<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-