STOCK OPTION AGREEMENT July 18, 2007
July
18, 2007
THIS
STOCK OPTION AGREEMENT
(“Agreement”) is entered into by and between AMARILLO BIOSCIENCES, INC. (“ABI”),
and COMMONWEALTH ASSOCIATES as Optionee (“Optionee”), as contemplated by that
certain Consulting Agreement of even date, between ABI and
Optionee.
WHEREAS,
ABI and
Optionee desire to enter into this Agreement to evidence the grant of options,
and to set forth the terms of the Options granted to Optionee;
THEREFORE,
in
consideration of the mutual covenants and agreements herein expressed, and
for
other good and adequate consideration the receipt and sufficiency of which
are
evidenced by the execution hereof, ABI and Optionee hereby agree as
follows:
I.
ADDITIONAL
DEFINITIONS
“33
Act”
shall mean the Securities Act of 1933.
II.
THE
AWARD
This
Agreement shall evidence the grant and award to Optionee of Options to purchase
following shares of the voting common stock of ABI (the “Shares”):
|
Number
of Shares
|
Effective
Date of Grant
|
Exercise
Price
|
|
1,000,000
|
July
18 , 2007
|
$0.20
|
The
Options vest immediately, and are exercisable during a period of twelve (12)
months from the date of this Agreement.
III.
REORGANIZATION
OF ABI
In
the
event of a Reorganization of ABI as defined below, Optionee shall be given
notice of such details of the Reorganization as are available to ABI, and shall
have a period of thirty (30) days after receipt of such notice during which
to
exercise the Options. If Optionee does not exercise the Options within said
thirty (30) day period, the Options shall lapse in their entirety, and be of
no
further force or effect.
As
used
herein, “Reorganization” shall be any merger, consolidation, conversion,
combination, split-up, or sale of all or substantially all of the assets of
ABI
which has been approved by the shareholders, or any combination of the
foregoing.
IV.
ADJUSTMENTS
In
the
event of any change in the outstanding Common Stock by reason of a stock
dividend or distribution, stock split, reverse stock split, reclassification,
or
other similar event (excepting, however, any Reorganization as defined in
Article III, above), the number of shares of Common Stock subject to Options,
and the Option Price of the Options, shall be appropriately
adjusted.
V.
GENERAL
RESTRICTIONS
Upon
exercise of any of the Stock Options by Optionee, the Shares shall be issued
to
Optionee subject to any applicable restrictions under federal or state
securities laws and regulations promulgated thereunder, and Optionee agrees
to
accept the Shares subject to such restrictions, and bearing any required or
appropriate legends. There is no assurance that a market for the Shares will
be
available, although at the time of this Agreement, the common stock of ABI
is
traded on the over-the-counter bulletin board. Currently, Rule 144 promulgated
under the 33 Act is available to permit sale of shares held for at least one
(1)
year; however, there is no assurance that ABI’s securities will continue to
qualify for resale pursuant to Rule 144, and if at some point ABI should cease
filing public reports under the Securities and Exchange Act of 1934, Rule 144
would no longer be available. By entering into this Stock Option Agreement,
ABI
makes no representation that its securities will continue to qualify for resale
under Rule 144, nor that its securities will continue to be traded on the
over-the-counter bulletin board, or any other exchange.
VI.
ASSIGNABILITY
The
Options shall not be assignable or transferable by Optionee except to a person
or entity approved by ABI in writing.
Although
limited transferability is allowed under the above-described conditions,
Optionee should consult with competent tax and securities counsel before
transferring options. It may be necessary to make appropriate disclosures to
transferees, regarding lack of marketability. In addition, transfers of Options
for value may cause Optionee to recognize taxable income.
VII.
ISSUANCE
OF SHARES
As
soon
as practicable after receipt of payment, ABI shall deliver to the Optionee
a
certificate or certificates evidencing the Shares. The Optionee shall become
a
shareholder of ABI with respect to common stock represented by certificates
so
issued and as such shall be fully entitled to receive dividends, to vote and
to
exercise all other rights of a shareholder.
VIII.
RULE
16b-3 EXEMPTION
The
Options shall comply with the applicable provisions of Rule 16b-3 promulgated
under the Securities and Exchange act of 1934, or any successor provision,
and
shall be deemed to 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 transactions regarding the Options or the underlying
common stock.
IX.
REGISTRATION
RIGHTS
If
at any
time prior to the expiration of five (5) years from the date of this Agreement
ABI files a registration statement under the 33 Act (including a post-effective
amendment to a previous registration statement) which relates to a current
offering of securities of any security holder of ABI (except in connection
with
an offering on Forms S-4 or S-8, or any other inappropriate form(s)), ABI shall
offer to Optionee the opportunity to register or qualify the Shares by inclusion
in the registration statement. ABI shall give 30 days prior written notice
to
Optionee of ABI’s intention to file a registration statement under the 33 Act,
which notice shall constitute an offer to Optionee to have its Shares included
in such registration statement, and Optionee shall notify ABI in writing within
ten days thereafter if Optionee desires to accept such offer. Neither the
delivery of such notice nor the acceptance by Optionee of such offer shall
obligate ABI to file such registration statement and, notwithstanding the actual
filing of the registration statement, ABI may at any time prior to its
effectiveness elect not to pursue the registration without liability to
Optionee.
In
the
event of any registration under the 33 Act of any of the Shares pursuant to
this
Article, Optionee shall be responsible for the registration costs associated
with the blue sky registration of the Shares in any state in which ABI is not
already registering shares of its common stock.
In
the
event of any registration under the 33 Act of any of the Shares underlying
this
Option, Optionee will be responsible for ensuring that the Shares are sold
in
strict compliance with the registration statement (including, without
limitation, the plan of distribution to be included therein) and all other
applicable federal and state securities laws and regulations.
The
Shares underlying this Option may be excluded from a registration statement
at
the reasonable election of ABI in the event all information essential for ABI
and its counsel to prepare the registration statement is not furnished by
Optionee, after Optionee, upon written request of ABI or its counsel, has been
given a reasonable amount of time (not less than ten business days from the
date
such request has been sent to Optionee) to transmit the requested information
to
ABI and/or its counsel.
In
the
event of any registration of the Shares under the 33 Act pursuant to this
Article, Optionee agrees to indemnify and hold harmless ABI and each affiliate
and controlling person, as defined by the 33 Act, of ABI, each officer or
employee of ABI who signs the registration statement, each director of ABI,
each
underwriter, and any and all affiliates and controlling persons, as defined
by
the 33 Act, of such persons against any and all losses, claims, damages or
liabilities and will reimburse ABI and each of the foregoing persons for any
losses, claims, damages or liabilities and for any legal or any other expenses
incurred by each such person, if the statement or omission in respect of which
such loss, claim, damage or liabilities is asserted was made in reliance upon
and in conformity with information furnished to ABI in writing, by Optionee
or
on Optionee’s behalf specifically for use in connection with the preparation of
such registration statement or the related prospectus.
X.
NO
RIGHTS AS A SHAREHOLDER
Optionee
shall have no rights as a shareholder with respect to the Shares unless and
until certificates evidencing the Shares shall have been issued to
Optionee.
XI.
TAX
WITHHOLDING
Upon
the
exercise of any of the Options, ABI shall have the right to require Optionee
to
pay to ABI the amount of any taxes that are required by law to be withheld
with
respect to such exercise.
XII.
TAX
CONSIDERATIONS
ABI
does
not and will not render tax advice to Optionee. Optionee represents that he
will
consult his own tax advisor with respect to the tax aspects of both the exercise
of the Options, and the disposition of the Shares. The Options are not qualified
stock options within the meaning of the Internal Revenue Code of 1986, and
therefore, the exercise of the Options may be expected to be a taxable
event.
XIII.
ENTIRE
AGREEMENT
This
Agreement is the only such agreement in force between ABI and Optionee regarding
options granted on the dates of grant hereinbefore shown.
IN
WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
| ABI: | ||
| AMARILLO BIOSCIENCES, INC. | ||
| |
|
|
| By: | /s/ Xxxxxx X. Xxxxxxx | |
|
Xxxxxx X. Xxxxxxx, CEO and President |
||
| OPTIONEE: | ||
| COMMONWEALTH ASSOCIATES | ||
| |
|
|
| By: | /s/ Xxxxxx X. Xxxxxxxx | |
|
Xxxxxx
X’Xxxxxxxx, CEO and President
|
||
