregoing Sections
5, 6, 7, and 8 of this Agreement are reasonable and necessary in order to
protect the legitimate interests of the Employer, and that any violation thereof
by Employee would result in irreparable injuries to the Employer. Therefore,
Employee acknowledges and agrees that, in the event of a violation by Employee
of any of those covenants or any of those restrictions the Employer shall be
entitled to obtain, from any court of competent jurisdiction, temporary,
preliminary and permanent injunctive relief to prevent a threatened breach or to
obtain a halt to an actual breach by Employee of any of Employee's covenants
contained in any of Sections 5, 6, 7, and 8 of this Agreement, in addition to
any other rights or remedies to which the Employer may be entitled at law or in
equity by reason of any such breach or threatened breach of this Agreement.

        12. MISCELLANEOUS.

           12.1 Governing Law. This Agreement is made under and shall be
governed by and construed in accordance with the laws of the State of
Washington.

           12.2 Prior Agreements. This Agreement contains the entire agreement
of the parties relating to the subject matter hereof and supersedes all prior
agreements and understanding



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with respect to such subject matter, and the parties hereto have made no
agreements, representations or warranties relating to the subject matter of this
Agreement which are not set forth herein.

           12.3 Withholding Taxes. The Employer shall withhold from any salary
and benefits payable under this Agreement all federal, state, city or other
taxes or amounts as shall be required to be withheld pursuant to any law or
governmental regulation or ruling.

           12.4 Amendments; Waiver. No amendment or modification of this
Agreement shall be deemed effective unless made in writing signed by the parties
hereto. No waiver of any provision hereof shall be construed as a further or
continuing waiver of such provision or any other provision hereof.

           12.5 Severability. To the extent any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect.

           12.6 Definitions. The following terms used in this Agreement shall
have the meanings set forth below:

                (a) "Affiliate" when used with reference to the Employer, means
any Person that controls is controlled by or is under common control of the
Employer and shall include any corporation, limited liability company or
partnership (including a joint venture in partnership form) at least fifty (50)
percent of the voting stock or membership or partnership interests of which are
owned by the Employer, directly or through the ownership by either of them of at
least fifty (50) percent of the voting stock or membership or partnership
interests of any other corporation, limited liability company or partnership.

                (b) "Person" shall mean any natural person, sole proprietorship,
firm, corporation, limited liability company, partnership, joint venture or
unincorporated association or any other business entity.

           12.7 Interpretation; Headings. This Agreement is the result of
arms'-length negotiations between the parties hereto and no provision hereof,
because of any ambiguity found to be contained therein or otherwise, shall be
construed against a party by reason of the fact that such party or its legal
counsel was the draftsman of that provision. Unless otherwise indicated
elsewhere in this Agreement, (i) the term "or" shall not be exclusive; (ii) the
term "including" shall mean "including, but not limited to," and (iii) the terms
"herein," "hereof," "hereto," "hereunder" and other terms similar to such terms
shall refer to this Agreement as a whole and not merely to the specific section,
subsection, paragraph or clause where such terms may appear. The section,
subsection and any paragraph headings contained herein are for the purpose of
convenience only and are not intended to define or limit or affect, and shall
not be considered in connection with, the interpretation of any of the terms or
provisions of this Agreement.

           12.8 Counterpart Execution. This Agreement may be executed by
facsimile and in counterparts, each of which shall be deemed an original and all
of which when taken together shall constitute but one and the same instrument.

           12.9 Arbitration. All disputes between the parties hereto shall be
determined solely and exclusively by arbitration in accordance with the
commercial arbitration rules then in




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effect of the American Arbitration Association, or any successors hereto
("AAA"), in King County, Washington, unless the parties otherwise agree in
writing. The parties shall jointly select an arbitrator. In the event the
parties fail to agree upon an arbitrator within ten (10) days, then each party
shall select an arbitrator and such arbitrators shall then select a third
arbitrator to serve as the sole arbitrator; provided, that if either party, in
such event, fails to select an arbitrator within seven (7) days, such arbitrator
shall be selected by the AAA upon application of either party. Judgment upon the
award of the agreed upon arbitrator or the so chosen third arbitrator, as the
case may be, shall be binding and shall be entered into by a court of competent
jurisdiction.

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year set forth above.



                                  "EMPLOYER"

                                  EPOCH PHARMACEUTICALS, INC.
                                  a Delaware corporation



                                  By: /s/ Sanford S. Zweifach
                                     -------------------------------------------
                                      Its: President and Chief Financial Officer


                                  "EMPLOYEE"



                                  /s/ William Gerber
                                  ----------------------------------------------
                                  William Gerber



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