<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14 A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as Permitted
by Rule 14a-6(3)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Amarillo Biosciences, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
1
<PAGE> 2
AMARILLO BIOSCIENCES, INC.
800 WEST 9TH AVENUE
AMARILLO, TEXAS 79101
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1997
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Amarillo Biosciences, Inc. (the
"Company") will be held in the Centennial Room of Boatmen's First National
Bank, 8th and Taylor, Amarillo, Texas on the 13th day of May, 1997 at 8:30
A.M., local time, for the following purposes:
1. To elect eight Directors to serve until the next Annual Meeting and
until their respective successors are elected and qualify.
2. To consider and vote upon amendments to the Company's 1996 Employee
Stock Option Plan permitted as a result of amendments to Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended, and to increase by
50,000 the number of shares of Common Stock reserved for issuance thereunder.
3. To consider and vote upon amendments to the Company's Outside
Director and Advisor Stock Option Plan permitted as a result of amendments to
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended,
and to increase by 50,000 the number of shares of Common Stock reserved for
issuance thereunder.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record as of the close of business on March 27, 1997
are entitled to receive notice of and to vote at the meeting. A list of such
stockholders shall be open to the examination of any stockholder during
ordinary business hours, for a period of ten days prior to the meeting, at the
principal executive offices of the Company, 800 West 9th Avenue, Amarillo,
Texas.
BY ORDER OF THE BOARD OF DIRECTORS
EDWARD L. MORRIS
Secretary
Amarillo, Texas
April 16, 1997
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN, DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN
ENVELOPE.
<PAGE> 3
AMARILLO BIOSCIENCES, INC.
800 WEST 9TH AVENUE
AMARILLO, TEXAS 79101
----------------
PROXY STATEMENT
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of Amarillo Biosciences, Inc. a Texas corporation (the "Company"),
for use only at the Annual Meeting of Stockholders to be held in the Centennial
Room of Boatmen's First National Bank, 8th and Taylor, Amarillo, Texas on the
13th day of May, 1997, at 8:30 A.M., local time, and at any adjournments
thereof. The approximate date on which this Proxy Statement and the
accompanying Proxy were first given or sent to security holders was April 16,
1997.
Each Proxy executed and returned by a stockholder may be revoked at any
time thereafter, by written notice to that effect to the Company, attention of
the Secretary, prior to the Annual Meeting, or to the Chairman, or the
Inspectors of Election, at the Annual Meeting, or by the execution and return
of a later-dated proxy, except as to any matter voted upon prior to such
revocation.
The Proxies in the accompanying form will be voted in accordance with the
specifications made and where no specifications are given, such Proxies will be
voted FOR the nominees for election as directors named herein, and for
proposals two and three, regarding amendments to the Company's stock option
plans. In the discretion of the proxy holders, the Proxies will also be voted
FOR or AGAINST such other matters as may properly come before the meeting. The
management of the Company is not aware that any other matters are to be
presented for action at the meeting. The election of directors will be
determined by a plurality of the votes of the shares of common stock, par value
$.01 per share (the "Common Stock"), present in person or represented by proxy
at the Annual Meeting and entitled to vote on the election of directors.
Accordingly, in the case of shares that are present or represented at the
Meeting for quorum purposes, not voting such shares for a particular nominee
for director, including by withholding authority on the Proxy, will not operate
to prevent the election of such nominee if he or she otherwise receives a
plurality of the votes.
VOTING SECURITIES
The Board of Directors has fixed the close of business on March 27, 1997 as
the record date for the determination of stockholders entitled to receive
notice of and to vote at the Annual Meeting. The issued and outstanding stock
of the Company on March 27, 1997 consisted of 5,414,232 shares of Common Stock,
each entitled to one vote. A quorum of the stockholders is constituted by the
presence, in person or by proxy, of holders of record of Common Stock,
representing a majority of the number of votes entitled to be cast.
PRINCIPAL STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned as of March 1, 1997, by each person who is known by the
Company to own beneficially more than 5% of the Company's outstanding Common
Stock.
<TABLE>
<CAPTION>
Percentage of
Name and Address Number of Shares -------------
of Beneficial Owner Beneficially Owned Class (1)
------------------- ------------------ ---------
<S> <C> <C>
Hayashibara Biochemical Laboratories, Inc. . . . . . . . . . . . 1,232,856 22.8%
Dr. Joseph M. Cummins . . . . . . . . . . . . . . . . . . . . . . 681,084 (1) 12.6%
Mesa, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 315,120 5.8%
Mochida Pharmaceutical Co., Ltd. . . . . . . . . . . . . . . . . 300,000 5.5%
</TABLE>
- ----------------
(1) Includes an aggregate of 343,918 shares of Common Stock held by Joseph
Cummins as trustee under certain trusts for the benefit of his children and
9,590 shares owned by Dr. Cummins' wife.
1
<PAGE> 4
SECURITY OWNERSHIP OF DIRECTORS AND NAMED EXECUTIVE OFFICERS
The following table sets forth, as of March 1, 1997, beneficial ownership
of shares of Common Stock of the Company by each director, each of certain
executive officers and all directors and executive officers as a group.
<TABLE>
<CAPTION>
Total Number of Percentage of
Shares Beneficially Common Stock
Name Owned Owned
---- -------------------- ----------------
<S> <C> <C>
Joseph Cummins . . . . . . . . . . . . . . . . . . . . . . . . . 681,084 (1) 12.6%
Dennis Moore . . . . . . . . . . . . . . . . . . . . . . . . . . 149,616 2.8%
James Cook . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,600 (2) 1.2%
Katsuaki Hayashibara . . . . . . . . . . . . . . . . . . . . . . 48,240 1.0%
Stephen Chen . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 *
Brian McLean . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
James Page . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Total Group (all directors and executive
officers - 9 persons) . . . . . . . . . . . . . . . . . . . 1,058,104 (3) 19.5%
</TABLE>
- ----------------
* Less than 1%
(1) Includes an aggregate of 343,918 shares of Common Stock held by Joseph
Cummins as trustee under certain trusts for the benefit of his children and
9,590 shares owned by Dr. Cummins' wife.
(2) All of such shares are owned jointly with Mr. Cook's wife.
(3) Includes an aggregate of 22,344 shares of Common Stock held by one officer
as trustee of a trust, an aggregate of 28,000 shares of Common Stock held
by such officer as the executor of an estate, an aggregate of 960 shares of
Common Stock held by such officer as the trustee of a profit sharing plan
and an aggregate of 7,616 of Common Stock owned by a law firm of which such
officer is a member.
PROPOSAL ONE
ELECTION OF DIRECTORS
Eight directors will be elected at the meeting to hold office until the
next Annual Meeting of Stockholders and until their respective successors are
elected and qualify. The By-Laws of the Company permit the Board of Directors
to fix the number of directors at no less than one nor more than thirty persons
and the Board of Directors has fixed the number of directors at eight persons.
The Proxies solicited by this proxy statement may not be voted for a greater
number of persons than the number of nominees named. It is intended that these
Proxies will be voted for the following nominees, but the holders of these
Proxies reserve discretion to cast votes for individuals other than the
nominees for director named below in the event of the unavailability of any
such nominee. The Company has no reason to believe that any of the nominees
will become unavailable for election. Set forth below are the names of the
nominees, the principal occupation of each, the year in which first elected a
director of the Company and certain other information concerning each of the
nominees.
The name of, and certain information with respect to, all directors,
executive officers and all persons nominated or chosen to become a director are
as follows (all of the following except Messrs. Hughes, Richards and Morris
have been nominated to serve as directors):
2
<PAGE> 5
<TABLE>
<CAPTION>
Director
Name and Age Since Principal Occupation for the Past Five Years
- ----------------------------------------- -------- ----------------------------------------------------
<S> <C> <C>
Joseph Cummins, DVM, PhD, 54 . . . . . . 1984 Chairman of the Board of the Company since June
1984. Served as President of the Company since
December 1994 and from June 1984 to September 1992.
Received a PhD degree in microbiology from the
University of Missouri in 1978 and a doctor of
veterinary medicine degree from Ohio State
University in 1966.
Tom D'Alonzo, 53 . . . . . . . . . . . . 1997 Joined Pharmaceutical Product Development, Inc. as
President and Chief Operating Officer and member of
the Board of Directors in October 1996. Previously
served as President and Chief Executive Officer of
Genvec, Inc.; a gene therapy biotech company from
1993 to 1996. Held various management positions
including President with Glaxo, Inc. from 1983 to
1993. Serves on the Board of Directors of Goodmark,
Inc., a publicly traded company listed on NASDAQ.
Charles Hughes, 57 . . . . . . . . . . . -- Executive Vice President, Chief Financial Officer
and Treasurer since September 1996 and was Vice
President - Finance and Administration, Chief
Financial Officer and Treasurer of the Company since
April 1993. From August 1991 to March 1993, Vice
President of First National Bank of Amarillo.
Certified Public Accountant, received a MBA degree
from West Texas State University in 1977.
Alan Richards, PhD, 45 . . . . . . . . . -- Served the Company in various capacities since June
1990, most recently as Director of Clinical and
Regulatory Affairs. From 1986 to 1990, member of
the faculty of Campbell University teaching
microbiology, immunology, genetics and
biotechnology. Received a PhD degree in veterinary
microbiology and immunology from Texas A&M
University in 1984.
Stephen Chen, PhD (1), 47 . . . . . . . . 1996 President and Chief Executive Officer of STC
International, Inc., a health care investment firm,
since May 1992. From August 1989 to May 1992,
Director of Pharmaceutical Research and Development
for the Ciba Consumer Pharmaceuticals Division of
Ciba-Geigy.
James Cook (2)(3), 62 . . . . . . . . . . 1988 President and Chief Executive Officer of the First
National Bank of Arvada since January 1992 and from
April 1987 to December 1991, Executive Vice
President of First National Bank of Amarillo.
Katsuaki Hayashibara (1)(2), 53 . . . . . 1994 Named Director of the Overseas Business Development
Division of Hayashibara Company, Ltd. in January
1997. Served as Director of Research and
Development for Hayashibara Biochemical
Laboratories, Inc. since 1988.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
Director
Name and Age Since Principal Occupation for the Past Five Years
- ----------------------------------------- -------- ----------------------------------------------------
<S> <C> <C>
Brian McLean, MD, 37 . . . . . . . . . . 1996 Partner in a New York venture capital firm. From
1991 to 1996, staff anesthesiologist with Tarzana
Regional Medical Center. Received a MBA degree in
1992 and a MD degree in 1987 from UCLA
Dennis Moore, DVM (2)(3), 50 . . . . . . 1986 Doctor of veterinary medicine since 1972 and was in
private practice from 1972 to 1995. Management of
personal investments since 1995.
James Page, MD (1), 70 . . . . . . . . . 1996 Prior to retiring in 1991 as a Vice President with
Adria Laboratories, Inc., held various upper
management level positions with Carter Wallace,
Inc., Merck Sharpe & Dohme Research Laboratories and
Wyeth Laboratories.
Edward L. Morris (4), 51 . . . . . . . . -- Served as Secretary of the Company since 1986. Since
1983 a partner in the law firm of Morris, Moore,
Moss & Douglass, P.C., which firm provides legal
services to the Company.
</TABLE>
__________________
(1) Member of the Compensation Committee.
(2) Member of the Finance Committee.
(3) Member of the Audit Committee.
(4) Mr. Morris is not an executive officer of the Company, and is not
considered to perform any significant policy making functions for the
Company; however, since he is both the Secretary to the Company, and one of
its legal advisors, and participates in that capacity in meetings of the
Company's Board of Directors, he is named in this item.
PROPOSAL TWO
APPROVAL OF AMENDMENTS TO
THE COMPANY'S 1996 EMPLOYEE STOCK OPTION PLAN
At the Annual Meeting, the Company's shareholders will be asked to consider
and vote upon amendments to the Company's 1996 Employee Stock Option Plan (the
"Stock Option Plan"). The amendments were adopted by the Company's Board of
Directors on March 13, 1997, subject to shareholder approval.
The first purpose of the amendments is to increase the flexibility of the
Board of Directors or committee of directors appointed to administer the Stock
Option Plan (the "Committee") to take advantage of recent amendments to Rule
16b-3 ("Rule 16b-3) under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), with respect to grants of options under the Stock Option Plan.
The second purpose of the amendment is to increase the number of shares of the
Company's Common Stock reserved for issuance under the Stock Option Plan to
200,000. This amendment will involve an increase of 50,000 shares of Common
Stock available for distribution.
Rule 16b-3 provides exemptions for transactions by employees, officers and
directors involving an issuer's employee benefit plans. In 1996 the Securities
Exchange Commission simplified and revised Rule 16b-3 in several respects. As
revised, Rule 16b-3 provides that option grants by an issuer to an officer or
director subject to the short-swing trading provisions of Section 16 of the
1934 Act will be exempt upon satisfaction of any one of the three following
alternative conditions: (i) approval of the grant transaction by the issuer's
board of directors or a committee of two or more Non-Employee Directors (as
defined in Rule 16b-3); (ii) approval or ratification of the grant transaction
by the holders of a majority of the issuer's securities; or (iii) satisfaction
of a six-month holding period with respect to the equity securities acquired
following the date of acquisition. As amended, the Stock Option Plan allows
the Board of Directors or Committee to utilize any one of the three alternative
conditions for exempting the option grants, and eliminates the
4
<PAGE> 7
requirement that officers, directors and 10% shareholders of the Company
receive grants from a committee consisting solely of "disinterested persons"
within the meaning of Rule 16b-3 prior to its amendment in 1996. The proposed
amendment also eliminates permitted transfers of awards under the Stock Option
Plan pursuant to a qualified domestic relations order as defined in the
Internal Revenue Code of 1986, as amended, or Title I of the Employee
Retirement Income Security Act of 1974, as amended. The Board of Directors
believes that this amendment is desirable because it is consistent with the
nontransferable nature of the options granted under the Stock Option Plan.
The Stock Option Plan as proposed to be amended also increases the number
of shares of Common Stock reserved for issuance thereunder from 150,000 to
200,000 shares. The purpose of the Stock Option Plan is to closely associate
the interests of the management of the Company and its subsidiaries and
affiliates with those of the shareholders by reinforcing the relationship
between participants' rewards and shareholder gains, provide management with an
equity ownership in the Company commensurate with Company performance, maintain
competitive compensation levels, and provide an incentive to management for
continuous employment with the Company. The Board of Directors believes that
this increase is necessary for the Company to remain competitive in the
recruitment, motivation and retention of its employees, and recommends that the
shareholders approve this proposal.
The shares awarded to employees of the Company under the Stock Option Plan
come from authorized but unissued shares of Common Stock. Without the 50,000
shares that are the subject of this proposal, there are a total of 150,000
shares of the Company's Common Stock authorized for issuance upon the exercise
of options granted under the Stock Option Plan. As of March 27, 1997, no
shares of Common Stock had been purchased upon the exercise of options issued
under the Stock Option Plan and a total of 40,500 shares of Common Stock were
subject to outstanding options that have been granted pursuant to the Stock
Option Plan.
Description of the Stock Option Plan
Following is a summary description of the Stock Option Plan:
General. The purpose of the Stock Option Plan is to serve as an incentive
to employees for continuous employment with the Company, to maintain
competitive compensation levels for employees and to more closely align the
interests of shareholders and employees of the Company.
Awards under the Stock Plan are in the form of incentive stock options
("ISOs"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended. Limited stock appreciation rights ("Limited Rights") relating to such
ISOs may be granted. At present, an aggregate of 150,000 shares of Common
Stock are reserved for issuance upon the exercise of ISOs granted under the
Stock Option Plan. If the amendments described herein are approved, an
aggregate of 200,000 shares of Common Stock will be reserved for issuance upon
the exercise of ISOs under the Stock Option Plan.
Administration. As amended, the Stock Option Plan is administered by a
committee of at least two directors of the Company (the "Committee"), which has
the authority in its sole discretion to grant ISOs and Limited Rights to
eligible employees, to determine the timing and amount of such awards, to
impose limitations, restrictions and conditions upon such awards and to
interpret the Stock Option Plan and related rules and agreements.
Eligibility. Employees of the Company are eligible to receive grants of
options under the Stock Option Plan. Directors who are not otherwise employed
by the Company are not considered to be "employees" of the Company for purposes
of the Stock Option Plan. As of March 27, 1997, approximately eight (8)
employees were eligible to receive grants under the Stock Option Plan.
Options. All ISOs granted to employees who do not possess more than 10% of
the total combined voting power of all classes of stock of the Company will be
exercisable at a price equal to 100% of the fair market value of a share of
Common Stock on the date of grant and will vest at the rate of 20% per year,
commencing on the first anniversary of the date of grant. All ISOs granted to
10% shareholders will be exercisable at a price equal to 110% of the fair
market value of a share of Common Stock on the date of grant and will vest at
the rate of 25% per year, commencing on the first anniversary of the date of
grant. The aggregate fair market value of the shares covered by ISOs granted
under the Stock Plan that become exercisable by a holder for the first time in
any calendar year is subject to a $100,000 limit. The maximum number of shares
of Common Stock with respect to which ISOs may be granted in any one year to
any employee shall not exceed 50,000.
5
<PAGE> 8
ISOs granted to employees who are not 10% shareholders must be exercised
prior to the expiration of ten years from the date of grant and ISOs granted to
10% shareholders must be exercised prior to the expiration of five years from
the date of grant. ISOs are exercisable only during the holder's employment,
and, in the case of involuntary termination of the employee, for a period of up
to 90 days after the termination of such holder's employment to the extent the
ISOs were exercisable at the date of termination or become exercisable within
the 90 days after termination of employment. However, in the case of the
termination of an optionee's employment by reason of his disability or
retirement, the ISOs held by him may be exercised for a period of 36 months
after such termination to the extent the ISOs were exercisable at the date of
termination. In the case of the death of an optionee, any ISO exercisable on
the date of the employee's death may be exercised by the employee's estate or
beneficiaries if such exercise occurs within the remaining term of the option
but in no event after one year after the employee's death. The Stock Plan as
amended provides that ISOs may not be transferred other than by will or the
laws of descent and distribution.
Concurrently with or subsequent to the award of any ISO, the Committee may
award a Limited Right with respect to each ISO permitting the optionee to be
paid the appreciation on the Common Stock in lieu of (but not in addition to)
exercising the ISO. A Limited Right is fully exercisable and must be exercised
immediately preceding or simultaneously with a Change in Control (as defined in
the Stock Option Plan), except that if a Change of Control occurs without
notice to the holder of the Limited Right or an opportunity by the holder of
the Limited Right to exercise it, the Limited Right must be exercised as soon
as practicable after the Change of Control occurs.
Any shares of Common Stock subject to an option which has been terminated
unexercised or expires shall again be available for issuance under the Stock
Option Plan, except that shares subject to an option which are not issued
because the optionee has elected to be paid upon the exercise of a related
Limited Right shall not again be available for issuance under the Stock Option
Plan.
Amendments and Termination. The Committee may amend, alter or terminate
the Stock Option Plan at any time. However, without shareholder approval no
such amendment, alteration or termination may be made that (i) increases the
number of shares of Common Stock issuable under the Stock Option Plan, (ii)
extends the period during which any award may be granted or exercised, or (iii)
extends the term of the Stock Option Plan.
Federal Income Tax Consequences
The grant of an ISO has no immediate federal income tax consequences to the
optionee or the Company. The exercise of an ISO while the optionee is an
employee or within three months after termination of employment generally has
no immediate tax consequences to the Company or the optionee. If the optionee
is subject to the alternative minimum tax, however, the exercise of an ISO
would result in an increase in the optionee's alternative minimum taxable
income equal to the excess of the fair market value of the shares at the time
of exercise over the exercise price. If an optionee holds the shares acquired
pursuant to the exercise of an ISO for the required holding period, the
optionee generally recognizes long-term capital gain or loss upon a subsequent
sale of the shares in the amount of the difference between the amount realized
upon the sale and the exercise price of the shares. In such a case, the
Company is not entitled to a deduction in connection with the grant or exercise
of the ISO or the sale of shares acquired pursuant to such exercise. If,
however, an optionee exercises an ISO more than three months after termination
of employment or disposes of the shares prior to the expiration of the required
holding period, the optionee generally recognizes ordinary income equal to the
excess of the fair market value of the shares on the date of exercise over the
exercise price of the shares, and the excess generally would be treated as
long-term or short-term capital gain. The required holding period is the
longer of two years from the date the option was granted and one year after the
date of issuance of the shares upon the exercise of the option.
Option Grants
The following table sets forth, as of March 27, 1997, the total number of
unexercised options granted under the Stock Option Plan to the Company's
Chairman of the Board, President and Chief Executive Officer and all employees,
including all current officers who are not executive officers, as a group.
6
<PAGE> 9
<TABLE>
<CAPTION>
Number of Shares Average Per
Subject to Share
Name Options Granted Exercise Price
---- --------------- --------------
<S> <C> <C>
Dr. Joseph M. Cummins . . . . . . . . . . . . . . . . . . . . . . . . 7,500 $5.50 (1)
All current employees as a group [eight (8) persons] . . . . . . . . 40,500 $5.09
</TABLE>
__________________
(1) The fair market value of the Common Stock on the date of grant was $5.00
per share.
Over the term of the Stock Option Plan, up to March 27, 1997, a total of
40,500 options had been granted and no options had been canceled.
Options outstanding under the Stock Option Plan have expiration dates
ranging from August 8, 2001 to August 8, 2006.
The amendments to the Stock Option Plan, which have been adopted by the
Company's Board of Directors and which will be voted upon by the shareholders
at the annual meeting of the Company, are as follows:
Section 1.02, Administration, Subparagraph (a): The third sentence of this
Subparagraph shall be deleted in its entirety. The sentence to be deleted
reads as follows:
Notwithstanding anything in this Section 1.02 to the contrary,
so long as any equity security of the Company is registered
under Section 12 of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), or any successor statute, all
authority to exercise discretion with respect to participation
in the Plan by persons who are (i) "officers" within the
meaning of the applicable Securities and Exchange Commission
rules and regulations relating to Section 16 of the 1934 Act,
or any successor statute, (ii) directors of the Company and/or
(iii) beneficial owners of more than ten percent (10%) of any
class of equity securities of the Company who are otherwise
eligible to participate in the Plan, and the timing, pricing,
amounts and other terms and conditions of awards granted under
the Plan to such officers, directors and beneficial owners,
shall be vested in the Committee, if all of the members of the
Committee are disinterested persons within the meaning
ascribed to such term in Rule 16b-3 promulgated under the 1934
Act, or within any successor definition or under any successor
rule ("disinterested persons").
Section 1.02, Administration, Subparagraph (d): In the first sentence of
this Subparagraph, the first reference to "1934 Act" is amended to read,
"Securities Exchange Act of 1934 (the '1934 Act')".
Section 1.05, Aggregate Limitation on Awards, Subparagraph (a): In the
second sentence of this Subparagraph, the number "one hundred fifty thousand
(150,000)" shall be amended to read, "two hundred thousand (200,000)."
Section 4.02, Non-Assignability: In the first sentence of this Section,
the following clause shall be deleted in its entirety: "or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended."
The foregoing amendments shall become effective on the date approved by the
holders of a majority of the shares of Common Stock present in person or by
proxy and entitled to vote at the 1997 annual meeting of Shareholders of ABI.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENTS TO THE COMPANY
1996 EMPLOYEE STOCK OPTION PLAN.
7
<PAGE> 10
PROPOSAL THREE
APPROVAL OF AMENDMENTS TO
THE COMPANY'S OUTSIDE DIRECTOR AND ADVISOR STOCK OPTION PLAN
At the Annual Meeting, the Company's shareholders will be asked to consider
and vote upon amendments to the Company's Outside Director and Advisor Stock
Option Plan (the "Directors Plan"). The amendments were adopted by the
Company's Board of Directors on March 13, 1997, subject to shareholder
approval.
The first purpose of the amendments is to increase the authority of the
committee appointed by the Board of Directors to administer the Directors Plan
(the "Committee") to take advantage of the amendments to Rule 16b-3 under the
1934 Act. The second purpose of the amendment is to increase the number of
shares of the Company's Common Stock reserved for issuance under the Directors
Plan to 150,000. This amendment will involve an increase of 50,000 shares of
Common Stock available for distribution.
Rule 16b-3 provides exemptions for transactions by directors, officers and
employees involving an issuer's employee benefit plans. In 1996 the Securities
and Exchange Commission simplified and revised Rule 16b-3 in several respects.
See "PROPOSAL TWO-APPROVAL OF AMENDMENTS TO THE COMPANY'S 1996 EMPLOYEE STOCK
OPTION PLAN" for a brief description of Rule 16b-3 as revised with respect to
option grants. As amended, the Directors Plan provides that the Committee,
which shall consist of at least two members of the Board of Directors, shall
have the authority to designate directors and scientific advisors eligible to
participate in the Directors Plan, to grant awards provided in the Directors
Plan as determined by the Committee and to impose such restrictions,
limitations and conditions upon such awards as the Committee shall deem
appropriate. The amended Directors Plan provides that with respect to persons
subject to Section 16 of the 1934 Act, transactions under the Directors Plan
are intended to comply with all applicable provisions of Rule 16b-3 under the
1934 Act, thereby affording the Committee the flexibility to utilize any one of
the three alternative conditions to exempt option grants. The Directors Plan
as amended also maintains the formula provisions providing for automatic grants
of a fixed number of stock options.
The amended Directors Plan takes advantage of the elimination from Rule
16b-3 of its previous requirement that options be nontransferable and provides
that the Committee may grant an optionee limited rights to transfer options
granted under the Directors Plan. If the stock option agreement so provides,
options may be transferred by the optionee to Permitted Transferees (generally
a member of the optionee's immediate family, trusts for the benefit of such
family members and family partnerships) so long as there is no consideration
for the transfer.
The Directors Plan as proposed to be amended also increases the number of
shares of Common Stock reserved for issuance thereunder from 100,000 to 150,000
shares. The purpose of the Directors Plan is to closely associate the
interests of the outside directors and scientific advisors of the Company and
its subsidiaries and affiliates with those of the shareholders by reinforcing
the relationship between participants' rewards and shareholder gains, provide
outside directors and scientific advisors with an equity ownership in the
Company commensurate with Company performance, and provide an incentive to
outside directors and scientific advisors for continuous employment with the
Company. The Board of Directors believes that this increase is necessary for
the Company to remain competitive in the recruitment, motivation and retention
of its outside directors and scientific advisors and recommends that the
shareholders approve this proposal.
The shares of Common Stock of the Company under the Directors Plan come
from authorized but unissued shares of Common Stock. Without the 50,000 shares
that are the subject of this proposal, there are a total of 100,000 shares of
the Company's Common Stock authorized for issuance upon the exercise of options
granted under the Directors Plan. As of March 27, 1997, no shares of Common
Stock had been purchased upon the exercise of options issued under the
Directors Plan and a total of 100,000 shares of Common Stock were subject to
outstanding options that have been granted pursuant to the Directors Plan.
Description of the Directors Plan
Following is a summary description of the Directors Plan:
8
<PAGE> 11
General. The purpose of the Directors Plan is to provide an incentive to
outside directors and members of the Company's Scientific Advisory Board
("Advisors") for continuous association with the Company and to reinforce the
relationship between participants' rewards and shareholder gains. As of March
27, 1997, approximately seven outside directors and seven Advisors were
eligible to receive grants under the Directors Plan.
Awards under the Directors Plan are in the form of so-called non-qualified
stock options and limited rights relating to such options. At present, an
aggregate of 100,000 shares of Common Stock are reserved for issuance upon
exercise of options granted under the Directors Plan. If the amendments
described herein are approved, an aggregate of 150,000 shares of Common Stock
will be reserved for issuance upon the exercise of stock options under the
Directors Plan. Options under the Directors Plan may be granted only to
directors or Advisors who are not officers or employees of the Company.
Administration. As amended, the Directors Plan is to be administered by a
Committee consisting of at least two directors of the Company which has the
authority, in its sole discretion, to interpret the Directors Plan, to adopt,
amend and rescind rules and regulations relating to the Directors Plan, to
designate the directors and Advisors eligible to participate in the Directors
Plan, grant awards provided in the Directors Plan, and to otherwise administer
the Plan.
Options. Under the Directors Plan, each Outside Director is automatically
granted an option to purchase 10,000 shares of Common Stock on the date such
person becomes an Outside Director, and each Advisor is automatically granted
an option to purchase 5,000 shares of Common Stock on the date such person
first becomes an Advisor. As amended, the Directors Plan provides that the
Committee shall have the authority to designate Directors and Scientific
Advisors eligible to participate in the Directors Plan, to grant awards
provided in the Directors Plan as determined by the Committee, and to impose
such restrictions, limitations and conditions upon such awards as the Committee
shall deem appropriate. All options granted under the Directors Plan will be
exercisable at a price equal to 100% of the fair market value of a share of
Common Stock on the date of grant and will vest at the rate of 20% per year,
commencing on the first anniversary of the date of grant. Options must be
exercised prior to the expiration of ten years from date of grant.
Amendments and Termination. The Committee may without action by the
shareholders amend the Directors Plan or awards thereunder in response to
changes in securities or other applicable laws or to comply with stock exchange
rules or requirements. Without shareholder approval, the Committee may not
extend the period during which an option or limited right may be exercised or
extend the term of the Directors Plan. The Company is required to obtain
shareholder approval of other amendments, including any increase in the number
of shares of Common Stock issuable under the Directors Plan, to the extent
required by applicable laws or the exchange on which the Common Stock is
listed.
Transferability. Unless otherwise provided in an agreement with the
optionee, options under the Directors Plan may not be transferred other than by
will or the laws of descent and distribution. If the option agreement so
provides, options and limited rights may be transferred by the holder to
Permitted Transferees (generally a member of the optionee's immediate family,
trusts for the benefit of such family members and family partnerships) so long
as there is no consideration for the transfer. The provisions of the Directors
Plan relating to exercisability of outstanding options after the optionee's
termination of association with the Company by virtue of his death, disability
or involuntary termination and the exercise of limited rights are the same as
the provisions of the Stock Option Plan relating thereto.
Federal Income Tax Consequences
The grant of a non-qualified stock option does not result in taxable income
to the holder of the option, or in a deduction by the Company. The tax
consequences are determined generally at the time the optionee exercises the
non- qualified stock option. Upon the exercise of a non-qualified stock
option, the optionee recognizes ordinary income in an amount equal to the
difference between the fair market value of the Company's Common Stock on the
date of exercise and the exercise price of the option. The Company is entitled
to a deduction in an amount equal to the amount that was includable in the
optionee's gross income.
Option Grants
The following table sets forth, as of March 27, 1997, the total number of
unexercised options granted under the Directors Plan to all current directors
of the Company who are not executive officers as a group, each nominee for
9
<PAGE> 12
election as a director and each other person who received or is to receive five
percent (5%) of such options. Pursuant to the terms of the Plan, options may
only be granted to outside directors and Advisors.
<TABLE>
<CAPTION>
Number of Shares Average Per
Subject to Share
Name Options Granted Exercise Price
---- --------------- --------------
<S> <C> <C>
All current directors who are not executive officers
(seven persons) . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000 $5.04
Each other person who received or is to receive 5% of the options
under the Directors Plan
Steven Berk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 $5.00
Michael Lange . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 $5.00
Masashi Kurimoto . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 $5.00
Jun Minowada . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 $5.00
Doug Testa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 $5.00
Wayne Tompkins . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 $5.00
Akio Uemura . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 $5.00
</TABLE>
Over the term of the Directors Plan, up to March 27, 1997, a total of
100,00 options had been granted and no options had been canceled.
Options outstanding under the Directors Plan have expiration dates ranging
from August 8, 2006 to March 20, 2007.
The amendments to the Directors Plan, which have been adopted by the
Company's Board of Directors and which will be voted upon by the shareholders
at the annual meeting of the Company, are as follows:
Section 1.02, Administration of the Plan, Subparagraph (b): The existing
Subparagraph (b) shall be deleted, and the following Subparagraph (b) shall be
substituted:
(b) The Committee shall have the authority, in its sole discretion
and from time to time, to:
(i) designate the directors and Advisors eligible to
participate in the Plan;
(ii) grant awards provided in the Plan in such form and amount
as the Committee shall determine;
(iii) impose such limitations, restrictions and conditions upon
any such awards as the Committee shall deem appropriate;
and
(iv) interpret the Plan, adopt, amend and rescind rules and
regulations relating to the Plan, and make all other
determinations and take all other action necessary or
advisable for the implementation and administration of the
Plan.
Section 1.02, Administration of the Plan, Subparagraph (d): The existing
Subparagraph (d) shall be deleted, and existing paragraphs (e) and (f) shall be
redesignated as paragraphs (d) and (e), respectively.
Section 1.04, Aggregate Limitation on Awards, Subparagraph (a): In the
second sentence of this Subparagraph, the number "one hundred thousand
(100,000)" shall be changed to read "one hundred fifty thousand (150,000)."
Section 2.01, Award of Stock Options. The introductory clause under this
Section, "All grants of Stock Options to Outside Directors and/or Scientific
Advisors under the Plan shall be automatic and non-discretionary and shall be
made strictly in accordance with the following provisions:" shall be deleted in
its entirety.
10
<PAGE> 13
Section 2.01, Award of Stock Options, Subparagraph (a): This Subparagraph
shall be deleted, and the following Subparagraph (a) shall be substituted:
(a) The Committee may, from time to time and subject to the
provisions of the Plan and such other terms and conditions as the Committee
may prescribe, grant to any participant in the Plan one or more
non-qualified stock options ("Options") to purchase for cash the number of
shares of Common Stock allotted by the Committee.
Section 2.01, Award of Stock Options, Subparagraph (b): The existing
Subparagraph (b) shall be deleted, and the following shall be substituted:
(b) Each Outside Director shall be automatically granted an Option
to purchase ten thousand (10,000) shares on the date on which such person
first becomes an Outside Director, whether through election by the
shareholders of the Company or appointment by the Board to fill a vacancy.
The foregoing notwithstanding, any Outside Director who has previously
received an Option award as a Scientific Advisor under Section 2.01(c),
below, shall be automatically awarded, in his capacity as an Outside
Director, an option to purchase only five thousand (5,000) shares, instead
of ten thousand (10,000) shares, although additional Options may be awarded
by the Committee.
Section 2.01, Award of Stock Options, Subparagraph (c): The existing
Subparagraph (c) shall be deleted, and the following shall be substituted:
(c) Each Scientific Advisor who is not also serving as an Outside
Director shall be automatically granted an Option to purchase five thousand
(5,000) shares on the date on which such person first becomes a Scientific
Advisor. The foregoing notwithstanding, any Scientific Advisor who has
previously received an Option award as an Outside Director shall not
automatically be awarded any additional Options as a Scientific Advisor,
although additional Options may be awarded by the Committee.
Section 2.01, Award of Stock Options, Subparagraph (e): The second
sentence of this Subparagraph, "All Options shall be automatically granted in
accordance with the terms of this Section 2.01," shall be deleted.
Section 2.01, Award of Stock Options, Subparagraph (f): In the first
sentence of this Subparagraph (f), the clause "Securities and Exchange Act of
1934 (the "Exchange Act")" shall be changed to "1934 Act," and the clause
"Section 16 of the Exchange Act" shall be changed to "Section 16 of the 1934
Act."
Section 2.11, Rule 16b-3 Exemption: In this Section, the clause
"Securities and Exchange Act of 1934 (the "Exchange Act")" shall be changed to
"1934 Act;" and the clause "Section 16 of the Exchange Act" shall be changed to
"Section 16 of the 1934 Act."
Section 3.03, Exercise Period: In the final sentence of this Section, the
clause "Securities and Exchange Act of 1934, as amended" is changed to "1934
Act."
Section 4.02, Non-Assignability: The existing text in this Section is
deleted, and the following text is substituted:
Unless otherwise provided in the agreement with the Optionee, Options
shall not be assignable or transferable by the recipient thereof, except by
will or by the laws of descent and distribution, and during the life of the
recipient, such award shall be exercisable only by such person or by such
person's guardian or legal representative. If provided in the agreement
with the Optionee, Options and rights may be transferred by the holder to
Permitted Transferees, provided that there cannot be any consideration for
the transfer. "Permitted Transferee" means a member of a holder's
immediate family, trusts for the benefit of such immediate family members,
and partnerships in which the holder and such immediate family members are
the only partners. An immediate family member shall include a holder's
descendants, spouse, and spouses of descendants.
Section 4.07, Amendment of the Plan: The existing text of this Section is
deleted, and the following text is substituted:
(a) Subject to subsection (b), the Committee may, without further
action by the shareholders and without receiving further consideration from
the participants, amend this Plan or condition or modify awards under this
Plan
11
<PAGE> 14
in response to changes in securities or other laws or rules, regulations or
regulatory interpretations thereof applicable to this Plan or to comply
with stock exchange rules or requirements.
(b) The Committee may at any time and from time to time terminate or
modify or amend the Plan in any respect, except that without shareholder
approval the Committee may not extend the term of the Plan. ABI shall seek
and obtain shareholder approval of any amendment to increase the number of
shares of Common Stock which may be issued under the Plan or for any other
amendment to the Plan to the extent that such increase or other amendment
requires shareholder approval under the requirements of the stock exchange
or market system under which shares of Common Stock of the Company are then
listed or the Internal Revenue Code of 1986 or other laws then in effect
and applicable to the Company and the Plan. The termination or any
modification or amendment of the Plan, except as provided in subsection
(a), shall not without the consent of a participant affect his rights under
an award previously granted to him.
The foregoing amendments shall become effective on the date approved
by the holders of a majority of the shares of Common Stock present in person or
by proxy and entitled to vote at the 1997 annual meeting of shareholders of
ABI.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENTS TO THE COMPANY
DIRECTOR AND ADVISOR STOCK OPTION PLAN.
COMPLIANCE WITH SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires directors and officers of the Company and persons who
own more than 10 percent of the Company's common stock to file with the
Securities and Exchange Commission (the "Commission") initial reports of
ownership and reports of changes in ownership of the common stock. Directors,
officers and more than 10 percent shareholders are required by the Exchange Act
to furnish the Company with copies of all Section 16(a) forms they file.
During 1996, Dr. Stephen Chen and Dr. Brian McLean, directors of the
Company, were late filing a Form 4 (Statement of Changes in Beneficial
Ownership) within the time period required by Section 16(a) of the Exchange
Act.
Other than mentioned above, to the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required during the year ended
December 31, 1996, all filings applicable to its directors, officers and more
than 10 percent beneficial owners were timely filed.
BOARD OF DIRECTORS
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company, although it
is not involved in day-to-day operating details. Members of the Board are kept
informed of the Company's business by various reports and documents sent to
them as well as by operating and financial reports made at Board and Committee
meetings. The Board held nine meetings in 1996. The Company does not have a
nominating committee.
DIRECTORS' FEES AND OTHER COMPENSATION
Directors who are not employees of the Company received a fee of $1,000 for
each regularly scheduled meeting of the Board of Directors attended or $250 for
participating in a regularly scheduled Board meeting by conference telephone,
but do not receive any additional compensation for service on committees of the
Board of Directors. Officers of the Company do not receive additional
compensation for serving as directors.
AUDIT COMMITTEE
The Audit Committee reviews the internal controls of the Company and the
objectivity of its financial reporting. It meets with appropriate Company
financial personnel and the Company's independent certified public accountants
in
12
<PAGE> 15
connection with these reviews. This committee recommends to the Board the
appointment of the independent certified public accountants to serve as
auditors for the following year in examining the books and records of the
Company. The Audit Committee, consisting of James Cook and Dennis Moore, did
not meet in 1996.
COMPENSATION COMMITTEE
The Compensation Committee, consisting of Stephen Chen, Katsuaki
Hayashibara and James Page, meets on call and has the authority to act with
respect to the compensation of officers and employees of the Company. The
Committee met twice in 1996 and all members were present.
EXECUTIVE COMPENSATION
The following table presents the compensation paid by the Company to its
Chairman of the Board, President and Chief Executive Officer for 1994 through
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------------
Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($)
- ----------------------------------------------- ------ ---------- --------- ----------------
<S> <C> <C> <C> <C>
Dr. Joseph Cummins, Chairman of the Board,
President and Chief Executive Officer . . . 1996 $120,000 $ -- $252,000 (1)
1995 $120,000 $ 500 $ --
1994 $120,000 $ -- $ --
</TABLE>
- -----------------
(1) Represents the value of 30,000 shares of common stock issued at $5.00 per
share and payment of withholding tax requirements in settlement of
restricted stock grants and a company contribution of $12,000 to the
Simplified Employee Pension Plan.
OPTION GRANTS IN 1996
The following table sets forth certain information relating to options
granted in 1996 to the named executive officer to purchase shares of Common
Stock of the Company.
<TABLE>
<CAPTION>
Number of Shares
of Common Stock % of Total
Underlying Options Granted Exercise or
Options to Employees Base Price Expiration
Name Granted (#) in 1996 ($/Sh) Date
- --------------------------------------- --------------- --------------- ----------- ----------
<S> <C> <C> <C> <C>
Joseph Cummins . . . . . . . . . . . . 7,500 18.5% $5.50 (1) 08/08/2001
</TABLE>
- -----------------
(1) The fair market value of the Common Stock on the date of the grant was
$5.00 per share.
13
<PAGE> 16
AGGREGATED OPTION EXERCISES AT DECEMBER 31, 1996
AND YEAR-END OPTION VALUES
The following table sets forth information for the named executive officer
regarding the exercise of options during 1996 and unexercised options held at
the end of 1996.
<TABLE>
<CAPTION> Number of Shares of
Common Stock Value of Unexercised
Underlying Unexercised In-The-Money
Shares Value Options at Options at
Acquired on Realized December 31, 1996 (#) December 31, 1996 ($) (1)
Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
------------ -------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Joseph Cummins . . . . . . -- -- -- / 7,500 -- / --
</TABLE>
- --------------
(1) Calculated based on the closing price of the Common Stock ($4.75) as
reported by NASDAQ on December 31, 1996.
CERTAIN TRANSACTIONS
The Company has relied significantly on HBL, the largest shareholder of the
Company, for a substantial portion of its capital requirements. From 1989 to
1996, HBL has provided an aggregate of $9,000,000 of funding pursuant to a
Joint Development and Manufacturing/Supply Agreement (the "Development
Agreement"), purchased from the Company an aggregate of 661,620 shares of
common stock for a total purchase price of $2,444,300 and made loans to the
Company aggregating $3,000,000, of which $1,000,000 loaned after March 31, 1996
was repaid simultaneously with the consummation of the Company's initial public
offering in August 1996. As of December 31, 1996, the outstanding amount of
the Company's indebtedness to HBL (including accrued interest) was $2,573,296.
HBL owns 1,232,856 shares, approximately 23% of the Company's common stock. In
addition to the development Agreement, HBL and the Company are parties to
various license and manufacturing and supply agreements pursuant to which the
Company licenses certain technology to or from HBL and HBL supplies
formulations of its interferon alpha to the Company.
In May 1996, the Company amended the employment agreements of three
officers to provide that, in lieu of issuing an aggregate of 126,000 shares of
common stock that were originally to be issued to such persons as a result of
their satisfying certain criteria under which the common stock becomes
issuable, the Company would issue an aggregate of 79,000 shares and would use
$235,000 of the proceeds of the initial public offering to satisfy withholding
tax obligations relating to such issuances. The 79,000 shares were issued and
the $235,000 of withholding tax obligations were paid in August 1996. The
amended employment agreement between the Company and Dr. Cummins provides for
the term of Dr. Cummins' employment agreement to be extended to December 31,
1999.
Pursuant to a Contract Termination and Severance Agreement with Edward
Sherwood, a former President of the Company, in January 1995 the Company issued
to Dr. Sherwood an aggregate of 29,640 shares of common stock and satisfied the
withholding tax obligations relating to such issuance.
Pursuant to a Stock Purchase Agreement entered into in September 1987
between the Company and Mesa, Inc. ("Mesa"), which owns 315,120 shares of
common stock, the Company has agreed that for as long as Mesa is a shareholder
of the Company, the Company shall not without the prior written approval of
Mesa engage in any repurchase or redemption of its issued and outstanding
shares of common stock, unless such repurchase or redemption is offered, pro
rata, to all then existing shareholders.
During the years ended December 31, 1996 and 1995, the Company accrued an
aggregate of $81,600 and $68,700, respectively, for legal services rendered by
Morris, Moore, Moss and Douglass, P.C. Edward Morris, the Secretary of the
Company, is a member of such firm.
14
<PAGE> 17
HBL has agreed to indemnify the Company and its officers, directors,
employees and agents for litigation expenses, losses, damages and amounts paid
in settlement arising out of litigation which may be brought by Hoffmann-La
Roche, Inc. or its affiliates relating to the United States Patent 4,503,035
owned by Roche.
Although the Company believes that the foregoing transactions were on terms
no less favorable to the Company than would have been available from
unaffiliated third parties in arm's length transactions, there can be no
assurance that this is the case. All future transactions and loans between the
Company and its officers, directors and 5% shareholders will be on terms no
less favorable to the Company than could be obtained from independent third
parties. There can be no assurance, however, that future transactions or
arrangements between the Company and its affiliates will be advantageous, that
conflicts of interest will not arise with respect thereto or that if conflicts
do arise, that they will be resolved in favor of the Company.
STOCKHOLDER PROPOSALS
Stockholders may present proposals for inclusion in the Company's proxy
statement for the 1998 annual meeting of stockholders provided they are
received by the Company no later than December 17, 1997, and are otherwise in
compliance with applicable Securities and Exchange Commission regulations.
GENERAL
So far as is now known, there is no business other than that described
above to be presented for action by the stockholders at the meeting, but it is
intended that the proxies will be voted upon any other matters and proposals
that may legally come before the meeting and any adjournments thereof in
accordance with the discretion of the persons named therein.
COST OF SOLICITATION
The cost of solicitation of proxies will be borne by the Company. It is
expected that the solicitations will be made primarily by mail, but regular
employees or representatives of the Company may also solicit proxies by
telephone or telegraph and in person, and arrange for brokerage houses and
other custodians, nominees and fiduciaries to send proxy material to the
principals at the expense of the Company.
EDWARD L. MORRIS
Secretary
15
<PAGE> 18
COMMON STOCK PROXY
AMARILLO BIOSCIENCES, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Revoking any such prior appointment, the undersigned, a stockholder of
Amarillo Biosciences, Inc., hereby appoints Joseph M. Cummins and James Cook,
and each of them, attorneys and agents of the undersigned, with full power of
substitution, to vote all shares of the Common Stock of the undersigned in said
Company at the Annual Meeting of Stockholders of said Company to be held in the
Centennial Room of Boatmen's First National Bank, 8th and Taylor, Amarillo,
Texas on May 13, 1997 at 8:30 A.M. local time and at any adjournments thereof,
as fully and effectually as the undersigned could do if personally present and
voting, hereby approving, ratifying and confirming all that said attorneys and
agents or their substitutes may lawfully do in place of the undersigned as
indicated below.
This proxy when properly executed will be voted as directed. If no
direction is indicated, this proxy will be voted for proposals (1), (2) and
(3), and will be voted in the discretion of the proxy holders on other matters
to properly come before the meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 19
AMARILLO BIOSCIENCES, INC.
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
1 Election of Directors: Stephen Chen, James Cook, Joseph Cummins, Tom
D'Alonzo, Katsuaki Hayashibara, Brian McLean, Dennis Moore and James Page.
For All
For Withheld Except
[ ] [ ] [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. Approval of amendments to the 1996 Employee Stock Option Plan.
For Against
[ ] [ ]
3. Approval of amendments to the Outside Director and Advisor Stock Option Plan.
For Against
[ ] [ ]
4. Upon any other matters which may properly come before the meeting or any
adjournments thereof.
Please sign exactly as name appears below.
Dated: , 1997
---------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
Signature if held jointly
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope. When shares are held by joint tenants, both should sign. When signing
as attorney, as executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
