DIRECTOR AGREEMENT

 

DIRECTOR AGREEMENT (“Agreement”) made and entered into as of March 6, 2008 (the
“Effective Date”), by and between Medistem Laboratories, Inc., a Nevada
corporation (the “Company”), and Roger M. Nocera, M.D. (“Nocera”).

 

RECITALS

 

WHEREAS, the Company and Nocera previously entered into an Employment Agreement
on February 1, 2006 (the “Original Execution Date”), effective as of October 1,
2005 (the “Employment Agreement”); and

 

WHEREAS, the Company and Nocera mutually desire to terminate the Employment
Agreement subject to the terms hereof; and

 

WHEREAS, the Company and Nocera desire to set forth their agreement regarding
Nocera’s continued willingness to serve as a director of the Company.

 

NOW THEREFORE, the Company and Nocera agree as follows:

 

ARTICLE I.

 

TERMINATION OF EMPLOYMENT AGREEMENT

 

1.1     Termination of Employment Agreement. The Company and Nocera hereby
mutually agree to terminate the Employment Agreement subject to the terms
hereof. Unless specifically stated to the contrary in this Agreement, the rights
and obligations of Nocera and the Company intended to survive termination of the
Employment Agreement shall survive.

 

ARTICLE II

 

DUTIES AND TERM

 

2.1     Service as Director. During the Term (as defined below) of this
Agreement, Nocera agrees to serve, if elected, as a director of the Company.

 

2.2     Term. The term of this Agreement shall commence on the Effective Date
and shall continue as provided herein, unless sooner terminated, through
December 31, 2009; provided, however, that the term of this Agreement shall be
automatically extended without further action of either party for additional one
(1) year periods, unless written notice of either party’s intention not to
extend has been given to the other party at least thirty (30) days prior to the
expiration of the then-effective term. The period from the Effective Date until
the termination of Nocera’s service as a director is referred to as the “Term”.

 

 

 

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ARTICLE III.

 

COMPENSATION

 

For all services rendered by Nocera in any capacity under this Agreement,
including, without limitation, services as a director, officer or member of any
committee of the Board or of any subsidiary or affiliate of the Company, the
Company shall compensate Nocera as follows:

 

3.1           Annual Bonus. Nocera shall be entitled to compensation payments at
levels at least commensurate with compensation paid to the other directors of
the Company for their service as directors, as determined from time to time by
the Board in its sole and absolute discretion (the “Compensation”). Nocera’s
Compensation will be paid in form and at the same time as Compensation is
generally paid to the directors of the Company.

 

3.2          Stock Options. Pursuant to the Employment Agreement, the Company
granted to Nocera an option to purchase an aggregate of 6,000,000 shares of
common stock of the Company (the “Options”). The per share exercise price of the
Options is equal to the fair market value of the common stock of the Company on
the Original Execution Date. The Employment Agreement provided that the Options
shall vest over three (3) years from the Original Execution Date, with the first
25% vesting on the Original Execution Date and the remaining 75% vesting in
three (3) equal installments on each anniversary date of the Original Execution
Date. The terms and conditions of the Options were set forth in a separate
Incentive Stock Option Agreement substantially in the form attached hereto as
Exhibit A. The Incentive Stock Option Agreement has been amended by a First
Amendment to Incentive Stock Option Agreement substantially in the form attached
hereto as Exhibit B.

 

3.3          Future Equity Awards. Nocera shall be entitled to participate in
all Company long term incentive programs extended to the directors of the
Company generally at levels commensurate with Nocera’s position as a director
and his role with the Company.

 

3.4          Reimbursement of Business Expenses. The Company shall, in
accordance with standard Company policies, pay, or reimburse Nocera for, all
reasonable travel and other expenses incurred by Nocera in performing his
obligations under this Agreement.

 

3.6          Additional Benefits. Nocera shall be entitled to participate in any
benefit and welfare programs, plans and arrangements (including, without
limitation, bonus, pension, profit-sharing, supplemental pension and other
retirement plans, insurance, hospitalization, medical and disability benefits,
travel or accident insurance plans) and fringe benefits, such as club dues and
fees of professional organizations and associations, which are from time to time
available to all of the Company’s directors.

 

ARTICLE IV.

 

TERMINATION OF AGREEMENT

 

4.1          Death or Retirement of Nocera. This Agreement shall automatically
terminate upon death or Retirement of Nocera. The term “Retirement” shall mean
normal retirement at age 65 or in accordance with rules generally applicable to
the Company’s directors in accordance with any other retirement arrangement
established with Nocera’s consent with respect to Nocera.

 

4.2          By Nocera. Nocera shall be entitled to terminate this Agreement at
any time by giving notice to the Company.

 

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4.3          By Company. The Company shall be entitled to terminate this
Agreement at any time by giving notice to Nocera.

 

a)          In the event Nocera is terminated for Cause (as defined below),
Nocera shall be entitled to receive accrued and vested benefits up to the date
of termination and shall be promptly reimbursed for all business expenses
properly incurred by Nocera prior to the date of termination.

 

(b)          In the event Nocera is terminated without Cause, Nocera shall be
entitled to receive accrued and vested benefits up to the date of termination
and shall be promptly reimbursed for all business expenses properly incurred by
Nocera prior to the date of termination. In addition, Nocera shall have ninety
(90) days from the date of termination to exercise any vested but unexercised
options existing as of the termination date.

 

(c)          For purposes of this Agreement, the term "Cause" shall mean the
occurrence of any of the following:

 

(i)           Nocera's gross and willful misconduct with regard to the Company
which is materially injurious to the Company;

 

(ii)          Nocera has engaged in fraudulent conduct with respect to the
Company's business or in conduct of a criminal nature that will have an material
adverse impact on the Company's standing and reputation;

 

(iii)         the continued and unjustified willful failure or willful refusal
by Nocera to attempt to perform the duties required of him by this Agreement
(other than any such failure or refusal resulting from incapacity due to
physical or mental illness) which willful failure or willful refusal is not
cured within fifteen (15) days following (A) receipt by Nocera of written notice
from the Board specifying the factors or events constituting such willful
failure or willful refusal, and (B) a reasonable opportunity for Nocera to
correct such deficiencies; or

 

(iv)         Nocera's use of drugs and/or alcohol in material violation of the
Company's policy in effect on the Execution Date.

 

No event or condition described above shall constitute Cause unless (x) the
Company first gives Nocera a notice of termination no fewer than ______ (___)
days prior to the date of termination; and (y) Nocera is provided the
opportunity to appear before the Board, with or without legal representation at
his election to present arguments on his own behalf.

 

 No act or failure to act on Nocera's part will be considered "willful" unless
done, or omitted to be done, by Nocera not in good faith and without reasonable
belief that his action or omission was not adverse to the best interests of the
Company.

 

 

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ARTICLE V.

 

RESTRICTIVE COVENANTS

 

5.1

Confidentiality.

 

(a)          Nocera covenants and agrees to hold in strictest confidence, and
not disclose to any person without the express written consent of the Company,
any and all of the Company’s Proprietary Information, except as such disclosure
may be required or desirable in connection with his service as a director
hereunder. Further, this Section 5.1(a) shall not prevent Nocera from disclosing
Proprietary Information in connection with any litigation, arbitration or
mediation to enforce this Agreement, provided that such disclosure is necessary
or reasonably desirable for Nocera to assert any claim or defense in such
proceeding. In addition, this Section 5.1(a) shall not apply to Proprietary
Information that Nocera is required to disclose by applicable law, regulation or
legal process. This covenant and agreement shall survive this Agreement and
continue to be binding upon Nocera after the expiration or termination of this
Agreement, whether by passage of time or otherwise, so long as such information
and data shall remain Proprietary Information.

 

(b)          Upon termination of this Agreement for any reason, Nocera shall
immediately turn over to the Company any Proprietary Information in his
possession. Nocera shall have no right to retain any copies of any material
qualifying as Proprietary Information for any reason whatsoever after
termination of his service as a director without the express written consent of
the Company. Notwithstanding the foregoing, Nocera shall be entitled to retain
(i) papers and other materials of a personal nature, including, but not limited
to, photographs, personal diaries, calendars and Rolodexes, (ii) information
showing his compensation or relating to reimbursement of expenses, (iii)
information that is required for the preparation of his personal income tax
return, (iv) documents provided to him in his capacity as a participant in any
director benefit plan, policy or program of the Company and (v) this Agreement
and any other agreement by and between him and the Company with regard to his
former employment, service as a director or termination thereof.

 

(c)          For purposes of this Agreement, “Proprietary Information” means and
includes the following: the identity of clients or customers or potential
clients or customer of the Company or its affiliates; any written, typed or
printed lists, or other materials identifying the clients or customers of the
Company or its affiliates; any financial or other information supplied by
clients or customers of the Company or its affiliates; any and all data or
information involving the Company, its affiliates, programs, methods, or
contacts employed by the Company or its affiliates in the conduct of their
business; any lists, documents, manuals, records, forms, or other material used
by the Company or its affiliates in the conduct of their business; and any other
secret or confidential information concerning the Company’s or its affiliates’
business or affairs. The terms “list,” “document” or other equivalents, as used
in this subparagraph (c), are not limited to a physical writing or compilation
but also include any and all information whatsoever regarding the subject matter
of the “list” or “document,” whether or not such compilation has been reduced to
writing. “Proprietary Information” shall not include any information which: (i)
is or becomes publicly available or generally known within the relevant trade or
industry through no act or failure of Nocera; (ii) was or is rightfully learned
by Nocera from a source other than the Company before being received from the
Company; or (iii) becomes independently available to Nocera as a matter of right
from a third party, provided such third party is not to Nocera’s knowledge
subject to a confidentiality agreement with the Company. If only a portion of
the Proprietary Information is or becomes publicly available, then only that
portion shall not be Proprietary Information hereunder.

 

 

 

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5.2          Non-Disparagement. During the Term and for a period of twelve (12)
months after the Term, each party agrees not to disparage the other party.

 

5.4          Remedies. Nocera acknowledges that the remedy at law for any breach
or threatened breach of Sections 5.1 and 5.2 will be inadequate and,
accordingly, that the Company shall, in addition to all other available remedies
(including without limitation, seeking such damages as it can show it has
sustained by reason of such breach), be entitled to injunctive relief or
specific performance without any bond or other security being required of any
court.

 

5.5          Agreement Confidential. During the Term and for a period of twelve
(12) months after the Term, each party agrees not to disclose to any third party
the conditions of Nocera’s prior employment with or service as a director of the
Company except as may be required in filings made pursuant to applicable law and
the rules and regulations of the Securities and Exchange Commission; provided,
Nocera may disclose the terms of the Employment Agreement and this Agreement to
his accountants, attorneys, future and potential future employers and/or spouse,
provided that they also agree to maintain the confidentiality of this Agreement.

 

5.6

Mitigation of Damages; Arbitration.

 

(a)          The Company’s obligation to perform its obligations hereunder shall
not be affected by any set off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against Nocera or others. In
no event shall Nocera be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to Nocera under any of the
provisions of this Agreement and such amounts shall not be reduced whether or
not Nocera obtains other employment. The Company agrees to pay promptly as
incurred, to the full extent permitted by law, all legal fees and expense which
Nocera may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, Nocera or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee or performance thereof (including as a result of any contest by Nocera
about the amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate provided for in
Code Section 1274(d) or any successor provision thereto, for an obligation with
a term equal to the length of such delay.

 

(b)          Any dispute or controversy arising from or relating to this
Agreement and/or Nocera’s prior employment or ongoing relationship with the
Company shall be resolved by binding arbitration, to be held in Maricopa County,
Arizona or in any other location mutually agreed to by the Company and Nocera in
accordance with the rules and procedures of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. Nocera and the Company agree that, in
the event a dispute arises that concerns this Agreement, if Nocera is the
Prevailing Party, Nocera shall be entitled to recover all of his reasonable fees
and expenses, including, without limitation, reasonable attorneys’ fees and
expenses, incurred in connection with the dispute. A Prevailing Party is one who
is successful on any significant substantive issue in the action and achieves
either a judgment in such party’s favor or some other affirmative recovery.

 

5.7          Successors; Binding Agreement. This Agreement shall be binding upon
any successor to the Company and shall inure to the benefit of and be
enforceable by Nocera’s personal or legal representatives, beneficiaries,
designees, executors, administrators, heirs, distributees, devisees and
legatees.

 

 

 

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5.8          Modification; No Waiver. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto. No term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument by the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future or as to any other term or condition.

 

5.9          Severability. The covenants and agreements contained herein are
separate and severable and the invalidity or unenforceability of any one or more
of such covenants or agreements, if not material to the arrangement that is the
basis for this Agreement, shall not affect the validity or enforceability of any
other covenant or agreement contained herein. If, in any judicial proceedings, a
court shall refuse to enforce one or more of the covenants or agreements
contained herein because the duration thereof is too long, or the scope thereof
is too broad, it is expressly agreed between the parties hereto that such
duration or scope shall be deemed reduced to the extent necessary to permit the
enforcement of such covenants or agreements.

 

5.10       Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, to the parties hereto at
the following addresses:

 

If to the Company, to it at:

 

Medistem Laboratories, Inc.

2027 E. Cedar Street, Suite 102

Tempe, Arizona 85281

ATTN: Neil H. Riordan, Ph.D.

 

with a copy to:

 

DLA Piper US LLP

2415 East Camelback Road, Suite 700

Phoenix, Arizona 85016

ATTN: Greg R. Hall, Esq.

 

If to Nocera, to him at the last address for Nocera on the books of the Company.

 

5.11       Assignment. This Agreement and any rights hereunder shall not be
assignable to either party without the prior written consent of the other party;
provided, the Company may only assign this Agreement to an acquirer of all or
substantially all of the assets of the Company who has assumed all of the
Company’s obligations hereunder in a writing delivered to Nocera and otherwise
complies with the provisions of this Agreement with regard to such assumption.

 

5.12       Entire Understanding. This Agreement constitutes the entire
understanding between the parties hereto and no agreement, representation,
warranty or covenant has been made by either party except as expressly set forth
herein.

 

5.13       Nocera’s Representations. Nocera represents and warrants that neither
the execution and delivery of this Agreement nor the performance of his duties
hereunder violates the provisions of any other agreement to which he is a party
or by which he is bound.

 

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5.14       Survivorship. Unless specifically stated to the contrary in this
Agreement, the rights and obligations of Nocera and Company intended to survive
termination of Nocera’s service as a director shall survive any termination of
Nocera’s service as a director or expiration of the Term.

 

5.15       Governing Law. This Agreement shall be construed in accordance with
and governed for all purposes by the laws of the State of Arizona applicable to
contracts executed and wholly performed within such state.

 

5.16       Indemnification. The Company agrees that if Nocera is or is made a
party, or is threatened to be made a party, to any action, suit or proceeding (a
“Proceeding”), by reason of the fact that he is or was a director, officer or
employee of the Company or is or was serving at the request of the Company as a
director, officer, member, employee or agent of another entity, Nocera shall be
fully indemnified and held harmless by the Company to the fullest extent
permitted by law against all cost, expense, liability and loss reasonably
incurred or suffered by Nocera in connection therewith, and such indemnification
shall continue after termination of Nocera’s service as a director with respect
to acts or omissions which occurred prior to termination of his service as a
director and which occur after termination of his service as a director, and
shall inure to the benefit of Nocera’s heirs, executors and administrators. To
the fullest extent allowed by law, the Company shall advance to Nocera all
reasonable costs and expenses incurred by him in connection with a Proceeding
within 20 calendar days after receipt by the Company of a written request for
such advance. Such request shall include an undertaking by Nocera to repay the
amount of such advance if it shall ultimately be determined that he is not
entitled to be indemnified against such costs and expenses.

 

5.17       Counterparts. This Agreement may be executed by either of the parties
hereto in counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.

 

5.18       Headings. The headings of sections herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.

 

Company:

 

MEDISTEM LABORATORIES, INC.,

a Nevada Corporation

 

By:                                                        

 

Name:                                                  

 

Title:                                                    

 

 

 

                                                               

Roger M. Nocera 

 

 

 

 

 

 

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EXHIBIT A

 

Form of Incentive Stock Option Agreement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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EXHIBIT B

 

Form of First Amendment to Incentive Stock Option Agreement