EXHIBIT 10.54

SUPPLY AGREEMENT FOR ANIMAL HEALTH

THIS AGREEMENT is made and effective this 20th day of  March, 2008, by and
between AMARILLO BIOSCIENCES, INCORPORATED, a Texas corporation with its
principal place of business at 4134 Business Park Drive, Amarillo, Texas 79110
USA (hereinafter “ABI”) and CytoPharm, Inc., (“CYTO”), a corporation, having a
principal place of business at 6 F No. 6, Jungshing Road, Sec. 1, Wugu Shiang,
Taipei County 248, Taiwan, (ABI and CYTO collectively referred to hereinafter as
the “Parties”).
 
WHEREAS, ABI has substantial expertise in the production and use of HBL
interferon (hereinafter defined) and has proprietary rights and know-how in the
field of produc­tion, purification, formulation and use of HBL interferon.
 
WHEREAS, ABI and CYTO now desire to promote applications of technology relating
to the oral administration of HBL interferon in the swine, cattle and poultry
species and CYTO desires to use, formulate, test, and market oral dosage forms
of  HBL interferon for treatment of diseases and other healthcare applications
of swine, cattle and poultry in the Territory (hereinafter defined);
 
WHEREAS, CYTO has expressed willingness to pay all costs related to gaining
regulatory approval in Taiwan and China but desires ABI's assistance with study
design, protocol preparation, regulatory affairs and management of clinical
trials.
 
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, CYTO and ABI agree as follows:
 

 
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ARTICLE I
DEFINITIONS
 
1.01.    “Agreement” means this Supply Agreement.
 
1.02.            “Affiliate” means a corporation, company, partner­ship, or
other business entity which controls or is controlled by, or is under common
control with, the designat­ed party.  In the case of a corporation, “control”
means owner­ship either directly or indirectly of at least forty percent (40%)
of the shares of stock entitled to vote for the election of directors.  By way
of explanation but not limitation, Cyto Biotech, is an Affiliate of CYTO.
 
1.03.            “Anhydrous Crystalline Maltose or “ACM” means a maltose
crystalline powder that is obtained from highly purified maltose by additional
dehydration by heating.
 
1.04.            “Animal Dose(s)” means the approved dosage of HBL IFNα in
International Units (IU) per unit dose to be used in the animal species which
dosage shall be determined by the testing to be funded by CYTO.
 
1.05.            “bulk HBL interferon” means HBL IFNα provided in a concentrated
form for use in the manufacture of formulations for use in the Licensed Species.
 
1.06.            “Commercially Reasonable Efforts” means, unless the Parties
agree otherwise, those efforts consistent with the exercise of prudent
scientific and business judgment, as applied to other products of similar
scientific and commercial potential within the relevant product lines of the
Parties.
 
1.07             “HBL Agreement” means the Joint Development and
Manufacturing/Supply Agreement by and between HBL and ABI dated as of March 13,
1992, [as amended by the First Amendment to Joint Development and
Manufacturing/Supply Agreement

 
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dated as of January 17, 1996 and the Addendum to Manufacturing/Supply Agreements
dated as of May 10, 1996 and September 7, 2001].
 
1.08.            “HBL interferon” means the natural human interferon-alpha
(“IFNα”) used by HBL for the formulation of natural IFNα-containing
formu­lation(s) for use in the treatment of human renal cell carcinoma and
hepatitis B in Japan, presently under the manufactur­ing and commer­cializing
approval of the Ministry of Health and Welfare in Japan, and which is produced
by HBL.  HBL interferon is provided for use in the manufacture of formulations
for use in the Licensed Species.
 
1.09.            “Licensed Species” means swine, cattle and poultry.
 
1.010.          “Net Sales” means the invoice amounts actually received for
sales of the Product by CYTO, its Affiliates or sub-licensees in a bona fide
arm's length transaction, less the following items, provided that they are bona
fide transactions designed to optimize the sales of Product (a) cash discounts
and trade allowances actually granted, (b) rebates and charge backs required by
Applicable Laws or made pursuant to agreements with customers, (c) credits or
allowances actually granted upon claims, damaged goods, outdated goods,
rejections or returns of such Product, including recalls, (d) taxes, tariffs and
similar obligations, duties or other governmental charges (other than income
taxes and inventory taxes) levied on, absorbed or otherwise imposed on sales of
such Product in the Territory and shown separately on the invoice, (e) shipping
charges, and (f) insurance costs related to shipping.
 
1.11.            “Other Interferon” means any interferon not provided by HBL
that is formulated with ACM to treat Licensed Species.

 
 
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1.12.            “Product” means a formulation or composition containing both
ACM and HBL IFN, Other Interferon formulated with ACM, or other products
formulated by CYTO based on the above product and designated for oral use in the
Licensed Species.
 
1.13.            “Technical Information” means all informa­tion, reports,
results, inven­tions, licenses, know-how, improve­ments, materials, and any
other technical and scien­tific data, specifica­tions and formulae directly
related to develop­ment, regulatory approval, manufacture, testing, use,
marketing and/or sale of HBL interferon, and any non-public information relevant
to the business of the Parties which is necessarily disclosed by one to the
other during the Parties' performance under this Agreement.  “ABI Technical
Informa­tion” refers to Technical Informa­tion originating with ABI or which ABI
has developed or has obtained through its contractual relationships with third
parties including HBL.  “CYTO Technical Informa­tion” refers to Technical
Information originating with CYTO or which CYTO will develop or has devel­oped
or has obtained through its contractual relationships with third
parties.  “Technical Informa­tion” when not other­wise speci­fied herein means
both ABI Technical Information and CYTO Techni­cal Informa­tion.
 
1.14.            “Territory” means the countries of Republic of China (“Taiwan”)
and People’s Republic of China (“China”).
 
 
ARTICLE II
RESEARCH AND DEVELOPMENT
 
2.01.    ABI Obligations.  Subject to the terms and conditions of this
Agreement, ABI shall supply ACM, bulk HBL interferon and ABI Technical
Information for the manufacture, use, formula­tion, testing and/or marketing of
oral dosage forms involving the stabilization and

 
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delivery of HBL IFN in ACM, for use in the Licensed Species in the Territory,
exclusively to CYTO for such use, and to no other persons or entities.  Such
oral dosage forms shall be subject to resale or other distribution by CYTO to
other persons or entities for use, formula­tion, testing, and/or marketing;
provided, however, that CYTO shall not resell or otherwise distribute such oral
dosage forms or HBL interferon and ACM to other persons or entities for
formulation, testing and/or marketing by such other persons or entities without
first obtaining ABI's written approval, which approval shall not be unreasonably
withheld.  ABI shall ­supply ACM and bulk HBL interferon for delivery to CYTO
f.o.b. HBL's manufac­turing facili­ties, or for delivery at other locations by
agreement of the Parties, packaged in bulk, and such product shall be supplied
in response to issu­ance by CYTO of written purchase orders de­livered to ABI
specifying the quantity to be supplied, along with any special
instruc­tions/requests regarding the supply and/or delivery of the product.
 
2.02.     CYTO Obligations. CYTO will use Commercially Reasonable Efforts to
timely complete at the sole cost and expense of CYTO (i) clinical trials and
development of Product for the treatment of the Licensed Species, (ii) animal
toxicology and other pre-clinical studies required for commercial launch of the
Product, and (iii) other tasks supporting commercialization of the final
formulation of the Product.
 
(a) CYTO shall use Commercially Reasonable Efforts to timely secure any and all
Governmental Approvals in the Territory and shall own and maintain all
Governmental Approvals and related information as provided herein. The Parties
agree and acknowledge that Governmental Approval for the Product will be sought
in The Territory.
 

 
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(b) The foregoing notwithstanding, it shall be conclusively presumed that CYTO
has not used “Commercially Reasonable Efforts” as to a particular Licensed
Species, if (i) CYTO fails to commence clinical trials for that species within
one (1) year of the Effective Date; or (ii) CYTO fails to achieve commercial
sales for that species within two (2) years of the Effective Date.  If CYTO
fails to enroll a species in a clinical trial within twelve (12) months or fails
to achieve commercial sales for that species within two (2) years, CYTO shall
lose the rights under this Agreement for that particular species, but not for
other species for which CYTO has used Commercial Reasonable Efforts.
 
 
(c) CYTO shall maintain records in sufficient detail and in good scientific
manner appropriate for patent and regulatory purposes and shall properly reflect
all work done and results achieved in the performance of its duties hereunder
(including all data in the form required to be maintained under any Applicable
Laws), and any subsequent pre-clinical or clinical studies (the “Clinical
Records”). The Clinical Records generated in the Territory shall be owned by
CYTO and shall be considered Confidential Information of CYTO and ABI.  ABI may
request the Clinical Records, and CYTO shall provide the Clinical Records to
ABI, subject to applicable laws and regulations.  These records include books,
records, reports, research notes, charts, graphs, comments, computations,
analyses, compilations, recordings, photographs, computer programs and
documentation thereof, computer information storage means, samples of materials
and other graphic or written data generated in connection with CYTO's research
and development activities with respect to the Product.
 

 
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(d) In the event ABI requests that more than 1,000 pages be copied in connection
with the foregoing, ABI shall reimburse CYTO for CYTO’s actual out of pocket
costs for making copies in excess of 1,000 pages.  ABI shall pay CYTO such
amounts within 30 days following ABI’s receipt of an invoice therefor
accompanied by documentation reasonably supporting such invoice.
 
                (e) ABI has the right, upon fifteen business days’ prior written
notice to CYTO, to review the Clinical Records associated with CYTO’s activities
under this Agreement during normal business hours, and CYTO shall, subject to
Applicable Laws, provide ABI upon request with a copy of all requested Clinical
Records, at ABI’s cost, to the extent reasonably required for the exercise of
ABI's rights under this Agreement. ABI may use the Clinical Records and the
summaries thereof for commercial and regulatory approval purposes. If ABI wants
to provide a non-governmental entity Third Party with the Clinical Records or a
summary thereof or use information contained in such records for a commercial
purpose, ABI may do so as long as the non-governmental entity Third Party agrees
to the Confidentiality provisions of Article VIII.
 
2.03.    Availability of Resources; Cooperation. Each Party shall maintain
laboratories, offices and/or other facilities reasonably necessary to carry out
the activities to be performed by such Party hereunder. Upon reasonable advance
notice, each Party agrees to make its employees and non-employee consultants
reasonably available at their respective work locations to consult with the
other Party on issues arising during the collaboration and in connection with
any request from any Governmental Authority, including regulatory, scientific,
technical and clinical testing issues.  Such meeting may be arranged through the
internet or site visit. The meetings should be arranged within 15 working days
after the requests, where feasible.
 
2.04.      Reporting Obligations of CYTO. On or prior to December 31st of each
year during the TERM of this Agreement CYTO shall provide ABI with a report of
ongoing development efforts, including a report of efforts by CYTO with respect
to clinical testing, regulatory approval efforts, marketing/sales strategy, and
any other areas into which CYTO's reasonable business efforts in accordance with
this paragraph may reasonably be categorized. Such report shall be provided in
English and shall be accompanied by samples of labeling, instructions,
promotional and other support materials, if any, developed for CYTO's sales
force, patients, physicians, or other outside parties.
 
ARTICLE III
LICENSE
 
 
3.01.     License and Supply Grant.  Subject to the terms of this Agreement and
the Existing Licenses, ABI hereby grants to CYTO:
 
 
(a) an exclusive sublicense, under the ABI Technology to use the ABI Technology
to market, advertise, promote, manufacture, offer for sale, sell, and distribute
the Product in the Territory; and
 
(b) an exclusive sublicense, under all rights granted to ABI pursuant to the HBL
Agreement to market, advertise, promote, manufacture, offer for sale, sell, and
distribute the Product in the Territory.
 
3.02.     Restrictions. CYTO shall have the right to use and sell Product only
in the Territory and only for use in the Licensed Species. . CYTO shall not seek
customers, establish any branch or maintain any distribution depot for Product
in any country outside the Territory. CYTO
shall not sell Product to any customer in any country outside the Territory or
to any customer in the Territory if, to the knowledge of CYTO, such customer
intends to resell such Product in any country outside the Territory.
 
3.03.      Retained Rights.  ABI retains all rights other than as set forth in
this Agreement to HBL IFN and IFN, including without limitation, the right to
test, develop, license, sublicense, market, distribute or otherwise use IFN and
HBL IFN in the Licensed Species outside the Territory.
 
ARTICLE IV

PAYMENTS AND ROYALTIES

 
 
4.01.      Initial Fee.  On the Effective Date, as an initial license fee, CYTO
shall pay to ABI a sum equal to Thirty Thousand US Dollars ($30,000).  This fee
will be wired into ABI’s designated bank account within 30 days of the Effective
Date. Failure to make this initial paymentshall cause the Agreement to be
terminated and to be of no further force or effect (except for Article XV).
Upon  receipt of the initial license fee, ABI shall provide CYTO with All the
existing regulatory documents in ABI’s possession that are needed to obtain
government approval for trials in China and Taiwan.  ABI shall request HBL
transfer the technologies and manufacturing processes for mixing concentrated
IFNα and ACM to CYTO; and CYTO will utilize such technologies and processes
solely for the purpose of mixing interferon with ACM. After ABI notifies CYTO in
writing or by e-mail of supplying documents above and completes the transfer of
technologies and manufacturing processes, CYTO will wire into ABI’s designated
bank account an additional thirty thousand dollars ($30,000) within 30 days.

 
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4.02.     Royalty Payments.  During the TERM, CYTO, its Affiliates or
sub-licensees in bonafide arm’s length transactions, will pay ABI a royalty on
aggregate Net Sales of Product in each calendar year equal to seven and one half
percent (7.5%) each year. Royalties shall be due and payable thirty (30) days
after the end of each calendar quarter (each a “Royalty Payment Date”). CYTO may
prepay, in whole or in part, any royalties prior to the applicable Royalty
Payment Date.  If Other Interferon is formulated with ACM to manufacture
product, Cyto shall pay ABI a royalty on aggregate Net Sales of Product in each
calendar year equal to five and on half percent (5.5%) each year.
 
4.03.    Minimum Royalty. During the TERM, and for each calendar year beginning
with the second calendar year after approval of sales of Product in the
Territory, CYTO shall pay ABI a minimum royalty, which shall be fifty thousand
dollars ($50,000).  The Minimum Royalty calculations and payment therefor shall
be made within thirty (30) days after the close of each calendar year,
commencing with the first calendar year after approval of sales of Product in
the Territory.  Failure to make this Minimum Royalty shall be a reason for
Termination pursuant to Section 7.02.  Payments made to ABI pursuant to Section
4.02 above for the applicable calendar year shall count toward the Minimum
Royalty.
 
4.04.    Minimum Sales. CYTO shall meet or exceed the following annual minimum
sales.  If CYTO does not achieve these levels, ABI will have the right to
terminate the Agreement.  Year 1 means the first 12 months after regulatory
approval is obtained.
Year 1                            $0.5 million
Year 2                            $1.5 million
Year 3 and beyond     $4.0 million

 
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4.05.      Reports. CYTO shall furnish to ABI a quarterly written report, which
report shall contain at a minimum (a) the number of interferon and ACM sold; (b)
the calculation of Net Sales; (c) royalties payable in U.S. dollars, if any,
which shall have accrued hereunder based upon Net Sales; (d) withholding taxes,
if any, required by law to be deducted with respect to such sales; (e) the dates
of the First Commercial Sale of any Product; and (f) the exchange rates, if any,
used to determine the amount of United States dollars (collectively, the
“Royalty Statement”). Reports shall be due on the 45th day following the close
of each quarter.
 
 
4.06.     Records and Audits.  During the TERM and for a period of two years
thereafter or upon written notice to CYTO received prior to the expiration of
such two year period as otherwise required in order for ABI to comply with
Applicable Law, CYTO shall keep complete and accurate records in sufficient
detail to permit ABI to confirm the completeness and accuracy of the information
presented in each Royalty Statement and all payments due hereunder. CYTO shall
permit an independent, certified public accountant reasonably acceptable to CYTO
to audit and/or inspect those records of CYTO (including financial records) that
relate to number of lozenges sold and Net Sales for the sole purpose of
verifying the completeness and accuracy of the Royalty Statements and, the
calculation of Minimum Royalties, Net Sales and confirming royalty payments for
the Product, during the preceding calendar year. Such inspection shall be
conducted during CYTO’s normal business hours, no more than once in any 12-month
period and upon at least thirty (30) days’ prior written notice by ABI to CYTO.
If such accounting firm concludes that such payments were underpaid during the
periods reviewed by such accountants, CYTO shall pay ABI the amount of any such
underpayments, within thirty (30) days of the date ABI delivers to CYTO such
accounting firm's report so concluding that such payments were underpaid.  If
CYTO

 
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fails to remit the payment within thirty (30) days, interest at a rate equal to
the Prime Rate of Interest shall be imposed starting from the 31st day.  If such
accounting firm concludes that such payments were overpaid during such period,
ABI shall pay to CYTO the amount of any such overpayments, without interest,
within thirty (30) days of the date ABI delivers to CYTO such accounting firm's
report so concluding that such payments were overpaid. If ABI fails to remit
payment within 30 days, interest at a rate equal to the Prime Rate shall be
imposed starting from the 31st day.  Provisions in this Section 4.06 requiring
either Party to pay interest shall not prevent the other Party from immediately
taking all actions necessary to collect all amounts due, or to enforce any other
remedy under this Agreement.  ABI shall bear the full cost of such audit unless
such audit discloses an underpayment by more than 5% of the amount due during
such period. In such case, CYTO shall bear the full cost of such audit. CYTO
shall provide ABI a copy of the CYTO audited financial statements with
sufficient detail to show the portion of revenue from HBL interferon sales and
Other Interferon formulation with ACM sales each year to be delivered to ABI
within 3 months of the end of CYTO’s fiscal year.
 
4.07.      Exchange Rate; Manner and Place of Payment.   All payments hereunder
shall be payable in United States dollars. With respect to each calendar
quarter, whenever conversion of payments from any foreign currency shall be
required, such conversion shall be made at the rate of exchange reported in The
Wall Street Journal on the last business day of the applicable calendar quarter.
All payments owed under this Agreement shall be made by wire transfer to a bank
account designated in writing by ABI, unless otherwise specified in writing by
ABI.

 
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4.08.     Late Payments. Unless otherwise provided in this Agreement, upon the
failure of CYTO to pay any amount due under this Agreement within five days
after receipt of notice by ABI that such amount has become due and payable and
has not been paid, CYTO shall pay interest to ABI on such amount from the date
such amount is due under this Agreement at the rate of 12% per annum calculated
on the number of days such payment is delinquent, unless such payment is being
disputed by CYTO in good faith pursuant to Section 5.03(a).  Nothing in this
Section 4.08 shall relieve CYTO of CYTO’s obligation to make payments, risk
Termination pursuant to Section 5.03(a), or provide a Royalty Statement pursuant
to Section 5.03(b).
 
4.09.     Taxes.  All taxes levied on account of the payments accruing to ABI
under this Agreement shall be paid by ABI for its own account, including taxes
levied thereon as income to ABI. If provision is made in law or regulation for
withholding, such tax shall be deducted from the payment made by CYTO, paid to
the proper taxing authority and a receipt of payment of the tax secured and
promptly delivered to ABI.
 
4.10.             CYTO shall pay ABI for Bulk HBL Interferon $10/million IU plus
$30/kilogram for ACM plus the amount of any future HBL price increases to ABI.

4.11.             CYTO shall remit to ABI payment in U.S. funds via wire
transfer to a bank account of ABI’s choice.  Fifty percent (50%) of the payment
will accompany the purchase order with the balance to be paid within 15 days of
the date CYTO accepts delivery at HBL’s factory or warehouse in Japan.

 
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ARTICLE V
WARRANTIES
 
ABI makes no warranty, express or implied, and all implied warranties or
warran­ties of merchantabil­ity and fitness for a particular purpose are hereby
disclaimed and excluded.  HBL warrants to ABI in the HBL Agreement that
Manufactured Products delivered to ABI, its Affiliates, or Sub licensees shall
conform to all specifications listed on the Product Specification Sheet(s) for
said Manufacture Product(s) at the time of its delivery, provided that HBL shall
be compensated separately for any packaging or labeling performed at the request
of ABI.  It is understood that HBL makes no other warranties of merchantability
and fitness for a particular purpose which are beyond the aforesaid stated
warranty obligations are hereby disclaimed and excluded.
 
                                        ARTICLE VI
                                DISCLAIMERS AND INDEMNIFICATION
 
6.01.             ABI makes no represen­tation or warranty that the manufacture
or sale of Manufactured Products will not infringe any third party patent, nor
does ABI assume any obligations with respect to infringements of patents of
others arising as a result of CYTO's activities under this Agree­ment except as
otherwise expressly provided in this Agree­ment.
 
6.02.             ABI makes no covenant either to defend any infringe­ment
charge by a third party or to initiate action against infringers of any of its
patents except as otherwise expressly provided in this Agreement.
 
6.03.             ABI makes no representation or warranty concern­ing the
potential profitability of sales of Product and shall not be liable for failure
of licensee to obtain a profit or income from such sales.
 

 
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6.04.                       ABI SHALL NOT BE DEEMED TO HAVE MADE ANY
REPRESEN­TATION OR WARRANTY AS TO THE CONDI­TION, MERCHANT­ABILI­TY, DESIGN,
FUNCTION OR FITNESS FOR USE OF PROD­UCTS.
 
6.05.                      CYTO agrees that it shall indemnify and save ABI
harmless from any and all claims, demands, actions and causes of action against
ABI, whether groundless or not, in connec­tion with any and all injuries,
losses, damages or liabili­ty of any kind whatsoever, arising, directly or
indirect­ly, out of the use, distribution, and/or sale of Product by or through
CYTO.  ABI shall notify CYTO in writing within ten (10) days of its receipt of
any claim, demand or lawsuit.  Upon assumption by CYTO of its duty to defend,
CYTO will have control of the claim, demand or lawsuit, and except as may be
neces­sary to prevent lapse of its legal rights, ABI shall be required to incur
no expense with regard to said claim, demand or lawsuit.  ABI shall, at CYTO's
request, provide reason­able assis­tance in defense of any such claim, demand or
lawsuit.
 
 
                                        ARTICLE VII
                                TERM OR TERMINATION; DEFAULT
 
7.01.                      Unless sooner termi­nated as herein­after provided,
this Agreement shall remain in effect for a period of ten (10) years from the
date of this Agreement.  After said initial term, the Agreement shall be
automatical­ly renewed for successive one (1) year terms subject to the prior
written agreement of the Parties (herein­after called “Renewal Terms”).
 
7.02.                      If CYTO shall at any time during the initial term or
any subsequent Renewal Term of this Agreement default in any obligation
hereunder or fail to pay any payment due, and such default shall not be cured
within sixty (60) days after written notice from ABI to CYTO specifying the
nature of the default, ABI may terminate this Agreement, or may demand specific
performance.  Failure to conduct clinical trials in swine in the USA and China
within twelve (12) months of the execution of this Agreement shall be cause for
termination without notice.

 
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7.03.                      If ABI shall, at any time during the initial term or
any subsequent Renewal Terms of this Agree­ment, default in any obligation
hereunder other than a default caused by HBL and such default shall not be cured
within sixty (60) days after written notice from CYTO to ABI specifying the
nature of the default, CYTO may termi­nate this Agreement, or may demand
specific perfor­mance.  If a default is caused by HBL, ABI will make its best
efforts to influence HBL to cure the default.
 
7.04.                      Any termination pursuant to this Article shall not
relieve ABI of any obligation to fill purchase orders placed with ABI prior to
termination.
 
7.05.                      The exercise by either Party of any right of
termina­tion shall not constitute a waiver of any other rights or remedies
available to such party for violation of the terms of this Agreement or under
applicable law.
 
  ARTICLE VIII
                                                                            
CONFIDENTIALITY
 
8.01.                      ABI owns or is licensed under confi­den­tial or
secret information relating to HBL interferon-containing products and the use of
same in the Licensed Species, and it is the intention of ABI to maintain this
confidentiality.
 
8.02.                      CYTO possesses trade secrets and technical and
marketing information that are proprietary to CYTO, and it is its intention to
maintain the confidentiality of its propri­etary information.
 

 
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8.03.                      Each Party agrees to maintain confiden­tial and
secret all information which may be disclosed or provided to it by the other
Party and that the Parties may together subse­quently acquire in relation to
interferon-containing products and which is designated in writing by clearly
identifiable legend as being confidential or secret in character.
 
8.04.                      Each Party's obligation to the other (to maintain
confidentiality) hereunder shall terminate with respect to any particular item
and only said item of the disclosing Party's confidential information, when the
recipi­ent Party can demonstrate that such item of information:
 
8.04.1.                       Is publicly known and available through some means
other than by the recipient Party's act or omission; or
 
8.04.2.                       Was in the recipient Party's pos­session prior to
its disclosure by the other Party, provided that written evidence of such
possession is estab­lished; or
 
8.04.3.                        Has come into the recipient Party's possession
through a third party free of any obligation of confidentiality to the
disclosing Party, where said third party has acquired said information lawfully
and not under circumstances forbidding its disclo­sure.
 
8.05.                      Neither Party will permit confidential or secret
information or any part thereof to be disclosed to third parties or to employees
except on a “need-to-know” basis and each will maintain confidential or secret
informa­tion and/or documents with the same precautions it uses to safe­guard
its own confidential or secret informa­tion.
 
8.06.                      Each Party will notify the other promptly if it has
knowledge that a third party possesses confidential or secret information of the
other Party related to interferon-containing products.
 

 
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8.07.                      CYTO shall have the right to use ABI's confi­dential
or secret informa­tion to the extent reasonably necessary to accomplish the
objectives of this Agree­ment, including specifically the right to disclose such
information to its Affiliates, actual and potential purchasers or transferees,
third-party contract consultants and scientific investigators (from whom CYTO
shall secure Confidential Disclosure Agreements) and to regulatory agencies in
support of applications for regu­latory agency approval to make, test and/or
sell HBL interferon-­containing products.
 
 
ARTICLE IX
BOOKS AND RECORDS
 
9.01.                      CYTO shall keep proper books of accounts which
clearly indicate the volume of sales and all other financial data and
documentation associated with sales of oral interferon.  CYTO shall provide ABI
a copy of the CYTO audited financial statements with sufficient detail to show
the portion of revenue from sales of Product in Licensed Species each year to be
delivered to ABI at the earliest possible date within 3 months after the end of
CYTO’s fiscal year.
 
9.02.                      ABI may nominate an independent public accountant,
acceptable to and approved by CYTO (which approval shall not be unreasonably
withheld), once in each calendar year, to inspect the books of account of CYTO
and other records and reports deemed reasonably necessary for inspection by said
accountant during reasonable business hours for the purpose of verifying the
accuracy of the reports and payments made by CYTO during the preceding calendar
year.  Such accountant shall not disclose any information related to CYTO's
financial matters but shall certify to ABI the accuracy of the reports and
payments made by CYTO in accordance with

 
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this Agreement.  All fees charged by such accountant shall be paid by ABI except
if there are discrepancies in CYTO's reports, which result in under reporting or
under payment by a factor greater than 10% of the amount due.  In such instance
CYTO shall reimburse ABI for the accountant's costs other than as required by
law.  ABI shall not make any public disclosure of the CYTO reports or payments
referred to in this agreement.  To the extent disclosure of such information to
a third party is required in the ordinary course of ABI's business, such
disclosure shall be made subject to the recipient's agreement to hold such
information in confidence.
 
 
ARTICLE X
MISCELLANEOUS
 
10.01.                      Survival.  ARTICLES VII, VIII, and IX shall survive
any termination of this Agreement.
 
10.02.                      Force Majeure.  The failure of CYTO, ABI, or any of
their Affiliates to take any act re­quired by this Agreement if occasioned by an
act of God or the public enemy, fire, explosion, earthquake, perils of the sea,
floods, drought, war, riot, sabotage, accident, embargo or any circum­stance of
like or different character beyond the reasonable control of the Party so
failing or by the interrup­tion or delay in transportation, inadequacy, or
shortage or failure of the supply of materials and/or equipment, equipment
break­down, labor trouble or compliance with any order, direction, action  or
request of any govern­mental officer, depart­ment or agency and whether in any
case such circum­stance now exists or hereafter arises, shall not subject either
Party to any liabili­ty to the other.
 
10.03.                      Arbitration.  The Parties hereto desire to avoid and
settle without litigation future disputes which may arise between them relative
to this Agreement.  Accordingly, the Parties

 
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agree to engage in good faith negotiations to resolve any such dispute.  In the
event they are unable to resolve any such dispute by negotia­tion, such dispute
shall be submitted to arbitration as follows: If arbitration is initiated by
CYTO, it shall be held in the State of Texas, U.S.A. in compliance with the
Commer­cial Arbitration Rules of the American Arbitration Associa­tion.  If
arbitration is initiated by ABI, it shall be held in Taiwan in compliance with
the Commer­cial Arbitration Rules of the Arbitration Associa­tion of Taiwan. The
arbitra­tion award shall be final and binding upon the Parties hereto and may be
filed with and enforced by any competent court of competent jurisdic­tion to
enforce said award.  If arbitration is initiated by ABI for failure to pay for
HBL interferon, Bulk HBL interferon or ACM, it shall be held in Japan in
compliance with the Rule of the Japan Commercial Arbitration Association.
 
10.04.                      Communication.  Any payment, notice or other
communi­cation required or permitted to be made or given to either Party hereto
pursuant to this Agreement shall be sufficiently made or given on the date of
sending if sent to such Party by certified or registered mail or by an overnight
courier service, postage or delivery charge prepaid, or by telex or telefax
addressed to it at its address set forth, or to such other address(es) as it may
designate by written notice given to the other Party as follows:
 
In case of ABI:                              Dr. Joseph M. Cummins, Chairman &
CEO
Amarillo Biosciences, Inc.
4134 Business Park Drive
Amarillo, TX 79110
Facsimile: (806) 376-9301
 
With a copy to:                            Edward L. Morris, Legal Counsel
SandersBaker, PC
320 S. Polk, Ste. 700
Amarillo, TX 79101
Facsimile: (806) 372-3725

 
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In case of CYTO:                         Dr. Ellson Chen, Chairman of Board of
Directors
CytoPharm, Inc.,
6 F No. 6, Jungshing Road, Sec. 1
Wugu Shiang, Taipei County 248
Taiwan  
Telephone: +886-2-89769628

                                10.05.                      Amendments to
Agreement.  This Agreement consti­tutes the entire agreement between the Parties
hereto with respect to all of the matters herein addressed, and supersedes all
previous arrangements whether written or oral, covering the same subject
matter.  Any amendment or modifica­tion of this Agreement shall be effective
only if made in writing, and executed by both Parties.
 
10.06.                      Assignment.  This Agreement shall not be assignable
by CYTO to any person or entity other than a CYTO Affiliate without the prior
written consent of ABI.  This Agreement shall not be assignable by ABI to any
person or entity other than an ABI Affiliate without the prior written consent
of CYTO.
 
10.07.                      Enforceability.  If one or more of the provi­sions
of this Agreement shall be held to be invalid, illegal or unenforce­able, the
validity, legality or en­force­ability of the remaining provisions hereof shall
not in any way be affected or impaired thereby.  To the extent permitted by law,
each Party waives any provi­sion of law, which renders any provi­sion herein
invalid, illegal or unenforceable in any respect.
 
10.08.                      Nature of Relationship.  Nothing herein shall be
construed to place the Parties in a relationship of partners or joint venturers,
nor does this Agreement make either party the agent or legal representative of
the other for any purposes whatsoever.  The Parties further

 
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agree that no representation shall be made by either party that would create an
apparent agency, employment, partner­ship or joint venture.  Neither party shall
have the power express or implied, to obligate or bind the other in any manner
what­soever.
 
10.09.                      Headings.  The headings of the several sections of
this Agreement are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
 
10.10.      Waiver.  No provision of this Agree­ment shall be deemed waived,
unless such waiver is in writing and signed by the Party against which the
waiver is sought to be en­forced.  The waiver by either of the Parties hereto of
any breach of any provision hereof by the other Party shall not be construed to
be either a waiver of any succeeding breach of any such provision or a waiver of
the provision itself.
 
10.11.        Governmental Approval. In the event ABI has to obtain the approval
from the appropriate govern­mental authori­ties of Japan to deliver HBL
interferon to the country in which CYTO will use and/or market HBL inter­feron
or products containing HBL interferon, ABI's obliga­tion pertaining to the
supply of the said product to the said country shall be subject to such approval
granted in writing to HBL or ABI.
 
10.12.              No Third-Party Beneficiaries.  This Agreement contemplates
no third-party beneficiaries, and no person or entity, other than the Parties or
their permitted assignees, shall have any rights whatsoever under this
Agreement.
 

 
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IN WITNESS WHEREOF, the Parties hereunto have caused this Manufactur­ing/Supply
Agree­ment to be executed in dupli­cate by their duly auth­orized
repre­sentatives as of the date first above written.
ABI:                                                                                             CYTO:

AMARILLO BIOSCIENCES,
INC.                                                           CYTOPHARM, INC.

By:     /s/ Joseph M.
Cummins                                                                  By:     /s/
Ellson Y. Chen
      Dr. Joseph M.
Cummins                                                                             Dr.
Ellson Y. Chen
      President and
CEO                                                                                     
Chairman of the Board of Director

 
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