PROPOSAL FOUR

AMENDMENT TO 1993 STOCK PLAN

    The Board of Directors has adopted, subject to stockholder ratification, an amendment to the BioNebraska, Inc. 1993 Stock Plan (the "Stock Plan") which provides for an increase in the total number of shares available under the Stock Plan by 1,600,000 shares to a total of 3,740,000 shares and to extend the term under which incentive stock options may be granted under the Plan. The Board of Directors deemed it prudent to increase the shares available for grant under the Stock Plan to facilitate future option grants and to extend the term of such options to be consistent with industry standards.

Summary of the Stock Plan

    The Stock Plan, which was originally adopted in 1993 and, as subsequently amended, authorizes the grant of options to purchase up to 2,140,000 shares of Common Stock to key employees, consultants and directors. The Stock Plan is currently administered by BioNebraska's Board of Directors. The Board may delegate its authority to a committee of "disinterested persons", as defined in the Stock Plan. The Board or the committee has the power to select recipients, make awards of stock options and adopt regulations and procedures for the Stock Plan.

    The Stock Plan permits the award of both stock options that qualify as "incentive stock options" under the Internal Revenue Code and options that do not so qualify ("non-qualified options'). Incentive stock options differ as to their tax treatment and are subject to a number of limitations under the Internal Revenue Code. The exercise price of incentive stock options must equal the fair market value of the Common Stock on the date of the grant (or, for an option granted to a person holding more than 10% of BioNebraska's voting stock, not less than 110% of fair market value.) If Proposal Four is adopted, incentive stock options may be granted under the Stock Plan until June 18, 2011.

9

    The term of each option is fixed by the committee or the Board at the time of grant. Prior to July 2000, options were generally granted for terms of five years. In 1998, the Board approved the modification of outstanding options to purchase an aggregate of 270,000 shares issued to officers, directors, employees and consultants to extend the terms for five additional years. Consistent with industry practice, the Board elected in July 2000 to grant all new options for ten-year terms (except that an incentive option granted to a person holding more than 10% of BioNebraska's voting stock may be exercisable only for five years) and authorized the modification of all other outstanding options to extend the terms for five additional years, subject to consent of the holders. The Company reported a compensation charge for financial reporting purposes in 1998 and 2000 to reflect these extensions.

    The Stock Plan provides that, following the termination of an optionee's employment with BioNebraska, the optionee's vested options are exercisable for the lesser of ninety (90) days or the remaining term of the option, except if such optionee is terminated for "cause," in which event the optionee's options will immediately terminate. The Board has provided in all outstanding option agreements with employees that the options are exercisable for a period of ninety (90) days following the optionee's death, disability or retirement, or until the expiration of the stated term of the option, whichever is less. The option grants also provide that the vesting of options will be accelerated upon a change in control of the Company. Options may not be transferred other than by will or the laws of descent and distribution, and during the lifetime of an optionee may be exercised only by the optionee.

Grants of Options

    As of the Record Date, directors, officers, other employees and members of the Scientific and Medical Advisory Board held outstanding options under the Stock Plan to purchase a total of 1,836,000 shares, of which options to purchase 1,243,348 shares were exercisable. Of the total options outstanding under the Stock Plan, 800,000 options are held by the executive officers and 1,036,000 options are held by other employees, directors and consultants. Shares covered by expired or terminated stock options may be used for subsequent awards under the Stock Plan.

Federal Income Tax Treatment

    An optionee will not realize taxable income upon either the granting or exercise of an incentive stock option. In addition, an optionee generally will not realize taxable compensation income upon the exercise of an incentive stock option if he or she exercises it as an employee or within three months after termination of employment (or within one year after termination if the termination results from a permanent or total disability). However, upon exercise of the incentive stock option, the amount by which the fair market value of any shares exercised exceeds the option price is an item of tax preference for purposes of the alternative minimum tax. Upon the sale of such stock, the optionee generally will recognize capital gain or loss provided the stock has been held for at least two years from the date of the option grant and at least one year after the stock was purchased. If the applicable holding periods are not satisfied, the option will be taxed as a non-qualified option.

    An optionee also will not realize taxable compensation income upon the grant of a non-qualified option. When an optionee exercises a non-qualified option, he or she realizes taxable compensation income at that time equal to the difference between the aggregate option price and the fair market value of the stock on the date of exercise. Upon the sale of stock acquired pursuant to the non-qualified option, the optionee's basis for determining taxable gain or loss will be the sum of the option price paid for the stock plus any related compensation income recognized by the optionee, and such gain or loss will be long-term or short-term capital gain or loss depending upon whether the optionee has held the shares for more than one year. The Company is entitled to a tax deduction to the extent, and at the time, that the participant realizes compensation income.

10

    The foregoing discussion of the federal income tax treatment of options is necessarily general and any option holder should consult his or her tax advisor as to his or her own particular circumstances and applicable laws and regulations.

Stockholder Approval

Vote Required

    The affirmative vote of a majority of voting power of the outstanding shares of BioNebraska's Common Stock and Series B, C, D, E, F, G and H Preferred Stock present and voting, either in person or by proxy, at the Annual Meeting is required to amend the Plan.

The Board of Directors Recommends that Stockholders Vote "For"
the Proposed Amendment to the Stock Plan.