Document:

KCS EX 10.1 06.30.13

Exhibit 10.1
KANSAS CITY SOUTHERN ANNUAL INCENTIVE PLAN
(As Amended and Restated Effective January 1, 2013)

1.    PURPOSE.  The purpose of the Plan is to provide management employees of the Employer with annual incentive compensation based on the level of achievement of financial and other performance criteria.  The Plan is intended to focus the interests of these employees on the key measures of the Company’s success and to reward these employees for achieving the key measures of the Company’s success.  This Plan is intended to be a performance-based plan for purposes of Section 162(m) of the Code.
2.    DEFINITIONS.  As used in the Plan, the following terms shall have the meanings set forth below:
(a)    “Award” shall mean a cash payment for a Performance Year payable to a Participant on account of his or her participation in the Plan.  
(b)    “Board” shall mean the Board of Directors of the Company.
(c)    “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, including applicable regulations and rulings thereunder and any successor provisions thereto.
(d)    “Committee” shall mean the Compensation and Organization Committee of the Board (or any successor committee).
(e)    “Company” shall mean Kansas City Southern, and any successor thereto which adopts the Plan.
(f)    “Covered Employee” shall mean employee described in Section 162(m)(3) of the Code. 
(g)    “Disability” shall mean a disability as defined under the Employer’s applicable long-term disability program.
(h)    “Eligible Employee” shall mean an individual who is employed by an Employer in active service and who is not represented by a union or other collective bargaining organization.
(i)    “Employer” shall mean the Company and any affiliate of the Company that elects to participate and be an Employer under the Plan with the consent of the Company.
(j)    “Leave” shall mean an absence from work with the approval of the applicable Employer.  Leaves include absences for short-term disability, family leaves of absence and other approved leaves of absence.
(k)    “Maximum Award” shall mean an Award level that may be paid if the maximum level of the Performance Goal(s) is achieved in the Performance Year.
(l)    “Participant” shall mean, with respect to any Performance Year, any Eligible Employee who is selected to participate in the Plan in accordance with Section 3 of the Plan.

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(m)    “Performance Goal” shall mean the pre-established performance goal(s) established under the Plan for each Performance Year as described in Section 4 of the Plan.
(n)    “Performance Measures” shall mean one or more of the following criteria on which Performance Goals may be based:
(i)    Earnings (either in the aggregate or on a per-share basis); 
(ii)    Net income (before or after taxes); 
(iii)    Operating income;
(iv)    Cash flow;
(v)    Return measures (including return on assets, equity, or sales); 
(vi)    Earnings before or after any, or any combination of, taxes, interest or depreciation and amortization; 
(vii)    Gross revenues; 
(viii)    Share price (including growth measures and stockholder return or attainment by the Company's common stock of a specified value for a specified period of time); 
(ix)    Reductions in expense levels in each case, where applicable, determined either on a Company-wide basis or in respect of any one or more business units; 
(x)    Net economic value; 
(xi)    Market share;
(xii)    Operating profit;
(xiii)    Costs; 
(xiv)    Operating and maintenance cost management and employee productivity; 
(xv)    Stockholder returns (including return on assets, investments, equity, or gross sales); 
(xvi)    Economic value added; 
(xvii)    Aggregate product unit and pricing targets; 
(xviii)    Strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market share, market penetration, geographic business expansion goals, objectively identified project milestones, production volume levels, cost targets, and goals relating to acquisitions or divestitures; 
(xix)    Achievement of business or operational goals such as market share and/or business development; 

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(xx)    Results of customer satisfaction surveys;
(xxi)    Safety record;
(xxii)    Network and service reliability;
(xxiii    Debt ratings, debt leverage and debt service; and/or
(xxiv)    Operating ratio;
provided, that, with respect to any Eligible Employee who is not a Covered Employee, the Committee shall have the authority to use Performance Measures other than those herein specified (including individual performance criteria) as it deems appropriate in its sole discretion.
(o)    “Performance Year” shall mean the calendar year of the Company in which a Participant provides services on account of which the Award is made.
(p)    “Plan” shall mean the Kansas City Southern Annual Incentive Plan, as set forth herein, as from time to time amended.
(q)    “Proration Fraction” shall mean a fraction, the numerator of which is the number of days in the Performance Year the individual was an Eligible Employee, and the denominator of which is 365.
(r)    “Qualified Performance-Based Award” shall mean an Award to a Covered Employee that is intended to meet the qualified performance-based compensation exception contained in Section 162(m)(4)(C) of the Code. 
(s)    “Target Award” shall mean an Award level that may be paid if the target level of the Performance Goal(s) is achieved in the Performance Year.
(t)    “Threshold Award” shall mean an Award level that may be paid if the threshold level of the Performance Goal(s) is achieved in the Performance Year.
3.    ELIGIBILITY and PARTICIPATION.
(a)    In General.  An Eligible Employee of an Employer will become a Participant for a Performance Year if he or she is selected by the Company, subject to the approval of the Committee, as eligible to participate in the Plan.  Participants will be determined at the beginning of each Performance Year, and participation in the Plan during one Performance Year does not guarantee continued participation in future Performance Years.  The Company, subject to the approval of the Committee, may add Participants during the course of a Performance Year as it deems appropriate in its sole discretion.  A Participant must be employed by an Employer on the last business day of a Performance Year in order to be eligible to receive an Award, except as provided in Section 3(b)(2) below.
(b)    Prorations for Partial Year.  A Participant who is not an Eligible Employee for an entire Performance Year may receive an Award for any portion of the Performance Year that he or she is an Eligible Employee, under the circumstances described below and subject to Section 5 of the Plan:

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1)    New Hires, Transfers.  A Participant who becomes an Eligible Employee on account of being hired or transferred during a Performance Year will be eligible for a prorated Award for such Performance Year.  The amount of the prorated Award shall be equal to the full amount of the Award otherwise determined under Section 4 of the Plan, multiplied by the Proration Fraction.  Notwithstanding the preceding two sentences, and subject to the provisions of Section 3(a) of the Plan, an individual who becomes an Eligible Employee on or after October 1 of a Performance Year will not become a Participant in such Performance Year and will not be eligible for an Award for such Performance Year.
2)    Death or Disability.  A Participant who has a termination of employment during a Performance Year on account of death or Disability will be eligible for a prorated Award for such Performance Year.  The amount of the prorated Award shall be equal to the full amount of the Award for such individual for the Performance Year in which the death or Disability occurs, multiplied by the Proration Fraction.  With respect to the calculation of an Award for purposes of this provision, the Participant’s rate of base salary in effect for the last full payroll period of his or her employment shall be used.
Notwithstanding the foregoing, the Committee may, in its discretion, based upon the recommendation of the Company, determine that a Participant who is added during the course of a Performance Year will be eligible for an Award for the Performance Year that is not a prorated Award and that therefore is not multiplied by the Proration Fraction.

(c)    Leaves.  A Participant who is on Leave for an aggregate of more than three (3) months during a Performance Year will not be eligible for an Award for such Performance Year; provided however, a Participant who is on Leave under the Family Medical Leave Act will continue as a Participant during such Leave and will be eligible for an Award for the Performance Year of such Leave subject to other provisions of the Plan, and a Participant who is on Leave during a period of service in the uniformed services and returns to employment with the Employer and is entitled to benefits upon reemployment under the Uniformed Services Employment and Reemployment Rights Act will continue as a Participant during such Leave and will be eligible for an Award for the Performance Year of such Leave subject to other provisions of the Plan.  
4.    DETERMINATION OF AWARDS.
(a)    Establishment of Performance Goal.  The Company shall establish objective Performance Goals for each Award after the beginning of each Performance Year subject to the approval of the Committee.  The Performance Goals may be based upon the performance of the Company, the Employer, or any operating unit level, division or function thereof, and may be applied either alone or relative to the performance of other businesses or individuals (including industry or general market indices), based on one or more of the Performance Measures.  Performance Goals may be expressed as whole dollar amounts, percentages or growth rates.  Performance Goals will be determined each year by the senior management of the Company, with consultation from other third party sources, and are subject to the approval of the Committee.  Performance Goals will be set for each Performance Measure as follows:  threshold, target and maximum.  No Award will be made under a Performance Measure if results are below the threshold level.
(b)    Establishment of Awards.  The Company shall also establish, subject to the approval of the Committee, the Threshold Award, the Target Award and the Maximum Award payable to a Participant if the Performance Goal(s) is achieved. The payment of any Award shall be subject to achievement 

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of the applicable Performance Goals and certification by senior management of the Company to the degree to which each of the Performance Goals have been attained.  The Committee will consider such certification in its determination hereunder of whether an Award shall be paid.  Threshold Awards, Target Awards and Maximum Awards will be expressed as a percentage of a Participant’s base salary and correspond to his or her salary grade.  Target Award percentages will be determined each year by the senior management of the Company, with consultation from other third party sources, and are subject to the approval of the Committee.  If a Participant’s base salary and/or salary grade changes during a Performance Year, the amount of the Participant’s Award will be computed in proportion to his or her base salary and/or salary grade that applied to such Participant each day during such Performance Year.    
(c)    Maximum Individual Award.  The maximum amount of any Maximum Award to a Participant for any Performance Year shall be the lesser of $3,000,000 or 200 percent of a Participant’s Target Award for a Performance Year.  Threshold Award amounts will be 50% of the potential Target Award amount (multiplied by the Performance Measure weighting).  
(d)    Adjustments to Awards.  The Committee may, in its discretion, modify the amount of any Award based on such criteria as it shall determine, including, but not limited to, financial results, individual performance, safety performance, business unit and site accomplishments, and other factors tied to the success of the Company or any of its business units; provided, that no increase may be made in the amount payable with respect to any Qualified Performance-Based Award made to a Covered Employee unless the Committee amends such Award so that it no longer qualifies for the performance-based exception under Section 162(m)(4)(C) of the Code.  The Committee shall retain the discretion to adjust any Award downward.  There is no obligation of uniformity of treatment of Participants under the Plan.
(e)    Profit Sharing Adjustment.  If, under statutory law, a Participant is entitled to a profit sharing payment from the Employer for a calendar year that coincides with a Performance Year, then the Award amount otherwise payable to the Participant hereunder shall be reduced by an amount equal to such statutory profit sharing amount payable to the Participant.  If applicable, for purposes of calculating such reduction, the statutory profit sharing amount shall be converted to U.S. dollars in accordance with procedures established hereunder.  
5.    PAYMENT OF AWARDS.
(a)    Time of Payment.  An Award shall be paid to a Participant in cash as soon as practicable after the Committee has certified in writing that the Performance Goal(s) for the Performance Year have been achieved; provided, however, in no event will the Award with respect to a Performance Year be paid to a Participant later than the 15th day of the third month following the end of such Performance Year.  No absolute right to any Award shall be considered as having accrued to any Participant prior to the payment of the Award.  Notwithstanding the foregoing, an Award with respect to a Performance Year to be paid to a Participant that is not subject to income taxation under the laws of the United States, may be paid later than the 15th day of the third month following the end of such Performance Year, but shall not in any event be paid later than the 30th day of the fourth month following the end of such Performance Year.  Awards payable to other Participants who have had a termination of employment on account of death or Disability during the Performance Year shall be payable in accordance with Section 3(b) of the Plan and at the same time other Participants receive Awards under the Plan.

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(b)    Termination of Employment Other Than on Account of Death or Disability.  A Participant who has a termination of employment other than on account of death or Disability prior to the last day of a Performance Year shall not be paid any Award for such Performance Year.
(c)    Termination of Employment on Account of Death or Disability.  A Participant who has a termination of employment on account of death or Disability after the end of the Performance Year but prior to the payment date for Awards for such Performance Year shall be paid the full amount of any Award for such Performance Year, determined under Section 4 of the Plan (in addition to any amount determined under Section 3(b) for the Performance Year in which the termination of employment on account of death or Disability occurs).  If the Participant dies prior to receiving payment of an Award, any Award payable under the Plan to such Participant shall be paid to the Participant’s estate.
(d)    Withholding.  Awards are subject to withholding for applicable federal, state and local taxes.
6.    COMPLIANCE WITH SECTION 162(M) OF THE CODE.
(a)    Purpose.  The purpose of Section 6 of the Plan is to provide the Committee the ability to grant Qualified Performance-Based Awards to Covered Employees, in accordance with Section 162(m)(4)(C) of the Code. This Section 6 of the Plan shall apply only to Qualified Performance-Based Awards granted to Covered Employees and shall supersede any other provision of such Award or this Plan that is inconsistent with this Section 6. 

(b)    Procedures with Respect to Qualified Performance-Based Awards. Any Qualified Performance-Based Award granted by the Committee to a Covered Employee shall be set forth in writing and shall specify the following:  

(i)    the Covered Employee to whom the Award is made;

(ii)    the Performance Goals applicable to the Performance Year, which shall be specified by the Committee no later than ninety (90) days after the beginning of such  Performance Year, but in no event after twenty-five percent (25%) of the applicable Performance Year has elapsed, provided that the outcome is substantially uncertain at the time the Committee establishes such Performance Goals;  and

(iii)    the amount that may be earned upon attainment of such Performance Goals.

(c)    Payment of Qualified Performance-Based Awards. Except as otherwise permitted under Section 162(m) of the Code, payment of any Qualified Performance-Based Award subject to this Section 6 of the Plan shall be contingent on the attainment of the Performance Goals applicable to such Award.  Following the completion of each Performance Year and prior to the payment of such Qualified Performance-Based Award, the Committee shall certify in writing whether the applicable Performance Goals have been achieved for such Performance Year.  In determining the amount earned by a Covered Employee, the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Year.  A Participant shall be eligible to receive payment pursuant to a Qualified Performance-Based Award for a Performance Year only if the Performance Goals for such year are achieved. 

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(d)    Additional Limitations. Notwithstanding any other provision of the Plan, any Award which is granted to a Covered Employee and is intended to constitute Qualified Performance-Based Award shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m)(4)(C) of the Code, and the Plan and/or any Award shall be deemed amended to the extent necessary to conform to such requirements. 

7.    PLAN ADMINISTRATION.
(a)    Administration.  The Plan shall be administered by the Committee.  The Committee shall have full discretionary authority to establish the rules and regulations relating to the Plan, to interpret the Plan and those rules and regulations, to determine the Awards and the Performance Measures applicable to each Award, to approve all Awards, to decide the facts in any case arising under the Plan, and to make all other determinations and to take all other actions necessary or appropriate for the proper administration of the Plan.  In making any determinations under or referred to in the Plan, the Committee shall be entitled to rely on opinions, reports or statements of employees of the Company and of counsel, public accountants, and other professional or expert persons.  The Committee’s administration of the Plan, including all such rules and regulations, interpretations, selections, determinations, approvals, decisions, delegations, amendments, terminations and other actions, shall be final and binding on the Company and its stockholders and all employees, including Participants and their beneficiaries.  No member of the Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any Award.
(b)    Delegation.  Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members, and may delegate all or any part of its responsibilities and powers for administering the Plan to one or more persons as the Committee deems appropriate, and at any time may revoke any such allocation or delegation.
8.    AMENDMENT OR TERMINATION OF PLAN.  The Committee may amend (in whole or in part) or terminate the Plan at any time, effective at such date as the Committee may determine.  The Company also may amend (in whole or in part) or terminate the Plan at any time effective as of such date as the Company may determine, provided, however, any such amendment of the Plan by the Company is subject to the approval of the Committee.
9.    MISCELLANEOUS PROVISIONS.
(a)    Awards Not Transferable.  A Participant’s right and interest under the Plan may not be assigned or transferred.  Any attempted assignment or transfer shall be null and void and shall extinguish, in the Committee’s sole discretion, the Company’s obligation under the Plan to pay Awards with respect to the Participant.
(b)    Effect of Awards on Other Compensation.
1)    Awards shall not be considered eligible pay under other plans, benefit arrangements or fringe benefit arrangements of the Company, unless otherwise provided under the terms of other plans.

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2)    To the extent provided in the applicable benefit plan or benefit arrangement of an Employer, amounts payable as Awards will be reduced in accordance with the Participant’s compensation reduction election, if any, in effect under other plans at the time the Award is paid.
(c)    No Employment Rights.  This Plan is not a contract between the Employer and any employee or Participant.  Neither the Plan, nor any action taken hereunder, shall be construed as giving to any Participant the right to be retained in the employ of the Employer.  Nothing in the Plan shall limit or affect in any manner or degree the normal and usual powers of management, exercised by the officers and the Board or any committee of the Board, to change the duties or the character of employment of any employee or to remove an individual from the employment of the Employer at any time, all of which rights and powers are expressly reserved.
(d)    Unfunded Plan.  The Plan shall be unfunded.  No Employer shall be required to establish any special or separate fund, or to make any other segregation of assets, to assure payment of Awards.  Awards shall be paid solely from the general assets of the Participant’s Employer, to the extent the payments are attributable to services for the Employer.  To the extent any person acquires a right to receive payments from an Employer under the Plan, the right is no greater than the right of any other unsecured general creditor.
(e)    Payment in Shares of Company Common Stock.  Notwithstanding any provision in this Plan to the contrary, the Committee may direct that payment of an Award be made in shares of the Company’s common stock, in lieu of cash, in accordance with any executive stock ownership guidelines adopted by the Committee.  Any such Award paid in shares of the Company’s common stock shall be made pursuant to and in accordance with the Kansas City Southern 2008 Stock Option and Performance Award Plan (or any successor plan). 
(f)    Applicable Law.  The Plan shall be governed by the laws of the State of Missouri and applicable federal law.

8Exh 10.1_SP

Exhibit 10.1

EMPLOYMENT  AGREEMENT

EMPLOYMENT AGREEMENT, dated as of July 15, 2013 and effective on the Commencement Date (July 15, 2013) by and between NeoStem, Inc. (the "Company") and Stephen W. Potter (the "Employee").

W I T N E S S E T H:

NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto hereby agree as follows:

Section 1.       Employment.  The Company agrees to employ the Employee, and the Employee agrees to be employed by the Company on a full-time basis, continuing until December 31, 2014 (the "Term") and renewable upon mutual agreement of the parties hereto. The Employee hereby represents and warrants that he has the legal capacity to execute and perform this Agreement, and that its execution and performance by him will not violate the terms of any existing agreement or understanding to which the Employee is a party.

Section 2.       Position and Duties.   During the Term, the Employee shall (i) render services as the Executive Vice President of Neostem and (ii) perform duties consistent with such title and such other related duties as the CEO shall reasonably request.  Employee will report to the CEO.  During the Term, and except for reasonable vacation periods pursuant to the Company's policies, the Employee shall devote his full time, attention, skill and efforts to the business and affairs of the Company and its subsidiaries and affiliates Employee shall be based out of his Massachusetts home; however, it is understood that in this role frequent travel outside and within the US, including to the Company's New York, New York, Allendale, New Jersey and Mountain View, CA locations shall be required.  The parties acknowledge that Employee also serves as a member of the Board of Directors of the Company.  If Employee is required to resign  as  a  Board  member,  all  outstanding  options  and  shares  related  to  that  role  will immediately vest

Section 3.        Compensation.  For all services rendered by the Employee in any capacity required hereunder during the Term, the Employee shall be compensated as follows:

(a)       The Company shall pay the Employee a fixed annual salary equal to $295,000 (the "Base Salary") in accordance with the Company's payroll practices, including the withholding of appropriate payroll taxes.

(b)       The Employee shall be entitled to participate in all compensation and employee benefit plans or programs, and to receive all benefits and perquisites, which are approved by the Board of Directors and are generally made available by the Company to all salaried employees of the Company and to the extent permissible under the general terms and provisions  of  such  plans  or  programs  and  in  accordance  with  the  provisions  thereof. Notwithstanding any of the foregoing, nothing in this Agreement shall require the Company or any subsidiary or  affiliate thereof  to  establish, maintain or  continue any particular plan or program nor preclude the amendment, rescission or termination of any such plan or program that may be established from time to time.

(c)       Effective upon the Commencement Date of this Agreement, the Employee shall be granted an option (the "Option") to purchase 300,000 shares (the "Option Shares") (which Option Shares shall be adjusted to 30,000 shares post the Company's  1:10 reverse stock split scheduled to become effective July 16, 2013) of the Company's  common stock,  $.001  par  value  (the  "Common  Stock")  under  and  subject to  the  Company's  2009
Amended and Restated Equity Compensation Plan ("2009 Equity Plan") at an exercise price equal to the closing price of the Common Stock on the Commencement Date.  The Option shall vest and become exercisable subject to Employee's continued employment as to  100,000 Option Shares on each of (i) the first year anniversary of the Commencement Date; (ii) the second year anniversary   of the Commencement Date; and (iii) the date on which the Company closes a strategic transaction for which Employee played a significant role.     The foregoing Option is subject in all respects to the terms and conditions of the 2009 Equity Plan and applicable law and shall be subject to a written grant agreement setting forth the terms and conditions to which such Option grant shall be subject. All Option and Option Share issuances are subject to Employee's execution of the Company's Insider Trading Policy. In addition, Employee acknowledges that in his position, he will be an "affiliate" of the Company for purposes of U.S. securities laws and subject to applicable laws with respect thereto.

(d)       Employee shall be eligible for an annual cash bonus of up to 30% of his Base Salary as well as discretionary bonuses that may be approved by the Compensation Committee from time to time.

(e)       The  Company  shall  pay  or  reimburse  the  Employee  for  all reasonable travel (it being understood that travel shall be arranged by the Company) and other reasonable expenses incurred by the Employee in connection with the performance of his duties and obligations under this Agreement, subject to the Employee's  presentation of appropriate vouchers or receipts in accordance with such policies and approval procedures as the Company may from time to time establish for employees (including but not limited to prior approval of extraordinary expenses) and to preserve any deductions for Federal income taxation purposes to which the  Company may be entitled.

Section 4.       Benefits; Perquisites; Expense Reimbursement.   In addition to those  payments set  forth  above,  Employee  shall  be  entitled  to  the  following  benefits and payments:

(a) Vacation. Employee shall be entitled to three (3) weeks paid vacation per calendar year (pro rated in the event of a service year which is shorter than a calendar year), in addition to Company holidays. Any vacation time not used during a calendar year will be forfeited without compensation.

(b) Perquisites and Reimbursement of Expenses. Employee shall receive perquisites generally available to senior executives of the Company, including, but not limited to, payment or reimbursement for cell phone, blackberry and internet service.

Section 5.       Termination of Employment.

(a) The Company may terminate Employee's employment prior to the end of the Term upon ninety (90) days'  prior written notice to Employee.   Employee may terminate Employee's employment  upon  ninety  (90) days'  prior written  notice to the Company.   In the event that  Employee's employment  terminates  before the expiration of the Term for any reason earned but unpaid Base Salary as of the date of termination  of employment  shall be payable in full and an amount equal to thirty (30) days of additional salary shall be payable in full.  No other payments  shall be made or benefits provided by the Company  under this Agreement  except as may otherwise be provided in this Section.

(b) Continued  Benefits.   The Employee  and his eligible dependents  shall be entitled to continue participation in the Company's group health plans in accordance with the health care continuation  requirements  of the Consolidated  Omnibus Reconciliation  Act of 1985 ("COBRA").

(c)  Release   of  Claims.     Notwithstanding   anything  contained   in  this Agreement  to the contrary,  the  Company's provision  of the additional  payments  and benefits under Section 5  hereof shall be contingent in all respects upon the Employee executing (and not revoking) a general release of claims against the Company and its affiliates, in the form provided by the Company (the "Release").

Section  6.        Confidentiality;  Covenant  Against   Competition;  Proprietary
Information; Corporate Policies.

(a)        Confidentiality,     Non-Compete     and    Inventions  Assignment Agreement.  The Employee  acknowledges  that Employee  as a condition  to this Agreement,  is simultaneously    executing    a   Confidentiality,    Non-Compete    and   Inventions    Assignment Agreement attached hereto as Annex A and that the terms of such agreement will be in full force and effect as of the Commencement Date.

(b)       Corporate Policies.    The Employee acknowledges  and agrees that on the Commencement  Date, he will execute and be bound by the Company's various corporate policies, including but not limited to its expense reimbursement policies.

Section  7.        Withholding  Taxes.   The  Company  may  directly  or  indirectly withhold  from any payments  made under this Agreement  all Federal, state, city or other taxes and all other deductions as shall be required pursuant to any law or governmental regulation or ruling  or pursuant  to any contributory  benefit  plan maintained  by the Company  in  which  the Employee may participate.

Section 8.       Notices. All notices, requests, demands and other communications required or permitted hereunder  shall be given in writing and shall be deemed to have been duly given  if delivered  or mailed,  postage  prepaid,  by certified  or registered  mail or by use of an independent  third  party  commercial  delivery  service  for  same  day  or  next  day  delivery  and providing a signed receipt as follows:

NeoStem, Inc.
420 Lexington Avenue
Suite 450
NewYork,NewYork  10170
Attention: General Counsel

		
	(c) 
	To the Employee: Stephen Potter

75 Canton Ave.
Milton, MA 02186

or to such other address as either party shall have previously specified in writing to the other. Notice by mail shall be deemed effective on the second business day after its deposit with the United States Postal Service, notice by same day courier service shall be deemed effective on the day of deposit with the delivery service and notice by next day delivery service shall be deemed effective on the day following the deposit with the delivery service.

Section 9.       No Attachment.   Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect; provided, however, that nothing in this Section 11 shall preclude the assumption of such rights by executors, administrators or other legal representatives of the Employee or his estate and their conveying any rights hereunder to the person or persons entitled thereto.

Section 10.     Source  of  Payment.    All  payments  provided  for  under  this Agreement shall be paid in cash from the general funds of the Company. The Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments, and, if the Company shall make any investments to aid it in meeting its obligations hereunder, the  Employee  shall  have no  right, title  or  interest whatever in  or  to  any  such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments.  Nothing contained in this Agreement, and no action taken pursuant to  its provisions, shall create or  be construed to create a trust of any kind, or a fiduciary relationship, between the Company and the Employee or any other person.  To the extent that any person acquires a right to  receive payments from  the Company hereunder, such right, without prejudice to rights which employees may have, shall be no greater than the right of an unsecured creditor of the Company.

Section 11.     Binding Agreement; No Assignment.   This Agreement shall be binding upon, and shall inure to  the benefit of, the Employee and the Company and their respective  permitted   successors,  assigns,  heirs,  beneficiaries  and  representatives.     This Agreement is personal to the Employee and may not be assigned by him.  This Agreement may not be assigned by the Company except (a) in connection with a sale of all or substantially all of its assets or a merger or consolidation of the Company, or (b) to an entity that is a subsidiary or affiliate of the Company or the Parent.  Any attempted assignment in violation of this Section 13 shall be null and void.

Section 12.     Governing  Law;   Consent   to   Jurisdiction.      The   validity, interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of New York.  In addition, the Employee and the Company irrevocably submit to the exclusive jurisdiction of the courts of the State of New York and the United States District Court sitting in New York County for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on the Employee or the Company any where in the world by the same methods as are specified for the giving of notices under this Agreement.  The Employee and the Company irrevocably consent to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.

Section 13.     Entire Agreement; Amendments.  This Agreement (together with Annex A hereto) embodies the entire agreement between Employee, and the Company with respect to the subject matter hereof and may only be amended or otherwise modified by a writing executed by all of the parties hereto.

Section 14.     Counterparts. This Agreement may be executed in any number of counterparts, each of which when executed shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

Section 15.     Severability;  Blue-Pencilling.     The provisions,  sections  and paragraphs, and the specific terms set forth therein, of this Agreement are severable.   If any provision, section or paragraph, or specific term contained therein, of this Agreement or the application thereof is determined by a court to be illegal, invalid or unenforceable, that provision, section, paragraph or term shall not be a part of this Agreement, and the legality, validity and enforceability of remaining provisions, sections and paragraphs, and all other terms therein, of this Agreement shall not be affected thereby.  The Employee acknowledges and agrees that as to himself, the restrictive covenants contained herein and in  Annex A hereto (the "Restrictive Covenants")  are  reasonable and  valid in  geographical and temporal scope and  in all other respects.  If any court determines that any of such Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions.  It is the desire and intent of the parties that the Restrictive Covenants will be enforced to the fullest extent permissible under the  laws  and  public  policies  applied  in  each  jurisdiction in  which enforcement is  sought. Accordingly, if any Restrictive Covenant shall be adjudicated to be invalid or unenforceable, such Restrictive Covenant shall be deemed amended to the extent necessary in order that such provision be valid and enforceable, such amendment to apply only with respect to the operation of such Restrictive Covenant in the particular jurisdiction in which such adjudication is made.

Section 16.     Prior  Agreements.      This   Agreement   supersedes   all   prior agreements  and  understandings  (including  verbal  agreements)  between  Employee  and  the Company regarding the terms and conditions of Employee's  employment with the Company including the Consulting Agreement.

Section 17.     409A Compliance.

(a)       Notwithstanding  anything  to  the  contrary  contained  herein,  if necessary to comply with the restriction in Section 409A(a)(2)(B) of the Internal Revenue Code of 1986, as amended (the "Code") concerning payments to "specified employees," any payment on account of the Employee's  separation from service that would otherwise be due hereunder within six months after such separation shall nonetheless be delayed until the first business day of the seventh month following the Employee's date of termination and the first such payment shall include the cumulative amount of any payments that would have been paid prior to such date if not for such restriction, together with interest on such cumulative amount during the period of such restriction at a rate, per annum, equal to the applicable federal short-term rate (compounded monthly) in effect under Section 1274(d) of the Code on the date of termination. For purposes of Section 7 hereof, the Employee shall be a "specified employee" for the 12- month period beginning on the first day of the fourth month following each "Identification Date" if he is a "key employee" (as defined in Section 416(i) of the Code without regard to Section 416(i)(5)  thereof)  of  the  Company  at  any  time during the 12-month  period ending on  the
"Identification Date."  For purposes of the foregoing, the Identification Date shall be December
31.

(b)       This Agreement is intended to comply with the requirements of Section 409A of the Code and regulations promulgated thereunder ("Section 409A").   To the extent that any provision in this Agreement is ambiguous as to its compliance with Section409A,  the  provision  shall  be  read  in  such  a  manner  so  that  no  payments  due  under this Agreement shall be subject to an "additional tax" as defined in Section 409A(a)(l)(B)  of the
Code.  For purposes of Section 409A, each payment made under this Agreement shall be treated as a separate payment.   In no event may the Employee, directly or indirectly, designate the calendar  year of  payment.   Notwithstanding anything contained herein to  the contrary, the Employee  shall  not  be  considered  to  have  terminated  employment  with  the  Company for purposes of Section 7 hereof unless he would be considered to have incurred a "termination of employment"  from  the  Company  within  the  meaning  of  Treasury  Regulation  §1.409A-
1(h)(l )(ii).

(c)       All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (i) any reimbursement is 

for expenses incurred during the Employee's lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.

[Signature follows on next page]

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by their respective duly authorized officers and the Employee has signed this Agreement, all as of the first date written above but effecting as of the Commencement Date.

NEOSTEM, INC.
By: /s/ Robin Smith
Name: Robin Smith
Title: CEO

                        
/s/ Stephen Potter
Stephen Potter

ANNEX A

NEOSTEM, INC.

Employee Confidentiality, Non-Compete and Inventions Assignment Agreement

I (the "Employee")  recognize that NeoStem, Inc., a Delaware corporation (the "Company"),  is  engaged,  directly  or  through  its  subsidiaries,  in  the  product  and  process development, consulting, characterization and comparability, collection and storage, distribution, manufacturing  and  transport  of  stem  cells  and  other  cells  for  cell  based  medicine  and regenerative science and the research and development of proprietary cellular therapies with respect to cardiovascular disease, T-cell  therapy for autoimmune conditions and a VSEL TM Technology   platform  (the   ''NeoStem   Business").   The  Business  includes  any  additional regenerative medicine initiative  which becomes a significant part of the Company's business during my employment tenure with the Company.   Any company with  which the Company enters into, or seeks or considers entering into, a business relationship in furtherance of the Business is referred to as a "Business Partner."

I understand  that  as part of my performance of duties as an employee of the Company (the "Engagement"),  I will have access to confidential or proprietary information of the Company and the Business Partners, and I may make new contributions and inventions of value to the Company.  I further understand that my Engagement creates in me a duty of trust and confidentiality to the Company with respect to any information: (1) related, applicable or useful  to  the  business  of  the  Company, including  the  Company's  anticipated research and development or such activities of its Business Partners; (2) resulting from tasks performed by me for the Company; (3) resulting from the use of equipment, supplies or facilities owned, leased or contracted for by the Company; or (4) related, applicable or useful to the business of any partner, client or customer of the Company, which may be made known to me or learned by me during the period of my Engagement.

For purposes of this Agreement, the following definitions apply:

"Proprietary Information" shall mean information relating to the Business or the business of any Business Partner and generally unavailable to the public that has been created, discovered, developed or otherwise has become known to the Company or in which property rights have been assigned or otherwise conveyed to the Company or a Business Partner, which information has economic  value  or  potential  economic  value  to the  business in  which the Company is or will be engaged.   Proprietary Information shall include, but not be limited to, trade secrets, processes, formulas, writings, data, know-how, negative know-how, improvements, discoveries, developments, designs, inventions, techniques, technical data, patent applications, customer  and  supplier  lists,  financial  information,  business  plans  or  projections  and  any modifications or enhancements to any of the above.

"Inventions" shall mean all Business-related discoveries, developments, designs, improvements,  inventions,  formulas,  software  programs,  processes,  techniques, know-how, negative know-how, writings, graphics and other data, whether or not patentable or registrable under patent, copyright or similar statutes, that are related to or useful in the business or future business of the  Company or its Business Partners or result from use of premises or other property owned,  leased  or  contracted  for  by  the  Company.    Without  limiting  the generality of  the foregoing, Inventions shall also include anything related to the Business that derives actual or potential economic value from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use.

As part of the consideration for my Engagement or continued Engagement, as the case may be, and the compensation received by me from the Company from time to time, I hereby agree as follows:

1.        Proprietary Information and  Inventions. The Company, its Business Partners or their respective assigns, as the case may be, are and shall be the sole owner of all Proprietary Information and Inventions related to the Business and the sole owner of all patents, trademarks, service  marks,  copyrights,  mask  rights  and  other  rights  (collectively  referred  to  herein  as "Rights") pertaining to any Proprietary Information or Inventions. I hereby acknowledge that all original works of authorship that are made by me (solely or jointly with others) within the scope of my Engagement and which are protectable by copyright are "works for hire" as that term is defined in the United States Copyright Act (17 USCA, Section 101).  I further hereby assign to the Company, any Rights I may have or acquire in any Proprietary Information or Inventions which arise in the course of my Engagement.   I further agree to assist the Company or any person designated by it in every proper way (but 

at the Company's expense) to obtain and from time to time enforce Rights relating to said Proprietary Information or Inventions in any and all countries.   I will execute all documents for use in applying for, obtaining and enforcing such Rights in such Proprietary Information or Inventions as the Company may desire, together with any assignments thereof to the Company or persons designated by it.  My obligation to assist the Company or any person designated by it in obtaining and enforcing Rights relating to Proprietary Information or Inventions shall continue beyond the cessation of my Engagement ("Cessation of my Engagement").   In the event the Company is unable, after reasonable effort, to secure my signature on any document or documents needed to apply for or enforce any Right relating to Proprietary Information or to an Invention, whether because of my physical or mental incapacity or for any other reason whatsoever, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agents and attorneys-in-fact to act for and in my behalf  and  stead  in  the  execution  and  filing  of  any  such application  and in furthering the application for and enforcement of Rights with the same legal force and effect as if such acts were performed by me.

2.         Confidentiality.    At  all  times,  both  during  my  Engagement  and  after  the Cessation of my Engagement, whether the cessation is voluntary or involuntary, for any reason or  no  reason, or  by disability,  I  will  keep  in  strictest confidence  and  trust all Proprietary Information, and I will not disclose or use or permit the use or disclosure of any Proprietary Information or Rights pertaining to Proprietary Information, or anything related thereto, without the prior written consent of the Company, except as may be necessary in the ordinary course of performing my duties for the Company.   I recognize that the Company has received and in the future  will  receive  from  third  parties  (including  Business  Partners)  their  confidential  or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes.   I agree that I owe the Company and such third parties (including Business Partners), during my Engagement and after the Cessation of my Engagement, a duty to hold all such confidential or proprietary information in the strictest confidence, and I will not disclose or use or permit the use or disclosure of any such confidential or proprietary information without the prior written consent of the Company, except as may be necessary in the ordinary course of performing my duties for the Company consistent with the Company's agreement with such third party.

3.         Noncompetition and Nonsolicitation.

(a)       During my Engagement, and for a period of one (I) year after the Cessation of my Engagement, I will not directly or indirectly, whether alone or in concert with others or as a partner,  officer,  director,  consultant,  agent,  employee  or  stockholder  of  any  company  or commercial enterprise, engage in any activity in the United States or Canada or Europe that the Company shall determine in good faith is in competition with the Company concerning its work or any Business Partner's work in the Business.   Further during my Engagement and for a period of one (I)  year after the Cessation of my Engagement, I agree not to plan or otherwise take any preliminary steps, either alone or in concert with others, to set up or engage in any business enterprise that would be in competition with the Company in the Business:

(b)       During my Engagement and for a period of one (1) year after the Cessation of my Engagement, I will not directly or indirectly, whether alone or in concert with others or as a partner,  officer,  director,  consultant,  agent,  employee  or  stockholder  of  any  company  or commercial enterprise, either alone or in concert  with others, not take any of the following actions:

(i)        persuade   or   attempt   to   persuade  any   Business  Partner,  Customer, Prospective Customer or Supplier to cease doing business with the Company, or to reduce the amount of business it does with the Company;

(ii)       solicit  or  service  for  himself  or  for any  Person a  Business Partner, a Customer, a Prospective Customer or a Supplier in order to provide goods or services that are competitive  with  the goods  and  services  provided  by the Company in  connection with the Business;

(iii)     persuade or attempt to persuade any Service Provider to cease providing services to the Company or any Business Partner; of
(iv)      solicit for hire or hire for himself or for any Person any Service Provider.
 (v)       The following definitions are applicable to this Section 3(b):

(A)      "Customer" means any Person that purchased goods or services from the Company at any time within 2 years prior to the date of the solicitation prohibited by Section 3(b)(i) or (ii).

(B)      "Prospective   Customer"   means   any  Person   with  whom  the Company met or to whom the Company presented for the purpose of soliciting the Person to become a  Customer  of  the  Company  within 6 months  prior to the  date  of the  solicitation prohibited by Section 3(b)(i) or (ii).

(C)      "Service  Provider"  means  any  Person  who  is  an  employee or independent contractor of the Company or the Company or who was within twelve (12) months preceding the solicitation prohibited by Section  3(b)(iii) or (iv) an employee or independent contractor of the Company or the Company.

(D)      "Supplier" means any Person that sold goods or services to the Company at any time within twelve (12) months prior to the date of the solicitation prohibited by Section 3(b)(i) or (ii).

(E)       "Person" means an individual, a sole proprietorship, a corporation, a limited  liability company,  a  partnership, an  association, a  trust, or  other  business entity, whether or not incorporated.

(c)       The following  shall not be deemed to breach the foregoing obligations: (i) my ownership of stock, partnership interests or other securities of any entity not in excess of two percent (2%) of any class of such interests or securities which is publicly traded. It is understood and agreed that the restrictions contained in this Section 3 shall immediately cease to be of force and effect  in the event  the  Company and its  Business Partner ceases to  be engaged in the Business.

(d)       Employee  acknowledges that  (i)  the  restrictions  contained in  this section are reasonable and necessary to protect the legitimate business interests of the Company, (ii) that the one (1) year term of this obligation is reasonable in scope, and (iii) that this obligation is a material term, without which the Company would be unwilling to enter into an employment relationship with the Employee.

4.         Delivery  of  Company Property  and  Work  Product.   In  the  event  of  the Cessation of my Engagement, I will deliver to the Company all biological materials, devices, records,  sketches,  reports,  memoranda,  notes,  proposals,  lists,  correspondence, equipment, documents, photographs, photostats, negatives, undeveloped film, drawings, specifications, tape recordings or other electronic recordings, programs, data, marketing material and other materials or property of any nature belonging to the Company or  its clients or customers, and I will not take with me, or allow a third party to take, any of the foregoing or any reproduction of any of the foregoing.

5.        No Conflict.    I represent, warrant and covenant that my performance of all the terms of this Agreement and the performance of my duties for the Company does not and will not  breach  any  agreement  to  keep  in  confidence  proprietary  information  acquired  by  me in confidence or in trust prior to my Engagement.  I have not entered into, and I agree that I will not enter into, any agreement, either written or oral, in conflict herewith.

6.         No Use of Confidential Information.   I represent,  warrant and covenant that I have  not  brought  and will  not  bring  with me to the  Company  or use in my Engagement  any materials  or documents  of a former  employer, or any person or entity for which I have acted as an independent  contractor  or consultant,  that are not generally  available  to the public,  unless I have obtained  written  authorization from  any such  former  employer,  person  or firm for their possession  and use.   I understand and  agree that, in my service  to the Company, I am not to breach any obligation of confidentiality that I have to former employers or other persons.

7.         Enforcement; Equitable Relief.    Employee  acknowledges  that any  breach  or threatened  breach by Employee  of any provision of this Agreement may result in immediate and irreparable  injury  to  the  Company,  and that  such  injury  may  not  be readily  compensable  by monetary   damages.      In  the   event   of  any  such   breach   or  threatened   breach,  Employee acknowledges  that, in addition  to all other remedies  available  at law and equity, the Company shall be entitled to seek equitable  relief (including  a temporary  restraining  order, a preliminary injunction  and/or a permanent  injunction),  and an equitable  accounting of all earnings, profits or other benefits arising from such breach and will be entitled to receive such other damages, direct or consequential,  as may be appropriate.   In addition,  and not instead of, those rights, Employee further acknowledges that Employee  shall be responsible for payment of the fees and expenses of the Company's attorneys  and experts,  as well as the Company's court costs, pertaining to any suit,  action,  or other  proceeding, arising  directly  or indirectly  out of Employee's violation  or threatened  violation of any of the provisions of 

this section.  The Company shall not be required to post any bond or other security in connection with any proceeding to enforce this section.

8.         Severability.  If any provision  of  this  Agreement  shall  be determined  by  any court  of competent  jurisdiction to  be unenforceable  or otherwise  invalid  as written, the same shall be enforced and validated  to the extent permitted  by law.  All provisions of this Agreement are  severable,  and  the  unenforceability or  invalidity  of  any  single  provision  hereof  shall  not affect the remaining provisions.

9.         Miscellaneous.  This  Agreement  shall  be governed  by and construed  under the laws  of the State  of New  York  applied  to contracts  made  and performed  wholly  within such state.   No implied waiver of any provision  within this Agreement shall arise in the absence of a waiver in writing, and no waiver with respect to a specific circumstance,  event or occasion shall be  construed  as  a  continuing waiver  as  to similar  circumstances,  events  or  occasions.    This Agreement,   together   with  the  offer  letter  or  employment   agreement   (if  any)  between  the Company  and myself,  contains  the  sole  and entire  agreement  and  understanding  between the Company  and myself  with respect  to the subject matter  hereof and supersedes and replaces any prior agreements to the extent any such agreement is inconsistent  herewith.  This Agreement can be amended,  modified,  released  or  changed  in whole  or in part only  by a written  agreement executed  by the Company  and  myself    This Agreement  shall  be binding  upon  me, my heirs, executors,  assigns and administrators, and it shall inure to the benefit of the Company and each of its successors  or assigns.   This Agreement  shall  be effective  as of the first day of my being retained to  render services  to  the  Company,  even  if such  date  precedes  the  date  I sign  this
Agreement.

10.      Thorough Understanding of Agreement.  I have read all of this Agreement and understand  it completely, and by my signature below I represent that this Agreement is the only statement  made  by  or  on  behalf  of  the  Company  upon  which  I have  relied in signing  this Agreement.

IN WITNESS WHEREOF, I have caused this Employee  Confidentiality, Non­Compete and Inventions Assignment  Agreement to be signed on the date written below.

DATED: 7/15/13                    _______________________________
Stephen Potter

/s/ Stephen Potter
[Signature]

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