<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO
________________.
Commission file number 0-22170
EPOCH PHARMACEUTICALS, INC.
(exact name of small business issuer as specified in its charter)
Delaware 91-1311592
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1725 220th Street, S.E., No. 104, Bothell, Washington 98021
(Address of principal executive offices)
(206) 485-8566
(Issuer's telephone number)
NOT APPLICABLE
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
------ ------
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at July 30, 1996
----- -----------------------------
<S> <C>
Common Stock, $.01 par value 14,266,713
</TABLE>
Page 1 of 54 Pages
Exhibit Index on Page 14
<PAGE> 2
EPOCH PHARMACEUTICALS, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page Number
-----------
<S> <C>
Item 1. Financial Statements
Balance Sheets as of December 31, 1995
and June 30, 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations (unaudited) for the three
months and six months ended June 30, 1995 and 1996. . . . . . . . . . . . . . . . 4
Statements of Cash Flows (unaudited) for the six months ended
June 30, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
2
<PAGE> 3
EPOCH PHARMACEUTICALS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
1995 (UNAUDITED)
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 3,739,144 $ 5,860,879
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 147,975 60,852
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . 52,968 48,525
------------- -------------
Total current assets . . . . . . . . . . . . . . . . . 3,940,087 5,970,256
Equipment and leasehold improvements, net . . . . . . . . . . . 350,045 282,348
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 39,363 21,150
------------- -------------
Total assets . . . . . . . . . . . . . . . . . . . . . $ 4,329,495 $ 6,273,754
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . $ 1,217,994 $ 16,301
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 341,899 214,780
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . 361,664 278,542
Accrued litigation costs . . . . . . . . . . . . . . . . . . 250,000 --
------------- -------------
Total current liabilities . . . . . . . . . . . . . . 2,171,557 509,623
Stockholders' equity:
Common stock, par value $.01; authorized 20,000,000 shares,
issued and outstanding 7,023,400 and 14,246,713 shares . 70,234 142,467
Additional paid-in capital . . . . . . . . . . . . . . . . . 46,860,059 52,087,320
Deferred compensation . . . . . . . . . . . . . . . . . . . . (99,512) (70,712)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . (44,672,843) (46,394,944)
------------- -------------
Total stockholders' equity . . . . . . . . . . . . . . 2,157,938 5,764,131
Total liabilities and stockholders' equity . . . . . . $ 4,329,495 $ 6,273,754
============= =============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
EPOCH PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
1995 1996 1995 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating expenses:
Research and development . . . . . . . . $ 6,881 $ 483,542 $ 456,383 $ 1,012,464
General & administrative . . . . . . . . 620,901 121,763 881,697 529,079
---------- ---------- ----------- -----------
Operating loss . . . . . . . . . . . (627,782) (605,305) (1,338,080) (1,541,543)
Other income (expense):
Interest income . . . . . . . . . . . . . 6,099 26,250 9,636 62,193
Interest and financing expense . . . . . (57,277) (23,495) (107,219) (179,251)
Other income . . . . . . . . . . . . . . 1,800 4,601 2,400 9,401
---------- --------- ---------- ----------
Loss from continuing operations . . . (677,160) (597,949) (1,433,263) (1,649,200)
Income (loss) from discontinued
operations . . . . . . . . . . . . . . 62,464 (79,934) 541,299 (72,901)
---------- ---------- ----------- -----------
Net loss . . . . . . . . . . . . . . $ (614,696) $ (677,883) $ (891,964) $(1,722,101)
========== ========== =========== ===========
Loss per share from continuing
operations . . . . . . . . . . . . . . . . $ (0.10) $ (0.08) $ (0.21) $ (0.22)
Income (loss) per share from
discontinued operations . . . . . . . . . . $ 0.01 $ (0.01) $ 0.08 $ (0.01)
---------- ---------- ----------- -----------
Net loss per share . . . . . . . . . . . . . $ (0.09) $ (0.09) $ (0.13) $ (0.23)
Weighted average common shares
outstanding during the period . . . . . . . 7,014,996 7,756,794 7,011,548 7,390,616
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
EPOCH PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------------------
1995 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (891,964) $(1,722,101)
Adjustments to reconcile net loss to net cash
used in operating activities:
Continuing operations:
Depreciation and amortization . . . . . . . . . . . . . . 139,348 127,014
Amortization of discount on notes payable . . . . . . . . -- 122,326
Changes in operating assets and liabilities:
Other assets . . . . . . . . . . . . . . . . . . . . . . . 13,988 21,573
Accounts payable and accrued liabilities . . . . . . . . . (765,840) (446,745)
Other current liabilities . . . . . . . . . . . . . . . . 124,687 (625)
Discontinued operations:
Changes in current assets and current liabilities . . . . 612,746 75,334
Decrease in net noncurrent assets
in excess of noncurrent liabilities . . . . . . . . . 42,504 --
---------- -----------
Net cash used in operating activities . . . . . . . . . . . (724,531) (1,823,224)
Cash used in investing activities - acquisition of equipment
and leasehold improvements . . . . . . . . . . . . . . . . . (4,000) (30,516)
---------- -----------
Cash flows from financing activities:
Proceeds from notes payable . . . . . . . . . . . . . . . . 1,250,000 --
Principal payments on notes payable . . . . . . . . . . . . (144,274) (1,324,019)
Principal payments on capital leases . . . . . . . . . . . . (13,425)
Proceeds from sale of common stock . . . . . . . . . . . . . -- 4,632,500
Exercise of warrants and stock options . . . . . . . . . . . 4,420 666,994
---------- -----------
Net cash provided by financing activities . . . . . . . . . 1,096,721 3,975,475
---------- -----------
Net increase in cash and cash equivalents . . . . . . . . . . 368,190 2,121,735
Cash and cash equivalents at beginning of period . . . . . . . . 9,984 3,739,144
---------- -----------
Cash and cash equivalents at end of period . . . . . . . . . . . $ 378,174 $ 5,860,879
========== ===========
Supplemental disclosure of cash flow information-
cash payments made during the period for interest . . . . $ 13,688 $ 68,101
========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
EPOCH PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
(1) BASIS OF PRESENTATION
Epoch Pharmaceuticals, Inc. ("Epoch" or "the Company"), formerly MicroProbe
Corporation, was organized to develop, manufacture and market therapeutic and
diagnostic products utilizing oligonucleotide technology. In November 1995,
the Company sold its diagnostics assets to Becton, Dickinson and Company (see
note 2). The Company's continuing activities are focused on the development of
therapeutic technologies and products.
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB. Accordingly, they do not include all of
the information and footnotes required to be presented for complete financial
statements. The accompanying financial statements include all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods presented. Certain 1995 balances have been reclassified to conform
with the 1996 presentation.
The financial statements and related disclosures have been prepared with the
presumption that users of the interim financial information have read or have
access to the audited financial statements for the preceding fiscal year.
Accordingly, these financial statements should be read in conjunction with the
audited financial statements and the related notes thereto included in the
Company's Annual Report on Form 10-KSB as filed with the Securities and
Exchange Commission on April 9, 1996 (pursuant to Rule 12b-25 under the
Securities Exchange Act of 1934).
The Company has experienced significant quarterly fluctuations in operating
results and it expects that these fluctuations in expenses and net losses will
continue.
(2) SALE OF DIAGNOSTICS ASSETS
In November 1995, the Company sold the Company's assets and technology
associated with its Diagnostics Division (the "Assets") to Becton, Dickinson
and Company, a New Jersey corporation, through its Becton Dickinson Diagnostic
Instrument Systems Division (collectively, "Becton"). The Assets related to
the Company's development, marketing and sale of diagnostic products which
involve the use of nucleic acid probes to detect and identify microorganisms in
biological samples under the names "Affirm(R) VP," "Affirm(R) VPIII,"
"Affirm(R) DP," "Hybriquick(R)" and "Isoquick(R)". The Assets included:
tangible personal property, interests in certain contracts and other
instruments, rights in permits and licenses, raw materials and inventory,
technology, trade secrets, patents, other intellectual property (including the
name "MicroProbe"), rights in customer lists, records and data, computer
software programs, goodwill and causes of action held by the Company against
third parties. The aggregate purchase price paid by Becton for the Assets and
for the Company's covenant not to compete with Becton for a period of five
years was $8,510,000. The Purchase Price is subject to an upward adjustment of
$1,500,000 contingent upon Procter & Gamble entering into a supply
6
<PAGE> 7
agreement with Becton by November 2002, for the dental diagnostic products,
which were transferred by the Company to Becton, and Procter & Gamble obtaining
all clearances from the United States Food and Drug Administration necessary
for the commercial sale of such products in the U.S.
(3) PRIVATE PLACEMENT
In June 1996, the Company successfully completed a private offering of Units,
each Unit consisting of one share of the Company's Common Stock and one warrant
to purchase 0.5 shares of the Company's Common Stock. The Company sold a total
of 5 million Units, for an aggregate purchase price of $5 million to
institutional and accredited individual investors.
The term of the warrants is five (5) years, and they are exercisable at $2.50
per share (or $1.25 per 0.5 shares). Each warrant shall be redeemable by the
Company at any time after eighteen months from the date that they are issued at
$0.05 per warrant, provided that the closing trading price per share of Common
Stock is at least $3.75 for twenty (20) consecutive trading days.
In connection with the private placement, pursuant to an agreement with its
financial advisor, David Blech, the Company paid fees of $350,000 to Mr. Blech.
In addition, the Company cancelled fifty percent (50%) of the obligations of
Mr. Blech arising in connection with the transactions involving Ribonetics
GmbH, including the "put" rights contained in an agreement dated December 1,
1993 between the Company and Mr. Blech. The aggregate amount cancelled was
$1,635,588. The balance is accruing interest at the minimum applicable federal
rate. As the obligation had been fully reserved, and the remaining balance is
fully reserved, neither the cancellation nor the remaining obligation is
reflected on the Company's balance sheet. The Company also issued to Mr. Blech
five year warrants to purchase 500,000 shares of Common Stock at $1.00 per
share. The warrants are not exercisable for one year and are held in escrow by
the Company until the balance of the Ribonetics debt is satisfied.
In addition to completion of the private placement, major shareholders of the
Company elected to exercise previously existing warrants to purchase 2,200,000
shares of the Company's Common Stock at $0.30 per share generating an
additional $660,000 of cash to the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
At June 30, 1996, the Company had cash and cash equivalents of $5,861,000 which
the Company anticipates will provide sufficient working capital to operate
approximately fifteen months. The Company's continuing operations are research
and development, and will not generate cash in the near term to fund future
operations.
In June 1996, the Company successfully completed a private offering of Units,
each Unit consisting of one share of the Company's Common Stock and one warrant
to purchase 0.5 shares of the Company's Common Stock as described in Note (3)
of the Notes to the Financial Statements.
7
<PAGE> 8
Also in June 1996, the Company announced that it intends to exchange for every
two (2) warrants which were issued in conjunction with the Company's public
offering in September 1993 at $6.50 per share, one (1) new warrant to purchase
one (1) share of the Company's Common Stock with a term of five (5) years that
is exercisable at $2.50 per share. Each warrant shall be redeemable by the
Company at any time after eighteen months from the date that they are issued at
$0.05 per warrant, provided that the closing trading price per share of Common
Stock is at least $3.75 for twenty (20) consecutive trading days.
Since inception, the Company has financed its operations primarily through the
sales of its equity securities. In addition, the Company received $8,510,000
from the sale of its Diagnostics Division. To continue operations, the Company
will be required to sell additional equity securities, borrow additional funds,
or obtain additional financing through licensing, joint venture, or other
collaborative arrangements. The Company is pursuing such financing
arrangements but has no commitments for such financing and there can be no
assurance that such financing will be available on satisfactory terms, if at
all.
This Quarterly Report on Form 10-QSB contains certain forward-looking
statements that are based on current expectations. In light of the important
factors that can materially affect results, including those set forth below and
elsewhere in this Quarterly Report on Form 10-QSB, the inclusion of
forward-looking information herein should not be regarded as a representation
by the Company or any other person that the objectives or plans of the Company
will be achieved. The Company may encounter competitive, technological,
financial and business challenges making it more difficult than expected to
continue to develop and market therapeutic technologies and products; the
market may not accept the Company's therapeutic products; the Company may be
unable to retain existing key management personnel; and there may be other
material adverse changes in the Company's operations or business. Certain
important factors affecting the forward-looking statements made herein include,
but are not limited to (i) the successful development of viable therapeutic
technologies and products, (ii) accurately forecasting capital expenditures,
and (iii) obtaining new sources of external financing. Assumptions relating to
budgeting, marketing, product development and other management decisions are
subjective in many respects and thus susceptible to interpretations and
periodic revisions based on actual experience and business developments, the
impact of which may cause the Company to alter its marketing, capital
expenditure or other budgets, which may in turn affect the Company's financial
position and results of operations.
Future operating results may be impacted by a number of factors that could
cause actual results to differ materially from those stated herein, which
reflect management's current expectations. These factors include industry
specific factors, the Company's ability to maintain access to external
financing sources and its financial liquidity, the Company's ability to timely
develop and produce commercially viable therapeutic products and the Company's
ability to manage expense levels.
RESULTS OF OPERATIONS
The following discussion of results of operations reflects the Company's
Diagnostics Division as discontinued operations for the three and six month
periods ended June 30, 1995 and 1996.
8
<PAGE> 9
Research and development expenses for the three months ended June 30, 1996
increased $477,000 over the same period in the prior year. In the three month
period ended June 30, 1995, research and development expense was reduced by
$404,000 for a research contract which had been accrued but was subsequently
cancelled. This same adjustment affects the comparison of the six month
results. Additionally, increased research activity is being funded with
proceeds from the sale of the diagnostic assets and from the private placement.
Additional increases in expenditures for research and development throughout
1996 are anticipated as the Company devotes additional resources to these
efforts.
General and administrative expenses decreased in both the three and six month
periods ended June 30, 1996, compared to the corresponding period in 1995.
Contributing to these reductions are the elimination of activities associated
with selling the diagnostic division and patent litigation, both of which
caused increased legal and travel expenses in the 1995 periods. Specifically,
legal expenses were $105,000 and travel expenses were $66,000 in the three
month period ended June 30, 1995, as compared to $15,000 for legal and $29,000
for travel in the same period of 1996. Also, the building lease was
renegotiated in late 1995, resulting in savings on rent expense in the first
six months of 1996, compared to the same six month period of 1995 of $54,000.
Additionally, in July 1996 the In Re Blech Securities Litigation suit (see Part
II, Item 1, Legal Proceedings) was dismissed. Accordingly, $250,000 of
estimated costs which had been accrued for this matter was reversed as a
reduction of expenses in the three and six month periods ended June 30, 1996.
Interest income in the three and six month periods ended June 30, 1996
increased compared with the respective period in the prior year due to higher
investable funds. Interest expense in the period increased over the respective
periods in the prior year as a result of obligations incurred to secure bridge
financing for the Company. While the Company received significant cash from
the sale of the diagnostics division, the bridge loans were not fully paid off
until completion of the private placement in June 1996. In addition to the
interest on the principle amounts of the loans, interest expense in the six
months ended June 30, 1996 includes $122,000 of amortization of debt discount
relating to a $480,000 warrant price adjustment associated with the bridge
refinancing. The price adjustment was credited to additional paid-in capital
and the debt discount was being amortized over the term of the notes. At March
31, 1996 the discount had been fully amortized.
LIQUIDITY AND CAPITAL RESOURCES
The net cash increase of $2,122,000 from December 31, 1995 to June 30, 1996 was
the result of the receipt of net proceeds of $4,633,000 from the private
placement completed in June 1996, and the receipt of $660,000 from the exercise
of warrants to purchase the Company's common stock by major shareholders in
June 1996. These receipts were offset by the repayment of notes payable plus
interest in the amount of $1,396,000, and disbursements for normal operating
expenditures.
The Company's accounts payable and accrued liabilities balances decreased by
$210,000 from December 31, 1995 to June 30, 1996 primarily due to the payment
of $66,000 in interest on notes payable as well as normal business fluctuations
and payments issued after receipt of funds from the sale of the Diagnostics
Division.
9
<PAGE> 10
The Company's primary future needs for capital are for continued research and
development. The Company's working capital requirements may vary depending
upon numerous factors including the progress of the Company's research and
development, competitive and technological advances and the FDA regulatory
process.
The Company will require additional funds to continue its operations and, over
the longer term, will require substantial additional funds to maintain and
expand its research and development activities and to ultimately commercialize,
with or without the assistance of corporate partners, any of its proposed
products. The Company will seek collaborative or other arrangements with large
pharmaceutical companies, under which such companies would provide additional
capital to the Company in exchange for exclusive or non-exclusive license or
other rights to certain of the technologies and products the Company is
developing. However, the competition for such arrangements with major
pharmaceutical companies is intense, with a large number of biopharmaceutical
companies attempting to satisfy their funding requirements through such
arrangements. There can be no assurance that an agreement or agreements will
arise from these discussions in a timely manner, or at all, or that revenues
that may be generated thereby will offset operating expenses sufficiently to
reduce the Company's short- or long-term funding requirements. Additional
equity or debt financings may be required, and there can be no assurance that
funds will be available from such financings on favorable terms, or at all.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has from time to time received written notices from parties
alleging that the Company's products and proposed products infringe the
proprietary rights of such parties. The Company believes that such notices are
common in its industry and believes it is not infringing the proprietary rights
of such parties. However, there can be no assurance that such parties will not
ultimately bring legal proceedings against the Company.
The Company was named as an additional defendant in In Re Blech Securities
Litigation, 94 Civ. 7696 (RWS), pursuant to an Amended Consolidated Class
Action Complaint (the "Amended Complaint") filed on March 28, 1995 in the
United States District Court for the Southern District of New York (the
"Court"). The plaintiffs brought this action as a purported class action on
behalf of persons who purchased, during the period from July 1, 1991 through
September 21, 1994, securities of 24 companies, including securities issued by
the Company. The Amended Complaint names as defendants David Blech, D. Blech &
Co., Mark S. Germain, Nicholas Madonia as trustee for various trusts, Mordechai
Jofen as trustee for The Edward Blech Trust, Chancellor Capital Management,
Inc., Parag Saxena, Bear, Stearns & Company, Inc., Baird Patrick & Co., and
eleven of the foregoing 24 issuing companies. The Company was one of those
eleven named defendant companies.
The Amended Complaint sought to allege against the Company violations of
antifraud provisions of the federal securities law and common law fraud and
deceit in connection with a purported scheme to, inter alia, artificially
inflate and maintain prices of the securities issued by the 24 companies
10
<PAGE> 11
referenced above. In that regard, the Amended Complaint purports to allege
fraudulent activities involving the foregoing securities, including without
limitation unlawful "sham" transactions and the providing of undisclosed
"incentives" to investment fund managers and others to purchase such
securities. The Amended Complaint seeks the following relief: (a)
certification of this action as a class action; (b) damages in an unspecified
amount and interest; (c) costs and expenses of this action, including
reasonable fees of attorneys, accountants and experts and other disbursements;
and (d) such other and further relief as may be proper.
The Company moved to dismiss the Amended Complaint as it applies to the Company
on the grounds that the Amended Complaint failed to plead the purported fraud
with the requisite particularity and failed to state a claim. Plaintiffs
opposed the motion. Oral argument of the motion occurred on November 9, 1995.
By decision dated June 6, 1996, the Court granted the Company's motion to
dismiss for failure to plead fraud with particularity and declined to exercise
jurisdiction over the pendent common law claims asserted against the Company
under state law. The Court granted plaintiffs leave to replead their purported
claims within twenty days of the date of the decision, which time the Court
subsequently extended to July 26, 1996. The Company was not named in the
repleading and the case has been dismissed with respect to the Company.
11
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
4.1 Form of Subscription Agreement with Private Placement
Investors
4.2 Warrant Agreement between the Company and American
Stock Transfer & Trust Company dated June 21, 1996,
with form of Warrant
10.65 Consulting Agreement with David Blech dated March 29,
1996
27 Financial Data Schedules
(B) REPORTS ON FORM 8-K
The Company filed no Current Reports on Form 8-K during the
quarter ended June 30, 1996.
12
<PAGE> 13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EPOCH PHARMACEUTICALS, INC.
Date: August 13, 1996 By: /s/ SANFORD ZWEIFACH
---------------------------------
Sanford Zweifach
President/Chief Financial Officer
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
------ ----------- ------
<S> <C> <C>
4.1 Form of Subscription Agreement with Private Placement Investors 15
4.2 Warrant Agreement between the Company and American Stock Transfer & Trust
Company dated June 21, 1996, with form of Warrant 27
10.65 Consulting Agreement with David Blech dated March 29, 1996 52
27 Financial Data Schedules 54
</TABLE>
14
<PAGE> 1
EXHIBIT 4.1
EPOCH PHARMACEUTICALS, INC.
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT ("Agreement") is made as of _______ ___,
1996, between Epoch Pharmaceuticals, Inc., a Delaware corporation, with its
principal offices located at 1725 220th Street, S.E., Suite 104, Bothell,
Washington 98021 (the "Company"), and the undersigned purchaser (the
"Purchaser").
W I T N E S S E T H:
WHEREAS, the Company desires to issue up to 6,000,000 shares of its
Common Stock (the "Shares") at $1.00 per share (the "Offering"), and the
Purchaser desires to purchase the number of Shares set forth on the signature
page hereof, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations and covenants herein contained, the parties hereto
agree as follows:
1. Subscription. Subject to the terms and conditions hereinafter
set forth, the Purchaser, intending to be legally bound, hereby irrevocably
subscribes for and agrees to purchase from the Company the number of Shares set
forth on the signature page hereof at a purchase price equal to $1.00 per
Share. Upon its execution and delivery of this Agreement, the Company agrees
to sell such Shares to the Purchaser for said purchase price.
2. Payment, Closings. (a) The purchase price for the
Shares purchased hereby is payable by cashier's check made payable to "The
Epoch Pharmaceuticals, Inc. Escrow Account" contemporaneously with the
execution and delivery of this Agreement. The Company may close the purchase
of the Shares at any time after subscriptions for at least Five Million
(5,000,000) Shares have been received (the "First Closing"). One or more
additional closings my occur if the Company receives additional subscriptions.
The certificates representing the Shares purchased by the Purchaser will be
delivered by the Company within fifteen (15) days following the consummation of
such closing.
(b) The purchase period will terminate at 11:59 P.M. on
May 15, 1996, unless extended by the Company for a period or periods not beyond
June 30, 1996 (the "Termination Date"). The Shares will be offered on a "best
efforts" basis.
(c) If the Company shall not have obtained subscriptions
(including this subscription) for purchases of a minimum of Five Million
(5,000,000) Shares on or before the Termination Date, then this purchase shall
be void and all funds paid hereunder by the Purchaser, without interest, shall
be promptly returned to the Purchaser.
<PAGE> 2
(d) David Blech will act as financial advisor for the
Company in connection with this offering. The Company has agreed to pay David
Blech certain consideration as set forth in the Memorandum of Terms of Private
Placement of Shares.
3. Acceptance of Subscription. The Purchaser understands and
agrees that the Company, in its sole discretion, reserves the right to accept
or reject this or any other subscription for Shares in whole or in part,
notwithstanding prior receipt by the Purchaser of notice of acceptance. If
this subscription is rejected in whole or in part, the Company shall promptly
return all funds received from the Purchaser without interest thereon or
deduction therefrom, and this Agreement shall thereafter be of no further force
or effect.
4. Representations and Warranties. The Purchaser acknowledges,
represents and warrants to, and agrees with, the Company as follows:
(a) The purchase of the Shares involves a high degree of
risk in that: (i) the Company is in the development stage, has sustained
continuous losses and has generated no significant revenues from its current
operations from inception, and currently has limited working capital; (ii) the
Company expects to sustain continuous losses from operations over the
foreseeable future, and currently has no salable services or products; (iii)
the Purchaser may not be able to liquidate his or her investment; (iv)
transferability of the Shares is extremely limited; and (v) the Purchaser could
sustain the loss of his entire investment.
(b) The Purchaser understands that the offering and sale
of the Shares has not been reviewed by the United States Securities and
Exchange Commission (the "SEC") and is intended to be exempt from registration
under the Securities Act of 1933 (the "Securities Act"), by virtue of Section
4(2) of the Securities Act and the provisions of Regulation D promulgated
thereunder and, in accordance therewith and in furtherance thereof, the
Purchaser represents and warrants to and agrees with the Company as follows:
(i) The Purchaser has received the Company's
Memorandum of Terms for Private Placement of Shares and the attachments thereto
(the "Offering Documents"), and has carefully reviewed it and understands the
information contained therein;
(ii) The Purchaser has prior investment
experience, including investments in non-registered securities, or has employed
the services of an investment advisor, attorney or accountant to read all of
the documents furnished or made available by the Company to other prospective
purchasers of the Shares and to evaluate the merits and risks of such an
investment; that the Purchaser recognizes the highly speculative nature of this
investment; and that the Purchaser must be able to bear and is able to bear the
economic risk assumed by purchase of the Shares;
(iii) The Purchaser has been furnished by the
Company during the course of this transaction with all information regarding
the Company which the Purchaser has requested or desired to know; that all
documents which Purchaser requested which could be reasonably provided have
been made available for inspection and review; that Purchaser has been afforded
the opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the Company, its
business and financial condition and terms and conditions of the offering, and
any additional information which he or
2
<PAGE> 3
she requested, and all such questions have been answered and all such
additional information has been provided to the full satisfaction of the
Purchaser;
(iv) No oral or written representations have been
made other than as stated in the Offering Documents, and no oral or written
information furnished to the Purchaser or Purchaser advisor(s) in connection
with the offering of the Shares were in any way inconsistent with the
information stated in the Offering Documents;
(v) The Purchaser is not subscribing for the
Shares as a result of or subsequent to any advertisement, article, notice, or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting, or
any solicitation of a subscription by a person not previously known to the
Purchaser in connection with investments in securities generally;
(vi) The Purchaser either has a pre-existing
personal or business relationship with the Company or its officers or directors
or the Purchaser has such knowledge and experience in financial, tax, and
business matters so as to enable the Purchaser to utilize the information made
available to the Purchaser in connection with the offering of the Shares to
evaluate the merits and risks of an investment in the Shares and to make an
informed investment decision with respect thereto;
(vii) The Purchaser is not relying on the Company
with respect to the tax and other economic considerations of an investment in
the Shares, and has relied on the advice of, or has consulted with, only his
own advisors; and
(viii) The Purchaser is purchasing the Shares for
its own account, for investment and not with a view to resale or distribution
except in compliance with the Securities Act. The Purchaser is aware that Rule
144 promulgated under the Securities Act permits only routine sales of
restricted securities in limited amounts in accordance with the terms and
conditions of Rule 144.
(c) The Purchaser understands that the Securities have
not been registered under the Securities Act by reason of a claimed exemption
under the provisions of the Securities Act which depends, in part, upon the
investment intention of the Purchaser.
(d) The Purchaser meets the qualifications of one or more
of the subparagraphs listed below (please insert your initials in the
appropriate place(s) next to the description(s) applicable to you). If
Purchaser meets none of the qualifications listed below, initial here
____________________.
________ (i) A natural person who had individual
income of more than $200,000 in each of the two most
recent years or joint income with that person's
spouse in excess of $300,000 in each of the two most
recent years and who reasonably expects to reach that
same income level for the current year;
3
<PAGE> 4
________ (ii) A natural person whose individual
net worth, or joint net worth with that person's
spouse, is in excess of $1,000,000. For this
purpose, "net worth" means the excess of total assets
at fair market value, including home and personal
property, over total liabilities;
________ (ii) A trust, with total assets in excess
of $5,000,000, which is not formed for the purpose of
acquiring the Shares, and whose purchase is directed
by a person who has such knowledge and experience in
financial and business matters that he is capable of
evaluating the risks and merits of an investment in
the Shares;
________ (iv) A bank as defined in Section 3(a)(2)
of the Securities Act, or a savings and loan
association or other institution as defined in
Section 3(a)(5)(a) of the Securities Act whether
acting in its individual or fiduciary capacity; a
broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; an insurance
company as defined in Section 2(13) of the Securities
Act; an investment company registered under the
Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of
the Investment Company Act of 1940; a small business
investment company licensed by the U.S. Small
Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958; a plan
established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a
state or its political subdivisions, for the benefit
of its employees, if such plan has total assets in
excess of $5,000,000; or an employee benefit plan
within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as
defined in Section 3(21) of the Employee Retirement
Income Security Act of 1974, which is either a bank,
savings and loan association, insurance company, or
registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000
or, if the employee benefit plan is a self-directed
plan and the investment decision is made solely by
persons who are accredited investors;
________ (v) A private business development
company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940;
________ (vi) An organization described in Section
501(c)(3) of the Internal Revenue Code of 1986, as,
amended, a corporation, Massachusetts or similar
business trust, or partnership, not formed for the
specific purpose of acquiring the Shares, with total
assets in excess of $5,000,000;
________ (vii) A director or executive officer of
the Company; or
________ (viii) An entity in which all of the equity
owners meet the requirements of at least one of the
above subparagraphs.
(e) The Purchaser acknowledges, represents and warrants
to the Company:
4
<PAGE> 5
(i) The Purchaser, if executing this Agreement in
a representative or fiduciary capacity, has full power and authority to execute
and deliver this Agreement in such capacity and on behalf of the subscribing
individual, ward, partnership, trust, estate, corporation, or other entity for
whom the Purchaser is executing this Agreement, and such individual, ward,
partnership, trust, estate, corporation, or other entity has full right and
power to perform pursuant to this Agreement and make an investment in the
Company; and
(ii) The representations, warranties, and
agreements of the Purchaser contained herein shall survive the execution and
delivery of this Agreement and the purchase of the Shares.
5. Indemnification. The Purchaser agrees to indemnify and hold
harmless the Company and its officers, directors, employees, agents, and
affiliates against any and all loss, liability, claim, damage, and expense
whatsoever (including, but not limited to, any and all expenses reasonably
incurred in investigating, preparing, or defending against any litigation
commenced or threatened or any claim whatsoever) arising out of or based upon
any false representation or warranty or breach or failure by the Purchaser to
comply with any covenant or agreement made by the Purchaser herein or in any
other document furnished by the Purchaser to any of the foregoing in connection
with this transaction.
6. Irrevocability; Binding Effect. The Purchaser hereby
acknowledges and agrees that the subscription hereunder is irrevocable by the
Purchaser, that, except as required by law, the Purchaser is not entitled to
cancel, terminate, or revoke this Agreement or any agreements of the Purchaser
hereunder, and that this Agreement and such other agreements shall survive the
death or disability of the Purchaser and shall be binding upon and inure to the
benefit of the parties and their heirs, executors, administrators, successors,
legal representatives, and permitted assigns. If the Purchaser is more than
one person, the obligations of the Purchaser hereunder shall be joint and
several and the agreements, representations, warranties, and acknowledgments
herein contained shall be deemed to be made by and be binding upon each such
person and his heirs, executors, administrators, successors, legal
representatives, and permitted assigns.
7. Restrictions on Transfer.
(a) The Shares shall not be transferable, except upon the
conditions specified in this Agreement, which conditions are intended, in part,
to insure compliance with the provisions of the Securities Act, or, in the case
of Section 8 hereof, to assist in an orderly distribution. The Purchaser will
cause any proposed transferee of Shares held by the Purchaser to agree to take
and hold those securities subject to the provisions and upon the conditions
specified in this Section 7.
(b) Each certificate representing Shares or any other
securities issued in respect of the Shares upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted or unless the securities evidenced by such
certificate have been registered under the Securities Act) be stamped or
otherwise imprinted with a legend in substantially the following form (in
addition to any legend required under applicable state securities laws):
5
<PAGE> 6
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR UNDER ANY
STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR
TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933 AND ANY
APPLICABLE STATE SECURITIES LAW OR (ii) EPOCH PHARMACEUTICALS,
INC. ("THE COMPANY") RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY OR COUNSEL TO THE HOLDER OF SUCH SECURITIES WHICH
COUNSEL IS REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
SECURITIES MAY BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS.
THE COMPANY'S SUBSCRIPTION AGREEMENT DATED _________ ___, 1996
WITH THE HOLDER CONTAINS ADDITIONAL PROVISIONS RESTRICTING THE
TRANSFER OF THESE SECURITIES. A COPY OF SUCH AGREEMENT IS
AVAILABLE FOR INSPECTION AT THE COMPANY'S OFFICE."
8. Registration Rights.
(a) Between sixty (60) and ninety (90) days of the First
Closing, the Company shall file a registration statement pursuant to the
Securities Act, to the end that the Shares may be sold under the Securities Act
and the Company will use its best efforts to cause such registration to become
effective and continue to be effective (current) (including the taking of such
steps as are necessary to obtain the removal of any stop order) until the first
to occur of (i) three years following the First Closing, (ii) the holder has
advised that all of the Shares so registered have been sold or (iii) until the
Shares so registered are saleable without restriction pursuant to Rule 144
under the Securities Act or otherwise.
(b) The Purchaser hereby covenants with the Company not
to make any sale of the Shares without effectively causing the prospectus
delivery requirement under the Securities Act to be satisfied, and the
Purchaser acknowledges and agrees that such Shares are not transferable on the
books of the Company unless the certificate submitted to the transfer agent
evidencing the Shares is accompanied by a separate certificate: (i) in the
form of Appendix A hereto, (ii) executed by an officer of, or other authorized
persons designated by, the Purchaser, and (iii) to the effect that (A) the
Shares have been sold in accordance with such registration statement and (B)
the requirement of delivering a current prospectus has been satisfied. The
Purchaser acknowledges that there may occasionally be times when the Company
must suspend the use of the prospectus forming a part of the registration
statement until such time as an amendment to the registration statement has
been filed by the Company and declared effective by the SEC, or until such time
as the Company has filed an appropriate report with the SEC pursuant to the
Securities Exchange Act of 1934, as amended. The Purchaser hereby covenants
that it will not sell any Shares pursuant to said prospectus during the period
commencing at the time at which the Company gives the Purchaser notice of the
suspension of the use of said prospectus and ending at the time the Company
gives the Purchaser notice that the Purchaser may thereafter effect sales
pursuant to said prospectus.
6
<PAGE> 7
(c) The following provisions of this Section 8 shall also
be applicable:
(1) Following the effective date of such
registration statement, the Company shall upon the request of any holder of
Shares supply such holder a number of prospectuses meeting the requirements of
the Securities Act, as shall be requested by such holder to permit such holder
to make a public offering of all Shares from time to time offered or sold by
such holder, provided that such holder shall from time to time furnish the
Company with such appropriate information (relating to the intentions of such
holder) in connection therewith as the Company shall request in writing. The
Company shall also use its best efforts to qualify the Shares for resale in
such states as the holder shall reasonably designate.
(2) The Company shall bear the entire cost and
expense of the registration of securities under this Section 8. Any holder
whose Shares are included in any such registration statement pursuant to this
Section 8 shall, however, bear the fees of his own counsel, any registration
fees, transfer taxes or underwriting discounts or commissions applicable to the
Shares sold by him pursuant thereto.
(3) The Company shall indemnify and hold harmless
each such holder and each underwriter, within the meaning of the Securities
Act, who may purchase from or sell for any such holder any Shares from and
against any and all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material act contained in any
registration statement under the Act or any prospectus included therein
required to be filed or furnished by reason of this Section 8 or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or alleged untrue statement or omission or alleged
omission based upon information furnished or required to be furnished in
writing to the Company by such holder or underwriter within the meaning of such
Act; provided, however, that the Company shall not be obliged so to indemnify
any such holder or underwriter or controlling person unless such holder or
underwriter shall at the same time indemnify the Company, its directors, each
officer signing the related registration statement and each person, if any, who
controls the Company within the meaning of such Act, from and against any and
all losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or any prospectus required to be filed or furnished by reason of this
Section 8 or caused by any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, insofar as such losses, claims, damages or liabilities are caused
by any untrue statement or alleged untrue statement or omission based upon
information furnished in writing to the Company by any such holder or
underwriter expressly for use therein.
9. Representations by and Covenants of the Company.
(a) The Company represents and warrants to the Purchaser
that prior to the consummation of this offering and at the First Closing and,
if applicable to such Purchaser, at any subsequent closing:
7
<PAGE> 8
(i) The Company is a corporation duly organized,
existing and in good standing under the laws of the State of Delaware, and has
the corporate power to conduct the business which it conducts and proposes to
conduct.
(ii) The execution, delivery and performance of
this Agreement by the Company will have been duly approved by the Board of
Directors of the Company.
(iii) The Shares have been duly and validly
authorized and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable.
(iv) The Company has obtained all licenses,
permits and other governmental authorizations necessary to the conduct of its
business; such licenses, permits and other governmental authorizations obtained
are in full force and effect; and the Company is in all material respects
complying therewith.
(v) Except as set forth in the Offering Materials
the Company knows of no pending or threatened legal or governmental proceedings
to which the Company is a party which could materially adversely affect the
business, property, financial condition or operations of the Company.
(vi) The Company is not in violation of or
material default under, nor will the execution and delivery of this Agreement
and the consummation of the transactions herein contemplated result in a
violation of or constitute a material default under, its Certificate of
Incorporation or by-laws, in the performance or observance of any material
obligations, agreement, covenant or condition contained in any bond, debenture,
note or other evidence of indebtedness or in any material contract, indenture,
mortgage, loan agreement, lease, joint venture or other agreement or instrument
to which it or any of its properties may be bound or in violation of any
material order, rule, regulation, writ, injunction, or decree of any
government, governmental instrumentality or court, domestic or foreign.
(vii) The Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1995, and the other Offering Documents,
taken as a whole, are accurate in all material respects and do not contain any
untrue statement of a material fact required to be stated therein or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
(viii) As of the date hereof, there has been no
material adverse change in the financial condition or results of operation of
the Company since December 31, 1995.
(b) The Company will use the proceeds from the Shares for
repayment of debt, research and development and for general working capital
purposes.
10. Termination. All provisions of this Agreement shall terminate
five years after the date of the First Closing.
8
<PAGE> 9
11. Modification and Waiver. Neither this Agreement nor any
provisions hereof shall be waived, modified, discharged, or terminated except
by an instrument in writing signed by the party against whom any such waiver,
modification, discharge, or termination is sought. A waiver by either party of
a breach of any provision of this Agreement shall not operate, or be construed,
as a waiver of any subsequent breach by that same party.
12. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail or delivered by hand to the party to whom it is to be given (a)
if to the Company, at the address set forth above, or (b) if to the Purchaser,
at the address set forth on the signature page hereof (or, in either case, to
such other address as the party shall have furnished in writing in accordance
with the provisions of this Section 12), and shall be deemed given at the time
of certification or delivery thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington applicable to
agreements made and to be performed in that state.
14. Severability. The holding of any provision of this Agreement
to be invalid or unenforceable by a court of competent jurisdiction shall not
affect any other provision of this Agreement, which shall remain in full force
and effect.
15. Entire Agreement. This Agreement contains the entire
agreement of the parties with respect to the subject matter hereof and shall be
binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, heirs, distributees, and permitted successors
and assigns.
16. Further Assurances. The parties agree to execute and deliver
all such further documents, agreements and instruments and take such other and
further action as may be necessary or appropriate to carry out the purposes and
intent of this Agreement.
17. Section Headings. The Section headings appearing in this
Agreement are for purposes of easy reference and shall not be considered a part
of this Agreement or in any way modify, amend or affect its provisions.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
EPOCH PHARMACEUTICALS, INC.
By:
----------------------------------
Fred Craves
Chief Executive Officer
- -------------------------------- ---------------------------------
Signature of Purchaser Number of Shares
Being Purchased
- --------------------------------
Name of Purchaser (Please Print)
- --------------------------------
Address of Purchaser
- --------------------------------
Social Security or Taxpayer I.D.
Number of Purchaser
PURCHASER:
PLEASE INSERT YOUR INITIALS IN THE APPROPRIATE PARAGRAPH(S) IN SECTION
4(d) ON PAGES 3 AND 4.
10
<PAGE> 11
EXHIBIT A
Attention:
CERTIFICATE OF SUBSEQUENT SALE
------------------------------
The undersigned, [and officer of, or other person duly authorized by]
______________________________________________________________________________
[fill in official name of individual or institution]
hereby certifies that he/she [said institution] is the holder of the shares
evidenced by the attached certificate, and as such, sold such shares
on _______________________ in accordance with registration statement number
[date]
33-__________________ of Epoch Pharmaceuticals, Inc. and the requirement of
delivering a current prospectus has been complied with in connection with such
sale.
Print or Type:
Name of Holder
(Individual or
Institution):
-----------------------------------
Name of Individual
representing
Holder (if an
Institution):
-----------------------------------
Title of Individual
representing
Holder (if an
Institution):
-----------------------------------
Signature by:
Individual Holder
or Individual
representing Holder:
-----------------------------------
<PAGE> 12
ADDENDUM TO EPOCH PHARMACEUTICALS, INC.
SUBSCRIPTION AGREEMENT
JUNE 7, 1996
Pursuant to this addendum to Epoch Pharmaceuticals, Inc. Subscription
Agreement, the Offering consists of 6,000,000 Units, each Unit consisting of
one share and a warrant to purchase .5 shares of Common Stock, as described in
the Memorandum of Terms, at a purchase price of $1.00 per Unit. All references
in this Subscription Agreement to shares shall be deemed to refer to Units.
Please acknowledge that you have received this Addendum by executing the
acknowledgement at the bottom of this letter and returning it to the Company by
fax (206-486-8336) and mailing the original to Epoch Pharmaceuticals, Inc.,
1725 220th St. SE, #104, Bothell, WA 98021.
- -------------------------------------- ---------------------
Print Name Date
- --------------------------------------
Signature
<PAGE> 1
EXHIBIT 4.2
__________________
WARRANT AGREEMENT
BETWEEN
EPOCH PHARMACEUTICALS, INC.
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY
DATED AS OF JUNE 21, 1996
__________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DISTRIBUTION OF WARRANT CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Appointment of Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Form of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Execution of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Issuance and Distribution of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Registration of Common Stock and Exercisability of Warrants . . . . . . . . . . . . . . . . 2
2.3 Procedure for Exercise of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Issuance of Warrant Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Certificates for Unexercised Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Reservation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Disposition of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
CALL OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Call Price and Trigger Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Payment of Call Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV
ADJUSTMENTS AND NOTICE PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Adjustment of Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Current Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 No Adjustments to Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4 Deferral of Adjustments to Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.5 Adjustment to Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.6 Reorganizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.7 Reclassification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.8 Adjustment of Call Trigger Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.9 Verification of Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.10 Notice of Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.11 Notice of Call . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.12 Notice of Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.13 Warrant Certificate Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.14 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V
OTHER PROVISIONS RELATING TO RIGHTS OF REGISTERED HOLDERS OF WARRANT CERTIFICATES . . . . . . . . 9
5.1 Rights of Warrant Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Lost, Stolen, Mutilated or Destroyed Warrant Certificates . . . . . . . . . . . . . . . . . 9
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI
SPLIT UP, COMBINATION, EXCHANGE, TRANSFER AND CANCELLATION OF WARRANT CERTIFICATES . . . . . . . . . . . . 10
6.1 Split Up, Combination, Exchange and Transfer of Warrant Certificates . . . . . . . . . . . . . . . . . 10
6.2 Cancellation of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.3 Agreement of Warrant Certificate Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VII
PROVISIONS CONCERNING THE WARRANT AGENT AND OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.1 Payment of Taxes and Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Resignation or Removal of Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Notice of Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 Merger of Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 Company Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 Certification for the Benefit of Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.7 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.8 Liability of Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 Use of Attorneys, Agents and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 Acceptance of Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 Changes to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.14 Successor to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.15 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.16 Defects in Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.17 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.18 Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.19 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.20 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.21 Conflict of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.22 Availability of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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<PAGE> 4
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of June 21, 1996, between EPOCH
PHARMACEUTICALS, INC., a Delaware corporation (the "Company"), and AMERICAN
STOCK TRANSFER & TRUST COMPANY, a corporation organized under the banking laws
of the State of New York (the "Warrant Agent").
W I T N E S S E T H:
WHEREAS, the Company has made a private placement of units consisting
of one (1) share of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), and one (1) Class C Redeemable Common Stock Purchase Warrants
(the "Warrants") to purchase one-half (1/2) share of the Company's Common
Stock; and
WHEREAS, the Company desires the Warrant Agent, and the Warrant Agent
agrees, to act on behalf of the Company in connection with the issuance,
transfer, exchange, replacement, redemption and surrender of certificates
representing the Warrants (the "Warrant Certificates"); and
WHEREAS, the Company and the Warrant Agent desire to set forth in this
Warrant Agreement, among other things, the form and provisions of the Warrant
Certificates and the terms and conditions under which they may be issued,
transferred, exchanged, replaced, redeemed and surrendered in connection with
the exercise and redemption of the Warrants;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DISTRIBUTION OF WARRANT CERTIFICATES
1.1 Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act on behalf of the Company in accordance with the
instructions hereinafter set forth in this Agreement, and the Warrant Agent
hereby accepts such appointment.
1.2 Form of Warrant Certificates. The Warrant Certificates shall
be issued in registered form only and, together with the purchase and
assignment forms to be printed on the reverse thereof, shall be substantially
in the form of Exhibit A attached hereto, and, in addition, may have such
letters, numbers or other marks of identification or designation and such
legends, summaries or endorsements stamped, printed, lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with
the provisions of this Agreement or as, in any particular case, may be
required, in the opinion of counsel for the Company, to comply with any law or
with any rule or regulation of any regulatory authority or agency or to conform
to customary usage.
<PAGE> 5
1.3 Execution of Warrant Certificates. The Warrant Certificates
shall be executed on behalf of the Company by its Chairman of the Board, Chief
Executive Officer or President or any Vice President, and by its Chief
Financial Officer or Treasurer or any Assistant Treasurer, or Secretary or any
Assistant Secretary, either manually or by facsimile signature printed thereon.
The Warrant Certificate shall be manually countersigned and dated the date of
the countersignature by the Warrant Agent and shall not be valid for any
purpose unless so countersigned and dated. In case any authorized officer of
the Company who shall have signed any of the Warrant Certificates shall cease
to be such officer of the Company either before or after delivery thereof by
the Company to the Warrant Agent, the signature of such person on such Warrant
Certificates, nevertheless, shall be valid and such Warrant Certificates may be
countersigned by the Warrant Agent and issued and delivered to those persons
entitled to receive the Warrants represented thereby with the same force and
effect as though the person who signed such Warrant Certificates had not ceased
to be such officer of the Company.
1.4 Issuance and Distribution of Warrant Certificates. The
Company shall deliver to the Warrant Agent an adequate supply of Warrant
Certificates executed on behalf of the Company, as described in Section 1.3
hereof. Upon receipt of an order from the Company, the Warrant Agent shall
within three business days complete and countersign Warrant Certificates and
shall deliver such Warrant Certificates pursuant to written instructions of the
Company.
ARTICLE II
WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
2.1 Exercise Price. Each Warrant Certificate for the Warrants
shall, when signed by the Chairman, Chief Executive Officer or President or any
Vice President, and by the Chief Financial Officer or Treasurer or any
Assistant Treasurer, or Secretary or any Assistant Secretary, of the Company
and countersigned by the Warrant Agent, entitle the registered holder thereof,
subject to the provisions of Article III hereof, to purchase from the Company
one-half (1/2) share of Common Stock for each Warrant evidenced thereby, at the
purchase price of $1.25 per one-half (1/2) share, (the "Initial Exercise
Price"), or such adjusted number of shares at such adjusted purchase price as
may be established from time to time pursuant to the provisions of Article IV
hereof, payable in full at the time of exercise of the Warrant. Except as the
context otherwise requires, the term "Exercise Price" as used in this Agreement
shall mean the purchase price of one share of Common Stock upon the exercise of
a Warrant, reflecting all appropriate adjustments made in accordance with the
provisions of Article IV hereof and Section 7.12 hereof.
2.2 Registration of Common Stock and Exercisability of Warrants.
Each Warrant may be exercised at any time, but not after 5:00 P.M., New York,
City time, on the earlier of June 20, 2001 or the business day immediately
preceding the Call Date (as defined in Section 4.9). The term "Exercise
Deadline" as used in this Agreement shall mean the latest time and date at
which the Warrants may be exercised. Pursuant to the Subscription Agreements
under which the Warrants were sold, the Company is obligated to register the
shares issuable upon exercise of the Warrants.
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<PAGE> 6
2.3 Procedure for Exercise of Warrants. During the period
specified in and subject to the provisions of Section 2.2 hereof, the Warrants
may be exercised by surrendering the Warrant Certificates representing such
Warrants to the Warrant Agent at its principal office (the "Principal Office"),
which is presently located at 40 Wall Street, New York, New York 10005, with
the election to purchase form set forth on the Warrant Certificate duly
completed and executed, with signatures guaranteed by a member firm of a
national securities exchange, a commercial bank or trust company located in the
United States, a member of the National Association of Securities Dealers, Inc.
("NASD") or other eligible guarantor institution which is a participant in a
signature guarantee program (as such terms are defined in Reg. 240.17Ad-15
under the Securities Exchange Act of 1934, as amended) acceptable to the
Warrant Agent ("Signatures Guaranteed"), accompanied by payment in full of the
Exercise Price as provided in Section 2.1 in effect at the time of such
exercise, together with such taxes as are specified in Section 7.1 hereof, for
each share of Common Stock with respect to which such Warrants are being
exercised. Such Exercise Price and taxes shall be paid in full by certified
check or money order, payable in United States currency, to the Warrant Agent
for the account of the Company. The date on which Warrants are exercised in
accordance with this Section 2.3(a) is sometimes referred to herein as the Date
of Exercise of such Warrants.
2.4 Issuance of Warrant Shares. As soon as practicable after the
Date of Exercise of any Warrants, the Company shall issue, or cause the
transfer agent for the Common Stock, if any, to issue a certificate or
certificates for the number of full shares of Common Stock to which such holder
is entitled, registered in accordance with the instructions set forth in the
election to purchase. All Warrant Shares shall be validly authorized and
issued, fully paid and nonassessable and free from all taxes, liens and charges
created by the Company in respect of the issue thereof, and shall be previously
unissued shares. Each person in whose name any such certificate for Warrant
Shares is issued shall for all purposes be deemed to have become the holder of
record of the Warrant Shares represented thereby on the Date of Exercise of the
Warrants resulting in the issuance of such shares, irrespective of the date of
issuance or delivery of such certificate for the Warrant Shares.
2.5 Certificates for Unexercised Warrants. In the event that less
than all of the Warrants represented by a Warrant Certificate are exercised,
the Warrant Agent shall execute and mail, by first-class mail, within 30 days
of the Date of Exercise, to the registered holder of such Warrant Certificate,
or such other person as shall be designated in the election to purchase, a new
Warrant Certificate representing the number of full Warrants not exercised. In
no event shall a fraction of a Warrant be exercised, and the Warrant Agent
shall distribute no Warrant Certificates representing fractions of Warrants
under this or any other section of this Agreement. Final fractions of shares
shall be treated as provided in Section 4.14.
2.6 Reservation of Shares. The Company shall at all times reserve
and keep available for issuance upon the exercise of Warrants a number of its
authorized but unissued shares of Common Stock that will be sufficient to
permit the exercise in full of all outstanding Warrants.
2.7 Disposition of Proceeds. The Warrant Agent shall account at
least monthly (or more frequently upon the request of the Company, provided
that in no event shall the Warrant Agent be required to account more frequently
than weekly) to the Company with respect to Warrants exercised and concurrently
deliver to the Company all funds.
3
<PAGE> 7
ARTICLE III
CALL OF WARRANTS
3.1 Call Price and Trigger Price. The Company may, at its option,
upon not less than 30 days' nor more than 60 days' notice, call for redemption
of all or any portion of the then outstanding Warrants at a call price of $.05
per warrant (such price is hereinafter referred to as the "Call Price"), at any
time after 9:30 A.M., New York City time, on December 20, 1997, provided the
Current Market Price of the Company's Common Stock, as determined pursuant to
Section 4.2, has been at least 150% of the then effective Exercise Price of the
Warrants, as adjusted pursuant to Section 4.8 (the "Call Trigger Price") but
not giving effect to any decrease of such Exercise Price as permitted by
Section 7.12 hereof, for 20 consecutive business days ending within 15 days of
the date of the notice of such call shall have been given to the Warrant Agent
by the Company pursuant to Section 4.11, and provided further that the Company
has complied and continues to be in compliance with the provisions of Section
2.2 hereof. In the event the Company exercises its right to redeem the
Warrants, such Warrants will be exercisable until the close of business on the
date fixed for redemption in such notice. If any Warrant called for redemption
is not exercised by such time, such Warrant shall cease to be exercisable and
the holder thereof shall be entitled only to the redemption price..
3.2 Payment of Call Price. On or prior to the opening of business
on the Call Date (as defined in Section 4.11), the Company will deposit with
the Warrant Agent funds in form satisfactory to the Warrant Agent sufficient to
purchase all the Warrants which are to be called. Payment of the Call Price
will be made by the Warrant Agent upon presentation and surrender of the
Warrant Certificates representing such Warrants to the Warrant Agent at its
Principal Office.
ARTICLE IV
ADJUSTMENTS AND NOTICE PROVISIONS
4.1 Adjustment of Exercise Price. Subject to the provisions of
this Article IV, the Exercise Price in effect from time to time shall be
subject to adjustment, as follows:
(a) In case the Company shall at any time after the date
hereof (i) declare a dividend on the outstanding Common Stock payable in shares
of its capital stock, (ii) subdivide the outstanding Common Stock, (iii)
combine the outstanding Common Stock into a smaller number of shares, or (iv)
issue any shares of its capital stock by reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then, in each case,
the Exercise Price in effect, and the number of shares of Common Stock issuable
upon exercise of the Warrants outstanding, at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification, shall be proportionately adjusted so that the holders of the
Warrants after such time shall be entitled to receive the aggregate number and
kind of shares which, if such Warrants had been exercised immediately prior to
such time, such holders would have owned upon such exercise and been entitled
to receive by virtue of such dividend,
4
<PAGE> 8
subdivision, combination or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) In case the Company shall distribute to all holders
of Common Stock (including any such distribution made to the shareholders of
the Company in connection with a consolidation or merger in which the Company
is the continuing corporation) evidences of its indebtedness, cash or assets
(other than distributions and dividends payable in shares of Common Stock), or
rights, options or warrants to subscribe for or purchase Common Stock, or
securities convertible into or exchangeable for shares of Common Stock, then,
in each case, the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to the record date for the determination of
shareholders entitled to receive such distribution by a fraction, the numerator
of which shall be the Current Market Price (as determined pursuant to Section
4.2 hereof) per share of Common Stock on such record date, less the fair market
value (as determined in good faith by the board of directors of the Company,
whose determination shall be conclusive absent manifest error) of the portion
of the evidences of indebtedness or assets so to be distributed, or of such
rights, options, or warrants or convertible or exchangeable securities, or the
amount of such cash, applicable to one share, and the denominator of which
shall be such Current Market Price per share of Common Stock. Such adjustment
shall become effective at the close of business on such record date.
4.2 Current Market Price. For the purpose of any computation
under Section 3.1 and this Article IV, the Current Market Price per share of
Common Stock on any date shall be deemed to be the average of the daily closing
prices for the 20 consecutive trading days immediately preceding the date in
question. For the purpose of any computation hereunder or under Section 3.1,
the closing price for each day shall be the last reported sales price regular
way or, in case no such reported sale takes place on such day, the closing bid
price regular way, in either case on the principal national securities exchange
(including, for purposes hereof, the NASDAQ National Market System) on which
the Common Stock is listed or admitted to trading or, if the Common Stock is
not listed or admitted to trading on any national securities exchange, the
highest reported bid price for the Common Stock as furnished by the NASD
through NASDAQ or a similar organization if NASDAQ is no longer reporting such
information. If on any such date the Common Stock is not listed or admitted to
trading on any national securities exchange and is not quoted by NASDAQ or any
similar organization, the fair value of a share of Common Stock on such date as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error, shall be used.
4.3 No Adjustments to Exercise Price. No adjustment in the
Exercise Price shall be required if such adjustment is less than $.05;
provided, however, that any adjustments which by reason of this Article IV are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Article IV shall be made to
the nearest cent or to the nearest one hundredth of a share, as the case may
be.
4.4 Deferral of Adjustments to Exercise Price. In any case in
which this Article IV shall require that an adjustment in the Exercise Price be
made effective as of a record date for a specified event, the Company may elect
to defer, until the occurrence of such event, issuing to the holders of the
Warrants, if any holder has exercised a Warrant after such record date, the
shares of Common Stock, if any, issuable upon such exercise over and above the
shares of
5
<PAGE> 9
Common Stock, if any, issuable upon such exercise on the basis of the Exercise
price in effect prior to such adjustment; provided, however, that the Company
shall deliver to such exercising holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
upon the occurrence of the event requiring such adjustment.
4.5 Adjustment to Number of Shares. Upon each adjustment of the
Exercise Price as a result of the calculations made in Section 4.1(b) hereof,
the Warrants shall thereafter evidence the right to purchase, at the adjusted
Exercise Price, that number of shares (calculated to the nearest hundredth)
obtained by dividing (A) the product obtained by multiplying the number of
shares purchasable upon exercise of the Warrants prior to adjustment of the
number of shares by the Exercise Price in effect prior to adjustment of the
Exercise Price by (B) the Exercise Price in effect after such adjustment of the
Exercise Price.
4.6 Reorganizations. In case of any capital reorganization, other
than in the cases referred to in Section 4.1 hereof, or the consolidation or
merger of the Company with or into another corporation (other than a merger or
consolidation in which the Company is the continuing corporation and which does
not result in any reclassification of the outstanding shares of Common Stock or
the conversion of such outstanding shares of Common Stock into shares of other
stock or other securities or property), or in the case of any sale, lease or
conveyance to another corporation of the property and assets of any nature of
the Company as an entirety or substantially as an entirety (such actions being
hereinafter collectively referred to as "Reorganizations"), there shall
thereafter be deliverable upon exercise of any Warrant (in lieu of the number
of shares of Common Stock theretofore deliverable) the number of shares of
stock or other securities or property to which a holder of the number of shares
of Common Stock which would otherwise have been deliverable upon the exercise
of such Warrant would have been entitled upon such Reorganization if such
Warrant had been exercised in full immediately prior to such Reorganization.
In case of any Reorganization, appropriate adjustment, as determined in good
faith by the Board of Directors of the Company, shall be made in the
application of the provisions herein set forth with respect to the rights and
interests of Warrant holders so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any shares or
other property thereafter deliverable upon exercise of Warrants. Any such
adjustment shall be made by and set forth in a supplemental agreement between
the Company, or any successor thereto, and the Warrant Agent and shall for all
purposes hereof conclusively be deemed to be an appropriate adjustment. The
Company shall not effect any such Reorganization unless upon or prior to the
consummation thereof the successor corporation, or if the Company shall be the
surviving corporation in any such Reorganization and is not the issuer of the
shares of stock or other securities or property to be delivered to holders of
shares of the Common Stock outstanding at the effective time thereof, then such
issuer, shall assume by written instrument the obligation to deliver to the
registered holder of any Warrant Certificate such shares of stock, securities,
cash or other property as such holder shall be entitled to purchase in
accordance with the foregoing provisions. In the event of sale, lease or
conveyance or other transfer of all or substantially all of the assets of the
Company as part of a plan for liquidation of the Company, all rights to
exercise any Warrant shall terminate 30 days after the Company gives written
notice to each registered holder of a Warrant Certificate that such sale or
conveyance or other transfer has been consummated.
6
<PAGE> 10
4.7 Reclassifications. In case of any reclassification or change
of the shares of Common Stock issuable upon exercise of the Warrants (other
than a change in par value or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), or in case of any
consolidation or merger of another corporation into the Company in which the
Company is the continuing corporation and in which there is a reclassification
or change (including a change to the right to receive cash or other property)
of the shares of Common Stock (other than a change in par value, or from no par
value to a specified par value, or as a result of a subdivision or combination,
but including any change in the shares into two or more classes or series of
shares), the holders of the Warrants shall have the right thereafter to receive
upon exercise of the Warrants solely the kind and amount of shares of stock and
other securities, property, cash, or any combination thereof receivable upon
such reclassification, change, consolidation or merger by a holder of the
number of shares of Common Stock for which the Warrants might have been
exercised immediately prior to such reclassification, change, consolidation or
merger. Thereafter, appropriate provision shall be made for adjustments which
shall be as nearly equivalent as practicable to the adjustments in Article IV.
The above provisions of this Section 4.7 shall similarly apply to successive
reclassifications and changes of shares of Common Stock.
4.8 Adjustment of Call Trigger Price. Upon each adjustment of the
Exercise Price of the Warrants pursuant to Article IV hereof, the Call Trigger
Price shall be adjusted by multiplying such price as in effect prior to such
adjustment by a fraction, the numerator of which shall be the Exercise Price
subsequent to adjustment and the denominator of which shall be the Exercise
Price prior to such adjustment. All calculations under this Section 4.8 shall
be made to the nearest cent.
4.9 Verification of Computations. Whenever the exercise price is
adjusted as provided in this Article IV, the Company will promptly obtain a
certificate of its Chief Financial Officer setting forth the exercise price as
so adjusted and a brief statement of the facts accounting for such adjustment,
and will make available a brief summary thereof to the holders of the Warrant
Certificates, at their addresses listed on the register maintained for that
purpose by the Warrant Agent (which summary may be included in any notice of
adjustment required by Section 4.12 hereof).
4.10 Notice of Certain Actions. In case at any time the Company
shall propose:
(a) to pay any dividend or make any distribution on
shares of Common Stock in shares of Common Stock or make any other
distribution (other than regularly scheduled cash dividends which are
not in a greater amount per share than the most recent such cash
dividend) to all holders of Common Stock; or
(b) to issue any rights, warrants or other securities to
all holders of Common Stock entitling them to purchase any additional
shares of Common Stock or any other rights, warrants or other
securities; or
7
<PAGE> 11
(c) to effect any consolidation, merger, sale, lease, or
conveyance of property, described in Section 4.6, or any
reclassification or change of outstanding shares of Common Stock,
described in Section 4.7; or
(d) to effect any liquidation, dissolution or winding-up
of the Company; or
(e) to take any other action which would cause an
adjustment to the Exercise Price;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to the Warrant Agent. Such notice shall specify the date on which
the books of the Company shall close, or a record shall be taken, for
determining holders of Common Stock entitled to receive such stock dividend or
other distribution or such rights or warrants, or the date on which such
reclassification, change, consolidation, merger, sale, lease, other
disposition, liquidation, dissolution, winding up or exchange or other action
shall take place or commence, as the case may be, and the date as of which it
is expected that holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action, if any such date has
been fixed. The Company shall cause copies of such notice to be mailed to each
registered holder of a Warrant Certificate. Such notice shall be mailed, in
the case of any action covered by Subsection 4.10(a) or 4.10(b) above, at least
15 days prior to the record date for determining holders of the Common Stock
for purposes of receiving such payment or offer; in the case of any action
covered by Subsection 4.10(c) or 4.10(d) above, at least 15 days prior to the
earlier of the date upon which such action is to take place or any record date
to determine holders of Common Stock entitled to receive such securities or
other property; and in the case of any action covered by Subsection 4.10(e)
above, no more than 15 days after such action.
4.11 Notice of Call. Notice of any call for redemption shall be
given to the Warrant Agent by the Company upon not less than 30 days nor more
than 60 days prior to the date established for such call (the "Call Date") and
the Company shall cause the Warrant Agent to mail such notice to all registered
holders of Warrant Certificates to be called promptly after the Company shall
have given such notice to the Warrant Agent. Each such notice of call will
specify the Call Date and the Call Price. The notice will state that payment
of the Call Price will be made by the Warrant Agent upon presentation and
surrender of the Warrant Certificates representing such Warrants to the Warrant
Agent at its Principal Office, and will also state that the right to exercise
the Warrants will terminate at 5:00 P.M., New York City time, on the business
day immediately preceding the Call Date. The Company will also make prompt
public announcement of such redemption by news release and by notice to the
NASD or any national securities exchange on which the Warrants are listed for
trading.
4.12 Notice of Adjustments. Whenever any adjustment is made
pursuant to this Article IV, the Company shall cause written notice of such
adjustment to be sent by registered mail, postage prepaid to the Warrant Agent
within 15 days thereafter, such notice to include in reasonable detail (i) the
events precipitating the adjustment, (ii) the computation of any adjustments,
and (iii) the Exercise Price, the number of shares or the securities or other
property purchasable upon exercise of each Warrant and the Call Trigger Price
after giving effect to such adjustment. The Company shall cause the Warrant
Agent, within 15 days after receipt for such
8
<PAGE> 12
notice from the Company, to mail a similar notice to be mailed to each
registered holder of a Warrant Certificate.
4.13 Warrant Certificate Amendment. Irrespective of any
adjustments pursuant to this Article IV, Warrant Certificates theretofore or
thereafter issued need not be amended or replaced but certificates thereafter
issued shall bear an appropriate legend or other notice of any adjustments.
4.14 Fractional Shares. The Company shall not be required upon the
exercise of any Warrant to issue fractional shares of Common Stock which may
result from such exercise. If more than one Warrant is exercised at one time
by the same registered holder, the number of full shares of Common Stock which
shall be deliverable shall be computed based on the number of shares
deliverable in exchange for the aggregate number of Warrants exercised. With
respect to any final fraction of a share called for upon the exercise of any
Warrant or Warrants, the Company may pay a cash adjustment in respect of such
final fraction in an amount equal to the same fraction of the Current Market
Price of a share of Common Stock calculated in accordance with Section 4.2.
ARTICLE V
OTHER PROVISIONS RELATING TO RIGHTS OF
REGISTERED HOLDERS OF WARRANT CERTIFICATES
5.1 Rights of Warrant Holders. No Warrant Certificate shall
entitle the registered holder thereof to any of the rights of a shareholder of
the Company, including, without limitation, the right to vote, to receive
dividends and other distributions, or to receive any notice of, or to attend,
meetings of shareholders or any other proceedings of the Company.
5.2 Lost, Stolen, Mutilated or Destroyed Warrant Certificates. If
any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company shall direct the Warrant Agent to execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Warrant Certificate, or
in lieu of or in substitution for a lost, stolen or destroyed Warrant
Certificate, a new Warrant Certificate for the number of Warrants represented
by the Warrant Certificate so mutilated, lost, stolen or destroyed but only
upon receipt of evidence of such loss, theft or destruction of such Warrant
Certificate, and of the ownership thereof, and indemnity, if requested, all
satisfactory to the Company and the Warrant Agent. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges incidental thereto as the
Company or Warrant Agent may prescribe. Any such new Warrant Certificate shall
constitute an original contractual obligation of the Company, whether or not
the allegedly lost, stolen, mutilated or destroyed Warrant Certificate shall be
at any time enforceable by anyone.
9
<PAGE> 13
ARTICLE VI
SPLIT UP, COMBINATION, EXCHANGE, TRANSFER
AND CANCELLATION OF WARRANT CERTIFICATES
6.1 Split Up, Combination, Exchange and Transfer of Warrant
Certificates. Prior to the Exercise Deadline, Warrant Certificates, subject to
the provisions of Section 6.2, may be split up, combined or exchanged for other
Warrant Certificates representing a like aggregate number of Warrants or may be
transferred in whole or in part. Any holder desiring to split up, combine or
exchange a Warrant Certificate or Warrant Certificates shall make such request
in writing delivered to the Warrant Agent at its Principal Office and shall
surrender the Warrant Certificate or Warrant Certificates so to be split up,
combined or exchanged at said office. Subject to any applicable laws, rules or
regulations restricting transferability, any restriction on transferability
that may appear on a Warrant Certificate in accordance with the terms hereof,
or any "stop-transfer" instructions the Company may give to the Warrant Agent
to implement any such restrictions (which instructions the Company is expressly
authorized to give), transfer of outstanding Warrant Certificates may be
effected by the Warrant Agent from time to time upon the books of the Company
to be maintained by the Warrant Agent for that purpose, upon a surrender of the
Warrant Certificate to the Warrant Agent at its Principal Office, with the
assignment form set forth in the Warrant Certificate duly executed and with
Signatures Guaranteed. Upon any such surrender for split up, combination,
exchange or transfer, the Warrant Agent shall execute and deliver to the person
entitled thereto a Warrant Certificate or Warrant Certificates, as the case may
be, as so requested. The Warrant Agent may require the holder to pay a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any split up, combination, exchange or transfer of Warrant
Certificates prior to the issuance of any new Warrant Certificate.
6.2 Cancellation of Warrant Certificates. Any Warrant Certificate
surrendered upon the exercise of Warrants or for split up, combination,
exchange or transfer, or purchased or otherwise acquired by the Company, shall
be cancelled and shall not be reissued by the Company; and, except as provided
(i) in Section 2.5, in case of the exercise of less than all of the Warrants
evidenced by a Warrant Certificate, or (ii) in Section 6.1, in case of a split
up, combination, exchange or transfer of the Warrants evidenced by a Warrant
Certificate, no Warrant Certificate shall be issued hereunder in lieu of such
cancelled Warrant Certificate. Any Warrant Certificate so cancelled shall be
destroyed by the Warrant Agent unless otherwise directed by the Company.
6.3 Agreement of Warrant Certificate Holders. Every holder of a
Warrant Certificate by accepting the same consents and agrees with the Company
and the Warrant Agent and with every other holder of a Warrant Certificate
that:
(a) transfer of the Warrant Certificates shall be
registered on the books of the Company maintained for that purpose by the
Warrant Agent only if surrendered at the Principal Office of the Warrant Agent,
duly endorsed or accompanied by a proper instrument of transfer, with
Signatures Guaranteed; and
10
<PAGE> 14
(b) prior to due presentment for registration of
transfer, the Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the absolute owner thereof
and of the Warrants evidenced thereby (notwithstanding any notations of
ownership or writing on the Warrant Certificates made by anyone other than the
Company or the Warrant Agent) for all purposes whatsoever, and neither the
Company nor the Warrant Agent shall be affected by any notice to the contrary.
ARTICLE VII
PROVISIONS CONCERNING THE WARRANT AGENT
AND OTHER MATTERS
7.1 Payment of Taxes and Charges. The Company will from time to
time promptly pay to the Warrant Agent, or make provisions satisfactory to the
Warrant Agent for the payment of, all taxes and charges that may be imposed by
the United States or any state upon the Company or the Warrant Agent in
connection with the issuance or delivery of shares of Common Stock upon the
exercise of any Warrants, but any transfer taxes in connection with the
issuance of Warrant Certificates or certificates for shares of Common Stock in
any name other than that of the registered holder of the Warrant Certificate
surrendered shall be paid by such registered holder; and, in such case, the
Company shall not be required to issue or deliver any Warrant Certificate or
certificate for shares of Common Stock until such taxes shall have been paid or
it has been established to the Company's satisfaction that no tax is due.
7.2 Resignation or Removal of Warrant Agent. The Warrant Agent
may resign its duties and be discharged from all further duties and liabilities
hereunder after giving 30 days' notice in writing to the Company, except that
such shorter notice may be given as the Company shall, in writing, accept as
sufficient. Upon comparable notice to the Warrant Agent, the Company may
remove the Warrant Agent; provided, however, that in such event the Company
shall appoint a new Warrant Agent, as hereinafter provided, and the removal of
the Warrant Agent shall not be effective until a new Warrant Agent has been
appointed and has accepted such appointment. If the office of Warrant Agent
becomes vacant by resignation or incapacity to act or otherwise, the Company
shall appoint in writing a new Warrant Agent. If the Company shall fail to
make such appointment within a period of 30 days after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Warrant Agent or by the registered holder of any Warrant Certificate, then the
registered holder of any Warrant Certificate may apply to any court of
competent jurisdiction for the appointment of a new Warrant Agent. Any
successor Warrant Agent, whether appointed by the Company or any such court,
shall be a registered transfer agent, bank or trust company in good standing
and incorporated under the United States banking laws or under the laws of any
State within the United States, having its principal office within the United
States. Any new Warrant Agent appointed hereunder shall execute, acknowledge
and deliver to the former Warrant Agent last in office and to the Company, an
instrument accepting such appointment under substantially the same terms and
conditions as are contained herein and thereupon such new Warrant Agent,
without any further act or deed, shall become vested with the rights, powers,
duties and responsibilities of the Warrant Agent and the former Warrant Agent
shall cease to be the Warrant Agent; but if for any reason it becomes necessary
or expedient to have the former Warrant Agent execute and deliver any further
11
<PAGE> 15
assurance, conveyance, act or deed, the same shall be done at the expense of
the Company and shall be legally and validly executed and delivered by the
former Warrant Agent.
7.3 Notice of Appointment. Not later than the effective date of
the appointment of a new Warrant Agent, the Company shall cause notice thereof
to be mailed to the former Warrant Agent and the transfer agent, if any, for
the Common Stock and shall forthwith cause a copy of such notice to be mailed
to each registered holder of a Warrant Certificate. Failure to mail such
notice, or any defect contained therein, shall not affect the legality or
validity of the appointment of the successor Warrant Agent.
7.4 Merger of Warrant Agent. Any company into which the Warrant
Agent may be merged or with which it may be consolidated, or any company
resulting from any merger or consolidation to which the Warrant Agent shall be
a party, shall be the successor Warrant Agent under this Agreement without
further act, provided that such company would be eligible for appointment as a
successor Warrant Agent under the provisions of Section 7.2 hereof. Any such
successor Warrant Agent may adopt the prior countersignature of any predecessor
Warrant Agent and distribute Warrant Certificates countersigned but not
distributed by such predecessor Warrant Agent, or may countersign the Warrant
Certificates in its own name.
7.5 Company Responsibilities. The Company agrees that it shall
(i) pay the Warrant Agent reasonable remuneration for its services as Warrant
Agent hereunder and will reimburse the Warrant Agent upon demand for all
expenses, advances and expenditures that the Warrant Agent may reasonably incur
in the execution of its duties hereunder (including fees and expenses of its
counsel); (ii) provide the Warrant Agent, upon request, with sufficient funds
to pay any cash due pursuant to Section 4.14 upon exercise of Warrants; and
(iii) perform, execute, acknowledge and deliver or cause to be performed,
executed, acknowledged and delivered all further and other acts, instruments
and assurances as may reasonably be required by the Warrant Agent for the
carrying out or performing by the Warrant Agent of the provisions of this
Agreement.
7.6 Certification for the Benefit of Warrant Agent. Whenever in
the performance of its duties under this Agreement the Warrant Agent shall deem
it necessary or desirable that any matter be proved or established or that any
instructions with respect to the performance of its duties hereunder be given
by the Company prior to taking or suffering any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed)
may be deemed to be conclusively proved and established, or such instructions
may be given, by a certificate or instrument signed by the Chairman, the Chief
Executive Officer, the President, a Vice President, the Secretary or the
Treasurer of the Company and delivered to the Warrant Agent. Such certificate
or instrument may be relied upon by the Warrant Agent for any action taken or
suffered in good faith by it under the provisions of this Agreement; but in its
discretion the Warrant Agent may in lieu thereof accept other evidence of such
matter or a may require such further or additional evidence as it may deem
reasonable.
7.7 Books and Records. The Warrant Agent shall maintain the
Company's books and records for registration and registration of transfer of
the Warrant Certificates issued hereunder. Such books and records shall show
the names and addresses of the respective holders of the
12
<PAGE> 16
Warrant Certificates, the number of Warrants evidenced on its face by each
Warrant Certificate and the date of each Warrant Certificate.
7.8 Liability of Warrant Agent. The Warrant Agent shall be liable
hereunder for its own negligence or willful misconduct. The Warrant Agent
shall act hereunder solely as an agent for the Company and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not be
liable for or by reason of any of the statements of fact or recitals contained
in this Agreement or in the Warrant Certificates (except its counter-signature
thereof) or be required to verify the same, but all such statements and
recitals are and shall be deemed to have been made by the Company only. The
Warrant Agent will not incur any liability or responsibility to the Company or
to any holder of any Warrant Certificate for any action taken, or any failure
to take action, in reliance on any notice, resolution, waiver, consent, order,
certificate or other paper, document or instrument reasonably believed by the
Warrant Agent to be genuine and to have been signed, sent or presented by the
proper party or parties. The Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution
and delivery hereof by the Company or in respect of the validity or execution
of any Warrant Certificate (except its counter-signature thereof); nor shall it
be responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Warrant Certificate; nor shall it be
responsible for the making of any adjustment required under the provisions of
Article IV hereof or responsible for the manner, method or amount of any such
adjustment or the facts that would require any such adjustment; nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock or other securities
to be issued pursuant to this Agreement or any Warrant Certificate or as to
whether any shares of Common Stock or other securities will, when issued, be
validly authorized and issued and fully paid and nonassessable.
7.9 Use of Attorneys, Agents and Employees. The Warrant Agent may
execute and exercise any of the rights or powers hereby vested in it or perform
any duty hereunder either itself or by or through its attorneys, agents or
employees.
7.10 Indemnification. The Company agrees to indemnify the Warrant
Agent and save it harmless against any and all losses, expenses or liabilities,
including judgements, costs and counsel fees arising out of or in connection
with its agency under this Agreement, except as a result of the negligence or
willful misconduct of the Warrant Agent.
7.11 Acceptance of Agency. The Warrant Agent hereby accepts the
agency established by this Agreement and agrees to perform the same upon the
terms and conditions herein set forth.
7.12 Changes to Agreement. The Warrant Agent may, without the
consent or concurrence of any registered holder of a Warrant Certificate, by
supplemental agreement or otherwise, join with the Company in making any
changes or corrections in this Agreement that they shall have been advised by
counsel (i) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, (ii) add to the covenants and agreements of the Company or the
Warrant Agent in this Agreement such further covenants and agreements
thereafter to be observed, or (iii) result in the surrender or modification of
any right or power reserved to or conferred upon the Company or
13
<PAGE> 17
the Warrant Agent in this Agreement, including, without limitation, the
reduction of the Exercise Price (except for purposes of Article III hereof),
but which changes or corrections do not or will not adversely affect, alter or
change the rights, privileges or immunities of the registered holders of
Warrant Certificates.
7.13 Assignment. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns.
7.14 Successor to Company. The Company will not merger or
consolidate with or into any other corporation or sell or otherwise transfer
its property, assets and business substantially as an entirety to a successor
corporation, unless the corporation resulting from such merger, consolidation,
sale or transfer (if not the Company) shall expressly assume, by supplemental
agreement satisfactory in form and substance to the Warrant Agent and delivered
to the Warrant Agent, the due and punctual performance and observance of each
and every covenant and condition of this Agreement to be performed and observed
by the Company.
7.15 Notices. Any notice or demand required by this Agreement to
be given or made by the Warrant Agent or by the registered holder of any
Warrant Certificate to or on the Company shall be sufficiently given or made if
sent by first-class or registered mail, postage prepaid, addressed (until
another address is filed in writing with the Warrant Agent by the Company) as
follows:
Epoch Pharmaceuticals, Inc.
1725 220th Street, S.E., No. 104
Bothell, Washington 98021
Attention: Chief Financial Officer
Any notice or demand required by this Agreement to be given or made by the
registered holder of any Warrant Certificate or by the Company to or on the
Warrant Agent shall be sufficiently given or made if sent by first-class or
registered mail, postage prepaid, addressed (until another address is filed in
writing with the Company by the Warrant Agent), as follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: George Karfunkel
Any notice or demand required by this Agreement to be given or made by the
Company or the Warrant Agent to or on the registered holder of any Warrant
Certificate shall be sufficiently given or made, whether or not such holder
receives the notice, if sent by first-class or registered mail, postage
prepaid, addressed to such registered holder at his last address as shown on
the books of the Company maintained by the Warrant Agent. Otherwise such
notice or demand shall be deemed given when received by the party entitled
thereto.
14
<PAGE> 18
7.16 Defects in Notice. Failure to file any certificate or notice
or to mail any notice, or any defect in any certificate or notice pursuant to
this Agreement, shall not affect in any way the rights of any registered holder
of a Warrant Certificate or the legality or validity of any adjustment made
pursuant to Article IV hereof, or any transaction giving rise to any such
adjustment, or the legality or validity of any action taken or to be taken by
the Company.
7.17 Governing Law. The laws of the State of New York shall govern
this Warrant Agreement and the Warrant Certificates.
7.18 Standing. Nothing in this Agreement expressed and nothing
that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company, the Warrant Agent, and the registered holders of the Warrant
Certificates any right, remedy or claim under or by reason of this Agreement or
of any covenant, condition, stipulation, promise or agreement contained herein;
and all covenants, conditions, stipulations, promises and agreements contained
in this Agreement shall be for the sole and exclusive benefit of the Company
and the Warrant Agent and their respective successors and assigns, and the
registered holders of the Warrant Certificates.
7.19 Headings. The descriptive headings of the articles and
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
7.20 Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts shall together constitute but one and the same instrument.
7.21 Conflict of Interest. The Warrant Agent and any shareholder,
director, officer or employee of the Warrant Agent may buy, sell or deal in any
of the Warrant Certificates or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though the Warrant Agent were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company, including, without limitation, as trustee under
any indenture or as transfer agent for the Common Stock or any other securities
of the Company, or for any other legal entity.
7.22 Availability of the Agreement. The Warrant Agent shall keep
copies of this Agreement available for inspection by holders of Warrants during
normal business hours at its Principal Office. Copies of this Agreement may be
obtained upon written request addressed to:
Epoch Pharmaceuticals, Inc.
1725 220th Street, S.E., No. 104
Bothell, Washington 98021
Attention: Chief Financial Officer
15
<PAGE> 19
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
EPOCH PHARMACEUTICALS, INC.
By: /s/ SANFORD ZWEIFACH
------------------------------
Name: Sanford Zweifach
Title: President and Chief
Financial Officer
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: /s/ HERBERT J. LEMMER
-----------------------------
Name: Herber J. Lemmer
Title: Vice President
16
<PAGE> 20
WCC-____ WARRANT CERTIFICATE
CERTIFICATE FOR WARRANTS
NOT EXERCISABLE AFTER 5:00 P.M., NEW YORK CITY TIME,
ON JUNE 20, 2001
EPOCH PHARMACEUTICALS, INC.
CLASS C REDEEMABLE COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES that
or registered assigns is the registered holder (the "Registered Holder") of the
number of Warrants set forth above, each of which represents the right to
purchase one-half (1/2) fully paid and nonassessable share of Common Stock, par
value $.01 per share (the "Common Stock") of Epoch Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), at the initial exercise price ("Exercise
Price") of $1.25 per one-half share at any time,but not after the Expiration
Date hereinafter referred to, by surrendering this Warrant Certificate, with
the form of election to purchase set forth hereon duly executed at the office
maintained pursuant to the Warrant Agreement hereinafter referred to for that
purpose by American Stock Transfer & Trust Company, or its successor as warrant
agent (any such warrant agent being herein called the "Warrant Agent"), and by
paying in full the Exercise Price, plus transfer taxes, if any. Payment of the
Exercise Price shall be made in United States currency, by certified check or
money order payable to the Warrant Agent for the account of the Company.
The Warrants are subject to call for redemption by the Company upon
not less than 30 days' nor more than 60 days' notice at a call price of $0.05
per warrant (the "Call Price"), at any time after 9:30 A.M, New York City time,
on December 20, 1997, provided that closing sale price of the Common Stock, as
determined pursuant to Section 4.2 of the Warrant Agreement, dated as of June
21, 1996, between the Company and the Warrant Agent (the "Warrant Agreement"),
shall have been at least 150% of the then effective exercise price of the
Warrants, as adjusted pursuant to Section 4.8 of the Warrant Agreement (the
"Call Trigger Price"), for a period of 20 consecutive business days ending
within 15 days of the date that the notice of such call (the "Call Notice") is
given by the Company to the Warrant Agent pursuant to Section 4.11 of the
Warrant Agreement, and provided further that the Company has complied and
continues to be in compliance with the provisions of Section 2.2 of the Warrant
Agreement.
<PAGE> 21
No warrant may be executed after 5:00 P.M., New York City time, on the
expiration date (the "Expiration Date") which will be the earlier of June 20,
2001 or the business day preceding the call date specified in a Call Notice.
All warrants evidenced hereby shall thereafter become void.
Prior to the Expiration Date, subject to any applicable laws, rules or
regulations restrictions transferability and to any restriction on
transferability that may appear on this Warrant Certificate in accordance with
the terms of the Warrant Agreement, the Registered Holder shall be entitled to
transfer this Warrant Certificate, in whole or in part, upon surrender of this
Warrant Certificate at the office of the Warrant Agent maintained for that
purpose with the form of assignment set forth hereon duly executed, with
signatures guaranteed by a member firm of a national securities exchange, a
commercial bank or a trust company located in the United States or a member of
the National Association of Securities Dealers, Inc. or other eligible
guarantor institution which is a participant in a signature guarantee program
(as such terms are defined in Reg. 240.17Ad-15 under the Securities Exchange
Act of 1934, as amended), acceptable to the Warrant Agent. Upon any such
transfer, a new Warrant Certificate or Warrant Certificates representing the
same aggregate number of Warrants will be issued in accordance with
instructions in the form of assignment.
Upon the exercise of less than all of the Warrants evidence by this
Warrant Certificate, there shall be issued to the Registered Holder a new
Warrant Certificate in respect of the Warrants not exercised.
Prior to the Expiration Date, the Registered Holder shall be entitled
to exchange this Warrant Certificate with or without prior Warrant
Certificates, for another Warrant Certificate or Warrant Certificates of the
same aggregate number of Warrants upon surrender of this Warranter Certificate
at the office maintained for such purpose by the Warrant Agent.
Upon certain events provided for in the Warrant Agreement hereinafter
referred to the Exercise Price, the number of shares of Common Stock issuable
upon the exercise of each Warrant and the Call Trigger Price are required to be
adjusted.
No fractional shares will be issued upon the exercise of Warrants. As
to any final fraction of a share which the registered holder of one or more
Warrant Certificates, the rights under which are exercised in the same
transaction, would otherwise be entitled to purchase upon such exercise, the
Company shall pay the cash value thereof determined as provided in the Warrant
Agreement.
This Warrant Certificate is issued under and in accordance with the
Warrant Agreements and is subject to the terms and provisions contained in said
Warrant Agreement, to all of which terms and provisions the Registered Holder
consents by acceptance hereof.
This Warrant Certificate shall not entitle the Registered Holder to
any of the rights of a shareholder of the Company, including without
limitation, the rights to vote, to receive dividends and other distributions,
or to attend or receive any notice of meetings of shareholders or any other
proceedings of the Company.
2
<PAGE> 22
This Warrant Certificate shall not be valid for any purpose unless and
until it shall have been countersigned by the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its facsimile Corporate Seal.
Dated: June 21, 1996
EPOCH PHARMACEUTICALS, INC.
ATTEST:
By:
-------------------------------
Secretary
By:
-------------------------------
President
3
<PAGE> 23
ELECTION TO PURCHASE
The undersigned hereby irrevocably elects to exercise ____ of the
Warrants represented by this Warrant Certificate and to purchase the shares of
Common Stock issuable upon the exercise of said Warrants, and requests that
certificates for such shares be issued and delivered as follows:
ISSUE TO:
- -------------------------------------------------------------------------------
(NAME)
- -------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- -------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER TAX IDENTIFYING NUMBER)
DELIVER TO:
- -------------------------------------------------------------------------------
(NAME)
- -------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
If the number of Warrants hereby exercised is less than all the Warrants
represented by this Warrant Certificate, the undersigned requests that a new
Warrant Certificate representing the number of full Warrants not exercised be
issued and delivered as set forth below.
In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$_________ by certified check or money order payable to Warrant Agent for the
account of the Company in United States currency.
Dated:
- ------------------------------------ --------------------------------
(Insert Social Security or other (Signature of registered holder)
identifying number(s) of holder(s))
--------------------------------
(Signature of registered holder,
of co-owned)
NOTE: Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate
4
<PAGE> 24
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto the Assignee named below all of the rights of the undersigned represented
by the within Warrant Certificate, with respect to the number of warrants set
forth below:
Name of Assignee Address No. of Warrants
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
and does hereby irrevocably constitute and appoint ____________________________
_____________ to make such transfer on the books of Epoch Pharmaceuticals, Inc.
maintained for that purpose, with full power of substitution in the premises.
Dated:
- ------------------------------------ --------------------------------
(Insert Social Security or other (Signature of registered holder)
identifying number(s) of holder(s))
---------------------------------
(Signature of registered holder,
of co-owned)
NOTE: Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate
Signature(s) Guaranteed:
5
<PAGE> 1
EXHIBIT 10.65
March 29, 1996
EPOCH PHARMACEUTICALS, INC.
1725 220th Street, S.E., Suite 104
Bothell, Washington 98021
Gentlemen:
This letter will confirm the understanding and agreement that you have
retained me as a consultant to assist you for a period of one year from the
date hereof in connection with transactions including the structuring of, among
other things, equity placements, licensing agreements and research and
development collaborations as follows:
1. In consideration of my services, should I introduce the
Company to an opportunity that yields immediately available funds to the
Company, the following fee structure will apply:
(a) Seven percent (7%) of the gross proceeds received by
the Company in the transaction.
(b) Warrants to purchase shares of the Company's Common
Stock with an aggregate exercise price amount equal
to ten percent (10%) of the gross proceeds received
by the Company in the transaction, with a per share
exercise price of $1.00. Such Warrants will be held
in escrow by the Company until such time as the
balance of the Ribonetics Debt (as defined in
paragraph 1(c) below) is satisfied.
(c) In the event that at least $5,000,000 is received by
the Company by April 30, 1996, the Company will
cancel fifty percent (50%) of the obligations of
David Blech to the Company arising in connection with
the Ribonetics' transaction, including the "put"
rights contained in the agreement dated December 1,
1993, between David Blech and the Company (the
"Ribonetics Debt"). The parties acknowledge that the
amount of the Ribonetics Debt is $3,271,175, and is
now due and payable and is accruing interest at the
minimum applicable federal rate in effect under IRC
Section 1274 in effect on September 27, 1994.
For purposes of this Agreement, "Warrants" mean warrants to
purchase shares of Common Stock of the Company at a price of
$1.00 per share exercisable commencing one year after the
closing of a transaction under 1(a) above for a term of four
years after such closing. The Warrants would have customary
anti-dilution provisions and demand and piggyback
registration rights attached to the shares of Common Stock
issuable upon exercise thereof.
<PAGE> 2
Epoch Pharmaceuticals, Inc.
March 29, 1996
Page 2
The fee payable under this Section 1 shall be payable for only
one transaction during the term of this Agreement. Any fees payable for
additional transactions shall be separately negotiated by the parties prior to
any such transaction and shall only be effective pursuant to a written
agreement signed by both parties; provided, however, that the parties agree
that if fees are paid under this Section 1 for any transaction where the gross
proceeds to the Company are less than $5,000,000, then fees to be negotiated
for subsequent transactions during the term of the letter shall not be on terms
any more favorable than those set forth in Sections 1(a) and 1(b) until such
time, if any, as the aggregate gross proceeds to the Company from all such
transactions total at lease $5,000,000.
2. I also agree to meet and consult with and advise the Company
concerning opportunities which I identify and, if requested, participate in
negotiations together with the Company.
3. You have also agreed to pay my legal fees in the amount of up
to $17,500 at the closing of a transaction under Section 1 above. Cash
compensation and legal fees should be wired to the account listed on the
enclosed instructions and the Warrants will be held in an escrow account as
provided in Section 1(b).
4. The Company will have no obligation to pay any fee or other
amounts except as specifically set forth above.
5. Either party may terminate the engagement hereunder at any
time by giving the other party at least ten days' prior written notice. Upon
termination, I will return to the Company any materials of the Company then in
my possession.
Please confirm your agreement to these terms by executing the enclosed
copy of this letter where indicated below.
Sincerely.
/s/ DAVID BLECH
-----------------------
David Blech
ACCEPTED AND AGREED:
EPOCH PHARMACEUTICALS, INC.
By: /s/ SANFORD ZWEIFACH
------------------------------
Its: Chief Financial Officer
------------------------------
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