<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1999
----------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20791
AMARILLO BIOSCIENCES, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
TEXAS 75-1974352
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
800 West Ninth, Amarillo, TX 79101
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
806-376-1741 FAX 806-376-9301
- --------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required 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
--- ---
As of June 30, 1999 there were 6,360,326 shares of the issuer's common stock
outstanding.
1
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AMARILLO BIOSCIENCES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets - December 31, 1998 and June
30, 1999.................................................................... 3
Consolidated Statements of Operations - Three Months and
Six Months Ended June 30, 1998 and 1999 and Cumulative
from June 25, 1984 (Inception) through June 30, 1999........................ 4
Condensed Consolidated Statements of Cash Flows - Six
Months Ended June 30, 1998 and 1999 and Cumulative from
June 25, 1984 (Inception) through June 30, 1999............................. 5
Notes to Consolidated Financial Statements.................................. 6
ITEM 2. Management's Plan of Operations............................................. 7
PART II: OTHER INFORMATION
ITEM 2. Changes in Securities....................................................... 9
ITEM 4. Submission of Matters to a Vote of Securities Holders....................... 9
ITEM 5. Other Information........................................................... 9
ITEM 6. Exhibits and Reports on Form 8-K............................................ 10
Signatures ............................................................................ 13
</TABLE>
2
<PAGE> 3
AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,776,328 $ 1,869,062
Other current assets 43,415 32,574
------------- -------------
Total current assets 4,819,743 1,901,636
Property and equipment, net 116,761 114,424
Patent license, net of accumulated amortization of $81,177 and
$84,823 at December 31, 1998 and June 30, 1999, respectively 43,823 40,177
Investment in ISI common stock 5,735 738
------------- -------------
Total assets $ 4,986,062 $ 2,056,975
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 88,920 $ 61,650
Accrued interest 208,356 --
Other accrued liabilities 20,722 19,086
------------- -------------
Total current liabilities 317,998 80,736
Notes payable to related party 2,600,000 --
------------- -------------
Total liabilities 2,917,998 80,736
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 10,000,000
Issued shares - 6,360,326 54,142 63,603
Additional paid-in capital 13,392,138 16,220,202
Deficit accumulated during the development stage (11,378,216) (14,307,566)
------------- -------------
Total stockholders' equity 2,068,064 1,976,239
------------- -------------
Total liabilities and stockholders' equity $ 4,986,062 $ 2,056,975
============= =============
</TABLE>
See accompanying notes.
3
<PAGE> 4
AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Cumulative
from
June 25,
1984
Three months ended Six months ended (Inception)
June 30, June 30, through
-------------------------------- -------------------------------- June 30,
1998 1999 1998 1999 1999
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Contract revenues $ -- $ -- $ -- $ -- $ 9,000,000
Interferon sales -- -- -- -- 420,974
Interest income 77,664 27,951 167,475 76,638 1,491,275
Sublicense fees -- -- -- -- 113,334
Royalty income -- -- -- -- 31,544
Gain on sale of ISI stock -- -- -- -- 113,972
Other -- -- -- -- 604,431
------------- ------------- ------------- ------------- -------------
77,664 27,951 167,475 76,638 11,775,530
Expenses:
Research and
development expenses 351,894 450,355 720,411 2,131,399 13,483,843
Selling, general, and
administrative expenses 260,312 521,090 558,991 845,419 11,718,139
Interest expense 29,250 321 58,500 29,170 846,114
------------- ------------- ------------- ------------- -------------
641,456 971,766 1,337,902 3,005,988 26,048,096
------------- ------------- ------------- ------------- -------------
Loss before income taxes (563,792) (943,815) (1,170,427) (2,929,350) (14,272,566)
Income tax expense -- -- -- -- 35,000
------------- ------------- ------------- ------------- -------------
Net loss $ (563,792) $ (943,815) $ (1,170,427) $ (2,929,350) $ (14,307,566)
============= ============= ============= ============= =============
Basic and diluted loss
per share $ (0.10) $ (0.15) $ (0.22) $ (0.50)
============= ============= ============= =============
Weighted average shares
outstanding 5,414,232 6,349,929 5,414,232 5,884,665
============= ============= ============= =============
</TABLE>
See accompanying notes.
4
<PAGE> 5
AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six months ended Cumulative from
June 30, June 25, 1984
-------------------------------- (Inception) through
1998 1999 June 30, 1999
------------- ------------- -------------
<S> <C> <C> <C>
Net cash used in operating activities $ (997,211) $ (2,901,136) $ (13,071,973)
Net cash used in investing activities 556,356 (6,130) (535,987)
Net cash provided by financing activities -- -- 15,477,019
------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents (440,855) (2,907,266) 1,869,059
Cash and cash equivalents at beginning
of period 879,170 4,776,328 --
------------- ------------- -------------
Cash and cash equivalents at end of
period $ 438,315 $ 1,869,062 $ 1,869,059
============= ============= =============
Supplemental Disclosure of Cash Flow
Information
Cash paid for income taxes $ -- $ -- $ 37,084
============= ============= =============
Cash paid for interest $ -- $ -- $ 6,466
============= ============= =============
</TABLE>
See accompanying notes.
5
<PAGE> 6
AMARILLO BIOSCIENCES, INC. AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation. The accompanying consolidated financial
statements, which should be read in conjunction with the consolidated
financial statements and footnotes included in the Company's Form
10-KSB, are unaudited (except for the December 31, 1998 consolidated
balance sheet which was derived from the Company's audited financial
statements), but have been prepared in accordance with generally
accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary
for a fair presentation have been included.
Operating results for the six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the full
year ending December 31, 1999.
2. Loss per share. Loss per share is computed based on the weighted
average number of common shares outstanding.
3. Effective April 2, 1999, by agreement between the Company and
Hayashibara Biochemical Laboratories (HBL), two promissory notes dated
September 25, 1996 and September 16, 1997, issued by the Company to HBL
for loans, were converted into common stock of the Company. The amount
converted included principal of $2.6 million, and accrued interest at
$237,526. The total number of shares of common stock of the Company
issued to HBL in consideration for the cancellation of said notes was
946,094 shares, at $2.9992 per share. The share price was determined by
the average of the high and low price weighted by volume for the ten
trading days prior to April 2, 1999. The shares are "restricted stock"
within the meaning of Rule 144 promulgated under the U.S. Securities
Act of 1933, and must be held for one year before they can be sold
under such rule.
As a consequence of the conversion, HBL's ownership of the Company has
increased from 22.8%, to 34.3%.
6
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ITEM 2. MANAGEMENT'S PLAN OF OPERATIONS
Amarillo Biosciences, Inc. is a development stage company, which is conducting
research and development activities focused on biologics for the treatment of
human and animal diseases. The Company has not commenced any significant product
commercialization and, until such time as it does, will not generate significant
product revenues. The Company's accumulated deficit has continued to grow, from
$11,378,216 at December 31, 1998 to $14,307,566 at June 30, 1999. Operating
losses are expected to continue for the foreseeable future and until such time
as the Company is able to attain sales levels sufficient to support its
operations.
During the next twelve months the Company will continue its research and
development activities, as well as the activities necessary to develop
commercial partnerships and licenses. The Company's expenditure of financial
resources during this period will fall principally into six broad categories, as
follows: Research and Development; Personnel; Consulting and Professional (other
than legal and accounting); Legal; Public Relations, Investor Relations, and
Shareholder Relations; and Liquidity Needs. The Company's expectations and goals
with respect to these categories are addressed separately below, by category:
RESEARCH AND DEVELOPMENT: Until it achieves commercial product sales, the
Company's business is research and development, and this is the area where the
Company's principal efforts will be expended during the next 12 months. The
Company has budgeted approximately $4.2 million for expenditure during the next
twelve months on research and development, inclusive of amounts to be expended
on the Company's Phase III Sjogren's syndrome clinical trial.
PERSONNEL: In addition to its intellectual property, the Company's principal
assets are its personnel. The Company has been successful in controlling its
personnel costs, both by maintaining its principal location in Amarillo, Texas,
and by ensuring maximum efficiency and utilization of existing personnel. The
Company has budgeted approximately $1 million for personnel expenses during the
next twelve months, including salaries, payroll taxes, worker's compensation
insurance, directors' and officers' general liability insurance, and group life,
health, dental, and liability insurance.
CONSULTING AND PROFESSIONAL (EXCEPT LEGAL AND ACCOUNTING): The Company has
budgeted approximately $150,000 for expenditure on professional consultants in
the next 12 months. Consulting fees are expected to be paid to the Company's
scientific advisory board; to certain directors who perform specific consulting
tasks at the Company's request; and to a number of independent consultants, in
connection with the operation of the Company. The Company will continue to use
the services of consultants to complement the Company's small full-time staff,
where such is a more efficient utilization of the Company's resources.
LEGAL AND ACCOUNTING: Although the Company is not involved in litigation, it has
budgeted legal expenses of approximately $180,000 during the next 12 months.
Almost 40% of the Company's legal expenditures will be for preparation and
filing of patents and for maintenance of existing patents in a number of
countries. Other legal expenses will be related to compliance with laws and
regulations affecting public companies, licensing and contracting, and general
corporate matters. The Company does not presently have an in-house legal staff,
nor does it intend to put such a staff in place during the next 12 months. The
Company will maintain Ernst & Young as its auditors.
7
<PAGE> 8
PUBLIC RELATIONS, INVESTOR RELATIONS AND SHAREHOLDER RELATIONS: The Company
recognizes that its ability to raise capital will depend, to some extent, upon
its relations with both potential future investors and its existing
shareholders. In turn, such relationships are built upon the foundation of
adequate, timely, and comprehensible communications. Accordingly, the Company
has budgeted approximately $125,000 for expenditure on these items during the
next 12 months. The expenditures will include payments to the Company's public
relations consultants, as well as the Company's expenses in attending a number
of meetings with analysts and institutional investors. The Company has also
budgeted sufficient amounts to maintain its comprehensive web site
(www.amarbio.com).
LIQUIDITY NEEDS: The principal budget items discussed above, along with other
miscellaneous costs and expenses, will cause the Company to expend approximately
$6.1 million during the next twelve months including the substantial expense of
the Company's Phase III Sjogren's syndrome trial. At June 30, 1999, the Company
had available cash of $1,869,062 and a $3 million loan commitment from
Hayashibara Biochemical Laboratories, payable in $1 million increments on or
before August 31, 1999; November 30, 1999; and February 29, 2000. The Company is
currently seeking additional funding through strategic collaborations and public
or private equity financing in an amount sufficient to support its operations
through June 30, 2000, and in connection therewith, is in negotiations with
several parties to obtain such financing. Should a commitment for additional
funds not be obtained during the third quarter of 1999, the Company will take
steps to curtail clinical trial expenditures and to reduce staff and
administrative expenses. Management believes that based on the Company's ability
to curtail clinical trial expense and to reduce staff and administration
expenses, available funds are sufficient to meet its anticipated cash
requirements for at least the next twelve months.
8
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
The following information is provided with respect to unregistered securities
issued by the Company, pursuant to conversion by Hayashibara Biochemical
Laboratories ("HBL") of $2,837,526 of debt (including principal and accrued
interest) held by it:
(a) The conversion occurred effective April 2, 1999 and the securities of
the Company issued to satisfy the conversion were 946,094 shares of the
Company's common stock, $.01 par value.
(b) No underwriters were employed. The securities were not offered
publicly, and were issued in their entirety to Hayashibara Biochemical
Laboratories, Inc., the principal shareholder of the Company.
(c) The total consideration was conversion of debt held by HBL, aggregating
$2,600,000 in principal, and $237,526 in accrued interest. There were
no underwriting discounts or commissions.
(d) The issuance was exempt from registration pursuant to Section 4(2) of
the Securities Act of 1933, HBL being a sophisticated investor and
major shareholder of the Company with a long association with the
Company, and represented on the Company's Board of Directors.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the annual meeting of the stockholders of the Company, held on May 11, 1999,
and adjourned to and continued on June 11, 1999, several matters were submitted
to a vote of security holders. All management nominees for directors were
elected to serve for the ensuing year. Each nominee received 4,149,995
affirmative votes, and there were withheld from voting for each nominee 11,700
shares ("broker non-votes"). The Company's Employee Stock Option Plan was
amended, as recommended by Management, upon an affirmative vote of 2,982,298
shares, with 16,800 shares voting against, and 15,450 shares abstaining. The
Company's Outside Director and Advisor Stock Option Plan was amended, as
recommended by Management, upon an affirmative vote of 2,986,148 shares, with
13,200 shares voting against, and 15,200 shares abstaining. The Company's
Articles of Incorporation were amended, as recommended by Management, upon an
affirmative vote of 3,616,162 shares, with 24,300 shares voting against, and
10,600 shares abstaining.
ITEM 5. OTHER INFORMATION.
Effective July 22, 1999, the Company secured a $3 million loan from Hayashibara
Biochemical Laboratories, its principal shareholder. The loan will provide $1
million per quarter starting in August, 1999, and will be repayable upon the
earlier of July 22, 2004, or 1 year after FDA approval is obtained for the use
of low dose oral interferon alpha for any indication. These funds will be used
for the Company's ongoing clinical trial programs. Hayashibara Biochemical
Laboratories owns 34.3% of Amarillo Biosciences, Inc.
9
<PAGE> 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT INDEX
NUMBER DESCRIPTION
------ -----------
3.1 Restated Articles of Incorporation of the Company, dated
June 22, 1999.
3.3* Bylaws of the Company.
4.1* Specimen Common Stock Certificate.
4.2* Form of Underwriter's Warrant.
10.1* Agreement dated as of April 1, 1984 between University
Patents, Inc. and the Company.
10.2* License Agreement dated as of March 22, 1988 between the
Company and The Texas A&M University System.
10.3* License Agreement dated October 20, 1989 between the Company
and ISI.
10.4* Manufacturing and Supply Agreement dated October 20, 1989
between the Company and ISI.
10.5* Joint Development and Manufacturing/Supply Agreement dated
March 13, 1992 between the Company and HBL, as amended.
10.6* Amended and Restated Agreement dated as of November 24, 1992
between Mitsubishi and the Company.
10.7* Japan Animal Health License Agreement dated January 20, 1993
between the Company and HBL.
10.9* Employment Agreement dated as of March 4, 1994 between the
Company and Dr. Joseph M. Cummins, as amended.
10.11* Manufacturing/Supply Agreement dated June 1, 1994 between
the Company and HBL.
10.12* Settlement Agreement dated April 27, 1995 among the Company,
ISI, Pharma Pacific Management Pty. Ltd. ("PPM"), Pharma
Pacific Pty. Ltd., Pharma Pacific Ltd., and Fernz
Corporation Limited.
10.13* Amendment of ACC/ISI License Agreement dated April 27, 1995
between the Company and ISI.
10.14* PPM/ACC Sub-license Agreement dated April 27, 1995 between
PPM and the Company.
10.15* License and Supply Agreement dated July 10, 1995 between
Veldona Africa, Inc. ("VAF") and Innovative Therapeutics,
Ltd. ("ITL").
10.16* Pricing Amendment, dated December 5, 1995 between VAF and
ITL.
10.18* Form of Consulting Agreement between the Company and the
Underwriter.
10.19* Research Agreement dated March 25, 1996 between the Company
and Ajinomoto Co., Inc.
10.20 1996 Employee Stock Option Plan, Amended and Restated as of
May 11, 1999.
10.21 Outside Director and Advisor Stock Option Plan, Amended and
Restated as of May 11, 1999.
10.22* Form of Indemnification Agreement between the Company and
officers and directors of the Company.
10
<PAGE> 11
NUMBER DESCRIPTION
------ -----------
10.23* Indemnification Agreement between HBL and the Company.
10.24* Stock Purchase Agreement dated as of September 21, 1987
between Mesa Operating Limited Partnership and the Company.
10.26** License Agreement dated July 22, 1997, between Hoffmann-La
Roche Inc., and the Company.
10.27** Distribution Agreement dated January 12, 1998, between
Global Damon Pharmaceutical and the Company.
10.28** Distribution Agreement dated September 17, 1997, between HBL
and the Company (TNF-A).
10.29** Distribution Agreement dated September 17, 1997, between HBL
and the Company (IFN-G).
10.30*** Amendment No. 1 dated September 28, 1998 to License
Agreement of March 22, 1988, between The Texas A&M
University System and the Company.
10.31*** Employment Agreement dated as of November 29, 1998 between
the Company and Kathleen L. Kelleher.
10.32*** Employment Agreement dated as of September 14, 1998 between
the Company and Dr. Philip C. Fox.
10.33*** Employment Agreement dated as of September 14, 1998 between
the Company and John Smith.
10.34*** Engagement Agreement dated as of October 15, 1998 between
Trust Company of the South and the Company.
21. Subsidiaries of the Company. The following sets forth the
name and jurisdiction of incorporation of each subsidiary of
the Company. All of such subsidiaries are wholly-owned by
the Company.
<TABLE>
<CAPTION>
NAME JURISDICTION OF INCORPORATION
- ----------------------------- -----------------------------
<S> <C>
VANGUARD BIOSCIENCES, INC. TEXAS
VELDONA USA, INC. TEXAS
VELDONA AFRICA, INC. TEXAS
VELDONA POLAND, INC. TEXAS
ABI TAIWAN, INC. TEXAS
AMARILLO CELL OF CANADA, INC. TEXAS
</TABLE>
*The Exhibit is incorporated by reference to the exhibit of the same number to
the Company's Registration Statement on Form SB-2 filed with and declared
effective by the Commission (File No. 333-4413) on August 8, 1996.
**The Exhibit is incorporated by reference to the Company's 1997 Annual Report
on Form 10-KSB filed with the Commission on or before March 31, 1998.
***The Exhibit is incorporated by reference to the Company's 1998 Annual Report
on Form 10-KSB filed with the Commission on or before March 31, 1999.
11
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EXHIBIT 27. Financial Data Schedule
REPORTS ON FORM 8-K
The Company filed a report on Form 8-K on April 2, 1999. The item
reported was the conversion by Hayashibara Biochemical Laboratories,
Inc. ("HBL") of debt held by it in the amount of $2,837,526, to 946,094
shares of the Company's common stock. Further information on this
conversion is detailed at Note 3 to the Consolidated Financial
Statements contained in Part I of this report.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMARILLO BIOSCIENCES, INC.
Date: Aug. 11, 1999 By: /s/ JOSEPH M. CUMMINS
------------- ------------------------------------
Joseph M. Cummins
President, Chief Executive Officer
and Chief Financial Officer
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
3.1 Restated Articles of Incorporation of the Company, dated
June 22, 1999.
3.3* Bylaws of the Company.
4.1* Specimen Common Stock Certificate.
4.2* Form of Underwriter's Warrant.
10.1* Agreement dated as of April 1, 1984 between University
Patents, Inc. and the Company.
10.2* License Agreement dated as of March 22, 1988 between the
Company and The Texas A&M University System.
10.3* License Agreement dated October 20, 1989 between the Company
and ISI.
10.4* Manufacturing and Supply Agreement dated October 20, 1989
between the Company and ISI.
10.5* Joint Development and Manufacturing/Supply Agreement dated
March 13, 1992 between the Company and HBL, as amended.
10.6* Amended and Restated Agreement dated as of November 24, 1992
between Mitsubishi and the Company.
10.7* Japan Animal Health License Agreement dated January 20, 1993
between the Company and HBL.
10.9* Employment Agreement dated as of March 4, 1994 between the
Company and Dr. Joseph M. Cummins, as amended.
10.11* Manufacturing/Supply Agreement dated June 1, 1994 between
the Company and HBL.
10.12* Settlement Agreement dated April 27, 1995 among the Company,
ISI, Pharma Pacific Management Pty. Ltd. ("PPM"), Pharma
Pacific Pty. Ltd., Pharma Pacific Ltd., and Fernz
Corporation Limited.
10.13* Amendment of ACC/ISI License Agreement dated April 27, 1995
between the Company and ISI.
10.14* PPM/ACC Sub-license Agreement dated April 27, 1995 between
PPM and the Company.
10.15* License and Supply Agreement dated July 10, 1995 between
Veldona Africa, Inc. ("VAF") and Innovative Therapeutics,
Ltd. ("ITL").
10.16* Pricing Amendment, dated December 5, 1995 between VAF and
ITL.
10.18* Form of Consulting Agreement between the Company and the
Underwriter.
10.19* Research Agreement dated March 25, 1996 between the Company
and Ajinomoto Co., Inc.
10.20 1996 Employee Stock Option Plan, Amended and Restated as of
May 11, 1999.
10.21 Outside Director and Advisor Stock Option Plan, Amended and
Restated as of May 11, 1999.
10.22* Form of Indemnification Agreement between the Company and
officers and directors of the Company.
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.23* Indemnification Agreement between HBL and the Company.
10.24* Stock Purchase Agreement dated as of September 21, 1987
between Mesa Operating Limited Partnership and the Company.
10.26** License Agreement dated July 22, 1997, between Hoffmann-La
Roche Inc., and the Company.
10.27** Distribution Agreement dated January 12, 1998, between
Global Damon Pharmaceutical and the Company.
10.28** Distribution Agreement dated September 17, 1997, between HBL
and the Company (TNF-A).
10.29** Distribution Agreement dated September 17, 1997, between HBL
and the Company (IFN-G).
10.30*** Amendment No. 1 dated September 28, 1998 to License
Agreement of March 22, 1988, between The Texas A&M
University System and the Company.
10.31*** Employment Agreement dated as of November 29, 1998 between
the Company and Kathleen L. Kelleher.
10.32*** Employment Agreement dated as of September 14, 1998 between
the Company and Dr. Philip C. Fox.
10.33*** Employment Agreement dated as of September 14, 1998 between
the Company and John Smith.
10.34*** Engagement Agreement dated as of October 15, 1998 between
Trust Company of the South and the Company.
21. Subsidiaries of the Company. The following sets forth the
name and jurisdiction of incorporation of each subsidiary of
the Company. All of such subsidiaries are wholly-owned by
the Company.
27. Financial Data Schedule
</TABLE>
<TABLE>
<CAPTION>
NAME JURISDICTION OF INCORPORATION
- ----------------------------- -----------------------------
<S> <C>
VANGUARD BIOSCIENCES, INC. TEXAS
VELDONA USA, INC. TEXAS
VELDONA AFRICA, INC. TEXAS
VELDONA POLAND, INC. TEXAS
ABI TAIWAN, INC. TEXAS
AMARILLO CELL OF CANADA, INC. TEXAS
</TABLE>
*The Exhibit is incorporated by reference to the exhibit of the same number to
the Company's Registration Statement on Form SB-2 filed with and declared
effective by the Commission (File No. 333-4413) on August 8, 1996.
**The Exhibit is incorporated by reference to the Company's 1997 Annual Report
on Form 10-KSB filed with the Commission on or before March 31, 1998.
***The Exhibit is incorporated by reference to the Company's 1998 Annual Report
on Form 10-KSB filed with the Commission on or before March 31, 1999.
<PAGE> 1
EXHIBIT 3.1
AMARILLO BIOSCIENCES, INC.
RESTATED ARTICLES OF INCORPORATION
ARTICLE I
AMARILLO BIOSCIENCES, INC., pursuant to the provisions of Article 4.07
of the Texas Business Corporation Act, hereby adopts Restated Articles of
Incorporation which accurately copy the Articles of Incorporation and all
amendments thereto that are in effect to date and as further amended by such
Restated Articles of Incorporation as hereinafter set forth and which contain no
other change in any provision thereof.
ARTICLE II
The Articles of Incorporation of the Corporation are amended by the
Restated Articles of Incorporation as follows:
Article Four is amended by changing the number of shares authorized in
the first paragraph thereof from "ten million (10,000,000)" to "twenty million
(20,000,000)".
A new Article Five is adopted, which Article Five shall read in its
entirety as follows:
"ARTICLE FIVE
The Corporation shall have the authority to issue
ten million (10,000,000) shares of preferred stock, one cent
($.01) par value. The Board of Directors of the Corporation
shall have authority to establish series of the unissued
preferred stock of the Corporation by affixing and
determining the designations, preferences, limitations, and
relative rights, including voting rights, of the shares of
any series so established to the same extent that such
designations, preferences,
-1-
<PAGE> 2
limitations and relative rights could be stated if fully set
forth in these Articles of Incorporation."
Articles Five, Six and Seven, as so designated prior to the addition of
the new Article Five, shall be redesignated as Articles Six, Seven and Eight,
respectively.
ARTICLE III
The amendments made by these Restated Articles of Incorporation have
been effected in conformity with the provisions of the Texas Business
Corporation Act and such Restated Articles of Incorporation and the amendments
made by the Restated Articles of Incorporation were duly adopted by the
Shareholders of the Corporation on the 11th day of June, 1999.
ARTICLE IV
The number of shares of the Corporation outstanding at the time of such
adoption was 5,414,232, and the number of shares entitled to vote thereon was
5,414,232. The number of shares voted for such amendment was 3,616,162, and the
number of shares voted against such amendment was 24,300.
ARTICLE V
The amendment effects no change in the amount of stated capital of the
Corporation.
ARTICLE VI
A new Article Eight is added to the Articles of Incorporation, stating
the current names and addresses of the Directors of the Corporation, which
Article Eight shall read as follows:
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<PAGE> 3
"ARTICLE EIGHT
The names and addresses of the Directors of the Corporation are:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Joseph M. Cummins 800 W. 9th
Amarillo, TX 79101
Katsuaki Hayashibara 800 W. 9th
Amarillo, TX 79101
James Cook 800 W. 9th
Amarillo, TX 79101
Dennis Moore 800 W. 9th
Amarillo, TX 79101
Steve Chen 800 W. 9th
Amarillo, TX 79101
Dr. James Page 800 W. 9th
Amarillo, TX 79101
Tom D'Alonzo 800 W. 9th
Amarillo, TX 79101
Brian McLean 800 W. 9th
Amarillo, TX 79101
Richard Franco 800 W. 9th
Amarillo, TX 79101
Ed Amento 800 W. 9th
Amarillo, TX 79101
</TABLE>
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<PAGE> 4
ARTICLE VII
The Articles of Incorporation and all amendments and supplements
thereto are hereby superseded by the following Restated Articles of
Incorporation which accurately copy the entire text thereof and as amended as
above set forth:
ARTICLE ONE
The name of the Corporation is AMARILLO BIOSCIENCES, INC.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose or purposes for which the Corporation is organized are:
(1) To transact all lawful business of every kind and character for
which a Corporation may be incorporated under the Texas Business Corporate
Act.
(2) To prepare, write, make, provide, record, transcribe, computerize,
and/or generate data, information, articles, papers, forms, projections,
figures, and the application of the same, as well as to disseminate and
publish such materials and documentation thereof, and to market and sell
the same.
(3) To develop, write, make, buy, file, prepare, license, sublicense
patents related to medicine, veterinary medicine, and/or agriculture and to
market and sell the same.
(4) To make, have made, use, sell or otherwise transfer substances
intended for human or nonhuman administration which, or the use or
manufacture of which, is covered in whole or in part by a claim of a
Licensed Patent in the country of manufacture, use, or sale.
(5) To engage for profit in the business of professional consultations
in such form and manner as will serve the medical, veterinary medical,
agricultural and/or livestock industries, as well as related industries.
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<PAGE> 5
(6) To purchase, own, hold, operate, rent, lease, sell, convey and deal
in real property, personal property and services incidental to the purposes
of the Corporation, subject to Part Four, Texas Miscellaneous Corporation
Laws Act.
ARTICLE FOUR
The Corporation shall have authority to issue twenty million
(20,000,000) shares of capital stock, one cent ($.01) par value.
No holder of shares of any class of the Corporation shall have the
preemptive right to subscribe for or acquire additional shares of the
Corporation of the same or any other class, whether such shares shall be hereby
or hereafter authorized; and no holder of shares of any class of the Corporation
shall have any right to acquire any shares which may be held in the Treasury of
the Corporation. All such additional or Treasury shares may be sold for such
consideration, at such time, and to such person or persons as the Board of
Directors may from time to time determine.
The Corporation may purchase, directly or indirectly, its own shares to
the extent of the aggregate of unrestricted capital surplus available therefor
and unrestricted reduction surplus available therefor.
The right to cumulate votes in the election of directors is expressly
prohibited.
ARTICLE FIVE
The Corporation shall have the authority to issue ten million
(10,000,000) shares of preferred stock, one cent ($.01) par value. The Board of
Directors of the Corporation shall have authority to establish series of the
unissued preferred stock of the Corporation by affixing and determining the
designations, preferences, limitations, and relative rights, including voting
rights, of the shares of any series so established to the same extent that such
designations, preferences, limitations and relative rights could be stated if
fully set forth in these Articles of Incorporation.
ARTICLE SIX
The Corporation will not commence business until it has received for
the issuance of its shares a consideration of the value of One Thousand
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<PAGE> 6
Dollars ($1,000), consisting of money, labor done or property actually received.
ARTICLE SEVEN
The address of the Corporation's registered office is 800 West 9th
Street, Amarillo, Texas 79101, and the name of its registered agent at such
address is JOSEPH M. CUMMINS.
ARTICLE EIGHT
The names and addresses of the Directors of the Corporation are:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Joseph M. Cummins 800 W. 9th
Amarillo, TX 79101
Katsuaki Hayashibara 800 W. 9th
Amarillo, TX 79101
James Cook 800 W. 9th
Amarillo, TX 79101
Dennis Moore 800 W. 9th
Amarillo, TX 79101
Steve Chen 800 W. 9th
Amarillo, TX 79101
Dr. James Page 800 W. 9th
Amarillo, TX 79101
Tom D'Alonzo 800 W. 9th
Amarillo, TX 79101
Brian McLean 800 W. 9th
Amarillo, TX 79101
Richard Franco 800 W. 9th
Amarillo, TX 79101
</TABLE>
-6-
<PAGE> 7
<TABLE>
<S> <C>
Ed Amento 800 W. 9th
Amarillo, TX 79101
</TABLE>
DATED this ____ day of June, 1999.
AMARILLO BIOSCIENCES, INC.
By:
-------------------------------------
Joseph M. Cummins, President
THE STATE OF TEXAS )
COUNTY OF POTTER )
BEFORE ME, a notary public, on this day personally appeared JOSEPH M.
CUMMINS, known to me to be the person whose name is subscribed to the foregoing
document and, being by me first duly sworn, declares that the statements therein
contained are true and correct.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of ___________,
1999.
-------------------------------
Notary Public, State of Texas
My Commission Expires:
------------
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<PAGE> 1
EXHIBIT 10.20
AMARILLO BIOSCIENCES, INC.
1996 EMPLOYEE STOCK OPTION PLAN
AMENDED AND RESTATED AS OF
MAY 11, 1999
ARTICLE I -- GENERAL
1.01. PURPOSES.
The purposes of this 1996 Employee Stock Option Plan (the "Plan") are
to: (1) closely associate the interests of the management of AMARILLO
BIOSCIENCES, INC. ("ABI") and its Subsidiaries and Affiliates (collectively
referred to as the "Company") with the shareholders by reinforcing the
relationship between participants' rewards and shareholder gains; (2) provide
management with an equity ownership in the Company commensurate with Company
performance, as reflected in increased shareholder value; (3) maintain
competitive compensation levels; and (4) provide an incentive to management for
continuous employment with the Company.
1.02. ADMINISTRATION.
(a) The Plan shall be administered by a committee of directors
appointed by the Board of Directors of ABI (the "Committee"), as constituted
from time to time. The Committee shall consist of at least two members of the
Board. 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").
(b) The Committee shall have the authority, in its sole discretion and
from time to time to:
(i) designate the employees or classes of employees eligible to
participate in the Plan;
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<PAGE> 2
(ii) grant awards provided in the Plan in such form and amount,
and subject to such vesting, as the Committee shall
determine, provided that in no event shall the period for
vesting be longer than that set forth in Section 2.04,
below.
(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.
(c) Decisions and determinations of the Committee on all matters
relating to the Plan shall be in its sole discretion and shall be conclusive. No
member of the Committee shall be liable for any action taken or decision made in
good faith relating to the Plan or any award thereunder.
(d) With respect to persons subject to Section 16 of the Securities
Exchange act of 1934 (the "1934 Act"), transactions under the Plan are intended
to comply with all applicable conditions of Rule 16b-3 or its successor under
the 1934 Act. To the extent any provision of the Plan or action by the Board of
Directors or the Committee fails to so comply, it shall be deemed null and void,
to the extent permitted by law and deemed advisable by the Board of Directors or
the Committee, as applicable.
(e) All usual and reasonable expenses of the Committee shall be paid by
the Company, and no member shall receive compensation with respect to his
services for the Committee except as may be authorized by the Board of
Directors. The Board of Directors and the Committee may employ attorneys,
consultants, accountants or other persons, and the Board of Directors, the
Committee, the Company and its officers and directors shall be entitled to rely
upon the advice, opinions or valuations of any such persons. All actions taken
and all interpretations and determinations made by the Board of Directors or
the Committee in good faith shall be final and binding upon all Employees who
have received awards, and upon the Company and all other interested persons. No
member of Board of Directors or the Committee shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Plan or awards made thereunder, and the Company shall indemnify
and hold harmless each member of the Board of Directors or the Committee against
all loss, cost, expenses or damages, occasioned by any act or omission to act in
connection with any such action, determination or interpretation under or of the
Plan, consistent with the Company's certificate of incorporation and bylaws.
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<PAGE> 3
1.03. ELIGIBILITY FOR PARTICIPATION.
Participants in the Plan shall be selected by the Committee from among
the employees of the Company. In making this selection and in determining the
form and amount of awards, the Committee shall consider any factors deemed
relevant, including the individual's functions, responsibilities, value of
services to the Company and past and potential contributions to the Company's
profitability and sound growth.
1.04. TYPES OF AWARDS UNDER PLAN.
Awards under the Plan will be in the form of Incentive Stock Options,
as described in Article II; provided, however, that Limited Rights, as described
in Article III, may be awarded with respect to Options concurrently or
previously awarded.
1.05. AGGREGATE LIMITATION ON AWARDS.
(a) Shares of stock which may be issued under the Plan shall be
authorized and unissued or treasury shares of Common Stock of ABI ("Common
Stock"). The maximum number of shares of Common Stock which may be issued under
the Plan shall be five hundred ninety thousand (590,000) shares. The maximum
number of shares of Common Stock with respect to which Incentive Stock Options
may be granted in any one year to any employee shall not exceed one hundred
fifty thousand (150,000).
(b) In addition to shares of Common Stock actually issued pursuant to
the exercise of Incentive Stock Options, there shall be deemed to have been
issued a number of shares equal to the number of shares of Common Stock in
respect of which Limited Rights (as described in Article III) shall have been
exercised.
(c) Any shares of Common Stock subject to an Incentive Stock Option
which for any reason is terminated unexercised or expires shall again be
available for issuance under the Plan, but shares subject to an Incentive Stock
Option which are not issued as a result of the exercise of Limited Rights shall
not again be available for issuance under the Plan.
1.06. EFFECTIVE DATE AND TERM OF PLAN.
(a) The Plan 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 1996 Annual Meeting of Shareholders of ABI.
(b) No awards shall be made under the Plan after the last day of the
Company's 2001 fiscal year provided, however, that the Plan and all awards made
under the Plan prior to such
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<PAGE> 4
date shall remain in effect until such awards have been satisfied or terminated
in accordance with the Plan and the terms of such awards.
ARTICLE II -- INCENTIVE STOCK OPTIONS
2.01. AWARD OF INCENTIVE STOCK OPTIONS.
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 "Incentive Stock Options,"
intended to qualify as such under the provisions of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") ("Incentive Stock Options") to
purchase for cash the number of shares of Common Stock allotted by the
Committee. The date an Incentive Stock Option is granted shall mean the date
selected by the Committee as of which the Committee allots a specific number of
shares to a participant pursuant to the Plan.
2.02. INCENTIVE STOCK OPTION AGREEMENTS.
The grant of an Incentive Stock Option shall be evidenced by a written
Incentive Stock Option Agreement, executed by the Company and the holder of an
Incentive Stock Option (the "Optionee"), stating the number of shares of Common
Stock subject to the Incentive Stock Option evidenced thereby, and in such form
as the Committee may from time to time determine.
2.03. INCENTIVE STOCK OPTION PRICE.
The Option Price per share of Common Stock deliverable upon the
exercise of an Incentive Stock Option shall be 100% of the Fair Market Value of
a share of Common Stock on the date the Incentive Stock Option is granted;
provided, however, that with respect to any Optionee who owns stock possessing
more than 10% of the total combined voting power of all classes of stock of ABI
or of its parent or Subsidiary corporation (with such ownership determined in
view of the attribution provisions of Section 424(d) of the Code), the Option
Price per share of Common Stock deliverable upon the exercise of an Incentive
Stock Option shall be 110% of the Fair Market Value of a share of Common Stock
on the date the Incentive Stock Option is granted. The Committee shall determine
the date on which an option is granted, provided that such date is consistent
with the Code and any applicable rules or regulations thereunder; in the absence
of such determination, the date on which the Committee adopts a resolution
granting an option shall be considered the date on which such option is granted,
provided the Employee to whom the option is granted is promptly notified of the
grant and a written option agreement is duly executed as of the date of the
resolution.
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<PAGE> 5
2.04. TERM AND EXERCISE.
Each Incentive Stock Option for employees who are not 10% owners is
exercisable during a period of ten years from the date of grant thereof (the
"Option Term"), subject to the Vesting Schedule for Employees who are not 10%
Owners, set forth below. With respect to any Optionee who at the time the Option
is granted owns stock possessing more than 10% of the total combined voting
power of all classes of stock of ABI or of its parent or Subsidiary corporation
(with such ownership determined pursuant to the attribution rules set forth in
Section 424(d) of the Code), each Incentive Stock Option is exercisable during a
period of five years from the date of grant thereof, subject to the Vesting
Schedule for Employees who are 10% Owners, set forth below. No Incentive Stock
Option shall be exercisable after the expiration of its Option Term. The
Committee may also in its sole discretion accelerate the exerciseability or
vesting of any option or installment thereof at any time.
VESTING SCHEDULE FOR EMPLOYEES WHO ARE NOT 10% OWNERS. Options awarded
shall be exercisable, subject to the other terms and conditions of the Plan,
only upon the expiration of the designated number of years of active employment
with the Company from date of award, as provided below:
20% of Options awarded - 1 year
40% of Options awarded - 2 years
60% of Options awarded - 3 years
80% of Options awarded - 4 years
100% of Options awarded - 5 years
VESTING SCHEDULE FOR EMPLOYEES WHO ARE 10% OWNERS.
25% of Options awarded - 1 year
50% of Options awarded - 2 years
75% of Options awarded - 3 years
100% of Options awarded - 4 years
Except as provided in Sections 2.06, 2.07 and 2.08 hereof, no Incentive
Stock Option shall be exercised at any time unless the holder thereof is then a
regular full-time employee of the Company or one of its subsidiaries.
2.05. MAXIMUM AMOUNT OF INCENTIVE STOCK OPTION GRANT.
In no event shall the aggregate Fair Market Value of all Common Stock
(determined at the time the option is granted) with respect to which Incentive
Stock Options are exercisable for the first time by an individual during any
calendar year (under all plans of the Company and its subsidiaries) exceed
$100,000.
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<PAGE> 6
2.06. DEATH OF OPTIONEE.
(a) Upon the death of the Optionee, any Incentive Stock Option
exercisable on the date of death may be exercised by the Optionee's estate or by
a person who acquires the right to exercise such Incentive Stock Option by
bequest or inheritance or by reason of the death of the Optionee, provided that
such exercise occurs within both the remaining Option Term of the Incentive
Stock Option and one year after the Optionee's death.
(b) The provisions of this Section shall apply notwithstanding the fact
that the Optionee's employment may have terminated prior to death, but only to
the extent of any Incentive Stock Options exercisable on the date of death.
2.07. RETIREMENT OR DISABILITY.
Upon the termination of the Optionee's employment by reason of
permanent disability (as defined herein) or retirement (as determined by the
Committee), the Optionee may, within 36 months from the date of such termination
of employment, exercise any Incentive Stock Options to the extent such Incentive
Stock Options were exercisable at the date of such termination of employment.
Notwithstanding the foregoing, the tax treatment available pursuant to Section
422 of the Code upon the exercise of an Incentive Stock Option will not be
available to an Optionee who exercises any Incentive Stock Options more than (i)
12 months after the date of termination of employment due to permanent
disability or (ii) three months after the date of termination of employment due
to retirement. For purposes hereof, "permanent disability" shall have the
meaning set forth in Section 22(e)(3) of the Code or any successor provision
thereto.
2.08. TERMINATION FOR OTHER REASONS.
Except as provided in Sections 2.06 and 2.07 or except as otherwise
determined by the Committee, all Incentive Stock Options shall terminate upon
the termination of the Optionee's employment; provided, however, that if the
Optionee's employment was involuntarily terminated (with or without cause),
Optionee may exercise, during a 90-day period commencing with date of
termination, all Options theretofore vested, or which vest during said 90-day
period, under the Vesting Schedules set forth in Paragraph 2.04, above. At the
end of the 90-day period, all rights of such Optionee under any then outstanding
option or right shall terminate and shall be forfeited immediately as to any
unexercised portion thereof.
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<PAGE> 7
2.09. MANNER OF PAYMENT.
Each Stock Option Agreement shall set forth the procedure governing the
exercise of the Stock Option granted thereunder, and shall provide that, upon
such exercise in respect of any shares of Common Stock subject thereto, the
Optionee shall pay to the Company, in full, the Option Price for such shares
with cash or in shares of the Common Stock, valued at the Fair Market Value per
Share on the date of exercise.
2.10. ISSUANCE OF SHARES.
As soon as practicable after receipt of payment, the Company shall
deliver to the Optionee a certificate or certificates for such shares of Common
Stock. The Optionee shall become a shareholder of the Company with respect to
Common Stock represented by share certificates so issued and as such shall be
fully entitled to receive dividends, to vote and to exercise all other rights of
a shareholder.
2.11. EFFECT OF EXERCISE.
The exercise of any Stock Option shall cancel that number of related
Limited Rights, if any, which is equal to the number of shares of Common Stock
purchased pursuant to said Option.
2.12. RULE 16b-3 EXEMPTION.
Options granted under the Plan shall comply with the applicable
provisions of Rule 16b-3 promulgated under the 1934 Act, or any successor, and
shall contain such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of the 1934 Act
with respect to Plan transactions.
ARTICLE III -- LIMITED RIGHTS
3.01. AWARD OF LIMITED RIGHTS.
Concurrently with or subsequent to the award of any Incentive Stock
Option, the Committee may, subject to the provisions of the Plan and such other
terms and conditions as the Committee may prescribe, award to the Optionee with
respect to each Option, a related limited right permitting the Optionee, during
a specified limited time period, to be paid the appreciation on the Common Stock
in lieu of exercising the Option ("Limited Right").
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<PAGE> 8
3.02. LIMITED RIGHTS AGREEMENT.
Limited Rights granted under the Plan shall be evidenced by written
agreements in such form as the Committee may from time to time determine.
3.03. EXERCISE PERIOD.
Limited Rights shall (and must) be exercised immediately preceding or
simultaneous with the date of a Change in Control of ABI (the "Exercise
Period"), and all Limited Rights held by the Optionee shall be exercised during
such Exercise Period, without regard to the Vesting Schedules set forth in
Paragraph 2.04; provided, however, that if a Change in Control shall have
occurred without notice or opportunity for exercise of Limited Rights, then the
Limited Rights shall be exercised as soon as practicable after a determination
has been made that a "Change in Control" has occurred, or has been deemed to
have occurred.
As used in the Plan, a "Change in Control" shall be deemed to have
occurred if
(a) individuals who were directors of ABI, immediately prior to a
Control Transaction shall cease, within one year of such Control Transaction, to
constitute a majority of the Board of Directors of ABI (or of the Board of
Directors of any successor to ABI or to all or substantially all of its
assets), or
(b) any entity, person or Group other than ABI or a Subsidiary of ABI
or Hayashibara Biochemical Laboratories, Inc. or an Affiliate thereof acquires
shares of ABI in a transaction or series of transactions that result in such
entity, person or Group directly or indirectly owning beneficially fifty-one
percent (51%) or more of the outstanding shares.
As used herein, "Control Transaction" shall be
(i) any tender offer for or acquisition of capital stock of ABI,
(ii) any merger, consolidation, or sale of all or substantially
all of the assets of ABI which has been approved by the
shareholders,
(iii) any contested election of directors of ABI, or
(iv) any combination of the foregoing;
which results in a change in voting power sufficient to elect a majority of the
Board of Directors of ABI. As used herein, "Group" shall mean persons who act in
concert as described in Sections 13(d)(3) and/or 14(d)(2) of the Securities
Exchange Act of 1934, as amended.
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<PAGE> 9
3.04. AMOUNT OF PAYMENT.
The amount of payment to which an Optionee shall be entitled upon the
exercise of each Limited Right shall be equal to 100% of the amount, if any,
which is equal to the difference between the Fair Market Value per share of
Common Stock covered by the related Option on the date the Option was granted
and the Market Price of a share of such Common Stock. Market Price is defined to
be the greater of (i) the highest price per share of the Company's Common Stock
paid in connection with any Change in Control and (ii) the highest price per
share of the Company's Common Stock paid pursuant to an unsolicited brokerage
transaction during the 60-day period prior to the Change in Control.
3.05. FORM OF PAYMENT.
Payment of the amount to which an Optionee is entitled upon the
exercise of Limited Rights, as determined pursuant to Section 3.04, shall be
made solely in cash.
3.06. EFFECT OF EXERCISE.
If Limited Rights are exercised, the Stock Options related to such
Limited Rights cease to be exercisable to the extent of the number of shares
with respect to which the Limited Rights were exercised. Upon the exercise or
termination of the Options related to such Limited Rights, the Limited Rights
granted with respect thereto terminate to the extent of the number of shares as
to which the related Options were exercised or terminated.
3.07. RETIREMENT OR DISABILITY.
Upon termination of the Optionee's employment with the Company by
reason of permanent disability or retirement (as each is determined by the
Committee), the Optionee may, within 36 months from the date of termination,
exercise any Limited Right to the extent such Limited Right is otherwise
exercisable during such 36-month period.
3.08. DEATH OF OPTIONEE OR TERMINATION FOR OTHER REASONS.
Except as provided in Section 3.07, or except as otherwise determined
by the Committee, all Limited Rights granted under the Plan shall terminate upon
the termination of the Optionee's employment with the Company, or upon the death
of the Optionee.
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<PAGE> 10
ARTICLE IV -- MISCELLANEOUS
4.01. GENERAL RESTRICTION.
Each award under the Plan shall be subject to the requirement that, if
at any time the Committee shall determine that (i) the listing, registration or
qualification of the shares of Common Stock subject or related thereto upon any
securities exchange or under any state or federal law, or (ii) the consent or
approval of any government regulatory body, or (iii) an agreement by the grantee
of an award with respect to the disposition of shares of Common Stock, is
necessary or desirable as a condition of, or in connection with, the granting of
such award or the issue or purchase of shares of Common Stock thereunder, such
award may not be consummated in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Committee.
4.02. NON-ASSIGNABILITY.
No award under the Plan shall be assignable or transferable by the
recipient thereof, except by will or by the laws of descent and distribution.
During the life of the recipient, such award shall be exercisable only by such
person or by such person's guardian or legal representative.
4.03. RIGHT TO TERMINATE EMPLOYMENT.
Nothing in the Plan or in any agreement entered into pursuant to the
Plan shall confer upon any participant the right to continue in the employment
of the Company or affect any right which the Company may have to terminate the
employment of such participant.
4.04. NON-UNIFORM DETERMINATIONS.
The Committee's determinations under the Plan (including without
limitation determinations of the persons to receive awards, the form, amount and
timing of such awards, the terms and provisions of such awards and the
agreements evidencing same) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, awards under
the Plan, whether or not such persons are similarly situated.
4.05. RIGHTS AS A SHAREHOLDER.
The recipient of any award under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for shares of
Common Stock are issued to him.
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<PAGE> 11
4.06. DEFINITIONS.
In this Plan the following definitions (along with other definitions
set forth elsewhere in the Plan) shall apply:
(a) "Affiliate" means any person or entity which directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with ABI.
(b) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without
limitation the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on
such system or exchange (or the exchange with the greatest
volume of trading in Common Stock) on the date of grant, as
reported in The Wall Street Journal or such other source as
the Board deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted
by a recognized securities dealer but selling prices are not
reported, the Fair Market Value of a Share of Common Stock
shall be the mean between the bid and asked prices for the
Common Stock on the last market trading day prior to the day
of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in
good faith by the Committee.
(c) "Option" means Incentive Stock Option.
(d) "Option Price" means the purchase price per share of Common Stock
deliverable upon the exercise of an Incentive Stock Option.
(e) "Subsidiary" means any corporation of which, at the time more than
50% of the shares entitled to vote generally in an election of directors are
owned directly or indirectly by ABI or any Subsidiary thereof.
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<PAGE> 12
4.07. LEAVES OF ABSENCE.
The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect of any leave of
absence taken by the recipient of any award. Without limiting the generality of
the foregoing, the Committee shall be entitled to determine (i) whether or not
any such leave of absence shall constitute a termination of employment within
the meaning of the Plan and (ii) the impact, if any, of any such leave of
absence on awards under the Plan theretofore made to any recipient who takes
such leave of absence.
4.08. NEWLY ELIGIBLE EMPLOYEES.
The Committee shall be entitled to make such rules, regulations,
determinations and awards as it deems appropriate in respect of any employee who
becomes eligible to participate in the Plan or any portion thereof after the
commencement of an award or incentive period.
4.09. ADJUSTMENTS.
In the event of any change in the outstanding Common Stock by reason of
a stock dividend or distribution, recapitalization, merger, consolidation,
split-up, combination, exchange of shares or the like, the Committee shall
appropriately adjust the number of shares of Common Stock which may be issued
under the Plan, the number of shares of Common Stock subject to Options
theretofore granted under the Plan, the Option Price of Options theretofore
granted under the Plan, the amount and terms of any Limited Rights theretofore
awarded under the Plan, and any and all other matters deemed appropriate by the
Committee.
4.10. AMENDMENT OF THE PLAN.
(a) 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 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 (i) increase the maximum number of shares of
Common Stock which may be issued under the Plan (other than increases pursuant
to Section 4.10), (ii) extend the period during which any award may be granted
or exercised, or (iii) extend the term of 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 or her rights under
an award previously granted to him or her.
-12-
<PAGE> 13
4.11. DISPOSITION OF OPTION SHARES; WITHHOLDING TAXES.
Upon the disposition (within the meaning of Code Section 424(c)) of
shares of Common Stock acquired pursuant to the exercise of an Incentive Stock
Option prior to the expiration of the holding period requirements of Code
Section 422(a)(1), the Optionee shall be required to give notice to the Company
of such disposition and the Company shall have the right to require the Optionee
to pay to the Company the amount of any taxes that are required by law to be
withheld with respect to such disposition.
-13-
<PAGE> 1
EXHIBIT 10.21
AMARILLO BIOSCIENCES, INC.
OUTSIDE DIRECTOR AND ADVISOR STOCK OPTION PLAN
AMENDED AND RESTATED AS OF
MAY 11, 1999
ARTICLE I -- GENERAL
1.01. PURPOSES.
The purposes of this Outside Director and Advisor Stock Option Plan
(the "Plan") are to: (1) closely associate the interests of the Outside
Directors and Scientific Advisors of AMARILLO BIOSCIENCES, INC. ("ABI") and its
Subsidiaries and Affiliates (collectively referred to as the "Company") with the
shareholders by reinforcing the relationship between participants' rewards and
shareholder gains; (2) provide ABI's Outside Directors and Scientific Advisors
with an equity ownership in the Company commensurate with Company performance,
as reflected in increased shareholder value; and (3) provide an incentive to
Outside Directors and Scientific Advisors for continuous association with the
Company. The Plan is not an incentive stock option plan within the meaning of
Section 422 of the Internal Revenue Code of 1986 (the "Code").
1.02. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by a Committee of persons appointed
by the Board of Directors of ABI (the "Committee"), as constituted from time to
time. The Committee shall consist of at least two members of the Board.
(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,
and subject to such vesting, as the Committee shall
determine, provided that in no event shall the period for
vesting be longer than that set forth in Section 2.04,
below.
(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
-1-
<PAGE> 2
other action necessary or advisable for the implementation
and administration of the Plan.
(c) Decisions and determinations of the Committee on all matters
relating to the Plan shall be conclusive. No member of the Committee shall be
liable for any action taken or decision made in good faith relating to the Plan
or any award thereunder.
(d) With respect to persons subject to Section 16 of the 1934 Act,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successor under the 1934 Act. To the extent any
provision of the Plan or action by the Board of Directors or the Committee fails
to so comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Board of Directors or the Committee, as applicable.
(e) All usual and reasonable expenses of the Committee shall be paid by
the Company, and no member shall receive compensation with respect to his
services for the Committee except as may be authorized by the Board of
Directors. The Board of Directors and the Committee may employ attorneys,
consultants, accountants or other persons, and the Board of Directors, the
Committee, the Company and its officers and directors shall be entitled to rely
upon the advice, opinions or valuations of any such persons. All actions taken
and all interpretations and determinations made by the Board of Directors or
the Committee in good faith shall be final and binding upon all person who have
received awards, and upon the Company and all other interested persons. No
member of Board of Directors or the Committee shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Plan or awards made thereunder, and the Company shall indemnify
and hold harmless each member of the Board of Directors or the Committee against
all loss, cost, expenses or damages, occasioned by any act or omission to act in
connection with any such action, determination or interpretation under or of the
Plan, consistent with the Company's certificate of incorporation and bylaws.
1.03. AWARDS UNDER PLAN.
Each award under the Plan will include both:
(i) Stock Options, as described in Article II; and
(ii) Limited Rights, as described in Article III.
1.04. AGGREGATE LIMITATION ON AWARDS.
(a) Shares of stock which may be issued under the Plan shall be
authorized and unissued or treasury shares of Common Stock of ABI ("Common
Stock"). The maximum number of shares of Common Stock which may be issued under
the Plan shall be four hundred ten thousand (410,000) shares.
-2-
<PAGE> 3
(b) In addition to shares of Common Stock actually issued pursuant to
the exercise of Stock Options, there shall be deemed to have been issued a
number of shares equal to the number of shares of Common Stock in respect of
which Limited Rights (as described in Article III) shall have been exercised.
(c) Any shares of Common Stock subject to a Stock Option which for any
reason is terminated unexercised or expires shall again be available for
issuance under the Plan, but shares subject to a Stock Option which are not
issued as a result of the exercise of Limited Rights shall not again be
available for issuance under the Plan.
1.05. EFFECTIVE DATE AND TERM OF PLAN.
(a) The Plan 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 1996 Annual Meeting of Shareholders of ABI.
(b) No awards shall be made under the Plan after the last day of the
Company's 2001 fiscal year provided, however, that the Plan and all awards made
under the Plan prior to such date shall remain in effect until such awards have
been satisfied or terminated in accordance with the Plan and the terms of such
awards.
ARTICLE II -- STOCK OPTIONS
2.01. AWARD OF STOCK OPTIONS.
(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.
(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.
(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
-3-
<PAGE> 4
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.
(d) In the event any Option granted under the Plan would cause the
number of shares subject to outstanding Options plus the number of shares
previously purchased under Options to exceed the total number of shares
available for issuance under the Plan, then the remaining Options shall be
granted to persons qualifying for same, on a pro rata basis, and no further
grants shall be made until such time, if any, as additional shares become
available for grant under the Plan through action of the shareholders to
increase the number of shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.
(e) Options may be granted only to Outside Directors and/or Scientific
Advisors.
(f) Options granted under the Plan shall comply with the applicable
provisions of Rule 16b-3 promulgated under the 1934 Act, or any successor
provisions thereto, and shall contain such additional conditions or restrictions
as may be required thereunder to qualify for the maximum exemption from Section
16 of the 1934 Act with respect to Plan transactions.
2.02. STOCK OPTION AGREEMENTS.
The grant of a Stock Option shall be evidenced by a written Stock
Option Agreement, executed by the Company and the holder of a Stock Option (the
"Optionee"), stating the number of shares of Common Stock subject to the Stock
Option evidenced thereby, and in such form as the Committee may from time to
time determine.
2.03. STOCK OPTION PRICE.
The Option Price per share of Common Stock deliverable upon the
exercise of a Stock Option shall be 100% of the Fair Market Value of a share of
Common Stock on the date the Stock Option is granted.
2.04. TERM AND EXERCISE.
Each Stock Option may be exercised during a period of ten years from
the date of grant thereof (the "Option Term"), subject to the vesting schedule
set forth below. The Committee may also in its sole discretion accelerate the
exerciseability or vesting of any option or installment thereof at any time. No
Stock Option shall be exercisable after the expiration of its Option Term.
VESTING SCHEDULE. Options awarded shall be exercisable, subject to the
other terms and conditions of the Plan, only upon the expiration of the
designated number of years of active
-4-
<PAGE> 5
association with the Company as an Outside Director or Scientific Advisor, from
date of award, as provided below:
20% of Options awarded - 1 year
40% of Options awarded - 2 years
60% of Options awarded - 3 years
80% of Options awarded - 4 years
100% of Options awarded - 5 years
2.05. MANNER OF PAYMENT.
Each Stock Option Agreement shall set forth the procedure governing the
exercise of the Stock Option granted thereunder, and shall provide that, upon
such exercise in respect of any shares of Common Stock subject thereto, the
Optionee shall pay to the Company, in full, the Option Price for such shares
with cash or in shares of the Common Stock, valued at the Fair Market Value per
Share on the date of exercise.
2.06. ISSUANCE OF SHARES.
As soon as practicable after receipt of payment, the Company shall
deliver to the Optionee a certificate or certificates for such shares of Common
Stock. The Optionee shall become a shareholder of the Company with respect to
Common Stock represented by share certificates so issued and as such shall be
fully entitled to receive dividends, to vote and to exercise all other rights of
a shareholder.
2.07. DEATH OF OPTIONEE.
(a) Upon the death of the Optionee, any rights to the extent
exercisable on the date of death may be exercised by the Optionee's estate, or
by a person who acquires the right to exercise such Stock Option by bequest or
inheritance or by reason of the death of the Optionee, provided that such
exercise occurs within both the remaining effective term of the Stock Option and
one year after the Optionee's death.
(b) The provisions of this Section shall apply notwithstanding the fact
that the Optionee's association may have terminated prior to death, but only to
the extent of any rights exercisable on the date of death.
-5-
<PAGE> 6
2.08. DISABILITY.
Upon termination of the Optionee's association by reason of permanent
disability (as defined herein), the Optionee may, within 36 months from the date
of termination, exercise any Stock Options to the extent such Options are
exercisable during such 36-month period. Notwithstanding the foregoing, the tax
treatment available pursuant to Section 422 of the Code upon the exercise of an
Incentive Stock Option will not be available to an Optionee who exercises any
Incentive Stock Options more than (i) 12 months after the date of termination of
employment due to permanent disability or (ii) three months after the date of
termination of employment due to retirement. For purposes hereof, "permanent
disability" shall have the meaning set forth in Section 22(e)(3) of the Code or
any successor provision thereto.
2.09. TERMINATION FOR OTHER REASONS.
Except as provided in Sections 2.07 and 2.08, or except as otherwise
determined by the Committee, all Stock Options shall terminate upon the
termination of the Optionee's association with the Company as an Outside
Director or Scientific Advisor; provided, however, that if the Optionee's
association was involuntarily terminated (with or without cause), Optionee may
exercise, during a 90-day period commencing with date of termination, all
Options theretofore vested, or which vest during said 90-day period, under the
Vesting Schedule set forth in Paragraph 2.04, above. At the end of the 90-day
period, all rights of such Optionee under any then outstanding option or right
shall terminate and shall be forfeited immediately as to any unexercised portion
thereof.
2.10. EFFECT OF EXERCISE.
The exercise of any Stock Option shall cancel that number of related
Limited Rights, if any, which is equal to the number of shares of Common Stock
purchased pursuant to said Option.
2.11. RULE 16b-3 EXEMPTION.
Options granted under the Plan shall comply with the applicable
provisions of Rule 16b-3 promulgated under the 1934 Act, or any successor
provisions thereto, and shall contain such additional conditions or restrictions
as may be required thereunder to qualify for the maximum exemption from Section
16 of the 1934 Act with respect to Plan transactions.
ARTICLE III -- LIMITED RIGHTS
3.01. AWARD OF LIMITED RIGHTS.
Concurrently with the award of each Stock Option, there shall
automatically be awarded to the Optionee, with respect to each Option, a related
limited right permitting the Optionee,
-6-
<PAGE> 7
during a specified limited time period, to be paid the appreciation on the
Common Stock in lieu of exercising the Option ("Limited Right").
3.02. LIMITED RIGHTS AGREEMENT.
Limited Rights granted under the Plan shall be evidenced by written
agreements in such form as the Committee may from time to time determine.
3.03. EXERCISE PERIOD.
Limited Rights shall (and must) be exercised immediately preceding or
simultaneous with the date of a Change in Control of ABI (the "Exercise
Period"), and all Limited Rights held by the Optionee shall be exercised during
such Exercise Period, without regard to the Vesting Schedule set forth in
Paragraph 2.04; provided, however, that if a Change in Control shall have
occurred without notice or opportunity for exercise of Limited Rights, then the
Limited Rights shall be exercised as soon as practicable after a determination
has been made that a "Change in Control" has occurred, or has been deemed to
have occurred.
As used in the Plan, a "Change in Control" shall be deemed to have
occurred if
(a) individuals who were directors of ABI immediately prior to a
Control Transaction shall cease, within one year of such Control Transaction, to
constitute a majority of the Board of Directors of ABI (or of the Board of
Directors of any successor to ABI or to all or substantially all of its
assets), or
(b) any entity, person or Group other than ABI or a Subsidiary of ABI
or Hayashibara Biochemical Laboratories, Inc. or an Affiliate thereof acquires
shares of ABI in a transaction or series of transactions that result in such
entity, person or Group directly or indirectly owning beneficially fifty-one
percent (51%) or more of the outstanding shares.
As used herein, "Control Transaction" shall be
(i) any tender offer for or acquisition of capital stock of ABI,
(ii) any merger, consolidation, or sale of all or substantially
all of the assets of ABI which has been approved by the
shareholders,
(iii) any contested election of directors of ABI, or
(iv) any combination of the foregoing;
-7-
<PAGE> 8
which results in a change in voting power sufficient to elect a majority of the
Board of Directors of ABI. As used herein, "Group" shall mean persons who act in
concert as described in Sections 13(d)(3) and/or 14(d)(2) of the 1934 Act, as
amended.
3.04. AMOUNT OF PAYMENT.
The amount of payment to which an Optionee shall be entitled upon the
exercise of each Limited Right shall be equal to 100% of the amount, if any,
which is equal to the difference between the Fair Market Value per share of
Common Stock covered by the related Option on the date the Option was granted
and the Market Price of a share of such Common Stock. Market Price is defined to
be the greater of (i) the highest price per share of the Company's Common Stock
paid in connection with any Change in Control and (ii) the highest price per
share of the Company's Common Stock paid pursuant to an unsolicited brokerage
transaction during the 60-day period prior to the Change in Control.
3.05. FORM OF PAYMENT.
Payment of the amount to which an Optionee is entitled upon the
exercise of Limited Rights, as determined pursuant to Section 3.04, shall be
made solely in cash.
3.06. EFFECT OF EXERCISE.
If Limited Rights are exercised, the Stock Options related to such
Limited Rights cease to be exercisable to the extent of the number of shares
with respect to which the Limited Rights were exercised. Upon the exercise or
termination of the Options related to such Limited Rights, the Limited Rights
granted with respect thereto terminate to the extent of the number of shares as
to which the related Options were exercised or terminated.
3.07. DISABILITY.
Upon termination of the Optionee's association with the Company as
either an Outside Director or Scientific Advisor by reason of permanent
disability (as determined by the Committee), the Optionee may, within 36 months
from the date of termination, exercise any Limited Right to the extent such
Limited Right is otherwise exercisable during such 36-month period.
3.08. DEATH OF OPTIONEE OR TERMINATION FOR OTHER REASONS.
Except as provided in Section 3.07, or except as otherwise determined
by the Committee, all Limited Rights granted under the Plan shall terminate upon
the termination of the Optionee's association with the Company as either an
Outside Director or Scientific Advisor or upon the death of the Optionee.
-8-
<PAGE> 9
ARTICLE IV -- MISCELLANEOUS
4.01. GENERAL RESTRICTION.
Each award under the Plan shall be subject to the requirement that, if
at any time the Committee shall determine that (i) the listing, registration or
qualification of the shares of Common Stock subject or related thereto upon any
securities exchange or under any state or federal law, or (ii) the consent or
approval of any government regulatory body, or (iii) an agreement by the grantee
of an award with respect to the disposition of shares of Common Stock, is
necessary or desirable as a condition of, or in connection with, the granting of
such award or the issue or purchase of shares of Common Stock thereunder, such
award may not be consummated in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Committee.
4.02. NON-ASSIGNABILITY.
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.
4.03. RIGHT TO TERMINATE ASSOCIATION.
Nothing in the Plan or in any agreement entered into pursuant to the
Plan shall confer upon any participant the right to continue in association with
the Company or affect any right which the Company or the shareholders of the
Company may have to terminate the association of such participant.
4.04. RIGHTS AS A SHAREHOLDER.
The recipient of any award under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for shares of
Common Stock are issued to him.
-9-
<PAGE> 10
4.05. DEFINITIONS.
In this Plan the following definitions (along with other definitions
elsewhere set forth in the Plan) shall apply:
(a) "Affiliate" means any person or entity which directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with ABI.
(b) "Board" means the Board of Directors of ABI.
(c) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without
limitation the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on
such system or exchange (or the exchange with the greatest
volume of trading in Common Stock) on the date of grant, as
reported in The Wall Street Journal or such other source as
the Board deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted
by a recognized securities dealer but selling prices are not
reported, the Fair Market Value of a Share of Common Stock
shall be the mean between the bid and asked prices for the
Common Stock on the last market trading day prior to the day
of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in
good faith by the Committee.
(d) "Option" or "Stock Option" means all or any Options granted under
the Plan.
(e) "Option Price" means the purchase price per share of Common Stock
deliverable upon the exercise of a Stock Option.
-10-
<PAGE> 11
(f) "Outside Director" means a director of ABI, who is not an employee
of the Company.
(g) "Scientific Advisor" means a person named by the Board of Directors
of ABI to serve on the Company's Board of Scientific Advisors.
(h) "Shares" or "shares," unless otherwise specified, shall mean shares
of Common Stock.
(i) "Subsidiary" means any corporation of which, at the time, more than
50% of the shares entitled to vote generally in an election of directors are
owned directly or indirectly by ABI or any Subsidiary thereof.
4.06. ADJUSTMENTS.
In the event of any change in the outstanding Common Stock by reason of
a stock dividend or distribution, recapitalization, merger, consolidation,
split-up, combination, exchange of shares or the like, the Committee shall
appropriately adjust the number of shares of Common Stock which may be issued
under the Plan, the number of shares of Common Stock subject to Options
theretofore granted under the Plan, the Option Price of Options theretofore
granted under the Plan, the amount and terms of any Limited Rights theretofore
awarded under the Plan, and any and all other matters deemed appropriate by the
Committee.
4.07. AMENDMENT OF THE PLAN.
(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 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.
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1999 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN THIS FORM 10-QSB
FOR PERIOD ENDED JUNE 30, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,869,062
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,901,636
<PP&E> 250,507
<DEPRECIATION> 136,083
<TOTAL-ASSETS> 2,056,975
<CURRENT-LIABILITIES> 80,736
<BONDS> 0
0
0
<COMMON> 63,603
<OTHER-SE> 1,912,636
<TOTAL-LIABILITY-AND-EQUITY> 2,056,975
<SALES> 0
<TOTAL-REVENUES> 76,638
<CGS> 0
<TOTAL-COSTS> 2,131,399
<OTHER-EXPENSES> 845,419
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,170
<INCOME-PRETAX> (2,929,350)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,929,350)
<EPS-BASIC> (.50)
<EPS-DILUTED> (.50)
</TABLE>
